CAPITAL CITY BANK GROUP INC

Performance Summary

.

Net income attributable to common shareowners totaled $16.9

million, or $0.99 per diluted share, for the first

quarter of 2025 compared to $13.1 million, or $0.77 per diluted share, for

the fourth quarter of 2024, and $12.6 million, or $0.74 per

diluted share, for the first quarter of 2024.

.

Tax-equivalent net

interest income for the first quarter of 2025 totaled $41.6 million, compared to $41.2

million

for the fourth quarter of 2024, and $38.4 million for the first quarter of

Compared to both prior periods, the increase was driven

by higher investment securities interest due to new investment purchases at higher

yields, in addition to lower deposit interest expense,

partially offset by lower loan interest due to lower average loan balances

and interest rates.

Two less calendar days also contributed

to

the decline in loan interest compared to the fourth quarter of 2024.

Higher overnight funds interest also contributed to the increase

over the first quarter of 2024, reflective of a higher level of average earning

assets.

Our net interest margin for the first quarter of

2025 was 4.22%, an increase of five basis points over the fourth quarter of 2024

and an increase of 21 basis points over the first

Provision and Allowance for Credit

Losses.

For the first quarter of 2025, we recorded a provision expense for credit

losses of $0.8

million compared to $0.7 million for the fourth quarter of 2024 and $0.9

million for the first quarter of 2024. Net loan charge-offs

were nine basis points of average loans for the first quarter of 2025 versus 25 basis points

for the fourth quarter of 2024 and 22 basis

points for the first quarter of 2024. At March 31, 2025, the allowance for credit losses for

loans held for investment (“HFI”) totaled

$29.7 million compared to $29.3 million at December 31, 2024 and March 31, 2024.

.

Noninterest income for the first quarter of 2025 totaled $19.9 million compared to

$18.8 million for the fourth

quarter of 2024 and $18.1 million for the first quarter of 2024. The $1.1 million,

or 6.1%, increase over the fourth quarter of 2024 was

due to a $0.7 million increase in mortgage banking revenues and a $0.5

million increase in wealth management fees, partially offset

by

a $0.1 million decrease in deposits fees. Compared to the first quarter of 2024,

the $1.8 million, or 10.0%, increase was driven by a

$1.1 million increase in wealth management fees and a $0.9 million increase in

mortgage banking revenues, partially offset by a $0.2

million decrease in deposit fees.

.

Noninterest expense for the first quarter of 2025 totaled $38.7 million compared to $41.8

million for the fourth

quarter of 2024 and $40.2 million for the first quarter of 2024. The $3.1 million,

or 7.4%, decrease from the fourth quarter of 2024,

reflected a $3.1 million decrease in other expense, a $0.1 million decrease

in occupancy expense, and a $0.1 million increase in

compensation expense. Compared to the first quarter of 2024, the

$1.5 million decrease reflected a $1.8 million increase in

compensation expense offset by a $3.1 million decrease

in other expense and a $0.2 million decrease in net occupancy expense.

Compared to both prior periods, the decrease in other expense reflected

lower other real estate expense, primarily due to a $4.4 million

gain from the sale of our operations center building in the first quarter of 2025.

Financial Condition

Earning Assets.

Average earning assets totaled

$3.994 billion for the first quarter of 2025, an increase of $72.0 million, or 1.8%,

over

the fourth quarter of 2024, and an increase of $144.3 million, or 3.7%, over the first

The increase over both prior

periods was driven by higher deposit balances.

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

a

$67.1 million increase in investment securities and a $22.7 million increase

in overnight funds sold partially offset by a $11.5

million

decrease in loans HFI and a $6.3 million decrease in loans held for sale (“HFS”).

Compared to the first quarter of 2024, the change in

the earning asset mix reflected a $180.5 million increase in overnight funds and

a $29.1 million increase in investment securities that

was partially offset by a $62.7 million decrease in loans HFI and

a $2.6 million decrease in loans HFS.

Loans.

Average loans HFI decreased

$11.5 million, or 0.4%, from the fourth quarter

of 2024 and decreased $62.7 million, or 2.3%,

from the first quarter of 2024.

Loans HFI at March 31, 2025 increased $9.2 million, or 0.3%, over December

31, 2024 and decreased

$70.4 million, or 2.6%, from March 31, 2024.

Credit Quality

.

Nonperforming assets (nonaccrual loans and other real estate) totaled $4.4 million

at March 31, 2025 compared to

$6.7 million at December 31, 2024 and $6.8 million at March 31, 2024.

At March 31, 2025, nonperforming assets as a percent of total

assets was 0.10%, compared to 0.15% at December 31, 2024 and 0.16%

at March 31, 2024.

Nonaccrual loans totaled $4.3 million at

March 31, 2025, a $2.0 million decrease from December 31, 2024 and a $2.5 million decrease

from March 31, 2024.

Further,

classified loans totaled $19.2 million at March 31, 2025, a $0.7 million decrease

from December 31, 2024 and a $3.1 million decrease

from March 31, 2024.

.

Average total

deposits were $3.665 billion for the first quarter of 2025, an increase of $65.1 million,

or 1.8%, over the

fourth quarter of 2024 and an increase of $89.0 million, or 2.5%, over the first quarter

At March 31, 2025, total deposits

were $3.784 billion, an increase of $111.9

million, or 3.0%, over December 31, 2024, and an increase of $129.1 million,

or 3.5%, over

March 31, 2024. Total

public funds balances were $648.0 million at March 31, 2025, $660.9 million at

December 31, 2024, and

$615.0 million at March 31, 2024.

Capital

.

At March 31, 2025, we were “well-capitalized”

with a total risk-based capital ratio of 19.20% and a tangible common

equity

ratio (a non-GAAP financial measure) of 9.61% compared to 18.64%

and 9.51%, respectively,

at December 31, 2024 and 16.84% and

8.53%, respectively,

at March 31, 2024.

At March 31, 2025, 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

$

49,782

$

49,743

$

46,820

Taxable Equivalent Adjustments

Total Interest Income (FTE)

49,826

49,790

46,900

Interest Expense

8,235

8,640

8,465

Net Interest Income (FTE)

41,591

41,150

38,435

Taxable Equivalent Adjustments

Net Interest Income After Provision for Credit Losses

40,779

40,402

37,435

19,907

18,760

18,097

38,701

41,782

40,171

Income Before Income Taxes

21,985

17,380

15,361

5,127

4,219

3,536

(Income) Loss Attributable to Noncontrolling Interests

(71)

$

16,858

$

13,090

$

12,557

Basic Net Income Per Share

$

0.99

$

0.77

$

0.74

Diluted Net Income Per Share

$

0.99

$

0.77

$

0.74

Net interest income represents our single largest source of

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

less interest expense paid on interest bearing liabilities.

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

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

debt obligations.

We provide an

analysis of our net

interest income including average yields and rates in Table

I, “Average Balances &

Interest Rates,” on page 47.

Tax-equivalent net

interest income for the first quarter of 2025 totaled $41.6 million, compared to $41.2 million

for the fourth quarter

of 2024, and $38.4 million for the first quarter of 2024.

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

securities interest due to new investment purchases at higher yields, in addition

to lower deposit interest expense, partially offset by

lower loan interest due to lower average loan balances and interest rates.

Two less calendar days

in the first quarter of 2025 also

contributed to the decline in loan interest compared to the fourth quarter

Higher overnight funds interest in the first quarter of

2025 also contributed to the increase over the first quarter of 2024,

reflective of a higher level of average earning assets.

Our net interest margin for the first quarter of 2025 was 4.22%, an increase

of five basis points over the fourth quarter of 2024 and an

increase of 21 basis points over the first quarter of 2024.

For the month of March 2025, our net interest margin was 4.22%.

The

increase in net interest margin over the fourth quarter of 2024 reflected

a higher yield in the investment portfolio driven by new

purchases during the quarter and a lower cost of deposits, partially offset

by a lower overnight funds rate. The increase over the first

quarter of 2024 reflected favorable investment repricing

and a lower cost of deposits, partially offset by lower average loan balances

for both prior periods.

For the first quarter of 2025, our cost of funds was 84 basis points, a decrease of four basis points

from the

fourth quarter of 2024 and the first quarter of 2024.

Our cost of deposits (including noninterest bearing accounts) was 82 basis points,

86 basis points, and 85 basis points, respectively,

for the same periods.

We recorded

a provision expense for credit losses of $0.8 million for the first quarter of 2025 compared

to $0.7 million for the fourth

quarter of 2024 and $0.9 million for the first quarter of 2024.

For the first quarter of 2025, we recorded a provision expense of $1.1

million for loans HFI and a provision benefit of $0.3 million for unfunded loan

commitments, which was comparable to the fourth

See “Allowance for Credit Losses” below for a discussion of the various factors

that impacted our provision expense.

Noninterest income for the first quarter of 2025 totaled $19.9 million compared

to $18.8 million for the fourth quarter of 2024 and

$18.1 million for the first quarter of 2024.

The $1.1 million, or 6.1%, increase over the fourth quarter of 2024 was primarily

due to a

$0.7 million increase in mortgage banking revenues and a $0.5 million increase

in wealth management fees, partially offset by a $0.1

million decrease in deposits fees.

The increase in mortgage revenues was driven by an increase in rate locks and a higher gain

on sale

margin.

The increase in wealth management fees was attributable to a $0.5 million increase in insurance

commission revenue.

Compared to the first quarter of 2024, the $1.8 million, or 10.0%, increase was driven

by a $1.1 million increase in wealth

management fees and a $0.9 million increase in mortgage banking revenues,

partially offset by a $0.2 million decrease in deposit fees.

The increase in wealth management fees reflected higher retail brokerage fees

of $0.6 million, insurance commission revenue of $0.3

million, and trust fees of $0.2 million.

The increase in mortgage revenues was driven by an increase in loan fundings

and a higher

gain on sale margin.

Noninterest income represented 32.39% of operating revenues (net interest

income plus noninterest income) for the first quarter of

compared to 31.34% for the fourth quarter of 2024 and 32.06% for the first quarter of 202

The table below reflects the major components of noninterest income.

$

5,061

$

5,207

$

5,250

3,514

3,697

3,620

Wealth Management

Fees

5,763

5,222

4,682

3,820

3,118

2,878

Other

1,749

1,516

1,667

Total

$

19,907

$

18,760

$

18,097

Significant components of noninterest income are discussed in more

detail below.

.

Deposit fees for the first quarter of 2025 totaled $5.1 million, a decrease of $0.1

million, or 2.8%,

from the fourth

quarter of 2024 and a decrease of $0.2 million, or 3.6%,

from the first quarter of 2024. Compared to the fourth quarter of 2024, the

$0.1 million decrease was attributable to a decrease in overdraft fees.

Compared to the first quarter of 2024, the decrease reflected a

$0.1 million decrease in overdraft fees and a $0.1 million decrease in commercial

account analysis fees.

.

Bank card fees for the first quarter of 2025 totaled $3.5 million, a $0.2 million, or 4.9%

,

decrease from the fourth

quarter of 2024 and a $0.1 million, or 2.9%,

decrease from the first quarter of 2024. The decrease from both prior periods reflected

lower debit card usage related to slower consumer spending.

Wealth

Management Fees

.

Wealth management fees,

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

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

and insurance commission revenues,

totaled $5.8

million for the first quarter of 2025, an increase of $0.5 million, or 10.4%, over the

fourth quarter of 2024 and an increase of $1.1

million, or 23.1%, over the first quarter of 2024. The increase over the fourth

quarter of 2024

was due to a $0.5 million increase in

insurance commission revenues.

The increase over the first quarter of 2024 reflected higher retail brokerage

fees of $0.6 million,

insurance commission revenue of $0.3 million, and trust fees of $0.2 million.

At March 31, 2025, total assets under management were

approximately $3.068 billion compared to $3.049 billion

at December 31, 2024 and $2.686 billion at March 31, 2024. Compared to

the prior year, the growth in assets under management

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

new

managed trust accounts.

.

Mortgage banking revenues totaled $3.8 million for the first quarter of

2025, an increase of $0.7

million, or 22.5%, over the fourth quarter of 2024 and an increase of $0.9 million,

or 32.7%, over the first quarter of 2024. Compared

to the fourth quarter of 2024, the increase was driven by an increase in rate locks

and a higher gain on sale margin. Compared to the

first quarter of 2024, the increase was primarily due to an increase in loan

fundings and a higher gain on sale margin. We

provide a

detailed overview of our mortgage banking operation, including

a detailed break-down of mortgage banking revenues, mortgage

servicing activity,

and warehouse funding within Note 4 - Mortgage Banking Activities in the Notes to

Consolidated Financial

Statements.

Other

.

Other income totaled $1.7 million for the first quarter of 2025, an increase of $0.2 million,

or 15.4%, over the fourth quarter of

2024 and an increase of $0.1 million, or 4.9%, over the first quarter of

2024. Compared to the fourth quarter of 2024, the increase was

primarily attributable to higher miscellaneous income. Compared

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

higher loan servicing income.

Noninterest expense for the first quarter of 2025 totaled $38.7 million compared

to $41.8 million for the fourth quarter of 2024 and

$40.2 million for the first quarter of 2024.

The $3.1 million, or 7.4%, decrease from the fourth quarter of 2024 reflected a

$3.1 million

decrease in other expense, a $0.1 million decrease in occupancy expense,

and a $0.1 million increase in compensation expense.

The

decrease in other expense was driven by a $3.5 million decrease in other real estate

expense, which reflected higher gains from the

sale of banking facilities, primarily the sale of our operations center building

in the first quarter of 2025, partially offset by a $0.5

million increase in charitable contribution expense.

The slight decrease in occupancy expense was due to lower maintenance/repairs

for buildings and furniture, fixtures and equipment (“FF&E”).

The slight net increase in compensation expense reflected a $0.2

million increase in salary expense offset by a $0.1 million decrease in associate

benefit expense.

Compared to the first quarter of

2024, the $1.5 million, or 3.7%, decrease reflected a $3.1 million decrease in

other expense and a $0.2 million decrease in occupancy

expense that was partially offset by a $1.8 million increase

in compensation expense.

The decrease in other expense was primarily

attributable to a $4.4 million decrease in other real estate expense, which

reflected higher gains from the sale of banking offices,

primarily the aforementioned gain from the sale of our operations center building

in the first quarter of 2025, partially offset by

increases in processing expense of $0.6 million and charitable contribution

expense of $0.6 million.

The slight decrease in occupancy

expense was due to lower FF&E depreciation expense and maintenance/repair

expense.

The increase in compensation expense

reflected a $1.3 million increase in salary expense and a $0.5 million increase

in associate benefit expense.

The increase in salary

expense was primarily attributable to increases in base salaries of $0.5 million,

commission expense of $0.5 million, and cash

incentive plan expense of $0.3 million.

Higher associate insurance costs drove the increase in associate benefit expense.

The table below reflects the major components of noninterest expense.

Salaries

$

21,883

$

21,645

$

20,604

Associate Benefits

4,365

4,463

3,803

Total Compensation

26,248

26,108

24,407

Premises

3,172

3,132

3,173

Equipment

3,621

3,761

3,821

Total Occupancy

6,793

6,893

6,994

Legal Fees

Professional Fees

1,622

1,844

1,258

Processing Services

2,469

2,381

1,833

Advertising

Telephone

Insurance - Other

Other Real Estate Owned, net

(4,470)

(951)

Pension - Other

(873)

(419)

(419)

Miscellaneous

4,119

3,209

3,206

Total Other

5,660

8,781

8,770

Total

$

38,701

$

41,782

$

40,171

Significant components of noninterest expense are discussed in

more detail below.

Compensation

.

Compensation expense totaled $26.2 million for the first quarter of 2025, an increase

of $0.1 million, or 1.0%, over

the fourth quarter of 2024 and an increase of $1.8 million, or 7.5%, over

the first quarter of 2024. Compared to the fourth quarter of

2024, the slight net increase reflected a $0.2 million increase in salary expense

offset by a $0.1 million decrease in associate benefit

expense. The increase in salary expense was primarily attributable to an

increase in payroll tax expense,

which reflected the annual re-

set of this tax as well as payroll taxes related to a high level of cash/stock incentives

paid in the first quarter. The decrease in associate

benefit expense reflected a slight decrease in the pension plan service cost expense.

Compared to the first quarter of 2024, the increase

was driven by higher salary expense of $1.3 million and associate benefit

expense of $0.5 million. The increase in salary expense was

primarily due to increases in base salaries of $0.5 million (annual merit),

commission expense of $0.5 million, and cash incentive plan

expense of $0.3

million. Higher associate insurance costs drove the increase in associate benefit expense.

Occupancy.

Occupancy expense (including premises and equipment) totaled $6.8

million for the first quarter of 2025, a decrease of

$0.1

million, or 1.5% from the fourth quarter of 2024 and a decrease of $0.2 million, or 2.9%, from

the first quarter of 2024. The

decrease from the fourth quarter of 2024 was primarily due to lower

maintenance and repairs for buildings and FF&E. The decrease

from the first quarter of 2024

reflected lower FF&E depreciation and maintenance agreement expense.

Other

.

Other noninterest expense totaled $5.7 million for the first quarter of

2025, a decrease of $3.1 million, or 35.5%, from the

fourth quarter of 2024 and the first quarter of 2024. The decrease from

the fourth quarter of 2024 was driven by a $3.5 million

decrease in other real estate expense, which reflected higher gains from

the sale of banking facilities, primarily the sale of our

operations center building in the first quarter of 2025, partially offset

by a $0.5 million increase in charitable contribution expense.

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

to a $4.5 million decrease in other real estate expense,

which reflected higher gains from the sale of banking offices,

primarily the aforementioned gain from the sale of our operations center

building in the first quarter of 2025, partially offset by increases in processing

expense of $0.6 million, and charitable contribution

expense of $0.6 million.

Our operating efficiency ratio (expressed as noninterest

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

noninterest income) was 62.93% for the first quarter of 2025 compared

to 69.74% for the fourth quarter of 2024 and 71.06% for the

first quarter of 2024. The improvement in this metric compared to both prior

periods was primarily attributable to lower noninterest

expense in the first quarter of 2025,

which included a $4.4 million gain from the sale of our operations center building.

Higher

revenues (net interest income and noninterest income) also contributed,

but to a lesser extent.

Income Taxes

We realized income

tax expense of $5.1 million (effective rate of 23.3%) for the first quarter of

2025 compared to $4.2 million

(effective rate of 24.3%) for the fourth quarter of 2024 and $3.5

million (effective rate of 23.0%) for the first quarter of 2024.

Compared to the fourth quarter of 2024, the decrease in our effective

tax rate was primarily due to a discrete item in the first quarter of

2025 related to an excess tax benefit for stock compensation.

Absent discrete items, we expect our annual effective tax rate to

approximate 24% for 2025.

FINANCIAL CONDITION

Average earning

assets totaled $3.994 billion for the first quarter of 2025, an increase of $72.0 million, or 1.8%, over

the fourth

quarter of 2024, and an increase of $144.3 million, or 3.7%, over

the first quarter of 2024.

The increase over both prior periods was

driven by higher deposit balances (see below –

).

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

reflected a $67.1 million increase in investment securities and a $22.7

million increase in overnight funds sold, partially offset by

a

$11.5 million decrease in loans HFI and a $6.3

million decrease in loans HFS.

Compared to the first quarter of 2024, the change in

the earning asset mix reflected a $180.5 million increase in overnight funds and

a $29.1 million increase in investment securities that

was partially offset by a $62.7 million decrease in loans HFI and

a $2.6 million decrease in loans HFS.

Investment Securities

Average investments

totaled $982.3 million, a $67.1 million, or 7.3%, increase over the fourth quarter

of 2024 and $29.1 million, or

3.1%, increase over the first quarter of 2024. Our investment portfolio represented

24.6% of our average earning assets for the first

quarter of 2025 compared to 23.3% for the fourth quarter of 2024

and 24.8% for the first quarter of 2024. For the remainder of 2025,

we will continue to monitor our overall liquidity position and market

conditions to determine if cash flow from the investment

portfolio should be reinvested or allowed to run-off

into overnight funds.

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

it functions as a key element of liquidity and

asset/liability management.

Two types of classifications are approved

for investment securities which are Available

-for-Sale (“AFS”)

and Held-to-Maturity (“HTM”).

At March 31, 2025, $517.2 million, or 52.7%, of the investment portfolio was classified as HTM

and

$461.2 million, or 47.0%, was classified as AFS. The average maturity

of our total portfolio at March 31, 2025 was 2.64 years

compared to 2.54 years at December 31, 2024 and 2.76 years at March

31, 2024. The duration of our investment portfolio at March

31, 2025 was 2.10 years compared to 2.19 years at December 31, 2024 and

2.39 years at March 31, 2024. 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 March 31, 2025, there were 829 positions (combined AFS and HTM)

with unrealized pre-tax losses totaling $38.3 million. 59 of

these positions are U.S. Treasuries and

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

674 were U.S. government agency

securities issued by U.S. government sponsored entities. The remaining

96 positions (municipal securities and corporate bonds) have a

credit component.

At March 31, 2025, corporate debt securities had an allowance for credit losses of $73,000

and municipal securities

had an allowance of $2,000. At March 31, 2025, all collateralized mortgage

obligation securities, mortgage-backed securities, Small

Business Administration securities,

U.S. Agency, and

U.S. Treasury bonds held were AAA rated.

Loans HFI

Average loans

HFI decreased $11.5 million, or 0.4%, from the fourth

quarter of 2024 and decreased $62.7 million, or 2.3%, from the

first quarter of 2024. Compared to the fourth quarter of 2024, the decrease was primarily

attributable to declines in construction loans

of $8.6 million, commercial loans of $5.7 million, and consumer loans of $2.1 million,

partially offset by a $6.6 million increase in

home equity loans. Compared to the first quarter of 2024, the decline was driven

by decreases in consumer loans (primarily indirect

auto) of $58.8 million, commercial loans of $32.9 million, and commercial real

estate mortgage loans of $23.1 million, partially offset

by increases in residential real estate loans of $28.9 million, construction

loans of $11.5 million, and home equity loans of $10.4

Loans HFI at March 31, 2025 increased $9.2 million, or 0.3%, over December 31,

2024 and decreased $70.4 million, or 2.6%, from

March 31, 2024. Compared to December 31, 2024, the increase was primarily

attributable to increases in commercial real estate

mortgage loans of $27.8 million and residential real estate loans of $12.1 million,

consumer loans (primarily indirect auto) of $6.7

million, and home equity loans of $5.9 million, partially offset by

decreases in construction loans of $27.7 million, commercial loans

of $4.8 million, and other loans of $10.8 million. Compared to the first quarter of 2024,

the decline was driven by decreases in

consumer loans (primarily indirect auto) of $48.0 million, commercial

loans of $33.9 million, commercial real estate mortgage loans

of $16.7 million, and construction loans of $10.4 million, partially offset

by increases in residential real estate loans of $27.8 million

and home equity loans of $11.4 million.

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 $4.4

million at March 31, 2025 compared to $6.7 million at

December 31, 2024 and $6.8 million at March 31, 2024.

At March 31, 2025, nonperforming assets as a percent of total assets was

0.10%, compared to 0.15% at December 31, 2024 and 0.16% at March 31, 2024.

Nonaccrual loans totaled $4.3 million at March 31,

2025, a $2.0 million decrease from December 31, 2024 and a $2.5 million

decrease from March 31, 2024.

Further, classified loans

totaled $19.2 million at March 31, 2025, a $0.7 million decrease from December

31, 2024 and a $3.1 million decrease from March 31,

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

the loans’ amortized cost basis to present the net amount

expected to be collected on the loans.

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

earnings and reduced by the charge-off

of loan amounts (net of recoveries).

Loans are charged off against the allowance when

management believes the uncollectability of a loan balance is confirmed.

Expected recoveries do not exceed the aggregate of amounts

previously charged-off and expected to be charged

-off.

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

exposures is provided through the credit loss provision but recorded

as a separate liability included in other liabilities.

Management estimates the allowance balance using relevant available

information, from internal and external sources relating to past

events, current conditions, and reasonable and supportable forecasts.

Historical loan default and loss experience provides the basis for

the estimation of expected credit losses.

Adjustments to historical loss information incorporate management’s

view of current

conditions and forecasts.

At March 31, 2025, the allowance for credit losses for loans HFI totaled $29.7

million compared to $29.3 million at December 31,

2024 and March 31, 2024. Activity within the allowance is provided in

Note 3 – Loans Held for Investment and Allowance for Credit

Losses in the Notes to Consolidated Financial Statements. The increase

in the allowance over December 31, 2024 reflected higher

loan balances and higher loan loss rates, partially offset by

a lower level of net loan charge-offs.

The increase in the allowance over

March 31, 2024 was primarily due to higher loss rates. Net loan charge

-offs were nine basis points of average loans for the first

quarter of 2025 versus 25 basis points for the fourth quarter of 2024

and 22 basis points for the first quarter of 2024.

At March 31,

2025, the allowance represented 1.12% of loans HFI compared to

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

At March 31, 2025, the allowance for credit losses for unfunded commitments

totaled $1.8 million compared to $2.2 million and $3.1

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

The decline in the allowance for unfunded commitments from

December 31, 2024 and March 31, 2024 reflected a lower level of unfunded

loan commitments. The allowance for unfunded

commitments is recorded in other liabilities.

Average total

deposits were $3.665 billion for the first quarter of 2025, an increase of $65.1 million,

or 1.8%, over the fourth quarter

of 2024 and an increase of $89.0 million, or 2.5%, over the first quarter

Compared to the fourth quarter of 2024, the increase

was primarily attributable to higher NOW account balances largely

due to the seasonal increase in our public fund balances.

The

increase over the first quarter of 2024 reflected growth in NOW,

money market and certificate of deposit account balances which

was

mainly due to 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 March 31, 2025, total deposits were $3.784 billion, an increase of $111.9

million, or 3.0%, over December 31, 2024, and an

increase of $129.1 million, or 3.5%, over March 31, 2024.

The increase over December 31, 2024 was due to higher balances in all

deposit categories. The increase over March 31, 2024 was primarily due to

higher NOW account balances (primarily business

accounts), and to a lesser extent increases in money market and certificates of deposit,

partially offset by lower savings account

balances. Total public

funds balances were $648.0 million at March 31, 2025, $660.9 million at December

31, 2024, and $615.0

million at March 31, 2024.

Business deposit transaction accounts classified as repurchase agreements

averaged $29.8 million for the first quarter of 2025, an

increase of $1.8 million over the fourth quarter of 2024 and an increase of $4.1

million over the first quarter of 2024. At March 31,

2025,

repurchase agreement balances were $22.8 million compared to $26.2

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

31, 2024.

We continue

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

environment.

MARKET RISK AND INTEREST RATE

SENSITIVITY

Market Risk and Interest Rate Sensitivity

Overview.

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

commodity prices, and equity prices.

We have risk

management policies designed to monitor and limit exposure to market

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

significant market risk involving exchange rates, commodity prices, or

equity prices.

In asset and liability management activities, our

policies are designed to minimize structural interest rate risk.

Interest Rate Risk Management.

Our net income is largely dependent on net interest income.

Net interest income is susceptible to

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

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

When

interest-bearing liabilities mature or reprice more quickly

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

market rates of interest could adversely affect net interest

income.

Similarly, when interest-earning

assets mature or reprice more

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

result in a decrease in net interest income.

Net interest

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

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

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

equity.

We have established

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

which is administered by

management’s Asset Liability Management

Committee (“ALCO”).

The policy establishes limits of risk, which are quantitative

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

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

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

in interest rates for maturities from one

day to 30 years.

We measure the potential

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

earnings, long-

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

computer modeling.

The simulation model captures

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

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%

17.3%

13.0%

8.7%

4.5%

-4.7%

-9.8%

-15.3%

-20.9%

15.4%

11.5%

7.6%

3.9%

-4.3%

-9.0%

-14.3%

-19.9%

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%

39.1%

31.1%

23.0%

15.2%

-1.9%

-11.7%

-22.5%

-32.8%

40.8%

32.9%

24.8%

17.1%

0.1%

-9.8%

-20.9%

-31.6%

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

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

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

margin of the Company,

while declining rate

environments

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

to the fourth quarter of 2024, these metrics generally

became more favorable in the rising rate scenarios and less favorable

in the falling rate scenarios.

This was primarily attributable to

the $125 million increase in variable rate overnight funds at March 31,

2025, which increases our asset sensitivity to falling rates. The

instantaneous,

parallel rate shock results over the next 12-month and 24-month periods are outside

of policy in the rates down 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

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%

29.0%

23.7%

17.1%

9.3%

-11.2%

-23.1%

-33.7%

-40.3%

30.7%

24.4%

17.0%

9.0%

-17.2%

-23.7%

-35.1%

-42.2%

EVE Ratio (policy minimum 5.0%)

30.4%

28.6%

26.6%

24.4%

19.2%

16.4%

13.9%

12.4%

At March 31, 2025, the economic value of equity was favorable in

all rising rate environments and unfavorable in the falling rate

environments. Compared to December 31, 2024, EVE metrics were generally

more favorable in most rate scenarios. 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 March 31, 2025, we had the ability to generate approximately $1.540

billion (excludes overnight funds position of $446 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 March 31, 2025 was sufficient to meet our on-going

needs and execute our business strategy.

We also view our

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

portfolio as collateral for

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

debt issued by the U.S. Treasury,

U.S. governmental

agencies, municipal governments, and corporate entities. Additional

information on our investment portfolio is provided within Note 2

– Investment Securities.

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

plus FED funds sold less FED funds purchased) sold

position of $320.9 million in the first quarter of 2025 compared to $298.3 million

in the fourth quarter of 2024 and $140.5 million in

the first quarter of 2024.

Compared to both prior periods, the increase reflected higher average deposits and

lower average loans.

We expect our

capital expenditures will be approximately $10.0 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 $37.3 million for the first quarter of 2025 compared to $34.5

million for the fourth quarter of

and $29.5 million for the first quarter of 2024. The increase over both prior periods reflected growth

in repurchase agreement

balances and an increase in mortgage warehouse borrowings. 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.

In the second quarter of 2020, we entered into a derivative cash flow hedge

of our interest rate risk related to our subordinated debt.

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

the CCBG Capital Trust I borrowing and $20 million of

the

CCBG Capital Trust II borrowing). The interest rate

swap agreement requires CCBG to pay fixed and receive variable (three-month

CME Term SOFR plus spread)

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

interest rate swap

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

Statements.

Capital

Our capital ratios are presented in the Selected Quarterly Financial Data

table on page 34.

At March 31, 2025, our regulatory capital

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

under the Basel III capital standards.

Shareowners’ equity was $512.6 million at March 31, 2025 compared to $495.3

million at December 31, 2024 and $448.3 million at

March 31, 2024.

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

income attributable to

shareowners of $16.9 million, a net $3.6 million decrease in the accumulated

other comprehensive loss, the issuance of stock of $2.4

million, and stock compensation accretion of $0.4 million.

The net favorable change in accumulated other comprehensive loss

reflected a $4.1 million decrease in the investment securities loss that was partially offset

by a $0.5 million decrease in the fair value

of the interest rate swap related to subordinated debt. Shareowners’ equity

was reduced by a common stock dividend of $4.1 million

($0.24 per share) and net adjustments totaling $1.9 million related to transactions

under our stock compensation plans.

At March 31, 2025, our total risk-based capital ratio was 19.20% compared

to 18.64% at December 31, 2024 and 16.84% at March 31,

Our common equity tier 1 capital ratio was 16.08%, 15.54%, and 13.82%, respectively,

on these dates.

Our leverage ratio was

11.17%, 11.05%,

and 10.45%, respectively, on these

dates.

At March 31, 2025, all our regulatory capital ratios exceeded the

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

standards.

Further, our tangible common equity ratio

(non-GAAP financial measure) was 9.61% at March 31, 2025 compared to 9.51% and 8.53%

at December 31, 2024 and March 31,

2024, respectively.

If our unrealized HTM securities losses of $12.1 million (after-tax)

were recognized in accumulated other

comprehensive loss, our adjusted tangible capital ratio would be 9.33%.

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 March 31, 2025,

the net pension asset reflected in other

comprehensive loss was $9.7 million compared to $9.7 million

at December 31, 2024 and $0.4 million at March 31, 2024. The

favorable adjustment for the pension plan compared to March 31, 2024

was primarily attributable to a higher than estimated return on

plan assets in 2024 and a higher discount rate used to determine the plan liability at

December 31, 2024. 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 2024

Form 10-K.

OFF-BALANCE SHEET ARRANGEMENTS

We are a party

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

course of business to meet the financing needs of our

clients.

At March 31, 2025, we had $656.0 million in commitments to extend credit

and $7.3 million in standby letters of credit.

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

any condition established in the

contract.

Commitments generally have fixed expiration dates or other termination

clauses and may require payment of a fee.

Since

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

the total commitment amounts do not necessarily

represent future cash requirements.

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

the performance

of a client to a third party.

We use the same credit

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

balance sheet instruments.

If commitments arising from these financial instruments continue to require

funding at historical levels, management does not

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

obligations.

In the event these commitments

require funding in excess of historical levels, management believes current

liquidity, advances available from the

FHLB and the

Federal Reserve, and investment security maturities provide a sufficient

source of funds to meet these commitments.

Certain agreements provide that the commitments are unconditionally

cancellable by the bank and for those agreements no allowance

for credit losses has been recorded.

We

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

unconditionally cancellable by the Bank, which is included in other

liabilities on the Consolidated Statements of Financial Condition

and totaled $1.8 million at March 31, 2025.

CRITICAL ACCOUNTING POLICIES

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

Financial Statements included in our 2024 Form 10-K.

The preparation of our Consolidated Financial Statements

in accordance with GAAP and reporting practices applicable to the banking

industry requires us to make estimates and assumptions that affect

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

and to disclose contingent assets and liabilities.

Actual results could differ from those estimates.

We have identified

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

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

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

to the portrayal of our financial condition and results, and

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

the effects of matters that are

inherently uncertain.

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

used, are described

throughout this Item 2, Management’s

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

Part II, Item 7,

Management’s Discussion and Analysis

of Financial Condition and Results of Operations included

in our 2024 Form 10-K.

TABLE I

AVERAGE

BALANCES & INTEREST RATES

Average

Average

Average

Average

Average

Average

Rate

Rate

Rate

Assets:

$

24,726

$

8.04

%

$

31,047

$

7.89

%

$

27,314

$

5.99

%

(1)(2)

2,665,910

40,029

6.09

2,677,396

40,521

6.07

2,728,629

40,196

5.95

Taxable Securities

981,485

5,802

2.38

914,353

4,688

2.04

952,328

4,238

1.78

Tax-Exempt Securities

(2)

4.32

4.31

4.34

Interest Bearing Deposits

320,948

3,496

4.42

298,255

3,596

4.80

140,488

1,893

5.42

Total Earning Assets

3,993,914

49,826

5.06

%

3,921,900

49,790

5.05

%

3,849,615

46,900

4.90

%

Cash & Due From Banks

73,467

73,992

75,763

Allowance For Credit Losses

(30,008)

(30,107)

(30,030)

297,660

293,884

295,275

TOTAL ASSETS

$

$

$

Liabilities:

Noninterest Bearing Deposits

$

1,317,425

$

1,323,556

$

1,344,188

NOW Accounts

1,249,955

$

3,854

1.25

%

1,182,073

$

3,826

1.29

%

1,201,032

$

4,497

1.51

%

Money Market Accounts

420,059

2,187

2.11

422,615

2,526

2.38

353,591

1,985

2.26

Savings Accounts

507,676

0.14

504,859

0.14

539,374

0.14

Other Time Deposits

170,367

1,166

2.78

167,321

1,235

2.94

138,328

2.69

Total Interest Bearing Deposits

2,348,057

7,383

1.28

2,276,868

7,766

1.36

2,232,325

7,594

1.37

Total Deposits

3,665,482

7,383

0.82

3,600,424

7,766

0.86

3,576,513

7,594

0.85

Repurchase Agreements

29,821

2.23

28,018

2.82

25,725

3.14

Short-Term Borrowings

7,437

6.39

6,510

5.06

3,758

4.16

52,887

4.23

52,887

4.30

52,887

4.70

Other Long-Term Borrowings

5.68

5.57

4.80

Total Interest Bearing Liabilities

2,438,996

8,235

1.37

%

2,365,077

8,640

1.45

%

2,314,976

8,465

1.47

%

Other Liabilities

65,211

73,130

68,295

TOTAL LIABILITIES

3,821,632

3,761,763

3,727,459

Temporary Equity

6,763

7,150

TOTAL SHAREOWNERS’ EQUITY

513,401

491,143

456,014

TOTAL LIABILITIES, TEMPORARY

AND SHAREOWNERS’ EQUITY

$

$

$

Interest Rate Spread

3.69

%

3.59

%

3.43

%

$

41,591

$

41,150

$

38,435

Net Interest Margin

(3)

4.22

%

4.17

%

4.01

%

(1)

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

Interest income includes net loan costs of $0.4 million for

the three months ended

March 31, 2025, $0.2 million for the three months ended

December 31, 2024, and net loan fees of $0.1 million for

the three months ended March 31, 2024.

(2)

Interest income includes the effects of taxable equivalent adjustments

using a 21% tax rate.

(3)

Taxable equivalent net interest income divided by average earning assets.

QUANTITATIVE

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

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

Discussion and Analysis of Financial Condition and Results of

Operations, above, which is incorporated herein by reference.

Management has determined that no additional disclosures are

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

since December 31, 2024.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

At March 31, 2025, the end of the period covered by this Form 10-Q, our management,

including our Chief Executive Officer and

Chief Financial Officer, evaluated

the effectiveness of our disclosure controls and procedures (as defined

in Rule 13a-15(e) under the

Securities Exchange Act of 1934).

Based upon that evaluation, our Chief Executive Officer and Chief

Financial Officer concluded

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

our disclosure controls and procedures were effective.

Our management, including our Chief Executive Officer

and Chief Financial Officer, has reviewed

our internal control over financial

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

Act of 1934). During the quarter ended March 31, 2025, there

have been no significant changes in our internal control over financial reporting

during our most recently completed fiscal quarter that

have materially affected, or are reasonably likely to materially

affect, our internal control over financial reporting.

PART

II.

OTHER INFORMATION

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 2024 Form

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

Additional risks and uncertainties not currently known to

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

our business, financial condition and/or operating

results.

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 March 31, 2025, 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