Attached files
| file | filename |
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| EX-99.1 - EXHIBIT 99.1 - Capital Bank Financial Corp. | exhibit991earningsreleasef.htm |
| 8-K - 8-K - Capital Bank Financial Corp. | a8-kx2q16earningsrelease.htm |
2016 Second Quarter Earnings
July 21, 2016
Safe Harbor Statement
2 7/21/2016
Forward-Looking Statements
Information in this presentation 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 presentation 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 presentation. 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.
3
Creating Regional Bank Franchise in SE Growth Markets
7/21/2016
CommunityOne* Capital Bank
* Subject to regulatory approval.
*
4
Commitment to Profitability and Returns
7/21/2016
See reconciliation of non-GAAP measures in appendix.
Return on Equity and Core ROTCE Return on Average Assets
1.10%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2% ROAA Core ROAA
Double-
digit
0%
2%
4%
6%
8%
10%
12%
14% ROE Core ROTCE
5
Second Quarter Highlights
■ Reported EPS of $0.40, up 43% y/y, and core EPS of $0.42, up 40% y/y
■ Generated $473 million in new loans
■ Loan portfolio increased 8% annualized q/q and 10% y/y
■ New Loan portfolio nonaccruals remain very low at 0.12%
■ NIM compressed only 2 bps to 3.62%
■ Noninterest expense down 10% y/y, efficiency ratio declined to 61%, core efficiency
ratio declined to 59%
7/21/2016
See reconciliation of non-GAAP measures in appendix.
Second Quarter Financial Summary
6 7/21/2016
See reconciliation of non-GAAP measures in appendix.
■ Net interest income increased by $0.1 mm
sequentially and $0.8 mm y/y, reflecting
relatively strong NIM of 3.62%, down only 2
bps sequentially
■ $1.2 mm provision includes $2.0 mm
provision for new loans and $0.8 mm reversal
of impairment on legacy loans
■ Noninterest expense down 5% sequentially
and 10% year-over-year
■ Book value per share increased by $0.44 to
$23.52, and tangible book value rose by
$0.45 to $20.22
Non-core adjustments detail
$ 000s
Conversion, merger, and restructuring 886
Legal 355
Securities gains (117)
Total pre-tax 1,124
Tax effect of adjustments (294)
Total after-tax 830
($ mm's except per share data, growth rates, and metrics)
2Q16 1Q16 2Q15
Net interest income 61.5 0% 1%
Provision (reversal) 1.2 -15% -10%
Non-interest income 11.9 NM 15%
Non-interest expense 44.5 -5% -10%
Pretax income 27.7 78% 37%
Net income 17.4 77% 34%
Per share $0.40 82% 43%
Adjustments 0.8 NM NM
Core Net Income 18.2 8% 30%
Per share $0.42 11% 40%
Key Metrics 2Q16 1Q16 2Q15
Net interest margin 3.62% 3.64% 3.94%
Fee ratio 16.2% 4.0% 14.6%
Efficiency ratio 60.6% 73.4% 69.7%
ROA 0.93% 0.53% 0.75%
ROE 6.9% 4.0% 4.9%
Core Metrics
Core fee ratio 16.1% 16.1% 14.7%
Core efficiency ratio 59.1% 61.6% 67.3%
Core ROA 0.97% 0.91% 0.82%
Core ROTCE 8.4% 8.0% 6.2%
% change
New Loan Production
7 7/21/2016
New Loans by Geography New Loans by Product
$ mm’s $ mm’s
Includes loan purchases of $33 mm, $14mm, $29mm, $8mm, and
$16 mm in 2Q15, 3Q15, 4Q15, 1Q16, and 2Q16, respectively
161 155 145
75
139
200 234
199
141
183
128
101
157
80
151
$489 $490 $501
$296
$473
2Q15 3Q15 4Q15 1Q16 2Q16
Florida Carolinas Tennessee
210
159
212
145
230
91
126
98
89
133
123
121
126
62
110
$489 90 $501
$296
$473
2Q15 3 4Q15 1Q16 2Q16
Commercial CRE Consumer Auto
$424
$406
$436
1,132 1,099 1,121 1,191 1,172
1,367 1,252 1,383
1,402 1,457
1,471
1,364
1,459 1,583 1,509
1,522 1,851
1,897 1,764 1,670
5,492 5,566
5,860 5,940 5,807
2Q15 3Q15 4Q15 1Q16 2Q16
Noninterest demand NOW
Savings & Money Market Time / Other
Y/Y
Growth*
8%
5%
6%
14%
8%
Cost of Deposits Down 1 bp Q/Q
8 7/21/2016
Cost of Deposits Deposit Balances
$ mm’s
Note: Core deposits include noninterest demand, NOW, and
savings & money market, excluding brokered deposits.
0.36%
0.39% 0.40%
0.42% 0.41%
0.15% 0.15% 0.15%
0.17% 0.18%
0.39% 0.40% 0.40%
0.42% 0.42%
2Q15 3Q15 4Q15 1Q16 2Q16
Total Core D posits Contractual Deposits
*Growth rate reflects average balances.
NIM Compresses 2 bps to 3.62%
9 7/21/2016
Net Interest Margin (NIM)
See reconciliation of contractual net interest margin in appendix.
Yields and Cost of Funds
0.46% 0.47% 0.47% 0.51% 0.50%
4.87% 4.71% 4.55% 4.52% 4.48%
2.05% 2.14%
2.25% 2.32% 2.35%
2Q15 3Q15 4Q15 1Q16 2Q16
Loans
Investments
Cost of
Funds
3.94% 3.82% 3.70% 3.64% 3.62%
3.25% 3.19% 3.21% 3.16%
3.25%
2Q15 3Q15 4Q15 1Q16 2Q16
GAAP NIM Contractual NIM
Non-interest Income
10 7/21/2016
Non-interest Income
$ mm’s
See reconciliation of non-GAAP measures in appendix.
Non-interest Income Detail
$ mm’s
2Q15 1Q16 2Q16
Services charges on deposits 5.2 4.8 4.5
Debit card income 3.2 3.1 3.2
Fees on mortgage loans sold 1.3 1.0 1.1
Investment advisory and trust fees 1.1 0.5 0.5
FDIC indemnification asset expense (2.5) - -
Termination of loss share agreement - (9.2) -
Securites gains (losses) (0.1) 0.0 0.1
Other 2.2 2.3 2.5
Non-interest income 10.4 2.6 11.9
Core non-interest income 10.4 11.7 11.8
10.4
11.4
10.6
2.6
11.9
10.4
11.5
10.5
11.7 11.8
2Q15 3Q15 4Q15 1Q16 2Q16
Non-interest income Core non-interest Income
47.9 48.3
42.8 45.0 43.3
49.5 48.3 47.8 46.9
44.5
2Q15 3Q15 4Q15 1Q16 2Q16
Non-core adjustments Core non-interest expense
Noninterest Expense Down 10% Y/Y
11 7/21/2016
Non-interest Expense
$ mm’s
See reconciliation of non-GAAP measures in appendix.
Efficiency Ratio
60.6%
59.1%
40%
45%
50%
55%
60%
65%
70%
75%
80%
85%
90% Efficiency Ratio Core Efficiency Ratio
Target 60%
Liquidity and Capital Ratios Remain Strong
12 7/21/2016
■ Modified duration of investments was 4.6
years at June 30, 2016, vs. 4.7 years at
March 31, 2016
Tier 1 Leverage Ratio1
(1) 2Q16 capital ratio is preliminary.
Liquidity
14.7%
13.6%
12.7%
12.5% 12.6%
2Q15 3Q15 4Q15 1Q16 2Q16
1
Cash /
Equivalents
16%
Agency MBS
41%
Agency
CMBS
25%
Agency CMO
7%
Corporate
Bonds
5%
Trust
Preferred
3%
SBA /
Other
2%
Muni
1%
New Loan Portfolio Performing Strongly
13 7/21/2016
New Loan Portfolio Credit Metrics
Past Dues & Nonaccruals
0.14%
0.11% 0.11%
0.09%
0.17%
0.19%
0.17%
0.11% 0.11%
0.12%
2Q15 3Q15 4Q15 1Q16 2Q16
Past Due Non-Accruals
2Q15 1Q16 2Q16
Criticized 0.65% 0.25% 0.27%
Classified Performing 0.37% 0.55% 0.83%
Classified Nonperforming 0.19% 0.11% 0.12%
Total Criticized/Classified 1.21% 0.91% 1.22%
Net Charge-offs
0.13%
0.15%
0.22%
0.12% 0.15%
2Q15 3Q15 4Q15 1Q16 2Q16
New Loan Portfolio Reserve Metrics 2Q15 1Q16 2Q16
Reserves / Loans 0.60% 0.48% 0.46%
Reserves / NCOs 3.63x 4.73x 3.05x
Re erves / Nonaccruals 3.19x 4.33x 3.73x
2Q15 1Q16 2Q16
Provision (reversal) on legacy loans (0.5) - (0.8)
FDIC indemnification asset expense 2.5 - -
OREO valuation expense 1.7 0.5 1.1
Termination of loss share agreements - 9.2 -
(Gains) losses on sales of OREO (1.0) (0.7) (0.4)
Foreclosed asset related expense 0.6 0.3 0.4
Loan workout expense 0.8 0.2 0.1
Salaries and employee benefits 0.8 0.5 0.5
Total legacy credit expense 4.9 10.0 0.9
832
577
349
224 213
154
129
78
53 44
986
706
427
277 257
2012 2013 2014 2015 2Q16
Loans REO
-74%
Special Assets Down 74% Since 2012
14 7/21/2016
Special Assets Nonperforming Loans / Total Loans
$ mm’s
Legacy Credit Expenses
$ mm’s
5.8%
2.6%
1.2% 1.2% 1.1%
2013 2014 2015 1Q16 2Q16
15
Capital Bank Investment Highlights
■ Experienced management team with institutional track record
■ Positioned in Southeastern growth markets
■ Disciplined and sustainable growth story
■ Focused on deploying capital and improving profitability
■ Attractive valuation
7/21/2016
Appendix
16 7/21/2016
GAAP and Non-GAAP Disclosures
17 7/21/2016
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 at the end of this release. The Company believes core net
income, the core efficiency ratio and core ROA are useful for both investors and management to understand the
effects of certain non-interest items and provide an alternative view of the Company’s performance over time and in
comparison to the Company’s competitors. These measures should not be viewed as a substitute for net income. The
Company believes that tangible book value and tangible book value per share are useful for both investors and
management as these are measures commonly used by financial institutions, regulators and investors to measure the
capital adequacy of financial institutions. The Company believes these measures facilitate comparison of the quality
and composition of the Company’s capital over time and in comparison to its competitors. These measures should not
be viewed as a substitute for total shareholders’ equity.
The Company uses these non-GAAP measures for various purposes, including measuring performance for incentive
compensation and as a basis for strategic planning and forecasting.
These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not
audited. They should not be considered in isolation or as a substitute for analysis of results reported under
GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.
Reconciliation of Core Noninterest Income / Expense
18 7/21/2016
$ 000's
2Q16 1Q16 4Q15 3Q15 2Q15
Net interest income $61,515 $61,367 $62,078 $61,637 $60,685
Reported non-interest income 11,922 2,566 10,597 11,418 10,363
Less: Securities gains (losses), net 117 40 54 (43) (57)
Less: Termination of loss share – (9,178) – – –
Core non-interest income $11,805 $11,704 $10,543 $11,461 $10,420
Reported non-interest expense $44,536 $46,938 $47,756 $48,346 $49,502
Less: Stock-based compensation expense – – – – –
Contingent value right expense – – – – 4
Severance expense – 75 – 63 14
Loss on extinguishment of debt – – – – 1,438
Conversion costs and merger 881 1,107 33 – –
Legal merger non deductible 355 580 – – –
Restructuring expense 5 142 – 23 178
Contract termination – – 4,215 – –
Conversion and severance expenses
(conversion and merger expenses and
salaries and employee benefits) – – 704 – –
Core non-interest expense $43,295 $45,034 $42,804 $48,260 $47,868
Core Fee Ratio* 16.1% 16.1% 14.5% 15.7% 14.7%
Efficiency Ratio** 60.7% 73.4% 65.7% 66.2% 69.7%
Core Efficiency Ratio*** 59.1% 61.6% 58.9% 66.0% 67.3%
* Core Fee Ratio: Core non-interest income / (Net interest income + Core non-interest income)
** Efficiency Ratio: Non-interest expense / (Net interest income + Non-interest income)
***Core Efficiency Ratio: Core non-interest expense / (Net interest income + Core non-interest income)
Reconciliation of Core Net Income
19 7/21/2016
$ 000's
Quarter Quarter Quarter Quarter Quarter Quarter
Ended Ended Ended Ended Ended Ended
2Q16 2Q16 1Q16 1Q16 2Q15 2Q15
$17,402 $17,402 $9,840 $9,840 $12,990 $12,990
Pre-Tax After-tax Pre-Tax After-tax Pre-Tax After-tax
Non-Interest Income
- - 9,178 5,670 - -
Security losses / (gains)* (117) (72) (40) (25) 57 35
Non-Interest Expense
- - - - - -
- - - - 4 2
- - 75 46 14 9
5 3 142 88 178 110
881 544 1,107 684 - -
355 355 580 580 - -
- - - - 1,438 887
Tax effect of adjustments* (294) NA (3,999) NA (648) NA
18,232 18,232 16,883 16,883 14,033 14,033
Average Assets $7,484,365 $7,450,422 $6,885,513
Tangible Common Equity $868,745 $848,305 $907,829
** ROA 0.93% 0.53% 0.75%
*** Core ROA 0.97% 0.91% 0.82%
**** Core ROTCE 8.4% 8.0% 6.2%
* Tax effected at an income tax rate of 38.0%
** ROA: Annualized net income / average assets
*** Core ROA: Annualized core net income / average assets
**** Core ROTCE: Annualized core net income / tangible common equity
Net income
Adjustments
Core Net Income
Stock-based compensation expense*
Contingent Value Right expense
Termination of loss share agreement
Loss on extinguishment of debt
Severance expense *
Restructuring expense*
Conversion costs and merger tax deductible*
Legal merger non deductible
Tangible Book Value
20 7/21/2016
(In thousands, except per share data)
June 30, 2016
Total common shareholders' equity $1,016,498
Intangibles, net of taxes 142,725
Tangible book value* $873,773
Common shares outstanding 43,219
Tangible book value per share $20.22
* Tangible book value is equal to book value less goodwill and core deposit intangibles, net
of related deferred tax liabilities.
Contractual Net Interest Margin
21 7/21/2016 (1) Includes effects of tax equivalent adjustments
(2) Excludes purchase accounting adjustments
$ 000s
Average Earning
Assets
Net Interest
Income (1)
Net Interest
Margin
June 30, 2016
Reported 6,876,936 61,950 3.62%
Purchase accounting impact (39,114) 6,438 0.37%
Contractual Net Interest Margin (2) 3.25%
March 31, 2016
Reported 6,832,335 61,786 3.64%
Purchase accounting impact (44,537) 8,171 0.48%
Contractual Net Interest Margin (2) 3.16%
December 31, 2015
Reported 6,698,719 62,491 3.70%
Purchase accounting impact (50,768) 8,460 0.49%
Contractual Net Interest Margin (2) 3.21%
September 30, 2015
Reported 6,442,167 62,044 3.82%
Purchase accounting impact (55,281) 10,381 0.63%
Contractual Net Interest Margin (2) 3.19%
June 30, 2015
Reported 6,221,394 61,068 3.94%
Purchase accounting impact (63,174) 10,711 0.69%
Contractual Net Interest Margin (2) 3.25%