---

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UNITED STATES 
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON,
D.C. 20549


FORM 10-Q

|                                                       |                                                                                          
|------------------------------------------------------ | -----------------------------------------------------------------------------------------
|x                                                      | QUARTERLY REPORT PURSUANT TO
 SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|                                                       |                                                                                          
|                                                       | For the Quarterly Period Ended March 31, 2011                                            
|                                                       |                                                                                          
|OR                                                    
|                                                       |                                                                                          
|o                                                      | TRANSITION REPORT PURSUANT TO
 SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|                                                       |                                                                                          
|                                                       | For the transition period from ____________ to ____________                              
|                                                       |                                                                                          
|Commission File Number: 0-13358                       
|                                                      
|CAPITAL CITY BANK GROUP, INC.                         
|(Exact name of registrant as specified in its charter)

|                                                                |  |                                     
|--------------------------------------------------------------- |  | ------------------------------------
|Florida                                                         |  | 59-2273542                          
|(State or
 other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                                |  |                                     
|217 North Monroe Street, Tallahassee,
 Florida                  |  | 32301                               
|(Address of principal executive office)                         |  | (Zip Code)                          

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

Indicate by
check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No o

Indicate by
check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post
such files). Yes o No o

Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definitions
of large accelerated filer, accelerated filer, and smaller reporting
company in Rule 12b-2 of the Exchange Act.

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

Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act). Yes o No x

At April 30,
2011, 17,127,289 shares of the Registrants Common Stock, $.01 par value, were
outstanding.

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CAPITAL CITY BANK GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q 
FOR THE PERIOD ENDED MARCH 31, 2011 TABLE OF CONTENTS

|                               |  |                                                                                                |    |   
|------------------------------ |  | ---------------------------------------------------------------------------------------------- | -- | --
|                               |  | Page                                                                                          
|PART I  Financial Information |  |                                                                                               
|                               |  |                                                                                                |    |   
|Item 1.                        |  | Consolidated Financial Statements (Unaudited)                                                  |    |   
|                               |  | Consolidated
 Statements of Financial Condition  March 31, 2011 and December 31, 2010         |    | 4 
|                               |  | Consolidated
 Statements of Operations  Three Months Ended March 31, 2011 and 2010            |    | 5 
|                               |  | Consolidated
 Statement of Changes in Shareowners Equity  Three Months Ended March 31,
 2011 |    | 6 
|                               |  | Consolidated
 Statements of Cash Flow  Three Months Ended March 31, 2011 and 2010             |    | 7 
|                               |  | Notes to
 Consolidated Financial Statements                                                    |    | 8 
|                               |  |                                                                                                |    |   
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and
 Results of Operations         |    | 20
|                               |  |                                                                                                |    |   
|Item 3.                        |  | Quantitative and Qualitative Disclosure About Market Risk                                      |    | 36
|                               |  |                                                                                                |    |   
|Item 4.                        |  | Controls and Procedures                                                                        |    | 36
|                               |  |                                                                                                |    |   
|PART II  Other Information    |  |                                                                                               
|                               |  |                                                                                                |    |   
|Item 1.                        |  | Legal Proceedings                                                                              |    | 36
|                               |  |                                                                                                |    |   
|Item 1A.                       |  | Risk Factors                                                                                   |    | 36
|                               |  |                                                                                                |    |   
|Item 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                    |    | 36
|                               |  |                                                                                                |    |   
|Item 3.                        |  | Defaults Upon Senior Securities                                                                |    | 36
|                               |  |                                                                                                |    |   
|Item 4.                        |  | [Removed and Reserved]                                                                         |    | 36
|                               |  |                                                                                                |    |   
|Item 5.                        |  | Other Information                                                                              |    | 36
|                               |  |                                                                                                |    |   
|Item 6.                        |  | Exhibits                                                                                       |    | 37
|                               |  |                                                                                                |    |   
|Signatures                     |  |                                                                                                | 38

2

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INTRODUCTORY NOTE 
Caution Concerning Forward-Looking Statements

This Quarterly
Report on Form 10-Q contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements include, among others, statements about our beliefs, plans,
objectives, goals, expectations, estimates and intentions that are subject to
significant risks and uncertainties and are subject to change based on various
factors, many of which are beyond our control. The words may, could,
should, would, believe, anticipate, estimate, expect, intend,
plan, target, goal, and similar expressions are intended to identify
forward-looking statements.

All forward-looking
statements, by their nature, are subject to risks and uncertainties. Our actual
future results may differ materially from those set forth in our
forward-looking statements.

Our ability to
achieve our financial objectives could be adversely affected by the factors
discussed in detail in Part I, Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations and Part II, Item 1A. Risk
Factors in this Quarterly Report on Form 10-Q, the following sections of our
Annual Report on Form 10-K for the year ended December 31, 2010 (the 2010 Form
10-K): (a) Introductory Note in Part I, Item 1. Business; (b) Risk
Factors in Part I, Item 1A., as updated in our subsequent quarterly reports
filed on Form 10-Q, and (c) Introduction in Managements Discussion and
Analysis of Financial Condition and Results of Operations, in Part II, Item 7.
as well as:

| |   |                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | § | legislative or regulatory
 changes, including The Dodd-Frank Act;                                                                                                          
| |   |                                                                                                                                                                            
| | § | the strength of the United
 States economy in general and the strength of the local economies in which we
 conduct operations;                                             
| |   |                                                                                                                                                                            
| | § | the accuracy of our financial
 statement estimates and assumptions, including the estimate for our loan loss
 provision and the valuation allowance on deferred tax assets;
| |   |                                                                                                                                                                            
| | § | the frequency and magnitude
 of foreclosure of our loans;                                                                                                                  
| |   |                                                                                                                                                                            
| | § | continued depression of the
 market value of the Company that could result in an impairment of goodwill;                                                                   
| |   |                                                                                                                                                                            
| | § | restrictions on our
 operations, including the inability to pay dividends without our regulators
 consent;                                                                
| |   |                                                                                                                                                                            
| | § | the effects of the health and
 soundness of other financial institutions, including the FDICs need to
 increase Deposit Insurance Fund assessments;                       
| |   |                                                                                                                                                                            
| | § | our ability to declare and
 pay dividends;                                                                                                                                 
| |   |                                                                                                                                                                            
| | § | changes in the securities and
 real estate markets;                                                                                                                        
| |   |                                                                                                                                                                            
| | § | changes in monetary and
 fiscal policies of the U.S. Government;                                                                                                           
| |   |                                                                                                                                                                            
| | § | inflation, interest rate,
 market and monetary fluctuations;                                                                                                               
| |   |                                                                                                                                                                            
| | § |                                                                                                                                                                            
| |   |                                                                                                                                                                            
| | § | the effects of our lack of a
 diversified loan portfolio, including the risks of geographic and industry
 concentrations;                                                  
| |   |                                                                                                                                                                            
| | § | our need and our ability to
 incur additional debt or equity financing;                                                                                                    
| |   |                                                                                                                                                                            
| | § |                                                                                                                                                                            
| |   |                                                                                                                                                                            
| | § | the effects of harsh weather
 conditions, including hurricanes, and man-made disasters;                                                                                    
| |   |                                                                                                                                                                            
| | § | our ability to comply with
 the extensive laws and regulations to which we are subject;                                                                                    
| |   |                                                                                                                                                                            
| | § | the willingness of clients to
 accept third-party products and services rather than our products and
 services and vice versa;                                             
| |   |                                                                                                                                                                            
| | § | increased competition and its
 effect on pricing;                                                                                                                          
| |   |                                                                                                                                                                            
| | § | technological changes;                                                                                                                                                     
| |   |                                                                                                                                                                            
| | § | negative publicity and the
 impact on our reputation;                                                                                                                      
| |   |                                                                                                                                                                            
| | § | the effects of security
 breaches and computer viruses that may affect our computer systems;                                                                               
| |   |                                                                                                                                                                            
| | § | changes in consumer spending
 and saving habits;                                                                                                                           
| |   |                                                                                                                                                                            
| | § | growth and profitability of
 our noninterest income;                                                                                                                       
| |   |                                                                                                                                                                            
| | § | changes in accounting
 principles, policies, practices or guidelines;                                                                                                      
| |   |                                                                                                                                                                            
| | § | the limited trading activity
 of our common stock;                                                                                                                         
| |   |                                                                                                                                                                            
| | § | the concentration of
 ownership of our common stock;                                                                                                                       
| |   |                                                                                                                                                                            
| | § | anti-takeover provisions
 under federal and state law as well as our Articles of Incorporation and our
 Bylaws;                                                            
| |   |                                                                                                                                                                            
| | § | our ability to integrate the
 business and operations of companies and banks that we have acquired, and
 those we may acquire in the future;                               
| |   |                                                                                                                                                                            
| | § | 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.                                                                                                                

However, other
factors besides those referenced also could adversely affect our results, and
you should not consider any such list of factors to be a complete set of all
potential risks or uncertainties. Any forward-looking statements made by us or
on our behalf speak only as of the date they are made. We do not undertake to
update any forward-looking statement, except as required by applicable law.

3

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|        |                                  
|------- | ---------------------------------
|PART I. | FINANCIAL INFORMATION            
|        |                                  
|Item 1. | CONSOLIDATED FINANCIAL STATEMENTS

CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AS OF MARCH 31, 2011 AND DECEMBER 31, 2010

|                                                                                                                                                                            |  |                           |           |                   |   |           |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | --------- | ----------------- | - | --------- | -
|(Dollars In Thousands, Except
 Share Data)                                                                                                                                  |  | Unaudited
 March 31, 2011 |           | December 31, 2010 |  
|                                                                                                                                                                            |  |                           |           |                   |  
|ASSETS                                                                                                                                                                      |  |                           |           |                   |   |           |  
|Cash and Due From Banks                                                                                                                                                     |  | $                         | 52,000    |                   | $ | 35,410    |  
|Federal Funds Sold and Interest Bearing
 Deposits                                                                                                                           |  |                           | 271,375   |                   |   | 200,783   |  
|                                                                                                                                                                            |  |                           |           |                   |   |           |  
|Total Cash and Cash Equivalents                                                                                                                                             |  |                           | 323,375   |                   |   | 236,193   |  
|                                                                                                                                                                            |  |                           |           |                   |   |           |  
|Investment Securities, Available-for-Sale                                                                                                                                   |  |                           | 311,356   |                   |   | 309,731   |  
|                                                                                                                                                                            |  |                           |           |                   |   |           |  
|Loans, Net of Unearned Interest                                                                                                                                             |  |                           | 1,714,794 |                   |   | 1,758,671 |  
|Allowance for Loan Losses                                                                                                                                                   |  |                           | (33,873   | )                 |   | (35,436   | )
|                                                                                                                                                                            |  |                           |           |                   |   |           |  
|Loans, Net                                                                                                                                                                  |  |                           | 1,680,921 |                   |   | 1,723,235 |  
|                                                                                                                                                                            |  |                           |           |                   |   |           |  
|Premises and Equipment, Net                                                                                                                                                 |  |                           | 113,918   |                   |   | 115,356   |  
|Goodwill                                                                                                                                                                    |  |                           | 84,811    |                   |   | 84,811    |  
|Other Intangible Assets                                                                                                                                                     |  |                           | 995       |                   |   | 1,348     |  
|Other Real Estate Owned                                                                                                                                                     |  |                           | 55,364    |                   |   | 57,937    |  
|Other Assets                                                                                                                                                                |  |                           | 91,754    |                   |   | 93,442    |  
|                                                                                                                                                                            |  |                           |           |                   |   |           |  
|Total Assets                                                                                                                                                                |  | $                         | 2,662,494 |                   | $ | 2,622,053 |  
|                                                                                                                                                                            |  |                           |           |                   |   |           |  
|                                                                                                                                                                            |  |                           |           |                   |   |           |  
|LIABILITIES                                                                                                                                                                 |  |                           |           |                   |   |           |  
|Deposits:                                                                                                                                                                   |  |                           |           |                   |   |           |  
|Noninterest Bearing Deposits                                                                                                                                                |  | $                         | 540,184   |                   | $ | 546,257   |  
|Interest Bearing Deposits                                                                                                                                                   |  |                           | 1,606,863 |                   |   | 1,557,719 |  
|                                                                                                                                                                            |  |                           |           |                   |   |           |  
|Total Deposits                                                                                                                                                              |  |                           | 2,147,047 |                   |   | 2,103,976 |  
|                                                                                                                                                                            |  |                           |           |                   |   |           |  
|Short-Term Borrowings                                                                                                                                                       |  |                           | 86,650    |                   |   | 92,928    |  
|Subordinated Notes Payable                                                                                                                                                  |  |                           | 62,887    |                   |   | 62,887    |  
|Other Long-Term Borrowings                                                                                                                                                  |  |                           | 50,050    |                   |   | 50,101    |  
|Other Liabilities                                                                                                                                                           |  |                           | 56,582    |                   |   | 53,142    |  
|                                                                                                                                                                            |  |                           |           |                   |   |           |  
|Total Liabilities                                                                                                                                                           |  |                           | 2,403,216 |                   |   | 2,363,034 |  
|                                                                                                                                                                            |  |                           |           |                   |   |           |  
|                                                                                                                                                                            |  |                           |           |                   |   |           |  
|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; 17,127,236 and 17,100,081 shares issued and outstanding at
 March 31, 2011 and December 31, 2010, respectively |  |                           | 171       |                   |   | 171       |  
|Additional Paid-In Capital                                                                                                                                                  |  |                           | 37,548    |                   |   | 36,920    |  
|Retained Earnings                                                                                                                                                           |  |                           | 237,276   |                   |   | 237,679   |  
|Accumulated Other Comprehensive Loss, Net
 of Tax                                                                                                                           |  |                           | (15,717   | )                 |   | (15,751   | )
|                                                                                                                                                                            |  |                           |           |                   |   |           |  
|Total Shareowners Equity                                                                                                                                                   |  |                           | 259,278   |                   |   | 259,019   |  
|                                                                                                                                                                            |  |                           |           |                   |   |           |  
|Total Liabilities and Shareowners Equity                                                                                                                                   |  | $                         | 2,662,494 |                   | $ | 2,622,053 |  
|                                                                                                                                                                            |  |                           |           |                   |   |           |  

The accompanying Notes to Consolidated
Financial Statements are an integral part of these statements.

4

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CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31
(Unaudited)

|                                                     |  |                    |            |      |   |            |  
|---------------------------------------------------- |  | ------------------ | ---------- | ---- | - | ---------- | -
|                                                     |  | Three Months Ended |           
|                                                     |  |                    |           
|(Dollars in Thousands, Except Per Share Data)        |  | 2011               |            | 2010 |  
|                                                     |  |                    |            |      |   |            |  
|INTEREST INCOME                                      |  |                    |            |      |   |            |  
|Interest and
 Fees on Loans                          |  | $                  | 23,947     |      | $ | 26,992     |  
|Investment
 Securities:                              |  |                    |            |      |   |            |  
|U.S. Treasuries                                      |  |                    | 401        |      |   | 103        |  
|U.S. Government Agencies                             |  |                    | 357        |      |   | 320        |  
|States and Political Subdivisions                    |  |                    | 219        |      |   | 490        |  
|Other Securities                                     |  |                    | 94         |      |   | 77         |  
|Federal
 Funds Sold                                  |  |                    | 171        |      |   | 172        |  
|                                                     |  |                    |            |      |   |            |  
|Total Interest Income                                |  |                    | 25,189     |      |   | 28,154     |  
|                                                     |  |                    |            |      |   |            |  
|INTEREST EXPENSE                                     |  |                    |            |      |   |            |  
|Deposits                                             |  |                    | 1,258      |      |   | 2,938      |  
|Short-Term
 Borrowings                               |  |                    | 111        |      |   | 17         |  
|Subordinated
 Notes Payable                          |  |                    | 340        |      |   | 651        |  
|Other
 Long-Term Borrowings                          |  |                    | 494        |      |   | 526        |  
|                                                     |  |                    |            |      |   |            |  
|Total Interest Expense                               |  |                    | 2,203      |      |   | 4,132      |  
|                                                     |  |                    |            |      |   |            |  
|                                                     |  |                    |            |      |   |            |  
|NET INTEREST INCOME                                  |  |                    | 22,986     |      |   | 24,022     |  
|Provision
 for Loan Losses                           |  |                    | 4,133      |      |   | 10,740     |  
|                                                     |  |                    |            |      |   |            |  
|Net Interest
 Income After Provision For Loan Losses |  |                    | 18,853     |      |   | 13,282     |  
|                                                     |  |                    |            |      |   |            |  
|                                                     |  |                    |            |      |   |            |  
|NONINTEREST INCOME                                   |  |                    |            |      |   |            |  
|Service
 Charges on Deposit Accounts                 |  |                    | 5,983      |      |   | 6,628      |  
|Data
 Processing                                     |  |                    | 974        |      |   | 900        |  
|Asset
 Management Fees                               |  |                    | 1,080      |      |   | 1,020      |  
|Securities
 Transactions                             |  |                    |           |      |   | 5          |  
|Mortgage
 Banking Fees                               |  |                    | 617        |      |   | 508        |  
|Bank Card
 Fees                                      |  |                    | 2,496      |      |   | 2,175      |  
|Gain on Sale
 of Visa Stock                          |  |                    | 3,172      |      |   |           |  
|Other                                                |  |                    | 2,012      |      |   | 2,731      |  
|                                                     |  |                    |            |      |   |            |  
|Total Noninterest Income                             |  |                    | 16,334     |      |   | 13,967     |  
|                                                     |  |                    |            |      |   |            |  
|                                                     |  |                    |            |      |   |            |  
|NONINTEREST EXPENSE                                  |  |                    |            |      |   |            |  
|Salaries and
 Associate Benefits                     |  |                    | 16,577     |      |   | 16,779     |  
|Occupancy,
 Net                                      |  |                    | 2,396      |      |   | 2,408      |  
|Furniture
 and Equipment                             |  |                    | 2,226      |      |   | 2,181      |  
|Intangible
 Amortization                             |  |                    | 353        |      |   | 710        |  
|Other Real
 Estate Expense                           |  |                    | 3,677      |      |   | 2,825      |  
|Other                                                |  |                    | 8,102      |      |   | 8,481      |  
|                                                     |  |                    |            |      |   |            |  
|Total Noninterest Expense                            |  |                    | 33,331     |      |   | 33,384     |  
|                                                     |  |                    |            |      |   |            |  
|                                                     |  |                    |            |      |   |            |  
|INCOME (LOSS) BEFORE INCOME TAXES                    |  |                    | 1,856      |      |   | (6,135     | )
|Income Tax
 Expense (Benefit)                        |  |                    | 546        |      |   | (2,672     | )
|                                                     |  |                    |            |      |   |            |  
|                                                     |  |                    |            |      |   |            |  
|NET INCOME (LOSS)                                    |  | $                  | 1,310      |      | $ | (3,463     | )
|                                                     |  |                    |            |      |   |            |  
|                                                     |  |                    |            |      |   |            |  
|Basic Net
 Income (Loss) Per Share                   |  | $                  | 0.08       |      | $ | (0.20      | )
|                                                     |  |                    |            |      |   |            |  
|Diluted Net
 Income (Loss) Per Share                 |  | $                  | 0.08       |      | $ | (0.20      | )
|                                                     |  |                    |            |      |   |            |  
|                                                     |  |                    |            |      |   |            |  
|Average
 Basic Shares Outstanding                    |  |                    | 17,121,602 |      |   | 17,057,061 |  
|Average
 Diluted Shares Outstanding                  |  |                    | 17,130,118 |      |   | 17,069,550 |  

The accompanying Notes to Consolidated
Financial Statements are an integral part of these statements.

5

---



CAPITAL CITY BANK GROUP, INC. 
CONSOLIDATED STATEMENT OF CHANGES IN SHAREOWNERS
EQUITY 
(Unaudited)

|                                                                             |  |                     |            |               |   |                             |  |                    |        |                                                          |   |         |   |   |         |   |   |         |  
|---------------------------------------------------------------------------- |  | ------------------- | ---------- | ------------- | - | --------------------------- |  | ------------------ | ------ | -------------------------------------------------------- | - | ------- | - | - | ------- | - | - | ------- | -
|(Dollars In Thousands, Except
 Share Data)                                   |  | Shares
 Outstanding |            | Common
 Stock |   | Additional
 Paid-In Capital |  | Retained
 Earnings |        | Accumulated
 Other
 Comprehensive
 Income, Net of
 Taxes |   | Total   |  
|                                                                             |  |                     |            |               |   |                             |  |                    |        |                                                          |   |         |  
|                                                                             |  |                     |            |               |   |                             |  |                    |        |                                                          |   |         |   |   |         |   |   |         |  
|Balance, December 31, 2010                                                   |  |                     | 17,100,081 |               | $ | 171                         |  | $                  | 36,920 |                                                          | $ | 237,679 |   | $ | (15,751 | ) | $ | 259,019 |  
|Comprehensive Income:                                                        |  |                     |            |               |   |                             |  |                    |        |                                                          |   |         |   |   |         |   |   |         |  
|Net Income                                                                   |  |                     |           |               |   |                            |  |                    |       |                                                          |   | 1,310   |   |   |        |   |   | 1,310   |  
|Net Change in Unrealized Gain On
 Available-for-Sale Securities (net of tax) |  |                     |           |               |   |                            |  |                    |       |                                                          |   |        |   |   | 34      |   |   | 34      |  
|                                                                             |  |                     |            |               |   |                             |  |                    |        |                                                          |   |         |   |   |         |   |   |         |  
|Total Comprehensive Income                                                   |  |                     |           |               |   |                            |  |                    |       |                                                          |   |         |   |   |         |   |   | 1,344   |  
|Cash Dividends ($0.10 per share)                                             |  |                     |           |               |   |                            |  |                    |       |                                                          |   | (1,713  | ) |   |        |   |   | (1,713  | )
|Stock Performance Plan Compensation                                          |  |                     |           |               |   |                            |  |                    | 215    |                                                          |   |        |   |   |        |   |   | 215     |  
|Issuance of Common Stock                                                     |  |                     | 27,155     |               |   |                            |  |                    | 413    |                                                          |   |        |   |   |        |   |   | 413     |  
|                                                                             |  |                     |            |               |   |                             |  |                    |        |                                                          |   |         |   |   |         |   |   |         |  
|                                                                             |  |                     |            |               |   |                             |  |                    |        |                                                          |   |         |   |   |         |   |   |         |  
|Balance, March 31, 2011                                                      |  |                     | 17,127,236 |               | $ | 171                         |  | $                  | 37,548 |                                                          | $ | 237,276 |   | $ | (15,717 | ) | $ | 259,278 |  
|                                                                             |  |                     |            |               |   |                             |  |                    |        |                                                          |   |         |   |   |         |   |   |         |  

The accompanying Notes to Consolidated
Financial Statements are an integral part of these statements.

6

---



CAPITAL CITY BANK GROUP, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31 
(Unaudited)

|                                                     |  |      |         |      |   |         |  
|---------------------------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|(Dollars in Thousands)                               |  | 2011 |         | 2010 |  
|                                                     |  |      |         |      |  
|CASH FLOWS FROM OPERATING ACTIVITIES                 |  |      |         |      |   |         |  
|Net Income (Loss)                                    |  | $    | 1,310   |      | $ | (3,463  | )
|Adjustments to Reconcile Net Income to               |  |      |         |      |   |         |  
|Cash Provided by Operating Activities:               |  |      |         |      |   |         |  
|Provision for Loan Losses                            |  |      | 4,133   |      |   | 10,740  |  
|Depreciation                                         |  |      | 1,753   |      |   | 1,689   |  
|Net Securities Amortization                          |  |      | 1,021   |      |   | 689     |  
|Amortization of Intangible Assets                    |  |      | 353     |      |   | 710     |  
|Gain (Loss) on Securities Transactions               |  |      |        |      |   | (5      | )
|Origination of Loans Held-for-Sale                   |  |      | (24,032 | )    |   | (22,089 | )
|Proceeds From Sales of Loans Held-for-Sale           |  |      | 27,812  |      |   | 23,963  |  
|Net Gain From Sales of Loans Held-for-Sale           |  |      | (617    | )    |   | (508    | )
|Non-Cash Compensation                                |  |      | 215     |      |   | 358     |  
|Decrease in Deferred Income Taxes                    |  |      | 918     |      |   | 2,251   |  
|Net Decrease in Other Assets                         |  |      | 12,394  |      |   | 4,218   |  
|Net Increase (Decrease) in Other
 Liabilities        |  |      | 3,440   |      |   | (2,049  | )
|                                                     |  |      |         |      |   |         |  
|Net Cash Provided By Operating Activities            |  |      | 28,700  |      |   | 16,504  |  
|                                                     |  |      |         |      |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES                 |  |      |         |      |   |         |  
|Securities Available-for-Sale:                       |  |      |         |      |   |         |  
|Purchases                                            |  |      | (24,677 | )    |   | (69,842 | )
|Sales                                                |  |      |        |      |   | 505     |  
|Payments, Maturities, and Calls                      |  |      | 22,090  |      |   | 27,379  |  
|Net Decrease in Loans                                |  |      | 25,940  |      |   | 34,312  |  
|Purchase of Premises & Equipment                     |  |      | (315    | )    |   | (3,304  | )
|                                                     |  |      |         |      |   |         |  
|Net Cash Provided By (Used) In Investing
 Activities |  |      | 23,038  |      |   | (10,950 | )
|                                                     |  |      |         |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES                 |  |      |         |      |   |         |  
|Increase in Deposits                                 |  |      | 43,071  |      |   | 24,706  |  
|Net Decrease in Short-Term Borrowings                |  |      | (6,277  | )    |   | (16,941 | )
|Increase in Other Long-Term Borrowings               |  |      | 790     |      |   | 2,429   |  
|Repayment of Other Long-Term Borrowings              |  |      | (840    | )    |   | (1,131  | )
|Dividends Paid                                       |  |      | (1,713  | )    |   | (3,242  | )
|Issuance of Common Stock                             |  |      | 413     |      |   | 360     |  
|                                                     |  |      |         |      |   |         |  
|Net Cash Provided by Financing Activities            |  |      | 35,444  |      |   | 6,181   |  
|                                                     |  |      |         |      |   |         |  
|NET CHANGE IN CASH AND CASH EQUIVALENTS              |  |      | 87,182  |      |   | 11,735  |  
|                                                     |  |      |         |      |   |         |  
|Cash and Cash Equivalents at Beginning of
 Period    |  |      | 236,193 |      |   | 334,293 |  
|                                                     |  |      |         |      |   |         |  
|Cash and Cash Equivalents at End of Period           |  | $    | 323,375 |      | $ | 346,028 |  
|                                                     |  |      |         |      |   |         |  
|                                                     |  |      |         |      |   |         |  
|Supplemental Disclosure:                             |  |      |         |      |   |         |  
|Interest Paid on Deposits                            |  | $    | 1,432   |      | $ | 2,937   |  
|                                                     |  |      |         |      |   |         |  
|Interest Paid on Debt                                |  |      | 945     |      |   | 1,192   |  
|                                                     |  |      |         |      |   |         |  
|                                                     |  |      |         |      |   |         |  
|Taxes Paid                                           |  |      | 1,273   |      |   | 166     |  
|                                                     |  |      |         |      |   |         |  
|Loans Transferred to Other Real Estate
 Owned        |  |      | 9,078   |      |   | 15,100  |  
|                                                     |  |      |         |      |   |         |  
|Issuance of Common Stock as Non-Cash Compensation    |  |      | 413     |      |   | 359     |  
|                                                     |  |      |         |      |   |         |  
|Transfer of Current Portion of Long-Term
 Borrowings |  | $    |        |      | $ | 8       |  
|                                                     |  |      |         |      |   |         |  

The accompanying Notes to Consolidated
Financial Statements are an integral part of these statements.

7

---



CAPITAL CITY BANK GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Capital City
Bank Group, Inc. (CCBG or the Company) provides a full range of banking and
banking-related services to individual and corporate clients through its
subsidiary, Capital City Bank, with banking offices located in Florida,
Georgia, and Alabama. The Company is subject to competition from other
financial institutions, is subject to regulation by certain government agencies
and undergoes periodic examinations by those regulatory authorities.

The unaudited
consolidated financial statements included herein have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission, including Regulation S-X. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to such rules and regulations. Prior
period financial statements have been reformatted and amounts reclassified, as
necessary, to conform to the current presentation. The Company and its
subsidiary follow accounting principles generally accepted in the United States
(GAAP) and reporting practices applicable to the banking industry. The
principles that materially affect its financial position, results of operations
and cash flows are set forth in the Notes to Consolidated Financial Statements,
which are included in the 2010 Form 10-K.

In the opinion
of management, the consolidated financial statements contain all adjustments,
which are those of a recurring nature, and disclosures necessary to present
fairly the financial position of the Company as of March 31, 2011 and December
31, 2010, the results of operations for the three months ended March 31, 2011
and 2010, and cash flows for the three months ended March 31, 2011 and 2010.

NOTE 2 - INVESTMENT SECURITIES

Investment Portfolio Composition.The
amortized cost and related market value of investment securities
available-for-sale were as follows:

|                                           |  |                  |         |                    |   |                     |  |                |     |  |   |         | 
|------------------------------------------ |  | ---------------- | ------- | ------------------ | - | ------------------- |  | -------------- | --- |  | - | ------- | 
|                                           |  | March 31, 2011   |        
|                                           |  |                  |        
|(Dollars in Thousands)                     |  | Amortized 
 Cost |         | Unrealized 
 Gains |   | Unrealized 
 Losses |  | Market 
 Value |    
|                                           |  |                  |         |                    |   |                     |  |                |    
|U.S.
 Treasury                             |  | $                | 174,881 |                    | $ | 1,152               |  | $              | 136 |  | $ | 175,897 | 
|U.S.
 Government Agencies and Corporations |  |                  |        |                    |   |                    |  |                |    |  |   |        | 
|States and
 Political Subdivisions         |  |                  | 68,865  |                    |   | 278                 |  |                | 2   |  |   | 69,141  | 
|Mortgage-Backed
 Securities                |  |                  | 53,822  |                    |   | 622                 |  |                | 190 |  |   | 54,254  | 
|Other
 Securities(1)                       |  |                  | 12,664  |                    |   |                    |  |                | 600 |  |   | 12,064  | 
|                                           |  |                  |         |                    |   |                     |  |                |     |  |   |         | 
|Total
 Investment Securities               |  | $                | 310,232 |                    | $ | 2,052               |  | $              | 928 |  | $ | 311,356 | 
|                                           |  |                  |         |                    |   |                     |  |                |     |  |   |         | 

|                                           |  |                   |         |                    |   |                     |  |                |       |  |   |         | 
|------------------------------------------ |  | ----------------- | ------- | ------------------ | - | ------------------- |  | -------------- | ----- |  | - | ------- | 
|                                           |  | December 31, 2010 |        
|                                           |  |                   |        
|(Dollars in Thousands)                     |  | Amortized 
 Cost  |         | Unrealized 
 Gains |   | Unrealized 
 Losses |  | Market 
 Value |      
|                                           |  |                   |         |                    |   |                     |  |                |      
|U.S.
 Treasury                             |  | $                 | 160,913 |                    | $ | 1,371               |  | $              | 134   |  | $ | 162,150 | 
|U.S.
 Government Agencies and Corporations |  |                   |        |                    |   |                    |  |                |      |  |   |        | 
|States and
 Political Subdivisions         |  |                   | 78,990  |                    |   | 319                 |  |                | 9     |  |   | 79,300  | 
|Mortgage-Backed
 Securities                |  |                   | 56,099  |                    |   | 678                 |  |                | 560   |  |   | 56,217  | 
|Other
 Securities(1)                       |  |                   | 12,664  |                    |   |                    |  |                | 600   |  |   | 12,064  | 
|                                           |  |                   |         |                    |   |                     |  |                |       |  |   |         | 
|Total
 Investment Securities               |  | $                 | 308,666 |                    | $ | 2,368               |  | $              | 1,303 |  | $ | 309,731 | 
|                                           |  |                   |         |                    |   |                     |  |                |       |  |   |         | 

|    |                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes Federal Home Loan Bank and Federal Reserve Bank stock
 recorded at cost of $7.2 million and $4.8 million, respectively, at March 31,
 2011 and December 31, 2010.

8

---



Securities
with an amortized cost of $165.7 million and $131.6 million at March 31, 2011
and December 31, 2010, respectively, were pledged to secure public deposits and
for other purposes.

The Companys
subsidiary, Capital City Bank, as a member of the Federal Home Loan Bank
(FHLB) of Atlanta, is required to own capital stock in the FHLB of Atlanta
based generally upon the balances of residential and commercial real estate
loans, and FHLB advances. FHLB stock of $7.2 million which is included in other
securities is pledged to secure FHLB advances. No ready market exists for this
stock, and it has no quoted market value. However, redemption of this stock has
historically been at par value.

Maturity Distribution.
As of March 31, 2011, the Companys investment securities had the following
maturity distribution based on contractual maturities:

|                                  |  |                |         |              |   |         | 
|--------------------------------- |  | -------------- | ------- | ------------ | - | ------- | 
|(Dollars in Thousands)            |  | Amortized Cost |         | Market Value |  
|                                  |  |                |         |              |  
|Due in one
 year or less          |  | $              | 85,816  |              | $ | 86,055  | 
|Due after
 one through five years |  |                | 204,489 |              |   | 206,018 | 
|Due after
 five through ten years |  |                | 7,263   |              |   | 7,219   | 
|Due over ten
 years               |  |                |        |              |   |        | 
|No Maturity                       |  |                | 12,664  |              |   | 12,064  | 
|                                  |  |                |         |              |   |         | 
|Total Investment Securities       |  | $              | 310,232 |              | $ | 311,356 | 
|                                  |  |                |         |              |   |         | 

Expected
maturities may differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.

Other Than Temporarily Impaired Securities.
The following table summarizes the investment securities with unrealized losses
at March 31, 2011 aggregated by major security type and length of time in a
continuous unrealized loss position:

|                                          |  |                      |        |                         |   |               |  |                    |     |               |   |                    |  |   |        |  |   |     | 
|----------------------------------------- |  | -------------------- | ------ | ----------------------- | - | ------------- |  | ------------------ | --- | ------------- | - | ------------------ |  | - | ------ |  | - | --- | 
|                                          |  | March 31, 2011       |       
|                                          |  |                      |       
|                                          |  | Less Than
 12 Months |        | Greater Than
 12 Months |   | Total         | 
|                                          |  |                      |        |                         |   |               | 
|(Dollars in Thousands)                    |  | Market
 Value        |        | Unrealized
 Losses      |   | Market
 Value |  | Unrealized
 Losses |     | Market
 Value |   | Unrealized
 Losses | 
|                                          |  |                      |        |                         |   |               |  |                    |     |               |   |                    | 
|U.S. Treasury                             |  | $                    | 33,254 |                         | $ | 136           |  | $                  |    |               | $ |                   |  | $ | 33,254 |  | $ | 136 | 
|U.S. Government Agencies and Corporations |  |                      |       |                         |   |              |  |                    |    |               |   |                   |  |   |       |  |   |    | 
|States and Political Subdivisions         |  |                      | 1,073  |                         |   | 2             |  |                    |    |               |   |                   |  |   | 1,073  |  |   | 2   | 
|Mortgage-Backed Securities                |  |                      | 18,311 |                         |   | 190           |  |                    |    |               |   |                   |  |   | 18,311 |  |   | 190 | 
|Other Securities                          |  |                      |       |                         |   |              |  |                    | 600 |               |   | 600                |  |   | 600    |  |   | 600 | 
|                                          |  |                      |        |                         |   |               |  |                    |     |               |   |                    |  |   |        |  |   |     | 
|Total Investment Securities               |  | $                    | 52,638 |                         | $ | 328           |  | $                  | 600 |               | $ | 600                |  | $ | 53,238 |  | $ | 928 | 
|                                          |  |                      |        |                         |   |               |  |                    |     |               |   |                    |  |   |        |  |   |     | 

Management
evaluates securities for other than temporary impairment at least quarterly,
and more frequently when economic or market concerns warrant such evaluation.
Consideration is given to: 1) the length of time and the extent to which the
fair value has been less than amortized cost, 2) the financial condition and
near-term prospects of the issuer, and 3) the intent and ability of the Company
to retain its investment in the issuer for a period of time sufficient to allow
for any anticipated recovery in cost. In analyzing an issuers financial
condition, management considers whether the securities are issued by the federal
government or its agencies, whether downgrades by rating agencies have
occurred, regulatory issues, and analysts reports.

At March 31,
2011, the Company had securities of $310.2 million with net pre-tax unrealized
gains of $1.1 million on these securities, of which $52.6 million have
unrealized losses totaling $0.9 million. Approximately $0.3 million of these
securities have been in a loss position for less than 12 months. These
securities are primarily in a loss position because they were acquired when the
general level of interest rates was lower than that on March 31, 2011. The
Company believes that the losses in these securities are temporary in nature
and that the full principal will be collected as anticipated. Because the
declines in the market value of these investments are attributable to changes
in interest rates and not credit quality and because the Company has the
ability and intent to hold these investments until there is a recovery in fair
value, which may be at maturity, the Company does not consider these
investments to be other-than-temporarily impaired at March 31, 2011. One
preferred bank stock issue for $0.6 million has been in a loss position for
greater than 12 months. The Company continues to closely monitor the fair value
of this security as the subject bank continues to experience negative operating
trends.

9

---



NOTE 3 - LOANS

The
composition of the Companys loan portfolio was as follows:

|                                        |  |                |           |                   |   |           | 
|--------------------------------------- |  | -------------- | --------- | ----------------- | - | --------- | 
|(Dollars in Thousands)                  |  | March 31, 2011 |           | December 31, 2010 |  
|                                        |  |                |           |                   |  
|Commercial,
 Financial and Agricultural |  | $              | 153,960   |                   | $ | 157,394   | 
|Real
 Estate-Construction               |  |                | 35,614    |                   |   | 43,239    | 
|Real
 Estate-Commercial                 |  |                | 668,583   |                   |   | 671,702   | 
|Real
 Estate-Residential(1)             |  |                | 406,579   |                   |   | 424,229   | 
|Real
 Estate-Home Equity                |  |                | 248,745   |                   |   | 251,565   | 
|Real
 Estate-Loans Held-for-Sale        |  |                | 2,723     |                   |   | 6,312     | 
|Consumer                                |  |                | 198,590   |                   |   | 204,230   | 
|                                        |  |                |           |                   |   |           | 
|Loans, Net of Unearned Interest         |  | $              | 1,714,794 |                   | $ | 1,758,671 | 
|                                        |  |                |           |                   |   |           | 

|    |                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes loans in process with outstanding balances of $10.2 million
 and $5.1 million for March 31, 2011 and December 31, 2010, respectively.

Net deferred
fees included in loans at March 31, 2011 and December 31, 2010 were $1.8
million.

Past Due Loans. A
loan is defined as a past due loan when one full payment is past due or a
contractual maturity is over 30 days past due (DPD).

The following
table presents the aging of the recorded investment in past due loans as of
March 31, 2011 and December 31, 2010 by class of loans:

|                                        |  |            |        |            |  |              |  |                 |   |                |  |              |  |  |           |  |   |           | 
|--------------------------------------- |  | ---------- | ------ | ---------- |  | ------------ |  | --------------- | - | -------------- |  | ------------ |  |  | --------- |  | - | --------- | 
|March 31,
 2011(Dollars
 in Thousands)  |  | 30-59
 DPD |        | 60-89
 DPD |  | Over 90
 DPD |  | Total
 Past Due |   | Total
 Current |  | Total
 Loans | 
|                                        |  |            |        |            |  |              |  |                 |   |                |  |              | 
|Commercial,
 Financial and Agricultural |  | $          | 1,111  |            |  | 125          |  |                 |  |                |  | 1,236        |  |  | 152,042   |  | $ | 153,960   | 
|Real Estate
 - Construction             |  |            | 466    |            |  |             |  |                 |  |                |  | 466          |  |  | 33,276    |  |   | 35,614    | 
|Real Estate
 - Commercial Mortgage      |  |            | 3,893  |            |  | 1,646        |  |                 |  |                |  | 5,539        |  |  | 627,043   |  |   | 668,583   | 
|Real Estate
 - Residential              |  |            | 6,736  |            |  | 1,364        |  |                 |  |                |  | 8,100        |  |  | 371,019   |  |   | 409,302   | 
|Real Estate
 - Home Equity              |  |            | 1,208  |            |  | 266          |  |                 |  |                |  | 1,474        |  |  | 242,768   |  |   | 248,745   | 
|Consumer                                |  |            | 2,249  |            |  | 327          |  |                 |  |                |  | 2,576        |  |  | 195,300   |  |   | 198,590   | 
|                                        |  |            |        |            |  |              |  |                 |   |                |  |              |  |  |           |  |   |           | 
|Total Past
 Due Loans                   |  | $          | 15,663 |            |  | 3,728        |  |                 |   |                |  | 19,391       |  |  | 1,621,448 |  | $ | 1,714,794 | 
|                                        |  |            |        |            |  |              |  |                 |   |                |  |              |  |  |           |  |   |           | 

|                                          |  |            |        |            |  |              |  |                 |     |                |  |              |  |  |           |  |   |           | 
|----------------------------------------- |  | ---------- | ------ | ---------- |  | ------------ |  | --------------- | --- | -------------- |  | ------------ |  |  | --------- |  | - | --------- | 
|December
 31, 2010(Dollars
 in Thousands) |  | 30-59
 DPD |        | 60-89
 DPD |  | Over 90
 DPD |  | Total
 Past Due |     | Total
 Current |  | Total
 Loans | 
|                                          |  |            |        |            |  |              |  |                 |     |                |  |              | 
|Commercial,
 Financial and Agricultural   |  | $          | 645    |            |  | 193          |  |                 |    |                |  | 838          |  |  | 155,497   |  | $ | 157,394   | 
|Real Estate
 - Construction               |  |            | 314    |            |  | 129          |  |                 |    |                |  | 443          |  |  | 40,890    |  |   | 43,239    | 
|Real Estate
 - Commercial Mortgage        |  |            | 5,577  |            |  | 840          |  |                 |    |                |  | 6,417        |  |  | 638,411   |  |   | 671,702   | 
|Real Estate
 - Residential                |  |            | 7,171  |            |  | 3,958        |  |                 | 120 |                |  | 11,249       |  |  | 389,103   |  |   | 430,541   | 
|Real Estate
 - Home Equity                |  |            | 1,444  |            |  | 698          |  |                 | 39  |                |  | 2,182        |  |  | 244,579   |  |   | 251,565   | 
|Consumer                                  |  |            | 2,867  |            |  | 356          |  |                 |    |                |  | 3,223        |  |  | 200,139   |  |   | 204,230   | 
|                                          |  |            |        |            |  |              |  |                 |     |                |  |              |  |  |           |  |   |           | 
|Total Past
 Due Loans                     |  | $          | 18,018 |            |  | 6,174        |  |                 | 159 |                |  | 24,352       |  |  | 1,668,619 |  | $ | 1,758,671 | 
|                                          |  |            |        |            |  |              |  |                 |     |                |  |              |  |  |           |  |   |           | 

10

---



Nonaccrual Loans.
Loans are generally placed on non-accrual status if principal or interest
payments become 90 days past due and/or management deems the collectability of
the principal and/or interest to be doubtful. Loans are returned to accrual
status when the principal and interest amounts contractually due are brought
current or when future payments are reasonably assured.

The following
table presents the recorded investment in nonaccrual loans and loans past due
over 90 days and still on accrual by class of loans as of March 31, 2011 and
December 31, 2010:

|                                        |  |                |        |                   |  |            |  |              |        |  |   |     | 
|--------------------------------------- |  | -------------- | ------ | ----------------- |  | ---------- |  | ------------ | ------ |  | - | --- | 
|                                        |  | March 31, 2011 |        | December 31, 2010 | 
|(Dollars in Thousands)                  |  | Nonaccrual     |        | Over 90 Days      |  | Nonaccrual |  | Over 90 Days |       
|                                        |  |                |        |                   |  |            |  |              |       
|Commercial,
 Financial and Agricultural |  | $              | 682    |                   |  |           |  | $            | 1,059  |  | $ |    | 
|Real Estate
 - Construction             |  |                | 1,872  |                   |  |           |  |              | 1,907  |  |   |    | 
|Real Estate
 - Commercial Mortgage      |  |                | 36,001 |                   |  |           |  |              | 26,874 |  |   |    | 
|Real Estate
 - Residential              |  |                | 30,183 |                   |  |           |  |              | 30,189 |  |   | 120 | 
|Real Estate
 - Home Equity              |  |                | 4,502  |                   |  |           |  |              | 4,803  |  |   | 39  | 
|Consumer                                |  |                | 714    |                   |  |           |  |              | 868    |  |   |    | 
|                                        |  |                |        |                   |  |            |  |              |        |  |   |     | 
|Total
 Nonaccrual Loans                 |  | $              | 73,954 |                   |  |           |  | $            | 65,700 |  | $ | 159 | 
|                                        |  |                |        |                   |  |            |  |              |        |  |   |     | 

Credit Quality Indicators.
As part of the ongoing monitoring of the Companys loan portfolio quality,
management categorizes loans into risk categories based on relevant information
about the ability of borrowers to service their debt such as: current financial
information, historical payment performance, credit documentation, and current
economic/market trends, among other factors. Risk ratings are assigned to each
loan and revised as needed through established monitoring procedures for
individual loan relationships over a predetermined amount and review of smaller
balance homogenous loan pools. [0]The Company uses the following definitions for
the categorizing and managing its problem loans.

Special
Mention  Loans in this category are presently protected from loss, but
weaknesses are apparent which, if not corrected, could cause future problems.
Adverse economic or market conditions may negatively impact the borrowers
ability to repay. Loans in this category may not meet required underwriting
criteria and have no mitigating factors. More than the ordinary amount of
attention is warranted for these loans.

Substandard 
Loans in this category exhibit well-defined weaknesses that would typically
bring normal repayment into jeopardy. These loans are no longer adequately
protected due to well-defined weaknesses that affect the repayment capacity of
the borrower. The possibility of loss is much more evident and above average
supervision is required for these loans.

Nonaccrual 
Loans in this category are on nonaccrual status due to the borrowers inability
to meet the repayment terms and where future capacity to repay is remote.

The following
table presents the risk category of loans by segment as of March 31, 2011 and
December 31, 2010:

|                                       |  |                                      |        |             |   |          |  |       |       |  |   |         | 
|-------------------------------------- |  | ------------------------------------ | ------ | ----------- | - | -------- |  | ----- | ----- |  | - | ------- | 
|March 31,
 2011(Dollars
 in Thousands) |  | Commercial,
 Financial,
 Agriculture |        | Real Estate |   | Consumer |  | Total |      
|                                       |  |                                      |        |             |   |          |  |       |      
|Special
 Mention                       |  | $                                    | 12,050 |             | $ | 108,354  |  | $     | 83    |  | $ | 120,487 | 
|Substandard                            |  |                                      | 9,300  |             |   | 133,842  |  |       | 716   |  |   | 143,858 | 
|Nonaccrual                             |  |                                      | 682    |             |   | 72,558   |  |       | 714   |  |   | 73,954  | 
|                                       |  |                                      |        |             |   |          |  |       |       |  |   |         | 
|Total Loans                            |  | $                                    | 22,032 |             | $ | 314,754  |  | $     | 1,513 |  | $ | 338,299 | 
|                                       |  |                                      |        |             |   |          |  |       |       |  |   |         | 

|                                           |  |                                      |        |             |   |          |  |       |       |  |   |         | 
|------------------------------------------ |  | ------------------------------------ | ------ | ----------- | - | -------- |  | ----- | ----- |  | - | ------- | 
|December
 31, 2010 (Dollars
 in Thousands) |  | Commercial,
 Financial,
 Agriculture |        | Real Estate |   | Consumer |  | Total |      
|                                           |  |                                      |        |             |   |          |  |       |      
|Special
 Mention                           |  | $                                    | 20,539 |             | $ | 100,008  |  | $     | 102   |  | $ | 120,649 | 
|Substandard                                |  |                                      | 10,599 |             |   | 165,143  |  |       | 719   |  |   | 176,461 | 
|Nonaccrual                                 |  |                                      | 1,060  |             |   | 63,773   |  |       | 867   |  |   | 65,700  | 
|                                           |  |                                      |        |             |   |          |  |       |       |  |   |         | 
|Total Loans                                |  | $                                    | 32,198 |             | $ | 328,924  |  | $     | 1,688 |  | $ | 362,810 | 
|                                           |  |                                      |        |             |   |          |  |       |       |  |   |         | 

11

---



NOTE 4 - ALLOWANCE FOR LOAN LOSSES

An analysis of
the changes in the allowance for loan losses for the three month periods ended
March 31 was as follows:

|                                            |  |      |        |      |   |         |  
|------------------------------------------- |  | ---- | ------ | ---- | - | ------- | -
|(Dollars in Thousands)                      |  | 2011 |        | 2010 |  
|                                            |  |      |        |      |  
|Balance,
 Beginning of Year                 |  | $    | 35,436 |      | $ | 43,999  |  
|Provision
 for Loan Losses                  |  |      | 4,133  |      |   | 10,740  |  
|Recoveries
 on Loans Previously Charged-Off |  |      | 520    |      |   | 889     |  
|Loans
 Charged-Off                          |  |      | (6,216 | )    |   | (14,429 | )
|                                            |  |      |        |      |   |         |  
|Balance, End
 of Year                       |  | $    | 33,873 |      | $ | 41,199  |  
|                                            |  |      |        |      |   |         |  

The following
table presents the balance in the allowance for loan losses and the recorded investment
in loans by portfolio class based on impairment method as of March 31, 2011 and
December 31, 2010:

|                                            |  |                                       |         |                           |  |                                   |  |                          |         |                          |  |          |  |             |         |       |  |         |  |  |     |  |   |           | 
|------------------------------------------- |  | ------------------------------------- | ------- | ------------------------- |  | --------------------------------- |  | ------------------------ | ------- | ------------------------ |  | -------- |  | ----------- | ------- | ----- |  | ------- |  |  | --- |  | - | --------- | 
|March 31,
 2011(Dollars
 in Thousands)      |  | Commercial,
 Financial,
 Agricultural |         | Real Estate
 Construction |  | Real Estate
 Commercial
 Mortgage |  | Real Estate
 Residential |         | Real Estate
 Home Equity |  | Consumer |  | Unallocated |         | Total | 
|                                            |  |                                       |         |                           |  |                                   |  |                          |         |                          |  |          |  |             |         |       | 
|Allowance Allocated to:                     |  |                                       |         |                           |  |                                   |  |                          |         |                          |  |          |  |             |         |       |  |         |  |  |     |  |   |           | 
|Loans Individually Evaluated for Impairment |  | $                                     | 174     |                           |  | 481                               |  |                          | 5,508   |                          |  | 7,165    |  |             | 1,212   |       |  | 58      |  |  |    |  | $ | 14,598    | 
|Loans Collectively Evaluated for Impairment |  |                                       | 1,265   |                           |  | 1,023                             |  |                          | 4,529   |                          |  | 8,372    |  |             | 1,422   |       |  | 1,719   |  |  | 945 |  |   | 19,275    | 
|                                            |  |                                       |         |                           |  |                                   |  |                          |         |                          |  |          |  |             |         |       |  |         |  |  |     |  |   |           | 
|Total                                       |  | $                                     | 1,439   |                           |  | 1,504                             |  |                          | 10,037  |                          |  | 15,537   |  |             | 2,634   |       |  | 1,777   |  |  | 945 |  | $ | 33,873    | 
|                                            |  |                                       |         |                           |  |                                   |  |                          |         |                          |  |          |  |             |         |       |  |         |  |  |     |  |   |           | 
|                                            |  |                                       |         |                           |  |                                   |  |                          |         |                          |  |          |  |             |         |       |  |         |  |  |     |  |   |           | 
|Total Loans:                                |  |                                       |         |                           |  |                                   |  |                          |         |                          |  |          |  |             |         |       |  |         |  |  |     |  |   |           | 
|Individually Evaluated for Impairment       |  | $                                     | 1,397   |                           |  | 2,589                             |  |                          | 49,758  |                          |  | 31,734   |  |             | 3,338   |       |  | 138     |  |  |    |  | $ | 88,954    | 
|Collectively Evaluated for Impairment       |  |                                       | 152,563 |                           |  | 33,024                            |  |                          | 618,825 |                          |  | 377,568  |  |             | 245,407 |       |  | 198,453 |  |  |    |  |   | 1,625,840 | 
|                                            |  |                                       |         |                           |  |                                   |  |                          |         |                          |  |          |  |             |         |       |  |         |  |  |     |  |   |           | 
|Total                                       |  | $                                     | 153,960 |                           |  | 35,613                            |  |                          | 668,583 |                          |  | 409,302  |  |             | 248,745 |       |  | 198,591 |  |  |    |  | $ | 1,714,794 | 

|                                             |  |                                       |         |                           |  |                                   |  |                          |         |                          |  |          |  |             |         |       |   |         |  |  |       |  |   |           | 
|-------------------------------------------- |  | ------------------------------------- | ------- | ------------------------- |  | --------------------------------- |  | ------------------------ | ------- | ------------------------ |  | -------- |  | ----------- | ------- | ----- | - | ------- |  |  | ----- |  | - | --------- | 
|December
 31, 2010(Dollars in Thousands)     |  | Commercial,
 Financial,
 Agricultural |         | Real Estate
 Construction |  | Real Estate
 Commercial
 Mortgage |  | Real Estate
 Residential |         | Real Estate
 Home Equity |  | Consumer |  | Unallocated |         | Total |  
|                                             |  |                                       |         |                           |  |                                   |  |                          |         |                          |  |          |  |             |         |       |  
|Allowance
 Allocated to:                     |  |                                       |         |                           |  |                                   |  |                          |         |                          |  |          |  |             |         |       |   |         |  |  |       |  |   |           | 
|Loans Individually Evaluated for
 Impairment |  | $                                     | 252     |                           |  | 413                               |  | $                        | 4,640   |                          |  | 7,965    |  | $           | 1,389   |       | $ | 71      |  |  |      |  | $ | 14,730    | 
|Loans Collectively Evaluated for
 Impairment |  |                                       | 1,292   |                           |  | 1,647                             |  |                          | 4,005   |                          |  | 9,081    |  |             | 1,133   |       |   | 2,541   |  |  | 1,007 |  |   | 20,706    | 
|                                             |  |                                       |         |                           |  |                                   |  |                          |         |                          |  |          |  |             |         |       |   |         |  |  |       |  |   |           | 
|Total                                        |  | $                                     | 1,544   |                           |  | 2,060                             |  |                          | 8,645   |                          |  | 17,046   |  |             | 2,522   |       |   | 2,612   |  |  | 1,007 |  | $ | 35,436    | 
|                                             |  |                                       |         |                           |  |                                   |  |                          |         |                          |  |          |  |             |         |       |   |         |  |  |       |  |   |           | 
|Total Loans:                                 |  |                                       |         |                           |  |                                   |  |                          |         |                          |  |          |  |             |         |       |   |         |  |  |       |  |   |           | 
|Individually Evaluated for Impairment        |  | $                                     | 1,685   |                           |  | 2,533                             |  | $                        | 42,369  |                          |  | 37,779   |  | $           | 3,278   |       | $ | 144     |  |  |      |  | $ | 87,788    | 
|Collectively Evaluated for Impairment        |  |                                       | 155,709 |                           |  | 40,706                            |  |                          | 629,333 |                          |  | 392,762  |  |             | 248,287 |       |   | 204,086 |  |  |      |  |   | 1,670,883 | 
|                                             |  |                                       |         |                           |  |                                   |  |                          |         |                          |  |          |  |             |         |       |   |         |  |  |       |  |   |           | 
|Total                                        |  | $                                     | 157,394 |                           |  | 43,239                            |  |                          | 671,702 |                          |  | 430,541  |  |             | 251,565 |       |   | 204,230 |  |  |      |  | $ | 1,758,671 | 
|                                             |  |                                       |         |                           |  |                                   |  |                          |         |                          |  |          |  |             |         |       |   |         |  |  |       |  |   |           | 

12

---



Impaired Loans.
Loans are deemed to be impaired when, based on current information and events,
it is probable that the Company will not be able to collect all amounts due
(principal and interest payments), according to the contractual terms of the
loan agreement. Loans, for which the terms have been modified, and for which
the borrower is experiencing financial difficulties, are considered troubled
debt restructurings and classified as impaired. Interest income recognized on
impaired loans was approximately $0.7 million for the three month periods ended
March 31, 2011 and March 31, 2010, respectively.

The following
table presents loans individually evaluated for impairment by class of loans as
of March 31, 2011 and December 31, 2010:

|                                        |  |                            |        |                                           |   |                                      |  |                    |        |                              |   |        |  |   |         | 
|--------------------------------------- |  | -------------------------- | ------ | ----------------------------------------- | - | ------------------------------------ |  | ------------------ | ------ | ---------------------------- | - | ------ |  | - | ------- | 
|(Dollars in Thousands)                  |  | Unpaid
 Principal
 Balance |        | Recorded 
 Investment
 With No
 Allowance |   | Recorded
 Investment With
 Allowance |  | Related
 Allowance |        | Average Recorded
 Investment |  
|                                        |  |                            |        |                                           |   |                                      |  |                    |        |                              |  
|March 31, 2011:                         |  |                            |        |                                           |   |                                      |  |                    |        |                              |   |        |  |   |         | 
|Commercial,
 Financial and Agricultural |  | $                          | 1,397  |                                           | $ | 454                                  |  | $                  | 943    |                              | $ | 174    |  | $ | 1,540   | 
|Real Estate
 - Construction             |  |                            | 2,589  |                                           |   | 534                                  |  |                    | 2,055  |                              |   | 481    |  |   | 2,561   | 
|Real Estate
 - Commercial Mortgage      |  |                            | 49,758 |                                           |   | 9,746                                |  |                    | 40,012 |                              |   | 5,508  |  |   | 46,064  | 
|Real Estate
 - Residential              |  |                            | 31,734 |                                           |   | 4,175                                |  |                    | 27,558 |                              |   | 7,165  |  |   | 34,757  | 
|Real Estate
 - Home Equity              |  |                            | 3,338  |                                           |   | 746                                  |  |                    | 2,593  |                              |   | 1,212  |  |   | 3,308   | 
|Consumer                                |  |                            | 138    |                                           |   |                                     |  |                    | 138    |                              |   | 58     |  |   | 141     | 
|                                        |  |                            |        |                                           |   |                                      |  |                    |        |                              |   |        |  |   |         | 
|Total                                   |  | $                          | 88,954 |                                           | $ | 15,655                               |  | $                  | 73,299 |                              | $ | 14,598 |  | $ | 88,371  | 
|                                        |  |                            |        |                                           |   |                                      |  |                    |        |                              |   |        |  |   |         | 
|                                        |  |                            |        |                                           |   |                                      |  |                    |        |                              |   |        |  |   |         | 
|December 31, 2010:                      |  |                            |        |                                           |   |                                      |  |                    |        |                              |   |        |  |   |         | 
|Commercial,
 Financial and Agricultural |  | $                          | 1,684  |                                           | $ | 389                                  |  | $                  | 1,295  |                              | $ | 252    |  | $ | 2,768   | 
|Real Estate
 - Construction             |  |                            | 2,533  |                                           |   |                                     |  |                    | 2,533  |                              |   | 413    |  |   | 5,801   | 
|Real Estate
 - Commercial Mortgage      |  |                            | 42,370 |                                           |   | 9,030                                |  |                    | 33,340 |                              |   | 4,640  |  |   | 48,820  | 
|Real Estate
 - Residential              |  |                            | 37,780 |                                           |   | 3,295                                |  |                    | 34,485 |                              |   | 7,965  |  |   | 41,958  | 
|Real Estate
 - Home Equity              |  |                            | 3,278  |                                           |   | 375                                  |  |                    | 2,903  |                              |   | 1,389  |  |   | 3,087   | 
|Consumer                                |  |                            | 143    |                                           |   |                                     |  |                    | 143    |                              |   | 71     |  |   | 172     | 
|                                        |  |                            |        |                                           |   |                                      |  |                    |        |                              |   |        |  |   |         | 
|Total                                   |  | $                          | 87,788 |                                           | $ | 13,089                               |  | $                  | 74,699 |                              | $ | 14,730 |  | $ | 102,606 | 
|                                        |  |                            |        |                                           |   |                                      |  |                    |        |                              |   |        |  |   |         | 

NOTE 5 - INTANGIBLE ASSETS

The Company
had net intangible assets of $85.8 million and $86.2 million at March 31, 2011
and December 31, 2010, respectively. Intangible assets were as follows:

|                                  |  |                |         |                           |   |               |  |                           |         |  |   |        | 
|--------------------------------- |  | -------------- | ------- | ------------------------- | - | ------------- |  | ------------------------- | ------- |  | - | ------ | 
|                                  |  | March 31, 2011 |         | December 31, 2010         |  
|                                  |  |                |         |                           |  
|(Dollars in Thousands)            |  | Gross
 Amount  |         | Accumulated
 Amortization |   | Gross
 Amount |  | Accumulated
 Amortization |        
|                                  |  |                |         |                           |   |               |  |                           |        
|Core Deposit
 Intangibles         |  | $              | 47,176  |                           | $ | 46,739        |  | $                         | 47,176  |  | $ | 46,434 | 
|Goodwill                          |  |                | 84,811  |                           |   |              |  |                           | 84,811  |  |   |       | 
|Customer
 Relationship Intangible |  |                | 1,867   |                           |   | 1,309         |  |                           | 1,867   |  |   | 1,261  | 
|                                  |  |                |         |                           |   |               |  |                           |         |  |   |        | 
|Total
 Intangible Assets          |  | $              | 133,854 |                           | $ | 48,048        |  | $                         | 133,854 |  | $ | 47,695 | 
|                                  |  |                |         |                           |   |               |  |                           |         |  |   |        | 

Net Core Deposit Intangibles:As
of March 31, 2011 and December 31, 2010, the Company had net core deposit
intangibles of $0.4 million and $0.7 million, respectively. Amortization
expense for the first three months of 2011 and 2010 was approximately $0.3
million and $0.7 million, respectively. Estimated annual amortization expense
for 2011 is $0.5 million. All of our core deposit intangibles will be fully
amortized in January 2013.

Goodwill: As of
March 31, 2011 and December 31, 2010, the Company had goodwill, net of
accumulated amortization, of $84.8 million.

In December
2010, the Company performed its annual goodwill impairment test and concluded
that goodwill was not impaired at December 31, 2010. During the first quarter
of 2011, the Company assessed the indicators of impairment and noted that there
had been no significant changes since the year-end 2010 evaluation. Thus, the
Company concluded that goodwill was not impaired as of March 31, 2011. The
Company will continue to monitor and test goodwill as appropriate.

13

---



Other: As of March
31, 2011 and December 31, 2010, the Company had a customer relationship
intangible asset, net of accumulated amortization, of $0.6 million and $0.7
million, respectively. This intangible asset was recorded as a result of the
March 2004 acquisition of trust customer relationships. Amortization expense
for the first three months of 2011 and 2010 was approximately $48,000.
Estimated annual amortization expense is approximately $191,000 based on use of
a 10-year useful life.

NOTE 6 - DEPOSITS

The composition
of the Companys interest bearing deposits at March 31, 2011 and December 31,
2010 was as follows:

|                                |  |                |           |                   |   |           | 
|------------------------------- |  | -------------- | --------- | ----------------- | - | --------- | 
|(Dollars in Thousands)          |  | March 31, 2011 |           | December 31, 2010 |  
|                                |  |                |           |                   |  
|NOW Accounts                    |  | $              | 818,512   |                   | $ | 770,149   | 
|Money Market
 Accounts          |  |                | 288,224   |                   |   | 275,416   | 
|Savings
 Deposits               |  |                | 150,051   |                   |   | 139,888   | 
|Other Time
 Deposits            |  |                | 350,076   |                   |   | 372,266   | 
|                                |  |                |           |                   |   |           | 
|Total Interest Bearing Deposits |  | $              | 1,606,863 |                   | $ | 1,557,719 | 
|                                |  |                |           |                   |   |           | 

NOTE 7 - STOCK-BASED COMPENSATION

The Company
recognizes the cost of stock-based associate stock compensation in accordance
with ASC-718-20-05-1 and ASC 718-50-05-01, (formerly SFAS No. 123R),
Share-Based Payment (Revised) under the fair value method.

As of March
31, 2011, the Company had three stock-based compensation plans, consisting of
the 2005 Associate Stock Incentive Plan (ASIP), the 2005 Associate Stock
Purchase Plan (ASPP), and the 2005 Director Stock Purchase Plan (DSPP).
Total compensation expense associated with these plans for the three months
ended March 31, 2011 and 2010 was $245,000 and $390,000, respectively.

ASIP. The Companys
ASIP allows the Companys Board of Directors to award key associates various
forms of equity-based incentive compensation. Under the ASIP, all participants
in this plan are eligible to earn an equity award, in the form of performance
shares. The Company, under the terms and conditions of the ASIP, created the
2011 Incentive Plan (2011 Plan), which has an annual award tied to an
internally established earnings goal. The grant-date fair value of the shares
eligible to be awarded in 2011 is approximately $895,000. A total of 51,952
shares are eligible for issuance. For the first three months of 2011, the
Company recognized approximately $215,000 in expense related to the ASIP.

A total of
875,000 shares of common stock have been reserved for issuance under the ASIP.
To date, the Company has issued a total of 67,022 shares of common stock under
the ASIP.

Executive Stock Option Agreement.Prior
to 2007, the Company maintained a stock option arrangement for a key executive
officer (William G. Smith, Jr. - Chairman, President and CEO, CCBG). The status
of the options granted under this arrangement is detailed in the table provided
below. In 2007, the Company replaced its practice of entering into a stock
option arrangement by establishing a Performance Share Unit Plan under the
provisions of the ASIP that allows the executive to earn shares based on the
compound annual growth rate in diluted earnings per share over a three-year
period. The details of this program for the executive are outlined in a Form
8-K filing dated January 31, 2007. No expense related to this plan was
recognized for the first three months of 2011 and 2010 as the results did not
meet the earnings performance goal.

A summary of
the status of the Companys option shares as of March 31, 2011 is presented
below:

|                                |  |        |        |                                  |   |                                  |  |                            |     |  |   |   | 
|------------------------------- |  | ------ | ------ | -------------------------------- | - | -------------------------------- |  | -------------------------- | --- |  | - | - | 
|Options                         |  | Shares |        | Weighted-Average
 Exercise Price |   | Weighted-Average
 Remaining Term |  | Aggregate
 Intrinsic Value |    
|                                |  |        |        |                                  |   |                                  |  |                            |    
|Outstanding
 at January 1, 2011 |  |        | 60,384 |                                  | $ | 32.79                            |  |                            | 3.9 |  | $ |  | 
|Granted                         |  |        |       |                                  |   |                                 |  |                            |    |  |   |  | 
|Exercised                       |  |        |       |                                  |   |                                 |  |                            |    |  |   |  | 
|Forfeited or
 expired           |  |        |       |                                  |   |                                 |  |                            |    |  |   |  | 
|                                |  |        |        |                                  |   |                                  |  |                            |     |  |   |   | 
|Outstanding
 at March 31, 2011  |  |        | 60,384 |                                  | $ | 32.79                            |  |                            | 3.6 |  | $ |  | 
|Exercisable
 at March 31, 2011  |  |        | 60,384 |                                  | $ | 32.79                            |  |                            | 3.6 |  | $ |  | 

Compensation expense associated
with the aforementioned option shares was fully recognized as of December 31,
2007.

14

---



DSPP.The Companys
DSPP allows the directors to purchase the Companys common stock at a price
equal to 90% of the closing price on the date of purchase. Stock purchases
under the DSPP are limited to the amount of the directors annual cash
compensation. The DSPP has 93,750 shares reserved for issuance. A total of
93,532 shares have been issued since the inception of the DSPP. For the first
three months 2011, the Company recognized approximately $9,000 in expense
related to this plan. For the first three months of 2010, the Company
recognized approximately $8,500 in expense related to the DSPP.

ASPP.Under the
Companys ASPP, substantially all associates may purchase the Companys common
stock through payroll deductions at a price equal to 90% of the lower of the
fair market value at the beginning or end of each six-month offering period.
Stock purchases under the ASPP are limited to 10% of an associates eligible
compensation, up to a maximum of $25,000 (fair market value on each enrollment
date) in any plan year. Shares are issued at the beginning of the quarter
following each six-month offering period. The ASPP has 593,750 shares of common
stock reserved for issuance. A total of 171,467 shares have been issued since
inception of the ASPP. For the first three months of 2011, the Company
recognized approximately $21,000 in expense related to the ASPP plan compared
to approximately $24,000 in expense for the same period in 2010.

NOTE 8 - EMPLOYEE BENEFIT PLANS

The Company
has a defined benefit pension plan covering substantially all full-time and
eligible part-time associates and a Supplemental Executive Retirement Plan
(SERP) covering its executive officers.

The components
of the net periodic benefit costs for the Companys qualified benefit pension
plan were as follows:

|                                    |  |                              |        |      |   |        |  
|----------------------------------- |  | ---------------------------- | ------ | ---- | - | ------ | -
|                                    |  | Three Months Ended March 31, |       
|                                    |  |                              |       
|(Dollars in Thousands)              |  | 2011                         |        | 2010 |  
|                                    |  |                              |        |      |  
|                                    |  |                              |        |      |   |        |  
|Discount
 Rate                      |  |                              | 5.55   | %    |   | 5.75   | %
|Long-Term
 Rate of Return on Assets |  |                              | 8.00   | %    |   | 8.00   | %
|                                    |  |                              |        |      |   |        |  
|Service Cost                        |  | $                            | 1,550  |      | $ | 1,525  |  
|Interest
 Cost                      |  |                              | 1,325  |      |   | 1,175  |  
|Expected
 Return on Plan Assets     |  |                              | (1,650 | )    |   | (1,525 | )
|Prior
 Service Cost Amortization    |  |                              | 125    |      |   | 125    |  
|Net Loss
 Amortization              |  |                              | 550    |      |   | 525    |  
|                                    |  |                              |        |      |   |        |  
|Net Periodic
 Benefit Cost          |  | $                            | 1,900  |      | $ | 1,825  |  
|                                    |  |                              |        |      |   |        |  

The components
of the net periodic benefit costs for the Companys SERP were as follows:

|                                 |  |                              |      |      |   |      |  
|-------------------------------- |  | ---------------------------- | ---- | ---- | - | ---- | -
|                                 |  | Three Months Ended March 31, |     
|                                 |  |                              |     
|(Dollars in Thousands)           |  | 2011                         |      | 2010 |  
|                                 |  |                              |      |      |  
|                                 |  |                              |      |      |   |      |  
|Discount
 Rate                   |  |                              | 5.55 | %    |   | 5.75 | %
|                                 |  |                              |      |      |   |      |  
|Service Cost                     |  | $                            |     |      | $ |     |  
|Interest
 Cost                   |  |                              | 40   |      |   | 42   |  
|Prior
 Service Cost Amortization |  |                              | 45   |      |   | 45   |  
|Net Gain
 Amortization           |  |                              | (98  | )    |   | (85  | )
|                                 |  |                              |      |      |   |      |  
|Net Periodic
 Benefit Cost       |  | $                            | (13  | )    | $ | 2    |  
|                                 |  |                              |      |      |   |      |  

15

---



NOTE 9 - COMMITMENTS AND CONTINGENCIES

Lending Commitments.
The Company is a party to financial instruments with off-balance sheet risks in
the normal course of business to meet the financing needs of its clients. These
financial instruments consist of commitments to extend credit and standby
letters of credit.

The Companys
maximum exposure to credit loss under standby letters of credit and commitments
to extend credit is represented by the contractual amount of those instruments.
The Company uses the same credit policies in establishing commitments and
issuing letters of credit as it does for on-balance sheet instruments. As of
March 31, 2011, the amounts associated with the Companys off-balance sheet
obligations were as follows:

|                                 |  |   |        | 
|-------------------------------- |  | - | ------ | 
|(Dollars in Millions)            |  |   | Amount | 
|                                 |  |   |        | 
|Commitments
 to Extend Credit(1) |  | $ | 313    | 
|Standby
 Letters of Credit       |  | $ | 12     | 

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

Commitments to
extend credit are agreements to lend to clients so long as there is no
violation of any condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses and may require
payment of a fee. Since many of the commitments are expected to expire without
being drawn upon, the total commitment amounts do not necessarily represent
future cash requirements.

Contingencies. The
Company is a party to lawsuits and claims arising out of the normal course of
business. In managements opinion, there are no known pending claims or
litigation, the outcome of which would, individually or in the aggregate, have
a material effect on the consolidated results of operations, financial
position, or cash flows of the Company.

Indemnification Obligation.
The Company is a member of the Visa U.S.A. network. Visa U.S.A believes that
its member banks are required to indemnify it for potential future settlement
of certain litigation (the Covered Litigation). In 2008, the Company, as a
member of the Visa U.S.A. network, obtained Class B shares of Visa, Inc. upon
its initial public offering. Since its initial public offering, Visa, Inc. has
funded a litigation reserve for the Covered Litigation resulting in a reduction
in the Class B shares held by the Company. During the first quarter of 2011,
the Company sold its remaining Class B shares resulting in a $3.2 million
pre-tax gain. Associated with this sale, the Company entered into a swap
contract with the purchaser of the shares that requires a payment to the
counterparty in the event that Visa, Inc. makes subsequent revisions to the
conversion ratio for its Class B shares. Further information on the swap
contract is contained within Note 10 below.

NOTE 10  FAIR VALUE MEASUREMENTS

The fair value
of an asset or liability is the price that would be received to sell that asset
or paid to transfer that liability in an orderly transaction occurring in the
principal market (or most advantageous market in the absence of a principal
market) for such asset or liability. In estimating fair value, the Company
utilizes valuation techniques that are consistent with the market approach, the
income approach and/or the cost approach. Such valuation techniques are
consistently applied. Inputs to valuation techniques include the assumptions
that market participants would use in pricing an asset or liability. ASC Topic
820 establishes a fair value hierarchy for valuation inputs that gives the
highest priority to quoted prices in active markets for identical assets or
liabilities and the lowest priority to unobservable inputs. The fair value
hierarchy is as follows:

Level 1 Inputs -Unadjusted
quoted prices in active markets for identical assets or liabilities that the
reporting entity has the ability to access at the measurement date.

Level 2 Inputs -Inputs
other than quoted prices included in Level 1 that are observable for the asset
or liability, either directly or indirectly. These might include quoted prices
for similar assets or liabilities in active markets, quoted prices for
identical or similar assets or liabilities in markets that are not active,
inputs other than quoted prices that are observable for the asset or liability
(such as interest rates, volatilities, prepayment speeds, credit risks, etc.)
or inputs that are derived principally from or corroborated by market data by
correlation or other means.

Level 3 Inputs -Unobservable
inputs for determining the fair values of assets or liabilities that reflect an
entitys own assumptions about the assumptions that market participants would
use in pricing the assets or liabilities.

In general,
fair value is based upon quoted market prices, where available. If such quoted
market prices are not available, fair value is based upon models that primarily
use, as inputs, observable market-based parameters. Valuation adjustments may
be made to ensure that financial instruments are recorded at fair value. These
adjustments may include amounts to reflect counterparty credit quality, the
Companys creditworthiness, among other things, as well as unobservable
parameters. Any such valuation adjustments are applied consistently over time. The
Companys valuation methodologies may produce a fair value calculation that may
not be indicative of

16

---



net realizable
value or reflective of future fair values. While management believes the
Companys valuation methodologies are appropriate and consistent with other
market participants, the use of different methodologies or assumptions to
determine the fair value of certain financial instruments could result in a
different estimate of fair value at the reporting date. A more detailed
description of the valuation methodologies used for assets and liabilities
measured at fair value is set forth in the Companys 2010 Form 10-K.

Financial Assets and Financial Liabilities.
The following table summarizes financial assets and financial liabilities
measured at fair value on a recurring basis as of March 31, 2011 segregated by
the level of the valuation inputs within the fair value hierarchy utilized to
measure fair value:

|                                        |  |                 |         |                 |   |                 |  |                   |     |  |   |         | 
|--------------------------------------- |  | --------------- | ------- | --------------- | - | --------------- |  | ----------------- | --- |  | - | ------- | 
|(Dollars in Thousands)                  |  | Level 1
 Inputs |         | Level 2
 Inputs |   | Level 3
 Inputs |  | Total Fair
 Value |    
|                                        |  |                 |         |                 |   |                 |  |                   |    
|                                        |  |                 |         |                 |   |                 |  |                   |     |  |   |         | 
|March 31, 2011                          |  |                 |         |                 |   |                 |  |                   |     |  |   |         | 
|ASSETS:                                 |  |                 |         |                 |   |                 |  |                   |     |  |   |         | 
|Securities
 available for sale:         |  |                 |         |                 |   |                 |  |                   |     |  |   |         | 
|US Treasury                             |  | $               | 175,898 |                 | $ |                |  | $                 |    |  | $ | 175,898 | 
|States and
 Political Subdivisions      |  |                 | 1,391   |                 |   | 67,749          |  |                   |    |  |   | 69,140  | 
|Residential
 Mortgage-Backed Securities |  |                 |        |                 |   | 54,254          |  |                   |    |  |   | 54,254  | 
|Other
 Securities                       |  |                 |         |                 |   | 12,064          |  |                   |    |  |   | 12,064  | 
|                                        |  |                 |         |                 |   |                 |  |                   |     |  |   |         | 
|LIABILITIES:                            |  |                 |         |                 |   |                 |  |                   |     |  |   |         | 
|                                        |  |                 |         |                 |   |                 |  |                   |     |  |   |         | 
|Fair Value
 Swap                        |  |                 |         |                 |   |                 |  |                   | 600 |  |   | 600     | 

Fair Value Swap.
During the first quarter of 2011, the Company entered into a stand-alone
derivative contract with the purchaser of its Visa Class B shares. The
valuation represents an internally developed estimate of the exposure based
upon probability-weighted potential Visa litigation losses and related carrying
cost obligations required under the contract.

Non-Financial Assets and Non-Financial
Liabilities. Certain non-financial assets measured at
fair value on a nonrecurring basis are detailed below; that is, the instruments
are not measured at fair value on an ongoing basis but are subject to fair
value adjustments in certain circumstances (for example, when there is evidence
of impairment).

Impaired Loans. On a
non-recurring basis, certain impaired loans are reported at the fair value of
the underlying collateral if repayment is expected solely from the liquidation
of collateral. Collateral values are estimated using Level 2 inputs based on
customized discounting criteria. Impaired loans had a carrying value of $89.0
million, with a valuation allowance of $14.6 million.

Loans Held for Sale.
Loans held for sale were $2.7 million as of March 31, 2011. These loans are
carried at the lower of cost or fair value and are adjusted to fair value on a
non-recurring basis. Fair value is based on observable markets rates for
comparable loan products which is considered a Level 2 fair value measurement.

Other Real Estate Owned.
During the first three months of 2011, certain foreclosed assets, upon initial
recognition, were measured and reported at fair value through a charge-off to
the allowance for possible loan losses based on the fair value of the
foreclosed asset. The fair value of the foreclosed asset, upon initial
recognition, is estimated using Level 2 inputs based on observable market data.
Foreclosed assets measured at fair value upon initial recognition totaled $9.1
million during the three months ended March 31, 2011. In addition, the Company
recognized subsequent losses totaling $1.2 million for foreclosed assets that
were re-valued during the three months ended March 31, 2011. The carrying value
of foreclosed assets was $55.4 million at March 31, 2011.

FASB ASC Topic
825 requires disclosure of the fair value of financial assets and financial
liabilities, including those financial assets and financial liabilities that
are not measured and reported at fair value on a recurring or non-recurring
basis. A detailed description of the valuation methodologies used in estimating
the fair value of financial instruments is set forth in the Companys 2010 Form
10-K.

17

---



The Companys
financial instruments that have estimated fair values are presented below:

|                                         |  |                 |           |                        |   |                 |  |                        |           |  |   |           | 
|---------------------------------------- |  | --------------- | --------- | ---------------------- | - | --------------- |  | ---------------------- | --------- |  | - | --------- | 
|                                         |  |                 |          
|                                         |  | March 31, 2011  |           | December 31, 2010      |  
|                                         |  |                 |           |                        |  
|(Dollars in Thousands)                   |  | Carrying
 Value |           | Estimated
 Fair
 Value |   | Carrying
 Value |  | Estimated
 Fair
 Value |          
|                                         |  |                 |           |                        |   |                 |  |                        |          
|Financial
 Assets:                       |  |                 |           |                        |   |                 |  |                        |           |  |   |           | 
|Cash                                     |  | $               | 52,000    |                        | $ | 52,000          |  | $                      | 35,410    |  | $ | 35,410    | 
|Short-Term
 Investments                  |  |                 | 271,375   |                        |   | 271,375         |  |                        | 200,783   |  |   | 200,783   | 
|Investment
 Securities                   |  |                 | 311,356   |                        |   | 311,356         |  |                        | 309,731   |  |   | 309,731   | 
|Loans, Net
 of Allowance for Loan Losses |  |                 | 1,680,921 |                        |   | 1,632,705       |  |                        | 1,723,235 |  |   | 1,675,997 | 
|                                         |  |                 |           |                        |   |                 |  |                        |           |  |   |           | 
|Total
 Financial Assets                  |  | $               | 2,315,652 |                        | $ | 2,267,436       |  | $                      | 2,269,159 |  | $ | 2,221,921 | 
|                                         |  |                 |           |                        |   |                 |  |                        |           |  |   |           | 
|                                         |  |                 |           |                        |   |                 |  |                        |           |  |   |           | 
|Financial
 Liabilities:                  |  |                 |           |                        |   |                 |  |                        |           |  |   |           | 
|Deposits                                 |  | $               | 2,147,047 |                        | $ | 2,148,335       |  | $                      | 2,103,976 |  | $ | 2,105,568 | 
|Short-Term
 Borrowings                   |  |                 | 86,650    |                        |   | 82,740          |  |                        | 92,928    |  |   | 89,287    | 
|Subordinated
 Notes Payable              |  |                 | 62,887    |                        |   | 62,888          |  |                        | 62,887    |  |   | 62,884    | 
|Long-Term
 Borrowings                    |  |                 | 50,050    |                        |   | 52,477          |  |                        | 50,101    |  |   | 52,302    | 
|Derivative
 Instrument  Fair Value Swap |  |                 | 600       |                        |   | 600             |  |                        |          |  |   |          | 
|                                         |  |                 |           |                        |   |                 |  |                        |           |  |   |           | 
|Total
 Financial Liabilities             |  | $               | 2,347,234 |                        | $ | 2,347,040       |  | $                      | 2,309,892 |  | $ | 2,310,041 | 
|                                         |  |                 |           |                        |   |                 |  |                        |           |  |   |           | 

All
non-financial instruments are excluded from the above table. The disclosures also
do not include certain intangible assets such as client relationships, deposit
base intangibles and goodwill. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.

NOTE 11  NEW AUTHORITATIVE ACCOUNTING
GUIDANCE

ASU No. 2010-20, Receivables (Topic 310) -
Disclosures about the Credit Quality of Financing Receivables and the Allowance
for Credit Losses. ASU 2010-20 requires entities to
provide disclosures designed to facilitate financial statement users
evaluation of (i) the nature of credit risk inherent in the entitys portfolio
of financing receivables, (ii) how that risk is analyzed and assessed in
arriving at the allowance for credit losses and (iii) the changes and reasons
for those changes in the allowance for credit losses. Disclosures must be
disaggregated by portfolio segment, the level at which an entity develops and
documents a systematic method for determining its allowance for credit losses,
and class of financing receivable, which is generally a disaggregation of
portfolio segment. The required disclosures include, among other things, a
roll-forward of the allowance for credit losses as well as information about
modified, impaired, non-accrual and past due loans and credit quality indicators.
ASU 2010-20 became effective for the Companys financial statements as of
December 31, 2010, as it relates to disclosures required as of the end of a
reporting period. Disclosures that relate to activity during a reporting period
became effective for the Companys financial statements beginning on January 1,
2011. ASU 2011-01, Receivables (Topic 310) - Deferral of the Effective Date of
Disclosures about Troubled Debt Restructurings in Update No. 2010-20,
temporarily deferred the effective date for disclosures related to troubled
debt restructurings to coincide with the effective date of the then proposed
ASU 2011-02, Receivables (Topic 310) - A Creditors Determination of Whether a
Restructuring Is a Troubled Debt Restructuring, which is further discussed
below.

ASU No. 2010-28, Intangibles - Goodwill and
Other (Topic 350) - When to Perform Step 2 of the Goodwill Impairment Test for
Reporting Units with Zero or Negative Carrying Amounts.
ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting
units with zero or negative carrying amounts. For those reporting units, an
entity is required to perform Step 2 of the goodwill impairment test if it is
more likely than not that a goodwill impairment exists. In determining whether it
is more likely than not that a goodwill impairment exists, an entity should
consider whether there are any adverse qualitative factors indicating that an
impairment may exist such as if an event occurs or circumstances change that
would more likely than not reduce the fair value of a reporting unit below its
carrying amount. ASU 2010-28 became effective for the Company on January 1,
2011 and did not have a significant impact on the Companys financial
statements.

ASU No. 2011-02, Receivables
(Topic 310) - A Creditors Determination of Whether a Restructuring Is a
Troubled Debt Restructuring. ASU 2011-02 clarifies which loan modifications
constitute troubled debt restructurings and is intended to assist creditors in
determining whether a modification of the terms of a receivable meets the
criteria to be considered a troubled debt restructuring,
both for purposes of recording an impairment loss and for disclosure of
troubled debt restructurings. In evaluating whether a restructuring constitutes
a troubled debt restructuring, a creditor must separately conclude, under the
guidance clarified by ASU 2011-02, that both of the following exist:
(a) the restructuring constitutes a concession; and (b) the debtor is
experiencing financial difficulties. ASU 2011-02 will be effective for the
Company on July 1, 2011, and applies retrospectively to restructurings
occurring on or after January 1, 2011. Adoption of ASU 2011-02 is not
expected have a significant impact on the Companys financial statements.

18

---



QUARTERLY FINANCIAL DATA (UNAUDITED)

|                                                    |  |          |           |        |   |           |   |        |           |       |   |           |   |       |           |        |   |           |    |   |           |    |   |           |  
|--------------------------------------------------- |  | -------- | --------- | ------ | - | --------- | - | ------ | --------- | ----- | - | --------- | - | ----- | --------- | ------ | - | --------- | -- | - | --------- | -- | - | --------- | -
|                                                    |  | 2011     |           | 2010   |   | 2009      |  
|                                                    |  |          |           |        |   |           |  
|(Dollars in Thousands,
Except Per Share Data)       |  | First(1) |           | Fourth |   | Third     |   | Second |           | First |   | Fourth    |   | Third |           | Second |  
|                                                    |  |          |           |        |   |           |   |        |           |       |   |           |   |       |           |        |  
|Summary of Operations:                              |  |          |           |        |   |           |   |        |           |       |   |           |   |       |           |        |   |           |    |   |           |    |   |           |  
|                                                   
|Interest Income                                     |  | $        | 25,189    |        | $ | 26,831    |   | $      | 27,576    |       | $ | 27,934    |   | $     | 28,154    |        | $ | 29,756    |    | $ | 30,787    |    | $ | 31,180    |  
|Interest Expense                                    |  |          | 2,203     |        |   | 2,473     |   |        | 2,792     |       |   | 3,565     |   |       | 4,132     |        |   | 4,464     |    |   | 4,235     |    |   | 4,085     |  
|Net Interest Income                                 |  |          | 22,986    |        |   | 24,358    |   |        | 24,784    |       |   | 24,369    |   |       | 24,022    |        |   | 25,292    |    |   | 26,552    |    |   | 27,095    |  
|Provision for Loan Losses                           |  |          | 4,133     |        |   | 3,783     |   |        | 5,668     |       |   | 3,633     |   |       | 10,740    |        |   | 10,834    |    |   | 12,347    |    |   | 8,426     |  
|Net Interest Income After Provision for Loan Losses |  |          | 18,853    |        |   | 20,575    |   |        | 19,116    |       |   | 20,736    |   |       | 13,282    |        |   | 14,458    |    |   | 14,205    |    |   | 18,669    |  
|Noninterest Income                                  |  |          | 16,334    |        |   | 14,735    |   |        | 13,449    |       |   | 14,674    |   |       | 13,967    |        |   | 14,411    |    |   | 14,304    |    |   | 14,634    |  
|Noninterest Expense                                 |  |          | 33,331    |        |   | 33,540    |   |        | 32,363    |       |   | 34,629    |   |       | 33,384    |        |   | 35,313    |    |   | 31,615    |    |   | 32,930    |  
|                                                   
|Income (Loss) Before Income Taxes                   |  |          | 1,856     |        |   | 1,770     |   |        | 202       |       |   | 781       |   |       | (6,135    | )      |   | (6,444    | )  |   | (3,106    | )  |   | 373       |  
|Income Tax (Benefit) Expense                        |  |          | 546       |        |   | (148      | ) |        | (199      | )     |   | 50        |   |       | (2,672    | )      |   | (3,037    | )  |   | (1,618    | )  |   | (401      | )
|Net Income (Loss)                                   |  | $        | 1,310     |        | $ | 1,918     |   | $      | 401       |       | $ | 731       |   | $     | (3,463    | )      | $ | (3,407    | )  | $ | (1,488    | )  | $ | 774       |  
|Net Interest Income (FTE)                           |  | $        | 23,257    |        | $ | 24,654    |   | $      | 25,116    |       | $ | 24,738    |   | $     | 24,473    |        | $ | 25,845    |    | $ | 27,128    |    | $ | 27,679    |  
|                                                    |  |          |           |        |   |           |   |        |           |       |   |           |   |       |           |        |   |           |    |   |           |    |   |           |  
|Per Common Share:                                   |  |          |           |        |   |           |   |        |           |       |   |           |   |       |           |        |   |           |    |   |           |    |   |           |  
|Net Income (Loss) Basic                             |  | $        | 0.08      |        | $ | 0.12      |   | $      | 0.02      |       | $ | 0.04      |   | $     | (0.20     | )      | $ | (0.20     | )  | $ | (0.08     | )  | $ | 0.04      |  
|Net Income (Loss) Diluted                           |  |          | 0.08      |        |   | 0.12      |   |        | 0.02      |       |   | 0.04      |   |       | (0.20     | )      |   | (0.20     | )  |   | (0.08     | )  |   | 0.04      |  
|Dividends Declared                                  |  |          | 0.10      |        |   | 0.10      |   |        | 0.10      |       |   | 0.10      |   |       | 0.19      |        |   | 0.19      |    |   | 0.19      |    |   | 0.19      |  
|Diluted Book Value                                  |  |          | 15.13     |        |   | 15.15     |   |        | 15.25     |       |   | 15.32     |   |       | 15.34     |        |   | 15.72     |    |   | 15.76     |    |   | 16.03     |  
|Market Price:                                       |  |          |           |        |   |           |   |        |           |       |   |           |   |       |           |        |   |           |    |   |           |    |   |           |  
|High                                                |  |          | 13.80     |        |   | 14.19     |   |        | 14.24     |       |   | 18.25     |   |       | 14.61     |        |   | 14.34     |    |   | 17.10     |    |   | 17.35     |  
|Low                                                 |  |          | 11.87     |        |   | 11.56     |   |        | 10.76     |       |   | 12.36     |   |       | 11.57     |        |   | 11.00     |    |   | 13.92     |    |   | 11.01     |  
|Close                                               |  |          | 12.68     |        |   | 12.60     |   |        | 12.14     |       |   | 12.38     |   |       | 14.25     |        |   | 13.84     |    |   | 14.20     |    |   | 16.85     |  
|                                                    |  |          |           |        |   |           |   |        |           |       |   |           |   |       |           |        |   |           |    |   |           |    |   |           |  
|Selected Average Balances:                          |  |          |           |        |   |           |   |        |           |       |   |           |   |       |           |        |   |           |    |   |           |    |   |           |  
|Loans, Net                                          |  | $        | 1,730,330 |        | $ | 1,782,916 |   | $      | 1,807,483 |       | $ | 1,841,379 |   | $     | 1,886,367 |        | $ | 1,944,873 |    | $ | 1,964,984 |    | $ | 1,974,197 |  
|Earning Assets                                      |  |          | 2,278,602 |        |   | 2,218,049 |   |        | 2,273,198 |       |   | 2,329,365 |   |       | 2,358,288 |        |   | 2,237,561 |    |   | 2,157,362 |    |   | 2,175,281 |  
|Total Assets                                        |  |          | 2,643,017 |        |   | 2,576,793 |   |        | 2,626,758 |       |   | 2,678,488 |   |       | 2,698,419 |        |   | 2,575,250 |    |   | 2,497,969 |    |   | 2,506,352 |  
|Deposits                                            |  |          | 2,125,379 |        |   | 2,115,867 |   |        | 2,172,165 |       |   | 2,234,178 |   |       | 2,248,760 |        |   | 2,090,008 |    |   | 1,950,170 |    |   | 1,971,190 |  
|Shareowners Equity                                 |  |          | 261,603   |        |   | 262,622   |   |        | 263,742   |       |   | 263,873   |   |       | 268,555   |        |   | 268,556   |    |   | 275,027   |    |   | 277,114   |  
|Common Equivalent Average Shares:                   |  |          |           |        |   |           |   |        |           |       |   |           |   |       |           |        |   |           |    |   |           |    |   |           |  
|Basic                                               |  |          | 17,122    |        |   | 17,095    |   |        | 17,087    |       |   | 17,063    |   |       | 17,057    |        |   | 17,034    |    |   | 17,024    |    |   | 17,010    |  
|Diluted                                             |  |          | 17,130    |        |   | 17,096    |   |        | 17,088    |       |   | 17,074    |   |       | 17,070    |        |   | 17,035    |    |   | 17,025    |    |   | 17,010    |  
|                                                    |  |          |           |        |   |           |   |        |           |       |   |           |   |       |           |        |   |           |    |   |           |    |   |           |  
|Performance Ratios:                                 |  |          |           |        |   |           |   |        |           |       |   |           |   |       |           |        |   |           |    |   |           |    |   |           |  
|Return on Average Assets                            |  |          | 0.20      | %      |   | 0.30      | % |        | 0.06      | %     |   | 0.11      | % |       | (0.52     | )%     |   | (0.52     | )% |   | (0.24     | )% |   | 0.12      | %
|Return on Average Equity                            |  |          | 2.03      |        |   | 2.90      |   |        | 0.60      |       |   | 1.11      |   |       | (5.23     | )      |   | (5.03     | )  |   | (2.15     | )  |   | 1.12      |  
|Net Interest Margin (FTE)                           |  |          | 4.14      |        |   | 4.41      |   |        | 4.38      |       |   | 4.26      |   |       | 4.21      |        |   | 4.59      |    |   | 4.99      |    |   | 5.11      |  
|Noninterest Income as % of Operating Revenue        |  |          | 41.54     |        |   | 37.69     |   |        | 35.17     |       |   | 37.58     |   |       | 36.77     |        |   | 36.30     |    |   | 35.01     |    |   | 35.07     |  
|Efficiency Ratio                                    |  |          | 83.30     |        |   | 83.75     |   |        | 82.08     |       |   | 86.06     |   |       | 85.00     |        |   | 85.21     |    |   | 73.86     |    |   | 75.44     |  
|                                                    |  |          |           |        |   |           |   |        |           |       |   |           |   |       |           |        |   |           |    |   |           |    |   |           |  
|Asset Quality:                                      |  |          |           |        |   |           |   |        |           |       |   |           |   |       |           |        |   |           |    |   |           |    |   |           |  
|Allowance for Loan Losses                           |  |          | 33,873    |        |   | 35,436    |   |        | 37,720    |       |   | 38,442    |   |       | 41,199    |        |   | 43,999    |    |   | 45,401    |    |   | 41,782    |  
|Allowance for Loan Losses to Loans                  |  |          | 1.98      | %      |   | 2.01      | % |        | 2.10      | %     |   | 2.11      | % |       | 2.23      | %      |   | 2.30      | %  |   | 2.32      | %  |   | 2.12      | %
|Nonperforming Assets                                |  |          | 153,346   |        |   | 145,286   |   |        | 145,643   |       |   | 149,814   |   |       | 153,669   |        |   | 144,052   |    |   | 144,372   |    |   | 143,626   |  
|                                                   
|Nonperforming Assets to Loans + ORE                 |  |          | 8.66      |        |   | 8.00      |   |        | 7.86      |       |   | 8.01      |   |       | 8.10      |        |   | 7.38      |    |   | 7.25      |    |   | 7.19      |  
|Nonperforming Assets to Total Assets                |  |          | 5.76      |        |   | 5.54      |   |        | 5.65      |       |   | 5.65      |   |       | 5.66      |        |   | 5.32      |    |   | 5.79      |    |   | 5.69      |  
|Allowance to Non-Performing Loans                   |  |          | 34.57     |        |   | 40.57     |   |        | 39.94     |       |   | 37.80     |   |       | 38.42     |        |   | 40.77     |    |   | 40.90     |    |   | 33.71     |  
|Net Charge-Offs to Average Loans                    |  |          | 1.33      |        |   | 1.35      |   |        | 1.40      |       |   | 1.39      |   |       | 2.91      |        |   | 2.42      |    |   | 1.76      |    |   | 1.39      |  
|                                                    |  |          |           |        |   |           |   |        |           |       |   |           |   |       |           |        |   |           |    |   |           |    |   |           |  
|Capital Ratios:                                     |  |          |           |        |   |           |   |        |           |       |   |           |   |       |           |        |   |           |    |   |           |    |   |           |  
|Tier 1 Capital Ratio                                |  |          | 13.46     | %      |   | 13.24     | % |        | 12.93     | %     |   | 12.78     | % |       | 12.81     | %      |   | 12.76     | %  |   | 12.76     | %  |   | 12.85     | %
|Total Capital Ratio                                 |  |          | 14.82     |        |   | 14.59     |   |        | 14.29     |       |   | 14.14     |   |       | 14.16     |        |   | 14.11     |    |   | 14.12     |    |   | 14.20     |  
|Tangible Capital Ratio                              |  |          | 6.73      |        |   | 6.82      |   |        | 6.98      |       |   | 6.80      |   |       | 6.62      |        |   | 6.84      |    |   | 7.43      |    |   | 7.47      |  
|Leverage Ratio                                      |  |          | 9.74      |        |   | 10.10     |   |        | 9.75      |       |   | 9.58      |   |       | 9.64      |        |   | 10.39     |    |   | 10.96     |    |   | 11.07     |  

|    |                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes a $2.6 million
 (net) pre-tax gain from sale of Visa shares  $3.2 million gain less $0.6
 million related swap liability.

19

---



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

Managements
discussion and analysis (MD&A) provides supplemental information, which
sets forth the major factors that have affected our financial condition and
results of operations and should be read in conjunction with the Consolidated
Financial Statements and related notes. The MD&A is divided into
subsections entitled Business Overview, Financial Overview, Results of
Operations, Financial Condition, Market Risk and Interest Rate
Sensitivity, Liquidity and Capital Resources, Off-Balance Sheet
Arrangements, and Critical Accounting Policies. The following information
should provide a better understanding of the major factors and trends that
affect our earnings performance and financial condition, and how our
performance during 2011 compares with the prior year. Throughout this section,
Capital City Bank Group, Inc., and subsidiaries, collectively, are referred to
as CCBG, Company, we, us, or our.

In this
MD&A, we present an operating efficiency ratio which is not calculated
based on accounting principles generally accepted in the United States
(GAAP), but that we believe provides important information regarding our
results of operations. Our calculation of the operating efficiency ratio is
computed by dividing noninterest expense less intangible amortization, by the
sum of tax equivalent net interest income and noninterest income. Management
uses this non-GAAP measure as part of its assessment of its performance in
managing noninterest expenses. We believe that excluding intangible
amortization and merger expenses in our calculations better reflect our
periodic expenses and is more reflective of normalized operations.

Although we
believe the above-mentioned non-GAAP financial measure enhances investors
understanding of our business and performance this non-GAAP financial measure
should not be considered an alternative to GAAP. In addition, there are material
limitations associated with the use of this non-GAAP financial measure such as
the risks that readers of our financial statements may disagree as to the
appropriateness of items included or excluded in this measure and that our
measure may not be directly comparable to other companies that calculate this
measure differently. Our management compensates for this limitation by
providing a detailed reconciliation between GAAP information and the non-GAAP
financial measure as detailed below.

Reconciliation of operating efficiency ratio to efficiency ratio:

|                                           |  |                     |       |                     |  |                |    |  |       |   
|------------------------------------------ |  | ------------------- | ----- | ------------------- |  | -------------- | -- |  | ----- | --
|                                           |  | Three
 Months Ended |      
|                                           |  |                     |      
|                                           |  | March 31,2011       |       | December
 31,
 2010 |  | March
 31,2010 |   
|                                           |  |                     |       |                     |  |                |   
|Efficiency
 ratio                          |  |                     | 84.19 | %                   |  | 85.16          |    |  | 86.85 | % 
|Effect of
 intangible amortization expense |  |                     | (0.89 | )%                  |  | (1.41          | )% |  | (1.85 | )%
|                                           |  |                     |       |                     |  |                |    |  |       |   
|Operating
 efficiency ratio                |  |                     | 83.30 | %                   |  | 83.75          | %  |  | 85.00 | % 

20

---



The following
discussion should be read in conjunction with the condensed consolidated
financial statements and notes thereto included in this Quarterly Report on
Form 10-Q.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly
Report on Form 10-Q, including this MD&A section, contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These forward-looking statements include, among others, statements
about our beliefs, plans, objectives, goals, expectations, estimates and
intentions that are subject to significant risks and uncertainties and are
subject to change based on various factors, many of which are beyond our
control. The words may, could, should, would, believe, anticipate,
estimate, expect, intend, plan, target, goal, and similar
expressions are intended to identify forward-looking statements.

All
forward-looking statements, by their nature, are subject to risks and
uncertainties. Our actual future results may differ materially from those set
forth in our forward-looking statements. Please see the Introductory Note and
Item 1A. Risk Factors of our 2010 Report on Form 10-K, as updated in our
subsequent quarterly reports filed on Form 10-Q, and in our other filings made
from time to time with the SEC after the date of this report.

However, other
factors besides those listed in our Quarterly Report or in our Annual Report
also could adversely affect our results, and you should not consider any such
list of factors to be a complete set of all potential risks or uncertainties.
Any forward-looking statements made by us or on our behalf speak only as of the
date they are made. We do not undertake to update any forward-looking
statement, except as required by applicable law.

BUSINESS OVERVIEW

Our Business

We are a bank
holding company headquartered in Tallahassee, Florida, and we are the parent of
our wholly-owned subsidiary, Capital City Bank (the Bank or CCB). The Bank
offers a broad array of products and services through a total of 70
full-service offices located in Florida, Georgia, and Alabama. The Bank offers
commercial and retail banking services, as well as trust and asset management,
retail securities brokerage and data processing services.

Our
profitability, like most financial institutions, is dependent to a large extent
upon net interest income, which is the difference between the interest received
on earning assets, such as loans and securities, and the interest paid on
interest-bearing liabilities, principally deposits and borrowings. Results of
operations are also affected by the provision for loan losses, operating
expenses such as salaries and employee benefits, occupancy and other operating
expenses including income taxes, and noninterest income such as service charges
on deposit accounts, asset management and trust fees, retail securities
brokerage fees, mortgage banking fees, bank card fees, and data processing
fees.

Much of our
lending operations are within the State of Florida, which has been particularly
hard hit in the current economic recession. Evidence of the economic downturn
in Florida is particularly reflected in current unemployment statistics and
realization of real estate property devaluation. According to the U.S.
Department of Labor, the Florida unemployment rate (seasonally adjusted) at
December 2010 increased to 12.0% from 11.8% at the end of 2009 and 7.6% at the
end of 2008. While our Florida markets have generally realized an unemployment
rate below the Florida rate, they have been adversely impacted as evidenced by
layoffs and business closings, as well as wealth reduction due to depressed
markets. Real estate property valuations have also been depressed during the
economic downturn as evidenced by our higher level of problem assets and credit
related costs. An extended continuation of the recession in Florida would
likely exacerbate the adverse effects of these difficult market conditions on
our clients, which may have a negative impact on our financial results.

21

---



FINANCIAL OVERVIEW

A summary
overview of our financial performance for the first quarter of 2011 versus the
fourth quarter of 2010 and the first quarter of 2010 is provided below.

Summary of Financial Performance 

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Net income
 of $1.3 million, or $0.08 per diluted share for the first quarter of 2011
 compared to a net income of $1.9 million, or $0.12 per diluted share in the
 fourth quarter of 2010, and a net loss of $3.5 million, or $0.20 per diluted
 share for the first quarter of 2010. Earnings for the first quarter of 2011
 include a $1.6 million after-tax gain from the sale of our Visa shares.                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | Total credit
 costs (loan loss provision plus other real estate owned (OREO) costs) were
 $7.8 million ($0.28 per share), $8.5 million ($0.31 per share), and $13.6
 million ($0.49 per share) for the quarters ended March 31, 2011, December 31,
 2010, and March 31, 2010, respectively.                                                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | Tax equivalent net
 interest income for the first quarter of 2011 decreased $1.4 million, or 5.7%
 from the fourth quarter of 2010 and $1.2 million, or 5.0%, from the first
 quarter of 2010. For both periods, the decline was due to a reduction in loan
 income attributable to declining loan balances and continued unfavorable
 asset repricing. An unfavorable two day calendar variance also contributed to
 the reduction from the fourth quarter of 2010.                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | Noninterest
 income increased $1.6 million, or 10.9% over the fourth quarter of 2010 and
 $2.4 million, or 16.9%, over the first quarter of 2010. The higher
 noninterest income for the first quarter of 2011 was due to a $3.2 million
 pre-tax gain from the sale of Visa stock. Lower deposit fees and mortgage
 banking fees partially offset the Visa stock gain when compared to the fourth
 quarter of 2010. Compared to the first quarter of 2010, lower deposit fees
 and merchant fees partially offset the Visa stock gain.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | Noninterest
 expense decreased $0.2 million and $0.1 million from the fourth quarter of
 2010 and first quarter of 2010, respectively. The decline compared to the fourth
 quarter of 2010 was primarily due to a reduction in other expense of $1.3
 million, partially offset by higher compensation expense of $1.2 million.
 Compared to the first quarter of 2010, the decrease in noninterest expense
 was attributable to lower compensation expense of $0.2 million partially
 offset by higher other expense of $0.1 million. 
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | Average earning assets
 totaled $2.279 billion for the first quarter of 2011, a $60.6 million, or
 2.7% increase over the fourth quarter of 2010, and a decrease of $79.7
 million, or 3.4% from the first quarter of 2010. The increase  over the
 fourth quarter of 2010 was driven by increases in both deposits and short-term
 borrowings, while the decline from the first quarter of 2010 was due to lower
 deposit balances, primarily CD balances.                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | Average loans decreased
 $52.6 million, or 3.0%, from the fourth quarter of 2010 and $156.0 million,
 or 8.3%, from the first quarter of 2010 due to weak loan demand attributable
 to the lack of consumer confidence and a sluggish economy. Normal
 amortization and a higher level of payoffs as well as the resolution of
 problem loans also affected the balance of loans.                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | Average deposit balances
 were $2.125 billion for the first quarter of 2011, an increase of $9.5
 million, or 0.5% over the fourth quarter of 2010, and a decrease of $123.4
 million, or 5.5% from the first quarter of 2010. Growth in public funds drove
 the growth over the fourth quarter of 2010. A reduction in CD balances was
 the primary reason for the decline versus the first quarter of 2010.                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | Nonperforming assets totaled $153.3 million at March 31,
 2011, an increase of $8.1
 million over December 31, 2010 and a reduction of $0.3 million over
 March 31, 2010. Nonperforming
 assets represented 5.76% of total assets at March 31, 2011 compared to 5.54%
 at December 31, 2010 and 5.66% at March 31, 2010. Compared to the fourth
 quarter of 2010, a higher level of nonaccrual loans, primarily the default of
 one classified loan for $6.0 million, drove the increase in nonperforming
 assets.                     
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | As of March
 31, 2011, we are well-capitalized with a risk based capital ratio of 14.82%
 and a tangible capital ratio of 6.73% compared to 14.59% and 6.82%,
 respectively, at December 31, 2010 and 14.16% and 6.62%, respectively, at
 March 31, 2010.                                                                                                                                                                                                                                                                              

22

---



RESULTS OF OPERATIONS

Net Income

For the first
quarter of 2011, we realized net income of $1.3 million, or $0.08 per diluted
share, compared to net income of $1.9 million, or $0.12 per diluted share in
the fourth quarter of 2010 (linked quarter) and a net loss of $3.5 million,
or $0.20 per diluted share for the first quarter of 2010.

Compared to
the fourth quarter of 2010, net income reflects lower net interest income of
$1.4 million, an increase in the loan loss provision of $0.3 million, and
higher income tax expense of $0.7 million, partially offset by higher
noninterest income of $1.6 million, and lower noninterest expense of $0.2
million. During the first quarter of 2011, we sold all of our Visa Class B
shares of stock, which resulted in a $3.2 million pre-tax gain reflected in
noninterest income and a swap liability of $0.6 million reflected in
noninterest expense.

The increase
in net income over the first quarter of 2010 was driven by a lower loan loss
provision of $6.6 million and higher noninterest income of $2.4 million,
partially offset by a reduction in net interest income of $1.0 million and
higher income tax expense of $3.2 million.

A condensed earnings summary
of each major component of our financial performance is provided below:

|                                                     |  |                    |        |                    |   |                 |   |   |        |   
|---------------------------------------------------- |  | ------------------ | ------ | ------------------ | - | --------------- | - | - | ------ | --
|                                                     |  | Three Months Ended |       
|                                                     |  |                    |       
|(Dollars in Thousands, except per share
 data)       |  | March 31,
 2011    |        | December 31,
 2010 |   | March 31,
 2010 |  
|                                                     |  |                    |        |                    |   |                 |  
|Interest Income                                      |  | $                  | 25,189 |                    | $ | 26,831          |   | $ | 28,154 |   
|Taxable equivalent
 Adjustments                      |  |                    | 271    |                    |   | 296             |   |   | 451    |   
|                                                     |  |                    |        |                    |   |                 |   |   |        |   
|Total Interest Income
 (FTE)                         |  |                    | 25,460 |                    |   | 27,127          |   |   | 28,605 |   
|Interest Expense                                     |  |                    | 2,203  |                    |   | 2,473           |   |   | 4,132  |   
|                                                     |  |                    |        |                    |   |                 |   |   |        |   
|Net Interest Income (FTE)                            |  |                    | 23,257 |                    |   | 24,654          |   |   | 24,473 |   
|Provision for Loan Losses                            |  |                    | 4,133  |                    |   | 3,783           |   |   | 10,740 |   
|Taxable Equivalent
 Adjustments                      |  |                    | 271    |                    |   | 296             |   |   | 451    |   
|                                                     |  |                    |        |                    |   |                 |   |   |        |   
|Net Interest Income After
 provision for Loan Losses |  |                    | 18,853 |                    |   | 20,575          |   |   | 13,282 |   
|Noninterest Income                                   |  |                    | 16,334 |                    |   | 14,735          |   |   | 13,967 |   
|Noninterest Expense                                  |  |                    | 33,331 |                    |   | 33,540          |   |   | 33,384 |   
|                                                     |  |                    |        |                    |   |                 |   |   |        |   
|Income (Loss) Before
 Income Taxes                   |  |                    | 1,856  |                    |   | 1,770           |   |   | (6,135 | ) 
|Income Tax Expense
 (Benefit)                        |  |                    | 546    |                    |   | (148            | ) |   | (2,672 | ) 
|                                                     |  |                    |        |                    |   |                 |   |   |        |   
|Net Income (Loss)                                    |  | $                  | 1,310  |                    | $ | 1,918           |   | $ | (3,463 | ) 
|                                                     |  |                    |        |                    |   |                 |   |   |        |   
|                                                     |  |                    |        |                    |   |                 |   |   |        |   
|Basic Net Income (Loss)
 Per Share                   |  | $                  | 0.08   |                    | $ | 0.12            |   | $ | (0.20  | ) 
|                                                     |  |                    |        |                    |   |                 |   |   |        |   
|Diluted Net Income (Loss)
 Per Share                 |  | $                  | 0.08   |                    | $ | 0.12            |   | $ | (0.20  | ) 
|                                                     |  |                    |        |                    |   |                 |   |   |        |   
|                                                     |  |                    |        |                    |   |                 |   |   |        |   
|Return on Average Equity                             |  |                    | 0.20   | %                  |   | 0.30            | % |   | (0.52  | )%
|Return on Average Assets                             |  |                    | 2.03   | %                  |   | 2.90            | % |   | (5.23  | )%

Net Interest Income

Net interest income
represents our single largest source of earnings and is equal to interest
income and fees generated by earning assets, less interest expense paid on
interest bearing liabilities. This information is provided on a taxable equivalent
basis to reflect the tax-exempt status of income earned on certain loans and
investments, the majority of which are state and local government debt
obligations. We provide an analysis of our net interest income including
average yields and rates in Table I on page 35.

Tax equivalent net interest
income for the first quarter of 2011 was $23.3 million compared to $24.7
million for the fourth quarter of 2010 and $24.5 million for the first quarter
of 2010.

23

---



The decrease of $1.4 million
in tax equivalent net interest income as compared to the fourth quarter of 2010
was due to two less calendar days; a reduction in loan income attributable to
declining loan balances and continued unfavorable asset repricing. This was
partially offset by lower interest expense and a slight decrease in foregone
interest on nonaccrual loans. With the exception of calendar days, the
explanation for the $1.2 million decline from the prior year quarter
essentially mirrors the explanation for the linked quarter.

Tax equivalent interest
income for the first quarter of 2011 was $25.5 million compared to $27.1
million for the fourth quarter of 2010 and $28.6 million for the first quarter
of 2010. The decrease in interest income when compared to both periods reflects
unfavorable asset repricing and declining loan balances, which has been
partially offset by a lower foregone interest on nonaccrual loans.

Interest expense for the
first quarter of 2011 was $2.2 million compared to $2.5 million for the fourth
quarter of 2010 and $4.1 million for the first quarter of 2010. Lower interest
expense for both comparable periods reflects a reduction in deposit rates
primarily in certificates of deposit.

The net interest margin in
the first quarter of 2011 was 4.14%, a decrease of 27 basis points from the
fourth quarter of 2010 and a decline of 7 basis points from the first quarter
of 2010. The decrease in the margin when compared to both periods reflects a
reduction in the earning asset yield attributable to a shift in the mix of
earning assets and continued unfavorable repricing. Partially offsetting the
unfavorable variances was a reduction in the cost of funds, primarily the
average rate paid on certificates of deposit.

Provision for Loan Losses

The provision
for loan losses for the first quarter of 2011 was $4.1 million compared to $3.8
million in the fourth quarter of 2010 and $10.7 million for the first quarter
of 2010. The increase in the loan loss provision compared to the linked quarter
primarily reflects reserves for newly identified impaired loans. A reduction in
general reserves had a favorable impact on the loan loss provision and reflects
a decline in our classified loan balance, partially due to loan upgrades during
the quarter, a lower historical loss rate and a reduction in past dues.
Compared to the first quarter of 2010, a reduction in impaired loans was the
primary factor driving the decline in the loan loss provision. Net charge-offs
for the first quarter of 2011 totaled $5.7 million, or 1.33%, of average loans
compared to $6.1 million, or 1.35% for the fourth quarter of 2010 and $13.5
million, or 2.91% in the first quarter of 2010. At quarter-end, the allowance
for loan losses of $33.9 million was 1.98% of outstanding loans (net of
overdrafts) and provided coverage of 35% of nonperforming loans compared to
2.01% and 41%, respectively, at December 31, 2010, and 2.23% and 38%,
respectively, at March 31, 2010.

Charge-off activity for the
respective periods is set forth below:

|                                                                                                    |  |                    |       |                    |   |                 |   |   |        |  
|--------------------------------------------------------------------------------------------------- |  | ------------------ | ----- | ------------------ | - | --------------- | - | - | ------ | -
|                                                                                                    |  | Three Months Ended |      
|                                                                                                    |  |                    |      
|(Dollars in Thousands, except per share
 data)                                                      |  | March 31,
 2011    |       | December 31,
 2010 |   | March 31,
 2010 |  
|                                                                                                    |  |                    |       |                    |   |                 |  
|                                                                                                   
|CHARGE-OFFS                                                                                         |  |                    |       |                    |   |                 |   |   |        |  
|Commercial, Financial and
 Agricultural                                                             |  | $                  | 721   |                    | $ | 629             |   | $ | 842    |  
|Real Estate  Construction                                                                          |  |                    |      |                    |   | 234             |   |   | 3,722  |  
|Real Estate  Commercial
 Mortgage                                                                  |  |                    | 430   |                    |   | 1,469           |   |   | 4,631  |  
|Real Estate  Residential                                                                           |  |                    | 4,445 |                    |   | 3,629           |   |   | 3,727  |  
|Consumer                                                                                            |  |                    | 620   |                    |   | 582             |   |   | 1,507  |  
|                                                                                                    |  |                    |       |                    |   |                 |   |   |        |  
|Total Charge-offs                                                                                   |  |                    | 6,216 |                    |   | 6,543           |   |   | 14,429 |  
|                                                                                                    |  |                    |       |                    |   |                 |   |   |        |  
|                                                                                                    |  |                    |       |                    |   |                 |   |   |        |  
|RECOVERIES                                                                                          |  |                    |       |                    |   |                 |   |   |        |  
|Commercial, Financial and
 Agricultural                                                             |  |                    | 63    |                    |   | 48              |   |   | 77     |  
|Real Estate  Construction                                                                          |  |                    | 9     |                    |   |                |   |   |       |  
|Real Estate  Commercial
 Mortgage                                                                  |  |                    | 12    |                    |   | 55              |   |   | 157    |  
|Real Estate  Residential                                                                           |  |                    | 96    |                    |   | 7               |   |   | 114    |  
|Consumer                                                                                            |  |                    | 340   |                    |   | 366             |   |   | 545    |  
|                                                                                                    |  |                    |       |                    |   |                 |   |   |        |  
|Total Recoveries                                                                                    |  |                    | 520   |                    |   | 476             |   |   | 893    |  
|                                                                                                    |  |                    |       |                    |   |                 |   |   |        |  
|                                                                                                    |  |                    |       |                    |   |                 |   |   |        |  
|Net Charge-offs                                                                                     |  | $                  | 5,696 |                    | $ | 6,067           |   | $ | 13,536 |  
|                                                                                                    |  |                    |       |                    |   |                 |   |   |        |  
|Net Charge- offs
 (Annualized) as a percent of Average Loans Outstanding, Net of
 Unearned Interest |  |                    | 1.33  | %                  |   | 1.35            | % |   | 2.91   | %

24

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Noninterest Income

Noninterest
income for the first quarter of 2011 totaled $16.3 million, an increase of $1.6
million, or 10.9% over the fourth quarter of 2010 and $2.4 million, or 16.9%
over the first quarter of 2010. The increase for both periods was due to a $3.2
million gain (reflected in other income) from the sale of all the Class B
shares of Visa stock that were obtained from the initial public offering of
Visa, Inc.

Compared to
the fourth quarter of 2010, a lower level of deposit fees of $0.5 million and
mortgage banking fees of $0.4 million partially offset the gain realized from
the sale of Visa stock. Compared to the first quarter of 2010, noninterest
income increased $2.4 million reflecting the $3.2 million gain on the sale of
Visa shares, a $0.3 million increase in bank card fees, and higher retail
brokerage fees of $0.2 million, partially offset by a $0.6 million decline in
deposit fees and a $0.7 million decline in merchant fees, which is included in
Other income in the table below.

Noninterest income
represented 41.54% of operating revenues in the first quarter of 2011 compared
to 37.69% in the fourth quarter of 2010 and 36.77% in the first quarter of
2010. The increase over both prior periods is due to the impact of the gain
realized from the sale of Visa stock.

Going forward,
our data processing fees will be reduced due to the loss of two client banks
that were taken into receivership by the FDIC during the later part of 2010.
The annualized impact on our noninterest income will approximate $1.2 million.
In addition, we expect our bank card fees to be negatively impacted once final
rules are completed regarding the regulation of interchange fees by the Federal
Reserve. We continue to monitor the proposed rulemaking regarding interchange
fees, but cannot ascertain its impact on our bank card fees at this time. We
discuss both of these matters in further detail below.

The table below reflects the
major components of noninterest income.

|                                     |  |                    |        |                    |   |                 |  |   |        | 
|------------------------------------ |  | ------------------ | ------ | ------------------ | - | --------------- |  | - | ------ | 
|                                     |  | Three Months Ended |       
|                                     |  |                    |       
|(Dollars in Thousands)               |  | March 31,
 2011    |        | December 31,
 2010 |   | March 31,
 2010 | 
|                                     |  |                    |        |                    |   |                 | 
|                                     |  |                    |        |                    |   |                 |  |   |        | 
|Noninterest Income:                  |  |                    |        |                    |   |                 |  |   |        | 
|Service Charges on Deposit
 Accounts |  | $                  | 5,983  |                    | $ | 6,434           |  | $ | 6,628  | 
|Data Processing Fees                 |  |                    | 974    |                    |   | 880             |  |   | 900    | 
|Asset Management Fees                |  |                    | 1,080  |                    |   | 1,095           |  |   | 1,020  | 
|Retail Brokerage Fees                |  |                    | 729    |                    |   | 738             |  |   | 565    | 
|Investment Security Gains            |  |                    |       |                    |   |                |  |   | 5      | 
|Mortgage Banking Fees                |  |                    | 617    |                    |   | 1,027           |  |   | 508    | 
|Interchange Fees (1)                 |  |                    | 1,360  |                    |   | 1,285           |  |   | 1,212  | 
|ATM/Debit Card Fees (1)              |  |                    | 1,136  |                    |   | 1,051           |  |   | 963    | 
|Gain on Sale of Visa Stock           |  |                    | 3,172  |                    |   |                |  |   |       | 
|Other                                |  |                    | 1,283  |                    |   | 2,225           |  |   | 2,166  | 
|                                     |  |                    |        |                    |   |                 |  |   |        | 
|                                     |  |                    |        |                    |   |                 |  |   |        | 
|Total Noninterest Income             |  | $                  | 16,334 |                    | $ | 14,735          |  | $ | 13,967 | 
|                                     |  |                    |        |                    |   |                 |  |   |        | 

(1) Together referred to as Bank
Card Fees

Significant
components of noninterest income are discussed in more detail below.

Service Charges on Deposit Accounts. Deposit service charge fees declined
$451,000, or 7.0%, from the fourth quarter of 2010 and decreased $645,000, or
9.7%, from the first quarter of 2010. The decline from the fourth quarter of
2010 reflects a two-day calendar variance in the number of processing days, and
a seasonal variance in the use of our overdraft product. The decline in deposit
fees compared to the first quarter of 2010 reflects a lower level of overdraft
fees due to reduced activity reflective of current economic conditions, a
higher level of consumer awareness that has both impacted consumer and business
spending habits, as well as the implementation of new rules under Regulation E,
which regulate our ability to post one-time debit card/ATM transactions for
clients who have not opted in to our overdraft protection service.

Retail Brokerage Fees. Fees from the sale of retail investment and
insurance products decreased $9,000, or 1.2%, from the fourth quarter of 2010
and increased $164,000, or 29.0%, over from first quarter of 2010. The variance
for each period reflects lower/higher trading activity by clients,
respectively. An increase in new business also contributed to the improvement
over the first quarter of 2010.

25

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Mortgage Banking Fees. Mortgage banking fees decreased $410,000,
or 39.9%, from the fourth quarter of 2010 due to lower loan production
attributable to a slowdown in new home purchase activity in our Tallahassee
market. Our loan pipeline declined during the first quarter of 2011 due to consumer uncertainty in our Tallahassee market
related to potential state job cuts.

Asset Management Fees. Fees from asset management activities
decreased $15,000, or 1.4%, from the fourth quarter of 2010 and increased
$60,000, or 5.9%, over the first quarter of 2010. The variance for both periods
reflects fluctuation in asset values for accounts under discretionary
management for which fees are based on the account value at quarter-end. At
March 31, 2011, assets under management totaled $732.3 million compared to
$744.9 million at December 31, 2010 and $712.8 million at March 31, 2010.

Bank Card Fees. Bank
card fees (including interchange fees and ATM/debit card fees) increased
$160,000, or 6.8%, over the fourth quarter of 2010 and $321,000, or 14.8%, over
the first quarter of 2010. The increase for both periods reflects higher card
utilization. An ATM fee increase in 2010 also contributed to the favorable
variance versus the first quarter of 2010.

Other. Other income increased by $2.2 million over the fourth quarter and
$2.3 million over the first quarter of 2010 attributable to the gain realized
from the sale of our Class B shares of Visa stock obtained from the 2008
initial public offering of Visa, Inc. Compared to the fourth quarter of 2010, a
reduction in gains from the sale of OREO properties of $0.3 million and decline
in miscellaneous recoveries $0.4 million partially offset the gain from the
sale of Visa stock. Compared to the first quarter of 2010, a $0.7 million
reduction in merchant fees partially offset the gain from the sale of Visa
stock. The decline in merchant fees reflects the migration of our last
remaining merchant to another processor  the decline in these revenues is
substantially offset by a reduction in processing costs, which is reflected as
interchange fees in noninterest expense.

Noninterest Expense

Noninterest expense for the
first quarter of 2011 totaled $33.3 million, a decrease of $0.2 million, or
0.6%, from the fourth quarter of 2010 and $0.1 million, or 0.1%, from the first
quarter of 2010. The decline compared to the fourth quarter of 2010 was
primarily due to a reduction in other expense of $1.3 million partially offset
by higher compensation expense of $1.2 million. Other expense declined due to
lower OREO expense of $1.0 million, advertising expense of $0.4 million,
professional fees of $0.3 million, and intangible amortization expense of $0.2
million. Partially offsetting these declines in other expense was an increase
in miscellaneous expense of $0.5 million. The unfavorable variance in
miscellaneous expense primarily reflects the recognition of a $0.6 million swap
liability related to the sale of our Visa stock and the prior quarter reversal
of our $0.8 million Visa litigation reserve, partially offset by a decline in other
losses of $0.6 million. One-time expenses in the fourth quarter of 2010
contributed to the variance.

Compared to the first
quarter of 2010, the $0.1 million, or 0.1% decrease in noninterest expense was
attributable to lower compensation expense of $0.2 million partially offset by
higher other expense of $0.1 million. Other expense increased due to higher
OREO expense of $0.8 million, insurance-other of $0.2 million, and
miscellaneous expense of $0.3 million. Partially offsetting these unfavorable
variances was lower expense for professional fees of $0.2 million, intangible
amortization of $0.4 million, and interchange fees of $0.6 million. The
unfavorable variance in miscellaneous expense primarily reflects the
recognition of a $0.6 million swap liability related to the sale of our Visa
stock, partially offset by other one-time expenses in the first quarter of 2010
related to a debit card promotion.

26

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The table
below reflects the major components of noninterest expense.

|                          |  |                    |        |                    |   |                 |  |   |        | 
|------------------------- |  | ------------------ | ------ | ------------------ | - | --------------- |  | - | ------ | 
|                          |  | Three Months Ended |       
|                          |  |                    |       
|(Dollars in Thousands)    |  | March 31,
 2011    |        | December 31,
 2010 |   | March 31,
 2010 | 
|                          |  |                    |        |                    |   |                 | 
|                          |  |                    |        |                    |   |                 |  |   |        | 
|Noninterest Expense:      |  |                    |        |                    |   |                 |  |   |        | 
|                          |  |                    |        |                    |   |                 |  |   |        | 
|Salaries                  |  | $                  | 12,936 |                    | $ | 12,223          |  | $ | 13,049 | 
|Associate Benefits        |  |                    | 3,641  |                    |   | 3,166           |  |   | 3,730  | 
|                          |  |                    |        |                    |   |                 |  |   |        | 
|Total Compensation        |  |                    | 16,577 |                    |   | 15,389          |  |   | 16,779 | 
|                          |  |                    |        |                    |   |                 |  |   |        | 
|Premises                  |  |                    | 2,396  |                    |   | 2,406           |  |   | 2,408  | 
|Equipment                 |  |                    | 2,226  |                    |   | 2,268           |  |   | 2,181  | 
|                          |  |                    |        |                    |   |                 |  |   |        | 
|Total Occupancy           |  |                    | 4,622  |                    |   | 4,674           |  |   | 4,589  | 
|                          |  |                    |        |                    |   |                 |  |   |        | 
|Legal Fees                |  |                    | 1,107  |                    |   | 1,101           |  |   | 1,046  | 
|Professional Fees         |  |                    | 845    |                    |   | 1,142           |  |   | 1,048  | 
|Processing Services       |  |                    | 950    |                    |   | 881             |  |   | 887    | 
|Advertising               |  |                    | 558    |                    |   | 971             |  |   | 678    | 
|Travel and Entertainment  |  |                    | 211    |                    |   | 239             |  |   | 232    | 
|Printing and Supplies     |  |                    | 348    |                    |   | 346             |  |   | 404    | 
|Telephone                 |  |                    | 441    |                    |   | 398             |  |   | 550    | 
|Postage                   |  |                    | 474    |                    |   | 317             |  |   | 447    | 
|Insurance - Other         |  |                    | 1,380  |                    |   | 1,557           |  |   | 1,188  | 
|Intangible Amortization   |  |                    | 353    |                    |   | 553             |  |   | 710    | 
|Interchange Fees          |  |                    | 1      |                    |   | 3               |  |   | 554    | 
|Courier Service           |  |                    | 120    |                    |   | 105             |  |   | 116    | 
|Other Real Estate Owned   |  |                    | 3,677  |                    |   | 4,709           |  |   | 2,825  | 
|Miscellaneous             |  |                    | 1,667  |                    |   | 1,155           |  |   | 1,331  | 
|                          |  |                    |        |                    |   |                 |  |   |        | 
|Total Other               |  |                    | 12,132 |                    |   | 13,477          |  |   | 12,016 | 
|                          |  |                    |        |                    |   |                 |  |   |        | 
|Total Noninterest Expense |  | $                  | 33,331 |                    | $ | 33,540          |  | $ | 33,384 | 
|                          |  |                    |        |                    |   |                 |  |   |        | 

Significant
components of noninterest expense are discussed in more detail below.

Compensation. Salaries and associate benefit expense increased $1.2 million, or
7.7%, over the fourth quarter of 2010 due to higher incentive expense (cash and
stock) of $0.7 million, payroll/unemployment taxes of $0.3 million, and pension
expense of $0.2 million. Incentive expense increased due to the resetting to
par of several performance incentive programs - this expense is then
subsequently adjusted throughout the year based on actual performance. The
increase in pension expense reflects utilization of a lower discount rate in
2011 reflective of lower long-term bond rates. The increase in taxes also
reflects the resetting of federal/state income taxes as well as higher
unemployment taxes reflecting a recent rate increase. Compared to the first
quarter of 2010, salaries and benefit expense decreased $0.2 million, or 1.2%,
due to lower employee salary expense of $0.4 million partially offset by higher
incentive expense of $0.2 million. The reduction in employee salary expense
reflects reduction in headcount. The increase in incentive expense is primarily
due to a higher level of cash incentive pay-outs.

Occupancy. Occupancy expense (including premises and equipment) totaled $4.6
million for the first quarter of 2011, a decrease of $0.1 million, or 1.1%,
from the fourth quarter of 2010 driven by a reduction in maintenance and repair
expense primarily reflecting a lower level of maintenance activity on
buildings. Compared to the first quarter of 2010, occupancy expense remained
flat as a decrease in expense for building furnishings was offset by higher
property tax expense, both related to the opening of our new trust building.

Other. Other
noninterest expense decreased $1.3 million, or 9.9%, from the fourth quarter of
2010 and increased $0.1 million, or 0.1%, over the first quarter of 2010. The
decrease compared to the fourth quarter of 2010 was due to lower OREO costs of
$1.0 million, advertising expense of $0.4 million, professional fees of $0.3
million, intangible amortization expense of $0.2 million, and other losses of
$0.6 million. Unfavorable variances related to the recognition of a $0.6
million swap liability related to the sale of our Visa stock and the prior
quarter reversal of our $0.8 million Visa litigation reserve partially offset
the aforementioned reductions. Lower carrying costs of $0.5 million and
valuation adjustments/losses of $0.5 million were the primary reason for the
decline in OREO expense. A lower level of advertising and public relations
activity drove the decline in advertising expense. Professional fees were lower
primarily due to nonrecurring expenses in the fourth quarter of 2010 for
consulting engagements. Intangible amortization expense declined due to the
full amortization of core deposit intangibles related to several past
acquisitions. Other losses declined due to a lower level of debit card losses.

27

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Compared to
the first quarter of 2010, the slight increase in other noninterest expense was
attributable to higher OREO expense of $0.8 million, insurance-other of $0.2
million, and recognition of a $0.6 million swap liability. These unfavorable
variances were partially offset by lower intangible amortization expense of
$0.4 million, professional fees of $0.2 million, advertising expense of $0.1
million, telephone expense of $0.1 million, and interchange fees of $0.6
million. An increase in losses from the sale of OREO properties drove the
increase in OREO expense. The increase in insurance-other primarily reflects a
higher rate paid for FDIC insurance premium. Intangible amortization expense
declined due to the full amortization of core deposit intangibles related to
several past acquisitions. Professional fees were lower primarily due to
one-time costs in the first quarter of 2010 for a consulting engagement as well
as a reduction in certain ongoing consulting/professional engagements. A lower
level of advertising and public relations activity drove the decline in
advertising expense. The decline in telephone expense reflects recent review
and renegotiation of our telecom provider contracts. The reduction in
interchange fees reflects the migration of our last remaining merchant to
another processor  the decline in these processing costs are more than offset
by a reduction in merchant fees, which are reflected in noninterest income.

Our operating efficiency
ratio (expressed as noninterest expense, excluding intangible amortization
expense and merger expenses, as a percent of the sum of taxable-equivalent net
interest income plus noninterest income) was 83.30% for the first quarter of
2011 compared to 83.75% for the fourth quarter of 2010 and 85.00% for the first
quarter of 2010. The reduction over comparative quarters primary reflects the
gain on sale of Visa shares.

Income Taxes

Income tax expense for the
first quarter of 2011 totaled $0.5 million, an increase of $0.7 million over
the fourth quarter of 2010, and $3.2 million over the first quarter of 2010. A
higher level of book operating profit at our bank subsidiary due to the gain on
sale of Visa stock in the first quarter of 2011 drove the higher level of tax
expense compared to prior periods. Reversal of a tax contingency during the
fourth quarter of 2010 also contributed to the variance.

FINANCIAL CONDITION

Average
earning assets were $2.279 billion for the first quarter of 2011, an increase
of $60.6 million, or 2.7% from the fourth quarter of 2010, and a decline of
$79.7 million, or 3.4%, from the first quarter of 2010. The higher level of
earning assets over the linked quarter was funded by growth in both deposits
and short-term borrowings. Quarter over quarter, average overnight funds grew
by $70.2 million, the investment portfolio grew $43.0 million and loans
declined $52.6 million, partially attributable to the resolution of problem
loans during the quarter.

Investment Securities

In the first
quarter of 2011, our average investment portfolio increased $43.0 million, or
16.4%, from the prior quarter and increased $136.7 million, or 81.1%, from the
first quarter of 2010. As a percentage of average earning assets, the
investment portfolio represented 13.4% in the first quarter of 2011, compared
to 11.8% in the prior quarter and 7.2% in the first quarter of 2010. The
increase in the average balance of the investment portfolio compared to the
linked quarter was primarily attributable to investments in US Treasury
securities largely used for pledging purposes, partially offset by municipal
bonds that matured and were not replaced due to limited availability of certain
high-quality investments. The increase in the investment portfolio compared to
the first quarter of 2010 was a result of an investment strategy which utilized
a portion of the Banks excess liquidity to attain a higher yield than
overnight funds. If appropriate, we will continue to look to deploy a portion
of the overnight funds position in the investment portfolio during the second
quarter.

The investment portfolio is
a significant component of our operations and, as such, it functions as a key
element of liquidity and asset/liability management. As of March 31, 2011, all
securities are classified as available-for-sale, which offers management full
flexibility in managing our liquidity and interest rate sensitivity without
adversely impacting our regulatory capital levels. It is neither managements
intent nor practice to participate in the trading of investment securities for
the purpose of recognizing gains and therefore we do not maintain a trading
portfolio. Securities in the available-for-sale portfolio are recorded at fair
value with unrealized gains and losses associated with these securities
recorded net of tax, in the accumulated other comprehensive income (loss)
component of shareowners equity.

At March 31, 2011, the
investment portfolio maintained a net pre-tax unrealized gain of $1.1 million
compared to $1.1 million and $1.0 million at December 31, 2010 and March 31,
2010, respectively. Although the bond market was volatile over the last quarter
and year, the short nature and mix of investments resulted in minimal change in
market value at quarter-end over prior periods. Approximately $52.6 million of
our investment securities have an unrealized loss totaling $0.3 million. All
positions have been in a loss position for less than 12 months. These positions
consist of municipal bonds pre-refunded with US Government securities, GNMA
mortgage-backed securities (MBS), which carry the full faith and credit of the
US Government, and US Treasury securities. These positions are not considered
impaired, and are expected to mature at par or better. Excluded from these
figures is a $0.6 million unrealized loss on a preferred stock investment held
at the holding company that maintained a zero book value as of March 31, 2011

28

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and December 31, 2010. No
additional impairment was recorded during the first quarter of 2011, but we
continue to closely monitor the fair value of this security as the issuer of
this security continues to experience negative operating trends.

Loans

Average loans
decreased $52.6 million, or 3.0%, from the fourth quarter of 2010 and $156.0
million, or 8.3%, from the comparable period in 2010. The loan portfolio
continues to be impacted by weak loan demand attributable to the lack of
consumer confidence and a sluggish economy. In addition to lower production,
normal amortization and payoffs, the resolution of problem loans has the effect
of lowering the loan portfolio as loans are either charged off or transferred
to the other real estate owned category.

During the
first quarter, problem loan resolutions accounted for $15.3 million, or 35%, of
a net reduction in total loans of $43.9 million, and over the last twelve
months, problem loan resolutions accounted for $70.4 million, or 51%, of the
net reduction of $136.8 million. The problem loan resolutions and reductions in
portfolio balances previously noted are based on as of balances, not
averages.

Our bankers continue to try
to reach clients who are interested in moving or expanding their banking
relationships. While we strive to identify opportunities to increase loans
outstanding and enhance the portfolios overall contribution to earnings, we
will only do so by adhering to sound lending principles applied in a prudent
and consistent manner. Thus, we will not relax our underwriting standards in
order to achieve designated growth goals and, where appropriate, have adjusted
our standards to reflect risks inherent in the current economic environment.

Nonperforming Assets

Nonperforming
assets (including nonaccrual loans, restructured loans (TDRs), and other real
estate owned (OREO)) totaled $153.3 million at the end of the first quarter
of 2011, an increase of $8.1 million over the fourth quarter of 2010 and a
reduction of $0.3 million from the first quarter of 2010. Compared to the
fourth quarter of 2010, nonaccrual loans increased $8.3 million due to a higher
level of defaults within our problem loan pool, a significant portion of which
was related to one borrowing relationship totaling $6.0 million. TDRs totaled
$24.0 million at the end of the first quarter, a $2.4 million increase over the
fourth quarter of 2010. The balance of OREO decreased $2.6 million from the
fourth quarter of 2010 reflective of an increased pace of property
dispositions. Compared to the first quarter of 2010, the slight decline in
nonperforming assets reflects a $2.4 million reduction in the nonaccrual loan
balance and a $6.8 million decline in TDRs, partially offset by an $8.9 million
increase in the OREO balance. Nonperforming assets represented 5.76% of total
assets at March 31, 2011 compared to 5.54% at December 31, 2010 and 5.66% at
March 31, 2010.

Allowance for Loan Losses

We maintain an allowance for
loan losses at a level sufficient to provide for the estimated loan losses
inherent in the loan portfolio as of the balance sheet date. Credit losses
arise from borrowers inability or unwillingness to repay, and from other risks
inherent in the lending process, including collateral risk, operations risk,
concentration risk and economic risk. All related risks of lending are
considered when assessing the adequacy of the loan loss reserve. The allowance
for loan losses is established through a provision charged to expense. Loans
are charged against the allowance when management believes collection of the
principal is unlikely. The allowance for loan losses is based on managements
judgment of overall loan quality. This is a significant estimate based on a
detailed analysis of the loan portfolio. The balance can and will change based
on changes in the assessment of the portfolios overall credit quality. We evaluate the adequacy of the
allowance for loan losses on a quarterly basis.

The allowance for loan
losses was $33.9 million at March 31, 2011 compared to $35.4 million at
December 31, 2010. The allowance for loan losses was 1.98% of outstanding loans
(net of overdrafts) and provided coverage of 35% of nonperforming loans at
March 31, 2011 compared to 2.01% and 41%, respectively, at December 31, 2010.
The decline in the allowance is due to a lower level of general reserves
reflective of improving credit metrics, including a reduction in our classified
loan balance, partially due to loan upgrades during the quarter, a lower
historical loss ratio and a reduction in past dues. It is managements opinion
that the allowance at March 31, 2011 is adequate to absorb losses inherent in
the loan portfolio at quarter-end.

Deposits

Average total
deposits were $2.125 billion for the first quarter, an increase of $9.5
million, or 0.5%, over the fourth quarter of 2010 and a decrease of $123.4
million, or 5.5%, from the first quarter of 2010. Deposit levels improved
slightly from the linked quarter primarily as a result of growth in public
funds, partially offset by declines in certificates of deposit and existing
clients moving from the Guarantee Now Account (GNA) product to repurchase
agreements. Public funds balances have increased as anticipated from the linked
quarter reflecting seasonality within this deposit category.

29

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Pursuant to
changes in the FDICs Temporary Liquidity Guarantee Program, our government
guaranteed NOW product was discontinued during the fourth quarter. As of
year-end 2010, approximately $95 million in balances from this product remained
in the NOW category, $95 million migrated to the noninterest bearing DDA
category, and $60 million moved into Repurchase Agreements.

We continue to pursue
prudent pricing discipline to manage the mix of our deposits. Therefore, we are
not attempting to compete with higher rate paying competitors for deposits. The
decrease from the first quarter of 2010 reflects a reduction in money market
accounts (primarily promotional deposits), deposits transferring from GNA to
repurchase agreements and lower certificates of deposit balances, partially
offset by higher public funds.

MARKET RISK AND INTEREST RATE
SENSITIVITY

Market Risk and Interest Rate
Sensitivity

Overview.Market risk management arises from changes in
interest rates, exchange rates, commodity prices, and equity prices. We have
risk management policies to monitor and limit exposure to market risk and do
not participate in activities that give rise to significant market risk
involving exchange rates, commodity prices, or equity prices. In asset and
liability management activities, our policies are designed to minimize
structural interest rate risk.

Interest Rate Risk Management.Our net income is largely dependent on net
interest income. Net interest income is susceptible to interest rate risk to
the degree that interest-bearing liabilities mature or re-price on a different
basis than interest-earning assets. When interest-bearing liabilities mature or
re-price more quickly than interest-earning assets in a given period, a
significant increase in market rates of interest could adversely affect net
interest income. Similarly, when interest-earning assets mature or re-price
more quickly than interest-bearing liabilities, falling interest rates could
result in a decrease in net interest income. Net interest income is also
affected by changes in the portion of interest-earning assets that are funded
by interest-bearing liabilities rather than by other sources of funds, such as
noninterest-bearing deposits and shareowners equity.

We have established a
comprehensive interest rate risk management policy, which is administered by
managements Asset/Liability Management Committee (ALCO). The policy
establishes limits of risk, which are quantitative measures of the percentage
change in net interest income (a measure of net interest income at risk) and
the fair value of equity capital (a measure of economic value of equity (EVE)
at risk) resulting from a hypothetical change in interest rates for maturities
from one day to 30 years. We measure the potential adverse impacts that
changing interest rates may have on our short-term earnings, long-term value,
and liquidity by employing simulation analysis through the use of computer
modeling. The simulation model captures optionality factors such as call
features and interest rate caps and floors imbedded in investment and loan
portfolio contracts. As with any method of gauging interest rate risk, there
are certain shortcomings inherent in the interest rate modeling methodology
used by us. When interest rates change, actual movements in different
categories of interest-earning assets and interest-bearing liabilities, loan
prepayments, and withdrawals of time and other deposits, may deviate
significantly from assumptions used in the model. Finally, the methodology does
not measure or reflect the impact that higher rates may have on adjustable-rate
loan clients ability to service their debts, or the impact of rate changes on
demand for loan, and deposit products.

We prepare a current base
case and three alternative simulations, at least once a quarter, and report the
analysis to the Board of Directors. In addition, more frequent forecasts may be
produced when interest rates are particularly uncertain or when other business
conditions so dictate.

Our interest rate risk
management goal is to avoid unacceptable variations in net interest income and
capital levels due to fluctuations in market rates. Management attempts to
achieve this goal by balancing, within policy limits, the volume of
floating-rate liabilities with a similar volume of floating-rate assets, by
keeping the average maturity of fixed-rate asset and liability contracts
reasonably matched, by maintaining a pool of administered core deposits, and by
adjusting pricing rates to market conditions on a continuing basis.

The balance sheet is subject
to testing for interest rate shock possibilities to indicate the inherent
interest rate risk. Average interest rates are shocked by plus or minus 100,
200, and 300 basis points (bp), although we may elect not to use particular
scenarios that we determined are impractical in a current rate environment. It
is managements goal to structure the balance sheet so that net interest
earnings at risk over a 12-month period and the economic value of equity at
risk do not exceed policy guidelines at the various interest rate shock levels.

We augment our quarterly
interest rate shock analysis with alternative external interest rate scenarios
on a monthly basis. These alternative interest rate scenarios may include
non-parallel rate ramps.

Analysis.Measures of net interest income at risk produced
by simulation analysis are indicators of an institutions short-term
performance in alternative rate environments. These measures are typically
based upon a relatively brief period, usually one year. They do not necessarily
indicate the long-term prospects or economic value of the institution.

30

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ESTIMATED
CHANGES IN NET INTEREST INCOME (1)

|                          |  |         |   |         |      |         |  |         |   |  |      |   | 
|------------------------- |  | ------- | - | ------- | ---- | ------- |  | ------- | - |  | ---- | - | 
|Changes in Interest Rates |  | +300 bp |   | +200 bp |      | +100 bp |  | -100 bp |  
|                          |  |         |   |         |      |         |  |         |  
|Policy Limit (±)          |  | 10.0    | % |         | 7.5  | %       |  | 5.0     | % |  | 5.0  | % | 
|March 31, 2011            |  | -8.2    | % |         | -4.1 | %       |  | -1.0    | % |  | -0.5 | % | 
|December 31, 2010         |  | -9.7    | % |         | -5.5 | %       |  | -1.9    | % |  | -1.0 | % | 

The Net
Interest Income at Risk position improved for the first quarter of 2011, when
compared to the prior quarter-end, for all rate scenarios. Our largest exposure
is at the +300 basis point (bp) level, with a measure of -8.2%, which is
still within our policy limit of -10.0%. This is an improvement over the prior
quarter reflecting higher levels of overnight funds, which re-price
immediately. All measures of net interest income at risk are within our
prescribed policy limits.

The measures
of equity value at risk indicate our ongoing economic value by considering the
effects of changes in interest rates on all of our cash flows, and discounting
the cash flows to estimate the present value of assets and liabilities. The
difference between these discounted values of the assets and liabilities is the
economic value of equity, which, in theory, approximates the fair value of our
net assets.

ESTIMATED
CHANGES IN ECONOMIC VALUE OF EQUITY (1)

|                          |  |         |   |         |      |         |  |         |   |  |      |   | 
|------------------------- |  | ------- | - | ------- | ---- | ------- |  | ------- | - |  | ---- | - | 
|Changes in Interest Rates |  | +300 bp |   | +200 bp |      | +100 bp |  | -100 bp |  
|                          |  |         |   |         |      |         |  |         |  
|Policy Limit (±)          |  | 12.5    | % |         | 10.0 | %       |  | 7.5     | % |  | 7.5  | % | 
|March 31, 2011            |  | -2.5    | % |         | 1.5  | %       |  | 3.0     | % |  | -6.3 | % | 
|December 31, 2010         |  | -1.2    | % |         | 2.4  | %       |  | 3.5     | % |  | -6.6 | % | 

Our risk
profile, as measured by EVE, declined for the first quarter of 2011 when
compared to the linked quarter-end with the exception of the down 100 bp
scenario, which reported a favorable slight increase. In the rising rate
scenarios, our largest exposure is at the up 300 bp scenario, with a measure of
-2.5%, which is still within our policy limit of -12.5%. This is a decline from
the prior quarter primarily attributable to higher Treasury and FHLB curves,
reflecting declines in the market value of loans and increases in the market
values of deposits and FHLB borrowings, respectively. All measures of economic
value of equity are within our prescribed policy limits.

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

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

In general
terms, liquidity is a measurement of our ability to meet our cash needs. Our
objective in managing our liquidity is to maintain our ability to meet loan
commitments, purchase securities or repay deposits and other liabilities in
accordance with their terms, without an adverse impact on our current or future
earnings. Our liquidity strategy is guided by policies that are formulated and
monitored by our ALCO and senior management, and which take into account the
marketability of assets, the sources and stability of funding and the level of
unfunded commitments. We regularly evaluate all of our various funding sources
with an emphasis on accessibility, stability, reliability and
cost-effectiveness. Our principal source of funding has been our client
deposits, supplemented by our short-term and long-term borrowings, primarily
from securities sold under repurchase agreements, federal funds purchased and
FHLB borrowings. We believe that the cash generated from operations, our
borrowing capacity and our access to capital resources are sufficient to meet
our future operating capital and funding requirements.

Overall, we
have the ability to generate $634.5 million in additional liquidity through all
of our available resources. In addition to primary borrowing outlets mentioned
above, we also have the ability to generate liquidity by borrowing from the
Federal Reserve Discount Window and through brokered deposits. Management
recognizes the importance of maintaining liquidity and has developed a
Contingency Liquidity Plan, which addresses various liquidity stress levels and
our response and action based on the level of severity. We periodically test
our credit facilities for access to the funds, but also understand that as the
severity of the liquidity level increases that certain credit facilities may no
longer be available. The liquidity available to us is considered sufficient to
meet the ongoing needs.

31

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We view our
investment portfolio as a liquidity source and have the option to pledge the
portfolio as collateral for borrowings or deposits, and/or sell selected
securities. The portfolio consists of debt issued by the U.S. Treasury, U.S.
governmental agencies, and municipal governments. The weighted average life of
the portfolio is approximately 1.7 years and as of quarter-end had a net
unrealized pre-tax gain of $1.1 million.

Our average
liquidity (defined as funds sold plus interest bearing deposits with other
banks less funds purchased) of $238.1 million during the first quarter of 2011
compared to an average net overnight funds sold
position of $164.9 million in the prior quarter and an average overnight funds soldposition of $297.0 million in the
first quarter of 2010. The higher balance when compared to the linked quarter
primarily reflects the increase in deposits mentioned above, growth in
short-term borrowings and declines in the loan portfolio, partially offset by a
higher level of investment securities. The unfavorable variance as compared to
first quarter 2010 is primarily attributable to declines in deposits and the
deployment of funds to the investment portfolio, partially offset by a net
reduction in loans.

Capital
expenditures are expected to approximate $4.0 million over the next 12 months,
which consist primarily of office remodeling, office equipment and furniture,
and technology purchases. Management believes that these capital expenditures
will be funded with existing resources without impairing our ability to meet
our on-going obligations.

Borrowings

At March 31,
2011, advances from the FHLB consisted of $60.1 million in outstanding debt
consisting of 50 notes. During the first quarter of 2011, the Bank made FHLB
advance payments totaling approximately $0.8 million and obtained one new FHLB
advance totaling $0.8 million. The FHLB notes are collateralized by a blanket
floating lien on all of our 1-4 family residential mortgage loans, commercial
real estate mortgage loans, and home equity mortgage loans.

We have issued
two junior subordinated deferrable interest notes to wholly owned Delaware
statutory trusts. The first note for $30.9 million was issued to CCBG Capital
Trust I in November 2004. The second note for $32.0 million was issued to CCBG
Capital Trust II in May 2005. The interest payments for the CCBG Capital Trust
I borrowing are due quarterly at a variable rate of LIBOR plus a margin of
1.90%. The rate for the first quarter was 2.20%. This note matures on December
31, 2034. The interest payment for the CCBG Capital Trust II borrowing adjusts
quarterly to a variable rate of LIBOR plus a margin of 1.80%. The rate for the
first quarter was 2.10%. This note matures on June 15, 2035. The proceeds of
these borrowings were used to partially fund acquisitions.

In accordance
with certain Federal Reserve Resolutions (discussed in further detail within
our 2010 Form 10-K), CCBG must receive approval from the Federal Reserve prior
to incurring new debt, refinancing existing debt, or making interest payments
on its trust preferred securities. Under the terms of each trust preferred
securities note, in the event of default or if we elect to defer interest on
the note, we may not, with certain exceptions, declare or pay dividends or make
distributions on our capital stock or purchase or acquire any of our capital
stock.

Capital

Equity capital
was $259.3 million as of March 31, 2011, compared to $259.0 million as of
December 31, 2010. Our leverage ratio was 9.74% and 10.10%, respectively, and
our tangible capital ratio was 6.73% and 6.82%, respectively, for the same
periods. Our risk-adjusted capital ratio of 14.82% at March 31, 2011, exceeds
the 10% threshold to be designated as well-capitalized under the risk-based
regulatory guidelines. Management believes its strong capital base has offered
protection during the course of the current economic downturn. In addition, to
date we have not initiated a capital raise and were not a TARP participant.

During the
first three months of 2011, shareowners equity increased $0.3 million, or
0.5%, on an annualized basis. During this same period, shareowners equity was
positively impacted by net income of $1.3 million, the issuance of stock
totaling approximately $0.4 million, accrual for performance shares of
approximately $0.2 million, and a change in our net unrealized gain on
securities of $0.1 million. Dividends paid reduced shareowners equity by
approximately $1.7 million.

At March 31,
2011, our common stock had a book value of $15.13 per diluted share compared to
$15.15 at December 31, 2010. Book value is impacted by changes in the amount of
our net unrealized gain or loss on investment securities available-for-sale and
changes to the amount of our unfunded pension liability both of which are
recorded through other comprehensive income. At March 31, 2011, the net
unrealized gain on investment securities available for sale was $0.7 million
and the amount of our unfunded pension liability was $16.4 million.

State and
federal regulations place certain restrictions on the payment of dividends by
both CCBG and the Bank. The Banks aggregate net profits for the past two years
are significantly less than the dividends declared and paid to CCBG over that
same period. In addition, in accordance with the Federal Reserve Resolutions
(discussed in further detail within our 2010 Form 10-K), the Bank must seek
approval from the Federal Reserve prior to declaring or paying a dividend. As a
result, the Bank must obtain approval from its regulators to issue and declare
any further dividends to CCBG. The Bank may not receive the required approvals.
As of March 31, 2011, we believe we have sufficient cash to fund shareowner
dividends in 2011 should the Board choose to declare and pay a

32

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quarterly
dividend during the year. Even if we have sufficient cash to pay dividends, we
must seek approval from the Federal Reserve to pay dividends to our shareowners
and may not receive the required approvals. We will continue to evaluate our
dividend quarterly and consult with our regulators concerning matters relating
to our overall dividend policy.

OFF-BALANCE SHEET ARRANGEMENTS

We do not
currently engage in the use of derivative instruments to hedge interest rate
risks. However, we are a party to financial instruments with off-balance sheet
risks in the normal course of business to meet the financing needs of our
clients.

At March 31,
2011, we had $312.9 million in commitments to extend credit and $11.6 million
in standby letters of credit. Commitments to extend credit are agreements to
lend to a client so long as there is no violation of any condition established
in the contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. Standby letters
of credit are conditional commitments issued by us to guarantee the performance
of a client to a third party. We use the same credit policies in establishing
commitments and issuing letters of credit as we do for on-balance sheet
instruments.

If commitments
arising from these financial instruments continue to require funding at
historical levels, management does not anticipate that such funding will
adversely impact its ability to meet on-going obligations. In the event these
commitments require funding in excess of historical levels, management believes
current liquidity, advances available from the FHLB and the Federal Reserve,
and investment security maturities provide a sufficient source of funds to meet
these commitments.

33

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CRITICAL ACCOUNTING POLICIES

The
consolidated financial statements and accompanying Notes to Consolidated
Financial Statements are prepared in accordance with accounting principles
generally accepted in the United States of America, which require us to make
various estimates and assumptions (see Note 1 in the Notes to Consolidated
Financial Statements). We believe that, of our significant accounting policies,
the following may involve a higher degree of judgment and complexity.

Allowance for Loan Losses.
The allowance for loan losses is established through a charge to the provision
for loan losses. Provisions are made to reserve for estimated losses in loan
balances. The allowance for loan losses is a significant estimate and is
evaluated quarterly by us for adequacy. The use of different estimates or
assumptions could produce a different required allowance, and thereby a larger
or smaller provision recognized as expense in any given reporting period. A
further discussion of the allowance for loan losses can be found in the section
entitled Allowance for Loan Losses and Note 1 in the Notes to Consolidated
Financial Statements in our 2010 Form 10-K.

Intangible Assets.
Intangible assets consist primarily of goodwill, core deposit assets, and other
identifiable intangibles that were recognized in connection with various
acquisitions. Goodwill represents the excess of the cost of acquired businesses
over the fair market value of their identifiable net assets. We perform an
impairment review on an annual basis during the fourth quarter or more
frequently if events or changes in circumstances indicate that the carrying
value may not be recoverable. Impairment testing requires management to make
significant judgments and estimates relating to the fair value of its reporting
unit. Significant changes to our estimates, when and if they occur, could
result in a non-cash impairment charge and thus have a material impact on our
operating results for any particular reporting period. A goodwill impairment
charge would not adversely affect the calculation of our risk based and
tangible capital ratios. Our annual review for impairment determined that no
impairment existed at December 31, 2010. Because the book value of our equity
exceeded our market capitalization as of March 31, 2011, we considered the
guidelines set forth in ASC Topic 350 to discern whether further testing for
potential impairment was needed. Based on this assessment, we concluded that no
further testing for impairment was needed as of March 31, 2011.

Core deposit
assets represent the premium we paid for core deposits. Core deposit
intangibles are amortized on the straight-line method over various periods
ranging from 5-10 years. Generally, core deposits refer to nonpublic,
non-maturing deposits including noninterest-bearing deposits, NOW, money market
and savings. We make certain estimates relating to the useful life of these
assets, and rate of run-off based on the nature of the specific assets and the
client bases acquired. If there is a reason to believe there has been a
permanent loss in value, management will assess these assets for impairment.
Any changes in the original estimates may materially affect our operating
results.

Pension Assumptions.
We have a defined benefit pension plan for the benefit of substantially all of
our associates. Our funding policy with respect to the pension plan is to
contribute amounts to the plan sufficient to meet minimum funding requirements
as set by law. Pension expense, reflected in the Consolidated Statements of
Income in noninterest expense as Salaries and Associate Benefits, is
determined by an external actuarial valuation based on assumptions that are
evaluated annually as of December 31, the measurement date for the pension
obligation. The Consolidated Statements of Financial Condition reflect an
accrued pension benefit cost due to funding levels and unrecognized actuarial
amounts. The most significant assumptions used in calculating the pension
obligation are the weighted-average discount rate used to determine the present
value of the pension obligation, the weighted-average expected long-term rate
of return on plan assets, and the assumed rate of annual compensation
increases. These assumptions are re-evaluated annually with the external
actuaries, taking into consideration both current market conditions and
anticipated long-term market conditions.

The
weighted-average discount rate is determined by matching the anticipated
Retirement Plan cash flows to a long-term corporate Aa-rated bond index and
solving for the underlying rate of return, which investing in such securities
would generate. This methodology is applied consistently from year-to-year. We
anticipate using a 5.55% discount rate in 2011.

The weighted-average
expected long-term rate of return on plan assets is determined based on the
current and anticipated future mix of assets in the plan. The assets currently
consist of equity securities, U.S. Government and Government Agency debt
securities, and other securities (typically temporary liquid funds awaiting
investment). We anticipate using a rate of return on plan assets of 8.0% for
2011.

The assumed
rate of annual compensation increases is based on expected trends in salaries
and the employee base. We anticipate using a compensation increase of 4.25% for
2011 reflecting current market trends.

Information on
components of our net periodic benefit cost is provided in Note 8 of the Notes
to Consolidated Financial Statements included herein and Note 12 of the Notes
to Consolidated Financial Statements in our 2010 Form 10-K.

34

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TABLE I
AVERAGE BALANCES & INTEREST RATES

|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|-------------------------------------------------- |  | ------------------ | --------- | ------------------ | - | --------------- |  | ------- | ---- | -------- | - | --------- | - | ------- | ------ | -------- |  | ---- | - | - | --------- | - | - | ------ |  |  | ---- | -
|                                                   |  | Three Months Ended |          
|                                                   |  |                    |          
|(Taxable Equivalent Basis - Dollars in
 Thousands) |  | March
 31, 2011    |           | December
 31, 2010 |   | March
 31, 2010 | 
|                                                   |  |                    |           |                    |   |                 | 
|                                                   |  | Balance            |           | Interest           |   | Rate            |  | Balance |      | Interest |   | Rate      |   | Balance |        | Interest |  | Rate |  
|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |  
|ASSETS                                             |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|Loans, Net of Unearned Interest(1)(2)              |  | $                  | 1,730,330 |                    | $ | 24,101          |  |         | 5.65 | %        | $ | 1,782,916 |   | $       | 25,799 |          |  | 5.74 | % | $ | 1,886,367 |   | $ | 27,180 |  |  | 5.84 | %
|Taxable Investment Securities                      |  |                    | 231,153   |                    |   | 851             |  |         | 1.48 |          |   | 178,926   |   |         | 799    |          |  | 1.78 |   |   | 71,325    |   |   | 500    |  |  | 2.81 |  
|Tax-Exempt Investment Securities(2)                |  |                    | 74,226    |                    |   | 337             |  |         | 1.81 |          |   | 83,469    |   |         | 434    |          |  | 2.08 |   |   | 97,316    |   |   | 753    |  |  | 3.10 |  
|Funds Sold                                         |  |                    | 242,893   |                    |   | 171             |  |         | 0.28 |          |   | 172,738   |   |         | 95     |          |  | 0.24 |   |   | 303,280   |   |   | 172    |  |  | 0.23 |  
|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|Total Earning Assets                               |  |                    | 2,278,602 |                    |   | 25,460          |  |         | 4.53 | %        |   | 2,218,049 |   |         | 27,127 |          |  | 4.85 | % |   | 2,358,288 |   |   | 28,605 |  |  | 4.92 | %
|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|Cash and Due From Banks                            |  |                    | 50,942    |                    |   |                 |  |         |      |          |   | 51,030    |   |         |        |          |  |      |   |   | 54,873    |   |   |        |  |  |      |  
|Allowance for Loan Losses                          |  |                    | (34,822   | )                  |   |                 |  |         |      |          |   | (37,713   | ) |         |        |          |  |      |   |   | (44,584   | ) |   |        |  |  |      |  
|Other Assets                                       |  |                    | 348,295   |                    |   |                 |  |         |      |          |   | 345,427   |   |         |        |          |  |      |   |   | 329,842   |   |   |        |  |  |      |  
|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|TOTAL ASSETS                                       |  | $                  | 2,643,017 |                    |   |                 |  |         |      |          | $ | 2,576,793 |   |         |        |          |  |      |   | $ | 2,698,419 |   |   |        |  |  |      |  
|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|LIABILITIES                                        |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|NOW Accounts                                       |  | $                  | 786,939   |                    | $ | 261             |  |         | 0.13 | %        | $ | 837,625   |   | $       | 296    |          |  | 0.14 | % | $ | 867,004   |   | $ | 384    |  |  | 0.18 | %
|Money Market Accounts                              |  |                    | 278,562   |                    |   | 131             |  |         | 0.19 |          |   | 282,887   |   |         | 134    |          |  | 0.19 |   |   | 374,161   |   |   | 689    |  |  | 0.75 |  
|Savings Accounts                                   |  |                    | 144,623   |                    |   | 18              |  |         | 0.05 |          |   | 136,276   |   |         | 16     |          |  | 0.05 |   |   | 126,352   |   |   | 15     |  |  | 0.05 |  
|Other Time Deposits                                |  |                    | 360,575   |                    |   | 848             |  |         | 0.95 |          |   | 382,870   |   |         | 1,078  |          |  | 1.12 |   |   | 438,112   |   |   | 1,850  |  |  | 1.71 |  
|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|Total Interest Bearing Deposits                    |  |                    | 1,570,699 |                    |   | 1,258           |  |         | 0.32 |          |   | 1,639,658 |   |         | 1,524  |          |  | 0.37 |   |   | 1,805,629 |   |   | 2,938  |  |  | 0.66 |  
|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|Short-Term Borrowings                              |  |                    | 87,267    |                    |   | 111             |  |         | 0.52 |          |   | 34,706    |   |         | 99     |          |  | 1.14 |   |   | 30,673    |   |   | 17     |  |  | 0.22 |  
|Subordinated Notes Payable                         |  |                    | 62,887    |                    |   | 340             |  |         | 2.16 |          |   | 62,887    |   |         | 342    |          |  | 2.13 |   |   | 62,887    |   |   | 651    |  |  | 4.14 |  
|Other Long-Term Borrowings                         |  |                    | 50,345    |                    |   | 494             |  |         | 3.98 |          |   | 50,097    |   |         | 508    |          |  | 4.02 |   |   | 49,981    |   |   | 526    |  |  | 4.27 |  
|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|Total Interest Bearing Liabilities                 |  |                    | 1,771,198 |                    |   | 2,203           |  |         | 0.50 | %        |   | 1,787,348 |   |         | 2,473  |          |  | 0.55 | % |   | 1,949,170 |   |   | 4,132  |  |  | 0.86 | %
|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|Noninterest Bearing Deposits                       |  |                    | 554,680   |                    |   |                 |  |         |      |          |   | 476,209   |   |         |        |          |  |      |   |   | 443,131   |   |   |        |  |  |      |  
|Other Liabilities                                  |  |                    | 55,536    |                    |   |                 |  |         |      |          |   | 50,614    |   |         |        |          |  |      |   |   | 37,563    |   |   |        |  |  |      |  
|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|TOTAL LIABILITIES                                  |  |                    | 2,381,414 |                    |   |                 |  |         |      |          |   | 2,314,171 |   |         |        |          |  |      |   |   | 2,429,864 |   |   |        |  |  |      |  
|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|SHAREOWNERS EQUITY                                |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|TOTAL SHAREOWNERS EQUITY                          |  |                    | 261,603   |                    |   |                 |  |         |      |          |   | 262,622   |   |         |        |          |  |      |   |   | 268,555   |   |   |        |  |  |      |  
|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|TOTAL LIABILITIES & EQUITY                         |  | $                  | 2,643,017 |                    |   |                 |  |         |      |          | $ | 2,576,793 |   |         |        |          |  |      |   | $ | 2,698,419 |   |   |        |  |  |      |  
|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|Interest Rate Spread                               |  |                    |           |                    |   |                 |  |         | 4.03 | %        |   |           |   |         |        |          |  | 4.30 | % |   |           |   |   |        |  |  | 4.06 | %
|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|Net Interest Income                                |  |                    |           |                    | $ | 23,257          |  |         |      |          |   |           |   | $       | 24,654 |          |  |      |   |   |           |   | $ | 24,473 |  |  |      |  
|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  
|Net Interest Margin(3)                             |  |                    |           |                    |   |                 |  |         | 4.14 | %        |   |           |   |         |        |          |  | 4.41 | % |   |           |   |   |        |  |  | 4.21 | %
|                                                   |  |                    |           |                    |   |                 |  |         |      |          |   |           |   |         |        |          |  |      |   |   |           |   |   |        |  |  |      |  

|    |                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Average balances include nonaccrual loans. Interest income
 includes fees on loans of $366,000 and $363,000, for the three months ended
 March 31, 2011 and 2010.
|   
|(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.                                                                                       

35

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

See Market Risk and
Interest Rate Sensitivity in Managements Discussion and Analysis of Financial
Condition and Results of Operations, above, which is incorporated herein by
reference. Management has determined that no additional disclosures are
necessary to assess changes in information about market risk that have occurred
since December 31, 2010.

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

Evaluation of Disclosure Controls and Procedures

As of March 31, 2011, the
end of the period covered by this Form 10-Q, our management, including our
Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rule
13a-15(e) under the Securities Exchange Act of 1934). Based upon that
evaluation, our Chief Executive Officer and Chief Financial Officer each
concluded that as of March 31, 2011, the end of the period covered by this Form
10-Q, we maintained effective disclosure controls and procedures.

Changes in Internal Control over Financial Reporting

Our management, including
the Chief Executive Officer and Chief Financial Officer, has reviewed our
internal control over financial reporting (as defined in Rule 13a-15(f) under
the Securities Exchange Act of 1934). There have been no significant changes in
our internal control over financial reporting during our most recently
completed fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

|         |                   
|-------- | ------------------
|PART II. | OTHER
 INFORMATION
|         |                   
|Item 1.  | Legal Proceedings 

We are party
to lawsuits and claims arising out of the normal course of business. In
managements opinion, there are no known pending claims or litigation, the
outcome of which would, individually or in the aggregate, have a material
effect on our consolidated results of operations, financial position, or cash
flows.

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

In addition to the other
information set forth in this Quarterly Report, you should carefully consider
the factors discussed in Part I, Item 1A. Risk Factors in our 2010 Form 10-K,
as updated in our subsequent quarterly reports. The risks described in our 2010
Form 10-K are not the only risks facing us. Additional risks and uncertainties
not currently known to us or that we currently deem to be immaterial also may
materially adversely affect our business, financial condition and/or operating
results.

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

None.

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

None.

|        |                     
|------- | --------------------
|Item 4. | Removed and Reserved
|        |                     
|Item 5. | Other Information   

None.

36

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

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

|     |                                                                                                                                                                                                  
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 | Certification of William
 G. Smith, Jr., Chairman, President and Chief Executive Officer of Capital
 City Bank Group, Inc., Pursuant to Rule 13a-14(a) of the Securities Exchange
 Act of 1934.  
|     |                                                                                                                                                                                                  
|31.2 | Certification of J.
 Kimbrough Davis, Executive Vice President and Chief Financial Officer of
 Capital City Bank Group, Inc., Pursuant to Rule 13a-14(a) of the Securities
 Exchange Act of 1934.
|     |                                                                                                                                                                                                  
|32.1 | Certification of William
 G. Smith, Jr., Chairman, President and Chief Executive Officer of Capital
 City Bank Group, Inc., Pursuant to 18 U.S.C. Section 1350.                                  
|     |                                                                                                                                                                                                  
|32.2 | Certification of J. Kimbrough
 Davis, Executive Vice President and Chief Financial Officer of Capital City
 Bank Group, Inc., Pursuant to 18 U.S.C. Section 1350.                                

37

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SIGNATURES

Pursuant to
the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this Report to be signed on its behalf by the undersigned Chief
Financial Officer hereunto duly authorized.

|                                                                                                                  | 
|----------------------------------------------------------------------------------------------------------------- | 
|CAPITAL CITY
 BANK GROUP, INC.                                                                                   
|(Registrant)                                                                                                     
|                                                                                                                 
|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: May 9,
 2011                                                                                               

38

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