CAPITAL CITY BANK GROUP INC - Quarter Report: 2022 March (Form 10-Q)

ccbg-20220331

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, 2022

☐

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

For the transition period from ____________ to ____________

Commission File Number:

0-13358

Capital City Bank Group, Inc.

(Exact name of Registrant as specified in its charter)

Florida

59-2273542

(State or other jurisdiction of incorporation or organization)

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

217 North Monroe Street

Tallahassee

Florida

32301

(Address of principal executive office)

(Zip Code)

(

850

)

402-7821

(Registrant's telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, Par value $0.01

CCBG

Nasdaq Stock Market

, LLC

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

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

filing requirements for the past 90 days.

Yes

[X] No [

]

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

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

such files).

Yes [

] No [

]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,

an emerging growth company.

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

company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

☐

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

]

[X]

At May 2, 2022,

16,947,627

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

CAPITAL CITY BANK

GROUP,

INC.

QUARTERLY

REPORT ON FORM 10-Q

FOR THE THREE MONTHS ENDED MARCH 31, 2022

TABLE OF CONTENTS

PART I –

Financial Information

Page

Item 1.

Consolidated Financial Statements (Unaudited)

Consolidated Statements of Financial Condition – March 31, 2022 and December 31, 2021

Consolidated Statements of Income – Three Months Ended March 31, 2022 and 2021

Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2022 and 2021

Consolidated Statements of Changes in Shareowners’ Equity – Three Months Ended March 31, 2022 and 2021

Consolidated Statements of Cash Flows – Three Months Ended March 31, 2022 and 2021

Notes to Consolidated Financial Statements

Item 2.

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

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

Item 4.

Controls and Procedures

PART II –

Other Information

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosure

Item 5.

Other Information

Item 6.

Exhibits

Signatures

INTRODUCTORY NOTE

Caution Concerning Forward-Looking Statements

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

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

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

which are beyond our control.

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

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

“target,” “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

Form 10-Q and

the following sections

of our Annual

Report on Form

10-K for the

year ended December

31, 2021

(the “2021 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:

●

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 allowance for credit losses,

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 magnitude and duration of the ongoing COVID-19 pandemic and its impact on the global economy and financial market conditions

and our business;

●

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;

●

climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that could

significantly impact our business;

●

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, Except Par Value)

2022

2021

ASSETS

Cash and Due From Banks

77,963

65,313

Federal Funds Sold and Interest Bearing Deposits

790,465

970,041

Total Cash and Cash Equivalents

868,428

1,035,354

Investment Securities, Available

for Sale, at fair value (amortized cost of $

655,927

and $

660,732

)

624,361

654,611

Investment Securities, Held to Maturity (fair value of $

501,277

and $

339,699

)

518,678

339,601

Equity Securities

855

861

Total Investment

Securities

1,143,894

995,073

Loans Held For Sale, at fair value

50,815

52,532

Loans Held for Investment

1,985,509

1,931,465

Allowance for Credit Losses

(20,756)

(21,606)

Loans Held for Investment, Net

1,964,753

1,909,859

Premises and Equipment, Net

82,518

83,412

Goodwill and Other Intangibles

93,213

93,253

Other Real Estate Owned

Other Assets

106,407

94,349

Total Assets

4,310,045

4,263,849

LIABILITIES

Deposits:

Noninterest Bearing Deposits

1,704,329

1,668,912

Interest Bearing Deposits

2,061,178

2,043,950

Total Deposits

3,765,507

3,712,862

Short-Term

Borrowings

30,865

34,557

Subordinated Notes Payable

52,887

Other Long-Term

Borrowings

806

884

Other Liabilities

77,323

67,735

Total Liabilities

3,927,388

3,868,925

Temporary Equity

10,512

11,758

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;

16,947,602

and

16,892,060

shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

169

Additional Paid-In Capital

35,188

34,423

Retained Earnings

370,531

364,788

Accumulated Other Comprehensive Loss, net of tax

(33,743)

(16,214)

Total Shareowners’

Equity

372,145

383,166

Total Liabilities, Temporary

Equity, and Shareowners' Equity

4,310,045

4,263,849

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)

2022

2021

INTEREST INCOME

Loans, including Fees

22,133

23,350

Investment Securities:

Taxable Securities

2,890

1,863

Tax Exempt Securities

Federal Funds Sold and Interest Bearing Deposits

409

213

Total Interest Income

25,438

25,446

INTEREST EXPENSE

Deposits

224

208

Short-Term

Borrowings

192

412

Subordinated Notes Payable

317

307

Other Long-Term

Borrowings

Total Interest Expense

742

948

NET INTEREST INCOME

24,696

24,498

Provision for Credit Losses

(982)

Net Interest Income After Provision For Credit Losses

24,696

25,480

NONINTEREST INCOME

Deposit Fees

5,191

4,271

Bank Card Fees

3,763

3,618

Wealth Management

Fees

6,070

3,090

Mortgage Banking Revenues

8,946

17,125

Other

1,848

1,722

Total Noninterest

Income

25,818

29,826

NONINTEREST EXPENSE

Compensation

24,856

26,064

Occupancy, Net

6,093

5,967

Other Real Estate Owned, Net

(118)

Pension Settlement

209

Other

8,050

8,563

Total Noninterest

Expense

39,233

40,476

INCOME BEFORE INCOME TAXES

11,281

14,830

Income Tax Expense

2,235

2,787

NET INCOME

9,046

12,043

Income Attributable to Noncontrolling Interests

(591)

(2,537)

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

8,455

9,506

BASIC NET INCOME PER SHARE

0.50

0.56

DILUTED NET INCOME PER SHARE

0.50

0.56

Average Basic Shares

Outstanding

16,931

16,838

Average Diluted

Shares Outstanding

16,946

16,862

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)

2022

2021

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

8,455

9,506

Other comprehensive (loss) income, before

tax:

Investment Securities:

Change in net unrealized (loss) gain on securities available for sale

(25,445)

(1,952)

Derivative:

Change in net unrealized gain on effective cash flow

derivative

1,836

2,125

Benefit Plans:

Reclassification adjustment for service cost

Actuarial gain

166

Pension Settlement

209

Total Benefit Plans

209

190

Other comprehensive (loss) income, before

tax

(23,400)

363

Deferred tax (benefit) expense related to other comprehensive income

(5,871)

Other comprehensive (loss) income, net of tax

(17,529)

271

TOTAL COMPREHENSIVE

(LOSS) INCOME

(9,074)

9,777

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, 2022

16,892,060

169

34,423

364,788

(16,214)

383,166

Net Income Attributable to Common Shareowners

8,455

Other Comprehensive Loss, net of tax

(17,529)

Cash Dividends ($

0.1600

per share)

(2,712)

Stock Based Compensation

245

Stock Compensation Plan Transactions, net

55,542

520

Balance, March 31, 2022

16,947,602

169

35,188

370,531

(33,743)

372,145

Balance, January 1, 2021

16,790,573

168

32,283

332,528

(44,142)

320,837

Net Income Attributable to Common Shareowners

9,506

Reclassification to Temporary Equity

(1)

(4,182)

Other Comprehensive Income, net of tax

271

Cash Dividends ($

0.1500

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

(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)

2022

2021

CASH FLOWS FROM OPERATING

ACTIVITIES

Net Income Attributable to Common Shareowners

8,455

9,506

Adjustments to Reconcile Net Income to

Cash Provided by Operating Activities:

Provision for Credit Losses

(982)

Depreciation

1,907

1,942

Amortization of Premiums, Discounts and Fees, net

2,907

2,428

Amortization of Intangible Asset

Pension Plan Settlement Charge

209

Originations of Loans Held-for-Sale

(246,887)

(470,248)

Proceeds From Sales of Loans Held-for-Sale

257,550

519,331

Mortgage Banking Revenues

(8,946)

(17,125)

Net Additions for Capitalized Mortgage Servicing Rights

227

119

Change in Valuation

Provision for Mortgage Servicing Rights

(250)

Stock Compensation

245

219

Net Tax Benefit From Stock-Based

Compensation

(19)

(4)

Deferred Income Taxes

(6,167)

(378)

Net Change in Operating Leases

(27)

(41)

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

(202)

Net Decrease (Increase) in Other Assets

1,441

(1,370)

Net Increase in Other Liabilities

7,036

7,935

Net Cash Provided By Operating Activities

17,971

50,880

CASH FLOWS FROM INVESTING ACTIVITIES

Securities Held to Maturity:

Purchases

(194,448)

(54,382)

Payments, Maturities, and Calls

14,441

24,629

Securities Available for

Sale:

Purchases

(25,139)

(133,628)

Proceeds from Sale or Securities

3,365

Payments, Maturities, and Calls

24,824

49,349

Purchases of Loans Held for Investment

(26,713)

(23,686)

Net Increase in Loans Held for Investment

(28,405)

(29,437)

Proceeds From Sales of Other Real Estate Owned

1,084

Purchases of Premises and Equipment

(1,013)

(1,592)

Noncontrolling Interest Contributions

1,838

1,259

Net Cash Used In Investing Activities

(231,250)

(166,404)

CASH FLOWS FROM FINANCING ACTIVITIES

Net Increase in Deposits

52,645

140,548

Net Decrease in Short-Term

Borrowings

(3,692)

(24,181)

Repayment of Other Long-Term

Borrowings

(78)

(1,014)

Dividends Paid

(2,712)

(2,528)

Issuance of Common Stock Under Purchase Plans

190

Net Cash Provided By Financing Activities

46,353

112,858

NET DECREASE IN CASH AND CASH EQUIVALENTS

(166,926)

(2,666)

Cash and Cash Equivalents at Beginning of Period

1,035,354

928,549

Cash and Cash Equivalents at End of Period

868,428

925,883

Supplemental Cash Flow Disclosures:

Interest Paid

715

1,009

Income Taxes Paid

Noncash Investing and Financing Activities:

Loans Transferred to Other Real Estate Owned

184

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTE 1 –

BUSINESS AND BASIS OF PRESENTATION

Nature of Operations

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

banking and banking-

related services to individual and corporate clients through its subsidiary,

Capital City Bank, with banking offices located in Florida,

Georgia, and Alabama.

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

to regulation by certain

government agencies and undergoes periodic examinations

by those regulatory authorities.

Basis of Presentation

The consolidated financial statements in this Quarterly Report on Form

10-Q include the accounts of CCBG

and its wholly owned subsidiary,

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

All material inter-company transactions and accounts

have been eliminated.

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

presentation.

The accompanying unaudited consolidated financial statements have

been prepared in accordance with generally accepted accounting

principles for interim financial information and with the instructions to

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

Accordingly,

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

accounting principles for complete financial

statements.

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

recurring accruals) considered necessary for a fair

presentation have been included.

The Consolidated Statement of Financial Condition at December

31, 2021 has been derived from the audited consolidated financial

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

required by generally accepted accounting principles for

complete financial statements.

For further information, refer to the consolidated financial statements and

notes thereto included in the

Company’s annual report

on Form 10-K for the year ended December 31, 2021.

Acquisition.

April 30, 2021

, a newly formed subsidiary of CCBG, Capital City Strategic Wealth,

LLC (“CCSW”) acquired

substantially all of the assets of Strategic Wealth

Group, LLC and certain related businesses (“SWG”), including

advisory, service,

and insurance carrier agreements, and the assignment of all related revenues

thereof.

Under the terms of the purchase agreement,

SWG principles became officers of CCSW and will continue

the operation of their

five

offices in South Georgia offering wealth

management services and comprehensive risk management

and asset protection services for individuals and businesses.

CCBG paid

4.5

million in cash consideration and recorded goodwill of $

2.8

million and a customer relationship intangible asset of $

1.6

million.

Accounting Standards Updates

Accounting Standards Update (“ASU”)

2022-02, “Financial Instruments – Credit Losses (Topic

326)

In March 2022, the Financial

Accounting Standards Board ("FASB")

issued ASU 2022-02, "Financial Instruments – Credit Losses (Topic

326), Troubled Debt

Restructurings and Vintage

Disclosures". ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings

("TDRs")

in ASC 310-40, "Receivables - Troubled Debt

Restructurings by Creditors" for entities that have adopted the current expected credit

loss model introduced by ASU 2016-13, “Financial Instruments –

Credit Losses (Topic 326):

Measurement of Credit Losses on

Financial Instruments”.

ASU 2022-02 also requires that public business entities disclose current

-period gross charge-offs by year of

origination for financing receivables and net investments in leases within the

scope of Subtopic 326-20, "Financial Instruments—

Credit Losses—Measured at Amortized Cost".

ASU 2022-02 is effective for the Company for fiscal years beginning

after December

15, 2022, including interim periods within those fiscal years, with early

adoption permitted. The Company is evaluating the effect

that

ASU 2022-02 will have on its consolidated financial statements and

related disclosures.

NOTE 2 –

INVESTMENT SECURITIES

Investment Portfolio Composition

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

securities available-for-sale and securities held-to-maturity and the corresponding

amounts of gross

Available for

Sale

Amortized

Unrealized

Allowance for

Fair

(Dollars in Thousands)

Cost

Gains

Losses

Credit Losses

Value

March 31, 2022

U.S. Government Treasury

190,049

10,051

180,013

U.S. Government Agency

232,067

547

8,179

224,435

States and Political Subdivisions

47,107

3,753

(15)

43,350

Mortgage-Backed Securities

(1)

91,169

5,121

86,063

Corporate Debt Securities

88,208

5,018

(21)

83,173

Other Securities

(2)

7,327

Total

655,927

592

32,122

(36)

624,361

December 31, 2021

U.S. Government Treasury

190,409

2,606

187,868

U.S. Government Agency

238,490

1,229

2,141

237,578

States and Political Subdivisions

47,762

811

(15)

46,980

Mortgage-Backed Securities

(1)

89,440

598

88,869

Corporate Debt Securities

87,537

1,304

(21)

86,222

Other Securities

(2)

7,094

Total

660,732

1,375

7,460

(36)

654,611

Held to Maturity

Amortized

Unrealized

Fair

(Dollars in Thousands)

Cost

Gains

Losses

Value

March 31, 2022

U.S. Government Treasury

289,237

9,355

279,892

Mortgage-Backed Securities

(1)

229,441

414

8,470

221,385

Total

518,678

424

17,825

501,277

December 31, 2021

U.S. Government Treasury

115,499

1,622

113,877

Mortgage-Backed Securities

(1)

224,102

2,819

1,099

225,822

Total

339,601

2,819

2,721

339,699

(1)

Comprised of residential mortgage-backed

securities

(2)

Includes Federal Home Loan Bank and Federal Reserve Bank stock, recorded

at cost of $

2.3

million and $

5.1

million,

respectively,

at March 31, 2022 and $

2.0

million and $

5.1

million, respectively,

at December 31, 2021.

At March 31, 2022, the investment portfolio had $

0.9

million in equity securities. These securities do not have a readily determinable

fair value and were not credit impaired.

Securities with an amortized cost of $

453.3

million and $

463.8

million at March 31, 2022 and December 31, 2021, respectively,

were

pledged to secure public deposits and for other purposes.

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

to own capital stock in the FHLB based

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

advances.

FHLB stock, which is included in

other securities,

is pledged to secure FHLB advances.

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

redemption of this stock has historically been at par value.

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

stock in the Federal Reserve Bank of Atlanta

based on a specified ratio relative to the Bank’s

capital.

Federal Reserve Bank stock is carried at cost.

Investment Sales.

There were sales of investment securities totaling $

3.4

million for the three months ended March 31, 2022. There

were no significant sales of investment securities for the three months ended

December 31, 2021 and March 31, 2021.

Maturity Distribution

At March 31, 2022, 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

Fair Value

Amortized Cost

Fair Value

Due in one year or less

36,321

34,519

Due after one year through five years

306,432

290,613

289,237

279,892

Due after five year through ten years

62,103

56,445

Mortgage-Backed Securities

91,169

86,063

229,441

221,385

U.S. Government Agency

152,575

149,394

Equity Securities

7,327

Total

655,927

624,361

518,678

501,277

Unrealized Losses on Investment Securities.

The following table summarizes the available for sale investment securities with

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

unrealized loss position:

Less Than

Greater Than

12 Months

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

(Dollars in Thousands)

Value

Losses

Value

Losses

Value

Losses

March 31, 2022

Available for

Sale

U.S. Government Treasury

117,369

6,723

57,638

3,328

175,007

10,051

U.S. Government Agency

122,572

5,952

43,637

2,227

166,209

8,179

States and Political Subdivisions

42,181

3,719

444

42,625

3,753

Mortgage-Backed Securities

85,848

5,121

85,848

5,121

Corporate Debt Securities

79,718

5,018

79,718

5,018

Total

447,688

26,533

101,719

5,589

549,407

32,122

Held to Maturity

U.S. Government Treasury

261,362

9,355

261,362

9,355

Mortgage-Backed Securities

166,472

7,633

10,496

837

176,968

8,470

Total

427,834

16,988

10,496

837

438,330

17,825

December 31, 2021

Available for

Sale

U.S. Government Treasury

172,206

2,606

172,206

2,606

U.S. Government Agency

127,484

1,786

17,986

355

145,470

2,141

States and Political Subdivisions

42,122

811

42,122

811

Mortgage-Backed Securities

81,832

598

81,832

598

Corporate Debt Securities

69,354

1,304

69,354

1,304

Total

492,998

7,105

17,986

355

510,984

7,460

Held to Maturity

U.S. Government Treasury

113,877

1,622

113,877

1,622

Mortgage-Backed Securities

115,015

1,099

115,015

1,099

Total

228,892

2,721

228,892

2,721

At March 31, 2022, there were

673

positions (combined Available-for-Sale

and Held-to-Maturity) with unrealized losses totaling

49.9

million.

553

of these positions were U.S. government agency securities issued by U.S. government

Category

in AOCI

from AOCI to Income

Three months ended March 31, 2022

Interest expense

1,370

(28)

Three months ended March 31, 2021

Interest expense

1,587

(33)

The Company estimates there will be approximately $

0.1

million reclassified as an increase to interest income within the next 12

months.

The Company had a collateral liability of $

4.0

million and $

2.0

million at March 31, 2022 and December 31, 2021, respectively.

NOTE 6 – LEASES

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

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

liabilities, included in other assets and liabilities, respectively,

on its Consolidated Statement of Financial Condition.

The Company’s operating

leases primarily relate to banking offices with remaining lease terms

from

years.

The Company’s

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

lease payments, or significant assumptions or judgments

made in applying the requirements of Topic

842.

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

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

At March 31, 2022, the operating lease ROU assets and liabilities were $

11.7

million and $

12.3

million, respectively. At December

31, 2021, ROU assets and liabilities were $

11.5

million and $

12.2

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)

2022

2021

Operating lease expense

384

344

Short-term lease expense

179

140

Total lease expense

563

484

Other information:

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

Operating cash flows from operating leases

429

385

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

592

Weighted average

remaining lease term — operating leases (in years)

24.9

25.5

Weighted average

discount rate — operating leases

2.0%

2.1%

The table below summarizes the maturity of remaining lease liabilities:

(Dollars in Thousands)

March 31, 2022

2022

1,581

2023

1,190

2024

1,120

2025

977

2026

875

2027 and thereafter

10,341

Total

16,084

Less: Interest

(3,773)

Present Value

of Lease liability

12,311

At March 31, 2022, the Company had four additional operating lease obligations

for banking offices (to be constructed) that have not

yet commenced. Three of the leases have payments totaling $

9.3

million based on the initial contract terms of

15 years

, and the fourth

lease has payments totaling $

1.4

million based on the initial contract term of

10 years

Payments for the banking offices are expected

to commence after the construction periods end, which are each expected to occur during the fourth quarter of 2022 and the first

quarter of 2023.

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 $

0.5

million at March 31, 2022.

NOTE 7 - EMPLOYEE BENEFIT PLANS

The Company has a defined benefit pension plan covering substantially all full-time

and eligible part-time associates and a

Supplemental Executive Retirement Plan (“SERP”) and a Supplemental

Executive Retirement Plan II (“SERP II”) covering its

executive officers.

The defined benefit plan was amended in December 2019 to remove plan eligibility

for new associates hired after

December 31, 2019.

The SERP II was adopted by the Company’s

Board on May 21, 2020 and covers certain executive officers that

were not covered by the SERP.

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

benefit pension plan were as follows:

Three Months Ended March 31,

(Dollars in Thousands)

2022

2021

Service Cost

1,572

1,743

Interest Cost

1,166

1,221

Expected Return on Plan Assets

(2,675)

(2,787)

Prior Service Cost Amortization

Net Loss Amortization

428

1,691

Pension Settlement

209

Net Periodic Benefit Cost

704

1,872

Discount Rate Used for Benefit Cost

3.11%

2.88%

Long-term Rate of Return on Assets

6.75%

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

Three Months Ended March 31,

(Dollars in Thousands)

2022

2021

Service Cost

Interest Cost

Prior Service Cost Amortization

Net Loss Amortization

180

198

Net Periodic Benefit Cost

336

285

Discount Rate Used for Benefit Cost

2.80%

2.38%

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

compensation expense in the accompanying statements of

income.

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

expense category in the statements

of income.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Lending Commitments

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

sheet risks in the normal course of business

to meet the financing needs of its clients.

These financial instruments consist of commitments to extend credit and standby

letters of

credit.

The Company’s maximum exposure

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

the contractual amount of those instruments.

The Company uses the same credit policies in establishing commitments

and issuing

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

The amounts associated with the Company’s

off-balance sheet

obligations were as follows:

March 31, 2022

December 31, 2021

(Dollars in Thousands)

Fixed

Variable

Total

Fixed

Variable

Total

Commitments to Extend Credit

(1)

200,236

563,634

763,870

217,531

505,897

723,428

Standby Letters of Credit

5,020

5,205

Total

205,256

563,634

768,890

222,736

505,897

728,633

(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)

2022

2021

Beginning Balance

2,897

1,644

Provision for Credit Losses

1,330

Ending Balance

2,976

2,974

Other Commitments.

In the normal course of business, the Company enters into lease commitments

which are classified as operating

leases. See Note 6 – Leases for additional information on the maturity of the

Company’s operating lease commitments.

Furthermore,

the Company has an outstanding commitment of up to $

1.0

million in a bank tech venture capital fund focused on finding and funding

technology solutions for community banks. At March 31, 2022 and at December

31, 2021, the Company had contributed $

0.1

million

of the commitment.

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 $

0.2

million.

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

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

obligations, federal agency bullet or mortgage pass-through securities,

general obligation or revenue-based municipal bonds.

Pricing for such instruments is easily obtained.

At least annually,

the Company

will validate prices supplied by the independent pricing service by compari

ng them to prices obtained from an independent third-party

source.

Loans Held for Sale

The fair value of residential mortgage loans held for sale based on Level 2 inputs is determined,

when possible,

using either quoted secondary-market prices or investor commitments.

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

using quoted prices for a similar asset or assets, adjusted for the specific attributes of

that loan, which would be used by other market

participants.

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

Mortgage Banking Derivative Instruments.

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

models incorporating market pricing for instruments with similar characteristics,

commonly referred to as best execution pricing, or

investor commitment prices for best effort IRLCs which have

unobservable inputs, such as an estimate of the fair value of the

servicing rights expected to be recorded upon sale of the loans, net estimated costs to

originate the loans, and the pull-through rate,

and are therefore classified as Level 3 within the fair value hierarchy.

The fair value of forward sale commitments is based on

observable market pricing for similar instruments and are therefore

classified as Level 2 within the fair value hierarchy.

Interest Rate Swap.

The Company’s derivative positions

are classified as level 2 within the fair value hierarchy and are valued

using

models generally accepted in the financial services industry and

that use actively quoted or observable market input values from

external market data providers.

The fair value derivatives are determined using discounted cash flow models.

Fair Value

Swap

The Company entered into a stand-alone derivative contract with the purchaser of

its Visa Class B shares.

The

valuation represents the amount due and payable to the counterparty based upon

the revised share conversion rate, if any,

during the

period. At March 31, 2022,

amount was payable. At December 31, 2021, there was a $

0.1

million payable.

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, 2022

ASSETS:

Securities Available for

Sale:

U.S. Government Treasury

180,013

U.S. Government Agency

224,435

States and Political Subdivisions

43,350

Mortgage-Backed Securities

86,063

Corporate Debt Securities

83,173

Other Securities

7,327

Loans Held for Sale

50,815

Interest Rate Swap Derivative

3,886

Mortgage Banking Hedge Derivative

850

Mortgage Banking IRLC Derivative

1,117

Mortgage Servicing Rights

7,177

December 31, 2021

ASSETS:

Securities Available for

Sale:

U.S. Government Treasury

187,868

U.S. Government Agency

237,578

States and Political Subdivisions

46,980

Mortgage-Backed Securities

88,869

Corporate Debt Securities

86,222

Other Securities

7,094

Loans Held for Sale

52,532

Interest Rate Swap Derivative

2,050

Mortgage Banking IRLC Derivative

1,258

Mortgage Servicing Rights

4,718

LIABILITIES:

Mortgage Banking Hedge Derivative

Mortgage Banking Activities

The Company had Level 3 issuances and transfers related to mortgage

banking activities of $

4.3

million

and $

13.6

million, respectively, for the

three months ended March 31, 2022 and $

15.4

million and $

10.5

million, respectively, for the

three months ended March 31, 2021.

Issuances are valued based on the change in fair value of the underlying mortgage

loan from

inception of the IRLC to the Consolidated Statement of Financial Condition

date, adjusted for pull-through rates and costs to originate.

IRLCs transferred out of Level 3 represent IRLCs that were funded and moved

to mortgage loans held for sale, at fair value.

Assets Measured at Fair Value

on a Non-Recurring Basis

Certain assets are measured at fair value on a non-recurring basis (i.e., the

assets are not measured at fair value on an ongoing basis

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

An example would be assets exhibiting evidence of impairment.

The following is a description of valuation methodologies used for assets measured

on a non-recurring basis.

Collateral Dependent Loans

Impairment for collateral dependent loans is measured using the fair

value of the collateral less selling

costs.

The fair value of collateral is determined by an independent valuation

or professional appraisal in conformance with banking

regulations.

Collateral values are estimated using Level 3 inputs due to the volatility in the real estate market,

and the judgment and

estimation involved in the real estate appraisal process.

Collateral dependent loans are reviewed and evaluated on at least a quarterly

basis for additional impairment and adjusted accordingly.

Valuation

techniques are consistent with those techniques applied in prior

periods.

Collateral-dependent loans had a carrying value of $

1.5

million with a valuation allowance of $

0.1

million at March 31, 2022

and $

2.8

million and $

0.2

million, respectively,

at December 31, 2021.

Other Real Estate Owned

During the first three months of 2022, 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, 2022, there was

valuation allowance for loan servicing rights

compared to $

0.3

million valuation allowance at December 31, 2021.

Assets and Liabilities Disclosed at Fair Value

The Company is required to disclose the estimated fair value of financial instruments,

both assets and liabilities, for which it is

practical to estimate fair value and the following is a description of valuation

methodologies used for those assets and liabilities.

Cash and Short-Term

Investments.

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

fair value, given

the short time frame to maturity and as such assets do not present unanticipated

credit concerns.

Securities Held to Maturity

Securities held to maturity are valued in accordance with the methodology previously

noted in the

caption “Assets and Liabilities Measured at Fair Value

on a Recurring Basis – Securities Available

for Sale”.

Loans.

The loan portfolio is segregated into categories and the fair value of each loan category is calculated

using present value

techniques based upon projected cash flows and estimated discount

rates.

Pursuant to the adoption of ASU 2016-01,

Recognition and

Measurement of Financial Assets and Financial

Liabilities

, the values reported reflect the incorporation of a liquidity discount to meet

the objective of “exit price” valuation.

Deposits.

The fair value of Noninterest Bearing Deposits, NOW Accounts, Money Market

Accounts and Savings Accounts are the

amounts payable on demand at the reporting date. The fair value of fixed maturity

certificates of deposit is estimated using present

value techniques and rates currently offered for deposits of

similar remaining maturities.

Subordinated Notes Payable.

The fair value of each note is calculated using present value techniques,

based upon projected cash

flows and estimated discount rates as well as rates being offered

for similar obligations.

Short-Term

and Long-Term

Borrowings.

The fair value of each note is calculated using present value techniques,

based upon

projected cash flows and estimated discount rates as well as rates being offered

for similar debt.

A summary of estimated fair values of significant financial instruments consisted

of the following:

March 31, 2022

Carrying

Level 1

Level 2

Level 3

(Dollars in Thousands)

Value

Inputs

ASSETS:

Cash

77,963

Short-Term Investments

790,465

Investment Securities, Available

for Sale

624,361

180,013

444,348

Investment Securities, Held to Maturity

518,678

279,892

221,385

Equity Securities

(1)

855

Loans Held for Sale

50,815

Other Equity Securities

(2)

2,898

Interest Rate Swap Derivative

3,886

Mortgage Banking Hedge Derivative

850

Mortgage Servicing Rights

4,001

7,177

Mortgage Banking IRLC Derivative

1,117

Loans, Net of Allowance for Credit Losses

1,964,753

1,934,570

LIABILITIES:

Deposits

3,765,507

3,417,626

Short-Term

Borrowings

30,865

Subordinated Notes Payable

52,887

45,336

Long-Term Borrowings

806

834

December 31, 2021

Carrying

Level 1

Level 2

Level 3

(Dollars in Thousands)

Value

Inputs

ASSETS:

Cash

65,313

Short-Term Investments

970,041

Investment Securities, Available

for Sale

654,611

187,868

466,743

Investment Securities, Held to Maturity

339,601

113,877

225,822

Equity Securities

(1)

861

Loans Held for Sale

52,532

Other Equity Securities

(2)

2,848

Interest Rate Swap Derivative

2,050

Mortgage Servicing Rights

3,774

4,718

Mortgage Banking IRLC Derivative

1,258

Loans, Net of Allowance for Credit Losses

1,909,859

1,903,640

LIABILITIES:

Deposits

3,712,862

3,713,478

Short-Term

Borrowings

34,557

Subordinated Notes Payable

52,887

42,609

Long-Term Borrowings

884

938

Mortgage Banking Hedge Derivative

(1)

Not readily marketable securities - reflected

in other assets.

(2)

Accounted for under the equity method – 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) Income

Balance as of January 1, 2022

(4,588)

1,530

(13,156)

(16,214)

Other comprehensive (loss) income during the period

(19,055)

1,370

156

(17,529)

Balance as of March 31, 2022

(23,643)

2,900

(13,000)

(33,743)

Balance as of January 1, 2021

2,700

428

(47,270)

(44,142)

Other comprehensive (loss) income during the period

(1,458)

1,587

142

271

Balance as of March 31, 2021

1,242

2,015

(47,128)

(43,871)

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 2022 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,"

"vision," "goal," and similar expressions are intended to

identify forward-looking statements.

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

Our actual future results may differ materially

from those set forth in our forward-looking statements.

Please see the Introductory Note and

Item 1A. Risk Factors

of our 2021

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").

We offer

a broad array of products and services through a total of 57 full-service offices

located in Florida, Georgia, and Alabama.

We provide a full range of

banking services, including traditional deposit and credit

services, mortgage banking, asset management, trust, merchant services, bankcards,

securities brokerage services and financial

advisory services, including life insurance products,

risk management and asset protection services.

Our profitability, like

most financial institutions, is dependent to a large extent upon net

interest income, which is the difference

between the interest and fees received on interest earning assets, such as loans and

securities, and the interest paid on interest-bearing

liabilities, principally deposits and borrowings.

Results of operations are also affected by the provision for credit losses, operating

expenses such as salaries and employee benefits, occupancy and other

operating expenses including income taxes, and noninterest

income such as mortgage banking revenues, wealth management fees,

deposit fees, and bank card fees.

We have included

a detailed discussion of the economic conditions in our markets and our long-term strategic

objectives as part of the

MD&A section of our 2021 Form 10-K.

Acquisitions

On April 30, 2021, a newly formed subsidiary of CCBG, Capital City Strategic

Wealth, LLC

(“CCSW”), completed its acquisition of

substantially all of the assets of Strategic Wealth

Group, LLC and certain related businesses (“SWG”).

CCSW was consolidated into

CCBG’s financial statements

effective May 1, 2021.

A detailed discussion regarding the acquisition of Capital City Strategic Wealth,

LLC is included as part of the MD&A section of our 2021 Form 10-K.

NON-GAAP FINANCIAL MEASURES

We present a tangible

common equity ratio and a tangible book value per diluted share that, in each case, removes the

effect of

goodwill and other intangibles that resulted from merger

and acquisition activity. We

believe these measures are useful to investors

because it allows investors to more easily compare our capital adequacy to

other companies in the industry.

The generally accepted

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

each quarter presented is provided below.

2022

2021

(Dollars in Thousands, except per share data)

First

Fourth

Third

Second

First

Shareowners' Equity (GAAP)

372,145

383,166

348,868

335,880

324,426

Less: Goodwill and Other Intangibles (GAAP)

93,213

93,253

93,293

93,333

89,095

Tangible Shareowners' Equity (non-GAAP)

278,932

289,913

255,575

242,547

235,331

Total Assets (GAAP)

4,310,045

4,263,849

4,048,733

4,011,459

3,929,884

Less: Goodwill and Other Intangibles (GAAP)

93,213

93,253

93,293

93,333

89,095

Tangible Assets (non-GAAP)

4,216,832

4,170,596

3,955,440

3,918,126

3,840,789

Tangible Common

Equity Ratio (non-GAAP)

A/B

6.61%

6.95%

6.46%

6.19%

6.13%

Actual Diluted Shares Outstanding (GAAP)

16,962,362

16,935,389

16,911,715

16,901,375

16,875,719

Tangible Book Value

per Diluted Share (non-GAAP)

A/C

16.44

17.12

15.11

14.35

13.94

SELECTED QUARTERLY

FINANCIAL DATA

(UNAUDITED)

(Dollars in Thousands, Except

2022

2021

Per Share Data)

First

Fourth

Third

Second

First

Summary of Operations

Interest Income

25,438

25,549

28,520

26,836

25,446

Interest Expense

742

838

848

856

948

Net Interest Income

24,696

24,711

27,672

25,980

24,498

Provision for Credit Losses

(571)

(982)

Net Interest Income After

Provision for Credit Losses

24,696

24,711

27,672

26,551

25,480

Noninterest Income

25,818

24,672

26,574

26,473

29,826

Noninterest Expense

39,233

40,207

39,702

42,123

40,476

Income

Before

Income Taxes

11,281

9,176

14,544

10,901

14,830

Income Tax Expense

2,235

2,040

2,949

2,059

2,787

Income Attributable to NCI

(591)

(764)

(1,504)

(1,415)

(2,537)

Net Income Attributable to CCBG

8,455

6,372

10,091

7,427

9,506

Net Interest Income (FTE)

24,774

24,790

27,750

26,064

24,606

Per Common Share

Net Income Basic

0.50

0.38

0.60

0.44

0.56

Net Income Diluted

0.50

0.38

0.60

0.44

0.56

Cash Dividends Declared

0.16

0.15

Diluted Book Value

21.94

22.63

20.63

19.87

19.22

Diluted Tangible Book Value

(1)

16.44

17.12

15.11

14.35

13.94

Market Price:

High

28.88

29.00

26.10

27.39

28.98

Low

25.96

24.77

22.02

24.55

21.42

26.36

26.40

24.74

25.79

26.02

Selected Average Balances

Loans Held for Investment

1,963,578

1,948,324

1,974,132

2,036,781

2,044,363

Earning Assets

3,938,824

3,791,313

3,693,123

3,623,910

3,497,929

Total Assets

4,266,775

4,127,937

4,026,613

3,956,349

3,821,521

Deposits

3,714,062

3,549,145

3,447,688

3,387,352

3,239,508

Shareowners’ Equity

383,956

350,140

341,460

329,040

326,330

Common Equivalent Average Shares:

Basic

16,931

16,880

16,875

16,858

16,838

Diluted

16,946

16,923

16,909

16,885

16,862

Performance Ratios:

Return on Average Assets

0.80

0.61

0.99

0.75

1.01

Return on Average Equity

8.93

7.22

11.72

9.05

11.81

Net Interest Margin (FTE)

2.55

2.60

2.98

2.89

2.85

Noninterest Income as % of

Operating Revenue

51.11

49.96

48.99

50.47

54.90

Efficiency Ratio

77.55

81.29

73.09

80.18

74.36

Asset Quality:

Allowance for Credit Losses ("ACL")

20,756

21,606

21,500

22,175

22,026

ACL to Loans HFI

1.05

1.12

1.11

1.10

1.07

Nonperforming Assets (“NPAs”)

2,745

4,339

3,218

6,302

5,472

NPAs to Total

Assets

0.06

0.10

0.08

0.16

0.14

NPAs to Loans HFI plus OREO

0.14

0.22

0.17

0.31

0.27

ACL to Non-Performing Loans

760.83

499.93

710.39

433.93

410.78

Net Charge-Offs to Average

Loans HFI

0.16

0.02

0.03

(0.07)

(0.10)

Capital Ratios:

Tier 1 Capital

15.98

16.14

15.69

15.44

16.08

Total Capital

16.98

17.15

16.70

16.48

17.20

Common Equity Tier 1

13.77

13.86

13.45

13.14

13.63

Leverage

8.78

8.95

9.05

8.84

8.97

Tangible Common Equity

(1)

6.61

6.95

6.46

6.19

6.13

(1)

Non-GAAP financial measure.

See non-GAAP reconciliation on page 31.

FINANCIAL OVERVIEW

Results of Operations

Performance Summary

Net income attributable to common shareowners of $8.5 million, or

$0.50 per diluted share, for the first

quarter of 2022 compared to net income of $6.4 million, or $0.38 per diluted share,

for the fourth quarter of 2021, and $9.5 million, or

$0.56 per diluted share, for the first quarter of 2021.

Net Interest Income

Tax-equivalent net

interest income for the first quarter of 2022 totaled $24.8 million, comparable

to the fourth

quarter of 2021, and $24.6 million for the first quarter of 2021.

Compared to the fourth quarter of 2021, higher rates on overnight

funds and growth in the investment portfolio was offset

by two less calendar days during the quarter.

Compared to the first quarter of

2021, interest income grew as a result of our larger investment portfolio,

in addition to a reduction in interest expense, partially offset

by lower loan fees.

Provision and Allowance for Credit

Losses.

We did not

record a provision for credit losses for the first quarter of 2022 or

the fourth

quarter of 2021 and recorded a negative provision of $1.0 million for

the first quarter of 2021.

The lack of provision for the first

quarter of 2022 reflected continued strong credit quality and slight improvement

in the forecasted level of unemployment.

Noninterest Income

Noninterest income for the first quarter of 2022 totaled $25.8 million, an increase

of $1.1 million, or 4.5%, over

the fourth quarter of 2021 and a decrease of $4.0 million, or 13.4%, from

the first quarter of 2021.

The increase over the fourth

quarter of 2021 was due to higher wealth management fees, primarily

insurance revenues.

The decline from the first quarter 2021 was

driven by lower mortgage banking revenues (largely

attributable to lower loan refinancing activity and a lower gain on

sale margin)

that were partially offset by higher activity based fees

(deposit and bank card).

Noninterest Expense

Noninterest expense for the first quarter of 2022 totaled $39.2 million, a decrease of $1.0

million, or 2.4%, from

the fourth quarter of 2021 and a $1.3 million, or 3.1%, decrease from

the first quarter of 2021.

The decrease from the fourth quarter of

2021 was primarily attributable to a decrease in other miscellaneous expense,

primarily pension expense.

The decrease from the first

quarter of 2021 was driven by lower mortgage banking commissions and

pension expense. These favorable variances were partially

offset by higher insurance commissions, associate benefits,

other real estate and miscellaneous expenses.

Financial Condition

Earning Assets.

Average earning assets totaled

$3.939 billion for the first quarter of 2022, an increase of $147.5 million,

or 3.9%,

over the fourth quarter of 2021, and an increase of $440.9 million, or

12.6%, over the first quarter of 2021.

The increase over the

fourth quarter of 2021 was primarily attributable to seasonal growth

in our public fund deposits. The increase compared to the first

quarter of 2021 was primarily driven by higher deposit balances.

Loans

Average loans held for investment

(“HFI”) increased $15.3 million, or 0.8%, over the fourth quarter of 2021

and decreased

$80.8 million, or 4.0%, from the first quarter of 2021. Excluding small business

(“SBA PPP”) loans, average loans HFI increased

$18.8 million compared to the fourth quarter of 2021, and increased $115.9

million compared to the first quarter of 2021.

New loan

production strengthened in the latter part of the first quarter of 2022 resulting

in period end loan growth of $54 million over the fourth

quarter of 2021.

Credit Quality

Overall credit quality is strong and continues to improve.

Nonaccrual loans totaled $2.7 million at March 31, 2022, a

$1.6

million decrease from December 31, 2021 and a $2.7 million decrease from March 31, 2021.

At March 31, 2022 and December

31, 2021, nonaccrual loans as a percentage of total loans was 0.13% and 0.21%,

respectively. Classified loans increased

$4.4 million

over the fourth quarter of 2021 and reflected one loan relationship that

is in the loan workout process and has been reserved for at

March 31, 2022.

Deposits

Average total

deposits were $3.714 billion for the first quarter of 2022, an increase of $164.9 million,

or 4.6%, over the

fourth quarter of 2021 and $474.6 million, or 14.6%, over the first quarter

of 2021.

Growth over the fourth quarter of 2021 was

primarily attributable to an increase in seasonal public fund deposits. Various

government stimulus programs contributed to the year

over year increase.

Capital

At March 31, 2022, we were well-capitalized with a total risk-based capital

ratio of 16.98% and a tangible common equity

ratio (a non-GAAP financial measure) of 6.61% compared to 17.15%

and 6.95%, respectively,

at December 31, 2021 and 17.20% and

6.13%, respectively, at March

31, 2021.

At March 31, 2022, 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 2022, we realized net income attributable to common

shareowners of $8.5 million, or $0.50 per diluted share,

compared to net income of $6.4 million, or $0.38 per diluted share, for the fourth quarter

of 2021, and $9.5 million, or $0.56 per

diluted share, for the first quarter of 2021.

For the first quarter of 2022, we realized income before income taxes of

$11.3 million compared to $9.2 million for

the fourth quarter

of 2021 and $14.8 million for the first quarter of 2021. Compared to

the fourth quarter of 2021, the $2.1 million increase was

attributable to a $1.1

million increase in noninterest income and lower noninterest expense of

$1.0 million. Compared to the first

quarter of 2021, the $3.5 million decrease in income before income taxes

was attributable to a $4.0 million decrease in noninterest

income and a $1.0 million increase in the provision for credit losses that was partially offset

by lower noninterest expense of $1.3

million and higher net interest income of $0.2 million.

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, 2022

December 31, 2021

March 31, 2021

Interest Income

25,438

25,549

25,446

Taxable Equivalent Adjustments

108

Total Interest Income (FTE)

25,516

25,628

25,554

Interest Expense

742

838

948

Net Interest Income (FTE)

24,774

24,790

24,606

Provision for Credit Losses

(982)

Taxable Equivalent Adjustments

108

Net Interest Income After Provision for Credit Losses

24,696

24,711

25,480

Noninterest Income

25,818

24,672

29,826

Noninterest Expense

39,233

40,207

40,476

Income Before Income Taxes

11,281

9,176

14,830

Income Tax Expense

2,235

2,040

2,787

Income Attributable to Noncontrolling Interests

(591)

(764)

(2,537)

Net Income Attributable to Common Shareowners

8,455

6,372

9,506

Basic Net Income Per Share

0.50

0.38

0.56

Diluted Net Income Per Share

0.50

0.38

0.56

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 2022 totaled $24.8 million, comparable to the fourth

quarter of 2021, and

$24.6 million for the first quarter of 2021.

Compared to the fourth quarter of 2021, higher rates on overnight funds and growth

in the

investment portfolio was offset by two less calendar days during

the quarter.

Compared to the first quarter of 2021, interest income

grew as a result of our larger investment portfolio and a reduction

in interest expense, partially offset by lower loan fees.

Our net interest margin for the first quarter of 2022 was 2.55%, a decrease

of five basis points from the fourth quarter of 2021 and a

decrease of 30 basis points from the first quarter of 2021.

Compared to both prior periods, the decrease was primarily attributable to

growth in earning assets (driven by deposit inflows), which negatively

impacted our margin percentage. Our net interest margin

for

the first quarter of 2022, excluding the impact of overnight funds

in excess of $200 million, was 3.11%.

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 did not

record a provision for credit losses for the first quarter of 2022 or the fourth quarter of 2021

and recorded a provision

benefit of $1.0 million for the first quarter of 2021.

The lack of provision for the first quarter of 2022 reflected continued strong

credit

quality and slight improvement in the forecasted level of unemployment.

The provision benefit for the first quarter of 2021 generally

reflected improving economic conditions and a lower level of expected

losses related to COVID-19.

We discuss the allowance

for

credit losses further below.

Noninterest Income

Noninterest income for the first quarter of 2022 totaled $25.8 million compared

to $24.7 million for the fourth quarter of 2021 and

$29.8 million for the first quarter of 2021.

The increase over the fourth quarter of 2021 was primarily attributable to higher wealth

management fees of $2.1 million that were partially offset by

lower mortgage banking revenues of $0.9 million.

The increase in

wealth management fees was attributable to higher insurance commission

revenues. Lower loan production and a slightly lower gain

on sale margin drove the decline in mortgage banking

revenues. Compared to the first quarter of 2021, the decline was due to lower

mortgage banking revenues attributable to lower loan production (primarily

refinancing activity) and a lower gain on sale margin.

Noninterest income represented 51.1% of operating revenues (net interest

income plus noninterest income) for the first quarter of 2022

compared to 50.0% for the fourth quarter of 2021 and 54.9% for the first quarter of 2021.

The table below reflects the major components of noninterest income to help

facilitate a better understanding of the period over period

comparison.

Three Months Ended

(Dollars in Thousands)

March 31, 2022

December 31, 2021

March 31, 2021

Deposit Fees

5,191

5,300

4,271

Bank Card Fees

3,763

3,872

3,618

Wealth Management

Fees

6,070

3,922

3,090

Mortgage Banking Revenues

8,946

9,800

17,125

Other

1,848

1,778

1,722

Total

Noninterest Income

25,818

24,672

29,826

Significant components of noninterest income are discussed in more

detail below.

Deposit Fees

Deposit fees for the first quarter of 2022 totaled $5.2 million, a decrease of $0.1

million, or 2.1%, from the fourth

quarter of 2021 and an increase of $0.9 million, or 21.5%, over the first quarter of

2021.

The decline from the fourth quarter of 2021

reflects two less days of processing.

The increase over the first quarter of 2021 reflected higher account

maintenance fees attributable

to the third quarter 2021 conversion of the remaining free checking accounts

to monthly maintenance fee account types.

Bank Card Fees

Bank card fees for the first quarter of 2022 totaled $3.8 million, a decrease of $0.1

million, or 2.8%, from the fourth

quarter of 2021 and an increase of $0.2 million, or 4.0%, over the first quarter

of 2021.

The decline from the fourth quarter of 2021

reflects two less days of processing.

The increase over the first quarter of 2021 was primarily attributable

to growth in checking

accounts.

Wealth

Management Fees

Wealth management fees,

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

brokerage fees (i.e., investment,

insurance products, and retirement accounts), and insurance commission

revenues,

totaled $6.1

million for the first quarter of 2022, an increase of $2.1 million or 54.8%, over the

fourth quarter of 2021 and an increase of $3.0

million, or 96.5%, over the first quarter of 2021.

Insurance commission revenues was the primary driver of the increase over

both

prior periods.

Higher retail brokerage fees also contributed to the increase over the first quarter of 2021.

At March 31, 2022, total

assets under management were approximately $2.329 billion compared

to $2.324 billion at December 31, 2021 and $2.088 billion at

March 31, 2021.

Mortgage Banking Revenues

Mortgage banking revenues totaled $8.9 million for the first quarter of

2022, a decrease of $0.9 million,

or 8.7%, from the fourth quarter of 2021 and a decrease of $8.2 million, or 47.

8% from the first quarter of 2021.

The decrease from

the fourth quarter of 2021 reflected lower loan production and a slightly lower gain on

sale margin.

Compared to the first quarter of

2021, the decline was due to lower loan production (largely

refinancing activity),

and a lower gain on sale margin.

We provide a

detailed overview of our mortgage banking operation, including

a detailed break-down of mortgage banking revenues, mortgage

servicing activity,

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

Consolidated Financial

Statements.

Production volume totaled $247 million for the first quarter of 2022,

$294 million for the fourth quarter of 2021,

and

$463 million for the first quarter of 2021.

Refinancing activity represented 21% of loan production for the first quarter of 2022,

24%

for the fourth quarter of 2021, and 40% for the first quarter of 2021.

CCHL contributed approximately $0.4 million to CCBG

consolidated earnings in the first quarter of 2022 compared to $0.5 million in the fourth

quarter of 2021, and $1.6 million in the first

quarter of 2021.

Noninterest Expense

Noninterest expense for the first quarter of 2022 totaled $39.2 million compared

to $40.2 million for the fourth quarter of 2021 and

$40.5 million for the first quarter of 2021.

The decrease from the fourth quarter of 2021 was primarily attributable

to lower other

expense of $1.2 million which included a $1.6 million decrease in pension

expense (reflected in miscellaneous expense).

Salary

expense increased $0.1 million and reflected higher variable commission

expense (higher insurance of $0.7 million partially offset by

lower mortgage banking of $0.6 million).

Compared to the first quarter of 2021, the decrease was primarily attributable

to lower

salary expense of $1.8 million, primarily lower variable commission expense

(lower mortgage banking of $2.6 million partially offset

by higher insurance of $0.8 million).

Associate benefits expense increased by $0.6 million and reflected higher

insurance expense

attributable to utilization of self-insurance reserves in 2021.

Pension expense declined by $1.0 million, but was substantially offset

higher expenses for other real estate and other miscellaneous.

The decrease in pension expense in 2022 generally reflected a higher

discount rate used in 2022 for determining plan liabilities and

strong asset returns in 2021.

The table below reflects the major components of noninterest expense to

help facilitate a better understanding of the year over year

comparison.

The table below reflects the major components of noninterest expense.

Three Months Ended

(Dollars in Thousands)

March 31, 2022

December 31, 2021

March 31, 2021

Salaries

20,664

20,587

22,447

Associate Benefits

4,192

4,196

3,617

Total Compensation

24,856

24,783

26,064

Premises

2,759

2,671

2,759

Equipment

3,334

3,289

3,208

Total Occupancy

6,093

5,960

5,967

Legal Fees

349

280

558

Professional Fees

1,332

1,438

1,330

Processing Services

1,637

1,455

1,545

Advertising

773

658

749

Telephone

728

736

755

Insurance - Other

510

541

501

Other Real Estate Owned, net

(118)

Pension Settlement

209

572

Miscellaneous

2,721

3,758

3,125

Total Other

8,284

9,464

8,445

Total

Noninterest Expense

39,233

40,207

40,476

Significant components of noninterest expense are discussed in

more detail below.

Compensation

Compensation expense totaled $24.9 million for the first quarter of 2022, an increase

of $0.1 million, or less than

1.0%, over the fourth quarter of 2021 and a decrease of $1.2 million,

or 4.6%, from the first quarter of 2021.

Compared to the fourth

quarter of 2021, the $0.1 million increase in salary expense was primarily

attributable to higher commission expense of $0.7 million

related to higher insurance revenues that was partially offset

by lower commission expense of $0.6 million related to lower mortgage

banking revenues.

Compared to the first quarter of 2021, the decrease reflected lower salary expense

of $1.8 million partially offset

by higher associate benefit expense of $0.6 million.

The decline in salary expense reflected lower commission expense of $2.6

million related to mortgage banking revenues partially offset

by higher commission expense of $0.9 million related to insurance

revenues.

The increase in associate benefits expense was attributable to higher associate insurance expense

–

for the first quarter of

2021

we did not recognize expense due to the utilization of reserves related to our self-insured

plan.

Occupancy.

Occupancy expense (including premises and equipment) totaled $6.1

million for the first quarter of 2022, an increase of

$0.1 million or 2.2% over the fourth quarter of 2021 and an increase

of $0.1 million, or 2.1%, over the first quarter of 2021.

The

increase over both prior periods was primarily related to

software additions related to certain risk management and strategic initiatives.

Other

Other noninterest expense totaled $8.3 million for the first quarter of

2022, a decrease of $1.2 million, or 12.5%, from the

fourth quarter of 2021 and a decrease of $0.2 million, or 1.9%, from

the first quarter of 2021.

The decrease from the fourth quarter of

2021 was primarily attributable to lower miscellaneous expense (pension

expense of $1.6 million partially offset by a higher level of

other loss expense of $0.2 million).

Compared to the first quarter of 2021, the decrease was primarily driven by lower

miscellaneous

expense (pension expense of $0.9 million partially offset by

higher other losses of $0.2 million, higher MSR amortization of $0.1

million, hiring expense of $0.1 million, and a $0.3 million favorable

MSR valuation reserve adjustment in the first quarter of 2021).

The lower level of pension expense in 2022 generally reflected a higher

discount rate in 2022 for determining plan liabilities and

strong asset returns in 2021.

Our operating efficiency ratio (expressed as noninterest

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

noninterest income) was 77.55% for the first quarter of 2022 compared

to 81.29% for the fourth quarter of 2021 and 74.36% for the

first quarter of 2021.

Income Taxes

We realized income

tax expense of $2.2 million (effective rate of 20%) for the first quarter of

2022 compared to $2.0 million

(effective rate of 22%) for the fourth quarter of 2021

and $2.8 million (effective rate of 19%) for the first quarter of 2021.

Tax

expense for the fourth quarter of 2021 was unfavorably impacted by discrete

tax expense of $0.1 million. Absent discrete items, we

expect our annual effective tax rate to approximate 19%

-20% in 2022.

FINANCIAL CONDITION

Average earning

assets totaled $3.939 billion for the first quarter of 2022, an increase of $147.5 million, or

3.9%, over the fourth

quarter of 2021, and an increase of $440.9 million, or 12.6%, over

the first quarter of 2021.

The increase over the fourth quarter of

2021 was primarily attributable to seasonal growth in our public fund deposits. The

increase compared to the first quarter of 2021 was

primarily driven by higher deposit balances (see below

– Deposits).

Investment Securities

Average investment

increased $68.1 million, or 6.9%, over the fourth quarter of 2021 and increased $526.5

million, or 98.8%, over

the first quarter of 2021.

Our investment portfolio represented 26.9% of our average earning assets for the first

quarter of 2022

compared to 26.1% for the fourth quarter of 2021, and 15.2% for the first

quarter of 2021.

During the first quarter of 2022, we

initiated buy programs

to add to our investment portfolio as part of our overall Statement of Financial

Condition management,

which

were completed by the end of the first quarter 2022.

For the remainder of 2022, we will continue to monitor our overall liquidity

position and, dependent on market conditions, look for opportunities to

reinvest proceeds and/or purchase additional securities that

align with our overall investment strategy.

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 2022, we purchased securities under

both the AFS and HTM designations.

At March 31, 2022, $624.4 million, or 54.6%, of our investment portfolio

was classified as AFS, and $518.7 million, or 45.3%,

classified as HTM.

The average maturity of our total portfolio at March 31, 2022

was 3.63 years compared to 3.63 years and 2.78

years at December 31, 2021 and March 31, 2021, 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 maint

ain a trading portfolio.

At March 31, 2022, there were 673 positions (combined AFS and HTM)

with unrealized losses totaling $49.9 million.

Of these 673

positions, 501 of these positions carry the full faith and credit of the U.S.

Government (US Treasuries, SBA securities, and

GNMA

pools) and are 0% risk-weighted assets for regulatory purposes. There were

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

government sponsored entities and carry the implicit guarantee of the

U.S. Government. We

believe the long history of no credit

losses on government securities indicates that the expectation of nonpayment

of the amortized cost basis is zero.

The remaining 120

positions (municipal securities, corporate bonds, and asset backed securities)

have a credit component.

At March 31, 2022, all CMO,

MBS, SBA, US Agencies, and Treasury

bonds held were AAA rated. Corporate debt securities had an allowance for

credit losses

totaling $21,000 at March 31, 2022 and municipal securities had an allowance

for credit losses totaling $15,000.

Loans HFI

Average loans

held for investment (“HFI”) increased $15.3 million, or 0.8%, over the fourth quarter of 2021

and decreased $80.8

million, or 4.0%, from the first quarter of 2021. Excluding SBA PPP loans, average

loans HFI increased $18.8 million compared to

the fourth quarter of 2021, and increased $115.9

million compared to the first quarter of 2021.

Compared to the fourth quarter of

2021, the increase in average loans (excluding SBA PPP loans) reflected

growth in commercial loans (primarily institutional),

residential loans, HELOCs, and consumer loans (indirect auto). Compared

to the first quarter of 2021, we realized growth in

commercial loans, construction loans, residential mortgages, and consumer

loans (indirect auto).

New loan production strengthened in

the latter part of the first quarter of 2022 resulting in period end loan growth of $54 million

over the fourth quarter of 2021. Period-end

increases were realized in most loan categories with the largest growth

in commercial loans (primarily institutional) and consumer

loans (indirect auto).

Without compromising our credit standards

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

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

Credit Quality

Overall credit quality is strong and continues to improve.

Nonperforming assets (nonaccrual loans and other real estate) totaled $2.7

million at March 31, 2022 compared to $4.3 million at December 31, 2021

and $5.5 million at March 31, 2021.

At March 31, 2022,

nonperforming assets as a percentage of total assets totaled 0.06% compared

to 0.10% at December 31, 2021 and 0.14% at March 31,

2021.

Nonaccrual loans totaled $2.7 million at March 31, 2022, a $1.6 million decrease

from December 31, 2021 and a $2.8 million

decrease from March 31, 2021.

The $4.4 million increase in classified loans over the fourth quarter of 2021,

reflects one loan

relationship that is in the loan workout process and has been reserved

for at March 31, 2022.

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, 2022, the allowance for credit losses for HFI loans totaled $20.8

million compared to $21.6 million at December 31,

2021 and $22.0 million at March 31, 2021.

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

statements.

At March 31, 2022, the allowance represented 1.05% of HFI

loans and provided coverage of 761% of nonperforming

loans compared to 1.12% and 500%, respectively,

at December 31, 2021, and 1.07% and 411%, respectively,

at March 31, 2021.

At March 31, 2022, the allowance for credit losses for unfunded commitments

totaled $3.0 million compared to $2.9 million at

December 31, 2021 and $3.0 million at March 31, 2021.

The allowance for unfunded commitments is recorded in other liabilities.

Deposits

Average total

deposits were $3.714 billion for the first quarter of 2022, an increase of $164.9 million,

or 4.6%, over the fourth quarter

of 2021 and $474.6 million, or 14.6%, over the first quarter of 2021.

Growth over the fourth quarter of 2021 was primarily

attributable to an increase in seasonal public fund deposits. Compared to the first quarter 2021,

strong growth occurred in our

noninterest bearing deposits, NOW accounts, and savings account balances.

Over the past few years, we have experienced strong core

deposit growth, in addition to growth related to multiple government

stimulus programs in response to the Covid-19 pandemic, such

as those under the CARES Act and the American Rescue Plan Act.

Given these increases, the potential exists for our deposit levels to

be volatile into 2022 due to the uncertain timing of the outflows of the stimulus related

balances, in addition to the frequency and

degree to which the Federal Open Market Committee (FOMC) raises the overnight

funds rate. It is anticipated that current liquidity

levels will remain robust due to our strong overnight funds sold position.

The Bank continues to strategically consider ways to safely

deploy a portion of this liquidity.

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 arises from changes in interest rates, exchange rates,

commodity prices, and equity prices.

We have risk

management policies designed to monitor and limit exposure to market

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

significant market risk involving exchange rates, commodity prices, or

equity prices.

In asset and liability management activities, our

policies are designed to minimize structural interest rate risk.

Interest Rate Risk Management.

Our net income is largely dependent

on net interest income.

Net interest income is susceptible to

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

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

When

interest-bearing liabilities mature or reprice more quickly

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

market rates of interest could adversely affect net interest

income.

Similarly, when interest-earning

assets mature or reprice more

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

result in a decrease in net interest income.

Net interest

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

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

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

equity.

We have established

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

which is administered by

management’s Asset Liability Management

Committee (“ALCO”).

The policy establishes limits of risk, which are quantitative

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

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

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

in interest rates for maturities from one

day to 30 years.

We measure the potential

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

earnings, long-

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

computer modeling.

The simulation model captures

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

in investment and loan portfolio contracts.

As with

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

inherent in the interest rate modeling methodology used by

us.

When interest rates change, actual movements in different categories

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

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

from assumptions used in the model.

Finally, the

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

on adjustable-rate loan clients’ ability to service their

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

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

possibilities to indicate the inherent interest rate risk.

We prepare

a current base case and several alternative interest rate simulations (-100,+100, +200,

+300, and +400 basis points (bp)), at

least once per quarter, and report the analysis to

ALCO, our Market Risk Oversight Committee (“MROC”), our Enterprise Risk

Oversight Committee (“EROC”) and the Board of Directors.

(The -200bp rate scenario was not modeled starting in the second half of

2019 due to the low interest rate environment below 2.00%). We

augment our interest rate shock analysis with alternative interest rate

scenarios on a quarterly basis that may include ramps, parallel shifts, and a flattening

or steepening of the yield curve (non-parallel

shift).

In addition, more frequent forecasts may be produced when interest rates are particularly

uncertain or when other business

conditions so dictate.

Our goal is to structure the statement of financial condition so that net interest earnings at risk over

12-month and 24-month periods

and the economic value of equity at risk do not exceed policy guidelines

at the various interest rate shock levels. We

attempt to

achieve this goal by balancing, within policy limits, the volume of floating-rate

liabilities with a similar volume of floating-rate assets,

by keeping the average maturity of fixed-rate asset and liability contracts

reasonably matched, by managing the mix of our core

deposits, and by adjusting our rates to market conditions on a continuing

basis.

Analysis.

Measures of net interest income at risk produced by simulation analysis are

indicators of an institution’s short-term

performance in alternative rate environments.

These measures are typically based upon a relatively brief period, and do not

necessarily indicate the long-term prospects or economic value of the institution.

ESTIMATED CHANGES

IN NET INTEREST INCOME

(1)

Percentage Change (12-month shock)

+400 bp

+300 bp

+200 bp

+100 bp

-100 bp

Policy Limit

-15.0%

-12.5%

-10.0%

-7.5%

March 31, 2022

27.0%

20.1%

13.2%

6.4%

-7.4%

December 31, 2021

36.6%

27.2%

17.8%

8.7%

-6.2%

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, 2022

46.8%

35.3%

23.9%

12.8%

-9.9%

December 31, 2021

55.0%

40.5%

26.1%

12.2%

-11.1%

The Net Interest Income (“NII”) 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. These metrics became less favorable in rising rate scenarios

compared to the prior quarter as slightly longer duration assets

were purchased. The percent change in NII became less favorable in the down

rate scenario as the NII base increased due to higher

rates and now has more room to fall. All scenarios are within policy.

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

by considering the effects of changes in interest rates on all

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

assets and liabilities. The difference between these

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

which in theory approximates the fair value of our net

assets.

ESTIMATED CHANGES

IN ECONOMIC VALUE

OF EQUITY

(1)

Changes in Interest Rates

+400 bp

+300 bp

+200 bp

+100 bp

-100 bp

Policy Limit

-30.0%

-25.0%

-20.0%

-15.0%

March 31, 2022

20.2%

16.2%

11.5%

6.3%

-14.7%

December 31, 2021

31.5%

24.6%

16.5%

8.2%

-19.0%

EVE Ratio (policy minimum 5.0%)

18.9%

18.0%

16.9%

15.9%

12.3%

(1) Down 200, 300, and 400 bp rate scenarios have been excluded due to the

current interest rate environment.

At March 31, 2022, the economic value of equity was favorable

in all rising rate environments and unfavorable in a falling rate

environment. EVE metrics became less favorable in a rising rate environment

due to longer duration investments purchased in the

investment portfolio, and became more favorable in the rates down

scenario as our nonmaturity deposits became more valuable as

rates rose.

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

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

additional simulations will be analyzed to

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

in mix of our financial assets and liabilities, measured over

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

LIQUIDITY AND CAPITAL

RESOURCES

Liquidity

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

cash needs.

Our objective in managing our liquidity is to

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

other liabilities in accordance with their

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

Our liquidity strategy is guided by policies that are formulated and

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

the marketability of assets, the sources and stability of

funding and the level of unfunded commitments.

We regularly evaluate

all of our various funding sources with an emphasis on

accessibility, stability,

reliability

and cost-effectiveness.

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

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

repurchase agreements, federal funds purchased and

FHLB borrowings.

We believe that the cash

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

are

sufficient to meet our future operating capital and funding requirements.

At March 31, 2022, we had the ability to generate

$1.477 billion in additional liquidity through all of our available resources (this

excludes $790 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, 2022, 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 primarily consists of debt issued by the U.S. Treasury,

U.S.

governmental and federal agencies, municipal governments,

corporate bonds, and asset-backed securities.

The weighted average life

of the portfolio was approximately 3.63 years at March 31, 2022, and the available

for sale portfolio had a net unrealized pre-tax loss

of $31.5 million.

Our average overnight funds position (defined deposits with banks plus

Fed funds sold less Fed funds purchased) was $873.1 million

in the first quarter of 2022 compared to an average net overnight funds

sold position of $789.1 million in the fourth quarter of 2021

and $814.6 million in the first quarter of 2021.

The increase over the fourth quarter of 2021 was primarily due to growth in our

seasonal deposits.

The increase compared to the first quarter 2021 was driven by strong core deposit growth,

in addition to pandemic

related stimulus programs.

We expect our

capital expenditures will be approximately $8.0 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

Average short

term borrowings totaled $32.4 million for the first quarter of 2022 compared to $46.4

million for the fourth quarter of

2021 and $67.0 million for the first quarter of 2021. The variance over both prior

periods was primarily 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.

We have issued two

junior subordinated deferrable interest notes to our wholly owned

Delaware statutory trusts.

The first note for

$30.9 million was issued to CCBG Capital Trust I in

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

The second

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

May 2005.

The interest payment for the CCBG Capital Trust I

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

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 continue to evaluate

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 in

Note 5 – Derivatives in the Consolidated Financial Statements.

Capital

Our capital ratios are presented in the Selected Quarterly Financial Data

table on page 32.

At March 31, 2022, our regulatory capital

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

under the Basel III capital standards.

Our capital ratios are presented in the Selected Quarterly Financial Data

table on page 32.

At March 31, 2022, our regulatory capital

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

under the Basel III capital standards.

Shareowners’ equity was $372.1 million at March 31, 2022 compared to $383.2

million at December 31, 2021 and $324.4 million at

March 31, 2021.

During the first quarter of 2022, shareowners’ equity was positively impacted by net income

of $8.5 million, a $0.2

million decrease in the accumulated other comprehensive loss for our

pension plan, a $1.4 million increase in the fair value of the

interest rate swap related to subordinated debt, net adjustments totaling $0.5 million

related to transactions under our stock

compensation plans, and stock compensation accretion of $0.2 million.

Shareowners’ equity was reduced by common stock dividends

of $2.7 million ($0.16 per share) and a $19.1 million increase in the

unrealized loss on investment securities.

At March 31, 2022, our common stock had a book value of $21.94 per diluted

share compared to $22.63 at December 31, 2021

and

$19.22 at March 31, 2021.

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

securities.

March 31, 2022, the net loss was $23.6 million compared to a net loss of $4.5

million at December 31, 2021 and a $1.2 million net

gain at March 31, 2021.

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, 2022, the net pension liability reflected in

other comprehensive loss was $13.0 million compared to $13.2 million

at December 31, 2021 and $47.1 million at March 31, 2021.

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 2021 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 $4.6

million (after-tax) using the

balances from the December 31, 2021 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, 2022, we had $763.9 million in commitments to extend credit

and $5.0 million in standby letters of credit.

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

any condition established in the

contract.

Commitments generally have fixed expiration dates or other termination

clauses and may require payment of a fee.

Since

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

the total commitment amounts do not necessarily

represent future cash requirements.

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

the performance

of a client to a third party.

We use the same credit

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

balance sheet instruments.

If commitments arising from these financial instruments continue to

require funding at historical levels, management does not

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

obligations.

In the event these commitments

require funding in excess of historical levels, management believes current

liquidity, advances available from the

FHLB and the

Federal Reserve, and investment security maturities provide a sufficient

source of funds to meet these commitments.

Certain agreements provide that the commitments are unconditionally

cancellable by the bank and for those agreements no allowance

for credit losses has been recorded.

We have recorded

an allowance for credit losses on loan commitments that are not

unconditionally cancellable by the bank, which is included in other

liabilities on the consolidated statements of financial condition and

totaled $3.0 million at March 31, 2022.

CRITICAL ACCOUNTING POLICIES

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

Financial Statements included in our 2021 Form 10-K.

The preparation of our Consolidated Financial Statements

in accordance with GAAP and reporting practices applicable to the banking

industry requires us to make estimates and assumptions that affect

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

and to disclose contingent assets and liabilities.

Actual results could differ from those estimates.

We have identified

accounting for (i) the allowance for credit losses, (ii) 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 2021 Form 10-K.

TABLE I

AVERAGE

BALANCES & INTEREST RATES

Three Months Ended

March 31, 2022

December 31, 2021

March 31, 2021

Average

(Dollars in Thousands)

Balances

Interest

Rate

Balances

Interest

Rate

Balances

Interest

Rate

Assets:

Loans Held for Sale

43,004

397

3.75

62,809

522

3.29

106,242

970

3.70

Loans Held for Investment

(1)(2)

1,963,578

21,811

4.50

1,948,324

22,296

4.54

2,044,363

22,483

4.46

Taxable Securities

1,056,736

2,889

1.10

987,700

2,493

1.00

528,842

1,863

1.41

Tax-Exempt Securities

(2)

2,409

1.60

3,380

2.07

3,844

2.61

Federal Funds Sold and Interest Bearing

Deposits

873,097

409

0.19

789,100

300

0.15

814,638

213

0.11

Total Earning Assets

3,938,824

25,516

2.63

3,791,313

25,628

2.68

3,497,929

25,554

2.96

Cash & Due From Banks

74,253

73,752

68,978

Allowance For Credit Losses

(21,655)

(22,127)

(24,128)

Other Assets

275,353

284,999

278,742

TOTAL ASSETS

4,266,775

4,127,937

3,821,521

Liabilities:

NOW Accounts

1,079,906

0.03

963,778

0.03

985,517

0.03

Money Market Accounts

285,406

0.05

289,335

0.05

269,829

0.05

Savings Accounts

599,359

0.05

573,563

0.05

492,252

0.05

Other Time Deposits

97,054

0.14

101,037

0.14

102,089

0.15

Total Interest Bearing Deposits

2,061,725

224

0.04

1,927,713

213

0.04

1,849,687

208

0.05

Short-Term Borrowings

32,353

192

2.40

46,355

307

2.63

67,033

412

2.49

Subordinated Notes Payable

52,887

317

2.40

52,887

306

2.26

52,887

307

2.32

Other Long-Term Borrowings

833

4.49

1,414

3.50

2,736

3.18

Total Interest Bearing Liabilities

2,147,798

742

0.14

2,028,369

838

0.16

1,972,343

948

0.19

Noninterest Bearing Deposits

1,652,337

1,621,432

1,389,821

Other Liabilities

72,166

114,657

111,050

TOTAL LIABILITIES

3,872,301

3,764,458

3,473,214

Temporary Equity

10,518

13,339

21,977

TOTAL SHAREOWNERS’ EQUITY

383,956

350,140

326,330

TOTAL LIABILITIES, TEMPORARY

AND SHAREOWNERS’ EQUITY

4,266,775

4,127,937

3,821,521

Interest Rate Spread

2.49

2.52

2.77

Net Interest Income

24,774

24,790

24,606

Net Interest Margin

(3)

2.55

2.60

2.85

(1)

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

Interest income includes loan fees of $0.2 million, $0.4

million and $1.2 million for

the three months ended March 31, 2022, December 31,

2021 and March 31, 2021, 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, 2021.

Item 4.

CONTROLS AND PROCEDURES

At March 31, 2022, 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, 2022,

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 2021 Form 10-K, as updated in our subsequent

quarterly reports. The risks described in our 2021 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

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101.PRE

XBRL Taxonomy

Extension Presentation Linkbase Document

101.DEF

XBRL Taxonomy

Extension Definition Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has

duly caused this Report to be signed on its

behalf by the undersigned Chief Financial Officer hereunto duly

authorized.

CAPITAL CITY

BANK GROUP,

INC.

(Registrant)

/s/ 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: May 4, 2022