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Apr 22, 2016

Capital Bank Financial Corp. Reports 1Q GAAP and Core EPS of $0.22 and $0.38

CHARLOTTE, N.C., April 22, 2016 (GLOBE NEWSWIRE) -- Capital Bank Financial Corp. (Nasdaq:CBF) (the "Company") today reported net income for the first quarter of 2016 of $9.8 million, or $0.22 per diluted share, and core net income of $16.9 million, or $0.38 per diluted share. Core adjustments for the first quarter of 2016 included a pre-tax charge of $9.2 million, related to the early termination of the FDIC loss share agreements, $0.6 million of non-tax deductible merger related expenses, $1.1 million of tax deductible merger related expenses, and $0.1 million of severance. Year over year core net income and core net income per diluted share rose 30% and 41%, respectively.

First quarter highlights include:

•   Loan portfolio grew 11% year over year;
•   Total deposits were up 11% year over year, with a 21% sequential annualized growth in Core deposits;
•   Remaining FDIC loss share agreements were terminated;
•   Tangible Book Value per share increased to $19.77; and
•   Declared a $0.10 per share quarterly common stock dividend.

Gene Taylor, Chairman and Chief Executive Officer of Capital Bank Financial Corp., commented, "The highlight of the quarter was strong core deposit growth, tight expense control, and excellent credit metrics. As anticipated, loan portfolio growth slowed in the first quarter, reflecting the decision to put Capital Bank's prime indirect auto portfolio into run-off during the fourth quarter, which is one component of our strategy to improve profitability over the next two years."

Chris Marshall, Chief Financial Officer of Capital Bank Financial Corp., added, "Integration planning for CommunityOne merger is nearly complete, thanks to hard work by teammates at both banks. We are looking forward to doing even more business with our customers upon closing."

Loan Portfolio and Composition

During the first quarter, the loan portfolio was flat at $5.6 billion. New loans of $296 million were offset by loan resolutions totaling $29 million, and principal repayments of $265 million. New loan production during the first quarter was absent of indirect auto lending, which contributed $65 million during the prior quarter.

The effects of exiting indirect auto lending had a $68 million loan portfolio impact in comparison to the prior quarter, as shown below:

(Dollars in millions) Mar 31,
 2016
  Dec 31,
 2015
Beginning balance of gross loans $5,633  $5,405 
New loan production  296  487 
Principal repayments / resolutions (294) (259)
Ending balance of gross loans $5,635  $5,633 
     
Annualized loan growth rate  0% 17%
     
Indirect lending portfolio (contraction) growth (34) 34 
     
Effect of discontinuing indirect lending, quarter over quarter (68)  
     
Loan growth rate  (excluding impact of indirect lending) 5%  
      

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

  Mar 31,
 2016
 Dec 31,
 2015
 Mar 31,
 2015
Commercial real estate 22% 22% 23%
C&I 44% 43% 43%
Consumer 32% 32% 32%
Other  2% 3% 2%
Total 100% 100% 100%
          

Deposits Composition and Cost of Funds

During the first quarter, total deposits increased by $79.5 million to $5.9 billion. The sequential increase was mainly the result of the Company's continued focus on growing low-cost core deposits, which were up $213 million, or a 21% annualized rate. Partially offsetting the increase was a decrease in higher rate brokered deposits and time deposits, which were down $134 million. The cost of core deposits increased two basis points to 0.17%, mostly due to re-pricing of deposits as a result of the federal funds rate increase and increased money market balances. Core deposits include all checking, savings and money market accounts, excluding brokered, and now represent 70% of total deposits. Sequentially and year over year, the cost of total deposits increased two basis points and eight basis points, respectively, to 0.42%. The contractual cost of total deposits, which excludes purchase accounting, increased two basis point sequentially and four basis points year over year to 0.42%.

Net Interest Income and Net Interest Margin

Net interest income declined $0.7 million to $61.4 million from $62.1 million for the fourth quarter of 2015 mainly due to a shorter calendar, and increased $1.6 million from $59.7 million for the first quarter of 2015. The net interest margin for the first quarter of 2016 was 3.64%, a decline of six basis points sequentially and 32 basis points year over year. The sequential and year over year net interest margin decline was due to the lower average yield on new loans as compared to the yields of the Company's legacy acquired loans and the slight increase in the cost of total deposits. New and acquired non-impaired loans represent $4.6 billion with an average yield of 3.7%, compared to $1.0 billion of acquired loans outstanding with an average yield of 8.2%.

Non-Interest Income

Non-interest income declined $8.0 million to $2.6 million from $10.6 million for the fourth quarter of 2015 and declined $7.4 million from $9.9 million for the first quarter of 2015. The sequential decline was mainly driven by the termination of the FDIC loss share agreements, which resulted in additional FDIC indemnification asset expense of $7.7 million when compared to last quarter, and a decline in bank-owned life insurance income, resulting from a death benefit in the fourth quarter of 2015. The year over year decline was mainly driven by a $6.7 million increase in FDIC indemnification asset expense as discussed above, and a $0.5 million decline in investment advisory fee income.

Provision for Loan and Lease Losses and Credit Quality

The provision of $1.4 million recorded for the first quarter of 2016 included a $1.4 million provision for new and acquired non-impaired loans. There was a de minimis amount of reversal of provision on legacy loans during the quarter. Net charge-offs for the first quarter of 2016 were $1.1 million, down from $2.3 million in the fourth quarter of 2015.

At March 31, 2016, the allowance for loan and lease losses was $45.3 million, of which $24.5 million related to acquired impaired loans and $20.8 million related to new and acquired non-impaired loans. The allowance for loan and lease losses represents 0.80% of the Company's total $5.6 billion loan portfolio.

At March 31, 2016, non-performing loans were $64.6 million, down 5% from December 31, 2015, and down 49%, from March 31, 2015, mainly as a result of resolutions and upgrades.

Non-Interest Expense

Non-interest expense declined $0.8 million to $46.9 million from $47.8 million for the fourth quarter of 2015 and declined $5.7 million from $52.6 million for the first quarter of 2015. The sequential decline was mainly due to the absence of a $4.2 million charge in fourth quarter resulting from the termination of a legacy debit card processing contract, and a decrease of legacy credit expenses. Partially offsetting the decline was a $2.3 million increase in employee compensation mostly due to a seasonality increase in tax and employee benefit expenses, and a $0.3 million increase in occupancy expense and equipment expense.

The year over year decline was mainly due to the absence of a $2.3 million restructuring charge in the first quarter from consolidation of facilities and severance, a $1.7 million decline in employee compensation resulting from cost savings initiatives, and lower legacy credit costs as discussed above.

Income Tax Expense

Income tax expense was $5.8 million for the first quarter of 2016, an effective rate of 37%, compared to $8.8 million and 37% for the fourth quarter of 2015. Income tax expense was $6.5 million and 36% for the first quarter of 2015.

Financial Position

Total assets increased by $503 million to $7.5 billion as of March 31, 2016, from $7.0 billion as of March 31, 2015. During the quarter, the Company's loan portfolio was flat at $5.6 billion. Total deposits increased by $80 million to $5.9 billion, and Core deposits increased by $213 million, or a 21% annualized rate. FHLB borrowings decreased $60 million. Tangible book value per share was $19.77 as of March 31, 2016, an increase of $0.24 and $0.28 over December 31, 2015 and March 31, 2015, respectively. During the first quarter, the Company repurchased 148 thousand shares of common stock for $4.4 million at an average price of $29.61. 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 11.1%, 13.0%, 13.0% and 13.7%, respectively, as of March 31, 2016, under currently applicable regulations.

The Company declared a cash dividend of $0.10 per share, payable on May 25, 2016, to shareholders of record as of May 11, 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 (719) 325-2469, and the confirmation pass code is 3145353.  Please dial in 10 minutes prior to the beginning of the call. A telephonic replay of the conference call will be available through April 29, 2016, by dialing (719) 457-0820 and entering pass code 3145353. 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.

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 $7.5 billion in total assets as of March 31, 2016, and 151 full-service banking offices throughout Florida, North and South Carolina, Tennessee and Virginia. To learn more about Capital Bank Financial Corporation, 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
 Mar 31,
 2016
 Dec 31,
 2015
 Sep 30,
 2015
 Jun 30,
 2015
 Mar 31,
 2015
Interest and dividend income$69,472  $69,553  $68,718  $67,311  $66,046 
Interest expense8,105  7,475  7,081  6,626   6,317 
Net Interest Income61,367  62,078  61,637  60,685   59,729 
Provision (reversal) for loan and lease losses1,375  1,089  799  1,299  (841)
Net interest income after provision (reversal) for loan and lease losses59,992  60,989  60,838  59,386  60,570 
Non-Interest Income         
Service charges on deposit accounts4,811  4,911  5,472  5,189  4,705 
Debit card income3,086  3,029  3,113  3,176  2,964 
Fees on mortgage loans originated and sold971  875  990  1,278  1,147 
Investment advisory and trust fees497  597  860  1,125  1,006 
FDIC indemnification asset expense  (1,526) (1,418) (2,499) (2,439)
Termination of loss share agreements(9,178)        
Investment securities gains (losses), net40  54  (43) 231  90 
Other-than-temporary impairment loss on investments:         
Gross impairment loss      (288)  
Other income2,339  2,657  2,444  2,151  2,447 
Total non-interest income2,566  10,597  11,418  10,363  9,920 
Non-Interest Expense          
Salaries and employee benefits22,162  20,219  22,620  21,881  23,881 
Stock-based compensation expense317    309  108  284 
Net occupancy and equipment expense7,703  7,385  7,621  7,754  8,129 
Computer services3,575  3,479  3,471  3,343  3,397 
Software expense2,036  2,061  2,198  2,082  2,142 
Telecommunication expense1,532  1,168  1,515   1,367  1,380 
OREO valuation expense467  341  2,075  1,710  1,390 
Net gains on sales of OREO(679) (801) (351) (957) (7)
Foreclosed asset related expense285  405  872  600  674 
Loan workout expense244  650  194  795  623 
Conversion and merger related expense1,687  704       
Professional fees1,612  1,529  1,958  1,723  1,734 
Losses on extinguishment of debt      1,438   
Restructuring charges, net142   4,248  23  178  2,341 
Contingent value right expense      4  116 
Regulatory assessments1,275  1,486  1,423  1,831  1,695 
Other expense4,580  4,882  4,418  5,645  4,868 
Total non-interest expense46,938  47,756  48,346  49,502  52,647 
Income before income taxes15,620  23,830  23,910  20,247  17,843 
Income tax expense5,780  8,809  8,589  7,257  6,454 
Net income $9,840  $15,021  $15,321  $12,990  $11,389 
           
Earnings per share:         
Basic$0.23  $0.35  $0.34  $0.28  $0.25 
Diluted$0.22  $0.34  $0.33  $0.28  $0.24 
           
Weighted average shares outstanding:          
Basic43,063  43,499  45,359  45,913  46,294 
Diluted43,904   44,550  46,534  47,220  47,632 


CAPITAL BANK FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands)
(Unaudited)
 
 Mar 31,
 2016
 Dec 31,
 2015
 Mar 31,
 2015
Assets     
Cash and due from banks$88,802  $87,985  $96,484 
Interest-bearing deposits in other banks93,218  56,711  143,497 
Total cash and cash equivalents182,020  144,696  239,981 
Trading securities3,418  3,013  2,853 
Investment securities available-for-sale at fair value (amortized cost $657,631, $640,455 and $568,621, respectively)663,925  637,329  575,593 
Investment securities held-to-maturity at amortized cost (fair value  $467,372, $475,134 and $457,939, respectively)460,483  472,505  448,962 
Loans held for sale8,070  10,569  12,403 
Loans, net of deferred loan costs and fees5,626,887  5,622,147   5,065,606 
Less: Allowance for loan and lease losses45,263  45,034  48,225 
Loans, net5,581,624  5,577,113  5,017,381 
Other real estate owned48,505  52,776  71,453 
FDIC indemnification asset  6,725  15,195 
Receivable from FDIC  678  3,172 
Premises and equipment, net157,131  159,149  163,501 
Goodwill134,522  134,522  134,522 
Intangible assets, net14,166  15,100  17,943 
Deferred income tax asset, net95,363  105,316  121,083 
Other assets130,571  129,988  152,694 
Total Assets$7,479,798  $7,449,479  $6,976,736 
Liabilities and Shareholders' Equity     
Liabilities      
Deposits:     
Non-interest bearing demand$1,190,831  $1,121,160   $1,114,423 
Interest bearing demand1,402,342  1,382,732  1,405,390 
Money market1,262,581  1,190,121  924,228 
Savings420,073  418,879  491,394 
Time deposits1,663,906  1,747,318  1,428,121 
Total deposits5,939,733  5,860,210  5,363,556 
Federal Home Loan Bank advances400,849  460,898  356,043 
Short-term borrowings16,200  12,410  27,605 
Long-term borrowings86,328  85,777  139,975 
Accrued expenses and other liabilities39,695  43,919  35,208 
Total liabilities$6,482,805  $6,463,214  $5,922,387 
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, 37,207 issued and 26,636 outstanding, 37,012 issued 26,589 outstanding and 37,310 issued and 30,037 outstanding, respectively.372  370  373 
Common stock-Class B $0.01 par value: 200,000 shares authorized, 18,327 issued and 16,554 outstanding, 18,327 issued and 16,554 outstanding and 18,369 issued and 16,595 outstanding, respectively.183  183  184 
Additional paid in capital1,076,931  1,076,415  1,081,912 
Retained earnings214,268  208,742  169,792 
Accumulated other comprehensive (loss) income3,878  (5,196) 274 
Treasury stock, at cost, 12,345, 12,196 and 9,047 shares, respectively(298,639) (294,249) (198,186)
Total shareholders' equity996,993  986,265   1,054,349 
Total Liabilities and Shareholders' Equity$7,479,798  $7,449,479  $6,976,736 



CAPITAL BANK FINANCIAL CORP.
KEY METRICS
(Dollars in thousands)
(Unaudited)
 
 Three Months Ended
 Mar 31,
 2016
 Dec 31,
 2015
 Sep 30,
 2015
 Jun 30,
 2015
 Mar 31,
 2015
Performance Ratios          
Interest rate spread3.50% 3.57% 3.68% 3.79% 3.83%
Net interest margin3.64% 3.70% 3.82% 3.94% 3.96%
Return on average assets0.53% 0.82% 0.86% 0.75% 0.66%
Return on average shareholders' equity3.96% 5.99% 5.85% 4.90% 4.29%
Efficiency ratio73.42% 65.71% 66.18%  69.67% 75.59%
Average interest-earning assets to average interest-bearing liabilities129.54% 129.55% 132.10 % 133.39% 131.94%
Average loans receivable to average deposits95.66% 96.68% 96.01% 94.12% 95.47%
Yield on interest-earning assets4.11% 4.14% 4.26% 4.36% 4.38%
Cost of interest-bearing liabilities0.62% 0.57% 0.58% 0.57% 0.55%
Asset and Credit Quality Ratios-Total Loans         
Non-accrual loans$8,526  $8,945  $9,647  $9,807  $11,482 
Nonperforming acquired loans$56,041  $59,194  $72,023  $83,515  $115,865 
Nonperforming loans to loans receivable1.15% 1.21% 1.51% 1.79% 2.51%
Nonperforming assets to total assets1.51% 1.63% 1.88% 2.23% 2.85%
Covered loans to total gross loans% 1.30% 1.45% 3.39% 3.71%
ALLL to nonperforming assets39.97% 37.13% 33.88% 30.56% 24.22%
ALLL to total gross loans0.80% 0.80% 0.86% 0.92% 0.95%
Annualized net charge-offs/average loans0.08% 0.17% 0.20% 0.12% 0.09%
Asset and Credit Quality Ratios-New Loans         
Nonperforming new loans to total new loans receivable0.11% 0.11% 0.17% 0.19%  0.22%
New loans ALLL to total gross new loans0.47% 0.47% 0.51% 0.59% 0.61%
Asset and Credit Quality Ratios-Acquired Loans         
Nonperforming acquired loans to total acquired loans receivable4.67% 4.69% 5.21% 5.58% 7.30%
Covered acquired loans to total gross acquired loans% 5.43% 5.45 % 11.38% 11.47%
Acquired loans ALLL to total gross acquired loans1.93% 1.83% 1.80% 1.71% 1.67%
Capital Ratios (Company)         
Total average shareholders' equity to total average assets13.35% 13.67%  14.79% 15.41% 15.48%
Tangible common equity ratio (1)11.57% 11.46% 12.26% 13.15% 13.22%
Tier 1 leverage capital ratio12.49% 12.67% 13.60% 14.66% 14.42%
Tier 1 common capital ratio13.38% 14.73% 14.44% 16.07% 16.42%
Tier 1 risk-based capital ratio14.58% 13.63% 15.60% 17.33% 17.70%
Total risk-based capital ratio15.32% 15.47% 16.38% 18.18% 18.66%
Capital Ratios (Bank)         
Tangible common equity ratio (1)11.45% 11.20% 11.36% 11.35 % 11.32%
Tier 1 leverage capital ratio11.10% 11.09% 11.19%  11.15% 10.89%
Tier 1 common capital ratio12.95% 12.89% 12.85% 13.18% 13.34%
Tier 1 risk-based capital ratio12.95% 12.89% 12.85% 13.18% 13.34%
Total risk-based capital ratio13.72% 13.68% 13.69% 14.10% 14.30%
               
(1) See "Reconciliation of Non-GAAP Measures"              


CAPITAL BANK FINANCIAL CORP.
LOANS AND DEPOSITS
(Dollars in thousands)
(Unaudited)
 
 Mar 31,
 2016
 Dec 31,
 2015
 Sep 30,
 2015
 Jun 30,
 2015
 Mar 31,
 2015
Loans         
Non-owner occupied commercial real estate$850,766  $866,392  $847,225  $834,351  $823,763 
Other commercial construction and land194,971  196,795  192,283  182,283  180,166 
Multifamily commercial real estate75,737  80,708  82,762  76,754  88,980 
1-4 family residential construction and land96,703  93,242  87,193  78,572  66,547 
Total commercial real estate1,218,177  1,237,137  1,209,463  1,171,960  1,159,456 
Owner occupied commercial real estate1,095,460  1,104,972  1,065,875  1,030,111  1,038,493 
Commercial and industrial1,375,233  1,309,704  1,219,101  1,181,451  1,125,708 
Lease financing1,088  1,256  1,488  1,661  1,834 
Total commercial2,471,781  2,415,932  2,286,464  2,213,223  2,166,035 
1-4 family residential1,015,071  1,017,791  985,982  959,224  928,832 
Home equity loans368,510  375,276  373,993  375,271   379,946 
Indirect auto loans317,863  351,817  318,841  263,723  222,087 
Other consumer loans84,108  84,661  82,483  77,867  74,666 
Total consumer1,785,552   1,829,545  1,761,299  1,676,085  1,605,531 
Other 159,447  150,102  147,718  145,146  146,987 
Total loans$5,634,957  $5,632,716  $5,404,944  $5,206,414  $5,078,009 
          
Deposits          
Non-interest bearing demand$1,190,831  $1,121,160  $1,099,252  $1,132,085  $1,114,423 
Interest bearing demand1,402,342  1,382,732  1,251,365  1,367,123  1,405,390 
Money market1,162,546  1,040,086  927,391  991,520  924,228 
Savings420,073  418,879  436,385  479,885  491,394 
Total core deposits4,175,792  3,962,857   3,714,393  3,970,613  3,935,435 
Wholesale money market100,035   150,035  78,015     
Time deposits1,663,906  1,747,318  1,773,170  1,521,810  1,428,121 
Total deposits$5,939,733  $5,860,210  $5,565,578  $5,492,423  $5,363,556 



CAPITAL BANK FINANCIAL CORP.
LEGACY CREDIT EXPENSES
(Dollars in thousands)
(Unaudited)
 
 Three Months Ended
 Mar 31,
 2016
 Dec 31,
2015
 Sep 30,
2015
 Jun 30,
2015
 Mar 31,
2015
Provision (reversal) on legacy loans$9  $(1,161) $492  $(523) $(1,926)
FDIC indemnification asset expense  1,526  1,418   2,499  2,439 
OREO valuation expense467  341  2,075  1,710  1,390 
Termination of loss share agreements9,178         
Net gains on sales of OREO(679) (801) (351) (957) (7)
Foreclosed asset related expense285  405  872  600  674 
Loan workout expense244  650  194  795  623 
Salaries and employee benefits522  549  797  796  832 
Total legacy credit expenses $10,026  $1,509  $5,497   $4,920  $4,025 


CAPITAL BANK FINANCIAL CORP.
QUARTERLY AVERAGE BALANCES AND YIELDS
(Dollars in thousands)
(Unaudited)
 
  Three Months Ended
March 31, 2016
 Three Months Ended
December 31, 2015
  Average
Balances
 Interest Yield /
Rate
 Average
Balances
 Interest Yield /
Rate
Interest earning assets            
Loans (1) $5,611,488  $63,009  4.52% $5,496,222  $63,035  4.55%
Investment securities (1) 1,122,523  6,483  2.32% 1,119,848  6,355  2.25%
Interest bearing deposits in other banks 73,188  84  0.46% 40,177  23  0.23%
Other earning assets (2) 25,136  315  5.04% 42,473  553  5.17%
Total interest earning assets 6,832,335  $69,891  4.11% 6,698,720  $69,966  4.14%
Non-interest earning assets 618,087      633,796      
Total assets $7,450,422      $7,332,516     
Interest bearing liabilities            
Time deposits $1,689,653  $4,120  0.98% $1,774,732  $4,124  0.92%
Money market 1,247,333  1,067  0.34% 1,081,968  780  0.29%
Interest bearing demand 1,370,957  648  0.19% 1,286,737   529  0.16%
Savings 419,588  227  0.22% 426,686  236  0.22%
Total interest bearing deposits 4,727,531  6,062  0.52% 4,570,123  5,669  0.49%
Short-term borrowings and FHLB advances 460,892  532  0.46% 515,302  365  0.28%
Long-term borrowings 85,986  1,511  7.07% 85,438  1,441  6.69%
Total interest bearing liabilities 5,274,409  8,105  0.62% 5,170,863   $7,475  0.57%
Non-interest bearing demand 1,138,782      1,114,932     
Other liabilities 42,418      44,479     
Shareholders' equity 994,813       1,002,242     
Total liabilities and shareholders' equity $7,450,422      $7,332,516     
Net interest income and spread   $61,786  3.50%   $62,491  3.57%
Net interest margin     3.64%     3.70%
 
(1) Presented on a fully tax equivalent basis
(2) Includes Federal Reserve Bank, Federal Home Loan Bank and Bankers Bank stocks


CAPITAL BANK FINANCIAL CORP.
QUARTERLY AVERAGE BALANCES AND YIELDS
(Dollars in thousands)
(Unaudited)
 
  Three Months Ended
March 31, 2016
 Three Months Ended
March 31, 2015
  Average
Balances
 Interest Yield /
Rate
 Average
Balances
 Interest Yield /
Rate
Interest earning assets            
Loans (1) $5,611,488  $63,009  4.52% $5,044,763  $60,710  4.88%
Investment securities (1) 1,122,523  6,483  2.32% 1,014,448  5,141  2.06%
Interest bearing deposits in other banks 73,188  84  0.46% 58,654  33  0.23%
Other earning assets (2) 25,136  315  5.04% 50,803  688  5.49%
Total interest earning assets 6,832,335  $69,891  4.11% 6,168,668  $66,572  4.38%
Non-interest earning assets 618,087      685,654     
Total assets $7,450,422      $6,854,322     
Interest bearing liabilities            
Time deposits $1,689,653  $4,120  0.98% $1,409,605  $2,999  0.86%
Money market  1,247,333  1,067  0.34% 914,385  554   0.25%
Interest bearing demand 1,370,957  648  0.19% 1,397,011   592  0.17%
Savings 419,588  227  0.22% 496,907  265  0.22%
Total interest bearing deposits 4,727,531  $6,062  0.52% 4,217,908  4,410  0.42%
Short-term borrowings and FHLB advances 460,892  532  0.46% 319,901  182  0.23%
Long-term borrowings 85,986  1,511  7.07% 137,394  1,725  5.09%
Total interest bearing liabilities 5,274,409  8,105  0.62% 4,675,203  $6,317  0.55%
Non-interest bearing demand 1,138,782      1,066,401     
Other liabilities 42,418      51,653     
Shareholders' equity 994,813      1,061,065     
Total liabilities and shareholders' equity $7,450,422      $6,854,322     
Net interest income and spread   $61,786  3.50%   $60,255  3.83%
Net interest margin     3.64%     3.96%
 
(1) Presented on a fully tax equivalent basis
(2) Includes Federal Reserve Bank, Federal Home Loan Bank and Bankers Bank stocks


CAPITAL BANK FINANCIAL CORP.
RECONCILIATION OF NON-GAAP MEASURES
(Dollars in thousands)
(Unaudited)
 
CORE NET INCOME Three Months Ended
  Mar 31, 2016  Dec 31, 2015 Mar 31, 2015
Net Income $9,840  $ 9,840  $15,021  $ 15,021  $11,389  $11,389 
  Pre-Tax After-Tax Pre-Tax After-Tax Pre-Tax After-Tax
Adjustments            
Non-interest income            
Indemnification asset termination 9,178  5,670         
Security (gains) losses* (40) (25) (54) (33) (90) (55)
Non-interest expense            
Stock-based compensation expense*          95  58 
Contingent value right expense*         116  72 
Severance expense* 75  46      111  68 
Restructuring expense* 142  88  32  20  2,341  1,444 
Conversion costs and merger tax deductible* 1,107  684  33  20     
Legal merger non deductible 580  580  673  673      
Contract termination*     4,215  2,594     
Tax effect of adjustments* (3,999)  N/A  (1,625)  N/A  (986)  N/A 
Core Net Income $16,883  $16,883  $18,295  $18,295  $12,976  $12,976 
             
Diluted shares 43,904    44,550    47,632   
Core Net Income per share $0.38    $0.41    $0.27   
Average Assets 7,450,422    7,332,516    6,854,322   
             
ROA** 0.53%   0.82%   0.66%  
Core ROA*** 0.91%   1.00%   0.76%  
 
* 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 RATIOThree Months Ended
 Mar 31,
 2016
 Dec 31,
 2015
 Sep 30,
 2015
 Jun 30,
 2015
 Mar 31,
 2015
Net interest income$61,367  $62,078  $61,637  $60,685  $59,729 
          
Reported non-interest income2,566  10,597  11,418   10,363  9,920 
Indemnification asset termination(9,178)        
Less: Securities gains (losses)40  54  (43) (57) 90 
Core non-interest income$ 11,704  $10,543  $11,461  $10,420  $9,830 
          
Reported non-interest expense$46,938  $47,756  $48,346  $49,502  $52,647 
Less: Stock-based compensation expense        95 
Contingent value right expense      4  116 
Severance expense75    63  14  111 
Loss on extinguishment of debt      1,438   
Conversion costs and merger tax deductible1,107  33       
Legal merger non deductible580          
Restructuring expense142    23  178  2,341 
Contract termination  4,215       
Conversion and severance expenses (conversion and merger expenses and salaries and employees benefits)  704       
Core non-interest expense$45,034  $42,804  $48,260  $47,868  $49,984 
          
Efficiency ratio*73.42% 65.71% 66.18% 69.67% 75.59%
Core efficiency ratio**61.63% 58.94% 66.02% 67.32% 71.86%
 
*  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
  Mar 31,
 2016
 Dec 31,
 2015
 Sep 30,
 2015
 Jun 30,
 2015
 Mar 31,
 2015
Total shareholders' equity $996,993  $986,265  $1,022,642  $1,059,346  $ 1,054,349 
Less: goodwill and intangible assets, net of taxes (143,304) (143,863) (144,447) (145,035) (145,622)
Tangible book value* $853,689  $842,402  $878,195  $914,311  $908,727 
Common shares outstanding 43,189  43,143   44,466  46,440  46,632 
Tangible book value per share $19.77  $19.53  $19.75  $19.69  $19.49 
 
* 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
  Mar 31,
 2016
 Dec 31,
 2015
 Sep 30,
 2015
 Jun 30,
 2015
 Mar 31,
 2015
Total shareholders' equity $996,993  $986,265  $1,022,642  $1,059,346  $1,054,349 
Less: goodwill and intangible assets (148,688) (149,622) (150,567) (151,517) (152,465)
Tangible common equity $848,305  $836,643  $872,075  $907,829  $901,884 
Total assets $7,479,798  $7,449,479  $7,261,196  $7,054,501  $6,976,736 
Less: goodwill and intangible assets (148,688) (149,622) (150,567) (151,517) (152,465)
Tangible assets $7,331,110  $7,299,857  $7,110,629   $6,902,984  $6,824,271 
Tangible common equity ratio 11.57% 11.46% 12.26% 13.15% 13.22%

 

CONTACT:

Kenneth A. Posner

Chief of Strategic Planning and Investor Relations

Phone: (212) 399-4020

E-mail: Kposner@cbfcorp.com

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Source: Capital Bank Financial Corp.

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