UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,
D.C.
20549

FORM ~~10-Q~~

~~[x]~~

10-Q/A

(Amendment
No.1)

☒

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

For the Quarterly Period Ended ~~September 30, 2017~~

March 31, 2023

~~[ ]~~

☐

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

~~(Exact name of registrant as specified in its charter)~~

Capital City Bank Group, Inc.

~~Florida~~		~~59-2273542~~
~~(State or other jurisdiction of incorporation or organization)~~		~~(I.R.S. Employer Identification No.)~~

(Exact name of Registrant as specified in its charter)

~~217 North Monroe Street, Tallahassee,~~ Florida		~~32301~~
~~(Address of principal executive office)~~		~~(Zip Code)~~

~~(850) 402-7821~~

~~(Registrant's telephone number, including area code)~~

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~~ [ ]

[X]

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~

such files).

Yes ~~[X] No~~ [ ]

[X]

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 [X]~~	~~Non-accelerated filer [ ]~~	~~Smaller reporting company [ ]~~
		~~(Do not check if smaller reporting company)~~	~~Emerging growth company [ ]~~

☐

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 [

]

No ~~[X]~~

[X]

At ~~October 31, 2017, 16,966,047~~ April 28, 2023,

17,021,748

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

2
EXPLANATORY NOTE
Capital City Bank Group, Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-Q/A (the “Amendment” or “Form 10-
Q/A”) to amend and restate certain items in its Quarterly Report on Form 10-Q for the three months ended March 31, 2023, originally
filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 1, 2023 (the “Original Form 10-Q”). Except as
described below, no other information included in the Original Form 10-Q is being amended or updated by this Amendment and this
Amendment does not purport to reflect any information or events subsequent to the Original Form 10-Q.
Restatement Background
As previously disclosed in the Company’s Current Report on Form 8-K filed with the SEC on November 13, 2023, the Company
identified certain inter-company transactions between its subsidiaries, Capital City Home Loans Inc. (“CCHL”), and Capital City
Bank (“CCB” or “the Bank”), involving residential mortgage loan purchases that were not properly recorded. The inaccuracies
materially impacted the Company’s previously issued financial statements as of and for the annual period ended December 31, 2022,
the three months ended March 31, 2022 and 2023, the three and six months ended June 30, 2022 and 2023, and the three and nine
months ended September 30, 2022 (the “Impacted Financials”). In connection with these transactions, CCHL recorded mortgage
banking revenue and a mortgage servicing right. On an ongoing basis, CCHL recognized noninterest income for servicing these loans
on behalf of CCB.
Because these inter-company transactions were not properly eliminated and net loan fees were not properly recorded, management,
after discussion with the Company’s independent registered public accounting firm, FORVIS, LLP (“FORVIS”), and the chair of the
Audit Committee of the Company’s Board of Directors, determined that the Impacted Financials should no longer be relied upon, and
certain consolidated statement of financial condition line items, including loans, other assets, other liabilities, and equity, and
consolidated statement of income line items, including mortgage banking revenues, loan interest income, compensation expense, other
income, income taxes, and net income, needed to be restated. For additional information on the restatements, see “Part I – Item 1
Financial Information – Note 1 – Restatement of Previously Issued Consolidated Financial Statements” in this Form 10-Q/A.
The Company determined that it would file amendments to the Annual Report on Form 10-K for the year ended December 31, 2022,
the Original Form 10-Q, and its Quarterly Report on Form 10-Q for the three and six months ended June 30, 2023, including restated
financial statements and related disclosures (collectively, the “Amended Reports”). All material restatement information will be
included in the Amended Reports, and we do not intend to separately amend the Quarterly Reports on Form 10-Q that the Company
has previously filed with the SEC for the three months ended March 31, 2022, the three and six months ended June 30, 2022, and the
three and nine months ended September 30, 2022 (collectively, the “2022 Form 10-Qs”). As a result, the 2022 Form 10-Qs should no
longer be relied upon.
Restatement of Previously Issued Consolidated Financial Statements
This Form 10-Q/A includes unaudited restated consolidated financial statements as of March 31, 2023 and for the three-month period
ended March 31, 2023, and the audited restated consolidated statements of financial condition as of December 31, 2022. In addition to
correcting the accounting treatment for the inter-company transactions described above, the restated consolidated financial statements
included herein also correct previously identified errors that the Company determined to be immaterial, both individually and in the
aggregate.
For additional information on the restatements, see “Part I – Item 1 Financial Information – Note 1 – Restatement of Previously Issued
Consolidated Financial Statements” in this Form 10-Q/A.
This Form 10-Q/A also amends and restates the following items included in the Original Form 10-Q as appropriate to reflect the
restatement and revision of the relevant periods: Part I – Item 1 Financial Information; Item 2. Management’s Discussions and
Analysis of Financial Condition and Results of Operations; Item 3. Quantitative and Qualitative Disclosures About Market Risk; Item
4. Controls and Procedures; and Part II – Item 6. Exhibits.
In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is also
including with this Form 10-Q/A currently dated certifications of the Company’s Chief Executive Officer and Chief Financial Officer
(attached as Exhibits 31.1, 31.2, 32.1, and 32.2).

Except as discussed above and as further described herein, the Company has not modified or updated the disclosures presented in the

Original Form 10-Q. Accordingly, this Form 10-Q/A does not reflect events occurring after the filing of the Original Form 10-Q or

modify or update those disclosures affected by any such subsequent events. Information not affected by the restatements reflects

disclosures made at the time of the filing of the Original Form 10-Q. Forward-looking statements included in this Form 10-Q/A

represent management’s views as of the date of the Original Form 10-Q and should not be assumed to be accurate as of any date

thereafter. This Form 10-Q/A should be read in conjunction with the Company's filings made with the SEC subsequent to the filing of

the Original Form 10-Q, including any amendment to those filings.

Control Considerations

In connection with the restatements discussed above, management has re-assessed the effectiveness of the Company’s internal control

over financial reporting and disclosure controls and procedures as of March 31, 2023, as further described in “Part I – Item 4. Controls

and Procedures.” Based on this assessment, the Company identified a material weakness in its internal control over financial reporting

for the review of significant inter-company mortgage sales and servicing. As a result, the Company’s Chief Financial Officer

concluded that the internal control over financial reporting and disclosure controls and procedures were not effective as of March 31,

2023. Management has taken steps towards remediating the material weakness in the Company’s internal control over financial

reporting. For additional information related to the material weakness in internal control over financial and the related remedial

measures, see Part II Item 9A – Controls and Procedures in the Company’s Form 10-K/A for the year ended December 31, 2022,

which was filed with the SEC on December 22, 2023 (the “2022 Form 10-K/A”) for a description of these matters.

CAPITAL CITY BANK
GROUP,
INC.

QUARTERLY
REPORT ON FORM ~~10-Q~~

10-Q/A

FOR THE ~~PERIOD~~THREE MONTHS ENDED ~~SEPTEMBER 30, 2017~~

MARCH 31, 2023

TABLE OF CONTENTS

~~PART I – Financial Information~~			~~Page~~

~~Item 1.~~	~~Consolidated Financial Statements (Unaudited)~~
	~~Consolidated Statements of Financial Condition – September 30, 2017 and December 31, 2016~~			4
	~~Consolidated Statements of Changes in Shareowners’ Equity – Nine Months Ended September 30, 2017 and 2016~~			7
	~~Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2017 and 2016~~			8
	~~Notes to Consolidated Financial Statements~~			9

~~Item 2.~~	~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~			29

~~Item 3.~~	~~Quantitative and Qualitative Disclosure About Market Risk~~			46

~~Item 4.~~	~~Controls and Procedures~~			46

~~PART II – Other Information~~

~~Item 1.~~		~~Legal Proceedings~~		46

~~Item 1A.~~		~~Risk Factors~~		46

~~Item 2.~~		~~Unregistered Sales of Equity Securities and Use of Proceeds~~		46

~~Item 3.~~		~~Defaults Upon Senior Securities~~		46

~~Item 4.~~		~~Mine Safety Disclosure~~		46

~~Item 5.~~		~~Other Information~~		46

~~Item 6.~~		~~Exhibits~~		46

~~Signatures~~				48

PART I –

Financial Information

Page

Item 1.

Consolidated Financial Statements (Unaudited)

Consolidated Statements of Financial Condition – March 31, 2023 and December 31, 2022

Consolidated Statements of Income – Three Months Ended March 31, 2023 and 2022

Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2023 and 2022

Consolidated Statements of Changes in Shareowners’ Equity – Three Months Ended March 31, 2023 and 2022

Consolidated Statements of Cash Flows – Three Months Ended March 31, 2023 and 2022

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~~10-Q/A 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,~~

“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~~ 10-Q/A

and the

following

sections of ~~our Annual Report on~~

the 2022

2022 Form ~~10-K for the year ended December 31, 2016 (the “2016 Form 10-K”):~~

10-K/A:

(a) “Introductory

Note”

Part I,

Item 1.

“Business”; (b)

“Risk

Factors” 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;~~ 10-Q/A;

and (c) ~~“Introduction”~~

“Introduction” in ~~“Management’s~~

“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;

●

adverse developments in the financial services industry generally, such as the recent bank failures and any related impact on depositor

behavior;

●

the effects of changes ~~including~~in the ~~Dodd-Frank Act, Basel III,~~level of checking or savings account deposits and the competition for deposits on our funding costs, net

interest margin and ability to ~~repay~~replace maturing deposits and ~~qualified mortgage standards;~~

·advances, as necessary;

●

the effects of actions taken by governmental agencies to stabilize the recent volatility in the financial system and the effectiveness of such

actions;

●

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

●

inflation, interest rate, market and monetary fluctuations;

●

the effects of security breaches and computer viruses that may affect our computer systems or fraud related to debit card products;

●

the accuracy of our financial statement estimates and assumptions, including the estimates used for our ~~loan loss provision,~~ allowance for credit losses,

deferred tax asset valuation and pension plan;

●

changes in our liquidity position;

●

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 loan segments, 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 ~~now~~ subject to our ~~compliance with heightened~~ capital requirements;

●

changes in the securities and real estate markets;

●

structural changes in ~~monetary~~the markets for origination, sale and ~~fiscal policies~~servicing of residential mortgages;

●

uncertainty in the ~~U.S. Government;~~

·~~inflation,~~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 ~~market~~risk or price risk resulting from retaining mortgage servicing rights and ~~monetary fluctuations;~~

·the potential effects of higher interest

rates on our loan origination volumes;

●

the effect of corporate restructuring, acquisitions or dispositions, including the actual restructuring and other related charges and the failure

to achieve the expected gains, revenue growth or expense savings from such corporate restructuring, acquisitions or dispositions;

●

the effects of natural disasters, harsh weather conditions ~~including hurricanes, and man-made disasters;~~

·(including hurricanes), widespread health emergencies (including pandemics, such

as the COVID-19 pandemic), military conflict, terrorism, civil unrest or other geopolitical events;

●

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

operate;

●

the impact of the restatement of the Impacted Financials;

●

any inability to implement and maintain effective internal control over financial reporting and/or disclosure control or inability to

remediate any existing material weaknesses in our internal control over financial reporting and/or disclosure controls deemed ineffective;

●

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;

●

the outcomes of litigation or regulatory proceedings;

●

negative publicity and the impact on our reputation;

●

changes in consumer spending and saving habits;

●

growth and profitability of our noninterest income;

·~~changes in accounting principles, policies, practices or guidelines;~~

●

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 I. FINANCIAL INFORMATION
Item 1.

CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

September 30,

December 31,
(Dollars in Thousands)
2017

2016
ASSETS

Cash and Due From Banks
$
50,420

$
48,268
Federal Funds Sold and Interest Bearing Deposits

140,694

247,779

Total Cash and Cash Equivalents

191,114

296,047

Investment Securities, Available for Sale, at fair value

510,846

522,734
Investment Securities, Held to Maturity, at amortized cost (fair value of $183,523 and $176,746)

184,262

177,365

Total Investment Securities

695,108

700,099

Loans Held For Sale

7,800

10,886

Loans, Net of Unearned Income

1,630,338

1,561,289

Allowance for Loan Losses

(13,339)

(13,431)

Loans, Net

1,616,999

1,547,858

Premises and Equipment, net

92,345

95,476
Goodwill

84,811

84,811
Other Real Estate Owned

5,987

10,638
Other Assets

96,678

99,382

Total Assets
$
2,790,842

$
2,845,197

LIABILITIES

Deposits:

Noninterest Bearing Deposits
$
870,644

$
791,182

Interest Bearing Deposits

1,476,973

1,621,104

Total Deposits

2,347,617

2,412,286

Short-Term Borrowings

6,777

12,749
Subordinated Notes Payable

52,887

52,887
Other Long-Term Borrowings

15,047

14,881
Other Liabilities

83,313

77,226

Total Liabilities

2,505,641

2,570,029

SHAREOWNERS’ EQUITY

Preferred Stock, $.01 par value; 3,000,000 shares authorized; no shares issued and outstanding

-

-
Common Stock, $.01 par value; 90,000,000 shares authorized; 16,966,047 and 16,844,698 shares

issued and outstanding at September 30, 2017 and December 31, 2016, respectively

170

168
Additional Paid-In Capital

35,892

34,188
Retained Earnings

275,013

267,037
Accumulated Other Comprehensive Loss, net of tax

(25,874)

(26,225)
Total Shareowners’ Equity

285,201

275,168
Total Liabilities and Shareowners' Equity
$
2,790,842

$
2,845,197

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

PART

FINANCIAL INFORMATION

CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,
(Dollars in Thousands, Except Per Share Data)
2017

2016

2017

2016
INTEREST INCOME

Loans, including Fees
$
19,479

$
18,046

$
56,204

$
54,196
Investment Securities:

Taxable

2,150

1,633

5,832

4,591

Tax Exempt

266

213

795

643
Federal Funds Sold and Interest Bearing Deposits

446

212

1,472

892
Total Interest Income

22,341

20,104

64,303

60,322

INTEREST EXPENSE

Deposits

530

223

1,199

655
Short-Term Borrowings

15

43

77

91
Subordinated Notes Payable

420

341

1,203

1,071
Other Long-Term Borrowings

115

177

331

599
Total Interest Expense

1,080

784

2,810

2,416

NET INTEREST INCOME

21,261

19,320

61,493

57,906
Provision for Loan Losses

490

-

1,389

355
Net Interest Income After Provision For Loan Losses

20,771

19,320

60,104

57,551

NONINTEREST INCOME

Deposit Fees

5,153

5,373

15,295

16,094
Bank Card Fees

2,688

2,759

8,361

8,467
Wealth Management Fees

2,197

1,774

6,112

5,256
Mortgage Banking Fees

1,480

1,503

4,344

3,800
Other

1,478

1,602

4,737

7,286
Total Noninterest Income

12,996

13,011

38,849

40,903

NONINTEREST EXPENSE

Compensation

16,349

15,993

49,137

48,285
Occupancy, net

4,501

4,734

13,437

13,777
Other Real Estate Owned, net

(118)

821

780

3,306
Other

5,975

6,474

19,196

20,286
Total Noninterest Expense

26,707

28,022

82,550

85,654

INCOME BEFORE INCOME TAXES

7,060

4,309

16,403

12,800
Income Tax Expense

2,505

1,436

5,543

4,350

NET INCOME
$
4,555

$
2,873

$
10,860

$
8,450

BASIC NET INCOME PER SHARE
$
0.27

$
0.18

$
0.64

$
0.50
DILUTED NET INCOME PER SHARE
$
0.27

$
0.17

$
0.64

$
0.49

Average Common Basic Shares Outstanding

16,965

16,804

16,946

17,049
Average Common Diluted Shares Outstanding

17,044

16,871

17,009

17,100

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
Item 1.

CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,
(Dollars in Thousands)
2017

2016

2017

2016
NET INCOME
$
4,555

$
2,873

$
10,860

$
8,450
Other comprehensive income, before tax:

Change in net unrealized gain/loss on securities available for sale

(99)

(1,158)

516

1,535
Amortization of unrealized losses on securities transferred from

available for sale to held to maturity

19

21

57

60
Total Investment Securities

(80)

(1,137)

573

1,595
Other comprehensive (loss) income, before tax

(80)

(1,137)

573

1,595
Deferred tax (benefit) expense related to other comprehensive income

(31)

(439)

222

615
Other comprehensive (loss) income, net of tax

(49)

(698)

351

980
TOTAL COMPREHENSIVE INCOME
$
4,506

$
2,175

$
11,211

$
9,430

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

Comprehensive

Shares

Common

Additional

Retained

Loss, Net of

(Dollars In Thousands, Except Share Data)
Outstanding

Stock

Paid-In Capital

Earnings

Taxes

Total
Balance, January 1, 2016
17,156,919

$
172

$
38,256

$
258,181

$
(22,257)

$
274,352
Net Income
-

-

-

8,450

-

8,450
Other Comprehensive Income, net of tax
-

-

-

-

980

980
Cash Dividends ($0.1200 per share)
-

-

-

(2,050)

-

(2,050)
Repurchase of Common Stock
(435,461)

(4)

(6,308)

-

-

(6,312)
Stock Based Compensation
-

-

743

-

-

743
Impact of Transactions Under Compensation Plans, net
85,620

-

461

-

-

461
Balance, September 30, 2016
16,807,078

$
168

$
33,152

$
264,581

$
(21,277)

$
276,624

Balance, January 1, 2017
16,844,698

$
168

$
34,188

$
267,037

$
(26,225)

$
275,168
Net Income
-

-

-

10,860

-

10,860
Other Comprehensive Income, net of tax
-

-

-

-

351

351
Cash Dividends ($0.1700 per share)
-

-

-

(2,884)

-

(2,884)
Stock Based Compensation
-

-

1,196

-

-

1,196
Impact of Transactions Under Compensation Plans, net
121,349

2

508

-

-

510
Balance, September 30, 2017
16,966,047

$
170

$
35,892

$
275,013

$
(25,874)

$
285,201

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)

Nine Months Ended September 30,
(Dollars in Thousands)
2017

2016
CASH FLOWS FROM OPERATING ACTIVITIES

Net Income
$
10,860

$
8,450
Adjustments to Reconcile Net Income to

   Cash Provided by Operating Activities:

      Provision for Loan Losses

1,389

355
      Depreciation

4,966

5,198
      Amortization of Premiums, Discounts, and Fees, net

4,928

4,642
      Gain on Partial Retirement of Trust Preferred Securities

-

(2,487)
      Net Decrease in Loans Held-for-Sale

3,086

1,122
      Stock Compensation

1,196

743
      Net Tax Benefit From Stock-Based Compensation

(223)

-
      Deferred Income Taxes

247

3,087
      Net Loss on Sales and Write-Downs of Other Real Estate Owned

456

2,523
      Loss on Disposal of Premises and Equipment

276

131
      Net Decrease (Increase) in Other Assets

2,559

(6,610)
      Net Increase in Other Liabilities

6,487

6,733
Net Cash Provided By Operating Activities

36,227

23,887

CASH FLOWS FROM INVESTING ACTIVITIES

Securities Held to Maturity:

      Purchases

(60,703)

(40,320)
      Payments, Maturities, and Calls

53,031

37,495
Securities Available for Sale:

      Purchases

(122,949)

(125,975)
      Payments, Maturities, and Calls

130,997

74,450
Purchases of Loans Held for Investment

(44,083)

-
Net Increase in Loans

(27,327)

(68,775)
Proceeds From Sales of Other Real Estate Owned

5,952

7,338
Purchases of Premises and Equipment

(3,052)

(3,696)
Net Cash Used In Investing Activities

(68,134)

(119,483)

CASH FLOWS FROM FINANCING ACTIVITIES

Net (Decrease) Increase in Deposits

(64,669)

12,258
Net Decrease in Short-Term Borrowings

(3,020)

(50,023)
Redemption of Subordinated Notes

-

(7,500)
Repayment of Other Long-Term Borrowings

(2,786)

(5,819)
Dividends Paid

(2,884)

(2,050)
Payments to Repurchase Common Stock

-

(6,312)
Issuance of Common Stock Under Compensation Plans

333

321
Net Cash Used In Financing Activities

(73,026)

(59,125)

NET DECREASE IN CASH AND CASH EQUIVALENTS

(104,933)

(154,721)

Cash and Cash Equivalents at Beginning of Period

296,047

378,905
Cash and Cash Equivalents at End of Period
$
191,114

$
224,184

Supplemental Cash Flow Disclosures:

   Interest Paid
$
2,825

$
2,422
   Income Taxes Paid (Refunded)
$
4,044

$
(355)

Noncash Investing and Financing Activities:

   Loans and Premises Transferred to Other Real Estate Owned
$
2,024

$
3,309

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

CAPITAL CITY BANK
GROUP,
INC.

CONSOLIDATED STATEMENTS
OF FINANCIAL CONDITION

(Unaudited)

(As Restated)

March 31,

December 31,

(Dollars in Thousands, Except Par Value)

2023

2022

ASSETS

Cash and Due From Banks

84,549

72,114

Federal Funds Sold and Interest Bearing Deposits

303,403

528,536

Total Cash and Cash Equivalents

387,952

600,650

Investment Securities, Available
for Sale, at fair value (amortized cost of $

438,068

and $

455,232

)

402,943

413,294

Investment Securities, Held to Maturity (fair value of $

612,200

and $

612,701

)

651,755

660,744

Equity Securities

1,883

Total Investment
Securities

1,056,581

1,074,048

Loans Held For Sale, at fair value

28,475

26,909

Loans Held for Investment

2,657,147

2,547,685

Allowance for Credit Losses

(26,808)

(25,068)

Loans Held for Investment, Net

2,630,339

2,522,617

Premises and Equipment, Net

82,055

82,138

Goodwill and Other Intangibles

93,053

93,093

Other Real Estate Owned

431

Other Assets

123,294

119,337

Total Assets

4,401,762

4,519,223

LIABILITIES

Deposits:

Noninterest Bearing Deposits

1,601,388

1,653,620

Interest Bearing Deposits

2,222,532

2,285,697

Total Deposits

3,823,920

3,939,317

Short-Term
Borrowings

26,632

56,793

Subordinated Notes Payable

52,887

Other Long-Term
Borrowings

463

513

Other Liabilities

85,878

73,675

Total Liabilities

3,989,780

4,123,185

Temporary Equity

8,722

8,757

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;

17,021,748

and

16,986,785

shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

170

Additional Paid-In Capital

37,512

37,331

Retained Earnings

397,654

387,009

Accumulated Other Comprehensive Loss, net of tax

(32,076)

(37,229)

Total Shareowners’

Equity

403,260

387,281

Total Liabilities, Temporary
Equity, and Shareowners’ Equity

4,401,762

4,519,223

The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.

CAPITAL CITY BANK
GROUP,
INC.

CONSOLIDATED STATEMENTS
OF INCOME

(Unaudited)

(As Restated)

Three Months Ended March 31,

(Dollars in Thousands, Except Per Share
Data)

2023

2022

INTEREST INCOME

Loans, including Fees

34,891

22,429

Investment Securities:

Taxable Securities

4,912

2,890

Tax Exempt Securities

Federal Funds Sold and Interest Bearing Deposits

4,111

409

Total Interest Income

43,926

25,734

INTEREST EXPENSE

Deposits

2,488

224

Short-Term
Borrowings

461

192

Subordinated Notes Payable

571

317

Other Long-Term
Borrowings

Total Interest Expense

3,526

742

NET INTEREST INCOME

40,400

24,992

Provision for Credit Losses

3,099

Net Interest Income After Provision for Credit Losses

37,301

24,960

NONINTEREST INCOME

Deposit Fees

5,239

5,191

Bank Card Fees

3,726

3,763

Wealth Management
Fees

3,928

6,070

Mortgage Banking Revenues

2,871

4,055

Other

1,994

1,733

Total Noninterest
Income

17,758

20,812

NONINTEREST EXPENSE

Compensation

23,524

22,298

Occupancy, Net

6,762

6,093

Other

7,389

8,132

Total Noninterest
Expense

37,675

36,523

INCOME BEFORE INCOME TAXES

17,384

9,249

Income Tax Expense

3,710

1,720

NET INCOME

13,674

7,529

Loss (Income) Attributable to Noncontrolling Interests

(591)

NET INCOME ATTRIBUTABLE
TO COMMON SHAREOWNERS

13,709

6,938

BASIC NET INCOME PER SHARE

0.81

0.41

DILUTED NET INCOME PER SHARE

0.80

0.41

Average Basic Shares
Outstanding

17,016

16,931

Average Diluted
Shares Outstanding

17,045

16,946

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)

(As Restated)

Three Months Ended

March 31,

(Dollars in Thousands)

2023

2022

NET INCOME ATTRIBUTABLE
TO COMMON SHAREOWNERS

13,709

6,938

Other comprehensive income (loss), before
tax:

Investment Securities:

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

6,808

(25,448)

Amortization of unrealized losses on securities transferred from available
for sale to held to maturity

865

Derivative:

Change in net unrealized (loss) gain on effective cash flow
derivative

(801)

1,836

Benefit Plans:

Pension Settlement

209

Total Benefit Plans

209

Other comprehensive income (loss), before
tax

6,872

(23,400)

Deferred tax expense (benefit) related to other comprehensive income

1,719

(5,871)

Other comprehensive income (loss), net of tax

5,153

(17,529)

TOTAL COMPREHENSIVE
INCOME (LOSS)

18,862

(10,591)

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

Shares

Common

Paid-In

Retained

(Loss) Income,

(Dollars In Thousands, Except Share Data)

Outstanding

Stock

Capital

Earnings

Net of Taxes

Total

Balance, January 1, 2023 (As Restated)

16,986,785

170

37,331

387,009

(37,229)

387,281

Net Income Attributable to Common Shareowners

13,709

Other Comprehensive Income, net of tax

5,153

Cash Dividends ($

0.1800

per share)

(3,064)

Repurchase of Common Stock

(25,241)

(819)

Stock Based Compensation

536

Stock Compensation Plan Transactions, net

60,204

464

Balance, March 31, 2023 (As Restated)

17,021,748

170

37,512

397,654

(32,076)

403,260

Balance, January 1, 2022 (As Restated)

16,892,060

169

34,423

364,788

(16,214)

383,166

Net Income Attributable to Common Shareowners

6,938

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 (As Restated)

16,947,602

169

35,188

369,014

(33,743)

370,628

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)

(As Restated)

Three Months Ended March 31,

(Dollars in Thousands)

2023

2022

CASH FLOWS FROM OPERATING
ACTIVITIES

Net Income Attributable to Common Shareowners

13,709

6,938

Adjustments to Reconcile Net Income to

Cash Provided by Operating Activities:

Provision for Credit Losses

3,099

Depreciation

1,969

1,907

Amortization of Premiums, Discounts and Fees, net

1,067

2,610

Amortization of Intangible Asset

Pension Plan Settlement Charge

209

Originations of Loans Held-for-Sale

(213,240)

(242,253)

Proceeds From Sales of Loans Held-for-Sale

214,545

252,584

Mortgage Banking Revenues

(2,871)

(4,055)

Net Additions for Capitalized Mortgage Servicing Rights

(91)

364

Stock Compensation

536

245

Net Tax Benefit From Stock-Based
Compensation

(19)

Deferred Income Taxes (Benefit)

(1,170)

(6,682)

Net Change in Operating Leases

(3)

(27)

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

(1,858)

Net Decrease (Increase) in Other Assets

(4,349)

1,897

Net Increase in Other Liabilities

12,471

7,036

Net Cash Provided By Operating Activities

23,854

20,826

CASH FLOWS FROM INVESTING ACTIVITIES

Securities Held to Maturity:

Purchases

(194,448)

Proceeds from Payments, Maturities, and Calls

8,820

14,441

Securities Available for
Sale:

Purchases

(2,017)

(25,139)

Proceeds from Sale of Securities

3,365

Proceeds from Payments, Maturities, and Calls

16,559

24,824

Purchases of Loans Held for Investment

(121,029)

(26,713)

Net Decrease (Increase) in Loans Held for Investment

9,629

(31,260)

Proceeds From Sales of Other Real Estate Owned

2,699

Purchases of Premises and Equipment

(1,886)

(1,013)

Noncontrolling Interest Contributions

1,838

Net Cash Used In Investing Activities

(87,225)

(234,105)

CASH FLOWS FROM FINANCING ACTIVITIES

Net (Decrease) Increase in Deposits

(115,397)

52,645

Net Decrease in Short-Term
Borrowings

(30,161)

(3,692)

Repayment of Other Long-Term
Borrowings

(50)

(78)

Dividends Paid

(3,064)

(2,712)

Payments to Repurchase Common Stock

(819)

Proceeds from Issuance of Common Stock Under Purchase Plans

164

190

Net Cash (Used In) Provided by Financing Activities

(149,327)

46,353

NET DECREASE IN CASH AND CASH EQUIVALENTS

(212,698)

(166,926)

Cash and Cash Equivalents at Beginning of Period

600,650

1,035,354

Cash and Cash Equivalents at End of Period

387,952

868,428

Supplemental Cash Flow Disclosures:

Interest Paid

3,723

715

Income Taxes Paid

7,466

Noncash Investing and Financing Activities:

Loans Transferred to Other Real Estate Owned

423

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 -~~SIGNIFICANT ACCOUNTING POLICIES~~

–

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~~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~~wholly owned subsidiary,

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

All material inter-company transactions and accounts

have been eliminated.

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

presentation.

The accompanying unaudited consolidated financial statements have

been prepared in accordance with generally accepted accounting

principles for interim financial information and with the instructions to Form

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

Accordingly,

they do not include all of the information and ~~footnotes~~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~~Consolidated Statement of ~~financial condition~~Financial Condition at December

31, ~~2016~~2022 has been derived from the audited consolidated financial

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

required by generally accepted accounting principles for

complete financial statements.

For further information, refer to the consolidated financial statements and ~~footnotes~~ notes

thereto included in the

Company’s annual report

on Form ~~10-K~~10-K/A for the year ended December 31, ~~2016.~~

2022.

NOTE 2 – INVESTMENT SECURITIES

Investment Portfolio Composition. The amortized cost and related market value of investment securities available-for-sale and
held-to-maturity were as follows:

September 30, 2017

December 31, 2016

Amortized
Unrealized
Unrealized
Market
Amortized
Unrealized
Unrealized
Market

Cost

Gains

Losses

Value

Cost

Gain

Losses

Value
Available for Sale

U.S. Government Treasury
$
257,635

$
32

$
869

$
256,798

$
286,867

$
262

$
851

$
286,278
U.S. Government Agency

147,550

729

290

147,989

131,489

495

344

131,640
States and Political Subdivisions

95,869

175

54

95,990

95,197

23

381

94,839
Mortgage-Backed Securities

1,218

114

-

1,332

1,312

118

-

1,430
Equity Securities⁽¹⁾

8,737

-

-

8,737

8,547

-

-

8,547
Total
$
511,009

$
1,050

$
1,213

$
510,846

$
523,412

$
898

$
1,576

$
522,734

Held to Maturity

U.S. Government Treasury
$
93,309

$
2

$
183

$
93,128

$
119,131

$
107

$
81

$
119,157
States and Political Subdivisions

7,051

31

2

7,080

8,175

1

38

8,138
Mortgage-Backed Securities

83,902

55

642

83,315

50,059

29

637

49,451
Total
$
184,262

$
88

$
827

$
183,523

$
177,365

$
137

$
756

$
176,746

Total Investment Securities
$
695,271

$
1,138

$
2,040

$
694,369

$
700,777

$
1,035

$
2,332

$
699,480

Accounting Standards Updates

Adoption of New Accounting Standard,

On January 1, 2023, the Company adopted Accounting Standards Update (“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 in Accounting

Standards Codification (“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.”

Proposed Accounting Standards

ASU

2023-01, “Leases (Topic

842)

Common Control Arrangements.” ASU 2023-01 requires

entities to amortize leasehold improvements associated with common control

leases over the useful life to the common control group.

ASU 2023-01 also provides certain practical expedients applicable to private

companies and not-for-profit organizations. ASU 2023-

01 will be effective for us on January 1, 2024, though early adoption

is permitted. The Company is evaluating the effect that ASU

2023-01 will have on its consolidated financial statements and related disclosures.

ASU No.

2023-02, “Investments—Equity Method and Joint Ventures

(Topic

323)

: Accounting for Investments in Tax

Credit

Structures Using the Proportional Amortization Method.” ASU 2023-02

is intended to improve the accounting and disclosures for

investments in tax credit structures. ASU 2023-02 allows entities to elect to account

for qualifying tax equity investments using the

proportional amortization method, regardless of the program giving

rise to the related income tax credits. Previously,

this method was

only available for qualifying tax equity investments in low-income

housing tax credit structures. ASU 2023-02 will be effective for us

on January 1, 2024, though early adoption is permitted.

The Company is evaluating the effect that ASU 2023-02 will have on its

consolidated financial statements and related disclosures.

Restatement of Previously Issued Consolidated Financial

Statements

We have restated

herein our unaudited consolidated financial statements for the three months ended

March 31, 2023. We have

also

restated financial statement periods for the year of 2022 and restated the impacted

amounts within the accompanying notes to the

consolidated financial statements.

Restatement Background

CCHL sold residential mortgage loans to CCB. CCHL recorded mortgage

banking revenue and a mortgage servicing right. On an

ongoing basis, CCHL recognized noninterest income for servicing these loans

on behalf of CCB. As a result of this misstatement,

assets are overstated by $

1.2

million as of March 31, 2023 and net income is overstated by $

1.2

million for the three months ended

March 31, 2023. This represents

0.03

% of previously reported total assets as of March 31, 2023 and

8.33

% of previously reported net

income for the three months ended March 31, 2023. As a result, diluted EPS decreases

from $

0.88

per share to $

0.80

per share.

Description of Misstatements

Misstatements Associated with Mortgage Loan Sale Transactions

Loan Origination Costs & Gain on Sale of Loan

CCHL originated certain mortgage loans that were sold to the Bank for

a premium. The gain recorded by CCHL and the

corresponding loan purchase premium recorded by the Bank were not

eliminated in consolidation. Additionally,

the

Company did not defer net loan origination costs on these loans. The impacts

of the loan origination costs & gain on sale of

loan misstatements on each period are presented in this note.

Mortgage Servicing Right (“MSR”) Asset

CCHL recorded an MSR asset and recognized a corresponding gain related

to the aforementioned loans sold to and serviced

for the Bank. As the MSR asset is recorded at amortized cost, CCHL also recorded

amortization expense in each period in

other non-interest expense. The MSR asset, gain, and amortization expense should

have been eliminated in consolidation.

The impacts of the MSR Asset misstatements on each period are presented

in this note.

Mortgage Servicing

The Bank recorded servicing fee expense and CCHL recorded servicing

income; these amounts should have been eliminated

in consolidation. The impacts of the mortgage servicing misstatements on each

period are presented in this note.

Statement of Financial Condition Misclassification

CCHL classifies all mortgage production as loans held for sale. The portion

of this production that was designated to be sold

to the Bank should have been designated as loans held for investment for the Consolidated

Financial Statements. This

reclassification also reflects the reversal of the related mark-to-market

adjustment and the establishment of the Allowance for

Credit Losses (“ACL”) on these loans. While previously the mark-to-market

adjustment had been reversed and the ACL

established at the time the loans were sold to CCB, this correction reflects those entries

in the appropriate periods. The

impacts of the restatement on each period are presented in this note.

Description of Restatement Tables

The following tables present the amounts previously reported and a reconciliation

of the restatement amounts reported on the restated

Consolidated Statement of Financial Condition as of March 31, 2023

and December 31, 2022, the restated Consolidated Statements

Income for the three months ended March 31, 2023 and 2022, restated

Consolidated Statement of Comprehensive Income for the three

months ended March 31, 2023 and 2022, restated Consolidated Statements of

Changes in Shareowners’ Equity for the three months

ended March 31, 2023 and 2022, and the restated Consolidated Statements of Cash Flows

for the three months ended March 31, 2023.

The amounts previously reported for the three months ended March 31, 2023

were derived from our Quarterly Report on Form 10-Q

for the three months ended March 31, 2023, originally filed May 1, 2023.

PART

FINANCIAL INFORMATION

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF FINANCIAL CONDITION

(Unaudited)

March 31, 2023

December 31, 2022

(Dollars in Thousands, Except Par Value)

As Previously

Reported

As Restated

As Previously

Reported

As Restated

ASSETS

Cash and Due From Banks

84,549

72,114

Federal Funds Sold and Interest Bearing Deposits

303,403

528,536

Total Cash and Cash Equivalents

387,952

600,650

Investment Securities, Available

for Sale, at fair value (amortized

cost of $

438,068

and $

455,232

)

402,943

413,294

Investment Securities, Held to Maturity (fair value of $

612,200

and $

612,701

)

651,755

660,744

Equity Securities

1,883

Total Investment

Securities

1,056,581

1,074,048

Loans Held For Sale, at fair value

55,118

28,475

54,635

26,909

Loans Held for Investment

2,636,884

2,657,147

2,525,180

2,547,685

Allowance for Credit Losses

(26,507)

(26,808)

(24,736)

(25,068)

Loans Held for Investment, Net

2,610,377

2,630,339

2,500,444

2,522,617

Premises and Equipment, Net

82,055

82,138

Goodwill and Other Intangibles

93,053

93,093

Other Real Estate Owned

431

Other Assets

124,593

123,294

120,519

119,337

Total Assets

4,409,742

4,401,762

4,525,958

4,519,223

LIABILITIES

Deposits:

Noninterest Bearing Deposits

1,601,388

1,653,620

Interest Bearing Deposits

2,222,532

2,285,697

Total Deposits

3,823,920

3,939,317

Short-Term

Borrowings

26,632

56,793

Subordinated Notes Payable

52,887

Other Long-Term

Borrowings

463

513

Other Liabilities

85,878

73,675

Total Liabilities

3,989,780

4,123,185

Temporary Equity

8,722

8,757

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;

17,021,748

and

16,986,785

shares issued and outstanding at March 31, 2023 and December

31, 2022, respectively

170

Additional Paid-In Capital

37,512

37,331

Retained Earnings

405,634

397,654

393,744

387,009

Accumulated Other Comprehensive Loss, net of tax

(32,076)

(37,229)

Total Shareowners’

Equity

411,240

403,260

394,016

387,281

Total Liabilities, Temporary

Equity, and Shareowners’ Equity

4,409,742

4,401,762

4,525,958

4,519,223

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, 2023

March 31, 2022

(Dollars in Thousands, Except Per Share

Data)

As Previously

Reported

As Restated

As Previously

Reported

As Restated

INTEREST INCOME

Loans, including Fees

34,880

34,891

22,133

22,429

Investment Securities:

Taxable Securities

4,912

2,890

Tax Exempt Securities

Federal Funds Sold and Interest Bearing Deposits

4,111

409

Total Interest Income

43,915

43,926

25,438

25,734

INTEREST EXPENSE

Deposits

2,488

224

Short-Term

Borrowings

461

192

Subordinated Notes Payable

571

317

Other Long-Term

Borrowings

Total Interest Expense

3,526

742

NET INTEREST INCOME

40,389

40,400

24,696

24,992

Provision for Credit Losses

3,130

3,099

Net Interest Income After Provision for Credit Losses

37,259

37,301

24,696

24,960

NONINTEREST INCOME

Deposit Fees

5,239

5,191

Bank Card Fees

3,726

3,763

Wealth Management

Fees

3,928

6,070

Mortgage Banking Revenues

6,995

2,871

8,946

4,055

Other

2,360

1,994

1,848

1,733

Total Noninterest

Income

22,248

17,758

25,818

20,812

NONINTEREST EXPENSE

Compensation

25,636

23,524

24,856

22,298

Occupancy, Net

6,762

6,093

Other

8,057

7,389

8,284

8,132

Total Noninterest

Expense

40,455

37,675

39,233

36,523

INCOME BEFORE INCOME TAXES

19,052

17,384

11,281

9,249

Income Tax Expense

4,133

3,710

2,235

1,720

NET INCOME

14,919

13,674

9,046

7,529

Loss (Income) Attributable to Noncontrolling Interests

(591)

NET INCOME ATTRIBUTABLE

TO COMMON

SHAREOWNERS

14,954

13,709

8,455

6,938

BASIC NET INCOME PER SHARE

0.88

0.81

0.50

0.41

DILUTED NET INCOME PER SHARE

0.88

0.80

0.50

0.41

Average Basic Shares

Outstanding

17,016

16,931

Average Diluted

Shares Outstanding

17,045

16,946

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, 2023

March 31, 2022

(Dollars in Thousands)

Previously

Reported

As Restated

Previously

Reported

As Restated

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

14,954

13,709

8,455

6,938

Other comprehensive income (loss), before

tax:

Investment Securities:

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

6,808

(25,448)

Amortization of unrealized losses on securities transferred from

available for sale to held to maturity

865

Derivative:

Change in net unrealized (loss) gain on effective cash flow

derivative

(801)

1,836

Benefit Plans:

Pension Settlement

209

Total Benefit Plans

209

Other comprehensive income (loss), before

tax

6,872

(23,400)

Deferred tax expense (benefit) related to other comprehensive income

1,719

(5,871)

Other comprehensive income (loss), net of tax

5,153

(17,529)

TOTAL COMPREHENSIVE

INCOME (LOSS)

20,107

18,862

(9,074)

(10,591)

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)

Three Months Ended March 31, 2023

(Dollars in thousands, except per share data)

Outstanding

Common

Stock

Additional

Paid-In

Capital

Retained

Earnings

Accumulated

Other

Comprehensive

Loss, Net of

Taxes

Total

As Previously Reported

Balance, January 1, 2023, as previously reported

16,986,785

170

37,331

393,744

(37,229)

394,016

Net Income Attributable to Common

Shareowners

14,954

Other Comprehensive Loss, Net of Tax

5,153

Cash Dividends ($

0.18

per share)

(3,064)

Repurchase of Common Stock

(25,241)

(819)

Stock Based Compensation

536

Stock Compensation Plan Transactions, net

60,204

464

Balance, March 31, 2023, as previously reported

17,021,748

170

37,512

405,634

(32,076)

411,240

As Restated

Balance, January 1, 2023, as restated

16,986,785

170

37,331

387,009

(37,229)

387,281

Net Income Attributable to Common

Shareowners

13,709

Other Comprehensive Loss, Net of Tax

5,153

Cash Dividends ($

0.18

per share)

(3,064)

Repurchase of Common Stock

(25,241)

(819)

Stock Based Compensation

536

Stock Compensation Plan Transactions, net

60,204

464

Balance, March 31, 2023, as restated

17,021,748

170

37,512

397,654

(32,076)

403,260

Three Months Ended March 31, 2022

(Dollars in thousands, except per share data)

Outstanding

Common

Stock

Additional

Paid-In

Capital

Retained

Earnings

Accumulated

Other

Comprehensive

Loss, Net of

Taxes

Total

As Previously Reported

Balance, January 1, 2022, as previously reported

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 ($

0.16

per share)

(2,712)

Stock Based Compensation

245

Stock Compensation Plan Transactions, net

55,542

520

Balance, March 31, 2022, as previously reported

16,947,602

169

35,188

370,531

(33,743)

372,145

As Restated

Balance, January 1, 2022, as restated

16,892,060

169

34,423

364,788

(16,214)

383,166

Net Income Attributable to Common

Shareowners

6,938

Other Comprehensive Loss, Net of Tax

(17,529)

Cash Dividends ($

0.16

per share)

(2,712)

Stock Based Compensation

245

Stock Compensation Plan Transactions, net

55,542

520

Balance, March 31, 2022, as restated

16,947,602

169

35,188

369,014

(33,743)

370,628

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF CASH FLOWS (Unaudited)

Three Months Ended

March 31, 2023

March 31, 2022

(Dollars in Thousands)

Previously

Reported

Restated

Previously

Reported

As Restated

CASH FLOWS FROM OPERATING

ACTIVITIES

Net Income Attributable to Common Shareowners

14,954

13,709

8,455

6,938

Adjustments to Reconcile Net Income to

Provision for Credit Losses

3,130

3,099

Depreciation

1,969

1,907

Amortization of Premiums, Discounts, and Fees, net

1,080

1,067

2,907

2,610

Amortization of Intangible Assets

Pension Settlement Charge

209

Originations of Loans Held-for-Sale

(212,085)

(213,240)

(246,887)

(242,253)

Proceeds From Sales of Loans Held-for-Sale

218,597

214,545

257,550

252,584

Mortgage Banking Revenues

(6,995)

(2,871)

(8,946)

(4,055)

Net Additions for Capitalized Mortgage Servicing Rights

(633)

(91)

227

364

Stock Compensation

536

245

Net Tax Benefit From Stock-Based

Compensation

(19)

Deferred Income Taxes (Benefit)

(747)

(1,170)

(6,167)

(6,682)

Net Change in Operating Leases

(3)

(27)

Net (Gain) Loss on Sales and Write-Downs of Other Real Estate

Owned

(1,858)

Net Decrease (Increase) in Other Assets

(4,349)

1,441

1,897

Net (Decrease) Increase in Other Liabilities

12,471

7,036

Net Cash Provided (Used In) By Operating Activities

26,107

23,854

17,971

20,826

CASH FLOWS FROM INVESTING ACTIVITIES

Securities Held to Maturity:

Purchases

(194,448)

Payments, Maturities, and Calls

8,820

14,441

Securities Available for

Sale:

Purchases

(2,017)

(25,139)

Proceeds from Sale of Securities

3,365

Payments, Maturities, and Calls

16,559

24,824

Purchase of loans held for investment

(121,029)

(26,713)

Net Decrease (Increase) in Loans Held for Investment

7,376

9,629

(28,405)

(31,260)

Proceeds From Sales of Other Real Estate Owned

2,699

Purchases of Premises and Equipment

(1,886)

(1,013)

Noncontrolling interest contributions received

1,838

Net Cash Used In Investing Activities

(89,478)

(87,225)

(231,250)

(234,105)

CASH FLOWS FROM FINANCING ACTIVITIES

Net Increase in Deposits

(115,397)

52,645

Net (Decrease) Increase in Other Short-Term

Borrowings

(30,161)

(3,692)

Repayment of Other Long-Term

Borrowings

(50)

(78)

Dividends Paid

(3,064)

(2,712)

Payments to Repurchase Common Stock

(819)

Issuance of Common Stock Under Compensation Plans

164

190

Net Cash Provided By Financing Activities

(149,327)

46,353

NET DECREASE IN CASH AND CASH EQUIVALENTS

(212,698)

(166,926)

Cash and Cash Equivalents at Beginning of Period

600,650

1,035,354

Cash and Cash Equivalents at End of Period

387,952

868,428

Supplemental Cash Flow Disclosures:

Interest Paid

3,723

715

Income Taxes Paid

7,466

Noncash Investing and Financing Activities:

Loans and Premises Transferred to Other Real Estate Owned

423

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENT

OF FINANCIAL CONDITION

(Unaudited)

As of March 31, 2023

(Dollars in Thousands, except per share data)

Previously

Reported

2022

Restatement

Impact

2023

Restatement

Impact

As Restated

ASSETS:

Cash and Due From Banks

84,549

Federal Funds Sold and Interest Bearing Deposits

303,403

Total Cash and Cash Equivalents

387,952

Investment Securities Available

for Sale (amortized cost of

438,068

)

402,943

Investment Securities Held to Maturity (fair value of $

612,200

)

651,755

Other Equity Securities

1,883

Total Investment Securities

1,056,581

Loans Held For Sale

55,118

(27,726)

1,083

28,475

Loans, Net of Unearned Income

2,636,884

22,505

(2,242)

2,657,147

Allowance for Loan Losses

(26,507)

(332)

(26,808)

Loans, Net

2,610,377

22,173

(2,211)

2,630,339

Premises and Equipment, Net

82,055

Goodwill

93,053

Other Real Estate Owned

Other Assets

124,593

(1,182)

(117)

123,294

Total Assets

4,409,742

(6,735)

(1,245)

4,401,762

LIABILITIES

Deposits:

Noninterest Bearing Deposits

1,601,388

Interest Bearing Deposits

2,222,532

Total Deposits

3,823,920

Short-Term

Borrowings

26,632

Subordinated Notes Payable

52,887

Other Long-Term

Borrowings

463

Other Liabilities

85,878

Total Liabilities

3,989,780

Temporary Equity

8,722

SHAREOWNERS' EQUITY

Preferred Stock: $

.01

par value,

3,000,000

shares authorized

shares issues and outstanding

Common Stock, $

.01

par value,

90,000,000

shares authorized

17,021,748 shares issued and outstanding

170

Additional Paid-In Capital

37,512

Retained Earnings

405,634

(6,735)

(1,245)

397,654

Accumulated Other Comprehensive Loss, Net of Tax

(32,076)

Total Shareowners' Equity

411,240

(6,735)

(1,245)

403,260

Total Liabilities, Temporary

Equity, and Shareowners' Equity

4,409,742

(6,735)

(1,245)

4,401,762

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENT

OF INCOME

(Unaudited)

For Three Months Ended March 31, 2023

(Dollars in thousands, except per share data)

Previously

Reported

Restatement

Impact

As Restated

INTEREST INCOME

Loans, Including Fees

34,880

34,891

Taxable Securities

4,912

Tax Exempt Securities

Funds Sold

4,111

Total Interest Income

43,915

43,926

INTEREST EXPENSE

Deposits

2,488

Short-Term

Borrowings

461

Subordinated Notes Payable

571

Other Long-Term

Borrowings

Total Interest Expense

3,526

Net Interest Income

40,389

40,400

Provision for Loan Losses

3,130

(31)

3,099

Net Interest Income After Provision For Loan Losses

37,259

37,301

NONINTEREST INCOME

Deposit Fees

5,239

Bank Card Fees

3,726

Wealth Management

Fees

3,928

Mortgage Banking Fees

6,995

(4,124)

2,871

Other

2,360

(366)

1,994

Total Noninterest

Income

22,248

(4,490)

17,758

NONINTEREST EXPENSE

Compensation

25,636

(2,112)

23,524

Occupancy, Net

6,762

Other

8,057

(668)

7,389

Total Noninterest

Expense

40,455

(2,780)

37,675

INCOME BEFORE INCOME TAXES

19,052

(1,668)

17,384

Income Tax Expense

4,133

(423)

3,710

NET INCOME

14,919

(1,245)

13,674

Pre-Tax Income

Attributable to Noncontrolling Interests

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

14,954

(1,245)

13,709

BASIC NET INCOME PER SHARE

0.88

(0.07)

0.81

DILUTED NET INCOME PER SHARE

0.88

(0.08)

0.80

AVERAGE

Basic

17,016

Diluted

17,045

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENT

OF COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended March 31, 2023

(Dollars in thousands, except per share data)

Previously

Reported

Restatement

Impact

As Restated

NET INCOME

14,954

(1,245)

13,709

Other comprehensive income (loss), before

tax:

Investment Securities:

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

6,808

Amortization of unrealized losses on securities transferred from available

for sale to

held to maturity

865

Derivative:

Change in net unrealized gain on effective cash flow

derivative

(801)

Benefit Plans:

Other comprehensive income (loss), before

tax:

6,872

Deferred tax expense related to other comprehensive income

1,719

Other comprehensive income (loss), net of tax

5,153

TOTAL COMPREHENSIVE

INCOME

20,107

(1,245)

18,862

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENT

OF CHANGES IN SHAREOWNERS' EQUITY

(Unaudited)

Three Months Ended March 31, 2023

(Dollars in thousands, except per share data)

Outstanding

Common

Stock

Additional

Paid-In

Capital

Retained

Earnings

Accumulated

Other

Comprehensive

Loss, Net of

Taxes

Total

As Previously Reported

Balance, January 1, 2023, as previously reported

16,986,785

$170

$37,331

$393,744

$(37,229)

$394,016

Net Income Attributable to Common Shareowners

14,954

Other Comprehensive Loss, Net of Tax

5,153

Cash Dividends ($

0.18

per share)

(3,064)

Repurchase of Common Stock

(25,241)

(819)

Stock Based Compensation

536

Stock Compensation Plan Transactions, net

60,204

464

Balance, March 31, 2023, as previously reported

17,021,748

$170

$37,512

$405,634

$(32,076)

$411,240

Restatement Impacts

Balance, January 1, 2023, as restated

(6,735)

Net Income Attributable to Common Shareowners

(1,245)

Balance, March 31, 2023, as restated

(7,980)

As Restated

Balance, January 1, 2023, as restated

16,986,785

$170

$37,331

$387,009

$(37,229)

$387,281

Net Income Attributable to Common Shareowners

13,709

Other Comprehensive Loss, Net of Tax

5,153

Cash Dividends ($

0.18

per share)

(3,064)

Repurchase of Common Stock

(25,241)

(819)

Stock Based Compensation

536

Stock Compensation Plan Transactions, net

60,204

464

Balance, March 31, 2023, as restated

17,021,748

$170

$37,512

$397,654

$(32,076)

$403,260

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENT

OF CASH FLOWS

(Unaudited)

Three Months Ended March 31, 2023

(Dollars in Thousands)

As Previously

Reported

Restatement

Impact

As Restated

CASH FLOWS FROM OPERATING

ACTIVITIES

Net Income Attributable to Common Shareowners

14,954

(1,245)

13,709

Adjustments to Reconcile Net Income to

Provision for Credit Losses

3,130

(31)

3,099

Depreciation

1,969

Amortization of Premiums, Discounts, and Fees, net

1,080

(13)

1,067

Amortization of Intangible Assets

Originations of Loans Held-for-Sale

(212,085)

(1,155)

(213,240)

Proceeds From Sales of Loans Held-for-Sale

218,597

(4,052)

214,545

Mortgage Banking Revenues

(6,995)

4,124

(2,871)

Net Additions for Capitalized Mortgage Servicing Rights

(633)

542

(91)

Stock Compensation

536

Deferred Income Taxes (Benefit)

(747)

(423)

(1,170)

Net Change in Operating Leases

(3)

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

(1,858)

Net Decrease (Increase) in Other Assets

(4,349)

Net (Decrease) Increase in Other Liabilities

12,471

Net Cash Provided (Used In) By Operating Activities

26,107

(2,253)

23,854

CASH FLOWS FROM INVESTING ACTIVITIES

Securities Held to Maturity:

Payments, Maturities, and Calls

8,820

Securities Available for

Sale:

Purchases

(2,017)

Payments, Maturities, and Calls

16,559

Purchase of loans held for investment

(121,029)

Net Decrease in Loans Held for Investment

7,376

2,253

9,629

Proceeds From Sales of Other Real Estate Owned

2,699

Purchases of Premises and Equipment

(1,886)

Net Cash Used In Investing Activities

(89,478)

2,253

(87,225)

CASH FLOWS FROM FINANCING ACTIVITIES

Net Increase in Deposits

(115,397)

Net (Decrease) Increase

in Other Short-Term Borrowings

(30,161)

Repayment of Other Long-Term

Borrowings

(50)

Dividends Paid

(3,064)

Payments to Repurchase Common Stock

(819)

Issuance of Common Stock Under Compensation Plans

164

Net Cash Provided By Financing Activities

(149,327)

NET DECREASE IN CASH AND CASH EQUIVALENTS

(212,698)

Cash and Cash Equivalents at Beginning of Period

600,650

Cash and Cash Equivalents at End of Period

387,952

Supplemental Cash Flow Disclosures:

Interest Paid

3,723

Income Taxes Paid

7,466

Noncash Investing and Financing Activities:

Loans and Premises Transferred to Other Real Estate Owned

423

NOTE 2 –

INVESTMENT SECURITIES

Investment Portfolio Composition

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

securities available-for-sale (“AFS”) and securities held-to-maturity (“HTM”)

and the corresponding amounts of gross

unrealized gains and losses.

Available for

Sale

Amortized

Unrealized

Allowance for

Fair

(Dollars in Thousands)

Cost

Gains

Losses

Credit Losses

Value

March 31, 2023

U.S. Government Treasury

23,984

1,611

22,373

U.S. Government Agency

184,294

127

10,131

174,290

States and Political Subdivisions

47,143

5,663

(8)

41,479

Mortgage-Backed Securities

(1)

79,148

10,137

69,014

Corporate Debt Securities

96,144

7,718

(28)

88,432

Other Securities

(2)

7,355

Total

438,068

171

35,260

(36)

402,943

December 31, 2022

U.S. Government Treasury

23,977

1,928

22,050

U.S. Government Agency

198,888

12,863

186,052

States and Political Subdivisions

47,197

6,855

(13)

40,329

Mortgage-Backed Securities

(1)

80,829

11,426

69,405

Corporate Debt Securities

97,119

8,874

(28)

88,236

Other Securities

(2)

7,222

Total

455,232

41,946

(41)

413,294

Held to Maturity

Amortized

Unrealized

Fair

(Dollars in Thousands)

Cost

Gains

Losses

Value

March 31, 2023

U.S. Government Treasury

457,446

20,272

437,174

Mortgage-Backed Securities

(1)

194,309

19,302

175,026

Total

651,755

39,574

612,200

December 31, 2022

U.S. Government Treasury

457,374

25,641

431,733

Mortgage-Backed Securities

(1)

203,370

22,410

180,968

Total

660,744

48,051

612,701

(1)

Comprised of residential mortgage-backed
securities

(2)

Includes Federal Home Loan Bank and Federal Reserve Bank ~~and FNBB, Inc.~~ stock, recorded
at cost of ~~$3.2 million, $4.8~~ $

2.3

million and ~~$0.8~~ $

5.1

million,

respectively,
at ~~September 30, 2017~~March 31, 2023 and ~~$3.3 million, $4.8~~ $

2.1

million and ~~$0.5~~ $

5.1

million, respectively,
at December 31, ~~2016.~~

2022.

At March 31, 2023 and December 31, 2022, the investment portfolio had $

1.9

million and $

0.01

million, respectively in equity

securities. These securities do not have a readily determinable fair value

and were not credit impaired.

Securities with an amortized cost of ~~$214.3~~ $

660.1

million and ~~$332.7~~ $

656.1

million at ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, respectively,

were

pledged to secure public deposits and for other purposes.

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

to own capital stock in the FHLB based

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

advances.

FHLB stock, which is included in ~~equity~~

other securities,

is pledged to secure FHLB advances.

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

During the third quarter of 2022, the Company transferred certain securities from
the AFS to HTM classification.
Transfers are made

at fair value on the date of the transfer.
The

securities had an amortized cost basis and fair value of $

168.4

million and $

159.0

million, respectively at the time of transfer.
The net unamortized, unrealized loss on the transferred securities included in
accumulated

other comprehensive loss in the accompanying statement of financial condition
at March 31, 2023 totaled $

7.1

million.
This amount

will continue to be amortized out of accumulated other comprehensive loss over
the remaining life of the underlying securities as an

adjustment of the yield on those securities.

Investment Sales.

There were no significant sales of investment securities for the three months ended
March 31, 2023 and $

3.4

million

in sales of investment securities for the three months ended March 31, 2022.

Maturity Distribution

At ~~September 30, 2017,~~March 31, 2023, the ~~Company's~~ Company’s

investment securities had the following maturity distribution based

contractual maturity.

Expected maturities may differ from contractual maturities because borrowers

may have the right to call or

prepay obligations.

Mortgage-backed securities (“MBS”) and certain amortizing U.S. government

agency securities are shown

separately because they are not due at a certain maturity date.

Available for Sale

Held to Maturity
(Dollars in Thousands)
Amortized Cost

Market Value

Amortized Cost

Market Value
Due in one year or less
$
138,454

$
138,421

$
63,439

$
63,370
Due after one through five years

253,590

252,720

36,922

36,838
Mortgage-Backed Securities

1,217

1,332

83,901

83,315
U.S. Government Agency

109,011

109,636

-

-
Equity Securities

8,737

8,737

-

-
Total
$
511,009

$
510,846

$
184,262

$
183,523

Available for
Sale
Held to Maturity
(Dollars in Thousands)
Amortized Cost
Fair Value
Amortized Cost
Fair Value
Due in one year or less
$
36,233
$
35,696
$
-
$
-
Due after one year through five years
159,994
147,344
457,446
437,174
Due after five year through ten years
50,961
42,970
-
-
Mortgage-Backed Securities
79,148
69,014
194,309
175,026
U.S. Government Agency
104,377
100,564
-
-
Other Securities
7,355
7,355
-
-
Total
$
438,068
$
402,943
$
651,755
$
612,200

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

12 Months

Total

Market

Unrealized

Market

Unrealized

Market

Unrealized
(Dollars in Thousands)
Value

Losses

Value

Losses

Value

Losses
September 30, 2017

Available for Sale

U.S. Government Treasury
$
191,720

$
759

$
9,981

$
110

$
201,701

$
869
U.S. Government Agency

34,775

126

17,853

164

52,628

290
States and Political Subdivisions

23,031

22

5,129

32

28,160

54
Total

249,526

907

32,963

306

282,489

1,213


Held to Maturity

U.S. Government Treasury

83,173

183


-

-


83,173

183
States and Political Subdivisions

504

2

-

-

504

2
Mortgage-Backed Securities

47,159

579

4,373

63

51,532

642
Total
$
130,836

$
764

$
4,373

$
63

$
135,209

$
827

December 31, 2016

Available for Sale

U.S. Government Treasury
$
116,704

$
851

$
-

$
-

$
116,704

$
851
U.S. Government Agency

48,520

310

6,699

34

55,219

344
States and Political Subdivisions

81,521

380

294

1

81,815

381
Mortgage-Backed Securities

3

-

-

-

3

-
Total

246,748

1,541

6,993

35

253,741

1,576


Held to Maturity

U.S. Government Treasury

35,210

81

-

-

35,210

81
States and Political Subdivisions

7,491

38

-

-

7,491

38
Mortgage-Backed Securities

36,710

599

4,010

38

40,720

637
Total
$
79,411

$
718

$
4,010

$
38

$
83,421

$
756

~~Management evaluates securities~~

Less Than

Greater Than

12 Months

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

(Dollars in Thousands)

Value

Losses

Value

Losses

Value

Losses

March 31, 2023

Available for ~~other than temporary impairment at least quarterly,~~

Sale

U.S. Government Treasury

994

19,481

1,611

20,475

1,611

U.S. Government Agency

29,035

354

133,057

9,777

162,092

10,131

States and ~~more frequently when economic or market concerns warrant such evaluation. Declines in the fair value of available-for-sale (“AFS”)~~Political Subdivisions

39,905

5,663

39,905

5,663

Mortgage-Backed Securities

68,892

10,137

68,892

10,137

Corporate Debt Securities

10,009

215

74,472

7,503

84,481

7,718

Total

40,038

569

335,807

34,691

375,845

35,260

Held to Maturity

U.S. Government Treasury

4,827

106

432,346

20,166

437,173

20,272

Mortgage-Backed Securities

9,360

297

164,217

19,005

173,577

19,302

Total

14,187

403

596,563

39,171

610,750

39,574

December 31, 2022

Available for

Sale

U.S. Government Treasury

983

19,189

1,928

20,172

1,928

U.S. Government Agency

63,112

2,572

113,004

10,291

176,116

12,863

States and ~~held-to-maturity (“HTM”)securities below their cost that are deemed~~Political Subdivisions

1,425

38,760

6,853

40,185

6,855

Mortgage-Backed Securities

6,594

959

60,458

10,467

67,052

11,426

Corporate Debt Securities

26,959

878

58,601

7,996

85,560

8,874

Total

99,073

4,411

290,012

37,535

389,085

41,946

Held to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, the Company considers, (i) whether it has decided to sell the security, (ii) whether it is more likely than not that the Company will have to sell the security before its market value recovers, and (iii) whether the present value of expected cash flows is sufficient to recover the entire amortized cost basis. When assessing a security’s expected cash flows, the Company considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost and (ii) the financial condition and near-term prospects of the issuer. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by rating agencies have occurred, regulatory issues, and analysts’ reports.

Maturity

U.S. Government Treasury

177,552

11,018

254,181

14,623

431,733

25,641

Mortgage-Backed Securities

88,723

6,814

91,462

15,596

180,185

22,410

Total

266,275

17,832

345,643

30,219

611,918

48,051

At ~~September 30, 2017,~~ March 31, 2023, there were ~~266~~

896

positions (combined AFS and HTM) with unrealized losses totaling ~~$2.0~~ $

74.8

million. 58

of these

positions ~~were~~are U.S. Treasury bonds and carry

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

684

are U.S. government ~~treasury securities guaranteed by the U.S. government. 103 of these positions were U.S. government~~ agency ~~and mortgage-backed~~

securities issued by U.S. government sponsored entities.~~Because~~

We believe

the ~~declines~~long history of no credit losses on government securities

indicates that the expectation of nonpayment of the amortized cost basis is effectively

zero.

The remaining

125

positions (municipal

securities and corporate bonds) have a credit component.

At March 31, 2023, all collateralized mortgage obligation securities

(“CMO”), MBS, Small Business Administration securities (“SBA”), U.S. Agency,

and U.S. Treasury bonds held were AAA rated.

March 31, 2023, corporate debt securities had an allowance for credit losses of

28,000

and municipal securities had an allowance of

8,000

Credit Quality Indicators

The Company monitors the credit quality of its investment securities through

various risk management procedures, including the

monitoring of credit ratings.

A majority of the debt securities in the ~~market value~~Company’s

investment portfolio were issued by a U.S.

government entity or agency and are either explicitly or implicitly guaranteed

by the U.S. government.

The Company believes the

long history of no credit losses on these securities indicates that the expectation

of nonpayment of the amortized cost basis is

effectively zero, even if the U.S. government were

to technically default.

Further, certain municipal securities held by the Company

have been pre-refunded and secured by government guaranteed treasuries.

Therefore, for the aforementioned securities, the Company

does

t assess or record expected credit losses due to the zero loss assumption.

The Company monitors the credit quality of its

municipal and corporate securities portfolio via credit ratings

which are updated on a quarterly basis.

On a quarterly basis, municipal

and corporate securities in an unrealized loss position are evaluated to determine

if the loss is attributable to ~~changes in interest rates~~credit related factors and ~~not~~

if an allowance for credit ~~quality and because the Company has the present ability and intent to hold these investments until there~~loss is ~~a recovery in fair value, which may be at maturity, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2017.~~

needed.

NOTE 3 – LOANS ~~NET~~

HELD FOR INVESTMENT AND ALLOWANCE

FOR CREDIT LOSSES

Loan Portfolio Composition

The composition of the held for investment (“HFI”) loan portfolio was as follows:

(Dollars in Thousands)
September 30, 2017

December 31, 2016
Commercial, Financial and Agricultural
$
215,963

$
216,404
Real Estate – Construction

67,813

58,443
Real Estate – Commercial Mortgage

527,331

503,978
Real Estate – Residential⁽¹⁾

315,583

281,509
Real Estate – Home Equity

228,499

236,512
Consumer

275,149

264,443

Loans, Net of Unearned Income
$
1,630,338

$
1,561,289

(As Restated)

(Dollars in Thousands)

March 31, 2023

December 31, 2022

Commercial, Financial and Agricultural

236,263

247,362

Real Estate – Construction

253,903

234,519

Real Estate – Commercial Mortgage

798,438

782,557

Real Estate – Residential

(1)

855,357

749,513

Real Estate – Home Equity

206,931

208,217

Consumer

(2)

306,255

325,517

Loans Held For Investment, Net of Unearned Income

2,657,147

2,547,685

(1)

Includes loans in process ~~with outstanding~~ balances of ~~$10.9~~ $

8.5

million and ~~$9.6~~ $

6.1

million at ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~
2022, respectively.

(2)

Includes overdraft balances of $

0.9

million and $

1.1

million at March 31, 2023 and December 31, 2022,

respectively.

Net deferred loan costs, which include premiums on purchased loans,

included in loans were ~~$0.7~~ $

5.7

million at ~~September 30, 2017~~March 31, 2023 and ~~$0.5~~ $

5.1

million at December 31, ~~2016.~~

2022.

Accrued interest receivable on loans which is excluded from amortized

cost totaled $

8.6

million at March 31, 2023 and $

8.0

million at

December 31, 2022, and is reported separately in Other Assets.

The Company has pledged a blanket floating lien on all 1-4 family residential mortgage

loans, commercial real estate mortgage loans,

and home equity loans to support available borrowing capacity at the FHLB of

Atlanta and has pledged a blanket floating lien on all

consumer loans, commercial loans, and construction loans to support

available borrowing capacity at the Federal Reserve Bank of

Atlanta.

~~Nonaccrual Loans~~

Loan Purchase and Sales

The Company will periodically purchase newly originated 1-4 family real

estate secured adjustable rate

loans from Capital City Home Loans ~~are generally placed on nonaccrual status if principal or interest payments become 90 days past due and/or management deems~~(“CCHL”), a related party.

Residential loan purchases from CCHL totaled $

120.1

million and

26.3

million for the ~~collectability~~three months ended March 31, 2023 and March 31, 2022, respectively,

and were not credit impaired.

Allowance for Credit Losses

The methodology for estimating the amount of credit losses reported in the

allowance for credit losses

(“ACL”) has two basic components: first, an asset-specific component

involving loans that do not share risk characteristics and the

measurement of expected credit losses for such individual loans; and second,

a pooled component for expected credit losses for pools

of loans that share similar risk characteristics.

This allowance methodology is discussed further in Note 1 – Significant

Accounting

Policies in the principal and/or interest to be doubtful. Loans are returned to accrual status when the principal and interest amounts contractually due are brought current or when future payments are reasonably assured.

2022 Form 10-K/A.

The following table ~~presents~~details the ~~recorded investment~~activity in ~~nonaccrual~~the allowance for credit losses by portfolio

segment.

Allocation of a portion of the

allowance to one category of loans does not preclude its availability to absorb

losses in other categories.

Commercial,

Real Estate

Financial,

Real Estate

Commercial

Real Estate

(Dollars in Thousands)

Agricultural

Construction

Mortgage

Residential

Home Equity

Consumer

Total

Three Months Ended

March 31, 2023 (As Restated)

Beginning Balance

1,506

2,654

4,815

10,741

1,864

3,488

25,068

Provision for Credit Losses

704

1,152

(10)

1,329

3,260

Charge-Offs

(164)

(120)

(2,366)

(2,650)

Recoveries

944

1,130

Net (Charge-Offs) Recoveries

(69)

(112)

(1,422)

(1,520)

Ending Balance

1,515

3,359

4,710

11,950

1,879

3,395

26,808

Three Months Ended

March 31, 2022 (As Restated)

Beginning Balance

2,191

3,302

5,810

4,129

2,296

3,878

21,606

Provision for Credit Losses

(161)

(714)

(181)

346

(405)

1,068

(47)

Charge-Offs

(73)

(266)

(33)

(1,402)

(1,774)

Recoveries

165

716

1,003

Net (Charge-Offs) Recoveries

(237)

(686)

(771)

Ending Balance

2,122

2,596

5,392

4,502

1,916

4,260

20,788

For the three months ended March 31, 2023, the allowance for HFI loans

increased by $

1.7

million and ~~loans past due over 90 days~~reflected a provision expense

of $

3.2

million and ~~still~~net loan charge-offs of $

1.5

million.

The increase was primarily driven by incremental reserves needed for loan

growth.

For the three months ended March 31, 2022, the allowance decreased by $

0.8

million and reflected a provision benefit of

0.05

million and net loan charge-offs of $

0.8

million.

The decrease reflected improvement in the forecasted level of unemployment

and its potential effect on ~~accrual by class~~rates of ~~loans.~~

default.

September 30, 2017

December 31, 2016
(Dollars in Thousands)
Nonaccrual

90 + Days

Nonaccrual

90 + Days
Commercial, Financial and Agricultural
$
41

$
-

$
468

$
-
Real Estate – Construction

362

-

311

-
Real Estate – Commercial Mortgage

2,425

-

3,410

-
Real Estate – Residential

2,350

-

2,330

-
Real Estate – Home Equity

1,108

-

1,774

-
Consumer

272

-

240

-
Total Nonaccrual Loans
$
6,558

$
-

$
8,533

$
-

Four unemployment forecast scenarios were utilized to estimate probability

of default and

are weighted based on management’s

estimate of probability.

See Note 8 – Commitments and Contingencies for information on the

allowance for off-balance sheet credit commitments.

Loan Portfolio Aging.

A loan is defined as a past due loan when one full payment is past due or a contractual maturity

is over 30 days

past due (“DPD”).

The following table presents the aging of the ~~recorded investment~~amortized cost basis in accruing

past due loans by class of loans.

30-59

60-89

90 +

Total

Total

Total
(Dollars in Thousands)
DPD

DPD

DPD

Past Due

Current

Loans⁽¹⁾
September 30, 2017

Commercial, Financial and Agricultural
$
249

$
584

$
-

$
833

$
215,089

$
215,963
Real Estate – Construction

-

5

-

5

67,446

67,813
Real Estate – Commercial Mortgage

1,277

168

-

1,445

523,461

527,331
Real Estate – Residential

374

754

-

1,128

312,105

315,583
Real Estate – Home Equity

455

1

-

456

226,935

228,499
Consumer

1,266

554

-

1,820

273,057

275,149
Total Past Due Loans
$
3,621

$
2,066

$
-

$
5,687

$
1,618,093

$
1,630,338

December 31, 2016

Commercial, Financial and Agricultural
$
209

$
48

$
-

$
257

$
215,679

$
216,404
Real Estate – Construction

949

282

-

1,231

56,901

58,443
Real Estate – Commercial Mortgage

835

1

-

836

499,732

503,978
Real Estate – Residential

1,199

490

-

1,689

277,490

281,509
Real Estate – Home Equity

577

51

-

628

234,110

236,512
Consumer

1,516

281

-

1,797

262,406

264,443
Total Past Due Loans
$
5,285

$
1,153

$
-

$
6,438

$
1,546,318

$
1,561,289

⁽¹⁾ Total Loans include nonaccrual loans

~~Allowance for Loan Losses~~

30-59

60-89

90 +

Total

Nonaccrual

Total

(Dollars in Thousands)

DPD

Past Due

Current

Loans

March 31, 2023 (As Restated)

Commercial, Financial and Agricultural

248

252

235,999

236,263

Real Estate – Construction

1,137

252,766

253,903

Real Estate – Commercial Mortgage

130

795,747

2,561

798,438

Real Estate – Residential

(1)

1,040

853,551

766

855,357

Real Estate – Home Equity

206,195

682

206,931

Consumer

2,175

273

2,448

303,239

568

306,255

Total

4,718

343

5,061

2,647,497

4,589

2,657,147

December 31, 2022 (As Restated)

Commercial, Financial and Agricultural

109

126

235

247,086

247,362

Real Estate – Construction

359

234,143

234,519

Real Estate – Commercial Mortgage

158

149

307

781,605

645

782,557

Real Estate – Residential

845

530

1,375

747,899

239

749,513

Real Estate – Home Equity

207,411

771

208,217

Consumer

3,666

1,852

5,518

319,415

584

325,517

Total

5,137

2,692

7,829

2,537,559

2,297

2,547,685

Nonaccrual Loans

.The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s best estimate of incurred losses within the existing portfolio of loans.

Loans are ~~charged-off~~generally placed on nonaccrual status if principal or interest payments

become 90 days past due and/or

management deems the collectability of the principal and/or interest to

be doubtful.

Loans are returned to accrual status when the ~~allowance~~

principal and interest amounts contractually due are brought current

or when ~~losses~~future payments are ~~deemed to be probable and~~ reasonably ~~quantifiable.~~

assured.

The following table ~~details~~presents the ~~activity in the allowance for loan losses by portfolio class. Allocation of a portion of the allowance to one category~~amortized cost basis of loans ~~does not preclude its availability to absorb losses~~ in ~~other categories.~~

nonaccrual

Commercial,

Real Estate

Financial,

Real Estate

Commercial

Real Estate

Real Estate

(Dollars in Thousands)
Agricultural

Construction

Mortgage

Residential

Home Equity
Consumer

Total
Three Months Ended

September 30, 2017

Beginning Balance
$
1,095

$
114

$
3,825

$
3,384

$
2,524

$
2,300

$
13,242

Provision for Loan Losses

208

(26)

286

(32)

(103)

157

490

Charge-Offs

(276)

-

(94)

(125)

(50)

(455)

(1,000)

Recoveries

79

50

69

60

84

265

607

Net Charge-Offs

(197)

50

(25)

(65)

34

(190)

(393)
Ending Balance
$
1,106

$
138

$
4,086

$
3,287

$
2,455

$
2,267

$
13,339

Nine Months Ended

September 30, 2017

Beginning Balance
$
1,198

$
168

$
4,315

$
3,445

$
2,297

$
2,008

$
13,431

Provision for Loan Losses

401

(80)

264

(348)

148

1,004

1,389

Charge-Offs

(693)

-

(643)

(285)

(142)

(1,616)

(3,379)

Recoveries

200

50

150

475

152

871

1,898

Net Charge-Offs

(493)

50

(493)

190

10

(745)

(1,481)
Ending Balance
$
1,106

$
138

$
4,086

$
3,287

$
2,455

$
2,267

$
13,339

Three Months Ended

September 30, 2016

Beginning Balance
$
1,048

$
126

$
4,389

$
3,835

$
2,391

$
1,888

$
13,677

Provision for Loan Losses

163

(3)

224

(324)

(307)

247

-

Charge-Offs

(143)

-

(5)

(96)

(51)

(479)

(774)

Recoveries

199

-

45

139

237

221

841

Net Charge-Offs

56

-

40

43

186

(258)

67
Ending Balance
$
1,267

$
123

$
4,653

$
3,554

$
2,270

$
1,877

$
13,744

Nine Months Ended

September 30, 2016

Beginning Balance
$
905

$
101

$
4,498

$
4,409

$
2,473

$
1,567

$
13,953

Provision for Loan Losses

559

22

71

(1,030)

(168)

901

355

Charge-Offs

(484)

-

(279)

(779)

(412)

(1,356)

(3,310)

Recoveries

287

-

363

954

377

765

2,746

Net Charge-Offs

(197)

-

84

175

(35)

(591)

(564)
Ending Balance
$
1,267

$
123

$
4,653

$
3,554

$
2,270

$
1,877

$
13,744

status and loans past due over 90 days and still on accrual

by class of loans.

March 31, 2023

December 31, 2022

Nonaccrual

With No

With

90 + Days

With No

With

90 + Days

(Dollars in Thousands)

ACL

Still Accruing

ACL

Still Accruing

Commercial, Financial and Agricultural

Real Estate – Construction

Real Estate – Commercial Mortgage

2,438

123

389

256

Real Estate – Residential

766

239

Real Estate – Home Equity

682

771

Consumer

568

584

Total Nonaccrual

Loans

2,438

2,151

389

1,908

Collateral Dependent Loans.

The following table ~~details~~presents the ~~amount of the allowance for loan losses by portfolio class disaggregated on the~~amortized cost basis of ~~the Company’s impairment methodology.~~

collateral-dependent

Commercial,

Real Estate

Financial,

Real Estate

Commercial

Real Estate

Real Estate

(Dollars in Thousands
Agricultural

Construction

Mortgage

Residential

Home Equity
Consumer

Total
September 30, 2017

Period-end amount

Allocated to:

Loans Individually

Evaluated for Impairment
$
88

$
24

$
1,846

$
1,196

$
454

$
3

$
3,611
Loans Collectively

Evaluated for Impairment

1,018

114

2,240

2,091

2,001

2,264

9,728
Ending Balance
$
1,106

$
138

$
4,086

$
3,287

$
2,455

$
2,267

$
13,339

December 31, 2016

Period-end amount

Allocated to:

Loans Individually

Evaluated for Impairment
$
80

$
-

$
2,038

$
1,561

$
335

$
6

$
4,020
Loans Collectively

Evaluated for Impairment

1,118

168

2,277

1,884

1,962

2,002

9,411
Ending Balance
$
1,198

$
168

$
4,315

$
3,445

$
2,297

$
2,008

$
13,431

September 30, 2016

Period-end amount

Allocated to:

Loans Individually

Evaluated for Impairment
$
132

$
-

$
2,124

$
1,669

$
276

$
7

$
4,208
Loans Collectively

Evaluated for Impairment

1,135

123

2,529

1,885

1,994

1,870

9,536
Ending Balance
$
1,267

$
123

$
4,653

$
3,554

$
2,270

$
1,877

$
13,744

loans.

~~The Company’s recorded investment~~

March 31, 2023

December 31, 2022

Real Estate

Non Real Estate

Real Estate

Non Real Estate

(Dollars in ~~loans related to each balance in the allowance for~~Thousands)

Secured

Commercial, Financial and Agricultural

Real Estate – Construction

Real Estate – Commercial Mortgage

2,207

389

Real Estate – Residential

160

Real Estate – Home Equity

231

130

Consumer

Total Collateral Dependent

Loans

2,438

700

A loan ~~losses by portfolio class and disaggregated on the basis of the Company’s impairment methodology was as follows:~~

~~Impaired Loans~~~~. Loans are deemed to be impaired~~is collateral dependent when based on current information and events, it is probable that the Company will not be able to collect all amounts due (principal and interest payments), according to the contractual terms of the loan agreement. Loans, for which the terms have been modified, and for which the borrower is experiencing financial ~~difficulties,~~

difficulty and repayment of the loan is dependent on

the

sale or operation of the underlying collateral.

The Bank’s collateral dependent

loan portfolio is comprised primarily of real estate secured loans, collateralized

by either residential

or commercial collateral types.

The loans are ~~considered troubled debt restructurings~~carried at fair value based on current values determined by

either independent appraisals

or internal evaluations, adjusted for selling costs or other amounts to be deducted

when estimating expected net sales proceeds.

Residential Real Estate Loans In Process of Foreclosure

At March 31, 2023 and ~~classified as impaired.~~

~~The following table presents~~December 31, 2022, the Company had $

0.4

million

and $

0.6

million, respectively, in 1-4 family

residential real estate loans ~~individually evaluated~~ for ~~impairment by class of loans.~~

which formal foreclosure proceedings were in process.

Unpaid

Recorded

Recorded

Principal

Investment

Investment

Related
(Dollars in Thousands)

Balance

With No Allowance
With Allowance

Allowance
September 30, 2017

Commercial, Financial and Agricultural

$
847

$
122

$
725

$
88
Real Estate – Construction

363

298

65

24
Real Estate – Commercial Mortgage

20,716

2,141

18,575

1,846
Real Estate – Residential

13,258

1,962

11,296

1,196
Real Estate – Home Equity

2,915

902

2,013

454
Consumer

132

58

74

3
Total

$
38,231

$
5,483

$
32,748

$
3,611

December 31, 2016

Commercial, Financial and Agricultural

$
1,042

$
565

$
477

$
80
Real Estate – Construction

247

-

247

-
Real Estate – Commercial Mortgage

23,855

8,954

14,901

2,038
Real Estate – Residential

15,596

2,509

13,087

1,561
Real Estate – Home Equity

3,375

1,871

1,504

335
Consumer

174

65

109

6
Total

$
44,289

$
13,964

$
30,325

$
4,020
For the three-month period ended March 31, 2023, the Company

did

t modify any loans made to borrowers experiencing financial

difficulty.

~~The following table summarizes the average recorded investment and interest income recognized by class of impaired loans.~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Average

Total

Average

Total

Average

Total

Average

Total

Recorded

Interest

Recorded

Interest

Recorded

Interest

Recorded

Interest
(Dollars in Thousands)

Investment

Income

Investment

Income

Investment

Income

Investment

Income
Commercial, Financial and

Agricultural

$
963

$
12

$
871

$
12

$
1,051

$
35

$
847

$
37
Real Estate – Construction

363

-

-

-

334

2

24

-
Real Estate – Commercial Mortgage

21,109

219

20,692

203

22,283

662

20,757

658
Real Estate – Residential

14,068

162

17,091

197

14,608

516

17,743

602
Real Estate – Home Equity

3,114

28

2,824

29

3,280

81

3,001

84
Consumer

136

2

196

2

148

6

215

7
Total

$
39,753

$
423

$
41,674

$
443

$
41,704

$
1,302

$
42,587

$
1,388

Credit Risk Management

The Company has adopted comprehensive lending policies, underwriting standards and

loan review

procedures designed to maximize loan income within an acceptable level

of risk.

Management and the Board of Directors review and

approve these policies and procedures on a regular basis (at least annually).

Reporting systems are used to monitor loan originations, loan quality,

concentrations of credit, loan delinquencies and nonperforming

loans and potential problem loans.

Management and the Credit Risk Oversight Committee periodically review

our lines of business to

monitor asset quality trends and the appropriateness of credit policies.

In addition, total borrower exposure limits are established and

concentration risk is monitored.

As part of this process, the overall composition of the portfolio is reviewed to gauge diversification

of risk, client concentrations, industry group, loan type, geographic area, or other

relevant classifications of loans.

Specific segments

of the loan portfolio are monitored and reported to the Board on a quarterly basis and

have strategic plans in place to supplement

Board approved credit policies governing exposure limits and underwriting

standards.

Detailed below are the types of loans within

the Company’s loan portfolio

and risk characteristics unique to each.

Commercial, Financial, and Agricultural – Loans in this category

are primarily made based on identified cash flows of the borrower

with consideration given to underlying collateral and personal or

other guarantees.

Lending policy establishes debt service coverage

ratio limits that require a borrower’s cash flow to be sufficient

to cover principal and interest payments on all new and existing debt.

The majority of these loans are secured by the assets being financed or other business assets such

as accounts receivable, inventory,

equipment.

Collateral values are determined based upon third party appraisals and evaluations.

Loan to value ratios at origination are

governed by established policy guidelines.

Real Estate Construction – Loans in this category consist of short-term

construction loans, revolving and non-revolving credit lines

and construction/permanent loans made to individuals and investors to finance

the acquisition, development, construction or

rehabilitation of real property.

These loans are primarily made based on identified cash flows of the borrower

or project and generally

secured by the property being financed, including 1-4 family residential properties

and commercial properties that are either ~~owner-occupied~~owner-

occupied or investment in nature.

These properties may include either vacant or improved property.

Construction loans are generally

based upon estimates of costs and value associated with the completed project.

Collateral values are determined based upon third

party appraisals and evaluations.

Loan to value ratios at origination are governed by established policy guidelines.

The disbursement

of funds for construction loans is made in relation to the progress of the project and

as such these loans are closely monitored by ~~on-site~~on-

site inspections.

Real Estate Commercial Mortgage – Loans in this category consists of commercial

mortgage loans secured by property that is either

owner-occupied or investment in nature.

These loans are primarily made based on identified cash flows of the borrower or

project

with consideration given to underlying real estate collateral and

personal guarantees.

Lending policy establishes debt service

coverage ratios and loan to value ratios specific to the property type.

Collateral values are determined based upon third party

appraisals and evaluations.

Real Estate Residential – Residential mortgage loans held in the Company’s

loan portfolio are made to borrowers that demonstrate the

ability to make scheduled payments with full consideration to underwriting

factors such as current income, employment status, current

assets, and other financial resources, credit history,

and the value of the collateral.

Collateral consists of mortgage liens on 1-4 family

residential properties.

Collateral values are determined based upon third party appraisals and evaluations.

Real Estate Residential – Residential mortgage loans held in the Company’s loan portfolio are made to borrowers that demonstrate the ability to make scheduled payments with full consideration to underwriting factors such as current income, employment status, current assets, and other financial resources, credit history, and the value of the collateral. Collateral consists of mortgage liens on 1-4 family residential properties. Collateral values are determined based upon third party appraisals and evaluations.

The Company does not

originate sub-prime loans.

Real Estate Home Equity – Home equity loans and lines are made to qualified individuals

for legitimate purposes generally secured

by senior or junior mortgage liens on owner-occupied

1-4 family homes or vacation homes.

Borrower qualifications include

favorable credit history combined with supportive income and debt ratio

requirements and combined loan to value ratios within

established policy guidelines.

Collateral values are determined based upon third party appraisals and evaluations.

Consumer Loans – This loan portfolio includes personal installment loans, direct

and indirect automobile financing, and overdraft

lines of credit.

The majority of the consumer loan ~~portfolio~~category consists of direct and indirect ~~and direct~~ automobile

loans.

Lending policy

establishes maximum debt to income ratios, minimum credit scores, and includes

guidelines for verification of applicants’ income and

receipt of credit reports.

Credit Quality Indicators

As part of the ongoing monitoring of the Company’s

loan portfolio quality, management

categorizes loans

into risk categories based on relevant information about the ability of borrowers to

service their debt such as: current financial

information, historical payment performance, credit documentation,

and current ~~economic/~~economic and market trends, among other

factors.

Risk ratings are assigned to each loan and revised as needed through established monitoring

procedures for individual loan

relationships over a predetermined amount and review of smaller balance homogenous

loan pools.

The Company uses the definitions

noted below for categorizing and managing its criticized loans.

Loans categorized as “Pass” do not meet the criteria set forth ~~for the Special Mention, Substandard, or Doubtful categories~~ below

and are not considered criticized.

Special Mention – Loans in this category are presently protected from loss, but

weaknesses are apparent which, if not corrected, could

cause future problems.

Loans in this category may not meet required underwriting criteria and

have no mitigating factors.

More than

the ordinary amount of attention is warranted for these loans.

Substandard – Loans in this category exhibit well-defined weaknesses that would

typically bring normal repayment into jeopardy.

These loans are no longer adequately protected due to well-defined

weaknesses that affect the repayment capacity of the

borrower.

The possibility of loss is much more evident and above average supervision is required for

these loans.

Doubtful – Loans in this category have all the weaknesses inherent in a loan categorized

as Substandard, with the characteristic that

the weaknesses make collection or liquidation in full, on the basis of currently

existing facts, conditions, and values, highly

questionable and improbable.

Performing/Nonperforming – Loans within certain homogenous

loan pools (home equity and consumer) are not individually reviewed,

but are monitored for credit quality via the aging status of the loan and

by payment activity.

The performing or nonperforming status

is updated on an on-going basis dependent upon improvement and

deterioration in credit quality.

The following table summarizes gross loans held for investment and

current period gross write-offs at March 31, 2023 by years of

origination and internally assigned credit risk ratings (refer to Credit Risk Management

section for detail on risk rating system).

Term

Loans by Origination Year

(As

Restated)

(As

Restated)

Revolving

(As

Restated)

(Dollars in Thousands)

2023

2022

2021

2020

2019

Prior

Loans

Total

Commercial, Financial,

Agriculture:

Pass

9,753

86,415

40,206

17,534

12,291

15,965

49,582

231,746

Special Mention

1,200

748

2,322

4,390

Substandard

127

Total

10,953

86,495

40,954

17,605

12,297

16,055

51,904

236,263

Current-Period Gross

Writeoffs

105

164

Real Estate -

Construction:

Pass

34,114

149,982

52,697

7,275

397

123

6,881

251,469

Special Mention

859

453

1,337

Substandard

1,097

Total

34,114

149,982

53,556

8,397

850

123

6,881

253,903

Real Estate -

Commercial Mortgage:

Pass

34,848

245,205

159,795

131,444

51,973

137,449

26,056

786,770

Special Mention

995

339

992

240

1,402

2,819

300

7,087

Substandard

822

966

753

642

763

635

4,581

Total

35,843

246,366

161,753

132,437

54,017

141,031

26,991

798,438

Current-Period Gross

Writeoffs

120

Real Estate - Residential:

Pass

116,896

473,235

92,988

44,541

28,365

80,711

9,109

845,845

Special Mention

356

525

632

1,605

Substandard

1,042

1,133

1,725

953

3,054

7,907

Total

116,896

474,369

94,477

46,791

29,318

84,397

9,109

855,357

Real Estate - Home

Equity:

Performing

149

133

387

1,192

204,376

206,249

Nonperforming

592

682

Total

149

133

401

1,268

204,968

206,931

Consumer:

Performing

15,735

122,092

100,617

32,203

17,726

12,242

5,072

305,687

Nonperforming

269

170

568

Total

15,735

122,361

100,787

32,222

17,810

12,268

5,072

306,255

Current-Period Gross

Writeoffs

646

915

488

110

113

2,366

NOTE 4 – MORTGAGE BANKING ACTIVITIES

The Company’s mortgage

banking activities include mandatory delivery loan sales, forward sales contracts used

to manage residential

loan pipeline price risk, utilization of warehouse lines to fund secondary

market residential loan closings, and residential mortgage

servicing.

Residential Mortgage Loan Production

The Company originates, markets, and services conventional and government

-sponsored residential mortgage loans.

Generally,

conforming fixed rate residential mortgage loans are held for sale in the secondary

market and non-conforming and adjustable-rate

residential mortgage loans may be held for investment.

The volume of residential mortgage loans originated for sale and secondary

market prices are the primary drivers of origination revenue.

Residential mortgage loan commitments are generally outstanding for 30

to 90 days, which represents the typical period from

commitment to originate a residential mortgage loan to when the closed

loan is sold to an investor.

Residential mortgage loan

commitments are subject to both credit and price risk.

Credit risk is managed through underwriting policies and procedures,

including

collateral requirements, which are generally accepted by the secondary

loan markets.

Price risk is primarily related to interest rate

fluctuations and is partially managed through forward sales of residential mortgage

-backed securities (primarily to-be announced

securities, or TBAs) or mandatory delivery commitments with investors.

The unpaid principal balance of residential mortgage loans held for sale, notional

amounts of derivative contracts related to residential

mortgage loan commitments and forward contract sales and their related fair values

are set- forth below.

(As Restated)

March 31, 2023

December 31, 2022

Unpaid Principal

(Dollars in Thousands)

Balance/Notional

Fair Value

Balance/Notional

Fair Value

Residential Mortgage Loans Held for Sale

28,204

28,475

26,274

26,909

Residential Mortgage Loan Commitments ("IRLCs")

(1)

51,984

1,346

36,535

819

Forward Sales Contracts

(2)

34,000

(216)

15,500

187

29,605

27,915

(1)

Recorded in other assets at fair value

(2)

Recorded in other liabilities and other assets at fair value

at March 31, 2023 and December 31, 2022, respectively

At March 31, 2023, the Company had $

0.3

million in residential mortgage loans held for sale 30-89 days past due and $

0.3

million of

loans were on nonaccrual status. At December 31, 2022, the Company had

0.6

million of residential mortgage loans held for sale 30-

89 days past due and $

0.1

million of loans were on nonaccrual status.

Mortgage banking revenue was as follows:

(As Restated)

Three Months Ended March 31,

(Dollars in Thousands)

2023

2022

Net realized gains on sales of mortgage loans

1,194

2,140

Net change in unrealized gain on mortgage loans held for sale

457

(900)

Net change in the fair value of mortgage loan commitments (IRLCs)

527

(141)

Net change in the fair value of forward sales contracts

(402)

857

Pair-Offs on net settlement of forward sales contracts

(1)

2,255

Mortgage servicing rights additions

191

Net origination fees

905

(160)

Total mortgage banking

revenues

2,871

4,055

Residential Mortgage Servicing

The Company may retain the right to service residential mortgage loans

sold.

The unpaid principal balance of loans serviced for

others is the primary driver of servicing revenue.

The following represents a summary of mortgage servicing rights.

(As Restated)

(Dollars in Thousands)

March 31, 2023

December 31, 2022

Number of residential mortgage loans serviced for others

1,806

1,769

Outstanding principal balance of residential mortgage loans serviced

for others

418,150

410,740

Weighted average

interest rate

3.95%

3.62%

Remaining contractual term (in months)

304

298

Conforming conventional loans serviced by the Company are sold to Federal

National Mortgage Association (“FNMA”) on a non-

recourse basis, whereby foreclosure losses are generally

the responsibility of FNMA and not the Company.

The government loans

serviced by the Company are secured through the Government National

Mortgage Association (“GNMA”), whereby the Company is

insured against loss by the Federal Housing Administration or partially guaranteed

against loss by the Veterans

Administration.

March 31, 2023, the servicing portfolio balance consisted of the following

loan types: FNMA (

86.9

%), GNMA (

0.5

%), and private

investor (

12.6

%).

FNMA and private investor loans are structured as actual/actual payment remittance.

The Company had

delinquent residential mortgage loans in GNMA pools serviced by the Company

at March 31, 2023 and $

0.3

December 31, 2022, respectively.

The right to repurchase these loans and the corresponding liability has been

recorded in other assets

and other liabilities, respectively,

in the Consolidated Statement of Financial Condition.

For the three months ended March 31, 2023

and March 31, 2022, the Company repurchased $

0.9

million and $

0.4

million in delinquent residential loans from the GNMA pools.

When delinquent residential loans are repurchased, the Company has the

intention to modify their terms and include the loans in new

GNMA pools.

Activity in the capitalized mortgage servicing rights was as follows:

(As Restated)

Three Months Ended March 31,

(Dollars in Thousands)

2023

2022

Beginning balance

2,599

3,774

Additions due to loans sold with servicing retained

191

Deletions and amortization

(99)

(368)

Sale of servicing rights

101

Ending balance

2,792

3,410

At March 31, 2023, we recorded the sale of $

334

million (unpaid principal balance) in FNMA mortgage servicing rights that

pending FNMA approval.

The book value of the mortgage servicing rights of $

2.3

million and the pending gain on sale of $

1.38

million were recorded as a secured borrowing in Other Liabilities within the Consolidated

Financial Statement of Condition.

Subsequent to March 31, 2023, FNMA approval was obtained.

The Company did

t record any permanent impairment losses on mortgage servicing rights for the

three months ended March 31,

2023 or 2022.

The key unobservable inputs used in determining the fair value of the Company’s

mortgage servicing rights were as follows:

(As Restated)

March 31, 2023

December 31, 2022

Minimum

Maximum

Minimum

Maximum

Discount rates

9.51%

12.00%

9.50%

12.00%

Annual prepayment speeds

13.45%

21.56%

12.33%

20.23%

Cost of servicing (per loan)

Changes in residential mortgage interest rates directly affect

the prepayment speeds used in valuing the Company’s

mortgage

servicing rights.

A separate third party model is used to estimate prepayment speeds based on interest rates, housing

turnover rates,

estimated loan curtailment, anticipated defaults, and other relevant factors.

The weighted average annual prepayment speed was

18.60

% at March 31, 2023 and

13.42

% at December 31, 2022.

Warehouse

Line Borrowings

The Company has the following warehouse lines of credit and master repurchase

agreements with various financial institutions at

March 31, 2023.

Amounts

(Dollars in Thousands)

Outstanding

million master repurchase agreement without defined expiration.

Interest is at the SOFR rate plus

2.00%

3.00%

, with a floor rate of

3.25%

A cash pledge deposit of $

0.5

million is required by the lender.

8,309

million warehouse line of credit agreement expiring in

December 2023

Interest is at the SOFR plus

2.25%

3.25%

13,864

Total Warehouse

Borrowings

22,173

Warehouse

line borrowings are classified as short-term borrowings.

At December 31, 2022, warehouse line borrowings totaled $

50.2

million. At March 31, 2023, the Company had residential mortgage

loans held for sale and construction loans held for investment

pledged as collateral under the above warehouse lines of credit and master repurchase

agreements.

The above agreements also contain

covenants which include certain financial requirements, including

maintenance of minimum tangible net worth, minimum liquid

assets, and maximum debt to net worth ratio, as defined in the agreements.

The Company was in compliance with all significant debt

covenants at March 31, 2023.

The Company has extended a $

million warehouse line of credit to CCHL, a

% owned subsidiary entity.

Balances and

transactions under this line of credit are eliminated in the Company’s

consolidated financial statements and thus not included in the

total short term borrowings noted on the Consolidated Statement of

Financial Condition.

The balance of this line of credit at March

31, 2023 and December 31, 2022 was $

32.8

million and $

22.9

million, respectively.

NOTE 5 – DERIVATIVES

The Company enters into derivative financial instruments to manage exposures

that arise from business activities that result in the

receipt or payment of future known and uncertain cash amounts, the value of

which are determined by interest rates.

The Company’s

derivative financial instruments are used to manage differences in

the amount, timing, and duration of the Company’s

known or

expected cash receipts and its known or expected cash payments principally

related to the Company’s subordinated

debt.

Cash Flow Hedges of Interest Rate Risk

Interest rate swaps with notional amounts totaling $

million at March 31, 2023 were designed as a cash flow hedge for subordinated

debt.

Under the swap arrangement, the Company will pay a fixed interest rate of

2.50

% and receive a variable interest rate based on

three-month LIBOR plus a weighted average margin of

1.83

For derivatives designated and that qualify as cash flow hedges of interest rate

risk, the gain or loss on the derivative is recorded in

accumulated other comprehensive income (“AOCI”) and subsequently

reclassified into interest expense in the same period(s) during

which the hedged transaction affects earnings. Amounts reported

in accumulated other comprehensive income related to derivatives

will be reclassified to interest expense as interest payments are made on the

Company’s variable-rate subordinated

debt.

The following table reflects the cash flow hedges included in the consolidated

statements of financial condition

Statement of Financial

Notional

Fair

Weighted Average

(Dollars in Thousands)

Condition Location

Amount

Value

Maturity (Years)

March 31, 2023

Interest rate swaps related to subordinated debt

Other Assets

30,000

5,394

7.3

December 31, 2022

Interest rate swaps related to subordinated debt

Other Assets

30,000

6,195

7.5

The following table presents the ~~risk category~~net gains (losses) recorded in AOCI and the

consolidated statements of ~~loans by segment.~~

income related to the cash

Commercial,

Financial,

Total Criticized
(Dollars in Thousands)

Agriculture

Real Estate

Consumer

Loans
September 30, 2017

Special Mention

$
9,277

$
16,105

$
317

$
25,699
Substandard

1,322

34,367

856

36,545
Doubtful

-

-

-

-
Total Criticized Loans

$
10,599

$
50,472

$
1,173

$
62,244

December 31, 2016

Special Mention

$
3,300

$
23,183

$
216

$
26,699
Substandard

1,158

39,800

549

41,507
Doubtful

-

-

-

-
Total Criticized Loans

$
4,458

$
62,983

$
765

$
68,206
flow derivative instruments (interest rate swaps related to subordinated

~~Troubled Debt Restructurings (“TDRs”)~~. ~~TDRs are loans~~debt) for the three months ended March 31, 2023.

Amount of (Loss)

Amount of Gain

Gain Recognized

(Loss) Reclassified

(Dollars in Thousands)

Category

in AOCI

from AOCI to Income

Three months ended March 31, 2023

Interest expense

(598)

309

Three months ended March 31, 2022

Interest expense

1,370

(28)

The Company estimates there will be approximately $

1.2

million reclassified as a decrease to interest expense within the next 12

months.

The Company had a collateral liability of $

5.4

million and $

5.8

million at March 31, 2023 and December 31, 2022, respectively.

NOTE 6 – LEASES

Operating leases in which the ~~borrower~~Company is ~~experiencing financial~~ ~~difficulty~~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, 2023, the operating lease ROU assets and liabilities were $

24.7

million and $

25.1

million, respectively. At December

31, 2022, ROU assets and liabilities were $

22.3

million and $

22.7

million, respectively.

The Company ~~has granted an economic concession~~ does not have any finance

leases or any significant lessor agreements.

The table below summarizes our lease expense and other information related

to the borrower that it would not otherwise consider. In these instances, as part of a work-out alternative, the Company will make concessions including the extension of the loan term, a principal moratorium, a reductionCompany’s operating leases.

Three Months Ended

March 31,

(Dollars in Thousands)

2023

2022

Operating lease expense

700

384

Short-term lease expense

139

179

Total lease expense

839

563

Other information:

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

Operating cash flows from operating leases

706

429

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

2,906

592

Weighted average

remaining lease term — operating leases (in years)

18.6

24.9

Weighted average

discount rate ~~or a combination thereof.~~ — operating leases

3.3%

2.0%

The ~~impact~~table below summarizes the maturity of ~~the TDR modifications~~remaining lease liabilities:

(Dollars in Thousands)

March 31, 2023

2023

2,354

2024

2,666

2025

2,438

2026

2,320

2027

2,245

2028 and ~~defaults are factored into the allowance for loan losses on a loan-by-loan basis as all TDRs are, by definition, impaired loans. Thus, specific reserves are established based upon the results~~ thereafter

21,045

Total

33,068

Less: Interest

(8,002)

Present Value

of either a discounted cash flow analysis or the underlying collateral value, if the loan is deemed to be collateral dependent. A TDR classification can be removed if the borrower’s financial condition improves such that the borrower is no longer in financial difficulty, the loan has not had any forgiveness of principal or interest, and the loan is subsequently refinanced or restructured at market terms and qualifies as a new loan.

Lease liability

25,066

~~The following table presents loans classified as TDRs.~~

September 30, 2017

December 31, 2016
(Dollars in Thousands)

Accruing

Nonaccruing

Accruing

Nonaccruing
Commercial, Financial and Agricultural

$
826

$
21

$
772

$
40
Real Estate – Construction

-

65

-

-
Real Estate – Commercial Mortgage

18,460

1,061

20,673

1,259
Real Estate – Residential

11,494

991

13,969

444
Real Estate – Home Equity

2,515

187

2,647

-
Consumer

132

-

172

-
Total TDRs

$
33,427

$
2,325

$
38,233

$
1,743

Loans classified as TDRs during the periods indicated are presented in the table below. The modifications made during the reporting period involved either an extension of the loan term, an interest rate adjustment, or a principal moratorium, and the financial impact of these modifications was not material.

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2017

Pre-

Post-

Pre-

Post-

Number

Modified

Modified

Number

Modified

Modified

of

Recorded

Recorded

of

Recorded

Recorded
(Dollars in Thousands)

Contracts

Investment

Investment

Contracts

Investment

Investment
Commercial, Financial and Agricultural

1

$
32

$
22

1

$
32

$
22
Real Estate – Construction

-

-

-

1

64

65
Real Estate – Commercial Mortgage

1

160

70

1

160

70
Real Estate – Residential

1

101

102

2

316

283
Real Estate – Home Equity

3

149

147

4

205

203
Consumer

-

-

-

-

-

-
Total TDRs

6

$
442

$
341

9

$
777

$
643

Three Months Ended September 30,

Nine Months Ended September 30,

2016

2016

Pre-

Post-

Pre-

Post-

Number

Modified

Modified

Number

Modified

Modified

of

Recorded

Recorded

of

Recorded

Recorded
(Dollars in Thousands)

Contracts

Investment

Investment

Contracts

Investment

Investment
Commercial, Financial and Agricultural

-

$
-

$
-

-

$
-

$
-
Real Estate – Construction

-

-

-

-

-

-
Real Estate – Commercial Mortgage

-

-

-

1

332

332
Real Estate – Residential

-

-

-

6

589

590
Real Estate – Home Equity

1

17

17

5

205

206
Consumer

-

-

-

-

-

-
Total TDRs

1

$
17

$
17

12

$
1,126

$
1,128

For the three and nine months ended September 30, 2017, there were no loans modified as TDRs within the previous 12 months that have substantially defaulted. For the three and nine months ended September 30, 2016, loans modified as TDRs within the previous 12 months that have substantially defaulted during periods indicated are presented in the table below.

Three Months Ended September 30,

Nine Months Ended September 30,

2016

2016

Number

Post-Modified

Number

Post-Modified

of

Recorded

of

Recorded

(Dollars in Thousands)

Contracts

Investment⁽¹⁾

Contracts

Investment⁽¹⁾

Commercial, Financial and Agricultural

-

$
-

-

$
-

Real Estate – Construction

-

-

-

-

Real Estate – Commercial Mortgage

-

-

-

-

Real Estate – Residential

-

-

1

98

Real Estate – Home Equity

-

-

1

3

Consumer

-

-

1

35

Total TDRs

-

$
-

3

$
136

⁽¹⁾ ~~Recorded investment reflects charge-offs and additional funds advanced at time of restructure, if applicable.~~

~~The following table provides information on how TDRs were modified during the periods indicated.~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2017

Number of

Recorded

Number of

Recorded
(Dollars in Thousands)

Contracts

Investment⁽¹⁾

Contracts

Investment⁽¹⁾
Extended amortization

1

$
70

1

$
70
Interest rate adjustment

-

-

3

302
Extended amortization and interest rate adjustment

4

249

4

249
Other

1

22

1

22
Total TDRs

6

$
341

9

$
643

Three Months Ended September 30,

Nine Months Ended September 30,

2016

2016

Number of

Recorded

Number of

Recorded
(Dollars in Thousands)

Contracts

Investment⁽¹⁾

Contracts

Investment⁽¹⁾
Extended amortization

1

$
17

2

$
107
Interest rate adjustment

-

-

-

-
Extended amortization and interest rate adjustment

-

-

10

1,021
Total TDRs

1

$
17

12

$
1,128

⁽¹⁾ ~~Recorded investment reflects charge-offs and additional funds advanced at time of restructure, if applicable.~~

~~NOTE 4 – OTHER REAL ESTATE OWNED~~

~~The following table presents other real estate owned activity for the periods indicated.~~

Three Months Ended September 30,

Nine Months Ended September 30,
(Dollars in Thousands)
2017

2016

2017

2016
Beginning Balance
$
7,968

$
14,622

$
10,638

$
19,290
Additions

339

890

2,024

3,309
Valuation Write-downs

(350)

(397)

(1,118)

(1,910)
Sales

(1,970)

(2,377)

(5,291)

(7,951)
Other

-

-

(266)

-
Ending Balance
$
5,987

$
12,738

$
5,987

$
12,738

Net expenses applicable to other real estate owned include the following:

Three Months Ended September 30,

Nine Months Ended September 30,
(Dollars in Thousands)
2017

2016

2017

2016
Gains from the Sale of Properties
$
(711)

$
(70)

$
(980)

$
(364)
Losses from the Sale of Properties

123

216

318

977
Rental Income from Properties

(19)

(34)

(73)

(66)
Property Carrying Costs

139

312

397

849
Valuation Adjustments

350

397

1,118

1,910
Total
$
(118)

$
821

$
780

$
3,306

~~As of September 30, 2017,~~At March 31, 2023, the Company had ~~$0.8~~

additional operating lease obligations for banking offices

that have not yet commenced.

A related party is the lessor in an operating lease with the Company.

The Company’s minimum payment

is $

0.2

million annually

through 2052, for an aggregate remaining obligation of ~~loans secured by residential real estate in the process of foreclosure~~.

2.4

million at March 31, 2023.

NOTE 57 - 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)

2023

2022

Service Cost

872

1,572

Interest Cost

1,458

1,166

Expected Return on Plan Assets

(1,701)

(2,675)

Prior Service Cost Amortization

Net Loss Amortization

234

428

Pension Settlement

209

Net Periodic Benefit Cost

864

704

Discount Rate Used for Benefit Cost

5.63%

3.11%

Long-term Rate of Return on Assets

6.75%

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

Three Months Ended September 30,

Nine Months Ended September 30,
(Dollars in Thousands)
2017

2016

2017

2016
Service Cost
$
1,688

$
1,613

$
5,064

$
4,839
Interest Cost

1,437

1,397

4,312

4,191
Expected Return on Plan Assets

(2,006)

(1,934)

(6,019)

(5,802)
Prior Service Cost Amortization

56

69

167

207
Net Loss Amortization

953

801

2,859

2,403
Net Periodic Benefit Cost
$
2,128

$
1,946

$
6,383

$
5,838

Discount Rate

4.21%

4.52%

4.21%

4.52%
Long-term Rate of Return on Assets

7.25%

7.50%

7.25%

7.50%
Three Months Ended March 31,

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

Three Months Ended September 30,

Nine Months Ended September 30,
(Dollars in Thousands)
2017

2016

2017

2016
Interest Cost
$
48

$
40

$
143

$
120
Net Loss Amortization

149

190

448

570
Net Periodic Benefit Cost
$
197

$
230

$
591

$
690

Discount Rate

3.92%

4.13%

3.92%

4.13%
(Dollars in Thousands)

2023

2022

Service Cost

Interest Cost

130

Prior Service Cost Amortization

Net Loss Amortization

(155)

180

Net Periodic Benefit Cost

336

Discount Rate Used for Benefit Cost

5.45%

2.80%

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 68 - 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:

September 30, 2017

December 31, 2016
(Dollars in Thousands)
Fixed

Variable

Total

Fixed

Variable

Total
Commitments to Extend Credit⁽¹⁾
$
90,441

$
376,864

$
467,305

$
69,993

$
332,420

$
402,413
Standby Letters of Credit

4,676

-

4,676

4,768

-

4,768
Total
$
95,117

$
376,864

$
471,981

$
74,761

$
332,420

$
407,181

March 31, 2023

December 31, 2022

(Dollars in Thousands)

Fixed

Variable

Total

Fixed

Variable

Total

Commitments to Extend Credit

(1)

248,660

577,180

825,840

243,614

531,873

775,487

Standby Letters of Credit

5,677

5,619

Total

254,337

577,180

831,517

249,233

531,873

781,106

(1)

Commitments include unfunded loans, revolving
lines of credit, and ~~other unused~~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)

2023

2022

Beginning Balance

2,989

2,897

Provision for Credit Losses

(156)

Ending Balance

2,833

2,976

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 and a commitment of up to $

7.0

million in a solar tax credit equity fund.
At March 31,

2023, the Company had contributed $

0.3

million of the bank tech commitment and $

2.8

million of the solar fund commitment.
At

December 31, 2022, the Company had contributed $

0.2

million of the bank tech commitment and $

1.0

million of the solar fund

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

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 itthe 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 resulting in a $3.2 million pre-tax gain.~~ 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.

Conversion ratio payments and ongoing fixed quarterly charges

are reflected in

earnings in the period incurred.

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 ~~$89,000. Conversion ratio payments and ongoing fixed quarterly charges are reflected in earnings in the period incurred.~~

0.3

million.

NOTE 79 – 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~~entity’s own

assumptions about the assumptions that market participants would

use in pricing the assets or liabilities.

Assets and Liabilities Measured at Fair Value
on a Recurring Basis

Securities Available for Sale.

U.S. Treasury securities are reported at fair value

utilizing Level 1 inputs.

Other securities classified as

available for sale are reported at fair value utilizing Level 2 inputs.

For these securities, the Company obtains fair value measurements

from an independent pricing service.

The fair value measurements consider observable data that may include dealer quotes,

market

spreads, cash flows, the U.S. Treasury yield curve,

live trading levels, trade execution data, credit information and the bond’s

terms

and conditions, among other things.

In general, the Company does not purchase securities that have a complicated structure.

The Company’s entire portfolio consists of

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

obligations, federal agency bullet or mortgage pass-through

securities, or

general obligation or ~~revenue based~~revenue-based municipal bonds.

Pricing for such instruments is easily obtained. ~~From time to time,~~

At least annually, the Company

will validate ~~on a sample basis,~~ prices supplied by the independent pricing service by ~~comparison~~compari

ng them to prices obtained from an independent third-party ~~sources~~

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 ~~derived~~ investor commitments.

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

using ~~internal~~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 ~~September 30, 2017,~~March 31, 2023, there were

amounts payable and at December 31, 2022, there was a $

0.1

million payable.

A summary of fair values for assets and liabilities recorded at fair

value on a recurring basis consisted of the following:

Level 1

Level 2

Level 3

Total Fair
(Dollars in Thousands)
Inputs

Inputs

Inputs

Value
September 30, 2017

Securities Available for Sale:

U.S. Government Treasury
$
256,798

$
-

$
-

$
256,798

U.S. Government Agency

-

147,989

-

147,989

States and Political Subdivisions

-

95,990

-

95,990

Mortgage-Backed Securities

-

1,332

-

1,332

Equity Securities

-

8,737

-

8,737

December 31, 2016

Securities Available for Sale:

U.S. Government Treasury
$
286,278

$
-

$
-

$
286,278

U.S. Government Agency

-

131,640

-

131,640

States and Political Subdivisions

-

94,839

-

94,839

Mortgage-Backed Securities

-

1,430

-

1,430

Equity Securities

-

8,547

-

8,547

Level 1

Level 2

Level 3

Total
Fair

(Dollars in Thousands)

Inputs

Value

March 31, 2023 (As Restated)

ASSETS:

Securities Available for
Sale:

U.S. Government Treasury

22,373

U.S. Government Agency

174,290

States and Political Subdivisions

41,479

Mortgage-Backed Securities

69,014

Corporate Debt Securities

88,432

Loans Held for Sale

28,475

Interest Rate Swap Derivative

5,394

Mortgage Banking IRLC Derivative

1,346

LIABILITIES:

Mortgage Banking Hedge Derivative

216

December 31, 2022 (As Restated)

ASSETS:

Securities Available for
Sale:

U.S. Government Treasury

22,050

U.S. Government Agency

186,052

States and Political Subdivisions

40,329

Mortgage-Backed Securities

69,405

Corporate Debt Securities

88,236

Loans Held for Sale

26,909

Interest Rate Swap Derivative

6,195

Mortgage Banking Hedge Derivative

187

Mortgage Banking IRLC Derivative

819

Mortgage Banking Activities

.
The Company had Level 3 issuances and transfers related to mortgage
banking activities of $

4.3

million

and $

6.7

million, respectively, for the three
months ended March 31, 2023, and $

4.3

million and $

13.6

million, respectively, for the

three months ended March 31, 2022.
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.

~~Impaired~~

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. ~~Impaired~~

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. ~~Impaired collateral dependent~~

Collateral-dependent loans had a carrying value of ~~$5.7~~ $

2.4

million with a

valuation allowance at March 31, 2023 and a

carrying value of ~~$0.7 million at September 30, 2017 and $6.3~~ $

0.7

million and ~~$0.6~~ a $

0.1

million ~~respectively,~~valuation allowance at December 31, ~~2016.~~

~~Loans Held for Sale~~. These loans are carried at the lower of cost or fair value and are adjusted to fair value on a non-recurring basis. Fair value is based on observable markets rates for comparable loan products, which is considered a Level 2 fair value measurement.

2022.

Other Real Estate Owned

During the first ~~nine~~three months of ~~2017,~~2023, certain foreclosed assets, upon initial recognition,

were measured

and reported at fair value through a charge-off

to the allowance for ~~loan~~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 each of March 31, 2023 and December 31, 2022, there was

valuation

allowance for loan servicing rights.

Assets and Liabilities Disclosed at Fair Value

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

both assets and liabilities, for which it is

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

methodologies used for those assets and liabilities.

Cash and Short-Term
Investments.

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

fair value, given

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

credit concerns.

Securities Held to Maturity

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

noted in ~~this footnote under~~ the

caption “Assets and Liabilities Measured at Fair Value

on a Recurring Basis – Securities Available

for ~~Sale”.~~

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 that~~

rates.

Pursuant to the adoption of ASU 2016-01,

Recognition and

Measurement of Financial Assets and Financial

Liabilities

, the values reported reflect the ~~credit, interest rate, and~~incorporation of a liquidity ~~risks inherent in each loan category. The calculated present values are then reduced by an allocation~~discount to meet

the objective of ~~the allowance for loan losses against each respective loan category.~~

“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 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 not

recorded at fair value consisted of the following:

September 30, 2017

Carrying

Level 1

Level 2

Level 3
(Dollars in Thousands)

Value

Inputs

Inputs

Inputs
ASSETS:

Cash

$
50,420

$
50,420

$
-

$
-
Short-Term Investments

140,694

140,694

-

-
Investment Securities, Available for Sale

510,846

256,798

254,048

-
Investment Securities, Held to Maturity

184,262

93,128

90,395

-
Loans Held for Sale

7,800

-

7,800

-
Loans, Net of Allowance for Loan Losses

1,616,999

-

-

1,608,364

LIABILITIES:

Deposits

$
2,347,617

$
-

$
2,280,468

$
-
Short-Term Borrowings

6,777

-

6,808

-
Subordinated Notes Payable

52,887

-

41,012

-
Long-Term Borrowings

15,047

-

15,238

-

December 31, 2016

Carrying

Level 1

Level 2

Level 3
(Dollars in Thousands)

Value

Inputs

Inputs

Inputs
ASSETS:

Cash

$
48,268

$
48,268

$
-

$
-
Short-Term Investments

247,779

247,779

-

-
Investment Securities, Available for Sale

522,734

286,278

236,456

-
Investment Securities, Held to Maturity

177,365

119,157

57,589

-
Loans Held for Sale

10,886

-

10,886

-
Loans, Net of Allowance for Loan Losses

1,547,858

-

-

1,543,576

LIABILITIES:

Deposits

$
2,412,286

$
-

$
2,272,572

$
-
Short-Term Borrowings

12,749

-

12,802

-
Subordinated Notes Payable

52,887

-

42,024

-
Long-Term Borrowings

14,881

-

15,122

-

(As Restated)

March 31, 2023

Carrying

Level 1

Level 2

Level 3

(Dollars in Thousands)

Value

Inputs

ASSETS:

Cash

84,549

Short-Term Investments

303,403

Investment Securities, Held to Maturity

651,755

437,174

175,026

Equity Securities

(1)

1,883

Other Equity Securities

(2)

2,848

Mortgage Servicing Rights

2,792

4,824

Loans, Net of Allowance for Credit Losses

2,630,339

2,482,705

LIABILITIES:

Deposits

3,823,920

3,284,249

Short-Term

Borrowings

26,632

Subordinated Notes Payable

52,887

45,365

Long-Term Borrowings

463

464

(As Restated)

December 31, 2022

Carrying

Level 1

Level 2

Level 3

(Dollars in Thousands)

Value

Inputs

ASSETS:

Cash

72,114

Short-Term Investments

528,536

Investment Securities, Held to Maturity

660,774

431,733

180,968

Equity Securities

(1)

Other Equity Securities

(2)

2,848

Mortgage Servicing Rights

2,599

4,491

Loans, Net of Allowance for Credit Losses

2,522,617

2,377,229

LIABILITIES:

Deposits

3,939,317

3,310,383

Short-Term

Borrowings

56,793

Subordinated Notes Payable

52,887

45,763

Long-Term Borrowings

513

(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 8 10 – ACCUMULATED
OTHER COMPREHENSIVE INCOME

(LOSS)

The amounts allocated to accumulated other comprehensive income

(loss) are presented in the table below. ~~Reclassification adjustments related to securities held~~

Accumulated

Securities

Other

Available

Interest Rate

Retirement

Comprehensive

(Dollars in Thousands)

for ~~sale are included in net gain/loss on securities transactions in the accompanying consolidated statements~~Sale

Swap

Plans

(Loss) Income

Balance as of ~~comprehensive income. For the periods presented, reclassifications adjustments related to securities held for sale was not material.~~

Before

Tax

Net of

Tax

(Expense)

Tax
(Dollars in Thousands)
Amount

Benefit

Amount
Three Months Ended September 30, 2017

Investment Securities:

Change in net unrealized gain/loss on securities available for sale
$
(99)

$
38

$
(61)
Amortization of losses on securities transferred from available for sale to held to

maturity

19

(7)

12

Total Other Comprehensive Loss
$
(80)

$
31

$
(49)

Nine Months Ended September 30, 2017

Investment Securities:

Change in net unrealized gain/loss on securities available for sale
$
516

$
(200)

$
316
Amortization of losses on securities transferred from available for sale to held to

maturity

57

(22)

35

Total Other Comprehensive Income
$
573

$
(222)

$
351

Before

Tax

Net of

Tax

(Expense)

Tax
(Dollars in Thousands)
Amount

Benefit

Amount
Three Months Ended September 30, 2016

Investment Securities:

Change in net unrealized gain/loss on securities available for sale
$
(1,158)

$
447

$
(711)
Amortization of losses on securities transferred from available for sale to held to

maturity

21

(8)

13

Total Other Comprehensive Income
$
(1,137)

$
439

$
(698)

Nine Months Ended September 30, 2016

Investment Securities:

Change in net unrealized gain/loss on securities available for sale
$
1,535

$
(592)

$
943
Amortization of losses on securities transferred from available for sale to held to

maturity

60

(23)

37

Total Other Comprehensive Income
$
1,595

$
(615)

$
980

Accumulated other comprehensive loss was comprised of the following components:

Accumulated

Securities

Other

Available

Retirement

Comprehensive
(Dollars in Thousands)
for Sale

Plans

Loss
Balance as of January 1, 2017
$
(583)

$
(25,642)

$
(26,225)
Other comprehensive income during the period

351

-

351
Balance as of September 30, 2017
$
(232)

$
(25,642)

$
(25,874)

Balance as of January 1, 2016
$
(127)

$
(22,130)

$
(22,257)
Other comprehensive income during the period

980

-

980
Balance as of September 30, 2016
$
853

$
(22,130)

$
(21,277)

~~NOTE 9 – ACCOUNTING STANDARDS UPDATES~~

~~ASU~~ ~~2014-09, “Revenue from Contracts with Customers (Topic 606).”~~ ASU 2014-09 implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. A significant portion of the Company’s revenue is comprised of net interest income on financial instruments, which is explicitly excluded from the scope of ASU 2014-09. In addition to interest income, the Company has various noninterest income revenue streams that the Company is in the process of assessing. The Company formed a revenue recognition working group that has completed its scoping and walk-through of noninterest income revenue streams. Amongst non-interest income revenue streams, mortgage banking fees are not in the scope of the standard. Management has substantially completed its detailed contract review for the remaining revenue streams and is in the process of evaluating any impact on its financial statements. ASU 2014-09 is effective for the Company on January 1, ~~2018 and must be retrospectively applied. The Company expects to adopt~~2023

(37,349)

4,625

(4,505)

(37,229)

Other comprehensive income (loss) during the ~~standard with a cumulative effect adjustment to opening retained earnings, if such adjustment is deemed to be significant.~~

~~ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement~~period

5,751

(598)

5,153

Balance as of ~~Credit Losses on Financial Statements.”~~ ~~ASU 2016-13 requires the measurement~~March 31, 2023

(31,598)

4,027

(4,505)

(32,076)

Balance as of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 will be effective for the Company on January 1, ~~2020. The Company is currently evaluating the potential impact of ASU 2016-13 on its financial statements.~~

~~ASU 2~~~~017-04, “Intangibles – Goodwill and~~ 2022

(4,588)

1,530

(13,156)

(16,214)

Other ~~(Topic 350).”~~ ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Instead, under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should considercomprehensive (loss) income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. ASU 2017-04 is effective for the Company on January 1, 2020 and is not expected to have a significant impact on its financial statements.

~~ASU 2~~017-05, “Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) - Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Asset.” ~~ASU 2017-05clarifies the scope of Subtopic 610-20 and adds guidance for partial sales of nonfinancial assets, inc~~luding partial sales of real estate. Historically, accounting principles generally accepted in the United States (“GAAP”) contained several different accounting models to evaluate whether the transfer of certain assets qualified for sale treatment. ASU 2017-05 reduces the number of potential accounting models that might apply and clarifies which model does apply in various circumstances. ASU 2017-05 is effective for the Company on January 1, 2018 and is not expected to have a significant impact on its financial statements.

~~ASU 2~~~~017-07, “Compensation – Retirement Benefits (Topic 715).”~~ ~~ASU 2017-07requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees~~ during the ~~period. The other components~~period

(19,055)

1,370

156

(17,529)

Balance as of net benefit cost as defined in paragraphs 715-30-35-4 and 715-60-35-9 are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. ASU 2017-07 is effective for the Company on January 1, 2018 and is not expected to have a significant impact on its financial statements.

~~ASU 2017-09, “Compensation – Stock Compensation (Topic 718).”~~ ASU 2017-09 clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Modification accounting is required only if the fair value, or calculated intrinsic value if it is used to measure the award, the vesting conditions, or the classification of the award as equity or liability changes as a result of the change in terms or conditions. ASU 2017-09 is effective for the Company on January 1, 2018 and is not expected to have a significant impact on its financial statements.

March 31, 2022

(23,643)

2,900

~~ASU 2017-11, “Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815).”~~ ASU 2017-11 has two parts (i) Accounting for Certain Financial Instruments with Down Round Features and (ii) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part (i) changes the classification analysis of certain equity-linked financial instruments with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. Part (ii) re-characterizes the indefinite deferral of certain provisions of Topic 480 that are now presented as pending continent in the Codification, to a scope exception. Those amendments do not have an accounting effect. ASU 2017-11 is effective for the Company on January 1, 2019 and is not expected to have a significant impact on its financial statements.

~~ASU 2017-12, “Derivatives and Hedging (Topic 815).”~~ ASU 2017-12 amends the hedge accounting recognition and presentation requirements in ASC 815. The amendments objectives are to (1) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and (2) reduce the complexity of and to simplify the application of hedge accounting by preparers. ASU 2017-12 is effective for the Company on January 1, 2019 and ~~is not expected to have a significant impact on its financial statements.~~

(13,000)

(33,743)

Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF

OPERATIONS

Management’s discussion

and analysis ("(“MD~~&A"~~&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 ~~2017~~2023 compares with prior years.

Throughout this section, Capital City Bank Group, Inc., and subsidiaries, collectively,

is referred to as ~~"CCBG," "Company," "we," "us,"~~“CCBG,” “Company,”

“we,”

“us,” or ~~"our."~~

“our.”

We have restated
our previously issued consolidated financial statements contained
in this Form 10-Q/A. For background on the

restatement, the fiscal periods impacted, control considerations and other
information, see “Explanatory Note” preceding “Part I –

Item 1. Consolidated Financial Statement (Unaudited)” above.
In addition, this MD&A is being restated to conform to the restated

financial statements. For additional information related to the restatement
s, see “Part I – Item 1 Financial Information – Note 1 –

Restatement of Previously Issued Consolidated Financial Statements” above.

CAUTION CONCERNING ~~FORWARD-LOOKING~~FORWARD
-LOOKING STATEMENTS

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

contains ~~"forward-looking statements"~~ “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,"~~ “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 of this quarterly report on Form 10-Q/A

well as the Introductory Note and

Item 1A. Risk Factors

of our ~~2016 Report on~~2022 Form ~~10-K,~~10-K/A, as updated in our subsequent quarterly reports

filed on Form ~~10-Q,~~10-Q/A, 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"~~“Bank” or ~~"CCB"~~“CCB”). ~~The Bank offers~~

We offer

a broad array of products and services through a total of 60 full-service offices

located in Florida, Georgia, and Alabama. ~~The Bank offers commercial and retail~~

We provide a full range of

banking services, ~~as well as~~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 ~~management, retail securities brokerage and data processing~~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 ~~loan~~credit losses, operating

expenses such as salaries and employee benefits, occupancy and other

operating expenses including income taxes, and noninterest

income such as ~~deposit fees,~~mortgage banking revenues, wealth management fees, ~~mortgage banking~~

deposit fees, and bank card fees.

We have included

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

objectives ~~is included~~ as part of the

MD&A section of our ~~2016~~2022 Form ~~10-K.~~

10-K/A.

NON-GAAP FINANCIAL ~~MEASURE~~

MEASURES (UNAUDITED)

We present a tangible

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

effect of

goodwill ~~resulting~~and other intangibles that resulted from merger

and acquisition activity. We

believe ~~this measure is~~these measures are useful to investors

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

other companies in the industry.

The ~~GAAP~~generally accepted

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

each quarter presented is provided below.

2017

2016

2015
(Dollars in Thousands)

Third

Second

First

Fourth

Third

Second

First

Fourth
Shareowners' Equity (GAAP)

$
285,201

$
281,513

$
278,059

$
275,168

$
276,624

$
274,824

$
276,833

$
274,352
Less: Goodwill (GAAP)

84,811

84,811

84,811

84,811

84,811

84,811

84,811

84,811
Tangible Shareowners' Equity (non-GAAP)
A

200,390

196,702

193,248

190,357

191,813

190,013

192,022

189,541
Total Assets (GAAP)

2,790,842

2,814,843

2,895,531

2,845,197

2,753,154

2,767,636

2,792,186

2,797,860
Less: Goodwill (GAAP)

84,811

84,811

84,811

84,811

84,811

84,811

84,811

84,811
Tangible Assets (non-GAAP)
B
$
2,706,031

$
2,730,032

$
2,810,720

$
2,760,386

$
2,668,343

$
2,682,825

$
2,707,375

$
2,713,049
Tangible Common Equity Ratio (non-GAAP)
A/B

7.41%

7.21%

6.88%

6.90%

7.19%

7.08%

7.09%

6.99%

(As Restated)

2023

2022

(Dollars in Thousands, except per share data)

First

Fourth

Third

Second

First

Shareowners' Equity (GAAP)

403,260

387,281

368,485

368,705

370,628

Less: Goodwill and Other Intangibles (GAAP)

93,053

93,093

93,133

93,173

93,213

Tangible Shareowners' Equity (non-GAAP)

310,207

294,188

275,352

275,532

277,415

Total Assets (GAAP)

4,401,762

4,519,223

4,327,991

4,351,327

4,308,528

Less: Goodwill and Other Intangibles (GAAP)

93,053

93,093

93,133

93,173

93,213

Tangible Assets (non-GAAP)

4,308,709

4,426,130

4,234,858

4,258,154

4,215,315

Tangible Common Equity Ratio (non-GAAP)

A/B

7.20%

6.65%

6.50%

6.47%

6.58%

Actual Diluted Shares Outstanding (GAAP)

17,049,913

17,039,401

16,998,177

16,981,614

16,962,362

Tangible Book Value

per Diluted Share (non-GAAP)

A/C

18.19

17.27

16.20

16.23

16.35

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

2017

2016

2015
(Dollars in Thousands, Except

(Per Share Data)
Third

Second

First

Fourth

Third

Second

First

Fourth

Summary of Operations:

Interest Income
$
22,341

$
21,422

$
20,540

$
20,832

$
20,104

$
20,174

$
20,044

$
20,602

Interest Expense

1,080

926

804

773

784

798

834

808

Net Interest Income

21,261

20,496

19,736

20,059

19,320

19,376

19,210

19,794

Provision for Loan Losses

490

589

310

464

-

(97)

452

513

Net Interest Income After

Provision for Loan Losses

20,771

19,907

19,426

19,595

19,320

19,473

18,758

19,281

Noninterest Income⁽²⁾

12,996

13,135

12,718

12,778

13,011

15,215

12,677

13,221

Noninterest Expense

26,707

27,921

27,922

27,560

28,022

28,702

28,930

28,280

Income Before Income Taxes

7,060

5,121

4,222

4,813

4,309

5,986

2,505

4,222

Income Tax Expense

2,505

1,560

1,478

1,517

1,436

2,056

858

1,620

Net Income

4,555

3,561

2,744

3,296

2,873

3,930

1,647

2,602

Net Interest Income (FTE)
$
21,595

$
20,799

$
20,006

$
20,335

$
19,603

$
19,617

$
19,421

$
20,006

Per Common Share:

Net Income Basic
$
0.27

$
0.21

$
0.16

$
0.20

$
0.18

$
0.22

$
0.10

$
0.16

Net Income Diluted

0.27

0.21

0.16

0.20

0.17

0.22

0.10

0.16

Cash Dividends Declared

0.07

0.05

0.05

0.05

0.04

0.04

0.04

0.04

Diluted Book Value

16.73

16.54

16.38

16.23

16.39

16.31

16.04

15.93

Market Price:

High

24.58

22.39

21.79

23.15

15.35

15.96

15.88

16.05

Low

19.60

17.68

19.22

14.29

13.32

13.16

12.83

13.56

Close

24.01

20.42

21.39

20.48

14.77

13.92

14.59

15.35

Selected Average Balances:

Loans, Net
$
1,638,578

$
1,608,629

$
1,585,561

$
1,573,264

$
1,555,889

$
1,531,777

$
1,507,508

$
1,492,521

Earning Assets

2,466,287

2,502,030

2,529,207

2,423,388

2,417,943

2,447,777

2,440,718

2,353,729

Total Assets

2,779,960

2,817,479

2,845,140

2,743,463

2,734,465

2,767,854

2,763,746

2,678,214

Deposits

2,329,162

2,373,423

2,407,278

2,306,917

2,288,741

2,276,553

2,258,600

2,174,718

Shareowners’ Equity

285,296

281,661

278,489

278,943

277,407

279,532

277,464

275,893

Common Equivalent Average Shares:

Basic

16,965

16,955

16,919

16,809

16,804

17,144

17,202

17,145

Diluted

17,044

17,016

16,944

16,913

16,871

17,196

17,235

17,214

Performance Ratios:

Return on Average Assets

0.65
%

0.51
%

0.39
%

0.48
%

0.42
%

0.57
%

0.24
%

0.39
%

Return on Average Equity

6.33

5.07

4.00

4.70

4.12

5.65

2.39

3.74

Net Interest Margin (FTE)

3.48

3.33

3.21

3.34

3.23

3.22

3.20

3.37


Noninterest Income as % of

Operating Revenue

37.94

39.05

39.19

38.91

40.24

43.99

39.76

40.05

Efficiency Ratio

77.21

82.28

85.33

83.23

85.92

82.40

90.13

85.11

Asset Quality:

Allowance for Loan Losses
$
13,339

$
13,242

$
13,335

$
13,431

$
13,744

$
13,677

$
13,613

$
13,953

Allowance for Loan Losses to Loans
0.82
%

0.81
%

0.84
%

0.86
%

0.88
%

0.89
%

0.90
%

0.93
%

Nonperforming Assets (“NPAs”)
$
12,545

$
15,934

$
17,799

$
19,171

$
21,352

$
22,836

$
26,499

$
29,595


NPAs to Total Assets

0.45
%

0.57
%

0.61
%

0.67
%

0.78
%

0.83
%

0.95
%

1.06
%

NPAs to Loans plus OREO

0.76

0.97

1.11

1.21

1.35

1.48

1.73

1.94

Allowance to Non-Performing Loans
203.39

166.23

160.70

157.40

159.56

166.50

150.44

135.40

Net Charge-Offs to Average Loans
0.10

0.17

0.10

0.20

(0.02)

(0.04)

0.21

0.34

Capital Ratios:

Tier 1 Capital

16.19
%

15.58
%

15.68
%

15.51
%

15.48
%

15.63
%

16.39
%

16.42
%

Total Capital

16.96

16.32

16.44

16.28

16.28

16.44

17.20

17.25

Common Equity Tier 1

13.26

12.72

12.77

12.61

12.55

12.65

12.82

12.84

Leverage

10.48

10.20

9.95

10.23

10.12

9.98

10.34

10.65


Tangible Common Equity⁽¹⁾

7.41

7.21

6.88

6.90

7.19

7.08

7.09

6.99


⁽¹⁾Non-GAAP financial measure. See non-GAAP reconciliation on page 29.

⁽²⁾Includes $2.5 million gain on partial retirement of trust preferred securities in second quarter, 2016.

SELECTED QUARTERLY

FINANCIAL DATA

(UNAUDITED)

(As Restated)

2023

2022

(Dollars in Thousands, Except Per Share Data)

First

Fourth

Third

Second

First

Summary of Operations

Interest Income

43,926

41,218

35,442

29,516

25,734

Interest Expense

3,526

3,122

2,037

987

742

Net Interest Income

40,400

38,096

33,405

28,529

24,992

Provision for Credit Losses

3,099

3,616

2,154

1,692

Net Interest Income After

Provision for Credit Losses

37,301

34,480

31,251

26,837

24,960

Noninterest Income

17,758

15,296

18,509

20,564

20,812

Noninterest Expense

37,675

39,262

37,699

38,150

36,523

Income Before Income Taxes

17,384

10,514

12,061

9,251

9,249

Income Tax Expense

3,710

1,900

2,493

1,685

1,720

Income Attributable to NCI

995

(306)

(591)

Net Income Attributable to CCBG

13,709

9,609

9,605

7,260

6,938

Net Interest Income (FTE)

(1)

40,500

38,185

33,488

28,604

25,070

Per Common Share

Net Income Basic

0.81

0.56

0.57

0.43

0.41

Net Income Diluted

0.80

0.56

0.57

0.43

0.41

Cash Dividends Declared

0.18

0.17

0.16

Diluted Book Value

23.65

22.73

21.68

21.71

21.85

Diluted Tangible Book Value

(2)

18.19

17.27

16.20

16.23

16.35

Market Price:

High

36.86

36.23

33.93

28.55

28.88

Low

28.18

31.14

27.41

24.43

25.96

Close

29.31

32.50

31.11

27.89

26.36

Selected Average Balances

Investment Securities

1,064,212

1,081,092

1,120,728

1,144,757

1,059,145

Loans Held for Investment

2,582,395

2,439,379

2,264,075

2,084,679

1,963,578

Earning Assets

4,062,688

4,032,733

4,009,951

3,974,221

3,938,824

Total Assets

4,411,865

4,381,825

4,357,678

4,321,388

4,266,775

Deposits

3,817,314

3,803,042

3,769,864

3,765,329

3,714,062

Shareowners’ Equity

404,067

380,570

379,305

373,365

383,956

Common Equivalent Average Shares:

Basic

17,016

16,963

16,960

16,949

16,931

Diluted

17,045

17,016

16,996

16,971

16,946

Performance Ratios:

Return on Average Assets

1.26

0.87

0.67

0.66

Return on Average Equity

13.76

10.02

10.05

7.80

7.33

Net Interest Margin (FTE)

4.04

3.76

3.32

2.89

2.58

Noninterest Income as % of Operating Revenue

30.53

28.65

35.65

41.89

45.44

Efficiency Ratio

64.67

73.41

72.51

77.59

79.60

Asset Quality:

Allowance for Credit Losses (“ACL”)

26,808

25,068

22,747

21,463

20,788

Nonperforming Assets (“NPAs”)

4,602

2,728

2,422

3,231

2,745

ACL to Loans HFI

1.01

0.98

0.96

1.05

NPAs to Total
Assets

0.10

0.06

0.07

0.06

NPAs to Loans HFI plus OREO

0.17

0.11

0.10

0.14

ACL to Non-Performing Loans

584.18

1,091.34

944.36

683.35

762.00

Net Charge-Offs to Average Loans HFI

0.24

0.21

0.12

0.22

0.16

Capital Ratios:

Tier 1 Capital

14.23

14.27

14.59

14.97

15.91

Total Capital

15.29

15.30

15.58

15.95

16.95

Common Equity Tier 1

12.40

12.38

12.62

12.91

13.70

Leverage

9.09

8.91

8.80

8.70

8.74

Tangible Common Equity

(2)

7.20

6.65

6.50

6.47

6.58

(1)

Fully Tax Equivalent

(2)

Non-GAAP financial measure.
See non-GAAP reconciliation on page 45.

FINANCIAL OVERVIEW

~~A summary overview of our financial performance is provided below.~~

Results of Operations

Performance Summary

Net income attributable to common shareowners of ~~$4.6~~$13.7 million, or ~~$0.27~~$0.80 per

diluted share, for the first

quarter of 2023 compared to $9.6 million, or $0.56 per diluted share, for the ~~third~~ fourth

quarter of ~~2017 compared to net income of $3.6~~2022, and $6.9 million, or ~~$0.21~~$0.41 per

diluted share, for the ~~second~~first quarter of ~~2017, and~~2022.

Net Interest Income

Tax-equivalent net income of $2.9 million, or $0.17 per diluted share for the third quarter of 2016. For the first nine months of 2017, we realized net income of $10.9 million, or $0.64 per diluted share, compared to net income of $8.4 million, or $0.49 per diluted share, for the same period of 2016.

·~~Tax equivalent net~~

interest income for the ~~third~~first quarter of ~~2017 was $21.6~~ 2023

totaled $40.5

million, compared to ~~$20.8~~$38.2 million

for the fourth quarter of 2022, and $25.1 million for the ~~second~~first quarter of ~~2017~~

2022.

Compared to both prior periods, the increase reflected

strong loan growth and ~~$19.6~~higher interest rates across a majority of our

earning assets, partially offset by higher deposit costs.

Provision and Allowance for Credit

Losses.

We recorded

a provision for credit losses of $3.1 million for the ~~third~~first quarter of 2016. The increase over both the prior quarters was driven by growth in the loan portfolio, coupled with higher short-term interest rates, partially offset by a higher rate paid on negotiated rate deposits. For the first nine months of 2017, tax equivalent net interest income totaled $62.4 million 2023

compared to ~~$58.6~~$3.6 million for the ~~comparable period in 2016. The year over year increase was driven by growth in the loan~~fourth quarter of 2022 and ~~investment portfolios, coupled with higher short-term interest rates, partially offset by a higher rate paid on negotiated rate deposits and one less calendar day.~~

·~~Provision for loan losses was $0.5~~$0.03 million

for the ~~third~~first quarter of ~~2017 compared~~2022.

Compared to ~~$0.6 million for~~ the ~~second~~fourth quarter

of ~~2017 and no~~2022, the decrease reflected a lower level of loan growth.

The provision for the ~~third~~first quarter of ~~2016.~~ For the first nine months of 2017, the loan loss provision totaled $1.4 million compared to $0.4 million for the same period of 2016. The increase in the loan loss provision compared to the prior year periods was primarily due to growth in the loan portfolio2022 reflected lower required

reserves needed post-pandemic.

Noninterest Income

Noninterest income for the ~~third~~first quarter of ~~2017~~2023 totaled ~~$13.0~~$17.8 million, ~~a decrease~~ an increase

of ~~$0.1~~$2.5 million, or ~~1.1%~~16.1%, ~~from~~ over

the ~~second~~fourth quarter of ~~2017~~2022 and comparable to the third quarter of 2016. For the first nine months of 2017, noninterest income totaled $38.8 million, a $2.0 million, or 5.0%, decrease from the same period of 2016, primarily due to a $2.5 million gain from the partial retirement of our trust preferred securities (“TRUPs”) in the second quarter of 2016, that was partially offset by higher wealth management fees and mortgage banking fees.

·Noninterest expense for the third quarter of 2017 totaled $26.7 million, a decrease of $1.2 million, or 4.3% from the second quarter of 2017 and a decrease of $1.3 million, or 4.7%, from the third quarter of 2016. The decrease from both prior periods was due to lower other real estate owned (“OREO”) expense (primarily related to gains on sale) and various other expenses (advertising, legal, professional, processing). For the first nine months of 2017, noninterest expense totaled $82.6 million, a decrease of $3.1 million, or ~~3.6%~~14.7%, from

the first quarter of 2022.

The increase over the fourth

quarter of 2022 was primarily due to higher mortgage banking revenues

(higher rate locks and gain on sale margin) partially offset

lower deposit fees (two less processing days).

The decrease from the ~~same period of 2016~~ first quarter 2022 was driven by lower wealth management fees

due to lower ~~OREO expense (all categories:~~ ~~gain/loss~~insurance commissions - the first quarter of 2022 was higher

than normal due to closing of several large insurance

policies.

Lower mortgage revenues (lower rate locks and gain on sale ~~carrying costs,~~margin)

also contributed to the decrease but was partially offset

by an increase in other income.

Noninterest Expense

Noninterest expense for the first quarter of 2023 totaled $37.7 million compared to $39.3

million for the fourth

quarter of 2022 and ~~valuation adjustments~~),$36.5 million for the first quarter of 2022.

Compared to the fourth quarter of 2022, the $1.6 million decrease

reflected a decrease in other expense of $2.6 million that was partially offset

by an increase in occupancy expense of $0.5 million and

compensation expense of $0.5 million.

The decrease in other expense was primarily attributable to lower other real estate expense

$1.6 million due to a gain on the sale of a banking office. Further,

pension expense (non-service-related component) for the first

quarter of 2023 totaled $0.2 million compared to $1.1 million for

the fourth quarter of 2022 which included a $1.8 million pension

settlement charge.

Compared to the first quarter of 2022, the $1.2 million increase reflected increases

in compensation expense of

$1.2 million and ~~various~~occupancy expense of $0.7 million that were partially

off by a decrease in other ~~expenses (primarily legal~~expense of $0.7 million.

The

addition of banking offices and ~~FDIC insurance),~~staffing

in new markets drove the variance in salary and occupancy expenses.

Further, compensation

expense reflected a $0.7 million decrease in pension service cost that was partially offset

by ~~higher~~an increase in stock-based compensation

expense ~~(stock compensation).~~

of $0.4 million.

Financial Condition

Earning Assets.

Average earning assets ~~were $2.466~~totaled

$4.063 billion for the ~~third~~first quarter of ~~2017, a decrease~~2023, an increase of ~~$35.7~~$30.0 million,

or ~~1.4%~~0.7%, ~~from~~ over

the ~~second~~fourth quarter of ~~2017,~~2022, and an increase of ~~$42.9~~$123.9 million, or ~~1.8%~~3.1%, over the

first quarter of 2022.

The increase over both prior

periods was primarily driven by higher deposit balances.

The mix of earning assets continues to improve driven by strong loan

growth.

Loans.

Average loans held for investment

(“HFI”) increased $143.0 million, or 5.9%, over the fourth quarter of ~~2016. The decrease in average earning assets from the second quarter of 2017 was attributable to a decline in short-term investments, partially~~ offset by growth in our loan portfolio. The increase in earning assets compared to the fourth quarter 2016 was primarily due to growth in the loan portfolio, partially offset by a decline in total investment securities.

·~~Average loans~~202

and increased ~~by $29.9~~

$618.8 million, or ~~1.9%~~31.5%, over the ~~second~~first quarter of ~~2017, and $65.3~~2022.

Period end loans increased $109.5 million, or ~~4.2%~~4.3%, over the fourth quarter of ~~2016. Increases~~

2022 and $668.5 million, or 33.6%, over ~~both prior periods reflected~~ the first quarter of 2022.

Compared to the fourth quarter of 2022, a majority of the increase

was realized in the residential real estate category,

and to a lesser extent, the construction and commercial real estate mortgage

categories.

Compared to the first quarter of 2022, loan growth was broad based, with increases realized in

all categories except

consumer loans.

The slowdown in ~~all~~the secondary market residential loan ~~types except commercial~~sales has allowed us to book

a steady flow of CCHL’s

adjustable-rate production in our loan portfolio throughout 2022

and the first quarter of 2023.

Credit Quality

Overall credit quality remains stable.

Nonperforming assets (nonaccrual loans and ~~home equity loans.~~

·~~Nonperforming assets~~other real estate) totaled ~~$12.5~~ $4.6

million at ~~September 30, 2017, a decrease of $3.4~~March 31, 2023 compared to $2.7 million ~~or 21%, from June 30, 2017 and $6.6 million, or 35%, from~~at December 31, ~~2016. Nonperforming~~2022,

and $2.7 million at March 31, 2022.

At March 31, 2023,

nonperforming assets ~~represented 0.45%~~as a percent of total assets ~~at September 30, 2017~~totaled 0.10% compared

to ~~0.57% at June 30, 2017 and 0.67%~~0.06% at December 31, ~~2016.~~

·2022 and 0.06% at March 31,

2022.

Nonaccrual loans totaled $4.6 million at March 31, 2023, a $2.3 million increase

over December 31, 2022, and a $1.9 million

increase over March 31, 2022. At ~~September 30, 2017,~~March 31, 2023, the increase was primarily

due to the addition of one large business loan

relationship totaling $1.8 million to nonaccrual status – it is in the process of

collection and is adequately secured and reserved for.

Deposits

Average total

deposits were $3.817 billion for the first quarter of 2023, an increase of $14.3 million,

or 0.4%, over the

fourth quarter of 2022 and $103.3 million, or 2.8%, over

the first quarter of 2022.

Growth over the fourth quarter of 2022 was

primarily attributable to an increase in NOW account balances, primarily

due to a seasonal increase in our public fund deposits that

occurred late in the fourth quarter.

Compared to the first quarter of 2022, we had strong growth in our NOW accounts

and, to a lesser

extent, our savings account balances.

Capital

At March 31, 2023, we were well-capitalized with a ~~risk based~~total risk-based capital ratio

of ~~16.96%~~15.29% and a tangible common equity

ratio (a non-GAAP financial measure) of ~~7.41%~~7.20% compared to ~~16.32%~~15.

30% and ~~7.21%, respectively, at June 30, 2017, and 16.28% and 6.90%~~6.65%, respectively at December 31, ~~2016. All~~2022 and 16.95% and

6.58%, respectively, at March

31, 2022.

At March 31, 2023, all of our regulatory capital ratios exceeded the threshold to be ~~well-capitalized~~well-

capitalized under the Basel III capital standards.

RESULTS

~~RESULTS~~ OF OPERATIONS

~~Net Income~~

For the third quarter of 2017, we realized net income of $4.6 million, or $0.27 per diluted share, compared to net income of $3.6 million, or $0.21 per diluted share for the second quarter of 2017, and net income of $2.9 million, or $0.17 per diluted share, for the third quarter of 2016. For the first nine months of 2017, we realized net income of $10.9 million, or $0.64 per diluted share, compared to net income of $8.4 million, or $0.49 per diluted share for the same period in 2016.

~~Compared to the second quarter of 2017, the increase in earnings reflected higher net interest income of $0.8 million,~~

The following table provides a $1.2 million decrease in noninterest expense, and a $0.1 million reduction in the loan loss provision, partially offset by higher income taxes of $1.0 million and a $0.1 million decrease in noninterest income.

Compared to the third quarter of 2016, performance reflected higher net interest income of $1.9 million and a $1.3 million decrease in noninterest expense, partially offset by higher income taxes of $1.1 million and a $0.4 million increase in the loan loss provision.

The increase in earnings for the first nine months of 2017 versus the comparable period in 2016 was attributable to higher net interest income of $3.6 million and a $3.1 million reduction in noninterest expense, partially offset by lower noninterest income of $2.0 million, a $1.2 million increase in income taxes, and a $1.0 million increase in the loan loss provision.

A condensed ~~earnings~~ summary of ~~each major component~~our results of ~~our financial performance is provided below:~~

operations

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,
(Dollars in Thousands, except per share data)

2017

2017

2016

2017

2016
Interest Income

$
22,341

$
21,422

$
20,104

$
64,303

$
60,322
Taxable Equivalent Adjustments

334

303

283

907

735
Total Interest Income (FTE)

22,675

21,725

20,387

65,210

61,057
Interest Expense

1,080

926

784

2,810

2,416
Net Interest Income (FTE)

21,595

20,799

19,603

62,400

58,641
Provision for Loan Losses

490

589

-

1,389

355
Taxable Equivalent Adjustments

334

303

283

907

735
Net Interest Income After Provision for Loan Losses

20,771

19,907

19,320

60,104

57,551
Noninterest Income

12,996

13,135

13,011

38,849

40,903
Noninterest Expense

26,707

27,921

28,022

82,550

85,654
Income Before Income Taxes

7,060

5,121

4,309

16,403

12,800
Income Tax Expense

2,505

1,560

1,436

5,543

4,350
Net Income

$
4,555

$
3,561

$
2,873

$
10,860

$
8,450

Basic Net Income Per Share

$
0.27

$
0.21

$
0.18

$
0.64

$
0.50
Diluted Net Income Per Share

$
0.27

$
0.21

$
0.17

$
0.64

$
0.49

- a discussion of the various components are discussed

in further detail below.

(As Restated)

Three Months Ended

(Dollars in Thousands, except per share data)

March 31, 2023

December 31, 2022

March 31, 2022

Interest Income

43,926

41,218

25,734

Taxable Equivalent Adjustments

100

Total Interest Income (FTE)

44,026

41,306

25,812

Interest Expense

3,526

3,122

742

Net Interest Income

(FTE)

40,500

38,184

25,070

Provision for Credit Losses

3,099

3,616

Taxable Equivalent Adjustments

100

Net Interest Income After Provision for Credit Losses

37,301

34,480

24,960

Noninterest Income

17,758

15,296

20,812

Noninterest Expense

37,675

39,262

36,523

Income Before Income Taxes

17,384

10,514

9,249

Income Tax Expense

3,710

1,900

1,720

Income Attributable to Noncontrolling Interests

995

(591)

Net Income Attributable to Common Shareowners

13,709

9,609

6,938

Basic Net Income Per Share

0.81

0.56

0.41

Diluted Net Income Per Share

0.80

0.56

0.41

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"~~ “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 ~~45.~~

~~Tax equivalent~~58.

Tax-equivalent net

interest income ~~was $21.6~~for the first quarter of 2023

totaled $40.5

million, compared to $38.2 million for the ~~third~~fourth quarter

of ~~2017 compared to $20.8~~ 2022, and $25.1

million for the ~~second~~first quarter of ~~2017 and $19.6 million for the third quarter of 2016.~~ ~~The increase in tax equivalent net interest income compared~~2022.

Compared to ~~the~~ both prior periods, the increase reflected strong loan growth and

higher rates across a ~~favorable shift in the~~majority of our earning ~~asset mix and improved yields,~~assets, partially offset

by higher rates paid on negotiated rate deposits. Also, as compared to the second quarter of 2017, there was one additional calendar day. For the first nine months of 2017, tax equivalent net interest income totaled $62.4 million compared to $58.6 million for the comparable period in 2016. The year over year increase was driven by growth in the loan and investment portfolios, coupled with higher short-term rates, partially offset by a higher rate paid on negotiated rate deposits and one less calendar day as 2016 was a leap year.

The overnight funds rate has increased four times since December 2015, positively affecting our net interest income due to favorable repricing of our variable and adjustable rate earning assets. Although these rate increases have also resulted in higher rates paid on our negotiated rate deposit products, we continue to monitor and manage our overall cost of funds, which was 17 basis points in the third quarter of 2017, and 15 basis points for the first nine months of 2017. Despite highly competitive loan pricing across most markets, the yield of the overall loan portfolio increased quarter-over-quarter.

costs.

Our net interest margin for the ~~third~~first quarter of ~~2017~~2023 was ~~3.48%~~4.04%, an increase

of 1528 basis points over the ~~second~~fourth quarter of ~~2017~~2022 and ~~an increase of 25~~ 146

basis points over the ~~third~~first quarter of ~~2016.~~ 2022, both driven by higher interest rates and

an overall improved earning asset mix.

For the

month of March 2023, our net interest margin was 4.07%.

For the first ~~nine months~~quarter of ~~2017, the net interest margin increased 12~~2023, our cost of funds was 35 basis points, ~~to 3.34% compared to~~an

increase of four basis points over the fourth quarter of 2022 and 27 basis points

over the first quarter of 2022.

Our cost of interest-

bearing deposits was 46 basis points, 35 basis points, and 4 basis points, respectively,

for the same ~~period~~periods.

Our total cost of ~~2016. The increase in~~deposits

(including noninterest bearing accounts) was 26 basis points, 20 basis points,

and 2 basis points, respectively,

for the ~~margin as compared to all respective periods reflects rising interest rates and a favorable shift in our earning asset mix, which has produced higher net interest income in each period.~~

~~We continue to maintain short duration portfolios on both sides of the balance sheet and believe we are well positioned to respond to changing market conditions.~~

same periods.

Provision for ~~Loan~~Credit Losses

~~The~~

We recorded

a provision for ~~loan~~credit losses ~~for the third quarter~~ of 2017 was $0.5 million compared to $0.6 million provision expense for the second quarter of 2017 and no provision for the third quarter of 2016. For the first nine months of 2017, the loan loss provision totaled $1.4 million compared to $0.4$3.1 million for the ~~same period~~first quarter of ~~2016.~~2023 compared to $3.6 million for

the fourth quarter of

2022 and $0.03 million for the first quarter of 2022.

The ~~increase~~decrease in the ~~loan loss~~ provision compared to the ~~prior year periods~~fourth quarter of 2022 was

primarily attributable to ~~growth in the~~a lower level of loan ~~portfolio.~~ ~~We realized net loan charge-offs of $0.4 million, or 0.10% (annualized), of average loans~~growth.

The credit loss provision for the ~~third~~first quarter of ~~2017. This compares to net loan charge-offs of $0.7 million, or 0.17% (annualized)~~ 2022 generally reflected

lower

required reserves needed post-pandemic.

We discuss the allowance

for the second quarter of 2017 and net loan recoveries of $0.1 million, or 0.02% (annualized) for the third quarter of 2016. For the first nine months of 2017, net charge-offs totaled $1.5 million, or 0.12% (annualized), of average loans compared to $0.6 million, or 0.05% (annualized), for the same period of 2016.

credit losses further below.

Charge-off activity for the respective periods is set forth below:

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,
(Dollars in Thousands, except per share data)
2017

2017

2016

2017

2016
CHARGE-OFFS

Commercial, Financial and Agricultural
$
276

$
324

$
143

$
693

$
484

Real Estate - Construction

-

-

-

-

-

Real Estate - Commercial Mortgage

94

478

5

643

279

Real Estate - Residential

125

44

96

285

779

Real Estate - Home Equity

50

-

51

142

412

Consumer

455

537

479

1,616

1,356

Total Charge-offs
$
1,000

$
1,383

$
774

$
3,379

$
3,310

RECOVERIES

Commercial, Financial and Agricultural
$
79

$
40

$
199

$
200

$
287

Real Estate - Construction

50

-

-

50

-

Real Estate - Commercial Mortgage

69

58

45

150

363

Real Estate - Residential

60

202

139

475

954

Real Estate - Home Equity

84

39

237

152

377

Consumer

265

362

221

871

765

Total Recoveries
$
607

$
701

$
841

$
1,898

$
2,746

Net (Recoveries) Charge-offs
$
393

$
682

$
(67)

$
1,481

$
564

Net (Recoveries) Charge-offs (Annualized) as a

0.10
%

0.17
%

(0.02)
%

0.12
%

0.05
%

percent of Average Loans Outstanding, Net of

Unearned Income

Noninterest Income

Noninterest income for the ~~third~~first quarter of ~~2017~~2023 totaled ~~$13.0~~$17.8 million ~~a decrease of $0.1~~compared

to $15.3 million ~~or 1.1%, from~~for the ~~second~~fourth quarter of ~~2017~~2022 and ~~unchanged from~~

$20.8 million for the ~~third~~first quarter of ~~2016. For~~2022.

The $2.5 million increase over the fourth quarter of 2022 was primarily attributable

higher mortgage banking revenues at CCHL of $2.8 million partially offset

by lower deposit fees $0.3 million.

The increase in

mortgage banking revenues reflected a higher level of rate locks and

gain on sale margin.

The decrease in deposit fees was partially

attributable to two less processing days in the first ~~nine months~~quarter.

Compared to the first quarter of ~~2017, noninterest income totaled $38.8~~2022, the $3.1 million ~~a $2.0 million, or 5.0%,~~ decrease ~~from the same period~~reflected

lower wealth management fees of ~~2016,~~ ~~due to lower other income of $2.5~~$2.1 million and ~~deposit fees~~ mortgage banking revenues

of ~~$0.8~~$1.2 million, partially offset by higher other income

of $0.3 million.

The decrease in wealth management fees was due to lower insurance commission revenues

which reflected higher

than normal revenues in the first quarter of ~~$0.9 million~~2022 related to the closing of several large

insurance policies.

The decline in mortgage

banking revenues was attributable to a lower level of rate locks and ~~mortgage banking fees of $0.5 million.~~ gain on sale margin.

The ~~decrease~~increase in other income was ~~attributable~~primarily

due to ~~a $2.5 million gain from the partial retirement of our trust preferred securities (“TRUPs”) in the second quarter of 2016.~~

higher loan servicing income and miscellaneous income.

Noninterest income represented ~~37.9%~~30.5% of operating revenues (net interest

income plus noninterest income) infor the ~~third~~first quarter of ~~2017~~ 2023

compared to ~~39.1% in~~28.7% for the ~~second~~fourth quarter of ~~2017~~2022 and ~~40.2% in~~45.4% for the ~~third~~first quarter of ~~2016. For the first nine months of 2017, noninterest income represented 38.7% of operating revenues compared to 41.4% for the same period of 2016.~~

2022.

The table below reflects the major components of noninterest income.

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,
(Dollars in Thousands)
2017

2017

2016

2017

2016
Deposit Fees
$
5,153

$
5,052

$
5,373

$
15,295

$
16,094
Bank Card Fees

2,688

2,870

2,759

8,361

8,467
Wealth Management Fees

2,197

2,073

1,774

6,112

5,256
Mortgage Banking Fees

1,480

1,556

1,503

4,344

3,800
Other

1,478

1,584

1,602

4,737

7,286

Total Noninterest Income
$
12,996

$
13,135

$
13,011

$
38,849

$
40,903
(As Restated)

Three Months Ended

(Dollars in Thousands)

March 31, 2023

December 31, 2022

March 31, 2022

Deposit Fees

5,239

5,536

5,191

Bank Card Fees

3,726

3,744

3,763

Wealth Management

Fees

3,928

3,649

6,070

Mortgage Banking Revenues

2,871

102

4,055

Other

1,994

2,265

1,733

Total

Noninterest Income

17,758

15,296

20,812

Significant components of noninterest income are discussed in more

detail below.

Deposit Fees

Deposit fees for the ~~third~~first quarter of ~~2017~~2023 totaled $5.2 million, ~~an increase~~a decrease of $0.3

million, or 5.4%, from the fourth

quarter of 2022 and comparable to the first quarter of 2022.

The decline from the fourth quarter of 2022 reflected two less days of

processing.

Bank Card Fees

Bank card fees for the first quarter of 2023 totaled $3.7 million, comparable to the

fourth quarter of 2022 and a

decrease of $0.1 million, or ~~2.0% over the second quarter of 2017, and a decrease of $0.2 million, or 4.1%~~1.0%, from the ~~third~~first quarter of ~~2016. For~~2022.

The decline from the first ~~nine months~~quarter of ~~2017, deposit fees totaled $15.3 million, a decrease of $0.8 million, or 5.0%, from the same period of 2016. The decrease from both prior year periods~~2022 was primarily attributable

to lower debit card usage and reflected lower ~~overdraft service fees due to a reduction in accounts using this service as well as lower utilization by existing users.~~

consumer spending.

Wealth
Management Fees

Wealth management fees,

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

brokerage fees (i.e., investment,

insurance products, and retirement accounts), and insurance ~~products)~~ commission

revenues,

totaled ~~$2.2~~ $3.9

million for the ~~third~~first quarter of ~~2017,~~2023, an increase of ~~$0.1~~$0.3 million, or ~~6.0%~~7.7%, over the ~~second~~

fourth quarter of ~~2017~~2022 and ~~$0.4~~ a decrease of $2.1

million, or ~~23.8% over~~35.3%, from the ~~third~~first quarter of ~~2016. For the first nine months of 2017, wealth management fees totaled $6.1 million, an increase of $0.9 million, or 16.3%, over the same period of 2016.~~ 2022.

The increase over ~~all respective prior periods~~the fourth quarter of 2022 was primarily attributable to higher

retail brokerage fees.

The decrease from the first quarter of 2022 was due to lower insurance commission revenues

which reflected

higher ~~trust fees and retail brokerage fees driven by an increase~~than normal revenues in ~~assets under management and improved sales efforts. Third~~the first quarter ~~2017 wealth management fees reflected a~~of 2022 related to the closing of

several large ~~account booked during the quarter that contributed $0.2 million in gross fees.~~ insurance policies.

At ~~September 30, 2017,~~ March 31, 2023,

total assets under management were approximately ~~$1.370~~$2.330 billion

compared to ~~$1.192~~$2.273 billion at December 31, ~~2016~~2022 and ~~$1.182~~ $2.329

billion at ~~September 30, 2016.~~

March 31, 2022.

Mortgage Banking ~~Fees.~~ Revenues

Mortgage banking ~~fees~~revenues totaled ~~$1.5~~$2.9 million for the ~~third~~first quarter of ~~2017, a decrease of $0.1 million, or 4.9%, from the second quarter of 2017 and comparable to the third quarter of 2016. For the first nine months of 2017, fees totaled $4.3 million,~~

2023, an increase of ~~$0.5~~ $2.8

million, ~~or 14.3%,~~ over the ~~same period of 2016. Strong home sales in our markets and a growing market share of residential loan production continue to enhance our mortgage banking fees. Loan closings slowed during the third~~fourth quarter of ~~2017 due to the impact of hurricanes during the quarter, but have since resumed normal closing timeframes.~~

~~Other~~~~. Other income totaled $1.5 million for the third quarter of 2017, a decrease of $0.1 million, or 6.7%, from the second quarter of 2017~~2022 and a decrease of ~~$0.1~~ $1.2 million

from the first quarter of 2022.

Compared to the fourth quarter

of 2022, the increase reflected a higher level of rate locks and gain on sale margin.

The decrease from the first quarter of 2022 was

attributable to lower rate lock volume and gain on sale margin.

We provide a detailed

overview of our mortgage banking operation,

including a detailed break-down of mortgage banking revenues, mortgage

servicing activity, and

warehouse funding within Note 4 -

Mortgage Banking Activities in the Notes to Consolidated Financial Statements.

Other

Other income totaled $2.0 million for the first quarter of 2023, a decrease of $0.3

million, or ~~7.7%~~12.0%, from the ~~third~~fourth quarter of ~~2016. For~~

2022 and an increase of $0.3 million, or 15.1%, over the first ~~nine months of 2017, other income decreased $2.5 million, or 35.0%, compared to the same period of 2016 attributable to a $2.5 million gain from the partial retirement of our TRUPs in the second~~ quarter of ~~2016.~~

2022.

Compared to both prior periods, the change was driven

by variances in miscellaneous income.

Noninterest Expense

Noninterest expense for the ~~third~~first quarter of ~~2017~~2023 totaled ~~$26.7~~$37.7 million compared

to $39.3 million for the fourth quarter of 2022 and

$36.5 million for the first quarter of 2022.

Compared to the fourth quarter of 2022, the $1.6

million decrease reflected a decrease in

other expense of $2.6 million that was partially offset by an

increase in occupancy expense of $0.5 million and compensation expense

of $0.5 million.

The decrease in other expense was primarily attributable to lower other real estate expense

of $1.6 million due to a

gain on the sale of a banking office.

Further, pension expense (non-service-related

component) decreased $1.1 million from the fourth quarter of 2022 which included

$1.8 million pension settlement charge. Compared to the first quarter

of 2022, the $1.2 million increase reflected increases in

compensation expense of $1.2 million ~~or 4.3%, from the second quarter~~and occupancy expense of ~~2017, and~~$0.7 million

that were partially off by a decrease in other expense of

$0.7 million.

The addition of ~~$1.3~~banking offices and staffing in new markets

drove the variance in salary and occupancy expenses.

Further, compensation expense reflected

a $0.7 million ~~or 4.7%, from the third quarter~~decrease in pension service cost that was partially offset

by an increase in

stock-based compensation expense of ~~2016.~~ $0.4 million.

The ~~decrease from both prior periods~~reduction in other expense was primarily due to lower ~~OREO~~pension expense ~~(primarily~~(non-

service related ~~to gains on sale) and various other expenses (advertising, legal, professional, and processing)~~component). ~~For~~

The table below reflects the ~~first nine months~~major components of ~~2017,~~ noninterest expense totaled $82.6 million, a decrease of $3.1 million, or 3.6%, from the same period of 2016 attributable to lower OREO expense of $2.5 million (all categories: gain/loss on sale, carrying costs, and valuation adjustments), occupancy expense of $0.3 million, and various other expenses totaling $0.9 million (primarily legal and FDIC insurance), partially offset by higher compensation expense $0.8 million (stock compensation). expense.

(As Restated)

Three Months Ended

(Dollars in Thousands)

March 31, 2023

December 31, 2022

March 31, 2022

Salaries

19,517

18,581

18,106

Associate Benefits

4,007

4,452

4,192

Total Compensation

23,524

23,033

22,298

Premises

3,245

2,907

2,759

Equipment

3,517

3,346

3,334

Total Occupancy

6,762

6,253

6,093

Legal Fees

362

390

349

Professional Fees

1,324

1,441

1,332

Processing Services

1,742

1,368

1,637

Advertising

874

729

773

Telephone

706

690

728

Insurance - Other

831

649

510

Other Real Estate Owned, net

(1,827)

(241)

Pension - Other

1,371

(654)

Pension Settlement

(291)

102

Miscellaneous

3,370

3,870

3,330

Total Other

7,389

9,976

8,132

Total

Noninterest Expense management is an important part of our culture and strategic focus as we continue to review and evaluate opportunities to optimize our operations, reduce operating costs, and manage our discretionary expenses.

The table below reflects the major components of noninterest expense.

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,
(Dollars in Thousands)
2017

2017

2016

2017

2016
Salaries
$
11,793

$
11,560

$
11,796

$
35,118

$
35,562
Associate Benefits

4,556

4,732

4,197

14,019

12,723

Total Compensation

16,349

16,292

15,993

49,137

48,285

Premises

2,205

2,217

2,269

6,626

6,852
Equipment

2,296

2,338

2,465

6,811

6,925

Total Occupancy

4,501

4,555

4,734

13,437

13,777

Legal Fees

405

537

452

1,428

1,788
Professional Fees

816

885

896

2,605

2,649
Processing Services

1,567

1,700

1,747

4,913

5,097
Advertising

296

531

441

1,293

1,310
Travel and Entertainment

194

222

230

590

653
Printing and Supplies

115

188

160

478

554
Telephone

502

527

699

1,858

1,637
Postage

185

185

201

586

685
Insurance - Other

409

410

397

1,221

1,658
Other Real Estate Owned, net

(118)

315

821

780

3,306
Miscellaneous

1,486

1,574

1,251

4,224

4,255

Total Other

5,857

7,074

7,295

19,976

23,592

Total Noninterest Expense
$
26,707

$
27,921

$
28,022

$
82,550

$
85,654

37,675

39,262

36,523

Significant components of noninterest expense are discussed in more detail

below.

Compensation

Compensation expense totaled ~~$16.3~~$23.5 million for the ~~third~~first quarter of ~~2017, comparable to~~ 2023, an increase

of $0.5 million, or 2.1%, over

the ~~second~~fourth quarter of ~~2017~~2022 and an increase of ~~$0.4~~$1.2 million, or ~~2.2%~~5.5%, over

the ~~third~~first quarter of ~~2016.~~ 2022.

Compared to the fourth quarter of

2022, the $0.5 million increase in compensation expense reflected an increase

in salary expense of $0.9 million that was partially

offset by a decrease in associate benefits expense of $0.4

million.

The increase ~~over~~in salary expense was primarily attributable to a

decrease in realized loan cost (credit to salary expense) and higher payroll

tax expense which reflected the ~~third quarter~~annual re-set of ~~2016 was due~~this tax as

well as payroll taxes related to ~~higher~~a high level of cash/stock incentives paid

in the first quarter.

The decrease in associate benefit ~~expense. For the first nine months~~expense

reflected a decrease of ~~2017,~~$0.7 million in pension service cost that was partially offset

by increases in stock compensation ~~expense totaled $49.1 million, an increase of $0.8 million, or 1.8%~~(higher

expected pay-out for long-term incentive plan), ~~over the same period of 2016 attributable to higher~~associate insurance,

and other associate benefit expense (annual sales/service awards

event).

Compared to the first quarter of ~~$1.3~~2022, the increase reflected higher salary expense

of $1.4 million partially offset by lower

associate benefit expense of $0.2 million.

The increase in salary expense was primarily due to a decrease in realized

loan cost and the

addition of ~~$0.5 million. Compared to both prior year periods, the increase~~ banking offices and staffing

in ~~other~~new markets.

The decrease in associate benefit expense was primarily due to ~~higher stock~~a decrease in

pension service cost of $0.7 million that was partially offset by

an increase in stock-based compensation ~~attributable to higher pay-out values reflective~~expense of improving financial performance. To a lesser extent, higher pension plan expense attributable to a reduction in the discount rate for plan liabilities contributed to the increase. The reduction in salary expense was due to lower associate headcount.

$0.4 million.

Occupancy.

Occupancy expense (including premises and equipment) totaled ~~$4.5~~ $6.8

million for the ~~third~~first quarter of ~~2017,~~2023, an increase of

$0.5

million, or 8.1% over the fourth quarter of 2022 and an increase of $0.7 million,

or 11.0%, over the first quarter of 2022.

The

increase over both prior periods was primarily attributable

to the three recently opened full-service offices and the re-location of one

office.

Other

Other noninterest expense totaled $7.4 million for the first quarter of

2023, a decrease of ~~$0.1~~$2.6 million, or ~~1.2%~~25.9%, from the ~~second~~

fourth quarter of ~~2017~~2022 and a decrease of ~~$0.2~~$0.7 million, or 9.1%, from

the ~~third~~first quarter of ~~2016.~~ 2022.

The decrease from the ~~second~~fourth quarter of ~~2017~~

2022

was primarily attributable a decrease in other real estate expense of $1.6 million due to ~~lower equipment and premises maintenance expense. The decrease~~ a gain

from the ~~third~~sale of a banking office

and lower pension settlement expense of $1.8 million, partially offset

by higher pension expense (non-service-related component) of

$0.8 million.

Compared to the first quarter of ~~2016~~2022, the decrease was primarily driven by lower other real

estate expense of $1.8

million due to ~~lower depreciation on furniture~~a gain in other real estate from the sale of a banking office

that was partially offset by higher pension expense (non-

service-related component) of $0.8

million and ~~equipment. For the first nine months of 2017, occupancy expense totaled $13.4 million, a decrease~~higher FDIC assessments of $0.3 million, or 2.5%, from the same period of 2016 and reflects a reduction in the number of banking offices as well as lower depreciation expense for furniture and fixtures reflective of assets being fully depreciated.

million.

~~Other~~. Other noninterest expense totaled $5.9 million for the third quarter of 2017, a decrease of $1.2 million, or 17.2% from the second quarter of 2017 and a decrease of $1.4 million, or 19.7%, from the third quarter of 2016. The decrease from the second quarter of 2017 was primarily due to lower OREO expense of $0.4 million and various other expenses, including, advertising of $0.2 million, legal of $0.1 million, processing of $0.1 million, professional of $0.1 million, and printing/supplies of $0.1 million. The decrease in OREO expense reflects a higher level of gains from sale of properties. The decrease from the third quarter of 2016 primarily reflects lower OREO expense of $0.9 million and various other expenses, including, processing of $0.2 million, and telephone of $0.2 million. For the first nine months of 2017, other expense decreased $3.6 million, or 15.3%, from the same period of 2016, primarily attributable to lower OREO expense of $2.5 million, FDIC insurance expense of $0.4 million, legal fees of $0.4 million, and telephone expense of $0.2 million. ~~All OREO expense categories (gain/loss on sale, carrying costs, and valuation adjustments) continue to improve as we liquidate our remaining properties.~~ Lower FDIC assessment factors have driven the reduction in FDIC insurance premiums. Legal fees continue to decline as a result of lower support needed for problem asset resolutions. The higher level of telephone expense reflected the running of dual circuits for the first half of 2017 as our new telephone system was implemented.

Our operating efficiency ratio (expressed as noninterest

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

noninterest income) was ~~77.21%~~64.67% for the ~~third~~first quarter of ~~2017~~2023 compared

to ~~82.28%~~73.41% for the ~~second~~fourth quarter of ~~2017~~2022 and ~~85.92%~~79.60% for the ~~third~~

first quarter of ~~2016. For the first nine months of 2017, this ratio was 81.53% compared to 86.05% for the same period of 2016.~~

2022.

The improvement over both prior periods reflected higher net interest income.

Income Taxes

We realized income

tax expense of ~~$2.5~~$3.7 million ~~(35%~~ (effective rate of 21.3%) for the

first quarter of 2023 compared to $1.9 million

(effective ~~rate)~~rate of 18.1%) for the ~~third~~fourth quarter of ~~2017 compared to $1.6~~ 2022 and $1.7

million ~~(30% effective rate)~~(effective rate of 18.6%) for the ~~second~~first quarter of ~~2017 and $1.4~~2022.

discrete tax item of $0.4 million ~~(33% effective rate) for~~ related our SERP plan favorably impacted

the ~~third quarter of 2016. The lower~~ effective tax rate for the ~~second~~fourth quarter of ~~2017 reflected income tax benefits realized in connection with stock based compensation awards. For the first nine months of 2017, income tax expense totaled $5.5 million (34%~~2022.

Absent discrete items, we expect our annual effective ~~rate) compared to $4.3 million (34% effective rate) for the comparable period of 2016.~~ ~~Absent any other future discrete events, we anticipate our effective income~~ tax rate to approximate ~~35%.~~

21%-22% in 2023.
The increase in the effective tax rate

for 2023 reflects a lower level of pre-tax income from CCHL in relation
to our consolidated income as the non-controlling interest

adjustment for CCHL is accounted for as a permanent tax adjustment.

FINANCIAL CONDITION

Average earning

assets ~~were $2.466~~totaled $4.063 billion for the ~~third~~first quarter of ~~2017, a decrease~~2023, an increase of ~~$35.7~~$30.0 million, or ~~1.4%~~0.7%, ~~from~~ over

the ~~second~~ fourth

quarter of ~~2017,~~2022, and an increase of ~~$42.9~~$123.9 million, or ~~1.8%~~3.1%, over

the ~~fourth~~first quarter of ~~2016.~~ 2022.

The ~~decline in~~increase over both prior periods was

primarily driven by higher deposit balances (see below –

Deposits

The mix of earning assets ~~compared~~continues to ~~the second quarter 2017 was attributable to a decrease in our short-term investments, partially offset~~improve driven by ~~growth in our~~ strong

loan portfolio. The increase in earning assets compared to the fourth quarter 2016 was primarily due to growth in the loan portfolio, partially offset by a decline in total investment securities. The decline in the level of our short-term investments (which consists primarily of overnight funds) during the third quarter was mostly attributable to the seasonality of our public fund deposits.

growth.

Investment Securities

~~In the third quarter of 2017, our average~~

Average investment ~~portfolio~~

decreased ~~$5.6~~$16.9 million, or ~~0.8%, from the second quarter of 2017 and decreased $17.6 million, or 2.5%~~1.6%, from the fourth quarter of ~~2016. Securities in our~~2022 and increased

$5.1 million, or 0.5%, over the

first quarter of 2022.

Our investment portfolio represented ~~27.9%~~26.2% of our average earning assets infor the ~~third~~

first quarter of ~~2017,~~2023 compared

to ~~27.7% in the second quarter of 2017, and 29.1% in~~26.8% for the fourth quarter of ~~2016. Investment securities as a percent of average earning assets increased slightly compared to~~2022 and 26.9% for the ~~second~~first quarter of 2017, as the decline in average earning assets was greater relative to the decline in the investment portfolio. The decrease in the average balance of our investment portfolio compared to both prior periods primarily reflected a decrease in U.S. Treasury (“UST”) securities, partially offset by an increase in Ginnie Mae (“GNMA”) mortgage-backed securities. 2022.

For the remainder of ~~2017,~~2023, we will continue to ~~closely~~

monitor our overall liquidity ~~levels, as well as look for new investment products that are prudent relative to our risk profile~~position and ~~overall investment strategy.~~ L ~~iquidity levels, including anticipated~~allow cash flow from the

investment portfolio ~~will determine the extent~~ to ~~which investment cash flow will be reinvested into securities.~~

run-off to overnight funds.

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

it functions as a key element of liquidity and

asset/liability management.

Two types of classifications are approved

for investment securities which are ~~Available-for-Sale~~Available

-for-Sale (“AFS”)

and Held-to-Maturity (“HTM”). ~~During the third quarter of 2017, we purchased securities under both the AFS and HTM designations.~~

At ~~September 30, 2017, $510.8~~March 31, 2023, $402.9 million, or ~~73.5%~~38.1%, of our investment portfolio

was classified as AFS,

and ~~$184.3~~$651.8 million, or ~~26.5%~~61.8%, classified as HTM.

The average maturity of our total portfolio at March 31, 2023

was 3.34 years

compared to 3.57 years at December 31, 2022 and 3.63 years at March

31, 2022.

The duration of our investment portfolio at March

31, 2023 was 2.99 years.

In the third quarter of 2022, to mitigate risk to accumulated other comprehensive income due

to higher

interest rates, we reclassified 33 U.S. Treasury obligations

totaling $168.4 million with unrealized losses of $9.4 million from AFS to

HTM.

At March 31, 2023, $7.1 million was remaining in unrealized losses relating to

these securities.

We determine

the classification of a security at the time of acquisition based on how the purchase will affect

our asset/liability strategy

and future business plans and opportunities.

We consider multiple

factors in determining classification, including regulatory capital

requirements, volatility in earnings or other comprehensive income,

and liquidity needs.

Securities in the AFS portfolio are recorded

at fair value with unrealized gains and losses associated with these securities recorded

net of tax, in the accumulated other

comprehensive income component of shareowners’ equity.

HTM securities are acquired or owned with the intent of holding

them to ~~maturity (final payment date).~~

maturity.

HTM investments are measured at amortized cost.

We do not

trade, nor do we presently intend to begin trading investment

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

a trading portfolio.

At ~~September 30, 2017,~~ March 31, 2023, there were ~~266~~896 positions (combined AFS and HTM) with

pre-tax unrealized losses totaling ~~$2.0 million. GNMA mortgage-backed securities, UST,~~$74.8 million (see

Note 2 – Investment Securities in the Notes to Consolidated Financial Statements for

detail by category).

87 of these positions are

U.S. Treasury bonds and ~~Small Business Administration (“SBA”) investments~~ carry the full faith and credit ~~guarantee~~of

the U.S. Government.

684 are U.S. government agency securities issued by

U.S. government sponsored entities.

We believe the

long history of no credit losses on government securities indicates that

the

expectation of nonpayment of the amortized cost basis is effectively

zero.

The remaining 125 positions (Municipal securities and

corporate bonds) have a credit component.

At March 31, 2023, corporate debt securities had an allowance for credit losses of

$28,000

and municipal securities had an allowance of $8,000.

At March 31, 2023, all CMO, MBS, SBA, U.S. ~~Government,~~ Agency,

and ~~are 0% risk-weighted assets~~U.S. Treasury

bonds held were AAA rated.

Loans HFI

Average loans

held for ~~regulatory capital purposes. SBA securities float monthly~~investment (“HFI”) increased $143.0 million, or ~~quarterly to~~5.9%, over the ~~prime rate~~ fourth quarter of 2022

and ~~are uncapped. Federal Home Loan Bank (“FHLB”) and Federal Farm Credit Bureau (“FFCB”) are direct obligations~~$618.8 million, or

31.5%, over the first quarter of U.S. Government Agencies. None of these positions with unrealized losses are considered impaired, and all are expected to mature at par. The table below provides further detail on investment securities with unrealized losses.

2022.

Less Than 12 months

12 months or Longer

Total

Market
Unrealized

Market
Unrealized

Market
Unrealized
(Dollars in Thousands)
Count

Value
Losses

Count

Value
Losses

Count

Value
Losses
GNMA
58
$
47,159
$
579

13
$
4,373
$
63

71
$
51,532
$
642
UST
56

274,893

942

2

9,981

110

58

284,874

1,052
SBA
24

9,618

70

8

4,657

34

32

14,275

104
FHLB and FFCB
18

25,158

56

6

13,196

130

24

38,354

186
States and Political Subdivisions
67

23,534

24

14

5,129

32

81

28,663

56
Total
223
$
380,362
$
1,671

43
$
37,336
$
369

266
$
417,698
$
2,040

~~The average maturity of our total portfolio at September 30, 2017 was 1.87 years compared to 1.86 years and 1.85 years at June 30, 2017 and December 31, 2016, respectively.~~

~~Loans~~

~~Average~~Period end loans increased ~~$29.9~~$109.5 million, or ~~1.9% compared to~~4.3%, over the ~~second~~fourth quarter

of 2022 and $668.5

million, or 33.6%, over the first quarter of ~~2017, and have grown $65.3 million, or 4.2% compared~~2022.

Compared to the fourth quarter of ~~2016. Increases over both prior periods reflected growth~~2022, a majority of the increase was realized in ~~all loan types except~~the

residential real estate category,

and to a lesser extent, the construction and commercial ~~loans and home equity loans. We acquired three loan pools during the first nine months of 2017, including $18.3 million of adjustable rate residential loans in~~ real estate mortgage categories.

Compared to

the first quarter ~~$16.4 million~~ of ~~fixed and adjustable commercial real estate loans~~2022, loan growth was broad based, with increases realized in ~~the second quarter, and $8.5 million of adjustable residential real estate loans in the third quarter. The loans were individually reviewed and evaluated in accordance with~~all categories

except consumer loans.

Without compromising our credit standards

changing our underwriting ~~standards.~~

We standards, or taking on inordinate interest rate risk,

continue to closely monitor our markets and make minor ~~modifications on some of our lending programs to try to mitigate the impact that consumer and business deleveraging has had on our portfolio. None of these changes involved lowering our~~adjustments as necessary.

Credit Quality

Overall credit ~~standards. These programs, coupled with economic improvements in our anchor markets, have helped to increase overall production.~~

~~Nonperforming Assets~~

quality remains stable.

Nonperforming assets (nonaccrual loans and ~~OREO)~~other real estate) totaled ~~$12.5~~ $4.6

million at ~~September 30, 2017, a decrease of $3.4~~March 31,

2023 compared to $2.7 million ~~or 21.3%, from June 30, 2017 and $6.6 million, or 34.6%, from~~at December 31, ~~2016.~~ 2022 and $2.7 million

at March 31, 2022.

At March 31, 2023, the increase was

primarily due to the addition of one large business loan relationship

totaling $1.8 million to nonaccrual status is in the process of

collection and is adequately secured and reserved for.

At March 31, 2023, nonperforming assets as a percentage of total assets totaled

0.10% compared to 0.06% at December 31, 2022 and 0.06% at March 31, 202

Nonaccrual loans totaled ~~$6.6~~$4.6 million at ~~September 30, 2017,~~March 31,

2023, a ~~$1.4~~$2.3 million ~~decrease from June 30, 2017~~increase over December 31, 2022 and a ~~$2.0~~$1.9 million increase

over March 31, 2022.

Further, classified loans

totaled $12.2 million at March 31, 2023, a $7.2 million decrease from December

31, ~~2016. The balance of OREO totaled $6.0~~2022 and a $10.2 million ~~at September 30, 2017, a~~ decrease ~~of $2.0 million~~ from ~~June 30, 2017 and $4.6 million from December~~ March

31, ~~2016. Nonperforming assets represented 0.45% of total assets at September 30, 2017 compared to 0.57% at June 30, 2017 and 0.67% at December 31, 2016.~~

2022.

(Dollars in Thousands)
September 30, 2017

June 30, 2017

December 31, 2016
Nonaccruing Loans:

Commercial, Financial and Agricultural
$
41

$
455

$
468

Real Estate - Construction

362

363

311

Real Estate - Commercial Mortgage

2,425

2,984

3,410

Real Estate - Residential

2,350

2,485

2,330

Real Estate - Home Equity

1,108

1,496

1,774

Consumer

272

183

240

Total Nonperforming Loans (“NPLs”)⁽¹⁾
$
6,558

$
7,966

$
8,533

Other Real Estate Owned

5,987

7,968

10,638

Total Nonperforming Assets (“NPAs”)
$
12,545

$
15,934

$
19,171

Past Due Loans 30 – 89 Days
$
5,687

$
3,789

$
6,438

Performing Troubled Debt Restructurings
$
33,427

$
35,436

$
38,233

Nonperforming Loans/Loans

0.40
%

0.49
%

0.54
%
Nonperforming Assets/Total Assets

0.45

0.57

0.67

Nonperforming Assets/Loans Plus OREO

0.76

0.97

1.21

Allowance/Nonperforming Loans

203.39
%

166.23
%

157.40
%

~~(1)~~~~Nonperforming TDRs are included in the NPL totals.~~

Activity within our nonperforming asset portfolio is provided in the table below.

Three Months Ended September 30,

Nine Months Ended September 30,
(Dollars in Thousands)
2017

2016

2017

2016
NPA Beginning Balance:
$
15,934

$
22,836

$
19,171

$
29,595
Change in Nonaccrual Loans:

Beginning Balance

7,966

8,214

8,533

10,305

Additions

2,440

2,844

8,555

9,120

Charge-Offs

(644)

(414)

(2,246)

(2,053)

Transferred to OREO

(261)

(832)

(1,043)

(3,011)

Paid Off/Payments

(1,534)

(529)

(2,927)

(1,892)

Restored to Accrual

(1,409)

(669)

(4,314)

(3,855)
Ending Balance

6,558

8,614


6,558


8,614

Change in OREO:

Beginning Balance

7,968

14,622

10,638

19,290

Additions

339

890

2,024

3,309

Valuation Write-downs

(350)

(397)

(1,118)

(1,910)

Sales

(1,970)

(2,377)

(5,291)

(7,951)

Other

-

-

(266)

-
Ending Balance

5,987

12,738


5,987


12,738
NPA Net Change

(3,389)

(1,484)

(6,626)

(8,243)
NPA Ending Balance
$
12,545

$
21,352

$
12,545

$
21,352

Activity within our TDR portfolio is provided in the table below.

Three Months Ended September 30,

Nine Months Ended September 30,
(Dollars in Thousands)
2017

2016

2017

2016
TDR Beginning Balance:
$
37,917

$
37,539

$
39,976

$
38,321

Additions

341

17

643

1,128

Charge-Offs

(5)

(10)

(458)

(10)

Paid Off/Payments

(2,416)

(519)

(4,284)

(2,001)

Transferred to OREO

(85)

(179)

(125)

(590)
TDR Ending Balance⁽¹⁾
$
35,752

$
36,848

$
35,752

$
36,848

⁽¹⁾ Includes performing and nonaccrual TDR loan balances.

Allowance for ~~Loan~~Credit Losses

We maintain an allowance for loan losses at a level that management believes to be sufficient to provide for probable losses inherent in the loan portfolio as of the balance sheet date. Credit losses arise from borrowers’ inability or unwillingness to repay, and from other risks inherent in the lending process, including collateral risk, operations risk, concentration risk and economic risk. All related risks of lending are considered when assessing the adequacy of the loan loss reserve.

The allowance for ~~loan~~credit losses is ~~established through~~ 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 ~~charged to expense.~~ 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 ~~collection~~the uncollectability of a loan balance is confirmed.

Expected recoveries do not exceed the ~~principal~~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 ~~unlikely. The~~provided through the credit loss provision, but recorded as a separate

liability included in other liabilities.

Management estimates the allowance ~~for~~balance using relevant available information,

from internal and external sources relating to past

events, current conditions, and reasonable and supportable forecasts.

Historical loan ~~losses is based on management's judgment~~default and loss experience provides the basis for

the estimation of ~~overall loan quality. This is a significant estimate based on a detailed analysis~~expected credit losses.

Adjustments to historical loss information incorporate management’s

view of ~~the loan portfolio. The balance can~~current

conditions and ~~will change based on changes in the assessment of the loan portfolio's overall credit quality.We evaluate the adequacy of~~forecasts.

At March 31, 2023, the allowance for ~~loan~~credit losses ~~on a quarterly basis.~~

~~The allowance~~ for ~~loan losses was $13.3~~HFI loans totaled

$26.8 million ~~at September 30, 2017~~ compared to ~~$13.2 million at June 30, 2017 and $13.4~~$25.1 million at December 31, ~~2016.~~

2022 and $20.8 million at March 31, 2022.

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

statements.

The increase in the allowance ~~for~~ over the prior periods was primarily driven by

loan ~~losses was 0.82%~~growth.

At March 31, 2023, net charge-

offs totaled $1.5 million, an increase of ~~outstanding~~$0.2 million over

the fourth quarter of 2022, and $0.7 million over the first quarter of 2022.

At March 31, 2023, the allowance represented 1.01% of

HFI loans and provided coverage of ~~203%~~584% of nonperforming loans ~~at September 30, 2017~~ compared

to ~~0.81%~~0.98% and ~~166%~~1,091%, respectively, ~~at June 30, 2017 and 0.86% and 157%, respectively,~~

at December 31, ~~2016. We believe that~~2022, and 1.05% and 762%, respectively,

at March 31, 2022.

At March 31, 2023, the allowance for ~~loan~~credit losses ~~was adequate~~for unfunded commitments

totaled $2.8 million compared to ~~absorb losses inherent~~$3.0 million at

December 31, 2022 and $3.0 million at March 31, 2022. The allowance

for unfunded commitments is recorded in ~~our loan portfolio at June 30, 2017.~~

other liabilities.

Deposits

Average total

deposits were ~~$2.329~~$3.817 billion for the ~~third~~first quarter of ~~2017, a decrease of $44.3 million, or 1.9%, from the second quarter of 2017, and~~2023, an increase of ~~$22.2~~$14.3 million,

or 0.4%, over the fourth quarter

of 2022 and $103.3 million, or ~~1.0%~~2.8%, over the first quarter of 2022.

Compared to the fourth quarter of ~~2016. The~~2022, the increase reflected

higher NOW account balances, primarily due to a seasonal increase in our

public fund deposits that occurred late in the fourth quarter.

Compared to the first quarter of 2022, we experienced strong growth in our

NOW accounts, and to a lesser degree, our savings

accounts.

Period end total deposits declined $115.4 million

from the fourth quarter of 2022, and reflected lower balances in

noninterest bearing accounts, NOW accounts, and savings accounts, partially

offset by slight growth in money market accounts and

certificates of deposit

Noninterest bearing accounts decreased $52.2 million from the fourth quarter

of 2022, largely due to the

migration of two commercial clients into interest bearing NOW accounts, in addition

to clients seeking a higher yielding investment

account at Capital City Investments (approximately $30 million,

which is predominantly attributable to clients with higher balances).

Interest bearing deposits decreased $63.2 million from the fourth quarter

of 2022, including a $47.8 million decline in ~~average deposits compared to~~ the ~~second~~NOW

account balance that was largely driven by an anticipated seasonal

decline in public fund balances of $66 million, partially offset

the previously mentioned migration of two clients from noninterest bearing

accounts.

Savings account balances decreased $20.1

million from the fourth quarter of ~~2017 reflected lower public NOW~~2022, primarily attributable to clients

seeking higher yielding investment products outside of the

Bank.

Money market account ~~and certificates of deposit~~ balances ~~partially offset by increases in all other deposit types. The increase~~increased $4.5 million over the fourth quarter ~~2016 reflects higher levels~~

of 2022 (also due to some migration from

noninterest bearing ~~deposits, savings accounts, and money market accounts, partially offset by declines~~accounts), in ~~public NOW accounts and certificates of deposit. The seasonal inflows of public funds peaked~~addition to growth in ~~the first quarter of 2017 for this cycle, and are expected to decline into the fourth quarter of 2017.~~

Deposit levels remain strong, as the seasonal decline in public NOW accounts was partially offset by increases in all other non-maturity deposits during the quarter. Although rates remain at historical lows and we have not adjusted our ~~rate structure average core deposits grew year over year.~~ new markets which

offered a promotional rate.

We continue

to closely monitor our ~~overall liquidity position~~cost of deposits and deposit ~~rates~~mix as we ~~believe that a prudent pricing discipline remains~~manage through the ~~key to managing our mix of deposits.~~

current

rising rate environment.

MARKET RISK AND INTEREST RATE
SENSITIVITY

Market Risk and Interest Rate Sensitivity

Overview.

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

commodity prices, and equity prices.

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. ~~Our risk~~

In asset and liability management activities, our

policies are ~~primarily~~ designed to minimize structural interest rate risk.

Interest Rate Risk Management.

Our net income is largely dependent on net interest income.

Net interest income is susceptible to

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

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

When

interest-bearing liabilities mature or ~~re-price~~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 ~~re-price~~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/~~Asset Liability Management

Committee (“ALCO”).

The policy establishes limits of risk, ~~limits,~~ which are quantitative

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

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

(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~~long-

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

computer modeling.

The simulation model ~~is designed to capture~~ 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 ~~analyzing~~gauging interest rate risk, there are certain shortcomings

inherent in the interest rate modeling methodology ~~that we use.~~ 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 ~~assumptions that we use in our modeling.~~ 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.

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%	-7.5%
September 30, 2017	14.8%	10.9%	6.9%	3.3%	-8.1%
June 30,2017	12.5%	9.0%	5.6%	2.7%	-8.7%

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%	-10.0%
September 30, 2017	41.4%	31.0%	20.6%	10.9%	-13.0%
June 30,2017	41.3%	30.9%	20.7%	11.3%	-13.2%

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%	-15.0%
September 30, 2017	34.4%	27.3%	19.2%	10.6%	-21.7%
June 30,2017	35.1%	27.8%	19.6%	10.8%	-23.7%

PART I. FINANCIAL INFORMATION
Item 1.

CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

			(Unaudited)
			September 30,		December 31,
(Dollars in Thousands)			2017		2016
ASSETS
Cash and Due From Banks			$	50,420	$	48,268
Federal Funds Sold and Interest Bearing Deposits				140,694		247,779
		Total Cash and Cash Equivalents		191,114		296,047

Investment Securities, Available for Sale, at fair value				510,846		522,734
Investment Securities, Held to Maturity, at amortized cost (fair value of $183,523 and $176,746)				184,262		177,365
		Total Investment Securities		695,108		700,099

Loans Held For Sale				7,800		10,886

Loans, Net of Unearned Income				1,630,338		1,561,289
	Allowance for Loan Losses			(13,339)		(13,431)
		Loans, Net		1,616,999		1,547,858

Premises and Equipment, net				92,345		95,476
Goodwill				84,811		84,811
Other Real Estate Owned				5,987		10,638
Other Assets				96,678		99,382
		Total Assets	$	2,790,842	$	2,845,197

LIABILITIES
Deposits:
	Noninterest Bearing Deposits		$	870,644	$	791,182
	Interest Bearing Deposits			1,476,973		1,621,104
		Total Deposits		2,347,617		2,412,286

Short-Term Borrowings				6,777		12,749
Subordinated Notes Payable				52,887		52,887
Other Long-Term Borrowings				15,047		14,881
Other Liabilities				83,313		77,226
		Total Liabilities		2,505,641		2,570,029

SHAREOWNERS’ EQUITY
Preferred Stock, $.01 par value; 3,000,000 shares authorized; no shares issued and outstanding				-		-
Common Stock, $.01 par value; 90,000,000 shares authorized; 16,966,047 and 16,844,698 shares
issued and outstanding at September 30, 2017 and December 31, 2016, respectively				170		168
Additional Paid-In Capital				35,892		34,188
Retained Earnings				275,013		267,037
Accumulated Other Comprehensive Loss, net of tax				(25,874)		(26,225)
Total Shareowners’ Equity				285,201		275,168
Total Liabilities and Shareowners' Equity			$	2,790,842	$	2,845,197

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 September 30,				Nine Months Ended September 30,
(Dollars in Thousands, Except Per Share Data)		2017		2016		2017		2016
INTEREST INCOME
Loans, including Fees		$	19,479	$	18,046	$	56,204	$	54,196
Investment Securities:
	Taxable		2,150		1,633		5,832		4,591
	Tax Exempt		266		213		795		643
Federal Funds Sold and Interest Bearing Deposits			446		212		1,472		892
Total Interest Income			22,341		20,104		64,303		60,322

INTEREST EXPENSE
Deposits			530		223		1,199		655
Short-Term Borrowings			15		43		77		91
Subordinated Notes Payable			420		341		1,203		1,071
Other Long-Term Borrowings			115		177		331		599
Total Interest Expense			1,080		784		2,810		2,416

NET INTEREST INCOME			21,261		19,320		61,493		57,906
Provision for Loan Losses			490		-		1,389		355
Net Interest Income After Provision For Loan Losses			20,771		19,320		60,104		57,551

NONINTEREST INCOME
Deposit Fees			5,153		5,373		15,295		16,094
Bank Card Fees			2,688		2,759		8,361		8,467
Wealth Management Fees			2,197		1,774		6,112		5,256
Mortgage Banking Fees			1,480		1,503		4,344		3,800
Other			1,478		1,602		4,737		7,286
Total Noninterest Income			12,996		13,011		38,849		40,903

NONINTEREST EXPENSE
Compensation			16,349		15,993		49,137		48,285
Occupancy, net			4,501		4,734		13,437		13,777
Other Real Estate Owned, net			(118)		821		780		3,306
Other			5,975		6,474		19,196		20,286
Total Noninterest Expense			26,707		28,022		82,550		85,654

INCOME BEFORE INCOME TAXES			7,060		4,309		16,403		12,800
Income Tax Expense			2,505		1,436		5,543		4,350

NET INCOME		$	4,555	$	2,873	$	10,860	$	8,450

BASIC NET INCOME PER SHARE		$	0.27	$	0.18	$	0.64	$	0.50
DILUTED NET INCOME PER SHARE		$	0.27	$	0.17	$	0.64	$	0.49

Average Common Basic Shares Outstanding			16,965		16,804		16,946		17,049
Average Common Diluted Shares Outstanding			17,044		16,871		17,009		17,100

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)

	Nine Months Ended September 30,
(Dollars in Thousands)	2017		2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	10,860	$	8,450
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Provision for Loan Losses		1,389		355
Depreciation		4,966		5,198
Amortization of Premiums, Discounts, and Fees, net		4,928		4,642
Gain on Partial Retirement of Trust Preferred Securities		-		(2,487)
Net Decrease in Loans Held-for-Sale		3,086		1,122
Stock Compensation		1,196		743
Net Tax Benefit From Stock-Based Compensation		(223)		-
Deferred Income Taxes		247		3,087
Net Loss on Sales and Write-Downs of Other Real Estate Owned		456		2,523
Loss on Disposal of Premises and Equipment		276		131
Net Decrease (Increase) in Other Assets		2,559		(6,610)
Net Increase in Other Liabilities		6,487		6,733
Net Cash Provided By Operating Activities		36,227		23,887

CASH FLOWS FROM INVESTING ACTIVITIES
Securities Held to Maturity:
Purchases		(60,703)		(40,320)
Payments, Maturities, and Calls		53,031		37,495
Securities Available for Sale:
Purchases		(122,949)		(125,975)
Payments, Maturities, and Calls		130,997		74,450
Purchases of Loans Held for Investment		(44,083)		-
Net Increase in Loans		(27,327)		(68,775)
Proceeds From Sales of Other Real Estate Owned		5,952		7,338
Purchases of Premises and Equipment		(3,052)		(3,696)
Net Cash Used In Investing Activities		(68,134)		(119,483)

CASH FLOWS FROM FINANCING ACTIVITIES
Net (Decrease) Increase in Deposits		(64,669)		12,258
Net Decrease in Short-Term Borrowings		(3,020)		(50,023)
Redemption of Subordinated Notes		-		(7,500)
Repayment of Other Long-Term Borrowings		(2,786)		(5,819)
Dividends Paid		(2,884)		(2,050)
Payments to Repurchase Common Stock		-		(6,312)
Issuance of Common Stock Under Compensation Plans		333		321
Net Cash Used In Financing Activities		(73,026)		(59,125)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(104,933)		(154,721)

Cash and Cash Equivalents at Beginning of Period		296,047		378,905
Cash and Cash Equivalents at End of Period	$	191,114	$	224,184

Supplemental Cash Flow Disclosures:
Interest Paid	$	2,825	$	2,422
Income Taxes Paid (Refunded)	$	4,044	$	(355)

Noncash Investing and Financing Activities:
Loans and Premises Transferred to Other Real Estate Owned	$	2,024	$	3,309

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

NOTE 2 – INVESTMENT SECURITIES

Investment Portfolio Composition. The amortized cost and related market value of investment securities available-for-sale and
held-to-maturity were as follows:
	September 30, 2017									December 31, 2016
	Amortized		Unrealized		Unrealized		Market		Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value		Cost		Gain		Losses		Value
Available for Sale
U.S. Government Treasury	$	257,635	$	32	$	869	$	256,798	$	286,867	$	262	$	851	$	286,278
U.S. Government Agency		147,550		729		290		147,989		131,489		495		344		131,640
States and Political Subdivisions		95,869		175		54		95,990		95,197		23		381		94,839
Mortgage-Backed Securities		1,218		114		-		1,332		1,312		118		-		1,430
Equity Securities⁽¹⁾		8,737		-		-		8,737		8,547		-		-		8,547
Total	$	511,009	$	1,050	$	1,213	$	510,846	$	523,412	$	898	$	1,576	$	522,734

Held to Maturity
U.S. Government Treasury	$	93,309	$	2	$	183	$	93,128	$	119,131	$	107	$	81	$	119,157
States and Political Subdivisions		7,051		31		2		7,080		8,175		1		38		8,138
Mortgage-Backed Securities		83,902		55		642		83,315		50,059		29		637		49,451
Total	$	184,262	$	88	$	827	$	183,523	$	177,365	$	137	$	756	$	176,746

Total Investment Securities	$	695,271	$	1,138	$	2,040	$	694,369	$	700,777	$	1,035	$	2,332	$	699,480

	Less Than				Greater Than
	12 Months				12 Months				Total
	Market		Unrealized		Market		Unrealized		Market		Unrealized
(Dollars in Thousands)	Value		Losses		Value		Losses		Value		Losses
September 30, 2017
Available for Sale
U.S. Government Treasury	$	191,720	$	759	$	9,981	$	110	$	201,701	$	869
U.S. Government Agency		34,775		126		17,853		164		52,628		290
States and Political Subdivisions		23,031		22		5,129		32		28,160		54
Total		249,526		907		32,963		306		282,489		1,213

Held to Maturity
U.S. Government Treasury		83,173		183		-		-		83,173		183
States and Political Subdivisions		504		2		-		-		504		2
Mortgage-Backed Securities		47,159		579		4,373		63		51,532		642
Total	$	130,836	$	764	$	4,373	$	63	$	135,209	$	827

December 31, 2016
Available for Sale
U.S. Government Treasury	$	116,704	$	851	$	-	$	-	$	116,704	$	851
U.S. Government Agency		48,520		310		6,699		34		55,219		344
States and Political Subdivisions		81,521		380		294		1		81,815		381
Mortgage-Backed Securities		3		-		-		-		3		-
Total		246,748		1,541		6,993		35		253,741		1,576

Held to Maturity
U.S. Government Treasury		35,210		81		-		-		35,210		81
States and Political Subdivisions		7,491		38		-		-		7,491		38
Mortgage-Backed Securities		36,710		599		4,010		38		40,720		637
Total	$	79,411	$	718	$	4,010	$	38	$	83,421	$	756

	30-59		60-89		90 +		Total		Total		Total
(Dollars in Thousands)	DPD		DPD		DPD		Past Due		Current		Loans⁽¹⁾
September 30, 2017
Commercial, Financial and Agricultural	$	249	$	584	$	-	$	833	$	215,089	$	215,963
Real Estate – Construction		-		5		-		5		67,446		67,813
Real Estate – Commercial Mortgage		1,277		168		-		1,445		523,461		527,331
Real Estate – Residential		374		754		-		1,128		312,105		315,583
Real Estate – Home Equity		455		1		-		456		226,935		228,499
Consumer		1,266		554		-		1,820		273,057		275,149
Total Past Due Loans	$	3,621	$	2,066	$	-	$	5,687	$	1,618,093	$	1,630,338

December 31, 2016
Commercial, Financial and Agricultural	$	209	$	48	$	-	$	257	$	215,679	$	216,404
Real Estate – Construction		949		282		-		1,231		56,901		58,443
Real Estate – Commercial Mortgage		835		1		-		836		499,732		503,978
Real Estate – Residential		1,199		490		-		1,689		277,490		281,509
Real Estate – Home Equity		577		51		-		628		234,110		236,512
Consumer		1,516		281		-		1,797		262,406		264,443
Total Past Due Loans	$	5,285	$	1,153	$	-	$	6,438	$	1,546,318	$	1,561,289

⁽¹⁾ Total Loans include nonaccrual loans

		Commercial,				Real Estate
		Financial,		Real Estate		Commercial		Real Estate		Real Estate
(Dollars in Thousands)		Agricultural		Construction		Mortgage		Residential		Home Equity		Consumer		Total
Three Months Ended
September 30, 2017
Beginning Balance		$	1,095	$	114	$	3,825	$	3,384	$	2,524	$	2,300	$	13,242
	Provision for Loan Losses		208		(26)		286		(32)		(103)		157		490
	Charge-Offs		(276)		-		(94)		(125)		(50)		(455)		(1,000)
	Recoveries		79		50		69		60		84		265		607
	Net Charge-Offs		(197)		50		(25)		(65)		34		(190)		(393)
Ending Balance		$	1,106	$	138	$	4,086	$	3,287	$	2,455	$	2,267	$	13,339

Nine Months Ended
September 30, 2017
Beginning Balance		$	1,198	$	168	$	4,315	$	3,445	$	2,297	$	2,008	$	13,431
	Provision for Loan Losses		401		(80)		264		(348)		148		1,004		1,389
	Charge-Offs		(693)		-		(643)		(285)		(142)		(1,616)		(3,379)
	Recoveries		200		50		150		475		152		871		1,898
	Net Charge-Offs		(493)		50		(493)		190		10		(745)		(1,481)
Ending Balance		$	1,106	$	138	$	4,086	$	3,287	$	2,455	$	2,267	$	13,339

Three Months Ended
September 30, 2016
Beginning Balance		$	1,048	$	126	$	4,389	$	3,835	$	2,391	$	1,888	$	13,677
	Provision for Loan Losses		163		(3)		224		(324)		(307)		247		-
	Charge-Offs		(143)		-		(5)		(96)		(51)		(479)		(774)
	Recoveries		199		-		45		139		237		221		841
	Net Charge-Offs		56		-		40		43		186		(258)		67
Ending Balance		$	1,267	$	123	$	4,653	$	3,554	$	2,270	$	1,877	$	13,744

Nine Months Ended
September 30, 2016
Beginning Balance		$	905	$	101	$	4,498	$	4,409	$	2,473	$	1,567	$	13,953
	Provision for Loan Losses		559		22		71		(1,030)		(168)		901		355
	Charge-Offs		(484)		-		(279)		(779)		(412)		(1,356)		(3,310)
	Recoveries		287		-		363		954		377		765		2,746
	Net Charge-Offs		(197)		-		84		175		(35)		(591)		(564)
Ending Balance		$	1,267	$	123	$	4,653	$	3,554	$	2,270	$	1,877	$	13,744

	Unpaid		Recorded		Recorded
	Principal		Investment		Investment		Related
(Dollars in Thousands)	Balance		With No Allowance		With Allowance		Allowance
September 30, 2017
Commercial, Financial and Agricultural	$	847	$	122	$	725	$	88
Real Estate – Construction		363		298		65		24
Real Estate – Commercial Mortgage		20,716		2,141		18,575		1,846
Real Estate – Residential		13,258		1,962		11,296		1,196
Real Estate – Home Equity		2,915		902		2,013		454
Consumer		132		58		74		3
Total	$	38,231	$	5,483	$	32,748	$	3,611

December 31, 2016
Commercial, Financial and Agricultural	$	1,042	$	565	$	477	$	80
Real Estate – Construction		247		-		247		-
Real Estate – Commercial Mortgage		23,855		8,954		14,901		2,038
Real Estate – Residential		15,596		2,509		13,087		1,561
Real Estate – Home Equity		3,375		1,871		1,504		335
Consumer		174		65		109		6
Total	$	44,289	$	13,964	$	30,325	$	4,020

	Commercial,
	Financial,						Total Criticized
(Dollars in Thousands)	Agriculture		Real Estate		Consumer		Loans
September 30, 2017
Special Mention	$	9,277	$	16,105	$	317	$	25,699
Substandard		1,322		34,367		856		36,545
Doubtful		-		-		-		-
Total Criticized Loans	$	10,599	$	50,472	$	1,173	$	62,244

December 31, 2016
Special Mention	$	3,300	$	23,183	$	216	$	26,699
Substandard		1,158		39,800		549		41,507
Doubtful		-		-		-		-
Total Criticized Loans	$	4,458	$	62,983	$	765	$	68,206

	September 30, 2017
	Carrying		Level 1		Level 2		Level 3
(Dollars in Thousands)	Value		Inputs		Inputs		Inputs
ASSETS:
Cash	$	50,420	$	50,420	$	-	$	-
Short-Term Investments		140,694		140,694		-		-
Investment Securities, Available for Sale		510,846		256,798		254,048		-
Investment Securities, Held to Maturity		184,262		93,128		90,395		-
Loans Held for Sale		7,800		-		7,800		-
Loans, Net of Allowance for Loan Losses		1,616,999		-		-		1,608,364

LIABILITIES:
Deposits	$	2,347,617	$	-	$	2,280,468	$	-
Short-Term Borrowings		6,777		-		6,808		-
Subordinated Notes Payable		52,887		-		41,012		-
Long-Term Borrowings		15,047		-		15,238		-

			Before		Tax		Net of
			Tax		(Expense)		Tax
(Dollars in Thousands)			Amount		Benefit		Amount
Three Months Ended September 30, 2017
Investment Securities:
Change in net unrealized gain/loss on securities available for sale			$	(99)	$	38	$	(61)
Amortization of losses on securities transferred from available for sale to held to
	maturity			19		(7)		12
		Total Other Comprehensive Loss	$	(80)	$	31	$	(49)

Nine Months Ended September 30, 2017
Investment Securities:
Change in net unrealized gain/loss on securities available for sale			$	516	$	(200)	$	316
Amortization of losses on securities transferred from available for sale to held to
	maturity			57		(22)		35
		Total Other Comprehensive Income	$	573	$	(222)	$	351

Accumulated other comprehensive loss was comprised of the following components:

					Accumulated
	Securities				Other
	Available		Retirement		Comprehensive
(Dollars in Thousands)	for Sale		Plans		Loss
Balance as of January 1, 2017	$	(583)	$	(25,642)	$	(26,225)
Other comprehensive income during the period		351		-		351
Balance as of September 30, 2017	$	(232)	$	(25,642)	$	(25,874)

Balance as of January 1, 2016	$	(127)	$	(22,130)	$	(22,257)
Other comprehensive income during the period		980		-		980
Balance as of September 30, 2016	$	853	$	(22,130)	$	(21,277)

		2017						2016								2015
(Dollars in Thousands)		Third		Second		First		Fourth		Third		Second		First		Fourth
Shareowners' Equity (GAAP)		$	285,201	$	281,513	$	278,059	$	275,168	$	276,624	$	274,824	$	276,833	$	274,352
Less: Goodwill (GAAP)			84,811		84,811		84,811		84,811		84,811		84,811		84,811		84,811
Tangible Shareowners' Equity (non-GAAP)	A		200,390		196,702		193,248		190,357		191,813		190,013		192,022		189,541
Total Assets (GAAP)			2,790,842		2,814,843		2,895,531		2,845,197		2,753,154		2,767,636		2,792,186		2,797,860
Less: Goodwill (GAAP)			84,811		84,811		84,811		84,811		84,811		84,811		84,811		84,811
Tangible Assets (non-GAAP)	B	$	2,706,031	$	2,730,032	$	2,810,720	$	2,760,386	$	2,668,343	$	2,682,825	$	2,707,375	$	2,713,049
Tangible Common Equity Ratio (non-GAAP)	A/B		7.41%		7.21%		6.88%		6.90%		7.19%		7.08%		7.09%		6.99%

	Less Than 12 months					12 months or Longer					Total
			Market	Unrealized				Market	Unrealized				Market	Unrealized
(Dollars in Thousands)	Count		Value	Losses		Count		Value	Losses		Count		Value	Losses
GNMA	58	$	47,159	$	579	13	$	4,373	$	63	71	$	51,532	$	642
UST	56		274,893		942	2		9,981		110	58		284,874		1,052
SBA	24		9,618		70	8		4,657		34	32		14,275		104
FHLB and FFCB	18		25,158		56	6		13,196		130	24		38,354		186
States and Political Subdivisions	67		23,534		24	14		5,129		32	81		28,663		56
Total	223	$	380,362	$	1,671	43	$	37,336	$	369	266	$	417,698	$	2,040

(Dollars in Thousands)		September 30, 2017			June 30, 2017			December 31, 2016
Nonaccruing Loans:
	Commercial, Financial and Agricultural	$	41		$	455		$	468
	Real Estate - Construction		362			363			311
	Real Estate - Commercial Mortgage		2,425			2,984			3,410
	Real Estate - Residential		2,350			2,485			2,330
	Real Estate - Home Equity		1,108			1,496			1,774
	Consumer		272			183			240
Total Nonperforming Loans (“NPLs”)⁽¹⁾		$	6,558		$	7,966		$	8,533
Other Real Estate Owned			5,987			7,968			10,638
Total Nonperforming Assets (“NPAs”)		$	12,545		$	15,934		$	19,171

Past Due Loans 30 – 89 Days		$	5,687		$	3,789		$	6,438
Performing Troubled Debt Restructurings		$	33,427		$	35,436		$	38,233

Nonperforming Loans/Loans			0.40	%		0.49	%		0.54	%
Nonperforming Assets/Total Assets			0.45			0.57			0.67
Nonperforming Assets/Loans Plus OREO			0.76			0.97			1.21
Allowance/Nonperforming Loans			203.39	%		166.23	%		157.40	%

TABLE I
AVERAGE BALANCES & INTEREST RATES

	Three Months Ended September 30,													Nine Months Ended September 30,
	2017						2016							2017						2016
	Average				Average			Average				Average		Average				Average		Average				Average
(Dollars in Thousands)	Balances		Interest		Rate			Balances		Interest		Rate		Balances		Interest		Rate		Balances		Interest		Rate
Assets:
Loans⁽¹⁾⁽²⁾	$	1,638,578	$	19,672	4.76	%		$	1,555,889	$	18,216	4.66	%	$	1,611,117	$	56,689	4.70	%	$	1,531,813	$	54,590	4.76	%
Taxable Securities⁽²⁾		588,518		2,150	1.45				606,606		1,632	1.07			593,579		5,832	1.31			576,790		4,591	1.03
Tax-Exempt Securities		98,463		407	1.65				89,241		327	1.47			99,059		1,217	1.64			91,399		984	1.44
Funds Sold		140,728		446	1.26				166,207		212	0.51			195,189		1,472	1.01			235,414		892	0.51
Total Earning Assets		2,466,287		22,675	3.65	%			2,417,943		20,387	3.35	%		2,498,944		65,210	3.49	%		2,435,416		61,057	3.35	%
Cash & Due From Banks		51,880							45,139						51,043						46,521
Allowance For Loan Losses		(13,542)							(14,052)						(13,547)						(14,102)
Other Assets		275,335							285,435						277,514						287,444
TOTAL ASSETS	$	2,779,960						$	2,734,465					$	2,813,954					$	2,755,279

Liabilities:
NOW Accounts	$	755,620	$	339	0.18	%		$	774,899	$	78	0.04	%	$	813,858	$	694	0.11	%	$	778,840	$	214	0.04	%
Money Market Accounts		262,486		80	0.12				258,183		30	0.05			261,118		172	0.09			255,885		89	0.05
Savings Accounts		327,675		40	0.05				297,172		37	0.05			320,634		118	0.05			288,740		107	0.05
Other Time Deposits		148,652		71	0.19				165,324		78	0.19			153,215		215	0.19			171,052		245	0.19
Total Interest Bearing Deposits		1,494,433		530	0.14				1,495,578		223	0.06			1,548,825		1,199	0.11			1,494,517		655	0.06
Short-Term Borrowings		9,920		15	0.59				12,162		43	1.39			10,552		77	0.97			44,147		91	0.28
Subordinated Notes Payable		52,887		420	3.11				52,887		341	2.52			52,887		1,203	3.00			56,683		1,071	2.48
Other Long-Term Borrowings		15,427		115	2.95				23,629		177	2.98			15,324		331	2.89			26,031		599	3.07
Total Interest Bearing Liabilities		1,572,667		1,080	0.28	%			1,584,256		784	0.20	%		1,627,588		2,810	0.24	%		1,621,378		2,416	0.20	%
Noninterest Bearing Deposits		834,729							793,163						820,843						780,167
Other Liabilities		87,268							79,639						83,683						75,603
TOTAL LIABILITIES		2,494,664							2,457,058						2,532,114						2,477,148

TOTAL SHAREOWNERS’ EQUITY		285,296							277,407						281,840						278,131

TOTAL LIABILITIES AND
SHAREOWNERS’ EQUITY	$	2,779,960						$	2,734,465					$	2,813,954					$	2,755,279

Interest Rate Spread					3.37	%						3.15	%					3.25	%					3.15	%
Net Interest Income			$	21,595						$	19,603					$	62,400					$	58,641
Net Interest Margin⁽³⁾					3.48	%						3.23	%					3.34	%					3.22	%

⁽¹⁾Average Balances include nonaccrual loans.
⁽²⁾Interest income includes the effects of taxable equivalent adjustments using a 35% tax rate.
⁽³⁾Taxable equivalent net interest income divided by average earnings assets.

~~/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: November 2, 2017~~