Capital City earnings increased in the third quarter of 2026 as a wider net interest margin and lower credit costs outweighed weaker fee income. The Tallahassee, Florida-based bank reported net income attributable to common shareowners of $16.9 million, or $0.99 per diluted share, on October 20, up from both the preceding quarter and a year earlier.
Key Takeaways
- Diluted earnings rose to $0.99 from $0.95 in the second quarter and $0.93 a year earlier.
- Net interest margin widened to 4.42%, while noninterest income fell 5.9% from the preceding quarter.
- Quarter-end deposits declined seasonally, but core deposits increased and nonperforming assets fell.
Table of Contents
- Capital City earnings benefit from wider interest margin
- Lower credit costs offset weaker mortgage revenue
- Seasonal public-fund outflows reduce deposits
- Conclusion
Capital City earnings benefit from wider interest margin
Capital City Bank Group’s third-quarter 2026 results showed net income rising from $16.3 million in the second quarter and $16.0 million in the third quarter of 2025. Profit increased despite lower average loan balances, with higher investment income and lower deposit interest expense supporting the improvement.
Tax-equivalent net interest income reached $45.1 million, compared with $44.2 million in the preceding quarter and $43.6 million a year earlier. New securities purchases at higher yields and an additional calendar day helped lift the quarterly total.
Net interest margin expanded seven basis points from the second quarter to 4.42%. The bank’s cost of funds declined two basis points to 0.73%, while its earning-asset yield increased four basis points to 5.15%. The results therefore reflected improved yields and funding costs rather than an expansion in lending.
| Item | Details |
|---|---|
| Return on assets | 1.53% in Q3 2026, versus 1.48% in Q2 2026. |
| Return on equity | 11.67% in Q3 2026, versus 11.38% in Q2 2026. |
| Loan-loss allowance coverage | 1.22% of loans held for investment at September 30, versus 1.24% at June 30. |
| Average net overnight funds sold | $337.9 million in Q3 2026, versus $365.1 million in Q2 2026. |
Lower credit costs offset weaker mortgage revenue
The bank recorded a $0.1 million credit-loss provision benefit, compared with a $0.9 million provision expense in the second quarter. Nonperforming assets fell to $9.7 million at September 30 from $13.4 million at June 30, while annualized net loan charge-offs declined to eight basis points of average loans from 14 basis points.
Noninterest income moved in the opposite direction, falling $1.2 million to $19.4 million. Mortgage banking revenue declined by $1.0 million as production volume weakened, and deposit fees fell by $0.5 million. A $0.5 million increase in wealth management fees partly offset those declines.
The company attributed lower deposit fees to reduced overdraft fees following processing changes designed to better align with industry practices. Noninterest expense declined $0.3 million to $42.3 million, primarily reflecting lower compensation expense.
Seasonal public-fund outflows reduce deposits
Total deposits stood at $3.667 billion on September 30, down $54.4 million, or 1.5%, from June 30. Capital City attributed the decline to normal seasonal reductions in public-fund balances, which fell $58.3 million. Core deposits increased $3.9 million over the same period.
Average deposits declined by a smaller 0.9% during the quarter. Loans held for investment also contracted, falling $10.1 million, or 0.4%, on a quarter-end basis. Those distinctions matter: the headline deposit decline did not reflect falling core balances, and the bank was not simultaneously expanding its overall loan portfolio.
Conclusion
Capital City’s profit improvement rested on stronger interest margins and better credit quality, while mortgage revenue and loan balances remained weaker. For the full year, management expects an effective tax rate of approximately 23%–24%, absent discrete items or new tax-credit investments.
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