CORAL GABLES, Fla., Jan. 30, 2013 (GLOBE NEWSWIRE) -- Capital Bank Financial Corp. (Nasdaq:CBF) today reported fourth quarter 2012 net income of $5.3 million, or $0.10 per diluted share compared with net income of $37.8 million or $0.75 per diluted share, for the third quarter of 2012 (which included a $34.0 million tax benefit) and net income of $1.4 million, or $0.02 per diluted share, for the fourth quarter of 2011. Results for the fourth quarter of 2012 included $3.8 million of non-cash equity compensation associated with original founder awards, $2.4 million of severance and conversion related expense associated with the acquisition of Southern Community Financial Corporation, $0.2 million of non-cash impairment charges related to intangible assets of Naples Capital Advisors and $0.1 million of merger expenses. Excluding these items, core net income, a non-GAAP measure, for the fourth quarter of 2012 was $9.3 million or $0.17 per diluted share as compared to core net income of $8.7 million, or $0.19 per diluted share for the third quarter of 2012. The reconciliation of non-GAAP measures, 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, commented, "We are pleased with Capital Bank's earnings performance for the fourth quarter of 2012, which reflected both an improved credit performance and the acquisition of Southern Community. We also produced a strong increase in loan originations for the fourth quarter compared with the third quarter and significant growth in core deposits.
"During the quarter, we successfully completed the integration of Southern Community. Capital Bank now operates 164 branches on one core processing platform, under centralized management, and with consistent products, rates, and branding across the entire footprint. Looking ahead to 2013, we are continuing to assess selected acquisition targets focusing on those that are additive to our Southeastern franchise without presenting material dilution. Our top priority for 2013 is to improve our core profitability."
Operating and financial highlights for the fourth quarter include the following:
Originated $253.0 million of new loans for the quarter, 70.2% of which were commercial loans, demonstrating continued execution of the Company's organic growth and portfolio diversification strategies.
Successfully integrated the Southern Community acquisition onto the Company's processing platform and permanently rebranded all 22 branches to the Capital Bank brand.
Generated $136 million of organic growth in core deposits (total deposits minus time deposits). At year-end, core deposits represented 64.7% of total deposit funding, and total deposits represented 96.3% of total funding.
Capital Bank Financial Corp. ended the fourth quarter with a tier 1 leverage ratio of 13% and held $125.4 million in cash and cash equivalents.
Completed the fourth quarter with tangible book value per share of $17.74.
CFO Chris Marshall commented, "At quarter end, Capital Bank was strongly capitalized and had significant liquidity with which to fund growth. During 2013, we expect to improve our core return on assets by generating organic loan portfolio growth, implementing cost savings plans, reducing our funding costs, and benefitting from a gradual reduction in credit expenses."
The Company's banking operations began with the acquisitions of three banks from the FDIC on July 16, 2010 and subsequently included the acquisitions of TIB Financial Corp. on September 30, 2010, Capital Bank Corporation on January 28, 2011, Green Bankshares, Inc. on September 7, 2011 and Southern Community Financial Corporation on October 1, 2012. Accordingly, operating results for the three and twelve months ended December 31, 2012 and 2011 are not generally comparable.
For the acquisition of Southern Community estimated fair values of assets acquired and liabilities assumed are based on the information that is available and the Company believes this information provides a reasonable basis for estimating these fair values. If additional information or evidence is obtained during the measurement period, this may result in changes to the estimated fair value amounts.
Loan Portfolio Growth and Composition
During the fourth quarter, the loan portfolio increased to $4.7 billion from $4.1 billion at September 30, 2012 due to the acquisition of Southern Community, which closed on October 1, 2012. Excluding the effect of the acquisition of Southern Community, the loan portfolio decreased by $154.3 million, as strong originations of $253.0 million were exceeded by elevated paydowns. These paydowns reflect Capital Bank's strategy to reduce its legacy concentration in commercial real estate loans.
The relative composition of our loan portfolio at the end of the fourth and third quarters of 2012 and the fourth quarter of 2011 was as follows:
December 31, 2012
September 30, 2012
December 31, 2011
Commercial real estate
At December 31, 2012, commercial real estate loans had declined to 31% of the total portfolio and commercial loans had increased to 37%, consistent with the Company's portfolio diversification strategy.
For the fourth quarter of 2012, the loan portfolio yield declined to 6.04% from 6.28% for the third quarter, reflecting the addition of Southern Community's $772.7 million loan portfolio on October 1, 2012, which had a weighted average yield of 4.99% and lower yields on new loan production.
Deposit Growth, Composition, and Yields
During the fourth quarter, total deposits increased to $5.9 billion from $4.8 billion at September 30, 2012 due to the acquisition of Southern Community. Excluding the impact of the acquisition of Southern Community, deposits decreased by $67.0 million, as $136.0 million of growth in core deposits was offset by planned shrinkage in high-cost legacy time deposits. Core deposits now make up 64.7% of total deposits as compared to 63.1% in the third quarter.
The cost of deposits declined during the quarter to 0.49% from 0.58% for the third quarter due to continued growth in low-cost core deposits, as well as a decline in average yield on time deposits primarily resulting from the Southern Community acquisition.
Net Interest Income and Net Interest Margin
Net interest income for the fourth quarter of 2012 increased by approximately $5.7 million, or 9.4%, to $66.0 million, from $60.3 million for the third quarter of 2012 and increased $2.4 million, or 3.8%, from the fourth quarter of 2011. The main driver of the increase in net interest income for the quarter was the addition of Southern Community.
Net interest margin for the quarter was 4.11%, a reduction of 34 basis points that was largely driven by the acquisition of Southern Community and the high level of low yielding securities held by that bank at the point of merger. These effects, combined, equated to 23 basis points of the decline. New originations, which were booked at an average yield of 4.27%, normal reinvestment activity and changes in funding cost caused an additional decline of 11 basis points, as compared to the 15 basis point contraction we experienced in the third quarter.
Non-interest income decreased $5.1 million to $15.3 million for the fourth quarter of 2012 from $20.4 million for the third quarter and decreased $0.7 million from $16.0 million for the fourth quarter of 2011. The decrease in the fourth quarter was driven by a $4.9 million decline in investment securities gains, a quarter over quarter change in FDIC indemnification asset accretion of $0.5 million and the absence of $3.5 million of legal and insurance settlement gains recognized in the third quarter. These declines were offset by a $2.3 million increase in service charges on deposits income, debit card income and fees on mortgage loans sold, coupled with the addition of Southern Community.
Provision for Loan Losses and Credit Quality
The provision for loan losses of $4.4 million recorded for the fourth quarter of 2012 includes approximately a $3.0 million provision for newly originated loans (including the impact of charge-offs of $1.0 million) and an $1.4 million impairment primarily reflecting declines in appraised values and lower expectations for future cash flows from certain residential and construction loans.
The provision for newly originated loans served to increase the allowance to 1.05% of $1.4 billion in originated loans outstanding.
During the fourth quarter, non-performing loans declined from 8.3% to 7.8% of total loans. Acquired impaired loans greater than 90 days past due and still accruing decreased by 7.1% excluding the $49.4 million resulting from the acquisition of Southern Community. Combined, loans greater than 90 days past due and accruing increased by $26.2 million to $352.7 million at the end of the quarter. Nonaccrual loans increased by $2.9 million to $14.0 million during the quarter.
Non-interest expense decreased to $68.4 million for the fourth quarter of 2012 from $69.6 million for the third quarter and increased from $60.4 for the fourth quarter of 2011. The main driver of the decrease for the quarter was the absence of $2.9 million in losses on extinguishment of debt and $1.8 million of legal settlement expenses as compared to the third quarter along with a decline of $2.6 million in merger, legal, severance and conversion related expense. These reductions were, in part, offset by the addition of Southern Community's operating expenses.
Total assets increased by $1.1 billion to $7.3 billion as of December 31, 2012 from $6.2 billion as of September 30, 2012 due mainly to the addition of approximately $1.3 billion of assets from Southern Community, net of additional paid in capital.
Cash and cash equivalents increased from $462.2 million to $734.9 million as of December 31, 2012, despite payments to acquire Southern Community and pay off its TARP-related securities and FHLB borrowings. The Company's investment securities available for sale was $1.0 billion at December 31, 2012.
Total shareholders' equity increased by $5.9 million during the quarter to $1.2 billion at December 31, 2012. Tangible book value per share was $17.74 as of December 31, 2012.
The Company's national bank subsidiary, Capital Bank N.A., reported Tier 1, Tier 1 Risk-Based and Total Risk-Based capital ratios of 11.7%, 17.1% and 18.3%, respectively, as of December 31, 2012.
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) 325-2455, and the confirmation pass code is 1007414. Please dial in 10 minutes prior to the beginning of the call. A 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. A telephonic replay of the conference call will be available through February 6, 2013, by dialing (719) 457-0820 and entering pass code 1007414. 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 prospectus 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 statements regarding: (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 the acquired business into our business model; (7) projected population and income growth in our targeted market areas; and (8) 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.
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 approximately $7.3 billion in total assets as of December 31, 2012 and 164 full-service banking offices throughout Florida, North Carolina, South Carolina, Tennessee and Virginia. To learn more about Capital Bank, N.A., please visit www.capitalbank-us.com.
CAPITAL BANK FINANCIAL CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
For the Quarter Ended
December 31, 2012
September 30, 2012
June 30, 2012
March 31, 2012
December 31, 2011
Interest and dividend income
NET INTEREST INCOME
Provision for loan losses
Service charges on deposit accounts
Debit card income
Fees on mortgage loans sold
Investment advisory and trust fees
FDIC indemnification asset accretion
Investment securities gains, net
Other-than-temporary impairment losses on investments:
Gross impairment loss
Less: Impairments recognized in other comprehensive income
Net impairment losses recognized in earnings
Total non-interest income
Salaries & employee benefits
Net occupancy expense
Foreclosed asset related expense
Conversion and merger related expenses
Loan workout expenses
Loss on extinguishment of debt
Legal settlement expense
Impairment of intangible asset
Total non-interest expense
Income before income taxes
Income tax (benefit) expense
NET INCOME BEFORE ATTRIBUTION OF NONCONTROLLING INTERESTS
Net income attributable to non-controlling interests
Net income attributable to Capital Bank Financial Corp.
BASIC EARNINGS PER COMMON SHARE:
DILUTED EARNINGS PER COMMON SHARE:
CAPITAL BANK FINANCIAL CORP
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands, except per share data)