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

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 expense12,044 10,821 9,927 8,302 8,064
Net interest income85,242 82,116 77,819 62,627 61,515
Provision for loan and lease losses2,303 3,392 1,980 586 1,172
Net interest income after provision for loan and lease losses82,939 78,724 75,839 62,041 60,343
Non-interest income
Service charges on deposit accounts5,237 5,375 5,949 4,777 4,486
Debit card income5,051 4,765 4,211 3,389 3,235
Fees on mortgage loans originated and sold1,150 1,248 1,402 1,334 1,140
Investment advisory and trust fees596 641 591 290 455
Investment securities gains, net70 67 1,894 71 117
Other income3,896 3,756 2,969 2,509 2,489
Total non-interest income16,000 15,852 17,016 12,370 11,922
Non-interest expense
Salaries and employee benefits27,662 29,166 26,134 20,935 20,139
Stock-based compensation expense964 900 531 790 467
Net occupancy and equipment expense8,826 8,992 8,374 7,340 7,355
Computer services4,280 3,873 4,364 3,153 3,274
Software expense2,573 2,662 2,391 1,948 2,000
Telecommunication expense1,939 2,424 2,147 1,790 1,558
OREO valuation expense262 247 677 742 1,119
Net gains on sales of OREO(204) (308) (150) (159) (413)
Foreclosed asset related expense376 364 513 397 399
Loan workout expense281 201 327 206 71
Conversion and merger related expense, net981 3,037 18,525 394 1,236
Professional fees1,800 2,096 1,761 1,642 1,353
Restructuring charges, net2,978 1,912 4 (113) 5
Legal settlement expense45 1,361 1,500
Regulatory assessments1,145 719 1,092 841 1,259
Other expense7,077 6,418 5,943 6,124 4,714
Total non-interest expense60,985 62,703 73,994 47,530 44,536
Income before income taxes37,954 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:
Basic51,683 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 banks49,247 60,413 201,348
Total cash and cash equivalents155,411 160,547 309,055
Trading securities4,290 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 sale3,533 4,980 12,874
Loans, net of deferred loan costs and fees7,566,581 7,506,975 7,393,318
Less: Allowance for loan and lease losses44,638 43,891 43,065
Loans, net7,521,943 7,463,084 7,350,253
Other real estate owned41,364 51,050 53,482
Premises and equipment, net184,939 199,167 205,425
Goodwill234,158 234,158 235,500
Intangible assets, net29,750 31,553 33,370
Deferred income tax asset, net134,452 146,724 150,272
Bank owned life insurance100,672 100,251 99,702
Other assets107,066 101,862 100,724
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 demand1,884,674 1,960,187 1,930,143
Money market1,828,889 1,821,474 1,725,838
Savings480,590 496,230 497,171
Time deposits2,218,444 2,134,473 2,137,312
Total deposits8,075,013 8,092,607 7,880,628
Federal Home Loan Bank advances470,600 490,650 545,701
Short-term borrowings32,637 21,125 19,157
Long-term borrowings118,096 117,272 116,456
Accrued expenses and other liabilities65,271 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 capital1,371,224 1,369,689 1,368,459
Retained earnings279,914 262,443 247,758
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’ equity1,332,084 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 ratio60.24% 64.00% 78.02% 63.38% 60.65%
Average interest-earning assets to average interest-bearing liabilities130.70% 129.53% 130.22% 131.43% 131.21%
Average loans receivable to average deposits93.97% 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 liabilities0.69% 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 receivable0.90% 0.95% 1.01% 1.02% 1.13%
Nonperforming assets to total assets1.09% 1.22% 1.30% 1.37% 1.44%
ALLL to nonperforming assets40.64% 35.73% 33.45% 41.29% 40.98%
ALLL to loans held for investment0.59% 0.58% 0.58% 0.75% 0.78%
Annualized net charge-offs/average loans0.08% 0.14% 0.17% 0.10% 0.11%
Capital Ratios (Company) (2)
Total average shareholders’ equity to total average assets13.1% 13.1% 13.2% 13.5% 13.5%
Tier 1 leverage capital ratio11.8% 11.6% 12.2% 12.9% 12.6%
Tier 1 common capital ratio12.5% 12.2% 12.4% 13.3% 13.4%
Tier 1 risk-based capital ratio13.8% 13.4% 13.5% 14.4% 14.6%
Total risk-based capital ratio14.3% 14.0% 14.0% 15.1% 15.3%
Capital Ratios (Bank) (2)
Tier 1 leverage capital ratio10.7% 10.7% 11.2% 10.5% 10.4%
Tier 1 common capital ratio12.6% 12.3% 12.4% 12.0% 12.0%
Tier 1 risk-based capital ratio12.6% 12.3% 12.4% 12.0% 12.0%
Total risk-based capital ratio13.1% 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 land384,581 350,401 327,622 222,794 212,315
Multifamily commercial real estate147,365 115,996 117,515 76,296 74,328
1-4 family residential construction and land153,761 157,920 140,030 111,954 100,306
Total commercial real estate1,951,283 1,811,661 1,716,050 1,331,565 1,278,779
Owner occupied commercial real estate1,287,811 1,313,086 1,321,405 1,072,586 1,075,306
Commercial and industrial1,424,862 1,443,828 1,468,874 1,458,523 1,448,698
Lease financing 525 877
Total commercial2,712,673 2,756,914 2,790,279 2,531,634 2,524,881
1-4 family residential1,782,799 1,787,097 1,714,702 1,168,468 1,039,309
Home equity loans489,497 502,099 507,759 364,117 364,169
Indirect auto loans174,861 199,951 226,717 254,736 285,618
Other consumer loans220,946 222,824 222,255 94,277 85,964
Total consumer2,668,103 2,711,971 2,671,433 1,881,598 1,775,060
Other238,055 231,409 228,430 191,136 166,185
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 demand1,884,674 1,960,187 1,930,143 1,463,520 1,456,558
Money market1,678,842 1,746,444 1,651,023 1,166,918 1,105,460
Savings480,590 496,230 497,171 401,205 403,106
Total core deposits5,706,522 5,883,104 5,668,501 4,239,443 4,137,605
Wholesale money market150,047 75,030 74,815 125,030 50,015
Time deposits2,218,444 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 RATIOThree 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 income16,000 15,852 17,016 12,370 11,922
Less: Securities gains, net70 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 deductible1,218 280 61 355
Restructuring expense, net2,978 1,912 4 (113) 5
Legal settlement45 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

Source:Capital Bank Financial Corp.