ccbg-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,

D.C.

20549

FORM

10-Q

☒

QUARTERLY REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended

June 30, 2024

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number:

0-13358

Capital City Bank Group, Inc.

(Exact name of Registrant as specified in its charter)

Florida

59-2273542

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

217 North Monroe Street

Tallahassee

Florida

32301

(Address of principal executive office)

(Zip Code)

(

850

)

402-7821

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, Par value $0.01

CCBG

Nasdaq Stock Market

, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of

1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such

filing requirements for the past 90 days.

Yes

[X] No [

]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405

of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit

such files).

Yes [

] No [

]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,

an emerging growth company.

See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth

company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any

new or revised financial accounting standards pursuant to Section 13(a) of The Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [

]

[X]

At July 31, 2024,

16,941,768

shares of the Registrant’s Common Stock, $.01 par value, were outstanding.

CAPITAL CITY BANK

GROUP,

INC.

QUARTERLY

REPORT ON FORM 10-Q

FOR THE PERIOD ENDED JUNE 30, 2024

TABLE OF CONTENTS

PART I –

Financial Information

Page

Item 1.

Consolidated Financial Statements (Unaudited)

Consolidated Statements of Financial Condition – June 30, 2024 and December 31, 2023

Consolidated Statements of Income – Three and Six Months Ended June 30, 2024 and 2023

Consolidated Statements of Comprehensive Income (Loss) – Three and Six Months Ended June 30, 2024 and 2023

Consolidated Statements of Changes in Shareowners’ Equity – Three and Six Months Ended June 30, 2024 and 2023

Consolidated Statements of Cash Flows – Six Months Ended June 30, 2024 and 2023

Notes to Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

Item 4.

Controls and Procedures

PART II –

Other Information

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosure

Item 5.

Other Information

Item 6.

Exhibits

Signatures

INTRODUCTORY NOTE

Caution Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform

Act of 1995. These forward-looking statements include, among others, statements about our beliefs, plans, objectives, goals, expectations,

estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors, many of

which are beyond our control.

The words “may,” “could,” “should,” “would,” “believe,”

“anticipate,” “estimate,” “expect,” “intend,” “plan,”

“target,” “vision,” “goal,” and similar expressions are intended to identify forward-looking statements.

All forward-looking statements, by their nature, are subject to risks and uncertainties.

Our actual future results may differ materially from

those set forth in our forward-looking statements.

Our

ability

achieve

our

financial

objectives

could

adversely

affected

the

factors

discussed

detail

Part

II,

Item

1A.

“Risk

Factors” in

this Quarterly

Report on

Form 10-Q

and in

Part I,

Item 1A.

“Risk Factors”

in our

Annual Report

on Form

10-K/A for

the year

ended December 31,

2023 (the “2023

Form 10-K/A”), as

updated in our

subsequent quarterly reports

filed on Form

10-Q, as well

as, among

other factors:

●

our ability to successfully manage credit risk, interest rate risk, liquidity risk, and other risks inherent to our industry;

●

the effects of changes in the level of checking or savings account deposits and the competition for deposits on our funding costs, net

interest margin and ability to replace maturing deposits and advances;

●

legislative or regulatory changes;

●

adverse developments in the financial services industry generally;

●

inflation, interest rate, market and monetary fluctuations;

●

uncertainty in the pricing of residential mortgage loans that we sell, as well as competition for the mortgage servicing rights related to these

loans;

●

interest rate risk and price risk resulting from retaining mortgage servicing rights and the effects of higher interest rates on our loan

origination volumes;

●

changes in monetary and fiscal policies of the U.S. Government;

●

the cost and effects of cybersecurity incidents or other failures, interruptions, or security breaches of our systems or those of our customers

or third-party providers;

●

the effects of fraud related to debit card products;

●

the accuracy of our financial statement estimates and assumptions;

●

changes in accounting principles, policies, practices or guidelines;

●

the frequency and magnitude of foreclosure of our loans;

●

the effects of our lack of a diversified loan portfolio;

●

the strength of the local economies in which we operate;

●

our ability to declare and pay dividends;

●

structural changes in the markets for origination, sale and servicing of residential mortgages;

●

our ability to retain key personnel;

●

the effects of natural disasters (including hurricanes), widespread health emergencies (including pandemics), military conflict, terrorism,

civil unrest or other geopolitical events;

●

our ability to comply with the extensive laws and regulations to which we are subject;

●

the impact of the restatement of our previously issued consolidated statements of cash flows;

●

any deficiencies in the processes undertaken to effect these restatements and to identify and correct all errors in our historical financial

statements that may require restatement;

●

any inability to implement and maintain effective internal control over financial reporting and/or disclosure control or inability to

remediate our existing material weaknesses in our internal controls deemed ineffective;

●

the willingness of clients to accept third-party products and services rather than our products and services;

●

technological changes;

●

the outcomes of litigation or regulatory proceedings;

●

negative publicity and the impact on our reputation;

●

changes in consumer spending and saving habits;

●

growth and profitability of our noninterest income;

●

the limited trading activity of our common stock;

●

the concentration of ownership of our common stock;

●

anti-takeover provisions under federal and state law as well as our Articles of Incorporation and our Bylaws;

●

other risks described from time to time in our filings with the Securities and Exchange Commission; and

●

our ability to manage the risks involved in the foregoing.

However, other factors besides those listed in

Item 1A Risk Factors

or discussed in this Form 10-Q also could adversely affect our results,

and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties.

Any forward-looking

statements made by us or on our behalf speak only as of the date they are made.

We do not undertake to update any forward-looking

statement, except as required by applicable law.

PART

FINANCIAL INFORMATION

Item 1.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF FINANCIAL CONDITION

(Unaudited)

June 30,

December 31,

(Dollars in Thousands, Except Par Value)

2024

2023

ASSETS

Cash and Due From Banks

75,304

83,118

Federal Funds Sold and Interest Bearing Deposits

272,675

228,949

Total Cash and Cash Equivalents

347,979

312,067

Investment Securities, Available

for Sale, at fair value (amortized cost of $

341,307

and $

367,747

)

310,941

337,902

Investment Securities, Held to Maturity (fair value of $

551,244

and $

591,751

)

582,984

625,022

Equity Securities

2,537

3,450

Total Investment

Securities

896,462

966,374

Loans Held For Sale, at fair value

24,022

28,211

Loans Held for Investment

2,690,223

2,733,918

Allowance for Credit Losses

(29,219)

(29,941)

Loans Held for Investment, Net

2,661,004

2,703,977

Premises and Equipment, Net

81,414

81,266

Goodwill and Other Intangibles

92,853

92,933

Other Real Estate Owned

650

Other Assets

121,311

119,648

Total Assets

4,225,695

4,304,477

LIABILITIES

Deposits:

Noninterest Bearing Deposits

1,343,606

1,377,934

Interest Bearing Deposits

2,264,958

2,323,888

Total Deposits

3,608,564

3,701,822

Short-Term

Borrowings

25,770

35,341

Subordinated Notes Payable

52,887

Other Long-Term

Borrowings

1,009

315

Other Liabilities

69,987

66,080

Total Liabilities

3,758,217

3,856,445

Temporary Equity

6,479

7,407

SHAREOWNERS’ EQUITY

Preferred Stock, $

0.01

par value;

3,000,000

shares authorized;

shares issued and outstanding

Common Stock, $

0.01

par value;

90,000,000

shares authorized;

16,941,553

and

16,950,222

shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

169

170

Additional Paid-In Capital

35,547

36,326

Retained Earnings

445,959

426,275

Accumulated Other Comprehensive Loss, net of tax

(20,676)

(22,146)

Total Shareowners’

Equity

460,999

440,625

Total Liabilities, Temporary

Equity, and Shareowners’ Equity

4,225,695

4,304,477

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF INCOME

(Unaudited)

Three Months Ended

June 30,

Six Months Ended

June 30,

(Dollars in Thousands, Except Per Share

Data)

2024

2023

2024

2023

INTEREST INCOME

Loans, including Fees

41,138

37,608

81,821

72,499

Investment Securities:

Taxable

3,998

4,803

8,236

9,716

Tax Exempt

Funds Sold

3,624

2,782

5,517

6,893

Total Interest Income

48,766

45,205

95,586

89,131

INTEREST EXPENSE

Deposits

8,579

4,008

16,173

6,496

Short-Term

Borrowings

285

451

525

912

Subordinated Notes Payable

630

604

1,258

1,175

Other Long-Term

Borrowings

Total Interest Expense

9,497

5,068

17,962

8,594

NET INTEREST INCOME

39,269

40,137

77,624

80,537

Provision for Credit Losses

1,204

2,197

2,124

5,296

Net Interest Income After Provision For Credit Losses

38,065

37,940

75,500

75,241

NONINTEREST INCOME

Deposit Fees

5,377

5,326

10,627

10,565

Bank Card Fees

3,766

3,795

7,386

7,521

Wealth Management

Fees

4,439

4,149

9,121

8,077

Mortgage Banking Revenues

4,381

3,363

7,259

6,234

Other

1,643

3,334

3,310

5,328

Total Noninterest

Income

19,606

19,967

37,703

37,725

NONINTEREST EXPENSE

Compensation

24,406

23,438

48,813

46,962

Occupancy, Net

6,997

6,820

13,991

13,582

Other

9,038

10,027

17,808

17,417

Total Noninterest

Expense

40,441

40,285

80,612

77,961

INCOME BEFORE INCOME TAXES

17,230

17,622

32,591

35,005

Income Tax Expense

3,189

3,417

6,725

7,126

NET INCOME

14,041

14,205

25,866

27,879

Loss (Income) Attributable to Noncontrolling Interests

109

(31)

841

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

14,150

14,174

26,707

27,883

BASIC NET INCOME PER SHARE

0.84

0.83

1.58

1.64

DILUTED NET INCOME PER SHARE

0.83

1.57

1.64

Average Common

Basic Shares Outstanding

16,931

17,002

16,941

17,009

Average Common

Diluted Shares Outstanding

16,960

17,035

16,964

17,040

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

(Dollars in Thousands)

2024

2023

2024

2023

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

14,150

14,174

26,707

27,883

Other comprehensive income (loss), before

tax:

Investment Securities:

Change in net unrealized loss on securities available for sale

769

(2,887)

(406)

3,921

Amortization of unrealized losses on securities transferred from

available for sale to held to maturity

845

876

1,736

1,741

Derivative:

Change in net unrealized gain on effective cash flow

derivative

(50)

585

387

(217)

Benefit Plans:

Pension plan settlement

(217)

Total Benefit Plans

(217)

Other comprehensive income (loss), before

tax

1,564

(1,643)

1,717

5,228

Deferred tax expense (benefit) related to other comprehensive income

160

(347)

247

1,371

Other comprehensive income (loss), net of tax

1,404

(1,296)

1,470

3,857

TOTAL COMPREHENSIVE

INCOME

15,554

12,878

28,177

31,740

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF CHANGES IN SHAREOWNERS’ EQUITY

(Unaudited)

Accumulated

Other

Additional

Comprehensive

Common

Paid-In

Retained

(Loss) Income,

(Dollars In Thousands, Except Share Data)

Outstanding

Stock

Capital

Earnings

Net of Taxes

Total

Balance, April 1, 2024

16,928,507

169

34,861

435,364

(22,080)

448,314

Net Income Attributable to Common Shareowners

14,150

Other Comprehensive Income, net of tax

1,404

Cash Dividends ($

0.2100

per share)

(3,555)

Stock Based Compensation

322

Stock Compensation Plan Transactions, net

13,046

364

Balance, June 30, 2024

16,941,553

169

35,547

445,959

(20,676)

460,999

Balance, April 1, 2023

17,021,748

170

37,512

397,654

(32,076)

403,260

Net Income Attributable to Common Shareowners

14,174

Other Comprehensive Loss, net of tax

(1,296)

Cash Dividends ($

0.1800

per share)

(3,057)

Repurchase of Common Stock

(40,495)

(1,203)

Stock Based Compensation

228

Stock Compensation Plan Transactions, net

10,381

316

Balance, June 30, 2023

16,991,634

170

36,853

408,771

(33,372)

412,422

Balance, January 1, 2024

16,950,222

170

36,326

426,275

(22,146)

440,625

Net Income Attributable to Common Shareowners

26,707

Reclassification to Temporary Equity

Other Comprehensive Income, net of tax

1,470

Cash Dividends ($

0.4200

per share)

(7,110)

Repurchase of Common Stock

(82,540)

(2,330)

Stock Based Compensation

715

Stock Compensation Plan Transactions, net

73,871

(1)

836

835

Balance, June 30, 2024

16,941,553

169

35,547

445,959

(20,676)

460,999

Balance, January 1, 2023

16,986,785

170

37,331

387,009

(37,229)

387,281

Net Income Attributable to Common Shareowners

27,883

Other Comprehensive Income, net of tax

3,857

Cash Dividends ($

0.3600

per share)

(6,121)

Repurchase of Common Stock

(65,736)

(2,022)

Stock Based Compensation

764

Stock Compensation Plan Transactions, net

70,585

780

Balance, June 30, 2023

16,991,634

170

36,853

408,771

(33,372)

412,422

(1)

Adjustments to redemption value for non-controlling

interest in Capital City Home Loans, LLC ("CCHL")

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF CASH FLOWS

(Unaudited)

Six Months Ended June 30,

(Dollars in Thousands)

2024

2023

CASH FLOWS FROM OPERATING

ACTIVITIES

Net Income Attributable to Common Shareowners

26,707

27,883

Adjustments to Reconcile Net Income to

Cash Provided by Operating Activities:

Provision for Credit Losses

2,124

5,296

Depreciation

4,050

3,927

Amortization of Premiums, Discounts and Fees, net

1,842

2,117

Amortization of Intangible Asset

Pension Plan Settlement Gain

(291)

Originations of Loans Held-for-Sale

(241,631)

(203,266)

Proceeds From Sales of Loans Held-for-Sale

249,378

191,180

Mortgage Banking Revenues

(7,259)

(6,234)

Net Additions for Capitalized Mortgage Servicing Rights

134

(253)

Stock Compensation

715

764

Deferred Income Taxes (Benefit)

(1,346)

(2,849)

Net Change in Operating Leases

195

(3)

Net Gain on Sales and Write-Downs of Other Real Estate Owned

(1,900)

Net (Increase) Decrease in Other Assets

1,425

4,593

Net Increase in Other Liabilities

3,170

3,815

Net Cash Provided By Operating Activities

39,584

24,859

CASH FLOWS FROM INVESTING ACTIVITIES

Securities Held to Maturity:

Purchases

(3,944)

Proceeds from Payments, Maturities, and Calls

45,849

18,992

Securities Available for

Sale:

Purchases

(5,661)

(4,634)

Proceeds from Payments, Maturities, and Calls

32,169

32,490

Equity Securities:

Net Increase in Equity Securities

(10)

Purchases of Loans Held for Investment

(302)

(1,463)

Proceeds from Sales of Loans

19,176

26,645

Net Decrease (Increase) in Loans Held for Investment

24,288

(164,319)

Proceeds From Sales of Other Real Estate Owned

3,772

Purchases of Premises and Equipment

(4,198)

(3,851)

Net Cash Provided by (Used In) Investing Activities

107,367

(92,368)

CASH FLOWS FROM FINANCING ACTIVITIES

Net Decrease in Deposits

(93,258)

(150,451)

Net Decrease in Short-Term

Borrowings

(9,571)

(6,120)

Net Increase (Decrease) in Other Long-Term

Borrowings

694

(99)

Dividends Paid

(7,110)

(6,121)

Payments to Repurchase Common Stock

(2,330)

(2,022)

Proceeds from Issuance of Common Stock Under Purchase Plans

536

480

Net Cash Used In by Financing Activities

(111,039)

(164,333)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

35,912

(231,842)

Cash and Cash Equivalents at Beginning of Period

312,067

600,650

Cash and Cash Equivalents at End of Period

347,979

368,808

Supplemental Cash Flow Disclosures:

Interest Paid

17,153

8,720

Income Taxes Paid

3,005

3,860

Noncash Investing Activities:

Loans and Premises Transferred to Other Real Estate Owned

649

1,442

Loans Transferred from Held for Investment

to Held for Sale, net

15,475

26,076

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTE 1 –

BUSINESS AND BASIS OF PRESENTATION

Nature of Operations

Capital City Bank Group, Inc. (“CCBG” or the “Company”) provides a full range of

banking and banking-

related services to individual and corporate clients through its subsidiary,

Capital City Bank, with banking offices located in Florida,

Georgia, and Alabama.

The Company is subject to competition from other financial institutions, is subject to

regulation by certain

government agencies and undergoes periodic examinations

by those regulatory authorities.

Basis of Presentation

The consolidated financial statements in this Quarterly Report on Form

10-Q include the accounts of CCBG

and its wholly owned subsidiary,

Capital City Bank (“CCB” or the “Bank”).

All material inter-company transactions and accounts

have been eliminated.

Certain previously reported amounts have been reclassified to conform to the current year’s

presentation.

The accompanying unaudited consolidated financial statements have

been prepared in accordance with generally accepted accounting

principles for interim financial information and with the instructions to Form

10-Q and Article 10 of Regulation S-X.

Accordingly,

they do not include all of the information and notes required by generally accepted

accounting principles for complete financial

statements.

In the opinion of management, all adjustments (consisting of normal

recurring accruals) considered necessary for a fair

presentation have been included.

The Consolidated Statement of Financial Condition at December

31, 2023 has been derived from the audited consolidated financial

statements at that date, but does not include all of the information and notes

required by generally accepted accounting principles for

complete financial statements.

For further information, refer to the consolidated financial statements and notes

thereto included in the

Company’s 2023 Form

10-K/A.

Accounting Standards Updates

Proposed Accounting Standards

ASU

2023-01, “Leases (Topic

842)

Common Control Arrangements.” Accounting Standards

Update (“ASU”) 2023-01 requires entities to amortize leasehold

improvements associated with common control leases over the useful

life to the common control group. ASU 2023-01 also provides certain practical

expedients applicable to private companies and not-

for-profit organizations. The standard is effective

for the Company on January 1, 2024. As the Company does not have any such

common control leases, adoption of this standard did not have any immediate impact

on its consolidated financial statements and

related disclosures.

ASU No.

2023-02, “Investments—Equity Method and Joint Ventures

(Topic

323)

: Accounting for Investments in Tax

Credit

Structures Using the Proportional Amortization Method.” ASU 2023-02

is intended to improve the accounting and disclosures for

investments in tax credit structures. ASU 2023-02 allows entities to elect to account

for qualifying tax equity investments using the

proportional amortization method, regardless of the program giving

rise to the related income tax credits. Previously,

this method was

only available for qualifying tax equity investments in low-income

housing tax credit structures. The standard was effective for the

Company on January 1, 2024. As the Company does not have any such investments

in tax credit structures that are accounted for

using the proportional amortization method, adoption of this standard did not have

any immediate impact on its consolidated financial

statements or disclosures.

ASU No. 2023-06, “Disclosure Improvements:

Codification Amendments in Response to the SEC’s

Disclosure Update and

Simplification Initiative.”

ASU 2023-06 is intended to clarify or improve disclosure and presentation

requirements of a variety of

topics, which will allow users to more easily compare entities subject to the SEC's existing

disclosures with those entities that were

not previously subject to the requirements and align the requirements in the

FASB accounting standard

codification with the SEC's

regulations. The Company is currently evaluating the provisions of

the amendments and the impact on its future consolidated

statements.

ASU No. 2023-07, “Improvements to Reportable

Segment Disclosures.”

ASU

2023-07 requires disclosure of significant segment

expenses and other segment items on an interim and annual basis. The standard

is effective for fiscal years beginning after December

15, 2023, and for interim periods beginning after December 15,

2024. The Company is currently evaluating the provisions of the

amendments

and the impact on its future consolidated statements.

ASU 2023-09, ”Income Taxes

(Topic

740) – Improvements to Income Tax

Disclosures.”

ASU 2023-09 is intended to increase

transparency about income tax information by requiring consistent categories

and greater disaggregation of information in the rate

reconciliation and income taxes paid, disaggregated by jurisdiction. This guidance

will be effective for annual periods beginning after

December 15, 2024. The Company is currently evaluating the provisions

of the amendments and the impact on its future consolidated

statements.

NOTE 2 –

INVESTMENT SECURITIES

Investment Portfolio Composition

. The following table summarizes the amortized cost and related fair value of investment

securities available-for-sale (“AFS”) and securities held-to-maturity (“HTM”)

and the corresponding amounts of gross

unrealized gains and losses.

Available for

Sale

Amortized

Unrealized

Allowance for

Fair

(Dollars in Thousands)

Cost

Gains

Losses

Credit Losses

Value

June 30, 2024

U.S. Government Treasury

24,941

1,073

23,868

U.S. Government Agency

133,562

7,531

126,105

States and Political Subdivisions

43,302

4,669

(5)

38,628

Mortgage-Backed Securities

(1)

69,810

11,283

58,527

Corporate Debt Securities

61,596

5,744

(135)

55,717

Other Securities

(2)

8,096

Total

341,307

30,300

(140)

310,941

December 31, 2023

U.S. Government Treasury

25,947

1,269

24,679

U.S. Government Agency

152,983

104

8,053

145,034

States and Political Subdivisions

43,951

4,861

(8)

39,083

Mortgage-Backed Securities

(1)

73,015

9,714

63,303

Corporate Debt Securities

63,600

6,031

(17)

57,552

Other Securities

(2)

8,251

Total

367,747

108

29,928

(25)

337,902

Held to Maturity

Amortized

Unrealized

Fair

(Dollars in Thousands)

Cost

Gains

Losses

Value

June 30, 2024

U.S. Government Treasury

427,878

14,143

413,735

Mortgage-Backed Securities

(1)

155,106

17,601

137,509

Total

582,984

31,744

551,244

December 31, 2023

U.S. Government Treasury

457,681

16,492

441,189

Mortgage-Backed Securities

(1)

167,341

16,792

150,562

Total

625,022

33,284

591,751

(1)

Comprised of residential mortgage-backed

securities

(2)

Includes Federal Home Loan Bank and Federal Reserve Bank stock, recorded

at cost of $

3.0

million and $

5.1

million,

respectively,

at June 30, 2024 and $

3.2

million and $

5.1

million, respectively,

at December 31, 2023.

At June 30, 2024 and December 31, 2023, the investment portfolio had $

2.5

million and $

3.5

million, respectively in equity securities.

These securities do not have a readily determinable fair value and were not

credit impaired.

Securities with an amortized cost of $

498.4

million and $

578.5

million at June 30, 2024 and December 31, 2023, respectively,

were

pledged to secure public deposits and for other purposes.

The Bank, as a member of the Federal Home Loan Bank of Atlanta (“FHLB”), is required

to own capital stock in the FHLB based

generally upon the balances of residential and commercial real estate loans and FHLB

advances.

FHLB stock, which is included in

other securities,

is pledged to secure FHLB advances.

No ready market exists for this stock, and it has no quoted fair value; however,

redemption of this stock has historically been at par value.

As a member of the Federal Reserve Bank of Atlanta, the Bank is required to maintain

stock in the Federal Reserve Bank of Atlanta

based on a specified ratio relative to the Bank’s

capital.

Federal Reserve Bank stock is carried at cost.

Investment Sales.

There were

sales of investment securities for the three and six months ended June 30, 2024 and

June 30, 2023.

Maturity Distribution

At June 30, 2024, the Company’s investment

securities had the following maturity distribution based on

contractual maturity.

Expected maturities may differ from contractual maturities because borrowers

may have the right to call or

prepay obligations.

Mortgage-backed securities (“MBS”) and certain amortizing U.S. government

agency securities are shown

separately because they are not due at a certain maturity date.

Available for

Sale

Held to Maturity

(Dollars in Thousands)

Amortized Cost

Fair Value

Amortized Cost

Fair Value

Due in one year or less

25,906

25,261

192,392

188,638

Due after one year through five years

139,310

129,016

235,486

225,097

Due after five year through ten years

30,774

26,049

Mortgage-Backed Securities

69,810

58,527

155,106

137,509

U.S. Government Agency

67,411

63,992

Other Securities

8,096

Total

341,307

310,941

582,984

551,244

Unrealized Losses on Investment Securities.

The following table summarizes the available for sale investment securities with

unrealized losses aggregated by major security type and length of time in a continuous

unrealized loss position:

Less Than

Greater Than

12 Months

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

(Dollars in Thousands)

Value

Losses

Value

Losses

Value

Losses

June 30, 2024

Available for

Sale

U.S. Government Treasury

3,963

19,905

1,068

23,868

1,073

U.S. Government Agency

6,526

111,593

7,503

118,119

7,531

States and Political Subdivisions

2,687

212

35,946

4,457

38,633

4,669

Mortgage-Backed Securities

58,453

11,283

58,512

11,283

Corporate Debt Securities

945

150

54,907

5,594

55,852

5,744

Total

14,180

395

280,804

29,905

294,984

30,300

Held to Maturity

U.S. Government Treasury

140,435

2,687

273,300

11,456

413,735

14,143

Mortgage-Backed Securities

3,924

132,228

17,563

136,152

17,601

Total

144,359

2,725

405,528

29,019

549,887

31,744

December 31, 2023

Available for

Sale

U.S. Government Treasury

19,751

1,269

19,751

1,269

U.S. Government Agency

12,890

121,220

7,979

134,110

8,053

States and Political Subdivisions

1,149

37,785

4,830

38,934

4,861

Mortgage-Backed Securities

63,195

9,714

63,218

9,714

Corporate Debt Securities

57,568

6,031

57,568

6,031

Total

14,062

105

299,519

29,823

313,581

29,928

Held to Maturity

U.S. Government Treasury

153,880

3,178

287,310

13,314

441,190

16,492

Mortgage-Backed Securities

786

148,282

16,778

149,068

16,792

Total

154,666

3,192

435,592

30,092

590,258

33,284

At June 30, 2024, there were

856

positions (combined AFS and HTM) with unrealized losses totaling $

62.0

million.

of these

positions are U.S. Treasury bonds and

carry the full faith and credit of the U.S. Government.

673

are U.S. government agency

securities issued by U.S. government sponsored entities.

We believe

the long history of no credit losses on government securities

indicates that the expectation of nonpayment of the amortized cost basis is effectively

zero.

At June 30, 2024, all collateralized

mortgage obligation securities, mortgage-backed securities, Small Business Administration

securities, U.S. Agency,

and U.S. Treasury

bonds held were AAA rated.

The remaining

101

positions (municipal securities and corporate bonds) have a credit component.

June 30, 2024, corporate debt securities had an allowance for credit losses of

135,000

and municipal securities had an allowance of

5,000

Credit Quality Indicators

The Company monitors the credit quality of its investment securities through

various risk management procedures, including the

monitoring of credit ratings.

A majority of the debt securities in the Company’s

investment portfolio were issued by a U.S.

government entity or agency and are either explicitly or implicitly guaranteed

by the U.S. government.

The Company believes the

long history of no credit losses on these securities indicates that the expectation

of nonpayment of the amortized cost basis is

effectively zero, even if the U.S. government were

to technically default.

Further, certain municipal securities held by the Company

have been pre-refunded and secured by government guaranteed treasuries.

Therefore, for the aforementioned securities, the Company

does

t assess or record expected credit losses due to the zero loss assumption.

The Company monitors the credit quality of its

municipal and corporate securities portfolio via credit ratings

which are updated on a quarterly basis.

On a quarterly basis, municipal

and corporate securities in an unrealized loss position are evaluated to determine

if the loss is attributable to credit related factors and

if an allowance for credit loss is needed.

NOTE 3 – LOANS HELD FOR INVESTMENT AND ALLOWANCE

FOR CREDIT LOSSES

Loan Portfolio Composition

The composition of the held for investment (“HFI”) loan portfolio was as follows:

(Dollars in Thousands)

June 30, 2024

December 31, 2023

Commercial, Financial and Agricultural

204,990

225,190

Real Estate – Construction

200,754

196,091

Real Estate – Commercial Mortgage

823,122

825,456

Real Estate – Residential

(1)

1,014,827

1,004,219

Real Estate – Home Equity

211,126

210,920

Consumer

(2)

235,404

272,042

Loans Held For Investment, Net of Unearned Income

2,690,223

2,733,918

(1)

Includes loans in process balances of $

3.5

million and $

3.2

million at June 30, 2024 and December 31, 2023, respectively.

(2)

Includes overdraft balances of $

1.2

million and $

1.0

million at June 30, 2024 and December 31, 2023, respectively.

Net deferred loan costs, which include premiums on purchased loans,

included in loans were $

7.7

million at June 30, 2024 and $

7.8

million at December 31, 2023.

Accrued interest receivable on loans which is excluded from amortized

cost totaled $

10.5

million at June 30, 2024 and $

10.1

million

at December 31, 2023, and is reported separately in Other Assets.

The Company has pledged a blanket floating lien on all 1-4 family residential mortgage

loans, commercial real estate mortgage loans,

and home equity loans to support available borrowing capacity at the FHLB of

Atlanta and has pledged a blanket floating lien on all

consumer loans, commercial loans, and construction loans to support available

borrowing capacity at the Federal Reserve Bank of

Atlanta.

Loan Purchase and Sales

The Company will periodically purchase newly originated 1-4 family real

estate secured adjustable-rate

loans from CCHL, a related party.

Residential loan purchases from CCHL totaled $

73.6

million and $

199.5

million for the six months

ended June 30, 2024 and June 30, 2023, respectively,

and were not credit impaired.

Allowance for Credit Losses

The methodology for estimating the amount of credit losses reported in the

allowance for credit losses

(“ACL”) has two basic components: first, an asset-specific component

involving loans that do not share risk characteristics and the

measurement of expected credit losses for such individual loans; and second,

a pooled component for expected credit losses for pools

of loans that share similar risk characteristics.

This allowance methodology is discussed further in Note 1 – Significant

Accounting

Policies in the Company’s 2023 Form

10-K/A.

The following table details the activity in the allowance for credit losses by portfolio

segment.

Allocation of a portion of the

allowance to one category of loans does not preclude its availability to absorb

losses in other categories.

Commercial,

Real Estate

Financial,

Real Estate

Commercial

Real Estate

(Dollars in Thousands)

Agricultural

Construction

Mortgage

Residential

Home Equity

Consumer

Total

Three Months Ended

June 30, 2024

Beginning Balance

1,525

1,869

5,947

14,828

1,896

3,264

29,329

Provision for Credit Losses

391

(118)

110

(63)

(68)

877

1,129

Charge-Offs

(400)

(1,632)

(2,032)

Recoveries

655

793

Net (Charge-Offs) Recoveries

(341)

(977)

(1,239)

Ending Balance

1,575

1,751

6,076

14,788

1,865

3,164

29,219

Six Months Ended

June 30, 2024

Beginning Balance

1,482

2,502

5,782

15,056

1,818

3,301

29,941

Provision for Credit Losses

675

(751)

(311)

2,265

2,011

Charge-Offs

(682)

(17)

(76)

(3,820)

(4,595)

Recoveries

100

223

1,418

1,862

Net (Charge-Offs) Recoveries

(582)

223

(15)

(2,402)

(2,733)

Ending Balance

1,575

1,751

6,076

14,788

1,865

3,164

29,219

Three Months Ended

June 30, 2023

Beginning Balance

1,515

3,359

4,710

11,950

1,879

3,395

26,808

Provision for Credit Losses

(86)

(512)

732

1,306

(188)

670

1,922

Charge-Offs

(54)

(39)

(1,887)

(1,980)

Recoveries

132

131

1,147

1,493

Net Charge-Offs

132

(740)

(487)

Ending Balance

1,446

2,848

5,453

13,388

1,783

3,325

28,243

Six Months Ended

June 30, 2023

Beginning Balance

1,506

2,654

4,815

10,741

1,864

3,488

25,068

Provision for Credit Losses

(8)

192

739

2,458

(198)

1,999

5,182

Charge-Offs

(218)

(120)

(39)

(4,253)

(4,630)

Recoveries

166

189

156

2,091

2,623

Net Charge-Offs

(52)

(101)

189

117

(2,162)

(2,007)

Ending Balance

1,446

2,848

5,453

13,388

1,783

3,325

28,243

For the six months ended June 30, 2024, the allowance for loans HFI decreased by $

0.7

million and reflected a provision expense of

2.0

million and net loan charge-offs of $

2.7

million.

The decrease in the allowance was primarily due to lower loan balances.

For

the six months ended June 30, 2023, the allowance for loans HFI increased by

3.2

million and reflected a provision expense of $

5.2

million and net loan charge-offs of $

2.0

million.

The increase was primarily driven by incremental reserves needed for loan growth.

Unemployment forecast scenarios were utilized to estimate probability

of default and are weighted based on management’s

estimate

of probability.

See Note 8 – Commitments and Contingencies for information on the allowance

for off-balance sheet credit

commitments.

Loan Portfolio Aging.

A loan is defined as a past due loan when one full payment is past due or a contractual maturity

is over 30 days

past due (“DPD”).

The following table presents the aging of the amortized cost basis in accruing

past due loans by class of loans.

30-59

60-89

90 +

Total

Nonaccrual

Total

(Dollars in Thousands)

DPD

Past Due

Current

Loans

June 30, 2024

Commercial, Financial and Agricultural

139

124

263

204,574

153

204,990

Real Estate – Construction

200,432

322

200,754

Real Estate – Commercial Mortgage

351

822,128

643

823,122

Real Estate – Residential

855

367

1,222

1,010,794

2,811

1,014,827

Real Estate – Home Equity

234

209,779

1,113

211,126

Consumer

2,816

786

3,602

231,329

473

235,404

Total

4,395

1,277

5,672

2,679,036

5,515

2,690,223

December 31, 2023

Commercial, Financial and Agricultural

311

105

416

224,463

311

225,190

Real Estate – Construction

206

195,563

322

196,091

Real Estate – Commercial Mortgage

794

823,753

909

825,456

Real Estate – Residential

670

704

1,000,525

2,990

1,004,219

Real Estate – Home Equity

268

209,653

999

210,920

Consumer

3,693

774

4,467

266,864

711

272,042

Total

5,942

913

6,855

2,720,821

6,242

2,733,918

Nonaccrual Loans

Loans are generally placed on nonaccrual status if principal or interest payments

become 90 days past due and/or

management deems the collectability of the principal and/or interest to

be doubtful.

Loans are returned to accrual status when the

principal and interest amounts contractually due are brought current

or when future payments are reasonably assured.

The following table presents the amortized cost basis of loans in nonaccrual

status and loans past due over 90 days and still on accrual

by class of loans.

June 30, 2024

December 31, 2023

Nonaccrual

With No

With

90 + Days

With No

With

90 + Days

(Dollars in Thousands)

ACL

Still Accruing

ACL

Still Accruing

Commercial, Financial and Agricultural

153

311

Real Estate – Construction

275

322

Real Estate – Commercial Mortgage

513

130

781

128

Real Estate – Residential

2,398

413

1,705

1,285

Real Estate – Home Equity

253

860

999

Consumer

473

711

Total Nonaccrual

Loans

3,439

2,076

2,486

3,756

Collateral Dependent Loans.

The following table presents the amortized cost basis of collateral-dependent

loans.

June 30, 2024

December 31, 2023

Real Estate

Non Real Estate

Real Estate

Non Real Estate

(Dollars in Thousands)

Secured

Commercial, Financial and Agricultural

Real Estate – Construction

275

Real Estate – Commercial Mortgage

513

1,296

Real Estate – Residential

1,690

1,706

Real Estate – Home Equity

253

Consumer

Total Collateral Dependent

Loans

2,731

3,277

A loan is collateral dependent when the borrower is experiencing financial

difficulty and repayment of the loan is dependent on

the

sale or operation of the underlying collateral.

The Bank’s collateral dependent

loan portfolio is comprised primarily of real estate secured loans, collateralized

by either residential

or commercial collateral types.

The loans are carried at fair value based on current values determined by

either independent appraisals

or internal evaluations, adjusted for selling costs or other amounts to be deducted

when estimating expected net sales proceeds.

Residential Real Estate Loans In Process of Foreclosure

At June 30, 2024 and December 31, 2023, the Company had $

0.6

million

and $

0.5

million, respectively, in 1-4 family

residential real estate loans for which formal foreclosure proceedings were in process.

Modifications to Borrowers Experiencing

Financial Difficulty.

Occasionally, the Company may

modify loans to borrowers who are

experiencing financial difficulty.

Loan modifications to borrowers in financial difficulty are loans in

which the Company has granted

an economic concession to the borrower that it would not otherwise consider.

In these instances, as part of a work-out alternative, the

Company will make concessions including the extension of the loan

term, a principal moratorium, a reduction in the interest rate, or a

combination thereof.

The impact of the modifications and defaults are factored into the allowance for credit

losses on a loan-by-loan

basis.

Thus, specific reserves are established based upon the results of either a

discounted cash flow analysis or the underlying

collateral value, if the loan is deemed to be collateral dependent.

A modified loan classification can be removed if the borrower’s

financial condition improves such that the borrower is no longer in financial difficulty,

the loan has not had any forgiveness of

principal or interest, and the loan is subsequently refinanced or restructured

at market terms and qualifies as a new loan.

At June 30, 2024, and December 31, 2023, the Company did

t have any modified loans made to borrowers due to the borrower

experiencing financial difficulty.

Credit Risk Management

The Company has adopted comprehensive lending policies, underwriting standards and

loan review

procedures designed to maximize loan income within an acceptable level

of risk.

Management and the Board of Directors review and

approve these policies and procedures on a regular basis (at least annually).

Reporting systems are used to monitor loan originations, loan quality,

concentrations of credit, loan delinquencies and nonperforming

loans and potential problem loans.

Management and the Credit Risk Oversight Committee periodically review

our lines of business to

monitor asset quality trends and the appropriateness of credit policies.

In addition, total borrower exposure limits are established and

concentration risk is monitored.

As part of this process, the overall composition of the portfolio is reviewed to gauge diversification

of risk, client concentrations, industry group, loan type, geographic area, or other

relevant classifications of loans.

Specific segments

of the loan portfolio are monitored and reported to the Board on a quarterly basis and

have strategic plans in place to supplement

Board approved credit policies governing exposure limits and underwriting

standards.

Detailed below are the types of loans within

the Company’s loan portfolio

and risk characteristics unique to each.

Commercial, Financial, and Agricultural – Loans in this category

are primarily made based on identified cash flows of the borrower

with consideration given to underlying collateral and personal or

other guarantees.

Lending policy establishes debt service coverage

ratio limits that require a borrower’s cash flow to be sufficient

to cover principal and interest payments on all new and existing debt.

The majority of these loans are secured by the assets being financed or other business assets such

as accounts receivable, inventory,

equipment.

Collateral values are determined based upon third party appraisals and evaluations.

Loan to value ratios at origination are

governed by established policy guidelines.

Real Estate Construction – Loans in this category consist of short-term

construction loans, revolving and non-revolving credit lines

and construction/permanent loans made to individuals and investors to finance

the acquisition, development, construction or

rehabilitation of real property.

These loans are primarily made based on identified cash flows of the borrower

or project and generally

secured by the property being financed, including 1-4 family residential properties

and commercial properties that are either owner-

occupied or investment in nature.

These properties may include either vacant or improved property.

Construction loans are generally

based upon estimates of costs and value associated with the completed project.

Collateral values are determined based upon third

party appraisals and evaluations.

Loan to value ratios at origination are governed by established policy guidelines.

The disbursement

of funds for construction loans is made in relation to the progress of the project and

as such these loans are closely monitored by on-

site inspections.

Real Estate Commercial Mortgage – Loans in this category consists of commercial

mortgage loans secured by property that is either

owner-occupied or investment in nature.

These loans are primarily made based on identified cash flows of the borrower or

project

with consideration given to underlying real estate collateral and

personal guarantees.

Lending policy establishes debt service

coverage ratios and loan to value ratios specific to the property type.

Collateral values are determined based upon third party

appraisals and evaluations.

Real Estate Residential – Residential mortgage loans held in the Company’s

loan portfolio are made to borrowers that demonstrate the

ability to make scheduled payments with full consideration to underwriting

factors such as current income, employment status, current

assets, and other financial resources, credit history,

and the value of the collateral.

Collateral consists of mortgage liens on 1-4 family

residential properties.

Collateral values are determined based upon third party appraisals and evaluations.

The Company does not

originate sub-prime loans.

Real Estate Home Equity – Home equity loans and lines are made to qualified individuals

for legitimate purposes generally secured

by senior or junior mortgage liens on owner-occupied

1-4 family homes or vacation homes.

Borrower qualifications include

favorable credit history combined with supportive income and debt ratio

requirements and combined loan to value ratios within

established policy guidelines.

Collateral values are determined based upon third party appraisals and evaluations.

Consumer Loans – This loan portfolio includes personal installment loans, direct

and indirect automobile financing, and overdraft

lines of credit.

The majority of the consumer loan category consists of direct and indirect automobile

loans.

Lending policy

establishes maximum debt to income ratios, minimum credit scores, and includes

guidelines for verification of applicants’ income and

receipt of credit reports.

Credit Quality Indicators

As part of the ongoing monitoring of the Company’s

loan portfolio quality, management

categorizes loans

into risk categories based on relevant information about the ability of borrowers to

service their debt such as: current financial

information, historical payment performance, credit documentation,

and current economic and market trends, among other

factors.

Risk ratings are assigned to each loan and revised as needed through established monitoring

procedures for individual loan

relationships over a predetermined amount and review of smaller balance homogenous

loan pools.

The Company uses the definitions

noted below for categorizing and managing its criticized loans.

Loans categorized as “Pass” do not meet the criteria set forth below

and are not considered criticized.

Special Mention – Loans in this category are presently protected from loss, but

weaknesses are apparent which, if not corrected, could

cause future problems.

Loans in this category may not meet required underwriting criteria and

have no mitigating factors.

More than

the ordinary amount of attention is warranted for these loans.

Substandard – Loans in this category exhibit well-defined weaknesses that would

typically bring normal repayment into jeopardy.

These loans are no longer adequately protected due to well-defined

weaknesses that affect the repayment capacity of the

borrower.

The possibility of loss is much more evident and above average supervision is required for

these loans.

Doubtful – Loans in this category have all the weaknesses inherent in a loan categorized

as Substandard, with the characteristic that

the weaknesses make collection or liquidation in full, on the basis of currently

existing facts, conditions, and values, highly

questionable and improbable.

Performing/Nonperforming – Loans within certain homogenous

loan pools (home equity and consumer) are not individually reviewed,

but are monitored for credit quality via the aging status of the loan and by payment

activity.

The performing or nonperforming status

is updated on an on-going basis dependent upon improvement and

deterioration in credit quality.

The following tables summarize gross loans held for investment at June

30, 2024 and December 31, 2023 and current period gross

write-offs for the six months ended June 30, 2024 and twelve months

ended December 31, 2023 by years of origination and internally

assigned credit risk ratings (refer to Credit Risk Management section for detail

on risk rating system).

(Dollars in Thousands)

Term

Loans by Origination Year

Revolving

As of June 30, 2024

2024

2023

2022

2021

2020

Prior

Loans

Total

Commercial, Financial,

Agriculture:

Pass

18,575

49,781

46,330

23,774

7,579

11,464

44,117

201,620

Special Mention

213

339

468

158

1,615

2,800

Substandard

110

102

106

107

570

Total

18,788

50,230

46,900

24,011

7,651

11,571

45,839

204,990

Current-Period Gross

Writeoffs

160

343

682

Real Estate -

Construction:

Pass

32,673

110,069

44,567

5,782

186

645

193,922

Special Mention

3,201

709

335

4,245

Substandard

1,979

465

2,587

Total

35,942

112,757

44,976

6,247

186

646

200,754

Real Estate -

Commercial Mortgage:

Pass

45,499

118,169

252,091

129,114

94,607

133,921

19,088

792,489

Special Mention

179

5,513

5,456

784

5,122

17,054

Substandard

5,210

3,536

1,295

1,989

1,549

13,579

Total

50,888

123,682

261,083

130,409

97,380

140,592

19,088

823,122

Real Estate - Residential:

Pass

78,716

345,104

378,478

74,703

33,062

84,752

9,074

1,003,889

Special Mention

267

1,136

483

455

2,428

Substandard

1,416

2,636

1,211

3,247

8,510

Total

78,716

345,371

379,981

78,475

34,756

88,454

9,074

1,014,827

Current-Period Gross

Writeoffs

Real Estate - Home

Equity:

Performing

171

535

114

969

208,167

210,013

Nonperforming

1,113

Total

171

535

114

969

209,280

211,126

Current-Period Gross

Writeoffs

Consumer:

Performing

18,338

56,734

71,927

55,518

15,708

8,059

8,174

234,458

Nonperforming

236

153

473

946

Total

18,418

56,734

72,163

55,671

15,708

8,063

8,647

235,404

Current-Period Gross

Writeoffs

1,237

752

1,166

351

134

114

3,820

(Dollars in Thousands)

Term

Loans by Origination Year

Revolving

As of December 31, 2023

2023

2022

2021

2020

2019

Prior

Loans

Total

Commercial, Financial,

Agriculture:

Pass

57,320

66,671

28,933

10,610

7,758

7,502

44,350

223,144

Special Mention

168

608

356

1,227

Substandard

164

177

122

161

819

Total

57,652

67,456

29,387

10,697

7,787

7,624

44,587

225,190

Current-Period Gross

Writeoffs

252

511

Real Estate - Construction:

Pass

101,684

68,265

18,181

188

4,617

192,935

Special Mention

631

500

539

212

1,882

Substandard

576

651

1,274

Total

102,315

68,812

19,296

863

188

4,617

196,091

Real Estate - Commercial

Mortgage:

Pass

117,840

275,079

135,663

101,210

43,878

109,878

18,367

801,915

Special Mention

3,266

5,684

229

1,358

573

11,110

Substandard

1,226

6,695

1,637

605

1,574

694

12,431

Total

121,106

281,989

142,358

103,076

45,841

112,025

19,061

825,456

Current-Period Gross

Writeoffs

120

Real Estate - Residential:

Pass

372,394

400,437

83,108

35,879

24,848

68,685

8,252

993,603

Special Mention

268

502

313

1,255

Substandard

570

1,110

1,906

1,626

1,007

3,142

9,361

Total

373,232

401,636

85,097

38,007

25,855

72,140

8,252

1,004,219

Current-Period Gross

Writeoffs

Real Estate - Home

Equity:

Performing

890

127

386

950

207,509

209,921

Nonperforming

999

Total

890

127

386

950

208,508

210,920

Current-Period Gross

Writeoffs

Consumer:

Performing

68,496

90,031

70,882

21,314

10,210

4,258

5,431

270,622

Nonperforming

293

355

710

1,420

Total

68,789

90,386

70,940

21,318

10,210

4,258

6,141

272,042

Current-Period Gross

Writeoffs

3,137

3,224

1,362

329

230

162

8,543

NOTE 4 – MORTGAGE BANKING ACTIVITIES

The Company’s mortgage

banking activities include mandatory delivery loan sales, forward sales contracts used

to manage residential

loan pipeline price risk, utilization of warehouse lines to fund secondary

market residential loan closings, and residential mortgage

servicing.

Residential Mortgage Loan Production

The Company originates, markets, and services conventional and government

-sponsored residential mortgage loans.

Generally,

conforming fixed rate residential mortgage loans are held for sale in the secondary

market and non-conforming and adjustable-rate

residential mortgage loans may be held for investment.

The volume of residential mortgage loans originated for sale and secondary

market prices are the primary drivers of origination revenue.

Residential mortgage loan commitments are generally outstanding for 30

to 90 days, which represents the typical period from

commitment to originate a residential mortgage loan to when the closed

loan is sold to an investor.

Residential mortgage loan

commitments are subject to both credit and price risk.

Credit risk is managed through underwriting policies and procedures,

including

collateral requirements, which are generally accepted by the secondary

loan markets.

Price risk is primarily related to interest rate

fluctuations and is partially managed through forward sales of residential mortgage

-backed securities (primarily to-be announced

securities, or TBAs) or mandatory delivery commitments with investors.

The unpaid principal balance of residential mortgage loans held for sale, notional

amounts of derivative contracts related to residential

mortgage loan commitments,

such as interest rate lock commitments (“IRLC’s”)

and forward contract sales and their related fair

values are set- forth below.

June 30, 2024

December 31, 2023

Unpaid Principal

(Dollars in Thousands)

Balance/Notional

Fair Value

Balance/Notional

Fair Value

Residential Mortgage Loans Held for Sale

23,128

24,022

27,944

28,211

Residential Mortgage Loan Commitments ("IRLCs")

(1)

37,992

690

23,545

523

Forward Sales Contracts

(2)

35,500

24,500

209

(1)

Recorded in other assets at fair value

(2)

Recorded in other assets and other liabilities at fair value,

respectively

At June 30, 2024, the Company had

residential mortgage loans held for sale 30-89 days past due and $

0.7

million of loans were on

nonaccrual status. At December 31, 2023, the Company had

residential mortgage loans held for sale 30-89 days past due and $

0.7

million of loans were on nonaccrual status.

Mortgage banking revenue was as follows:

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in Thousands)

2024

2023

2024

2023

Net realized gains on sales of mortgage loans

3,159

2,301

4,835

3,494

Net change in unrealized gain on mortgage loans held for sale

(934)

169

(476)

Net change in the fair value of IRLC's

(37)

(75)

167

452

Net change in the fair value of forward sales contracts

132

316

264

(86)

Pair-Offs on net settlement of forward sales contracts

152

210

Mortgage servicing rights additions

242

287

Net origination fees

807

1,563

1,372

2,468

Total mortgage banking

revenues

4,381

3,363

7,259

6,234

Residential Mortgage Servicing

The Company may retain the right to service residential mortgage loans

sold.

The unpaid principal balance of loans serviced for

others is the primary driver of servicing revenue.

The following represents a summary of mortgage servicing rights.

(Dollars in Thousands)

June 30, 2024

December 31, 2023

Number of residential mortgage loans serviced for others

489

450

Outstanding principal balance of residential mortgage loans serviced

for others

129,390

108,897

Weighted average

interest rate

5.65%

5.37%

Remaining contractual term (in months)

350

309

Conforming conventional loans serviced by the Company are sold to Federal

National Mortgage Association (“FNMA”) on a non-

recourse basis, whereby foreclosure losses are generally

the responsibility of FNMA and not the Company.

The government loans

serviced by the Company are secured through the Government National

Mortgage Association (“GNMA”), whereby the Company is

insured against loss by the Federal Housing Administration or partially

guaranteed against loss by the Veterans

Administration.

June 30, 2024, the servicing portfolio balance consisted of the following

loan types: FNMA (

%), GNMA (

%), and private investor

(

%).

FNMA and private investor loans are structured as actual/actual payment remittance.

The Company had

delinquent residential mortgage loans in GNMA pools serviced by the Company

at June 30, 2024 and December

31, 2023, respectively.

The Company had

repurchases for the three and six months ended June 30, 2024, and $

0.5

million and $

1.5

million for the three and six months ended June 30, 2023, in delinquent

residential loans from the GNMA pools. When delinquent

residential loans are repurchased, the Company has the intention to modify

their terms and include the loans in new GNMA pools.

Activity in the capitalized mortgage servicing rights was as follows:

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in Thousands)

2024

2023

2024

2023

Beginning balance

919

2,792

831

2,599

Additions due to loans sold with servicing retained

242

287

Deletions and amortization

(46)

(36)

(108)

(34)

Sale of servicing rights

(2,287)

Ending balance

965

565

965

565

The Company did

t record any permanent impairment losses on mortgage servicing rights for the

three months ended June 30, 2024

or 2023.

The key unobservable inputs used in determining the fair value of the Company’s

mortgage servicing rights were as follows:

June 30, 2024

December 31, 2023

Minimum

Maximum

Minimum

Maximum

Discount rates

9.50%

12.00%

9.50%

12.00%

Annual prepayment speeds

9.82%

18.47%

11.23%

17.79%

Cost of servicing (per loan)

Changes in residential mortgage interest rates directly affect

the prepayment speeds used in valuing the Company’s

mortgage

servicing rights.

A separate third party model is used to estimate prepayment speeds based on interest rates, housing

turnover rates,

estimated loan curtailment, anticipated defaults, and other relevant factors.

The weighted average annual prepayment speed was

13.44

% at June 30, 2024 and

14.22

% at December 31, 2023.

Warehouse

Line Borrowings

The Company has the following warehouse lines of credit and master repurchase

agreements with various financial institutions at June

30, 2024.

Amounts

(Dollars in Thousands)

Outstanding

million master repurchase agreement without defined expiration.

Interest is at the SOFR rate plus

2.00%

3.00%

, with a floor rate of

3.25%

4.25%

A cash pledge deposit of $

0.1

million is required by the lender.

1,403

million warehouse line of credit agreement expiring in

December 2024

Interest is at the SOFR plus

2.75%

3.25%

1,905

Total Warehouse

Borrowings

3,308

Warehouse

line borrowings are classified as short-term borrowings.

At December 31, 2023, warehouse line borrowings totaled $

8.4

million. At June 30, 2024, the Company had residential mortgage loans

held for sale pledged as collateral under the above warehouse

lines of credit and master repurchase agreements.

The above agreements also contain covenants which include certain financial

requirements, including maintenance of minimum tangible net worth, minimum

liquid assets, and maximum debt to net worth ratio, as

defined in the agreements.

The Company was in compliance with all significant debt covenants at June 30, 2024.

The Company has extended a $

million warehouse line of credit to CCHL, a

% owned subsidiary entity.

Balances and

transactions under this line of credit are eliminated in the Company’s

consolidated financial statements and thus not included in the

total short term borrowings noted on the Consolidated Statement of

Financial Condition.

The balance of this line of credit was $

32.4

million and $

31.4

million at June 30, 2024 and December 31, 2023, respectively.

NOTE 5 – DERIVATIVES

The Company enters into derivative financial instruments to manage exposures

that arise from business activities that result in the

receipt or payment of future known and uncertain cash amounts, the value of

which are determined by interest rates.

The Company’s

derivative financial instruments are used to manage differences in

the amount, timing, and duration of the Company’s

known or

expected cash receipts and its known or expected cash payments principally

related to the Company’s subordinated

debt.

Cash Flow Hedges of Interest Rate Risk

Interest rate swaps with notional amounts totaling $

million at June 30, 2024 were designed as a cash flow hedge for subordinated

debt.

Under the swap arrangement, the Company will pay a fixed interest rate of

2.50

% and receive a variable interest rate based on

three-month CME Term

SOFR (secured overnight financing rate).

For derivatives designated and that qualify as cash flow hedges of interest rate

risk, the gain or loss on the derivative is recorded in

accumulated other comprehensive income (“AOCI”) and subsequently

reclassified into interest expense in the same period(s) during

which the hedged transaction affects earnings. Amounts reported

in accumulated other comprehensive income related to derivatives

will be reclassified to interest expense as interest payments are made on the

Company’s variable-rate subordinated

debt.

The following table reflects the cash flow hedges included in the consolidated

statements of financial condition

Statement of Financial

Notional

Fair

Weighted Average

(Dollars in Thousands)

Condition Location

Amount

Value

Maturity (Years)

June 30, 2024

Interest rate swaps related to subordinated debt

Other Assets

30,000

5,705

6.0

December 31, 2023

Interest rate swaps related to subordinated debt

Other Assets

30,000

5,317

6.5

The following table presents the change in net gains (losses) recorded in AOCI and

the consolidated statements of income related to

the cash flow derivative instruments (interest rate swaps related to subordinated

debt) for the three and six months ended June 30,

2024.

Change in Gain

Amount of Gain

(Loss) Recognized

(Loss) Reclassified

(Dollars in Thousands)

Category

in AOCI

from AOCI to Income

Three months ended June 30, 2024

Interest expense

(37)

376

Three months ended June 30, 2023

Interest expense

437

332

Six months ended June 30, 2024

Interest expense

289

751

Six months ended June 30, 2023

Interest expense

(161)

641

The Company estimates there will be approximately $

1.3

million reclassified as a decrease to interest expense within the next 12

months.

The Company had a collateral liability of $

5.8

million and $

5.5

million at June 30, 2024 and December 31, 2023, respectively.

NOTE 6 – LEASES

Operating leases in which the Company is the lessee are recorded as operating

lease right of use (“ROU”) assets and operating

liabilities, included in other assets and liabilities, respectively,

on its Consolidated Statement of Financial Condition.

The Company’s operating

leases primarily relate to banking offices with remaining lease terms

from one to

years.

The Company’s

leases are not complex and do not contain residual value guarantees, variable

lease payments, or significant assumptions or judgments

made in applying the requirements of Topic

842.

Operating leases with an initial term of 12 months or less are not recorded on the

Consolidated Statement of Financial Condition and the related lease expense is recognized on a straight-line basis over the lease term.

At June 30, 2024, the operating lease ROU assets and liabilities were $

25.8

million and $

26.4

million, respectively. At December

31,

2023, ROU assets and liabilities were $

27.0

million and $

27.4

million, respectively.

The Company does not have any finance leases

or any significant lessor agreements.

The table below summarizes our lease expense and other information related

to the Company’s operating leases.

Three Months Ended

Six Months Ended

June 30,

(Dollars in Thousands)

2024

2023

2024

2023

Operating lease expense

828

705

1,668

1,405

Short-term lease expense

195

132

389

271

Total lease expense

1,023

837

2,057

1,676

Other information:

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

784

706

1,494

1,411

Right-of-use assets obtained in exchange for new operating lease liabilities

2,993

Weighted average

remaining lease term — operating leases (in years)

16.7

18.5

16.7

18.5

Weighted average

discount rate — operating leases

3.5%

3.3%

3.5%

3.3%

The table below summarizes the maturity of remaining lease liabilities:

(Dollars in Thousands)

June 30, 2024

2024

1,644

2025

3,083

2026

2,947

2027

2,882

2028

2,633

2029 and thereafter

20,690

Total

33,879

Less: Interest

(7,505)

Present Value

of Lease liability

26,374

At June 30, 2024, the Company had

one

additional operating lease obligation for a banking office (to be constructed)

that has not yet

commenced.

The lease has payments totaling $

3.8

million based on an initial contract term of

years.

Payments for the banking

office are expected to commence after the construction period

ends, which is expected to occur during the fourth quarter of 2024.

A related party is the lessor in a land lease with the Company.

The payments under the lease agreement provide for annual lease

payments of approximately $

0.1

million annually through December 2033, and thereafter,

increase by

% every

years until 2053 at

which time the rent amount will adjust based on reappraisal of the parcel rental

value.

The Company then has

four

successive options

to extend the lease for

five years

each with rental increases of 5% at each extension.

The aggregate remaining obligation of the lease

totaled $

2.2

million at June 30, 2024.

NOTE 7 - EMPLOYEE BENEFIT PLANS

The Company has a defined benefit pension plan covering substantially all full-time

and eligible part-time associates and a

Supplemental Executive Retirement Plan (“SERP”) and a Supplemental

Executive Retirement Plan II (“SERP II”) covering its

executive officers.

The defined benefit plan was amended in December 2019 to remove plan eligibility

for new associates hired after

December 31, 2019.

The SERP II was adopted by the Company’s

Board on May 21, 2020 and covers certain executive officers that

were not covered by the SERP.

The components of the net periodic benefit cost for the Company’s

qualified benefit pension plan were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in Thousands)

2024

2023

2024

2023

Service Cost

929

872

1,857

1,744

Interest Cost

1,524

1,458

3,048

2,916

Expected Return on Plan Assets

(2,029)

(1,701)

(4,058)

(3,403)

Prior Service Cost Amortization

Net Loss Amortization

234

467

Net Periodic Benefit Cost

465

864

929

1,727

Discount Rate

5.29%

5.63%

5.29%

5.63%

Long-term Rate of Return on Assets

6.75%

The components of the net periodic benefit cost for the Company’s

SERP and SERP II were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in Thousands)

2024

2023

2024

2023

Service Cost

Interest Cost

114

130

227

261

Prior Service Cost Amortization

Net Loss Amortization

(71)

(155)

(140)

(309)

Pension Settlement Gain

(291)

Net Periodic Benefit Cost

(274)

105

(254)

Discount Rate

5.11%

5.45%

5.11%

5.45%

During the month of June 2023, lump sum payments made under the SERP triggered

settlement accounting and remeasurement of the

plan at June 30, 2023.

In accordance with applicable accounting guidance for retirement benefit plans, the

Company recorded a

settlement gain of $

0.3

million in June 2023.

The service cost component of net periodic benefit cost is reflected in

compensation expense in the accompanying statements of

income.

The other components of net periodic cost are included in “other” within the noninterest

expense category in the statements

of income.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Lending Commitments

The Company is a party to financial instruments with off-balance

sheet risks in the normal course of business

to meet the financing needs of its clients.

These financial instruments consist of commitments to extend credit and standby

letters of

credit.

The Company’s maximum exposure

to credit loss under standby letters of credit and commitments to extend credit is represented

the contractual amount of those instruments.

The Company uses the same credit policies in establishing commitments

and issuing

letters of credit as it does for on-balance sheet instruments.

The amounts associated with the Company’s

off-balance sheet

obligations were as follows:

June 30, 2024

December 31, 2023

(Dollars in Thousands)

Fixed

Variable

Total

Fixed

Variable

Total

Commitments to Extend Credit

(1)

201,381

533,164

734,545

207,605

534,745

742,350

Standby Letters of Credit

6,134

6,094

Total

207,515

533,164

740,679

213,699

534,745

748,444

(1)

Commitments include unfunded loans, revolving

lines of credit, and off-balance sheet residential

loan commitments.

Commitments to extend credit are agreements to lend to a client so long as there is no violation of

any condition established in the

contract.

Commitments generally have fixed expiration dates or other termination

clauses and may require payment of a fee.

Since

many of the commitments are expected to expire without being drawn upon,

the total commitment amounts do not necessarily

represent future cash requirements.

Standby letters of credit are conditional commitments issued by the

Company to guarantee the performance of a client to a third

party.

The credit risk involved in issuing letters of credit is essentially the same as that involved

in extending loan facilities. In

general, management does not anticipate any material losses as a result of

participating in these types of transactions.

However, any

potential losses arising from such transactions are reserved for in the same manner

as management reserves for its other credit

facilities.

For both on- and off-balance sheet financial instruments, the Company

requires collateral to support such instruments when it is

deemed necessary.

The Company evaluates each client’s

creditworthiness on a case-by-case basis.

The amount of collateral

obtained upon extension of credit is based on management’s

credit evaluation of the counterparty.

Collateral held varies, but may

include deposits held in financial institutions; U.S. Treasury

securities; other marketable securities; real estate; accounts receivable;

property, plant and

equipment; and inventory.

The allowance for credit losses for off-balance sheet credit commitments

that are not unconditionally cancellable by the bank is

adjusted as a provision for credit loss expense and is recorded in other liabilities.

The following table shows the activity in the

allowance.

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in Thousands)

2024

2023

2024

2023

Beginning Balance

3,121

2,833

3,191

2,989

Provision for Credit Losses

287

(52)

131

Ending Balance

3,139

3,120

3,139

3,120

Other Commitments.

In the normal course of business, the Company enters into lease commitments

which are classified as operating

leases. See Note 6 – Leases for additional information on the maturity of the

Company’s operating lease commitments.

The Company has an outstanding commitment of up to $

1.0

million in a bank tech venture capital fund focused on finding and

funding technology solutions for community banks and commitments

of up to $

8.7

million for a solar tax credit equity fund

investment.

At June 30, 2024, the amount remaining to be funded for the bank tech venture capital

and solar tax credit equity

investment fund commitments was $

0.4

million and $

8.2

million, respectively.

Contingencies

The Company is a party to lawsuits and claims arising out of the normal course of business.

In management's opinion,

there are

known pending claims or litigation, the outcome of which would, individually or in

the aggregate, have a material effect

on the consolidated results of operations, financial position, or cash flows

of the Company.

Indemnification Obligation

The Company is a member of the Visa U.S.A. network.

Visa U.S.A member banks are

required to

indemnify the Visa U.S.A.

network for potential future settlement of certain litigation (the “Covered Litigation”)

that relates to several

antitrust lawsuits challenging the practices of Visa

and MasterCard International.

In 2008, the Company, as a member

of the Visa

U.S.A. network, obtained Class B shares of Visa,

Inc. upon its initial public offering.

Since its initial public offering, Visa,

Inc. has

funded a litigation reserve for the Covered Litigation resulting in a reduction

in the Class B shares held by the Company.

During the

first quarter of 2011, the Company sold its remaining

Class B shares.

Associated with this sale, the Company entered into a swap

contract with the purchaser of the shares that requires a payment to the

counterparty in the event that Visa, Inc. makes

subsequent

revisions to the conversion ratio for its Class B shares.

Conversion ratio payments and ongoing fixed quarterly charges

are reflected in

earnings in the period incurred.

Fixed charges included in the swap liability are payable quarterly

until the litigation reserve is fully

liquidated and at which time the aforementioned swap contract will be terminated.

Quarterly fixed payments approximate $

0.2

million.

NOTE 9 – FAIR VALUE

MEASUREMENTS

The fair value of an asset or liability is the price that would be received to sell that asset or paid

to transfer that liability in an orderly

transaction occurring in the principal market (or most advantageous market in

the absence of a principal market) for such asset or

liability.

In estimating fair value, the Company utilizes valuation techniques that are consistent with

the market approach, the income

approach and/or the cost approach.

Such valuation techniques are consistently applied.

Inputs to valuation techniques include the

assumptions that market participants would use in pricing an asset or liability.

Accounting Standards Codification Topic

820

establishes a fair value hierarchy for valuation inputs that gives the highest priority

to quoted prices in active markets for identical

assets or liabilities and the lowest priority to unobservable inputs.

The fair value hierarchy is as follows:

●

Level 1 Inputs -

Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting

entity has the

ability to access at the measurement date

●

Level 2 Inputs -

Inputs other than quoted prices included in Level 1 that are observable for the asset or liability,

either directly

or indirectly. These might

include quoted prices for similar assets or liabilities in active markets, quoted prices

for identical

or similar assets or liabilities in markets that are not active, inputs other

than quoted prices that are observable for the asset or

liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.)

or inputs that are derived principally from, or

corroborated, by market data by correlation or other means

●

Level 3 Inputs -

Unobservable inputs for determining the fair values of assets or liabilities that reflect

an entity’s own

assumptions about the assumptions that market participants would

use in pricing the assets or liabilities.

Assets and Liabilities Measured at Fair Value

on a Recurring Basis

Securities Available for Sale.

U.S. Treasury securities are reported at fair value

utilizing Level 1 inputs.

Other securities classified as

available for sale are reported at fair value utilizing Level 2 inputs.

For these securities, the Company obtains fair value measurements

from an independent pricing service.

The fair value measurements consider observable data that may include dealer quotes,

market

spreads, cash flows, the U.S. Treasury yield curve,

live trading levels, trade execution data, credit information and the bond’s

terms

and conditions, among other things.

In general, the Company does not purchase securities that have a complicated structure.

The Company’s entire portfolio consists of

traditional investments, nearly all of which are U.S. Treasury

obligations, federal agency bullet or mortgage pass-through

securities, or

general obligation or revenue-based municipal bonds.

Pricing for such instruments is easily obtained.

At least annually, the Company

will validate prices supplied by the independent pricing service by compari

ng them to prices obtained from an independent third-party

source.

Equity Securities.

Investment securities classified as equity securities are carried at cost and

the share of earnings or losses is reported

through net income as an adjustment to the investment balance. These securities are not

readily marketable and therefore are classified

as a Level 3 input within the fair value hierarchy.

Loans Held for Sale

The fair value of residential mortgage loans held for sale based on Level 2 inputs is determined,

when possible,

using either quoted secondary-market prices or investor commitments.

If no such quoted price exists, the fair value is determined

using quoted prices for a similar asset or assets, adjusted for the specific attributes of

that loan, which would be used by other market

participants.

The Company has elected the fair value option accounting for its held for sale loans.

Mortgage Banking Derivative Instruments.

The fair values of interest rate lock commitments (“IRLCs”) are derived by valuation

models incorporating market pricing for instruments with similar characteristics,

commonly referred to as best execution pricing, or

investor commitment prices for best effort IRLCs which have

unobservable inputs, such as an estimate of the fair value of the

servicing rights expected to be recorded upon sale of the loans, net estimated costs to originate

the loans, and the pull-through rate,

and are therefore classified as Level 3 within the fair value hierarchy.

The fair value of forward sale commitments is based on

observable market pricing for similar instruments and are therefore

classified as Level 2 within the fair value hierarchy.

Interest Rate Swap.

The Company’s derivative positions are

classified as Level 2 within the fair value hierarchy and are valued using

models generally accepted in the financial services industry and that

use actively quoted or observable market input values from

external market data providers.

The fair value derivatives are determined using discounted cash flow models.

Fair Value

Swap

The Company entered into a stand-alone derivative contract with the purchaser of

its Visa Class B shares.

The

valuation represents the amount due and payable to the counterparty based upon

the revised share conversion rate, if any,

during the

period. At June 30, 2024 and December 31, 2023, there were

amounts payable.

A summary of fair values for assets and liabilities recorded at fair

value on a recurring basis consisted of the following:

Level 1

Level 2

Level 3

Total

Fair

(Dollars in Thousands)

Inputs

Value

June 30, 2024

ASSETS:

Securities Available for

Sale:

U.S. Government Treasury

23,868

U.S. Government Agency

126,105

States and Political Subdivisions

38,628

Mortgage-Backed Securities

58,527

Corporate Debt Securities

55,717

Equity Securities

2,537

Loans Held for Sale

24,022

Residential Mortgage Loan Commitments ("IRLCs")

690

Interest Rate Swap Derivative

5,705

Forward Sales Contracts

December 31, 2023

ASSETS:

Securities Available for

Sale:

U.S. Government Treasury

24,679

U.S. Government Agency

145,034

States and Political Subdivisions

39,083

Mortgage-Backed Securities

63,303

Corporate Debt Securities

57,552

Equity Securities

3,450

Loans Held for Sale

28,211

Residential Mortgage Loan Commitments ("IRLCs")

523

Interest Rate Swap Derivative

5,317

LIABILITIES:

Forward Sales Contracts

209

Mortgage Banking Activities

The Company had Level 3 issuances and transfers related to mortgage banking

activities of $

4.1

million

and $

7.1

million, respectively, for the six months

ended June 30, 2024, and $

7.9

million and $

11.8

million, respectively, for

the six

months ended June 30, 2023.

Issuances are valued based on the change in fair value of the underlying

mortgage loan from inception

of the IRLC to the Consolidated Statement of Financial Condition date,

adjusted for pull-through rates and costs to originate.

IRLCs

transferred out of Level 3 represent IRLCs that were funded and moved

to mortgage loans held for sale, at fair value.

Assets Measured at Fair Value

on a Non-Recurring Basis

Certain assets are measured at fair value on a non-recurring basis (i.e., the

assets are not measured at fair value on an ongoing basis

but are subject to fair value adjustments in certain circumstances).

An example would be assets exhibiting evidence of impairment.

The following is a description of valuation methodologies used for assets measured

on a non-recurring basis.

Collateral Dependent Loans

Impairment for collateral dependent loans is measured using the fair

value of the collateral less selling

costs.

The fair value of collateral is determined by an independent valuation

or professional appraisal in conformance with banking

regulations.

Collateral values are estimated using Level 3 inputs due to the volatility in the real estate market,

and the judgment and

estimation involved in the real estate appraisal process.

Collateral dependent loans are reviewed and evaluated on at least a quarterly

basis for additional impairment and adjusted accordingly.

Valuation

techniques are consistent with those techniques applied in prior

periods.

Collateral-dependent loans had a carrying value of $

2.8

million with a valuation allowance of $

0.1

million at June 30, 2024

and a carrying value of $

3.3

million and a $

0.1

million valuation allowance at December 31, 2023.

Other Real Estate Owned

During the first six months of 2024, certain foreclosed assets, upon initial recognition,

were measured and

reported at fair value through a charge-off

to the allowance for credit losses based on the fair value of the foreclosed asset less

estimated cost to sell.

The fair value of the foreclosed asset is determined by an independent valuation or

professional appraisal in

conformance with banking regulations.

On an ongoing basis, we obtain updated appraisals on foreclosed assets and realize valuation

adjustments as necessary.

The fair value of foreclosed assets is estimated using Level 3 inputs due to the judgment

and estimation

involved in the real estate valuation process.

Mortgage Servicing Rights

Residential mortgage loan servicing rights are evaluated for impairment

at each reporting period based

upon the fair value of the rights as compared to the carrying amount.

Fair value is determined by a third party valuation model using

estimated prepayment speeds of the underlying mortgage loans serviced and

stratifications based on the risk characteristics of the

underlying loans (predominantly loan type and note interest rate).

The fair value is estimated using Level 3 inputs, including a

discount rate, weighted average prepayment speed, and the cost of loan

servicing.

Further detail on the key inputs utilized are

provided in Note 4 – Mortgage Banking Activities.

At each of June 30, 2024 and December 31, 2023, there was

valuation

allowance for loan servicing rights.

Assets and Liabilities Disclosed at Fair Value

The Company is required to disclose the estimated fair value of financial instruments,

both assets and liabilities, for which it is

practical to estimate fair value and the following is a description of valuation

methodologies used for those assets and liabilities.

Cash and Short-Term

Investments.

The carrying amount of cash and short-term investments is used to approximate

fair value, given

the short time frame to maturity and as such assets do not present unanticipated

credit concerns.

Securities Held to Maturity

Securities held to maturity are valued in accordance with the methodology previously

noted in the

caption “Assets and Liabilities Measured at Fair Value

on a Recurring Basis – Securities Available

for Sale.”

Other Equity Securities.

Other equity securities are accounted for under the equity method (Topic

323) and recorded at cost.

These

securities are not readily marketable securities and are reflected in Other

Assets on the Statement of Financial Condition.

Loans.

The loan portfolio is segregated into categories and the fair value of each loan category is calculated

using present value

techniques based upon projected cash flows and estimated discount

rates.

The values reported reflect the incorporation of a liquidity

discount to meet the objective of “exit price” valuation.

Deposits.

The fair value of Noninterest Bearing Deposits, NOW Accounts, Money Market

Accounts and Savings Accounts are the

amounts payable on demand at the reporting date. The fair value of fixed maturity

certificates of deposit is estimated using present

value techniques and rates currently offered for deposits of

similar remaining maturities.

Subordinated Notes Payable.

The fair value of each note is calculated using present value techniques,

based upon projected cash

flows and estimated discount rates as well as rates being offered

for similar obligations.

Short-Term

and Long-Term

Borrowings.

The fair value of each note is calculated using present value techniques,

based upon

projected cash flows and estimated discount rates as well as rates being offered

for similar debt.

A summary of estimated fair values of significant financial instruments not

recorded at fair value consisted of the following:

June 30, 2024

Carrying

Level 1

Level 2

Level 3

(Dollars in Thousands)

Value

Inputs

ASSETS:

Cash

75,304

Fed Funds Sold and Interest Bearing Deposits

272,675

Investment Securities, Held to Maturity

582,984

413,735

137,509

Other Equity Securities

2,848

Mortgage Servicing Rights

965

1,552

Loans, Net of Allowance for Credit Losses

2,661,004

2,506,855

LIABILITIES:

Deposits

3,608,564

3,161,667

Short-Term

Borrowings

25,770

Subordinated Notes Payable

52,887

43,620

Long-Term Borrowings

1,009

December 31, 2023

Carrying

Level 1

Level 2

Level 3

(Dollars in Thousands)

Value

Inputs

ASSETS:

Cash

83,118

Fed Funds Sold and Interest Bearing Deposits

228,949

Investment Securities, Held to Maturity

625,022

441,189

150,562

Other Equity Securities

2,848

Mortgage Servicing Rights

831

1,280

Loans, Net of Allowance for Credit Losses

2,703,977

2,510,529

LIABILITIES:

Deposits

3,701,822

3,243,896

Short-Term

Borrowings

35,341

Subordinated Notes Payable

52,887

44,323

Long-Term Borrowings

315

All non-financial instruments are excluded from the above table.

The disclosures also do not include goodwill.

Accordingly, the

aggregate fair value amounts presented do not represent the underlying

value of the Company.

NOTE 10 – ACCUMULATED

OTHER COMPREHENSIVE INCOME (LOSS)

The amounts allocated to accumulated other comprehensive income

(loss) are presented in the table below.

Accumulated

Securities

Other

Available

Interest Rate

Retirement

Comprehensive

(Dollars in Thousands)

for Sale

Swap

Plans

(Loss) Income

Balance as of January 1, 2024

(25,691)

3,970

(425)

(22,146)

Other comprehensive income during the period

1,181

289

1,470

Balance as of June 30, 2024

(24,510)

4,259

(425)

(20,676)

Balance as of January 1, 2023

(37,349)

4,625

(4,505)

(37,229)

Other comprehensive income (loss) during the period

4,236

(162)

(217)

3,857

Balance as of June 30, 2023

(33,113)

4,463

(4,722)

(33,372)

Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS

OPERATIONS

Management’s discussion

and analysis (“MD&A”) provides supplemental information, which sets forth

the major factors that have

affected our financial condition and results of operations

and should be read in conjunction with the Consolidated Financial

Statements and related notes.

The following information should provide a better understanding of

the major factors and trends that

affect our earnings performance and financial condition,

and how our performance during the second quarter of 2024 compares with

prior periods.

Throughout this section, Capital City Bank Group, Inc., and subsidiaries, collectively,

is referred to as “CCBG,”

“Company,”

“we,” “us,” or “our.”

CAUTION CONCERNING FORWARD

-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including this MD&A section, contains

“forward-looking statements”

within the meaning of the

Private Securities Litigation Reform Act of 1995.

These forward-looking statements include, among others, statements about

our

beliefs, plans, objectives, goals, expectations, estimates and intentions that are

subject to significant risks and uncertainties and are

subject to change based on various factors, many of which are beyond

our control.

The words “may,”

“could,” “should,” “would,”

“believe,” “anticipate,”

“estimate,” “expect,”

“intend,” “plan,”

“target,”

“vision,” “goal,”

and similar expressions are intended to

identify forward-looking statements.

All forward-looking statements, by their nature, are subject to risks and uncertainties.

Our actual future results may differ materially

from those set forth in our forward-looking statements.

Please see the Introductory Note of this quarterly report on Form 10-Q

as well

as the Introductory Note and

Item 1A. Risk Factors

of our 2023 Form 10-K/A, as updated in our subsequent quarterly reports filed

Form 10-Q, and in our other filings made from time to time with the SEC after the date

of this report.

However, other factors besides those listed in our

Quarterly Report or in our Annual Report also could adversely affect our

results,

and you should not consider any such list of factors to be a complete set of all potential risks or

uncertainties.

Any forward-looking

statements made by us or on our behalf speak only as of the date they are made.

We do not undertake to

update any forward-looking

statement, except as required by applicable law.

BUSINESS OVERVIEW

We are a financial

holding company headquartered in Tallahassee,

Florida, and we are the parent of our wholly owned subsidiary,

Capital City Bank (the “Bank” or “CCB”).

We offer

a broad array of products and services through a total of 63 full-service offices

and 105 ATMs/ITMs

located in Florida, Georgia, and Alabama.

Through Capital City Home Loans, LLC (“CCHL”), we have 29

additional offices in the Southeast for our mortgage banking business.

We provide

a full range of banking services, including

traditional deposit and credit services, mortgage banking, asset management,

trust, merchant services, bankcards, securities brokerage

services and financial advisory services, including life insurance products

risk management and asset protection services.

Our profitability, like

most financial institutions, is dependent to a large extent upon net

interest income, which is the difference

between the interest and fees received on interest earning assets, such as loans and

securities, and the interest paid on interest-bearing

liabilities, principally deposits and borrowings.

Results of operations are also affected by the provision for credit losses, operating

expenses such as salaries and employee benefits, occupancy and other

operating expenses including income taxes, and noninterest

income such as mortgage banking revenues, wealth management fees,

deposit fees, and bank card fees.

We have included

a detailed discussion of the economic conditions in our markets and our long-term strategic

objectives as part of the

MD&A section of our 2023 Form 10-K/A.

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

We present a tangible

common equity ratio and a tangible book value per diluted share that, in each case, removes

the effect of

goodwill and other intangibles that resulted from merger

and acquisition activity. We

believe these measures are useful to investors

because it allows investors to more easily compare our capital adequacy to

other companies in the industry.

The generally accepted

accounting principles (“GAAP”) to non-GAAP reconciliation for

each quarter presented is provided below.

2024

2023

(Dollars in Thousands, except per share data)

Second

First

Fourth

Third

Second

Shareowners' Equity (GAAP)

460,999

448,314

440,625

419,706

412,422

Less: Goodwill and Other Intangibles (GAAP)

92,853

92,893

92,933

92,973

93,013

Tangible Shareowners' Equity (non-GAAP)

368,146

355,421

347,692

326,733

319,409

Total Assets (GAAP)

4,225,695

4,259,922

4,304,477

4,138,287

4,391,206

Less: Goodwill and Other Intangibles (GAAP)

92,853

92,893

92,933

92,973

93,013

Tangible Assets (non-GAAP)

4,132,842

4,167,029

4,211,544

4,045,314

4,298,193

Tangible Common Equity Ratio (non-GAAP)

A/B

8.91%

8.53%

8.26%

8.08%

7.43%

Actual Diluted Shares Outstanding (GAAP)

16,970,228

16,947,204

17,000,758

16,997,886

17,025,023

Tangible Book Value

per Diluted Share (non-GAAP)

A/C

21.69

20.97

20.45

19.22

18.76

SELECTED QUARTERLY

FINANCIAL DATA

(UNAUDITED)

2024

2023

(Dollars in Thousands, Except Per Share Data)

Second

First

Fourth

Third

Second

Summary of Operations

Interest Income

48,766

46,820

46,184

45,753

45,205

Interest Expense

9,497

8,465

7,013

6,473

5,068

Net Interest Income

39,269

38,355

39,171

39,280

40,137

Provision for Credit Losses

1,204

920

2,025

2,393

2,197

Net Interest Income After

Provision for Credit Losses

38,065

37,435

37,146

36,887

37,940

Noninterest Income

19,606

18,097

17,157

16,728

19,967

Noninterest Expense

40,441

40,171

39,958

39,105

40,285

Income Before Income Taxes

17,230

15,361

14,345

14,510

17,622

Income Tax Expense

3,189

3,536

2,909

3,004

3,417

Loss (Income) Attributable to NCI

109

732

284

1,149

(31)

Net Income Attributable to CCBG

14,150

12,557

11,720

12,655

14,174

Net Interest Income (FTE)

(1)

39,334

38,435

39,264

39,367

40,224

Per Common Share

Net Income Basic

0.84

0.74

0.69

0.75

0.83

Net Income Diluted

0.83

0.74

0.70

0.74

0.83

Cash Dividends Declared

0.21

0.20

0.18

Diluted Book Value

27.17

26.45

25.92

24.69

24.21

Diluted Tangible Book Value

(2)

21.69

20.97

20.45

19.22

18.76

Market Price:

High

28.58

31.34

32.56

33.44

34.16

Low

25.45

26.59

26.12

28.64

28.03

28.44

27.70

29.43

29.83

30.64

Selected Average Balances

Investment Securities

919,832

953,184

963,184

1,005,003

1,043,858

Loans Held for Investment

2,726,748

2,728,629

2,711,243

2,672,653

2,657,693

Earning Assets

3,935,280

3,849,615

3,823,980

3,876,980

3,974,803

Total Assets

4,272,188

4,190,623

4,166,777

4,218,855

4,320,601

Deposits

3,641,028

3,576,513

3,548,506

3,596,816

3,719,564

Shareowners’ Equity

465,297

456,014

435,116

427,580

418,757

Common Equivalent Average Shares:

Basic

16,931

16,951

16,947

16,985

17,002

Diluted

16,960

16,969

16,997

17,025

17,035

Performance Ratios:

Return on Average Assets (annualized)

1.33

1.21

1.12

1.19

1.32

Return on Average Equity (annualized)

12.23

11.07

10.69

11.74

13.58

Net Interest Margin (FTE)

4.02

4.01

4.07

4.03

4.06

Noninterest Income as % of Operating Revenue

33.30

32.06

30.46

29.87

33.22

Efficiency Ratio

68.61

71.06

70.82

69.88

66.93

Asset Quality:

Allowance for Credit Losses (“ACL”)

29,219

29,329

29,941

29,083

28,243

Nonperforming Assets (“NPAs”)

6,165

6,799

6,243

4,695

6,624

ACL to Loans HFI

1.09

1.07

1.10

1.08

1.05

NPAs to Total

Assets

0.15

0.16

0.15

0.11

0.15

NPAs to Loans HFI plus OREO

0.23

0.25

0.23

0.17

0.25

ACL to Non-Performing Loans

529.79

431.46

479.70

619.58

426.44

Net Charge-Offs to Average Loans HFI

0.18

0.22

0.23

0.17

0.07

Capital Ratios:

Tier 1 Capital

16.31

15.67

15.37

15.11

14.56

Total Capital

17.50

16.84

16.57

16.30

15.68

Common Equity Tier 1

14.44

13.82

13.52

13.26

12.73

Leverage

10.51

10.45

10.30

9.98

9.54

Tangible Common Equity

(2)

8.91

8.53

8.26

8.08

7.43

(1)

Fully Tax Equivalent

(2)

Non-GAAP financial measure.

See non-GAAP reconciliation on page 33.

FINANCIAL OVERVIEW

Results of Operations

Performance Summary.

Net income attributable to common shareowners totaled $14.2

million, or $0.83 per diluted share, for the

second quarter of 2024 compared to $12.6 million, or $0.74 per diluted

share, for the first quarter of 2024, and $14.2 million, or $0.83

per diluted share, for the second quarter of 2023.

For the first six months of 2024, net income attributable to common shareowners

totaled $26.7 million, or $1.57 per diluted share, compared to net income of $27.9

million, or $1.64 per diluted share, for the same

period of 2023.

Net Interest Income.

Tax-equivalent net

interest income for the second quarter of 2024 totaled $39.3 million, compared

to $38.4

million for the first quarter of 2024, and $40.2 million for the second quarter of 2023.

Compared to the first quarter of 2024, the

increase was primarily due to higher overnight funds and loan interest income

that was partially offset by higher deposit interest

expense.

Compared to the second quarter of 2023, the $0.9 million decrease was generally

driven by higher deposit interest expense

and lower overnight funds and investment interest income which outpaced

an increase in loan interest income.

For the first six months

of 2024, tax-equivalent net interest income totaled $77.8 million compared to $80.7

million for the same period of 2023.

The decrease

was primarily driven by the same aforementioned trends.

Provision and Allowance for Credit

Losses.

We recorded

a provision for credit losses of $1.2 million for the second quarter of 2024

compared to $0.9 million for the first quarter of 2024 and $2.2 million

for the second quarter of 2023.

Compared to the first quarter of

2024, the increase in the provision was primarily due to loan grade migration and

slightly higher loss rates partially offset by lower

loan balances.

For the first six months of 2024, we recorded a provision for credit losses of $2.1 million

compared to $5.3 million for

the same period of 2023 with the decrease driven primarily by lower new

loan volume in 2024.

At June 30, 2024, the allowance

represented 1.09% of loans held for investment (“HFI”) compared

to 1.07% at March 31, 2024, and 1.10% at December 31, 2023.

Noninterest Income

Noninterest income for the second quarter of 2024 totaled $19.6 million compared

to $18.1 million for the first

quarter of 2024 and $20.0 million for the second quarter of 2023.

The $1.5 million increase over the first quarter of 2024 was due to

an increase in mortgage banking revenues.

Compared to the second quarter of 2023, the $0.4 million decrease was primarily

attributable to a $1.7 million decrease in other income which reflected

a $1.4 million gain from the sale of mortgage servicing rights in

the second quarter of 2023, partially offset by a $1.0 million increase

in mortgage banking revenues and a $0.3 million increase in

wealth management fees.

For the first six months of 2024, noninterest income totaled $37.7 million, which is comparable

to the same

period of 2023 and reflected a $2.0 million decrease in other income

that was partially offset by a $1.0 million increase in wealth

management fees and a $1.0 million increase in mortgage banking revenues.

Noninterest Expense.

Noninterest expense for the second quarter of 2024 totaled $40.4 million

compared to $40.2 million for the first

quarter of 2024 and $40.3 million for the second quarter of 2023.

The $0.2 million increase over the first quarter of 2024 reflected a

$0.2 million increase in other expense which included the write-off

of obsolete assets from the remodeling of an office site and a core

system migration in the second quarter of 2024.

Compared to the second quarter of 2023, the $0.1 million increase reflected

a $1.0

million increase in compensation expense and a $0.1 million increase in

occupancy expense that was partially offset by a $1.0 million

decrease in other expense.

For the first six months of 2024, noninterest expense totaled $80.6 million compared to $78.0 million

for

the same period of 2023 with the $2.6 million increase attributable to increases in compensation

expense of $1.8 million, occupancy

expense of $0.4 million, and other expense of $0.4 million.

Other expense for 2023 included a $1.8 million gain from the sale of a

banking office in the first quarter of 2023.

Financial Condition

Earning Assets.

Average earning

assets totaled $3.935 billion for the second quarter of 2024, an increase of $85.7 million,

or 2.2%,

over the first quarter of 2024, and an increase of $111.3

million, or 2.9%, over the fourth quarter of 2023.

The variance for both prior

period comparisons was driven by an increase in deposit balances, resulting

in higher levels of overnight funds sold.

Compared to the

fourth quarter of 2023, the change in the earning asset mix reflected a $162.7 million

increase in overnight funds and a $15.5 million

increase in loans HFI that was partially offset by lower

investment securities of $43.4 million, and loans held for sale of $23.5 million.

Loans.

Average loans HFI decreased

$1.9 million, or 0.1%, from the first quarter of 2024 and increased $15.5 million, or

0.6%, over

the fourth quarter of 2023.

Period end loans HFI decreased $40.9 million, or 1.5%, from the first quarter of 2024

and decreased $43.7

million, or 1.6%, from the fourth quarter of 2023.

Credit Quality

. Nonperforming assets (nonaccrual loans and other real estate) totaled

$6.2 million at June 30, 2024 compared to $6.8

million at March 31, 2024 and $6.2 million at December 31, 2023.

At June 30, 2024, nonperforming assets as a percent of total assets

equaled 0.15%, compared to 0.16% at March 31, 2024 and 0.15% at December

31, 2023.

Nonaccrual loans totaled $5.5 million at

June 30, 2024, a $1.3 million increase over March 31, 2024 and a $0.7 million decrease

from December 31, 2024.

Further, classified

loans totaled $25.6 million at June 30, 2024, a $3.3 million increase over

March 31, 2024 and a $3.4 million increase over December

31, 2023.

Deposits

. Average total

deposits were $3.641 billion for the second quarter of 2024, an increase of $64.5

million, or 1.8%, over the

first quarter of 2024 and an increase of $92.5 million, or 2.6%, over the fourth quarter

of 2023.

At June 30, 2024, total deposits were

$3.609 billion, decreases of $46.2 million, or 1.3%, from March 31, 2024,

and $93.3 million, or 2.5%, from December 31, 2023.

Capital

. At June 30, 2024, we were “well-capitalized”

with a total risk-based capital ratio of 17.50% and a tangible common equity

ratio (a non-GAAP financial measure) of 8.91% compared to 16.84%

and 8.53%, respectively,

at March 31, 2024 and 16.57% and

8.26%, respectively,

at December 31, 2023.

At June 30, 2024, all of our regulatory capital ratios exceeded the threshold to be

“well-

capitalized”

under the Basel III capital standards.

RESULTS

OF OPERATIONS

The following table provides a condensed summary of our results of operations

- a discussion of the various components are discussed

in further detail below.

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

(Dollars in Thousands, except per share data)

2024

2023

2024

2023

Interest Income

48,766

46,820

45,205

95,586

89,131

Taxable Equivalent Adjustments

145

188

Total Interest Income (FTE)

48,831

46,900

45,292

95,731

89,319

Interest Expense

9,497

8,465

5,068

17,962

8,594

Net Interest Income (FTE)

39,334

38,435

40,224

77,769

80,725

Provision for Credit Losses

1,204

920

2,197

2,124

5,296

Taxable Equivalent Adjustments

145

188

Net Interest Income After Provision for Credit Losses

38,065

37,435

37,940

75,500

75,241

Noninterest Income

19,606

18,097

19,967

37,703

37,725

Noninterest Expense

40,441

40,171

40,285

80,612

77,961

Income Before Income Taxes

17,230

15,361

17,622

32,591

35,005

Income Tax Expense

3,189

3,536

3,417

6,725

7,126

Pre-Tax (Income) Loss Attributable to Noncontrolling

Interest

109

732

(31)

841

Net Income Attributable to Common Shareowners

14,150

12,557

14,174

26,707

27,883

Basic Net Income Per Share

0.84

0.74

0.83

1.58

1.64

Diluted Net Income Per Share

0.83

0.74

0.83

1.57

1.64

Net Interest Income

Net interest income represents our single largest source of earnings

and is equal to interest income and fees generated by earning

assets less interest expense paid on interest bearing liabilities.

This information is provided on a “taxable equivalent” basis to reflect

the tax-exempt status of income earned on certain loans and state and local

government debt obligations.

We provide an analysis of

our net interest income including average yields and rates in Table

I, “Average Balances

& Interest Rates,” on page 47.

Tax-equivalent net

interest income for the second quarter of 2024 totaled $39.3 million, compared

to $38.4 million for the first quarter

of 2024, and $40.2 million for the second quarter of 2023.

Compared to the first quarter of 2024, the increase was primarily due

higher overnight funds and loan interest income that was partially offset

by higher deposit interest expense.

The increase in overnight

funds interest income reflected higher average deposit balances and the increase

in loan interest income reflected existing loans re-

pricing at higher rates and new loan volume at higher rates.

The increase in deposit interest expense was attributable to higher

average

money market account (“MMA”) balances and to a lesser extent certificates

of deposit (“CD”) balances and reflected a combination of

re-mix from other deposit categories and higher rates for certain products.

Compared to the second quarter of 2023, the $0.9 million decrease was generally

driven by higher deposit interest expense and lower

overnight funds and investment interest income which outpaced an increase

in loan interest income.

For the first six months of 2024,

tax-equivalent net interest income totaled $77.8 million compared

to $80.7 million for the same period of 2023.

The decrease was

primarily driven by the same aforementioned trends.

Our net interest margin for the second quarter of 2024 was 4.02%,

an increase of one basis point over the first quarter of 2024 and a

decrease of four basis points from the second quarter of 2023.

For the month of June 2024, our net interest margin was 4.04%.

For the

first six months of 2024, our net interest margin was 4.01% compared

to 4.05% for the same period of 2023.

Compared to the first

quarter of 2024, the slight increase was primarily due to the favorable

loan repricing that was partially offset by higher deposit cost.

The decrease from both prior year periods reflected higher deposit cost related

to re-mix within the deposit base and higher rates paid

on deposits, partially offset by higher yields from new loan volume

and existing loans repricing at higher rates.

For the second quarter

of 2024, our cost of funds was 97 basis points, an increase of nine basis points

over the first quarter of 2024 and an increase of 46 basis

points over the second quarter of 2023.

Our cost of deposits (including noninterest bearing accounts) was 95 basis points, 85

basis

points, and 43 basis points, respectively,

for the same periods.

Provision for Credit Losses

We recorded

a provision for credit losses of $1.2 million for the second quarter of 2024 compared

to $0.9 million for the first quarter

of 2024 and $2.2 million for the second quarter of 2023.

Compared to the first quarter of 2024, the increase in the provision was

primarily due to loan grade migration and slightly higher loss rates partially offset

by lower loan balances.

For the first six months of

2024, we recorded a provision for credit losses of $2.1 million compared

to $5.3 million for the same period of 2023 with the decrease

driven primarily by lower new loan volume in 2024.

We discuss the allowance

for credit losses further below.

For more information

on charge-offs and recoveries, see Note 3 –

Loans Held for Investment and Allowance for Credit Losses in the Notes to Consolidated

Financial Statements.

Noninterest Income

Noninterest income for the second quarter of 2024 totaled $19.6 million

compared to $18.1 million for the first quarter of 2024 and

$20.0 million for the second quarter of 2023.

The $1.5 million increase over the first quarter of 2024 was due to an increase in

mortgage banking revenues driven by higher production.

Compared to the second quarter of 2023, the $0.4 million decrease was

primarily attributable to a $1.7 million decrease in other income which

reflected a $1.4 million gain from the sale of mortgage

servicing rights in the second quarter of 2023, partially offset

by a $1.0 million increase in mortgage banking revenues driven

by a

higher gain on sale margin, and a $0.3 million increase in wealth management

fees.

For the first six months of 2024, noninterest income totaled $37.7 million,

which is comparable to the same period of 2023 and

reflected a $2.0 million decrease in other income that was partially offset

by a $1.0 million increase in wealth management fees and a

$1.0 million increase in mortgage banking revenues.

The decrease in other income was primarily attributable to the aforementioned

$1.4 million gain from the sale of mortgage servicing rights in 2023.

A decrease in vendor bonus income and miscellaneous income

also contributed to the decrease.

The increase in wealth management fees was primarily driven by higher retail

brokerage fees and to

a lesser extent trust fees.

The increase in mortgage banking revenues was due to a higher gain on sale margin.

Noninterest income represented 33.3% of operating revenues (net

interest income plus noninterest income) in the second quarter of

2024 compared to 32.0% in the first quarter of 2024 and 33.2% in the second

quarter of 2023.

For the first six months of 2024,

noninterest income represented 32.7% of operating revenues compared

to 31.9% for the same period of 2023.

The table below reflects the major components of noninterest income.

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

(Dollars in Thousands)

2024

2023

2024

2023

Deposit Fees

5,377

5,250

5,326

10,627

10,565

Bank Card Fees

3,766

3,620

3,795

7,386

7,521

Wealth Management

Fees

4,439

4,682

4,149

9,121

8,077

Mortgage Banking Revenues

4,381

2,878

3,363

7,259

6,234

Other

1,643

1,667

3,334

3,310

5,328

Total

Noninterest Income

19,606

18,097

19,967

37,703

37,725

Significant components of noninterest income are discussed in more

detail below.

Deposit Fees

Deposit fees for the second quarter of 2024

totaled $5.4

million, an increase of $0.1 million, or 2.4%, over the first

quarter of 2024, and an increase of $0.1

million, or 1.0%, over the second quarter of 2023.

For the first six months of 2024, deposit

fees totaled $10.6 million, an increase an increase of $0.1 million, or 0.6%,

over the same period of 2023.

Compared to the first

quarter of 2024, the increase was primarily attributable to an increase in

commercial account analysis fee income.

The increase over

both prior year periods was also driven by higher commercial account

analysis fee income.

Bank Card Fees

Bank card fees for the second quarter of 2024 totaled $3.8

million, an increase of $0.1 million, or 4.1%, over the

first quarter of 2024, and comparable to the second quarter of 2023.

For the first six months of 2024, bank card fees totaled $7.4

million, a decrease of $0.1 million, or 1.8%, from the same period of 2023.

The slight change in fees between all periods reflected

variance in debit card utilization as consumer spending patterns normalize.

Wealth

Management Fees

Wealth management fees

include trust fees through Capital City Trust (i.e., managed

accounts and

trusts/estates), retail brokerage fees through Capital City Investments (i.e.,

investment, insurance products, and retirement accounts),

and financial advisory fees through Capital City Strategic Wealth

(i.e., including the sale of life insurance, risk management and asset

protection services).

Wealth management

fees for the second quarter of 2024 totaled $4.4

million, a decrease of $0.2 million, or 5.2%

from the first quarter of 2024, and an increase of $0.3 million,

or 7.0% over the second quarter of 2023.

For the first six months of

2024, wealth management fees totaled $9.1 million, an increase of $1.0

million, or 12.9%, over the same period of 2023, and reflected

an $0.8 million increase in retail brokerage fees and a $0.4 million increase in

trust fees that was partially offset by a $0.2 million

decrease in insurance commission revenue.

The increase in retail brokerage assets was driven by increased fixed income and

annuity

product sales and the increase in trust fees reflected both new account

growth and higher account values/returns reflective of the

improved market returns.

At June 30, 2024, total assets under management were approximately $2.770

billion compared to $2.686

billion at March 31, 2024 and $2.588 billion at December 31, 2023.

Mortgage Banking Revenues.

Mortgage banking revenues totaled $4.4 million for the second quarter

of 2024, an increase of $1.5

million, or 52.2%, over the first quarter of 2024

and an increase of $1.0 million, or 30.3%, over the second quarter of 2023.

For the

first six months of 2024, revenues totaled $7.3 million compared to

$6.2 million for the same period of 2023.

Compared to the first

quarter of 2024, the increase was driven by higher production.

Compared to both prior year periods, the increase was attributable to a

higher gain on sale margin which reflected a higher percentage

of secondary market/mandatory delivery loan sales.

We provide a

detailed overview of our mortgage banking operation, including

a detailed break-down of mortgage banking revenues, mortgage

servicing activity,

and warehouse funding within Note 4 – Mortgage Banking Activities in the Notes

to Consolidated Financial

Statements.

Other

Other income totaled $1.6 million for the second quarter of 2024,

comparable to the first quarter of 2024 and a decrease of

$1.7 million, or 50.7%, from the third quarter of 2023.

For the first six months of 2024, other income totaled $3.3 million compared

to $5.3 million for the same period of 2023.

The decrease from both prior year periods was primarily due to a $1.4 million

gain from

the sale of mortgage servicing rights realized in the second quarter of 2023.

Decreases in miscellaneous income of $0.3 million and

vendor dividend income of $0.2 million contributed to the decrease for the six-month

period.

Noninterest Expense

Noninterest expense for the second quarter of 2024 totaled $40.4 million

compared to $40.2 million for the first quarter of 2024 and

$40.3 million for the second quarter of 2023.

The $0.2 million increase over the first quarter of 2024 reflected a $0.2 million increase

in other expense which included the write-off of obsolete

assets from the remodeling of an office site and a core system migration

the second quarter of 2024.

Compared to the second quarter of 2023, the $0.1 million increase reflected a $1.0 million

increase in

compensation expense and a $0.1 million increase in occupancy expense

that was partially offset by a $1.0 million decrease in other

expense.

The increase in compensation expense reflected a $0.7 million increase in salary expense

and a $0.3 million increase in

associate benefit expense.

The increase in salary expense was primarily due to lower realized loan cost (credit offset

to salary

expense) of $0.5 million (lower new loan volume) and higher base salary expense of $0.3

million.

The increase in associate benefit

expense was attributable to higher expense for associate insurance.

The increase in occupancy expense was due to higher expense for

maintenance agreements (security upgrades).

The decrease in other expense was due to a one-time payment for $0.8 million in the

second quarter of 2023 related to a consulting engagement for the negotiation

of a new core processing agreement.

For the first six months of 2024, noninterest expense totaled $80.6 million compared

to $78.0 million for the same period of 2023 with

the $2.6 million increase attributable to increases in compensation expense of

$1.8 million, occupancy expense of $0.4 million, and

other expense of $0.4 million.

The increase in compensation expense was primarily due to a lower level of realized

loan cost (credit

offset to salary expense) of $2.0 million (lower new loan volume)

and higher base salary expense of $0.8 million (primarily annual

merit raises), partially offset by lower commission expense of

$1.1 million.

The increase in occupancy was driven by an increase in

expense for maintenance agreements (security upgrades and addition of

interactive teller machines).

The increase in other expense

reflected a $1.8 million gain from the sale of a banking office in the first

quarter of 2023 that was partially offset by lower pension

plan expense of $0.6 million and the favorable impact of the aforementioned

one-time consulting expense of $0.8 million in 2023.

The table below reflects the major components of noninterest expense.

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

(Dollars in Thousands)

2024

2023

2024

2023

Salaries

20,754

20,604

20,044

41,358

39,561

Associate Benefits

3,652

3,803

3,394

7,455

7,401

Total Compensation

24,406

24,407

23,438

48,813

46,962

Premises

3,043

3,173

3,170

6,216

6,414

Equipment

3,954

3,821

3,650

7,775

7,168

Total Occupancy

6,997

6,994

6,820

13,991

13,582

Legal Fees

430

435

419

865

781

Professional Fees

1,340

1,258

2,039

2,598

3,363

Processing Services

1,938

1,833

1,872

3,771

3,614

Advertising

851

815

959

1,666

1,833

Telephone

718

709

679

1,427

1,385

Insurance – Other

749

915

872

1,664

1,703

Other Real Estate Owned, net

(28)

(1,855)

Pension - Other

(419)

(838)

Pension Settlement (Gain) Charge

(291)

Miscellaneous

3,412

3,206

3,500

6,618

6,871

Total Other

9,038

8,770

10,027

17,808

17,417

Total

Noninterest Expense

40,441

40,171

40,285

80,612

77,961

Significant components of noninterest expense are discussed in more detail

below.

Compensation

Compensation expense totaled $24.4 million for the second quarter of 2024,

comparable to the first quarter of 2024

and a $1.0 million increase from the second quarter of 2023.

The increase in compensation expense reflected a $0.7 million increase

in salary expense and a $0.3 million increase in associate benefit expense.

The increase in salary expense was primarily due to lower

realized loan cost (credit offset to salary expense) of $0.5 million (lower

new loan volume) and higher base salary expense of $0.3

million.

The increase in associate benefit expense was attributable to higher expense for

associate insurance.

For the first six months

of 2023, compensation expense totaled $48.8 million compared

to $47.0 million for the same period of 2023

with the $1.8 million

increase attributable to a $1.8 million increase in salary expense which reflected

a $2.0 million reduction in realized loan cost (credit

offset to salary expense) driven by lower new loan volume,

and higher base salary expense of $0.8 million (primarily annual merit

raises), partially offset by lower commission expense of $1.1 million.

Occupancy

Occupancy expense totaled $7.0 million for the second quarter of 2024, comparable

to the first quarter of 2024 and a $0.2

million increase from the second quarter of 2023.

For the first six months of 2024, occupancy expense totaled $14.0 million compared

to $13.6 million for the same period of 2023.

Compared to both prior year periods,

the increase in occupancy expense was due to

higher expense for maintenance agreements (security upgrades).

Other

Other expense totaled $9.0 million for the second quarter of 2024

compared to $8.8 million for the first quarter of 2024

and

$10.0 million for the second quarter of 2023.

For the first six months of 2024, other expense totaled $17.8 million compared to $17.4

million for the same period of 2023.

Compared to the first quarter of 2024, the $0.2 million increase was attributable to

the write-off

of obsolete assets from the remodeling of an office site and a core

system migration in the second quarter of 2024.

Compared to the

second quarter of 2023, the decrease was primarily due to a one-time payment

for $0.8 million in the second quarter of 2023 related to

a consulting engagement for the negotiation of a new core processing agreement.

For the six-month period, the increase was primarily

due to a $1.8 million gain from the sale of a banking office in the first quarter

of 2023 that was partially offset by lower pension plan

expense of $0.6

million and the favorable impact of the aforementioned one-time consulting

expense of $0.8 million in 2023.

Our operating efficiency ratio (expressed as noninterest

expense as a percentage of the sum of taxable-equivalent net interest income

plus noninterest income) was 68.61%

for the second quarter of 2024 compared to 71.06% for the first quarter of 202

and 66.93% for

the second quarter of 2023.

For the first six months of 2024, this ratio was 69.81% compared to 65.82% for

the same period of 2023.

Income Taxes

We realized income

tax expense of $3.2 million (effective rate of 18.5%) for the second

quarter of 2024 compared to $3.5 million

(effective rate of 23.0%) for the first quarter of 2024 and $3.4

million (effective rate of 19.4%) for the second quarter of 2023.

For the

first six months of 2024, we realized income tax expense of $6.7 million (effective

rate of 20.6%) compared to $7.1 million (effective

rate of 20.4%) for the same period of 2023.

The decrease in our effective tax rate for the second quarter of

2024 was primarily due to

a higher level of tax benefit accrued from a new investment in a solar tax credit equity fund.

Absent discrete items, we expect our

annual effective tax rate to approximate 20-21% for 2024.

FINANCIAL CONDITION

Average earning

assets totaled $3.935 billion for the second quarter of 2024, an increase of $85.7 million, or

2.2%, over the first

quarter of 2024, and an increase of $111.3

million, or 2.9%, over the fourth quarter of 2023.

The variance for both prior period

comparisons was driven by an increase in deposit balances (see below –

Deposits

), resulting in higher levels of overnight funds sold.

Compared to the fourth quarter of 2023, the change in the earning asset mix reflected

a $162.7 million increase in overnight funds and

a $15.5 million increase in loans HFI that was partially offset by lower

investment securities of $43.4 million, and loans held for sale

of $23.5 million.

Investment Securities

Average investments

decreased $33.4 million, or 3.5%, from the first quarter of 2024

and $43.4 million, or 4.5%,

from the fourth

quarter of 2023. Our investment portfolio represented 23.4% of our average

earning assets for the second quarter of 2024 compared to

24.8% for the first quarter of 2024 and 25.2% for the fourth quarter of

2023.

For the remainder of 2024, we will continue to monitor

our overall liquidity position and market conditions to determine if

cash flow from the investment portfolio should be reinvested or

allowed to run-off into overnight funds.

The investment portfolio is a significant component of our operations and, as such,

it functions as a key element of liquidity and

asset/liability management.

Two types of classifications are approved

for investment securities which are Available

-for-Sale (“AFS”)

and Held-to-Maturity (“HTM”).

At June 30, 2024, $583.0 million, or 65.0%, of the investment portfolio was classified as HTM and

$310.9 million, or 34.7%, was classified as AFS. The average maturity

of our total portfolio at June 30, 2024 was 2.67 compared to

2.76 years at March 31, 2024 and 2.91 years at December 31, 2023.

The duration of our investment portfolio at June 30, 2024 was

2.16 years compared to 2.39 years at March 31, 2024 and 2.91 years

at December 31, 2023.

Additional information on unrealized

gains/losses in the AFS and HTM portfolios is provided in Note 2 – Investment

Securities.

We determine

the classification of a security at the time of acquisition based on how the purchase will affect

our asset/liability strategy

and future business plans and opportunities.

We consider multiple

factors in determining classification, including regulatory capital

requirements, volatility in earnings or other comprehensive income,

and liquidity needs.

Securities in the AFS portfolio are recorded

at fair value with unrealized gains and losses associated with these securities recorded

net of tax, in the accumulated other

comprehensive income component of shareowners’ equity.

HTM securities are acquired or owned with the intent of holding them

maturity.

HTM investments are measured at amortized cost.

We do not

trade, nor do we presently intend to begin trading investment

securities for the purpose of recognizing gains and therefore we do not maintain

a trading portfolio.

At June 30, 2024, there were 856 positions (combined AFS and HTM) with

unrealized losses totaling $62.0 million. 82 of these

positions are U.S. Treasuries and carry the full faith

and credit of the U.S. Government.

673 were U.S. government agency securities

issued by U.S. government sponsored entities. The remaining 101 positions

(municipal securities and corporate bonds) have a credit

component.

At June 30, 2024, corporate debt securities had an allowance for credit losses of $135,000

and municipal securities had

an allowance of $5,000.

At June 30, 2024, all collateralized mortgage obligation securities, mortgage

-backed securities,

Small

Business Administration securities,

U.S. Agency, and

U.S. Treasury bonds held were AAA rated.

Loans HFI

Average loans

HFI decreased $1.9 million, or 0.1%, from the first quarter of 2024 and increased $15.5 million,

or 0.6%, over the

fourth quarter of 2023.

Compared to the first quarter of 2024, the slight decrease was driven by a decline

in the consumer loans

(primarily indirect auto) of $19.0 million, partially offset by increases

in residential real estate loans of $10.1 million and commercial

real estate loans of $8.0 million.

Compared to the fourth quarter of 2023, the increase was primarily attributable to a $51.8

million

increase in residential real estate loans that was partially offset by

a decrease of $35.0 million in consumer loans (primarily indirect

auto).

Period end loans HFI decreased $40.9 million, or 1.5%, from the first quarter of 2024

and decreased $43.7 million, or 1.6%, from the

fourth quarter of 2023.

Compared to the first quarter of 2024, the decline reflected a $20.0 million decrease

in consumer loans

(primarily indirect auto) and a $13.3 million decrease in commercial loans

(primarily tax-exempt loans).

The decrease from the fourth

quarter of 2023 was primarily attributable to a $36.8 million decrease

in consumer loans (primarily indirect auto) and commercial

loans of $20.2 million (primarily tax-exempt loans) that was partially offset

by a $11.3 million increase in residential real estate loans.

Without compromising our credit standards

changing our underwriting standards, or taking on inordinate interest rate risk,

continue to closely monitor our markets and make minor adjustments as necessary.

Credit Quality

Nonperforming assets (nonaccrual loans and other real estate) totaled $6.2

million at June 30, 2024 compared to $6.8 million at March

31, 2024 and $6.2 million at December 31, 2023.

At June 30, 2024, nonperforming assets as a percent of total assets equaled 0.15%,

compared to 0.16% at March 31, 2024 and 0.15% at December 31, 2023.

Nonaccrual loans totaled $5.5 million at June 30, 2024, a

$1.3 million decrease from March 31, 2024 and a $0.7 million decrease

from December 31, 2024.

Further, classified loans totaled

$25.6 million at June 30, 2024, a $3.3 million increase over March 31, 2024

and a $3.4 million increase over December 31, 2023.

Allowance for Credit Losses

The allowance for credit losses is a valuation account that is deducted from the

loans’ amortized cost basis to present the net amount

expected to be collected on the loans.

The allowance for credit losses is adjusted by a credit loss provision which is reported in

earnings and reduced by the charge-off of loan amounts

(net of recoveries).

Loans are charged off against the allowance when

management believes the uncollectability of a loan balance is confirmed.

Expected recoveries do not exceed the aggregate of amounts

previously charged-off and expected to be charged

-off.

Expected credit loss inherent in non-cancellable off-balance sheet credit

exposures is provided through the credit loss provision but recorded as a separate

liability included in other liabilities.

Management estimates the allowance balance using relevant available information,

from internal and external sources relating to past

events, current conditions, and reasonable and supportable forecasts.

Historical loan default and loss experience provides the basis for

the estimation of expected credit losses.

Adjustments to historical loss information incorporate management’s

view of current

conditions and forecasts.

At June 30, 2024, the allowance for credit losses for loans HFI totaled $29.2

million compared to $29.3 million at March 31, 2024 and

$29.9 million at December 31, 2023.

Activity within the allowance is provided in Note 3 – Loans Held for Investment

and Allowance

for Credit Losses in the Consolidated Financial Statements.

The slight decrease in the allowance from March 31, 2024 reflected a

lower level of net charge-offs (18 basis points

for the second quarter of 2024 versus 22 basis points for the first quarter of 2024) that

was offset by a higher credit loss provision (see above –

Provision for Credit Losses

The decrease in the allowance from December

31, 2023 was primarily due to lower loan balances.

At June 30, 2024, the allowance represented 1.09% of loans HFI compared

1.07% at March 30, 2024, and 1.10% at December 31, 2023.

At June 30, 2024, the allowance for credit losses for unfunded commitments

totaled $3.1 million compared to $3.1

million and $3.2

million at March 31, 2024 and December 31, 2023, respectively.

The allowance for unfunded commitments is recorded in other

liabilities.

Deposits

Average total

deposits were $3.641 billion for the second quarter of 2024, an increase of $64.5 million, or 1.8%,

over the first quarter

of 2024 and an increase of $92.5 million, or 2.6%, over the fourth quarter

of 2023.

Compared to both prior periods, growth occurred

in both money market and CD balances which reflected a combination of balances

migrating from savings, and to a lesser extent

noninterest bearing accounts, in addition to receiving new deposits from existing

and new clients via various deposit strategies.

addition, compared to the fourth quarter of 2023, the increase in NOW balances reflected

higher average public funds balances as

municipal tax receipts are received/deposited by those clients starting in late November.

To a lesser extent, we have realized

NOW

account inflows from new and existing business accounts which reflected

our bankers focus on deposit gathering initiatives.

At June 30, 2024, total deposits were $3.609 billion, decreases of $46.2 million,

or 1.3%, from March 31, 2024, and $93.3 million, or

2.5%,

from December 31, 2023.

The decrease from both prior periods was primarily due to lower NOW account

balances, partially

offset by the aforementioned growth in money market

and CD balances from both new and existing clients.

The decline in NOW

accounts primarily reflects seasonal public fund balance activity.

Total public funds balances were

$575.0 million at June 30, 2024,

$615.0 million at March 31, 2024, and $709.8 million at December 31,

2023.

Business deposit transaction accounts classified as repurchase agreements

averaged $27.0 million for the second quarter of 2024, an

increase of $1.3 million over the first quarter of 2024 and an increase of $0.2 million

over the fourth quarter of 2023. At June 30,

2024, repurchase agreement balances were $22.5 million compared

to $23.5 million at March 31, 2024 and $27.0 million at December

31, 2023.

We continue

to closely monitor our cost of deposits and deposit mix as we manage through the current rate

environment.

MARKET RISK AND INTEREST RATE

SENSITIVITY

Market Risk and Interest Rate Sensitivity

Overview.

Market risk arises from changes in interest rates, exchange rates,

commodity prices, and equity prices.

We have risk

management policies designed to monitor and limit exposure to market

risk and we do not participate in activities that give rise to

significant market risk involving exchange rates, commodity prices, or

equity prices.

In asset and liability management activities, our

policies are designed to minimize structural interest rate risk.

Interest Rate Risk Management.

Our net income is largely dependent on net interest income.

Net interest income is susceptible to

interest rate risk to the degree that interest-bearing liabilities mature

or reprice on a different basis than interest-earning assets.

When

interest-bearing liabilities mature or reprice more quickly

than interest-earning assets in a given period, a significant increase in

market rates of interest could adversely affect net interest

income.

Similarly, when interest-earning

assets mature or reprice more

quickly than interest-bearing liabilities, falling market interest rates could

result in a decrease in net interest income.

Net interest

income is also affected by changes in the portion of interest-earning

assets that are funded by interest-bearing liabilities rather than by

other sources of funds, such as noninterest-bearing deposits and shareowners’

equity.

We have established

what we believe to be a comprehensive interest rate risk management policy,

which is administered by

management’s Asset Liability Management

Committee (“ALCO”).

The policy establishes limits of risk, which are quantitative

measures of the percentage change in net interest income (a measure of net

interest income at risk) and the fair value of equity capital

(a measure of economic value of equity (“EVE”) at risk) resulting from a hypothetical change

in interest rates for maturities from one

day to 30 years.

We measure the potential

adverse impacts that changing interest rates may have on our short-term

earnings, long-

term value, and liquidity by employing simulation analysis through the use of

computer modeling.

The simulation model captures

optionality factors such as call features and interest rate caps and floors imbedded

in investment and loan portfolio contracts.

As with

any method of gauging interest rate risk, there are certain shortcomings

inherent in the interest rate modeling methodology used by

us.

When interest rates change, actual movements in different categories

of interest-earning assets and interest-bearing liabilities, loan

prepayments, and withdrawals of time and other deposits, may deviate significantly

from assumptions used in the model.

Finally, the

methodology does not measure or reflect the impact that higher rates may have

on adjustable-rate loan clients’ ability to service their

debts, or the impact of rate changes on demand for loan and deposit products.

The statement of financial condition is subject to testing for interest rate shock

possibilities to indicate the inherent interest rate risk.

We apply instantaneous,

parallel rate shocks to the base case in 100 basis point (bp) increments ranging from down

400bp to up

400bps at least once per quarter, with the

analysis reported to ALCO, our Market Risk Oversight Committee (“MROC”),

our

Enterprise Risk Oversight Committee (“EROC”) and the Board of Directors.

We augment our interest rate

shock analysis with

alternative interest rate scenarios on a quarterly basis that may include ramps,

and a flattening or steepening of the yield curve (non-

parallel shift).

In addition, more frequent forecasts may be produced when interest rates are particularly

uncertain or when other

business conditions so dictate.

Our goal is to structure the statement of financial condition so that net interest earnings at risk over

12-month and 24-month periods

and the economic value of equity at risk do not exceed policy guidelines

at the various interest rate shock levels. We

attempt to

achieve this goal by balancing, within policy limits, the volume of floating-rate

liabilities with a similar volume of floating-rate assets,

by keeping the average maturity of fixed-rate asset and liability contracts

reasonably matched, by managing the mix of our core

deposits, and by adjusting our rates to market conditions on a continuing

basis.

Analysis.

Measures of net interest income at risk produced by simulation analysis are

indicators of an institution’s short-term

performance in alternative rate environments.

These measures are typically based upon a relatively brief period, and do not

necessarily indicate the long-term prospects or economic value of the institution.

ESTIMATED CHANGES

IN NET INTEREST INCOME

(1)

Percentage Change (12-month shock)

+400 bp

+300 bp

+200 bp

+100 bp

-100 bp

-200 bp

-300 bp

-400 bp

Policy Limit

-15.0%

-12.5%

-10.0%

-7.5%

-10.0%

-12.5%

-15.0%

June 30, 2024

15.0%

11.2%

7.3%

3.8%

-4.1%

-8.5%

-13.4%

-18.3%

March 31, 2024

10.0%

7.5%

4.8%

2.5%

-3.1%

-6.5%

-10.5%

-15.1%

Percentage Change (24-month shock)

+400 bp

+300 bp

+200 bp

+100 bp

-100 bp

-200 bp

-300 bp

-400 bp

Policy Limit

-17.5%

-15.0%

-12.5%

-10.0%

-12.5%

-15.0%

-17.5%

June 30, 2024

41.8%

33.9%

26.0%

18.6%

2.2%

-7.4%

-18.1%

-28.6%

March 31, 2024

38.2%

31.3%

24.4%

18.0%

3.5%

-5.4%

-15.4%

-26.0%

The Net Interest Income (“NII”) at Risk position of an instantaneous,

parallel rate shock indicates that in the short-term (over the next

12 months), all rising rate environments will positively impact the net interest

margin of the Company,

while declining rate

environments

will have a negative impact on the net interest margin. Compared

to the first quarter of 2024, these metrics generally

became more favorable in the rising rate scenarios and less favorable

in the falling rate scenarios primarily attributable to the growth

in variable rate overnight funds which made the Bank more asset sensitive.

The instantaneous,

parallel rate shock results over the next

12-month and 24-month periods are outside of policy in the rates down

300 bps and 400 bps scenario primarily due to the

aforementioned increase in overnight funds.

The measures of equity value at risk indicate our ongoing economic value

by considering the effects of changes in interest rates on all

of our cash flows by discounting the cash flows to estimate the present value of

assets and liabilities. The difference between these

discounted values of the assets and liabilities is the economic value of equity,

which in theory approximates the fair value of our net

assets.

ESTIMATED CHANGES

IN ECONOMIC VALUE

OF EQUITY

(1)

Changes in Interest Rates

+400 bp

+300 bp

+200 bp

+100 bp

-100 bp

-200 bp

-300 bp

-400 bp

Policy Limit

-30.0%

-25.0%

-20.0%

-15.0%

-20.0%

-25.0%

-30.0%

June 30, 2024

20.2%

16.5%

11.7%

6.1%

-9.5%

-19.0%

-26.1%

-28.8%

March 31, 2024

19.5%

15.3%

10.4%

5.4%

-8.7%

-17.8%

-24.9%

-28.4%

EVE Ratio (policy minimum 5.0%)

21.8%

20.7%

19.5%

18.2%

15.0%

13.2%

11.9%

11.3%

At June 30, 2024, the economic value of equity was favorable in all rising

rate environments and unfavorable in the falling rate

environments. Compared to the first quarter of 2024, EVE metrics were slightly

more favorable in the rising rate environment and less

favorable in falling rate environments.

EVE is currently in compliance with policy in all rate scenarios as the EVE ratio

exceeds the

policy minimum of 5.0% in each shock scenario.

As the interest rate environment and the dynamics of the economy continue to change,

additional simulations will be analyzed to

address not only the changing rate environment, but also the change

in mix of our financial assets and liabilities, measured over

multiple years, to help assess the risk to the Company.

LIQUIDITY AND CAPITAL

RESOURCES

Liquidity

In general terms, liquidity is a measurement of our ability to meet our

cash needs.

Our objective in managing our liquidity is to

maintain our ability to meet loan commitments, purchase securities or repay deposits and

other liabilities in accordance with their

terms, without an adverse impact on our current or future earnings.

Our liquidity strategy is guided by policies that are formulated and

monitored by our ALCO and senior management, which take into account

the marketability of assets, the sources and stability of

funding and the level of unfunded commitments.

We regularly evaluate

all of our various funding sources with an emphasis on

accessibility, stability,

reliability and cost-effectiveness.

Our principal source of funding has been our client deposits, supplemented

by our short-term and long-term borrowings, primarily from securities sold under

repurchase agreements, federal funds purchased and

FHLB borrowings.

We believe that the cash

generated from operations, our borrowing capacity and our access to capital resources

are

sufficient to meet our future operating capital and funding requirements.

At June 30, 2024, we had the ability to generate approximately $1.500 billion

(excludes overnight funds position of $273 million) in

additional liquidity through various sources including various federal funds

purchased lines, Federal Home Loan Bank borrowings, the

Federal Reserve Discount Window,

and brokered deposits.

We recognize

the importance of maintaining liquidity and have developed

a Contingent Liquidity Plan, which addresses various liquidity stress levels and

our response and action based on the level of severity.

We periodically

test our credit facilities for access to the funds, but also understand that as the severity

of the liquidity level increases

that certain credit facilities may no longer be available.

We conduct

a liquidity stress test on a quarterly basis based on events that

could potentially occur at the Bank and report results to our ALCO, MROC

EROC, and Board of Directors.

At June 30, 2024, we

believe the liquidity available to us was sufficient to meet our on-going

needs and execute our business strategy.

We also view our

investment portfolio as a liquidity source and have the option to pledge securities in our

portfolio as collateral for

borrowings or deposits, and/or to sell selected securities.

Additional information on our investment portfolio is provided within

Note

2 – Investment Securities.

The Bank maintained an average net overnight funds (deposits with banks plus

FED funds sold less FED funds purchased) sold

position of $262.4 million in the second quarter of 2024 compared

to $140.5 million in the first quarter of 2024 and $99.8 million in

the fourth quarter of 2023.

Compared to both prior periods, the increase was primarily driven by higher average

deposits and

investment portfolio cash flow run-off.

We expect our

capital expenditures will be approximately $12.0 million over the next 12 months,

which will primarily consist of

construction of new offices, office remodeling,

office equipment/furniture, and technology purchases.

Management expects that these

capital expenditures will be funded with existing resources without impairing

our ability to meet our on-going obligations.

Borrowings

Average short

-term borrowings totaled $33.6 million for the second quarter of 2024 compared

to $29.5 million for the first quarter of

2024

and $43.8 million for the fourth quarter of 2023.

Compared to the first quarter of 2024, the increase was primarily attributable to

a higher balance maintained on CCHL’s

warehouse line. Compared to the fourth quarter of 2023, the decrease

was attributable to a

lower balance maintained on CCHL’s

warehouse line.

Additional detail on these warehouse borrowings is provided in Note 4 –

Mortgage Banking Activities in the Consolidated Financial Statements.

We have issued two

junior subordinated deferrable interest notes to our wholly owned

Delaware statutory trusts.

The first note for

$30.9 million was issued to CCBG Capital Trust I in

November 2004, of which $10 million was retired in April 2016.

The second

note for $32.0 million was issued to CCBG Capital Trust II

in May 2005.

The interest payment for the CCBG Capital Trust I

borrowing is due quarterly and adjusts quarterly to a variable rate of three-month

CME Term SOFR (secured overnight

financing rate)

plus a margin of 1.90%.

This note matures on December 31, 2034.

The interest payment for the CCBG Capital Trust II borrowing

due quarterly and adjusts quarterly to a variable interest rate based on three-month

CME Term SOFR plus a margin

of 1.80%.

This

note matures on June 15, 2035.

The proceeds from these borrowings were used to partially fund acquisitions.

Under the terms of each

junior subordinated deferrable interest note, in the event of default or

if we elect to defer interest on the note, we may not, with certain

exceptions, declare or pay dividends or make distributions on our capital

stock or purchase or acquire any of our capital stock.

During the second quarter of 2020, we entered into a derivative cash

flow hedge of our interest rate risk related to our subordinated

debt.

The notional amount of the derivative is $30 million ($10 million of the CCBG Capital Trust

I borrowing and $20 million of the

CCBG Capital Trust II borrowing).

The interest rate swap agreement requires CCBG to pay fixed and receive variable (three-month

CME Term SOFR plus spread)

and has an average all-in fixed rate of 2.50% for 10 years.

Additional detail on the interest rate swap

agreement is provided in Note 5 – Derivatives in the Consolidated Financial

Statements.

Capital

Our capital ratios are presented in the Selected Quarterly Financial Data

table on page 34.

At June 30, 2024, our regulatory capital

ratios exceeded the threshold to be designated as “well-capitalized”

under the Basel III capital standards.

Shareowners’ equity was $461.0 million at June 30, 2024 compared to

$448.3 million at March 31, 2024 and $440.6 million at

December 31, 2023.

For the first six months of 2024, shareowners’ equity was positively impacted by net income

attributable to

shareowners of $26.7 million, a $1.2 million decrease in the net unrealized

loss on available for sale securities, net adjustments

totaling $0.8

million related to transactions under our stock compensation plans, stock

compensation accretion of $0.7 million, a $0.3

million increase in the fair value of the interest rate swap related to subordinated debt

and a $0.1 million reclassification to temporary

equity.

Shareowners’ equity was reduced by a common stock dividend of $7.1 million ($0.42

per share) and the repurchase of

common stock of $2.3 million (82,540 shares).

At June 30, 2024, our total risk-based capital ratio was 17.50% compared to 16.84% at March

31, 2024 and 16.57% at December 31,

2023.

Our common equity tier 1 capital ratio was 14.44%, 13.82%, and 13.52%, respectively,

on these dates.

Our leverage ratio was

10.51%, 10.45%, and 10.30%, respectively,

on these dates.

At June 30, 2024, all our regulatory capital ratios exceeded the thresholds

to be designated as “well-capitalized” under the Basel III capital standards.

Further, our tangible common equity

ratio (non-GAAP

financial measure) was 8.91% at June 30, 2024 compared to 8.53% and 8.26% at March

31, 2024 and December 31, 2023,

respectively.

If our unrealized held-to-maturity securities losses of $21.7 million (after-tax)

were recognized in accumulated other

comprehensive loss, our adjusted tangible capital ratio would be 8.38%.

Our tangible capital ratio is also impacted by the recording of our unfunded pension

liability through other comprehensive income in

accordance with Accounting Standards Codification

Topic 715.

At June 30, 2024, the net pension liability reflected in other

comprehensive loss was $0.4 million compared to $0.4 million

at March 31, 2024 and December 31, 2023.

This liability is re-

measured annually on December 31

based on an actuarial calculation of our pension liability.

Significant assumptions used in

calculating the liability include the weighted average discount rate used to measure

the present value of the pension liability,

the

weighted average expected long-term rate of return on pension

plan assets, and the assumed rate of annual compensation increases, all

of which will vary when re-measured.

The discount rate assumption used to calculate the pension liability is subject to long-term

corporate bond rates at December 31

These assumptions and sensitivities are discussed in the section entitled “Critical

Accounting

Policies and Estimates” in Part II, Item7. Management’s

Discussion and Analysis of Financial Condition and Results of Operations,

our 2023 Form 10-K/A.

OFF-BALANCE SHEET ARRANGEMENTS

We are a party

to financial instruments with off-balance sheet risks in the normal

course of business to meet the financing needs of our

clients.

At June 30, 2024, we had $734.5 million in commitments to extend credit

and $6.2 million in standby letters of credit.

Commitments

to extend credit are agreements to lend to a client so long as there is no violation of any

condition established in the contract.

Commitments generally have fixed expiration dates or other termination

clauses and may require payment of a fee.

Since many of the

commitments are expected to expire without being drawn upon,

the total commitment amounts do not necessarily represent future

cash requirements.

Standby letters of credit are conditional commitments issued by us to guarantee the performance

of a client to a

third party.

We use the same credit policies

in establishing commitments and issuing letters of credit as we do for on-balance

sheet

instruments.

If commitments arising from these financial instruments continue to require

funding at historical levels, management does not

anticipate that such funding will adversely impact our ability to meet our on-going

obligations.

In the event these commitments

require funding in excess of historical levels, management believes current

liquidity, advances available from the

FHLB and the

Federal Reserve, and investment security maturities provide a sufficient

source of funds to meet these commitments.

Certain agreements provide that the commitments are unconditionally

cancellable by the bank and for those agreements no allowance

for credit losses has been recorded.

We have recorded

an allowance for credit losses on loan commitments that are not

unconditionally cancellable by the Bank, which is included in other

liabilities on the Consolidated Statements of Financial Condition

and totaled $3.1 million at June 30, 2024.

CRITICAL ACCOUNTING POLICIES

Our significant accounting policies are described in Note 1 to the Consolidated

Financial Statements included in our 2023 Form 10-

K/A.

The preparation of our Consolidated Financial Statements

in accordance with GAAP and reporting practices applicable to the

banking industry requires us to make estimates and assumptions that affect

the reported amounts of assets, liabilities, revenues and

expenses, and to disclose contingent assets and liabilities.

Actual results could differ from those estimates.

We have identified

accounting for (i) the allowance for credit losses, (ii) goodwill,

(iii) pension assumptions, and (iv) income taxes as

our most critical accounting policies and estimates in that they are important

to the portrayal of our financial condition and results, and

they require our subjective and complex judgment as a result of the need to make estimates about

the effects of matters that are

inherently uncertain.

These accounting policies, including the nature of the estimates and types of assumptions

used, are described

throughout this Item 2, Management’s

Discussion and Analysis of Financial Condition and Results of Operations, and

Part II, Item 7,

Management’s Discussion and Analysis

of Financial Condition and Results of Operations included

in our 2023 Form 10-K/A.

TABLE I

AVERAGE BALANCES & INTEREST RATES (UNAUDITED)

Three Months Ended June 30,

Six Months Ended June 30,

2024

2023

2024

2023

Average

(Dollars in Thousands)

Balances

Interest

Rate

Balances

Interest

Rate

Balances

Interest

Rate

Balances

Interest

Rate

Assets:

Loans Held for Sale

26,281

517

5.26

54,350

800

5.90

26,797

1,080

5.62

54,728

1,445

5.32

Loans Held for Investment

(1)(2)

2,726,748

40,683

6.03

2,657,693

36,890

5.55

2,727,688

80,879

5.99

2,620,252

71,232

5.48

Taxable Securities

918,989

3,998

1.74

1,041,202

4,803

1.84

935,658

8,237

1.76

1,051,232

9,716

1.85

Tax-Exempt Securities

(2)

843

4.36

2,656

2.47

850

4.35

2,747

2.41

Federal Funds Sold and Interest Bearing

Deposits

262,419

3,624

5.56

218,902

2,782

5.10

201,454

5,517

5.51

289,543

6,893

4.80

Total Earning Assets

3,935,280

48,831

4.99

3,974,803

45,292

4.57

3,892,447

95,731

4.94

4,018,502

89,319

4.48

Cash & Due From Banks

74,803

75,854

75,283

75,250

Allowance For Credit Losses

(29,564)

(27,893)

(29,797)

(26,771)

Other Assets

291,669

297,837

293,473

298,999

TOTAL ASSETS

4,272,188

4,320,601

4,231,406

4,365,980

Liabilities:

Noninterest Bearing Deposits

1,346,546

1,539,877

1,345,367

1,570,642

NOW Accounts

1,207,643

4,425

1.47

1,200,400

3,038

1.01

1,204,337

8,922

1.49

1,214,585

5,190

0.86

Money Market Accounts

407,387

2,752

2.72

288,466

747

1.04

380,489

4,737

2.50

278,077

955

0.69

Savings Accounts

519,374

176

0.14

602,848

120

0.08

529,374

364

0.14

616,045

196

0.06

Other Time Deposits

160,078

1,226

3.08

87,973

103

0.47

149,203

2,150

2.90

88,819

155

0.35

Total Interest Bearing Deposits

2,294,482

8,579

1.50

2,179,687

4,008

0.74

2,263,403

16,173

1.44

2,197,526

6,496

0.60

Total Deposits

3,641,028

8,579

0.95

3,719,564

4,008

0.43

3,608,770

16,173

0.90

3,768,168

6,496

0.35

Repurchase Agreements

26,999

217

3.24

17,888

115

2.58

26,362

418

3.19

13,639

124

1.83

Other Short-Term Borrowings

6,592

4.16

17,834

336

7.54

5,176

107

4.16

27,745

788

5.73

Subordinated Notes Payable

52,887

630

4.71

52,887

604

4.52

52,887

1,258

4.70

52,887

1,175

4.42

Other Long-Term Borrowings

258

4.31

431

4.80

270

4.56

455

4.80

Total Interest Bearing Liabilities

2,381,218

9,497

1.60

2,268,727

5,068

0.90

2,348,098

17,962

1.54

2,292,252

8,594

0.76

Other Liabilities

72,634

84,305

70,464

82,765

TOTAL LIABILITIES

3,800,398

3,892,909

3,763,929

3,945,659

Temporary Equity

6,493

8,935

6,821

8,869

TOTAL SHAREOWNERS’ EQUITY

465,297

418,757

460,656

411,452

TOTAL LIABILITIES, TEMPORARY

AND SHAREOWNERS’ EQUITY

4,272,188

4,320,601

4,231,406

4,365,980

Interest Rate Spread

3.38

3.67

3.40

3.73

Net Interest Income

39,334

40,224

77,769

80,725

Net Interest Margin

(3)

4.02

4.06

4.01

4.05

(1)

Average Balances include net loan fees, discounts and premiums and nonaccrual loans.

Interest income includes loan costs of $0.2 million and

$0.3 million for the three and six months ended June

30, 2024, and net loan

fees of $0.1 million and $0.4 million for the three

and six month periods ended June 30, 2023.

(2)

Interest income includes the effects of taxable equivalent adjustments

using a 21% Federal tax rate.

(3)

Taxable equivalent net interest income divided by average earning assets.

Item 3.

QUANTITATIVE

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

See “Market Risk and Interest Rate Sensitivity” in Management’s

Discussion and Analysis of Financial Condition and Results of

Operations, above, which is incorporated herein by reference.

Management has determined that no additional disclosures are

necessary to assess changes in information about market risk that have occurred

since December 31, 2023.

Item 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

At June 30, 2024, the end of the period covered by this Form 10-Q, our management,

including our Chief Executive Officer and Chief

Financial Officer, evaluated

the effectiveness of our disclosure controls and procedures (as defined

in Rule 13a-15(e) under the

Securities Exchange Act of 1934).

Based upon that evaluation, our Chief Executive Officer and Chief

Financial Officer concluded

that, as of the end of the period covered by this report our disclosure controls and procedures

were ineffective due to the identification

of the material weakness discussed below.

Previously Reported Material Weakness

in Internal Control Over Financial Reporting

A material weakness is a deficiency,

or a combination of deficiencies, in internal control over financial reporting such

that there is a

reasonable possibility that a material misstatement of the Company’s

annual interim financial statements will not be prevented or

detected on a timely basis.

As reported in our 2023 Form 10-K/A, we did not maintain effective

internal control over financial

reporting (as such term is defined in Rule 13a-15(f) under the Securities Exchange

Act of 1934) as of December 31, 2023 as a result of

a material weakness in our internal control over financial reporting for the review of

significant inter-company mortgage loan sales

and servicing transactions was not designed effectively.

Specifically, management’s

review control over the completeness and

accuracy of elimination entries in the consolidation process was not designed

effectively, as the review

was not sufficiently precise to

identify all the necessary elimination entries between CCB and its subsidiary,

CCHL. The Company determined inter-company

transactions related to the sale of residential mortgage loans were not properly eliminated

and net loan fees were not properly

recorded. Further, financial information obtained

from CCHL for certain construction/permanent loan activity was not in sufficient

detail to appropriately classify this activity within the Statement of Cash Flows.

Specifically, management’s

review control over the

completeness, accuracy and review of financial information provided

from CCHL related to the Statement of Cash Flows was not

designed effectively as the review was not sufficiently

precise to identify all errors in financial reporting. Refer to our 2023 Form 10-

K/A for further information on the material weakness.

Remediation Plan

Since identifying the material weakness described above, management,

with oversight from the Audit Committee and input from the

Board of Directors, has devoted substantial resources to the ongoing

implementation of remediation efforts. These remediation

efforts,

summarized below are intended to address both the identified material weakness

and to enhance the Company’s overall

internal

control over financial reporting and disclosure controls and procedures.

Based on additional procedures and post-closing review,

management concluded that the consolidated financial statements

included in this report present fairly,

in all material respects, our

financial position, results of operations, and cash flows for the periods presented,

in conformity with GAAP.

The internal control and procedural enhancements and remedial actions that

have been implemented include:

Enhance the precision level review of activity within existing accounts that are

subject to elimination during consolidation, to

ensure appropriate elimination;

Enhance review procedures to identify new inter-company

accounts and activities subject to elimination during

consolidation;

Increase the granularity of general ledger mapping for inter-company

accounts subject to elimination during consolidation;

Enhance financial close checklist and pre-close meeting agenda to assist the reviewer

identifying and assessing inter-

company activities that are subject to elimination in a timely manner; and

Enhance the detail of review procedures of financial information obtained

from a subsidiary

to identify, assess and validate

appropriate classification when preparing the consolidated financial statements,

including when reviewing items in the

operating, investing or financing activity sections within the Statement of

Cash Flow.

To remediate

the material weakness, the Company implemented the internal control and procedural enhancements

noted above in

items 1-4 during the fourth quarter of 2023 and implemented the enhancement

noted above in item 5 during the first quarter of 2024.

The material weakness cannot be considered remediated until the applicable

controls have operated for a sufficient period of time and

management has concluded, through testing, that these controls are designed

and operating effectively.

Accordingly, management

will

continue to monitor and evaluate the effectiveness of our

internal control over financial reporting and the disclosure controls and

procedures.

Change in Internal Control

Except as identified above with respect to remediation of the material weakness,

there have been no significant changes in our internal

control over financial reporting during our most recently completed fiscal

quarter that have materially affected, or are reasonably

likely to materially affect, our internal control over financial reporting.

PART

II.

OTHER INFORMATION

Item 1.

Legal Proceedings

We are party

to lawsuits arising out of the normal course of business.

In management's opinion, there is no known pending litigation,

the outcome of which would, individually or in the aggregate, have a material effect

on our consolidated results of operations,

financial position, or cash flows.

Item 1A.

Risk Factors

In addition to the other information set forth in this Quarterly Report, you should carefully consider

the factors discussed in Part I,

Item 1A. “Risk Factors” in our 2023 Form 10-K/A, as updated in our subsequent

quarterly reports. The risks described in our 2023

Form 10-K/A and our subsequent quarterly reports are not the only risks facing

us. Additional risks and uncertainties not currently

known to us or that we currently deem to be immaterial also may materially adversely

affect our business, financial condition and/or

operating results.

Item 2.

Unregistered Sales of Equity Securities and Use of

Proceeds

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosure

Not Applicable.

Item 5.

Other Information

During the three months ended June 30, 2024, none of our directors or

officers (as defined in Rule 16a-1(f) under the Exchange Act)

adopted

terminated

any contract, instruction or written plan for the purchase or sale of our securities that was intended

to satisfy the

affirmative defense conditions of Rule 10b5-1(c) under

the Exchange Act or any “

non-Rule

10b5-1

trading arrangement” as defined in

Item 408(c) of Regulation S-K.

Item 6.

Exhibits

(A)

Exhibits

31.1

Certification of William G Smith, Jr., Chairman, President and Chief Executive Officer of Capital City Bank Group, Inc.,

Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

31.2

Certification of Jeptha E. Larkin, Executive Vice President and Chief Financial Officer of Capital City Bank Group, Inc.,

Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

32.1

Certification of William G. Smith, Jr., Chairman, President and Chief Executive Officer of Capital City Bank Group, Inc.,

Pursuant to 18 U.S.C. Section 1350.

32.2

Certification of Jeptha E. Larkin, Executive Vice President and Chief Financial Officer of Capital City Bank Group, Inc.,

Pursuant to 18 U.S.C. Section 1350.

101.SCH

XBRL Taxonomy

Extension Schema Document

101.CAL

XBRL Taxonomy

Extension Calculation Linkbase Document

101.LAB

XBRL Taxonomy

Extension Label Linkbase Document

101.PRE

XBRL Taxonomy

Extension Presentation Linkbase Document

101.DEF

XBRL Taxonomy

Extension Definition Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,

the Registrant has duly caused this Report to be signed on its

behalf by the undersigned Chief Financial Officer hereunto duly

authorized.

CAPITAL CITY

BANK GROUP,

INC.

(Registrant)

/s/ Jeptha E. Larkin

Jeptha E. Larkin

Executive Vice President

and Chief Financial Officer

(Mr. Larkin is the Principal

Financial Officer and has

been duly authorized to sign on behalf of the Registrant)

Date: August 1, 2024