CAPITAL CITY BANK GROUP INC - Quarter Report: 2021 March (Form 10-Q)

ccbg-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,

D.C.

20549

FORM

10-Q

☒

QUARTERLY REPORT

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

For the Quarterly Period Ended

March 31, 2021

☐

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

For the transition period from ____________ to ____________

Commission File Number:

0-13358

Capital City Bank Group, Inc.

(Exact name of Registrant as specified in its charter)

Florida

59-2273542

(State or other jurisdiction of incorporation or organization)

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

217 North Monroe Street

Tallahassee

Florida

32301

(Address of principal executive office)

(Zip Code)

(

850

)

402-7821

(Registrant's telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, Par value $0.01

CCBG

Nasdaq Stock Market

, LLC

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

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

filing requirements for the past 90 days.

Yes

[X] No [

]

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

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

such files).

Yes [

] No [

]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,

a non-accelerated filer, a smaller reporting company, or

an emerging growth company.

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

company” in Rule 12b-2

of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

any

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

☐

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

[

]

[X]

At April 29, 2021,

16,851,878

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

CAPITAL CITY BANK

GROUP,

INC.

QUARTERLY

REPORT ON FORM 10-Q

FOR THE PERIOD ENDED MARCH 31, 2021

TABLE OF CONTENTS

PART I –

Financial Information

Page

Item 1.

Consolidated Financial Statements (Unaudited)

Consolidated Statements of Financial Condition – March 31, 2021 and December 31, 2020

Consolidated Statements of Income – Three Months Ended March 31, 2021 and 2020

Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2021 and 2020

Consolidated Statements of Changes in Shareowners’ Equity – Three Months Ended March 31, 2021 and 2020

Consolidated Statements of Cash Flows – Three Months Ended March 31, 2021 and 2020

Notes to Consolidated Financial Statements

Item 2.

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

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

Item 4.

Controls and Procedures

PART II –

Other Information

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 3.

Defaults Upon

Senior Securities

Item 4.

Mine Safety Disclosure

Item 5.

Other Information

Item 6.

Exhibits

Signatures

INTRODUCTORY NOTE

Caution Concerning Forward-Looking Statements

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

Securities Litigation Reform

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

objectives, goals, expectations,

estimates and intentions that are subject to significant risks and uncertainties and are subject

to change based on various factors, many of

which are beyond our control.

The words “may,” “could,” “should,”

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

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

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

Our actual future results may differ materially from

those set forth in our forward-looking statements.

Our ability to achieve

our financial objectives could

be adversely affected by

the factors discussed in detail

in Part I, Item 2.

“Management’s

Discussion and Analysis

of Financial Condition

and Results of Operations”

and Part II, Item

1A. “Risk Factors” in

this Quarterly Report on

Form 10-Q and the

following sections of our

Annual Report on Form

10-K for the year

ended December 31, 2020

(the “2020 Form 10

-K”):

(a) “Introductory Note”

in Part I,

Item 1. “Business”

(b) “Risk Factors”

in Part I,

Item 1A, as

updated in our

subsequent quarterly reports

filed on Form 10-Q; and (c) “Introduction”

in “Management’s Discussion and

Analysis of Financial Condition and Results

of Operations,” in

Part II, Item 7, as well as:

●

the magnitude and duration of the ongoing COVID-19 pandemic and its impact on the global and local economies

and financial market

conditions and our business, results of operations and financial condition, including the impact of our participation

in government

programs related to COVID-19;

●

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

●

legislative or regulatory changes;

●

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

●

inflation, interest rate, market and monetary fluctuations;

●

the effects of security breaches and computer viruses that may affect our computer

systems or fraud related to debit card products;

●

the accuracy of our financial statement estimates and assumptions, including the estimates used for our loan

loss reserve, deferred tax

asset valuation and pension plan;

●

changes in accounting principles, policies, practices or guidelines;

●

the frequency and magnitude of foreclosure of our loans;

●

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

concentrations;

●

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

conduct operations;

●

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

●

changes in the securities and real estate markets;

●

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

●

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

rights related to

these loans and related interest rate risk or price risk resulting from retaining mortgage servicing

rights and the potential effects of

higher interest rates on our loan origination volumes;

●

the effect of corporate restructuring, acquisitions or dispositions, including the actual

restructuring and other related charges and the

failure to achieve the expected gains, revenue growth or expense savings from such corporate restructuring,

acquisitions or dispositions;

●

the effects of natural disasters, harsh weather conditions (including hurricanes), widespread

health emergencies, military conflict,

terrorism, civil unrest or other geopolitical events;

●

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

for each jurisdiction where

we operate;

●

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

services and vice versa;

●

increased competition and its effect on pricing;

●

technological changes;

●

negative publicity and the impact on our reputation;

●

changes in consumer spending and saving habits;

●

growth and profitability of our noninterest income;

●

the limited trading activity of our common stock;

●

the concentration of ownership of our common stock;

●

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

●

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

●

our ability to manage the risks involved in the foregoing.

However, other factors besides those listed in

Item 1A Risk Factors

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

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

Any forward-looking

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

We do not undertake to update

any forward-looking

statement, except as required by applicable law.

PART

FINANCIAL INFORMATION

Item 1.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF FINANCIAL CONDITION

(Unaudited)

March 31,

December 31,

(Dollars in Thousands)

2021

2020

ASSETS

Cash and Due From Banks

73,973

67,919

Funds Sold

851,910

860,630

Total Cash and Cash

Equivalents

925,883

928,549

Investment Securities, Available

for Sale, at fair value

406,245

324,870

Investment Securities, Held to Maturity (fair value of $

204,158

and $

175,175

)

199,109

169,939

Total Investment

Securities

605,354

494,809

Loans Held For Sale, at fair value

82,081

114,039

Loans Held for Investment

2,057,727

2,006,426

Allowance for Credit Losses

(22,026)

(23,816)

Loans Held for Investment, Net

2,035,701

1,982,610

Premises and Equipment, Net

86,370

86,791

Goodwill

89,095

Other Real Estate Owned

110

808

Other Assets

105,290

101,370

Total Assets

3,929,884

3,798,071

LIABILITIES

Deposits:

Noninterest Bearing Deposits

1,473,891

1,328,809

Interest Bearing Deposits

1,884,217

1,888,751

Total Deposits

3,358,108

3,217,560

Short-Term

Borrowings

55,687

79,654

Subordinated Notes Payable

52,887

Other Long-Term

Borrowings

1,829

3,057

Other Liabilities

109,487

102,076

Total Liabilities

3,577,998

3,455,234

Temporary Equity

27,460

22,000

SHAREOWNERS’ EQUITY

Preferred Stock, $

0.01

par value;

3,000,000

shares authorized;

shares issued and outstanding

Common Stock, $

0.01

par value;

90,000,000

shares authorized;

16,851,878

and

16,790,573

shares issued and outstanding at March 31, 2021 and December

31, 2020, respectively

169

168

Additional Paid-In Capital

32,804

32,283

Retained Earnings

335,324

332,528

Accumulated Other Comprehensive Loss, net of tax

(43,871)

(44,142)

Total Shareowners’

Equity

324,426

320,837

Total Liabilities, Temporary

Equity, and Shareowners' Equity

3,929,884

3,798,071

The accompanying Notes to Consolidated Financial

Statements are an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF INCOME

(Unaudited)

Three Months Ended March 31,

(Dollars in Thousands, Except Per Share

Data)

2021

2020

INTEREST INCOME

Loans, including Fees

23,350

23,593

Investment Securities:

Taxable Securities

1,863

2,996

Tax Exempt Securities

Funds Sold

213

757

Total Interest Income

25,446

27,365

INTEREST EXPENSE

Deposits

208

939

Short-Term

Borrowings

412

132

Subordinated Notes Payable

307

471

Other Long-Term

Borrowings

Total Interest Expense

948

1,592

NET INTEREST INCOME

24,498

25,773

Provision for Credit Losses

(982)

4,990

Net Interest Income After Provision For Credit Losses

25,480

20,783

NONINTEREST INCOME

Deposit Fees

4,271

5,015

Bank Card Fees

3,618

3,051

Wealth Management

Fees

3,090

2,604

Mortgage Banking Revenues

17,125

3,253

Other

1,722

1,555

Total Noninterest

Income

29,826

15,478

NONINTEREST EXPENSE

Compensation

26,064

19,736

Occupancy, Net

5,967

4,979

Other Real Estate Owned, Net

(118)

(798)

Other

8,563

7,052

Total Noninterest

Expense

40,476

30,969

INCOME BEFORE INCOME TAXES

14,830

5,292

Income Tax Expense

2,787

1,282

NET INCOME

12,043

4,010

Pre-Tax Income

Attributable to Noncontrolling Interests

(2,537)

277

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

9,506

4,287

BASIC NET INCOME PER SHARE

0.56

0.25

DILUTED NET INCOME PER SHARE

0.56

0.25

Average Basic Shares

Outstanding

16,838

16,808

Average Diluted

Shares Outstanding

16,862

16,842

The accompanying Notes to Consolidated Financial

Statements are an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended

March 31,

(Dollars in Thousands)

2021

2020

NET INCOME

9,506

4,287

Other comprehensive income, before

tax:

Investment Securities:

Change in net unrealized gain (loss) on securities available

for sale

(1,952)

3,547

Derivative:

Change in net unrealized gain on effective cash

flow derivative

2,125

Benefit Plans:

Reclassification adjustment for service cost

Actuarial gain

166

Total Benefit Plans

190

Other comprehensive income, before

tax

363

3,547

Deferred tax expense related to other comprehensive

income

899

Other comprehensive income, net of tax

271

2,648

TOTAL COMPREHENSIVE

INCOME

9,777

6,935

The accompanying Notes to Consolidated Financial

Statements are an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF CHANGES IN SHAREOWNERS' EQUITY

(Unaudited)

Accumulated

Other

Additional

Comprehensive

Common

Paid-In

Retained

(Loss) Income,

(Dollars In Thousands, Except Share

Data)

Outstanding

Stock

Capital

Earnings

Net of Taxes

Total

Balance, January 1, 2021

16,790,573

168

32,283

332,528

(44,142)

320,837

Net Income

9,506

Reclassification to Temporary

Equity

(1)

(4,182)

Other Comprehensive Income, net of tax

271

Cash Dividends ($

0.15

00 per share)

(2,528)

Stock Based Compensation

219

Stock Compensation Plan Transactions,

net

61,305

302

303

Balance, March 31, 2021

16,851,878

169

32,804

335,324

(43,871)

324,426

Balance, January 1, 2020

16,771,544

168

32,092

322,937

(28,181)

327,016

Adoption of ASC 326

(3,095)

Net Income

4,287

Other Comprehensive Income, net of tax

2,648

Cash Dividends ($

0.14

00 per share)

(2,357)

Repurchase of Common Stock

(33,074)

(1)

(707)

(708)

Stock Based Compensation

291

Stock Compensation Plan Transactio

ns, net

73,311

424

425

Balance, March 31, 2020

16,811,781

168

32,100

321,772

(25,533)

328,507

(1)

Adjustment to redemption value for

non-controlling interest

in Capital City Home Loans.

The accompanying Notes to Consolidated Financial

Statements are an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF CASH FLOWS

(Unaudited)

Three Months Ended March 31,

(Dollars in Thousands)

2021

2020

CASH FLOWS FROM OPERATING

ACTIVITIES

Net Income

9,506

4,287

Adjustments to Reconcile Net Income to

Cash Provided by Operating Activities:

Provision for Credit Losses

(982)

4,990

Depreciation

1,942

1,623

Amortization of Premiums, Discounts and Fees, net

2,428

1,643

Originations of Loans Held-for-Sale

(470,248)

(150,840)

Proceeds From Sales of Loans Held-for-Sale

519,331

80,781

Net Gain From Sales of Loans Held-for-Sale

(17,125)

(3,030)

Net Additions for Capitalized Mortgage Servicing Rights

119

Change in Valuation

Provision for Mortgage Servicing Rights

(250)

Stock Compensation

219

291

Net Tax Benefit From

Stock-Based Compensation

(4)

(84)

Deferred Income Taxes

(378)

(511)

Net Change in Operating Leases

(41)

192

Net Gain on Sales and Write-Downs of

Other Real Estate Owned

(202)

(931)

Net Increase in Other Assets

(1,370)

(20,255)

Net Increase in Other Liabilities

7,935

26,646

Net Cash Provided By (Used In) Operating Activities

50,880

(55,198)

CASH FLOWS FROM INVESTING ACTIVITIES

Securities Held to Maturity:

Purchases

(54,382)

(32,250)

Payments, Maturities, and Calls

24,629

19,370

Securities Available

for Sale:

Purchases

(133,628)

(26,795)

Payments, Maturities, and Calls

49,349

50,347

Purchases of Loans Held for Investment

(23,686)

(2,756)

Net Increase in Loans Held for Investment

(29,437)

(22,191)

Net Cash Paid for Brand Acquisition

(2,405)

Proceeds From Sales of Other Real Estate Owned

1,084

1,155

Purchases of Premises and Equipment

(1,592)

(4,773)

Noncontrolling Interest Contributions

1,259

Net Cash Used In Investing Activities

(166,404)

(20,298)

CASH FLOWS FROM FINANCING ACTIVITIES

Net Increase (Decrease) in Deposits

140,548

(99,869)

Net (Decrease) Increase in Short-Term

Borrowings

(24,181)

70,018

Repayment of Other Long-Term

Borrowings

(1,014)

(524)

Dividends Paid

(2,528)

(2,357)

Payments to Repurchase Common Stock

(708)

Issuance of Common Stock Under Purchase Plans

125

Net Cash Provided By (Used In) Financing Activities

112,858

(33,315)

NET DECREASE IN CASH AND CASH EQUIVALENTS

(2,666)

(108,811)

Cash and Cash Equivalents at Beginning of Period

928,549

378,423

Cash and Cash Equivalents at End of Period

925,883

269,612

Supplemental Cash Flow Disclosures:

Interest Paid

1,009

1,562

Noncash Investing and Financing Activities:

Loans Transferred to Other Real Estate Owned

184

734

The accompanying Notes to Consolidated Financial

Statements are an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTE 1 –

BUSINESS AND BASIS OF PRESENTATION

Nature of Operations

Capital City Bank Group, Inc. (“CCBG” or the “Company”)

provides a full range of banking and banking-

related services to individual and corporate clients through

its subsidiary, Capital City Bank,

with banking offices located in Florida,

Georgia, and Alabama.

The Company is subject to competition from other financial

institutions, is subject to regulation by certain

government agencies and undergoes periodic

examinations by those regulatory authorities.

Basis of Presentation

The consolidated financial statements in this Quarterly Report

on Form 10-Q include the accounts of CCBG

and its wholly owned subsidiary,

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

All material inter-company transactions and accounts

have been eliminated.

Certain previously reported amounts have been reclassified to conform

to the current year’s presentation.

The accompanying unaudited consolidated financial statements

have been prepared in accordance with generally accepted accounting

principles for interim financial information and with

the instructions to Form 10-Q and Article 10 of Regulation S-X.

Accordingly,

they do not include all of the information and footnotes required

by generally accepted accounting principles for complete financial

statements.

In the opinion of management, all adjustments (consisting of

normal recurring accruals) considered necessary for a fair

presentation have been included.

The consolidated statement of financial condition at

December 31, 2020 has been derived from the audited

consolidated financial

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

information and footnotes required by generally accepted accounting

principles

for complete financial statements.

For further information, refer to the consolidated financial statements

and footnotes thereto

included in the Company’s

annual report on Form 10-K for the year ended December

31, 2020.

Accounting Standards Updates

ASU 2020-04, "Reference Rate Reform

(Topic

848).

ASU 2020-04 provides optional expedients and exceptions for applying

GAAP

to loan and lease agreements, derivative contracts, and

other transactions affected by the anticipated transition

away from LIBOR

toward new interest rate benchmarks. For transactions

that are modified because of reference rate reform and that meet certain

scope

guidance (i) modifications of loan agreements should

be accounted for by prospectively adjusting the effective

interest rate and the

modification will be considered "minor" so that any existing

unamortized origination fees/costs would carry forward and

continue to

be amortized and (ii) modifications of lease agreements

should be accounted for as a continuation of the existing

agreement with no

reassessments of the lease classification and the discount

rate or re-measurements of lease payments that otherwise would be required

for modifications not accounted for as separate

contracts. ASU 2020-04 also provides numerous optional expedients

for derivative

accounting.

ASU 2020-04 is effective March 12, 2020 through

December 31, 2022.

An entity may elect to apply ASU 2020-04 for

contract modifications as of January 1, 2020, or prospectively

from a date within an interim period that includes or is subsequent

March 12, 2020, up to the date that the financial statements

are available to be issued.

Once elected for a Topic

or an Industry

Subtopic within the Codification, the amendments in this

ASU must be applied prospectively for all eligible contract

modifications for

that Topic or Industry

Subtopic.

It is anticipated this ASU will simplify any modifications executed

between the selected start date

(yet to be determined) and December 31, 2022 that are

directly related to LIBOR transition by allowing prospective

recognition of the

continuation of the contract, rather than extinguishment of

the old contract resulting in writing off unamortized

fees/costs.

Further,

ASU 2021-01, “Reference Rate Reform

(Topic

848): Scope,”

clarifies that certain optional expedients and exceptions

in ASC 848 for

contract modifications and hedge accounting apply

to derivatives that are affected by the discounting

transition. ASU 2021-01 also

amends the expedients and exceptions in ASC 848 to

capture the incremental consequences of the scope clarification and

to tailor the

existing guidance to derivative instruments.

The Company is evaluating the impact of this ASU and has not

yet determined if this

ASU will have material effects on the Company’s

business operations and consolidated financial statements.

NOTE 2 –

INVESTMENT SECURITIES

Investment Portfolio Composition

. The following table summarizes the amortized cost and related

market value of investment

securities available-for-sale and securities held

-to-maturity and the corresponding amounts of gross unrealized

gains and losses.

March 31, 2021

December 31, 2020

Amortized

Unrealized

Market

Amortized

Unrealized

Market

Cost

Gains

Losses

Value

Cost

Gain

Losses

Value

Available for

Sale

U.S. Government Treasury

173,029

551

464

173,116

103,547

972

104,519

U.S. Government Agency

220,018

2,096

584

221,530

205,972

2,743

184

208,531

States and Political Subdivisions

4,244

4,308

3,543

3,632

Mortgage-Backed Securities

440

496

456

515

Equity Securities

(1)

6,795

7,673

Total

404,526

2,776

1,057

406,245

321,191

3,863

184

324,870

Held to Maturity

U.S. Government Treasury

5,001

5,014

Mortgage-Backed Securities

199,109

5,358

309

204,158

164,938

5,223

170,161

Total

199,109

5,358

309

204,158

169,939

5,236

175,175

Total Investment

Securities

603,635

8,134

1,366

610,403

491,130

9,099

184

500,045

(1)

Includes Federal Home Loan Bank and Federal Reserve Bank

stock, recorded

at cost of $

2.0

million and $

4.8

million,

respectively,

at March 31, 2021 and includes

Federal Home Loan Bank and Federal Reserve Bank stock recorded

at cost of $

2.9

million and $

4.8

million, respectively,

at December 31, 2020.

Securities with an amortized cost of $

351.1

million and $

308.2

million at March 31, 2021 and December 31, 2020, respectively,

were

pledged to secure public deposits and for other purposes.

The Bank, as a member of the Federal Home Loan Bank

of Atlanta (“FHLB”), is required to own capital stock in the FHLB based

generally upon the balances of residential and commercial

real estate loans and FHLB advances.

FHLB stock, which is included in

equity securities, is pledged to secure FHLB advances.

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

quoted

market value;

however, redemption of this stock

has historically been at par value.

As a member of the Federal Reserve Bank of Atlanta,

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

Atlanta

based on a specified ratio relative to the Bank’s

capital.

Federal Reserve Bank stock is carried at cost.

Maturity Distribution

At March 31, 2021,

the Company's investment securities had the following maturity

distribution based on

contractual maturity.

Expected maturities may differ from contractual maturities

because borrowers may have the right to call or

prepay obligations.

Mortgage-backed securities and certain amortizing U.S. government

agency securities are shown separately

because they are not due at a certain maturity date.

Available for

Sale

Held to Maturity

(Dollars in Thousands)

Amortized Cost

Market Value

Amortized Cost

Market Value

Due in one year or less

77,464

77,741

Due after one year through five years

138,352

137,981

Due after five year through ten years

989

Mortgage-Backed Securities

440

496

199,109

204,158

U.S. Government Agency

180,486

182,243

Equity Securities

6,795

Total

404,526

406,245

199,109

204,158

Unrealized Losses on Investment Securities.

The following table summarizes the available for sale investment

securities with

unrealized losses aggregated by major security type

and length of time in a continuous unrealized loss position:

Less Than

Greater Than

12 Months

Total

Market

Unrealized

Market

Unrealized

Market

Unrealized

(Dollars in Thousands)

Value

Losses

Value

Losses

Value

Losses

March 31, 2021

Available for

Sale

U.S. Government Treasury

65,577

464

65,577

464

U.S. Government Agency

63,630

554

4,778

68,408

584

States and Political Subdivisions

744

Total

129,951

1,027

4,778

134,729

1,057

Held to Maturity

Mortgage-Backed Securities

20,550

309

20,550

309

Total

20,550

309

20,550

309

December 31, 2020

Available for

Sale

U.S. Government Agency

28,266

156

4,670

32,936

184

Total

28,266

156

4,670

32,936

184

At March 31, 2021, there were

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

1.4

million.

these positions

were U.S. government agency securities issued by U.S. government

Category

from AOCI to Income

Three months ended March 31, 2021

1,587

Interest Expense

(33)

The Company estimates there will be approximately

0.1

million reclassified as an increase to interest expense within

the next 12

months.

The Company had a collateral liability of $

2.6

million and $

0.5

million at March 31, 2021 and December 31, 2020, respectively.

NOTE 6 – LEASES

Operating leases in which the Company is the lessee are

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

liabilities, included in other assets and liabilities, respectively,

on its consolidated statement of financial condition.

Operating lease ROU assets represent the Company’s

right to use an underlying asset during the lease term

and operating lease

liabilities represent the Company’s

obligation to make lease payments arising from the lease.

ROU assets and operating lease

liabilities are recognized at lease commencement based

on the present value of the remaining lease payments using a

discount rate that

represents the Company’s

incremental borrowing rate at the lease commencement

date.

Operating lease expense, which is comprised

of amortization of the ROU asset and the implicit interest accreted

on the operating lease liability,

is recognized on a straight-line basis

over the lease term, and is recorded in occupancy expense

in the consolidated statements of income.

The Company’s operating

leases primarily relate to banking offices with remaining

lease terms from

years.

The Company’s

leases are not complex and do not contain residual value

guarantees, variable lease payments, or significant assumptions

or judgments

made in applying the requirements of Topic

842.

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

balance sheet and the related lease expense is recognized on a straight-line basis over the lease term.

At March 31, 2021, the operating

lease ROU assets and liabilities were $

11.8

million and $

12.6

million, respectively.

The Company does not have any finance leases or

any significant lessor agreements.

The table below summarizes our lease expense and other

information related to the Company’s

operating leases.

Three Months Ended

March 31,

(Dollars in Thousands)

2021

2020

Operating lease expense

344

156

Short-term lease expense

140

Total lease expense

484

235

Other information:

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

Operating cash flows from operating leases

385

160

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

5,092

Weighted average

remaining lease term — operating leases (in years)

25.5

15.4

Weighted average

discount rate — operating leases

2.1%

2.4%

The table below summarizes the maturity of remaining

lease liabilities:

(Dollars in Thousands)

March 31, 2021

2021

1,158

2022

1,389

2023

995

2024

945

2025

771

2026 and thereafter

11,132

Total

16,390

Less: Interest

(3,837)

Present Value

of Lease liability

12,553

At March 31, 2021, the Company had additional operating

lease payments for

two

banking offices that have not yet commenced

totaling $

4.8

million based on the initial contract term of

15 years

Payments for the banking offices are expected to commence after

the construction period ends, which is expected to occur during the second quarter of 2022 and the third quarter of 2022.

A related party is the lessor in an operating lease with

the Company.

The Company’s minimum

payment is $

0.2

million annually

through 2024, for an aggregate remaining obligation of

0.7

million at March 31, 2021.

NOTE 7 - EMPLOYEE BENEFIT PLANS

The Company has a defined benefit pension plan covering

substantially all full-time and eligible part-time associates and

Supplemental Executive Retirement Plan (“SERP”) and

a Supplemental Executive Retirement Plan II (“SERP II”) covering

its

executive officers.

The defined benefit plan was amended in December 2019

to remove plan eligibility for new associates hired after

December 31, 2019.

The SERP II was adopted by the Company’s

Board on May 21, 2020 and covers certain executive officers

that

were not covered by the SERP.

The components of the net periodic benefit cost for

the Company's qualified benefit pension plan were as follows:

Three Months Ended March 31,

(Dollars in Thousands)

2021

2020

Service Cost

1,743

1,457

Interest Cost

1,221

1,411

Expected Return on Plan Assets

(2,787)

(2,748)

Prior Service Cost Amortization

Net Loss Amortization

1,691

1,011

Special Termination

Charge

Net Periodic Benefit Cost

1,872

1,196

Discount Rate Used for Benefit Cost

2.88%

3.53%

Long-term Rate of Return on Assets

6.75%

7.00%

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

SERP plans were as follows:

Three Months Ended March 31,

(Dollars in Thousands)

2021

2020

Service Cost

Interest Cost

Prior Service Cost Amortization

Net Loss Amortization

198

247

Net Periodic Benefit Cost

285

319

Discount Rate Used for Benefit Cost

2.38%

3.16%

The service cost component of net periodic benefit cost is reflected

in compensation expense in the accompanying statements of

income.

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

within the noninterest expense category in the statements

of income.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Lending Commitments

The Company is a party to financial instruments with off

-balance sheet risks in the normal course of business

to meet the financing needs of its clients.

These financial instruments consist of commitments to extend

credit and standby letters of

credit.

The Company’s maximum

exposure to credit loss under standby letters of credit and

commitments to extend credit is represented by

the contractual amount of those instruments.

The Company uses the same credit policies in establishing commitments

and issuing

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

The amounts associated with the Company’s

off-balance sheet

obligations were as follows:

March 31, 2021

December 31, 2020

(Dollars in Thousands)

Fixed

Variable

Total

Fixed

Variable

Total

Commitments to Extend Credit

(1)

170,898

599,387

770,285

160,372

596,572

756,944

Standby Letters of Credit

6,711

6,550

Total

177,609

599,387

776,996

166,922

596,572

763,494

(1)

Commitments include unfunded loans, revolving

lines of credit, and off-balance sheet

residential loan commitments.

Commitments to extend credit are agreements to lend

to a client so long as there is no violation of any condition established in

the

contract.

Commitments generally have fixed expiration dates or other

termination clauses and may require payment of a fee.

Since

many of the commitments are expected to expire without

being drawn upon, the total commitment amounts do not necessarily

represent future cash requirements.

Standby letters of credit are conditional commitments

issued by the Company to guarantee the performance

of a client to a third

party.

The credit risk involved in issuing letters of credit is essentially the

same as that involved in extending loan facilities. In

general, management does not anticipate any material

losses as a result of participating in these types of transactions.

However, any

potential losses arising from such transactions are reserved

for in the same manner as management reserves for its other

credit

facilities.

For both on-

and off-balance sheet financial instruments, the Company

requires collateral to support such instruments when it is

deemed necessary.

The Company evaluates each client’s

creditworthiness on a case-by-case basis.

The amount of collateral

obtained upon extension of credit is based on management’s

credit evaluation of the counterparty.

Collateral held varies, but may

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

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

property, plant and

equipment; and inventory.

The allowance for credit losses for off-balance sheet

credit commitments that are not unconditionally cancellable

by the bank is

adjusted as a provision for credit loss expense and is recorded

in other liabilities.

The following table shows the activity in the

allowance.

Three Months Ended March 31,

(Dollars in Thousands)

2021

2020

Beginning Balance

1,644

157

Impact of Adoption of ASC 326

876

Provision for Credit Losses

1,330

Ending Balance

2,974

1,033

Contingencies

The Company is a party to lawsuits and claims arising out of

the normal course of business.

In management's opinion,

there are no known pending claims or litigation, the outcome

of which would, individually or in the aggregate, have a

material effect

on the consolidated results of operations, financial

position, or cash flows of the Company.

Indemnification Obligation

The Company is a member of the Visa

U.S.A. network.

Visa U.S.A member banks

are required to

indemnify the Visa U.S.A.

network for potential future settlement of certain litigation

(the “Covered Litigation”) that relates to several

antitrust lawsuits challenging the practices of Visa

and MasterCard International.

In 2008, the Company,

as a member of the Visa

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

Inc. upon its initial public offering.

Since its initial public offering, Visa,

Inc. has

funded a litigation reserve for the Covered Litigation resulting

in a reduction in the Class B shares held by the Company.

During the

first quarter of 2011, the Company

sold its remaining Class B shares.

Associated with this sale, the Company entered into a

swap

contract with the purchaser of the shares that requires

a payment to the counterparty in the event that Visa,

Inc. makes subsequent

revisions to the conversion ratio for its Class B shares.

Fixed charges included in the swap liability are payable

quarterly until the litigation reserve is fully liquidated

and at which time the

aforementioned swap contract will be terminated.

Quarterly fixed payments approximate $

200,000

Conversion ratio payments and

ongoing fixed quarterly charges are reflected

in earnings in the period incurred.

NOTE 9 – FAIR VALUE

MEASUREMENTS

The fair value of an asset or liability is the price that would

be received to

sell that asset or paid to transfer that liability in an orderly

transaction occurring in the principal market (or most advantageous

market in the absence of a principal market) for such asset or

liability.

In estimating fair value, the Company utilizes valuation techniques

that are consistent with the market approach, the income

approach and/or the cost approach.

Such valuation techniques are consistently applied.

Inputs to valuation techniques include the

assumptions that market participants would use in

pricing an asset or liability.

ASC Topic 820

establishes a fair value hierarchy for

valuation inputs that gives the highest priority to quoted

prices in active markets for identical assets or liabilities and the

lowest

priority to unobservable inputs.

The fair value hierarchy is as follows:

●

Level 1 Inputs -

Unadjusted quoted prices in active markets for identical assets or liabilities

that the reporting entity has the

ability to access at the measurement date

●

Level 2 Inputs -

Inputs other than quoted prices included in Level 1 that

are observable for the asset or liability,

either directly

or indirectly. These

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

quoted prices for identical

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

inputs other than quoted prices that are observable for the

asset or

liability (such as interest rates, volatilities, prepayment

speeds, credit risks, etc.) or inputs that are derived principally from, or

corroborated, by market data by correlation or other means

●

Level 3 Inputs -

Unobservable inputs for determining the fair values of assets or

liabilities that reflect an entity's own

assumptions about the assumptions that market participants

would use in pricing the assets or liabilities.

Assets and Liabilities Measured at Fair

Value on

a Recurring Basis

Securities Available for Sale.

U.S. Treasury securities are reported

at fair value utilizing Level 1 inputs.

Other securities classified as

available for sale are reported at fair value utilizing Level

2 inputs.

For these securities, the Company obtains fair value measurements

from an independent pricing service.

The fair value measurements consider observable data that may

include dealer quotes, market

spreads, cash flows, the U.S. Treasury

yield curve, live trading levels, trade execution data, credit information

and the bond’s terms

and conditions, among other things.

In general, the Company does not purchase securities that have

a complicated structure.

The Company’s entire portfolio

consists of

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

obligations, federal agency bullet or mortgage pass-through

securities, or

general obligation or revenue-based municipal bonds.

Pricing for such instruments is easily obtained.

At least annually,

the Company

will validate prices supplied by the independent pricing

service by comparing them to prices obtained from an independent

third-party

source.

Loans Held for Sale

The fair value of residential mortgage loans held for sale based

on Level 2 inputs is determined, when possible,

using either quoted secondary-market prices or investor commitments.

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

using quoted prices for a similar asset or assets, adjusted for

the specific attributes of that loan, which would be used

by other market

participants.

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

for sale loans.

Mortgage Banking Derivative Instruments.

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

by valuation

models incorporating market pricing for instruments with

similar characteristics, commonly referred to as best execution

pricing, or

investor commitment prices for best effort

IRLCs which have unobservable inputs, such as an estimate of

the fair value of the

servicing rights expected to be recorded upon sale of the

loans, net estimated costs to originate the loans, and the pull-through

rate,

and are therefore classified as Level 3 within the fair value

hierarchy.

The fair value of forward sale commitments is based on

observable market pricing for similar instruments and

are therefore classified as Level 2 within the fair value

hierarchy.

Interest Rate Swap.

The Company’s derivative

positions are classified as level 2 within the fair value

hierarchy and are valued using

models generally accepted in the financial services

industry and that use actively quoted or observable market

input values from

external market data providers.

The fair value derivatives are determined using discounted cash

flow models.

Fair Value

Swap

The Company entered into a stand-alone derivative contract

with the purchaser of its Visa Class B

shares.

The

valuation represents the amount due and payable to the counterparty

based upon the revised share conversion rate, if any,

during the

period.

A summary of fair values for assets and liabilities consisted

of the following:

Level 1

Level 2

Level 3

Total

Fair

(Dollars in Thousands)

Inputs

Value

March 31, 2021

ASSETS:

Securities Available

for Sale:

U.S. Government Treasury

173,116

U.S. Government Agency

221,530

States and Political Subdivisions

4,308

Mortgage-Backed Securities

496

Equity Securities

(1)

6,795

Loans Held for Sale

82,081

Interest Rate Swap Derivative

2,699

Mortgage Banking Hedge Derivative

1,356

Mortgage Banking IRLC Derivative

2,982

Mortgage Servicing Rights

4,019

December 31, 2020

ASSETS:

Securities Available

for Sale:

U.S. Government Treasury

104,519

U.S. Government Agency

208,531

States and Political Subdivisions

3,632

Mortgage-Backed Securities

515

Equity Securities

(1)

7,673

Loans Held for Sale

114,039

Interest Rate Swap Derivative

574

Mortgage Banking IRLC Derivative

4,825

LIABILITIES:

Mortgage Banking Hedge Derivative

907

(1)

Not readily marketable securities - reflected

in other assets.

Mortgage Banking Activities

The Company had Level 3 issuances and transfers of

15.4

million and $

10.5

million, respectively,

for

the three month period ending March 31, 2021 and Level 3

issuances and transfers of $

1.2

million and $

1.8

million, respectively,

for

the three month period ending March 31, 2020 related to

mortgage banking activities.

Issuances are valued based on the change in fair

value of the underlying mortgage loan from inception

of the IRLC to the balance sheet date, adjusted for pull

-through rates and costs

to originate.

IRLCs transferred out of Level 3 represent IRLCs that were funded

and moved to mortgage loans held for sale, at fair

value.

Assets Measured at Fair Value

on a Non-Recurring Basis

Certain assets are measured at fair value on a non-recurring

basis (i.e., the assets are not measured at fair value on an

ongoing basis

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

An example would be assets exhibiting evidence of impairment.

The following is a description of valuation methodologies

used for assets measured on a non-recurring basis.

Collateral Dependent Loans

Impairment for collateral dependent loans is measured

using the fair value of the collateral less selling

costs.

The fair value of collateral is determined by an

independent valuation or professional appraisal in conformance with banking

regulations.

Collateral values are estimated using Level 3 inputs due to the volatility

in the real estate market, and the judgment and

estimation involved in the real estate appraisal process.

Collateral dependent loans are reviewed and evaluated on

at least a quarterly

basis for additional impairment and adjusted accordingly.

Valuation

techniques are consistent with those techniques applied in

prior

periods.

Collateral-dependent loans had a carrying value of $

4.0

million with a valuation allowance of $

0.1

million at March 31, 2021

and $

7.1

million and $

0.1

million, respectively,

at December 31, 2020.

Other Real Estate Owned

During the first three months of 2021,

certain foreclosed assets, upon initial recognition, were measured

and reported at fair value through a charge-off

to the allowance for credit losses based on the fair value of

the foreclosed asset less

estimated cost to sell.

The fair value of the foreclosed asset is determined by

an independent valuation or professional appraisal in

conformance with banking regulations.

On an ongoing basis, we obtain updated appraisals on foreclosed

assets and realize valuation

adjustments as necessary.

The fair value of foreclosed assets is estimated using Level 3

inputs due to the judgment and estimation

involved in the real estate valuation process.

Mortgage Servicing Rights

Residential mortgage loan servicing rights are evaluated

for impairment at each reporting period based

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

amount.

Fair value is determined by a third party valuation model using

estimated prepayment speeds of the underlying mortgage loans serviced

and stratifications based on the risk characteristics of the

underlying loans (predominantly loan type and note interest

rate).

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

discount rate, weighted average prepayment speed, and

the cost of loan servicing.

Further detail on the key inputs utilized are

provided in Note 4 – Mortgage Banking Activities.

At March 31, 2021, there was

valuation allowance for loan servicing rights.

Assets and Liabilities Disclosed at Fair Value

The Company is required to disclose the estimated fair value

of financial instruments, both assets and liabilities, for which

it is

practical to estimate fair value and the following

is a description of valuation methodologies used for those assets and liabilities.

Cash and Short-Term

Investments.

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

to approximate fair value, given

the short time frame to maturity and as such assets do

not present unanticipated credit concerns.

Securities Held to Maturity

Securities held to maturity are valued in accordance

with the methodology previously noted in this

footnote under the caption “Assets and Liabilities Measured

at Fair Value

on a Recurring Basis – Securities Available

for Sale”.

Loans.

The loan portfolio is segregated into categories and the fair value

of each loan category is calculated using present value

techniques based upon projected cash flows, estimated

discount rates, and incorporates a liquidity discount to meet

the objective of

“exit price” valuation.

Deposits.

The fair value of Noninterest Bearing Deposits, NOW Accounts,

Money Market Accounts and Savings Accounts are the

amounts payable on demand at the reporting date. The

fair value of fixed maturity certificates of deposit is estimated using

present

value techniques and rates currently offered

for deposits of similar remaining maturities.

Subordinated Notes Payable.

The fair value of each note is calculated using present

value techniques, based upon projected cash

flows and estimated discount rates as well as rates being offered

for similar obligations.

Short-Term

and Long-Term

Borrowings.

The fair value of each note is calculated using present value

techniques, based upon

projected cash flows and estimated discount rates as well as rates

being offered for similar debt.

A summary of estimated fair values of significant

financial instruments consisted of the following:

March 31, 2021

Carrying

Level 1

Level 2

Level 3

(Dollars in Thousands)

Value

Inputs

ASSETS:

Cash

73,973

Short-Term

Investments

851,910

Investment Securities, Available

for Sale

406,245

173,116

233,129

Investment Securities, Held to Maturity

199,109

204,158

Equity Securities

(1)

3,588

Loans Held for Sale

82,081

Interest Rate Swap Derivative

2,699

Mortgage Banking Hedge Derivative

1,356

Mortgage Banking IRLC Derivative

2,982

Mortgage Servicing Rights

3,583

4,019

Loans, Net of Allowance for Credit Losses

2,035,701

2,036,010

LIABILITIES:

Deposits

3,358,108

3,358,015

Short-Term

Borrowings

55,687

Subordinated Notes Payable

52,887

43,038

Long-Term Borrowings

1,829

1,927

December 31, 2020

Carrying

Level 1

Level 2

Level 3

(Dollars in Thousands)

Value

Inputs

ASSETS:

Cash

67,919

Short-Term

Investments

860,630

Investment Securities, Available

for Sale

324,870

104,519

220,351

Investment Securities, Held to Maturity

169,939

5,014

170,161

Loans Held for Sale

114,039

Equity Securities

(1)

3,589

Interest Rate Swap Derivative

574

Mortgage Banking IRLC Derivative

4,825

Mortgage Servicing Rights

3,452

3,451

Loans, Net of Allowance for Credit Losses

1,982,610

1,990,740

LIABILITIES:

Deposits

3,217,560

3,217,615

Short-Term

Borrowings

79,654

Subordinated Notes Payable

52,887

43,449

Long-Term Borrowings

3,057

3,174

Mortgage Banking Hedge Derivative

907

(1)

Not readily marketable securities - reflected

in other assets.

All non-financial instruments are excluded from the

above table.

The disclosures also do not include goodwill.

Accordingly, the

aggregate fair value amounts presented do not represent

the underlying value of the Company.

NOTE 10 – ACCUMULATED

OTHER COMPREHENSIVE INCOME (LOSS)

The amounts allocated to accumulated other comprehensive

income (loss) are presented in the table below.

Accumulated

Securities

Other

Available

Interest Rate

Retirement

Comprehensive

(Dollars in Thousands)

for Sale

Swap

Plans

Loss

Balance as of January 1, 2021

2,700

428

(47,270)

(44,142)

Other comprehensive income during the period

(1,458)

1,587

142

271

Balance as of March 31, 2021

1,242

2,015

(47,128)

(43,871)

Balance as of January 1, 2020

864

(29,045)

(28,181)

Other comprehensive income during the period

2,648

Balance as of March 31, 2020

3,512

(29,045)

(25,533)

Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS

OPERATIONS

Management’s discussion

and analysis ("MD&A") provides supplemental information,

which sets forth the major factors that have

affected our financial condition and results of

operations and should be read in conjunction with the Consolidated

Financial

Statements and related notes.

The following information should provide a better

understanding of the major factors and trends that

affect our earnings performance and financial

condition, and how our performance during 2021 compares with prior

years.

Throughout this section, Capital City Bank Group,

Inc., and subsidiaries, collectively,

is referred to as "CCBG," "Company,"

"we,"

"us," or "our."

CAUTION CONCERNING FORWARD

-LOOKING STATEMENTS

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

section, contains "forward-looking statements" within the

meaning of the

Private Securities Litigation Reform Act of 1995.

These forward-looking statements include, among others, statements

about our

beliefs, plans, objectives, goals, expectations, estimates and

intentions that are subject to significant risks and uncertainties

and are

subject to change based on various factors, many of which

are beyond our control.

The words "may,"

"could," "should," "would,"

"believe," "anticipate," "estimate," "expect," "intend,"

"plan," "target," "goal," and similar expressions are intended

to identify

forward-looking statements.

All forward-looking statements, by their nature, are subject

to risks and uncertainties.

Our actual future results may differ materially

from those set forth in our forward-looking statements.

Please see the Introductory Note and

Item 1A. Risk Factors

of our 2020

Report on Form 10-K, as updated in our subsequent quarterly

reports filed on Form 10-Q, and in our other filings made

from time to

time with the SEC after the date of this report.

However, other factors besides those

listed in our Quarterly Report or in our Annual Report also

could adversely affect our results,

and you should not consider any such list of factors to

be a complete set of all potential risks or uncertainties.

Any forward-looking

statements made by us or on our behalf speak only as of the

date they are made.

We do not undertake

to update any forward-looking

statement, except as required by applicable law.

BUSINESS OVERVIEW

We are a financial

holding company headquartered in Tallahassee,

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

Capital City Bank (the "Bank" or "CCB").

The Bank offers a broad array of products and

services through a total of 57 full-service

offices located in Florida, Georgia,

and Alabama.

The Bank offers commercial and retail banking services,

as well as trust and asset

management, and retail securities brokerage.

We offer

residential mortgage banking services through Capital City Home

Loans.

Our profitability,

like most financial institutions, is dependent to a large

extent upon net interest income, which is the difference

between the interest and fees received on earning assets, such

as loans and securities, and the interest paid on interest-bearing

liabilities, principally deposits and borrowings.

Results of operations are also affected by the provision for

credit losses, noninterest

income such as deposit fees, wealth management fees, mortgage

banking

fees and bank card fees, and operating expenses such as

salaries and employee benefits, occupancy,

and other operating expenses, including income taxes.

A detailed discussion regarding the economic conditions

in our markets and our long-term strategic objectives is included as part

the MD&A section of our 2020 Form 10-K.

Strategic Alliance

On March 1, 2020, CCB completed its acquisition of a 51% membership

interest in Brand Mortgage Group, LLC

(“Brand”) which is now operated as a Capital City Home Loans

(“CCHL”).

CCHL was consolidated into CCBG’s

financial

statements effective March 1, 2020.

See Note 1 – Business Combination in the 2020 Form 10-K

in the Consolidated Financial

Statements.

RESPONSE TO COVID-19 PANDEMIC

The global and local responses to the COVID-19 pandemic

have shown significant progress, and our clients and

associates continue

adjust to the changing conditions presented by the

pandemic. However, the pandemic

has adversely impacted a broad range of

industries in which the Company’s

customers operate and could still impair their ability to

fulfill their financial obligations to the

Company.

In addition, although our associates have generally been

available and working during the pandemic, COVID-19 has the

potential to create widespread business continuity issues for

the Company.

Congress, the President, and the Federal Reserve have

taken several actions designed to cushion the economic fallout.

The

Coronavirus Aid, Relief and Economic Security (“CARES”) Act

was signed into law at the end of March 2020 as a $2 trillion

legislative package.

The goal of the CARES Act was to curb the economic downturn

through various measures, including direct

financial aid to American families and economic

stimulus to significantly impacted industry sectors through programs

like the

Paycheck Protection Program ("PPP") and Main Street Lending

Program (“MSLP”).

During December 2020, many provisions of the

CARES Act were extended through the end of 2021.

In addition to the general impact of COVID-19, certain provisions

of the

CARES Act as well as other recent legislative and regulatory

relief efforts have had a material impact on

the Company’s 2020 and

2021 operations and could continue to impact operations going

forward.

The Company’s business is dependent

upon the willingness and ability of its associates and clients to

conduct banking and other

financial transactions.

While it appears that epidemiological and macroeconomic

conditions are trending in a positive direction at

March 31, 2021, if case counts trend higher in our

markets,

the Company could experience further adverse effects

on its business,

financial condition, results of operations and cash

flows.

While it is not possible to know the full universe or extent that the impact

COVID-19, and any potential resulting measures to curtail its spread,

will have on the Company’s

future operations, we discuss

potential impacts on our financial performance in

more detail throughout parts of the MD&A section.

To protect the

health of our

clients and associates and comply with applicable government

directives, we have modified our business practices as noted

below.

COVID-19 Update

●

We continue

to closely follow COVID-19 case count trends in our markets and adjust

our operations as needed to respond

to the changing conditions presented by the COVID-19 pandemic.

●

All of our banking offices are open for business, but

continue to be subject to national guidelines

and local safety

ordinances that are designed to protect our clients and associates.

●

To limit building

capacity, we continue

to utilize flexible in-office and remote working arrangements

for non-retail

associates.

●

In support of social distancing measures, we encourage

clients to use our enhanced digital access options for banking

products and access to sales associates.

NON-GAAP FINANCIAL MEASURES

We present a

tangible common equity ratio and a tangible book value per

diluted share that, in each case, reduces shareowners’ equity

and total assets by the amount of goodwill resulting

from merger and acquisition activity.

We believe these

measures

are useful to

investors because it allows investors to more easily compare

our capital adequacy to other companies in the industry

although the

manner in which we calculate non-GAAP financial

measures may differ from that of other companies reporting

non-GAAP measures

with similar names.

The GAAP to non-GAAP reconciliation for each quarter presented

on page 31 is provided below.

2021

2020

2019

(Dollars in Thousands, except per share data)

First

Fourth

Third

Second

First

Fourth

Third

Second

Shareowners' Equity (GAAP)

324,426

320,837

339,425

335,057

328,507

327,016

321,562

314,595

Less: Goodwill (GAAP)

89,095

89,275

84,811

Tangible Shareowners' Equity (non

-GAAP)

235,331

231,742

250,330

245,962

239,232

242,205

236,751

229,784

Total Assets (GAAP)

3,929,884

3,798,071

3,587,041

3,499,524

3,086,523

3,088,953

2,934,513

3,017,654

Less: Goodwill (GAAP)

89,095

89,275

84,811

Tangible Assets (non-GAAP)

3,840,789

3,708,976

3,497,946

3,410,429

2,997,248

3,004,142

2,849,702

2,932,843

Tangible Common Equity Ratio

(non-GAAP)

A/B

6.13%

6.25%

7.16%

7.21%

7.98%

8.06%

8.31%

7.83%

Actual Diluted Shares Outstanding (GAAP)

16,875,719

16,844,997

16,800,563

16,821,743

16,845,462

16,855,161

16,797,241

16,773,449

Diluted Tangible Book Value

(non-GAAP)

A/C

13.94

13.76

14.90

14.62

14.20

14.37

14.09

13.70

SELECTED QUARTERLY

FINANCIAL DATA

(UNAUDITED)

(Dollars in Thousands, Except

2021

2020

2019

Per Share Data)

First

Fourth

Third

Second

First

Fourth

Third

Second

Summary of Operations

Interest Income

25,446

26,154

26,166

26,512

27,365

28,008

28,441

28,665

Interest Expense

948

1,181

1,044

1,054

1,592

1,754

2,244

2,681

Net Interest Income

24,498

24,973

25,122

25,458

25,773

26,254

26,197

25,984

Provision for Credit Losses

(982)

1,342

1,308

2,005

4,990

(162)

776

646

Net Interest Income After

Provision for Credit Losses

25,480

23,631

23,814

23,453

20,783

26,416

25,421

25,338

Noninterest Income

29,826

30,523

34,965

30,199

15,478

13,828

13,903

12,770

Noninterest Expense

40,476

41,348

40,342

37,303

30,969

29,142

27,873

28,396

Income

Before

Income Taxes

14,830

12,806

18,437

16,349

5,292

11,102

11,451

9,712

Income Tax Expense

2,787

2,833

3,165

2,950

1,282

2,537

2,970

2,387

(Income) Loss Attributable to NCI

(2,537)

(2,227)

(4,875)

(4,253)

277

Net Income Attributable to CCBG

9,506

7,746

10,397

9,146

4,287

8,565

8,481

7,325

Net Interest Income (FTE)

24,607

25,082

25,233

25,564

25,877

26,378

26,333

26,116

Per Common Share

Net Income Basic

0.56

0.46

0.62

0.55

0.25

0.51

0.44

Net Income Diluted

0.56

0.46

0.62

0.55

0.25

0.51

0.50

0.44

Cash Dividends Declared

0.15

0.14

0.13

0.11

Diluted Book Value

19.22

19.05

20.20

19.92

19.50

19.40

19.14

18.76

Diluted Tangible Book Value

(1)

13.94

13.76

14.90

14.62

14.20

14.37

14.09

13.70

Market Price:

High

28.98

26.35

21.71

23.99

30.62

30.95

28.00

25.00

Low

21.42

18.14

17.55

16.16

15.61

25.75

23.70

21.57

26.02

24.58

18.79

20.95

20.12

30.50

27.45

24.85

Selected Average Balances

Loans Held for Investment

2,044,363

1,993,470

2,005,178

1,982,960

1,847,780

1,834,085

1,824,685

1,814,401

Earning Assets

3,497,929

3,337,409

3,223,838

3,016,772

2,751,880

2,694,700

2,670,081

2,719,217

Total Assets

3,821,521

3,652,436

3,539,332

3,329,226

3,038,788

2,982,204

2,959,310

3,010,662

Deposits

3,239,508

3,066,136

2,971,277

2,783,453

2,552,690

2,524,951

2,495,755

2,565,431

Shareowners’ Equity

326,330

343,674

340,073

333,515

331,891

326,904

320,273

313,599

Common Equivalent Average Shares:

Basic

16,838

16,763

16,771

16,797

16,808

16,750

16,747

16,791

Diluted

16,862

16,817

16,810

16,839

16,842

16,834

16,795

16,818

Performance Ratios:

Return on Average Assets

1.01

0.84

1.17

1.10

0.57

1.14

0.98

Return on Average Equity

11.81

8.97

12.16

11.03

5.20

10.39

10.51

9.37

Net Interest Margin (FTE)

2.85

3.00

3.12

3.41

3.78

3.89

3.92

3.85

Noninterest Income as % of

Operating Revenue

54.90

55.00

58.19

54.26

37.52

34.50

34.67

32.95

Efficiency Ratio

74.36

67.01

66.90

74.89

72.48

69.27

73.02

Asset Quality:

Allowance for Credit Losses ("ACL")

22,026

23,816

23,137

22,457

21,083

13,905

14,319

14,593

ACL to Loans HFI

1.07

1.19

1.16

1.11

1.13

0.75

0.78

0.79

Nonperforming Assets (“NPAs”)

5,472

6,679

6,732

8,025

6,337

5,425

5,454

6,632

NPAs to Total

Assets

0.14

0.18

0.19

0.23

0.21

0.18

0.19

0.22

NPAs to Loans HFI plus OREO

0.27

0.33

0.34

0.40

0.34

0.29

0.30

0.36

ACL to Non-Performing Loans

410.78

405.66

420.30

322.37

432.61

310.99

290.55

259.55

Net Charge-Offs to Average

Loans HFI

(0.10)

0.09

0.11

0.05

0.23

0.05

0.23

0.04

Capital Ratios:

Tier 1 Capital

16.08

16.19

16.77

16.59

16.12

17.16

16.83

16.36

Total Capital

17.20

17.30

17.88

17.60

17.19

17.90

17.59

17.13

Common Equity Tier 1

13.63

13.71

14.20

14.01

13.55

14.47

14.13

13.67

Leverage

8.97

9.33

9.64

10.12

10.81

11.25

11.09

10.64

Tangible Common Equity

(1)

6.13

6.25

7.16

7.21

7.98

8.06

8.31

7.83

(1)

Non-GAAP financial measure.

See non-GAAP reconciliation on page 30.

FINANCIAL OVERVIEW

Results of Operations

Performance Summary

Net income was $9.5 million, or $0.56 per diluted share,

for the first quarter of 2021 compared to net income

of $7.7 million, or $0.46 per diluted share, for the fourth

quarter of 2020 and net income of $4.3 million,

or $0.25 per diluted share,

for

the first quarter of 2020.

Net Interest Income

Taxable equivalent

net interest income for the first quarter of 2021 was $24.6

million compared to $25.1 million

for the fourth quarter of 2020 and $25.9 million for the

first quarter of 2020.

The decrease compared to both prior periods reflected

lower rates earned

on investment securities and variable/adjustable rate loans.

The year-over-year decline also reflected lower rates on

overnight funds.

Partially offsetting these declines were higher volumes

of earning assets, including lower yielding loans from

the

SBA Paycheck Protection Program (“SBA PPP”) and overnight

funds.

Provision and Allowance for Credit

Losses.

For the first quarter of 2021, we recorded a negative provision

of $1.0 million compared

to provision expense of $1.3 million for the fourth

quarter of 2020 and $5.0 million for the first quarter of

2020.

The negative

provision for the first quarter of 2021 generally reflected

improving economic conditions and a lower level of expected

losses related

to COVID-19.

Further, we recognized net loan recoveries

of $0.5 million in the first quarter of 2021.

Noninterest Income

Noninterest income for the first quarter of 2021 totaled $29.8

million, a decrease of $0.7 million, or 2.3%, from

the fourth quarter of 2020 and a $14.3 million, or 92.7%,

increase over the first quarter of 2020.

The decrease from the fourth quarter

of 2020 was due to a seasonal decline in mortgage

banking revenues.

The increase over the first quarter of 2020 was also attributable

to higher mortgage banking revenues due to the strategic

alliance with CCHL.

Noninterest Expense

Noninterest expense for the first quarter of 2021 totaled $40.5

million, a decrease of $0.9 million, or 2.1%, from

the fourth quarter of 2020 and a $9.5 million, or 30.78%,

increase over the first quarter of 2020.

The decrease from the fourth quarter

of 2020 was primarily attributable to lower compensation

expense and other real estate owned (“OREO”) expense.

The increase

compared to the first quarter of 2020 reflected expenses added

by the CCHL acquisition as Core CCBG’s

expenses remained flat.

Financial Condition

Earning Assets

Average

earning assets were $3.498 billion for the first quarter of 2021,

an increase of $160.5 million, or 4.8%

over

the fourth quarter of 2020, and an increase of $746.0 million,

or 27.1% over the first quarter of 2020.

The increase over both prior

periods was primarily driven by higher deposit balances,

which funded growth in both overnight funds sold and SBA PPP loans.

Deposit balances increased as a result of strong core deposit

growth, in addition to funding retained at the bank from

SBA PPP loans,

and various other stimulus programs.

Loans

Average loans held

for investment (“HFI”) increased $50.9 million, or

2.6%, over the fourth quarter of 2020 and $196.6

million, or 10.6%, over the first quarter of 2020.

Period end balances increased $51.3 million, or 2.6%, over the fourth

quarter of

2020 and $195.3 million, or 10.5%, over the first quarter

of 2020.

In the first quarter of 2021, we originated an additional round

SBA PPP loans totaling $65.4 million.

Excluding SBA PPP loans, average and period end loans increased

$23 million and $36

million, respectively,

over the fourth quarter of 2020.

Credit Quality

Nonaccrual loans totaled $5.4 million (0.26% of HFI loans)

at March 31, 2021

compared to $5.9 million (0.29%

HFI loans) at December 31, 2020 and $4.9 million (0.26%

of HFI loans) at March 31, 2020.

Classified loans totaled $20.6 million,

$17.6

million, and $16.5 million at the same respective periods.

We continue

to closely monitor borrowers and loan portfolio

segments impacted by the pandemic.

Approximately $328 million of the $333 million in loans that received

COVID-19 loan

extension have resumed making regularly scheduled payments

and we have experienced nominal problem loan migration

within that

pool of loans.

Deposits

Average total

deposits increased $173.4 million, or 5.7%, over the fourth

quarter of 2020,

and $686.8 million, or 26.9%,

over the first quarter of 2020.

Period end deposit balances grew $140.5 million and

$812.5 million over the fourth quarter of 2020 and

first quarter of 2020,

respectively, indicating

strong growth in core deposit balances.

Over the past twelve months, multiple

government stimulus programs have been implemented,

including the CARES Act and the American Rescue Plan Act, which

are

responsible for a portion of this growth.

Capital

At March 31, 2021, we were well-capitalized with a total risk-based

capital ratio of 17.20%

and a tangible common equity

ratio (a non-GAAP financial measure) of 6.13% compared

to 17.30% and 6.25%, respectively,

at December 31, 2020 and 17.19% and

7.98%, respectively,

at March 31, 2020.

At March 31, 2021, all of our regulatory capital ratios exceeded

the threshold to be well-

capitalized under the Basel III capital standards.

RESULTS

OF OPERATIONS

Net Income

For the first quarter of 2021, we realized net income of

$9.5 million, or $0.56 per diluted share, compared to

net income of $7.7

million, or $0.46 per diluted share, for the fourth quarter

of 2020, and $4.3 million, or $0.25 per diluted share, for the first quarter

2020.

Compared to the fourth quarter of 2020, the $2.0 million

increase in operating profit was attributable to a $2.3

million decrease in the

provision for credit losses and lower noninterest expense

of $0.9 million, partially offset by a $0.7 million

decrease in noninterest

income and lower net interest income of $0.5 million.

Compared to the first quarter of 2020, the $9.5 million

increase in operating profit was attributable to a $14.3 million

increase in

noninterest income and a lower provision for credit losses of

$6.0 million, partially offset by higher noninterest

expense of $9.5 million

and lower net interest income of $1.3 million.

This comparison reflects the acquisition of a 51% membership

interest in, and

consolidation of, CCHL on March 1, 2020.

A condensed earnings summary of each major component

of our financial performance is provided below:

Three Months Ended

(Dollars in Thousands, except per share data)

March 31, 2021

December 31, 2020

March 31, 2020

Interest Income

25,446

26,154

27,365

Taxable Equivalent Adjustments

109

104

Total Interest Income (FTE)

25,555

26,263

27,469

Interest Expense

948

1,181

1,592

Net Interest Income (FTE)

24,607

25,082

25,877

Provision for Credit Losses

(982)

1,342

4,990

Taxable Equivalent Adjustments

109

104

Net Interest Income After Provision for Credit Losses

25,480

23,631

20,783

Noninterest Income

29,826

30,523

15,478

Noninterest Expense

40,476

41,348

30,969

Income Before Income Taxes

14,830

12,806

5,292

Income Tax Expense

2,787

2,833

1,282

Pre-Tax (Income) Loss

Attributable to Noncontrolling Interests

(2,537)

(2,227)

277

Net Income Attributable to Common Shareowners

9,506

7,746

4,287

Basic Net Income Per Share

0.56

0.46

0.25

Diluted Net Income Per Share

0.56

0.46

0.25

Net Interest Income

Net interest income represents our single largest

source of earnings and is equal to interest income and fees

generated by earning

assets less interest expense paid on interest bearing liabilities.

This information is provided on a "taxable equivalent" basis to

reflect

the tax-exempt status of income earned on certain loans

and state and local government debt obligations.

We provide an analysis of

our net interest income including average yields and rates

in Table I on page 44.

Tax-equivalent

net interest income for the first quarter of 2021 was $24.6 million

compared to $25.1 million for the fourth quarter of

2020 and $25.9 million for the first quarter of 2020.

The decrease compared to both prior periods reflected lower

rates earned on

investment securities and variable/adjustable rate loans.

The year-over-year decline also reflected lower rates on overnight

funds.

Partially offsetting these declines were higher volumes

of earning assets, including lower yielding SBA PPP loans and

overnight

funds.

Our net interest margin for the first quarter

of 2021 was 2.85%, a decrease of 15 basis points from

the fourth quarter of 2020 and a

decline of 93 basis points from the first quarter of 2020.

The decreases were primarily attributable to significant growth in

overnight

funds which reduced our margin.

Our net interest margin for the first quarter of 2021

excluding the impact of overnight funds in

excess of $200 million, was 3.45%.

We anticipate

margin improvement from these levels as a portion

of our overnight funds are

deployed into various strategies under consideration.

The federal funds target rate has remained

in the range of 0.00%-0.25% since March 2020 when the Fed

reduced its overnight rate by

150 basis points, and as a result we continue to experience

lower repricing of our variable/adjustable rate earning assets and

investment securities. Interest and fee income related

to the SBA PPP (See Loans below) will partially offset

the effect of lower rates.

Our overall cost of funds remained low during

the first quarter of 2021 at 0.11%, a decrease

of three basis points compared to the

fourth quarter of 2020, primarily due to a reduction in

short-term borrowings.

Due to highly competitive fixed-rate loan pricing in our

markets, we continue to review our loan pricing and make adjustments

where

we believe

appropriate and prudent.

Provision for Credit Losses

We recorded

a negative provision for credit losses of $1.0 million (consisting

of a negative $2.3 million for HFI loans, partially offset

by a $1.3 million expense for unfunded loan commitments)

for the first quarter of 2021 compared to provision expense

of $1.3 million

for the fourth quarter of 2020 and $5.0 million for the

first quarter of 2020.

The negative provision for the first quarter of 2021

generally reflected improving economic conditions and

a lower level of expected losses related to COVID-19.

Further, we recognized

net loan recoveries of $0.5 million in the first quarter

of 2021.

We discuss the allowance

for credit losses and COVID-19 exposure

further below.

Charge-off activity for the respective

periods is set forth below:

Three Months Ended

(Dollars in Thousands, except per share data)

March 31, 2021

December 31, 2020

March 31, 2020

CHARGE-OFFS

Commercial, Financial and Agricultural

104

362

Real Estate - Construction

Real Estate - Commercial Mortgage

Real Estate - Residential

110

Real Estate - Home Equity

Consumer

(1)

1,056

1,232

1,566

Total Charge

-offs

1,136

1,384

2,080

RECOVERIES

Commercial, Financial and Agricultural

136

Real Estate - Construction

Real Estate - Commercial Mortgage

645

191

Real Estate - Residential

153

Real Estate - Home Equity

124

Consumer

(1)

678

564

695

Total Recoveries

1,658

898

999

Net Charge-offs (Recoveries)

(522)

486

1,081

Net Charge-offs (Recoveries) (Annualized)

to Average Loans HFI

(0.10)

0.09

0.23

(1)

Includes overdrafts.

Noninterest Income

Noninterest income for the first quarter of 2021 totaled

$29.8 million compared to $30.5 million for the fourth

quarter of 2020 and

$15.5 million for the first quarter of 2020.

The decrease from the fourth quarter of 2020 was due to lower mortgage

banking revenues

of $0.6 million and deposit fees of $0.4 million, partially

offset by higher bank card fees of $0.2 million and

other income of $0.1

million.

Compared to the first quarter of 2020, the $14.3 million increase

reflected higher mortgage banking revenues of $13.9

million, wealth management fees of $0.5 million,

and bank card fees of $0.6 million, partially offset by

lower deposit fees of $0.7

million.

Noninterest income represented 54.9% of operating revenues

(net interest income plus noninterest income) for the first quarter

of 2021

compared to 55.0% for the fourth quarter of 2020 and

37.5% for the first quarter of 2020.

The 51% ownership acquisition of CCHL and consolidation

into CCBG’s financial statements

occurred on March 1, 2020.

The table

below reflects the major components of noninterest income

for both Core CCBG and CCHL to help facilitate a better understanding

the period over period comparison.

Three Months Ended

Mar 31, 2021

Dec 31, 2020

Mar 31, 2020

(Dollars in thousands)

Core

CCBG

CCHL

Core

CCBG

CCHL

Core

CCBG

CCHL

Deposit Fees

4,271

4,713

5,015

Bank Card Fees

3,618

3,462

3,051

Wealth Management Fees

3,090

3,069

2,604

Mortgage Banking Revenues

279

16,846

302

17,409

1,138

2,115

Other

1,296

426

1,205

363

1,459

Total Noninterest Income

12,554

17,272

12,751

17,772

13,267

2,211

Significant components of noninterest income are

discussed in more detail below.

Deposit Fees

Deposit fees for the first quarter of 2021 totaled $4.3 million,

a decrease of $0.4 million, or 9.4%, from the fourth

quarter of 2020 and $0.7 million,

or 14.8%, from the first quarter of 2020.

The decrease from both prior periods was attributable to

lower overdraft fees and reflected lower utilization

of our overdraft services,

which we believe is primarily attributable to government

stimulus.

Bank Card Fees

Bank card fees for the first quarter of 2021 totaled $3.6

million, an increase of $0.2 million, or 4.5%, over the fourth

quarter of 2020 and $0.6

million, or 18.6%, over the first quarter of 2020.

Compared to both prior periods, the improvement reflected

higher card activity driven by increased consumer spending

which we believe is reflective of the economic recovery

and additional

government stimulus.

Wealth

Management Fees

Wealth management

fees, which include both trust fees (i.e., managed accounts

and trusts/estates)

and

retail brokerage fees (i.e., investment, insurance products,

and retirement accounts), totaled $3.1 million for the

first quarter of 2021,

comparable to the fourth quarter of 2020 and an increase

of $0.5

million, or 18.7%, over the first quarter of 2020.

The increase over

the first quarter of 2020 reflected higher assets under management

and higher trading activity.

At March 31, 2021, total assets under

management were approximately $2.088 billion compared

to $1.979 billion at December 31, 2020 and $1.561 billion at March

31,

2020.

Mortgage Banking Revenues

Mortgage banking revenues totaled $17.1 million for the

first quarter of 2021, a decrease of $0.6

million, or 3.3%, from the fourth quarter of 2020

and an increase of $13.9 million, or 426.4% over the first quarter

of 2020.

The

decrease from the fourth quarter of 2020 reflected

a seasonal decline in production.

The increase over the first quarter of 2020 was

attributable to the strategic alliance with CCHL that began

on March 1, 2020.

Noninterest Expense

Noninterest expense for the first quarter of 2021 totaled

$40.5 million compared to $41.3 million for the fourth

quarter of 2020 and

$31.0 million for the first quarter of 2020.

The decrease from the fourth quarter of 2020 was primarily attributable

to lower

compensation expense of $0.6 million and other real estate owned

(“OREO”) expense of $0.7 million, partially offset

by higher other

expense of $0.5 million.

Compared to the first quarter of 2020, the $9.5 million

increase reflected expenses added by the CCHL

acquisition as Core CCBG’s expenses

remained flat.

The 51% ownership acquisition of CCHL and consolidation

into CCBG’s financial statements

occurred on March 1, 2020.

The table

below reflects the major components of noninterest expense

for both Core CCBG and CCHL to help facilitate a better

understanding

of the year over year comparison.

Three Months Ended

Mar 31, 2021

Dec 31, 2020

Mar 31, 2020

(Dollars in thousands)

Core

CCBG

CCHL

Core

CCBG

CCHL

Core

CCBG

CCHL

Salaries

12,171

10,276

12,384

10,398

13,488

2,242

Associate Benefits

3,396

221

3,740

200

3,957

Total Compensation

15,567

10,497

16,124

10,598

17,445

2,291

Premises

2,372

387

2,340

397

2,249

134

Equipment

2,734

474

2,716

523

2,499

Total Occupancy

5,106

861

5,056

920

4,748

231

Legal Fees

553

315

468

Professional Fees

1,167

163

1,078

154

1,055

Processing Services

1,545

1,299

1,557

Advertising

442

307

505

286

461

123

Travel and Entertainment

110

242

Printing and Supplies

176

172

187

Telephone

668

636

111

577

Postage

171

173

175

Insurance - Other

501

457

296

Other Real Estate Owned, Net

(118)

570

(4)

(798)

Miscellaneous

2,140

393

1,584

1,034

1,577

136

Total Other Expense

7,344

1,101

6,899

1,751

5,797

457

Total Noninterest Expense

28,017

12,459

28,079

13,269

27,990

2,979

Significant components of noninterest expense are

discussed in more detail below.

Compensation

Compensation expense totaled $26.1 million for the first quarter

of 2021, a decrease of $0.7 million, or 2.5%, from the

fourth quarter of 2020 and an increase of $6.3 million,

or 32.1%, over the first quarter of 2020.

The decrease from the fourth quarter

of 2020 was due to lower salary expense at Core CCBG (primarily

realized loan cost which is a credit offset to expense)

and lower

associate benefit expense (associate insurance).

The increase over the first quarter of 2020 reflects the addition

of expenses for a full

quarter from CCHL.

Occupancy.

Occupancy expense (including premises and equipment) totaled

$6.0 million for the first quarter of 2021, comparable to

the fourth quarter of 2020 and an increase of $1.0 million,

or 19.9%, over the first quarter of 2020.

Compared to the first quarter of

2020, the increase reflected expenses added from

the CCHL integration,

primarily lease expense for loan production offices.

Higher

expense for maintenance and repairs at Core CCBG also contributed,

but to a lesser extent.

Other

Other noninterest expense totaled $8.4 million for the first quarter

of 2021, a decrease of $0.2 million, or 2.4%, from the

fourth

quarter of 2020 and an increase of $2.2 million, or 35

.0%, over the first quarter of 2020.

The increase over the first quarter of 2020

reflected the addition of CCHL expenses and higher

OREO expense at Core CCBG driven by a $1.0 million gain

from the sale of a

banking office in the first quarter of 2020.

Our operating efficiency ratio (expressed

as noninterest expense as a percent of the sum of taxable-equivale

nt net interest income plus

noninterest income) was 74.36% for the first quarter

of 2021 compared to 74.36%

for the fourth quarter of 2020 and 74.89% for the

first quarter of 2020.

Income Taxes

We realized income

tax expense of $2.8 million (effective rate of 19%)

for the first quarter of 2021 compared to $2.8 million

(effective rate of 22%) for the fourth quarter

of 2020 and $1.3 million (effective rate of 24%) for the

first quarter of 2020.

Tax

expense for the fourth quarter of 2020 was unfavorably

impacted by a $0.3 million discrete tax expense.

Compared to the first quarter

of 2020, the decrease in our effective tax rate

was attributable to converting CCHL to a partnership for tax

purposes in the second

quarter of 2020.

Absent discrete items, we expect our annual effective tax

rate to approximate 18%-19% in 2021.

FINANCIAL CONDITION

Average earning

assets were $3.498 billion for the first quarter of 2021, an

increase of $160.5 million, or 4.8%, over the fourth quarter

of 2020, and an increase of $746.0 million, or 27.1%,

over the first quarter of 2020.

The increase over both prior periods was

primarily driven by higher deposit balances, which funded

growth in both overnight funds sold and SBA PPP loans.

Deposit balances

increased as a result of strong core deposit growth,

in addition to funding retained at the bank from SBA PPP loans, and

various other

stimulus programs.

Investment Securities

In the first quarter of 2021, our average investment

portfolio increased $14.9 million, or 2.9%, over the fourth

quarter of 2020 and

decreased $102.1 million, or 16.1%, from the

first quarter of 2020.

Securities in our investment portfolio represented 15.2% of our

average earning assets for the first quarter of 2021

compared to 15.5% for the fourth quarter of 2020, and 23.1% for the

first quarter of

2020.

For the remainder of 2021, we will continue to monitor the

interest rate environment and look for opportunities to purchase

additional investment securities that align with the overall

investment strategy of the Company.

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”).

During the first quarter of 2021, we purchased securities under

the AFS designation.

At March 31,

2021,

$406.2 million, or 67.1%, of our investment portfolio was classified as AFS,

and $199.1 million, or 32.9%, classified as HTM.

The average maturity of our total portfolio at March

31, 2021 was 2.78 years compared to 2.09 years and 2.20 years

at December 31,

2020

and March 31, 2020, respectively.

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, 2021,

there were 89 positions (combined AFS and HTM) with unrealized

losses totaling $1.4 million at March 31, 2021.

GNMA mortgage-backed securities, US Treasuries,

and SBA securities carry the full faith and credit

guarantee of the US

Government, and are 0% risk-weighted assets for regulatory

purposes. The municipal bond positions are either pre

-refunded with

government securities, or are AAA rated. None of these

positions with unrealized losses are considered impaired, and

all are expected

to mature at par.

Further, we believe the long history of

no credit losses on these securities indicates that the expectation

nonpayment of the amortized cost basis is zero.

Loans HFI

Average loans

HFI increased $50.9 million, or 2.6%, over the fourth quarter of 2020

and increased $196.6 million, or 10.6%, over the

first quarter of 2020.

Compared to the fourth quarter of 2020, average loan balances

increased across all loan types except

institutional and consumer, which

declined slightly.

Compared to the first quarter of 2020, average loan balances increased

across all

loan types except institutional, consumer,

and HELOCs.

Period-end HFI loans increased $51.3 million, or 2.6%, over

the fourth

quarter of 2020 and increased $195.3 million, or 10.5%,

over the first quarter of 2020.

In the first quarter of 2021, we originated an additional

round of SBA PPP loans totaling $65.4 million (reflected in the

commercial

loan category) which averaged $23.7 million for the quarter.

Approximately $256 million in SBA PPP loans have been made

since

the inception of this program.

Through the first quarter of 2021, approximately $47

million in SBA PPP loans have been forgiven and

paid-off ($36 million in the first quarter of 2021

and $11 million in the fourth quarter of 2020).

Forgiveness applications are expected

to remain strong over the next three months for SBA PPP loans

funded in 2020, and then over the course of 2021 for the

SBA PPP

loans funded in 2021.

SBA PPP loan fee income totaled approximately $1.3 million

for the first quarter of 2021.

At March 31, 2021

we had $5.0 million (net) in deferred SBA PPP loan fees.

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 OREO) totaled

$5.5 million at March 31, 2021, a $1.2 million decrease

from December

31, 2020 and a $0.9 million decrease from March 31, 2020

Nonaccrual loans totaled $5.4 million at March 31, 2021,

a $0.5 million

decrease from December 31, 2020 and a $0.5 million increase

over March 31, 2020.

The balance of OREO totaled $0.1 million at

March 31, 2021, a decrease of $0.7 million and $1.4

million from December 31, 2020 and March 31, 2020,

respectively.

(Dollars in Thousands)

March 31, 2021

December 31, 2020

March

31, 2020

Nonaccruing Loans:

Commercial, Financial and Agricultural

150

161

358

Real Estate - Construction

179

Real Estate - Commercial Mortgage

1,256

1,412

1,332

Real Estate - Residential

3,150

3,130

2,213

Real Estate - Home Equity

462

695

692

Consumer

165

294

279

Total Nonaccruing

Loans (“NALs”)

(1)

5,362

5,871

4,874

Other Real Estate Owned

110

808

1,463

Total Nonperforming

Assets (“NPAs”)

5,472

6,679

6,337

Past Due Loans 30 – 89 Days

2,622

4,594

5,077

Performing Troubled Debt Restructurings

13,597

13,887

15,934

Nonaccruing Loans/Loans HFI

0.26

0.29

0.26

Nonperforming Assets/Total

Assets

0.14

0.18

0.21

Nonperforming Assets/Loans HFI Plus OREO

0.27

0.33

0.34

Allowance/Nonaccruing Loans

410.78

405.66

432.61

(1)

Nonaccrual TDRs totaling $0.7 million, $0.5 million, and

$1.0 million are included in NALs for March

31, 2021, December 31,

2020 and March 31, 2020, respectively.

COVID-19 Exposure

We continue

to monitor our loan portfolio for segments that continue to be

affected by the pandemic.

To assist our clients, we have

extended loans totaling $333 million of which 75% were

for commercial borrowers and 25% were for consumer

borrowers.

Approximately $328 million, or 98%, of the loan balances associated

with these borrowers have resumed making regularly

scheduled

payments of which loan balances totaling $2.9 million

were over 30 days delinquent and an additional $0.6 million was

on nonaccrual

status at March 31, 2021.

Of the $5 million that remains on extension, no loans were

classified at March 31, 2021.

Allowance for Credit Losses

The allowance for credit losses is a valuation account that

is deducted from the loans’ amortized cost basis to present

the net amount

expected to be collected on the loans.

The allowance for credit losses is adjusted by a credit loss provision

which is reported in

earnings, and reduced by the charge-off

of loan amounts, net of recoveries.

Loans are charged off against the allowance when

management believes the uncollectability of a loan balance

is confirmed.

Expected recoveries do not exceed the aggregate of amounts

previously charged-off and expected

to be charged-off.

Expected credit loss inherent in non-cancellable off

-balance sheet credit

exposures is provided through the credit loss provision,

but recorded as a separate liability included in other liabilities.

Management estimates the allowance balance using

relevant available information, from internal and external

sources relating to past

events, current conditions, and reasonable and supportable

forecasts.

Historical loan default and loss experience provides the basis for

the estimation of expected credit losses.

Adjustments to historical loss information incorporate

management’s view of current

conditions and forecasts.

At March 31, 2021, the allowance for credit losses for

loans HFI totaled $22.0 million compared to $23.8 million

at December 31,

2020 and $21.1 million at March 31, 2020.

Activity within the allowance is detailed in Note 3 to the consolidated

financial

statements.

The $1.8 million net decrease in the allowance for the

first quarter of 2021 reflected net loan recoveries totaling

$0.5

million and the release of $2.3 million in reserves

which reflected lower expected loan losses related to COVID-19.

At March 31,

2021, the allowance represented 1.07% of loans HFI and

provided coverage of 411% of nonperforming

loans compared to 1.19% and

406%, respectively,

at December 31, 2020 and 1.13% and 433%, respectively,

at March 31, 2020.

At March 31, 2021, excluding SBA

PPP loans (100% government guaranteed), the

allowance represented 1.19% of loans HFI compared to 1.30%

at December 31, 2020.

At March 31, 2021, the allowance for credit losses for

unfunded commitments totaled $3.0 million compared to $1.6 million

December 31, 2020 and $1.0 million at March 31,

2020.

The allowance for unfunded commitments is recorded in other liabilities.

Deposits

Average total

deposits were $3.240 billion for the first quarter of 2021, an

increase of $173.4 million, or 5.7%, over the fourth quarter

of 2020 and $686.8 million, or 26.9%, over the first quarter

of 2020.

Over the past twelve months, multiple government stimulus

programs have been implemented, including the CARES Act

and the American Rescue Plan Act, which are responsible for

a portion

of this growth. Given these large increases, the

potential exists for our deposit levels to be volatile throughout 2021

due to the

uncertain timing of the outflows of the stimulus related balances

and the economic recovery.

It is anticipated that current liquidity

levels will remain robust due to our strong overnight funds

sold position.

We monitor

deposit rates on an ongoing basis and adjust if necessary,

as a prudent pricing discipline remains the key to managing

our

mix of deposits.

MARKET RISK AND INTEREST RATE

SENSITIVITY

Market Risk and Interest Rate Sensitivity

Overview.

Market risk management arises from changes in interest rates,

exchange rates, commodity prices, and equity prices.

have risk management policies to monitor and limit exposure

to interest rate risk and do not participate in activities that

give rise to

significant market risk involving exchange rates, commodity

prices, or equity prices. Our risk management policies are

primarily

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 re-price on a different basis than interest

-earning assets.

When

interest-bearing liabilities mature or re-price more quickly

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

market rates of interest could adversely affect

net interest income.

Similarly, when interest-earning

assets mature or re-price more

quickly than interest-bearing liabilities, falling 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

a comprehensive interest rate risk management policy,

which is administered by management’s

Asset/Liability

Management Committee (“ALCO”).

The policy establishes risk limits, 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 is designed to capture optionality

factors

such as call features and interest rate caps and floors imbedded

in investment and loan portfolio contracts.

As with any method of

analyzing interest rate risk, there are certain shortcomings

inherent in the interest rate modeling methodology that

we use.

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 the assumptions that we use in our

modeling.

Finally, the methodology

does not measure or reflect the impact that higher rates may

have on variable and adjustable-rate loan

clients’ ability to service their debts, or the impact of rate

changes on demand for loan and deposit products.

We prepare

a current base case and several alternative simulations at least once

per quarter and present the analysis to ALCO, with the

risk metrics also reported to the Board of Directors.

In addition, more frequent forecasts may be produced when

interest rates are

particularly uncertain or when other business conditions

so dictate.

Our interest rate risk management goal is to maintain expected

changes in our net interest income and capital levels due

to fluctuations

in market interest rates within acceptable limits.

Management attempts to achieve this goal by balancing,

within policy limits, the

volume of variable-rate liabilities with a similar volume

of variable-rate assets, by keeping the average maturity of fixed-rate

asset and

liability contracts reasonably matched, by maintaining

our core deposits as a significant component of our total funding

sources and by

adjusting rates to market conditions on a continuing basis.

We test our balance

sheet using varying interest rate shock scenarios to analyze our interest

rate risk. Average

interest rates are

shocked by plus or minus 100, 200, 300, and 400 basis

points (“bp”), although we may elect not to use particular

scenarios that we

determined are impractical in a current rate environment.

It is management’s goal

to structure the balance sheet 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 augment

our interest rate shock analysis with alternative external

interest rate scenarios on a quarterly basis.

These alternative

interest rate scenarios may include non-parallel rate ramps.

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

Policy Limit

-15.0%

-12.5%

-10.0%

-7.5%

March 31, 2021

40.6%

30.0%

19.4%

9.3%

-4.0%

December 31, 2020

39.0%

28.7%

18.7%

9.0%

-3.0%

Percentage Change (24-month shock)

+400 bp

+300 bp

+200 bp

+100 bp

-100 bp

Policy Limit

-17.5%

-15.0%

-12.5%

-10.0%

March 31, 2021

53.0%

37.0%

21.2%

6.2%

-14.2%

December 31, 2020

54.2%

38.3%

22.6%

7.6%

-10.9%

The Net Interest Income at Risk position indicates

that in the short-term, all rising rate environments will positively

impact the net

interest margin of the Company,

while a declining rate environment of 100bp will have a

negative impact on the net interest margin.

Compared to the prior quarter-end, the 12-month

Net Interest Income at Risk position became more favorable in

all rising rate

scenarios, and was slightly less favorable in the falling

rate scenario due to the higher level of nonmaturity deposits, and

our limited

ability to lower deposit rates relative to the decline

in the market. Compared to the prior quarter-end, the 24-month

Net Interest

Income at Risk position became slightly less favorable

in all rate scenarios primarily due to the lower amount

of SBA PPP loan fees in

year two compared to year one.

All measures of Net Interest Income at Risk in rising rate

environments are within our prescribed policy limits over the next 12

-month

and 24-month periods. We

are out of compliance in the down 100bp scenario for the 24-month

period due to our limited ability to

lower our deposit rates relative to the decline in market rates.

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, and discounting the cash flows to estimate the

present value of assets and liabilities.

The difference between the

aggregated 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

Policy Limit

-30.0%

-25.0%

-20.0%

-15.0%

March 31, 2021

166.7%

132.0%

93.3%

50.0%

-54.0%

March 31, 2021 (Alternate Scenario)

(2)

115.9%

87.8%

56.5%

22.1%

-3.1%

December 31, 2020

160.9%

127.5%

89.9%

48.4%

-90.4%

(1) Down 200, 300, and 400 bp scenarios have been

excluded due to the low interest rate environment.

(2)

For the rates down 100 bp scenario,

the high negative percentage change

is due to a negative value assigned to our nonmaturity

deposits.

Since we believe our nonmaturity deposits are

highly valued core franchise deposits, we run

an alternate EVE

calculation which caps the projected

value of our nonmaturity deposits at their book value.

At March 31, 2021,

the economic value of equity results are favorable in all

rising rate environments and are within prescribed

tolerance levels, but are out of policy in the down 100

bp EVE scenario. EVE output in the down 100bp scenario is extreme

given the

historically low rate environment, in conjunction with

the high overnight funds sold balance.

Management is monitoring the EVE

analysis in light of the economic recovery and evaluating

various strategies.

As management believes there is more permanency to

recent deposit growth, we are planning to invest an additional

$500 million in the investment portfolio, which will lessen

the bank’s

asset sensitivity.

In an alternate EVE scenario where the value of our nonmaturity

deposits are capped at their book value, we are

within policy guidelines.

As the interest rate environment and the dynamics of the

economy continue to change, additional simulations will be analyzed

address not only the changing rate environment, but also

the changing balance sheet mix, 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, 2021,

we had the ability to generate $1.262 billion in additional liquidity

through all of our available resources (this

excludes $852 million in overnight funds sold).

In addition to the primary borrowing outlets mentioned

above, we also have the

ability to generate liquidity by borrowing from the Federal

Reserve Discount Window and through

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 ALCO,

our

Market Risk Oversight Committee, Risk Oversight Committee,

and the Board of Directors.

At March 31, 2021,

we believe the

liquidity available to us was sufficient to meet

our on-going needs and execute our business strategy.

We view our

investment portfolio primarily as a source of liquidity and have

the option to pledge the portfolio as collateral for

borrowings or deposits, and/or sell selected securities.

The portfolio consists of debt issued by the

U.S. Treasury,

U.S. governmental

and federal agencies, and municipal governments.

The weighted average life of the portfolio was approximately 2.78

years at March

31, 2021,

and the available for sale portfolio had a net unrealized pre

-tax gain of $1.7 million.

Our average overnight funds position (defined deposits with banks

plus Fed funds sold less Fed funds purchased) was $814.6

million

during the first quarter of 2021 compared to an average

net overnight funds sold position of $705.1 million in the fourth quarter

2020 and $234.4 million in the first quarter of 2020.

The increase compared to both prior periods was driven by

deposit inflows

related to pandemic related stimulus programs and growth

in our core deposits (see

Deposits

We expect

our capital expenditures will be approximately $7.0 million over

the next 12 months, which will primarily consist of office

remodeling, office equipment/furniture, and technology

purchases.

Management expects that these capital expenditures will be

funded with existing resources without impairing our

ability to meet our on-going obligations.

Borrowings

At March 31, 2021,

average short term borrowings totaled $67.0 million compared

to $95.3 million at December 31,

2020 and $32.9

million at March 31, 2020.

The variance over both prior periods was attributable to the

fluctuation of residential mortgage warehouse

borrowings at CCHL.

Additional detail on these borrowings is provided in Note

4 – Mortgage Banking Activities in the Consolidated

Financial Statements.

At March 31, 2021,

fixed rate credit advances from the FHLB totaled $1.9

million in outstanding debt consisting of five notes. During

the first three months of 2021, the Bank made FHLB advance payments

totaling approximately $0.3 million,

which included one

advance that paid off, and another that matured.

We did not obtain

any new FHLB advances during this period. The FHLB notes are

collateralized by a blanket floating lien on all of our 1-4

family residential mortgage loans, commercial real estate mortgage

loans, and

home equity mortgage loans.

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

borrowing is due quarterly and adjusts quarterly to a

variable rate of three-month LIBOR 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 rate of three-month LIBOR 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.

We are in the process of

evaluating the impact of the

expected discontinuation of LIBOR on our two junior

subordinated deferrable interest notes.

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 (Libor 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

Note 5 – Derivatives in the Consolidated Financial Statements.

Capital

Our capital ratios are presented in the Selected Quarterly

Financial Data table on page 31.

At March 31, 2021, our regulatory capital

ratios exceeded the threshold to be designated as “well-capita

lized” under the Basel III capital standards.

Shareowners’ equity was $324.4 million at March

31, 2021 compared to $320.8 million at December 31, 2020

and $328.5 million at

March 31, 2020.

During the first quarter of 2021, shareowners’ equity was positively

impacted by net income of $9.5 million, a $1.6

million increase in fair value of the interest rate swap

related to subordinated debt, net adjustments totaling $0.3

million related to

transactions under our stock compensation plans, stock

compensation accretion of $0.2 million, and a $0.1 million

decrease in the

accumulated other comprehensive loss for our pension

plan.

Shareowners’ equity was reduced by a common stock dividend

of $2.5

million ($0.15 per share), reclassification of $4.2 million

to temporary equity to increase the redemption value of the

non-controlling

interest in CCHL, and a $1.4 million decrease in the

unrealized gain on investment

securities.

At March 31, 2021, our common stock had a book value

of $19.22 per diluted share compared to $19.05 at

December 31, 2020 and

$19.50 at March 31, 2020.

Book value is impacted by the net after-tax unrealized gains and losses on

AFS investment securities.

March 31, 2021, the net gain was $1.7 million compared

to a $3.7 million net gain at December 31, 2020 and a $3.5 million

net gain at

March 31, 2020.

Book value 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, 2021, the net pension liability reflected in other

comprehensive loss was $47.1 million compared to

$47.3 million at December 31, 2020 and $29.0 million at March

31, 2020.

This

liability is re-measured annually on December 31

based on an actuarial calculation of our pension liability.

Significant assumptions

used in calculating the liability are discussed in our

2020 Form 10-K “Critical Accounting Policies” and 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

The estimated

impact to the pension liability based on a 25-basis point

increase or decrease in long-term corporate bond rates used

to discount the

pension obligation would decrease or increase the pension

liability by approximately $6.6 million (after-tax) using the balances

from

the December 31, 2020 measurement date.

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, 2021,

we had $770.3 million in commitments to extend credit and $6.7

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 no

anticipate that such funding will adversely impact our ability to

meet our on-going obligations.

In the event these commitments

require funding in excess of historical levels, management

believes current liquidity,

advances available from the FHLB and the

Federal Reserve, and investment security maturities provide

a sufficient source of funds to meet these commitments.

Certain agreements provide that the commitments are

unconditionally cancellable by the bank and for those agreements

no allowance

for credit losses has been recorded.

We have recorded

an allowance for credit losses on loan commitments that are not

unconditionally cancellable by the bank, which is included

in other liabilities on the consolidated statements of financial condition

and

totaled $3.0 million at March 31, 2021.

CRITICAL ACCOUNTING POLICIES

Our significant accounting policies are described in Note

1 to the Consolidated Financial Statements included in our

2020 Form 10-K.

The preparation of our Consolidated Financial Statement

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) valuation of

goodwill, (iii) pension benefits, 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 2020 Form 10-K.

TABLE I

AVERAGE

BALANCES & INTEREST RATES

Three Months Ended

March 31, 2021

December 31, 2020

March 31, 2020

Average

(Dollars in Thousands)

Balances

Interest

Rate

Balances

Interest

Rate

Balances

Interest

Rate

Assets:

Loans Held for Sale

106,242

970

3.70

121,052

878

3.85

34,923

210

2.64

Loans Held for Investment

(1)(2)

2,044,363

22,483

4.46

1,993,470

23,103

4.55

1,847,780

23,482

5.11

Taxable Securities

528,842

1,863

1.41

513,277

2,072

1.61

629,512

2,995

1.91

Tax-Exempt Securities

(2)

3,844

2.61

4,485

2.71

5,293

1.86

Funds Sold

814,638

214

0.11

705,125

180

0.10

234,372

757

1.30

Total Earning Assets

3,497,929

25,555

2.96

3,337,409

26,263

3.14

2,751,880

27,469

4.01

Cash & Due From Banks

68,978

73,968

56,958

Allowance For Loan Losses

(24,128)

(23,725)

(14,389)

Other Assets

278,742

264,784

244,339

TOTAL ASSETS

3,821,521

3,652,436

3,038,788

Liabilities:

NOW Accounts

985,517

0.03

879,564

0.03

808,811

725

0.36

Money Market Accounts

269,829

0.05

261,543

0.05

212,211

117

0.22

Savings Accounts

492,252

0.05

466,116

0.05

379,237

0.05

Other Time Deposits

102,089

0.15

102,809

0.17

105,542

0.19

Total Interest Bearing Deposits

1,849,687

208

0.05

1,710,032

201

0.05

1,505,801

939

0.25

Short-Term Borrowings

67,033

412

2.49

95,280

639

2.67

32,915

132

1.61

Subordinated Notes Payable

52,887

307

2.32

52,887

311

2.30

52,887

471

3.52

Other Long-Term Borrowings

2,736

3.18

3,700

3.18

6,312

3.21

Total Interest Bearing Liabilities

1,972,343

948

0.19

1,861,899

1,181

0.25

1,597,915

1,592

0.40

Noninterest Bearing Deposits

1,389,821

1,356,104

1,046,889

Other Liabilities

111,050

74,605

59,587

TOTAL LIABILITIES

3,473,214

3,292,608

2,704,391

Temporary Equity

21,977

16,154

2,506

TOTAL SHAREOWNERS’ EQUITY

326,330

343,674

331,891

TOTAL LIABILITIES, TEMPORARY

AND SHAREOWNERS’ EQUITY

3,821,521

3,652,436

3,038,788

Interest Rate Spread

2.77

2.88

3.61

Net Interest Income

24,607

25,082

25,877

Net Interest Margin

(3)

2.85

3.00

3.78

(1)

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

Interest income includes loan fees of $1.2 million, $1.1 million

and $0.2 million for

the three months ended March 31, 2021, December 31, 2020 and

March 31, 2020, respectively.

(2)

Interest income includes the effects of taxable equivalent adjustments using

a 21% tax rate.

(3)

Taxable equivalent net interest income divided by average earnings assets.

Item 3. QUANTITATIVE

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

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

Discussion and Analysis of Financial Condition and

Results of

Operations, above, which is incorporated herein by reference.

Management has determined that no additional disclosures

are

necessary to assess changes in information about market

risk that have occurred since December 31, 2020.

Item 4. CONTROLS

AND PROCEDURES

At March 31, 2021, 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, the Chief Executive Officer

and Chief Financial Officer concluded

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

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 on March 31, 2021,

other than the above, there have been no significant changes

in our internal control over financial reporting during

our most recently

completed fiscal quarter that have materially affected,

or are reasonably likely to materially affect, our internal

control over financial

reporting.

PART

II. OTHER

INFORMATION

Item 1. Legal

Proceedings

We are party

to lawsuits arising out of the normal course of business.

In management's opinion, there is no known pending

litigation,

the outcome of which would, individually or in the aggregate,

have a material effect on our consolidated results

of operations,

financial position, or cash flows.

Item 1A. Risk

Factors

In addition to the other information set forth in this Quarterly

Report, you should carefully consider the factors discussed in

Part I,

Item 1A. “Risk Factors” in our 2020 Form 10-K, as updated

in our subsequent quarterly reports. The risks described

in our 2020 Form

10-K and our subsequent quarterly reports are not the only

risks facing us. Additional risks and uncertainties not currently

known to us

or that we currently deem to be immaterial also may materially

adversely affect our business, financial condition

and/or operating

results.

Item 2. Unregistered

Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults

Upon Senior Securities

None.

Item 4. Mine

Safety Disclosure

Not Applicable.

Item 5. Other

Information

None.

Item 6. Exhibits

(A) Exhibits

31.1

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

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

31.2

Certification of J. Kimbrough Davis, 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 J. Kimbrough Davis, Executive Vice President and Chief Financial Officer of Capital City Bank Group,

Inc., Pursuant to 18 U.S.C. Section 1350.

101.SCH XBRL Taxonomy

Extension Schema Document

101.CAL XBRL

Taxonomy

Extension Calculation Linkbase Document

101.LAB XBRL

Taxonomy

Extension Label Linkbase Document

101.PRE XBRL

Taxonomy

Extension Presentation Linkbase Document

101.DEF XBRL Taxonomy

Extension Definition Linkbase Document

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/ J. Kimbrough Davis

J. Kimbrough Davis

Executive Vice President

and Chief Financial Officer

(Mr. Davis is the Principal

Financial Officer and has

been duly authorized to sign on behalf of the Registrant)

Date: April 30,

2021