# CAPITAL CITY BANK GROUP INC (CCBG) FY 2025 MD&A

Verbatim Item 7 Management's Discussion and Analysis from CAPITAL CITY BANK GROUP INC's 10-K for fiscal year 2025.

SEC filing source: https://www.sec.gov/Archives/edgar/data/726601/000072660126000007/ccbg-20251231.htm
Accession: 0000726601-26-000007
Filing date: 2026-02-27
Report date: 2025-12-31
Extracted from a later financial-section MD&A body after the formal Item 7 span was a short reference.
Confidence: high

Company profile: /company/CCBG/
All MD&A years: /company/CCBG/mda/
Previous year: /company/CCBG/mda/fy2024/ (FY 2024)

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, personal and commercial finance companies
 
,
 
peer-to-peer lending businesses and other types of

financial institutions. In addition to traditional competitors, we also face increasing
 
competition from a rapidly expanding group

of nontraditional financial service providers. These include established and
 
emerging wealth technology companies

(“wealthtechs”), financial technology companies (“fintechs”), technology
 
-enabled lenders, digital-only banks, crowdfunding

platforms, and mobile-based payment applications. These firms often
 
leverage advanced technologies, agile product development

cycles, and streamlined digital interfaces that allow them to deliver certain
 
financial products and services—such as unsecured

consumer loans, small business working-capital loans, digital wallets, and peer-to-peer
 
payments—more quickly or conveniently

than traditional banking institutions. Some fintech competitors operate
 
with lower overhead and, in some cases, are subject to

fewer regulatory requirements than banks and bank holding companies.
 
This can allow them to offer competitive pricing, faster

decision making or funding, and simplified user experiences. 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. Industry

consolidation also intensifies competition in our markets. Mergers
 
among financial institutions have created larger,

better-capitalized, and more geographically diverse
 
competitors with expanded digital capabilities and broader product sets. These

institutions may be better positioned to make significant investments in technology,
 
marketing, and infrastructure, which can

enhance their ability to compete for both clients and talent.
 
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

$1.195 billion, or 32.6% of our consolidated deposits at December
 
31, 2025.

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

2025

2024

2023

Florida

Alachua

4.8%

4.9%

5.1%

Bay

0.4%

0.2%

0.3%

Bradford

37.0%

34.3%

37.1%

Citrus

3.7%

4.3%

4.4%

Clay

2.8%

2.2%

2.4%

Dixie

22.6%

21.5%

17.5%

Gadsden

82.3%

81.8%

81.9%

Gilchrist

41.1%

41.6%

42.2%

Gulf

11.2%

11.2%

12.4%

Hernando

5.2%

5.2%

4.9%

Jefferson

27.2%

24.6%

28.3%

Leon

16.8%

15.5%

16.9%

Levy

24.3%

26.4%

26.4%

Madison

13.3%

13.5%

13.5%

Putnam

22.7%

28.3%

34.4%

St. Johns

0.7%

0.7%

0.8%

Suwannee

6.0%

6.4%

6.6%

Taylor

69.4%

73.7%

75.0%

Wakulla

14.7%

8.4%

8.4%

Walton

0.7%

0.6%

0.3%

Washington

7.0%

7.8%

9.2%

Georgia

Bibb

3.2%

3.1%

2.9%

Cobb

0.1%

0.1%

0.1%

Gwinnett

(2)

0.1%

0.0%

0.0%

Grady

15.0%

14.0%

13.8%

Laurens

6.3%

6.0%

6.7%

Troup

5.2%

5.4%

5.6%

Alabama

Chambers

8.2%

9.0%

8.6%

(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.

10

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.
 
We reinforce these
 
cultural priorities through

ongoing communication, leadership engagement across our markets,
 
and programs designed to strengthen associate connection,

belonging, and service to our clients and communities.

At December 31, 2025, we had approximately 902 full-time associates and approximately
 
25 part-time associates. At December

31, 2025, approximately 68% of our workforce was female, 32% 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.
 
All of our associates are hired

on the basis of their individual skills, qualifications, merit,
 
and in accordance with applicable law.

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 14 consecutive
 
years, a “Best Bank to Work
 
For” by American

Banker for 13 consecutive years and being named World’s
 
Best Banks, America’s Best Banks (ranked
 
#13) and America’s Best-

in-State Banks (Ranked #5 in Florida and Ranked #4 in Georgia)
 
by Forbes in 2025, a selection made from direct consumer

feedback and online reviews.

The average tenure of our associates is approximately 9.8 years, and
 
the average tenure of our management team is 24.3 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.
 
We periodically
 
evaluate our benefits and total rewards offerings to ensure
 
they remain competitive

within our industry and responsive to the evolving needs of our workforce.

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.
 
These tools also

support flexible work arrangements, increased collaboration, and the ability
 
to maintain continuity while meeting the needs of

associates and clients.

Talent
 
Acquisition, Development, Retention and Culture

. Our culture emphasizes our longstanding dedication to being respectful

to others and having a workforce that is representative of the communities we serve.
 
We believe in attracting,
 
retaining and

promoting quality talent. Our success depends on our ability to attract,
 
retain and develop employees, and our talent acquisition

teams partner with hiring managers in sourcing and presenting a slate of qualified
 
candidates to strengthen our organization.

Professional development is a key priority,
 
which is facilitated through our many corporate development initiatives including

extensive training programs, corporate mentoring, leadership programs,
 
educational reimbursement and professional speaker

series. Our talent acquisition, development and retention focuses on rewarding
 
merit and achievement while nurturing and

progressing skilled talent across various business segments.

Integral to our culture and values is a commitment to an equal-opportunity
 
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, produce more creative solutions,
 
offer better

client service and are vital to attracting and retaining talent. 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.

11

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.
 
We continue
 
to evaluate and enhance our well-being programs to support physical, emotional,

and financial wellness across our workforce.

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.
 
We remain committed to
 
providing tools, support and

flexibility that enable associates to perform their roles effectively
 
while managing personal commitments.

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
 
7,914 community service hours in 2025, and 9,542, and 10,526 hours in 202
 
4
 
and 2023, respectively.
 
Additionally,

the CCBG Foundation donated approximately $0.3 million in 2025,
 
2024 and 2023 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 2025, the CCBG Foundation made grants totaling
 
$173,000 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.
 
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.

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.

Capital City Bank Group, Inc.

We are extensively
 
regulated under federal and state law.
 
The following is a brief summary that does not purport to be a complete

description of all regulations that affect us or all aspects of those regulations.
 
This discussion is qualified in its entirety by

reference to the particular statutory and regulatory provisions described below
 
and is not intended to be an exhaustive description

of the statutes or regulations applicable to the Company’s
 
and the Bank’s business. In addition, proposals
 
to change the laws and

regulations governing the banking industry are frequently raised at both
 
the state and federal levels. The likelihood and timing of

any changes in these laws and regulations, and the impact such changes may
 
have on us and the Bank, are difficult to predict.

Regulatory agencies may issue enforcement actions, policy statements, interpretive
 
letters, and similar written guidance

applicable to us or to the Bank. Changes in applicable laws, regulations, or regulatory
 
guidance, or their interpretation by

regulatory agencies or courts may have a material adverse effect on
 
our and the Bank’s business, operations,
 
and earnings.

12

We and the Bank
 
must undergo regular examinations by the Board of Governors of the Federal
 
Reserve System (the “Federal

Reserve”), which will examine for adherence to a range of legal and regulatory
 
compliance responsibilities. A bank regulator

conducting an examination has complete access to the books and records
 
of the examined institution. The results of the

examination are confidential. Supervision and regulation of banks,
 
their holding companies, and affiliates is intended primarily

for the protection of depositors and clients, the Deposit Insurance Fund
 
(“DIF”) of the Federal Deposit Insurance Corporation

(“FDIC”), and the U.S. banking and financial system rather than holders
 
of our securities.

We are registered
 
as a bank holding company with the Federal Reserve under the Bank Holding Company
 
Act (“BHC Act”) and

have elected to be treated as a financial holding company.
 
As such, we are subject to comprehensive supervision and regulation

by the Federal Reserve and are subject to its regulatory reporting requirements.
 
Federal law subjects bank holding companies,

such as the Company, to
 
restrictions on the types of activities in which they may engage, and to a range of supervisory

requirements produce more creative solutions, offer better
 
client service and are vital to attracting and retaining talent. In addition,

the Florida Office of Financial Regulation (“Florida OFR”) regulates
 
bank holding companies that own Florida-chartered banks,

such as us, under the bank holding company laws of the State of Florida. Various
 
federal and state bodies regulate and supervise

our non-bank activities including our brokerage, investment advisory,
 
and insurance agency activities. These include, but are not

limited to, the Securities and Exchange Commission (“SEC”), the Financial
 
Industry Regulatory Authority,
 
federal and state

banking regulators, and various state regulators of insurance and brokerage activities.

Violations of laws and regulations,
 
or other unsafe and unsound practices, may result in regulatory agencies imposing
 
fines or

penalties, cease and desist orders, or taking other enforcement actions. Under
 
certain circumstances, these agencies may enforce

these remedies directly against officers, directors, employees, and
 
other parties participating in the affairs of a bank or bank

holding company.
 
Like all bank holding companies, we are regulated extensively under federal and
 
state law. Under federal and

state laws and regulations pertaining to the safety and soundness of insured depository
 
institutions, state banking regulators, the

Federal Reserve, and separately the FDIC as the insurer of bank deposits have the
 
authority to compel or restrict certain actions

on our part if they determine that we have insufficient capital or
 
other resources, or are otherwise operating in a manner that may

be deemed to be inconsistent with safe and sound banking practices. Under
 
this authority, our regulators
 
can require us or our

subsidiaries to enter into informal or formal supervisory agreements, including
 
board resolutions, memoranda of understanding,

written agreements, and consent or cease and desist orders pursuant to which
 
we would be required to take identified corrective

actions to address cited concerns and to refrain from taking certain actions.

If we become subject to and are unable to comply with the terms of any regulatory
 
actions or directives, supervisory agreements

or orders, then we could become subject to additional, heightened supervisory
 
actions and orders, possibly including prompt

corrective action restrictions and/or other regulatory actions, including
 
prohibitions on the payment of dividends on our common

stock and preferred stock. If our regulators were to take such supervisory actions,
 
then we could, among other things, become

subject to significant restrictions on our ability to develop any new business, as well as restrictions
 
on our existing business, and

we could be required to raise additional capital, dispose of certain assets and liabilities within
 
a prescribed period of time, or both.

The terms of any such action could have a material negative effect
 
on our business, reputation, operating flexibility,
 
financial

condition, and the value of our capital stock.

13

Permitted Activities

As a financial holding company,
 
we are permitted to engage directly or indirectly in a broader range of activities than
 
those

permitted for a bank holding company that has not elected to be a financial holding
 
company. Bank holding companies
 
are

generally restricted to engaging in the business of banking, managing,
 
or controlling banks and certain other activities determined

by the Federal Reserve to be closely related to banking. Financial holding companies
 
may also engage in activities that are

considered to be financial in nature, as well as those incidental or,
 
if determined by the Federal Reserve, complementary to

financial activities. If the Bank ceases to be “well capitalized” or “well managed”
 
under applicable regulatory standards, or if the

Bank receives a rating of less than satisfactory under the CRA, the Federal
 
Reserve may, among other
 
things, place limitations on

our ability to conduct these broader financial activities or,
 
if the deficiencies persist, require us to divest the banking subsidiary or

the businesses engaged in activities permissible only for financial holding
 
companies.

In addition, the Federal Reserve has the power to order a bank holding
 
company or its subsidiaries to terminate any nonbanking

activity or terminate its ownership or control of any nonbank subsidiary
 
when it has reasonable cause to believe that continuation

of such activity or such ownership or control constitutes a serious risk to the financial
 
safety, soundness, or stability of
 
any bank

subsidiary of that bank holding company.
 
As further described below, each of
 
the Company and the Bank is well-capitalized

under applicable regulatory standards as of December 31, 2025,
 
and the Bank has an overall rating of “Satisfactory” in its most

recent CRA evaluation.

Source of Strength Obligations

A bank holding company,
 
such as us, is required to act as a source of financial and managerial strength to its subsidiary bank.
 
The

term “source of financial strength” means the ability of a company,
 
such as us, that directly or indirectly owns or controls an

insured depository institution, such as the Bank, to provide financial
 
assistance to such insured depository institution in the event

of financial distress. The appropriate federal banking agency for
 
the depository institution (in the case of the Bank, this agency is

the Federal Reserve) may require reports from us to assess our ability
 
to serve as a source of strength and to enforce compliance

with the source of strength requirements by requiring us to provide financial
 
assistance to the Bank in the event of financial

distress. If we were to enter bankruptcy or become subject to the orderly
 
liquidation process established by the Dodd-Frank Wall

Street Reform and Consumer Protection Act (“Dodd-Frank Act”),
 
any commitment by us to a federal bank regulatory agency to

maintain the capital of the Bank would be assumed by the bankruptcy
 
trustee or the FDIC, as appropriate, and entitled to a

priority of payment. In addition, the FDIC provides that any insured
 
depository institution generally will be liable for any loss

incurred by the FDIC in connection with the default of, or any assistance provided
 
by the FDIC to, a commonly controlled insured

depository institution. The Bank is an FDIC-insured depository institution
 
and thus subject to these requirements.

Acquisitions

The BHC Act permits acquisitions of banks by bank holding companies,
 
such that we and any other bank holding company,

whether located in Florida or elsewhere, may acquire a bank located in
 
any other state, subject to certain deposit-percentage, age

of bank charter requirements, and other restrictions. The BHC Act requires that
 
a bank holding company obtain the prior approval

of the Federal Reserve before (i) acquiring direct or indirect ownership
 
or control of more than 5% of the voting shares of any

additional bank or bank holding company,
 
(ii) taking any action that causes an additional bank or bank holding company
 
to

become a subsidiary of the bank holding company,
 
or (iii) merging or consolidating with any other bank
 
holding company. The

Federal Reserve may not approve any such transaction that would result
 
in a monopoly or would be in furtherance of any

combination or conspiracy to monopolize or attempt to monopolize the business
 
of banking in any section of the United States, or

the effect of which may be substantially to lessen competition
 
or to tend to create a monopoly in any section of the country,
 
or

that in any other manner would be in restraint of trade unless the anticompetitive
 
effects of the proposed transaction are clearly

outweighed in the public interest by the probable effect of the transaction
 
in meeting the convenience and needs of the community

to be served. The Federal Reserve is also required to consider: (i) the financial and managerial
 
resources of the companies

involved, including pro forma capital ratios; (ii) the risk to the stability of
 
the United States banking or financial system; (iii) the

convenience and needs of the communities to be served, including performance
 
under the CRA; and (iv) the effectiveness of the

company in combatting money laundering.

Change in Control

Federal law restricts the amount of voting stock of a bank holding company
 
or a bank that a person may acquire without the prior

approval of banking regulators. Under the Change in Bank Control
 
Act and the regulations thereunder, a person or group
 
must

give advance notice to the Federal Reserve before acquiring control
 
of any bank holding company,
 
such as the Company, or

before acquiring control of any FDIC-insured bank, such as the Bank.
 
Upon receipt of such notice, the Federal Reserve may

approve or disapprove the acquisition. The Change in Bank Control Act creates
 
a rebuttable presumption of control if a person or

group acquires the power to vote 10% or more of our outstanding
 
common stock.

14

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 the Company are indirect changes in control
 
of the Bank.

The overall effect of such laws is to make it more difficult
 
to acquire a bank holding company and a bank by tender offer or

similar means than it might be to acquire control of another type of corporation.
 
Consequently, shareholders
 
of the Company may

be less likely to benefit from the rapid increases in stock prices that may result
 
from tender offers or similar efforts to acquire

control of other companies. Investors should be aware of these requirements
 
when acquiring shares of our stock.

Incentive Compensation

The Dodd-Frank Act required the federal banking agencies and
 
the SEC to establish joint rules or guidelines for financial

institutions with more than $1 billion in assets, such as us and the Bank,
 
which prohibit incentive compensation arrangements that

the agencies determine to encourage inappropriate risks by the institution.
 
The federal banking agencies issued proposed rules in

2011 and previously issued guidance
 
on sound incentive compensation policies. In 2016, the federal banking
 
agencies and the

SEC proposed rules that would, depending upon the assets of the institution, directly
 
regulate incentive compensation

arrangements and would require enhanced oversight and recordkeeping.
 
As of December 31, 2025, these rules have not been

implemented, although the SEC did adopt final rules implementing
 
the clawback provisions of the Dodd-Frank Act in 2022.

We

and the Bank have undertaken efforts to ensure that our
 
incentive compensation plans do not encourage inappropriate risks,

consistent with three key principles - that incentive compensation arrangements
 
should appropriately balance risk and financial

rewards, be compatible with effective controls and risk management,
 
and be supported by strong corporate governance.

Source of Strength Obligations

A bank holding company,
 
such as us, is required to act as a source of financial and managerial strength to its subsidiary bank.
 
The

term “source of financial strength” means the ability of a company,
 
such as us, that directly or indirectly owns or controls an

insured depository institution, such as the Bank, to provide financial
 
assistance to such insured depository institution in the event

of financial distress. The appropriate federal banking agency for
 
the depository institution (in the case of the Bank, this agency is

the Federal Reserve) may require reports from us to assess our ability
 
to serve as a source of strength and to enforce compliance

with the source of strength requirements by requiring us to provide financial
 
assistance to the Bank in the event of financial

distress. If we were to enter bankruptcy or become subject to the orderly
 
liquidation process established by the Dodd-Frank Act,

any commitment by us to a federal bank regulatory agency to maintain
 
the capital of the Bank would be assumed by the

bankruptcy trustee or the FDIC, as appropriate, and entitled to a priority
 
of payment. In addition, the FDIC provides that any

insured depository institution generally will be liable for any loss incurred
 
by the FDIC in connection with the default of, or any

assistance provided by the FDIC to, a commonly controlled insured
 
depository institution. The Bank is an FDIC-insured

depository institution and thus subject to these requirements.

Capital Requirements

We

and the Bank are required under federal law to maintain certain minimum
 
capital levels based on ratios of capital to total

assets and capital to risk-weighted assets. The required capital ratios are minimums,
 
and the Federal Reserve may determine that a

banking organization based on its size, complexity,
 
or risk profile must maintain a higher level of capital in order to operate in a

safe and sound manner.
 
Risks such as concentration of credit risks and the risk arising from nontraditional activities,
 
as well as the

institution’s exposure
 
to a decline in the economic value of its capital due to changes in interest rates, and an
 
institution’s ability

to manage those risks, are important factors that are to be taken into account
 
in assessing an institution’s overall
 
capital adequacy.

The following is a brief description of the relevant provisions of these capital
 
rules and their potential impact on our capital levels.

We

and the Bank are subject to the following risk-based capital ratios: a CET1 risk-based
 
capital ratio, a Tier 1 risk-based capital

ratio, which includes CET1 and additional Tier
 
1 capital, and a total risk-based capital ratio, which includes Tier
 
1 and Tier 2

capital. CET1 is primarily comprised of the sum of common stock instruments
 
and related surplus net of treasury stock plus

retained earnings less certain adjustments and deductions, including
 
with respect to goodwill, intangible assets, mortgage

servicing assets, and deferred tax assets subject to temporary timing differences.
 
Additional Tier 1 capital is primarily comprised

of noncumulative perpetual preferred stock. Tier
 
2 capital consists of instruments disqualified from Tier
 
1 capital, including

qualifying subordinated debt and a limited amount of loan loss reserves up
 
to a maximum of 1.25% of risk-weighted assets,

subject to certain eligibility criteria. The capital rules also define the
 
risk-weights assigned to assets and off-balance sheet items to

determine the risk-weighted asset components of the risk-based capital
 
rules, including, for example, certain “high volatility”

commercial real estate, past due assets, structured securities, and equity
 
holdings.

15

The leverage capital ratio, which serves as a minimum capital standard,
 
is the ratio of Tier 1 capital to quarterly average
 
total

consolidated assets net of goodwill, certain other intangible assets, and certain
 
required deduction items. The required minimum

leverage ratio for all banks and bank holding companies is 4%.

In addition, effective January 1, 2019, the capital rules required
 
a capital conservation buffer of 2.5% above each of the minimum

risk-based capital ratio requirements (CET1, Tier
 
1, and total capital), which is designed to absorb losses during periods of

economic stress. These buffer requirements must be
 
met for a bank or bank holding company to be able to pay dividends, engage

in share buybacks, or make discretionary bonus payments to executive
 
management without restriction.

The Federal Deposit Insurance Corporation Improvement Act (“FDICIA”),
 
among other things, requires the federal bank

regulatory agencies to take “prompt corrective action” regarding depository
 
institutions that do not meet minimum capital

requirements. FDICIA establishes five regulatory capital tiers: “well capitalized,”
 
“adequately capitalized,” “undercapitalized,”

“significantly undercapitalized,” and “critically undercapitalized.” A depository
 
institution’s capital tier will depend
 
upon how its

capital levels compare to various relevant capital measures and certain
 
other factors, as established by regulation. FDICIA

generally prohibits a depository institution from making any capital distribution
 
(including payment of a dividend) or paying any

management fee to its holding company if the depository institution would
 
thereafter be undercapitalized. The FDICIA imposes

progressively more restrictive restraints on operations, management,
 
and capital distributions depending on the category in which

an institution is classified. Undercapitalized depository institutions are
 
subject to restrictions on borrowing from the Federal

Reserve System. In addition, undercapitalized depository institutions
 
may not accept brokered deposits absent a waiver from the

FDIC, are subject to growth limitations, and are required to submit capital
 
restoration plans for regulatory approval. A depository

institution's holding company must guarantee any required capital restoration
 
plan up to an amount equal to the lesser of 5% of

the depository institution's assets at the time it becomes undercapitalized
 
or the amount of the capital deficiency when the

institution fails to comply with the plan. Federal banking agencies may not
 
accept a capital plan without determining, among

other things, that the plan is based on realistic assumptions and is likely to
 
succeed in restoring the depository institution's capital.

If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly
 
undercapitalized.

To be well-capitalized,
 
the Bank must maintain at least the following capital ratios:

●

6.5% CET1 to risk-weighted assets;

●

8.0% Tier 1 capital to risk-weighted assets;

●

10.0% Total capital to
 
risk-weighted assets; and

●

5.0% leverage ratio.

The Federal Reserve has not yet revised the well-capitalized standard
 
for bank holding companies to reflect the higher capital

requirements imposed under the current capital rules applicable to
 
banks. For purposes of the Federal Reserve’s
 
Regulation

Y,

including determining whether a bank holding company meets the requirements
 
to be a financial holding company,
 
bank holding

companies, such as the Company,
 
must maintain a Tier 1 risk-based capital ratio of 6.0%
 
or greater and a total risk-based capital

ratio of 10.0% or greater to be well-capitalized. Also, the Federal Reserve
 
may require bank holding companies, including the

Company, to maintain
 
capital ratios substantially in excess of mandated minimum levels depending
 
upon general economic

conditions and a bank holding company’s
 
particular condition, risk profile, and growth plans.

Failure to be well-capitalized or to meet minimum capital requirements
 
could result in certain mandatory and possible additional

discretionary actions by regulators that, if undertaken, could have an adverse
 
material effect on our operations or financial

condition. Failure to meet minimum capital requirements could also result
 
in restrictions on the Company’s
 
or the Bank’s ability

to pay dividends or otherwise distribute capital or to receive regulatory
 
approval of applications or other restrictions on its growth.

In 2025, the Company’s and
 
the Bank’s regulatory capital ratios were above
 
the applicable well-capitalized standards and met the

capital conservation buffer.
 
Based on current estimates, we expect the Company and the Bank to exceed
 
all applicable well-

capitalized regulatory capital requirements and the capital conservation
 
buffer in 2026.

Payment of Dividends

We

are a legal entity separate and distinct from the Bank and our other subsidiaries.
 
Under the laws of the State of Florida, we, as

a business corporation, may declare and pay dividends in cash or property
 
unless the payment or declaration would be contrary to

restrictions contained in our Articles of Incorporation, or unless, after
 
payment of the dividend, we would not be able to pay our

debts when they become due in the usual course of our business or our
 
total assets would be less than the sum of our total

liabilities. In addition, we are also subject to federal regulatory capital requirements
 
that effectively limit the amount of cash

dividends that we may pay.

16

Under a Federal Reserve policy adopted in 2009, the board of directors
 
of a bank holding company must consider different factors

to ensure that its dividend level is prudent relative to maintaining a strong
 
financial position and is not based on overly optimistic

earnings scenarios, such as potential events that could affect its ability
 
to pay, while still maintaining
 
a strong financial position.

As a general matter, the Federal Reserve has indicated
 
that the board of directors of a bank holding company should consult with

the Federal Reserve and eliminate, defer,
 
or significantly reduce the bank holding company’s
 
dividends if:

●

its net income available to shareholders for the past four quarters, net
 
of dividends previously paid during that period, is

not sufficient to fully fund the dividends;

●

its prospective rate of earnings retention is not consistent with its capital needs and
 
overall current and prospective

financial condition; or

●

it will not meet, or is in danger of not meeting, its minimum regulatory capital
 
adequacy ratios.

The primary sources of funds for our payment of dividends to our shareholders
 
are cash on hand and dividends from the Bank and

our non-bank subsidiaries. The Bank is subject to legal limitations on
 
the frequency and amount of dividends that can be paid to

the Company. The
 
Federal Reserve may restrict the ability of the Bank to pay dividends if such payments would
 
constitute an

unsafe or unsound banking practice.

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.

In addition, we and the Bank are subject to various general regulatory policies
 
and requirements relating to the payment of

dividends, including requirements to maintain adequate capital above
 
regulatory minimums. The Federal Reserve has indicated

that paying dividends that deplete a bank’s
 
capital base to an inadequate level would be an unsafe and unsound banking
 
practice.

The Federal Reserve has indicated that depository institutions and their
 
holding companies should generally pay dividends only

out of current operating earnings.

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.

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 FDIC up to the maximum extent permitted

by law, and the FDIC has certain
 
supervisory enforcement powers over us.

17

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, 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 DIF.

Safety and Soundness Standards / Risk Management

The Federal Deposit Insurance Act requires the federal bank regulatory
 
agencies to prescribe, by regulation or guideline,

operational and managerial standards for all insured depository institutions
 
relating to: (i) internal controls; (ii) information

systems and audit systems; (iii) loan documentation; (iv) credit underwriting;
 
(v) interest rate risk exposure; and (vi) asset quality.

The federal banking agencies have adopted regulations and Interagency
 
Guidelines Establishing Standards for Safety and

Soundness to implement these required standards. These guidelines set forth
 
the safety and soundness standards used to identify

and address problems at insured depository institutions before capital
 
becomes impaired. Under the regulations, if a regulator

determines that a bank fails to meet any standards prescribed by
 
the guidelines, the regulator may require the bank to submit an

acceptable plan to achieve compliance, consistent with deadlines for
 
the submission and review of such safety and soundness

compliance plans.

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.

Insurance of Accounts and Other Assessments

The Bank’s deposits are insured
 
by the FDIC’s DIF up to the limits under
 
applicable law, which currently
 
are set at $250,000 per

depositor, per insured bank, for each account
 
ownership category. The Bank
 
is subject to FDIC assessments for its deposit

insurance. The FDIC calculates quarterly deposit insurance assessments based
 
on an institution’s average
 
total consolidated assets

less its average tangible equity and applies one of four risk categories determined
 
by reference to its capital levels, supervisory

ratings, and certain other factors. The assessment rate schedule can change
 
from time to time, at the discretion of the FDIC,

subject to certain limits.

As of June 30, 2020, the DIF reserve ratio fell to 1.30%, below the statutory
 
minimum of 1.35%. The FDIC, as required under the

Federal Deposit Insurance Act, established a plan on September 15, 2020
 
to restore the DIF reserve ratio to meet or exceed the

statutory minimum of 1.35% within eight years. On October 18, 2022,
 
the FDIC adopted an amended restoration plan to increase

the likelihood that the reserve ratio would be restored to at least 1.35% by September
 
30, 2028. The FDIC's amended restoration

plan increased the initial base deposit insurance assessment rate schedules
 
uniformly by 2 bps, beginning with the first quarterly

assessment period of 2023. The FDIC could further increase the deposit
 
insurance assessments for certain insured depository

institutions, including the Bank, if the DIF reserve ratio is not restored as projected.

In November 2023, the FDIC approved a final rule to implement a special assessment to
 
recover the loss to the DIF associated

with several bank failures that occurred during the first half of 2023. The assessment base
 
for the special assessment is equal to a

bank's uninsured deposits reported as of December 31, 2022, adjusted
 
to exclude the first $5 billion, to be collected at an annual

rate of approximately 13.4 bps for an anticipated total of eight quarterly
 
assessment periods, beginning with the first quarterly

assessment period of 2024. 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 Bank.

18

Insurance of deposits may be terminated by the FDIC upon a finding that the
 
institution has engaged in unsafe and unsound

practices, is in an unsafe or unsound condition to continue operations, or has violated
 
any applicable law, regulation,
 
rule, order,

or condition imposed by a bank’s federal
 
regulatory agency. In addition,
 
the Federal Deposit Insurance Act provides that, in the

event of the liquidation or other resolution of an insured depository institution,
 
the claims of depositors of the institution,

including the claims of the FDIC as subrogee of insured depositors, and certain
 
claims for administrative expenses of the FDIC as

a receiver, will have priority over other general
 
unsecured claims against the institution, including those of the parent bank

holding company.

Transactions with Affiliates and
 
Insiders

The Bank is subject to restrictions on extensions of credit and certain
 
other transactions between the Bank and the Company or

any nonbank affiliate. Generally,
 
these covered transactions with either the Company or any affiliate
 
are limited to 10% of the

Bank’s capital and surplus, and all such
 
transactions between the Bank and the Company and all of its nonbank affiliates

combined are limited to 20% of the Bank’s
 
capital and surplus. Loans and other extensions of credit from the Bank to the

Company or any affiliate generally are required
 
to be secured by eligible collateral in specified amounts. In addition, any

transaction between the Bank and the Company or any affiliate are
 
required to be on an arm’s length
 
basis. Federal banking laws

also place similar restrictions on certain extensions of credit by insured banks,
 
such as the Bank, to their directors, executive

officers, and principal shareholders.

Anti-Tying Restrictions

In general, a bank may not extend credit, lease, sell property,
 
or furnish any services or fix or vary the consideration for them on

the condition that (i) the client obtain or provide some additional credit, property,
 
or services from or to the bank or bank holding

company or their subsidiaries or (ii) the client not obtain some other credit, property,
 
or services from a competitor, except to the

extent reasonable conditions are imposed to assure the soundness of
 
the credit extended. A bank may,
 
however, offer combined-

balance products and may otherwise offer more favorable
 
terms if a client obtains two or more traditional bank products. The law

also expressly permits banks to engage in other forms of tying and authorizes
 
the Federal Reserve Board to grant additional

exceptions by regulation or order.
 
Also, certain foreign transactions are exempt from the general rule.

Community Reinvestment Act

The Bank is subject to the provisions of the CRA, which imposes a continuing and affirmative
 
obligation, consistent with safe and

sound operation, to help meet the credit needs of entire communities where the
 
bank accepts deposits, including low- and

moderate-income neighborhoods. The Federal Reserve’s
 
assessment of the Bank’s CRA record
 
is made available to the public.

CRA agreements with private parties must be disclosed and annual
 
CRA reports must be made to the Federal Reserve. A bank

holding company will not be permitted to become or remain a financial
 
holding company and no new activities authorized under

GLB may be commenced by a holding company or by a bank financial subsidiary
 
if any of its bank subsidiaries received less than

a “satisfactory” CRA rating in its latest CRA examination. Federal CRA regulations
 
require, among other things, that evidence of

discrimination against applicants on a prohibited basis and illegal or abusive lending
 
practices be considered in the CRA

evaluation. The Bank has a rating of “Satisfactory” in its most recent CRA evaluation.

In 2023 the Federal Reserve, OCC, and FDIC issued a final rule to modernize their
 
respective CRA regulations. The revised rules

would substantially alter the methodology for assessing compliance with
 
the CRA, with material aspects taking effect January
 
1,

2026 and revised data reporting requirements taking effect
 
January 1, 2027. The revised CRA regulations have been subject to an

injunction since March 29, 2024. On July 16, 2025, the Federal Reserve, OCC, and FDIC
 
issued a joint proposal to rescind the

2023 modernization rule. The agencies continue to apply the CRA rules as they existed
 
before the 2023 modernization,

considering the injunction and pending finalization of the recission of the modernization
 
rule.

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.

19

At December 31, 2025, CCB’s ratio
 
of construction, land development and other land loans to total tier 1 risk-based
 
capital was

49%, its ratio of commercial real estate loans to total tier 1 risk-based capital was 119%
 
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.

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

A continued focus of governmental policy relating to financial institutions in recent
 
years has been combating money laundering

and terrorist financing. The USA PATRIOT
 
Act broadened the application of anti-money laundering
 
regulations to apply to

additional types of financial institutions such as broker-dealers, investment advisors,
 
and insurance companies, and strengthened

the ability of the U.S. government to help prevent, detect, and prosecute
 
international money laundering and the financing of

terrorism. The principal provisions of Title
 
III of the USA PATRIOT
 
Act require that regulated financial institutions, including

state member banks: (i) establish an anti-money laundering program
 
that includes training and audit components; (ii) comply with

regulations regarding the verification of the identity of any person seeking
 
to open an account; (iii) take additional required

precautions with non-U.S. owned accounts; and (iv) perform certain
 
verification and certification of money laundering risk for

their foreign correspondent banking relationships. Failure of a
 
financial institution to comply with the USA PATRIOT
 
Act’s

requirements could have serious legal and reputational consequences
 
for the institution. The Bank has augmented its systems and

procedures to meet the requirements of these regulations and will continue
 
to revise and update its policies, procedures, and

controls to reflect changes required by law.

FinCEN has adopted rules that require financial institutions to obtain beneficial
 
ownership information with respect to legal

entities with which such institutions conduct business, subject to certain exclusions
 
and exemptions. Bank regulators are focusing

their examinations on anti-money laundering compliance, and we continue
 
to monitor and augment, where necessary,
 
our anti-

money laundering compliance programs. Banking regulators will consider
 
compliance with the USA PATRIOT
 
Act’s money

laundering provisions in acting upon merger and acquisition
 
proposals. Bank regulators routinely examine institutions for

compliance with these obligations and have been active in imposing
 
cease and desist and other regulatory orders and civil money

penalties against institutions found to be violating these obligations.
 
Sanctions for violations of the USA PATRIOT
 
Act can be

imposed in an amount equal to twice the sum involved in the violating transaction
 
up to $1 million. 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.

Economic Sanctions

OFAC is responsible
 
for helping to ensure that U.S. entities do not engage in transactions with certain
 
prohibited parties, as

defined by various executive orders and acts of Congress. OFAC
 
publishes, and routinely updates, lists of names of persons and

organizations suspected of aiding, harboring, or engaging
 
in terrorist acts, including the Specially Designated Nationals and

Blocked Persons List. If we find a name on any transaction, account, or wire transfer
 
that is on an OFAC list, we must undertake

certain specified activities, which could include blocking or freezing
 
the account or transaction requested, and we must notify the

appropriate authorities.

20

Privacy, Credit Reporting, and Data Security

The Gramm-Leach-Bliley Act (“GLB”) generally prohibits disclosure
 
of non-public consumer information to non-affiliated third

parties unless the consumer has been given the opportunity to object and
 
has not objected to such disclosure. Financial institutions

are further required to disclose their privacy policies to clients annually.
 
Financial institutions, however, will be required
 
to

comply with state law if it is more protective of consumer privacy than the
 
GLB. The GLB also directed federal regulators to

prescribe standards for the security of consumer information. The
 
Bank is subject to such standards, as well as standards for

notifying clients in the event of a security breach. The Bank utilizes credit bureau
 
data in underwriting activities. Use of such data

is regulated under the Fair Credit Reporting Act and Regulation V on
 
a uniform, nationwide basis, including credit reporting,

prescreening, and sharing of information between affiliates
 
and the use of credit data. The Fair and Accurate Credit Transactions

Act, which amended the Fair Credit Reporting Act, permits states to enact identity
 
theft laws that are not inconsistent with the

conduct required by the provisions of that Act. Clients must be notified
 
when unauthorized disclosure involves sensitive client

information that may be misused. On November 18, 2021, the federal
 
banking agencies issued a new rule effective in 2022 that

requires banks to notify their primary federal regulator within 36
 
hours of a “computer-security incident” that rises to the level of

a “notification incident.” In addition, effective in December 2023,
 
the SEC issued a new rule that generally requires SEC

registrants to disclose on Form 8-K certain 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.
 
The SEC rule

also requires registrants to disclose certain information concerning
 
cybersecurity risk management, strategy and governance on

Form 10-K.

The federal banking regulators regularly issue guidance regarding
 
cybersecurity intended to enhance cyber risk management

standards among financial institutions. As a result, financial institutions, like the
 
Company and the Bank, are expected to establish

multiple lines of defense and to ensure their risk management processes address
 
the risk posed by potential threats to the

institution. A financial institution’s
 
management is expected to maintain sufficient processes to effectively
 
respond and recover

the institution’s operations after
 
a cyber-attack. A financial institution is also expected to develop
 
appropriate processes to enable

recovery of data and business operations if a critical service provider
 
of the institution falls victim to this type of cyber-attack. In

addition, effective in December 2023, the SEC enhanced and standardized
 
the disclosure obligations related to a registrant's

cybersecurity risk management, strategy,
 
and governance. Our information security protocols are designed in part to adhere to
 
the

requirements of bank regulatory guidance and these enhanced SEC disclosure requirements.
 
See "Part I - Item 1C. Cybersecurity"

of this Report for additional information on cybersecurity.

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

providing detailed requirements with respect to these programs, including data
 
encryption requirements. Many states have also

recently implemented or modified their data breach notification 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 clients are located.

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.

21

Consumer Laws and Regulations

Activities of the Bank are subject to a variety of statutes and regulations designed
 
to protect consumers. These laws and

regulations include, among numerous other things, provisions that:

●

limit the interest and other charges collected or contracted for by
 
the Bank, including rules respecting the terms of credit

cards and of debit card overdrafts;

●

govern the Bank’s disclosures of
 
credit terms to consumer borrowers;

●

require the Bank to provide information to enable the public and public officials
 
to determine whether it is fulfilling its

obligation to help meet the housing needs of the communities it serves;

●

prohibit the Bank from discriminating on the basis of race, creed, or other prohibited
 
factors when it makes decisions to

extend credit;

●

govern the manner in which the Bank may collect consumer debts; and

●

prohibit unfair, deceptive, or abusive
 
acts or practices in the provision of consumer financial products and services.

The Consumer Financial Protection Bureau (“CFPB”) adopted a rule
 
that implements the ability-to-repay and qualified mortgage

provisions of the Dodd-Frank Act (the “ATR/QM
 
rule”), which requires lenders to consider,
 
among other things, income,

employment status, assets, payment amounts, and credit history before
 
approving a mortgage, and provides a compliance “safe

harbor” for lenders that issue certain “qualified mortgages.” The ATR/QM
 
rule defines a “qualified mortgage” to have certain

specified characteristics and generally prohibits loans with negative amortization,
 
interest-only payments, balloon payments, or

terms exceeding 30 years from being qualified mortgages. The
 
rule also establishes general underwriting criteria for qualified

mortgages, including that monthly payments be calculated based on the highest
 
payment that will apply in the first five years of

the loan and that the borrower have a total debt-to-income ratio that is less than or
 
equal to 43%. While “qualified mortgages” will

generally be afforded safe harbor status, a rebuttable presumption
 
of compliance with the ability-to-repay requirements will attach

to “qualified mortgages” that are “higher priced mortgages” (which are generally
 
subprime loans). In addition, the securitizer of

asset-backed securities must retain not less than 5% of the credit risk of the assets collateralizing
 
the asset-backed securities,

unless subject to an exemption for asset-backed securities that are collateralized
 
exclusively by residential mortgages that qualify

as “qualified residential mortgages.”

The CFPB has also issued rules to implement requirements of the Dodd-Frank
 
Act pertaining to mortgage loan origination

(including with respect to loan originator compensation and loan originator qualifications)
 
as well as integrated mortgage

disclosure rules. In addition, the CFPB has issued rules that require servicers
 
to comply with certain standards and practices with

regard to error correction; information disclosure; force-placement
 
of insurance; information management policies and

procedures; requiring information about mortgage loss mitigation options be
 
provided to delinquent borrowers; providing

delinquent borrowers access to servicer personnel with continuity of contact
 
about the borrower’s mortgage loan account; and

evaluating borrowers’ applications for available loss mitigation options. These
 
rules also address initial rate adjustment notices for

adjustable-rate mortgages, periodic statements for residential mortgage
 
loans, and prompt crediting of mortgage payments and

response to requests for payoff amounts.

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.

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.

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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.

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