10-Q - CCBG - Equibles

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, 2022

☐

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

For the transition period from ____________ to ____________

Commission File Number:

0-13358

Capital City Bank Group, Inc.

(Exact name of Registrant as specified in its charter)

Florida

59-2273542

(State or other jurisdiction of incorporation or organization)

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

217 North Monroe Street

Tallahassee

Florida

32301

(Address of principal executive office)

(Zip Code)

(

850

)

402-7821

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, Par value $0.01

CCBG

Nasdaq Stock Market

, LLC

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

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

filing requirements for the past 90 days.

Yes

[X] No [

]

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

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

such files).

Yes [

] No [

]

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

an emerging growth company.

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

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

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

☐

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

]

[X]

At October 28, 2022,

16,961,812

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

CAPITAL CITY BANK

GROUP,

INC.

QUARTERLY

REPORT ON FORM 10-Q

FOR THE PERIOD ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS

PART I –

Financial Information

Page

Item 1.

Consolidated Financial Statements (Unaudited)

Consolidated Statements of Financial Condition – September 30, 2022 and December 31, 2021

Consolidated Statements of Income – Three and Nine Months Ended September 30, 2022 and 2021

Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, 2022 and 2021

Consolidated Statements of Changes in Shareowners’ Equity – Three and Nine Months Ended September 30, 2022 and 2021

Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2022 and 2021

Notes to Consolidated Financial Statements

Item 2.

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

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

Item 4.

Controls and Procedures

PART II –

Other Information

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosure

Item 5.

Other Information

Item 6.

Exhibits

Signatures

INTRODUCTORY NOTE

Caution Concerning Forward-Looking Statements

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

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

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

which are beyond our control.

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

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

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

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

Our actual future results may differ materially from

those set forth in our forward-looking statements.

Our ability to

achieve our financial objectives

could be adversely affected

by the factors discussed

in detail in Part

I, Item 2. “Management’s

Discussion and

Analysis of Financial

Condition and

Results of Operations”

and Part II,

Item 1A. “Risk

Factors” in this

Quarterly Report on

Form 10-Q and

the following sections

of our Annual

Report on Form

10-K for the

year ended December

31, 2021

(the “2021 Form

10-K”):

(a) “Introductory

Note” in

Part I,

Item 1.

“Business”; (b)

“Risk Factors”

in Part

I, Item

1A, as

updated in

our subsequent

quarterly reports

filed on Form 10-Q; and (c)

“Introduction” in “Management’s

Discussion and Analysis of Financial Condition

and Results of Operations,” in

Part II, Item 7, as well as:

●

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

●

the impact of legislative or regulatory changes on our business;

●

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

●

the impact of inflation, interest rate, market and monetary fluctuations on our loan origination volumes and deposit portfolio;

●

changes in consumer spending and saving habits;

●

the effects of security breaches and computer viruses that may affect our computer systems or fraud related to debit card products;

●

the accuracy of our financial statement estimates and assumptions, including the estimates used for our allowance for credit losses,

deferred tax asset valuation and pension plan;

●

changes in accounting principles, policies, practices or guidelines;

●

the frequency and magnitude of foreclosure of our loans;

●

the effects of our lack of a diversified loan portfolio, including the risks of geographic and industry concentrations;

●

the strength of the United States economy in general and the strength of the local economies in which we conduct operations;

●

climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that could

significantly impact our business;

●

our ability to declare and pay dividends, the payment of which is subject to our capital requirements;

●

changes in the securities and real estate markets;

●

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

●

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

these loans and related interest rate risk or price risk resulting from retaining mortgage servicing rights;

●

the effects of natural disasters, harsh weather conditions (including hurricanes), widespread health emergencies

(including the ongoing

COVID-19 pandemic),

military conflict, terrorism, civil unrest or other geopolitical events;

●

our ability to comply with the extensive laws and regulations to which we are subject, including the laws for each jurisdiction where

we operate;

●

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

●

increased competition and its effect on pricing;

●

technological changes;

●

negative publicity and the impact on our reputation;

●

growth and profitability of our noninterest income;

●

the limited trading activity of our common stock;

●

the concentration of ownership of our common stock;

●

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

●

risks from the ongoing COVID-19 pandemic; and

●

our ability to manage the risks involved in the foregoing.

However, other factors besides those listed in

Item 1A Risk Factors

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

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

Any forward-looking

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

We do not undertake to update any forward-looking

statement, except as required by applicable law.

PART

FINANCIAL INFORMATION

Item 1.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF FINANCIAL CONDITION

(Unaudited)

September 30,

December 31,

(Dollars in Thousands, Except Par Value)

2022

2021

ASSETS

Cash and Due From Banks

72,686

65,313

Federal Funds Sold and Interest Bearing Deposits

497,679

970,041

Total Cash and Cash Equivalents

570,365

1,035,354

Investment Securities, Available

for Sale, at fair value (amortized cost of $

461,646

and $

660,732

)

416,745

654,611

Investment Securities, Held to Maturity (fair value of $

623,628

and $

339,699

)

676,178

339,601

Equity Securities

1,349

861

Total Investment

Securities

1,094,272

995,073

Loans Held For Sale, at fair value

50,304

52,532

Loans Held for Investment

2,346,185

1,931,465

Allowance for Credit Losses

(22,510)

(21,606)

Loans Held for Investment, Net

2,323,675

1,909,859

Premises and Equipment, Net

81,736

83,412

Goodwill and Other Intangibles

93,133

93,253

Other Real Estate Owned

Other Assets

119,173

94,349

Total Assets

4,332,671

4,263,849

LIABILITIES

Deposits:

Noninterest Bearing Deposits

1,737,046

1,668,912

Interest Bearing Deposits

2,022,332

2,043,950

Total Deposits

3,759,378

3,712,862

Short-Term

Borrowings

52,271

34,557

Subordinated Notes Payable

52,887

Other Long-Term

Borrowings

562

884

Other Liabilities

84,657

67,735

Total Liabilities

3,949,755

3,868,925

Temporary Equity

9,751

11,758

SHAREOWNERS’ EQUITY

Preferred Stock, $

0.01

par value;

3,000,000

shares authorized;

shares issued and outstanding

Common Stock, $

0.01

par value;

90,000,000

shares authorized;

16,961,812

and

16,892,060

shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

170

169

Additional Paid-In Capital

36,234

34,423

Retained Earnings

384,964

364,788

Accumulated Other Comprehensive Loss, net of tax

(48,203)

(16,214)

Total Shareowners’

Equity

373,165

383,166

Total Liabilities, Temporary

Equity, and Shareowners’ Equity

4,332,671

4,263,849

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)

2022

2021

2022

2021

INTEREST INCOME

Loans, including Fees

27,761

25,885

73,966

73,817

Investment Securities:

Taxable

4,360

2,332

11,083

6,231

Tax Exempt

Funds Sold

3,231

285

5,048

698

Total Interest Income

35,364

28,520

90,122

80,802

INTEREST EXPENSE

Deposits

1,052

210

1,542

626

Short-Term

Borrowings

536

317

1,071

1,053

Subordinated Notes Payable

443

307

1,130

922

Other Long-Term

Borrowings

Total Interest Expense

2,037

848

3,766

2,652

NET INTEREST INCOME

33,327

27,672

86,356

78,150

Provision for Credit Losses

2,099

3,641

(1,553)

Net Interest Income After Provision For Credit Losses

31,228

27,672

82,715

79,703

NONINTEREST INCOME

Deposit Fees

5,947

5,075

16,585

13,582

Bank Card Fees

3,860

3,786

11,657

11,402

Wealth Management

Fees

3,937

3,623

14,410

9,987

Mortgage Banking Revenues

7,116

12,283

25,127

42,625

Other

2,074

1,807

5,876

5,277

Total Noninterest

Income

22,934

26,574

73,655

82,873

NONINTEREST EXPENSE

Compensation

24,738

25,245

74,977

76,687

Occupancy, Net

6,153

6,032

18,321

17,972

Other

8,919

8,425

26,243

27,642

Total Noninterest

Expense

39,810

39,702

119,541

122,301

INCOME BEFORE INCOME TAXES

14,352

14,544

36,829

40,275

Income Tax Expense

3,074

2,949

7,486

7,795

NET INCOME

11,278

11,595

29,343

32,480

Loss (Income) Attributable to Noncontrolling Interests

(1,504)

(860)

(5,456)

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

11,315

10,091

28,483

27,024

BASIC NET INCOME PER SHARE

0.67

0.60

1.68

1.60

DILUTED NET INCOME PER SHARE

0.67

0.60

1.68

1.60

Average Common

Basic Shares Outstanding

16,960

16,875

16,947

16,857

Average Common

Diluted Shares Outstanding

16,996

16,909

16,973

16,886

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

(Dollars in Thousands)

2022

2021

2022

2021

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

11,315

10,091

28,483

27,024

Other comprehensive (loss) income, before

tax:

Investment Securities:

Change in net unrealized gain/loss on securities available for sale

(2,618)

(1,935)

(38,778)

(4,361)

Unrealized losses on securities transferred from available for sale

to held to maturity

(9,384)

Amortization of unrealized losses on securities transferred from

available for sale to held to maturity

586

Derivative:

Change in net unrealized gain on effective cash flow

derivative

1,407

172

4,403

1,378

Benefit Plans:

Reclassification adjustment for service cost

Actuarial gain

166

Defined benefit plan settlement

102

500

480

2,500

Total Benefit Plans

102

500

480

2,690

Other comprehensive (loss) income, before

tax

(9,907)

(1,263)

(42,693)

(293)

Deferred tax (benefit) expense related to other comprehensive income

(2,469)

(10,704)

292

Other comprehensive (loss) income, net of tax

(7,438)

(1,304)

(31,989)

(585)

TOTAL COMPREHENSIVE

INCOME (LOSS)

3,877

8,787

(3,506)

26,439

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, 2022

16,959,280

170

35,738

376,532

(40,765)

371,675

Net Income Attributable to Common Shareowners

11,315

Other Comprehensive Loss, net of tax

(7,438)

Cash Dividends ($

0.1700

per share)

(2,883)

Stock Based Compensation

415

Stock Compensation Plan Transactions, net

2,532

Balance, September 30, 2022

16,961,812

170

36,234

384,964

(48,203)

373,165

Balance, July 1, 2021

16,874,279

169

33,560

345,574

(43,423)

335,880

Net Income Attributable to Common Shareowners

10,091

Reclassification to Temporary Equity

(1)

6,585

Other Comprehensive Loss, net of tax

(1,304)

Cash Dividends ($

0.1600

per share)

(2,700)

Stock Based Compensation

219

Stock Compensation Plan Transactions, net

4,024

Balance, September 30, 2021

16,878,303

169

33,876

359,550

(44,727)

348,868

Balance, January 1, 2022

16,892,060

169

34,423

364,788

(16,214)

383,166

Net Income Attributable to Common Shareowners

28,483

Other Comprehensive Loss, net of tax

(31,989)

Cash Dividends ($

0.4900

per share)

(8,307)

Stock Based Compensation

904

Stock Compensation Plan Transactions, net

69,752

907

908

Balance, September 30, 2022

16,961,812

170

36,234

384,964

(48,203)

373,165

Balance, January 1, 2021

16,790,573

168

32,283

332,528

(44,142)

320,837

Net Income Attributable to Common Shareowners

27,024

Reclassification to Temporary Equity

(1)

7,756

Other Comprehensive Loss, net of tax

(585)

Cash Dividends ($

0.4600

per share)

(7,758)

Stock Based Compensation

657

Stock Compensation Plan Transactions, net

87,730

936

937

Balance, September 30, 2021

16,878,303

169

33,876

359,550

(44,727)

348,868

(1)

Adjustment to redemption value for non-controlling interest in Capital City Home Loans.

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)

2022

2021

CASH FLOWS FROM OPERATING

ACTIVITIES

Net Income Attributable to Common Shareowners

28,483

27,024

Adjustments to Reconcile Net Income to

Cash Provided by Operating Activities:

Provision for Credit Losses

3,641

(1,553)

Depreciation

5,689

5,666

Amortization of Premiums, Discounts and Fees, net

7,190

11,401

Amortization of Intangible Asset

120

Pension Plan Settlement Charge

480

2,500

Originations of Loans Held-for-Sale

(799,482)

(1,247,119)

Proceeds From Sales of Loans Held-for-Sale

826,837

1,326,747

Mortgage Banking Revenues

(25,127)

(42,625)

Net Additions for Capitalized Mortgage Servicing Rights

(1,921)

138

Change in Valuation

Provision for Mortgage Servicing Rights

(250)

Stock Compensation

904

657

Net Tax Benefit From Stock-Based

Compensation

(19)

(4)

Deferred Income Taxes

(11,265)

(3,085)

Net Change in Operating Leases

(83)

(122)

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

(136)

(1,640)

Net Decrease (Increase) in Other Assets

3,696

Net Increase in Other Liabilities

12,839

8,283

Net Cash Provided By Operating Activities

51,846

86,168

CASH FLOWS FROM INVESTING ACTIVITIES

Securities Held to Maturity:

Purchases

(219,865)

(235,356)

Payments, Maturities, and Calls

40,096

61,673

Securities Available for

Sale:

Purchases

(41,880)

(478,000)

Proceeds from Sale or Securities

3,365

Payments, Maturities, and Calls

64,301

148,968

Purchases of Loans Held for Investment

(329,481)

(92,336)

Net (Increase) Decrease in Loans Held for Investment

(90,086)

150,590

Net Cash Paid for Acquisitions

(4,482)

Proceeds From Sales of Other Real Estate Owned

1,683

3,892

Purchases of Premises and Equipment

(4,013)

(4,590)

Noncontrolling Interest Contributions

2,867

5,424

Net Cash Used In Investing Activities

(573,013)

(444,217)

CASH FLOWS FROM FINANCING ACTIVITIES

Net Increase in Deposits

46,516

248,402

Net Increase (Decrease) in Short-Term

Borrowings

17,592

(28,458)

Repayment of Other Long-Term

Borrowings

(200)

(1,233)

Dividends Paid

(8,307)

(7,758)

Issuance of Common Stock Under Purchase Plans

577

667

Net Cash Provided By Financing Activities

56,178

211,620

NET DECREASE IN CASH AND CASH EQUIVALENTS

(464,989)

(146,429)

Cash and Cash Equivalents at Beginning of Period

1,035,354

928,549

Cash and Cash Equivalents at End of Period

570,365

782,120

Supplemental Cash Flow Disclosures:

Interest Paid

3,588

2,679

Income Taxes Paid

6,410

12,759

Noncash Investing and Financing Activities:

Loans Transferred to Other Real Estate Owned

1,543

1,636

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTE 1 –

BUSINESS AND BASIS OF PRESENTATION

Nature of Operations

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

of banking and banking-

related services to individual and corporate clients through its subsidiary,

Capital City Bank, with banking offices located in Florida,

Georgia, and Alabama.

The Company is subject to competition from other financial institutions,

is subject to regulation by certain

government agencies and undergoes periodic examinations

by those regulatory authorities.

Basis of Presentation

The consolidated financial statements in this Quarterly Report on Form

10-Q include the accounts of CCBG

and its wholly owned subsidiary,

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

All material inter-company transactions and accounts

have been eliminated.

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

presentation.

The accompanying unaudited consolidated financial statements have

been prepared in accordance with generally accepted accounting

principles for interim financial information and with the instructions to Form

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

Accordingly,

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

accounting principles for complete financial

statements.

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

recurring accruals) considered necessary for a fair

presentation have been included.

The Consolidated Statement of Financial Condition at December

31, 2021 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 annual report

on Form 10-K for the year ended December 31, 2021.

Acquisition.

April 30, 2021

, a newly formed subsidiary of CCBG, Capital City Strategic Wealth,

LLC (“CCSW”) acquired

substantially all of the assets of Strategic Wealth

Group, LLC and certain related businesses (“SWG”), including

advisory, service,

and insurance carrier agreements, and the assignment of all related revenues

thereof.

Under the terms of the purchase agreement,

SWG principles became officers of CCSW and will continue

the operation of their

five

offices in South Georgia offering wealth

management services and comprehensive risk management

and asset protection services for individuals and businesses.

CCBG paid

4.5

million in cash consideration and recorded goodwill of $

2.8

million and a customer relationship intangible asset of $

1.6

million.

Accounting Standards Updates

Accounting Standards Update (“ASU”)

2022-02, Financial Instruments – Credit Losses (Topic

326)

In March 2022, the Financial

Accounting Standards Board issued ASU 2022-02, “Financial Instruments

– Credit Losses (Topic 326),

Troubled Debt Restructurings

and Vintage Disclosures".

ASU 2022-02 eliminates the accounting guidance for troubled debt restructur

ings (“TDRs”) in Accounting

Standards Codification (“ASC”) 310-40, “Receivables - Troubled

Debt Restructurings by Creditors”

for entities that have adopted the

current expected credit loss model introduced by ASU 2016-13,

“Financial Instruments – Credit Losses (Topic

326),

Measurement of

Credit Losses on Financial Instruments.”

ASU 2022-02 also requires that public business entities disclose current-period

gross

charge-offs by year of origination for financing

receivables and net investments in leases within the scope of Subtopic 326-20,

“Financial Instruments—Credit Losses—Measured at Amortized

Cost”.

ASU 2022-02 is effective for the Company for fiscal years

beginning after December 15, 2022, including interim periods within those

fiscal years, with early adoption permitted. Upon adoption,

ASU 2022-02 is not expected to have a significant impact on our consolidated

financial statements and related disclosures.

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, 2022

U.S. Government Treasury

21,140

2,082

19,058

U.S. Government Agency

206,631

13,572

193,144

States and Political Subdivisions

47,249

7,008

(13)

40,228

Mortgage-Backed Securities

(1)

82,879

12,583

70,298

Corporate Debt Securities

96,421

9,730

(28)

86,691

Other Securities

(2)

7,326

Total

461,646

115

44,975

(41)

416,745

December 31, 2021

U.S. Government Treasury

190,409

2,606

187,868

U.S. Government Agency

238,490

1,229

2,141

237,578

States and Political Subdivisions

47,762

811

(15)

46,980

Mortgage-Backed Securities

(1)

89,440

598

88,869

Corporate Debt Securities

87,537

1,304

(21)

86,222

Other Securities

(2)

7,094

Total

660,732

1,375

7,460

(36)

654,611

Held to Maturity

Amortized

Unrealized

Fair

(Dollars in Thousands)

Cost

Gains

Losses

Value

September 30, 2022

U.S. Government Treasury

462,302

27,585

434,717

Mortgage-Backed Securities

(1)

213,876

24,975

188,911

Total

676,178

52,560

623,628

December 31, 2021

U.S. Government Treasury

115,499

1,622

113,877

Mortgage-Backed Securities

(1)

224,102

2,819

1,099

225,822

Total

339,601

2,819

2,721

339,699

(1)

Comprised of residential mortgage-backed

securities

(2)

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

at cost of $

2.3

million and $

5.0

million,

respectively,

at September 30, 2022 and $

2.0

million and $

5.1

million, respectively,

at December 31, 2021.

At September 30, 2022, the investment portfolio had $

1.3

million in equity securities. These securities do not have a readily

determinable fair value and were not credit impaired.

Securities with an amortized cost of $

469.2

million and $

463.8

million at September 30, 2022 and December 31, 2021, respectively,

were pledged to secure public deposits and for other purposes.

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

to own capital stock in the FHLB based

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

FHLB advances.

FHLB stock, which is included in

other securities,

is pledged to secure FHLB advances.

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

redemption of this stock has historically been at par value.

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

stock in the Federal Reserve Bank of Atlanta

based on a specified ratio relative to the Bank’s

capital.

Federal Reserve Bank stock is carried at cost.

During the third quarter of 2022, the Company transferred certain securities from

the AFS to HTM classification.

Transfers are made

at fair value on the date of the transfer.

The

securities had an amortized cost basis and fair value of $

168.4

million and $

159.0

million, respectively at the time of transfer.

The net unamortized, unrealized loss on the transferred securities included

in accumulated

other comprehensive loss in the accompanying balance sheet at September

30, 2022 totaled $

8.8

million.

This amount will be

amortized out of accumulated other comprehensive loss over the remaining

life of the underlying securities as an adjustment of the

yield on those securities.

Investment Sales.

There were no significant sales of investment securities for the three or nine months

ended September 30, 2022 or

September 30, 2021.

Maturity Distribution

At September 30, 2022, the Company’s

investment securities had the following maturity distribution based on

contractual maturity.

Expected maturities may differ from contractual maturities because borrowers

may have the right to call or

prepay obligations.

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

agency securities are shown

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

Available for

Sale

Held to Maturity

(Dollars in Thousands)

Amortized Cost

Fair Value

Amortized Cost

Fair Value

Due in one year or less

39,283

35,743

Due after one year through five years

151,355

138,505

462,302

434,717

Due after five year through ten years

54,076

44,031

Mortgage-Backed Securities

82,879

70,298

213,876

188,911

U.S. Government Agency

126,727

120,842

Other Securities

7,326

Total

461,646

416,745

676,178

623,628

Unrealized Losses on Investment Securities.

The following table summarizes the available for sale investment securities with

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

unrealized loss position:

Less Than

Greater Than

12 Months

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

(Dollars in Thousands)

Value

Losses

Value

Losses

Value

Losses

September 30, 2022

Available for

Sale

U.S. Government Treasury

19,058

2,082

19,058

2,082

U.S. Government Agency

69,249

3,367

110,295

10,205

179,544

13,572

States and Political Subdivisions

5,831

736

34,410

6,272

40,241

7,008

Mortgage-Backed Securities

25,953

4,076

44,278

8,507

70,231

12,583

Corporate Debt Securities

33,827

1,211

48,927

8,519

82,754

9,730

Total

134,860

9,390

256,968

35,585

391,828

44,975

Held to Maturity

U.S. Government Treasury

205,334

12,813

229,383

14,772

434,717

27,585

Mortgage-Backed Securities

108,405

10,634

79,302

14,341

187,707

24,975

Total

313,739

23,447

308,685

29,113

622,424

52,560

December 31, 2021

Available for

Sale

U.S. Government Treasury

172,206

2,606

172,206

2,606

U.S. Government Agency

127,484

1,786

17,986

355

145,470

2,141

States and Political Subdivisions

42,122

811

42,122

811

Mortgage-Backed Securities

81,832

598

81,832

598

Corporate Debt Securities

69,354

1,304

69,354

1,304

Total

492,998

7,105

17,986

355

510,984

7,460

Held to Maturity

U.S. Government Treasury

113,877

1,622

113,877

1,622

Mortgage-Backed Securities

115,015

1,099

115,015

1,099

Total

228,892

2,721

228,892

2,721

At September 30, 2022, there were

897

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

97.5

million.

of these

positions are U.S. Treasury bonds and

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

682

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 zero.

The remaining

128

positions (municipal securities

and corporate bonds) have a credit component.

At September 30, 2022, all collateralized mortgage obligation securities

(“CMO”),

MBS, Small Business Administration securities (“SBA”), U.S. Agency,

and U.S. Treasury bonds held were AAA rated.

At September

30, 2022, corporate debt securities had an allowance for credit losses of $

28,000

and municipal securities had an allowance of

13,000

Credit Quality Indicators

The Company monitors the credit quality of its investment securities through

various risk management procedures, including the

monitoring of credit ratings.

A majority of the debt securities in the Company’s

investment portfolio were issued by a U.S.

government entity or agency and are either explicitly or implicitly guaranteed

by the U.S. government.

The Company believes the

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

of nonpayment of the amortized

cost basis is 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 not

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

The Company monitors the credit quality of its municipal and

corporate securities portfolio via credit ratings

which are updated on a quarterly basis.

On a quarterly basis, municipal and corporate

securities in an unrealized loss position are evaluated to determine if the

loss is attributable to credit related factors and if an allowance

for credit loss is needed.

NOTE 3 – LOANS HELD FOR INVESTMENT AND ALLOWANCE

FOR CREDIT LOSSES

Loan Portfolio Composition

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

(Dollars in Thousands)

September 30, 2022

December 31, 2021

Commercial, Financial and Agricultural

246,304

223,086

Real Estate – Construction

237,718

174,394

Real Estate – Commercial Mortgage

715,870

663,550

Real Estate – Residential

(1)

594,785

360,021

Real Estate – Home Equity

202,512

187,821

Consumer

(2)

348,996

322,593

Loans Held For Investment, Net of Unearned Income

2,346,185

1,931,465

(1)

Includes loans in process balances of $

21.7

million and $

13.6

million at September 30, 2022 and December 31, 2021,

respectively.

(2)

Includes overdraft balances of $

1.0

million and $

1.1

million at September 30, 2022 and December 31, 2021, respectively.

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

included in loans were $

8.5

million at September 30, 2022 and

3.9

million at December 31, 2021.

Accrued interest receivable on loans which is excluded from amortized

cost totaled $

6.6

million at September 30, 2022 and $

5.3

million at December 31, 2021, and is reported separately in Other Assets.

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

loans, commercial real estate mortgage loans,

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

Atlanta and has pledged a blanket floating lien on all

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

borrowing capacity at the Federal Reserve Bank of

Atlanta.

Loan Purchase and Sales

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

estate secured adjustable rate

loans from Capital City Home Loans (“CCHL”), a related party.

Residential loan purchases from CCHL totaled $

267.0

million and

72.7

million for the nine months ended September 30, 2022 and September 30,

2021, respectively, and

were not credit impaired.

Allowance for Credit Losses

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

allowance for credit losses

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

involving loans that do not share risk characteristics and the

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

a pooled component for expected credit losses for pools

of loans that share similar risk characteristics.

This allowance methodology is discussed further in Note 1 – Significant

Accounting

Policies in the Company’s 2021 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, 2022

Beginning Balance

1,641

3,138

5,052

5,645

1,760

4,045

21,281

Provision for Credit Losses

(136)

(22)

(120)

1,333

127

749

1,931

Charge-Offs

(2)

(1)

(1,759)

(1,762)

Recoveries

926

1,060

Net (Charge-Offs) Recoveries

(833)

(702)

Ending Balance

1,561

3,118

4,939

7,022

1,909

3,961

22,510

Nine Months Ended

September 30, 2022

Beginning Balance

2,191

3,302

5,810

4,129

2,296

3,878

21,606

Provision for Credit Losses

267

(194)

(697)

2,707

(501)

1,940

3,522

Charge-Offs

(1,179)

(267)

(33)

(4,354)

(5,833)

Recoveries

282

186

147

2,497

3,215

Net (Charge-Offs) Recoveries

(897)

(174)

186

114

(1,857)

(2,618)

Ending Balance

1,561

3,118

4,939

7,022

1,909

3,961

22,510

Three Months Ended

September 30, 2021

Beginning Balance

1,972

2,759

7,569

4,353

2,457

3,065

22,175

Provision for Credit Losses

178

517

(1,588)

(433)

(131)

911

(546)

Charge-Offs

(37)

(405)

(17)

(15)

(1,314)

(1,788)

Recoveries

169

401

967

1,659

Net Charge-Offs

(236)

384

(347)

(129)

Ending Balance

2,179

3,286

5,745

4,304

2,357

3,629

21,500

Nine Months Ended

September 30, 2021

Beginning Balance

2,204

2,479

7,029

5,440

3,111

3,553

23,816

Provision for Credit Losses

(192)

797

(1,719)

(1,768)

(900)

740

(3,042)

Charge-Offs

(138)

(405)

(88)

(94)

(3,040)

(3,765)

Recoveries

305

840

720

240

2,376

4,491

Net Charge-Offs

167

435

632

146

(664)

726

Ending Balance

2,179

3,286

5,745

4,304

2,357

3,629

21,500

For the nine months ended September 30, 2022, the allowance for

HFI loans increased by $

0.9

million and reflected a provision

expense of $

3.5

million and net loan charge-offs of $

2.6

million.

The increase was driven by incremental reserves needed for loan

growth, and to a lesser extent, a higher projected rate of unemployment and

its potential effect on rates of default.

For the nine months

ended September 30, 2021, the allowance decreased by $

2.3

million and reflected a provision benefit of $

3.0

million and net loan

recoveries of $

0.7

million.

The decrease generally reflected improving economic conditions, primarily

a lower rate of unemployment

and its potential effect on rates of default, and strong net

loan recoveries totaling $

0.7

million.

Unemployment forecast scenarios are

utilized to estimate probability of default and are weighted based on management’s

estimate of probability.

See Note 8 –

Commitments and Contingencies for information on the

allowance for off-balance sheet credit commitments.

Loan Portfolio Aging.

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

is over 30 days

past due (“DPD”).

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

past due loans by class of loans.

30-59

60-89

90 +

Total

Nonaccrual

Total

(Dollars in Thousands)

DPD

Past Due

Current

Loans

September 30, 2022

Commercial, Financial and Agricultural

274

342

245,883

246,304

Real Estate – Construction

237,718

Real Estate – Commercial Mortgage

1,098

714,292

480

715,870

Real Estate – Residential

(1)

114

1,237

1,351

592,629

805

594,785

Real Estate – Home Equity

564

582

201,134

796

202,512

Consumer

2,151

739

2,890

345,857

249

348,996

Total

4,201

2,062

6,263

2,337,513

2,409

2,346,185

December 31, 2021

Commercial, Financial and Agricultural

100

123

222,873

223,086

Real Estate – Construction

174,394

Real Estate – Commercial Mortgage

151

662,795

604

663,550

Real Estate – Residential

365

151

516

357,408

2,097

360,021

Real Estate – Home Equity

210

186,292

1,319

187,821

Consumer

1,964

636

2,600

319,781

212

322,593

Total

2,790

810

3,600

1,923,543

4,322

1,931,465

(1)

Includes $0.1 million of Loans Held for Sale in nonaccrual status as of September 30, 2022.

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, 2022

December 31, 2021

Nonaccrual

With No

With

90 + Days

With No

With

90 + Days

(Dollars in Thousands)

ACL

Still Accruing

ACL

Still Accruing

Commercial, Financial and Agricultural

Real Estate – Construction

Real Estate – Commercial Mortgage

480

604

Real Estate – Residential

597

208

928

1,169

Real Estate – Home Equity

796

463

856

Consumer

249

212

Total Nonaccrual

Loans

597

1,812

1,458

2,864

Collateral Dependent Loans.

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

loans.

September 30, 2022

December 31, 2021

Real Estate

Non Real Estate

Real Estate

Non Real Estate

(Dollars in Thousands)

Secured

Commercial, Financial and Agricultural

Real Estate – Construction

Real Estate – Commercial Mortgage

455

Real Estate – Residential

570

1,645

Real Estate – Home Equity

596

649

Consumer

Total Collateral Dependent

Loans

1,166

2,749

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, 2022 and December 31, 2021, the Company had $

0.7

million and $

0.9

million, respectively, in

1-4 family residential real estate loans for which formal foreclosure proceedings were

process.

Troubled

Debt Restructurings (“TDRs”).

At September 30, 2022, the Company had $

6.3

million in TDRs, all of which were

performing in accordance with the modified terms.

At December 31, 2021, the Company had $

8.0

million in TDRs, of which $

7.6

million were performing in accordance with modified terms.

For TDRs, the Company estimated $

0.3

million of credit loss reserves at

September 30, 2022 and December 31, 2021.

The modifications made to TDRs involved either an extension of the loan term, a principal moratorium,

a reduction in the interest rate,

or a combination thereof.

For the three and nine months ended September 30, 2022, there were

loans modified.

For the three and

nine months ended September 30, 2021, there were no loans modified

and

three

loans modified with a recorded investment of $

0.6

million, respectively.

For the nine month periods ended September 30, 2022 and September 30, 2021,

there were

loans classified

as TDRs, for which there was a payment default and the loans were modified within

the 12 months prior to default.

Credit Risk Management

The Company has adopted comprehensive lending policies, underwriting standards and

loan review

procedures designed to maximize loan income within an acceptable

level of risk.

Management and the Board of Directors review and

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

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

concentrations of credit, loan delinquencies and nonperforming

loans and potential problem loans.

Management and the Credit Risk Oversight Committee periodically

review our lines of business to

monitor asset quality trends and the appropriateness of credit policies.

In addition, total borrower exposure limits are established and

concentration risk is monitored.

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

diversification

of risk, client concentrations, industry group, loan type, geographic

area, or other relevant classifications of loans.

Specific segments

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

basis and have strategic plans in place to supplement

Board approved credit policies governing exposure limits and underwriting

standards.

Detailed below are the types of loans within

the Company’s loan portfolio

and risk characteristics unique to each.

Commercial, Financial, and Agricultural – Loans in this category

are primarily made based on identified cash flows of the borrower

with consideration given to underlying collateral and personal or

other guarantees.

Lending policy establishes debt service coverage

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

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

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

assets such as accounts receivable, inventory,

equipment.

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

Loan to value ratios at origination are

governed by established policy guidelines.

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

construction loans, revolving and non-revolving credit lines

and construction/permanent loans made to individuals and investors to

finance the acquisition, development, construction or

rehabilitation of real property.

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

or project and generally

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

properties and commercial properties that are either owner-

occupied or investment in nature.

These properties may include either vacant or improved property.

Construction loans are generally

based upon estimates of costs and value associated with the completed

project.

Collateral values are determined based upon third

party appraisals and evaluations.

Loan to value ratios at origination are governed by established policy

guidelines.

The disbursement

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

and as such these loans are closely monitored by on-

site inspections.

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

mortgage loans secured by property that is either

owner-occupied or investment in nature.

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

project

with consideration given to underlying real estate collateral and

personal guarantees.

Lending policy establishes debt service

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

Collateral values are determined based upon third party

appraisals and evaluations.

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

loan portfolio are made to borrowers that demonstrate the

ability to make scheduled payments with full consideration to underwriting

factors such as current income, employment status, current

assets, and other financial resources, credit history,

and the value of the collateral.

Collateral consists of mortgage liens on 1-4 family

residential properties.

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

The Company does not

originate sub-prime loans.

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

individuals for legitimate purposes generally secured

by senior or junior mortgage liens on owner-occupied

1-4 family homes or vacation homes.

Borrower qualifications include

favorable credit history combined with supportive income and debt ratio

requirements and combined loan to value ratios within

established policy guidelines.

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

Consumer Loans – This loan portfolio includes personal installment loans,

direct and indirect automobile financing, and overdraft

lines of credit.

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

loans.

Lending policy

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

includes guidelines for verification of applicants’ income and

receipt of credit reports.

Credit Quality Indicators

As part of the ongoing monitoring of the Company’s

loan portfolio quality, management

categorizes loans

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

to service their debt such as: current financial

information, historical payment performance, credit documentation,

and current economic and market trends, among other

factors.

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

procedures for individual loan

relationships over a predetermined amount and review of smaller balance homogenous

loan pools.

The Company uses the definitions

noted below for categorizing and managing its criticized loans.

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

and are not considered criticized.

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

weaknesses are apparent which, if not corrected, could

cause future problems.

Loans in this category may not meet required underwriting criteria and

have no mitigating factors.

More than

the ordinary amount of attention is warranted for these loans.

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

typically bring normal repayment into jeopardy.

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

weaknesses that affect the repayment capacity of the

borrower.

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

for these loans.

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

as Substandard, with the characteristic that

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

currently existing facts, conditions, and values, highly

questionable and improbable.

Performing/Nonperforming – Loans within certain homogenous

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

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

activity.

The performing or nonperforming status

is updated on an on-going basis dependent upon improvement

and deterioration in credit quality.

The following table summarizes gross loans held for investment at

September 30, 2022

by years of origination and internally assigned

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

system).

Term

Loans by Origination Year

Revolving

(Dollars in Thousands)

2022

2021

2020

2019

2018

Prior

Loans

Total

Commercial, Financial,

Agriculture:

Pass

71,112

49,357

22,681

17,018

13,343

12,893

57,623

244,027

Special Mention

1,979

2,010

Substandard

150

267

Total

71,112

49,357

22,688

17,026

13,438

13,066

59,617

246,304

Real Estate -

Construction:

Pass

101,666

92,202

37,665

809

125

3,023

235,490

Special Mention

323

384

786

1,537

Substandard

691

Total

101,710

92,525

38,740

1,595

125

3,023

237,718

Real Estate -

Commercial Mortgage:

Pass

172,531

148,101

122,782

57,497

61,869

105,875

19,567

688,222

Special Mention

219

5,014

233

1,725

733

6,779

1,578

16,281

Substandard

7,415

1,789

391

622

1,021

129

11,367

Total

180,165

154,904

123,406

59,844

62,602

113,675

21,274

715,870

Real Estate - Residential:

Pass

310,007

100,110

47,970

30,070

20,570

67,954

8,748

585,429

Special Mention

279

128

545

1,026

Substandard

679

1,336

820

1,441

720

3,334

8,330

Total

310,965

101,446

48,918

31,527

21,348

71,833

8,748

594,785

Real Estate - Home

Equity:

Performing

141

403

149

1,368

199,612

201,717

Nonperforming

780

795

Total

141

418

149

1,368

200,392

202,512

Consumer:

Performing

131,573

124,096

42,504

24,655

14,966

5,455

5,498

348,747

Nonperforming

109

249

Total

131,573

124,205

42,580

24,669

15,005

5,466

5,498

348,996

NOTE 4 – MORTGAGE BANKING ACTIVITIES

The Company’s mortgage

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

to manage residential

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

market residential loan closings, and residential mortgage

servicing.

Residential Mortgage Loan Production

The Company originates, markets, and services conventional and

government-sponsored residential mortgage loans.

Generally,

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

secondary market and non-conforming and adjustable-rate

residential mortgage loans may be held for investment.

The volume of residential mortgage loans originated for sale and secondary

market prices are the primary drivers of origination revenue.

Residential mortgage loan commitments are generally outstanding for 30

to 90 days, which represents the typical period from

commitment to originate a residential mortgage loan to when the closed

loan is sold to an investor.

Residential mortgage loan

commitments are subject to both credit and price risk.

Credit risk is managed through underwriting policies and procedures, including

collateral requirements, which are generally accepted by the secondary

loan markets.

Price risk is primarily related to interest rate

fluctuations and is partially managed through forward sales of residential

mortgage-backed securities (primarily to-be announced

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

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

notional amounts of derivative contracts related to residential

mortgage loan commitments and forward contract sales and their related

fair values are set- forth below.

September 30, 2022

December 31, 2021

Unpaid Principal

(Dollars in Thousands)

Balance/Notional

Fair Value

Balance/Notional

Fair Value

Residential Mortgage Loans Held for Sale

50,358

50,304

50,733

52,532

Residential Mortgage Loan Commitments ("IRLCs")

(1)

65,967

1,373

51,883

1,258

Forward Sales Contracts

(2)

19,000

609

48,000

(7)

52,286

53,783

(1)

Recorded in other assets at fair value

(2)

Recorded in other assets and other liabilities at fair value

at September 30, 2022 and December 31, 2021, respectively

At September 30, 2022, the Company had

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

0.1

million of loans

were on nonaccrual status. At December 31, 2021, the Company had $

0.2

million of residential mortgage loans held for sale 30-89

days past due and

loans were on nonaccrual status.

Mortgage banking revenue was as follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in Thousands)

2022

2021

2022

2021

Net realized gains on sales of mortgage loans

3,287

12,132

13,222

40,089

Net change in unrealized gain on mortgage loans held for sale

(958)

(165)

(1,853)

(1,663)

Net change in the fair value of mortgage loan commitments

439

(806)

116

(3,108)

Net change in the fair value of forward sales contracts

655

540

616

1,358

Pair-Offs on net settlement of forward sales contracts

637

(636)

4,846

2,199

Mortgage servicing rights additions

1,079

205

3,167

845

Net origination fees

1,977

1,013

5,013

2,905

Total mortgage banking

revenues

7,116

12,283

25,127

42,625

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, 2022

December 31, 2021

Number of residential mortgage loans serviced for others

2,818

2,106

Outstanding principal balance of residential mortgage loans serviced

for others

801,046

532,967

Weighted average

interest rate

3.92%

3.59%

Remaining contractual term (in months)

343

317

Conforming conventional loans serviced by the Company are sold to Federal

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

recourse basis, whereby foreclosure losses are generally the responsibility

of FNMA and not the Company.

The government loans

serviced by the Company are secured through the Government National

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

insured against loss by the Federal Housing Administration or partially

guaranteed against loss by the Veterans

Administration.

September 30, 2022, the servicing portfolio balance consisted of

the following loan types: FNMA (

%), GNMA (

%), and private

investor (

%).

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

The Company had $

0.8

million and $

2.0

million in delinquent residential mortgage loans in GNMA pools serviced

by the Company at

September 30, 2022 and December 31, 2021, respectively.

The right to repurchase these loans and the corresponding liability has

been recorded in other assets and other liabilities, respectively,

in the Consolidated Statement of Financial Condition.

For the three

and nine months ended September 30, 2022, the Company repurchased

0.3

million and $

1.3

million in delinquent residential loans

from the GNMA pools.

For the three month period ended September 30, 2021, the Company did

t repurchase any delinquent

residential loans currently from the GNMA pools.

For the nine month period ended September 30, 2021, the Company repurchased

2.2

million in delinquent residential loans in GNMA pools.

When delinquent residential loans are repurchased, the Company has the

intention to modify their terms and include the loans in new GNMA pools.

Activity in the capitalized mortgage servicing rights was as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in Thousands)

2022

2021

2022

2021

Beginning balance

5,086

3,710

3,774

3,452

Additions due to loans sold with servicing retained

1,079

205

3,167

845

Deletions and amortization

(470)

(351)

(1,246)

(983)

Valuation

allowance reversal

250

Ending balance

5,695

3,564

5,695

3,564

The Company did

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

three or nine months ended

September 30, 2022 and September 30, 2021.

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

mortgage servicing rights were as follows:

September 30, 2022

December 31, 2021

Minimum

Maximum

Minimum

Maximum

Discount rates

9.50%

12.00%

11.00%

15.00%

Annual prepayment speeds

5.88%

10.71%

11.98%

23.79%

Cost of servicing (per loan)

Changes in residential mortgage interest rates directly affect

the prepayment speeds used in valuing the Company’s

mortgage

servicing rights.

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

turnover rates,

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

The weighted average annual prepayment speed was

8.08

% at September 30, 2022 and

15.85

% at December 31, 2021.

Warehouse

Line Borrowings

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

agreements with various financial institutions at

September 30, 2022.

Amounts

(Dollars in Thousands)

Outstanding

million master repurchase agreement without defined expiration.

Interest is at the Prime rate minus

1.00%

to plus

1.00%

, with a floor rate of

3.25%

A cash pledge deposit of $

0.5

million is required by the lender.

3,346

million warehouse line of credit agreement expiring in

November 2022

Interest is at the SOFR plus

2.25%

, to

3.25%

41,378

Total Warehouse

Borrowings

44,724

Warehouse

line borrowings are classified as short-term borrowings.

At December 31, 2021, warehouse line borrowings totaled $

29.0

million. At September 30, 2022, the Company had residential mortgage

loans held for sale and construction loans held for investment

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, 2022.

The Company has extended a $

million warehouse line of credit to CCHL, a

% owned subsidiary entity.

Balances and

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

consolidated financial statements and thus not included in the

total short term borrowings noted on the Consolidated Statement of

Financial Condition.

The balance of this line of credit at

September 30, 2022 and December 31, 2021 was $

23.3

million and $

14.8

million, respectively.

NOTE 5 – DERIVATIVES

The Company enters into derivative financial instruments to manage exposures

that arise from business activities that result in the

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

which are determined by interest rates.

The Company’s

derivative financial instruments are used to manage differences in

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

known or

expected cash receipts and its known or expected cash payments principally

related to the Company’s subordinated

debt.

Cash Flow Hedges of Interest Rate Risk

Interest rate swaps with notional amounts totaling $

million at September 30, 2022 were designed as a cash flow hedge for

subordinated debt.

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

2.50

% and receive a variable interest

rate based on three-month LIBOR plus a weighted average margin

1.83

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

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

accumulated other comprehensive income (“AOCI”) and subsequently

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

which the hedged transaction affects earnings. Amounts reported

in accumulated other comprehensive income related to derivatives

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

Company’s variable-rate subordinated

debt.

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

statements of financial condition

Statement of Financial

Notional

Fair

Weighted Average

(Dollars in Thousands)

Condition Location

Amount

Value

Maturity (Years)

September 30, 2022

Interest rate swaps related to subordinated debt

Other Assets

30,000

6,453

7.8

December 31, 2021

Interest rate swaps related to subordinated debt

Other Assets

30,000

2,050

8.5

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

consolidated statements of income related to the cash

flow derivative instruments (interest rate swaps related to subordinated

debt) for the three and nine months ended September 30, 2022

and September 30, 2021.

Amount of Gain

(Loss) Recognized

(Loss) Reclassified

(Dollars in Thousands)

Category

in AOCI

from AOCI to Income

Three months ended September 30, 2022

Interest expense

1,050

113

Three months ended September 30, 2021

Interest expense

128

(41)

Nine months ended September 30, 2022

Interest expense

3,287

112

Nine months ended September 30, 2021

Interest expense

1,029

(111)

The Company estimates there will be approximately $

1.1

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

months.

The Company had a collateral liability of $

6.3

million and $

2.0

million at September 30, 2022 and December 31, 2021, respectively.

NOTE 6 – LEASES

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

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

liabilities, included in other assets and liabilities, respectively,

on its Consolidated Statement of Financial Condition.

The Company’s operating

leases primarily relate to banking offices with remaining lease terms

from

years.

The Company’s

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

lease payments, or significant assumptions or judgments

made in applying the requirements of Topic

842.

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

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

At September 30, 2022, the operating lease ROU assets and liabilities were $

14.0

million and $

14.6

million, respectively. At

December 31, 2021, ROU assets and liabilities were $

11.5

million and $

12.2

million, respectively.

The Company does not have any

finance leases or any significant lessor agreements.

The table below summarizes our lease expense and other information related

to the Company’s operating leases.

Three Months Ended

Nine Months Ended

September 30,

(Dollars in Thousands)

2022

2021

2022

2021

Operating lease expense

427

369

1,202

1,075

Short-term lease expense

158

181

495

490

Total

lease expense

585

550

1,697

1,565

Other information:

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

Operating cash flows from operating leases

439

410

1,303

1,197

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

2,406

269

3,598

784

Weighted average

remaining lease term — operating leases (in years)

22.0

25.0

22.0

25.0

Weighted average

discount rate — operating leases

2.2%

2.0%

2.2%

2.0%

The table below summarizes the maturity of remaining lease liabilities:

(Dollars in Thousands)

September 30, 2022

2022

625

2023

1,955

2024

1,860

2025

1,445

2026

1,367

2027 and thereafter

13,362

Total

20,614

Less: Interest

(6,025)

Present Value

of Lease liability

14,589

At September 30, 2022, the Company had

five

additional operating lease obligations for banking offices (to be

constructed) that have

not yet commenced.

Three

of these leases have payments totaling $

9.3

million based on initial contract terms of

years and

two

leases have payments totaling $

3.4

million based on the initial contract term of

years.

Payments for the banking offices are

expected to commence after the construction periods end, which are

each expected to occur during the fourth quarter of 2022 and the

first quarter of 2023.

A related party is the lessor in an operating lease with the Company.

The Company’s minimum payment

is $

0.2

million annually

through 2024, for an aggregate remaining obligation of $

0.4

million at September 30, 2022.

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)

2022

2021

2022

2021

Service Cost

1,572

1,743

4,717

5,229

Interest Cost

1,166

1,221

3,499

3,664

Expected Return on Plan Assets

(2,675)

(2,787)

(8,026)

(8,361)

Prior Service Cost Amortization

Net Loss Amortization

428

1,691

1,285

5,073

Pension Settlement

102

500

480

2,500

Net Periodic Benefit Cost

597

2,372

1,966

8,116

Discount Rate

3.11%

2.88%

3.11%

2.88%

Long-term Rate of Return on Assets

6.75%

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

SERP and SERP II were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in Thousands)

2022

2021

2022

2021

Service Cost

Interest Cost

237

183

Prior Service Cost Amortization

207

157

Net Loss Amortization

180

243

540

683

Net Periodic Benefit Cost

336

382

1,008

1,050

Discount Rate

2.80%

2.38%

2.80%

2.38%

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

compensation expense in the accompanying statements of

income.

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

expense category in the statements

of income.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Lending Commitments

The Company is a party to financial instruments with off

-balance sheet risks in the normal course of business

to meet the financing needs of its clients.

These financial instruments consist of commitments to extend credit and standby

letters of

credit.

The Company’s maximum exposure

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

the contractual amount of those instruments.

The Company uses the same credit policies in establishing commitments

and issuing

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

The amounts associated with the Company’s

off-balance sheet

obligations were as follows:

September 30, 2022

December 31, 2021

(Dollars in Thousands)

Fixed

Variable

Total

Fixed

Variable

Total

Commitments to Extend Credit

(1)

256,284

535,306

791,590

217,531

505,897

723,428

Standby Letters of Credit

5,460

5,205

Total

261,744

535,306

797,050

222,736

505,897

728,633

(1)

Commitments include unfunded loans, revolving

lines of credit, and off-balance sheet residential

loan commitments.

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

any condition established in the

contract.

Commitments generally have fixed expiration dates or other termination

clauses and may require payment of a fee.

Since

many of the commitments are expected to expire without being drawn

upon, the total commitment amounts do not necessarily

represent future cash requirements.

Standby letters of credit are conditional commitments issued by

the Company to guarantee the performance of a client to a third

party.

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

in extending loan facilities. In

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

of participating in these types of transactions.

However, any

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

as management reserves for its other credit

facilities.

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

requires collateral to support such instruments when it is

deemed necessary.

The Company evaluates each client’s

creditworthiness on a case-by-case basis.

The amount of collateral

obtained upon extension of credit is based on management’s

credit evaluation of the counterparty.

Collateral held varies, but may

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

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

property, plant and

equipment; and inventory.

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

that are not unconditionally cancellable by the bank is

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

The following table shows the activity in the

allowance.

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in Thousands)

2022

2021

2022

2021

Beginning Balance

2,853

2,587

2,897

1,644

Provision for Credit Losses

159

530

115

1,473

Ending Balance

3,012

3,117

3,012

3,117

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.

Furthermore,

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 $

7.0

million in a solar tax credit equity fund.

At September 30,

2022, the Company had contributed $

0.2

million of the bank tech commitment and $

0.3

million of the solar fund commitment.

December 31, 2021, the Company had contributed $

0.1

million of the bank tech commitment.

Contingencies

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

In management's opinion,

there are

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

in the aggregate, have a material effect

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

of the Company.

Indemnification Obligation

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

Visa U.S.A member banks are

required to

indemnify the Visa U.S.A.

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

that relates to several

antitrust lawsuits challenging the practices of Visa

and MasterCard International.

In 2008, the Company, as a member

of the Visa

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

Inc. upon its initial public offering.

Since its initial public offering, Visa,

Inc. has

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

in the Class B shares held by the Company.

During the

first quarter of 2011, the Company sold its remaining

Class B shares.

Associated with this sale, the Company entered into a swap

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

counterparty in the event that Visa, Inc. makes

subsequent

revisions to the conversion ratio for its Class B shares.

Conversion ratio payments and ongoing fixed quarterly charges

are reflected in

earnings in the period incurred.

Fixed charges included in the swap liability are payable quarterly

until the litigation reserve is fully

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

Quarterly fixed payments approximate $

0.2

million.

NOTE 9 – FAIR VALUE

MEASUREMENTS

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

to transfer that liability in an orderly

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

the absence of a principal market) for such asset or

liability.

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

the market approach, the income

approach and/or the cost approach.

Such valuation techniques are consistently applied.

Inputs to valuation techniques include the

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

ASC Topic 820

establishes a fair value hierarchy for

valuation inputs that gives the highest priority to quoted prices in active markets

for identical assets or liabilities and the lowest

priority to unobservable inputs.

The fair value hierarchy is as follows:

●

Level 1 Inputs -

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

entity has the

ability to access at the measurement date

●

Level 2 Inputs -

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

either directly

or indirectly. These might

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

for identical

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

than quoted prices that are observable for the asset or

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

or inputs that are derived principally from, or

corroborated, by market data by correlation or other means

●

Level 3 Inputs -

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

an entity’s own

assumptions about the assumptions that market participants would

use in pricing the assets or liabilities.

Assets and Liabilities Measured at Fair Value

on a Recurring Basis

Securities Available for Sale.

U.S. Treasury securities are reported at fair value

utilizing Level 1 inputs.

Other securities classified as

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

For these securities, the Company obtains fair value measurements

from an independent pricing service.

The fair value measurements consider observable data that may include dealer

quotes, market

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

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

terms

and conditions, among other things.

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

The Company’s entire portfolio consists

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

obligations, federal agency bullet or mortgage pass-through securities,

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 as Level 2 within the fair value hierarchy.

Interest Rate Swap.

The Company’s derivative positions

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

using

models generally accepted in the financial services industry and

that use actively quoted or observable market input values from

external market data providers.

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

Fair Value

Swap

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

its Visa Class B shares.

The

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

the revised share conversion rate, if any,

during the

period. At September 30, 2022, there was $

0.2

million payable and at December 31, 2021, there was a $

0.1

million payable.

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

value on a recurring basis consisted of the following:

Level 1

Level 2

Level 3

Total

Fair

(Dollars in Thousands)

Inputs

Value

September 30, 2022

ASSETS:

Securities Available for

Sale:

U.S. Government Treasury

19,058

U.S. Government Agency

193,144

States and Political Subdivisions

40,228

Mortgage-Backed Securities

70,298

Corporate Debt Securities

86,691

Loans Held for Sale

50,304

Interest Rate Swap Derivative

6,453

Mortgage Banking Hedge Derivative

609

Mortgage Banking IRLC Derivative

1,373

December 31, 2021

ASSETS:

Securities Available for

Sale:

U.S. Government Treasury

187,868

U.S. Government Agency

237,578

States and Political Subdivisions

46,980

Mortgage-Backed Securities

88,869

Corporate Debt Securities

86,222

Loans Held for Sale

52,532

Interest Rate Swap Derivative

2,050

Mortgage Banking IRLC Derivative

1,258

LIABILITIES:

Mortgage Banking Hedge Derivative

Mortgage Banking Activities

The Company had Level 3 issuances and transfers related to mortgage

banking activities of $

11.4

million and $

23.4

million, respectively,

for the nine months ended September 30, 2022 and $

26.2

million and $

38.6

million,

respectively, for the

nine months ended September 30, 2021.

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

mortgage loan from inception of the IRLC to the Consolidated Statement

of Financial Condition date, adjusted for pull-through rates

and costs to originate.

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

to mortgage loans held for sale,

at fair value.

Assets Measured

at Fair Value

on a Non-Recurring Basis

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

assets are not measured at fair value on an ongoing basis

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

An example would be assets exhibiting evidence of impairment.

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

on a non-recurring basis.

Collateral Dependent Loans

Impairment for collateral dependent loans is measured using the fair

value of the collateral less selling

costs.

The fair value of collateral is determined by an independent valuation

or professional appraisal in conformance with banking

regulations.

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

and the judgment and

estimation involved in the real estate appraisal process.

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

basis for additional impairment and adjusted accordingly.

Valuation

techniques are consistent with those

techniques applied in prior

periods.

Collateral-dependent loans had a carrying value of $

1.2

million with a valuation allowance of $

0.1

million at September 30,

2022 and $

2.8

million and $

0.2

million, respectively,

at December 31, 2021.

Other Real Estate Owned

During the first nine months of 2022, certain foreclosed assets, upon initial recognition,

were measured and

reported at fair value through a charge-off

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

estimated cost to sell.

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

professional appraisal in

conformance with banking regulations.

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

adjustments as necessary.

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

and estimation

involved in the real estate valuation process.

Mortgage Servicing Rights

Residential mortgage loan servicing rights are evaluated for impairment

at each reporting period based

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

Fair value is determined by a third party valuation model using

estimated prepayment speeds of the underlying mortgage loans serviced and

stratifications based on the risk characteristics of the

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

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

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

servicing.

Further detail on the key inputs utilized are

provided in Note 4 – Mortgage Banking Activities.

At each of September 30, 2022 and December 31, 2021, 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.

Pursuant to the adoption of ASU 2016-01,

Recognition and

Measurement of Financial Assets and Financial

Liabilities

, 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, 2022

Carrying

Level 1

Level 2

Level 3

(Dollars in Thousands)

Value

Inputs

ASSETS:

Cash

72,686

Short-Term Investments

497,679

Investment Securities, Held to Maturity

676,178

434,717

188,911

Equity Securities

(1)

1,349

Other Equity Securities

(2)

2,848

Mortgage Servicing Rights

5,695

9,441

Loans, Net of Allowance for Credit Losses

2,323,675

2,207,464

LIABILITIES:

Deposits

3,759,378

3,209,190

Short-Term

Borrowings

52,271

51,821

Subordinated Notes Payable

52,887

46,532

Long-Term Borrowings

562

564

December 31, 2021

Carrying

Level 1

Level 2

Level 3

(Dollars in Thousands)

Value

Inputs

ASSETS:

Cash

65,313

Short-Term Investments

970,041

Investment Securities, Held to Maturity

339,601

113,877

225,822

Equity Securities

(1)

861

Other Equity Securities

(2)

2,848

Mortgage Servicing Rights

3,774

4,718

Loans, Net of Allowance for Credit Losses

1,909,859

1,903,640

LIABILITIES:

Deposits

3,712,862

3,713,478

Short-Term

Borrowings

34,557

Subordinated Notes Payable

52,887

42,609

Long-Term Borrowings

884

938

(1)

Not readily marketable securities - reflected

in other assets.

(2)

Accounted for under the equity method – not readily

marketable securities – reflected in other assets.

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

The disclosures also do not include goodwill.

Accordingly, the

aggregate fair value amounts presented do not represent the underlying

value of the Company.

NOTE 10 – ACCUMULATED

OTHER COMPREHENSIVE INCOME (LOSS)

The amounts allocated to accumulated other comprehensive income

(loss) are presented in the table below.

Accumulated

Securities

Other

Available

Interest Rate

Retirement

Comprehensive

(Dollars in Thousands)

for Sale

Swap

Plans

(Loss) Income

Balance as of January 1, 2022

(4,588)

1,530

(13,156)

(16,214)

Other comprehensive (loss) income during the period

(35,634)

3,287

358

(31,989)

Balance as of September 30, 2022

(40,222)

4,817

(12,798)

(48,203)

Balance as of January 1, 2021

2,700

428

(47,270)

(44,142)

Other comprehensive (loss) income during the period

(3,249)

1,029

1,635

(585)

Balance as of September 30, 2021

(549)

1,457

(45,635)

(44,727)

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 2022 compares with prior years.

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

is referred to as “CCBG,” “Company,”

“we,”

“us,” or “our.”

CAUTION CONCERNING FORWARD

-LOOKING STATEMENTS

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

“forward-looking statements”

within the meaning of the

Private Securities Litigation Reform Act of 1995.

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

our

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

subject to significant risks and uncertainties and are

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

our control.

The words “may,”

“could,” “should,” “would,”

“believe,” “anticipate,”

“estimate,” “expect,”

“intend,” “plan,”

“target,”

“vision,” “goal,”

and similar expressions are intended to

identify forward-looking statements.

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

Our actual future results may differ materially

from those set forth in our forward-looking statements.

Please see the Introductory Note and

Item 1A. Risk Factors

of our 2021

Report on 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 57 full-service offices

located in Florida, Georgia, and Alabama.

We provide a full range of

banking services, including traditional deposit and credit

services, mortgage banking, asset management, trust, merchant services, bankcards,

securities brokerage services and financial

advisory services, including life insurance products,

risk management and asset protection services.

Our profitability, like

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

interest income, which is the difference

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

securities, and the interest paid on interest-bearing

liabilities, principally deposits and borrowings.

Results of operations are also affected by the provision for credit

losses, operating

expenses such as salaries and employee benefits, occupancy and other

operating expenses including income taxes, and noninterest

income such as mortgage banking revenues, wealth management fees,

deposit fees, and bank card fees.

We have included

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

objectives as part of the

MD&A section of our 2021 Form 10-K.

Acquisitions

On April 30, 2021, a newly formed subsidiary of CCBG, Capital City Strategic

Wealth, LLC

(“CCSW”), completed its acquisition of

substantially all of the assets of Strategic Wealth

Group, LLC and certain related businesses (“SWG”).

CCSW was consolidated into

CCBG’s financial statements

effective May 1, 2021.

A detailed discussion regarding the acquisition of Capital City Strategic Wealth,

LLC is included as part of the MD&A section of our 2021 Form 10-K.

NON-GAAP FINANCIAL MEASURES

We present a tangible

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

effect of

goodwill and other intangibles that resulted from merger

and acquisition activity. We

believe these measures are useful to investors

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

other companies in the industry.

The generally accepted

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

each quarter presented is provided below.

2022

2021

(Dollars in Thousands, except per share data)

Third

Second

First

Fourth

Third

Shareowners' Equity (GAAP)

373,165

371,675

372,145

383,166

348,868

Less: Goodwill and Other Intangibles (GAAP)

93,133

93,173

93,213

93,253

93,293

Tangible Shareowners' Equity (non-GAAP)

280,032

278,502

278,932

289,913

255,575

Total Assets (GAAP)

4,332,671

4,354,297

4,310,045

4,263,849

4,048,733

Less: Goodwill and Other Intangibles (GAAP)

93,133

93,173

93,213

93,253

93,293

Tangible Assets (non-GAAP)

4,239,538

4,261,124

4,216,832

4,170,596

3,955,440

Tangible Common

Equity Ratio (non-GAAP)

A/B

6.61%

6.54%

6.61%

6.95%

6.46%

Actual Diluted Shares Outstanding (GAAP)

16,998,177

16,981,614

16,962,362

16,935,389

16,911,715

Tangible Book Value

per Diluted Share (non-GAAP)

A/C

16.47

16.40

16.44

17.12

15.11

SELECTED QUARTERLY

FINANCIAL DATA

(UNAUDITED)

(Dollars in Thousands, Except

2022

2021

Per Share Data)

Third

Second

First

Fourth

Third

Summary of Operations

Interest Income

35,364

29,320

25,438

25,549

28,520

Interest Expense

2,037

987

742

838

848

Net Interest Income

33,327

28,333

24,696

24,711

27,672

Provision for Credit Losses

2,099

1,542

Net Interest Income After

Provision for Credit Losses

31,228

26,791

24,696

24,711

27,672

Noninterest Income

22,934

24,903

25,818

24,672

26,574

Noninterest Expense

39,810

40,498

39,233

40,207

39,702

Income

Before

Income Taxes

14,352

11,196

11,281

9,176

14,544

Income Tax Expense

3,074

2,177

2,235

2,040

2,949

Income Attributable to NCI

(306)

(591)

(764)

(1,504)

Net Income Attributable to CCBG

11,315

8,713

8,455

6,372

10,091

Net Interest Income (FTE)

33,410

28,409

24,774

24,790

27,750

Per Common Share

Net Income Basic

0.67

0.51

0.50

0.38

0.60

Net Income Diluted

0.67

0.51

0.50

0.38

0.60

Cash Dividends Declared

0.17

0.16

Diluted Book Value

21.95

21.89

21.94

22.63

20.63

Diluted Tangible Book Value

(1)

16.47

16.40

16.44

17.12

15.11

Market Price:

High

33.93

28.55

28.88

29.00

26.10

Low

27.41

24.43

25.96

24.77

22.02

31.11

27.89

26.36

26.40

24.74

Selected Average Balances

Investment Securities

1,120,728

1,144,757

1,059,145

991,080

909,294

Loans Held for Investment

2,264,075

2,084,679

1,963,578

1,948,324

1,974,132

Earning Assets

4,009,951

3,974,221

3,938,824

3,791,313

3,693,123

Total Assets

4,357,678

4,321,388

4,266,775

4,127,937

4,026,613

Deposits

3,769,864

3,765,329

3,714,062

3,549,145

3,447,688

Shareowners’ Equity

379,305

373,365

383,956

350,140

341,460

Common Equivalent Average Shares:

Basic

16,960

16,949

16,931

16,880

16,875

Diluted

16,996

16,971

16,946

16,923

16,909

Performance Ratios:

Return on Average Assets

1.03

0.81

0.80

0.61

0.99

Return on Average Equity

11.83

9.36

8.93

7.22

11.72

Net Interest Margin (FTE)

3.31

2.87

2.55

2.60

2.98

Noninterest Income as % of

Operating Revenue

40.76

46.78

51.11

49.96

48.99

Efficiency Ratio

70.66

75.96

77.55

81.29

73.09

Asset Quality:

Allowance for Credit Losses (“ACL”)

22,510

21,281

20,756

21,606

21,500

ACL to Loans HFI

0.96

1.05

1.12

1.11

Nonperforming Assets (“NPAs”)

2,422

3,231

2,745

4,339

3,218

NPAs to Total

Assets

0.06

0.07

0.06

0.10

0.08

NPAs to Loans HFI plus OREO

0.10

0.15

0.14

0.22

0.17

ACL to Non-Performing Loans

934.53

677.57

760.83

499.93

710.39

Net Charge-Offs to Average

Loans HFI

0.12

0.22

0.16

0.02

0.03

Capital Ratios:

Tier 1 Capital

14.80

15.13

15.98

16.14

15.69

Total Capital

15.75

16.07

16.98

17.15

16.70

Common Equity Tier 1

12.83

13.07

13.77

13.86

13.45

Leverage

8.91

8.77

8.78

8.95

9.05

Tangible Common Equity

(1)

6.61

6.54

6.61

6.95

6.46

(1)

Non-GAAP financial measure.

See non-GAAP reconciliation on page 32.

FINANCIAL OVERVIEW

Results of Operations

Performance Summary.

Net income attributable to common shareowners of $11.3

million, or $0.67 per diluted share, for the third

quarter of 2022 compared to net income of $8.7

million, or $0.51 per diluted share, for the second quarter of 2022, and $10.1

million,

or $0.60 per diluted share, for the third quarter of 2021.

For the first nine months of 2022, net income attributable to common

shareowners totaled $28.5 million, or $1.68 per diluted share, compared to net

income of $27.0 million, or $1.60 per diluted share, for

the same period of 2021.

Net Interest Income.

Tax-equivalent net

interest income for the third quarter of 2022 totaled $33.4 million, compared

to $28.4 million

for the second quarter of 2022, and $27.7 million for the third quarter of 2021.

For the first nine months of 2022, tax-equivalent net

interest income totaled $86.6 million compared to $78.4 million for the

same period of 2021.

Compared to the referenced prior

periods, the increase reflected strong loan growth, higher investment

balances,

and higher rates across a majority of our earning assets.

Provision and Allowance for Credit

Losses.

We recorded

a provision for credit losses of $2.1 million for the third quarter of 2022

compared to $1.5 million in the second quarter of 2022 and no provision

for the third quarter of 2021.

For the first nine months of

2022, the provision was an expense of $3.6 million compared to a benefit of $1.6

million for the same period of 2021.

The higher

level of provision compared to all prior periods was primarily attributable

to strong loan growth.

The credit loss provision in 2021

was favorably impacted by strong loan recoveries.

At September 30, 2022, the allowance represented 0.96% of HFI loans compared

to 0.96% at June 30, 2022 and 1.12% at December 31, 2021.

Noninterest Income.

Noninterest income for the third quarter of 2022 totaled $22.9 million compared

to $24.9 million for the second

quarter of 2022 and $26.6

million for the third quarter of 2021.

The $2.0 million decrease from the second quarter of 2022 was

attributable to lower mortgage banking revenues

of $1.9 million.

For the first nine months of 2022, noninterest income totaled $73.7

million compared to $82.9 million for the same period of 2021 and reflected

lower mortgage banking revenues of $17.5 million,

partially offset by higher deposit fees of $3.0 million and wealth management

fees of $4.4

million (insurance revenues of $3.5 million

and retail brokerage fees of $0.9 million).

The decrease in mortgage banking revenues in 2022 has been largely

offset by interest

income from strong adjustable rate residential production being booked

into our loan portfolio.

We discuss noninterest

income in

further detail below.

Noninterest Expense.

Noninterest expense for the third quarter of 2022 totaled $39.8 million compared

to $40.5 million for the second

quarter of 2022 and $39.7 million for the third quarter of 2021.

The $0.7 million decrease from the second quarter of 2022 was

primarily attributable to lower compensation expense from variable/performance

-based compensation at Capital City Home Loans

(“CCHL”) and CCSW.

For the first nine months of 2022, noninterest expense totaled $119.5

million compared to $122.3 million for

the same period of 2021 and reflected lower compensation

expense of $1.7 million and other expense of $1.4 million, partially offset

by higher occupancy expense of $0.3 million.

We discuss noninterest

expense in further detail below.

Financial Condition

Earning Assets.

Average earning assets totaled

$4.010 billion for the third quarter of 2022, an increase of $35.7 million, or 0.9%,

over

the second quarter of 2022, and an increase of $218.6 million, or 5.8%,

over the fourth quarter of 2021.

The increase over both prior

periods was primarily driven by higher deposit balances.

The mix of earning assets continues to improve driven by strong loan

growth.

Loans

Average loans held for investment

(“HFI”) increased $179.4 million, or 8.6%, over the second quarter of 2022

and increased

$315.8 million, or 16.2%, over the fourth quarter of 2021.

Period end loans increased $132.5 million, or 6.0%, over the second

quarter of 2022 and $414.7 million, or 21.5%, over the fourth quarter of 2021.

The growth in 2022 has been broad based with

increases realized in all loan categories, more significantly,

residential mortgage, residential construction, and commercial real

estate.

The slowdown in secondary market residential loan sales has allowed us to

book a steady flow of CCHL’s

adjustable rate production

in our loan portfolio throughout 2022.

Credit Quality

Overall credit quality remains strong.

Nonperforming assets (nonaccrual loans and other real estate) totaled $2.4

million at September 30, 2022 compared to $3.2 million at June

30, 2022 and $4.3 million at December 31, 2021.

At September 30,

2022, nonperforming assets as a percent of total assets totaled 0.06% compared

to 0.07% at June 30, 2022 and 0.10% at December 31,

2021.

Nonaccrual loans totaled $2.4 million at September 30, 2022, a $0.

million decrease from June 30, 2022 and a $1.9 million

decrease from December 31, 2021.

Deposits

Average total

deposits were $3.770 billion for the third quarter of 2022, an increase of $4.5 million, or

0.1%, over the

second quarter of 2022 and $220.7 million, or 6.2%, over the fourth quarter of 2021.

Growth over the second quarter of 2022 was

primarily attributable

to an increase in noninterest bearing and savings account balances.

Compared to the fourth quarter 2021, we

have had strong growth in our noninterest bearing deposits, NOW accounts,

and savings account balances.

Capital

At September 30, 2022, we were well-capitalized with a total risk-based capital ratio

of 15.75% and a tangible common

equity ratio (a non-GAAP financial measure) of 6.61% compared to

16.07% and 6.54%, respectively at June 30, 2022 and 17.15% and

6.95%, respectively, at December

31, 2021.

At September 30, 2022, 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)

2022

2021

2022

2021

Interest Income

35,364

29,320

28,520

90,122

80,802

Taxable Equivalent Adjustments

237

270

Total Interest Income (FTE)

35,447

29,396

28,598

90,359

81,072

Interest Expense

2,037

987

848

3,766

2,652

Net Interest Income (FTE)

33,410

28,409

27,750

86,593

78,420

Provision for Credit Losses

2,099

1,542

3,641

(1,553)

Taxable Equivalent Adjustments

237

270

Net Interest Income After Provision for Credit Losses

31,228

26,791

27,672

82,715

79,703

Noninterest Income

22,934

24,903

26,574

73,655

82,873

Noninterest Expense

39,810

40,498

39,702

119,541

122,301

Income Before Income Taxes

14,352

11,196

14,544

36,829

40,275

Income Tax Expense

3,074

2,177

2,949

7,486

7,795

Pre-Tax Income Attributable to Noncontrolling

Interest

(306)

(1,504)

(860)

(5,456)

Net Income Attributable to Common Shareowners

11,315

8,713

10,091

28,483

27,024

Basic Net Income Per Share

0.67

0.51

0.60

1.68

1.60

Diluted Net Income Per Share

0.67

0.51

0.60

1.68

1.60

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 on page 46.

Tax-equivalent net

interest income for the third quarter of 2022 totaled $33.4 million, compared

to $28.4 million for the second

quarter of 2022, and $27.7 million for the third quarter of 2021.

For the first nine months of 2022, tax-equivalent net interest income

totaled $86.6 million compared to $78.4 million for the same period of 2021.

Compared to the referenced prior periods, the increase

reflected strong loan growth and higher rates across a majority of

our earning assets.

Our net interest margin for the third quarter of 2022 was 3.31%, an increase

of 44 basis points over the second quarter of 2022 and 33

basis points over the third quarter of 2021, both driven by higher interest rates and an

overall improved earning asset mix.

For the

month of September 2022, our net interest margin

was 3.41%.

Excluding the impact of overnight funds in excess of $200 million, our

net interest margin for the third quarter of 2022 was 3.54%.

Compared to the nine month period of 2021, the net interest margin

remained flat at 2.91% as the favorable impact of higher interest rates and

an improved earning asset mix offset the favorable impact

in 2021 from a significant level of SBA Paycheck Protection Program fee income.

Provision for Credit Losses

We recorded

a provision for credit losses of $2.1 million for the third quarter of 2022 compared

to $1.5 million in the second quarter

of 2022 and no provision for the third quarter of 2021.

For the first nine months of 2022, the provision was an expense of $3.6 million

compared to a benefit of $1.6 million for the same period of 2021.

The higher level of provision compared to all prior periods was

primarily attributable to strong loan growth.

The credit loss provision in 2021 was favorably impacted by strong loan recoveries.

discuss the allowance for credit losses further below.

For more information on charge-offs and recoveries,

see Note 3 – Loans Held for

Investment and Allowance for Credit Losses.

Noninterest Income

Noninterest income for the third quarter of 2022 totaled $22.9 million compared

to $24.9 million for the second quarter of 2022 and

$26.6 million for the third quarter of 2021.

The $2.0 million decrease from the second quarter of 2022 was primarily

attributable to

lower mortgage banking revenues of $1.9 million.

Compared to the third quarter of 2021, the $3.6 million decrease was attributable to

lower mortgage banking revenues of $5.2 million, partially

offset by higher deposit fees of $0.9 million, other income of $0.

million,

and wealth management fees of $0.3 million.

For the first nine months of 2022, noninterest income totaled $73.7 million compared

$82.9 million for the same period of 2021 and reflected lower mortgage

banking revenues of $17.5 million, partially offset by higher

deposit fees of $3.0 million and wealth management fees of $4.4

million (primarily insurance revenues of $3.5 million and retail

brokerage fees of $0.9 million).

Lower mortgage banking revenues for 2022 reflected a reduction in refinancing

activity and, to a

lesser degree,

lower purchase mortgage originations primarily driven by higher interest

rates.

For 2022, CCHL contributed $0.5

million ($0.03 per diluted share) to earnings versus $3.4 million ($0.21 per

diluted share) in 2021, which has largely been offset

by a

$1.2 million ($0.07 per diluted share) contribution to earnings by CCSW and

improvement in both deposit fees and retail brokerage

fees, which reflects our continued commitment to revenue diversification.

Noninterest income represented 40.8% of operating revenues (net

interest income plus noninterest income) in the third quarter of 2022

compared to 46.8% in the second quarter of 2022 and 49.0% in the third quarter

of 2021.

For the first nine months of 2022,

noninterest income represented 46.0% of operating revenues compared

to 51.5% for the same period of 2021.

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)

2022

2021

2022

2021

Deposit Fees

5,947

5,447

5,075

16,585

13,582

Bank Card Fees

3,860

4,034

3,786

11,657

11,402

Wealth Management

Fees

3,937

4,403

3,623

14,410

9,987

Mortgage Banking Revenues

7,116

9,065

12,283

25,127

42,625

Other

2,074

1,954

1,807

5,876

5,277

Total

Noninterest Income

22,934

24,903

26,574

73,655

82,873

Significant components of noninterest income are discussed in more

detail below.

Deposit Fees

Deposit fees for the third quarter of 2022 totaled $5.9 million, an increase of $0.5

million, or 9.2%, over the second

quarter of 2022, and an increase of $0.9 million, or 17.2%, over

the third quarter of 2021.

For the first nine months of 2022, deposit

fees totaled $16.6 million, an increase of $3.0 million, or 22.1%, over the same period

of 2021.

Compared to second quarter of 2022,

the increase reflected higher overdraft fees.

The increase over both prior year periods was attributable to higher monthly service

charge fees and overdraft fees.

The conversion of our remaining free checking accounts to a monthly maintenance

fee account type

drove the increase in service charge fees.

The increase in overdraft fees was driven by higher utilization of our overdraft service

which is closely correlated (inversely) with the consumer savings rate which

has declined noticeably since it substantially increased

during 2020 and 2021 due to the high level of governmental stimulus related

to the COVID-19 pandemic.

Bank Card Fees

Bank card fees for the third quarter of 2022 totaled $3.9 million, a $0.2 million, or 4.3%,

decrease from the second

quarter of 2022, and a $0.1 million, or 2.0% increase over the third quarter

of 2021.

For the first nine months of 2022, bank card fees

totaled $11.7 million, an increase of $0.3 million, or

2.2%, over the same period of 2021.

The increase over the prior year periods was

primarily attributable to growth in checking accounts.

Wealth

Management Fees

Wealth management fees

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

accounts and

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

investment, insurance products, and retirement accounts),

and financial advisory fees through Capital City Strategic Wealth

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

protection services).

Wealth management

fees for the third quarter of 2022 totaled $3.9 million, a $0.5 million,

or 10.6%, decrease

from the second quarter of 2022, which reflected lower insurance revenues

of $0.5 million due to a lower level of insurance policy

sales.

Compared to the third quarter of 2021, the $0.3 million, or 8.7%,

increase was due to higher retail brokerage fees of $0.2

million.

For the first nine months of 2022, wealth management fees increased $4.4 million, or 44.3%,

primarily due to higher

insurance revenues of $3.5 million and retail brokerage fees of $0.9 million.

The higher level of insurance revenues reflected the

acquisition of Capital City Strategic Wealth

in May 2021.

At September 30, 2022, total assets under management were approximately

$2.117 billion compared to $2.201 billion

at June 30, 2022 and $2.324 billion at December 31, 2021.

Mortgage Banking Revenues.

Mortgage banking revenues totaled $7.1 million for the third quarter of

2022 compared to $9.1 million

for the second quarter of 2022 and $12.3 million for the third quarter of 2021.

For the first nine months of 2022, revenues totaled

$25.1 million compared to $42.6 million for the same period of 2021.

Lower mortgage banking revenues for 2022 reflected a

reduction in refinancing activity,

and to a lesser degree lower purchase mortgage originations, primarily driven

by higher interest

rates.

In addition, gain on sale margins have been pressured due to

a lower level of governmental loan originations and mandatory

delivery loan sales (both of which provide a higher gain on sale percentage).

During 2022, strong best efforts origination volume has

allowed us to book a steady flow of adjustable rate residential loans in our portfolio and

has contributed to loan growth and earnings.

In addition, continued stability in our construction/permanent loan program

has partially offset the slowdown in secondary market

originations.

Other

Other income totaled $2.1 million for the third quarter of 2022 compared

to $2.0 million for the second quarter of 2022 and

$1.8 million for the third quarter of 2021.

The slight increase over the third quarter of 2021 reflected higher loan servicing

income

and miscellaneous loan fees.

For the first nine months of 2022, other income totaled $5.9 million

compared to $5.3 million for the

same period of 2021 with the increase attributable to higher loan servicing income,

VISA debit card incentive income, and

miscellaneous loan fees.

The increase in loan servicing income reflected an increase in CCHL’s

loan servicing portfolio and the

increase

in miscellaneous loan fees was attributable to higher loan volume.

Noninterest Expense

Noninterest expense for the third quarter of 2022 totaled $39.8 million

compared to $40.5 million for the second quarter of 2022 and

$39.7 million for the third quarter of 2021.

The $0.7 million decrease from the second quarter of 2022 was primarily

attributable to

lower compensation expense of $0.6 million which reflected lower

variable/performance-based compensation expense at CCHL and

CCSW totaling $1.5 million, partially offset by higher variable/performance

-based compensation of $0.6 million and base salaries

(primarily annual merit raises) of $0.2 million at the Bank.

Compared to the third quarter of 2021, the $0.1 million increase reflected

higher other expense of $0.5 million and occupancy expense of $0.1

million, partially offset by lower compensation expense of $0.5

million.

The increase in other expense was primarily attributable to higher other

real estate expense of $1.0 million partially offset by

lower pension settlement expense of $0.4 million.

The decrease in compensation expense reflected lower variable/performance

-based

compensation at CCHL totaling $1.5

million, partially offset by higher variable/performance-based

compensation of $0.7 million and

base salaries of $0.3

million at the Bank.

For the first nine months of 2022, noninterest expense totaled $119.5

million compared to $122.3 million for the same period of 2021

and reflected lower compensation expense of $1.7 million and other

expense of $1.4 million, partially offset by higher occupancy

expense of $0.3 million.

The reduction in compensation expense was primarily due to lower variable/performance

-based

compensation at CCHL totaling $7.0 million, partially offset

by higher variable/performance-based compensation totaling $2.8

million, base salaries (merit and new market staffing additions)

of $2.0 million, and associate insurance expense (utilized self-

insurance reserves in 2021) of $0.6 million at the Bank.

The net $1.4 million decrease in other expense was primarily attributable to

lower pension settlement expense of $2.0 million and miscellaneous expense

of $1.1 million, partially offset by higher other real estate

expense of $1.4 million and advertising expense of $0.4

million.

A lower level of lump sum retirement payments drove the decrease

in pension settlement expense compared to three and nine month periods

of 2021.

We expect additional pension

settlement expense

for the remainder of 2022 based on our current estimate of lump sum pension

pay-outs to retirees.

We discuss noninterest

expense in

further detail below.

To date, the

impact of inflation and higher prices on our cost structure has not been significant.

While operating in a very tight labor

market, we have mitigated the impact of salary pressures by not replacing

certain positions that became vacant.

Further, we have

realized higher than historical increases in certain premises and

processing contracts reflective of inflationary pressures. We

will

continue to focus on opportunities to re-negotiate or replace vendors

at periodic renewals.

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)

2022

2021

2022

2021

Salaries

20,375

21,461

21,060

62,500

64,625

Associate Benefits

4,363

3,922

4,185

12,477

12,062

Total Compensation

24,738

25,383

25,245

74,977

76,687

Premises

2,784

2,734

2,736

8,278

8,209

Equipment

3,369

3,341

3,296

10,043

9,763

Total Occupancy

6,153

6,075

6,032

18,321

17,972

Legal Fees

357

316

251

1,022

1,130

Professional Fees

1,258

1,406

1,459

3,996

4,195

Processing Services

1,777

1,752

1,775

5,166

5,114

Advertising

726

980

645

2,479

2,025

Telephone

730

703

731

2,162

2,239

Insurance – Other

656

593

509

1,760

1,555

Other Real Estate Owned, net

(92)

(29)

(1,126)

(96)

(1,514)

Pension Settlement

102

169

500

480

2,500

Miscellaneous

3,405

3,150

3,681

9,274

10,398

Total Other

8,919

9,040

8,425

26,243

27,642

Total

Noninterest Expense

39,810

40,498

39,702

119,541

122,301

Significant components of noninterest expense are discussed in more detail

below.

Compensation

Compensation expense totaled $24.7 million for the third quarter of 2022 compared

to $25.4 million for the second

quarter of 2022 and $25.2 million for the third quarter of 2021.

The $0.7 million decrease from the second quarter of 2022 was

primarily attributable to lower compensation expense of $0.6 million which

reflected lower variable/performance-based compensation

expense at CCHL and CCSW totaling $1.5 million, partially offset

by higher variable/performance-based compensation of $0.6

million and base salaries (primarily annual merit raises) of $0.2

million at the Bank.

Compared to the third quarter of 2021, the $0.5

million decrease in compensation expense reflected lower variable/performance

-based compensation at CCHL totaling $1.5 million,

partially offset by higher variable/performance-based compensation

of $0.7 million and base salaries of $0.3 million at the Bank.

For the first nine months of 2022, compensation expense totaled $75.0

million compared to $76.7 million for the same period of 2021

with the $1.7

million decrease attributable to lower variable/performance-based compensation

at CCHL of $7.0 million, partially

offset by higher variable/performance-based

compensation totaling $2.8 million, base salaries (merit and new market staffing

additions) of $2.0 million, and associate insurance expense (utilized self-insurance

reserves in 2021) of $0.6 million at the Bank.

Occupancy

Occupancy expense totaled $6.2

million for the third quarter of 2022 compared to $6.1 million for the second quarter

2022 and $6.0 million for the third quarter of 2021.

For the first nine months of 2022, occupancy expense totaled $18.3 million

compared to $18.0 million for the same period of 2021.

Compared to the nine month period of 2021, the increase was attributable to

higher software expense and banking office

lease expense.

Other

Other expense totaled $8.9 million for the third quarter of 2022 compared

to $9.0

million for the second quarter of 2022 and

$8.4 million for the third quarter of 2021.

Compared to the second quarter of 2022, the $0.1 million decrease was primarily due

lower advertising expense of $0.3 million and professional fees of $0.1

million, partially offset by higher miscellaneous expense

$0.2 million (debit card losses).

Compared to the third quarter of 2021, the $0.5 million increase was primarily

attributable to higher

other real estate expense of $1.0 million, partially offset by

lower pension settlement expense of $0.4 million.

For the first nine months of 2022, other expense totaled $26.2 million

compared to $27.6 million for the same period of 2021 with the

$1.4 million decrease primarily attributable to lower pension settlement expense

of $2.0 million, miscellaneous expense of $1.1

million, and professional fees of $0.2 million, partially offset

by higher expense for other real estate expense of $1.4 million,

advertising of $0.4 million, and insurance–other of $0.2 million.

A lower level of lump sum retirements in 2022 drove the decrease in

pension settlement expense compared to the three and nine month periods

of 2021.

We expect additional

pension settlement expense

for the remainder of 2022 based on our current estimate of lump sum pension

pay-outs to retirees.

Lower compliance support costs

drove the decline in professional fees.

The higher level of other real estate expense was attributable to gains from the

sale of two

banking offices

in 2021.

The increase in advertising expense is related to new market expansion and return

of brand advertising to

pre-pandemic levels.

Higher FDIC insurance costs related to an increase in asset size drove the increase

in insurance-other.

The

decrease in miscellaneous expense was primarily attributable to lower

expense for our base pension plan service cost of $3.7 million

that was partially offset by higher expense for travel/entertainment

of $0.5 million, mortgage servicing rights (“MSR”) of $0.5 million,

other losses of $0.6 million, a $0.3

million expense for our VISA share swap agreement,

loan servicing costs of $0.2 million, credit

bureau/appraisal fees of $0.1 million, and training costs of $0.1 million.

Our operating efficiency ratio (expressed as noninterest

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

plus noninterest income) was 70.66%

for the third quarter of 2022 compared to 75.96% for the second quarter of 2022 and 73.09%

for

the third quarter of 2021.

For the first nine months of 2022, this ratio was 74.60% compared to 75.83%

for the same period of 2021.

Income Taxes

We realized income

tax expense of $3.1 million (effective rate of 21.4%) for the

third quarter of 2022 compared to $2.2 million

(effective rate of 19.4%) for the second quarter of 2022

and $2.9 million (effective rate of 20.3%) for the third quarter of 2021.

For

the first nine months of 2022, we realized income tax expense of $7.5

million (effective rate of 20.3%) compared to $7.8 million

(effective rate of 19.4%) for the same period of 2021.

The increase in the effective tax rate in 2022 was primarily attributable to a

lower level of pre-tax income from CCHL as the noncontrolling

interest adjustment for CCHL is accounted for as a permanent tax

adjustment.

Absent discrete items, we expect our annual effective tax rate to

approximate 21% in 2022.

FINANCIAL CONDITION

Average

earning assets totaled $4.010 billion for the third quarter of 2022, an increase

of $35.7 million, or 0.9%, over the second

quarter of 2022, and an increase of $218.6 million, or 5.8%, over

the fourth quarter of 2021.

The increase over both prior periods was

primarily driven by higher deposit balances (see below –

Deposits

The mix of earning assets continues to improve driven by strong

loan growth.

Investment Securities

Average investment

decreased $24.0 million, or 2.1% from the second quarter of 2022 and increased

$129.6 million, or 13.1%, over

the fourth quarter of 2021.

Our investment portfolio represented 27.9% of our average earning

assets for the third quarter of 2022

compared to 28.8% for the second quarter of 2022 and 26.1% for the fourth quarter

of 2021.

For the remainder of 2022, we will

continue to monitor our overall liquidity position and, dependent on market

conditions, look for opportunities to reinvest a portion of

the proceeds into additional securities that align with our overall investment

strategy.

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 Availabl

e-for-Sale (“AFS”)

and Held-to-Maturity (“HTM”).

At September 30, 2022, $416.7 million, or 38.1%, of our investment portfolio

was classified as AFS,

and $676.2 million, or 61.8%, classified as HTM.

The average maturity of our total portfolio at September 30, 2022 was 3.51

years

compared to 3.51 years at June 30, 2022 and 3.63 years at December 31, 2021.

During the quarter, to mitigate risk to AOCI due to

higher interest rates, we reclassified 33 U.S. Treasury

obligations totaling $168.4 million with unrealized losses of $9.4 million

from

AFS to HTM.

At September 30, 2022, $8.8 million was remaining in unrealized losses relating

to these securities.

We determine

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

our asset/liability strategy

and future business plans and opportunities.

We consider multiple

factors in determining classification, including regulatory

capital

requirements, volatility in earnings or other comprehensive income,

and liquidity needs.

Securities in the AFS portfolio are recorded

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

net of tax, in the accumulated other

comprehensive income component of shareowners’ equity.

HTM securities are acquired or owned with the intent of holding

them to

maturity.

HTM investments are measured at amortized cost.

We do not

trade, nor do we presently intend to begin trading investment

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

a trading portfolio.

At September 30, 2022, there were 897 positions (combined AFS and HTM)

with unrealized losses totaling $97.5 million (see Note 2

– Investment Securities in the Notes to Consolidated Financial Statements for

detail by category).

87 of these positions are U.S.

Treasury bonds and carry the full faith and

credit of the U.S. Government.

682 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 zero.

The remaining 128 positions (Municipal securities and corporate bonds) have

credit component.

At September 30, 2022, corporate debt securities had an allowance for credit losses of

$28,000 and municipal

securities had an allowance of $13,000. At September 30, 2022, all CMO, MBS, SBA,

U.S. Agency,

and U.S. Treasury bonds held

were AAA rated.

Loans HFI

Average loans

held for investment (“HFI”) increased $179.4 million, or 8.6%, over the second quarter of

2022 and increased $315.8

million, or 16.2%, over the fourth quarter of 2021.

Period end loans increased $132.5 million, or 6.0%, over the second quarter

2022 and $414.7 million, or 21.5%, over the fourth quarter of 2021.

The growth in 2022 has been broad based with increases realized

in all loan categories, more significantly,

residential mortgage, residential construction and commercial

real estate.

The slowdown in

secondary market residential loan sales has allowed us to book a steady flow

of CCHL’s

adjustable rate production in our loan

portfolio throughout 2022.

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

Overall credit quality remains strong.

Nonperforming assets (nonaccrual loans and other real estate) totaled $2.

million at September

30, 2022 compared to $3.2 million at June 30, 2022 and $4.3 million at December

31, 2021.

At September 30, 2022, nonperforming

assets as a percent of total assets equaled 0.06% compared to 0.07% at June 30, 2022

and 0.10% at December 31, 2021.

Nonaccrual

loans totaled $2.4

million at September 30, 2022, a $0.7 million decrease from June 30, 2022 and a $1.9

million decrease from

December 31, 2021.

Further, classified loans increased $1.4

million over the second quarter of 2022 to $21.0 million.

Allowance for Credit Losses

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

the loans’ amortized cost basis to present the net amount

expected to be collected on the loans.

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

earnings, and reduced by the charge-off

of loan amounts (net of recoveries).

Loans are charged off against the allowance when

management believes the uncollectability of a loan balance is confirmed.

Expected recoveries do not exceed the aggregate of amounts

previously charged-off and expected to be charged

-off.

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

exposures is provided through the credit loss provision, but recorded

as a separate liability included in other liabilities.

Management estimates the allowance balance using relevant available

information, from internal and external sources relating to past

events, current conditions, and reasonable and supportable forecasts.

Historical loan default and loss experience provides the basis for

the estimation of expected credit losses.

Adjustments to historical loss information incorporate management’s

view of current

conditions and forecasts.

At September 30, 2022, the allowance for credit losses for HFI loans totaled

$22.5 million compared to $21.3 million at June 30, 2022

and $21.6 million at December 31, 2021.

Activity within the allowance is provided in Note 3 to the consolidated financial statements.

The $1.2 million increase in the allowance for the third quarter was driven

by incremental reserves needed for loan growth and, to a

lesser extent, a higher projected rate of unemployment and its potential

effect on rates of default.

Net charge-offs decreased $0.4

million to $0.7 million for the third quarter of 2022.

At September 30, 2022, the allowance represented 0.96% of HFI loans and

provided coverage of 935% of nonperforming loans compared to

0.96% and 678%, respectively, at June

30, 2022, and 1.12% and

500%, respectively,

at December 31, 2021.

At September 30, 2022, the allowance for credit losses for unfunded

commitments totaled $3.0 compared to $2.9 million at June 30,

2022 and $2.9 million at December 31, 2021. The allowance for unfunded

commitments is recorded in other liabilities.

Deposits

Average total

deposits were $3.770 billion for the third quarter of 2022, an increase of $4.5 million, or 0.1%, over

the second quarter

of 2022 and $220.7 million, or 6.2%, over the fourth quarter of 2021.

Compared to the second quarter of 2022, the increase reflected

higher noninterest bearing and savings balances.

Compared to the fourth quarter of 2021, we have had strong growth in our

noninterest bearing deposits, NOW accounts, and savings account balances.

Over the past few years, we have experienced strong core

deposit growth. We

continue to closely monitor our cost of deposits and deposit mix as we manage

through the current rising rate

environment.

It is anticipated that liquidity levels will remain strong given our current level of

overnight funds.

We monitor

deposit rates on an ongoing basis and adjust, if necessary,

as a prudent pricing discipline remains the key to managing our

mix of deposits.

MARKET RISK AND INTEREST RATE

SENSITIVITY

Market Risk and Interest Rate Sensitivity

Overview.

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

commodity prices, and equity prices.

We have risk

management policies designed to monitor and limit exposure to market

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

significant market risk involving exchange rates, commodity prices, or

equity prices.

In asset and liability management activities, our

policies are designed to minimize structural interest rate risk.

Interest Rate Risk Management.

Our net income is largely dependent on net interest income.

Net interest income is susceptible to

interest rate risk to the degree that interest-bearing

liabilities mature or reprice on a different basis than interest-earning

assets.

When

interest-bearing liabilities mature or reprice more quickly

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

market rates of interest could adversely affect net interest

income.

Similarly, when interest-earning

assets mature or reprice more

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

result in a decrease in net interest income.

Net interest

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

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

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

equity.

We have established

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

which is administered by

management’s Asset Liability Management

Committee (“ALCO”).

The policy establishes limits of risk, which are quantitative

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

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

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

in interest rates for maturities from one

day to 30 years.

We measure the potential

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

earnings, long-

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

computer modeling.

The simulation model captures

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

in investment and loan portfolio contracts.

As with

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

inherent in the interest rate modeling methodology used by

us.

When interest rates change, actual movements in different categories

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

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

from assumptions used in the model.

Finally, the

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

on adjustable-rate loan clients’ ability to service their

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

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

possibilities to indicate the inherent interest rate risk.

We prepare

a current base case and several alternative interest rate simulations (-300, -200, -100,+100,

+200, +300, and +400 basis

points (bp)), at least once per quarter,

and report the analysis to ALCO, our Market Risk Oversight Committee (“MROC”), our

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

(The -300bp rate scenario was reintroduced into the

model beginning in the third quarter of 2022 due to the higher interest rate

environment). We augment

our interest rate shock analysis

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

parallel shifts, and a flattening or steepening of the

yield curve (non-parallel shift).

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

particularly uncertain or

when other business conditions so dictate.

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

12-month and 24-month periods

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

at the various interest rate shock levels. We

attempt to

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

liabilities with a similar volume of floating-rate assets,

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

reasonably matched, by managing the mix of our core

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

basis.

Analysis.

Measures

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

an institution’s short-term

performance in alternative rate environments.

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

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

ESTIMATED CHANGES

IN NET INTEREST INCOME

(1)

Percentage Change (12-month shock)

+400 bp

+300 bp

+200 bp

+100 bp

-100 bp

-200 bp

-300 bp

Policy Limit

-15.0%

-12.5%

-10.0%

-7.5%

-10.0%

-12.5%

September 30, 2022

15.9%

11.9%

7.8%

4.0%

-6.8%

-14.9%

-22.8%

June 30,2022

19.3%

14.5%

9.6%

4.9%

-10.3%

-17.6%

n/a

Percentage Change (24-month shock)

+400 bp

+300 bp

+200 bp

+100 bp

-100 bp

-200 bp

-300 bp

Policy Limit

-17.5%

-15.0%

-12.5%

-10.0%

-12.5%

-15.0%

September 30, 2022

36.7%

29.1%

21.5%

14.2%

-4.4%

-16.8%

-28.7%

June 30,2022

39.3%

30.3%

21.3%

12.6%

-11.5%

-22.6%

n/a

The Net Interest Income (“NII”) at Risk position indicates

that in the short-term, all rising rate environments will positively impact

the

net interest margin of the Company,

while declining rate environments

will have a negative impact on the net interest margin.

Compared to the second quarter of 2022, these metrics became less favorable

in the rising rate scenarios primarily due to loan growth,

which reduced our level of overnight funds and made us slightly less asset sensitive.

The converse is true in that metrics became more

favorable in the down rate scenarios due to loan growth which increased

asset duration and therefore protection against falling rates.

The percent change over both a 12-month and 24-month shock are outside

of policy in a rates down 200 bps and down 300 bps

scenario due to our limited ability to lower our deposit rates relative to the

decline in market rate.

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

by considering the effects of changes in interest rates on all

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

assets and liabilities. The difference between these

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

which in theory approximates the fair value of our net

assets.

ESTIMATED CHANGES

IN ECONOMIC VALUE

OF EQUITY

(1)

Changes in Interest Rates

+400 bp

+300 bp

+200 bp

+100 bp

-100 bp

-200 bp

-300 bp

Policy Limit

-30.0%

-25.0%

-20.0%

-15.0%

-20.0%

-25.0%

September 30, 2022

11.9%

9.6%

6.8%

3.9%

-8.0%

-18.7%

-31.4%

June 30, 2022

14.4%

11.7%

8.3%

4.7%

-11.7%

-25.4%

n/a

EVE Ratio (policy minimum 5.0%)

20.3%

19.5%

18.7%

17.9%

15.3%

13.3%

11.0%

(1) The down 400 bp rate scenario has been excluded due to the curre

nt interest rate environment.

A down 300 bp rate scenario was

added in the third quarter of 2022.

At September 30, 2022, the economic value of equity was favorable

in all rising rate environments and unfavorable in the falling rate

environments. Compared to the second quarter of 2022, EVE metrics became

less favorable in a rising rate environment primarily due

to the use of cash to fund loan growth and became more favorable in the rates

down scenario as loan growth extended our asset

duration.

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

rate scenario exceeds 5.0%.

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

additional simulations will be analyzed to

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

in mix of our financial assets and liabilities, measured over

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

LIQUIDITY AND CAPITAL

RESOURCES

Liquidity

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

cash needs.

Our objective in managing our liquidity is to

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

other liabilities in accordance with their

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

Our liquidity strategy is guided by policies that are formulated and

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

the marketability of assets, the sources and stability of

funding and the level of unfunded commitments.

We regularly evaluate

all of our various funding sources with an emphasis on

accessibility, stability,

reliability

and cost-effectiveness.

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

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

repurchase agreements, federal funds purchased and

FHLB borrowings.

We believe that the cash

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

are

sufficient to meet our future operating capital and funding requirements.

At September 30, 2022, we had the ability to generate $1.479 billion

in additional liquidity through all of our available resources (this

excludes $497.7 million in overnight funds sold).

In addition to the primary borrowing outlets mentioned above, we also have

the

ability to generate liquidity by borrowing from the Federal Reserve Discount

Window and through brokered deposits.

We recognize

the importance of maintaining liquidity and have developed a Contingent

Liquidity Plan, which addresses various liquidity stress

levels and our response and action based on the level of severity.

We periodically

test our credit facilities for access to the funds, but

also understand that as the severity of the liquidity level increases that certain credit facilities may

no longer be available.

We conduct

a liquidity stress test on a quarterly basis based on events that could potentially occur

at the Bank and report results to ALCO, our

Market Risk Oversight Committee, Risk Oversight Committee,

and the Board of Directors.

At September 30, 2022, we believe the

liquidity available to us was sufficient to meet our on-going needs

and execute our business strategy.

We view our

investment portfolio primarily as a source of liquidity and have the option to pledge

the portfolio as collateral for

borrowings or deposits, and/or sell selected securities.

The portfolio primarily consists of debt issued by the U.S. Treasury,

U.S.

governmental and federal agencies, municipal governments,

corporate bonds, and asset-backed securities.

The weighted average life

of the portfolio was approximately 3.51 years at September 30, 2022, and

the available for sale portfolio had a net unrealized pre-tax

loss of $45.0 million.

We maintained

an average net overnight funds (interest deposits with banks plus FED funds sold less FED funds

purchased) sold

position of $570.0 million in the third quarter of 2022 compared to $691.9

million in the second quarter of 2022 and $789.1 million in

the fourth quarter of 2021.

The declining overnight funds position reflects growth in average loans.

We expect our

capital expenditures will be approximately $8.0 million over the next 12 months, which

will primarily consist of

construction of new offices, office remodeling,

office equipment/furniture, and technology purchases.

Management expects that these

capital expenditures will be funded with existing resources without impairing

our ability to meet our on-going obligations.

Borrowings

Average short

term borrowings totaled $46.7 million for the third quarter of 2022 compared to

$31.8 million for the second quarter of

2022 and $46.4 million for the fourth quarter of 2021. The variance compared

to both prior periods was primarily attributable to an

increase in short-term repurchase agreements and CCHL’s

warehouse line.

Additional detail on these borrowings is provided in Note

4 – Mortgage Banking Activities in the Consolidated Financial Statements.

We have issued two

junior subordinated deferrable interest notes to our wholly owned

Delaware statutory trusts.

The first note for

$30.9 million was issued to CCBG Capital Trust I in

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

The second

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

May 2005.

The interest payment for the CCBG Capital Trust I

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

LIBOR 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 rate of three-month LIBOR plus a margin of 1.80%.

This note matures on June 15, 2035.

The proceeds from these

borrowings were used to partially fund acquisitions.

Under the terms of each junior subordinated deferrable interest note, in the event

of default or if we elect to defer interest on the note, we may not, with certain exceptions,

declare or pay dividends or make

distributions on our capital stock or purchase or acquire any of our capital

stock.

We continue to evaluate

the impact of the expected

discontinuation of LIBOR on our two junior subordinated deferrable

interest notes.

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

flow hedge of our interest rate risk related to our subordinated

debt.

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

I borrowing and $20 million of the

CCBG Capital Trust II borrowing).

The interest rate swap agreement requires CCBG to pay fixed and receive variable (Libor

plus

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

Additional detail on the interest rate swap agreement is provided in

Note 5 – Derivatives in the Consolidated Financial Statements.

Capital

Our capital ratios are presented in the Selected Quarterly Financial Data

table on page 33.

At September 30, 2022, our regulatory

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

under the Basel III capital standards.

Shareowners’ equity was $373.2 million at September 30, 2022

compared to $371.7 million at June 30, 2022 and $383.2 million at

December 31, 2021.

For the first nine months of 2022, shareowners’ equity was positively impacted by

net income attributable to

common shareowners of $28.5 million, a $3.3 million increase in the fair

value of the interest rate swap related to subordinated debt,

stock compensation accretion of $0.9 million, net adjustments totaling

$0.8 million related to transactions under our stock

compensation plans, and a $0.4 million decrease in the accumulated other

comprehensive loss for our pension plan.

Shareowners’

equity was reduced by common stock dividends of $8.3 million ($0.49 per

share) and a $35.6 million increase in the unrealized loss

on investment securities.

At September 30, 2022, our common stock had a book value of $21.95

per diluted share compared to $21.89 at June 30, 2022 and

$22.63 at December 31, 2021.

Book value is impacted by the net after-tax unrealized gains and

losses on AFS investment securities.

At September 30, 2022, the net loss was $40.2 million compared to a net loss of $31.7

million at June 30, 2022 and $4.6 million at

December 31, 2021.

Book value 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, 2022, the net pension liability reflected

in other comprehensive loss was $12.8 million compared to $12.9 million

at June 30, 2022 and $13.2 million at December 31, 2021.

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 are discussed in our 2021 Form

10-K “Critical Accounting Policies” and include the

weighted average discount rate used to measure the present value of the pension

liability, the weighted average

expected long-term

rate of return on pension plan assets, and the assumed rate of annual compensation

increases, all of which will vary when re-measured.

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

long-term corporate bond rates at December 31

The

estimated impact to the pension liability based on a 25-basis point increase

or decrease in long-term corporate bond rates used to

discount the pension obligation would decrease or increase the pension

liability by approximately $4.6

million (after-tax) using the

balances

from the December 31, 2021 measurement date.

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, 2022, we had $791.6 million in commitments to extend

credit and $5.5 million in standby letters of credit.

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

any condition established in the

contract.

Commitments generally have fixed expiration dates or other termination

clauses and may require payment of a fee.

Since

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

the total commitment amounts do not necessarily

represent future cash requirements.

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

the performance

of a client to a third party.

We use the same credit

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

balance sheet instruments.

If commitments arising from these financial instruments continue to require

funding at historical levels, management does not

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

obligations.

In the event these commitments

require funding in excess of historical levels, management believes current

liquidity, advances available from

the FHLB and the

Federal Reserve, and investment security maturities provide a sufficient

source of funds to meet these commitments.

Certain agreements provide that the commitments are unconditionally

cancellable by the bank and for those agreements no allowance

for credit losses has been recorded.

We have recorded

an allowance for credit losses on loan commitments that are not

unconditionally cancellable by the bank, which is included in other

liabilities on the consolidated statements of financial condition and

totaled $3.0 million at September 30, 2022.

CRITICAL ACCOUNTING POLICIES

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

Financial Statements included in our 2021 Form 10-K.

The preparation of our Consolidated Financial Statements

in accordance with GAAP and reporting practices applicable to the banking

industry requires us to make estimates and assumptions that affect

the reported amounts of assets, liabilities, revenues and expenses,

and to disclose contingent assets and liabilities.

Actual results could differ from those estimates.

We have identified

accounting for (i) the allowance for credit losses, (ii) valuation of goodwill, (iii) pension

benefits, and (iv) income

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

to the portrayal of our financial condition and

results, and they require our subjective and complex judgment as a result of

the need to make estimates about the effects of matters

that are inherently uncertain.

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

assumptions used, are

described throughout this Item 2, Management’s

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

Part

II, Item 7, Management’s

Discussion and Analysis of Financial Condition and Results of Operations included

in our 2021 Form 10-K.

TABLE I

AVERAGE BALANCES & INTEREST RATES

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Average

(Dollars in Thousands)

Balances

Interest

Rate

Balances

Interest

Rate

Balances

Interest

Rate

Balances

Interest

Rate

Assets:

Loans Held for Sale

55,164

486

4.82

67,753

497

2.91

50,387

1,594

4.23

83,558

2,033

3.24

Loans Held for Investment

(1)(2)

2,264,075

27,354

4.76

1,974,132

25,458

5.12

2,105,211

72,598

4.61

2,018,168

72,036

4.76

Taxable Securities

1,117,789

4,359

1.55

904,962

2,333

1.03

1,105,822

11,082

1.34

708,606

6,232

1.17

Tax-Exempt Securities

(2)

2,939

2.30

4,332

2.31

2,614

1.90

3,904

2.49

Funds Sold

569,984

3,231

2.25

741,944

285

0.15

710,559

5,048

0.95

791,466

698

0.12

Total Earning Assets

4,009,951

35,447

3.51

3,693,123

28,598

3.07

3,974,593

90,359

3.04

3,605,702

81,072

3.01

Cash & Due From Banks

79,527

72,773

77,856

71,956

Allowance For Credit Losses

(21,509)

(22,817)

(21,382)

(23,241)

Other Assets

289,709

283,534

284,546

281,162

TOTAL ASSETS

4,357,678

4,026,613

4,315,613

3,935,579

Liabilities:

NOW Accounts

1,016,475

868

0.34

945,788

0.03

1,042,958

1,074

0.14

965,839

222

0.03

Money Market Accounts

288,758

0.10

282,860

0.05

286,804

140

0.07

274,990

100

0.05

Savings Accounts

643,640

0.05

551,383

0.05

623,986

229

0.05

524,710

192

0.05

Other Time Deposits

94,073

0.14

102,765

0.14

95,408

0.14

102,619

112

0.15

Total Interest Bearing Deposits

2,042,946

1,052

0.20

1,882,796

210

0.04

2,049,156

1,542

0.10

1,868,158

626

0.04

Short-Term Borrowings

46,679

536

4.56

49,773

317

2.53

36,991

1,071

3.87

55,923

1,053

2.52

Subordinated Notes Payable

52,887

443

3.28

52,887

307

2.27

52,887

1,130

2.82

52,887

922

2.30

Other Long-Term Borrowings

580

4.74

1,652

3.37

710

4.58

2,046

3.29

Total Interest Bearing Liabilities

2,143,092

2,037

0.38

1,987,108

848

0.17

2,139,744

3,766

0.24

1,979,014

2,652

0.18

Noninterest Bearing Deposits

1,726,918

1,564,892

1,700,800

1,490,787

Other Liabilities

98,501

112,707

86,055

110,526

TOTAL LIABILITIES

3,968,511

3,664,707

3,926,599

3,580,327

Temporary Equity

9,862

20,446

10,156

22,920

TOTAL SHAREOWNERS’ EQUITY

379,305

341,460

378,858

332,332

TOTAL LIABILITIES, TEMPORARY

AND SHAREOWNERS’ EQUITY

4,357,678

4,026,613

4,315,613

3,935,579

Interest Rate Spread

3.13

2.91

2.80

2.83

Net Interest Income

33,410

27,750

86,593

78,420

Net Interest Margin

(3)

3.31

2.98

2.91

(1)

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

Interest income includes loans fees of $0.3 million

and $3.2 million for the three month periods ended September

30, 2022 and

2021, respectively, and $0.8 million and $6.3 million for the nine month periods ended September

30, 2022 and 2021, respectively.

(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, 2021.

Item 4.

CONTROLS AND PROCEDURES

At September 30, 2022, 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, the Chief Executive Officer and Chief Financial

Officer concluded

that, as of the end of the period covered by this report these 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 on September 30, 2022,

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 2021 Form 10-K, as updated in our subsequent

quarterly reports. The risks described in our 2021 Form

10-K and our subsequent quarterly reports are not the only risks facing us. Additional risks

and uncertainties not currently known to us

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

affect our business, financial condition and/or operating

results.

Item 2.

Unregistered Sales of Equity Securities and Use of

Proceeds

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosure

Not Applicable.

Item 5.

Other Information

None.

Item 6.

Exhibits

(A)

Exhibits

31.1

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

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

31.2

Certification of J. Kimbrough Davis, Executive Vice President and Chief Financial Officer of Capital City Bank Group,

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

32.1

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

Pursuant to 18 U.S.C. Section 1350.

32.2

Certification of J. Kimbrough Davis, Executive Vice President and Chief Financial Officer of Capital City Bank Group,

Inc., Pursuant to 18 U.S.C. Section 1350.

101.SCH

XBRL Taxonomy

Extension Schema Document

101.CAL

XBRL Taxonomy

Extension Calculation Linkbase Document

101.LAB

XBRL Taxonomy

Extension Label Linkbase Document

101.PRE

XBRL Taxonomy

Extension Presentation Linkbase Document

101.DEF

XBRL Taxonomy

Extension Definition Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant

has duly caused this Report to be signed on its

behalf by the undersigned Chief Financial Officer hereunto duly

authorized.

CAPITAL CITY

BANK GROUP,

INC.

(Registrant)

/s/ J. Kimbrough Davis

J. Kimbrough Davis

Executive Vice President

and Chief Financial Officer

(Mr. Davis is the Principal Financial

Officer and has

been duly authorized to sign on behalf of the Registrant)

Date: October 31, 2022

exhibit311

Exhibit 31.1

Certification of CEO Pursuant to Securities Exchange Act

Rule 13a-14(a) / 15d-14(a) as Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, William G. Smith, Jr.,

certify that:

I have reviewed this quarterly report on Form 10-Q of Capital City Bank Group,

Inc.;

Based on my knowledge, this report does not contain any untrue statement of

a material fact or omit to state a material fact

necessary to make the statements made, in light of the circumstances under

which such statements were made, not misleading

with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information

included in this report, fairly present in all

material respects the financial condition, results of operations and cash flows

of the registrant as of, and for, the periods

presented in this report;

The registrant’s other certifying

officer and I are responsible for establishing and maintaining

disclosure controls and

procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))

and internal control over financial reporting (as

defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls

and procedures to be designed

under our supervision, to ensure that material information relating to the

registrant, including its consolidated

subsidiaries, is made known to us by others within those entities, particularly

during the period in which this report

is being prepared;

(b)

Designed such internal control over financial reporting, or caused such

internal control over financial reporting to be

designed under our supervision, to provide reasonable assurance regarding

the reliability of financial reporting and

the preparation of financial statements for external purposes in accordance with

generally accepted accounting

principles;

(c)

Evaluated the effectiveness of the registrant’s

disclosure controls and procedures and presented in this report our

conclusions about the effectiveness of the disclosure controls and procedures,

as of the end of the period covered by

this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s

internal control over financial reporting that occurred during

the registrant’s most recent fiscal quarter

that has materially affected, or is reasonably likely to materially

affect, the

registrant’s internal control

over financial reporting; and

The registrant’s other certifying

officer and I have disclosed, based on our most recent evaluation

of internal control over

financial reporting, to the registrant’s auditors

and the audit committee of the registrant’s

board of directors (or persons

performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of

internal control over financial

reporting which are reasonably likely to adversely affect the registrant’s

ability to record, process, summarize and

report financial information; and

(b)

Any fraud, whether or not material, that involves management or other

employees who have a significant role in the

registrant’s internal control

over financial reporting.

/s/ William G. Smith, Jr.

William G. Smith, Jr.

Chairman, President and

Chief Executive Officer

Date: October 31, 2022

exhibit312

Exhibit 31.2

Certification of CFO Pursuant to Securities Exchange Act

Rule 13a-14(a) / 15d-14(a) as Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, J. Kimbrough Davis, certify that:

I have reviewed this quarterly report on Form 10-Q of Capital City Bank Group,

Inc.;

Based on my knowledge, this report does not contain any untrue statement of

a material fact or omit to state a material fact

necessary to make the statements made, in light of the circumstances under

which such statements were made, not misleading

with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information

included in this report, fairly present in all

material respects the financial condition, results of operations and cash flows

of the registrant as of, and for, the periods

presented in this report;

The registrant’s other certifying

officer and I are responsible for establishing and maintaining

disclosure controls and

procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))

and internal control over financial reporting (as

defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls

and procedures to be designed

under our supervision, to ensure that material information relating to the

registrant, including its consolidated

subsidiaries, is made known to us by others within those entities, particularly

during the period in which this report

is being prepared;

(b)

Designed such internal control over financial reporting, or caused such

internal control over financial reporting to be

designed under our supervision, to provide reasonable assurance regarding

the reliability of financial reporting and

the preparation of financial statements for external purposes in accordance with

generally accepted accounting

principles;

(c)

Evaluated the effectiveness of the registrant’s

disclosure controls and procedures and presented in this report our

conclusions about the effectiveness of the disclosure controls and procedures,

as of the end of the period covered by

this report

based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s

internal control over financial reporting that occurred during

the registrant’s most recent fiscal

quarter that has materially affected, or is reasonably likely

to materially affect, the

registrant’s internal control

over financial reporting; and

The registrant’s other certifying

officer and I have disclosed, based on our most recent evaluation

of internal control over

financial reporting, to the registrant’s auditors

and the audit committee of the registrant’s

board of directors (or persons

performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of

internal control over financial

reporting which are reasonably likely to adversely affect

the registrant’s ability to record, process,

summarize and

report financial information; and

(b)

Any fraud, whether or not material, that involves management or

other employees who have a significant role in the

registrant’s internal control

over financial reporting.

/s/ J. Kimbrough Davis

J. Kimbrough Davis

Executive Vice President

and

Chief Financial Officer

Date: October 31, 2022

exhibit321

Exhibit 32.1

Certification of CEO Pursuant to 18 U.S.C. Section 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of

the Sarbanes-Oxley Act of 2002, I, William G. Smith

Jr.,

Chairman, President, and Chief Executive Officer

of Capital City Bank Group, Inc., hereby certify that to my knowledge (1) this

Quarterly Report of the Company on Form 10-Q for the period ended September

30, 2022, as filed with the Securities and Exchange

Commission on the date hereof (this "Report"), fully complies with the requirements

of Section 13(a) of the Securities Exchange Act

of 1934, as amended, and (2) the information contained in this Report fairly

presents, in all material respects, the financial condition

of the Company and its results of operations as of and for the periods covered

therein.

/s/ William G. Smith, Jr.

William G. Smith, Jr.

Chairman, President, and

Chief Executive Officer

Date: October 31, 2022

A signed original of this written statement required by Section 906, or other document

authenticating, acknowledging or otherwise

adopting the signature that appears in typed form within the electronic version

of this written statement required by Section 906, has

been provided to the Company and will be retained by the Company and

furnished to the Securities and Exchange Commission or its

staff upon request.

exhibit322

Exhibit 32.2

Certification of CFO Pursuant to 18 U.S.C. Section 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of

the Sarbanes-Oxley Act of 2002, I, J. Kimbrough Davis,

Executive Vice President

and Chief Financial Officer of Capital City Bank Group, Inc., hereby certify that

to my knowledge (1) this

Quarterly Report of the Company on Form 10-Q for the period ended September

30, 2022, as filed with the Securities and Exchange

Commission on the date hereof (this "Report"), fully complies with the requirements

of Section 13(a) of the Securities Exchange Act

of 1934, as amended, and (2) the information contained in this Report fairly presents,

in all material respects, the financial condition

of the Company and its results of operations as of and for the periods covered

therein.

/s/ J. Kimbrough Davis

J. Kimbrough Davis

Executive Vice President

and

Chief Financial Officer

Date: October 31, 2022

A signed original of this written statement required by Section 906, or other document

authenticating, acknowledging or otherwise

adopting the signature that appears in typed form within the electronic version

of this written statement required by Section 906, has

been provided to the Company and will be retained by the Company and

furnished to the Securities and Exchange Commission or its

staff upon request.