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

June 30, 2021

☐

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, or

an emerging growth company.

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

company” in Rule 12b-2

of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

any

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

☐

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

[

]

[X]

At July 29, 2021,

16,874,279

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

CAPITAL CITY BANK

GROUP,

INC.

QUARTERLY

REPORT ON FORM 10-Q

FOR THE PERIOD ENDED JUNE 30, 2021

TABLE OF CONTENTS

PART I –

Financial Information

Page

Item 1.

Consolidated Financial Statements (Unaudited)

Consolidated Statements of Financial Condition – June 30, 2021 and December 31, 2020

Consolidated Statements of Income – Three and Six Months Ended June 30, 2021 and 2020

Consolidated Statements of Comprehensive Income – Three and Six Months Ended June 30, 2021 and 2020

Consolidated Statements of Changes in Shareowners’ Equity – Three and Six Months Ended June 30, 2021 and 2020

Consolidated Statements of Cash Flows – Six Months Ended June 30, 2021 and 2020

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 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, 2020

(the “2020 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:

●

the magnitude and duration of the ongoing COVID-19 (including the Delta variant) pandemic and its impact

on the global and local

economies and financial market conditions and our business, results of operations and financial condition, including

the impact of our

participation in government programs related to COVID-19;

●

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

●

legislative or regulatory changes;

●

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

●

inflation, interest rate, market and monetary fluctuations;

●

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;

●

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 and the potential effects of

higher interest rates on our loan origination volumes;

●

the effect of corporate restructuring, acquisitions or dispositions, including the actual

restructuring and other related charges and the

failure to achieve the expected gains, revenue growth or expense savings from such corporate restructuring,

acquisitions or dispositions;

●

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

health emergencies, 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;

●

changes in consumer spending and saving habits;

●

growth and profitability of our noninterest income;

●

the limited trading activity of our common stock;

●

the concentration of ownership of our common stock;

●

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

●

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

●

our ability to manage the risks involved in the foregoing.

However, other factors besides those listed in

Item 1A Risk Factors

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

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

Any forward-looking

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

We do not undertake to update

any forward-looking

statement, except as required by applicable law.

PART

FINANCIAL INFORMATION

Item 1.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF FINANCIAL CONDITION

(Unaudited)

June 30,

December 31,

(Dollars in Thousands)

2021

2020

ASSETS

Cash and Due From Banks

78,894

67,919

Funds Sold

766,920

860,630

Total Cash and Cash

Equivalents

845,814

928,549

Investment Securities, Available

for Sale, at fair value

480,890

324,870

Investment Securities, Held to Maturity (fair value of $

329,881

and $

175,175

)

325,559

169,939

Total Investment

Securities

806,449

494,809

Loans Held For Sale, at fair value

80,821

114,039

Loans Held for Investment

2,008,662

2,006,426

Allowance for Credit Losses

(22,175)

(23,816)

Loans Held for Investment, Net

1,986,487

1,982,610

Premises and Equipment, Net

85,745

86,791

Goodwill and Other Intangibles

93,333

89,095

Other Real Estate Owned

1,192

808

Other Assets

111,618

101,370

Total Assets

4,011,459

3,798,071

LIABILITIES

Deposits:

Noninterest Bearing Deposits

1,552,864

1,328,809

Interest Bearing Deposits

1,894,057

1,888,751

Total Deposits

3,446,921

3,217,560

Short-Term

Borrowings

47,200

79,654

Subordinated Notes Payable

52,887

Other Long-Term

Borrowings

1,720

3,057

Other Liabilities

105,534

102,076

Total Liabilities

3,654,262

3,455,234

Temporary Equity

21,317

22,000

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;

16,874,279

and

16,790,573

shares issued and outstanding at June 30, 2021 and December

31, 2020, respectively

169

168

Additional Paid-In Capital

33,560

32,283

Retained Earnings

345,574

332,528

Accumulated Other Comprehensive Loss, net of tax

(43,423)

(44,142)

Total Shareowners’

Equity

335,880

320,837

Total Liabilities, Temporary

Equity, and Shareowners' Equity

4,011,459

3,798,071

The accompanying Notes to Consolidated Financial

Statements are an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF INCOME

(Unaudited)

Three Months Ended

June 30,

Six Months Ended

June

30,

(Dollars in Thousands, Except Per Share

Data)

2021

2020

2021

2020

INTEREST INCOME

Loans, including Fees

24,582

23,687

47,932

47,280

Investment Securities:

Taxable

2,036

2,708

3,899

5,704

Tax Exempt

Funds Sold

200

413

845

Total Interest

Income

26,836

26,512

52,282

53,877

INTEREST EXPENSE

Deposits

208

218

416

1,157

Short-Term

Borrowings

324

421

736

553

Subordinated Notes Payable

308

374

615

845

Other Long-Term

Borrowings

Total Interest Expense

856

1,054

1,804

2,646

NET INTEREST INCOME

25,980

25,458

50,478

51,231

Provision for Credit Losses

(571)

2,005

(1,553)

6,995

Net Interest Income After Provision For Credit Losses

26,551

23,453

52,031

44,236

NONINTEREST INCOME

Deposit Fees

4,236

3,756

8,507

8,771

Bank Card Fees

3,998

3,142

7,616

6,193

Wealth Management

Fees

3,274

2,554

6,364

5,158

Mortgage Banking Revenues

13,217

19,397

30,342

22,650

Other

1,748

1,350

3,470

2,905

Total Noninterest

Income

26,473

30,199

56,299

45,677

NONINTEREST EXPENSE

Compensation

25,378

23,658

51,442

43,394

Occupancy, Net

5,973

5,798

11,940

10,777

Other Real Estate Owned, Net

(270)

116

(388)

(682)

Pension Settlement

2,000

Other

9,042

7,731

17,605

14,783

Total Noninterest

Expense

42,123

37,303

82,599

68,272

INCOME BEFORE INCOME TAXES

10,901

16,349

25,731

21,641

Income Tax Expense

2,059

2,950

4,846

4,232

NET INCOME

8,842

13,399

20,885

17,409

Pre-Tax Income

Attributable to Noncontrolling Interests

(1,415)

(4,253)

(3,952)

(3,976)

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

7,427

9,146

16,933

13,433

BASIC NET INCOME PER SHARE

0.44

0.55

1.00

0.80

DILUTED NET INCOME PER SHARE

0.44

0.55

1.00

0.80

Average Common

Basic Shares Outstanding

16,858

16,797

16,848

16,803

Average Common

Diluted Shares Outstanding

16,885

16,839

16,874

16,844

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

Six Months Ended

June 30,

(Dollars in Thousands)

2021

2020

2021

2020

NET INCOME

7,427

9,146

16,933

13,433

Other comprehensive income, before

tax:

Investment Securities:

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

(481)

433

(2,434)

3,980

Derivative:

Change in net unrealized gain on effective cash

flow derivative

(919)

(104)

1,206

(104)

Benefit Plans:

Reclassification adjustment for service cost

Actuarial gain

166

Defined benefit plan settlement

2,000

Total Benefit Plans

2,000

2,190

Other comprehensive income, before

tax

600

329

962

3,876

Deferred tax expense related to other comprehensive

income

152

243

951

Other comprehensive income, net of tax

448

277

719

2,925

TOTAL COMPREHENSIVE

INCOME

7,875

9,423

17,652

16,358

The accompanying Notes to Consolidated Financial

Statements are an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF CHANGES IN SHAREOWNERS' EQUITY

(Unaudited)

Accumulated

Other

Additional

Comprehensive

Common

Paid-In

Retained

(Loss) Income,

(Dollars In Thousands, Except Share

Data)

Outstanding

Stock

Capital

Earnings

Net of Taxes

Total

Balance, April 1, 2021

16,851,878

169

32,804

335,324

(43,871)

324,426

Net Income

7,427

Reclassification to Temporary

Equity

(1)

5,353

Other Comprehensive Income, net of tax

448

Cash Dividends ($

0.15

00 per share)

(2,530)

Stock Based Compensation

219

Stock Compensation Plan Transactions,

net

22,401

537

Balance, June 30, 2021

16,874,279

169

33,560

345,574

(43,423)

335,880

Balance, April 1, 2020

16,811,781

168

32,100

321,772

(25,533)

328,507

Net Income

9,146

Other Comprehensive Income, net of tax

277

Cash Dividends ($

0.14

00 per share)

(2,348)

Repurchase of Common Stock

(43,878)

(863)

Stock Based Compensation

Stock Compensation Plan Transactions,

net

12,373

261

Balance, June 30, 2020

16,780,276

168

31,575

328,570

(25,256)

335,057

Balance, January 1, 2021

16,790,573

168

32,283

332,528

(44,142)

320,837

Net Income

16,933

Reclassification to Temporary

Equity

(1)

1,171

Other Comprehensive Income, net of tax

719

Cash Dividends ($

0.3

000 per share)

(5,058)

Stock Based Compensation

438

Stock Compensation Plan Transactions,

net

83,706

839

840

Balance, June 30, 2021

16,874,279

169

33,560

345,574

(43,423)

335,880

Balance, January 1, 2020

16,771,544

168

32,092

322,937

(28,181)

327,016

Adoption of ASC 326

(3,095)

Net Income

13,433

Other Comprehensive Income, net of tax

2,925

Cash Dividends ($

0.28

00 per share)

(4,705)

Repurchase of Common Stock

(76,952)

(1)

(1,570)

(1,571)

Stock Based Compensation

368

Stock Compensation Plan Transactions,

net

85,684

685

686

Balance, June 30, 2020

16,780,276

168

31,575

328,570

(25,256)

335,057

(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)

Six Months Ended June 30,

(Dollars in Thousands)

2021

2020

CASH FLOWS FROM OPERATING

ACTIVITIES

Net Income

16,933

13,433

Adjustments to Reconcile Net Income to

Cash Provided by Operating Activities:

Provision for Credit Losses

(1,553)

6,995

Depreciation

3,782

3,400

Amortization of Premiums, Discounts and Fees, net

5,946

3,414

Amortization of Intangible Asset

Pension Plan Settlement Charge

2,000

Originations of Loans Held-for-Sale

(877,613)

(431,775)

Proceeds From Sales of Loans Held-for-Sale

941,173

385,518

Net Gain From Sales of Loans Held-for-Sale

(30,342)

(20,844)

Net Additions for Capitalized Mortgage Servicing Rights

(8)

Change in Valuation

Provision for Mortgage Servicing Rights

(250)

Stock Compensation

438

368

Net Tax Benefit From

Stock-Based Compensation

(4)

(84)

Deferred Income Taxes

(469)

(695)

Net Change in Operating Leases

(81)

498

Net Gain on Sales and Write-Downs of

Other Real Estate Owned

(507)

(915)

Net Increase in Other Assets

(9,789)

(23,035)

Net Increase in Other Liabilities

2,472

36,251

Net Cash Provided By (Used In) Operating Activities

52,168

(27,471)

CASH FLOWS FROM INVESTING ACTIVITIES

Securities Held to Maturity:

Purchases

(201,308)

(32,250)

Payments, Maturities, and Calls

44,238

38,362

Securities Available

for Sale:

Purchases

(255,379)

(38,364)

Payments, Maturities, and Calls

94,911

102,846

Purchases of Loans Held for Investment

(70,043)

(18,359)

Net Decrease (Increase) in Loans Held for Investment

64,708

(167,587)

Net Cash Paid for Acquisitions

(4,482)

(2,405)

Proceeds From Sales of Other Real Estate Owned

1,121

1,800

Purchases of Premises and Equipment

(3,215)

(6,842)

Noncontrolling Interest Contributions

3,464

Net Cash Used In Investing Activities

(325,985)

(122,799)

CASH FLOWS FROM FINANCING ACTIVITIES

Net Increase in Deposits

229,361

309,542

Net (Decrease) Increase in Short-Term

Borrowings

(32,668)

57,460

Repayment of Other Long-Term

Borrowings

(1,123)

(837)

Dividends Paid

(5,058)

(4,705)

Payments to Repurchase Common Stock

(1,571)

Issuance of Common Stock Under Purchase Plans

570

386

Net Cash Provided By Financing Activities

191,082

360,275

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(82,735)

210,005

Cash and Cash Equivalents at Beginning of Period

928,549

378,423

Cash and Cash Equivalents at End of Period

845,814

588,428

Supplemental Cash Flow Disclosures:

Interest Paid

1,877

2,655

Income Taxes Paid

9,369

3,613

Noncash Investing and Financing Activities:

Loans Transferred to Other Real Estate Owned

998

991

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 footnotes 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, 2020 has been derived from the audited

consolidated financial

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

information and footnotes required by generally accepted accounting

principles

for complete financial statements.

For further information, refer to the consolidated financial statements

and footnotes thereto

included in the Company’s

annual report on Form 10-K for the year ended December

31, 2020.

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.

CCSW paid

4.4

million in cash consideration and recorded goodwill of $

2.8

million and a customer relationship intangible asset of $

1.6

million.

Accounting Standards Updates

ASU 2020-04, "Reference Rate Reform

(Topic

848).

ASU 2020-04 provides optional expedients and exceptions for applying

GAAP

to loan and lease agreements, derivative contracts, and

other transactions affected by the anticipated transition

away from LIBOR

toward new interest rate benchmarks. For transactions

that are modified because of reference rate reform and that meet certain

scope

guidance (i) modifications of loan agreements should

be accounted for by prospectively adjusting the effective

interest rate and the

modification will be considered "minor" so that any existing

unamortized origination fees/costs would carry forward and

continue to

be amortized and (ii) modifications of lease agreements

should be accounted for as a continuation of the existing

agreement with no

reassessments of the lease classification and the discount

rate or re-measurements of lease payments that otherwise would be required

for modifications not accounted for as separate

contracts. ASU 2020-04 also provides numerous optional expedients

for derivative

accounting.

ASU 2020-04 is effective March 12, 2020 through

December 31, 2022.

An entity may elect to apply ASU 2020-04 for

contract modifications as of January 1, 2020, or prospectively

from a date within an interim period that includes or is subsequent

March 12, 2020, up to the date that the financial statements

are available to be issued.

Once elected for a Topic

or an Industry

Subtopic within the Codification, the amendments in this

ASU must be applied prospectively for all eligible contract

modifications for

that Topic or Industry

Subtopic.

It is anticipated this ASU will simplify any modifications executed

between the selected start date

(yet to be determined) and December 31, 2022 that are

directly related to LIBOR transition by allowing prospective

recognition of the

continuation of the contract, rather than extinguishment of

the old contract resulting in writing off unamortized

fees/costs.

Further,

ASU 2021-01, “Reference Rate Reform

(Topic

848): Scope,”

clarifies that certain optional expedients and exceptions

in ASC 848 for

contract modifications and hedge accounting apply

to derivatives that are affected by the discounting

transition. ASU 2021-01 also

amends the expedients and exceptions in ASC 848 to

capture the incremental consequences of the scope clarification and

to tailor the

existing guidance to derivative instruments.

The Company is evaluating the impact of this ASU and has not

yet determined if this

ASU will have material effects on the Company’s

business operations and consolidated financial statements.

NOTE 2 –

INVESTMENT SECURITIES

Investment Portfolio Composition

. The following table summarizes the amortized cost and related

market value of investment

securities available-for-sale and securities held-to-maturity

and the corresponding amounts of gross unrealized gains and

losses.

June 30, 2021

December 31, 2020

Amortized

Unrealized

Market

Amortized

Unrealized

Market

Cost

Gains

Losses

Value

Cost

Gain

Losses

Value

Available for

Sale

U.S. Government Treasury

161,247

220

590

160,877

103,547

972

104,519

U.S. Government Agency

226,807

2,087

593

228,301

205,972

2,743

184

208,531

States and Political Subdivisions

13,555

13,607

3,543

3,632

Mortgage-Backed Securities

56,894

56,950

456

515

Corporate Debt Securities

14,357

14,360

Equity Securities

(1)

6,795

7,673

Total

479,655

2,426

1,191

480,890

321,191

3,863

184

324,870

Held to Maturity

U.S. Government Treasury

110,926

110,921

5,001

5,014

Mortgage-Backed Securities

214,633

4,579

252

218,960

164,938

5,223

170,161

Total

325,559

4,638

316

329,881

169,939

5,236

175,175

Total Investment

Securities

805,214

7,064

1,507

810,771

491,130

9,099

184

500,045

(1)

Includes Federal Home Loan Bank and Federal Reserve Bank

stock, recorded

at cost of $

2.0

million and $

4.8

million,

respectively,

at June 30, 2021 and includes Federal Home Loan

Bank and Federal Reserve Bank stock recorded

at cost of $

2.9

million and $

4.8

million, respectively,

at December 31, 2020.

Securities with an amortized cost of $

348.7

million and $

308.2

million at June 30, 2021 and December 31, 2020, 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

equity securities, is pledged to secure FHLB advances.

No ready market exists for this stock, and it has no

quoted market 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.

Maturity Distribution

At June 30, 2021, 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 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

Market Value

Amortized Cost

Market Value

Due in one year or less

52,053

52,075

Due after one year through five years

170,442

169,879

110,926

110,921

Due after five year through ten years

17,645

17,620

Mortgage-Backed Securities

56,894

56,950

214,633

218,960

U.S. Government Agency

175,826

177,571

Equity Securities

6,795

Total

479,655

480,890

325,559

329,881

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

Market

Unrealized

Market

Unrealized

Market

Unrealized

(Dollars in Thousands)

Value

Losses

Value

Losses

Value

Losses

June 30, 2021

Available for

Sale

U.S. Government Treasury

114,398

590

114,398

590

U.S. Government Agency

84,107

530

8,906

93,013

593

States and Political Subdivisions

3,394

Total

201,899

1,128

8,906

210,805

1,191

Held to Maturity

U.S. Government Treasury

57,803

Mortgage-Backed Securities

51,208

252

51,208

252

Total

109,011

316

109,011

316

December 31, 2020

Available for

Sale

U.S. Government Agency

28,266

156

4,670

32,936

184

Total

28,266

156

4,670

32,936

184

At June 30, 2021, there were

150

positions (combined AFS and HTM) with unrealized losses totaling

1.5

million.

145

of these

positions were U.S. government agency securities issued by

U.S. government sponsored entities.

The remaining

five

were municipal

securities.

Because the declines in the market value of these securities

were attributable to changes in interest rates and not credit

quality, and because

the Company had the ability and intent to hold these investments

until there is a recovery in fair value, which

may be at maturity,

the Company did

t record any allowance for credit losses on any investment securities

at June 30, 2021.

Additionally,

ne of the securities held by the Company were past due

or in nonaccrual status at June 30, 2021.

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

securities portfolio via credit ratings which are updated

on a quarterly basis.

On a quarterly basis, municipal securities in an

unrealized loss position are evaluated to determine if

the loss is attributable to credit related factors and if an allowance

for credit loss

is needed.

NOTE 3 – LOANS HELD FOR INVESTMENT AND ALLOWANCE

FOR CREDIT LOSSES

Loan Portfolio Composition

The composition of the held for investment (“HFI”) loan

portfolio was as follows:

(Dollars in Thousands)

June 30, 2021

December 31, 2020

Commercial, Financial and Agricultural

292,953

393,930

Real Estate – Construction

149,884

135,831

Real Estate – Commercial Mortgage

707,599

648,393

Real Estate – Residential

(1)

368,457

352,543

Real Estate – Home Equity

190,078

205,479

Consumer

(2)

299,691

270,250

Loans HFI, Net of Unearned Income

2,008,662

2,006,426

(1)

Includes loans in process with outstanding

balances of $

7.4

million and $

10.9

million at June 30, 2021 and December 31, 2020,

respectively.

(2)

Includes overdraft balances of $

1.2

million and $

0.7

million at June 30, 2021 and December 31, 2020, respectively.

Net deferred loan costs, which include premiums on purchased

loans, included in loans were $

0.5

million at June 30, 2021 and net

deferred loan fees were $

0.1

million at December 31, 2020.

Accrued interest receivable on loans which is excluded

from amortized cost totaled $

6.4

million at June 30, 2021 and $

6.9

million at

December 31, 2020, and is reported separately in Other

Assets.

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

family residential mortgage loans, commercial real estate mortgage

loans,

and home equity loans to support available borrowing

capacity at the FHLB of Atlanta and has pledged a blanket

floating lien on all

consumer loans, commercial loans, and construction loans

to support available borrowing capacity at the Federal Reserve Bank

Atlanta.

The Company transferred $

9.4

million of home equity loans from HFI to HFS in the

second quarter of 2021.

Loan Purchases

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 $

51.1

million for the six month

period ended June 30, 2021, and were not credit

impaired.

In addition, during the second quarter of 2021, the Company

acquired a

pool of

individual commercial real estate loans from a third party bank

that totaled $

17.4

million and were not credit impaired.

Allowance for Credit Losses

The allowance for credit losses is calculated in accordance

with the current expected credit loss model,

ASC 326 (“CECL”),

which was adopted on January 1, 2020.

The allowance 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

– Business and Basis of Presentation/Significant Accounting

Policies in the

Company’s 2020 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

June 30, 2021

Beginning Balance

1,957

2,254

6,956

5,204

2,575

3,080

22,026

Provision for Credit Losses

(56)

505

587

(1,030)

(114)

(76)

(184)

Charge-Offs

(32)

(65)

(74)

(670)

(841)

Recoveries

103

244

731

1,174

Net (Charge-Offs) Recoveries

179

(4)

333

Ending Balance

1,972

2,759

7,569

4,353

2,457

3,065

22,175

Six Months Ended

June 30, 2021

Beginning Balance

2,204

2,479

7,029

5,440

3,111

3,553

23,816

Provision for Credit Losses

(370)

280

(131)

(1,335)

(769)

(171)

(2,496)

Charge-Offs

(101)

(71)

(79)

(1,726)

(1,977)

Recoveries

239

671

319

194

1,409

2,832

Net (Charge-Offs) Recoveries

138

671

248

115

(317)

855

Ending Balance

1,972

2,759

7,569

4,353

2,457

3,065

22,175

Three Months Ended

June 30, 2020

Beginning Balance

2,247

1,239

5,828

6,005

2,701

3,063

21,083

Provision for Credit Losses

333

716

742

(615)

399

1,615

Charge-Offs

(186)

(1)

(52)

(1,175)

(1,414)

Recoveries

914

1,173

Net Charge-Offs

(112)

(261)

(241)

Ending Balance

2,468

1,955

6,640

5,440

2,753

3,201

22,457

Six Months Ended

June 30, 2020

Beginning Balance

1,675

370

3,416

3,128

2,224

3,092

13,905

Impact of Adopting ASC 326

488

302

1,458

1,243

374

(596)

3,269

Provision for Credit Losses

739

1,283

1,516

1,089

141

1,837

6,605

Charge-Offs

(548)

(11)

(111)

(83)

(2,741)

(3,494)

Recoveries

114

261

1,609

2,172

Net Charge-Offs

(434)

250

(20)

(1,132)

(1,322)

Ending Balance

2,468

1,955

6,640

5,440

2,753

3,201

22,457

For the six month period ended June 30, 2021, the allowance

for HFI loans decreased by $

1.6

million and reflected a negative

provision of $

2.5

million and net loan recoveries of $

0.9

million.

The negative provision 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

$0.9 million.

Three unemployment rate forecast scenarios were utilized to estimate

probability of default and were weighted based on

management’s estimate

of probability.

The mitigating impact of the unprecedented fiscal stimulus as well as various

government

sponsored loan programs, was also considered.

See Note 8 – Commitments and Contingencies for information

on the allowance for

off-balance sheet credit commitments.

Loan Portfolio Aging.

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

due or a contractual maturity is over 30 days

past due (“DPD”).

The following table presents the aging of the amortized cost

basis in accruing past due loans by class of loans.

30-59

60-89

90 +

Total

Nonaccrual

Total

(Dollars in Thousands)

DPD

Past Due

Current

Loans

June 30, 2021

Commercial, Financial and Agricultural

353

360

292,565

292,953

Real Estate – Construction

840

149,044

149,884

Real Estate – Commercial Mortgage

309

155

464

705,614

1,521

707,599

Real Estate – Residential

394

211

605

365,329

2,523

368,457

Real Estate – Home Equity

138

220

188,930

928

190,078

Consumer

1,061

195

1,256

298,325

110

299,691

Total

2,199

1,546

3,745

1,999,807

5,110

2,008,662

December 31, 2020

Commercial, Financial and Agricultural

194

124

318

393,451

161

393,930

Real Estate – Construction

717

134,935

179

135,831

Real Estate – Commercial Mortgage

293

646,688

1,412

648,393

Real Estate – Residential

375

530

905

348,508

3,130

352,543

Real Estate – Home Equity

325

138

463

204,321

695

205,479

Consumer

1,556

342

1,898

268,058

294

270,250

Total

2,743

1,851

4,594

1,995,961

5,871

2,006,426

Nonaccrual Loans

Loans are generally placed on nonaccrual status if principal or

interest payments become 90 days past due and/or

management deems

the collectability of the principal and/or interest to be doubtful.

Loans are returned to accrual status when the

principal and interest amounts contractually due are brought

current or when future payments are reasonably assured.

The following table presents the amortized cost basis of loans in

nonaccrual status and loans past due over 90 days and

still on accrual

by class of loans.

June 30, 2021

December 31, 2020

Nonaccrual

With

With No

90 + Days

With

With No

90 + Days

(Dollars in Thousands)

ACL

Still Accruing

ACL

Still Accruing

Commercial, Financial and Agricultural

161

Real Estate – Construction

179

Real Estate – Commercial Mortgage

1,027

494

337

1,075

Real Estate – Residential

1,588

935

1,617

1,513

Real Estate – Home Equity

928

695

Consumer

110

294

Total Nonaccrual

Loans

3,681

1,429

3,283

2,588

Collateral Dependent Loans.

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

loans.

June 30, 2021

December 31, 2020

Real Estate

Non Real Estate

Real Estate

Non Real Estate

(Dollars in Thousands)

Secured

Commercial, Financial and Agricultural

Real Estate – Commercial Mortgage

1,734

3,900

Real Estate – Residential

2,192

3,022

Real Estate – Home Equity

700

219

Consumer

Total Collateral Dependent

Loans

4,626

7,141

A loan is collateral dependent when the borrower is experiencing

financial difficulty and repayment of the loan

is dependent on the

sale or operation of the underlying collateral.

The Bank’s collateral dependent

loan portfolio is comprised primarily of real estate secured loans,

collateralized by either residential

or commercial collateral types.

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

by either independent appraisals

or internal evaluations, adjusted for selling costs or other

amounts to be deducted when estimating expected net sales proceeds.

Residential Real Estate Loans In Process

of Foreclosure

At June 30, 2021 and December 31, 2020, the Company had

1.2

million

and $

1.6

million, respectively, in 1-4

family residential real estate loans for which formal foreclosure

proceedings were in process.

Troubled

Debt Restructurings (“TDRs”).

At June 30, 2021, the Company had $

9.9

million in TDRs, of which $

9.0

million were

performing in accordance with the modified terms.

At December 31, 2020 the Company had $

14.3

million in TDRs, of which $

13.9

million were performing in accordance with modified

terms.

For TDRs, the Company estimated $

0.4

million and $

0.6

million of

credit loss reserves at June 30, 2021 and December

31, 2020, respectively.

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 months ended June 30, 2021, there was

one

loan modified with a recorded investment of $

0.1

million.

For the three months ended June 30, 2020, there were

two

loans modified with a recorded investment of $

0.1

million.

For

the six month period ended June 30, 2021, there were

three

loans modified with a recorded investment of $

0.6

million.

For the six

month period ended June 30, 2020, there were

three

loans modified with a recorded investment of $

0.2

million.

For the three and six month period ended June 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.

For the three month period ended June 30, 2020, 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.

For the six month period ended June 30, 2020, there were

two

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

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 portfolio consists of indirect and

direct 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 June 30, 2021 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)

2021

2020

2019

2018

2017

Prior

Loans

Total

Commercial, Financial,

Agriculture:

Pass

96,160

56,466

37,288

24,612

11,525

17,651

48,606

292,308

Special Mention

180

321

Substandard

228

324

Total

96,217

56,477

37,468

24,872

11,548

17,730

48,641

292,953

Real Estate -

Construction:

Pass

41,183

78,597

23,854

488

134

4,073

148,329

Special Mention

715

Substandard

840

Total

41,898

79,437

23,854

488

134

4,073

149,884

Real Estate -

Commercial Mortgage:

Pass

108,247

155,143

98,591

111,327

66,381

96,834

22,358

658,881

Special Mention

4,510

16,720

4,601

13,304

39,165

Substandard

1,561

583

3,589

1,799

1,931

9,553

Total

109,808

155,752

106,690

128,137

72,781

112,069

22,362

707,599

Real Estate - Residential:

Pass

83,586

76,616

50,779

34,010

31,307

71,827

7,906

356,031

Special Mention

139

123

170

529

982

Substandard

936

1,908

2,783

1,732

1,113

2,872

100

11,444

Total

84,522

78,663

53,583

35,865

32,590

75,228

8,006

368,457

Real Estate - Home

Equity:

Performing

155

353

179

755

2,091

185,557

189,150

Nonperforming

928

Total

155

353

179

755

2,091

186,485

190,078

Consumer:

Performing

96,878

84,462

52,437

37,372

16,460

6,652

5,319

299,580

Nonperforming

111

Total

96,878

84,462

52,442

37,406

16,474

6,710

5,319

299,691

NOTE 4 – MORTGAGE BANKING ACTIVITIES

The Company’s mortgage

banking activities at its subsidiary Capital City Homes Loans (“CCHL”) 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.

For the six month period of 2020, information provided below

reflects CCHL activities for the period March 1, 2020

to June 30, 2020 and CCB legacy residential real estate activities for

the period

January 1, 2020 to March 1, 2020.

All quarterly information subsequent to the quarter ended March 31,

2020 includes CCHL activity.

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.

June 30, 2021

December 31, 2020

Unpaid Principal

(Dollars in Thousands)

Balance/Notional

Fair Value

Balance/Notional

Fair Value

Residential Mortgage Loans Held for Sale

78,111

80,821

109,831

114,039

Residential Mortgage Loan Commitments ("IRLCs")

(1)

107,797

2,524

147,494

4,825

Forward Sales Contracts

(2)

99,000

(90)

158,500

(907)

83,255

117,957

(1)

Recorded in other assets at fair value

(2)

Recorded in other liabilities at fair value

The Company had

residential mortgage loans held for sale that were 90 days or more

outstanding or on nonaccrual at June 30, 2021

and had $

0.6

million at December 31, 2020.

Mortgage banking revenue was as follows:

Three Months Ended

Six Months Ended

June 30,

(Dollars in Thousands)

2021

2020

2021

2020

Net realized gains on sales of mortgage loans

13,534

14,580

27,958

17,987

Net change in unrealized

gain on mortgage loans held for sale

532

1,092

(1,499)

1,830

Net change in the fair value of mortgage loan commitments

(IRLCs)

(458)

1,487

(2,301)

3,142

Net change in the fair value of forward sales contracts

(1,446)

1,625

817

231

Pair-Offs on net settlement of forward

sales contracts

(476)

(3,019)

2,835

(4,395)

Mortgage servicing rights additions

453

2,049

640

2,049

Net origination fees

1,078

1,583

1,892

1,806

Total mortgage

banking revenues

13,217

19,397

30,342

22,650

Residential Mortgage Servicing

The Company may retain the right to service residential

mortgage loans sold.

The unpaid principal balance of loans serviced for

others is the primary driver of servicing revenue.

The following represents a summary of mortgage

servicing rights.

(Dollars in Thousands)

June 30, 2021

December 31, 2020

Number of residential mortgage loans serviced for others

2,008

1,796

Outstanding principal balance of residential mortgage

loans serviced for others

498,984

456,135

Weighted average

interest rate

3.61%

3.64%

Remaining contractual term (in months)

318

321

Conforming conventional loans serviced by the Company

are sold to 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

GNMA, whereby the Company is insured against loss by

the Federal Housing Administration or partially guaranteed against loss by

the Veterans

Administration.

At June 30, 2021, 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 $

2.8

million and $

4.9

million in delinquent residential mortgage loans currently

in GNMA pools serviced by the

Company at June 30, 2021 and December 31, 2020,

respectively.

The right to repurchase these loans and the corresponding liability

has been recorded in other assets and other liabilities, respectively,

in the Consolidated Statements of Financial Condition.

For the

three and six months ended June 30, 2021, the Company

repurchased $

0.7

million and $

2.2

million, respectively,

of GNMA

delinquent or defaulted mortgage loans with the intention

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

Activity in the capitalized mortgage servicing rights was as follows:

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in Thousands)

2021

2020

2021

2020

Beginning balance

3,583

910

3,452

910

Additions due to loans sold with servicing retained

453

2,049

640

2,074

Deletions and amortization

(326)

(97)

(632)

(122)

Valuation

allowance reversal

250

Ending balance

3,710

2,862

3,710

2,862

The Company did

t record any permanent impairment losses on mortgage servicing

rights for the three or six month periods ended

June 30, 2021 and June 30, 2020.

The key unobservable inputs used in determining the

fair value of the Company’s mortgage

servicing rights were as follows:

June 30, 2021

December 31, 2020

Minimum

Maximum

Minimum

Maximum

Discount rates

11.00%

15.00%

11.00%

15.00%

Annual prepayment speeds

13.09%

22.68%

13.08%

23.64%

Cost of servicing (per loan)

110

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

16.52

% at June 30, 2021 and

17.10

% at December 31, 2020.

Warehouse

Line Borrowings

The Company has the following warehouse lines of

credit and master repurchase agreements with various financial institutions

at June

30, 2021.

Amounts

(Dollars in Thousands)

Outstanding

million warehouse line of credit agreement expiring

October 2021

Interest is at LIBOR plus

2.25%

, with a

floor rate of

3.50%

A cash pledge deposit of $

0.1

million is required by the lender.

5,630

million master repurchase agreement without defined expiration.

Interest is at the LIBOR plus

2.24%

3.00%

, with a floor rate of

3.25%

A cash pledge deposit of $

0.5

million is required by the lender.

7,772

million warehouse line of credit agreement expiring in

September 2021

Interest is at the LIBOR plus

2.75%

, with a floor rate of

3.25%

29,195

Total Warehouse

Borrowings

42,597

Warehouse

line borrowings are classified as short-term borrowings.

At June 30, 2021, the Company had mortgage loans held for sale

pledged as collateral under the above warehouse lines

of credit and master repurchase agreements.

The above agreements also contain

covenants which include certain financial requirements,

including maintenance of minimum tangible net worth,

minimum liquid

assets, maximum debt to net worth ratio and positive net

income, as defined in the agreements.

The Company was in compliance with

all significant debt covenants at June 30, 2021.

The Company intends to renew the warehouse lines of

credit and master repurchase agreements when they mature

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 June 30,

2021 was $

27.7

million.

NOTE 5 – DERIVATIVES

The Company enters into derivative financial instruments to manage

exposures that arise from business activities that result in the

receipt or payment of future known and uncertain cash

amounts, the value of which are determined by interest rates.

The Company’s

derivative financial instruments are used to manage differences

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

known or

expected cash receipts and its known or expected

cash payments principally related to the Company’s

subordinated debt.

Cash Flow Hedges of Interest Rate Risk

Interest rate swaps with notional amounts totaling

million at June 30, 2021 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

Notional

Fair

Balance Sheet

Weighted Average

(Dollars in Thousands)

Amount

Value

Location

Maturity (Years)

June 30, 2021

Interest rate swaps related to subordinated debt

30,000

1,780

Other Assets

9.0

December 31, 2020

Interest rate swaps related to subordinated debt

30,000

574

Other Assets

9.5

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 six month periods ended

June 30, 2021

and June 30, 2020.

Amount of Gain

(Loss) Recognized

(Loss) Reclassified

(Dollars in Thousands)

in AOCI

Category

from AOCI to Income

Three months ended June 30, 2021

(686)

Interest Expense

(37)

Three months ended June 30, 2020

(108)

Interest Expense

(3)

Six months ended June 30, 2021

900

Interest Expense

(70)

Six months ended June 30, 2020

(108)

Interest Expense

(3)

The Company estimates there will be approximately

0.1

million reclassified as an increase to interest expense within

the next 12

months.

The Company had a collateral liability of $

1.7

million and $

0.5

million at June 30, 2021 and December 31, 2020, 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

balance sheet and the related lease expense is recognized on a straight-line basis over the lease term.

At June 30, 2021, the operating

lease ROU assets and liabilities were $

11.9

million and $

12.7

million, respectively.

The Company does not have any finance leases or

any significant lessor agreements.

The table below summarizes our lease expense and other

information related to the Company’s

operating leases.

Three Months Ended

Six Months Ended

June 30,

(Dollars in Thousands)

2021

2020

2021

2020

Operating lease expense

362

265

706

422

Short-term lease expense

170

154

310

233

Total

lease expense

532

419

1,016

655

Other information:

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

Operating cash flows from operating leases

402

263

786

424

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

440

515

5,120

Weighted average

remaining lease term — operating leases (in years)

25.1

15.5

25.1

15.5

Weighted average

discount rate — operating leases

2.0%

2.4%

2.0%

2.4%

The table below summarizes the maturity of remaining

lease liabilities:

(Dollars in Thousands)

June 30, 2021

2021

816

2022

1,480

2023

1,086

2024

1,033

2025

855

2026 and thereafter

11,165

Total

16,435

Less: Interest

(3,780)

Present Value

of Lease liability

12,655

At June 30, 2021, the Company had additional operating

lease payments for

two

banking offices that have not yet commenced totaling

4.8

million based on the initial contract term of

15 years

Payments for the banking offices are expected to commence after the

construction period ends, which is expected to occur during the second quarter of 2022 and the third quarter of 2022.

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

0.7

million at June 30, 2021.

NOTE 7 - EMPLOYEE BENEFIT PLANS

The Company has a defined benefit pension plan covering

substantially all full-time and eligible part-time associates and

Supplemental Executive Retirement Plan (“SERP”) and

a Supplemental Executive Retirement Plan II (“SERP II”) covering

its

executive officers.

The defined benefit plan was amended in December 2019

to remove plan eligibility for new associates hired after

December 31, 2019.

The SERP II was adopted by the Company’s

Board on May 21, 2020 and covers certain executive officers

that

were not covered by the SERP.

The components of the net periodic benefit cost for

the Company's qualified benefit pension plan were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in Thousands)

2021

2020

2021

2020

Service Cost

1,743

1,457

3,486

2,914

Interest Cost

1,221

1,400

2,442

2,811

Expected Return on Plan Assets

(2,787)

(2,748)

(5,574)

(5,496)

Prior Service Cost Amortization

Net Loss Amortization

1,691

974

3,382

1,985

Settlement Loss

2,000

Special Termination

Charge

Net Periodic Benefit Cost

3,872

1,087

5,744

2,283

Discount Rate

2.88%

3.53%

2.88%

3.53%

Long-term Rate of Return on Assets

6.75%

7.00%

6.75%

7.00%

In the second quarter of 2021, lump sum payments

made under the Company’s defined

benefit pension plan triggered settlement

accounting.

In accordance with the applicable accounting guidance for defined

benefit plans, the Company recorded a settlement loss

of $

2.0

million.

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

SERP and SERP II were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in Thousands)

2021

2020

2021

2020

Service Cost

Interest Cost

120

155

Prior Service Cost Amortization

109

Net Loss Amortization

243

441

318

Net Periodic Benefit Cost

382

273

667

592

Discount Rate

2.38%

3.16%

2.38%

3.16%

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 by

the contractual amount of those instruments.

The Company uses the same credit policies in establishing commitments

and issuing

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

The amounts associated with the Company’s

off-balance sheet

obligations were as follows:

June 30, 2021

December 31, 2020

(Dollars in Thousands)

Fixed

Variable

Total

Fixed

Variable

Total

Commitments to Extend Credit

(1)

204,549

560,909

765,458

160,372

596,572

756,944

Standby Letters of Credit

6,587

6,550

Total

211,136

560,909

772,045

166,922

596,572

763,494

(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 cance

llable by the bank is

adjusted as a provision for credit loss expense and is recorded

in other liabilities.

The following table shows the activity in the

allowance.

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in Thousands)

2021

2020

2021

2020

Beginning Balance

2,974

1,033

1,644

157

Impact of Adoption of ASC 326

876

Provision for Credit Losses

(387)

391

943

391

Ending Balance

2,587

1,424

2,587

1,424

Contingencies

The Company is a party to lawsuits and claims arising out of

the normal course of business.

In management's opinion,

there are no known pending claims or litigation, the outco

me 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.

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 $

205,000

Conversion ratio payments and

ongoing fixed quarterly charges are reflected

in earnings in the period incurred.

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 of

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

obligations, federal agency bullet or mortgage pass-through

securities, or

general obligation or revenue-based municipal bonds.

Pricing for such instruments is easily obtained.

At least annually,

the Company

will validate prices supplied by the independent pricing

service by comparing 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.

A summary of fair values for assets and liabilities consisted

of the following:

Level 1

Level 2

Level 3

Total

Fair

(Dollars in Thousands)

Inputs

Value

June 30, 2021

ASSETS:

Securities Available

for Sale:

U.S. Government Treasury

160,877

U.S. Government Agency

228,301

States and Political Subdivisions

13,607

Mortgage-Backed Securities

56,950

Corporate Debt Securities

14,360

Equity Securities

(1)

6,795

Loans Held for Sale

80,821

Interest Rate Swap Derivative

1,780

Mortgage Banking IRLC Derivative

2,524

Mortgage Servicing Rights

3,900

LIABILITIES:

Mortgage Banking Hedge Derivative

December 31, 2020

ASSETS:

Securities Available

for Sale:

U.S. Government Treasury

104,519

U.S. Government Agency

208,531

States and Political Subdivisions

3,632

Mortgage-Backed Securities

515

Equity Securities

(1)

7,673

Loans Held for Sale

114,039

Interest Rate Swap Derivative

574

Mortgage Banking IRLC Derivative

4,825

LIABILITIES:

Mortgage Banking Hedge Derivative

907

(1)

Not readily marketable securities - reflected

in other assets.

Mortgage Banking Activities

The Company had Level 3 issuances and transfers related

to mortgage banking activities of $

27.4

million and $

19.3

million, respectively,

for the six month period ending June 30, 2021 and $

14.6

million and $

19.4

million,

respectively, for the

period March 1, 2020 to June 30, 2020.

Issuances are valued based on the change in fair value of

the underlying

mortgage loan from inception of the IRLC to the balance

sheet 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 Val

ue 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 $

4.7

million with a valuation allowance of $

0.6

million at June 30, 2021

and $

7.1

million and $

0.1

million, respectively,

at December 31, 2020.

Other Real Estate Owned

During the first six months of 2021,

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 June 30, 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.

A summary of estimated fair values of significant

financial instruments consisted of the following:

June 30, 2021

Carrying

Level 1

Level 2

Level 3

(Dollars in Thousands)

Value

Inputs

ASSETS:

Cash

78,894

Short-Term

Investments

766,920

Investment Securities, Available

for Sale

480,890

160,877

320,013

Investment Securities, Held to Maturity

325,559

110,921

218,960

Equity Securities

(1)

3,588

Loans Held for Sale

80,821

Interest Rate Swap Derivative

1,780

Mortgage Banking IRLC Derivative

2,524

Mortgage Servicing Rights

3,710

3,900

Loans, Net of Allowance for Credit Losses

1,986,487

1,988,297

LIABILITIES:

Deposits

3,446,921

3,350,614

Short-Term

Borrowings

47,200

Subordinated Notes Payable

52,887

42,609

Long-Term Borrowings

1,720

1,804

Mortgage Banking Hedge Derivative

December 31, 2020

Carrying

Level 1

Level 2

Level 3

(Dollars in Thousands)

Value

Inputs

ASSETS:

Cash

67,919

Short-Term

Investments

860,630

Investment Securities, Available

for Sale

324,870

104,519

220,351

Investment Securities, Held to Maturity

169,939

5,014

170,161

Loans Held for Sale

114,039

Equity Securities

(1)

3,589

Interest Rate Swap Derivative

574

Mortgage Banking IRLC Derivative

4,825

Mortgage Servicing Rights

3,452

3,451

Loans, Net of Allowance for Credit Losses

1,982,610

1,990,740

LIABILITIES:

Deposits

3,217,560

3,217,615

Short-Term

Borrowings

79,654

Subordinated Notes Payable

52,887

43,449

Long-Term Borrowings

3,057

3,174

Mortgage Banking Hedge Derivative

907

(1)

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

Balance as of January 1, 2021

2,700

428

(47,270)

(44,142)

Other comprehensive income during the period

(1,816)

900

1,635

719

Balance as of June 30, 2021

884

1,328

(45,635)

(43,423)

Balance as of January 1, 2020

864

(29,045)

(28,181)

Other comprehensive income during the period

3,004

(79)

2,925

Balance as of June 30, 2020

3,868

(79)

(29,045)

(25,256)

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 2021 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," "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 2020

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").

The Bank offers a broad array of products and

services through a total of 57 full-service

offices located in Florida, Georgia,

and Alabama.

The Bank offers commercial and retail banking services,

as well as trust and asset

management, retail securities brokerage,

and life insurance.

We offer

residential mortgage banking services through Capital City

Home Loans.

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 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, noninterest

income such as deposit fees, wealth management fees, mortgage

banking fees and bank card fees, and operating expenses such as

salaries and employee benefits, occupancy,

and other operating expenses, including income taxes.

A detailed discussion regarding the economic conditions

in our markets and our long-term strategic objectives is included as part

the MD&A section of our 2020 Form 10-K.

Acquisitions

On March 1, 2020, CCB completed its acquisition of

a 51% membership interest in Brand Mortgage Group, LLC (“Brand”)

which is

now operated as a Capital City Home Loans (“CCHL”).

CCHL was consolidated into CCBG’s

financial statements effective March

1, 2020.

See Note 1 – Business Combination in the 2020 Form 10-K in the

Consolidated Financial Statements.

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.

See Note 1 – Business and Basis of Presentation.

RESPONSE TO COVID-19 PANDEMIC

The ongoing global and local responses to the COVID-19

pandemic and the new Delta variant continue to impact

our clients and

associates as they adjust to the changing conditions presented

by the pandemic.

The pandemic has adversely impacted a broad range

of industries in which the Company’s

customers operate and could still impair their ability to fulfill their

financial obligations to the

Company.

In addition, although our associates have generally been

available and working during the pandemic, COVID-19 and the

current Delta variant surge have the potential to

create widespread business continuity issues for the Company.

Congress, the President, and the Federal Reserve have

taken and continue to take actions designed to cushion the economic

fallout.

The Coronavirus Aid, Relief and Economic Security (“CARES”)

Act was signed into law at the end of March 2020

as a $2 trillion

legislative package.

The goal of the CARES Act was to curb the economic downturn

through various measures, including direct

financial aid to American families and economic

stimulus to significantly impacted industry sectors through programs

like the

Paycheck Protection Program ("PPP") and Main Street Lending

Program (“MSLP”).

During December 2020, many provisions of the

CARES Act were extended through the end of 2021.

In addition to the general impact of COVID-19, certain provisions

of the

CARES Act as well as other recent legislative and regulatory

relief efforts have had a material impact on

the Company’s 2020 and

2021 operations and could continue to impact operations going

forward.

The Company’s business is dependent

upon the willingness and ability of its associates and clients to

conduct banking and other

financial transactions.

While it appeared that epidemiological and macroeconomic

conditions were trending in a positive direction in

the first quarter of 2021, if the Delta variant continues to

cause case counts to trend higher in our markets, the Company

could

experience further adverse effects on its business, financial

condition, results of operations and cash flows.

While it is not possible to

know the full universe or extent that the impact of COVID-19’s

variants, and any potential resulting measures to curtail their

spread,

will have on the Company’s

future operations, we discuss potential impacts on our financial performance

in more detail throughout

parts of the MD&A section.

To protect

the health of our clients and associates and comply with applicable

government directives, we

have modified our business practices as noted belo

●

We continue

to closely monitor COVID-19 and adjust our operations, as needed,

to the changing case counts and impacts of

COVID-19 in our communities.

●

We have established

a tentative return to work date for all associates, but we

will adjust as necessary depending on changing

conditions.

●

All of our banking offices have returned to

normal banking hours and lobby services; however,

we will adjust such hours and

services as necessary depending on the changing conditions.

●

We are adhering

to national guidelines and local safety ordinances to protect

both clients and associates.

●

We continue

to support clients with the Small Business Administration Payment

Protection Program (“SBA PPP”) by actively

assisting with the Round 1 and 2 forgiveness process.

NON-GAAP FINANCIAL MEASURES

We present a

tangible common equity ratio and a tangible book value per

diluted share that, in each case, reduces shareowners’ equity

and total assets by the amount of goodwill and other

identifiable intangible assets resulting from merger

and acquisition activity.

believe these measures are useful to investors because it allows

investors to more easily compare our capital adequacy

to other

companies in the industry,

although the manner in which we calculate non-GAAP financial

measures may differ from that of other

companies reporting non-GAAP measures with similar names

The GAAP to non-GAAP reconciliation for each quarter presented

page 31 is provided below.

2021

2020

2019

(Dollars in Thousands, except per share data)

Second

First

Fourth

Third

Second

First

Fourth

Third

Shareowners' Equity (GAAP)

335,880

324,426

320,837

339,425

335,057

328,507

327,016

321,562

Less: Goodwill and Other Intangibles (GAAP)

93,333

89,095

89,275

84,811

Tangible Shareowners' Equity (non

-GAAP)

242,547

235,331

231,742

250,330

245,962

239,232

242,205

236,751

Total Assets (GAAP)

4,011,459

3,929,884

3,798,071

3,587,041

3,499,524

3,086,523

3,088,953

2,934,513

Less: Goodwill and Other Intangibles (GAAP)

93,333

89,095

89,275

84,811

Tangible Assets (non-GAAP)

3,918,126

3,840,789

3,708,976

3,497,946

3,410,429

2,997,248

3,004,142

2,849,702

Tangible Common Equity Ratio

(non-GAAP)

A/B

6.19%

6.13%

6.25%

7.16%

7.21%

7.98%

8.06%

8.31%

Actual Diluted Shares Outstanding (GAAP)

16,901,375

16,875,719

16,844,997

16,800,563

16,821,743

16,845,462

16,855,161

16,797,241

Diluted Tangible Book Value

(non-GAAP)

A/C

14.35

13.94

13.76

14.90

14.62

14.20

14.37

14.09

SELECTED QUARTERLY

FINANCIAL DATA

(UNAUDITED)

(Dollars in Thousands, Except

2021

2020

2019

Per Share Data)

Second

First

Fourth

Third

Second

First

Fourth

Third

Summary of Operations

Interest Income

26,836

25,446

26,154

26,166

26,512

27,365

28,008

28,441

Interest Expense

856

948

1,181

1,044

1,054

1,592

1,754

2,244

Net Interest Income

25,980

24,498

24,973

25,122

25,458

25,773

26,254

26,197

Provision for Credit Losses

(571)

(982)

1,342

1,308

2,005

4,990

(162)

776

Net Interest Income After

Provision for Credit Losses

26,551

25,480

23,631

23,814

23,453

20,783

26,416

25,421

Noninterest Income

26,473

29,826

30,523

34,965

30,199

15,478

13,828

13,903

Noninterest Expense

(1)

42,123

40,476

41,348

40,342

37,303

30,969

29,142

27,873

Income

Before

Income Taxes

10,901

14,830

12,806

18,437

16,349

5,292

11,102

11,451

Income Tax Expense

2,059

2,787

2,833

3,165

2,950

1,282

2,537

2,970

(Income) Loss Attributable to NCI

(1,415)

(2,537)

(2,227)

(4,875)

(4,253)

277

Net Income Attributable to CCBG

7,427

9,506

7,746

10,397

9,146

4,287

8,565

8,481

Net Interest Income (FTE)

26,064

24,607

25,082

25,233

25,564

25,877

26,378

26,333

Per Common Share

Net Income Basic

0.44

0.56

0.46

0.62

0.55

0.25

0.51

Net Income Diluted

0.44

0.56

0.46

0.62

0.55

0.25

0.51

0.50

Cash Dividends Declared

0.15

0.14

0.13

Diluted Book Value

19.87

19.22

19.05

20.20

19.92

19.50

19.40

19.14

Diluted Tangible Book Value

(2)

14.35

13.94

13.76

14.90

14.62

14.20

14.37

14.09

Market Price:

High

27.39

28.98

26.35

21.71

23.99

30.62

30.95

28.00

Low

24.55

21.42

18.14

17.55

16.16

15.61

25.75

23.70

25.79

26.02

24.58

18.79

20.95

20.12

30.50

27.45

Selected Average Balances

Loans Held for Investment

2,036,781

2,044,363

1,993,470

2,005,178

1,982,960

1,847,780

1,834,085

1,824,685

Earning Assets

3,623,910

3,497,929

3,337,409

3,223,838

3,016,772

2,751,880

2,694,700

2,670,081

Total Assets

3,956,349

3,821,521

3,652,436

3,539,332

3,329,226

3,038,788

2,982,204

2,959,310

Deposits

3,387,352

3,239,508

3,066,136

2,971,277

2,783,453

2,552,690

2,524,951

2,495,755

Shareowners’ Equity

329,040

326,330

343,674

340,073

333,515

331,891

326,904

320,273

Common Equivalent Average Shares:

Basic

16,858

16,838

16,763

16,771

16,797

16,808

16,750

16,747

Diluted

16,885

16,862

16,817

16,810

16,839

16,842

16,834

16,795

Performance Ratios:

Return on Average Assets

0.75

1.01

0.84

1.17

1.10

0.57

1.14

Return on Average Equity

9.05

11.81

8.97

12.16

11.03

5.20

10.39

10.51

Net Interest Margin (FTE)

2.89

2.85

3.00

3.12

3.41

3.78

3.89

3.92

Noninterest Income as % of

Operating Revenue

50.47

54.90

55.00

58.19

54.26

37.52

34.50

34.67

Efficiency Ratio

80.18

74.36

67.01

66.90

74.89

72.48

69.27

Asset Quality:

Allowance for Credit Losses ("ACL")

22,175

22,026

23,816

23,137

22,457

21,083

13,905

14,319

ACL to Loans HFI

1.10

1.07

1.19

1.16

1.11

1.13

0.75

0.78

Nonperforming Assets (“NPAs”)

6,302

5,472

6,679

6,732

8,025

6,337

5,425

5,454

NPAs to Total

Assets

0.16

0.14

0.18

0.19

0.23

0.21

0.18

0.19

NPAs to Loans HFI plus OREO

0.31

0.27

0.33

0.34

0.40

0.34

0.29

0.30

ACL to Non-Performing Loans

433.93

410.78

405.66

420.30

322.37

432.61

310.99

290.55

Net Charge-Offs to Average

Loans HFI

(0.07)

(0.10)

0.09

0.11

0.05

0.23

0.05

0.23

Capital Ratios:

Tier 1 Capital

15.44

16.08

16.19

16.77

16.59

16.12

17.16

16.83

Total Capital

16.48

17.20

17.30

17.88

17.60

17.19

17.90

17.59

Common Equity Tier 1

13.14

13.63

13.71

14.20

14.01

13.55

14.47

14.13

Leverage

8.84

8.97

9.33

9.64

10.12

10.81

11.25

11.09

Tangible Common Equity

(2)

6.19

6.13

6.25

7.16

7.21

7.98

8.06

8.31

(1)

Includes a $2.0 million (pre-tax), or $0.10/share

(after-tax), partial pension settlement charge

for the second quarter of 2021.

(2)

Non-GAAP financial measure.

See non-GAAP reconciliation on page 30.

FINANCIAL OVERVIEW

Results of Operations

Performance Summary.

Net income of $7.4 million, or $0.44 per diluted share, for

the second quarter of 2021 compared to net

income of $9.5 million, or $0.56 per diluted share, for

the first quarter of 2021, and $9.1 million, or $0.55 per

diluted share, for the

second quarter of 2020.

For the first six months of 2021, net income totaled $16.9 million, or

$1.00 per diluted share, compared to net

income of $13.4 million, or $0.80 per diluted share,

for the same period of 2020.

Net income for the second quarter of 2021 included

a partial pension settlement charge of $2.0

million (pre-tax), or $0.10 per diluted share (after-tax).

Net Interest Income.

Tax-equivalent

net interest income for the second quarter of 2021

was $26.1 million compared to $24.6 million

for the first quarter of 2021 and $25.6 million for the second

quarter of 2020.

For the first six months of 2021, tax-equivalent net

interest income totaled $50.7 million compared to $51.4

million for the same period of 2020.

Loan growth and higher SBA PPP loan

fees drove the improvement over the first quarter of 2021.

For the six month period, the decrease generally reflected

lower rates

earned on investment securities and variable/adjustable rate

loans partially offset by higher SBA PPP loan fees

and lower interest

expense.

Provision and Allowance for Credit

Losses.

Provision for credit losses was a negative $0.6 million

for the second quarter of 2021

compared to a negative provision of $1.0 million for the

first quarter of 2021 and provision expense of $2.0 million

for the second

quarter of 2020.

For the first six months of 2021, we recorded a negative provision

of $1.6 million compared

to provision expense of

$7.0 million for the same period of 2020.

The negative provision for the first half of 2021 generally reflected

improving economic

conditions and strong net loan recoveries.

Noninterest Income.

Noninterest income for the second quarter of 2021

totaled $26.5 million compared to $29.8 million for the first

quarter of 2021 and $30.2 million for the second quarter

of 2020.

The aforementioned declines were primarily due to

lower mortgage

banking revenues at CCHL, but were partially offset

by improvements in wealth management fees and bank

card fees.

For the first six

months of 2021, noninterest income totaled $56.3 million

compared to $45.7 million for the same period of 2020 with the increase

driven by the addition of CCHL mortgage banking

revenues late in the first quarter of 2020, and strong growth

in bank card fees and

wealth management fees.

Noninterest Expense.

Noninterest expense for the second quarter of 2021 totaled

$42.1 million compared to $40.5 million for the first

quarter of 2021 and $37.3 million for the second quarter

of 2020.

The $1.6 million increase over the first quarter of 2021 reflected

$2.0 million partial pension settlement charge

that was partially offset by lower commission expense at CCHL

and lower legal fees

and other real estate owned (“OREO”) expense at CCB.

Compared to the prior year periods, the increase was primarily

attributable to

the aforementioned partial pension settlement charge

lower realized loan cost, higher pension plan expense (driven by

a lower

discount rate for plan liabilities), and performance based

compensation.

Additionally, the increase for

the six month period included

operating expenses of CCHL from March 1, 2020 forward.

Financial Condition

Earning Assets.

Average earning

assets were $3.624 billion for the second quarter of 2021, an

increase of $126.0 million, or 3.6%,

over the first quarter of 2021, and an increase of $286.5

million, or 8.6%

over the fourth quarter of 2020.

The increase over both prior

periods was primarily driven by higher deposit balances,

which funded growth in both overnight funds sold and the investment

portfolio.

Deposit balances increased as a result of strong core deposit

growth, in addition to funding retained at the bank from

SBA

PPP loans, and various other stimulus programs.

Loans

Average loans held

for investment (“HFI”) decreased $7.6 million, or 0.4%,

from the first quarter of 2021 and increased $43.3

million, or 2.2%, over the fourth quarter of 2020.

Excluding SBA PPP loans, average core loans grew $54.4 million

and $90.4 million

over both respective periods and period end loans

grew $74.3 million and $97.7 million over both respective periods.

Growth in

period end loans was driven primarily in the commercial

mortgage, indirect, and construction categories.

At June 30, 2021, SBA PPP

loan balances totaled $79.9 million and remaining

deferred SBA PPP net loan fees totaled $3.5 million.

Credit Quality

Nonaccrual loans totaled $5.1 million (0.25% of HFI loans)

at June 30, 2021 compared to $5.4 million (0.26% of HFI

loans) at March 31, 2021 and $5.9 million (0.29

of HFI loans) at December 31, 2020.

Classified loans totaled $19.4 million, $20.6

million, and $17.6 million at the same respective periods.

Deposits

Average total

deposits increased $147.8 million, or 4.6%, over the first quarter

of 2021, and $321.2 million, or 10.5%, over

the fourth quarter of 2020.

Over the past 12 months, multiple government stimulus

programs have been implemented, including the

CARES Act and the American Rescue Plan Act, which are

responsible for a portion of this growth.

Capital

At June 30, 2021, we were well-capitalized with a total risk-based

capital ratio of 16.48%

and a tangible common equity

ratio (a non-GAAP financial measure) of 6.19% compared

to 17.20% and 6.13%, respectively,

at March 31, 2021 and 17.30%

and

6.25%, respectively,

at December 31, 2020.

At June 30, 2021, all of our regulatory capital ratios exceeded

the threshold to be well-

capitalized under the Basel III capital standards.

RESULTS

OF OPERATIONS

The following table provides a condensed summary of

our results of operations - a discussion of the various components

are discussed

in further detail below.

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

(Dollars in Thousands, except per share data)

2021

2020

2021

2020

Interest Income

26,836

25,446

26,512

52,282

53,877

Taxable Equivalent Adjustments

109

106

193

210

Total Interest Income (FTE)

26,920

25,555

26,618

52,475

54,087

Interest Expense

856

948

1,054

1,804

2,646

Net Interest Income (FTE)

26,064

24,607

25,564

50,671

51,441

Provision for Credit Losses

(571)

(982)

2,005

(1,553)

6,995

Taxable Equivalent Adjustments

109

106

193

210

Net Interest Income After Provision for Credit Losses

26,551

25,480

23,453

52,031

44,236

Noninterest Income

26,473

29,826

30,199

56,299

45,677

Noninterest Expense

42,123

40,476

37,303

82,599

68,272

Income Before Income Taxes

10,901

14,830

16,349

25,731

21,641

Income Tax Expense

2,059

2,787

2,950

4,846

4,232

Pre-Tax Income Attributable to

Noncontrolling Interest

(1,415)

(2,537)

(4,253)

(3,952)

(3,976)

Net Income Attributable to Common Shareowners

7,427

9,506

9,146

16,933

13,433

Basic Net Income Per Share

0.44

0.56

0.55

1.00

0.80

Diluted Net Income Per Share

0.44

0.56

0.55

1.00

0.80

Net Interest Income

Net interest income represents our single largest

source of earnings and is equal to interest income and fees

generated by earning

assets less interest expense paid on interest bearing liabilities.

This information is provided on a "taxable equivalent" basis to

reflect

the tax-exempt status of income earned on certain loans

and state and local government debt obligations.

We provide an analysis of

our net interest income including average yields and rates

in Table I on page 44.

Tax-equivalent

net interest income for the second quarter of 2021 totaled $26.1

million compared to $24.6 million for the first quarter

of 2021 and $25.6 million for the second quarter of 2020.

Compared to the first quarter of 2021, the increase reflected

higher SBA

PPP loan fees of $0.7 million, higher loan interest of

$0.5 million driven by loan growth, and higher investment

securities income of

$0.2 million, which reflected deployment of excess overnight

funds into the investment portfolio.

Compared to the second quarter of

2020, the increase was driven by higher SBA PPP loan fees of

$1.3 million partially offset by lower interest earned

on investment

securities and variable/adjustable rate loans.

For the first six months of 2021, tax-equivalent net interest income

totaled $50.7 million

compared to $51.4 million for the same period of 2020.

The decrease generally reflected lower rates earned on investment

securities

and variable/adjustable rate loans partially offset

by higher SBA PPP loan fees and lower interest expense.

Our net interest margin for the second quarter

of 2021 was 2.89%, an increase of three basis points over

the first quarter of 2021 and a

decrease of 52 basis points from the second quarter of

2020.

Compared to the first quarter of 2021, the increase was driven

by higher

SBA PPP loan fees.

Compared to the second quarter of 2020, the decrease was primarily

attributable to downward re-pricing of

earning assets and significant growth in overnight

funds (driven by deposit inflows),

which negatively impacts our margin percentage.

For the first six months of 2021, the net interest margin

decreased 72 basis points to 2.87% generally reflective of downward

re-

pricing of our earning assets (variable/adjustable rate

loans and securities portfolio) partially offset by

a lower cost of funds and higher

SBA PPP

loan fees.

Our net interest margin for the second quarter

of 2021, excluding the impact of overnight funds in

excess of

$200 million, was 3.46%.

Due to highly competitive fixed-rate loan pricing in our

markets, we continue to review our loan pricing and make adjustments

where

we believe

appropriate and prudent.

Provision for Credit Losses

We recorded

a negative provision for credit losses of $0.6 million for the second

quarter of 2021 compared to a negative provision

$1.0 million for the first quarter of 2021 and provision expense

of $2.0 million for the second quarter of 2020.

For the first six months

of 2021, we recorded a negative provision of $1.6 million

compared to provision expense of $7.0 million for the same period

of 2020.

The negative provision for the first half of 2021 generally

reflected improving economic conditions and strong net loan recoveries

totaling $0.9 million.

We discuss the allowance

for credit losses further below.

For more information on charge-offs and recoveries,

see Note 3 – Loans Held for Investment and Allowance for

Credit Losses.

Noninterest Income

Noninterest income for the second quarter of 2021 totaled

$26.5 million compared to $29.8 million for the first quarter of 202

and

$30.2 million for the second quarter of 2020.

The primary reason for the aforementioned declines were primarily

due to lower

mortgage banking revenues at CCHL, but were partially

offset by improvements in wealth management fees and

bank card fees.

The

decline in mortgage banking fees reflected lower production

volume (primarily re-finance activity) and a lower gain on

sale margin.

For the first six months of 2021, noninterest income

totaled $56.3 million compared to $45.7 million for the same period

of 2020 with

the increase driven by the addition of CCHL mortgage

banking revenues late in the first quarter of 2020, and higher

bank card fees

and wealth management fees which grew $1.4 million

and $1.2 million, respectively.

Noninterest income represented 50.5% of operating revenues

(net interest income plus noninterest income) in the second quarter

2021

compared to 54.9% in the first quarter of 2021 and 54.3% in the second

quarter of 2020.

For the first six months of 2021,

noninterest income represented 52.7% of operating revenues

compared to 47.1% for the same period of 2020.

The table below reflects the major components of noninterest income.

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

(Dollars in Thousands)

2021

2020

2021

2020

Deposit Fees

4,236

4,271

3,756

8,507

8,771

Bank Card Fees

3,998

3,618

3,142

7,616

6,193

Wealth Management

Fees

3,274

3,090

2,554

6,364

5,158

Mortgage Banking Revenues

13,217

17,125

19,397

30,342

22,650

Other

1,748

1,722

1,350

3,470

2,905

Total

Noninterest Income

26,473

29,826

30,199

56,299

45,677

Significant components of noninterest income are

discussed in more detail below.

Mortgage Banking Revenues.

Mortgage banking revenues totaled $13.2 million for

the second quarter of 2021 compared to $17.1

million for the first quarter of 2021 and $19.4 million

for the second quarter of 2020.

For the six months of 2021, revenues totaled

$30.3 million compared to $22.7 million for the same period

of 2020.

Lower production volume and gain on sale margin drove

the

decline from the first quarter of 2021 and a lower

gain on sale margin was the primary reason

for the decline versus the second quarter

of 2020.

The increase over the six month period of 2020 reflected the addition

of CCHL mortgage banking revenues late in the first

quarter of 2020 and overall higher production volume

reflective of the significant reduction in interest rates.

Deposit Fees

. Deposit fees for the second quarter of 2021 totaled $4.2 million,

a decrease of $0.1 million, or 0.8%, from the first

quarter of 2021, and an

increase of $0.5 million, or 12.8%, over the second

quarter of 2020.

For the first six months of 2021, deposit

fees totaled $8.5 million, a decrease of $0.3 million, or

3.0%, from the same period of 2020.

Compared to all prior periods, the

variances

were driven by the utilization of our overdraft service which has been

volatile during the pandemic given the timing of

various stimulus payments to consumers over the past 12

months and higher monthly service charge fees.

Bank Card Fees

Bank card fees for the second quarter of 2021 totaled $4.0

million, a $0.4 million, or 10.5%, increase over the first

quarter of 2021, and a $0.9 million, or 27.2%, increase over

the second quarter of 2020.

For the first six months of 2021, bank card

fees totaled $7.6 million, an

increase of $1.4 million,

or 23.0%, over the same period of 2020.

Compared to all prior periods, the

improvement reflected higher card activity driven by increased

consumer spending,

which we believe is reflective of the economic

recovery.

Wealth

Management Fees

Wealth management

fees, which include both trust fees (i.e., managed accounts

and trusts/estates) and

retail brokerage fees (i.e., investment, insurance products,

and retirement accounts) totaled $3.3 million for the second

quarter of 2021,

a $0.2

million, or 6.0%, increase over the first quarter of 2021 and

a $0.7 million, or 28.2%, increase over the second quarter of

2020.

For the first six months of 2021, wealth management

fees totaled $6.4 million, an

increase of $1.2 million,

or 23.4%, over the same

period of 2020.

The favorable variances versus all prior periods reflected

higher assets under management and increased trading

activity by our retail brokerage clients.

At June 30,

2021, total assets under management were approximately

$2.190 billion compared

to $1.979 billion at December 31, 2020 and $1.750 billion

at June 30, 2020.

Other.

Other income for the second quarter of 2021 totaled $1.7

million, comparable to the first quarter of 2021, and $0.4 million,

29.5%, over the second quarter of 2020.

For the first six months of 2021, other income totaled $3.5 million,

an increase of $0.6

million, or 19.4%, over the same period of 2020.

The increase over both prior year periods was primarily attributable

to loan servicing

fees added as part of the CCHL acquisition.

Noninterest Expense

Noninterest expense for the second quarter of 2021 totaled

$42.1 million compared to $40.5 million for the first quarter

of 2021 and

$37.3 million for the second quarter of 2020.

For the first six months of 2021, noninterest expense totaled

$82.6 million compared to

$68.3 million for the same period of 2020.

The $1.6 million increase over the first quarter of 2021 reflected

a $2.0 million partial

pension settlement charge (due to a high level

of lump sum pay-outs) that was partially offset by lower

commission expense at CCHL

and lower legal fees and other real estate owned (“OREO”)

expense at CCB.

Compared to the prior year periods, the increase was

primarily attributable to the aforementioned partial pension

settlement charge,

lower realized loan cost (credit offset to salary

expense), higher pension plan expense (driven by a

lower discount rate for plan liabilities), and performance

based compensation.

Additionally, the

increase for the first half of 2021 reflects the inclusion of CCHL expenses

for a full six month period versus only

four months in 2020.

The table below reflects the major components of noninterest expense

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

(Dollars in Thousands)

2021

2020

2021

2020

Salaries

21,117

22,447

19,977

43,564

35,708

Associate Benefits

4,261

3,617

3,681

7,878

7,686

Total Compensation

25,378

26,064

23,658

51,442

43,394

Premises

2,714

2,759

2,628

5,473

5,011

Equipment

3,259

3,208

3,170

6,467

5,766

Total Occupancy

5,973

5,967

5,798

11,940

10,777

Legal Fees

321

558

412

879

881

Professional Fees

1,406

1,330

1,334

2,736

2,455

Processing Services

1,794

1,545

1,447

3,339

3,004

Advertising

631

749

799

1,381

1,383

Telephone

754

755

829

1,508

1,439

Insurance - Other

545

501

420

1,046

716

Other Real Estate Owned, net

(270)

(118)

116

(388)

(682)

Pension Settlement

2,000

Miscellaneous

3,591

3,125

2,490

6,716

4,905

Total Other

10,772

8,445

7,847

19,217

14,101

Total

Noninterest Expense

42,123

40,476

37,303

82,599

68,272

Significant components of noninterest expense are

discussed in more detail below.

Compensation

Compensation expense totaled $25.4 million for the second quarter

of 2021 compared to $26.1 million for the first

quarter of 2021 and $23.7 million for the second quarter

of 2020.

For the first six months of 2021, compensation expense totaled

$51.4 million compared to $43.4 million for the same period

of 2020.

Compared to the first quarter of 2021, the decrease is due to

lower commission expense at CCHL (lower production volume)

of $0.9 million,

payroll taxes of $0.4 million (primarily related to

2020 annual bonuses paid in January,

2021), and cash incentive expense of $0.4 million, partially offset

by higher

associate insurance

expense (utilization of self-funded plan reserves in

first quarter of 2021) of $0.6 million and lower realized

loan cost (credit offset to

salaries – primarily related to lower SBA loan production

)

of $0.4 million.

Compared to the second quarter of 2020, the increase was

primarily attributable to lower realized loan cost (credit

offset to salaries – primarily related to lower SBA

loan production) of $0.9

million, and higher pension plan expense (service cost) of

$0.3 million, and base salaries (merit raises) of $0.5 million.

The increase

for the six month period was primarily due to the addition

of CCHL compensation (primarily commission expense)

beginning March

1, 2020 as core CCBG compensation expense remained

essentially flat.

Occupancy

Occupancy expense totaled $6.0 million for the second quarter

of 2021 comparable to the first quarter of 2021 and $5.8

million for the second quarter of 2020.

For the first six months of 2021,

occupancy expense totaled $12.0 million compared to

$10.8

million for the same period of 2020.

The increase for the six month period was primarily due to the

addition of CCHL occupancy

costs beginning March 1, 2020 as well as higher expense at

core CCBG reflective of increased FF&E depreciation

related to increase

technology investment.

Other

Other noninterest expense totaled $10.8 million for

the second quarter of 2021 compared to $8.4 million for the first

quarter of

2021 and $7.8 million for the second quarter

of 2020.

For the first six months of 2021, other noninterest expense totaled $19.2

million

compared to $14.1 million for the same period of 2020.

Compared to the first quarter of 2021, the increase was primarily

attributable

to a $2.0 million partial pension plan settlement charge

related to higher lump sum pay-outs which triggered settlement

accounting.

Compared to the second quarter of 2020 the increase

was also attributable to the aforementioned pension settlement

charge as well as

higher expense for our current year defined benefit pension

cost of $0.6 million (due to a lower discount rate utilized

for determining

the 2021 plan year expense), and higher processing

fees of $0.3 million (reflective of higher debit card volume).

The increase for the

six month period was primarily due to the addition

of CCHL expenses beginning in March 1, 2020 and to a lesser

extent higher

expenses at core CCBG, including processing fees (higher

debit card volume), legal/professional (related to the

SWG and CCHL

acquisitions), FDIC insurance expense (related to higher

level of assets), and OREO expense (attributable to lower OREO sales gains).

Our operating efficiency ratio (expressed

as noninterest expense as a percentage of the sum of taxable-equivale

nt net interest income

plus noninterest income) was 80.18% for the second

quarter of 2021 compared to 74.36%

for the first quarter of 2021 and 66.90%

for

the second quarter of 2020.

For the first six months of 2021,

this ratio was 77.22%

compared to 70.30% for the same period of 2020.

Additional detail on CCHL’s

operations and key performance metrics is provided below.

Three Months Ended

Six Months Ended

(Dollars in thousands)

Jun 30, 2021

Mar 31, 2021

Jun 30, 2020

Jun 30, 2021

Jun 30, 2020

Net Interest Income

(153)

109

(134)

125

Mortgage Banking Fees

13,116

16,846

19,156

29,962

21,271

Other

425

426

203

851

299

Total Noninterest

Income

13,541

17,272

19,359

30,813

21,570

Salaries

8,538

10,276

8,381

18,814

10,623

Other Associate Benefits

210

221

204

431

253

Total Compensation

8,748

10,497

8,585

19,245

10,876

Occupancy, Net

854

861

768

1,715

999

Other

1,359

1,101

1,248

2,460

1,705

Total Noninterest

Expense

10,961

12,459

10,601

23,420

13,580

Operating Profit

2,599

4,660

8,867

7,259

8,115

Key Performance Metrics:

Total Loans Closed

406,859

463,126

407,118

869,985

510,008

Total Loans Closed

Purchase

76%

60%

51%

68%

53%

Refinance

24%

40%

49%

32%

47%

Income Taxes

We realized income

tax expense of $2.1 million (effective rate of 19%)

for the second quarter of 2021 compared to $2.8 million

(effective rate of 19%) for

the first quarter of 2021 and $2.9 million (effective

rate of 18%) for the second quarter of 2020.

For the

first six months of 2021, we realized income tax

expense of $4.8 million (effective rate of 19%) compared

to $4.2 million (effective

rate of 20%) for the same period of 2020.

Absent discrete items, we expect our annual effective tax

rate to approximate 18%-19% for

the remainder of 2021.

FINANCIAL CONDITION

Average earning

assets totaled $3.624 billion for the second quarter of 2021, an

increase of $126.0 million, or 3.6%, over the first

quarter of 2021, and an increase of $286.5 million,

or 8.6%, over the fourth quarter of 2020.

The increase over both prior periods was

primarily driven by higher deposit balances, which funded

growth in both overnight funds sold and the investment

portfolio.

Deposit

balances increased as a result of strong core deposit growth,

in addition to funding retained at the bank from SBA PPP loans,

and

various other stimulus programs.

Investment Securities

In the second quarter of 2021, our average investment

portfolio increased $158.7 million, or 29.8%, over the first quarter

of 2021 and

increased $173.6 million, or 33.5%, over the fourth quarter

of 2020.

Our investment portfolio represented 19.1% of our average

earning assets for the second quarter of 2021 compared

to 15.5% for the fourth quarter of 2020,

and 20.1% for the second quarter of

2020.

During the second quarter of 2021, we initiated a buy program

to add to our investment portfolio as part of our overall balance

sheet management.

For the remainder of 2021, we will continue to monitor our overall

liquidity position and look for opportunities to

purchase additional investment 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 Available

-for-Sale (“AFS”)

and Held-to-Maturity (“HTM”).

During the second quarter of 2021, we purchased securities under

the AFS designation.

At June 30,

2021,

$480.9 million, or 59.6%, of our investment portfolio was classified as AFS,

and $325.6 million, or 40.4%, classified as HTM.

The average maturity of our total portfolio at June

30, 2021 was 3.34 years compared to 2.78 years and 2.09

years at March 31, 2021

and December 31, 2020, respectively.

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 June 30,

2021,

there were 150 positions (combined AFS and HTM) with unrealized

losses totaling $1.5

million at June 30,

2021.

Of these 150 positions, 145 are U.S. government agency

securities issued by U.S. government sponsored entities which carry

the full

faith and credit guarantee of the US Government and are

0% risk-weighted assets for regulatory purposes. The remaining

five

positions are municipal bonds with a minimum credit rating

of “A”. None of these positions with unrealized losses are considered

impaired, and all are expected to mature at par.

Further, we believe the long history of

no credit

losses on these securities indicates

that the expectation of nonpayment of the amortized cost

basis is zero.

Loans HFI

Average loans

held for investment (HFI) decreased $7.6 million, or 0.4%, from

the first quarter of 2021 and increased $43.3 million,

or 2.2%, over the fourth quarter of 2020.

Excluding SBA PPP loans, average core loans grew $54.4

million and $90.4 million over

both respective periods and period end loans grew $74.3

million and $97.7 million over both respective periods.

Growth in period end

loans was driven primarily in the commercial mortgage,

indirect, and construction categories.

At June 30, 2021, SBA PPP loan

balances totaled $79.9 million and remaining deferred SBA PPP net

loan fees totaled $3.5 million.

SBA PPP loan forgiveness

applications are expected to remain strong for the remainder

of 2021.

Without compromising our credit standards

changing our underwriting standards, or taking on inordinate interest

rate risk, we

continue to closely monitor our markets

and make minor adjustments as necessary.

Credit Quality

Nonperforming assets (nonaccrual loans and OREO, “NPAs”

)

totaled $6.3 million at June 30, 2021, a $0.8 million increase from

March 31, 2021, and a $0.4 million decrease from December

31, 2020.

Nonaccrual loans totaled $5.1 million (0.25% of HFI loans) at

June 30, 2021 compared to $5.4 million (0.26

of HFI loans) at March 31, 2021 and $6.8 million (0.

29% of HFI loans) at December

31, 2020.

For additional metrics on NPAs

see the Asset Quality section of the Selected Quarterly

Financial Data table.

For more

information on nonaccrual loans see Note 3 – Loans Held

for Investment and Allowance for Credit Losses.

The balance of OREO

totaled $1.2 million at June 30, 2021, an increase of

$1.1 million over March 31, 2021 and a $0.3 million increase

over December 31,

2020.

A significant portion of the increase in ORE is attributable to an

office property,

which was under contract and moved to ORE

late in the second quarter.

Allowance for Credit Losses

The allowance for credit losses is a valuation account that

is deducted from the loans’ amortized cost basis to present

the net amount

expected to be collected on the loans.

The allowance for credit losses is adjusted by a credit loss provision

which is reported in

earnings, and reduced by the charge-off

of loan amounts, net of recoveries.

Loans are charged off against the allowance when

management believes the uncollectability of a loan balance

is confirmed.

Expected recoveries do not exceed the aggregate of amounts

previously charged-off and expected

to be charged-off.

Expected credit loss inherent in non-cancellable off

-balance sheet credit

exposures is provided through the credit loss provision,

but recorded as a separate liability included in other liabilities.

Management estimates the allowance balance using

relevant available information, from internal and external

sources relating to past

events, current conditions, and reasonable and supportable

forecasts.

Historical loan default and loss experience provides the basis for

the estimation of expected credit losses.

Adjustments to historical loss information incorporate

management’s view of current

conditions and forecasts.

At June 30, 2021, the allowance for credit losses for

loans HFI totaled $22.2 million compared to $22.0 million

at March 31, 2021 and

$23.8 million at December 31, 2020.

Activity within the allowance is detailed in Note 3 to the

consolidated financial statements.

The

$0.2 million net increase in the allowance for the second quarter

of 2021 was primarily attributable to net loan recoveries totaling

$0.3

million.

For the first half of 2021, the $1.6 million net decrease in the

allowance reflected net loan recoveries of $0.9 million and

lower expected losses related to COVID-19, partially

offset by core loan growth (ex-SBA PPP).

At June 30, 2021, the allowance

represented 1.10% of loans HFI and provided coverage

of 434% of nonperforming loans compared to 1.19% and

406%, respectively,

at December 31, 2020.

At June 30, 2021, excluding SBA PPP loans (100% government

guaranteed), the allowance represented 1.15%

of loans HFI compared to 1.30% at December 31, 2020.

At June 30, 2021, the allowance for credit losses for

unfunded commitments totaled $2.6 million compared to $3.0 million

at March

31, 2021 and $1.6 million at December 31, 2020.

The allowance for unfunded commitments is recorded

in other liabilities.

Deposits

Average total

deposits were $3.387 billion for the second quarter of 2021, an

increase of $147.8 million, or 4.6%, over the first quarter

of 2021 and $321.2 million, or 10.5%, over the fourth

quarter of 2020.

The strongest growth over both comparable periods occurred

in our noninterest bearing deposits and savings account

balances.

Average public

deposits in the second quarter 2021 increased

compared to the fourth quarter 2020, but declined compared

to the first quarter 2021 due to the seasonality of these

deposits.

Over the

past 12 months, multiple government stimulus programs

have been implemented, including those under the CARES Act and

the

American Rescue Plan Act, which are responsible for a

large part of the growth in average deposits.

Given these increases, the

potential exists for our deposit levels to be volatile

for the remainder of 2021 due to the uncertain timing of the outflows of

the

stimulus related balances and the economic recovery.

It is anticipated that current liquidity levels will remain robust due

to our strong

overnight funds sold position.

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 management arises from changes in interest rates,

exchange rates, commodity prices, and equity prices.

have risk management policies to monitor and limit exposure

to interest rate risk and do not participate in activities that

give rise to

significant market risk involving exchange rates, commodity

prices, or equity prices. Our risk management policies are

primarily

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 re-price on a different basis than interest

-earning assets.

When

interest-bearing liabilities mature or re-price more quickly

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

market rates of interest could adversely affect

net interest income.

Similarly, when interest-earning

assets mature or re-price more

quickly than interest-bearing liabilities, falling 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

a comprehensive interest rate risk management policy,

which is administered by management’s

Asset/Liability

Management Committee (“ALCO”).

The policy establishes risk limits, 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 is designed to capture optionality

factors

such as call features and interest rate caps and floors imbedded

in investment and loan portfolio contracts.

As with any method of

analyzing interest rate risk, there are certain shortcomings

inherent in the interest rate modeling methodology that

we use.

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 the assumptions that we use in our

modeling.

Finally, the methodology

does not measure or reflect the impact that higher rates may

have on variable and adjustable-rate loan

clients’ ability to service their debts, or the impact of rate

changes on demand for loan and deposit products.

We prepare

a current base case and several alternative simulations at least once

per quarter and present the analysis to ALCO, with the

risk metrics also reported to the Board of Directors.

In addition, more frequent forecasts may be produced when

interest rates are

particularly uncertain or when other business conditions

so dictate.

Our interest rate risk management goal is to maintain expected

changes in our net interest income and capital levels due

to fluctuations

in market interest rates within acceptable limits.

Management attempts to achieve this goal by balancing,

within policy limits, the

volume of variable-rate liabilities with a similar volume

of variable-rate assets, by keeping the average maturity of fixed-rate

asset and

liability contracts reasonably matched, by maintaining

our core deposits as a significant component of our total funding

sources and by

adjusting rates to market conditions on a continuing basis.

We test our balance

sheet using varying interest rate shock scenarios to analyze our interest

rate risk. Average

interest rates are

shocked by plus or minus 100, 200, 300, and 400 basis

points (“bp”), although we may elect not to use particular

scenarios that we

determined are impractical in a current rate environment.

It is management’s goal

to structure the balance sheet 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 augment

our interest rate shock analysis with alternative external

interest rate scenarios on a quarterly basis.

These alternative

interest rate scenarios may include non-parallel rate ramps.

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

Policy Limit

-15.0%

-12.5%

-10.0%

-7.5%

June 30, 2021

33.1%

24.4%

15.8%

7.6%

-4.7%

March 31, 2021

40.6%

30.0%

19.4%

9.3%

-4.0%

Percentage Change (24-month shock)

+400 bp

+300 bp

+200 bp

+100 bp

-100 bp

Policy Limit

-17.5%

-15.0%

-12.5%

-10.0%

June 30, 2021

46.0%

32.5%

19.1%

6.5%

-12.4%

March 31, 2021

53.0%

37.0%

21.2%

6.2%

-14.2%

The Net Interest Income at Risk position indicates

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

impact the net

interest margin of the Company,

while a declining rate environment of 100bp will have a

negative impact on the net interest margin.

The 12-month Net Interest Income at Risk position became

less favorable in all rate scenarios primarily due to lower PPP fees for

the

year-over-year comparison. Compared to the

prior quarter-end, the 24-month Net Interest Income at Risk position

became slightly

more favorable in rates down 100 bps and rates up 100

bps due to investment purchases during the quarter,

and slightly less favorable

in rate scenarios of rates up 200 bps or more as the balance

sheet is less asset sensitive due to these asset purchases. As an intended

result of the $500 million investment strategy during

the quarter, the Bank has become slightly

less asset sensitive, and has slightly

less risk to the rates down scenario.

All measures of Net Interest Income at Risk in rising rate

environments are within our prescribed policy limits over the next 12

-month

and 24-month periods. We

are out of compliance in the down 100bp scenario for the 24-month

period due to our limited ability to

lower our deposit rates relative to the decline in market rates.

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, and discounting the cash flows to estimate the

present value of assets and liabilities.

The difference between the

aggregated 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

Policy Limit

-30.0%

-25.0%

-20.0%

-15.0%

June 30, 2021

47.9%

38.4%

27.5%

15.2%

-35.2%

June 30, 2021 (Alternate Scenario)

(2)

37.2%

28.4%

18.2%

9.1%

-12.5%

March 31, 2021

96.8%

76.6%

53.9%

28.5%

-55.6%

(1) Down 200, 300, and 400 bp scenarios have been

excluded due to the low interest rate environment.

(2)

For the rates down 100 bp scenario,

the high negative percentage change

is due to a negative value assigned to our nonmaturity

deposits.

Since we believe our nonmaturity deposits are

highly valued core franchise deposits, we run

an alternate EVE

calculation which caps the projected

value of our nonmaturity deposits at their book value.

In the alternate EVE scenario where

the value of our nonmaturity deposits are

capped at their book value, both our EVE and our EVE Ratio

are within policy

guidelines.

At June 30, 2021,

the economic value of equity results are favorable in all rising

rate environments and are within prescribed tolerance

levels.

The EVE Ratio (EVE/EVA)

was 6.4% for the second quarter 2021, which is within policy

limits.

EVE metrics became more

favorable in the rates down scenario reflecting the deployment of

additional funds in the investment portfolio and utilization of

and a

lower cost of acquiring and maintaining deposits, which was incorporated

into the model in the second quarter.

LIQUIDITY AND CAPITAL

RESOURCES

Liquidity

In general terms, liquidity is a measurement of our ability

to meet our cash needs.

Our objective in managing our liquidity is to

maintain our ability to meet loan commitments, purchase

securities or repay deposits and other liabilities in accordance

with their

terms, without an adverse impact on our current or future

earnings.

Our liquidity strategy is guided by policies that are formulated

and

monitored by our ALCO and senior management,

which take into account the marketability of assets, the sources and

stability of

funding and the level of unfunded commitments.

We regularly evaluate

all of our various funding sources with an emphasis on

accessibility, stability,

reliability and cost-effectiveness.

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

by our short-term and long-term borrowings, primarily

from securities sold under repurchase agreements, federal

funds purchased and

FHLB borrowings.

We believe that the

cash generated from operations, our borrowing capacity and our

access to capital resources are

sufficient to meet our future operating capital

and funding requirements.

At June 30,

2021,

we had the ability to generate $1.248 billion in additional

liquidity through all of our available resources (this

excludes $767 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 June 30, 2021,

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, and municipal governments.

The weighted average life of the portfolio was approximately

3.34

years at June 30, 2021,

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

gain of $1.2 million.

Our average overnight funds position (defined deposits with banks

plus Fed funds sold less Fed funds purchased) was $818.6

million

in the second quarter of 2021 compared to an average net

overnight funds sold position of $814.6 million in the first quarter of

2021

and $705.1 million in the fourth quarter of 2020.

The increase compared to both prior periods was driven

by deposit inflows related to

pandemic related stimulus programs and growth

in our core deposits (see

Deposits

We expect

our capital expenditures will be approximately $7.0 million over

the next 12 months, which will primarily consist of 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

At June 30,

2021,

average short term borrowings totaled $51.2 million compared

to $67.0 million at March 31, 2021 and $95.3 million

at December 31, 2020.

The variance over both prior periods was attributable to the

fluctuation of residential mortgage warehouse

borrowings at CCHL.

Additional detail on these borrowings is provided in Note

4 – Mortgage Banking Activities in the Consolidated

Financial Statements.

At June 30,

2021,

fixed rate credit advances from the FHLB totaled $1.8 million

in outstanding debt consisting of five notes. During

the first six months of 2021, the Bank made FHLB advance payments

totaling approximately $0.4 million,

which included one

advance that paid off, and another that matured.

We did not obtain

any new FHLB advances during this period. The FHLB notes are

collateralized by a blanket floating lien on all of our 1-4

family residential mortgage loans, commercial real estate mortgage

loans, and

home equity mortgage loans.

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

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

Note 5 – Derivatives in the Consolidated Financial Statements.

Capital

Our capital ratios are presented in the Selected Quarterly

Financial Data table on page 31.

At June 30, 2021, our regulatory capital

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

under the Basel III capital standards.

Shareowners’ equity was $335.9 million at June 30,

2021 compared to $324.4 million at March 31, 2021 and

$320.8 million at

December 31, 2020 and.

For the first six months of 2021, shareowners’ equity was positively

impacted by net income of $16.9

million, a $0.9 million increase in fair value of

the interest rate swap related to subordinated debt, net adjustments

totaling $1.0 million

related to transactions under our stock compensation plans,

stock compensation accretion of $0.4 million, and reclassification

of $1.2

million from temporary equity to decrease the redemption

value of the non-controlling interest in CCHL.

In addition, $1.6 million

was reclassified from accumulated other comprehensive

loss to pension expense in conjunction with partial pension settlement

charge

reflected in earnings, therefore, the charge

had no net effect on equity.

Shareowners’ equity was reduced by common stock dividends

of $5.1 million ($0.30 per share) and a $1.8 million

decrease in the unrealized gain on investment securities.

At June 30, 2021, our common stock had a book value

of $19.87 per diluted share compared to $19.22 at March 31,

2021 and $19.05

at December 31, 2020.

Book value is impacted by the net after-tax unrealized

gains and losses on AFS investment securities.

At June

30, 2021, the net gain was $0.9 million compared

to a $1.2 million net gain at March 31, 2021

and a $2.7 million net gain at December

31, 2020.

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 June 30, 2021,

the net pension liability reflected in other

comprehensive loss was $45.6 million compared to

$47.1 million at March 31, 2021 and $47.2 million at December

31, 2020.

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

2020 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 $6.6 million (after-tax) using the balances

from

the December 31, 2020 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 June 30, 2021,

we had $772.0 million in commitments to extend credit and

$6.6 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 $2.6 million at June 30, 2021.

CRITICAL ACCOUNTING POLICIES

Our significant accounting policies are described in Note

1 to the Consolidated Financial Statements included in our

2020 Form 10-K.

The preparation of our Consolidated Financial Statement

in accordance with GAAP and reporting practices applicable

to the banking

industry requires us to make estimates and assumptions that

affect the reported amounts of assets, liabilities, revenues

and expenses,

and to disclose contingent assets and liabilities.

Actual results could differ from those estimates.

We have identified

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

goodwill and other identifiable intangible assets,

(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 2020 Form 10-K.

TABLE I

AVERAGE BALANCES & INTEREST RATES

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Average

(Dollars in Thousands)

Balances

Interest

Rate

Balances

Interest

Rate

Balances

Interest

Rate

Balances

Interest

Rate

Assets:

Loans Held for Sale

77,101

566

2.94

74,965

550

3.41

91,591

1,536

3.38

55,181

906

3.30

Loans Held for Investment

(1)(2)

2,036,781

24,095

4.74

1,982,960

23,235

4.70

2,040,551

46,578

4.71

1,915,370

46,571

4.89

Taxable Securities

687,882

2,036

1.18

601,509

2,708

1.80

608,801

3,899

1.28

615,511

5,703

1.86

Tax-Exempt Securities

(2)

3,530

2.58

5,865

2.51

3,686

2.60

5,579

2.20

Funds Sold

818,616

200

0.10

351,473

0.10

816,638

414

0.10

292,922

845

0.58

Total Earning Assets

3,623,910

26,920

2.98

3,016,772

26,618

3.55

3,561,267

52,475

2.97

2,884,563

54,087

3.77

Cash & Due From Banks

74,076

72,647

71,541

64,802

Allowance For Credit Losses

(22,794)

(21,642)

(23,457)

(18,015)

Other Assets

281,157

261,449

279,956

252,657

TOTAL ASSETS

3,956,349

3,329,226

3,889,307

3,184,007

Liabilities:

NOW Accounts

966,649

0.03

789,378

0.04

976,031

150

0.03

799,094

803

0.20

Money Market Accounts

272,138

0.05

222,377

0.07

270,990

0.05

217,295

157

0.15

Savings Accounts

529,844

0.05

409,366

0.05

511,152

124

0.05

394,301

0.05

Other Time Deposits

102,995

0.15

104,718

0.19

102,544

0.15

105,130

101

0.19

Total Interest Bearing Deposits

1,871,626

208

0.04

1,525,839

218

0.06

1,860,717

416

0.05

1,515,820

1,157

0.15

Short-Term Borrowings

51,152

324

2.54

73,377

421

2.31

59,049

736

2.51

53,146

553

2.09

Subordinated Notes Payable

52,887

308

2.30

52,887

374

2.80

52,887

615

2.31

52,887

845

3.16

Other Long-Term Borrowings

1,762

3.38

5,766

2.84

2,246

3.26

6,039

3.03

Total Interest Bearing Liabilities

1,977,427

856

0.17

1,657,869

1,054

0.26

1,974,899

1,804

0.18

1,627,892

2,646

0.33

Noninterest Bearing Deposits

1,515,726

1,257,614

1,453,121

1,152,251

Other Liabilities

107,801

72,073

109,417

65,830

TOTAL LIABILITIES

3,600,954

2,987,556

3,537,437

2,845,973

Temporary Equity

26,355

8,155

24,178

5,331

TOTAL SHAREOWNERS’ EQUITY

329,040

333,515

327,692

332,703

TOTAL LIABILITIES, TEMPORARY

AND SHAREOWNERS’ EQUITY

3,956,349

3,329,226

3,889,307

3,184,007

Interest Rate Spread

2.81

3.30

2.79

3.44

Net Interest Income

26,064

25,564

50,671

51,441

Net Interest Margin

(3)

2.89

3.41

2.87

3.59

(1)

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

Interest income includes loans fees of $1.9 million and $0.6 million

for the three month periods ended June 30, 2021 and 2020,

respectively, and $3.1 million and $0.8 million for the six month periods ended June 30, 2021

and 2020, 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, 2020.

Item 4. CONTROLS

AND PROCEDURES

At June 30, 2021, 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 June 30, 2021, other

than the above, 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 2020 Form 10-K, as updated

in our subsequent

quarterly reports. The risks described in our 2020 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

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101.DEF XBRL Taxonomy

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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: July 30,

2021

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;

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

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: July 30,

2021

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;

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

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: July 30,

2021

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 June 30, 2021, 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 Exchan

ge 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: July 30,

2021

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 June 30, 2021, 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 Exchan

ge 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: July 30,

2021

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.