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Jul 20, 2017

Capital Bank Financial Corp. Reports Second Quarter GAAP EPS of $0.45 and Core EPS of $0.50

CHARLOTTE, N.C., July 20, 2017 (GLOBE NEWSWIRE) -- Capital Bank Financial Corp. (Nasdaq:CBF) (the "Company") today reported second quarter GAAP net income of $23.8 million, which increased 14% quarter over quarter. GAAP net income per diluted share was $0.45. Core net income increased to $26.7 million, up 12% quarter over quarter. Core net income per diluted share was $0.50.  Core pre-tax adjustments for the second quarter of 2017 included $3.0 million of branch closure expenses and $1.0 million of merger related expenses, offset by $0.1 million net gain on investment securities. The reconciliation of non-GAAP financial measures (including core net income, core net income per diluted share, and core ROA) are included in tabular form at the end of this release.

Highlights of the quarter include:

  • Announcement of a definitive agreement to merge with First Horizon National Corporation;
  • GAAP ROA of 0.95%, up 11 bps quarter over quarter and core ROA of 1.06%, up 10 bps quarter over quarter;
  • GAAP efficiency ratio of 60.2%; and
  • Declared quarterly dividend of $0.12 per common share.

"We are very excited about joining with First Horizon in creating a $40 billion regional bank with strong growth and high returns. Comprehensive pre-merger integration planning is off to a fast start," said Gene Taylor, Chairman and Chief Executive Officer of Capital Bank Financial Corp.

"We are pleased with this quarter's results which demonstrated very significant progress toward our profitability and return targets for 2017. We continue to execute on cost savings initiatives and are well-positioned to carry our momentum into the second half of the year," added Chris Marshall, Chief Financial Officer of Capital Bank Financial Corp.

Loan Portfolio and Composition

During the second quarter, the loan portfolio increased by $58.2 million to $7.6 billion, consisting of a $95.4 million increase in commercial real estate and commercial and industrial loans, a $43.9 million decrease in consumer loans, and a $6.7 million increase in other loans.  New loan production of $481.9 million was in line with plan and partially offset by strong special assets resolutions of $42.8 million, continued run-off of the prime indirect loan portfolio of $25.1 million, and the sale of $14.1 million in loans.

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

       
  Jun 30,
 2017
 Mar 31,
 2017
 Dec 31,
 2016
Commercial real estate 26% 24% 23%
C&I 36% 37% 38%
Consumer 35% 36% 36%
Other 3% 3% 3%
Total 100% 100% 100%
          

Deposits Composition and Cost of Funds               

During the second quarter, total deposits decreased by $17.6 million to $8.1 billion. The quarterly average balance on deposits, which is less sensitive to individual customer activity, increased by $65.2 million. Contributing to the fluctuation in deposits was a commercial deposit of $50.1 million that was recorded late in the first quarter and subsequently withdrawn early in the second quarter. The cost of total deposits increased by two basis points sequentially to 0.41%, and was flat year over year, as the Company continues to implement carefully targeted pricing strategies.

Net Interest Income and Net Interest Margin

Net interest income increased $3.1 million to $85.2 million from $82.1 million for the first quarter of 2017 and increased $23.7 million from $61.5 million for the second quarter of 2016. The net interest margin for the second quarter of 2017 was 3.75%, an increase of two basis points sequentially and 13 basis points year over year.

Non-Interest Income

Non-interest income increased $0.1 million to $16.0 million from $15.9 million for the first quarter of 2017 and increased $4.1 million from $11.9 million for the second quarter of 2016. The sequential increase was mainly driven by a $0.3 million increase in debit card income that was partially offset by a $0.1 million decrease in service charges on deposit accounts. The year over year increase was mainly due to the acquisition of CommunityOne and includes a $1.8 million increase in debit card income, a $1.4 million increase in other income (includes BOLI, credit card and merchant service income), and a $0.8 million increase in service charges.

Provision for Loan and Lease Losses and Credit Quality

The provision of $2.3 million recorded for the second quarter of 2017 included a $1.5 million provision for non-purchased credit impaired loans and a $0.8 million provision on purchased credit impaired loans. Net charge-offs for the second quarter of 2017 were $1.6 million, $1.0 million lower than the first quarter of 2017.

At June 30, 2017, the allowance for loan and lease losses was $44.6 million of which $24.0 million related to purchase credit impaired loans and $20.6 million related to non-purchased credit impaired loans. The allowance for loan and lease losses represents 0.59% of the Company's total $7.6 billion loan portfolio.

At June 30, 2017, non-performing loans were $68.2 million, or 0.90% of loans, and decreased 4.7% from March 31, 2017, mainly as a result of resolutions and upgrades. The balance on non-performing loans increased 4.8% from June 30, 2016, due primarily to the acquisition of CommunityOne.

Non-Interest Expense

Non-interest expense declined $1.7 million to $61.0 million from $62.7 million for the first quarter of 2017 and increased $16.5 million from $44.5 million for the second quarter of 2016. The sequential decrease was mainly due to a decrease of $2.1 million in conversion and merger expense and $1.5 million in salaries and benefits. Partially offsetting the decrease was a $1.1 million increase in restructuring charges. The year over year increase was mainly due to increases of $7.5 million in salaries and benefit expense, $3.0 million in restructuring charges, and $1.5 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 $14.1 million for the second quarter of 2017 with an effective tax rate of 37%, compared to $11.0 million and 34% for the first quarter of 2017. Income tax expense was $10.3 million and an effective tax rate of 37% for the second quarter of 2016.

Financial Position

Total assets decreased by $4.3 million to $10.1 billion as of June 30, 2017, from $10.1 billion as of March 31, 2017. During the quarter, the Company's loan portfolio increased $58.2 million to $7.6 billion. Total deposits decreased by $17.6 million to $8.1 billion. Core deposits include all checking, savings and money market accounts, excluding brokered, and represent 71% of total deposits. FHLB borrowings decreased $20.1 million. Book value per share was $25.62 as of June 30, 2017, an increase of $0.45 and $2.10 from March 31, 2017 and June 30, 2016, respectively. Tangible book value per share was $20.76 as of June 30, 2017, an increase of $0.47 and $0.54 from March 31, 2017 and June 30, 2016, respectively. During the second quarter, the Company did not repurchase shares of common stock. The Company has $88 million remaining under the current board authorized stock repurchase program. 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 August 21, 2017, to shareholders of record as of August 7, 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 June 30, 2017, and 189 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
 Jun 30,
 2017
  Mar 31,
 2017
 Dec 31,
 2016
 Sep 30,
 2016
 Jun 30,
 2016
Interest and dividend income$97,286  $92,937  $87,746  $70,929  $69,579 
Interest expense12,044  10,821  9,927  8,302  8,064 
Net interest income85,242  82,116  77,819  62,627  61,515 
Provision for loan and lease losses2,303  3,392  1,980  586  1,172 
Net interest income after provision for loan and lease losses82,939  78,724  75,839  62,041  60,343 
Non-interest income         
Service charges on deposit accounts5,237  5,375  5,949  4,777  4,486 
Debit card income5,051  4,765  4,211  3,389  3,235 
Fees on mortgage loans originated and sold1,150  1,248   1,402  1,334  1,140 
Investment advisory and trust fees596  641  591  290  455 
Investment securities gains, net70  67  1,894  71  117 
Other income3,896  3,756  2,969  2,509  2,489 
Total non-interest income16,000  15,852  17,016  12,370  11,922 
Non-interest expense         
Salaries and employee benefits27,662  29,166  26,134  20,935  20,139 
Stock-based compensation expense964  900  531  790  467 
Net occupancy and equipment expense8,826  8,992  8,374  7,340  7,355 
Computer services4,280  3,873  4,364  3,153  3,274 
Software expense2,573  2,662  2,391  1,948  2,000 
Telecommunication expense1,939  2,424  2,147  1,790  1,558 
OREO valuation expense262  247  677  742  1,119 
Net gains on sales of OREO(204) (308) (150) (159) (413)
Foreclosed asset related expense376  364  513  397  399 
Loan workout expense281  201  327  206  71 
Conversion and merger related expense, net981  3,037  18,525  394  1,236 
Professional fees1,800  2,096   1,761  1,642  1,353 
Restructuring charges, net2,978  1,912   4  (113) 5 
Legal settlement expense45    1,361  1,500   
Regulatory assessments1,145  719  1,092  841  1,259 
Other expense7,077   6,418  5,943  6,124  4,714 
Total non-interest expense60,985  62,703  73,994  47,530  44,536 
Income before income taxes37,954  31,873  18,861  26,881  27,729 
Income tax expense (1)14,148  10,990  6,509  8,370  10,288 
Net income (1)$23,806  $20,883  $12,352   $18,511  $17,441 
          
Earnings per share:         
Basic (1)$0.46  $0.40  $0.25  $0.43  $0.41 
Diluted (1)$0.45  $0.39  $ 0.24  $0.42  $0.40 
           
Weighted average shares outstanding:          
Basic51,683  51,634  49,334  43,028  43,011 
Diluted (1)53,226  53,127  50,722  44,118  44,068 
               

(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, September 30, 2016, and June 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 and June 30, 2016 . Additionally, there was an increase of $0.01 to the basic earnings per share for the three months ended June 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)
 
 Jun 30,
 2017
 Mar 31,
 2017
  Dec 31,
 2016
Assets     
Cash and due from banks$106,164  $100,134   $107,707 
Interest-bearing deposits in other banks49,247  60,413  201,348 
Total cash and cash equivalents155,411  160,547  309,055 
Trading securities4,290  4,150  3,791 
Investment securities available-for-sale at fair value (amortized cost $1,152,613, $1,168,995, and $927,266, respectively)1,145,712  1,154,496  912,250 
Investment securities held-to-maturity at amortized cost (fair value $431,269, $445,696, and $460,911, respectively)430,411  446,020   463,959 
Loans held for sale3,533  4,980  12,874 
Loans, net of deferred loan costs and fees7,566,581   7,506,975  7,393,318 
Less: Allowance for loan and lease losses44,638  43,891  43,065 
Loans, net7,521,943  7,463,084  7,350,253 
Other real estate owned41,364  51,050  53,482 
Premises and equipment, net184,939   199,167  205,425 
Goodwill234,158  234,158   235,500 
Intangible assets, net29,750  31,553  33,370 
Deferred income tax asset, net134,452  146,724  150,272 
Bank owned life insurance100,672  100,251  99,702 
Other assets107,066  101,862  100,724 
Total Assets$10,093,701  $10,098,042  $9,930,657 
Liabilities and Shareholders' Equity     
Liabilities     
Deposits:     
Non-interest bearing demand$1,662,416  $1,680,243  $1,590,164 
Interest bearing demand1,884,674  1,960,187  1,930,143 
Money market1,828,889  1,821,474  1,725,838 
Savings480,590  496,230  497,171 
Time deposits2,218,444  2,134,473  2,137,312 
Total deposits 8,075,013  8,092,607  7,880,628 
Federal Home Loan Bank advances470,600  490,650  545,701 
Short-term borrowings32,637  21,125  19,157 
Long-term borrowings118,096  117,272  116,456 
Accrued expenses and other liabilities65,271   68,457  76,668 
Total liabilities$8,761,617  $8,790,111  $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, 46,624 issued and 35,357 outstanding, 46,479 issued 35,212 outstanding, and 46,178 issued and 34,911 outstanding, respectively.466  465  462 
Common stock-Class B $0.01 par value: 200,000 shares authorized, 18,407 issued and 16,634 outstanding, 18,527 issued and 16,754 outstanding, and 18,627 issued and 16,854 outstanding, respectively.184  185  186 
Additional paid in capital1,371,224  1,369,689  1,368,459 
Retained earnings279,914  262,443  247,758 
Accumulated other comprehensive loss(7,320) (12,467) (12,434)
Treasury stock, at cost, 13,040, 13,040, and 13,040 shares, respectively(312,384) (312,384) (312,384)
Total shareholders' equity1,332,084  1,307,931  1,292,047 
Total Liabilities and Shareholders' Equity$10,093,701  $10,098,042  $9,930,657 
            


CAPITAL BANK FINANCIAL CORP.
KEY METRICS
(Dollars in thousands)
(Unaudited)
 
 Three Months Ended
 Jun 30,
 2017
 Mar 31,
 2017
 Dec 31,
 2016
 Sep 30,
 2016
 Jun 30,
 2016
Performance Ratios         
Interest rate spread (1)3.59% 3.58% 3.53% 3.43% 3.48%
Net interest margin (1)3.75% 3.73% 3.67% 3.58% 3.62%
Return on average assets (3)0.95% 0.84% 0.53% 0.98% 0.93%
Return on average shareholders' equity (3)7.20% 6.43% 4.03% 7.25% 6.88%
Efficiency ratio60.24% 64.00% 78.02% 63.38% 60.65%
Average interest-earning assets to average interest-bearing liabilities130.70% 129.53% 130.22% 131.43% 131.21%
Average loans receivable to average deposits93.97% 93.41%  94.57% 98.46% 96.56%
Yield on interest-earning assets (1)4.27% 4.21% 4.13% 4.05% 4.09%
Cost of interest-bearing liabilities0.69% 0.63% 0.61% 0.62% 0.62%
Asset and Credit Quality Ratios-Total Loans                   
Non-accrual loans$13,821  $13,608  $11,449  $11,873  $9,016 
Nonperforming purchase credit impaired loans$54,399  $57,969  $63,668  $48,477  $56,108 
Nonperforming loans to loans receivable0.90% 0.95% 1.01% 1.02% 1.13%
Nonperforming assets to total assets1.09% 1.22% 1.30% 1.37% 1.44%
ALLL to nonperforming assets40.64% 35.73% 33.45% 41.29% 40.98%
ALLL to loans held for investment0.59% 0.58% 0.58% 0.75% 0.78%
Annualized net charge-offs/average loans0.08% 0.14% 0.17% 0.10% 0.11%
Capital Ratios (Company) (2)                    
Total average shareholders' equity to total average assets13.1% 13.1% 13.2% 13.5% 13.5%
Tier 1 leverage capital ratio11.8% 11.6% 12.2% 12.9% 12.6%
Tier 1 common capital ratio12.5% 12.2% 12.4% 13.3% 13.4%
Tier 1 risk-based capital ratio13.8% 13.4% 13.5% 14.4% 14.6%
Total risk-based capital ratio14.3% 14.0% 14.0% 15.1% 15.3%
Capital Ratios (Bank) (2)                   
Tier 1 leverage capital ratio10.7% 10.7% 11.2% 10.5% 10.4%
Tier 1 common capital ratio12.6% 12.3% 12.4% 12.0% 12.0%
Tier 1 risk-based capital ratio12.6% 12.3%  12.4% 12.0% 12.0%
Total risk-based capital ratio13.1% 12.9% 12.9% 12.7% 12.7%

(1) Presented on a fully tax equivalent basis.
(2) Capital Ratios are preliminary. 
(3) 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, September 30, 2016, and June 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 both three months ended September and June 2016. See "Adoption of New Accounting Guidance" above for additional information.

 
CAPITAL BANK FINANCIAL CORP.
LOANS AND DEPOSITS
(Dollars in thousands)
(Unaudited)
 
 Jun 30,
 2017
 Mar 31,
 2017
 Dec 31,
 2016
 Sep 30,
 2016
 Jun 30,
 2016
Loans         
Non-owner occupied commercial real estate$1,265,576  $1,187,344  $1,130,883  $920,521   $891,830 
Other commercial construction and land384,581  350,401  327,622   222,794  212,315 
Multifamily commercial real estate147,365  115,996  117,515  76,296  74,328 
1-4 family residential construction and land153,761  157,920  140,030  111,954  100,306 
Total commercial real estate1,951,283  1,811,661  1,716,050  1,331,565  1,278,779 
Owner occupied commercial real estate1,287,811  1,313,086  1,321,405  1,072,586  1,075,306 
Commercial and industrial1,424,862  1,443,828  1,468,874  1,458,523  1,448,698 
Lease financing       525  877 
Total commercial2,712,673  2,756,914  2,790,279  2,531,634  2,524,881 
1-4 family residential1,782,799  1,787,097  1,714,702  1,168,468  1,039,309 
Home equity loans489,497  502,099  507,759  364,117  364,169 
Indirect auto loans174,861  199,951  226,717  254,736  285,618 
Other consumer loans220,946  222,824   222,255  94,277  85,964 
Total consumer2,668,103  2,711,971  2,671,433  1,881,598  1,775,060 
Other238,055  231,409  228,430  191,136  166,185 
Total loans$7,570,114  $7,511,955  $7,406,192  $5,935,933  $5,744,905 
          
Deposits         
Non-interest bearing demand$1,662,416  $1,680,243  $1,590,164  $1,207,800  $1,172,481 
Interest bearing demand1,884,674  1,960,187  1,930,143  1,463,520   1,456,558 
Money market1,678,842  1,746,444  1,651,023  1,166,918  1,105,460 
Savings480,590  496,230  497,171  401,205  403,106 
Total core deposits5,706,522  5,883,104  5,668,501  4,239,443  4,137,605 
Wholesale money market150,047  75,030  74,815  125,030  50,015 
Time deposits2,218,444  2,134,473  2,137,312  1,668,784  1,619,507 
Total deposits$8,075,013  $8,092,607  $7,880,628  $6,033,257  $5,807,127 
                    


CAPITAL BANK FINANCIAL CORP.
QUARTERLY AVERAGE BALANCES AND YIELDS
(Dollars in thousands)
(Unaudited)
 
  Three Months Ended
June 30, 2017
 Three Months Ended
March 31, 2017
  Average
Balances
 Interest Yield /
Rate
 Average
Balances
 Interest Yield /
Rate
Interest earning assets            
Loans (1) $7,515,169  $86,405  4.61% $7,409,284  $ 83,753  4.58%
Investment securities (1) 1,596,382  11,005  2.77 % 1,501,816  9,312  2.51%
Interest bearing deposits in other banks 42,140  93  0.89% 58,269  97  0.68%
Other earning assets (2) 32,074  388  4.85% 29,053  357  4.98%
Total interest earning assets (1) 9,185,765  $97,891  4.27% 8,998,422  $93,519  4.21%
Non-interest earning assets 884,900       909,138      
Total assets $10,070,665       $9,907,560      
Interest bearing liabilities              
Time deposits $2,152,086  $4,789  0.89% $2,141,806   $4,539  0.86%
Money market 1,787,200  1,963  0.44% 1,777,343  1,756  0.40%
Interest bearing demand 1,914,622  1,255  0.26% 1,922,687  1,138  0.24 %
Savings 488,123  220  0.18% 494,538  220  0.18%
Total interest bearing deposits 6,342,031  8,227  0.52% 6,336,374  7,653  0.49%
Short-term borrowings and FHLB advances 568,575  1,433  1.01% 493,643   887  0.73%
Long-term borrowings 117,576  2,384  8.13 % 116,744  2,281  7.92%
Total interest bearing liabilities 7,028,182  12,044  0.69% 6,946,761  10,821  0.63%
Non-interest bearing demand 1,655,233       1,595,695      
Other liabilities 64,318        65,753      
Shareholders' equity 1,322,932       1,299,351      
Total liabilities and shareholders' equity $10,070,665       $9,907,560      
Net interest income and spread (1)   $85,847  3.59%   $82,698  3.58%
Net interest margin (1)     3.75%     3.73%
             
Net interest income (FTE) (1)   $85,847      $82,698   
Tax equivalent adjustment   (605)     (582)  
Net interest income   $85,242      $82,116   
                  

(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
June 30, 2017
 Three Months Ended
June 30, 2016
  Average
Balances
 Interest Yield /
Rate
 Average
Balances
 Interest Yield /
Rate
Interest earning assets            
Loans (1) $7,515,169  $86,405  4.61% $5,653,647  $62,999  4.48 %
Investment securities (1) 1,596,382  11,005  2.77% 1,131,791   6,612  2.35%
Interest bearing deposits in other banks 42,140  93  0.89% 64,802  74  0.46%
Other earning assets (2) 32,074  388  4.85% 26,696  330  4.97%
Total interest earning assets (1) 9,185,765  $97,891   4.27% 6,876,936  $70,015  4.09%
Non-interest earning assets 884,900       607,429      
Total assets $10,070,665       $7,484,365      
Interest bearing liabilities              
Time deposits $2,152,086  $4,789  0.89% $1,620,023  $4,018  1.00%
Money market 1,787,200  1,963  0.44% 1,184,532  1,028  0.35%
Interest bearing demand 1,914,622  1,255  0.26% 1,451,666  749  0.21%
Savings 488,123  220  0.18% 411,496  208  0.20%
Total interest bearing deposits 6,342,031  8,227  0.52% 4,667,717  6,003  0.52%
Short-term borrowings and FHLB advances 568,575  1,433  1.01% 485,850  515  0.43%
Long-term borrowings 117,576  2,384  8.13% 87,496  1,547  7.11%
Total interest bearing liabilities 7,028,182  12,044  0.69% 5,241,063  8,065  0.62%
Non-interest bearing demand 1,655,233       1,187,056      
Other liabilities 64,318       42,319      
Shareholders' equity 1,322,932       1,013,927      
Total liabilities and shareholders' equity $10,070,665       $7,484,365      
Net interest income and spread (1)   $85,847  3.59%   $61,950  3.48%
Net interest margin (1)     3.75%      3.62%
             
Net interest income (FTE) (1)   $85,847      $61,950   
Tax equivalent adjustment   (605)     (435)  
Net interest income   $85,242      $61,515   

(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)
 
  Six Months Ended
June 30, 2017
 Six Months Ended
June 30, 2016
  Average
Balances
 Interest Yield /
Rate
 Average
Balances
 Interest Yield /
Rate
Interest earning assets            
Loans (1) $7,462,519  $170,157  4.60% $5,632,568  $126,007  4.50%
Investment securities (1) 1,549,360  20,318  2.64% 1,127,157  13,096  2.34%
Interest bearing deposits in other banks 50,160  190  0.76% 68,995  158  0.46%
Other earning assets (2) 30,572  745  4.91% 25,916  644  5.00%
Total interest earning assets (1) 9,092,611  $191,410  4.25%  6,854,636  $139,905  4.10%
Non-interest earning assets 896,951       612,758      
Total assets  $9,989,562       $7,467,394      
Interest bearing liabilities              
Time deposits $2,146,974  $9,327  0.88% $1,654,838  $8,138  0.99%
Money market  1,782,299  3,720  0.42% 1,215,933  2,094  0.35%
Interest bearing demand 1,918,632  2,393  0.25% 1,411,311  1,397  0.20%
Savings 491,313  440  0.18% 415,542  435  0.21%
Total interest bearing deposits 6,339,218  15,880  0.51% 4,697,624  12,064  0.52%
Short-term borrowings and FHLB advances 531,316  2,320  0.88% 473,371  1,046  0.44%
Long-term borrowings 117,162  4,664  8.03% 86,741  3,058  7.09%
Total interest bearing liabilities 6,987,696  22,864  0.66% 5,257,736  16,168  0.62%
Non-interest bearing demand 1,625,628       1,162,919      
Other liabilities 65,032       42,369      
Shareholders' equity 1,311,206       1,004,370      
Total liabilities and shareholders' equity $9,989,562       $7,467,394      
Net interest income and spread (1)   $ 168,546  3.59%   $123,737  3.49%
Net interest margin (1)     3.74%      3.63%
             
Net interest income (FTE) (1)   $168,546      $123,737   
Tax equivalent adjustment   (1,188)      (855)  
Net interest income   $167,358      $122,882   
                 

(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
  Jun 30, 2017 Mar 31, 2017 Dec 31, 2016
Net Income (1) $23,806  $23,806  $20,883  $20,883  $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) (70) (43) (67) (41) (1,894) (1,170)
Non-interest expense             
Conversion and merger related expense tax deductible, net (2) (237) (146) 3,037  1,877  18,245  11,270 
Conversion and merger related expense non tax deductible 1,218   1,218      280  280 
Restructuring expense (2) 2,978  1,840  1,912  1,181  4  3 
Legal Settlement (2) 45  28      1,361  841 
Tax Adjustment         (1,350) (1,350)
Severance expense (2)         7  4 
Tax effect of adjustments (2) (1,037) N/A  (1,865) N/A  (6,775) N/A 
Core Net Income (1) $26,703  $26,703  $23,900  $23,900   $22,230  $22,230 
             
Diluted shares (1) 53,226    53,127    50,722   
Core Net Income per share (1) $0.50    $0.45    $0.44   
Average Assets 10,070,665    9,907,560    9,329,334   
             
ROA (1)(3) 0.95%   0.84%   0.53%  
Core ROA (1) (4) 1.06%   0.96%   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 RATIOThree Months Ended
 Jun 30,
 2017
 Mar 31,
 2017
 Dec 31,
 2016
 Sep 30,
 2016
 Jun 30,
 2016
Net interest income$85,242  $82,116  $77,819  $62,627  $61,515 
          
Reported non-interest income16,000  15,852  17,016  12,370  11,922 
Less: Securities gains, net70  67  1,894  71  117 
Core non-interest income$15,930  $ 15,785  $15,122  $12,299  $ 11,805 
          
Reported non-interest expense$ 60,985  $62,703  $73,994  $47,530  $44,536 
Less: Conversion and merger related expense tax deductible, net(237) 3,037  18,245  331  881 
Conversion and merger related expense non tax deductible1,218    280   61  355 
Restructuring expense, net2,978  1,912  4   (113) 5 
Legal settlement45    1,361  1,500   
Severance expense    7     
Core non-interest expense$56,981  $57,754  $54,097  $45,751  $43,295 
          
Efficiency ratio (1)60.24% 64.00% 78.02% 63.38% 60.65%
Core efficiency ratio (2)56.32% 58.99% 58.21% 61.06% 59.05%

(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
  Jun 30,
 2017
 Mar 31,
 2017
 Dec 31,
 2016
 Sep 30,
 2016
 Jun 30,
 2016
Total shareholders' equity $1,332,084  $1,307,931  $1,292,047  $1,029,841  $1,016,498 
Less: goodwill (234,158) (234,158) (235,500) (134,522) (134,522)
Less: intangibles (29,750) (31,553) (33,370) (12,288) (13,231)
Tax effect on intangible assets (1) 11,159  12,003  12,694  4,669  5,028 
Tangible book value (2) $1,079,335  $1,054,223  $ 1,035,871  $887,700  $873,773 
Common shares outstanding 51,991  51,966  51,765  43,235   43,219 
Tangible book value per share $20.76  $20.29  $20.01  $20.53  $20.22 

(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:

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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