Capital Bank Financial Corp. Reports Third Quarter EPS of $0.42, Up 27% Year Over Year, and Increases Dividend 20% to $0.12 Per Share

CHARLOTTE, N.C., Oct. 20, 2016 (GLOBE NEWSWIRE) — Capital Bank Financial Corp. (Nasdaq:CBF) (the “Company”) today reported net income for the third quarter of 2016 of $18.5 million, or $0.42 per diluted share and core net income of $18.5 million, or $0.42 per diluted share. Net income rose 21% year over year, while net income per diluted share rose 27%.

Core adjustments for the third quarter of 2016 included $1.5 million of legal settlement expense and $0.3 million of tax deductible merger related expenses, offset by a $1.1 million tax adjustment and $0.1 million of gains on sales of investment securities.

Gene Taylor, Chairman and Chief Executive Officer of Capital Bank Financial Corp., commented, “We look forward to completion of the CommunityOne merger, a carefully-executed conversion, and an expanded footprint in North Carolina.”

Chris Marshall, Chief Financial Officer of Capital Bank Financial Corp., added, “We are pleased with this quarter’s results and are positioning to end the year strongly and enter 2017 with good momentum.”

Loan Portfolio and Composition

During the third quarter, the loan portfolio was up $191.0 million at $5.9 billion. New loans of $471 million were offset by loan resolutions and payoffs totaling $280 million.

The relative composition of the Company’s loan portfolio at the end of the third and second quarters of 2016 and fourth quarter of 2015 was as follows:

    Sep 30,
 2016
  Jun 30,
 2016
  Dec 31,
 2015
Commercial real estate   22 %   22 %   22 %
C&I   43 %   44 %   43 %
Consumer   32 %   31 %   32 %
Other   3 %   3 %   3 %
Total   100 %   100 %   100 %
 

Deposits Composition and Cost of Funds

During the third quarter, total deposits increased by $226.1 million to $6.0 billion. The cost of total deposits remained flat at 0.41% basis points, while the cost of core deposits increased one basis point to 0.19%. Core deposits include all checking, savings and money market accounts, excluding brokered, now represent 70% of total deposits. The contractual cost of total deposits, which excludes purchase accounting was 0.41%, a decline of one basis point sequentially.

Net Interest Income and Net Interest Margin

Net interest income increased $1.1 million to $62.6 million from $61.5 million for the second quarter of 2016 and increased $1.0 million from $61.6 million for the third quarter of 2015. The net interest margin for the third quarter of 2016 was 3.58%, a decline of four basis points sequentially and 24 basis points year over year. The sequential and year over year net interest margin decline was mostly due to the lower average yield on new loans as compared to the yields of the Company’s legacy acquired loans. New and acquired non-impaired loans represent $5.0 billion with an average yield of 3.67%, compared to $0.9 billion of acquired impaired loans outstanding with an average yield of 8.55%.

Non-Interest Income

Non-interest income increased $0.4 million to $12.4 million from $11.9 million for the second quarter of 2016 and increased $1.0 million from $11.4 million for the third quarter of 2015. The sequential increase was mainly driven by higher service charges on deposit accounts and fees on mortgage loans originated and sold, as fees for residential mortgages sold increased 17% quarter over quarter, partially offset by a decline in investment advisory income.

The year over year increase was mainly due to the absence of $1.4 million of FDIC indemnification asset expense recorded in the prior year and an increase of fees on mortgage loans originated and sold. Partially offsetting the increase was a $0.7 million decline in service charges and a $0.6 million decline in investment advisory income.

Provision for Loan and Lease Losses and Credit Quality

The provision of $0.6 million recorded for the third quarter of 2016 included a $0.6 million provision for new and acquired non-impaired loans and a $48 thousand reversal on acquired impaired loans. Net charge-offs for the third quarter of 2016 were $1.5 million, remaining at the same level of the second quarter of 2016.

At September 30, 2016, the allowance for loan and lease losses was $44.0 million, of which $23.7 million related to acquired impaired loans and $20.3 million related to new and acquired non-impaired loans. The allowance for loan and lease losses represents 0.75% of the Company’s total $5.9 billion loan portfolio.

At September 30, 2016, non-performing loans were $60.4 million, a decrease of 7% from June 30, 2016, and a decrease of 26%, from September 30, 2015, mainly as a result of resolutions and upgrades.

Non-Interest Expense

Non-interest expense increased $3.0 million to $47.5 million from $44.5 million for the second quarter of 2016 and declined $0.8 million from $48.3 million for the third quarter of 2015. The sequential increase was mainly due to $1.5 million legal settlement expense and increased salaries and benefit expense of $0.8 million. Partially offsetting the increase was a $0.8 million decrease in conversion and merger expense.

The year over year decline was mainly due to a $1.7 million decrease in salaries and benefit expense resulting from cost saving initiatives and lower OREO valuation expenses of $1.3 million, partially offset by $1.5 million legal settlement expense occurring in the third quarter of 2016.

Income Tax Expense

Income tax expense was $8.4 million for the third quarter of 2016, an effective rate of 31%, compared to $10.3 million and 37% for the second quarter of 2016. Income tax expense was $8.6 million and 36% for the third quarter of 2015. The change in effective income tax rate was mainly due to a favorable adjustment for discrete items, partially offset by an increase in rate change and state taxes and lower tax-exempt interest income.

Financial Position

Total assets increased by $171.2 million to $7.8 billion as of September 30, 2016, from $7.6 billion as of June 30, 2016. During the quarter, the Company’s loan portfolio increased $191.0 million to $5.9 billion. Total deposits increased by $226.1 million to $6.0 billion, and core deposits increased by $101.8 million, or a 10% annualized rate. FHLB borrowings decreased $75.0 million. Book value per share was $23.82 as of September 30, 2016, an increase of $0.30 and $0.82 over June 30, 2016 and September 30, 2015, respectively. Tangible book value per share was $20.53 as of September 30, 2016, an increase of $0.31 and $0.78 over June 30, 2016 and September 30, 2015, respectively. During the third quarter, the Company did not repurchase shares of common stock. The Company has $101 million remaining under the current board authorized stock repurchase program.

The Company’s bank subsidiary, Capital Bank Corporation, had preliminary Tier 1 Leverage, Tier 1 Common, Tier 1 Risk-Based and Total Risk-Based capital ratios of 10.5%, 12.0%, 12.0% and 12.7%, respectively, as of September 30, 2016, under currently applicable regulations.

The GreenBank CVR expired on September 7, 2016 and based on portfolio losses exceeding the stipulated amount, there was no payout to CVR holders.

The Company declared a cash dividend of $0.12 per share, payable on November 22, 2016, to shareholders of record as of November 9, 2016.

Conference Call

The Company will host a conference call today at 10:00 a.m. Eastern Time. The number to call for this interactive teleconference is (913) 312-0720, and the confirmation pass code is 5829592.  Please dial in 10 minutes prior to the beginning of the call. A telephonic replay of the conference call will be available through October 28, 2016, by dialing (719) 457-0820 and entering pass code 5829592. The live broadcast of the conference call will be available online at the Company’s web site at www.capitalbank-us.com, by following the link to Investor Relations. An on-line replay of the call will be available at the same site for 90 days.

Forward-Looking Statements

Information in this press release contains forward-looking statements.  Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking.  These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases.  Accordingly, these statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them.  Our actual results could differ materially from those anticipated in such forward-looking statements as a result of several factors more fully described under the caption “Risk Factors” in the annual report on Form 10-K and other periodic reports filed by us with the Securities and Exchange Commission.  Any or all of our forward-looking statements in this press release may turn out to be inaccurate.  The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved.  We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.  There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward looking statements including, but not limited to: (1) changes in general economic and financial market conditions; (2) changes in the regulatory environment; (3) economic conditions generally and in the financial services industry; (4) changes in the economy affecting real estate values; (5) our ability to achieve loan and deposit growth; (6) the completion of future acquisitions or business combinations and our ability to integrate any acquired businesses into our business model; (7) projected population and income growth in our targeted market areas; (8) competitive pressures in our markets and industry; (9) our ability to attract and retain key personnel; (10) changes in accounting policies or judgments and (11) volatility and direction of market interest rates and a weakening of the economy which could materially impact credit quality trends and the ability to generate loans.  All forward-looking statements are necessarily only estimates of future results, and actual results may differ materially from expectations.  You are, therefore, cautioned not to place undue reliance on such statements, which should be read in conjunction with the other cautionary statements that are included elsewhere in this press release. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

Use of Non-GAAP Financial Measures

Core net income, core efficiency ratio, core return-on-assets (“core ROA”), tangible book value and tangible book value per share are each non-GAAP measures used in this report.  A reconciliation to the most directly comparable GAAP financial measures – net income in the case of core net income and core ROA, total non-interest income and total non-interest expense in the case of core efficiency ratio, and total shareholders’ equity in the case of tangible book value and tangible book value per share – appears in tabular form at the end of this release.  The Company believes core net income, the core efficiency ratio and core ROA are useful for both investors and management to understand the effects of certain non-interest items and provide an alternative view of the Company’s performance over time and in comparison to the Company’s competitors. These measures should not be viewed as a substitute for net income.  The Company believes that tangible book value and tangible book value per share are useful for both investors and management as these are measures commonly used by financial institutions, regulators and investors to measure the capital adequacy of financial institutions.  The Company believes these measures facilitate comparison of the quality and composition of the Company’s capital over time and in comparison to its competitors. These measures should not be viewed as a substitute for total shareholders’ equity.

The Company uses these non-GAAP measures for various purposes, including measuring performance for incentive compensation and as a basis for strategic planning and forecasting.

These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited.  They should not be considered in isolation or as a substitute for analysis of results reported under GAAP.  These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

About Capital Bank Financial Corp.

Capital Bank Financial Corp. is a bank holding company, formed in 2009 to create a premier regional banking franchise in the southeastern United States. CBF is the parent of Capital Bank Corporation, a State of North Carolina chartered financial institution with $7.8 billion in total assets as of September 30, 2016, and 151 full-service banking offices throughout Florida, North and South Carolina, Tennessee and Virginia. To learn more about Capital Bank Financial Corp, please visit www.capitalbank-us.com.

 
 
CAPITAL BANK FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars and shares in thousands, except per share data)
(Unaudited)
 
  Three Months Ended
  Sep 30,
 2016
  Jun 30,
 2016
  Mar 31,
 2016
  Dec 31,
 2015
  Sep 30,
 2015
Interest and dividend income $ 70,929     $ 69,579     $ 69,472     $ 69,553     $ 68,718  
Interest expense 8,302     8,064     8,105     7,475     7,081  
Net Interest Income 62,627     61,515     61,367     62,078     61,637  
Provision for loan and lease losses 586     1,172     1,375     1,089     799  
Net interest income after provision for loan and lease losses 62,041     60,343     59,992     60,989     60,838  
Non-Interest Income                  
Service charges on deposit accounts 4,777     4,486     4,811     4,911     5,472  
Debit card income 3,389     3,235     3,086     3,029     3,113  
Fees on mortgage loans originated and sold 1,334     1,140     971     875     990  
Investment advisory and trust fees 290     455     497     597     860  
FDIC indemnification asset expense             (1,526 )   (1,418 )
Termination of loss share agreements         (9,178 )        
Investment securities gains (losses), net 71     117     40     54     (43 )
Other income 2,509     2,489     2,339     2,657     2,444  
Total non-interest income 12,370     11,922     2,566     10,597     11,418  
Non-Interest Expense                  
Salaries and employee benefits 20,935     20,139     22,162     20,219     22,620  
Stock-based compensation expense 790     467     317         309  
Net occupancy and equipment expense 7,340     7,355     7,703     7,385     7,621  
Computer services 3,153     3,274     3,575     3,479     3,471  
Software expense 1,948     2,000     2,036     2,061     2,198  
Telecommunication expense 1,790     1,558     1,532     1,168     1,515  
OREO valuation expense 742     1,119     467     341     2,075  
Net gains on sales of OREO (159 )   (413 )   (679 )   (801 )   (351 )
Foreclosed asset related expense 397     399     285     405     872  
Loan workout expense 206     71     244     650     194  
Conversion and merger related expense 394     1,236     1,687     704      
Professional fees 1,642     1,353     1,612     1,529     1,958  
Restructuring charges, net (113 )   5     142     4,248     23  
Legal settlement expense 1,500                  
Regulatory assessments 841     1,259     1,275     1,486     1,423  
Other expense 6,124     4,714     4,580     4,882     4,418  
Total non-interest expense 47,530     44,536     46,938     47,756     48,346  
Income before income taxes 26,881     27,729     15,620     23,830     23,910  
Income tax expense 8,393     10,327     5,780     8,809     8,589  
Net income $ 18,488     $ 17,402     $ 9,840     $ 15,021     $ 15,321  
                   
Earnings per share:                  
Basic $ 0.43     $ 0.40     $ 0.23     $ 0.35     $ 0.34  
Diluted $ 0.42     $ 0.40     $ 0.22     $ 0.34     $ 0.33  
                   
Weighted average shares outstanding:                  
Basic 43,028     43,011     43,063     43,499     45,359  
Diluted 43,909     43,879     43,904     44,550     46,534  
                             

 
CAPITAL BANK FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands)
(Unaudited)
 
  Sep 30,
 2016
  Jun 30,
 2016
  Dec 31,
 2015
Assets          
Cash and due from banks $ 88,171     $ 84,038     $ 87,985  
Interest-bearing deposits in other banks 116,136     135,977     56,711  
Total cash and cash equivalents 204,307     220,015     144,696  
Trading securities 3,701     3,536     3,013  
Investment securities available-for-sale at fair value (amortized cost $639,687 $637,072 and $640,455, respectively) 652,945     650,470     637,329  
Investment securities held-to-maturity at amortized cost (fair value $474,834 $477,731 and $475,134, respectively) 466,063     468,943     472,505  
Loans held for sale 95,253     6,446     10,569  
Loans, net of deferred loan costs and fees 5,840,680     5,738,459     5,622,147  
Less: Allowance for loan and lease losses 43,984     44,883     45,034  
Loans, net 5,796,696     5,693,576     5,577,113  
Other real estate owned 46,007     44,236     52,776  
FDIC indemnification asset         6,725  
Receivable from FDIC         678  
Premises and equipment, net 157,863     158,305     159,149  
Goodwill 134,522     134,522     134,522  
Intangible assets, net 12,288     13,231     15,100  
Deferred income tax asset, net 80,418     92,277     105,316  
Other assets 142,395     135,668     129,988  
Total Assets $ 7,792,458     $ 7,621,225     $ 7,449,479  
Liabilities and Shareholders’ Equity          
Liabilities          
Deposits:          
Non-interest bearing demand $ 1,207,800     $ 1,172,481     $ 1,121,160  
Interest bearing demand 1,463,520     1,456,558     1,382,732  
Money market 1,291,948     1,155,475     1,190,121  
Savings 401,205     403,106     418,879  
Time deposits 1,668,784     1,619,507     1,747,318  
Total deposits 6,033,257     5,807,127     5,860,210  
Federal Home Loan Bank advances 575,751     650,800     460,898  
Short-term borrowings 15,428     16,785     12,410  
Long-term borrowings 87,445     86,883     85,777  
Accrued expenses and other liabilities 50,736     43,132     43,919  
Total liabilities $ 6,762,617     $ 6,604,727     $ 6,463,214  
Shareholders’ equity          
Preferred stock $0.01 par value: 50,000 shares authorized, 0 shares issued          
Common stock-Class A $0.01 par value: 200,000 shares authorized, 37,253
issued and 26,381 outstanding, 37,237 issued 26,665 outstanding and 37,012 issued and 26,589 outstanding, respectively.
373     372     370  
Common stock-Class B $0.01 par value: 200,000 shares authorized, 18,627
issued and 16,854 outstanding, 18,327 issued and 16,554 outstanding and 18,327 issued and 16,554 outstanding, respectively.
186     183     183  
Additional paid in capital 1,078,746     1,077,769     1,076,415  
Retained earnings 241,554     227,370     208,742  
Accumulated other comprehensive (loss) income 7,621     9,443     (5,196 )
Treasury stock, at cost, 12,645, 12,345 and 12,196 shares, respectively (298,639 )   (298,639 )   (294,249 )
Total shareholders’ equity 1,029,841     1,016,498     986,265  
Total Liabilities and Shareholders’ Equity $ 7,792,458     $ 7,621,225     $ 7,449,479  
 

 
CAPITAL BANK FINANCIAL CORP.
KEY METRICS
(Dollars in thousands)
(Unaudited)
 
  Three Months Ended
  Sep 30,
 2016
  Jun 30,
 2016
  Mar 31,
 2016
  Dec 31,
 2015
  Sep 30,
 2015
Performance Ratios                  
Interest rate spread 3.43 %   3.48 %   3.50 %   3.57 %   3.68 %
Net interest margin 3.58 %   3.62 %   3.64 %   3.70 %   3.82 %
Return on average assets 0.97 %   0.93 %   0.53 %   0.82 %   0.86 %
Return on average shareholders’ equity 7.24 %   6.87 %   3.96 %   5.99 %   5.85 %
Efficiency ratio 63.38 %   60.65 %   73.42 %   65.71 %   66.18 %
Average interest-earning assets to average interest-bearing liabilities 131.43 %   131.21 %   129.54 %   129.55 %   132.10 %
Average loans receivable to average deposits 98.46 %   96.56 %   95.66 %   96.68 %   96.01 %
Yield on interest-earning assets 4.05 %   4.09 %   4.11 %   4.14 %   4.26 %
Cost of interest-bearing liabilities 0.62 %   0.62 %   0.62 %   0.57 %   0.58 %
Asset and Credit Quality Ratios-Total Loans                  
Non-accrual loans $ 11,873     $ 9,016     $ 8,526     $ 8,945     $ 9,647  
Nonperforming acquired loans $ 48,477     $ 56,108     $ 56,041     $ 59,194     $ 72,023  
Nonperforming loans to loans receivable 1.02 %   1.13 %   1.15 %   1.21 %   1.51 %
Nonperforming assets to total assets 1.37 %   1.44 %   1.51 %   1.63 %   1.88 %
Covered loans to total gross loans %   %   %   1.30 %   1.45 %
ALLL to nonperforming assets 41.29 %   40.98 %   39.97 %   37.13 %   33.88 %
ALLL to total gross loans 0.75 %   0.78 %   0.80 %   0.80 %   0.86 %
Annualized net charge-offs/average loans 0.10 %   0.11 %   0.08 %   0.17 %   0.20 %
Asset and Credit Quality Ratios-New Loans                  
Nonperforming new loans to total new loans receivable 0.19 %   0.12 %   0.11 %   0.11 %   0.17 %
New loans ALLL to total gross new loans 0.43 %   0.46 %   0.47 %   0.47 %   0.51 %
Asset and Credit Quality Ratios-Acquired Loans                  
Nonperforming acquired loans to total acquired loans receivable 4.65 %   5.08 %   4.67 %   4.69 %   5.21 %
Covered acquired loans to total gross acquired loans %   %   %   5.43 %   5.45 %
Acquired loans ALLL to total gross acquired loans 2.15 %   2.04 %   1.93 %   1.83 %   1.80 %
Capital Ratios (Company)                  
Total average shareholders’ equity to total average assets 13.46 %   13.55 %   13.35 %   13.67 %   14.79 %
Tangible common equity ratio (1) 11.55 %   11.62 %   11.57 %   11.46 %   12.26 %
Tier 1 leverage capital ratio 12.89 %   12.64 %   12.49 %   12.67 %   13.60 %
Tier 1 common capital ratio 13.27 %   13.38 %   13.38 %   14.73 %   14.44 %
Tier 1 risk-based capital ratio 14.44 %   14.57 %   14.58 %   13.63 %   15.60 %
Total risk-based capital ratio 15.12 %   15.29 %   15.32 %   15.47 %   16.38 %
Capital Ratios (Bank)                  
Tangible common equity ratio (1) 10.74 %   10.71 %   11.45 %   11.20 %   11.36 %
Tier 1 leverage capital ratio 10.53 %   10.42 %   11.10 %   11.09 %   11.19 %
Tier 1 common capital ratio 11.98 %   11.97 %   12.95 %   12.89 %   12.85 %
Tier 1 risk-based capital ratio 11.98 %   11.97 %   12.95 %   12.89 %   12.85 %
Total risk-based capital ratio 12.70 %   12.72 %   13.72 %   13.68 %   13.69 %

(1) See “Reconciliation of Non-GAAP Measures”

 
 
CAPITAL BANK FINANCIAL CORP.
LOANS AND DEPOSITS
(Dollars in thousands)
(Unaudited)
 
  Sep 30,
 2016
  Jun 30,
 2016
  Mar 31,
 2016
  Dec 31,
 2015
  Sep 30,
 2015
Loans                  
Non-owner occupied commercial real estate $ 920,521     $ 891,830     $ 850,766     $ 866,392     $ 847,225  
Other commercial construction and land 222,794     212,315     194,971     196,795     192,283  
Multifamily commercial real estate 76,296     74,328     75,737     80,708     82,762  
1-4 family residential construction and land 111,954     100,306     96,703     93,242     87,193  
Total commercial real estate 1,331,565     1,278,779     1,218,177     1,237,137     1,209,463  
Owner occupied commercial real estate 1,072,586     1,075,306     1,095,460     1,104,972     1,065,875  
Commercial and industrial 1,458,523     1,448,698     1,375,233     1,309,704     1,219,101  
Lease financing 525     877     1,088     1,256     1,488  
Total commercial 2,531,634     2,524,881     2,471,781     2,415,932     2,286,464  
1-4 family residential 1,168,468     1,039,309     1,015,071     1,017,791     985,982  
Home equity loans 364,117     364,169     368,510     375,276     373,993  
Indirect auto loans 254,736     285,618     317,863     351,817     318,841  
Other consumer loans 94,277     85,964     84,108     84,661     82,483  
Total consumer 1,881,598     1,775,060     1,785,552     1,829,545     1,761,299  
Other 191,136     166,185     159,447     150,102     147,718  
Total loans $ 5,935,933     $ 5,744,905     $ 5,634,957     $ 5,632,716     $ 5,404,944  
                   
Deposits                  
Non-interest bearing demand $ 1,207,800     $ 1,172,481     $ 1,190,831     $ 1,121,160     $ 1,099,252  
Interest bearing demand 1,463,520     1,456,558     1,402,342     1,382,732     1,251,365  
Money market 1,166,918     1,105,460     1,162,546     1,040,086     927,391  
Savings 401,205     403,106     420,073     418,879     436,385  
Total core deposits 4,239,443     4,137,605     4,175,792     3,962,857     3,714,393  
Wholesale money market 125,030     50,015     100,035     150,035     78,015  
Time deposits 1,668,784     1,619,507     1,663,906     1,747,318     1,773,170  
Total deposits $ 6,033,257     $ 5,807,127     $ 5,939,733     $ 5,860,210     $ 5,565,578  
                                       

 
CAPITAL BANK FINANCIAL CORP.
LEGACY CREDIT EXPENSES
(Dollars in thousands)
(Unaudited)
 
  Three Months Ended
  Sep 30,
2016
  June 30,
2016
  Mar 31,
2016
  Dec 31,
2015
  Sep 30,
2015
Provision (reversal) on legacy loans $ 48     $ (778 )   $ 9     $ (1,161 )   $ 492  
FDIC indemnification asset expense             1,526     1,418  
OREO valuation expense 742     1,119     467     341     2,075  
Termination of loss share agreements         9,178          
Net gains on sales of OREO (159 )   (413 )   (679 )   (801 )   (351 )
Foreclosed asset related expense 397     399     285     405     872  
Loan workout expense 206     71     244     650     194  
Salaries and employee benefits 511     519     522     549     797  
Total legacy credit expenses $ 1,745     $ 917     $ 10,026     $ 1,509     $ 5,497  
                                       

 
CAPITAL BANK FINANCIAL CORP.
QUARTERLY AVERAGE BALANCES AND YIELDS
(Dollars in thousands)
(Unaudited)
 
    Three Months Ended
September 30, 2016
  Three Months Ended
June 30, 2016
    Average
Balances
  Interest   Yield /
Rate
  Average
Balances
  Interest   Yield /
Rate
Interest earning assets                        
Loans (1)   $ 5,786,171     $ 64,055     4.40 %   $ 5,653,647     $ 62,999     4.48 %
Investment securities (1)   1,133,031     6,924     2.43 %   1,131,791     6,612     2.35 %
Interest bearing deposits in other banks   60,373     69     0.45 %   64,802     74     0.46 %
Other earning assets (2)   29,788     337     4.50 %   26,696     330     4.97 %
Total interest earning assets   7,009,363     $ 71,385     4.05 %   6,876,936     $ 70,015     4.09 %
Non-interest earning assets   583,413             607,429          
Total assets   $ 7,592,776             $ 7,484,365          
Interest bearing liabilities                        
Time deposits   $ 1,613,502     $ 3,992     0.98 %   $ 1,620,023     $ 4,018     1.00 %
Money market   1,225,743     1,132     0.37 %   1,184,532     1,028     0.35 %
Interest bearing demand   1,444,305     752     0.21 %   1,451,666     749     0.21 %
Savings   404,187     205     0.20 %   411,496     208     0.20 %
Total interest bearing deposits   4,687,737     6,081     0.52 %   4,667,717     6,003     0.52 %
Short-term borrowings and FHLB advances   558,313     635     0.45 %   485,850     515     0.43 %
Long-term borrowings   87,095     1,586     7.24 %   87,496     1,547     7.11 %
Total interest bearing liabilities   5,333,145     8,302     0.62 %   5,241,063     8,065     0.62 %
Non-interest bearing demand   1,188,771             1,187,056          
Other liabilities   48,997             42,319          
Shareholders’ equity   1,021,863             1,013,927          
Total liabilities and shareholders’ equity   $ 7,592,776             $ 7,484,365          
Net interest income and spread       $ 63,083     3.43 %       $ 61,950     3.48 %
Net interest margin           3.58 %           3.62 %

(1) Presented on a fully tax equivalent basis
(2) Includes Federal Home Loan Bank stocks

 
 
CAPITAL BANK FINANCIAL CORP.
QUARTERLY AVERAGE BALANCES AND YIELDS
(Dollars in thousands)
(Unaudited)
 
    Three Months Ended
September 30, 2016
  Three Months Ended
September 30, 2015
    Average
Balances
  Interest   Yield /
Rate
  Average
Balances
  Interest   Yield /
Rate
Interest earning assets                        
Loans (1)   $ 5,786,171     $ 64,055     4.40 %   $ 5,261,793     $ 62,461     4.71 %
Investment securities (1)   1,133,031     6,924     2.43 %   1,088,818     5,885     2.14 %
Interest bearing deposits in other banks   60,373     69     0.45 %   36,596     19     0.21 %
Other earning assets (2)   29,788     337     4.50 %   54,960     760     5.49 %
Total interest earning assets   7,009,363     $ 71,385     4.05 %   6,442,167     $ 69,125     4.26 %
Non-interest earning assets   583,413             645,715          
Total assets   $ 7,592,776             $ 7,087,882          
Interest bearing liabilities                        
Time deposits   $ 1,613,502     $ 3,992     0.98 %   $ 1,642,745     $ 3,957     0.96 %
Money market   1,225,743     1,132     0.37 %   977,273     658     0.27 %
Interest bearing demand   1,444,305     752     0.21 %   1,291,439     540     0.17 %
Savings   404,187     205     0.20 %   452,058     241     0.21 %
Total interest bearing deposits   4,687,737     6,081     0.52 %   4,363,515     5,396     0.49 %
Short-term borrowings and FHLB advances   558,313     635     0.45 %   428,249     272     0.25 %
Long-term borrowings   87,095     1,586     7.24 %   84,922     1,413     6.60 %
Total interest bearing liabilities   5,333,145     8,302     0.62 %   4,876,686     7,081     0.58 %
Non-interest bearing demand   1,188,771             1,116,757          
Other liabilities   48,997             46,117          
Shareholders’ equity   1,021,863             1,048,322          
Total liabilities and shareholders’ equity   $ 7,592,776             $ 7,087,882          
Net interest income and spread       $ 63,083     3.43 %       $ 62,044     3.68 %
Net interest margin           3.58 %           3.82 %

    Nine Months Ended
September 30, 2016
  Nine Months Ended
September 30, 2015
    Average
Balances
  Interest   Yield /
Rate
  Average
Balances
  Interest   Yield /
Rate
Interest earning assets                        
Loans (1)   $ 5,684,143     $ 190,063     4.47 %   $ 5,129,607     $ 184,889     4.82 %
Investment securities (1)   1,129,129     20,020     2.37 %   1,047,451     16,324     2.08 %
Interest bearing deposits in other banks   66,100     227     0.46 %   50,187     88     0.23 %
Other earning assets (2)   27,216     981     4.81 %   51,167     2,093     5.47 %
Total interest earning assets   6,906,588     $ 211,291     4.09 %   6,278,412     $ 203,394     4.33 %
Non-interest earning assets   602,904             665,016          
Total assets   $ 7,509,492             $ 6,943,428          
Interest bearing liabilities                        
Time deposits   $ 1,640,959     $ 12,130     0.99 %   $ 1,506,488     $ 10,357     0.92 %
Money market   1,219,227     3,227     0.35 %   945,170     1,811     0.26 %
Interest bearing demand   1,422,389     2,149     0.20 %   1,356,300     1,710     0.17 %
Savings   411,729     640     0.21 %   477,698     765     0.21 %
Total interest bearing deposits   4,694,304     $ 18,146     0.52 %   4,285,656     $ 14,643     0.46 %
Short-term borrowings and FHLB advances   501,892     1,680     0.45 %   336,791     597     0.24 %
Long-term borrowings   86,860     4,644     7.14 %   116,922     4,784     5.47 %
Total interest bearing liabilities   5,283,056     24,470     0.62 %   4,739,369     20,024     0.56 %
Non-interest bearing demand   1,171,599             1,102,393          
Other liabilities   44,594             44,891          
Shareholders’ equity   1,010,244             1,056,775          
Total liabilities and shareholders’ equity   $ 7,509,493             $ 6,943,428          
Net interest income and spread       $ 186,821     3.47 %       $ 183,370     3.77 %
Net interest margin           3.61 %           3.90 %

(1) Presented on a fully tax equivalent basis
(2) Includes Federal Home Loan Bank stocks

 
 
CAPITAL BANK FINANCIAL CORP.
RECONCILIATION OF NON-GAAP MEASURES
(Dollars in thousands)
(Unaudited)
 
CORE NET INCOME   Three Months Ended
    Sep 30, 2016   Jun 30, 2016   Dec 31, 2015
Net Income   $ 18,488     $ 18,488     $ 17,402     $ 17,402     $ 15,021     $ 15,021  
    Pre-Tax   After-Tax   Pre-Tax   After-Tax   Pre-Tax   After-Tax
Adjustments                        
Non-interest income                        
Security (gains) losses*   (71 )   (44 )   (117 )   (72 )   (54 )   (33 )
Non-interest expense                        
Legal Settlement   1,500     927                  
Tax Adjustment   (1,067 )   (1,067 )                
Restructuring expense*   (113 )   (70 )   5     3     32     20  
Conversion costs and merger tax deductible*   331     205     881     544     33     20  
Legal merger non deductible   61     61     355     355     673     673  
Contract termination*                   4,215     2,594  
Tax effect of adjustments*   (629 )   N/A   (294 )   N/A   (1,625 )   N/A
Core Net Income   $ 18,500     $ 18,500     $ 18,232     $ 18,232     $ 18,295     $ 18,295  
                         
Diluted shares   43,909         43,879         44,550      
Core Net Income per share   $ 0.42         $ 0.42         $ 0.41      
Average Assets   7,592,776         7,484,365         7,332,516      
                         
ROA**   0.97 %       0.93 %       0.82 %    
Core ROA***   0.97 %       0.97 %       1.00 %    

    * Tax effected at an income tax rate of 38%
  ** ROA: Annualized net income / Average assets
*** Core ROA: Annualized core net income / Average assets

 
 
CAPITAL BANK FINANCIAL CORP.
RECONCILIATION OF NON-GAAP MEASURES (Continuation)
(Dollars in thousands)
(Unaudited)
 
CORE EFFICIENCY RATIO Three Months Ended
  Sep 30,
 2016
  Jun 30,
 2016
  Mar 31,
 2016
  Dec 31,
 2015
  Sep 30,
 2015
Net interest income $ 62,627     $ 61,515     $ 61,367     $ 62,078     $ 61,637  
                   
Reported non-interest income 12,370     11,922     2,566     10,597     11,418  
Indemnification asset termination         (9,178 )        
Less: Securities gains (losses) 71     117     40     54     (43 )
Core non-interest income $ 12,299     $ 11,805     $ 11,704     $ 10,543     $ 11,461  
                   
Reported non-interest expense $ 47,530     $ 44,536     $ 46,938     $ 47,756     $ 48,346  
Less: Severance expense         75         63  
Conversion costs and merger tax deductible 331     881     1,107     33      
Legal settlement 1,500                  
Legal merger non deductible 61     355     580          
Restructuring expense (113 )   5     142         23  
Contract termination             4,215      
Conversion and severance expenses (conversion and merger expenses and salaries and employees benefits)             704      
Core non-interest expense $ 45,751     $ 43,295     $ 45,034     $ 42,804     $ 48,260  
                   
Efficiency ratio* 63.38 %   60.65 %   73.42 %   65.71 %   66.18 %
Core efficiency ratio** 61.06 %   59.05 %   61.63 %   58.94 %   66.02 %

   *  Efficiency Ratio: Non-interest expense / (Non-interest income + Net interest income)
 **  Core Efficiency Ratio: Core non-interest expense / (Core non-interest income + Net interest income)

 
 
CAPITAL BANK FINANCIAL CORP.
RECONCILIATION OF NON-GAAP MEASURES (Continuation)
(Dollars and shares in thousands, except per share data)
(Unaudited)
 
TANGIBLE BOOK VALUE   Three Months Ended
    Sep 30,
 2016
  Jun 30,
 2016
  Mar 31,
 2016
  Dec 31,
 2015
  Sep 30,
 2015
Total shareholders’ equity   $ 1,029,841     $ 1,016,498     $ 996,993     $ 986,265     $ 1,022,642  
Less: goodwill and intangible assets, net of taxes   (142,141 )   (142,725 )   (143,304 )   (143,863 )   (144,447 )
Tangible book value*   $ 887,700     $ 873,773     $ 853,689     $ 842,402     $ 878,195  
Common shares outstanding   43,235     43,219     43,189     43,143     44,466  
Tangible book value per share   $ 20.53     $ 20.22     $ 19.77     $ 19.53     $ 19.75  

* Tangible book value is equal to book value less goodwill and core deposit intangibles,
net of related deferred tax liabilities.

TANGIBLE COMMON EQUITY RATIO   Three Months Ended
    Sep 30,
 2016
  Jun 30,
 2016
  Mar 31,
 2016
  Dec 31,
 2015
  Sep 30,
 2015
Total shareholders’ equity   $ 1,029,841     $ 1,016,498     $ 996,993     $ 986,265     $ 1,022,642  
Less: goodwill and intangible assets   (146,810 )   (147,753 )   (148,688 )   (149,622 )   (150,567 )
Tangible common equity   $ 883,031     $ 868,745     $ 848,305     $ 836,643     $ 872,075  
Total assets   $ 7,792,458     $ 7,621,225     $ 7,479,798     $ 7,449,479     $ 7,261,196  
Less: goodwill and intangible assets   (146,810 )   (147,753 )   (148,688 )   (149,622 )   (150,567 )
Tangible assets   $ 7,645,648     $ 7,473,472     $ 7,331,110     $ 7,299,857     $ 7,110,629  
Tangible common equity ratio   11.55 %   11.62 %   11.57 %   11.46 %   12.26 %
                               
CONTACT: CONTACT:
Kenneth A. Posner
Chief of Strategic Planning and Investor Relations
Phone: (212) 399-4020
E-mail: Kposner@cbfcorp.com

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