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

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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 expense 12,044     10,821     9,927     8,302     8,064  
Net interest income 85,242     82,116     77,819     62,627     61,515  
Provision for loan and lease losses 2,303     3,392     1,980     586     1,172  
Net interest income after provision for loan and lease losses 82,939     78,724     75,839     62,041     60,343  
Non-interest income                  
Service charges on deposit accounts 5,237     5,375     5,949     4,777     4,486  
Debit card income 5,051     4,765     4,211     3,389     3,235  
Fees on mortgage loans originated and sold 1,150     1,248     1,402     1,334     1,140  
Investment advisory and trust fees 596     641     591     290     455  
Investment securities gains, net 70     67     1,894     71     117  
Other income 3,896     3,756     2,969     2,509     2,489  
Total non-interest income 16,000     15,852     17,016     12,370     11,922  
Non-interest expense                  
Salaries and employee benefits 27,662     29,166     26,134     20,935     20,139  
Stock-based compensation expense 964     900     531     790     467  
Net occupancy and equipment expense 8,826     8,992     8,374     7,340     7,355  
Computer services 4,280     3,873     4,364     3,153     3,274  
Software expense 2,573     2,662     2,391     1,948     2,000  
Telecommunication expense 1,939     2,424     2,147     1,790     1,558  
OREO valuation expense 262     247     677     742     1,119  
Net gains on sales of OREO (204 )   (308 )   (150 )   (159 )   (413 )
Foreclosed asset related expense 376     364     513     397     399  
Loan workout expense 281     201     327     206     71  
Conversion and merger related expense, net 981     3,037     18,525     394     1,236  
Professional fees 1,800     2,096     1,761     1,642     1,353  
Restructuring charges, net 2,978     1,912     4     (113 )   5  
Legal settlement expense 45         1,361     1,500      
Regulatory assessments 1,145     719     1,092     841     1,259  
Other expense 7,077     6,418     5,943     6,124     4,714  
Total non-interest expense 60,985     62,703     73,994     47,530     44,536  
Income before income taxes 37,954     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:                  
Basic 51,683     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 banks 49,247     60,413     201,348  
Total cash and cash equivalents 155,411     160,547     309,055  
Trading securities 4,290     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 sale 3,533     4,980     12,874  
Loans, net of deferred loan costs and fees 7,566,581     7,506,975     7,393,318  
Less: Allowance for loan and lease losses 44,638     43,891     43,065  
Loans, net 7,521,943     7,463,084     7,350,253  
Other real estate owned 41,364     51,050     53,482  
Premises and equipment, net 184,939     199,167     205,425  
Goodwill 234,158     234,158     235,500  
Intangible assets, net 29,750     31,553     33,370  
Deferred income tax asset, net 134,452     146,724     150,272  
Bank owned life insurance 100,672     100,251     99,702  
Other assets 107,066     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 demand 1,884,674     1,960,187     1,930,143  
Money market 1,828,889     1,821,474     1,725,838  
Savings 480,590     496,230     497,171  
Time deposits 2,218,444     2,134,473     2,137,312  
Total deposits 8,075,013     8,092,607     7,880,628  
Federal Home Loan Bank advances 470,600     490,650     545,701  
Short-term borrowings 32,637     21,125     19,157  
Long-term borrowings 118,096     117,272     116,456  
Accrued expenses and other liabilities 65,271     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 capital 1,371,224     1,369,689     1,368,459  
Retained earnings 279,914     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' equity 1,332,084     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 ratio 60.24 %   64.00 %   78.02 %   63.38 %   60.65 %
Average interest-earning assets to average interest-bearing liabilities 130.70 %   129.53 %   130.22 %   131.43 %   131.21 %
Average loans receivable to average deposits 93.97 %   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 liabilities 0.69 %   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 receivable 0.90 %   0.95 %   1.01 %   1.02 %   1.13 %
Nonperforming assets to total assets 1.09 %   1.22 %   1.30 %   1.37 %   1.44 %
ALLL to nonperforming assets 40.64 %   35.73 %   33.45 %   41.29 %   40.98 %
ALLL to loans held for investment 0.59 %   0.58 %   0.58 %   0.75 %   0.78 %
Annualized net charge-offs/average loans 0.08 %   0.14 %   0.17 %   0.10 %   0.11 %
Capital Ratios (Company) (2)                                      
Total average shareholders' equity to total average assets 13.1 %   13.1 %   13.2 %   13.5 %   13.5 %
Tier 1 leverage capital ratio 11.8 %   11.6 %   12.2 %   12.9 %   12.6 %
Tier 1 common capital ratio 12.5 %   12.2 %   12.4 %   13.3 %   13.4 %
Tier 1 risk-based capital ratio 13.8 %   13.4 %   13.5 %   14.4 %   14.6 %
Total risk-based capital ratio 14.3 %   14.0 %   14.0 %   15.1 %   15.3 %
Capital Ratios (Bank) (2)                                      
Tier 1 leverage capital ratio 10.7 %   10.7 %   11.2 %   10.5 %   10.4 %
Tier 1 common capital ratio 12.6 %   12.3 %   12.4 %   12.0 %   12.0 %
Tier 1 risk-based capital ratio 12.6 %   12.3 %   12.4 %   12.0 %   12.0 %
Total risk-based capital ratio 13.1 %   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 land 384,581     350,401     327,622     222,794     212,315  
Multifamily commercial real estate 147,365     115,996     117,515     76,296     74,328  
1-4 family residential construction and land 153,761     157,920     140,030     111,954     100,306  
Total commercial real estate 1,951,283     1,811,661     1,716,050     1,331,565     1,278,779  
Owner occupied commercial real estate 1,287,811     1,313,086     1,321,405     1,072,586     1,075,306  
Commercial and industrial 1,424,862     1,443,828     1,468,874     1,458,523     1,448,698  
Lease financing             525     877  
Total commercial 2,712,673     2,756,914     2,790,279     2,531,634     2,524,881  
1-4 family residential 1,782,799     1,787,097     1,714,702     1,168,468     1,039,309  
Home equity loans 489,497     502,099     507,759     364,117     364,169  
Indirect auto loans 174,861     199,951     226,717     254,736     285,618  
Other consumer loans 220,946     222,824     222,255     94,277     85,964  
Total consumer 2,668,103     2,711,971     2,671,433     1,881,598     1,775,060  
Other 238,055     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 demand 1,884,674     1,960,187     1,930,143     1,463,520     1,456,558  
Money market 1,678,842     1,746,444     1,651,023     1,166,918     1,105,460  
Savings 480,590     496,230     497,171     401,205     403,106  
Total core deposits 5,706,522     5,883,104     5,668,501     4,239,443     4,137,605  
Wholesale money market 150,047     75,030     74,815     125,030     50,015  
Time deposits 2,218,444     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 RATIO Three 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 income 16,000     15,852     17,016     12,370     11,922  
Less: Securities gains, net 70     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 deductible 1,218         280     61     355  
Restructuring expense, net 2,978     1,912     4     (113 )   5  
Legal settlement 45         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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