10-Q - CCBG - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,

D.C.

20549

FORM

10-Q

☒

QUARTERLY REPORT

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

For the Quarterly Period Ended

September 30, 2025

☐

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

For the transition period from ____________ to ____________

Commission File Number:

0-13358

Capital City Bank Group, Inc.

(Exact name of Registrant as specified in its charter)

Florida

59-2273542

(State or other jurisdiction of incorporation or organization)

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

217 North Monroe Street

Tallahassee

Florida

32301

(Address of principal executive office)

(Zip Code)

(

850

)

402-7821

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, Par value $0.01

CCBG

Nasdaq Stock Market

, LLC

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

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

filing requirements for the past 90 days.

Yes

[X] No [

]

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

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

such files).

Yes [

] No [

]

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

an emerging growth company.

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

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

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

☐

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

]

[X]

At October 31, 2025,

17,068,825

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

CAPITAL CITY BANK

GROUP,

INC.

QUARTERLY

REPORT ON FORM 10-Q

FOR THE PERIOD ENDED SEPTEMBER 30, 2025

TABLE OF CONTENTS

PART I –

Financial Information

Page

Item 1.

Consolidated Financial Statements (Unaudited)

Consolidated Statements of Financial Condition – September 30, 2025 and December 31, 2024

Consolidated Statements of Income – Three and Nine Months Ended September 30, 2025 and 2024

Consolidated Statements of Comprehensive Income (Loss) – Three and Nine Months Ended September 30, 2025 and 2024

Consolidated Statements of Changes in Shareowners’ Equity – Three and Nine Months Ended September 30, 2025 and 2024

Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2025 and 2024

Notes to Consolidated Financial Statements

Item 2.

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

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

Item 4.

Controls and Procedures

PART II –

Other Information

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosure

Item 5.

Other Information

Item 6.

Exhibits

Signatures

INTRODUCTORY NOTE

Special Cautionary Notice Regarding Forward-Looking Statements

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

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

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

which are beyond our control.

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

“anticipate,” “contemplate,” “estimate,” “expect,”

“intend,” “plan,” “point to,” “project,” “target,” “vision,” “goal,” “continue,” “further,”

and similar expressions are intended to identify

forward-looking statements.

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

Our actual future results may differ materially from

those set forth in our forward-looking statements.

Our

ability

achieve

our

financial

objectives

could

adversely

affected

the

factors

discussed

detail

Part

II,

Item

1A.

“Risk

Factors” in this Quarterly Report on Form 10-Q and in Part I, Item 1A. “Risk Factors” in our Annual Report on

Form 10-K for the year ended

December 31,

2024

(the “2024

Form 10-K”),

as updated

in our

subsequent

quarterly reports

filed on

Form 10-Q,

as well

as,

among other

factors:

●

The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal

Reserve Board;

●

Inflation, interest rate, market and monetary fluctuations;

●

Local, regional, national, and international economic conditions and the impact they may have on us and our clients and our

assessment of that impact;

●

The costs and effects of legal and regulatory developments, the outcomes of legal proceedings or regulatory or other

governmental inquiries, the results of regulatory examinations or reviews and the ability to obtain required regulatory

approvals;

●

The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and

insurance) and their application with which we and our subsidiaries must comply;

●

The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as other

accounting standard setters;

●

The accuracy of our financial statement estimates and assumptions;

●

Changes in the financial performance and/or condition of our borrowers;

●

Changes in the mix of loan geographies, sectors and types or the level of non-performing assets and charge-offs;

●

Changes in estimates of future credit loss reserve requirements based upon the periodic review thereof under relevant

regulatory and accounting requirements;

●

Changes in our liquidity position;

●

The timely development and acceptance of new products and services and perceived overall value of these products and

services by users;

●

Changes in consumer spending, borrowing, and saving habits;

●

Greater than expected costs or difficulties related to the integration of new products and lines of business;

●

Technological changes;

●

The cost and effects of cyber incidents or other failures, interruptions, or security breaches of our systems or those of our

customers or third-party providers;

●

Fraud or misconduct by internal or external parties which we may not be able to prevent, detect or mitigate;

●

Acquisitions and integration of acquired businesses;

●

Dispositions (including the impact from the sale of our insurance subsidiary),

acquisitions and integration of acquired

businesses;

●

Impairment of our goodwill or other intangible assets;

●

Changes in the reliability of our vendors, internal control systems, or information systems;

●

Our ability to increase market share and control expenses;

●

Our ability to attract and retain qualified employees;

●

Changes in our organization, compensation, and benefit plans;

●

The soundness of other financial institutions;

●

Volatility

and disruption in national and international financial and commodity markets;

●

Changes in the competitive environment in our markets and among banking organizations and other financial service

providers;

●

Action or inaction by the federal government, including as a result of any prolonged government shutdown or government

intervention in the U.S. financial system;

●

A deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid

exceeding the debt ceiling, and uncertainties surrounding the federal budget and economic policy;

●

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

terrorism, civil unrest, climate change or other geopolitical events;

●

Our ability to declare and pay dividends;

●

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

●

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

●

Potential claims, damages, penalties, fines, costs and reputational damage resulting from pending or future litigation,

regulatory proceedings and enforcement actions;

●

Negative publicity and the impact on our reputation;

●

The limited trading activity and concentration of ownership of our common stock; and

●

Other factors and risks described under “Risk Factors” herein and in any of the Company’s subsequent

reports filed with the

SEC and available on its website at www.sec.gov.

However, other factors besides those listed in

Item 1A Risk Factors

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

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

Any forward-looking

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

We do not undertake to update any forward-looking

statement, except as required by applicable law.

PART

FINANCIAL INFORMATION

Item 1.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF FINANCIAL CONDITION

(Unaudited)

September 30,

December 31,

(Dollars in Thousands, Except Par Value)

2025

2024

ASSETS

Cash and Due From Banks

68,397

70,543

Federal Funds Sold and Interest Bearing Deposits

397,502

321,311

Total Cash and Cash Equivalents

465,899

391,854

Investment Securities, Available

for Sale, at fair value (amortized cost of $

592,323

and $

429,033

)

577,333

403,345

Investment Securities, Held to Maturity (fair value of $

394,125

and $

544,460

)

404,659

567,155

Equity Securities

2,145

2,399

Total Investment

Securities

984,137

972,899

Loans Held For Sale, at fair value

24,204

28,672

Loans Held for Investment

2,582,007

2,651,550

Allowance for Credit Losses

(30,202)

(29,251)

Loans Held for Investment, Net

2,551,805

2,622,299

Premises and Equipment, Net

79,748

81,952

Goodwill and Other Intangibles

89,095

92,773

Other Real Estate Owned

1,831

367

Other Assets

127,055

134,116

Total Assets

4,323,774

4,324,932

LIABILITIES

Deposits:

Noninterest Bearing Deposits

1,303,786

1,306,254

Interest Bearing Deposits

2,311,126

2,365,723

Total Deposits

3,614,912

3,671,977

Short-Term

Borrowings

40,244

28,304

Subordinated Notes Payable

42,582

52,887

Other Long-Term

Borrowings

680

794

Other Liabilities

84,721

75,653

Total Liabilities

3,783,139

3,829,615

SHAREOWNERS’ EQUITY

Preferred Stock, $

0.01

par value;

3,000,000

shares authorized;

shares issued and outstanding

Common Stock, $

0.01

par value;

90,000,000

shares authorized;

17,068,650

and

16,974,513

shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively

171

170

Additional Paid-In Capital

40,067

37,684

Retained Earnings

499,176

463,949

Accumulated Other Comprehensive Income (Loss), net of tax

1,221

(6,486)

Total Shareowners’

Equity

540,635

495,317

Total Liabilities and Shareowners’

Equity

4,323,774

4,324,932

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF INCOME

(Unaudited)

Three Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in Thousands, Except Per Share

Data)

2025

2024

2025

2024

INTEREST INCOME

Loans, including Fees

40,279

41,659

121,629

123,480

Investment Securities:

Taxable

7,175

4,149

19,644

12,385

Tax Exempt

Funds Sold and Interest Bearing Deposits

3,964

3,514

11,369

9,031

Total Interest Income

51,431

49,328

152,672

144,914

INTEREST EXPENSE

Deposits

7,265

8,223

22,053

24,396

Short-Term

Borrowings

216

273

832

798

Subordinated Notes Payable

383

610

1,473

1,868

Other Long-Term

Borrowings

Total Interest Expense

7,874

9,117

24,384

27,079

NET INTEREST INCOME

43,557

40,211

128,288

117,835

Provision for Credit Losses

1,881

1,206

3,269

3,330

Net Interest Income After Provision For Credit Losses

41,676

39,005

125,019

114,505

NONINTEREST INCOME

Deposit Fees

5,877

5,512

16,258

16,139

Bank Card Fees

3,733

3,624

11,021

11,010

Wealth Management

Fees

5,173

4,770

16,142

13,891

Mortgage Banking Revenues

4,794

3,966

12,804

11,225

Other

2,754

1,641

6,027

4,951

Total Noninterest

Income

22,331

19,513

62,252

57,216

NONINTEREST EXPENSE

Compensation

26,056

25,800

78,794

74,613

Occupancy, Net

7,037

7,098

20,901

21,089

Other

9,823

10,023

24,460

27,831

Total Noninterest

Expense

42,916

42,921

124,155

123,533

INCOME BEFORE INCOME TAXES

21,091

15,597

63,116

48,188

Income Tax Expense

5,141

2,980

15,264

9,705

NET INCOME

15,950

12,617

47,852

38,483

Loss Attributable to Noncontrolling Interests

501

1,342

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

15,950

13,118

47,852

39,825

BASIC NET INCOME PER SHARE

0.93

0.77

2.81

2.35

DILUTED NET INCOME PER SHARE

0.93

0.77

2.80

2.35

Average Common

Basic Shares Outstanding

17,068

16,943

17,050

16,942

Average Common

Diluted Shares Outstanding

17,114

16,979

17,083

16,966

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

(Dollars in Thousands)

2025

2024

2025

2024

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

15,950

13,118

47,852

39,825

Other comprehensive income, before

tax:

Investment Securities:

Change in net unrealized loss on securities available for sale

2,932

9,505

10,676

9,099

Amortization of unrealized losses on securities transferred from

available for sale to held to maturity

202

785

1,044

2,521

Derivative:

Change in net unrealized gain on effective cash flow

derivative

(253)

(1,261)

(1,442)

(873)

Other comprehensive income, before

tax

2,881

9,029

10,278

10,747

Deferred tax expense related to other comprehensive income

720

2,435

2,571

2,683

Other comprehensive income, net of tax

2,161

6,594

7,707

8,064

TOTAL COMPREHENSIVE

INCOME

18,111

19,712

55,559

47,889

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF CHANGES IN SHAREOWNERS’ EQUITY

(Unaudited)

Accumulated

Other

Additional

Comprehensiv

Common

Paid-In

Retained

(Loss) Income,

(Dollars In Thousands, Except Share Data)

Outstanding

Stock

Capital

Earnings

Net of Taxes

Total

Balance, July 1, 2025

17,066,395

171

39,527

487,665

(940)

526,423

Net Income Attributable to Common Shareowners

15,950

Other Comprehensive Income, net of tax

2,161

Cash Dividends ($

0.2600

per share)

(4,439)

Stock Based Compensation

448

Stock Compensation Plan Transactions, net

2,255

Balance, September 30, 2025

17,068,650

171

40,067

499,176

1,221

540,635

Balance, July 1, 2024

16,941,553

169

35,547

445,959

(20,676)

460,999

Net Income Attributable to Common Shareowners

13,118

Reclassification to Temporary Equity

(1)

(838)

Other Comprehensive Income, net of tax

6,594

Cash Dividends ($

0.2300

per share)

(3,897)

Stock Based Compensation

425

Stock Compensation Plan Transactions, net

2,817

Balance, September 30, 2024

16,944,370

169

36,070

454,342

(14,082)

476,499

Balance, January 1, 2025

16,974,513

170

37,684

463,949

(6,486)

495,317

Net Income Attributable to Common Shareowners

47,852

Other Comprehensive Income, net of tax

7,707

Cash Dividends ($

0.7400

per share)

(12,625)

Stock Based Compensation

1,373

Stock Compensation Plan Transactions, net

94,137

1,010

1,011

Balance, September 30, 2025

17,068,650

171

40,067

499,176

1,221

540,635

Balance, January 1, 2024

16,950,222

170

36,326

426,275

(22,146)

440,625

Net Income Attributable to Common Shareowners

39,825

Reclassification to Temporary Equity

(1)

(751)

Other Comprehensive Income, net of tax

8,064

Cash Dividends ($

0.6500

per share)

(11,007)

Repurchase of Common Stock

(82,540)

(2,330)

Stock Based Compensation

1,139

Stock Compensation Plan Transactions, net

76,688

(1)

935

934

Balance, September 30, 2024

16,944,370

169

36,070

454,342

(14,082)

476,499

(1)

Adjustments to redemption value for non-controlling

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

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF CASH FLOWS

(Unaudited)

Nine Months Ended September 30,

(Dollars in Thousands)

2025

2024

CASH FLOWS FROM OPERATING

ACTIVITIES

Net Income Attributable to Common Shareowners

47,852

39,825

Adjustments to Reconcile Net Income to

Cash Provided by Operating Activities:

Provision for Credit Losses

3,269

3,330

Depreciation

5,548

5,798

Amortization of Premiums, Discounts and Fees, net

3,403

3,130

Amortization of Intangible Asset

107

120

Gain on Sale of Subsidiary

(773)

Originations of Loans Held-for-Sale

(332,760)

(366,700)

Proceeds From Sales of Loans Held-for-Sale

350,882

369,063

Mortgage Banking Revenues

(12,804)

(11,225)

Net Additions for Capitalized Mortgage Servicing Rights

(138)

Stock Compensation

1,373

1,139

Net Tax Benefit from

Stock-Based Compensation

(154)

Deferred Income Taxes

2,429

1,400

Net Change in Operating Leases

208

Net (Gain) Loss on Sales and Write-Downs of Other Real Estate

Owned

(4,514)

Net Decrease in Other Assets

3,770

1,738

Net Increase in Other Liabilities

8,364

4,645

Net Cash Provided By Operating Activities

76,054

52,334

CASH FLOWS FROM INVESTING ACTIVITIES

Securities Held to Maturity:

Purchases

(66,697)

(20,287)

Proceeds from Payments, Maturities, and Calls

228,784

83,657

Securities Available for

Sale:

Purchases

(225,039)

(49,436)

Proceeds from Payments, Maturities, and Calls

60,899

55,229

Equity Securities:

Purchases

(60)

Net Decrease in Equity Securities

1,191

158

Purchases of Loans Held for Investment

(958)

(302)

Proceeds from Sales of Loans

39,802

31,462

Net Decrease in Loans Held for Investment

23,666

19,779

Net Cash Received for Divestitures

2,375

Proceeds From Sales of Other Real Estate Owned

7,340

Purchases of Premises and Equipment

(5,967)

(6,442)

Net Cash Provided by Investing Activities

65,336

113,851

CASH FLOWS FROM FINANCING ACTIVITIES

Net Decrease in Deposits

(57,065)

(122,745)

Net Increase in Short-Term

Borrowings

11,940

1,729

Redemption of Subordinated Notes

(10,305)

Net Increase in Other Long-Term

Borrowings

677

Dividends Paid

(12,625)

(11,007)

Payments to Repurchase Common Stock

(2,330)

Proceeds from Issuance of Common Stock Under Purchase Plans

710

634

Net Cash Used In Financing Activities

(67,345)

(133,042)

NET INCREASE IN CASH AND CASH EQUIVALENTS

74,045

33,143

Cash and Cash Equivalents at Beginning of Period

391,854

312,067

Cash and Cash Equivalents at End of Period

465,899

345,210

Supplemental Cash Flow Disclosures:

Interest Paid

24,148

26,143

Income Taxes Paid

8,700

5,741

Supplemental Noncash Items:

Loans and Premises Transferred to Other Real Estate Owned

4,290

683

Loans Transferred from Held for Investment

to Held for Sale, net

40,652

25,640

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTE 1 –

BUSINESS AND BASIS OF PRESENTATION

Nature of Operations

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

banking and banking-

related services to individual and corporate clients through its wholly owned

subsidiary, Capital City Bank (“CCB” or the

“Bank”),

with banking offices located in Florida, Georgia,

and Alabama.

The Company is subject to competition from other financial

institutions, is subject to regulation by certain government agencies and undergoes

periodic examinations by those regulatory

authorities.

Basis of Presentation

The consolidated financial statements in this Quarterly Report on Form

10-Q include the accounts of CCBG

and CCB.

All material inter-company transactions and accounts have

been eliminated.

Certain previously reported amounts have

been reclassified to conform to the current year’s presentation.

The accompanying unaudited consolidated financial statements have

been prepared in accordance with generally accepted accounting

principles for interim financial information and with the instructions to Form

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

Accordingly,

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

accounting principles for complete financial

statements.

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

recurring accruals) considered necessary for a fair

presentation have been included.

The Consolidated Statement of Financial Condition at December

31, 2024 has been derived from the audited consolidated financial

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

required by generally accepted accounting principles for

complete financial statements.

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

thereto included in the

Company’s 2024 Form

10-K.

Accounting Standards Updates

Proposed Accounting Standards

ASU No. 2023-06, “Disclosure Improvements:

Codification Amendments in Response to the SEC’s

Disclosure Update and Simplification Initiative.”

Accounting Standards Update

(“ASU”) 2023-06 is intended to clarify or improve

disclosure and presentation requirements of a variety of topics, which will allow users to

more easily compare entities subject to the

SEC’s existing disclosures with those

entities that were not previously subject to the requirements and align the requirements

in the

FASB accounting

standard codification with the SEC’s

regulations. ASU 2023-06 is to be applied prospectively,

and early adoption is

prohibited. For reporting entities subject to the SEC’s

existing disclosure requirements, the effective

dates of ASU 2023-06 will be the

date on which the SEC’s removal of

that related disclosure requirement from Regulation S-X or Regulation

S-K becomes effective. If

by June 30, 2027, the SEC has not removed the applicable requirement from

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

of the related amendment will not become effective for

any entities. The Company is currently evaluating the provisions of the

amendments and the impact on its future consolidated statements.

ASU No. 2023-09, “Income Taxes

(Topic

740): Improvements to Income Tax

Disclosures.”

ASU 2023-09 is intended to enhance

transparency and decision usefulness of income tax disclosures. The ASU addresses

investor requests for more transparency about

income tax information through improvements to income tax disclosures,

primarily related to the rate reconciliation and income taxes

paid information. Retrospective application in all prior periods is permitted.

ASU 2023-09 is effective for the Company as of January

1, 2025. The Company is currently evaluating the impact of the incremental

income taxes information that will be required to be

disclosed within its Annual Report on Form 10-K for the year ended December

31, 2025 and subsequent annual reports.

ASU No. 2023-03, “Income Statement — Reporting Comprehensive

Income — Expense Disaggregation

Disclosures (Subtopic 220-

40): Disaggregation of Income Statement

Expenses.”

ASU 2024-03 introduces new requirements to disclose additional information

about certain types of expenses, including employee compensation, depreciation,

intangible asset amortization, and selling expenses.

ASU 2024-03 is effective for the Company as of January 1, 2026. The

Company is currently evaluating the impact of the incremental

disclosures that will be required under the standard.

ASU 2025-06, “Intangibles - Goodwill and Other -Internal-Use Software (Subtopic

350-40): Targeted

Improvements to the

Accounting for Internal-Use Software.”

The ASU updates accounting for internal-use software by shifting from a stage-based

model

to a principles-based approach aligned with modern development. Key

provisions include new capitalization criteria based on

authorization, funding commitment, and probable completion, removal

of development stages, integrated website guidance, and

enhanced disclosures.

The Company is currently evaluating the provisions of the amendments and

the impact on its future

consolidated statements and disclosures.

NOTE 2 –

INVESTMENT SECURITIES

Investment Portfolio Composition

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

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

and the corresponding amounts of gross

unrealized gains and losses.

Available for

Sale

Amortized

Unrealized

Allowance for

Fair

(Dollars in Thousands)

Cost

Gains

Losses

Credit Losses

Value

September 30, 2025

U.S. Government Treasury

272,030

1,567

283

273,314

U.S. Government Agency

165,774

3,148

162,685

States and Political Subdivisions

37,525

2,319

35,248

Mortgage-Backed Securities

(1)

61,225

8,286

52,940

Corporate Debt Securities

47,672

2,580

(43)

45,049

Other Securities

(2)

8,097

Total

592,323

1,669

16,616

(43)

577,333

December 31, 2024

U.S. Government Treasury

106,710

934

105,801

U.S. Government Agency

148,666

5,578

143,127

States and Political Subdivisions

43,212

3,827

(3)

39,382

Mortgage-Backed Securities

(1)

66,379

10,902

55,477

Corporate Debt Securities

55,970

4,444

(64)

51,462

Other Securities

(2)

8,096

Total

429,033

25,685

(67)

403,345

Held to Maturity

Amortized

Unrealized

Fair

(Dollars in Thousands)

Cost

Gains

Losses

Value

September 30, 2025

U.S. Government Treasury

170,612

1,348

169,264

Mortgage-Backed Securities

(1)

234,047

625

9,811

224,861

Total

404,659

625

11,159

394,125

December 31, 2024

U.S. Government Treasury

368,005

6,476

361,529

Mortgage-Backed Securities

(1)

199,150

16,235

182,931

Total

567,155

22,711

544,460

(1)

Comprised of residential mortgage-backed

securities.

(2)

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

at cost of $

3.0

million and $

5.1

million,

respectively,

at September 30, 2025 and at December 31, 2024.

At September 30, 2025 and December 31, 2024, the investment portfolio

had $

2.1

million and $

2.4

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 $

442.6

million and $

489.5

million at September 30, 2025 and December 31, 2024, respectively,

were pledged to secure public deposits and for other purposes.

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

to own capital stock in the FHLB based

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

FHLB advances. The Bank’s investment

in FHLB

stock, which is included in other securities is pledged to secure FHLB advances.

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

quoted fair value; however, redemption

of this stock has historically been at par value.

As a member of the Federal Reserve Bank of

Atlanta, the Bank is required to maintain stock in the Federal Reserve Bank of Atlanta

based on a specified ratio relative to the Bank’s

capital.

Federal Reserve Bank stock is carried at cost.

Investment Sales.

There were

sales of investment securities for the three and nine months ended September 30, 2025 and

2024.

Maturity Distribution

At September 30, 2025, the Company’s

investment securities had the following maturity distribution based on

contractual maturity.

Expected maturities may differ from contractual maturities because borrowers

may have the right to call or

prepay obligations.

Mortgage-backed securities, certain amortizing U.S. government agency

securities and other securities are shown

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

Available for

Sale

Held to Maturity

(Dollars in Thousands)

Amortized Cost

Fair Value

Amortized Cost

Fair Value

Due in one year or less

89,433

88,479

170,612

169,264

Due after one year through five years

306,889

304,548

Due after five year through ten years

12,896

11,675

Mortgage-Backed Securities

61,225

52,940

234,047

224,861

U.S. Government Agency

113,783

111,594

Other Securities

8,097

Total

592,323

577,333

404,659

394,125

Unrealized Losses on Investment Securities.

The following table summarizes the available for sale and held to maturity

investment

securities with unrealized losses aggregated by major security type and length

of time in a continuous unrealized loss position:

Less Than

Greater Than

12 Months

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

(Dollars in Thousands)

Value

Losses

Value

Losses

Value

Losses

September 30, 2025

Available for

Sale

U.S. Government Treasury

14,604

11,832

240

26,436

283

U.S. Government Agency

68,734

456

82,855

2,692

151,589

3,148

States and Political Subdivisions

1,876

124

31,747

2,195

33,623

2,319

Mortgage-Backed Securities

52,861

8,286

52,897

8,286

Corporate Debt Securities

43,522

2,580

43,522

2,580

Total

85,250

623

222,817

15,993

308,067

16,616

Held to Maturity

U.S. Government Treasury

169,264

1,348

169,264

1,348

Mortgage-Backed Securities

17,694

113,104

9,718

130,798

9,811

Total

17,694

282,368

11,066

300,062

11,159

December 31, 2024

Available for

Sale

U.S. Government Treasury

81,363

318

14,510

616

95,873

934

U.S. Government Agency

33,155

184

100,844

5,394

133,999

5,578

States and Political Subdivisions

2,728

164

36,654

3,663

39,382

3,827

Mortgage-Backed Securities

55,409

10,902

55,463

10,902

Corporate Debt Securities

3,093

249

48,369

4,195

51,462

4,444

Total

120,393

915

255,786

24,770

376,179

25,685

Held to Maturity

U.S. Government Treasury

361,529

6,476

361,529

6,476

Mortgage-Backed Securities

58,230

1,000

119,353

15,235

177,583

16,235

Total

58,230

1,000

480,882

21,711

539,112

22,711

At September 30, 2025, there were

750

positions (combined AFS and HTM) with unrealized pre-tax losses totaling

27.8

million.

of these positions are U.S. Treasury bonds and carry

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

634

are U.S. government

agency securities issued by U.S. government sponsored entities.

We believe the

long history of no credit losses on government

securities indicates that the expectation of nonpayment of the amortized

cost basis is effectively zero.

At September 30, 2025, all

collateralized mortgage obligation securities, mortgage

-backed securities, Small Business Administration securities, U.S. Agency,

and

U.S. Treasury bonds held were AAA rated.

The remaining

positions (municipal securities and corporate bonds) have a credit

component.

At September 30, 2025, corporate debt securities had an allowance for credit losses of $

43,000

and municipal securities

had an allowance of less than $

1,000

ne of the securities held by the Company were past due or in nonaccrual status at September

30, 2025.

Credit Quality Indicators

The Company monitors the credit quality of its investment securities through

various risk management procedures, including the

monitoring of credit ratings.

A majority of the debt securities in the Company’s

investment portfolio were issued by a U.S.

government entity or agency and are either explicitly or implicitly guaranteed

by the U.S. government.

The Company believes the

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

of nonpayment of the amortized cost basis is

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

to technically default.

Further, certain municipal securities held by the Company

have been pre-refunded and secured by government guaranteed

treasuries.

Therefore, for the aforementioned securities, the Company

does

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

The Company monitors the credit quality of its

municipal and corporate securities portfolio via credit ratings

which are updated on a quarterly basis.

On a quarterly basis, municipal

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

if the loss is attributable to credit related factors and

if an allowance for credit loss is needed.

NOTE 3 – LOANS HELD FOR INVESTMENT AND ALLOWANCE

FOR CREDIT LOSSES

Loan Portfolio Composition

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

(Dollars in Thousands)

September 30, 2025

December 31, 2024

Commercial, Financial and Agricultural

179,018

189,208

Real Estate – Construction

156,756

219,994

Real Estate – Commercial Mortgage

785,290

779,095

Real Estate – Residential

(1)

1,039,607

1,042,504

Real Estate – Home Equity

234,111

220,064

Consumer

(2)

187,225

200,685

Loans Held For Investment, Net of Unearned Income

2,582,007

2,651,550

(1)

Includes loans in process balances of $

2.6

million and $

13.6

million at September 30, 2025 and December 31, 2024, respectively.

(2)

Includes overdraft balances of $

1.4

million and $

1.2

million at September 30, 2025 and December 31, 2024, respectively.

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

included in loans were $

8.5

million at September 30, 2025 and

8.3

million at December 31, 2024.

Accrued interest receivable on loans which is excluded from amortized

cost totaled $

9.8

million at September 30, 2025 and $

10.3

million at December 31, 2024, and is reported separately in Other Assets.

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

loans, commercial real estate mortgage loans,

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

Atlanta and has pledged a blanket floating lien on all

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

borrowing capacity at the Federal Reserve Bank of

Atlanta.

Allowance for Credit Losses

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

allowance for credit losses

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

involving loans that do not share risk characteristics and the

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

a pooled component for expected credit losses for pools

of loans that share similar risk characteristics.

This allowance methodology is discussed further in Note 1 – Significant

Accounting

Policies in the Company’s 2024 Form

10-K.

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

portfolio segment.

Allocation of a portion of the

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

absorb losses in other categories.

Commercial,

Real Estate

Financial,

Real Estate

Commercial

Real Estate

(Dollars in Thousands)

Agricultural

Construction

Mortgage

Residential

Home Equity

Consumer

Total

Three Months Ended

September 30, 2025

Beginning Balance

1,425

1,811

6,256

15,264

2,014

3,092

29,862

Provision for Credit Losses

370

(352)

268

164

200

900

1,550

Charge-Offs

(373)

(12)

(10)

(1,573)

(1,968)

Recoveries

632

758

Net (Charge-Offs) Recoveries

(278)

(941)

(1,210)

Ending Balance

1,517

1,459

6,532

15,429

2,214

3,051

30,202

Nine Months Ended

September 30, 2025

Beginning Balance

1,514

2,384

5,867

14,568

1,952

2,966

29,251

Provision for Credit Losses

331

(925)

648

733

235

2,329

3,351

Charge-Offs

(615)

(69)

(34)

(4,359)

(5,077)

Recoveries

287

197

2,115

2,677

Net (Charge-Offs) Recoveries

(328)

128

(2,244)

(2,400)

Ending Balance

1,517

1,459

6,532

15,429

2,214

3,051

30,202

Three Months Ended

September 30, 2024

Beginning Balance

1,575

1,751

6,076

14,788

1,865

3,164

29,219

Provision for Credit Losses

134

442

547

(240)

(49)

1,045

1,879

Charge-Offs

(331)

(3)

(23)

(1,926)

(2,283)

Recoveries

176

693

1,021

Net (Charge-Offs) Recoveries

(155)

(1,233)

(1,262)

Ending Balance

1,554

2,193

6,625

14,636

1,852

2,976

29,836

Nine Months Ended

September 30, 2024

Beginning Balance

1,482

2,502

5,782

15,056

1,818

3,301

29,941

Provision for Credit Losses

809

(309)

618

(551)

3,310

3,890

Charge-Offs

(1,013)

(3)

(17)

(99)

(5,746)

(6,878)

Recoveries

276

228

148

120

2,111

2,883

Net (Charge-Offs) Recoveries

(737)

225

131

(3,635)

(3,995)

Ending Balance

1,554

2,193

6,625

14,636

1,852

2,976

29,836

For the nine months ended September 30, 2025, the allowance for

loans HFI increased by $

0.9

million and reflected a provision

expense of $

3.4

million and net loan charge-offs of $

2.4

million.

The increase in the allowance over December 31, 2024 was

primarily attributable to qualitative factor adjustments that were partially

offset by lower loan balances.

For the nine months ended

September 30, 2024, the allowance for loans HFI decreased by $

0.1

million and reflected a provision expense of $

3.9

million and net

loan charge-offs of $

4.0

million.

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

by higher loss rates

and loan grade migration.

Four unemployment forecast scenarios were utilized to estimate probability of default

and are weighted

based on management’s estimate

of probability.

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

off-balance sheet credit commitments.

Loan Portfolio Aging.

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

is over 30 days

past due (“DPD”).

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

past due loans by class of loans.

30-59

60-89

90 +

Total

Nonaccrual

Total

(Dollars in Thousands)

DPD

Past Due

Current

Loans

September 30, 2025

Commercial, Financial and Agricultural

274

298

177,354

1,366

179,018

Real Estate – Construction

156,756

Real Estate – Commercial Mortgage

832

400

1,232

782,051

2,007

785,290

Real Estate – Residential

406

1,154

1,560

1,035,791

2,256

1,039,607

Real Estate – Home Equity

406

424

231,849

1,838

234,111

Consumer

1,669

285

1,954

184,543

728

187,225

Total

3,587

1,881

5,468

2,568,344

8,195

2,582,007

December 31, 2024

Commercial, Financial and Agricultural

340

390

188,781

189,208

Real Estate – Construction

219,994

Real Estate – Commercial Mortgage

719

100

819

777,710

566

779,095

Real Estate – Residential

185

498

683

1,038,694

3,127

1,042,504

Real Estate – Home Equity

122

218,160

1,782

220,064

Consumer

2,154

143

2,297

197,598

790

200,685

Total

3,520

791

4,311

2,640,937

6,302

2,651,550

Nonaccrual Loans

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

become 90 days past due and/or

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

be doubtful.

Loans are returned to accrual status when the

principal and interest amounts contractually due are brought current

or when future payments are reasonably assured.

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

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

by class of loans.

September 30, 2025

December 31, 2024

Nonaccrual

With No

With

90 + Days

With No

With

90 + Days

(Dollars in Thousands)

ACL

Still Accruing

ACL

Still Accruing

Commercial, Financial and Agricultural

1,210

156

Real Estate – Construction

Real Estate – Commercial Mortgage

1,780

227

427

139

Real Estate – Residential

1,452

804

2,046

1,081

Real Estate – Home Equity

1,614

224

509

1,273

Consumer

728

790

Total Nonaccrual

Loans

6,056

2,139

2,982

3,320

Collateral Dependent Loans.

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

loans.

September 30, 2025

December 31, 2024

Real Estate

Non Real Estate

Real Estate

Non Real Estate

(Dollars in Thousands)

Secured

Commercial, Financial and Agricultural

1,210

Real Estate – Construction

Real Estate – Commercial Mortgage

1,780

427

Real Estate – Residential

2,180

2,476

Real Estate – Home Equity

1,614

651

Consumer

Total Collateral Dependent

Loans

5,574

1,210

3,554

A loan is collateral dependent when the borrower is experiencing

financial difficulty and repayment of the loan is dependent on

the

sale or operation of the underlying collateral.

The Bank’s collateral dependent

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

by either residential

or commercial collateral types.

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

either independent appraisals

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

when estimating expected net sales proceeds.

Residential Real Estate Loans In Process of Foreclosure

At September 30, 2025, the Company had $

0.9

million of 1-4 family

residential real estate loans for which formal foreclosure proceedings were

in process, compared to $

0.5

million at December 31,

2024.

Modifications to Borrowers Experiencing

Financial Difficulty.

Occasionally, the Company may

modify loans to borrowers who are

experiencing financial difficulty.

Loan modifications to borrowers in financial difficulty are loans in

which the Company has granted

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

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

Company will make concessions including the extension of the loan

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

combination thereof.

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

losses on a loan-by-loan

basis.

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

discounted cash flow analysis or the underlying

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

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

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

the loan has not had any forgiveness of

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

at market terms and qualifies as a new loan.

At September 30, 2025, the Company maintained

two

modified commercial mortgage loans to borrowers experiencing financial

difficulty.

One

loan for $

2.5

million was provided a 6-month interest only extension in exchange for

additional collateral and was

current with

payment delay.

A second loan

for $

0.3

million was provided a below market interest rate and extended repayment

terms and was

30 days past due

at September 30, 2025.

other new modifications to borrowers experiencing financial difficulty

were made during the nine months ended September 30, 2025 and 2024.

Credit Risk Management

The Company has adopted comprehensive lending policies, underwriting standards and

loan review

procedures designed to maximize loan income within an acceptable

level of risk.

Management and the Board of Directors review and

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

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

concentrations of credit, loan delinquencies and nonperforming

loans and potential problem loans.

Management and the Credit Risk Oversight Committee periodically

review the Company’s lines

of business to monitor asset quality trends and the appropriateness of credit policies.

In addition, total borrower exposure limits are

established and concentration risk is monitored.

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

diversification of risk, client concentrations, industry group, loan

type, geographic area, or other relevant classifications of loans.

Specific segments of the loan portfolio are monitored and reported

to the Board on a quarterly basis and have strategic plans in place

to supplement Board approved credit policies governing exposure

limits and underwriting standards.

Detailed below are the types of

loans within the Company’s

loan portfolio and risk characteristics unique to each.

Commercial, Financial, and Agricultural – Loans in this category

are primarily made based on identified cash flows of the borrower

with consideration given to underlying collateral and personal or

other guarantees.

Lending policy establishes debt service coverage

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

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

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

business assets such as accounts receivable, inventory,

equipment.

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

Loan to value ratios at origination are

governed by established policy guidelines.

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

construction loans, revolving and non-revolving credit lines

and construction/permanent loans made to individuals and investors

to finance the acquisition, development, construction or

rehabilitation of real property.

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

or project and generally

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

properties and commercial properties that are either owner-

occupied or investment in nature.

These properties may include either vacant or improved property.

Construction loans are generally

based upon estimates of costs and value associated with the completed

project.

Collateral values are determined based upon third

party appraisals and evaluations.

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

The disbursement

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

and as such these loans are closely monitored by on-

site inspections.

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

mortgage loans secured by property that is either

owner-occupied or investment in nature.

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

project

with consideration given to underlying real estate collateral and

personal guarantees.

Lending policy establishes debt service

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

Collateral values are determined based upon third party

appraisals and evaluations.

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

loan portfolio are made to borrowers that demonstrate the

ability to make scheduled payments with full consideration to underwriting

factors such as current income, employment status, current

assets, and other financial resources, credit history,

and the value of the collateral.

Collateral consists of mortgage liens on 1-4 family

residential properties.

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

The Company does not

originate sub-prime loans.

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

individuals for legitimate purposes generally secured

by senior or junior mortgage liens on owner-occupied

1-4 family homes or vacation homes.

Borrower qualifications include

favorable credit history combined with supportive income and

debt ratio requirements and combined loan to value ratios within

established policy guidelines.

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

Consumer Loans – This loan portfolio includes personal installment loans,

direct and indirect automobile financing, and overdraft

lines of credit.

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

loans.

Lending policy

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

includes guidelines for verification of applicants’ income and

receipt of credit reports.

Credit Quality Indicators

As part of the ongoing monitoring of the Company’s

loan portfolio quality, management

categorizes loans

into risk categories based on relevant information about the ability of

borrowers to service their debt such as: current financial

information, historical payment performance, credit documentation,

and current economic and market trends, among other

factors.

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

procedures for individual loan

relationships over a predetermined amount and review of smaller balance homogenous

loan pools.

The Company uses the definitions

noted below for categorizing and managing its criticized loans.

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

and are not considered criticized.

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

but weaknesses are apparent which, if not corrected, could

cause future problems.

Loans in this category may not meet required underwriting criteria and

have no mitigating factors.

More than

the ordinary amount of attention is warranted for these loans.

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

typically bring normal repayment into jeopardy.

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

weaknesses that affect the repayment capacity of the

borrower.

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

for these loans.

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

as Substandard, with the characteristic that

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

currently existing facts, conditions, and values, highly

questionable and improbable.

Performing/Nonperforming – Loans within certain homogenous

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

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

activity.

The performing or nonperforming status

is updated on an on-going basis dependent upon improvement

and deterioration in credit quality.

The following tables summarize gross loans held for investment at September

30, 2025 and December 31, 2024 and current period

gross write-offs for the nine months ended September 30, 2025

and 12 months ended December 31, 2024 by years of origination and

internally assigned credit risk ratings (refer to Credit Risk Management section

for detail on risk rating system).

(Dollars in Thousands)

Term

Loans by Origination Year

Revolving

As of September 30, 2025

2025

2024

2023

2022

2021

Prior

Loans

Total

Commercial, Financial,

Agriculture:

Pass

28,710

27,329

25,719

26,672

13,671

9,439

41,051

172,591

Special Mention

2,851

250

1,722

4,913

Substandard

130

1,241

1,514

Total

28,710

27,329

28,700

26,835

13,699

9,731

44,014

179,018

Current-Period Gross

Writeoffs

148

327

615

Real Estate - Construction:

Pass

50,730

63,161

10,010

14,284

190

15,022

153,450

Special Mention

2,588

Substandard

718

Total

50,730

63,161

10,728

16,872

190

15,022

156,756

Real Estate - Commercial

Mortgage:

Pass

74,048

82,444

108,719

180,457

95,397

162,220

25,699

728,984

Special Mention

3,885

5,550

23,406

3,948

6,663

1,143

44,595

Substandard

384

1,402

3,808

860

5,158

11,711

Total

78,317

83,846

114,368

207,671

100,205

174,041

26,842

785,290

Real Estate - Residential:

Pass

115,780

133,764

286,851

326,723

62,441

92,274

9,682

1,027,515

Special Mention

975

277

401

1,653

Substandard

3,866

1,309

1,314

3,782

168

10,439

Total

115,780

137,630

286,851

328,032

64,730

96,333

10,251

1,039,607

Current-Period Gross

Writeoffs

Real Estate - Home Equity:

Performing

1,600

439

109

638

229,459

232,273

Nonperforming

1,764

1,838

Total

1,674

439

109

638

231,223

234,111

Current-Period Gross

Writeoffs

Consumer:

Performing

51,487

24,496

31,429

36,559

26,315

6,955

9,256

186,497

Nonperforming

195

115

280

728

Total

51,682

24,611

31,498

36,839

26,376

6,963

9,256

187,225

Current-Period Gross

Writeoffs

1,872

202

792

933

352

109

4,359

(Dollars in Thousands)

Term

Loans by Origination Year

Revolving

As of December 31, 2024

2024

2023

2022

2021

2020

Prior

Loans

Total

Commercial, Financial,

Agriculture:

Pass

35,596

36,435

37,506

18,433

4,610

9,743

41,720

184,043

Special Mention

435

3,979

261

4,760

Substandard

193

405

Total

36,031

40,414

37,960

18,454

4,668

9,814

41,867

189,208

Current-Period Gross

Writeoffs

548

500

111

160

183

1,512

Real Estate - Construction:

Pass

105,148

73,615

29,821

185

8,288

217,110

Special Mention

1,555

1,329

2,884

Total

106,703

73,615

31,150

185

8,288

219,994

Current-Period Gross

Writeoffs

Real Estate - Commercial

Mortgage:

Pass

77,561

110,183

207,574

109,863

87,369

122,272

26,324

741,146

Special Mention

171

2,913

17,031

2,253

4,402

530

27,300

Substandard

2,463

3,403

869

2,508

1,305

101

10,649

Total

77,732

115,559

228,008

110,732

92,130

127,979

26,955

779,095

Current-Period Gross

Writeoffs

Real Estate - Residential:

Pass

165,050

316,521

358,851

71,423

31,169

76,921

11,872

1,031,807

Special Mention

265

1,104

468

534

521

2,892

Substandard

528

1,450

1,446

1,295

2,918

168

7,805

Total

165,050

317,314

360,301

73,973

32,932

80,373

12,561

1,042,504

Current-Period Gross

Writeoffs

Real Estate - Home Equity:

Performing

801

521

119

821

215,981

218,282

Nonperforming

1,782

Total

801

521

119

821

217,763

220,064

Current-Period Gross

Writeoffs

132

Consumer:

Performing

32,293

44,995

55,942

42,002

10,899

4,116

9,648

199,895

Nonperforming

174

321

156

790

Total

32,303

45,169

56,263

42,158

10,957

4,187

9,648

200,685

Current-Period Gross

Writeoffs

2,562

1,605

2,088

897

237

162

7,627

NOTE 4 – MORTGAGE BANKING ACTIVITIES

The Company’s mortgage

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

to manage residential

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

market residential loan closings, and residential mortgage

servicing.

Residential Mortgage Loan Production

The Company originates, markets, and services conventional and

government-sponsored residential mortgage loans.

Generally,

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

secondary market and non-conforming and adjustable-rate

residential mortgage loans may be held for investment.

The volume of residential mortgage loans originated for sale and secondary

market prices are the primary drivers of origination revenue.

Residential mortgage loan commitments are generally outstanding for 30

to 90 days, which represents the typical period from

commitment to originate a residential mortgage loan to when the

closed loan is sold to an investor.

Residential mortgage loan

commitments are subject to both credit and price risk.

Credit risk is managed through underwriting policies and procedures, including

collateral requirements, which are generally accepted by the secondary

loan markets.

Price risk is primarily related to interest rate

fluctuations and is partially managed through forward sales of residential

mortgage-backed securities (primarily to-be announced

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

The unpaid principal balance of residential mortgage loans held

for sale, notional amounts of derivative contracts related to residential

mortgage loan commitments,

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

and forward contract sales and their related fair

values are set forth below.

September 30, 2025

December 31, 2024

Unpaid Principal

(Dollars in Thousands)

Balance/Notional

Fair Value

Balance/Notional

Fair Value

Residential Mortgage Loans Held for Sale

23,481

24,204

28,117

28,672

Residential Mortgage Loan Commitments ("IRLCs")

(1)

29,911

607

15,000

248

Forward Sales Contracts

(1)

27,000

16,000

(1)

Recorded in other assets at fair value.

At September 30, 2025, the Company had

residential mortgage loans held for sale 30-89 days past due or on nonaccrual

status. At

December 31, 2024, the Company had

residential mortgage loans held for sale 30-89 days past due or on nonaccrual

status.

Mortgage banking revenue was as follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in Thousands)

2025

2024

2025

2024

Net realized gains on sales of mortgage loans

3,871

3,664

10,356

8,499

Net change in unrealized gain on mortgage loans held for sale

130

143

302

312

Net change in the fair value of IRLC's

(45)

(135)

359

Net change in the fair value of forward sales contracts

199

(52)

(85)

212

Pair-Offs on net settlement of forward

sales contracts

(234)

(383)

(404)

(173)

Mortgage servicing rights additions

292

Net origination fees

833

679

2,192

2,051

Total mortgage banking

revenues

4,794

3,966

12,804

11,225

Residential Mortgage Servicing

The Company may retain the right to service residential mortgage

loans sold.

The unpaid principal balance of loans serviced for

others is the primary driver of servicing revenue.

The following represents a summary of mortgage servicing rights.

(Dollars in Thousands)

September 30, 2025

December 31, 2024

Number of residential mortgage loans serviced for others

464

504

Outstanding principal balance of residential mortgage loans serviced

for others

121,767

135,416

Weighted average

interest rate

5.74%

5.86%

Remaining contractual term (in months)

353

348

Conforming conventional loans serviced by the Company are sold to Federal

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

recourse basis, whereby foreclosure losses are generally the responsibility

of FNMA and not the Company.

The government loans

serviced by the Company are secured through the Government National

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

insured against loss by the Federal Housing Administration or partially

guaranteed against loss by the Veterans

Administration.

September 30, 2025, the servicing portfolio balance consisted of

the following loan types: FNMA (

61.4

%), GNMA (

4.3

%), and

private investor (

34.3

%).

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

At September 30, 2025 and December 31, 2024, the Company did

t have delinquent residential mortgage loans in GNMA pools

serviced by the Company.

The right to repurchase these loans and the corresponding liability has been recorded in other assets and

other liabilities, respectively,

in the Consolidated Statements of Financial Condition.

The Company had

repurchases for the three

months ended September 30, 2025 and 2024, and $

0.3

million and

repurchases in the nine months ended September 30, 2025 and

2024, respectively, of

GNMA delinquent or defaulted mortgage loans with the intention to modify

their terms and include the loans in

new GNMA pools.

Activity in the capitalized mortgage servicing rights was as follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in Thousands)

2025

2024

2025

2024

Beginning balance

889

965

933

831

Additions due to loans sold with servicing retained

292

Deletions and amortization

(44)

(46)

(132)

(154)

Ending balance

885

969

885

969

The Company did

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

three or nine months ended

September 30, 2025 or 2024.

The key unobservable inputs used in determining the fair value of

the Company’s mortgage servicing rights were

as follows:

September 30, 2025

December 31, 2024

Minimum

Maximum

Minimum

Maximum

Discount rates

9.50%

12.00%

9.50%

12.00%

Annual prepayment speeds

9.83%

18.89%

9.14%

18.88%

Cost of servicing (per loan)

Changes in residential mortgage interest rates directly affect

the prepayment speeds used in valuing the Company’s

mortgage

servicing rights.

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

turnover rates,

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

The weighted average annual prepayment speed was

13.09

% at September 30, 2025 and

13.44

% at December 31, 2024.

Warehouse

Line Borrowings

The Company has the following warehouse lines of credit and master

repurchase agreements with various financial institutions at

September 30, 2025.

Amounts

(Dollars in Thousands)

Outstanding

million master repurchase agreement without defined expiration.

Interest is at the SOFR rate plus

2.25%

3.25%

, with a floor rate of

3.25%

4.25%

A cash pledge deposit of $

0.1

million is required by the lender.

326

million warehouse line of credit agreement expiring in

June 2026

Interest is at the SOFR plus

2.50%

3.00%

14,289

Total Warehouse

Borrowings

14,615

Warehouse

line borrowings are classified as short-term borrowings.

At December 31, 2024, warehouse line borrowings totaled $

1.9

million. At September 30, 2025, the Company had residential mortgage

loans held for sale pledged as collateral under the above

warehouse lines of credit and master repurchase agreements.

The above agreements also contain covenants which include certain

financial requirements, including maintenance of minimum tangible

net worth, minimum liquid assets, and maximum debt to net

worth ratio, as defined in the agreements. The Company was in compliance with all

significant debt covenants at September 30, 2025.

NOTE 5 – DERIVATIVES

The Company enters into derivative financial instruments to manage exposures

that arise from business activities that result in the

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

which are determined by interest rates.

The Company’s

derivative financial instruments are used to manage differences in

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

known or

expected cash receipts and its known or expected cash payments principally

related to the Company’s subordinated

debt.

Cash Flow Hedges of Interest Rate Risk

Interest rate swaps with notional amounts totaling $

million at September 30, 2025 were designed as a cash flow hedge for

subordinated debt.

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

2.50

% and receive a variable interest

rate based on three-month CME Term

SOFR (secured overnight financing rate).

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

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

accumulated other comprehensive income (“AOCI”) and subsequently

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

which the hedged transaction affects earnings. Amounts reported

in accumulated other comprehensive income related to derivatives

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

Company’s variable-rate subordinated

debt.

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

statements of financial condition

Statement of Financial

Notional

Fair

Weighted Average

(Dollars in Thousands)

Condition Location

Amount

Value

Maturity (Years)

September 30, 2025

Interest rate swaps related to subordinated debt

Other Assets

30,000

3,877

4.8

December 31, 2024

Interest rate swaps related to subordinated debt

Other Assets

30,000

5,319

5.5

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

the consolidated statements of income related to

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

debt).

Change in Gain

Amount of Gain

(Loss) Recognized

(Loss) Reclassified

(Dollars in Thousands)

Category

in AOCI

from AOCI to Income

Three months ended September 30, 2025

Interest expense

(189)

303

Three months ended September 30, 2024

Interest expense

(941)

377

Nine months ended September 30, 2025

Interest expense

(1,076)

899

Nine months ended September 30, 2024

Interest expense

(652)

1,128

The Company had a collateral liability of $

4.0

million and $

5.5

million at September 30, 2025 and December 31, 2024, respectively.

On October 4, 2025, the Company terminated the interest rate swap related to subordinated

debt and will amortize an unrecognized

gain of $

3.8

million over the remaining life of the swap agreement.

NOTE 6 – LEASES

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

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

liabilities, included in other assets and liabilities, respectively,

on its Consolidated Statements of Financial Condition.

The Company’s operating

leases primarily relate to banking offices with remaining lease terms

from

less than one

years.

The

Company’s leases are not complex

and do not contain residual value guarantees, variable lease payments, or

significant assumptions

or judgments made in applying the requirements of Topic

842.

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

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

over the lease term.

At September 30, 2025, the operating lease ROU assets and liabilities were $

26.9

million and $

27.5

million,

respectively. At December

31, 2024, ROU assets and liabilities were $

24.9

million and $

25.5

million, respectively.

The Company

recognized $

0.1

million of rental income during the nine months ended September 30, 2025 for

a lease that terminated in February

2025.

The Company does not have any finance leases.

The table below summarizes our lease expense and other information related

to the Company’s operating leases.

Three Months Ended

Nine Months Ended

September 30,

(Dollars in Thousands)

2025

2024

2025

2024

Operating lease expense

928

841

2,689

2,509

Short-term lease expense

171

229

722

618

Total lease expense

1,099

1,070

3,411

3,127

Other information:

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

Operating cash flows from operating leases

882

1,095

2,676

2,315

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

4,041

Weighted average

remaining lease term — operating leases (in years)

15.7

16.7

15.7

16.7

Weighted average

discount rate — operating leases

3.7%

3.5%

3.7%

3.5%

The table below summarizes the maturity of remaining lease liabilities:

(Dollars in Thousands)

September 30, 2025

2025

896

2026

3,591

2027

3,387

2028

3,102

2029

2,880

2030 and thereafter

21,293

Total

35,149

Less: Interest

(7,601)

Present Value

of Lease liability

27,548

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

The payments under the lease agreement provide for annual lease

payments of approximately $

0.1

million annually through December 2033, and thereafter,

increase by

% every

years until 2053 at

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

value.

The Company then has

four

successive options

to extend the lease for

five years

each with rental increases of 5% at each extension.

The aggregate remaining obligation of the lease

totaled $

2.1

million at September 30, 2025.

Further, in accordance with this lease agreement,

the Company made a $

0.2

million

payment in July 2025 to the lessor as reimbursement for a portion of the costs related

to the development of subject property to

support the construction of a new banking office by the Company.

NOTE 7 - EMPLOYEE BENEFIT PLANS

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

and eligible part-time associates and a

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

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

executive officers.

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

for new associates hired after

December 31, 2019.

The SERP II was adopted by the Company’s

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

were not covered by the SERP.

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

qualified benefit pension plan were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in Thousands)

2025

2024

2025

2024

Service Cost

861

929

2,581

2,786

Interest Cost

1,676

1,524

5,029

4,572

Expected Return on Plan Assets

(2,265)

(2,029)

(6,794)

(6,087)

Net Loss Amortization

(413)

(1,240)

123

Net Periodic Benefit Cost

(141)

465

(424)

1,394

Discount Rate

5.82%

5.29%

5.82%

5.29%

Long-term Rate of Return on Assets

6.75%

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

SERP and SERP II were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in Thousands)

2025

2024

2025

2024

Service Cost

Interest Cost

131

114

395

341

Prior Service Cost Amortization

Net Loss Amortization

(30)

(71)

(88)

(210)

Net Periodic Benefit Cost

137

417

158

Discount Rate

5.57%

5.11%

5.57%

5.11%

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

compensation expense in the accompanying statements of

income.

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

expense category in the

Consolidated Statements of Income.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Lending Commitments

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

sheet risks in the normal course of business

to meet the financing needs of its clients.

These financial instruments consist of commitments to extend credit and standby

letters of

credit.

The Company’s maximum exposure

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

the contractual amount of those instruments.

The Company uses the same credit policies in establishing commitments

and issuing

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

The amounts associated with the Company’s

off-balance sheet

obligations were as follows:

September 30, 2025

December 31, 2024

(Dollars in Thousands)

Fixed

Variable

Total

Fixed

Variable

Total

Commitments to Extend Credit

(1)

187,658

517,663

705,321

184,223

479,191

663,414

Standby Letters of Credit

7,114

7,287

Total

194,772

517,663

712,435

191,510

479,191

670,701

(1)

Commitments include unfunded loans, revolving

lines of credit, and off-balance sheet residential

loan commitments.

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

of any condition established in the

contract.

Commitments generally have fixed expiration dates or other termination

clauses and may require payment of a fee.

Since

many of the commitments are expected to expire without being drawn

upon, the total commitment amounts do not necessarily

represent future cash requirements.

Standby letters of credit are conditional commitments issued by

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

party.

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

in extending loan facilities. In

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

of participating in these types of transactions.

However, any

potential losses arising from such transactions are reserved for in the

same manner as management reserves for its other credit

facilities.

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

requires collateral to support such instruments when it is

deemed necessary.

The Company evaluates each client’s

creditworthiness on a case-by-case basis.

The amount of collateral

obtained upon extension of credit is based on management’s

credit evaluation of the counterparty.

Collateral held varies, but may

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

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

property, plant and

equipment; and inventory.

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

that are not unconditionally cancellable by the bank is

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

The following table shows the activity in the

allowance.

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in Thousands)

2025

2024

2025

2024

Beginning Balance

1,738

3,139

2,155

3,191

Provision for Credit Losses

357

(617)

(60)

(669)

Ending Balance

2,095

2,522

2,095

2,522

Other Commitments.

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

which are classified as operating

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

Company’s operating lease commitments.

The Company has an outstanding commitment of up to $

1.0

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

funding technology solutions for community banks.

At September 30, 2025, the amount remaining to be funded for the bank tech

venture capital commitment was $

0.3

million.

Contingencies

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

In management's opinion,

there are

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

the aggregate, have a material effect

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

of the Company.

Indemnification Obligation

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

Visa U.S.A member banks are

required to

indemnify the Visa U.S.A.

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

that relates to several

antitrust lawsuits challenging the practices of Visa

and MasterCard International.

In 2008, the Company, as a member

of the Visa

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

Inc. upon its initial public offering.

Since its initial public offering, Visa,

Inc. has

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

in the Class B shares held by the Company.

In 2011, the

Company sold its remaining Class B shares.

Associated with this sale, the Company entered into a swap contract with the purchaser

of the shares that requires a payment to the counterparty in the event that Visa,

Inc. makes subsequent revisions to the conversion

ratio.

Conversion ratio payments and ongoing fixed quarterly charges are reflected

in earnings in the period incurred.

Fixed charges

included in the swap liability are payable quarterly until the litigation reserve

is fully liquidated and at which time the aforementioned

swap contract will be terminated.

Quarterly fixed payments are approximately $

0.2

million.

There was a $

0.2

million counterparty

payment accrued and payable at September 30, 2025 due to a revision

to the share conversion rate related to additional funding by

VISA of the merchant litigation reserve.

NOTE 9 – FAIR VALUE

MEASUREMENTS

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

to transfer that liability in an orderly

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

the absence of a principal market) for such asset or

liability.

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

the market approach, the income

approach and/or the cost approach.

Such valuation techniques are consistently applied.

Inputs to valuation techniques include the

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

Accounting Standards Codification Topic

820

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

to quoted prices in active markets for identical

assets or liabilities and the lowest priority to unobservable inputs.

The fair value hierarchy is as follows:

●

Level 1 Inputs -

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

entity has the

ability to access at the measurement date

●

Level 2 Inputs -

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

either directly

or indirectly. These might

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

for identical

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

than quoted prices that are observable for the asset or

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

or inputs that are derived principally from, or

corroborated, by market data by correlation or other means

●

Level 3 Inputs -

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

an entity’s own

assumptions about the assumptions that market participants would

use in pricing the assets or liabilities.

Assets and Liabilities Measured at Fair Value

on a Recurring Basis

Securities Available for Sale.

U.S. Treasury securities are reported at fair value

utilizing Level 1 inputs.

Other securities classified as

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

For these securities, the Company obtains fair value measurements

from an independent pricing service.

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

market

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

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

terms

and conditions, among other things.

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

The Company’s entire portfolio consists

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

obligations, federal agency bullet or mortgage pass-through

securities, or

general obligation or revenue-based municipal bonds.

Pricing for such instruments is easily obtained.

At least annually, the Company

will validate prices supplied by the independent pricing service by compari

ng them to prices obtained from an independent third-party

source.

Equity Securities.

Investment securities classified as equity securities are carried at cost and

the share of earnings or losses is reported

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

readily marketable and therefore are classified

as a Level 3 input within the fair value hierarchy.

Loans Held for Sale

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

when possible,

using either quoted secondary-market prices or investor commitments.

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

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

that loan, which would be used by other market

participants.

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

Mortgage Banking Derivative Instruments.

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

models incorporating market pricing for instruments with similar characteristics,

commonly referred to as best execution pricing, or

investor commitment prices for best effort IRLCs which have

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

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

the loans, and the pull-through rate,

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

The fair value of forward sale commitments is based on

observable market pricing for similar instruments and are therefore

classified as Level 2 within the fair value hierarchy.

Interest Rate Swap.

The Company’s derivative positions

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

using

models generally accepted in the financial services industry and

that use actively quoted or observable market input values from

external market data providers.

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

Fair Value

Swap

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

its Visa Class B shares.

The

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

the revised share conversion rate, if any,

during the

period. The Company’s

derivative positions are classified as Level 2 within the fair value hierarchy and use

actively quoted or

observable market input values from external market data providers.

There was a $

0.2

million counterparty payment accrued and

payable at September 30, 2025 and

amount payable at December 31, 2024.

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

value on a recurring basis consisted of the following:

Level 1

Level 2

Level 3

Total

Fair

(Dollars in Thousands)

Inputs

Value

September 30, 2025

ASSETS:

Securities Available for

Sale:

U.S. Government Treasury

273,314

U.S. Government Agency

162,685

States and Political Subdivisions

35,248

Mortgage-Backed Securities

52,940

Corporate Debt Securities

45,049

Equity Securities

2,145

Loans Held for Sale

24,204

Interest Rate Swap Derivative

3,877

Forward Sales Contracts

Residential Mortgage Loan Commitments ("IRLCs")

607

December 31, 2024

ASSETS:

Securities Available for

Sale:

U.S. Government Treasury

105,801

U.S. Government Agency

143,127

States and Political Subdivisions

39,382

Mortgage-Backed Securities

55,477

Corporate Debt Securities

51,462

Equity Securities

2,399

Loans Held for Sale

28,672

Interest Rate Swap Derivative

5,319

Forward Sales Contracts

Residential Mortgage Loan Commitments ("IRLCs")

248

Mortgage Banking Activities

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

activities of $

6.1

million

and $

13.0

million, respectively, for the

nine months ended September 30, 2025, and $

5.9

million and $

11.0

million, respectively,

for

the nine months ended September 30, 2024.

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

from inception of the IRLC to the Consolidated Statement of Financial Condition

date, adjusted for pull-through rates and costs to

originate.

IRLCs transferred out of Level 3 represent IRLCs that were funded

and moved to mortgage loans held for sale, at fair

value.

Assets Measured at Fair Value

on a Non-Recurring Basis

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

assets are not measured at fair value on an ongoing basis

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

An example would be assets exhibiting evidence of impairment.

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

on a non-recurring basis.

Collateral Dependent Loans

Impairment for collateral dependent loans is measured using the fair

value of the collateral less selling

costs.

The fair value of collateral is determined by an independent valuation

or professional appraisal in conformance with banking

regulations.

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

and the judgment and

estimation involved in the real estate appraisal process.

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

basis for additional impairment and adjusted accordingly.

Valuation

techniques are consistent with those techniques applied in prior

periods.

Collateral-dependent loans had a carrying value of $

6.8

million with valuation allowance of less than $

0.1

million at

September 30, 2025 and a carrying value of $

3.6

million and a $

0.1

million valuation allowance at December 31, 2024.

Other Real Estate Owned

During the first nine months of 2025, certain foreclosed assets, upon initial recognition,

were measured and

reported at fair value through a charge-off to the allowance

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

estimated cost to sell.

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

professional appraisal in

conformance with banking regulations.

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

adjustments as necessary.

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

and estimation

involved in the real estate valuation process.

Mortgage Servicing Rights

Residential mortgage loan servicing rights are evaluated for impairment

at each reporting period based

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

Fair value is determined by a third party valuation model using

estimated prepayment speeds of the underlying mortgage loans serviced and

stratifications based on the risk characteristics of the

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

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

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

servicing.

Further detail on the key inputs utilized are

provided in Note 4 – Mortgage Banking Activities.

At each of September 30, 2025 and December 31, 2024, there was

valuation

allowance for loan servicing rights.

Assets and Liabilities Disclosed at Fair Value

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

both assets and liabilities, for which it is

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

methodologies used for those assets and liabilities.

Cash and Short-Term

Investments.

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

fair value, given

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

credit concerns.

Securities Held to Maturity

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

noted in the

caption “Assets and Liabilities Measured at Fair Value

on a Recurring Basis – Securities Available

for Sale.”

Other Equity Securities.

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

323) and recorded at cost.

These

securities are not readily marketable securities and are reflected in Other

Assets on the Statement of Financial Condition.

Loans.

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

using present value

techniques based upon projected cash flows and estimated discount

rates.

The values reported reflect the incorporation of a liquidity

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

Deposits.

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

Accounts and Savings Accounts are the

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

certificates of deposit is estimated using present

value techniques and rates currently offered for deposits of

similar remaining maturities.

Subordinated Notes Payable.

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

based upon projected cash

flows and estimated discount rates as well as rates being offered

for similar obligations.

Short-Term

and Long-Term

Borrowings.

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

based upon

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

for similar debt.

A summary of estimated fair values of significant financial instruments not

recorded at fair value consisted of the following:

September 30, 2025

Carrying

Level 1

Level 2

Level 3

(Dollars in Thousands)

Value

Inputs

ASSETS:

Cash

68,397

Fed Funds Sold and Interest Bearing Deposits

397,502

Investment Securities, Held to Maturity

404,659

169,264

224,861

Other Equity Securities

(1)

2,848

Mortgage Servicing Rights

885

1,412

Loans, Net of Allowance for Credit Losses

2,551,805

2,357,689

LIABILITIES:

Deposits

3,614,912

2,993,838

Short-Term

Borrowings

40,244

Subordinated Notes Payable

42,582

38,971

Long-Term Borrowings

680

December 31, 2024

Carrying

Level 1

Level 2

Level 3

(Dollars in Thousands)

Value

Inputs

ASSETS:

Cash

70,543

Fed Funds Sold and Interest Bearing Deposits

321,311

Investment Securities, Held to Maturity

567,155

361,529

182,931

Other Equity Securities

(1)

2,848

Mortgage Servicing Rights

933

1,616

Loans, Net of Allowance for Credit Losses

2,622,299

2,457,883

LIABILITIES:

Deposits

3,671,977

3,046,926

Short-Term

Borrowings

28,304

Subordinated Notes Payable

52,887

42,530

Long-Term Borrowings

794

(1)

Accounted for under the equity method – not readily

marketable securities – reflected in other assets.

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

The disclosures also do not include goodwill.

Accordingly, the

aggregate fair value amounts presented do not represent the underlying

value of the Company.

NOTE 10 – ACCUMULATED

OTHER COMPREHENSIVE INCOME (LOSS)

The amounts allocated to accumulated other comprehensive income

(loss) are presented in the table below.

Accumulated

Securities

Other

Available

Interest Rate

Retirement

Comprehensive

(Dollars in Thousands)

for Sale

Swap

Plans

(Loss) Income

Balance as of January 1, 2025

(20,179)

3,971

9,722

(6,486)

Other comprehensive income (loss) during the period

8,783

(1,076)

7,707

Balance as of September 30, 2025

(11,396)

2,895

9,722

1,221

Balance as of January 1, 2024

(25,691)

3,970

(425)

(22,146)

Other comprehensive income during the period

8,716

(652)

8,064

Balance as of September 30, 2024

(16,975)

3,318

(425)

(14,082)

Note 11 - SEGMENT REPORTING

The Company operates a single reportable business segment that is comprised

of commercial banking within the states of Florida,

Georgia, and Alabama.

The Company’s chief executive

officer is deemed the Chief Operating Decision Maker (“CODM”). The

CODM evaluates the financial performance of the Company by evaluating

revenue streams, significant expenses, and budget to actual

results in assessing the Company’s

single reporting segment and in the determination of allocating resources. The

CODM uses

consolidated net income to benchmark the Company against peers and to evaluate

performance and allocate resources.

Significant

revenue and expense categories evaluated by the CODM are consistent with the presentation

of the Consolidated Statement of Income

and components of other noninterest expense.

Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS

OPERATIONS

Management’s discussion

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

the major factors that have

affected our financial condition and results of operations

and should be read in conjunction with the Consolidated Financial

Statements and related notes.

The following information should provide a better understanding of

the major factors and trends that

affect our earnings performance and financial condition,

and how our performance during the third quarter of 2025 compares with

prior periods.

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

is referred to as “CCBG,”

“Company,”

“we,” “us,” or “our.”

CAUTION CONCERNING FORWARD

-LOOKING STATEMENTS

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

contains “forward-looking statements”

within the meaning of the

Private Securities Litigation Reform Act of 1995.

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

our

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

subject to significant risks and uncertainties and are

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

our control.

The words “may,”

“could,” “should,” “would,”

“believe,” “anticipate,” “contemplate,” “estimate,” “expect,” “intend,”

“plan,” “point to,” “project,” “target,” “vision,” “goal,”

“continue,” “further,” and similar expressions

are intended to identify forward-looking statements.

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

Our actual future results may differ materially

from those set forth in our forward-looking statements.

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

as the Introductory Note and

Item 1A. Risk Factors

of our 2024 Form 10-K, as updated in our subsequent quarterly reports filed on

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

of this report.

However, other factors besides those listed in our

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

results,

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

uncertainties.

Any forward-looking

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

We do not undertake to

update any forward-looking

statement, except as required by applicable law.

BUSINESS OVERVIEW

We are a financial

holding company headquartered in Tallahassee,

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

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

We offer

a broad array of products and services through a total of 62 full-service offices

and 108 ATMs/ITMs

located in Florida, Georgia, and Alabama.

Through Capital City Home Loans, LLC (“CCHL”), we have 28

additional offices in the Southeast for our mortgage banking business.

We provide

a full range of banking services, including

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

trust, merchant services, bankcards, securities brokerage

services and financial advisory services, including life insurance products

risk management and asset protection services.

Our profitability, like

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

interest income, which is the difference

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

securities, and the interest paid on interest-bearing

liabilities, principally deposits and borrowings.

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

expenses such as salaries and employee benefits, occupancy and other

operating expenses including income taxes, and noninterest

income such as mortgage banking revenues, wealth management fees,

deposit fees, and bank card fees.

We have included

a detailed discussion of our long-term strategic objectives as part of the MD&A section

of our 2024 Form 10-K.

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

We present a tangible

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

effect of

goodwill and other intangibles that resulted from merger

and acquisition activity. We

believe these measures are useful to investors

because they allow investors to more easily compare our capital adequacy

to other companies in the industry.

Non-GAAP financial

measures should not be considered alternatives to generally accepted

accounting principles (“GAAP”)-basis financial statements and

other bank holding companies may define or calculate these non-GAAP measures

or similar measures differently.

The GAAP to non-GAAP reconciliation for each quarter presented is provided

below.

2025

2024

(Dollars in Thousands, except per share data)

Third

Second

First

Fourth

Third

Shareowners' Equity (GAAP)

540,635

526,423

512,575

495,317

476,499

Less: Goodwill and Other Intangibles (GAAP)

89,095

92,693

92,733

92,773

92,813

Tangible Shareowners' Equity (non-GAAP)

451,540

433,730

419,842

402,544

383,686

Total Assets (GAAP)

4,323,774

4,391,753

4,461,233

4,324,932

4,225,316

Less: Goodwill and Other Intangibles (GAAP)

89,095

92,693

92,733

92,773

92,813

Tangible Assets (non-GAAP)

4,234,679

4,299,060

4,368,500

4,232,159

4,132,503

Tangible Common Equity Ratio (non-GAAP)

A/B

10.66%

10.09%

9.61%

9.51%

9.28%

Actual Diluted Shares Outstanding (GAAP)

17,115,336

17,097,986

17,072,330

17,018,122

16,980,686

Tangible Book Value

per Diluted Share (non-GAAP)

A/C

26.38

25.37

24.59

23.65

22.60

SELECTED QUARTERLY

FINANCIAL DATA

(UNAUDITED)

2025

2024

(Dollars in Thousands, Except Per Share Data)

Third

Second

First

Fourth

Third

Summary of Operations

Interest Income

51,431

51,459

49,782

49,743

49,328

Interest Expense

7,874

8,275

8,235

8,640

9,117

Net Interest Income

43,557

43,184

41,547

41,103

40,211

Provision for Credit Losses

1,881

620

768

701

1,206

Net Interest Income After

Provision for Credit Losses

41,676

42,564

40,779

40,402

39,005

Noninterest Income

22,331

20,014

19,907

18,760

19,513

Noninterest Expense

42,916

42,538

38,701

41,782

42,921

Income Before Income Taxes

21,091

20,040

21,985

17,380

15,597

Income Tax Expense

5,141

4,996

5,127

4,219

2,980

(Income) Loss Attributable to NCI

(71)

501

Net Income Attributable to CCBG

15,950

15,044

16,858

13,090

13,118

Net Interest Income (FTE)

(1)

43,602

43,228

41,591

41,150

40,260

Per Common Share

Net Income Basic

0.93

0.88

0.99

0.77

Net Income Diluted

0.93

0.88

0.99

0.77

Cash Dividends Declared

0.26

0.24

0.23

Diluted Book Value

31.59

30.79

30.02

29.11

28.06

Diluted Tangible Book Value

(2)

26.38

25.37

24.59

23.65

22.60

Market Price:

High

44.69

39.82

38.27

40.86

36.67

Low

38.00

32.38

33.00

26.72

41.79

39.35

35.96

36.65

35.29

Selected Average Balances

Investment Securities

993,880

1,007,981

982,330

915,202

908,456

Loans Held for Investment

2,606,213

2,652,572

2,665,910

2,677,396

2,693,533

Earning Assets

3,981,530

4,032,008

3,993,914

3,921,900

3,883,414

Total Assets

4,317,951

4,370,261

4,335,033

4,259,669

4,215,862

Deposits

3,612,331

3,680,707

3,665,482

3,600,424

3,572,034

Shareowners’ Equity

542,216

527,583

513,401

491,143

480,137

Common Equivalent Average Shares:

Basic

17,068

17,056

17,027

16,946

16,943

Diluted

17,114

17,088

17,044

16,990

16,979

Performance Ratios:

Return on Average Assets (annualized)

1.47

1.38

1.58

1.22

1.24

Return on Average Equity (annualized)

11.67

11.44

13.32

10.60

10.87

Net Interest Margin (FTE)

4.34

4.30

4.22

4.17

4.12

Noninterest Income as % of Operating Revenue

33.89

31.67

32.39

31.34

32.67

Efficiency Ratio

65.09

67.26

62.93

69.74

71.81

Asset Quality:

Allowance for Credit Losses (“ACL”)

30,202

29,862

29,734

29,251

29,836

Nonperforming Assets (“NPAs”)

10,026

6,581

4,428

6,669

7,242

ACL to Loans HFI

1.17

1.13

1.12

1.10

1.11

NPAs to Total

Assets

0.23

0.15

0.10

0.15

0.17

NPAs to Loans HFI plus OREO

0.39

0.25

0.17

0.25

0.27

ACL to Non-Performing Loans

368.54

463.01

692.10

464.14

452.64

Net Charge-Offs to Average Loans HFI

0.18

0.09

0.25

0.19

Capital Ratios:

Tier 1 Capital

19.33

18.38

18.01

17.46

16.77

Total Capital

20.59

19.60

19.20

18.64

17.97

Common Equity Tier 1

17.73

16.81

16.08

15.54

14.88

Leverage

11.64

11.14

11.17

11.05

10.89

Tangible Common Equity

(2)

10.66

10.09

9.61

9.51

9.28

(1)

Fully Tax Equivalent.

(2)

Non-GAAP financial measure.

See non-GAAP reconciliation on page 34.

FINANCIAL OVERVIEW

Results of Operations

Performance Summary.

Net income attributable to common shareowners of $16.0 million, or $0.93 per

diluted share, for the third

quarter of 2025 compared to $15.0 million, or $0.88 per diluted share, for

the second quarter of 2025, and $13.1 million, or $0.77 per

diluted share, for the third quarter of 2024.

For the first nine months of 2025, net income attributable to common shareowners totaled

$47.9 million, or $2.80 per diluted share, compared to net income of $39.8

million, or $2.35 per diluted share, for the same period of

2024.

Net Interest Income.

Tax-equivalent net

interest income for the third quarter of 2025 totaled $43.6 million compared

to $43.2 million

for the second quarter of 2025 and $40.3 million for the third quarter of 2024.

Compared to the second quarter of 2025, the increase

was driven by a $0.5 million increase in investment securities income, a $0.4

million decrease in interest expense, and a $0.1 million

increase in overnight funds income, partially offset

by a $0.6 million decrease in loan income.

One additional calendar day in the

third quarter of 2025 contributed to the improvement.

Compared to the third quarter of 2024, the increase was primarily due to a $3.0

million increase in investment securities income, a $1.2 million decrease

in interest expense, and a $0.5 million increase in overnight

funds income, partially offset by a $1.4 million decrease in

loan income.

For the first nine months of 2025, tax-equivalent net interest

income totaled $128.4 million compared to $118.0

million for the same period of 2024, with the increase primarily attributable to

$7.3 million increase in investment securities income, a $2.3 million increase

in overnight funds income, and a $2.3 million decrease

in deposit interest expense, partially offset by a $1.9 million decrease

in loan income.

Provision and Allowance for Credit

Losses.

We recorded

a provision expense for credit losses of $1.9 million for the third quarter of

2025 compared to $0.6 million for the second quarter of 2025 and $1.2 million for

the third quarter of 2024.

For the first nine months

of 2025, we recorded a provision expense for credit losses of $3.3 million which

was comparable to the same period of 2024.

September 30, 2025, the allowance for credit losses for loans HFI totaled $30.2

million (1.17% of loans HFI) compared to $29.9

million (1.13% of loans HFI) at June 30, 2025 and $29.3 million at December

31, 2024 (1.10% of loans HFI).

Noninterest Income

. Noninterest income for the third quarter of 2025 totaled $22.3 million compared

to $20.0 million for the second

quarter of 2025 and $19.5 million for the third quarter of 2024.

The $2.3 million, or 11.6%, increase over the second quarter

of 2025

was primarily due to a $1.2 million increase in other income, a $0.6 million increase

in mortgage banking revenues, and a $0.6 million

increase in deposit fees.

The increase in other income was primarily due to a $0.7 million gain from the sale of our

insurance

subsidiary (Capital City Strategic Wealth)

in the third quarter of 2025, and to a lesser extent higher miscellaneous income.

Compared

to the third quarter of 2024, the $2.8 million, or 14.4%, increase was primarily

due to a $1.1 million increase in other income, a $0.8

million increase in mortgage banking revenues, a $0.4 million increase in

wealth management fees, and a $0.4 million increase in

deposit fees.

The increase in other income reflected the aforementioned gain from

the sale of our insurance subsidiary. For

the first

nine months of 2025, noninterest income totaled $62.3 million compared

to $57.2 million for the same period of 2024, primarily

attributable to a $2.2 million increase in wealth management fees, a $1.6 million

increase in mortgage banking revenues, and a $1.1

million increase in other income. The increase in other income reflected

the aforementioned gain from the sale of our insurance

subsidiary and higher miscellaneous income.

Noninterest Expense.

Noninterest expense for the third quarter of 2025 totaled $42.9 million compared

to $42.5 million for the second

quarter of 2025 and $42.9 million for the third quarter of 2024.

The $0.4 million, or 0.9%, increase over the second quarter of 2025

reflected a $0.8 million increase in other expense that was partially offset

by a $0.4 million decrease in compensation expense.

Compared to the third quarter of 2024, a $0.3 million increase in compensation

expense was offset by a $0.2 million decrease in other

expense and a $0.1 million decline in occupancy expense. For the first nine months

of 2025, noninterest expense totaled $124.2

million compared to $123.5 million for the same period of 2024 with

the $0.6 million, or 0.5%, increase primarily due to a $4.2

million increase in compensation expense that was partially offset

by a $3.4 million decrease in other expense and a $0.2 million

decrease in occupancy expense.

Financial Condition

Earning Assets.

Average earning assets totaled

$3.982 billion for the third quarter of 2025, a decrease of $50.5 million, or 1.3%,

from

the second quarter of 2025, and an increase of $59.6 million, or 1.5%, over

the fourth quarter of 2024.

Compared to the second

quarter of 2025, the change in the earning asset mix reflected a $46.4 million

decrease in loans HFI and a $14.1 million decrease in

investment securities, partially offset by a $7.4 million

increase in overnight funds sold and a $2.6 million increase in loans held for

sale (“HFS”).

Compared to the fourth quarter of 2024, the change in earning asset mix reflected a $78.7

million increase in

investment securities and a $57.9 million increase in overnight funds sold, partially

offset by a $71.2 million decrease in loans HFI

and a $5.8 million decrease in loans HFS.

Loans.

Average loans HFI decreased

$46.4 million, or 1.8%, from the second quarter of 2025 and decreased

$71.2 million, or 2.7%,

from the fourth quarter of 2024.

Loans HFI at September 30, 2025, decreased $49.5 million, or 1.9%, from

June 30, 2025, and

decreased $69.5 million, or 2.6%, from December 31, 2024.

Credit Quality

Nonperforming assets (nonaccrual loans and other real estate) totaled $10.0

million at September 30, 2025 compared

to $6.6 million at June 30, 2025 and $6.7 million at December 31, 2024.

At September 30, 2025, nonperforming assets as a

percentage of total assets was 0.23%, compared to 0.15% at June 30,

2025 and 0.15% at December 31, 2024.

Nonaccrual loans

totaled $8.2 million at September 30, 2025, a $1.7 million increase over

June 30, 2025 and a $1.9 million increase over December 31,

2024.

Further, classified loans totaled $26.5 million

at September 30, 2025, a $2.1 million decrease from June 30, 2025 and a $6.6

million increase over December 31, 2024.

Deposits

Average total

deposits were $3.612 billion for the third quarter of 2025, a decrease of $68.4 million,

or 1.86%, from the

second quarter of 2025 and an increase of $11.9

million, or 0.33%, over the fourth quarter of 2024.

At September 30, 2025, total

deposits were $3.615 billion, a decrease of $89.9 million, or 2.4%,

from June 30, 2025, and a decrease of $57.1 million, or 1.6%, from

December 31, 2024.

Public funds totaled $497.9 million at September 30, 2025, $596.6 million at June

30, 2025, and $660.9 million

at December 31, 2024.

Capital

At September 30, 2025, we were “well-capitalized”

with a total risk-based capital ratio of 20.59% and a tangible common

equity ratio (a non-GAAP financial measure) of 10.66% compared

to 19.60% and 10.09%, respectively,

at June 30, 2025, and 18.64%

and 9.51%, respectively,

at December 31, 2024.

At September 30, 2025, all of our regulatory capital ratios exceeded the threshold

be “well-capitalized”

under the Basel III capital standards.

RESULTS

OF OPERATIONS

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

a discussion of the various components are discussed

in further detail below.

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

(Dollars in Thousands, except per share data)

2025

2024

2025

2024

Interest Income

51,431

51,459

49,328

152,672

144,914

Taxable Equivalent Adjustments

133

194

Total Interest Income (FTE)

51,476

51,503

49,377

152,805

145,108

Interest Expense

7,874

8,275

9,117

24,384

27,079

Net Interest Income (FTE)

43,602

43,228

40,260

128,421

118,029

Provision for Credit Losses

1,881

620

1,206

3,269

3,330

Taxable Equivalent Adjustments

133

194

Net Interest Income After Provision for Credit Losses

41,676

42,564

39,005

125,019

114,505

Noninterest Income

22,331

20,014

19,513

62,252

57,216

Noninterest Expense

42,916

42,538

42,921

124,155

123,533

Income Before Income Taxes

21,091

20,040

15,597

63,116

48,188

Income Tax Expense

5,141

4,996

2,980

15,264

9,705

Pre-Tax Loss Attributable to Noncontrolling Interest

501

1,342

Net Income Attributable to Common Shareowners

15,950

15,044

13,118

47,852

39,825

Basic Net Income Per Share

0.93

0.88

0.77

2.81

2.35

Diluted Net Income Per Share

0.93

0.88

0.77

2.80

2.35

Net Interest Income

Net interest income represents our single largest source of earnings

and is equal to interest income and fees generated by earning assets

less interest expense paid on interest bearing liabilities.

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

exempt status of income earned on certain loans and state and local government

debt obligations.

We provide an

analysis of our net

interest income including average yields and rates in Table

I, “Average Balances &

Interest Rates,” on page 49.

Tax-equivalent net

interest income for the third quarter of 2025 totaled $43.6

million compared to $43.2 million for the second quarter

of 2025 and $40.3

million for the third quarter of 2024.

Compared to the second quarter of 2025, the increase was driven by a $0.5

million increase in investment securities income, a $0.4 million decrease

in interest expense, and a $0.1 million increase in overnight

funds income, partially offset by a $0.6 million decrease in

loan income.

One additional calendar day in the third quarter of 2025

contributed to the improvement.

Compared to the third quarter of 2024, the increase was primarily due to a $3.0 million increase

investment securities income, a $1.2 million decrease in interest expense,

and a $0.5 million increase in overnight funds income,

partially offset by a $1.4 million decrease in loan income.

New investment purchases at higher yields drove the increase in investment

securities income for both prior period comparisons.

Further, the decrease in deposit interest expense from

both prior periods reflected

the gradual decrease in our deposit rates.

The decrease in loan income compared to both prior periods was due to lower loan

balances

that was partially offset by favorable rate repricing.

For the first nine months of 2025, tax-equivalent net interest income

totaled $128.4 million compared to $118.0

million for the same

period of 2024, with the increase primarily attributable to a $7.3

million increase in investment securities income, a $2.3 million

increase in overnight funds income, and a $2.3 million decrease in deposit

interest expense.

New investment purchases at higher yields

drove the increase in investment securities income.

Higher average deposit balances contributed to the increase in overnight

funds

income.

The decrease in deposit interest expense reflected the aforementioned decrease

in our deposit rates.

The decrease in loan

income was due to lower loan balances that was partially offset by favorable

rate repricing.

Our net interest margin for the third quarter of 2025 was 4.34%, an

increase of four basis points over the second quarter of 2025 and an

increase of 22 basis points over the third quarter of 2024.

For the month of September 2025, our net interest margin was 4.41%.

For

the first nine months of 2025, our net interest margin of

4.28% reflected a 23-basis point increase over the same period of 2024.

The

improvement in net interest margin over all prior periods reflected

a higher yield in the investment portfolio,

driven by new purchases

at higher yields,

and lower deposit costs.

For the third quarter of 2025, our cost of funds was 78 basis points, a decrease of

four basis

points from the second quarter of 2025 and a 15-basis point decrease from the

third quarter of 2024.

Our cost of deposits (including

noninterest bearing accounts) was 80 basis points, 81 basis points, and

92 basis points, respectively, for

the same periods.

Provision for Credit Losses

We recorded

a provision expense for credit losses of $1.9 million for the third quarter of 2025

compared to $0.6 million for the second

quarter of 2025 and $1.2 million for the third quarter of 2024.

For the first nine months of 2025, we recorded a provision expense for

credit losses of $3.3 million which was comparable to the same period of 2024.

For the third quarter of 2025, the provision reflected

an expense of $1.5 million for loans HFI and a $0.4

million expense for unfunded loan commitments.

This compares to a $0.7 million

expense for loans HFI, and a benefit of $0.1

million for unfunded loan commitments in the second quarter of 2025,

and a $1.9

million

expense for loans HFI, $0.6 million benefit for unfunded loan commitments,

and a $0.1 million expense for debt securities in the third

quarter of 2024.

For the first nine months of 2025, the provision reflected a $3.4 million expense

for loans HFI and a $0.1

million

benefit for unfunded loan commitments compared to a $3.9 million

expense for loans HFI, a $0.7

million benefit for unfunded loan

commitments,

and a $0.1 million benefit for debt securities for the first nine months of 2024.

We discuss the various

factors that

impacted our provision expense in further detail below under the heading

Allowance for Credit Losses.

Noninterest Income

Noninterest income for the third quarter of 2025 totaled $22.3 million compared

to $20.0 million for the second quarter of 2025 and

$19.5 million for the third quarter of 2024.

The $2.3 million, or 11.6%, increase over the second quarter

of 2025 was primarily due to

a $1.2 million increase in other income, a $0.6 million increase in mortgage banking

revenues, and a $0.6 million increase in deposit

fees.

The increase in other income was primarily due to a $0.7 million gain from the sale of our

insurance subsidiary (Capital City

Strategic Wealth)

in the third quarter of 2025, and to a lesser extent higher miscellaneous income.

The increase in mortgage revenues

was driven by an increase in the gain on sale margin for loan sales.

Fee adjustments made late in the second quarter of 2025

contributed to the increase in deposit fees and miscellaneous income.

Compared to the third quarter of 2024, the $2.8 million, or

14.4%, increase was primarily due to a $1.1 million increase in other income,

a $0.8 million increase in mortgage banking revenues, a

$0.4 million increase in wealth management fees, and a $0.4 million increase in deposit

fees.

The increase in other income reflected

the aforementioned gain from the sale of our insurance subsidiary

and higher miscellaneous income.

Higher production volume and

gain on sale margin drove the improvement in mortgage banking

revenues.

The increase in wealth management fees was primarily

due to higher retail brokerage fees.

The aforementioned fee adjustments drove the improvement in deposit fees.

For the first nine months of 2025, noninterest income totaled $62.3 million

compared to $57.2 million for the same period of 2024,

primarily attributable to a $2.2 million increase in wealth management

fees, a $1.6 million increase in mortgage banking revenues, and

a $1.1 million increase in other income.

The increase in wealth management fees reflected increases in trust fees of $1.1 million

and

retail brokerage fees of $1.0 million attributable to a combination of new

business and higher account valuations.

A fee increase

implemented in early 2025 also contributed to the increase in trust fees.

Higher production volume and gain on sale margin drove

the

improvement in mortgage banking revenues.

The increase in other income reflected the aforementioned gain from the sale of our

insurance subsidiary and higher miscellaneous income.

Noninterest income represented 33.9% of operating revenues (net

interest income plus noninterest income) in the third quarter of 2025

compared to 31.7% in the second quarter of 2025 and 32.7% in the third quarter

of 2024.

For the first nine months of 2025,

noninterest income represented 32.7% of operating revenues comparable

to the same period of 2024.

The table below reflects the major components of noninterest income.

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

(Dollars in Thousands)

2025

2024

2025

2024

Deposit Fees

5,877

5,320

5,512

16,258

16,139

Bank Card Fees

3,733

3,774

3,624

11,021

11,010

Wealth Management

Fees

5,173

5,206

4,770

16,142

13,891

Mortgage Banking Revenues

4,794

4,190

3,966

12,804

11,225

Other

2,754

1,524

1,641

6,027

4,951

Total

Noninterest Income

22,331

20,014

19,513

62,252

57,216

Significant components of noninterest income are discussed in more

detail below.

Deposit Fees

Deposit fees for the third quarter of 2025

totaled $5.9

million, an increase of $0.6

million, or 10.5%, over the second

quarter of 2025, and an increase of $0.4

million, or 6.6%, over the third quarter of 2024.

For the first nine months of 2025, deposit

fees totaled $16.3 million, a $0.1 million, or 0.7%, increase over

the same period of 2024.

Compared to all prior periods the increases

were primarily due to service charge fee adjustments made

late in the second quarter of 2025.

Bank Card Fees

Bank card fees for the third quarter of 2025 totaled $3.7 million, comparable to the

second quarter of 2025, and $0.1

million, or 3.0%, increase over the third quarter of 2024.

For the first nine months of 2025, bank card fees totaled $11.0

million,

comparable to the same period of 2024.

Wealth

Management Fees

Wealth management fees

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

accounts and

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

investment, insurance products, and retirement

accounts).

In September 2025, we sold our subsidiary,

Capital City Strategic Wealth,

which provided the sale of life insurance, risk

management and asset protection services.

Wealth management

fees for the third quarter of 2025 totaled $5.2 million, comparable to

the second quarter of 2025 and a $0.4 million, or 8.4%, increase over

the third quarter of 2024.

For the first nine months of 2025,

wealth management fees totaled $16.1 million, an increase of $2.2

million, or 16.2%, over the same period of 2024, and reflected a

$1.1 million increase in trust fees, a $1.0 million increase in retail brokerage

fees, and a $0.1 million increase in insurance commission

revenue.

At September 30, 2025, total assets under management were approximately

$3.244 billion compared to $3.192 billion at

June 30, 2025, and $3.049 billion at December 31, 2024.

Compared to the prior periods, the growth in assets under management was

primarily due to new retail brokerage accounts and to a lesser extent new

managed trust accounts.

A fee increase in first quarter of

2025 also contributed to the increase in trust fees compared to the prior year periods

Mortgage Banking Revenues.

Mortgage banking revenues totaled $4.8 million for the third quarter of

2025, an increase of $0.6

million, or 14.4%, over the second quarter of 2025 and an increase of

$0.8 million, or 20.9%, over the third quarter of 2024.

For the

first nine months of 2025, mortgage banking revenues totaled $12.8

million compared to $11.2 million for the same period

of 2024.

The increase compared to the second quarter of 2025 was attributable

to a higher gain on sale margin for loan sales.

Higher

production volume and gain on sale margin drove the improvement

over both prior year periods.

We provide a detailed

overview of

our mortgage banking operation, including a detailed break-down

of mortgage banking revenues, mortgage servicing activity,

and

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

Financial Statements.

Other

Other income totaled $2.8 million for the third quarter of 2025, an

increase of $1.2 million, or 80.7%, over the second quarter

of 2025, and an increase of $1.1 million, or 67.8%, over the third

quarter of 2024.

For the first nine months of 2025, other income

totaled $6.0 million, a $1.1 million, or 21.7%, increase over the same period

of 2024.

Compared to all prior periods, the increase was

primarily due to a $0.7 million gain from the sale of our insurance subsidiary (Capital

City Strategic Wealth)

in the third quarter of

2025 and to a lesser extent higher miscellaneous income.

Noninterest Expense

Noninterest expense for the third quarter of 2025 totaled $42.9 million compared

to $42.5 million for the second quarter of 2025 and

$42.9 million for the third quarter of 2024.

The $0.4 million, or 0.9%, increase over the second quarter of 2025 reflected a $0.8

million increase in other expense that was partially offset by a $0.4 million

decrease in compensation expense.

The increase in other

expense was driven by higher miscellaneous expenses of $0.7 million and professional

fees of $0.1 million.

The decrease in

compensation was primarily due to lower performance-based compensation

(cash and stock incentives).

Compared to the third quarter

of 2024, a $0.3 million increase in compensation expense was offset

by a $0.2 million decrease in other expense and a $0.1 million

decline in occupancy expense.

For the first nine months of 2025, noninterest expense totaled $124.2

million compared to $123.5 million for the same period of 2024

with the $0.6 million, or 0.5%, increase primarily due to a $4.2 million

increase in compensation expense that was partially offset by

$3.4 million decrease in other expense and a $0.2 million decrease in occupancy

expense.

The increase in compensation was due to a

$2.6 million increase in salary expense and a $1.6 million increase in associate benefit

expense.

The increase in salary expense was

primarily due to increases in incentive plan expense of $1.3 million, base

salaries of $0.6 million (merit based), and commissions of

$0.7 million (retail brokerage and mortgage).

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

associate

insurance.

The decrease in other expense was primarily due to a $4.5 million decrease in other real estate

expense due to higher gains

from the sale of banking facilities, and a $1.4 million decrease in miscellaneous expense

(non-service component of pension expense),

partially offset by increases in processing expense of $1.4 million (outsource

of core processing system), charitable contribution

expense of $0.8 million, and professional fees of $0.3 million.

The table below reflects the major components of noninterest expense.

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

(Dollars in Thousands)

2025

2024

2025

2024

Salaries

21,740

22,013

21,637

65,636

62,995

Associate Benefits

4,316

4,477

4,163

13,158

11,618

Total Compensation

26,056

26,490

25,800

78,794

74,613

Premises

3,176

3,272

3,245

9,620

9,461

Equipment

3,861

3,799

3,853

11,281

11,628

Total Occupancy

7,037

7,071

7,098

20,901

21,089

Legal Fees

491

480

407

1,474

1,272

Professional Fees

1,621

1,518

1,869

4,761

4,467

Processing Services

2,475

2,491

2,260

7,434

6,030

Advertising

711

801

654

2,350

2,320

Telephone

762

714

692

2,195

2,119

Insurance – Other

750

757

737

2,239

2,401

Other Real Estate Owned, net

(4,431)

Pension - Other

(871)

(872)

(419)

(2,616)

(1,256)

Miscellaneous

3,866

3,067

3,777

11,054

10,395

Total Other

9,823

8,977

10,023

24,460

27,831

Total

Noninterest Expense

42,916

42,538

42,921

124,155

123,533

Significant components of noninterest expense are discussed in more detail

below.

Compensation.

Compensation expense totaled $26.1 million for the third quarter of 2025, a $0.4 million,

or 1.6%, decrease from the

second quarter of 2025 and a $0.3 million, or 1.0%, increase over

the third quarter of 2024.

The decrease from the second quarter of

2025

reflected a $0.3

million decrease in salary expense and a $0.1

million decrease in associate benefit expense, both due to lower

performance-based compensation (cash incentives and stock compensation)

Compared to the third quarter of 2024, the increase

reflected a $0.1 million increase in salary expense and a $0.2 million increase

in associate benefit expense.

The increase in salary

expense was primarily attributable to a $0.2 million increase in cash incentive

s, a $0.2 million increase in commissions, and a $0.1

million increase in 401K matching expense, that was partially offset

by a $0.3 million decrease in base salaries.

The increase in

associate benefit expense was primarily due to an increase in stock

compensation expense.

For the first nine months of 2025, compensation expense totaled $78.8

million compared to $74.6 million for the same period of 2024

with the $4.2 million increase attributable to a $2.6 million increase in salary

expense and a $1.6 million increase in associate benefit

expense.

The increase in salary expense was primarily due to increases in incentive plan expense of $1.

million, commissions of

$0.7 million (retail brokerage and mortgage),

and base salaries of $0.6

million (merit-based).

The increase in associate benefit

expense was primarily due to higher cost for associate insurance.

Occupancy

Occupancy expense totaled $7.0 million for the third quarter of 2025, a $0.1 million,

or 0.5%, decrease from the second

quarter of 2025 and a $0.1 million, or 0.9%, decrease from the third quarter of 202

For the first nine months of 2025, occupancy

expense totaled $20.9 million compared to $21.1 million for the same period

of 2024.

Lower property expenses related to our

operations center that was sold in 2024 was partially offset by

higher banking office lease expense drove the variance for the prior

period comparisons.

Other

Other expense totaled $9.8 million for the third quarter of 2025 compared to $9.0 million

for the second quarter of 2025 and

$10.0 million for the third quarter of 2024.

For the first nine months of 2025, other expense totaled $24.5 million compared

to $27.8

million for the same period of 2024.

Compared to the second quarter of 2025, the $0.8 million increase was an increase

miscellaneous expense which reflected a non-routine expense related

to our VISA share swap due to additional funding of VISA’s

litigation reserve, a higher level of other losses, and an increase in expense for our

residential mortgage sale indemnification reserve.

The $3.3 million increase for the nine-month comparison was primarily due to

a $4.5 million decrease in other real estate expense and

a $1.4

million decrease in pension-other expense, that was partially offset

by $1.4 million increase in processing expense, a $0.8

million increase in charitable contribution expense, and a $0.3 million increase

in professional fees.

The decrease in other real estate

expense was attributable to a gain from the sale of our operations center building

in the first quarter of 2025.

The decrease in other-

pension expense reflected lower expense for the non-service component

of pension expense which reflected strong asset returns in the

plan.

The outsourcing of our core processing system in mid-2024 drove the increase

in processing expense.

Our operating efficiency ratio (expressed as noninterest

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

plus noninterest income) improved to 65.09% for the third quarter of 2025

compared to 67.26% for the second quarter of 2025

and

71.81%

for the third quarter of 2024.

For the first nine months of 2025, this ratio was 65.11%

compared to 70.49% for the same

period of 2024.

Income Taxes

We realized income

tax expense of $5.1 million (effective rate of 24.4%) for the third quarter of

2025 compared to $5.0 million

(effective rate of 24.9%) for the second quarter of 2025

and $3.0 million (effective rate of 19.1%) for the third quarter of 2024.

For

the first nine months of 2025, we realized income tax expense of $15.3 million

(effective rate of 24.2%) compared to $9.7 million

(effective rate of 20.1%) for the same period of 2024.

A lower level of tax benefit accrued from a solar tax credit equity fund drove

the increase in our effective tax rate compared to the prior year periods.

Absent discrete items or new tax credit investments, we

expect our annual effective tax rate to approximate 24%

for 2025.

FINANCIAL CONDITION

Average earning

assets totaled $3.982 billion for the third quarter of 2025, a decrease of $50.5

million, or 1.3%, from the second

quarter of 2025, and an increase of $59.6 million, or 1.5%, over the

fourth quarter of 2024.

The change for both prior periods was

driven by variances in deposit balances (see below –

Deposits

Compared to the second quarter of 2025, the change in the earning

asset mix reflected a $46.4 million decrease in loans HFI and a $14.1 million decrease

in investment securities, partially offset by a

$7.4 million increase in overnight funds sold and a $2.6 million increase in

loans held for sale.

Compared to the fourth quarter of

2024, the change in the earning asset mix reflected a $78.7 million increase in investment

securities and a $57.9 million increase in

overnight funds sold, partially offset by a $71.2 million

decrease in loans HFI and a $5.8 million decrease in loans HFS.

Investment Securities

Average investments

totaled $993.9 million in the third quarter of 2025, a $14.1 million, or 1.4%,

decrease from the second quarter of

2025

and a $78.7 million, or 8.6% increase over the fourth quarter of 2024. Our investment portfolio

represented 25.0% of our average

earning assets for the third quarter of 2025 compared to 25.0% for the second

quarter of 2025 and 23.3% for the fourth quarter of

2024.

For the remainder of 2025, we will continue to monitor our overall liquidity position

and market conditions to determine if cash

flow from the investment portfolio should be reinvested or allowed

to flow into overnight funds.

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

it functions as a key element of liquidity and

asset/liability management.

Two types of classifications are approved

for investment securities which are Available

-for-Sale (“AFS”)

and Held-to-Maturity (“HTM”).

At September 30, 2025, $577.3 million, or 58.7%, of the investment portfolio was classified

as AFS

and $404.7 million, or 41.1%, was classified as HTM. The average

maturity of our total portfolio at September 30, 2025 was 2.70

years compared to 2.66 years at June 30, 2025 and 2.54 years at December

31, 2024.

The duration of our investment portfolio at

September 30, 2025 was 2.15 years compared to 2.14 years at June 30,

2025 and 2.19 years at December 31, 2024.

Additional

information on unrealized gains/losses in the AFS and HTM portfolios is provided

in Note 2 – Investment Securities.

determine the classification of a security at the time of acquisition based

on how the purchase will affect our asset/liability strategy

and future business plans and opportunities.

consider multiple factors in determining classification, including

regulatory capital

requirements, volatility in earnings or other comprehensive income,

and liquidity needs. Securities in the AFS portfolio are recorded at

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

net of tax, in the accumulated other

comprehensive income component of shareowners’ equity.

HTM securities are acquired or owned with the intent of holding

them to

maturity.

HTM investments are measured at amortized cost.

do not trade, nor do we presently intend to begin trading investment

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

maintain a trading portfolio.

At September 30, 2025, there were 750 positions (combined AFS and HTM)

with unrealized pre-tax losses totaling $27.8 million.

of these positions are U.S. Treasury bonds and carry

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

634 are U.S. government

agency securities issued by U.S. government sponsored entities.

We believe the

long history of no credit losses on government

securities indicates that the expectation of nonpayment of the amortized

cost basis is effectively zero.

At September 30, 2025, all

collateralized mortgage obligation securities, mortgage

-backed securities, Small Business Administration securities, U.S. Agency,

and

U.S. Treasury bonds held were rated AA+ or higher.

The remaining 83 positions (municipal securities and corporate bonds) have

credit component.

At September 30, 2025, corporate debt securities had an allowance for credit

losses of $43,000 and municipal

securities had an allowance of less than $1,000. None of the securities held by

the Company were past due or in nonaccrual status at

September 30, 2025.

Loans HFI

Average loans

HFI decreased by $46.4 million, or 1.8%, from the second quarter of 2025 and decreased

by $71.2 million, or 2.7%,

from the fourth quarter of 2024.

Compared to the second quarter of 2025, the decline reflected decreases in construction

loans of

$22.4 million, consumer loans (primarily indirect auto) of $10.4

million, commercial real estate loans of $8.7 million, residential real

estate loans of $2.9 million, and commercial loans of $2.7 million, partially

offset by a $2.0 million increase in home equity loans.

Compared to the fourth quarter of 2024, the decline was primarily attributable

to decreases in construction loans of $55.6 million,

consumer loans (primarily auto indirect loans) of $14.4 million, commercial

loans of $11.9 million and commercial real estate loans

$6.8 million, partially offset by increases in home equity

loans of $12.8 million and residential real estate loans of $7.0 million.

Loans HFI at September 30, 2025, decreased by $49.5 million, or 1.9%,

from June 30, 2025, and decreased by $69.5 million, or 2.6%,

from December 31, 2024.

Compared to June 30, 2025, the decline was primarily due to decreases in construction

loans of $17.4

million, commercial real estate loans of $17.2 million, consumer loans (primarily

indirect auto) of $11.6 million, and residential real

estate loans of $9.0 million, partially offset by a $5.9 million increase

in home equity loans.

Compared to December 31, 2024, the

decrease was primarily attributable to decreases in construction loans

of $63.2 million, consumer loans (primarily indirect auto) of

$13.6 million, and commercial loans of $10.2 million, partially offset

by increases in home equity loans of $14.0 million, residential

real estate loans of $8.8 million, and commercial real estate loans of $6.2 million.

Without compromising our credit standards

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

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

Credit Quality

Nonperforming assets (nonaccrual loans and other real estate) totaled $10.0

million at September 30, 2025, compared to $6.6 million

at June 30, 2025, and $6.7 million at December 31, 2024.

At September 30, 2025, nonperforming assets as a percentage of total

assets

was 0.23%, compared to 0.15% at June 30, 2025 and 0.15% at December 31, 2024.

Nonaccrual loans totaled $8.2 million at

September 30, 2025, a $1.7 million increase over June 30, 2025 and a $1.9 million increase over

December 31, 2024 with the increase

over both periods primarily attributable to two home equity loans totaling

$1.8 million.

Classified loans totaled $26.5 million at

September 30, 2025, a $2.1 million decrease from June 30, 2025, and a $6.6 million

increase over December 31, 2024.

The increase

over December 31, 2024 was primarily due to the downgrade of four residential

real estate loans totaling $4.2 million and two

commercial real estate loans totaling $4.3 million.

Allowance for Credit Losses

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

the loans’ amortized cost basis to present the net amount

expected to be collected on the loans.

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

earnings and reduced by the charge-off

of loan amounts (net of recoveries).

Loans are charged off against the allowance when

management believes the uncollectability of a loan balance is confirmed.

Expected recoveries do not exceed the aggregate of amounts

previously charged-off and expected to be charged

-off.

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

exposures is provided through the credit loss provision but recorded

as a separate liability included in other liabilities.

Management estimates the allowance balance using relevant available

information, from internal and external sources relating to past

events, current conditions, and reasonable and supportable forecasts.

Historical loan default and loss experience provides the basis for

the estimation of expected credit losses.

Adjustments to historical loss information incorporate management’s

view of current

conditions and forecasts.

At September 30, 2025, the allowance for credit losses for loans HFI totaled

$30.2 million compared to $29.9 million at June 30, 2025

and $29.3 million at December 31, 2024. Activity within the allowance

is provided in Note 3 – Loans Held for Investment and

Allowance for Credit Losses in the Notes to Consolidated Financial Statements.

The increase in the allowance over June 30, 2025 and

December 31, 2024 was primarily attributable to qualitative factor

adjustments that were partially offset by lower loan balances.

September 30, 2025, the allowance represented 1.17% of loans HFI compared

to 1.13% at June 30, 2025, and 1.10% at December 31,

2024.

At September 30, 2025, the allowance for credit losses for unfunded

commitments totaled $2.1 million compared to $1.7 million and

$2.2 million at June 30, 2025 and December 31, 2024, respectively.

The change in the allowance for unfunded commitments from

both prior periods reflected variances in the level of unfunded loan commitments.

The allowance for unfunded commitments is

recorded in other liabilities.

Deposits

Average total

deposits were $3.612 billion for the third quarter of 2025, a decrease of $68.4 million,

or 1.86%, from the second quarter

of 2025 and an increase of $11.9 million, or 0.33%,

over the fourth quarter of 2024.

Compared to the second quarter of 2025, the

decrease was attributable to lower public funds balances (primarily NOW accounts)

due to the seasonal reduction in those balances,

partially offset by higher core deposit balances (primarily

noninterest bearing checking, money market accounts, and certificates of

deposit).

The increase over the fourth quarter of 2024 reflected strong growth in core deposit balances,

partially offset by the seasonal

decline in public fund balances.

At September 30, 2025, total deposits were $3.615 billion, a decrease of $89.9

million, or 2.4%, from June 30, 2025, and a decrease of

$57.1 million, or 1.6%, from December 31, 2024.

The decrease compared to both prior periods was due to a decline in public fund

deposits, partially offset by growth in our core deposits.

Public funds totaled $497.9 million at September 30, 2025, $596.6

million at

June 30, 2025, and $660.9 million at December 31, 2024.

Business deposit transaction accounts classified as repurchase agreements

averaged $22.0 million for the third quarter of 2025, a

decrease of $0.6 million from the second quarter of 2025 and a decrease

of $6.1 million from the fourth quarter of 2024. At September

30, 2025, repurchase agreement balances were $25.6 million compared

to $21.8 million at June 30, 2025 and $26.2 million at

December 31, 2024.

We continue

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

environment.

MARKET RISK AND INTEREST RATE

SENSITIVITY

Market Risk and Interest Rate Sensitivity

Overview.

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

commodity prices, and equity prices.

We have risk

management policies designed to monitor and limit exposure to market

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

significant market risk involving exchange rates, commodity prices, or

equity prices.

In asset and liability management activities, our

policies are designed to minimize structural interest rate risk.

Interest Rate Risk Management.

Our net income is largely dependent on net interest income.

Net interest income is susceptible to

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

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

When

interest-bearing liabilities mature or reprice more quickly

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

market rates of interest could adversely affect net interest

income.

Similarly, when interest-earning

assets mature or reprice more

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

result in a decrease in net interest income.

Net interest

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

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

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

equity.

We have established

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

which is administered by

management’s Asset Liability Management

Committee (“ALCO”).

The policy establishes limits of risk, which are quantitative

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

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

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

in interest rates for maturities from one

day to 30 years.

We measure the potential

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

earnings, long-

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

computer modeling.

The simulation model captures

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

embedded in investment and loan portfolio contracts.

As with

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

inherent in the interest rate modeling methodology used by

us.

When interest rates change, actual movements in different categories

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

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

from assumptions used in the model.

Finally, the

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

on adjustable-rate loan clients’ ability to service their

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

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

possibilities to indicate the inherent interest rate risk.

We apply instantaneous,

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

400bp to up

400bps at least once per quarter, with

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

our

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

We augment our interest rate

shock analysis with

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

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

parallel shift).

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

uncertain or when other

business conditions so dictate.

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

12-month and 24-month periods

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

at the various interest rate shock levels. We

attempt to

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

liabilities with a similar volume of floating-rate assets,

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

reasonably matched, by managing the mix of our core

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

basis.

Analysis.

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

indicators of an institution’s short-term

performance in alternative rate environments.

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

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

ESTIMATED CHANGES

IN NET INTEREST INCOME

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%

September 30, 2025

18.9%

14.2%

9.5%

4.9%

-5.3%

-11.3%

-17.9%

-23.8%

June 30, 2025

19.2%

14.4%

9.6%

5.0%

-5.3%

-11.1%

-17.5%

-23.3%

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%

September 30, 2025

37.7%

29.5%

21.1%

13.1%

-5.1%

-15.9%

-28.1%

-39.1%

June 30, 2025

39.3%

31.0%

22.5%

14.4%

-3.8%

-14.4%

-26.2%

-37.0%

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

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

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

margin of the Company,

while declining rate

environments

will have a negative impact on the net interest margin.

Compared to the second quarter of 2025, these metrics became

slightly less favorable primarily due to a change in asset mix favoring

variable rate overnight funds, making us more asset sensitive

with slightly more exposure to falling rates.

The instantaneous parallel rate shock results over the next 12-month and 24-month

periods are outside of policy in the rates down 200 bps, 300 bps,

and 400 bps scenarios

largely due to the limited ability to decrease

deposit rates the full extent of this rate change.

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

by considering the effects of changes in interest rates on all

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

assets and liabilities. The difference between these

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

which in theory approximates the fair value of our net

assets.

ESTIMATED CHANGES

IN ECONOMIC VALUE

OF EQUITY

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%

September 30, 2025

34.2%

27.6%

19.6%

10.5%

-12.0%

-24.7%

-36.2%

-40.7%

June 30, 2025

29.4%

23.9%

17.1%

9.2%

-11.5%

-23.9%

-34.8%

-40.8%

EVE Ratio (policy minimum 5.0%)

32.1%

30.0%

27.7%

25.2%

19.4%

16.3%

13.6%

12.5%

At September 30, 2025, the economic value of equity was favorable

in all rising rate environments and unfavorable in the falling rate

environments.

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

the policy minimum of 5.0%

in each shock scenario.

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

additional simulations will be analyzed to

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

in mix of our financial assets and liabilities measured over

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

LIQUIDITY AND CAPITAL

RESOURCES

Liquidity

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

cash needs.

Our objective in managing our liquidity is to

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

other liabilities in accordance with their

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

Our liquidity strategy is guided by policies that are formulated and

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

the marketability of assets, the sources and stability of

funding and the level of unfunded commitments.

We regularly evaluate

all of our various funding sources with an emphasis on

accessibility, stability,

reliability and cost-effectiveness.

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

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

repurchase agreements, federal funds purchased and

FHLB borrowings.

We believe that the cash

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

are

sufficient to meet our future operating capital and funding requirements.

At September 30, 2025, we had the ability to generate approximately $1.625 billion

(excludes overnight funds position of $398

million) in additional liquidity through various sources including

various federal funds purchased lines, Federal Home Loan Bank

borrowings, the Federal Reserve Discount Window,

and brokered deposits. We

recognize the importance of maintaining liquidity and

have developed a Contingent Liquidity Plan, which addresses various liquidity

stress levels and our response and action based on the

level of severity.

We periodically test our

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

the

liquidity level increases that certain credit facilities may no longer be available.

We conduct a liquidity

stress test on a quarterly basis

based on events that could potentially occur at the Bank and report results to

our ALCO, MROC,

EROC, and Board of Directors.

believe the liquidity available to us at September 30, 2025 was sufficient

to meet our on-going needs and execute our business

strategy.

We also view our

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

portfolio as collateral for

borrowings or deposits, and/or to sell selected securities. Our portfolio consists of

debt issued by the U.S. Treasury,

U.S. governmental

agencies, municipal governments, and corporate entities. Additional

information on our investment portfolio is provided within Note 2

– Investment Securities.

The Bank maintained an average net overnight funds (i.e., deposits with banks

plus FED funds sold less FED funds purchased) sold

position of $356.2 million in the third quarter of 2025 compared to

$348.8 million in the second quarter of 2025 and $298.3 million in

the fourth quarter of 2024.

Compared to the second quarter of 2025, the slight increase reflected lower average

loan and investment

security balances,

partially offset by lower average deposit balances.

The increase over the fourth quarter of 2024 was primarily due

to lower average loan balances.

We expect our

capital expenditures will be approximately $10.0 million over the next 12 months,

which will primarily consist of

construction of a new office, office remodeling,

office equipment/furniture, and technology purchases.

Management expects that

these capital expenditures will be funded with existing resources without impairing

our ability to meet our on-going obligations.

Borrowings

Average short

-term borrowings totaled $34.7 million for the third quarter of 2025 compared

to $33.1 million for the second quarter of

2025 and $34.5 million for the fourth quarter of 2024.

The variances compared to both prior periods were primarily due to mortgage

warehouse borrowing activity.

Additional detail on warehouse borrowings is provided in Note 4 –

Mortgage Banking Activities in the

Consolidated Financial Statements.

We have issued two

junior subordinated deferrable interest notes to our wholly owned

Delaware statutory trusts.

The first note for

$30.9 million was issued to CCBG Capital Trust I in

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

In the second

quarter of 2025, we made a principal payment of $5.1 million on this note.

The second note for $32.0 million was issued to CCBG

Capital Trust II in May 2005.

In the second quarter of 2025, we made a principal payment of $5.1

million on this note.

The interest

payment for the CCBG Capital Trust I borrowing

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

SOFR (secured overnight financing rate) plus a margin of

1.90%. This note matures on December 31, 2034. The interest payment

for

the CCBG Capital Trust II borrowing is due quarterly

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

SOFR plus a margin of 1.80%.

This note matures on June 15, 2035.

The proceeds from these borrowings were used to partially fund

acquisitions.

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

default or if we elect to defer interest

on the note, we may not, with certain exceptions, declare or pay dividends or make distributions

on our capital stock or purchase or

acquire any of our capital stock.

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 (three-month

CME Term SOFR plus spread)

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

on the interest rate swap

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

Statements.

Capital

Our capital ratios are presented in the Selected Quarterly Financial

Data table on page 35.

At September 30, 2025, our regulatory

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

under the Basel III capital standards.

Shareowners’ equity was $540.6 million at September 30, 2025,

compared to $526.4 million at June 30, 2025, and $495.3 million at

December 31, 2024.

For the first nine months of 2025, shareowners’ equity was positively impacted by net

income attributable to

shareowners of $47.9 million, a net $7.7 million decrease in the accumulated

other comprehensive loss, the issuance of common stock

of $2.9 million, and stock compensation accretion of $1.4 million.

The net favorable change in accumulated other comprehensive loss

reflected a $8.8 million decrease in the investment securities loss that was partially offset

by a $1.1 million decrease in the fair value

of the interest rate swap related to subordinated debt.

Shareowners’ equity was reduced by common stock dividends of $12.6 million

($0.74 per share) and net adjustments totaling $2.0 million related to transactions

under our stock compensation plans.

At September 30, 2025, our total risk-based capital ratio was 20.59%

compared to 19.60% at June 30, 2025, and 18.64% at December

31, 2024.

Our common equity tier 1 capital ratio was 17.73%, 16.81%, and 15.54%, respectively,

on these dates.

Our leverage ratio

was 11.64%, 11.14%,

and 11.05%, respectively,

on these dates.

At September 30, 2025, all our regulatory capital ratios exceeded

the

thresholds to be designated as “well-capitalized” under the Basel III

capital standards.

Further, our tangible common equity ratio

(non-GAAP financial measure) was 10.66% at September 30, 2025, compared to 10.09%

and 9.51% at June 30, 2025, and December

31, 2024, respectively.

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

liability through other comprehensive income in

accordance with Accounting Standards Codification

Topic 715. At September 30, 2025,

the net pension asset reflected in other

comprehensive income was $9.7 million comparable to

June 30, 2025 and December 31, 2024.

This liability is re-measured annually

on December 31

based on an actuarial calculation of our pension liability.

Significant assumptions used in calculating the liability

include the weighted average discount rate used to measure the present

value of the pension liability, the

weighted average expected

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

increases, all of which will vary when

re-measured. The discount rate assumption used to calculate the pension

liability is subject to long-term corporate bond rates at

December 31

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

Policies and Estimates”

in Part II, Item7. Management’s Discussion

and Analysis of Financial Condition and Results of Operations, of

our 2024 Form 10-K.

OFF-BALANCE SHEET ARRANGEMENTS

We are a party

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

course of business to meet the financing needs of our

clients.

At September 30, 2025, we had $705.3 million in commitments to extend

credit and $7.1 million in standby letters of credit.

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

any condition established in the

contract.

Commitments generally have fixed expiration dates or other termination

clauses and may require payment of a fee.

Since

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

the total commitment amounts do not necessarily

represent future cash requirements.

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

the performance

of a client to a third party.

We use the same credit

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

balance sheet instruments.

If commitments arising from these financial instruments continue to require

funding at historical levels, management does not

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

obligations.

In the event these commitments

require funding in excess of historical levels, management believes current

liquidity, advances available from the

FHLB and the

Federal Reserve, and investment security maturities provide a sufficient

source of funds to meet these commitments.

Certain agreements provide that the commitments are unconditionally

cancellable by the bank and for those agreements no allowance

for credit losses has been recorded.

have recorded an allowance for credit losses on loan commitments that are not

unconditionally cancellable by the Bank, which is included in other

liabilities on the Consolidated Statements of Financial Condition

and totaled $2.1 million at September 30, 2025.

CRITICAL ACCOUNTING POLICIES

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

Financial Statements included in our 2024 Form 10-K.

The preparation of our Consolidated Financial Statements

in accordance with GAAP and reporting practices applicable to the banking

industry requires us to make estimates and assumptions that affect

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

and to disclose contingent assets and liabilities.

Actual results could differ from those estimates.

We have identified

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

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

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

to the portrayal of our financial condition and results, and

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

the effects of matters that are

inherently uncertain.

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

used, are described

throughout this Item 2, Management’s

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

Part II, Item 7,

Management’s Discussion and Analysis

of Financial Condition and Results of Operations included

in our 2024 Form 10-K.

TABLE I

AVERAGE BALANCES & INTEREST RATES (UNAUDITED)

Three Months Ended September 30,

Nine Months Ended September 30,

2025

2024

2025

2024

Average

(Dollars in Thousands)

Balances

Interest

Rate

Balances

Interest

Rate

Balances

Interest

Rate

Balances

Interest

Rate

Assets:

Loans Held for Sale

25,276

425

6.68

24,570

720

7.49

24,226

1,390

7.67

26,050

1,800

6.22

Loans Held for Investment

(1)(2)

2,606,213

39,894

6.07

2,693,533

40,985

6.09

2,641,346

120,359

6.09

2,716,220

121,864

6.02

Taxable Securities

992,260

7,175

2.88

907,610

4,148

1.82

993,460

19,644

2.64

926,241

12,385

1.78

Tax-Exempt Securities

(2)

1,620

4.44

846

4.33

1,313

4.43

848

4.34

Federal Funds Sold and Interest Bearing

Deposits

356,161

3,964

4.42

256,855

3,514

5.44

342,094

11,369

4.44

220,056

9,031

5.48

Total Earning Assets

3,981,530

51,476

5.12

3,883,414

49,377

5.06

4,002,439

152,805

5.10

3,889,415

145,108

4.98

Cash & Due From Banks

65,085

70,994

68,074

73,843

Allowance For Credit Losses

(30,342)

(29,905)

(30,282)

(29,833)

Other Assets

301,678

291,359

300,788

292,762

TOTAL ASSETS

4,317,951

4,215,862

4,341,019

4,226,187

Liabilities:

Noninterest Bearing Deposits

1,314,560

1,332,305

1,324,753

1,340,981

NOW Accounts

1,198,124

3,782

1.25

1,145,544

4,087

1.42

1,224,402

11,386

1.24

1,184,596

13,009

1.47

Money Market Accounts

416,656

2,090

1.99

418,625

2,694

2.56

422,817

6,617

2.09

393,294

7,431

2.52

Savings Accounts

503,189

159

0.13

512,098

180

0.14

506,255

509

0.13

523,573

544

0.14

Other Time Deposits

179,802

1,234

2.72

163,462

1,262

3.07

174,418

3,541

2.71

153,991

3,412

2.96

Total Interest Bearing Deposits

2,297,771

7,265

1.25

2,239,729

8,223

1.46

2,327,892

22,053

1.27

2,255,454

24,396

1.44

Total Deposits

3,612,331

7,265

0.80

3,572,034

8,223

0.92

3,652,645

22,053

0.81

3,596,435

24,396

0.91

Repurchase Agreements

21,966

158

2.86

27,126

221

3.24

24,752

478

2.58

26,619

639

3.21

Other Short-Term Borrowings

12,753

1.82

2,673

7.63

10,251

354

4.62

4,334

159

4.88

Subordinated Notes Payable

42,582

383

3.52

52,887

610

4.52

49,113

1,473

3.95

52,887

1,868

4.64

Other Long-Term Borrowings

681

5.55

795

5.55

755

4.50

447

5.16

Total Interest Bearing Liabilities

2,375,753

7,874

1.32

2,323,210

9,117

1.56

2,412,763

24,384

1.35

2,339,741

27,079

1.55

Other Liabilities

85,422

73,767

75,664

71,574

TOTAL LIABILITIES

3,775,735

3,729,282

3,813,180

3,752,296

Temporary Equity

6,443

6,694

TOTAL SHAREOWNERS’ EQUITY

542,216

480,137

527,839

467,197

TOTAL LIABILITIES, TEMPORARY

AND SHAREOWNERS’ EQUITY

4,317,951

4,215,862

4,341,019

4,226,187

Interest Rate Spread

3.81

3.49

3.75

3.43

Net Interest Income

43,602

40,260

128,421

118,029

Net Interest Margin

(3)

4.34

4.12

4.28

4.05

(1)

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

Interest income includes loan costs of $0.4 million and

$1.1 million for the three and nine months ended September

30, 2025,

and loan cost of $0.2 and $0.5 million for the three and nine

month periods ended September 30, 2024.

(2)

Interest income includes the effects of taxable equivalent adjustments

using a 21% Federal tax rate.

(3)

Taxable equivalent net interest income divided by average earning assets.

Item 3.

QUANTITATIVE

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

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

Discussion and Analysis of Financial Condition and Results of

Operations, above, which is incorporated herein by reference.

Management has determined that no additional disclosures are

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

since December 31, 2024.

Item 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

At September 30, 2025, the end of the period covered by this Form 10-Q, our management,

including our Chief Executive Officer and

Chief Financial Officer, evaluated

the effectiveness of our disclosure controls and procedures (as defined

in Rule 13a-15(e) under the

Securities Exchange Act of 1934).

Based upon that evaluation, our Chief Executive Officer and Chief

Financial Officer concluded

that, as of the end of the period covered by this report,

our disclosure controls and procedures were effective.

Our management, including our Chief Executive Officer

and Chief Financial Officer, has reviewed

our internal control over financial

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

Act of 1934). During the quarter ended September 30, 2025,

there have been no significant changes in our internal control over

financial reporting during our most recently completed fiscal

quarter that have materially affected, or are reasonably likely to

materially affect, our internal control over financial reporting.

PART

II.

OTHER INFORMATION

Item 1.

Legal Proceedings

We are party

to lawsuits arising out of the normal course of business.

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

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

on our consolidated results of operations,

financial position, or cash flows.

Item 1A.

Risk Factors

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

the factors discussed in Part I,

Item 1A. “Risk Factors” in our 2024 Form 10-K, as updated in our subsequent

quarterly reports. The risks described in our 2024 Form

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

Additional risks and uncertainties not currently known to

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

our business, financial condition and/or operating

results.

Item 2.

Unregistered Sales of Equity Securities and Use of

Proceeds

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosure

Not Applicable.

Item 5.

Other Information

During the three months ended September 30, 2025, none

of our directors or officers (as defined in Rule 16a-1(f) under the

Exchange

Act)

adopted

, modified or

terminated

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

intended to satisfy the affirmative defense conditions of Rule 10b5-1(c)

under the Exchange Act or any “

non-Rule

10b5-1

trading

arrangement” as defined in Item 408(c) of Regulation S-K.

Item 6.

Exhibits

(A)

Exhibits

3.1

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

the Registrant’s

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

3.2

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

Form 8-K (filed

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

31.1

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

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

31.2

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

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

32.1

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

to 18 U.S.C. Section 1350.

32.2

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

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

101.SCH

XBRL Taxonomy

Extension Schema Document

101.CAL

XBRL Taxonomy

Extension Calculation Linkbase Document

101.LAB

XBRL Taxonomy

Extension Label Linkbase Document

101.PRE

XBRL Taxonomy

Extension Presentation Linkbase Document

101.DEF

XBRL Taxonomy

Extension Definition Linkbase Document

104

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

SIGNATURES

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

duly caused this Report to be signed on its

behalf by the undersigned Chief Financial Officer hereunto duly

authorized.

CAPITAL CITY

BANK GROUP,

INC.

(Registrant)

/s/ Jeptha E. Larkin

Jeptha E. Larkin

Executive Vice President

and Chief Financial Officer

(Mr. Larkin is the Principal Financial

Officer and has

been duly authorized to sign on behalf of the Registrant)

Date: October 31, 2025

exhibit311

Exhibit 31.1

Certification of CEO Pursuant to Securities Exchange Act

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

Section 302 of the Sarbanes-Oxley Act of 2002

I, William G. Smith, Jr.,

certify that:

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

Inc.;

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

a material fact or omit to state a material fact

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

which such statements were made, not misleading

with respect to the period covered by this report;

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

included in this report, fairly present in all

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

of the registrant as of, and for, the periods

presented in this report;

The registrant’s other certifying

officer and I are responsible for establishing and maintaining

disclosure controls and

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

and internal control over financial reporting (as

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

(a)

Designed such disclosure controls and procedures, or caused such disclosure

controls and procedures to be designed

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

registrant, including its consolidated

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

during the period in which this report

is being prepared;

(b)

Designed such internal control over financial reporting, or caused such

internal control over financial reporting to be

designed under our supervision, to provide reasonable assurance regarding

the reliability of financial reporting and

the preparation of financial statements for external purposes in accordance with

generally accepted accounting

principles;

(c)

Evaluated the effectiveness of the registrant’s

disclosure controls and procedures and presented in this report our

conclusions about the effectiveness of the disclosure controls and procedures,

as of the end of the period covered by

this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s

internal control over financial reporting that occurred during

the registrant’s most recent fiscal quarter

that has materially affected, or is reasonably likely to materially

affect, the

registrant’s internal control

over financial reporting; and

The registrant’s other certifying

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

of internal control over

financial reporting, to the registrant’s auditors

and the audit committee of the registrant’s

board of directors (or persons

performing the equivalent functions):

(a)

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

internal control over financial

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

ability to record, process, summarize and

report financial information; and

(b)

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

employees who have a significant role in the

registrant’s internal control

over financial reporting.

/s/ William G. Smith, Jr.

William G. Smith, Jr.

Chairman and Chief Executive Officer

Date: October 31, 2025

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 quarterly report on Form 10-Q of Capital City Bank Group,

Inc.;

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

a material fact or omit to state a material fact

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

which such statements were made, not misleading

with respect to the period covered by this report;

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

included in this report, fairly present in all

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

of the registrant as of, and for, the periods

presented in this report;

The registrant’s other certifying

officer and I are responsible for establishing and maintaining

disclosure controls and

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

and internal control over financial reporting (as

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

(a)

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

and procedures to be designed

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

registrant, including its consolidated

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

during the period in which this report

is being prepared;

(b)

Designed such internal control over financial reporting, or caused such

internal control over financial reporting to be

designed under our supervision, to provide reasonable assurance regarding

the reliability of financial reporting and

the preparation of financial statements for external purposes in accordance with

generally accepted accounting

principles;

(c)

Evaluated the effectiveness of the registrant’s

disclosure controls and procedures and presented in this report our

conclusions about the effectiveness of the disclosure controls and procedures,

as of the end of the period covered by

this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s

internal control over financial reporting that occurred during

the registrant’s most recent fiscal quarter

that has materially affected, or is reasonably likely to materially

affect, the

registrant’s internal control

over financial reporting; and

The registrant’s other certifying

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

of internal control over

financial reporting, to the registrant’s auditors

and the audit committee of the registrant’s

board of directors (or persons

performing the equivalent functions):

(a)

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

internal control over financial

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

ability to record, process, summarize and

report financial information; and

(b)

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

employees who have a significant role in the

registrant’s internal control

over financial reporting.

/s/ Jeptha E. Larkin

Jeptha E. Larkin

Executive Vice President

and

Chief Financial Officer

Date: October 31, 2025

exhibit321

Exhibit 32.1

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

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

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

Jr.,

Chairman and Chief Executive Officer of Capital City Bank Group,

Inc., hereby certify that to my knowledge (1) this Quarterly

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

30, 2025, 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 and Chief Executive Officer

Date: October 31, 2025

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

authenticating, acknowledging or otherwise

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

of this written statement required by Section 906, has

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

furnished to the Securities and Exchange Commission or its

staff upon request.

exhibit322

Exhibit 32.2

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

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

the Sarbanes-Oxley Act of 2002, I, Jeptha E. Larkin,

Executive Vice President

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

to my knowledge (1) this

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

30, 2025, 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: October 31, 2025

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

authenticating, acknowledging or otherwise

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

of this written statement required by Section 906, has

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

furnished to the Securities and Exchange Commission or its

staff upon request.