CAPITAL CITY BANK GROUP INC (CCBG)

Management’s Discussion and Analysis of

Financial Condition and Results of Operations under the section captioned

“Business Overview” for discussion related to the expansion of our

Business.

Competition

We face significant

competition in our market areas. We

compete against a wide range of banking and nonbanking institutions

including banks, savings and loan associations, credit unions, money market

funds, mutual fund advisory companies, mortgage

banking companies, investment banking companies, insurance agencies and

companies, securities firms, brokerage firms,

financial technology firms, finance companies and other types of financial

institutions. Some of our competitors are larger

financial institutions with greater resources and, as such, may have higher

lending limits and may offer other services that are not

provided by us. However, we believe that the

larger financial institutions are less familiar with the markets in which we operate

and typically target a different client base. We

also believe clients who bank at community banks tend to prefer the relationship

style service of community banks compared to larger banks and

financial services companies.

As a result, we expect to be able to effectively compete in our markets

with larger financial institutions through providing

superior client service and leveraging our knowledge and experience

in providing banking products and services in our market

areas. See Item 1A. Risk Factors under the section captioned “Our future success is dependent

on our ability to compete

effectively in the highly competitive banking and financial

services industry” for further discussion related to the competitive

environment in which we operate.

Our primary market area consists of 21 counties in Florida, six counties in Georgia,

and one county in Alabama. Most of Florida’s

major banking concerns have a presence in Leon County,

where our main office is located.

Our Leon County deposits totaled

$1.200 billion, or 32.7% of our consolidated deposits at December 31, 2024.

9

The table below depicts our market share percentage within each county,

based on commercial bank deposits within the county.

Market Share as of June 30,

(1)

County

2024

2023

2022

Florida

Alachua

4.9%

5.1%

4.9%

Bay

0.2%

0.3%

0.3%

Bradford

34.3%

37.1%

34.9%

Citrus

4.3%

4.4%

4.7%

Clay

2.2%

2.4%

2.3%

Dixie

21.5%

17.5%

19.8%

Gadsden

81.8%

81.9%

82.1%

Gilchrist

41.6%

42.2%

41.2%

Gulf

11.2%

12.4%

14.8%

Hernando

5.2%

4.9%

5.0%

Jefferson

24.6%

28.3%

24.8%

Leon

15.5%

16.9%

15.4%

Levy

26.4%

26.4%

25.4%

Madison

13.5%

13.5%

14.0%

Putnam

28.3%

34.4%

26.4%

St. Johns

0.7%

0.8%

0.7%

Suwannee

6.4%

6.6%

7.0%

Taylor

73.7%

75.0%

73.8%

Wakulla

8.4%

8.4%

10.0%

Walton

0.6%

0.3%

-

Washington

7.8%

9.2%

11.2%

Georgia

Bibb

3.1%

2.9%

3.2%

Cobb

0.1%

0.1%

0.0%

Gwinnett

(2)

0.0%

0.0%

-

Grady

14.0%

13.8%

16.3%

Laurens

6.0%

6.7%

7.8%

Troup

5.4%

5.6%

6.4%

Alabama

Chambers

9.0%

8.6%

9.3%

(1)

Obtained from the FDIC Summary of Deposits Report for the year indicated.

(2)

Bank office opened in the second quarter of 2023.

Seasonality

We believe our

commercial banking operations are not generally seasonal in nature; however,

public deposits tend to increase

with tax collections in the fourth and first quarters of each year and decline

as a result of governmental spending thereafter.

Human Capital Matters

Our culture distinguishes us from our competitors and is the driving force

behind our continued success. Our leadership is

committed to a culture that values people alongside results.

Our brand promise (“More than your bank. Your

banker.”)

and purpose (“We

empower our clients’ financial wellness and help

them build secure futures”), together with our core values statement (“Do

the Right Thing, Build Relationships & Loyalty,

Embrace Individuality & Value

Others, Promote Career Growth, Be Committed to Community,

and Represent the Star (our bank)

Proudly”), are the foundation on which our culture is built.

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The bank has grown significantly since its beginnings in 1895. Our commitment

to fostering a culture that values our associates

across our entire footprint remains unwavering. We

have a Chief Culture Officer and a Chief Inclusion Officer

who make it a

priority to ensure our culture is maintained and associates exemplify our values.

At December 31, 2024, we had approximately 940 full-time associates and

approximately 29 part-time associates. At December

31, 2024, approximately 68% of our workforce was female, 32% was male,

and approximately 21% was ethnic minorities. None

of our associates are represented by a labor union or covered by a collective bargaining

agreement.

Our commitment to people and being an employer with integrity and heart has

earned us numerous accolades including:

one of

the “Best Companies to Work

for in Florida” by Florida Trend for 13 consecutive

years, a “Best Bank to Work

For” by American

Bankers for 12 consecutive years and being named by Forbes in 2023 and 2024

as one of “America’s Best-in-State Banks,

a

selection made from direct consumer feedback and online reviews.

The average tenure of our associates is approximately 9.4 years, and

the average tenure of our management team is 23.9 years.

Tenure statistics support

these accolades and further demonstrate that associates enjoy working

for CCBG.

Compensation and Benefits Program

. To attract and retain experienced

associates we offer a competitive compensation and

benefits program, foster a culture where everyone feels included and empowered

to do to their best work, and give associates the

opportunity to give back to their communities and make a social impact.

Our compensation program is designed to attract and reward talented individuals

who possess the skills necessary to support our

business objectives, assist in the achievement of our strategic goals and

create long-term value for our shareowners. We

provide

our associates with compensation packages that include base salary and

annual incentive bonuses, and certain associates can

receive equity awards tied to the Company’s

performance.

Experience has taught us that a compensation program with both

short-

and long-term awards provides fair and competitive

compensation and aligns associate and shareowner interests by incentivizing

business and individual performance. This dual

approach also encourages long-term company performance and integrates compensation

with our business plans.

In addition to cash and equity compensation, we offer associates benefits

including life and health (medical, dental & vision)

insurance, paid time off, an associate stock purchase plan, and a

401(k) plan. Associates hired prior to 2020 are eligible to

participate in a pension plan.

A core value is providing associates the ability to “grow a career.”

To that end, we support and encourage

associates to develop a

life-long habit of continuous learning that focuses on personal and professional

development through higher education. We

offer

an educational Tuition Assistance Plan to help eligible

associates continue or begin post-high school education, develop skills,

increase knowledge and aid in career development.

We have invested

in tools and capabilities that allow our team members to work remotely as appropriate.

Inclusion.

Integral to our culture and values is a commitment to an equitable, diverse, and inclusive work

environment whereby

respect, acceptance and belonging are practiced and experienced by all.

Our associates are our most valuable assets, and our differences make

us stronger. The individual perspectives,

life experiences,

capabilities and talents, which our associates invest in their work, represent a

significant part of our culture, reputation and

collective achievements.

The Chief Inclusion Officer and the Inclusion Council, which comprises

diverse associates from various levels and offices

throughout our organization, connect the company’s

diversity and inclusion initiatives with our broader business strategies.

A

diverse team produces more creative solutions, offers better client

service and is vital to attracting and retaining talent—key

factors that contribute to our success. We

continue to build an inclusive culture through a variety of inclusion initiatives

for

internal promotions and hiring practices.

Health and Safety

. Our business success is fundamentally connected to our associates’ well-being.

We make available to our

associates a voluntary wellness program,

StarFit that provides associates with resources and good-health opportunities through

exercise, diet and preventive care.

In response to emerging workplace practices, we made changes to our

flex–work program to assist our associates in maintaining a

work/life balance consistent with their professional and personal goals.

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Social Matters

Community Involvement.

We aim to give back

to the communities where we live and work and believe that this commitment

helps in our efforts to attract and retain associates. Our commitment

to help our community starts with our associates. Community

involvement is a hallmark for our organization, and it comes naturally

to our associates. We encourage

our associates to volunteer

their hours with service organizations and philanthropic groups in

the communities we serve.

We recorded

9,542 community service hours in 2024, and 10,526, and 9,508 hours in 2023 and 2022,

respectively. Additionally,

the CCBG Foundation donated approximately $0.3 million in 2024 and 2023

and approximately $0.2 million in 2022 to various

non-profit organizations in the communities we serve.

Since 2015, we have annually supported the United Way

of the Big Bend in analyzing financial information for its annual grant

review process. Many of these grants are provided to low-moderate income

communities in the Big Bend area.

Access, affordability,

and financial inclusion.

Our community commitment to further financial literacy in the markets we service

remains an ongoing focus. In 2024, the CCBG Foundation made grants totaling

$167,000 to Community Reinvestment Act of

1977 (“CRA”) eligible organizations in our market

area. We are committed

to providing educational outreach regarding home

ownership and financial access for minorities. We

are a long-time supporter of Habitat for Humanity,

with our associates

providing volunteer hours on home builds.

During 2020 to 2023, we partnered with Habitat for Humanity and Warrick

Dunn

Charities to build and furnish four homes.

Further, we continue to originate loans under the Habitat for

Humanity loan program

and community development loans under various affordable

housing, community service, and revitalization projects.

During tax season, we provide locations for community residents to access Volunteer

Income Tax Assistance (VITA)

services.

VITA is a nationwide

IRS program that offers free tax preparation assistance to people who generally

make $60,000 or less,

persons with disabilities, the elderly,

and limited English-speaking taxpayers who need assistance in preparing their

own tax

returns.

Environmental Matters

We recognize

the value of environmental stewardship and seek opportunities to reduce our carbon

footprint and incorporate

energy efficiency products into business operations.

We have implemented

company-wide recycling programs and have

converted exterior lighting to LED at 58 offices. Further reducing

our environmental impact, our office model design is reduced

from an average 5,500 square feet to 3,300 square feet. As we renovate or build

new facilities, we employ energy efficient

equipment such as HVAC

systems and lighting controls in offices.

In 2022 through 2024, we made commitments for a $7 million investment in SOLCAP 2022

-1, LLC, a $7 million investment in

SOLCAP 2023-1, LLC, and an $9.1 million investment in SOLCAP 2024-1, LLC. Each of these funds

were formed to make solar

tax equity investments in renewable solar energy projects and

provided us with tax credits and other tax benefits. These projects

will produce approximately 31,778,716 kw hours of clean power each

year. The clean power produced is equivalent

to removing

approximately 21,350 metric tons of greenhouse gas emissions. We

plan to continue to review these kinds of investment

opportunities as they arise.

We work to ensure

lending activities do not encourage business activities that could cause irreparable

damage to our reputation or

the environment. In general, we evaluate each credit or transaction

on its individual merits, with larger deals receiving more

attention and deeper analysis, including a review of environmental matters

related to certain real estate loans, which is overseen

by our Credit Risk Oversight Committee.

To prepare for any climate-related

occurrences, we have a business continuity plan that addresses how to maintain

business

operations in the event of a disastrous event. We

also offer disaster assistance to our associates, which includes

accommodation/shelter reimbursement in case of evacuations or sustained

power outages.

Regulatory Considerations

We

must comply with state and federal banking laws and regulations

that control virtually all aspects of our operations.

These

laws and regulations generally aim to

protect our depositors, not necessarily our shareowners

or our creditors. Any changes in

applicable laws or regulations may materially

affect our business and prospects. Proposed

legislative or regulatory changes may

also affect our operations. The following description summarizes some of the

laws and regulations to which we are

subject.

References to applicable statutes and

regulations are brief summaries,

do not purport to be complete, and are qualified

in their

entirety by reference

to such statutes and regulations.

12

Capital City Bank Group, Inc.

We are registered

with the Board of Governors of the Federal Reserve System (the “Federal Reserve”) as a bank

holding

company under the Bank Holding Company Act of 1956 (“BHC Act”) and have

also elected to be a financial holding company.

As a result, we are subject to supervisory regulation and examination by the

Federal Reserve. The BHC Act, the Dodd-Frank Wall

Street Reform and Consumer Protection Act (the “Dodd-Frank Act”),

the Gramm-Leach-Bliley Financial Modernization Act (the

“GLBA”), and other federal laws subject financial holding companies

to restrictions on the types of activities in which they may

engage, and to a range of supervisory requirements and activities, including regulatory

enforcement actions for violations of laws

and regulations.

Permitted Activities

The GLBA reformed the U.S. banking system by: (i) allowing bank holding

companies (“BHCs”) that qualify as “financial

holding companies,” such as CCBG, to engage in a broad range of financial

and related activities; (ii) allowing insurers and other

financial service companies to acquire banks; (iii) removing restrictions that applied

to bank holding company ownership of

securities firms and mutual fund advisory companies; and (iv) establishing

the overall regulatory scheme applicable to bank

holding companies that also engage in insurance and securities operations.

The general effect of the law was to establish a

comprehensive framework to permit affiliations among

commercial banks, insurance companies, securities firms, and other

financial service providers. Activities that are financial in nature are broadly

defined to include not only banking, insurance, and

securities activities, but also merchant banking and additional activities that the

Federal Reserve, in consultation with the

Secretary of the Treasury,

determines to be financial in nature, incidental to such financial activities, or complementary

activities

that do not pose a substantial risk to the safety and soundness of depository

institutions or the financial system generally.

In contrast to financial holding companies, bank holding companies

are limited to managing or controlling banks, furnishing

services to or performing services for its subsidiaries, and engaging

in other activities that the Federal Reserve determines by

regulation or order to be so closely related to banking or managing or

controlling banks as to be a proper incident thereto. In

determining whether a particular activity is permissible, the Federal Reserve

must consider whether the performance of such an

activity reasonably can be expected to produce benefits to the public

that outweigh possible adverse effects. Possible benefits

include greater convenience, increased competition, and gains in efficiency.

Possible adverse effects include undue concentration

of resources, decreased or unfair competition, conflicts of interest, and unsound

banking practices. Despite prior approval, the

Federal Reserve may order a bank holding company or its subsidiaries to terminate

any activity or to terminate ownership or

control of any subsidiary when the Federal Reserve has reasonable cause

to believe that a serious risk to the financial safety,

soundness or stability of any bank subsidiary of that bank holding company

may result from such an activity.

Changes in Control

Subject to certain exceptions, the BHC Act and the Change in Bank Control Act

(“CBCA”), together with the applicable

regulations, require Federal Reserve approval (or,

depending on the circumstances, no notice of disapproval) prior to any

acquisition of “control” of a bank or bank holding company.

Under the BHC Act, a company (a broadly defined term that includes

partnerships among other things) that acquires the power,

directly or indirectly, to direct

the management or policies of an insured

depository institution or to vote 25% or more of any class of voting securities of

any insured depository institution is deemed to

control the institution and to be a bank holding company.

A company that acquires less than 5% of any class of voting security

(and that does not exhibit the other control factors) is presumed not to have control.

For ownership levels between the 5% and

25% thresholds, the Federal Reserve has developed an extensive body of

law on the circumstances in which control may or may

not exist.

Under the CBCA, if an individual or a company that acquires 10% or more of any

class of voting securities of an insured

depository institution or its holding company and either that institution or

company has registered securities under Section 12 of

the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or no

other person will own a greater percentage of that

class of voting securities immediately after the acquisition, then that investor is presumed

to have control and may be required to

file a change in bank control notice with the institution’s

or the holding company’s primary

federal regulator. Our common

stock

is registered under Section 12 of the Exchange Act, so we are subject to these rules.

As a financial holding company,

we are required to obtain prior approval from the Federal Reserve before (i) acquiring

all or

substantially all of the assets of a bank or bank holding company,

(ii) acquiring direct or indirect ownership or control of more

than 5% of the outstanding voting stock of any bank or bank holding company

(unless we own a majority of such bank’s voting

shares), or (iii) acquiring, merging or consolidating with

any other bank or bank holding company.

In determining whether to

approve a proposed bank acquisition, federal bank regulators will consider,

among other factors, the effect of the acquisition on

competition, the public benefits expected to be received from the acquisition,

the projected capital ratios and levels on a post-

acquisition basis, and the companies’ records of addressing the credit needs of

the communities they serve, including the needs of

low and moderate income neighborhoods, consistent with the safe and sound

operation of the bank, under the CRA.

13

Under Florida law,

a person or entity proposing to directly or indirectly acquire control of a Florida chartered

bank must also

obtain permission from the Florida Office of Financial

Regulation (the “Florida OFR”). The Florida Statutes define “control”

as

either (i) indirectly or directly owning, controlling or having power to vote

25% or more of the voting securities of a bank; (ii)

controlling the election of a majority of directors of a bank; (iii) owning,

controlling, or having power to vote 10% or more of the

voting securities as well as directly or indirectly exercising a controlling

influence over management or policies of a bank; or (iv)

as determined by the

Florida OFR. These requirements will affect us because the Bank is chartered

under Florida law and

changes in control of CCBG are indirect changes in control of CCB.

Prohibitions Against Tying Arrangements

Banks are subject to the prohibitions on certain tying arrangements.

We

are prohibited, subject to some exceptions, from

extending credit to or offering any other service, or fixing

or varying the consideration for such extension of credit or service, on

the condition that the customer obtain some additional service from

the institution or its affiliates or not obtain services of a

competitor of the institution.

Capital; Dividends; Source of Strength

The Federal Reserve imposes certain capital requirements on financial

holding companies under the BHC Act, including a

minimum leverage ratio and a minimum ratio of “qualifying” capital

to risk-weighted assets. These requirements are described

below under “Capital Regulations.” Subject to these capital requirements

and certain other restrictions, we are generally able to

borrow money to make a capital contribution to CCB, and such loans

may be repaid from dividends paid from CCB to us.

We

are

also able to raise capital for contributions to CCB by issuing securities without having

to receive regulatory approval, subject to

compliance with federal and state securities laws.

It is the Federal Reserve’s policy

that bank holding companies should generally pay dividends on common

stock only out of

income available over the past year,

and only if prospective earnings retention is consistent with the organization’s

expected

future needs and financial condition. It is also the Federal Reserve’s

policy that bank holding companies should not maintain

dividend levels that undermine their ability to be a source of strength to

their banking subsidiaries. Additionally,

the Federal

Reserve has indicated that bank holding companies should carefully

review their dividend policies and has discouraged payment

ratios that are at maximum allowable levels unless both asset quality and capital

are very strong. The Federal Reserve possesses

enforcement powers over bank holding companies and their non-bank subsidiaries

to prevent or remedy actions that represent

unsafe or unsound practices or violations of applicable statutes and regulations.

Among these powers is the ability to proscribe the

payment of dividends by banks and bank holding companies.

Bank holding companies are expected to consult with the Federal Reserve before

redeeming any equity or other capital instrument

included in Tier 1 or Tier

2 capital prior to stated maturity,

if such redemption could have a material effect on the level or

composition of the organization’s

capital base. In addition, a bank holding company may not repurchase

shares equal to 10% or

more of its net worth if it would not be well-capitalized (as defined by the

Federal Reserve) after giving effect to such repurchase.

Bank holding companies experiencing financial weaknesses, or

that are at significant risk of developing financial weaknesses,

must consult with the Federal Reserve before redeeming or repurchasing

common stock or other regulatory capital instruments.

In accordance with Federal Reserve policy,

which has been codified by the Dodd-Frank Act, we are expected to act as a source of

financial strength to CCB and to commit resources to support CCB in circumstances

in which we might not otherwise do so. In

furtherance of this policy,

the Federal Reserve may require a financial holding company to terminate any

activity or relinquish

control of a nonbank subsidiary (other than a nonbank subsidiary

of a bank) upon the Federal Reserve’s determination

that such

activity or control constitutes a serious risk to the financial soundness or stability

of any subsidiary depository institution of the

financial holding company.

Further, federal bank regulatory authorities have

additional discretion to require a financial holding

company to divest itself of any bank or nonbank subsidiary if the agency

determines that divestiture may aid the depository

institution’s financial condition.

Safe and Sound Banking Practices

Bank holding companies and their nonbanking subsidiaries are prohibited

from engaging in activities that represent unsafe and

unsound banking practices or that constitute a violation of law or regulations.

Under certain conditions the Federal Reserve may

conclude that some actions of a bank holding company,

such as a payment of a cash dividend, would constitute an unsafe and

unsound banking practice. The Federal Reserve also has the authority

to regulate the debt of bank holding companies, including

the authority to impose interest rate ceilings and reserve requirements on

such debt. The Federal Reserve may also require a bank

holding company to file written notice and obtain its approval prior to purchasing

or redeeming its equity securities, unless certain

conditions are met.

14

Capital City Bank

Capital City Bank is a state-chartered commercial banking institution that is chartered

by and headquartered in the State of Florida

and is subject to supervision and regulation by the Florida OFR. The Florida OFR supervises and

regulates all areas of our

operations including, without limitation, the making of loans, the issuance of

securities, the conduct of our corporate affairs, the

satisfaction of capital adequacy requirements, the payment of dividends,

and the establishment or closing of banking centers. We

are also a member bank of the Federal Reserve System, which makes our operations

subject to broad federal regulation and

oversight by the Federal Reserve. In addition, our deposit accounts are insured

by the Federal Deposit Insurance Corporation (the

”FDIC”) up to the maximum extent permitted by law,

and the FDIC has certain supervisory enforcement powers over us.

As a Florida state-chartered bank, we are empowered by statute, subject to

the limitations contained in those statutes, to take and

pay interest on savings and time deposits, to accept demand deposits, to

make loans on residential and other real estate, to make

consumer and commercial loans, to invest (with certain limitations) in equity securities

and in debt obligations of banks and

corporations and to provide various other banking services for the benefit

of our clients. Various

consumer laws and regulations

also affect our operations, including state usury laws, laws relating to

fiduciaries, consumer credit and equal credit opportunity

laws, and fair credit reporting. In addition, the Federal Deposit Insurance Corporation

Improvement Act of 1991, or FDICIA,

prohibits insured state-chartered institutions from conducting activities as principal

that are not permitted for national banks. A

bank, however, may engage in certain otherwise

prohibited activity if it meets its minimum capital requirements and the FDIC

determines that the activity does not present a significant risk to the Deposit Insurance

Fund (“DIF”).

Safety and Soundness Standards / Risk Management

The federal banking agencies have adopted guidelines establishing

operational and managerial standards to promote the safety

and soundness of federally insured depository institutions. The guidelines

set forth standards for internal controls, information

systems, internal audit systems, loan documentation, credit underwriting,

interest rate exposure, asset growth, compensation, fees

and benefits, asset quality and earnings.

In general, the safety and soundness guidelines prescribe the goals to be achieved

in each area, and each institution is responsible

for establishing its own procedures to achieve those goals. If an institution

fails to comply with any of the standards set forth in

the guidelines, the financial institution’s

primary federal regulator may require the institution to submit a plan for

achieving and

maintaining compliance. If a financial institution fails to submit an acceptable

compliance plan or fails in any material respect to

implement a compliance plan that has been accepted by its primary federal

regulator, the regulator is required to issue an order

directing the institution to cure the deficiency.

Until the deficiency cited in the regulator’s order is cured, the regulator

may

restrict the financial institution’s

rate of growth, require the financial institution to increase its capital, restrict the

rates the

institution pays on deposits or require the institution to take any action

the regulator deems appropriate under the circumstances.

Noncompliance with the standards established by the safety and soundness

guidelines may also constitute grounds for other

enforcement action by the federal bank regulatory agencies, including

cease and desist orders and civil money penalty

assessments.

The bank regulatory agencies have increasingly emphasized the importance

of sound risk management processes and strong

internal controls when evaluating the activities of the financial institutions they

supervise. Properly managing risks has been

identified as critical to the conduct of safe and sound banking activities and has

become even more important as new

technologies, product innovation and the size and speed of financial transactions have

changed the nature of banking markets. The

agencies have identified a spectrum of risks facing a banking institution including,

but not limited to, credit, market, liquidity,

operational, legal and reputational risk. A particular area of focus for regulators

has been operational risk, which arises from the

potential that inadequate information systems, operational problems,

breaches in internal controls, fraud or unforeseen

catastrophes will result in unexpected losses. New products and services, third

party risk management and cybersecurity are

critical sources of operational risk that financial institutions are expected

to address in the current environment. The Bank is

expected to have active board and senior management oversight; adequate

policies, procedures and limits; adequate risk

measurement, monitoring and management information systems; and

comprehensive internal controls.

Reserves

The Federal Reserve requires all depository institutions to maintain

reserves against transaction accounts (noninterest bearing and

NOW checking accounts). The balances maintained to meet the reserve

requirements imposed by the Federal Reserve may be

used to satisfy liquidity requirements. An institution may borrow from

the Federal Reserve Bank “discount window” as a

secondary source of funds, provided that the institution meets the Federal

Reserve Bank’s credit standards.

15

Dividends

CCB is subject to legal limitations on the frequency and amount of dividends

that can be paid to CCBG. The Federal Reserve may

restrict the ability of CCB to pay dividends if such payments would constitute an

unsafe or unsound banking practice.

Additionally, financial

institutions are now required to maintain a capital conservation buffer

of at least 2.5% of risk-weighted

assets in order to avoid restrictions on capital distributions and other payments.

If a financial institution’s capital conservation

buffer falls below the minimum requirement, its maximum payout

amount for capital distributions and discretionary payments

declines to a set percentage of eligible retained income based on the size of the

buffer. See “Capital Regulations” below

for

additional details on this capital requirement.

In addition, Florida law and Federal regulation place restrictions on the declaration

of dividends from state-chartered banks to

their holding companies. Under the Florida Financial Institutions Code,

the board of directors of a state-chartered bank, after it

charges off bad debts, depreciation and other

worthless assets, if any, and makes provisions

for reasonably anticipated future

losses on loans and other assets, may quarterly,

semi-annually or annually declare a dividend of up to the aggregate net profits of

that period combined with the bank’s

retained net profits for the preceding two years. In addition, with the approval of the

Florida OFR and Federal Reserve, the bank’s

board of directors may declare a dividend from retained net profits which accrued

prior to the preceding two years. Before declaring such dividends, 20% of

the net profits for the preceding period as is covered by

the dividend must be transferred to the surplus fund of the bank until this fund becomes

equal to the amount of the bank’s

common stock then issued and outstanding. However,

a Florida state-chartered bank may not declare any dividend if (i) its net

income (loss) from the current year combined with the retained net income

(loss) for the preceding two years aggregates a loss or

(ii) the payment of such dividend would cause the capital account of the bank to fall below the

minimum amount required by law,

regulation, order or any written agreement with the

Florida OFR or a federal regulatory agency.

Under Federal Reserve

regulations, a state member bank may,

without the prior approval of the Federal Reserve, pay a dividend in an amount that, when

taken together with all dividends declared during the calendar year,

does not exceed the sum of the bank’s net income

during the

current calendar year and the retained net income of the prior two calendar years.

The Federal Reserve may approve greater

amounts.

Insurance of Accounts and Other Assessments

Deposits at U.S. domiciled banks are insured by the FDIC, subject to limits and

conditions of applicable laws and regulations.

Our deposit accounts are insured by the DIF generally up to a maximum of

$250,000 per separately insured depositor.

In order to

fund the DIF,

all insured depository institutions are required to pay quarterly assessments to

the FDIC that are based on an

institutions assignment to one of four risk categories based on supervisory

evaluations, regulatory capital levels and certain other

factors. The FDIC has the discretion to adjust an institution’s

risk rating and may terminate its insurance of deposits upon a

finding that the institution engaged or is engaging in unsafe and unsound practices,

is in an unsafe or unsound condition to

continue operations, or violated any applicable law,

regulation, rule, order or condition imposed by the FDIC or written

agreement entered into with the FDIC. The FDIC may also prohibit any FDIC-insured

institution from engaging in any activity it

determines to pose a serious risk to the DIF.

In October 2022, the FDIC finalized a rule to increase the initial base deposit insurance

assessment rate schedules uniformly by 2

basis points beginning with the first quarterly assessment period of 2023. The increased

assessment is intended to improve the

likelihood that the DIF reserve ratio would reach the statutory minimum of 1.35%

by the statutory deadline of September 30,

2028 prescribed under the FDIC’s amended

restoration plan. In November 2023, the FDIC adopted a final rule with respect to a

special assessment to recover the costs associated with protecting uninsured

depositors following the closures of Silicon Valley

Bank and Signature Bank. The final rule does not apply to any banking organization

with less than $5 billion in total consolidated

assets and therefore the special assessment did not directly impact the Company.

Transactions with Affiliates and

Insiders

Pursuant to Sections 23A and 23B of the Federal Reserve Act and Regulation

W,

the authority of CCB to engage in transactions

with related parties or “affiliates” or to make loans to insiders is limited.

Loan transactions with an affiliate generally must be

collateralized and certain transactions between CCB and its affiliates,

including the sale of assets, the payment of money or the

provision of services, must be on terms and conditions that are substantially the

same, or at least as favorable to CCB, as those

prevailing for comparable nonaffiliated transactions.

In addition, CCB generally may not purchase securities issued or

underwritten by affiliates.

16

Loans to executive officers and directors of an insured depository

institution or any of its affiliates or to any person who directly

or indirectly, or

acting through or in concert with one or more persons, owns, controls or has the power

to vote more than 10% of

any class of voting securities of a bank, which we refer to as “10% Shareowners,”

or to any political or campaign committee the

funds or services of which will benefit those executive officers, directors,

or 10% Shareowners or which is controlled by those

executive officers, directors or 10% Shareowners, are

subject to Sections 22(g) and 22(h) of the Federal Reserve Act and the

corresponding regulations (Regulation O) and Section 13(k) of

the Exchange Act relating to the prohibition on personal loans to

executives (which exempts financial institutions in compliance with the

insider lending restrictions of Section 22(h) of the Federal

Reserve Act). Among other things, these loans must be made on terms substantially

the same as those prevailing on transactions

made to unaffiliated individuals and certain extensions

of credit to those persons must first be approved in advance by a

disinterested majority of the entire board of directors. Section 22(h) of the

Federal Reserve Act prohibits loans to any of those

individuals where the aggregate amount exceeds an amount equal

to 15% of an institution’s unimpaired

capital and surplus plus

an additional 10% of unimpaired capital and surplus in the case of loans

that are fully secured by readily marketable collateral, or

when the aggregate amount on all of the extensions of credit outstanding

to all of these persons would exceed our unimpaired

capital and unimpaired surplus. Section 22(g) identifies limited circumstances

in which we are permitted to extend credit to

executive officers.

Community Reinvestment Act

The CRA and its corresponding regulations are intended to encourage banks to

help meet the credit needs of the communities

they serve, including low- and moderate-income (“LMI”) neighborhoods,

consistent with safe and sound banking practices. These

regulations provide for regulatory assessment of a bank’s

record in meeting the credit needs of its market area. Federal banking

agencies are required to publicly disclose each bank’s

rating under the CRA. The Federal Reserve considers a bank’s

CRA rating

when the bank submits an application to establish bank branches, merge

with another bank, or acquire the assets and assume the

liabilities of another bank. In the case of a financial holding company,

the CRA performance record of all banks involved in a

merger or acquisition are reviewed in connection with

the application to acquire ownership or control of shares or assets of a bank

or to merge with another bank or bank holding company.

An unsatisfactory record can substantially delay or block the

transaction. We

received a satisfactory rating on our most recent CRA assessment.

In 2023, the Federal Reserve, along with the FDIC and OCC, issued a joint final

rule that made significant amendments to the

regulations implementing the CRA to “strengthen and modernize” those

regulations, including by creating rigorous data-driven

performance tests and growing the geographic areas in which a bank’s

CRA performance may be evaluated. The final rules were

intended to achieve the following key goals, among others:

●

strengthen the achievement of the core purpose of the CRA;

●

encourage banks to expand access to credit, investment, and banking services

in LMI communities;

●

adapt to changes in the banking industry,

including internet and mobile banking;

●

provide greater clarity and consistency in the application of the CRA regulations;

and

●

tailor CRA evaluations and data collection to bank size and type.

The compliance date for a majority of the rule’s

provisions is January 1, 2026. The remaining requirements, including

the data

reporting requirements, will be applicable on January 1, 2027. We

are planning for compliance with the final rules and continue to

evaluate the impact of the final rules to our financial condition, results of operations,

and liquidity, which cannot

be predicted at

this time.

Capital Regulations

The federal banking regulators have adopted rules implementing

risk-based, capital adequacy guidelines for financial holding

companies and their subsidiary banks based on the Basel III standards. Under

these guidelines, assets and off-balance sheet items

are assigned to specific risk categories each with designated risk weightings.

These risk-based capital guidelines were designed to

make regulatory capital requirements more sensitive to differences

in risk profiles among banks and bank holding companies, to

account for off-balance sheet exposure, to minimize disincentives

for holding liquid assets, and to achieve greater consistency in

evaluating the capital adequacy of major banks throughout the world.

The resulting capital ratios represent capital as a percentage

of total risk-weighted assets and off-balance sheet items.

17

In computing total risk-weighted assets, bank and bank holding company

assets are given risk-weights of 0%, 20%, 50%, 100%

and 150%. In addition, certain off-balance sheet items are given

similar credit conversion factors to convert them to asset

equivalent amounts to which an appropriate risk-weight will apply.

Most loans will be assigned to the 100% risk category,

except

for performing first mortgage loans fully secured by 1-to-4 family and

certain multi-family residential property,

which carry a

50% risk rating. Most investment securities (including, primarily,

general obligation claims on states or other political

subdivisions of the United States) will be assigned to the 20% category,

except for municipal or state revenue bonds, which have

a 50% risk-weight, and direct obligations of the U.S. Treasury

or obligations backed by the full faith and credit of the U.S.

Government, which have a 0% risk-weight. In covering off

-balance sheet items, direct credit substitutes, including general

guarantees and standby letters of credit backing financial obligations,

are given a 100% conversion factor.

Transaction-related

contingencies such as bid bonds, standby letters of credit backing nonfinancial

obligations, and undrawn commitments (including

commercial credit lines with an initial maturity of more than one year)

have a 50% conversion factor. Short

-term commercial

letters of credit are converted at 20% and certain short-term unconditionally

cancelable commitments have a 0% factor.

The rules implement strict eligibility criteria for regulatory capital instruments

and improve the methodology for calculating risk-

weighted assets to enhance risk sensitivity.

Consistent with the international Basel III framework, the rules include

a minimum

ratio of Common Equity Tier 1 Capital to Risk-Weighted

Assets of 4.5%. The rules provide for a Common Equity Tier

1 Capital

conservation buffer of 2.5% of risk-weighted assets. This buffer

is added to each of the three risk-based capital ratios to determine

whether an institution has established the buffer.

The rules provide for a minimum ratio of Tier 1 Capital to

Risk-Weighted Assets

of 6% and include a minimum leverage ratio of 4% for all banking organizations.

If a financial institution’s capital conservation

buffer falls below 2.5% (e.g., if the institution’s

Common Equity Tier 1 Capital to Risk-Weighted

Assets is less than 7.0%), then

capital distributions and discretionary payments will be limited

or prohibited based on the size of the institution’s

buffer. The

types of payments subject to this limitation include dividends, share buybacks,

discretionary payments on Tier 1 instruments, and

discretionary bonus payments.

The capital regulations may also impact the treatment of accumulated

other comprehensive income (“AOCI”) for regulatory

capital purposes. AOCI generally flows through to regulatory capital;

however, community banks and their holding

companies

were allowed a one-time irrevocable opt-out election to continue

to treat AOCI the same as under the old regulations for

regulatory capital purposes. This election was required to be made on the

first call report or bank holding company annual report

(on form FR Y-9C)

filed after January 1, 2015.

We

made the opt-out election. Additionally,

the rules also permitted community

banks with less than $15 billion in total assets to continue to count certain

non-qualifying capital instruments issued prior to May

19, 2010, as Tier 1 capital, including trust preferred

securities and cumulative perpetual preferred stock (subject to a limit of 25%

of Tier 1 capital). However,

non-qualifying capital instruments issued on or after May 19, 2010, would

not qualify for Tier 1

capital treatment.

Commercial Real Estate Concentration Guidelines

The federal banking regulators have implemented guidelines to address

increased concentrations in commercial real estate loans.

These guidelines describe the criteria regulatory agencies will use as indicators

to identify institutions potentially exposed to

commercial real estate concentration risk. An institution that has (i) experienced

rapid growth in commercial real estate lending,

(ii) notable exposure to a specific type of

commercial real estate, (iii) total reported loans for construction, land development,

and

other land representing 100% or more of total risk-based capital, or (iv)

total commercial real estate (including construction) loans

representing 300% or more of total risk-based capital and the outstanding

balance of the institutions commercial real estate

portfolio has increased by 50% or more in the prior 36 months, may be identified

for further supervisory analysis of a potential

concentration risk.

At December 31, 2024, CCB’s ratio

of construction, land development and other land loans to total risk-based

capital was 78%,

its ratio of total commercial real estate loans to total risk-based capital was 212%

and, therefore, CCB was under the 100% and

300% thresholds, respectively,

set forth in clauses (iii) and (iv) above.

As a result, we are not deemed to have a concentration in

commercial real estate lending under applicable regulatory guidelines.

18

Prompt Corrective Action

The federal banking agencies are required to take “prompt corrective

action” with respect to financial institutions that do not meet

minimum capital requirements. The law establishes five categories

for this purpose: “well-capitalized,” “adequately capitalized,”

“undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.”

To be considered “well-capitalized,”

an

insured depository institution must maintain minimum capital ratios and

must not be subject to any order or written directive to

meet and maintain a specific capital level for any capital measure. An institution

that fails to remain well-capitalized becomes

subject to a series of restrictions that increase in severity as its capital condition weakens.

Such restrictions may include a

prohibition on capital distributions, restrictions on asset growth or

restrictions on the ability to receive regulatory approval of

applications. The regulations apply only to banks and not to BHCs. However,

the Federal Reserve is authorized to take

appropriate action at the holding company level based on the undercapitalized

status of the holding company’s

subsidiary banking

institutions. In certain instances relating to an undercapitalized banking

institution, the BHC would be required to guarantee the

performance of the undercapitalized subsidiary’s

capital restoration plan and could be liable for civil money damages for failure

to fulfill those guarantee commitments.

In addition, failure to meet capital requirements may cause an institution

to be directed to raise additional capital. Federal law

further mandates that the agencies adopt safety and soundness standards generally

relating to operations and management, asset

quality and executive compensation, and authorizes administrative action

against an institution that fails to meet such standards.

Failure to meet capital guidelines may subject a banking organization

to a variety of other enforcement remedies, including

additional substantial restrictions on its operations and activities, termination

of deposit insurance by the FDIC and, under certain

conditions, the appointment of a conservator or receiver.

At December 31, 2024, we exceeded the requirements contained in the

applicable regulations, policies and directives pertaining to

capital adequacy to be classified as “well capitalized” and are unaware

of any material violation or alleged violation of these

regulations, policies or directives (see table below). Rapid growth, poor

loan portfolio performance, or poor earnings

performance, or a combination of these factors, could change our

capital position in a relatively short period of time, making

additional capital infusions necessary.

Our capital ratios can be found in Note 17 to the Notes to our Consolidated

Financial

Statements.

Interstate Banking and Branching

The Dodd-Frank Act relaxed interstate branching restrictions by modifying

the federal statute governing de novo interstate

branching by state member banks. Consequently,

a state member bank may open its initial branch in a state outside of the bank’s

home state by way of an interstate bank branch, so long as a bank chartered under

the laws of that state would be permitted to

open a branch at that location.

Anti-money Laundering

The Uniting and Strengthening America by Providing Appropriate Tools

Required to Intercept and Obstruct Terrorism

Act of

2001 (the “USA Patriot Act”), provides the federal government with additional

powers to address terrorist threats through

enhanced domestic security measures, expanded surveillance powers,

increased information sharing and broadened anti-money

laundering requirements. By way of amendments to the Bank Secrecy

Act (the “BSA”), the USA Patriot Act puts in place

measures intended to encourage information sharing among bank regulatory

and law enforcement agencies. In addition, certain

provisions of the USA Patriot Act impose affirmative obligations

on a broad range of financial institutions.

The USA Patriot Act, BSA, and the related federal regulations require

banks to establish anti-money laundering programs that

include policies, procedures and controls to detect, prevent and report

money laundering and terrorist financing and to verify the

identity of their customers and of beneficial owners of their legal entity customers.

The Anti-Money Laundering Act (“AMLA”), which amends the BSA, was enacted

in early 2021. The AMLA is intended to be a

comprehensive reform and modernization of U.S. bank secrecy and

anti-money laundering laws. In particular, it codifies a risk-

based approach to anti-money laundering compliance for financial

institutions, requires the U.S. Department of the Treasury

to

promulgate priorities for anti-money laundering and countering the

financing of terrorism policy,

requires the development of

standards for testing technology and internal processes for BSA compliance,

expands enforcement-

and investigation-related

authority (including increasing available sanctions for certain BSA violations),

and expands BSA whistleblower incentives and

protections.

Many AMLA provisions require additional rulemakings, reports,

and other measures, and the impact of the AMLA will depend

on, among other things, rulemaking and implementation

guidance. In June 2021, the Financial Crimes Enforcement Network, a

bureau of the U.S. Department of the Treasury,

issued the priorities for anti-money laundering and countering the financing of

terrorism policy required under the AMLA. The priorities include corruption,

cybercrime, terrorist financing, fraud, transnational

crime, drug trafficking, human trafficking

and proliferation financing.

19

There is also increased scrutiny of compliance with the sanctions programs

and rules administered and enforced by the Office of

Foreign Assets Control of the U.S. Department of Treasury,

or “OFAC.” OFAC

administers and enforces economic and trade

sanctions against targeted foreign countries and regimes,

terrorists, international narcotics traffickers, those engaged

in activities

related to the proliferation of weapons of mass destruction, and other threats

to the national security, foreign

policy or economy of

the United States, based on U.S. foreign policy and national security

goals. OFAC issues regulations

that restrict transactions by

U.S. persons or entities (including banks), located in the U.S. or abroad,

with certain foreign countries, their nationals or

“specially designated nationals.” OFAC

regularly publishes listings of foreign countries and designated

nationals that are

prohibited from conducting business with any U.S. entity or individual.

While OFAC is responsible

for promulgating, developing

and administering these controls and sanctions, all of the bank regulatory

agencies are responsible for ensuring that financial

institutions comply with these regulations.

Privacy

A variety of federal and state privacy laws govern the collection, safeguarding,

sharing and use of customer information, and

require that financial institutions have policies regarding information

privacy and security. The GLBA

and related regulations

require banks and their affiliated companies to adopt and

disclose privacy policies, including policies regarding the sharing of

personal information with third parties. Some state laws also protect the privacy

of information of state residents and require

adequate security of such data, and certain state laws may require us

to notify affected individuals of security breaches of

computer databases that contain their personal information. These

laws may also require us to notify law enforcement, regulators

or consumer reporting agencies in the event of a data breach, as well as businesses

and governmental agencies that own data.

Cybersecurity

The federal banking regulators regularly issue new guidance and standards,

and update existing guidance and standards, regarding

cybersecurity intended to enhance cyber risk management among financial

institutions. Financial institutions are expected to

comply with such guidance and standards and to accordingly develop appropriate

security controls and risk management

processes. If we fail to observe such regulatory guidance or standards, we

could be subject to various regulatory sanctions,

including financial penalties. In 2023, the SEC issued a final rule that requires

disclosure of material cybersecurity incidents, as

well as cybersecurity risk management, strategy and governance. Under

this rule, banking organizations that are SEC registrants

must generally disclose information about a material cybersecurity incident

within four business days of determining it is material

with periodic updates as to the status of the incident in subsequent filings,

as necessary.

Banking organizations are also required to notify their primary

banking regulator within 36 hours of determining that a

“computer-security incident” has materially disrupted or degraded,

or is reasonably likely to materially disrupt or degrade, the

banking organization’s

ability to carry out banking operations or deliver banking products and services

to a material portion of its

customer base, its businesses and operations that would result in material loss, or its operations

that would impact the stability of

the United States.

State regulators have also been increasingly active in implementing privacy

and cybersecurity standards and regulations.

Recently, several states have

adopted regulations requiring certain financial institutions to implement

cybersecurity programs and

many states have also recently implemented or modified their data breach

notification, information security and data privacy

requirements. We

expect this trend of state-level activity in those areas to continue and are continually

monitoring developments

in the states in which our customers are located.

Risks and exposures related to cybersecurity attacks, including litigation

and enforcement risks, are expected to be elevated for

the foreseeable future due to the rapidly evolving nature and sophistication of

these threats, as well as due to the expanding use of

internet banking, mobile banking, and other technology-based products

and services by us and our customers.

See Item 1A. Risk Factors for a further discussion of risks related to cybersecurity

and Item 1C. Cybersecurity for a further

discussion of risk management strategies and governance processes related to

cybersecurity.

20

Consumer Laws and Regulations

CCB is also subject to other federal and state consumer laws and regulations that

are designed to protect consumers in

transactions with banks. These laws and regulations, among other things, mandate

certain disclosures and regulate the manner in

which financial institutions must deal with clients when taking deposits or making

loans to clients, provide substantive consumer

rights, prohibit discrimination in credit transactions, regulate the use of

credit report information, provide financial privacy

protections, prohibit unfair, deceptive and

abusive practices, restrict our ability to raise interest rates, and subject us to

substantial

regulatory oversight. CCB must comply with these consumer protection

laws and regulations as part of its ongoing client

relations. Violations of

applicable consumer protection laws can result in significant potential liability from

litigation brought by

customers, including actual damages, restitution and attorneys’ fees. Federal

bank regulators, state attorneys general and state and

local consumer protection agencies may also seek to enforce consumer protection

requirements and obtain these and other

remedies, including regulatory sanctions, customer rescission rights,

action by the state and local attorneys general in each

jurisdiction in which we operate and civil money penalties. Failure to

comply with consumer protection requirements may also

result in our failure to obtain any required bank regulatory approval

for merger or acquisition transactions we may wish to pursue

or our prohibition from engaging in such transactions even if approval is not required.

In addition, the Consumer Financial Protection Bureau (“CFPB”) issues regulations

and standards under these federal consumer

protection laws that affect our consumer businesses. Although

the CFPB has jurisdiction over banks with $10 billion or greater in

assets, the regulations and standards issued by the CFPB may also impact

CCB or its subsidiaries by virtue of the adoption of the

same or similar regulations and standards by the Federal Reserve or FDIC.

These include regulations setting “ability to repay”

standards for residential mortgage loans and mortgage loan servicing

and originator compensation standards, which generally

require creditors to make a reasonable, good faith determination of

a consumer’s ability to repay any consumer credit transaction

secured by a dwelling (excluding an open-end credit plan, timeshare

plan, reverse mortgage, or temporary loan) and establishes

certain protections from liability under this requirement for loans that meet the

requirements of the “qualified mortgage” safe

harbor. Also, the TILA-RESPA

Integrated Disclosure, or TRID, rules for mortgage closings have impacted

our loan applications.

These rules, including the required loan forms, generally increased the time it takes to

approve mortgage loans.

In 2022, certain members of Congress and the leadership of the CFPB expressed a heightened

interest in bank consumer overdraft

protection programs. In 2022, the CFPB piloted a supervision effort

to collect key metrics from some supervised institutions

regarding the consumer impact of their overdraft and non-sufficient

fund practices, with the intent of using this information to

identify institutions for further examination and review.

The CFPB indicated, at the time, that it intended to pursue enforcement

actions against banking organizations, and their executives,

that oversee overdraft practices that were deemed to be unlawful, and

indeed took action against a large bank for charging “surprise”

overdraft fees known as authorized positive fees. In October

of

2022, the CFPB issued guidance to help banks avoid charging

illegal surprise overdraft fees. In addition, the Comptroller of the

Currency has identified potential options for reform of national bank overdraft protection

practices, including providing a grace

period before the imposition of a fee, refraining from charging multiple

fees in a single day and eliminating fees altogether.

In December 2024, the CFPB issued a final rule that, among other things, will require

financial institutions with more than $10

billion in assets to offer overdraft protection services to

either provide customers that receive such services with loan disclosures

required under the TILA and Regulation Z, or cap any charges associated with the

provision of such services at $5 or an amount

that would allow the institution to cover its costs and losses with respect to the overdraft

credit transaction. The CFPB’s final

rule

on overdraft credit is currently scheduled to take effect on October

1, 2025. However, the rule is subject to legal challenges

and

continued implementation of the final rule under the new leadership

of the CFPB is uncertain. While this new rule would not

impose direct obligations on CCB, it would directly impact some of CCB’s

competitors and therefore may influence CCB’s

policies and practices relating to overdraft protection services.

See Item 1A. Risk Factors under the section captioned “Fee revenues from overdraft

protection programs constitute a significant

portion of our noninterest income and may continue to be subject to increased

supervisory scrutiny” for further discussion related

to the impacts of increased scrutiny of overdraft fees on us.

Future Legislative Developments

Various

bills are from time to time introduced in the U.S. Congress and the Florida legislature.

This legislation may change

banking and tax statutes and the environment in which our banking subsidiary

and we operate in substantial and unpredictable

ways. We cannot

determine the ultimate effect that potential legislation, if enacted, or

implementing regulations with respect

thereto, would have upon our financial condition or results of operations or

that of our banking subsidiary.

21

Effect of Governmental Monetary Policies

The commercial banking business is affected not only by general

economic conditions, but also by the monetary policies of the

Federal Reserve. Changes in the discount rate on member bank borrowing,

availability of borrowing at the “discount window,”

open market operations, changes in the Fed Funds target

interest rate, changes in interest rates payable on reserve accounts, the

imposition of changes in reserve requirements against member banks’ deposits

and assets of foreign banking centers and the

imposition of and changes in reserve requirements against certain borrowings

by banks and their affiliates are some of the

instruments of monetary policy available to the Federal Reserve. These monetary

policies are used in varying combinations to

influence overall growth and distributions of bank loans, investments and deposits,

which may affect interest rates charged on

loans or paid on deposits. The monetary policies of the Federal Reserve have

had a significant effect on the operating results of

commercial banks and are expected to continue to do so in the future. The

Federal Reserve’s policies are primarily

influenced by

its dual mandate of price stability and full employment, and, to a lesser degree by

short-term and long-term changes in the

international trade balance and in the fiscal policies of the U.S. Government. Future

changes in monetary policy and the effect of

such changes on our business and earnings in the future cannot be predicted.

Website Access to Company’s

Reports

Our Internet website is www.ccbg.com.

Our annual reports on Form 10-K, quarterly reports on Form 10-Q,

current reports on

Form 8-K, including any amendments to those reports filed or furnished pursuant

to section 13(a) or 15(d), and reports filed

pursuant to Section 16, 13(d), and 13(g) of the Exchange Act are available

free of charge through our website as soon as

reasonably practicable after they are electronically filed with, or furnished

to, the SEC.

The information on our website is not

incorporated by reference into this report.

22

Management’s Discussion and Analysis of

Financial Condition and Results of Operations under the section captioned

“Business Overview” for discussion related to the expansion of our

Business.

Competition

There is significant competition among commercial banks in our market

areas. We compete

against a wide range of banking and

nonbanking institutions including banks, savings and loan associations, credit

unions, money market funds, mutual fund advisory

companies, mortgage banking companies, investment banking companies,

insurance agencies and companies, securities firms,

brokerage firms, finance companies and other types of financial institutions.

Some of our competitors are larger financial

institutions with greater resources and, as such, may have higher lending

limits and may offer other services that are not provided

by us. However, we believe that the larger

financial institutions are less familiar with the markets in which we operate and

typically target a different client base. We

also believe clients who bank at community banks tend to prefer the relationship

style

service of community banks compared to larger banks.

As a result, we expect to be able to effectively compete in our markets

with larger financial institutions through providing

superior client service and leveraging our knowledge and experience

in providing banking products and services in our market

areas. See Item 1A. Risk Factors under the section captioned “Our future success is dependent

on our ability to compete

effectively in the highly competitive banking industry” for further discussion

related to the competitive environment in which we

operate.

Our primary market area consists of 21 counties in Florida, six counties in

Georgia, and one county in Alabama. Most of Florida’s

major banking concerns have a presence in Leon County,

where our main office is located.

Our Leon County deposits totaled

$1.272 billion, or 34.4% of our consolidated deposits at December 31, 2023.

10

The table below depicts our market share percentage within each county,

based on commercial bank deposits within the county.

Market Share as of June 30,

(1)

County

2023

2022

2021

Florida

Alachua

5.1%

4.9%

4.6%

Bay

0.3%

0.3%

0.2%

Bradford

37.1%

34.9%

32.4%

Citrus

4.4%

4.7%

4.1%

Clay

2.4%

2.3%

2.8%

Dixie

17.5%

19.8%

18.9%

Gadsden

81.9%

82.1%

81.1%

Gilchrist

42.2%

41.2%

39.6%

Gulf

12.4%

14.8%

14.6%

Hernando

4.9%

5.0%

3.9%

Jefferson

28.3%

24.8%

24.4%

Leon

16.9%

15.4%

11.9%

Levy

26.4%

25.4%

26.4%

Madison

13.5%

14.0%

14.5%

Putnam

34.4%

26.4%

23.2%

St. Johns

0.8%

0.7%

0.7%

Suwannee

6.6%

7.0%

6.8%

Taylor

75.0%

73.8%

73.2%

Wakulla

8.4%

10.0%

10.5%

Walton

0.3%

-

-

Washington

9.2%

11.2%

11.2%

Georgia

Bibb

2.9%

3.2%

3.3%

Cobb

0.1%

0.0%

0.0%

Gwinnett

(2)

0.0%

-

-

Grady

13.8%

16.3%

14.8%

Laurens

6.7%

7.8%

7.9%

Troup

5.6%

6.4%

6.1%

Alabama

Chambers

8.6%

9.3%

9.3%

(1)

Obtained from the FDIC Summary of Deposits Report for the year indicated.

(2)

Bank office opened in the second quarter of 2023.

Seasonality

We believe our

commercial banking operations are not generally seasonal in nature; however,

public deposits tend to increase

with tax collections in the fourth and first quarters of each year and decline

as a result of governmental spending thereafter.

Human Capital Matters

Our culture distinguishes us from our competitors and is the driving force

behind our continued success. Our leadership is

committed to a culture that values people alongside results.

Our brand promise (“More than your bank. Your

banker.”)

and purpose (“We

empower our clients’ financial wellness and help

them build secure futures”), together with our core values statement (“Do

the Right Thing, Build Relationships & Loyalty,

Embrace Individuality & Value

Others, Promote Career Growth, Be Committed to Community,

and Represent the Star (our bank)

Proudly”), are the foundation on which our culture is built.

11

The bank has grown significantly since its beginnings in 1895. Our commitment

to fostering a culture that values our associates

across our entire footprint remains unwavering. We

have a Chief Culture Officer and a Chief Diversity Officer

who make it a

priority to ensure our culture is maintained and associates exemplify our values.

Diversity and Inclusion

. Integral to our culture and values is a commitment to an equitable, diverse, and inclusive work

environment whereby respect, acceptance and belonging are practiced

and experienced by all.

Our associates are our most valuable assets, and our differences make

us stronger. The individual perspectives,

life experiences,

capabilities and talents, which our associates invest in their work, represent a

significant part of our culture, reputation and

collective achievements.

The Chief Diversity Officer and the Diversity,

Equity, and Inclusion (DE&I) Council,

which comprises diverse associates from

various levels and offices throughout our organization,

connect the company’s diversity and inclusion

initiatives with our broader

business strategies. A diverse team produces more creative solutions, offers

better client service and is vital to attracting and

retaining talent—key factors that contribute to our success. We

continue to build an inclusive culture through a variety of DE&I

initiatives for internal promotions and hiring practices.

At February 8, 2024, we had approximately 811

associates, which included approximately 784 full-time associates and

approximately 27 part-time associates. At February 8, 2024, approximately

70% of our workforce was female, 30% was male,

and approximately 22% was ethnic minorities. None of our associates are represented

by a labor union or covered by a collective

bargaining agreement.

Our commitment to people and being an employer with integrity and heart has

earned us numerous accolades including:

one of

the “Best Companies to Work

for in Florida” by Florida Trend for 12 consecutive

years, a “Best Bank to Work

For” by American

Bankers Association for 11 consecutive years

and being named by Forbes in 2023 as one of “America’s

Best-in-State Banks, a

selection made from direct consumer feedback and online reviews.

The average tenure of our associates is approximately 9.6 years, and the

average tenure of our management team is 28 years.

Tenure statistics support

these accolades and further demonstrate that associates enjoy working

for CCB.

Compensation and Benefits Program

. To attract and retain experienced

associates we offer a competitive compensation and

benefits program, foster a culture where everyone feels included and empowered

to do to their best work, and give associates the

opportunity to give back to their communities and make a social impact.

Our compensation program is designed to attract and reward talented individuals

who possess the skills necessary to support our

business objectives, assist in the achievement of our strategic goals and

create long-term value for our shareowners. We

provide

our associates with compensation packages that include base salary and

annual incentive bonuses, and certain associates can

receive equity awards tied to the Company’s

performance.

Experience has taught us that a compensation program with both

short-

and long-term awards provides fair and competitive

compensation and aligns associate and shareowner interests by incentivizing

business and individual performance. This dual

approach also encourages long-term company performance and integrates compensation

with our business plans.

In addition to cash and equity compensation, we offer associates benefits

including life and health (medical, dental & vision)

insurance, paid time off, an associate stock purchase plan, and a

401(k) plan. Associates hired prior to 2020 are eligible to

participate in a pension plan.

A core value is providing associates the ability to “grow a career.”

To that end, we support and encourages

associates to develop a

life-long habit of continuous learning that focuses on personal and professional

development through higher education. We

offer

an educational Tuition Assistance Plan to help eligible

associates continue or begin post-high school education, develop skills,

increase knowledge and aid in career development.

We have invested

in tools and capabilities that allow our team members to work remotely as appropriate.

Health and Safety

. Our business success is fundamentally connected to our associates’ well-being.

We make available to our

associates a voluntary wellness program,

StarFit that provides associates with resources and good-health opportunities through

exercise, diet and preventive care.

In response to emerging workplace practices, we made changes to our

flex–work program to assist our associates in maintaining a

work/life balance consistent with their professional and personal goals.

12

We continue

to follow local and federal guidance, including guidance prescribed by the Centers for

Disease Control and

Prevention (“CDC”), regarding COVID-19 precautions and health measures.

Social Matters

Community Involvement

. We aim to give back

to the communities where we live and work and believe that this commitment

helps in our efforts to attract and retain associates. Our commitment

to help our community starts with our associates. Community

involvement is a hallmark for our organization, and it comes naturally

to our associates. We

encourage our associates to volunteer

their hours with service organizations and philanthropic groups in

the communities we serve.

We recorded

10,526 community service hours in 2023, and 9,508, and 8,697 hours in

2022 and 2021, respectively. Furthermore,

the CCBG Foundation donated $0.3 million in 2023 to various non-profit organizations

in the communities we serve and $0.3

million and $0.2 million in 2022, and 2021, respectively.

Since 2015, we have annually supported the United Way

of the Big Bend in analyzing financial information for its annual grant

review process. Many of these grants are provided to low-moderate income

communities in the Big Bend area.

Access, affordability,

and financial inclusion.

Our community commitment to further financial literacy in the markets we service

remains an ongoing focus. In 2023, the CCBG Foundation made grants totaling

$143,000 to Community Reinvestment Act of

1977 (“CRA”) eligible organizations in our market

area. We are committed

to providing educational outreach regarding home

ownership and financial access for minorities. We

are a long-time supporter of Habitat for Humanity,

with our associates

providing volunteer hours on home builds.

During 2020 to 2023, we partnered with Habitat for Humanity and Warrick

Dunn

Charities to build and furnish four homes.

During tax season, we provide locations for community residents to access Volunteer

Income Tax Assistance (VITA)

services.

VITA is a nationwide

IRS program that offers free tax preparation assistance to people who generally

make $60,000 or less,

persons with disabilities, the elderly,

and limited English-speaking taxpayers who need assistance in preparing their

own tax

returns.

Environmental Matters

We recognize

the value of environmental stewardship and seek opportunities to reduce our carbon

footprint and incorporate

energy efficiency products into business operations.

We have implemented

company-wide recycling programs and have

converted exterior lighting to LED at 64 offices. Further reducing

our environmental impact, our office model design is reduced

from an average 5,500 square feet to 3,300 square feet. As we renovate or build

new facilities, we employ energy efficient

equipment such as HVAC

systems and lighting controls in offices.

In 2022, we made a commitment for a $7 million investment in SOLCAP 2022-1,

LLC and, in 2023, we made a commitment for

a $7 million investment in SOLCAP 2023-1, LLC. Each of these funds were formed

to make solar tax equity investments in

renewable solar energy projects that will provide us with

tax credits and other tax benefits. These projects will produce

approximately 20,186,357 kw hours of clean power each year.

The clean power produced is equivalent to removing

approximately 14,306 metric tons of greenhouse gas emissions. We

plan to continue to review these kinds of investment

opportunities as they arise.

We work to ensure

lending activities do not encourage business activities that could cause irreparable

damage to our reputation or

the environment. In general, we evaluate each credit or transaction

on its individual merits, with larger deals receiving more

attention and deeper analysis, including a review of environmental matters

related to certain real estate loans, which is overseen

by our Credit Risk Oversight Committee.

To prepare for any climate-related

occurrences, we have a business continuity plan that addresses how to maintain

business

operations in the event of a disastrous event. We

also offer disaster assistance to our associates, which includes

accommodation/shelter reimbursement in case of evacuations or sustained

power outages.

Regulatory Considerations

We must comply

with state and federal banking laws and regulations

that control virtually all aspects of our operations.

These

laws and regulations generally aim to protect

our depositors, not necessarily our shareowners or our creditors.

Any changes in

applicable laws or regulations may materially affect

our business and prospects. Proposed

legislative or regulatory changes may

also affect our operations. The following description summarizes some of the laws and

regulations to which we are

subject.

References to applicable statutes and regulations

are brief summaries, do not purport to be complete, and

are qualified in their

entirety by reference

to such statutes and regulations.

13

Capital City Bank Group, Inc.

We are registered

with the Board of Governors of the Federal Reserve as a bank holding company under

the Bank Holding

Company Act of 1956 (“BHC Act”) and have also elected to be a financial

holding company. As a result,

we are subject to

supervisory regulation and examination by the Federal Reserve. The BHC Act, the Dodd

-Frank Wall Street Reform

and

Consumer Protection Act (the “Dodd-Frank Act”), the Gramm-Leach-Bliley Financial

Modernization Act (the “GLBA”), and

other federal laws subject financial holding companies to restrictions on the types of

activities in which they may engage, and to a

range of supervisory requirements and activities, including regulatory

enforcement actions for violations of laws and regulations.

Permitted Activities

The GLBA reformed the U.S. banking system by: (i) allowing bank holding companies

(“BHCs”) that qualify as “financial

holding companies,” such as CCBG, to engage in a broad range of financial

and related activities; (ii) allowing insurers and other

financial service companies to acquire banks; (iii) removing restrictions that applied

to bank holding company ownership of

securities firms and mutual fund advisory companies; and (iv) establishing the

overall regulatory scheme applicable to bank

holding companies that also engage in insurance and securities operations.

The general effect of the law was to establish a

comprehensive framework to permit affiliations among

commercial banks, insurance companies, securities firms, and other

financial service providers. Activities that are financial in nature are broadly

defined to include not only banking, insurance, and

securities activities, but also merchant banking and additional activities that the Federal

Reserve, in consultation with the

Secretary of the Treasury,

determines to be financial in nature, incidental to such financial activities, or complementary

activities

that do not pose a substantial risk to the safety and soundness of depository institutions

or the financial system generally.

In contrast to financial holding companies, bank holding companies are

limited to managing or controlling banks, furnishing

services to or performing services for its subsidiaries, and engaging

in other activities that the Federal Reserve determines by

regulation or order to be so closely related to banking or managing or controlling

banks as to be a proper incident thereto. In

determining whether a particular activity is permissible, the Federal Reserve must

consider whether the performance of such an

activity reasonably can be expected to produce benefits to the public that outweigh

possible adverse effects. Possible benefits

include greater convenience, increased competition, and gains in efficiency.

Possible adverse effects include undue concentration

of resources, decreased or unfair competition, conflicts of interest, and unsound

banking practices. Despite prior approval, the

Federal Reserve may order a bank holding company or its subsidiaries to terminate

any activity or to terminate ownership or

control of any subsidiary when the Federal Reserve has reasonable cause

to believe that a serious risk to the financial safety,

soundness or stability of any bank subsidiary of that bank holding company

may result from such an activity.

Changes in Control

Subject to certain exceptions, the BHC Act and the Change in Bank Control Act

(“CBCA”), together with the applicable

regulations, require Federal Reserve approval (or,

depending on the circumstances, no notice of disapproval) prior to any

acquisition of “control” of a bank or bank holding company.

Under the BHC Act, a company (a broadly defined term that includes

partnerships among other things) that acquires the power,

directly or indirectly, to direct

the management or policies of an insured

depository institution or to vote 25% or more of any class of voting securities of

any insured depository institution is deemed to

control the institution and to be a bank holding company.

A company that acquires less than 5% of any class of voting security

(and that does not exhibit the other control factors) is presumed not to have control.

For ownership levels between the 5% and

25% thresholds, the Federal Reserve has developed an extensive body of

law on the circumstances in which control may or may

not exist.

Further, on January 30, 2020, the Federal Reserve finalized

a rule that simplifies and increases the transparency of its

rules for determining when one company controls another company for

purposes of the BHC Act.

The rule became effective

September 30, 2020. It has and will likely continue to have a meaningful impact on

control determinations related to investments

in banks and bank holding companies and investments by bank holding

companies in nonbank companies.

Under the CBCA, if an individual or a company that acquires 10% or more of any

class of voting securities of an insured

depository institution or its holding company and either that institution or

company has registered securities under Section 12 of

the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or no

other person will own a greater percentage of that

class of voting securities immediately after the acquisition, then that investor is presumed

to have control and may be required to

file a change in bank control notice with the institution’s

or the holding company’s primary

federal regulator. Our common

stock

is registered under Section 12 of the Exchange Act so we are subject to these rules.

14

As a financial holding company,

we are required to obtain prior approval from the Federal Reserve before (i) acquiring

all or

substantially all of the assets of a bank or bank holding company,

(ii) acquiring direct or indirect ownership or control of more

than 5% of the outstanding voting stock of any bank or bank holding company

(unless we own a majority of such bank’s voting

shares), or (iii) acquiring, merging or consolidating with

any other bank or bank holding company.

In determining whether to

approve a proposed bank acquisition, federal bank regulators will consider,

among other factors, the effect of the acquisition on

competition, the public benefits expected to be received from the acquisition,

the projected capital ratios and levels on a post-

acquisition basis, and the companies’ records of addressing the credit needs of

the communities they serve, including the needs of

low and moderate income neighborhoods, consistent with the safe and sound

operation of the bank, under the CRA.

Under Florida law,

a person or entity proposing to directly or indirectly acquire control of a Florida bank must

also obtain

permission from the Florida Office of Financial Regulation. The

Florida Statutes define “control” as either (i) indirectly or

directly owning, controlling or having power to vote 25% or more of the voting

securities of a bank; (ii) controlling the election of

a majority of directors of a bank; (iii) owning, controlling, or having power to vote 10%

or more of the voting securities as well as

directly or indirectly exercising a controlling influence over management

or policies of a bank; or (iv) as determined by the

Florida Office of Financial Regulation. These requirements

will affect us because the Bank is chartered under Florida law and

changes in control of CCBG are indirect changes in control of CCB.

Prohibitions Against Tying Arrangements

Banks are subject to the prohibitions on certain tying arrangements.

We are prohibited,

subject to some exceptions, from

extending credit to or offering any other service, or fixing or varying

the consideration for such extension of credit or service, on

the condition that the customer obtain some additional service from the institution

or its affiliates or not obtain services of a

competitor of the institution.

Capital; Dividends; Source of Strength

The Federal Reserve imposes certain capital requirements on financial

holding companies under the BHC Act, including a

minimum leverage ratio and a minimum ratio of “qualifying” capital to risk-weighted

assets. These requirements are described

below under “Capital Regulations.” Subject to these capital requirements

and certain other restrictions, we are generally able to

borrow money to make a capital contribution to CCB, and such loans may

be repaid from dividends paid from CCB to us. We

are

also able to raise capital for contributions to CCB by issuing securities without having

to receive regulatory approval, subject to

compliance with federal and state securities laws.

It is the Federal Reserve’s policy

that bank holding companies should generally pay dividends on common

stock only out of

income available over the past year,

and only if prospective earnings retention is consistent with the organization’s

expected

future needs and financial condition. It is also the Federal Reserve’s

policy that bank holding companies should not maintain

dividend levels that undermine their ability to be a source of strength to their banking

subsidiaries. Additionally,

the Federal

Reserve has indicated that bank holding companies should carefully review

their dividend policies and has discouraged payment

ratios that are at maximum allowable levels unless both asset quality and capital are

very strong. The Federal Reserve possesses

enforcement powers over bank holding companies and their non-bank subsidiaries

to prevent or remedy actions that represent

unsafe or unsound practices or violations of applicable statutes and regulations. Among

these powers is the ability to proscribe the

payment of dividends by banks and bank holding companies.

Bank holding companies are expected to consult with the Federal Reserve before

redeeming any equity or other capital instrument

included in Tier 1 or Tier

2 capital prior to stated maturity,

if such redemption could have a material effect on the level or

composition of the organization’s

capital base. In addition, a bank holding company may not repurchase shares equal

to 10% or

more of its net worth if it would not be well-capitalized (as defined by the Federal Reserve)

after giving effect to such repurchase.

Bank holding companies experiencing financial weaknesses, or that

are at significant risk of developing financial weaknesses,

must consult with the Federal Reserve before redeeming or repurchasing common

stock or other regulatory capital instruments.

In accordance with Federal Reserve policy,

which has been codified by the Dodd-Frank Act, we are expected to act as a source of

financial strength to CCB and to commit resources to support CCB in circumstances in

which we might not otherwise do so. In

furtherance of this policy,

the Federal Reserve may require a financial holding company to terminate any activity or

relinquish

control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon

the Federal Reserve’s determination

that such

activity or control constitutes a serious risk to the financial soundness or stability of

any subsidiary depository institution of the

financial holding company.

Further, federal bank regulatory authorities have

additional discretion to require a financial holding

company to divest itself of any bank or nonbank subsidiary if the agency determines

that divestiture may aid the depository

institution’s financial condition.

Safe and Sound Banking Practices

15

Bank holding companies and their nonbanking subsidiaries are prohibited

from engaging in activities that represent unsafe and

unsound banking practices or that constitute a violation of law or regulations.

Under certain conditions the Federal Reserve may

conclude that some actions of a bank holding company,

such as a payment of a cash dividend, would constitute an unsafe and

unsound banking practice. The Federal Reserve also has the authority

to regulate the debt of bank holding companies, including

the authority to impose interest rate ceilings and reserve requirements on such debt.

The Federal Reserve may also require a bank

holding company to file written notice and obtain its approval prior to purchasing

or redeeming its equity securities, unless certain

conditions are met.

Capital City Bank

Capital City Bank is a state-chartered commercial banking institution that is chartered

by and headquartered in the State of Florida

and is subject to supervision and regulation by the Florida Office of

Financial Regulation. The Florida Office of Financial

Regulation supervises and regulates all areas of our operations including,

without limitation, the making of loans, the issuance of

securities, the conduct of our corporate affairs, the satisfaction

of capital adequacy requirements, the payment of dividends, and

the establishment or closing of banking centers. We

are also a member bank of the Federal Reserve System, which makes our

operations subject to broad federal regulation and oversight by the Federal

Reserve. In addition, our deposit accounts are insured

by the FDIC up to the maximum extent permitted by law,

and the FDIC has certain supervisory enforcement powers over us.

As a Florida state-chartered bank, we are empowered by statute, subject to

the limitations contained in those statutes, to take and

pay interest on savings and time deposits, to accept demand deposits, to

make loans on residential and other real estate, to make

consumer and commercial loans, to invest (with certain limitations) in equity securities

and in debt obligations of banks and

corporations and to provide various other banking services for the benefit

of our clients. Various

consumer laws and regulations

also affect our operations, including state usury laws, laws relating to

fiduciaries, consumer credit and equal credit opportunity

laws, and fair credit reporting. In addition, the Federal Deposit Insurance Corporation

Improvement Act of 1991, or FDICIA,

prohibits insured state-chartered institutions from conducting activities as principal

that are not permitted for national banks. A

bank, however, may engage in certain otherwise

prohibited activity if it meets its minimum capital requirements and the FDIC

determines that the activity does not present a significant risk to the Deposit Insurance

Fund (“DIF”).

Safety and Soundness Standards / Risk Management

The federal banking agencies have adopted guidelines establishing

operational and managerial standards to promote the safety

and soundness of federally insured depository institutions. The guidelines

set forth standards for internal controls, information

systems, internal audit systems, loan documentation, credit underwriting,

interest rate exposure, asset growth, compensation, fees

and benefits, asset quality and earnings.

In general, the safety and soundness guidelines prescribe the goals to be achieved

in each area, and each institution is responsible

for establishing its own procedures to achieve those goals. If an institution fails to

comply with any of the standards set forth in

the guidelines, the financial institution’s

primary federal regulator may require the institution to submit a plan for

achieving and

maintaining compliance. If a financial institution fails to submit an acceptable

compliance plan or fails in any material respect to

implement a compliance plan that has been accepted by its primary federal

regulator, the regulator is required to issue an order

directing the institution to cure the deficiency.

Until the deficiency cited in the regulator’s order is cured, the regulator

may

restrict the financial institution’s

rate of growth, require the financial institution to increase its capital, restrict the

rates the

institution pays on deposits or require the institution to take any action

the regulator deems appropriate under the circumstances.

Noncompliance with the standards established by the safety and soundness guidelines

may also constitute grounds for other

enforcement action by the federal bank regulatory agencies, including

cease and desist orders and civil money penalty

assessments.

The bank regulatory agencies have increasingly emphasized the importance

of sound risk management processes and strong

internal controls when evaluating the activities of the financial institutions they

supervise. Properly managing risks has been

identified as critical to the conduct of safe and sound banking activities and has

become even more important as new

technologies, product innovation and the size and speed of financial transactions have

changed the nature of banking markets. The

agencies have identified a spectrum of risks facing a banking institution including,

but not limited to, credit, market, liquidity,

operational, legal and reputational risk. In particular,

recent regulatory pronouncements have focused on operational risk, which

arises from the potential that inadequate information systems, operational problems,

breaches in internal controls, fraud or

unforeseen catastrophes will result in unexpected losses. New products and services,

third party risk management and

cybersecurity are critical sources of operational risk that financial institutions are expected

to address in the current environment.

The Bank is expected to have active board and senior management oversight; adequate

policies, procedures and limits; adequate

risk measurement, monitoring and management information systems; and

comprehensive internal controls.

Reserves

16

The Federal Reserve requires all depository institutions to maintain reserves

against transaction accounts (noninterest bearing and

NOW checking accounts). The balances maintained to meet the reserve requirements

imposed by the Federal Reserve may be

used to satisfy liquidity requirements. An institution may borrow from

the Federal Reserve Bank “discount window” as a

secondary source of funds, provided that the institution meets the Federal Reserve

Bank’s credit standards.

Dividends

CCB is subject to legal limitations on the frequency and amount of dividends

that can be paid to CCBG. The Federal Reserve may

restrict the ability of CCB to pay dividends if such payments would constitute an

unsafe or unsound banking practice.

Additionally, financial

institutions are now required to maintain a capital conservation buffer

of at least 2.5% of risk-weighted

assets in order to avoid restrictions on capital distributions and other payments.

If a financial institution’s capital conservation

buffer falls below the minimum requirement, its maximum payout

amount for capital distributions and discretionary payments

declines to a set percentage of eligible retained income based on the size of the

buffer. See “Capital Regulations” below

for

additional details on this capital requirement.

In addition, Florida law and Federal regulation place restrictions on the declaration

of dividends from state-chartered banks to

their holding companies. Under the Florida Financial Institutions Code,

the board of directors of a state-chartered bank, after it

charges off bad debts, depreciation and other

worthless assets, if any, and makes provisions

for reasonably anticipated future

losses on loans and other assets, may quarterly,

semi-annually or annually declare a dividend of up to the aggregate net profits of

that period combined with the bank’s

retained net profits for the preceding two years. In addition, with the approval of the Florida

Office of Financial Regulation and Federal Reserve,

the bank’s board of directors may declare a

dividend from retained net

profits which accrued prior to the preceding two years. Before declaring such dividends,

20% of the net profits for the preceding

period as is covered by the dividend must be transferred to the surplus fund of the

bank until this fund becomes equal to the

amount of the bank’s common stock

then issued and outstanding. However, a Florida

state-chartered bank may not declare any

dividend if (i) its net income (loss) from the current year combined with the retained net

income (loss) for the preceding two years

aggregates a loss or (ii) the payment of such dividend would cause the capital account

of the bank to fall below the minimum

amount required by law, regulation,

order or any written agreement with the Florida Office of Financial

Regulation or a federal

regulatory agency.

Under Federal Reserve regulations, a state member bank may,

without the prior approval of the Federal

Reserve, pay a dividend in an amount that, when taken together with all dividends

declared during the calendar year, does not

exceed the sum of the bank’s net income

during the current calendar year and the retained net income of the prior

two calendar

years. The Federal Reserve may approve greater amounts.

Insurance of Accounts and Other Assessments

Deposits at U.S. domiciled banks are insured by the FDIC, subject to limits and conditions of

applicable laws and regulations.

Our deposit accounts are insured by the DIF generally up to a maximum of

$250,000 per separately insured depositor.

In order to

fund the DIF,

all insured depository institutions are required to pay quarterly assessments to

the FDIC that are based on an

institutions assignment to one of four risk categories based on supervisory

evaluations, regulatory capital levels and certain other

factors. The FDIC has the discretion to adjust an institution’s

risk rating and may terminate its insurance of deposits upon a

finding that the institution engaged or is engaging in unsafe and unsound practices,

is in an unsafe or unsound condition to

continue operations, or violated any applicable law,

regulation, rule, order or condition imposed by the FDIC or written

agreement entered into with the FDIC. The FDIC may also prohibit any FDIC-insured

institution from engaging in any activity it

determines to pose a serious risk to the DIF.

In October 2022, the FDIC finalized a rule to increase the initial base deposit insurance

assessment rate schedules uniformly by 2

basis points beginning with the first quarterly assessment period of 2023. The increased

assessment is intended to improve the

likelihood that the DIF reserve ratio would reach the statutory minimum of 1.35%

by the statutory deadline of September 30,

2028 prescribed under the FDIC’s amended

restoration plan. In November 2023, the FDIC adopted a final rule with respect to a

special assessment to recover the costs associated with protecting uninsured

depositors following the closures of Silicon Valley

Bank and Signature Bank. The final rule does not apply to any banking organization

with less than $5 billion in total consolidated

assets and therefore the special assessment is not expected to impact the Company.

Transactions with Affiliates and

Insiders

Pursuant to Sections 23A and 23B of the Federal Reserve Act and Regulation

W, the authority

of CCB to engage in transactions

with related parties or “affiliates” or to make loans to insiders is limited. Loan

transactions with an affiliate generally must be

collateralized and certain transactions between CCB and its affiliates,

including the sale of assets, the payment of money or the

provision of services, must be on terms and conditions that are substantially the same,

or at least as favorable to CCB, as those

prevailing for comparable nonaffiliated transactions. In

addition, CCB generally may not purchase securities issued or

underwritten by affiliates.

17

Loans to executive officers and directors of an insured depository institution

or any of its affiliates or to any person who directly

or indirectly, or acting

through or in concert with one or more persons, owns, controls or has the power

to vote more than 10% of

any class of voting securities of a bank, which we refer to as “10% Shareowners,”

or to any political or campaign committee the

funds or services of which will benefit those executive officers, directors,

or 10% Shareowners or which is controlled by those

executive officers, directors or 10% Shareowners, are subject to Sections

22(g) and 22(h) of the Federal Reserve Act and the

corresponding regulations (Regulation O) and Section 13(k) of the

Exchange Act relating to the prohibition on personal loans to

executives (which exempts financial institutions in compliance with the insider

lending restrictions of Section 22(h) of the Federal

Reserve Act). Among other things, these loans must be made on terms substantially

the same as those prevailing on transactions

made to unaffiliated individuals and certain extensions of

credit to those persons must first be approved in advance by a

disinterested majority of the entire board of directors. Section 22(h) of the Federal

Reserve Act prohibits loans to any of those

individuals where the aggregate amount exceeds an amount equal to

15% of an institution’s unimpaired

capital and surplus plus

an additional 10% of unimpaired capital and surplus in the case of loans that are fully

secured by readily marketable collateral, or

when the aggregate amount on all of the extensions of credit outstanding

to all of these persons would exceed our unimpaired

capital and unimpaired surplus. Section 22(g) identifies limited circumstances

in which we are permitted to extend credit to

executive officers.

Community Reinvestment Act

The CRA and its corresponding regulations are intended to encourage banks to

help meet the credit needs of the communities

they serve, including low- and moderate-income (“LMI”) neighborhoods,

consistent with safe and sound banking practices. These

regulations provide for regulatory assessment of a bank’s

record in meeting the credit needs of its market area. Federal banking

agencies are required to publicly disclose each bank’s

rating under the CRA. The Federal Reserve considers a bank’s

CRA rating

when the bank submits an application to establish bank branches, merge

with another bank, or acquire the assets and assume the

liabilities of another bank. In the case of a financial holding company,

the CRA performance record of all banks involved in a

merger or acquisition are reviewed in connection with

the application to acquire ownership or control of shares or assets of a bank

or to merge with another bank or bank holding company.

An unsatisfactory record can substantially delay or block the

transaction. We

received a satisfactory rating on our most recent CRA assessment.

In October 2023, the Federal Reserve, along with the FDIC and OCC, issued a joint final

rule that made significant amendments

to the regulations implementing the CRA to “strengthen and modernize”

those regulations, including by creating rigorous data-

driven performance tests and growing the geographic areas in which

a bank’s CRA performance may be

evaluated. The final rules

are intended to achieve the following key goals, among others: strengthen

the achievement of the core purpose of the CRA;

encourage banks to expand access to credit, investment, and banking services

in LMI communities; adapt to changes in the

banking industry, including

internet and mobile banking; provide greater clarity and consistency in the application

of the CR

A

regulations; and tailor CRA evaluations and data collection to bank size and

type. Although the effective date of the final rule is

April 1, 2024, the compliance date for the majority of the rule’s

provisions is January 1, 2026. The remaining requirements,

including the data reporting requirements, will be applicable on January 1, 2027.

We are planning for

compliance with the final

rules and continue to evaluate the impact of the final rules to our financial condition,

results of operations, and liquidity,

which

cannot be predicted at this time.

Capital Regulations

The federal banking regulators have adopted rules implementing

risk-based, capital adequacy guidelines for financial holding

companies and their subsidiary banks based on the Basel III standards. Under these

guidelines, assets and off-balance sheet items

are assigned to specific risk categories each with designated risk weightings.

These risk-based capital guidelines were designed to

make regulatory capital requirements more sensitive to differences

in risk profiles among banks and bank holding companies, to

account for off-balance sheet exposure, to minimize disincentives

for holding liquid assets, and to achieve greater consistency in

evaluating the capital adequacy of major banks throughout the world.

The resulting capital ratios represent capital as a percentage

of total risk-weighted assets and off-balance sheet items.

In computing total risk-weighted assets, bank and bank holding company

assets are given risk-weights of 0%, 20%, 50%, 100%

and 150%. In addition, certain off-balance sheet items are given similar

credit conversion factors to convert them to asset

equivalent amounts to which an appropriate risk-weight will apply.

Most loans will be assigned to the 100% risk category,

except

for performing first mortgage loans fully secured by 1-to-4 family and

certain multi-family residential property,

which carry a

50% risk rating. Most investment securities (including, primarily,

general obligation claims on states or other political

subdivisions of the United States) will be assigned to the 20% category,

except for municipal or state revenue bonds, which have

a 50% risk-weight, and direct obligations of the U.S. Treasury

or obligations backed by the full faith and credit of the U.S.

Government, which have a 0% risk-weight. In covering off

-balance sheet items, direct credit substitutes, including general

guarantees and standby letters of credit backing financial obligations, are

given a 100% conversion factor. Transaction

-related

contingencies such as bid bonds, standby letters of credit backing nonfinancial

obligations, and undrawn commitments (including

commercial credit lines with an initial maturity of more than one year) have a

50% conversion factor. Short-term

commercial

letters of credit are converted at 20% and certain short-term unconditionally

cancelable commitments have a 0% factor.

18

The rules implement strict eligibility criteria for regulatory capital instruments

and improve the methodology for calculating risk-

weighted assets to enhance risk sensitivity.

Consistent with the international Basel III framework, the rules include

a minimum

ratio of Common Equity Tier 1 Capital to Risk-Weighted

Assets of 4.5%. The rules provide for a Common Equity Tier

1 Capital

conservation buffer of 2.5% of risk-weighted assets. This buffer

is added to each of the three risk-based capital ratios to determine

whether an institution has established the buffer.

The rules provide for a minimum ratio of Tier 1 Capital to Risk-Weighted

Assets

of 6% and include a minimum leverage ratio of 4% for all banking organizations.

If a financial institution’s capital conservation

buffer falls below 2.5% (e.g., if the institution’s

Common Equity Tier 1 Capital to Risk-Weighted

Assets is less than 7.0%), then

capital distributions and discretionary payments will be limited or prohibited

based on the size of the institution’s buffer.

The

types of payments subject to this limitation include dividends, share buybacks,

discretionary payments on Tier 1 instruments,

and

discretionary bonus payments.

The capital regulations may also impact the treatment of accumulated

other comprehensive income (“AOCI”) for regulatory

capital purposes. AOCI generally flows through to regulatory capital; however,

community banks and their holding companies

were allowed a one-time irrevocable opt-out election to continue

to treat AOCI the same as under the old regulations for

regulatory capital purposes. This election was required to be made on the first call

report or bank holding company annual report

(on form FR Y-9C)

filed after January 1, 2015. We

made the opt-out election. Additionally,

the rules also permitted community

banks with less than $15 billion in total assets to continue to count certain non

-qualifying capital instruments issued prior to May

19, 2010, as Tier 1 capital, including trust preferred

securities and cumulative perpetual preferred stock (subject to a limit of 25%

of Tier 1 capital). However,

non-qualifying capital instruments issued on or after May 19, 2010, would not

qualify for Tier 1

capital treatment.

Commercial Real Estate Concentration Guidelines

The federal banking regulators have implemented guidelines to address increased

concentrations in commercial real estate loans.

These guidelines describe the criteria regulatory agencies will use as indicators to

identify institutions potentially exposed to

commercial real estate concentration risk. An institution that has (i) experienced

rapid growth in commercial real estate lending,

(ii) notable exposure to a specific type of

commercial real estate, (iii) total reported loans for construction, land development,

and

other land representing 100% or more of total risk-based capital, or (iv)

total commercial real estate (including construction) loans

representing 300% or more of total risk-based capital and the outstanding

balance of the institutions commercial real estate

portfolio has increased by 50% or more in the prior 36 months, may be identified for

further supervisory analysis of a potential

concentration risk.

At December 31, 2023, CCB’s ratio of

construction, land development and other land loans to total risk-based

capital was 77%,

its ratio of total commercial real estate loans to total risk-based capital was 235%

and, therefore, CCB was under the 100% and

300% thresholds, respectively,

set forth in clauses (iii) and (iv) above.

As a result, we are not deemed to have a concentration in

commercial real estate lending under applicable regulatory guidelines.

Prompt Corrective Action

The federal banking agencies are required to take “prompt corrective

action” with respect to financial institutions that do not meet

minimum capital requirements. The law establishes five categories for

this purpose: “well-capitalized,” “adequately capitalized,”

“undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.”

To be considered “well-capitalized,”

an

insured depository institution must maintain minimum capital ratios and

must not be subject to any order or written directive to

meet and maintain a specific capital level for any capital measure. An institution

that fails to remain well-capitalized becomes

subject to a series of restrictions that increase in severity as its capital condition weakens. Such

restrictions may include a

prohibition on capital distributions, restrictions on asset growth or restrictions

on the ability to receive regulatory approval of

applications. The regulations apply only to banks and not to BHCs. However,

the Federal Reserve is authorized to take

appropriate action at the holding company level based on the undercapitalized

status of the holding company’s subsidiary

banking

institutions. In certain instances relating to an undercapitalized banking

institution, the BHC would be required to guarantee the

performance of the undercapitalized subsidiary’s

capital restoration plan and could be liable for civil money damages for failure

to fulfill those guarantee commitments.

In addition, failure to meet capital requirements may cause an institution to

be directed to raise additional capital. Federal law

further mandates that the agencies adopt safety and soundness standards generally

relating to operations and management, asset

quality and executive compensation, and authorizes administrative action

against an institution that fails to meet such standards.

Failure to meet capital guidelines may subject a banking organization

to a variety of other enforcement remedies, including

additional substantial restrictions on its operations and activities, termination of

deposit insurance by the FDIC and, under certain

conditions, the appointment of a conservator or receiver.

19

At December 31, 2023, we exceeded the requirements contained in the applicable

regulations, policies and directives pertaining to

capital adequacy to be classified as “well capitalized” and are unaware

of any material violation or alleged violation of these

regulations, policies or directives (see table below). Rapid growth, poor loan

portfolio performance, or poor earnings

performance, or a combination of these factors, could change our capital position

in a relatively short period of time, making

additional capital infusions necessary.

Our capital ratios can be found in Note 17 to the Notes to our Consolidated Financial

Statements.

Interstate Banking and Branching

The Dodd-Frank Act relaxed interstate branching restrictions by modifying

the federal statute governing de novo interstate

branching by state member banks. Consequently,

a state member bank may open its initial branch in a state outside of the bank’s

home state by way of an interstate bank branch, so long as a bank chartered under the

laws of that state would be permitted to

open a branch at that location.

Anti-money Laundering

The Uniting and Strengthening America by Providing Appropriate Tools

Required to Intercept and Obstruct Terrorism

Act of

2001 (the “USA Patriot Act”), provides the federal government with additional

powers to address terrorist threats through

enhanced domestic security measures, expanded surveillance powers,

increased information sharing and broadened anti-money

laundering requirements. By way of amendments to the Bank Secrecy

Act (the “BSA”), the USA Patriot Act puts in place

measures intended to encourage information sharing among bank regulatory

and law enforcement agencies. In addition, certain

provisions of the USA Patriot Act impose affirmative obligations

on a broad range of financial institutions.

The USA Patriot Act, BSA, and the related federal regulations require banks

to establish anti-money laundering programs that

include policies, procedures and controls to detect, prevent and report

money laundering and terrorist financing and to verify the

identity of their customers and of beneficial owners of their legal entity customers.

The Anti-Money Laundering Act (“AMLA”), which amends the BSA, was enacted in

early 2021. The AMLA is intended to be a

comprehensive reform and modernization of U.S. bank

secrecy and anti-money laundering laws. In particular,

it codifies a risk-

based approach to anti-money laundering compliance for financial institutions,

requires the U.S. Department of the Treasury to

promulgate priorities for anti-money laundering and countering the

financing of terrorism policy,

requires the development of

standards for testing technology and internal processes for BSA compliance,

expands enforcement-

and investigation-related

authority (including increasing available sanctions for certain BSA violations),

and expands BSA whistleblower incentives and

protections.

Many AMLA provisions require additional rulemakings, reports, and

other measures, and the impact of the AMLA will depend

on, among other things, rulemaking and implementation guidance.

In June 2021, the Financial Crimes Enforcement Network, a

bureau of the U.S. Department of the Treasury,

issued the priorities for anti-money laundering and countering the financing of

terrorism policy required under the AMLA. The priorities include corruption,

cybercrime, terrorist financing, fraud, transnational

crime, drug trafficking, human trafficking

and proliferation financing.

There is also increased scrutiny of compliance with the sanctions programs

and rules administered and enforced by the Office of

Foreign Assets Control of the U.S. Department of Treasury,

or “OFAC.” OFAC

administers and enforces economic and trade

sanctions against targeted foreign countries and regimes, terrorists, international

narcotics traffickers, those engaged in activities

related to the proliferation of weapons of mass destruction, and other threats to

the national security, foreign

policy or economy of

the United States, based on U.S. foreign policy and national security goals.

OFAC issues regulations

that restrict transactions by

U.S. persons or entities (including banks), located in the U.S. or abroad,

with certain foreign countries, their nationals or

“specially designated nationals.” OFAC

regularly publishes listings of foreign countries and designated

nationals that are

prohibited from conducting business with any U.S. entity or individual. While OFAC

is responsible for promulgating, developing

and administering these controls and sanctions, all of the bank regulatory

agencies are responsible for ensuring that financial

institutions comply with these regulations.

Privacy

A variety of federal and state privacy laws govern the collection, safeguarding, sharing

and use of customer information, and

require that financial institutions have policies regarding information privacy

and security. The GLBA and related

regulations

require banks and their affiliated companies to adopt and disclose

privacy policies, including policies regarding the sharing of

personal information with third parties. Some state laws also protect the privacy of

information of state residents and require

adequate security of such data, and certain state laws may require us to notify

affected individuals of security breaches of

computer databases that contain their personal information. These laws may

also require us to notify law enforcement, regulators

or consumer reporting agencies in the event of a data breach, as well as businesses and

governmental agencies that own data.

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Cybersecurity

The federal banking regulators regularly issue new guidance and standards,

and update existing guidance and standards, regarding

cybersecurity intended to enhance cyber risk management among financial

institutions. Financial institutions are expected to

comply with such guidance and standards and to accordingly develop appropriate

security controls and risk management

processes. If we fail to observe such regulatory guidance or standards, we

could be subject to various regulatory sanctions,

including financial penalties. In 2023, the SEC issued a final rule that requires

disclosure of material cybersecurity incidents, as

well as cybersecurity risk management, strategy and governance. Under

this rule, banking organizations that are SEC registrants

must generally disclose information about a material cybersecurity incident

within four business days of determining it is material

with periodic updates as to the status of the incident in subsequent filings,

as necessary.

Under a final rule adopted by federal banking agencies in 2021, banking organizations

are required to notify their primary

banking regulator within 36 hours of determining that a “computer-security

incident” has materially disrupted or degraded, or is

reasonably likely to materially disrupt or degrade, the banking organization’s

ability to carry out banking operations or deliver

banking products and services to a material portion of its customer base,

its businesses and operations that would result in

material loss, or its operations that would impact the stability of the United States.

State regulators have also been increasingly active in implementing privacy

and cybersecurity standards and regulations.

Recently, several states have

adopted regulations requiring certain financial institutions to implement

cybersecurity programs and

many states have also recently implemented or modified their data breach

notification, information security and data privacy

requirements. We

expect this trend of state-level activity in those areas to continue and are continually

monitoring developments

in the states in which our customers are located.

Risks and exposures related to cybersecurity attacks, including litigation

and enforcement risks, are expected to be elevated for

the foreseeable future due to the rapidly evolving nature and sophistication of

these threats, as well as due to the expanding use of

internet banking, mobile banking, and other technology-based products

and services by us and our customers.

See Item 1A. Risk Factors for a further discussion of risks related to cybersecurity

and Item 1C. Cybersecurity for a further

discussion of risk management strategies and governance processes related to

cybersecurity.

Overdraft Fee Regulation

The Electronic Fund Transfer Act prohibits

financial institutions from charging consumers fees for paying overdrafts

on

automated teller machines, or ATM,

and one-time debit card transactions, unless a consumer consents, or opts

in, to the overdraft

service for those type of transactions.

If a consumer does not opt in, any ATM

transaction or debit that overdraws the consumer’s

account will be denied.

Overdrafts on the payment of checks and regular electronic bill payments are not covered

by this rule.

Before opting in, the consumer must be provided a notice that explains the financial

institution’s overdraft services,

including the

fees associated with the service, and the consumer’s choices.

Financial institutions must provide consumers who do not opt in

with the same account terms, conditions and features (including pricing)

that they provide to consumers who do opt in.

Consumer Laws and Regulations

CCB is also subject to other federal and state consumer laws and regulations that

are designed to protect consumers in

transactions with banks. While the list set forth below is not exhaustive,

these laws and regulations include the Truth in Lending

Act, the Truth in Savings Act, the Electronic Fund

Transfer Act, the Expedited Funds Availability

Act, the Check Clearing for the

21st Century Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the

Equal Credit Opportunity Act, the

Fair Housing Act, the Home Mortgage Disclosure Act, the Fair and

Accurate Credit Transactions Act, the Mortgage Disclosure

Improvement Act, and the Real Estate Settlement Procedures Act, among

others. These laws and regulations mandate certain

disclosures and regulate the manner in which financial institutions must deal

with clients when taking deposits or making loans to

clients. CCB must comply with these consumer protection laws and regulations as part

of its ongoing client relations.

21

In addition, the Consumer Financial Protection Bureau (“CFPB”) issues regulations

and standards under these federal consumer

protection laws that affect our consumer businesses. These

include regulations setting “ability to repay” standards for residential

mortgage loans and mortgage loan servicing and originator compensation

standards, which generally require creditors to make a

reasonable, good faith determination of a consumer’s ability

to repay any consumer credit transaction secured by a dwelling

(excluding an open-end credit plan, timeshare plan, reverse mortgage,

or temporary loan) and establishes certain protections from

liability under this requirement for loans that meet the requirements of the “qualified

mortgage” safe harbor. Also, the more

recent

TILA-RESPA

Integrated Disclosure, or TRID, rules for mortgage closings have

impacted our loan applications. These rules,

including the required loan forms, generally increased the time it takes to approve

mortgage loans.

Future Legislative Developments

Various

bills are from time to time introduced in the U.S. Congress and the Florida legislature.

This legislation may change

banking and tax statutes and the environment in which our banking subsidiary

and we operate in substantial and unpredictable

ways. We cannot

determine the ultimate effect that potential legislation, if enacted, or

implementing regulations with respect

thereto, would have upon our financial condition or results of operations or

that of our banking subsidiary.

Legislative and Regulatory Responses to the COVID-19 Pandemic

The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, which came

into law in 2020, was a $2.2 trillion

economic stimulus bill that was intended to provide relief in response to the

COVID-19 pandemic. The CARES Act, among other

things, amended the SBA’s

loan program, in which the Bank participates, to create a guaranteed,

unsecured loan program (the

“PPP”) to fund operational costs of eligible businesses, organizations

and self-employed persons during COVID-19. The PPP

authorized financial institutions to make federally guaranteed loans to

qualifying small businesses and non-profit organizations.

These loans carry an interest rate of 1% per annum and a maturity of two years for loans

originated prior to June 5, 2020 and five

years for loans originated on or after June 5, 2020. The PPP provides that

such loans may be forgiven if the borrowers meet

certain requirements with respect to maintaining employee headcount

and payroll and the use of the loan proceeds after the loan is

originated. Although the PPP ended in accordance with its terms on May 31,

2021, outstanding PPP loans continue to go through

the process of either obtaining forgiveness from the SBA or pursuing

claims under the SBA guaranty.

There have also been a number of regulatory actions intended to help mitigate the adverse economic

impact of the COVID-19

pandemic on borrowers, including several mandates from the bank regulatory

agencies, requiring financial institutions to work

constructively with borrowers affected by the COVID-19

pandemic.

While these programs have generally expired, governmental

authorities may take additional actions in the future to limit the adverse impacts of

COVID-19 that may affect the Bank and its

clients.

Effect of Governmental Monetary Policies

The commercial banking business is affected not only by general

economic conditions, but also by the monetary policies of the

Federal Reserve. Changes in the discount rate on member bank borrowing,

availability of borrowing at the “discount window,”

open market operations, changes in the Fed Funds target

interest rate, changes in interest rates payable on reserve accounts, the

imposition of changes in reserve requirements against member banks’ deposits

and assets of foreign banking centers and the

imposition of and changes in reserve requirements against certain borrowings

by banks and their affiliates are some of the

instruments of monetary policy available to the Federal Reserve. These monetary

policies are used in varying combinations to

influence overall growth and distributions of bank loans, investments and deposits,

which may affect interest rates charged on

loans or paid on deposits. The monetary policies of the Federal Reserve have

had a significant effect on the operating results of

commercial banks and are expected to continue to do so in the future. The

Federal Reserve’s policies are primarily

influenced by

its dual mandate of price stability and full employment, and, to a lesser degree by

short-term and long-term changes in the

international trade balance and in the fiscal policies of the U.S. Government. Future

changes in monetary policy and the effect of

such changes on our business and earnings in the future cannot be predicted.

Website Access to Company’s

Reports

Our Internet website is www.ccbg.com.

Our annual reports on Form 10-K, quarterly reports on Form 10-Q,

current reports on

Form 8-K, including any amendments to those reports filed or furnished pursuant

to section 13(a) or 15(d), and reports filed

pursuant to Section 16, 13(d), and 13(g) of the Exchange Act are available

free of charge through our website as soon as

reasonably practicable after they are electronically filed with, or furnished

to, the Securities and Exchange Commission.

The

information on our website is not incorporated by reference into this report.

22

Management’s Discussion and Analysis of

Financial Condition and Results of Operations under the section captioned

“Net Interest Income” and “Market Risk and Interest Rate Sensitivity” elsewhere

in this report for further discussion related to

interest rate sensitivity and our management of interest rate risk.

The fair value of our investments could decline which would cause a reduction

in shareowners’ equity.

A portion of our investment securities portfolio

(38.5%) at December 31, 2022 has been designated as available-for-sale pursuant

to U.S. generally accepted accounting principles relating to accounting for

investments. Such principles require that unrealized

gains and losses in the estimated value of the available-for-sale

portfolio be “marked to market” and reflected as a separate item in

shareowners’ equity (net of tax) as accumulated other comprehensive

income/losses. Shareowners’ equity will continue to reflect

the unrealized gains and losses (net of tax) of these investments. The fair value

of our investment portfolio may decline, causing a

corresponding decline in shareowners’ equity.

Management believes that several factors will affect the

fair values of our investment portfolio. These include, but are not limited

to, changes in interest rates or expectations of changes in interest rates, the degree

of volatility in the securities markets, inflation

rates or expectations of inflation and the slope of the interest rate yield curve

(the yield curve refers to the differences between

short-term and long-term interest rates; a positively sloped yield curve means short

-term rates are lower than long-term rates).

These and other factors may impact specific categories of the portfolio differently,

and we cannot predict the effect these factors

may have on any specific category.

21

Inflationary pressures and rising prices may

affect our results of operations and financial condition.

Inflation rose sharply at the end of 2021 and continued rising in 2022 at levels not

seen for over 40 years. Inflationary pressures

are currently expected to remain elevated throughout 2023. Small to medium

-sized businesses may be impacted more during

periods of high inflation as they are not able to leverage economics of scale to

mitigate cost pressures compared to larger

businesses. Consequently,

the ability of our business customers to repay their loans may deteriorate, and in some

cases this

deterioration may occur quickly,

which would adversely impact our results of operations and financial condition.

Furthermore, a

prolonged period of inflation could cause wages and other costs to further

increase which could adversely affect our results of

operations and financial condition. Sustained higher interest rates by

the Federal Reserve may be needed to tame persistent

inflationary price pressures, which could push down asset prices and weaken

economic activity. A deterioration

in economic

conditions in the United States and our markets could result in an increas

e

in loan delinquencies and non-performing assets,

decreases in loan collateral values and a decrease in demand for our products and

services, all of which, in turn, would adversely

affect our business, financial condition and results of operations.

The impact of interest rates on our mortgage banking business can

have a significant impact on revenues.

Changes in interest rates can impact our mortgage-related revenues and net revenues

associated with our mortgage activities.

A

decline in mortgage rates generally increases the demand for mortgage loans

as borrowers refinance, but also generally leads to

accelerated payoffs. Conversely,

in a constant or increasing rate environment, we would expect fewer loans to be refinanced

and a

decline in payoffs. Although we use models to assess the impact

of interest rates on mortgage-related revenues, the estimates of

revenues produced by these models are dependent on estimates and assumptions

of future loan demand, prepayment speeds and

other factors which may differ from actual subsequent

experience.

Shares of our common stock are not an insured

deposit and may lose value.

The shares of our common stock are not a bank deposit and will not be insured or

guaranteed by the FDIC or any other

government agency.

Your

investment will be subject to investment risk, and you must be capable of affording the

loss of your

entire investment.

Limited trading activity for shares of our common stock may

contribute to price volatility.

While our common stock is listed and traded on the Nasdaq Global Select Market, there

has historically been limited trading

activity in our common stock.

The average daily trading volume of our common stock over the 12-month

period ending

December 31, 2022 was approximately 27,987 shares. Due to the limited

trading activity of our common stock, relativity small

trades may have a significant impact on the price of our common stock.

Securities analysts may not initiate coverage or continue to cover our common

stock, and this may have a negative impact

on its market price.

The trading market for our common stock will depend in part on the research

and reports that securities analysts publish about us

and our business. We do

not have any control over securities analysts, and they may not initiate coverage

or continue to cover our

common stock. If securities analysts do not cover our common stock, the lack

of research coverage may adversely affect its

market price. If we are covered by securities analysts, and our common stock is the subject of

an unfavorable report, our stock

price would likely decline. If one or more of these analysts ceases to cover our Company

or fails to publish regular reports on us,

we could lose visibility in the financial markets, which may cause our

stock price or trading volume to decline.

We may be adversely

impacted by the transition from LIBOR as a reference

rate.

The United Kingdom’s Financial Conduct

Authority and the administrator of LIBOR have announced that the publication

of the

most commonly used U.S. dollar London Interbank Offered Rate (“LIBOR”)

settings will cease to be published or cease to be

representative after June 30, 2023.

The publication of all other LIBOR settings ceased to be published as of December 31,

2021.

Given consumer protection, litigation, and reputation risks, the bank regulatory

agencies have indicated that entering into new

contracts that use LIBOR as a reference rate after December 31, 2021, would

create safety and soundness risks and that they will

examine bank practices accordingly.

Therefore, the agencies encouraged banks to cease entering into new contracts that use

LIBOR as a reference rate as soon as practicable and in any event by December 31,

2021.

Prior to December 31, 2021, we

discontinued originating LIBOR-based loans.

22

At December 31, 2022, we have 112 loans

totaling approximately $71 million that are indexed to LIBOR.

We believe our

current

portfolio of LIBOR based loan contracts contain the necessary fallback language,

however, the timing and manner in which each

customer’s contract

transitions to a replacement index will vary on a case-by-case basis.

We also have $33

million in floating rate

investment securities that are indexed to LIBOR.

We are currently

evaluating fallback language for each investment security.

Lastly, we have two floating

rate subordinated debenture notes totaling $53 million and a related interest rate swap

contract for

$30 million that are indexed to LIBOR (Refer to Note 12 – Long Term

Borrowings and Note 5 – Derivatives in our Consolidated

Financial Statements).

Effective June 30, 2023, in accordance with the trust agreement

and the Adjustable Interest Rate (LIBOR)

Act of 2021, LIBOR will be replaced with 3-month CME term SOFR (secured overnight

financing rate) as the interest rate index

for these notes.

The interest rate swap contract adheres to the International Swaps and Derivatives

Association’s protocol which

requires conversion to the fallback SOFR rate at the time of LIBOR cessation.

Since replacement rates are calculated differently,

payments under contracts referencing new rates will differ

from those referencing LIBOR, which may lead to increased volatility

as compared to LIBOR.

Credit Risks

Our loan portfolio includes loans with a higher risk of loss which could lead to higher loan

losses and nonperforming

assets.

We originate

commercial real estate loans, commercial loans, construction loans, vacant land

loans, consumer loans, and

residential mortgage loans primarily within our market area. Commercial

real estate, commercial, construction, vacant land, and

consumer loans may expose a lender to greater credit risk than traditional

fixed-rate fully amortizing loans secured by single-

family residential real estate because the collateral securing these loans may

not be sold as easily as single-family residential real

estate. In addition, these loan types tend to involve larger loan balances

to a single borrower or groups of related borrowers and

are more susceptible to a risk of loss during a downturn in the business cycle. These

loans also have historically had greater credit

risk than other loans for the following reasons:

●

Commercial Real Estate Loans

. Repayment is dependent on income being generated in amounts sufficient

to cover

operating expenses and debt service. These loans also involve greater risk because

they are generally not fully amortizing

over the loan period, but rather have a balloon payment due at maturity.

A borrower’s ability to make a balloon payment

typically will depend on the borrower’s ability to either

refinance the loan or timely sell the underlying property.

At

December 31, 2022, commercial mortgage loans comprised approximately

31.0% of our total loan portfolio.

●

Commercial Loans

. Repayment is generally dependent upon the successful operation of the borrower’s

business. In

addition, the collateral securing the loans may depreciate over time, be

difficult to appraise, be illiquid, or fluctuate in

value based on the success of the business. At December 31, 2022, commercial loans

comprised approximately 9.8% of

our total loan portfolio.

●

Construction Loans

. The risk of loss is largely dependent on our initial estimate of whether

the property’s value at

completion equals or exceeds the cost of property construction and the availability

of take-out financing. During the

construction phase, a number of factors can result in delays or cost overruns. If

our estimate is inaccurate or if actual

construction costs exceed estimates, the value of the property securing our

loan may be insufficient to ensure full

repayment when completed through a permanent loan, sale of the property,

or by seizure of collateral.

At December 31,

2022, construction loans comprised approximately 9.3% of our total loan portfolio.

●

Vacant

Land Loans

. Because vacant or unimproved land is generally held by the borrower

for investment purposes or

future use, payments on loans secured by vacant or unimproved land will typically

rank lower in priority to the borrower

than a loan the borrower may have on their primary residence or business. These loans

are susceptible to adverse

conditions in the real estate market and local economy.

At December 31, 2022, vacant land loans comprised

approximately 3.28% of our total loan portfolio.

●

HELOCs

. Our open-ended home equity loans have an interest-only draw period

followed by a five-year repayment

period of 0.75% of the principal balance monthly and a balloon payment

at maturity. Upon the commencement

of the

repayment period, the monthly payment can increase significantly,

thus, there is a heightened risk that the borrower will

be unable to pay the increased payment. Further,

these loans also involve greater risk because they are generally not fully

amortizing over the loan period, but rather have a balloon payment due

at maturity.

A borrower’s ability to make a

balloon payment may depend on the borrower’s ability

to either refinance the loan or timely sell the underlying property.

At December 31, 2022, HELOCs comprised approximately 8.2% of

our total loan portfolio.

23

●

Consumer Loans

. Consumer loans (such as automobile loans and personal lines of

credit) are collateralized, if at all,

with assets that may not provide an adequate source of payment of the loan due

to depreciation, damage, or loss. At

December 31, 2022, consumer loans comprised approximately 12.9%

of our total loan portfolio, with indirect auto loans

making up a majority of this portfolio at approximately 93.3% of the total

balance.

The increased risks associated with these types of loans result in a correspondingly

higher probability of default on such loans (as

compared to fixed-rate fully amortizing single-family real estate loans). Loan

defaults would likely increase our loan losses and

nonperforming assets and could adversely affect our allowance

for loan losses and our results of operations.

Our loan portfolio is heavily concentrated in mortgage loans secured

by properties in Florida and Georgia which causes

our risk of loss to be higher than if we had a more geographically diversified

portfolio.

Our interest-earning assets are heavily concentrated in mortgage loans secured

by real estate, particularly real estate located in

Florida and Georgia.

At December 31, 2022, approximately 77% of our loans included real estate as a primary,

secondary, or

tertiary component of collateral. The real estate collateral in each case provides

an alternate source of repayment in the event of

default by the borrower; however, the value

of the collateral may decline during the time the credit is extended. If we are required

to liquidate the collateral securing a loan during a period of reduced real estate

values to satisfy the debt, our earnings and capital

could be adversely affected.

Additionally, at December

31, 2022, a significant number of our loans secured by real estate are secured by commercial and

residential properties located in Florida and Georgia. The

concentration of our loans in these areas subjects us to risk that a

downturn in the economy or recession in these areas could result in a decrease in

loan originations and increases in delinquencies

and foreclosures, which would more greatly affect us than

if our lending were more geographically diversified. In addition, since

a large portion of our portfolio is secured by properties located

in Florida and Georgia, the occurrence of a natural disaster,

such

as a hurricane, or a man-made disaster could result in a decline in loan originations,

a decline in the value or destruction of

mortgaged properties and an increase in the risk of delinquencies, foreclosures

or loss on loans originated by us. We

may suffer

further losses due to the decline in the value of the properties underlying our

mortgage loans, which would have an adverse

impact on our results of operations and financial condition.

Our concentration in loans secured by real estate

may increase our credit losses, which would negatively

affect our

financial results.

Due to the lack of diversified industry within some of the markets served by CCB and the relatively

close proximity of our

geographic markets, we have both geographic concentrations as well as concentrations

in the types of loans funded. Specifically,

due to the nature of our markets, a significant portion of the portfolio has historically

been secured with real estate. At December

31, 2022, approximately 33% and 44% of our $2.525 billion loan

portfolio was secured by commercial real estate and residential

real estate, respectively.

As of this same date, approximately 9% was secured by property under

construction.

In the event we are required to foreclose on a property securing one of our mortgage

loans or otherwise pursue our remedies in

order to protect our investment, we may be unable to recover funds in an amount

equal to our projected return on our investment

or in an amount sufficient to prevent a loss to us due to prevailing economic

conditions, real estate values and other factors

associated with the ownership of real property.

As a result, the market value of the real estate or other collateral underlying our

loans may not, at any given time, be sufficient to satisfy the outstanding

principal amount of the loans, and consequently,

we

would sustain loan losses.

An inadequate allowance for credit losses would reduce our

earnings.

We are exposed

to the risk that our clients may be unable to repay their loans according to their terms and

that any collateral

securing the payment of their loans may not be sufficient

to assure full repayment. This could result in credit losses that are

inherent in the lending business. We

evaluate the collectability of our loan portfolio and provide an allowance

for credit losses

that we believe is adequate based upon such factors as:

●

the risk characteristics of various classifications of loans;

●

previous loan loss experience;

●

specific loans that have loss potential;

●

delinquency trends;

●

estimated fair market value of the collateral;

●

current and future economic conditions; and

●

geographic and industry loan concentrations.

24

At December 31, 2022, our allowance for credit losses for loans held for

investment was $24.7 million, which represented

approximately 0.982% of our total loans held for investment.

We had $2.3

million in nonaccruing loans at December 31, 2022.

The allowance is based on management’s

reasonable estimate and may not prove sufficient to cover future loan

losses.

Although

management uses the best information available to make determinations

with respect to the allowance for credit losses, future

adjustments may be necessary if economic conditions differ substantially

from the assumptions used or adverse developments

arise with respect to our nonperforming or performing loans.

In addition, regulatory agencies, as an integral part of their

examination process, periodically review our estimated losses on loans.

Our regulators may require us to recognize additional

losses based on their judgments about information available to them at the time of

their examination.

Accordingly, the allowance

for credit losses may not be adequate to cover all future loan losses and significant increases

to the allowance may be required in

the future if, for example, economic conditions worsen.

A material increase in our allowance for credit losses would adversely

impact our net income and capital in future periods, while having the effect

of overstating our current period earnings.

We may incur significant costs associated

with the ownership of real property

as a result of foreclosures, which could

reduce our net income.

Since we originate loans secured by real estate, we may have to foreclose on the

collateral property to protect our investment and

may thereafter own and operate such property,

in which case we would be exposed to the risks inherent in the ownership of real

estate.

The amount that we, as a mortgagee, may realize after a foreclosure is dependent

upon factors outside of our control, including,

but not limited to:

●

general or local economic conditions;

●

environmental cleanup liability;

●

neighborhood values;

●

interest rates;

●

real estate tax rates;

●

operating expenses of the mortgaged properties;

●

supply of and demand for rental units or properties;

●

ability to obtain and maintain adequate occupancy of the properties;

●

zoning laws;

●

governmental rules, regulations and fiscal policies; and

●

acts of God.

Certain expenditures associated with the ownership of real estate, including

real estate taxes, insurance and maintenance costs,

may adversely affect the income from the real estate. Furthermore,

we may need to advance funds to continue to operate or to

protect these assets. As a result, the cost of operating real property

assets may exceed the rental income earned from such

properties or we may be required to dispose of the real property at a loss.

25

Liquidity Risks

Liquidity risk could impair our ability to fund operations and jeopardize our financial

condition.

Effective liquidity management is essential for the operation of

our business. We

require sufficient liquidity to meet client loan

requests, client deposit maturities and withdrawals, payments on our debt obligations

as they come due and other cash

commitments under both normal operating conditions and other unpredictable

circumstances causing industry or general financial

market stress. If we are unable to raise funds through deposits, borrowings,

earnings and other sources, it could have a substantial

negative effect on our liquidity.

In particular, a majority of our liabilities during

2022 were checking accounts and other liquid

deposits, which are generally payable on demand or upon short notice.

By comparison, a substantial majority of our assets were

loans, which cannot generally be called or sold in the same time frame. Although

we have historically been able to replace

maturing deposits and advances as necessary,

we might not be able to replace such funds in the future, especially if a large

number of our depositors seek to withdraw their accounts at the same time, regardless

of the reason. Our access to funding

sources in amounts adequate to finance our activities on terms that are acceptable

to us could be impaired by factors that affect us

specifically or the financial services industry or economy in general.

Factors that could negatively impact our access to liquidity

sources include a decrease in the level of our business activity as a result of a downturn

in the markets in which our loans are

concentrated, adverse regulatory action against us, or our inability to attract

and retain deposits. Our access to deposits may be

negatively impacted by,

among other factors, periods of low interest rates or high interest rates.

Periods of high interest rates

could promote increased competition for deposits, including from new

financial technology competitors, or provide customers

with alternative investment options.

Our ability to borrow could also be impaired by factors that are not specific to us, such

as a

disruption in the financial markets or negative views and expectations about

the prospects for the financial services industry.

If we

are unable to maintain adequate liquidity,

it could materially and adversely affect our business, results of operations

or financial

condition.

We may be unable to pay dividends in the future.

In 2022, our Board of Directors declared four quarterly cash dividends.

Declarations of any future dividends will be contingent on

our ability to earn sufficient profits and to remain well capitalized,

including our ability to hold and generate sufficient capital to

comply with the Common Equity Tier 1 Capital

conservation buffer requirement. In addition, due to our contractual obligations

with the holders of our trust preferred securities, if we defer the payment of accrued interest

owed to the holders of our trust

preferred securities, we may not make dividend payments to our

shareowners.

Further, under applicable statutes and regulations,

CCB’s board of directors,

after charging-off bad debts, depreciation and other

worthless assets, if any,

and making provisions for reasonably anticipated future losses on loans and other assets,

may quarterly,

semi-annually, or

annually declare and pay dividends to CCBG of up to the aggregate net income

of that period combined with

the CCB’s retained net income for

the preceding two years and, with the approval of the Florida Office of Financial

Regulation

and Federal Reserve, declare a dividend from retained net income which accrued

prior to the preceding two years.

Additional

state laws generally applicable to Florida corporations may also limit our ability

to declare and pay dividends. Thus, our ability to

fund future dividends may be restricted by state and federal laws and regulations.

Regulatory and Compliance Risks

We are subject to

extensive regulation, which could restrict our activities

and impose financial requirements or limitations

on the conduct of our business.

We

are subject to extensive regulation, supervision and examination

by our regulators, including the Florida Office of Financial

Regulation, the Federal Reserve, and the FDIC. Our compliance with

these industry regulations is costly and restricts certain of

our activities, including payment of dividends, mergers

and acquisitions, investments, lending and interest rates charged on

loans,

interest rates paid on deposits, access to capital and brokered deposits and locations

of banking offices. If we are unable to meet

these regulatory requirements, our financial condition, liquidity and results of

operations would be materially and adversely

affected.

Our activities are also regulated under consumer protection laws applicable

to our lending, deposit and other activities. Many of

these regulations are intended primarily for the protection of our

depositors and the Deposit Insurance Fund and not for the

benefit of our shareowners. In addition to the regulations of the bank regulatory

agencies, as a member of the Federal Home Loan

Bank of Atlanta (“FHLB”), we must also comply with applicable regulations

of the Federal Housing Finance Agency and the

Federal Home Loan Bank.

26

Our failure to comply with these laws and regulations could subject us to restrictions

on our business activities, fines and other

penalties, any of which could adversely affect our results of

operations, capital base and the price of our securities. Further,

any

new laws, rules and regulations could make compliance more difficult

or expensive or otherwise adversely affect our business and

financial condition. Please refer to the Section entitled “Business – Regulatory

Considerations” on page 10.

U.S. federal banking agencies may require us to increase

our regulatory capital, long-term debt or liquidity requirements,

which could result in the need to issue additional qualifying securities or to

take other actions, such as to sell company

assets.

We are subject to

U.S. regulatory capital and liquidity rules. These rules, among other things, establish minimum

requirements to

qualify as a well-capitalized institution. If CCB fails to maintain its status as well capitalized

under the applicable regulatory

capital rules, the Federal Reserve will require us to agree to bring the bank back to

well-capitalized status. For the duration of

such an agreement, the Federal Reserve may impose restrictions on our

activities. If we were to fail to enter into or comply with

such an agreement or fail to comply with the terms of such agreement, the Federal

Reserve may impose more severe restrictions

on our activities, including requiring us to cease and desist activities permitted

under the Bank Holding Company Act of 1956.

Capital and liquidity requirements are frequently introduced and amended.

It is possible that regulators may increase regulatory

capital requirements, change how regulatory capital is calculated or increase liquidity

requirements.

In 2013, the Federal Reserve Board released its final rules which implement

in the United States the Basel III regulatory capital

reforms from the Basel Committee on Banking Supervision and certain

changes required by the Dodd-Frank Act. Under the final

rule, minimum requirements increased for both the quality and quantity of capital held

by banking organizations. Consistent with

the international Basel framework, the rule includes a new minimum

ratio of Common Equity Tier 1 Capital, or CET1, to Risk-

Weighted Assets, or

RWA,

of 4.5% and a CET1 conservation buffer of 2.5% of RWA

(which was fully phased-in in 2019) that

apply to all supervised financial institutions.

The CET1 conservation buffer requirement requires us

to hold additional CET1

capital in excess of the minimum required to meet the CET1 to RWA

ratio requirement. The rule also, among other things, raised

the minimum ratio of Tier 1 Capital to RWA

from 4% to 6% and included a minimum leverage ratio of 4% for all banking

organizations. The impact of the new capital rules requires us to maintain

higher levels of capital, which we expect will lower our

return on equity. Additionally,

if our CET1 to RWA

ratio does not exceed the minimum required plus the additional CET1

conservation buffer,

we may be restricted in our ability to pay dividends or make other distributions of capital to our shareowners.

Further changes to and compliance with the regulatory capital and liquidity requirements

may impact our operations by requiring

us to liquidate assets, increase borrowings, issue additional equity or other

securities, cease or alter certain operations, sell

company assets or hold highly liquid assets, which may adversely affect

our results of operations. We

may be prohibited from

taking capital actions such as paying or increasing dividends or repurchasing

securities.

Changes in accounting standards or assumptions in applying accounting policies

could adversely affect us.

Our accounting policies and methods are fundamental to how we record and report

our financial condition and results of

operations. Some of these policies require use of estimates and assumptions

that may affect the reported value of our assets or

liabilities and results of operations and are critical because they require management

to make difficult, subjective and complex

judgments about matters that are inherently uncertain. If those assumptions,

estimates or judgments were incorrectly made, we

could be required to correct and restate prior-period financial statements. Accounting

standard-setters and those who interpret the

accounting standards, the SEC, banking regulators and our independent

registered public accounting firm may also amend or even

reverse their previous interpretations or positions on how various standards

should be applied. These changes may be difficult to

predict and could impact how we prepare and report our financial statements. In

some cases, we could be required to apply a new

or revised standard retrospectively,

resulting in us revising prior-period financial statements.

Florida financial institutions, such as CCB, face a higher risk of noncompliance

and enforcement actions with the Bank

Secrecy Act and other anti-money laundering statutes and regulations.

Since September 11, 2001, banking regulators

have intensified their focus on anti-money laundering and Bank Secrecy Act

compliance requirements, particularly the anti-money laundering

provisions of the USA PATRIOT

Act. There is also increased

scrutiny of compliance with the rules enforced by the Office of Foreign

Assets Control, or OFAC. Since 2004,

federal banking

regulators and examiners have been extremely aggressive in their supervision

and examination of financial institutions located in

the State of Florida with respect to the institution’s

Bank Secrecy Act/anti-money laundering compliance. Consequently,

numerous formal enforcement actions have been instituted against financial

institutions. If CCB’s policies, procedures

and

systems are deemed deficient or the policies, procedures and systems of the

financial institutions that it has already acquired or

may acquire in the future are deficient, CCB would be subject to liability,

including fines and regulatory actions such as

restrictions on its ability to pay dividends and the necessity to obtain regulatory

approvals to proceed with certain aspects of its

business plan, including its acquisition plans.

27

Fee revenues from overdraft protection

programs constitute a significant portion of our noninterest income

and may be

subject to increased supervisory scrutiny.

Revenues derived from transaction fees associated with overdraft protection

programs offered to consumers represent a

significant portion of our noninterest income. In 2022, the Company collected

approximately $10.6 million in net consumer

overdraft transaction fees.

In 2022, certain members of Congress and the leadership of the CFPB have expressed

a heightened interest in bank consumer

overdraft protection programs. In 2022, the CFPB piloted a supervision

effort to collect key metrics from some supervised

institutions regarding the consumer impact of their overdraft and

non-sufficient fund practices, with the intent of using this

information to identify institutions for further examination and review.

The CFPB has indicated that it intends to pursue

enforcement actions against banking organizations,

and their executives, that oversee overdraft practices that are deemed to be

unlawful, and indeed took action against a large bank for charging

“surprise” overdraft fees known as authorized positive fee. In

October of 2022, the CFPB issued guidance to help banks avoid charging

illegal surprise overdraft fees. In addition, the

Comptroller of the Currency has identified potential options for

reform of national bank overdraft protection practices, including

providing a grace period before the imposition of a fee, refraining

from charging multiple fees in a single day and eliminating fees

altogether.

In response to this increased congressional and regulatory scrutiny,

and in anticipation of enhanced supervision and enforcement

of overdraft protection practices in the future, certain banking organizations

have begun to modify their overdraft protection

programs, including by discontinuing the imposition of overdraft transaction

fees. These competitive pressures from our peers, as

well as any adoption by our regulators of new rules or supervisory guidance or

more aggressive examination and enforcement

policies in respect of banks’ overdraft protection practices, could cause

us to modify our program and practices in ways that may

have a negative impact on our revenue and earnings, which, in turn, could have

an adverse effect on our financial condition and

results of operations.

Operational Risks

Many types of operational risks can affect our earnings negatively.

We regularly

assess and monitor operational risk in our businesses. Despite our efforts to

assess and monitor operational risk, our

risk management framework may not be effective in all cases.

Factors that can impact operations and expose us to risks varying

in

size, scale and scope include:

●

failures of technological systems or breaches of security measures, including, but not

limited to, those resulting from

computer viruses or cyber-attacks;

●

unsuccessful or difficult implementation of computer systems upgrades;

●

human errors or omissions, including failures to comply with applicable

laws or corporate policies and procedures;

●

theft, fraud or misappropriation of assets, whether arising from the intentional

actions of internal personnel or external

third parties;

●

breakdowns in processes, breakdowns in internal controls or failures of

the systems and facilities that support our

operations;

●

deficiencies in services or service delivery;

●

negative developments in relationships with key counterparties, third-party

vendors, or employees in our day-to-day

operations; and

●

external events that are wholly or partially beyond our control, such as pandemics,

geopolitical events, political unrest,

natural disasters or acts of terrorism.

While we have in place many controls and business continuity plans designed

to address these factors and others, these plans may

not operate successfully to mitigate these risks effectively.

If our controls and business continuity plans do not mitigate the

associated risks successfully,

such factors may have a negative impact on our business, financial condition or results

of

operations. In addition, an important aspect of managing our operational

risk is creating a risk culture in which all employees

fully understand that there is risk in every aspect of our business and the importance

of managing risk as it relates to their job

functions. We

continue to enhance our risk management program to support our risk culture. Nonetheless,

if we fail to provide the

appropriate environment that sensitizes all of our employees to managing

risk, our business could be impacted adversely.

28

We are subject to

certain operational risks, including, but not limited to, customer,

employee or third-party fraud and

data processing system failures and errors.

We rely on

the ability of our employees and systems to process a high number of transactions. Operational

risk is the risk of loss

resulting from our operations, including but not limited to, the risk of

fraud by employees or persons outside our company,

the

execution of unauthorized transactions by employees, errors relating

to transaction processing and technology,

breaches of our

internal control systems and compliance requirements. Insurance coverage

may not be available for such losses, or where

available, such losses may exceed insurance limits. This risk of loss also includes

the potential legal actions that could arise as a

result of operational deficiencies or as a result of non-compliance with applicable

regulatory standards, adverse business decisions

or their implementation, or customer attrition due to potential negative

publicity. In the event of a breakdown

in our internal

control systems, improper operation of systems or improper employee

actions, we could suffer financial loss, face regulatory

action, and/or suffer damage to our reputation.

We are subject to

credit and/or settlement risk arising from

the soundness of other financial institutions and

counterparties which may have a material adverse effect on our business, financial condition,

and results of operations.

Financial services institutions are interrelated as a result of trading,

clearing, counterparty, or other

relationships. We

have

exposure to many different industries and counterparties,

and routinely execute transactions with counterparties in the financial

services industry, including

commercial banks, brokers and dealers, investment banks, other institutional

clients, and certain

vendors.

Many of these transactions expose us to credit or settlement risk in the event of

a default or other failure to adhere to

contractual obligations by a counterparty or client. In addition, our credit

or settlement risk may be exacerbated when any

collateral held by us cannot be realized upon or is liquidated at prices not sufficient

to recover the full amount of the credit or

derivative exposure due to us. Increased interconnectivity amongst

financial institutions also increases the risk of cyber-attacks

and information system failures for financial institutions. Any such losses could

have a material adverse effect on our business,

financial condition,

and results of operations.

Pandemics, natural disasters, global climate change, acts of terrorism

and global conflicts may have a negative impact on

our business and operations.

Pandemics (such as the COVID-19 pandemic), natural disasters, global

climate change, acts of terrorism, global conflicts or other

similar events have in the past, and may in the future have, a negative impact on our

business and operations. These events impact

us negatively to the extent that they result in reduced capital markets activity,

lower asset price levels, or disruptions in general

economic activity in the United States or abroad, or in financial market settlement functions.

In addition, these or similar events

may impact economic growth negatively,

which could have an adverse effect on our business and operations and may have other

adverse effects on us in ways that we are unable to predict.

Our business operations could be disrupted if significant portions of our

workforce were unable to work effectively,

including

because of illness, quarantines, government actions, or other restrictions

in connection with the pandemic. Further, work-from-

home and other modified business practices may introduce additional operational

risks, including cybersecurity and execution

risks, which may result in inefficiencies or delays, and may affect

our ability to, or the manner in which we, conduct our business

activities. Disruptions to our clients could result in increased risk of delinquencies,

defaults, foreclosures and losses on our loans.

The escalation of the pandemic may also negatively impact regional economic

conditions for a period of time, resulting in

declines in local loan demand, liquidity of loan guarantors, loan collateral (particularly

in real estate), loan originations and

deposit availability.

Litigation may adversely affect our results.

We are subject to

litigation in the ordinary course of business. Claims and legal actions, including

supervisory actions by our

regulators, could involve large monetary claims and significant

defense costs. The outcome of litigation and regulatory matters as

well as the timing of ultimate resolution are inherently difficult to

predict.

Actual legal and other costs of resolving claims may be greater than our

legal reserves. The ultimate resolution of a pending legal

proceeding, depending on the remedy sought and granted, could

materially adversely affect our results of operations and financial

condition.

In addition, governmental authorities have, at times, sought criminal penalties

against companies in the financial services sector

for violations, and, at times, have required an admission of wrongdoing

from financial institutions in connection with resolving

such matters. Criminal convictions or admissions of wrongdoing in a settlement with

the government can lead to greater exposure

in civil litigation and reputational harm.

Substantial legal liability or significant regulatory action against us could have material

adverse financial effects or cause

significant reputational harm, which adversely impact our business prospects.

Further, we may be exposed to substantial

uninsured liabilities, which could adversely affect

our results of operations and financial condition.

29

Strategic Risks

Our future success is dependent on our ability to compete effectively

in the highly competitive banking industry.

We face vigorous

competition for deposits, loans and other financial services in our market area

from other banks and financial

institutions, including savings and loan associations, savings banks,

finance companies and credit unions. A number of our

competitors are significantly larger than we are and have greater access to

capital and other resources. Many of our competitors

also have higher lending limits, more expansive branch networks, and offer

a wider array of financial products and services. To

a

lesser extent, we also compete with other providers of financial services, such as money

market mutual funds, brokerage firms,

consumer finance companies, insurance companies and governmental

organizations, which may offer financial products and

services on more favorable terms than we are able to. Many of our non-bank

competitors are not subject to the same extensive

regulations that govern our activities. As a result, these non-bank competitors have advantages over

us in providing certain

services. The effect of this competition may reduce or limit our

margins or our market share and may adversely affect our

results

of operations and financial condition.

Our directors, executive officers, and principal shareowners,

if acting together,

have substantial control over all matters

requiring shareowner approval,

including changes of control. Because Mr.

William G. Smith, Jr.

is a principal

shareowner and our Chairman, President, and Chief Executive

Officer and Chairman of CCB, he has substantial control

over all matters on a day-to-day basis.

Our directors, executive officers, and principal

shareowners beneficially owned approximately 23.3% of the outstanding

shares of

our common stock at December 31, 2022.

William G. Smith, Jr.,

our Chairman, President and Chief Executive Officer

beneficially owned 17.1% of our shares as of that date.

Accordingly, these directors, executive

officers, and principal

shareowners, if acting together, may be

able to influence or control matters requiring approval by our shareowners,

including the

election of directors and the approval of mergers, acquisitions or

other extraordinary transactions. Moreover,

because William G.

Smith, Jr. is the Chairman, President,

and Chief Executive Officer of CCBG and Chairman of CCB, he has substantial

control

over all matters on a day-to-day basis, including the nomination and election

of directors.

These directors, executive officers, and principal shareowners may

also have interests that differ from yours and may vote in a

way with which you disagree, and which may be adverse to your interests. The concentration

of ownership may have the effect of

delaying, preventing or deterring a change of control of our company,

could deprive our shareowners of an opportunity to receive

a premium for their common stock as part of a sale of our Company and might ultimately

affect the market price of our common

stock. You

may also have difficulty changing management, the composition of

the Board of Directors, or the general direction of

our Company.

Our Articles of Incorporation, Bylaws, and certain laws and regulations

may prevent or delay transactions you might

favor,

including a sale or merger of CCBG.

CCBG is registered with the Federal Reserve as a financial holding

company under the Bank Holding Company Act, or BHC Act.

As a result, we are subject to supervisory regulation and examination by the

Federal Reserve. The Gramm-Leach-Bliley Act, the

BHC Act, and other federal laws subject financial holding companies

to restrictions on the types of activities in which they may

engage, and to a range of supervisory requirements and activities, including regulatory

enforcement actions for violations of laws

and regulations.

Provisions of our Articles of Incorporation, Bylaws, certain laws and regulations

and various other factors may make it more

difficult and expensive for companies or persons to acquire control

of us without the consent of our Board of Directors. It is

possible, however, that you would want a

takeover attempt to succeed because, for example, a potential buyer could offer

a

premium over the then prevailing price of our common stock.

For example, our Articles of Incorporation permit our Board of Directors

to issue preferred stock without shareowner action. The

ability to issue preferred stock could discourage a company from attempting

to obtain control of us by means of a tender offer,

merger, proxy contest or

otherwise. We are also subject to

certain provisions of the Florida Business Corporation Act and our

Articles of Incorporation that relate to business combinations with interested

shareowners. Other provisions in our Articles of

Incorporation or Bylaws that may discourage takeover attempts or make them

more difficult include:

●

Supermajority voting requirements to remove a director from office;

●

Provisions regarding the timing and content of shareowner proposals

and nominations;

●

Supermajority voting requirements to amend Articles of Incorporation

unless approval is received by a majority of

“disinterested directors”;

●

Absence of cumulative voting; and

●

Inability for shareowners to take action by written consent.

30

Reputational Risks

Damage to our reputation could harm our businesses, including our

competitive position and business prospects.

Our ability to attract and retain customers, clients, investors and employees

is impacted by our reputation. Harm to our reputation

can arise from various sources, including officer,

director or employee fraud, misconduct and unethical behavior,

security

breaches, litigation or regulatory outcomes, compensation practices, lending

practices, the suitability or reasonableness of

recommending particular trading or investment strategies, including

the reliability of our research and models, prohibiting clients

from engaging in certain transactions and employee sales practices. Additionally,

our reputation may be harmed by failing to

deliver products, subpar standards of service and quality expected by our

customers, clients and the community,

compliance

failures, the inability to manage technology change or maintain effective

data management, cyber incidents, internal and external

fraud, inadequacy of responsiveness to internal controls, unintended

disclosure of personal, proprietary or confidential

information, conflicts of interest and breach of fiduciary obligations, the

handling of health emergencies or pandemics, and the

activities of our clients, customers, counterparties and third parties, including

vendors. Our reputation may also be negatively

impacted by our environmental, social, and governance practices and

disclosures, our businesses and our customers, including

practices and disclosures related to climate change. Actions by the financial

services industry generally or by certain members or

individuals in the industry also can adversely affect our reputation.

In addition, adverse publicity or negative information posted

on social media by employees, the media or otherwise, whether or not factually

correct, may adversely impact our business

prospects or financial results.

We are subject to

complex and evolving laws and regulations regarding privacy,

know-your-customer requirements, data

protection, cross-border data movement and other matters. Principles

concerning the appropriate scope of consumer and

commercial privacy vary considerably in different jurisdictions,

and regulatory and public expectations regarding the definition

and scope of consumer and commercial privacy may remain fluid.

It is possible that these laws may be interpreted and applied by

various jurisdictions in a manner inconsistent with our current or future practices,

or that is inconsistent with one another.

If

personal, confidential or proprietary information of customers or clients

in our possession, or in the possession of third parties

(including their downstream service providers) or financial data aggregators,

is mishandled, misused or mismanaged, or if we do

not timely or adequately address such information, we may face regulatory,

reputational and operational risks which could

adversely affect our financial condition and results of operations.

We could suffer

reputational harm if we fail to properly identify and manage potential conflicts of interest.

Management of

potential conflicts of interest has become increasingly complex as we expand

our business activities through more numerous

transactions, obligations and interests with and among our clients. The failure

to adequately address, or the perceived failure to

adequately address, conflicts of interest could affect the

willingness of clients to use our products and services, or give rise to

litigation or enforcement actions, which could adversely affect our

business.

Our actual or perceived failure to address these and other issues, such as operational

risks, gives rise to reputational risk that could

harm us and our business prospects. Failure to appropriately address any

of these issues could also give rise to additional

regulatory restrictions, legal risks and reputational harm, which could, among

other consequences, increase the size and number

of litigation claims and damages asserted or subject us to enforcement

actions, fines and penalties, and cause us to incur related

costs and expenses.

Technology

Risks

We process, maintain,

and transmit confidential client information through our

information technology systems, such as

our online banking service.

Cybersecurity issues, such as security breaches and computer viruses, affecting

our

information technology systems or fraud related to our

debit card products could disrupt our business, result in the

unintended disclosure or misuse of confidential or proprietary

information, damage our reputation, increase our costs,

and cause losses.

We collect and

store sensitive data, including our proprietary business information and that of

our clients, and personally

identifiable information of our clients and employees, in our

information technology systems

.

We also provide

our clients the

ability to bank online.

The secure processing, maintenance, and transmission of this information

is critical to our operations.

Our

network, or those of our clients, could be vulnerable to unauthorized

access, computer viruses, phishing schemes and other

security problems.

Financial institutions and companies engaged in data processing have increasingly

reported breaches in the

security of their websites or other systems, some of which have involved sophisticated and

targeted attacks intended to obtain

unauthorized access to confidential information, destroy data, disrupt or degrade

service, sabotage systems or cause other damage.

31

We may be required

to spend significant capital and other resources to protect against the threat of

security breaches and

computer viruses or to alleviate problems caused by security breaches or viruses.

Security breaches and viruses could expose us to

claims, litigation and other possible liabilities. Any inability to prevent

security breaches or computer viruses could also cause

existing clients to lose confidence in our systems and could adversely affect

our reputation and our ability to generate deposits.

Additionally, fraud

losses related to debit and credit cards have risen in recent years due in large part

to growing and evolving

schemes to illegally use cards or steal consumer credit card information despite

risk management practices employed by the debit

and credit card industries. Many issuers of debit and credit cards have suffered

significant losses in recent years due to the theft of

cardholder data that has been illegally exploited for personal gain.

The potential for debit and credit card fraud against us or our clients and our third-party

service providers is a serious issue. Debit

and credit card fraud is pervasive, and the risks of cybercrime are complex

and continue to evolve. In view of the recent high-

profile retail data breaches involving client personal and financial information,

the potential impact on us and any exposure to

consumer losses and the cost of technology investments to improve security

could cause losses to us or our clients, damage to our

brand, and an increase in our costs.

Item 1B.

Unresolved Staff Comments

None.

Item 2.

Properties

We are headquartered

in Tallahassee, Florida.

Our executive office is in the Capital City Bank building located

on the corner of

Tennessee and Monroe

Streets in downtown Tallahassee.

The building is owned by CCB, but is located on land leased under a

long-term agreement.

At December 31, 2022, Capital City Bank had 58 banking offices.

Of these locations, we lease the land, buildings, or both at

seven locations and own the land and buildings at the remaining 51. CCHL had

33 loan production offices, all of which were

leased.

Capital City Strategic Wealth,

LLC. maintained five offices, all of which were leased.

Management’s Discussion and Analysis of

Financial Condition and Results of Operations under the section captioned

“Net Interest Income” and “Market Risk and Interest Rate Sensitivity” elsewhere

in this report for further discussion related to

interest rate sensitivity and our management of interest rate risk.

The fair value of our investments could decline which would cause a reduction

in shareowners’ equity.

A large portion of our investment securities portfolio

at December 31, 2021 has been designated as available-for-sale

pursuant to

U.S. generally accepted accounting principles relating to

accounting for investments. Such principles require that unrealized gains

and losses in the estimated value of the available-for-sale portfolio

be “marked to market” and reflected as a separate item in

shareowners’ equity (net of tax) as accumulated other comprehensive

income/losses. Shareowners’ equity will continue to reflect

the unrealized gains and losses (net of tax) of these investments. The

fair value of our investment portfolio may decline, causing a

corresponding decline in shareowners’ equity.

Management believes that several factors will affect

the fair values of our investment portfolio. These include, but are not limited

to, changes in interest rates or expectations of changes in interest rates, the

degree of volatility in the securities markets, inflation

rates or expectations of inflation and the slope of the interest rate yield

curve (the yield curve refers to the differences between

short-term and long-term interest rates; a positively sloped yield curve means short

-term rates are lower than long-term rates).

These and other factors may impact specific categories of the portfolio differently,

and we cannot predict the effect these factors

may have on any specific category.

20

Shares of our common stock are not an insured

deposit and may lose value.

The shares of our common stock are not a bank deposit and will not be insured or guaranteed

by the FDIC or any other

government agency.

Your

investment will be subject to investment risk, and you must be capable of affording

the loss of your

entire investment.

Limited trading activity for shares of our common

stock may contribute to price volatility.

While our common stock is listed and traded on the Nasdaq Global Select Market,

there has historically been limited trading

activity in our common stock.

The average daily trading volume of our common stock over the 12-month

period ending

December 31, 2021 was approximately 29,919 shares. Due to the limited

trading activity of our common stock, relativity small

trades may have a significant impact on the price of our common stock.

Securities analysts may not initiate coverage or continue to cover our common

stock, and this may have a negative impact

on its market price.

The trading market for our common stock will depend in part on the research

and reports that securities analysts publish about us

and our business. We do

not have any control over securities analysts, and they may not initiate coverage

or continue to cover our

common stock. If securities analysts do not cover our common stock,

the lack of research coverage may adversely affect its

market price. If we are covered by securities analysts, and our common stock is the subject of

an unfavorable report, our stock

price would likely decline. If one or more of these analysts ceases to cover

our Company or fails to publish regular reports on us,

we could lose visibility in the financial markets, which may cause our

stock price or trading volume to decline.

We may be adversely impacted by

the transition from LIBOR as a reference

rate.

The United Kingdom’s Financial

Conduct Authority and the administrator of LIBOR have announced

that the publication of the

most commonly used U.S. dollar London Interbank Offered Rate (“LIBOR”)

settings will cease to be published or cease to be

representative after June 30, 2023.

The publication of all other LIBOR settings ceased to be published as of December

31, 2021.

Given

consumer

protection, litigation, and reputation

risks, the bank regulatory

agencies

have

indicated

that entering

into

new

contracts that use LIBOR as a reference rate after December 31, 2021, would

create safety and soundness risks and that they

will examine bank practices accordingly.

Therefore, the agencies encouraged banks to cease entering into new contracts that use

LIBOR as a reference rate as soon as practicable and in any event by December 31,

2021.

Prior to December 31, 2021, we

discontinued originating LIBOR-based loans.

At December 31, 2021, we have 108 loans totaling approximately $77 million

that are indexed to LIBOR.

We believe our

current

portfolio of LIBOR based loan contracts contain the necessary fallback langu

age, however, the timing and manner in which each

customer’s contract transitions to a replacement index will vary

on a case-by-case basis.

We also have

$34 million in floating rate

investment securities that are indexed

to LIBOR.

We are currently

evaluating fallback language for each investment security.

Lastly, we have two

floating rate subordinated debenture notes totaling $53 million and a related interest

rate swap contract for

$30 million that are indexed to LIBOR (Refer to Note 12 – Long Term

Borrowings and Note 5 – Derivatives in our Consolidated

Financial Statements).

The subordinated debenture notes do not contain fallback language allowing

for a replacement rate, but

will convert to a fixed rate (LIBOR plus margin) at the time of

LIBOR cessation.

The interest rate swap contract adheres to ISDA

protocol which requires conversion to the fallback SOFR rate at the time of

LIBOR cessation.

There continues to be substantial

uncertainty as to the ultimate effects of the LIBOR transition,

including with respect to the acceptance and use of other

benchmark rates.

Since replacement rates are calculated differently,

payments under contracts referencing new rates will differ

from those referencing LIBOR, which may lead to increased volatility as compared

to LIBOR.

COVID-19 Risks

The ongoing global COVID-19 outbreak could harm our

business and results of operations. The magnitude and duration

of the pandemic’s impact will depend on future

developments, which are highly uncertain and

are difficult to predict.

The COVID-19 pandemic continues to negatively impact economic

and commercial activity and financial markets, both globally

and within the United States. Stay-at-home orders, travel restrictions and

closure of non-essential businesses and similar orders

imposed across the United States to restrict the spread of COVID-19 in 2021

resulted in significant business and operational

disruptions, including business closures, supply chain disruptions,

and mass layoffs and furloughs. Although local jurisdictions

were not subject to stay-at-home orders, worker shortages, vaccine

and testing requirements, new variants of COVID-19 and

other health and safety recommendations have impacted the ability of

businesses to return to pre-pandemic levels of activity and

employment.

21

The COVID-19 pandemic has had a specific impact

on our business, including: (1) causing some of our borrowers to be unable

to

meet existing payment obligations, particularly borrowers disproportionately

affected by business shutdowns and travel

restrictions;

(2) requiring us to increase our allowance for loan losses; and (3) affecting

consumer and business spending,

borrowing and savings habits. The ultimate risk posed by the COVID-19 pandemic

remains highly uncertain; however, COVID-

19 poses a material risk to our business, financial condition and results of

operations. Other factors likely to have an adverse

effect on our results of operations include:

●

risks to the capital markets due to the volatility in financial markets that

may impact the performance of our investment

securities portfolio;

●

effects on key employees, including operational management

personnel and those charged with preparing, monitoring

and evaluating our financial reporting and internal controls;

●

declines in demand for loans and other banking services and products, as well as increases

in our non-performing loans,

owing to the effects of COVID-19 in the markets served by the Bank

and on the business of borrowers of the Bank;

●

declines in demand resulting from adverse impacts of the virus on businesses deemed

to be “non-essential” by

governments in the markets served by the Bank;

●

reduced fees as we waive certain fees for our customers impacted by

the COVID-19 pandemic; and

●

higher operating costs, increased

cybersecurity risks and potential loss of productivity while some of our associates work

remotely.

Lastly, our commercial

real estate and multi-family loans are dependent on the profitable operation and mana

gement of the

properties securing such loans. The longer the pandemic persists, the

stronger the likelihood that COVID-19 could have a

significant adverse impact by reducing the revenue and cash flows of

our borrowers, impacting the borrowers’ ability to repay

their loans, increasing the risk of delinquencies and defaults, and reducing

the collateral value underlying the loans.

The extent to which the COVID-19 pandemic will ultimately affect

our financial condition and results of operations is unknown

and will depend, among other things, on the duration of the pandemic,

the actions undertaken by national, state and local

governments and health officials to contain the virus or mitigate

its effects, the safety and effectiveness of

the vaccines that have

been developed and the ability of pharmaceutical companies and governments

to continue to manufacture and distribute those

vaccines, changes to interest rates, and how quickly and to what extent economic

conditions improve and normal business and

operating conditions resume. Any one or a combination of these factors could

negatively impact our business, financial condition

and results of operations and prospects.

Credit Risks

Our loan portfolio includes loans with a higher risk of loss which could lead to higher loan

losses and nonperforming

assets.

We originate

commercial real estate loans, commercial loans, construction loans, vacant

land loans, consumer loans, and

residential mortgage loans primarily within our market area. Commercial

real estate, commercial, construction, vacant land, and

consumer loans may expose a lender to greater credit risk than traditional

fixed-rate fully amortizing loans secured by single-

family residential real estate because the collateral securing these loans may

not be sold as easily as single-family residential real

estate. In addition, these loan types tend to involve larger

loan balances to a single borrower or groups of related borrowers and

are more susceptible to a risk of loss during a downturn in the business cycle.

These loans also have historically had greater credit

risk than other loans for the following reasons:

●

Commercial Real Estate Loans

. Repayment is dependent on income being generated in amounts

sufficient to cover

operating expenses and debt service. These loans also involve greater risk because

they are generally not fully amortizing

over the loan period, but rather have a balloon payment due at maturity.

A borrower’s ability to make a balloon payment

typically will depend on the borrower’s ability to either

refinance the loan or timely sell the underlying property.

At

December 31, 2021, commercial mortgage loans comprised approximately

34.4% of our total loan portfolio.

●

Commercial Loans

. Repayment is generally dependent upon the successful operation

of the borrower’s business. In

addition, the collateral securing the loans may depreciate over time, be

difficult to appraise, be illiquid, or fluctuate in

value based on the success of the business. At December 31, 2021, commercial

loans comprised approximately 11.6%

of

our total loan portfolio.

22

●

Construction Loans

. The risk of loss is largely dependent on our initial estimate of

whether the property’s value at

completion equals or exceeds the cost of property construction and the

availability of take-out financing. During the

construction phase, a number of factors can result in delays or cost overruns.

If our estimate is inaccurate or if actual

construction costs exceed estimates, the value of the property securing

our loan may be insufficient to ensure full

repayment when completed through a permanent loan, sale of the property,

or by seizure of collateral.

At December 31,

2021, construction loans comprised approximately 9.0% of our total loan

portfolio.

●

Vacant

Land Loans

. Because vacant or unimproved land is generally held by the borrower

for investment purposes or

future use, payments on loans secured by vacant or unimproved land will typically

rank lower in priority to the borrower

than a loan the borrower may have on their primary residence or business. These

loans are susceptible to adverse

conditions in the real estate market and local economy.

At December 31, 2021, vacant land loans comprised

approximately 3.42% of our total loan portfolio.

●

HELOCs

. Our open-ended home equity loans have an interest-only draw period

followed by a five-year repayment

period of 0.75% of the principal balance monthly and a balloon payment

at maturity. Upon the commencement

of the

repayment period, the monthly payment can increase significantly,

thus, there is a heightened risk that the borrower will

be unable to pay the increased payment. Further,

these loans also involve greater risk because they are generally not fully

amortizing over the loan period, but rather have a balloon payment

due at maturity.

A borrower’s ability to make a

balloon payment may depend on the borrower’s ability

to either refinance the loan or timely sell the underlying property.

At December 31, 2021, HELOCs comprised approximately 9.7% of

our total loan portfolio.

●

Consumer Loans

. Consumer loans (such as automobile loans and personal lines of

credit) are collateralized, if at all,

with assets that may not provide an adequate source of payment of

the loan due to depreciation, damage, or loss. At

December 31, 2021, consumer loans comprised approximately 16.7

%

of our total loan portfolio, with indirect auto loans

making up a majority of this portfolio at approximately 93.1% of the total

balance.

The increased risks associated with these types of loans result in a correspondingly

higher probability of default on such loans (as

compared to fixed-rate fully amortizing single-family real estate loans).

Loan defaults would likely increase our loan losses and

nonperforming assets and could adversely affect our

allowance for loan losses and our results of operations.

Our loan portfolio is heavily concentrated in mortgage loans secured

by properties in Florida and Georgia which causes

our risk of loss to be higher than if we had a more geographically diversified

portfolio.

Our interest-earning assets are heavily concentrated in mortgage loans secured

by real estate, particularly real estate located in

Florida and Georgia.

At December 31, 2021, approximately 72% of our loans included real estate as a primary,

secondary, or

tertiary component of collateral. The real estate collateral in each case provides

an alternate source of repayment in the event of

default by the borrower; however, the value

of the collateral may decline during the time the credit is extended. If we

are required

to liquidate the collateral securing a loan during a period of reduced real

estate values to satisfy the debt, our earnings and capital

could be adversely affected.

Additionally, at

December 31, 2021, substantially all of our loans secured by real estate are secured by

commercial and residential

properties located in Northern Florida and Middle Georgia. The

concentration of our loans in these areas subjects us to risk that a

downturn in the economy or recession in these areas could result in a decrease

in loan originations and increases in delinquencies

and foreclosures, which would more greatly affect us than

if our lending were more geographically diversified. In addition, since

a large portion of our portfolio is secured by properties located

in Florida and Georgia, the occurrence of a natural disaster,

such

as a hurricane, or a man-made disaster could result in a decline in loan originations,

a decline in the value or destruction of

mortgaged properties and an increase in the risk of delinquencies, foreclosures

or loss on loans originated by us. We

may suffer

further losses due to the decline in the value of the properties underlying

our mortgage loans, which would have an adverse

impact on our results of operations and financial condition.

Our concentration in loans secured by real estate

may increase our credit losses, which would negatively

affect our

financial results.

Due to the lack of diversified industry within the markets served by CCB and the relatively

close proximity of our geographic

markets, we have both geographic concentrations as well as concentrations

in the types of loans funded. Specifically,

due to the

nature of our markets, a significant portion of the portfolio has historically been

secured with real estate. At December 31, 2021,

approximately 38% and 34% of our $1.931 billion loan portfolio was secured

by commercial real estate and residential real estate,

respectively. As of

this same date, approximately 9% was secured by property under construction.

23

In the event we are required to foreclose on a property securing one of our mortgage

loans or otherwise pursue our remedies in

order to protect our investment, we may be unable to recover funds in an amount

equal to our projected return on our investment

or in an amount sufficient to prevent a loss to us due to prevailing economic

conditions, real estate values and other factors

associated with the ownership of real property.

As a result, the market value of the real estate or other collateral underlying our

loans may not, at any given time, be sufficient to satisfy the outstanding

principal amount of the loans, and consequently,

we

would sustain loan losses.

An inadequate allowance for credit losses would reduce

our earnings.

We are exposed

to the risk that our clients may be unable to repay their loans according to their terms and

that any collateral

securing the payment of their loans may not be sufficient

to assure full repayment. This could result in credit losses that are

inherent in the lending business. We

evaluate the collectability of our loan portfolio and provide an allowance

for credit losses

that we believe is adequate based upon such factors as:

●

the risk characteristics of various classifications of loans;

●

previous loan loss experience;

●

specific loans that have loss potential;

●

delinquency trends;

●

estimated fair market value of the collateral;

●

current and future economic conditions; and

●

geographic and industry loan concentrations.

At December 31, 2021, our allowance for credit losses for loans held

for investment was $21.6 million, which represented

approximately 1.12% of our total loans held for investment.

We had $4.3

million in nonaccruing loans at December 31, 2021.

The allowance is based on management’s

reasonable estimate and may not prove sufficient to cover future

loan losses.

Although

management uses the best information available to make determinations

with respect to the allowance for credit losses, future

adjustments may be necessary if economic conditions differ

substantially from the assumptions used or adverse developments

arise with respect to our nonperforming or performing loans.

In addition, regulatory agencies, as an integral part of their

examination process, periodically review our estimated losses on loans.

Our regulators may require us to recognize additional

losses based on their judgments about information available to them at the

time of their examination.

Accordingly, the allowance

for credit losses may not be adequate to cover all future loan losses and significant

increases to the allowance may be required in

the future if, for example, economic conditions worsen.

A material increase in our allowance for credit losses would adversely

impact our net income and capital in future periods, while having the effect

of overstating our current period earnings.

We may incur significant costs associated

with the ownership of real property as a

result of foreclosures, which could

reduce our net income.

Since we originate loans secured by real estate, we may have to foreclose on

the collateral property to protect our investment and

may thereafter own and operate such property,

in which case we would be exposed to the risks inherent in the ownership of

real

estate.

The amount that we, as a mortgagee, may realize after a foreclosure is dependent

upon factors outside of our control, including,

but not limited to:

●

general or local economic conditions;

●

environmental cleanup liability;

●

neighborhood values;

●

interest rates;

●

real estate tax rates;

●

operating expenses of the mortgaged properties;

●

supply of and demand for rental units or properties;

●

ability to obtain and maintain adequate occupancy of the properties;

●

zoning laws;

●

governmental rules, regulations and fiscal policies; and

●

acts of God.

Certain expenditures associated with the ownership of real estate, including

real estate taxes, insurance and maintenance costs,

may adversely affect the income from the real estate. Furthermore,

we may need to advance funds to continue to operate or to

protect these assets. As a result, the cost of operating real property

assets may exceed the rental income earned from such

properties or we may be required to dispose of the real property at a loss.

24

Liquidity Risks

Liquidity risk could impair our ability to fund operations and jeopardize our

financial condition.

Effective liquidity management is essential for the operation

of our business. We require

sufficient liquidity to meet client loan

requests, client deposit maturities and withdrawals, payments on our

debt obligations as they come due and other cash

commitments under both normal operating conditions and other

unpredictable circumstances causing industry or general financial

market stress. If we are unable to raise funds through deposits, borrowings,

earnings and other sources, it could have a substantial

negative effect on our liquidity.

In particular, a majority of our liabilities during

2021 were checking accounts and other liquid

deposits, which are generally payable on demand or upon short notice.

By comparison, a substantial majority of our assets were

loans, which cannot generally be called or sold in the same time frame.

Although we have historically been able to replace

maturing deposits and advances as necessary,

we might not be able to replace such funds in the future, especially if

a large

number of our depositors seek to withdraw their accounts at the same time,

regardless of the reason. Our access to funding

sources in amounts adequate to finance our activities on terms that are acceptable

to us could be impaired by factors that affect us

specifically or the financial services industry or economy in general.

Factors that could negatively impact our access to liquidity

sources include a decrease in the level of our business activity as a result of

a downturn in the markets in which our loans are

concentrated, adverse regulatory action against us, or our inability to attract

and retain deposits. Our ability to borrow could also

be impaired by factors that are not specific to us, such as a disruption

in the financial markets or negative views and expectations

about the prospects for the financial services industry.

If we are unable to maintain adequate liquidity,

it could materially and

adversely affect our business, results of operations or

financial condition.

We may be unable to pay dividends in the

future.

In 2021, our Board of Directors declared four quarterly cash dividends.

Declarations of any future dividends will be contingent on

our ability to earn sufficient profits and to remain well capitalized,

including our ability to hold and generate sufficient

capital to

comply with the CET1 conservation buffer requirement.

In addition, due to our contractual obligations with the holders of our

trust preferred securities, if we defer the payment of accrued interest owed to the holders

of our trust preferred securities, we may

not make dividend payments to our shareowners.

Further, under applicable statutes and regulations,

CCB’s board of directors,

after charging-off bad debts, depreciation and

other

worthless assets, if any,

and making provisions for reasonably anticipated future losses on loans and other

assets, may quarterly,

semi-annually, or

annually declare and pay dividends to CCBG of up to the aggregate net income

of that period combined with

the CCB’s retained net income

for the preceding two years and, with the approval of the Florida Office

of Financial Regulation

and Federal Reserve, declare a dividend from retained net income which

accrued prior to the preceding two years.

Additional

state laws generally applicable to Florida corporations may also limit our ability

to declare and pay dividends. Thus, our ability to

fund future dividends may be restricted by state and federal laws and regulations.

Regulatory and Compliance Risks

We are subject to

extensive regulation, which could restrict our

activities and impose financial requirements or limitations

on the conduct of our business.

We are subject

to extensive regulation, supervision and examination by our regulators,

including the Florida Office of Financial

Regulation, the Federal

Reserve, and the FDIC. Our compliance with these industry regulations is costly

and restricts certain of

our activities, including payment of dividends, mergers

and acquisitions, investments, lending and interest rates charged on

loans,

interest rates paid on deposits, access to capital and brokered deposits and

locations of banking offices. If we are unable to meet

these regulatory requirements, our financial condition, liquidity and

results of operations would be materially and adversely

affected.

Our activities are also regulated under consumer protection laws applicable

to our lending, deposit and other activities. Many of

these regulations are intended primarily for the protection of our

depositors and the Deposit Insurance Fund and not for the

benefit of our shareowners. In addition to the regulations of the bank

regulatory agencies, as a member of the Federal Home Loan

Bank, we must also comply with applicable regulations of the Federal Housing

Finance Agency and the Federal Home Loan

Bank.

Our failure to comply with these laws and regulations could subject us to restrictions

on our business activities, fines and other

penalties, any of which could adversely affect our results

of operations, capital base and the price of our securities. Further,

any

new laws, rules and regulations could make compliance more difficult

or expensive or otherwise adversely affect our business and

financial condition. Please refer to the Section entitled “Business – Regulatory

Considerations” on page 10.

25

U.S. federal banking agencies may require us to

increase our regulatory capital, long-term

debt or liquidity requirements,

which could result in the need to issue additional qualifying securities or

to take other actions, such as to sell company

assets.

We are subject

to U.S. regulatory capital and liquidity rules. These rules, among other things,

establish minimum requirements to

qualify as a well-capitalized institution. If CCB fails to maintain its status as well

capitalized under the applicable regulatory

capital rules, the Federal Reserve will require us to agree to bring the bank

back to well-capitalized status. For the duration of

such an agreement, the Federal Reserve may impose restrictions on our

activities. If we were to fail to enter into or comply with

such an agreement or fail to comply with the terms of such agreement, the Federal

Reserve may impose more severe restrictions

on our activities, including requiring us to cease and desist activities permitted

under the Bank Holding Company Act of 1956.

Capital and liquidity requirements are frequently introduced and

amended. It is possible that regulators may increase regulatory

capital requirements, change how regulatory capital is calculated or increase

liquidity requirements.

In 2013, the Federal Reserve Board released its final rules which implement

in the United States the Basel III regulatory capital

reforms from the Basel Committee on Banking Supervision and certain

changes required by the Dodd-Frank Act. Under the final

rule, minimum requirements increased for both the quality and quantity of capital

held by banking organizations. Consistent with

the international Basel framework, the rule includes a new minimum

ratio of Common Equity Tier 1 Capital, or CET1, to

Risk-

Weighted Assets, or

RWA,

of 4.5% and a CET1 conservation buffer of 2.5% of

RWA

(which was fully phased-in in 2019) that

apply to all supervised financial institutions.

The CET1 conservation buffer requirement requires

us to hold additional CET1

capital in excess of the minimum required to meet the CET1 to

RWA

ratio requirement. The rule also, among other things, raised

the minimum ratio of Tier 1 Capital to

RWA

from 4% to 6% and included a minimum leverage ratio of 4% for all banking

organizations. The impact of the new capital rules requires

us to maintain higher levels of capital, which we expect will lower our

return on equity.

Additionally, if our CET1 to

RWA

ratio does not exceed the minimum required plus the additional CET1

conservation buffer,

we may be restricted in our ability to pay dividends or make other distributions of capital to our

shareowners.

Further changes to and compliance with the regulatory capital and liquidity

requirements may impact our operations by requiring

us to liquidate assets, increase borrowings, issue additional equity or other

securities, cease or alter certain operations, sell

company assets or hold highly liquid assets, which may adversely affect

our results of operations. We

may be prohibited from

taking capital actions such as paying or increasing dividends or repurchasing

securities.

Changes in accounting standards or assumptions in applying accounting

policies could adversely affect us.

Our accounting policies and methods are fundamental to how we record

and report our financial condition and results of

operations. Some of these policies require use of estimates and assumptions

that may affect the reported value of our assets or

liabilities and results of operations and are critical because they require management

to make difficult, subjective and complex

judgments about matters that are inherently uncertain. If those assumptions,

estimates or judgments were incorrectly made, we

could be required to correct and restate prior-period financial statements. Accounting

standard-setters and those who interpret the

accounting standards, the SEC, banking regulators and our independent

registered public accounting firm may also amend or even

reverse their previous interpretations or positions on how various standards

should be applied. These changes may be difficult to

predict and could impact how we prepare and report our financial statements. In

some cases, we could be required to apply a new

or revised standard retrospectively,

resulting in us revising prior-period financial statements.

Florida financial institutions, such as CCB, face a higher risk of noncompliance

and enforcement actions with the Bank

Secrecy Act and other anti-money laundering statutes and regulations.

Since September 11, 2001, banking regulators

have intensified their focus on anti-money laundering and Bank Secrecy Act

compliance requirements, particularly the anti-money laundering

provisions of the USA PATRIOT

Act. There is also increased

scrutiny of compliance with the rules enforced by the Office of Foreign

Assets Control, or OFAC. Since 2004,

federal banking

regulators and examiners have been extremely aggressive in their supervision

and examination of financial institutions located in

the State of Florida with respect to the institution’s

Bank Secrecy Act/anti-money laundering compliance. Consequently,

numerous formal enforcement actions have been instituted against financial

institutions. If CCB’s policies, procedures

and

systems are deemed deficient or the policies, procedures and systems of

the financial institutions that it has already acquired or

may acquire in the future are deficient, CCB would be subject to liability,

including fines and regulatory actions such as

restrictions on its ability to pay dividends and the necessity to obtain regulatory

approvals to proceed

with certain aspects of its

business plan, including its acquisition plans.

26

Fee revenues from overdraft protection

programs constitute a significant portion of our noninterest income

and may be

subject to increased supervisory scrutiny.

Revenues derived from transaction fees associated with overdraft protection

programs offered to our customers represent a

significant portion of our noninterest income. In 2021, the Company

collected approximately $9.9 million in net overdraft

transaction fees. In recent months, certain members of Congress and

the leadership of the CFPB have expressed a heightened

interest in bank overdraft protection programs. In December 2021,

the CFPB published a report providing data on banks’

overdraft and non-sufficient funds fee revenues as well as observations

regarding consumer protection issues relating to

participation in such programs. The CFPB has indicated that it intends to

pursue enforcement actions against banking

organizations, and their executives, that oversee

overdraft practices that are deemed to be unlawful. In addition, the Comptroller

of the Currency has identified potential options for reform of national

bank overdraft protection practices, including providing a

grace period before the imposition of a fee, refraining from charging

multiple fees in a single day and eliminating fees altogether.

In response to this increased congressional and regulatory scrutiny,

and in anticipation of enhanced supervision and enforcement

of overdraft protection practices in the future, certain banking organizations

have begun to modify their overdraft protection

programs, including by discontinuing the imposition of overdraft transaction

fees. These competitive pressures from our peers, as

well as any adoption by our regulators of new rules or supervisory guidance

or more aggressive examination and enforcement

policies in respect of banks’ overdraft protection practices, could cause

us to modify our program and practices in ways that may

have a negative impact on our revenue and earnings, which, in turn, could

have an adverse effect on our financial condition and

results of operations. In addition, as supervisory expectations and industry

practices regarding overdraft

Operational Risks

Many types of operational risks can affect our earnings negatively.

We regularly

assess and monitor operational risk in our businesses. Despite our efforts

to assess and monitor operational risk, our

risk management framework may not be effective in

all cases. Factors that can impact operations and expose us to risks varying in

size, scale and scope include:

●

failures of technological systems or breaches of security measures, including,

but not limited to, those resulting from

computer viruses or cyber-attacks;

●

unsuccessful or difficult implementation of computer

systems upgrades;

●

human errors or omissions, including failures to comply with applicable

laws or corporate policies and procedures;

●

theft, fraud or misappropriation of assets, whether arising from the intentional

actions of internal personnel or external

third parties;

●

breakdowns in processes, breakdowns in internal controls or failures

of the systems and facilities that support our

operations;

●

deficiencies in services or service delivery;

●

negative developments in relationships with key counterparties, third-party

vendors, or employees in our day-to-day

operations; and

●

external events that are wholly or partially beyond our control, such

as pandemics, geopolitical events, political unrest,

natural disasters or acts of terrorism.

While we have in place many controls and business continuity plans designed

to address these factors and others, these plans may

not operate successfully to mitigate these risks effectively.

If our controls and business continuity plans do not mitigate the

associated risks successfully,

such factors may have a negative impact on our business, financial condition

or results of

operations. In addition, an important aspect of managing our operational

risk is creating a risk culture in which all employees

fully understand that there is risk in every aspect of our business and the

importance of managing risk as it relates to their job

functions. We

continue to enhance our risk management program to support our risk culture. Nonetheless,

if we fail to provide the

appropriate environment that sensitizes all of our employees to managing

risk, our business could be impacted adversely.

27

We are subject to

certain operational risks, including, but not limited to, customer,

employee or third-party fraud and

data processing system failures and errors.

We rely on

the ability of our employees and systems to process a high number of transactions. Operational

risk is the risk of loss

resulting from our operations, including but not limited to, the risk of

fraud by employees or persons outside our company,

the

execution of unauthorized transactions by employees, errors relating

to transaction processing and technology,

breaches of our

internal control systems and compliance requirements. Insurance coverage

may not be available for such losses, or where

available, such losses may exceed insurance limits. This risk of loss also includes

the potential legal actions that could arise as a

result of operational deficiencies or as a result of non-compliance with applicable

regulatory standards, adverse business decisions

or their implementation, or customer attrition due to potential negative

publicity. In the event of a breakdown

in our internal

control systems, improper operation of systems or improper employee

actions, we could suffer financial loss, face regulatory

action, and/or suffer damage to our reputation.

Pandemics, natural disasters, global climate change, acts of

terrorism and global conflicts may have a negative impact

on

our business and operations.

Pandemics, including the continuing COVID-19 pandemic, natural

disasters, global climate change, acts of terrorism, global

conflicts or other similar events have in the past, and may in the future have,

a negative impact on our business and operations.

These events impact us negatively to the extent that they result in reduced capital

markets activity, lower asset price

levels, or

disruptions in general economic activity in the United States or abroad,

or in financial market settlement functions. In addition,

these or similar events may impact economic growth negatively,

which could have an adverse effect on our business and

operations and may have other adverse effects on us in

ways that we are unable to predict.

Our business operations could be disrupted if significant portions of

our workforce were unable to work effectively,

including

because of illness, quarantines, government actions, or other restrictions

in connection with the pandemic. Further,

work-from-

home and other modified business practices may introduce additional

operational risks, including cybersecurity and execution

risks, which may result in inefficiencies or delays, and may affect

our ability to, or the manner in which we, conduct our business

activities. Disruptions to our clients could result in increased risk of

delinquencies, defaults, foreclosures and losses on our loans.

The escalation of the pandemic may also negatively impact regional economic

conditions for a period of time, resulting in

declines in local loan demand, liquidity of loan guarantors, loan collateral

(particularly in real estate), loan originations and

deposit availability.

Litigation may adversely affect our results.

We are subject

to litigation in the ordinary course of business. Claims and legal actions, including

supervisory actions by our

regulators, could involve large monetary claims and significant

defense costs. The outcome of litigation and regulatory matters as

well as the timing of ultimate resolution are inherently difficult

to predict.

Actual legal and other costs of resolving claims may be greater than

our legal reserves. The ultimate resolution of a pending legal

proceeding, depending on the remedy sought and granted,

could materially adversely affect our results of operations and financial

condition.

In addition, governmental authorities have, at times, sought criminal

penalties against companies in the financial services sector

for violations, and, at times, have required an admission of wrongdoing

from financial institutions in connection with resolving

such matters. Criminal convictions or admissions of wrongdoing in

a settlement with the government can lead to greater exposure

in civil litigation and reputational harm.

Substantial legal liability or significant regulatory action against us could

have material adverse financial effects or cause

significant reputational harm, which adversely impact our business prospects.

Further, we may be exposed to substantial

uninsured liabilities, which could adversely affect

our results of operations and financial condition.

28

Strategic Risks

Our future success is dependent on our ability to compete effectively

in the highly competitive banking industry.

We face vigorous

competition for deposits, loans and other financial services in our market area

from other banks and financial

institutions, including savings and loan associations, savings banks,

finance companies and credit unions. A number of our

competitors are significantly larger than we are and have greater

access to capital and other resources. Many of our competitors

also have higher lending limits, more expansive branch networks, and

offer a wider array of financial products and services. To

a

lesser extent, we also compete with other providers of financial services, such

as money market mutual funds, brokerage firms,

consumer finance companies, insurance companies and gov

ernmental organizations, which may offer financial

products and

services on more favorable terms than we are able to. Many of our non-bank

competitors are not subject to the same extensive

regulations that govern our activities. As a result, these non-bank competitors have

advantages over us in providing certain

services. The effect of this competition may reduce or

limit our margins or our market share and may adversely affect

our results

of operations and financial condition.

Our directors, executive officers, and principal shareowners,

if acting together,

have substantial control over all matters

requiring shareowner approval,

including changes of control. Because Mr.

William G. Smith, Jr.

is a principal

shareowner and our Chairman, President, and Chief

Executive Officer and Chairman of CCB, he has substantial

control

over all matters on a day-to-day basis.

Our directors, executive officers, and principal shareowners

beneficially owned approximately 23.7%

of the outstanding shares of

our common stock at December 31, 2021.

William G. Smith, Jr.,

our Chairman, President and Chief Executive Officer

beneficially owned 17.2% of our shares as of that date.

Accordingly, these directors, executive

officers, and principal

shareowners, if acting together, may

be able to influence or control matters requiring approval by our shareowners,

including the

election of directors and the approval of mergers, acquisitions

or other extraordinary transactions. Moreover,

because William G.

Smith, Jr. is the Chairman, President,

and Chief Executive Officer of CCBG and Chairman of CCB, he has substantial

control

over all matters on a day-to-day basis, including the nomination and election

of directors.

These directors, executive officers, and principal

shareowners may also have interests that differ from yours and may

vote in a

way with which you disagree, and which may be adverse to your interests. The

concentration of ownership may have the effect of

delaying, preventing or deterring a change of control of our company,

could deprive our shareowners of an opportunity to receive

a premium for their common stock as part of a sale of our Company and might

ultimately affect the market price of our common

stock. You

may also have difficulty changing management, the composition

of the Board of Directors, or the general direction of

our Company.

Our Articles of Incorporation, Bylaws, and certain laws and regulations

may prevent or delay transactions you might

favor,

including a sale or merger of CCBG.

CCBG is registered with the Federal Reserve as a financial holding

company under the Bank Holding Company Act, or BHC Act.

As a result, we are subject to supervisory regulation and examination

by the Federal Reserve. The Gramm-Leach-Bliley Act, the

BHC Act, and other federal laws subject financial holding companies

to particular restrictions on the types of activities in which

they may engage, and to a range of supervisory requirements and activities, including

regulatory enforcement actions for

violations of laws and regulations.

Provisions of our Articles of Incorporation, Bylaws, certain laws and

regulations and various other factors may make it more

difficult and expensive for companies or persons to acquire control

of us without the consent of our Board of Directors. It is

possible, however, that you would want

a takeover attempt to succeed because, for example, a potential buyer could offer

a

premium over the then prevailing price of our common stock.

For example, our Articles of Incorporation permit our Board of Directors

to issue preferred stock without shareowner action. The

ability to issue preferred stock could discourage a company from

attempting to obtain control of us by means of a tender offer,

merger, proxy contest or

otherwise. We are also subject

to certain provisions of the Florida Business Corporation Act and our

Articles of Incorporation that relate to business combinations with interested

shareowners. Other provisions in our Articles of

Incorporation or Bylaws that may discourage takeover attempts or make them

more difficult include:

●

Supermajority voting requirements to remove a director from office;

●

Provisions regarding the timing and content of shareowner proposals

and nominations;

●

Supermajority voting requirements to amend Articles of Incorporation

unless approval is received by a majority of

“disinterested directors”;

●

Absence of cumulative voting; and

●

Inability for shareowners to take action by written consent.

29

Reputational Risks

Damage to our reputation could harm our businesses, including

our competitive position and business prospects.

Our ability to attract and retain customers, clients, investors and employees

is impacted by our reputation. Harm to our reputation

can arise from various sources, including officer,

director or employee fraud, misconduct and unethical behavior,

security

breaches, litigation or regulatory outcomes, compensation practices, lending

practices, the suitability or reasonableness of

recommending particular trading or investment strategies,

including the reliability of our research and models, prohibiting clients

from engaging in certain transactions and employee sales practices. Additionally,

our reputation may be harmed by failing to

deliver products, subpar standards of service and quality expected by

our customers, clients and the community,

compliance

failures, the inability to manage technology change or maintain effective

data management, cyber incidents, internal and external

fraud, inadequacy of responsiveness to internal controls, unintended

disclosure of personal, proprietary or confidential

information, conflicts of interest and breach of fiduciary obligations,

the handling of health emergencies or pandemics, and the

activities of our clients, customers, counterparties and third parties, including

vendors. Our reputation may also be negatively

impacted by our environmental, social, and governance practices and

disclosures,

our businesses and our customers, including

practices and disclosures related to climate change. Actions by the financial

services industry generally or by certain members or

individuals in the industry also can adversely affect our reputation.

In addition, adverse publicity or negative information posted

on social media by employees, the media or otherwise, whether or not

factually correct, may adversely impact our business

prospects or financial results.

We are subject

to complex and evolving laws and regulations regarding privacy,

know-your-customer requirements, data

protection, cross-border data movement and other matters. Principles

concerning the appropriate scope of consumer and

commercial privacy vary considerably in different

jurisdictions, and regulatory and public expectations regarding the definition

and scope of consumer and commercial privacy may remain fluid.

It is possible that these laws may be interpreted and applied by

various jurisdictions in a manner inconsistent with our current or future practices,

or that is inconsistent with one another.

If

personal, confidential or proprietary information of customers or

clients in our possession, or in the possession of third parties

(including their downstream service providers) or financial data aggregators,

is mishandled, misused or mismanaged, or if we do

not timely or adequately address such information, we may face regulatory,

reputational and operational risks which could

adversely affect our financial condition and

results of operations.

We could

suffer reputational harm if we fail to properly identify and manage

potential conflicts of interest. Management of

potential conflicts of interest has become increasingly complex as we expand

our business activities through more numerous

transactions, obligations and interests with and among our clients. The failure