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8-K - FORM 8-K - Capital Bank Financial Corp.f8k_072414.htm
EX-99.2 - EXHIBIT 99.2 - Capital Bank Financial Corp.exh_992.htm
EXHIBIT 99.1
 
 
CONTACT:
Kenneth A. Posner
Chief of Strategic Planning and Investor Relations
Phone: (212) 399-4020
E-mail: Kposner@cbfcorp.com

 
CAPITAL BANK FINANCIAL CORP. REPORTS SECOND QUARTER NET INCOME
OF $12.4 MILLION OR $0.25 PER DILUTED SHARE, UP 47% YEAR OVER YEAR
 
 
·
Loan portfolio grew sequentially at an annualized rate of 16%;
 
·
Record new loans of $442 million during the quarter; up 75% and 46% sequentially and year over year, respectively;
 
·
Legacy credit expense declined 32% and 67% on a sequential and year-over-year basis;
 
·
Efficiency and core efficiency ratio declined to 70.5% and 69.3%, respectively;
 
·
ROA and core ROA increased to 76 and 80 basis points, respectively; and
 
·
Tangible book value per share increased to $18.85.
 
Coral Gables, Fla. (July 24, 2014) - Capital Bank Financial Corp. (Nasdaq: CBF) (the “Company”) today reported second quarter 2014 net income of $12.4 million, or $0.25 per diluted share, and core net income of $13.1 million, or $0.26 per diluted share.  Net income rose 32% year over year and net income per diluted share rose 47%.  Core net income rose 22% year over year and core net income per diluted share rose 30%.  This resulted in a ROA of 76 basis points and a core ROA of 80 basis points, both of which reflect continued improvements on a sequential and year-over-year basis.

Core adjustments for the second quarter of 2014 included $0.3 million of non-cash equity compensation associated with original founder awards and $0.3 million of contingent value right (“CVR”) expense. The reconciliation of non-GAAP measures (including core net income, core efficiency ratio, core ROA, tangible book value and tangible book value per share), which the Company believes facilitate the assessment of its banking operations and peer comparability, is included in tabular form at the end of this release.

Gene Taylor, Chairman and Chief Executive Officer of Capital Bank Financial Corp., commented, "Record new loans, combined with reduced run-off from the legacy book, resulted in positive 16% net growth this quarter.  I am very pleased with the quality of the new loan book and with the momentum in checking account sales in our retail branches."
 
Chris Marshall, Chief Financial Officer of Capital Bank Financial Corp., added, "This quarter's improvement in growth and profitability reflects consistent execution by talented teammates throughout the bank.  At the same time, we are maintaining our disciplined approach to risk management, which is evident in the bank's diversified portfolio, strong credit quality, and conservative interest rate risk profile."

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CBF Reports Second Quarter Results
Page 2
July 24, 2014
 
Loan Portfolio and Composition

During the second quarter, the loan portfolio increased by $175.7 million to $4.7 billion, an annualized growth rate of 16%.  New loans of $441.7 million were offset by resolutions totaling $69.8 million, including transfers to OREO of $8.2 million, and principal repayments of $196.2 million.

The relative composition of the Company’s loan portfolio at the end of the second and first quarters of 2014 and fourth quarter of 2013 was as follows:

   
June 30,
2014
   
March 31,
2014
   
December 31,
2013
 
Commercial real estate
    25 %     26 %     27 %
C&I
    42 %     41 %     41 %
Consumer
    31 %     30 %     30 %
Other
    2 %     3 %     2 %
Total
    100 %     100 %     100 %

Deposits, Composition and Yields

During the second quarter, total deposits remained consistent at $5.2 billion. The cost of deposits remained flat at 0.33% from the first quarter of 2014 and declined ten basis points from the second quarter of 2013. Continued planned shrinkage in high-cost legacy time deposits drove the improvement year over year.  The cost of core deposits remained flat at 0.14% sequentially and year over year. Core deposits include all checking, savings and money market accounts and now represent 73.7% of total deposits.

Net Interest Income and Net Interest Margin

Net interest income declined $1.6 million to $60.8 million from $62.5 million for the first quarter of 2014 and $4.5 million from $65.4 million for the second quarter of 2013. The net interest margin for the second quarter of 2014 was 4.26%, a decline of fifteen basis points sequentially and six basis points year over year.  The decline over the first quarter reflects the lower rate of new loans, as compared to the rate on our legacy portfolio.  The rate on new loans was 3.50% in the quarter, down from 4.00% in the prior quarter.  This decline was driven by a significant shift in customer preference for variable rate financing.  The percentage of new loans with variable rates increased to 65% in the quarter, as compared to 54% in the prior quarter.

Non-Interest Income

Non-interest income increased $0.5 million to $11.9 million for the second quarter of 2014 from $11.4 million for the first quarter of 2014 and declined $1.6 million from $13.5 million for the second quarter of 2013.  The decline year over year was mainly driven by an increase of $1.0 million in FDIC indemnification asset amortization as a result of lower credit loss expectations in our legacy loan portfolios.

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CBF Reports Second Quarter Results
Page 3
July 24, 2014
 
Provision for Loan Losses and Credit Quality

The provision for loan losses of $1.4 million recorded for the second quarter of 2014 includes a $2.3 million provision for new and acquired non-impaired loans and $0.9 million in reversals of impairments due to improvements in cash flow estimates for certain acquired impaired loan pools.  Net charge-offs for the second quarter of 2014 were $1.7 million.

The provision for new and acquired non-impaired loans served to increase the related allowance to $20.8 million, or 0.78% of the $2.7 billion in new and acquired non-impaired loans outstanding.

During the second quarter, non-performing loans declined by $24.9 million, or 11% sequentially to $212.1 million.  Acquired impaired loans greater than 90 days past due and still accruing declined by $26.2 million sequentially, or 12% to $200.8 million. Nonaccrual loans increased to 0.37% of total non-purchased credit impaired loans from 0.36%, at the end of the first quarter.

Non-Interest Expense

Non-interest expense declined to $51.3 million for the second quarter of 2014 from $55.2 million for the first quarter of 2014 and declined from $59.4 million for the second quarter of 2013.  The sequential and year over year decline was largely driven by lower legacy credit expenses reflecting the continued resolution of special assets.

OREO valuation and foreclosed asset related expenses, net of gains on sale, declined $3.5 million and $5.4 million sequentially and year over year, respectively.  OREO sales during the quarter resulted in a $29.2 million reduction of the OREO balance, approximately 20%, to $96.3 million at June 30, 2014.

Income Tax Expense

Income tax expense was $7.6 million for the second quarter of 2014, an effective income tax rate of 38.0%.  Income tax expense was $7.2 million for the first quarter of 2014, an effective income tax rate of 38.7%. The higher first quarter effective rate was due to the change in value of the CVR in connection with the Company’s legacy Green Bankshares portfolio.  The change in estimated value of the CVR is not deductible for income tax purposes. Income tax expense was $5.6 million for the second quarter of 2013, an effective income tax rate of 37.2%.  The lower prior year second quarter effective rate was due to higher tax-exempt interest income compared to the current quarter.

Financial Position

Total assets increased by $75.0 million to $6.6 billion as of June 30, 2014 from $6.5 billion as of March 31, 2014.  During the quarter, the Company’s loan portfolio increased by $175.7 million to $4.5 billion, an annualized growth rate of 16%.  Cash and investment securities declined by $70.9 million to fund loan growth and the repurchase of 1.8 million shares of common stock at an average price of $24.04 per share.  In addition, the Company’s Board of Directors has authorized a $50.0 million increase in our common stock repurchase authorization.  While deposits remained flat, FHLB borrowings increased by $140.0 million.  Tangible book value per share was $18.85 as of June 30, 2014, an increase of $0.16 and $0.84 over March 31, 2014 and June 30, 2013, respectively.

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CBF Reports Second Quarter Results
Page 4
July 24, 2014
 
The Company’s national bank subsidiary, Capital Bank N.A., has preliminary Tier 1, Tier 1 Risk-Based and Total Risk-Based capital ratios of 14.1%, 18.0% and 19.2%, respectively, as of June 30, 2014, under currently applicable regulations.

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) 325-2464, and the confirmation pass code is 1013515. Please dial in 10 minutes prior to the beginning of the call. A telephonic replay of the conference call will be available through August 2, 2014, by dialing (719) 457-0820 and entering pass code 1013515. 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.

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CBF Reports Second Quarter Results
Page 5
July 24, 2014
 
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 each of core net income, core efficiency ratio, and core ROA is useful for both investors and management to understand the effects of certain non-interest items and provides an alternative view of the Company’s performance over time and in comparison to the Company’s competitors.  Neither core net income, core efficiency ratio, nor core ROA should 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 analyses 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 national 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 N.A., a national banking association with $6.6 billion in total assets as of June 30, 2014, and 162 full-service banking offices throughout Florida, North and South Carolina, Tennessee and Virginia. To learn more about Capital Bank, N.A., please visit www.capitalbank-us.com.
 
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CBF Reports Second Quarter Results
Page 6
July 24, 2014
 
CAPITAL BANK FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)

   
Three Months Ended
 
   
June 30,
2014
   
March 31,
2014
   
Dec. 31,
2013
   
Sept. 30,
2013
   
June 30,
2013
 
Interest and dividend income
  $ 66,846     $ 68,543     $ 71,981     $ 72,480     $ 73,189  
Interest expense
    6,015       6,090       6,258       7,094       7,837  
Net Interest Income
    60,831       62,453       65,723       65,386       65,352  
Provision (reversal) for loan losses
    1,404       (24 )     3,265       984       4,467  
Non-Interest Income
                                       
Service charges on deposit accounts
    5,672       5,436       5,858       6,034       6,335  
Debit card income
    3,103       2,844       2,864       2,854       2,979  
Fees on mortgage loans originated and sold
    1,123       759       1,082       1,477       1,601  
Investment advisory and trust fees
    910       1,261       1,075       740       357  
FDIC indemnification asset expense
    (2,064 )     (2,165 )     (1,877 )     (502 )     (1,108 )
Investment securities (losses) gains, net
    (28 )     174       164       (247 )     205  
Other-than-temporary impairment losses on investments:
                                       
Gross impairment loss
                      (54 )      
Less: Impairments recognized in other comprehensive income
                             
Net impairment losses recognized in earnings
                      (54 )      
Other income
    3,171       3,060       4,105       4,978       3,137  
Total non-interest income
    11,887       11,369       13,271       15,280       13,506  
Non-Interest Expense
                                       
Salaries and employee benefits
    23,449       23,498       23,969       22,668       22,638  
Stock-based compensation expense
    1,020       728       1,127       1,371       1,364  
Net occupancy and equipment expense
    8,723       8,599       8,457       8,866       8,686  
OREO valuation expense
    3,022       3,573       3,190       6,045       6,209  
(Gain) loss on sales of OREO
    (3,192 )     (721 )     (278 )     188       (2,205 )
Foreclosed asset related expense
    991       1,459       1,046       1,265       2,225  
Loan workout expense
    1,117       1,177       1,682       2,063       2,236  
Conversion and merger related expense
                      (19 )     140  
Professional fees
    2,038       2,004       2,409       2,426       2,344  
Contingent value right expense (income)
    327       767       298       (776 )     428  
Gain on extinguishment of debt
                      (430 )      
Software expense
    1,940       1,868       1,990       1,874       1,817  
Other expense
    11,838       12,272       12,361       13,722       13,500  
Total non-interest expense
    51,273       55,224       56,251       59,263       59,382  
Income before income taxes
    20,041       18,622       19,478       20,419       15,009  
Income tax expense
    7,616       7,208       7,272       8,975       5,580  
Net income
  $ 12,425     $ 11,414     $ 12,206     $ 11,444     $ 9,429  
Basic earnings per share
  $ 0.25     $ 0.23     $ 0.24     $ 0.22     $ 0.18  
Diluted earnings per share
  $ 0.25     $ 0.22     $ 0.23     $ 0.22     $ 0.17  
 
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CBF Reports Second Quarter Results
Page 7
July 24, 2014
 
CAPITAL BANK FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands)
(Unaudited)

   
June 30,
2014
   
March 31,
2014
   
Dec. 31,
2013
 
Assets
                 
Cash and due from banks
  $ 109,963     $ 122,145     $ 118,937  
Interest-bearing deposits with banks
    31,070       52,735       45,504  
Total cash and cash equivalents
    141,033       174,880       164,441  
Trading securities
    6,515       6,562       6,348  
Investment securities available-for-sale at fair value (amortized cost $591,668, $658,971 and $688,717, respectively)
    594,745       657,788       685,441  
Investment securities held-to-maturity at amortized cost (fair value $480,971, $449,739 and $459,693, respectively)
    475,167       449,131       465,098  
Loans held for sale
    9,926       4,833       8,012  
Loans, net of deferred loan costs and fees
    4,712,249       4,541,652       4,544,017  
Less: Allowance for loan losses
    55,307       55,606       56,851  
    Loans, net
    4,656,942       4,486,046       4,487,166  
Other real estate owned
    96,283       120,270       129,396  
FDIC indemnification asset
    25,529       28,744       33,610  
Receivable from FDIC
    4,578       5,832       7,624  
Premises and equipment, net
    177,568       178,629       179,855  
Goodwill
    134,522       134,522       131,987  
Intangible assets, net
    20,876       22,111       23,365  
Deferred income tax asset, net
    148,432       158,074       166,762  
Other assets
    131,890       121,202       128,456  
Total Assets
  $ 6,624,006     $ 6,548,624     $ 6,617,561  
Liabilities and Shareholders’ Equity
                       
Liabilities
                       
Deposits:
                       
Noninterest-bearing demand
  $ 1,000,049     $ 1,000,914     $ 923,993  
Negotiable order of withdrawal accounts
    1,319,667       1,326,555       1,321,903  
Money market
    953,446       945,354       961,526  
Savings
    528,567       536,948       530,144  
Time deposits
    1,359,727       1,382,422       1,447,497  
Total deposits
    5,161,456       5,192,193       5,185,063  
Federal Home Loan Bank advances
    161,185       21,231       96,278  
Short-term borrowings
    32,814       30,453       24,850  
Long-term borrowings
    139,116       138,837       138,561  
Other liabilities
    55,877       62,154       60,021  
Total liabilities
    5,550,448       5,444,868       5,504,773  
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,  36,654 issued and 30,925 outstanding, 36,405 issued and 32,475 outstanding and 36,212 issued and 33,051 outstanding, respectively.
    367       364       362  
Common stock-Class B $0.01 par value: 200,000 shares authorized, 19,025 issued and 18,225 outstanding, 19,454 issued and 18,654 outstanding and 19,647 issued and 19,047 outstanding, respectively.
    190       194       196  
Additional paid in capital
    1,080,735       1,082,963       1,082,235  
Retained earnings
    131,324       118,899       107,485  
Accumulated other comprehensive loss
    (3,212 )     (6,042 )     (7,528 )
Treasury stock, at cost, 6,528, 4,730 and 3,761 shares, respectively
    (135,846 )     (92,622 )     (69,962 )
Total shareholders’ equity
    1,073,558       1,103,756       1,112,788  
Total Liabilities and Shareholders’ Equity
  $ 6,624,006     $ 6,548,624     $ 6,617,561  
 
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CBF Reports Second Quarter Results
Page 8
July 24, 2014
 
CAPITAL BANK FINANCIAL CORP.
KEY METRICS
(Dollars in thousands)
(Unaudited)

   
Three Months Ended
 
   
June 30,
2014
   
March 31,
2014
   
Dec. 31,
2013
   
Sept. 30,
2013
   
June 30,
2013
 
Performance Ratios
                             
Interest rate spread
    4.12 %     4.28 %     4.39 %     4.32 %     4.19 %
Net interest margin
    4.26 %     4.41 %     4.52 %     4.45 %     4.32 %
Return on average assets
    0.76 %     0.70 %     0.74 %     0.69 %     0.54 %
Return on average shareholders' equity
    4.58 %     4.09 %     4.39 %     4.12 %     3.30 %
Efficiency ratio
    70.51 %     74.81 %     71.21 %     73.47 %     75.30 %
Average interest-earning assets to average interest-bearing liabilities
    131.23 %     129.81 %     129.70 %     127.15 %     125.45 %
Average loans receivable to average deposits
    89.10 %     88.18 %     85.88 %     84.58 %     82.47 %
Yield on interest-earning assets
    4.67 %     4.83 %     4.95 %     4.93 %     4.83 %
Cost on interest-bearing liabilities
    0.55 %     0.56 %     0.56 %     0.61 %     0.65 %
Asset and Credit Quality Ratios-Total Loans
                                       
Non-accrual loans
  $ 11,368     $ 10,107     $ 11,810     $ 13,824     $ 11,054  
Acquired impaired loans > 90 days past due and still accruing
  $ 200,755     $ 226,941     $ 253,817     $ 261,470     $ 300,452  
Nonperforming loans to loans receivable
    4.49 %     5.21 %     5.84 %     6.15 %     6.77 %
Nonperforming assets to total assets
    4.66 %     5.47 %     5.98 %     6.14 %     6.68 %
Covered loans to total gross loans
    5.09 %     5.71 %     6.27 %     7.03 %     7.47 %
ALLL to nonperforming assets
    17.93 %     15.52 %     14.38 %     13.91 %     12.50 %
ALLL to total gross loans
    1.17 %     1.22 %     1.25 %     1.26 %     1.24 %
Annualized net charge-offs/average loans
    0.15 %     0.11 %     0.08 %     0.04 %     0.42 %
Asset and Credit Quality Ratios-New Loans
                                       
Nonperforming new loans to total new loans receivable
    0.21 %     0.24 %     0.34 %     0.45 %     0.34 %
New loans ALLL to total gross new loans
    0.74 %     0.80 %     0.80 %     0.82 %     0.83 %
Asset and Credit Quality Ratios-Acquired Loans
                                       
Nonperforming acquired loans to total acquired loans receivable
    10.25 %     10.67 %     11.16 %     10.61 %     11.08 %
Covered acquired loans to total gross acquired loans
    11.95 %     11.98 %     12.34 %     12.53 %     12.47 %
Acquired loans ALLL to total gross acquired loans
    1.76 %     1.68 %     1.69 %     1.61 %     1.51 %
Capital Ratios (Company)
                                       
Total average shareholders' equity to total average assets
    16.64 %     17.01 %     16.85 %     16.64 %     16.40 %
Tangible common equity ratio (1)
    14.19 %     14.82 %     14.82 %     14.76 %     14.21 %
Tier 1 leverage ratio (2)
    14.61 %     14.94 %     14.95 %     14.47 %     13.84 %
Tier 1 risk-based capital ratio (2)
    18.57 %     19.68 %     19.74 %     19.72 %     19.22 %
Total risk-based capital ratio (2)
    19.77 %     20.92 %     21.00 %     21.00 %     20.48 %
Capital Ratios (Bank)
                                       
Tangible common equity ratio (1)
    15.11 %     14.99 %     14.62 %     14.43 %     15.28 %
Tier 1 leverage ratio (2)
    14.10 %     13.70 %     13.40 %     12.80 %     13.50 %
Tier 1 risk-based capital ratio (2)
    18.00 %     18.10 %     17.70 %     17.40 %     18.70 %
Total risk-based capital ratio (2)
    19.20 %     19.30 %     18.90 %     18.70 %     19.90 %
(1) See "Reconciliation of Non-GAAP Measures"
(2) June 30, 2014 regulatory capital ratios are preliminary
 
- MORE -
 
 

 
CBF Reports Second Quarter Results
Page 9
July 24, 2014
 
CAPITAL BANK FINANCIAL CORP.
LOANS AND DEPOSITS
(Dollars in thousands)
(Unaudited)

   
June 30,
2014
   
March 31,
2014
   
Dec. 31,
2013
 
Loans
                 
Non-owner occupied commercial real estate
  $ 793,733     $ 790,698     $ 775,733  
Other commercial construction and land
    243,671       256,190       300,494  
Multifamily commercial real estate
    62,793       68,701       67,688  
1-4 family residential construction and land
    80,160       79,508       71,351  
Total commercial real estate
    1,180,357       1,195,097       1,215,266  
Owner occupied commercial real estate
    1,040,533       1,061,571       1,058,148  
Commercial and industrial
    932,800       806,359       803,736  
Leases
    2,346       2,513       2,676  
Total commercial
    1,975,679       1,870,443       1,864,560  
1-4 family residential
    863,897       801,573       804,322  
Home equity
    380,767       382,946       386,366  
Other consumer
    213,639       183,611       170,526  
Total consumer
    1,458,303       1,368,130       1,361,214  
Other
    107,836       112,815       110,989  
Total loans
  $ 4,722,175     $ 4,546,485     $ 4,552,029  
Deposits
                       
Non-interest bearing demand
  $ 1,000,049     $ 1,000,914     $ 923,993  
Negotiable order of withdraw accounts
    1,319,667       1,326,555       1,321,903  
Money market
    953,446       945,354       961,526  
Savings
    528,567       536,948       530,144  
Total core deposits
    3,801,729       3,809,771       3,737,566  
Time deposits
    1,359,727       1,382,422       1,447,497  
Total deposits
  $ 5,161,456     $ 5,192,193     $ 5,185,063  
 
- MORE -
 
 

 
CBF Reports Second Quarter Results
Page 10
July 24, 2014
 
CAPITAL BANK FINANCIAL CORP.
LEGACY CREDIT EXPENSES
(Dollars in thousands)
(Unaudited)

   
Three Months Ended
 
   
June 30,
2014
   
March 31,
2014
   
Dec. 31,
2013
   
Sept. 30,
2013
   
June 30,
2013
 
Provision (reversal) on legacy loans
  $ (940 )   $ (2,488 )   $ (1,220 )   $ (72 )   $ 2,500  
FDIC indemnification asset expense
    2,064       2,165       1,877       502       1,108  
OREO valuation expense
    3,022       3,573       3,190       6,045       6,209  
(Gains) loss on sale of OREO
    (3,192 )     (721 )     (278 )     188       (2,205 )
Foreclosed asset related expense
    991       1,459       1,046       1,265       2,225  
Loan workout expense
    1,117       1,177       1,682       2,063       2,236  
Salaries and employee benefits
    1,300       1,300       1,300       1,300       1,300  
Total legacy credit expenses
  $ 4,362     $ 6,465     $ 7,597     $ 11,291     $ 13,373  
 
- MORE -
 
 

 
CBF Reports Second Quarter Results
Page 11
July 24, 2014
 
CAPITAL BANK FINANCIAL CORP.
QUARTERLY AVERAGE BALANCES AND YIELDS
(Dollars in thousands)
(Unaudited)

   
Three Months Ended
June 30, 2014
   
Three Months Ended
March 31, 2014
 
   
Average
Balances
   
 
Interest*
   
 
Yield*
   
Average
Balances
   
 
Interest*
   
 
Yield*
 
Interest earning assets
                                   
Loans
  $ 4,593,337     $ 61,826       5.40 %   $ 4,542,255     $ 63,404       5.66 %
Investments
    1,060,611       4,648       1.76 %     1,141,231       4,801       1.71 %
Interest bearing deposits
    62,172       37       0.24 %     47,526       25       0.21 %
Other**
    40,346       578       5.75 %     43,123       581       5.46 %
Total interest earning assets
    5,756,466     $ 67,089       4.67 %     5,774,135     $ 68,811       4.83 %
Non-interest earning assets
    763,185                       779,933                  
Total Assets
  $ 6,519,651                     $ 6,554,068                  
Interest bearing liabilities
                                               
Time
  $ 1,358,478     $ 2,878       0.85 %   $ 1,413,731     $ 2,970       0.85 %
Money market
    931,867       523       0.23 %     948,738       526       0.22 %
NOW
    1,330,856       556       0.17 %     1,313,700       538       0.17 %
Savings
    531,414       286       0.22 %     532,823       282       0.21 %
Total interest bearing deposits
    4,152,615       4,243       0.41 %     4,208,992       4,316       0.42 %
Short-term borrowings and FHLB Advances
    98,002       50       0.20 %     103,851       70       0.27 %
Long-term borrowings
    135,831       1,719       5.08 %     135,317       1,704       5.11 %
Total interest bearing liabilities
    4,386,448     $ 6,012       0.55 %     4,448,160     $ 6,090       0.56 %
Non-interest bearing deposits
    1,002,757                       942,006                  
Other Liabilities
    45,281                       48,964                  
Shareholders' equity
    1,085,165                       1,114,938                  
Total Liabilities and Shareholders' Equity
  $ 6,519,651                     $ 6,554,068                  
Net interest income and spread
          $ 61,077       4.12 %           $ 62,721       4.28 %
Net interest margin
                    4.26 %                     4.41 %
* Presented on a fully tax equivalent basis
** Includes Federal Reserve Bank, Federal Home Loan Bank and Bankers Bank stocks
 
- MORE -
 
 

 
CBF Reports Second Quarter Results
Page 12
July 24, 2014
 
CAPITAL BANK FINANCIAL CORP.
QUARTERLY AVERAGE BALANCES AND YIELDS
(Dollars in thousands)
(Unaudited)

   
Three Months Ended
June 30, 2014
   
Three Months Ended
June 30, 2013
 
   
Average
Balances
   
 
Interest*
   
 
Yield*
   
Average
Balances
   
 
Interest*
   
 
Yield*
 
Interest earning assets
                                   
Loans
  $ 4,593,337     $ 61,826       5.40 %   $ 4,604,224     $ 68,363       5.96 %
Investments
    1,060,611       4,648       1.76 %     1,292,249       4,525       1.40 %
Interest bearing deposits
    62,172       37       0.24 %     164,784       102       0.25 %
Other**
    40,346       578       5.75 %     36,278       462       5.11 %
Total interest earning assets
    5,756,466     $ 67,089       4.67 %     6,097,535     $ 73,452       4.83 %
Non-interest earning assets
    763,185                       865,118                  
Total Assets
  $ 6,519,651                     $ 6,962,653                  
Interest bearing liabilities
                                               
Time
  $ 1,358,478     $ 2,878       0.85 %   $ 1,853,592     $ 4,598       0.99 %
Money market
    931,867       523       0.23 %     1,055,635       575       0.22 %
NOW
    1,330,856       556       0.17 %     1,263,133       499       0.16 %
Savings
    531,414       286       0.22 %     506,997       255       0.20 %
Total interest bearing deposits
    4,152,615       4,243       0.41 %     4,679,357       5,927       0.51 %
Short-term borrowings and FHLB Advances
    98,002       50       0.20 %     38,794       15       0.16 %
Long-term borrowings
    135,831       1,719       5.08 %     142,541       1,894       5.33 %
Total interest bearing liabilities
    4,386,448     $ 6,012       0.55 %     4,860,692     $ 7,836       0.65 %
Non-interest bearing deposits
    1,002,757                       903,637                  
Other Liabilities
    45,281                       56,324                  
Shareholders' equity
    1,085,165                       1,142,000                  
Total Liabilities and Shareholders' Equity
  $ 6,519,651                     $ 6,962,653                  
Net interest income and spread
          $ 61,077       4.12 %           $ 65,616       4.19 %
Net interest margin
                    4.26 %                     4.32 %
 
* Presented on a fully tax equivalent basis
** Includes Federal Reserve Bank, Federal Home Loan Bank and Bankers Bank stocks
 
- MORE -
 
 

 
CBF Reports Second Quarter Results
Page 13
July 24, 2014
 
CAPITAL BANK FINANCIAL CORP.
YEAR TO DATE AVERAGE BALANCES AND YIELDS
(Dollars in thousands)
(Unaudited)

   
Six Months Ended
June 30, 2014
   
Six Months Ended
June 30, 2013
 
   
Average
Balances
   
 
Interest*
   
 
Yield*
   
Average
Balances
   
 
Interest*
   
 
Yield*
 
Interest earning assets
                                   
Loans
  $ 4,567,937     $ 125,230       5.53 %   $ 4,638,263     $ 140,319       6.10 %
Investments
    1,100,698       9,449       1.73 %     1,150,237       8,074       1.42 %
Interest bearing deposits
    54,890       63       0.23 %     374,399       473       0.25 %
Other**
    41,727       1,159       5.60 %     37,565       952       5.11 %
Total earning assets
    5,765,252     $ 135,901       4.75 %     6,200,464     $ 149,818       4.87 %
Non-earning assets
    775,274                       880,302                  
Total Assets
  $ 6,540,526                     $ 7,080,766                  
Interest bearing liabilities
                                               
Time
  $ 1,385,952     $ 5,850       0.85 %   $ 1,919,601     $ 9,633       1.01 %
Money market
    940,256       1,049       0.22 %     1,084,577       1,204       0.22 %
NOW
    1,322,325       1,094       0.17 %     1,269,488       1,054       0.17 %
Savings
    532,115       568       0.22 %     505,365       513       0.20 %
Total interest bearing deposits
    4,180,648       8,561       0.41 %     4,779,031       12,404       0.52 %
Short-term borrowings and FHLB Advances
    100,910       121       0.24 %     41,009       29       0.14 %
Long-term borrowings
    135,575       3,423       5.09 %     156,648       4,393       5.66 %
Total interest bearing liabilities
    4,417,133     $ 12,105       0.55 %     4,976,688     $ 16,826       0.68 %
Non-interest bearing deposits
    972,549                       896,277                  
Other Liabilities
    50,872                       54,320                  
Shareholders' equity
    1,099,972                       1,153,481                  
Total Liabilities and shareholders' equity
  $ 6,540,526                     $ 7,080,766                  
Net interest income and spread
          $ 123,796       4.20 %           $ 132,992       4.19 %
Net interest margin
                    4.33 %                     4.33 %
* Presented on a fully tax equivalent basis
** Includes Federal Reserve Bank, Federal Home Loan Bank and Bankers Bank stocks
 
- MORE -
 
 

 
CBF Reports Second Quarter Results
Page 14
July 24, 2014
 
CAPITAL BANK FINANCIAL CORP.
RECONCILIATION OF NON-GAAP MEASURES
(Dollars in thousands)
(Unaudited)

CORE NET INCOME
 
Three Months Ended
 
   
June 30, 2014
   
March 31, 2014
   
December 31, 2013
 
                                     
Net Income
  $ 12,425     $ 12,425     $ 11,414     $ 11,414     $ 12,206     $ 12,206  
   
Pre-Tax
   
After-Tax
   
Pre-Tax
   
After-Tax
   
Pre-Tax
   
After-Tax
 
Adjustments
                                               
Non-interest income
                                               
Security gains*
    28       17       (173 )     (106 )     (164 )     (100 )
Non-interest expense
                                               
Stock-based compensation expense*
    529       324       523       320       940       575  
Contingent value right expense
    327       327       767       767       299       299  
Severance
                6       6              
Legal settlement
                2       2              
Taxes
                                               
Tax effect of adjustments*
    (216 )     N/A       (136 )     N/A       (301 )     N/A  
Core Net Income
  $ 13,093     $ 13,093     $ 12,403     $ 12,403     $ 12,980     $ 12,980  
                                                 
Average Assets
  $ 6,520             $ 6,554             $ 6,598          
                                                 
ROA**
    0.76 %             0.70 %             0.74 %        
                                                 
Core ROA***
    0.80 %             0.76 %             0.79 %        
* Tax effected at an income tax rate of 39%
** ROA: Annualized net income / average assets
*** Core ROA: Annualized core net income / average assets
- MORE -
 
 

 
CBF Reports Second Quarter Results
Page 15
July 24, 2014
 
CAPITAL BANK FINANCIAL CORP.
RECONCILIATION OF NON-GAAP MEASURES (Continuation)
(Dollars in thousands)
(Unaudited)

CORE EFFICIENCY RATIO
 
Three Months Ended
 
   
June 30,
2014
   
March 31,
2014
   
Dec. 31,
2013
   
Sept. 30,
2013
   
June 30,
2013
 
Net interest income
  $ 60,831     $ 62,453     $ 65,723     $ 65,386     $ 65,352  
Reported non-interest income
    11,887       11,369       13,271       15,280       13,506  
Less: Securities gains (losses)
    (28 )     174       164       (247 )     205  
Core non-interest income
  $ 11,915     $ 11,195     $ 13,107     $ 15,527     $ 13,301  
Reported non-interest expense
  $ 51,273     $ 55,224     $ 56,251     $ 59,263     $ 59,382  
Less: Stock-based compensation expense
    531       533       942       1,147       1,366  
Less: Contingent value right expense (income)
    327       767       299       (776 )     428  
Less: Conversion and severance expenses (conversion and merger expenses and salaries and employees benefits)
                            140  
Less: Gain on extinguishment of debt
                      (430 )      
Core non-interest expense
  $ 50,415     $ 53,924     $ 55,010     $ 59,322     $ 57,448  
Efficiency Ratio*
    70.51 %     74.81 %     71.21 %     73.47 %     75.30 %
Core Efficiency Ratio**
    69.30 %     73.22 %     69.78 %     73.43 %     73.04 %
  
   * 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)
 
- MORE -
 
 

 
CBF Reports Second Quarter Results
Page 16
July 24, 2014
 
CAPITAL BANK FINANCIAL CORP.
RECONCILIATION OF NON-GAAP MEASURES (Continuation)
(Dollars in thousands, except per share data)
(Unaudited)

TANGIBLE BOOK VALUE
 
Three Months Ended
 
   
June 30,
2014
   
March 31,
2014
   
Dec. 31,
2013
   
Sept. 30,
2013
   
June 30,
2013
 
Total shareholders' equity
  $ 1,073,558     $ 1,103,756     $ 1,112,788     $ 1,107,825     $ 1,102,751  
Less: goodwill, core deposits intangibles, net of taxes
    (147,290 )     (148,045 )     (146,258 )     (147,061 )     (147,865 )
Tangible book value
  $ 926,268     $ 955,711     $ 966,530     $ 960,764     $ 954,886  
    Common shares outstanding
    49,150       51,129       52,098       52,419       53,019  
Tangible book value per share***
  $ 18.85     $ 18.69     $ 18.55     $ 18.33     $ 18.01  
*** 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
 
   
June 30,
2014
   
March 31,
2014
   
Dec. 31,
2013
   
Sept. 30,
2013
   
June 30,
2013
 
Total shareholders' equity
  $ 1,073,558     $ 1,103,756     $ 1,112,788     $ 1,107,825     $ 1,102,751  
Less: goodwill, core deposits intangibles
    (155,398 )     (156,633 )     (155,351 )     (156,667 )     (157,983 )
Tangible common equity
  $ 918,160     $ 947,123     $ 957,437     $ 951,158     $ 944,768  
Total assets
  $ 6,624,006     $ 6,548,624     $ 6,617,561     $ 6,601,311     $ 6,807,236  
Less: goodwill, core deposits intangibles
    (155,398 )     (156,633 )     (155,351 )     (156,667 )     (157,983 )
Tangible assets
  $ 6,468,608     $ 6,391,991     $ 6,462,210     $ 6,444,644     $ 6,649,253  
Tangible common equity ratio
    14.19 %     14.82 %     14.82 %     14.76 %     14.21 %

-END-