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

March 31, 2024

☐

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 June 28, 2024,

16,941,553

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 THREE MONTHS ENDED MARCH 31, 2024

TABLE OF CONTENTS

PART I –

Financial Information

Page

Item 1.

Consolidated Financial Statements (Unaudited)

Consolidated Statements of Financial Condition – March 31, 2024 and December 31, 2023

Consolidated Statements of Income – Three Months Ended March 31, 2024 and 2023

Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2024 and 2023

Consolidated Statements of Changes in Shareowners’ Equity – Three Months Ended March 31, 2024 and 2023

Consolidated Statements of Cash Flows – Three Months Ended March 31, 2024 and 2023

Notes to Consolidated Financial Statements

Item 2.

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

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

Item 4.

Controls and Procedures

PART II –

Other Information

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosure

Item 5.

Other Information

Item 6.

Exhibits

Signatures

INTRODUCTORY NOTE

Caution Concerning Forward-Looking Statements

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

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

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

which are beyond our control.

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

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

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

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

Our actual future results may differ materially from

those set forth in our forward-looking statements.

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/A for

the year

ended December 31,

2023 (the “2023

Form 10-K/A”), as

updated in our

subsequent quarterly reports

filed on Form

10-Q, as well

as, among

other factors:

●

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

●

legislative or regulatory changes;

●

adverse developments in the financial services industry generally, such as bank failures and any related impact on depositor behavior;

●

the effects of changes in the level of checking or savings account deposits and the competition for deposits on our funding costs, net

interest margin and ability to replace maturing deposits and advances, as necessary;

●

inflation, interest rate, market and monetary fluctuations;

●

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

loans and related interest rate risk or price risk resulting from retaining mortgage servicing rights and the potential effects of higher interest

rates on our loan origination volumes;

●

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

●

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

●

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

deferred tax asset valuation and pension plan;

●

changes in our liquidity position;

●

changes in accounting principles, policies, practices or guidelines;

●

the frequency and magnitude of foreclosure of our loans;

●

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

●

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

●

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

●

changes in the securities and real estate markets;

●

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

●

our ability to retain key personnel;

●

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

as the COVID-19 pandemic), military conflict, terrorism, civil unrest or other geopolitical events;

●

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

operate;

●

the impact of the restatement of our previously issued consolidated statements of cash flows for the years ended December 31, 2021, 2022

and 2023 and for each of the three month periods ended March 31, 2022 and 2023, six month periods ended June 30, 2022 and 2023 and

nine month periods ended September 30, 2022 and 2023;

●

any deficiencies in the processes undertaken to effect such restatements and to identify and correct all errors in our historical financial

statements that may require restatement;

●

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

remediate our existing material weaknesses in our internal controls deemed ineffective;

●

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

●

increased competition and its effect on pricing;

●

technological changes;

●

the cost and effects of cybersecurity incidents or other failures, interruptions, or security breaches of our systems of those of our customers

or third-party providers;

●

the outcomes of litigation or regulatory proceedings;

●

negative publicity and the impact on our reputation;

●

changes in consumer spending and saving habits;

●

growth and profitability of our noninterest income;

●

the limited trading activity of our common stock;

●

the concentration of ownership of our common stock;

●

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

●

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

●

our ability to manage the risks involved in the foregoing.

However, other factors besides those listed in

Item 1A Risk Factors

or discussed in this 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)

March 31,

December 31,

(Dollars in Thousands, Except Par Value)

2024

2023

ASSETS

Cash and Due From Banks

73,642

83,118

Federal Funds Sold and Interest Bearing Deposits

231,047

228,949

Total Cash and Cash Equivalents

304,689

312,067

Investment Securities, Available

for Sale, at fair value (amortized cost of $

358,416

and $

367,747

)

327,338

337,902

Investment Securities, Held to Maturity (fair value of $

569,682

and $

591,751

)

603,386

625,022

Equity Securities

3,445

3,450

Total Investment

Securities

934,169

966,374

Loans Held For Sale, at fair value

24,705

28,211

Loans Held for Investment

2,731,172

2,733,918

Allowance for Credit Losses

(29,329)

(29,941)

Loans Held for Investment, Net

2,701,843

2,703,977

Premises and Equipment, Net

81,452

81,266

Goodwill and Other Intangibles

92,893

92,933

Other Real Estate Owned

Other Assets

120,170

119,648

Total Assets

4,259,922

4,304,477

LIABILITIES

Deposits:

Noninterest Bearing Deposits

1,361,939

1,377,934

Interest Bearing Deposits

2,292,862

2,323,888

Total Deposits

3,654,801

3,701,822

Short-Term

Borrowings

31,886

35,341

Subordinated Notes Payable

52,887

Other Long-Term

Borrowings

265

315

Other Liabilities

65,181

66,080

Total Liabilities

3,805,020

3,856,445

Temporary Equity

6,588

7,407

SHAREOWNERS’ EQUITY

Preferred Stock, $

0.01

par value;

3,000,000

shares authorized;

shares issued and outstanding

Common Stock, $

0.01

par value;

90,000,000

shares authorized;

16,928,507

and

16,950,222

shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

169

170

Additional Paid-In Capital

34,861

36,326

Retained Earnings

435,364

426,275

Accumulated Other Comprehensive Loss, net of tax

(22,080)

(22,146)

Total Shareowners’

Equity

448,314

440,625

Total Liabilities, Temporary

Equity, and Shareowners’ Equity

4,259,922

4,304,477

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 March 31,

(Dollars in Thousands, Except Per Share

Data)

2024

2023

INTEREST INCOME

Loans, including Fees

40,683

34,891

Investment Securities:

Taxable Securities

4,238

4,912

Tax Exempt Securities

Federal Funds Sold and Interest Bearing Deposits

1,893

4,111

Total Interest Income

46,820

43,926

INTEREST EXPENSE

Deposits

7,594

2,488

Short-Term

Borrowings

240

461

Subordinated Notes Payable

628

571

Other Long-Term

Borrowings

Total Interest Expense

8,465

3,526

NET INTEREST INCOME

38,355

40,400

Provision for Credit Losses

920

3,099

Net Interest Income After Provision for Credit Losses

37,435

37,301

NONINTEREST INCOME

Deposit Fees

5,250

5,239

Bank Card Fees

3,620

3,726

Wealth Management

Fees

4,682

3,928

Mortgage Banking Revenues

2,878

2,871

Other

1,667

1,994

Total Noninterest

Income

18,097

17,758

NONINTEREST EXPENSE

Compensation

24,407

23,524

Occupancy, Net

6,994

6,762

Other

8,770

7,389

Total Noninterest

Expense

40,171

37,675

INCOME BEFORE INCOME TAXES

15,361

17,384

Income Tax Expense

3,536

3,710

NET INCOME

11,825

13,674

Loss Attributable to Noncontrolling Interests

732

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

12,557

13,709

BASIC NET INCOME PER SHARE

0.74

0.81

DILUTED NET INCOME PER SHARE

0.74

0.80

Average Basic Shares

Outstanding

16,951

17,016

Average Diluted

Shares Outstanding

16,969

17,045

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended

March 31,

(Dollars in Thousands)

2024

2023

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

12,557

13,709

Other comprehensive income, before

tax:

Investment Securities:

Change in net unrealized loss on securities available for sale

(1,175)

6,808

Amortization of unrealized losses on securities transferred from available

for sale to held to maturity

891

865

Derivative:

Change in net unrealized gain on effective cash flow

derivative

437

(801)

Other comprehensive income, before

tax

153

6,872

Deferred tax expense related to other comprehensive income

1,719

Other comprehensive income, net of tax

5,153

TOTAL COMPREHENSIVE

INCOME

12,623

18,862

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF CHANGES IN SHAREOWNERS’ EQUITY

(Unaudited)

Accumulated

Other

Additional

Comprehensive

Common

Paid-In

Retained

(Loss) Income,

(Dollars In Thousands, Except Share Data)

Outstanding

Stock

Capital

Earnings

Net of Taxes

Total

Balance, January 1, 2024

16,950,222

170

36,326

426,275

(22,146)

440,625

Net Income Attributable to Common Shareowners

12,557

Reclassification to Temporary Equity

(1)

Other Comprehensive Income, net of tax

Cash Dividends ($

0.2100

per share)

(3,555)

Repurchase of Common Stock

(82,540)

(1)

(2,329)

(2,330)

Stock Based Compensation

392

Stock Compensation Plan Transactions, net

60,825

472

Balance, March 31, 2024

16,928,507

169

34,861

435,364

(22,080)

448,314

Balance, January 1, 2023

16,986,785

170

37,331

387,009

(37,229)

387,281

Net Income Attributable to Common Shareowners

13,709

Other Comprehensive Income, net of tax

5,153

Cash Dividends ($

0.1800

per share)

(3,064)

Repurchase of Common Stock

(25,241)

(819)

Stock Based Compensation

536

Stock Compensation Plan Transactions, net

60,204

464

Balance, March 31, 2023

17,021,748

170

37,512

397,654

(32,076)

403,260

(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)

Three Months Ended March 31,

(Dollars in Thousands)

2024

2023

CASH FLOWS FROM OPERATING

ACTIVITIES

Net Income Attributable to Common Shareowners

12,557

13,709

Adjustments to Reconcile Net Income to

Cash Provided by Operating Activities:

Provision for Credit Losses

920

3,099

Depreciation

2,051

1,969

Amortization of Premiums, Discounts and Fees, net

953

1,067

Amortization of Intangible Asset

Originations of Loans Held-for-Sale

(105,717)

(75,626)

Proceeds From Sales of Loans Held-for-Sale

106,941

73,706

Mortgage Banking Revenues

(2,878)

(2,871)

Net Additions for Capitalized Mortgage Servicing Rights

(88)

(91)

Stock Compensation

392

536

Net Tax Benefit from

Stock-Based Compensation

(5)

Deferred Income Taxes (Benefit)

(1,799)

(1,170)

Net Change in Operating Leases

166

(3)

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

(1,858)

Net Decrease (Increase) in Other Assets

2,598

(4,349)

Net (Decrease) Increase in Other Liabilities

(1,497)

12,471

Net Cash Provided By Operating Activities

14,647

20,629

CASH FLOWS FROM INVESTING ACTIVITIES

Securities Held to Maturity:

Purchases

(1,277)

Proceeds from Payments, Maturities, and Calls

22,827

8,820

Securities Available for

Sale:

Purchases

(1,100)

(2,017)

Proceeds from Payments, Maturities, and Calls

10,012

16,559

Equity Securities:

Net Decrease in Equity Securities

Purchases of Loans Held for Investment

(302)

(923)

Proceeds from Sales of Loans

13,116

20,084

Net Increase in Loans Held for Investment

(6,830)

(127,336)

Proceeds From Sales of Other Real Estate Owned

2,699

Purchases of Premises and Equipment

(2,237)

(1,886)

Net Cash Provided by (Used In) Investing Activities

34,214

(84,000)

CASH FLOWS FROM FINANCING ACTIVITIES

Net Decrease in Deposits

(47,021)

(115,397)

Net Decrease in Short-Term

Borrowings

(3,455)

(30,161)

Repayment of Other Long-Term

Borrowings

(50)

Dividends Paid

(3,555)

(3,064)

Payments to Repurchase Common Stock

(2,330)

(819)

Proceeds from Issuance of Common Stock Under Purchase Plans

172

164

Net Cash Used In by Financing Activities

(56,239)

(149,327)

NET DECREASE IN CASH AND CASH EQUIVALENTS

(7,378)

(212,698)

Cash and Cash Equivalents at Beginning of Period

312,067

600,650

Cash and Cash Equivalents at End of Period

304,689

387,952

Supplemental Cash Flow Disclosures:

Interest Paid

7,875

3,723

Income Taxes Paid

7,466

Supplemental Noncash Items:

Loans Transferred to Other Real Estate Owned

423

Loans Transferred from Held for Investment

to Held for Sale, net

7,956

16,859

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTE 1 –

BUSINESS AND BASIS OF PRESENTATION

Nature of Operations

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

banking and banking-

related services to individual and corporate clients through its subsidiary,

Capital City Bank, with banking offices located in Florida,

Georgia, and Alabama.

The Company is subject to competition from other financial institutions, is subject to

regulation by certain

government agencies and undergoes periodic examinations

by those regulatory authorities.

Basis of Presentation

The consolidated financial statements in this Quarterly Report on Form

10-Q include the accounts of CCBG

and its wholly owned subsidiary,

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

All material inter-company transactions and accounts

have been eliminated.

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

presentation.

The accompanying unaudited consolidated financial statements have

been prepared in accordance with generally accepted accounting

principles for interim financial information and with the instructions to Form

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

Accordingly,

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

accounting principles for complete financial

statements.

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

recurring accruals) considered necessary for a fair

presentation have been included.

The Consolidated Statement of Financial Condition at December

31, 2023 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 2023 Form

10-K/A.

Accounting Standards Updates

Adoption of New Accounting Standard,

On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2022-02,

“Financial Instruments – Credit Losses (Topic

326), Troubled Debt Restructurings and Vintage

Disclosures.” ASU 2022-02 eliminates

the accounting guidance for troubled debt restructurings in Accounting

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

Troubled Debt Restructurings by Creditors

”

for entities that have adopted the current expected credit loss model introduced

by ASU

2016-13, “Financial Instruments – Credit Losses (Topic

326), Measurement of Credit Losses on Financial Instruments.”

ASU 2022-

02 also requires that public business entities disclose current-period

gross charge-offs by year of origination for financing receivables

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

Instruments—Credit Losses—Measured at Amortized

Cost.”

Proposed Accounting Standards

ASU

2023-01, “Leases (Topic

842)

Common Control Arrangements.” ASU 2023-01 requires

entities to amortize leasehold improvements associated with common control

leases over the useful life to the common control group.

ASU 2023-01 also provides certain practical expedients applicable to private

companies and not-for-profit organizations. The

standard

is effective for the Company on January 1, 2024. As the Company

does not have any such common control leases, adoption of this

standard will not have any immediate impact on its consolidated financial statements and

related disclosures.

ASU No.

2023-02, “Investments—Equity Method and Joint Ventures

(Topic

323)

: Accounting for Investments in Tax

Credit

Structures Using the Proportional Amortization Method.” ASU 2023-02

is intended to improve the accounting and disclosures for

investments in tax credit structures. ASU 2023-02 allows entities to elect to account

for qualifying tax equity investments using the

proportional amortization method, regardless of the program giving

rise to the related income tax credits. Previously,

this method was

only available for qualifying tax equity investments in low-income

housing tax credit structures. The standard is effective for the

Company on January 1, 2024. As the Company does not have any such investments

in tax credit structures that are accounted for

using the proportional amortization method, adoption of this standard will not

have any immediate impact on its consolidated financial

statements or disclosures.

ASU No. 2023-06, “Disclosure Improvements

Codification Amendments in Response to the SEC’s

Disclosure Update and

Simplification Initiative.”

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. The Company is currently evaluating the provisions of

the amendments and the impact on its future consolidated

statements.

NOTE 2 –

INVESTMENT SECURITIES

Investment Portfolio Composition

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

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

and the corresponding amounts of gross

unrealized gains and losses.

Available for

Sale

Amortized

Unrealized

Allowance for

Fair

(Dollars in Thousands)

Cost

Gains

Losses

Credit Losses

Value

March 31, 2024

U.S. Government Treasury

24,977

1,226

23,751

U.S. Government Agency

147,113

8,142

139,048

States and Political Subdivisions

43,509

4,767

(39)

38,703

Mortgage-Backed Securities

(1)

71,465

10,918

60,548

Corporate Debt Securities

63,256

6,021

(43)

57,192

Other Securities

(2)

8,096

Total

358,416

31,074

(82)

327,338

December 31, 2023

U.S. Government Treasury

25,947

1,269

24,679

U.S. Government Agency

152,983

104

8,053

145,034

States and Political Subdivisions

43,951

4,861

(8)

39,083

Mortgage-Backed Securities

(1)

73,015

9,714

63,303

Corporate Debt Securities

63,600

6,031

(17)

57,552

Other Securities

(2)

8,251

Total

367,747

108

29,928

(25)

337,902

Held to Maturity

Amortized

Unrealized

Fair

(Dollars in Thousands)

Cost

Gains

Losses

Value

March 31, 2024

U.S. Government Treasury

442,762

16,288

426,474

Mortgage-Backed Securities

(1)

160,624

17,422

143,208

Total

603,386

33,710

569,682

December 31, 2023

U.S. Government Treasury

457,681

16,492

441,189

Mortgage-Backed Securities

(1)

167,341

16,792

150,562

Total

625,022

33,284

591,751

(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 March 31, 2024 and $

3.2

million and $

5.1

million, respectively,

at December 31, 2023.

At March 31, 2024 and December 31, 2023, the investment portfolio had $

3.4

million and $

3.5

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 $

452.5

million and $

578.5

million at March 31, 2024 and December 31, 2023, respectively,

were

pledged to secure public deposits and for other purposes.

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

to own capital stock in the FHLB based

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

advances.

FHLB stock, which is included in

other securities,

is pledged to secure FHLB advances.

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

redemption of this stock has historically been at par value.

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

stock in the Federal Reserve Bank of Atlanta

based on a specified ratio relative to the Bank’s

capital.

Federal Reserve Bank stock is carried at cost.

Investment Sales.

There were

sales of investment securities for the three months ended March 31, 2024 and March

31, 2023.

Maturity Distribution

At March 31, 2024, the Company’s

investment securities had the following maturity distribution based

contractual maturity.

Expected maturities may differ from contractual maturities because borrowers

may have the right to call or

prepay obligations.

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

agency securities are shown

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

Available for

Sale

Held to Maturity

(Dollars in Thousands)

Amortized Cost

Fair Value

Amortized Cost

Fair Value

Due in one year or less

31,877

31,210

136,137

133,613

Due after one year through five years

138,581

127,809

306,625

292,861

Due after five year through ten years

34,427

29,217

Mortgage-Backed Securities

71,465

60,548

160,624

143,208

U.S. Government Agency

73,970

70,458

Other Securities

8,096

Total

358,416

327,338

603,386

569,682

Unrealized Losses on Investment Securities.

The following table summarizes the available for sale investment securities with

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

unrealized loss position:

Less Than

Greater Than

12 Months

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

(Dollars in Thousands)

Value

Losses

Value

Losses

Value

Losses

March 31, 2024

Available for

Sale

U.S. Government Treasury

3,980

19,771

1,225

23,751

1,226

U.S. Government Agency

13,416

117,053

8,064

130,469

8,142

States and Political Subdivisions

1,296

37,445

4,731

38,741

4,767

Mortgage-Backed Securities

60,446

10,917

60,517

10,918

Corporate Debt Securities

57,236

6,021

57,236

6,021

Total

18,763

116

291,951

30,958

310,714

31,074

Held to Maturity

U.S. Government Treasury

144,380

3,214

282,094

13,074

426,474

16,288

Mortgage-Backed Securities

1,785

140,058

17,411

141,843

17,422

Total

146,165

3,225

422,152

30,485

568,317

33,710

December 31, 2023

Available for

Sale

U.S. Government Treasury

19,751

1,269

19,751

1,269

U.S. Government Agency

12,890

121,220

7,979

134,110

8,053

States and Political Subdivisions

1,149

37,785

4,830

38,934

4,861

Mortgage-Backed Securities

63,195

9,714

63,218

9,714

Corporate Debt Securities

57,568

6,031

57,568

6,031

Total

14,062

105

299,519

29,823

313,581

29,928

Held to Maturity

U.S. Government Treasury

153,880

3,178

287,310

13,314

441,190

16,492

Mortgage-Backed Securities

786

148,282

16,778

149,068

16,792

Total

154,666

3,192

435,592

30,092

590,258

33,284

At March 31, 2024, there were

876

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

64.8

million.

of these

positions are U.S. Treasury bonds and carry

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

690

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.

The remaining

101

positions (municipal

securities and corporate bonds) have a credit component.

At March 31, 2024, all collateralized mortgage obligation securities,

mortgage-backed securities,

Small Business Administration securities,

U.S. Agency, and U.S. Treasury

bonds held were AAA rated.

At March 31, 2024, corporate debt securities had an allowance for credit losses of $

43,000

and municipal securities had an allowance

of $

39,000

Credit Quality Indicators

The Company monitors the credit quality of its investment securities through

various risk management procedures, including the

monitoring of credit ratings.

A majority of the debt securities in the Company’s

investment portfolio were issued by a U.S.

government entity or agency and are either explicitly or implicitly guaranteed

by the U.S. government.

The Company believes the

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

of nonpayment of the amortized cost basis is

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)

March 31, 2024

December 31, 2023

Commercial, Financial and Agricultural

218,298

225,190

Real Estate – Construction

202,692

196,091

Real Estate – Commercial Mortgage

823,690

825,456

Real Estate – Residential

(1)

1,016,580

1,004,219

Real Estate – Home Equity

214,617

210,920

Consumer

(2)

255,295

272,042

Loans Held For Investment, Net of Unearned Income

2,731,172

2,733,918

(1)

Includes loans in process balances of $

4.4

million and $

3.2

million at March 31, 2024 and December 31,

2023, respectively.

(2)

Includes overdraft balances of $

1.1

million and $

1.0

million at March 31, 2024 and December 31,

2023, respectively.

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

included in loans were $

7.6

million at March 31, 2024 and $

7.8

million at December 31, 2023.

Accrued interest receivable on loans which is excluded from amortized

cost totaled $

10.2

million at March 31, 2024 and $

10.1

million

at December 31, 2023, and is reported separately in Other Assets.

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

loans, commercial real estate mortgage loans,

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

Atlanta and has pledged a blanket floating lien on all

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

borrowing capacity at the Federal Reserve Bank of

Atlanta.

Loan Purchase and Sales

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

estate secured adjustable-rate

loans from CCHL, a related party.

Residential loan purchases from CCHL totaled $

35.6

million and $

120.1

million for the three

months ended March 31, 2024 and March 31, 2023, respectively,

and were not credit impaired.

Allowance for Credit Losses

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

allowance for credit losses

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

involving loans that do not share risk characteristics and the

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

a pooled component for expected credit losses for pools

of loans that share similar risk characteristics.

This allowance methodology is discussed further in Note 1 – Significant

Accounting

Policies in the Company’s 2023 Form

10-K/A.

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

March 31, 2024

Beginning Balance

1,482

2,502

5,782

15,056

1,818

3,301

29,941

Provision for Credit Losses

284

(633)

(39)

(248)

130

1,388

882

Charge-Offs

(282)

(17)

(76)

(2,188)

(2,563)

Recoveries

204

763

1,069

Net (Charge-Offs) Recoveries

(241)

204

(52)

(1,425)

(1,494)

Ending Balance

1,525

1,869

5,947

14,828

1,896

3,264

29,329

Three Months Ended

March 31, 2023

Beginning Balance

1,506

2,654

4,815

10,741

1,864

3,488

25,068

Provision for Credit Losses

704

1,152

(10)

1,329

3,260

Charge-Offs

(164)

(120)

(2,366)

(2,650)

Recoveries

944

1,130

Net (Charge-Offs) Recoveries

(69)

(112)

(1,422)

(1,520)

Ending Balance

1,515

3,359

4,710

11,950

1,879

3,395

26,808

For the three months ended March 31, 2024, the allowance for HFI loans

decreased by $

0.6

million and reflected a provision expense

of $

0.9

million and net loan charge-offs of $

1.5

million.

The decrease was primarily due to favorable loan grade migration, lower loss

rates, and a combination of lower loan balances and shift in mix within the

portfolio.

For the three months ended March 31, 2023, the

allowance for HFI loans increased by $

1.7

million and reflected a provision expense of $

3.3

million and net loan charge-offs of $

1.5

million.

The increase was primarily driven by incremental reserves needed for loan growth.

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

March 31, 2024

Commercial, Financial and Agricultural

567

635

217,357

306

218,298

Real Estate – Construction

202,370

322

202,692

Real Estate – Commercial Mortgage

879

821,379

1,432

823,690

Real Estate – Residential

1,040

1,042

1,012,210

3,328

1,016,580

Real Estate – Home Equity

101

213,766

750

214,617

Consumer

2,412

323

2,735

251,900

660

255,295

Total

4,999

393

5,392

2,718,982

6,798

2,731,172

December 31, 2023

Commercial, Financial and Agricultural

311

105

416

224,463

311

225,190

Real Estate – Construction

206

195,563

322

196,091

Real Estate – Commercial Mortgage

794

823,753

909

825,456

Real Estate – Residential

670

704

1,000,525

2,990

1,004,219

Real Estate – Home Equity

268

209,653

999

210,920

Consumer

3,693

774

4,467

266,864

711

272,042

Total

5,942

913

6,855

2,720,821

6,242

2,733,918

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.

March 31, 2024

December 31, 2023

Nonaccrual

With No

With

90 + Days

With No

With

90 + Days

(Dollars in Thousands)

ACL

Still Accruing

ACL

Still Accruing

Commercial, Financial and Agricultural

306

311

Real Estate – Construction

322

Real Estate – Commercial Mortgage

1,295

137

781

128

Real Estate – Residential

2,102

1,226

1,705

1,285

Real Estate – Home Equity

323

427

999

Consumer

660

711

Total Nonaccrual

Loans

3,720

3,078

2,486

3,756

Collateral Dependent Loans.

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

loans.

March 31, 2024

December 31, 2023

Real Estate

Non Real Estate

Real Estate

Non Real Estate

(Dollars in Thousands)

Secured

Commercial, Financial and Agricultural

Real Estate – Construction

275

Real Estate – Commercial Mortgage

1,295

1,296

Real Estate – Residential

2,102

1,706

Real Estate – Home Equity

323

Consumer

Total Collateral Dependent

Loans

3,995

3,277

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 March 31, 2024 and December 31, 2023, the Company had $

0.8

million

and $

0.5

million, respectively, in 1-4 family

residential real estate loans for which formal foreclosure proceedings were in process.

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 March 31, 2024, and December 31, 2023, the Company did

t have any modified loans made to borrowers due to the borrower

experiencing financial difficulty.

Credit Risk Management

The Company has adopted comprehensive lending policies, underwriting standards and

loan review

procedures designed to maximize loan income within an acceptable level

of risk.

Management and the Board of Directors review and

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

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

concentrations of credit, loan delinquencies and nonperforming

loans and potential problem loans.

Management and the Credit Risk Oversight Committee periodically review

our lines of business to

monitor asset quality trends and the appropriateness of credit policies.

In addition, total borrower exposure limits are established and

concentration risk is monitored.

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

of risk, client concentrations, industry group, loan type, geographic area, or other

relevant classifications of loans.

Specific segments

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

have strategic plans in place to supplement

Board approved credit policies governing exposure limits and underwriting

standards.

Detailed below are the types of loans within

the Company’s loan portfolio

and risk characteristics unique to each.

Commercial, Financial, and Agricultural – Loans in this category

are primarily made based on identified cash flows of the borrower

with consideration given to underlying collateral and personal or

other guarantees.

Lending policy establishes debt service coverage

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

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

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

as accounts receivable, inventory,

equipment.

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

Loan to value ratios at origination are

governed by established policy guidelines.

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

construction loans, revolving and non-revolving credit lines

and construction/permanent loans made to individuals and investors to finance

the acquisition, development, construction or

rehabilitation of real property.

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

or project and generally

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

and commercial properties that are either owner-

occupied or investment in nature.

These properties may include either vacant or improved property.

Construction loans are generally

based upon estimates of costs and value associated with the completed project.

Collateral values are determined based upon third

party appraisals and evaluations.

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

The disbursement

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

as such these loans are closely monitored by on-

site inspections.

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

mortgage loans secured by property that is either

owner-occupied or investment in nature.

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

project

with consideration given to underlying real estate collateral and

personal guarantees.

Lending policy establishes debt service

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

Collateral values are determined based upon third party

appraisals and evaluations.

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

loan portfolio are made to borrowers that demonstrate the

ability to make scheduled payments with full consideration to underwriting

factors such as current income, employment status, current

assets, and other financial resources, credit history,

and the value of the collateral.

Collateral consists of mortgage liens on 1-4 family

residential properties.

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

The Company does not

originate sub-prime loans.

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

for legitimate purposes generally secured

by senior or junior mortgage liens on owner-occupied

1-4 family homes or vacation homes.

Borrower qualifications include

favorable credit history combined with supportive income and debt ratio

requirements and combined loan to value ratios within

established policy guidelines.

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

Consumer Loans – This loan portfolio includes personal installment loans, direct

and indirect automobile financing, and overdraft

lines of credit.

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

loans.

Lending policy

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

guidelines for verification of applicants’ income and

receipt of credit reports.

Credit Quality Indicators

As part of the ongoing monitoring of the Company’s

loan portfolio quality, management

categorizes loans

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

service their debt such as: current financial

information, historical payment performance, credit documentation,

and current economic and market trends, among other

factors.

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

procedures for individual loan

relationships over a predetermined amount and review of smaller balance homogenous

loan pools.

The Company uses the definitions

noted below for categorizing and managing its criticized loans.

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

and are not considered criticized.

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

weaknesses are apparent which, if not corrected, could

cause future problems.

Loans in this category may not meet required underwriting criteria and

have no mitigating factors.

More than

the ordinary amount of attention is warranted for these loans.

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

typically bring normal repayment into jeopardy.

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

weaknesses that affect the repayment capacity of the

borrower.

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

these loans.

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

as Substandard, with the characteristic that

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

existing facts, conditions, and values, highly

questionable and improbable.

Performing/Nonperforming – Loans within certain homogenous

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

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

activity.

The performing or nonperforming status

is updated on an on-going basis dependent upon improvement and

deterioration in credit quality.

The following tables summarize gross loans held for investment at March

31, 2024 and December 31, 2023 and current period gross

write-offs for the three months ended March 31, 2024

and twelve months ended December 31, 2023 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 March 31, 2024

2024

2023

2022

2021

2020

Prior

Loans

Total

Commercial, Financial,

Agriculture:

Pass

8,690

54,213

60,831

25,989

9,022

13,831

43,073

215,649

Special Mention

224

153

542

305

698

1,936

Substandard

158

142

161

713

Total

8,914

54,524

61,462

26,367

9,121

13,978

43,932

218,298

Current-Period Gross

Writeoffs

167

282

Real Estate -

Construction:

Pass

9,733

121,495

52,078

12,036

187

4,833

200,362

Special Mention

668

520

290

210

1,688

Substandard

568

642

Total

9,733

122,163

52,672

12,894

210

187

4,833

202,692

Real Estate -

Commercial Mortgage:

Pass

17,060

114,391

271,591

132,081

98,214

146,120

17,344

796,801

Special Mention

5,573

5,633

795

1,995

13,996

Substandard

1,204

6,599

2,271

2,120

699

12,893

Total

17,060

119,964

278,428

138,680

101,280

150,235

18,043

823,690

Real Estate - Residential:

Pass

38,629

358,059

390,522

80,624

35,045

95,003

8,509

1,006,391

Special Mention

267

494

163

1,094

Substandard

1,512

2,526

1,028

4,029

9,095

Total

38,629

358,326

392,122

83,232

36,567

99,195

8,509

1,016,580

Current-Period Gross

Writeoffs

Real Estate - Home

Equity:

Performing

507

130

2,388

210,775

213,868

Nonperforming

749

Total

507

130

2,388

211,524

214,617

Current-Period Gross

Writeoffs

Consumer:

Performing

11,402

63,285

80,641

63,277

18,244

10,864

6,304

254,017

Nonperforming

151

291

639

1,278

Total

11,402

63,436

80,932

63,361

18,313

10,908

6,943

255,295

Current-Period Gross

Writeoffs

638

418

697

231

2,188

(Dollars in Thousands)

Term

Loans by Origination Year

Revolving

As of December 31, 2023

2023

2022

2021

2020

2019

Prior

Loans

Total

Commercial, Financial,

Agriculture:

Pass

57,320

66,671

28,933

10,610

7,758

7,502

44,350

223,144

Special Mention

168

608

356

1,227

Substandard

164

177

122

161

819

Total

57,652

67,456

29,387

10,697

7,787

7,624

44,587

225,190

Current-Period Gross

Writeoffs

252

511

Real Estate - Construction:

Pass

101,684

68,265

18,181

188

4,617

192,935

Special Mention

631

500

539

212

1,882

Substandard

576

651

1,274

Total

102,315

68,812

19,296

863

188

4,617

196,091

Real Estate - Commercial

Mortgage:

Pass

117,840

275,079

135,663

101,210

43,878

109,878

18,367

801,915

Special Mention

3,266

5,684

229

1,358

573

11,110

Substandard

1,226

6,695

1,637

605

1,574

694

12,431

Total

121,106

281,989

142,358

103,076

45,841

112,025

19,061

825,456

Current-Period Gross

Writeoffs

120

Real Estate - Residential:

Pass

372,394

400,437

83,108

35,879

24,848

68,685

8,252

993,603

Special Mention

268

502

313

1,255

Substandard

570

1,110

1,906

1,626

1,007

3,142

9,361

Total

373,232

401,636

85,097

38,007

25,855

72,140

8,252

1,004,219

Current-Period Gross

Writeoffs

Real Estate - Home

Equity:

Performing

890

127

386

950

207,509

209,921

Nonperforming

999

Total

890

127

386

950

208,508

210,920

Current-Period Gross

Writeoffs

Consumer:

Performing

68,496

90,031

70,882

21,314

10,210

4,258

5,431

270,622

Nonperforming

293

355

710

1,420

Total

68,789

90,386

70,940

21,318

10,210

4,258

6,141

272,042

Current-Period Gross

Writeoffs

3,137

3,224

1,362

329

230

162

8,543

NOTE 4 – MORTGAGE BANKING ACTIVITIES

The Company’s mortgage

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

to manage residential

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

market residential loan closings, and residential mortgage

servicing.

Residential Mortgage Loan Production

The Company originates, markets, and services conventional and government

-sponsored residential mortgage loans.

Generally,

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

market and non-conforming and adjustable-rate

residential mortgage loans may be held for investment.

The volume of residential mortgage loans originated for sale and secondary

market prices are the primary drivers of origination revenue.

Residential mortgage loan commitments are generally outstanding for 30

to 90 days, which represents the typical period from

commitment to originate a residential mortgage loan to when the closed

loan is sold to an investor.

Residential mortgage loan

commitments are subject to both credit and price risk.

Credit risk is managed through underwriting policies and procedures,

including

collateral requirements, which are generally accepted by the secondary

loan markets.

Price risk is primarily related to interest rate

fluctuations and is partially managed through forward sales of residential mortgage

-backed securities (primarily to-be announced

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

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

amounts of derivative contracts related to residential

mortgage loan commitments and forward contract sales and their related fair values

are set- forth below.

March 31, 2024

December 31, 2023

Unpaid Principal

(Dollars in Thousands)

Balance/Notional

Fair Value

Balance/Notional

Fair Value

Residential Mortgage Loans Held for Sale

23,848

24,705

27,944

28,211

Residential Mortgage Loan Commitments ("IRLCs")

(1)

41,675

727

23,545

523

Forward Sales Contracts

(2)

39,500

24,500

209

25,510

28,943

(1)

Recorded in other assets at fair value

(2)

Recorded in other liabilities at fair value

At March 31, 2024, the Company had $

0.1

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

0.7

million of

loans were on nonaccrual status. At December 31, 2023, the Company had

residential mortgage loans held for sale 30-89 days past

due and $

0.7

million of loans were on nonaccrual status.

Mortgage banking revenue was as follows:

Three Months Ended March 31,

(Dollars in Thousands)

2024

2023

Net realized gains on sales of mortgage loans

1,676

1,194

Net change in unrealized gain on mortgage loans held for sale

457

Net change in the fair value of mortgage loan commitments

204

527

Net change in the fair value of forward sales contracts

132

(402)

Pair-Offs on net settlement of forward sales contracts

(1)

Mortgage servicing rights additions

150

191

Net origination fees

565

905

Total mortgage banking

revenues

2,878

2,871

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)

March 31, 2024

December 31, 2023

Number of residential mortgage loans serviced for others

463

450

Outstanding principal balance of residential mortgage loans serviced

for others

120,713

108,897

Weighted average

interest rate

5.48%

5.37%

Remaining contractual term (in months)

349

309

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.

March 31, 2024, the servicing portfolio balance consisted of the following

loan types: FNMA (

%), GNMA (

%), and private

investor (

%).

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

The Company had

delinquent residential mortgage loans in GNMA pools serviced by the Company

at March 31, 2024 and

December 31, 2023, respectively.

The right to repurchase these loans and the corresponding liability has been

recorded in other assets

and other liabilities, respectively,

in the Consolidated Statement of Financial Condition.

The Company had

repurchases for the

three months ended March 31, 2024, and $

0.3

million repurchased for the three months ended March 31, 2023, in delinquent

residential loans from the GNMA pools. When delinquent residential loans

are repurchased, the Company has the intention to modify

their terms and include the loans in new GNMA pools.

Activity in the capitalized mortgage servicing rights was as follows:

Three Months Ended

March 31,

(Dollars in Thousands)

2024

2023

Beginning balance

831

2,599

Additions due to loans sold with servicing retained

150

191

Deletions and amortization

(62)

(99)

Sale of servicing rights

101

Ending balance

919

2,792

The Company did

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

three months ended March 31,

2024 or 2023.

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

mortgage servicing rights were as follows:

March 31, 2024

December 31, 2023

Minimum

Maximum

Minimum

Maximum

Discount rates

9.50%

12.00%

9.50%

12.00%

Annual prepayment speeds

11.27%

19.66%

11.23%

17.79%

Cost of servicing (per loan)

Changes in residential mortgage interest rates directly affect

the prepayment speeds used in valuing the Company’s

mortgage

servicing rights.

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

turnover rates,

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

The weighted average annual prepayment speed was

14.82

% at March 31, 2024 and

14.22

% at December 31, 2023.

Warehouse

Line Borrowings

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

agreements with various financial institutions at

March 31, 2024.

Amounts

(Dollars in Thousands)

Outstanding

million master repurchase agreement without defined expiration.

Interest is at the SOFR rate plus

2.00%

3.00%

, with a floor rate of

3.25%

4.25%

A cash pledge deposit of $

0.1

million is required by the lender.

8,409

million warehouse line of credit agreement expiring in

December 2024

Interest is at the SOFR plus

2.75%

3.25%

Total Warehouse

Borrowings

8,409

Warehouse

line borrowings are classified as short-term borrowings.

At March 31, 2024, warehouse line borrowings totaled $

8.4

million. At March 31, 2024, 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 March 31,

2024.

The Company has extended a $

million warehouse line of credit to CCHL, a

% owned subsidiary entity.

Balances and

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

consolidated financial statements and thus not included in the

total short term borrowings noted on the Consolidated Statement of

Financial Condition.

The balance of this line of credit was $

31.4

million at March 31, 2024 and December 31, 2023, respectively.

NOTE 5 – DERIVATIVES

The Company enters into derivative financial instruments to manage exposures

that arise from business activities that result in the

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

which are determined by interest rates.

The Company’s

derivative financial instruments are used to manage differences in

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

known or

expected cash receipts and its known or expected cash payments principally

related to the Company’s subordinated

debt.

Cash Flow Hedges of Interest Rate Risk

Interest rate swaps with notional amounts totaling $

million at March 31, 2024 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)

March 31, 2024

Interest rate swaps related to subordinated debt

Other Assets

30,000

5,755

6.3

December 31, 2023

Interest rate swaps related to subordinated debt

Other Assets

30,000

5,317

6.5

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

consolidated statements of income related to the cash

flow derivative instruments (interest rate swaps related to subordinated

debt) for the three months ended March 31, 2024.

Amount of (Loss)

Amount of Gain

Gain Recognized

(Loss) Reclassified

(Dollars in Thousands)

Category

in AOCI

from AOCI to Income

Three months ended March 31, 2024

Interest expense

326

375

Three months ended March 31, 2023

Interest expense

(598)

309

The Company estimates there will be approximately $

1.3

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

months.

The Company had a collateral liability of $

5.9

million and $

5.5

million at March 31, 2024 and December 31, 2023, respectively.

NOTE 6 – LEASES

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

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

liabilities, included in other assets and liabilities, respectively,

on its Consolidated Statement of Financial Condition.

The Company’s operating

leases primarily relate to banking offices with remaining lease terms

from

years.

The Company’s

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

lease payments, or significant assumptions or judgments

made in applying the requirements of Topic

842.

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

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

At March 31, 2024, the operating lease ROU assets and liabilities were $

26.2

million and $

26.8

million, respectively. At December

31, 2023, ROU assets and liabilities were $

27.0

million and $

27.4

million, respectively.

The Company does not have any finance

leases or any significant lessor agreements.

The table below summarizes our lease expense and other information related

to the Company’s operating leases.

Three Months Ended

March 31,

(Dollars in Thousands)

2024

2023

Operating lease expense

841

700

Short-term lease expense

194

139

Total lease expense

1,035

839

Other information:

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

Operating cash flows from operating leases

677

706

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

2,906

Weighted average

remaining lease term — operating leases (in years)

16.8

18.6

Weighted average

discount rate — operating leases

3.5%

3.3%

The table below summarizes the maturity of remaining lease liabilities:

(Dollars in Thousands)

March 31, 2024

2024

2,635

2025

3,062

2026

2,922

2027

2,851

2028

2,611

2029 and thereafter

20,670

Total

34,751

Less: Interest

(7,951)

Present Value

of Lease liability

26,800

At March 31, 2024, the Company had

one

additional operating lease obligation for a banking office (to be constructed)

that has not yet

commenced.

The lease has payments totaling $

3.8

million based on an initial contract term of

years.

Payments for the banking

office are expected to commence after the construction period

ends, which is expected to occur during the fourth quarter of 2024.

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 $

2.2

million at March 31, 2024.

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 March 31,

(Dollars in Thousands)

2024

2023

Service Cost

929

872

Interest Cost

1,524

1,458

Expected Return on Plan Assets

(2,029)

(1,701)

Prior Service Cost Amortization

Net Loss Amortization

234

Net Periodic Benefit Cost

465

864

Discount Rate Used for Benefit Cost

5.29%

5.63%

Long-term Rate of Return on Assets

6.75%

The components of the net periodic benefit cost for the Company's SERP plans were as follows:

Three Months Ended March 31,

(Dollars in Thousands)

2024

2023

Service Cost

Interest Cost

114

130

Prior Service Cost Amortization

Net Loss Amortization

(70)

(155)

Net Periodic Benefit Cost

Discount Rate Used for Benefit Cost

5.11%

5.45%

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

compensation expense in the accompanying statements of

income.

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

expense category in the statements

of income.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Lending Commitments

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

sheet risks in the normal course of business

to meet the financing needs of its clients.

These financial instruments consist of commitments to extend credit and standby

letters of

credit.

The Company’s maximum exposure

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

the contractual amount of those instruments.

The Company uses the same credit policies in establishing commitments

and issuing

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

The amounts associated with the Company’s

off-balance sheet

obligations were as follows:

March 31, 2024

December 31, 2023

(Dollars in Thousands)

Fixed

Variable

Total

Fixed

Variable

Total

Commitments to Extend Credit

(1)

194,929

558,559

753,488

207,605

534,745

742,350

Standby Letters of Credit

6,284

6,094

Total

201,213

558,559

759,772

213,699

534,745

748,444

(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 March 31,

(Dollars in Thousands)

2024

2023

Beginning Balance

3,191

2,989

Provision for Credit Losses

(70)

(156)

Ending Balance

3,121

2,833

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 March 31, 2024, the amount remaining to be funded for the commitment

was

0.4

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.

During the

first quarter of 2011, the Company sold its remaining

Class B shares.

Associated with this sale, the Company entered into a swap

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

counterparty in the event that Visa, Inc. makes

subsequent

revisions to the conversion ratio for its Class B shares.

Conversion ratio payments and ongoing fixed quarterly charges

are reflected in

earnings in the period incurred.

Fixed charges included in the swap liability are payable quarterly

until the litigation reserve is fully

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

Quarterly fixed payments approximate $

0.2

million.

NOTE 9 – FAIR VALUE

MEASUREMENTS

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

to transfer that liability in an orderly

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

the absence of a principal market) for such asset or

liability.

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

the market approach, the income

approach and/or the cost approach.

Such valuation techniques are consistently applied.

Inputs to valuation techniques include the

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

ASC Topic 820

establishes a fair value hierarchy for

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

for identical assets or liabilities and the lowest

priority to unobservable inputs.

The fair value hierarchy is as follows:

●

Level 1 Inputs -

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

entity has the

ability to access at the measurement date

●

Level 2 Inputs -

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

either directly

or indirectly. These might

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

for identical

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

than quoted prices that are observable for the asset or

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

or inputs that are derived principally from, or

corroborated, by market data by correlation or other means

●

Level 3 Inputs -

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

an entity’s own

assumptions about the assumptions that market participants would

use in pricing the assets or liabilities.

Assets and Liabilities Measured at Fair Value

on a Recurring Basis

Securities Available for Sale.

U.S. Treasury securities are reported at fair value

utilizing Level 1 inputs.

Other securities classified as

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

For these securities, the Company obtains fair value measurements

from an independent pricing service.

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

market

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

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

terms

and conditions, among other things.

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

The Company’s entire portfolio consists

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

obligations, federal agency bullet or mortgage pass-through

securities, 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. At March 31, 2024 and December 31, 2023, there were

amounts payable.

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

value on a recurring basis consisted of the following:

Level 1

Level 2

Level 3

Total

Fair

(Dollars in Thousands)

Inputs

Value

March 31, 2024

ASSETS:

Securities Available for

Sale:

U.S. Government Treasury

23,751

U.S. Government Agency

139,048

States and Political Subdivisions

38,703

Mortgage-Backed Securities

60,548

Corporate Debt Securities

57,192

Equity Securities

3,445

Loans Held for Sale

24,705

Residential Mortgage Loan Commitments

727

Interest Rate Swap Derivative

5,755

LIABILITIES:

Forward Sales Contracts

December 31, 2023

ASSETS:

Securities Available for

Sale:

U.S. Government Treasury

24,679

U.S. Government Agency

145,034

States and Political Subdivisions

39,083

Mortgage-Backed Securities

63,303

Corporate Debt Securities

57,552

Equity Securities

3,450

Loans Held for Sale

28,211

Residential Mortgage Loan Commitments

523

Interest Rate Swap Derivative

5,317

LIABILITIES:

Forward Sales Contracts

209

Mortgage Banking Activities

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

activities of $

2.1

million

and $

2.8

million, respectively, for the three

months ended March 31, 2024, and $

4.3

million and $

6.7

million, respectively, for the

three months ended March 31, 2023.

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 $

4.0

million with a valuation allowance of $

0.1

million at March 31,

2024 and a carrying value of $

3.3

million and a $

0.1

million valuation allowance at December 31, 2023.

Other Real Estate Owned

During the first three months of 2024, 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 March 31, 2024 and December 31, 2023, 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:

March 31, 2024

Carrying

Level 1

Level 2

Level 3

(Dollars in Thousands)

Value

Inputs

ASSETS:

Cash

73,642

Fed Funds Sold and Interest Bearing Deposits

231,047

Investment Securities, Held to Maturity

603,386

426,474

143,208

Other Equity Securities

2,848

Mortgage Servicing Rights

919

1,419

Loans, Net of Allowance for Credit Losses

2,701,843

2,531,574

LIABILITIES:

Deposits

3,654,801

3,208,299

Short-Term

Borrowings

31,886

Subordinated Notes Payable

52,887

43,861

Long-Term Borrowings

265

264

December 31, 2023

Carrying

Level 1

Level 2

Level 3

(Dollars in Thousands)

Value

Inputs

ASSETS:

Cash

83,118

Fed Funds Sold and Interest Bearing Deposits

228,949

Investment Securities, Held to Maturity

625,022

441,189

150,562

Other Equity Securities

2,848

Mortgage Servicing Rights

831

1,280

Loans, Net of Allowance for Credit Losses

2,703,977

2,510,529

LIABILITIES:

Deposits

3,701,822

3,243,896

Short-Term

Borrowings

35,341

Subordinated Notes Payable

52,887

44,323

Long-Term Borrowings

315

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, 2024

(25,691)

3,970

(425)

(22,146)

Other comprehensive (loss) income during the period

(260)

326

Balance as of March 31, 2024

(25,951)

4,296

(425)

(22,080)

Balance as of January 1, 2023

(37,349)

4,625

(4,505)

(37,229)

Other comprehensive income (loss) during the period

5,751

(598)

5,153

Balance as of March 31, 2023

(31,598)

4,027

(4,505)

(32,076)

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 first quarter of 2024 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,”

“estimate,” “expect,”

“intend,” “plan,”

“target,”

“vision,” “goal,”

and similar expressions are intended to

identify forward-looking statements.

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

Our actual future results may differ materially

from those set forth in our forward-looking statements.

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

as well

as the Introductory Note and

Item 1A. Risk Factors

of our 2023 Form 10-K/A, as updated in our subsequent quarterly reports filed

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 63 full-service offices

and 104 ATMs/ITMs

located in Florida, Georgia, and Alabama.

Through Capital City Home Loans, LLC (“CCHL”), we have 29

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 the economic conditions in our markets and our long-term strategic

objectives as part of the

MD&A section of our 2023 Form 10-K/A.

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 it allows investors to more easily compare our capital adequacy to

other companies in the industry.

The generally accepted

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

each quarter presented is provided below.

2024

2023

(Dollars in Thousands, except per share data)

First

Fourth

Third

Second

First

Shareowners' Equity (GAAP)

448,314

440,625

419,706

412,422

403,260

Less: Goodwill and Other Intangibles (GAAP)

92,893

92,933

92,973

93,013

93,053

Tangible Shareowners' Equity (non-GAAP)

355,421

347,692

326,733

319,409

310,207

Total Assets (GAAP)

4,259,922

4,304,477

4,138,287

4,391,206

4,401,762

Less: Goodwill and Other Intangibles (GAAP)

92,893

92,933

92,973

93,013

93,053

Tangible Assets (non-GAAP)

4,167,029

4,211,544

4,045,314

4,298,193

4,308,709

Tangible Common Equity Ratio (non-GAAP)

A/B

8.53%

8.26%

8.08%

7.43%

7.20%

Actual Diluted Shares Outstanding (GAAP)

16,947,204

17,000,758

16,997,886

17,025,023

17,049,913

Tangible Book Value

per Diluted Share (non-GAAP)

A/C

20.97

20.45

19.22

18.76

18.19

SELECTED QUARTERLY

FINANCIAL DATA

(UNAUDITED)

2024

2023

(Dollars in Thousands, Except Per Share Data)

First

Fourth

Third

Second

First

Summary of Operations

Interest Income

46,820

46,184

45,753

45,205

43,926

Interest Expense

8,465

7,013

6,473

5,068

3,526

Net Interest Income

38,355

39,171

39,280

40,137

40,400

Provision for Credit Losses

920

2,025

2,393

2,197

3,099

Net Interest Income After

Provision for Credit Losses

37,435

37,146

36,887

37,940

37,301

Noninterest Income

18,097

17,157

16,728

19,967

17,758

Noninterest Expense

40,171

39,958

39,105

40,285

37,675

Income Before Income Taxes

15,361

14,345

14,510

17,622

17,384

Income Tax Expense

3,536

2,909

3,004

3,417

3,710

Loss (Income) Attributable to NCI

732

284

1,149

(31)

Net Income Attributable to CCBG

12,557

11,720

12,655

14,174

13,709

Net Interest Income (FTE)

(1)

38,435

39,264

39,367

40,224

40,500

Per Common Share

Net Income Basic

0.74

0.69

0.75

0.83

0.81

Net Income Diluted

0.74

0.70

0.74

0.83

0.80

Cash Dividends Declared

0.21

0.20

0.18

Diluted Book Value

26.45

25.92

24.69

24.21

23.65

Diluted Tangible Book Value

(2)

20.97

20.45

19.22

18.76

18.19

Market Price:

High

31.34

32.56

33.44

34.16

36.86

Low

26.59

26.12

28.64

28.03

28.18

27.70

29.43

29.83

30.64

29.31

Selected Average Balances

Investment Securities

953,184

963,184

1,005,003

1,043,858

1,064,212

Loans Held for Investment

2,728,629

2,711,243

2,672,653

2,657,693

2,582,395

Earning Assets

3,849,615

3,823,980

3,876,980

3,974,803

4,062,688

Total Assets

4,190,623

4,166,777

4,218,855

4,320,601

4,411,865

Deposits

3,576,513

3,548,506

3,596,816

3,719,564

3,817,314

Shareowners’ Equity

456,014

435,116

427,580

418,757

404,067

Common Equivalent Average Shares:

Basic

16,951

16,947

16,985

17,002

17,016

Diluted

16,969

16,997

17,025

17,035

17,045

Performance Ratios:

Return on Average Assets (annualized)

1.21

1.12

1.19

1.32

1.26

Return on Average Equity (annualized)

11.07

10.69

11.74

13.58

13.76

Net Interest Margin (FTE)

4.01

4.07

4.03

4.06

4.04

Noninterest Income as % of Operating Revenue

32.06

30.46

29.87

33.22

30.53

Efficiency Ratio

71.06

70.82

69.88

66.93

64.67

Asset Quality:

Allowance for Credit Losses (“ACL”)

29,329

29,941

29,083

28,243

26,808

Nonperforming Assets (“NPAs”)

6,799

6,243

4,695

6,624

4,602

ACL to Loans HFI

1.07

1.10

1.08

1.05

1.01

NPAs to Total

Assets

0.16

0.15

0.11

0.15

0.10

NPAs to Loans HFI plus OREO

0.25

0.23

0.17

0.25

0.17

ACL to Non-Performing Loans

431.46

479.70

619.58

426.44

584.18

Net Charge-Offs to Average Loans HFI

0.22

0.23

0.17

0.07

0.24

Capital Ratios:

Tier 1 Capital

15.67

15.37

15.11

14.56

14.23

Total Capital

16.84

16.57

16.30

15.68

15.29

Common Equity Tier 1

13.82

13.52

13.26

12.73

12.40

Leverage

10.45

10.30

9.98

9.54

9.09

Tangible Common Equity

(2)

8.53

8.26

8.08

7.43

7.20

(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 totaled $12.6 million,

or $0.74 per diluted share, for the first

quarter of 2024 compared to $11.7 million,

or $0.70 per diluted share, for the fourth quarter of 2023, and $13.7

million, or $0.80 per

diluted share, for the first quarter of 2023.

Net Interest Income

Tax-equivalent net

interest income for the first quarter of 2024 totaled $38.4 million compared to

$39.3 million

for the fourth quarter of 2023, and $40.5 million for the first quarter of

2023.

Compared to both prior periods, the decline was

primarily attributable to an increase in deposit interest expense, partially offset

by higher loan interest income.

Our net interest margin

for the first quarter of 2024 was 4.01%, a decrease of six basis points from

the fourth quarter of 2023 and a decrease of three basis

points from the first quarter of 2023.

Provision and Allowance for Credit

Losses.

We recorded

a provision for credit losses of $0.9 million for the first quarter of 2024

compared to $2.0 million for the fourth quarter of 2023 and $3.1

million for the first quarter of 2023.

The decrease in the provision

compared to the fourth quarter of 2023 was primarily attributable to a lower

level of reserves required for new loans, favorable loan

grade migration, and lower loss rates.

Compared to the first quarter of 2023, the decrease was driven by lower new

loan growth in the

first quarter of 2024.

Noninterest Income

Noninterest income for the first quarter of 2024 totaled $18.1 million compared to

$17.2 million for the fourth

quarter of 2023 and $17.8 million for the first quarter of 2023.

The $0.9 million increase over the fourth quarter of 2023 was due to a

$0.5 million increase in mortgage banking revenues and a $0.4 million increase

in wealth management fees.

Compared to the first

quarter of 2023, the $0.3 million increase was primarily attributable to higher

wealth management fees of $0.7 million partially offset

by lower other income of $0.3 million.

Noninterest Expense

Noninterest expense for the first quarter of 2024 totaled $40.2 million compared to $40.0

million for the fourth

quarter of 2023 and $37.7 million for the first quarter of 2023.

The $0.2 million increase over the fourth quarter of 2023 reflected a

$0.6 million increase in compensation expense that was partially offset

by decreases in occupancy expense of $0.1 million and other

expense of $0.3 million.

Compared to the first quarter of 2023, the $2.5 million increase reflected

higher other expense as we realized

a $1.8 million gain from the sale of other real estate (banking office) in

the first quarter of 2023.

Further, compensation expense was

$0.9 million higher primarily due to a lower level of realized loan cost (credit offset

to salary expense) due to decreased new loan

production.

Financial Condition

Earning Assets.

Average earning

assets totaled $3.850 billion for the first quarter of 2024, an increase of $25.6 million,

or 0.7%, over

the fourth quarter of 2023, and a decrease of $213.1 million, or 5.2%, from the

first quarter of 2023.

The variance for both prior

period comparisons was driven by change in deposit balances.

Compared to both prior periods, the mix of earning assets improved as

overnight funds were utilized to fund loan growth.

Loans.

Average loans held for

investment (“HFI”) increased $17.4 million, or 0.6%, over the fourth

quarter of 2023 and $146.2

million, or 5.7%, over the first quarter of 2023.

Compared to both prior periods, the increase was primarily due to an increase in

residential loans partially offset by a decline in consumer

loans (primarily auto).

Period end loans decreased $2.7 million, or 0.1%,

from the fourth quarter of 2023 and increased $74.0 million, or 2.8%, over the

first quarter of 2023.

Compared to the first quarter of

2023, the increase reflected growth in residential loans and to a lesser extent commercial

real estate loans partially offset by lower

consumer (auto) loan balances.

Credit Quality

. Overall credit quality remained stable.

Nonperforming assets (nonaccrual loans and other real estate) totaled $6.8

million at March 31, 2024 compared to $6.2 million at December 31, 2023

and $4.6 million at March 31, 2023.

At March 31, 2024,

nonperforming assets as a percent of total assets equaled 0.16% compared to

0.15% at December 31, 2023 and 0.10% at March 31,

2023.

Nonaccrual loans totaled $6.8 million at March 31, 2024, a $0.6 million increase over December

31, 2023 and a $2.2 million

increase over March 31, 2023.

Further, classified loans totaled $22.3 million at March

31, 2024, a $0.1 million increase over

December 31, 2023 and a $10.1 million increase over March 31, 2023.

Deposits

. Average total

deposits were $3.577 billion for the first quarter of 2024, an increase of $28.0 million,

or 0.8%, over the fourth

quarter of 2023 and a decrease of $240.8 million, or 6.3%, from the first

quarter of 2023.

Compared to the fourth quarter of 2023, the

increase reflected a higher average balance for public funds (municipal clients

primarily NOW accounts) which typically peak late in

the fourth quarter.

Further, we realized growth in both our money market

and certificates of deposit (“CD”) balances which reflected

a combination of balances migrating from noninterest bearing and savings accounts,

in addition to receiving new deposits from

existing and new clients.

Compared to the first quarter of 2023, the decrease was primarily attributable to lower noninterest

bearing

and savings accounts, partially offset by increases in money market

and CD balances.

The decrease in noninterest bearing and savings

accounts reflected a combination of consumer/business spend of pandemic

related stimulus funds and rate sensitive clients seeking

higher yields, partially offset by the aforementioned migration

to higher rate deposit products (money market and CD).

Capital

. At March 31, 2024, we were “well-capitalized”

with a total risk-based capital ratio of 16.84% and a tangible common equity

ratio (a non-GAAP financial measure) of 8.53% compared to 16.57%

and 8.26%, respectively,

at December 31, 2023 and 15.29% and

7.20%, respectively,

at March 31, 2023.

At March 31, 2024, all of our regulatory capital ratios exceeded the threshold to be “well-

capitalized”

under the Basel III capital standards.

RESULTS

OF OPERATIONS

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

a discussion of the various components are discussed

in further detail below.

Three Months Ended

(Dollars in Thousands, except per share data)

March 31, 2024

December 31, 2023

March 31, 2023

Interest Income

46,820

46,184

43,926

Taxable Equivalent Adjustments

100

Total Interest Income (FTE)

46,900

46,277

44,026

Interest Expense

8,465

7,013

3,526

Net Interest Income (FTE)

38,435

39,264

40,500

Provision for Credit Losses

920

2,025

3,099

Taxable Equivalent Adjustments

100

Net Interest Income After Provision for Credit Losses

37,435

37,146

37,301

Noninterest Income

18,097

17,157

17,758

Noninterest Expense

40,171

39,958

37,675

Income Before Income Taxes

15,361

14,345

17,384

Income Tax Expense

3,536

2,909

3,710

Loss Attributable to Noncontrolling Interests

732

284

Net Income Attributable to Common Shareowners

12,557

11,720

13,709

Basic Net Income Per Share

0.74

0.69

0.81

Diluted Net Income Per Share

0.74

0.70

0.80

Net Interest Income

Net interest income represents our single largest source of

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

assets less interest expense paid on interest bearing liabilities.

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

the tax-exempt status of income earned on certain loans and state and local

government debt obligations.

We provide an analysis of

our net interest income including average yields and rates in Table

I, “Average Balances

& Interest Rates,” on page 47.

Tax-equivalent net

interest income for the first quarter of 2024 totaled $38.4 million compared to $39.3 million

for the fourth quarter

of 2023, and $40.5 million for the first quarter of 2023.

Compared to both prior periods, the decline was primarily attributable to an

increase in deposit interest expense, partially offset by higher

loan interest income.

The increase in deposit interest expense was

primarily attributable to higher average money market balances and to a lesser extent

CD balances and reflected a combination of re-

mix from other deposit categories and higher rates for these products.

The increase in loan interest income reflected existing loans re-

pricing at higher rates and new loan volume at higher rates.

Further, the first quarter of 2024 had one less calendar

day compared to

the fourth quarter of 2023 and one additional calendar day compared to the first

quarter of 2023.

Our net interest margin for the first quarter of 2024 was 4.01%, a decrease

of six basis points from the fourth quarter of 2023 and a

decrease of three basis points from the first quarter of 2023. For the month

of March, our net interest margin was 4.02%. The decrease

compared to both prior periods primarily reflected higher deposit cost related

to re-mix within the deposit base and higher rates paid

on deposits, partially offset by higher yields from new loan volume

and loan repricing at higher rates. For the first quarter of 2024, our

cost of funds was 88 basis points, an increase of 15 basis points over the fourth

quarter of 2023 and an increase of 53 basis points over

the first quarter of 2023.

Our cost of deposits (including noninterest bearing accounts) was 85 basis points, 66 basis points,

and 26

basis points, respectively,

for the same periods.

Provision for Credit Losses

We recorded

a provision for credit losses of $0.9 million for the first quarter of 2024 compared to $2.0 million for

the fourth quarter of

2023 and $3.1 million for the first quarter of 2023.

The decrease in the provision compared to the fourth quarter of 2023 was

primarily attributable to a lower level of reserves required for new loans, favorable

loan grade migration, and lower loss rates.

Compared to the first quarter of 2023, the decrease was driven by lower new

loan growth in the first quarter of 2024.

We discuss the

allowance for credit losses further below.

Noninterest Income

Noninterest income for the first quarter of 2024 totaled $18.1 million compared

to $17.2 million for the fourth quarter of 2023 and

$17.8 million for the first quarter of 2023.

The $0.9 million increase over the fourth quarter of 2023 was due to a $0.5 million

increase in mortgage banking revenues and a $0.4 million increase in wealth management

fees.

Compared to the first quarter of 2023,

the $0.3 million increase was primarily attributable to higher wealth management

fees of $0.7 million partially offset by lower other

income of $0.3 million.

For both prior period comparisons, the increase in mortgage banking revenues

reflected a higher volume of

rate locks and third-party loan sales.

A combination of higher trust fees, retail brokerage fees, and insurance commissions

drove the

increase in wealth management fees over the fourth quarter of 2023.

Higher retail brokerage fees of $0.4 million and trust fees of $0.2

million drove the increase over the first quarter of 2023.

The decrease in other income was primarily due to lower loan servicing

income and miscellaneous income.

Noninterest income represented 32.06% of operating revenues (net interest

income plus noninterest income) for the first quarter of

2024 compared to 30.46% for the fourth quarter of 2023 and 30.53% for

the first quarter of 2023.

The table below reflects the major components of noninterest income.

Three Months Ended

(Dollars in Thousands)

March 31, 2024

December 31, 2023

March 31, 2023

Deposit Fees

5,250

5,304

5,239

Bank Card Fees

3,620

3,713

3,726

Wealth Management

Fees

4,682

4,276

3,928

Mortgage Banking Revenues

2,878

2,327

2,871

Other

1,667

1,537

1,994

Total

Noninterest Income

18,097

17,157

17,758

Significant components of noninterest income are discussed in more

detail below.

Deposit Fees

Deposit fees for the first quarter of 2024 totaled $5.2 million, comparable to the fourth

quarter of 2023 and the first

quarter of 2023.

Compared to the fourth quarter of 2023, a $0.1 million increase in commercial account

analysis fees was offset by a

$0.1 million decrease in overdraft fees.

Compared to the first quarter of 2023, a $0.1 million increase in overdraft fees was offset

by a

$0.1 million decrease in account maintenance fees.

Bank Card Fees

Bank card fees for the first quarter of 2024 totaled $3.6 million, a $0.1 million decrease

from both the fourth quarter

of 2023 and first quarter of 2023 and reflected lower debit card usage related to

a decline in consumer spending.

Wealth

Management Fees

Wealth management fees,

which include both trust fees (i.e., managed accounts and trusts/estates), retail

brokerage fees (i.e., investment, insurance products, and retirement accounts),

and insurance commission revenues,

totaled $4.7

million for the first quarter of 2024, an increase of $0.4 million, or 9.5%, over the fourth

quarter of 2023 and an increase of $0.8

million, or 19.2%, over the first quarter of 2023.

Compared to the fourth quarter of 2023, the increase reflected a combination of

higher trust fees and retail brokerage fees due to growth in assets under management,

and higher insurance commission revenues.

The

increase over the first quarter of 2023 was primarily attributable to higher retail

brokerage fees reflective of increased assets under

management, and to a lesser extent higher trust fees and insurance commission

revenues.

At March 31, 2024, total assets under

management were approximately $2.686 billion compared

to $2.588 billion at December 31, 2023 and $2.330 billion at March 31,

2023.

Compared to December 31, 2023, the increase was primarily attributable to growth in trust assets and

the growth over March

31, 2023 was primarily in retail brokerage assets reflecting increases in investments

in fixed income and annuity products, and higher

account values/returns reflective of the improved market returns.

Mortgage Banking Revenues

Mortgage banking revenues totaled $2.9 million for the first quarter of

2024, an increase of $0.5

million, or 23.7%, over the fourth quarter of 2023 and comparable to

the first quarter of 2023.

Compared to the fourth quarter of

2023, the increase reflected a higher level of rate locks and third-party

loan sales.

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 $1.7 million for the first quarter of 2024, a decrease of $0.1

million, or 8.5%, from the fourth quarter of

2023

and a decrease of $0.3

million, or 16.4%, from the first quarter of 2023.

Compared to the first quarter of 2023, the decrease was

primarily attributable to lower loan servicing income (due to sale of mortgage

servicing rights) and miscellaneous income.

Noninterest Expense

Noninterest expense for the first quarter of 2024 totaled $40.2 million compared

to $40.0 million for the fourth quarter of 2023 and

$37.7 million for the first quarter of 2023.

The $0.2 million increase over the fourth quarter of 2023 reflected a $0.6 million

increase

in compensation expense that was partially offset by decreases in

occupancy expense of $0.1 million and other expense of $0.3

million.

The increase in compensation expense was primarily attributable to higher payroll taxes (annual

re-set) and 401k plan

matching expense.

Compared to the first quarter of 2023, the $2.5 million increase reflected higher other expense

as we realized a

$1.8 million gain from the sale of other real estate (banking office)

in the first quarter of 2023.

Further, compensation expense was

$0.9 million higher primarily due to a lower level of realized loan cost (credit offset

to salary expense) due to decreased new loan

production.

The table below reflects the major components of noninterest expense.

Three Months Ended

(Dollars in Thousands)

March 31, 2024

December 31, 2023

March 31, 2023

Salaries

20,604

20,258

19,517

Associate Benefits

3,803

3,564

4,007

Total Compensation

24,407

23,822

23,524

Premises

3,173

3,402

3,245

Equipment

3,821

3,696

3,517

Total Occupancy

6,994

7,098

6,762

Legal Fees

435

573

362

Professional Fees

1,258

1,629

1,324

Processing Services

1,833

1,497

1,742

Advertising

815

759

874

Telephone

709

686

706

Insurance - Other

915

713

831

Other Real Estate Owned, net

(123)

(1,827)

Pension - Other

(419)

Miscellaneous

3,206

3,272

3,370

Total Other

8,770

9,038

7,389

Total

Noninterest Expense

40,171

39,958

37,675

Significant components of noninterest expense are discussed in

more detail below.

Compensation

Compensation expense totaled $24.4 million for the first quarter of 2024, an increase

of $0.6 million, or 2.5%, over

the fourth quarter of 2023 and an increase of $0.9 million, or 3.8%, over

the first quarter of 2023. Compared to the fourth quarter of

2023, the increase reflected an increase in salary expense of $0.3

million and associate benefit expense of $0.3

million. The increase in

salary expense was primarily attributable to an increase in payroll tax

expense which reflected the annual re-set of this tax as well as

payroll taxes related to a high level of cash/stock incentives paid in the

first quarter.

The increase in associate benefit expense reflected

increases in stock compensation expense (higher expected pay-out

for incentive plan) and other associate benefit expense (annual

sales/service awards event). Compared to the first quarter of 2023, the

increase reflected an increase in salary expense of $1.1

million

partially offset by a $0.2 million decrease in associate benefit expense.

The increase in salary expense was primarily due to a lower

level of realized loan cost (credit offset to salary expense) due to decreased

new loan production and to a lesser extent base salaries

(annual merit) that was partially offset by lower commission expense

at CCHL. Lower stock compensation expense drove the

decrease in associate benefit expense and reflected a higher pay-out for the

prior year long-term incentive plan.

Occupancy.

Occupancy expense (including premises and equipment) totaled $7.0

million for the first quarter of 2024, a decrease of

$0.1

million, or 1.5% from the fourth quarter of 2023 and an increase of $0.2 million, or 3.4%, over

the first quarter of 2023. The

decrease from the fourth quarter of 2023 was due to lower building

maintenance, and the increase over the first quarter of 2023

reflected higher FF&E depreciation and maintenance agreement

expense partially attributable to new offices opened in 2023.

Other

Other noninterest expense totaled $8.8 million for the first quarter of

2024, a decrease of $0.3 million, or 2.9%, from the fourth

quarter of 2023 and an increase of $1.4 million, or 18.7%, from the first quarter

of 2023. The decrease from the fourth quarter was

primarily due to lower pension-other expense (non-service component

)

of $0.4 million and professional fees of $0.4 million that was

partially offset by higher processing fees of $0.3 million and insurance

-other of $0.2 million. The increase over the first quarter of

2023 was primarily due to a $1.8 million increase in other real estate expense

as we realized a $1.8 million gain from the sale of a

banking office in the first quarter of 2023. A $0.4 million decrease in

pension-other expense was partially offsetting.

Our operating efficiency ratio (expressed as noninterest

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

noninterest income) was 71.06% for the first quarter of 2024 compared

to 70.82% for the fourth quarter of 2023 and 64.67% for the

first quarter of 2023. The decrease from the first quarter of 2023 was primarily

attributable to lower noninterest expense which

included a $1.8 million gain from the sale of a banking office, and

to a lesser extent lower net interest income.

Income Taxes

We realized income

tax expense of $3.5 million (effective rate of 23.0%) for the first quarter of

2024 compared to $2.9 million

(effective rate of 20.3%) for the fourth quarter of 2023 and $3.7

million (effective rate of 21.3%) for the first quarter of 2023.

The

increase in our effective tax rate for the first quarter of 2024

compared to both prior periods was primarily due to a lower level of tax

benefit accrued from an investment in a solar tax credit equity fund.

Absent discrete items or new tax credit investments, we expect

our annual effective tax rate to approximate 23% for 2024.

FINANCIAL CONDITION

Average earning

assets totaled $3.850 billion for the first quarter of 2024, an increase of $25.6 million, or 0.7%, over

the fourth

quarter of 2023, and a decrease of $213.1 million, or 5.2%, from the first quarter

of 2023.

The variance for both prior period

comparisons was driven by change in deposit balances (see below –

Deposits).

Compared to both prior periods, the mix of earning

assets improved as overnight funds were utilized to fund loan growth.

Investment Securities

Average investments

decreased $10.0 million, or 1.0%, from the fourth quarter of 2023. Our

investment portfolio represented 24.8%

of our average earning assets for the first quarter of 2024 compared

to 25.2% for the fourth quarter of 2023.

For the remainder of

2024, 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 run-off

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 March 31, 2024, $603.4 million, or 64.6%, of the investment portfolio

was classified as HTM

and $330.7 million, or 35.4% was classified as AFS. The average maturity

of our total portfolio at March 31, 2024 was 2.76 years

compared to 2.91 years at December 31, 2023.

The duration of our investment portfolio at March 31, 2024 and December 31,

2023

was 2.39 years and 2.91 years, respectively.

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

provided in Note 2 – Investment Securities.

We determine

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

our asset/liability strategy

and future business plans and opportunities.

We consider multiple

factors in determining classification, including regulatory

capital

requirements, volatility in earnings or other comprehensive income,

and liquidity needs.

Securities in the AFS portfolio are recorded

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

net of tax, in the accumulated other

comprehensive income component of shareowners’ equity.

HTM securities are acquired or owned with the intent of holding them

maturity.

HTM investments are measured at amortized cost.

We do not

trade, nor do we presently intend to begin trading investment

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

a trading portfolio.

At March 31, 2024, there were 876 positions (combined AFS and HTM) with unrealized

losses totaling $64.8 million. 85 of these

positions are U.S. Treasuries and carry the full faith

and credit of the U.S. Government.

690 were U.S. government agency securities

issued by U.S. government sponsored entities. The remaining 101 positions

(municipal securities and corporate bonds) have a credit

component. At March 31, 2024, corporate debt securities had an

allowance for credit losses of $43,000 and municipal securities had

an allowance of $39,000.

At March 31, 2024, all collateralized mortgage obligation securities, mortgage

-backed securities, Small

Business Administration securities,

U.S. Agency, and

U.S. Treasury bonds held were AAA rated.

Loans HFI

Average loans

HFI increased $17.4 million, or 0.6%, over the fourth quarter of 2023 and $146.2 million,

or 5.7%, over the first quarter

of 2023.

Compared to both prior periods, the increase was primarily due to an increase in

residential loans partially offset by a decline

in consumer loans (primarily auto).

Period end loans decreased $2.7 million, or 0.1%, from the fourth quarter of 2023 and increased

$74.0 million, or 2.8%, over the first quarter of 2023.

The decrease from the fourth quarter of 2023 was primarily due to lower

consumer (auto) loan portfolio balances partially offset by

growth in residential loans.

Compared to the first quarter of 2023, the

increase reflected growth in residential loans and to a lesser extent commercial real

estate loans partially offset by lower consumer

(auto) loan balances.

Without compromising our credit standards

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

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

Credit Quality

Overall credit quality remained stable.

Nonperforming assets (nonaccrual loans and other real estate) totaled $6.8 million at

March

31, 2024 compared to $6.2 million at December 31, 2023 and $4.6 million at March

31, 2023.

At March 31, 2024, nonperforming

assets as a percent of total assets equaled 0.16% compared to 0.15% at December 31, 2023

and 0.10% at March 31, 2023.

Nonaccrual

loans totaled $6.8 million at March 31, 2024, a $0.6 million increase over December

31, 2023 and a $2.2 million increase over March

31, 2023.

Further, classified loans totaled $22.3 million

at March 31, 2024, a $0.1 million increase over December 31, 2023 and a

$10.1 million increase over March 31, 2023.

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 March 31, 2024, the allowance for credit losses for HFI loans totaled

$29.3 million compared to $29.9 million at December 31,

2023 and $26.8 million at March 31, 2023.

Activity within the allowance is provided in Note 3 – Loans Held for Investment and

Allowance for Credit Losses in the Consolidated Financial Statements.

The decrease in the allowance from December 31, 2023 was

primarily due to favorable loan grade migration, lower loss rates, and a combination

of lower loan balances and shift in mix within the

portfolio.

Compared to March 31, 2023, the increase was primarily driven by loan growth.

At March 31, 2024, the allowance

represented 1.07% of HFI loans compared to 1.10% at December 31, 2023, and 1.01%

at March 31, 2023.

At March 31, 2024, the allowance for credit losses for unfunded commitments

totaled $3.1 million compared to $3.2

million at

December 31, 2023 and $2.8 million at March 31, 2023.

The allowance for unfunded commitments is recorded in other liabilities.

Deposits

Average total

deposits were $3.577 billion for the first quarter of 2024, an increase of $28.0 million,

or 0.8%, over the fourth quarter

of 2023 and a decrease of $240.8 million, or 6.3%, from the first quarter

of 2023.

Compared to the fourth quarter of 2023, the

increase reflected a higher average balance for public funds (municipal clients

primarily NOW accounts) which typically peak late in

the fourth quarter.

Further, we realized growth in both our money market

and CD balances which reflected a combination of balances

migrating from noninterest bearing and savings accounts, in addition

to receiving new deposits from existing and new clients.

Compared to the first quarter of 2023, the decrease was primarily attributable

to lower noninterest bearing and savings accounts,

partially offset by increases in money market and CD balances.

The decrease in noninterest bearing and savings accounts reflected

combination of consumer/business spend of pandemic related stimulus

funds and rate sensitive clients seeking higher yields, partially

offset by the aforementioned migration to higher rate deposit products

(money market and CD).

At March 31, 2024, total deposits were $3.654 billion, a decrease of $47.0

million, or 1.3%, from December 31, 2023 and $169.1

million, or 4.4% from March 31, 2023.

The decrease from December 31, 2023 was primarily attributable to lower public funds

(municipal clients - primarily NOW accounts) partially offset by

higher money market balances and to a lesser extent CD balances.

The decrease from March 31, 2023 was due to the same aforementioned factors

driving the average variance. Total

public funds

balances were $615.0 million at March 31, 2024, $709.8 million December

31, 2023, and $637.8 million at March 31, 2023.

Business deposit transaction accounts classified as repurchase agreements

averaged $25.7 million for the first quarter of 2024, a

decrease of $1.1 million from the fourth quarter of 2023 and an increase of $16.4

million over the first quarter of 2023.

At March 31,

2024, repurchase agreement balances were $23.5 million compared

to $27.0 million at December 31, 2023 and $4.4 million at March

31, 2023.

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 imbedded

in investment and loan portfolio contracts.

As with

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

inherent in the interest rate modeling methodology used by

us.

When interest rates change, actual movements in different categories

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

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

from assumptions used in the model.

Finally, the

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

on adjustable-rate loan clients’ ability to service their

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

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

possibilities to indicate the inherent interest rate risk.

We 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

(1)

Percentage Change (12-month shock)

+400 bp

+300 bp

+200 bp

+100 bp

-100 bp

-200 bp

-300 bp

-400 bp

Policy Limit

-15.0%

-12.5%

-10.0%

-7.5%

-10.0%

-12.5%

-15.0%

March 31, 2024

10.0%

7.5%

4.8%

2.5%

-3.1%

-6.5%

-10.5%

-15.1%

December 31, 2023

3.0%

2.1%

1.3%

0.7%

-1.2%

-3.6%

-7.5%

-12.8%

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%

March 31, 2024

38.2%

31.3%

24.4%

18.0%

3.5%

-5.4%

-15.4%

-26.0%

December 31, 2023

29.5%

24.4%

19.3%

14.8%

4.1%

-3.5%

-12.9%

-23.6%

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 fourth quarter of 2023, these metrics became

more favorable in the rising rate scenarios and less favorable in the falling

rate scenarios primarily attributable to the update of our

deposit beta assumptions which will vary depending on the rate shock.

The instantaneous,

parallel rate shock results over the next 12-

months

are slightly outside of policy in the rates down 400 bps scenario and outside

of policy over 24 months

in the rates down 300

bps and 400 bps scenarios primarily due to change in our deposit beta assumptions

discussed above.

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

by considering the effects of changes in interest rates on all

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

assets and liabilities. The difference between these

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

which in theory approximates the fair value of our net

assets.

ESTIMATED CHANGES

IN ECONOMIC VALUE

OF EQUITY

(1)

Changes in Interest Rates

+400 bp

+300 bp

+200 bp

+100 bp

-100 bp

-200 bp

-300 bp

-400 bp

Policy Limit

-30.0%

-25.0%

-20.0%

-15.0%

-20.0%

-25.0%

-30.0%

March 31, 2024

19.5%

15.3%

10.4%

5.4%

-8.7%

-17.8%

-24.9%

-28.4%

December 31, 2023

12.9%

10.7%

7.8%

4.4%

-6.4%

-14.0%

-23.6%

-27.8%

EVE Ratio (policy minimum 5.0%)

20.6%

19.5%

18.4%

17.2%

14.4%

12.7%

11.4%

10.8%

At March 31, 2024, the economic value of equity was favorable in

all rising rate environments and unfavorable in the falling rate

environments. Compared to the fourth quarter of 2023, EVE metrics were

slightly more favorable in the rising rate environment and

less favorable in falling rate environments.

EVE is currently in compliance with policy in all rate scenarios,

and the EVE ratio

exceeds 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 March 31, 2024, we had the ability to generate approximately $1.542 billion

(excludes overnight funds position of $231 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.

At March 31, 2024, we

believe the liquidity available to us 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.

Additional information on our investment portfolio is provided within

Note

2 – Investment Securities.

The Bank maintained an average net overnight funds (deposits with banks plus

FED funds sold less FED funds purchased) sold

position of $140.5 million in the first quarter of 2024 compared to $99.8 million

in the fourth quarter of 2023 and $361.0 million in

the first quarter of 2023.

Compared to the fourth quarter of 2023, the increase was driven by average deposit

growth and investment

portfolio run-off, partially offset by average

loan growth.

Compared to the first quarter of 2023, the decrease was attributable to lower

average deposit balances and growth in our loan portfolio, partially offset

by investment portfolio run-off.

We expect our

capital expenditures will be approximately $12.0 million over the next 12 months,

which will primarily consist of

construction of new offices, office remodeling,

office equipment/furniture, and technology purchases.

Management expects that these

capital expenditures will be funded with existing resources without impairing

our ability to meet our on-going obligations.

Borrowings

Average short

-term borrowings totaled $29.5 million for the first quarter of 2024 compared to $43.8

million for the fourth quarter of

2023 and $47.1 million for the first quarter of 2023.

Compared to both prior periods, the decrease was attributable to a lower balance

maintained on CCHL’s

warehouse line.

Additional detail on these 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.

The second

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

in May 2005.

The interest payment for the CCBG Capital Trust I

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

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

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.

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

flow hedge of our interest rate risk related to our subordinated

debt.

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

I borrowing and $20 million of the

CCBG Capital Trust II borrowing).

The interest rate swap agreement requires CCBG to pay fixed and receive variable (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 March 31, 2024, our regulatory capital

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

under the Basel III capital standards.

Shareowners’ equity was $448.3 million at March 31, 2024 compared to

$440.6 million at December 31, 2023 and $403.3 million at

March 31, 2023.

For the first three months of 2024, shareowners’ equity was positively impacted by net

income attributable to

shareowners of $12.6 million, net adjustments totaling $0.5 million

related to transactions under our stock compensation plans, stock

compensation accretion of $0.4 million, and a $0.3 million increase in the fair value

of the interest rate swap related to subordinated

debt.

Shareowners’ equity was reduced by a common stock dividend of $3.6 million

($0.21 per share), the repurchase of stock of $2.3

million (82,540 shares), and a $0.2 million increase in the net unrealized

loss on available for sale securities.

At March 31, 2024, our total risk-based capital ratio was 16.84% compared

to 16.57% at December 31, 2023 and 15.29% at March 31,

2023.

Our common equity tier 1 capital ratio was 13.82%, 13.52%, and 12.40%, respectively,

on these dates.

Our leverage ratio was

10.45%, 10.30%, and 9.09%, respectively,

on these dates.

At March 31, 2024, 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 8.53% at March 31, 2024 compared to 8.26% and 7.20%

at December 31, 2023 and March 31, 2023,

respectively.

If our unrealized held-to-maturity securities losses of $21.6 million (after-tax)

were recognized in accumulated other

comprehensive loss, our adjusted tangible capital ratio would be 8.01%.

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

liability through other comprehensive income in

accordance with ASC Topic

715.

At March 31, 2024, the net pension liability reflected in other comprehensive loss was

$0.4 million

compared to $0.4 million at December 31, 2023 and $4.5 million at March

31, 2023.

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 2023 Form 10-K/A.

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 March 31, 2024, we had $753.5 million in commitments to extend credit

and $6.3 million in standby letters of credit.

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

any condition established in the

contract.

Commitments generally have fixed expiration dates or other termination

clauses and may require payment of a fee.

Since

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

the total commitment amounts do not necessarily

represent future cash requirements.

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

the performance

of a client to a third party.

We use the same credit

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

balance sheet instruments.

If commitments arising from these financial instruments continue to require

funding at historical levels, management does not

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

obligations.

In the event these commitments

require funding in excess of historical levels, management believes current

liquidity, advances available from the

FHLB and the

Federal Reserve, and investment security maturities provide a sufficient

source of funds to meet these commitments.

Certain agreements provide that the commitments are unconditionally

cancellable by the bank and for those agreements no allowance

for credit losses has been recorded.

We have recorded

an allowance for credit losses on loan commitments that are not

unconditionally cancellable by the bank, which is included in other

liabilities on the consolidated statements of financial condition and

totaled $3.1 million at March 31, 2024.

CRITICAL ACCOUNTING POLICIES

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

Financial Statements included in our 2023 Form 10-

K/A.

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 2023 Form 10-K/A.

TABLE I

AVERAGE

BALANCES & INTEREST RATES

Three Months Ended

March 31, 2024

December 31, 2023

March 31, 2023

Average

(Dollars in Thousands)

Balances

Interest

Rate

Balances

Interest

Rate

Balances

Interest

Rate

Assets:

Loans Held for Sale

27,314

563

5.99

49,790

817

6.50

55,110

644

4.74

Loans Held for Investment

(1)(2)

2,728,629

40,196

5.95

2,711,243

39,679

5.81

2,582,395

34,342

5.39

Taxable Securities

952,328

4,238

1.78

962,322

4,389

1.81

1,061,372

4,912

1.86

Tax-Exempt Securities

(2)

856

4.34

862

4.32

2,840

2.36

Interest Bearing Deposits

140,488

1,893

5.42

99,763

1,385

5.51

360,971

4,111

4.62

Total Earning Assets

3,849,615

46,900

4.90

3,823,980

46,277

4.80

4,062,688

44,026

4.39

Cash & Due From Banks

75,763

76,681

74,639

Allowance For Credit Losses

(30,030)

(29,998)

(25,637)

Other Assets

295,275

296,114

300,175

TOTAL ASSETS

4,190,623

4,166,777

4,411,865

Liabilities:

Noninterest Bearing Deposits

1,344,188

1,416,825

1,601,750

NOW Accounts

1,201,032

4,497

1.51

1,138,461

3,696

1.29

1,228,928

2,152

0.71

Money Market Accounts

353,591

1,985

2.26

318,844

1,421

1.77

267,573

208

0.31

Savings Accounts

539,374

188

0.14

557,579

202

0.14

629,388

0.05

Other Time Deposits

138,328

924

2.69

116,797

553

1.88

89,675

0.24

Total Interest Bearing Deposits

2,232,325

7,594

1.37

2,131,681

5,872

1.09

2,215,564

2,488

0.46

Total Deposits

3,576,513

7,594

0.85

3,548,506

5,872

0.66

3,817,314

2,488

0.26

Repurchase Agreements

25,725

201

3.14

26,831

199

2.94

9,343

0.37

Short-Term Borrowings

3,758

4.16

16,906

310

7.29

37,766

452

4.86

Subordinated Notes Payable

52,887

628

4.70

52,887

627

4.64

52,887

571

4.32

Other Long-Term Borrowings

281

4.80

336

4.72

480

4.80

Total Interest Bearing Liabilities

2,314,976

8,465

1.47

2,228,641

7,013

1.25

2,316,040

3,526

0.62

Other Liabilities

68,295

78,772

81,206

TOTAL LIABILITIES

3,727,459

3,724,238

3,998,996

Temporary Equity

7,150

7,423

8,802

TOTAL SHAREOWNERS’ EQUITY

456,014

435,116

404,067

TOTAL LIABILITIES, TEMPORARY

AND SHAREOWNERS’ EQUITY

4,190,623

4,166,777

4,411,865

Interest Rate Spread

3.43

3.55

3.77

Net Interest Income

38,435

39,264

40,500

Net Interest Margin

(3)

4.01

4.07

4.04

(1)

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

Interest income includes net loan costs of $0.1 million for

the three months ended

March 31, 2024 and December 31, 2023, and net loan fees

of $0.1 million for the three months ended March 31,

2023.

(2)

Interest income includes the effects of taxable equivalent adjustments

using a 21% tax rate.

(3)

Taxable equivalent net interest income divided by average earnings 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, 2023.

Item 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

At March 31, 2024, 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 ineffective due to the identification

of the material weakness discussed below.

Previously Reported Material Weakness

in Internal Control Over Financial Reporting

A material weakness is a deficiency,

or a combination of deficiencies, in internal control over financial reporting such

that there is a

reasonable possibility that a material misstatement of the Company’s

annual interim financial statements will not be prevented or

detected on a timely basis.

As reported in our 2023 Form 10-K/A, we did not maintain effective

internal control over financial

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

Act of 1934) as of December 31, 2023 as a result of

a material weakness in our internal control over financial reporting for the review of

significant inter-company mortgage loan sales

and servicing transactions was not designed effectively.

Specifically, management’s

review control over the completeness and

accuracy of elimination entries in the consolidation process was not designed

effectively, as the review

was not sufficiently precise to

identify all the necessary elimination entries between CCB and its subsidiary,

CCHL. The Company determined inter-company

transactions related to the sale of residential mortgage loans were not properly eliminated

and net loan fees were not properly

recorded. Further, financial information obtained

from CCHL for certain construction/permanent loan activity was not in sufficient

detail to appropriately classify this activity within the Statement of Cash Flows.

Specifically, management’s

review control over the

completeness, accuracy and review of financial information provided

from CCHL related to the Statement of Cash Flows was not

designed effectively as the review was not sufficiently

precise to identify all errors in financial reporting. Refer to our 2023 Form 10-

K/A for a description of our material weakness.

Remediation Plan

Since identifying the material weakness described above, management,

with oversight from the Audit Committee and input from the

Board of Directors, has devoted substantial resources to the ongoing

implementation of remediation efforts. These remediation

efforts,

summarized below are intended to address both the identified material weakness

and to enhance the Company’s overall

internal

control over financial reporting and disclosure controls and procedures.

Based on additional procedures and post-closing review,

management concluded that the consolidated financial statements

included in this report present fairly,

in all material respects, our

financial position, results of operations, and cash flows for the periods presented,

in conformity with GAAP.

The internal control and procedural enhancements and remedial actions that

have been implemented include:

Enhance the precision level review of activity within existing accounts that are

subject to elimination during consolidation, to

ensure appropriate elimination;

Enhance review procedures to identify new inter-company

accounts and activities subject to elimination during

consolidation;

Increase the granularity of general ledger mapping for inter-company

accounts subject to elimination during consolidation;

Enhance financial close checklist and pre-close meeting agenda to assist the reviewer

identifying and assessing inter-

company activities that are subject to elimination in a timely manner; and

Enhance the detail of review procedures of financial information obtained

from a subsidiary

to identify, assess and validate

appropriate classification when preparing the consolidated financial statements,

including when reviewing items in the

operating, investing or financing activity sections within the Statement of

Cash Flows.

To remediate

the material weakness, the Company implemented the internal control and procedural enhancements

noted above in

items 1-4 during the fourth quarter of 2023 and implemented the enhancement

noted above in item 5 during the first quarter of 2024.

The material weakness cannot be considered remediated until the applicable

controls have operated for a sufficient period of time and

management has concluded, through testing, that these controls are designed

and operating effectively.

Accordingly, management

will

continue to monitor and evaluate the effectiveness of our

internal control over financial reporting and the disclosure controls and

procedures.

Change in Internal Control

Except as identified above with respect to remediation of the material weakness,

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 2023 Form 10-K/A, as updated in our subsequent

quarterly reports. The risks described in our 2023

Form 10-K/A 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

Purchases of Equity Securities by the Issuer and

Affiliated Purchasers

The following table contains information about all purchases made by,

or on behalf of, us and any affiliated purchaser (as defined

Rule 10b-18(a)(3) under the Exchange Act) of shares or other units of any class of

our equity securities that is registered pursuant to

Section 12 of the Exchange Act.

Total

number

Average

Total

number of shares

Maximum Number of shares

of shares

price paid

purchased under our

remaining for purchase under

Period

purchased

per share

share repurchase program

our share repurchase program

January 1, 2024 to

January 31, 2024

(1)

9,101

$29.49

9,101

441,409

February 1, 2024 to

February 29, 2024

(2)

63,162

28.01

63,162

686,838

March 1, 2024 to

March 31, 2024

(2)

10,277

28.21

10,277

676,561

Total

82,540

$28.19

82,540

(1)

The information reported in this row relates to shares that were repurchased

during the first quarter of 2024 through the

Company’s predecessor share

repurchase program that was approved on January 31, 2019 and was set to expire

in 2024, under

which we were authorized to repurchase up to 750,000 shares of our common

stock.

The predecessor share repurchase program

was terminated in January 2024.

(2)

The information reported in this row relates to shares that were repurchased

during the first quarter of 2024 through the Capital

City Bank Group, Inc. Share Repurchase Program (“the Program”),

effective February 1, 2024, that was publicly announced on

February 2, 2024 and that expires on February 1, 2029, under which

we were authorized to repurchase up to 750,000 shares of

our common stock.

Under the Program, shares may be repurchased by the Company from time to time in the open

market or

through private transactions, as market conditions warrant.

The program does not obligate the Company to repurchase any

specified number of shares of its common stock.

No shares are repurchased outside of the Program.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosure

Not Applicable.

Item 5.

Other Information

During the three months ended March 31, 2024, none of our directors or officers

(as defined in Rule 16a-1(f) under the Exchange Act)

adopted

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

31.1

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

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

31.2

Certification of 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, President 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: July 12, 2024

exhibit311

Exhibit 31.1

Certification of CEO Pursuant to Securities Exchange Act

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

Section 302 of the Sarbanes-Oxley Act of 2002

I, William G. Smith, Jr.,

certify that:

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

Inc.;

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

a material fact or omit to state a material fact

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

which such statements were made, not misleading

with respect to the period covered by this report;

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

included in this report, fairly present in all

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

of the registrant as of, and for, the periods

presented in this report;

The registrant’s other certifying

officer and I are responsible for establishing and maintaining

disclosure controls and

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

and internal control over financial reporting (as

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

(a)

Designed such disclosure controls and procedures, or caused such disclosure

controls and procedures to be designed

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

registrant, including its consolidated

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

during the period in which this report

is being prepared;

(b)

Designed such internal control over financial reporting, or caused such

internal control over financial reporting to be

designed under our supervision, to provide reasonable assurance regarding

the reliability of financial reporting and

the preparation of financial statements for external purposes in accordance with

generally accepted accounting

principles;

(c)

Evaluated the effectiveness of the registrant’s

disclosure controls and procedures and presented in this report our

conclusions about the effectiveness of the disclosure controls and procedures,

as of the end of the period covered by

this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s

internal control over financial reporting that occurred during

the registrant’s most recent fiscal quarter

that has materially affected, or is reasonably likely to materially

affect, the

registrant’s internal control

over financial reporting; and

The registrant’s other certifying

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

of internal control over

financial reporting, to the registrant’s auditors

and the audit committee of the registrant’s

board of directors (or persons

performing the equivalent functions):

(a)

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

internal control over financial

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

ability to record, process, summarize and

report financial information; and

(b)

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

employees who have a significant role in the

registrant’s internal control

over financial reporting.

/s/ William G. Smith, Jr.

William G. Smith, Jr.

Chairman, President and

Chief Executive Officer

Date: July 12, 2024

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: July 12, 2024

exhibit321

Exhibit 32.1

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

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

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

Jr.,

Chairman, President, and Chief Executive Officer of Capital City Bank

Group, Inc., hereby certify that to my knowledge (1) this

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

31, 2024, as filed with the Securities and Exchange

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

of Section 13(a) of the Securities Exchange Act

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

in all material respects, the financial condition

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

therein.

/s/ William G. Smith, Jr.

William G. Smith, Jr.

Chairman, President, and

Chief Executive Officer

Date: July 12, 2024

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 March

31, 2024, 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: July 12, 2024

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.