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~~

June 30, ~~2017~~

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]~~ [

]

[ 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~~ July 27, 2023,

16,991,634

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 period ended June 30, 2023, originally filed
with the U.S. Securities and Exchange Commission (the “SEC”) on July 31, 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,
its Quarterly Report on Form 10-Q for the three months ended March 31, 2023, and the Original Form 10-Q, 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 June 30, 2023 and for the three-month and six-
month periods ended June 30, 2023, and the audited restated consolidated statements of financial condition as of December 31, 2022.
In addition to correcting the accounting treatment for the mortgage banking 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/A. Accordingly, this Form 10-Q/A does not reflect events occurring after the filing of 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 June 30, 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 June 30,

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 ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~

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 – June 30, 2023 and December 31, 2022

Consolidated Statements of Income – Three and Six Months Ended June 30, 2023 and 2022

Consolidated Statements of Comprehensive Income (Loss) – Three and Six Months Ended June 30, 2023 and 2022

Consolidated Statements of Changes in Shareowners’ Equity – Three and Six Months Ended June 30, 2023 and 2022

Consolidated Statements of Cash Flows – Six Months Ended June 30, 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 on

Form ~~10-Q~~10-Q/A and

the following sections

of ~~our Annual Report on~~ the 2022

Form ~~10-K for the year ended December 31, 2016 (the “2016 Form 10-K”):~~10-K/A: (a) ~~“Introductory~~

“Introductory Note” in

Part I, Item

1. “Business”; (b) ~~“Risk~~

“Risk Factors”

in Part I, Item 1A, as updated in our subsequent quarterly reports filed on Form ~~10-Q;~~10-Q/A; and

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)

June 30,

December 31,

(Dollars in Thousands, Except Par Value)

2023

2022

ASSETS

Cash and Due From Banks

83,679

72,114

Federal Funds Sold and Interest Bearing Deposits

285,129

528,536

Total Cash and Cash Equivalents

368,808

600,650

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

424,220

and $

455,232

)

386,220

413,294

Investment Securities, Held to Maturity (fair value of $

595,219

and $

612,701

)

641,398

660,744

Equity Securities

1,703

Total Investment
Securities

1,029,321

1,074,048

Loans Held For Sale, at fair value

44,659

26,909

Loans Held for Investment

2,683,512

2,547,685

Allowance for Credit Losses

(28,243)

(25,068)

Loans Held for Investment, Net

2,655,269

2,522,617

Premises and Equipment, Net

82,062

82,138

Goodwill and Other Intangibles

93,013

93,093

Other Real Estate Owned

431

Other Assets

118,073

119,337

Total Assets

4,391,206

4,519,223

LIABILITIES

Deposits:

Noninterest Bearing Deposits

1,520,134

1,653,620

Interest Bearing Deposits

2,268,732

2,285,697

Total Deposits

3,788,866

3,939,317

Short-Term
Borrowings

50,673

56,793

Subordinated Notes Payable

52,887

Other Long-Term
Borrowings

414

513

Other Liabilities

77,192

73,675

Total Liabilities

3,970,032

4,123,185

Temporary Equity

8,752

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;

16,991,634

and

16,986,785

shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

170

Additional Paid-In Capital

36,853

37,331

Retained Earnings

408,771

387,009

Accumulated Other Comprehensive Loss, net of tax

(33,372)

(37,229)

Total Shareowners’

Equity

412,422

387,281

Total Liabilities, Temporary
Equity, and Shareowners’ Equity

4,391,206

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

June 30,

Six Months Ended

June 30,

(Dollars in Thousands, Except Per Share
Data)

2023

2022

2023

2022

INTEREST INCOME

Loans, including Fees

37,608

24,268

72,499

46,697

Investment Securities:

Taxable

4,803

3,833

9,716

6,723

Tax Exempt

Funds Sold

2,782

1,408

6,893

1,817

Total Interest Income

45,205

29,516

89,131

55,250

INTEREST EXPENSE

Deposits

4,008

266

6,496

490

Short-Term
Borrowings

451

343

912

535

Subordinated Notes Payable

604

370

1,175

687

Other Long-Term
Borrowings

Total Interest Expense

5,068

987

8,594

1,729

NET INTEREST INCOME

40,137

28,529

80,537

53,521

Provision for Credit Losses

2,197

1,692

5,296

1,724

Net Interest Income After Provision For Credit Losses

37,940

26,837

75,241

51,797

NONINTEREST INCOME

Deposit Fees

5,326

5,447

10,565

10,638

Bank Card Fees

3,795

4,034

7,521

7,797

Wealth Management
Fees

4,149

4,403

8,077

10,473

Mortgage Banking Revenues

3,363

4,857

6,234

8,912

Other

3,334

1,823

5,328

3,556

Total Noninterest
Income

19,967

20,564

37,725

41,376

NONINTEREST EXPENSE

Compensation

23,438

23,222

46,962

45,520

Occupancy, Net

6,820

6,075

13,582

12,168

Other

10,027

8,853

17,417

16,985

Total Noninterest
Expense

40,285

38,150

77,961

74,673

INCOME BEFORE INCOME TAXES

17,622

9,251

35,005

18,500

Income Tax Expense

3,417

1,685

7,126

3,405

NET INCOME

14,205

7,566

27,879

15,095

(Income) Loss Attributable to Noncontrolling Interests

(31)

(306)

(897)

NET INCOME ATTRIBUTABLE
TO COMMON SHAREOWNERS

14,174

7,260

27,883

14,198

BASIC NET INCOME PER SHARE

0.83

0.43

1.64

0.84

DILUTED NET INCOME PER SHARE

0.83

0.43

1.64

0.84

Average Common
Basic Shares Outstanding

17,002

16,949

17,009

16,940

Average Common
Diluted Shares Outstanding

17,035

16,971

17,040

16,958

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

CAPITAL CITY BANK
GROUP,
INC.

CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(As Restated)

Three Months Ended

Six Months Ended

June 30,

(Dollars in Thousands)

2023

2022

2023

2022

NET INCOME ATTRIBUTABLE
TO COMMON SHAREOWNERS

14,174

7,260

27,883

14,198

Other comprehensive (loss) income, before
tax:

Investment Securities:

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

(2,887)

(10,718)

3,921

(36,167)

Amortization of unrealized losses on securities transferred from

available for sale to held to maturity

876

1,741

Derivative:

Change in net unrealized gain on effective cash flow
derivative

585

1,161

(217)

2,997

Benefit Plans:

Pension plan settlement

(217)

169

(217)

378

Total Benefit Plans

(217)

169

(217)

378

Other comprehensive (loss) income, before
tax

(1,643)

(9,384)

5,228

(32,783)

Deferred tax (benefit) expense related to other comprehensive income

(347)

(2,362)

1,371

(8,232)

Other comprehensive (loss) income, net of tax

(1,296)

(7,022)

3,857

(24,551)

TOTAL COMPREHENSIVE
INCOME (LOSS)

12,878

238

31,740

(10,353)

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, April 1, 2023, as restated

17,021,748

170

37,512

397,654

(32,076)

403,260

Net Income Attributable to Common Shareowners

14,174

Other Comprehensive Loss, net of tax

(1,296)

Cash Dividends ($

0.1800

per share)

(3,057)

Repurchase of Common Stock

(40,495)

(1,203)

Stock Based Compensation

228

Stock Compensation Plan Transactions, net

10,381

316

Balance, June 30, 2023, as restated

16,991,634

170

36,853

408,771

(33,372)

412,422

Balance, April 1, 2022, as restated

16,947,602

169

35,188

369,014

(33,743)

370,628

Net Income Attributable to Common Shareowners

7,260

Other Comprehensive Loss, net of tax

(7,022)

Cash Dividends ($

0.1600

per share)

(2,712)

Stock Based Compensation

244

Stock Compensation Plan Transactions, net

11,678

306

307

Balance, June 30, 2022, as restated

16,959,280

170

35,738

373,562

(40,765)

368,705

Balance, January 1, 2023, As Restated

16,986,785

170

37,331

387,009

(37,229)

387,281

Net Income Attributable to Common Shareowners

27,883

Other Comprehensive Income, net of tax

3,857

Cash Dividends ($

0.3600

per share)

(6,121)

Repurchase of Common Stock

(65,736)

(2,022)

Stock Based Compensation

764

Stock Compensation Plan Transactions, net

70,585

780

Balance, June 30, 2023, As Restated

16,991,634

170

36,853

408,771

(33,372)

412,422

Balance, January 1, 2022, As Restated

16,892,060

169

34,423

364,788

(16,214)

383,166

Net Income Attributable to Common Shareowners

14,198

Other Comprehensive Loss, net of tax

(24,551)

Cash Dividends ($

0.3200

per share)

(5,424)

Stock Based Compensation

489

Stock Compensation Plan Transactions, net

67,220

826

827

Balance, June 30, 2022, As Restated

16,959,280

170

35,738

373,562

(40,765)

368,705

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)

Six Months Ended June 30,

(Dollars in Thousands)

2023

2022

CASH FLOWS FROM OPERATING
ACTIVITIES

Net Income Attributable to Common Shareowners

27,883

14,198

Adjustments to Reconcile Net Income to

Cash Provided by Operating Activities:

Provision for Credit Losses

5,296

1,724

Depreciation

3,927

3,802

Amortization of Premiums, Discounts and Fees, net

2,117

5,053

Amortization of Intangible Asset

Pension Plan Settlement (Gain) Charge

(291)

378

Originations of Loans Held-for-Sale

(214,364)

(549,018)

Proceeds From Sales of Loans Held-for-Sale

202,848

585,476

Mortgage Banking Revenues

(6,234)

(8,912)

Net Additions for Capitalized Mortgage Servicing Rights

(253)

360

Stock Compensation

764

489

Net Tax Benefit From Stock-Based
Compensation

(19)

Deferred Income Taxes

(2,849)

(9,887)

Net Change in Operating Leases

(3)

(72)

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

(1,900)

(26)

Net Decrease in Other Assets

4,593

3,516

Net Increase in Other Liabilities

3,815

22,040

Net Cash Provided By Operating Activities

25,429

69,182

CASH FLOWS FROM INVESTING ACTIVITIES

Securities Held to Maturity:

Purchases

(218,548)

Proceeds from Payments, Maturities, and Calls

18,992

28,111

Securities Available for
Sale:

Purchases

(4,634)

(37,044)

Proceeds from Sale of Securities

3,365

Proceeds from Payments, Maturities, and Calls

32,490

47,413

Purchases of Loans Held for Investment

(201,000)

(174,779)

Net Decrease (Increase) in Loans Held for Investment

61,293

(130,913)

Proceeds From Sales of Other Real Estate Owned

3,772

Purchases of Premises and Equipment

(3,851)

(3,322)

Noncontrolling Interest Contributions

2,573

Net Cash Used In Investing Activities

(92,938)

(483,114)

CASH FLOWS FROM FINANCING ACTIVITIES

Net (Decrease) Increase in Deposits

(150,451)

73,396

Net (Decrease) Increase in Short-Term
Borrowings

(6,120)

4,784

Repayment of Other Long-Term
Borrowings

(99)

(150)

Dividends Paid

(6,121)

(5,424)

Payments to Repurchase Common Stock

(2,022)

Proceeds from Issuance of Common Stock Under Purchase Plans

480

496

Net Cash (Used In) Provided by Financing Activities

(164,333)

73,102

NET DECREASE IN CASH AND CASH EQUIVALENTS

(231,842)

(340,830)

Cash and Cash Equivalents at Beginning of Period

600,650

1,035,354

Cash and Cash Equivalents at End of Period

368,808

694,524

Supplemental Cash Flow Disclosures:

Interest Paid

8,720

1,617

Income Taxes Paid

3,860

3,765

Noncash Investing and Financing Activities:

Loans Transferred to Other Real Estate Owned

1,442

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 the Company 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 the

Company 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

and six months ended June 30, 2023. We

have

also restated financial statements for the year ended December 31, 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 $

1.6

million as of June 30, 2023 and net income is overstated by $

1.6

million for the six months ended June

30, 2023. This represents

0.04

% of total assets as of June 30, 2023 and

5.83

% of net income for the six months ended June 30, 2023.

As a result, diluted EPS decreases from $

1.73

per share to $

1.64

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 includes 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 Statements

of Financial Condition as of June 30, 2023 and December 31, 2022, the restated

Consolidated Statements

Income for the three and six months ended June 30, 2023 and 2022, the restated

Consolidated Statements

of Comprehensive Income

(Loss) for the three and six months ended June 30, 2023 and 2022, the restated Consolidated

Statements of Changes in Shareowners’

Equity for the three and six months ended June 30, 2023 and 2022, and the restated Consolidated

Statements of Cash Flows for the six

months ended June 30, 2023. The amounts previously reported as of June 30,

2023 and for the three and six months ended June 30,

2023 were derived from our Quarterly Report on Form 10-Q for

the period ended June 30, 2023, originally filed July 31, 2023.

PART

FINANCIAL INFORMATION

Item 1.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF FINANCIAL CONDITION

(Unaudited)

June 30, 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

83,679

72,114

Federal Funds Sold and Interest Bearing Deposits

285,129

528,536

Total Cash and Cash Equivalents

368,808

600,650

Investment Securities, Available

for Sale, at fair value (amortized

cost of $

424,220

and $

455,232

)

386,220

413,294

Investment Securities, Held to Maturity (fair value of $

595,219

and $

612,701

)

641,398

660,744

Equity Securities

1,703

Total Investment

Securities

1,029,321

1,074,048

Loans Held For Sale, at fair value

67,908

44,659

54,635

26,909

Loans Held for Investment

2,667,003

2,683,512

2,525,180

2,547,685

Allowance for Credit Losses

(27,964)

(28,243)

(24,736)

(25,068)

Loans Held for Investment, Net

2,639,039

2,655,269

2,500,444

2,522,617

Premises and Equipment, Net

82,062

82,138

Goodwill and Other Intangibles

93,013

93,093

Other Real Estate Owned

431

Other Assets

119,411

118,073

120,519

119,337

Total Assets

4,399,563

4,391,206

4,525,958

4,519,223

LIABILITIES

Deposits:

Noninterest Bearing Deposits

1,520,134

1,653,620

Interest Bearing Deposits

2,268,732

2,285,697

Total Deposits

3,788,866

3,939,317

Short-Term

Borrowings

50,673

56,793

Subordinated Notes Payable

52,887

Other Long-Term

Borrowings

414

513

Other Liabilities

77,192

73,675

Total Liabilities

3,970,032

4,123,185

Temporary Equity

8,752

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;

16,991,634

and

16,986,785

shares issued and outstanding at June 30, 2023 and December 31,

2022, respectively

170

Additional Paid-In Capital

36,853

37,331

Retained Earnings

417,128

408,771

393,744

387,009

Accumulated Other Comprehensive Loss, net of tax

(33,372)

(37,229)

Total Shareowners’

Equity

420,779

412,422

394,016

387,281

Total Liabilities, Temporary

Equity, and Shareowners’ Equity

4,399,563

4,391,206

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

June 30, 2023

June 30, 2022

(Dollars in Thousands, Except Per Share

Data)

As Previously

Reported

As Restated

As Previously

Reported

As Restated

INTEREST INCOME

Loans, including Fees

37,477

37,608

24,072

24,268

Investment Securities:

Taxable Securities

4,803

3,833

Tax Exempt Securities

Federal Funds Sold and Interest Bearing Deposits

2,782

1,408

Total Interest Income

45,074

45,205

29,320

29,516

INTEREST EXPENSE

Deposits

4,008

266

Short-Term

Borrowings

451

343

Subordinated Notes Payable

604

370

Other Long-Term

Borrowings

Total Interest Expense

5,068

987

NET INTEREST INCOME

40,006

40,137

28,333

28,529

Provision for Credit Losses

2,219

2,197

1,542

1,692

Net Interest Income After Provision for Credit Losses

37,787

37,940

26,791

26,837

NONINTEREST INCOME

Deposit Fees

5,326

5,447

Bank Card Fees

3,795

4,034

Wealth Management

Fees

4,149

4,403

Mortgage Banking Revenues

5,837

3,363

9,065

4,857

Other

3,766

3,334

1,954

1,823

Total Noninterest

Income

22,873

19,967

24,903

20,564

NONINTEREST EXPENSE

Compensation

24,884

23,438

25,383

23,222

Occupancy, Net

6,820

6,075

Other

10,830

10,027

9,040

8,853

Total Noninterest

Expense

42,534

40,285

40,498

38,150

INCOME BEFORE INCOME TAXES

18,126

17,622

11,196

9,251

Income Tax Expense

3,544

3,417

2,177

1,685

NET INCOME

14,582

14,205

9,019

7,566

Loss (Income) Attributable to Noncontrolling Interests

(31)

(306)

NET INCOME ATTRIBUTABLE

TO COMMON

SHAREOWNERS

14,551

14,174

8,713

7,260

BASIC NET INCOME PER SHARE

0.86

0.83

0.51

0.43

DILUTED NET INCOME PER SHARE

0.85

0.83

0.51

0.43

Average Basic Shares

Outstanding

17,002

16,949

Average Diluted

Shares Outstanding

17,035

16,971

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF INCOME

(Unaudited)

Six Months Ended

June 30, 2023

June 30, 2022

(Dollars in Thousands, Except Per Share

Data)

As Previously

Reported

As Restated

As Previously

Reported

As Restated

INTEREST INCOME

Loans, including Fees

72,357

72,499

46,205

46,697

Taxable Securities

9,716

6,723

Tax Exempt Securities

Federal Funds Sold and Interest Bearing Deposits

6,893

1,817

Total Interest Income

88,989

89,131

54,758

55,250

INTEREST EXPENSE

Deposits

6,496

490

Short-Term

Borrowings

912

535

Subordinated Notes Payable

1,175

687

Other Long-Term

Borrowings

Total Interest Expense

8,594

1,729

NET INTEREST INCOME

80,395

80,537

53,029

53,521

Provision for Credit Losses

5,349

5,296

1,542

1,724

Net Interest Income After Provision for Credit Losses

75,046

75,241

51,487

51,797

NONINTEREST INCOME

Deposit Fees

10,565

10,638

Bank Card Fees

7,521

7,797

Wealth Management

Fees

8,077

10,473

Mortgage Banking Revenues

12,832

6,234

18,011

8,912

Other

6,126

5,328

3,802

3,556

Total Noninterest

Income

45,121

37,725

50,721

41,376

NONINTEREST EXPENSE

Compensation

50,520

46,962

50,239

45,520

Occupancy, Net

13,582

12,168

Other

18,887

17,417

17,324

16,985

Total Noninterest

Expense

82,989

77,961

79,731

74,673

INCOME BEFORE INCOME TAXES

37,178

35,005

22,477

18,500

Income Tax Expense

7,677

7,126

4,412

3,405

NET INCOME

29,501

27,879

18,065

15,095

Loss (Income) Attributable to Noncontrolling Interests

(897)

NET INCOME ATTRIBUTABLE

TO COMMON

SHAREOWNERS

29,505

27,883

17,168

14,198

BASIC NET INCOME PER SHARE

1.73

1.64

1.01

0.84

DILUTED NET INCOME PER SHARE

1.73

1.64

1.01

0.84

Average Basic Shares

Outstanding

17,009

16,940

Average Diluted

Shares Outstanding

17,040

16,958

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

Three Months Ended

June 30, 2023

June 30, 2022

(Dollars in Thousands)

Previously

Reported

As Restated

Previously

Reported

As Restated

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

14,551

14,174

8,713

7,260

Other comprehensive income (loss), before

tax:

Investment Securities:

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

(2,887)

(10,718)

Amortization of unrealized losses on securities transferred from

available for sale to held to maturity

876

Derivative:

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

derivative

585

1,161

Benefit Plans:

Pension Settlement

(217)

169

Total Benefit Plans

(217)

169

Other comprehensive income (loss), before

tax

(1,643)

(9,384)

Deferred tax (benefit) expense related to other comprehensive income

(347)

(2,362)

Other comprehensive income (loss), net of tax

(1,296)

(7,022)

TOTAL COMPREHENSIVE

INCOME (LOSS)

13,255

12,878

1,691

238

The accompanying Notes to Consolidated Financial Statements are

an integral part of these statements.

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

Six Months Ended

June 30, 2023

June 30, 2022

(Dollars in Thousands)

Previously

Reported

As Restated

Previously

Reported

As Restated

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

29,505

27,883

17,168

14,198

Other comprehensive income (loss), before

tax:

Investment Securities:

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

3,921

(36,167)

Amortization of unrealized losses on securities transferred from

available for sale to held to maturity

1,741

Derivative:

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

derivative

(217)

2,997

Benefit Plans:

Pension Settlement

(217)

378

Total Benefit Plans

(217)

378

Other comprehensive income (loss), before

tax

5,228

(32,783)

Deferred tax expense (benefit) related to other comprehensive income

1,371

(8,232)

Other comprehensive income (loss), net of tax

3,857

(24,551)

TOTAL COMPREHENSIVE

INCOME (LOSS)

33,362

31,740

(7,383)

(10,353)

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 June 30, 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, April 1, 2023, as previously reported

17,021,748

170

37,512

405,634

(32,076)

411,240

Net Income Attributable to Common Shareowners

14,551

Other Comprehensive Loss, Net of Tax

(1,296)

Cash Dividends ($

0.18

per share)

(3,057)

Repurchase of Common Stock

(40,495)

(1,203)

Stock Based Compensation

228

Stock Compensation Plan Transactions, net

10,381

316

Balance, June 30, 2023, as previously reported

16,991,634

170

36,853

417,128

(33,372)

420,779

As Restated

Balance, April 1, 2023, as restated

17,021,748

170

37,512

397,654

(32,076)

403,260

Net Income Attributable to Common Shareowners

14,174

Other Comprehensive Loss, Net of Tax

(1,296)

Cash Dividends ($

0.18

per share)

(3,057)

Repurchase of Common Stock

(40,495)

(1,203)

Stock Based Compensation

228

Stock Compensation Plan Transactions, net

10,381

316

Balance, June 30, 2023, as restated

16,991,634

170

36,853

408,771

(33,372)

412,422

Three Months Ended June 30, 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, April 1, 2022, as previously reported

16,947,602

169

35,188

370,531

(33,743)

372,145

Net Income Attributable to Common Shareowners

8,713

Other Comprehensive Loss, Net of Tax

(7,022)

Cash Dividends ($

0.16

per share)

(2,712)

Stock Based Compensation

244

Stock Compensation Plan Transactions, net

11,678

306

307

Balance, June 30, 2022, as previously reported

16,959,280

170

35,738

376,532

(40,765)

371,675

As Restated

Balance, April 1, 2022, as restated

16,947,602

169

35,188

369,014

(33,743)

370,628

Net Income Attributable to Common Shareowners

7,260

Other Comprehensive Loss, Net of Tax

(7,022)

Cash Dividends ($

0.16

per share)

(2,712)

Stock Based Compensation

244

Stock Compensation Plan Transactions, net

11,678

306

307

Balance, June 30, 2022, as restated

16,959,280

170

35,738

373,562

(40,765)

368,705

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF CHANGES IN SHAREOWNERS' EQUITY

(Unaudited)

Six Months Ended June 30, 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

29,505

Other Comprehensive Loss, Net of Tax

3,857

Cash Dividends ($

0.36

per share)

(6,121)

Repurchase of Common Stock

(65,736)

(2,022)

Stock Based Compensation

764

Stock Compensation Plan Transactions, net

70,585

780

Balance, June 30, 2023, as previously reported

16,991,634

170

36,853

417,128

(33,372)

420,779

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

27,883

Other Comprehensive Loss, Net of Tax

3,857

Cash Dividends ($

0.36

per share)

(6,121)

Repurchase of Common Stock

(65,736)

(2,022)

Stock Based Compensation

764

Stock Compensation Plan Transactions, net

70,585

780

Balance, June 30, 2023, as restated

16,991,634

170

36,853

408,771

(33,372)

412,422

Six Months Ended June 30, 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

17,168

Other Comprehensive Loss, Net of Tax

(24,551)

Cash Dividends ($

0.32

per share)

(5,424)

Stock Based Compensation

489

Stock Compensation Plan Transactions, net

67,220

826

827

Balance, June 30, 2022, as previously reported

16,959,280

170

35,738

376,532

(40,765)

371,675

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

14,198

Other Comprehensive Loss, Net of Tax

(24,551)

Cash Dividends ($

0.32

per share)

(5,424)

Stock Based Compensation

489

Stock Compensation Plan Transactions, net

67,220

826

827

Balance, June 30, 2022, as restated

16,959,280

170

35,738

373,562

(40,765)

368,705

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENTS

OF CASH FLOWS (Unaudited)

Six Months Ended

Jun 30, 2023

Jun 30, 2022

(Dollars in Thousands)

As Previously

Reported

As Restated

As Previously

Reported

As Restated

CASH FLOWS FROM OPERATING

ACTIVITIES

Net Income Attributable to Common Shareowners

29,505

27,883

17,168

14,198

Adjustments to Reconcile Net Income to

Provision for Credit Losses

5,349

5,296

1,542

1,724

Depreciation

3,927

3,802

Amortization of Premiums, Discounts, and Fees, net

2,260

2,117

5,545

5,053

Amortization of Intangible Assets

Pension Settlement Charge

(291)

378

Originations of Loans Held-for-Sale

(209,775)

(214,364)

(573,239)

(549,018)

Proceeds From Sales of Loans Held-for-Sale

209,334

202,848

595,074

585,476

Mortgage Banking Revenues

(12,832)

(6,234)

(18,011)

(8,912)

Net Additions for Capitalized Mortgage Servicing Rights

(859)

(253)

1,358

360

Stock Compensation

764

489

Net Tax Benefit From Stock-Based

Compensation

(19)

Deferred Income Taxes (Benefit)

(2,298)

(2,849)

(8,879)

(9,887)

Net Change in Operating Leases

(3)

(72)

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

(1,900)

(26)

Net Decrease (Increase) in Other Assets

4,492

4,593

845

3,516

Net (Decrease) Increase in Other Liabilities

3,815

22,040

Net Cash Provided (Used In) By Operating Activities

31,568

25,429

48,075

69,182

CASH FLOWS FROM INVESTING ACTIVITIES

Securities Held to Maturity:

Purchases

(218,548)

Payments, Maturities, and Calls

18,992

28,111

Securities Available for

Sale:

Purchases

(4,634)

(37,044)

Proceeds from Sale of Securities

3,365

Payments, Maturities, and Calls

32,490

47,413

Purchase of loans held for investment

(201,000)

(174,779)

Net Increase in Loans Held for Investment

55,154

61,293

(109,806)

(130,913)

Proceeds From Sales of Other Real Estate Owned

3,772

Purchases of Premises and Equipment

(3,851)

(3,322)

Noncontrolling interest contributions received

2,573

Net Cash Used In Investing Activities

(99,077)

(92,938)

(462,007)

(483,114)

CASH FLOWS FROM FINANCING ACTIVITIES

Net Increase in Deposits

(150,451)

73,396

Net (Decrease) Increase in Other Short-Term

Borrowings

(6,120)

4,784

Repayment of Other Long-Term

Borrowings

(99)

(150)

Dividends Paid

(6,121)

(5,424)

Payments to Repurchase Common Stock

(2,022)

Issuance of Common Stock Under Compensation Plans

480

496

Net Cash Provided By Financing Activities

(164,333)

73,102

NET DECREASE IN CASH AND CASH EQUIVALENTS

(231,842)

(340,830)

Cash and Cash Equivalents at Beginning of Period

600,650

1,035,354

Cash and Cash Equivalents at End of Period

368,808

694,524

Supplemental Cash Flow Disclosures:

Interest Paid

8,720

1,617

Income Taxes Paid

3,860

3,765

Noncash Investing and Financing Activities:

Loans and Premises Transferred to Other Real Estate Owned

1,442

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENT

OF FINANCIAL CONDITION

(Unaudited)

As of June 30, 2023

(Dollars in Thousands, except per share data)

As Previously

Reported

Restatement

Impact

As Restated

ASSETS:

Cash and Due From Banks

83,679

Federal Funds Sold and Interest Bearing Deposits

285,129

Total Cash and Cash Equivalents

368,808

Investment Securities, Available

for Sale, at fair value (amortized cost

of $

424,220

)

386,220

Investment Securities, Held to Maturity (fair value of $

595,219

)

641,398

Other Equity Securities

1,703

Total Investment Securities

1,029,321

Loans Held For Sale

67,908

(23,249)

44,659

Loans, Net of Unearned Income

2,667,003

16,509

2,683,512

Allowance for Loan Losses

(27,964)

(279)

(28,243)

Loans, Net

2,639,039

16,230

2,655,269

Premises and Equipment, Net

82,062

Goodwill

93,013

Other Real Estate Owned

Other Assets

119,411

(1,338)

118,073

Total Assets

4,399,563

(8,357)

4,391,206

LIABILITIES

Deposits:

Noninterest Bearing Deposits

1,520,134

Interest Bearing Deposits

2,268,732

Total Deposits

3,788,866

Short-Term

Borrowings

50,673

Subordinated Notes Payable

52,887

Other Long-Term

Borrowings

414

Other Liabilities

77,192

Total Liabilities

3,970,032

Temporary Equity

8,752

SHAREOWNERS' EQUITY

Preferred Stock: $

0.01

par value,

3,000,000

shares authorized

shares issued and outstanding

Common Stock, $

0.01

par value,

90,000,000

shares authorized

16,991,634

shares issued and outstanding

170

Additional Paid-In Capital

36,853

Retained Earnings

417,128

(8,357)

408,771

Accumulated Other Comprehensive Loss, Net of Tax

(33,372)

Total Shareowners' Equity

420,779

(8,357)

412,422

Total Liabilities, Temporary

Equity, and Shareowners' Equity

4,399,563

(8,357)

4,391,206

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENT

OF INCOME

(Unaudited)

For Three Months Ended June 30, 2023

(Dollars in thousands, except per share data)

Previously

Reported

Restatement

Impact

As Restated

INTEREST INCOME

Loans, Including Fees

37,477

131

37,608

Taxable Securities

4,803

Tax Exempt Securities

Funds Sold

2,782

Total Interest Income

45,074

131

45,205

INTEREST EXPENSE

Deposits

4,008

Short-Term

Borrowings

451

Subordinated Notes Payable

604

Other Long-Term

Borrowings

Total Interest Expense

5,068

Net Interest Income

40,006

131

40,137

Provision for Loan Losses

2,219

(22)

2,197

Net Interest Income After Provision For Loan Losses

37,787

153

37,940

NONINTEREST INCOME

Deposit Fees

5,326

Bank Card Fees

3,795

Wealth Management

Fees

4,149

Mortgage Banking Fees

5,837

(2,474)

3,363

Other

3,766

(432)

3,334

Total Noninterest

Income

22,873

(2,906)

19,967

NONINTEREST EXPENSE

Compensation

24,884

(1,446)

23,438

Occupancy, Net

6,820

Other

10,830

(803)

10,027

Total Noninterest

Expense

42,534

(2,249)

40,285

INCOME BEFORE INCOME TAXES

18,126

(504)

17,622

Income Tax Expense

3,544

(127)

3,417

NET INCOME

14,582

(377)

14,205

Pre-Tax Income

Attributable to Noncontrolling Interests

(31)

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

14,551

(377)

14,174

BASIC NET INCOME PER SHARE

0.86

(0.03)

0.83

DILUTED NET INCOME PER SHARE

0.85

(0.02)

0.83

AVERAGE

Basic

17,002

Diluted

17,035

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENT

OF INCOME

(Unaudited)

For Six Months Ended June 30, 2023

(Dollars in thousands, except per share data)

Previously

Reported

Restatement

Impact

As Restated

INTEREST INCOME

Loans, Including Fees

72,357

142

72,499

Taxable Securities

9,716

Tax Exempt Securities

Funds Sold

6,893

Total Interest Income

88,989

142

89,131

INTEREST EXPENSE

Deposits

6,496

Short-Term

Borrowings

912

Subordinated Notes Payable

1,175

Other Long-Term

Borrowings

Total Interest Expense

8,594

Net Interest Income

80,395

142

80,537

Provision for Loan Losses

5,349

(53)

5,296

Net Interest Income After Provision For Loan Losses

75,046

195

75,241

NONINTEREST INCOME

Deposit Fees

10,565

Bank Card Fees

7,521

Wealth Management

Fees

8,077

Mortgage Banking Fees

12,832

(6,598)

6,234

Other

6,126

(798)

5,328

Total Noninterest

Income

45,121

(7,396)

37,725

NONINTEREST EXPENSE

Compensation

50,520

(3,558)

46,962

Occupancy, Net

13,582

Other

18,887

(1,470)

17,417

Total Noninterest

Expense

82,989

(5,028)

77,961

INCOME BEFORE INCOME TAXES

37,178

(2,173)

35,005

Income Tax Expense

7,677

(551)

7,126

NET INCOME

29,501

(1,622)

27,879

Pre-Tax Income

Attributable to Noncontrolling Interests

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

29,505

(1,622)

27,883

BASIC NET INCOME PER SHARE

1.73

(0.09)

1.64

DILUTED NET INCOME PER SHARE

1.73

(0.09)

1.64

AVERAGE

Basic

17,009

Diluted

17,040

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENT

OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

For Three Months Ended June 30, 2023

(Dollars in thousands, except per share data)

Previously

Reported

Restatement

Impact

As Restated

NET INCOME

14,551

(377)

14,174

Other comprehensive income (loss), before

tax:

Investment Securities:

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

(2,887)

Amortization of unrealized losses on securities transferred from available

for sale to

held to maturity

876

Derivative:

Change in net unrealized gain on effective cash flow

derivative

585

Benefit Plans:

Current year acturial loss

(217)

Total Benefit Plans

(217)

Other comprehensive income (loss), before

tax:

(1,643)

Deferred tax (benefit) expense related to other comprehensive income

(347)

Other comprehensive income (loss), net of tax

(1,296)

TOTAL COMPREHENSIVE

INCOME

13,255

(377)

12,878

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENT

OF COMPREHENSIVE INCOME

(Unaudited)

For Six Months Ended June 30, 2023

(Dollars in thousands, except per share data)

Previously

Reported

Restatement

Impact

As Restated

NET INCOME

29,505

(1,622)

27,883

Other comprehensive income (loss), before

tax:

Investment Securities:

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

3,921

Amortization of unrealized losses on securities transferred from available

for sale to

held to maturity

1,741

Derivative:

Change in net unrealized gain on effective cash flow

derivative

(217)

Benefit Plans:

Current year acturial loss

(217)

Total Benefit Plans

(217)

Other comprehensive income (loss), before

tax:

5,228

Deferred tax expense (benefit) related to other comprehensive income

1,371

Other comprehensive income (loss), net of tax

3,857

TOTAL COMPREHENSIVE

INCOME

33,362

(1,622)

31,740

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENT

OF CHANGES IN SHAREOWNERS' EQUITY

(Unaudited)

Three Months Ended June 30, 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, April 1, 2023, as previously reported

17,021,748

170

37,512

405,634

(32,076)

411,240

Net Income Attributable to Common Shareowners

14,551

Other Comprehensive Loss, Net of Tax

(1,296)

Cash Dividends ($

0.18

per share)

(3,057)

Repurchase of Common Stock

(40,495)

(1,203)

Stock Based Compensation

228

Stock Compensation Plan Transactions, net

10,381

316

Balance, June 30, 2023, as previously reported

16,991,634

170

36,853

417,128

(33,372)

420,779

Restatement Impacts

Balance, April 1, 2023

(7,980)

Net Income Attributable to Common Shareowners

(377)

Balance, June 30, 2023

(8,357)

As Restated

Balance, April 1, 2023, as restated

17,021,748

170

37,512

397,654

(32,076)

403,260

Net Income Attributable to Common Shareowners

14,174

Other Comprehensive Loss, Net of Tax

(1,296)

Cash Dividends ($

0.18

per share)

(3,057)

Repurchase of Common Stock

(40,495)

(1,203)

Stock Based Compensation

228

Stock Compensation Plan Transactions, net

10,381

316

Balance, June 30, 2023, as restated

16,991,634

170

36,853

408,771

(33,372)

412,422

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENT

OF CHANGES IN SHAREOWNERS' EQUITY

(Unaudited)

Six Months Ended June 30, 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

29,505

Other Comprehensive Loss, Net of Tax

3,857

Cash Dividends ($

0.36

per share)

(6,121)

Repurchase of Common Stock

(65,736)

(2,022)

Stock Based Compensation

764

Stock Compensation Plan Transactions, net

70,585

780

Balance, June 30, 2023, as previously reported

16,991,634

170

36,853

417,128

(33,372)

420,779

Restatement Impacts

Balance, January 1, 2023

(6,735)

Net Income Attributable to Common Shareowners

(1,622)

Balance, June 30, 2023

(8,357)

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

27,883

Other Comprehensive Loss, Net of Tax

3,857

Cash Dividends ($

0.36

per share)

(6,121)

Repurchase of Common Stock

(65,736)

(2,022)

Stock Based Compensation

764

Stock Compensation Plan Transactions, net

70,585

780

Balance, June 30, 2023, as restated

16,991,634

170

36,853

408,771

(33,372)

412,422

CAPITAL CITY BANK

GROUP,

INC.

CONSOLIDATED STATEMENT

OF CASH FLOWS

(Unaudited)

Six Months Ended June 30, 2023

(Dollars in Thousands)

As Previously

Reported

Restatement

Impact

As Restated

CASH FLOWS FROM OPERATING

ACTIVITIES

Net Income Attributable to Common Shareowners

29,505

(1,622)

27,883

Adjustments to Reconcile Net Income to

Provision for Credit Losses

5,349

(53)

5,296

Depreciation

3,927

Amortization of Premiums, Discounts, and Fees, net

2,260

(143)

2,117

Amortization of Intangible Assets

Pension Settlement Charge

(291)

Originations of Loans Held-for-Sale

(209,775)

(4,589)

(214,364)

Proceeds From Sales of Loans Held-for-Sale

209,334

(6,486)

202,848

Mortgage Banking Revenues

(12,832)

6,598

(6,234)

Net Additions for Capitalized Mortgage Servicing Rights

(859)

606

(253)

Stock Compensation

764

Deferred Income Taxes (Benefit)

(2,298)

(551)

(2,849)

Net Change in Operating Leases

(3)

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

(1,900)

Net Decrease (Increase) in Other Assets

4,492

101

4,593

Net (Decrease) Increase in Other Liabilities

3,815

Net Cash Provided (Used In) By Operating Activities

31,568

(6,139)

25,429

CASH FLOWS FROM INVESTING ACTIVITIES

Securities Held to Maturity:

Payments, Maturities, and Calls

18,992

Securities Available for

Sale:

Purchases

(4,634)

Payments, Maturities, and Calls

32,490

Purchase of loans held for investment

(201,000)

Net Increase in Loans Held for Investment

55,154

6,139

61,293

Proceeds From Sales of Other Real Estate Owned

3,772

Purchases of Premises and Equipment

(3,851)

Net Cash Used In Investing Activities

(99,077)

6,139

(92,938)

CASH FLOWS FROM FINANCING ACTIVITIES

Net Increase in Deposits

(150,451)

Net (Decrease) Increase

in Other Short-Term Borrowings

(6,120)

Repayment of Other Long-Term

Borrowings

(99)

Dividends Paid

(6,121)

Payments to Repurchase Common Stock

(2,022)

Issuance of Common Stock Under Compensation Plans

480

Net Cash Provided By Financing Activities

(164,333)

NET DECREASE IN CASH AND CASH EQUIVALENTS

(231,842)

Cash and Cash Equivalents at Beginning of Period

600,650

Cash and Cash Equivalents at End of Period

368,808

Supplemental Cash Flow Disclosures:

Interest Paid

8,720

Income Taxes Paid

3,860

Noncash Investing and Financing Activities:

Loans and Premises Transferred to Other Real Estate Owned

1,442

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

June 30, 2023

U.S. Government Treasury

22,047

1,797

20,250

U.S. Government Agency

175,515

11,303

164,240

States and Political Subdivisions

46,842

5,958

(5)

40,879

Mortgage-Backed Securities

(1)

77,144

11,014

66,132

Corporate Debt Securities

95,317

7,995

(19)

87,364

Other Securities

(2)

7,355

Total

424,220

38,067

(24)

386,220

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

June 30, 2023

U.S. Government Treasury

457,522

25,365

432,157

Mortgage-Backed Securities

(1)

183,876

20,815

163,062

Total

641,398

46,180

595,219

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~~June 30, ~~2017~~2023 and ~~$3.3 million, $4.8~~ $

2.1

million and ~~$0.5~~ $

5.1

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

2022.

At June 30, 2023 and December 31, 2022, the investment portfolio had $

1.7

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~~ $

613.7

million and ~~$332.7~~ $

656.1

million at ~~September~~June 30, ~~2017~~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 June 30, 2023 totaled $

6.2

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 or six months
ended June 30, 2023. There were

no significant sales of investment securities for the three months ended
June 30, 2022 and $

3.4

million in sales for the six months

ended June 30, 2022.

Maturity Distribution

At ~~September~~June 30, ~~2017,~~2023, the ~~Company's~~Company’s investment

securities had the following maturity distribution based on

contractual maturity.

Expected maturities may differ from contractual maturities because borrowers

may have the right to call or

prepay obligations.

Mortgage-backed securities (“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
$
41,681
$
41,030
$
-
$
-
Due after one year through five years
153,275
139,764
457,522
432,157
Due after five year through ten years
49,673
41,410
-
-
Mortgage-Backed Securities
77,144
66,132
183,876
163,062
U.S. Government Agency
95,092
90,529
-
-
Other Securities
7,355
7,355
-
-
Total
$
424,220
$
386,220
$
641,398
$
595,219

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

June 30, 2023

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

Sale

U.S. Government Treasury

19,271

1,797

19,271

1,797

U.S. Government Agency

18,020

191

122,553

11,112

140,573

11,303

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

1,559

39,325

5,949

40,884

5,958

Mortgage-Backed Securities

66,016

11,014

66,040

11,014

Corporate Debt Securities

1,967

79,768

7,987

81,735

7,995

Total

21,570

208

326,933

37,859

348,503

38,067

Held to Maturity

U.S. Government Treasury

432,157

25,365

432,157

25,365

Mortgage-Backed Securities

3,265

141

159,566

20,674

162,831

20,815

Total

3,265

141

591,723

46,039

594,988

46,180

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~~June 30, ~~2017,~~ 2023, there were ~~266~~

917

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

84.2

million. 58

of these

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

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

705

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

126

positions (municipal

securities and corporate bonds) have a credit component.

At June 30, 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.

At June 30,

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

19,000

and municipal securities had an allowance of $

5,000

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)

June 30, 2023

December 31, 2022

Commercial, Financial and Agricultural

227,219

247,362

Real Estate – Construction

226,404

234,519

Real Estate – Commercial Mortgage

831,285

782,557

Real Estate – Residential

(1)

898,809

749,513

Real Estate – Home Equity

203,142

208,217

Consumer

(2)

296,653

325,517

Loans Held For Investment, Net of Unearned Income

2,683,512

2,547,685

(1)

Includes loans in process ~~with outstanding balances~~balance of ~~$10.9 million and $9.6~~ $

6.1

million at ~~September~~both June 30, ~~2017~~2023 and December 31, ~~2016,~~2022.

(2)

Includes overdraft balances of $

1.0

million and $

1.1

million at June 30, 2023 and December 31, 2022, respectively.

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

included in loans were ~~$0.7~~ $

6.2

million at ~~September~~June 30, ~~2017~~2023 and ~~$0.5~~ $

5.1

million, as restated, at December 31, ~~2016.~~

2022.

Accrued interest receivable on loans which is excluded from amortized

cost totaled $

9.2

million at June 30, 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 $

199.5

million and

158.8

million for the ~~collectability~~six months ended June 30, 2023 and June 30, 2022, respectively,

and were not credit impaired.

For the three

months ended June 30, 2022, the Company also acquired commercial real

estate loans that were not credit impaired from a third-party

bank totaling $

15.0

million.

The Company did

t purchase any commercial real estate loans during the three months ended June 30,

2023.

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

June 30, 2023, as restated

Beginning Balance

1,515

3,359

4,710

11,950

1,879

3,395

26,808

Provision for Credit Losses

(86)

(512)

732

1,306

(188)

670

1,922

Charge-Offs

(54)

(39)

(1,887)

(1,980)

Recoveries

132

131

1,147

1,493

Net (Charge-Offs) Recoveries

132

(740)

(487)

Ending Balance

1,446

2,848

5,453

13,388

1,783

3,325

28,243

Six Months Ended

June 30, 2023, as restated

Beginning Balance

1,506

2,654

4,815

10,741

1,864

3,488

25,068

Provision for Credit Losses

(8)

192

739

2,458

(198)

1,999

5,182

Charge-Offs

(218)

(120)

(39)

(4,253)

(4,630)

Recoveries

166

189

156

2,091

2,623

Net (Charge-Offs) Recoveries

(52)

(101)

189

117

(2,162)

(2,007)

Ending Balance

1,446

2,848

5,453

13,388

1,783

3,325

28,243

Three Months Ended

June 30, 2022, as restated

Beginning Balance

2,122

2,596

5,392

4,502

1,916

4,260

20,788

Provision for Credit Losses

564

542

(396)

1,210

(223)

123

1,820

Charge-Offs

(1,104)

(1,193)

(2,297)

Recoveries

115

855

1,152

Net Charge-Offs

(1,045)

115

(338)

(1,145)

Ending Balance

1,641

3,138

5,052

5,827

1,760

4,045

21,463

Six Months Ended

June 30, 2022, as restated

Beginning Balance

2,191

3,302

5,810

4,129

2,296

3,878

21,606

Provision for Credit Losses

403

(172)

(577)

1,556

(628)

1,191

1,773

Charge-Offs

(1,177)

(266)

(33)

(2,595)

(4,071)

Recoveries

224

142

125

1,571

2,155

Net Charge-Offs

(953)

(181)

142

(1,024)

(1,916)

Ending Balance

1,641

3,138

5,052

5,827

1,760

4,045

21,463

For the six months ended June 30, 2023, the allowance for HFI loans increased

by $

3.2

million, as restated, and ~~loans past~~reflected a provision

expense of $

5.2

million and net loan charge-offs of $

2.0

million.

The increase was primarily driven by incremental reserves needed

for loan growth.

For the six months ended June 30, 2022, the allowance decreased by $

0.1

million and reflected a provision expense

of $

1.8

million and net loan charge-offs of $

1.9

million. The lower provision expense for the six months ended June 30, 2022 was

primarily due ~~over 90 days~~to the release of reserves held for potential pandemic-related

losses that did not materialize to the extent projected,

partially offset by growth in reserves for strong new loan origination

volume. Four unemployment forecast scenarios were utilized to

estimate probability of default and ~~still~~are weighted based on ~~accrual by class~~management’s

estimate of ~~loans.~~

probability.

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

$
-

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

June 30, 2023, as restated

Commercial, Financial and Agricultural

196

277

226,933

227,219

Real Estate – Construction

218

225,771

415

226,404

Real Estate – Commercial Mortgage

124

828,740

2,421

831,285

Real Estate – Residential

241

128

369

896,739

1,701

898,809

Real Estate – Home Equity

202,318

756

203,142

Consumer

2,409

742

3,151

292,181

1,321

296,653

Total

2,993

1,214

4,207

2,672,682

6,623

2,683,512

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.

June 30, 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

415

Real Estate – Commercial Mortgage

2,212

209

389

256

Real Estate – Residential

1,172

529

239

Real Estate – Home Equity

227

529

771

Consumer

1,321

584

Total Nonaccrual

Loans

4,026

2,597

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~~

June 30, 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

415

Real Estate – Commercial Mortgage

2,212

389

Real Estate – Residential

1,098

160

Real Estate – Home Equity

227

130

Consumer

Total Collateral Dependent

Loans

3,952

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 June 30, 2023 and ~~classified as impaired.~~

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

0.7

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 six-month period ended June 30, 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 at June

30, 2023 and current period gross write-offs for the six

months ended June 30, 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)

Revolving

(As Restated)

(Dollars in Thousands)

2023

2022

2021

2020

2019

Prior

Loans

Total

Commercial, Financial,

Agriculture:

Pass

25,879

77,944

36,236

14,631

10,016

10,518

46,644

221,868

Special Mention

1,490

516

986

126

149

1,909

5,245

Substandard

106

Total

27,375

78,506

37,243

14,774

10,085

10,683

48,553

227,219

Current-Period Gross

Writeoffs

129

218

Real Estate -

Construction:

Pass

59,976

121,631

32,667

1,807

189

123

7,855

224,248

Special Mention

478

375

853

Substandard

218

1,085

1,303

Total

60,454

121,631

33,260

2,892

189

123

7,855

226,404

Real Estate -

Commercial Mortgage:

Pass

62,928

261,333

165,145

128,342

47,330

130,477

19,554

815,109

Special Mention

4,343

793

948

239

1,483

2,461

439

10,706

Substandard

806

831

1,920

628

632

653

5,470

Total

67,271

262,932

166,924

130,501

49,441

133,570

20,646

831,285

Current-Period Gross

Writeoffs

120

Real Estate - Residential:

Pass

173,708

473,235

89,049

41,916

26,818

75,872

8,323

888,921

Special Mention

269

228

517

560

1,666

Substandard

1,320

1,253

1,571

935

3,073

8,222

Total

174,047

474,647

90,530

44,004

27,753

79,505

8,323

898,809

Real Estate - Home

Equity:

Performing

149

129

392

1,122

200,582

202,385

Nonperforming

757

Total

149

129

392

1,122

201,339

203,142

Current-Period Gross

Writeoffs

Consumer:

Performing

39,592

109,461

88,648

28,133

14,878

8,976

5,645

295,333

Nonperforming

633

418

179

1,320

Total

39,592

110,094

89,066

28,312

14,959

8,983

5,647

296,653

Current-Period Gross

Writeoffs

1,571

1,486

763

138

143

4,253

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)

June 30, 2023

December 31, 2022

Unpaid Principal

(Dollars in Thousands)

Balance/Notional

Fair Value

Balance/Notional

Fair Value

Residential Mortgage Loans Held for Sale

45,322

44,659

26,274

26,909

Residential Mortgage Loan Commitments ("IRLCs")

(1)

61,126

1,270

36,535

819

Forward Sales Contracts

(2)

29,000

100

15,500

187

46,029

27,915

Recorded in other assets at fair value

Recorded in other assets at fair value at June 30,2023

and December 31, 2022, respectively

At June 30, 2023, the Company had

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

0.1

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

June 30,

Six Months Ended

June 30,

(Dollars in Thousands)

2023

2022

2023

2022

Net realized gains on sales of mortgage loans

2,301

2,099

3,494

4,238

Net change in unrealized gain on mortgage loans held for sale

(934)

503

(476)

(396)

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

(75)

(183)

452

(324)

Net change in the fair value of forward sales contracts

316

(896)

(86)

(38)

Pair-Offs on net settlement of forward sales contracts

1,954

4,209

Mortgage servicing rights additions

320

287

324

Net origination fees

1,563

1,060

2,468

899

Total mortgage banking

revenues

3,363

4,857

6,234

8,912

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)

June 30, 2023

December 31, 2022

Number of residential mortgage loans serviced for others

381

1,769

Outstanding principal balance of residential mortgage loans serviced

for others

86,920

410,740

Weighted average

interest rate

4.93%

3.62%

Remaining contractual term (in months)

301

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.

June 30, 2023, the servicing portfolio balance consisted of the following

loan types: FNMA (

%), GNMA (

%), and private investor

(

%).

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 June 30, 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 and six months ended June 30,

2023, the Company repurchased $

0.5

million and $

1.5

million, respectively, in

delinquent residential loans that were in GNMA pools.

For the three and six months ended June 30, 2022, the Company repurchased $

0.6

million and $

1.0

million, respectively, 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

June 30,

Six Months Ended

June 30,

(Dollars in Thousands)

2023

2022

2023

2022

Beginning balance

2,792

3,410

2,599

3,774

Additions due to loans sold with servicing retained

320

287

324

Deletions and amortization

(36)

(315)

(34)

(683)

Sale of servicing rights

(1)

(2,287)

Ending balance

565

3,415

565

3,415

The Company sold an MSR portfolio with an unpaid principal balance of $

334

million for a sales price of $

4.0

million,

recognizing a $

1.38

million gain on sale, recorded

in other noninterest income on the Consolidated

Statement of Income.

The Company did

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

three months ended June 30, 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)

June 30, 2023

December 31, 2022

Minimum

Maximum

Minimum

Maximum

Discount rates

9.51%

12.00%

9.50%

12.00%

Annual prepayment speeds

11.26%

17.07%

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

14.80

% at June 30, 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 June

30, 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.

11,105

million warehouse line of credit agreement expiring in

December 2023

Interest is at the SOFR plus

2.25%

3.25%

16,948

Total Warehouse

Borrowings

28,053

Warehouse

line borrowings are classified as short-term borrowings.

At December 31, 2022, warehouse line borrowings totaled $

50.2

million. At June 30, 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 June 30, 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 June 30,

2023 and December 31, 2022 was $

42.8

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 June 30, 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 CME Term

SOFR (secured overnight financing rate).

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)

June 30, 2023

Interest rate swaps related to subordinated debt

Other Assets

30,000

5,979

7.0

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 and six months ended June 30, 2023.

Amount of (Loss)

Amount of Gain

Gain Recognized

(Loss) Reclassified

(Dollars in Thousands)

Category

in AOCI

from AOCI to Income

Three months ended June 30, 2023

Interest expense

437

332

Three months ended June 30, 2022

Interest expense

867

Six months ended June 30, 2023

Interest expense

(161)

641

Six months ended June 30, 2022

Interest expense

2,237

(2)

The Company estimates there will be approximately $

1.4

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

months.

The Company had a collateral liability of $

5.9

million and $

5.8

million at June 30, 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 June 30, 2023, the operating lease ROU assets and liabilities were $

24.3

million and $

24.6

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

Six Months Ended

June 30,

(Dollars in Thousands)

2023

2022

2023

2022

Operating lease expense

705

391

1,405

775

Short-term lease expense

132

159

271

337

Total lease expense

837

550

1,676

1,112

Other information:

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

Operating cash flows from operating leases

706

435

1,411

864

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

600

2,993

1,192

Weighted average

remaining lease term — operating leases (in years)

18.5

24.5

18.5

24.5

Weighted average

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

3.3%

2.2%

3.3%

2.2%

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

(Dollars in Thousands)

June 30, 2023

2023

1,664

2024

2,697

2025

2,469

2026

2,333

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

32,453

Less: Interest

(7,808)

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

24,645

~~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~~At June 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,~~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 $

0.1

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 June 30, 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~~ Company’s

qualified benefit pension plan 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%

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%

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in Thousands)

2023

2022

2023

2022

Service Cost

872

1,572

1,744

3,145

Interest Cost

1,458

1,166

2,916

2,333

Expected Return on Plan Assets

(1,701)

(2,675)

(3,403)

(5,351)

Prior Service Cost Amortization

Net Loss Amortization

234

428

467

857

Pension Settlement Charge

169

378

Net Periodic Benefit Cost

864

664

1,727

1,370

Discount Rate

5.63%

3.11%

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
SERP and SERP II were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in Thousands)

2023

2022

2023

2022

Service Cost

Interest Cost

130

261

158

Prior Service Cost Amortization

138

Net Loss Amortization

(155)

180

(309)

360

Pension Settlement Gain

(291)

Net Periodic Benefit Cost

(274)

336

(254)

672

Discount Rate

5.45%

2.80%

5.45%

2.80%

During the month of June 2023, lump sum payments made under the SERP triggered
settlement accounting and remeasurement of the

plan at June 30, 2023.
In accordance with applicable accounting guidance for retirement benefit plans,
the Company recorded a

settlement gain of $

0.3

million in June 2023.

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

June 30, 2023

December 31, 2022

(Dollars in Thousands)

Fixed

Variable

Total

Fixed

Variable

Total

Commitments to Extend Credit

(1)

206,057

569,036

775,093

243,614

531,873

775,487

Standby Letters of Credit

6,297

5,619

Total

212,354

569,036

781,390

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 June 30,

Six Months Ended June 30,

(Dollars in Thousands)

2023

2022

2023

2022

Beginning Balance

2,833

2,976

2,989

2,897

Provision for Credit Losses

287

(123)

131

(44)

Ending Balance

3,120

2,853

3,120

2,853

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 a 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 $

7.4

million in a solar tax credit equity fund.
For the six months ended

June 30, 2023, the Company had contributed $

0.4

million of the bank tech commitment and $

2.9

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.~~

0.2

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

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.

Equity Securities.

Investment securities classified as equity securities are measured at

fair value of the investment with changes in fair

value recorded in earnings.

Loans Held for Sale

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

when possible,

using either quoted secondary-market prices or investor commitments.

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

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

that loan, which would be used by other market

participants.

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

Mortgage Banking Derivative Instruments.

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

models incorporating market pricing for instruments with similar characteristics,

commonly referred to as best execution pricing, or

investor commitment prices for best effort IRLCs which have

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

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

the loans, and the pull-through rate,

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

The fair value of forward sale commitments is based on

observable market pricing for similar instruments and are therefore

classified as Level 2 within the fair value hierarchy.

Interest Rate Swap.

The Company’s derivative positions are

classified as Level 2 within the fair value hierarchy and are valued using

models generally accepted in the financial services industry and that

use actively quoted or observable market input values from

external market data providers.

The fair value derivatives are determined using ~~internal~~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~~June 30, ~~2017,~~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

June 30, 2023, as restated

ASSETS:

Securities Available for
Sale:

U.S. Government Treasury

20,250

U.S. Government Agency

164,240

States and Political Subdivisions

40,879

Mortgage-Backed Securities

66,132

Corporate Debt Securities

87,364

Equity Securities

460

Loans Held for Sale

44,659

Interest Rate Swap Derivative

5,979

Mortgage Banking Hedge Derivative

100

Mortgage Banking IRLC Derivative

1,270

LIABILITIES:

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 $

7.9

million

and $

11.8

million, respectively, for the
six months ended June 30, 2023, and $

7.7

million and $

16.8

million, respectively, for the
six

months ended June 30, 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~~ $

4.0

million with a

valuation allowance at June 30, 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~~six 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 June 30, 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.

Equity Securities.

Investment securities classified as equity securities that do not have readily determinable
fair values are measured at

cost and remeasured to fair value when impaired or upon observable transaction
prices.

Other Equity Securities.

Investment securities classified as other equity securities that do not have
readily determinable fair values, are

measured at cost, remeasured to fair value when impaired or upon observable
transaction prices and accounted for under the equity

method of accounting and reflected in other assets.

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)

June 30, 2023

Carrying

Level 1

Level 2

Level 3

(Dollars in Thousands)

Value

Inputs

ASSETS:

Cash

83,679

Short-Term Investments

285,129

Investment Securities, Held to Maturity

641,398

432,157

163,062

Equity Securities

(1)

1,243

Other Equity Securities

(2)

2,848

Mortgage Servicing Rights

565

1,013

Loans, Net of Allowance for Credit Losses

2,655,269

2,476,509

LIABILITIES:

Deposits

3,788,866

3,289,733

Short-Term

Borrowings

50,673

Subordinated Notes Payable

52,887

45,563

Long-Term Borrowings

414

412

(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

4,236

(162)

(217)

3,857

Balance as of ~~Credit Losses on Financial Statements.”~~ ~~ASU 2016-13 requires the measurement~~June 30, 2023

(33,113)

4,463

(4,722)

(33,372)

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

(27,071)

2,237

283

(24,551)

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.

June 30, 2022

(31,659)

3,767

~~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.~~

(12,873)

(40,765)

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

operations

and

should

read

conjunction

with

the

Consolidated

Financial

Statements and

notes.

The following

information

should provide

a better

understanding of

the major

factors ~~that have affected our financial condition~~

and ~~results~~trends

that

affect

our

earnings

performance

and

financial

condition,

and

how

our

performance

during

2023

compares

with

prior

years.

Throughout

this section,

Capital City

Bank Group,

Inc., and

subsidiaries, collectively,

is referred

to as

“CCBG,” “Company,”

“we,”

“us,” or “our.”

have

restated

our

previously

issued

consolidated

financial

statements

contained

this

Form

10-Q/A.

For

background

the

restatement,

the

fiscal

periods

impacted,

control

considerations

and

other

information,

see

“Explanatory

Note”

preceding

“Part

–

Item

Consolidated

Financial

Statement

(Unaudited)”

above.

addition,

this MD&A

is being

restated

conform

the

restated

financial

statements.

For

additional

information

the

restatements,

see

“Part

–

Item

Financial

Information

–

Note

–

Restatement of ~~operations and should be read in conjunction with the~~Previously Issued 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 compares with prior years. Throughout this section, Capital City Bank Group, Inc., and subsidiaries, collectively, is referred to as "CCBG," "Company," "we," "us," or "our."

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~~ Form ~~10-K,~~10-K/A, as updated in our subsequent quarterly reports filed

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 6062 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)

Second

First

Fourth

Third

Second

Shareowners' Equity (GAAP)

412,422

403,260

387,281

368,485

368,705

Less: Goodwill and Other Intangibles (GAAP)

93,013

93,053

93,093

93,133

93,173

Tangible Shareowners' Equity (non-GAAP)

319,409

310,207

294,188

275,352

275,532

Total Assets (GAAP)

4,391,206

4,401,762

4,519,223

4,327,991

4,351,327

Less: Goodwill and Other Intangibles (GAAP)

93,013

93,053

93,093

93,133

93,173

Tangible Assets (non-GAAP)

4,298,193

4,308,709

4,426,130

4,234,858

4,258,154

Tangible Common Equity Ratio (non-GAAP)

A/B

7.43%

7.20%

6.65%

6.50%

6.47%

Actual Diluted Shares Outstanding (GAAP)

17,025,023

17,049,913

17,039,401

16,998,177

16,981,614

Tangible Book Value

per Diluted Share (non-GAAP)

A/C

18.76

18.19

17.27

16.20

16.23

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)

Second

First

Fourth

Third

Second

Summary of Operations

Interest Income

45,205

43,926

41,218

35,442

29,516

Interest Expense

5,068

3,526

3,122

2,037

987

Net Interest Income

40,137

40,400

38,096

33,405

28,529

Provision for Credit Losses

2,197

3,099

3,616

2,154

1,692

Net Interest Income After

Provision for Credit Losses

37,940

37,301

34,480

31,251

26,837

Noninterest Income

19,967

17,758

15,296

18,509

20,564

Noninterest Expense

40,285

37,675

39,262

37,699

38,150

Income Before Income Taxes

17,622

17,384

10,514

12,061

9,251

Income Tax Expense

3,417

3,710

1,900

2,493

1,685

(Income) Loss Attributable to NCI

(31)

995

(306)

Net Income Attributable to CCBG

14,174

13,709

9,609

9,605

7,260

Net Interest Income (FTE)

(1)

40,224

40,500

38,185

33,488

28,604

Per Common Share

Net Income Basic

0.83

0.81

0.56

0.57

0.43

Net Income Diluted

0.83

0.80

0.56

0.57

0.43

Cash Dividends Declared

0.18

0.17

0.16

Diluted Book Value

24.21

23.65

22.73

21.68

21.71

Diluted Tangible Book Value

(2)

18.76

18.19

17.27

16.20

16.23

Market Price:

High

34.16

36.86

36.23

33.93

28.55

Low

28.03

28.18

31.14

27.41

24.43

Close

30.64

29.31

32.50

31.11

27.89

Selected Average Balances

Investment Securities

1,043,858

1,064,212

1,081,092

1,120,728

1,144,757

Loans Held for Investment

2,657,693

2,582,395

2,439,379

2,264,075

2,084,679

Earning Assets

3,974,803

4,062,688

4,032,733

4,009,951

3,974,221

Total Assets

4,320,601

4,411,865

4,381,825

4,357,678

4,321,388

Deposits

3,719,564

3,817,314

3,803,042

3,769,864

3,765,329

Shareowners’ Equity

418,757

404,067

380,570

379,305

373,365

Common Equivalent Average Shares:

Basic

17,002

17,016

16,963

16,960

16,949

Diluted

17,035

17,045

17,016

16,996

16,971

Performance Ratios:

Return on Average Assets (annualized)

1.32

1.26

0.87

0.67

Return on Average Equity (annualized)

13.58

13.76

10.02

10.05

7.80

Net Interest Margin (FTE)

4.06

4.04

3.76

3.32

2.89

Noninterest Income as % of Operating Revenue

33.22

30.53

28.65

35.65

41.89

Efficiency Ratio

66.93

64.67

73.41

72.51

77.59

Asset Quality:

Allowance for Credit Losses (“ACL”)

28,243

26,808

25,068

22,747

21,463

Nonperforming Assets (“NPAs”)

6,624

4,602

2,728

2,422

3,231

ACL to Loans HFI

1.05

1.01

0.98

0.96

NPAs to Total
Assets

0.15

0.10

0.06

0.07

NPAs to Loans HFI plus OREO

0.25

0.17

0.11

0.10

0.14

ACL to Non-Performing Loans

426.44

584.18

1,091.33

944.36

683.35

Net Charge-Offs to Average Loans HFI

0.07

0.24

0.21

0.12

0.22

Capital Ratios:

Tier 1 Capital

14.56

14.23

14.27

14.59

14.97

Total Capital

15.68

15.29

15.30

15.58

15.95

Common Equity Tier 1

12.73

12.40

12.38

12.62

12.91

Leverage

9.54

9.09

8.91

8.80

8.70

Tangible Common Equity

(2)

7.43

7.20

6.65

6.50

6.47

(1)

Fully Tax Equivalent

(2)

Non-GAAP financial measure.
See non-GAAP reconciliation on page 51.

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~~$14.2 million, or ~~$0.27~~$0.83 per diluted

share, for the second

quarter of 2023 compared to $13.7 million, or $0.80 per diluted share, for

the ~~third~~first quarter of ~~2017 compared to net income of $3.6~~2023, and $7.3 million, or ~~$0.21~~$0.43 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.~~ 2022.

For the first ~~nine~~six months of ~~2017, we realized~~2023, net income ~~of $10.9~~attributable to common shareowners totaled

$27.9 million, or ~~$0.64~~$1.64 per diluted share, compared to net income of ~~$8.4~~ $14.2

million, or ~~$0.49~~$0.84 per diluted share, for the same period of ~~2016.~~

·~~Tax equivalent~~

2022.

Net Interest Income.

Tax-equivalent net

interest income for the ~~third~~second quarter of ~~2017 was $21.6~~2023 totaled $40.2 million, compared

to ~~$20.8~~$40.5

million for the first quarter of 2023, and $28.6 million for the second quarter of ~~2017~~2022.

Compared to the first quarter of 2023, the

decrease reflected higher deposit interest expense and ~~$19.6~~a lower level of

interest income from overnight funds, partially offset by higher

loan interest due to loan growth and higher interest rates.

For the first six months of 2023, tax-equivalent net interest income totaled

$80.7

million compared to $53.7 million for the ~~third quarter~~same period of ~~2016.~~ 2022.

The ~~increase~~increases over both ~~the~~ prior ~~quarters was~~year periods were driven by

strong loan growth ~~in the loan portfolio, coupled with~~and higher ~~short-term~~ interest rates ~~partially offset by~~across a ~~higher rate paid on negotiated rate deposits. For the first nine months~~majority of ~~2017, tax equivalent net interest income totaled $62.4 million compared to $58.6 million~~our

earning assets.

Provision and Allowance 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 interest rates, partially offset by~~ Credit

Losses.

We recorded

a ~~higher rate paid on negotiated rate deposits and one less calendar day.~~

·~~Provision~~provision for ~~loan~~credit losses ~~was $0.5 million for the third quarter~~ of ~~2017 compared to $0.6~~$2.2 million for the second quarter of ~~2017 and no provision~~2023

compared to $3.1 million for the ~~third~~first quarter of ~~2016.~~ 2023 and $1.7 million

for the second quarter of 2022.

The decrease in the provision

compared to the first quarter of 2023 was primarily attributable to a lower

level of loan growth and a decrease in net loan charge-offs.

For the first ~~nine~~six months of ~~2017,~~2023, we recorded a provision for credit losses of $5.3 million

compared to $1.7 million for the ~~loan loss~~same period

of 2022.

The release of reserves held for pandemic-related losses favorably impacted

our provision in 2022. At June 30, 2023, the

allowance represented 1.05% of HFI loans compared to 1.01% at March 31,

2023, and 0.98% at December 31, 2022.

Noninterest Income.

Noninterest income for the second quarter of 2023 totaled $20.0 million compared

to $17.8 million for the first

quarter of 2023 and $20.6 million for the second quarter of 2022.

The $2.2 million increase over the first quarter of 2023 reflected an

increase in other income of $1.3 million, mortgage banking revenues of $0.5

million, wealth management fees of $0.2 million, deposit

fees of $0.1 million, and bankcard fees of $0.1 million.

The increase in other income was attributable to a $1.4 million ~~compared~~gain from the

sale of mortgage servicing rights.

The decrease in mortgage banking revenues was attributable to ~~$0.4~~a lower gain on sale margin.

For the

first six months of 2023, noninterest income totaled $37.7 million compared

to $41.4 million for the same period of ~~2016.~~2022 with the $3.7

million decrease primarily attributable to lower mortgage banking revenues

of $2.7 million and wealth management fees of $2.4

million, partially offset by a $1.8 million increase in other income.

The decrease in mortgage banking revenues was attributable to a

lower gain on sale margin.

The decrease in wealth management fees was driven by a decrease in insurance commissions due

to the

sale of large policies in 2022. The increase in other income reflected

the ~~loan loss provision compared to the prior year periods was primarily due to growth~~previously mentioned sale of mortgage servicing rights. We

discuss noninterest income in ~~the loan portfolio~~.

·further detail below.

Noninterest ~~income~~Expense.

Noninterest expense for ~~the third quarter of 2017 totaled $13.0 million, a decrease of $0.1 million, or 1.1%, from~~ the second quarter of ~~2017~~2023 totaled $40.3 million compared

to $37.7 million for the first

quarter of 2023 and ~~comparable~~$38.2 million for the second quarter of 2022.

Compared to the ~~third~~first quarter of ~~2016.~~ 2023, the $2.6 million increase was

primarily due to an increase in other expense of $2.6 million that was partially offset

by a $0.1 million decrease in compensation

expense.

The unfavorable variance in other expense reflected a $1.8 million gain from the sale of a banking

office in the first quarter

of 2023.

Further, the second quarter of 2023 includes a non-routine

consulting expense of $0.8 million related to our core processing

system outsourcing contract negotiation.

For the first ~~nine~~six months of ~~2017,~~2023, noninterest ~~income~~expense totaled ~~$38.8~~$78.0 million ~~a $2.0~~compared

$74.7 million ~~or 5.0%, decrease from~~for the same period of ~~2016,~~2022 with the $3.3 million increase

attributable to an increase in compensation expense of $1.5

million, occupancy expense of $1.4 million, and other expense of $0.4 million.

The increase in compensation expense was primarily

due to an increase in realized loan cost (credit offset to salary expense) driven

by increased loan growth in 2022.

The increase in

occupancy expense reflected the addition of banking offices

since mid/late 2022.

The variance in other expense was primarily due to

the previously mentioned consulting payment and increases in pension

plan expense (non-service-related component) and FDIC

insurance fees, partially offset by the previously mentioned

gain on the sale of a ~~$2.5 million gain from the partial retirement of our trust preferred securities (“TRUPs”)~~ banking office.

We discuss noninterest expense

further detail below.

Financial Condition

Earning Assets.

Average earning assets totaled

$3.975 billion for 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,~~2023, a decrease of ~~$1.2~~$87.9 million, or ~~4.3%~~ 2.2%,

from the ~~second~~first quarter of ~~2017~~2023, and a decrease of ~~$1.3~~$57.9 million, or ~~4.7%~~1.4%, from

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

The decrease from both prior

periods was ~~due~~attributable to lower ~~other real estate owned (“OREO”) expense (primarily related~~deposit balances.

The mix of earning assets continues to ~~gains on sale) and various other expenses (advertising, legal, professional, processing). For~~improve as overnight funds are being

utilized to fund loan growth.

Loans.

Average loans HFI increased

$75.3 million, or 2.9%, over the first ~~nine months~~quarter of ~~2017, noninterest expense totaled $82.6~~2023 and $218.3 million, ~~a decrease~~or

9.0%, over the

fourth quarter of ~~$3.1~~2022.

Period end loans increased $26.4 million, or ~~3.6%~~1.0%, ~~from~~over the ~~same period of 2016 due to lower OREO expense (all categories:~~ ~~gain/loss on sale, carrying costs, and valuation adjustments), occupancy expense, and various other expenses (primarily legal and FDIC insurance), partially offset by higher compensation expense (stock compensation).~~

~~Financial Condition~~

·~~Average earning assets were $2.466 billion for the third~~first quarter of ~~2017, a decrease of $35.7~~2023

and $135.8 million, or ~~1.4%~~5.3%, ~~from the second quarter of 2017, and an increase of $42.9 million, or 1.8%,~~

over the fourth quarter of ~~2016.~~ 2022. Compared to both prior periods, the growth was primarily

in the residential real estate and commercial

real estate categories and was partially offset by lower indirect auto

and home equity loan balances.

Credit Quality

Credit quality metrics remained strong for the quarter.

Nonperforming assets (nonaccrual loans and other real estate)

totaled $6.6 million at June 30, 2023, compared to $4.6 million at March 31, 2023

and $2.7 million at December 31, 2022.

At June

30, 2023, nonperforming assets as a percent of total assets equaled 0.15%, compared

to 0.10% at March 31, 2023 and 0.06% at

December 31, 2022.

Nonaccrual loans totaled $6.6 million at June 30, 2023, a $2.0 million increase

over March 31, 2023 and a $4.3

million increase over December 31, 2022.

The increase was primarily due to the addition of one large residential loan

($1.1 million)

to nonaccrual status which was adequately secured and reserved for.

Further, classified loans totaled $15.0 million at June

30, 2023, a

$2.8 million increase over March 31, 2023 and a $4.4 million decrease ~~in average earning assets~~ from

December 31, 2022.

Deposits

Average total

deposits were $3.720 billion for the second quarter of ~~2017 was~~2023, a decrease of $97.8 million,

or 2.6%, from the

first quarter of 2023 and a decrease of $83.5 million, or 2.2%, from the fourth quarter

of 2022.

Compared to both prior periods, the

decreases were primarily attributable to alower noninterest bearing and savings

balances, primarily offset by higher money market

balances.

Compared to the first quarter of 2023, the decrease in NOW account balances reflected the

seasonal decline in ~~short-term investments, partially~~ ~~offset by growth in~~ our ~~loan portfolio. The increase in earning assets compared~~public

funds balances.

Compared to the fourth quarter ~~2016 was primarily due~~of 2022, the increase in NOW accounts reflected higher

average public funds balances

which began to ~~growth~~build in ~~the loan portfolio, partially offset by a decline in total investment securities.~~

·~~Average loans increased by $29.9 million, or 1.9%, over the second quarter of 2017,~~December 2022 and ~~$65.3 million, or 4.2%, over~~affect the ~~fourth quarter of 2016. Increases over both prior periods reflected~~ ~~growth in all loan types except commercial loans and home equity loans.~~

·~~Nonperforming assets totaled $12.5 million at September 30, 2017, a decrease of $3.4 million, or 21%, from~~

average comparison.

Capital

At June 30, ~~2017 and $6.6 million, or 35%, from December 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.~~

·~~At September 30, 2017,~~2023, we were well-capitalized with a ~~risk based~~total risk-based capital ratio

of ~~16.96%~~15.68% and a tangible common equity

ratio (a non-GAAP financial measure) of ~~7.41%~~7.43% compared to ~~16.32%~~ 15.29%

and ~~7.21%~~7.20%, respectively,

at ~~June 30, 2017,~~March 31, 2023 and ~~16.28%~~15.30% and ~~6.90%~~

6.65%, respectively, at December

31, ~~2016. All~~2022.

At June 30, 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

Six Months Ended

June 30,

March 31,

June 30,

(Dollars in Thousands, except per share data)

2023

2022

2023

2022

Interest Income

45,205

43,926

29,516

89,131

55,250

Taxable Equivalent Adjustments

100

188

155

Total Interest Income (FTE)

45,292

44,026

29,592

89,319

55,405

Interest Expense

5,068

3,526

987

8,594

1,729

Net Interest Income

(FTE)

40,224

40,500

28,605

80,725

53,676

Provision for Credit Losses

2,197

3,099

1,692

5,296

1,724

Taxable Equivalent Adjustments

100

188

155

Net Interest Income After Provision for Credit Losses

37,940

37,301

26,837

75,241

51,797

Noninterest Income

19,967

17,758

20,564

37,725

41,376

Noninterest Expense

40,285

37,675

38,150

77,961

74,673

Income Before Income Taxes

17,622

17,384

9,251

35,005

18,500

Income Tax Expense

3,417

3,710

1,685

7,126

3,405

Pre-Tax (Income) Loss Attributable to Noncontrolling

Interest

(31)

(306)

(897)

Net Income Attributable to Common Shareowners

14,174

13,709

7,260

27,883

14,198

Basic Net Income Per Share

0.83

0.81

0.43

1.64

0.84

Diluted Net Income Per Share

0.83

0.80

0.43

1.64

0.84

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~~65.

Tax-equivalent net

interest income ~~was $21.6~~for the second quarter of 2023 totaled $40.2 million, compared

to $40.5 million for the ~~third~~first quarter

of ~~2017 compared to $20.8~~ 2023, and $28.6

million for the second quarter of ~~2017 and $19.6 million for~~2022.

Compared to the ~~third~~first quarter of ~~2016.~~ ~~The increase in tax equivalent net~~2023, the decrease reflected higher deposit

interest expense and a lower level of interest income ~~compared to the both prior periods reflected a favorable shift in the earning asset mix and improved yields,~~from overnight funds, partially

offset by higher ~~rates paid on negotiated rate deposits. Also, as compared~~loan interest due to ~~the second quarter of 2017, there was one additional calendar day.~~ loan growth

and higher interest rates.

For the first ~~nine~~six months of ~~2017, tax equivalent~~2023, tax-equivalent net interest income totaled ~~$62.4~~$80.7 million

compared to ~~$58.6~~ $53.7

million for the ~~comparable~~same period ~~in 2016.~~ of 2022.

The increases over both prior year ~~over year increase was~~periods were driven by ~~growth in the~~strong loan growth

and ~~investment portfolios, coupled with~~ higher ~~short-term~~ interest

rates ~~partially offset by~~across 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~~majority 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.

Our net interest margin for the ~~third~~second quarter of ~~2017~~2023 was ~~3.48%~~4.06%,

an increase of 15two basis points

over the first quarter of 2023 and an

increase of 117 basis points over the second

quarter of 2022.

For the month of June 2023, our net interest margin was 4.10%.

For the

first six months of 2023, our net interest margin was 4.05%, an

increase of 131 basis points over the same period of 2022.

The

increase compared to all prior periods reflected a combination of higher

interest rates and loan growth, partially offset by a higher cost

of deposits.

For the second quarter of 2023, our cost of funds was 51 basis points, an increase of 16

basis points over the first quarter

of 2023 and 41 basis points over the second quarter of ~~2017 and an increase~~2022.

Our total cost of 25deposits (including noninterest bearing accounts)

was

43 basis points, ~~over the third quarter of 2016. For the first nine months of 2017, the net interest margin increased 12~~26 basis points, ~~to 3.34% compared to~~and 3 basis points, respectively,

for the same period of 2016. The increase in 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.~~

periods.

Provision for ~~Loan~~Credit Losses

~~The~~

We recorded

a provision for ~~loan~~credit losses ~~for the third quarter~~ of ~~2017 was $0.5~~$2.2 million ~~compared to $0.6 million provision expense~~ for the second quarter of ~~2017 and no provision~~2023 compared

to $3.1 million for the ~~third~~first quarter

of 2023 and $1.7 million for the second quarter of ~~2016.~~ 2022.

The decrease in the provision compared to the first quarter of 2023 was

primarily attributable to a lower level of loan growth and a decrease in net loan

charge-offs.

For the first ~~nine~~six months of ~~2017, the loan loss~~2023, we

recorded a provision ~~totaled $1.4~~for credit losses of $5.3 million compared to ~~$0.4~~ $1.7

million for the same period of ~~2016.~~2022.

The ~~increase~~release of reserves

held for pandemic-related losses favorably impacted our provision in 2022.

We discuss the ~~loan loss provision compared to the prior year periods was primarily attributable to growth in the loan portfolio.~~ ~~We realized net loan~~allowance

for credit losses further

below. For more information

on charge-offs ~~of $0.4 million, or 0.10% (annualized), of average loans~~and recoveries, see Note 3 –

Loans Held for ~~the third quarter of 2017. This compares to net loan charge-offs of $0.7 million, or 0.17% (annualized)~~Investment and Allowance for Credit Losses.

Noninterest Income

Noninterest income for the second quarter of ~~2017 and net loan recoveries of $0.1~~2023 totaled $20.0 million ~~or 0.02% (annualized)~~

compared to $17.8 million for the ~~third~~first quarter of ~~2016. For the first nine months of 2017, net charge-offs totaled $1.5~~2023 and

$20.6 million ~~or 0.12% (annualized), of average loans compared to $0.6 million, or 0.05% (annualized),~~ for ~~the same period of 2016.~~

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 quarter of 2017 totaled $13.0 million, a decrease of $0.1 million, or 1.1%, from~~ the second quarter of ~~2017 and unchanged from~~2022.

The $2.2 million increase over the ~~third~~first 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,~~ ~~due to lower~~ 2023 reflected an increase in

other

income of ~~$2.5~~$1.3 million, ~~and deposit fees~~mortgage banking revenues of ~~$0.8~~$0.5 million, ~~partially offset by higher~~

wealth management fees of ~~$0.9~~ $0.2 million, deposit fees of $0.1

million, and ~~mortgage banking~~bankcard fees of ~~$0.5~~$0.1 million.

The ~~decrease~~increase in other income was attributable to a ~~$2.5~~$1.4 million gain from the ~~partial retirement~~sale of ~~our trust preferred securities (“TRUPs”)~~

mortgage servicing rights.

The increase in mortgage banking revenues was attributable to a higher

gain on sale margin. For the ~~second quarter~~first

six months of ~~2016.~~

2023, noninterest income totaled $37.7 million compared

to $41.4 million for the same period of 2022 with the $3.7

million decrease primarily attributable to lower mortgage banking revenues

of $2.7 million and wealth management fees of $2.4

million, partially offset by a $1.8 million increase in other income.

The decrease in mortgage banking revenues was attributable to

lower rate lock volume and gain on sale margin.

The decrease in wealth management fees was driven by a decrease in insurance

commissions due to the sale of large policies in 2022. The increase

in other income reflected the previously mentioned sale of

mortgage servicing rights.

Noninterest income represented ~~37.9%~~33.22% of operating revenues (net interest

income plus noninterest income) in the ~~third~~second quarter of ~~2017~~

2023 compared to ~~39.1%~~30.53% in the first quarter of 2023 and 41.89% in the second

quarter of ~~2017 and 40.2% in the third quarter of 2016.~~ 2022.

For the first ~~nine~~six months of ~~2017,~~ 2023,

noninterest income represented ~~38.7%~~31.90% of operating revenues compared

to ~~41.4%~~43.60% 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

Six Months Ended

June 30,

March 31,

June 30,

(Dollars in Thousands)

2023

2022

2023

2022

Deposit Fees

5,326

5,239

5,447

10,565

10,638

Bank Card Fees

3,795

3,726

4,034

7,521

7,797

Wealth Management

Fees

4,149

3,928

4,403

8,077

10,473

Mortgage Banking Revenues

3,363

2,871

4,857

6,234

8,912

Other

3,334

1,994

1,823

5,328

3,556

Total

Noninterest Income

19,967

17,758

20,564

37,725

41,376

Significant components of noninterest income are discussed in more

detail below.

Deposit Fees

Deposit fees for the ~~third~~second quarter of ~~2017~~ 2023

totaled ~~$5.2~~ $5.3

million, an increase of $0.1 million, or ~~2.0%~~1.7%, over the first

quarter of 2023, and a decrease of $0.1 million, or 2.2%, from the second quarter

of 2022.

For the first six months of 2023, deposit

fees totaled $10.6 million, a decrease of $0.1 million, or 0.7%, from

the same period of 2022.

Compared to the first quarter of 2023,

the increase reflected higher overdraft fees.

The decrease from both prior year periods was attributable to lower

service charge and

ATM

fees.

Bank Card Fees

Bank card fees for the second quarter of ~~2017,~~2023 totaled $3.8 million, an increase of $0.1

million, or 1.8%, over the

first quarter of 2023, and a decrease of $0.2 million, or ~~4.1%~~5.9%, from the ~~third~~

second quarter of ~~2016.~~ 2022.

For the first ~~nine~~six months of ~~2017, deposit~~2023, bank

card fees totaled ~~$15.3~~$7.5 million, a decrease of ~~$0.8~~ $0.3

million, or ~~5.0%~~3.5%, from the same period of ~~2016. The decrease from~~2022.

Compared to the first quarter of

2023,

the increase reflected one more day of processing. Compared to both prior ~~year~~ periods, the decline

reflected lower ~~overdraft service fees due~~debit card usage

related 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 through Capital City Trust (i.e., managed

accounts and

trusts/~~estates, and retirement plans) and~~estates), retail brokerage fees through Capital City Investments (i.e.,

investment, insurance products, and retirement accounts),

and financial advisory fees through Capital City Strategic Wealth

(i.e., including the sale of life insurance, ~~products) totaled $2.2 million~~risk management and asset

protection services).

Wealth management

fees for ~~the third quarter of 2017, an increase of $0.1 million, or 6.0%, over~~ the second quarter of ~~2017 and $0.4 million, or 23.8% over the third quarter of 2016. For the first nine months of 2017, wealth management fees~~2023 totaled ~~$6.1~~$4.1 million, an increase of ~~$0.9~~ $0.

million, or ~~16.3%~~

5.6%, over the same period of 2016. The increase over all respective prior periods was due to higher trust fees and retail brokerage fees driven by an increase in assets under management and improved sales efforts. Third quarter 2017 wealth management fees reflected a large account booked during the quarter that contributed $0.2 million in gross fees. At September 30, 2017, total assets under management were approximately $1.370 billion compared to $1.192 billion at December 31, 2016 and $1.182 billion at September 30, 2016.

~~Mortgage Banking Fees.~~ ~~Mortgage banking fees totaled $1.5 million for the third~~first quarter of ~~2017,~~2023, and a decrease of ~~$0.1~~$0.3 million, or ~~4.9%~~5.8%,

from the second quarter of ~~2017 and comparable to the third quarter of 2016.~~ 2022.

For the first ~~nine~~six months

of ~~2017,~~2023, wealth management fees totaled $4.3 million, an increase of $0.5 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 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 and a decrease of $0.1 million, or 7.7%, from the third quarter of 2016. For 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.

~~Noninterest Expense~~

~~Noninterest expense for the third quarter of 2017 totaled $26.7~~$8.1 million, a decrease of ~~$1.2~~

$2.4 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 OREO expense (primarily related to gains on sale) and various other expenses (advertising, legal, professional, and processing). For the first nine months of 2017, noninterest expense totaled $82.6 million, a decrease of $3.1 million, or 3.6%22.9%, from the same period of ~~2016~~2022.

The

decrease reflected lower insurance commission revenues due to the sale of large

policies in 2022.

Mortgage Banking Revenues.

Mortgage banking revenues totaled $3.4 million for the second quarter

of 2023, compared to $2.9

million for the first quarter of 2023 and $4.9 million for the second quarter

of 2022.

For the first six months of 2023, revenues totaled

$6.2 million compared to $8.9 million for the same period of 2022. The increase compared

to the first quarter of 2023 was attributable

to higher gain on sale margin. The decrease in mortgage banking

revenues compared to the second quarter of 2022 was attributable to

lower ~~OREO~~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 $3.3 million for the second quarter of 2023 compared

to $2.0 million for the first quarter of 2023 and

$1.8 million for the second quarter of 2022.

For the first six months of 2023, other income totaled $5.3 million compared to

$3.6

million for the same period of 2022.

The increase over all prior periods was primarily due to a $1.4 million gain from the sale

mortgage servicing rights.

Higher miscellaneous income of $0.4 million also contributed to the increase

for the six-month period.

Noninterest Expense

Noninterest expense for the second quarter of 2023 totaled $40.3 million

compared to $37.7 million for the first quarter of 2023 and

$38.2 million for the second quarter of 2022.

Compared to the first quarter of 2023, the $2.6 million increase was primarily due to

increase in other expense of ~~$2.5~~$2.6 million ~~(all categories: gain/loss on~~that was partially offset by

a $0.1 million decrease in compensation expense.

The

unfavorable variance in other expense reflected a $1.8 million gain from

the sale ~~carrying costs,~~of a banking office in the first quarter of 2023.

Further, the second quarter of 2023

included a $0.8 million expense related to a consulting engagement to assist in negotiating a multi-

year contract for the outsourcing of our core processing system, a higher expense

for advertising and ~~valuation adjustments),~~travel/entertainment totaling $0.3

million, and a $0.2 million expense related to our VISA (class B shares) swap.

Partially offsetting these increases was a $0.3 million

gain related to our SERP.

The decrease in compensation expense reflected a $0.5 million increase in

salary expense (lower realized

loan cost offset to salary expense) that was partially offset

by lower associate benefit expense of $0.6 million (primarily stock-based

compensation).

Compared to the second quarter of 2022, the $2.1 million increase in noninterest

expense reflected increases in other expense of $1.2

million, occupancy expense of ~~$0.3~~$0.7 million, and ~~various~~compensation

expense of $0.2 million. For the first six months of 2023, noninterest

expense totaled $78.0 million compared to $74.7 million for the same period

of 2022 with the $3.3 million increase attributable to an

increase in compensation expense of $1.5 million, occupancy expense of

$1.4 million, and other ~~expenses totaling $0.9 million (primarily legal~~expense of $0.4 million. The increase

in compensation expense was primarily due to an increase in realized loan

cost (credit offset to salary expense) driven by increased

loan growth in 2022.

The increase in occupancy expense reflected the addition of banking offices

since mid/late 2022.

The variance

in other expense was primarily due to the previously mentioned consulting

payment and increases in pension plan expense (non-

service-related component) and FDIC ~~insurance),~~insurance fees, partially offset

by ~~higher compensation expense $0.8 million (stock compensation).~~ ~~Expense management is an important part~~the previously mentioned gain on the sale 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.~~

a banking office

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

The table below reflects the major components of noninterest expense.

(As Restated)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

(Dollars in Thousands)

2023

2022

2023

2022

Salaries

20,044

19,517

19,300

39,561

37,406

Associate Benefits

3,394

4,007

3,922

7,401

8,114

Total Compensation

23,438

23,524

23,222

46,962

45,520

Premises

3,170

3,245

2,734

6,414

5,493

Equipment

3,650

3,517

3,341

7,168

6,675

Total Occupancy

6,820

6,762

6,075

13,582

12,168

Legal Fees

419

362

316

781

665

Professional Fees

2,039

1,324

1,406

3,363

2,738

Processing Services

1,872

1,742

1,752

3,614

3,389

Advertising

959

874

980

1,833

1,753

Telephone

679

706

703

1,385

1,431

Insurance – Other

872

831

593

1,703

1,103

Other Real Estate Owned, net

(28)

(1,827)

(29)

(1,855)

(4)

Pension - Other

(761)

(1,522)

Pension Settlement (Gain) Charge

(291)

169

(291)

378

Miscellaneous

3,500

3,370

3,724

6,871

7,054

Total Other

10,027

7,389

8,853

17,417

16,985

Total

Noninterest Expense

40,285

37,675

38,150

77,961

74,673

Significant components of noninterest expense are discussed in more detail

below.

~~Compensation~~.

Compensation.

Compensation expense totaled ~~$16.3~~$23.4 million for the ~~third~~second quarter of ~~2017, comparable~~2023 compared

to $23.5 million for the first

quarter of 2023 and $23.2 million for the second quarter of 2022.

The $0.1 million decrease from the first quarter of 2023 reflected a

$0.5

million increase in salary expense and a $0.6 million decrease in associate benefit expense.

The increase in salary expense was

primarily due to a $0.5 million decrease in realized loan cost (credit offset

to salary expense) that was partially offset by lower income

taxes of $0.3 million.

The decrease in associate benefit expense was attributable to a decrease in stock-based

compensation expense.

Compared to the second quarter of ~~2017 and an~~2022, the $0.2 million increase ~~of $0.4~~reflected

a $0.7 million ~~or 2.2% over the third quarter of 2016. The~~ increase ~~over the third quarter of 2016~~in salary expense that was ~~due to higher~~partially

offset by a $0.5 million decrease in associate benefit expense. For the first nine months of 2017, compensation expense totaled $49.1 million, an increase of $0.8 million, or 1.8%, over the same period of 2016 attributable to higher associate benefit expense of $1.3 million, partially offset by lower salary expense of $0.5 million. Compared to both prior year periods, the

The increase in ~~other associate benefit~~salary expense was primarily due to a $1.0 million

decrease in realized loan cost and higher ~~stock compensation attributable to higher pay-out values reflective~~base salaries of ~~improving financial performance. To a lesser extent, higher pension plan expense attributable to a reduction~~$0.8 million, partially

offset by lower incentives of $1.3 million.

The

decrease in ~~the discount rate for plan liabilities contributed to the increase. The reduction in salary~~associate benefit expense was due to lower pension plan expense (service

cost) of $0.7 million that was partially offset by

a $0.2

million increase in associate ~~headcount.~~

~~Occupancy.~~ ~~Occupancy~~insurance expense.

The decline in pension plan expense ~~(including premises and equipment)~~(service cost) was generally due to

lower benefit obligation which reflected an increased level of retirements

in 2022.

The increase in associate insurance expense

reflected higher premiums at our annual renewal.

For the first six months of 2023, compensation expense totaled ~~$4.5~~$47.0 million

compared to $45.5 million for the ~~third quarter~~same period of ~~2017,~~2022 with the $1.5

million increase attributable to an increase in salary expense of

$2.2 million (primarily the addition of staffing in our new markets)

that was partially offset by a $0.7 million decrease in associate

benefit expense, primarily pension plan expense (service cost) due

to an increased level of ~~$0.1~~ retirements in 2022.

Occupancy

Occupancy expense totaled $6.8

million ~~or 1.2%, from~~for the second quarter of ~~2017 and a decrease of $0.2~~ 2023 compared to $6.8

million ~~from~~for the ~~third~~first quarter of ~~2016. The decrease from~~

2023

and $6.1 million for the second quarter of ~~2017 was due to lower equipment and premises maintenance expense. The decrease from the third quarter of 2016 was due to lower depreciation on furniture and equipment.~~ 2022.

For the first ~~nine~~six months of ~~2017,~~2023, occupancy expense totaled ~~$13.4~~$13.6 million ~~a decrease of $0.3~~

compared to $12.2 million ~~or 2.5%, from~~for the same period of ~~2016 and reflects a reduction in the number~~2022.

The addition of four new banking offices ~~as well as lower depreciation~~ since mid/late 2022

and higher

property/equipment insurance premiums drove the increase in occupancy

expense for ~~furniture and fixtures reflective of assets being fully depreciated.~~

both prior year comparisons.

Other.

Other~~. Other noninterest~~ expense totaled ~~$5.9~~$10.0 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~~2023 compared

to $7.4 million ~~or 19.7%, from~~for the ~~third~~first quarter of ~~2016. The decrease from~~2023 and

$8.9

million for the second quarter of ~~2017~~2022.

Compared to the first quarter of 2023, the $2.6 million decrease reflected a $1.8 million

gain from the sale of a banking office in the first quarter of 2023.

Further, the second quarter of 2023 included a $0.8 million

expense

related to a consulting engagement to assist in negotiating a multi-year

contract for the outsourcing of our core processing system, a

higher expense for advertising and travel/entertainment totaling $0.3 million,

and a $0.2 million expense related to our VISA (class B

shares) swap.

Partially offsetting these increases was a $0.3 million gain

related to our SERP.

The increase in other expense over

both prior year periods was primarily ~~due~~related to ~~lower OREO~~the previously mentioned consulting

payment of $0.8 million made in the second

quarter of 2023 and increases in pension plan expense ~~of $0.4 million~~(non-service-related

component), 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.~~FDIC insurance fees. The ~~decrease in OREO expense reflects a higher level of gains~~previously

mentioned gain from the 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~~a banking office in the first ~~nine months~~ quarter

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 circuits2023 partially offset these increases for the ~~first half of 2017 as our new telephone system was implemented.~~

six-month

period

comparison.

Our operating efficiency ratio (expressed as noninterest

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

plus noninterest income) was ~~77.21% for the third quarter of 2017 compared to 82.28%~~ 66.93%

for the second quarter of ~~2017 and 85.92%~~2023 compared to 64.67% for the ~~third~~first quarter of ~~2016.~~ 2023 and 77.59%

for

the second quarter of 2022.

For the first ~~nine~~six months of ~~2017,~~2023, this ratio was ~~81.53%~~65.82% compared to ~~86.05%~~78.56% for the same period

of 2022.

Income Taxes

We realized income

tax expense of $3.4 million (effective rate of 19.39%) for the second quarter

of 2023 compared to $3.7 million

(effective rate of 21.34%) for the first quarter of 2023 and

$1.7 million (effective rate of 18.21%) for the second quarter of

2022.

For

the first six months of 2023, we realized income tax expense of $7.1 million (effective

rate of 20.36%) compared to $3.4 million

(effective rate of 18.41%) for the same period of ~~2016.~~

~~Income Taxes~~

We realized income tax expense of $2.5 million (35% effective rate) for the third quarter of 2017 compared to $1.6 million (30% effective rate) for the second quarter of 2017 and $1.4 million (33% effective rate) for the third quarter of 2016. 2022.

The ~~lower~~decrease in our effective tax rate for the second quarter of ~~2017~~2023 reflected ~~income~~

tax ~~benefits realized~~benefit accrued from an investment in ~~connection with stock based compensation awards. For the first nine months of 2017, income~~a solar tax ~~expense totaled $5.5 million (34%~~credit equity fund. 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%.~~

20-21% for 2023.

FINANCIAL CONDITION

Average earning

assets ~~were $2.466~~totaled $3.975 billion for the ~~third~~second quarter of ~~2017,~~2023, a decrease of ~~$35.7~~$87.9 million, or

2.2%, from the first

quarter of 2023, and a decrease of $57.9 million, or 1.4%, from the ~~second quarter of 2017, and an increase of $42.9 million, or 1.8%, over the~~ fourth quarter of ~~2016.~~ 2022.

The ~~decline in~~decrease from both prior periods was

attributable to lower deposit balances (see below –

Deposits

The mix of earning assets ~~compared~~continues to ~~the second quarter 2017 was attributable~~improve as overnight funds are

being utilized to ~~a decrease in our short-term investments, partially offset by growth in our~~fund 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 investment portfolio~~

Average investments

decreased ~~$5.6~~$20.4 million, or ~~0.8%~~1.9%, from the ~~second~~first quarter of ~~2017~~ 2023

and decreased ~~$17.6~~$37.2 million, or ~~2.5%~~3.4%, from the

fourth quarter of ~~2016. Securities in our~~2022.

Our investment portfolio represented ~~27.9%~~26.3% of our average earning assets infor the ~~third~~ second

quarter of ~~2017,~~ 2023

compared to ~~27.7% in~~26.2% for the ~~second~~first quarter of ~~2017,~~2023 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 the second 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~~June 30, ~~2017, $510.8~~2023, $386.2 million, or ~~73.5%~~37.5%, of our investment portfolio was classified

as AFS, and ~~$184.3~~

$641.4 million, or ~~26.5%~~62.3%, classified as HTM.

The average maturity of our total portfolio at June 30, 2023 was 3.07 years compared

3.34 years at March 31, 2023 and 3.57 years at December 31, 2022.

The duration of our investment portfolio at June 30, 2023 was

2.76 years.

Additional information on unrealized gains/losses in the AFS and HTM portfolios is provided

in Note 2 – Investment

Securities.

We determine

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

our asset/liability strategy

and future business plans and opportunities.

We consider multiple

factors in determining classification, including regulatory

capital

requirements, volatility in earnings or other comprehensive income,

and liquidity needs.

Securities in the AFS portfolio are recorded

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

net of tax, in the accumulated other

comprehensive income component of shareowners’ equity.

HTM securities are acquired or owned with the intent of holding them

to ~~maturity (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~~June 30, ~~2017,~~ 2023, there were ~~266~~917 positions (combined AFS and HTM) with

unrealized losses totaling ~~$2.0~~$84.2 million. ~~GNMA mortgage-backed securities, UST,~~86 of these

positions are U.S. Treasuries and ~~Small Business Administration (“SBA”) investments~~ carry the full faith

and credit ~~guarantee~~ of the U.S. ~~Government,~~Government.

705 were U.S. government agency securities

issued by U.S. government sponsored entities. The remaining 126 positions

(municipal securities and are 0% risk-weighted assets for regulatory capital purposes. SBA securities float monthly or quarterly to the prime rate and are uncapped. Federal Home Loan Bank (“FHLB”) and Federal Farm Credit Bureau (“FFCB”) are direct obligations 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.

corporate bonds) have a credit

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~~component. At June 30, ~~2017~~2023, corporate debt securities had

an allowance for credit losses of $19,000 and ~~December 31, 2016, respectively.~~

municipal securities had an

allowance of $5,000.
At June 30, 2023, all CMO, MBS, SBA, U.S. Agency,
and U.S. Treasury bonds held were AAA rated.

Loans

HFI

Average loans

HFI increased $75.3 million, or 2.9%, over the first quarter of 2023 and $218.3 million, or 9.0%,

over the fourth quarter

of 2022.

Period end loans increased ~~$29.9~~$26.4 million, or ~~1.9% compared to~~1.0%, over the ~~second~~first quarter of ~~2017,~~2023 and ~~have grown $65.3~~

$135.8 million, or ~~4.2% compared to~~5.3%, over the fourth

quarter of ~~2016. Increases over~~2022.

Compared to both prior periods, ~~reflected~~the growth was primarily in ~~all loan types except~~ the residential real estate and

commercial ~~loans~~ real estate

categories and was partially offset by lower indirect auto

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 the first quarter, $16.4 million of fixed and adjustable commercial real estate loans 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 withbalances.

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~~adjustments as necessary.

Credit Quality

Credit quality metrics remained strong for the impact that consumer and business deleveraging has had on our portfolio. None of these changes involved lowering our credit standards. These programs, coupled with economic improvements in our anchor markets, have helped to increase overall production.

~~Nonperforming Assets~~

quarter.

Nonperforming assets (nonaccrual loans and ~~OREO)~~other real estate) totaled ~~$12.5~~ $6.6

million at ~~September 30, 2017, a decrease of $3.4 million, or 21.3%, from~~ June 30, ~~2017~~ 2023 compared to $4.6 million at March 31, 2023

and ~~$6.6~~$2.7 million ~~or 34.6%, from~~at December 31, ~~2016.~~ 2022.

At June 30, 2023,

nonperforming assets as a percent of total assets equaled 0.15%, compared

to 0.10% at March 31, 2023 and 0.06% at December 31,

2022.

Nonaccrual loans totaled $6.6 million at ~~September 30, 2017, a $1.4 million decrease from~~ June 30, ~~2017~~ 2023, a $2.0 million increase over March 31, 2023

and a ~~$2.0~~$4.3 million increase

over December 31, 2022.

The increase was primarily due to the addition of one large residential loan

($1.1 million) to nonaccrual

status which was adequately secured and reserved for.

Further, classified loans totaled $15.0 million at June 30,

2023, a $2.8 million

increase over March 31, 2023 and a $4.4 million decrease from December 31, 2016. The balance of OREO totaled $6.0 million at September 30, 2017, a decrease of $2.0 million from June 30, 2017 and $4.6 million from December 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 June 30, 2023, the allowance for ~~loan~~credit losses ~~on a quarterly basis.~~

~~The allowance~~ for ~~loan losses was $13.3~~HFI loans totaled $28.2

million compared to $26.8 million at ~~September 30, 2017 compared to $13.2 million at June 30, 2017~~March 31, 2023 and ~~$13.4~~

$25.1 million at December 31, ~~2016.~~2022.

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

The increase in the allowance in 2023 has primarily been driven by loan growth.

At June 30, 2023, net charge-offs totaled $0.5

million, a decrease of $1.0 million from the first quarter of 2023, and $0.8 million

from the fourth quarter of 2022.

At June 30, 2023,

the allowance represented 1.05% of HFI loans compared to 1.01% at March 31, 2023,

and 0.98% at December 31, 2022.

At June 30, 2023, the allowance for credit losses for unfunded commitments

totaled $3.1 million compared to $2.8 million at March

31, 2023 and $3.0 million at December 31, 2022. The allowance for loan losses was 0.82% of outstanding loans and provided coverage of 203% of nonperforming loans at September 30, 2017 compared to 0.81% and 166%, respectively, at June 30, 2017 and 0.86% and 157%, respectively, at December 31, 2016. We believe that the allowance for loan losses was adequate to absorb losses inherentunfunded

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

other liabilities.

Deposits

Average total

deposits were ~~$2.329~~$3.720 billion for ~~the third quarter of 2017, a decrease of $44.3 million, or 1.9%, from~~ the second quarter of ~~2017,~~2023, a decrease of $97.8 million, or 2.6%,

from the first quarter

of 2023 and a decrease of $83.5 million, or 2.2%, from the fourth quarter

of 2022.

Compared to both prior periods, the decreases were

primarily attributable to lower noninterest bearing and savings balances,

primarily offset by higher money market balances.

Compared to the first quarter of 2023, the decrease in NOW account balances

reflected the seasonal decline in our public funds

balances.

Compared to the fourth quarter of 2022, the increase in NOW accounts reflected higher

average public funds balances

which began to build in December 2022 and affect the

average comparison.

At June 30, 2023, total deposits were $3.789 billion, a decrease of $35.1

million, or 0.9%, from March 31, 2023 and $150.5 million, or

3.8%, from December 31, 2022.

The June 30, 2023 deposit balance included a $103 million short-term deposit (in the NOW

category) made late in June by a municipal client.

Compared to both prior periods, the decreases were primarily attributable

to lower

noninterest bearing balances, savings balances, and NOW balances (primarily

public funds, excluding the previously mentioned large

municipal client deposit), primarily offset by higher money market

balances.

For comparison to the prior periods, both the average and period-end

balance variances in noninterest bearing and savings balances

generally reflected annual tax payments made by clients in April, continued

client spend of stimulus savings, the migration (re-mix) of

balances to an interest-bearing product type (primarily money market

accounts), and clients seeking higher yielding investment

products outside of the Bank, including the migration of $13 million in the

second quarter of 2023 and $43 million for the first six

months of 2023 to our wealth management division.

Repurchase agreement balances averaged $17.9 million for the second quarter

of 2023, an increase of ~~$22.2~~$8.5 million ~~or 1.0%~~over the first

quarter of 2023 and $9.4 million over the fourth quarter of ~~2016. The decline in average deposits~~ 2022.

At June 30, 2023, repurchase agreement balances were $22.6 million

compared to ~~the second quarter~~$4.4 million at March 31, 2023 and $6.6 million at December 31, 2022.

These balances consist of ~~2017 reflected lower public NOW account and certificates of~~ client operating

deposit ~~balances, partially offset by increases in all other deposit types. The increase over the fourth quarter 2016 reflects higher levels of noninterest bearing deposits, savings~~ accounts and money market accounts, partially offset by declines in public NOW accounts and certificates of deposit. The seasonal inflows of public funds peaked 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 andthat we have ~~not adjusted~~secured by various securities we own and

are reflected in our ~~rate structure average core deposits grew year over year.~~ balance sheet under short-term

borrowings.

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.

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

possibilities to indicate the inherent interest rate risk.

We prepare

a current base case and several alternative interest rate simulations (-400, -300, -200,

-100, +100, +200, +300, and +400

basis points (bp)), at least once per quarter, and

report the analysis to ALCO, our Market Risk Oversight Committee (“MROC”), our

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

We augment our interest rate

shock analysis with

alternative interest rate scenarios on a quarterly basis that may include ramps,

parallel shifts, and a flattening or steepening of the yield

curve (non-parallel shift).

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

uncertain or when

other business conditions so dictate.

Our ~~interest rate risk management~~ goal is to maintain expected changes in our net interest income and capital levels due to fluctuations in market interest rates within acceptable limits. Management attempts to achieve this goal by balancing, within policy limits, the volume of variable-rate liabilities with a similar volume of variable-rate assets, by keeping the average maturity of fixed-rate asset and liability contracts reasonably matched, by maintaining our core deposits as a significant component of our total funding sources, and by adjusting pricing rates to market conditions on a continuing basis.

We test our balance sheet using varying interest rate shock scenarios to analyze our interest rate risk. Average interest rates are shocked by plus or minus 100, 200, 300, and 400 basis points (“bp”), although we may elect not to use particular scenarios that we determined are impractical in a current rate environment. It is management’s goal to structure the ~~balance sheet~~statement of financial condition so that net interest earnings at risk over

12-month and 24-month periods

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

at the various interest rate shock levels. ~~Management also acknowledges that at~~We

attempt to

achieve this ~~time, policy guidelines are exceeded in the down 100 bp shock scenario. To bring these metrics into compliance with our~~goal by balancing, within policy limits, ~~would require~~ the ~~bank~~volume of floating-rate

liabilities with a similar volume of floating-rate assets,

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

reasonably matched, by managing the mix of our core

deposits, and by adjusting our rates to ~~extend its asset duration considerably, which we do not believe is prudent given the current historically low interest environment.~~

~~We augment our interest rate shock analysis with alternative external interest rate scenarios~~market conditions on a ~~quarterly~~ continuing

basis. ~~These alternative interest rate scenarios may include non-parallel rate ramps.~~

~~Analysis~~.

Analysis.

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

indicators of an institution’s short-term

performance in alternative rate environments.

These measures are typically based upon a relatively brief period, ~~usually one year. They~~and do not

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

ESTIMATED CHANGES IN NET INTEREST INCOME ⁽¹⁾

Percentage Change (12-month shock)
+400 bp
+300 bp
+200 bp
+100 bp
-100 bp

Policy Limit
-15.0%
-12.5%
-10.0%
-7.5%
-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 NET INTEREST INCOME

(1)

Percentage Change (12-month shock)

+400 bp

+300 bp

+200 bp

+100 bp

-100 bp

-200 bp

-300 bp

-400 bp

Policy Limit

-15.0%

-12.5%

-10.0%

-7.5%

-10.0%

-12.5%

-15.0%

June 30, 2023

4.1%

3.0%

1.9%

1.0%

-1.5%

-4.4%

-9.6%

-15.3%

March 31, 2023

7.1%

5.2%

3.4%

1.8%

-3.3%

-8.8%

-15.5%

-21.2%

Percentage Change (24-month shock)

+400 bp

+300 bp

+200 bp

+100 bp

-100 bp

-200 bp

-300 bp

-400 bp

Policy Limit

-17.5%

-15.0%

-12.5%

-10.0%

-12.5%

-15.0%

-17.5%

June 30, 2023

28.4%

23.5%

18.4%

13.9%

3.4%

-4.4%

-15.1%

-25.6%

March 31, 2023

28.0%

22.7%

17.2%

12.2%

-0.5%

-10.9%

-22.5%

-31.2%

The Net Interest Income (“NII”) at Risk position indicates

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

the

net interest margin of the Company,

while a declining rate ~~environment of 100bp~~ environments

will have a negative impact on ~~our~~the net interest margin. ~~The 12-month Net Interest Income at Risk positions improved at~~

Compared to the ~~end of the third~~first quarter of ~~2017 when compared to~~ 2023, these metrics became less favorable in

the ~~prior quarter-end in all~~rising rate scenarios primarily due to ~~declines~~loan growth,

which reduced our level of overnight funds and made us slightly less asset sensitive.

The converse is applicable in ~~average negotiated~~the down rate ~~deposits,~~

scenarios where the metrics became more favorable due to loan growth which ~~are our most rate sensitive deposits.~~

increased asset duration and therefore protection against

falling rates.

The percent change over the 12-month shock is outside of policy in the down 400 bps

scenario, and the percent change

over the 24-month ~~Net Income at Risk positions had minimal movement~~shock is outside of policy in ~~either direction for~~ the ~~various shock scenarios.~~

~~All measures of net interest income at risk are within our prescribed policy limits with the exception of an instantaneous rate shock of -100 bp over both a 12-month~~rates down 300 bps and ~~24-month period, which were -8.1% and -13.0% compared to limits of -7.50% and -10.0%, respectively. These metrics remain out of compliance~~

400 bps scenarios

due to our limited ability to lower our ~~deposits~~

deposit rates ~~in response~~relative to athe decline in market rates. To bring this metric into compliance with our policy limits in the down 100bp scenario would require the bank to extend its asset duration considerably, which we do not believe is prudent given the historically low interest rate environment.

rate.

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

by considering the effects of changes in interest rates on all

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

assets and liabilities. The difference between ~~the aggregated~~ these

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

which in theory approximates the fair value of our net

assets.

ESTIMATED CHANGES IN ECONOMIC VALUE OF EQUITY ⁽¹⁾

Changes in Interest Rates
+400 bp
+300 bp
+200 bp
+100 bp
-100 bp

Policy Limit
-30.0%
-25.0%
-20.0%
-15.0%
-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%
ESTIMATED CHANGES

IN ECONOMIC VALUE

OF EQUITY

(1)

Changes in Interest Rates

+400 bp

+300 bp

+200 bp

+100 bp

-100 bp

-200 bp

-300 bp

-400 bp

Policy Limit

-30.0%

-25.0%

-20.0%

-15.0%

-20.0%

-25.0%

-30.0%

June 30, 2023

10.7%

9.1%

6.7%

3.9%

-7.1%

-18.0%

-30.2%

-32.6%

March 31, 2023

11.6%

9.6%

7.0%

4.0%

-7.1%

-17.9%

-31.3%

-35.7%

EVE Ratio (policy minimum 5.0%)

18.8%

18.2%

17.4%

16.6%

14.3%

12.4%

10.4%

9.9%

(1) The down 400 bp rate scenario was added in the fourth quarter of 2022.

At ~~September~~June 30, ~~2017,~~2023, the economic value of equity was favorable in all rising

rate ~~scenarios versus~~environments and unfavorable in the ~~base case was slightly less favorable compared~~falling rate

environments. Compared to the ~~prior~~first quarter ~~but~~ of 2023, EVE metrics were slightly

more favorable in the ~~falling~~rising and declining rate

environments.

EVE is currently in compliance with policy in all rate scenarios as the EVE ratio in each rate

scenario ~~compared~~exceeds 5.0%.

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

additional simulations will be analyzed to

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

in mix of our financial assets and liabilities, measured over

multiple years, to help assess the risk to the prior quarter, as average balances of our negotiated rate deposits declined . The EVE in the rates down 100 bp scenario remains outside of the desired parameters as exposure to falling rates is more extreme due to the low level of current deposit costs and limited capacity to reduce those costs relative to comparable discount benchmarks used to value them. To bring this metric into compliance with our policy limits in the down 100 bp scenario would require the bank to extend its asset duration considerably, which we do not believe is prudent given the historically low interest rate environment.

~~(1)~~~~Down 200, 300, and 400 bp scenarios have been excluded due to the historically low interest rate environment.~~

Company.

LIQUIDITY AND CAPITAL
RESOURCES

Liquidity

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

cash needs.

Our objective in managing our liquidity is to

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

other liabilities in accordance with their

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

Our liquidity strategy is guided by policies that are formulated and

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

the marketability of assets, the sources and stability of

funding and the level of unfunded commitments.

We regularly evaluate

all of our various funding sources with an emphasis on

accessibility, stability,

reliability and cost-effectiveness.

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

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

repurchase agreements, federal funds purchased and

FHLB borrowings.

We believe that the cash

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

are

sufficient to meet our future operating capital and funding requirements.

At ~~September~~June 30, ~~2017,~~2023, we had the ability to generate ~~$1.363~~approximately $1.506 billion

(excludes overnight funds position of $285 million) in

additional liquidity through ~~all of our available resources (this excludes $141 million in overnight~~various sources including various federal funds ~~sold). In addition to~~

purchased lines, Federal Home Loan Bank borrowings, the ~~primary borrowing outlets mentioned above, we also have the ability to generate liquidity by borrowing from the~~

Federal Reserve Discount Window,

and through brokered deposits. We

recognize the importance of maintaining liquidity and have

developed a ~~Contingency~~Contingent Liquidity Plan, which addresses various liquidity

stress levels and our response and action based on the level

of severity.

We periodically test our credit

facilities for access to the funds, but also understand that as the severity of the liquidity

level increases that certain credit facilities may no longer be available.

We conduct a liquidity

stress test on a quarterly basis based on

events that could potentially occur at the Bank and report results to ALCO, our

Market Risk Oversight Committee, Risk Oversight

Committee, and the Board of Directors.

At ~~September~~June 30, ~~2017,~~2023, we believe the liquidity available to us was sufficient

to meet our ~~needs.~~

on-going

needs and execute our business strategy.

We also view our

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

portfolio as collateral for

borrowings or deposits, and/or to sell selected securities.

Additional information on our investment portfolio is provided within

Note

2 –

Investment Securities

The portfolio consists of debt issued by the U.S. Treasury, U.S. governmental and federal agencies, and municipal governments. The weighted average life of the portfolio was approximately 1.87 years, and at September 30, 2017, it had a net unrealized loss of $0.2 million in the available-for-sale portfolio.

~~Our average overnight funds position (defined as funds sold plus interest bearing deposits with other banks less funds purchased) was $140.7 million during the third quarter of 2017 compared to~~Bank maintained an average net overnight funds (deposits with banks plus

FED funds sold less FED funds purchased) sold

position of ~~$200.8~~$218.9 million in the second quarter of ~~2017 and $145.5~~2023 compared

to $361.0 million in the first quarter of 2023 and $469.4 million in

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

The ~~decrease in net~~declining overnight funds ~~compared to the second quarter of 2017~~position reflected growth in ~~our loan portfolio~~average loans and ~~declines in public fund~~ lower

average deposit

balances. The decrease in net overnight funds compared to the fourth quarter of 2016 primarily reflected higher levels of loan growth, partially offset by higher deposit balances, specifically noninterest bearing deposits and savings accounts.

We expect our

capital expenditures will be approximately ~~$5.0~~$8.0 million over the next 12 months, which

will primarily consist of

construction of new offices, office remodeling,

office equipment/furniture, and technology purchases.

Management expects that these

capital expenditures will be funded with existing resources without impairing

our ability to meet our on-going obligations.

Borrowings

~~At September 30, 2017, advances from~~

Average short

-term borrowings totaled $35.7 million for the ~~FHLB totaled $14.2~~second quarter of 2023 compared to

$47.1 million ~~in outstanding debt consisting of 17 notes. During~~for the first ~~nine months~~quarter of ~~2017,~~

2023 and $50.8 million for the Bank made FHLB advance payments totaling approximately $3.9 million, which included paying off two advances totaling $1.4 million, and one maturing advance of $0.6 million. We did not obtain any new FHLB advances during the thirdfourth quarter of ~~2017.~~ 2022.

The ~~FHLB notes are collateralized by a blanket floating lien~~variance compared to both prior periods was primarily attributable to an

increase in repurchase agreement balances (discussed under

Deposits

) and fluctuation in warehouse line borrowings that support our

mortgage banking operations.

Additional detail on ~~all of our 1-4 family residential mortgage loans, commercial real estate mortgage loans, and home equity mortgage loans.~~

these warehouse borrowings is provided in Note 4 –

Mortgage Banking Activities

in the Consolidated Financial Statements.

We have issued two

junior subordinated deferrable interest notes to our wholly owned

Delaware statutory trusts.

The first note for ~~$30.9~~

$30.9 million was issued to CCBG Capital Trust I in

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

The second

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

in May 2005.

The interest payment for the CCBG Capital Trust I

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

CME Term SOFR (secured overnight

financing rate)

plus a margin of 1.90%.

This note matures on December 31, 2034.

The interest payment for the CCBG Capital Trust II borrowing

due quarterly and adjusts ~~annually~~quarterly to a variable interest rate ofbased on three-month ~~LIBOR~~

CME Term SOFR plus a margin

of 1.80%.

This

note matures on June 15, 2035.

The proceeds from these borrowings were used to partially fund acquisitions.

Under the terms of each

junior subordinated deferrable interest note, in the event of default or

if we elect to defer interest on the note, we may not, with certain

exceptions, declare or pay dividends or make distributions on our capital

stock or purchase or acquire any of our capital stock.

~~On April 12, 2016,~~During the second quarter of 2020, we ~~retired $10~~entered into a derivative cash

flow hedge of our interest rate risk related to our subordinated

debt.

The notional amount of the derivative is $30 million ~~in face value~~($10 million of ~~trust preferred securities that were auctioned as part of a liquidation of a pooled collateralized debt obligation fund. The trust preferred securities were originally issued through~~the CCBG Capital Trust ~~I. Our winning bid equated to approximately 75%~~

I borrowing and $20 million of the ~~$10 million par value, with~~

CCBG Capital Trust II borrowing).

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

CME Term SOFR plus spread)

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

Additional detail on the ~~25% discount resulting~~interest rate swap

agreement is provided in ~~a pre-tax gain of approximately $2.5 million.~~

~~We utilized internal resources and a $3.75 million draw on a short-term borrowing facility to fund the repurchase.~~

~~Late~~Note 5 – Derivatives in the ~~first quarter 2017,~~Consolidated Financial

Statements.

Capital

Our capital ratios are presented in the remaining $3.0 million balance of this short-term facility was transferred to a long-term facility with a rate that floats to the prime rate. During the third quarter 2017, $150,000 was been paid down, leaving a balance of $2.85 million.

~~Capital~~

~~Shareowners’ equity was $285.2 million at September 30, 2017, compared to $281.5 million at~~Selected Quarterly Financial Data

table on page 52.

At June 30, ~~2017 and $275.2 million at December 31, 2016. Our leverage ratio was 10.48%, 10.20%, and 10.23%, respectively, for these periods. Further, at September 30, 2017,~~2023, our ~~risk-adjusted~~regulatory capital ratio was 16.96% compared to 16.32% and 16.28% at June 30, 2017 and December 31, 2016, respectively. Our common equity tier 1 ratio was 13.26% at September 30, 2017 compared to 12.72% and 12.61% at June 30, 2017 and December 31, 2016, respectively. All of our capital

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

under the Basel III capital ~~standards~~standards.

Shareowners’ equity was $412.4 million at ~~September~~June 30, ~~2017.~~

~~During~~2023 compared

to $403.3 million at March 31, 2023 and $387.3 million at

December 31, 2022.

For the first ~~nine~~six months of ~~2017, shareowners’ equity increased $10.0 million, or 4.9%, on an annualized basis. During this same period,~~2023, shareowners’ equity was positively impacted by net income

attributable to

common shareowners of ~~$10.9~~$27.9 million, a $4.2 million decrease in the unrealized

loss on investment securities, the issuance of stock of

$2.1 million, and stock compensation accretion of ~~$1.2 million, a $0.3 million net decrease in the unrealized loss on investment securities, and net adjustments totaling~~ $0.5 ~~million related to transactions under our stock compensation plans.~~ million.

Shareowners’ equity was reduced by common stock dividends of $6.1

million ($0.36 per share), the repurchase of stock of $2.0 million (65,736 shares),

net adjustments totaling ~~$2.9 million.~~

~~At September 30, 2017,~~$1.3

million related to

transactions under our ~~common~~ stock ~~had~~compensation plans, and a ~~book~~$0.2 million decrease

in the fair value of ~~$16.73 per diluted share~~the interest rate swap related to

subordinated debt.

At June 30, 2023, our total risk-based capital ratio was 15.68% compared to ~~$16.54~~ 15.29%

at March 31, 2023 and 15.30% at December 31,

2022.

Our common equity tier 1 capital ratio was 12.73%, 12.40%, and 12.38%, respectively,

on these dates.

Our leverage ratio was

9.54%, 9.09%, and 8.91%, respectively,

on these dates.

At June 30, ~~2017~~2023, all our regulatory capital ratios exceeded the threshold to be

designated as “well-capitalized” under the Basel III capital standards.

Further, our tangible common equity ratio was 7.43%

at June

30, 2023 compared to 7.20% and ~~$16.23~~6.65% at ~~December~~March 31, ~~2016.~~ ~~Book value~~2023 and December

31, 2022, respectively.

If our unrealized HTM securities

losses of $30.0 million (after-tax) were recognized in accumulated other

comprehensive loss, our adjusted tangible capital ratio would

be 6.73%.

Our tangible capital ratio is also impacted by ~~changes in~~ the ~~amount of our net unrealized gain or loss on investment securities available-for-sale and changes to the amount~~recording of our unfunded pension

liability ~~both~~through other comprehensive income in

accordance with ASC Topic

715.

At June 30, 2023, the net pension liability reflected in other comprehensive loss was $4.7

million

compared to $4.5 million at March 31, 2023 and $4.5 million at December 31,

2022.

This liability is re-measured annually on

December 31

based on an actuarial calculation of our pension liability.

Significant assumptions used in calculating the liability

include the weighted average discount rate used to measure the present

value of the pension liability, the

weighted average expected

long-term rate of return on pension plan assets, and the assumed rate of annual compensation

increases, all of which ~~impact other comprehensive income. At September 30, 2017,~~will vary when

re-measured.

The discount rate assumption used to calculate the ~~net unrealized loss on investment securities available for sale was $0.2 million and the amount of our unfunded~~ pension liability ~~was $25.6 million.~~

~~In February 2014,~~is subject to long

-term corporate bond rates at

December 31

These assumptions and sensitivities are discussed in our Board of Directors authorized the repurchase of up to 1,500,000 shares of our outstanding common stock through February 2019. Repurchases may be made in the open market or in privately negotiated transactions; however, we are not obligated to repurchase any specified number of shares. We have not repurchased any shares during 2017. At September 30, 2017, we were authorized to repurchase up to 640,000 additional shares under the plan.

2022 Form 10-K/A “Critical Accounting

Policies and

Estimates”.

OFF-BALANCE SHEET ARRANGEMENTS

We ~~do not currently engage in the use of derivative instruments to hedge interest rate risks. However, we~~ are a party

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

course of business to meet the financing needs of our

clients.

~~As of September~~

At June 30, ~~2017,~~2023, we had ~~$467.0~~$775.1 million in commitments to extend credit

and ~~$4.7~~$6.3 million in standby letters of credit.

Commitments

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

condition established in the contract.

Commitments generally have fixed expiration dates or other termination

clauses and may require payment of a fee.

Since many of the

commitments are expected to expire without being drawn upon,

the total commitment amounts do not necessarily represent future

cash requirements.

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

of a client to a

third party.

We use the same credit policies

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

sheet

instruments.

If commitments arising from these financial instruments continue to require

funding at historical levels, management does not

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

obligations.

In the event these commitments

require funding in excess of historical levels, management believes current

liquidity, advances available from the

FHLB and the

Federal Reserve, and investment security maturities provide a sufficient

source of funds to meet these commitments.

Certain agreements provide that the commitments are unconditionally
cancellable by the bank and for those agreements no allowance

for credit losses has been recorded.
We have recorded
an allowance for credit losses on loan commitments that are not

unconditionally cancellable by the bank, which is included in other
liabilities on the consolidated statements of financial condition and

totaled $3.1 million at June 30, 2023.

CRITICAL ACCOUNTING POLICIES

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

Financial Statements included in our ~~2016~~2022 Form ~~10-K.~~ 10-

K/A.

The preparation of our Consolidated Financial Statements

in accordance with GAAP and reporting practices applicable to the

banking industry requires us to make estimates and assumptions that affect

the reported amounts of assets, liabilities, revenues and

expenses, and to disclose contingent assets and liabilities.

Actual results could differ from those estimates.

We have identified

accounting for (i) the allowance for ~~loan and lease~~credit losses, (ii) ~~valuation of~~ goodwill, ~~and~~

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

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

to the portrayal of our financial condition and results, and

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

the effects of matters that are

inherently uncertain.

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

used, are described

throughout this Item 2, Management’s

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

Part II, Item 7. 7,

Management’s Discussion and Analysis

of Financial Condition and Results of Operations included

in our 2022 Form 10-K/A.

TABLE I

AVERAGE BALANCES & INTEREST RATES (UNAUDITED)

(As Restated)

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Average

(Dollars in Thousands)

Balances

Interest

Rate

Balances

Interest

Rate

Balances

Interest

Rate

Balances

Interest

Rate

Assets:

Loans Held for Sale

54,350

800

5.90

52,860

711

5.39

54,728

1,445

5.32

47,959

1,108

4.66

Loans Held for Investment

(1)(2)

2,657,693

36,890

5.55

2,084,679

23,628

4.55

2,620,252

71,232

5.48

2,024,463

45,737

4.56

Taxable Securities

1,041,202

4,803

1.84

1,142,269

3,834

1.34

1,051,232

9,716

1.85

1,099,739

6,723

1.22

Tax-Exempt Securities

(2)

2,656

2.47

2,488

1.73

2,747

2.41

2,449

1.67

Funds Sold

218,902

2,782

5.10

691,925

1,408

0.82

289,543

6,893

4.80

782,011

1,817

0.47

Total Earning Assets

3,974,803

45,292

4.57

3,974,221

29,591

2.99

4,018,502

89,319

4.48

3,956,621

55,405

2.82

Cash & Due From Banks

75,854

79,730

75,250

77,007

Allowance For Credit Losses

(27,893)

(20,984)

(26,771)

(21,318)

Other Assets

297,837

288,421

298,999

281,922

TOTAL ASSETS

4,320,601

4,321,388

4,365,980

4,294,232

Liabilities:

Noninterest Bearing Deposits

1,539,877

1,722,325

1,570,642

1,687,524

NOW Accounts

1,200,400

3,038

1.01

1,033,190

120

0.05

1,214,585

5,190

0.86

1,056,419

206

0.04

Money Market Accounts

288,466

748

1.04

286,210

0.05

278,077

955

0.69

285,810

0.05

Savings Accounts

602,848

120

0.08

628,472

0.05

616,045

196

0.06

613,996

149

0.05

Other Time Deposits

87,973

103

0.47

95,132

0.14

88,819

155

0.35

96,088

0.14

Total Interest Bearing Deposits

2,179,687

4,008

0.74

2,043,004

266

0.05

2,197,526

6,496

0.60

2,052,313

490

0.05

Total Deposits

3,719,564

4,008

0.43

3,765,328

266

0.03

3,768,168

6,496

0.35

3,739,837

490

0.03

Repurchase Agreements

17,888

115

2.58

5,064

0.03

13,639

124

1.83

6,093

0.03

Other Short-Term Borrowings

17,834

336

7.54

26,718

343

5.15

27,745

788

5.73

25,973

534

4.14

Subordinated Notes Payable

52,887

604

4.52

52,887

370

2.76

52,887

1,175

4.42

52,887

687

2.58

Other Long-Term Borrowings

431

4.80

722

4.54

455

4.80

777

4.51

Total Interest Bearing Liabilities

2,268,727

5,068

0.90

2,128,395

987

0.19

2,292,252

8,594

0.76

2,138,043

1,729

0.16

Other Liabilities

84,305

87,207

82,765

79,728

TOTAL LIABILITIES

3,892,909

3,937,927

3,945,659

3,905,295

Temporary Equity

8,935

10,096

8,869

10,306

TOTAL SHAREOWNERS’ EQUITY

418,757

373,365

411,452

378,631

TOTAL LIABILITIES, TEMPORARY

AND SHAREOWNERS’ EQUITY

4,320,601

4,321,388

4,365,980

4,294,232

Interest Rate Spread

3.67

2.80

3.73

2.66

Net Interest Income

40,224

28,604

80,725

53,676

Net Interest Margin

(3)

4.06

2.89

4.05

2.74

(1)

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

Interest income includes loans fees of $0.1 million

and $0.4 million for the three month periods ended June 30,

2023 and

2022, respectively, and $0.2 million and $0.3 million for the six month periods ended

June 30, 2023 and 2022, respectively.

(2)

Interest income includes the effects of taxable equivalent adjustments

using a 21% Federal tax rate.

(3)

Taxable equivalent net interest income divided by average earning assets.

Item 3.

QUANTITATIVE

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

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

Discussion and Analysis of Financial Condition and Results of ~~Operations included in our 2016 Form 10-K.~~

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.

~~Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

~~See “Market Risk and Interest Rate Sensitivity” in Management’s Discussion and Analysis of Financial Condition and Results of~~ Operations, above, which is incorporated herein by reference.

Management has determined that no additional disclosures are

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

since December 31, ~~2016.~~

2022.

Item 4.
CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

At ~~September~~June 30, ~~2017,~~2023, the end of the period covered by this Form 10-Q, our management,

including our Chief Executive Officer and Chief

Financial Officer, evaluated

the effectiveness of our disclosure controls and procedures (as defined

in Rule 13a-15(e) under the

Securities Exchange Act of 1934).

Based upon that evaluation, at the time the Original Form 10-Q was filed, our Chief Executive

Officer and Chief Financial Officer ~~each~~ concluded

that, ~~at September 30, 2017,~~as of the end of the period covered by this ~~Form 10-Q, we maintained effective~~report these disclosure controls and ~~procedures.~~

~~Changes~~

procedures were effective. Subsequent to that evaluation, management
conducted a reevaluation, concluding that our disclosure

controls and procedures were ineffective as of June
30, 2023 due to the identification of the material weakness discussed below.

Previously Reported Material Weakness
in Internal Control ~~over~~Over Financial Reporting

Our management ~~including our Chief Executive Officer~~is responsible for establishing and ~~Chief Financial Officer, has reviewed our~~ maintaining effective

internal control over financial reporting, ~~(as~~ as such term is

defined in Rule 13a-15(f) under the Securities Exchange Act of ~~1934). There~~1934. As reported

in our 2022 Form 10-K/A, we did not maintain

effective internal control as of December 31, 2022 as a result of

a material weakness in our internal control over financial reporting

for

the review of certain inter-company mortgage sales and

servicing. A material weakness is a deficiency,

or a combination of

deficiencies, in internal control over financial reporting such that there is a reasonable

possibility that a material misstatement of the

Company’s annual interim financial

statements will not be prevented or detected on a timely basis. Refer to our 2022

Form 10-K/A for

a description of our material weakness.

Ongoing Remediation Efforts to Address Material Weakness

Our material weakness was not remediated as of the filing of this Form 10-Q/A.

Since identifying the material weakness described

above, management, with oversight from the Audit Committee and input from

the Board of Directors, has devoted substantial

resources to the ongoing implementation of remediation efforts.

These remediation efforts, summarized below,

which either have

already been implemented or are continuing to be implemented, are intended

to address both the identified material weakness and to

enhance the Company’s overall internal

control over financial reporting and disclosure controls and procedures.

Certain internal control and procedural enhancements and remedial

actions are in the process of completion, including:

●

Enhance the precision level for the review of existing accounts subject to elimination

and confirmation of proper elimination

in consolidation;

●

Enhance the procedures for identifying new inter-company

accounts and activities subject to elimination in consolidation;

●

Increase the granularity of general ledger mapping for inter-company

accounts subject to elimination in consolidation; and

●

Enhance financial close checklist and pre-close meeting agenda to ensure proper

and timely identification of inter-company

activities subject to elimination.

Management believes the foregoing effects will effectively

remediate the material weakness described above. As the Company

continues to evaluate and improve its internal control over financial reporting

and disclosure controls and procedures, management

may determine to take additional measures to improve controls and determine

to modify the remediation plan described above. The

Company is working to remediate the material weakness as efficiently

and effectively as possible. Procedures to implement the

remediation plan have required significant amounts of time, allocation of internal

resources and external costs, and remaining

remediation efforts will continue to place significant demands on

financial and operational resources until this plan is completed.

The material weakness described above cannot be considered remediated until

the applicable controls have operated for a sufficient

period of time and management has concluded, through testing, that

these controls are designed and operating effectively.

Accordingly, management

will continue to monitor and evaluate the effectiveness of our internal control over

financial reporting in

the activities affected by the material weakness described above.

Changes in Internal Control

Except as identified above with respect to remediation of the material weakness,

during the quarter ended on June 30, 2023, there were

no significant changes in our internal control over financial reporting during

our most recently completed fiscal quarter that ~~have~~ materially

affected, or are reasonably likely to materially affect,

our internal control over financial reporting.

PART
II.
OTHER INFORMATION

Item 1.
Legal Proceedings

We are party

to lawsuits arising out of the normal course of business.

In management's opinion, there is no known pending litigation,

the outcome of which would, individually or in the aggregate, have a material effect

on our consolidated results of operations,

financial position, or cash flows.

Item 1A.
Risk Factors

In addition to the other information set forth in this Quarterly Report, you should carefully consider

the factors discussed in Part I,

Item 1A. “Risk Factors” in our ~~2016~~2022 Form ~~10-K,~~10-K/A, as updated in our subsequent

quarterly reports. The risks described in our ~~2016~~ 2022

Form ~~10-K~~10-K/A and our subsequent quarterly reports are not the only risks facing

us. Additional risks and uncertainties not currently

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

affect our business, financial condition and/or

operating results.

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

~~None.~~

Purchases of Equity Securities by the
Issuer and Affiliated Purchasers

The following table contains information about all purchases made by,
or on behalf of, us and any affiliated purchaser (as defined
in

Rule 10b-18(a)(3) under the Exchange Act) of shares or other units of any class of
our equity securities that is registered pursuant to

Section 12 of the Exchange Act.

Total
number

Average

Total
number of shares

Maximum Number of shares

of shares

price paid

purchased under our

remaining for purchase under

Period

purchased

per share

share repurchase program

(1)

our share repurchase program

April 1, 2023 to

April 30, 2023

4,000

$30.49

4,000

543,807

May 1, 2023 to

May 31, 2023

36,495

29.70

36,495

507,312

June 1, 2023 to

June 30, 2023

507,312

Total

40,495

$29.78

40,495

507,312

(1)

This amount represents the number of shares that were repurchased during
the second quarter of 2023 through the Capital City

Bank Group, Inc. Share Repurchase Program (the “Program”), which
was approved on January 31, 2019
for a five-year period,

under which we were authorized to repurchase up to 750,000 shares of
our common stock.
The Program is flexible and shares are

acquired from the public markets and other sources using free cash flow.
No shares are repurchased outside of the Program.

Item 3.
Defaults Upon Senior Securities

None.

Item 4.
Mine Safety Disclosure

~~None.~~

Not Applicable.

Item 5.
Other Information

~~None.~~

(c) Rule 10b5-1 Trading Plans

During the three months ended June 30, 2023, none of our directors or officers
(as defined in Rule 16a-1(f) under the Exchange Act)

adopted or terminated any contract, instruction or written plan for
the purchase or sale of our securities that was intended to satisfy the

affirmative defense conditions of Rule 10b5-1(c) under
the Exchange Act or any “non-Rule 10b5-1 trading arrangement” as defined
in

Item 408(c) of Regulation S-K.

Item 6.
Exhibits

(A)

Exhibits

31.1

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

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

31.2

Certification of Jeptha E. Larkin, Executive VicePresident and Chief Financial Officer of Capital City Bank Group,Inc.,

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

32.1

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

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

~~31.2~~ 18 U.S.C. Section 1350.

32.2

Certification of ~~J. Kimbrough Davis,~~Jeptha E. Larkin, Executive VicePresident and Chief Financial Officer of Capital City Bank Group,Inc., ~~Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.~~

~~32.1 Certification of William G. Smith, Jr., Chairman, President and Chief Executive Officer of Capital City Bank Group, Inc.,~~

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

101.SCH

~~32.2Certification of J. Kimbrough Davis, Executive Vice President and Chief Financial Officer of Capital City Bank Group, Inc., Pursuant to 18 U.S.C. Section 1350.~~

~~101.INS XBRL Instance Document~~

~~101.SCH~~ XBRL Taxonomy

Extension Schema Document

101.CAL

XBRL Taxonomy

Extension Calculation Linkbase Document

101.LAB

XBRL Taxonomy

Extension Label Linkbase Document

101.PRE

XBRL Taxonomy

Extension Presentation Linkbase Document

101.DEF

XBRL Taxonomy

Extension Definition Linkbase Document

104

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

SIGNATURES

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

duly caused this Report to be signed on its

behalf by the undersigned Chief Financial Officer hereunto duly

authorized.

CAPITAL CITY

BANK GROUP,

INC.

~~(Registrant)~~

~~/s/ J. Kimbrough Davis~~
~~J. Kimbrough Davis~~
~~Executive Vice President and~~ ~~Chief Financial Officer~~
~~(Mr. Davis is the Principal Financial Officer and has been duly authorized to sign on behalf of the Registrant)~~

~~Date: November 2, 2017~~

(Registrant)

/s/ Jeptha E. Larkin

Jeptha E. Larkin

~~Exhibit Index~~

~~ExhibitDescription~~

~~31.1~~ ~~Certification of William G. Smith, Jr., Chairman, President and Chief Executive Officer of Capital City Bank Group, Inc., Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.~~

~~31.2~~ ~~Certification of J. Kimbrough Davis,~~ Executive Vice President

and Chief Financial Officer ~~of Capital City Bank Group, Inc., Pursuant~~

(Mr. Larkin is the Principal

Financial Officer and has

been duly authorized to ~~Rule 13a-14(a)~~sign on behalf of the ~~Securities Exchange Act of 1934.~~

~~32.1~~ ~~Certification of William G. Smith, Jr., Chairman, President and Chief Executive Officer of Capital City Bank Group, Inc., Pursuant to 18 U.S.C. Section 1350.~~

~~32.2~~ ~~Certification of J. Kimbrough Davis, Executive Vice President and Chief Financial Officer of Capital City Bank Group, Inc., Pursuant to 18 U.S.C. Section 1350.~~

~~101.INS XBRL Instance Document~~

~~101.SCH XBRL Taxonomy Extension Schema Document~~

~~101.CAL XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.LAB XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE XBRL Taxonomy Extension Presentation Linkbase Document~~

~~101.DEF XBRL Taxonomy Extension Definition Linkbase Document~~

Registrant)

Date: December 22, 2023

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	%

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%

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.