Capital City Bank Earnings Rise as Margin Expands
Tax-equivalent net interest income increased to $44.2 million as funding costs declined.
Capital City Bank Group (CCBG), the regional bank holding company, reported higher second-quarter earnings as wider lending margins offset a shrinking loan portfolio and rising credit costs. Net income rose to $16.3 million, or $0.95 a diluted share, from $15.8 million, or $0.92 a share, in the first quarter and $15.0 million, or $0.88 a share, a year earlier.
The quarter extended a recovery in profitability driven by lower funding costs and the bank’s shift of liquidity into higher-yielding securities. Net interest margin expanded 11 basis points from the first quarter to 4.35%, five basis points above the year-earlier level, as earning-asset yield increased and cost of funds declined.
Tax-equivalent net interest income rose from $42.9 million sequentially and $43.2 million a year earlier, helped by securities purchases, lower deposit interest expense and one additional calendar day. Cost of funds fell to 0.75% from 0.81% in the first quarter, while deposit cost declined to 0.76% from 0.81%.
The balance-sheet shift continued as average investment securities increased $48.2 million sequentially and average overnight funds declined $42.6 million. Average loans held for investment fell 1.3%, or $32.4 million, with residential and commercial real-estate loans each decreasing $14.4 million. Period-end loans declined to $2.500 billion, about 5% below the year-earlier balance.
Noninterest income increased 3.3% from the first quarter and 2.9% from a year earlier to $20.6 million. Higher mortgage production lifted mortgage-banking revenue by $0.4 million sequentially, while increased card volume added $0.2 million to bank-card fees. A $1.0 million year-over-year decline in wealth-management fees, tied to lower retail brokerage assets under management, partly offset gains elsewhere.
Noninterest expense rose 3.1% sequentially to $42.6 million, reflecting higher other and occupancy costs, and remained nearly flat from a year earlier. The credit-loss provision increased to $0.9 million, while annualized net charge-offs rose to 0.14% of average loans from 0.10% in the first quarter.
Credit measures weakened as classified loans climbed $15.3 million to $29.8 million following downgrades of four commercial-real-estate relationships, including two private schools with $9.8 million of combined exposure. Nonperforming assets increased to $13.4 million, or 0.30% of assets, from 0.29% in the first quarter and 0.15% a year earlier.
Capital continued to build despite those credit pressures. Tangible book value increased 2% sequentially to $28.07 a diluted share, and the common-equity Tier 1 ratio rose to 19.80%. Deposit-product changes are expected to reduce related fee revenue beginning in the third quarter.