----

----

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

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

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

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

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

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

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

----

TABLE 

| PART      I – Financial Information |                                                                                                       | Page   |
|-------------------------------------------|------------------------------------------------------------------------------------------------------------|--------|
|                                      |
| Item      1.                              | Consolidated      Financial Statements (Unaudited)                                                         |   |
|                                      | Consolidated Statements of Financial Condition – June 30, 2008      and December 31, 2007            | 4      |
|                                      | Consolidated Statements of Income – Three and Six Months Ended      June 30, 2008 and 2007           | 5      |
|                                      | Consolidated Statement of Changes in Shareowners’ Equity – Six      Months Ended June 30, 2008 | 6      |
|                                      | Consolidated Statements of Cash Flow – Six Months Ended June      30, 2008 and 2007                  | 7      |
|                                      | Notes to Consolidated Financial    Statements                                                              | 8      |
|                                      |                                                                                                       |   |
| Item      2.                              | Management's Discussion and Analysis of Financial Condition      and Results of Operations                 | 17     |
|                                      |                                                                                                       |   |
| Item      3.                              | Quantitative and Qualitative Disclosure About Market      Risk                                             | 34     |
|                                      |                                                                                                       |   |
| Item      4.                              | Controls and Procedures                                                                                    | 34     |
|                                      |                                                                                                       |   |
| PART      II – Other Information    |                                                                                                       |   |
|                                      |
| Item      1.                              | Legal Proceedings                                                                                          | 34     |
|                                      |                                                                                                       |   |
| Item      1A.                             | Risk Factors                                                                                               | 34     |
|                                      |                                                                                                       |   |
| Item      2.                              | Unregistered Sales of Equity Securities and Use of      Proceeds                                           | 35     |
|                                      |                                                                                                       |   |
| Item      3.                              | Defaults Upon Senior Securities                                                                            | 35     |
|                                      |                                                                                                       |   |
| Item      4.                              | Submission of Matters to a Vote of Security      Holders                                                   | 35     |
|                                      |                                                                                                       |   |
| Item      5.                              | Other Information                                                                                          | 36     |
|                                      |                                                                                                       |   |
| Item      6.                              | Exhibits                                                                                                   | 36     |
|                                      |                                                                                                       |   |
| Signatures                                |                                                                                                       | 37     |

----

(table of contents)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

----

(table of contents)

PART

| (Dollars      In Thousands, Except Share Data)                                                                                                                                          |   | June      30, 2008 |      |   | December      31, 2007 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------|--------|------------------------|--------|
| ASSETS                                                                                                                                                                                  |   |               |      |   |                   |   |
| Cash      and Due From Banks                                                                                                                                                            |   | $                  | 108,672   |   |                   | $      | 93,437 |   |
| Funds      Sold and Interest Bearing Deposits                                                                                                                                           |   |               | 192,786   |   |                   |   | 166,260 |   |
| Total      Cash and Cash Equivalents                                                                                                                                                    |   |               | 301,458   |   |                   |   | 259,697 |   |
|                                                                                                                                                                                    |   |               |      |   |                   |   |   |   |
| Investment      Securities, Available-for-Sale                                                                                                                                          |   |               | 185,971   |   |                   |   | 190,719 |   |
|                                                                                                                                                                                    |   |               |      |   |                   |   |   |   |
| Loans,      Net of Unearned Interest                                                                                                                                                    |   |               | 1,916,815 |   |                   |   | 1,915,850 |   |
| Allowance      for Loan Losses                                                                                                                                                          |   |               | (22,518   | )      |                   |   | (18,066 | ) |
| Loans,      Net                                                                                                                                                                         |   |               | 1,894,297 |   |                   |   | 1,897,784 |   |
|                                                                                                                                                                                    |   |               |      |   |                   |   |   |   |
| Premises      and Equipment, Net                                                                                                                                                        |   |               | 102,559   |   |                   |   | 98,612 |   |
| Goodwill                                                                                                                                                                                |   |               | 84,811    |   |                   |   | 84,811 |   |
| Other      Intangible Assets                                                                                                                                                            |   |               | 10,840    |   |                   |   | 13,757 |   |
| Other      Assets                                                                                                                                                                       |   |               | 69,479    |   |                   |   | 70,947 |   |
| Total      Assets                                                                                                                                                                       |   | $                  | 2,649,415 |   |                   | $      | 2,616,327 |   |
|                                                                                                                                                                                    |   |               |      |   |                   |   |   |   |
| LIABILITIES                                                                                                                                                                             |   |               |      |   |                   |   |   |   |
| Deposits:                                                                                                                                                                               |   |               |      |   |                   |   |   |   |
| Noninterest      Bearing Deposits                                                                                                                                                       |   | $                  | 416,992   |   |                   | $      | 432,659 |   |
| Interest      Bearing Deposits                                                                                                                                                          |   |               | 1,745,934 |   |                   |   | 1,709,685 |   |
| Total      Deposits                                                                                                                                                                     |   |               | 2,162,926 |   |                   |   | 2,142,344 |   |
|                                                                                                                                                                                    |   |               |      |   |                   |   |   |   |
| Short-Term      Borrowings                                                                                                                                                              |   |               | 51,783    |   |                   |   | 53,131 |   |
| Subordinated      Notes Payable                                                                                                                                                         |   |               | 62,887    |   |                   |   | 62,887 |   |
| Other      Long-Term Borrowings                                                                                                                                                         |   |               | 36,857    |   |                   |   | 26,731 |   |
| Other      Liabilities                                                                                                                                                                  |   |               | 38,382    |   |                   |   | 38,559 |   |
| Total      Liabilities                                                                                                                                                                  |   |               | 2,352,835 |   |                   |   | 2,323,652 |   |
|                                                                                                                                                                                    |   |               |      |   |                   |   |   |   |
| SHAREOWNERS'      EQUITY                                                                                                                                                                |   |               |      |   |                   |   |   |   |
| Preferred      Stock, $.01 par value, 3,000,000 shares authorized;no      shares outstanding                                                                                            |   |               | -         |   |                   |   | - |   |
| Common      Stock, $.01 par value, 90,000,000 shares authorized; 17,111,439 and      17,182,553 shares issued and outstanding at June 30, 2008 and December 31,      2007, respectively |   |               | 171       |   |                   |   | 172 |   |
| Additional      Paid-In Capital                                                                                                                                                         |   |               | 36,382    |   |                   |   | 38,243 |   |
| Retained      Earnings                                                                                                                                                                  |   |               | 266,171   |   |                   |   | 260,325 |   |
| Accumulated      Other Comprehensive Loss, Net of Tax                                                                                                                                   |   |               | (6,144    | )      |                   |   | (6,065 | ) |
| Total      Shareowners' Equity                                                                                                                                                          |   |               | 296,580   |   |                   |   | 292,675 |   |
| Total      Liabilities and Shareowners' Equity                                                                                                                                          |   | $                  | 2,649,415 |   |                   | $      | 2,616,327 |   |

----

(table of contents)

FOR 

|                                                          |   | Three      Months Ended |       |   | Six      Months Ended |   |       |
|---------------------------------------------------------------|--------|-------------------------|------------|--------|-----------------------|--------|------------|
| (Dollars      in Thousands, Except Per Share Data)            |   | 2008                    |       |   | 2007                  |   |       | 2008 |   |   | 2007 |   |
| INTEREST      INCOME                                          |   |                    |       |   |                  |   |       |   |   |   |   |   |
| Interest      and Fees on Loans                               |   | $                       | 33,422     |   |                  | $      | 39,092     |   |   | $ | 68,677 |   |   | $ | 78,145 |   |
| Investment      Securities:                                   |   |                    |       |   |                  |   |       |   |   |   |   |   |   |   |   |   |
| U.S.      Treasury                                            |   |                    | 182        |   |                  |   | 142        |   |   |   | 349 |   |   |   | 283 |   |
| U.S.      Govt. Agencies                                      |   |                    | 665        |   |                  |   | 916        |   |   |   | 1,426 |   |   |   | 1,856 |   |
| States      and Political Subdivisions                        |   |                    | 781        |   |                  |   | 708        |   |   |   | 1,567 |   |   |   | 1,384 |   |
| Other      Securities                                         |   |                    | 182        |   |                  |   | 177        |   |   |   | 361 |   |   |   | 360 |   |
| Funds      Sold                                               |   |                    | 1,028      |   |                  |   | 689        |   |   |   | 2,603 |   |   |   | 1,210 |   |
| Total      Interest Income                                    |   |                    | 36,260     |   |                  |   | 41,724     |   |   |   | 74,983 |   |   |   | 83,238 |   |
|                                                          |   |                    |       |   |                  |   |       |   |   |   |   |   |   |   |   |   |
| INTEREST      EXPENSE                                         |   |                    |       |   |                  |   |       |   |   |   |   |   |   |   |   |   |
| Deposits                                                      |   |                    | 7,162      |   |                  |   | 11,098     |   |   |   | 17,643 |   |   |   | 22,098 |   |
| Short-Term      Borrowings                                    |   |                    | 296        |   |                  |   | 737        |   |   |   | 817 |   |   |   | 1,498 |   |
| Subordinated      Notes Payable                               |   |                    | 931        |   |                  |   | 932        |   |   |   | 1,862 |   |   |   | 1,858 |   |
| Other      Long-Term Borrowings                               |   |                    | 396        |   |                  |   | 496        |   |   |   | 727 |   |   |   | 998 |   |
| Total      Interest Expense                                   |   |                    | 8,785      |   |                  |   | 13,263     |   |   |   | 21,049 |   |   |   | 26,452 |   |
|                                                          |   |                    |       |   |                  |   |       |   |   |   |   |   |   |   |   |   |
| NET      INTEREST INCOME                                      |   |                    | 27,475     |   |                  |   | 28,461     |   |   |   | 53,934 |   |   |   | 56,786 |   |
| Provision      for Loan Losses                                |   |                    | 5,432      |   |                  |   | 1,675      |   |   |   | 9,574 |   |   |   | 2,912 |   |
| Net      Interest Income After Provision For Loan Losses |   |                    | 22,043     |   |                  |   | 26,786     |   |   |   | 44,360 |   |   |   | 53,874 |   |
|                                                          |   |                    |       |   |                  |   |       |   |   |   |   |   |   |   |   |   |
| NONINTEREST      INCOME                                       |   |                    |       |   |                  |   |       |   |   |   |   |   |   |   |   |   |
| Service      Charges on Deposit Accounts                      |   |                    | 7,060      |   |                  |   | 6,442      |   |   |   | 13,825 |   |   |   | 12,487 |   |
| Data      Processing                                          |   |                    | 812        |   |                  |   | 790        |   |   |   | 1,625 |   |   |   | 1,505 |   |
| Asset      Management Fees                                    |   |                    | 1,125      |   |                  |   | 1,175      |   |   |   | 2,275 |   |   |   | 2,400 |   |
| Securities      Transactions                                  |   |                    | 30         |   |                  |   | 0          |   |   |   | 95 |   |   |   | 7 |   |
| Mortgage      Banking Revenues                                |   |                    | 506        |   |                  |   | 850        |   |   |   | 1,000 |   |   |   | 1,529 |   |
| Bank      Card Fees                                           |   |                    | 3,908      |   |                  |   | 3,504      |   |   |   | 7,869 |   |   |   | 6,991 |   |
| Other                                                         |   |                    | 2,277      |   |                  |   | 2,323      |   |   |   | 6,828 |   |   |   | 4,127 |   |
| Total      Noninterest Income                                 |   |                    | 15,718     |   |                  |   | 15,084     |   |   |   | 33,517 |   |   |   | 29,046 |   |
|                                                          |   |                    |       |   |                  |   |       |   |   |   |   |   |   |   |   |   |
| NONINTEREST      EXPENSE                                      |   |                    |       |   |                  |   |       |   |   |   |   |   |   |   |   |   |
| Salaries      and Associate Benefits                          |   |                    | 15,318     |   |                  |   | 14,992     |   |   |   | 30,922 |   |   |   | 30,711 |   |
| Occupancy,      Net                                           |   |                    | 2,491      |   |                  |   | 2,324      |   |   |   | 4,853 |   |   |   | 4,560 |   |
| Furniture      and Equipment                                  |   |                    | 2,583      |   |                  |   | 2,494      |   |   |   | 5,165 |   |   |   | 4,843 |   |
| Intangible      Amortization                                  |   |                    | 1,459      |   |                  |   | 1,458      |   |   |   | 2,917 |   |   |   | 2,917 |   |
| Other                                                         |   |                    | 8,905      |   |                  |   | 8,629      |   |   |   | 16,697 |   |   |   | 17,428 |   |
| Total      Noninterest Expense                                |   |                    | 30,756     |   |                  |   | 29,897     |   |   |   | 60,554 |   |   |   | 60,459 |   |
|                                                          |   |                    |       |   |                  |   |       |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE INCOME TAXES                               |   |                    | 7,005      |   |                  |   | 11,973     |   |   |   | 17,323 |   |   |   | 22,461 |   |
| Income      Taxes                                             |   |                    | 2,195      |   |                  |   | 4,082      |   |   |   | 5,233 |   |   |   | 7,613 |   |
|                                                          |   |                    |       |   |                  |   |       |   |   |   |   |   |   |   |   |   |
| NET      INCOME                                               |   | $                       | 4,810      |   |                  | $      | 7,891      |   |   | $ | 12,090 |   |   | $ | 14,848 |   |
|                                                          |   |                    |       |   |                  |   |       |   |   |   |   |   |   |   |   |   |
| Basic      Net Income Per Share                               |   | $                       | .28        |   |                  | $      | .43        |   |   | $ | .70 |   |   | $ | .81 |   |
| Diluted      Net Income Per Share                             |   | $                       | .28        |   |                  | $      | .43        |   |   | $ | .70 |   |   | $ | .81 |   |
|                                                          |   |                    |       |   |                  |   |       |   |   |   |   |   |   |   |   |   |
| Average      Basic Shares Outstanding                         |   |                    | 17,146,395 |   |                  |   | 18,089,022 |   |   |   | 17,158,312 |   |   |   | 18,247,991 |   |
| Average      Diluted Shares Outstanding                       |   |                    | 17,146,837 |   |                  |   | 18,089,223 |   |   |   | 17,159,052 |   |   |   | 18,248,245 |   |

----

(table of contents)

CONSOLIDATED 

|   (Dollars      In Thousands, Except Share Data)                                             | Shares      Outstanding |   |   | Common      Stock |   |   | AdditionalPaid-In      Capital |   |   | Retained      Earnings |    |   | Accumulated      Other Comprehensive Loss, Net of Taxes |   | Total  |    |
|--------------------------------------------------------------------------------------------------------|-------------------------|--------|--------|-------------------|--------|--------|--------------------------------|--------|--------|------------------------|---------|--------|---------------------------------------------------------|--------|--------|---------|
|                                                                                                   |                    |   |   |              |   |   |                           |   |   |                   |    |   |                                                    |   |   |    |
| Balance,      December 31, 2007                                                                        | 17,182,553              |   | $      |  172         |   | $      | 38,243                         |   |   | $                      | 260,325 |   |                                                    | $      | (6,065 | )       | $ | 292,675 |   |
| Cumulative      Effect of Adoption of EITF 06-4                                                        | -                       |   |   | -                 |   |   | -                              |   |   |                   | (30     | )      |                                                    |   | -      |    |   | (30 | ) |
| Comprehensive      Income:                                                                             |                    |   |   |              |   |   |                           |   |   |                   |    |   |                                                    |   |   |    |   |   |   |
| Net      Income                                                                                        | -                       |   |   | -                 |   |   | -                              |   |   |                   | 12,090  |   |                                                    |   | -      |    |   | 12,090 |   |
| Net      Change in Unrealized Gain On   Available-for-Sale      Securities (net of tax) | -                       |   |   | -                 |   |   | -                              |   |   |                   | -       |   |                                                    |   | (79    | )  |   | (79 | )  |
| Total      Comprehensive Income                                                                        | -                       |   |   | -                 |   |   | -                              |   |   |                   | -       |   |                                                    |   | -      |    |   | 12,011 |   |
| Cash      Dividends ($.3700 per share)                                                                 | -                       |   |   | -                 |   |   | -                              |   |   |                   | (6,214) |   |                                                    |   | -      |    |   | (6,214 | ) |
| Stock      Performance Plan Compensation                                                               | -                       |   |   | -                 |   |   | 17                             |   |   |                   | -       |   |                                                    |   | -      |    |   | 17 |   |
| Issuance      of Common Stock                                                                          | 18,927                  |   |   | -                 |   |   | 535                            |   |   |                   | -       |   |                                                    |   | -      |    |   | 535 |   |
| Repurchase      of Common Stock                                                                        | (90,041                 | )      |   | (1)               |   |   | (2,413                         | )      |   |                   | -       |   |                                                    |   | -      |    |   | (2,414 | ) |
|                                                                                                   |                    |   |   |              |   |   |                           |   |   |                   |    |   |                                                    |   |   |    |   |   |   |
| Balance,      June 30, 2008                                                                            | 17,111,439              |   | $      |  171         |   | $      | 36,382                         |   |   | $                      | 266,171 |   |                                                    | $      | (6,144 | )       | $ | 296,580 |   |

----

(table of contents)

 CASH 

| (Dollars      in Thousands)                                                            |   | 2008   |    |    | 2007   |   |
|----------------------------------------------------------------------------------------|--------|--------|---------|---------|--------|--------|
| CASH      FLOWS FROM OPERATING ACTIVITIES                                              |   |   |    |    |   |   |
| Net      Income                                                                        |   | $      | 12,090  |    |   | $      | 14,848 |   |
| Adjustments      to Reconcile Net Income toCash      Provided by Operating Activities: |   |   |    |    |   |   |   |   |
| Provision      for Loan Losses                                                         |   |   | 9,574   |    |   |   | 2,912 |   |
| Depreciation                                                                           |   |   | 3,447   |    |   |   | 3,087 |   |
| Net      Securities Amortization                                                       |   |   | 337     |    |   |   | 170 |   |
| Amortization      of Intangible Assets                                                 |   |   | 2,917   |    |   |   | 2,917 |   |
| Gain      on Securities Transactions                                                   |   |   | (95     | )       |   |   | (7 | ) |
| Origination      of Loans Held-for-Sale                                                |   |   | (32,269 | )       |   |   | (94,830 | ) |
| Proceeds      From Sales of Loans Held-for-Sale                                        |   |   | 35,931  |    |   |   | 93,254 |   |
| Net      Gain From Sales of Loans Held-for-Sale                                        |   |   | (1,000  | )       |   |   | (1,529 | ) |
| Non-Cash      Compensation                                                             |   |   | 17      |    |   |   | 63 |   |
| Deferred      Income Taxes                                                             |   |   | (730    | )  |   |   | 76 |   |
| Net      Decrease (Increase) in Other Assets                                           |   |   | 7,922   |    |   |   | (3,508 | ) |
| Net      (Decrease) Increase in Other Liabilities                                      |   |   | (1,387  | )  |   |   | 11,271 |   |
| Net      Cash Provided By Operating Activities                                         |   |   | 36,754  |    |   |   | 28,724 |   |
|                                                                                   |   |   |    |    |   |   |   |   |
| CASH      FLOWS FROM INVESTING ACTIVITIES                                              |   |   |    |    |   |   |   |   |
| Securities      Available-for-Sale:                                                    |   |   |    |    |   |   |   |   |
| Purchases                                                                              |   |   | (49,001 | )       |   |   | (27,582 | ) |
| Sales                                                                                  |   |   | 3,508   |    |   |   | - |   |
| Payments,      Maturities, and Calls                                                   |   |   | 49,846  |    |   |   | 29,186 |   |
| Net      (Increase) Decrease in Loans                                                  |   |   | (13,216 | )  |   |   | 67,966 |   |
| Purchase      of Premises & Equipment                                              |   |   | (7,395  | )       |   |   | (9,540 | ) |
| Proceeds      From Sales of Premises & Equipment                                   |   |   | -       |    |   |   | 335 |   |
| Net      Cash (Used In) Provided By Investing Activities                               |   |   | (16,258 | )  |   |   | 60,365 |   |
|                                                                                   |   |   |    |    |   |   |   |   |
| CASH      FLOWS FROM FINANCING ACTIVITIES                                              |   |   |    |    |   |   |   |   |
| Net      Increase (Decrease) in Deposits                                               |   |   | 20,582  |    |   |   | (72,064 | ) |
| Net      (Decrease) Increase in Short-Term Borrowings                                  |   |   | (1,343  | )       |   |   | 9,101 |   |
| Increase      in Other Long-Term Borrowings                                            |   |   | 11,623  |    |   |   | 1,700 |   |
| Repayment      of Other Long-Term Borrowings                                           |   |   | (1,504  | )       |   |   | (3,323 | )  |
| Dividends      Paid                                                                    |   |   | (6,214  | )       |   |   | (6,475 | ) |
| Repurchase      of Common Stock                                                        |   |   | (2,414  | )       |   |   | (23,219 | ) |
| Issuance      of Common Stock                                                          |   |   | 535     |    |   |   | 497 |   |
| Net      Cash Provided By (Used In) Financing Activities                               |   |   | 21,265  |    |   |   | (93,783 | ) |
|                                                                                   |   |   |    |    |   |   |   |   |
| NET      CHANGE IN CASH AND CASH EQUIVALENTS                                           |   |   | 41,761  |    |   |   | (4,694 | ) |
|                                                                                   |   |   |    |    |   |   |   |   |
| Cash      and Cash Equivalents at Beginning of Period                                  |   |   | 259,697 |    |   |   | 177,564 |   |
| Cash      and Cash Equivalents at End of Period                                        |   | $      | 301,458 |    |   | $      | 172,870 |   |
|                                                                                   |   |   |    |    |   |   |   |   |
| Supplemental      Disclosure:                                                          |   |   |    |    |   |   |   |   |
| Interest      Paid on Deposits                                                         |   | $      | 18,607  |    |   | $      | 22,103 |   |
| Interest      Paid on Debt                                                             |   | $      | 3,391   |    |   | $      | 4,377 |   |
| Taxes      Paid                                                                        |   | $      | 8,961   |    |   | $      | 6,601 |   |
| Loans      Transferred to Other Real Estate Owned                                      |   | $      | 4,467   |    |   | $      | 1,490 |   |
| Issuance      of Common Stock as Non-Cash Compensation                                 |   | $      | -       |    |   | $      | 1,158 |   |

----

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NOTES 

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

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

|                                   |   | June      30, 2008  |    |
|----------------------------------------|--------|---------------------|---------|
| (Dollars      in Thousands)            |   | Amortized      Cost |    |   | Unrealized      Gains |   |   | Unrealized      Losses |   |   | Market      Value |   |
| U.S.      Treasury                     |   | $                   | 25,104  |   |   | $ | 89 |   |   | $ | 284 |   |   | $ | 24,909 |   |
| U.S.      Government Agencies          |   |                | 19,526  |   |   |   | 197 |   |   |   | 5 |   |   |   | 19,718 |   |
| States      and Political Subdivisions |   |                | 94,466  |   |   |   | 706 |   |   |   | 194 |   |   |   | 94,978 |   |
| Mortgage-Backed      Securities        |   |                | 34,097  |   |   |   | 128 |   |   |   | 485 |   |   |   | 33,740 |   |
| Other      Securities(1)               |   |                | 12,572  |   |   |   | 54 |   |   |   | - |   |   |   | 12,626 |   |
| Total      Investment Securities       |   | $                   | 185,765 |   |   | $ | 1,174 |   |   | $ | 968 |   |   | $ | 185,971 |   |

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

|  (1) | Includes Federal Home Loan      Bank and Federal Reserve Bank stock recorded at cost of $6.7 million and      $4.8 million, respectively, at June 30, 2008, and $6.5 million and $4.8      million, respectively, at December 31,      2007. |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

| (Dollars      in Thousands)                 |   | June      30, 2008 |      |   | December      31, 2007 |   |
|---------------------------------------------|--------|--------------------|-----------|--------|------------------------|--------|
| Commercial,      Financial and Agricultural |   | $                  | 196,075   |   |                   | $      | 208,864 |   |
| Real      Estate-Construction               |   |               | 150,907   |   |                   |   | 142,248 |   |
| Real      Estate-Commercial                 |   |               | 622,282   |   |                   |   | 634,920 |   |
| Real      Estate-Residential                |   |               | 489,268   |   |                   |   | 485,608 |   |
| Real      Estate-Home Equity                |   |               | 205,536   |   |                   |   | 192,428 |   |
| Real      Estate-Loans Held-for-Sale        |   |               | 1,565     |   |                   |   | 2,764 |   |
| Consumer                                    |   |               | 251,182   |   |                   |   | 249,018 |   |
| Loans,      Net of Unearned Interest        |   | $                  | 1,916,815 |   |                   | $      | 1,915,850 |   |

| (Dollars      in Thousands)                     |   | 2008   |   |   | 2007   |   |
|-------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Balance,      Beginning of Period               |   | $      | 18,066 |   |   | $      |  17,217 |   |
| Provision      for Loan Losses                  |   |   | 9,574  |   |   |   | 2,912 |   |
| Recoveries      on Loans Previously Charged-Off |   |   | 1,287  |   |   |   | 946 |   |
| Loans      Charged-Off                          |   |   | (6,409 | )      |   |   |  (3,606 | ) |
| Balance,      End of Period                     |   | $      | 22,518 |   |   | $      |   17,469 |   |

|                                     |   | June      30, 2008 |   |   | December      31, 2007   |   |
|------------------------------------------|--------|--------------------|--------|--------|--------------------------|--------|
|  (Dollars      in Thousands)        |   | Balance            |   |   | Valuation      Allowance |   |   | Balance |   |   | Valuation      Allowance |   |
| Impaired      Loans:                     |   |               |   |   |                     |   |   |   |   |   |   |   |
| With      Related Valuation Allowance    |   | $                  | 28,344 |   |                     | $      | 7,429 |   |   | $ | 21,615 |   |   | $ | 4,702 |   |
| Without      Related Valuation Allowance |   |               | 34,106 |   |                     |   | - |   |   |   | 15,019 |   |   |   | - |   |

----

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

|                                  |   | June      30, 2008 |    |   | December      31, 2007  |   |
|---------------------------------------|--------|--------------------|---------|--------|-------------------------|--------|
|  (Dollars      in Thousands)     |   | GrossAmount        |    |   | AccumulatedAmortization |   |   | GrossAmount |   |   | AccumulatedAmortization |   |
| Core      Deposit Intangibles         |   | $                  | 47,176  |   |                    | $      | 37,420 |   |   | $ |           47,176 |   |   | $ |          34,598 |   |
| Goodwill                              |   |               | 84,811  |   |                    |   | - |   |   |   | 84,811 |   |   |   | - |   |
| Customer      Relationship Intangible |   |               | 1,867   |   |                    |   | 783 |   |   |   |             1,867 |   |   |   | 688 |   |
| Total      Intangible Assets          |   | $                  | 133,854 |   |                    | $      | 38,203 |   |   | $ | 133,854 |   |   | $ | 35,286 |   |

| (Dollars      in Thousands)          |   | June      30, 2008 |      |   | December      31, 2007 |   |
|--------------------------------------|--------|--------------------|-----------|--------|------------------------|--------|
| NOW      Accounts                    |   | $                  | 814,380   |   |                   | $      | 744,093 |   |
| Money      Market Accounts           |   |               | 387,011   |   |                   |   | 386,619 |   |
| Savings      Deposits                |   |               | 118,307   |   |                   |   | 111,600 |   |
| Other      Time Deposits             |   |               | 426,236   |   |                   |   | 467,373 |   |
| Total      Interest Bearing Deposits |   | $                  | 1,745,934 |   |                   | $      | 1,709,685 |   |

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

----

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| Options                             |   | Shares |   |   | Weighted-Average      Exercise Price |   |   | Weighted-Average      Remaining Term |   |   | Aggregate      Intrinsic Value |   |
|-------------------------------------|--------|--------|--------|--------|--------------------------------------|--------|--------|--------------------------------------|--------|--------|--------------------------------|--------|
| Outstanding      at January 1, 2008 |   |   | 60,384 |   |                                 | $      | 32.79  |                                 |   |   | 6.9                            |   |   | $ | - |   |
| Granted                             |   |   | -      |   |                                 |   | -      |                                 |   |   | -                              |   |   |   | - |   |
| Exercised                           |   |   | -      |   |                                 |   | -      |                                 |   |   | -                              |   |   |   | - |   |
| Forfeited      or expired           |   |   | -      |   |                                 |   | -      |                                 |   |   | -                              |   |   |   | - |   |
| Outstanding      at June 30, 2008   |   |   | 60,384 |   |                                 | $      | 32.79  |                                 |   |   | 6.4                            |   |   | $ | - |   |
| Exercisable      at June 30, 2008   |   |   | 60,384 |   |                                 | $      | 32.79  |                                 |   |   | 6.4                            |   |   | $ | - |   |

|                          |   | Six      Months Ended June 30, |   |
|-------------------------------|--------|--------------------------------|--------|
|                          |   | 2008                           |   |   | 2007 |   |
| Dividend      yield           |   |                           | 2.8    | % |   |   | 2.0 | % |
| Expected      volatility      |   |                           | 39.0   | % |   |   | 24.0 | % |
| Risk-free      interest rate  |   |                           | 3.1    | % |   |   | 4.9 | % |
| Expected      life (in years) |   |                           | 0.5    |   |   |   | 0.5 |   |

|                                    |   | Three      Months Ended June 30, |   |   | Six      Months Ended June 30, |   |
|-----------------------------------------|--------|---------------------------------------|--------|--------|--------------------------------|--------|
| (Dollars      in Thousands)             |   | 2008                                  |   |   | 2007                           |   |   | 2008 |   |   | 2007 |   |
|                                    |   |                                  |   |   |                           |   |   |   |   |   |   |   |
| Discount      Rate                      |   |                                  | 6.00   | %      |                           |   | 6.00 | % |   |   | 6.00 | % |   |   | 6.00 | % |
| Long-Term      Rate of Return on Assets |   |                                  | 8.00   | %      |                           |   | 8.00 | % |   |   | 8.00 | % |   |   | 8.00 | % |
|                                    |   |                                  |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Service      Cost                       |   | $                                     | 1,279  |   |                           | $      | 1,350 |   |   | $ | 2,558 |   |   | $ | 2,700 |   |
| Interest      Cost                      |   |                                  | 1,063  |   |                           |   | 1,025 |   |   |   | 2,126 |   |   |   | 2,050 |   |
| Expected      Return on Plan Assets     |   |                                  | (1,253 | )      |                           |   | (1,300 | ) |   |   | (2,506 | ) |   |   | (2,600 | ) |
| Prior      Service Cost Amortization    |   |                                  | 75     |   |                           |   | 100 |   |   |   | 151 |   |   |   | 200 |   |
| Net      Loss Amortization              |   |                                  | 280    |   |                           |   | 250 |   |   |   | 561 |   |   |   | 500 |   |
| Net      Periodic Benefit Cost          |   | $                                     | 1,444  |   |                           | $      | 1,425 |   |   | $ | 2,890 |   |   | $ | 2,850 |   |

----

(table of contents)

|                                 |   | Three      Months Ended June 30, |   |   | Six      Months Ended June 30, |   |
|--------------------------------------|--------|---------------------------------------|--------|--------|--------------------------------|--------|
| (Dollars      in Thousands)          |   | 2008                                  |   |   | 2007                           |   |   | 2008 |   |   | 2007 |   |
|                                 |   |                                  |   |   |                           |   |   |   |   |   |   |   |
| Discount      Rate                   |   |                                  | 6.00   | %      |                           |   | 6.00 | % |   |   | 6.00 | % |   |   | 6.00 | % |
|                                 |   |                                  |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Service      Cost                    |   | $                                     | 22     |   |                           | $      | 25 |   |   | $ | 44 |   |   | $ | 50 |   |
| Interest      Cost                   |   |                                  | 56     |   |                           |   | 63 |   |   |   | 111 |   |   |   | 126 |   |
| Prior      Service Cost Amortization |   |                                  | 2      |   |                           |   | 3 |   |   |   | 4 |   |   |   | 6 |   |
| Net      Loss Amortization           |   |                                  | 1      |   |                           |   | 18 |   |   |   | 3 |   |   |   | 36 |   |
| Net      Periodic Benefit Cost       |   | $                                     | 81     |   |                           | $      | 109 |   |   | $ | 162 |   |   | $ | 218 |   |

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

| (Dollars      in Millions)           |   | Amount |   |
|--------------------------------------|--------|--------|--------|
| Commitments      to Extend Credit(1) |   | $      | 401    |   |
| Standby      Letters of Credit       |   | $      | 17     |   |

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

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(table of contents)

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(table of contents)

|  (Dollars      in Thousands)  |   | Level      1 Inputs |   |   | Level      2 Inputs |   |    | Level      3 Inputs |   |   | TotalFair      Value |   |
|------------------------------------|--------|---------------------|--------|--------|---------------------|--------|---------|---------------------|--------|--------|----------------------|--------|
|                               |   |                |   |   |                |   |    |                |   |   |                 |   |
| Securities      Available for Sale |   | $                   | 44,627 |   |                | $      | 128,718 |                |   | $      | 1,054                |   |   | $ | 174,399 |   |

----

(table of contents)

|                                                         |   | 2008   |                                                                                                               |   | 2007   |   |        | 2006   |   |
|--------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------------------------------------------------|--------|--------|--------|-------------|--------|--------|
| (Dollars      in Thousands, Except Per Share Data)           |   | Second |                                                                                                               |   | First  |   |        | Fourth |   |   | Third |   |   | Second |   | First |   | Fourth |   |   | Third |   |   |
| Summary      of Operations:                                  |   |   |                                                                                                               |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Income                                         |   | $      | 36,260                                                                                                             |   |   | $      | 38,723      |   |   | $ |       40,786 |   |   | $ | 41,299 |   |   | $ | 41,724 |   | $ | 41,514 |   | $ | 42,600 |   |   | $ | 42,512 |   |   |
| Interest      Expense                                        |   |   | 8,785                                                                                                              |   |   |   | 12,264      |   |   |   |      13,241 |   |   |   |    13,389 |   |   |   | 13,263 |   |   |  13,189 |   |   | 13,003 |   |   |   | 12,289 |   |   |
| Net      Interest Income                                     |   |   | 27,475                                                                                                             |   |   |   | 26,459      |   |   |   |    27,545 |   |   |   |    27,910 |   |   |   | 28,461 |   |   | 28,325 |   |   | 29,597 |   |   |   | 30,223 |   |   |
| Provision      for Loan Losses                               |   |   | 5,432                                                                                                              |   |   |   | 4,142       |   |   |   |    1,699 |   |   |   |     1,552 |   |   |   | 1,675 |   |   |  1,237 |   |   | 460 |   |   |   | 711 |   |   |
| Net      Interest Income AfterProvision      for Loan Losses |   |   |                   22,043 |   |   |   | 22,317      |   |   |   |     25,846 |   |   |   | 26,358 |   |   |   | 26,786 |   |   | 27,088 |   |   |  29,137 |   |   |   |  29,512 |   |   |
| Noninterest      Income                                      |   |   | 15,718                                                                                                             |   |   |   | 17,799      |   |   |   |    15,823 |   |   |   | 14,431 |   |   |   | 15,084 |   |   | 13,962 |   |   | 14,385 |   |   |   | 14,144 |   |   |
| Noninterest      Expense                                     |   |   | 30,756                                                                                                             |   |   |   | 29,798      |   |   |   |      31,614 |   |   |   | 29,919 |   |   |   | 29,897 |   |   | 30,562 |   |   | 29,984 |   |   |   | 30,422 |   |   |
| Income      Before Provision for Income Taxes                |   |   | 7,005                                                                                                              |   |   |   | 10,318      |   |   |   |                   10,055 |   |   |   |     10,870 |   |   |   | 11,973 |   |   | 10,488 |   |   |  13,538 |   |   |   |  13,234 |   |   |
| Provision      for Income Taxes                              |   |   | 2,195                                                                                                              |   |   |   | 3,038       |   |   |   | 2,391 |   |   |   |           3,699 |   |   |   | 4,082 |   |   |  3,531 |   |   | 4,688 |   |   |   | 4,554 |   |   |
| Net      Income                                              |   | $      |  4,810                                                                                                        |   |   | $      |  7,280 |   |   | $ |          7,664 |   |   | $ |          7,171 |   |   | $ | 7,891 |   | $ |    6,957 |   | $ |  8,850 |   |   | $ |  8,680 |   |   |
| Net      Interest Income (FTE)                               |   | $      | 28,081                                                                                                             |   |   | $      | 27,077      |   |   | $ | 28,196 |   |   | $ |         28,517 |   |   | $ | 29,050 |   | $ |    28,898 |   | $ |  30,152 |   |   | $ |  30,745 |   |   |
|                                                         |   |   |                                                                                                               |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Per      Common Share:                                       |   |   |                                                                                                               |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Income Basic                                        |   | $      | 0.28                                                                                                               |   |   | $      | 0.42        |   |   | $ |     0.44 |   |   | $ | 0.41 |   |   | $ | 0.43 |   | $ |    0.38 |   | $ |  0.48 |   |   | $ |  0.47 |   |   |
| Net      Income Diluted                                      |   |   | 0.28                                                                                                               |   |   |   | 0.42        |   |   |   |      0.44 |   |   |   | 0.41 |   |   |   | 0.43 |   |   | 0.38 |   |   | 0.48 |   |   |   | 0.47 |   |   |
| Dividends      Declared                                      |   |   | .185                                                                                                               |   |   |   | .185        |   |   |   | .185 |   |   |   | .175 |   |   |   | .175 |   |   |   .175 |   |   | .175 |   |   |   | .163 |   |   |
| Diluted      Book Value                                      |   |   | 17.33                                                                                                              |   |   |   | 17.33       |   |   |   | 17.03 |   |   |   | 16.95 |   |   |   | 16.87 |   |   |  16.97 |   |   | 17.01 |   |   |   | 17.18 |   |   |
| Market      Price:                                           |   |   |                                                                                                               |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| High                                                         |   |   | 30.19                                                                                                              |   |   |   | 29.99       |   |   |   | 34.00 |   |   |   |          36.40 |   |   |   | 33.69 |   |   |  35.91 |   |   | 35.98 |   |   |   | 33.25 |   |   |
| Low                                                          |   |   | 21.76                                                                                                              |   |   |   | 24.76       |   |   |   | 24.60 |   |   |   |       27.69 |   |   |   | 29.12 |   |   |  29.79 |   |   | 30.14 |   |   |   | 29.87 |   |   |
| Close                                                        |   |   | 21.76                                                                                                              |   |   |   | 29.00       |   |   |   | 28.22 |   |   |   | 31.20 |   |   |   | 31.34 |   |   |  33.30 |   |   | 35.30 |   |   |   | 31.10 |   |   |
|                                                         |   |   |                                                                                                               |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selected      Average                                        |   |   |                                                                                                               |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances:                                                    |   |   |                                                                                                               |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                        |   | $      | 1,908,802                                                                                                          |   |   | $      | 1,909,574   |   |   | $ | 1,908,069 |   |   | $ |   1,907,235 |   |   | $ | 1,944,969 |   | $ |  1,980,224 |   | $ |  2,003,719 |   |   | $ |  2,025,112 |   |   |
| Earning      Assets                                          |   |   | 2,303,971                                                                                                          |   |   |   | 2,301,463   |   |   |   | 2,191,230 |   |   |   |    2,144,737 |   |   |   | 2,187,236 |   |   | 2,211,560 |   |   | 2,238,066 |   |   |   | 2,241,158 |   |   |
| Assets                                                       |   |   | 2,634,771                                                                                                          |   |   |   | 2,646,474   |   |   |   | 2,519,682 |   |   |   | 2,467,703 |   |   |   | 2,511,252 |   |   | 2,530,790 |   |   | 2,557,357 |   |   |   | 2,560,155 |   |   |
| Deposits                                                     |   |   | 2,140,546                                                                                                          |   |   |   | 2,148,874   |   |   |   | 2,016,736 |   |   |   |    1,954,160 |   |   |   | 1,987,418 |   |   | 2,003,726 |   |   | 2,028,453 |   |   |   | 2,023,523 |   |   |
| Shareowners’      Equity                               |   |   | 300,890                                                                                                            |   |   |   | 296,804     |   |   |   | 299,342 |   |   |   |       301,536 |   |   |   | 309,352 |   |   |   316,484 |   |   | 323,903 |   |   |   | 318,041 |   |   |
| Common      Equivalent Shares:                               |   |   |                                                                                                               |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                        |   |   | 17,146                                                                                                             |   |   |   | 17,170      |   |   |   | 17,444 |   |   |   | 17,709 |   |   |   | 18,089 |   |   | 18,409 |   |   | 18,525 |   |   |   | 18,530 |   |   |
| Diluted                                                      |   |   | 17,147                                                                                                             |   |   |   | 17,178      |   |   |   | 17,445 |   |   |   | 17,719 |   |   |   | 18,089 |   |   | 18,420 |   |   | 18,569 |   |   |   | 18,565 |   |   |
|                                                         |   |   |                                                                                                               |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratios:                                                      |   |   |                                                                                                               |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ROA                                                          |   |   | .73                                                                                                                | %      |   |   | 1.11        | %      |   |   | 1.21 | % |   |   | 1.15 | % |   |   | 1.26 | % |   |  1.11 | % |   | 1.37 | % |   |   | 1.35 | % |   |
| ROE                                                          |   |   | 6.43                                                                                                               | %      |   |   | 9.87        | %      |   |   | 10.16 | % |   |   | 9.44 | % |   |   | 10.23 | % |   |  8.91 | % |   | 10.84 | % |   |   | 10.83 | % |   |
| Net      Interest Margin (FTE)                               |   |   | 4.90                                                                                                               | %      |   |   | 4.73        | %      |   |   | 5.10 | % |   |   | 5.27 | % |   |   | 5.33 | % |   |  5.29 | % |   | 5.35 | % |   |   | 5.45 | % |   |
| Efficiency      Ratio                                        |   |   | 66.89                                                                                                              | %      |   |   | 63.15       | %      |   |   | 68.51 | % |   |   | 66.27 | % |   |   | 64.44 | % |   | 67.90 | % |   | 63.99 | % |   |   | 64.35 | % |   |

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

|                                           |   | Six      Months Ended June 30, |   |
|------------------------------------------------|--------|--------------------------------|--------|
|                                           |   | 2008                           |   |   | 2007 |   |
| Efficiency      ratio                          |   |                           | 68.29  | % |   |   | 69.50 | % |
| Effect      of intangible amortization expense |   |                           | (3.29  | )% |   |   | (3.35 | )% |
| Operating      efficiency ratio                |   |                           | 65.00  | % |   |   | 66.15 | % |

|                                                                  |   | Six      Months Ended June 30, |   |
|-----------------------------------------------------------------------|--------|--------------------------------|--------|
|                                                                  |   | 2008                           |   |   | 2007 |   |
| Net      noninterest expense as a percent of average assets           |   |                           | 2.06   | % |   |   | 2.51 | % |
| Effect      of intangible amortization expense                        |   |                           | (0.22  | )% |   |   | (0.23 | )% |
| Operating      net noninterest expense as a percent of average assets |   |                           | 1.84   | % |   |   | 2.28 | % |

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| ·   | Earnings      of $4.8 million ($0.28 per diluted share) for the second quarter of 2008      compared to $7.9 million ($0.43 per diluted share) for the second quarter      of 2007.  Earnings of $12.1 million ($0.70 per diluted share)      compared to $14.8 million ($0.81 per diluted share) for the same period in      2007.  The decline in earnings for both periods was driven by      lower net interest income and higher loan loss  provisions. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Tax      equivalent net interest income declined 3.3% and 4.8% for the three and      six month periods reflective of margin compression driven by an increased      level of foregone interest associated with a higher level of nonperforming      loans and an unfavorable shift in the mix of earning assets reflective of      a decline in loan balances. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Noninterest      income grew 4.2% for the three month period reflective of higher deposit      fees and retail brokerage fees.  For the first half of 2008, the      redemption of Visa Inc. shares ($2.4 million) drove a 15.4% increase over      the same period in 2007.  Deposit fees and bank card fees also      posted strong gains. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Noninterest      expense continues to be well controlled as evidenced by increases of $.9      million, or 2.9%, and $.1 million, or .16% for the three and six month      periods.  Noninterest expense for the first half of 2008      included the reversal of $1.1 million in our Visa Inc. litigation      accrual. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher      loan loss provision for both the three and six month periods is due to the      current economic slowdown and the impact of the stressed housing and real      estate markets.  The allowance for loan losses continues to be      adequately funded at 1.18% of total loans compared to .91% in the same      period in 2007. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We      remain well-capitalized with a risk based capital ratio of 14.35% and a      tangible capital ratio of 7.87%. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------|

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|                                     |   | Three      Months Ended June 30, |   |   | Six      Months Ended June 30, |    |
|------------------------------------------|--------|----------------------------------|--------|--------|--------------------------------|---------|
| (Dollars      in Thousands)              |   | 2008                             |   |   | 2007                           |    |   | 2008 |   |   | 2007 |   |
| Interest      Income                     |   | $                                | 36,260 |   |                           | $       | 41,724 |   |   | $ | 74,983 |   |   | $ | 83,238 |   |
| Taxable      Equivalent Adjustment(1)    |   |                             | 606    |   |                           |    | 589 |   |   |   | 1,225 |   |   |   | 1,162 |   |
| Interest      Income (FTE)               |   |                             | 36,866 |   |                           |    | 42,313 |   |   |   | 76,208 |   |   |   | 84,400 |   |
| Interest      Expense                    |   |                             | 8,785  |   |                           |    | 13,263 |   |   |   | 21,049 |   |   |   | 26,452 |   |
| Net      Interest Income (FTE)           |   |                             | 28,081 |   |                           |    | 29,050 |   |   |   | 55,159 |   |   |   | 57,948 |   |
| Provision      for Loan Losses           |   |                             | 5,432  |   |                           |    | 1,675 |   |   |   | 9,574 |   |   |   | 2,912 |   |
| Taxable      Equivalent Adjustment       |   |                             | 606    |   |                           |    | 589 |   |   |   | 1,225 |   |   |   | 1,162 |   |
| Net      Interest Income After Provision |   |                             | 22,043 |   |                           |    | 26,786 |   |   |   | 44,360 |   |   |   | 53,874 |   |
| Noninterest      Income                  |   |                             | 15,718 |   |                           |    | 15,084 |   |   |   | 33,517 |   |   |   | 29,046 |   |
| Noninterest      Expense                 |   |                             | 30,756 |   |                           |    | 29,897 |   |   |   | 60,554 |   |   |   | 60,459 |   |
| Income      Before Income Taxes          |   |                             | 7,005  |   |                           |    | 11,973 |   |   |   | 17,323 |   |   |   | 22,461 |   |
| Income      Taxes                        |   |                             | 2,195  |   |                           |    | 4,082 |   |   |   | 5,233 |   |   |   | 7,613 |   |
| Net      Income                          |   | $                           | 4,810  |   |                           | $  | 7,891 |   |   | $ | 12,090 |   |   | $  | 14,848 |   |
| Basic      Net Income Per Share          |   | $                                | 0.28   |   |                           | $       | 0.43 |   |   | $ | 0.70 |   |   | $ | 0.81 |   |
| Diluted      Net Income Per Share        |   | $                                | 0.28   |   |                           | $       | 0.43 |   |   | $  |  0.70 |   |   | $ | 0.81 |   |
|                                     |   |                             |   |   |                           |    |   |   |   |   |   |   |   |   |   |   |
| Return      on Average Assets(2)         |   |                             | .73    | %      |                           |    | 1.26 | % |   |   | .92 | % |   |   | 1.19 | % |
| Return      on Average Equity(2)         |   |                             | 6.43   | %      |                           |    | 10.23 | % |   |   | 8.14 | % |   |   | 9.57 | % |

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

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

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|                                        |   | Three      Months Ended June 30, |   |   | Six      Months Ended June 30, |   |
|---------------------------------------------|--------|----------------------------------|--------|--------|--------------------------------|--------|
| (Dollars      in Thousands)                 |   | 2008                             |   |   | 2007                           |   |   | 2008 |   |   | 2007 |   |
| CHARGE-OFFS                                 |   |                             |   |   |                           |   |   |   |   |   |   |   |
| Commercial,      Financial and Agricultural |   | $                                | 407    |   |                           | $      | 253 |   |   | $ | 1,043 |   |   | $ | 813 |   |
| Real      Estate – Construction       |   |                             | 158    |   |                           |   | - |   |   |   | 730 |   |   |   | 108 |   |
| Real      Estate – Commercial         |   |                             | 1,115  |   |                           |   | 5 |   |   |   | 1,241 |   |   |   | 331 |   |
| Real      Estate – Residential        |   |                             | 817    |   |                           |   | 992 |   |   |   | 993 |   |   |   | 1,059 |   |
| Consumer                                    |   |                             | 1,232  |   |                           |   | 534 |   |   |   | 2,402 |   |   |   | 1,295 |   |
| Total      Charge-offs                      |   |                             | 3,729  |   |                           |   | 1,784 |   |   |   | 6,409 |   |   |   | 3,606 |   |
|                                        |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| RECOVERIES                                  |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Commercial,      Financial and Agricultural |   |                             | 55     |   |                           |   | 47 |   |   |   | 195 |   |   |   | 83 |   |
| Real      Estate – Construction       |   |                             | -      |   |                           |   | - |   |   |   | - |   |   |   | - |   |
| Real      Estate – Commercial         |   |                             | 13     |   |                           |   | 5 |   |   |   | 14 |   |   |   | 10 |   |
| Real      Estate – Residential        |   |                             | 24     |   |                           |   | 26 |   |   |   | 28 |   |   |   | 27 |   |
| Consumer                                    |   |                             | 446    |   |                           |   | 392 |   |   |   | 1,051 |   |   |   | 826 |   |
| Total      Recoveries                       |   |                             | 538    |   |                           |   | 470 |   |   |   | 1,288 |   |   |   | 946 |   |
|                                        |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Net      Charge-offs                        |   | $                                | 3,191  |   |                           | $      | 1,314 |   |   | $ | 5,121 |   |   | $ | 2,660 |   |
|                                        |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Net      Charge-offs (Annualized) as a      |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Percent      of Average Loans Outstanding,  |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Net      of Unearned Interest               |   |                             | .67    | %      |                           |   | .27 | % |   |   | .54 | % |   |   | .27 | % |

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|                                     |   | Three      Months Ended June 30, |   |   | Six      Months Ended June 30, |   |
|------------------------------------------|--------|----------------------------------|--------|--------|--------------------------------|--------|
| (Dollars      in Thousands)              |   | 2008                             |   |   | 2007                           |   |   | 2008 |   |   | 2007 |   |
| Noninterest      Income:                 |   |                             |   |   |                           |   |   |   |   |   |   |   |
| Service      Charges on Deposit Accounts |   | $                                | 7,060  |   |                           | $      | 6,442 |   |   | $ | 13,825 |   |   | $ | 12,487 |   |
| Data      Processing                     |   |                             | 812    |   |                           |   | 790 |   |   |   | 1,625 |   |   |   | 1,505 |   |
| Fees      for Trust Services             |   |                             | 1,125  |   |                           |   | 1,175 |   |   |   | 2,275 |   |   |   | 2,400 |   |
| Retail      Brokerage Fees               |   |                             | 735    |   |                           |   | 804 |   |   |   | 1,204 |   |   |   | 1,266 |   |
| Invest      Sec Gain (Losses)            |   |                             | 30     |   |                           |   | - |   |   |   | 95 |   |   |   | 7 |   |
| Mortgage      Banking Revenues           |   |                             | 506    |   |                           |   | 850 |   |   |   | 1,000 |   |   |   | 1,529 |   |
| Merchant      Service Fees (1)           |   |                             | 2,074  |   |                           |   | 1,892 |   |   |   | 4,282 |   |   |   | 3,828 |   |
| Interchange      Fees (1)                |   |                             | 1,076  |   |                           |   | 951 |   |   |   | 2,085 |   |   |   | 1,861 |   |
| ATM/Debit      Card Fees (1)             |   |                             | 758    |   |                           |   | 661 |   |   |   | 1,502 |   |   |   | 1,302 |   |
| Other                                    |   |                             | 1,542  |   |                           |   | 1,519 |   |   |   | 5,624 |   |   |   | 2,861 |   |
|                                     |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Total      Noninterest Income            |   | $                                | 15,718 |   |                           | $      | 15,084 |   |   | $ | 33,517 |   |   | $ | 29,046 |   |

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|                           |   | Three      Months Ended June 30, |   |   | Six      Months Ended June 30, |
|--------------------------------|--------|----------------------------------|--------|--------|--------------------------------|
| (Dollars      in Thousands)    |   | 2008                             |   |   | 2007                           |   |   | 2008 |   |   | 2007 |
| Noninterest      Expense:      |   |                             |   |   |                           |   |   |   |   |   |   |
| Salaries                       |   | $                                | 12,627 |   |                           | $ | 12,286 |   |   | $ | 25,631 |   |   | $ | 24,629 |
| Associate      Benefits        |   |                             | 2,691  |   |                           |   | 2,706 |   |   |   | 5,291 |   |   |   | 6,082 |
| Total      Compensation        |   |                             | 15,318 |   |                           |   | 14,992 |   |   |   | 30,922 |   |   |   | 30,711 |
|                           |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Premises                       |   |                             | 2,491  |   |                           |   | 2,324 |   |   |   | 4,853 |   |   |   | 4,560 |
| Equipment                      |   |                             | 2,583  |   |                           |   | 2,494 |   |   |   | 5,165 |   |   |   | 4,843 |
| Total      Occupancy           |   |                             | 5,074  |   |                           |   | 4,818 |   |   |   | 10,018 |   |   |   | 9,403 |
|                           |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Legal      Fees                |   |                             | 474    |   |                           |   | 429 |   |   |   | 976 |   |   |   | 935 |
| Professional      Fees         |   |                             | 948    |   |                           |   | 872 |   |   |   | 1,819 |   |   |   | 1,864 |
| Processing      Services       |   |                             | 434    |   |                           |   | 622 |   |   |   | 895 |   |   |   | 1,004 |
| Advertising                    |   |                             | 895    |   |                           |   | 1,004 |   |   |   | 1,673 |   |   |   | 1,868 |
| Travel      and Entertainment  |   |                             | 341    |   |                           |   | 400 |   |   |   | 674 |   |   |   | 745 |
| Printing      and Supplies     |   |                             | 522    |   |                           |   | 584 |   |   |   | 1,037 |   |   |   | 1,098 |
| Telephone                      |   |                             | 701    |   |                           |   | 536 |   |   |   | 1,294 |   |   |   | 1,083 |
| Postage                        |   |                             | 435    |   |                           |   | 309 |   |   |   | 864 |   |   |   | 649 |
| Intangible      Amortization   |   |                             | 1,459  |   |                           |   | 1,458 |   |   |   | 2,917 |   |   |   | 2,917 |
| Interchange      Fees          |   |                             | 1,738  |   |                           |   | 1,573 |   |   |   | 3,587 |   |   |   | 3,242 |
| Commission      Fees           |   |                             | 443    |   |                           |   | 220 |   |   |   | 845 |   |   |   | 443 |
| Courier      Service           |   |                             | 117    |   |                           |   | 247 |   |   |   | 244 |   |   |   | 524 |
| Miscellaneous                  |   |                             | 1,857  |   |                           |   | 1,833 |   |   |   | 2,789 |   |   |   | 3,973 |
| Total      Other               |   |                             | 10,364 |   |                           |   | 10,087 |   |   |   | 19,614 |   |   |   | 20,345 |
|                           |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Total      Noninterest Expense |   | $                                | 30,756 |   |                           | $ | 29,897 |   |   | $ | 60,554 |   |   | $ | 60,459 |

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| Changes      in Interest Rates | +300      bp | +200      bp | +100      bp | -100      bp | -200      bp |
|--------------------------------|--------------|--------------|--------------|--------------|--------------|
|                           |         |         |         |         |         |
| Policy      Limit              | 10.0%        | 7.5%         | 5.0%         | -5.0%        | -7.5%        |
| June      30, 2008             | 1.2%         | 3.2%         | 2.7%         | -1.8%        | -7.1%        |
| March      31, 2008            | 1.3%         | 3.9%         | 3.1%         | -2.6%        | -7.5%        |

| Changes      in Interest Rates | +300      bp | +200      bp | +100      bp | -100      bp | -200      bp |
|--------------------------------|--------------|--------------|--------------|--------------|--------------|
|                           |         |         |         |         |         |
| Policy      Limit              | 12.5%        | 10.0%        | 7.5%         | -7.5%        | -10.0%       |
| June      30, 2008             | 1.5%         | 3.1%         | 2.3%         | -3.3%        | -7.1%        |
| March      31, 2008            | 1.6%         | 3.3%         | 2.5%         | -3.6%        | -7.2%        |

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|                                       |   | Three      Months Ended June 30, |      |   | Six      Months Ended June 30, |   |
|--------------------------------------------|--------|----------------------------------|-----------|--------|--------------------------------|--------|
|                                       |   | 2008                             |      |   | 2007                           |   |   | 2008 |   |   | 2007 |   |
|                                       |   | Balance                          |      |   | Interest                       |   |   | Rate |   |   | Balance |   |   | Interest |   |   | Rate |   |   | Balance |   |   | Interest |   |   | Rate |   |   | Balance |   |   | Interest |   |   | Rate |   |
| ASSETS                                     |   |                             |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans,      Net of Unearned Interest(1)(2) |   | $                                | 1,908,802 |   |                           | $      | 33,610 |   |   |   | 7.08 | % |   | $ | 1,944,969 |   |   | $ | 39,300 |   |   |   | 8.10 | % |   | $ | 1,909,187 |   |   | $ | 69,063 |   |   |   | 7.27 | % |   | $ | 1,962,499 |   |   | $ | 78,564 |   |   |   | 8.07 | % |
| Taxable      Investment Securities         |   |                             | 93,814    |   |                           |   | 1,028 |   |   |   | 4.38 |   |   |   | 105,425 |   |   |   | 1,236 |   |   |   | 4.68 |   |   |   | 94,300 |   |   |   | 2,136 |   |   |   | 4.52 |   |   |   | 106,894 |   |   |   | 2,499 |   |   |   | 4.68 |   |
| Tax-Exempt      Investment Securities(2)   |   |                             | 94,371    |   |                           |   | 1,200 |   |   |   | 5.09 |   |   |   | 83,907 |   |   |   | 1,088 |   |   |   | 5.19 |   |   |   | 92,581 |   |   |   | 2,407 |   |   |   | 5.20 |   |   |   | 83,270 |   |   |   | 2,127 |   |   |   | 5.11 |   |
| Funds      Sold                            |   |                             | 206,984   |   |                           |   | 1,028 |   |   |   | 1.96 |   |   |   | 52,935 |   |   |   | 689 |   |   |   | 5.15 |   |   |   | 206,649 |   |   |   | 2,602 |   |   |   | 2.49 |   |   |   | 46,669 |   |   |   | 1,210 |   |   |   | 5.16 |   |
| Total      Earning Assets                  |   |                             | 2,303,971 |   |                           |   | 36,866 |   |   |   | 6.43 |   |   |   | 2,187,236 |   |   |   | 42,313 |   |   |   | 7.76 |   |   |   | 2,302,717 |   |   |   | 76,208 |   |   |   | 6.65 |   |   |   | 2,199,332 |   |   |   | 84,400 |   |   |   | 7.73 |   |
| Cash      & Due From Banks             |   |                             | 82,182    |   |                           |   |   |   |   |   |   |   |   |   | 88,075 |   |   |   |   |   |   |   |   |   |   |   | 88,214 |   |   |   |   |   |   |   |   |   |   |   | 88,376 |   |   |   |   |   |   |   |   |   |
| Allowance      for Loan Losses             |   |                             | (20,558   | )      |                           |   |   |   |   |   |   |   |   |   | (17,263 | ) |   |   |   |   |   |   |   |   |   |   | (19,392 | ) |   |   |   |   |   |   |   |   |   |   | (17,169 | ) |   |   |   |   |   |   |   |   |
| Other      Assets                          |   |                             | 269,176   |   |                           |   |   |   |   |   |   |   |   |   | 253,204 |   |   |   |   |   |   |   |   |   |   |   | 269,083 |   |   |   |   |   |   |   |   |   |   |   | 250,428 |   |   |   |   |   |   |   |   |   |
| TOTAL      ASSETS                          |   | $                                | 2,634,771 |   |                           |   |   |   |   |   |   |   |   | $ | 2,511,252 |   |   |   |   |   |   |   |   |   |   | $ | 2,640,622 |   |   |   |   |   |   |   |   |   |   | $ | 2,520,967 |   |   |   |   |   |   |   |   |   |
|                                       |   |                             |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES                                |   |                             |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW      Accounts                          |   | $                                | 788,237   |   |                           | $      | 1,935 |   |   |   | 0.99 | % |   | $ | 541,525 |   |   | $ | 2,611 |   |   |   | 1.93 | % |   | $ | 781,064 |   |   | $ | 5,375 |   |   |   | 1.38 | % |   | $ | 546,884 |   |   | $ | 5,237 |   |   |   | 1.93 | % |
| Money      Market Accounts                 |   |                             | 376,996   |   |                           |   | 1,210 |   |   |   | 1.29 |   |   |   | 393,403 |   |   |   | 3,458 |   |   |   | 3.53 |   |   |   | 383,412 |   |   |   | 3,408 |   |   |   | 1.79 |   |   |   | 390,088 |   |   |   | 6,885 |   |   |   | 3.56 |   |
| Savings      Accounts                      |   |                             | 117,182   |   |                           |   | 29 |   |   |   | 0.10 |   |   |   | 122,560 |   |   |   | 74 |   |   |   | 0.24 |   |   |   | 115,172 |   |   |   | 63 |   |   |   | 0.11 |   |   |   | 123,982 |   |   |   | 152 |   |   |   | 0.25 |   |
| Other      Time Deposits                   |   |                             | 443,006   |   |                           |   | 3,988 |   |   |   | 3.62 |   |   |   | 474,761 |   |   |   | 4,955 |   |   |   | 4.19 |   |   |   | 455,143 |   |   |   | 8,797 |   |   |   | 3.89 |   |   |   | 477,845 |   |   |   | 9,824 |   |   |   | 4.15 |   |
| Total      Int. Bearing Deposits           |   |                             | 1,725,421 |   |                           |   | 7,162 |   |   |   | 1.67 |   |   |   | 1,532,249 |   |   |   | 11,098 |   |   |   | 2.91 |   |   |   | 1,734,791 |   |   |   | 17,643 |   |   |   | 2.05 |   |   |   | 1,538,799 |   |   |   | 22,098 |   |   |   | 2.90 |   |
| Short-Term      Borrowings                 |   |                             | 55,830    |   |                           |   | 296 |   |   |   | 2.13 |   |   |   | 66,764 |   |   |   | 737 |   |   |   | 4.41 |   |   |   | 61,963 |   |   |   | 817 |   |   |   | 2.64 |   |   |   | 67,832 |   |   |   | 1,498 |   |   |   | 4.44 |   |
| Subordinated      Notes Payable            |   |                             | 62,887    |   |                           |   | 931 |   |   |   | 5.86 |   |   |   | 62,887 |   |   |   | 932 |   |   |   | 5.94 |   |   |   | 62,887 |   |   |   | 1,862 |   |   |   | 5.86 |   |   |   | 62,887 |   |   |   | 1,858 |   |   |   | 5.96 |   |
| Other      Long-Term Borrowings            |   |                             | 34,612    |   |                           |   | 396 |   |   |   | 4.60 |   |   |   | 42,284 |   |   |   | 496 |   |   |   | 4.71 |   |   |   | 31,128 |   |   |   | 727 |   |   |   | 4.70 |   |   |   | 42,708 |   |   |   | 998 |   |   |   | 4.71 |   |
| Total      Int. Bearing Liabilities        |   |                             | 1,878,750 |   |                           |   | 8,785 |   |   |   | 1.88 |   |   |   | 1,704,184 |   |   |   | 13,263 |   |   |   | 3.12 |   |   |   | 1,890,769 |   |   |   | 21,049 |   |   |   | 2.24 |   |   |   | 1,712,226 |   |   |   | 26,452 |   |   |   | 3.11 |   |
| Noninterest      Bearing Deposits          |   |                             | 415,125   |   |                           |   |   |   |   |   |   |   |   |   | 455,169 |   |   |   |   |   |   |   |   |   |   |   | 409,918 |   |   |   |   |   |   |   |   |   |   |   | 456,728 |   |   |   |   |   |   |   |   |   |
| Other      Liabilities                     |   |                             | 40,006    |   |                           |   |   |   |   |   |   |   |   |   | 42,547 |   |   |   |   |   |   |   |   |   |   |   | 41,088 |   |   |   |   |   |   |   |   |   |   |   | 39,115 |   |   |   |   |   |   |   |   |   |
| TOTAL      LIABILITIES                     |   |                             | 2,333,881 |   |                           |   |   |   |   |   |   |   |   |   | 2,201,900 |   |   |   |   |   |   |   |   |   |   |   | 2,341,775 |   |   |   |   |   |   |   |   |   |   |   | 2,208,069 |   |   |   |   |   |   |   |   |   |
|                                       |   |                             |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SHAREOWNERS'      EQUITY                   |   |                             |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL      SHAREOWNERS' EQUITY             |   |                             | 300,890   |   |                           |   |   |   |   |   |   |   |   |   | 309,352 |   |   |   |   |   |   |   |   |   |   |   | 298,847 |   |   |   |   |   |   |   |   |   |   |   | 312,898 |   |   |   |   |   |   |   |   |   |
|                                       |   |                             |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL      LIABILITIES & EQUITY        |   | $                                | 2,634,771 |   |                           |   |   |   |   |   |   |   |   | $ | 2,511,252 |   |   |   |   |   |   |   |   |   |   | $ | 2,640,622 |   |   |   |   |   |   |   |   |   |   | $ | 2,520,967 |   |   |   |   |   |   |   |   |   |
|                                       |   |                             |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Rate Spread                  |   |                             |      |   |                           |   |   |   |   |   | 4.55 |   |   |   |   |   |   |   |   |   |   |   | 4.64 |   |   |   |   |   |   |   |   |   |   |   | 4.41 |   |   |   |   |   |   |   |   |   |   |   | 4.62 |   |
| Net      Interest Income                   |   |                             |      |   |                           | $      | 28,081 |   |   |   |   |   |   |   |   |   |   | $ | 29,050 |   |   |   |   |   |   |   |   |   |   | $ | 55,159 |   |   |   |   |   |   |   |   |   |   | $ | 57,948 |   |   |   |   |   |
| Net      Interest Margin(3)                |   |                             |      |   |                           |   |   |   |   |   | 4.90 | % |   |   |   |   |   |   |   |   |   |   | 5.33 | % |   |   |   |   |   |   |   |   |   |   | 4.81 | % |   |   |   |   |   |   |   |   |   |   | 5.31 | % |

| (1) | Average balances include      nonaccrual loans.  Interest income includes fees on loans of      $682,000 and $1.4 million, for the three and six months ended June 30,      2008, versus $743,000 and $1.6 million for the comparable periods ended      June 30, 2007. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

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(table of contents)

| Item 3. | QUANTITATIVE      AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK |
|---------|----------------------------------------------------------------|

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

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

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

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

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(table of contents)

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

| Period                                   | Total      numberof      sharespurchased |         | Averageprice      paidper      share |   | Total      number ofshares      purchased aspart      of our sharerepurchase program(1) |         | Maximum      Numberof      shares thatmay      yet be purchasedunder      our sharerepurchase      program |   |
|------------------------------------------|------------------------------------------|--------------|--------------------------------------|--------|-----------------------------------------------------------------------------------------|--------------|------------------------------------------------------------------------------------------------------------|--------|
|                                     |                                     |         |                                 |   |                                                                                    |         |                                                                                                       |   |   |   |   |   |   |   |   |
| April      1, 2008 toApril      30, 2008 |                                     |  6,500  |                                 |   |                                                                                    |  $25.90 |                                                                                                       |   |   |  2,315,701 |   |   |   |  356,174 |   |
| May      1, 2008 toMay      31, 2008     |                                     |  38,050 |                                 |   |                                                                                    |  $25.74 |                                                                                                       |   |   |  2,353,751 |   |   |   |  318,124 |   |
| June      1, 2008 toJune      30, 2008   |                                     |  20,491 |                                 |   |                                                                                    |  $25.99 |                                                                                                       |   |   |  2,374,242 |   |   |   |  297,633 |   |
| Total                                    |                                     | 65,041       |                                 |   |                                                                                    | $25.88       |                                                                                                       |   |   | 2,374,242 |   |   |   | 297,633 |   |
|                                     |                                     |         |                                 |   |                                                                                    |         |                                                                                                       |   |   |   |   |   |   |   |   |

| (1) | This      balance represents the number of shares that were repurchased through the      Capital City Bank Group, Inc. Share Repurchase Program (the “Program”),      which was approved on March 30, 2000, and modified by our Board on January      24, 2002, March 22, 2007, and November 11, 2007 under which we were      authorized to repurchase up to 2,671,875 shares of our common      stock.  The Program is flexible and shares are acquired from the      public markets and other sources using free cash flow.  There is      no predetermined expiration date for the Program.  No shares in      the second quarter were repurchased outside of the  Program. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| Item      4. | Submission of Matters to a Vote of Security      Holders |
|--------------|----------------------------------------------------------|

| 1. | The      following directors were elected for terms expiring as      noted.  These individuals served on the Board of Directors prior      to the Annual Meeting.  The number of votes cast were as      follows: |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| For      terms to expire at the 2011 annual meeting: |   | For    |       |   | Against/Withheld |   |
|------------------------------------------------------|--------|--------|------------|--------|------------------|--------|
| Thomas      A. Barron                                |   |   | 14,348,133 |   |             |   | 50,871 |   |
| J.      Everitt Drew                                 |   |   | 14,345,156 |   |             |   | 53,848 |   |
| Lina      Knox                                       |   |   | 14,318,221 |   |             |   | 80,783 |   |

| 2. | The      shareowners ratified the selection of Ernst & Young as the Company's      independent auditors for the fiscal year ending December 31,      2008.  The number of votes cast were as  follows: |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|       | Against/ |       | Broker        |
|------------|----------|------------|---------------|
| For        | Withheld | Abstention | Non      Vote |
| 14,349,754 | 24,063   | 25,186     | 0             |

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(table of contents)

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

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

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

| 10.1 | Form      of Participant Agreement for 2008 Stock-Based Incentive Plan –      incorporated herein by reference to Exhibit 10.1 of the Registrant’s      Current Report on Form 8-K (filed 6/5/08) (No.    0-13358). |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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. Section1350. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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. Section1350. |
|------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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(table of contents)

SIGNATURES

| By: /s/ J. Kimbrough Davis                                           |   |
|----------------------------------------------------------------------|--------|
| J.      Kimbrough Davis                                              |   |
| Executive      Vice President and Chief Financial Officer            |   |
| (Mr.      Davis is the Principal Financial Officer and has been duly |   |
|  authorized      to sign on behalf of the Registrant)           |   |
|                                                                 |   |
| Date:  August      8, 2008                                 |   |