Capital Bank Financial Corp. Reports Third Quarter GAAP EPS of $0.48 and Core EPS of $0.50

CHARLOTTE, N.C., Oct. 19, 2017 (GLOBE NEWSWIRE) — Capital Bank Financial Corp. (Nasdaq:CBF) (the “Company”) today reported third quarter GAAP net income of $25.8 million, which increased 8% quarter over quarter. GAAP net income per diluted share was $0.48. Core net income decreased to $26.5 million, down 1% quarter over quarter. Core net income per diluted share was $0.50. Core pre-tax adjustments for the third quarter of 2017 included $0.6 million of branch closure expenses and $0.6 million of merger related expenses, partially offset by $0.1 million net gain on investment securities. The reconciliation of non-GAAP financial measures (including core net income and core net income per diluted share) are included in tabular form at the end of this release.

Highlights of the quarter include:

  • Reported ROA of 1.02%, up 7 bps quarter over quarter;
  • Reported efficiency ratio of 56.6%; down 365 bps quarter over quarter;
  • Sustained only temporary disruption in our branch network associated with Hurricane Irma and reopened all but two offices within a matter of days;
  • Shareholders voted to approve merger with First Horizon National Corporation; and
  • Declared quarterly dividend of $0.12 per common share.

“We are working hard to prepare for the merger with First Horizon, while at the same time sustaining profitability and customer momentum,” said Gene Taylor, Chairman and Chief Executive Officer of Capital Bank Financial Corp.

“We achieved strong results in the third quarter, which are in line with the goals we outlined at the beginning of the year.  We also made significant progress in planning our integration with First Horizon, and we are well positioned to continue our momentum following our close,” added Chris Marshall, Chief Financial Officer of Capital Bank Financial Corp.

Hurricane Irma

On September 10, 2017, Hurricane Irma struck the south coast of Florida, temporarily disrupting our branch network. However within a matter of days, all but two of our offices were back open and assisting customers, while the remaining two offices will open during the fourth quarter. The Company incurred property costs associated with Hurricane Irma of approximately $0.2 million, which are reflected in third quarter results. The Company has also reviewed its lending and deposit portfolio and determined no impairment was indicated at this time as a result of Hurricane Irma. In working with its borrowers and depositors affected by this hurricane, the Company has entered into temporary payment deferral agreements of 90 days or less on loans covering $78.6 million of outstanding principle. Each of these loans were assessed individually and were determined to not be a troubled debt restructuring. The review process is on-going and we will continue to monitor the impact on our loan portfolio.

Loan Portfolio and Composition

During the third quarter, the loan portfolio increased by $42.5 million to $7.6 billion, consisting of a $53.1 million increase in commercial real estate and commercial and industrial loans, a $14.0 million decrease in consumer loans, and a $3.4 million increase in other loans. New loan production of $485.4 million was offset by payoffs of $408.7 million and special assets resolutions of $34.2 million.

The relative composition of the Company’s loan portfolio at the end of the third and second quarter of 2017 and fourth quarter of 2016 was as follows:

    Sep 30,
 2017
  Jun 30,
 2017
  Dec 31,
 2016
Commercial real estate   26 %   26 %   23 %
C&I   36 %   36 %   38 %
Consumer   35 %   35 %   36 %
Other   3 %   3 %   3 %
Total   100 %   100 %   100 %
                   

Deposits Composition and Cost of Funds

During the third quarter, total deposits increased by $46.6 million sequentially to $8.1 billion. The cost of total deposits increased by seven basis points sequentially to 0.48% and increased seven basis points year over year.

Net Interest Income and Net Interest Margin

Net interest income increased $0.7 million to $85.9 million from $85.2 million for the second quarter of 2017 and increased $23.3 million from $62.6 million for the third quarter of 2016. The year over year increase was mainly due to the acquisition of CommunityOne. The net interest margin for the third quarter of 2017 was 3.71%, a decline of four basis points sequentially and an increase of 13 basis points year over year.

Non-Interest Income

Non-interest income declined $1.2 million to $14.8 million from $16.0 million for the second quarter of 2017 and increased $2.4 million from $12.4 million for the third quarter of 2016. The year over year increase was mainly due to the acquisition of CommunityOne and includes a $1.4 million increase in debit card income, a $0.6 million increase in other income (includes BOLI, credit card and merchant service income), and a $0.5 million increase in service charges.

Provision for Loan and Lease Losses and Credit Quality

The provision of $3.0 million recorded for the third quarter of 2017 included a $2.8 million provision for non-purchased credit impaired loans and a $0.2 million provision on purchased credit impaired loans. Net charge-offs for the third quarter of 2017 were $2.3 million, $0.7 million higher than the second quarter of 2017.

At September 30, 2017, the allowance for loan and lease losses was $45.4 million, of which $24.2 million related to purchase credit impaired loans and $21.2 million related to non-purchased credit impaired loans. The allowance for loan and lease losses represents 0.60% of the Company’s total $7.6 billion loan portfolio.

At September 30, 2017, non-performing loans were $63.8 million, or 0.84% of loans, and decreased 6.48% from June 30, 2017, mainly as a result of resolutions and upgrades. The balance on non-performing loans increased 5.72% from September 30, 2016, due primarily to the acquisition of CommunityOne.

Non-Interest Expense

Non-interest expense declined $4.0 million to $57.0 million from $61.0 million for the second quarter of 2017 and increased $9.5 million from $47.5 million for the third quarter of 2016. Contributing to the sequential decrease was a decrease of $2.4 million in restructuring charges related to branch closures during the second quarter, a $1.0 million decrease in salaries and benefits and a $0.5 million decrease in computer services as part of cost savings initiatives. Partially offsetting the sequential decrease was a $0.5 million increase in stock based compensation. The year over year increase was mainly due to increases of $5.8 million in salaries and benefit expense and $1.6 million in occupancy and equipment expense, which were mostly related to the acquisition of CommunityOne. The Company benefited from cost savings associated with the integration of CommunityOne and continues to review opportunities for additional cost savings.

Income Tax Expense

Income tax expense was $14.9 million for the third quarter of 2017 with an effective tax rate of 37%, compared to $14.1 million and 37% for the second quarter of 2017. Income tax expense was $8.4 million and an effective tax rate of 31% for the third quarter of 2016.

Financial Position

Total assets increased by $46.3 million to $10.1 billion as of September 30, 2017, from $10.1 billion as of June 30, 2017. During the quarter, the Company’s loan portfolio increased $42.5 million to $7.6 billion. Total deposits increased by $46.6 million to $8.1 billion. Core deposits include all checking, savings and money market accounts, excluding brokered, and represent 70% of total deposits. FHLB borrowings decreased $30.1 million. Book value per share was $26.04 as of September 30, 2017, an increase of $0.42 and $2.22 from June 30, 2017 and September 30, 2016, respectively. Tangible book value per share was $21.26 as of September 30, 2017, an increase of $0.50 and $0.73 from June 30, 2017 and September 30, 2016, respectively. During the third quarter, the Company did not repurchase shares of common stock. The reconciliation of non-GAAP financial measures (including tangible book value and tangible book value per share) are included in tabular form at the end of this release.

The Company declared a cash dividend of $0.12 per share, payable on November 13, 2017, to shareholders of record as of November 3, 2017.

Adoption of New Accounting Guidance

The Company elected to early adopt ASU 2016-09 in the fourth quarter of 2016, which addresses, among other items, the accounting for income taxes and forfeitures. Upon adoption, excess tax benefits generated when stock awards vest or settle are no longer recognized in equity but are instead recognized as a reduction to provision for income taxes. The Company reflected the adjustments on a modified prospective basis as of January 1, 2016, the beginning of the annual period that includes the interim period of adoption.

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, 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 the most directly comparable GAAP measure.

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 $10.1 billion in total assets as of September 30, 2017, and 178 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,
2017
  Jun 30,
2017
  Mar 31,
2017
  Dec 31,
2016
  Sep 30,
2016
Interest and dividend income $ 99,711     $ 97,286     $ 92,937     $ 87,746     $ 70,929  
Interest expense 13,795     12,044     10,821     9,927     8,302  
Net interest income 85,916     85,242     82,116     77,819     62,627  
Provision for loan and lease losses 3,042     2,303     3,392     1,980     586  
Net interest income after provision for loan and lease losses 82,874     82,939     78,724     75,839     62,041  
Non-interest income                  
Service charges on deposit accounts 5,311     5,237     5,375     5,949     4,777  
Debit card income 4,822     5,051     4,765     4,211     3,389  
Fees on mortgage loans originated and sold 931     1,150     1,248     1,402     1,334  
Investment advisory and trust fees 537     596     641     591     290  
Investment securities gains, net 98     70     67     1,894     71  
Other income 3,074     3,896     3,756     2,969     2,509  
Total non-interest income 14,773     16,000     15,852     17,016     12,370  
Non-interest expense                  
Salaries and employee benefits 26,708     27,662     29,166     26,134     20,935  
Stock-based compensation expense 1,441     964     900     531     790  
Net occupancy and equipment expense 8,894     8,826     8,992     8,374     7,340  
Computer services 3,794     4,280     3,873     4,364     3,153  
Software expense 2,524     2,573     2,662     2,391     1,948  
Telecommunication expense 1,968     1,939     2,424     2,147     1,790  
OREO valuation expense 249     262     247     677     742  
Net losses (gains) on sales of OREO 1     (204 )   (308 )   (150 )   (159 )
Foreclosed asset related expense 487     376     364     513     397  
Loan workout expense 281     281     201     327     206  
Conversion and merger related expense, net 591     981     3,037     18,525     394  
Professional fees 2,071     1,800     2,096     1,761     1,642  
Restructuring charges, net 595     2,978     1,912     4     (113 )
Legal settlement expense     45         1,361     1,500  
Regulatory assessments 1,020     1,145     719     1,092     841  
Other expense 6,360     7,077     6,418     5,943     6,124  
Total non-interest expense 56,984     60,985     62,703     73,994     47,530  
Income before income taxes 40,663     37,954     31,873     18,861     26,881  
Income tax expense (1) 14,905     14,148     10,990     6,509     8,370  
Net income (1) $ 25,758     $ 23,806     $ 20,883     $ 12,352     $ 18,511  
                   
Earnings per share:                  
Basic (1) $ 0.50     $ 0.46     $ 0.40     $ 0.25     $ 0.43  
Diluted (1) $ 0.48     $ 0.45     $ 0.39     $ 0.24     $ 0.42  
                   
Weighted average shares outstanding:                  
Basic 51,705     51,683     51,634     49,334     43,028  
Diluted (1) 53,226     53,226     53,127     50,722     44,118  
                             

(1) We elected to early adopt ASU 2016-09 in the fourth quarter of 2016. The impacts of adoption have been reflected in our consolidated statements of income for the three months ended December 31, 2016 and September 30, 2016, and did not have a material effect. Accordingly, adjustments were made using the modified prospective approach and resulted in, among other items, a $0.1 million decrease to net income for the three months ended December 31, 2016, and a $0.0 million increase to net income for the three months ended September 30, 2016. See “Adoption of New Accounting Guidance” above for additional information.

 
 
CAPITAL BANK FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands)
(Unaudited)
 
  Sep 30,
 2017
  Jun 30,
 2017
  Dec 31,
 2016
Assets          
Cash and due from banks $ 97,147     $ 106,164     $ 107,707  
Interest-bearing deposits in other banks 86,982     49,247     201,348  
Total cash and cash equivalents 184,129     155,411     309,055  
Trading securities 4,458     4,290     3,791  
Investment securities available-for-sale at fair value (amortized cost $1,161,024, $1,152,613, and $927,266, respectively) 1,155,694     1,145,712     912,250  
Investment securities held-to-maturity at amortized cost (fair value $415,238, $431,269, and $460,911, respectively) 412,051     430,411     463,959  
Loans held for sale 3,060     3,533     12,874  
Loans, net of deferred loan costs and fees 7,609,540     7,566,581     7,393,318  
Less: Allowance for loan and lease losses 45,428     44,638     43,065  
Loans, net 7,564,112     7,521,943     7,350,253  
Other real estate owned 44,416     41,364     53,482  
Premises and equipment held for sale 17,378     18,494     2,599  
Premises and equipment, net 183,734     184,939     205,425  
Goodwill 231,292     234,158     235,500  
Intangible assets, net 27,938     29,750     33,370  
Deferred income tax asset, net 113,073     134,452     150,272  
Bank owned life insurance 100,611     100,672     99,702  
Other assets 98,039     88,572     98,125  
Total Assets $ 10,139,985     $ 10,093,701     $ 9,930,657  
Liabilities and Shareholders’ Equity          
Liabilities          
Deposits:          
Non-interest bearing demand $ 1,631,526     $ 1,662,416     $ 1,590,164  
Interest bearing demand 1,846,172     1,884,674     1,930,143  
Money market 1,885,180     1,828,889     1,725,838  
Savings 471,931     480,590     497,171  
Time deposits 2,286,815     2,218,444     2,137,312  
Total deposits 8,121,624     8,075,013     7,880,628  
Federal Home Loan Bank advances 440,549     470,600     545,701  
Short-term borrowings 34,802     32,637     19,157  
Long-term borrowings 118,929     118,096     116,456  
Accrued expenses and other liabilities 69,462     65,271     76,668  
Total liabilities $ 8,785,366     $ 8,761,617     $ 8,638,610  
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, 50,632 issued and 39,365 outstanding, 46,624 issued 35,357 outstanding, and 46,178 issued and 34,911 outstanding, respectively. 506     466     462  
Common stock-Class B $0.01 par value: 200,000 shares authorized, 14,435 issued and 12,661 outstanding, 18,407 issued and 16,634 outstanding, and 18,627 issued and 16,854 outstanding, respectively. 144     184     186  
Additional paid in capital 1,373,227     1,371,224     1,368,459  
Retained earnings 299,432     279,914     247,758  
Accumulated other comprehensive loss (6,306 )   (7,320 )   (12,434 )
Treasury stock, at cost, 13,040, 13,040, and 13,040 shares, respectively (312,384 )   (312,384 )   (312,384 )
Total shareholders’ equity 1,354,619     1,332,084     1,292,047  
Total Liabilities and Shareholders’ Equity $ 10,139,985     $ 10,093,701     $ 9,930,657  
                       

CAPITAL BANK FINANCIAL CORP.
KEY METRICS
(Dollars in thousands)
(Unaudited)
 
  Three Months Ended
  Sep 30,
 2017
  Jun 30,
 2017
  Mar 31,
 2017
  Dec 31,
 2016
  Sep 30,
 2016
Performance Ratios                  
Interest rate spread (1) 3.53 %   3.59 %   3.58 %   3.53 %   3.43 %
Net interest margin (1) 3.71 %   3.75 %   3.73 %   3.67 %   3.58 %
Return on average assets (2) 1.02 %   0.95 %   0.84 %   0.53 %   0.98 %
Return on average shareholders’ equity (2) 7.66 %   7.20 %   6.43 %   4.03 %   7.25 %
Efficiency ratio 56.59 %   60.24 %   64.00 %   78.02 %   63.38 %
Average interest-earning assets to average interest-bearing liabilities 131.12 %   130.70 %   129.53 %   130.22 %   131.43 %
Average loans receivable to average deposits 93.46 %   93.97 %   93.41 %   94.57 %   98.46 %
Yield on interest-earning assets (1) 4.31 %   4.27 %   4.21 %   4.13 %   4.05 %
Cost of interest-bearing liabilities 0.78 %   0.69 %   0.63 %   0.61 %   0.62 %
Asset and Credit Quality Ratios-Total Loans                                      
Non-accrual loans $ 18,126     $ 13,821     $ 13,608     $ 11,449     $ 11,873  
Nonperforming purchase credit impaired loans $ 45,674     $ 54,399     $ 57,969     $ 63,668     $ 48,477  
Nonperforming loans to loans receivable 0.84 %   0.90 %   0.95 %   1.01 %   1.02 %
Nonperforming assets to total assets 1.07 %   1.09 %   1.22 %   1.30 %   1.37 %
ALLL to nonperforming assets 41.85 %   40.64 %   35.73 %   33.45 %   41.29 %
ALLL to loans held for investment 0.60 %   0.59 %   0.58 %   0.58 %   0.75 %
Annualized net charge-offs/average loans 0.12 %   0.08 %   0.14 %   0.17 %   0.10 %

(1) Presented on a fully tax equivalent basis. 
(2) We elected to early adopt ASU 2016-09 in the fourth quarter of 2016. The impacts of adoption have been reflected in our consolidated statements of income for the three months ended December 31, 2016 and September 30, 2016, and did not have a material effect. Accordingly, adjustments were made using the modified prospective approach and resulted in, among other items, a one basis point increase to return on average assets for the three months ended September 30, 2016. Additionally, there were changes to return on average shareholders’ equity consisting of a two basis point decrease for the three months ended December 31, 2016, and a one basis point increase for the three months ended September 30, 2016. See “Adoption of New Accounting Guidance” above for additional information.

 
 
CAPITAL BANK FINANCIAL CORP.
LOANS AND DEPOSITS
(Dollars in thousands)
(Unaudited)
 
  Sep 30,
 2017
  Jun 30,
 2017
  Mar 31,
 2017
  Dec 31,
 2016
  Sep 30,
 2016
Loans                  
Non-owner occupied commercial real estate $ 1,293,647     $ 1,265,576     $ 1,187,344     $ 1,130,883     $ 920,521  
Other commercial construction and land 402,250     384,581     350,401     327,622     222,794  
Multifamily commercial real estate 148,192     147,365     115,996     117,515     76,296  
1-4 family residential construction and land 143,807     153,761     157,920     140,030     111,954  
Total commercial real estate 1,987,896     1,951,283     1,811,661     1,716,050     1,331,565  
Owner occupied commercial real estate 1,226,211     1,287,811     1,313,086     1,321,405     1,072,586  
Commercial and industrial 1,502,939     1,424,862     1,443,828     1,468,874     1,458,523  
Lease financing                 525  
Total commercial 2,729,150     2,712,673     2,756,914     2,790,279     2,531,634  
1-4 family residential 1,787,690     1,782,799     1,787,097     1,714,702     1,168,468  
Home equity loans 481,696     489,497     502,099     507,759     364,117  
Indirect auto loans 155,371     174,861     199,951     226,717     254,736  
Other consumer loans 229,357     220,946     222,824     222,255     94,277  
Total consumer 2,654,114     2,668,103     2,711,971     2,671,433     1,881,598  
Other 241,440     238,055     231,409     228,430     191,136  
Total loans $ 7,612,600     $ 7,570,114     $ 7,511,955     $ 7,406,192     $ 5,935,933  
                   
Deposits                  
Non-interest bearing demand $ 1,631,526     $ 1,662,416     $ 1,680,243     $ 1,590,164     $ 1,207,800  
Interest bearing demand 1,846,172     1,884,674     1,960,187     1,930,143     1,463,520  
Money market 1,735,107     1,678,842     1,746,444     1,651,023     1,166,918  
Savings 471,931     480,590     496,230     497,171     401,205  
Total core deposits 5,684,736     5,706,522     5,883,104     5,668,501     4,239,443  
Wholesale money market 150,073     150,047     75,030     74,815     125,030  
Time deposits 2,286,815     2,218,444     2,134,473     2,137,312     1,668,784  
Total deposits $ 8,121,624     $ 8,075,013     $ 8,092,607     $ 7,880,628     $ 6,033,257  
                                       

CAPITAL BANK FINANCIAL CORP.
QUARTERLY AVERAGE BALANCES AND YIELDS
(Dollars in thousands)
(Unaudited)
 
    Three Months Ended
September 30, 2017
  Three Months Ended
June 30, 2017
    Average
Balances
  Interest   Yield /
Rate
  Average
Balances
  Interest   Yield /
Rate
Interest earning assets                        
Loans (1)   $ 7,557,263     $ 90,064     4.73 %   $ 7,515,169     $ 86,405     4.61 %
Investment securities (1)   1,589,185     9,704     2.42 %   1,596,382     11,005     2.77 %
Interest bearing deposits in other banks   68,435     198     1.15 %   42,140     93     0.89 %
Other earning assets (2)   28,249     367     5.15 %   32,074     388     4.85 %
Total interest earning assets (1)   9,243,132     $ 100,333     4.31 %   9,185,765     $ 97,891     4.27 %
Non-interest earning assets   857,224               884,900            
Total assets   $ 10,100,356               $ 10,070,665            
Interest bearing liabilities                            
Time deposits   $ 2,274,258     $ 5,896     1.03 %   $ 2,152,086     $ 4,789     0.89 %
Money market   1,858,223     2,451     0.52 %   1,787,200     1,963     0.44 %
Interest bearing demand   1,839,844     1,296     0.28 %   1,914,622     1,255     0.26 %
Savings   477,530     219     0.18 %   488,123     220     0.18 %
Total interest bearing deposits   6,449,855     9,862     0.61 %   6,342,031     8,227     0.52 %
Short-term borrowings and FHLB advances   480,830     1,457     1.20 %   568,575     1,433     1.01 %
Long-term borrowings   118,423     2,476     8.30 %   117,576     2,384     8.13 %
Total interest bearing liabilities   7,049,108     13,795     0.78 %   7,028,182     12,044     0.69 %
Non-interest bearing demand   1,636,625               1,655,233            
Other liabilities   70,245               64,318            
Shareholders’ equity   1,344,378               1,322,932            
Total liabilities and shareholders’ equity   $ 10,100,356               $ 10,070,665            
Net interest income and spread (1)       $ 86,538     3.53 %       $ 85,847     3.59 %
Net interest margin (1)           3.71 %           3.75 %
                         
Net interest income (FTE) (1)       $ 86,538             $ 85,847      
Tax equivalent adjustment       (622 )           (605 )    
Net interest income       $ 85,916             $ 85,242      
                                 

(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, 2017
  Three Months Ended
September 30, 2016
    Average
Balances
  Interest   Yield /
Rate
  Average
Balances
  Interest   Yield /
Rate
Interest earning assets                        
Loans (1)   $ 7,557,263     $ 90,064     4.73 %   $ 5,786,171     $ 64,055     4.40 %
Investment securities (1)   1,589,185     9,704     2.42 %   1,133,031     6,924     2.43 %
Interest bearing deposits in other banks   68,435     198     1.15 %   60,373     69     0.45 %
Other earning assets (2)   28,249     367     5.15 %   29,788     337     4.50 %
Total interest earning assets (1)   9,243,132     $ 100,333     4.31 %   7,009,363     $ 71,385     4.05 %
Non-interest earning assets   857,224               583,413            
Total assets   $ 10,100,356               $ 7,592,776            
Interest bearing liabilities                            
Time deposits   $ 2,274,258     $ 5,896     1.03 %   $ 1,613,502     $ 3,992     0.98 %
Money market   1,858,223     2,451     0.52 %   1,225,743     1,132     0.37 %
Interest bearing demand   1,839,844     1,296     0.28 %   1,444,305     752     0.21 %
Savings   477,530     219     0.18 %   404,187     205     0.20 %
Total interest bearing deposits   6,449,855     9,862     0.61 %   4,687,737     6,081     0.52 %
Short-term borrowings and FHLB advances   480,830     1,457     1.20 %   558,313     635     0.45 %
Long-term borrowings   118,423     2,476     8.30 %   87,095     1,586     7.24 %
Total interest bearing liabilities   7,049,108     13,795     0.78 %   5,333,145     8,302     0.62 %
Non-interest bearing demand   1,636,625               1,188,771            
Other liabilities   70,245               48,997            
Shareholders’ equity   1,344,378               1,021,863            
Total liabilities and shareholders’ equity   $ 10,100,356               $ 7,592,776            
Net interest income and spread (1)       $ 86,538     3.53 %       $ 63,083     3.43 %
Net interest margin (1)           3.71 %           3.58 %
                         
Net interest income (FTE) (1)       $ 86,538             $ 63,083      
Tax equivalent adjustment       (622 )           (456 )    
Net interest income       $ 85,916             $ 62,627      
                                 

(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)
 
    Nine Months Ended
September 30, 2017
  Nine Months Ended
September 30, 2016
    Average
Balances
  Interest   Yield /
Rate
  Average
Balances
  Interest   Yield /
Rate
Interest earning assets                        
Loans (1)   $ 7,494,448     $ 260,222     4.64 %   $ 5,684,143     $ 190,063     4.47 %
Investment securities (1)   1,562,781     30,022     2.57 %   1,129,129     20,020     2.37 %
Interest bearing deposits in other banks   56,319     388     0.92 %   66,100     227     0.46 %
Other earning assets (2)   29,789     1,113     4.99 %   27,216     981     4.81 %
Total interest earning assets (1)   9,143,337     $ 291,745     4.27 %   6,906,588     $ 211,291     4.09 %
Non-interest earning assets   883,562               602,904            
Total assets   $ 10,026,899               $ 7,509,492            
Interest bearing liabilities                            
Time deposits   $ 2,189,869     $ 15,224     0.93 %   $ 1,640,959     $ 12,130     0.99 %
Money market   1,807,885     6,171     0.46 %   1,219,227     3,227     0.35 %
Interest bearing demand   1,892,081     3,689     0.26 %   1,422,389     2,149     0.20 %
Savings   486,668     659     0.18 %   411,729     640     0.21 %
Total interest bearing deposits   6,376,503     25,743     0.54 %   4,694,304     18,146     0.52 %
Short-term borrowings and FHLB advances   514,303     3,777     0.98 %   501,892     1,680     0.45 %
Long-term borrowings   117,587     7,140     8.12 %   86,860     4,644     7.14 %
Total interest bearing liabilities   7,008,393     36,660     0.70 %   5,283,056     24,470     0.62 %
Non-interest bearing demand   1,629,334               1,171,599            
Other liabilities   66,787               44,593            
Shareholders’ equity   1,322,385               1,010,244            
Total liabilities and shareholders’ equity   $ 10,026,899               $ 7,509,492            
Net interest income and spread (1)       $ 255,085     3.57 %       $ 186,821     3.47 %
Net interest margin (1)           3.73 %           3.61 %
                         
Net interest income (FTE) (1)       $ 255,085             $ 186,821      
Tax equivalent adjustment       (1,811 )           (1,312 )    
Net interest income       $ 253,274             $ 185,509      
                                 

(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, 2017   Jun 30, 2017   Dec 31, 2016
Net Income (1)   $ 25,758     $ 25,758     $ 23,806     $ 23,806     $ 12,352     $ 12,352  
    Pre-Tax   After-Tax   Pre-Tax   After-Tax   Pre-Tax   After-Tax
Adjustments                        
Non-interest income                        
Less: Securities gains, net (2)   (98 )   (61 )   (70 )   (43 )   (1,894 )   (1,170 )
Non-interest expense                        
Conversion and merger related expense tax deductible, net (2)   589     364     (237 )   (146 )   18,245     11,270  
Conversion and merger related expense non-tax deductible   2     2     1,218     1,218     280     280  
Restructuring expense (2)   595     367     2,978     1,840     4     3  
Legal Settlement (2)           45     28     1,361     841  
Tax Adjustment                   (1,350 )   (1,350 )
Severance expense (2)   33     21             7     4  
Tax effect of adjustments (2)   (428 )   N/A     (1,037 )   N/A     (6,775 )   N/A  
Core Net Income (1)   $ 26,451     $ 26,451     $ 26,703     $ 26,703     $ 22,230     $ 22,230  
                         
Diluted shares (1)   53,226         53,226         50,722      
Core Net Income per share (1)   $ 0.50         $ 0.50         $ 0.44      
Average Assets   10,100,356         10,070,665         9,329,334      
                         
ROA (1) (3)   1.02 %       0.95 %       0.53 %    
Core ROA (1) (4)   1.05 %       1.06 %       0.95 %    

(1) We elected to early adopt ASU 2016-09 in the fourth quarter of 2016. The impacts of adoption have been reflected in our consolidated statements of income for the three months ended December 31, 2016, and did not have a material effect. Accordingly, adjustments were made using the modified prospective approach and resulted in, among other items, a $0.1 million decrease to net income and core net income as well as a one basis point decrease to core ROA for the three months ended December 31, 2016. See “Adoption of New Accounting Guidance” above for additional information.
(2) Tax effected at a blended income tax rate of 38%.
(3) ROA: Annualized net income / Average assets.
(4) 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,
 2017
  Jun 30,
 2017
  Mar 31,
 2017
  Dec 31,
 2016
  Sep 30,
 2016
Net interest income $ 85,916     $ 85,242     $ 82,116     $ 77,819     $ 62,627  
                   
Reported non-interest income 14,773     16,000     15,852     17,016     12,370  
Less: Securities gains, net 98     70     67     1,894     71  
Core non-interest income $ 14,675     $ 15,930     $ 15,785     $ 15,122     $ 12,299  
                   
Reported non-interest expense $ 56,984     $ 60,985     $ 62,703     $ 73,994     $ 47,530  
Less: Conversion and merger related expense tax deductible, net 589     (237 )   3,037     18,245     331  
Conversion and merger related expense non-tax deductible 2     1,218         280     61  
Restructuring expense, net 595     2,978     1,912     4     (113 )
Legal settlement     45         1,361     1,500  
Severance expense 33             7      
Core non-interest expense $ 55,765     $ 56,981     $ 57,754     $ 54,097     $ 45,751  
                   
Efficiency ratio (1) 56.59 %   60.24 %   64.00 %   78.02 %   63.38 %
Core efficiency ratio (2) 55.44 %   56.32 %   58.99 %   58.21 %   61.06 %

(1)  Efficiency Ratio: Non-interest expense / (Non-interest income + Net interest income).
(2)  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,
 2017
  Jun 30,
 2017
  Mar 31,
 2017
  Dec 31,
 2016
  Sep 30,
 2016
Total shareholders’ equity   $ 1,354,619     $ 1,332,084     $ 1,307,931     $ 1,292,047     $ 1,029,841  
Less: goodwill   (231,292 )   (234,158 )   (234,158 )   (235,500 )   (134,522 )
Less: intangibles   (27,938 )   (29,750 )   (31,553 )   (33,370 )   (12,288 )
Tax effect on intangible assets (1)   10,480     11,159     12,003     12,694     4,669  
Tangible book value (2)   $ 1,105,869     $ 1,079,335     $ 1,054,223     $ 1,035,871     $ 887,700  
Common shares outstanding   52,027     51,991     51,966     51,765     43,235  
Book Value per share   $ 26.04     $ 25.62     $ 25.17     $ 24.96     $ 23.82  
Tangible book value per share   $ 21.26     $ 20.76     $ 20.29     $ 20.01     $ 20.53  

(1)  Tax effected at a blended income tax rate of 38%.
(2)  Tangible book value is equal to shareholders’ equity less goodwill and intangibles net of taxes.

CONTACT: CONTACT:
Kenneth A. Posner
Chief of Strategic Planning and Investor Relations
Phone: (212) 399-4020
E-mail: Kposner@cbfcorp.com