Capital City Bank (CCBG) 8-K Results of Operations and Financial Condition

Exhibit 99.2

FINANCIAL HIGHLIGHTS - FIRST QUARTER, 2007

·   Quarterly earnings totaled $7.0 million, or $0.38 per diluted share, decreases of 6.2% and 5.0%, respectively, from the first quarter of 2006.

·   Earnings for the quarter were negatively impacted by margin compression and a higher loan loss provision, but benefited from strong growth in noninterest income. Expense management initiatives are beginning to gain momentum as evidenced by only a 1.6% increase in noninterest expense over the first quarter of 2006.

·   Tax equivalent net interest income declined 1.9% as a result of a 2.8% reduction in average earning assets.

·   Strong growth of 7.0% realized in noninterest income, which more than offset the decline in net interest income.

·   Slight decline in credit quality as reflected by a higher loan loss provision for the quarter. Allowance for loan losses continues to be adequately funded at .87% of total loans and 208% of non-performing loans.

·   Well-capitalized with a risk based capital ratio of 14.83%.

	Three Months Ended
	March 31,			Dec. 31,		March 31,
(Dollars in thousands, except per share data)	2007			2006		2006
EARNINGS
Net Income	$	6,957			8,850		7,421
Diluted Earnings Per Common Share		0.38			0.48		0.40
PERFORMANCE
Return on Average Equity		8.91	%		10.84		9.66
Return on Average Assets		1.11			1.37		1.16
Net Interest Margin		5.29			5.35		5.25
Noninterest Income as % of Operating Revenue		33.02			32.71		30.93
Efficiency Ratio		67.90			63.99		67.20
CAPITAL ADEQUACY
Tier 1 Capital Ratio		13.88	%		14.00		13.00
Total Capital Ratio		14.83			14.95		13.94
Leverage Ratio		11.22			11.30		10.34
Equity to Assets		12.04			12.15		11.63

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	Three Months Ended
	March 31,			Dec. 31,		March 31,
(Dollars in thousands, except per share data)	2007			2006		2006
ASSET QUALITY
Allowance as % of Non-Performing Loans		207.67	%		214.09		330.70
Allowance as % of Loans		0.87			0.86		0.84
Net Charge-Offs as % of Average Loans		0.28			0.11		0.16
Nonperforming Assets as % of Loans and ORE		0.48			0.44		0.28
STOCK PERFORMANCE
High	$	35.91			35.98		37.97
Low		29.79			30.14		33.79
Close		33.30			35.30		35.55
Average Daily Trading Volume		24,499			19,826		15,281

Capital City Bank Group, Inc. (NASDAQ: CCBG) today reported earnings for the first quarter of 2007 totaling $7.0 million, or $0.38 per diluted share. This compares to $7.4 million, or $0.40 per diluted share, in the first quarter of 2006. The Return on Average Assets was 1.11% and the Return on Average Equity was 8.91%, compared to 1.16% and 9.66%, respectively, for the comparable period in 2006.

The decrease in earnings compared to first quarter 2006 was primarily attributable to a decrease in net interest income of $805,000, and increases in the loan loss provision of $570,000 and noninterest expense of $470,000, partially offset by an increase in noninterest income of $917,000. The decrease in net interest income reflects a 2.8% reduction in earning assets primarily in the loan portfolio. The higher loan loss provision was driven by a higher level of charge-offs. Higher expense for compensation and a one-time write-off of leasehold improvement costs were the primary reasons for the increase in noninterest expense. The 7.0% increase in noninterest income is due to improvement in deposit fees, asset management fees, and card processing fees.

William G. Smith, Jr., Chairman, President and CEO, stated, “Although we did not achieve our desired financial results in the first quarter, we did enjoy strong growth in our noninterest income and our expense management efforts have been successful in slowing the growth in operating expenses, which were up only 1.6% over the first quarter of 2006. Despite the more challenging operating environment, we will continue to focus on the fundamentals and execute our strategy. Capital City has a strong franchise and we look forward to opening four new offices in 2007.”

Tax equivalent net interest income in the first quarter decreased $563,000, or 1.9%, compared to the first quarter of 2006, due to a 2.8% decline in earning assets, primarily reflective of a $68.4 million, or 3.3% reduction in the loan portfolio. The net interest margin increased 4 basis points from the first quarter of 2006 to a level of 5.29%, attributable to a 63 basis point improvement in earning asset yields partially offset by a 59 basis point increase in the cost of funds. Compared to the prior quarter, the net interest margin declined 6 basis points due also to a decline in the loan portfolio and upward rate pressure on funding costs, including both nonmaturity and time deposits.

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The provision for loan losses of $1.2 million for the quarter was $570,000 higher than the first quarter of 2006 due to a higher level charge-offs. Net charge-offs totaled $1.3 million, or .28%, of average loans for the quarter compared to $800,000, or .16%, for the first quarter of 2006. At quarter-end, the allowance for loan losses was .87% of outstanding loans and provided coverage of 208% of nonperforming loans.

Noninterest income increased $917,000, or 7.0%, from the first quarter of 2006 primarily due to higher deposit fees, asset management fees, and card processing fees. The increase in deposit fees is due primarily to an increase in NSF/OD activity and the associated fees. Asset management fees increased primarily due to growth in new business. Card processing fees were driven higher by increased transaction volume for merchant services and increased interchange fees related to bank card activity.

Noninterest expense grew by $470,000, or 1.6%, compared to the first quarter of 2006. Higher expense for compensation ($289,000) and a one-time expense to write-off leasehold improvement costs ($250,000) for a banking office site were the primary reasons for the increase. The increase in compensation was driven by higher associate salaries and higher associate benefit costs, primarily pension and insurance, partially offset by a decline in stock-based compensation.

Average earning assets for the first quarter decreased $64.1 million, or 2.8%, over the comparable quarter in 2006. The decrease in earning assets is primarily reflective of a $68.4 million, or 3.3% decrease in average loans reflective of higher principal pay-downs and loan pay-offs, including the pay-off of several larger commercial loans, and a general slowing in lending activity within bank markets.

Nonperforming assets of $9.4 million increased from the first quarter of 2006 by $3.6 million. The increase in the level of nonperforming assets is due to an increase in non-accrual loans. Nonperforming assets represented .48% of loans and other real estate at the end of the first quarter compared to .28% for the same period in 2006 and .44% at year-end 2006.

Average total deposits decreased $36.5 million, or 1.8%, from the first quarter of 2006 driven primarily by a $66.4 million decline in demand deposit accounts and a $41.0 million decrease in time deposits. Increases in NOW and money market accounts of $42.0 million and $43.1 million, respectively, partially offset the aforementioned declines in demand deposits and time deposits. The change in deposit mix between the demand deposit and NOW/money market categories reflects the migration of clients toward higher rate paying nonmaturity deposit products. The decline in time deposit balances reflects management’s strategy to not compete with higher rate paying competitors for this funding source unless the relationship is profitable and warrants retention.

The Company had approximately $21.9 million in average net overnight funds sold for the first quarter of 2007 as compared to $29.5 million in average net overnight funds sold in the first quarter of 2006. The decline is due primarily to the aforementioned decline in deposits partially offset by an overall reduction in the loan portfolio.

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About Capital City Bank Group, Inc.

Capital City Bank Group, Inc. (NASDAQ: CCBG) is one of the largest financial services companies headquartered in Florida and has approximately $2.6 billion in assets. The Company provides a full range of banking services, including traditional deposit and credit services, asset management, trust, mortgage banking, merchant services, bankcards, data processing and securities brokerage services. The Company's bank subsidiary, Capital City Bank, was founded in 1895 and now has 69 banking offices, three mortgage lending offices, and 80 ATMs in Florida, Georgia and Alabama. In 2006, Mergent, Inc., a leading provider of information on publicly traded companies, named the Company as a Dividend Achiever. To be named a Dividend Achiever, a public company must have increased its regular cash dividends for at least 10 consecutive years. Of all publicly traded U.S. companies that pay dividends, less than three percent made this list. Capital City Bank Group, Inc. was also named to this list in 2005. For more information about Capital City Bank Group, Inc., visit www.ccbg.com.

FORWARD-LOOKING STATEMENTS

Forward-looking statements in this press release are based on current plans and expectations that are subject to uncertainties and risks, which could cause our future results to differ materially. The following factors, among others, could cause our actual results to differ: our ability to integrate acquisitions; the strength of the U.S. economy and the local economies where we conduct operations; harsh weather conditions; fluctuations in inflation, interest rates, or monetary policies; changes in the stock market and other capital and real estate markets; legislative or regulatory changes; customer acceptance of third-party products and services; increased competition and its effect on pricing; technological changes; changes in consumer spending and savings habits; our growth and profitability; changes in accounting; and our ability to manage the risks involved in the foregoing. Additional factors can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, and our other filings with the SEC, which are available at the SEC’s internet site (http://www.sec.gov). Forward-looking statements in this press release speak only as of the date of the press release, and we assume no obligation to update forward-looking statements or the reasons why actual results could differ.

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CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENT OF INCOME
Unaudited
	2007		2006
	First		Fourth		Third		Second			First
(Dollars in thousands, except per share data)	Quarter		Quarter		Quarter		Quarter			Quarter
INTEREST INCOME
Interest and Fees on Loans	$	39,053		40,096		40,260		38,967			37,343
Investment Securities		1,940		1,928		1,914		1,816			1,530
Funds Sold		521		576		338		586			539
Total Interest Income		41,514		42,600		42,512		41,369			39,412
INTEREST EXPENSE
Deposits		11,000		10,830		9,985		8,716			7,722
Short-Term Borrowings		761		722		753		776			824
Subordinated Notes Payable		926		936		936		926			926
Other Long-Term Borrowings		502		515		615		764			810
Total Interest Expense		13,189		13,003		12,289		11,182			10,282
Net Interest Income		28,325		29,597		30,223		30,187			29,130
Provision for Loan Losses		1,237		460		711		121			667
Net Interest Income after Provision for Loan Losses		27,088		29,137		29,512		30,066			28,463
NONINTEREST INCOME
Service Charges on Deposit Accounts		6,045		6,394		6,450		6,096			5,680
Data Processing		715		709		674		703			637
Asset Management Fees		1,225		1,180		1,215		1,155			1,050
Retail Brokerage Fees		462		586		520		502			483
Gain on Sale of Investment Securities		7		-		-		(4	)		-
Mortgage Banking Revenues		679		787		824		903			721
Merchant Fees		1,936		1,694		1,766		1,793			1,725
Interchange Fees		910		845		797		788			675
ATM/Debit Card Fees		641		658		635		627			599
Other		1,342		1,532		1,263		1,440			1,475
Total Noninterest Income		13,962		14,385		14,144		14,003			13,045
NONINTEREST EXPENSE
Salaries and Associate Benefits		15,719		14,943		15,278		15,204			15,430
Occupancy, Net		2,236		2,460		2,354		2,358			2,223
Furniture and Equipment		2,349		2,259		2,491		2,661			2,500
Intangible Amortization		1,459		1,484		1,536		1,536			1,530
Other		8,799		8,838		8,763		9,311			8,409
Total Noninterest Expense		30,562		29,984		30,422		31,070			30,092
OPERATING PROFIT		10,488		13,538		13,234		12,999			11,416
Provision for Income Taxes		3,531		4,688		4,554		4,684			3,995
NET INCOME	$	6,957		8,850		8,680		8,315			7,421
PER SHARE DATA
Basic Earnings	$	0.38		0.48		0.47		0.44			0.40
Diluted Earnings		0.38		0.48		0.47		0.44			0.40
Cash Dividends		0.175		0.175		0.163		0.163			0.163
AVERAGE SHARES
Basic		18,409		18,525		18,530		18,633			18,652
Diluted		18,420		18,569		18,565		18,653			18,665

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CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
Unaudited
	2007			2006
	First			Fourth			Third			Second			First
(Dollars in thousands, except per share data)	Quarter			Quarter			Quarter			Quarter			Quarter
ASSETS
Cash and Due From Banks	$	92,233			98,769			100,781			103,078			104,486
Funds Sold and Interest Bearing Deposits		93,832			78,795			35,631			126,210			110,604
Total Cash and Cash Equivalents		186,065			177,564			136,412			229,288			215,090
Investment Securities, Available-for-Sale		191,446			191,894			190,617			191,232			180,760
Loans, Net of Unearned Interest
Commercial, Financial, & Agricultural		205,048			229,327			218,442			220,345			223,310
Real Estate - Construction		180,549			179,072			183,238			180,049			172,317
Real Estate - Commercial		643,272			643,885			647,302			672,881			679,948
Real Estate - Residential		509,040			524,301			529,087			536,346			543,373
Real Estate - Home Equity		172,283			173,597			174,577			171,835			163,189
Consumer		235,175			234,596			237,069			238,381			240,921
Credit Card		-			-			-			-			-
Other Loans		14,899			11,837			14,521			29,784			26,951
Overdrafts		5,575			3,106			5,223			3,239			4,647
Total Loans, Net of Unearned Interest		1,965,841			1,999,721			2,009,459			2,052,860			2,054,656
Allowance for Loan Losses		(17,108	)		(17,217	)		(17,311	)		(17,264	)		(17,279	)
Loans, Net		1,948,733			1,982,504			1,992,148			2,035,596			2,037,377
Premises and Equipment, Net		88,812			86,538			84,915			81,407			76,693
Intangible Assets		102,944			104,402			105,886			107,422			108,958
Other Assets		60,117			55,008			48,895			52,541			55,841
Total Other Assets		251,873			245,948			239,696			241,370			241,492
Total Assets	$	2,578,117			2,597,910			2,558,873			2,697,486			2,674,719
LIABILITIES
Deposits:
Noninterest Bearing Deposits	$	467,875			490,014			506,331			572,549			562,140
NOW Accounts		575,740			599,433			533,549			555,350			518,024
Money Market Accounts		396,150			384,568			387,906			377,958			369,416
Regular Savings Accounts		124,970			125,500			129,884			135,330			137,780
Certificates of Deposit		477,327			482,139			491,569			512,672			521,796
Total Deposits		2,042,062			2,081,654			2,049,239			2,153,859			2,109,156
Short-Term Borrowings		77,936			65,023			54,171			77,571			89,105
Subordinated Notes Payable		62,887			62,887			62,887			62,887			62,887
Other Long-Term Borrowings		42,879			43,083			43,701			63,022			68,764
Other Liabilities		41,841			29,493			29,833			28,403			33,744
Total Liabilities		2,267,605			2,282,140			2,239,831			2,385,742			2,363,656
SHAREOWNERS' EQUITY
Common Stock		183			185			185			185			187
Additional Paid-In Capital		71,366			80,654			80,938			80,272			84,291
Retained Earnings		246,959			243,242			238,870			233,201			227,920
Accumulated Other Comprehensive Loss, Net of Tax		(7,996	)		(8,311	)		(951	)		(1,914	)		(1,335	)
Total Shareowners' Equity		310,512			315,770			319,042			311,744			311,063
Total Liabilities and Shareowners' Equity	$	2,578,117			2,597,910			2,558,873			2,697,486			2,674,719
OTHER BALANCE SHEET DATA
Earning Assets	$	2,251,119			2,270,410			2,235,707			2,370,302			2,346,020
Intangible Assets
Goodwill		84,811			84,811			84,811			84,811			84,811
Deposit Base		16,810			18,221			19,632			21,042			22,453
Other		1,323			1,370			1,443			1,569			1,694
Interest Bearing Liabilities		1,757,889			1,762,633			1,703,667			1,784,790			1,767,772
Book Value Per Diluted Share	$	16.97			17.01			17.18			16.81			16.65
Tangible Book Value Per Diluted Share		11.34			11.39			11.48			11.01			10.82
											18,530
Actual Basic Shares Outstanding		18,287			18,518			18,532			18,530			18,667
Actual Diluted Shares Outstanding		18,297			18,562			18,567			18,550			18,680

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CAPITAL CITY BANK GROUP, INC.
ALLOWANCE FOR LOAN LOSSES
AND NONPERFORMING ASSETS
Unaudited
	2007			2006
	First			Fourth		Third		Second		First
(Dollars in thousands)	Quarter			Quarter		Quarter		Quarter		Quarter
ALLOWANCE FOR LOAN LOSSES
Balance at Beginning of Period	$	17,217			17,311		17,264		17,279		17,410
Provision for Loan Losses		1,237			460		711		121		667
Net Charge-Offs		1,346			554		664		136		798
Balance at End of Period	$	17,108			17,217		17,311		17,264		17,279
As a % of Loans		0.87	%		0.86		0.86		0.84		0.84
As a % of Nonperforming Loans		207.67			214.09		269.35		325.80		330.70
As a % of Nonperforming Assets		181.23			197.19		253.79		299.72		298.27
CHARGE-OFFS
Commercial, Financial and Agricultural	$	560			81		294		144		322
Real Estate - Construction		108			-		-		-		-
Real Estate - Commercial		326			54		-		-		291
Real Estate - Residential		67			154		81		23		22
Consumer		761			787		690		448		591
Total Charge-Offs	$	1,822			1,076		1,065		615		1,226
RECOVERIES
Commercial, Financial and Agricultural	$	36			77		43		63		62
Real Estate - Construction		-			-		-		-		-
Real Estate - Commercial		5			9		4		2		3
Real Estate - Residential		3			1		2		2		7
Consumer		432			435		352		412		356
Total Recoveries	$	476			522		401		479		428
NET CHARGE-OFFS	$	1,346			554		664		136		798
Net Charge-Offs as a % of Average Loans (1)		0.28	%		0.11		0.13		0.03		0.16
RISK ELEMENT ASSETS
Nonaccruing Loans	$	8,238			8,042		6,427		5,299		5,225
Restructured		-			-		-		-		-
Total Nonperforming Loans		8,238			8,042		6,427		5,299		5,225
Other Real Estate		1,202			689		394		461		568
Total Nonperforming Assets	$	9,440			8,731		6,821		5,760		5,793
Past Due Loans 90 Days or More	$	860			135		300		205		367
Nonperforming Loans as a % of Loans		0.42	%		0.40		0.32		0.26		0.25
Nonperforming Assets as a % of
Loans and Other Real Estate		0.48			0.44		0.34		0.28		0.28
Nonperforming Assets as a % of Capital (2)		2.88			2.62		2.03		1.75		1.76
(1) Annualized
(2) Capital includes allowance for loan losses.

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AVERAGE BALANCE AND INTEREST RATES (1)
Unaudited
	First Quarter 2007								Fourth Quarter 2006							Third Quarter 2006							Second Quarter 2006								First Quarter 2006
	Average					Average			Average					Average		Average					Average		Average					Average			Average					Average
(Dollars in thousands)	Balance			Interest		Rate			Balance			Interest		Rate		Balance			Interest		Rate		Balance			Interest		Rate			Balance			Interest		Rate
ASSETS:
Loans, Net of Unearned Interest	$	1,980,224		$	39,264		8.04	%		2,003,719			40,296		7.98		2,025,112			40,433		7.92	$	2,040,656		$	39,059		7.68	%		2,048,642			37,439		7.41
Investment Securities
Taxable Investment Securities		108,377			1,263		4.67			108,041			1,263		4.66		109,097			1,264		4.60		114,521			1,233		4.30			118,055			1,091		3.70
Tax-Exempt Investment Securities		82,627			1,039		5.03			82,568			1,020		4.94		81,409			999		4.90		74,862			895		4.78			59,368			674		4.54
Total Investment Securities		191,004			2,302		4.82			190,609			2,283		4.78		190,506			2,263		4.73		189,383			2,128		4.49			177,423			1,765		3.98
Funds Sold		40,332			521		5.17			43,738			576		5.15		25,540			338		5.19		48,778			586		4.75			49,602			539		4.36
Total Earning Assets		2,211,560		$	42,087		7.71	%		2,238,066			43,155		7.65		2,241,158			43,034		7.62		2,278,817		$	41,773		7.35	%		2,275,667			39,743		7.08
Cash and Due From Banks		88,679								94,449							96,969							99,830								109,907
Allowance For Loan Losses		(17,073	)							(17,503	)						(17,420	)						(17,443	)							(17,582	)
Other Assets		247,624								242,345							239,448							241,886								236,466
Total Assets	$	2,530,790								2,557,357							2,560,155						$	2,603,090								2,604,458
LIABILITIES:
Interest Bearing Deposits
NOW Accounts	$	552,303		$	2,626		1.93	%		542,751			2,522		1.84		511,299			2,026		1.57	$	510,088		$	1,664		1.31	%		510,270			1,446		1.15
Money Market Accounts		386,736			3,427		3.59			391,346			3,488		3.54		381,628			3,259		3.39		363,754			2,642		2.91			343,652			2,298		2.71
Savings Accounts		125,419			78		0.25			128,027			76		0.24		132,421			73		0.22		136,168			67		0.20			139,664			62		0.18
Time Deposits		480,964			4,869		4.11			484,807			4,744		3.88		504,121			4,627		3.64		518,679			4,343		3.36			521,966			3,916		3.04
Total Interest Bearing Deposits		1,545,422			11,000		2.89			1,546,931			10,830		2.78		1,529,469			9,985		2.59		1,528,689			8,716		2.29			1,515,552			7,722		2.07
Short-Term Borrowings		68,911			761		4.46			65,385			722		4.36		73,078			753		4.07		82,846			776		3.75			93,867			824		3.55
Subordinated Notes Payable		62,887			926		5.97			62,887			936		5.91		62,887			936		5.91		62,887			926		5.91			62,887			926		5.97
Other Long-Term Borrowings		43,137			502		4.72			43,453			515		4.71		52,367			615		4.66		63,597			764		4.82			69,966			810		4.70
Total Interest Bearing Liabilities		1,720,357		$	13,189		3.11	%		1,718,656			13,003		3.00		1,717,801			12,289		2.84		1,738,019		$	11,182		2.58	%		1,742,272			10,282		2.39
Noninterest Bearing Deposits		458,304								481,522							494,054							519,066								524,696
Other Liabilities		35,645								33,276							30,259							30,211								26,029
Total Liabilities		2,214,306								2,233,454							2,242,114				��			2,287,296								2,292,997
SHAREOWNERS' EQUITY:	$	316,484								323,903							318,041							315,794								311,461
Total Liabilities and Shareowners' Equity	$	2,530,790								2,557,357							2,560,155						$	2,603,090								2,604,458
Interest Rate Spread				$	28,898		4.60	%					30,152		4.65					30,745		4.78				$	30,591		4.77	%					29,461		4.69
Interest Income and Rate Earned (2)				$	42,087		7.71						43,155		7.65					43,034		7.62				$	41,773		7.35						39,743		7.08
Interest Expense and Rate Paid (2)					13,189		2.42						13,003		2.30					12,289		2.17					11,182		1.97						10,282		1.83
Net Interest Margin				$	28,898		5.29	%					30,152		5.35					30,745		5.45				$	30,591		5.38	%					29,461		5.25

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