----

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**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      DC 20549**

**____________________**

**FORM      10-K**

| **ý** |   | **ANNUAL                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**     |
|------------|--------|-----------------------------------------------------------------------------|
|       |   | **SECURITIES                EXCHANGE ACT OF 1934**                     |
|       |   | **For                the fiscal year ended December 31, 2006**         |
|       |   | **OR**                                                                 |
| **o**      |   | **TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE** |
|       |   | **SECURITIES                EXCHANGE ACT OF 1934**                          |

**For      the transition period from ____________ to ____________**

**Capital      City Bank Group, Inc**

| **F****lorida**                                                  |   | **0-13358**                             |   | **59-2273542**                                   |
|------------------------------------------------------------------|--------|-----------------------------------------|--------|--------------------------------------------------|
| (State                of Incorporation)                          |   | (Commission                File Number) |   | (IRS                Employer Identification No.) |
| **217                North Monroe Street, Tallahassee, Florida** |   |  **32301**                         |
| (Address                of principal executive offices)          |   | (Zip                Code)               |

**(850)      671-0300**

**Securities      registered pursuant to Section 12(b) of the Act: **

**Securities      registered pursuant to Section 12(g) of the Act:**
**None**

| Class                                                  |   | Outstanding                at February 28, 2007 |
|--------------------------------------------------------|--------|-------------------------------------------------|
| Common                Stock, $0.01 par value per share |   | 18,388,831                shares                |
|                                                   |   |                                            |

**DOCUMENTS      INCORPORATED BY REFERENCE**

**Portions      of our Proxy Statement for the Annual Meeting of Shareowners to be held on      April 24, 2007, are incorporated by reference in      Part III.**

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**CAPITAL      CITY BANK GROUP, INC.**

**ANNUAL      REPORT FOR 2006 ON FORM 10-K**

**TABLEOF      CONTENTS**

| PART                I        |   |                                                                                                                                                 |   | PAGE     |
|------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|
|                         |   |                                                                                                                                                 |   |     |
| Item                1.       |   | Business                                                                                                                                             |   | 4        |
| Item                1A.      |   | Risk                Factors                                                                                                                          |   | 14       |
| Item                1B.      |   | Unresolved                Staff Comments                                                                                                             |   | 18       |
| Item                2.       |   | Properties                                                                                                                                           |   | 19       |
| Item                3.       |   | Legal                Proceedings                                                                                                                     |   | 19       |
| Item                4.       |   | Submission                of Matters to a Vote of Security                Holders                                                                    |   | 19       |
|                         |   |                                                                                                                                                 |   |     |
| PART                II       |   |                                                                                                                                                 |   |     |
|                         |   |                                                                                                                                                 |   |     |
|  Item                5. |   | Market                for the Registrant’s Common Equity, Related                Shareowner Matters, and Issuer Purchases of Equity Securities |   | 19       |
| Item                6.       |   | Selected                Financial Data                                                                                                               |   | 21       |
| Item                7.       |   | Management's                Discussion and Analysis of Financial Condition                and Results of Operations                                  |   |  22 |
| Item                7A.      |   | Quantitative                and Qualitative Disclosure About Market                Risk                                                              |   | 47       |
| Item                8.       |   | Financial                Statements and Supplementary                Data                                                                            |   | 49       |
| Item                9.       |   | Changes                in and Disagreements with Accountants on Accounting                and Financial Disclosure                                   |   | 82       |
| Item                9A.      |   | Controls                and Procedures                                                                                                               |   | 82       |
| Item                9B.      |   | Other                Information                                                                                                                     |   | 84       |
|                         |   |                                                                                                                                                 |   |     |
| PART                III      |   |                                                                                                                                                 |   |     |
|                         |   |                                                                                                                                                 |   |     |
| Item                10.      |   | Directors,                Executive Officers, and Corporate                Governance                                                                |   | 84       |
| Item                11.      |   | Executive                Compensation                                                                                                                |   | 84       |
| Item                12.      |   | Security                Ownership of Certain Beneficial Owners and                Management and Related Shareowner Matters                          |   | 84       |
| Item                13.      |   | Certain                Relationships and Related Transactions, and                Director Independence                                              |   | 85       |
| Item                14.      |   | Principal                Accounting Fees and Services                                                                                                |   | 85       |
|                         |   |                                                                                                                                                 |   |     |
| PART                IV       |   |                                                                                                                                                 |   |     |
|                         |   |                                                                                                                                                 |   |     |
| Item                15.      |   | Exhibits                and Financial Statement                Schedules                                                                             |   | 86       |
| Signatures                   |   | 88                                                                                                                                                   |

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*Table          of Contents*

**INTRODUCTORY      NOTE**

*Item      1A Risk Factors*

| §   | 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 conduct operations; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | the                accuracy of our financial statement estimates and assumptions; |
|--------------------|-----------------------------------------------------------------------------------|

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

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

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

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

| §   | 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 vice                versa; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

| §   | 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 saving habits; |
|--------------------|----------------------------------------------------------------|

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

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

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

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

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

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

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

*Item      1A Risk Factors*

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*Table          of Contents*

**PART      I**

***Item      1. Business***

**General**

**Banking      Services**

| §   | *Business                Banking*-                The Bank provides banking services to corporations and other business                clients. Credit products are available for a wide variety of general                business purposes, including financing for commercial business properties,                equipment, inventories and accounts receivable, as well as commercial                leasing and letters of credit. Treasury management services and merchant                credit card transaction processing services are also                offered. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | *Commercial                Real Estate Lending*-                The Bank provides a wide range of products to meet the financing                needs of                commercial developers and investors, residential builders and developers,                and community development. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | *Residential                Real Estate Lending*-                The Bank provides products to help meet the home financing needs                of                consumers, including conventional permanent and construction/permanent                (fixed or adjustable rate) financing arrangements, and FHA/VA loan                products. The bank offers both fixed-rate and adjustable rate mortgages                (“ARM”) loans. As of December 31, 2006, approximately 33% of the Bank’s                loan portfolio consisted of ARM                loans. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | *Retail                Credit*-                The Bank provides a full range of loan products to meet the needs                of                consumers, including personal loans, automobile loans, boat/RV loans,                home                equity loans, and credit card                programs. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | *Institutional                Banking -*                The Bank provides banking services to meet the needs of state and                local                governments, public schools and colleges, charities, membership and                not-for-profit associations including customized checking and savings                accounts, cash management systems, tax-exempt loans, lines of credit,                and                term loans. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

| §   | *Retail                Banking -*The                Bank provides a full range of consumer banking services, including                checking accounts, savings programs, automated teller machines (“ATMs”),                debit/credit cards, night deposit services, safe deposit facilities,                and                PC/Internet banking. Clients can use the “Star-Line” system to gain                24-hour access to their deposit and loan account information, and                transfer                funds between linked accounts. The Bank is a member of the “Star” ATM                Network that permits banking clients to access cash at ATMs or point                of                sale merchants. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Data      Processing Services**

**Trust      Services and Asset Management**

**Brokerage      Services**

**Expansion      of Business**

*Recent      Acquisitions. *

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*Table          of Contents*

**Competition**

|                                 |   | Market                  Share as of June 30,(1) |   |
|--------------------------------------|--------|-------------------------------------------------|--------|
|                                 |   | 2006                                            |   | 2005 |   | 2004 |   |
| Florida                              |   |                                            |   |   |   |   |   |
| Alachua                  County(2)   |   |                                            | 5.6    | % |   | 6.3 | %  |   | -- |   |
| Bradford                  County     |   |                                            | 44.6   | % |   | 42.6 | % |   | 37.1 | % |
| Citrus                  County       |   |                                            | 3.3    | % |   | 3.5 | % |   | 3.6 | % |
| Clay                  County         |   |                                            | 2.0    | % |   | 2.2 | % |   | 2.4 | % |
| Dixie                  County        |   |                                            | 20.8   | % |   | 17.3 | % |   | 16.9 | % |
| Gadsden                  County      |   |                                            | 64.9   | % |   | 68.0 | % |   | 77.7 | % |
| Gilchrist                  County    |   |                                            | 47.1   | % |   | 49.5 | % |   | 49.4 | % |
| Gulf                  County         |   |                                            | 14.3   | % |   | 19.8 | % |   | 22.1 | % |
| Hernando                  County     |   |                                            | 1.5    | % |   | 1.4 | % |   | 1.3 | % |
| Jefferson                  County    |   |                                            | 24.6   | % |   | 24.4 | % |   | 24.0 | % |
| Leon                  County         |   |                                            | 18.0   | % |   | 17.5 | % |   | 17.2 | % |
| Levy                  County         |   |                                            | 34.4   | % |   | 33.8 | % |   | 34.1 | % |
| Madison                  County      |   |                                            | 14.9   | % |   | 15.1 | % |   | 17.8 | % |
| Pasco                  County        |   |                                            | 0.2    | % |   | 0.3 | % |   | 0.4 | % |
| St.                  Johns County(2) |   |                                            | 1.5    | % |   | 2.0 |   |   | -- |   |
| Putnam                  County       |   |                                            | 12.3   | % |   | 12.3 | % |   | 12.5 | % |
| Suwannee                  County     |   |                                            | 11.8   | % |   | 7.5 | % |   | 7.7 | % |
| Taylor                  County       |   |                                            | 28.6   | % |   | 27.9 | % |   | 27.4 | % |
| Wakulla                  County(3)   |   |                                            | 2.9    | % |   | -- |   |   | -- |   |
| Washington                  County   |   |                                            | 17.4   | % |   | 20.3 | % |   | 20.0 | % |
| Georgia(4)                           |   |                                            |   |   |   |   |   |   |   |   |
| Bibb                  County         |   |                                            | 2.9    | % |   | 2.8 | % |   | 2.8 | % |
| Burke                  County        |   |                                            | 9.2    | % |   | 9.3 | % |   | 10.3 | % |
| Grady                  County        |   |                                            | 20.0   | % |   | 19.7 | % |   | 23.6 | % |
| Laurens                  County(5)   |   |                                            | 23.8   | % |   | 33.1 | % |   | 41.8 | %  |
| Troup                  County        |   |                                            | 8.2    | % |   | 7.5 | % |   | 8.2 | % |
| Alabama                              |   |                                            |   |   |   |   |   |   |   |   |
| Chambers                  County     |   |                                            | 4.7    | % |   | 3.9 | % |   | 4.4 | % |

| *(1)* | *Obtained                from the June 30, 2006 FDIC/OTS Summary of Deposits                Report.* |
|-------|------------------------------------------------------------------------------------------------------|

| *(2)* | *CCB                entered market in May 2005.* |
|-------|--------------------------------------------------|

| *(3)* | *CCB                entered market in December                2005.* |
|-------|----------------------------------------------------------------------|

| *(4)* | *Does                not include Thomas County where Capital City Bank maintains a residential                mortgage lending office only.* |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------|

| *(5)* | *CCB                entered market in October                2004.* |
|-------|---------------------------------------------------------------------|

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*Table          of Contents*

| County                   | Number                of Commercial                Banks | Number                of Commercial Bank                Offices |
|--------------------------|----------------------------------------------------------|-----------------------------------------------------------------|
| Florida                  |                                                     |                                                            |
| Alachua                  | 14                                                       |  64                                                        |
| Bradford                 |                  3                                  |                   3                                   |
| Citrus                   | 15                                                       |  46                                                        |
| Clay                     | 11                                                       |  26                                                        |
| Dixie                    |                  3                                  |                   4                                   |
| Gadsden                  |                  4                                  |                   6                                   |
| Gilchrist                |                  3                                  |                   5                                   |
| Gulf                     |                  4                                  |    6                                             |
| Hernando                 | 12                                                       |  36                                                        |
| Jefferson                |                  2                                  |                   2                                   |
| Leon                     | 13                                                       |  78                                                        |
| Levy                     |                  3                                  |  13                                                        |
| Madison                  |                  6                                  |                   6                                   |
| Pasco                    | 18                                                       | 96                                                              |
| Putnam                   |                  5                                  |  11                                                        |
| St.                Johns | 19                                                       |  60                                                        |
| Suwannee                 |                  4                                  |                  5                                         |
| Taylor                   |                  3                                  |                  4                                         |
| Wakulla                  |                  4                                  |                  9                                         |
| Washington               |                  4                                  |                  4                                         |
| Georgia                  |                                                     |                                                            |
| Bibb                     | 10                                                       |  52                                                        |
| Burke                    |                  5                                  |  10                                                        |
| Grady                    |                  5                                  |    8                                             |
| Laurens                  |                  9                                  |  19                                                        |
| Troup                    |                  8                                  |  17                                                        |
| Alabama                  |                                                     |                                                            |
| Chambers                 |                  4                                  |  8                                                         |

*Data      obtained from the June 30, 2006 FDIC/OTS Summary of Deposits      Report.*

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*Table          of Contents*

**REGULATORY      CONSIDERATIONS**

**The      Company**

*Permitted      Activities*

*Changes      in Control*

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*Table          of Contents*

*Tying.*

*Capital;      Dividends; Source of Strength.*

**Capital      City Bank**

*Reserves*

*Dividends*

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*Table          of Contents*

*Insurance      of Accounts and Other Assessments*

*Transactions      With Affiliates*

*Community      Reinvestment Act*

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*Table          of Contents*

*Capital      Regulations. *

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*Table          of Contents*

*Interstate      Banking and Branching. *

*Anti-money      Laundering*

*Securities      Activities*

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*Table          of Contents*

*Privacy*

*Consumer      Laws and Regulations*

**Future      Legislative Developments**

**Effect      of Governmental Monetary Policies**

**Income      Taxes**

**Website      Access to Company's Reports**

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*Table          of Contents*

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

*You      should consider carefully the following risk factors before deciding whether      to      invest in our common stock. Our business, including our operating results and      financial condition, could be harmed by any of these risks. Additional risks      and      uncertainties not currently known to us or that we currently deem to be      immaterial also may materially and adversely affect our business. The trading      price of our common stock could decline due to any of these risks, and you      may      lose all or part of your investment. In assessing these risks you should also      refer to the other information contained in our filings with the SEC, including      our financial statements and related notes.*

**Risks      Related to Our Business**

**We      may not be able to successfully manage our growth or implement our growth      strategies, which may adversely affect our results of operations and financial      condition.**

**We      may need additional capital resources in the future and these capital resources      may not be available when needed or at all.**

**We      may incur losses if we are unable to successfully manage interest rate      risk.**

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*Table          of Contents*

**An      inadequate allowance for loan losses would reduce our      earnings.**

| §   | the                risk characteristics of various classifications of                loans; |
|--------------------|---------------------------------------------------------------------------------------------|

| §   | previous                loan loss experience; |
|--------------------|-----------------------------------------------|

| §   | specific                loans that have loss potential; |
|--------------------|---------------------------------------------------------|

| §   | delinquency                trends; |
|--------------------|------------------------------------|

| §   | estimated                fair market value of the                collateral; |
|--------------------|------------------------------------------------------------------------------|

| §   | current                economic conditions; and |
|--------------------|-------------------------------------------------|

| §   | geographic                and industry loan concentrations. |
|--------------------|-------------------------------------------------------------|

**Our      loan portfolio includes loans with a higher risk of loss.**

| §   | *Commercial                Real Estate Loans*.                Repayment is dependent on income being generated in amounts sufficient                to                cover operating expenses and debt service. These loans also involve                greater risk because they are generally not fully amortizing over                a loan                period, but rather have a balloon payment due at maturity. A borrower’s                ability to make a balloon payment typically will depend on being                able to                either refinance the loan or timely sell the underlying property. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | *Commercial                Loans*.                Repayment is generally dependent upon the successful operation of                the                borrower’s business. In addition, the collateral securing the loans may                depreciate over time, be difficult to appraise, illiquid, or fluctuate                in                value based on the success of the                business. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | *Construction                Loans*.                The risk of loss is largely dependent on our initial estimate of                whether                the property’s value at completion equals or exceeds the cost of property                construction and the availability of take-out financing. During the                construction phase, a number of factors can result in delays or cost                overruns. If our estimate is inaccurate or if actual construction                costs                exceed estimates, the value of the property securing our loan may                be                insufficient to ensure full repayment when completed through a permanent                loan or by seizure of collateral. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | *Consumer                Loans*.                Consumer loans (such as personal lines of credit) are collateralized,                if                at all, with assets that may not provide an adequate source of payment                of                the loan due to depreciation, damage, or                loss. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Our      concentration in loans secured by real estate may increase our credit losses,      which would negatively affect our financial results.**

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*Table          of Contents*

**An      economic downturn in Florida and Georgia could hinder our ability to operate      profitably and have an adverse impact on our operations.**

**Since      we engage in lending secured by real estate and may be forced to foreclose      on      the collateral property and own the underlying real estate, we may be subject      to      the increased costs associated with the ownership of real property, which could      result in reduced net income.**

| §   | general                or local economic conditions; |
|--------------------|------------------------------------------------------|

| §   | neighborhood                values; |
|--------------------|-------------------------------------|

| §   | interest                rates; |
|--------------------|--------------------------------|

| §   | real                estate tax rates; |
|--------------------|---------------------------------------|

| §   | operating                expenses of the mortgaged                properties; |
|--------------------|-------------------------------------------------------------------------------|

| §   | supply                of and demand for rental units or                properties; |
|--------------------|------------------------------------------------------------------------------------|

| §   | ability                to obtain and maintain adequate occupancy of the                properties; |
|--------------------|----------------------------------------------------------------------------------------------------|

| §   | zoning                laws; |
|--------------------|-----------------------------|

| §   | governmental                rules, regulations and fiscal policies;                and |
|--------------------|----------------------------------------------------------------------------------------|

| §   | acts                of God. |
|--------------------|-----------------------------|

**Confidential      client information transmitted through our online banking service is vulnerable      to security breaches and computer viruses, which could expose us to litigation      and adversely affect our reputation and our ability to generate      deposits.**

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*Table          of Contents*

**We      must comply with the Bank Secrecy Act and other anti-money laundering statutes      and regulations.**

**Our      controls and procedures may fail or be circumvented.**

**We      are exposed to operational risk as a result of providing certain services,      which      could adversely affect our results of operations.**

**Our      future success is dependent on our ability to compete effectively in the highly      competitive banking industry. **

**We      are subject to extensive regulation that could restrict our activities and      impose financial requirements or limitations on the conduct of our business      and      limit our ability to receive dividends from the Bank.**

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*Table          of Contents*

***Risks      Related to an Investment in Our Common Stock***

**Limited      trading activity for shares of our common stock**
**      may contribute to price volatility.**

**Our      insiders have substantial control over matters requiring shareowner approval,      including changes of control.**

**Our      Articles of Incorporation, Bylaws, and certain laws and regulations may prevent      or delay transactions you might favor, including a sale or merger of      CCBG.**

| §   | Supermajority                voting requirements to remove a director from                office; |
|--------------------|---------------------------------------------------------------------------------------------------|

| §   | Provisions                regarding the timing and content of shareowner proposals and                nominations; |
|--------------------|--------------------------------------------------------------------------------------------------------------------|

| §   | Supermajority                voting requirements to amend Articles of Incorporation unless approval                is                received by a majority of “disinterested                directors”; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Absence                of cumulative voting; and |
|--------------------|--------------------------------------------------|

| §   | Inability                for shareowners to take action by written                consent. |
|--------------------|--------------------------------------------------------------------------------------------|

| ***Item                1B.*** | ***Unresolved                Staff Comments*** |
|-------------------------------|------------------------------------------------|

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*Table          of Contents*

| ***Item                2.*** | ***Properties*** |
|------------------------------|------------------|

| ***Item                3.*** | ***Legal                Proceedings*** |
|------------------------------|----------------------------------------|

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

**PART      II**

| ***Item                5.*** | ***Market                for the Registrant's Common Equity, Related Shareowner Matters, and                Issuer                Purchases of Equity                Securities*** |
|------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Common      Stock Market Prices and Dividends*

|                                               |   | 2006                         |   | 2005                        |   |
|----------------------------------------------------|--------|------------------------------|--------|-----------------------------|--------|
|                                               |   | Fourth                  Qtr. |   | Third                  Qtr. |   | Second                  Qtr. |   | First                  Qtr. |   | Fourth                  Qtr. |   | Third                  Qtr. |   | Second                  Qtr. |   | First                  Qtr. |   |
| Common                  stock price:               |   |                         |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| High                                               |   | $                            | 35.98  |                        | $      | 33.25 |   | $ | 35.39 |   | $ | 37.97 |   | $ | 39.33 |   | $ | 38.72 |   | $ | 33.46 |   | $ | 33.60 |   |
| Low                                                |   |                         | 30.14  |                        |   | 29.87 |   |   | 29.51 |   |   | 33.79 |   |   | 33.21 |   |   | 31.78 |   |   | 28.02 |   |   | 29.30 |   |
| Close                                              |   |                         | 35.30  |                        |   | 31.10 |   |   | 30.20 |   |   | 35.55 |   |   | 34.29 |   |   | 37.71 |   |   | 32.32 |   |   | 32.41 |   |
| Cash                  dividends declared per share |   |                         | .1750  |                        |   | .1625 |   |   | .1625 |   |   | .1625 |   |   | .1625 |   |   | .1520 |   |   | .1520 |   |   | .1520 |   |

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*Table          of Contents*

*Purchases      of Equity Securities by the Issuer and Affiliated Purchasers*

| **Period**                                           | **Total                number****of                shares****purchased** |   | **Average****price                paid****per                share** |   | **Total                number of****shares                purchased as****part                of our share****repurchase                program**(1) |   | **Maximum                Number****of                shares that****may                yet be purchased****under                our share****repurchase                program** |
|------------------------------------------------------|--------------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                 |                                                                     |   |                                                                 |   |                                                                                                                                                 |   |                                                                                                                                                                             |   |   |   |   |   |   |   |
| October                1, 2006 to October 31, 2006   |                                                                     | -      |                                                                 |   |                                                                                                                                                 | -      |                                                                                                                                                                             |   |   | - |   |   |   | 307,758 |   |
| November                1, 2006 to November 30, 2006 |                                                                     | 11,581 |                                                                 |   |                                                                                                                                                 | $32.98 |                                                                                                                                                                             |   |   | 879,837 |   |   |   | 296,177 |   |
| December                1, 2006 to December 31, 2006 |                                                                     | 4,139  |                                                                 |   |                                                                                                                                                 | 32.90  |                                                                                                                                                                             |   |   | 883,976 |   |   |   | 292,038 |   |
|                                                 |                                                                     |   |                                                                 |   |                                                                                                                                                 |   |                                                                                                                                                                             |   |   |   |   |   |   |   |   |
| Total                                                |                                                                     | 15,720 |                                                                 |   |                                                                                                                                                 | $32.96 |                                                                                                                                                                             |   |   | 883,976 |   |   |   | 292,038 |   |

| (1) | This                balance represents the number of shares that were repurchased through                the                Capital City Bank Group, Inc. Share Repurchase Program, which was                approved                on March 30, 2000, and modified by our Board on January 24, 2002                (the                "Program") under which we were authorized to repurchase up to 1,171,875                shares of our common stock. The Program is flexible and shares are                acquired from the public markets and other sources with either free                cash                flow or borrowed funds. There is no predetermined expiration date                for the                Program. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Performance      Graph*

|                                         |         | ***Period                Ending*** |         |
|----------------------------------------------|--------------|------------------------------------|--------------|
| ***Index***                                  | **12/31/01** | **12/31/02**                       | **12/31/03** | **12/31/04** | **12/31/05** | **12/31/06** |
| Capital                City Bank Group, Inc. | 100.00       | 168.06                             | 251.02       | 232.18 | 242.31 | 254.43 |
| NASDAQ                Composite              | 100.00       | 68.76                              | 103.67       | 113.16 | 115.57 | 127.58 |
| SNL                $1B-$5B Bank Index        | 100.00       | 115.44                             | 156.98       | 193.74 | 190.43 | 220.36 |

----

*Table          of Contents*

***Item      6.***
***Selected      Financial Data***

|                                                              |   | For                the Years Ended December 31, |       |
|-------------------------------------------------------------------|--------|-------------------------------------------------|------------|
| *(Dollars                in Thousands, Except Per Share Data)*(1) |   | 2006                                            |       | 2005 |   | 2004 |   | 2003 |   | 2002 |   |
|                                                              |   |                                            |       |   |   |   |   |   |   |   |   |
| Interest                Income                                    |   | $                                               | 165,893    |   | $ | 140,053 |   | $ | 101,525 |   | $ | 94,830 |   | $ | 104,165 |   |
| Net                Interest Income                                |   |                                            | 119,136    |   |   | 109,990 |   |   | 86,084 |   |   | 79,991 |   |   | 81,662 |   |
| Provision                for Loan Losses                          |   |                                            | 1,959      |   |   | 2,507 |   |   | 2,141 |   |   | 3,436 |   |   | 3,297 |   |
| Net                Income                                         |   |                                            | 33,265     |   |   | 30,281 |   |   | 29,371 |   |   | 25,193 |   |   | 23,082 |   |
|                                                              |   |                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Per                Common Share:                                  |   |                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                Net Income                                   |   | $                                               | 1.79       |   | $ | 1.66 |   | $ | 1.74 |   | $ | 1.53 |   | $ | 1.40 |   |
| Diluted                Net Income                                 |   |                                            | 1.79       |   |   | 1.66 |   |   | 1.74 |   |   | 1.52 |   |   | 1.39 |   |
| Cash                Dividends Declared                            |   |                                            | .663       |   |   | .619 |   |   | .584 |   |   | .525 |   |   | .402 |   |
| Book                Value                                         |   |                                            | 17.01      |   |   | 16.39 |   |   | 14.51 |   |   | 15.27 |   |   | 14.08 |   |
|                                                              |   |                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Key                Performance Ratios:                            |   |                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return                on Average Assets                           |   |                                            | 1.29       | % |   | 1.22 | % |   | 1.46 | % |   | 1.40 | % |   | 1.34 | % |
| Return                on Average Equity                           |   |                                            | 10.48      |   |   | 10.56 |   |   | 13.31 |   |   | 12.82 |   |   | 12.85 |   |
| Net                Interest Margin (FTE)                          |   |                                            | 5.35       |   |   | 5.09 |   |   | 4.88 |   |   | 5.01 |   |   | 5.35 |   |
| Dividend                Pay-Out Ratio                             |   |                                            | 37.01      |   |   | 37.35 |   |   | 33.62 |   |   | 34.51 |   |   | 28.87 |   |
| Equity                to Assets Ratio                             |   |                                            | 12.15      |   |   | 11.65 |   |   | 10.86 |   |   | 10.98 |   |   | 10.22 |   |
|                                                              |   |                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Asset                Quality:                                     |   |                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance                for Loan Losses                          |   | $                                               | 17,217     |   | $ | 17,410 |   | $ | 16,037 |   | $ | 12,429 |   | $ | 12,495 |   |
| Allowance                for Loan Losses to Loans                 |   |                                            | 0.86       | % |   | 0.84 | % |   | 0.88 | % |   | 0.93 | % |   | 0.97 | % |
| Nonperforming                Assets                               |   |                                            | 8,731      |   |   | 5,550 |   |   | 5,271 |   |   | 7,301 |   |   | 3,843 |   |
| Nonperforming                Assets to Loans + ORE                |   |                                            | 0.44       |   |   | 0.27 |   |   | 0.29 |   |   | 0.54 |   |   | 0.30 |   |
| Allowance                to Nonperforming Loans                   |   |                                            | 214.09     |   |   | 331.11 |   |   | 345.18 |   |   | 529.80 |   |   | 497.72 |   |
| Net                Charge-Offs to Average Loans                   |   |                                            | 0.11       |   |   | 0.13 |   |   | 0.22 |   |   | 0.27 |   |   | 0.23 |   |
|                                                              |   |                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Averages                for the Year:                             |   |                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans,                Net                                         |   | $                                               | 2,029,397  |   | $ | 1,968,289 |   | $ | 1,538,744 |   | $ | 1,318,080 |   | $ | 1,256,107 |   |
| Earning                Assets                                     |   |                                            | 2,258,277  |   |   | 2,187,672 |   |   | 1,789,843 |   |   | 1,624,680 |   |   | 1,556,500 |   |
| Total                Assets                                       |   |                                            | 2,581,078  |   |   | 2,486,733 |   |   | 2,006,745 |   |   | 1,804,895 |   |   | 1,727,180 |   |
| Deposits                                                          |   |                                            | 2,034,931  |   |   | 1,954,888 |   |   | 1,599,201 |   |   | 1,431,808 |   |   | 1,424,999 |   |
| Subordinated                Notes                                 |   |                                            | 62,887     |   |   | 50,717 |   |   | 5,155 |   |   | - |   |   | - |   |
| Long-Term                Borrowings                               |   |                                            | 57,260     |   |   | 70,216 |   |   | 59,462 |   |   | 55,594 |   |   | 30,423 |   |
| Shareowners'                Equity                                |   |                                            | 317,336    |   |   | 286,712 |   |   | 220,731 |   |   | 196,588 |   |   | 179,652 |   |
|                                                              |   |                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Year-End                Balances:                                 |   |                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans,                Net                                         |   | $                                               | 1,999,721  |   | $ | 2,067,494 |   | $ | 1,828,825 |   | $ | 1,341,632 |   | $ | 1,285,221 |   |
| Earning                Assets                                     |   |                                            | 2,270,410  |   |   | 2,299,677 |   |   | 2,113,571 |   |   | 1,648,818 |   |   | 1,636,472 |   |
| Total                Assets                                       |   |                                            | 2,597,910  |   |   | 2,625,462 |   |   | 2,364,013 |   |   | 1,846,502 |   |   | 1,824,771 |   |
| Deposits                                                          |   |                                            | 2,081,654  |   |   | 2,079,346 |   |   | 1,894,886 |   |   | 1,474,205 |   |   | 1,434,200 |   |
| Subordinated                Notes                                 |   |                                            | 62,887     |   |   | 62,887 |   |   | 30,928 |   |   | - |   |   | - |   |
| Long-Term                Borrowings                               |   |                                            | 43,083     |   |   | 69,630 |   |   | 68,453 |   |   | 46,475 |   |   | 71,745 |   |
| Shareowners'                Equity                                |   |                                            | 315,770    |   |   | 305,776 |   |   | 256,800 |   |   | 202,809 |   |   | 186,531 |   |
|                                                              |   |                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                Data:                                        |   |                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                Average Shares Outstanding                   |   |                                            | 18,584,519 |   |   | 18,263,855 |   |   | 16,805,696 |   |   | 16,528,109 |   |   | 16,531,606 |   |
| Diluted                Average Shares Outstanding                 |   |                                            | 18,609,839 |   |   | 18,281,243 |   |   | 16,810,926 |   |   | 16,563,986 |   |   | 16,592,944 |   |
| Shareowners                of Record(2)                           |   |                                            | 1,805      |   |   | 1,716 |   |   | 1,598 |   |   | 1,512 |   |   | 1,457 |   |
| Banking                Locations(2)                               |   |                                            | 69         |   |   | 69 |   |   | 60 |   |   | 57 |   |   | 54 |   |
| Full-Time                Equivalent Associates(2)                 |   |                                            | 1,056      |   |   | 1,013 |   |   | 926 |   |   | 795 |   |   | 781 |   |

| *(1)* | *All                share and per share data have been adjusted to reflect the 5-for-4                stock                split effective July 1, 2005, and the 5-for-4 stock split effective                June                13, 2003.* |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(2)* | *As                of the record date. The record date is on or about March 1st of the                following year.* |
|-------|------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

| ***Item                7.*** | ***Management's                Discussion and Analysis of Financial Condition and Results of                Operations*** |
|------------------------------|---------------------------------------------------------------------------------------------------------------------------|

|                                                                          | **For                the Years Ended December 31,** |
|-------------------------------------------------------------------------------|-----------------------------------------------------|
|                                                                          | **2006**                                            | **2005** | **2004** |
| Efficiency                ratio                                               | 68.87%                                              | 68.46% | 64.73% |
| Effect                of intangible amortization and one-time merger expenses | (3.45)%                                             | (3.67)% | (3.17%) |
| Operating                efficiency ratio                                     | 65.42%                                              | 64.79% | 61.56% |

|                                                                          | **For                the Years Ended December 31,** |
|-------------------------------------------------------------------------------|-----------------------------------------------------|
|                                                                          | **2006**                                            | **2005** | **2004** |
| Net                noninterest expense as a percent of average assets         | 2.56%                                               | 2.44% | 1.93% |
| Effect                of intangible amortization and one-time merger expenses | (0.24)%                                             | (0.24)% | (0.22)% |
| Operating                net noninterest expense ratio                        | 2.32%                                               | 2.20% | 1.71% |

----

*Table          of Contents*

**CAUTION      CONCERNING FORWARD-LOOKING STATEMENTS**

*Item      1A Risk Factors*
*Item      1A Risk Factors*

**BUSINESS      OVERVIEW**

----

*Table          of Contents*

*Recent      Acquisitions*

**FINANCIAL      OVERVIEW**

*2006      Financial Performance Highlights -*

| §   | 2006                earnings of $33.3 million, or $1.79 per diluted share, an increase                of 9.9%                and 7.8%, respectively, over 2005. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Growth                in earnings was attributable to strong growth in operating revenues                led by                an 8.3% improvement in net interest income and a 13.0% increase in                noninterest income. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Tax                equivalent net interest income grew 8.8% over 2005 due to growth                in                average earnings assets attributable to the FABC acquisition and                an                improved net interest margin. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Net                interest margin percentage improved 26 basis points over 2005 driven                by                higher earning asset yields and a slight improvement in the earning                asset                mix. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Noninterest                income grew 13.0% over 2005 due primarily to higher deposit fees,                retail                brokerage fees, and card processing                fees. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Strong                credit quality continues to be a key driver in the Bank’s earnings                performance. Net charge-offs totaled $2.1 million, or .11% of average                loans for 2006 compared to $2.5 million, or .13% in 2005. At year-end                the                allowance for loan losses was .86% of outstanding loans and provided                coverage of 214% of nonperforming                loans. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | We                remain well-capitalized with a risk based capital ratio of                14.95%. |
|--------------------|-----------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

**RESULTS      OF OPERATIONS**

**Table      1**

**CONDENSED      SUMMARY OF EARNINGS**

|                                                               |   | For                the Years Ended December 31, |    |
|--------------------------------------------------------------------|--------|-------------------------------------------------|---------|
| *(Dollars                in Thousands, Except Per Share Data)*(1)  |   | 2006                                            |    | 2005 |   | 2004 |   |
| Interest                Income                                     |   | $                                               | 165,893 |   | $ | 140,053 |   | $ | 101,525 |   |
| Taxable                Equivalent Adjustments                      |   |                                            | 1,812   |   |   | 1,222 |   |   | 1,207 |   |
| Total                Interest Income (FTE)                         |   |                                            | 167,705 |   |   | 141,275 |   |   | 102,732 |   |
| Interest                Expense                                    |   |                                            | 46,757  |   |   | 30,063 |   |   | 15,441 |   |
| Net                Interest Income (FTE)                           |   |                                            | 120,948 |   |   | 111,212 |   |   | 87,291 |   |
| Provision                for Loan Losses                           |   |                                            | 1,959   |   |   | 2,507 |   |   | 2,141 |   |
| Taxable                Equivalent Adjustments                      |   |                                            | 1,812   |   |   | 1,222 |   |   | 1,207 |   |
| Net                Interest Income After Provision for Loan Losses |   |                                            | 117,177 |   |   | 107,483 |   |   | 83,943 |   |
| Noninterest                Income                                  |   |                                            | 55,577  |   |   | 49,198 |   |   | 43,372 |   |
| Gain                on Sale of Credit Card Portfolios              |   |                                            | -       |   |   | - |   |   | 7,181 |   |
| Noninterest                Expense                                 |   |                                            | 121,568 |   |   | 109,814 |   |   | 89,226 |   |
| Income                Before Income Taxes                          |   |                                            | 51,186  |   |   | 46,867 |   |   | 45,270 |   |
| Income                Taxes                                        |   |                                            | 17,921  |   |   | 16,586 |   |   | 15,899 |   |
| Net                Income                                          |   | $                                               | 33,265  |   | $ | 30,281 |   | $ | 29,371 |   |
|                                                               |   |                                            |    |   |   |   |   |   |   |   |
| Basic                Net Income Per Share                          |   | $                                               | 1.79    |   | $ | 1.66 |   | $ | 1.74 |   |
| Diluted                Net Income Per Share                        |   | $                                               | 1.79    |   | $ | 1.66 |   | $ | 1.74 |   |

| *(1)* | *All                share and per share data have been adjusted to reflect the 5-for-4                stock                split effective July 1, 2005.* |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

**Net      Interest Income **

----

*Table          of Contents*

**Table      2**

**AVERAGE      BALANCES AND INTEREST RATES**

|                                                                 |   | **2006** |      | **2005** |   | **2004** |   |
|----------------------------------------------------------------------|--------|----------|-----------|----------|--------|----------|--------|
| *(Taxable                  Equivalent Basis - Dollars in Thousands)* |   | Balance  |      | Interest |   | Rate     |   | Balance |   | Interest |   | Rate |   | Balance |   | Interest |   | Rate |   |
| **ASSETS**                                                           |   |     |      |     |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans,                  Net of Unearned Interest(1)(2)               |   | $        | 2,029,397 |     | $      | 157,227  |   |   | 7.75 | % | $ | 1,968,289 |   | $ | 133,665 |   |   | 6.79 | % | $ | 1,538,744 |   | $ | 95,796 |   |   | 6.23 | % |
| Taxable                  Investment Securities                       |   |     | 112,392   |     |   | 4,851    |   |   | 4.31 | % |   | 142,406 |   |   | 4,250 |   |   | 2.98 | % |   | 131,842 |   |   | 3,138 |   |   | 2.38 | % |
| Tax-Exempt                  Investment Securities(2)                 |   |     | 74,634    |     |   | 3,588    |   |   | 4.81 | % |   | 49,252 |   |   | 2,369 |   |   | 4.81 | % |   | 51,979 |   |   | 2,965 |   |   | 5.70 | % |
| Funds                  Sold                                          |   |     | 41,854    |     |   | 2,039    |   |   | 4.81 | % |   | 27,725 |   |   | 991 |   |   | 3.53 | % |   | 67,278 |   |   | 833 |   |   | 1.24 | % |
| Total                  Earning Assets                                |   |     | 2,258,277 |     |   | 167,705  |   |   | 7.42 | % |   | 2,187,672 |   |   | 141,275 |   |   | 6.46 | % |   | 1,789,843 |   |   | 102,732 |   |   | 5.74 | % |
| Cash                  & Due From Banks                           |   |     | 100,237   |     |   |     |   |   |   |   |   | 105,787 |   |   |   |   |   |   |   |   | 93,070 |   |   |   |   |   |   |   |
| Allowance                  for Loan Losses                           |   |     | (17,486   | )        |   |     |   |   |   |   |   | (17,081 | ) |   |   |   |   |   |   |   | (13,846 | ) |   |   |   |   |   |   |
| Other                  Assets                                        |   |     | 240,050   |     |   |     |   |   |   |   |   | 210,355 |   |   |   |   |   |   |   |   | 137,678 |   |   |   |   |   |   |   |
| TOTAL                  ASSETS                                        |   | $        | 2,581,078 |     |   |     |   |   |   |   | $ | 2,486,733 |   |   |   |   |   |   |   | $ | 2,006,745 |   |   |   |   |   |   |   |
|                                                                 |   |     |      |     |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **LIABILITIES**                                                      |   |     |      |     |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                  Accounts                                        |   | $        | 518,671   |     | $      | 7,658    |   |   | 1.48 | % | $ | 430,601 |   | $ | 2,868 |   |   | .67 | % | $ | 292,492 |   | $ | 733 |   |   | .25 | % |
| Money                  Market Accounts                               |   |     | 370,257   |     |   | 11,687   |   |   | 3.16 | % |   | 275,830 |   |   | 4,337 |   |   | 1.57 | % |   | 227,808 |   |   | 1,190 |   |   | .52 | % |
| Savings                  Accounts                                    |   |     | 134,033   |     |   | 278      |   |   | 0.21 | % |   | 152,890 |   |   | 292 |   |   | 0.19 | % |   | 130,282 |   |   | 164 |   |   | .13 | % |
| Other                  Time Deposits                                 |   |     | 507,283   |     |   | 17,630   |   |   | 3.48 | % |   | 550,821 |   |   | 13,637 |   |   | 2.48 | % |   | 459,464 |   |   | 9,228 |   |   | 2.01 | % |
| Total                  Int. Bearing Deposits                         |   |     | 1,530,244 |     |   | 37,253   |   |   | 2.43 | % |   | 1,410,142 |   |   | 21,134 |   |   | 1.50 | % |   | 1,110,046 |   |   | 11,315 |   |   | 1.02 | % |
| Short-Term                  Borrowings                               |   |     | 78,700    |     |   | 3,074    |   |   | 3.89 | % |   | 97,863 |   |   | 2,854 |   |   | 2.92 | % |   | 100,582 |   |   | 1,270 |   |   | 1.26 | % |
| Subordinated                  Notes Payable                          |   |     | 62,887    |     |   | 3,725    |   |   | 5.92 | % |   | 50,717 |   |   | 2,981 |   |   | 5.88 | % |   | 5,155 |   |   | 294 |   |   | 5.71 | % |
| Other                  Long-Term Borrowings                          |   |     | 57,260    |     |   | 2,705    |   |   | 4.72 | % |   | 70,216 |   |   | 3,094 |   |   | 4.41 | % |   | 59,462 |   |   | 2,562 |   |   | 4.31 | % |
| Total                  Int. Bearing Liabilities                      |   |     | 1,729,091 |     |   | 46,757   |   |   | 2.70 | % |   | 1,628,938 |   |   | 30,063 |   |   | 1.85 | % |   | 1,275,245 |   |   | 15,441 |   |   | 1.21 | % |
| Noninterest                  Bearing Deposits                        |   |     | 504,687   |     |   |     |   |   |   |   |   | 544,746 |   |   |   |   |   |   |   |   | 489,155 |   |   |   |   |   |   |   |
| Other                  Liabilities                                   |   |     | 29,964    |     |   |     |   |   |   |   |   | 26,337 |   |   |   |   |   |   |   |   | 21,614 |   |   |   |   |   |   |   |
| TOTAL                  LIABILITIES                                   |   |     | 2,263,742 |     |   |     |   |   |   |   |   | 2,200,021 |   |   |   |   |   |   |   |   | 1,786,014 |   |   |   |   |   |   |   |
|                                                                 |   |     |      |     |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **SHAREOWNERS'                  EQUITY**                             |   |     |      |     |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL                  SHAREOWNERS' EQUITY                           |   |     | 317,336   |     |   |     |   |   |   |   |   | 286,712 |   |   |   |   |   |   |   |   | 220,731 |   |   |   |   |   |   |   |
|                                                                 |   |     |      |     |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL                  LIABILITIES & EQUITY                      |   | $        | 2,581,078 |     |   |     |   |   |   |   | $ | 2,486,733 |   |   |   |   |   |   |   | $ | 2,006,745 |   |   |   |   |   |   |   |
|                                                                 |   |     |      |     |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  Rate Spread                                |   |     |      |     |   |     |   |   | 4.72 | % |   |   |   |   |   |   |   | 4.61 | % |   |   |   |   |   |   |   | 4.53 | % |
| Net                  Interest Income                                 |   |     |      |     | $      | 120,948  |   |   |   |   |   |   |   | $ | 111,212 |   |   |   |   |   |   |   | $ | 87,291 |   |   |   |   |
| Net                  Interest Margin(3)                              |   |     |      |     |   |     |   |   | 5.35 | % |   |   |   |   |   |   |   | 5.09 | % |   |   |   |   |   |   |   | 4.88 | % |

| *(1)* | *Average                balances include nonaccrual loans. Interest income includes loan                fees of                $3.8 million, $3.1 million, and $1.7 million in 2006, 2005, and 2004,                respectively.* |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(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.* |
|-------|-----------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

**Table      3**

**RATE/VOLUME      ANALYSIS **

|                                                               |   | 2006                Changes From 2005 |   | 2005                Changes From 2004 |   |
|--------------------------------------------------------------------|--------|---------------------------------------|--------|---------------------------------------|--------|
|                                                               |   |                                  |   | Due                to Average         |   |   |   | Due                to Average |   |
| *(Taxable                Equivalent Basis - Dollars in Thousands)* |   | Total                                 |   | Volume                                |   | Rate |   | Total |   | Calendar                (3) |   | Volume |   | Rate |   |
| Earning                Assets:                                     |   |                                  |   |                                  |   |   |   |   |   |   |   |   |   |   |   |
| Loans,                Net of Unearned Interest (2)                 |   | $                                     | 23,562 |                                  | $      | 5,760 |   | $ | 17,802 |   | $ | 37,870 |   | $ | (262 | ) | $ | 27,706 |   | $ | 11,506 |   |
| Investment                Securities:                              |   |                                  |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                            |   |                                  | 601    |                                  |   | (689 | ) |   | 1,290 |   |   | 1,110 |   |   | (3 | ) |   | 693 |   |   | 420 |   |
| Tax-Exempt                (2)                                      |   |                                  | 1,219  |                                  |   | 1,220 |   |   | (1 | ) |   | (597 | ) |   | - |   |   | (156 | ) |   | (441 | ) |
| Funds                Sold                                          |   |                                  | 1,048  |                                  |   | 444 |   |   | 604 |   |   | 158 |   |   | (2 | ) |   | (488 | ) |   | 648 |   |
|                                                               |   |                                  |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                              |   |                                  | 26,430 |                                  |   | 6,735 |   |   | 19,695 |   |   | 38,541 |   |   | (267 | ) |   | 27,125 |   |   | 11,683 |   |
|                                                               |   |                                  |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                Bearing Liabilities:                       |   |                                  |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                Accounts                                        |   |                                  | 4,790  |                                  |   | 586 |   |   | 4,204 |   |   | 2,134 |   |   | (2 | ) |   | 347 |   |   | 1,789 |   |
| Money                Market Accounts                               |   |                                  | 7,350  |                                  |   | 1,485 |   |   | 5,865 |   |   | 3,148 |   |   | (3 | ) |   | 251 |   |   | 2,900 |   |
| Savings                Accounts                                    |   |                                  | (14    | )                                     |   | (36 | ) |   | 22 |   |   | 128 |   |   | (1 | ) |   | 28 |   |   | 101 |   |
| Time                Deposits                                       |   |                                  | 3,993  |                                  |   | (1,078 | ) |   | 5,071 |   |   | 4,408 |   |   | (25 | ) |   | 1,840 |   |   | 2,593 |   |
| Short-Term                Borrowings                               |   |                                  | 221    |                                  |   | (586 | ) |   | 807 |   |   | 1,585 |   |   | (3 | ) |   | 83 |   |   | 1,505 |   |
| Subordinated                Notes Payable                          |   |                                  | 744    |                                  |   | 715 |   |   | 29 |   |   | 2,687 |   |   | (1 | ) |   | 2,609 |   |   | 79 |   |
| Long-Term                Borrowings                                |   |                                  | (390   | )                                     |   | (571 | ) |   | 181 |   |   | 532 |   |   | (7 | ) |   | 465 |   |   | 74 |   |
|                                                               |   |                                  |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                              |   |                                  | 16,694 |                                  |   | 515 |   |   | 16,179 |   |   | 14,622 |   |   | (42 | ) |   | 5,623 |   |   | 9,041 |   |
|                                                               |   |                                  |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Changes                in Net Interest Income                      |   | $                                     | 9,736  |                                  | $      | 6,220 |   | $ | 3,516 |   | $ | 23,919 |   | $ | (255 | ) | $ | 21,502 |   | $ | 2,642 |   |

| *(1)* | *This                table shows the change in taxable equivalent net interest income                for                comparative periods based on either changes in average volume or                changes                in average rates for earning assets and interest bearing liabilities.                Changes which are not solely due to volume changes or solely due                to rate                changes have been attributed to rate changes.* |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(2)* | *Interest                income includes the effects of taxable equivalent adjustments using                a 35%                tax rate to adjust interest on tax-exempt loans and securities to                a                taxable equivalent basis.* |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*(3)*

*Reflects      the difference in 365 day year (2005) versus 366 day year      (2004).*

----

*Table          of Contents*

**Provision      for Loan Losses**

----

*Table          of Contents*

**Noninterest      Income**

|                                                        |   | For                the Years Ended December 31, |
|-------------------------------------------------------------|--------|-------------------------------------------------|
| *(Dollars                in Thousands)*                     |   | 2006                                            |   | 2005 |   | 2004 |
| Noninterest                Income:                          |   |                                            |   |   |   |   |
| Service                Charges on Deposit Accounts          |   | $                                               | 24,620 |   | $ | 20,740 |   | $ | 17,574 |
| Data                Processing                              |   |                                            | 2,723 |   |   | 2,610 |   |   | 2,628 |
| Asset                Management Fees                        |   |                                            | 4,600 |   |   | 4,419 |   |   | 4,007 |
| Retail                Brokerage Fees                        |   |                                            | 2,091 |   |   | 1,322 |   |   | 1,401 |
| (Loss)/Gain                on Sale of Investment Securities |   |                                            | (4) |   |   | 9 |   |   | 14 |
| Mortgage                Banking Revenues                    |   |                                            | 3,235 |   |   | 4,072 |   |   | 3,208 |
| Merchant                Services Fees                       |   |                                            | 6,978 |   |   | 6,174 |   |   | 5,135 |
| Interchange                Fees                             |   |                                            | 3,105 |   |   | 2,239 |   |   | 2,229 |
| Gain                on Sale of Credit Card Portfolios       |   |                                            | - |   |   | - |   |   | 7,180 |
| ATM/Debit                Card Fees                          |   |                                            | 2,519 |   |   | 2,206 |   |   | 2,007 |
| Other                                                       |   |                                            | 5,710 |   |   | 5,407 |   |   | 5,170 |
| Total                Noninterest Income                     |   | $                                               | 55,577 |   | $ | 49,198 |   | $ | 50,553 |

*Service      Charges on Deposit Accounts*

*Asset      Management Fees*

*Mortgage      Banking Revenues*

*Card      Fees*

----

*Table          of Contents*

**Noninterest      Expense**

|                                     |   | For                the Years Ended December 31, |
|------------------------------------------|--------|-------------------------------------------------|
| *(Dollars                in Thousands)*  |   | 2006                                            |   | 2005 |   | 2004 |
| Noninterest                Expense:      |   |                                            |   |   |   |   |
| Salaries                                 |   | $                                               | 46,604 |   | $ | 40,978 |   | $ | 33,968 |
| Associate                Benefits        |   |                                            | 14,251 |   |   | 12,709 |   |   | 10,377 |
| Total                Compensation        |   |                                            | 60,855 |   |   | 53,687 |   |   | 44,345 |
|                                     |   |                                            |   |   |   |   |   |   |   |
| Premises                                 |   |                                            | 9,395 |   |   | 8,293 |   |   | 7,074 |
| Equipment                                |   |                                            | 9,911 |   |   | 8,970 |   |   | 8,393 |
| Total                Occupancy           |   |                                            | 19,306 |   |   | 17,263 |   |   | 15,467 |
|                                     |   |                                            |   |   |   |   |   |   |   |
| Legal                Fees                |   |                                            | 1,734 |   |   | 1,827 |   |   | 1,301 |
| Professional                Fees         |   |                                            | 3,402 |   |   | 3,825 |   |   | 2,858 |
| Processing                Services       |   |                                            | 1,863 |   |   | 1,481 |   |   | 997 |
| Advertising                              |   |                                            | 4,285 |   |   | 4,275 |   |   | 2,001 |
| Travel                and Entertainment  |   |                                            | 1,664 |   |   | 1,414 |   |   | 1,023 |
| Printing                and Supplies     |   |                                            | 2,472 |   |   | 2,372 |   |   | 1,854 |
| Telephone                                |   |                                            | 2,323 |   |   | 2,493 |   |   | 2,048 |
| Postage                                  |   |                                            | 1,145 |   |   | 1,195 |   |   | 1,007 |
| Intangible                Amortization   |   |                                            | 6,085 |   |   | 5,440 |   |   | 3,824 |
| Merger                Expense            |   |                                            | - |   |   | 438 |   |   | 550 |
| Interchange                Fees          |   |                                            | 6,010 |   |   | 5,402 |   |   | 4,741 |
| Courier                Service           |   |                                            | 1,307 |   |   | 1,360 |   |   | 1,143 |
| Miscellaneous                            |   |                                            | 9,117 |   |   | 7,342 |   |   | 6,067 |
| Total                Other               |   |                                            | 41,407 |   |   | 38,864 |   |   | 29,414 |
|                                     |   |                                            |   |   |   |   |   |   |   |
| Total                Noninterest Expense |   | $                                               | 121,568 |   | $ | 109,814 |   | $ | 89,226 |

*Compensation*

----

*Table          of Contents*

*Occupancy*

*Other*

**Income      Taxes**

----

*Table          of Contents*

**FINANCIAL      CONDITION**

**Loans**

**Table      4**

**SOURCES      OF EARNING ASSET GROWTH**

|                                                       |   | 2005                to  |   | Percentage              |   | Components                of |
|------------------------------------------------------------|--------|-------------------------|--------|-------------------------|--------|------------------------------|
|                                                       |   | 2006                    |   | Of                Total |   | Average                      | Earning | Assets |
| *(Average                Balances - Dollars In Thousands)* |   | Change                  |   | Change                  |   | 2006                         | 2005 | 2004 |
|                                                       |   |                    |   |                    |   |                         |   |   |
| **Loans:**                                                 |   |                    |   |                    |   |                         |   |   |
| Commercial,                Financial, and Agricultural     |   | $                11,642 |   | 16.0%                   |   | 9.7%                         | 9.5% | 10.3% |
| Real                Estate - Construction                  |   | 23,811                  |   | 34.0%                   |   | 7.8%                         | 6.9% | 6.2% |
| Real                Estate - Commercial                    |   | (20,392)                |   | (29.0%)                 |   | 29.5%                        | 31.4% | 27.3% |
| Real                Estate - Residential                   |   | 42,022                  |   | 60.0%                   |   | 32.2%                        | 31.3% | 29.1% |
| Consumer                                                   |   | 4,025                   |   | 6.0%                    |   | 10.7%                        | 10.9% | 13.1% |
| Total                Loans                                 |   | 61,108                  |   | 87.0%                   |   | 89.9%                        | 90.0% | 86.0% |
|                                                       |   |                    |   |                    |   |                         |   |   |
| **Investment                Securities:**                  |   |                    |   |                    |   |                         |   |   |
| Taxable                                                    |   | (30,014)                |   | (43.0%)                 |   | 5.0%                         | 6.5% | 7.4% |
| Tax-Exempt                                                 |   | 25,382                  |   | 36.0%                   |   | 3.2%                         | 2.3% | 2.9% |
| Total                Securities                            |   | (4,632)                 |   | (7.0%)                  |   | 8.2%                         | 8.8% | 10.3% |
|                                                       |   |                    |   |                    |   |                         |   |   |
| Funds                Sold                                  |   | 14,129                  |   | 20.0%                   |   | 1.9%                         | 1.2% | 3.7% |
|                                                       |   |                    |   |                    |   |                         |   |   |
| Total                Earning Assets                        |   | $                70,605 |   | 100.0%                  |   | 100.0%                       | 100.0% | 100.0% |

----

*Table          of Contents*

**Table      5**

**LOANS      BY CATEGORY**

|                                                  |   | As                of December 31, |      |
|-------------------------------------------------------|--------|-----------------------------------|-----------|
| *(Dollars                in Thousands)*               |   | 2006                              |      | 2005 |   | 2004 |   | 2003 |   | 2002 |   |
| Commercial,                Financial and Agricultural |   | $                                 | 229,327   |   | $ | 218,434 |   | $ | 206,474 |   | $ | 160,048 |   | $ | 141,459 |   |
| Real                Estate - Construction             |   |                              | 179,072   |   |   | 160,914 |   |   | 140,190 |   |   | 89,149 |   |   | 91,110 |   |
| Real                Estate - Commercial               |   |                              | 643,885   |   |   | 718,741 |   |   | 655,426 |   |   | 391,250 |   |   | 356,807 |   |
| Real                Estate - Residential              |   |                              | 709,735   |   |   | 723,336 |   |   | 600,375 |   |   | 467,790 |   |   | 474,069 |   |
| Consumer                                              |   |                              | 237,702   |   |   | 246,069 |   |   | 226,360 |   |   | 233,395 |   |   | 221,776 |   |
| Total                Loans, Net of Unearned Interest  |   | $                                 | 1,999,721 |   | $ | 2,067,494 |   | $ | 1,828,825 |   | $ | 1,341,632 |   | $ | 1,285,221 |   |

**Table      6**

**LOAN      MATURITIES**

|                                                   |   | Maturity                Periods               |    |
|--------------------------------------------------------|--------|-----------------------------------------------|---------|
| *(Dollars                in Thousands)*                |   | One                Yearor                Less |    | Over                OneThroughFive                Years |   | OverFiveYears |   | Total |   |
| Commercial,                Financial and Agricultural  |   | $                                             | 96,103  |   |   | 96,313 |   |   | 36,911 |   |   | 229,327 |   |
| Real                Estate                             |   |                                          | 456,980 |   |   | 225,088 |   |   | 850,624 |   |   | 1,532,692 |   |
| Consumer(1)                                            |   |                                          | 31,788  |   |   | 201,772 |   |   | 4,142 |   |   | 237,702 |   |
| Total                                                  |   | $                                             | 584,871 |   |   | 523,173 |   |   | 891,677 |   |   | 1,999,721 |   |
|                                                   |   |                                          |    |   |   |   |   |   |   |   |   |   |   |
| Loans                with Fixed Rates                  |   | $                                             | 301,995 |   |   | 421,040 |   |   | 95,952 |   |   | 818,987 |   |
| Loans                with Floating or Adjustable Rates |   |                                          | 282,876 |   |   | 102,133 |   |   | 795,725 |   |   | 1,180,734 |   |
| Total                                                  |   | $                                             | 584,871 |   |   | 523,173 |   |   | 891,677 |   |   | 1,999,721 |   |

| *(1)* | *Demand                loans and overdrafts are reported in the category of one year or                less.* |
|-------|---------------------------------------------------------------------------------------------------------------|

**Allowance      for Loan Losses**

**.**

----

*Table          of Contents*

----

*Table          of Contents*

**Table      7**

**ANALYSIS      OF ALLOWANCE FOR LOAN LOSSES**

|                                                                          |   | For                the Years Ended December 31, |   |
|-------------------------------------------------------------------------------|--------|-------------------------------------------------|--------|
| *(Dollars                in Thousands)*                                       |   | 2006                                            |   | 2005 |   | 2004 |   | 2003 |   | 2002 |   |
|                                                                          |   |                                            |   |   |   |   |   |   |   |   |   |
| Balance                at Beginning of Year                                   |   | $                                               | 17,410 |   | $ | 16,037 |   | $ | 12,429 |   | $ | 12,495 |   | $ | 12,096 |   |
| Acquired                Reserves                                              |   |                                            | -      |   |   | 1,385 |   |   | 5,713 |   |   | - |   |   | - |   |
| Reserve                Reversal(1)                                            |   |                                            | -      |   |   | - |   |   | (800 | )  |   | - |   |   | - |   |
|                                                                          |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Charge-Offs:                                                                  |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                          |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial,                Financial and Agricultural                         |   |                                            | 841    |   |   | 1,287 |   |   | 873 |   |   | 426 |   |   | 818 |   |
| Real                Estate - Construction                                     |   |                                            | -      |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Real                Estate - Commercial                                       |   |                                            | 346    |   |   | 255 |   |   | 48 |   |   | 91 |   |   | - |   |
| Real                Estate - Residential                                      |   |                                            | 280    |   |   | 321 |   |   | 191 |   |   | 228 |   |   | 175 |   |
| Consumer                                                                      |   |                                            | 2,516  |   |   | 2,380 |   |   | 3,946 |   |   | 3,794 |   |   | 3,279 |   |
| Total                Charge-Offs                                              |   |                                            | 3,983  |   |   | 4,243 |   |   | 5,058 |   |   | 4,539 |   |   | 4,272 |   |
|                                                                          |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Recoveries:                                                                   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                          |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial,                Financial and Agricultural                         |   |                                            | 246    |   |   | 180 |   |   | 81 |   |   | 142 |   |   | 136 |   |
| Real                Estate - Construction                                     |   |                                            | -      |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Real                Estate - Commercial                                       |   |                                            | 17     |   |   | 3 |   |   | 14 |   |   | - |   |   | 20 |   |
| Real                Estate - Residential                                      |   |                                            | 11     |   |   | 37 |   |   | 188 |   |   | 18 |   |   | 37 |   |
| Consumer                                                                      |   |                                            | 1,557  |   |   | 1,504 |   |   | 1,329 |   |   | 877 |   |   | 1,181 |   |
| Total                Recoveries                                               |   |                                            | 1,831  |   |   | 1,724 |   |   | 1,612 |   |   | 1,037 |   |   | 1,374 |   |
|                                                                          |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                Charge-Offs                                                |   |                                            | 2,152  |   |   | 2,519 |   |   | 3,446 |   |   | 3,502 |   |   | 2,898 |   |
|                                                                          |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision                for Loan Losses                                      |   |                                            | 1,959  |   |   | 2,507 |   |   | 2,141 |   |   | 3,436 |   |   | 3,297 |   |
|                                                                          |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at End of Year                                         |   | $                                               | 17,217 |   | $ | 17,410 |   | $ | 16,037 |   | $ | 12,429 |   | $ | 12,495 |   |
|                                                                          |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio                of Net Charge-Offs to Average Loans Outstanding          |   |                                            | .11    | % |   | .13 | % |   | .22 | % |   | .27 | % |   | .23 | % |
|                                                                          |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance                for Loan Losses as a Percent of Loans at End of Year |   |                                            | .86    | % |   | .84 | % |   | .88 | % |   | .93 | % |   | .97 | % |
|                                                                          |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance                for Loan Losses as a Multiple of Net Charge-Offs     |   |                                            | 8.00x  |   |   | 6.91x |   |   | 4.65x |   |   | 3.55x |   |   | 4.31x |   |

| *(1)* | *Reflects                recapture of reserves allocated to the credit card portfolio sold                in                August 2004.* |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

**Table      8**

**ALLOCATION      OF ALLOWANCE FOR LOAN LOSSES**

|                                                  |   | 2006            |   | 2005                                                                                     |   | 2004            |   | 2003                                                                                     |   | 2002            |   |
|-------------------------------------------------------|--------|-----------------|--------|------------------------------------------------------------------------------------------|--------|-----------------|--------|------------------------------------------------------------------------------------------|--------|-----------------|--------|
| *(Dollars                in Thousands)*               |   | AllowanceAmount |   | Percentof                Loansin                EachCategoryTo                TotalLoans |   | AllowanceAmount |   | Percentof                Loansin                EachCategoryTo                TotalLoans |   | AllowanceAmount |   | Percentof                Loansin                EachCategoryTo                TotalLoans |   | AllowanceAmount |   | Percentof                Loansin                EachCategoryTo                TotalLoans |   | AllowanceAmount |   | Percentof                Loansin                EachCategoryTo                TotalLoans |   |
|                                                  |   |            |   |                                                                                     |   |            |   |                                                                                     |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Commercial,                Financial and Agricultural |   | $               | 3,900  |                                                                                     |   | 11.5            | %      | $                                                                                        | 3,663  |            |   | 10.6 | % | $ | 4,341 |   |   | 11.3 | % | $ | 2,824 |   |   | 11.9 | % | $ | 2,740 |   |   | 11.0 | % |
| Real                Estate:                           |   |            |   |                                                                                     |   |            |   |                                                                                     |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Construction                                          |   |            | 745    |                                                                                     |   | 9.0             |   |                                                                                     | 762    |            |   | 7.8 |   |   | 578 |   |   | 7.7 |   |   | 313 |   |   | 6.6 |   |   | 348 |   |   | 7.1 |   |
| Commercial                                            |   |            | 5,996  |                                                                                     |   | 32.2            |   |                                                                                     | 6,352  |            |   | 34.7 |   |   | 6,296 |   |   | 35.8 |   |   | 2,831 |   |   | 29.2 |   |   | 2,559 |   |   | 27.8 |   |
| Residential                                           |   |            | 1,050  |                                                                                     |   | 35.5            |   |                                                                                     | 1,019  |            |   | 35.0 |   |   | 705 |   |   | 32.8 |   |   | 853 |   |   | 34.9 |   |   | 1,021 |   |   | 36.9 |   |
| Consumer                                              |   |            | 3,081  |                                                                                     |   | 11.8            |   |                                                                                     | 3,105  |            |   | 11.9 |   |   | 2,966 |   |   | 12.4 |   |   | 4,169 |   |   | 17.4 |   |   | 4,210 |   |   | 17.2 |   |
| Not                Allocated                          |   |            | 2,445  |                                                                                     |   | -               |   |                                                                                     | 2,509  |            |   | - |   |   | 1,151 |   |   | - |   |   | 1,439 |   |   | - |   |   | 1,617 |   |   | - |   |
|                                                  |   |            |   |                                                                                     |   |            |   |                                                                                     |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                 |   | $               | 17,217 |                                                                                     |   | 100.0           | %      | $                                                                                        | 17,410 |            |   | 100.0 | % | $ | 16,037 |   |   | 100.0 | % | $ | 12,429 |   |   | 100.0 | % | $ | 12,495 |   |   | 100.0 | % |

----

*Table          of Contents*

**Risk      Element Assets**

**Table      9**

**RISK      ELEMENT ASSETS**

|                                                             |   | As                of December 31, |   |
|------------------------------------------------------------------|--------|-----------------------------------|--------|
| *(Dollars                in Thousands)*                          |   | 2006                              |   | 2005 |   | 2004 |   | 2003 |   | 2002 |   |
|                                                             |   |                              |   |   |   |   |   |   |   |   |   |
| Nonaccruing                Loans                                 |   | $                                 | 8,042  |   | $ | 5,258 |   | $ | 4,646 |   | $ | 2,346 |   | $ | 2,510 |   |
| Restructured                                                     |   |                              | -      |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Total                Nonperforming Loans                         |   |                              | 8,042  |   |   | 5,258 |   |   | 4,646 |   |   | 2,346 |   |   | 2,510 |   |
| Other                Real Estate                                 |   |                              | 689    |   |   | 292 |   |   | 625 |   |   | 4,955 |   |   | 1,333 |   |
| Total                Nonperforming Assets                        |   | $                                 | 8,731  |   | $ | 5,550 |   | $ | 5,271 |   | $ | 7,301 |   | $ | 3,843 |   |
|                                                             |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Past                Due 90 Days or More                          |   |                              | 135    |   |   | 309 |   |   | 605 |   | $ | 328 |   | $ | 2,453 |   |
|                                                             |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonperforming                Loans/Loans                         |   |                              | .40    | % |   | .25 | % |   | .25 | % |   | .17 | % |   | .20 | % |
| Nonperforming                Assets/Loans Plus Other Real Estate |   |                              | .44    | % |   | .27 | % |   | .29 | % |   | .54 | % |   | .30 | % |
| Nonperforming                Assets/Capital(1)                   |   |                              | 2.62   | % |   | 1.72 | % |   | 1.93 | % |   | 3.39 | % |   | 1.93 | % |
| Allowance/Nonperforming                Loans                     |   |                              | 214.09 | % |   | 331.11 | % |   | 345.18 | % |   | 529.80 | % |   | 497.72 | % |

| *(1)* | *For                computation of this percentage, "Capital" refers to shareowners'                equity                plus the allowance for loan                losses.* |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

**Investment      Securities**

----

*Table          of Contents*

**Table      10**

**MATURITY      DISTRIBUTION OF INVESTMENT SECURITIES**

|                                               |   | As                of December 31, |    |
|----------------------------------------------------|--------|-----------------------------------|---------|
|                                               |   | 2006                              |    | 2005 |   | 2004 |   |
| *(Dollars                in Thousands)*            |   | AmortizedCost                     |    | MarketValue |   | Weighted(1)AverageYield |   | AmortizedCost |   | MarketValue |   | Weighted(1)AverageYield |   | AmortizedCost |   | MarketValue |   | Weighted(1)AverageYield |   |
|                                               |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S.                GOVERNMENTS                    |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Due                in 1 year or less               |   | $                                 | 17,329  |   | $ | 17,150 |   |   | 3.45 | % | $ | 58,032 |   | $ | 57,621 |   |   | 2.30 | % | $ | 48,553 |   | $ | 48,327 |   |   | 2.08 | % |
| Due                over 1 year through 5 years     |   |                              | 56,388  |   |   | 55,978 |   |   | 4.64 |   |   | 24,296 |   |   | 23,662 |   |   | 3.52 |   |   | 66,863 |   |   | 66,204 |   |   | 2.38 |   |
| Due                over 5 years through 10 years   |   |                              | -       |   |   | - |   |   | - |   |   | 1,970 |   |   | 1,948 |   |   | 3.57 |   |   | 7,684 |   |   | 7,589 |   |   | 3.75 |   |
| Due                over 10 years                   |   |                              | -       |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| TOTAL                                              |   |                              | 73,717  |   |   | 73,128 |   |   | 4.36 |   |   | 84,298 |   |   | 83,231 |   |   | 2.68 |   |   | 123,100 |   |   | 122,120 |   |   | 2.35 |   |
|                                               |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| STATES                & POLITICAL SUBDIVISIONS |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Due                in 1 year or less               |   |                              | 31,438  |   |   | 31,300 |   |   | 4.21 |   |   | 21,097 |   |   | 21,048 |   |   | 4.66 |   |   | 27,916 |   |   | 28,090 |   |   | 5.94 |   |
| Due                over 1 year through 5 years     |   |                              | 52,183  |   |   | 51,922 |   |   | 5.25 |   |   | 32,130 |   |   | 31,702 |   |   | 4.11 |   |   | 21,076 |   |   | 21,200 |   |   | 4.56 |   |
| Due                over 5 years through 10 years   |   |                              | -       |   |   | - |   |   | - |   |   | 384 |   |   | 393 |   |   | 6.53 |   |   | 897 |   |   | 916 |   |   | 5.36 |   |
| Due                over 10 years                   |   |                              | -       |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| TOTAL                                              |   |                              | 83,621  |   |   | 83,222 |   |   | 4.86 |   |   | 53,611 |   |   | 53,143 |   |   | 4.34 |   |   | 49,889 |   |   | 50,206 |   |   | 5.35 |   |
|                                               |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| MORTGAGE-BACKED                SECURITIES(2)       |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Due                in 1 year or less               |   |                              | 3,568   |   |   | 3,571 |   |   | 5.37 |   |   | 339 |   |   | 337 |   |   | 3.97 |   |   | 489 |   |   | 493 |   |   | 5.13 |   |
| Due                over 1 year through 5 years     |   |                              | 14,942  |   |   | 14,732 |   |   | 4.58 |   |   | 14,958 |   |   | 14,685 |   |   | 4.12 |   |   | 22,719 |   |   | 22,839 |   |   | 3.96 |   |
| Due                over 5 years through 10 years   |   |                              | 4,734   |   |   | 4,593 |   |   | 5.02 |   |   | 5,651 |   |   | 5,509 |   |   | 5.09 |   |   | 3,085 |   |   | 3,068 |   |   | 4.83 |   |
| Due                over 10 years                   |   |                              | -       |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| TOTAL                                              |   |                              | 23,244  |   |   | 22,896 |   |   | 4.79 |   |   | 20,948 |   |   | 20,531 |   |   | 4.38 |   |   | 26,293 |   |   | 26,400 |   |   | 4.09 |   |
|                                               |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OTHER                SECURITIES                    |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Due                in 1 year or less               |   |                              | -       |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Due                over 1 year through 5 years     |   |                              | -       |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Due                over 5 years through 10 years   |   |                              | -       |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Due                over 10 years(3)                |   |                              | 12,648  |   |   | 12,648 |   |   | 5.78 |   |   | 14,114 |   |   | 14,114 |   |   | 4.75 |   |   | 11,514 |   |   | 11,514 |   |   | 4.31 |   |
| TOTAL                                              |   |                              | 12,648  |   |   | 12,648 |   |   | 5.78 |   |   | 14,114 |   |   | 14,114 |   |   | 4.75 |   |   | 11,514 |   |   | 11,514 |   |   | 4.31 |   |
|                                               |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL                INVESTMENT SECURITIES         |   | $                                 | 193,230 |   | $ | 191,894 |   |   | 4.72 | % | $ | 172,971 |   | $ | 171,019 |   |   | 3.57 | % | $ | 210,796 |   | $ | 210,240 |   |   | 3.38 | % |

| *(1)* | *Weighted                average yields are calculated on the basis of the amortized cost                of the                security. The weighted average yields on tax-exempt obligations are                computed on a taxable equivalent basis using a 35% tax                rate.* |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(2)* | *Based                on weighted average life.* |
|-------|--------------------------------------------------|

| *(3)* | *Federal                Home Loan Bank Stock and Federal Reserve Bank Stock are included                in this                category for weighted average yield, but do not have stated                maturities.* |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

**AVERAGE      MATURITY **

|                                             |   | As                of December 31, |
|--------------------------------------------------|--------|-----------------------------------|
| *(In                Years)*                      |   | 2006                              |   | 2005 |   | 2004 |
| U.S.                Governments                  |   | 1.76                              |   | 1.01 |   | 1.54 |   |
| States                and Political Subdivisions |   | 1.39                              |   | 1.31 |   | 1.32 |   |
| Mortgage-Backed                Securities        |   | 3.05                              |   | 5.05 |   | 2.67 |   |
| Other                Securities                  |   | -                                 |   | - |   | - |   |
| TOTAL                                            |   | 1.75                              |   | 1.65 |   | 1.63 |   |

**MUNICIPAL      PORTFOLIO QUALITY**

*(Dollars      in Thousands)*

| Moody's                Rating |   | Amortized                Cost |   | Percentage |
|-------------------------------|--------|-------------------------------|--------|------------|
| AAA                           |   | $                             | 77,122 |       | 92.79 | % |
| AA-1                          |   |                          | 0      |       | 0.00 |   |
| AA-2                          |   |                          | 500    |       | .60 |   |
| AA-3                          |   |                          | 501    |       | .60 |   |
| AA                            |   |                          | 20     |       | .02 |   |
| Not                Rated(1)   |   |                          | 4,983  |       | 5.99 |   |
| Total                         |   | $                             | 83,126 |       | 100.00 | % |

| *(1)* | *All                of the securities not rated by Moody's are rated "A-" or higher by                S&P.* |
|-------|-----------------------------------------------------------------------------------------------------------------|

**Deposits      and Funds Purchased**

----

*Table          of Contents*

**Table      11**

**SOURCES      OF DEPOSIT GROWTH**

|                                                       |   | 2005                to |     | Percentage              |   | Components                of  |   |
|------------------------------------------------------------|--------|------------------------|----------|-------------------------|--------|-------------------------------|--------|
|                                                       |   | 2006                   |     | of                Total |   | Total                Deposits |   |
| *(Average                Balances - Dollars in Thousands)* |   | Change                 |     | Change                  |   | 2006                          |   | 2005 |   | 2004 |   |
| Noninterest                Bearing Deposits                |   | $                      | (40,059) |                    |   | (50.0)                        | %      |   | 24.8 | % |   | 27.9 | % |   | 30.6 | % |
| NOW                Accounts                                |   |                   | 88,070   |                    |   | 110.0                         |   |   | 25.5 |   |   | 22.0 |   |   | 18.3 |   |
| Money                Market Accounts                       |   |                   | 94,427   |                    |   | 118.0                         |   |   | 18.2 |   |   | 14.1 |   |   | 14.3 |   |
| Savings                                                    |   |                   | (18,857) |                    |   | (23.6)                        |   |   | 6.6 |   |   | 7.8 |   |   | 8.1 |   |
| Time                Deposits                               |   |                   | (43,538) |                    |   | (54.4)                        |   |   | 24.9 |   |   | 28.2 |   |   | 28.7 |   |
| Total                Deposits                              |   | $                      | 80,043   |                    |   | 100.0                         | %      |   | 100.0 | % |   | 100.0 | % |   | 100.0 | % |

**Table      12**

**MATURITY      DISTRIBUTION OF CERTIFICATES OF DEPOSIT $100,000 OR OVER**

|                                          |   | December                31, 2006            |    |
|-----------------------------------------------|--------|---------------------------------------------|---------|
| *(Dollars                in Thousands)*       |   | Time                Certificates of Deposit |    | Percent |   |
| Three                months or less           |   | $                                           | 40,910  |   |   | 30.31 | % |
| Over                three through six months  |   |                                        | 28,448  |   |   | 21.08 |   |
| Over                six through twelve months |   |                                        | 44,515  |   |   | 32.98 |   |
| Over                twelve months             |   |                                        | 21,107  |   |   | 15.63 |   |
| Total                                         |   | $                                           | 134,980 |   |   | 100.00 | % |

**LIQUIDITY      AND CAPITAL RESOURCES**

**Liquidity**

**Borrowings**

----

*Table          of Contents*

**Table      13**

**CONTRACTUAL      CASH OBLIGATIONS**

|                                              |   | Payments                Due By Period       |   |
|---------------------------------------------------|--------|---------------------------------------------|--------|
| *(Dollars                in Thousands)*           |   | 1                Yearor                Less |   | 1                -                3Years |   | 4                -                5Years |   | After5                Years |   | Total |   |
| Federal                Home Loan Bank Advances    |   | $                                           | 15,585 |   | $ | 16,985 |   | $ | 5,225 |   | $ | 17,669 |   | $ | 55,464 |   |
| Subordinated                Notes Payable         |   |                                        | -      |   |   | - |   |   | - |   |   | 62,887 |   |   | 62,887 |   |
| Operating                Lease Obligations        |   |                                        | 1,503  |   |   | 2,600 |   |   | 2,036 |   |   | 6,071 |   |   | 12,210 |   |
| Total                Contractual Cash Obligations |   | $                                           | 17,088 |   | $ | 19,585 |   | $ | 7,261 |   | $ | 86,627 |   | $ | 130,561 |   |

**Capital      **

**Shareowners'      Equity**

| *(Dollars                in Thousands)*                           |   | 2006   |    | 2005   |   | 2004    |   |
|-------------------------------------------------------------------|--------|--------|---------|--------|--------|---------|--------|
| Common                Stock                                       |   |   | 185     |   |   | 186     |   |   | 177 |   |
| Additional                Paid-in Capital                         |   |   | 80,654  |   |   | 83,304  |   |   | 52,328 |   |
| Retained                Earnings                                  |   |   | 243,242 |   |   | 223,532 |   |   | 204,648 |   |
| Subtotal                                                          |   |   | 324,081 |   |   | 307,022 |   |   | 257,153 |   |
| Accumulated                Other Comprehensive (Loss), Net of Tax |   |   | (8,311) |   |   | (1,246  | )      |   | (353 | ) |
| Total                Shareowners' Equity                          |   | $      | 315,770 |   | $      | 305,776 |   | $ | 256,800 |   |

----

*Table          of Contents*

**Dividends**

| §   | Compliance                with state and federal laws and                regulations; |
|--------------------|---------------------------------------------------------------------------------------|

| §   | Our                capital position and our ability to meet our financial                obligations; |
|--------------------|-------------------------------------------------------------------------------------------------------|

| §   | Projected                earnings and asset levels; and |
|--------------------|---------------------------------------------------------|

| §   | The                ability of the Bank and us to fund                dividends. |
|--------------------|---------------------------------------------------------------------------------|

**OFF-BALANCE      SHEET ARRANGEMENTS**

----

*Table          of Contents*

**ACCOUNTING      POLICIES**

**Critical      Accounting Policies**

*Allowance      for Loan Losses*

*Intangible      Assets*

*Pension      Assumptions*
**       **

----

*Table          of Contents*

**Recent      Accounting Pronouncements**

*Statement      of Financial Accounting Standards*

*Financial      Accounting Standards Board Interpretations*

*SEC      Staff Accounting Bulletin*

----

*Table          of Contents*

|                            |   | Adjustment |      | Description |                                                                                                                                                                                                             | Years                Impacted |
|---------------------------------|--------|------------|-----------|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------|
|                            |   |       |      |        |                                                                                                                                                                                                             |                          |   |
| Operating                Leases |   | $          | 715,000   |        | Establish                deferred rent payable due to difference in using straight-line accounting                method for operating leases (required per SFAS 13) versus cash-basis                accounting |                          |  1990                - 2006 |
|                            |   |       |      |        |                                                                                                                                                                                                             |                          |   |
| Supplies                        |   | $          | 518,000   |        | Overstatement                of prepaid supply account due to improper recognition of sales tax                and                freight charges when supplies were used                                        |                          |  1998                - 2006 |
|                            |   |       |      |        |                                                                                                                                                                                                             |                          |   |
| Total                           |   | $          | 1,233,000 |        |                                                                                                                                                                                                             |                          |   |

----

*Table          of Contents*

| **ITEM                7A.** | **QUANTITATIVE                AND QUALITATIVE DISCLOSURE ABOUT MARKET                RISK** |
|-----------------------------|---------------------------------------------------------------------------------------------|

**Overview**

**Interest      Rate Risk Management**

**Inflation**

----

*Table          of Contents*

**Table      14**

**FINANCIAL      ASSETS AND LIABILITIES MARKET RISK ANALYSIS **
**(1)**

*Other      Than Trading Portfolio*

|                                       |   | **As                of December 31, 2006** |      |                      |   |
|--------------------------------------------|--------|--------------------------------------------|-----------|---------------------------|--------|
| *(Dollars                in Thousands)*    |   | **Year                1**                  |      | **Year                2** |   | **Year                3** |   | **Year                4** |   | **Year                5** |   | **Beyond** |   | **Total** |   | **Fair                Value****(5)** |   |
| Loans                                      |   |                                       |      |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fixed                Rate                  |   | $                                          | 318,728   |                      | $      | 154,370 |   | $ | 100,627 |   | $ | 46,290 |   | $ | 23,988 |   | $ | 17,314 |   | $ | 661,317 |   | $ | 660,438 |   |
| Average                Interest Rate       |   |                                       | 6.55      | %                         |   | 7.68 | % |   | 7.89 | % |   | 7.83 | % |   | 7.47 | % |   | 6.69 | % |   | 7.15 | % |   |   |   |
| Floating                Rate(2)            |   |                                       | 1,055,362 |                      |   | 163,095 |   |   | 94,883 |   |   | 8,636 |   |   | 5,861 |   |   | 10,567 |   |   | 1,338,404 |   |   | 1,348,804 |   |
| Average                Interest Rate       |   |                                       | 7.04      | %                         |   | 7.07 | % |   | 7.66 | % |   | 7.54 | % |   | 7.90 | % |   | 8.14 | % |   | 7.11 | % |   |   |   |
| Investment                Securities(3)    |   |                                       |      |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fixed                Rate                  |   |                                       | 56,247    |                      |   | 79,065 |   |   | 40,900 |   |   | 8,248 |   |   | 4,767 |   |   | 1,630 |   |   | 190,859 |   |   | 190,859 |   |
| Average                Interest Rate       |   |                                       | 3.13      | %                         |   | 4.34 | % |   | 4.10 | % |   | 4.09 | % |   | 4.25 | % |   | 4.84 | % |   | 3.93 | % |   |   |   |
| Floating                Rate               |   |                                       | 1,035     |                      |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 1,035 |   |   | 1,035 |   |
| Average                Interest Rate       |   |                                       | 5.21      | %                         |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 5.21 | % |   |   |   |
| Other                Earning Assets        |   |                                       |      |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Floating                Rate               |   |                                       | 78,795    |                      |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 78,795 |   |   | 78,795 |   |
| Average                Interest Rate       |   |                                       | 5.22      | %                         |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 5.22 | % |   |   |   |
| Total                Financial Assets      |   | $                                          | 1,510,167 |                      | $      | 396,530 |   | $ | 236,410 |   | $ | 63,174 |   | $ | 34,616 |   | $ | 29,511 |   | $ | 2,270,409 |   | $ | 2,279,930 |   |
| Average                Interest Rate       |   |                                       | 6.70      | %                         |   | 6.77 | % |   | 7.14 | % |   | 7.30 | % |   | 7.10 | % |   | 7.11 | % |   | 6.78 | % |   |   |   |
|                                       |   |                                       |      |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits(4)                                |   |                                       |      |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fixed                Rate Deposits         |   | $                                          | 397,418   |                      | $      | 57,172 |   | $ | 20,695 |   | $ | 5,713 |   | $ | 2,147 |   |   | - |   | $ | 483,145 |   | $ | 408,799 |   |
| Average                Interest Rate       |   |                                       | 4.00      | %                         |   | 4.10 | % |   | 4.26 | % |   | 3.94 | % |   | 4.17 | % |   | - |   |   | 4.02 | % |   |   |   |
| Floating                Rate Deposits      |   |                                       | 1,108,495 |                      |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 1,108,495 |   |   | 1,108,495 |   |
| Average                Interest Rate       |   |                                       | 2.35      | %                         |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 2.35 | % |   |   |   |
| Other                Interest Bearing      |   |                                       |      |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                                |   |                                       |      |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fixed                Rate Debt             |   |                                       | 4,397     |                      |   | 14,004 |   |   | 3,218 |   |   | 2,970 |   |   | 2,915 |   |   | 15,579 |   |   | 43,083 |   |   | 42,256 |   |
| Average                Interest Rate       |   |                                       | 4.64      | %                         |   | 4.41 | % |   | 4.77 | % |   | 4.90 | % |   | 4.98 | % |   | 4.98 | % |   | 4.74 | % |   |   |   |
| Floating                Rate Debt          |   |                                       | 65,023    |                      |   | - |   |   | 30,928 |   |   | 31,959 |   |   | - |   |   | - |   |   | 127,910 |   |   | 127,983 |   |
| Average                Interest Rate       |   |                                       | 4.22      | %                         |   | - |   |   | 5.71 | % |   | 6.07 | % |   | - |   |   | - |   |   | 5.04 | % |   |   |   |
| Total                Financial Liabilities |   | $                                          | 1,575,333 |                      | $      | 71,176 |   | $ | 54,841 |   | $ | 40,642 |   | $ | 5,062 |   | $ | 15,579 |   | $ | 1,762,633 |   | $ | 1,687,533 |   |
| Average                interest Rate       |   |                                       | 2.85      | %                         |   | 4.16 | % |   | 5.11 | % |   | 5.68 | % |   | 4.63 | % |   | 4.98 | % |   | 3.06 | % |   |   |   |

| *(1)* | *Based                upon expected cash flows unless otherwise                indicated.* |
|-------|--------------------------------------------------------------------------------------------|

| *(2)* | *Based                upon a combination of expected maturities and re-pricing                opportunities.* |
|-------|---------------------------------------------------------------------------------------------------------------|

| *(3)* | *Based                upon contractual maturity, except for callable and floating rate                securities, which are based on expected maturity and weighted average                life, respectively.* |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(4)* | *Savings,                NOW and money market accounts can be re-priced at any time, therefore,                all                such balances are included as floating rate deposits. Time deposit                balances are classified according to                maturity.* |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(5)* | *Fair                value of loans does not include a reduction for the allowance for                loan                losses.* |
|-------|------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

***Item      8. Financial Statements and Supplementary      Data***

**Table      15**

**QUARTERLY      FINANCIAL DATA**

|                                                                             |   | **2006** |      | **2005** |   |
|----------------------------------------------------------------------------------|--------|----------|-----------|----------|--------|
| *(Dollars                in Thousands, Except Per Share Data)*                   |   | Fourth   |      | Third    |   | Second |   | First |   | Fourth |   | Third |   | Second |   | First |   |
| Summary                of Operations:                                            |   |     |      |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                Income                                                   |   | $        | 42,600    |     | $      | 42,512 |   | $ | 41,369 |   | $ | 39,412 |   | $ | 38,780 |   | $ | 36,889 |   | $ | 33,910 |   | $ | 30,474 |   |
| Interest                Expense                                                  |   |     | 13,003    |     |   | 12,289 |   |   | 11,182 |   |   | 10,282 |   |   | 9,470 |   |   | 7,885 |   |   | 6,788 |   |   | 5,920 |   |
| Net                Interest Income                                               |   |     | 29,597    |     |   | 30,223 |   |   | 30,187 |   |   | 29,130 |   |   | 29,310 |   |   | 29,004 |   |   | 27,122 |   |   | 24,554 |   |
| Provision                for Loan Losses                                         |   |     | 460       |     |   | 711 |   |   | 121 |   |   | 667 |   |   | 1,333 |   |   | 376 |   |   | 388 |   |   | 410 |   |
| Net                Interest Income AfterProvision                for Loan Losses |   |     | 29,137    |     |   | 29,512 |   |   | 30,066 |   |   | 28,463 |   |   | 27,977 |   |   | 28,628 |   |   | 26,734 |   |   | 24,144 |   |
| Noninterest                Income                                                |   |     | 14,385    |     |   | 14,144 |   |   | 14,003 |   |   | 13,045 |   |   | 12,974 |   |   | 13,123 |   |   | 12,041 |   |   | 11,060 |   |
| Merger                Expense                                                    |   |     | -         |     |   | - |   |   | - |   |   | - |   |   | 24 |   |   | 180 |   |   | 234 |   |   | - |   |
| Noninterest                Expense                                               |   |     | 29,984    |     |   | 30,422 |   |   | 31,070 |   |   | 30,092 |   |   | 29,318 |   |   | 28,429 |   |   | 26,362 |   |   | 25,267 |   |
| Income                Before Provision for Income Taxes                          |   |     | 13,538    |     |   | 13,234 |   |   | 12,999 |   |   | 11,416 |   |   | 11,609 |   |   | 13,142 |   |   | 12,179 |   |   | 9,937 |   |
| Provision                for Income Taxes                                        |   |     | 4,688     |     |   | 4,554 |   |   | 4,684 |   |   | 3,995 |   |   | 4,150 |   |   | 4,565 |   |   | 4,311 |   |   | 3,560 |   |
| Net                Income                                                        |   | $        | 8,850     |     | $      | 8,680 |   | $ | 8,315 |   | $ | 7,421 |   | $ | 7,459 |   | $ | 8,577 |   | $ | 7,868 |   | $ | 6,377 |   |
| Net                Interest Income (FTE)                                         |   | $        | 30,152    |     | $      | 30,745 |   | $ | 30,591 |   | $ | 29,461 |   | $ | 29,652 |   | $ | 29,329 |   | $ | 27,396 |   | $ | 24,835 |   |
|                                                                             |   |     |      |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Per                Common Share:                                                 |   |     |      |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                Income Basic                                                  |   | $        | .48       |     | $      | .47 |   | $ | .44 |   | $ | .40 |   | $ | .40 |   | $ | .46 |   | $ | .44 |   | $ | .36 |   |
| Net                Income Diluted                                                |   |     | .48       |     |   | .47 |   |   | .44 |   |   | .40 |   |   | .40 |   |   | .46 |   |   | .44 |   |   | .36 |   |
| Dividends                Declared                                                |   |     | .175      |     |   | .163 |   |   | .163 |   |   | .163 |   |   | .163 |   |   | .152 |   |   | .152 |   |   | .152 |   |
| Diluted                Book Value                                                |   |     | 17.01     |     |   | 17.18 |   |   | 16.81 |   |   | 16.65 |   |   | 16.39 |   |   | 16.17 |   |   | 15.87 |   |   | 14.69 |   |
| Market                Price:                                                     |   |     |      |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| High                                                                             |   |     | 35.98     |     |   | 33.25 |   |   | 35.39 |   |   | 37.97 |   |   | 39.33 |   |   | 38.72 |   |   | 33.46 |   |   | 33.60 |   |
| Low                                                                              |   |     | 30.14     |     |   | 29.87 |   |   | 29.51 |   |   | 33.79 |   |   | 33.21 |   |   | 31.78 |   |   | 28.02 |   |   | 29.30 |   |
| Close                                                                            |   |     | 35.30     |     |   | 31.10 |   |   | 30.20 |   |   | 35.55 |   |   | 34.29 |   |   | 37.71 |   |   | 32.32 |   |   | 32.41 |   |
|                                                                             |   |     |      |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selected                Average                                                  |   |     |      |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances:                                                                        |   |     |      |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                            |   | $        | 2,003,719 |     | $      | 2,025,112 |   | $ | 2,040,656 |   | $ | 2,048,642 |   | $ | 2,062,775 |   | $ | 2,046,968 |   | $ | 1,932,637 |   | $ | 1,827,327 |   |
| Earning                Assets                                                    |   |     | 2,238,066 |     |   | 2,241,158 |   |   | 2,278,817 |   |   | 2,275,667 |   |   | 2,279,010 |   |   | 2,250,902 |   |   | 2,170,483 |   |   | 2,047,049 |   |
| Assets                                                                           |   |     | 2,557,357 |     |   | 2,560,155 |   |   | 2,603,090 |   |   | 2,604,458 |   |   | 2,607,597 |   |   | 2,569,524 |   |   | 2,458,788 |   |   | 2,306,807 |   |
| Deposits                                                                         |   |     | 2,028,453 |     |   | 2,023,523 |   |   | 2,047,755 |   |   | 2,040,248 |   |   | 2,027,017 |   |   | 2,013,427 |   |   | 1,932,144 |   |   | 1,847,378 |   |
| Shareowners’                Equity                                         |   |     | 323,903   |     |   | 318,041 |   |   | 315,794 |   |   | 311,461 |   |   | 306,208 |   |   | 300,931 |   |   | 278,107 |   |   | 260,946 |   |
| Common                Equivalent Average Shares:                                 |   |     |      |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                            |   |     | 18,525    |     |   | 18,530 |   |   | 18,633 |   |   | 18,652 |   |   | 18,624 |   |   | 18,623 |   |   | 18,094 |   |   | 17,700 |   |
| Diluted                                                                          |   |     | 18,569    |     |   | 18,565 |   |   | 18,653 |   |   | 18,665 |   |   | 18,654 |   |   | 18,649 |   |   | 18,102 |   |   | 17,708 |   |
|                                                                             |   |     |      |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratios:                                                                          |   |     |      |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ROA                                                                              |   |     | 1.37      | %        |   | 1.35 | % |   | 1.28 | % |   | 1.16 | % |   | 1.14 | % |   | 1.32 | % |   | 1.28 | % |   | 1.12 | % |
| ROE                                                                              |   |     | 10.84     | %        |   | 10.83 | % |   | 10.56 | % |   | 9.66 | % |   | 9.67 | % |   | 11.31 | % |   | 11.35 | % |   | 9.91 | % |
| Net                Interest Margin (FTE)                                         |   |     | 5.35      | %        |   | 5.45 | % |   | 5.38 | % |   | 5.25 | % |   | 5.16 | % |   | 5.17 | % |   | 5.07 | % |   | 4.92 | % |
| Efficiency                Ratio                                                  |   |     | 63.99     | %        |   | 64.35 | % |   | 66.23 | % |   | 67.20 | % |   | 65.22 | % |   | 63.60 | % |   | 63.56 | % |   | 67.06 | % |

| *(1)* | *All                share and per share data have been adjusted to reflect the 5-for-4                stock                split effective July 1, 2005.* |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

**CAPITAL      CITY BANK GROUP, INC.**

**CONSOLIDATED      FINANCIAL STATEMENTS**

| PAGE     |                                                                     |
|----------|--------------------------------------------------------------------------|
|  51 | Report                of Independent Registered Public Accounting Firm   |
|     |                                                                     |
|  52 | Consolidated                Statements of Income                         |
|     |                                                                     |
|  53 | Consolidated                Statements of Financial Condition            |
|     |                                                                     |
|  54 | Consolidated                Statements of Changes in Shareowners' Equity |
|     |                                                                     |
|  55 | Consolidated                Statements of Cash Flows                     |
|     |                                                                     |
|  56 | Notes                to Consolidated Financial                Statements |

----

*Table          of Contents*

**Report      of Independent Registered Public Accounting Firm**

*Share      Based Payment*
*Employers’      Accounting for Defined Benefit Pension and Other Postretirement Plans, an      amendment of FASB Statements No. 87, 88, 106 and 132R*
*Considering      the Effects of Prior Year Misstatements when Quantifying Misstatements in      Current Year Financial Statements*

----

*Table          of Contents*

**CAPITAL      CITY BANK GROUP, INC.**

**CONSOLIDATED      STATEMENTS OF INCOME**

|                                                              |   | For                the Years Ended December 31, |    |
|-------------------------------------------------------------------|--------|-------------------------------------------------|---------|
| *(Dollars                in Thousands, Except Per Share Data)*(1) |   | 2006                                            |    | 2005 |   | 2004 |   |
| **INTEREST                INCOME**                                |   |                                            |    |   |   |   |   |
| Interest                and Fees on Loans                         |   | $                                               | 156,666 |   | $ | 133,268 |   | $ | 95,607 |   |
| Investment                Securities:                             |   |                                            |    |   |   |   |   |   |   |   |
| U.S.                Treasury                                      |   |                                            | 453     |   |   | 412 |   |   | 759 |   |
| U.S.                Government Agencies and Corporations          |   |                                            | 3,605   |   |   | 3,223 |   |   | 2,111 |   |
| States                and Political Subdivisions                  |   |                                            | 2,337   |   |   | 1,545 |   |   | 1,944 |   |
| Other                Securities                                   |   |                                            | 793     |   |   | 614 |   |   | 271 |   |
| Funds                Sold                                         |   |                                            | 2,039   |   |   | 991 |   |   | 833 |   |
| Total                Interest Income                              |   |                                            | 165,893 |   |   | 140,053 |   |   | 101,525 |   |
|                                                              |   |                                            |    |   |   |   |   |   |   |   |
| **INTEREST                EXPENSE**                               |   |                                            |    |   |   |   |   |   |   |   |
| Deposits                                                          |   |                                            | 37,253  |   |   | 21,134 |   |   | 11,315 |   |
| Short-Term                Borrowings                              |   |                                            | 3,075   |   |   | 2,854 |   |   | 1,270 |   |
| Subordinated                Notes Payable                         |   |                                            | 3,725   |   |   | 2,981 |   |   | 294 |   |
| Other                Long-Term Borrowings                         |   |                                            | 2,704   |   |   | 3,094 |   |   | 2,562 |   |
| Total                Interest Expense                             |   |                                            | 46,757  |   |   | 30,063 |   |   | 15,441 |   |
|                                                              |   |                                            |    |   |   |   |   |   |   |   |
| **NET                INTEREST INCOME**                            |   |                                            | 119,136 |   |   | 109,990 |   |   | 86,084 |   |
| Provision                for Loan Losses                          |   |                                            | 1,959   |   |   | 2,507 |   |   | 2,141 |   |
| Net                Interest Income After                          |   |                                            |    |   |   |   |   |   |   |   |
| Provision                for Loan Losses                          |   |                                            | 117,177 |   |   | 107,483 |   |   | 83,943 |   |
|                                                              |   |                                            |    |   |   |   |   |   |   |   |
| **NONINTEREST                INCOME**                             |   |                                            |    |   |   |   |   |   |   |   |
| Service                Charges on Deposit Accounts                |   |                                            | 24,620  |   |   | 20,740 |   |   | 17,574 |   |
| Data                Processing                                    |   |                                            | 2,723   |   |   | 2,610 |   |   | 2,628 |   |
| Asset                Management Fees                              |   |                                            | 4,600   |   |   | 4,419 |   |   | 4,007 |   |
| (Loss)/Gain                on Sale of Investment Securities       |   |                                            | (4)     |   |   | 9 |   |   | 14 |   |
| Mortgage                Banking Revenues                          |   |                                            | 3,235   |   |   | 4,072 |   |   | 3,208 |   |
| Gain                on the Sale of Credit Card Portfolios         |   |                                            | -       |   |   | - |   |   | 7,181 |   |
| Other                                                             |   |                                            | 20,403  |   |   | 17,348 |   |   | 15,941 |   |
| Total                Noninterest Income                           |   |                                            | 55,577  |   |   | 49,198 |   |   | 50,553 |   |
|                                                              |   |                                            |    |   |   |   |   |   |   |   |
| **NONINTEREST                EXPENSE**                            |   |                                            |    |   |   |   |   |   |   |   |
| Salaries                and Associate Benefits                    |   |                                            | 60,855  |   |   | 53,687 |   |   | 44,345 |   |
| Occupancy,                Net                                     |   |                                            | 9,395   |   |   | 8,293 |   |   | 7,074 |   |
| Furniture                and Equipment                            |   |                                            | 9,911   |   |   | 8,970 |   |   | 8,393 |   |
| Intangible                Amortization                            |   |                                            | 6,085   |   |   | 5,440 |   |   | 3,824 |   |
| Merger                Expense                                     |   |                                            | -       |   |   | 438 |   |   | 550 |   |
| Other                                                             |   |                                            | 35,322  |   |   | 32,986 |   |   | 25,040 |   |
| Total                Noninterest Expense                          |   |                                            | 121,568 |   |   | 109,814 |   |   | 89,226 |   |
|                                                              |   |                                            |    |   |   |   |   |   |   |   |
| **INCOME                BEFORE INCOME TAXES**                     |   |                                            | 51,186  |   |   | 46,867 |   |   | 45,270 |   |
| Income                Taxes                                       |   |                                            | 17,921  |   |   | 16,586 |   |   | 15,899 |   |
|                                                              |   |                                            |    |   |   |   |   |   |   |   |
| **NET                INCOME**                                     |   | $                                               | 33,265  |   | $ | 30,281 |   | $ | 29,371 |   |
| BASIC                NET INCOME PER SHARE                         |   | $                                               | 1.79    |   | $ | 1.66 |   | $ | 1.74 |   |
| DILUTED                NET INCOME PER SHARE                       |   | $                                               | 1.79    |   | $ | 1.66 |   | $ | 1.74 |   |
|                                                              |   |                                            |    |   |   |   |   |   |   |   |
| Average                Basic Common Shares Outstanding            |   |                                            | 18,585  |   |   | 18,264 |   |   | 16,806 |   |
| Average                Diluted Common Shares Outstanding          |   |                                            | 18,610  |   |   | 18,281 |   |   | 16,811 |   |

| *(1)* | *All                share and per share data have been adjusted to reflect the 5-for-4                stock                split effective July 1, 2005.* |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

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

----

*Table          of Contents*

**CAPITAL      CITY BANK GROUP, INC.**

**CONSOLIDATED      STATEMENTS OF FINANCIAL CONDITION**

|                                                                                                                                                                                                                                     |   | As                of December 31, |      |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|-----------|
| *(Dollars                in Thousands, Except Per Share Data)*(1)                                                                                                                                                                        |   | 2006                              |      | 2005 |   |
| **ASSETS**                                                                                                                                                                                                                               |   |                              |      |   |   |
| Cash                and Due From Banks                                                                                                                                                                                                   |   | $                                 | 98,769    |   | $ | 105,195 |   |
| Funds                Sold and Interest Bearing Deposits                                                                                                                                                                                  |   |                              | 78,795    |   |   | 61,164 |   |
| Total                Cash and Cash Equivalents                                                                                                                                                                                           |   |                              | 177,564   |   |   | 166,359 |   |
| Investment                Securities, Available-for-Sale                                                                                                                                                                                 |   |                              | 191,894   |   |   | 171,019 |   |
|                                                                                                                                                                                                                                     |   |                              |      |   |   |   |   |
| Loans,                Net of Unearned Interest                                                                                                                                                                                           |   |                              | 1,999,721 |   |   | 2,067,494 |   |
| Allowance                for Loan Losses                                                                                                                                                                                                 |   |                              | (17,217)  |   |   | (17,410 | ) |
| Loans,                Net                                                                                                                                                                                                                |   |                              | 1,982,504 |   |   | 2,050,084 |   |
|                                                                                                                                                                                                                                     |   |                              |      |   |   |   |   |
| Premises                and Equipment, Net                                                                                                                                                                                               |   |                              | 86,538    |   |   | 73,818 |   |
| Goodwill                                                                                                                                                                                                                                 |   |                              | 84,811    |   |   | 84,829 |   |
| Other                Intangible Assets                                                                                                                                                                                                   |   |                              | 19,591    |   |   | 25,622 |   |
| Other                Assets                                                                                                                                                                                                              |   |                              | 55,008    |   |   | 53,731 |   |
| Total                Assets                                                                                                                                                                                                              |   | $                                 | 2,597,910 |   | $ | 2,625,462 |   |
|                                                                                                                                                                                                                                     |   |                              |      |   |   |   |   |
| **LIABILITIES**                                                                                                                                                                                                                          |   |                              |      |   |   |   |   |
| Deposits:                                                                                                                                                                                                                                |   |                              |      |   |   |   |   |
| Noninterest                Bearing Deposits                                                                                                                                                                                              |   | $                                 | 490,014   |   | $ | 559,492 |   |
| Interest                Bearing Deposits                                                                                                                                                                                                 |   |                              | 1,591,640 |   |   | 1,519,854 |   |
| Total                Deposits                                                                                                                                                                                                            |   |                              | 2,081,654 |   |   | 2,079,346 |   |
|                                                                                                                                                                                                                                     |   |                              |      |   |   |   |   |
| Short-Term                Borrowings                                                                                                                                                                                                     |   |                              | 65,023    |   |   | 82,973 |   |
| Subordinated                Notes Payable                                                                                                                                                                                                |   |                              | 62,887    |   |   | 62,887 |   |
| Other                Long-Term Borrowings                                                                                                                                                                                                |   |                              | 43,083    |   |   | 69,630 |   |
| Other                Liabilities                                                                                                                                                                                                         |   |                              | 29,493    |   |   | 24,850 |   |
| Total                Liabilities                                                                                                                                                                                                         |   |                              | 2,282,140 |   |   | 2,319,686 |   |
|                                                                                                                                                                                                                                     |   |                              |      |   |   |   |   |
| **SHAREOWNERS'                EQUITY**                                                                                                                                                                                                   |   |                              |      |   |   |   |   |
| Preferred                Stock, $.01 par value; 3,000,000 shares authorized; no shares issued                and                outstanding                                                                                              |   |                              | -         |   |   | - |   |
| Common                Stock, $.01 par value; 90,000,000 shares authorized; 18,518,398 and                18,631,706 shares issued and outstanding at December 31, 2006 and                December                31, 2005, respectively |   |                              | 185       |   |   | 186 |   |
| Additional                Paid-In Capital                                                                                                                                                                                                |   |                              | 80,654    |   |   | 83,304 |   |
| Retained                Earnings                                                                                                                                                                                                         |   |                              | 243,242   |   |   | 223,532 |   |
| Accumulated                Other Comprehensive Loss, Net of Tax                                                                                                                                                                          |   |                              | (8,311)   |   |   | (1,246 | ) |
| Total                Shareowners' Equity                                                                                                                                                                                                 |   |                              | 315,770   |   |   | 305,776 |   |
| Commitments                and Contingencies (See Note 18)                                                                                                                                                                               |   |                              |      |   |   |   |   |
| Total                Liabilities and Shareowners' Equity                                                                                                                                                                                 |   | $                                 | 2,597,910 |   | $ | 2,625,462 |   |

| *(1)* | *All                share and per share data have been adjusted to reflect the 5-for-4                stock                split effective July 1, 2005.* |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

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

----

*Table          of Contents*

**CAPITAL      CITY BANK GROUP, INC.**

**CONSOLIDATED      STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY**

| *(Dollars                in Thousands, Except Per Share Data)*(1)                                         |   | CommonStock |   | AdditionalPaid-InCapital |    | RetainedEarnings |   | Accumulated                OtherComprehensive(Loss)                Income,Net                of Taxes |     | Total  |   |
|-----------------------------------------------------------------------------------------------------------|--------|-------------|--------|--------------------------|---------|------------------|--------|-------------------------------------------------------------------------------------------------------|----------|--------|--------|
|                                                                                                      |   |        |   |                     |    |             |   |                                                                                                  |     |   |   |
| Balance,                December 31, 2003                                                                 |   | $           | 165    |                     |  $ | 16,124           |   |                                                                                                  | 185,134  |   | $      | 1,386 |   |  $ | 202,809 |   |
| Comprehensive                Income:                                                                      |   |        |   |                     |    |             |   |                                                                                                  |     |   |   |   |   |   |   |   |
| Net                Income                                                                                 |   |        | -      |                     |    | -                |   |                                                                                                  | 29,371   |   |   |   |   |   |   |   |
| Net                Change in Unrealized Loss On Available-for-Sale Securities (net of                tax) |   |        | -      |                     |    | -                |   |                                                                                                  | -        |   |   | (1,739 | ) |   |   |   |
| Total                Comprehensive Income                                                                 |   |        | -      |                     |    | -                |   |                                                                                                  | -        |   |   | - |   |   | 27,632 |   |
| Cash                Dividends ($.525 per share)                                                           |   |        | -      |                     |    | -                |   |                                                                                                  | (9,857   | )      |   | - |   |   | (9,857 | ) |
| Stock                Performance Plan Compensation                                                        |   |        | -      |                     |    | 193              |   |                                                                                                  | -        |   |   | - |   |   | 193 |   |
| Issuance                of Common Stock                                                                   |   |        | 12     |                     |    | 36,011           |   |                                                                                                  | -        |   |   | - |   |   | 36,023 |   |
|                                                                                                      |   |        |   |                     |    |             |   |                                                                                                  |     |   |   |   |   |   |   |   |
| Balance,                December 31, 2004                                                                 |   |        | 177    |                     |    | 52,328           |   |                                                                                                  | 204,648  |   |   | (353 | ) |   | 256,800 |   |
| Comprehensive                Income:                                                                      |   |        |   |                     |    |             |   |                                                                                                  |     |   |   |   |   |   |   |   |
| Net                Income                                                                                 |   |        | -      |                     |    | -                |   |                                                                                                  | 30,281   |   |   |   |   |   |   |   |
| Net                Change in Unrealized Loss On Available-for-Sale Securities (net of                tax) |   |        | -      |                     |    | -                |   |                                                                                                  | -        |   |   | (893 | ) |   |   |   |
| Total                Comprehensive Income                                                                 |   |        | -      |                     |    | -                |   |                                                                                                  | -        |   |   | - |   |   | 29,388 |   |
| Cash                Dividends ($.584 per share)                                                           |   |        | -      |                     |    | -                |   |                                                                                                  | (11,397  | )      |   | - |   |   | (11,397 | ) |
| Stock                Performance Plan Compensation                                                        |   |        | -      |                     |    | 968              |   |                                                                                                  | -        |   |   | - |   |   | 968 |   |
| Issuance                of Common Stock                                                                   |   |        | 9      |                     |    | 30,008           |   |                                                                                                  | -        |   |   | - |   |   | 30,017 |   |
|                                                                                                      |   |        |   |                     |    |             |   |                                                                                                  |     |   |   |   |   |   |   |   |
| Balance,                December 31, 2005                                                                 |   |        | 186    |                     |    | 83,304           |   |                                                                                                  | 223,532  |   |   | (1,246 | ) |   | 305,776 |   |
| Cumulative                Effect Adjustment upon adoption of SAB No. 108 (net of                tax)      |   |        | -      |                     |    | -                |   |                                                                                                  | (1,233)  |   |   | - |   |   | (1,233) |   |
| Balance                (adjusted), December 31, 2005                                                      |   |        | 186    |                     |    | 83,304           |   |                                                                                                  | 222,299  |   |   | (1,246) |   |   | 304,543 |   |
| Comprehensive                Income:                                                                      |   |        |   |                     |    |             |   |                                                                                                  |     |   |   |   |   |   |   |   |
| Net                Income                                                                                 |   |        | -      |                     |    | -                |   |                                                                                                  | 33,265   |   |   |   |   |   |   |   |
| Net                Change in Unrealized Loss On Available-for-Sale Securities (net of                tax) |   |        | -      |                     |    | -                |   |                                                                                                  | -        |   |   | 412 |   |   |   |   |
| Establish                Pension Liability upon adoption of SFAS No. 158 (net of                tax)      |   |        | -      |                     |    | -                |   |                                                                                                  | -        |   |   | (7,477) |   |   |   |   |
| Total                Comprehensive Income                                                                 |   |        | -      |                     |    | -                |   |                                                                                                  | -        |   |   | - |   |   | 26,200 |   |
| Cash                Dividends ($.663 per share)                                                           |   |        | -      |                     |    | -                |   |                                                                                                  | (12,322) |   |   | - |   |   | (12,322) |   |
| Stock                Performance Plan Compensation                                                        |   |        | -      |                     |    | 1,673            |   |                                                                                                  | -        |   |   | - |   |   | 1,673 |   |
| Issuance                of Common Stock                                                                   |   |        | 1      |                     |    | 1,035            |   |                                                                                                  | -        |   |   | - |   |   | 1,036 |   |
| Repurchase                of Common Stock                                                                 |   |        | (2)    |                     |    | (5,358)          |   |                                                                                                  | -        |   |   | - |   |   | (5,360) |   |
|                                                                                                      |   |        |   |                     |    |             |   |                                                                                                  |     |   |   |   |   |   |   |   |
| Balance,                December 31, 2006                                                                 |   | $           | 185    |                     | $       | 80,654           |   | $                                                                                                     | 243,242  |   | $      | (8,311) |   | $ | 315,770 |   |

| *(1)* | *All                share, per share, and shareowners' equity data have been adjusted                to                reflect the 5-for-4 stock split effective July 1, 2005, and the 5-for-4                stock split effective June 13,                2003.* |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

----

*Table          of Contents*

**CAPITAL      CITY BANK GROUP, INC.**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

|                                                                                                                                                   |   |   | For                the Years Ended December 31, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------|--------|
| *(Dollars                in Thousands)*                                                                                                                |   |   | 2006                                            |   |   | 2005 |   |   | 2004 |   |
| **CASH                FLOWS FROM OPERATING ACTIVITIES:**                                                                                               |   |   |                                            |   |   |   |   |   |   |   |
| Net                Income                                                                                                                              |   | $      | 33,265                                          |   | $ | 30,281 |   | $ | 29,371 |   |
| Adjustments                to Reconcile Net Income to Cash Provided by Operating                Activities:                                            |   |   |                                            |   |   |   |   |   |   |   |
| Provision                for Loan Losses                                                                                                               |   |   | 1,959                                           |   |   | 2,507 |   |   | 2,141 |   |
| Depreciation                                                                                                                                           |   |   | 6,795                                           |   |   | 5,899 |   |   | 5,288 |   |
| Net                Securities Amortization                                                                                                             |   |   | 582                                             |   |   | 1,454 |   |   | 2,117 |   |
| Amortization                of Intangible Assets                                                                                                       |   |   | 6,085                                           |   |   | 5,440 |   |   | 3,824 |   |
| Loss/(Gain)                on Sale of Investment Securities                                                                                            |   |   | 4                                               |   |   | (9 | ) |   | (14 | ) |
| Origination                of Loans Held-for-Sale                                                                                                      |   |   | (190,945)                                       |   |   | (219,171 | ) |   | (181,068 | ) |
| Proceeds                From Sales of Loans Held-for-Sale                                                                                              |   |   | 194,569                                         |   |   | 227,853 |   |   | 178,248 |   |
| Net                Gain From Sales of Loans Held-for Sale                                                                                              |   |   | (3,235)                                         |   |   | (4,072 | ) |   | (3,208 | ) |
| Non-Cash                Compensation                                                                                                                   |   |   | 1,673                                           |   |   | 968 |   |   | 1,707 |   |
| Deferred                Income Taxes                                                                                                                   |   |   | 1,614                                           |   |   | 182 |   |   | 765 |   |
| Net                Increase in Other Assets                                                                                                            |   |   | (11,327)                                        |   |   | (11,839 | ) |   | (4,210 | ) |
| Net                Increase (Decrease) in Other Liabilities                                                                                            |   |   | 5,148                                           |   |   | 9,264 |   |   | (3,182 | ) |
| Net                Cash Provided by Operating Activities                                                                                               |   |   | 46,187                                          |   |   | 48,757 |   |   | 31,779 |   |
|                                                                                                                                                   |   |   |                                            |   |   |   |   |   |   |   |
| **CASH                FLOWS FROM INVESTING ACTIVITIES:**                                                                                               |   |   |                                            |   |   |   |   |   |   |   |
| Securities                Available-for-Sale:                                                                                                          |   |   |                                            |   |   |   |   |   |   |   |
| Purchases                                                                                                                                              |   |   | (102,628)                                       |   |   | (45,717 | ) |   | (88,028 | ) |
| Sales                                                                                                                                                  |   |   | 283                                             |   |   | 35,142 |   |   | 3,466 |   |
| Payments,                Maturities, and Calls                                                                                                         |   |   | 81,500                                          |   |   | 81,783 |   |   | 128,617 |   |
| Net                Decrease (Increase) in Loans                                                                                                        |   |   | 64,213                                          |   |   | (127,715 | ) |   | (127,115 | ) |
| Net                Cash Acquired (Used In) Acquisitions                                                                                                |   |   | -                                               |   |   | 37,412 |   |   | (31,743 | ) |
| Purchase                of Premises & Equipment                                                                                                    |   |   | (20,145)                                        |   |   | (18,336 | ) |   | (5,576 | ) |
| Proceeds                From Sales of Premises & Equipment                                                                                         |   |   | 630                                             |   |   | 897 |   |   | 1,155 |   |
| Net                Cash Provided By (Used In) Investing Activities                                                                                     |   |   | 23,853                                          |   |   | (36,534 | ) |   | (119,224 | ) |
|                                                                                                                                                   |   |   |                                            |   |   |   |   |   |   |   |
| **CASH                FLOWS FROM FINANCING ACTIVITIES:**                                                                                               |   |   |                                            |   |   |   |   |   |   |   |
| Net                Increase (Decrease) in Deposits                                                                                                     |   |   | 2,308                                           |   |   | (17,125 | ) |   | 23,776 |   |
| Net                Decrease in Short-Term Borrowings                                                                                                   |   |   | (31,412)                                        |   |   | (33,085 | ) |   | (33,559 | ) |
| Proceeds                from Subordinated Notes Payable                                                                                                |   |   | -                                               |   |   | 31,959 |   |   | 30,928 |   |
| Increase                in Other Long-Term Borrowings                                                                                                  |   |   | 3,250                                           |   |   | 23,600 |   |   | 59,741 |   |
| Repayment                of Other Long-Term Borrowings                                                                                                 |   |   | (16,335)                                        |   |   | (2,380 | ) |   | (41,815 | ) |
| Dividends                Paid                                                                                                                          |   |   | (12,322)                                        |   |   | (11,397 | ) |   | (9,857 | ) |
| Repurchase                of Common Stock                                                                                                              |   |   | (5,360)                                         |   |   | - |   |   | - |   |
| Issuance                of Common Stock                                                                                                                |   |   | 1,036                                           |   |   | 1,019 |   |   | 1,184 |   |
| Net                Cash (Used In) Provided By Financing Activities                                                                                     |   |   | (58,835)                                        |   |   | (7,409 | ) |   | 30,398 |   |
|                                                                                                                                                   |   |   |                                            |   |   |   |   |   |   |   |
| **NET                CHANGE IN CASH AND CASH EQUIVALENTS**                                                                                             |   |   | 11,205                                          |   |   | 4,814 |   |   | (57,047 | ) |
|                                                                                                                                                   |   |   |                                            |   |   |   |   |   |   |   |
| Cash                and Cash Equivalents at Beginning of Year                                                                                          |   |   | 166,359                                         |   |   | 161,545 |   |   | 218,592 |   |
| Cash                and Cash Equivalents at End of Year                                                                                                |   | $      | 177,564                                         |   | $ | 166,359 |   | $ | 161,545 |   |
|                                                                                                                                                   |   |   |                                            |   |   |   |   |   |   |   |
| SUPPLEMENTAL                DISCLOSURES:                                                                                                               |   |   |                                            |   |   |   |   |   |   |   |
| Interest                Paid on Deposits                                                                                                               |   | $      | 36,509                                          |   | $ | 19,964 |   | $ | 10,661 |   |
| Interest                Paid on Debt                                                                                                                   |   | $      | 9,688                                           |   | $ | 8,754 |   | $ | 4,066 |   |
| Taxes                Paid                                                                                                                              |   | $      | 16,797                                          |   | $ | 15,923 |   | $ | 12,606 |   |
| Loans                Transferred to Other Real Estate                                                                                                  |   | $      | 1,018                                           |   | $ | 2,689 |   | $ | 1,351 |   |
| Cumulative                Effect Adjustment to Beginning Retained Earnings - SAB 108                                                                   |   | $      | 1,233                                           |   | $ | - |   | $ | - |   |
| Cumulative                Effect Adjustment to Other Comprehensive Income to Record Minimum                Pension                Liability - SFAS 158 |   | $      | 7,477                                           |   | $ | - |   | $ | - |   |
| Issuance                of Common Stock as Non-Cash Compensation                                                                                       |   | $      | 711                                             |   | $ | 339 |   | $ | 1,707 |   |
| Transfer                of Current Portion of Long-Term Borrowingsto                Short-Term Borrowings                                              |   | $      | 13,061                                          |   | $ | 20,043 |   | $ | 16,002 |   |

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

----

*Table          of Contents*

***Notes      to Consolidated Financial Statements***

**Note      1**

**SIGNIFICANT      ACCOUNTING POLICIES**

**Basis      of Presentation**

**Use      of Estimates**

**Cash      and Cash Equivalents**

**Investment      Securities**

----

*Table          of Contents*

**Loans**

**Loans      Held For Sale**

**Allowance      for Loan Losses**

**Long-Lived      Assets**

----

*Table          of Contents*

**Goodwill**

**Income      Taxes**

**Stock      Based Compensation**

**Recent      Accounting Pronouncements**

*Statement      of Financial Accounting Standards*

----

*Table          of Contents*

*Financial      Accounting Standards Board Interpretations*

*SEC      Staff Accounting Bulletin*

|                            |   | Adjustment |      | Description |                                                                                                                                                                                                      | Years                Impacted |
|---------------------------------|--------|------------|-----------|-------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------|
|                            |   |       |      |        |                                                                                                                                                                                                      |                          |   |
| Operating                Leases |   | $          | 715,000   |        | Establish                deferred rent payable due to difference in using straight-line accounting                for operating leases (required per SFAS 13) versus cash-basis                accounting |                          |  1990                - 2006 |
|                            |   |       |      |        |                                                                                                                                                                                                      |                          |   |
| Supplies                        |   | $          | 518,000   |        | Overstatement                of prepaid supply account due to improper recognition of sales tax                and                freight charges when supplies were used                                 |                          |  1998                - 2006 |
|                            |   |       |      |        |                                                                                                                                                                                                      |                          |   |
| Total                           |   | $          | 1,233,000 |        |                                                                                                                                                                                                      |                          |   |

----

*Table          of Contents*

**Note      2**

**INVESTMENT      SECURITIES**

*Investment      Portfolio Composition*

|                                                     |   | 2006          |    |
|----------------------------------------------------------|--------|---------------|---------|
| *(Dollars                in Thousands)*                  |   | AmortizedCost |    | UnrealizedGains |   | UnrealizedLosses |   | MarketValue |   |
| U.S.                Treasury                             |   | $             | 12,098  |   | $ | 16 |   | $ | 49 |   | $ | 12,065 |   |
| U.S.                Government Agencies and Corporations |   |          | 61,619  |   |   | 37 |   |   | 593 |   |   | 61,063 |   |
| States                and Political Subdivisions         |   |          | 83,621  |   |   | 16 |   |   | 415 |   |   | 83,222 |   |
| Mortgage-Backed                Securities                |   |          | 23,244  |   |   | 23 |   |   | 371 |   |   | 22,896 |   |
| Other                Securities(1)                       |   |          | 12,648  |   |   | - |   |   | - |   |   | 12,648 |   |
| Total                Investment Securities               |   | $             | 193,230 |   | $ | 92 |   | $ | 1,428 |   | $ | 191,894 |   |

|                                                     |   | 2005          |    |
|----------------------------------------------------------|--------|---------------|---------|
| *(Dollars                in Thousands)*                  |   | AmortizedCost |    | UnrealizedGains |   | UnrealizedLosses |   | MarketValue |   |
| U.S.                Treasury                             |   | $             | 9,065   |   | $ | - |   | $ | 50 |   | $ | 9,015 |   |
| U.S.                Government Agencies and Corporations |   |          | 75,233  |   |   | - |   |   | 1,017 |   |   | 74,216 |   |
| States                and Political Subdivisions         |   |          | 53,611  |   |   | 44 |   |   | 512 |   |   | 53,143 |   |
| Mortgage-Backed                Securities                |   |          | 20,948  |   |   | 35 |   |   | 452 |   |   | 20,531 |   |
| Other                Securities(1)                       |   |          | 14,114  |   |   | - |   |   | - |   |   | 14,114 |   |
| Total                Investment Securities               |   | $             | 172,971 |   | $ | 79 |   | $ | 2,031 |   | $ | 171,019 |   |

| *(1)* | *FHLB                and FRB stock recorded at                cost.* |
|-------|----------------------------------------------------------------------|

*Investment      Sales*

| *(Dollars                in Thousands)* |   | Year       |   | TotalProceeds |   | GrossRealized                Gains |   | GrossRealized                Losses |   |
|-----------------------------------------|--------|------------|--------|---------------|--------|------------------------------------|--------|-------------------------------------|--------|
|                                    |   |  2006 |   | $             | 283    |                               | $      | -                                   |   | $ | 4 |   |
|                                    |   |  2005 |   | $             | 35,142 |                               | $      | 9                                   |   | $ | - |   |
|                                    |   |  2004 |   | $             | 3,466  |                               | $      | 17                                  |   | $ | 3 |   |

*Maturity      Distribution*

| *(Dollars                in Thousands)*         |   | Amortized                Cost |   | Market                Value |
|-------------------------------------------------|--------|-------------------------------|--------|-----------------------------|
| Due                in one year or less          | $      | 52,337                        |   |  $                     | 52,020 |   |
| Due                after one through five years |   |  123,511                 |   |                        |  122,631 |   |
| Due                after five through ten years |   |  4,734                   |   |                        |  4,595 |   |
| No                Maturity                      |   |  12,648                  |   |                        |  12,648 |   |
| Total                Investment Securities      | $      | 193,230                       |   |  $                     | 191,894 |   |

----

*Table          of Contents*

*Other      Than Temporarily Impaired Securities*

|                                                     |   |                                             |   | December                31, 2006                    |   |        |   |
|----------------------------------------------------------|--------|--------------------------------------------------|--------|-----------------------------------------------------|--------|-------------|--------|
|                                                     |   | Less                Than12                months |   | Greater                Than12                Months |   | Total       |   |
| *(Dollars                in Thousands)*                  |   | MarketValue                                      |   | UnrealizedLosses                                    |   | MarketValue |   | UnrealizedLosses |   | MarketValue |   | UnrealizedLosses |   |
| U.S.                Treasury                             |   | $                                                | 12,065 |                                                | $      | 49          |   | $ | - |   | $ | - |   | $ | 12,065 |   | $ | 49 |   |
| U.S.                Government Agencies and Corporations |   |                                             | 29,308 |                                                |   | 172         |   |   | 30,242 |   |   | 421 |   |   | 59,550 |   |   | 593 |   |
| States                and Political Subdivisions         |   |                                             | 46,576 |                                                |   | 219         |   |   | 30,087 |   |   | 196 |   |   | 76,663 |   |   | 415 |   |
| Mortgage-Backed                Securities                |   |                                             | 9,156  |                                                |   | 1           |   |   | 13,560 |   |   | 370 |   |   | 22,716 |   |   | 371 |   |
| Total                Investment Securities               |   | $                                                | 97,105 |                                                | $      | 441         |   | $ | 73,889 |   | $ | 987 |   | $ | 170,994 |   | $ | 1,428 |   |

|                                                     |   |                                             |   | December                31, 2005                    |   |        |
|----------------------------------------------------------|--------|--------------------------------------------------|--------|-----------------------------------------------------|--------|-------------|
|                                                     |   | Less                Than12                months |   | Greater                Than12                Months |   | Total       |
| *(Dollars                in Thousands)*                  |   | MarketValue                                      |   | UnrealizedLosses                                    |   | MarketValue |   | UnrealizedLosses |   | MarketValue |   | UnrealizedLosses |
| U.S.                Treasury                             |   | $                                                | -      |                                                | $      | -           |   | $ | 9,015 |   | $ | 50 |   | $ | 9,015 |   | $ | 50 |
| U.S.                Government Agencies and Corporations |   |                                             | 7,907  |                                                |   | 98          |   |   | 66,309 |   |   | 919 |   |   | 74,216 |   |   | 1,017 |
| States                and Political Subdivisions         |   |                                             | 34,640 |                                                |   | 348         |   |   | 10,926 |   |   | 164 |   |   | 45,566 |   |   | 512 |
| Mortgage-Backed                Securities                |   |                                             | 7,680  |                                                |   | 179         |   |   | 9,741 |   |   | 273 |   |   | 17,421 |   |   | 452 |
| Total                Investment Securities               |   | $                                                | 50,227 |                                                | $      | 625         |   | $ | 95,991 |   | $ | 1,406 |   | $ | 146,218 |   | $ | 2,031 |

----

*Table          of Contents*

**Note      3**

**LOANS**

*Loan      Portfolio Composition*

| *(Dollars                in Thousands)*               |   | 2006   |      | 2005   |
|-------------------------------------------------------|--------|--------|-----------|--------|
| Commercial,                Financial and Agricultural |   | $      | 229,327   |   | $ | 218,434 |   |
| Real                Estate - Construction             |   |   | 179,072   |   |   | 160,914 |   |
| Real                Estate - Commercial Mortgage      |   |   | 643,885   |   |   | 718,741 |   |
| Real                Estate - Residential(1)           |   |   | 531,968   |   |   | 553,124 |   |
| Real                Estate - Home Equity              |   |   | 173,597   |   |   | 165,337 |   |
| Real                Estate - Loans Held-for-Sale      |   |   | 4,170     |   |   | 4,875 |   |
| Consumer                                              |   |   | 237,702   |   |   | 246,069 |   |
| Total                Loans, Net of Unearned Interest  |   | $      | 1,999,721 |   | $ | 2,067,494 |   |

*(1)*

*      Includes loans in process with outstanding balances of $11.5 million and $26.3      million for 2006 and 2005, respectively.*

*Concentrations      of Credit*

*Nonperforming/Past      Due Loans*

**Note      4**

**ALLOWANCE      FOR LOAN LOSSES**

| *(Dollars                in Thousands)*                   |   | 2006   |    | 2005   |   | 2004   |   |
|-----------------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|
| Balance,                Beginning of Year                 |   | $      | 17,410  |   | $      | 16,037 |   | $ | 12,429 |   |
| Acquired                Reserves                          |   |   | -       |   |   | 1,385  |   |   | 5,713 |   |
| Reserve                Reversal(1)                        |   |   | -       |   |   | -      |   |   | (800 | )  |
| Provision                for Loan Losses                  |   |   | 1,959   |   |   | 2,507  |   |   | 2,141 |   |
| Recoveries                on Loans Previously Charged-Off |   |   | 1,830   |   |   | 1,724  |   |   | 1,612 |   |
| Loans                Charged-Off                          |   |   | (3,982) |   |   | (4,243 | )      |   | (5,058 | ) |
| Balance,                End of Year                       |   | $      | 17,217  |   | $      | 17,410 |   | $ | 16,037 |   |

| *(1)* | *Reflects                recapture of reserves allocated to the Bank's credit card portfolio,                which                was sold in August 2004.* |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

*Impaired      Loans*

|                                            |   | 2006             |   | 2005               |   |
|-------------------------------------------------|--------|------------------|--------|--------------------|--------|
| *(Dollars                in Thousands)*         |   | ValuationBalance |   | ValuationAllowance |   | ValuationBalance |   | ValuationAllowance |   |
| Impaired                Loans:                  |   |             |   |               |   |   |   |   |   |   |   |   |   |
| With                Related Credit Allowance    |   | $                | 6,085  |               | $      | 2,255 |   | $ | 5,612 |   | $ | 2,915 |   |
| Without                Related Credit Allowance |   |             | 4,574  |               |   | - |   |   | 1,658 |   |   | - |   |

| *(Dollars                in Thousands)*                      |   | 2006    |   | 2005   |    | 2004   |   |
|--------------------------------------------------------------|--------|---------|--------|--------|---------|--------|--------|
| Average                Recorded Investment in Impaired Loans |   | $       | 12,782 |   | $       | 9,786  |   | $ | 5,382 |   |
|                                                         |   |    |   |   |    |   |   |   |   |   |
| Interest                Income on Impaired Loans             |   |    |   |   |    |   |   |   |   |   |
| Recognized                                                   |   | $  | 398    |   | $  | 218    |   | $ | 140 |   |
| Collected                in Cash                             |   |    | 398    |   |    | 218    |   |   | 120 |   |

**Note      5**

**INTANGIBLE      ASSETS**

|                                            |   | 2006        |    | 2005                    |   |
|-------------------------------------------------|--------|-------------|---------|-------------------------|--------|
| *(Dollars                in Thousands)*         |   | GrossAmount |    | AccumulatedAmortization |   | GrossAmount |   | AccumulatedAmortization |   |
| Core                Deposits Intangibles        |   | $           | 47,176  |                    | $      | 28,955 |   | $ | 47,176 |   | $ | 23,312 |   |
| Goodwill                                        |   |        | 84,811  |                    |   | - |   |   | 84,829 |   |   | - |   |
| Customer                Relationship Intangible |   |        | 1,867   |                    |   | 497 |   |   | 1,867 |   |   | 305 |   |
| Non-Compete                Agreement            |   |        | 537     |                    |   | 537 |   |   | 483 |   |   | 287 |   |
| Total                Intangible Assets          |   | $           | 134,391 |                    | $      | 29,989 |   | $ | 134,355 |   | $ | 23,904 |   |

*Net      Core Deposit Intangibles. *

*Goodwill.      *

*Other*

----

*Table          of Contents*

**Note      6**

**PREMISES      AND EQUIPMENT**

| *(Dollars                in Thousands)*    |   | 2006   |     | 2005   |   |
|--------------------------------------------|--------|--------|----------|--------|--------|
| Land                                       |   | $      | 22,597   |   | $      | 16,503 |   |
| Buildings                                  |   |   | 78,676   |   |   | 69,924 |   |
| Fixtures                and Equipment      |   |   | 52,129   |   |   | 46,293 |   |
| Total                                      |   |   | 153,402  |   |   | 132,720 |   |
| Accumulated                Depreciation    |   |   | (66,864) |   |   | (58,902 | ) |
| Premises                and Equipment, Net |   | $      | 86,538   |   | $      | 73,818 |   |

**Note      7**

**DEPOSITS**

| *(Dollars                in Thousands)* |   | 2006   |      | 2005   |   |
|-----------------------------------------|--------|--------|-----------|--------|--------|
| NOW                Accounts             |   | $      | 599,433   |   | $      | 520,878 |   |
| Money                Market Accounts    |   |   | 384,568   |   |   | 331,094 |   |
| Savings                Accounts         |   |   | 125,500   |   |   | 144,296 |   |
| Time                Deposits            |   |   | 482,139   |   |   | 523,586 |   |
| Total                                   |   | $      | 1,591,640 |   | $      | 1,519,854 |   |

| *(Dollars                in Thousands)* |   |   |    |
|-----------------------------------------|--------|--------|---------|
| 2007                                    |   | $      | 396,507 |   |
| 2008                                    |   |   | 56,790  |   |
| 2009                                    |   |   | 20,955  |   |
| 2010                                    |   |   | 5,452   |   |
| 2011                and thereafter      |   |   | 2,435   |   |
| Total                                   |   | $      | 482,139 |   |

| *(Dollars                in Thousands)*    |   | 2006   |   | 2005   |   | 2004   |   |
|--------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
| NOW                Accounts                |   | $      | 7,658  |   | $      | 2,868  |   | $ | 733 |   |
| Money                Market Accounts       |   |   | 11,687 |   |   | 4,337  |   |   | 1,189 |   |
| Savings                Accounts            |   |   | 278    |   |   | 292    |   |   | 164 |   |
| Time                Deposits < $100,000 |   |   | 12,087 |   |   | 9,247  |   |   | 6,683 |   |
| Time                Deposits > $100,000 |   |   | 5,543  |   |   | 4,390  |   |   | 2,546 |   |
| Total                                      |   | $      | 37,253 |   | $      | 21,134 |   | $ | 11,315 |   |

----

*Table          of Contents*

**Note      8**

**SHORT-TERM      BORROWINGS**

| *(Dollars                in Thousands)*                   |   | FederalFundsPurchased |   | SecuritiesSold                UnderRepurchaseAgreements |   | OtherShort-TermBorrowings |   |
|-----------------------------------------------------------|--------|-----------------------|--------|---------------------------------------------------------|--------|---------------------------|--------|
| 2006                                                      |   |                  |   |                                                    |   |                      |   |
| Balance                at December 31,                    |   | $                     | 11,950 |                                                    | $      | 38,022                    |   | $ | 15,051 |  (1) |
| Maximum                indebtedness at any month end      |   |                  | 39,225 |                                                    |   | 55,321                    |   |   | 34,738 |   |
| Daily                average indebtedness outstanding     |   |                  | 16,645 |                                                    |   | 34,335                    |   |   | 27,720 |   |
| Average                rate paid for the year             |   |                  | 4.82   | %                                                       |   | 3.79                      | %      |   | 3.47 | % |
| Average                rate paid on period-end borrowings |   |                  | 4.61   | %                                                       |   | 3.79                      | %      |   | 3.90 | % |
|                                                      |   |                  |   |                                                    |   |                      |   |   |   |   |
| 2005                                                      |   |                  |   |                                                    |   |                      |   |   |   |   |
| Balance                at December 31,                    |   | $                     | 11,925 |                                                    | $      | 38,702                    |   | $ | 32,346 |   |
| Maximum                indebtedness at any month end      |   |                  | 26,825 |                                                    |   | 65,206                    |   |   | 67,122 |   |
| Daily                average indebtedness outstanding     |   |                  | 31,644 |                                                    |   | 39,784                    |   |   | 26,435 |   |
| Average                rate paid for the year             |   |                  | 3.36   | %                                                       |   | 2.30                      | %      |   | 3.32 | % |
| Average                rate paid on period-end borrowings |   |                  | 3.88   | %                                                       |   | 3.21                      | %      |   | 3.48 | % |
|                                                      |   |                  |   |                                                    |   |                      |   |   |   |   |
| 2004                                                      |   |                  |   |                                                    |   |                      |   |   |   |   |
| Balance                at December 31,                    |   | $                     | 19,800 |                                                    | $      | 58,431                    |   | $ | 17,783 |   |
| Maximum                indebtedness at any month end      |   |                  | 27,875 |                                                    |   | 77,087                    |   |   | 41,941 |   |
| Daily                average indebtedness outstanding     |   |                  | 22,291 |                                                    |   | 54,607                    |   |   | 23,683 |   |
| Average                rate paid for the year             |   |                  | 1.27   | %                                                       |   | 0.71                      | %      |   | 2.52 | % |
| Average                rate paid on period-end borrowings |   |                  | 1.97   | %                                                       |   | 1.12                      | %      |   | 3.19 | % |

| *(1)* | *Includes                FHLB debt of $13.0 million and TT&L (client tax deposits) balance of                $2.0 million at December 31,                2006.* |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

**Note      9**

**LONG-TERM      BORROWINGS**

*Federal      Home Loan Bank Notes. *

| *(Dollars                in Thousands)*                          |   | 2006   |   | 2005   |   |
|------------------------------------------------------------------|--------|--------|--------|--------|--------|
| Due                on February 15, 2006, fixed rate of 3.00%     |   |   | -      |   |   | 10 |   |
| Due                on September 8, 2006, fixed rate of 4.28%     |   |   | -      |   |   | 10,000 |   |
| Due                on September 11, 2006, fixed rate of 2.93%    |   |   | -      |   |   | 20,000 |   |
| Due                on February 13, 2007, fixed rate of 3.05%(1)  |   |   | 3,000  |   |   | 3,000 |   |
| Due                on April 24, 2007, fixed rate of 7.30%(1)     |   |   | 23     |   |   | 80 |   |
| Due                on September 10, 2007, fixed rate of 4.29%(1) |   |   | 10,000 |   |   | 10,000 |   |
| Due                on May 30, 2008, fixed rate of 2.50%          |   |   | 61     |   |   | 98 |   |
| Due                on June 13, 2008, fixed rate of 5.40%         |   |   | 214    |   |   | 357 |   |
| Due                on September 8, 2008, fixed rate of 4.32%     |   |   | 10,000 |   |   | 10,000 |   |
| Due                on November 10, 2008, fixed rate of 4.12%     |   |   | 2,189  |   |   | 2,270 |   |
| Due                on October 19, 2009, fixed rate of 3.69%      |   |   | 470    |   |   | 638 |   |
| Due                on November 10, 2010, fixed rate of 4.72%     |   |   | 722    |   |   | 749 |   |
| Due                on December 31, 2010, fixed rate of 3.85%     |   |   | 699    |   |   | 864 |   |
| Due                on April 4, 2011, fixed rate of 4.00%(2)      |   |   | -      |   |   | 5,000 |   |
| Due                on December 18, 2012, fixed rate of 4.84%     |   |   | 566    |   |   | 589 |   |
| Due                on March 18, 2013, fixed rate of 6.37%        |   |   | 571    |   |   | 638 |   |
| Due                on June 17, 2013, fixed rate of 3.53%         |   |   | 793    |   |   | 888 |   |
| Due                on June 17, 2013, fixed rate of 3.85%         |   |   | 89     |   |   | 92 |   |
| Due                on June 17, 2013, fixed rate of 4.11%         |   |   | 1,720  |   |   | 1,776 |   |
| Due                on September 23, 2013, fixed rate of 5.64%    |   |   | 824    |   |   | 915 |   |
| Due                on January 27, 2014, fixed rate of 5.79%      |   |   | 1,191  |   |   | 1,246 |   |
| Due                on March 10, 2014, fixed rate of 4.21%        |   |   | 571    |   |   | 634 |   |
| Due                on May 27, 2014, fixed rate of 5.92%          |   |   | 435    |   |   | 482 |   |
| Due                on June 2, 2014, fixed rate of 4.52%          |   |   | 3,078  |   |   | 3,412 |   |
| Due                on July 20, 2016, fixed rate of 6.27%         |   |   | 1,134  |   |   | 1,252 |   |
| Due                on October 3, 2016, fixed rate of 5.41%       |   |   | 295    |   |   | 325 |   |
| Due                on October 31, 2016, fixed rate of 5.16%      |   |   | 656    |   |   | 722 |   |
| Due                on June 27, 2017, fixed rate of 5.53%         |   |   | 735    |   |   | 805 |   |
| Due                on October 31, 2017, fixed rate of 4.79%      |   |   | 903    |   |   | 986 |   |
| Due                on December 11, 2017, fixed rate of 4.78%     |   |   | 802    |   |   | 875 |   |
| Due                on February 26, 2018, fixed rate of 4.36%     |   |   | 1,906  |   |   | 2,076 |   |
| Due                on September 18, 2018, fixed rate of 5.15%    |   |   | 564    |   |   | 612 |   |
| Due                on November 5, 2018, fixed rate of 5.10%      |   |   | 3,499  |   |   | 3,627 |   |
| Due                on December 3, 2018, fixed rate of 4.87%      |   |   | 590    |   |   | 639 |   |
| Due                on December 17, 2018, fixed rate of 6.33%     |   |   | 1,486  |   |   | 1,566 |   |
| Due                on December 24, 2018, fixed rate of 6.29%     |   |   | 681    |   |   | 713 |   |
| Due                on February 16, 2021, fixed rate of 3.00%     |   |   | 814    |   |   | 850 |   |
| Due                on January 18, 2022, fixed rate of 5.25%      |   |   | 3,250  |   |   | - |   |
| Due                on May 30, 2023, fixed rate of 2.50%          |   |   | 933    |   |   | 967 |   |
| Due                on May 21, 2024, fixed rate of 5.94%          |   |   | -      |   |   | 8,845 |   |
| Total                outstanding                                 |   | $      | 55,464 |   | $      | 98,598 |   |

| *(1)* | *$13.0                million is classified as short-term                borrowings.* |
|-------|---------------------------------------------------------------------------------------|

| *(2)* | *This                advance was callable quarterly at the option of the                FHLB.* |
|-------|------------------------------------------------------------------------------------------------|

| *(Dollars                in Thousands)* |   |   |   |
|-----------------------------------------|--------|--------|--------|
| 2007                                    |   | $      | 15,585 |  (1) |
| 2008                                    |   |   | 14,567 |   |
| 2009                                    |   |   | 2,418  |   |
| 2010                                    |   |   | 2,971  |   |
| 2011                                    |   |   | 2,254  |   |
| 2012                and thereafter      |   |   | 17,669 |   |
| Total                                   |   | $      | 55,464 |   |

| *(1)* | *$13.0                million is classified as short-term                borrowings.* |
|-------|---------------------------------------------------------------------------------------|

----

*Table          of Contents*

*Repurchase      Agreements - Term*

*Junior      Subordinated Deferrable Interest Notes. *

----

*Table          of Contents*

**Note      10**

**INCOME      TAXES**

| *(Dollars                in Thousands)* |   | 2006   |   | 2005   |   | 2004   |   |
|-----------------------------------------|--------|--------|--------|--------|--------|--------|--------|
| Current:                                |   |   |   |   |   |   |   |
| Federal                                 |   | $      | 14,780 |   | $      | 15,114 |   | $ | 13,753 |   |
| State                                   |   |   | 1,527  |   |   | 1,290  |   |   | 1,381 |   |
| Deferred:                               |   |   |   |   |   |   |   |   |   |   |
| Federal                                 |   |   | 1,384  |   |   | 156    |   |   | 656 |   |
| State                                   |   |   | 230    |   |   | 26     |   |   | 109 |   |
| Total                                   |   | $      | 17,921 |   | $      | 16,586 |   | $ | 15,899 |   |

| *(Dollars                in Thousands)*              |   | 2006   |    | 2005   |   | 2004   |   |
|------------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|
| Tax                Expense at Federal Statutory Rate |   | $      | 17,915  |   | $      | 16,403 |   | $ | 15,845 |   |
| Increases                (Decreases) Resulting From: |   |   |    |   |   |   |   |   |   |   |
| Tax-Exempt                Interest Income            |   |   | (1,334) |   |   | (1,054 | )      |   | (992 | ) |
| State                Taxes, Net of Federal Benefit   |   |   | 1,142   |   |   | 856    |   |   | 969 |   |
| Other                                                |   |   | 198     |   |   | 381    |   |   | 77 |   |
| Actual                Tax Expense                    |   | $      | 17,921  |   | $      | 16,586 |   | $ | 15,899 |   |

| *(Dollars                in Thousands)*                   |   | 2006   |   | 2005   |   |
|-----------------------------------------------------------|--------|--------|--------|--------|--------|
| Deferred                Tax Assets attributable to:       |   |   |   |   |   |
| Allowance                for Loan Losses                  |   | $      | 6,659  |   | $      | 6,733 |   |
| Associate                Benefits                         |   |   | 700    |   |   | 650 |   |
| Unrealized                Losses on Investment Securities |   |   | 503    |   |   | 706 |   |
| Accrued                Pension/SERP                       |   |   | 2,474  |   |   | (133) |   |
| Market                Value of Loans                      |   |   | (122)  |   |   | 19 |   |
| Interest                on Nonperforming Loans            |   |   | 170    |   |   | 170 |   |
| Net                Operating Loss Carry Forwards          |   |   | 399    |   |   | 228 |   |
| Intangible                Assets                          |   |   | 70     |   |   | 44 |   |
| Accrued                Expense                            |   |   | 612    |   |   | 592 |   |
| Other                                                     |   |   | 835    |   |   | 251 |   |
| Total                Deferred Tax Assets                  |   | $      | 12,300 |   | $      | 9,260 |   |
|                                                      |   |   |   |   |   |   |   |
| Deferred                Tax Liabilities attributable to:  |   |   |   |   |   |   |   |
| Depreciation                on Premises and Equipment     |   | $      | 4,434  |   | $      | 4,676 |   |
| Deferred                Loan Costs                        |   |   | 2,550  |   |   | 1,752 |   |
| Core                Deposit Intangible Assets             |   |   | (278)  |   |   | 1,173 |   |
| Intangible                Assets                          |   |   | 1,319  |   |   | 1,019 |   |
| Securities                Accretion                       |   |   | 25     |   |   | 17 |   |
| Other                                                     |   |   | 223    |   |   | 243 |   |
| Total                Deferred Tax Liabilities             |   |   | 8,273  |   |   | 8,880 |   |
| Net                Deferred Tax Assets                    |   | $      | 4,027  |   | $      | 380 |   |

----

*Table          of Contents*

| *(Dollars                in Thousands)*                                                                                      |   | 2006   |    | 2005   |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|
| Balance                at Beginning of Year                                                                                  |   | $      | 380     |   | $      | 2,463 |   |
|                                                                                                                         |   |   |    |   |   |   |   |
| Purchase                Accounting Acquisitions                                                                              |   |   | -       |   |   | (2,403 | ) |
|                                                                                                                         |   |   |    |   |   |   |   |
| Change                in Accounting Method - Adoption of SFAS No. 158 and SAB No.                108                         |   |   | 5,463   |   |   | - |   |
|                                                                                                                         |   |   |    |   |   |   |   |
| Income                Tax (Expense) Benefit From Change in Unrealized Losses on                Available-for-Sale Securities |   |   | (202)   |   |   | 502 |   |
|                                                                                                                         |   |   |    |   |   |   |   |
| Deferred                Income Tax Expense on Continuing Operations                                                          |   |   | (1,614) |   |   | (182 | ) |
|                                                                                                                         |   |   |    |   |   |   |   |
| Balance                at End of Year                                                                                        |   | $      | 4,027   |   | $      | 380 |   |

**Note      11**

**STOCK-BASED      COMPENSATION**

*AIP.*

----

*Table          of Contents*

*Executive      Stock Option Agreement. *

| Options                                         | Shares |   |   | Weighted-Average                Exercise Price |   |   | Weighted-Average                Remaining Months To Vest |   |   | Aggregate                Intrinsic Value |
|-------------------------------------------------|--------|--------|--------|------------------------------------------------|--------|--------|----------------------------------------------------------|--------|--------|------------------------------------------|
| Outstanding                at January 1, 2006   | 60,384 |   | $      | 32.79                                          |   | $      | 29.4                                                     |   | $      | 88,161                                   |
| Granted                                         | -      |   |   | -                                              |   |   | -                                                        |   |   | -                                        |
| Exercised                                       | -      |   |   | -                                              |   |   | -                                                        |   |   | -                                        |
| Forfeited                or expired             | -      |   |   | -                                              |   |   | -                                                        |   |   | -                                        |
| Outstanding                at December 31, 2006 | 60,384 |   | $      | 32.79                                          |   | $      | 17.4                                                     |   | $      | 151,355                                  |
| Exercisable                at December 31, 2006 | 27,840 |   | $      | 32.79                                          |   | $      | 17.4                                                     |   | $      | 68,497                                   |

*DSPP.      *

*ASPP.      *

|                                    | 2006  | 2005  | 2004  |
|-----------------------------------------|-------|-------|-------|
| Dividend                yield           | 1.9%  | 1.9%  | 1.7%  |
| Expected                volatility      | 23.5% | 28.0% | 30.0% |
| Risk-free                interest rate  | 4.5%  | 2.6%  | 1.1%  |
| Expected                life (in years) | 0.5   | 0.5   | 0.5   |

----

*Table          of Contents*

**Note      12**

**EMPLOYEE      BENEFIT PLANS**

**Adoption      of SFAS 158**

**Incremental      Effect of Applying SFAS 158**

**On      Individual Line Items of the Consolidated Statement of Financial      Condition**

|                                                |   |   | Prior                to    |   |   | Effect                of |   |   | As                Reported     |
|-----------------------------------------------------|--------|--------|----------------------------|--------|--------|--------------------------|--------|--------|--------------------------------|
|                                                |   |   | Adoption                of |   |   | Adopting                 |   |   | at                December 31, |
| *(Dollars                in Thousands)*             |   |   | SFAS                158    |   |   | SFAS                158  |   |   | 2006                           |
|                                                |   |   |                       |   |   |                     |   |   |                           |
| Other                Assets                         |   | $      | 59,707                     |   | $      | (4,699)                  |   | $      | 55,008                         |
|                                                |   |   |                       |   |   |                     |   |   |                           |
| Total                Assets                         |   |   | 2,602,609                  |   |   | (4,699)                  |   |   | 2,597,910                      |
|                                                |   |   |                       |   |   |                     |   |   |                           |
| Other                Liabilities                    |   |   | 26,716                     |   |   | 2,777                    |   |   | 29,493                         |
|                                                |   |   |                       |   |   |                     |   |   |                           |
| Total                Liabilities                    |   |   | 2,279,363                  |   |   | 2,777                    |   |   | 2,282,140                      |
|                                                |   |   |                       |   |   |                     |   |   |                           |
| Accumulated                Other Comprehensive Loss |   |   | -                          |   |   | (7,477)                  |   |   | (7,477)                        |
|                                                |   |   |                       |   |   |                     |   |   |                           |
| Total                Shareowners' Equity            |   | $      | 323,247                    |   | $      | (7,477)                  |   | $      | 315,770                        |

**Pension      Plan**

----

*Table          of Contents*

| *(Dollars                in Thousands)*                                |   | 2006   |     | 2005   |   | 2004     |   |
|------------------------------------------------------------------------|--------|--------|----------|--------|--------|----------|--------|
| Change                in Projected Benefit Obligation:                 |   |   |     |   |   |     |   |
| Benefit                Obligation at Beginning of Year                 |   | $      | 64,131   |   | $      | 54,529   |   | $ | 46,227 |   |
| Service                Cost                                            |   |   | 4,930    |   |   | 4,352    |   |   | 3,776 |   |
| Interest                Cost                                           |   |   | 3,622    |   |   | 3,253    |   |   | 2,893 |   |
| Actuarial                Loss                                          |   |   | (1,421)  |   |   | 2,752    |   |   | 2,890 |   |
| Benefits                Paid                                           |   |   | (3,267)  |   |   | (3,501   | )      |   | (1,092 | ) |
| Expenses                Paid                                           |   |   | (149)    |   |   | (75      | )      |   | (165 | ) |
| Plan                Change                                             |   |   | 825      |   |   | -        |   |   | - |   |
| Acquisitions                                                           |   |   | -        |   |   | 2,821    |   |   | - |   |
| Projected                Benefit Obligation at End of Year             |   | $      | 68,671   |   | $      | 64,131   |   | $ | 54,529 |   |
|                                                                   |   |   |     |   |   |     |   |   |   |   |
| Accumulated                Benefit Obligation at End of Year           |   | $      | 49,335   |   | $      | 45,645   |   | $ | 38,325 |   |
|                                                                   |   |   |     |   |   |     |   |   |   |   |
| Change                in Plan Assets:                                  |   |   |     |   |   |     |   |   |   |   |
| Fair                Value of Plan Assets at Beginning of Year          |   | $      | 52,277   |   | $      | 41,125   |   | $ | 34,784 |   |
| Actual                Return on Plan Assets                            |   |   | 6,342    |   |   | 1,737    |   |   | 2,710 |   |
| Employer                Contributions                                  |   |   | 11,350   |   |   | 10,500   |   |   | 4,888 |   |
| Benefits                Paid                                           |   |   | (3,267)  |   |   | (3,501   | )      |   | (1,092 | ) |
| Expenses                Paid                                           |   |   | (149)    |   |   | (75      | )      |   | (165 |   |
| Acquisitions                                                           |   |   | -        |   |   | 2,491    |   |   | - |   |
| Fair                Value of Plan Assets at End of Year                |   | $      | 66,553   |   | $      | 52,277   |   | $ | 41,125 |   |
|                                                                   |   |   |     |   |   |     |   |   |   |   |
| Reconciliation                of Funded Status:                        |   |   |     |   |   |     |   |   |   |   |
| Funded                Status                                           |   | $      | (2,117)  |   | $      | (11,853  | )      | $ | (13,404 | ) |
| Unrecognized                Net Actuarial Losses                       |   |   | *        |   |   | 14,823   |   |   | 11,676 |   |
| Unrecognized                Prior Service Cost                         |   |   | *        |   |   | 1,302    |   |   | 1,517 |   |
| Unrecognized                Net Transition Obligation                  |   |   | -        |   |   | -        |   |   | - |   |
| Prepaid                (Accrued) Benefit Cost                          |   | $      | *        |   | $      | 4,272    |   | $ | (211 | ) |
|                                                                   |   |   |     |   |   |     |   |   |   |   |
| Components                of Net Periodic Benefit Costs:               |   |   |     |   |   |     |   |   |   |   |
| Service                Cost                                            |   | $      | 4,930    |   | $      | 4,352    |   | $ | 3,776 |   |
| Interest                Cost                                           |   |   | 3,622    |   |   | 3,410    |   |   | 2,893 |   |
| Expected                Return on Plan Assets                          |   |   | (4,046)  |   |   | (3,373   | )      |   | (2,665 | ) |
| Amortization                of Prior Service Costs                     |   |   | 215      |   |   | 215      |   |   | 215 |   |
| Transition                Obligation Recognition                       |   |   | -        |   |   | 11       |   |   | 1 |   |
| Recognized                Net Actuarial Loss                           |   |   | 1,598    |   |   | 1,324    |   |   | 1,163 |   |
| Net                Periodic Benefit Cost                               |   | $      | 6,319    |   | $      | 5,939    |   | $ | 5,383 |   |
|                                                                   |   |   |     |   |   |     |   |   |   |   |
|  *Not              applicable due to SFAS No. 158                 |   |   |     |   |   |     |   |   |   |   |
|                                                                   |   |   |     |   |   |     |   |   |   |   |
| Assumptions:                                                           |   |   |     |   |   |     |   |   |   |   |
| Weighted-average                used to determine benefit obligations: |   |   |     |   |   |     |   |   |   |   |
| Discount                Rate                                           |   |   | 6.00     | %      |   | 5.75     | %      |   | 6.00 | % |
| Expected                Return on Plan Assets                          |   |   | 8.00     | %      |   | 8.00     | %      |   | 8.00 | % |
| Rate                of Compensation Increase                           |   |   | 5.50     | %      |   | 5.50     | %      |   | 5.50 | % |
| Measurement                Date                                        |   |   | 12/31/06 |   |   | 12/31/05 |   |   | 12/31/04 |   |
|                                                                   |   |   |     |   |   |     |   |   |   |   |
| Weighted-average                used to determine net cost:            |   |   |     |   |   |     |   |   |   |   |
| Discount                Rate                                           |   |   | 5.75     | %      |   | 6.00     | %      |   | 6.25 | % |
| Expected                Return on Plan Assets                          |   |   | 8.00     | %      |   | 8.00     | %      |   | 8.00 | % |
| Rate                of Compensation Increase                           |   |   | 5.50     | %      |   | 5.50     | %      |   | 5.50 | % |

----

*Table          of Contents*

*Return      on Plan Assets.*

*Plan      Assets. *

|                             |   | Target                Allocation | Percentage                of PlanAssets                at Year-End(1) |
|----------------------------------|--------|----------------------------------|-----------------------------------------------------------------------|
|                             |   | 2007                             | 2006                                                                  | 2005 |
| Equity                Securities |   |                             | 65%                                                                   |   | 55% |   | 51% |
| Debt                Securities   |   |                             | 30%                                                                   |   | 18% |   | 23% |
| Real                Estate       |   |                             | -                                                                     |   | 1% |   | - |
| Cash                Equivalent   |   |                             | 5%                                                                    |   | 26% |   | 26% |
| Total                            |   |                             | 100%                                                                  |   | 100% |   | 100% |

| *(1)* | *Represents                asset allocation at year-end which may differ from the average target                allocation for the year due to the year-end cash contribution to                the                plan.* |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Expected      Benefit Payments*

| 2007                             |   | $      | 3,249,113  |
|----------------------------------|--------|--------|------------|
| 2008                             |   |   | 4,350,617  |
| 2009                             |   |   | 4,249,471  |
| 2010                             |   |   | 3,979,390  |
| 2011                             |   |   | 5,153,436  |
| 2012                through 2016 |   |   | 35,397,040 |
|                             |   | $      | 56,379,067 |

*Contributions.      *

|                                | 2006                        |   | 2005                        |   | Expected2007(1)             |
|-------------------------------------|-----------------------------|--------|-----------------------------|--------|-----------------------------|
| Actual                Contributions | $                11,350,000 |   | $                10,500,000 |   | $                10,000,000 |

*(1)*

*      Estimate of 2007 maximum allowable contribution.*

**Supplemental      Executive Retirement Plan**

----

*Table          of Contents*

| *(Dollars                in Thousands)*                                    |   | 2006   |    | 2005   |   | 2004   |   |
|----------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|
| Change                in Projected Benefit Obligation:                     |   |   |    |   |   |   |   |
| Benefit                Obligation at Beginning of Year                     |   | $      | 3,878   |   | $      | 3,601  |   | $ | 1,880 |   |
| Service                Cost                                                |   |   | 123     |   |   | 133    |   |   | 147 |   |
| Interest                Cost                                               |   |   | 230     |   |   | 207    |   |   | 198 |   |
| Actuarial                (Gain) Loss                                       |   |   | 62      |   |   | (63    | )      |   | 1,376 |   |
| Plan                Change                                                 |   |   | (274)   |   |   | -      |   |   | - |   |
| Projected                Benefit Obligation at End of Year                 |   | $      | 4,019   |   | $      | 3,878  |   | $ | 3,601 |   |
|                                                                       |   |   |    |   |   |   |   |   |   |   |
| Accumulated                Benefit Obligation at End of Year               |   | $      | 2,252   |   | $      | 2,295  |   | $ | 1,894 |   |
|                                                                       |   |   |    |   |   |   |   |   |   |   |
| Reconciliation                of Funded Status:                            |   |   |    |   |   |   |   |   |   |   |
| Funded                Status                                               |   | $      | (4,018) |   | $      | (3,878 | )      | $ | (3,601 | ) |
| Unrecognized                Net Actuarial Loss                             |   |   | *       |   |   | 734    |   |   | 874 |   |
| Unrecognized                Prior Service Cost                             |   |   | *       |   |   | 388    |   |   | 449 |   |
| Accrued                Benefit Cost                                        |   | $      | *       |   | $      | (2,756 | )      | $ | (2,278 | ) |
|                                                                       |   |   |    |   |   |   |   |   |   |   |
| Components                of Net Periodic Benefit Costs:                   |   |   |    |   |   |   |   |   |   |   |
| Service                Cost                                                |   | $      | 123     |   | $      | 133    |   | $ | 147 |   |
| Interest                Cost                                               |   |   | 230     |   |   | 207    |   |   | 198 |   |
| Amortization                of Prior Service Cost                          |   |   | 61      |   |   | 61     |   |   | 62 |   |
| Recognized                Net Actuarial Loss (Gain)                        |   |   | 100     |   |   | 77     |   |   | 84 |   |
| Net                Periodic Benefit Cost                                   |   | $      | 514     |   | $      | 478    |   | $ | 491 |   |
|                                                                       |   |   |    |   |   |   |   |   |   |   |
|  **Not              applicable due to adoption of SFAS No. 158*       |   |   |    |   |   |   |   |   |   |   |
|                                                                       |   |   |    |   |   |   |   |   |   |   |
| Assumptions:                                                               |   |   |    |   |   |   |   |   |   |   |
| Weighted-average                used to determine the benefit obligations: |   |   |    |   |   |   |   |   |   |   |
| Discount                Rate                                               |   |   | 6.00    | %      |   | 5.75   | %      |   | 6.00 | % |
| Rate                of Compensation Increase                               |   |   | 5.50    | %      |   | 5.50   | %      |   | 5.50 | % |
|                                                                       |   |   |    |   |   |   |   |   |   |   |
| Weighted-average                used to determine the net cost:            |   |   |    |   |   |   |   |   |   |   |
| Discount                Rate                                               |   |   | 5.75    | %      |   | 6.00   | %      |   | 6.25 | % |
| Rate                of Compensation Increase                               |   |   | 5.50    | %      |   | 5.50   | %      |   | 5.50 | % |

*Expected      Benefit Payments*

| 2007                             |   | $      | 19,665    |
|----------------------------------|--------|--------|-----------|
| 2008                             |   |   | 96,715    |
| 2009                             |   |   | 204,356   |
| 2010                             |   |   | 269,559   |
| 2011                             |   |   | 358,692   |
| 2012                through 2016 |   |   | 3,548,890 |
|                             |   | $      | 4,497,877 |

----

*Table          of Contents*

**401(k)      Plan**

**Other      Plans**

**Note      13**

**EARNINGS      PER SHARE**

| *(Dollars                in Thousands, Except Per Share Data)*                                                                    |   | 2006   |       | 2005   |   | 2004       |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|------------|--------|
| Numerator:                                                                                                                        |   |   |       |   |   |       |   |
| Net                Income                                                                                                         |   | $      | 33,265     |   | $      | 30,281     |   | $ | 29,371 |   |
|                                                                                                                              |   |   |       |   |   |       |   |   |   |   |
| Denominator:                                                                                                                      |   |   |       |   |   |       |   |   |   |   |
| Denominator                for Basic Earnings Per Share Weighted-Average Shares                                                   |   |   | 18,584,519 |   |   | 18,263,855 |   |   | 16,805,696 |   |
| Effects                of Dilutive Securities Stock Compensation Plans                                                            |   |   | 25,320     |   |   | 17,388     |   |   | 5,230 |   |
|                                                                                                                              |   |   |       |   |   |       |   |   |   |   |
| Denominator                for Diluted Earnings Per Share Adjusted Weighted-Average Shares and                Assumed Conversions |   |   | 18,609,839 |   |   | 18,281,243 |   |   | 16,810,926 |   |
|                                                                                                                              |   |   |       |   |   |       |   |   |   |   |
| Basic                Earnings Per Share                                                                                           |   | $      | 1.79       |   | $      | 1.66       |   | $ | 1.74 |   |
|                                                                                                                              |   |   |       |   |   |       |   |   |   |   |
| Diluted                Earnings per Share                                                                                         |   | $      | 1.79       |   | $      | 1.66       |   | $ | 1.74 |   |

----

*Table          of Contents*

**Note      14**

**CAPITAL**

|                                           |   | Actual |    | RequiredFor                CapitalAdequacy                Purposes |   | To                Be Well-Capitalized                UnderPrompt                CorrectiveAction                Provisions |   |
|------------------------------------------------|--------|--------|---------|--------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------|--------|
| *(Dollars                in* *Thousands)* |   | Amount |    | Ratio                                                              |   | Amount                                                                                                                     |   | Ratio |   | Amount |   | Ratio |   |
| As                of December 31, 2006:        |   |   |    |                                                               |   |                                                                                                                       |   |   |   |   |   |   |   |
| Tier                I Capital:                 |   |   |    |                                                               |   |                                                                                                                       |   |   |   |   |   |   |   |
| CCBG                                           |   | $      | 280,679 |                                                               |   | 14.00                                                                                                                      | %      | $ | 80,191 |   |   | 4.00 | % |   | * |   |   | * |   |
| CCB                                            |   |   | 273,425 |                                                               |   | 13.66                                                                                                                      | %      |   | 80,055 |   |   | 4.00 | % |   | 120,082 |   |   | 6.00 | % |
|                                           |   |   |    |                                                               |   |                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                Capital:                  |   |   |    |                                                               |   |                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CCBG                                           |   |   | 299,783 |                                                               |   | 14.95                                                                                                                      | %      |   | 160,382 |   |   | 8.00 | % |   | * |   |   | * |   |
| CCB                                            |   |   | 290,642 |                                                               |   | 14.52                                                                                                                      | %      |   | 160,109 |   |   | 8.00 | % |   | 200,137 |   |   | 10.00 | % |
|                                           |   |   |    |                                                               |   |                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                I Leverage:                |   |   |    |                                                               |   |                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CCBG                                           |   |   | 280,679 |                                                               |   | 11.30                                                                                                                      | %      |   | 80,191 |   |   | 4.00 | % |   | * |   |   | * |   |
| CCB                                            |   |   | 273,425 |                                                               |   | 11.03                                                                                                                      | %      |   | 80,055 |   |   | 4.00 | % |   | 100,068 |   |   | 5.00 | % |
|                                           |   |   |    |                                                               |   |                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| As                of December 31, 2005:        |   |   |    |                                                               |   |                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                I Capital:                 |   |   |    |                                                               |   |                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CCBG                                           |   | $      | 257,572 |                                                               |   | 12.61                                                                                                                      | %      | $ | 81,675 |   |   | 4.00 | % |   | * |   |   | * |   |
| CCB                                            |   |   | 252,096 |                                                               |   | 12.36                                                                                                                      | %      |   | 81,599 |   |   | 4.00 | % |   | 122,398 |   |   | 6.00 | % |
|                                           |   |   |    |                                                               |   |                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                Capital:                  |   |   |    |                                                               |   |                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CCBG                                           |   |   | 276,869 |                                                               |   | 13.56                                                                                                                      | %      |   | 163,349 |   |   | 8.00 | % |   | * |   |   | * |   |
| CCB                                            |   |   | 269,506 |                                                               |   | 13.21                                                                                                                      | %      |   | 163,198 |   |   | 8.00 | % |   | 203,997 |   |   | 10.00 | % |
|                                           |   |   |    |                                                               |   |                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                I Leverage:                |   |   |    |                                                               |   |                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CCBG                                           |   |   | 257,572 |                                                               |   | 10.27                                                                                                                      | %      |   | 61,256 |   |   | 4.00 | % |   | * |   |   | * |   |
| CCB                                            |   |   | 252,096 |                                                               |   | 10.07                                                                                                                      | %      |   | 61,199 |   |   | 4.00 | % |   | 101,999 |   |   | 5.00 | % |

*Not      applicable to bank holding companies.*

**Note      15**

**DIVIDEND      RESTRICTIONS**

----

*Table          of Contents*

**Note      16**

**RELATED      PARTY INFORMATION**

**Note      17**

**SUPPLEMENTARY      INFORMATION**

| *(Dollars                in Thousands)*    |   | 2006   |   | 2005   |   | 2004   |      |
|--------------------------------------------|--------|--------|--------|--------|--------|--------|-----------|
| Noninterest                Income:         |   |   |   |   |   |   |      |
| Merchant                Fee Income         |   | $      | 6,978  |   | $      | 6,174  |      | $ | 5,135 |   |
| Interchange                Commission Fees |   |   | 3,105  |   |   | 2,239  |      |   | 2,229 |   |
| ATM/Debit                Card Fees         |   |   | 2,519  |   |   | 2,206  | (1)  |   | 2,007 | (1)  |
| Noninterest                Expense:        |   |   |   |   |   |   |      |   |   |   |
| Professional                Fees           |   |   | 3,402  |   |   | 3,825  |      |   | 2,858 | (1)  |
| Printing                & Supplies     |   |   | 2,472  |   |   | 2,372  |      |   | 1,854 |   |
| Interchange                Service Fees    |   |   | 6,010  |   |   | 5,402  |      |   | 4,741 |   |
| Telephone                                  |   |   | 2,323  |   |   | 2,493  |      |   | 2,048 |   |
| Advertising                                |   |   | 4,285  |   |   | 4,275  |      |   | 2,001 | (1) |

| *(1)* | *<1%                of appropriate threshold.* |
|-------|---------------------------------------------------|

----

*Table          of Contents*

**Note      18**

**COMMITMENTS      AND CONTINGENCIES**

*Lending      Commitments*

| *(Dollars                in Thousands)*        |   | Amount |    |
|------------------------------------------------|--------|--------|---------|
| Commitments                to Extend Credit(1) |   | $      | 418,952 |   |
| Standby                Letters of Credit       |   | $      | 17,537  |   |

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

*Other      Commitments*

*Contingencies*

----

*Table          of Contents*

**Note      19**

**FAIR      VALUE OF FINANCIAL INSTRUMENTS**

|                                                   |   | At                December 31, |      |
|--------------------------------------------------------|--------|--------------------------------|-----------|
|                                                   |   | 2006                           |      | 2005 |   |
| *(Dollars                in Thousands)*                |   | CarryingValue                  |      | EstimatedFairValue |   | CarryingValue |   | EstimatedFairValue |   |
| Financial                Assets:                       |   |                           |      |   |   |   |   |   |   |
| Cash                                                   |   | $                              | 98,769    |   | $ | 98,769 |   | $ | 105,195 |   | $ | 105,195 |   |
| Short-Term                Investments                  |   |                           | 78,795    |   |   | 78,795 |   |   | 61,164 |   |   | 61,164 |   |
| Investment                Securities                   |   |                           | 191,894   |   |   | 191,894 |   |   | 171,019 |   |   | 171,019 |   |
| Loans,                Net of Allowance for Loan Losses |   |                           | 1,982,504 |   |   | 1,992,025 |   |   | 2,050,084 |   |   | 2,044,954 |   |
| Total                Financial Assets                  |   | $                              | 2,351,962 |   | $ | 2,361,483 |   | $ | 2,387,462 |   | $ | 2,382,332 |   |
|                                                   |   |                           |      |   |   |   |   |   |   |   |   |   |   |
| Financial                Liabilities:                  |   |                           |      |   |   |   |   |   |   |   |   |   |   |
| Deposits                                               |   | $                              | 2,081,654 |   | $ | 2,007,308 |   | $ | 2,079,346 |   | $ | 1,953,576 |   |
| Short-Term                Borrowings                   |   |                           | 65,023    |   |   | 64,970 |   |   | 82,973 |   |   | 82,748 |   |
| Subordinated                Notes Payable              |   |                           | 62,887    |   |   | 63,013 |   |   | 62,887 |   |   | 63,049 |   |
| Long-Term                Borrowings                    |   |                           | 43,083    |   |   | 42,256 |   |   | 69,630 |   |   | 69,295 |   |
| Total                Financial Liabilities             |   | $                              | 2,252,647 |   | $ | 2,177,547 |   | $ | 2,294,836 |   | $ | 2,168,668 |   |

----

*Table          of Contents*

**Note      20**

**PARENT      COMPANY FINANCIAL INFORMATION**

**Parent      Company Statements of Income**

| *(Dollars                in Thousands)*                                                                          |   | 2006   |    | 2005   |   | 2004   |   |
|------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|
| OPERATING                INCOME                                                                                  |   |   |    |   |   |   |   |
| Income                Received from Subsidiary Bank:                                                             |   |   |    |   |   |   |   |
| Dividends                                                                                                        |   | $      | 20,166  |   | $      | 10,597 |   | $ | 12,716 |   |
| Overhead                Fees                                                                                     |   |   | 3,524   |   |   | 2,716  |   |   | 3,232 |   |
| Other                Income                                                                                      |   |   | 112     |   |   | 87     |   |   | 2 |   |
| Total                Operating Income                                                                            |   |   | 23,802  |   |   | 13,400 |   |   | 15,950 |   |
|                                                                                                             |   |   |    |   |   |   |   |   |   |   |
| OPERATING                EXPENSE                                                                                 |   |   |    |   |   |   |   |   |   |   |
| Salaries                and Associate Benefits                                                                   |   |   | 2,360   |   |   | 2,191  |   |   | 2,257 |   |
| Interest                on Long-Term Borrowings                                                                  |   |   | -       |   |   | -      |   |   | 33 |   |
| Interest                on Subordinated Notes Payable                                                            |   |   | 3,725   |   |   | 2,981  |   |   | 294 |   |
| Professional                Fees                                                                                 |   |   | 741     |   |   | 1,399  |   |   | 895 |   |
| Advertising                                                                                                      |   |   | 403     |   |   | 467    |   |   | 286 |   |
| Legal                Fees                                                                                        |   |   | 604     |   |   | 701    |   |   | 468 |   |
| Other                                                                                                            |   |   | 649     |   |   | 471    |   |   | 480 |   |
| Total                Operating Expense                                                                           |   |   | 8,482   |   |   | 8,210  |   |   | 4,713 |   |
| Income                Before Income Taxes and Equity in Undistributed Earnings of Subsidiary                Bank |   |   | 15,320  |   |   | 5,190  |   |   | 11,237 |   |
| Income                Tax Benefit                                                                                |   |   | (1,835) |   |   | (2,060 | )      |   | (581 | ) |
| Income                Before Equity in Undistributed Earnings of Subsidiary Bank                                 |   |   | 17,155  |   |   | 7,250  |   |   | 11,818 |   |
| Equity                in Undistributed Earnings of Subsidiary Bank                                               |   |   | 16,110  |   |   | 23,031 |   |   | 17,553 |   |
| Net                Income                                                                                        |   | $      | 33,265  |   | $      | 30,281 |   | $ | 29,371 |   |

**Parent      Company Statements of Financial Condition**

| *(Dollars                in Thousands, Except Per Share Data)*(1)                                                                                                               |   | 2006   |    | 2005   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|
| ASSETS                                                                                                                                                                          |   |   |    |   |   |
| Cash                and Due From Subsidiary Bank                                                                                                                                |   | $      | 8,921   |   | $      | 5,434 |   |
| Investment                in Subsidiary Bank                                                                                                                                    |   |   | 373,278 |   |   | 364,898 |   |
| Other                Assets                                                                                                                                                     |   |   | 1,550   |   |   | 1,447 |   |
| Total                Assets                                                                                                                                                     |   | $      | 383,749 |   | $      | 371,779 |   |
|                                                                                                                                                                            |   |   |    |   |   |   |   |
| LIABILITIES                                                                                                                                                                     |   |   |    |   |   |   |   |
| Subordinated                Notes Payable                                                                                                                                       |   | $      | 62,887  |   | $      | 62,887 |   |
| Other                Liabilities                                                                                                                                                |   |   | 5,092   |   |   | 3,116 |   |
| Total                Liabilities                                                                                                                                                |   | $      | 67,979  |   | $      | 66,003 |   |
|                                                                                                                                                                            |   |   |    |   |   |   |   |
| SHAREOWNERS'                EQUITY                                                                                                                                              |   |   |    |   |   |   |   |
| Preferred                Stock, $.01 par value, 3,000,000 shares authorized; no shares issued                and                outstanding                                     |   |   | -       |   |   | - |   |
| Common                Stock, $.01 par value; 90,000,000                                                                                                                         |   |   |    |   |   |   |   |
| shares                authorized; 18,518,398 and 18,631,706 shares issued and outstanding                at                December 31,2006 and December 31, 2005, respectively |   |   | 185     |   |   | 186 |   |
| Additional                Paid-In Capital                                                                                                                                       |   |   | 80,654  |   |   | 83,304 |   |
| Retained                Earnings                                                                                                                                                |   |   | 243,242 |   |   | 223,532 |   |
| Accumulated                Other Comprehensive Loss, Net of Tax                                                                                                                 |   |   | (8,311) |   |   | (1,246 | ) |
| Total                Shareowners' Equity                                                                                                                                        |   |   | 315,770 |   |   | 305,776 |   |
| Total                Liabilities and Shareowners' Equity                                                                                                                        |   | $      | 383,749 |   | $      | 371,779 |   |

| *(1)* | *All                share and per share data have been adjusted to reflect the 5-for-4                stock                split effective July 1, 2005.* |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

**Parent      Company Statements of Cash Flows**

| *(Dollars                in Thousands)*                                                                         |   | 2006   |     | 2005   |   | 2004    |   |
|-----------------------------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|---------|--------|
| CASH                FLOWS FROM OPERATING ACTIVITIES:                                                            |   |   |     |   |   |    |   |
| Net                Income                                                                                       |   | $      | 33,265   |   | $      | 30,281  |   | $ | 29,371 |   |
| Adjustments                to Reconcile Net Income to Net Cash Provided by Operating                Activities: |   |   |     |   |   |    |   |   |   |   |
| Equity                in Undistributed Earnings of Subsidiary Bank                                              |   |   | (16,110) |   |   | (23,031 | )      |   | (17,553 | ) |
| Non-Cash                Compensation                                                                            |   |   | 1,673    |   |   | 110     |   |   | 1,707 |   |
| Increase                in Other Assets                                                                         |   |   | (670)    |   |   | 131     |   |   | (189 | ) |
| Increase                in Other Liabilities                                                                    |   |   | 1,976    |   |   | 381     |   |   | 68 |   |
| Net                Cash Provided by Operating Activities                                                        |   |   | 20,134   |   |   | 7,872   |   |   | 13,404 |   |
|                                                                                                            |   |   |     |   |   |    |   |   |   |   |
| CASH                FLOWS FROM INVESTING ACTIVITIES:                                                            |   |   |     |   |   |    |   |   |   |   |
| Cash                Paid for Investment in:                                                                     |   |   |     |   |   |    |   |   |   |   |
| CCBG                Capital Trust I and CCBG Capital Trust II                                                   |   |   | -        |   |   | (959    | )      |   | (928 | ) |
| Cash                Paid for Acquisitions                                                                       |   |   | -        |   |   | (29,953 | )      |   | (35,688 | ) |
| Net                Cash Used in Investing Activities                                                            |   |   | -        |   |   | (30,912 | )      |   | (36,616 | ) |
|                                                                                                            |   |   |     |   |   |    |   |   |   |   |
| CASH                FROM FINANCING ACTIVITIES:                                                                  |   |   |     |   |   |    |   |   |   |   |
| Proceeds                from Subordinated Notes                                                                 |   |   | -        |   |   | 31,959  |   |   | 30,928 |   |
| Increase                in Other Long-Term Borrowings                                                           |   |   | -        |   |   | -       |   |   | 30,000 |   |
| Repayments                of Long-Term Borrowings                                                               |   |   | -        |   |   | -       |   |   | (30,000 | ) |
| Payment                of Dividends                                                                             |   |   | (12,322) |   |   | (11,397 | )      |   | (9,857 | ) |
| Repurchase                of Common Stock                                                                       |   |   | (5,360)  |   |   | -       |   |   | - |   |
| Issuance                of Common Stock                                                                         |   |   | 1,035    |   |   | 1,019   |   |   | 1,184 |   |
| Net                Cash (Used in) Provided by Financing Activities                                              |   |   | (16,647) |   |   | 21,581  |   |   | 22,255 |   |
|                                                                                                            |   |   |     |   |   |    |   |   |   |   |
| Net                Increase (Decrease) in Cash                                                                  |   |   | 3,487    |   |   | (1,459  | )      |   | (957 | ) |
| Cash                at Beginning of Period                                                                      |   |   | 5,434    |   |   | 6,893   |   |   | 7,850 |   |
| Cash                at End of Period                                                                            |   | $      | 8,921    |   | $      | 5,434   |   | $ | 6,893 |   |

**Note      21**

**COMPREHENSIVE      INCOME**

|                                                                                                                                                          |   | 2006   |    | 2005   |   | 2004    |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|---------|--------|
| Other                Comprehensive Income (Loss):                                                                                                             |   |   |    |   |   |    |   |
|                       Securities available for sale:                                                                            |   |   |    |   |   |    |   |
|              Change                in net unrealized gain/loss during period:                |   | $      | 412     |   | $      | (893)   |   | $ | (1,739) |   |
|                      Change in funded status of defined benefit pension plan and SERP                plan(net                of tax) |   |   | (7,477) |   |   | -       |   |   | - |   |
|  Net                Other Comprehensive Loss                                                                                                             |   | $      | (7,065) |   | $      | (893)   |   | $ | (1,739) |   |
|                                                                                                                                                          |   |   |    |   |   |    |   |   |   |   |
| The                components of accumulated other comprehensive income, net of tax,                as of                year-end were as follows:            |   |   |    |   |   |    |   |   |   |   |
|                                                                                                                                                          |   |   |    |   |   |    |   |   |   |   |
|                       Net unrealized gain (loss) on securities available for                sale                                |   | $      | (834)   |   | $      | (1,246) |   | $ | (353) |   |
|                       Net unfunded liability for defined benefit pension plan and SERP                plan                      |   |   | (7,477) |   |   | -       |   |   | - |   |
|                                                                                                                                                          |   | $      | (8,311) |   | $      | (1,246) |   | $ | (353) |   |

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*Table          of Contents*

| ***Item                9.*** | ***Changes                in and Disagreements with Accountants on Accounting and Financial                Disclosure.*** |
|------------------------------|---------------------------------------------------------------------------------------------------------------------------|

| ***Item                9 A.*** | ***Controls                and Procedures*** |
|--------------------------------|----------------------------------------------|

*Evaluation      of Disclosure Controls and Procedures*

*Management's      Report on Internal Control Over Financial Reporting.*

*Change      in Internal Control*

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*Table          of Contents*

*Attestation      Report of Independent Registered Public Accounting Firm*

**Report      of Independent Registered Public Accounting Firm**

* *

* *

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*Table          of Contents*

| ***Item                9B.*** | ***Other                Information*** |
|-------------------------------|----------------------------------------|

**Part      III**

| ***Item                10.*** | ***Directors,                Executive Officers, and Corporate                Governance*** |
|-------------------------------|---------------------------------------------------------------------------------------------|

| ***Item                11.*** | ***Executive                Compensation*** |
|-------------------------------|---------------------------------------------|

| ***Item                12.*** | ***Security                Ownership of Certain Beneficial Owners and Management and Related                Shareowners Matters*** |
|-------------------------------|------------------------------------------------------------------------------------------------------------------------------------|

**Equity      Compensation Plan Information**

| Plan                Category                                                |   | Number                of securities to be issued upon exercise ofoutstanding                options, warrants and rights |   | Weighted-average                exercise priceof                outstanding options, warrants and rights |   | Number                of securities remaining availablefor                future issuance under equitycompensation                plans (excludingsecurities                reflected in column (a)) |
|-----------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                        |   | (a)                                                                                                                      |   | (b)                                                                                                      |   | (c)                                                                                                                                                                                                  |
| Equity                Compensation Plans Approved by Securities Holders     |   | 60,384(1)                                                                                                                |   | $32.83                                                                                                   |   |                                1,479,388(2)                                                                                    |
|                                                                        |   |                                                                                                                     |   |                                                                                                     |   |                                                                                                                                                                                                 |
| Equity                Compensation Plans Not Approved by Securities Holders |   | -                                                                                                                        |   | -                                                                                                        |   |  -                                                                                                                                                                                              |
| Total                                                                       |   | 60,384                                                                                                                   |   | $                32.83                                                                                   |   |                             1,479,388                                                                                                    |

| *(1)* | *Includes                60,384 shares that may be issued upon exercise of outstanding options                under the terminated 1996 Associate Incentive                Plan.* |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(2)* | *Consists                of 846,907 shares available for issuance under our 2005 Associate                Incentive Plan, 557,469 shares available for issuance under our 2005                Associate Stock Purchase Plan, and 75,012 shares available for issuance                under our 2005 Director Stock Purchase Plan. Of these plans, the                only plan                under which options may be granted in the future is our 2005 Associate                Incentive Plan.* |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

| ***Item                13.*** | ***Certain                Relationships and Related Transactions, and Director                Independence*** |
|-------------------------------|---------------------------------------------------------------------------------------------------------------|

| ***Item                14.*** | ***Principal                Accounting Fees and                Services*** |
|-------------------------------|----------------------------------------------------------------------------|

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*Table          of Contents*

**PART      IV**

|   | 2.1 | Agreement                and Plan of Merger, dated as of January 7, 2004, by and among Capital                City                Bank Group, Inc., Capital City Bank, Synovus Financial Corp. and                Quincy                State Bank - incorporated herein by reference to the Registrant’s Form 8-K                (filed 1/13/04) (No. 0-13358). |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

Capital      City Bank Group, Inc. Subsidiaries, as of December 31,      2006.**

Consent      of Independent Registered Public Accounting      Firm.**

C
ertification      of CEO pursuant to Securities and Exchange Act      Section 302 of the Sarbanes-Oxley Act of 2002.**

Certification      of CFO pursuant to Securities and Exchange Act      Section 302 of the Sarbanes-Oxley Act of 2002.**

Certification      of CEO pursuant to 18 U.S.C. Section 1350, as      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of      2002.**

Certification      of CFO pursuant to 18 U.S.C. Section 1350, as      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of      2002.**

| *  | Information                required to be presented in Exhibit 11 is provided in Note 13 to                the                consolidated financial statements under Part II, Item 8 of this Form                10-K                in accordance with the provisions of FASB Statement of Financial                Accounting Standards (SFAS) No. 128, *Earnings                Per Share*. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** | Filed                electronically herewith.                                                                                                                                                                                                                                                                                                                                                   |

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*Table          of Contents*

**Signatures**

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*Table          of Contents*

**Signatures**

| Directors:                                      |   |                                                     |
|-------------------------------------------------|--------|----------------------------------------------------------|
|                                            |   |                                                     |
|  /s/                Dubose Ausley          |   |  /s/                L. McGrath Keen, Jr.            |
|  DuBose                Ausley              |   |  L.                McGrath                Keen, Jr. |
|                                            |   |                                                     |
|  /s/                Thomas A. Barron       |   | /s/                Lina S. Knox                          |
|  Thomas                A. Barron           |   |  Lina                S. Knox                        |
|                                            |   |                                                     |
|  /s/                Frederick Carroll, III |   |  /s/                Ruth A. Knox                    |
|  Frederick                Carroll, III     |   |  Ruth                A. Knox                        |
|                                            |   |                                                     |
|  /s/                Cader B. Cox, III      |   |  /s/                Henry Lewis III                 |
|  Cader                B. Cox, III          |   |  Henry                Lewis III                     |
|                                            |   |                                                     |
|  /s/                J. Everitt Drew        |   |  /s/                William G. Smith, Jr.           |
|  J.                Everitt Drew            |   |  William                G. Smith, Jr.               |
|                                            |   |                                                     |
|  /s/                John K. Humphress      |   |                                                     |
| John                K. Humphress                |   |                                                     |

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