ccbg-20260930

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

September 30, 2026

☐

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

[X]

No [

]

Indicate by check

mark whether the registrant

is a large accelerated

filer, an accelerated

filer, a non-accelerated

filer, a smaller

reporting company, or

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 [

] No

[X]

At October 29, 2026,

17,115,671

shares of the Registrant’s Common Stock, $0.01 par value, were outstanding.

CAPITAL CITY

BANK GROUP,

INC.

QUARTERLY

REPORT ON FORM

10-Q

FOR THE PERIOD

ENDED SEPTEMBER

30, 2026

TABLE OF CONTENTS

PART I – Financial Information

Page

Item 1.

Consolidated Financial Statements (Unaudited)

Consolidated Statements of Financial Condition – September 30, 2026 and December 31, 2025

Consolidated Statements of Income – Three and Nine Months Ended September 30, 2026 and 2025

Consolidated Statements of Comprehensive Income (Loss) – Three and Nine Months Ended September 30, 2026 and 2025

Consolidated Statements of Changes in Shareowners’ Equity – Three and Nine Months Ended September 30, 2026 and 2025

Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2026 and 2025

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

Special Cautionary Notice Regarding 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

which are beyond our control.

The words “may,” “could,” “should,”

“would,” “believe,” “anticipate,”

“estimate,” “expect,”

“intend,” “plan,”

“target,” “vision,” “goal,” “will,”

“project,” “continue,” “outlook,”

“approximate,” “seasonal,”

“future,” and similar expressions

are intended

to identify forward

-looking statements.

All forward-looking statements,

by their nature, are subject

to risks and uncertainties.

Forward-looking statements

are based

on current

assumptions and expectations that are subject

to change and may

prove to be inaccurate.

Our actual future results may

differ materially from

those set forth

in our forward-looking statements.

Our ability to

achieve

our financial

objectives could

be adversely affected

by the factors

discussed in detail in 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 for the year ended

December 31, 2025 (the “2025 Form

10-K”), as updated in our subsequent

quarterly reports filed on

Form 10-Q, as well as, among other

factors

●

Changes in trade, monetary, and fiscal

policies and laws, including

actual changes in

interest rates and the Fed Funds rate and

changes in international

trade policies, tariffs

and treaties

affecting

imports and

exports, and

their related impacts

macroeconomic

conditions, customer

behavior, funding

costs and

loan and

securities portfolios;

●

Inflation,

interest rate, market

and monetary

fluctuations;

●

Local, regional, national,

and international

economic conditions

(including the value of

the U.S. Dollar in relation to the

currencies of other advanced and emerging

market countries and the performance of both domestic and

international

equity

and debt markets and valuation of

securities traded on recognized

domestic and international

exchanges), and the impact they

may have

on us and

our clients and our assessment

of that

impact;

●

Supply-demand imbalances and general

economic conditions affecting local real estate prices and

a general deterioration

commercial real estate

market fundamentals;

●

The costs and

effects of

legal and regulatory

developments,

the outcomes

of legal proceedings or regulatory or other

governmental

inquiries, the results of regulatory examinations

or reviews and the ability to

obtain required

regulatory

approvals;

●

The effect

of changes

in laws and regulations (including laws and

regulations concerning taxes,

banking, securities, and

insurance) and

their application

with which we and our subsidiaries must

comply;

●

The effect of changes in accounting policies and practices,

as may

be adopted

by the regulatory

agencies, as well as other

accounting

standard

setters;

●

The accuracy

of our financial

statement

estimates and

assumptions;

●

Changes in the creditworthiness,

financial performance

and/or condition

of our borrowers;

●

Changes in the mix

of loan geographies,

sectors and types

or the level of non-performing

assets and

charge-offs;

●

Changes in estimates

of future credit

loss reserve requirements based

upon the periodic

review thereof under relevant

regulatory and

accounting

requirements;

●

Changes in our liquidity position;

●

Changes in our capital

levels, capital requirements

or our ability to maintain

adequate

regulatory capital

ratios;

●

The timely development and acceptance

of new products and services as

well as risks (including reputational and

litigation)

attendant

thereto, and

perceived overall value

of these products

and services by users;

●

Changes in consumer

spending, borrowing, and saving

habits;

●

Changes in deposit

levels, deposit mix, pricing, or the availability and

cost of other

funding sources;

●

Greater than

expected costs

or difficulties related to the

integration of new products

and lines of business;

●

Increased

competition and

its effect on

pricing (including deposit fees), spending, third-party

relationships and

revenues;

●

Technological changes;

●

Risks associated

with the development

and use of

artificial intelligence;

●

The cost and effects

of cyber incidents or other

failures, interruptions, or security breaches

of our systems

or those of our

customers or third-party

providers;

●

Fraud or misconduct

by internal or external

parties which we may

not be able

to prevent, detect

or mitigate;

●

Dispositions, acquisitions and

integration of acquired

businesses;

●

Impairment

of our goodwill or other intangible assets;

●

Changes in the reliability of our

vendors, internal control

systems, or information

systems;

●

Our ability to increase market

share and

control expenses;

●

Our ability to attract

and retain

qualified employees;

●

Changes in our organization,

compensation,

and benefit

plans;

●

The soundness

of other financial

institutions;

●

Volatility and

disruption in national

and international

financial and

commodity

markets;

●

Changes in the competitive

environment

in our markets and

among banking

organizations

and other

financial service

providers;

●

Action or inaction by the federal government,

including as a result of any

prolonged government

shutdown or government

intervention in the U.S. financial

system;

●

A deterioration of the credit rating for U.S. long-term sovereign debt, actions

that the

U.S. government may

take to

avoid

exceeding the debt

ceiling, and uncertainties surrounding

the federal budget

and economic

policy;

●

The effects of natural disasters (including

hurricanes), widespread health

emergencies (including pandemics),

military conflict

(including impacts related

to the conflicts

in the Middle East and

resulting disruptions to energy and

other commodities

markets and

supply chains)

terrorism, civil unrest, climate change or other

geopolitical events;

●

Our ability to declare and

pay dividends;

●

Structural changes

in the markets

for origination, sale and

servicing of residential mortgages;

●

Any inability to implement

and maintain

effective internal

control over financial

reporting and/or disclosure

control;

●

Potential claims, damages,

penalties, fines, costs and

reputational

damage

resulting from pending or future

litigation,

regulatory proceedings and

enforcement

actions;

●

Negative publicity and the impact on our

reputation,

including the speed and scale at which information

can spread

through

social media or digital channels,

which could amplify

adverse market

or customer reactions;

and

●

The limited trading activity

and concentration

of ownership of our

common

stock.

However, other factors besides those listed

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)

September 30,

December 31,

(Dollars in Thousands,

Except Par Value)

2026

2025

ASSETS

Cash and

Due From Banks

71,617

62,189

Federal Funds Sold and

Interest Bearing Deposits

340,015

467,782

Total Cash

and Cash

Equivalents

411,632

529,971

Investment

Securities, Available for

Sale, at fair value

(amortized cost of $

893,054

and $

656,546

)

862,097

643,922

Investment

Securities, Held to Maturity (fair

value of $

293,832

and $

369,320

)

315,142

377,446

Equity Securities

3,203

2,069

Total Investment

Securities

1,180,442

1,023,437

Loans Held For Sale,

at fair value

23,455

21,695

Loans Held for

Investment

2,489,724

2,546,118

Allowance for Credit

Losses

(30,369)

(31,001)

Loans Held for

Investment,

Net

2,459,355

2,515,117

Premises and

Equipment, Net

83,257

79,457

Goodwill

89,095

Other Real Estate

Owned

2,353

1,936

Other Assets

147,163

125,057

Total Assets

4,396,752

4,385,765

LIABILITIES

Deposits:

Noninterest Bearing

Deposits

1,331,669

1,251,886

Interest Bearing Deposits

2,334,899

2,410,426

Total Deposits

3,666,568

3,662,312

Short-Term Borrowings

38,881

50,092

Subordinated

Notes Payable

33,303

42,582

Other Long-Term

Borrowings

567

680

Other Liabilities

83,571

77,248

Total Liabilities

3,822,890

3,832,914

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;

17,113,297

and

17,084,386

shares issued and

outstanding

at September

30, 2026 and

December 31, 2025,

respectively

171

Additional Paid-In Capital

41,516

41,650

Retained Earnings

543,611

508,443

Accumulated

Other Comprehensive

(Loss) Income, net

of tax

(11,436)

2,587

Total Shareowners’

Equity

573,862

552,851

Total Liabilities

and Shareowners’

Equity

4,396,752

4,385,765

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

September 30,

Nine Months Ended

September 30,

(Dollars in Thousands,

Except Per Share

Data)

2026

2025

2026

2025

INTEREST INCOME

Loans, including Fees

38,652

40,279

115,118

121,629

Investment

Securities:

Taxable

10,629

7,175

29,920

19,644

Tax Exempt

Funds Sold and

Interest Bearing Deposits

3,194

3,964

10,271

11,369

Total Interest

Income

52,486

51,431

155,344

152,672

INTEREST EXPENSE

Deposits

6,780

7,265

21,108

22,053

Short-Term Borrowings

395

216

1,205

832

Subordinated

Notes Payable

293

383

979

1,473

Other Long-Term

Borrowings

Total Interest

Expense

7,476

7,874

23,319

24,384

NET INTEREST

INCOME

45,010

43,557

132,025

128,288

Provision for Credit

Losses

(80)

1,881

1,551

3,269

Net Interest

Income

After Provision For Credit Losses

45,090

41,676

130,474

125,019

NONINTEREST INCOME

Deposit Fees

5,168

5,877

16,422

16,258

Bank Card

Fees

3,830

3,733

11,318

11,021

Wealth Management

Fees

4,640

5,173

12,876

16,142

Mortgage Banking

Revenues

3,673

4,794

12,585

12,804

Other

2,073

2,754

6,715

6,027

Total Noninterest

Income

19,384

22,331

59,916

62,252

NONINTEREST EXPENSE

Compensation

25,620

26,056

77,159

78,794

Occupancy,

Net

7,294

7,037

21,696

20,901

Other

9,381

9,823

27,453

24,460

Total Noninterest

Expense

42,295

42,916

126,308

124,155

INCOME BEFORE

INCOME TAXES

22,179

21,091

64,082

63,116

Income

Tax Expense

5,239

5,141

15,048

15,264

NET INCOME

16,940

15,950

49,034

47,852

BASIC NET INCOME

PER SHARE

0.99

0.93

2.87

2.81

DILUTED NET INCOME

PER SHARE

0.99

0.93

2.86

2.80

Average

Common

Basic Shares Outstanding

17,113

17,068

17,114

17,050

Average

Common

Diluted Shares Outstanding

17,152

17,114

17,141

17,083

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

Nine Months Ended

September 30,

(Dollars in Thousands)

2026

2025

2026

2025

NET INCOME

16,940

15,950

49,034

47,852

Other comprehensive

income, before tax:

Investment

Securities:

Change in net unrealized

loss on securities available

for sale

(12,163)

2,932

(18,326)

10,676

Amortization of

unrealized losses on securities

transferred from

available

for sale to held to

maturity

202

164

1,044

Derivative:

Change in net unrealized

gain on effective

cash flow derivative

(253)

(1,442)

Amortization of

terminated

cash flow derivative

gain

(202)

(600)

Other comprehensive

(loss) income, before

tax

(12,365)

2,881

(18,762)

10,278

Deferred tax (benefit)

expense related

to other comprehensive

(loss) income

(3,117)

720

(4,739)

2,571

Other comprehensive

(loss) income, net of

tax

(9,248)

2,161

(14,023)

7,707

TOTAL COMPREHENSIVE

INCOME

7,692

18,111

35,011

55,559

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, July 1, 2026

17,111,077

171

40,821

531,291

(2,188)

570,095

Net Income

16,940

Other Comprehensive

Loss, net of tax

(9,248)

Cash Dividends ($

0.2700

per share)

(4,620)

Stock Based

Compensation

133

Stock Compensation

Plan Transactions,

net

2,220

562

Balance, September 30, 2026

17,113,297

171

41,516

543,611

(11,436)

573,862

Balance, July 1, 2025

17,066,395

171

39,527

487,665

(940)

526,423

Net Income

15,950

Other Comprehensive

Income, net

of tax

2,161

Cash Dividends ($

0.2600

per share)

(4,439)

Stock Based

Compensation

448

Stock Compensation

Plan Transactions,

net

2,255

Balance, September 30, 2025

17,068,650

171

40,067

499,176

1,221

540,635

Balance, January

1, 2026

17,084,386

171

41,650

508,443

2,587

552,851

Net Income

49,034

Other Comprehensive

Loss, net of tax

(14,023)

Cash Dividends ($

0.8100

per share)

(13,866)

Repurchase

of Common

Stock

(63,088)

(2,639)

Stock Based

Compensation

1,478

Stock Compensation

Plan Transactions,

net

91,999

1,027

Balance, September 30, 2026

17,113,297

171

41,516

543,611

(11,436)

573,862

Balance, January

1, 2025

16,974,513

170

37,684

463,949

(6,486)

495,317

Net Income

47,852

Other Comprehensive

Income, net

of tax

7,707

Cash Dividends ($

0.7400

per share)

(12,625)

Stock Based

Compensation

1,373

Stock Compensation

Plan Transactions,

net

94,137

1,010

1,011

Balance, September 30, 2025

17,068,650

171

40,067

499,176

1,221

540,635

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)

Nine Months Ended September

30,

(Dollars in Thousands)

2026

2025

CASH FLOWS FROM

OPERATING

ACTIVITIES

Net Income

49,034

47,852

Adjustments

to Reconcile Net Income

Cash Provided by

Operating Activities:

Provision for Credit

Losses

1,551

3,269

Depreciation

5,521

5,548

Amortization of

Premiums, Discounts and

Fees, net

2,280

3,403

Amortization of

Intangible Asset

107

Gain on Sale of Subsidiary

(773)

Originations of

Loans Held-for-Sale

(315,284)

(332,760)

Proceeds From Sales

of Loans

Held-for-Sale

328,332

350,882

Mortgage Banking

Revenues

(12,585)

(12,804)

Net Deletions for Capitalized

Mortgage Servicing Rights

Stock Based

Compensation

1,478

1,373

Net Tax

Benefit from

Stock Based

Compensation

(132)

(154)

Deferred Income

Taxes

(2,532)

2,429

Net Change

in Operating Leases

(18)

Net Gain on Sales and

Write-Downs of Other Real

Estate Owned

(796)

(4,514)

Gain from Insurance

Claim on Premises

(453)

Net (Increase)

Decrease in Other Assets

(1,000)

3,770

Net Increase

in Other Liabilities

6,425

8,364

Net Cash

Provided By Operating Activities

61,837

76,054

CASH FLOWS FROM

INVESTING ACTIVITIES

Securities Held to Maturity:

Purchases

(113,266)

(66,697)

Proceeds from Payments,

Maturities, and

Calls

175,326

228,784

Securities Available

for Sale:

Purchases

(360,296)

(225,039)

Proceeds from Payments,

Maturities, and

Calls

116,071

60,899

Equity Securities:

Purchases

(1,219)

(60)

Net Decrease in

Equity Securities

1,191

Purchases of

Loans Held for

Investment

(7,013)

(958)

Proceeds from Sales of

Loans

53,229

39,802

Net Decrease in

Loans Held for

Investment

1,147

23,666

Purchase of

Bank Owned Life Insurance

(6,000)

Net Cash

Received for Divestitures

2,375

Proceeds from Insurance

Claims on Premises

453

Proceeds From Sales

of Other Real Estate

Owned

3,921

7,340

Purchases of

Premises and

Equipment

(10,571)

(5,967)

Net Cash

(Used In) Provided By Investing

Activities

(148,133)

65,336

CASH FLOWS FROM

FINANCING ACTIVITIES

Net Increase

(Decrease) in Deposits

4,256

(57,065)

Net (Decrease) Increase

in Short-Term Borrowings

(11,211)

11,940

Principal Payments

of Subordinated

Notes

(9,279)

(10,305)

Dividends Paid

(13,866)

(12,625)

Payments

to Repurchase

Common

Stock

(2,639)

Proceeds from Issuance

of Common

Stock Under Purchase

Plans

696

710

Net Cash

Used In Financing Activities

(32,043)

(67,345)

NET (DECREASE)

INCREASE IN CASH AND

CASH EQUIVALENTS

(118,339)

74,045

Cash and

Cash Equivalents

at Beginning of Period

529,971

391,854

Cash and

Cash Equivalents

at End of

Period

411,632

465,899

Supplemental Cash

Flow Disclosures:

Interest Paid

23,949

24,148

Federal Income

Taxes Paid

10,975

7,700

State and

Local Income

Taxes Paid:

Florida

1,975

775

All Other

112

225

Supplemental Noncash

Items:

Loans and

Premises Transferred to

Other Real Estate

Owned

3,542

4,290

Loans Transferred

from Held for Investment

to Held for Sale, net

55,452

40,652

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 wholly owned

subsidiary, Capital

City Bank

(“CCB” or the “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 CCB.

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, 2025 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

2025 Form 10-K.

Accounting Standards

Updates

Proposed Accounting Standards

ASU No. 2023-06, “Disclosure

Improvements: Codification

Amendments in Response

to the SEC’s

Disclosure Update

and Simplification

Initiative.”

Accounting Standards

Update

(“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. ASU 2023-06 is to be applied

prospectively, and

early adoption

prohibited. For reporting

entities subject to

the SEC’s existing

disclosure requirements,

the effective

dates of

ASU 2023-06 will be the

date on

which the SEC’s removal

of that

related disclosure requirement

from Regulation

S-X or Regulation S-K becomes

effective. If

by June 30, 2027,

the SEC has not

removed the

applicable requirement

from Regulation

S-X or Regulation S-K, the pending content

of the related

amendment

will not become effective

for any entities. The

Company

is currently evaluating the

provisions of the

amendments

and the

impact on

its future consolidated

statements.

ASU No. 2024-03,

“Income Statement

— Reporting

Comprehensive

Income — Expense Disaggregation

Disclosures (Subtopic

220-

40): Disaggregation

of Income Statement

Expenses.”

ASU 2024-03 introduces new requirements

to disclose additional

information

about

certain types

of expenses, including employee

compensation,

depreciation, intangible

asset amortization,

and selling expenses.

ASU 2024-03 is effective

for the Company

as of January 1, 2027. The

Company

is currently evaluating the

impact of

the incremental

disclosures that

will be required under the standard.

ASU 2025-06, “Intangibles

- Goodwill and

Other -Internal-Use Software

(Subtopic

350-40): Targeted

Improvements to the

Accounting

for Internal-Use Software.”

The ASU updates accounting

for internal-use software

by shifting from a

stage-based

model

to a principles-based

approach

aligned with modern development.

Key provisions include new capitalization

criteria based on

authorization,

funding commitment,

and probable

completion, removal

of development

stages, integrated website guidance,

and

enhanced

disclosures. ASU 2025-06 is effective

for the Company

as of January

1, 2028. The Company

is currently evaluating the

provisions of the

amendments

and the

impact on

its future consolidated

statements

and disclosures.

ASU 2025-08, “Financial

Instruments—Credit

Losses (Topic 326):

Purchased Loans.”

The ASU updates the

accounting

for

purchased

loans under ASC 326.

The amendments

expand

the population

of loans subject

to the “gross-up” accounting

model by

eliminating the former

distinction between purchased

credit-deteriorated

(“PCD”) and non-PCD loans. Under

the new guidance,

entities will apply

a single model for purchased

loans by recognizing an

allowance for credit

losses and adjusting

the amorti

zed cost

basis for the associated

noncredit discount

at acquisition.

ASU 2025-08 is effective for

the Company

as of January

1, 2027. The

Company

is currently evaluating the

provisions of the amendments

and the

impact on

its future consolidated

statements

and

disclosures.

ASU 2025-11, “Interim

Reporting (Topic

270): Narrow-Scope

Improvements.”

The ASU aims to clarify

and enhance

interim financial

reporting by defining

its scope, consolidating

GAAP disclosures in

Topic 270, adding

a principle for material

post-year

-end event

disclosure, and

refining statement

format

guidance to improve

consistency for

all preparers. These changes

do not alter

the

fundamental

requirements of

interim reporting but seek to

streamline and

standardize

the process. ASU 2025-11 is effective

for the

Company

in interim reporting periods beginning as

of January

1, 2028.

The Company

is currently evaluating the

provisions of the

amendments

and the

impact on

its future consolidated

statements.

ASU 2025-12, “Codification

Improvements.”

The ASU was issued to make

technical corrections, clarify

ambiguous

guidance and

generally streamline

the Accounting Standards

Codification

across various

topics, affecting

most reporting entities, with key

changes

including clarifications

for diluted EPS during losses,

lease receivable disclosures,

beneficial interest

calculations, and

treasury stock

accounting, aiming

for better usability

without significantly

altering core accounting

outcomes.

ASU 2025-12 is effective for

the

Company

as of January

1, 2027. 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

September 30, 2026

U.S. Government

Treasury

605,514

11,171

594,343

U.S. Government

Agency

164,330

4,095

160,311

States and

Political Subdivisions

35,004

2,429

32,575

Mortgage-Backed

Securities

(1)

55,044

10,715

44,329

Corporate

Debt Securities

33,162

2,574

(49)

30,539

Total

893,054

30,984

(49)

862,097

December 31, 2025

U.S. Government

Treasury

331,495

1,940

171

333,264

U.S. Government

Agency

174,527

2,484

172,114

States and

Political Subdivisions

36,918

2,045

34,911

Mortgage-Backed

Securities

(1)

59,699

7,697

52,004

Corporate

Debt Securities

45,810

2,236

(42)

43,532

Other Securities

(2)

8,097

Total

656,546

2,051

14,633

(42)

643,922

Held to Maturity

Amortized

Unrealized

Fair

(Dollars in Thousands)

Cost

Gains

Losses

Value

September 30, 2026

Mortgage-Backed

Securities

(1)

315,142

21,310

293,832

Total

315,142

21,310

293,832

December 31, 2025

U.S. Government

Treasury

129,782

514

129,268

Mortgage-Backed

Securities

(1)

247,664

930

8,542

240,052

Total

377,446

930

9,056

369,320

(1)

Comprised of residential mortgage-backed securities.

(2)

Includes Federal

Home Loan Bank stock

and Federal

Reserve Bank stock

recorded

at cost of $

3.0

million and

5.1

million at

December 31, 2025,

respectively.

These securities are

presented

in Other Assets beginning

September 30, 2026.

At September

30, 2026 and

December 31, 2025,

the investment

portfolio had

3.2

million and $

2.1

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 $

605.5

million and $

461.3

million at September

30, 2026 and

December 31, 2025,

respectively,

were pledged to

secure public deposits

and for other

purposes.

Investment Sales.

There were

sales of investment

securities for the three and

nine months

ended September

30, 2026 and

2025.

Maturity Distribution

At September 30, 2026

the Company

’s investment

securities had the following maturity

distribution based

contractual

maturity.

Expected maturities

may differ

from contractual

maturities because

borrowers may have

the right to call or

prepay obligations.

Mortgage-backed

securities, certain amortizing U.S.

government agency

securities and other

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

159,015

158,279

Due after

one year through

five years

532,658

516,640

Mortgage-Backed

Securities

55,044

44,329

315,142

293,832

U.S. Government

Agency

146,337

142,849

Total

893,054

862,097

315,142

293,832

Unrealized Losses

on Investment Securities.

The following table summarizes

the available

for sale and

held to maturity

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

September 30, 2026

Available

for Sale

U.S. Government

Treasury

591,355

11,156

2,988

594,343

11,171

U.S. Government

Agency

54,953

1,648

74,492

2,447

129,445

4,095

States and

Political Subdivisions

1,842

28,453

2,408

30,295

2,429

Mortgage-Backed

Securities

44,274

10,714

44,321

10,715

Corporate

Debt Securities

657

28,782

2,574

29,439

2,574

Total

648,854

12,826

178,989

18,158

827,843

30,984

Held to Maturity

Mortgage-Backed

Securities

201,991

9,348

91,838

11,962

293,829

21,310

Total

201,991

9,348

91,838

11,962

293,829

21,310

December 31, 2025

Available

for Sale

U.S. Government

Treasury

31,319

8,902

149

40,221

171

U.S. Government

Agency

62,809

182

91,760

2,302

154,569

2,484

States and

Political Subdivisions

3,030

124

30,705

1,921

33,735

2,045

Mortgage-Backed

Securities

51,932

7,697

51,932

7,697

Corporate

Debt Securities

42,333

2,236

42,333

2,236

Total

97,158

328

225,632

14,305

322,790

14,633

Held to Maturity

U.S. Government

Treasury

129,268

514

129,268

514

Mortgage-Backed

Securities

33,589

106,262

8,444

139,851

8,542

Total

33,589

235,530

8,958

269,119

9,056

At September

30, 2026, there

were

848

positions (combined

AFS and HTM) with unrealized

pre-tax losses totaling

52.3

million.

of these positions

are U.S. Treasury

bonds and carry

the full faith and

credit of the U.S. Government.

688

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 September 30, 2026,

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

positions (municipal securities

and corporate

bonds) have

a credit component.

September 30,

2026, corporate

debt securities had

allowance for

credit losses of $

49,000

ne of the securities held by

the

Company

were past due or in nonaccrual

status

September 30,

2026.

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 rating

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)

September 30, 2026

December 31, 2025

Commercial, Financial

and Agricultural

168,144

180,341

Real Estate

– Construction

149,335

146,920

Real Estate

– Commercial

Mortgage

736,380

768,731

Real Estate

– Residential

(1)

1,004,438

1,025,690

Real Estate

– Home Equity

246,120

240,897

Consumer

(2)

185,307

183,539

Loans Held For Investment,

Net of Unearned

Income

2,489,724

2,546,118

(1)

Includes loans

in process balances

of $

0.5

million and

5.6

million at September

30, 2026 and

December 31, 2025, respectively.

(2)

Includes overdraft

balances of

1.3

million and

1.2

million at September

30, 2026 and

December 31, 2025, respectively.

Net deferred loan

costs, which include premiums

on purchased

loans, included in loans

were $

8.8

million at September

30, 2026 and

8.6

million at December

31, 2025.

Accrued interest receivable

on loans which is

excluded from

amortized

cost, totaled

9.4

million at September

30, 2026 and

9.8

million at December

31, 2025, 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

Atlanta.

Loan Purchase

The Company

will periodically purchase commercial

real estate loans

for its portfolio.

Commercial loan

purchases

totaled $

6.7

million for the three and

nine months

ended September

30, 2026, and

were not credit impaired.

ne were purchased

during the comparable

2025 periods.

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

2025

Form 10-K.

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

September 30, 2026

Beginning Balance

1,828

1,282

7,540

14,877

2,467

3,013

31,007

Provision for Credit Losses

(25)

179

(241)

(837)

(52)

847

(129)

Charge-Offs

(251)

(9)

(1,883)

(2,136)

Recoveries

282

163

1,171

1,627

Net Recoveries (Charge-Offs)

154

(712)

(509)

Ending Balance

1,834

1,461

7,306

14,194

2,426

3,148

30,369

Nine Months Ended

September 30, 2026

Beginning Balance

1,751

1,681

6,859

15,317

2,368

3,025

31,001

Provision for Credit Losses

790

(220)

349

(1,343)

1,788

1,410

Charge-Offs

(1,128)

(47)

(6)

(4,503)

(5,684)

Recoveries

421

267

2,838

3,642

Net (Charge-Offs) Recoveries

(707)

220

(1,665)

(2,042)

Ending Balance

1,834

1,461

7,306

14,194

2,426

3,148

30,369

Three Months Ended

September 30, 2025

Beginning Balance

1,425

1,811

6,256

15,264

2,014

3,092

29,862

Provision for Credit Losses

370

(352)

268

164

200

900

1,550

Charge-Offs

(373)

(12)

(10)

(1,573)

(1,968)

Recoveries

632

758

Net (Charge-Offs) Recoveries

(278)

(941)

(1,210)

Ending Balance

1,517

1,459

6,532

15,429

2,214

3,051

30,202

Nine Months Ended

September 30, 2025

Beginning Balance

1,514

2,384

5,867

14,568

1,952

2,966

29,251

Provision for Credit Losses

331

(925)

648

733

235

2,329

3,351

Charge-Offs

(615)

(69)

(34)

(4,359)

(5,077)

Recoveries

287

197

2,115

2,677

Net (Charge-Offs) Recoveries

(328)

128

(2,244)

(2,400)

Ending Balance

1,517

1,459

6,532

15,429

2,214

3,051

30,202

At September 30, 2026,

the allowance

for credit losses for loans

HFI totaled $

30.4

million compared

to $

31.0

million

December 31,

2025 and

30.2

million

September 30,

2025. Activity within the allowance

for the nine month

period ended September

30, 2026,

reflected a provision

expense of $

1.4

million and net

loan charge-

offs

of $

2.0

million. The September

30, 2026 allowance reflected

the

utilization of a

lower forecasted

unemployment

rate in forecasting

loan loss rates and

lower loan balances,

compared

to the

December 31, 2025

allowance. At September

30, 2025, the

allowance for

loans HFI totaled

30.2

million, a $

1.0

million increase over

December 31, 2024. Activity

within the allowance for

the nine-month period

ended September 30, 2025,

reflected a provision

expense

of $

3.4

million and net

loan charge-

offs

of $

2.4

million. The net increase in the allowance

was primarily attributable

to qualitative

factor adjustments

that were partially

offset by

lower loan balances.

Four unemployment

forecast scenarios

were utilized to estimate

probability of default

and are weighted based

on management’s

estimate of probabilit

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

September 30, 2026

Commercial, Financial

and Agricultural

246

167,780

118

168,144

Real Estate

– Construction

634

148,322

379

149,335

Real Estate

– Commercial

Mortgage

1,829

732,478

2,073

736,380

Real Estate

– Residential

235

151

386

1,000,227

3,825

1,004,438

Real Estate

– Home Equity

122

245,734

264

246,120

Consumer

933

970

183,641

696

185,307

Total

3,365

822

4,187

2,478,182

7,355

2,489,724

December 31, 2025

Commercial, Financial

and Agricultural

537

172

709

178,354

1,278

180,341

Real Estate

– Construction

295

146,625

146,920

Real Estate

– Commercial

Mortgage

1,386

764,785

2,560

768,731

Real Estate

– Residential

807

1,930

2,737

1,020,810

2,143

1,025,690

Real Estate

– Home Equity

239,061

1,769

240,897

Consumer

1,561

262

1,823

180,871

845

183,539

Total

4,653

2,364

7,017

2,530,506

8,595

2,546,118

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.

September 30, 2026

December 31, 2025

Nonaccrual

With No

With

90 + Days

With No

With

90 + Days

(Dollars in Thousands)

ACL

Still Accruing

ACL

Still Accruing

Commercial, Financial

and Agricultural

118

1,038

240

Real Estate

– Construction

379

Real Estate

– Commercial

Mortgage

668

1,405

753

1,807

Real Estate

– Residential

1,810

2,015

1,275

868

Real Estate

– Home Equity

264

1,382

387

Consumer

696

845

Total Nonaccrual

Loans

2,478

4,877

4,448

4,147

Collateral

Dependent Loans.

The following table presents the

amortized

cost basis of collateral

-dependent

loans.

September 30, 2026

December 31, 2025

Real Estate

Non Real Estate

Real Estate

Non Real Estate

(Dollars in Thousands)

Secured

Commercial, Financial

and Agricultural

1,087

Real Estate

– Construction

379

Real Estate

– Commercial

Mortgage

11,697

2,450

Real Estate

– Residential

2,168

1,275

Real Estate

– Home Equity

391

1,561

Consumer

Total Collateral

Dependent Loans

14,635

5,286

1,087

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 September 30, 2026,

the Company

had $

0.4

million of 1-4 family

residential real estate

loans for which formal

foreclosure proceedings were

in process, compared

to $

0.2

million at December 31,

2025.

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

principal or interest,

and the

loan is subsequently

refinanced

or restructured at

market terms

and qualifies

as a new loan.

During the nine months

ended September

30, 2026, the

Company

did

t modify any

loans to borrowers experiencing financial

difficulty.

During the nine months

ended September

30, 2025,

one

commercial mortgage

loan for $

2.5

million was provided a

month interest

only extension in exchange

for additional

collateral.

The Company

closely monitors the performance

of loans modified

for borrowers experiencing financial

difficulty to evaluate

the

effectiveness

of its modification

strategies. At September 30,

2026, there were

outstanding

balances

of loans modified

during the

preceding twelve months

At September 30, 202

5, the amortized

cost basis of loans

modified during the preceding

twelve months

was

2.8

million, of which $

2.5

million were current and

0.3

million were 30 -59 days

past due.

Credit Risk Management

The Company

has adopted

comprehensive

lending policies, underwriting standards and

loan review

procedures designed

to maximize loan income

within

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 the Company’s

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

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

account

receivable, inventory,

equipment.

Collateral values

are determined based

upon third party appraisals

and evaluations.

Loan to value ratios

origination are

governed by established

policy guidelines.

Real Estate

Construction

– Loans in this category

consists

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

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

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

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 evaluati

ons.

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

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

“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

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

ongoing basis dependent

upon improvement

and deterioration

in credit quality.

The following table

summarize

gross loans held for investment

at September

30, 2026

and December

31, 2025

and current

period

gross writeoffs for

the nine months

ended September

30, 2026

and 12

months ended

December 31, 202

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 September 30, 2026

2026

2025

2024

2023

2022

Prior

Loans

Total

Commercial, Financial,

Agriculture:

Pass

34,032

28,937

16,563

13,119

13,790

13,510

43,485

163,436

Special Mention

2,340

1,090

768

4,296

Substandard

114

105

412

Total

34,146

28,998

16,705

15,508

14,947

13,513

44,327

168,144

Current-Period Gross

Writeoffs

110

279

184

435

1,128

Real Estate

- Construction:

Pass

56,034

70,866

2,433

2,212

9,694

6,545

147,837

Special Mention

485

Substandard

634

379

1,013

Total

56,034

70,866

3,067

2,591

10,179

6,545

149,335

Real Estate

- Commercial

Mortgage:

Pass

73,556

81,383

63,168

83,575

146,789

203,907

20,802

673,180

Special Mention

3,993

4,780

267

3,431

27,590

8,159

1,250

49,470

Substandard

4,202

3,559

1,857

2,470

144

12,328

Doubtful

1,402

Total

77,549

90,365

68,396

87,102

176,236

214,536

22,196

736,380

Real Estate

- Residential:

Pass

110,864

115,191

105,477

231,979

292,824

129,618

10,575

996,528

Special Mention

337

113

1,172

1,622

Substandard

457

286

555

946

792

3,252

6,288

Total

111,658

115,477

106,032

232,925

293,729

134,042

10,575

1,004,438

Current-Period Gross

Writeoffs

Real Estate - Home Equity:

Performing

600

269

219

406

244,418

245,928

Nonperforming

192

Total

600

269

219

406

244,610

246,120

Current-Period Gross

Writeoffs

(33)

Consumer:

Performing

61,018

46,514

14,991

17,655

18,508

12,339

13,586

184,611

Nonperforming

113

176

171

696

Total

61,131

46,690

15,060

17,731

18,679

12,430

13,586

185,307

Current-Period Gross

Writeoffs

2,364

613

200

454

487

257

128

4,503

(Dollars in Thousands)

Term Loans

by Origination

Year

Revolving

As of December

31, 2025

2025

2024

2023

2022

2021

Prior

Loans

Total

Commercial, Financial,

Agriculture:

Pass

37,680

23,425

22,907

23,068

10,922

8,740

48,354

175,096

Special Mention

322

121

2,740

180

163

3,593

Substandard

146

245

1,114

1,652

Total

38,002

23,692

25,742

23,376

10,942

8,956

49,631

180,341

Current-Period Gross

Writeoffs

209

114

344

782

Real Estate

- Construction:

Pass

76,850

39,024

3,298

14,996

187

9,295

143,703

Special Mention

372

2,127

2,499

Substandard

718

Total

76,850

39,024

4,388

17,123

187

9,295

146,920

Real Estate

- Commercial

Mortgage:

Pass

93,723

76,348

101,262

174,959

92,388

152,307

22,555

713,542

Special Mention

9,830

4,477

5,725

20,547

3,922

4,074

720

49,295

Substandard

750

1,402

418

1,229

1,847

150

5,894

Total

104,303

82,227

107,085

195,924

97,539

158,228

23,425

768,731

Current-Period Gross

Writeoffs

Real Estate

- Residential:

Pass

142,278

130,895

269,844

316,402

59,950

87,545

10,521

1,017,435

Special Mention

116

954

807

378

2,255

Substandard

558

429

1,201

1,310

2,341

161

6,000

Total

142,278

131,453

270,273

317,719

62,214

90,693

11,060

1,025,690

Current-Period Gross

Writeoffs

136

Real Estate - Home Equity:

Performing

391

411

106

587

237,678

239,201

Nonperforming

1,696

Total

391

411

106

587

239,374

240,897

Current-Period Gross

Writeoffs

Consumer:

Performing

63,443

21,866

27,919

31,464

21,524

5,164

11,315

182,695

Nonperforming

186

191

149

215

844

Total

63,629

22,057

28,068

31,679

21,596

5,195

11,315

183,539

Current-Period Gross

Writeoffs

2,789

376

1,003

1,036

454

144

152

5,954

NOTE 4 – MORTGAGE

BANKING ACTIVITIES

The Company’s

mortgage banki

ng 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

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

interest rate lock commitments

(“IRLCs”) and forward contract

sales and their related fair values

are set forth

below.

September 30, 2026

December 31, 2025

Unpaid Principal

(Dollars in Thousands)

Balance/Notional

Fair Value

Balance/Notional

Fair Value

Residential Mortgage

Loans Held for

Sale

22,937

23,455

20,944

21,695

Residential Mortgage

Loan Commitments

("IRLCs")

(1)

29,368

474

20,699

464

Forward Sales Contracts

(2)

20,500

397

25,500

(1)

Recorded in other assets at fair value.

(2)

Recorded in other assets and other liabilities at fair value at

September 30, 2026 and December 31, 2025, respectively.

At September 30, 2026

and December

31, 2025, the

Company

had

residential mortgage loans

held for sale 30-89

days past

due or

on nonaccrual

status.

Mortgage banking

revenue was

follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in Thousands)

2026

2025

2026

2025

Net realized gains

on sales of mortgage

loans

2,991

3,871

9,470

10,356

Net change

in unrealized (loss) gain on

mortgage loans

held for

sale

(595)

130

(266)

302

Net change

in the fair value

of IRLCs

(152)

(45)

359

Net change

in the fair value

of forward sales

contracts

452

199

482

(85)

Pair-Offs on

net settlement

of forward sales

contracts

(234)

276

(404)

Mortgage servicing rights

additions

125

Net origination fees

864

833

2,488

2,192

Total mortgage

banking revenues

3,673

4,794

12,585

12,804

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)

September 30, 2026

December 31, 2025

Number of residential

mortgage loans

serviced for others

456

Outstanding principal

balance

of residential mortgage

loans serviced for others

119,277

118,429

Weighted average

interest rate

5.78%

5.69%

Remaining contractual

term (in months)

353

354

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

insured against

loss by the Federal Housing

Administration or

partially guaranteed

against loss by the

United States Department

Veterans

Affairs.

At September 30, 2026,

the servicing portfolio balance

consisted of the

following loan types: FNMA (

62.5

%),

GNMA (

4.6

%), and private

investor (

32.9

%).

FNMA and

private investor loans

are structured

actual

/actual

payment

remittance

At September

30, 2026 and

December 31, 2025,

the Company

did

t have delinquent

residential mortgage loans

in GNMA pools

serviced by the

Company.

The right to repurchase

these loans and

the corresponding liability has

been recorded in other

assets and

other liabilities, respectively,

in the Consolidated

Statements

of Financial Condition.

The Company

had

repurchases for

the three

months ended

September 30,

2026 and

2025, and

repurchases and

0.3

million repurchases in the nine

months ended

September

30, 2026 and

2025, respectively,

of GNMA delinquent or defaulted

mortgage loans

with the intention to

modify their terms

and

include the loans

in new GNMA pools.

Activity in the

capitalized mortgage

servicing rights was

follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in Thousands)

2026

2025

2026

2025

Beginning balance

927

889

924

933

Additions due to

loans sold with servicing

retained

124

Deletions and

amortization

(47)

(44)

(140)

(132)

Ending balance

908

885

908

885

The Company

did

t record any

permanent

impairment

losses on mortgage servicing rights for the three

or nine months

ended

September 30,

2026 or 2025.

The key unobservable

inputs used in determining the

fair value of

the Company’s

mortgage servicing rights were

follows:

September 30, 2026

December 31, 2025

Minimum

Maximum

Minimum

Maximum

Discount rates

9.50%

12.00%

9.50%

12.00%

Annual prepayment

speeds

8.78%

17.99%

8.50%

18.73%

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

11.75

% at September

30, 2026 and

13.05

December 31, 2025.

Warehouse

Line Borrowings

The Company

has the following warehouse

lines of credit and master

repurchase agreements

with various financial

institutions

September 30,

2026:

Amounts

(Dollars in Thousands)

Outstanding

million master repurchase

agreement without

defined expiration.

Interest is at the

secured overnight

financing rate

(SOFR) rate plus

2.25%

3.25%

, with a floor rate of

3.25%

4.25%

A cash pledge deposit of

0.1

million is required

by the lender.

13,528

million warehouse line of

credit agreement

expiring in

September 2027

Interest is at the

SOFR rate plus

2.50%

6.00%

, with a floor rate

3.00%

6.50%

18,166

Total Warehouse

Borrowings

31,694

Warehouse

line borrowings are

classified as short-term

borrowings.

At December 31, 2025,

warehouse line borrowings

totaled $

28.1

million. At September

30, 2026, 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 September

30, 2026.

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

The Company

previously maintained

interest rate swaps

with notional amounts

totaling $

million designated as a

cash flow hedge

for subordinated

debt. Under the swap

arrangement,

the Company

paid a fixed

interest rate of

2.50

% and received

a variable

interest

rate based

on three-month

CME Term SOFR. In October

2025, the

Company

terminated

the swaps and

derecognized the derivative

assets. The unrealized

gain of $

2.7

million was deferred in

accumulated

other comprehensive

income and

will be amortized on a

straight-line basis into

interest expense through

the remaining term

of the original cash

flow hedge. The Company

estimates there

will

be approximately

0.8

million reclassified as a decrease

to interest expense

within the next 12 months.

For derivatives designated

and that

qualify as

cash flow hedges of

interest rate risk, the gain or loss on

the derivative is recorded

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 AOCI 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

presents the change

in net gains (losses) recorded in

AOCI and

the consolidated

statements

of income related

the cash flow derivative

instruments (interest rate

swaps related to

subordinated

debt).

Change in Gain

Amount of Gain

(Loss) Recognized

Reclassified

(Dollars in Thousands)

Category

in AOCI

from AOCI to Income

Three months

ended September

30, 2026

Interest expense

202

Three months

ended September

30, 2025

Interest expense

(189)

303

Nine months

ended September

30, 2026

Interest expense

600

Nine months

ended September

30, 2025

Interest expense

(1,076)

899

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 Statements

of Financial Condition.

The Company’s

operating leases primarily

relate to banking

offices with remaining lease

terms from less than

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 Statements of Financial Condition and the related lease expense is recognized on a straight-line basis

over the lease term.

At September

30, 2026, the

operating lease ROU assets

and liabilities were $

24.8

million and $

25.5

million,

respectively. At

December 31, 2025,

ROU assets and

liabilities were $

26.3

million and $

26.9

million, respectively. The

Company

does not have

any finance

leases.

The table below summarizes

our lease expense

and other

information

related to the

Company’s

operating leases.

Three Months Ended

Nine Months Ended

September 30,

(Dollars in Thousands)

2026

2025

2026

2025

Operating lease expense

922

928

2,746

2,689

Short-term lease expense

139

171

467

722

Total lease

expense

1,061

1,099

3,213

3,411

Other information:

Cash paid

for amounts

included in the measurement

of lease liabilities:

Operating cash

flows from operating

leases

929

882

2,775

2,676

Right-of-use assets

obtained

in exchange for

new operating lease liabilities

866

4,041

Weighted average

remaining lease term

— operating leases (in years)

15.4

15.7

15.4

15.7

Weighted average

discount rate

— operating leases

3.7%

The table below summarizes

the maturity

of remaining lease

liabilities:

(Dollars in Thousands)

September 30, 2026

2026

915

2027

3,478

2028

3,201

2029

2,911

2030

2,919

2031 and

thereafter

18,790

Total

32,214

Less: Interest

(6,757)

Present Value

of Lease liability

25,457

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

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

% at each

extension.

The aggregate remaining

obligation of the

lease

totaled $

1.9

million at September

30, 2026.

Further, in accordance

with the lease agreement,

the Company

made a

0.2

million

payment

in July 2025 to the

lessor as reimbursement

for a portion

of the costs related

to the development

of subject

property to

support the construction

of a new banking

office by the

Company.

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

September 30,

Nine Months Ended September

30,

(Dollars in Thousands)

2026

2025

2026

2025

Service Cost

833

861

2,498

2,581

Interest Cost

1,531

1,676

4,594

5,029

Expected Return

on Plan Assets

(2,218)

(2,265)

(6,653)

(6,794)

Net Loss Amortization

(474)

(413)

(1,421)

(1,240)

Net Periodic Benefit

Cost

(328)

(141)

(982)

(424)

Discount Rate

5.67%

5.82%

5.67%

5.82%

Long-term Rate

of Return on

Assets

6.50%

6.75%

6.50%

6.75%

The components

of the net periodic

benefit cost for

the Company’s

SERP and SERP II were as

follows:

Three Months Ended

September 30,

Nine Months Ended September

30,

(Dollars in Thousands)

2026

2025

2026

2025

Service Cost

Interest Cost

150

131

450

395

Prior Service Cost Amortization

Net Loss Amortization

238

(30)

713

(88)

Net Periodic Benefit

Cost

432

137

1,296

417

Discount Rate

5.24%

5.57%

5.24%

5.57%

The service cost component

of net periodic benefit

cost is reflected in compensation

expense in the accompanying

statements

income.

The other components

of net periodic cost

are included in “other”

within the noninterest expense

category in the

Consolidated

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 by

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:

September 30, 2026

December 31, 2025

(Dollars in Thousands)

Fixed

Variable

Total

Fixed

Variable

Total

Commitments

to Extend Credit

(1)

187,468

441,355

628,823

188,834

456,328

645,162

Standby

Letters of Credit

7,287

7,828

Total

194,755

441,355

636,110

196,662

456,328

652,990

(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

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

that involved

in extending loan facilities. In

general, management

does not anticipate any

material losses

a result of participating

in these types of

transactions.

However, any

potential losses arising

from such transactions

are reserved for in the

same manner

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

lowance for credit losses

for off-balance

sheet credit commitments

that are

not unconditionally

cancellable by

the bank

adjusted

a provision for credit loss expense

and is recorded in other

liabilities.

The following table

shows the activity

in the

allowance.

Three Months Ended

September

30,

Nine Months Ended September

30,

(Dollars in Thousands)

2026

2025

2026

2025

Beginning Balance

2,197

1,738

2,107

2,155

Provision for Credit

Losses

357

134

(60)

Ending Balance

2,241

2,095

2,241

2,095

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 a

commitment

of up to $

10.0

million in a solar tax credit equity

fund.

September 30, 202

6, the amount remaining

to be funded

for the bank

tech venture

capital and

solar tax credit equity

investment

fund

commitments

was $

0.2

million and $

8.9

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.

In 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.

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

are approximately

0.1

million.

There was a $

0.1

million counterparty

payment

accrued and

payable

at September

30, 2026

due to a revision to

the share conversion

rate related to

additional

funding by

VISA of the merchant

litigation reserve.

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

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

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

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.

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

Level 2 within the fair value

hierarchy.

Interest Rate Swap.

The Company’s

derivative positions

are classified

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. The Company’s

derivative positions

are classified

Level 2 within the fair value

hierarchy and

use actively quoted

observable market

input values from external

market data

providers.

There was a $

0.1

million and $

0.2

million counterparty

payment

accrued and

payable

September 30,

2026 and

December 31, 202

5, respectively.

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

September 30, 2026

ASSETS:

Securities Available

for Sale:

U.S. Government

Treasury

594,343

U.S. Government

Agency

160,311

States and

Political Subdivisions

32,575

Mortgage-Backed

Securities

44,329

Corporate

Debt Securities

30,539

Loans Held for

Sale

23,455

Forward Sales Contracts

397

Residential Mortgage

Loan Commitments

("IRLCs")

474

December 31, 2025

ASSETS:

Securities Available

for Sale:

U.S. Government

Treasury

333,264

U.S. Government

Agency

172,114

States and

Political Subdivisions

34,911

Mortgage-Backed

Securities

52,004

Corporate

Debt Securities

43,532

Equity Securities

2,069

Loans Held for

Sale

21,695

Residential Mortgage

Loan Commitments

("IRLCs")

464

LIABILITIES:

Forward Sales Contracts

Mortgage Banking Activities

The Company

had Level 3 issuances and

transfers related to

mortgage banking

activities of $

5.9

million

and $

12.1

million, respectively, for the

nine months

ended September

30, 2026, and

6.1

million and $

13.0

million, respectively, for

the nine months

ended September

30, 2025.

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

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 $

14.7

million with valuation allowance

of $

1.0

million at September

30,

2026 and

a carrying value

of $

6.4

million and a $

0.1

million valuation allowance

at December

31, 2025.

Other Real Estate Owned

During the first nine

months of 2026, 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

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

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 September

30, 2026 and

December 31, 2025,

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.”

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:

September 30, 2026

Carrying

Level 1

Level 2

Level 3

(Dollars in Thousands)

Value

Inputs

ASSETS:

Cash

71,617

Fed Funds Sold and

Interest Bearing Deposits

340,015

Investment

Securities, Held to Maturity

315,142

293,832

Mortgage Servicing

Rights

908

1,534

Loans, Net of Allowance

for Credit Losses

2,459,355

2,321,370

LIABILITIES:

Deposits

3,666,568

3,665,513

Short-Term Borrowings

38,881

Subordinated

Notes Payable

33,303

31,339

Long-Term

Borrowings

567

December 31, 2025

Carrying

Level 1

Level 2

Level 3

(Dollars in Thousands)

Value

Inputs

ASSETS:

Cash

62,189

Fed Funds Sold and

Interest Bearing Deposits

467,782

Investment

Securities, Held to Maturity

377,446

129,268

240,052

Other Equity Securities

2,848

Mortgage Servicing

Rights

924

1,359

Loans, Net of Allowance

for Credit Losses

2,515,117

2,416,937

LIABILITIES:

Deposits

3,662,312

3,662,466

Short-Term Borrowings

50,092

Subordinated

Notes Payable

42,582

40,116

Long-Term

Borrowings

680

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

Income (Loss)

Balance as of

January 1, 2026

(9,530)

2,676

9,441

2,587

Other comprehensive

loss during the period

(13,575)

(448)

(14,023)

Balance as of

September 30, 2026

(23,105)

2,228

9,441

(11,436)

Balance as of

January 1, 2025

(20,179)

3,971

9,722

(6,486)

Other comprehensive

income (loss) during the

period

8,783

(1,076)

7,707

Balance as of

September 30, 2025

(11,396)

2,895

9,722

1,221

NOTE 11 -

SEGMENT REPORTING

The Company

operates a

single reportable business segment

that is comprised

of commercial

banking within the states

of Florida,

Georgia, and

Alabama.

The Company’s

chief executive

officer is deemed

the Chief Operating Decision Maker

(“CODM”). The

CODM evaluates

the financial performance

of the Company

by evaluating revenue streams,

significant expenses, and

budget to actual

results in assessing

the Company’s

single reporting segment and

in the determination

of allocating resources.

The CODM uses

consolidated

net income to

benchmark

the Company

against peers and

to evaluate

performance

and allocate

resources.

Significant

revenue and expense

categories evaluated

by the CODM are consistent with the

presentation of the

Consolidated Statement

of Income

and components

of other noninterest

expense.

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 third quarter

of 2026

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,”

“contemplate,”

“estimate,” “expect,”

“intend,” “plan,”

“point to,” “project,”

“target,” “vision,” “goal,”

“continue,” “further,”

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 2025

Form 10-K, as updated

in our subsequent

quarterly reports filed on

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 62 full-service offices

and 107

ATMs/ITMs

located in Florida, Georgia,

and Alabama.

Through Capital

City Home Loans,

LLC (“CCHL”), we have 27

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

our long-term strategic objectives

as part of

the MD&A section of our 2025

Form 10-K.

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

goodwill and

other intangibles that

resulted from merger and

acquisition activity.

We believe these measures

are useful to investors

because

they allow investors to

more easily compare

our capital adequacy

to other companies

in the industry.

Non-GAAP financial

measures should

not be considered

alternatives

to generally accepted

accounting

principles (“GAAP”)-basis financial statements

and

other bank

holding companies

may define

or calculate these

non-GAAP measures or similar measures

differently.

The GAAP to non

-GAAP reconciliation for each

quarter presented

is provided below.

2026

2025

(Dollars in Thousands, except per share data)

Third

Second

First

Fourth

Third

Shareowners' Equity (GAAP)

573,862

570,095

559,912

552,851

540,635

Less: Goodwill and Other Intangibles (GAAP)

89,095

Tangible Shareowners' Equity (non-GAAP)

484,767

481,000

470,817

463,756

451,540

Total Assets (GAAP)

4,396,752

4,450,483

4,453,734

4,385,765

4,323,774

Less: Goodwill and Other Intangibles (GAAP)

89,095

Tangible Assets (non-GAAP)

4,307,657

4,361,388

4,364,639

4,296,670

4,234,679

Tangible Common Equity Ratio (non-GAAP)

A/B

11.25%

11.03%

10.79%

10.66%

Actual Diluted Shares Outstanding (GAAP)

17,152,603

17,135,824

17,114,954

17,154,586

17,115,336

Tangible Book Value per Diluted Share (non-GAAP)

A/C

28.26

28.07

27.51

27.03

26.38

SELECTED QUARTERLY

FINANCIAL DATA

(UNAUDITED)

2026

2025

(Dollars in Thousands, Except Per Share Data)

Third

Second

First

Fourth

Third

Summary of Operations

Interest Income

52,486

51,838

51,020

51,715

51,431

Interest Expense

7,476

7,640

8,203

8,355

7,874

Net Interest Income

45,010

44,198

42,817

43,360

43,557

Provision for Credit Losses

(80)

919

712

1,995

1,881

Net Interest Income After

Provision for Credit Losses

45,090

43,279

42,105

41,365

41,676

Noninterest Income

19,384

20,599

19,933

20,103

22,331

Noninterest Expense

42,295

42,640

41,373

42,867

42,916

Income Before Income Taxes

22,179

21,238

20,665

18,601

21,091

Income Tax Expense

5,239

4,961

4,848

4,896

5,141

Net Income

16,940

16,277

15,817

13,705

15,950

Net Interest Income (FTE)

(1)

45,059

44,241

42,857

43,404

43,602

Per Common Share

Net Income Basic

0.99

0.95

0.92

0.80

0.93

Net Income Diluted

0.99

0.95

0.92

0.80

0.93

Cash Dividends Declared

0.27

0.26

Diluted Book Value

33.46

33.27

32.71

32.23

31.59

Diluted Tangible Book Value

(2)

28.26

28.07

27.51

27.03

26.38

Market Price:

High

53.60

51.04

46.83

45.63

44.69

Low

47.63

42.79

39.26

38.27

38.00

48.33

49.42

43.46

42.57

41.79

Selected Average Balances

Investment Securities

1,177,883

1,167,321

1,119,125

1,006,040

993,880

Loans Held for Investment

2,495,535

2,505,875

2,538,318

2,568,073

2,606,213

Earning Assets

4,038,273

4,068,827

4,089,838

4,035,910

3,981,530

Total Assets

4,386,496

4,407,371

4,418,904

4,367,036

4,317,951

Deposits

3,647,526

3,678,776

3,691,016

3,647,510

3,612,331

Shareowners’ Equity

575,766

573,839

567,663

556,100

542,216

Common Equivalent Average Shares:

Basic

17,113

17,101

17,129

17,070

17,068

Diluted

17,152

17,126

17,146

17,140

17,114

Performance Ratios:

Return on Average Assets (annualized)

1.53

1.48

1.45

1.25

1.47

Return on Average Equity (annualized)

11.67

11.38

11.30

9.78

11.67

Net Interest Margin (FTE)

4.42

4.35

4.24

4.26

4.34

Noninterest Income as % of Operating Revenue

30.10

31.79

31.77

31.68

33.89

Efficiency Ratio

65.63

65.76

65.89

67.50

65.09

Asset Quality:

Allowance for Credit Losses (“ACL”)

30,369

31,007

30,999

31,001

30,202

Nonperforming Assets (“NPAs”)

9,708

13,435

12,965

10,531

10,026

ACL to Loans HFI

1.22

1.24

1.23

1.22

1.17

NPAs to Total Assets

0.22

0.30

0.29

0.24

0.23

NPAs to Loans HFI plus OREO

0.39

0.54

0.51

0.41

0.39

ACL to Non-Performing Loans

412.92

309.72

278.19

360.69

368.54

Net Charge-Offs to Average Loans HFI

0.08

0.14

0.10

0.18

Capital Ratios:

Tier 1 Capital

21.74

21.10

20.37

20.20

19.33

Total Capital

22.99

22.35

21.62

21.45

20.59

Common Equity Tier 1

20.43

19.80

19.08

18.56

17.73

Leverage

12.31

11.96

11.65

11.77

11.64

Tangible Common Equity

(2)

11.25

11.03

10.79

10.66

(1)

Fully Tax

Equivalent.

(2)

Non-GAAP financial measure.

See non-GAAP reconciliation on page 37.

FINANCIAL OVERVIEW

Results of Operations

Performance Summary.

Net income of

$16.9

million, or $0.99

per diluted share, for the

third quarter of

2026 compared

to $16.3

million, or $0.

95 per diluted share, for the

second quarter

of 2026, and

$16.0 million, or $0.93 per diluted share,

for the third quarter

2025. For the first

nine months

of 2026, net

income totaled

$49.0 million, or $2.86 per diluted

share, compared

to net income

of $47.9

million, or $2.80

per diluted share, for the

same period of

2025.

Net Interest Income.

Tax

-equivalent net

interest income for

the third quarter

of 2026

totaled $45.1

million, compared to

$44.2 million

for the second

quarter of

2026, and

$43.6 million for the third quarter

of 2025. Compared

to the second

quarter of

2026, the increase

was primarily attributable

to higher income from

investment

securities and loan

interest, in addition to

lower deposit interest expense,

partially offset

by lower overnight funds

income due to

lower average balances.

The increase over the

third quarter of

2025 was also

driven by the same

aforementioned

factors. One additional

calendar

day also

contributed to

the increase over

the second quarter

2026.

For the first nine months

of 2026, tax

-equivalent net

interest income totaled

$132.2

million compared

to $128.4 million for the

same period of

2025,

primarily attributable

to higher investment

securities income and

lower deposit interest expense, partially

offset

by lower loan interest

income and

overnight funds

income.

Provision and Allowance for Credit Losses.

We recorded a

provision benefit for

credit losses of $0.1 million for the

third quarter of

2026, compared

to a provision expense

of $0.9 million for the second

quarter of

2026 and

$1.9 million for the third quarter

of 2025.

For the first nine

months of

2026, we recorded a

provision expense for

credit losses of $1.6 million compared

to $3.3 million for the

same period of

2025. At September

30, 2026, the

allowance for credit

losses for loans HFI totaled

$30.4 million (1.22% of

loans HFI)

compared

to $31.0 million (1.24% of

loans HFI) at

June 30, 2026

and $31.0

million at December 31, 202

(1.22% of loans

HFI).

discuss the various factors

that impacted

our provision expense

in further detail below under

the heading

Allowance for Credit Losses.

Noninterest

Income

. Noninterest income for

the third quarter

of 2026

totaled $19.4

million, a $1.2 million, or 5.9%, decrease from

the

second quarter of 2026

and a $2.9 million,

or 13.2%, decrease

from the third quarter of 2025.

The decrease from

the second quarter

2026 was primarily attributable

to decreases in mortgage

banking revenues

of $1.0 million, deposit fees

of $0.5 million and

other

income of $0.2

million partially offset

by a $0.5

million increase in wealth management

fees. The decrease

from the third quarter

2025 was driven

by decreases

in mortgage banking

revenues of $1.1

million, deposit fees of $0.7

million, other income of $0.7

million

and wealth management

fees of $0.5 million, partially offset

by an increase

in bank card

fees of $0.1

million. For the first nine months

of 2026, noninterest

income totaled

$59.9 million, a $2.3 million, or 3.8%, decrease

from the same

period of 2025,

primarily

attributable

to decreases in wealth

management

fees of $3.3

million,

partially offset

by increases in other income

of $0.7 million and

bank card

fees of $0.3

million.

Noninterest Expense.

Noninterest expense

for the third quarter

of 2026

totaled $42.3

million, a $0.3 million, or 0.8%, decrease from

the second quarter of

2026 and a

$0.6 million, or 1.4%, decrease from

the third quarter

of 2025. The

decrease from

the second

quarter

of 2026

was primarily attributable

to decreases in compensation

expense of

$0.2 million and other

expense of

$0.1 million. The

decrease from the third

quarter of 2025 reflected

decreases in compensation

expense of

$0.4 million and other

expense of

$0.4 million

offset by

a $0.3

million increase in occupancy

expense. For the first nine months

of 2026, noninterest

expense totaled

$126.3 million,

a $2.2 million, or

1.7%, increase over the

same period of 2025

and reflected

increases in other expense

of $3.0 million and

occupancy

expense of

$0.8 million partially offset

by a decrease

in compensation

expense of

$1.6 million. The increase in other

expense was

primarily due to

a $3.9 million increase in

ORE expense,

reflecting lower gains on

property sales compared

to the prior year period,

which included a

significant gain from

the sale of our

operations center

building in the first quarter

of 2025.

Financial Condition

Earning Assets.

Average

earning assets totaled

$4.038 billion for the third quarter

of 2026, a

decrease of

$30.6 million, or 0.8%, from

the second quarter

of 2026, and

an increase of

$2.4 million, or 0.1% over the fourth

quarter of

2025. Compared

to the second

quarter

of 2026, the

change in earning asset

mix reflected a

$27.2 million decrease

in overnight funds

a $

10.3 million decrease in loans

held

for investment

and a

$3.5 million decrease in loans

held for sale (“HFS”),

partially offset

by a $10.5

million increase in investment

securities. Compared

to the fourth

quarter of

2025, the change

reflected a $171.8

million increase in investment

securities and a $2.7

million increase in

loans HFS, partially offset

by a $99.7

million decrease in overnight funds

and a

$72.5 million decrease

in loans

held for investment.

Loans.

Average

loans HFI decreased

by $10.3 million, or 0.4%, from

the second quarter

of 2026, and

decreased by

$72.5 million, or

2.8%, from the

fourth quarter

of 2025. Loans

HFI at September

30, 2026, decreased

by $10.1 million, or 0.4%, from

June 30, 2026,

and decreased

by $56.4 million, or 2.2%, from

December 31, 2025.

Credit Quality

. Nonperforming assets

(nonaccrual loans

and other real estate) totaled

$9.7 million at September

30, 2026 compared

$13.4 million at June

30, 2026

and $10.5 million

at December 31, 2025.

At September 30, 2026,

nonperforming assets

as a percentage

of total assets

was 0.22%, compared

to 0.30% at

June 30, 2026

and 0.24%

at December

31, 2025. Nonaccrual

loans totaled

$7.4

million at September

30, 2026, a

$2.7 million decrease from

June 30, 2026

and a

$1.2 million decrease from

December 31, 2025.

Other real estate

totaled $2.4

million at September

30, 2026,

a $1.1

million decrease from

June 30, 2026,

and a

$0.4 million increase

over December 31, 2025.

Further, classified loans

totaled $20.8

million at September

30, 2026, a

$9.0 million decrease from

June 30,

2026, and

a $6.5 million increase over

December 31, 2025.

Deposits

. Average total

deposits were $3.648 billion for the

third quarter of

2026, a decrease

of $31.2 million, or 0.9%, from

the

second quarter

of 2026, and

comparable

to the fourth

quarter of

2025. At September

30, 2026, total

deposits were $3.667

billion, a

decrease of

$54.4 million, or 1.5%, from

June 30, 2026, and

an increase

of $4.3 million, or 0.1%, over December

31, 2025. Total

public funds

balances

were $503.2 million at September

30, 2026, $561.5

million at June 30, 202

6, and $654.7

million at December

31, 2025.

Capital

. At September 30, 2026,

we were “well-capitalized”

with a total

risk-based capital

ratio of 22.99%

and a

tangible common

equity ratio (a non-GAAP

financial measure) of

11.25% compared

to 22.35%

and 11.03%,

respectively,

June 30, 2026,

and 21.45

and 10.79

%, respectively,

December 31, 2025.

At September 30, 2026,

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

Nine Months Ended

September 30,

June 30,

September 30,

(Dollars in Thousands,

except per share

data)

2026

2025

2026

2025

Interest Income

52,486

51,838

51,431

155,344

152,672

Taxable

Equivalent Adjustments

132

133

Total Interest

Income

(FTE)

52,535

51,881

51,476

155,476

152,805

Interest Expense

7,476

7,640

7,874

23,319

24,384

Net Interest Income

(FTE)

45,059

44,241

43,602

132,157

128,421

Provision for Credit Losses

(80)

919

1,881

1,551

3,269

Taxable

Equivalent Adjustments

132

133

Net Interest Income

After Provision for Credit Losses

45,090

43,279

41,676

130,474

125,019

Noninterest Income

19,384

20,599

22,331

59,916

62,252

Noninterest Expense

42,295

42,640

42,916

126,308

124,155

Income

Before Income

Taxes

22,179

21,238

21,091

64,082

63,116

Income

Tax Expense

5,239

4,961

5,141

15,048

15,264

Net Income

Attributable to Common

Shareowners

16,940

16,277

15,950

49,034

47,852

Basic Net Income

Per Share

0.99

0.95

0.93

2.87

2.81

Diluted Net Income Per Share

0.99

0.95

0.93

2.86

2.80

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 51.

Tax

-equivalent net interest income

for the third quarter of

2026 totaled $45.1

million, compared to

$44.2 million for the second

quarter

of 2026, and

$43.6 million for the third quarter

of 2025. Compared

to the second

quarter of

2026, the increase

was primarily

attributable

to higher income from

investment

securities and loan

interest income, in addition

to lower deposit interest expense,

partially offset

by lower overnight funds

income due to

lower average balances.

The increase in investment

securities income reflected

new investment

purchases at

higher rates and

higher balances as

we deploy additional

liquidity into the investment

security portfolio.

The decrease in deposit

interest expense was

primarily driven by lower

average balances

on seasonal

public funds accounts

and

lower

rates on time deposits.

One additional calendar

day also

contributed to

the increase over

the second quarter

of 2026. The

increase over

the third quarter

of 2025

was also driven by the

same aforementioned

factors.

For the first nine

months of

2026, tax

-equivalent net

interest income totaled

$132.2 million compared

to $128.4 million for the

same

period of 2025.

The increase was primarily attributable

to higher investment

securities income and

lower deposit interest expense,

partially offset

by lower loan interest income

and overnight

funds income.

New investment purchases

at higher yields and higher

balances

drove the increase

in investment securities income.

The decrease in deposit

interest expense was

primarily attributable

lower rates across

several product

lines. Lower average loan

balances

contributed to

the decrease

in loan interest income,

while the

decrease in overnight funds

income reflected

the deployment

of more liquidity into the

investment

portfolio as well as a lower average

overnight funds

rate.

Our net interest margin

for the third quarter

of 2026

was 4.42%, an

increase of seven

basis points over the

second quarter

of 2026

and

an increase of

eight basis points over the

third quarter of

2025. For the first nine months

of 2026, our

net interest margin

increased by

six basis points to

4.34% compared

to the same

period of 2025.

The increase in net interest

margin over all prior periods was

largely

attributable

to higher investment

security yield driven by new purchases

at higher rates and

lower deposit costs. For the

third quarter of

2026, our cost

of funds

was 73 basis points,

a decrease

of two basis points

from the second

quarter of

2026 and

five basis points

from

the third quarter

of 2025. Our cost

of deposits (including noninterest

bearing accounts)

was 74 basis points,

76 basis points,

and 80

basis points, respectively,

for the same

periods.

Provision for

Credit Losses

We recorded

a provision benefit for

credit losses of $0.1

million for the third

quarter of 2026, compared

to a provision expense

of $0.9

million for the second

quarter of

2026 and

$1.9 million for the third quarter

of 2025. For the

first nine months of

2026, we recorded

provision expense

for credit losses of $1.

million compared

to $3.3 million for the same

period of 2025.

For the first nine months

2026, the provision

reflected a $1.4

million expense for loans

HFI and

a $0.1

million expense for unfunded

loan commitments

compared

to a $3.4

million expense for loans

HFI and

$0.1 million benefit for unfunded

loan commitments

for the same

period

2025. We discuss

the various factors

that impacted

our provision expense

in further detail below under

the heading Allowance

for

Credit Losses.

Noninterest Income

Noninterest income

for the third quarter

of 2026

totaled $19.4

million, a $1.2 million, or 5.9%, decrease from

the second quarter

2026 and

a $2.9 million, or 13.2%, decrease

from the third quarter

of 2025. The

decrease from

the second quarter

of 2026

was

attributable

to decreases in mortgage

banking revenues

of $1.0 million, deposit fees

of $0.5 million and

other income of

$0.2 million

partially offset

by a $0.5

million increase in wealth management

fees. The decrease

in mortgage banking

revenues was primarily

due

to lower production

volume and

the decrease

in deposit fees reflected

lower overdraft fees

attributable

to processing changes

that

better align with industry

practices. The increase

in wealth management

fees was primarily due

to higher retail brokerage fee

The decrease from

the third quarter

of 2025

was driven by decreases

in mortgage banking

revenues of $1.1

million, deposit fees of

$0.7 million, other

income of $0.7

million and wealth management

fees of $0.5

million, partially offset

by an increase

in bank

card

fees of $0.1

million. The decrease in mortgage

banking revenues

was due to lower production

volume and

gain on sale margin. The

decrease in deposit

fees reflected lower overdraft

fees. The decrease

in other income reflected

a $0.7 million gain from

the sale of

our

insurance subsidiary

in the third quarter of

2025 – the

advisors at

this subsidiary also serviced retail brokerage

clients which drove the

decline in wealth

management

fees.

For the first nine

months of

2026, noninterest

income totaled

$59.9 million, a $2.3 million, or 3.8%, decrease

from the same

period of

2025, attributable

to decreases in wealth

management

fees of $3.3

million partially offset

by increases in other income

of $0.7

million

and bank card

fees of $0.3 million. The decrease

in wealth management

fees was attributable

to decreases in retail brokerage

fees (due

to lower assets under

management)

and lower insurance

commissions (attributable

to the aforementioned

sale of our insurance

subsidiary). The increase

in other income

was primarily attributable

to increases in other fees/commissions

of $0.3 million and

bank

owned life insurance

income of $0.2

million. The increase in bank

card fees reflected

higher card volume.

Noninterest income

represented 30.1%

of operating revenues

(net interest income plus

noninterest income)

for the third quarter

2026 compared

to 31.8% for the

second quarter

of 2026

and 33.9%

for the third quarter

of 2025. For the

first nine months

of 2026,

noninterest income

represented 31.2%

of operating revenues

compared

to 32.7%

for the same

period of 2025.

The table below reflects

the major

components

of noninterest

income.

Three Months

Ended

Nine Months Ended

September 30,

June 30,

September 30,

(Dollars in Thousands)

2026

2025

2026

2025

Deposit Fees

5,168

5,656

5,877

16,422

16,258

Bank Card

Fees

3,830

3,858

3,733

11,318

11,021

Wealth Management

Fees

4,640

4,185

5,173

12,876

16,142

Mortgage Banking

Revenues

3,673

4,660

4,794

12,585

12,804

Other

2,073

2,240

2,754

6,715

6,027

Total Noninterest

Income

19,384

20,599

22,331

59,916

62,252

Significant components

of noninterest

income are discussed

in more detail below.

Deposit Fees

. Deposit fees for

the third quarter

of 2026

totaled $5.

million, a decrease of

$0.5 million, or 8.6%, from the second

quarter of

2026, and

a decrease

of $0.7 million,

or 12.1%, from the

third quarter of

2025. For the first nine months

of 2026, deposit

fees totaled $16.4

million, a $0.2 million,

or 1.0%, increase over

the same period of 202

5. Compared to the second

quarter of 2026 and

third quarter

of 2025, the

decreases reflected

lower overdraft fees

attributable

to processing changes

that better

align with industry

practices. Compared

to the first nine months

of 2025, the

increase was primarily due

to higher service charge fees and

commercial

account

analysis fees.

Bank Card Fees

. Bank card fees for the third

quarter of 202

totaled $3.8

million,

decrease of

$0.1 million,

or 0.7%, from the

second

quarter of

2026, and

an increase of

$0.1 million, or 2.6%, over the third quarter

of 2025. For the first nine

months of

2026, bank

card

fees totaled

$11.3 million, a $0.

million, or 2.7% increase

over the same

period of 2025. The

increase over the

first nine months of

2025 reflected

higher card volume.

Wealth

Management

Fees

. Wealth management

fees include trust fees

through Capital

City Trust (i.e., managed

accounts

and

trusts/estates),

and retail brokerage

fees through Capital

City Investments

(i.e., investment, insurance

products, and

retirement

accounts)

Wealth management

fees for the third

quarter of

2026

totaled $4.6

million, an increase of $0.

million, or 10.9%, over the

second quarter of 202

and a $0.5 million,

or 10.3%, decrease from

the third quarter of 2025.

For the first nine months

of 2026, wealth

management

fees totaled $12.9 million, a

decrease of $3.3 million,

or 20.2%, from the

same period of 2025. The

increase compared

the second quarter

of 2026

was driven by higher retail brokerage

fees. The decrease

compared

to the prior year periods

was primarily

attributable

to a decrease

in retail brokerage assets

under management.

Further, to a lesser extent,

lower insurance commissions

contributed to

the decrease

and reflected

the sale of our

insurance subsidiary

in the third quarter of

2025. At September

30, 2026,

total assets

under management

were approximately

$2.892 billion compared

to $2.839

billion at June 30, 2026

and $3.

244 billion at

September 30,

2025. The increase

over June 30, 2026

reflected higher account

valuations

Compared

to September

30, 2025, the

decline was due

to lower retail brokerage

assets partially

attributable

to the sale of

our insurance subsidiary

in the third quarter

2025.

Mortgage Banking Revenues.

Mortgage banking revenues

totaled $3.7 million

for the third quarter

of 2026, a

decrease

$1.0 million,

or 21.2%, from

the second quarter

of 2026

and a

decrease

$1.1 million, or 23.4%, from the

third quarter of

2025. For the first nine

months of 2026,

mortgage banking

revenues totaled

$12.6 million,

a decrease

of $0.2 million, or 1.7%, from the

same period of

2025.

Compared

to the second

quarter of

2026, the decrease

was attributable

to lower production volume.

The decrease compared

to the

prior year periods was

due to lower production

volume and

gain on sale margin.

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

$2.1 million for the third quarter

of 2026, a

decrease

$0.2 million, or 7.5%, from the second

quarter of

2026, and a decrease

of $0.7 million, or 24.7%, from

the third quarter of

2025. For the first nine months

of 2026, other

income totaled

$6.7 million,

an increase of $0.7

million, or 11.4

%, over the same period

of 2025. Compared

to the third quarter

of 2025,

the decrease

was due to the

aforementioned

$0.7 million gain from the

sale of our insurance

subsidiary in the third quarter

of 2025.

The increase

over the first nine

months of

2025 was primarily

attributable

to increases in other fees/commissions

of $0.3 million and

bank owned

life insurance income

of $0.2 million.

Noninterest Expense

Noninterest expense

for the third quarter

of 2026

totaled $42.3

million, a $0.3 million, or 0.8%, decrease from

the second quarter

2026 and a $0.6

million, or 1.4%, decrease

from the third quarter of

2025. The decrease

from the second quarter

of 2026 was primarily

attributable

to decreases in compensation

expense of

$0.2 million (commission expense)

and other

expense of

$0.1 million. A $0.5

million decrease

in other real estate

expense that

was partially offset

by a $0.3

million increase in telephone expense

drove the

variance

in other expense. The

decrease from

the third quarter

of 2025

was also driven by the

same aforementioned

factors.

For the first nine

months of 2026, noninterest

expense totaled

$126.3 million, a $2.2

million, or 1.7%, increase over

the same

period of

2025 and

reflected increases in other

expense of

$3.0 million and occupancy

expense of

$0.8 million partially offset

by a $1.6

million

decrease in compensation

expense. The increase

in other expense

was primarily due to a

$3.9 million increase in ORE expense,

reflecting lower gains

on property sales

compared

to the prior year period, which included

a significant gain from

the sale of

our

operations center

building in the first quarter

of 2025. Lower charitable

contribution expense

of $0.6 million and

professional

fee

expense of

$0.6 million partially offset

the increase. The increase

in occupancy

expense reflected

higher expense for FF&E

maintenance

agreements and

software licenses. The decrease

in compensation

expense reflected

lower salary expense

of $1.1 million

and associate

benefit expense

of $0.5 million. Lower commission expense

drove the decline in salary

expense and

the decrease

associate

benefit expense

was primarily attributable

to lower stock based

compensation.

The table below reflects

the major

components

of noninterest

expense.

Three Months

Ended

Nine Months Ended

September 30,

June 30,

September 30,

(Dollars in Thousands)

2026

2025

2026

2025

Salaries

21,502

21,668

21,740

64,542

65,636

Associate Benefits

4,118

4,168

4,316

12,617

13,158

Total Compensation

25,620

25,836

26,056

77,159

78,794

Premises

3,132

3,096

3,176

9,407

9,620

Equipment

4,162

4,223

3,861

12,289

11,281

Total Occupancy

7,294

7,319

7,037

21,696

20,901

Legal Fees

492

537

491

1,529

1,474

Professional Fees

1,460

1,400

1,621

4,165

4,761

Processing Services

2,513

2,440

2,475

7,386

7,434

Advertising

787

854

711

2,511

2,350

Telephone

1,148

845

762

2,813

2,195

Insurance

– Other

735

738

750

2,205

2,239

Other Real Estate

Owned, net

(352)

117

(556)

(4,431)

Pension - Other

(747)

(744)

(871)

(2,236)

(2,616)

Miscellaneous

3,345

3,298

3,866

9,636

11,054

Total Other

9,381

9,485

9,823

27,453

24,460

Total Noninterest

Expense

42,295

42,640

42,916

126,308

124,155

Significant components

of noninterest

expense are

discussed in more detail below.

Compensation.

Compensation

expense totaled

$25.6

million for the third quarter

of 2026, a

decrease of

$0.2 million, or 0.8%, from

the second quarter of

2026 and a decrease

of $0.4

million, or 1.7%, from the third quarter

of 2025. Compared

to the second

quarter of

2026, the decrease

reflected a $0.2

million decrease in salary expense

(primarily commission expense

). Compared

to the third quarter

of 2025, the

decrease reflected

lower salary

expense of

$0.2 million (primarily commission expense)

and lower associate

benefits of

$0.2 million (primarily

lower health

insurance costs).

For the first nine

months of 2026, compensation

expense totaled

$77.2 million compared

to $78.8 million for the

same period of

2025

with the $1.6 million

decrease reflective

of lower salary

expense of

$1.1 million and associate

benefit expense

of $0.5 million. Lower

commission expense

drove the decline in salary

expense and

the decrease

in associate benefit

expense was primarily

attributable

lower health

care insurance

costs.

Occupancy

. Occupancy

expense totaled

$7.3 million for the third quarter

of 2026, comparable

to the second

quarter of

2026 and

$0.3 million, or 3.7%,

increase over the

third quarter of

2025. For the first nine months

of 2026, occupancy

expense totaled

$21.7

million,

a $0.8 million,

or 3.8%, increase

over the same

period of 2025. The

increase compared

to all prior periods was primarily

attributable

to higher FF&E maintenance

agreements and

software license expense.

Other

. Other expense totaled

$9.4 million for the third quarter

of 2026, a

$0.1 million, or 1.1% decrease

from the second

quarter of

2026 and

a $0.4 million, or 4.5%, decrease

from the third

quarter of

2025. For the first nine months

of 2026, other

expense totaled

$27.5 million,

a $3.0 million, or 12.2%,

increase over the

same period of

2025. Compared

to the second

quarter of

2026

and the

third

quarter of

2025,

the decrease

was primarily attributable

decrease in other

real estate expense

(ORE) that was partially

offset by

higher telephone

expense. The increase

over the first nine months

of 2025

was primarily due to a

$3.9 million increase in ORE

expense, which reflected

a lower level of gains

from the sale of properties,

namely a large gain

realized from the

sale of our operations

center building in the

first quarter

of 2025. Lower expense

for charitable

contributions of

$0.6 million and professional

fees of $0.6

million were partially

offsetting.

Our operating efficiency

ratio (expressed as

noninterest expense

as a percentage

of the sum

of taxable

-equivalent net

interest income

plus noninterest income)

was 65.63% for

the third quarter of 2026 compared

to 65.76% for the second quarter

of 2026

and 65.09

for

the third quarter

2025. For the first nine months

of 2026, this ratio

was 65.76% compared

to 65.11%

for the same

period of 2025.

Income Taxes

We realized income

tax expense

of $5.2 million (effective

rate of 23.6%)

for the third quarter

of 2026, compared

to $5.0 million

(effective rate of 23.4%)

for the second quarter

of 2026 and $5.1 million

(effective rate of 24.4%)

for the third quarter

of 2025.

For the

first nine months

of 2026, we realized income

tax expense

of $15.0 million (effective

rate of 23.5%)

compared

to $15.3 million

(effective rate

of 24.2%) for the

same period of

2025. Tax

benefits accrued

from a solar

tax credit investment

in 2026 drove

the

decrease in our effective

tax rate

compared

to the prior year periods. Absent

discrete items or new tax

credit investments, we

expect

our annual

effective tax

rate to approximate

23-24% for 2026.

FINANCIAL CONDITION

Average

earning assets totaled

$4.038 billion for the third quarter

of 2026, a

decrease of

$30.6 million, or 0.8%,

from the second

quarter of 2026, and

an increase of $2.4 million,

or 0.1% over the fourth

quarter of 2025. Compared

to the second quarter

of 2026,

the

change in earning asset

mix reflected a

$27.2 million decrease

in overnight funds, a

$10.3 million decrease

in loans held for

investment, and

a $3.5 million decrease

in loans held for sale (“HFS”), partially

offset by

a $10.5

million increase in investment

securities. Compared

to the fourth

quarter of

2025, the change

reflected a $171.8

million increase in investment

securities and a

$2.7

million increase in

loans HFS, partially offset

by a $99.7

million decrease in overnight funds

and a

$72.5 million decrease

in loans

held for investment.

Investment Securities

Average

investments

totaled $1.178

billion for the third quarter of

2026, a $10.6

million, or 0.9%,

increase over the

second quarter

2026 and

$171.8 million,

or 17.1%, increase over

the fourth quarter of

2025. Average

investments

represented 29.2%

of our average

earning assets for

the third quarter

of 2026

compared

to 28.7%

for the second

quarter of

2026

and 24.9%

for the fourth

quarter of

2025. For the remainder

of 2026, 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 utilized to support

loan growth.

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 September 30,

2026, $862.1

million, or 73.0%, of the investment

portfolio was classified as

AFS

and $315.1

million, or 26.7%, was classified as

HTM.

The average

maturity

of our total

investment

portfolio

September 30,

2026

was 2.98 years

compared

to 2.95 years

June 30, 2026

and 2.57

years

December 31, 2025.

The duration

of our total

investment

portfolio

September 30,

2026 was 2.63

years compared

to 2.60 years

June 30, 2026

and 2.12

years

December 31, 2025.

Additional information

on unrealized gains/

losses in the AFS and HTM

investment

portfolios is provided in Note 2 –

Investment

Securities.

We determine

the classification of a

security

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

fair value with unrealized

gains and losses associated

with these securities recorded

net of tax,

in the accumulated

other

comprehensive

loss component

of shareowners’ equity.

HTM securities are acquired

or owned with the intent

of holding them

maturity.

HTM investments

are measured

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 September

30, 2026, there

were 848 positions (combined

AFS and HTM) with unrealized

pre-tax losses totaling $52.3

million. 91

of these positions

are U.S. Treasury

bonds and carry

the full faith and

credit of the U.S. Government.

688 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 September

30, 2026, all collateralized

mortgage obligation

securities, mortgage

-backed

securities, Small Business Administration

securities, U.S. Agency,

and U.S. Treasury

bonds held were rated

AA+ or higher. The remaining

69 positions (municipal

securities and

corporate

bonds) have

a credit

component.

At September 30, 2026,

municipal securities and

corporate

debt securities had

immaterial allowance

for credit losses.

None of these securities

were past due

or in nonaccrual

status

September 30,

2026.

Loans HFI

Average

loans HFI decreased

by $10.3 million, or 0.4%,

from the second

quarter of

2026, and

decreased by

$72.5 million, or 2.8%,

from the fourth

quarter of

2025. Compared

to the second

quarter of

2026, the decline was

primarily attributable

to decreases

commercial real estate

loans of $8.4

million, residential real estate loans

of $4.5 million, and

construction loans

of $3.7 million,

partially offset

by increases in consumer

loans (primarily indirect auto)

of $2.2 million, home

equity loans of

$2.0 million, and

commercial loans

of $1.5 million. Compared

to the fourth

quarter of

2025, the decline was

primarily attributable

to decreases

residential real estate

loans of $35.2

million, commercial real estate

loans of $33.0

million, construction loans

of $7.8 million,

commercial loans

of $5.1 million, and

consumer loans

(primarily indirect auto) of

$0.7 million, partially offset

by increases in home

equity loans of

$7.9 million.

Loans HFI

at September

30, 2026, decreased

$10.1 million, or 0.4%,

from June 30,

2026, and

decreased $56.4

million, or 2.2%,

from

December 31, 2025. Compared

to June 30, 2026, the

decline was primarily attributable

to decreases in commercial

real estate loans

$14.3 million, commercial

loans of $4.4

million, and other loans

of $2.3 million, partially offset

by increases in residential

real estate

loans of $5.9

million, consumer loans

(primarily indirect auto)

of $3.2 million, home

equity loans of

$1.7 million, and construction

loans of $0.2

million. Compared

to December 31, 2025,

the decline was primarily attributable

to decreases in commercial

real estate

loans of $32.4

million, residential real estate

loans of $16.9

million, commercial loans of

$12.2 million, and other

loans of

$4.4

million, partially offset

by increases in home

equity loans of

$5.2 million, construction loans

of $2.4 million, and

consumer

loans

(primarily indirect auto)

of $1.7 million.

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 $9.7

million at September

30, 2026, compared

to $13.4 million

at June 30, 2026 and

$10.5 million at December

31, 2025. At September

30, 2026, nonperforming

assets as a percentage

of total assets

was 0.22%, compared

to 0.30% at

June 30, 2026

and 0.24%

at December

31, 2025. Nonaccrual

loans totaled

$7.4 million at

September 30, 2026,

a $2.7 million decrease

from June 30,

2026 and

a $1.2 million decrease

from December

31, 2025. Other real

estate totaled

$2.4 million at September

30, 2026, a

$1.1 million decrease from

June 30, 2026

and a

$0.4 million increase over

December 31, 2025.

Further, classified loans

totaled $20.8

million at September

30, 2026, a

$9.0 million decrease from

June 30, 2026

and a

$6.5 million increase over December

31, 2025.

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

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

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 September 30, 2026,

the allowance for credit

losses for loans

HFI totaled $30.4

million compared

to $31.0 million

June 30, 2026

and $31.0

million

December 31, 2025.

Activity within the allowance

is provided in Note 3 – Loans

Held for Investment

and

Allowance for Credit

Losses in the Notes to

Consolidated

Financial Statements.

Compared

to June 30, 2026,

the decline in the

allowance reflected

improved credit quality

metrics and a

lower level of net loan charge-

offs

of 8 basis points

of average

loans for the

third quarter

of 2026

versus 14 basis points

for the second

quarter of

2026 and

18 basis points for

the third quarter

of 2025. Net loan

charge-

offs

for the nine months

ended September

30, 2026 were 11

basis points compared

to 12 basis points

for the same

period of

2025. Compared

to December 31, 2025,

the decline in the allowance

was primarily attributable

to a decline in loan

balances.

September 30, 2026,

the allowance represented

1.22% of loans HFI compared

to 1.24%

June 30, 2026,

and 1.22%

December 31,

2025.

At September

30, 2026, the

allowance for

credit losses for unfunded

commitments

totaled $2.2

million compared to

$2.2 million and

$2.1 million

June 30, 2026

and December

31, 2025, respectively.

The slight change in the allowance

for unfunded

commitments

from December 31, 2025

reflected a variance

in the level of unfunded

loan commitments.

The allowance

for unfunded

commitments

is recorded in other

liabilities.

Deposits

Average

total deposits

were $3.648 billion for the

third quarter of

2026, a decrease

of $31.2 million, or 0.9%, from

the second quarter

of 2026, and

comparable

to the fourth

quarter of

2025. Compared

to the second

quarter of

2026, the decrease

was primarily due to

lower public funds

balances

of $63.8 million (primarily NOW accounts)

due to the seasonal

reduction in those balances,

partially

offset by

higher core deposit balances

of $32.6 million (primarily MMA

and noninterest

bearing checking).

At September

30, 2026, total

deposits were $3.667 billion, a decrease

of $54.4 million, or 1.5%,

from June 30,

2026, and

an increase

of $4.3 million, or

0.1%,

over December 31, 2025.

The decrease from

June 30, 2026,

was driven by lower public funds

balances

$58.3 million (primarily

NOW accounts),

partially offset

by an increase

in core deposit balances

of $3.9 million (primarily NOW

accounts).

The increase over December

31, 2025, was primarily

due to core deposit

growth of $155.8

million, partially offset

by lower

public funds

balances

of $151.5

million. Total public funds

balances

were $503.2 million at September

30, 2026, $561.5

million at

June 30, 2026,

and $654.7

million at December 31, 2025,

respectively.

Business deposit

transaction

accounts

classified as repurchase

agreements averaged

$14.2 million for the

third quarter of

2026, an

increase of $3.2 million

over the second quarter

of 2026

and a decrease

of $6.5 million from

the fourth

quarter of

2025. At September

30, 2026, repurchase

agreement balances

were $7.2 million compared

to $7.4 million at June

30, 2026

and $22.0

million at December

31, 2025.

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

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 embedded

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 both parallel

and upward

and downward

shifts in interest rates

(assuming

no balance

sheet growth) to indicate

the inherent interest rate

risk. We prepare a base

case (assumes

a static rate

environment)

and

several alternative

interest rate simulations

for various ranges of

upward and downward

interest rate changes.

This analysis is prepared

quarterly and

reported to ALCO, our Market

Risk Oversight Committee

(“MROC”), our Risk Oversight

Committee

(“ROC”) and

the

Board of

Directors. We will periodically

augment our interest

rate simulations

with alternative interest

rate scenarios that

may include

various non-parallel

shifts in interest rates, including

a flattening

or steepening of the

yield curve.

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

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.

The following table presents our

net interest income

simulation results

for gradual 12-month

and 24-month “ramp”

scenarios applied to the base

scenario. The “ramp”

scenario is a parallel

shift applied gradually

over a 12-month

period for the projected

12-month

and 24-month

period on a pro

rata basis.

ESTIMATED

CHANGES IN

NET INTEREST INCOME

As of September 30, 2026

% Change in NII

Change in Interest

Rates

12 Months

24 Months

+200 bp Ramp

3.9%

17.5%

+100 bp Ramp

2.0%

11.1%

-100 bp Ramp

-2.0%

-1.9%

-200 bp Ramp

-4.0%

-8.9%

As of June 30, 2026

% Change in NII

Change in Interest

Rates

12 Months

24 Months

+200 bp Ramp

4.8%

18.0%

+100 bp Ramp

2.4%

11.0%

-100 bp Ramp

-2.3%

-3.6%

-200 bp Ramp

-4.8%

-11.5%

The Net Interest Income

(“NII”) at Risk position

of an instantaneous

parallel rate shock

indicates that

in the short-term (over the

12 months),

all rising rate environments

will positively impact

the net interest margin

of the Company,

while declining rate

environment

will have a

negative impact

on the net interest

margin.

Compared

to the second

quarter of

2026, these metrics became

more favorable

in the declining rate scenarios

due to the deployment

of variable

rate overnight funds

into the investment

securities

portfolio.

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

% Change in EVE

EVE Ratio

Changes in Interest

Rates

September 30, 2026

June 30, 2026

September 30, 2026

June 30, 2026

+200 bp Shock

4.6%

10.6%

29.9%

27.2%

+100 bp Shock

3.2%

7.0%

29.0%

25.9%

-100 bp Shock

-6.1%

-9.0%

25.5%

21.4%

-200 bp Shock

-14.9%

-20.7%

22.7%

18.3%

At September

30, 2026, the economic

value of equity

was favorable

in all rising rate environments and

unfavorable

in the falling rate

environment

EVE was within prescribed

tolerance levels as

the EVE ratio (EVE/EVA)

in all rate scenarios

is greater than

5.0%.

Factors that

can impact

EVE values include the absolute

level of rates, the overall

structure of the

balance

sheet (including liquidity

levels), pre-payment

speeds, loan floors, and

the change

of model assumptions.

As the interest rate

environment

and the

dynamics

of the economy

continue to change,

additional

simulations will be analyzed

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

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 September

30, 2026,

we had the ability

to generate approximately

$1.745 billion (excludes overnight

funds position

of $340

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

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, ROC, and Board

of Directors.

believe the liquidity

available to us at September

30, 2026

was sufficient to meet

our ongoing 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. Our portfolio

consists of debt

issued by the U.S. Treasury,

U.S. governmental

agencies, municipal governments,

and corporate

entities. Additional information

on our investment

portfolio is provided within Note 2

– Investment

Securities.

The Bank

maintained

an average

net overnight funds

(i.e., deposits with banks plus FED funds sold,

less FED funds purchased)

sold

position of $337.9

million in the third

quarter of 2026 compared

to $365.1

million in the second quarter

of 2026

and $437.5

million in

the fourth quarter

of 2025. Compared

to the second quarter of

2026, the variance

reflected lower average

deposits and

the deployment

of excess liquidity into

the investment

security portfolio. Compared

to the fourth

quarter of

2025, the variance

was driven by the

deployment

of excess liquidity into the

investment

security portfolio. During the

first nine months

of 2026, excess

liquidity was

partially deployed

into investment

securities as loan demand

remained selective and

management

continued its disciplined

underwriting approach.

Management

believes the repositioning enhances

earnings while maintaining appropriate

liquidity levels.

We expect

our capital expenditures

will be approximately

$10.0 million over the next

12 months,

which will primarily consist of

construction of

a new office, 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 ongoing

obligations.

Borrowings

Average

short-term borrowings

totaled $45.7 million for

the third quarter

of 2026

compared

to $44.5 million for the

second quarter

2026 and

$41.6 million for the fourth

quarter of

2025.

The increase over the

second quarter

of 2026

reflected higher repurchase

agreement balances

The increase over the

fourth quarter

of 2025

was attributable

to higher mortgage warehouse

line borrowings.

Additional detail on

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.

We made

principal payments

on this note of

$4.1 million and $5.1

million in the first quarter of 2026

and the

second quarter

of 2025,

respectively.

The second note

for $32.0 million was issued

to CCBG Capital

Trust II in May

2005. We

made principal

payments

this note of

$5.1 million each in the

first quarter of

2026 and

the second quarter

of 2025.

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 is due quarterly

and adjusts

quarterly to a

variable interest rate

based on

three-month

CME Term SOFR plus a margin

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.

The Company

previously maintained

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). In October

2025, the interest

rate swaps were terminated.

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 38.

At September 30, 202

6, our regulatory

capital ratios

exceeded the

threshold to be designated

as “well-capitalized”

under the Basel

III capital

standards.

Shareowners’ equity

was $573.9

million at September

30, 2026 compared

to $570.1

million at June 30, 202

and $552.9

million at

December 31, 2025.

For the first nine months

of 2026, shareowners’

equity was positively impacted

by net income

of $49.0

million,

the issuance of

stock of $3.5

million, and stock compensation

accretion of

$1.5 million. Shareowners’ equity

was reduced by

common

stock dividends

of $13.9 million ($0.81

per share), repurchases

of our common

stock of $2.6

million (63,088 shares), net

adjustments

totaling $2.5

million related to transactions

under our stock-based compensation

plans, and

an unfavorable

net change

$14.0 million in accumulated

other comprehensive

loss due to an unfavorable

fair value mark

on investment

securities driven by

higher bond rates

At September 30, 2026,

our total risk-based

capital ratio was 22.99%

compared

to 22.35% at

June 30, 2026

and 21.45

at December

31, 2025. Our common

equity tier 1 capital

ratio was 20.43

%, 19.80%, and

18.56%, respectively,

on these dates.

Our leverage ratio

was 12.31%, 11.96

%, and 11.

77%, respectively, on

these dates.

At September 30,

2026, 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 11.25%

at September

30, 2026,

compared

to 11.03%

at June 30,

2026, and

10.79% at

December 31,

2025. If our

unrealized held-to-maturity

securities loss of $16.0 million (after

-tax) were recognized in accumulated

other

comprehensive

loss, our adjusted

tangible capital

ratio would be 10.88%.

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 September

30, 2026, June

30, 2026 and

December 31, 2025,

the

net pension asset

reflected in other comprehensive

income was $9.

million. 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

. These

assumptions

and sensitivities are discussed

in the section entitled “Critical

Accounting Policies

and Estimates”

in Part II, Item

Management’s

Discussion and Analysis of

Financial Condition

and Results of

Operations, of

our 2025

Form 10-K.

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 September

30, 2026,

we had $628.8

million in commitments

to extend

credit and $7.3

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 ongoing 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

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

$2.2 million

September 30,

2026.

CRITICAL ACCOUNTING

POLICIES

Our significant accounting

policies are described in Note 1 to

the Consolidated

Financial Statements

included in our 2025

Form 10-K.

The preparation

of our Consolidated Financial

Statement

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

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

Management’s

Discussion and Analysis of

Financial Condition

and Results of

Operations included

in our 2025 Form

10-K.

TABLE I

AVERAGE BALANCES & INTEREST RATES (UNAUDITED)

Three Months Ended September 30,

Nine Months Ended September 30,

2026

2025

2026

2025

Average

(Dollars in

Thousands)

Balances

Interest

Rate

Balances

Interest

Rate

Balances

Interest

Rate

Balances

Interest

Rate

Assets:

Loans Held for Sale

26,993

420

6.17

25,276

425

6.68

27,413

1,324

6.46

24,226

1,390

7.67

Loans Held for Investment

(1)(2)

2,495,535

38,277

6.09

2,606,213

39,894

6.07

2,513,086

113,914

6.06

2,641,346

120,359

6.09

Taxable Securities

1,176,534

10,629

3.60

992,260

7,175

2.88

1,153,550

29,920

3.46

993,460

19,644

2.64

Tax-Exempt

Securities

(2)

1,349

4.39

1,620

4.44

1,441

4.35

1,313

4.43

Federal Funds Sold and Interest Bearing

Deposits

337,862

3,194

3.75

356,161

3,964

4.42

369,967

10,271

3.71

342,094

11,369

4.44

Total Earning

Assets

4,038,273

52,535

5.15

3,981,530

51,476

5.12

4,065,457

155,476

5.11

4,002,439

152,805

5.10

Cash & Due

From Banks

70,540

65,085

66,013

68,074

Allowance For Credit

Losses

(31,607)

(30,342)

(31,585)

(30,282)

Other Assets

309,290

301,678

304,254

300,788

TOTAL ASSETS

4,386,496

4,317,951

4,404,139

4,341,019

Liabilities:

Noninterest

Bearing Deposits

1,316,425

1,314,560

1,302,686

1,324,753

NOW Accounts

1,224,587

3,804

1.23

1,198,124

3,782

1.25

1,263,412

11,963

1.27

1,224,402

11,386

1.24

Money Market Accounts

433,430

1,964

1.80

416,656

2,090

1.99

419,028

5,573

1.78

422,817

6,617

2.09

Savings Accounts

511,313

102

0.08

503,189

159

0.13

511,500

334

0.09

506,255

509

0.13

Other Time Deposits

161,771

910

2.23

179,802

1,234

2.72

175,655

3,238

2.46

174,418

3,541

2.71

Total Interest

Bearing Deposits

2,331,101

6,780

1.15

2,297,771

7,265

1.25

2,369,595

21,108

1.19

2,327,892

22,053

1.27

Total Deposits

3,647,526

6,780

0.74

3,612,331

7,265

0.80

3,672,281

21,108

0.77

3,652,645

22,053

0.81

Repurchase

Agreements

14,160

2.20

21,966

158

2.86

13,616

213

2.09

24,752

478

2.58

Other Short-Term

Borrowings

31,532

316

3.98

12,753

1.82

30,984

992

4.28

10,251

354

4.62

Subordinated

Notes Payable

33,303

293

3.45

42,582

383

3.52

36,045

979

3.58

49,113

1,473

3.95

Other Long-Term

Borrowings

567

5.55

681

5.55

635

5.68

755

4.50

Total Interest

Bearing Liabilities

2,410,663

7,476

1.23

2,375,753

7,874

1.32

2,450,875

23,319

1.27

2,412,763

24,384

1.35

Other Liabilities

83,642

85,422

78,126

75,664

TOTAL LIABILITIES

3,810,730

3,775,735

3,831,687

3,813,180

TOTAL SHAREOWNERS’ EQUITY

575,766

542,216

572,452

527,839

TOTAL LIABILITIES

AND

SHAREOWNERS’ EQUITY

4,386,496

4,317,951

4,404,139

4,341,019

Interest Rate Spread

3.92

3.81

3.83

3.75

Net Interest Income

45,059

43,602

132,157

128,421

Net Interest Margin

(3)

4.42

4.34

4.28

(1)

Average Balances

include net

loan fees,

discounts

and premiums.

Interest income

includes loan

costs of

$0.5 million

and $1.5

million for

the three and

nine months

ended September

30, 2026,

and loan costs of $0.4 million and $1.1 million for the

three and nine month periods ended September 30, 2025.

(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, 2025.

Item 4.

CONTROLS AND PROCEDURES

Evaluation of

Disclosure Controls

and Procedures

At September 30, 2026

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 effective.

Our management,

including our Chief Executive

Officer and Chief

Financial Officer, has

reviewed our internal control over

financial

reporting (as defined

in Rule 13a-15(f) under

the Securities Exchange

Act of 1934). During the

quarter ended

September 30, 2026,

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 2025

Form 10-K, as updated

in our subsequent

quarterly reports. The

risks described in our 2025 Form

10-K, and

our subsequent

quarterly reports are

not the only risks facing

us. Additional risks and uncertainties

not currently known

us or that

we currently deem to be

immaterial also

may materially

adversely affect

our business, financial

condition and/or

operating

results.

There have not been

any material changes

to the risk factors

disclosed in Item 1A. of Part

I of the Company’s

Annual Report

on Form

10-K for the year

ended December

31, 2025, previously

filed with the SEC.

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

-1 Trading Plans

During the three months

ended September

30, 2026,

none of our

directors or officers (as defined

in Rule 16a-1(f) under the

Exchange

Act)

adopted

, modified or

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

3.1

Amended and Restated Articles of Incorporation - incorporated herein by reference to Exhibit 3.1 of

the Registrant’s

Form 8-K (filed 5/3/21) (No. 000-13358).

3.2

Amended and Restated Bylaws - incorporated herein by reference to Exhibit 3.1 of the Registrant’s

Form 8-K (filed

12/20/2024) (No. 000-13358).

31.1

Certification of William G Smith, Jr., Chairman 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 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.

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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: October 30,

2026