Attached files
| file | filename |
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| 8-K - 8-K - Capital Bank Financial Corp. | a8-kx1q17earningsrelease.htm |
| EX-99.1 - EXHIBIT 99.1 - Capital Bank Financial Corp. | exhibit991earningsreleasef.htm |
2017 First Quarter Earnings
April 21, 2017
04/21/2017
Safe Harbor Statement
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 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.
2
04/21/2017
Southeastern Regional Bank in Attractive Growth Markets
Eight Acquisitions
3
One Southeastern Franchise
04/21/2017
4
First Quarter Highlights
Note: See reconciliation of core EPS, core ROA, and core efficiency ratio in appendix
■ Reported EPS of $0.39 and Core EPS of $0.45
■ Generated ROA of 0.84% and Core ROA of 0.96%
■ Successfully completed CommunityOne systems conversion, remain on
track for mid-40s cost saves
■ Grew loans 6% LQA and core deposits 15% LQA, with deposit costs flat
■ NIM expanded by 6 bps to 3.73%
■ Reported efficiency ratio of 64% including merger and branch closure
charges, and sustained Core efficiency ratio at 59%, below our 60% target
■ Total assets grew to $10.1 billion
04/21/2017
■ 1Q17 includes CommunityOne for full
quarter
■ Provision covers charge-offs, includes
reserve build of $0.7M
■ GAAP efficiency ratio of 64% includes
conversion charges and branch closures;
core efficiency ratio under 60% target
5
First Quarter Financial Summary
Note: See reconciliation of Core net income, Core EPS, Core fee ratio, Core efficiency ratio, Core ROA, and Core ROTCE in appendix
($ mm's except per share data, growth rates, and metrics)
1Q17 4Q16 1Q16
Net interest income 82.1$ 6% 34%
Provision 3.4 71% 147%
Non-interest income 15.9 -7% 518%
Non-interest expense 62.7 -15% 34%
Pretax income 31.9 69% 104%
Net income 20.9 68% 112%
Per share 0.39$ 61% 75%
Non-GAAP Adjustments 3.0 NM NM
Core net income 23.9 7% 42%
Per share 0.45$ 2% 17%
Key Metrics 1Q17 4Q16 1Q16
Net interest margin (NIM) 3.73 3.67 3.64
Fee ratio 16.2% 17.9% 4.0%
Efficiency ratio 64.0% 78.0% 73.4%
ROA 0.84% 0.53% 0.53%
ROE 6.4% 4.1% 4.0%
Non-GAAP Core Metri s
Core fee ratio 16.1% 16.3% 16.1%
Core efficiency ratio 59.0% 58.2% 61.6%
Core ROA 0.96% 0.96% 0.91%
Core ROTCE 9.2% 8.7% 8.0%
% change
04/21/2017
6 Note: See reconciliation of core EPS, core ROA, and core efficiency ratio in appendix
Tangible Book Value Per Share
Non-GAAP Adjustments Detail
(In thousands)
First Quarter Financial Summary (continued)
■ Conversion expenses of $3.0M during 1Q17,
in line with expected costs
■ Branch closure expenses of $1.9M
■ Dividend of $0.12/share declared for 1Q17
4Q16 20.01$
Net Income 0.39
Other 0.01
Dividends (0.12)
1Q17 20.29$
Non-core adjustments detail
1Q17
Conversion costs and merger tax deductible 3,037$
Restructuring expenses 1,912
Tax adjustment -
Securities gains (67)
Total pre-tax 4,882
Tax effect of adjustments (1,865)
Total after-tax 3,017$
04/21/2017
-$30
-$32 -$11
$7,406
+$178 $7,512
4Q16
Total
Loans
Run-off of
Prime
Indirect
Auto
Reduced
Line
Utilization
C1
Transition
Net New
Loans
1Q17
Total
Loans
21.06
7
Consistent High-Quality Loan Production
New Loans by Product
(In millions)
New Loans by Geography
(In millions)
Loan Production/Run-off Roll-forward
(In millions)
145
230
152 148 149
89
133
123
165 181
62
110
196 132
175
$296
$473 $471
$445
$505
1Q16 2Q16 3Q16 4Q16 1Q17
Commercial CRE Consumer
75
139
213
116
182
141
183
138
241
228
80
151 120 88
95
$296
$473 $471
$445
$505
1Q16 2Q16 3Q16 4Q16 1Q17
Florida Carolinas Tennessee
04/21/2017
Note: Core deposits include noninterest demand, NOW, savings & money market, and excludes time deposits. 8
Strong Core Deposit Growth
Deposit Balances
(In millions)
Cost of Deposits
1,191 1,172 1,207 1,590
1,680
1,402 1,457 1,464
1,930 1,960
1,583 1,509 1,568
2,148 2,244
1,764 1,670 1,794
2,213 2,209
1Q16 2Q16 3Q16 4Q16 1Q17
Noninterest demand NOW
Savings & Money Market Time / Other
$7,881
$5,940 $5,807
$6,033
28%
27%
24%
21%
$8,093
0.17% 0.18%
0.19% 0.19%
0.21%
0.42% .41% 0.41%
0.39% 0.39%
0.42% 0.42% 0.41% 0.41% 0.41%
1Q16 2Q16 3Q16 4Q16 1Q17
Core Deposits Total Cost of Deposits Contractual
04/21/2017
3.67%
+0.07%
+0.02%
4Q16 Net Loan
Recovery
Dec Rate Hike Compression /
Other
1Q17
3.73%
(0.03)%
Note: See reconciliation of contractual net interest margin in appendix 9
Net Interest Margin Grows 6 bps to 3.73%
Net Interest Margin (NIM)
Yields and Cost of Funds
3.64% 3.62% 3.58% 3.67% 3.73%
3.16% 3.25% 3.11% 3.27%
3.34%
1Q16 2Q16 3Q16 4Q16 1Q17
GAAP NIM Contractual NIM
0.51% 0.50% 0.51% 0.49% 0.49%
4.52% 4.48% 4.40% 4.54% 4.58%
2.32% 2.35% 2.43% 2.39% 2.51%
1Q16 2Q16 3Q16 4Q16 1Q17
Loans
Investments
Cost of
Funds
NIM Drivers
04/21/2017
Note: See reconciliation of core non-interest income in appendix 10
Non-interest Income up Sequentially
Non-interest Income
(In millions)
Non-interest Income Detail
(In millions)
$2.6
$11.9
$12.4
$17.0
$15.9
$11.7 $11.8
$12.3
$15.1
$15.8
1Q16 2Q16 3Q16 4Q16 1Q17
Non-interest Income Core Non-interest Income
1Q16 4Q16 1Q17
Services charges on deposits 4.8$ 5.9$ 5.4$
Debit card income 3.1 4.2 4.8
Fees on mortgage loans sold 1.0 1.4 1.2
Investment advisory and trust fees 0.5 0.6 0.6
FDIC indemnification asset expense (9.2) - -
Securites gains 0.0 1.9 0.1
Other 2.3 3.0 3.8
Non-interest Income 2.6$ 17.0$ 15.9$
Less: Securities gains (0.0) (1.9) (0.1)
Plus: FDIC IA Expense 9.2 - -
Non-GAAP Core Non-interest Income 11.7$ 15.1$ 15.8$
04/21/2017
Note: See reconciliation of core efficiency ratio and core non-interest expense in appendix 11
Focused on Efficiency & Merger Cost Savings
Efficiency Ratio Non-interest Expense Detail
(In millions)
45.0 43.3 45.8
54.1 57.8
$46.9
$44.5
$47.5
$74.0
$62.7
1Q16 2Q16 3Q16 4Q16 1Q17
Core Non-interest Expense Non-GAAP Adjustments
64.0%
59.0%
50%
55%
60%
65%
70%
75%
80%
85%
Efficiency Rati Core Effici ncy Ratio
Target 60%
04/21/2017
12
Liquidity and Capital Ratios Remain Strong
Tier 1 Leverage Ratio Liquidity Portfolio
Loan/Deposit Ratio
12.5%
12.6%
12.9%
12.2%
11.6%
1Q16 2Q16 3Q16 4Q16 1Q17
94.9%
98.9% 98.4%
94.0%
92.8%
1Q16 2Q16 3Q16 4Q16 1Q17
Cash / Equivalents, 9.1%
U.S. Agency Securities, 0.6%
Equity Securities and Mutual
Funds, 0.2%
Corporate bonds, 8.8%
Municipal bonds,
1.1%
Industrial Revenue, 0.2%
MBS -
GSE,
80.0%
1Q17 capital ratio is preliminary
04/21/2017
Credit Metrics
New Loan Portfolio Performing Strongly
Net Charge-offs (NCOs) Past Dues & Nonaccruals
13
0.09%
0.17%
0.11%
0.23%
0.09%0.11% 0.12%
0.18% 0.18% 0.21%
1Q16 2Q16 3Q16 4Q16 1Q17
Past Due Non-Accruals1Q16 4Q16 1Q17
Criticized 0.25% 0.57% 0.69%
Classified Performing 0.55% 0.37% 0.41%
las ified Nonperforming 0.11% 0.18% 0.21%
Total Criticized/Classified 0.91% 1.11% 1.32%
Reserves / Loans 0.47% 0.41% 0.40%
Reserves / NCOs 4.47x 1.72x 1.99x
Reserves / Nonaccruals 4.27x 2.27x 1.91x
Total LLR + Marks / Total Loan Portfolio 1.46% 1.19% 1.06%
0.12% 0.15% 0.12%
0.24% 0.20%
Q16 2Q16 3Q16 4Q16 1Q17
04/21/2017
Special Assets Remain at Low Levels
Nonperforming Loans / Total Loans
14
Special Assets
(In millions)
225 201 213 195
232 230
53
49 44 46
53 51
$278
$249 $257 $241
$285 $281
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
Loans REO
1.15% 1.13%
1.02% 1.01%
1Q16 2Q16 3Q16 4Q16 1 7
0.95%
04/21/2017
15
Appendix
04/21/2017
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 presentation. 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.
16
GAAP and Non-GAAP Disclosures
04/21/2017
17
Reconciliation of Core Noninterest Income / Expense
$ 000's
1Q17 4Q16 3Q16 2Q16 1Q16
Net interest income $82,116 $77,819 $62,627 $61,515 $61,367
Reported non-interest income 15,852 17,016 12,370 11,922 2,566
Less: Securities gains 67 1,894 71 117 40
Termination of loss share – – – – (9,178)
Core non-interest income $15,785 $15,122 $12,299 $11,805 $11,704
Reported non-interest expense $62,703 $73,994 $47,530 $44,536 $46,938
Less: Severance expense – 7 – – 75
Conversion costs and merger 3,037 18,245 331 881 1,107
Legal merger non deductible – 280 61 355 580
Restructuring expense 1,912 4 (113) 5 142
Contract termination – – – – –
Legal settlement – 1,361 1,500 – –
Core non-interest expense $57,754 $54,097 $45,751 $43,295 $45,034
Core Fee Ratio* 16.1% 16.3% 16.4% 16.1% 16.1%
Efficiency Ratio** 64.0% 78.0% 63.4% 60.6% 73.4%
Core Efficiency Ratio*** 59.0% 58.2% 61.1% 59.1% 61.6%
* 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)
04/21/2017
18
Reconciliation of Core Net Income
$ 000's Quarter Quarter Quarter Quarter Quarter Quarter
Ended Ended Ended Ended Ended Ended
1Q17 1Q17 4Q16 4Q16 1Q16 1Q16
20,883$ 20,883$ 12,434$ 12,434$ 9,840$ 9,840$
Pre-Tax After-tax Pre-Tax After-tax Pre-Tax After-tax
Non-Interest Income
Termination of loss share agreement 9,178 5,670
Security gains* (67) (41) (1,894) (1,170) (40) (25)
Non-Interest Expense
Severance expense * - - 7 4 75 46
Restructuring expense* 1,912 1,181 4 3 142 88
Conversion costs and merger tax deductible* 3,037 1,877 18,245 11,270 1,107 684
Legal merger non deductible - - 280 280 580 580
Contract Termination - - - - - -
Tax adjustment - - (1,350) (1,350) - -
Legal settlement* - - 1,361 841 - -
Tax effect of adjustments* (1,865) NA (6,775) NA (3,999) NA
23,900$ 23,900$ 22,312$ 22,312$ 16,883$ 16,883$
Diluted shares 53,127 50,387 43,904
Core Net Income per share $0.45 $0.44 $0.38
Average Assets $9,907,560 $9,329,334 $7,450,422
Tangible Common Equity $1,042,220 $1,023,177 $848,305
ROA** 0.84% 0.53% 0.53%
Core ROA*** 0.96% 0.96% 0.91%
Core ROTCE**** 9.2% 8.7% 8.0%
* Tax effected at an income tax rate of 38%
** ROA: Annualized net income / average assets
*** Core ROA: Annualized core net income / average assets
**** Core ROTCE: Annualized core net income / tangible common equity
Core Net Income
Net income
Adjustments
04/21/2017
19
Tangible Book Value
(In thousands, except per share data)
March 31, 2017
Total common shareholders' equity $1,307,931
Less: Goodwill and core deposit intangibles, net of taxes 253,708
angible book value* $1,054,223
Common shares outstanding 51,966
Tangible book value per share $20.29
* Tangible book value is equal to book value less goodwill and core deposit intangibles, net of related deferred tax
liabilities.
04/21/2017
1. Includes effects of tax equivalent adjustments
2. Excludes purchase accounting adjustments
20
Contractual Net Interest Margin
$ 000's Average Earning Net Interest Net Interest
Assets Income1 Margin
March 31, 2017
Reported 8,998,422 93,518 3.73%
Purchase Accounting Impact (38,782) 8,645 0.39%
Contractual Net Interest Margin2 3.34%
December 31, 2016
Reported 8,499,594 78,376 3.67%
Purchase Accounting Impact (41,663) 8,633 0.40%
Contractual Net Interest Margin2 3.27%
September 30, 2016
Reported 7,009,363 63,083 3.58%
Purchase Accounting Impact (33,558) 8,307 0.47%
Contractual Net Interest Margin2 3.11%
June 30, 2016
Reported 6,876,936 61,950 3.62%
Purchase Accounting Impact (39,114) 6,438 0.37%
Contractual Net Interest Margin2 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 Margin2 3.16%
04/21/2017
Owner
Occupied CRE
$1,313
17%
C&I
$1,444
19%
1-4 Resi
$1,787
24%
Jr. Lien /
HELOC
$502
7%
Consumer
Loans
$423
6%
Other
$231
3%
CRE Concentration well within Regulatory Guidelines
21
■ Total CRE was 156% of total risk based
capital
■ Construction & development loans were 44%
of total risk based capital
Portfolio by Loan Type
(In millions)
Non-owner Occupied CRE
$1,187
16%
Other C&D
$350
5%
Multifamily
$116
1%
1-4 C&D
$158
2%
Commercial
Real Estate
Loans