Capital Bank Financial Corp. Reports First Quarter

CHARLOTTE, N.C., April 21, 2017 (GLOBE NEWSWIRE) -- Capital Bank Financial Corp. (Nasdaq: CBF ) (the “Company”) today reported first quarter net income of $20.9 million, which increased 112% year over year. GAAP net income per diluted share was $0.39. Core net income increased to $23.9 million, up 42% year over year. Core net income per diluted share was $0.45. Core pre-tax adjustments for the first quarter of 2017 included $4.9 million of acquisition and branch closure expenses, offset by $0.1 million gain on investment securities.

“With the CommunityOne conversion now behind us, we are totally focused on high-quality loan and core deposit growth. Thanks to the consistent focus and efforts of Capital Bank’s teammates, we’re optimistic about the outlook,” said Gene Taylor, Chairman and Chief Executive Officer of Capital Bank Financial Corp.

“In addition to successfully completing the CommunityOne systems conversion, we’ve put in place new plans to rationalize excess facilities, which will help us achieve our stated profitability and return targets,” added Chris Marshall, Chief Financial Officer of Capital Bank Financial Corp.

Loan Portfolio and Composition

During the first quarter, the loan portfolio increased by $105.8 million to $7.5 billion. New loans of $504.8 million were offset by payoffs totaling $379.6 million and special asset resolutions of $19.4 million.

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

Deposits Composition and Cost of Funds

During the first quarter, total deposits increased by $212.0 million to $8.1 billion. The sequential increase was primarily due to a $90.1 million increase of non-interest checking balances and an increase of $95.6 million in money market balances. The cost of total deposits remained flat at 0.39%, while the cost of core deposits increased two basis points to 0.21%. Core deposits include all checking, savings and money market accounts, excluding brokered, and represent 73% of total deposits.

Net Interest Income and Net Interest Margin

Net interest income increased $4.3 million to $82.1 million from $77.8 million for the fourth quarter of 2016 and increased $20.7 million from $61.4 million for the first quarter of 2016. The net interest margin for the first quarter of 2017 was 3.73%, an increase of six basis points sequentially and nine basis points year over year. The sequential and year over year net interest margin increase was mainly due to a legacy loan recovery, which occurred during the first quarter of 2017.

Non-Interest Income

Non-interest income declined $1.2 million to $15.9 million from $17.0 million for the fourth quarter of 2016 and increased $13.3 million from $2.6 million for the first quarter of 2016. The sequential decrease was mainly driven by $1.8 million lower investment securities gains. The year over year increase was mainly due to the absence of a $9.2 million charge for the termination of loss share agreements in the prior year and an increase associated with the acquisition of CommunityOne.

Provision for Loan and Lease Losses and Credit Quality

The provision of $3.4 million recorded for the first quarter of 2017 included a $3.2 million provision for new and acquired non-impaired loans and a $186 thousand provision on acquired impaired loans. Net charge-offs for the first quarter of 2017 were $2.6 million, $0.3 million lower than the fourth quarter of 2016.

At March 31, 2017, the allowance for loan and lease losses was $43.9 million, of which $23.2 million related to acquired impaired loans and $20.7 million related to new and acquired non-impaired loans. The allowance for loan and lease losses represents 0.58% of the Company’s total $7.5 billion loan portfolio.

At March 31, 2017, non-performing loans were $71.6 million, a decrease of 4.7% from December 31, 2016, mainly as a result of resolutions and upgrades. Non-performing loans increased 10.8% from March 31, 2016, due primarily to the acquisition of CommunityOne.

Non-Interest Expense

Non-interest expense declined $11.3 million to $62.7 million from $74.0 million for the fourth quarter of 2016 and increased $15.8 million from $46.9 million for the first quarter of 2016. The sequential decrease was mainly due to a decrease of $15.5 million in conversion and merger expense and the absence of $1.4 million legal settlement expenses. Partially offsetting the decrease was a $3.0 million increase in salaries expense and benefit expense and $1.9 million in restructuring charges. The year over year increase was mainly due to an increase of $7.0 million in salaries and benefit expense, $1.8 million in restructuring charges, $1.4 million in conversion and merger expense and $1.3 million in occupancy expense, mostly related to the acquisition of CommunityOne.

Income Tax Expense

Income tax expense was $11.0 million for the first quarter of 2017, an effective rate of 34%, compared to $6.4 million and 34% for the fourth quarter of 2016. Income tax expense was $5.8 million and an effective tax rate of 37% for the first quarter of 2016. The year-over-year decrease in effective income tax rate is due to lower state income taxes, higher tax exempt interest income and other favorable adjustments.

Financial Position

Total assets increased by $167.4 million to $10.1 billion as of March 31, 2017, from $9.9 billion as of December 31, 2016. During the quarter, the Company’s loan portfolio increased $105.8 million to $7.5 billion. Total deposits increased by $212.0 million to $8.1 billion, and core deposits increased by $214.6 million, or a 15% annualized rate. FHLB borrowings decreased $55.1 million. Book value per share was $25.17 as of March 31, 2017, an increase of $0.21 and $2.09 over December 31, 2016 and March 31, 2016, respectively. Tangible book value per share was $20.29 as of March 31, 2017, an increase of $0.28 and $0.52 over December 31, 2016 and March 31, 2016, respectively. During the first 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 Company declared a cash dividend of $0.12 per share, payable on May 19, 2017, to shareholders of record as of May 5, 2017.

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 (913) 312-0654, and the confirmation pass code is 7115841. Please dial in 10 minutes prior to the beginning of the call. A telephonic replay of the conference call will be available through April 28, 2017, by dialing (719) 457-0820 and entering pass code 7115841. 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.

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, 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 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 March 31, 2017, and 193 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 . 

⁽¹⁾ Capital Ratios are preliminary ⁽²⁾ See “Reconciliation of Non-GAAP Measures”

⁽¹⁾ Presented on a fully tax equivalent basis ⁽²⁾ Includes Federal Home Loan Bank stocks

⁽¹⁾ Presented on a fully tax equivalent basis ⁽²⁾ Includes Federal Home Loan Bank stocks

    * Tax effected at an income tax rate of 38%   ** ROA: Annualized net income / Average assets *** Core ROA: Annualized core net income / Average assets

   *  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)

* Tangible book value is equal to book value less goodwill and core deposit intangibles, net of related deferred tax liabilities.

CONTACT: Kenneth A. Posner Chief of Strategic Planning and Investor Relations Phone: (212) 399-4020 E-mail: Kposner@cbfcorp.com