| 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 itscharter) |

| 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 areacode) |

| 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 – September 30, 2008 and December 31,      2007             | 4      |
|                                      | Consolidated      Statements of Income – Three and Nine Months Ended September 30, 2008 and      2007           | 5      |
|                                      | Consolidated      Statement of Changes in Shareowners’ Equity – Nine Months Ended September      30, 2008 | 6      |
|                                      | Consolidated      Statements of Cash Flow – Nine Months Ended September 30, 2008 and      2007                  | 7      |
|                                      | Notes      to Consolidated Financial Statements                                                                       | 8      |
|                                      |                                                                                                                  |   |
| Item      2.                              | Management's      Discussion and Analysis of Financial Condition and Results of      Operations                       | 17     |
|                                      |                                                                                                                  |   |
| 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                                                      | 35     |
|                                      |                                                                                                                  |   |
| Item      3.                              | Defaults      Upon Senior Securities                                                                                  | 35     |
|                                      |                                                                                                                  |   |
| Item      4.                              | Submission      of Matters to a Vote of Security Holders                                                              | 35     |
|                                      |                                                                                                                  |   |
| Item      5.                              | Other      Information                                                                                                | 35     |
|                                      |                                                                                                                  |   |
| Item      6.                              | Exhibits                                                                                                              | 36     |
|                                      |                                                                                                                  |   |
| Signatures                                |                                                                                                                  | 37     |

----

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

| §   | the      adequacy of collateral underlying collateralized loans and our ability to      resell the collateral if we foreclose on the  loans; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------|

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

| §   | the      accuracy of our financial statement estimates and assumptions, including      the estimate for our loan lossprovision; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| §   | the      extent to which our nonperforming loans increase or decrease as a      percentage of our total loanportfolio; |
|--------------------|------------------------------------------------------------------------------------------------------------------------|

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

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

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

| §   | the      effects of harsh weather conditions, including  hurricanes; |
|--------------------|----------------------------------------------------------------------|

| §   | inflation,      interest rate, market and monetaryfluctuations; |
|--------------------|-----------------------------------------------------------------|

| §   | effect      of changes in the stock market and other capital  markets; |
|--------------------|------------------------------------------------------------------------|

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

| §   | 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 viceversa; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------|

| §   | changes      in the securities and real estatemarkets; |
|--------------------|--------------------------------------------------------|

| §   | increased      competition and its effect onpricing; |
|--------------------|------------------------------------------------------|

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

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

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

| §   | changes      in consumer spending and savinghabits; |
|--------------------|-----------------------------------------------------|

| §   | growth      and profitability of our noninterestincome; |
|--------------------|---------------------------------------------------------|

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

| §   | the      limited trading activity of our commonstock; |
|--------------------|-------------------------------------------------------|

| §   | the      concentration of ownership of our commonstock; |
|--------------------|---------------------------------------------------------|

| §   | 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. |
|--------------------|------------------------------------------------------------------|

----

| (Dollars      In Thousands, Except Share Data)                                                                                                                                               |   | September      30, 2008 |      |   | December      31, 2007 |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|-----------|--------|------------------------|---------|
| ASSETS                                                                                                                                                                                       |   |                    |      |   |                   |    |
| Cash      and Due From Banks                                                                                                                                                                 |   | $                       | 71,062    |   |                   | $       | 93,437 |   |
| Funds      Sold and Interest Bearing Deposits                                                                                                                                                |   |                    | 27,419    |   |                   |    | 166,260 |   |
| Total      Cash and Cash Equivalents                                                                                                                                                         |   |                    | 98,481    |   |                   |    | 259,697 |   |
|                                                                                                                                                                                         |   |                    |      |   |                   |    |   |   |
| Investment      Securities, Available-for-Sale                                                                                                                                               |   |                    | 193,978   |   |                   |    | 190,719 |   |
|                                                                                                                                                                                         |   |                    |      |   |                   |    |   |   |
| Loans,      Net of Unearned Interest                                                                                                                                                         |   |                    | 1,927,229 |   |                   |    | 1,915,850 |   |
| Allowance      for Loan Losses                                                                                                                                                               |   |                    | (30,544   | )      |                   |    | (18,066 | ) |
| Loans,      Net                                                                                                                                                                              |   |                    | 1,896,685 |   |                   |    | 1,897,784 |   |
|                                                                                                                                                                                         |   |                    |      |   |                   |    |   |   |
| Premises      and Equipment, Net                                                                                                                                                             |   |                    | 104,806   |   |                   |    | 98,612 |   |
| Goodwill                                                                                                                                                                                     |   |                    | 84,811    |   |                   |    | 84,811 |   |
| Other      Intangible Assets                                                                                                                                                                 |   |                    | 9,381     |   |                   |    | 13,757 |   |
| Other      Assets                                                                                                                                                                            |   |                    | 66,308    |   |                   |    | 70,947 |   |
| Total      Assets                                                                                                                                                                            |   | $                       | 2,454,450 |   |                   | $       | 2,616,327 |   |
|                                                                                                                                                                                         |   |                    |      |   |                   |    |   |   |
| LIABILITIES                                                                                                                                                                                  |   |                    |      |   |                   |    |   |   |
| Deposits:                                                                                                                                                                                    |   |                    |      |   |                   |    |   |   |
| Noninterest      Bearing Deposits                                                                                                                                                            |   | $                       | 382,878   |   |                   | $       | 432,659 |   |
| Interest      Bearing Deposits                                                                                                                                                               |   |                    | 1,579,906 |   |                   |    | 1,709,685 |   |
| Total      Deposits                                                                                                                                                                          |   |                    | 1,962,784 |   |                   |    | 2,142,344 |   |
|                                                                                                                                                                                         |   |                    |      |   |                   |    |   |   |
| Short-Term      Borrowings                                                                                                                                                                   |   |                    | 47,069    |   |                   |    | 53,131 |   |
| Subordinated      Notes Payable                                                                                                                                                              |   |                    | 62,887    |   |                   |    | 62,887 |   |
| Other      Long-Term Borrowings                                                                                                                                                              |   |                    | 53,074    |   |                   |    | 26,731 |   |
| Other      Liabilities                                                                                                                                                                       |   |                    | 29,841    |   |                   |    | 38,559 |   |
| Total      Liabilities                                                                                                                                                                       |   |  $                 | 2,155,655 |   |                   |  $ | 2,323,652 |   |
|                                                                                                                                                                                         |   |                    |      |   |                   |    |   |   |
| 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; 17,124,986 and      17,182,553 shares issued and outstanding at September 30, 2008 and      December 31, 2007, respectively |   |                    | 171       |   |                   |    | 172 |   |
| Additional      Paid-In Capital                                                                                                                                                              |   |                    | 36,681    |   |                   |    | 38,243 |   |
| Retained      Earnings                                                                                                                                                                       |   |                    | 267,853   |   |                   |    | 260,325 |   |
| Accumulated      Other Comprehensive Loss, Net of Tax                                                                                                                                        |   |                    | (5,910    | )      |                   |    | (6,065 | ) |
| Total      Shareowners' Equity                                                                                                                                                               |   |                    | 298,795   |   |                   |    | 292,675 |   |
| Total      Liabilities and Shareowners' Equity                                                                                                                                               |   | $                       | 2,454,450 |   |                   | $       | 2,616,327 |   |

----

|                                                          |   | Three      Months Ended |       |   | Nine      Months Ended |   |                                                               |
|---------------------------------------------------------------|--------|-------------------------|------------|--------|------------------------|--------|--------------------------------------------------------------------|
| (Dollars      in Thousands, Except Per Share Data)            |   | 2008                    |       |   | 2007                   |   |                                                               | 2008 |   |   | 2007 |   |
| INTEREST      INCOME                                          |   |                    |       |   |                   |   |                                                               |   |   |   |   |   |
| Interest      and Fees on Loans                               |   | $                       | 32,435     |   |                   | $      |           38,692 |   |   | $ |  101,112 |   |   | $ |          116,838 |   |
| Investment      Securities:                                   |   |                    |       |   |                   |   |                                                               |   |   |   |   |   |   |   |   |   |
| U.S.      Treasury                                            |   |                    | 218        |   |                   |   | 143                                                                |   |   |   | 566 |   |   |   | 425 |   |
| U.S.      Govt. Agencies                                      |   |                    | 588        |   |                   |   | 906                                                                |   |   |   | 2,014 |   |   |   | 2,762 |   |
| States      and Political Subdivisions                        |   |                    | 803        |   |                   |   | 743                                                                |   |   |   | 2,372 |   |   |   | 2,127 |   |
| Other      Securities                                         |   |                    | 135        |   |                   |   | 176                                                                |   |   |   | 495 |   |   |   | 536 |   |
| Funds      Sold                                               |   |                    | 475        |   |                   |   | 639                                                                |   |   |   | 3,078 |   |   |   | 1,849 |   |
| Total      Interest Income                                    |   |                    | 34,654     |   |                   |   | 41,299                                                             |   |   |   | 109,637 |   |   |   | 124,537 |   |
|                                                          |   |                    |       |   |                   |   |                                                               |   |   |   |   |   |   |   |   |   |
| INTEREST      EXPENSE                                         |   |                    |       |   |                   |   |                                                               |   |   |   |   |   |   |   |   |   |
| Deposits                                                      |   |                    | 5,815      |   |                   |   | 11,266                                                             |   |   |   | 23,458 |   |   |   | 33,364 |   |
| Short-Term      Borrowings                                    |   |                    | 230        |   |                   |   | 734                                                                |   |   |   | 1,047 |   |   |   | 2,232 |   |
| Subordinated      Notes Payable                               |   |                    | 936        |   |                   |   | 936                                                                |   |   |   | 2,798 |   |   |   | 2,794 |   |
| Other      Long-Term Borrowings                               |   |                    | 488        |   |                   |   | 453                                                                |   |   |   | 1,215 |   |   |   | 1,451 |   |
| Total      Interest Expense                                   |   |                    | 7,469      |   |                   |   | 13,389                                                             |   |   |   | 28,518 |   |   |   | 39,841 |   |
|                                                          |   |                    |       |   |                   |   |                                                               |   |   |   |   |   |   |   |   |   |
| NET      INTEREST INCOME                                      |   |                    | 27,185     |   |                   |   | 27,910                                                             |   |   |   | 81,119 |   |   |   | 84,696 |   |
| Provision      for Loan Losses                                |   |                    | 10,425     |   |                   |   | 1,552                                                              |   |   |   | 19,999 |   |   |   | 4,464 |   |
| Net      Interest Income After Provision For Loan Losses |   |                    | 16,760     |   |                   |   | 26,358                                                             |   |   |   | 61,120 |   |   |   | 80,232 |   |
|                                                          |   |                    |       |   |                   |   |                                                               |   |   |   |   |   |   |   |   |   |
| NONINTEREST      INCOME                                       |   |                    |       |   |                   |   |                                                               |   |   |   |   |   |   |   |   |   |
| Service      Charges on Deposit Accounts                      |   |                    | 7,110      |   |                   |   | 6,387                                                              |   |   |   | 20,935 |   |   |   | 18,874 |   |
| Data      Processing                                          |   |                    | 873        |   |                   |   | 775                                                                |   |   |   | 2,498 |   |   |   | 2,280 |   |
| Asset      Management Fees                                    |   |                    | 1,025      |   |                   |   | 1,200                                                              |   |   |   | 3,300 |   |   |   | 3,600 |   |
| Securities      Transactions                                  |   |                    | 27         |   |                   |   | -                                                                  |   |   |   | 122 |   |   |   | 7 |   |
| Mortgage      Banking Revenues                                |   |                    | 331        |   |                   |   | 642                                                                |   |   |   | 1,331 |   |   |   | 2,171 |   |
| Bank      Card Fees                                           |   |                    | 2,431      |   |                   |   | 3,305                                                              |   |   |   | 10,300 |   |   |   | 10,296 |   |
| Gain      on Sale of Portion of Merchant Services Portfolio   |   |                    | 6,250      |   |                   |   | -                                                                  |   |   |   | 6,250 |   |   |   | - |   |
| Other                                                         |   |                    | 2,165      |   |                   |   | 2,122                                                              |   |   |   | 8,993 |   |   |   | 6,249 |   |
| Total      Noninterest Income                                 |   |                    | 20,212     |   |                   |   | 14,431                                                             |   |   |   | 53,729 |   |   |   | 43,477 |   |
|                                                          |   |                    |       |   |                   |   |                                                               |   |   |   |   |   |   |   |   |   |
| NONINTEREST      EXPENSE                                      |   |                    |       |   |                   |   |                                                               |   |   |   |   |   |   |   |   |   |
| Salaries      and Associate Benefits                          |   |                    | 15,417     |   |                   |   | 15,096                                                             |   |   |   | 46,339 |   |   |   | 45,807 |   |
| Occupancy,      Net                                           |   |                    | 2,373      |   |                   |   | 2,409                                                              |   |   |   | 7,226 |   |   |   | 6,969 |   |
| Furniture      and Equipment                                  |   |                    | 2,369      |   |                   |   | 2,513                                                              |   |   |   | 7,534 |   |   |   | 7,356 |   |
| Intangible      Amortization                                  |   |                    | 1,459      |   |                   |   | 1,459                                                              |   |   |   | 4,376 |   |   |   | 4,376 |   |
| Other                                                         |   |                    | 8,298      |   |                   |   | 8,442                                                              |   |   |   | 24,995 |   |   |   | 25,870 |   |
| Total      Noninterest Expense                                |   |                    | 29,916     |   |                   |   | 29,919                                                             |   |   |   | 90,470 |   |   |   | 90,378 |   |
|                                                          |   |                    |       |   |                   |   |                                                               |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE INCOME TAXES                               |   |                    | 7,056      |   |                   |   | 10,870                                                             |   |   |   | 24,379 |   |   |   | 33,331 |   |
| Income      Taxes                                             |   |                    | 2,218      |   |                   |   | 3,699                                                              |   |   |   | 7,451 |   |   |   | 11,312 |   |
|                                                          |   |                    |       |   |                   |   |                                                               |   |   |   |   |   |   |   |   |   |
| NET      INCOME                                               |   | $                       | 4,838      |   |                   | $      | 7,171                                                              |   |   | $ | 16,928 |   |   | $ | 22,019 |   |
|                                                          |   |                    |       |   |                   |   |                                                               |   |   |   |   |   |   |   |   |   |
| Basic      Net Income Per Share                               |   | $                       | .29        |   |                   | $      | .41                                                                |   |   | $ | .99 |   |   | $ | 1.22 |   |
| Diluted      Net Income Per Share                             |   | $                       | .29        |   |                   | $      | .41                                                                |   |   | $ | .99 |   |   | $ | 1.22 |   |
|                                                          |   |                    |       |   |                   |   |                                                               |   |   |   |   |   |   |   |   |   |
| Average      Basic Shares Outstanding                         |   |                    | 17,123,967 |   |                   |   | 17,709,119                                                         |   |   |   | 17,146,780 |   |   |   | 18,066,393 |   |
| Average      Diluted Shares Outstanding                       |   |                    | 17,127,949 |   |                   |   | 17,719,436                                                         |   |   |   | 17,149,392 |   |   |   | 18,076,916 |   |

----

|   (Dollars      In Thousands, Except Share Data)                                             | Shares      Outstanding |   |   | Common      Stock |    |   | AdditionalPaid-In      Capital |   |   | Retained      Earnings |    |   | Accumulated      Other Comprehensive Loss, Net of Taxes |   | Total  |    |
|--------------------------------------------------------------------------------------------------------|-------------------------|--------|--------|-------------------|---------|--------|--------------------------------|--------|--------|------------------------|---------|--------|---------------------------------------------------------|--------|--------|---------|
|                                                                                                   |                    |   |   |              |    |   |                           |   |   |                   |    |   |                                                    |   |   |    |
| Balance,      December 31, 2007                                                                        | 17,182,553              |   | $      |  172         |    | $      | 38,243                         |   |   | $                      | 260,325 |   |                                                    | $      | (6,065 | )       | $ | 292,675 |   |
| Cumulative      Effect of Adoption of EITF 06-4                                                        | -                       |   |   | -                 |    |   | -                              |   |   |                   | (30     | )      |                                                    |   | -      |    |   | (30 | ) |
| Comprehensive      Income:                                                                             |                    |   |   |              |    |   |                           |   |   |                   |    |   |                                                    |   |   |    |   |   |   |
| Net      Income                                                                                        | -                       |   |   | -                 |    |   | -                              |   |   |                   | 16,928  |   |                                                    |   | -      |    |   | 16,928 |   |
| Net      Change in Unrealized Gain On   Available-for-Sale      Securities (net of tax) | -                       |   |   | -                 |    |   | -                              |   |   |                   | -       |   |                                                    |   | 155    |    |   | 155 |   |
| Total      Comprehensive Income                                                                        | -                       |   |   | -                 |    |   | -                              |   |   |                   | -       |   |                                                    |   | -      |    |   | 17,083 |   |
| Cash      Dividends ($.5550 per share)                                                                 | -                       |   |   | -                 |    |   | -                              |   |   |                   | (9,370  | )      |                                                    |   | -      |    |   | (9,370 | ) |
| Stock      Performance Plan Compensation                                                               | -                       |   |   | -                 |    |   | 19                             |   |   |                   | -       |   |                                                    |   | -      |    |   | 19 |   |
| Issuance      of Common Stock                                                                          | 32,474                  |   |   |              |    |   | 832                            |   |   |                   | -       |   |                                                    |   | -      |    |   | 832 |   |
| Repurchase      of Common Stock                                                                        | (90,041                 | )      |   | (1                | )  |   | (2,413                         | )      |   |                   | -       |   |                                                    |   | -      |    |   | (2,414 | ) |
|                                                                                                   |                    |   |   |              |    |   |                           |   |   |                   |    |   |                                                    |   |   |    |   |   |   |
| Balance,      September 30, 2008                                                                       | 17,124,986              |   | $      |  171         |    | $      | 36,681                         |   | $      | 267,853                |    | $      | (5,910                                                  | )      | $      | 298,795 |   |

----

| (Dollars      in Thousands)                                                            |   | 2008   |                                                                                                     |    | 2007   |   |
|----------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------|---------|--------|--------|
| CASH      FLOWS FROM OPERATING ACTIVITIES                                              |   |   |                                                                                                     |    |   |   |
| Net      Income                                                                        |   | $      | 16,928                                                                                                   |    |   | $      | 22,019 |   |
| Adjustments      to Reconcile Net Income toCash      Provided by Operating Activities: |   |   |                                                                                                     |    |   |   |   |   |
| Provision      for Loan Losses                                                         |   |   |           19,999                                       |    |   |   |            4,464 |   |
| Depreciation                                                                           |   |   |             5,173                            |    |   |   |            4,673 |   |
| Net      Securities Amortization                                                       |   |   |                616            |    |   |   |               226 |   |
| Amortization      of Intangible Assets                                                 |   |   |             4,376                            |    |   |   |            4,376 |   |
| Gain      on Securities Transactions                                                   |   |   |              (122                       | )       |   |   |                 (7 | ) |
| Gain      On Sale of Portion of Merchant Services Portfolio                            |   |   | (6,250                                                                                                   | )       |   |   | - |   |
| Proceeds      From Sale of Portion of Merchant Services Portfolio                      |   |   | 6,250                                                                                                    |    |   |   | - |   |
| Origination      of Loans Held-for-Sale                                                |   |   |         (87,612                                                  | )       |   |   |      (132,961 | ) |
| Proceeds      From Sales of Loans Held-for-Sale                                        |   |   |           90,927                                       |    |   |   |        136,973 |   |
| Net      Gain From Sales of Loans Held-for-Sale                                        |   |   |           (1,331                                       | )       |   |   |          (2,171 | ) |
| Non-Cash      Compensation                                                             |   |   |                  19 |    |   |   |               135 |   |
| Increase      in Deferred Income Taxes                                                 |   |   |             1,081                            |    |   |   |               549 |   |
| Net      Decrease (Increase) in Other Assets                                           |   |   |           10,818                                       |    |   |   |          (5,443 | ) |
| Net      (Decrease) Increase in Other Liabilities                                      |   |   |         (10,283                                                  | )  |   |   |          16,854 |   |
| Net      Cash Provided By Operating Activities                                         |   |   | 50,589                                                                                                   |    |   |   | 49,687 |   |
|                                                                                   |   |   |                                                                                                     |    |   |   |   |   |
| CASH      FLOWS FROM INVESTING ACTIVITIES                                              |   |   |                                                                                                     |    |   |   |   |   |
| Securities      Available-for-Sale:                                                    |   |   |                                                                                                     |    |   |   |   |   |
| Purchases                                                                              |   |   |         (75,528                                                  | )       |   |   | (35,405 | ) |
| Sales                                                                                  |   |   |           10,490                                       |    |   |   | - |   |
| Payments,      Maturities, and Calls                                                   |   |   |           61,504                                       |    |   |   | 43,292 |   |
| Net      (Increase) Decrease in Loans                                                  |   |   |         (26,672                                                  | )  |   |   | 88,212 |   |
| Purchase      of Premises & Equipment                                              |   |   | (11,368                                                                                                  | )       |   |   | (14,394 | ) |
| Proceeds      From Sales of Premises & Equipment                                   |   |   | -                                                                                                        |    |   |   | 443 |   |
| Net      Cash (Used In) Provided By Investing Activities                               |   |   | (41,574                                                                                                  | )  |   |   | 82,148 |   |
|                                                                                   |   |   |                                                                                                     |    |   |   |   |   |
| CASH      FLOWS FROM FINANCING ACTIVITIES                                              |   |   |                                                                                                     |    |   |   |   |   |
| Net      Decrease in Deposits                                                          |   |   |       (179,561                                                             | )       |   |   | (144,241 | ) |
| Net      Decrease in Short-Term Borrowings                                             |   |   |           (6,053                                       | )       |   |   | (1,580 | ) |
| Increase      (Decrease) in Other Long-Term Borrowings                                 |   |   |           28,526                                       |    |   |   |          (8,499 | ) |
| Repayment      of Other Long-Term Borrowings                                           |   |   |           (2,191                                       | )       |   |   |          (4,485 | )  |
| Dividends      Paid                                                                    |   |   |           (9,370                                       | )       |   |   |          (9,608 | ) |
| Repurchase      of Common Stock                                                        |   |   |           (2,414                                       | )       |   |   |        (30,554 | ) |
| Issuance      of Common Stock                                                          |   |   |                832            |    |   |   |               545 |   |
| Net      Cash Used In Financing Activities                                             |   |   |       (170,231                                                             | )       |   |   |      (198,422 | ) |
|                                                                                   |   |   |                                                                                                     |    |   |   |   |   |
| NET      CHANGE IN CASH AND CASH EQUIVALENTS                                           |   |   | (161,216                                                                                                 | )       |   |   | (66,587 | ) |
|                                                                                   |   |   |                                                                                                     |    |   |   |   |   |
| Cash      and Cash Equivalents at Beginning of Period                                  |   |   | 259,697                                                                                                  |    |   |   | 177,564 |   |
| Cash      and Cash Equivalents at End of Period                                        |   | $      | 98,481                                                                                                   |    |   | $      | 110,977 |   |
|                                                                                   |   |   |                                                                                                     |    |   |   |   |   |
| Supplemental      Disclosure:                                                          |   |   |                                                                                                     |    |   |   |   |   |
| Interest      Paid on Deposits                                                         |   | $      | 25,135                                                                                                   |    |   | $      | 33,222 |   |
| Interest      Paid on Debt                                                             |   | $      | 5,040                                                                                                    |    |   | $      | 6,540 |   |
| Taxes      Paid                                                                        |   | $      | 14,027                                                                                                   |    |   | $      | 8,643 |   |
| Loans      Transferred to Other Real Estate Owned                                      |   | $      | 5,788                                                                                                    |    |   | $      | 2,828 |   |
| Issuance      of Common Stock as Non-Cash Compensation                                 |   | $      | 1                                                                                                        |    |   | $      | 1,159 |   |

----

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

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

|                                   |   | September      30, 2008 |                                                                           |
|----------------------------------------|--------|-------------------------|--------------------------------------------------------------------------------|
| (Dollars      in Thousands)            |   | Amortized      Cost     |                                                                           |   | Unrealized      Gains |   |   | Unrealized      Losses |   |   | Market      Value |   |
| U.S.      Treasury                     |   | $                       | 31,150                                                                         |   |   | $ | 125 |   |   | $ | 49 |   |   | $ | 31,226 |   |
| U.S.      Government Agencies          |   |                    | 8,209                                                                          |   |   |   | 123 |   |   |   | 3 |   |   |   | 8,329 |   |
| States      and Political Subdivisions |   |                    |           102,843            |   |   |   |                663 |   |   |   | 77 |   |   |   |      103,429 |   |
| Mortgage-Backed      Securities        |   |                    |             38,339 |   |   |   |                130 |   |   |   | 395 |   |   |   |        38,074 |   |
| Other      Securities(1)               |   |                    |             12,858 |   |   |   |                  62 |   |   |   | - |   |   |   |        12,920 |   |
| Total      Investment Securities       |   | $                       |           193,399            |   |   | $ |                1,103 |   |   | $ | 524 |   |   | $ |      193,978 |   |

|                                   |   | December      31, 2007 |                                              |
|----------------------------------------|--------|------------------------|---------------------------------------------------|
| (Dollars      in Thousands)            |   | Amortized      Cost    |                                              |   | Unrealized      Gains |   |   | Unrealized      Losses |   |   | Market      Value |   |
| U.S.      Treasury                     |   | $                      | 16,216                                            |   |   | $ | 97 |   |   | $ | - |   |   | $ | 16,313 |   |
| U.S.      Government Agencies          |   |                   | 45,489                                            |   |   |   | 295 |   |   |   | 34 |   |   |   | 45,750 |   |
| States      and Political Subdivisions |   |                   | 90,014                                            |   |   |   | 164 |   |   |   | 177 |   |   |   | 90,001 |   |
| Mortgage-Backed      Securities        |   |                   | 26,334                                            |   |   |   | 85 |   |   |   | 132 |   |   |   | 26,287 |   |
| Other      Securities(1)               |   |                   | 12,307                                            |   |   |   | 61 |   |   |   | - |   |   |   | 12,368 |   |
| Total      Investment Securities       |   | $                      |        190,360 |   |   | $ |             702 |   |   | $ |      343 |   |   | $ |   190,719 |   |

|  (1) | Includes Federal Home Loan      Bank and Federal Reserve Bank stock recorded at cost of $7.0 million and      $4.8 million, respectively, at September 30, 2008, and $6.5 million and      $4.8 million, respectively, at December 31,  2007. |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | NOTE      3 - LOANS |
|--------|---------------------|

| (Dollars      in Thousands)                 |   | September      30, 2008 |      |   | December      31, 2007 |   |
|---------------------------------------------|--------|-------------------------|-----------|--------|------------------------|--------|
| Commercial,      Financial and Agricultural |   | $                       | 189,676   |   |                   | $      | 208,864 |   |
| Real      Estate-Construction               |   |                    | 148,160   |   |                   |   | 142,248 |   |
| Real      Estate-Commercial                 |   |                    | 639,443   |   |                   |   | 634,920 |   |
| Real      Estate-Residential                |   |                    | 479,529   |   |                   |   | 485,608 |   |
| Real      Estate-Home Equity                |   |                    | 212,118   |   |                   |   | 192,428 |   |
| Real      Estate-Loans Held-for-Sale        |   |                    | 1,811     |   |                   |   | 2,764 |   |
| Consumer                                    |   |                    | 256,492   |   |                   |   | 249,018 |   |
| Loans,      Net of Unearned Interest        |   | $                       | 1,927,229 |   |                   | $      | 1,915,850 |   |

| (Dollars      in Thousands)                     |   | 2008   |   |   | 2007   |   |
|-------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Balance,      Beginning of Period               |   | $      | 18,066 |   |   | $      |  17,217 |   |
| Provision      for Loan Losses                  |   |   | 19,999 |   |   |   | 4,464 |   |
| Recoveries      on Loans Previously Charged-Off |   |   | 1,799  |   |   |   | 1,465 |   |
| Loans      Charged-Off                          |   |   | (9,320 | )      |   |   |  (5,145 | ) |
| Balance,      End of Period                     |   | $      | 30,544 |   |   | $      |   18,001 |   |

|                                     |   | September      30, 2008 |   |   | December      31, 2007   |   |
|------------------------------------------|--------|-------------------------|--------|--------|--------------------------|--------|
|  (Dollars      in Thousands)        |   | Balance                 |   |   | Valuation      Allowance |   |   | Balance |   |   | Valuation      Allowance |   |
| Impaired      Loans:                     |   |                    |   |   |                     |   |   |   |   |   |   |   |
| With      Related Valuation Allowance    |   | $                       | 37,120 |   |                     | $      | 11,364 |   |   | $ | 21,615 |   |   | $ | 4,702 |   |
| Without      Related Valuation Allowance |   |                    | 38,629 |   |                     |   | - |   |   |   | 15,019 |   |   |   | - |   |

----

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

|                                  |   | September      30, 2008 |    |   | December      31, 2007  |   |
|---------------------------------------|--------|-------------------------|---------|--------|-------------------------|--------|
|  (Dollars      in Thousands)     |   | GrossAmount             |    |   | AccumulatedAmortization |   |   | GrossAmount |   |   | AccumulatedAmortization |   |
| Core      Deposit Intangibles         |   | $                       | 47,176  |   |                    | $      | 38,831 |   |   | $ |           47,176 |   |   | $ |          34,598 |   |
| Goodwill                              |   |                    | 84,811  |   |                    |   | - |   |   |   | 84,811 |   |   |   | - |   |
| Customer      Relationship Intangible |   |                    | 1,867   |   |                    |   | 831 |   |   |   |             1,867 |   |   |   | 688 |   |
| Total      Intangible Assets          |   | $                       | 133,854 |   |                    | $      | 39,662 |   |   | $ | 133,854 |   |   | $ | 35,286 |   |

| (Dollars      in Thousands)          |   | September      30, 2008 |      |   | December      31, 2007 |   |
|--------------------------------------|--------|-------------------------|-----------|--------|------------------------|--------|
| NOW      Accounts                    |   | $                       | 698,509   |   |                   | $      | 744,093 |   |
| Money      Market Accounts           |   |                    | 368,453   |   |                   |   | 386,619 |   |
| Savings      Deposits                |   |                    | 116,858   |   |                   |   | 111,600 |   |
| Other      Time Deposits             |   |                    | 396,086   |   |                   |   | 467,373 |   |
| Total      Interest Bearing Deposits |   | $                       | 1,579,906 |   |                   | $      | 1,709,685 |   |

----

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

----

| Options                                |   | Shares |   |   | Weighted-Average      Exercise Price |   |   | Weighted-Average      Remaining Term |   |   | Aggregate      Intrinsic Value |   |
|----------------------------------------|--------|--------|--------|--------|--------------------------------------|--------|--------|--------------------------------------|--------|--------|--------------------------------|--------|
| Outstanding      at January 1, 2008    |   |   | 60,384 |   |                                 | $      | 32.79  |                                 |   |   | 6.9                            |   |   | $ | - |   |
| Granted                                |   |   | -      |   |                                 |   | -      |                                 |   |   | -                              |   |   |   | - |   |
| Exercised                              |   |   | -      |   |                                 |   | -      |                                 |   |   | -                              |   |   |   | - |   |
| Forfeited      or expired              |   |   | -      |   |                                 |   | -      |                                 |   |   | -                              |   |   |   | - |   |
| Outstanding      at September 30, 2008 |   |   | 60,384 |   |                                 | $      | 32.79  |                                 |   |   | 6.1                            |   |   | $ | - |   |
| Exercisable      at September 30, 2008 |   |   | 60,384 |   |                                 | $      | 32.79  |                                 |   |   | 6.1                            |   |   | $ | - |   |

|                          |   | Nine      Months Ended September 30, |   |
|-------------------------------|--------|--------------------------------------|--------|
|                          |   | 2008                                 |   |   | 2007 |   |
| Dividend      yield           |   |                                 | 3.2    | % |   |   | 2.2 | % |
| Expected      volatility      |   |                                 | 35.0   | % |   |   | 27.0 | % |
| Risk-free      interest rate  |   |                                 | 2.0    | % |   |   | 4.7 | % |
| Expected      life (in years) |   |                                 | 0.5    |   |   |   | 0.5 |   |

|                                    |   | Three      Months Ended September 30, |   |   | Nine      Months Ended September 30, |   |
|-----------------------------------------|--------|---------------------------------------|--------|--------|--------------------------------------|--------|
| (Dollars      in Thousands)             |   | 2008                                  |   |   | 2007                                 |   |   | 2008 |   |   | 2007 |   |
|                                    |   |                                  |   |   |                                 |   |   |   |   |   |   |   |
| Discount      Rate                      |   |                                  | 6.25   | %      |                                 |   | 6.00 | % |   |   | 6.25 | % |   |   | 6.00 | % |
| Long-Term      Rate of Return on Assets |   |                                  | 8.00   | %      |                                 |   | 8.00 | % |   |   | 8.00 | % |   |   | 8.00 | % |
|                                    |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Service      Cost                       |   | $                                     | 1,279  |   |                                 | $      | 1,350 |   |   | $ | 3,837 |   |   | $ | 4,050 |   |
| Interest      Cost                      |   |                                  | 1,063  |   |                                 |   | 1,025 |   |   |   | 3,189 |   |   |   | 3,075 |   |
| Expected      Return on Plan Assets     |   |                                  | (1,253 | )      |                                 |   | (1,300 | ) |   |   | (3,759 | ) |   |   | (3,900 | ) |
| Prior      Service Cost Amortization    |   |                                  | 75     |   |                                 |   | 100 |   |   |   | 225 |   |   |   | 300 |   |
| Net      Loss Amortization              |   |                                  | 280    |   |                                 |   | 250 |   |   |   | 840 |   |   |   | 750 |   |
| Net      Periodic Benefit Cost          |   | $                                     | 1,444  |   |                                 | $      | 1,425 |   |   | $ | 4,332 |   |   | $ | 4,275 |   |

----

|                                 |   | Three      Months Ended September  30, |   |   | Nine      Months Ended September 30, |   |
|--------------------------------------|--------|---------------------------------------------|--------|--------|--------------------------------------|--------|
| (Dollars      in Thousands)          |   | 2008                                        |   |   | 2007                                 |   |   | 2008 |   |   | 2007 |   |
|                                 |   |                                        |   |   |                                 |   |   |   |   |   |   |   |
| Discount      Rate                   |   |                                        | 6.25   | %      |                                 |   | 6.00 | % |   |   | 6.25 | % |   |   | 6.00 | % |
|                                 |   |                                        |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Service      Cost                    |   | $                                           | 22     |   |                                 | $      | 25 |   |   | $ | 66 |   |   | $ | 75 |   |
| Interest      Cost                   |   |                                        | 56     |   |                                 |   | 63 |   |   |   | 168 |   |   |   | 189 |   |
| Prior      Service Cost Amortization |   |                                        | 2      |   |                                 |   | 3 |   |   |   | 6 |   |   |   | 9 |   |
| Net      Loss Amortization           |   |                                        | 1      |   |                                 |   | 18 |   |   |   | 3 |   |   |   | 54 |   |
| Net      Periodic Benefit Cost       |   | $                                           | 81     |   |                                 | $      | 109 |   |   | $ | 243 |   |   | $ | 327 |   |

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

| (Dollars      in Millions)           |   | Amount |   |
|--------------------------------------|--------|--------|--------|
| Commitments      to Extend Credit(1) |   | $      | 380    |   |
| Standby      Letters of Credit       |   | $      | 17     |   |

| (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 |   |   | TotalFair      Value |   |
|------------------------------------|--------|---------------------|--------|--------|---------------------|--------|---------|---------------------|--------|--------|----------------------|--------|
|                               |   |                |   |   |                |   |    |                |   |   |                 |   |
| Securities      Available for Sale |   | $                   | 39,555 |   |                | $      | 141,502 |                |   | $      | 1,063                |   |   | $ | 182,120 |   |

----

|                                                         |   | 2008   |   |                                                                                     | 2007   |   |   | 2006        |   |   |
|--------------------------------------------------------------|--------|--------|--------|------------------------------------------------------------------------------------------|--------|--------|--------|-------------|--------|--------|
| (Dollars      in Thousands, Except Per Share Data)           |   |   |   |  Third                                                                              |   |   |   | Second      |   |   |   | First |   |   |   | Fourth |   |   |   | Third |   |   |   | Second |   |   |   | First |   |   |   |  Fourth |   |
| Summary      of Operations:                                  |   |   |   |                                                                                     |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Income                                         |   |   | $      |           34,654                       |   |   | $      | 36,260      |   |   | $ | 38,723 |   |   | $ |       40,786 |   |   | $ | 41,299 |   |   | $ | 41,724 |   |   | $ | 41,514 |   |   | $ | 42,600 |   |
| Interest      Expense                                        |   |   |   |            7,469                  |   |   |   | 8,785       |   |   |   | 12,264 |   |   |   |      13,241 |   |   |   |    13,389 |   |   |   | 13,263 |   |   |   |  13,189 |   |   |   | 13,003 |   |
| Net      Interest Income                                     |   |   |   |           27,185                       |   |   |   | 27,475      |   |   |   | 26,459 |   |   |   |    27,545 |   |   |   |    27,910 |   |   |   | 28,461 |   |   |   | 28,325 |   |   |   | 29,597 |   |
| Provision      for Loan Losses                               |   |   |   |           10,425                       |   |   |   | 5,432       |   |   |   | 4,142 |   |   |   |    1,699 |   |   |   |     1,552 |   |   |   | 1,675 |   |   |   |  1,237 |   |   |   | 460 |   |
| Net      Interest Income AfterProvision      for Loan Losses |   |   |   |     16,760                                                           |   |   |   | 22,043      |   |   |   | 22,317 |   |   |   |     25,846 |   |   |   | 26,358 |   |   |   | 26,786 |   |   |   | 27,088 |   |   |   |  29,137 |   |
| Noninterest      Income                                      |   |   |   |           20,212                       |   |   |   | 15,718      |   |   |   | 17,799 |   |   |   |    15,823 |   |   |   | 14,431 |   |   |   | 15,084 |   |   |   | 13,962 |   |   |   | 14,385 |   |
| Noninterest      Expense                                     |   |   |   |          29,916                             |   |   |   | 30,756      |   |   |   | 29,798 |   |   |   |      31,614 |   |   |   | 29,919 |   |   |   | 29,897 |   |   |   | 30,562 |   |   |   | 29,984 |   |
| Income      Before Provision for Income Taxes                |   |   |   |             7,056            |   |   |   | 7,005       |   |   |   | 10,318 |   |   |   |                   10,055 |   |   |   |     10,870 |   |   |   | 11,973 |   |   |   | 10,488 |   |   |   |  13,538 |   |
| Provision      for Income Taxes                              |   |   |   | 2,218                                                                                    |   |   |   | 2,195       |   |   |   | 3,038 |   |   |   | 2,391 |   |   |   |           3,699 |   |   |   | 4,082 |   |   |   |  3,531 |   |   |   | 4,688 |   |
| Net      Income                                              |   |   | $      |          4,838                              |   |   | $      |  4,810 |   |   | $ |  7,280 |   |   | $ |          7,664 |   |   | $ |          7,171 |   |   | $ | 7,891 |   |   | $ |    6,957 |   |   | $ |  8,850 |   |
| Net      Interest Income (FTE)                               |   |   | $      | 27,802                                                                                   |   |   | $      | 28,081      |   |   | $ | 27,077 |   |   | $ | 28,196 |   |   | $ |         28,517 |   |   | $ | 29,050 |   |   | $ |    28,898 |   |   | $ |  30,152 |   |
|                                                         |   |   |   |                                                                                     |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Per      Common Share:                                       |   |   |   |                                                                                     |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Income Basic                                        |   |   | $      |               0.29 |   |   | $      | 0.28        |   |   | $ | 0.42 |   |   | $ |     0.44 |   |   | $ | 0.41 |   |   | $ | 0.43 |   |   | $ |    0.38 |   |   | $ |  0.48 |   |
| Net      Income Diluted                                      |   |   |   |               0.29 |   |   |   | 0.28        |   |   |   | 0.42 |   |   |   |      0.44 |   |   |   | 0.41 |   |   |   | 0.43 |   |   |   | 0.38 |   |   |   | 0.48 |   |
| Dividends      Declared                                      |   |   |   | .185                                                                                     |   |   |   | .185        |   |   |   | .185 |   |   |   | .185 |   |   |   | .175 |   |   |   | .175 |   |   |   |   .175 |   |   |   | .175 |   |
| Diluted      Book Value                                      |   |   |   | 17.45                                                                                    |   |   |   | 17.33       |   |   |   | 17.33 |   |   |   | 17.03 |   |   |   | 16.95 |   |   |   | 16.87 |   |   |   |  16.97 |   |   |   | 17.01 |   |
| Market      Price:                                           |   |   |   |                                                                                     |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| High                                                         |   |   |   | 34.50                                                                                    |   |   |   | 30.19       |   |   |   | 29.99 |   |   |   | 34.00 |   |   |   |          36.40 |   |   |   | 33.69 |   |   |   |  35.91 |   |   |   | 35.98 |   |
| Low                                                          |   |   |   | 19.20                                                                                    |   |   |   | 21.76       |   |   |   | 24.76 |   |   |   | 24.60 |   |   |   |       27.69 |   |   |   | 29.12 |   |   |   |  29.79 |   |   |   | 30.14 |   |
| Close                                                        |   |   |   | 31.35                                                                                    |   |   |   | 21.76       |   |   |   | 29.00 |   |   |   | 28.22 |   |   |   | 31.20 |   |   |   | 31.34 |   |   |   |  33.30 |   |   |   | 35.30 |   |
|                                                         |   |   |   |                                                                                     |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selected      Average                                        |   |   |   |                                                                                     |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances:                                                    |   |   |   |                                                                                     |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                        |   |   | $      | 1,915,008                                                                                |   |   | $      | 1,908,802   |   |   | $ | 1,909,574 |   |   | $ | 1,908,069 |   |   | $ |   1,907,235 |   |   | $ | 1,944,969 |   |   | $ |  1,980,224 |   |   | $ |  2,003,719 |   |
| Earning      Assets                                          |   |   |   | 2,207,670                                                                                |   |   |   | 2,303,971   |   |   |   | 2,301,463 |   |   |   | 2,191,230 |   |   |   |    2,144,737 |   |   |   | 2,187,236 |   |   |   | 2,211,560 |   |   |   | 2,238,066 |   |
| Assets                                                       |   |   |   |    2,528,638                                                              |   |   |   | 2,634,771   |   |   |   | 2,646,474 |   |   |   | 2,519,682 |   |   |   | 2,467,703 |   |   |   | 2,511,252 |   |   |   | 2,530,790 |   |   |   | 2,557,357 |   |
| Deposits                                                     |   |   |   | 2,030,683                                                                                |   |   |   | 2,140,546   |   |   |   | 2,148,874 |   |   |   | 2,016,736 |   |   |   |    1,954,160 |   |   |   | 1,987,418 |   |   |   | 2,003,726 |   |   |   | 2,028,453 |   |
| Shareowners’      Equity                               |   |   |   | 303,595                                                                                  |   |   |   | 300,890     |   |   |   | 296,804 |   |   |   | 299,342 |   |   |   |       301,536 |   |   |   | 309,352 |   |   |   |   316,484 |   |   |   | 323,903 |   |
| Common      Equivalent Shares:                               |   |   |   |                                                                                     |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                        |   |   |   | 17,124                                                                                   |   |   |   | 17,146      |   |   |   | 17,170 |   |   |   | 17,444 |   |   |   | 17,709 |   |   |   | 18,089 |   |   |   | 18,409 |   |   |   | 18,525 |   |
| Diluted                                                      |   |   |   | 17,128                                                                                   |   |   |   | 17,147      |   |   |   | 17,178 |   |   |   | 17,445 |   |   |   | 17,719 |   |   |   | 18,089 |   |   |   | 18,420 |   |   |   | 18,569 |   |
|                                                         |   |   |   |                                                                                     |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratios:                                                      |   |   |   |                                                                                     |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ROA                                                          |   |   |   | .76                                                                                      | %      | (1)    |   | .73         | %      |   |   | 1.11 | % |   |   | 1.21 | % |   |   | 1.15 | % |   |   | 1.26 | % |   |   |  1.11 | % |   |   | 1.37 | %  |
| ROE                                                          |   |   |   | 6.34                                                                                     | %      | (1)    |   | 6.43        | %      |   |   | 9.87 | % |   |   | 10.16 | % |   |   | 9.44 | % |   |   | 10.23 | % |   |   |  8.91 | % |   |   | 10.84 | %  |
| Net      Interest Margin (FTE)                               |   |   |   | 5.01                                                                                     | %      |   |   | 4.90        | %      |   |   | 4.73 | % |   |   | 5.10 | % |   |   | 5.27 | % |   |   | 5.33 | % |   |   |  5.29 | % |   |   | 5.35 | %  |
| Efficiency      Ratio                                        |   |   |   | 59.27                                                                                    | %      | (1)    |   | 66.89       | %      |   |   | 63.15 | % |   |   | 68.51 | % |   |   | 66.27 | % |   |   | 64.44 | % |   |   | 67.90 | % |   |   | 63.99 | %  |

| (1) | Includes      $6.25 million ($3.8 million after-tax) one-time gain on sale of credit      card portfolio. |
|-----|-----------------------------------------------------------------------------------------------------------|

----

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

|                                           |   | Nine      Months Ended September 30, |   |
|------------------------------------------------|--------|--------------------------------------|--------|
|                                           |   | 2008                                 |   |   | 2007 |   |
| Efficiency      ratio                          |   |                                 | 66.19  | % |   |   | 69.55 | % |
| Effect      of intangible amortization expense |   |                                 | (3.21  | )% |   |   | (3.37 | )% |
| Operating      efficiency ratio                |   |                                 | 62.98  | % |   |   | 66.18 | % |

|                                                                  |   | Nine      Months Ended September 30, |   |
|-----------------------------------------------------------------------|--------|--------------------------------------|--------|
|                                                                  |   | 2008                                 |   |   | 2007 |   |
| Net      noninterest expense as a percent of average assets           |   |                                 | 1.89   | % |   |   | 2.51 | % |
| Effect      of intangible amortization expense                        |   |                                 | (0.23  | )% |   |   | (0.24 | )% |
| Operating      net noninterest expense as a percent of average assets |   |                                 | 1.66   | % |   |   | 2.27 | % |

----

----

----

| ·   | Earnings      of $4.8 million ($0.29 per diluted share) for the third quarter of 2008      compared to $7.2 million ($0.41 per diluted share) for the third quarter      of 2007.  Earnings of $16.9 million ($0.99 per diluted share)      for the nine months ended September 30, 2008 compared to $22.0 million      ($1.22 per diluted share) for the same period in 2007.  The      decline in earnings for both periods was driven by higher loan loss      provisions.  Earnings for both periods include a one-time      pre-tax gain of $6.25 million ($.22 per share (after-tax)) from the sale      of a portion of the bank’s merchant services portfolio on July 31,      2008. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Earnings      assets have increased $16.4 million, or .75% from the prior year-end      reflecting increases in short-term investments ($3.2 million), investment      securities ($3.2 million) and loans ($6.9 million).  Although it      was minimal, we were encouraged by the growth in the loan portfolio in the      third quarter, and the fact that the portfolio has been relatively stable      in 2008.  Given the challenging economic environment in which we      are operating, we believe this reflects our continued focus on sales and      service. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Tax      equivalent net interest income declined 2.5% and 4.1% for the three and      nine month periods reflective of an increased level of foregone interest      associated with a higher level of nonperforming loans and an unfavorable      shift in the mix of earning assets, coupled with an influx of higher cost      municipal deposits in 2008 which led to margin compression of 26 and 43      basis points, respectively, for the three and nine month      periods. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Noninterest      income increased $5.8 million, or 40.1%, for the three month period due to      the $6.25 million gain from the sale of a portion of the bank’s merchant      services portfolio.  Lower merchant fees attributable to the      portion of the merchant services portfolio sold and a decline in mortgage      banking revenues partially offset the aforementioned gain.  For      the first nine months of 2008, noninterest income increased $10.3 million,      or 23.6%, due to the gain on the sale of a portion of the bank’s merchant      services portfolio and the redemption of Visa shares ($2.4      million).  Deposit fees also contributed to the improvement in      noninterest income for bothperiods. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Noninterest      expense for the three month period was essentially unchanged due to a      reduction in interchange fees associated with the sale of a portion of the      merchant services portfolio, which was offset by higher commission fees      and other real estate owned write-downs.  For the first nine      months of 2008, noninterest expense increased $.1 million, or .10%, due to      higher compensation, occupancy expense and commission      fees.  These increases were partially offset by the reversal of      a portion ($1.1 million) of our Visa litigation accrual and the      aforementioned reduction in interchange fees ($.6      million).  Management continues to work on expense reduction      opportunities, improvement in cost controls, and enhancement of operating      efficiencies as core strategicobjectives. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher      loan loss provision for both the three and nine-month periods is due to      the current economic slowdown and the impact of the stressed housing and      real estate markets.  As of September 30, 2008, the allowance      for loan losses was 1.59% of total loans compared to .95% for the same      period in 2007. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We      remain well-capitalized with a risk based capital ratio of 14.76% and a      tangible capital ratio of 8.67%, both of which have increased from 14.35%      and 7.87%, respectively, in the priorquarter. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                     |   | Three      Months Ended September 30, |   |   | Nine      Months Ended September 30, |    |
|------------------------------------------|--------|---------------------------------------|--------|--------|--------------------------------------|---------|
| (Dollars      in Thousands)              |   | 2008                                  |   |   | 2007                                 |    |   | 2008 |   |   | 2007 |   |
| Interest      Income                     |   | $                                     | 34,654 |   |                                 | $       | 41,299 |   |   | $ | 109,637 |   |   | $ | 124,537 |   |
| Taxable      Equivalent Adjustment(1)    |   |                                  | 617    |   |                                 |    | 607 |   |   |   | 1,841 |   |   |   | 1,769 |   |
| Interest      Income (FTE)               |   |                                  | 35,271 |   |                                 |    | 41,906 |   |   |   | 111,478 |   |   |   | 126,306 |   |
| Interest      Expense                    |   |                                  | 7,469  |   |                                 |    | 13,389 |   |   |   | 28,518 |   |   |   | 39,841 |   |
| Net      Interest Income (FTE)           |   |                                  | 27,802 |   |                                 |    | 28,517 |   |   |   | 82,960 |   |   |   | 86,465 |   |
| Provision      for Loan Losses           |   |                                  | 10,425 |   |                                 |    | 1,552 |   |   |   | 19,999 |   |   |   | 4,464 |   |
| Taxable      Equivalent Adjustment       |   |                                  | 617    |   |                                 |    | 607 |   |   |   | 1,841 |   |   |   | 1,769 |   |
| Net      Interest Income After Provision |   |                                  | 16,760 |   |                                 |    | 26,358 |   |   |   | 61,120 |   |   |   | 80,232 |   |
| Noninterest      Income                  |   |                                  | 20,212 |   |                                 |    | 14,431 |   |   |   | 53,729 |   |   |   | 43,477 |   |
| Noninterest      Expense                 |   |                                  | 29,916 |   |                                 |    | 29,919 |   |   |   | 90,470 |   |   |   | 90,378 |   |
| Income      Before Income Taxes          |   |                                  | 7,056  |   |                                 |    | 10,870 |   |   |   | 24,379 |   |   |   | 33,331 |   |
| Income      Taxes                        |   |                                  | 2,218  |   |                                 |    | 3,699 |   |   |   | 7,451 |   |   |   | 11,312 |   |
| Net      Income                          |   | $                                | 4,838  |   |                                 | $  | 7,171 |   |   | $ | 16,928 |   |   | $  | 22,019 |   |
| Basic      Net Income Per Share          |   | $                                     | 0.29   |   |                                 | $       | 0.41 |   |   | $ | 0.99 |   |   | $ | 1.22 |   |
| Diluted      Net Income Per Share        |   | $                                     | 0.29   |   |                                 | $       | 0.41 |   |   | $  |  0.99 |   |   | $ | 1.22 |   |
|                                     |   |                                  |   |   |                                 |    |   |   |   |   |   |   |   |   |   |   |
| Return      on Average Assets(2)         |   |                                  | .76    | %      |                                 |    | 1.15 | % |   |   | .87 | % |   |   | 1.18 | % |
| Return      on Average Equity(2)         |   |                                  | 6.34   | %      |                                 |    | 9.44 | % |   |   | 7.53 | % |   |   | 9.53 | % |

| (1) | Computed using a statutory tax      rate of 35% |
|-----|-------------------------------------------------|

| (2) | Annualized |
|-----|------------|

----

----

|                                        | Three      Months Ended September 30, |   |   | Nine      Months Ended September 30, |   |
|---------------------------------------------|---------------------------------------|--------|--------|--------------------------------------|--------|
| (Dollars      in Thousands)                 | 2008                                  |   | 2007   |                                 |   |        2008 |   | 2007 |   |
| CHARGE-OFFS                                 |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |
| Commercial,      Financial and Agricultural | $                                     | 275    |   |                                 | $      | 279 |   | $ | 1,318 |   | $ | 1,092 |   |
| Real      Estate – Construction       |                                  | 77     |   |                                 |   | - |   |   | 807 |   |   | 108 |   |
| Real      Estate – Commercial         |                                  | (35)   |   |                                 |   | 245 |   |   | 1,205 |   |   | 576 |   |
| Real      Estate – Residential        |                                  | 797    |   |                                 |   | 161 |   |   | 1,791 |   |   | 1,220 |   |
| Consumer                                    |                                  | 1,797  |   |                                 |   | 854 |   |   | 4,199 |   |   | 2,149 |   |
| Total      Charge-offs                      |                                  | 2,911  |   |                                 |   | 1,539 |   |   | 9,320 |   |   | 5,145 |   |
|                                        |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |
| RECOVERIES                                  |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |
| Commercial,      Financial and Agricultural |                                  | 68     |   |                                 |   | 44 |   |   | 263 |   |   | 127 |   |
| Real      Estate – Construction       |                                  | 4      |   |                                 |   | - |   |   | 4 |   |   | - |   |
| Real      Estate – Commercial         |                                  | 1      |   |                                 |   | 2 |   |   | 15 |   |   | 12 |   |
| Real      Estate – Residential        |                                  | 6      |   |                                 |   | 2 |   |   | 33 |   |   | 29 |   |
| Consumer                                    |                                  | 433    |   |                                 |   | 471 |   |   | 1,484 |   |   | 1,297 |   |
| Total      Recoveries                       |                                  | 512    |   |                                 |   | 519 |   |   | 1,799 |   |   | 1,465 |   |
|                                        |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |
| Net      Charge-offs                        | $                                     | 2,399  |   |                                 | $      | 1,020 |   | $ | 7,521 |   | $ | 3,680 |   |
|                                        |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |
| Net      Charge-offs (Annualized) as a      |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |
| Percent      of Average Loans Outstanding,  |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |
| Net      of Unearned Interest               |                                  | .50    | %      |                                 |   | .21 | % |   | .53 | % |   | .25 | % |

----

|                                                        |   | Three      Months Ended September 30, |   |   | Nine      Months Ended September 30, |   |
|-------------------------------------------------------------|--------|---------------------------------------|--------|--------|--------------------------------------|--------|
| (Dollars      in Thousands)                                 |   | 2008                                  |   |   | 2007                                 |   |   | 2008 |   |   | 2007 |   |
| Noninterest      Income:                                    |   |                                  |   |   |                                 |   |   |   |   |   |   |   |
| Service      Charges on Deposit Accounts                    |   | $                                     | 7,110  |   |                                 | $      | 6,387 |   |   | $ | 20,935 |   |   | $ | 18,874 |   |
| Data      Processing Fees                                   |   |                                  | 873    |   |                                 |   | 775 |   |   |   | 2,498 |   |   |   | 2,280 |   |
| Fees      for Trust Services                                |   |                                  | 1,025  |   |                                 |   | 1,200 |   |   |   | 3,300 |   |   |   | 3,600 |   |
| Retail      Brokerage Fees                                  |   |                                  | 565    |   |                                 |   | 625 |   |   |   | 1,769 |   |   |   | 1,892 |   |
| Invest      Sec Gain (Losses)                               |   |                                  | 27     |   |                                 |   | - |   |   |   | 122 |   |   |   | 7 |   |
| Mortgage      Banking Revenues                              |   |                                  | 331    |   |                                 |   | 642 |   |   |   | 1,331 |   |   |   | 2,171 |   |
| Merchant      Service Fees (1)                              |   |                                  | 616    |   |                                 |   | 1,686 |   |   |   | 4,898 |   |   |   | 5,514 |   |
| Interchange      Fees (1)                                   |   |                                  | 1,073  |   |                                 |   | 934 |   |   |   | 3,158 |   |   |   | 2,795 |   |
| Gain      on Sale of Portion of Merchant Services Portfolio |   |                                  | 6,250  |   |                                 |   | - |   |   |   | 6,250 |   |   |   | - |   |
| ATM/Debit      Card Fees (1)                                |   |                                  | 742    |   |                                 |   | 685 |   |   |   | 2,244 |   |   |   | 1,987 |   |
| Other                                                       |   |                                  | 1,600  |   |                                 |   | 1,497 |   |   |   | 7,224 |   |   |   | 4,357 |   |
|                                                        |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Total      Noninterest Income                               |   | $                                     | 20,212 |   |                                 | $      | 14,431 |   |   | $ | 53,729 |   |   | $ | 43,477 |   |

----

|                           |   | Three      Months Ended September 30, |   |   | Nine      Months Ended September 30, |
|--------------------------------|--------|---------------------------------------|--------|--------|--------------------------------------|
| (Dollars      in Thousands)    |   | 2008                                  |   |   | 2007                                 |   |   | 2008 |   | 2007 |
| Noninterest      Expense:      |   |                                  |   |   |                                 |   |   |   |   |   |
| Salaries                       |   | $                                     | 12,616 |   |                                 | $ | 11,935 |   |   | $ | 38,246 |   | $ | 36,563 |
| Associate      Benefits        |   |                                  | 2,801  |   |                                 |   | 3,161 |   |   |   | 8,093 |   |   | 9,244 |
| Total      Compensation        |   |                                  | 15,417 |   |                                 |   | 15,096 |   |   |   | 46,339 |   |   | 45,807 |
|                           |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |
| Premises                       |   |                                  | 2,373  |   |                                 |   | 2,409 |   |   |   | 7,226 |   |   | 6,969 |
| Equipment                      |   |                                  | 2,369  |   |                                 |   | 2,513 |   |   |   | 7,534 |   |   | 7,356 |
| Total      Occupancy           |   |                                  | 4,742  |   |                                 |   | 4,922 |   |   |   | 14,760 |   |   | 14,325 |
|                           |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |
| Legal      Fees                |   |                                  | 531    |   |                                 |   | 383 |   |   |   | 1,507 |   |   | 1,318 |
| Professional      Fees         |   |                                  | 990    |   |                                 |   | 963 |   |   |   | 2,809 |   |   | 2,826 |
| Processing      Services       |   |                                  | 441    |   |                                 |   | 444 |   |   |   | 1,337 |   |   | 1,447 |
| Advertising                    |   |                                  | 738    |   |                                 |   | 799 |   |   |   | 2,412 |   |   | 2,667 |
| Travel      and Entertainment  |   |                                  | 326    |   |                                 |   | 338 |   |   |   | 1,000 |   |   | 1,083 |
| Printing      and Supplies     |   |                                  | 480    |   |                                 |   | 459 |   |   |   | 1,517 |   |   | 1,557 |
| Telephone                      |   |                                  | 688    |   |                                 |   | 594 |   |   |   | 1,982 |   |   | 1,677 |
| Postage                        |   |                                  | 460    |   |                                 |   | 476 |   |   |   | 1,324 |   |   | 1,125 |
| Intangible      Amortization   |   |                                  | 1,459  |   |                                 |   | 1,459 |   |   |   | 4,376 |   |   | 4,376 |
| Interchange      Fees          |   |                                  | 482    |   |                                 |   | 1,424 |   |   |   | 4,069 |   |   | 4,665 |
| Commission      Fees           |   |                                  | 718    |   |                                 |   | 406 |   |   |   | 1,563 |   |   | 849 |
| Courier      Service           |   |                                  | 120    |   |                                 |   | 47 |   |   |   | 365 |   |   | 571 |
| Miscellaneous                  |   |                                  | 2,324  |   |                                 |   | 2,109 |   |   |   | 5,110 |   |   | 6,085 |
| Total      Other               |   |                                  | 9,757  |   |                                 |   | 9,901 |   |   |   | 29,371 |   |   | 30,246 |
|                           |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |
| Total      Noninterest Expense |   | $                                     | 29,916 |   |                                 | $ | 29,919 |   |   | $ | 90,470 |   | $ | 90,378 |

----

----

----

----

| Changes      in Interest Rates | +300      bp | +200      bp | +100      bp | -100      bp | -200      bp |
|--------------------------------|--------------|--------------|--------------|--------------|--------------|
|                           |         |         |         |         |         |
| Policy      Limit              | -10.0%       | -7.5%        | -5.0%        | -5.0%        | -7.5%        |
| September      30, 2008        | -0.9%        | 1.3%         | 1.3%         | -1.3%        | -6.6%        |
| June      30, 2008             | 1.2%         | 3.2%         | 2.7%         | -1.8%        | -7.1%        |

| Changes      in Interest Rates | +300      bp | +200      bp | +100      bp | -100      bp | -200      bp |
|--------------------------------|--------------|--------------|--------------|--------------|--------------|
|                           |         |         |         |         |         |
| Policy      Limit              | -12.5%       | -10.0%       | -7.5%        | -7.5%        | -10.0%       |
| September      30, 2008        | 1.1%         | 2.2%         | 1.6%         | -1.5%        | -4.9%        |
| June      30, 2008             | 1.5%         | 3.1%         | 2.3%         | -3.3%        | -7.1%        |

----

----

----

----

----

|                                                       |   | Three      Months Ended September 30, |      |   | Nine      Months Ended September 30, |   |
|------------------------------------------------------------|--------|---------------------------------------|-----------|--------|--------------------------------------|--------|
|                                                       |   | 2008                                  |      |   | 2007                                 |   |   | 2008 |   |   | 2007 |   |
|   (Dollars In Thousands,      Except Share      Data) |   | Balance                               |      |   | Interest                             |   |   | Rate |   |   | Balance |   |   | Interest |   |   | Rate |   |   | Balance |   |   | Interest |   |   | Rate |   |   | Balance |   |   | Interest |   |   | Rate |   |
| ASSETS                                                     |   |                                  |      |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans,      Net of Unearned Interest(1)(2)                 |   | $                                     | 1,915,008 |   |                                 | $      | 32,622 |   |   |   | 6.78 | % |   | $ | 1,907,235 |   |   | $ | 38,901 |   |   |   | 8.09 | % |   | $ | 1,911,142 |   |   | $ | 101,684 |   |   |   | 7.11 | % |   | $ | 1,943,874 |   |   | $ | 117,465 |   |   |   | 8.08 | % |
| Taxable      Investment Securities                         |   |                                  | 93,723    |   |                                 |   | 940 |   |   |   | 3.99 |   |   |   | 102,618 |   |   |   | 1,224 |   |   |   | 4.75 |   |   |   | 94,106 |   |   |   | 3,076 |   |   |   | 4.35 |   |   |   | 105,453 |   |   |   | 3,723 |   |   |   | 4.70 |   |
| Tax-Exempt      Investment Securities(2)                   |   |                                  | 98,966    |   |                                 |   | 1,234 |   |   |   | 4.99 |   |   |   | 85,446 |   |   |   | 1,142 |   |   |   | 5.35 |   |   |   | 94,725 |   |   |   | 3,641 |   |   |   | 5.13 |   |   |   | 84,003 |   |   |   | 3,269 |   |   |   | 5.19 |   |
| Funds      Sold                                            |   |                                  | 99,973    |   |                                 |   | 475 |   |   |   | 1.86 |   |   |   | 49,438 |   |   |   | 639 |   |   |   | 5.06 |   |   |   | 170,831 |   |   |   | 3,077 |   |   |   | 2.37 |   |   |   | 47,602 |   |   |   | 1,849 |   |   |   | 5.12 |   |
| Total      Earning Assets                                  |   |                                  | 2,207,670 |   |                                 |   | 35,271 |   |   |   | 6.36 |   |   |   | 2,144,737 |   |   |   | 41,906 |   |   |   | 7.75 |   |   |   | 2,270,804 |   |   |   | 111,478 |   |   |   | 6.55 |   |   |   | 2,180,932 |   |   |   | 126,306 |   |   |   | 7.74 |   |
| Cash      & Due From Banks                             |   |                                  | 77,309    |   |                                 |   |   |   |   |   |   |   |   |   | 84,477 |   |   |   |   |   |   |   |   |   |   |   | 84,552 |   |   |   |   |   |   |   |   |   |   |   | 87,062 |   |   |   |   |   |   |   |   |   |
| Allowance      for Loan Losses                             |   |                                  | (22,851   | )      |                                 |   |   |   |   |   |   |   |   |   | (17,664 | ) |   |   |   |   |   |   |   |   |   |   | (20,554 | ) |   |   |   |   |   |   |   |   |   |   | (17,336 | ) |   |   |   |   |   |   |   |   |
| Other      Assets                                          |   |                                  | 266,510   |   |                                 |   |   |   |   |   |   |   |   |   | 256,153 |   |   |   |   |   |   |   |   |   |   |   | 268,220 |   |   |   |   |   |   |   |   |   |   |   | 252,359 |   |   |   |   |   |   |   |   |   |
| TOTAL      ASSETS                                          |   | $                                     | 2,528,638 |   |                                 |   |   |   |   |   |   |   |   | $ | 2,467,703 |   |   |   |   |   |   |   |   |   |   | $ | 2,603,022 |   |   |   |   |   |   |   |   |   |   | $ | 2,503,017 |   |   |   |   |   |   |   |   |   |
|                                                       |   |                                  |      |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES                                                |   |                                  |      |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW      Accounts                                          |   | $                                     | 727,754   |   |                                 | $      | 1,443 |   |   |   | 0.79 | % |   | $ | 525,795 |   |   | $ | 2,531 |   |   |   | 1.91 | % |   | $ | 763,164 |   |   | $ | 6,818 |   |   |   | 1.19 | % |   | $ | 539,777 |   |   | $ | 7,768 |   |   |   | 1.92 | % |
| Money      Market Accounts                                 |   |                                  | 369,544   |   |                                 |   | 1,118 |   |   |   | 1.20 |   |   |   | 403,957 |   |   |   | 3,565 |   |   |   | 3.50 |   |   |   | 378,756 |   |   |   | 4,526 |   |   |   | 1.60 |   |   |   | 394,762 |   |   |   | 10,450 |   |   |   | 3.54 |   |
| Savings      Accounts                                      |   |                                  | 117,970   |   |                                 |   | 30 |   |   |   | 0.10 |   |   |   | 117,451 |   |   |   | 70 |   |   |   | 0.24 |   |   |   | 116,112 |   |   |   | 93 |   |   |   | 0.11 |   |   |   | 121,781 |   |   |   | 222 |   |   |   | 0.24 |   |
| Other      Time Deposits                                   |   |                                  | 410,101   |   |                                 |   | 3,224 |   |   |   | 3.13 |   |   |   | 471,868 |   |   |   | 5,100 |   |   |   | 4.29 |   |   |   | 440,019 |   |   |   | 12,021 |   |   |   | 3.65 |   |   |   | 475,831 |   |   |   | 14,924 |   |   |   | 4.19 |   |
| Total      Int. Bearing Deposits                           |   |                                  | 1,625,369 |   |                                 |   | 5,815 |   |   |   | 1.42 |   |   |   | 1,519,071 |   |   |   | 11,266 |   |   |   | 2.94 |   |   |   | 1,698,051 |   |   |   | 23,458 |   |   |   | 1.85 |   |   |   | 1,532,151 |   |   |   | 33,364 |   |   |   | 2.91 |   |
| Short-Term      Borrowings                                 |   |                                  | 51,738    |   |                                 |   | 230 |   |   |   | 1.76 |   |   |   | 65,130 |   |   |   | 734 |   |   |   | 4.45 |   |   |   | 58,530 |   |   |   | 1,047 |   |   |   | 2.38 |   |   |   | 66,921 |   |   |   | 2,232 |   |   |   | 4.44 |   |
| Subordinated      Notes Payable                            |   |                                  | 62,887    |   |                                 |   | 936 |   |   |   | 5.83 |   |   |   | 62,887 |   |   |   | 936 |   |   |   | 5.91 |   |   |   | 62,887 |   |   |   | 2,798 |   |   |   | 5.85 |   |   |   | 62,887 |   |   |   | 2,794 |   |   |   | 5.94 |   |
| Other      Long-Term Borrowings                            |   |                                  | 43,237    |   |                                 |   | 488 |   |   |   | 4.48 |   |   |   | 38,269 |   |   |   | 453 |   |   |   | 4.70 |   |   |   | 35,194 |   |   |   | 1,215 |   |   |   | 4.61 |   |   |   | 41,212 |   |   |   | 1,451 |   |   |   | 4.71 |   |
| Total      Int. Bearing Liabilities                        |   |                                  | 1,783,231 |   |                                 |   | 7,469 |   |   |   | 1.67 |   |   |   | 1,685,357 |   |   |   | 13,389 |   |   |   | 3.15 |   |   |   | 1,854,662 |   |   |   | 28,518 |   |   |   | 2.05 |   |   |   | 1,703,171 |   |   |   | 39,841 |   |   |   | 3.13 |   |
| Noninterest      Bearing Deposits                          |   |                                  | 405,314   |   |                                 |   |   |   |   |   |   |   |   |   | 435,089 |   |   |   |   |   |   |   |   |   |   |   | 408,372 |   |   |   |   |   |   |   |   |   |   |   | 449,436 |   |   |   |   |   |   |   |   |   |
| Other      Liabilities                                     |   |                                  | 36,498    |   |                                 |   |   |   |   |   |   |   |   |   | 45,721 |   |   |   |   |   |   |   |   |   |   |   | 39,547 |   |   |   |   |   |   |   |   |   |   |   | 41,341 |   |   |   |   |   |   |   |   |   |
| TOTAL      LIABILITIES                                     |   |                                  | 2,225,043 |   |                                 |   |   |   |   |   |   |   |   |   | 2,166,167 |   |   |   |   |   |   |   |   |   |   |   | 2,302,581 |   |   |   |   |   |   |   |   |   |   |   | 2,193,948 |   |   |   |   |   |   |   |   |   |
|                                                       |   |                                  |      |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SHAREOWNERS'      EQUITY                                   |   |                                  |      |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL      SHAREOWNERS' EQUITY                             |   |                                  | 303,595   |   |                                 |   |   |   |   |   |   |   |   |   | 301,536 |   |   |   |   |   |   |   |   |   |   |   | 300,441 |   |   |   |   |   |   |   |   |   |   |   | 309,069 |   |   |   |   |   |   |   |   |   |
|                                                       |   |                                  |      |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL      LIABILITIES & EQUITY                        |   | $                                     | 2,528,638 |   |                                 |   |   |   |   |   |   |   |   | $ | 2,467,703 |   |   |   |   |   |   |   |   |   |   | $ | 2,603,022 |   |   |   |   |   |   |   |   |   |   | $ | 2,503,017 |   |   |   |   |   |   |   |   |   |
|                                                       |   |                                  |      |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Rate Spread                                  |   |                                  |      |   |                                 |   |   |   |   |   | 4.69 | % |   |   |   |   |   |   |   |   |   |   | 4.60 | % |   |   |   |   |   |   |   |   |   |   | 4.50 | % |   |   |   |   |   |   |   |   |   |   | 4.61 | % |
| Net      Interest Income                                   |   |                                  |      |   |                                 | $      | 27,802 |   |   |   |   |   |   |   |   |   |   | $ | 28,517 |   |   |   |   |   |   |   |   |   |   | $ | 82,960 |   |   |   |   |   |   |   |   |   |   | $ | 86,465 |   |   |   |   |   |
| Net      Interest Margin(3)                                |   |                                  |      |   |                                 |   |   |   |   |   | 5.01 | % |   |   |   |   |   |   |   |   |   |   | 5.27 | % |   |   |   |   |   |   |   |   |   |   | 4.87 | % |   |   |   |   |   |   |   |   |   |   | 5.30 | % |

| (1) | Average balances include      nonaccrual loans.  Interest income includes fees on loans of      $562,000 and $1.9 million, for the three and nine months ended September      30, 2008, versus $665,000 and $2.2 million for the comparable periods      ended September 30, 2007. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (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 MARKETRISK |
|--------------|----------------------------------------------------------------|

| 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 ofProceeds |
|--------------|-----------------------------------------------------------------|

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

| Item      4. | Submission      of Matters to a Vote of SecurityHolders |
|--------------|---------------------------------------------------------|

| 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 of1934. |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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. |
|------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 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:  November      10, 2008                                                                                   |   |