CAPITAL CITY BANK GROUP INC

Performance Summary.

Net income attributable to common shareowners totaled $13.1

million, or $0.77 per diluted share, for the

third quarter of 2024 compared to $14.2 million, or $0.83 per diluted

share, for the second quarter of 2024, and $12.7 million, or $0.74

per diluted share, for the third quarter of 2023.

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

totaled $39.8 million, or $2.35 per diluted share, compared to net income of $40.5

million, or $2.38 per diluted share, for the same

period of 2023.

Net Interest Income.

Tax-equivalent net

interest income for the third quarter of 2024 totaled $40.2 million, compared

to $39.3 million

for the second quarter of 2024, and $39.4 million for the third quarter of 2023.

Compared to the second quarter of 2024, the increase

was primarily due to increases in loan and investment interest income

and a decrease in deposit interest expense, partially offset by

a

decrease in overnight funds interest income.

One additional calendar day also contributed to the increase.

Favorable repricing of

existing adjustable/fixed rate loans at higher rates drove the increase in loan

interest income.

Compared to the third quarter of 2023,

the $0.9 million increase was primarily driven by an increase in loan interest income

and to a lesser extent overnight funds interest

income, partially offset by an increase in deposit interest expense.

For the first nine months of 2024, tax-equivalent net interest

income totaled $118.0 million compared

to $120.1 million for the same period of 2023 with the decrease primarily attributable

to an

increase in deposit interest expense and a decrease in investment interest income,

partially offset by an increase in loan interest

income.

Our net interest margin for the third quarter of 2024 was 4.12%, an increase of 10 basis points

over the second quarter of

2024 and an increase of nine basis points over the third quarter of 2023.

Provision and Allowance for Credit

Losses.

We recorded

a provision expense for credit losses of $1.2 million for the third quarter of

2024, comparable to the second quarter of 2024 and a $1.2 million decrease

from the third quarter of 2023.

Compared to the second

quarter of 2024, the provision reflected a $0.7 million increase in the provision

expense for loans held for investment (“HFI”), a $0.6

million provision benefit for unfunded loan commitments, and a $0.1

million provision benefit for debt securities.

For the first nine

months of 2024, we recorded a provision expense for credit losses of $3.3

million compared to $7.7 million for the same period of

2023. The decrease reflected a $3.2 million decrease in the provision

expense for loans HFI and a $1.2 million decrease in the

provision for unfunded loan commitments. The decrease in the provision

for loans HFI was primarily due to lower new loan volume in

2024 and lower loan balances.

The decrease in the provision for unfunded loan commitments reflected a lower

level of loan

commitments.

At September 30, 2024, the allowance represented 1.11%

of loans HFI compared to 1.09% at June 30, 2024, and

1.10%

.

Noninterest income for the third quarter of 2024 totaled $19.5 million compared

to $19.6 million for the second

quarter of 2024 and $16.7 million for the third quarter of 2023.

The slight decrease from the second quarter of 2024 reflected a $0.4

million decrease in mortgage banking revenues partially offset by

a $0.3 million increase in wealth management fees.

Compared to

the third quarter of 2023, the $2.8 million increase was primarily attributable

to a $2.1 million increase in mortgage banking revenues

driven by a higher gain on sale margin, and a $0.8 million

increase in wealth management fees.

noninterest income totaled $57.2 million compared to $54.5 million for the same

period of 2023, primarily attributable to a $3.2

million increase in mortgage banking revenues and a $1.8 million increase in

wealth management fees, partially offset by a $2.1

million decrease in other income.

Noninterest Expense.

Noninterest expense for the third quarter of 2024 totaled $42.9 million compared

to $40.4 million for the second

quarter of 2024 and $39.1 million for the third quarter of 2023.

The $2.5 million increase over the second quarter of 2024 was

primarily due to a $1.4 million increase in compensation and a $1.0 million increase

in other expense.

Compared to the third quarter

of 2023, the $3.8 million increase was primarily attributable to a $2.8 million

increase in compensation expense and a $0.9 million

increase in other expense.

For the first nine months of 2024, noninterest expense totaled $123.5 million

compared to $117.1 million

for the same period of 2023 with the $6.4 million increase primarily attributable

to increases in compensation expense of $4.6 million,

occupancy expense of $0.5 million, and other expense of $1.3 million.

Financial Condition

Earning Assets.

Average earning

assets totaled $3.883 billion for the third quarter of 2024, a decrease of $51.9 million, or 1.3%,

from

the second quarter of 2024, and an increase of $59.4 million, or 1.6%, over the

The change for both prior

periods was driven by variances in deposit balances.

Compared to the second quarter of 2024, the change in the earning asset mix

reflected a $33.2 million decrease in loans HFI, a $11.4

million decline in investment securities, and a $5.6 million decrease in

overnight funds sold.

Compared to the fourth quarter of 2023, the change in the earning asset mix reflected a $157.1 million

increase

in overnight funds that was partially offset by a $17.7 million decrease

in loans HFI, a $54.7 million decrease in investment securities

and a $25.2 million decline in loans held for sale.

Loans.

Average loans HFI decreased

$33.2 million, or 1.2%, from the second quarter of 2024 and decreased $17.7

million, or 0.7%,

from the fourth quarter of 2023.

Period end loans HFI decreased $7.1 million, or 0.3%, from the second quarter of 2024

and

decreased $50.8 million, or 1.9%, from the fourth quarter of 2023.

Credit Quality

.

Nonperforming assets (nonaccrual loans and other real estate) totaled $7.2 million

at September 30, 2024 compared to

$6.2 million at June 30, 2024 and $6.2 million at December 31, 2023.

At September 30, 2024, nonperforming assets as a percent of

total assets equaled 0.17%, compared to 0.15% at June 30, 2024 and 0.15%

Nonaccrual loans totaled $6.6

million at September 30, 2024, a $1.1 million increase over June 30, 2024

and a $0.3 million increase over December 31, 2023.

Further, classified loans totaled $25.5 million at September

30, 2024, a $0.1 million decrease from June 30, 2024 and a $3.3

million

increase over December 31, 2023.

.

Average total

deposits were $3.572 billion for the third quarter of 2024, a decrease of $69.0 million, or 1.9%,

from the

second quarter of 2024 and an increase of $23.5 million, or 0.7%, over the

At September 30, 2024, total

deposits were $3.579 billion, a decrease of $29.5 million, or 0.8%, from

June 30, 2024, and a decrease of $122.7 million, or 3.3%,

from December 31, 2023.

Capital

.

At September 30, 2024, we were “well-capitalized”

with a total risk-based capital ratio of 17.97% and a tangible common

equity ratio (a non-GAAP financial measure) of 9.28% compared to

17.50% and 8.91%, respectively,

at June 30, 2024 and 16.57%

and 8.26%, respectively,

At September 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

$

49,328

$

48,766

$

45,753

$

144,914

$

134,886

Taxable Equivalent Adjustments

Total Interest Income (FTE)

49,377

48,831

45,840

145,108

135,160

Interest Expense

9,117

9,497

6,473

27,079

15,067

Net Interest Income (FTE)

40,260

39,334

39,367

118,029

120,093

1,206

1,204

2,393

3,330

7,689

Taxable Equivalent Adjustments

Net Interest Income After Provision for Credit Losses

39,005

38,065

36,887

114,505

112,130

19,513

19,606

16,728

57,216

54,452

42,921

40,441

39,105

123,533

117,066

Income Before Income Taxes

15,597

17,230

14,510

48,188

49,516

2,980

3,189

3,004

9,705

10,130

Pre-Tax Loss Attributable to Noncontrolling Interest

1,149

1,342

1,153

$

13,118

$

14,150

$

12,655

$

39,825

$

40,539

Basic Net Income Per Share

$

0.77

$

0.84

$

0.75

$

2.35

$

2.38

Diluted Net Income Per Share

$

0.77

$

0.83

$

0.74

$

2.35

$

2.38

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 48.

Tax-equivalent net

interest income for the third quarter of 2024 totaled $40.2 million, compared to $39.3

million for the second quarter

of 2024, and $39.4

million for the third quarter of 2023.

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

increases in loan and investment interest income and a decrease in deposit interest expense,

partially offset by a decrease in overnight

funds interest income.

One additional calendar day also contributed to the increase.

Favorable repricing of existing adjustable/fixed

rate loans at higher rates drove the increase in loan interest income.

The increase in investment interest income was due to the

reinvestment of maturing securities at higher rates.

The decrease in deposit interest expense was attributable to lower average

NOW

account balances and average rate, in addition to lower rates on promotional

deposit products.

Compared to the third quarter of 2023, the $0.9 million increase was primarily driven

by an increase in loan interest income and to a

lesser extent overnight funds interest income, partially offset by an

increase in deposit interest expense.

For the first nine months of

2024, tax-equivalent net interest income totaled $118.0

million compared to $120.1 million for the same period of 2023 with the

decrease primarily attributable to an increase in deposit interest expense and

a decrease in investment interest income, partially offset

by an increase in loan interest income.

Our net interest margin for the third quarter of 2024 was 4.12%, an increase

of 10 basis points over the second quarter of 2024 and an

increase of nine basis points over the third quarter of 2023.

For the month of September 2024, our net interest margin was 4.16%.

For

the first nine months of 2024, our net interest margin was 4.05%

compared to 4.04% for the same period of 2023.

The increase over

the second quarter of 2024 reflected favorable loan and investment repricing,

partially offset by a lower overnight funds rate.

The

increase over both prior year periods reflected higher loan rates partially

offset by a higher cost of deposits.

For the third quarter of

2024, our cost of funds was 93 basis points, a decrease of four basis points from

the second quarter of 2024 and an increase of 27 basis

points over the third quarter of 2023.

Our cost of deposits (including noninterest bearing accounts) was 92 basis points, 95

basis

points, and 58 basis points, respectively,

for the same periods.

We recorded

a provision expense for credit losses of $1.2 million for the third quarter of 2024, comparable

to the second quarter of

2024 and a $1.2 million decrease from the third quarter of 2023.

Compared to the second quarter of 2024, the provision reflected a

$0.7 million increase in the provision expense for loans HFI, a $0.6

million provision benefit for unfunded loan commitments, and a

$0.1 million provision benefit for debt securities. The increase in the provision

for loans HFI was primarily due to loan grade

migration and slightly higher loss rates partially offset by

lower loan balances. A lower level of commitments drove the provision

benefit for unfunded loan commitments. For the first nine months of 2024,

we recorded a provision expense for credit losses of $3.3

million compared to $7.7 million for the same period of 2023. The decrease

reflected a $3.2 million decrease in the provision expense

for loans HFI and a $1.2 million decrease in the provision for unfunded

loan commitments. The decrease in the provision for loans

HFI was primarily due to lower new loan volume in 2024 and lower loan balance

s. The decrease in the provision for unfunded loan

commitments reflected a lower level of loan commitments. We

discuss the allowance for credit losses further below.

Noninterest income for the third quarter of 2024 totaled $19.5 million compared

to $19.6 million for the second quarter of 2024 and

$16.7 million for the third quarter of 2023.

The slight decrease from the second quarter of 2024 reflected a $0.4 million decrease in

mortgage banking revenues partially offset by

a $0.3 million increase in wealth management fees.

Compared to the third quarter of

2023, the $2.8 million increase was primarily attributable to a $2.1 million increase

in mortgage banking revenues driven by a higher

gain on sale margin, and a $0.8 million increase in wealth management

fees.

For the first nine months of 2024, noninterest income totaled $57.2 million

compared to $54.5 million for the same period of 2023,

primarily attributable to a $3.2 million increase in mortgage banking revenues

and a $1.8 million increase in wealth management fees,

partially offset by a $2.1 million decrease in other income.

The increase in mortgage banking revenues was due to a higher gain

on

sale margin.

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

fees and to a lesser extent trust

fees, primarily attributable to both new account growth and higher

account values driven by higher market returns.

The decrease in

other income was primarily attributable to a $1.4 million gain from the

sale of mortgage servicing rights in the second quarter of 2023,

and to a lesser extent a decrease in vendor bonus income and miscellaneous income.

Noninterest income represented 32.7% of operating revenues (net

interest income plus noninterest income) in the third quarter of 2024

compared to 33.3% in the second quarter of 2024 and 29.9% in the third quarter

of 2023.

noninterest income represented 32.7% of operating revenues compared

to 31.2% for the same period of 2023.

The table below reflects the major components of noninterest income.

$

5,512

$

5,377

$

5,456

$

16,139

$

16,021

3,624

3,766

3,684

11,010

11,205

Wealth Management

Fees

4,770

4,439

3,984

13,891

12,061

3,966

4,381

1,839

11,225

8,072

Other

1,641

1,643

1,765

4,951

7,093

Total

$

19,513

$

19,606

$

16,728

$

57,216

$

54,452

Significant components of noninterest income are discussed in more

detail below.

.

Deposit fees for the third quarter of 2024

totaled $5.5

million, an increase of $0.1

million, or 2.5%, over the second

quarter of 2024, and an increase of $0.1

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

For the first nine months of 2024, deposit

fees totaled $16.1 million, an increase an increase of $0.1 million, or 0.7%,

over the same period of 2023.

Compared to the second

quarter of 2024, the increase was driven by higher overdraft fees.

The increase over both prior year periods was primarily due to

higher commercial account analysis fee income.

.

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

3.8%, from the

second quarter of 2024, and a decrease of $0.1 million, or 1.6% from

the third quarter of 2023.

bank card fees totaled $11.0 million, a decrease

of $0.2

million, or 1.7%, 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 third quarter of 2024 totaled $4.8 million, an increase

of $0.3 million, or 7.5%,

over the second quarter of 2024, and an increase of $0.8 million,

or 19.7%, over the third quarter of 2023.

For the first nine months of

2024, wealth management fees totaled $13.9 million, an increase of $1.8

million, or 15.2%, over the same period of 2023, and

reflected an $1.4 million increase in retail brokerage fees and a $0.

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 September 30, 2024, total assets under management were approximately

$2.950 billion compared to

$2.770 billion at June 30, 2024 and $2.588 billion at December 31, 2023.

Mortgage Banking Revenues.

Mortgage banking revenues totaled $4.0 million for the third quarter of

2024, a decrease of $0.4 million,

or 9.5%, from the second quarter of 2024 and an increase of $2.1 million, or 115

.7%, over the third quarter of 2023.

For the first nine

months of 2024, mortgage banking revenues totaled $11.2

million compared to $8.1 million for the same period of 2023.

The

decrease compared to the second quarter of 2024 was attributable to slightly

lower loan sale volume. Compared to the 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 third quarter of 2024, comparable

to the second quarter of 2024 and a decrease of

$0.1 million, or 7.0%, from the third quarter of 2023.

For the first nine months of 2024, other income totaled $5.0 million compared

to $7.1 million for the same period of 2023.

The decrease from 2023 was primarily attributable to a $1.4 million gain from the

sale of

mortgage servicing rights realized in the second quarter of 2023,

and to a lesser extent a decrease in vendor bonus income and

miscellaneous income.

Noninterest expense for the third quarter of 2024 totaled $42.9 million compared

to $40.4 million for the second quarter of 2024 and

$39.1 million for the third quarter of 2023.

The $2.5 million increase over the second quarter of 2024 was primarily due to

a $1.4

million increase in compensation and a $1.0 million increase in other expense.

The increase in compensation reflected a $0.9 million

increase in salary expense and a $0.5 million increase in associate benefit

expense.

The increase in salary expense was driven by

annual merit adjustments, and the increase in other associate benefit

expense was primarily attributable to higher health insurance cost,

and to a lesser extent higher stock-based compensation expense.

The increase in other expense was primarily due to a $0.5 million

increase in professional fees, a $0.3 million increase in processing fees, and

higher miscellaneous expense, which included a $0.5

million payment to the counterparty for our VISA Class B share swap due to revision

to the share conversion rate related to additional

funding by VISA of the merchant litigation reserve.

Compared to the third quarter of 2023, the $3.8 million increase was primarily

attributable to a $2.8 million increase in compensation expense and a $0.9 million

increase in other expense.

The unfavorable

variance in compensation expense reflected a $2.2 million increase in salary expense

and a $0.6 million increase in associate benefit

expense, with the salary variance driven by merit adjustments and the associate

benefit expense variance reflective of higher health

insurance cost.

Further, salary expense was unfavorably impacted

by a $1.0 million decrease in realized loan cost (credit offset to

salary expense) which reflected lower loan volume in 2024.

The increase in other expense was attributable to a $0.6 million increase

in professional fees and higher miscellaneous expense due to the aforementioned

$0.5 million share swap payment in the third quarter

of 2024.

For the first nine months of 2024, noninterest expense totaled $123.5

million compared to $117.1 million for the same period

of 2023

with the $6.4 million increase primarily attributable to increases in compensation

expense of $4.6 million, occupancy expense of $0.5

million, and other expense of $1.3 million.

The increase in compensation expense reflected a $3.9 million increase in salary

expense

and a $0.7 million increase in associate benefit expense.

The increase in salary expense was primarily due to a $2.9 million decrease

in realized loan cost (credit offset to salary expense and lower new loan

volume) and a $1.9 million increase in base salary expense

(primarily annual merit raises), partially offset by a decrease in commission

expense of $1.3 million (lower residential mortgage

volume).

The increase in occupancy was primarily attributable to an increase in maintenance

agreement expense (security upgrades

and addition of interactive teller machines).

The increase in other expense was primarily due to a $1.8 million gain from the sale of

a

banking office in the first quarter of 2023 and higher miscellaneous

expense due to the aforementioned $0.5 million share swap

payment in 2024, which was partially offset by a $1.0 million decrease

in pension plan expense (service cost).

The table below reflects the major components of noninterest expense.

Salaries

$

21,637

$

20,754

$

19,459

$

62,995

$

59,020

Associate Benefits

4,163

3,652

3,544

11,618

10,945

Total Compensation

25,800

24,406

23,003

74,613

69,965

Premises

3,245

3,043

3,217

9,461

9,632

Equipment

3,853

3,954

3,763

11,628

10,930

Total Occupancy

7,098

6,997

6,980

21,089

20,562

Legal Fees

1,272

1,147

Professional Fees

1,869

1,340

1,254

4,467

4,617

Processing Services

2,260

1,938

1,874

6,030

5,488

Advertising

2,320

2,590

Telephone

2,119

2,044

Insurance – Other

2,401

2,406

Other Real Estate Owned, net

(1,846)

Pension - Other

(419)

(419)

(1,256)

Pension Settlement Gain

(291)

Miscellaneous

3,777

3,412

3,470

10,395

10,339

Total Other

10,023

9,038

9,122

27,831

26,539

Total

$

42,921

$

40,441

$

39,105

$

123,533

$

117,066

Significant components of noninterest expense are discussed in more detail

below.

Compensation.

Compensation expense totaled $25.8 million for the third quarter of 2024, a $1.4 million,

or 5.7%, increase over the

second quarter of 2024 and a $2.8 million, or 12.2%, increase over the third

quarter of 2023.

The increase over the second quarter of

2024 reflected a $0.9 million increase in salary expense and a $0.5 million

increase in associate benefit expense.

The increase in

salary expense was driven by annual merit adjustments, and the increase in

other associate benefit expense was primarily attributable

to higher health insurance cost, and to a lesser extent higher stock-based compensation

expense.

Compared to the third quarter of

2023, the unfavorable variance was attributable to a $2.2 million increase in

salary expense and a $0.6 million increase in associate

benefit expense, with the salary variance driven by merit adjustments and the

associate benefit expense variance reflective of higher

health insurance cost.

Further, salary expense was unfavorably impacted

by a $1.0 decrease in realized loan cost (credit offset to

salary expense) which reflected lower loan volume in 2024.

For the first nine months of 2024, compensation expense totaled $74.6

million compared to $70.0 million for the same period of 2023 with the $4.6

million increase attributable to a $3.9 million increase in

salary expense and a $0.7 million increase in associate benefit expense.

The increase in salary expense was primarily due to a $2.9

million decrease in realized loan cost (credit offset to salary expense)

(lower new loan volume) and a $1.9 million increase in base

salary expense (primarily annual merit raises), partially offset by

a $1.3 million decrease in commission expense (lower residential

mortgage volume).

Higher health care cost drove the increase in associate benefit expense.

Occupancy

.

Occupancy expense totaled $7.1 million for the third quarter of 2024, a $0.1 million

increase over both the second

quarter of 2024 and the third quarter of 2023.

For the first nine months of 2024, occupancy expense totaled $21.1 million compared

to

$20.6 million for the same period of 2023.

Compared to both prior year periods,

the increase in occupancy expense was primarily due

to higher expense for maintenance agreements (security upgrades and

interactive teller machines).

Other

.

Other expense totaled $10.0 million for the third quarter of 2024 compared

to $9.0 million for the second quarter of 2024 and

$9.1 million for the third quarter of 2023.

For the first nine months of 2024, other expense totaled $27.8 million compared

to $26.5

million for the same period of 2023.

Compared to the second quarter of 2024, the $1.0 million increase was primarily due to

a $0.5

million increase in professional fees, a $0.3 million increase in processing

fees, and higher miscellaneous expense, which included a

$0.5 million payment to the counterparty for our VISA Class B share swap due to

revision to the share conversion rate related to

additional funding by VISA of the merchant litigation reserve.

The $0.9 million increase over the third quarter of 2023 was driven

by

a $0.6 million increase in professional fees and higher miscellaneous expense

due to the aforementioned $0.5 million share swap

payment in the third quarter of 2024.

For the nine-month period, the $1.3 million increase was primarily due to a $1.8

million gain

from the sale of a banking office in the first quarter of 2023 and

higher miscellaneous expense in 2024 due to the aforementioned $0.5

million share swap payment, which was partially offset by a $1.0

million decrease in pension plan expense (service cost).

Our operating efficiency ratio (expressed as noninterest

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

plus noninterest income) was 71.81% for the third quarter of 2024 compared

to 68.61% for the second quarter of 2024

and 69.88% for

the third quarter of 2023.

For the first nine months of 2024, this ratio was 70.49% compared to 67.07%

for the same period of 2023.

Income Taxes

We realized income

tax expense of $3.0 million (effective rate of 19.1%) for the third quarter of

2024 compared to $3.2 million

(effective rate of 18.5%) for the second quarter of 2024

and $3.0 million (effective rate of 20.7%) for the third quarter of 2023.

For

the first nine months of 2024, we realized income tax expense of $9.7

million (effective rate of 20.1%) compared to $10.1 million

(effective rate of 20.5%) for the same period of 2023.

The decrease in our effective tax rate from both prior year periods was

primarily due to a higher level of tax benefit accrued from investments in solar tax

credit equity funds.

Absent discrete items, we

expect our annual effective tax rate to approximate 20-21%

for 2024.

FINANCIAL CONDITION

Average earning

assets totaled $3.883 billion for the third quarter of 2024, a decrease of $51.9 million, or

1.3%, from the second

quarter of 2024, and an increase of $59.4 million, or 1.6%, over the

The change for both prior periods was

driven by variances in deposit balances (see below –

).

Compared to the second quarter of 2024, the change in the earning

asset mix reflected a $33.2 million decrease in loans HFI, a $11.4

million decline in investment securities, and a $5.6 million decrease

in overnight funds sold.

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

$157.1 million

increase in overnight funds that was partially offset by

a $17.7 million decrease in loans HFI, a $54.7 million decrease in investment

securities and a $25.2 million decline in loans held for sale.

Investment Securities

Average investments

decreased $11.4 million, or 1.2%, from the second

quarter of 2024

and $54.7 million, or 5.7%, from the fourth

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

earning assets for each of the second and the third

quarters

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 September 30, 2024, $561.5 million, or 62.5%, of the investment portfolio was classified

as HTM

and $336.2 million, or 37.5%, was classified as AFS. The average

maturity of our total portfolio at September 30, 2024 was 2.51

compared to 2.67 years at June 30, 2024 and 2.91 years at December 31, 2023.

The duration of our investment portfolio at September

30, 2024 was 2.17 years compared to 2.16 years at June 30, 2024 and 2.91

years at December 31, 2023.

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 September 30, 2024, there were 818 positions (combined AFS and HTM)

with unrealized losses totaling $40.3 million. 73 of these

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

and credit of the U.S. Government.

651 were U.S. government agency securities

issued by U.S. government sponsored entities. The remaining 94 positions

(municipal securities and corporate bonds) have a credit

component.

At September 30, 2024, corporate debt securities had an allowance for credit losses of $79,000

and municipal securities

had an allowance of $4,000.

At September 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 $33.2 million, or 1.2%, from the second quarter of 2024 and decreased

$17.7 million, or 0.7%, from the

Compared to the second quarter of 2024, the decrease was driven by a $19.4

million decrease in consumer

loans (primarily indirect auto), a $13.2 million decrease in commercial

loans, and a $7.7 million decrease in commercial real estate

loans, partially offset by a $7.4 million increase in residential

real estate loans.

Compared to the fourth quarter of 2023, the decrease

was primarily attributable to a $54.5 million decrease in consumer loans (primarily

indirect auto) and a $24.2 million decrease in

commercial loans (primarily tax-exempt loans) that were partially offset

by a $59.2 million increase in residential real estate loans.

Period end loans HFI decreased $7.1 million, or 0.3%, from the second quarter of

2024 and decreased $50.8 million, or 1.9%, from the

Compared to the second quarter of 2024, the decline reflected a $20.9 million decrease

in consumer loans

(primarily indirect auto), a $10.4 million decrease in commercial loans, and

a $3.2 million decline in commercial real estate loans,

partially offset by a $10.9 million increase in residential real estate loans and

a $18.1 million increase in construction loans.

The

decrease from the fourth quarter of 2023 was primarily attributable to

a $57.7 million decrease in consumer loans (primarily indirect

auto), a $30.6 million decline in commercial loans, and a $5.5 million

decrease in commercial real estate loans, partially offset by

a

$22.2 million increase in residential real estate loans and a $22.8 million increase

in construction 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 $7.2

million at September 30, 2024 compared to $6.2 million at

June 30, 2024 and $6.2 million at December 31, 2023.

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

equaled 0.17%, compared to 0.15% at June 30, 2024 and 0.15% at December

31, 2023.

Nonaccrual loans totaled $6.6 million at

September 30, 2024, a $1.1 million increase over June 30, 2024 and a $0.3 million increase over

Further,

classified loans totaled $25.5 million at September 30, 2024, a $0.1 million

decrease from June 30, 2024 and a $3.3 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 September 30, 2024, the allowance for credit losses for loans HFI totaled

$29.8 million compared to $29.2 million at June 30, 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 Notes to Consolidated Financial Statements.

The increase in the allowance over June 30, 2024 was

primarily attributable to a slightly higher credit loss provision driven by a higher

forecasted unemployment rate utilized in calculating

loan loss rates and loan grade migration (see above – Provision for Credit Losses).

The change in the allowance from December 31,

2023 reflected lower loan balances offset by higher

loss rates and loan grade migration.

At September 30, 2024, the allowance

represented 1.11% of loans HFI compared to

1.09% at June 30, 2024, and 1.10% at December 31, 2023.

At September 30, 2024, the allowance for credit losses for unfunded

commitments totaled $2.5 million compared to $3.1

million and

$3.2

million at June 30, 2024 and December 31, 2023, respectively.

The decline in the allowance from June 30, 2024 and December

31, 2023 reflected a lower level of unfunded loan commitments. The

allowance for unfunded commitments is recorded in other

liabilities.

Average total

deposits were $3.572 billion for the third quarter of 2024, a decrease of $69.0 million,

or 1.9%, from the second quarter

of 2024 and an increase of $23.5 million, or 0.7%, over the fourth quarter

of 2023.

Compared to the second quarter of 2024, the

decrease was primarily attributable to lower NOW account balances primarily

due to the seasonal decline in our public fund balances.

The increase over the fourth quarter of 2023 reflected growth in both money

market and certificate of deposit balances which,

reflected a combination of balances migrating from savings and noninterest

bearing accounts, in addition to receiving new deposits

from existing and new clients via various deposit strategies.

At September 30, 2024, total deposits were $3.579 billion, a decrease of $29.5

million, or 0.8%, from June 30, 2024, and a decrease of

$122.7 million, or 3.3%, from December 31, 2023.

The decrease from June 30, 2024 was primarily due to lower noninterest bearing,

money market, and savings account balances.

The decrease from December 31, 2023 was primarily due to lower NOW account

balances, primarily due to the seasonal decline in our public funds, partially

offset by higher money market and certificate of deposit

balances from both new and existing clients.

Total public funds balances

were $516.2 million at September 30, 2024, $575.0 million

at June 30, 2024, and $709.8 million at December 31, 2023.

Business deposit transaction accounts classified as repurchase agreements

averaged $27.1 million for the third quarter of 2024, an

increase of $0.1 million over the second quarter of 2024 and an increase of $0.3

million over the fourth quarter of 2023. At September

30, 2024, repurchase agreement balances were $29.3 million compared

to $22.5 million at June 30, 2024 and $27.0 million at

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%

13.8%

10.3%

6.8%

3.5%

-3.8%

-8.2%

-12.9%

-18.0%

15.0%

11.2%

7.3%

3.8%

-4.1%

-8.5%

-13.4%

-18.3%

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%

40.9%

33.1%

25.2%

17.8%

1.3%

-8.4%

-19.1%

-29.2%

41.8%

33.9%

26.0%

18.6%

2.2%

-7.4%

-18.1%

-28.6%

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 second quarter of 2024, these metrics generally

became less favorable in the rising rate scenarios and more favorable

in the falling rate scenarios.

This was attributable to slightly

lower new volume asset rates, in addition to $50 million in investment purchases which

provide a benefit in a falling rate environment,

with a negative effect in rising rate scenarios.

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

largely due to the limited ability to decrease deposit rates

the full extent of this rate change.

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

by considering the effects of changes in interest rates on all

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

assets and liabilities. The difference between these

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

which in theory approximates the fair value of our net

assets.

ESTIMATED CHANGES

IN ECONOMIC VALUE

OF EQUITY

(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%

30.6%

24.5%

17.4%

9.6%

-11.4%

-21.7%

-31.3%

-31.7%

20.2%

16.5%

11.7%

6.1%

-9.5%

-19.0%

-26.1%

-28.8%

EVE Ratio (policy minimum 5.0%)

25.2%

23.6%

21.9%

20.1%

15.7%

13.6%

11.8%

11.7%

At September 30, 2024, the economic value of equity was favorable

in all rising rate environments and unfavorable in the falling rate

environments. Compared to the second quarter of 2024, EVE metrics were

more favorable in the rising rate environment and less

favorable in falling rate environments as slower decay rates were assumed for

our nonmaturity deposit portfolio, resulting in longer

assumed average lives. EVE is currently in compliance with policy in

all rate scenarios as the EVE ratio exceeds the policy minimum

of 5.0% in each shock scenario.

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

additional simulations will be analyzed to

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

in mix of our financial assets and liabilities, measured over

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

LIQUIDITY AND CAPITAL

RESOURCES

Liquidity

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

cash needs.

Our objective in managing our liquidity is to

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

other liabilities in accordance with their

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

Our liquidity strategy is guided by policies that are formulated and

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

the marketability of assets, the sources and stability of

funding and the level of unfunded commitments.

We regularly evaluate

all of our various funding sources with an emphasis on

accessibility, stability,

reliability and cost-effectiveness.

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

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

repurchase agreements, federal funds purchased and

FHLB borrowings.

We believe that the cash

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

are

sufficient to meet our future operating capital and funding requirements.

At September 30, 2024, we had the ability to generate approximately $1.522

billion (excludes overnight funds position of $262

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.

We

believe the liquidity available to us at September 30, 2024 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 (i.e., deposits with banks plus

FED funds sold less FED funds purchased) sold

position of $256.9 million in the third quarter of 2024 compared to $262.4

million in the second quarter of 2024 and $99.8 million in

the fourth quarter of 2023.

Compared to the second quarter of 2024, the decrease reflected lower average deposits (primarily

seasonal

public funds) that was substantially offset by a decline in average loans.

Compared to the fourth quarter of 2023, the increase was

primarily driven by higher average deposits and lower average investments.

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 $29.8 million for the third quarter of 2024 compared to

$33.6 million for the second quarter of

and $43.8 million for the fourth quarter of 2023.

The decrease from both prior periods reflected a lower balance maintained on

CCHL’s

warehouse line. Additional detail on warehouse borrowings

is provided in Note 4 – Mortgage Banking Activities in the

Consolidated Financial Statements.

We have issued two

junior subordinated deferrable interest notes to our wholly owned

Delaware statutory trusts.

The first note for

$30.9 million was issued to CCBG Capital Trust I in

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

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 September 30, 2024, our regulatory

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

under the Basel III capital standards.

Shareowners’ equity was $476.5 million at September 30, 2024

compared to $461.0 million at June 30, 2024 and $440.6 million at

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

income attributable to

shareowners of $39.8 million, a $8.7 million decrease in the net unrealized

loss on available for sale securities, net adjustments

totaling $0.9 million related to transactions under our stock compensation

plans, and stock compensation accretion of $1.1 million.

Shareowners’ equity was reduced by a common stock dividend

of $11.0 million ($0.65 per share), the repurchase of

common stock of

$2.3 million (82,540 shares), a $0.6 million increase in the fair value of the interest

rate swap related to subordinated debt, and a $0.7

million reclassification to temporary equity.

At September 30, 2024, our total risk-based capital ratio was 17.97% compared

to 17.50% at June 30, 2024 and 16.57% at December

31, 2023.

Our common equity tier 1 capital ratio was 14.88%, 14.44%, and 13.52%, respectively,

on these dates.

Our leverage ratio

was 10.89%, 10.51%, and 10.30%, respectively,

on these dates.

At September 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 9.28% at September 30, 2024 compared to 8.91%

and 8.26% at June 30, 2024 and December 31,

2023, respectively.

If our unrealized held-to-maturity securities losses of $12.9 million (after-tax)

were recognized in accumulated

other comprehensive loss, our adjusted tangible capital ratio would be 9.00%.

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

liability through other comprehensive income in

accordance with Accounting Standards Codification

Topic 715. At September 30, 2024,

the net pension liability reflected in other

comprehensive loss was $0.4 million compared to $0.4 million

at June 30, 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, as amended.

OFF-BALANCE SHEET ARRANGEMENTS

We are a party

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

course of business to meet the financing needs of our

clients.

At September 30, 2024, we had $714.2 million in commitments to extend

credit and $6.1 million in standby letters of credit.

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

any condition established in the

contract.

Commitments generally have fixed expiration dates or other termination

clauses and may require payment of a fee.

Since

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

the total commitment amounts do not necessarily

represent future cash requirements.

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

the performance

of a client to a third party.

We use the same credit

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

balance sheet instruments.

If commitments arising from these financial instruments continue to require

funding at historical levels, management does not

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

obligations.

In the event these commitments

require funding in excess of historical levels, management believes current

liquidity, advances available from the

FHLB and the

Federal Reserve, and investment security maturities provide a sufficient

source of funds to meet these commitments.

Certain agreements provide that the commitments are unconditionally

cancellable by the bank and for those agreements no allowance

for credit losses has been recorded.

We

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

unconditionally cancellable by the Bank, which is included in other

liabilities on the Consolidated Statements of Financial Condition

and totaled $2.5 million at September 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,

as amended.

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, as

amended.

TABLE I

AVERAGE BALANCES & INTEREST RATES (UNAUDITED)

Average

Average

Average

Average

Average

Average

Average

Average

Rate

Rate

Rate

Rate

Assets:

$

24,570

$

7.49

%

$

62,768

$

6.14

%

$

26,050

$

1,800

6.22

%

$

57,438

$

2,416

5.62

%

(1)(2)

2,693,533

40,985

6.09

2,672,653

38,455

5.71

2,716,220

121,864

6.02

2,637,911

109,688

5.56

Taxable Securities

907,610

4,148

1.82

1,002,547

4,549

1.80

926,241

12,385

1.78

1,034,825

14,265

1.84

Tax-Exempt Securities

(2)

4.33

2,456

2.66

4.34

2,649

2.49

Federal Funds Sold and Interest Bearing

256,855

3,514

5.44

136,556

1,848

5.37

220,056

9,031

5.48

237,987

8,741

4.91

Total Earning Assets

3,883,414

49,377

5.06

%

3,876,980

45,840

4.69

%

3,889,415

145,108

4.98

%

3,970,810

135,160

4.55

%

Cash & Due From Banks

70,994

75,941

73,843

75,483

Allowance For Credit Losses

(29,905)

(29,172)

(29,833)

(27,581)

291,359

295,106

292,762

297,688

TOTAL ASSETS

$

$

$

4,226,187

$

4,316,400

Liabilities:

Noninterest Bearing Deposits

1,332,305

1,474,574

1,340,981

1,538,268

NOW Accounts

$

1,145,544

$

4,087

1.42

%

$

1,125,171

$

3,489

1.23

%

$

1,184,596

$

13,009

1.47

%

$

1,184,453

$

8,679

0.98

%

Money Market Accounts

418,625

2,694

2.56

322,623

1,294

1.59

393,294

7,431

2.52

293,089

2,249

1.03

Savings Accounts

512,098

0.14

579,245

0.14

523,573

0.14

603,643

0.09

Other Time Deposits

163,462

1,262

3.07

95,203

0.96

153,991

3,412

2.96

90,970

0.57

Total Interest Bearing Deposits

2,239,729

8,223

1.46

2,122,242

5,214

0.97

2,255,454

24,396

1.44

2,172,155

11,710

0.72

Total Deposits

3,572,034

8,223

0.92

3,596,816

5,214

0.58

3,596,435

24,396

0.91

3,710,423

11,710

0.42

Repurchase Agreements

27,126

3.24

25,356

2.98

26,619

3.21

17,588

2.39

Other Short-Term Borrowings

2,673

7.63

24,306

7.17

4,334

4.88

26,586

1,228

6.17

52,887

4.52

52,887

4.62

52,887

1,868

4.64

52,887

1,800

4.49

Other Long-Term Borrowings

5.55

4.73

5.16

4.78

Total Interest Bearing Liabilities

2,323,210

9,117

1.56

%

2,225,178

6,473

1.15

%

2,339,741

27,079

1.55

%

2,269,649

15,067

0.89

%

Other Liabilities

73,767

83,099

71,574

82,877

TOTAL LIABILITIES

3,729,282

3,782,851

3,752,296

3,890,794

Temporary Equity

6,443

8,424

6,694

8,719

TOTAL SHAREOWNERS’ EQUITY

480,137

427,580

467,197

416,887

TOTAL LIABILITIES, TEMPORARY

AND SHAREOWNERS’ EQUITY

$

$

$

4,226,187

$

4,316,400

Interest Rate Spread

3.49

%

3.54

%

3.43

%

3.66

%

$

40,260

$

39,367

$

118,029

$

120,093

Net Interest Margin

(3)

4.12

%

4.03

%

4.05

%

4.04

%

(1)

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

Interest income includes loan costs of $0.2 million

and $0.5 million for the three and nine months ended September

30, 2024,

and net loan fees of $0.1 million for the three and nine

month periods ended September 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 September 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, as amended, 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, as amended, 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,

as updated in our subsequent quarterly reports. The risks described in

our 2023 Form 10-K, as amended, 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 September 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 Item 408(c) of Regulation S-K.

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

Extension Schema Document

101.CAL

Extension Calculation Linkbase Document

101.LAB

Extension Label Linkbase Document

101.PRE

Extension Presentation Linkbase Document

101.DEF

Extension Definition Linkbase Document

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: November 4, 2024