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

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------------|

| CAPITAL CITY BANK GROUP, INC.                          |
|--------------------------------------------------------|
| (Exact name of registrant as specified in its charter) |

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

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

| (850) 402-7000                                       |
|------------------------------------------------------|
| (Registrant's telephone number, including area code) |

| Large accelerated filer o | Accelerated filer x | Non-accelerated filer o                     | Smaller reporting company o |
|---------------------------|---------------------|---------------------------------------------|-----------------------------|
|                      |                | (Do not check if smaller reporting company) |                        |

----

| PART I   – Financial Information | Page                                                                                                  |   |
|---------------------------------------------|-------------------------------------------------------------------------------------------------------|--------|
|                                        |                                                                                                  |
| Item 1.                                     | Consolidated Financial Statements (Unaudited)                                                         |   |   |
|                                        | Consolidated Statements of Financial Condition – June 30, 2010 and December 31, 2009            | 4      |   |
|                                        | Consolidated Statements of Income – Three and Six Months Ended June 30, 2010 and 2009           | 5      |   |
|                                        | Consolidated Statement of Changes in Shareowners’ Equity – Six Months Ended June 30, 2010 | 6      |   |
|                                        | Consolidated Statements of Cash Flow – Six Months Ended June 30, 2010 and 2009                  | 7      |   |
|                                        | Notes to Consolidated Financial Statements                                                            | 8      |   |
|                                        |                                                                                                  |   |   |
| Item 2.                                     | Management's Discussion and Analysis of Financial Condition and Results of Operations                 | 18     |   |
|                                        |                                                                                                  |   |   |
| Item 3.                                     | Quantitative and Qualitative Disclosure About Market Risk                                             | 35     |   |
|                                        |                                                                                                  |   |   |
| Item 4.                                     | Controls and Procedures                                                                               | 35     |   |
|                                        |                                                                                                  |   |   |
| PART II –   Other Information    |                                                                                                  |   |
|                                        |                                                                                                  |
| Item 1.                                     | Legal Proceedings                                                                                     | 35     |   |
|                                        |                                                                                                  |   |   |
| Item 1A.                                    | Risk Factors                                                                                          | 35     |   |
|                                        |                                                                                                  |   |   |
| Item 2.                                     | Unregistered Sales of Equity Securities and Use of Proceeds                                           | 36     |   |
|                                        |                                                                                                  |   |   |
| Item 3.                                     | Defaults Upon Senior Securities                                                                       | 36     |   |
|                                        |                                                                                                  |   |   |
| Item 4.                                     | [Removed and Reserved]                                                                                | 36     |   |
|                                        |                                                                                                  |   |   |
| Item 5.                                     | Other Information                                                                                     | 36     |   |
|                                        |                                                                                                  |   |   |
| Item 6.                                     | Exhibits                                                                                              | 37     |   |
|                                        |                                                                                                  |   |   |
| Signatures                                  |                                                                                                  | 38     |   |
|                                        |                                                                                                  |   |   |
|                                        |                                                                                                  |   |   |
|                                        |                                                                                                  |   |   |

----

| §   | legislative or regulatory changes; |
|--------------------|------------------------------------|

| §   | the strength of the United States economy in general and the strength of the local economies in which we conduct operations; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------|

| §   | the accuracy of our financial statement estimates and assumptions, including the estimate for our loan loss provision and the valuation allowance on deferred tax assets; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | continued depression of the market value of the Company that could result in an impairment of goodwill; |
|--------------------|---------------------------------------------------------------------------------------------------------|

| §   | restrictions on our operations, including the inability to pay dividends without our regulators’ consent; |
|--------------------|-----------------------------------------------------------------------------------------------------------------|

| §   | the effects of the health and soundness of other financial institutions, including the FDIC’s need to increase Deposit Insurance Fund assessments; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | our ability to declare and pay dividends; |
|--------------------|-------------------------------------------|

| §   | changes in the securities and real estate markets; |
|--------------------|----------------------------------------------------|

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

| §   | inflation, interest rate, market and monetary fluctuations; |
|--------------------|-------------------------------------------------------------|

| §   | the frequency and magnitude of foreclosure of our loans; |
|--------------------|----------------------------------------------------------|

| §   | the effects of our lack of a diversified loan portfolio, including the risks of geographic and industry concentrations; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------|

| §   | our need and our ability to incur additional debt or equity financing; |
|--------------------|------------------------------------------------------------------------|

| §   | our ability to integrate the business and operations of companies and banks that we have acquired, and those we may acquire in the future; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

| §   | the effects of harsh weather conditions, including hurricanes, and man-made disasters, including the recent BP p.l.c. oil spill in the Gulf of Mexico; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | our ability to comply with the extensive laws and regulations to which we are subject; |
|--------------------|----------------------------------------------------------------------------------------|

| §   | the willingness of clients to accept third-party products and services rather than our products and services and vice versa; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------|

| §   | increased competition and its effect on pricing; |
|--------------------|--------------------------------------------------|

| §   | technological changes; |
|--------------------|------------------------|

| §   | the effects of security breaches and computer viruses that may affect our computer systems; |
|--------------------|---------------------------------------------------------------------------------------------|

| §   | changes in consumer spending and saving habits; |
|--------------------|-------------------------------------------------|

| §   | growth and profitability of our noninterest income; |
|--------------------|-----------------------------------------------------|

| §   | changes in accounting principles, policies, practices or guidelines; |
|--------------------|----------------------------------------------------------------------|

| §   | the limited trading activity of our common stock; |
|--------------------|---------------------------------------------------|

| §   | the concentration of ownership of our common stock; |
|--------------------|-----------------------------------------------------|

| §   | anti-takeover provisions under federal and state law as well as our Articles of Incorporation and our Bylaws; |
|--------------------|---------------------------------------------------------------------------------------------------------------|

| §   | other risks described from time to time in our filings with the Securities and Exchange Commission; and |
|--------------------|---------------------------------------------------------------------------------------------------------|

| §   | our ability to manage the risks involved in the foregoing. |
|--------------------|------------------------------------------------------------|

----

PART I.

CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

| (Dollars In Thousands, Except Share Data)                                                                                                                                |   | June 30, 2010 |      |   | December 31, 2009 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|-----------|--------|-------------------|--------|
| ASSETS                                                                                                                                                                   |   |          |      |   |              |   |
| Cash and Due From Banks                                                                                                                                                  |   | $             | 52,380    |   |              | $      | 57,877 |   |
| Federal Funds Sold and Interest Bearing Deposits                                                                                                                         |   |          | 250,508   |   |              |   | 276,416 |   |
| Total Cash and Cash Equivalents                                                                                                                                          |   |          | 302,888   |   |              |   | 334,293 |   |
|                                                                                                                                                                     |   |          |      |   |              |   |   |   |
| Investment Securities, Available-for-Sale                                                                                                                                |   |          | 218,785   |   |              |   | 176,673 |   |
|                                                                                                                                                                     |   |          |      |   |              |   |   |   |
| Loans, Net of Unearned Interest                                                                                                                                          |   |          | 1,821,782 |   |              |   | 1,915,940 |   |
| Allowance for Loan Losses                                                                                                                                                |   |          | (38,442   | )      |              |   | (43,999 | ) |
| Loans, Net                                                                                                                                                               |   |          | 1,783,340 |   |              |   | 1,871,941 |   |
|                                                                                                                                                                     |   |          |      |   |              |   |   |   |
| Premises and Equipment, Net                                                                                                                                              |   |          | 116,802   |   |              |   | 115,439 |   |
| Goodwill                                                                                                                                                                 |   |          | 84,811    |   |              |   | 84,811 |   |
| Other Intangible Assets                                                                                                                                                  |   |          | 2,610     |   |              |   | 4,030 |   |
| Other Real Estate Owned                                                                                                                                                  |   |          | 48,110    |   |              |   | 36,134 |   |
| Other Assets                                                                                                                                                             |   |          | 93,398    |   |              |   | 85,003 |   |
| Total Assets                                                                                                                                                             |   | $             | 2,650,744 |   |              | $      | 2,708,324 |   |
|                                                                                                                                                                     |   |          |      |   |              |   |   |   |
| LIABILITIES                                                                                                                                                              |   |          |      |   |              |   |   |   |
| Deposits:                                                                                                                                                                |   |          |      |   |              |   |   |   |
| Noninterest Bearing Deposits                                                                                                                                             |   | $             | 460,168   |   |              | $      | 427,791 |   |
| Interest Bearing Deposits                                                                                                                                                |   |          | 1,740,143 |   |              |   | 1,830,443 |   |
| Total Deposits                                                                                                                                                           |   |          | 2,200,311 |   |              |   | 2,258,234 |   |
|                                                                                                                                                                     |   |          |      |   |              |   |   |   |
| Short-Term Borrowings                                                                                                                                                    |   |          | 21,376    |   |              |   | 35,841 |   |
| Subordinated Notes Payable                                                                                                                                               |   |          | 62,887    |   |              |   | 62,887 |   |
| Other Long-Term Borrowings                                                                                                                                               |   |          | 55,605    |   |              |   | 49,380 |   |
| Other Liabilities                                                                                                                                                        |   |          | 48,885    |   |              |   | 34,083 |   |
| Total Liabilities                                                                                                                                                        |   |          | 2,389,064 |   |              |   | 2,440,425 |   |
|                                                                                                                                                                     |   |          |      |   |              |   |   |   |
| SHAREOWNERS' EQUITY                                                                                                                                                      |   |          |      |   |              |   |   |   |
| Preferred Stock, $.01 par value, 3,000,000 shares authorized;no shares outstanding                                                                                       |   |          | -         |   |              |   | - |   |
| Common Stock, $.01 par value, 90,000,000 shares authorized; 17,067,426 and 17,036,407 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively |   |          | 171       |   |              |   | 170 |   |
| Additional Paid-In Capital                                                                                                                                               |   |          | 36,633    |   |              |   | 36,099 |   |
| Retained Earnings                                                                                                                                                        |   |          | 238,779   |   |              |   | 246,460 |   |
| Accumulated Other Comprehensive Loss, Net of Tax                                                                                                                         |   |          | (13,903   | )      |              |   | (14,830 | ) |
| Total Shareowners' Equity                                                                                                                                                |   |          | 261,680   |   |              |   | 267,899 |   |
| Total Liabilities and Shareowners' Equity                                                                                                                                |   | $             | 2,650,744 |   |              | $      | 2,708,324 |   |

----

CONSOLIDATED STATEMENTS OF INCOME

|                                                     |   | Three Months Ended |                                                                                         |   | Six Months Ended |   |                                                                                         |
|----------------------------------------------------------|--------|--------------------|----------------------------------------------------------------------------------------------|--------|------------------|--------|----------------------------------------------------------------------------------------------|
| (Dollars in Thousands, Except Per Share Data)            |   | 2010               |                                                                                         |   | 2009             |   |                                                                                         | 2010 |   |   | 2009 |   |
| INTEREST INCOME                                          |   |               |                                                                                         |   |             |   |                                                                                         |   |   |   |   |   |
| Interest and Fees on Loans                               |   | $                  | 26,644                                                                                       |   |             | $      | 29,742                                                                                       |   |   | $ | 53,636 |   |   | $ | 59,279 |   |
| Investment Securities:                                   |   |               |                                                                                         |   |             |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| U.S. Treasuries                                          |   |               | 330                                                                                          |   |             |   | 157                                                                                          |   |   |   | 433 |   |   |   | 319 |   |
| U.S. Government Agencies                                 |   |               | 299                                                                                          |   |             |   | 501                                                                                          |   |   |   | 619 |   |   |   | 1,031 |   |
| States and Political Subdivisions                        |   |               | 406                                                                                          |   |             |   | 695                                                                                          |   |   |   | 896 |   |   |   | 1,432 |   |
| Other Securities                                         |   |               | 79                                                                                           |   |             |   | 84                                                                                           |   |   |   | 156 |   |   |   | 168 |   |
| Federal Funds Sold                                       |   |               | 176                                                                                          |   |             |   | 1                                                                                            |   |   |   | 348 |   |   |   | 4 |   |
| Total Interest Income                                    |   |               | 27,934                                                                                       |   |             |   | 31,180                                                                                       |   |   |   | 56,088 |   |   |   | 62,233 |   |
|                                                     |   |               |                                                                                         |   |             |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| INTEREST EXPENSE                                         |   |               |                                                                                         |   |             |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| Deposits                                                 |   |               | 2,363                                                                                        |   |             |   | 2,500                                                                                        |   |   |   | 5,301 |   |   |   | 4,995 |   |
| Short-Term Borrowings                                    |   |               |                12 |   |             |   |                88 |   |   |   |              29 |   |   |   |              156 |   |
| Subordinated Notes Payable                               |   |               | 639                                                                                          |   |             |   | 931                                                                                          |   |   |   | 1,290 |   |   |   | 1,858 |   |
| Other Long-Term Borrowings                               |   |               | 551                                                                                          |   |             |   | 566                                                                                          |   |   |   | 1,077 |   |   |   | 1,134 |   |
| Total Interest Expense                                   |   |               | 3,565                                                                                        |   |             |   | 4,085                                                                                        |   |   |   | 7,697 |   |   |   | 8,143 |   |
|                                                     |   |               |                                                                                         |   |             |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| NET INTEREST INCOME                                      |   |               | 24,369                                                                                       |   |             |   | 27,095                                                                                       |   |   |   | 48,391 |   |   |   | 54,090 |   |
| Provision for Loan Losses                                |   |               | 3,633                                                                                        |   |             |   | 8,426                                                                                        |   |   |   | 14,373 |   |   |   | 16,836 |   |
| Net Interest Income After Provision For Loan Losses |   |               | 20,736                                                                                       |   |             |   | 18,669                                                                                       |   |   |   | 34,018 |   |   |   | 37,254 |   |
|                                                     |   |               |                                                                                         |   |             |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| NONINTEREST INCOME                                       |   |               |                                                                                         |   |             |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| Service Charges on Deposit Accounts                      |   |               | 7,039                                                                                        |   |             |   | 7,162                                                                                        |   |   |   | 13,667 |   |   |   | 13,860 |   |
| Data Processing                                          |   |               | 919                                                                                          |   |             |   | 896                                                                                          |   |   |   | 1,819 |   |   |   | 1,766 |   |
| Asset Management Fees                                    |   |               | 1,080                                                                                        |   |             |   | 930                                                                                          |   |   |   | 2,100 |   |   |   | 1,900 |   |
| Securities Transactions                                  |   |               | -                                                                                            |   |             |   | 6                                                                                            |   |   |   | 5 |   |   |   | 6 |   |
| Mortgage Banking Fees                                    |   |               | 641                                                                                          |   |             |   | 902                                                                                          |   |   |   | 1,149 |   |   |   | 1,486 |   |
| Bank Card Fees                                           |   |               | 2,362                                                                                        |   |             |   | 2,002                                                                                        |   |   |   | 4,537 |   |   |   | 3,921 |   |
| Other                                                    |   |               | 2,633                                                                                        |   |             |   | 2,736                                                                                        |   |   |   | 5,364 |   |   |   | 5,737 |   |
| Total Noninterest Income                                 |   |               | 14,674                                                                                       |   |             |   | 14,634                                                                                       |   |   |   | 28,641 |   |   |   | 28,676 |   |
|                                                     |   |               |                                                                                         |   |             |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| NONINTEREST EXPENSE                                      |   |               |                                                                                         |   |             |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| Salaries and Associate Benefits                          |   |               | 15,584                                                                                       |   |             |   | 16,049                                                                                       |   |   |   | 32,363 |   |   |   | 33,286 |   |
| Occupancy, Net                                           |   |               | 2,585                                                                                        |   |             |   | 2,540                                                                                        |   |   |   | 4,993 |   |   |   | 4,885 |   |
| Furniture and Equipment                                  |   |               | 2,192                                                                                        |   |             |   | 2,304                                                                                        |   |   |   | 4,373 |   |   |   | 4,642 |   |
| Intangible Amortization                                  |   |               | 710                                                                                          |   |             |   | 1,010                                                                                        |   |   |   | 1,420 |   |   |   | 2,021 |   |
| Other Real Estate Expense                                |   |               | 4,082                                                                                        |   |             |   | 1,333                                                                                        |   |   |   | 6,907 |   |   |   | 2,092 |   |
| Other                                                    |   |               | 9,476                                                                                        |   |             |   | 9,694                                                                                        |   |   |   | 17,957 |   |   |   | 18,261 |   |
| Total Noninterest Expense                                |   |               | 34,629                                                                                       |   |             |   | 32,930                                                                                       |   |   |   | 68,013 |   |   |   | 65,187 |   |
|                                                     |   |               |                                                                                         |   |             |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| INCOME (LOSS) BEFORE INCOME TAXES                        |   |               | 781                                                                                          |   |             |   | 373                                                                                          |   |   |   | (5,354 | )  |   |   | 743 |   |
| Income Tax Expense (Benefit)                             |   |               | 50                                                                                           |   |             |   | (401                                                                                         | )  |   |   | (2,622 | )  |   |   | (681 | ) |
|                                                     |   |               |                                                                                         |   |             |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| NET INCOME (LOSS)                                        |   | $                  | 731                                                                                          |   |             | $      | 774                                                                                          |   |   | $ | (2,732) |   |   | $ | 1,424 |   |
|                                                     |   |               |                                                                                         |   |             |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| Basic Net Income (Loss) Per Share                        |   | $                  | 0.04                                                                                         |   |             | $      | 0.04                                                                                         |   |   | $ | (0.16) |   |   | $ | 0.08 |   |
| Diluted Net Income (Loss) Per Share                      |   | $                  | 0.04                                                                                         |   |             | $      | 0.04                                                                                         |   |   | $ | (0.16) |   |   | $ | 0.08 |   |
|                                                     |   |               |                                                                                         |   |             |   |                                                                                         |   |   |   |   |   |   |   |   |   |
| Average Basic Shares Outstanding                         |   |               | 17,063,176                                                                                   |   |             |   | 17,009,672                                                                                   |   |   |   | 17,060,135 |   |   |   | 17,059,175 |   |
| Average Diluted Shares Outstanding                       |   |               | 17,074,202                                                                                   |   |             |   | 17,010,157                                                                                   |   |   |   | 17,071,031 |   |   |   | 17,059,741 |   |

----

CONSOLIDATED STATEMENT OF CHANGES IN SHAREOWNERS' EQUITY

|   (Dollars In Thousands, Except Share Data)                                        | Shares Outstanding |   |   | Common Stock |   |   | AdditionalPaid-In Capital |   | Retained Earnings |    |    | Accumulated Other Comprehensive (Loss) Income, Net of Taxes |   |    | Total  |   |   |
|----------------------------------------------------------------------------------------------|--------------------|--------|--------|--------------|--------|--------|---------------------------|--------|-------------------|---------|---------|-------------------------------------------------------------|--------|---------|--------|--------|--------|
|                                                                                         |               |   |   |         |   |   |                      |   |              |    |    |                                                        |   |    |   |   |
| Balance, December 31, 2009                                                                   | 17,036,407         |   | $      |  170    |   | $      | 36,099                    |   | $                 | 246,460 |    |                                                        | $      | (14,830 | )      |   | $      | 267,899 |   |
| Comprehensive Income:                                                                        |               |   |   |         |   |   |                      |   |              |    |    |                                                        |   |    |   |   |   |   |   |
| Net Loss                                                                                     | -                  |   |   | -            |   |   | -                         |   |              | (2,732  | )  |                                                        |   | -       |   |   |   | (2,732 | )  |
| Net Change in Unrealized Gain On   Available-for-Sale Securities (net of tax) |               |   |   |         |   |   |                      |   |              |    |    |                                                        |   | 927     |   |   |   | 927 |   |
| Total Comprehensive Loss                                                                     | -                  |   |   | -            |   |   | -                         |   |              |    |    |                                                        |   |    |   |   |   | (1,805 | )  |
| Cash Dividends ($.2900 per share)                                                            | -                  |   |   | -            |   |   | -                         |   |              | (4,949  | )       |                                                        |   | -       |   |   |   | (4,949 | ) |
| Stock Performance Plan Compensation                                                          | -                  |   |   | -            |   |   | 115                       |   |              | -       |    |                                                        |   | -       |   |   |   | 115 |   |
| Issuance of Common Stock                                                                     | 31,019             |   |   | 1            |   |   | 419                       |   |              | -       |    |                                                        |   | -       |   |   |   | 420 |   |
|                                                                                         |               |   |   |         |   |   |                      |   |              |    |    |                                                        |   |    |   |   |   |   |   |
| Balance, June 30, 2010                                                                       | 17,067,426         |   | $      |  171    |   | $      | 36,633                    |   | $                 | 238,779 |    |                                                        | $      | (13,903 | )      |   | $      | 261,680 |   |

----

CONSOLIDATED STATEMENTS OF CASH FLOWS

| (Dollars in Thousands)                                                       |   | 2010   |                                                                                                                  |    | 2009   |   |
|------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------|---------|--------|--------|
| CASH FLOWS FROM OPERATING ACTIVITIES                                         |   |   |                                                                                                                  |    |   |   |
| Net (Loss) Income                                                            |   | $      | (2,732                                                                                                                | )  |   | $      | 1,424 |   |
| Adjustments to Reconcile Net Income toCash Provided by Operating Activities: |   |   |                                                                                                                  |    |   |   |   |   |
| Provision for Loan Losses                                                    |   |   |          14,373                                                          |    |   |   |          16,836 |   |
| Depreciation                                                                 |   |   |            3,495                                               |    |   |   |            3,350 |   |
| Net Securities Amortization                                                  |   |   |            1,537                                               |    |   |   |            1,044 |   |
| Amortization of Intangible Assets                                            |   |   |            1,420                                               |    |   |   |            2,021 |   |
| Gain on Securities Transactions                                              |   |   |               (5                                | )       |   |   | (6 | ) |
| Loss on Impaired Security                                                    |   |   | 61                                                                                                                    |    |   |   | - |   |
| Origination of Loans Held-for-Sale                                           |   |   |      (59,639                                                                                 | )       |   |   | (56,294 | ) |
| Proceeds From Sales of Loans Held-for-Sale                                   |   |   |        56,119                                                                      |    |   |   |          58,927 |   |
| Net Gain From Sales of Loans Held-for-Sale                                   |   |   |          (1,149                                                          | )       |   |   | (1,486 | ) |
| Non-Cash Compensation                                                        |   |   |                    115 |    |   |   | - |   |
| Increase in Deferred Income Taxes                                            |   |   |            538                                                 |    |   |   | 2,061 |   |
| Net Decrease (Increase) in Other Assets                                      |   |   |             7,495                                         |    |   |   | (12,870 | ) |
| Net Increase in Other Liabilities                                            |   |   | 10,186                                                                                                                |    |   |   |            20,653 |   |
| Net Cash Provided By Operating Activities                                    |   |   |          31,814                                                          |    |   |   | 35,660 |   |
|                                                                         |   |   |                                                                                                                  |    |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                         |   |   |                                                                                                                  |    |   |   |   |   |
| Securities Available-for-Sale:                                               |   |   |                                                                                                                  |    |   |   |   |   |
| Purchases                                                                    |   |   |        (91,038                                                                     | )       |   |   |         (40,544 | ) |
| Sales                                                                        |   |   |            505                                                 |    |   |   |           1,986 |   |
| Payments, Maturities, and Calls                                              |   |   |          47,871                                                          |    |   |   |           35,184 |   |
| Net Decrease (Increase) in Loans                                             |   |   |        54,993                                                                      |    |   |   |         (46,025 | )  |
| Purchase of Premises & Equipment                                         |   |   |        (4,858                                                                      | )       |   |   | (5,969 | ) |
| Proceeds From Sales of Premises & Equipment                              |   |   |        -                                                                           |    |   |   | 2 |   |
| Net Cash Provided By (Used In) Investing Activities                          |   |   |                7,473                       |    |   |   | (55,366 | )  |
|                                                                         |   |   |                                                                                                                  |    |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                         |   |   |                                                                                                                  |    |   |   |   |   |
| (Decrease) Increase in Deposits                                              |   |   |        (57,923                                                                     | )       |   |   | 13,757 |   |
| Net (Decrease) Increase in Short-Term Borrowings                             |   |   |          (14,465                                                         | )  |   |   |           11,950 |   |
| Increase in Other Long-Term Borrowings                                       |   |   |                   8,015     |    |   |   |           2,666 |   |
| Repayment of Other Long-Term Borrowings                                      |   |   |        (1,790                                                                      | )       |   |   |           (1,788 | ) |
| Dividends Paid                                                               |   |   |          (4,949                                                          | )       |   |   |           (6,486 | ) |
| Repurchase of Common Stock                                                   |   |   |          -                                                               |    |   |   |           (1,561 | ) |
| Issuance of Common Stock                                                     |   |   |          420                                                             |    |   |   |           629 |   |
| Net Cash (Used In) Provided By Financing Activities                          |   |   |               (70,692                           | )  |   |   |           19,167 |   |
|                                                                         |   |   |                                                                                                                  |    |   |   |   |   |
| NET CHANGE IN CASH AND CASH EQUIVALENTS                                      |   |   | (31,405                                                                                                               | )       |   |   | (539 | ) |
|                                                                         |   |   |                                                                                                                  |    |   |   |   |   |
| Cash and Cash Equivalents at Beginning of Period                             |   |   | 334,293                                                                                                               |    |   |   | 94,949 |   |
| Cash and Cash Equivalents at End of Period                                   |   | $      | 302,888                                                                                                               |    |   | $      | 94,410 |   |
|                                                                         |   |   |                                                                                                                  |    |   |   |   |   |
| Supplemental Disclosure:                                                     |   |   |                                                                                                                  |    |   |   |   |   |
| Interest Paid on Deposits                                                    |   | $      | 5,804                                                                                                                 |    |   | $      | 5,181 |   |
| Interest Paid on Debt                                                        |   | $      | 2,407                                                                                                                 |    |   | $      | 3,153 |   |
| Taxes Paid                                                                   |   | $      | 338                                                                                                                   |    |   | $      | 5,643 |   |
| Loans Transferred to Other Real Estate Owned                                 |   | $      | 23,904                                                                                                                |    |   | $      | 13,553 |   |
| Issuance of Common Stock as Non-Cash Compensation                            |   | $      | 420                                                                                                                   |    |   | $      | 154 |   |
| Transfer of Current Portion of Long-Term Borrowings                          |   | $      | 16                                                                                                                    |    |   |   | - |   |

----

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

| NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES |
|-----------------------------------------------|

| NOTE 2 - INVESTMENT SECURITIES |
|--------------------------------|

|                                   |   | June 30, 2010  |                                                                           |
|----------------------------------------|--------|----------------|--------------------------------------------------------------------------------|
| (Dollars in Thousands)                 |   | Amortized Cost |                                                                           |   | Unrealized Gains |   |   | Unrealized Losses |   |   | Market Value |   |
| U.S. Treasury                          |   | $              | 79,521                                                                         |   |   | $ | 1,386 |   |   | $ | - |   |   | $ | 80,907 |   |
| States and Political Subdivisions      |   |           | 92,963                                                                         |   |   |   |             735 |   |   |   | 2 |   |   |   | 93,696 |   |
| Residential Mortgage-Backed Securities |   |           |             30,747 |   |   |   |               899 |   |   |   | - |   |   |   |        31,646 |   |
| Other Securities(1)                    |   |           |             13,136 |   |   |   |                - |   |   |   | 600 |   |   |   |        12,536 |   |
| Total Investment Securities            |   | $              |           216,367            |   |   | $ |            3,020 |   |   | $ | 602 |   |   | $ |      218,785 |   |

|                                   |   | December 31, 2009 |                                              |
|----------------------------------------|--------|-------------------|---------------------------------------------------|
| (Dollars in Thousands)                 |   | Amortized Cost    |                                              |   | Unrealized Gains |   |   | Unrealized Losses |   |   | Market Value |   |
| U.S. Treasury                          |   | $                 | 22,270                                            |   |   | $ | 174 |   |   | $ | - |   |   | $ | 22,444 |   |
| States and Political Subdivisions      |   |              | 106,455                                           |   |   |   | 1,166 |   |   |   | 71 |   |   |   | 107,550 |   |
| Residential Mortgage-Backed Securities |   |              | 33,375                                            |   |   |   | 798 |   |   |   | 30 |   |   |   | 34,143 |   |
| Other Securities(1)                    |   |              | 13,236                                            |   |   |   | - |   |   |   | 700 |   |   |   | 12,536 |   |
| Total Investment Securities            |   | $                 |        175,336 |   |   | $ |             2,138 |   |   | $ |      801 |   |   | $ |   176,673 |   |

|  (1) | Includes Federal Home Loan Bank and Federal Reserve Bank stock recorded at cost of $7.7 million and $4.8 million, respectively, at June 30, 2010, and $7.7 million and $4.8 million, respectively, at December 31, 2009. |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (Dollars in Thousands)           |   | Amortized Cost |                                                                                                                  |   | Market Value |   |
|----------------------------------|--------|----------------|-----------------------------------------------------------------------------------------------------------------------|--------|--------------|--------|
| Due in one year or less          |   | $              |                  74,434          |   |         | $      |                 75,034 |   |
| Due after one through five years |   |           |                  128,654         |   |         |   |                 131,068 |   |
| Due after five through 10 years  |   |           |                    143 |   |         |   |                   147 |   |
| No Maturity                      |   |           |                  13,136          |   |         |   |                 12,536 |   |
| Total Investment Securities      |   | $              | 216,367                                                                                                               |   |         | $      | 218,785 |   |

|                                                              |               |   | June 30, 2010         |   |        |   |
|-------------------------------------------------------------------|--------------------|--------|-----------------------|--------|-------------|--------|
|                                                              | Less Than12 Months |   | Greater Than12 Months |   | Total       |   |
| (Dollars in Thousands)                                            | MarketValue        |   | UnrealizedLosses      |   | MarketValue |   | UnrealizedLosses |   | MarketValue |   | UnrealizedLosses |   |
| U.S. Treasury                                                     |               | $      | -                     |   |        | $      | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|     U.S. Government Agencies and Corporations |               |   | -                     |   |        |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|     States and Political Subdivisions         |               |   | 1,276                 |   |        |   | 2 |   |   |   | - |   |   |   | - |   |   |   | 1,276 |   |   |   | 2 |   |
|     Mortgage-Backed Securities           |               |   |  -               |   |        |   |  - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|     Other Securities                          |               |   | -                     |   |        |   | 600 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 600 |   |
|     Total Investment Securities               |               | $      | 1,276                 |   |        | $      | 602 |   |   | $ |   - |   |   | $ |   - |   |   | $ | 1,276 |   |   | $ | 602 |   |

----

| (Dollars in Thousands)                 |   | June 30, 2010 |      |   | December 31, 2009 |   |
|----------------------------------------|--------|---------------|-----------|--------|-------------------|--------|
| Commercial, Financial and Agricultural |   | $             | 161,268   |   |              | $      | 189,061 |   |
| Real Estate-Construction(2)            |   |          | 56,910    |   |              |   | 111,249 |   |
| Real Estate-Commercial(2)              |   |          | 676,516   |   |              |   | 716,791 |   |
| Real Estate-Residential(1) (2)         |   |          | 447,555   |   |              |   | 408,578 |   |
| Real Estate-Home Equity                |   |          | 247,726   |   |              |   | 246,722 |   |
| Real Estate-Loans Held-for-Sale        |   |          | 12,939    |   |              |   | 7,891 |   |
| Consumer                               |   |          | 218,868   |   |              |   | 235,648 |   |
| Loans, Net of Unearned Interest        |   | $             | 1,821,782 |   |              | $      | 1,915,940 |   |

| (1)   | Includes loans in process with outstanding balances of $9.4 million and $10.7 million for June 30, 2010 and December 31, 2009, respectively. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Reclassified $10 million in construction loans to residential real estate category and $30 million in commercial real estate loans to the residential real estate to better reflect the nature of the loans and their underlying collateral. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (Dollars in Thousands)                     |   | 2010   |    |   | 2009   |   |
|--------------------------------------------|--------|--------|---------|--------|--------|--------|
| Balance, Beginning of Period               |   | $      | 43,999  |   |   | $      | 37,004 |   |
| Provision for Loan Losses                  |   |   | 14,373  |   |   |   | 16,836 |   |
| Recoveries on Loans Previously Charged-Off |   |   | 2,129   |   |   |   | 1,604 |   |
| Loans Charged-Off                          |   |   | (22,059 | )      |   |   | (13,662 | ) |
| Balance, End of Period                     |   | $      | 38,442  |   |   | $      | 41,782 |   |

|                                |   | June 30, 2010 |   |   | December 31, 2009   |   |
|-------------------------------------|--------|---------------|--------|--------|---------------------|--------|
|  (Dollars in Thousands)        |   | Balance       |   |   | Valuation Allowance |   |   | Balance |   |   | Valuation Allowance |   |
| Impaired Loans:                     |   |          |   |   |                |   |   |   |   |   |   |   |
| With Related Valuation Allowance    |   | $             | 83,750 |   |                | $      | 16,213 |   |   | $ | 83,986 |   |   | $ | 21,066 |   |
| Without Related Valuation Allowance |   |          | 21,500 |   |                |   | - |   |   |   | 27,926 |   |   |   | - |   |

| NOTE 5 - INTANGIBLE ASSETS |
|----------------------------|

|                             |   | June 30, 2010 |    |   | December 31, 2009       |   |
|----------------------------------|--------|---------------|---------|--------|-------------------------|--------|
|  (Dollars in Thousands)     |   | GrossAmount   |    |   | AccumulatedAmortization |   |   | GrossAmount |   |   | AccumulatedAmortization |   |
| Core Deposit Intangibles         |   | $             | 47,176  |   |                    | $      | 45,267 |   |   | $ | 47,176 |   |   | $ | 43,943 |   |
| Goodwill                         |   |          | 84,811  |   |                    |   | - |   |   |   | 84,811 |   |   |   | - |   |
| Customer Relationship Intangible |   |          | 1,867   |   |                    |   | 1,166 |   |   |   | 1,867 |   |   |   | 1,070 |   |
| Total Intangible Assets          |   | $             | 133,854 |   |                    | $      | 46,433 |   |   | $ | 133,854 |   |   | $ | 45,013 |   |

----

| (Dollars in Thousands)          |   | June 30, 2010 |      |   | December 31, 2009 |   |
|---------------------------------|--------|---------------|-----------|--------|-------------------|--------|
| NOW Accounts                    |   | $             | 891,636   |   |              | $      | 899,649 |   |
| Money Market Accounts           |   |          | 303,369   |   |              |   | 373,105 |   |
| Savings Deposits                |   |          | 132,174   |   |              |   | 122,370 |   |
| Other Time Deposits             |   |          | 412,964   |   |              |   | 435,319 |   |
| Total Interest Bearing Deposits |   | $             | 1,740,143 |   |              | $      | 1,830,443 |   |

| NOTE 7 - STOCK-BASED COMPENSATION |
|-----------------------------------|

----

| Options                        |   | Shares |   |   | Weighted-Average Exercise Price |   |   | Weighted-Average Remaining Term |   |   | Aggregate Intrinsic Value |   |
|--------------------------------|--------|--------|--------|--------|---------------------------------|--------|--------|---------------------------------|--------|--------|---------------------------|--------|
| Outstanding at January 1, 2010 |   |   | 60,384 |   |                            | $      | 32.79  |                            |   |   | 4.9                       |   |   | $ | - |   |
| Granted                        |   |   | -      |   |                            |   | -      |                            |   |   | -                         |   |   |   | - |   |
| Exercised                      |   |   | -      |   |                            |   | -      |                            |   |   | -                         |   |   |   | - |   |
| Forfeited or expired           |   |   | -      |   |                            |   | -      |                            |   |   | -                         |   |   |   | - |   |
| Outstanding at June 30, 2010   |   |   | 60,384 |   |                            | $      | 32.79  |                            |   |   | 4.4                       |   |   | $ | - |   |
| Exercisable at June 30, 2010   |   |   | 60,384 |   |                            | $      | 32.79  |                            |   |   | 4.4                       |   |   | $ | - |   |

|                               |   | Three Months Ended June 30, |   |   | Six Months Ended June 30, |   |
|------------------------------------|--------|----------------------------------|--------|--------|---------------------------|--------|
| (Dollars in Thousands)             |   | 2010                             |   |   | 2009                      |   |   | 2010 |   |   | 2009 |   |
|                               |   |                             |   |   |                      |   |   |   |   |   |   |   |
| Discount Rate                      |   |                             | 5.75   | %      |                      |   | 6.00 | % |   |   | 5.75 | % |   |   | 6.00 | % |
| Long-Term Rate of Return on Assets |   |                             | 8.00   | %      |                      |   | 8.00 | % |   |   | 8.00 | % |   |   | 8.00 | % |
|                               |   |                             |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Service Cost                       |   | $                                | 1,525  |   |                      | $      | 1,525 |   |   | $ | 3,050 |   |   | $ | 3,050 |   |
| Interest Cost                      |   |                             | 1,175  |   |                      |   | 1,200 |   |   |   | 2,350 |   |   |   | 2,400 |   |
| Expected Return on Plan Assets     |   |                             | (1,525 | )      |                      |   | (1,275 | ) |   |   | (3,050 | ) |   |   | (2,550 | ) |
| Prior Service Cost Amortization    |   |                             | 125    |   |                      |   | 125 |   |   |   | 250 |   |   |   | 250 |   |
| Net Loss Amortization              |   |                             | 525    |   |                      |   | 750 |   |   |   | 1,050 |   |   |   | 1,500 |   |
| Net Periodic Benefit Cost          |   | $                                | 1,825  |   |                      | $      | 2,325 |   |   | $ | 3,650 |   |   | $ | 4,650 |   |

|                            |   | Three Months Ended June 30, |   |    | Six Months Ended June 30, |   |
|---------------------------------|--------|----------------------------------|--------|---------|---------------------------|--------|
| (Dollars in Thousands)          |   | 2010                             |   |    | 2009                      |   |   | 2010 |   |   | 2009 |   |
|                            |   |                             |   |    |                      |   |   |   |   |   |   |   |
| Discount Rate                   |   |                             | 5.75   | %       |                      |   | 6.00 | % |   |   | 5.75 | % |   |   | 6.00 | % |
|                            |   |                             |   |    |                      |   |   |   |   |   |   |   |   |   |   |   |
| Service Cost                    |   | $                                | -      |    |                      | $      | 5 |   |   | $ | - |   |   | $ | 10 |   |
| Interest Cost                   |   |                             | 42     |    |                      |   | 74 |   |   |   | 84 |   |   |   | 148 |   |
| Prior Service Cost Amortization |   |                             | 45     |    |                      |   | 45 |   |   |   | 90 |   |   |   | 90 |   |
| Net Loss Amortization           |   |                             | (85    | )  |                      |   | (5 | )  |   |   | (170 | ) |   |   | (11 | )  |
| Net Periodic Benefit Cost       |   | $                                | 2      |    |                      | $      | 119 |   |   | $ | 4 |   |   | $ | 237 |   |

----

| NOTE 9 - COMMITMENTS AND CONTINGENCIES |
|----------------------------------------|

| (Dollars in Thousands)          |   | Amount |    |
|---------------------------------|--------|--------|---------|
| Commitments to Extend Credit(1) |   | $      | 345,832 |   |
| Standby Letters of Credit       |   | $      | 12,957  |   |

| (1) | Commitments include unfunded loans, revolving lines of credit, and other unused commitments. |
|-----|----------------------------------------------------------------------------------------------|

----

|  (Dollars in Thousands)                               |   | Level 1 Inputs |         |   | Level 2 Inputs |   |    | Level 3 Inputs |   |   | Total Fair Value |   |
|------------------------------------------------------------|--------|----------------|--------------|--------|----------------|--------|---------|----------------|--------|--------|------------------|--------|
| June 30, 2010                                              |   |           |         |   |           |   |    |           |   |   |             |   |
| Securities available for sale:                             |   |           |         |   |           |   |    |           |   |   |             |   |
|     US Treasury                             |   | $              | 80,907       |   |           | $      | -       |           |   | $      | -                |   |   | $ | 80,907 |   |
|     States and Political Subdivisions       |   |           | 4,507        |   |           |   | 89,189  |           |   |   | -                |   |   |   | 93,696 |   |
|     Residential Mortgage-Backed Securities  |   |           | -            |   |           |   | 31,646  |           |   |   | -                |   |   |   | 31,646 |   |
|                                                       |   |           |         |   |           |   |    |           |   |   |             |   |   |   |   |   |
| December 31, 2009                                          |   |           |         |   |           |   |    |           |   |   |             |   |   |   |   |   |
| Securities available for sale:                             |   |           |         |   |           |   |    |           |   |   |             |   |   |   |   |   |
|     US Treasury                        |   |           | 22, 444 |   |           |   | -       |           |   |   | -                |   |   |   | 22,444 |   |
|     States and Political Subdivisions  |   |           | 3,709        |   |           |   | 103,841 |           |   |   | -                |   |   |   | 107,550 |   |
|     Residential Mortgage-Backed Securities  |   |           | -            |   |           |   | 34,143  |           |   |   | -                |   |   |   | 34,143 |   |
|                                                       |   |           |         |   |           |   |    |           |   |   |             |   |   |   |   |   |

----

|                                    |   |          |      |
|-----------------------------------------|--------|---------------|-----------|
|                                    |   | June 30, 2010 |      |   | December 31, 2009 |   |
| (Dollars in Thousands)                  |   | CarryingValue |      |   | EstimatedFairValue |   |   | CarryingValue |   |   | EstimatedFairValue |   |
| Financial Assets:                       |   |          |      |   |   |   |   |   |   |   |   |   |
| Cash                                    |   | $             | 52,380    |   |   | $ | 52,380 |   |   | $ | 57,877 |   |   | $ | 57,877 |   |
| Short-Term Investments                  |   |          | 250,508   |   |   |   | 250,508 |   |   |   | 276,416 |   |   |   | 276,416 |   |
| Investment Securities                   |   |          | 218,785   |   |   |   | 218,785 |   |   |   | 176,673 |   |   |   | 176,673 |   |
| Loans, Net of Allowance for Loan Losses |   |          | 1,783,340 |   |   |   | 1,761,917 |   |   |   | 1,871,941 |   |   |   | 1,851,699 |   |
| Total Financial Assets                  |   | $             | 2,305,013 |   |   | $ | 2,283,590 |   |   | $ | 2,382,907 |   |   | $ | 2,362,665 |   |
|                                    |   |          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial Liabilities:                  |   |          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                |   | $             | 2,200,311 |   |   | $ | 2,202,577 |   |   | $ | 2,258,234 |   |   | $ | 2,258,899 |   |
| Short-Term Borrowings                   |   |          | 21,376    |   |   |   | 20,773 |   |   |   | 35,841 |   |   |   | 34,209 |   |
| Subordinated Notes Payable              |   |          | 62,887    |   |   |   | 62,888 |   |   |   | 62,887 |   |   |   | 62,569 |   |
| Long-Term Borrowings                    |   |          | 55,605    |   |   |   | 58,839 |   |   |   | 49,380 |   |   |   | 51,509 |   |
| Total Financial Liabilities             |   | $             | 2,340,179 |   |   | $ | 2,345,077 |   |   | $ | 2,406,342 |   |   | $ | 2,407,186 |   |

----

----

|                                                |   | 2010   |      |   | 2009   |   |      | 2008   |   |
|-----------------------------------------------------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|
|  (Dollars in Thousands, Except Per Share Data) |   | Second |      |   | First  |   |      | Fourth |   |   | Third |   |   | Second |   |   | First |   |   | Fourth |   |   | Third(1) |   |
| Summary of Operations:                              |   |   |      |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest Income                                     |   | $      | 27,934    |   |   | $      | 28,154    |   |   | $ | 29,756 |   |   | $ | 30,787 |   |   | $ | 31,180 |   |   | $ | 31,053 |   |   | $ | 33,229 |   |   | $ | 34,654 |   |
| Interest Expense                                    |   |   | 3,565     |   |   |   | 4,132     |   |   |   | 4,464 |   |   |   | 4,235 |   |   |   | 4,085 |   |   |   | 4,058 |   |   |   | 5,482 |   |   |   | 7,469 |   |
| Net Interest Income                                 |   |   | 24,369    |   |   |   | 24,022    |   |   |   | 25,292 |   |   |   | 26,552 |   |   |   | 27,095 |   |   |   | 26,995 |   |   |   | 27,747 |   |   |   | 27,185 |   |
| Provision for Loan Losses                           |   |   | 3,633     |   |   |   | 10,740    |   |   |   | 10,834 |   |   |   | 12,347 |   |   |   | 8,426 |   |   |   | 8,410 |   |   |   | 12,497 |   |   |   | 10,425 |   |
| Net Interest Income AfterProvision for Loan Losses  |   |   | 20,736    |   |   |   | 13,282    |   |   |   | 14,458 |   |   |   | 14,205 |   |   |   | 18,669 |   |   |   | 18,585 |   |   |   | 15,250 |   |   |   | 16,760 |   |
| Noninterest Income                                  |   |   | 14,674    |   |   |   | 13,967    |   |   |   | 14,411 |   |   |   | 14,304 |   |   |   | 14,634 |   |   |   | 14,042 |   |   |   | 13,311 |   |   |   | 20,212 |   |
| Noninterest Expense                                 |   |   | 34,629    |   |   |   | 33,384    |   |   |   | 35,313 |   |   |   | 31,615 |   |   |   | 32,930 |   |   |   | 32,257 |   |   |   | 31,002 |   |   |   | 29,916 |   |
| Income (Loss) Before Provision for Income Taxes     |   |   | 781       |   |   |   | (6,135    | )      |   |   | (6,444 | ) |   |   | (3,106 | ) |   |   | 373 |   |   |   | 370 |   |   |   | (2,441 | ) |   |   | 7,056 |   |
| Income Tax Expense (Benefit)                        |   |   | 50        |   |   |   | (2,672    | )      |   |   | (3,037 | ) |   |   | (1,618 | ) |   |   | (401 | ) |   |   | (280 | ) |   |   | (738 | ) |   |   | 2,218 |   |
| Net Income (Loss)                                   |   | $      | 731       |   |   | $      | (3,463    | )      |   | $ | (3,407 | ) |   | $ | (1,488 | ) |   | $ | 774 |   |   | $ | 650 |   |   | $ | (1,703 | ) |   | $ | 4,838 |   |
| Net Interest Income (FTE)                           |   | $      | 24,738    |   |   | $      | 24,473    |   |   | $ | 25,845 |   |   | $ | 27,128 |   |   | $ | 27,679 |   |   | $ | 27,578 |   |   | $ | 28,387 |   |   | $ | 27,802 |   |
|                                                |   |   |      |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Per Common Share:                                   |   |   |      |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Income (Loss) Basic                             |   | $      | 0.04      |   |   | $      | (0.20     | )      |   | $ | (0.20 | ) |   | $ | (0.08 | ) |   | $ | 0.04 |   |   | $ | 0.04 |   |   | $ | (0.10 | ) |   | $ | 0.29 |   |
| Net Income (Loss) Diluted                           |   |   | 0.04      |   |   |   | (0.20     | )      |   |   | (0.20 | ) |   |   | (0.08 | ) |   |   | 0.04 |   |   |   | 0.04 |   |   |   | (0.10 | ) |   |   | 0.29 |   |
| Dividends Declared                                  |   |   | 0.100     |   |   |   | 0.190     |   |   |   | 0.190 |   |   |   | 0.190 |   |   |   | 0.190 |   |   |   | 0.190 |   |   |   | 0.190 |   |   |   | 0.185 |   |
| Diluted Book Value                                  |   |   | 15.32     |   |   |   | 15.34     |   |   |   | 15.72 |   |   |   | 15.76 |   |   |   | 16.03 |   |   |   | 16.18 |   |   |   | 16.27 |   |   |   | 17.45 |   |
| Market Price:                                       |   |   |      |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| High                                                |   |   | 18.25     |   |   |   | 14.61     |   |   |   | 14.34 |   |   |   | 17.10 |   |   |   | 17.35 |   |   |   | 27.31 |   |   |   | 33.32 |   |   |   | 34.50 |   |
| Low                                                 |   |   | 12.36     |   |   |   | 11.57     |   |   |   | 11.00 |   |   |   | 13.92 |   |   |   | 11.01 |   |   |   | 9.50 |   |   |   | 21.06 |   |   |   | 19.20 |   |
| Close                                               |   |   | 12.38     |   |   |   | 14.25     |   |   |   | 13.84 |   |   |   | 14.20 |   |   |   | 16.85 |   |   |   | 11.46 |   |   |   | 27.24 |   |   |   | 31.35 |   |
|                                                |   |   |      |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selected Average                                    |   |   |      |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances:                                           |   |   |      |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                               |   | $      | 1,841,379 |   |   | $      | 1,886,367 |   |   | $ | 1,944,873 |   |   | $ | 1,964,984 |   |   | $ | 1,974,197 |   |   | $ | 1,964,086 |   |   | $ | 1,940,083 |   |   | $ | 1,915,008 |   |
| Earning Assets                                      |   |   | 2,329,365 |   |   |   | 2,358,288 |   |   |   | 2,237,561 |   |   |   | 2,157,362 |   |   |   | 2,175,281 |   |   |   | 2,166,237 |   |   |   | 2,150,841 |   |   |   | 2,207,670 |   |
| Assets                                              |   |   | 2,678,488 |   |   |   | 2,698,419 |   |   |   | 2,575,250 |   |   |   | 2,497,969 |   |   |   | 2,506,352 |   |   |   | 2,486,925 |   |   |   | 2,463,318 |   |   |   | 2,528,638 |   |
| Deposits                                            |   |   | 2,234,178 |   |   |   | 2,248,760 |   |   |   | 2,090,008 |   |   |   | 1,950,170 |   |   |   | 1,971,190 |   |   |   | 1,957,354 |   |   |   | 1,945,866 |   |   |   | 2,030,684 |   |
| Shareowners’ Equity                           |   |   | 263,873   |   |   |   | 268,555   |   |   |   | 268,556 |   |   |   | 275,027 |   |   |   | 277,114 |   |   |   | 281,634 |   |   |   | 302,227 |   |   |   | 303,595 |   |
| Common Equivalent Shares:                           |   |   |      |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                               |   |   | 17,063    |   |   |   | 17,057    |   |   |   | 17,034 |   |   |   | 17,024 |   |   |   | 17,010 |   |   |   | 17,109 |   |   |   | 17,125 |   |   |   | 17,124 |   |
| Diluted                                             |   |   | 17,074    |   |   |   | 17,070    |   |   |   | 17,035 |   |   |   | 17,025 |   |   |   | 17,010 |   |   |   | 17,131 |   |   |   | 17,135 |   |   |   | 17,128 |   |
|                                                |   |   |      |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratios:                                             |   |   |      |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ROA                                                 |   |   | 0.11      | %      |   |   | (0.52     | )%     |   |   | (0.52 | )% |   |   | (0.24 | )% |   |   | 0.12 | % |   |   | 0.11 | % |   |   | (0.28 | )% |   |   | 0.76 | % |
| ROE                                                 |   |   | 1.11      | %      |   |   | (5.23     | )%     |   |   | (5.03 | )% |   |   | (2.15 | )% |   |   | 1.12 | % |   |   | 0.94 | % |   |   | (2.24 | )% |   |   | 6.34 | % |
| Net Interest Margin (FTE)                           |   |   | 4.26      | %      |   |   | 4.21      | %      |   |   | 4.59 | % |   |   | 4.99 | % |   |   | 5.11 | % |   |   | 5.16 | % |   |   | 5.26 | % |   |   | 5.01 | % |
| Efficiency Ratio                                    |   |   | 86.06     | %      |   |   | 85.00     | %      |   |   | 85.21 | % |   |   | 73.86 | % |   |   | 75.44 | % |   |   | 75.07 | % |   |   | 71.21 | % |   |   | 59.27 | % |

| (1) | Includes a $6.25 million ($3.8 million after-tax) one-time gain on sale of a portion of our merchant services portfolio. |
|-----|--------------------------------------------------------------------------------------------------------------------------|

----

| Item 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|---------|---------------------------------------------------------------------------------------|

|                                      |   |          |   |   | Three Months Ended |   |   | Six Months Ended |   |
|-------------------------------------------|--------|---------------|--------|--------|--------------------|--------|--------|------------------|--------|
|                                      |   | June 30, 2010 |   |   | March 31,2010      |   |   | June 30,2009     |   |   | June 30, 2010 |   |   | June 30,2009 |   |
| Efficiency ratio                          |   |          | 87.86  | %      |               |   | 86.85  | %                |   |   | 77.83 | % |   |   | 87.36 | % |   |   | 77.67 | % |
| Effect of intangible amortization expense |   |          | (1.80  | )%     |               |   | (1.85  | )%               |   |   | (2.39 | )% |   |   | (1.82 | )% |   |   | (2.41 | )% |
| Operating efficiency ratio                |   |          | 86.06  | %      |               |   | 85.00  | %                |   |   | 75.44 | % |   |   | 85.54 | % |   |   | 75.26 | % |

|                                                             |   |          |   |   | Three Months Ended |   |   | Six Months Ended |   |
|------------------------------------------------------------------|--------|---------------|--------|--------|--------------------|--------|--------|------------------|--------|
|                                                             |   | June 30, 2010 |   |   | March 31,2010      |   |   | June 30,2009     |   |   | June 30, 2010 |   |   | June 30,2009 |   |
| Net noninterest expense as a percent of average assets           |   |          | 2.99   | %      |               |   | 2.92   | %                |   |   | 2.93 | % |   |   | 2.95 | % |   |   | 2.95 | % |
| Effect of intangible amortization expense                        |   |          | (0.11  | )%     |               |   | (0.11  | )%               |   |   | (0.16 | )% |   |   | (0.10 | )% |   |   | (0.16 | )% |
| Operating net noninterest expense as a percent of average assets |   |          | 2.88   | %      |               |   | 2.81   | %                |   |   | 2.77 | % |   |   | 2.85 | % |   |   | 2.79 | % |

----

----

| ·   | Net income for the second quarter of 2010 totaled $0.7 million ($0.04 per diluted share) compared to a net loss of $3.5 million ($0.20 per diluted share) for the first quarter of 2010 and net income of $0.8 million ($0.04 per diluted share) for the second quarter of 2009.  For the first six months of 2010, we realized a net loss of $2.7 million ($0.16 per diluted share) compared to net income of $1.4 million ($0.08 per diluted share) for the comparable period of 2009. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Net income for the second quarter of 2010 reflects total credit related costs (loan loss provision and other real estate property costs (valuation adjustments, holding costs, and loss on sale)) of $7.7 million, compared to $13.6 million for the first quarter of 2010 and $9.8 million for the second quarter of 2009.  Credit related costs were $21.3 million for the first half of 2010 compared to $18.9 million for the same period in 2009. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Tax equivalent net interest income for the second quarter of 2010 was $24.7 million compared to $24.5 million for the first quarter of 2010 and $27.7 million for the second quarter of 2009.  For the first half of 2010, tax equivalent net interest income totaled $49.2 million compared to $55.3 million in 2009. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Noninterest income increased $0.7 million, or 5.1%, from the first quarter of 2010 due to higher deposit fees and retail brokerage fees.  Noninterest income was flat compared to the second quarter of 2009 and first half of 2009.  For both periods, a reduction in deposit fees and mortgage banking fees were offset by higher debit card fees and retail brokerage fees. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Noninterest expense increased $1.2 million, or 3.7%, from the first quarter of 2010 driven by higher expense for other real estate properties ($1.3 million) and higher FDIC insurance expense ($0.8 million), partially offset by lower compensation expense, primarily associate incentives ($0.8 million).  Year over year, noninterest expense increased $1.7 million, or 5.1%, and $2.8 million, or 4.3%, for the three and six-month periods, respectively.  For both periods, higher expense for other real estate properties was partially offset by lower pension expense and intangible amortization. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Loan loss provision for the second quarter of 2010 was $3.6 million, down $7.1 million from the first quarter of 2010 and $4.7 million from the second quarter of 2009.  For the first half of the 2010, the loan loss provision was $14.4 million compared to $16.8 million for the same period in 2009.  For all periods, overall improved credit quality and a significant slowdown in the level of loans migrating into our problem loan pool drove the lower required provision.  As of June 30, 2010, the allowance for loan losses was 2.11% of total loans and provided coverage of 38% of nonperforming loans compared to 2.30% and 41%, respectively, at year-end 2009. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Average earning assets were $2.329 billion for the second quarter of 2010, an increase of $91.9 million, or 5.4% from the fourth quarter of 2009 driven by an increase in the overnight funds position and a higher investment portfolio, partially offset by a decline in the loan portfolio. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | As of June 30, 2010, we are well-capitalized with a risk based capital ratio of 14.14% and a tangible capital ratio of 6.80% compared to 14.11% and 6.84%, respectively, at year-end 2009. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                |   | Three Months Ended |   | Six Months Ended |
|-----------------------------------------------------|--------|--------------------|--------|------------------|
| (Dollars in Thousands, except per share data)       |   | June 30, 2010      |   |             | March 31, 2010 |   |   | June 30, 2009 |   |   | June 30, 2010 |   |   | June 30, 2009 |   |
| Interest Income                                     |   | $             | 27,934 |             |   | $  | 28,154 |   |   | $  | 31,180 |   |   | $  | 56,088 |   |   | $  | 62,233 |   |
| Taxable equivalent Adjustments                      |   |               | 369    |             |   |   | 451 |   |   |   | 584 |   |   |   | 820 |   |   |   | 1,167 |   |
| Total Interest Income (FTE)                         |   |               | 28,303 |             |   |   | 28,605 |   |   |   | 31,764 |   |   |   | 56,908 |   |   |   | 63,400 |   |
| Interest Expense                                    |   |               | 3,565  |             |   |   | 4,132 |   |   |   | 4,085 |   |   |   | 7,697 |   |   |   | 8,143 |   |
| Net Interest Income (FTE)                           |   |               | 24,738 |             |   |   | 24,473 |   |   |   | 27,679 |   |   |   | 49,211 |   |   |   | 55,257 |   |
| Provision for Loan Losses                           |   |               | 3,633  |             |   |   | 10,740 |   |   |   | 8,426 |   |   |   | 14,373 |   |   |   | 16,836 |   |
| Taxable Equivalent Adjustments                      |   |               | 369    |             |   |   | 451 |   |   |   | 584 |   |   |   | 820 |   |   |   | 1,167 |   |
| Net Interest Income After provision for Loan Losses |   |               | 20,736 |             |   |   | 13,282 |   |   |   | 18,669 |   |   |   | 34,018 |   |   |   | 37,254 |   |
| Noninterest Income                                  |   |               | 14,674 |             |   |   | 13,967 |   |   |   | 14,634 |   |   |   | 28,641 |   |   |   | 28,676 |   |
| Noninterest Expense                                 |   |               | 34,629 |             |   |   | 33,384 |   |   |   | 32,930 |   |   |   | 68,013 |   |   |   | 65,187 |   |
| Income (Loss) Before Income Taxes                   |   |               | 781    |             |   |   | (6,135 | ) |   |   | 373 |   |   |   | (5,354 | )  |   |   | 743 |   |
| Income Tax Expense (Benefit)                        |   |               | 50     |             |   |   | (2,672 | ) |   |   | (401 | ) |   |   | (2,622 | ) |   |   | (681 | )  |
| Net Income (Loss)                                   |   | $             | 731    |             |   | $  | (3,463 | ) |   | $  | 774 |   |   | $  | (2,732 | )  |   | $  | 1,424 |   |
|                                                |   |               |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic Net Income (Loss) Per Share                   |   | $                  | 0.04   |             |   | $ | (0.20 | ) |   | $ | 0.04 |   |   | $ | (0.16 | )  |   | $ | 0.08 |   |
| Diluted Net Income (Loss) Per Share                 |   | $                  | 0.04   |             |   | $ | (0.20 | ) |   | $ | 0.04 |   |   | $ | (0.16 | )  |   | $ | 0.08 |   |
|                                                |   |               |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return on Average Equity                            |   |               | 1.11   | %                |   |   | (5.23 | )% |   |   | 1.12 | % |   |   | (2.07 | )% |   |   | 1.03 | % |
| Return on Average Assets                            |   |               | 0.11   | %                |   |   | (0.52 | )% |   |   | 0.12 | % |   |   | (0.20 | )% |   |   | 0.12 | % |

----

----

|                                          |   | Three Months Ended |   | Six Months Ended |
|-----------------------------------------------|--------|--------------------|--------|------------------|
| (Dollars in Thousands, except per share data) |   | June 30, 2010      |   |             | March 31, 2010 |   |   | June 30, 2009 |   |   | June 30,2010 |   |   | June 30, 2009 |   |
|                                          |   |               |   |             |   |   |   |   |   |   |   |   |   |   |   |
| CHARGE-OFFS                                   |   |               |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Commercial, Financial and Agricultural        |   |  $            | 405    |             |   |  $ | 842 |   |   |  $ | 388 |   |   |  $ | 1,247 |   |   |  $ | 1,245 |   |
| Real Estate - Construction                    |   |               | 1,220  |             |   |   | 3,722 |   |   |   | 3,356 |   |   |   | 4.942 |   |   |   | 3,676 |   |
| Real Estate - Commercial Mortgage             |   |               | 920    |             |   |   | 4,631 |   |   |   | 123 |   |   |   | 5,551 |   |   |   | 1,125 |   |
| Real Estate - Residential                     |   |               | 4,725  |             |   |   | 3,727 |   |   |   | 2,379 |   |   |   | 8,452 |   |   |   | 4,354 |   |
| Consumer                                      |   |               | 360    |             |   |   | 1,507 |   |   |   | 1,145 |   |   |   | 1,867 |   |   |   | 3,262 |   |
| Total Charge-offs                             |   |               | 7,630  |             |   |   | 14,429 |   |   |   | 7,391 |   |   |   | 22,059 |   |   |   | 13,662 |   |
|                                          |   |               |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| RECOVERIES                                    |   |               |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial, Financial and Agricultural        |   |               | 181    |             |   |   | 77 |   |   |   | 84 |   |   |   | 258 |   |   |   | 158 |   |
| Real Estate - Construction                    |   |               | 8      |             |   |   | - |   |   |   | - |   |   |   | 8 |   |   |   | 385 |   |
| Real Estate - Commercial Mortgage             |   |               | 43     |             |   |   | 157 |   |   |   | 1 |   |   |   | 200 |   |   |   | 1 |   |
| Real Estate - Residential                     |   |               | 638    |             |   |   | 114 |   |   |   | 51 |   |   |   | 752 |   |   |   | 109 |   |
| Consumer                                      |   |               | 370    |             |   |   | 541 |   |   |   | 439 |   |   |   | 911 |   |   |   | 951 |   |
| Total Recoveries                              |   |               | 1,240  |             |   |   | 889 |   |   |   | 575 |   |   |   | 2,129 |   |   |   | 1,604 |   |
|                                          |   |               |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Charge-offs                               |   |  $            | 6,390  |             |   |  $ | 13,540 |   |   |  $ | 6,816 |   |   |  $ | 19,930 |   |   |  $ | 12,058 |   |
|                                          |   |               |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Charge - Off's (Annualized)               |   |               | 1.39   | %                |   |   | 2.91 | % |   |   | 1.39 | % |   |   | 2.16 | % |   |   | 1.23 | % |
| as a percent of Average                       |   |               |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans Outstanding, Net of                     |   |               |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unearned Interest                             |   |               |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                |   |               |   |             |          |    |   |               |   |    |         |   |   |         |   |
|-------------------------------------|--------|--------------------|--------|------------------|---------------|---------|--------|--------------------|--------|---------|--------------|--------|--------|--------------|--------|
|                                |   | Three Months Ended |   | Six Months Ended |
| (Dollars in Thousands)              |   | June 30,2010       |   |             | March 31,2010 |    |   | June 30, 2009 |   |    | June 30,2010 |   |   | June 30,2009 |   |
|                                |   |               |   |             |          |    |   |               |   |    |         |   |   |         |   |
| Noninterest Income:                 |   |               |   |             |          |    |   |               |   |    |         |   |   |         |   |
| Service Charges on Deposit Accounts |   |  $            | 7,039  |             |          |  $ | 6,628  |               |   |  $ | 7,162        |   |   |  $      | 13,667 |   |   |  $ | 13,860 |   |
| Data Processing Fees                |   |               | 919    |             |          |    | 900    |               |   |    | 896          |   |   |         | 1,819  |   |   |   | 1,766 |   |
| Asset Management Fees               |   |               | 1,080  |             |          |    | 1,020  |               |   |    | 930          |   |   |         | 2,100  |   |   |   | 1,900 |   |
| Retail Brokerage Fees               |   |               | 846    |             |          |    | 565    |               |   |    | 625          |   |   |         | 1,411  |   |   |   | 1,118 |   |
| Investment Security Gains           |   |               | -      |             |          |    | 5      |               |   |    | 6            |   |   |         | 5      |   |   |   | 6 |   |
| Mortgage Banking Fees               |   |               | 641    |             |          |    | 508    |               |   |    | 902          |   |   |         | 1,149  |   |   |   | 1,486 |   |
| Interchange Fees (1)                |   |               | 1,289  |             |          |    | 1,212  |               |   |    | 1,118        |   |   |         | 2,501  |   |   |   | 2,174 |   |
| ATM/Debit Card Fees (1)             |   |               | 1,073  |             |          |    | 963    |               |   |    | 884          |   |   |         | 2,036  |   |   |   | 1,747 |   |
| Other                               |   |               | 1,787  |             |          |    | 2,166  |               |   |    | 2,111        |   |   |         | 3,953  |   |   |   | 4,619 |   |
|                                |   |               |   |             |          |    |   |               |   |    |         |   |   |         |   |   |   |   |   |   |
| Total Noninterest Income            |   |  $            | 14,674 |             |          |  $ | 13,967 |               |   |  $ | 14,634       |   |   |  $      | 28,641 |   |   |  $ | 28,676 |   |

----

----

|                                          |   | Three Months Ended |         | Six Months Ended |
|-----------------------------------------------|--------|--------------------|--------------|------------------|
| (Dollars in Thousands, except per share data) |   | June 30, 2010      |         |             | March 31, 2010 |   |   | June 30, 2009 |   |   | June 30, 2010 |   |   | June 30, 2009 |   |
|                                          |   |               |         |             |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest Expense:                          |   |               |         |             |   |   |   |   |   |   |   |   |   |   |   |
| Salaries                                      |   |  $            | 12,533       |             |   |  $ | 13,049 |   |   |  $ | 12,337 |   |   |  $ | 25,582 |   |   |  $ | 25,478 |   |
| Associate Benefits                            |   |               | 3,051        |             |   |   | 3,730 |   |   |   | 3,712 |   |   |   | 6,781 |   |   |   | 7,808 |   |
| Total Compensation                            |   |               | 15,584       |             |   |   | 16,779 |   |   |   | 16,049 |   |   |   | 32,363 |   |   |   | 33,286 |   |
|                                          |   |               |         |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Premises                                      |   |               | 2,585        |             |   |   | 2,408 |   |   |   | 2,540 |   |   |   | 4,993 |   |   |   | 4,885 |   |
| Equipment                                     |   |               | 2,192        |             |   |   | 2,181 |   |   |   | 2,304 |   |   |   | 4,373 |   |   |   | 4,641 |   |
| Total Occupancy                               |   |               | 4,777        |             |   |   | 4,589 |   |   |   | 4,844 |   |   |   | 9,366 |   |   |   | 9,526 |   |
|                                          |   |               |         |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Legal Fees                                    |   |               | 1,109        |             |   |   | 1,046 |   |   |   | 827 |   |   |   | 2,156 |   |   |   | 1,665 |   |
| Professional Fees                             |   |               | 1,047        |             |   |   | 1,048 |   |   |   | 931 |   |   |   | 2,095 |   |   |   | 1,891 |   |
| Processing Services                           |   |               | 974          |             |   |   | 887 |   |   |   | 880 |   |   |   | 1,861 |   |   |   | 1,788 |   |
| Advertising                                   |   |               | 877          |             |   |   | 678 |   |   |   | 752 |   |   |   | 1,555 |   |   |   | 1,607 |   |
| Travel and Entertainment                      |   |               | 243          |             |   |   | 232 |   |   |   | 234 |   |   |   | 474 |   |   |   | 528 |   |
| Printing and Supplies                         |   |               | 320          |             |   |   | 404 |   |   |   | 464 |   |   |   | 724 |   |   |   | 941 |   |
| Telephone                                     |   |               | 517          |             |   |   | 550 |   |   |   | 547 |   |   |   | 1,067 |   |   |   | 1,116 |   |
| Postage                                       |   |               | 450          |             |   |   | 447 |   |   |   | 452 |   |   |   | 897 |   |   |   | 870 |   |
| Insurance - Other                             |   |               | 1,982        |             |   |   | 1,188 |   |   |   | 2,192 |   |   |   | 3,172 |   |   |   | 3,058 |   |
| Intangible Amortization                       |   |               | 710          |             |   |   | 710 |   |   |   | 1,010 |   |   |   | 1,420 |   |   |   | 2,021 |   |
| Interchange Fees                              |   |               | 329          |             |   |   | 554 |   |   |   | 483 |   |   |   | 883 |   |   |   | 1,220 |   |
| Courier Service                               |   |               | 115          |             |   |   | 116 |   |   |   | 111 |   |   |   | 231 |   |   |   | 249 |   |
| Other Real Estate Owned                       |   |               | 4,082        |             |   |   | 2,825 |   |   |   | 1,333 |   |   |   | 6,907 |   |   |   | 2,092 |   |
| Miscellaneous                                 |   |               | 1,513        |             |   |   | 1,331 |   |   |   | 1,821 |   |   |   | 2,842 |   |   |   | 3,329 |   |
| Total Other                                   |   |               | 14,268       |             |   |   | 12,016 |   |   |   | 12,037 |   |   |   | 26,284 |   |   |   | 22,375 |   |
|                                          |   |               |         |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Noninterest Expense                |   |  $            | 34,629  |             |   |  $ | 33,384  |   |   |  $ | 32,930  |   |   |  $ | 68,013 |   |   |  $ | 65,187  |   |

----

----

----

----

| Changes in Interest Rates | +300 bp | +200 bp | +100 bp | -100 bp          |
|---------------------------|---------|---------|---------|------------------|
|                      |    |    |    |             |
| Policy Limit (±)     | 10.0%   | 7.5%    | 5.0%    |   5.0% |
| June 30, 2010             | -7.4%   | -4.0%   | -1.2%   | -0.7%            |
| March 31, 2010            | -8.1%   | -4.6%   | -1.3%   | -1.0%            |

| Changes in Interest Rates | +300 bp | +200 bp | +100 bp | -100 bp          |   |
|---------------------------|---------|---------|---------|------------------|--------|
|                      |    |    |    |             |   |
| Policy Limit (±)     | 12.5%   | 10.0%   | 7.5%    |   7.5% |   |
| June 30, 2010             | -2.6%   | 1.9%    | 3.5%    |  -7.2%      |   |
| March 31, 2010            | -6.2%   | -0.7%   | 2.1%    |  -5.9%      |   |
|                      |    |    |    |             |   |
|                      |    |    |    |             |   |

| (1) | Down 200 and 300 bp scenarios have been excluded due to the current historically low interest rate environment. |
|-----|-----------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

|                                              |   | Three Months Ended June 30, |      | Six Months Ended June 30, |
|---------------------------------------------------|--------|-----------------------------|-----------|---------------------------|
|                                              |   |                        |      |                      | 2010 |   |   |   |   |   |   |   |   | 2009 |   |   |   |   |   |   |   |   | 2010 |   |   |   |   |   |   |   |   | 2009 |   |   |   |   |
|                                              |   | Average                     |      |                      |   |   |   | Average |   |   | Average |   |   |   |   |   | Average |   |   | Average |   |   |   |   |   | Average |   |   | Average |   |   |   |   |   | Average |   |
| (Taxable Equivalent Basis - Dollars in Thousands) |   | Balances                    |      |                      | Interest |   |   | Rate |   |   | Balances |   |   | Interest |   |   | Rate |   |   | Balances |   |   | Interest |   |   | Rate |   |   | Balances |   |   | Interest |   |   | Rate |   |
|                                              |   |                        |      |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets:                                           |   |                        |      |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans, Net of Unearned Interest(1)(2)             |   | $                      | 1,841,379 |                      |   | $  | 26,795 |   |   |   | 5.84 | % |   | $  | 1,974,197 |   |   | $  | 29,954 |   |   |   | 6.09 | % |   | $  | 1,863,749 |   |   | $  | 53,975 |   |   |   | 5.84 | % |   | $  | 1,969,169 |   |   | $  | 59,678 |   |   |   | 6.11 | % |
| Taxable Investment Securities(2)                  |   |                        | 128,268   |                      |   |   | 708 |   |   |   | 2.21 |   |   |   | 89,574 |   |   |   | 742 |   |   |   | 3.31 |   |   |   | 99,954 |   |   |   | 1,208 |   |   |   | 2.42 |   |   |   | 90,248 |   |   |   | 1,518 |   |   |   | 3.37 |   |
| Tax-Exempt Investment Securities                  |   |                        | 92,140    |                      |   |   | 624 |   |   |   | 2.71 |   |   |   | 106,869 |   |   |   | 1,067 |   |   |   | 4.00 |   |   |   | 94,713 |   |   |   | 1,377 |   |   |   | 2.91 |   |   |   | 104,005 |   |   |   | 2,200 |   |   |   | 4.23 |   |
| Funds Sold                                        |   |                        | 267,578   |                      |   |   | 176 |   |   |   | 0.26 |   |   |   | 4,641 |   |   |   | 1 |   |   |   | 0.10 |   |   |   | 285,331 |   |   |   | 348 |   |   |   | 0.24 |   |   |   | 7,363 |   |   |   | 4 |   |   |   | 0.12 |   |
| Total Earning Assets                              |   |                        | 2,329,365 |                      |   |   | 28,303 |   |   |   | 4.87 | % |   |   | 2,175,281 |   |   |   | 31,764 |   |   |   | 5.86 | % |   |   | 2,343,747 |   |   |   | 56,908 |   |   |   | 4.90 | % |   |   | 2,170,785 |   |   |   | 63,400 |   |   |   | 5.89 | % |
| Cash & Due From Banks                         |   |                        | 50,739    |                      |   |   |   |   |   |   |   |   |   |   | 81,368 |   |   |   |   |   |   |   |   |   |   |   | 52,795 |   |   |   |   |   |   |   |   |   |   |   | 79,109 |   |   |   |   |   |   |   |   |   |
| Allowance For Loan Losses                         |   |                        | (41,074   | )                         |   |   |   |   |   |   |   |   |   |   | (41,978 | ) |   |   |   |   |   |   |   |   |   |   | (42,820 | ) |   |   |   |   |   |   |   |   |   |   | (40,003 | ) |   |   |   |   |   |   |   |   |
| Other Assets                                      |   |                        | 339,458   |                      |   |   |   |   |   |   |   |   |   |   | 291,681 |   |   |   |   |   |   |   |   |   |   |   | 334,677 |   |   |   |   |   |   |   |   |   |   |   | 286,801 |   |   |   |   |   |   |   |   |   |
| TOTAL ASSETS                                      |   | $                      | 2,678,488 |                      |   |   |   |   |   |   |   |   |   | $  | 2,506,352 |   |   |   |   |   |   |   |   |   |   | $  | 2,688,399 |   |   |   |   |   |   |   |   |   |   | $  | 2,496,692 |   |   |   |   |   |   |   |   |   |
|                                              |   |                        |      |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                                      |   |                        |      |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW Accounts                                      |   | $                      | 879,329   |                      |   | $  | 400 |   |   |   | 0.18 | % |   | $  | 709,039 |   |   | $  | 249 |   |   |   | 0.14 | % |   | $  | 873,200 |   |   | $  | 784 |   |   |   | 0.18 | % |   | $  | 714,123 |   |   | $  | 474 |   |   |   | 0.13 | % |
| Money Market Accounts                             |   |                        | 333,976   |                      |   |   | 331 |   |   |   | 0.40 |   |   |   | 298,007 |   |   |   | 192 |   |   |   | 0.26 |   |   |   | 353,958 |   |   |   | 1,020 |   |   |   | 0.58 |   |   |   | 309,719 |   |   |   | 382 |   |   |   | 0.25 |   |
| Savings Accounts                                  |   |                        | 131,333   |                      |   |   | 17 |   |   |   | 0.05 |   |   |   | 123,034 |   |   |   | 15 |   |   |   | 0.05 |   |   |   | 128,856 |   |   |   | 32 |   |   |   | 0.05 |   |   |   | 120,601 |   |   |   | 29 |   |   |   | 0.05 |   |
| Other Time Deposits                               |   |                        | 430,571   |                      |   |   | 1,615 |   |   |   | 1.50 |   |   |   | 417,545 |   |   |   | 2,044 |   |   |   | 1.96 |   |   |   | 434,321 |   |   |   | 3,465 |   |   |   | 1.61 |   |   |   | 404,847 |   |   |   | 4,110 |   |   |   | 2.05 |   |
| Total Interest Bearing Deposits                   |   |                        | 1,775,209 |                      |   |   | 2,363 |   |   |   | 0.53 |   |   |   | 1,547,625 |   |   |   | 2,500 |   |   |   | 0.65 |   |   |   | 1,790,335 |   |   |   | 5,301 |   |   |   | 0.60 |   |   |   | 1,549,290 |   |   |   | 4,995 |   |   |   | 0.65 |   |
| Short-Term Borrowings                             |   |                        | 22,694    |                      |   |   | 12 |   |   |   | 0.20 |   |   |   | 87,768 |   |   |   | 88 |   |   |   | 0.40 |   |   |   | 26,662 |   |   |   | 29 |   |   |   | 0.21 |   |   |   | 86,550 |   |   |   | 156 |   |   |   | 0.36 |   |
| Subordinated Note Payable                         |   |                        | 62,887    |                      |   |   | 639 |   |   |   | 4.02 |   |   |   | 62,887 |   |   |   | 931 |   |   |   | 5.86 |   |   |   | 62,887 |   |   |   | 1,290 |   |   |   | 4.08 |   |   |   | 62,887 |   |   |   | 1,858 |   |   |   | 5.88 |   |
| Other Long-Term Borrowings                        |   |                        | 52,704    |                      |   |   | 551 |   |   |   | 4.20 |   |   |   | 52,775 |   |   |   | 566 |   |   |   | 4.30 |   |   |   | 51,350 |   |   |   | 1,077 |   |   |   | 4.23 |   |   |   | 52,997 |   |   |   | 1,134 |   |   |   | 4.31 |   |
| Total Interest Bearing Liabilities                |   |                        | 1,913,494 |                      |   |   | 3,565 |   |   |   | 0.75 | % |   |   | 1,751,055 |   |   |   | 4,085 |   |   |   | 0.94 | % |   |   | 1,931,234 |   |   |   | 7,697 |   |   |   | 0.80 | % |   |   | 1.751,724 |   |   |   | 8,143 |   |   |   | 0.94 | % |
| Noninterest Bearing Deposits                      |   |                        | 458,969   |                      |   |   |   |   |   |   |   |   |   |   | 423,566 |   |   |   |   |   |   |   |   |   |   |   | 451,094 |   |   |   |   |   |   |   |   |   |   |   | 415,020 |   |   |   |   |   |   |   |   |   |
| Other Liabilities                                 |   |                        | 42,152    |                      |   |   |   |   |   |   |   |   |   |   | 54,617 |   |   |   |   |   |   |   |   |   |   |   | 39,870 |   |   |   |   |   |   |   |   |   |   |   | 50,586 |   |   |   |   |   |   |   |   |   |
| TOTAL LIABILITIES                                 |   |                        | 2,414,615 |                      |   |   |   |   |   |   |   |   |   |   | 2,229,238 |   |   |   |   |   |   |   |   |   |   |   | 2,422,198 |   |   |   |   |   |   |   |   |   |   |   | 2,217,330 |   |   |   |   |   |   |   |   |   |
|                                              |   |                        |      |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL SHAREOWNERS’ EQUITY                   |   |                        | 263,873   |                      |   |   |   |   |   |   |   |   |   |   | 277,114 |   |   |   |   |   |   |   |   |   |   |   | 266,201 |   |   |   |   |   |   |   |   |   |   |   | 279,362 |   |   |   |   |   |   |   |   |   |
|                                              |   |                        |      |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL LIABILITIES AND                             |   |                        |      |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SHAREOWNERS’ EQUITY                         |   | $                      | 2,678,488 |                      |   |   |   |   |   |   |   |   |   | $  | 2,506,352 |   |   |   |   |   |   |   |   |   |   | $  | 2,688,399 |   |   |   |   |   |   |   |   |   |   | $  | 2,496,692 |   |   |   |   |   |   |   |   |   |
|                                              |   |                        |      |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest Rate Spread                              |   |                        |      |                      |   |   |   |   |   |   | 4.12 | % |   |   |   |   |   |   |   |   |   |   | 4.92 | % |   |   |   |   |   |   |   |   |   |   | 4.10 | % |   |   |   |   |   |   |   |   |   |   | 4.95 | % |
| Net Interest Income                               |   |                        |      |                      |   | $  | 24,738 |   |   |   |   |   |   |   |   |   |   | $  | 27,679 |   |   |   |   |   |   |   |   |   |   | $  | 49,211 |   |   |   |   |   |   |   |   |   |   | $  | 55,257 |   |   |   |   |   |
| Net Interest Margin(3)                            |   |                        |      |                      |   |   |   |   |   |   | 4.26 | % |   |   |   |   |   |   |   |   |   |   | 5.11 | % |   |   |   |   |   |   |   |   |   |   | 4.24 | % |   |   |   |   |   |   |   |   |   |   | 5.13 | % |

|  (1) | Average balances include nonaccrual loans.  Interest income includes fees on loans of $363,000 and $782,000, for the three and six months ended June 30, 2010 versus $366,000 and $847,000 for the comparable periods ended June 30, 2009. |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  (2) | Interest income includes the effects of taxable equivalent adjustments using a 35% tax rate. |
|-----------|----------------------------------------------------------------------------------------------|

| (3) | Taxable equivalent net interest income divided by average earning assets. |
|-----|---------------------------------------------------------------------------|

----

| Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
|---------|------------------------------------------------------------|

| Item 4. | CONTROLS AND PROCEDURES |
|---------|-------------------------|

| PART II. | OTHER INFORMATION |
|----------|-------------------|

| Item 1. | Legal Proceedings |
|---------|-------------------|

| Item 1A. | Risk Factors |
|----------|--------------|

----

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

| Item 3. | Defaults Upon Senior Securities |
|---------|---------------------------------|

| Item 4. | [Removed and Reserved] |
|---------|------------------------|

| Item 5. | Other Information |
|---------|-------------------|

----

| Item 6. | Exhibits |
|---------|----------|

| (A) | Exhibits |
|-----|----------|

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

| 31.2 | Certification of J. Kimbrough Davis, Executive Vice President and Chief Financial Officer of Capital City Bank Group, Inc., Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

----

SIGNATURES

| By: /s/ J. Kimbrough Davis                                                                                      |   |
|-----------------------------------------------------------------------------------------------------------------|--------|
| J. Kimbrough Davis                                                                                              |   |
| Executive Vice President and Chief Financial Officer                                                            |   |
| (Mr. Davis is the Principal Financial Officer and has been duly authorized to sign on behalf of the Registrant) |   |
|                                                                                                            |   |
| Date: August 6, 2010                                                                                       |   |