CAPITAL CITY BANK GROUP INC

Performance Summary.

Net income attributable to common shareowners totaled $14.2

million, or $0.83 per diluted share, for the

second quarter of 2024 compared to $12.6 million, or $0.74 per diluted

share, for the first quarter of 2024, and $14.2 million, or $0.83

per diluted share, for the second quarter of 2023.

For the first six months of 2024, net income attributable to common shareowners

totaled $26.7 million, or $1.57 per diluted share, compared to net income of $27.9

million, or $1.64 per diluted share, for the same

period of 2023.

Net Interest Income.

Tax-equivalent net

interest income for the second quarter of 2024 totaled $39.3 million, compared

to $38.4

million for the first quarter of 2024, and $40.2 million for the second quarter of 2023.

Compared to the first quarter of 2024, the

increase was primarily due to higher overnight funds and loan interest income

that was partially offset by higher deposit interest

expense.

Compared to the second quarter of 2023, the $0.9 million decrease was generally

driven by higher deposit interest expense

and lower overnight funds and investment interest income which outpaced

an increase in loan interest income.

For the first six months

of 2024, tax-equivalent net interest income totaled $77.8 million compared to $80.7

million for the same period of 2023.

The decrease

was primarily driven by the same aforementioned trends.

Provision and Allowance for Credit

Losses.

We recorded

a provision for credit losses of $1.2 million for the second quarter of 2024

compared to $0.9 million for the first quarter of 2024 and $2.2 million

for the second quarter of 2023.

Compared to the first quarter of

2024, the increase in the provision was primarily due to loan grade migration and

slightly higher loss rates partially offset by lower

loan balances.

For the first six months of 2024, we recorded a provision for credit losses of $2.1 million

compared to $5.3 million for

the same period of 2023 with the decrease driven primarily by lower new

loan volume in 2024.

At June 30, 2024, the allowance

represented 1.09% of loans held for investment (“HFI”) compared

to 1.07% at March 31, 2024, and 1.10% at December 31, 2023.

.

Noninterest income for the second quarter of 2024 totaled $19.6 million compared

to $18.1 million for the first

quarter of 2024 and $20.0 million for the second quarter of 2023.

The $1.5 million increase over the first quarter of 2024 was due to

an increase in mortgage banking revenues.

Compared to the second quarter of 2023, the $0.4 million decrease was primarily

attributable to a $1.7 million decrease in other income which reflected

a $1.4 million gain from the sale of mortgage servicing rights in

the second quarter of 2023, partially offset by a $1.0 million increase

in mortgage banking revenues and a $0.3 million increase in

wealth management fees.

For the first six months of 2024, noninterest income totaled $37.7 million, which is comparable

to the same

period of 2023 and reflected a $2.0 million decrease in other income

that was partially offset by a $1.0 million increase in wealth

management fees and a $1.0 million increase in mortgage banking revenues.

Noninterest Expense.

Noninterest expense for the second quarter of 2024 totaled $40.4 million

compared to $40.2 million for the first

quarter of 2024 and $40.3 million for the second quarter of 2023.

The $0.2 million increase over the first quarter of 2024 reflected a

$0.2 million increase in other expense which included the write-off

of obsolete assets from the remodeling of an office site and a core

system migration in the second quarter of 2024.

Compared to the second quarter of 2023, the $0.1 million increase reflected

a $1.0

million increase in compensation expense and a $0.1 million increase in

occupancy expense that was partially offset by a $1.0 million

decrease in other expense.

For the first six months of 2024, noninterest expense totaled $80.6 million compared to $78.0 million

for

the same period of 2023 with the $2.6 million increase attributable to increases in compensation

expense of $1.8 million, occupancy

expense of $0.4 million, and other expense of $0.4 million.

Other expense for 2023 included a $1.8 million gain from the sale of a

banking office in the first quarter of 2023.

Financial Condition

Earning Assets.

Average earning

assets totaled $3.935 billion for the second quarter of 2024, an increase of $85.7 million,

or 2.2%,

over the first quarter of 2024, and an increase of $111.3

million, or 2.9%, over the fourth quarter of 2023.

The variance for both prior

period comparisons was driven by an increase in deposit balances, resulting

in higher levels of overnight funds sold.

Compared to the

fourth quarter of 2023, the change in the earning asset mix reflected a $162.7 million

increase in overnight funds and a $15.5 million

increase in loans HFI that was partially offset by lower

investment securities of $43.4 million, and loans held for sale of $23.5 million.

Loans.

Average loans HFI decreased

$1.9 million, or 0.1%, from the first quarter of 2024 and increased $15.5 million, or

0.6%, over

the fourth quarter of 2023.

Period end loans HFI decreased $40.9 million, or 1.5%, from the first quarter of 2024

and decreased $43.7

million, or 1.6%, from the fourth quarter of 2023.

Credit Quality

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

$6.2 million at June 30, 2024 compared to $6.8

million at March 31, 2024 and $6.2 million at December 31, 2023.

At June 30, 2024, nonperforming assets as a percent of total assets

equaled 0.15%, compared to 0.16% at March 31, 2024 and 0.15% at December

Nonaccrual loans totaled $5.5 million at

June 30, 2024, a $1.3 million increase over March 31, 2024 and a $0.7 million decrease

from December 31, 2024.

Further, classified

loans totaled $25.6 million at June 30, 2024, a $3.3 million increase over

March 31, 2024 and a $3.4 million increase over December

. Average total

deposits were $3.641 billion for the second quarter of 2024, an increase of $64.5

million, or 1.8%, over the

first quarter of 2024 and an increase of $92.5 million, or 2.6%, over the fourth quarter

of 2023.

At June 30, 2024, total deposits were

$3.609 billion, decreases of $46.2 million, or 1.3%, from March 31, 2024,

and $93.3 million, or 2.5%, from December 31, 2023.

Capital

. At June 30, 2024, we were “well-capitalized”

with a total risk-based capital ratio of 17.50% and a tangible common equity

ratio (a non-GAAP financial measure) of 8.91% compared to 16.84%

and 8.53%, respectively,

at March 31, 2024 and 16.57% and

8.26%, respectively,

At June 30, 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.

(Dollars in Thousands, except per share data)

Interest Income

$

48,766

$

46,820

$

45,205

$

95,586

$

89,131

Taxable Equivalent Adjustments

Total Interest Income (FTE)

48,831

46,900

45,292

95,731

89,319

Interest Expense

9,497

8,465

5,068

17,962

8,594

Net Interest Income (FTE)

39,334

38,435

40,224

77,769

80,725

1,204

2,197

2,124

5,296

Taxable Equivalent Adjustments

Net Interest Income After Provision for Credit Losses

38,065

37,435

37,940

75,500

75,241

19,606

18,097

19,967

37,703

37,725

40,441

40,171

40,285

80,612

77,961

Income Before Income Taxes

17,230

15,361

17,622

32,591

35,005

3,189

3,536

3,417

6,725

7,126

Pre-Tax (Income) Loss Attributable to Noncontrolling

(31)

$

14,150

$

12,557

$

14,174

$

26,707

$

27,883

Basic Net Income Per Share

$

0.84

$

0.74

$

0.83

$

1.58

$

1.64

Diluted Net Income Per Share

$

0.83

$

0.74

$

0.83

$

1.57

$

1.64

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 second quarter of 2024 totaled $39.3 million, compared

to $38.4 million for the first quarter

of 2024, and $40.2 million for the second quarter of 2023.

Compared to the first quarter of 2024, the increase was primarily due

to

higher overnight funds and loan interest income that was partially offset

by higher deposit interest expense.

The increase in overnight

funds interest income reflected higher average deposit balances and the increase

in loan interest income reflected existing loans re-

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

The increase in deposit interest expense was attributable to higher

average

money market account (“MMA”) balances and to a lesser extent certificates

of deposit (“CD”) balances and reflected a combination of

re-mix from other deposit categories and higher rates for certain products.

Compared to the second quarter of 2023, the $0.9 million decrease was generally

driven by higher deposit interest expense and lower

overnight funds and investment interest income which outpaced an increase

in loan interest income.

For the first six months of 2024,

tax-equivalent net interest income totaled $77.8 million compared

to $80.7 million for the same period of 2023.

The decrease was

primarily driven by the same aforementioned trends.

Our net interest margin for the second quarter of 2024 was 4.02%,

an increase of one basis point over the first quarter of 2024 and a

decrease of four basis points from the second quarter of 2023.

For the month of June 2024, our net interest margin was 4.04%.

For the

first six months of 2024, our net interest margin was 4.01% compared

to 4.05% for the same period of 2023.

quarter of 2024, the slight increase was primarily due to the favorable

loan repricing that was partially offset by higher deposit cost.

The decrease from both prior year periods 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 existing loans repricing at higher rates.

For the second quarter

of 2024, our cost of funds was 97 basis points, an increase of nine basis points

over the first quarter of 2024 and an increase of 46 basis

points over the second quarter of 2023.

Our cost of deposits (including noninterest bearing accounts) was 95 basis points, 85

basis

points, and 43 basis points, respectively,

for the same periods.

We recorded

a provision for credit losses of $1.2 million for the second quarter of 2024 compared

to $0.9 million for the first quarter

of 2024 and $2.2 million for the second quarter of 2023.

Compared to the first quarter of 2024, the increase in the provision was

primarily due to loan grade migration and slightly higher loss rates partially offset

by lower loan balances.

For the first six months of

2024, we recorded a provision for credit losses of $2.1 million compared

to $5.3 million for the same period of 2023 with the decrease

driven primarily by lower new loan volume in 2024.

We discuss the allowance

for credit losses further below.

For more information

on charge-offs and recoveries, see Note 3 –

Loans Held for Investment and Allowance for Credit Losses in the Notes to Consolidated

Financial Statements.

Noninterest income for the second quarter of 2024 totaled $19.6 million

compared to $18.1 million for the first quarter of 2024 and

$20.0 million for the second quarter of 2023.

The $1.5 million increase over the first quarter of 2024 was due to an increase in

mortgage banking revenues driven by higher production.

Compared to the second quarter of 2023, the $0.4 million decrease was

primarily attributable to a $1.7 million decrease in other income which

reflected a $1.4 million gain from the sale of mortgage

servicing rights in the second quarter of 2023, partially offset

by a $1.0 million increase in mortgage banking revenues driven

by a

higher gain on sale margin, and a $0.3 million increase in wealth management

fees.

For the first six months of 2024, noninterest income totaled $37.7 million,

which is comparable to the same period of 2023 and

reflected a $2.0 million decrease in other income that was partially offset

by a $1.0 million increase in wealth management fees and a

$1.0 million increase in mortgage banking revenues.

The decrease in other income was primarily attributable to the aforementioned

$1.4 million gain from the sale of mortgage servicing rights in 2023.

A decrease in vendor bonus income and miscellaneous income

also contributed to the decrease.

The increase in wealth management fees was primarily driven by higher retail

brokerage fees and to

a lesser extent trust fees.

The increase in mortgage banking revenues was due to a higher gain on sale margin.

Noninterest income represented 33.3% of operating revenues (net

interest income plus noninterest income) in the second quarter of

2024 compared to 32.0% in the first quarter of 2024 and 33.2% in the second

quarter of 2023.

For the first six months of 2024,

noninterest income represented 32.7% of operating revenues compared

to 31.9% for the same period of 2023.

The table below reflects the major components of noninterest income.

$

5,377

$

5,250

$

5,326

$

10,627

$

10,565

3,766

3,620

3,795

7,386

7,521

Wealth Management

Fees

4,439

4,682

4,149

9,121

8,077

4,381

2,878

3,363

7,259

6,234

Other

1,643

1,667

3,334

3,310

5,328

Total

$

19,606

$

18,097

$

19,967

$

37,703

$

37,725

Significant components of noninterest income are discussed in more

detail below.

.

Deposit fees for the second quarter of 2024

totaled $5.4

million, an increase of $0.1 million, or 2.4%, over the first

quarter of 2024, and an increase of $0.1

million, or 1.0%, over the second quarter of 2023.

For the first six months of 2024, deposit

fees totaled $10.6 million, an increase an increase of $0.1 million, or 0.6%,

over the same period of 2023.

quarter of 2024, the increase was primarily attributable to an increase in

commercial account analysis fee income.

The increase over

both prior year periods was also driven by higher commercial account

analysis fee income.

.

Bank card fees for the second quarter of 2024 totaled $3.8

million, an increase of $0.1 million, or 4.1%, over the

first quarter of 2024, and comparable to the second quarter of 2023.

For the first six months of 2024, bank card fees totaled $7.4

million, a decrease of $0.1 million, or 1.8%, from the same period of 2023.

The slight change in fees between all periods reflected

variance in debit card utilization as consumer spending patterns normalize.

Wealth

Management Fees

.

Wealth management fees

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

accounts and

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

investment, insurance products, and retirement accounts),

and financial advisory fees through Capital City Strategic Wealth

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

protection services).

Wealth management

fees for the second quarter of 2024 totaled $4.4

million, a decrease of $0.2 million, or 5.2%

from the first quarter of 2024, and an increase of $0.3 million,

or 7.0% over the second quarter of 2023.

For the first six months of

2024, wealth management fees totaled $9.1 million, an increase of $1.0

million, or 12.9%, over the same period of 2023, and reflected

an $0.8 million increase in retail brokerage fees and a $0.4 million increase in

trust fees that was partially offset by a $0.2 million

decrease in insurance commission revenue.

The increase in retail brokerage assets was driven by increased fixed income and

annuity

product sales and the increase in trust fees reflected both new account

growth and higher account values/returns reflective of the

improved market returns.

At June 30, 2024, total assets under management were approximately $2.770

billion compared to $2.686

billion at March 31, 2024 and $2.588 billion at December 31, 2023.

Mortgage Banking Revenues.

Mortgage banking revenues totaled $4.4 million for the second quarter

of 2024, an increase of $1.5

million, or 52.2%, over the first quarter of 2024

and an increase of $1.0 million, or 30.3%, over the second quarter of 2023.

For the

first six months of 2024, revenues totaled $7.3 million compared to

$6.2 million for the same period of 2023.

quarter of 2024, the increase was driven by higher production.

Compared to both prior year periods, the increase was attributable to a

higher gain on sale margin which reflected a higher percentage

of secondary market/mandatory delivery 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 $1.6 million for the second quarter of 2024,

comparable to the first quarter of 2024 and a decrease of

$1.7 million, or 50.7%, from the third quarter of 2023.

For the first six months of 2024, other income totaled $3.3 million compared

to $5.3 million for the same period of 2023.

The decrease from both prior year periods was primarily due to a $1.4 million

gain from

the sale of mortgage servicing rights realized in the second quarter of 2023.

Decreases in miscellaneous income of $0.3 million and

vendor dividend income of $0.2 million contributed to the decrease for the six-month

period.

Noninterest expense for the second quarter of 2024 totaled $40.4 million

compared to $40.2 million for the first quarter of 2024 and

$40.3 million for the second quarter of 2023.

The $0.2 million increase over the first quarter of 2024 reflected a $0.2 million increase

in other expense which included the write-off of obsolete

assets from the remodeling of an office site and a core system migration

in

the second quarter of 2024.

Compared to the second quarter of 2023, the $0.1 million increase reflected a $1.0 million

increase in

compensation expense and a $0.1 million increase in occupancy expense

that was partially offset by a $1.0 million decrease in other

expense.

The increase in compensation expense reflected a $0.7 million increase in salary expense

and a $0.3 million increase in

associate benefit expense.

The increase in salary expense was primarily due to lower realized loan cost (credit offset

to salary

expense) of $0.5 million (lower new loan volume) and higher base salary expense of $0.3

The increase in associate benefit

expense was attributable to higher expense for associate insurance.

The increase in occupancy expense was due to higher expense for

maintenance agreements (security upgrades).

The decrease in other expense was due to a one-time payment for $0.8 million in the

second quarter of 2023 related to a consulting engagement for the negotiation

of a new core processing agreement.

For the first six months of 2024, noninterest expense totaled $80.6 million compared

to $78.0 million for the same period of 2023 with

the $2.6 million increase attributable to increases in compensation expense of

$1.8 million, occupancy expense of $0.4 million, and

other expense of $0.4 million.

The increase in compensation expense was primarily due to a lower level of realized

loan cost (credit

offset to salary expense) of $2.0 million (lower new loan volume)

and higher base salary expense of $0.8 million (primarily annual

merit raises), partially offset by lower commission expense of

$1.1 million.

The increase in occupancy was driven by an increase in

expense for maintenance agreements (security upgrades and addition of

interactive teller machines).

The increase in other expense

reflected a $1.8 million gain from the sale of a banking office in the first

quarter of 2023 that was partially offset by lower pension

plan expense of $0.6 million and the favorable impact of the aforementioned

one-time consulting expense of $0.8 million in 2023.

The table below reflects the major components of noninterest expense.

Salaries

$

20,754

$

20,604

$

20,044

$

41,358

$

39,561

Associate Benefits

3,652

3,803

3,394

7,455

7,401

Total Compensation

24,406

24,407

23,438

48,813

46,962

Premises

3,043

3,173

3,170

6,216

6,414

Equipment

3,954

3,821

3,650

7,775

7,168

Total Occupancy

6,997

6,994

6,820

13,991

13,582

Legal Fees

Professional Fees

1,340

1,258

2,039

2,598

3,363

Processing Services

1,938

1,833

1,872

3,771

3,614

Advertising

1,666

1,833

Telephone

1,427

1,385

Insurance – Other

1,664

1,703

Other Real Estate Owned, net

(28)

(1,855)

Pension - Other

(419)

(419)

(838)

Pension Settlement (Gain) Charge

(291)

(291)

Miscellaneous

3,412

3,206

3,500

6,618

6,871

Total Other

9,038

8,770

10,027

17,808

17,417

Total

$

40,441

$

40,171

$

40,285

$

80,612

$

77,961

Significant components of noninterest expense are discussed in more detail

below.

Compensation

.

Compensation expense totaled $24.4 million for the second quarter of 2024,

comparable to the first quarter of 2024

and a $1.0 million increase from the second quarter of 2023.

The increase in compensation expense reflected a $0.7 million increase

in salary expense and a $0.3 million increase in associate benefit expense.

The increase in salary expense was primarily due to lower

realized loan cost (credit offset to salary expense) of $0.5 million (lower

new loan volume) and higher base salary expense of $0.3

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

associate insurance.

For the first six months

of 2023, compensation expense totaled $48.8 million compared

to $47.0 million for the same period of 2023

with the $1.8 million

increase attributable to a $1.8 million increase in salary expense which reflected

a $2.0 million reduction in realized loan cost (credit

offset to salary expense) driven by lower new loan volume,

and higher base salary expense of $0.8 million (primarily annual merit

raises), partially offset by lower commission expense of $1.1 million.

Occupancy

.

Occupancy expense totaled $7.0 million for the second quarter of 2024, comparable

to the first quarter of 2024 and a $0.2

million increase from the second quarter of 2023.

For the first six months of 2024, occupancy expense totaled $14.0 million compared

to $13.6 million for the same period of 2023.

Compared to both prior year periods,

the increase in occupancy expense was due to

higher expense for maintenance agreements (security upgrades).

Other

.

Other expense totaled $9.0 million for the second quarter of 2024

compared to $8.8 million for the first quarter of 2024

and

$10.0 million for the second quarter of 2023.

For the first six months of 2024, other expense totaled $17.8 million compared to $17.4

million for the same period of 2023.

Compared to the first quarter of 2024, the $0.2 million increase was attributable to

the write-off

of obsolete assets from the remodeling of an office site and a core

system migration in the second quarter of 2024.

Compared to the

second quarter of 2023, the decrease was primarily due to a one-time payment

for $0.8 million in the second quarter of 2023 related to

a consulting engagement for the negotiation of a new core processing agreement.

For the six-month period, the increase was primarily

due to a $1.8 million gain from the sale of a banking office in the first quarter

of 2023 that was partially offset by lower pension plan

expense of $0.6

million and the favorable impact of the aforementioned one-time consulting

expense of $0.8 million in 2023.

Our operating efficiency ratio (expressed as noninterest

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

plus noninterest income) was 68.61%

for the second quarter of 2024 compared to 71.06% for the first quarter of 202

and 66.93% for

the second quarter of 2023.

For the first six months of 2024, this ratio was 69.81% compared to 65.82% for

the same period of 2023.

Income Taxes

We realized income

tax expense of $3.2 million (effective rate of 18.5%) for the second

quarter of 2024 compared to $3.5 million

(effective rate of 23.0%) for the first quarter of 2024 and $3.4

million (effective rate of 19.4%) for the second quarter of 2023.

For the

first six months of 2024, we realized income tax expense of $6.7 million (effective

rate of 20.6%) compared to $7.1 million (effective

rate of 20.4%) for the same period of 2023.

The decrease in our effective tax rate for the second quarter of

2024 was primarily due to

a higher level of tax benefit accrued from a new investment in a solar tax credit equity fund.

Absent discrete items, we expect our

annual effective tax rate to approximate 20-21% for 2024.

FINANCIAL CONDITION

Average earning

assets totaled $3.935 billion for the second quarter of 2024, an increase of $85.7 million, or

2.2%, over the first

quarter of 2024, and an increase of $111.3

million, or 2.9%, over the fourth quarter of 2023.

The variance for both prior period

comparisons was driven by an increase in deposit balances (see below –

), resulting in higher levels of overnight funds sold.

Compared to the fourth quarter of 2023, the change in the earning asset mix reflected

a $162.7 million increase in overnight funds and

a $15.5 million increase in loans HFI that was partially offset by lower

investment securities of $43.4 million, and loans held for sale

of $23.5 million.

Investment Securities

Average investments

decreased $33.4 million, or 3.5%, from the first quarter of 2024

and $43.4 million, or 4.5%,

from the fourth

quarter of 2023. Our investment portfolio represented 23.4% of our average

earning assets for the second quarter of 2024 compared to

24.8% for the first quarter of 2024 and 25.2% for the fourth quarter of

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 June 30, 2024, $583.0 million, or 65.0%, of the investment portfolio was classified as HTM and

$310.9 million, or 34.7%, was classified as AFS. The average maturity

of our total portfolio at June 30, 2024 was 2.67 compared to

2.76 years at March 31, 2024 and 2.91 years at December 31, 2023.

The duration of our investment portfolio at June 30, 2024 was

2.16 years compared to 2.39 years at March 31, 2024 and 2.91 years

Additional information on unrealized

gains/losses in the AFS and HTM portfolios is 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

to

maturity.

HTM investments are measured at amortized cost.

We do not

trade, nor do we presently intend to begin trading investment

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

a trading portfolio.

At June 30, 2024, there were 856 positions (combined AFS and HTM) with

unrealized losses totaling $62.0 million. 82 of these

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

and credit of the U.S. Government.

673 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 June 30, 2024, corporate debt securities had an allowance for credit losses of $135,000

and municipal securities had

an allowance of $5,000.

At June 30, 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 decreased $1.9 million, or 0.1%, from the first quarter of 2024 and increased $15.5 million,

or 0.6%, over the

fourth quarter of 2023.

Compared to the first quarter of 2024, the slight decrease was driven by a decline

in the consumer loans

(primarily indirect auto) of $19.0 million, partially offset by increases

in residential real estate loans of $10.1 million and commercial

real estate loans of $8.0 million.

Compared to the fourth quarter of 2023, the increase was primarily attributable to a $51.8

million

increase in residential real estate loans that was partially offset by

a decrease of $35.0 million in consumer loans (primarily indirect

auto).

Period end loans HFI decreased $40.9 million, or 1.5%, from the first quarter of 2024

and decreased $43.7 million, or 1.6%, from the

fourth quarter of 2023.

Compared to the first quarter of 2024, the decline reflected a $20.0 million decrease

in consumer loans

(primarily indirect auto) and a $13.3 million decrease in commercial loans

(primarily tax-exempt loans).

The decrease from the fourth

quarter of 2023 was primarily attributable to a $36.8 million decrease

in consumer loans (primarily indirect auto) and commercial

loans of $20.2 million (primarily tax-exempt loans) that was partially offset

by a $11.3 million increase in residential real estate loans.

Without compromising our credit standards

,

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

we

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

Credit Quality

Nonperforming assets (nonaccrual loans and other real estate) totaled $6.2

million at June 30, 2024 compared to $6.8 million at March

31, 2024 and $6.2 million at December 31, 2023.

At June 30, 2024, nonperforming assets as a percent of total assets equaled 0.15%,

compared to 0.16% at March 31, 2024 and 0.15% at December 31, 2023.

Nonaccrual loans totaled $5.5 million at June 30, 2024, a

$1.3 million decrease from March 31, 2024 and a $0.7 million decrease

from December 31, 2024.

Further, classified loans totaled

$25.6 million at June 30, 2024, a $3.3 million increase over March 31, 2024

and a $3.4 million increase over December 31, 2023.

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

loans’ amortized cost basis to present the net amount

expected to be collected on the loans.

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

earnings and reduced by the charge-off of loan amounts

(net of recoveries).

Loans are charged off against the allowance when

management believes the uncollectability of a loan balance is confirmed.

Expected recoveries do not exceed the aggregate of amounts

previously charged-off and expected to be charged

-off.

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

exposures is provided through the credit loss provision but recorded as a separate

liability included in other liabilities.

Management estimates the allowance balance using relevant available information,

from internal and external sources relating to past

events, current conditions, and reasonable and supportable forecasts.

Historical loan default and loss experience provides the basis for

the estimation of expected credit losses.

Adjustments to historical loss information incorporate management’s

view of current

conditions and forecasts.

At June 30, 2024, the allowance for credit losses for loans HFI totaled $29.2

million compared to $29.3 million at March 31, 2024 and

$29.9 million at December 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 slight decrease in the allowance from March 31, 2024 reflected a

lower level of net charge-offs (18 basis points

for the second quarter of 2024 versus 22 basis points for the first quarter of 2024) that

was offset by a higher credit loss provision (see above –

).

The decrease in the allowance from December

31, 2023 was primarily due to lower loan balances.

At June 30, 2024, the allowance represented 1.09% of loans HFI compared

to

1.07% at March 30, 2024, and 1.10% at December 31, 2023.

At June 30, 2024, the allowance for credit losses for unfunded commitments

totaled $3.1 million compared to $3.1

million and $3.2

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

The allowance for unfunded commitments is recorded in other

liabilities.

Average total

deposits were $3.641 billion for the second quarter of 2024, an increase of $64.5 million, or 1.8%,

over the first quarter

of 2024 and an increase of $92.5 million, or 2.6%, over the fourth quarter

of 2023.

Compared to both prior periods, growth occurred

in both money market and CD balances which reflected a combination of balances

migrating from savings, and to a lesser extent

noninterest bearing accounts, in addition to receiving new deposits from existing

and new clients via various deposit strategies.

In

addition, compared to the fourth quarter of 2023, the increase in NOW balances reflected

higher average public funds balances as

municipal tax receipts are received/deposited by those clients starting in late November.

To a lesser extent, we have realized

NOW

account inflows from new and existing business accounts which reflected

our bankers focus on deposit gathering initiatives.

At June 30, 2024, total deposits were $3.609 billion, decreases of $46.2 million,

or 1.3%, from March 31, 2024, and $93.3 million, or

2.5%,

from December 31, 2023.

The decrease from both prior periods was primarily due to lower NOW account

balances, partially

offset by the aforementioned growth in money market

and CD balances from both new and existing clients.

The decline in NOW

accounts primarily reflects seasonal public fund balance activity.

Total public funds balances were

$575.0 million at June 30, 2024,

$615.0 million at March 31, 2024, and $709.8 million at December 31,

Business deposit transaction accounts classified as repurchase agreements

averaged $27.0 million for the second quarter of 2024, an

increase of $1.3 million over the first quarter of 2024 and an increase of $0.2 million

over the fourth quarter of 2023. At June 30,

2024, repurchase agreement balances were $22.5 million compared

to $23.5 million at March 31, 2024 and $27.0 million at December

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

-15.0%

-12.5%

-10.0%

-7.5%

-7.5%

-10.0%

-12.5%

-15.0%

15.0%

11.2%

7.3%

3.8%

-4.1%

-8.5%

-13.4%

-18.3%

10.0%

7.5%

4.8%

2.5%

-3.1%

-6.5%

-10.5%

-15.1%

Percentage Change (24-month shock)

+400 bp

+300 bp

+200 bp

+100 bp

-100 bp

-200 bp

-300 bp

-400 bp

-17.5%

-15.0%

-12.5%

-10.0%

-10.0%

-12.5%

-15.0%

-17.5%

41.8%

33.9%

26.0%

18.6%

2.2%

-7.4%

-18.1%

-28.6%

38.2%

31.3%

24.4%

18.0%

3.5%

-5.4%

-15.4%

-26.0%

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

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

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

margin of the Company,

while declining rate

environments

will have a negative impact on the net interest margin. Compared

to the first quarter of 2024, these metrics generally

became more favorable in the rising rate scenarios and less favorable

in the falling rate scenarios primarily attributable to the growth

in variable rate overnight funds which made the Bank more asset sensitive.

The instantaneous,

parallel rate shock results over the next

12-month and 24-month periods are outside of policy in the rates down

300 bps and 400 bps scenario primarily due to the

aforementioned increase in overnight funds.

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

-30.0%

-25.0%

-20.0%

-15.0%

-15.0%

-20.0%

-25.0%

-30.0%

20.2%

16.5%

11.7%

6.1%

-9.5%

-19.0%

-26.1%

-28.8%

19.5%

15.3%

10.4%

5.4%

-8.7%

-17.8%

-24.9%

-28.4%

EVE Ratio (policy minimum 5.0%)

21.8%

20.7%

19.5%

18.2%

15.0%

13.2%

11.9%

11.3%

At June 30, 2024, the economic value of equity was favorable in all rising

rate environments and unfavorable in the falling rate

environments. Compared to the first quarter of 2024, 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 as the EVE ratio

exceeds the

policy minimum of 5.0% in each shock scenario.

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

additional simulations will be analyzed to

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

in mix of our financial assets and liabilities, measured over

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

LIQUIDITY AND CAPITAL

RESOURCES

Liquidity

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

cash needs.

Our objective in managing our liquidity is to

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

other liabilities in accordance with their

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

Our liquidity strategy is guided by policies that are formulated and

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

the marketability of assets, the sources and stability of

funding and the level of unfunded commitments.

We regularly evaluate

all of our various funding sources with an emphasis on

accessibility, stability,

reliability and cost-effectiveness.

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

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

repurchase agreements, federal funds purchased and

FHLB borrowings.

We believe that the cash

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

are

sufficient to meet our future operating capital and funding requirements.

At June 30, 2024, we had the ability to generate approximately $1.500 billion

(excludes overnight funds position of $273 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 June 30, 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 $262.4 million in the second quarter of 2024 compared

to $140.5 million in the first quarter of 2024 and $99.8 million in

the fourth quarter of 2023.

Compared to both prior periods, the increase was primarily driven by higher average

deposits and

investment portfolio cash flow 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.

Average short

-term borrowings totaled $33.6 million for the second quarter of 2024 compared

to $29.5 million for the first quarter of

and $43.8 million for the fourth quarter of 2023.

Compared to the first quarter of 2024, the increase was primarily attributable to

a higher balance maintained on CCHL’s

warehouse line. Compared to the fourth quarter of 2023, 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

is

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

CME Term SOFR plus a margin

of 1.80%.

This

note matures on June 15, 2035.

The proceeds from these borrowings were used to partially fund acquisitions.

Under the terms of each

junior subordinated deferrable interest note, in the event of default or

if we elect to defer interest on the note, we may not, with certain

exceptions, declare or pay dividends or make distributions on our capital

stock or purchase or acquire any of our capital stock.

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 34.

At June 30, 2024, our regulatory capital

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

under the Basel III capital standards.

Shareowners’ equity was $461.0 million at June 30, 2024 compared to

$448.3 million at March 31, 2024 and $440.6 million at

December 31, 2023.

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

attributable to

shareowners of $26.7 million, a $1.2 million decrease in the net unrealized

loss on available for sale securities, net adjustments

totaling $0.8

million related to transactions under our stock compensation plans, stock

compensation accretion of $0.7 million, a $0.3

million increase in the fair value of the interest rate swap related to subordinated debt

,

and a $0.1 million reclassification to temporary

equity.

Shareowners’ equity was reduced by a common stock dividend of $7.1 million ($0.42

per share) and the repurchase of

common stock of $2.3 million (82,540 shares).

At June 30, 2024, our total risk-based capital ratio was 17.50% compared to 16.84% at March

31, 2024 and 16.57% at December 31,

Our common equity tier 1 capital ratio was 14.44%, 13.82%, and 13.52%, respectively,

on these dates.

Our leverage ratio was

10.51%, 10.45%, and 10.30%, respectively,

on these dates.

At June 30, 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 8.91% at June 30, 2024 compared to 8.53% and 8.26% at March

31, 2024 and December 31, 2023,

respectively.

If our unrealized held-to-maturity securities losses of $21.7 million (after-tax)

were recognized in accumulated other

comprehensive loss, our adjusted tangible capital ratio would be 8.38%.

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

liability through other comprehensive income in

accordance with Accounting Standards Codification

Topic 715.

At June 30, 2024, the net pension liability reflected in other

comprehensive loss was $0.4 million compared to $0.4 million

at March 31, 2024 and December 31, 2023.

This liability is re-

measured annually on December 31

st

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

st

.

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 June 30, 2024, we had $734.5 million in commitments to extend credit

and $6.2 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 June 30, 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 (UNAUDITED)

Average

Average

Average

Average

Average

Average

Average

Average

Rate

Rate

Rate

Rate

Assets:

$

26,281

$

5.26

%

$

54,350

$

5.90

%

$

26,797

$

1,080

5.62

%

$

54,728

$

1,445

5.32

%

(1)(2)

2,726,748

40,683

6.03

2,657,693

36,890

5.55

2,727,688

80,879

5.99

2,620,252

71,232

5.48

Taxable Securities

918,989

3,998

1.74

1,041,202

4,803

1.84

935,658

8,237

1.76

1,051,232

9,716

1.85

Tax-Exempt Securities

(2)

4.36

2,656

2.47

4.35

2,747

2.41

Federal Funds Sold and Interest Bearing

262,419

3,624

5.56

218,902

2,782

5.10

201,454

5,517

5.51

289,543

6,893

4.80

Total Earning Assets

3,935,280

48,831

4.99

%

3,974,803

45,292

4.57

%

3,892,447

95,731

4.94

%

4,018,502

89,319

4.48

%

Cash & Due From Banks

74,803

75,854

75,283

75,250

Allowance For Credit Losses

(29,564)

(27,893)

(29,797)

(26,771)

291,669

297,837

293,473

298,999

TOTAL ASSETS

$

$

$

4,231,406

$

4,365,980

Liabilities:

Noninterest Bearing Deposits

1,346,546

1,539,877

1,345,367

1,570,642

NOW Accounts

$

1,207,643

$

4,425

1.47

%

$

1,200,400

$

3,038

1.01

%

$

1,204,337

$

8,922

1.49

%

$

1,214,585

$

5,190

0.86

%

Money Market Accounts

407,387

2,752

2.72

288,466

1.04

380,489

4,737

2.50

278,077

0.69

Savings Accounts

519,374

0.14

602,848

0.08

529,374

0.14

616,045

0.06

Other Time Deposits

160,078

1,226

3.08

87,973

0.47

149,203

2,150

2.90

88,819

0.35

Total Interest Bearing Deposits

2,294,482

8,579

1.50

2,179,687

4,008

0.74

2,263,403

16,173

1.44

2,197,526

6,496

0.60

Total Deposits

3,641,028

8,579

0.95

3,719,564

4,008

0.43

3,608,770

16,173

0.90

3,768,168

6,496

0.35

Repurchase Agreements

26,999

3.24

17,888

2.58

26,362

3.19

13,639

1.83

Other Short-Term Borrowings

6,592

4.16

17,834

7.54

5,176

4.16

27,745

5.73

52,887

4.71

52,887

4.52

52,887

1,258

4.70

52,887

1,175

4.42

Other Long-Term Borrowings

4.31

4.80

4.56

4.80

Total Interest Bearing Liabilities

2,381,218

9,497

1.60

%

2,268,727

5,068

0.90

%

2,348,098

17,962

1.54

%

2,292,252

8,594

0.76

%

Other Liabilities

72,634

84,305

70,464

82,765

TOTAL LIABILITIES

3,800,398

3,892,909

3,763,929

3,945,659

Temporary Equity

6,493

8,935

6,821

8,869

TOTAL SHAREOWNERS’ EQUITY

465,297

418,757

460,656

411,452

TOTAL LIABILITIES, TEMPORARY

AND SHAREOWNERS’ EQUITY

$

$

$

4,231,406

$

4,365,980

Interest Rate Spread

3.38

%

3.67

%

3.40

%

3.73

%

$

39,334

$

40,224

$

77,769

$

80,725

Net Interest Margin

(3)

4.02

%

4.06

%

4.01

%

4.05

%

(1)

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

Interest income includes loan costs of $0.2 million and

$0.3 million for the three and six months ended June

30, 2024, and net loan

fees of $0.1 million and $0.4 million for the three

and six month periods ended June 30, 2023.

(2)

Interest income includes the effects of taxable equivalent adjustments

using a 21% Federal tax rate.

(3)

Taxable equivalent net interest income divided by average earning assets.

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.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

At June 30, 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 further information on the 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 Flow.

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

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.

Risk Factors

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

the factors discussed in Part I,

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.

Unregistered Sales of Equity Securities and Use of

Proceeds

None.

Defaults Upon Senior Securities

None.

Mine Safety Disclosure

Not Applicable.

Other Information

(c) Rule 10b5-1 Trading Plans

During the three months ended June 30, 2024, none of our directors or

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

adopted

or

terminated

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

to satisfy the

affirmative defense conditions of Rule 10b5-1(c) under

the Exchange Act or any “

non-Rule

10b5-1

trading arrangement” as defined in