UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,

20549

___________________________________

FORM

10-K

☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended

December 31, 2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Capital City Bank Group, Inc.

(Exact name of Registrant as specified in its charter)

Florida

0-13358

59-2273542

(State of Incorporation)

(Commission File Number)

(IRS Employer Identification No.)

217 North Monroe Street

Tallahassee

Florida

32301

(Address of principal executive offices)

(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, $0.01 par value

CCBG

The

Nasdaq Stock Market

LLC

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if

the registrant is a well-known

seasoned issuer, as defined in

Rule 405 of the Securities

Act. Yes

☐

☒

Indicate by check mark if the registrant is not required to file

reports pursuant to Section 13 or Section 15(d) of

the Exchange Act. Yes

☐

☒

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

☒

☐

Indicate by check mark whether the registrant has submitted

electronically and posted on its corporate Web site, if any, every Interactive Data File required to be

submitted and posted 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 and post such files). Yes

☒

☐

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 definition 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 provided pursuant to Section 13(a)

of the Exchange Act.

☐

Indicate by check mark whether the registrant has filed a

report on and attestation to its management’s assessment of the effectiveness of its internal control

over

financial reporting under Section 404(b) of the Sarbanes-Oxley

Act (15 U.S.C. 7262(b)) by the registered public accounting

firm that prepared or issued its audit

report.

☒

If securities are registered pursuant to Section 12(b) of the Act,

indicate by check mark whether the financial statements

of the registrant included in the filing reflect

the correction of an error to previously issued financial statements

☐

Indicate by check mark whether any of those error corrections

are restatements that required a recovery analysis of

incentive-based compensation received by any of

the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

☐

Indicate by check mark whether the registrant is a shell company

(as defined in Rule 12b-2 of the Exchange Act). Yes

☐

☒

The aggregate market value of the registrant’s common stock, $0.01 par value

per share, held by non-affiliates of the registrant on June

30, 2022, the last business day

of the registrant’s most recently completed second fiscal quarter, was approximately $

359,832,091

(based on the closing sales price of the registrant’s common stock

on that date). Shares of the registrant’s common stock held by each officer and director and

each person known to the registrant to own 10% or more of

the

outstanding voting power of the registrant have been excluded

in that such persons may be deemed to be affiliates. This

determination of affiliate status is not a

determination for other purposes.

Indicate the number of shares outstanding of each of the

issuer’s classes of common stock, as of the latest practicable date.

Class

Outstanding at February 28, 2023

Common Stock, $0.01 par value per share

17,016,994

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our Proxy Statement for the Annual Meeting of Shareowners to be held on April 25, 2023, are incorporated by reference in Part III.

CAPITAL CITY BANK

GROUP,

INC.

ANNUAL REPORT FOR 2022 ON FORM 10-K

TABLE OF CONTENTS

PART

PAGE

Item 1.

Business

Item 1A.

Risk Factors

Item 1B.

Unresolved Staff Comments

Item 2.

Properties

Item 3.

Legal Proceedings

Item 4.

Mine Safety Disclosure

PART

Item 5.

Market for the Registrant’s Common Equity, Related Shareowner Matters, and Issuer Purchases of

Equity Securities

Item 6.

Selected Financial Data

Item 7.

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

Item 7A.

Quantitative and Qualitative Disclosure About Market Risk

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

116

Item 9A.

Controls and Procedures

116

Item 9B.

Other Information

118

PART

III

Item 10.

Directors, Executive Officers, and Corporate Governance

119

Item 11.

Executive Compensation

119

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Shareowner Matters

119

Item 13.

Certain Relationships and Related Transactions, and Director Independence

119

Item 14.

Principal Accountant Fees and Services

119

PART

Item 15.

Exhibits and Financial Statement Schedules

120

Item 16.

Form 10-K Summary

121

Signatures

122

INTRODUCTORY NOTE

This Annual Report on Form 10-K contains “forward-looking statements” within

the meaning of the Private Securities Litigation

Reform Act of 1995. These forward-looking statements include, among others,

statements about our beliefs, plans, objectives,

goals,

expectations, estimates and intentions that are subject to significant risks and

uncertainties and are subject to change based

on various factors, many of which are beyond our control.

The words “may,” “could,”

“should,” “would,” “believe,”

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

“goal,” and similar expressions are intended to identify

forward-looking statements.

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

Our actual future results may differ

materially from those set forth in our forward-looking statements.

In addition to those risks discussed in this Annual Report under Item 1A Risk Factors, factors

that could cause our actual results

to differ materially from those in the forward-looking

statements, include, without limitation:

●

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 our liquidity position;

●

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 loan segments, 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

(including pandemics, such as the COVID-19 pandemic), military conflict,

terrorism, civil unrest or other geopolitical

events;

●

our ability to comply with the extensive laws and regulations to which

we are subject, including the laws for each

jurisdiction where we operate;

●

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

products and services and vice versa;

●

increased competition and its effect on pricing;

●

technological changes;

●

the outcomes of litigation or regulatory proceedings;

●

negative publicity and the impact on our reputation;

●

changes in consumer spending and saving habits;

●

growth and profitability of our noninterest income;

●

the limited trading activity of our common stock;

●

the concentration of ownership of our common stock;

●

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

and our Bylaws;

●

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

Commission; and

●

our ability to manage the risks involved in the foregoing.

However, other factors besides those listed in

Item 1A Risk Factors

or discussed in this 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.

PART

Item 1.

Business

About Us

General

Capital City Bank Group, Inc. (“CCBG”) is a financial holding company

headquartered in Tallahassee,

Florida. CCBG was

incorporated under Florida law on December 13, 1982, to acquire five national banks

and one state bank that all subsequently

became part of CCBG’s bank subsidiary,

Capital City Bank (“CCB” or the “Bank”). The Bank commenced operations

in 1895. In

this report, the terms “Company,”

“we,” “us,” or “our” mean CCBG and all subsidiaries included in our consolidated financial

statements.

CCBG is one of the largest publicly traded financial holding

companies headquartered in Florida and has approximately $4.5

billion in assets. We provide

a full range of banking services, including traditional deposit and credit services,

mortgage banking,

asset management, trust, merchant services, bankcards, securities brokerage

services and financial advisory services, including the

sale of life insurance, risk management and asset protection services. The

Bank has 58 banking offices and 89 ATMs/ITMs

Florida, Georgia, and Alabama.

Through Capital City Home Loans, LLC (“CCHL”), we have 33 additional offices

in the

Southeast for our mortgage banking business.

The majority of the revenue (excluding CCHL), approximately 86%, is derived

from our Florida market areas while approximately 13% and 1% of the

revenue is derived from our Georgia and other market

areas, respectively.

Approximately 52% of the revenue from CCHL is derived from our Georgia

market areas while

approximately 39% and 9% is derived from our Florida and other market areas,

respectively.

Below is a summary of our financial condition and results of operations for the past three

fiscal years, which we believe is a

sufficient period for understanding our general business development.

Our financial condition and results of operations are more

fully discussed in our Management’s

Discussion and Analysis on page 36 and our consolidated financial statements on

page 63.

Dollars in millions

Year

Ended

December 31,

Assets

Deposits

Shareowners’

Equity

Revenue

(1)

Net Income

2022

$4,526.0

$3,939.3

$394.0

$226.0

$40.1

2021

$4,263.8

$3,712.9

$383.2

$213.9

$33.4

2020

$3,798.1

$3,217.6

$320.8

$217.4

$31.6

(1)

Revenue represents interest income plus noninterest income

Dividends and management fees received from the Bank are CCBG’s

primary source of income. Dividend payments by the Bank

to CCBG depend on the capitalization, earnings and projected growth of

the Bank, and are limited by various regulatory

restrictions, including compliance with a minimum Common Equity

Tier 1 Capital conservation buffer.

See the section entitled

“Regulatory Considerations” in this Item 1 and Note 17 in the Notes to Consolidated

Financial Statements for a discussion of the

restrictions.

Item 6 contains other financial and statistical information about us.

Subsidiaries of CCBG

CCBG’s principal asset is the capital

stock of CCB, our wholly owned banking subsidiary,

which accounted for nearly 100% of

consolidated assets and net income attributable to CCBG at December 31,

2022.

CCBG also maintains an insurance subsidiary,

Capital City Strategic Wealth,

LLC.

CCB has two primary subsidiaries, which are wholly owned, Capital City Trust

Company

and Capital City Investments.

CCB also maintains

a 51% membership interest in a consolidated subsidiary,

CCHL, which we

acquired on March 1, 2020.

The nature of these subsidiaries is provided below.

Operating Segment

We have one

reportable segment with two principal services: Banking Services and Wealth

Management Services.

Banking

Services are operated at CCB, and Wealth

Management Services are operated under three separate subsidiaries (Capital City

Trust Company,

Capital City Investments, and Capital City Strategic Wealth,

LLC.).

Revenues from these principal services for

the year ended 2022 totaled approximately 91.8% and 8.2% of our

total revenue, respectively.

In 2022 and 2021, Banking

Services (CCB) revenue was approximately 93.2% and 94.7% of our total revenue

for each respective year.

Capital City Bank

CCB is a Florida-chartered full-service bank engaged in the commercial

and retail banking business. Significant services offered

by CCB include:

●

Business Banking

– We provide banking

services to corporations and other business clients. Credit products are available

for a wide variety of general business purposes, including financing for

commercial business properties, equipment,

inventories and accounts receivable, as well as commercial leasing and

letters of credit. We also provide

treasury

management services, and, through a marketing alliance with Elavon, Inc., merchant

credit card transaction processing

services.

●

Commercial Real Estate Lending

– We provide

a wide range of products to meet the financing needs of commercial

developers and investors, residential builders and developers, and community

development. Credit products are available

to purchase land and build structures for business use and for investors

who are developing residential or commercial

property.

●

Residential Real Estate Lending

– We provide products

through our strategic alliance with CCHL and its existing

network of locations to help meet the home financing needs of consumers,

including conventional permanent and

construction/ permanent (fixed, adjustable, or variable rate) financing

arrangements, and FHA/VA/Government

National

Mortgage Association (“GNMA”) loan products.

We offer

both fixed and adjustable rate residential mortgage (ARM)

loans.

We offer

these products through our existing network of CCHL locations.

We do not originate

subprime

residential real estate loans.

●

Retail Credit

– We provide

a full-range of loan products to meet the needs of consumers, including personal

loans,

automobile loans, boat/RV

loans, home equity loans, and through a marketing alliance with ELAN, we offer

credit card

programs.

●

Institutional Banking –

We provide banking

services to meet the needs of state and local governments, public schools

and colleges, charities, membership and not-for-profit

associations including customized checking and savings accounts,

cash management systems, tax-exempt loans, lines of credit, and term

loans.

●

Retail Banking

– We provide a full-range

of consumer banking services, including checking accounts, savings programs,

interactive/automated teller machines (ATMs/ITMs),

debit/credit cards, night deposit services, safe deposit facilities,

online banking, and mobile banking.

Capital City Trust Company

Capital City Trust Company,

or the Trust Company,

provides asset management for individuals through agency,

personal trust,

IRA, and personal investment management accounts. Associations,

endowments, and other nonprofit entities hire the Trust

Company to manage their investment portfolios. Additionally,

a staff of well-trained professionals serves individuals requiring

the

services of a trustee, personal representative, or a guardian.

The market value of trust assets under discretionary management

exceeded $1.082 billion at December 31, 2022, with total assets under administration

exceeding $1.097 billion.

Capital City Investments

We offer

our customers access to retail investment products through LPL Financial pursuant

to which retail investment products

would be offered through LPL. LPL offers a full line

of retail securities products, including U.S. Government bonds, tax-free

municipal bonds, stocks, mutual funds, unit investment trusts, annuities, life

insurance and long-term health care. Non-deposit

investment and insurance products are: (i) not FDIC insured; (ii) not deposits,

obligations, or guarantees by any bank; and (iii)

subject to investment risk, including the possible loss of principal amount

invested.

Capital City Strategic Wealth,

LLC.

We provide

a multi-disciplinary strategic planning approach that requires examining all facets of our

clients’ financial lives

through our business, estate, financial, insurance and business planning,

tax planning, and asset protection advisory services.

Insurance sales within this division include life, health, disability,

long-term care, and annuity solutions.

Lending Activities

One of our core goals is to support the communities in which we operate. We

seek loans from within our primary market area,

which is defined as the counties in which our banking offices are

located.

We will also originate

loans within our secondary

market area, defined as counties adjacent to those in which we have banking offices.

There may also be occasions when we will

have opportunities to make loans that are out of both the primary and secondary

market areas, including participation loans.

These loans are only approved if the underwriting is consistent with our criteria and generally

the project or applicant’s primary

business is in or near our primary or secondary market areas. Approval of all loans is subject

to our policies and standards

described in more detail below.

have adopted comprehensive lending policies, underwriting standards

and loan review procedures. Management and our

Board of Directors reviews and approves these policies and procedures on a regular

basis (at least annually).

Management has also implemented reporting systems designed to

monitor loan originations, loan quality,

concentrations of

credit, loan delinquencies, nonperforming loans, and potential problem

loans. Our 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, we establish total borrower exposure limits and monitor concentration

risk. 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 portfolio are monitored and reported to our

Board on a quarterly basis, and we have strategic plans in place to supplement

Board approved credit policies governing exposure

limits and underwriting standards. We

recognize that exceptions to the below-listed policy guidelines may

occasionally occur and

have established procedures for approving exceptions to these policy guidelines.

Residential Real Estate Loans

We originate

1-4 family, owner-occupied

residential real estate loans at CCHL for sale in the secondary market.

A vast majority

of residential loan originations are fixed-rate loans which are sold in the

secondary market on a non-recourse basis.

We will

frequently sell loans and retain the servicing rights.

Note 4 – Mortgage Banking Activities in the Notes to Our Consolidated

Financial Statements provides additional information on our servicing

portfolio.

CCB also maintains a portfolio of residential loans held for investment and

will periodically purchase newly originated 1-4

family secured adjustable rate loans from CCHL for that portfolio.

Residential loans held for investment are generally

underwritten in accordance with secondary market guidelines in effect

at the time of origination, including loan-to-value, or LTV,

and documentation requirements.

Residential real estate loans also include home equity lines of credit, or HELOCs, and

home equity loans. Our home equity

portfolio includes revolving open-ended equity loans with interest-only

or minimal monthly principal payments and closed-end

amortizing loans. Open-ended equity loans typically have an interest only

10-year draw period followed by a five-year repayment

period of 0.75% of principal balance monthly and balloon payment at maturity.

As of December 31, 2022, approximately 56% of

our residential home equity loan portfolio consisted of first mortgages.

Interest rates may be fixed or adjustable.

Adjustable-rate

loans are tied to the Prime Rate with a typical margin of 1.0% or more.

Commercial Loans

Our policy sets forth guidelines for debt service coverage ratios, LTV

ratios and documentation standards. Commercial loans are

primarily made based on identified cash flows of the borrower with consideration

given to underlying collateral and personal or

other guarantees. We

have established 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 our commercial loans are secured by the

assets being financed or other business assets such as accounts receivable or inventory.

Many of the loans in the commercial

portfolio have variable interest rates tied to the Prime Rate or U.S. Treasury

indices.

Commercial Real Estate Loans

We have adopted

guidelines for debt service coverage ratios, LTV

ratios and documentation standards for commercial real estate

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

borrower with consideration given to underlying real

estate collateral and personal guarantees. Our policy establishes a maximum

LTV specific to

property type and minimum 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. Commercial real estate loans may be fixed

or variable-rate loans with interest rates tied to the Prime Rate

or U.S. Treasury indices. We

require appraisals for loans in excess of $250,000 that are secured by real property.

Consumer Loans

Our consumer 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. The majority of our consumer

loans are short-term and have fixed rates of interest that are priced based on

current market interest rates and the financial

strength of the borrower. Our policy

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

guidelines

for verification of applicants’ income and receipt of credit reports.

Expansion of Business

See MD&A (Business Overview) for disclosures regarding the expansion

of our Business.

Competition

We operate in

a highly competitive environment, especially with respect to services and pricing, that

has undergone significant

changes. Since January 1, 2009, over 500 financial institutions have failed

in the U.S., including many in Florida and Georgia.

Nearly all of the failed banks were community banks. The assets and deposits of many

of these failed community banks were

acquired mostly by larger financial institutions. The banking industry

has also experienced significant consolidation through

mergers and acquisition, which we expect will continue

during 2023. However, we believe that the larger

financial institutions

acquiring banks in our market areas are less familiar with the markets in

which we operate and typically target a different client

base. We also believe

clients who bank at community banks tend to prefer the relationship style service

of community banks

compared to larger banks.

As a result, we expect to be able to effectively compete in our markets

with larger financial institutions through providing

superior client service and leveraging our knowledge and experience

in providing banking products and services in our market

areas. Thus, a further reduction of the number of community banks

could continue to enhance our competitive position and

opportunities in many of our markets. However,

larger financial institutions can benefit from economies of scale. Therefore,

these

larger institutions may be able to offer banking

products and services at more competitive prices than us. Additionally,

these

larger financial institutions may offer financial

products that we do not offer.

Our primary market area consists of 20 counties in Florida, six counties in Georgia,

and one county in Alabama. In these markets,

we compete against a wide range of banking and nonbanking institutions including

banks, savings and loan associations, credit

unions, money market funds, mutual fund advisory companies, mortgage

banking companies, investment banking companies,

finance companies and other types of financial institutions. Most of Florida’s

major banking concerns have a presence in Leon

County, where our main

office is located.

Our Leon County deposits totaled $1.489 billion, or 38% of our consolidated

deposits

at December 31, 2022.

The table below depicts our market share percentage within each county,

based on commercial bank deposits within the county.

Market Share as of June 30,

(1)

County

2022

2021

2020

Florida

Alachua

4.9%

4.6%

4.5%

Bay

0.3%

0.2%

0.0%

Bradford

34.9%

32.4%

30.6%

Citrus

4.7%

4.1%

3.6%

Clay

2.3%

2.8%

2.0%

Dixie

19.8%

18.9%

18.7%

Gadsden

82.1%

81.1%

80.8%

Gilchrist

41.2%

39.6%

38.7%

Gulf

14.8%

14.6%

12.8%

Hernando

5.0%

3.9%

3.5%

Jefferson

24.8%

24.4%

23.0%

Leon

15.4%

11.9%

13.3%

Levy

25.4%

26.4%

24.2%

Madison

14.0%

14.5%

14.0%

Putnam

26.4%

23.2%

20.7%

St. Johns

0.7%

0.6%

Suwannee

7.0%

6.8%

7.1%

Taylor

73.8%

73.2%

72.4%

Wakulla

10.0%

10.5%

8.3%

Washington

11.2%

11.0%

Georgia

Bibb

3.2%

3.3%

3.2%

Cobb

(2)

0.0%

Grady

16.3%

14.8%

14.0%

Laurens

7.8%

7.9%

8.4%

Troup

6.4%

6.1%

6.5%

Alabama

Chambers

9.3%

9.6%

(1)

Obtained from the FDIC Summary of Deposits Report for the year indicated.

(2)

Banking office opened in the fourth quarter of 2022.

Seasonality

We believe our

commercial banking operations are not generally seasonal in nature; however,

public deposits tend to increase

with tax collections in the fourth and first quarters of each year and decline

as a result of governmental spending thereafter.

Human Capital Matters

We are dedicated

to creating personal relationships with our customers and implementing

solutions that are right for them. Our

associates (our employees) are critical to achieving this mission, and it is crucial that

we continue to attract and retain experienced

associates. As part of these efforts, we strive to offer

a competitive compensation and benefits program, foster a community

where everyone feels included and empowered to do to their best work,

and give associates the opportunity to give back to their

communities and make a social impact.

At January 31, 2023, we had approximately 796 associates, which included

approximately 763 full-time associates and

approximately 33 part-time associates.

None of our associates are represented by a labor union or covered by a

collective

bargaining agreement.

At January 31, 2023, approximately 72% of our current workforce was female while 28%

was male, and

approximately 21% are ethnic minorities. The average tenure of our associates was approximately

9 years.

For more than 10 years, Florida Trend has honored us

by listing Capital City Bank as a Best Place to Work,

and American

Bankers Magazine has recognized us as a Best Bank to Work

For. Additionally,

Georgia Trend recognized CCB in 2016 and

2017 as a Best Place to Work.

Tenure statistics support

these accolades and further demonstrate that associates enjoy working

for

CCB.

Compensation and Benefits Program

. Our compensation program is designed to attract and reward talented

individuals who

possess the skills necessary to support our business objectives, assist in the

achievement of our strategic goals and create long-

term value for our shareowners. We

provide our associates with compensation packages that include base

salary, annual incentive

bonuses, and equity awards tied to the value of our stock price. We

believe that a compensation program with both short-term and

long-term awards provides fair and competitive compensation and aligns

associate and shareowner interests, including by

incentivizing business and individual performance (pay for performance),

motivating based on long-term company performance

and integrating compensation with our business plans. In addition to

cash and equity compensation, we also offer associates

benefits such as life and health (medical, dental & vision) insurance,

paid time off, paid parental leave, a 401(k) plan, and a

pension plan.

Diversity and Inclusion

. We believe that an equitable

and inclusive environment with diverse teams produces more creative

solutions, results in better services and is crucial to our efforts to attract and

retain key talent. We strive

to promote inclusion

through our corporate values of integrity,

advocacy, partnership, relationships,

community, and exceptional service.

In 2021, we

formed the Diversity,

Equity and Inclusion (DE&I) Charter and formed the DE&I Council. Our DE&I Council

consists of a

diverse group of members from all levels of the organization.

The Council’s focus is on diversity and

inclusion in our workforce,

workplace, and community.

They are responsible for connecting our diversity and inclusion activities with our

broader business

strategies. Additionally,

we created a Chief Diversity Officer position to provide direction and

leadership as we build processes,

initiatives, and special programs aimed at DE&I. Additionally during 2021,

we partnered with a third-party DE&I firm whose

mission is to embed equity and inclusion into work systems and culture, enhancing

outcomes for employees and customers. Our

partnership will further develop and enhance our DE&I plan and includes development

of focus group conversations, interviews

with Senior Leadership, research of existing policies and documentation

and outline of gaps in existing policies. All associates

receive DE&I education, awareness and training each year.

In January 2022, we added four new directors to our CCBG Board of

Directors. Of these four directors 50% are white males, 25% are minority

female and 25% are non-minority female. The CCBG

outside directors are made up of 11 non-shareowner

individuals. Of the 11 individuals, 27% are female and

18% are ethnic

minority. We

continue to focus on building an inclusive culture through a variety of diversity and inclusion

initiatives, including

related to internal promotions and hiring practices. As part of these initiatives, we

added the new position of Chief Culture Officer

and Head of Recruitment in 2022, and we have associate resource groups help

to build an inclusive culture through company

events, participation in our recruitment efforts, and input

into our hiring strategies. In addition, in response to emerging workplace

practices, we made changes to our Flex – work/life balance program

to assist our associates in maintaining a work/life balance

consistent with their goals and to attract, retain, and motivate key associates.

Health and Safety

. The success of our business is fundamentally connected to the well-being

of our people. Accordingly, we are

committed to the health, safety and wellness of our associates. We

provide our associates and their families with access to a

variety of flexible and convenient health and welfare programs, including benefits

that support their physical and mental health,

by providing tools and resources to help them improve or maintain their health

status. We also offer

choices to our associates

where possible so they can customize their benefits to meet their needs and

the needs of their families. In response to the COVID-

19 pandemic, we implemented significant operating environment changes

that we determined were in the best interest of our

associates, as well as the communities in which we operate, and which

comply with government regulations. We

have retained

many of these changes as a permanent part of our overall focus on associate and

client safety, and we continue to

follow local and

federal guidance, including guidance prescribed by the Centers for Disease Control

and Prevention (“CDC”), regarding COVID-

19 precautions and health measures.

Social Matters

Community Involvement

. We aim to give back

to the communities where we live and work and believe that this commitment

helps in our efforts to attract and retain associates. Our commitment

to help our community starts with our associates. Community

involvement is a hallmark for our organization, and it comes naturally

to our associates. We

encourage our associates to volunteer

their hours with service organizations and philanthropic groups in

the communities we serve. We

recorded 9,508, 8,697, and

8,169 community service hours in 2022, 2021, and 2020, respectively.

Furthermore, the CCBG Foundation donated $0.3

million,

$0.2 million, and $0.3 million to various non-profit organizations

in the communities we serve, during 2022, 2021, and 2020,

respectively.

Our community commitment to further financial literacy in our market remains an ongoing

goal and focus for our

associates and directors.

We continue

to focus on ways to better our communities in which we operate through monetary

resources and volunteer hours.

Access, affordability,

and financial inclusion.

In 2022, the CCBG Foundation made grants totaling $150,000 to

Community

Reinvestment Act eligible organizations in our market

area. Working with

CCHL, we are committed to providing educational

outreach regarding home ownership and financial access for minorities. We

are a long-time supporter of Habitat for Humanity,

with our associates providing volunteer hours on home builds.

During 2020 to 2022, we partnered with Habitat for Humanity,

Warrick Dunn

Charities, and Capital City Home Loans,

LLC. to build and furnish three homes.

During tax season, we provide

locations for community residents to access Volunteer

Income Tax Assistance (VITA)

services.

VITA is a nationwide

IRS

program that offers free tax preparation assistance to people

who generally make $54,000 or less, persons with disabilities, the

elderly, and limited English-speaking

taxpayers who need assistance in preparing their own tax returns. Since 2015, we have

annually supported the United Way

of the Big Bend in analyzing financial information for the annual grant review

process.

Many

of these grants are provided to low-moderate income communities in the Big Bend

area.

Small Business Lending.

We are focused on

supporting small businesses throughout our communities. The global pandemic

exposed the challenges of small business. Capital City Bank is proud

to have participated in the Paycheck Protection Program

(PPP), originating 3,508 loans totaling more than $266

million.

During the pandemic, our company financially supported locally

owned restaurants to provide meals and gift cards for our associates.

Environmental Matters

We are responsible

for protecting our planet and understand that reducing our business’s

carbon footprint is key to a sustainable

future. We

are committed to measuring and minimizing our collective impact on the

environment while contributing to

environmental stewardship and responsible business operations.

We strive to embed

environmental sustainability throughout our

products, services, operations, and culture to drive efficiencies

and responsible resource use while creating comfortable, safe, and

healthy workplaces for our associates.

As part of our corporate responsibility,

we continue to focus our efforts on sustainability

within our business and our community.

We are focused

on sustainability and resource conservation and, as a result, seek to reduce resource

consumption through

efficiency initiatives in our branches and offices.

We do this through

company-wide recycling programs, the implementation of

LED lighting in our workplaces, and working to reduce our reliance on disposable

products. As we renovate or build new

facilities, we try to leverage renewable sources for power and HVAC

through the employment of solar panels. In 2022, we made

a commitment for a $7 million investment in SOLCAP 2022-1, LLC,

a fund that was formed to make solar tax equity investments

in renewable solar energy projects that will provide us with

tax credits and other tax benefits. We

plan to continue to review these

investment opportunities as they arise. We

have also invested in tools and capabilities that allow our team members to work

remotely as appropriate. We

work hard to ensure that our lending activities do not encourage business activities

that could cause

irreparable damage to our reputation or the environment. As a result, we try

to conduct business responsibly and actively work

with shareowners to best serve our various constituents. We

monitor the environmental, social, and human rights risks of our

customers along with credit risks. This process involves management and

Board oversight and controls such as enhanced due

diligence and a reputation risk review which is overseen by our Enterprise

Risk Management Committee. In general, we evaluate

each credit or transaction on its individual merits, with larger deals

receiving more attention and deeper analysis, including a

review of environmental matters related to certain real estate loans which is overseen

by our Credit Risk Oversight Committee.

Regulatory Considerations

We must comply

with state and federal banking laws and regulations

that control virtually all aspects of our operations.

These

laws and regulations generally aim to protect

our depositors, not necessarily our shareowners or our

creditors. Any changes in

applicable laws or regulations may materially affect

our business and prospects. Proposed

legislative or regulatory changes may

also affect our operations. The following description summarizes some of the

laws and regulations to which we are

subject.

References to applicable statutes and regulations

are brief summaries, do not purport to be complete, and

are qualified in their

entirety by reference

to such statutes and regulations.

Capital City Bank Group, Inc.

We are registered

with the Board of Governors of the Federal Reserve as a bank holding company under

the Bank Holding

Company Act of 1956 (“BHC Act”) and have also elected to be a financial holding

company. As a result, we are subject

supervisory regulation and examination by the Federal Reserve.

The BHC Act, the Dodd-Frank Wall

Street Reform and

Consumer Protection Act, the Gramm-Leach-Bliley Financial Modernization

Act, and other federal laws subject financial holding

companies to restrictions on the types of activities in which they may engage,

and to a range of supervisory requirements and

activities, including regulatory enforcement actions for violations of

laws and regulations.

Permitted Activities

The Gramm-Leach-Bliley Act reformed the U.S. banking system by: (i) allowing

bank holding companies that qualify as

“financial holding companies,” such as CCBG, to engage in a broad range of financial

and related activities; (ii) allowing insurers

and other financial service companies to acquire banks; (iii) removing restrictions

that applied to bank holding company

ownership of securities firms and mutual fund advisory companies; and

(iv) establishing the overall regulatory scheme applicable

to bank holding companies that also engage in insurance and securities operations.

The general effect of the law was to establish a

comprehensive framework to permit affiliations among

commercial banks, insurance companies, securities firms, and other

financial service providers. Activities that are financial in nature are broadly

defined to include not only banking, insurance, and

securities activities, but also merchant banking and additional activities that the

Federal Reserve, in consultation with the

Secretary of the Treasury,

determines to be financial in nature, incidental to such financial activities, or complementary

activities

that do not pose a substantial risk to the safety and soundness of depository

institutions or the financial system generally.

In contrast to financial holding companies, bank holding companies are

limited to managing or controlling banks, furnishing

services to or performing services for its subsidiaries, and engaging

in other activities that the Federal Reserve determines by

regulation or order to be so closely related to banking or managing or controlling

banks as to be a proper incident thereto. In

determining whether a particular activity is permissible, the Federal Reserve must

consider whether the performance of such an

activity reasonably can be expected to produce benefits to the public that outweigh

possible adverse effects. Possible benefits

include greater convenience, increased competition, and gains in efficiency.

Possible adverse effects include undue concentration

of resources, decreased or unfair competition, conflicts of interest, and unsound

banking practices. Despite prior approval, the

Federal Reserve may order a bank holding company or its subsidiaries to terminate

any activity or to terminate ownership or

control of any subsidiary when the Federal Reserve has reasonable cause

to believe that a serious risk to the financial safety,

soundness or stability of any bank subsidiary of that bank holding company

may result from such an activity.

Changes in Control

Subject to certain exceptions, the BHC Act and the Change in Bank Control Act

(“CBCA”), together with the applicable

regulations, require Federal Reserve approval (or,

depending on the circumstances, no notice of disapproval) prior to any

acquisition of “control” of a bank or bank holding company.

Under the BHC Act, a company (a broadly defined term that includes

partnerships among other things) that acquires the power,

directly or indirectly,

to direct the management or policies of an insured

depository institution or to vote 25% or more of any class of voting securities of

any insured depository institution is deemed to

control the institution and to be a bank holding company.

A company that acquires less than 5% of any class of voting security

(and that does not exhibit the other control factors) is presumed not to have control.

For ownership levels between the 5% and

25% thresholds, the Federal Reserve has developed an extensive body of

law on the circumstances in which control may or may

not exist.

Further, on January 30, 2020, the Federal Reserve finalized

a rule that simplifies and increases the transparency of its

rules for determining when one company controls another company for

purposes of the BHC Act.

The rule became effective

September 30, 2020. It has and will likely continue to have a meaningful impact on

control determinations related to investments

in banks and bank holding companies and investments by bank holding

companies in nonbank companies.

Under the CBCA, if an individual or a company that acquires 10% or more of any

class of voting securities of an insured

depository institution or its holding company and either that institution or

company has registered securities under Section 12 of

the Exchange Act, or no other person will own a greater percentage of

that class of voting securities immediately after the

acquisition, then that investor is presumed to have control and may be

required to file a change in bank control notice with the

institution’s or the holding company’s

primary federal regulator. Our common

stock is registered under Section 12 of the

Exchange Act so we are subject to these rules.

As a financial holding company,

we are required to obtain prior approval from the Federal Reserve before (i) acquiring

all or

substantially all of the assets of a bank or bank holding company,

(ii) acquiring direct or indirect ownership or control of more

than 5% of the outstanding voting stock of any bank or bank holding company

(unless we own a majority of such bank’s voting

shares), or (iii) acquiring, merging or consolidating

with any other bank or bank holding company.

In determining whether to

approve a proposed bank acquisition, federal bank regulators will consider,

among other factors, the effect of the acquisition on

competition, the public benefits expected to be received from the acquisition,

the projected capital ratios and levels on a post-

acquisition basis, and the companies’ records of addressing the credit needs of

the communities they serve, including the needs of

low and moderate income neighborhoods, consistent with the safe and

sound operation of the bank, under the Community

Reinvestment Act of 1977.

Under Florida law,

a person or entity proposing to directly or indirectly acquire control of a Florida bank

must also obtain

permission from the Florida Office of Financial Regulation. The

Florida Statutes define “control” as either (i) indirectly or

directly owning, controlling or having power to vote 25% or more of the voting

securities of a bank; (ii) controlling the election of

a majority of directors of a bank; (iii) owning, controlling, or having power to vote 10%

or more of the voting securities as well as

directly or indirectly exercising a controlling influence over management

or policies of a bank; or (iv) as determined by the

Florida Office of Financial Regulation. These requirements

will affect us because the Bank is chartered under Florida law and

changes in control of CCBG are indirect changes in control of CCB.

Prohibitions Against Tying Arrangements

Banks are subject to the prohibitions of 12 U.S.C. 1972 on certain tying arrangements.

We are prohibited,

subject to some

exceptions, from extending credit to or offering any other service,

or fixing or varying the consideration for such extension of

credit or service, on the condition that the customer obtain some additional

service from the institution or its affiliates or not

obtain services of a competitor of the institution.

Capital; Dividends; Source of Strength

The Federal Reserve imposes certain capital requirements on financial

holding companies under the BHC Act, including a

minimum leverage ratio and a minimum ratio of “qualifying” capital to risk-weighted

assets. These requirements are described

below under “Capital Regulations.” Subject to these capital requirements

and certain other restrictions, we are generally able to

borrow money to make a capital contribution to CCB, and such loans may

be repaid from dividends paid from CCB to us. We

are

also able to raise capital for contributions to CCB by issuing securities without having

to receive regulatory approval, subject to

compliance with federal and state securities laws.

It is the Federal Reserve’s policy

that bank holding companies should generally pay dividends on common

stock only out of

income available over the past year,

and only if prospective earnings retention is consistent with the organization’s

expected

future needs and financial condition. It is also the Federal Reserve’s

policy that bank holding companies should not maintain

dividend levels that undermine their ability to be a source of strength to their banking

subsidiaries. Additionally,

the Federal

Reserve has indicated that bank holding companies should carefully review

their dividend policies and has discouraged payment

ratios that are at maximum allowable levels unless both asset quality and capital

are very strong. The Federal Reserve possesses

enforcement powers over bank holding companies and their non-bank subsidiaries

to prevent or remedy actions that represent

unsafe or unsound practices or violations of applicable statutes and regulations.

Among these powers is the ability to proscribe the

payment of dividends by banks and bank holding companies.

Bank holding companies are expected to consult with the Federal Reserve before

redeeming any equity or other capital instrument

included in Tier 1 or Tier

2 capital prior to stated maturity,

if such redemption could have a material effect on the level or

composition of the organization’s

capital base. In addition, a bank holding company may not repurchase shares equal

to 10% or

more of its net worth if it would not be well-capitalized (as defined by the Federal Reserve)

after giving effect to such repurchase.

Bank holding companies experiencing financial weaknesses, or

that are at significant risk of developing financial weaknesses,

must consult with the Federal Reserve before redeeming or repurchasing common

stock or other regulatory capital instruments.

In accordance with Federal Reserve policy,

which has been codified by the Dodd-Frank Act, we are expected to act as a source of

financial strength to CCB and to commit resources to support CCB in circumstances in

which we might not otherwise do so. In

furtherance of this policy,

the Federal Reserve may require a financial holding company to terminate any activity or

relinquish

control of a nonbank subsidiary (other than a nonbank subsidiary

of a bank) upon the Federal Reserve’s determination

that such

activity or control constitutes a serious risk to the financial soundness or stability of

any subsidiary depository institution of the

financial holding company.

Further, federal bank regulatory authorities have

additional discretion to require a financial holding

company to divest itself of any bank or nonbank subsidiary if the agency determines

that divestiture may aid the depository

institution’s financial condition.

Safe and Sound Banking Practices

Bank holding companies and their nonbanking subsidiaries are prohibited

from engaging in activities that represent unsafe and

unsound banking practices or that constitute a violation of law or regulations.

Under certain conditions the Federal Reserve may

conclude that some actions of a bank holding company,

such as a payment of a cash dividend, would constitute an unsafe and

unsound banking practice. The Federal Reserve also has the authority

to regulate the debt of bank holding companies, including

the authority to impose interest rate ceilings and reserve requirements on

such debt. The Federal Reserve may also require a bank

holding company to file written notice and obtain its approval prior to purchasing

or redeeming its equity securities, unless certain

conditions are met.

Capital City Bank

Capital City Bank is a state-chartered commercial banking institution that is chartered

by and headquartered in the State of Florida

and is subject to supervision and regulation by the Florida Office of

Financial Regulation. The Florida Office of Financial

Regulation supervises and regulates all areas of our operations including,

without limitation, the making of loans, the issuance of

securities, the conduct of our corporate affairs, the satisfaction

of capital adequacy requirements, the payment of dividends, and

the establishment or closing of banking centers. We

are also a member bank of the Federal Reserve System, which makes our

operations subject to broad federal regulation and oversight by the Federal

Reserve. In addition, our deposit accounts are insured

by the FDIC up to the maximum extent permitted by law,

and the FDIC has certain supervisory enforcement powers over us.

As a Florida state-chartered bank, we are empowered by statute, subject to

the limitations contained in those statutes, to take and

pay interest on savings and time deposits, to accept demand deposits, to

make loans on residential and other real estate, to make

consumer and commercial loans, to invest (with certain limitations) in equity securities

and in debt obligations of banks and

corporations and to provide various other banking services for the benefit

of our clients. Various

consumer laws and regulations

also affect our operations, including state usury laws, laws relating to

fiduciaries, consumer credit and equal credit opportunity

laws, and fair credit reporting. In addition, the Federal Deposit Insurance Corporation

Improvement Act of 1991, or FDICIA,

prohibits insured state-chartered institutions from conducting activities as principal

that are not permitted for national banks. A

bank, however, may engage in certain otherwise

prohibited activity if it meets its minimum capital requirements and the FDIC

determines that the activity does not present a significant risk to the Deposit Insurance

Fund.

Safety and Soundness Standards / Risk Management

The federal banking agencies have adopted guidelines establishing

operational and managerial standards to promote the safety

and soundness of federally insured depository institutions. The guidelines

set forth standards for internal controls, information

systems, internal audit systems, loan documentation, credit underwriting,

interest rate exposure, asset growth, compensation, fees

and benefits, asset quality and earnings.

In general, the safety and soundness guidelines prescribe the goals to be achieved

in each area, and each institution is responsible

for establishing its own procedures to achieve those goals. If an institution fails to

comply with any of the standards set forth in

the guidelines, the financial institution’s

primary federal regulator may require the institution to submit a plan for

achieving and

maintaining compliance. If a financial institution fails to submit an acceptable

compliance plan or fails in any material respect to

implement a compliance plan that has been accepted by its primary federal

regulator, the regulator is required to issue an order

directing the institution to cure the deficiency.

Until the deficiency cited in the regulator’s order is cured,

the regulator may

restrict the financial institution’s

rate of growth, require the financial institution to increase its capital, restrict the

rates the

institution pays on deposits or require the institution to take any action

the regulator deems appropriate under the circumstances.

Noncompliance with the standards established by the safety and soundness guidelines

may also constitute grounds for other

enforcement action by the federal bank regulatory agencies, including

cease and desist orders and civil money penalty

assessments.

The bank regulatory agencies have increasingly emphasized the importance

of sound risk management processes and strong

internal controls when evaluating the activities of the financial institutions they

supervise. Properly managing risks has been

identified as critical to the conduct of safe and sound banking activities and has

become even more important as new

technologies, product innovation and the size and speed of financial transactions have

changed the nature of banking markets. The

agencies have identified a spectrum of risks facing a banking institution including,

but not limited to, credit, market, liquidity,

operational, legal and reputational risk. In particular,

recent regulatory pronouncements have focused on operational risk, which

arises from the potential that inadequate information systems, operational problems,

breaches in internal controls, fraud or

unforeseen catastrophes will result in unexpected losses. New products and services,

third party risk management and

cybersecurity are critical sources of operational risk that financial institutions are expected

to address in the current environment.

The Bank is expected to have active board and senior management oversight; adequate

policies, procedures and limits; adequate

risk measurement, monitoring and management information systems; and

comprehensive internal controls.

Reserves

The Federal Reserve requires all depository institutions to maintain reserves

against transaction accounts (noninterest bearing and

NOW checking accounts). The balances maintained to meet the reserve requirements

imposed by the Federal Reserve may be

used to satisfy liquidity requirements. An institution may borrow from

the Federal Reserve Bank “discount window” as a

secondary source of funds, provided that the institution meets the Federal Reserve

Bank’s credit standards.

Dividends

CCB is subject to legal limitations on the frequency and amount of dividends

that can be paid to CCBG. The Federal Reserve may

restrict the ability of CCB to pay dividends if such payments would constitute

an unsafe or unsound banking practice.

Additionally, financial

institutions are now required to maintain a capital conservation buffer

of at least 2.5% of risk-weighted

assets in order to avoid restrictions on capital distributions and other payments.

If a financial institution’s capital conservation

buffer falls below the minimum requirement, its maximum payout

amount for capital distributions and discretionary payments

declines to a set percentage of eligible retained income based on the

size of the buffer. See “Capital Regulations,”

below for

additional details on this new capital requirement.

In addition, Florida law and Federal regulation place restrictions on the declaration

of dividends from state-chartered banks to

their holding companies. Under the Florida Financial Institutions Code,

the board of directors of a state-chartered bank, after it

charges off bad debts, depreciation and other

worthless assets, if any, and makes provisions

for reasonably anticipated future

losses on loans and other assets, may quarterly,

semi-annually or annually declare a dividend of up to the aggregate net profits of

that period combined with the bank’s

retained net profits for the preceding two years. In addition, with the approval of the Florida

Office of Financial Regulation and Federal Reserve,

the bank’s board of directors may declare a

dividend from retained net

profits which accrued prior to the preceding two years. Before declaring such

dividends, 20% of the net profits for the preceding

period as is covered by the dividend must be transferred to the surplus fund of the

bank until this fund becomes equal to the

amount of the bank’s common stock

then issued and outstanding. However,

a Florida state-chartered bank may not declare any

dividend if (i) its net income (loss) from the current year combined with the retained net

income (loss) for the preceding two years

aggregates a loss or (ii) the payment of such dividend would cause the capital

account of the bank to fall below the minimum

amount required by law, regulation,

order or any written agreement with the Florida Office of Financial

Regulation or a federal

regulatory agency.

Under Federal Reserve regulations, a state member bank may,

without the prior approval of the Federal

Reserve, pay a dividend in an amount that, when taken together with all dividends

declared during the calendar year, does not

exceed the sum of the bank’s net income

during the current calendar year and the retained net income of the prior

two calendar

years. The Federal Reserve may approve greater amounts.

Insurance of Accounts and Other Assessments

Deposits at U.S. domiciled banks are insured by the FDIC, subject to limits and conditions of

applicable laws and regulations.

Our deposit accounts are insured by the Deposit Insurance Fund, or

DIF, generally up

to a maximum of $250,000 per separately

insured depositor. In order to fund

the DIF, all insured depository

institutions are required to pay quarterly assessments to the

FDIC that are based on an institutions assignment to one of four

risk categories based on supervisory evaluations, regulatory

capital levels and certain other factors.

The FDIC has the discretion to adjust an institution’s

risk rating and may terminate its

insurance of deposits upon a finding that the institution engaged or is engaging

in unsafe and unsound practices, is in an unsafe or

unsound condition to continue operations, or violated any applicable law,

regulation, rule, order or condition imposed by the

FDIC or written agreement entered into with the FDIC. The FDIC may also prohibit

any FDIC-insured institution from engaging

in any activity it determines to pose a serious risk to the Deposit Insurance

Fund (“DIF”).

In October 2022, the FDIC adopted a final rule to increase the initial base deposit insurance

assessment rate schedules uniformly

by 2 basis points beginning with the first quarterly assessment period of 2023.

The increased assessment is expected to improve

the likelihood that the DIF reserve ratio would reach the statutory minimum of

1.35% by the statutory deadline prescribed under

the FDIC’s amended restoration

plan.

Transactions with Affiliates and

Insiders

Pursuant to Sections 23A and 23B of the Federal Reserve Act and Regulation

W, the authority

of CCB to engage in transactions

with related parties or “affiliates” or to make loans to insiders is limited. Loan

transactions with an affiliate generally must be

collateralized and certain transactions between CCB and its affiliates,

including the sale of assets, the payment of money or the

provision of services, must be on terms and conditions that are substantially the same,

or at least as favorable to CCB, as those

prevailing for comparable nonaffiliated transactions. In

addition, CCB generally may not purchase securities issued or

underwritten by affiliates.

Loans to executive officers and directors of an insured depository institution

or any of its affiliates or to any person who directly

or indirectly, or acting

through or in concert with one or more persons, owns, controls or has the power to vote

more than 10% of

any class of voting securities of a bank, which we refer to as “10% Shareowners,”

or to any political or campaign committee the

funds or services of which will benefit those executive officers, directors,

or 10% Shareowners or which is controlled by those

executive officers, directors or 10% Shareowners, are subject to Sections

22(g) and 22(h) of the Federal Reserve Act and the

corresponding regulations (Regulation O) and Section 13(k) of the

Exchange Act relating to the prohibition on personal loans to

executives (which exempts financial institutions in compliance with the insider

lending restrictions of Section 22(h) of the Federal

Reserve Act). Among other things, these loans must be made on terms substantially

the same as those prevailing on transactions

made to unaffiliated individuals and certain extensions of

credit to those persons must first be approved in advance by a

disinterested majority of the entire board of directors. Section 22(h) of the Federal

Reserve Act prohibits loans to any of those

individuals where the aggregate amount exceeds an amount equal to

15% of an institution’s unimpaired

capital and surplus plus

an additional 10% of unimpaired capital and surplus in the case of loans that are fully

secured by readily marketable collateral, or

when the aggregate amount on all of the extensions of credit outstanding

to all of these persons would exceed our unimpaired

capital and unimpaired surplus. Section 22(g) identifies limited circumstances

in which we are permitted to extend credit to

executive officers.

Community Reinvestment Act

The Community Reinvestment Act and its corresponding regulations are

intended to encourage banks to help meet the credit

needs of the communities they serve, including low- and moderate-income

neighborhoods, consistent with safe and sound

banking practices. These regulations provide for regulatory assessment of

a bank’s record in meeting the credit needs of

its

market area. Federal banking agencies are required to publicly disclose each

bank’s rating under the Community

Reinvestment

Act. The Federal Reserve considers a bank’s

Community Reinvestment Act rating when the bank submits an application to

establish bank branches, merge with another bank, or acquire

the assets and assume the liabilities of another bank. In the case of a

financial holding company,

the Community Reinvestment Act performance record of all banks involved

in a merger or

acquisition are reviewed in connection with the application to acquire

ownership or control of shares or assets of a bank or to

merge with another bank or bank holding company.

An unsatisfactory record can substantially delay or block the transaction. We

received a satisfactory rating on our most recent Community Reinvestment

Act assessment.

In 2022, the Federal Reserve, along with the FDIC and OCC, issued a Notice of

Proposed Rulemaking (“NPR”) that invited

public comment on an approach to modernize the regulations relating to the

Community Reinvestment Act to strengthen the

achievement of the core purpose of the statute, and to adapt to changes in the

banking industry, including

the expanded role of

mobile and online banking. We

continue to evaluate the impact of any changes to the regulations relating to the

Community

Reinvestment Act and their impact to our financial condition, results of operations,

and liquidity, which cannot be predicted

this time.

Capital Regulations

The federal banking regulators have adopted risk-based, capital adequacy

guidelines for financial holding companies and their

subsidiary banks based on the Basel III standards. Under these guidelines, assets and off

-balance sheet items are assigned to

specific risk categories each with designated risk weightings. These risk-based

capital guidelines were designed to make

regulatory capital requirements more sensitive to differences

in risk profiles among banks and bank holding companies, to

account for off-balance sheet exposure, to minimize disincentives

for holding liquid assets, and to achieve greater consistency in

evaluating the capital adequacy of major banks throughout the world.

The resulting capital ratios represent capital as a percentage

of total risk-weighted assets and off-balance sheet items.

In computing total risk-weighted assets, bank and bank holding company

assets are given risk-weights of 0%, 20%, 50%, 100%

and 150%. In addition, certain off-balance sheet items are given similar

credit conversion factors to convert them to asset

equivalent amounts to which an appropriate risk-weight will apply.

Most loans will be assigned to the 100% risk category,

except

for performing first mortgage loans fully secured by 1-to-4 family and

certain multi-family residential property,

which carry a

50% risk rating. Most investment securities (including, primarily,

general obligation claims on states or other political

subdivisions of the United States) will be assigned to the 20% category,

except for municipal or state revenue bonds, which have

a 50% risk-weight, and direct obligations of the U.S. Treasury

or obligations backed by the full faith and credit of the U.S.

Government, which have a 0% risk-weight. In covering off

-balance sheet items, direct credit substitutes, including general

guarantees and standby letters of credit backing financial obligations, are

given a 100% conversion factor. Transaction

-related

contingencies such as bid bonds, standby letters of credit backing nonfinancial

obligations, and undrawn commitments (including

commercial credit lines with an initial maturity of more than one year) have a

50% conversion factor. Short-term

commercial

letters of credit are converted at 20% and certain short-term unconditionally

cancelable commitments have a 0% factor.

Under the final rules, minimum requirements increased for both the quality

and quantity of capital held by banking organizations.

In this respect, the final rules implemented strict eligibility criteria for regulatory

capital instruments and improved the

methodology for calculating risk-weighted assets to enhance risk sensitivity.

Consistent with the international Basel III

framework, the rules included a new minimum ratio of Common Equity

Tier 1 Capital to Risk-Weighted

Assets of 4.5%. The

rules also created a Common Equity Tier 1 Capital conservation

buffer of 2.5% of risk-weighted assets. This buffer

is added to

each of the three risk-based capital ratios to determine whether an institution

has established the buffer.

The rules raised the

minimum ratio of Tier 1 Capital to Risk-Weighted

Assets from 4% to 6% and included a minimum leverage ratio of 4% for

all

banking organizations. If a financial institution’s

capital conservation buffer falls below 2.5% (e.g.,

if the institution’s Common

Equity Tier 1 Capital to Risk-Weighted

Assets is less than 7.0%), then capital distributions and discretionary

payments will be

limited or prohibited based on the size of the institution’s

buffer. The types of payments

subject to this limitation include

dividends, share buybacks, discretionary payments on Tier

1 instruments, and discretionary bonus payments.

The capital regulations may also impact the treatment of accumulated

other comprehensive income, or AOCI, for regulatory

capital purposes. AOCI generally flows through to regulatory capital, however,

community banks and their holding companies

were allowed a one-time irrevocable opt-out election to continue

to treat AOCI the same as under the old regulations for

regulatory capital purposes. This election was required to be made on the first call

report or bank holding company annual report

(on form FR Y-9C)

filed after January 1, 2015. We

made the opt-out election. Additionally,

the rules also permitted community

banks with less than $15 billion in total assets to continue to count certain non

-qualifying capital instruments issued prior to May

19, 2010, as Tier 1 capital, including trust preferred

securities and cumulative perpetual preferred stock (subject to a limit of 25%

of Tier 1 capital). However,

non-qualifying capital instruments issued on or after May 19, 2010, would

not qualify for Tier 1

capital treatment.

Commercial Real Estate Concentration Guidelines

The federal banking regulators have implemented guidelines to address increased

concentrations in commercial real estate loans.

These guidelines describe the criteria regulatory agencies will use as indicators

to identify institutions potentially exposed to

commercial real estate concentration risk. An institution that has (i) experienced

rapid growth in commercial real estate lending,

(ii) notable exposure to a specific type of

commercial real estate, (iii) total reported loans for construction, land development,

and

other land representing 100% or more of total risk-based capital, or (iv)

total commercial real estate (including construction) loans

representing 300% or more of total risk-based capital and the outstanding

balance of the institutions commercial real estate

portfolio has increased by 50% or more in the prior 36 months, may be identified for

further supervisory analysis of a potential

concentration risk.

At December 31, 2022, CCB’s ratio of

construction, land development and other land loans to total risk-based

capital was 71%,

its ratio of total commercial real estate loans to total risk-based capital was 239%

and, therefore, CCB was under the 100% and

300% thresholds, respectively,

set forth in clauses (iii) and (iv) above.

As a result, we are not deemed to have a concentration in

commercial real estate lending under applicable regulatory guidelines.

Prompt Corrective Action

The federal banking agencies are required to take “prompt corrective

action” with respect to financial institutions that do not meet

minimum capital requirements. The law establishes five categories for

this purpose: “well-capitalized,” “adequately capitalized,”

“undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.”

To be considered “well-capitalized,”

insured depository institution must maintain minimum capital ratios and

must not be subject to any order or written directive to

meet and maintain a specific capital level for any capital measure. An institution

that fails to remain well-capitalized becomes

subject to a series of restrictions that increase in severity as its capital condition weakens. Such

restrictions may include a

prohibition on capital distributions, restrictions on asset growth or restrictions

on the ability to receive regulatory approval of

applications. The regulations apply only to banks and not to BHCs. However,

the Federal Reserve is authorized to take

appropriate action at the holding company level, based on the undercapitalized

status of the holding company’s subsidiary

banking institutions. In certain instances relating to an undercapitalized banking

institution, the BHC would be required to

guarantee the performance of the undercapitalized subsidiary’s

capital restoration plan and could be liable for civil money

damages for failure to fulfill those guarantee commitments.

In addition, failure to meet capital requirements may cause an institution

to be directed to raise additional capital. Federal law

further mandates that the agencies adopt safety and soundness standards generally

relating to operations and management, asset

quality and executive compensation, and authorizes administrative action

against an institution that fails to meet such standards.

Failure to meet capital guidelines may subject a banking organization

to a variety of other enforcement remedies, including

additional substantial restrictions on its operations and activities, termination

of deposit insurance by the FDIC and, under certain

conditions, the appointment of a conservator or receiver.

At December 31, 2022, we exceeded the requirements contained in the applicable

regulations, policies and directives pertaining to

capital adequacy to be classified as “well capitalized” and are unaware

of any material violation or alleged violation of these

regulations, policies or directives (see table below). Rapid growth, poor

loan portfolio performance, or poor earnings

performance, or a combination of these factors, could change our capital position

in a relatively short period of time, making

additional capital infusions necessary.

Our capital ratios can be found in Note 17 to the Notes to our Consolidated Financial

Statements.

Interstate Banking and Branching

The Dodd-Frank Act relaxed interstate branching restrictions by modifying

the federal statute governing de novo interstate

branching by state member banks. Consequently,

a state member bank may open its initial branch in a state outside of the bank’s

home state by way of an interstate bank branch, so long as a bank chartered under the

laws of that state would be permitted to

open a branch at that location.

Anti-money Laundering

The Uniting and Strengthening America by Providing Appropriate Tools

Required to Intercept and Obstruct Terrorism

Act of

2001 (the “USA Patriot Act”), provides the federal government with additional

powers to address terrorist threats through

enhanced domestic security measures, expanded surveillance powers,

increased information sharing and broadened anti-money

laundering requirements. By way of amendments to the Bank Secrecy

Act, or “BSA,” the USA Patriot Act puts in place measures

intended to encourage information sharing among bank regulatory and

law enforcement agencies. In addition, certain provisions

of the USA Patriot Act impose affirmative obligations on a broad range

of financial institutions.

The USA Patriot Act, and BSA Acts and the related federal regulations require

banks to establish anti-money laundering

programs that include policies, procedures and controls to detect, prevent

and report money laundering and terrorist financing and

to verify the identity of their customers and of beneficial owners of their legal entity customers.

The Anti-Money Laundering Act (“AMLA”), which amends the BSA, was enacted

in early 2021. The AMLA is intended to be a

comprehensive reform and modernization of U.S. bank secrecy and

anti-money laundering laws. In particular,

it codifies a risk-

based approach to anti-money laundering compliance for financial institutions,

requires the U.S. Department of the Treasury to

promulgate priorities for anti-money laundering and countering the

financing of terrorism policy,

requires the development of

standards for testing technology and internal processes for BSA compliance,

expands enforcement-

and investigation-related

authority (including increasing available sanctions for certain BSA violations),

and expands BSA whistleblower incentives and

protections.

Many AMLA provisions will require additional rulemakings, reports

and other measures, and the impact of the AMLA will

depend on, among other things, rulemaking and implementation guidance.

In June 2021, the Financial Crimes Enforcement

Network, a bureau of the U.S. Department of the Treasury,

issued the priorities for anti-money laundering and countering the

financing of terrorism policy required under the AMLA. The priorities

include corruption, cybercrime, terrorist financing, fraud,

transnational crime, drug trafficking, human trafficking

and proliferation financing.

There is also increased scrutiny of compliance with the sanctions programs

and rules administered and enforced by the Office of

Foreign Assets Control of the U.S. Department of Treasury,

or “OFAC.” OFAC

administers and enforces economic and trade

sanctions against targeted foreign countries and regimes, terrorists, international

narcotics traffickers, those engaged in activities

related to the proliferation of weapons of mass destruction, and other threats to

the national security, foreign

policy or economy of

the United States, based on U.S. foreign policy and national security goals.

OFAC issues regulations

that restrict transactions by

U.S. persons or entities (including banks), located in the U.S. or abroad,

with certain foreign countries, their nationals or

“specially designated nationals.” OFAC

regularly publishes listings of foreign countries and designated

nationals that are

prohibited from conducting business with any U.S. entity or individual. While OFAC

is responsible for promulgating, developing

and administering these controls and sanctions, all of the bank regulatory

agencies are responsible for ensuring that financial

institutions comply with these regulations.

Privacy

A variety of federal and state privacy laws govern the collection, safeguarding, sharing

and use of customer information, and

require that financial institutions have policies regarding information privacy

and security. The Gramm-Leach-Bliley

Act and

related regulations require banks and their affiliated companies to

adopt and disclose privacy policies, including policies

regarding the sharing of personal information with third parties. Some state laws also

protect the privacy of information of state

residents and require adequate security of such data, and certain state laws may require

us to notify affected individuals of

security breaches of computer databases that contain their personal information.

These laws may also require us to notify law

enforcement, regulators or consumer reporting agencies in the event

of a data breach, as well as businesses and governmental

agencies that own data.

Overdraft Fee Regulation

The Electronic Fund Transfer Act prohibits

financial institutions from charging consumers fees for paying overdrafts

automated teller machines, or ATM,

and one-time debit card transactions, unless a consumer consents, or opts

in, to the overdraft

service for those type of transactions.

If a consumer does not opt in, any ATM

transaction or debit that overdraws the consumer’s

account will be denied.

Overdrafts on the payment of checks and regular electronic bill payments are not

covered by this new

rule.

Before opting in, the consumer must be provided a notice that explains the financial institution’s

overdraft services,

including the fees associated with the service, and the consumer’s

choices.

Financial institutions must provide consumers who do

not opt in with the same account terms, conditions and features (including pricing)

that they provide to consumers who do opt in.

Consumer Laws and Regulations

CCB is also subject to other federal and state consumer laws and regulations

that are designed to protect consumers in

transactions with banks. While the list set forth below is not exhaustive,

these laws and regulations include the Truth in Lending

Act, the Truth in Savings Act, the Electronic

Fund Transfer Act, the Expedited Funds Availability

Act, the Check Clearing for the

21st Century Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the

Equal Credit Opportunity Act, the

Fair Housing Act, the Home Mortgage Disclosure Act, the Fair and

Accurate Credit Transactions Act, the Mortgage Disclosure

Improvement Act, and the Real Estate Settlement Procedures Act, among

others. These laws and regulations mandate certain

disclosures and regulate the manner in which financial institutions must deal

with clients when taking deposits or making loans to

clients. CCB must comply with these consumer protection laws and regulations as part

of its ongoing client relations.

In addition, the Consumer Financial Protection Bureau issues regulations and

standards under these federal consumer protection

laws that affect our consumer businesses. These include regulations

setting “ability to repay” standards for residential mortgage

loans and mortgage loan servicing and originator compensation standards,

which generally require creditors to make a reasonable,

good faith determination of a consumer’s ability

to repay any consumer credit transaction secured by a dwelling (excluding an

open-end credit plan, timeshare plan, reverse mortgage, or temporary loan)

and establishes certain protections from liability under

this requirement for loans that meet the requirements of the “qualified mortgage”

safe harbor. Also, the more recent

TILA-

RESPA Integrated

Disclosure, or TRID, rules for mortgage closings have impacted our loan applications.

These rules, including

the required loan forms, generally increased the time it takes to approve mortgage

loans.

Future Legislative Developments

Various

bills are from time to time introduced in Congress and the Florida legislature. This legislation

may change banking and

tax statutes and the environment in which our banking subsidiary and we operate

in substantial and unpredictable ways. We

cannot determine the ultimate effect that potential legislation,

if enacted, or implementing regulations with respect thereto, would

have upon our financial condition or results of operations or that of

our banking subsidiary.

Legislative and Regulatory Responses

to the COVID-19 Pandemic

The Coronavirus Aid, Relief, and

Economic Security Act, or CARES Act,

which came into law in 2020,

was a $2.2 trillion

economic stimulus bill that was

intended to provide relief in

response to the COVID-19 pandemic.

The CARES Act, among other

things, amended the SBA’s loan program, in which the Bank participates, to

create a guaranteed, unsecured

loan program (the

“PPP”) to fund operational costs

of eligible businesses, organizations

and self-employed persons during

COVID-19. The PPP

authorized financial institutions

to make federally guaranteed

loans to qualifying small businesses

and non-profit organizations.

These loans carry an interest

rate of 1% per annum and a maturity

of two years for loans originated

prior to June 5, 2020 and

five

years for loans originated on

or after June 5, 2020. The PPP

provides that such loans may

be forgiven if the borrowers meet

certain

requirements with respect to

maintaining employee headcount and

payroll and the use of the loan

proceeds after the loan is

originated. Although the PPP ended

in accordance with its terms

on May 31, 2021, outstanding PPP

loans continue to go through

the process of either obtaining

forgiveness from the SBA or pursuing

claims under the SBA guaranty.

There have also been a number of

regulatory actions intended

to help mitigate the

adverse economic impact of

the COVID-19

pandemic on borrowers, including

several mandates from the

bank regulatory agencies, requiring

financial institutions to

work

constructively with borrowers

affected by the COVID-19 pandemic.

While these programs have

generally expired, governmental

authorities may take additional

actions in the future to

limit the adverse impacts

of COVID-19 that may affect the Bank

and its

clients.

Effect of Governmental Monetary Policies

The commercial banking business is affected not only by general

economic conditions, but also by the monetary policies of the

Federal Reserve. Changes in the discount rate on member bank borrowing,

availability of borrowing at the “discount window,”

open market operations, changes in the Fed Funds target

interest rate, changes in interest rates payable on reserve accounts, the

imposition of changes in reserve requirements against member banks’ deposits

and assets of foreign banking centers and the

imposition of and changes in reserve requirements against certain borrowings

by banks and their affiliates are some of the

instruments of monetary policy available to the Federal Reserve. These monetary

policies are used in varying combinations to

influence overall growth and distributions of bank loans, investments and deposits,

which may affect interest rates charged on

loans or paid on deposits. The monetary policies of the Federal Reserve have

had a significant effect on the operating results of

commercial banks and are expected to continue to do so in the future.

The Federal Reserve’s policies are primarily

influenced by

its dual mandate of price stability and full employment, and to a lesser degree by short

-term and long-term changes in the

international trade balance and in the fiscal policies of the U.S. Government. Future

changes in monetary policy and the effect of

such changes on our business and earnings in the future cannot be predicted.

Website Access to Company’s

Reports

Our Internet website is www.ccbg.com.

Our annual reports on Form 10-K, quarterly reports on Form 10-Q,

current reports on

Form 8-K, including any amendments to those reports filed or furnished pursuant

to section 13(a) or 15(d), and reports filed

pursuant to Section 16, 13(d), and 13(g) of the Exchange Act are available

free of charge through our website as soon as

reasonably practicable after they are electronically filed with, or furnished

to, the Securities and Exchange Commission.

The

information on our website is not incorporated by reference into this report.

Item 1A.

Risk Factors

An investment in our common stock contains a high degree

of risk. You should

consider carefully the following risk factors before

deciding whether to invest in our common stock. Our business, including our operating

results and financial condition, could be

harmed by any of these risks. Additional risks and uncertainties not currently

known to us or that we currently deem to be

immaterial also may materially and adversely affect our business. The trading

price of our common stock could decline due to

any of these risks, and you may lose all or part of your investment. In assessing these risks,

you should also refer to the other

information contained in our filings with the SEC, including our financial

statements and related notes.

Market Risks

We may incur losses if we are

unable to successfully manage interest rate risk.

Our profitability depends to a large extent on Capital City Bank’s

net interest income, which is the difference between income on

interest-earning assets, such as loans and investment securities, and

expense on interest-bearing liabilities such as deposits and

borrowings. We

are unable to predict changes in market interest rates, which are affected

by many factors beyond our control,

including inflation, recession, unemployment, federal funds

target rate, money supply,

domestic and international events and

changes in the United States and other financial markets. Our net interest income

may be reduced if: (i) more interest-earning

assets than interest-bearing liabilities reprice or mature during a time when

interest rates are declining or (ii) more interest-bearing

liabilities than interest-earning assets reprice or mature during a time when

interest rates are rising.

Changes in the difference between short-term

and long-term interest rates may also harm our business. We

generally use short-

term deposits to fund longer-term assets. When interest rates change,

assets and liabilities with shorter terms reprice more quickly

than those with longer terms, which could have a material adverse effect

on our net interest margin. During 2022, the Federal

Reserve raised the federal funds rate seven times for a cumulative increase of

4.25% and has signaled that it expects not to reduce

the federal funds rate in the near-term. Prior to 2022, the Federal

Reserve had not raised the federal funds rate since December

The increase in the federal funds rate could have an adverse effect

on our net interest income and profitability.

If market

interest rates continue to rise rapidly,

interest rate adjustment caps may also limit increases in the interest rates on adjustable

rate

loans, which could further reduce our net interest income. Further,

increased price competition for deposits resulting from the

return to a historically normal interest rate environment could adversely

affect our net interest margin.

Although we continuously monitor interest rates and have a number

of tools to manage our interest rate risk exposure, changes in

market assumptions regarding future interest rates could significantly impact our

interest rate risk strategy, our financial

position

and results of operations. If we do not properly monitor our interest rate risk management

strategies, these activities may not

effectively mitigate our interest rate sensitivity or have the desired

impact on our results of operations or financial condition.

Interest rates and economic conditions affect consumer

demand for housing and can create volatility in the mortgage industry.

These risks can have a material impact on the volume of mortgage originations

and refinancings, adversely affecting mortgage

banking revenues and the profitability of our mortgage banking business.

See Item 7.

Management’s Discussion and Analysis of

Financial Condition and Results of Operations under the section captioned

“Net Interest Income” and “Market Risk and Interest Rate Sensitivity” elsewhere

in this report for further discussion related to

interest rate sensitivity and our management of interest rate risk.

The fair value of our investments could decline which would cause a reduction

in shareowners’ equity.

A portion of our investment securities portfolio

(38.5%) at December 31, 2022 has been designated as available-for-sale pursuant

to U.S. generally accepted accounting principles relating to accounting for

investments. Such principles require that unrealized

gains and losses in the estimated value of the available-for-sale

portfolio be “marked to market” and reflected as a separate item in

shareowners’ equity (net of tax) as accumulated other comprehensive

income/losses. Shareowners’ equity will continue to reflect

the unrealized gains and losses (net of tax) of these investments. The fair value

of our investment portfolio may decline, causing a

corresponding decline in shareowners’ equity.

Management believes that several factors will affect the

fair values of our investment portfolio. These include, but are not limited

to, changes in interest rates or expectations of changes in interest rates, the degree

of volatility in the securities markets, inflation

rates or expectations of inflation and the slope of the interest rate yield curve

(the yield curve refers to the differences between

short-term and long-term interest rates; a positively sloped yield curve means short

-term rates are lower than long-term rates).

These and other factors may impact specific categories of the portfolio differently,

and we cannot predict the effect these factors

may have on any specific category.

Inflationary pressures and rising prices may

affect our results of operations and financial condition.

Inflation rose sharply at the end of 2021 and continued rising in 2022 at levels not

seen for over 40 years. Inflationary pressures

are currently expected to remain elevated throughout 2023. Small to medium

-sized businesses may be impacted more during

periods of high inflation as they are not able to leverage economics of scale to

mitigate cost pressures compared to larger

businesses. Consequently,

the ability of our business customers to repay their loans may deteriorate, and in some

cases this

deterioration may occur quickly,

which would adversely impact our results of operations and financial condition.

Furthermore, a

prolonged period of inflation could cause wages and other costs to further

increase which could adversely affect our results of

operations and financial condition. Sustained higher interest rates by

the Federal Reserve may be needed to tame persistent

inflationary price pressures, which could push down asset prices and weaken

economic activity. A deterioration

in economic

conditions in the United States and our markets could result in an increas

in loan delinquencies and non-performing assets,

decreases in loan collateral values and a decrease in demand for our products and

services, all of which, in turn, would adversely

affect our business, financial condition and results of operations.

The impact of interest rates on our mortgage banking business can

have a significant impact on revenues.

Changes in interest rates can impact our mortgage-related revenues and net revenues

associated with our mortgage activities.

decline in mortgage rates generally increases the demand for mortgage loans

as borrowers refinance, but also generally leads to

accelerated payoffs. Conversely,

in a constant or increasing rate environment, we would expect fewer loans to be refinanced

and a

decline in payoffs. Although we use models to assess the impact

of interest rates on mortgage-related revenues, the estimates of

revenues produced by these models are dependent on estimates and assumptions

of future loan demand, prepayment speeds and

other factors which may differ from actual subsequent

experience.

Shares of our common stock are not an insured

deposit and may lose value.

The shares of our common stock are not a bank deposit and will not be insured or

guaranteed by the FDIC or any other

government agency.

Your

investment will be subject to investment risk, and you must be capable of affording the

loss of your

entire investment.

Limited trading activity for shares of our common stock may

contribute to price volatility.

While our common stock is listed and traded on the Nasdaq Global Select Market, there

has historically been limited trading

activity in our common stock.

The average daily trading volume of our common stock over the 12-month

period ending

December 31, 2022 was approximately 27,987 shares. Due to the limited

trading activity of our common stock, relativity small

trades may have a significant impact on the price of our common stock.

Securities analysts may not initiate coverage or continue to cover our common

stock, and this may have a negative impact

on its market price.

The trading market for our common stock will depend in part on the research

and reports that securities analysts publish about us

and our business. We do

not have any control over securities analysts, and they may not initiate coverage

or continue to cover our

common stock. If securities analysts do not cover our common stock, the lack

of research coverage may adversely affect its

market price. If we are covered by securities analysts, and our common stock is the subject of

an unfavorable report, our stock

price would likely decline. If one or more of these analysts ceases to cover our Company

or fails to publish regular reports on us,

we could lose visibility in the financial markets, which may cause our

stock price or trading volume to decline.

We may be adversely

impacted by the transition from LIBOR as a reference

rate.

The United Kingdom’s Financial Conduct

Authority and the administrator of LIBOR have announced that the publication

of the

most commonly used U.S. dollar London Interbank Offered Rate (“LIBOR”)

settings will cease to be published or cease to be

representative after June 30, 2023.

The publication of all other LIBOR settings ceased to be published as of December 31,

2021.

Given consumer protection, litigation, and reputation risks, the bank regulatory

agencies have indicated that entering into new

contracts that use LIBOR as a reference rate after December 31, 2021, would

create safety and soundness risks and that they will

examine bank practices accordingly.

Therefore, the agencies encouraged banks to cease entering into new contracts that use

LIBOR as a reference rate as soon as practicable and in any event by December 31,

2021.

Prior to December 31, 2021, we

discontinued originating LIBOR-based loans.

At December 31, 2022, we have 112 loans

totaling approximately $71 million that are indexed to LIBOR.

We believe our

current

portfolio of LIBOR based loan contracts contain the necessary fallback language,

however, the timing and manner in which each

customer’s contract

transitions to a replacement index will vary on a case-by-case basis.

We also have $33

million in floating rate

investment securities that are indexed to LIBOR.

We are currently

evaluating fallback language for each investment security.

Lastly, we have two floating

rate subordinated debenture notes totaling $53 million and a related interest rate swap

contract for

$30 million that are indexed to LIBOR (Refer to Note 12 – Long Term

Borrowings and Note 5 – Derivatives in our Consolidated

Financial Statements).

Effective June 30, 2023, in accordance with the trust agreement

and the Adjustable Interest Rate (LIBOR)

Act of 2021, LIBOR will be replaced with 3-month CME term SOFR (secured overnight

financing rate) as the interest rate index

for these notes.

The interest rate swap contract adheres to the International Swaps and Derivatives

Association’s protocol which

requires conversion to the fallback SOFR rate at the time of LIBOR cessation.

Since replacement rates are calculated differently,

payments under contracts referencing new rates will differ

from those referencing LIBOR, which may lead to increased volatility

as compared to LIBOR.

Credit Risks

Our loan portfolio includes loans with a higher risk of loss which could lead to higher loan

losses and nonperforming

assets.

We originate

commercial real estate loans, commercial loans, construction loans, vacant land

loans, consumer loans, and

residential mortgage loans primarily within our market area. Commercial

real estate, commercial, construction, vacant land, and

consumer loans may expose a lender to greater credit risk than traditional

fixed-rate fully amortizing loans secured by single-

family residential real estate because the collateral securing these loans may

not be sold as easily as single-family residential real

estate. In addition, these loan types tend to involve larger loan balances

to a single borrower or groups of related borrowers and

are more susceptible to a risk of loss during a downturn in the business cycle. These

loans also have historically had greater credit

risk than other loans for the following reasons:

●

Commercial Real Estate Loans

. Repayment is dependent on income being generated in amounts sufficient

to cover

operating expenses and debt service. These loans also involve greater risk because

they are generally not fully amortizing

over the loan period, but rather have a balloon payment due at maturity.

A borrower’s ability to make a balloon payment

typically will depend on the borrower’s ability to either

refinance the loan or timely sell the underlying property.

December 31, 2022, commercial mortgage loans comprised approximately

31.0% of our total loan portfolio.

●

Commercial Loans

. Repayment is generally dependent upon the successful operation of the borrower’s

business. In

addition, the collateral securing the loans may depreciate over time, be

difficult to appraise, be illiquid, or fluctuate in

value based on the success of the business. At December 31, 2022, commercial loans

comprised approximately 9.8% of

our total loan portfolio.

●

Construction Loans

. The risk of loss is largely dependent on our initial estimate of whether

the property’s value at

completion equals or exceeds the cost of property construction and the availability

of take-out financing. During the

construction phase, a number of factors can result in delays or cost overruns. If

our estimate is inaccurate or if actual

construction costs exceed estimates, the value of the property securing our

loan may be insufficient to ensure full

repayment when completed through a permanent loan, sale of the property,

or by seizure of collateral.

At December 31,

2022, construction loans comprised approximately 9.3% of our total loan portfolio.

●

Vacant

Land Loans

. Because vacant or unimproved land is generally held by the borrower

for investment purposes or

future use, payments on loans secured by vacant or unimproved land will typically

rank lower in priority to the borrower

than a loan the borrower may have on their primary residence or business. These loans

are susceptible to adverse

conditions in the real estate market and local economy.

At December 31, 2022, vacant land loans comprised

approximately 3.28% of our total loan portfolio.

●

HELOCs

. Our open-ended home equity loans have an interest-only draw period

followed by a five-year repayment

period of 0.75% of the principal balance monthly and a balloon payment

at maturity. Upon the commencement

of the

repayment period, the monthly payment can increase significantly,

thus, there is a heightened risk that the borrower will

be unable to pay the increased payment. Further,

these loans also involve greater risk because they are generally not fully

amortizing over the loan period, but rather have a balloon payment due

at maturity.

A borrower’s ability to make a

balloon payment may depend on the borrower’s ability

to either refinance the loan or timely sell the underlying property.

At December 31, 2022, HELOCs comprised approximately 8.2% of

our total loan portfolio.

●

Consumer Loans

. Consumer loans (such as automobile loans and personal lines of

credit) are collateralized, if at all,

with assets that may not provide an adequate source of payment of the loan due

to depreciation, damage, or loss. At

December 31, 2022, consumer loans comprised approximately 12.9%

of our total loan portfolio, with indirect auto loans

making up a majority of this portfolio at approximately 93.3% of the total

balance.

The increased risks associated with these types of loans result in a correspondingly

higher probability of default on such loans (as

compared to fixed-rate fully amortizing single-family real estate loans). Loan

defaults would likely increase our loan losses and

nonperforming assets and could adversely affect our allowance

for loan losses and our results of operations.

Our loan portfolio is heavily concentrated in mortgage loans secured

by properties in Florida and Georgia which causes

our risk of loss to be higher than if we had a more geographically diversified

portfolio.

Our interest-earning assets are heavily concentrated in mortgage loans secured

by real estate, particularly real estate located in

Florida and Georgia.

At December 31, 2022, approximately 77% of our loans included real estate as a primary,

secondary, or

tertiary component of collateral. The real estate collateral in each case provides

an alternate source of repayment in the event of

default by the borrower; however, the value

of the collateral may decline during the time the credit is extended. If we are required

to liquidate the collateral securing a loan during a period of reduced real estate

values to satisfy the debt, our earnings and capital

could be adversely affected.

Additionally, at December

31, 2022, a significant number of our loans secured by real estate are secured by commercial and

residential properties located in Florida and Georgia. The

concentration of our loans in these areas subjects us to risk that a

downturn in the economy or recession in these areas could result in a decrease in

loan originations and increases in delinquencies

and foreclosures, which would more greatly affect us than

if our lending were more geographically diversified. In addition, since

a large portion of our portfolio is secured by properties located

in Florida and Georgia, the occurrence of a natural disaster,

such

as a hurricane, or a man-made disaster could result in a decline in loan originations,

a decline in the value or destruction of

mortgaged properties and an increase in the risk of delinquencies, foreclosures

or loss on loans originated by us. We

may suffer

further losses due to the decline in the value of the properties underlying our

mortgage loans, which would have an adverse

impact on our results of operations and financial condition.

Our concentration in loans secured by real estate

may increase our credit losses, which would negatively

affect our

financial results.

Due to the lack of diversified industry within some of the markets served by CCB and the relatively

close proximity of our

geographic markets, we have both geographic concentrations as well as concentrations

in the types of loans funded. Specifically,

due to the nature of our markets, a significant portion of the portfolio has historically

been secured with real estate. At December

31, 2022, approximately 33% and 44% of our $2.525 billion loan

portfolio was secured by commercial real estate and residential

real estate, respectively.

As of this same date, approximately 9% was secured by property under

construction.

In the event we are required to foreclose on a property securing one of our mortgage

loans or otherwise pursue our remedies in

order to protect our investment, we may be unable to recover funds in an amount

equal to our projected return on our investment

or in an amount sufficient to prevent a loss to us due to prevailing economic

conditions, real estate values and other factors

associated with the ownership of real property.

As a result, the market value of the real estate or other collateral underlying our

loans may not, at any given time, be sufficient to satisfy the outstanding

principal amount of the loans, and consequently,

would sustain loan losses.

An inadequate allowance for credit losses would reduce our

earnings.

We are exposed

to the risk that our clients may be unable to repay their loans according to their terms and

that any collateral

securing the payment of their loans may not be sufficient

to assure full repayment. This could result in credit losses that are

inherent in the lending business. We

evaluate the collectability of our loan portfolio and provide an allowance

for credit losses

that we believe is adequate based upon such factors as:

●

the risk characteristics of various classifications of loans;

●

previous loan loss experience;

●

specific loans that have loss potential;

●

delinquency trends;

●

estimated fair market value of the collateral;

●

current and future economic conditions; and

●

geographic and industry loan concentrations.

At December 31, 2022, our allowance for credit losses for loans held for

investment was $24.7 million, which represented

approximately 0.982% of our total loans held for investment.

We had $2.3

million in nonaccruing loans at December 31, 2022.

The allowance is based on management’s

reasonable estimate and may not prove sufficient to cover future loan

losses.

Although

management uses the best information available to make determinations

with respect to the allowance for credit losses, future

adjustments may be necessary if economic conditions differ substantially

from the assumptions used or adverse developments

arise with respect to our nonperforming or performing loans.

In addition, regulatory agencies, as an integral part of their

examination process, periodically review our estimated losses on loans.

Our regulators may require us to recognize additional

losses based on their judgments about information available to them at the time of

their examination.

Accordingly, the allowance

for credit losses may not be adequate to cover all future loan losses and significant increases

to the allowance may be required in

the future if, for example, economic conditions worsen.

A material increase in our allowance for credit losses would adversely

impact our net income and capital in future periods, while having the effect

of overstating our current period earnings.

We may incur significant costs associated

with the ownership of real property

as a result of foreclosures, which could

reduce our net income.

Since we originate loans secured by real estate, we may have to foreclose on the

collateral property to protect our investment and

may thereafter own and operate such property,

in which case we would be exposed to the risks inherent in the ownership of real

estate.

The amount that we, as a mortgagee, may realize after a foreclosure is dependent

upon factors outside of our control, including,

but not limited to:

●

general or local economic conditions;

●

environmental cleanup liability;

●

neighborhood values;

●

interest rates;

●

real estate tax rates;

●

operating expenses of the mortgaged properties;

●

supply of and demand for rental units or properties;

●

ability to obtain and maintain adequate occupancy of the properties;

●

zoning laws;

●

governmental rules, regulations and fiscal policies; and

●

acts of God.

Certain expenditures associated with the ownership of real estate, including

real estate taxes, insurance and maintenance costs,

may adversely affect the income from the real estate. Furthermore,

we may need to advance funds to continue to operate or to

protect these assets. As a result, the cost of operating real property

assets may exceed the rental income earned from such

properties or we may be required to dispose of the real property at a loss.

Liquidity Risks

Liquidity risk could impair our ability to fund operations and jeopardize our financial

condition.

Effective liquidity management is essential for the operation of

our business. We

require sufficient liquidity to meet client loan

requests, client deposit maturities and withdrawals, payments on our debt obligations

as they come due and other cash

commitments under both normal operating conditions and other unpredictable

circumstances causing industry or general financial

market stress. If we are unable to raise funds through deposits, borrowings,

earnings and other sources, it could have a substantial

negative effect on our liquidity.

In particular, a majority of our liabilities during

2022 were checking accounts and other liquid

deposits, which are generally payable on demand or upon short notice.

By comparison, a substantial majority of our assets were

loans, which cannot generally be called or sold in the same time frame. Although

we have historically been able to replace

maturing deposits and advances as necessary,

we might not be able to replace such funds in the future, especially if a large

number of our depositors seek to withdraw their accounts at the same time, regardless

of the reason. Our access to funding

sources in amounts adequate to finance our activities on terms that are acceptable

to us could be impaired by factors that affect us

specifically or the financial services industry or economy in general.

Factors that could negatively impact our access to liquidity

sources include a decrease in the level of our business activity as a result of a downturn

in the markets in which our loans are

concentrated, adverse regulatory action against us, or our inability to attract

and retain deposits. Our access to deposits may be

negatively impacted by,

among other factors, periods of low interest rates or high interest rates.

Periods of high interest rates

could promote increased competition for deposits, including from new

financial technology competitors, or provide customers

with alternative investment options.

Our ability to borrow could also be impaired by factors that are not specific to us, such

as a

disruption in the financial markets or negative views and expectations about

the prospects for the financial services industry.

If we

are unable to maintain adequate liquidity,

it could materially and adversely affect our business, results of operations

or financial

condition.

We may be unable to pay dividends in the future.

In 2022, our Board of Directors declared four quarterly cash dividends.

Declarations of any future dividends will be contingent on

our ability to earn sufficient profits and to remain well capitalized,

including our ability to hold and generate sufficient capital to

comply with the Common Equity Tier 1 Capital

conservation buffer requirement. In addition, due to our contractual obligations

with the holders of our trust preferred securities, if we defer the payment of accrued interest

owed to the holders of our trust

preferred securities, we may not make dividend payments to our

shareowners.

Further, under applicable statutes and regulations,

CCB’s board of directors,

after charging-off bad debts, depreciation and other

worthless assets, if any,

and making provisions for reasonably anticipated future losses on loans and other assets,

may quarterly,

semi-annually, or

annually declare and pay dividends to CCBG of up to the aggregate net income

of that period combined with

the CCB’s retained net income for

the preceding two years and, with the approval of the Florida Office of Financial

Regulation

and Federal Reserve, declare a dividend from retained net income which accrued

prior to the preceding two years.

Additional

state laws generally applicable to Florida corporations may also limit our ability

to declare and pay dividends. Thus, our ability to

fund future dividends may be restricted by state and federal laws and regulations.

Regulatory and Compliance Risks

We are subject to

extensive regulation, which could restrict our activities

and impose financial requirements or limitations

on the conduct of our business.

are subject to extensive regulation, supervision and examination

by our regulators, including the Florida Office of Financial

Regulation, the Federal Reserve, and the FDIC. Our compliance with

these industry regulations is costly and restricts certain of

our activities, including payment of dividends, mergers

and acquisitions, investments, lending and interest rates charged on

loans,

interest rates paid on deposits, access to capital and brokered deposits and locations

of banking offices. If we are unable to meet

these regulatory requirements, our financial condition, liquidity and results of

operations would be materially and adversely

affected.

Our activities are also regulated under consumer protection laws applicable

to our lending, deposit and other activities. Many of

these regulations are intended primarily for the protection of our

depositors and the Deposit Insurance Fund and not for the

benefit of our shareowners. In addition to the regulations of the bank regulatory

agencies, as a member of the Federal Home Loan

Bank of Atlanta (“FHLB”), we must also comply with applicable regulations

of the Federal Housing Finance Agency and the

Federal Home Loan Bank.

Our failure to comply with these laws and regulations could subject us to restrictions

on our business activities, fines and other

penalties, any of which could adversely affect our results of

operations, capital base and the price of our securities. Further,

any

new laws, rules and regulations could make compliance more difficult

or expensive or otherwise adversely affect our business and

financial condition. Please refer to the Section entitled “Business – Regulatory

Considerations” on page 10.

U.S. federal banking agencies may require us to increase

our regulatory capital, long-term debt or liquidity requirements,

which could result in the need to issue additional qualifying securities or to

take other actions, such as to sell company

assets.

We are subject to

U.S. regulatory capital and liquidity rules. These rules, among other things, establish minimum

requirements to

qualify as a well-capitalized institution. If CCB fails to maintain its status as well capitalized

under the applicable regulatory

capital rules, the Federal Reserve will require us to agree to bring the bank back to

well-capitalized status. For the duration of

such an agreement, the Federal Reserve may impose restrictions on our

activities. If we were to fail to enter into or comply with

such an agreement or fail to comply with the terms of such agreement, the Federal

Reserve may impose more severe restrictions

on our activities, including requiring us to cease and desist activities permitted

under the Bank Holding Company Act of 1956.

Capital and liquidity requirements are frequently introduced and amended.

It is possible that regulators may increase regulatory

capital requirements, change how regulatory capital is calculated or increase liquidity

requirements.

In 2013, the Federal Reserve Board released its final rules which implement

in the United States the Basel III regulatory capital

reforms from the Basel Committee on Banking Supervision and certain

changes required by the Dodd-Frank Act. Under the final

rule, minimum requirements increased for both the quality and quantity of capital held

by banking organizations. Consistent with

the international Basel framework, the rule includes a new minimum

ratio of Common Equity Tier 1 Capital, or CET1, to Risk-

Weighted Assets, or

RWA,

of 4.5% and a CET1 conservation buffer of 2.5% of RWA

(which was fully phased-in in 2019) that

apply to all supervised financial institutions.

The CET1 conservation buffer requirement requires us

to hold additional CET1

capital in excess of the minimum required to meet the CET1 to RWA

ratio requirement. The rule also, among other things, raised

the minimum ratio of Tier 1 Capital to RWA

from 4% to 6% and included a minimum leverage ratio of 4% for all banking

organizations. The impact of the new capital rules requires us to maintain

higher levels of capital, which we expect will lower our

return on equity. Additionally,

if our CET1 to RWA

ratio does not exceed the minimum required plus the additional CET1

conservation buffer,

we may be restricted in our ability to pay dividends or make other distributions of capital to our shareowners.

Further changes to and compliance with the regulatory capital and liquidity requirements

may impact our operations by requiring

us to liquidate assets, increase borrowings, issue additional equity or other

securities, cease or alter certain operations, sell

company assets or hold highly liquid assets, which may adversely affect

our results of operations. We

may be prohibited from

taking capital actions such as paying or increasing dividends or repurchasing

securities.

Changes in accounting standards or assumptions in applying accounting policies

could adversely affect us.

Our accounting policies and methods are fundamental to how we record and report

our financial condition and results of

operations. Some of these policies require use of estimates and assumptions

that may affect the reported value of our assets or

liabilities and results of operations and are critical because they require management

to make difficult, subjective and complex

judgments about matters that are inherently uncertain. If those assumptions,

estimates or judgments were incorrectly made, we

could be required to correct and restate prior-period financial statements. Accounting

standard-setters and those who interpret the

accounting standards, the SEC, banking regulators and our independent

registered public accounting firm may also amend or even

reverse their previous interpretations or positions on how various standards

should be applied. These changes may be difficult to

predict and could impact how we prepare and report our financial statements. In

some cases, we could be required to apply a new

or revised standard retrospectively,

resulting in us revising prior-period financial statements.

Florida financial institutions, such as CCB, face a higher risk of noncompliance

and enforcement actions with the Bank

Secrecy Act and other anti-money laundering statutes and regulations.

Since September 11, 2001, banking regulators

have intensified their focus on anti-money laundering and Bank Secrecy Act

compliance requirements, particularly the anti-money laundering

provisions of the USA PATRIOT

Act. There is also increased

scrutiny of compliance with the rules enforced by the Office of Foreign

Assets Control, or OFAC. Since 2004,

federal banking

regulators and examiners have been extremely aggressive in their supervision

and examination of financial institutions located in

the State of Florida with respect to the institution’s

Bank Secrecy Act/anti-money laundering compliance. Consequently,

numerous formal enforcement actions have been instituted against financial

institutions. If CCB’s policies, procedures

and

systems are deemed deficient or the policies, procedures and systems of the

financial institutions that it has already acquired or

may acquire in the future are deficient, CCB would be subject to liability,

including fines and regulatory actions such as

restrictions on its ability to pay dividends and the necessity to obtain regulatory

approvals to proceed with certain aspects of its

business plan, including its acquisition plans.

Fee revenues from overdraft protection

programs constitute a significant portion of our noninterest income

and may be

subject to increased supervisory scrutiny.

Revenues derived from transaction fees associated with overdraft protection

programs offered to consumers represent a

significant portion of our noninterest income. In 2022, the Company collected

approximately $10.6 million in net consumer

overdraft transaction fees.

In 2022, certain members of Congress and the leadership of the CFPB have expressed

a heightened interest in bank consumer

overdraft protection programs. In 2022, the CFPB piloted a supervision

effort to collect key metrics from some supervised

institutions regarding the consumer impact of their overdraft and

non-sufficient fund practices, with the intent of using this

information to identify institutions for further examination and review.

The CFPB has indicated that it intends to pursue

enforcement actions against banking organizations,

and their executives, that oversee overdraft practices that are deemed to be

unlawful, and indeed took action against a large bank for charging

“surprise” overdraft fees known as authorized positive fee. In

October of 2022, the CFPB issued guidance to help banks avoid charging

illegal surprise overdraft fees. In addition, the

Comptroller of the Currency has identified potential options for

reform of national bank overdraft protection practices, including

providing a grace period before the imposition of a fee, refraining

from charging multiple fees in a single day and eliminating fees

altogether.

In response to this increased congressional and regulatory scrutiny,

and in anticipation of enhanced supervision and enforcement

of overdraft protection practices in the future, certain banking organizations

have begun to modify their overdraft protection

programs, including by discontinuing the imposition of overdraft transaction

fees. These competitive pressures from our peers, as

well as any adoption by our regulators of new rules or supervisory guidance or

more aggressive examination and enforcement

policies in respect of banks’ overdraft protection practices, could cause

us to modify our program and practices in ways that may

have a negative impact on our revenue and earnings, which, in turn, could have

an adverse effect on our financial condition and

results of operations.

Operational Risks

Many types of operational risks can affect our earnings negatively.

We regularly

assess and monitor operational risk in our businesses. Despite our efforts to

assess and monitor operational risk, our

risk management framework may not be effective in all cases.

Factors that can impact operations and expose us to risks varying

size, scale and scope include:

●

failures of technological systems or breaches of security measures, including, but not

limited to, those resulting from

computer viruses or cyber-attacks;

●

unsuccessful or difficult implementation of computer systems upgrades;

●

human errors or omissions, including failures to comply with applicable

laws or corporate policies and procedures;

●

theft, fraud or misappropriation of assets, whether arising from the intentional

actions of internal personnel or external

third parties;

●

breakdowns in processes, breakdowns in internal controls or failures of

the systems and facilities that support our

operations;

●

deficiencies in services or service delivery;

●

negative developments in relationships with key counterparties, third-party

vendors, or employees in our day-to-day

operations; and

●

external events that are wholly or partially beyond our control, such as pandemics,

geopolitical events, political unrest,

natural disasters or acts of terrorism.

While we have in place many controls and business continuity plans designed

to address these factors and others, these plans may

not operate successfully to mitigate these risks effectively.

If our controls and business continuity plans do not mitigate the

associated risks successfully,

such factors may have a negative impact on our business, financial condition or results

operations. In addition, an important aspect of managing our operational

risk is creating a risk culture in which all employees

fully understand that there is risk in every aspect of our business and the importance

of managing risk as it relates to their job

functions. We

continue to enhance our risk management program to support our risk culture. Nonetheless,

if we fail to provide the

appropriate environment that sensitizes all of our employees to managing

risk, our business could be impacted adversely.

We are subject to

certain operational risks, including, but not limited to, customer,

employee or third-party fraud and

data processing system failures and errors.

We rely on

the ability of our employees and systems to process a high number of transactions. Operational

risk is the risk of loss

resulting from our operations, including but not limited to, the risk of

fraud by employees or persons outside our company,

the

execution of unauthorized transactions by employees, errors relating

to transaction processing and technology,

breaches of our

internal control systems and compliance requirements. Insurance coverage

may not be available for such losses, or where

available, such losses may exceed insurance limits. This risk of loss also includes

the potential legal actions that could arise as a

result of operational deficiencies or as a result of non-compliance with applicable

regulatory standards, adverse business decisions

or their implementation, or customer attrition due to potential negative

publicity. In the event of a breakdown

in our internal

control systems, improper operation of systems or improper employee

actions, we could suffer financial loss, face regulatory

action, and/or suffer damage to our reputation.

We are subject to

credit and/or settlement risk arising from

the soundness of other financial institutions and

counterparties which may have a material adverse effect on our business, financial condition,

and results of operations.

Financial services institutions are interrelated as a result of trading,

clearing, counterparty, or other

relationships. We

have

exposure to many different industries and counterparties,

and routinely execute transactions with counterparties in the financial

services industry, including

commercial banks, brokers and dealers, investment banks, other institutional

clients, and certain

vendors.

Many of these transactions expose us to credit or settlement risk in the event of

a default or other failure to adhere to

contractual obligations by a counterparty or client. In addition, our credit

or settlement risk may be exacerbated when any

collateral held by us cannot be realized upon or is liquidated at prices not sufficient

to recover the full amount of the credit or

derivative exposure due to us. Increased interconnectivity amongst

financial institutions also increases the risk of cyber-attacks

and information system failures for financial institutions. Any such losses could

have a material adverse effect on our business,

financial condition,

and results of operations.

Pandemics, natural disasters, global climate change, acts of terrorism

and global conflicts may have a negative impact on

our business and operations.

Pandemics (such as the COVID-19 pandemic), natural disasters, global

climate change, acts of terrorism, global conflicts or other

similar events have in the past, and may in the future have, a negative impact on our

business and operations. These events impact

us negatively to the extent that they result in reduced capital markets activity,

lower asset price levels, or disruptions in general

economic activity in the United States or abroad, or in financial market settlement functions.

In addition, these or similar events

may impact economic growth negatively,

which could have an adverse effect on our business and operations and may have other

adverse effects on us in ways that we are unable to predict.

Our business operations could be disrupted if significant portions of our

workforce were unable to work effectively,

including

because of illness, quarantines, government actions, or other restrictions

in connection with the pandemic. Further, work-from-

home and other modified business practices may introduce additional operational

risks, including cybersecurity and execution

risks, which may result in inefficiencies or delays, and may affect

our ability to, or the manner in which we, conduct our business

activities. Disruptions to our clients could result in increased risk of delinquencies,

defaults, foreclosures and losses on our loans.

The escalation of the pandemic may also negatively impact regional economic

conditions for a period of time, resulting in

declines in local loan demand, liquidity of loan guarantors, loan collateral (particularly

in real estate), loan originations and

deposit availability.

Litigation may adversely affect our results.

We are subject to

litigation in the ordinary course of business. Claims and legal actions, including

supervisory actions by our

regulators, could involve large monetary claims and significant

defense costs. The outcome of litigation and regulatory matters as

well as the timing of ultimate resolution are inherently difficult to

predict.

Actual legal and other costs of resolving claims may be greater than our

legal reserves. The ultimate resolution of a pending legal

proceeding, depending on the remedy sought and granted, could

materially adversely affect our results of operations and financial

condition.

In addition, governmental authorities have, at times, sought criminal penalties

against companies in the financial services sector

for violations, and, at times, have required an admission of wrongdoing

from financial institutions in connection with resolving

such matters. Criminal convictions or admissions of wrongdoing in a settlement with

the government can lead to greater exposure

in civil litigation and reputational harm.

Substantial legal liability or significant regulatory action against us could have material

adverse financial effects or cause

significant reputational harm, which adversely impact our business prospects.

Further, we may be exposed to substantial

uninsured liabilities, which could adversely affect

our results of operations and financial condition.

Strategic Risks

Our future success is dependent on our ability to compete effectively

in the highly competitive banking industry.

We face vigorous

competition for deposits, loans and other financial services in our market area

from other banks and financial

institutions, including savings and loan associations, savings banks,

finance companies and credit unions. A number of our

competitors are significantly larger than we are and have greater access to

capital and other resources. Many of our competitors

also have higher lending limits, more expansive branch networks, and offer

a wider array of financial products and services. To

lesser extent, we also compete with other providers of financial services, such as money

market mutual funds, brokerage firms,

consumer finance companies, insurance companies and governmental

organizations, which may offer financial products and

services on more favorable terms than we are able to. Many of our non-bank

competitors are not subject to the same extensive

regulations that govern our activities. As a result, these non-bank competitors have advantages over

us in providing certain

services. The effect of this competition may reduce or limit our

margins or our market share and may adversely affect our

results

of operations and financial condition.

Our directors, executive officers, and principal shareowners,

if acting together,

have substantial control over all matters

requiring shareowner approval,

including changes of control. Because Mr.

William G. Smith, Jr.

is a principal

shareowner and our Chairman, President, and Chief Executive

Officer and Chairman of CCB, he has substantial control

over all matters on a day-to-day basis.

Our directors, executive officers, and principal

shareowners beneficially owned approximately 23.3% of the outstanding

shares of

our common stock at December 31, 2022.

William G. Smith, Jr.,

our Chairman, President and Chief Executive Officer

beneficially owned 17.1% of our shares as of that date.

Accordingly, these directors, executive

officers, and principal

shareowners, if acting together, may be

able to influence or control matters requiring approval by our shareowners,

including the

election of directors and the approval of mergers, acquisitions or

other extraordinary transactions. Moreover,

because William G.

Smith, Jr. is the Chairman, President,

and Chief Executive Officer of CCBG and Chairman of CCB, he has substantial

control

over all matters on a day-to-day basis, including the nomination and election

of directors.

These directors, executive officers, and principal shareowners may

also have interests that differ from yours and may vote in a

way with which you disagree, and which may be adverse to your interests. The concentration

of ownership may have the effect of

delaying, preventing or deterring a change of control of our company,

could deprive our shareowners of an opportunity to receive

a premium for their common stock as part of a sale of our Company and might ultimately

affect the market price of our common

stock. You

may also have difficulty changing management, the composition of

the Board of Directors, or the general direction of

our Company.

Our Articles of Incorporation, Bylaws, and certain laws and regulations

may prevent or delay transactions you might

favor,

including a sale or merger of CCBG.

CCBG is registered with the Federal Reserve as a financial holding

company under the Bank Holding Company Act, or BHC Act.

As a result, we are subject to supervisory regulation and examination by the

Federal Reserve. The Gramm-Leach-Bliley Act, the

BHC Act, and other federal laws subject financial holding companies

to restrictions on the types of activities in which they may

engage, and to a range of supervisory requirements and activities, including regulatory

enforcement actions for violations of laws

and regulations.

Provisions of our Articles of Incorporation, Bylaws, certain laws and regulations

and various other factors may make it more

difficult and expensive for companies or persons to acquire control

of us without the consent of our Board of Directors. It is

possible, however, that you would want a

takeover attempt to succeed because, for example, a potential buyer could offer

premium over the then prevailing price of our common stock.

For example, our Articles of Incorporation permit our Board of Directors

to issue preferred stock without shareowner action. The

ability to issue preferred stock could discourage a company from attempting

to obtain control of us by means of a tender offer,

merger, proxy contest or

otherwise. We are also subject to

certain provisions of the Florida Business Corporation Act and our

Articles of Incorporation that relate to business combinations with interested

shareowners. Other provisions in our Articles of

Incorporation or Bylaws that may discourage takeover attempts or make them

more difficult include:

●

Supermajority voting requirements to remove a director from office;

●

Provisions regarding the timing and content of shareowner proposals

and nominations;

●

Supermajority voting requirements to amend Articles of Incorporation

unless approval is received by a majority of

“disinterested directors”;

●

Absence of cumulative voting; and

●

Inability for shareowners to take action by written consent.

Reputational Risks

Damage to our reputation could harm our businesses, including our

competitive position and business prospects.

Our ability to attract and retain customers, clients, investors and employees

is impacted by our reputation. Harm to our reputation

can arise from various sources, including officer,

director or employee fraud, misconduct and unethical behavior,

security

breaches, litigation or regulatory outcomes, compensation practices, lending

practices, the suitability or reasonableness of

recommending particular trading or investment strategies, including

the reliability of our research and models, prohibiting clients

from engaging in certain transactions and employee sales practices. Additionally,

our reputation may be harmed by failing to

deliver products, subpar standards of service and quality expected by our

customers, clients and the community,

compliance

failures, the inability to manage technology change or maintain effective

data management, cyber incidents, internal and external

fraud, inadequacy of responsiveness to internal controls, unintended

disclosure of personal, proprietary or confidential

information, conflicts of interest and breach of fiduciary obligations, the

handling of health emergencies or pandemics, and the

activities of our clients, customers, counterparties and third parties, including

vendors. Our reputation may also be negatively

impacted by our environmental, social, and governance practices and

disclosures, our businesses and our customers, including

practices and disclosures related to climate change. Actions by the financial

services industry generally or by certain members or

individuals in the industry also can adversely affect our reputation.

In addition, adverse publicity or negative information posted

on social media by employees, the media or otherwise, whether or not factually

correct, may adversely impact our business

prospects or financial results.

We are subject to

complex and evolving laws and regulations regarding privacy,

know-your-customer requirements, data

protection, cross-border data movement and other matters. Principles

concerning the appropriate scope of consumer and

commercial privacy vary considerably in different jurisdictions,

and regulatory and public expectations regarding the definition

and scope of consumer and commercial privacy may remain fluid.

It is possible that these laws may be interpreted and applied by

various jurisdictions in a manner inconsistent with our current or future practices,

or that is inconsistent with one another.

personal, confidential or proprietary information of customers or clients

in our possession, or in the possession of third parties

(including their downstream service providers) or financial data aggregators,

is mishandled, misused or mismanaged, or if we do

not timely or adequately address such information, we may face regulatory,

reputational and operational risks which could

adversely affect our financial condition and results of operations.

We could suffer

reputational harm if we fail to properly identify and manage potential conflicts of interest.

Management of

potential conflicts of interest has become increasingly complex as we expand

our business activities through more numerous

transactions, obligations and interests with and among our clients. The failure

to adequately address, or the perceived failure to

adequately address, conflicts of interest could affect the

willingness of clients to use our products and services, or give rise to

litigation or enforcement actions, which could adversely affect our

business.

Our actual or perceived failure to address these and other issues, such as operational

risks, gives rise to reputational risk that could

harm us and our business prospects. Failure to appropriately address any

of these issues could also give rise to additional

regulatory restrictions, legal risks and reputational harm, which could, among

other consequences, increase the size and number

of litigation claims and damages asserted or subject us to enforcement

actions, fines and penalties, and cause us to incur related

costs and expenses.

Technology

Risks

We process, maintain,

and transmit confidential client information through our

information technology systems, such as

our online banking service.

Cybersecurity issues, such as security breaches and computer viruses, affecting

our

information technology systems or fraud related to our

debit card products could disrupt our business, result in the

unintended disclosure or misuse of confidential or proprietary

information, damage our reputation, increase our costs,

and cause losses.

We collect and

store sensitive data, including our proprietary business information and that of

our clients, and personally

identifiable information of our clients and employees, in our

information technology systems

We also provide

our clients the

ability to bank online.

The secure processing, maintenance, and transmission of this information

is critical to our operations.

Our

network, or those of our clients, could be vulnerable to unauthorized

access, computer viruses, phishing schemes and other

security problems.

Financial institutions and companies engaged in data processing have increasingly

reported breaches in the

security of their websites or other systems, some of which have involved sophisticated and

targeted attacks intended to obtain

unauthorized access to confidential information, destroy data, disrupt or degrade

service, sabotage systems or cause other damage.

We may be required

to spend significant capital and other resources to protect against the threat of

security breaches and

computer viruses or to alleviate problems caused by security breaches or viruses.

Security breaches and viruses could expose us to

claims, litigation and other possible liabilities. Any inability to prevent

security breaches or computer viruses could also cause

existing clients to lose confidence in our systems and could adversely affect

our reputation and our ability to generate deposits.

Additionally, fraud

losses related to debit and credit cards have risen in recent years due in large part

to growing and evolving

schemes to illegally use cards or steal consumer credit card information despite

risk management practices employed by the debit

and credit card industries. Many issuers of debit and credit cards have suffered

significant losses in recent years due to the theft of

cardholder data that has been illegally exploited for personal gain.

The potential for debit and credit card fraud against us or our clients and our third-party

service providers is a serious issue. Debit

and credit card fraud is pervasive, and the risks of cybercrime are complex

and continue to evolve. In view of the recent high-

profile retail data breaches involving client personal and financial information,

the potential impact on us and any exposure to

consumer losses and the cost of technology investments to improve security

could cause losses to us or our clients, damage to our

brand, and an increase in our costs.

Item 1B.

Unresolved Staff Comments

None.

Item 2.

Properties

We are headquartered

in Tallahassee, Florida.

Our executive office is in the Capital City Bank building located

on the corner of

Tennessee and Monroe

Streets in downtown Tallahassee.

The building is owned by CCB, but is located on land leased under a

long-term agreement.

At December 31, 2022, Capital City Bank had 58 banking offices.

Of these locations, we lease the land, buildings, or both at

seven locations and own the land and buildings at the remaining 51. CCHL had

33 loan production offices, all of which were

leased.

Capital City Strategic Wealth,

LLC. maintained five offices, all of which were leased.

Item 3.

Legal Proceedings

We are 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 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 4

Mine Safety Disclosure

Not applicable.

PART

Item 5.

Market for the Registrant’s

Common Equity, Related Shareowner Matters,

and Issuer Purchases of Equity

Securities

Common Stock Market Prices and Dividends

Our common stock trades on the Nasdaq Global Select Market under

the symbol “CCBG.”

We had a

total of 1,124 shareowners

of record at January 31, 2023.

The following table presents the range of high and low closing sales prices reported

on the Nasdaq Global Select Market and cash

dividends declared for each quarter during the past two years.

2022

2021

Fourth

Quarter

Third

Quarter

Second

Quarter

First

Quarter

Fourth

Quarter

Third

Quarter

Second

Quarter

First

Quarter

Common stock price:

High

36.23

33.93

28.55

28.88

29.00

26.10

27.39

28.98

Low

31.14

27.41

24.43

25.96

24.77

22.02

24.55

21.42

32.50

31.11

27.89

26.36

26.40

24.74

25.79

26.02

Cash dividends per share

0.17

0.16

0.15

Florida law and Federal regulations impose restrictions on our ability to

pay dividends and limitations on the amount of dividends

that the Bank can pay annually to us.

See Item 1. “Capital; Dividends; Sources of Strength” and “Dividends” in the Business

section on page 11 and 13, Item 1A. “Market

Risks” in the Risk Factors section on page 19, Item 7. “Liquidity and Capital

Resources – Dividends” – in Management’s

Discussion and Analysis of Financial Condition and Operating Results on page

and Note 17 in the Notes to Consolidated Financial Statements.

Performance Graph

This performance graph compares the cumulative total shareowner

return on our common stock with the cumulative total

shareowner return of the Nasdaq Composite Index and the S&P U.S. Small Cap Banks Index

for the past five years.

The graph

assumes that $100 was invested on December 31, 2017 in our common stock and each of

the above indices, and that all dividends

were reinvested.

The shareowner return shown below represents past performance and should

not be considered indicative of

future performance.

ccbg20221231p33i0

Period Ending

Index

12/31/17

12/31/18

12/31/19

12/31/20

12/31/21

12/31/22

Capital City Bank Group, Inc.

100.00

102.49

137.30

113.48

124.86

157.09

Nasdaq Composite

100.00

97.16

132.81

192.47

235.15

158.65

SNL $1B-$5B Bank Index

100.00

83.44

104.69

95.08

132.36

116.69

Item 6.

Selected Financial Data

(Dollars in Thousands, Except Per Share Data)

2022

2021

2020

Interest Income

131,348

106,351

106,197

Net Interest Income

124,460

102,861

101,326

Provision for Credit Losses

7,162

(1,553)

9,645

Noninterest Income

94,627

107,545

111,165

Noninterest Expense

(1)

161,828

162,508

149,962

Pre-Tax Loss (Income) Attributable to Noncontrolling Interests

(2)

135

(6,220)

(11,078)

Net Income Attributable to Common Shareowners

40,147

33,396

31,576

Per Common Share:

Basic Net Income

2.37

1.98

1.88

Diluted Net Income

2.36

1.98

1.88

Cash Dividends Declared

0.66

0.62

0.57

Diluted Book Value

23.12

22.63

19.05

Diluted Tangible Book Value

(3)

17.66

17.12

13.76

Performance Ratios:

Return on Average Assets

0.93

0.84

0.93

Return on Average Equity

10.58

9.92

9.36

Net Interest Margin (FTE)

3.13

2.83

3.30

Noninterest Income as % of Operating Revenues

43.19

51.11

52.32

Efficiency Ratio

73.76

77.11

70.43

Asset Quality:

Allowance for Credit Losses ("ACL")

24,736

21,606

23,816

ACL to Loans Held for Investment ("HFI")

0.98

1.12

1.19

Nonperforming Assets ("NPAs")

2,728

4,339

6,679

NPAs to Total

Assets

0.06

0.10

0.18

NPAs to Loans HFI plus OREO

0.11

0.22

0.33

ACL to Non-Performing Loans

1,076.89

499.93

405.66

Net Charge-Offs to Average Loans HFI

0.18

(0.03)

0.12

Capital Ratios:

Tier 1 Capital

14.53

16.14

16.19

Total Capital

15.52

17.15

17.30

Common Equity Tier 1 Capital

12.64

13.86

13.71

Tangible Common Equity

(3)

6.79

6.95

6.25

Leverage

9.06

8.95

9.33

Equity to Assets

8.71

8.99

8.45

Dividend Pay-Out

27.97

31.31

30.32

Averages for the Year:

Loans Held for Investment

2,189,440

2,000,563

1,957,576

Earning Assets

3,989,248

3,652,486

3,083,675

Total Assets

4,332,302

3,984,064

3,391,071

Deposits

3,763,336

3,406,886

2,844,347

Shareowners’ Equity

379,290

336,821

337,313

Year

-End Balances:

Loans Held for Investment

2,525,180

1,931,465

2,006,426

Earning Assets

4,182,399

3,949,111

3,475,904

Total Assets

4,525,958

4,263,849

3,798,071

Deposits

3,939,317

3,712,862

3,217,560

Shareowners’ Equity

394,016

383,166

320,837

Other Data:

Basic Average Shares Outstanding

16,950,810

16,862,932

16,784,711

Diluted Average Shares Outstanding

16,984,740

16,892,947

16,821,950

Shareowners of Record

(4)

1,124

1,157

1,201

Banking Locations

(4)

Full-Time Equivalent Associates

(4)(5)

992

954

(1)

For 2022 and 2021, includes pension settlement charge of $2.3 million and

$3.1 million, respectively.

(2)

Acquired 51% membership interest in Brand Mortgage Group, LLC, re-named as Capital City Home Loans,

LLC, on March 1, 2020 - fully consolidated.

(3)

Diluted tangible book value and tangible common equity

ratio are non-GAAP financial measures. For additional information, including a reconciliation

to GAAP, refer

to page 35.

(4)

As of January 31st of the following year.

(5)

Reflects 992 full-time equivalent associates that

includes 196 full-time equivalent associates at CCHL.

NON-GAAP FINANCIAL MEASURES

We present a tangible

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

removes the effect of

goodwill that resulted from merger and acquisition activity.

We believe these

measures

are useful to investors because it allows

investors to more easily compare our capital adequacy to other companies in

the industry.

The generally accepted accounting

principles (“GAAP”) to non-GAAP reconciliation for selected year-to-date

financial data is provided below.

Non-GAAP Reconciliation - Selected Financial Data

(Dollars in Thousands, except per share data)

2022

2021

2020

Shareowners' Equity (GAAP)

394,016

383,166

320,837

Less: Goodwill and Other Intangibles (GAAP)

93,093

93,253

89,095

Tangible Shareowners' Equity (non-GAAP)

300,923

289,913

231,742

Total Assets (GAAP)

4,525,958

4,263,849

3,798,071

Less: Goodwill and Other Intangibles (GAAP)

93,093

93,253

89,095

Tangible Assets (non-GAAP)

4,432,865

4,170,596

3,708,976

Tangible Common Equity Ratio (non-GAAP)

A/B

6.79%

6.95%

6.25%

Actual Diluted Shares Outstanding (GAAP)

17,039,401

16,935,389

16,844,997

Tangible Book Value

per Diluted Share (non-GAAP)

A/C

17.66

17.12

13.76

Item 7.

Management’s

Discussion and Analysis of Financial Condition and Results of 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 included in the Annual Report on Form 10-K.

The MD&A is divided into subsections entitled

“Business Overview,” “Executive

Overview,” “Results of Operations,”

“Financial Condition,” “Liquidity and Capital Resources,”

“Off-Balance Sheet Arrangements,” and “Accounting Policies.”

The following information should provide a better understanding

of the major factors and trends that affect our earnings performance

and financial condition, and how our performance during

2022 compares with prior years.

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

collectively, are

referred to as “CCBG,” “Company,”

“we,” “us,” or “our.”

CAUTION CONCERNING FORWARD

-LOOKING STATEMENTS

This Annual Report on Form 10-K, including this MD&A section, contains “forward

-looking statements” within the meaning of

the Private Securities Litigation Reform Act of 1995.

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

our beliefs, plans, objectives, goals, expectations, estimates and

intentions that are subject to significant risks and uncertainties

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

beyond our control. The words “may,”

“could,” “should,”

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

“target,” “vision,” “goal,” and similar expressions are

intended to identify forward-looking statements.

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

Our actual future results may differ

materially from those set forth in our forward-looking statements.

Please see the Introductory Note and

Item 1A Risk Factors

this Annual Report for a discussion of factors that could cause our actual results to differ

materially from those in the forward-

looking statements.

However, other factors besides those listed in

Item 1A Risk Factors

or discussed in this 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

Our Business

We are a financial

holding company headquartered in Tallahassee,

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

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

We provide

a full range of banking services, including traditional deposit and credit

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

securities brokerage services and financial

advisory services, including the sale of life insurance, risk management,

and asset protection services. The Bank has 58 banking

offices and 89 ATMs/ITMs

in Florida, Georgia and Alabama.

Through Capital City Home Loans, LLC (“CCHL”), we have 33

additional offices in the Southeast for our mortgage banking business.

Please see the section captioned “About Us” beginning on

page 4 for more detailed information about our business.

Our profitability, like

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

interest income, which is the difference

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

securities, and the interest paid on interest-

bearing liabilities, principally deposits and borrowings.

Results of operations are also affected by the provision for

credit losses,

operating expenses such as salaries and employee benefits, occupancy

and other operating expenses including income taxes, and

noninterest income such as mortgage banking revenues, wealth management

fees, deposit fees, and bank card fees.

Strategic Review

Operating Philosophy

Our philosophy is to build long-term client relationships based on quality

service, high ethical standards,

and safe and sound banking practices.

We maintain a locally

oriented, community-based focus, which is augmented by

experienced, centralized support in select specialized areas.

Our local market orientation is reflected in our network of banking

office locations, experienced community executives with

a dedicated President for each market, and community boards which

support our focus on responding to local banking needs.

We strive to offer

a broad array of sophisticated products and to provide

quality service by empowering associates to make decisions in their local

markets.

Strategic Initiatives

In 2021, we initiated a new five-year strategic plan “2025 In Focus” that will guide

us in the areas of client

experience, channel optimization, market expansion, and culture.

As part of 2025 In Focus, we aim to take our brand of

relationship banking to the next level, further deepen relationships within

our communities, expand into new higher growth

markets, diversify our revenue sources, invest in new technology that

will support the expansion of client relationships, scale

within our lines of business, and drive higher profitability.

In 2022, we implemented initiatives in support of the strategic plan,

including the implementation of an integrated marketing software aimed at deepening

client relationships, initiation of a

comprehensive review of our banking office network, continued

expansion into new markets, and in 2020 and 2021 continued our

efforts to diversify our revenues by expanding our residential mortgage

banking and wealth businesses (discussed further below -

Recent Acquisition/Expansion Activity

Markets

We maintain a blend

of large and small markets in Florida and Georgia,

all in close proximity to major interstate

thoroughfares such as Interstates 10 and 75.

Our larger markets include Tallahassee

(Leon County, Florida),

Gainesville

(Alachua County, Florida),

Macon (Bibb County,

Georgia), and Suncoast (Hernando/Pasco/Citrus Counties, Florida).

The larger

employers in these markets are state and local governments, healthcare

providers, educational institutions, and small businesses,

providing stability and good growth dynamics that have historically grown

in excess of the national average.

We serve an

additional fifteen smaller, less competitive,

rural markets located on the outskirts of, and centered between, our larger

markets

where we are positioned as a market leader.

In 12 of 18 markets in Florida and two of four Georgia markets, we frequently

rank

within the top four banks in terms of deposit market share.

Furthermore, in the counties in which we operate, we maintain an

8.4% deposit market share in the Florida counties and 5.4% in the Georgia

counties (excluding Northern Arc markets entered in

2022).

Our markets provide for a strong core deposit funding base, a key differentiator

and driver of our profitability and

franchise value.

Recent Acquisition/Expansion Activity

We have continued

our expansion into the Northern Arc of Atlanta, Georgia by opening

full-service offices in Marietta (Cobb County) in the fourth

quarter of 2022 and Duluth (Gwinnett County) in the first quarter of

2023.

Additionally, we expanded our

presence in the Florida Panhandle by opening a full-service office

in Watersound, Florida

in the fourth quarter of 2022.

To expand our presence

and commitment to our Gainesville market, we plan to open a third full-

service banking office in the area in early 2023.

During 2022, we hired leadership and banking teams in the Northern Arc and

Walton County

office markets, including commercial bankers, retail delivery

support, private banking, wealth advisors, and

treasury professionals.

Further, CCHL loan originators will reside in the Northern

Arc and Walton County

offices.

On 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”) – Refer to Note 1

– Significant Accounting

Policies/Business Combination for additional information

on this transaction.

On March 1, 2020, CCB completed its acquisition of a 51% membership

interest in Brand Mortgage Group, LLC (“Brand”)

which is now operated as CCHL – Refer to Note 1 – Significant Accounting Policies/Business

Combination for additional

information on this transaction.

EXECUTIVE OVERVIEW

For 2022, net income attributable to common shareowners totaled $40.1 million,

or $2.36 per diluted share, compared to net

income of $33.4 million, or $1.98 per diluted share, for 2021 and $31.6 million,

or $1.88 per diluted share, for 2020.

The increase in net income attributable to common shareowners for 202

was attributable to higher net interest income of $21.6

million and lower noninterest expense of $0.7 million, partially offset

by an $8.7 million increase in the provision for credit losses,

lower noninterest income of $12.9 million, and higher income taxes of

$0.3 million.

Net income attributable to common

shareowners included a $6.4 million decrease in the deduction

to record the 49% non-controlling interest in the earnings of CCHL.

The increase in net income attributable to common shareowners for 2021

was attributable to a decrease in the provision for credit

losses of $11.2 million, higher net interest income

of $1.5 million and lower income taxes of $0.4 million, partially offset

higher noninterest expense of $12.5 million and lower noninterest income

of $3.6 million. Net income attributable to common

shareowners included a $4.9 million decrease in the deduction to

record the 49% non-controlling interest in the earnings of CCHL.

Below are

Summary Highlights

of our 2022 financial performance:

●

Strong growth

in net interest income of 21% reflected

improved earning asset mix and strength

of deposit franchise

●

Loan growth of $594 million, or 30.7% (end of period)

and $189 million, or 9.4% (year-to-date average)

●

Average Deposits grew

$356 million, or 10.5%

●

CCHL contribution decreased $0.24 per share

due to slower secondary market loan sales, but was more than

offset by

strong adjustable rate production

for our loan portfolio, and higher wealth and deposit fees

●

Noninterest expense included pension

settlement charges totaling $2.3 million or $0.11

per share

●

Tangible

book value per share increased $0.54,

or 3.2%, primarily due to strong earnings and a favorable

re-

measurement adjustment for pension plan,

partially offset by higher unrealized investment security losses

For more detailed information, refer to the following additional sections of

the MD&A “Results of Operations” and “Financial

Condition”.

RESULTS

OF OPERATIONS

A condensed earnings summary for the last three fiscal years is presented

in Table 1 below:

Table 1

CONDENSED SUMMARY OF EARNINGS

(Dollars in Thousands, Except Per Share

Data)

2022

2021

2020

Interest Income

131,348

106,351

106,197

Taxable Equivalent

Adjustments

325

349

430

Total Interest Income

(FTE)

131,673

106,700

106,627

Interest Expense

6,888

3,490

4,871

Net Interest Income (FTE)

124,785

103,210

101,756

Provision for Credit Losses

7,162

(1,553)

9,645

Taxable Equivalent

Adjustments

325

349

430

Net Interest Income After Provision for Credit Losses

117,298

104,414

91,681

Noninterest Income

94,627

107,545

111,165

Noninterest Expense

161,828

162,508

149,962

Income Before Income Taxes

50,097

49,451

52,884

Income Tax Expense

10,085

9,835

10,230

Pre-Tax Income

Attributable to Noncontrolling Interests

135

(6,220)

(11,078)

Net Income Attributable to Common Shareowners

40,147

33,396

31,576

Basic Net Income Per Share

2.37

1.98

1.88

Diluted Net Income Per Share

2.36

1.98

1.88

Net Interest Income and Margin

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.

We provide

an analysis of our net interest income, including

average yields and rates in Tables

2 and 3 below.

We provide this information

on a “taxable equivalent” basis to reflect the tax-

exempt status of income earned on certain loans and investments.

For 2022, our taxable equivalent net interest income increased $21.6

million, or 20.9%. This follows an increase of $1.5 million,

or 1.4% in 2021.

The increase in 2022

was primarily due to strong loan growth, higher interest rates, and growth in the

investment portfolio.

The increase in 2021 was primarily due to higher small business (“SBA PPP”) loan income

combined with

lower interest expense, partially offset by lower investment

portfolio income due to lower reinvestment rates.

For 2022, taxable equivalent interest income increased $25.0 million,

or 23.4%, over 2021.

For 2021, taxable equivalent interest

income increased $0.1 million, or 0.1%, over 2020.

The increase in 2022 was primarily due to an overall improved earning

asset

mix and higher interest rates on earning assets.

The increase in 2021

was primarily due to income on SBA PPP loans,

partially

offset by lower rates on earning assets.

For 2022, interest expense increased $3.4 million, or 97.4%, over 2021.

For 2021, interest expense decreased $1.4 million, or

28.4%, from 2020.

The variances for both 2022 and 2021 were related to our negotiated rate deposits,

primarily NOW accounts

which were tied to an adjustable rate index until mid-2022.

Our cost of interest bearing deposits was 17 basis points in 2022, 4

basis points in 2021, and 10 basis points in 2020.

Our total cost of deposits (including noninterest bearing accounts

)

was 9 basis

points in 2022, 2 basis points in 2021, and 5 basis points in 2020.

To a lesser extent, higher

interest expense for our variable rate

short-term borrowings (warehouse line of credit for mortgage banking)

and subordinated notes contributed to the increase in

2022.

Our total cost of funds (interest expense/average earning assets) was 17 basis points in

2022, 10 basis points in 2021, and

16 basis points in 2020.

Our interest rate spread (defined as the taxable-equivalent yield on

average earning assets less the average rate paid on interest

bearing liabilities) increased 23 basis points in 2022 and decreased 43

basis points in 2021.

Our net interest margin (defined as

taxable-equivalent interest income less interest expense divided by average

earning assets) of 3.13% in 2022 reflected a 30 basis

point increase over 2021.

The net interest margin of 2.83%

in 2021 reflected a 47 basis point decrease from 2020.

The increase

in the interest rate spread and net interest margin in 2022

reflected an improved earning asset mix, higher yields across a majority

of our earning assets due to the rapid increase in interest rates, and good control of

our deposit cost.

The decline in the interest

rate spread and net interest margin in 2021 reflected

lower earning asset yields due to lower rates, in addition to a higher level of

lower yielding overnight funds driven by strong deposit growth.

During 2022, the Federal Open Market Committee (“FOMC”) raised

interest rates 425 basis points, putting the federal funds

target rate at a range of 4.25%-4.50%, compared to

a range of 0.00%-0.25% at the end of 2021.

Our asset sensitive position,

with

strong core deposit funding and ample liquidity provide benefits in the higher

rate environment.

Table 2

AVERAGE

BALANCES AND INTEREST RATES

2022

2021

2020

(Taxable Equivalent Basis - Dollars

in Thousands)

Average

Balance

Interest

Average

Rate

Average

Balance

Interest

Average

Rate

Average

Balance

Interest

Average

Rate

ASSETS

Loans Held for Sale

(1)(2)

48,502

2,175

4.49

78,328

2,555

3.24

81,125

2,895

3.57

Loans Held for Investment

(1)(2)

2,189,440

104,016

4.75

2,000,563

94,332

4.76

1,957,576

92,261

4.71

Taxable Investment Securities

1,098,876

15,917

1.45

778,953

8,724

1.12

574,199

10,176

1.77

Tax-Exempt Investment Securities

(2)

2,668

2.03

3,772

2.39

5,123

124

2.42

Fed Funds Sold & Int Bearing Dep

649,762

9,511

1.46

790,870

998

0.13

465,652

1,171

0.25

Total Earning Assets

3,989,248

131,673

3.30

3,652,486

106,700

2.92

3,083,675

106,627

3.46

Cash & Due From Banks

76,929

72,409

68,386

Allowance for Credit Losses

(21,688)

(22,960)

(20,690)

Other Assets

287,813

282,129

259,700

TOTAL ASSETS

4,332,302

3,984,064

3,391,071

LIABILITIES

NOW Accounts

1,065,838

2,799

0.26

965,320

294

0.03

826,280

930

0.11

Money Market Accounts

283,407

203

0.07

278,606

134

0.05

235,931

223

0.09

Savings Accounts

628,313

309

0.05

537,023

263

0.05

423,529

207

0.05

Time Deposits

94,646

133

0.14

102,220

148

0.14

104,393

188

0.18

Total Interest Bearing Deposits

2,072,204

3,444

0.17

1,883,169

839

0.04

1,590,133

1,548

0.10

Short-Term Borrowings

40,483

1,761

4.35

53,511

1,360

2.54

69,119

1,690

2.44

Subordinated Notes Payable

52,887

1,652

3.08

52,887

1,228

2.29

52,887

1,472

2.74

Other Long-Term Borrowings

665

4.62

1,887

3.33

5,304

161

3.03

Total Interest Bearing Liabilities

2,166,239

6,888

0.32

1,991,454

3,490

0.18

1,717,443

4,871

0.28

Noninterest Bearing Deposits

1,691,132

1,523,717

1,254,214

Other Liabilities

85,684

111,567

72,400

TOTAL LIABILITIES

3,943,055

3,626,738

3,044,057

Temporary Equity

9,957

20,505

9,701

TOTAL SHAREOWNERS’

EQUITY

379,290

336,821

337,313

TOTAL LIABILITIES,

TEMPORARY EQUITY AND

SHAREOWNERS’ EQUITY

4,332,302

3,984,064

3,391,071

Interest Rate Spread

2.98

2.75

3.18

Net Interest Income

124,785

103,210

101,756

Net Interest Margin

(3)

3.13

2.83

3.30

(1)

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

Interest income includes loan fees of $1.1 million for 2022,

$6.6 million for 2021, and $2.6 million for 2020.

SBA PPP loans averaged $0.1 million in 2022, $92.4 million in

2021, and $125.4 million in 2020.

(2)

Interest income includes the effects of taxable equivalent adjustments using

a 21% tax rate.

(3)

Taxable equivalent net interest income divided by average earning assets.

Table 3

RATE/VOLUME

ANALYSIS

(1)

2022 vs. 2021

2021 vs. 2020

(Taxable Equivalent Basis -

Dollars in Thousands)

Increase (Decrease) Due to Change In

Total

Volume

Rate

Total

Calendar

(3)

Volume

Rate

Earnings Assets:

Loans Held for Sale

(2)

(380)

(987)

607

(340)

(8)

(100)

(232)

Loans Held for Investment

(2)

9,684

9,782

(98)

2,071

(252)

2,092

231

Taxable Investment Securities

7,193

3,583

3,610

(1,451)

(28)

3,657

(5,080)

Tax-Exempt Investment Securities

(2)

(37)

(27)

(10)

(34)

(33)

(1)

Funds Sold

8,513

(178)

8,691

(173)

(3)

821

(991)

Total

24,973

12,173

12,800

(291)

6,437

(6,073)

Interest Bearing Liabilities:

NOW Accounts

2,505

2,474

(636)

(3)

159

(792)

Money Market Accounts

(89)

(1)

(132)

Savings Accounts

Time Deposits

(15)

(11)

(4)

(40)

(1)

(3)

(36)

Short-Term Borrowings

401

(331)

732

(330)

(4)

(383)

Subordinated Notes Payable

424

(244)

(4)

(240)

Other Long-Term Borrowings

(32)

(41)

(98)

(104)

Total

3,398

(305)

3,703

(1,381)

(13)

(231)

(1,137)

Changes in Net Interest Income

21,575

12,478

9,097

1,454

(278)

6,668

(4,936)

(1)

This table shows the change in taxable equivalent net interest income for comparative periods based on either changes in average

volume or changes in average rates for interest earning assets and interest bearing liabilities. Changes which are not solely

due to volume changes or solely due to rate changes have been attributed to rate changes. SBA PPP loan income totaled less

than $0.1 million in 2022, $7.9 million in 2021, and $3.2 million in 2020.

(2)

Interest income includes the effects of taxable equivalent adjustments using a 21% tax rate to adjust on tax-exempt loans and securities

and securities to a taxable equivalent basis.

(3)

Reflects one extra calendar day in 2020.

Provision for Credit Losses

For 2022, we recorded a provision for credit loss expense of $7.2 million ($7.1

million expense for loans HFI and $0.1 million

expense for unfunded loan commitments) compared to a provision benefit

of $1.6 million for 2021 ($2.8 million benefit for loans

HFI and $1.2 million expense for unfunded loan commitments), and

provision expense of $9.6 million for 2020 ($9.0 million

expense for loans HFI and $0.6 million expense for unfunded loan commitments

The higher level of provision in 2022 was

primarily attributable to strong loan growth and weaker projected economic

conditions, primarily a higher rate of unemployment.

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

We discuss the various

factors that have

impacted our provision expense in more detail under the heading Allowance

for Credit Losses.

Noninterest Income

For 2022, noninterest income totaled $94.6 million, a $12.9 million decrease

from 2021 due to lower mortgage banking revenues

of $21.8 million, partially offset by higher wealth management

fees of $4.4 million, deposit fees of $3.2 million, other income of

$1.2 million, and bank card fees of $0.1 million.

Lower mortgage banking revenues at CCHL, for 2022 generally

reflected a

reduction in refinancing activity and, to a lesser degree, lower purchase mortgage

originations primarily driven by higher interest

rates.

In addition, gain on sale margins were pressured due to a lower level of

governmental loan originations and mandatory

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

Strong best efforts adjustable rate production by

CCHL during 2022 contributed to the Bank’s

loan growth and earnings.

For 2021, noninterest income totaled $107.5 million, a $3.6 million decrease

from 2020 primarily attributable to lower mortgage

banking revenues of $10.9 million, partially offset by

strong gains in wealth management fees of $2.7 million, bank card fees of

$2.2 million, and deposit fees of $1.1 million.

The decline in mortgage banking revenues was driven generally by lower

refinancing activity,

a shift in production mix (lower government versus conventional product), and

lower market driven gain on

sale margins.

Noninterest income as a percent of total operating revenues (net interest income plus

noninterest income) was 43.19% in 2022,

51.11% in 2021, and 52.32% in 2020.

In 2022 and 2021, lower mortgage banking revenues drove the decrease in

the percentage.

The table below reflects the major components of noninterest income.

Table 4

NONINTEREST INCOME

(Dollars in Thousands)

2022

2021

2020

Deposit Fees

22,121

18,882

17,800

Bank Card Fees

15,401

15,274

13,044

Wealth Management

Fees

18,059

13,693

11,035

Mortgage Banking Revenues

30,624

52,425

63,344

Other

8,422

7,271

5,942

Total Noninterest

Income

94,627

107,545

111,165

Significant components of noninterest income are discussed in more

detail below.

Deposit Fees

For 2022, deposit fees (service charge fees, insufficient

fund/overdraft fees, and business account analysis fees)

totaled $22.1 million compared to $18.9 million in 2021 and $17.8 million

in 2020.

The $3.2 million, or 17.2%, increase in 2022

reflected higher monthly

service charge fees and overdraft fees.

The conversion,

in the third quarter of 2021, of our remaining

free checking accounts to a monthly maintenance fee account type

drove the increase in service charge fees.

The increase in

overdraft fees was driven by higher utilization of our overdraft service

which is closely correlated (inversely) with the consumer

savings rate which has declined noticeably since it substantially increased

during 2020 and 2021 due to the high level of

governmental stimulus related to the COVID-19 pandemic.

The $1.1 million, or 6.1%, increase in 2021 reflected the

aforementioned conversion of the remaining free checking accounts to

a monthly maintenance fee account type.

Bank Card Fees

Bank card fees totaled $15.4 million in 2022 compared to $15.3 million in 2021

and $13.0 million in 2020.

The

slight increase in 2022 reflected incremental revenues from growth

in new checking accounts that was partially offset by

transaction volume which reflected a slowdown in consumer spending.

The favorable variance in 2021 generally reflected an

increase in card-not-present debit card transactions and increased on-line

spending by our clients in part due to the pandemic and

significant government stimulus in 2020 and 2021.

Wealth

Management Fees

Wealth management fees

including both trust fees (i.e., managed accounts and trusts/estates) and

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

accounts) totaled $18.1 million in 2022 compared to

$13.7 million in 2021 and $11.0 million in 2020.

The increase in 2022 was primarily due to higher insurance revenues of $3.7

million and retail brokerage fees of $0.6 million.

The higher level of insurance revenues reflected the acquisition of

CCSW in

2021.

The increase in fees for 2021 reflected higher retail brokerage fees of $1.8 million

and trust fees of $0.8 million.

Higher

retail brokerage transaction volume and advisory accounts added

from the acquisition of CCSW drove the increase in retail

brokerage fees.

The increase in trust fees was primarily attributable to an increase in assets under management.

At December 31,

2022, total assets under management (“AUM”) were approximately

$2.273 billion compared to $2.324 billion at December 31,

2021 and $1.979 billion at December 31, 2020.

The decrease in AUM in 2022 generally reflected lower account values/returns

reflective of volatile market conditions during the year partially offset

by new account growth.

Mortgage Banking Revenues

Mortgage banking revenues totaled $30.6 million in 2022 compared

to $52.4 million in 2021 and

$63.3 million in 2020.

Lower mortgage

banking revenues at CCHL for 2022 reflected a reduction in refinancing

activity and, to a

lesser degree, lower purchase mortgage originations primarily driven

by higher interest rates.

In addition, gain on sale margins

were pressured due to a lower level of governmental loan originations and mandatory

delivery loan sales (both of which provide a

higher gain on sale percentage).

Throughout 2022, strong best efforts origination volume allowed

us to book a steady flow of

adjustable rate residential loans in our portfolio which contributed to loan growth

and earnings.

In addition, continued stability in

our construction/permanent loan program partially offset the

slowdown in secondary market originations.

The decrease in 2021

was driven generally by lower refinancing volume, a shift in production mix (lower

government versus conventional product),

and lower market driven gain on sale margins.

We provide a detailed overview

of our mortgage banking operation, including a

detailed break-down of mortgage banking revenues, mortgage

servicing activity, and

warehouse funding within Note 4 -

Mortgage Banking Activities in the Notes to Consolidated Financial Statements.

Production volume totaled $1.02 billion in 2022,

$1.52 billion in 2021, and $1.56 billion in 2020.

Refinancing activity represented 13% of loan production in 2022, 30% in 2021,

and 40% in 2020.

For 2022, CCHL realized a $0.2 million net loss ($0.01 per diluted share) versus

$3.9 million net income

($0.23 per diluted share) in 2021, and $8.7 million net income ($0.52 per

diluted share) in 2020.

Other

Other noninterest income totaled $8.4 million in 2022 compared to $7.3 million

in 2021 and $5.9 million in 2020.

The

$1.1

million increase in 2022

was primarily attributable to higher loan servicing fees at CCHL of $0.5 and

a $0.4 million increase

in miscellaneous income, primarily from a $0.2 million gain on

the termination of a lease.

The $1.4 million increase in 2021 was

primarily attributable to higher loan servicing fees of $1.0 million at CCHL.

The higher level of loan servicing fees at CCHL for

both 2021 and 2022 reflected a higher volume of servicing retained loan

sales.

Noninterest Expense

For 2022, noninterest expense totaled $161.8 million, a $0.7 million

decrease from 2021 due to a decrease in compensation

expense of $0.9 million and other expense of $0.4 million, partially

offset by an increase in occupancy expense of $0.6 million.

The reduction in compensation expense was primarily due to a decrease in salary expense

of $1.6 million that was partially offset

by an increase in associate benefit expense of $0.7 million.

The variance in salary expense reflected lower variable/performance-

based compensation of $7.7 million and base salaries of $1.3 million at CCHL, partially

offset by an increase in salary expense at

the Bank, including variable/performance-based compensation totaling

$2.5 million, base salaries (merit and new market staffing

additions) of $3.1 million, and lower realized loan cost of $1.4 million

(credit offset to salary expense).

The increase in associate

benefit expense was due to an increase in insurance expense (utilized self-insurance

reserves in 2021) of $0.6 million and stock

compensation expense of $0.7 million at the Bank.

The net decrease in other expense was primarily due to lower pension plan

related costs, including a decrease of $4.9 million for the non-service

cost component of our pension plan (reflected in pension –

other) attributable to the utilization of a lower discount rate for plan liabilities

and a decrease of $0.8 million for pension plan

settlement expense.

These favorable variances were partially offset by an increase in

the expense for other real estate expense of

$1.2 million, travel/entertainment and advertising costs of $1.3 million

(return to pre-pandemic levels and market expansion),

other losses of $0.9 million (primarily debit card and check fraud), mortgage

servicing right amortization of $0.6 million, VISA

share swap conversion ratio payments of $0.4 million, FDIC insurance

fees of $0.3 million, and other miscellaneous costs related

to training, hiring, and variable costs related to loan production.

Gains from the sale of two banking offices in 2021 drove the

increase in other real estate expense.

The increase in occupancy expense is related to lease expense for four new banking

offices

added in 2022 and various software purchases, including network security

and end of life upgrades.

For 2021, noninterest expense totaled $162.5 million, a $12.5 million

increase over 2020 attributable to the addition of expenses

at CCHL (March 1, 2020 acquisition) of $2.3 million and higher expenses at the

Bank totaling $10.2 million.

The increase in

expenses at the Bank were primarily due to an increase in compensation expense

of $3.7 million, including an increase in salary

expense of $3.1 million (merit raises and realized loan cost) and associate benefit

expense of $0.6 million (primarily

pension/service cost), occupancy expense of $0.5 million, and other

expense of $5.9 million.

The increase in occupancy reflected

higher lease expense for two new loan production offices added in 2021

and higher depreciation expense related to technology

investments.

The increase in other expense was primarily

due to pension plan settlement expense of $3.1 million and higher

expense of $2.1 million for the non-service cost component of our pension

plan (reflected in pension – other) attributable to the

utilization of a lower discount rate for plan liabilities.

Increases in processing fees of $0.7 million (debit card volume),

professional fees of $0.6 million, and FDIC insurance fees of $0.5

million (higher asset size) that were partially offset by a

decrease in other real estate expense of $1.6 million (gains from the sale of

two banking offices in 2021), also contributed to the

increase in other expense.

Our operating efficiency ratio (expressed as noninterest

expense as a percent of taxable equivalent net interest income plus

noninterest income) was 71.47%, 77.11%

and 70.43% in 2022, 2021 and 2020, respectively.

The decrease in this metric for 2022

was primarily driven by higher taxable equivalent net interest income (refer

to caption headed Net Interest Income and Margin)

and slightly lower noninterest expense.

The increase in this metric for 2021 reflected higher noninterest expense,

largely the

aforementioned higher level of pension plan expenses.

Expense management is an important part of our culture and strategic focus.

We will continue

to review and evaluate

opportunities to optimize our delivery operations and invest in

technology that provides

favorable returns/scale and/or mitigates

risk.

The table below reflects the major components of noninterest expense.

Table 5

NONINTEREST EXPENSE

(Dollars in Thousands)

2022

2021

2020

Salaries

83,613

85,211

80,846

Associate Benefits

16,929

16,259

15,434

Total Compensation

100,542

101,470

96,280

Premises

11,184

10,879

10,512

Equipment

13,390

13,053

12,147

Total Occupancy,

net

24,574

23,932

22,659

Legal Fees

1,413

1,411

1,570

Professional Fees

5,437

5,633

4,863

Processing Services

6,534

6,569

5,832

Advertising

3,208

2,683

2,998

Travel and Entertainment

1,815

1,063

855

Telephone

2,851

2,975

2,869

Insurance – Other

2,409

2,096

1,607

Pension - Other

(3,043)

1,913

(216)

Pension Settlement

2,321

3,072

Other Real Estate, Net

(337)

(1,488)

104

Miscellaneous

14,104

11,179

10,541

Total Other Expense

36,712

37,106

31,023

Total Noninterest

Expense

161,828

162,508

149,962

Significant components of noninterest expense are discussed in more

detail below.

Compensation

Compensation expense totaled $100.5 million in 2022 compared to $101.5 million

in 2021, and $96.3 million in

2020.

For 2022, the $0.9 million, or 0.9%, net decrease reflected a decrease in salary

expense of $1.6 million that was partially

offset by an increase in associate benefit expense of $0.7 million.

The decrease in salary expense was primarily due to lower

variable/performance-based compensation of $7.7 million

and base salaries of $1.3 million at CCHL, partially

offset by an

increase in salary expense at the Bank, primarily variable/performance

-based compensation totaling $2.5 million, base salaries

(merit and new market staffing additions) of $3.1 million,

and a decrease in realized loan cost of $1.4 million (credit offset to

salary expense).

Further, the increase in associate benefit expense

was primarily due to an increases in expenses

at the Bank,

including associate insurance expense (utilized self-insurance reserves

in 2021) of $0.6 million and stock compensation expense

of $0.7 million that was partially offset by a decrease in pension

plan service cost of $0.5 million.

For 2021, the $5.2 million, or 5.4%, net increase was attributable to

increases in salary expense of $4.4 million and associate

benefit expense of $0.8 million.

Increases in salary expense of $3.1 million and associate benefit expense of $0.6 million

at the

Bank drove a majority of the increase with the addition of CCHL compensation

expense for a full 12-month period in 2021 versus

a ten month period in 2020 driving the remaining portion of the variance.

The higher level of salary expense at the Bank reflected

an increase in base salaries of $1.8 million, primarily merit raises, and a decrease

in realized loan cost of $0.8 million (credit

offset to salary expense).

The increase in associate benefit expense at the Bank was attributable to an increase in

pension plan

service cost of $1.1 million partially offset by a decrease in

associate insurance expense of $0.4 million.

Occupancy

Occupancy expense (including premises and equipment) totaled $24.5 million for

2022 compared to $23.9 million

for 2021, and $22.7 million for 2020.

For 2022, the $0.6

million, or 2.7%, increase was attributable to increases in software

license expense of $0.5 million and banking office

lease expense of $0.3 million, partially offset by a decrease in

maintenance and

repairs expense of $0.1 million.

The increase in software license expense reflected software upgrades for personal

computers and

network servers, and additional investment in network security monitoring

software.

For 2021, the $1.2 million, or 5.3%, increase was attributable to an

increase in occupancy expense of $0.5 million at the Bank

primarily related to depreciation and software license expense for additional

ATM/ITM

investments and other infrastructure

investments for business line support and risk management.

The remainder of the variance reflected CCHL occupancy expense

for a full 12-month period versus a ten month period in 2020.

Other

Other noninterest expense totaled $36.7 million in 2022 compared

to $37.1 million in 2021 and $31.0 million in 2020.

For 2022, the $0.4 million, or 1.1%, decrease was due to lower expenses

at the Bank, primarily a decrease in pension related

costs, including a decrease of $4.9 million for the non-service cost component

of our pension plan (reflected in pension – other)

attributable to the utilization of a lower discount rate for plan liabilities and a

decrease of $0.8 million for pension plan settlement

expense. These favorable variances were partially offset

by an increase in expenses for other real estate of $1.2 million (lower

gains from the sale of banking offices),

travel/entertainment and advertising costs totaling $1.3 million (return to pre

-pandemic

levels and market expansion), and insurance – other (FDIC insurance

premiums) of $0.3 million.

Additional increases were

realized in the following expenses that are reflected in the miscellaneous expense

category: other losses of $0.9 million (primarily

debit card and check fraud), mortgage servicing right amortization of $0.6

million (higher level of servicing retained loan sales),

VISA Class B share swap conversion ratio payments of $0.4 million, and

other miscellaneous costs for training, hiring, and

variable expenses related to loan production.

For 2021, the $6.1 million, or 19.7%, increase was driven by an increase

in other expenses at the Bank of $5.9 million, primarily

an increase in pension related expenses, including higher expense

of $2.1 million for the non-service cost component of our

pension plan attributable to the utilization of a lower discount rate for plan liabilities.

Additionally, we incurred $3.1

million in

pension settlement charges

in 2021 related to a high level of lump sum payments to retirees.

Lastly, we realized an

increase in

expense for processing fees of $0.7 million (debit card volume),

professional fees of $0.6 million (temporary staffing support),

and insurance – other (FDIC insurance premiums)

of $0.5 million (larger asset size), that were partially offset by

a decrease in

other real estate expense of $1.6 million (higher gains from the sale of banking offices)

contributed to the increase.

Income Taxes

For 2022, we realized income tax expense of $10.1 million (effective

rate of 20%) compared to $9.8 million (effective rate of

20%) for 2021 and $10.2 million (effective

rate of 19%) for 2020.

Income tax expense for 2022 and 2021 was unfavorably

impacted due to lower CCHL income.

For 2022, income tax expense was favorably impacted by $0.4 million related

to tax

benefits accrued via a 2022 investment in a solar tax credit equity fund.

Further, 2022 income tax expense was favorably

impacted by discrete tax items totaling $0.7 million related to a favorable deferred

tax adjustment for our Supplemental Executive

Retirement Plan and a State of Florida corporate tax refund.

Income

tax expense for 2021 was unfavorably impacted by net

discrete tax items totaling $0.3 million.

In September 2021, Florida enacted a corporate tax rate reduction from 4.5% to 3.535%

retroactive to January 1, 2021, with an

expiration date of December 31, 2021, therefore, there was no material

impact to our deferred tax accounts.

Our 2021 and 2020

state tax rates were adjusted to reflect the one percentage point (2020)

and two percentage point (2021) reductions each year.

The

Florida tax rate reverted to 5.5% effective January 1,

2022.

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

21%-22% in 2023.

FINANCIAL CONDITION

Average assets totaled

approximately $4.332 billion for 2022, an increase of $348.2

million, or 8.7%, over 2021.

Average

earning assets were approximately $3.989 billion for 2022, an increase

of $336.8 million, or 9.2%, over 2021.

Compared to 2021,

average overnight funds decreased $141.1 million, while investment securities

increased $318.8 million and average loans held

for investment were higher by $188.9 million.

We discuss these variances

in more detail below.

Table 2 provides

information on average balances and rates, Table

3 provides an analysis of rate and volume variances and Table

6 highlights the changing mix of our interest earning assets over the last three fiscal

years.

Loans

In 2022, average loans HFI increased $188.9 million, or 9.4%, compared to

an increase of $43.0 million, or 2.2%, in 2021.

Compared to 2021, the growth in average loans was broad based with increases

realized in most loan categories, more

significantly so in the residential real estate, construction, and consumer

(indirect auto) segments.

Total loans HFI at December

31, 2022 totaled $2.525 billion, a $594 million increase over December 31, 2021

and primarily reflected higher balances in the

following categories: residential real estate of $375 million, commercial

real estate of $119 million, and construction of $60

million.

At December 31, 2022, our consumer loans balances reflected direct loans

of $22 million and indirect auto loans of $303

million.

During 2022, indirect auto balances peaked at $338 million in May,

but declined gradually for the remainder of the year

as we focused on reducing exposure to this loan segment which totaled

$303 million at December 31, 2022.

As part of our overall strategy,

we will purchase newly originated 1-4 family real estate secured adjustable rate

loans from CCHL.

The strategic alliance with CCHL provides us a larger pool

of loan purchase opportunities, including participation loans for

construction/perm product,

which in large part drove the aforementioned increases in

residential real estate and construction

loans.

Expansion into new markets in the Northern Arc of Atlanta, Georgia

(Cobb and Gwinnett Counties) and Walton

County, Florida

drove incremental loan growth of approximately $65 million in 2022

as we added to those banking teams throughout 2022.

In 2022, average loans held for sale (“HFS”) decreased $29.8 million, or 38.1%,

from 2021 due to lower loan volume at CCHL.

Loans HFI and HFS as a percentage of average earning assets decreased slightly

to 56.1% in 2022 compared to 56.9% in 2021,

primarily attributable to an increase in our investment portfolio.

Table 6

SOURCES OF EARNING ASSET GROWTH

2021 to

Percentage

Components of

2022

Total

Average

Earning Assets

(Average Balances – Dollars In Thousands)

Change

2022

2021

2020

Loans:

Loans HFS

(29,826)

(8.9)

1.2

2.1

2.6

Loans HFI:

Commercial, Financial, and Agricultural

(71,063)

(21.1)

6.0

8.5

11.7

Real Estate – Construction

56,999

16.9

5.4

4.3

4.0

Real Estate – Commercial Mortgage

23,031

6.8

17.6

18.6

21.1

Real Estate – Residential

126,843

37.7

12.3

10.0

11.5

Real Estate – Home Equity

908

0.3

4.9

5.3

6.4

Consumer

52,159

15.5

8.7

8.0

8.8

Total HFI Loans

188,877

56.1

54.9

54.7

63.5

Total Loans HFS and

HFI

159,051

47.2

56.1

56.8

66.1

Investment Securities:

Taxable

319,923

95.0

27.5

21.3

18.6

Tax-Exempt

(1,104)

(0.3)

0.1

0.2

Total Securities

318,819

94.7

27.6

21.4

18.8

Funds Sold

(141,108)

(41.9)

16.3

21.8

15.1

Total Earning Assets

336,762

100

Our average total loans (HFS and HFI)-to-deposit ratio was 59.5%

in 2022, 61.0% in 2021, and 71.7% in 2020.

The composition of our HFI loan portfolio at December 31 for each of

the past three years is shown in Table

Table 8 arrays

our HFI loan portfolio at December 31, 2022, by maturity period.

As a percentage of the HFI loan portfolio, loans with fixed

interest rates represented 33.3% at December 31, 2022 compared to 39.3% at December

31, 2021. A higher level of 1-4 family

real estate secured adjustable rate loan production in 2022 drove the decrease

in the percentage.

Table 7

LOANS HFI BY CATEGORY

(Dollars in Thousands)

2022

2021

2020

Commercial, Financial and Agricultural

247,362

223,086

393,930

Real Estate – Construction

234,519

174,394

135,831

Real Estate – Commercial Mortgage

782,557

663,550

648,393

Real Estate – Residential

727,105

360,021

352,543

Real Estate – Home Equity

208,120

187,821

205,479

Consumer

325,517

322,593

270,250

Total Loans HFI, Net

of Unearned Income

2,525,180

1,931,465

2,006,426

Table 8

LOANS HFI MATURITIES

Maturity Periods

(Dollars in Thousands)

One Year

or Less

Over One

Through

Five Years

Five

Through

Fifteen

Years

Over

Fifteen

Years

Total

Commercial,

Financial and Agricultural

51,514

128,783

65,957

1,108

247,362

Real Estate – Construction

113,672

66,238

22,471

32,138

234,519

Real Estate – Commercial Mortgage

46,776

112,180

330,311

293,290

782,557

Real Estate – Residential

16,693

474,020

110,981

125,411

727,105

Real Estate – Home Equity

3,820

10,815

79,532

113,953

208,120

Consumer

(1)

5,835

143,516

176,157

325,517

Total

238,310

935,552

785,409

565,909

2,525,180

Total Loans HFI with

Fixed Rates

92,179

368,970

351,765

27,226

840,140

Total Loans HFI with

Floating or Adjustable Rates

146,131

566,582

433,644

538,683

1,685,040

Total

238,310

935,552

785,409

565,909

2,525,180

(1)

Demand loans and overdrafts are

reported in the category of one year or less.

Credit Quality

Table 9 provides

the components of nonperforming assets and various other credit quality and risk metrics

at December 31

for

the last three fiscal years.

Information regarding our accounting policies related to nonaccruals, past due loans,

and troubled debt

restructurings is provided in Note 3 – Loans Held for Investment and

Allowance for Credit Losses.

Overall credit quality continues to remain strong.

Nonperforming assets (nonaccrual loans and other real estate) totaled $2.7

million at December 31, 2022 compared to $4.3 million at December

31, 2021.

At December 31, 2022, nonperforming assets as a

percent of total assets was 0.06%,

a decrease of four basis points from December 31, 2021.

Table 9

CREDIT QUALITY

(Dollars in Thousands)

2022

2021

2020

Nonaccruing Loans:

Commercial, Financial and Agricultural

161

Real Estate – Construction

179

Real Estate – Commercial Mortgage

645

604

1,412

Real Estate – Residential

239

2,097

3,130

Real Estate – Home Equity

771

1,319

695

Consumer

584

212

294

Total Nonaccruing

Loans

2,297

4,322

5,871

Other Real Estate Owned

431

808

Total Nonperforming

Assets

2,728

4,339

6,679

Past Due Loans 30 – 89 Days

7,829

3,600

4,594

Performing Troubled Debt Restructurings

5,913

7,643

13,887

Classified Loans

19,342

17,912

17,631

Nonaccruing Loans/Loans

0.09

0.22

0.29

Nonperforming Assets/Total

Assets

0.06

0.10

0.18

Nonperforming Assets/Loans Plus OREO

0.11

0.22

0.33

Allowance/Nonaccruing Loans

1,076.89

499.93

405.66

Nonaccrual Loans

Nonaccrual loans totaled $2.3 million at December 31, 2022, a $2.0 million decrease

from December 31,

2021.

Generally, loans are placed

on nonaccrual status if principal or interest payments become 90 days past due or management

deems the collectability of the principal and interest to be doubtful.

Once a loan is placed in nonaccrual status, all previously

accrued and uncollected interest is reversed against interest income.

Interest income on nonaccrual loans is recognized when the

ultimate collectability is no longer considered 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.

If interest on our loans classified

as nonaccrual during 2022 had been recognized on a fully accruing basis,

we would have recorded an additional $0.2 million of

interest income for the year ended December 31, 2022.

Other Real Estate Owned

OREO represents property acquired as the result of borrower defaults

on loans or by receiving a deed

in lieu of foreclosure.

OREO is recorded at the lower of cost or estimated fair value, less estimated selling costs, at the

time of

foreclosure.

Write-downs occurring at foreclosure are

charged against the allowance for credit losses.

On an ongoing basis,

properties are either revalued internally or by a third-party appraiser as required

by applicable regulations.

Subsequent declines in

value are reflected as other noninterest expense.

Carrying costs related to maintaining the OREO properties are expensed as

incurred and are also reflected as other noninterest expense.

OREO totaled $0.4

million at December 31, 2022 versus $0.02 million at December 31, 2021.

During 2022, we added properties

totaling $2.4 million and sold properties totaling $2.0 million.

For 2021, we added properties totaling $1.7 million, sold

properties totaling $2.8 million, and recorded net favorable valuation

adjustments totaling $0.3

million.

Troubled

Debt Restructurings (“TDRs”).

TDRs are loans on which, due to the deterioration in the borrower’s

financial condition,

the original terms have been modified and deemed a concession to the borrower.

From time to time we will modify a loan as a

workout alternative.

Most of these instances involve an extension of the loan term, an interest rate reduction, or

a principal

moratorium.

A TDR classification can be removed if the borrower’s financial condition

improves such that the borrower is no

longer in financial difficulty,

the loan has not had any forgiveness of principal or interest, and the

loan is subsequently refinanced

or restructured at market terms and qualifies as a new loan in calendar years after

the year in which the restructuring took place.

Loans classified as TDRs at December 31, 2022 totaled $6.1 million compared

to $8.0 million at December 31, 2021.

Accruing

TDRs made up approximately $5.9 million of our TDR portfolio at December

31, 2022, of which $0.3 million was over 30 days

past due.

The weighted average rate for the loans within the accruing TDR portfolio was 5.96%.

During 2022, we modified two

loan contracts totaling approximately $0.1 million compared to three

loan contracts totaling approximately $0.6

million during

2021.

Our TDR default rate (default balance as a percentage of average TDRs) in 2022 and 2021

was 0.0% and 4.1%,

respectively.

Past Due Loans

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.

Past due loans at December 31, 2022 totaled $7.8 million compared to $3.6 million

at December 31, 2021.

Indirect

auto loans represented a large portion of the increase and at December

31, 2022 reflected 73% of total dollars past due and 72%

of total dollars past due at December 31, 2021.

Potential Problem Loans

Potential problem loans are defined as those loans which are now current but where management

has

doubt as to the borrower’s ability to comply with present

loan repayment terms.

At December 31, 2022, we had $2.8 million in

loans of this type which were not included in either of the nonaccrual, TDR or

90 day past due loan categories compared to $1.5

million at December 31, 2021.

Management monitors these loans closely and reviews their performance

on a regular basis.

Loan Concentrations

Loan concentrations exist when there are amounts loaned to multiple borrowers engaged

in similar

activities which cause them to be similarly impacted by economic or other conditions

and such amount exceeds 10% of total

loans.

Due to the lack of diversified industry within our markets and the relatively

close proximity of the markets, we have both

geographic concentrations as well as concentrations in the types of loans funded.

Specifically, due to the nature of our markets,

significant portion of our HFI loan portfolio has historically been

secured with real estate, approximately 77% at December 31,

2022 and 72% at December 31, 2021 with the increase driven by a higher volume

of 1-4 family residential real estate loans

originated in 2022.

The primary types of real estate collateral are commercial properties and 1-4 family

residential properties.

We review our

loan portfolio segments and concentration limits on an ongoing basis and will make

adjustments as needed to

mitigate/reduce risk to segments that reflect decline or stress.

We have established

an internal lending limit of $10 million for the total aggregate amount of

credit that will be extended to a

client and any related entities within our Board approved policies.

This compares to our legal lending limit of approximately $91

million.

The following table summarizes our real estate loan category as segregated

by the type of property.

Property type concentrations

are stated as a percentage of total real estate loans at December 31.

Table 10

REAL ESTATE

LOANS BY PROPERTY TYPE

2022

2021

Investor

Real Estate

Owner

Occupied

Real Estate

Investor

Real Estate

Owner

Occupied

Real Estate

Vacant

Land, Construction, and Land Development

15.0

18.1

Improved Property

27.7

57.3

28.4

53.5

Total Real Estate Loans

42.7

57.3

46.5

53.5

A major portion of our real estate loan category is centered in the owner occupied

category which carries a lower risk of non-

collection than certain segments of the investor category.

Approximately 42% of the investor real estate category was secured by

residential real estate at December 31, 2022.

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 separately 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.

Detailed information regarding the methodology for estimating the

amount reported in the allowance for credit losses is provided

in Note 1 – Significant Accounting Policies/Allowance for Credit Losses in

the Consolidated Financial Statements.

Note 3 – Loans Held for Investment and Allowance for Credit Losses in the

Consolidated Financial Statements provides the

activity in the allowance and the allocation by loan type for each of

the past three fiscal years.

For 2022, we realized net loan charge-offs of $3.9

million, or 0.18%, of average HFI loans, compared to net loan recoveries of

$0.6 million, or 0.03%, for 2021, and net loan charge-offs

of $2.4

million, or 0.12%, for 2020.

A majority of the increase in 2022

reflected higher commercial loan charge-offs and

consumer loan (indirect auto) charge-offs, as well as a significant

reduction in

loan recoveries.

The increase in commercial loan charge-offs was primarily

attributable to one problem loan relationship that was

resolved in the second quarter of 2022.

At December 31, 2022, the allowance for credit losses represented 0.98%

of HFI loans and provided coverage of 1,077% of

nonperforming loans compared to 1.12% and 500%, respectively,

at December 31, 2021 and 1.19% and 406%, respectively,

December 31, 2020.

At December 31, 2022, the allowance for credit losses for HFI loans totaled

$24.7 million compared to $21.6 million at December

31, 2021 and $23.8 million at December 31, 2020.

Incremental allowance related to loan growth, a higher projected rate of

unemployment and its effect on rates of default, and slower prepayment

speeds (due to higher interest rates) were all contributing

factors driving the $3.1 million increase in the allowance during 2022.

The $2.2 million decrease in the allowance for credit

losses in 2021 reflected improvements in forecasted economic conditions, favorable

loan migration and net loan recoveries

totaling $0.6 million, partially offset by incremental

reserves needed for loan growth (excluding SBA PPP).

Table 11

ALLOCATION OF

ALLOWANCE

FOR CREDIT LOSSES

2022

2021

2020

(Dollars in Thousands)

ACL

Amount

Percent of

Loans to

Total Loans

ACL

Amount

Percent of

Loans to

Total Loans

ACL

Amount

Percent of

Loans to

Total Loans

Commercial, Financial and Agricultural

1,506

9.8

2,191

11.6

2,204

19.6

Real Estate:

Construction

2,654

9.3

3,302

9.0

2,479

6.8

Commercial

4,815

31.0

5,810

34.4

7,029

32.3

Residential

10,409

28.8

4,129

18.6

5,440

17.6

Home Equity

1,864

8.2

2,296

9.7

3,111

10.2

Consumer

3,488

12.9

3,878

16.7

3,553

13.5

Total

24,736

100

21,606

100

23,816

100

Investment Securities

Our average investment portfolio balance increased $318.8

million, or 40.7%, in 2022 and increased $203.4 million, or 35.1%,

2021.

As a percentage of average earning assets, our investment portfolio represented

27.6% in 2022, compared to 21.4% in

2021.

In 2022, the growth in the investment portfolio was attributable to an investment

purchase program implemented to take

advantage of higher rates and deploy a portion of our excess liquidity

in addition to reinvesting a portion of the portfolio cash

flow during the year. As we continue

to monitor our overall liquidity levels throughout 2023, we will allow cash flow from

the

investment portfolio to run-off and we will review

various investment strategies as appropriate.

In 2022, average taxable investments increased $319.9 million,

or 41.1%, while tax-exempt investments decreased $1.1 million,

or 29.3%.

Taxable bonds increased

as part of our overall investment strategy,

and non-taxable investments decreased as the tax-

equivalent yield was generally unattractive throughout 2022

compared to taxable investments.

At December 31, 2022, municipal

securities (taxable and non-taxable) comprised 3.8% of the portfolio.

Our 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-for-Maturity (“HTM”).

In 2022 and 2021, we purchased securities under both the AFS and

HTM designations.

At December 31, 2022, $413.3 million, or 38.5% of our investment portfolio

was classified as AFS, with $660.7 million, or

61.5%, classified as HTM.

At December 31, 2021, the AFS and HTM portfolio comprised 65.8%

and 34.1%, respectively.

During the third quarter of 2022, U.S. Treasury

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

transferred from AFS to HTM.

At December 31, 2022, $7.9 million was remaining in unrealized losses for these securities.

Table 12 provides

the composition of our investment securities portfolio at December 31 for each of

the last three fiscal years.

Table 12

INVESTMENT SECURITIES COMPOSITION

2022

2021

2020

(Dollars in Thousands)

Carrying

Amount

Percent

Carrying

Amount

Percent

Carrying

Amount

Percent

Available for

Sale

U.S. Government Treasury

22,050

2.1

187,868

18.9

104,519

21.1

U.S. Government Agency

186,052

17.3

237,578

23.9

208,531

42.2

States and Political Subdivisions

40,329

3.8

46,980

4.7

3,632

0.7

Mortgage-Backed Securities

69,405

6.5

88,869

8.9

515

0.1

Corporate Debt Securities

88,236

8.2

86,222

8.7

Other Securities

7,222

0.6

7,094

0.7

7,673

1.6

Total

413,294

38.5

654,611

65.8

324,870

65.7

Held to Maturity

U.S. Government Treasury

457,374

42.6

115,499

11.6

5,001

1.0

Mortgage-Backed Securities

203,370

18.9

224,102

22.5

164,938

33.3

Total

660,744

61.5

339,601

34.1

169,939

34.3

Other Equity Securities

861

0.1

Total Investment

Securities

1,074,048

100

995,073

100

494,809

100

The classification of a security is determined upon acquisition based

on how the purchase will affect our asset/liability strategy

and future business plans and opportunities.

Classification determinations will also factor in 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 (loss) component of shareowners’ equity.

Securities designated as HTM are those acquired or owned with

the intent of holding them to maturity (final payment date).

HTM investments are measured at amortized cost.

It is neither

management’s current

intent nor practice to participate in the trading of investment securities for the purpose of recognizing

gains

and therefore we do not maintain a trading portfolio.

At December 31, 2022, there were 928 positions (combined AFS and HTM)

with pre-tax unrealized losses totaling $90.0 million.

The GNMA mortgage-backed securities, U.S. Treasuries,

and SBA securities held carry the full faith and credit guarantee of

the

U.S. Government, and are 0% risk-weighted assets.

Other mortgage-backed securities held (Federal National Mortgage

Association and Federal Home Loan Mortgage Corporation) are issued by

U.S. Government sponsored entities.

Direct

obligations of U.S. Government agencies (Federal Farm Credit Bank and

Federal Home Loan Bank of Atlanta) are also owned.

We believe the

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

of nonpayment of the

amortized cost basis is zero.

A large portion of the SBA securities float monthly or quarterly with

the prime rate and are

uncapped.

The remaining positions owned are municipal and corporate bonds.

At December 31, 2022, 26 corporate positions

had a total allowance for credit loss of $28,000 and 21 municipal positions had

a total allowance for credit loss of $13,000.

All of

these positions maintain an overall rating of at least “A-”, and all are expected to

mature at par.

The average maturity of our investment portfolio at December 31, 2022

was 3.57 years compared to 3.62 years at December 31,

2021.

The average life of our investment portfolio decreased slightly primarily

due to the natural aging of the portfolio, partially

offset by a portion of the portfolio being reinvested into short-to-intermediate

term securities.

The weighted average taxable equivalent yield of our investment portfolio

at December 31, 2022 was 2.03% versus 1.12% in

2021.

This increase in yield reflected higher reinvestment rates during 2022.

Our bond portfolio contained no investments in

obligations, other than U.S. Governments, of any state, municipality,

political subdivision, or any other issuer that exceeded 10%

of our shareowners’ equity at December 31, 2022.

Table 13 and Note 2

in the Notes to Consolidated Financial Statements present a detailed analysis of our

investment securities as

to type, maturity, unrealized

losses, and yield at December 31.

Table 13

MATURITY DISTRIBUTION

OF INVESTMENT SECURITIES

Within 1 year

1 - 5 years

5 - 10 years

After 10 years

Total

(Dollars in

Thousands)

Amount

WAY

(3)

Amount

WAY

(3)

Amount

WAY

(3)

Amount

WAY

(3)

Amount

WAY

(3)

Available for Sale

U.S. Government

Treasury

2,862

4.40

19,188

0.70

22,050

1.18

U.S. Government

Agency

40,904

1.39

143,233

2.99

1,915

1.70

186,052

2.62

States and Political

Subdivisions

4,039

1.42

17,298

1.35

18,992

1.85

40,329

0.72

Mortgage-Backed

Securities

(1)

2.03

4,424

1.26

46,069

2.13

18,911

2.39

69,405

2.14

Corporate Debt

Securities

1,000

5.05

65,554

1.77

21,682

2.18

88,236

1.91

Other Securities

(2)

7,222

5.79

7,222

5.79

Total

48,806

1.64

249,697

2.35

88,658

2.07

26,133

3.33

413,294

2.23

Held to Maturity

U.S. Government

Treasury

457,374

1.93

457,374

1.93

Mortgage-Backed

Securities

(1)

2,582

2.59

138,781

1.83

62,007

1.80

203,370

1.83

Total

2,582

2.59

596,155

1.91

62,007

1.80

660,744

1.90

Equity Securities

5.63

Total Investment

Securities

51,388

1.69

845,852

2.04

150,665

1.96

26,143

3.34

1,074,048

2.03

(1)

Based on weighted-average maturity.

(2)

Federal Home Loan Bank Stock and Federal Reserve

Bank Stock are included in this category for weighted average yield, but

do not have stated maturities.

(3)

Weighted average yield calculated based on current amortized cost balances – not presented on a tax equivalent basis.

Deposits and Short-Term

Borrowings

Average total

deposits for 2022 were $3.763 billion, an increase of $356.5 million, or 10.5%, over

Average deposits

increased $562.5 million, or 19.8%, from 2020 to 2021.

Both year-over-year increases occurred in all deposit types except

certificates of deposit, with the largest increases occurring

in noninterest bearing,

NOW accounts, and savings accounts.

Strong deposit growth occurred during 2022 reflecting additional federal stimulus

inflows as well as core deposit growth.

addition, strong seasonal growth of public funds occurred in the fourth quarter

of 2022 which is expected to be drawn down over

the course of 2023.

The FOMC has increased their benchmark interest rate aggressively by

425 basis points during 2022. This resulted in a shift in

deposit mix which we began to see in the fourth quarter of 2022, primarily

in two large corporate clients totaling approximately

$40 million that migrated from noninterest bearing to interest bearing deposit accounts.

Also in the fourth quarter, we began to

realize some run-off of stimulus funds and core deposits from

our more rate sensitive clients in favor of higher yielding

investments.

We have several strategies in

place to protect core deposits and mitigate

deposit run-off, and we will continue to

closely monitor several metrics such as the sensitivity of our clients to our deposit

rates, our overall liquidity position, and

competitor rates when pricing deposits.

This strategy is consistent with previous rate cycles and allows us to manage

the mix of

our deposits as well as the overall client relationship rather than competing

solely on rate.

We believe this enabled

us to maintain

a low cost of funds (interest expense/average earning assets) of

17 basis points for 2022 and 10 basis points for 2021.

Table 2 provides

an analysis of our average deposits, by category,

and average rates paid thereon for each of the last three fiscal

years. Table 14 reflects

the shift in our deposit mix over the last year and Table

15 provides a maturity distribution of time

deposits in denominations of $250,000 and over at December 31, 2022.

For 2022, noninterest bearing deposits represented 44.9%

of total average deposits.

This compares to 44.7% in 2021 and 44.1% in 2020.

Average short

-term borrowings decreased $13.0 million in 2022 primarily due to the decline in warehouse

line borrowings at

CCHL that are used to support our held for sale loan portfolio.

See Note 11 in the Notes to Consolidated Financial Statements

for

additional information on short-term borrowings.

We continue

to focus on the value of our deposit franchise, which produces a strong base of core

deposits with minimal reliance

on wholesale funding.

Table 14

SOURCES OF DEPOSIT GROWTH

2021 to

Percentage

Components of

2022

of Total

Total

Deposits

(Average Balances - Dollars in

Thousands)

Change

2022

2021

2020

Noninterest Bearing Deposits

167,415

47.0

44.9

44.7

44.1

NOW Accounts

100,518

28.2

28.3

29.0

Money Market Accounts

4,801

1.3

7.5

8.2

8.3

Savings Accounts

91,290

25.6

16.7

15.8

14.9

Time Deposits

(7,574)

(2.1)

2.6

3.0

3.7

Total Deposits

356,450

100

Table 15

MATURITY DISTRIBUTION

OF CERTIFICATES

OF DEPOSITS GREATER

THAN $250,000

2022

(Dollars in Thousands)

Certificates

of Deposit

Percent

Three months or less

1,518

12.2

Over three through six months

2,356

18.9

Over six through twelve months

2,527

20.3

Over twelve months

6,048

48.6

Total

12,449

100

Market Risk and Interest Rate Sensitivity

Overview.

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

commodity prices, and equity prices.

We have risk

management policies designed to monitor and limit exposure to market

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

significant market risk involving exchange rates, commodity prices, or

equity prices.

In asset and liability management activities,

our policies are designed to minimize structural interest rate risk.

Interest Rate Risk Management.

Our net income is largely dependent on net interest income.

Net interest income is susceptible to

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

or reprice on a different basis than interest-earning

assets.

When interest-bearing liabilities mature or reprice more quickly than interest-earning

assets in a given period, a significant

increase in market rates of interest could adversely affect net interest income.

Similarly, when interest-earning

assets mature or

reprice more quickly than interest-bearing liabilities, falling market interest rates

could result in a decrease in net interest

income.

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

assets that are funded by interest-

bearing liabilities rather than by other sources of funds, such as noninterest

-bearing deposits and shareowners’ equity.

We have established

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

which is administered by

management’s Asset Liability Management

Committee (“ALCO”).

The policy establishes limits of risk, which are quantitative

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

interest income at risk) and the fair value of equity

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

a hypothetical change in interest rates for

maturities from one day to 30 years.

We measure the

potential adverse impacts that changing interest rates may have on our

short-term earnings, long-term value, and liquidity by employing

simulation analysis through the use of computer modeling.

The

simulation model captures optionality factors such as call features and

interest rate caps and floors imbedded in investment and

loan portfolio contracts.

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

in the interest

rate modeling methodology used by us.

When interest rates change, actual movements in different categories

of interest-earning

assets and interest-bearing liabilities, loan prepayments, and withdrawals

of time and other deposits, may deviate significantly

from assumptions used in the model.

Finally, the methodology does not

measure or reflect the impact that higher rates may have

on adjustable-rate loan clients’ ability to service their debts, or the impact of

rate changes on demand for loan and deposit

products.

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

possibilities to indicate the inherent interest rate

risk.

We prepare

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

400 basis points

(bp)), at least once per quarter, and report the analysis

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

Oversight Committee (“ROC”) and the Board of Directors.

(The -200bp, -300bp, and -400bp rate scenarios were not modeled in

2021 due to the low interest rate environment below 2.00%). We

augment our interest rate shock analysis with alternative interest

rate scenarios on a quarterly basis that may include ramps, parallel shifts, and a flattening

or steepening of the yield curve (non-

parallel shift).

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

particularly uncertain or when other

business conditions so dictate.

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

risk over 12-month and 24-month

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

at the various interest rate shock levels.

attempt to achieve this goal by balancing, within policy limits, the volume

of floating-rate liabilities with a similar volume of

floating-rate assets, by keeping the average maturity of fixed-rate asset and liability

contracts reasonably matched, by managing

the mix of our core deposits, and by adjusting our rates to market conditions on

a continuing basis. At December 31, 2022, the

instantaneous

rate shock of -200bp, -300bp and -400bp over 12-months and over 24-months was outside

of the desired parameters

due to the limited ability to reprice deposits in these respective shock

scenarios.

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.

Table 16

ESTIMATED CHANGES

IN NET INTEREST INCOME

(1)

Percentage Change (12-month shock)

+400 bp

+300 bp

+200 bp

+100 bp

-100 bp

-200 bp

-300 bp

-400 bp

Policy Limit

-15.0

-12.5

-10.0

-7.5

-10.0

-12.5

-15.0

December 31, 2022

11.3

8.4

5.5

2.8

-5.0

-12.3

-20.0

-27.1

December 31, 2021

36.6

27.2

17.8

8.7

-6.2

n/a

Percentage Change (24-month shock)

+400 bp

+300 bp

+200 bp

+100 bp

-100 bp

-200 bp

-300 bp

-400 bp

Policy Limit

-17.5

-15.0

-12.5

-10.0

-12.5

-15.0

-17.5

December 31, 2022

31.3

25.2

19.0

13.1

-2.0

-13.8

-25.7

-36.3

December 31, 2021

55.0

40.5

26.1

12.2

-11.1

n/a

The Net Interest Income at risk position was generally less favorable

at December 31, 2022 compared to December 31, 2021 for

the 12-month and 24-month shocks for rising rate scenarios.

Strong loan growth and a reduction in our overnight funds balance

during the year made us less asset sensitive, which is less favorable

in rising rate environments, and more favorable in a falling

rate environment.

Net Interest Income at risk is within our prescribed policy limits over

both the 12-month and 24-month periods for all rising rate

scenarios, and the down 100 bps rate scenario.

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

policy in a rates down 200 bps, down 300 bps, and down 400 bps scenarios due

to our limited ability to lower our deposit rates

relative to the decline in market rate.

In addition, this analysis incorporates an instantaneous, parallel shock and

assumes we

move with market rates and do not lag our deposit 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 by discounting the cash flows to estimate the present value of

assets and liabilities. The difference

between these discounted values of the assets and liabilities is the economic value

of equity, which in theory

approximates the fair

value of our net assets.

Table 17

ESTIMATED CHANGES

IN ECONOMIC VALUE

OF EQUITY

(1)

Changes in Interest Rates

+400 bp

+300 bp

+200 bp

+100 bp

-100 bp

-200 bp

-300 bp

-400 bp

Policy Limit

-30.0

-25.0

-20.0

-15.0

-20.0

-25.0

-30.0

December 31, 2022

11.0

9.0

6.4

3.6

-7.4

-18.8

-30.9

-40.1

December 31, 2021

31.5

24.6

16.5

8.2

-19.0

n/a

EVE Ratio (policy minimum 5.0%)

21.7

21.0

20.1

19.2

16.6

14.3

12.0

10.2

(1)

Down 200, 300 and 400 bp rate scenarios have been added due to the current

interest rate environment.

At December 31, 2022, the economic value of equity was favorable

in all rising rate environments and was within prescribed

tolerance levels.

Factors that can impact EVE values include the absolute level of rates, the overall structure

of the balance sheet

(including liquidity levels), pre-payment speeds, loan floors,

and the change of model assumptions.

Although the change in EVE exceeds policy guidelines in the down

300 bps and down 400 bps rate scenarios, the EVE Ratios

(EVE/EVA)

were 12.0% and 10.2%, respectively,

at December 31, 2022 and were therefore within policy

guidelines.

EVE is out

of compliance only if BOTH the EVE and EVE ratio are outside of policy guidelines.

Therefore, EVE is currently in compliance

with policy in all rate scenarios.

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

additional simulations will be analyzed to

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

statement of financial condition mix, measured over

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

LIQUIDITY AND CAPITAL

RESOURCES

Liquidity

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

cash needs.

Our objective in managing our liquidity is to

maintain our ability to fund loan commitments, purchase securities, accommodate

deposit withdrawals or repay 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,

and 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.

For 2022

and 2021, our principal

source of funding was client deposits, supplemented by our short-term

and long-term borrowings, primarily from our trust-

preferred securities, 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 December 31, 2022, we had the ability to generate approximately $1.354

billion in additional liquidity through all of our

available resources beyond our overnight funds sold position.

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 certain credit facilities may no

longer be available.

We conduct quarterly liquidity

stress tests and the results are reported to ALCO, MROC, ROC and the Board

of Directors.

We believe the liquidity

available to us is sufficient to meet our ongoing needs.

We also view our

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

portfolio as collateral

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

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

U.S.

governmental agencies, municipal governments, and corporate entities.

The weighted-average maturity of our portfolio was 3.57

years at December 31, 2022 and the available-for-sale portfolio had a net unrealized

pre-tax loss of $41.9 million.

Our average net overnight funds sold position (defined as funds sold plus interest-bearing

deposits with other banks less funds

purchased) was $649.8 million in 2022 compared to an average net overnight

funds sold position of $790.9 million in 2021.

The

declining overnight funds position in 2022 reflected strong growth in

average loans.

We expect capital

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

will consist primarily of

technology purchases for banking offices, office

leasehold improvements, business applications, and information technology

security needs as well as furniture and fixtures and banking office

remodels.

We expect that these capital

expenditures will be

funded with existing resources without impairing our ability to meet our

ongoing obligations.

Borrowings

At December 31, 2022, total advances from the FHLB consisted of

$0.6 million in outstanding debt comprised of three notes.

2022, the Bank made FHLB advance payments totaling $0.9 million.

Two advances

matured, none were paid off, and no new

fixed rate advances were obtained in 2022. The FHLB notes are collateralized

by a floating lien on certain 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 wholly owned Delaware statutory

trusts.

The first note for

$30.9 million was issued to CCBG Capital Trust I in

November 2004.

The second note for $32.0 million was issued to CCBG

Capital Trust II in May 2005.

In the second quarter of 2020, we entered into a derivative cash flow hedge of our

interest rate risk related to our subordinated

debt.

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

I borrowing and $20 million

of the CCBG Capital Trust II borrowing).

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

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

Additional detail on the interest rate swap

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

For 2022, average short-term borrowings,

consisting primarily of CCHL warehouse line balances, declined $13.0 million

compared to 2021 due to lower residential loan production volume which

reduced short-term borrowing needs.

See Note 11 – Short Term

Borrowings and Note 12 – Long Term

Borrowings in the Notes to Consolidated Financial Statements

for additional information on borrowings.

In the ordinary course of business, we have entered into contractual obligations

and have made other commitments to make future

payments. Refer to the accompanying notes to consolidated financial

statements elsewhere in this report for the expected timing

of such payments as of December 31, 2022. These include payments related

to (i) long-term borrowings (Note 12 – Long-Term

Borrowings), (ii) short-term borrowings (Note 11

– Short-Term Borrowings),

(iii) operating leases (Note 7 – Leases), (iv) time

deposits with stated maturities (Note 10 – Deposits), and (v) commitments

to extend credit and standby letters of credit (Note 21 –

Commitments and Contingencies).

Capital Resources

Shareowners’ equity was $394.0 million at December 31, 2022

compared to $383.2 million at December 31, 2021.

For 2022,

shareowners’ equity was positively impacted by net income attributable

to common shareowners of $40.1 million, a $3.1 million

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

compensation accretion of $1.3 million, net

adjustments totaling $1.6 million related to transactions under our

stock compensation plans, and an $8.7 million decrease in the

accumulated other comprehensive loss for our pension plan.

Shareowners’ equity was reduced by common stock dividends of

$11.2 million ($0.66 per share) and a $32.8 million

increase in the unrealized loss on investment securities.

Additional historical

information on capital changes is provided in the Consolidated Statements of

Changes in Shareowners’ Equity in the

Consolidated Financial Statements.

We continue

to maintain a strong capital position.

The ratio of shareowners' equity to total assets at December 31, 2022 was

8.71%

compared to 8.99% at December 31, 2021.

Further, our tangible common equity ratio was 6.79

(non-GAAP financial

measure) at December 31, 2022 compared to 6.95% at December 31, 2021.

The decline in the ratios in 2022 was substantially

due to an increase in the unrealized loss on available-for-sale

securities.

We are subject to

regulatory risk-based capital requirements that measure capital relative

to risk-weighted assets and off-balance

sheet financial instruments.

At December 31, 2022, our total risk-based capital ratio was 15.52% compared

to 17.15% at

December 31, 2021.

Our common equity tier 1 capital ratio was 12.64%

and 13.86%, respectively, on

these dates.

Our leverage

ratio was 9.06%

and 8.95%, respectively, on

these dates.

With the exception of the leverage ratio, the decline

in our regulatory

capital ratios compared to 2021 was attributable to strong loan growth during

2022.

For a detailed discussion of our regulatory

capital requirements, refer to the “Regulatory Considerations – Capital Regulations”

section on page 15.

See Note 17 in the

Notes to Consolidated Financial Statements for additional information as to

our capital adequacy.

At December 31, 2022, our common stock had a book value of $23.12 per diluted

share compared to $22.63 at December 31,

2021.

Book value is impacted by the net unrealized gains and losses on investment

securities.

At December 31, 2022, the net

unrealized loss was $37.3 million compared to an unrealized loss of $4.6 million

at December 31, 2021.

Book value is also

impacted by the recording of our unfunded pension liability through

other comprehensive income in accordance with Accounting

Standards Codification Topic

715.

At December 31, 2022, the net pension liability reflected in accumulated other comprehensive

loss was $4.5 million compared to $13.2 million at December 31, 2021.

The favorable adjustment to our unfunded pension

liability reflected a higher discount rate used to calculate the present value

of the pension obligation that was partially offset by a

lower than estimated return on plan assets.

The higher discount rate reflected the increase in long-term interest rates in 2022.

This adjustment also favorably impacted our tangible capital ratio.

Further, book value is impacted by the periodic adjustment

made to record temporary equity at redemption value and there were no adjustments

made during 2022.

In February 2014, our Board of Directors authorized the repurchase of up to 1,500,000

shares of our outstanding common stock

over a five-year period.

Repurchases under the 2014 plan could be made in the open market or in privately negotiated

transactions; however, we were not obligated

to repurchase any specified number of shares.

In January 2019, the 2014 plan was

terminated and our Board of Directors approved a new share repurchase plan

that authorizes the repurchase of up to 750,000

shares of our outstanding common stock over a five-year period.

Terms of this plan are substantially similar

to the 2014 plan.

shares were repurchased in 2022

or 2021.

99,952 shares were repurchased in 2020 at an average price of $20.39

and 77,000

shares were repurchased in 2019 at an average price of $23.40.

Since 2014, a total of 1,361,682 shares of our outstanding

common stock have been repurchased at an average price of $17.

93 under our stock repurchase plans.

In January 2023, we

repurchased 25,000 shares of our common stock at $32.39 per share.

Dividends

Adequate capital and financial strength are paramount to our stability

and the stability of CCB.

Cash dividends declared and paid

should not place unnecessary strain on our capital levels.

When determining the level of dividends,

the following factors are

considered:

●

Compliance with state and federal laws and regulations;

●

Our capital position and our ability to meet our financial obligations;

●

Projected earnings and asset levels; and

●

The ability of the Bank and us to fund dividends.

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.

See Note 21 in the Notes to Consolidated Financial Statements.

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 on-going

obligations.

In the event these commitments

require funding in excess of historical levels, management believes current

liquidity, investment security

maturities, available

advances from the FHLB and Federal Reserve Bank, and warehouse

lines of credit provide a sufficient source of funds to meet

these commitments.

In conjunction with the sale and securitization of loans held for sale and their related

servicing rights, we may be exposed to

liability resulting from recourse, repurchase,

and make-whole agreements.

If it is determined subsequent to our sale of a loan or

its related servicing rights that a breach of the representations or warranties

made in the applicable sale agreement has occurred,

which may include guarantees that prepayments will not occur within a specified

and customary time frame, we may have an

obligation to either (a) repurchase the loan for the unpaid principal balance,

accrued interest, and related advances; (b) indemnify

the purchaser against any loss it suffers;

or (c) make the purchaser whole for the economic benefits of the

loan and its related

servicing rights.

Our repurchase, indemnification and make-whole obligations vary based upon

the terms of the applicable agreements, the nature

of the asserted breach, and the status of the mortgage loan at the time a claim is made.

We establish reserves for

estimated losses

of this nature inherent in the origination of mortgage loans by estimating the losses inherent

in the population of all loans sold

based on trends in claims and actual loss severities experienced. The reserve

will include accruals for probable contingent losses

in addition to those identified in the pipeline of claims received. The estimation

process is designed to include amounts based on

actual losses experienced from actual activity.

ACCOUNTING POLICIES

Critical Accounting Policies and Estimates

The consolidated financial statements and accompanying Notes to Consolidated

Financial Statements are prepared in accordance

with accounting principles generally accepted in the United States of America,

which require us to make various estimates and

assumptions (see Note 1 in the Notes to Consolidated Financial Statements).

We believe that,

of our significant accounting

policies, the following may involve a higher degree of judgment and

complexity.

Allowance for Credit Losses

The amount of the allowance for credit losses represents management’s

best estimate of current

expected credit losses considering available information, from internal

and external sources, relevant to assessing exposure to

credit loss over the contractual term of the instrument.

Relevant available information includes historical credit loss experience,

current conditions,

and reasonable and supportable forecasts.

While historical credit loss experience provides

the basis for the

estimation of expected credit losses, adjustments to historical loss information

may be made for changes in loan risk grades, loss

experience trends, loan prepayment trends, differences

in current portfolio-specific risk characteristics, environmental conditions,

future expectations, or other relevant factors.

While management utilizes its best judgment and information available,

the

ultimate adequacy of our allowance accounts is dependent upon

a variety of factors beyond our control, including the

performance of our portfolios, the economy,

changes in interest rates, and the view of the regulatory authorities toward

classification of assets. Detailed information on the Allowance

for Credit Losses valuation, and the assumptions used are provided

in Note 1 – Significant Accounting Policies of the Notes to Consolidated

Financial Statements.

Goodwill

Goodwill represents the excess of the cost of acquired businesses over the fair value

of their identifiable net

assets.

We perform

an impairment review on an annual basis or more frequently if events or changes in circumstances

indicate

that the carrying value may not be recoverable.

Adverse changes in the economic environment, declining operations, or other

factors could result in a decline in the estimated implied fair value of goodwill.

If the estimated implied fair value of goodwill is

less than the carrying amount, a loss would be recognized to reduce the

carrying amount to the estimated implied fair value.

We evaluate goodwill

for impairment on an annual basis and in 2017 adopted Accounting Standards Update

2017-04, Intangibles

– Goodwill and Other (Topic

350): Simplifying Accounting for Goodwill Impairment which

allows for a qualitative assessment

of goodwill impairment indicators.

If the assessment indicates that impairment has more than likely occurred, the

Company must

compare the estimated fair value of the reporting unit to its carrying amount.

If the carrying amount of the reporting unit exceeds

its estimated fair value, an impairment charge is recorded

equal to the excess.

During the fourth quarter of 2022, we performed our annual impairment

testing.

We proceeded with qualitative

assessment by

evaluating impairment indicators and concluded there were none that

indicated that goodwill impairment had occurred.

Pension Assumptions

We have a defined benefit

pension plan for the benefit of substantially all of our associates.

Our funding

policy with respect to the pension plan is to contribute, at a minimum,

amounts sufficient to meet minimum funding requirements

as set by law.

Pension expense is determined by an external actuarial valuation based

on assumptions that are evaluated annually

as of December 31, the measurement date for the pension obligation.

The service cost component of pension expense is reflected

as “Compensation Expense” in the Consolidated Statements of

Income.

All other components of pension expense are reflected as

“Other Expense”.

The Consolidated Statements of Financial Condition reflect an accrued

pension benefit cost due to funding levels and

unrecognized actuarial amounts.

The most significant assumptions used in calculating the pension

obligation are the weighted-

average discount rate used to determine the present value of the pension obligation,

the weighted-average expected long-term rate

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

These assumptions are re-evaluated annually

with the external actuaries, taking into consideration both current market

conditions and anticipated long-term market conditions.

The discount rate is determined by matching the anticipated defined pension

plan cash flows to the spot rates of a corporate AA-

rated bond index/yield curve and solving for the single equivalent discount

rate which would produce the same present value.

This methodology is applied consistently from year to year.

The discount rate utilized in 2022 was 3.11%.

The estimated impact

to 2022 pension expense of a 25 basis point increase or decrease in the discount

rate would have been an approximate $0.9

million decrease or increase, respectively.

We anticipate using

a 5.63% discount rate in 2023.

Based on the balances at the December 31, 2022 measurement date, the

estimated impact on accumulated other comprehensive

loss of a 25 basis point increase or decrease in the discount rate would have been a

decrease or increase of approximately $2.2

million (after-tax).

The estimated impact on accumulated other comprehensive loss of a 1% favorable/unfavorable

variance in the

actual rate of return on plan assets versus the assumed rate of return

on plan assets of 6.75% would have been an approximate

$1.2 million (after-tax) decrease/increase,

respectively.

The weighted-average expected long-term rate of return on plan assets is determined

based on the current and anticipated future

mix of assets in the plan.

The assets currently consist of equity securities, U.S. Government and

Government agency debt

securities, and other securities (typically temporary liquid funds awaiting investment).

The weighted-average expected long-term

rate of return on plan assets utilized for 2022 was 6.75%.

The estimated impact to 2022 pension expense of a 25 basis point

increase or decrease in the rate of return would have been an approximate

$0.4 million decrease or increase, respectively.

anticipate using a rate of return on plan assets of 6.75% for 2023.

The assumed rate of annual compensation increases of 4.40% in 2022 reflected

expected trends in salaries and the employee

base.

We anticipate using

a compensation increase of approximately 5.10% for 2023 reflecting current

market trends.

Detailed information on the pension plan, the actuarially determined

disclosures, and the assumptions used are provided in Note

15 of the Notes to Consolidated Financial Statements.

Income Taxes

Income tax expense is the total of the current year income tax due or refundable and the change in

deferred tax

assets and liabilities.

Deferred tax assets and liabilities are the expected future tax amounts for the

temporary differences between

carrying amounts and tax bases of assets and liabilities, computed using enacted

tax rates.

A valuation allowance, if needed,

reduces deferred tax assets to the amount expected to be realized.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax

position would be sustained in a tax

examination, with a tax examination being presumed to occur.

The amount recognized is the largest amount of tax benefit that is

greater than 50% likely of being realized on examination.

For tax positions not meeting the “more likely than not” test, no tax

benefit is recorded.

recognize interest and/or penalties related to income tax matters in other

expenses.

ITEM 7A.

QUANTITATIVE

AND QUALITATIVE

DISCLOSURE ABOUT MARKET RISK

See “Financial Condition - 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.

Item 8.

Financial Statements and Supplementary Data

2022 Report of Independent Registered Public Accounting Firm (PCAOB ID

686

)

2021 Report of Independent Registered Public Accounting Firm (PCAOB ID 42)

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED FINANCIAL

STATEMENTS

PAGE

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Financial Condition

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Shareowners’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the Shareowners,

Board of Directors and Audit Committee

Capital City Bank Group, Inc.

Tallahassee, Florida

Opinion on the Consolidated Financial Statements

We have audited

the accompanying consolidated statements of financial condition of Capital City

Bank Group, Inc. (the

“Company”) as of December 31, 2022 and 2021, the related consolidated

statements of income, comprehensive income, changes

in shareowners’ equity,

and cash flows for each of the years in the two-year period ended December 31, 2022,

and the related

notes (collectively referred to as the “financial statements”).

In our opinion, the consolidated financial statements referred to

above present fairly, in

all material respects, the financial position of the Company as of December 31, 2022

and 2021, and the

results of its operations and its cash flows for each of the years in the two-year period

ended December 31, 2022, in conformity

with accounting principles generally accepted in the United States of America.

We also have audited,

in accordance with the standards of the Public Company Accounting Oversight Board (United

States)

(“PCAOB”), the Company’s

internal control over financial reporting as of

December 31, 2022, based on criteria established in

Internal Control – Integrated Framework: (2013)

issued by the Committee of

Sponsoring Organizations of the Treadway

Commission and our report dated March 1, 2023, expressed an unqualified

opinion on

the effectiveness of the Company’s

internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s

management.

Our responsibility is to express an opinion on

the Company’s financial statements

based on our audits.

We are a public

accounting firm registered with the PCAOB and are required to be independent with

respect to the Company in

accordance with the U.S. federal securities laws and the applicable rules and

regulations of the Securities and Exchange

Commission and the PCAOB.

We conducted

our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the

audits to obtain reasonable assurance about whether the financial statements are

free of material misstatement, whether due to

error or fraud.

Our audits included performing procedures to assess the risks of material

misstatement of the financial statements, whether due to

error or fraud, and performing procedures that respond to those risks.

Such procedures include examining, on a test basis,

evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting

principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial

statements.

We believe that

our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below arises from the current-period

audit of the financial statements that was

communicated or required to be communicated to the audit committee

and that: (1) relate to accounts or disclosures that are

material to the financial statements and (2) involved our especially challenging,

subjective or complex judgments.

The

communication of critical audit matters does not alter in any way our opinion on the

financial statements, taken as a whole, and

we are not, by communicating the critical audit matters below,

providing separate opinions on the critical audit matters or on the

accounts or disclosures to which it relates.

Allowance for Credit Losses

The Company’s loans held for investment

portfolio totaled $2.53 billion as of December 31, 2022, and the allowance for credit

losses on loans held for investment was $24.7 million.

The Company’s unfunded

loan commitments totaled $781.1 million, with

an allowance for credit loss of $3.0 million.

The Company’s available-for-sale securities and

held-to-maturity securities

portfolios totaled $1.07 billion as of December 31, 2022, and the allowance

for credit losses on securities was $41,000.

Together

these allowance amounts represent the allowance for credit losses (ACL).

As more fully described in

Notes 1

and

to the Company’s consolidated financial

statements, the Company estimates its

exposure to expected credit losses as of the statement of financial condition date

for existing financial instruments held at

amortized cost and off-balance sheet exposures, such as unfunded

loan commitments, lines of credit and other unused

commitments that are not unconditionally cancelable by the Company.

The determination of the ACL requires management to exercise significant judgment

and consider numerous subjective factors,

including determining qualitative factors utilized to adjust historical loss rates, loan

credit risk grading and identifying loans

requiring individual evaluation among others.

As disclosed by management, different assumptions and

conditions could result in

a materially different amount for the estimate of the ACL.

We identified

the ACL at December 31, 2022, as a critical audit matter.

Auditing the ACL involved a high degree of subjectivity

in evaluating management’s

estimates, such as evaluating management’s

identification of credit quality indicators, grouping of

loans determined to be similar into pools, estimating the remaining life of loans

in a pool, assessment of economic conditions and

other environmental factors, evaluating the adequacy of specific allowances associated

with individually evaluated loans and

assessing the appropriateness of loan credit risk grades.

The primary procedures we performed as of December 31, 2022, to address this critical audit

matter included:

●

Obtained an understanding of the Company’s

process for establishing the ACL, including the qualitative factor

adjustments of the ACL

●

Tested the design

and operating effectiveness of controls, including those related to

technology, over the ACL,

including:

loan data completeness and accuracy

reconciliation of loan balances accounted for at amortized cost and underlying detail

classifications of loans by loan pool

historical charge-off data

evaluation of appraisals

the establishment of qualitative adjustments

back testing and stress testing

loan credit risk ratings

establishment of specific ACL on individually evaluated loan,

management’s review and disclosure

controls over the ACL

●

Tested the completeness

and accuracy of the information utilized in the ACL, including evaluating

the relevance and

reliability of such information

●

Tested the ACL model’s

computational accuracy

●

Evaluated the qualitative adjustments to the ACL, including assessing the

basis for adjustments and the reasonableness

of the significant assumptions

●

Tested the loan review

functions and evaluated the reasonableness of loan credit risk ratings

●

Evaluated the reasonableness of specific allowances on individually

evaluated loans

●

Evaluated the overall reasonableness of assumptions used by management

considering trends identified within peer

groups

●

Evaluated the accuracy and completeness of ASU No. 2016-13,

Financial Instruments – Credit Losses (Topic

326):

Measurement of Credit Losses

on Financial Instruments,

disclosures in the consolidated financial statements

●

Evaluated credit quality trends in delinquencies, non-accruals, charge

-offs and loan risk ratings

●

Tested estimated utilization

rate of unfunded loan commitments

●

Evaluated documentation prepared to assess the methodology utilized in the

ACL calculation for securities for

reasonableness

FORVIS, LLP (Formerly, BKD, LLP)

We have served

as the Company’s auditor since 2021.

Little Rock, Arkansas

March 1, 2023

Report of Independent Registered Public Accounting Firm

To the Shareowners

and the Board of Directors of Capital City Bank Group, Inc.

Opinion on the Financial Statements

We have audited

the accompanying consolidated statements of income, comprehensive income

shareowners' equity and cash

flows of Capital City Bank Group, Inc. for the year ended December 31, 2020,

and the related notes (collectively referred to as

the “consolidated financial statements”). In our opinion, the consolidated

financial statements present fairly,

in all material

respects, the results of the Company’s

operations and its cash flows for the year ended December 31, 2020, in conformity with

U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the

Company’s financial statements based

on our audit. We are a public

accounting firm registered with the PCAOB and are required

to be independent with respect to the Company in accordance with the U.S. federal

securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted

our audit in accordance with the standards of the PCAOB. Those standards require

that we plan and perform the

audit to obtain reasonable assurance about whether the financial statements are free

of material misstatement, whether due to error

or fraud. Our audit included performing procedures to assess the risks of material

misstatement of the financial statements,

whether due to error or fraud, and performing procedures that respond

to those risks. Such procedures included examining, on a

test basis, evidence regarding the amounts and disclosures in the financial

statements. Our audit also included evaluating the

accounting principles used and significant estimates made by management,

as well as evaluating the overall presentation of the

financial statements. We

believe that our audit provides a reasonable basis for our opinion.

/s/

Ernst & Young LLP

We served as the Company’s

auditor from 2007 to 2021.

Tallahassee, Florida

March 1, 2021

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF FINANCIAL CONDITION

As of December 31,

(Dollars in Thousands)

2022

2021

ASSETS

Cash and Due From Banks

72,114

65,313

Federal Funds Sold and Interest Bearing Deposits

528,536

970,041

Total Cash and Cash Equivalents

600,650

1,035,354

Investment Securities, Available

for Sale, at fair value (amortized cost of $

455,232

and $

660,732

)

413,294

654,611

Investment Securities, Held to Maturity (fair value of $

612,701

and $

339,699

)

660,744

339,601

Equity Securities

861

Total Investment

Securities

1,074,048

995,073

Loans Held For Sale, at fair value

54,635

52,532

Loans, Held for Investment

2,525,180

1,931,465

Allowance for Credit Losses

(24,736)

(21,606)

Loans Held for Investment, Net

2,500,444

1,909,859

Premises and Equipment, Net

82,138

83,412

Goodwill and Other Intangibles

93,093

93,253

Other Real Estate Owned

431

Other Assets

120,519

94,349

Total Assets

4,525,958

4,263,849

LIABILITIES

Deposits:

Noninterest Bearing Deposits

1,653,620

1,668,912

Interest Bearing Deposits

2,285,697

2,043,950

Total Deposits

3,939,317

3,712,862

Short-Term

Borrowings

56,793

34,557

Subordinated Notes Payable

52,887

Other Long-Term

Borrowings

513

884

Other Liabilities

73,675

67,735

Total Liabilities

4,123,185

3,868,925

Temporary Equity

8,757

11,758

SHAREOWNERS’ EQUITY

Preferred Stock, $

.01

par value;

3,000,000

shares authorized;

shares issued and outstanding

Common Stock, $

.01

par value;

90,000,000

shares authorized;

16,986,785

and

16,892,060

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

170

169

Additional Paid-In Capital

37,331

34,423

Retained Earnings

393,744

364,788

Accumulated Other Comprehensive Loss, Net of Tax

(37,229)

(16,214)

Total Shareowners’

Equity

394,016

383,166

Total Liabilities, Temporary

Equity, and Shareowners’ Equity

4,525,958

4,263,849

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF INCOME

For the Years

Ended December 31,

(Dollars in Thousands, Except Per Share

Data)

2022

2021

2020

INTEREST INCOME

Loans, including Fees

105,882

96,561

94,752

Investment Securities:

Taxable

15,917

8,724

10,176

Tax Exempt

Federal Funds Sold and Interest Bearing Deposits

9,511

998

1,171

Total Interest Income

131,348

106,351

106,197

INTEREST EXPENSE

Deposits

3,444

839

1,548

Short-Term

Borrowings

1,761

1,360

1,690

Subordinated Notes Payable

1,652

1,228

1,472

Other Long-Term

Borrowings

161

Total Interest Expense

6,888

3,490

4,871

NET INTEREST INCOME

124,460

102,861

101,326

Provision for Credit Losses

7,162

(1,553)

9,645

Net Interest Income After Provision for Credit Losses

117,298

104,414

91,681

NONINTEREST INCOME

Deposit Fees

22,121

18,882

17,800

Bank Card Fees

15,401

15,274

13,044

Wealth Management

Fees

18,059

13,693

11,035

Mortgage Banking Revenues

30,624

52,425

63,344

Other

8,422

7,271

5,942

Total Noninterest

Income

94,627

107,545

111,165

NONINTEREST EXPENSE

Compensation

100,542

101,470

96,280

Occupancy, Net

24,574

23,932

22,659

Other

36,712

37,106

31,023

Total Noninterest

Expense

161,828

162,508

149,962

INCOME BEFORE INCOME TAXES

50,097

49,451

52,884

Income Tax Expense

10,085

9,835

10,230

NET INCOME

40,012

39,616

42,654

Loss (Income) Attributable to Noncontrolling Interests

135

(6,220)

(11,078)

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

40,147

33,396

31,576

BASIC NET INCOME PER SHARE

2.37

1.98

1.88

DILUTED NET INCOME PER SHARE

2.36

1.98

1.88

Average Basic Common

Shares Outstanding

16,951

16,863

16,785

Average Diluted

Common Shares Outstanding

16,985

16,893

16,822

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME

For the Years

Ended December 31,

(Dollars in Thousands)

2022

2021

2020

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

40,147

33,396

31,576

Other comprehensive income (loss), before

tax:

Investment Securities:

Change in net unrealized (loss) gain on securities available-for-sale

(35,814)

(9,673)

2,437

Unrealized losses on securities transferred from available-for-sale

held-to-maturity

(9,384)

Amortization of unrealized losses on securities transferred from

available-for-sale to held-to-maturity

1,469

Derivative:

Change in net unrealized gain on effective cash flow derivative

4,146

1,476

574

Benefit Plans:

Reclassification adjustment for amortization of prior service cost

292

234

(880)

Reclassification adjustment for amortization of net loss

4,752

10,806

4,391

Defined benefit plan settlement

2,321

3,072

Current year actuarial gain (loss)

4,223

31,339

(27,924)

Total Benefit Plans

11,588

45,451

(24,413)

Other comprehensive (loss) income, before

tax:

(27,995)

37,280

(21,366)

Deferred tax benefit (expense) related to other comprehensive income

6,980

(9,352)

5,405

Other comprehensive (loss) income, net of tax

(21,015)

27,928

(15,961)

TOTAL COMPREHENSIVE

INCOME

19,132

61,324

15,615

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

Accumulated

Other

Comprehensive

(Loss) Income,

Net of Taxes

(Dollars in Thousands, Except Share Data)

Outstanding

Common

Stock

Additional

Paid-In

Capital

Retained

Earnings

Total

Balance, January 1, 2020

16,771,544

168

32,092

322,937

(28,181)

327,016

Impact of Adopting ASC 326 (CECL)

(3,095)

Net Income Attributable to Common Shareowners

31,576

Reclassification to Temporary Equity

(1)

(9,323)

Other Comprehensive Loss, Net of Tax

(15,961)

Cash Dividends ($

0.57

per share)

(9,567)

Stock Based Compensation

892

Stock Compensation Plan Transactions, net

118,981

1,340

1,341

Repurchase of Common Stock

(99,952)

(1)

(2,041)

(2,042)

Balance, December 31, 2020

16,790,573

168

32,283

332,528

(44,142)

320,837

Net Income Attributable to Common Shareowners

33,396

Reclassification to Temporary Equity

(1)

9,323

Other Comprehensive Income, Net of Tax

27,928

Cash Dividends ($

0.62

per share)

(10,459)

Stock Based Compensation

843

Stock Compensation Plan Transactions, net

101,487

1,297

1,298

Balance, December 31, 2021

16,892,060

169

34,423

364,788

(16,214)

383,166

Net Income Attributable to Common Shareowners

40,147

Other Comprehensive Loss, Net of Tax

(21,015)

Cash Dividends ($

0.66

per share)

(11,191)

Stock Based Compensation

1,630

Stock Compensation Plan Transactions, net

94,725

1,278

1,279

Balance, December 31, 2022

16,986,785

170

37,331

393,744

(37,229)

394,016

(1)

Adjustments to redemption value for non-controlling interest in CCHL

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF CASH FLOWS

For the Years

Ended December 31,

(Dollars in Thousands)

2022

2021

2020

CASH FLOWS FROM OPERATING

ACTIVITIES

Net Income Attributable to Common Shareowners

40,147

33,396

31,576

Adjustments to Reconcile Net Income to Cash From Operating Activities:

Provision for Credit Losses

7,162

(1,553)

9,645

Depreciation

7,596

7,607

7,230

Amortization of Premiums, Discounts, and Fees, net

8,333

14,072

7,533

Amortization of Intangible Assets

160

107

Pension Settlement Charges

2,321

3,072

Originations of Loans Held for Sale

(1,024,526)

(1,541,356)

(606,337)

Proceeds From Sales of Loans Held for Sale

1,053,047

1,655,288

565,151

Mortgage Banking Revenues

(30,624)

(52,425)

(63,344)

Net Additions for Capitalized Mortgage Servicing Rights

(2,742)

(2,792)

Change in Valuation

Provision for Mortgage Servicing Rights

(250)

250

Stock Compensation

1,630

843

892

Net Tax Benefit from

Stock Compensation

(27)

(4)

(84)

Deferred Income Taxes

(1,583)

(4,157)

(53)

Net Change in Operating Leases

(108)

(165)

(156)

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

(422)

(1,662)

(393)

Net (Increase) Decrease in Other Assets

(8,636)

10,885

(38,353)

Net Increase (Decrease) in Other Liabilities

8,837

(7,846)

40,624

Net Cash Provided By (Used In) Operating Activities

60,565

115,924

(48,611)

CASH FLOWS FROM INVESTING ACTIVITIES

Securities Held to Maturity:

Purchases

(219,865)

(251,525)

(32,250)

Payments, Maturities, and Calls

55,314

78,544

99,251

Securities Available for

Sale:

Purchases

(52,238)

(523,961)

(108,728)

Proceeds from the Sale of Securities

3,365

495

Payments, Maturities, and Calls

81,596

178,425

186,499

Purchases of Loans Held for Investment

(438,415)

(114,913)

(43,804)

Net (Increase) Decrease in Loans

(162,406)

183,249

(130,020)

Net Cash Paid for Acquisitions

(4,482)

(2,405)

Proceeds From Sales of Other Real Estate Owned

2,406

4,502

2,835

Purchases of Premises and Equipment, net

(6,322)

(5,193)

(9,738)

Noncontrolling Interest Contributions

2,867

7,139

5,766

Net Cash Used In Investing Activities

(733,698)

(447,720)

(32,594)

CASH FLOWS FROM FINANCING ACTIVITIES

Net Increase in Deposits

226,455

495,302

572,106

Net Increase (Decrease) in Short-Term

Borrowings

22,114

(45,938)

73,156

Repayment of Other Long-Term

Borrowings

(249)

(1,332)

(3,363)

Dividends Paid

(11,191)

(10,459)

(9,567)

Payments to Repurchase Common Stock

(2,042)

Issuance of Common Stock Under Compensation Plans

1,300

1,028

1,041

Net Cash Provided By Financing Activities

238,429

438,601

631,331

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(434,704)

106,805

550,126

Cash and Cash Equivalents at Beginning of Year

1,035,354

928,549

378,423

Cash and Cash Equivalents at End of Year

600,650

1,035,354

928,549

Supplemental Cash Flow Disclosures:

Interest Paid

6,586

3,547

4,841

Income Taxes Paid

7,466

16,339

9,171

Noncash Investing and Financing Activities:

Loans and Premises Transferred to Other Real Estate Owned

2,398

1,717

2,297

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

Notes to Consolidated Financial Statements

Note 1

SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

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

and banking-related services to individual and

corporate clients through its wholly-owned subsidiary,

Capital City Bank (“CCB” or the “Bank” and together with CCBG, the

“Company”), 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 include the accounts of CCBG

and CCB.

CCBG also maintains an insurance subsidiary,

Capital City Strategic Wealth,

LLC.

CCB has two primary subsidiaries, which are wholly owned, Capital City Trust

Company

and Capital City Investments. CCB also maintains a

% membership interest in a consolidated subsidiary,

Capital City Home

Loans, LLC.

All material inter-company transactions and accounts have been

eliminated in consolidation.

The Company, which operates

a single reportable business segment that is comprised of commercial banking

within the states of

Florida, Georgia, and Alabama, follows accounting principles generally

accepted in the United States of America and reporting

practices applicable to the banking industry.

The principles which materially affect the financial position, results of

operations

and cash flows are summarized below.

The Company determines whether it has a controlling financial interest in an

entity by first evaluating whether the entity is a

voting interest entity or a variable interest entity under accounting principles

generally accepted in the United States of America.

Voting

interest entities are entities in which the total equity investment at risk is sufficient

to enable the entity to finance itself

independently and provide the equity holders with the obligation to absorb losses, the

right to receive residual returns and the

right to make decisions about the entity’s

activities.

The Company consolidates voting interest entities in which it has all, or at

least a majority of, the voting interest.

As defined in applicable accounting standards, variable interest entities (“VIE’s”)

are

entities that lack one or more of the characteristics of a voting interest entity.

A controlling financial interest in an entity is

present when an enterprise has a variable interest, or a combination of variable

interests, that will absorb a majority of the entity’s

expected losses, receive a majority of the entity’s

expected residual returns, or both.

The enterprise with a controlling financial

interest, known as the primary beneficiary,

consolidates the VIE.

Two of CCBG’s

wholly owned subsidiaries, CCBG Capital

Trust I (established November 1, 2004) and

CCBG Capital Trust II (established May 24, 2005) are VIEs for

which the Company

is not the primary beneficiary.

Accordingly, the

accounts of these entities are not included in the Company’s

consolidated

financial statements.

Certain previously reported amounts have been reclassified to conform

to the current year’s presentation.

The Company has

evaluated subsequent events for potential recognition and/or disclosure

through the date the consolidated financial statements

included in this Annual Report on Form 10-K were filed with the

United States Securities and Exchange Commission.

Use of Estimates

The preparation of financial statements in conformity with accounting

principles generally accepted in the United States of

America requires management to make estimates and assumptions that affect

the reported amounts of assets and liabilities, the

disclosure of contingent assets and liabilities at the date of financial statements and

the reported amounts of revenues and

expenses during the reporting period.

Actual results could vary from these estimates.

Material estimates that are particularly

susceptible to significant changes in the near-term

relate to the determination of the allowance for credit losses, pension expense,

income taxes, loss contingencies, valuation of other real estate owned, and

valuation of goodwill and their respective analysis of

impairment.

Business Combination

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

Wealth, LLC

(“CCSW”) acquired substantially all

of the assets of Strategic Wealth

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

service, and insurance

carrier agreements, and the assignment of all related revenues thereof.

Under the terms of the purchase agreement, SWG

principles became officers of CCSW and will continue the operation

of their five offices in South Georgia offering

wealth

management services and comprehensive risk management and asset protection

services for individuals and businesses.

CCBG

paid $

4.5

million in cash consideration and recorded goodwill of $

2.8

million and a customer relationship intangible asset of $

1.6

million.

On March 1, 2020, CCB completed its acquisition of a

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

which is now operated as Capital City Home Loans, LLC (“CCHL”).

CCHL was consolidated into CCBG’s

financial statements

effective March 1, 2020.

Assets acquired totaled $

million (consisting primarily of loans held for sale) and liabilities assumed

totaled $

million (consisting primarily of warehouse line borrowings).

The primary reasons for the acquisition and strategic

alliance with Brand was to gain access to an expanded residential mortgage product

line-up and investor base (including a

mandatory delivery channel for loan sales), to hedge our net interest income

business and to generate other operational synergies

and cost savings.

CCB made a $

7.1

million cash payment for its

% membership interest and entered into a buyout agreement

for the remaining

% noncontrolling interest resulting in temporary equity with a fair value of $

7.4

million.

Goodwill totaling

4.3

million was recorded in connection with this acquisition.

Factors that contributed to the purchase price resulting in goodwill

include Brand’s strong management

team and expertise in the mortgage industry,

historical record of earnings, and operational

synergies created as part of the strategic alliance.

Recently Adopted Accounting Pronouncements

Since 2019, the Company has adopted ASU 2016-13

Financial Instruments – Credit Losses (Topic

326): Measurement of Credit

Losses on Financial Instruments,

ASU 2019-12 “

Income Taxes (Topic

740): Simplifying the Accounting for Income Taxes,”

ASU

2020-01 “

Investments – Equity Securities (Topic

321) and Investments – Equity Method and Joint Ventures

(Topic

323)”,

ASU

2020-04 “

Reference Rate Reform (Topic

848)”,

ASU 2020-08 “

Codification Improvements to Subtopic 310-20,

Receivables –

Nonrefundable Fees and Other Costs”,

and ASU 2020-09 “

Debt (Topic

470): Amendments to SEC Paragraphs Pursuant to SEC

Release No. 33-10762”

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks, interest-bearing

deposits in other banks, and federal funds

sold. Generally,

federal funds are purchased and sold for one-day periods and all other cash equivalents

have a maturity of 90

days or less.

The Company is required to maintain average reserve balances with the Federal Reserve

Bank based upon a

percentage of deposits.

On March 26, 2020, the Federal Reserve reduced the amount of the required reserve balance

zero

The Company maintains certain cash balances that are restricted under

warehouse lines of credit and master repurchase

agreements.

The restricted cash balance at December 31, 2022 was $

0.5

million.

Investment Securities

Investment securities are classified as held-to-maturity (“HTM”) and

carried at amortized cost when the Company has the positive

intent and ability to hold them until maturity.

Investment securities not classified as held-to-maturity are classified as available-

for-sale (“AFS”) and carried at fair value.

The Company does not have trading investment securities. Investment securities

classified as equity securities that do not have readily determinable fair

values, are measured at cost and remeasured to fair value

when impaired or upon observable transaction prices.

The Company determines the appropriate classification of securities at the

time of purchase.

For reporting and risk management purposes, we further segment investment securities by

the issuer of the

security which correlates to its risk profile: U.S. government treasury,

U.S. government agency,

state and political subdivisions,

mortgage-backed securities,

and corporate debt securities.

Certain equity securities with limited marketability,

such as stock in

the Federal Reserve Bank and the Federal Home Loan Bank, are classified as available

-for-sale and carried at cost.

Interest income includes amortization and accretion of purchase premiums

and discounts.

Realized gains and losses are derived

from the amortized cost of the security sold.

Gains and losses on the sale of securities are recorded on the trade date and are

determined using the specific identification method.

Securities transferred from available-for-sale to held-to-maturity

are

recorded at amortized cost plus or minus any unrealized gain or loss at the time

of transfer.

Any existing unrecognized gain or

loss continues to be reported in accumulated other comprehensive income

(net of tax) and amortized as an adjustment to interest

income over the remaining life of the security.

Any existing allowance for credit loss is reversed at the time of transfer.

Subsequent to transfer, the allowance for credit

losses on the transferred security is evaluated in accordance with the accounting

policy for held-to-maturity securities.

Additionally, any allowance

amounts reversed or established as part of the transfer are

presented on a gross basis in the Consolidated Statement of Income.

The accrual of interest is generally suspended on securities more than

90 days past due with respect to principal or interest.

When

a security is placed on nonaccrual status, all previously accrued and uncollected interest

is reversed against current income and

thus not included in the estimate of credit losses.

Credit losses and changes thereto, are established as an allowance for credit loss through

a provision for credit loss expense.

Losses are charged against the allowance when management

believes the uncollectability of a security is confirmed or when

either of the criteria regarding intent or requirement to sell is met.

Certain 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 considers 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.

Impairment - Available

-for-Sale Securities

Unrealized gains on available-for-sale securities are excluded from

earnings and reported, net of tax, in other comprehensive

income.

For available-for-sale securities that are in an unrealized loss position, the Company

first assesses whether it intends to

sell, or whether it is more likely than not it will be required to sell the security before

recovery of its amortized cost basis.

either of the criteria regarding intent or requirement to sell is met, the security’s

amortized cost basis is written down to fair value

through income.

For available-for-sale securities that do not meet the aforementioned criteria or have a zero loss assumption,

the

Company evaluates whether the decline in fair value has resulted from credit

losses or other factors.

In making this assessment,

management considers the extent to which fair value is less than amortized

cost, any changes to the rating of the security by a

rating agency, and adverse

conditions specifically related to the security,

among other factors.

If the assessment indicates that a

credit loss exists, the present value of cash flows to be collected from the security are compared

to the amortized cost basis of the

security.

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit

loss exists and

an allowance for credit losses is recorded through a provision for

credit loss expense, limited by the amount that fair value is less

than the amortized cost basis.

Any impairment that is not credit related is recognized in other

comprehensive income.

Allowance for Credit Losses - Held-to-Maturity Securities.

Management measures expected credit losses on each individual held-to-maturity debt security

that has not been deemed to have

a zero assumption.

Each security that is not deemed to have zero credit losses is individually measured

based on net realizable

value, or the difference between the discounted value of

the expected cash flows, based on the original effective rate, and the

recorded amortized basis of the security.

To the extent a shortfall is related to credit

loss, an allowance for credit loss is recorded

through a provision for credit loss expense.

Loans Held for Investment

Loans held for investment (“HFI”) are stated at amortized cost which includes the

principal amount outstanding, net premiums

and discounts, and net deferred loan fees and costs.

Accrued interest receivable on loans is reported in other assets and is not

included in the amortized cost basis of loans.

Interest income is accrued on the effective yield method based on outstanding

principal balances and includes loan late fees.

Fees charged to originate loans and direct loan origination

costs are deferred and

amortized over the life of the loan as a yield adjustment.

The Company defines loans as past due when one full payment is past due or

a contractual maturity is over 30 days late.

The

accrual of interest is generally suspended on loans more than 90 days past due

with respect to principal or interest.

When a loan is

placed on nonaccrual status, all previously accrued and uncollected interest

is reversed against current income and thus a policy

election has been made to not include in the estimate of credit losses.

Interest income on nonaccrual loans is recognized when the

ultimate collectability is no longer considered 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.

Loan charge-offs on commercial and investor

real estate loans are recorded when the facts and circumstances of the individual

loan confirm the loan is not fully collectible and the loss is reasonably quantifiable.

Factors considered in making these

determinations are the borrower’s and any guarantor’s

ability and willingness to pay,

the status of the account in bankruptcy court

(if applicable), and collateral value.

Charge-off decisions for consumer loans are dictated by

the Federal Financial Institutions

Examination Council’s Uniform

Retail Credit Classification and Account Management Policy which establishes standards

for the

classification and treatment of consumer loans, which generally require

charge-off after 120 days of delinquency.

The Company has adopted comprehensive lending policies, underwriting

standards and loan review procedures designed to

maximize loan income within an acceptable level of risk.

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

concentrations, loan delinquencies, nonperforming and potential problem

loans, and other credit quality metrics.

The ongoing

review of loan portfolio quality and trends by Management and the Credit Risk Oversight

Committee support the process for

estimating the allowance for credit losses.

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 for through the credit

loss provision, but recorded separately 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.

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

allowance for credit losses 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.

Loans That Do Not Share Risk Characteristics (Indivi

dually Analyzed)

Loans that do not share similar risk characteristics are evaluated on an individual

basis.

Loans deemed to be collateral dependent

have differing risk characteristics and are individually

analyzed to estimate the expected credit loss.

A loan is collateral

dependent when the borrower is experiencing financial difficulty

and repayment of the loan is dependent on the liquidation and

sale of the underlying collateral.

For collateral dependent loans where foreclosure is probable, the expected credit loss is

measured based on the difference between the fair

value of the collateral (less selling cost) and the amortized cost basis of the

asset.

For collateral dependent loans where foreclosure is not probable, the

Company has elected the practical expedient allowed

by Financial Accounting Standards Board (“FASB”)

Accounting Standards Codification

(“ASC”) Topic 326-20

to measure the

expected credit loss under the same approach as those loans where foreclosure

is probable.

For loans with balances greater than

$250,000,

the fair value of the collateral is obtained through independent appraisal of the underlying

collateral.

For loans with

balances less than $250,000, the Company has made a policy election to measure expected

loss for these individual loans utilizing

loss rates for similar loan types.

The aforementioned measurement criteria are applied for collateral dependent

troubled debt

restructurings.

Loans That Share Similar Risk Characteristics (Pooled

Loans)

The general steps in determining expected credit losses for the pooled loan component

of the allowance are as follows:

●

Segment loans into pools according to similar risk characteristics

●

Develop historical loss rates for each loan pool segment

●

Incorporate the impact of forecasts

●

Incorporate the impact of other qualitative factors

●

Calculate and review pool specific allowance for credit loss estimate

A discounted cash flow methodology is utilized to calculate expected

cash flows for the life of each individual loan.

The

discounted present value of expected cash flow is then compared to

the loan’s amortized cost basis to determine

the credit loss

estimate.

Individual loan results are aggregated at the pool level in determining total reserves for

each loan pool.

The primary inputs used to calculate expected cash flows include historical

loss rates which reflect probability of default (“PD”)

and loss given default (“LGD”), and prepayment rates.

The historical look-back period is a key factor in the calculation of the PD

rate and is based on management’s assessment

of current and forecasted conditions and may vary by loan pool.

Loans subject to

the Company’s risk rating process are

further sub-segmented by risk rating in the calculation of PD rates.

LGD rates generally

reflect the historical average net loss rate by loan pool.

Expected cash flows are further adjusted to incorporate the impact of loan

prepayments which will vary by loan segment and interest rate conditions.

In general, prepayment rates are based on observed

prepayment rates occurring in the loan portfolio and consideration of forecasted

interest rates.

In developing loss rates, adjustments are made to incorporate the impact of forecasted

conditions.

Certain assumptions are also

applied, including the length of the forecast and reversion periods.

The forecast period is the period within which management is

able to make a reasonable and supportable assessment of future conditions.

The reversion period is the period beyond which

management believes it can develop a reasonable and supportable forecast,

and bridges the gap between the forecast period and

the use of historical default and loss rates.

The remainder period reflects the remaining life of the loan.

The length of the forecast

and reversion periods are periodically evaluated and based on management’s

assessment of current and forecasted conditions and

may vary by loan pool.

For purposes of developing a reasonable and supportable assessment

of future conditions, management

utilizes established industry and economic data points and sources,

including the Federal Open Market Committee forecast, with

the forecasted unemployment rate being a significant factor.

PD rates for the forecast period will be adjusted accordingly based

on management’s assessment of

future conditions.

PD rates for the remainder period will reflect the historical mean PD rate.

Reversion period PD rates reflect the difference between forecast

and remainder period PD rates calculated using a straight-line

adjustment over the reversion period.

Loss rates are further adjusted to account for other risk factors that impact loan defaults

and losses.

These adjustments are based

on management’s assessment of

trends and conditions that impact credit risk and resulting credit losses, more

specifically internal

and external factors that are independent of and not reflected in the quantitative

loss rate calculations.

Risk factors management

considers in this assessment include trends in underwriting standards,

nature/volume/terms of loan originations, past due loans,

loan review systems, collateral valuations, concentrations, legal/regulatory/political

conditions, and the unforeseen impact of

natural disasters.

Allowance for Credit Losses on Off-Balance

Sheet Credit Exposures

The Company estimates expected credit losses over the contractual period

in which it is exposed to credit risk through a

contractual obligation to extend credit, unless that obligation is unconditionally

cancellable by the Company.

The allowance for

credit losses on off-balance sheet credit exposures is adjusted as a provision

for credit loss expense and is recorded in other

liabilities.

The estimate includes consideration of the likelihood that funding will occur

and an estimate of expected credit losses

on commitments expected to be funded over its estimated life and applies the same

estimated loss rate as determined for current

outstanding loan balances by segment.

Off-balance sheet credit exposures are identified and classified in the same categories as

the allowance for credit losses with similar risk characteristics that have been previously

mentioned.

Mortgage Banking Activities

Mortgage Loans Held for Sale and Revenue Recognition

Mortgage loans held for sale (“HFS”) are carried at fair value under the fair value

option with changes in fair value recorded in

mortgage banking revenues on the Consolidated Statements of

Income. The fair value of mortgage loans held for sale committed

to investors is calculated using observable market information such

as the investor commitment, assignment of trade or other

mandatory delivery commitment prices. The Company bases loans committed

to Federal National Mortgage Association

(“FNMA”), Government National Mortgage Association (“GNMA”), and

Federal Home Loan Mortgage Corporation

(“FHLMC”) (“Agency”) investors based on the Agency’s

quoted mortgage backed security (“MBS”) prices. The fair value of

mortgage loans held for sale not committed to investors is based on quoted best execution

secondary market prices. If no such

quoted price exists, the fair value is determined using quoted prices for

a similar asset or assets, such as MBS prices, adjusted for

the specific attributes of that loan, which would be used by other market

participants.

Gains and losses from the sale of mortgage loans held for sale are recognized based upon

the difference between the sales

proceeds and carrying value of the related loans upon sale and are recorded

in mortgage banking revenues on the Consolidated

Statements of Income. Sales proceeds reflect the cash received from investors

through the sale of the loan and servicing release

premium. If the related mortgage loan is sold with servicing retained, the

MSR addition is recorded in mortgage banking revenues

on the Consolidated Statements of Income.

Mortgage banking revenues also includes the unrealized gains and losses associated

with the changes in the fair value of mortgage loans held for sale, and the realized and

unrealized gains and losses from derivative

instruments.

Mortgage loans held for sale are considered sold when the Company surrenders

control over the financial assets. Control is

considered to have been surrendered when the transferred assets have been

isolated from the Company, beyond

the reach of the

Company and its creditors; the purchaser obtains the right (free of conditions

that constrain it from taking advantage of that right)

to pledge or exchange the transferred assets; and the Company does not

maintain effective control over the transferred assets

through either an agreement that both entitles and obligates the Company

to repurchase or redeem the transferred assets before

their maturity or the ability to unilaterally cause the holder to return specific

assets. The Company typically considers the above

criteria to have been met upon acceptance and receipt of sales proceeds

from the purchaser.

Government National Mortgage Association (“GNMA”) optional

repurchase programs allow financial institutions to buy back

individual delinquent mortgage loans that meet certain criteria from

the securitized loan pool for which the institution provides

servicing.

At the servicer’s option and without GNMA’s

prior authorization, the servicer may repurchase such a delinquent loan

for an amount equal to 100 percent of the remaining principal balance of

the loan.

Under FASB ASC Topic

860, “Transfers and

Servicing,” this buy-back option is considered a conditional option until

the delinquency criteria are met, at which time the option

becomes unconditional.

When the Company is deemed to have regained effective control over

these loans under the

unconditional buy-back option, the loans can no longer be reported

as sold and must be brought back onto the Consolidated

Statement of Financial Condition, regardless of whether there is intent to exercise

the buy-back option.

These loans are reported

in other assets with the offsetting liability being reported

in other liabilities.

Derivative Instruments (IRLC/Forward Commitments)

The Company holds and issues derivative financial instruments such as interest rate

lock commitments (“IRLCs”) and other

forward sale commitments. IRLCs are subject to price risk primarily

related to fluctuations in market interest rates. To

hedge the

interest rate risk on certain IRLCs, the Company uses forward sale commitments,

such as to-be-announced securities (“TBAs”) or

mandatory delivery commitments with investors. Management expects

these forward sale commitments to experience changes in

fair value opposite to the changes in fair value of the IRLCs thereby reducing

earnings volatility. Forward

sale commitments are

also used to hedge the interest rate risk on mortgage loans held for sale that are not

committed to investors and still subject to

price risk. If the mandatory delivery commitments are not fulfilled, the Company

pays a pair-off fee. Best effort

forward sale

commitments are also executed with investors, whereby certain loans

are locked with a borrower and simultaneously committed

to an investor at a fixed price. If the best effort IRLC does not fund,

there is no obligation to fulfill the investor commitment.

The Company considers various factors and strategies in determining

what portion of the IRLCs and uncommitted mortgage loans

held for sale to economically hedge.

All derivative instruments are recognized as other assets or other liabilities

on the

Consolidated Statements of Financial Condition at their fair value.

Changes in the fair value of the derivative instruments are

recognized in mortgage banking revenues on the Consolidated Statements

of Income in the period in which they occur.

Gains and

losses resulting from the pairing-out of forward sale commitments are recognized

in mortgage banking revenues on the

Consolidated Statements of Income. The Company accounts for

all derivative instruments as free-standing derivative instruments

and does not designate any for hedge accounting.

Mortgage Servicing Rights (“MSRs”) and Revenue Recognition

The Company sells residential mortgage loans in the secondary market and may

retain the right to service the loans sold. Upon

sale, an MSR asset is capitalized, which represents the then current fair value of

future net cash flows expected to be realized for

performing servicing activities.

As the Company has not elected to subsequently measure any class of servicing

assets under the

fair value measurement method, the Company follows the amortization method.

MSRs are amortized to noninterest income

(other income) in proportion to and over the period of estimated net servicing

income, and are assessed for impairment at each

reporting date.

MSRs are carried at the lower of the initial capitalized amount, net of accumulated amortization,

or estimated fair

value, and included in other assets, net, on the Consolidated Statements of

Financial Condition.

The Company periodically evaluates its MSRs asset for impairment.

Impairment is assessed based on fair value at each reporting

date 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).

As mortgage interest rates fall,

prepayment speeds are usually faster and the value of the MSRs asset generally

decreases, requiring additional valuation reserve.

Conversely, as mortgage

interest rates rise, prepayment speeds are usually slower and the value of

the MSRs asset generally

increases, requiring less valuation reserve.

A valuation allowance is established, through a charge to earnings, to

the extent the

amortized cost of the MSRs exceeds the estimated fair value by stratification.

If it is later determined that all or a portion of the

temporary impairment no longer exists for a stratification, the valuation

is reduced through a recovery to earnings.

An other-than-

temporary impairment (i.e., recoverability is considered remote when

considering interest rates and loan pay off activity) is

recognized as a write-down of the MSRs asset and the related valuation allowance

(to the extent a valuation allowance is

available) and then against earnings.

A direct write-down permanently reduces the carrying value of the

MSRs asset and

valuation allowance, precluding subsequent recoveries.

Derivative/Hedging Activities

At the inception of a derivative contract, the Company designates the derivative

as one of three types based on the Company’s

intentions and belief as to the likely effectiveness as a hedge. These three

types are (1) a hedge of the fair value of a recognized

asset or liability or of an unrecognized firm commitment (“fair value

hedge”), (2) a hedge of a forecasted transaction or the

variability of cash flows to be received or paid related to a recognized

asset or liability (“cash flow hedge”), or (3) an instrument

with no hedging designation (“standalone derivative”). For a fair value hedge,

the gain or loss on the derivative, as well as the

offsetting loss or gain on the hedged item, are recognized

in current earnings as fair values change. For a cash flow hedge, the

gain or loss on the derivative is reported in other comprehensive income and is reclassified

into earnings in the same periods

during which the hedged transaction affects earnings.

For both types of hedges, changes in the fair value of derivatives that are

not highly effective in hedging the changes in fair value or expected

cash flows of the hedged item are recognized immediately in

current earnings. Net cash settlements on derivatives that qualify for

hedge accounting are recorded in interest income or interest

expense, based on the item being hedged. Net cash settlements on derivatives

that do not qualify for hedge accounting are

reported in non-interest income. Cash flows on hedges are classified in the cash flow

statement the same as the cash flows of the

items being hedged.

The Company formally documents the relationship between derivatives

and hedged items, as well as the risk-management

objective and the strategy for undertaking hedge transactions at the inception

of the hedging relationship. This documentation

includes linking fair value or cash flow hedges to specific assets and liabilities on the

Consolidated Statement of Financial

Condition or to specific firm commitments or forecasted transactions. The Company

also formally assesses, both at the hedge’s

inception and on an ongoing basis, whether the derivative instruments that are used

are highly effective in offsetting changes in

fair values or cash flows of the hedged items. The Company discontinues

hedge accounting when it determines that the derivative

is no longer effective in offsetting changes in the

fair value or cash flows of the hedged item, the derivative is settled or

terminates, a hedged forecasted transaction is no longer probable, a hedged

firm commitment is no longer firm, or treatment of the

derivative as a hedge is no longer appropriate or intended. When hedge accounting

is discontinued, subsequent changes in fair

value of the derivative are recorded as non-interest income. When a fair

value hedge is discontinued, the hedged asset or liability

is no longer adjusted for changes in fair value and the existing basis adjustment is amortized

or accreted over the remaining life of

the asset or liability. When

a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions

are still

expected to occur, gains or losses that were accumulated

in other comprehensive income are amortized into earnings over the

same periods, in which the hedged transactions will affect

earnings.

Long-Lived Assets

Premises and equipment is stated at cost less accumulated depreciation,

computed on the straight-line method over the estimated

useful lives for each type of asset with premises being depreciated over

a range of

years, and equipment being

depreciated over a range of

years.

Additions, renovations and leasehold improvements to premises are capitalized and

depreciated over the lesser of the useful life or the remaining lease term.

Repairs and maintenance are charged to noninterest

expense as incurred.

Long-lived assets are evaluated for impairment if circumstances suggest that their

carrying value may not be recoverable, by

comparing the carrying value to estimated undiscounted cash flows.

If the asset is deemed impaired, an impairment charge is

recorded equal to the carrying value less the fair value. See Note 6 – Premises and

Equipment for additional information.

Leases

The Company has entered into various operating leases, primarily for

banking offices.

Generally, these leases have initial

lease

terms from one to ten years.

Many of the leases have one or more lease renewal options.

The exercise of lease renewal options is

at the Company’s sole discretion.

The Company does not consider exercise of any lease renewal options reasonably

certain.

Certain of the lease contain early termination options.

No renewal options or early termination options have been included in the

calculation of the operating right-of-use assets or operating lease liabilities.

Certain of the lease agreements provide for periodic

adjustments to rental payments for inflation.

At the commencement date of the lease, the Company recognizes a lease liability at

the present value of the lease payments not yet paid, discounted using

the discount rate for the lease or the Company’s

incremental borrowing rate.

As the majority of the Company’s

leases do not provide an implicit rate, the Company uses its

incremental borrowing rate at the commencement date in determining

the present value of lease payments.

The incremental

borrowing rate is based on the term of the lease.

At the commencement date, the Company also recognizes a right-of-use asset

measured at (i) the initial measurement of the lease liability; (ii) any lease payments made

to the lessor at or before the

commencement date less any lease incentives received; and (iii) any initial direct

costs incurred by the lessee.

Leases with an

initial term of 12 months or less are not recorded on the Statement of Financial

Condition.

For these short-term leases, lease

expense is recognized on a straight-line basis over the lease term.

The Company has no leases classified as finance leases.

See

Note 7 – Leases for additional information.

Bank Owned Life Insurance

The Company, through

its subsidiary bank, has purchased life insurance policies on certain key

officers.

Bank owned life

insurance is recorded at the amount that can be realized under the insurance contract

at the statement of financial condition date,

which is the cash surrender value adjusted for other charges or

other amounts due that are probable at settlement.

Goodwill and Other Intangibles

Goodwill represents the excess of the cost of businesses acquired over the

fair value of the net assets acquired.

In accordance

with FASB ASC Topic

350, the Company determined it has one goodwill reporting unit.

Goodwill is tested for impairment

annually during the fourth quarter or on an interim basis if an event occurs

or circumstances change that would more likely than

not reduce the fair value of the reporting unit below its carrying value.

Other intangible assets relate to customer intangibles

purchased as part of a business acquisition.

Intangible assets are tested for impairment at least annually or whenever changes in

circumstances indicate the carrying amount of the assets may not

be recoverable from future undiscounted cash flows.

See Note 8

– Goodwill and Other Intangibles for additional information

Other Real Estate Owned

Assets acquired through, or in lieu of, loan foreclosure are held for sale and

are initially recorded at the lower of cost or fair value

less estimated selling costs, establishing a new cost basis.

Subsequent to foreclosure, valuations are periodically performed by

management and the assets are carried at the lower of carrying amount or fair value

less cost to sell.

The valuation of foreclosed

assets is subjective in nature and may be adjusted in the future because of changes in economic

conditions.

Revenue and

expenses from operations and changes in value are included in

noninterest expense.

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary

course of business are recorded as liabilities when

the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.

See Note 21 – Commitments and

Contingencies for additional information.

Noncontrolling Interest

To the extent

the Company’s interest in a consolidated

entity represents less than 100% of the entity’s

equity, the Company

recognizes noncontrolling interests in subsidiaries.

In the case of the CCHL acquisition (previously noted under Business

Combination), the noncontrolling interest represents equity which is redeemable

or convertible for cash at the option of the equity

holder and is classified within temporary equity in the mezzanine

section of the Consolidated Statements of Financial

Condition.

The call/put option is redeemable at the option of either CCBG (call) or the

noncontrolling interest holder (put) on or after

January 1, 2025, and therefore, not entirely within CCBG’s

control.

The subsidiary’s net income or

loss and related dividends are

allocated to CCBG and the noncontrolling interest holder based on their relative

ownership percentages.

The noncontrolling

interest carrying value is adjusted on a quarterly basis to the higher of the

carrying value or current redemption value,

at the

Statement of Financial Condition date, through a corresponding adjustment

to retained earnings.

The redemption value is

calculated quarterly and is based on the higher of a predetermined book value

or pre-tax earnings multiple.

To the extent the

redemption value exceeds the fair value of the noncontrolling interest,

the Company’s earnings per share

attributable to common

shareowners is adjusted by that amount.

The Company uses an independent valuation expert to assist in estimating the fair value

of the noncontrolling interest using: 1) the discounted cash flow methodology

under the income approach,

and (2) the guideline

public company methodology under the market approach.

The estimated fair value is derived from equally weighting the result of

each of the two methodologies.

The estimation of the fair value includes significant assumptions concerning:

(1) projected loan

volumes; (2) projected pre-tax profit margins; (3) tax rates

and (4) discount rates.

Income Taxes

Income tax expense is the total of the current year income tax due or refundable

and the change in deferred tax assets and

liabilities (excluding deferred tax assets and liabilities related to business

combinations or components of other comprehensive

income).

Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences

between carrying

amounts and tax bases of assets and liabilities, computed using enacted tax

rates.

A valuation allowance, if needed, reduces

deferred tax assets to the expected amount most likely to be realized.

Realization of deferred tax assets is dependent upon the

generation of a sufficient level of future taxable income and recoverable

taxes paid in prior years.

The income tax effects related

to settlements of share-based payment awards are reported in earnings as an

increase or decrease in income tax expense.

The Company files a consolidated federal income tax return and a separate

federal tax return for CCHL. Each subsidiary files a

separate state income tax return.

Earnings Per Common Share

Basic earnings per common share is based on net income divided by the weighted

-average number of common shares outstanding

during the period excluding non-vested stock.

Diluted earnings per common share include the dilutive effect of

stock options and

non-vested stock awards granted using the treasury stock method.

A reconciliation of the weighted-average shares used in

calculating basic earnings per common share and the weighted average

common shares used in calculating diluted earnings per

common share for the reported periods is provided in Note 16 — Earnings

Per Share.

Comprehensive Income

Comprehensive income includes all changes in shareowners’ equity

during a period, except those resulting from transactions with

shareowners.

Besides net income, other components of the Company’s

comprehensive income include the after tax effect of

changes in the net unrealized gain/loss on securities available-for-sale,

unrealized gain/loss on cash flow derivatives, and changes

in the funded status of defined benefit and supplemental executive retirement plans.

Comprehensive income is reported in the

accompanying Consolidated Statements of Comprehensive Income

and Changes in Shareowners’ Equity.

Stock Based Compensation

Compensation cost is recognized for share-based awards issued to employees,

based on the fair value of these awards at the date

of grant.

Compensation cost is recognized over the requisite service period, generally

defined as the vesting period.

The market

price of the Company’s common

stock at the date of the grant is used for restricted stock awards.

For stock purchase plan awards,

a Black-Scholes model is utilized to estimate the fair value of the award.

The impact of forfeitures of share-based awards on

compensation expense is recognized as forfeitures occur.

Revenue Recognition

FASB ASC Topic

606, Revenue from Contracts with Customers (“ASC 606”), establishes principles

for reporting information

about the nature, amount, timing and uncertainty of revenue and cash flows

arising from the entity’s contracts to

provide goods or

services to customers. The core principle requires an entity to recognize revenue

to depict the transfer of goods or services to

customers in an amount that reflects the consideration that it expects to be entitled

to receive in exchange for those goods or

services recognized as performance obligations are satisfied.

The majority of the Company’s revenue

-generating transactions are not subject to ASC 606, including revenue generated

from

financial instruments, such as our loans, letters of credit, and investment securities,

and revenue related to the sale of residential

mortgages in the secondary market, as these activities are subject to other

GAAP discussed elsewhere within our disclosures.

The

Company recognizes revenue from these activities as it is earned based on

contractual terms, as transactions occur, or as services

are provided and collectability is reasonably assured.

Descriptions of the major revenue-generating activities that are within the

scope of ASC 606, which are presented in the accompanying Consolidated

Statements of Income as components of non-interest

income are as follows:

Deposit Fees - these represent general service fees for monthly account maintenance

and activity- or transaction-based fees and

consist of transaction-based revenue, time-based revenue (service period),

item-based revenue or some other individual attribute-

based revenue.

Revenue is recognized when the Company’s performance

obligation is completed which is generally monthly for

account maintenance services or when a transaction has been completed.

Payment for such performance obligations are generally

received at the time the performance obligations are satisfied.

Wealth Management

trust fees and retail brokerage fees – trust fees represent monthly fees due from wealth

management clients

as consideration for managing the client’s

assets. Trust services include custody of assets, investment

management, fees for trust

services and similar fiduciary activities. Revenue is recognized when the Company’s

performance obligation is completed each

month or quarter, which is the time that payment is received.

Also, retail brokerage fees are received from a third-party broker-

dealer, for which the Company acts as an agent,

as part of a revenue-sharing agreement for fees earned from

customers that are

referred to the third party.

These fees are for transactional and advisory services and are paid by the third party on a monthly

basis and recognized ratably throughout the quarter as the Company’s

performance obligation is satisfied.

Bank Card Fees – bank card related fees primarily includes interchange

income from client use of consumer and business debit

cards.

Interchange income is a fee paid by a merchant bank to the card-issuing bank through

the interchange network.

Interchange fees are set by the credit card associations and are based on cardholder purchase volumes.

The Company records

interchange income as transactions occur.

Gains and Losses from the Sale of Bank Owned Property – the performance

obligation in the sale of other real estate owned

typically will be the delivery of control over the property to the buyer.

If the Company is not providing the financing of the sale,

the transaction price is typically identified in the purchase and sale agreement.

However, if the Company provides seller

financing, the Company must determine a transaction price, depending

on if the sale contract is at market terms and taking into

account the credit risk inherent in the arrangement.

Insurance Commissions – insurance commissions recorded by the

Company are received from various insurance carriers based on

contractual agreements to sell policies to customers on behalf of the carriers.

The performance obligation for the Company is to

sell life and health insurance policies to customers.

This performance obligation is met when a new policy is sold (effective

date)

or when an existing policy renews. New policies and renewals generally have

a one-year term. In the agreements with the

insurance carriers, a commission rate is agreed upon. The commission is recognized

at the time of the sale of the policy (effective

date) or when a policy renews.

Insurance commissions are recorded within other noninterest income.

Other non-interest income primarily includes items such as mortgage

banking fees (gains from the sale of residential mortgage

loans held for sale), bank-owned life insurance, and safe deposit box fees,

none of which are subject to the requirements of ASC

606.

The Company has made no significant judgments in applying the revenue guidance

prescribed in ASC 606 that affects the

determination of the amount and timing of revenue from the above-described

contracts with clients.

Accounting Standard Updates

ASU 2022-02, “Financial Instruments – Credit Losses

(Topic

326): Troubled

Debt Restructurings and Vintage

Disclosures”.

The

amendments eliminate the accounting guidance for troubled debt

restructurings by creditors that have adopted the CECL model

and enhance the disclosure requirements for loan modifications and

restructurings made with borrowers experiencing financial

difficulty.

In addition, the amendments require disclosure of current-period gross write-offs

for financing receivables and net

investment in leases by year of origination in the vintage disclosures.

The amendments in this update are for fiscal years

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

fiscal years.

The Company believes the adoption of

this guidance will not have a material impact on its consolidated financial

statements.

Note 2

INVESTMENT SECURITIES

Investment Portfolio Composition

The following tables summarize the amortized cost and related fair value of investment

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

the corresponding amounts of gross unrealized gains and losses, and

allowance for credit losses.

Available for

Sale

Amortized

Unrealized

Allowance for

Fair

(Dollars in Thousands)

Cost

Gains

Losses

Credit Losses

Value

December 31, 2022

U.S. Government Treasury

23,977

1,928

22,050

U.S. Government Agency

198,888

12,863

186,052

States and Political Subdivisions

47,197

6,855

(13)

40,329

Mortgage-Backed Securities

(1)

80,829

11,426

69,405

Corporate Debt Securities

97,119

8,874

(28)

88,236

Other Securities

(2)

7,222

Total

455,232

41,946

(41)

413,294

December 31, 2021

U.S. Government Treasury

190,409

2,606

187,868

U.S. Government Agency

238,490

1,229

2,141

237,578

States and Political Subdivisions

47,762

811

(15)

46,980

Mortgage-Backed Securities

(1)

89,440

598

88,869

Corporate Debt Securities

87,537

1,304

(21)

86,222

Other Securities

(2)

7,094

Total

660,732

1,375

7,460

(36)

654,611

Held to Maturity

Amortized

Unrealized

Fair

(Dollars in Thousands)

Cost

Gains

Losses

Value

December 31, 2022

U.S. Government Treasury

457,374

25,641

431,733

Mortgage-Backed Securities

203,370

22,410

180,968

Total

660,744

48,051

612,701

December 31, 2021

U.S. Government Treasury

115,499

1,622

113,877

Mortgage-Backed Securities

224,102

2,819

1,099

225,822

Total

339,601

2,819

2,721

339,699

(1)

Comprised of residential mortgage-backed

securities.

(2)

Includes Federal Home Loan Bank and Federal Reserve Bank recorded

at cost of $

2.1

million and $

5.1

million, respectively,

December 31, 2022 and of $

2.0

million and $

5.1

million, respectively,

at December 31, 2021.

At December 31, 2022, and 2021, the investment portfolio had $

0.01

million and $

0.9

million, respectively, in equity

securities.

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

credit impaired.

Securities with an amortized cost of $

656.1

million and $

463.8

million at December 31, 2022 and 2021, respectively,

were

pledged to secure public deposits and for other purposes.

At December 31, 2022 and 2021, there were

holdings of securities of any one issuer, other than

the U.S. Government and its

agencies, in an amount greater than 10% of shareowners’ equity.

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

to own capital stock in the FHLB based

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

FHLB advances.

FHLB stock which is included

in other securities is pledged to secure FHLB advances.

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

however, redemption of this stock has historically

been at par value.

As a member of the Federal Reserve Bank of Atlanta, the

Bank is required to maintain stock in the Federal Reserve Bank of Atlanta based

on a specified ratio relative to the Bank’s capital.

Federal Reserve Bank stock is carried at cost.

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

the AFS to HTM classification.

Transfers are

made at fair value on the date of the transfer.

The

securities had an amortized cost basis and fair value of $

168.4

million and

159.0

million, respectively at the time of the transfer.

The net unamortized, unrealized loss on the transferred securities included

in accumulated other comprehensive loss in the accompanying Consolidated

Statement of Financial Condition at December 31,

2022 totaled $

7.9

million.

This amount will be amortized out of accumulated other comprehensive loss over

the remaining life of

the underlying securities as an adjustment of the yield on those securities.

Investment Sales

. There were no significant sales of investment securities for each of the

last three fiscal years.

Maturity Distribution

The following table shows the Company’s

AFS and HTM investment securities maturity distribution

based on contractual maturity at December 31, 2022.

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 since they are not due at a certain maturity

date.

Equity securities do not have a

contractual maturity date.

Available for

Sale

Held to Maturity

Amortized

Fair

Amortized

Fair

(Dollars in Thousands)

Cost

Value

Cost

Value

Due in one year or less

47,408

44,255

Due after one through five years

153,009

140,296

457,374

431,733

Due after five through ten years

51,785

42,566

Mortgage-Backed Securities

80,829

69,405

203,370

180,968

U.S. Government Agency

114,979

109,550

Other Securities

7,222

Total

455,232

413,294

660,744

612,701

Unrealized Losses

. The following table summarizes the investment securities with unrealized

losses at December 31, aggregated

by major security type and length of time in a continuous unrealized loss position:

Less Than 12 Months

Greater Than 12 Months

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

(Dollars in Thousands)

Value

Losses

Value

Losses

Value

Losses

December 31, 2022

Available for

Sale

U.S. Government Treasury

983

19,189

1,928

20,172

1,928

U.S. Government Agency

63,112

2,572

113,004

10,291

176,116

12,863

States and Political Subdivisions

1,425

38,760

6,853

40,185

6,855

Mortgage-Backed Securities

6,594

959

60,458

10,467

67,052

11,426

Corporate Debt Securities

26,959

878

58,601

7,996

85,560

8,874

Total

99,073

4,411

290,012

37,535

389,085

41,946

Held to Maturity

U.S. Government Treasury

177,552

11,018

254,181

14,623

431,733

25,641

Mortgage-Backed Securities

88,723

6,814

91,462

15,596

180,185

22,410

Total

266,275

17,832

345,643

30,219

611,918

48,051

December 31, 2021

Available for

Sale

U.S. Government Treasury

172,206

2,606

172,206

2,606

U.S. Government Agency

127,484

1,786

17,986

355

145,470

2,141

States and Political Subdivisions

42,122

811

42,122

811

Mortgage-Backed Securities

81,832

598

81,832

598

Equity Securities

69,354

1,304

69,354

1,304

Total

492,998

7,105

17,986

355

510,984

7,460

Held to Maturity

U.S. Government Treasury

113,877

1,622

113,877

1,622

Mortgage-Backed Securities

115,015

1,099

115,015

1,099

Total

228,892

2,721

228,892

2,721

At December 31, 2022, there were

928

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

90.0

million.

At December 31, 2021 there were

401

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

10.2

million.

For 2022,

of these of these positions were U.S. Treasury

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

Government.

714

of these positions were U.S. government agency and mortgage-backed securities

issued by U.S. government

of Shares

$[NUMBER]

Cash

Total

Award

Value

Shares convertible

from Performance

Share Units

will be

issued in

the calendar

quarter following

the calendar

year in which

the

Performance

Share Units

were earned.

The value

of the

issued is

treated

as compensation

and creates

an additional

tax

liability

for

the

Participant

as of

the first

date

the Participant

has

the right

to receive

the Shares,

whether

or not

the Participant

exercises that right.

CASH AWARD

Cash may be earned for achieving

Compound Annual Growth Rate (“CAGR”) in

Diluted Earnings per Share (“DEPS”) in a range

from zero

to a

maximum of

$[NUMBER].

If the

CAGR is

greater than

[NUMBER]% and

less than

or equal

to [NUMBER]%,

then the cash value portion of the award will be awarded on a pro-rata basis.

Payment will be based on three-year compounding.

Due to the

complexities of the

tax laws and

circumstances which may

affect individual participants,

the Participant is

encouraged

to consult with the Participant’s tax

advisor concerning any possible tax consequences of this transaction.

exhibit21

Exhibit 21.

Capital City Bank Group, Inc. Subsidiaries, at December 31, 2022.

Direct

Subsidiaries:

Capital City Bank

Capital City Strategic Wealth,

LLC (Florida)

CCBG Capital Trust I (Delaware)

CCBG Capital Trust II (Delaware)

Indirect Subsidiaries:

Capital City Investments (DBA)

Capital City Trust Company (Florida)

Capital City Home Loans,

LLC (Georgia)

FNB Financial Services, LLC (Florida)

Southeastern Oaks, LLC (Florida)

Capital City Wealth

Advisors, Inc. (Florida)

Southern Live Oak Investments, Inc. (Delaware)

Red Hills REIT, Inc.

(Florida)

exhibit231

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to

the incorporation by reference in the Registration Statement on Form S-3D (Registration

No. 333-20683) and the

Registration Statements on Form S-8 (Registration Nos. 333-36693

and 333-256134) of Capital City Bank Group, Inc. (the

Company) of our report dated March 1, 2023, on our audits of the consolidated

financial statements of the Company as of December

31, 2022 and 2021, and for each of the years in the two-year period ended December

31, 2022, which report is included in this

Annual Report on Form 10-K.

We also consent to

the incorporation by reference of our report dated March 1, 2023, on our

audit of

the internal control over financial reporting of the Company as of December 31, 2022,

which report is included in this Annual Report

on Form 10-K.

FORVIS, LLP (Formerly,

BKD, LLP)

Little Rock, Arkansas

March 1, 2023

exhibit232

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to

the incorporation by reference in the following Registration Statements:

(1)

Registration Statement (Form S-3D No. 333-20683) of Capital City Bank Group,

Inc.,

(2)

Registration Statement (Form S-8 No. 333-36693) of Capital City Bank Group,

Inc., and

(3)

Registration Statement (Form S-8 No. 333-256134) of Capital City Bank Group,

Inc.

of our report dated March 1, 2021, with respect to the consolidated financial

statements of Capital City Bank Group, Inc. included

in this Annual Report (Form 10-K) of Capital City Bank Group, Inc.

for the year ended December 31, 2020.

/s/ Ernst & Young,

LLP

Tallahassee, Florida

March 1, 2023

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 annual report on Form 10-K of Capital City Bank Group,

Inc.;

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

of a material fact or omit to state a material

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

such statements were made, not misleading

with respect to the period covered by this report;

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

information included in this report, fairly

present in all material respects the financial condition, results of operations

and cash flows of the registrant as of, and for, the

periods presented in this report;

The registrant’s other

certifying officer and I are responsible for establishing and maintaining

disclosure controls and

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

and internal control over financial reporting (as defined

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

(a)

Designed such disclosure controls and procedures, or caused such disclosure

controls and procedures to be

designed under our supervision, to ensure that material information relating

to the registrant, including its consolidated

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

during the period in which this report is

being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal

control over financial

reporting to be designed under our supervision, to provide reasonable assurance

regarding the reliability of financial

reporting and the preparation of financial statements for external purposes in accordance

with generally accepted

accounting principles;

(c)

Evaluated the effectiveness of the registrant’s

disclosure controls and procedures and presented in this

report our conclusions about the effectiveness of the disclosure

controls and procedures, as of the end of the period

covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s

internal control over financial reporting that occurred

during the registrant’s most recent fiscal quarter

(the registrant’s fourth fiscal quarter in

the case of an annual report) 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: March 1, 2023

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, Jeptha E. Larkin, certify that:

I have reviewed this annual report on Form 10-K of Capital City Bank Group,

Inc.;

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

of a material fact or omit to state a material

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

such statements were made, not misleading

with respect to the period covered by this report;

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

information included in this report, fairly

present in all material respects the financial condition, results of operations and

cash flows of the registrant as of, and for, the

periods presented in this report;

The registrant’s other

certifying officer and I are responsible for establishing and maintaining

disclosure controls and

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

and internal control over financial reporting (as defined

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

(a)

Designed such disclosure controls and procedures, or caused such disclosure

controls and procedures to be

designed under our supervision, to ensure that material information relating

to the registrant, including its consolidated

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

during the period in which this report is

being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal

control over financial

reporting to be designed under our supervision, to provide reasonable assurance

regarding the reliability of financial

reporting and the preparation of financial statements for external purposes in accordance

with generally accepted

accounting principles;

(c)

Evaluated the effectiveness of the registrant’s

disclosure controls and procedures and presented in this

report our conclusions about the effectiveness of the disclosure

controls and procedures, as of the end of the period

covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s

internal control over financial reporting that occurred

during the registrant’s most recent fiscal quarter

(the registrant’s fourth fiscal quarter in

the case of an annual report) 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/ Jeptha E. Larkin

Jeptha E. Larkin

Executive Vice President

and

Chief Financial Officer

Date: March 1, 2023

exhibit321

Exhibit 32.1

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

as Adopted Pursuant to Section 906

of the Sarbanes-Oxley Act of 2002

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

the Sarbanes-Oxley Act of 2002, the

undersigned certifies that, to the undersigned’s

knowledge, (1) this Annual Report of Capital City Bank Group, Inc. (the

“Company”) on Form 10-K for the year ended December 31, 2022,

as filed with the Securities and Exchange Commission on the

date hereof (this “Report”), fully complies with the requirements of Section

13(a) of the Securities Exchange Act of 1934, as

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

all material respects, the financial condition of the

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

/s/ William G. Smith, Jr.

William G. Smith, Jr.

Chairman, President and

Chief Executive Officer

Date: March 1, 2023

exhibit322

Exhibit 32.2

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

as Adopted Pursuant to Section 906

of the Sarbanes-Oxley Act of 2002

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

the Sarbanes-Oxley Act of 2002, the

undersigned certifies that, to the undersigned’s

knowledge, (1) this Annual Report of Capital City Bank Group, Inc. (the

“Company”) on Form 10-K for the year ended December 31, 2022,

as filed with the Securities and Exchange Commission on the

date hereof (this “Report”), fully complies with the requirements of Section

13(a) of the Securities Exchange Act of 1934, as

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

all material respects, the financial condition of the

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

/s/ Jeptha E. Larkin

Jeptha E. Larkin

Executive Vice President

and

Chief Financial Officer

Date: March 1, 2023