Capital City Bank Group (CCBG) Q3 2026 earnings review
Capital City Bank's problem loans fall, but fee income shrinks
Capital City Bank earned more this quarter even though its revenue fell, because it no longer needed to set money aside for bad loans. Chief executive William G. Smith, Jr. called it "strong earnings and solid momentum". Problem loans dropped by about a third from June and the lending margin widened again, but fee income fell 13% from a year ago.
| Revenue (interest after funding costs, plus fees) | $64.4M −2.3% from a year ago |
|---|---|
| Profit per share | $0.99 +6% from a year ago |
| Loans flagged as at risk | $20.8M $29.8M in June |
| Full-year tax rate outlook | Unchanged 23–24% |
⚖️ Verdict: 🟢 Bullish
The story got better, because the credit worry raised last quarter has eased and the margin keeps widening. At-risk loans fell $9 million while net interest income rose 3% from a year ago. The bad news: profit before credit costs fell, and one clean quarter does not settle the question about the downgraded property loans.
The question now is whether revenue can grow while the loan book keeps shrinking. One answer says bond income and cheaper deposits will lift net interest income by more than fees fall. The other says fee cuts and a smaller loan book will outweigh that. Fourth-quarter revenue against a year earlier will tell.
🐂 Bull Case
Higher Bond Yields Keep Widening the Margin
Capital City Bank makes most of its money from the gap between what its loans and bonds earn and what it pays for deposits. For a year it has moved cash parked overnight at other banks into bonds. The company said bond income rose on "new investment purchases at higher rates and higher balances".
- Taxable bond yield: 3.60%, up from 2.88% a year ago
- Bond interest income: $10.6 million, up 48% from a year ago
- Bonds as a share of average earning assets: 29%, from 25% a year ago, by our math
- Net interest income: $45.0 million, up 3% from a year ago
This matters because loans, the bank's best-paying asset, keep shrinking, so the bond portfolio has to carry net interest income on its own. So far it does: the net interest margin, that gap as a share of earning assets, widened to 4.42% from 4.35% in June. Deposit costs helped too, and the next card covers them.
What to watch: the taxable bond yield in the fourth-quarter release. Another rise would mean the portfolio can keep lifting net interest income even if loan balances fall further.
Deposit Costs Fell for a Third Straight Quarter
Capital City Bank pays little for its funding because more than a third of its deposits earn no interest. Its cost of deposits, the average rate across all accounts, fell to 0.74% from 0.80% a year ago. That rate has now fallen for three straight quarters.
The company said smaller balances in seasonal public accounts and lower rates on time deposits drove the fall in interest expense. Time deposits now cost 2.23%, down from 2.41% in June. Local governments pull their money out each autumn, and households and businesses are replacing it: core deposits grew $155.8 million since December.
What to watch: the cost of deposits in the fourth quarter, when public money flows back in. A rate at or below 0.74% would mean the bank keeps its funding advantage even as those balances return.
Capital Builds While Buybacks Stay Small
Capital City Bank holds far more capital than regulators require, and it keeps growing because profit outruns payouts. In nine months the bank paid $13.9 million in dividends and spent $2.6 million on buybacks. Net income was $49.0 million, so about two thirds stayed in the bank, by our math.
- Common equity tier 1 ratio, core capital against risk-weighted assets: 20.43%, from 17.73% a year ago
- Total risk-based capital ratio: 22.99%
- Tangible common equity to tangible assets: 11.25%, from 10.66%
The case against: capital that sits in bonds earns less than a loan would, which is one reason return on equity stays near 12% despite the thick cushion.
What to watch: fourth-quarter buybacks against the 5–15% of earnings the company has said it targets for repurchases. Purchases inside that range would show the bank has started to use the surplus.
🐻 Bear Case
Credit Risk Eased for One Quarter Only
In June Capital City Bank downgraded four commercial property loans, including two private schools, and its list of at-risk loans doubled. This quarter most of that reversed, and the bank booked a small credit instead of a charge for bad loans.
- Classified loans: $20.8 million, down from $29.8 million in June
- Commercial property loans on that list: $13.8 million, from $21.6 million
- Loans 30–89 days past due: $4.2 million, up from $2.7 million
One quarter does not settle it: the release does not say whether those borrowers were upgraded, paid off or sold, and past-due loans rose. The lender also trimmed its loss allowance to 1.22% of loans, so it is counting on the improvement rather than waiting for it.
What to watch: the classified-loan balance in the fourth quarter. A second reading near $20 million would turn one good number into a trend.
Profit Rose on Lower Credit Costs, Not Revenue
"Continued net interest margin expansion and improved credit quality contributed meaningfully to our third quarter results," chief executive William G. Smith, Jr. said. The second half did most of the work: pretax profit rose $1.1 million from a year ago while the charge for bad loans swung from a $1.9 million expense to a small benefit.
- Revenue: $64.4 million, down 2.3% from a year ago
- Profit before credit costs and taxes: $22.1 million, down 3.8%, by our math
- Loans held for investment: $2.49 billion, down 3.6% from a year ago
- Last year's revenue included a $0.7 million gain on selling an insurance arm
Strip out that swing and profit fell, because fee income dropped and a smaller loan book earned less interest. Without the one-time gain a year ago, revenue was still down about 1%, by our math. So revenue, not earnings, is the test of momentum, and revenue failed it.
The loan book fell only 0.4% since June, the smallest decline in a year, but it still fell, and the bank gives no outlook for lending. Bonds can offset only so much.
What to watch: fourth-quarter revenue against the $63.5 million of a year ago, when there was no asset-sale gain. Growth there would show bond income now outruns loan run-off and fee cuts.
Fee Income Fell on Deposit and Mortgage Fees
Fees are about 30% of Capital City Bank's revenue, so a weak quarter there shows quickly. Noninterest income fell 13% from a year ago to $19.4 million, the lowest in five quarters.
Two lines did the damage. Deposit fees dropped on "lower overdraft fees attributable to processing changes that better align with industry practices", a change the company announced in August. Mortgage banking revenue fell on "lower production volume", so fewer home loans were sold on to investors.
- Deposit fees: $5.2 million, down 12% from a year ago
- Mortgage banking revenue: $3.7 million, down 23%
- Wealth management fees: $4.6 million, down 10% from a year ago
What to watch: fourth-quarter deposit fees against this quarter's $5.2 million. Another decline would mean the overdraft change had not fully hit this quarter's numbers, and the fee hole is bigger than it looks.
Risks this quarter didn't answer
Three standing concerns got no new numbers in the earnings release, because the quarterly filing that carries them is not out yet.
- Interest-rate sensitivity: the filing's rate-shock table will show how much net interest income would lose if the Federal Reserve cuts; the margin widened this quarter, but before any cut.
- Loans modified for struggling borrowers: $3.4 million at June, of which $1.4 million was already 120 days past due; the filing's modification table will show whether more re-defaulted.
- Reserves on the four commercial property loans downgraded in June: the release says classified loans fell, not which loans left the list or how; the filing's risk-grade tables will show it.
💲 Other KPIs
Up 1.4% from a year ago, even after the usual autumn outflow of public money. Local governments pulled $58.3 million since June, as they do each year, while households and businesses kept adding money. Deposits that pay no interest, the cheapest funding, rose 2% from a year ago.
Down 1.4% from a year ago and 0.8% from June, on lower commission pay and smaller property costs. Compensation, the largest line, fell 1.7% from a year ago. The efficiency ratio, costs as a share of revenue, rose to 65.6% from 65.1% because revenue fell faster than costs.
Up 7.1% from a year ago, but growth has slowed every quarter from 17% last autumn. This quarter's drag was a $9.2 million hit to equity from bond prices, by our math, as higher market rates cut the value of securities held for sale. Tangible book value is equity per share after goodwill.
🔮 Guidance
Unchanged. The plan still has the bank paying roughly 23.5 cents of tax on each dollar of pretax profit, below last year's 24.7%, thanks to "Tax benefits accrued from a solar tax credit investment in 2026". The nine-month rate is 23.5%, so the fourth quarter needs no catch-up. Last year's rate ran above the outlook only on one-off items in the final quarter.
❓ Key Questions
What happened to the four property loans downgraded in June?
Classified loans fell $9.0 million in a quarter, but the release does not say whether the two schools, the hotel and the funeral home were upgraded, repaid or sold. The answer decides whether the credit worry is over.
Is the overdraft fee change fully in this quarter's numbers?
Deposit fees fell $0.5 million from June. If the new processing rules started mid-quarter, the fourth quarter will show a larger drop, and the company has not given an annual size.
Is the loan decline a choice or a lack of demand?
Loans fell only $10 million since June, the smallest drop in a year. Whether the bank is turning business away on price or simply sees fewer borrowers decides whether the book can grow again.
What will the bank do with its surplus capital?
Core capital is more than double the well-capitalized threshold and buybacks ran $2.6 million in nine months. A framework for returning or deploying it would change the earnings outlook.
How would the margin hold up if rates fell?
The margin widened as new bonds were bought at higher rates. The quarterly filing's rate-shock table will show how much of that reverses in a cutting cycle.