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Capital Bank Financial Corp. Reports Third Quarter GAAP EPS of $0.48 and Core EPS of $0.50

CHARLOTTE, N.C., Oct. 19, 2017 (GLOBE NEWSWIRE) -- Capital Bank Financial Corp. (Nasdaq:CBF) (the “Company”) today reported third quarter GAAP net income of $25.8 million, which increased 8% quarter over quarter. GAAP net income per diluted share was $0.48. Core net income decreased to $26.5 million, down 1% quarter over quarter. Core net income per diluted share was $0.50. Core pre-tax adjustments for the third quarter of 2017 included $0.6 million of branch closure expenses and $0.6 million of merger related expenses, partially offset by $0.1 million net gain on investment securities. The reconciliation of non-GAAP financial measures (including core net income and core net income per diluted share) are included in tabular form at the end of this release.

Highlights of the quarter include:

  • Reported ROA of 1.02%, up 7 bps quarter over quarter;
  • Reported efficiency ratio of 56.6%; down 365 bps quarter over quarter;
  • Sustained only temporary disruption in our branch network associated with Hurricane Irma and reopened all but two offices within a matter of days;
  • Shareholders voted to approve merger with First Horizon National Corporation; and
  • Declared quarterly dividend of $0.12 per common share.

“We are working hard to prepare for the merger with First Horizon, while at the same time sustaining profitability and customer momentum,” said Gene Taylor, Chairman and Chief Executive Officer of Capital Bank Financial Corp.

“We achieved strong results in the third quarter, which are in line with the goals we outlined at the beginning of the year. We also made significant progress in planning our integration with First Horizon, and we are well positioned to continue our momentum following our close,” added Chris Marshall, Chief Financial Officer of Capital Bank Financial Corp.

Hurricane Irma

On September 10, 2017, Hurricane Irma struck the south coast of Florida, temporarily disrupting our branch network. However within a matter of days, all but two of our offices were back open and assisting customers, while the remaining two offices will open during the fourth quarter. The Company incurred property costs associated with Hurricane Irma of approximately $0.2 million, which are reflected in third quarter results. The Company has also reviewed its lending and deposit portfolio and determined no impairment was indicated at this time as a result of Hurricane Irma. In working with its borrowers and depositors affected by this hurricane, the Company has entered into temporary payment deferral agreements of 90 days or less on loans covering $78.6 million of outstanding principle. Each of these loans were assessed individually and were determined to not be a troubled debt restructuring. The review process is on-going and we will continue to monitor the impact on our loan portfolio.

Loan Portfolio and Composition

During the third quarter, the loan portfolio increased by $42.5 million to $7.6 billion, consisting of a $53.1 million increase in commercial real estate and commercial and industrial loans, a $14.0 million decrease in consumer loans, and a $3.4 million increase in other loans. New loan production of $485.4 million was offset by payoffs of $408.7 million and special assets resolutions of $34.2 million.

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

Sep 30,
2017
Jun 30,
2017
Dec 31,
2016
Commercial real estate 26% 26% 23%
C&I 36% 36% 38%
Consumer 35% 35% 36%
Other 3% 3% 3%
Total 100% 100% 100%

Deposits Composition and Cost of Funds

During the third quarter, total deposits increased by $46.6 million sequentially to $8.1 billion. The cost of total deposits increased by seven basis points sequentially to 0.48% and increased seven basis points year over year.

Net Interest Income and Net Interest Margin

Net interest income increased $0.7 million to $85.9 million from $85.2 million for the second quarter of 2017 and increased $23.3 million from $62.6 million for the third quarter of 2016. The year over year increase was mainly due to the acquisition of CommunityOne. The net interest margin for the third quarter of 2017 was 3.71%, a decline of four basis points sequentially and an increase of 13 basis points year over year.

Non-Interest Income

Non-interest income declined $1.2 million to $14.8 million from $16.0 million for the second quarter of 2017 and increased $2.4 million from $12.4 million for the third quarter of 2016. The year over year increase was mainly due to the acquisition of CommunityOne and includes a $1.4 million increase in debit card income, a $0.6 million increase in other income (includes BOLI, credit card and merchant service income), and a $0.5 million increase in service charges.

Provision for Loan and Lease Losses and Credit Quality

The provision of $3.0 million recorded for the third quarter of 2017 included a $2.8 million provision for non-purchased credit impaired loans and a $0.2 million provision on purchased credit impaired loans. Net charge-offs for the third quarter of 2017 were $2.3 million, $0.7 million higher than the second quarter of 2017.

At September 30, 2017, the allowance for loan and lease losses was $45.4 million, of which $24.2 million related to purchase credit impaired loans and $21.2 million related to non-purchased credit impaired loans. The allowance for loan and lease losses represents 0.60% of the Company’s total $7.6 billion loan portfolio.

At September 30, 2017, non-performing loans were $63.8 million, or 0.84% of loans, and decreased 6.48% from June 30, 2017, mainly as a result of resolutions and upgrades. The balance on non-performing loans increased 5.72% from September 30, 2016, due primarily to the acquisition of CommunityOne.

Non-Interest Expense

Non-interest expense declined $4.0 million to $57.0 million from $61.0 million for the second quarter of 2017 and increased $9.5 million from $47.5 million for the third quarter of 2016. Contributing to the sequential decrease was a decrease of $2.4 million in restructuring charges related to branch closures during the second quarter, a $1.0 million decrease in salaries and benefits and a $0.5 million decrease in computer services as part of cost savings initiatives. Partially offsetting the sequential decrease was a $0.5 million increase in stock based compensation. The year over year increase was mainly due to increases of $5.8 million in salaries and benefit expense and $1.6 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 $14.9 million for the third quarter of 2017 with an effective tax rate of 37%, compared to $14.1 million and 37% for the second quarter of 2017. Income tax expense was $8.4 million and an effective tax rate of 31% for the third quarter of 2016.

Financial Position

Total assets increased by $46.3 million to $10.1 billion as of September 30, 2017, from $10.1 billion as of June 30, 2017. During the quarter, the Company’s loan portfolio increased $42.5 million to $7.6 billion. Total deposits increased by $46.6 million to $8.1 billion. Core deposits include all checking, savings and money market accounts, excluding brokered, and represent 70% of total deposits. FHLB borrowings decreased $30.1 million. Book value per share was $26.04 as of September 30, 2017, an increase of $0.42 and $2.22 from June 30, 2017 and September 30, 2016, respectively. Tangible book value per share was $21.26 as of September 30, 2017, an increase of $0.50 and $0.73 from June 30, 2017 and September 30, 2016, respectively. During the third quarter, the Company did not repurchase shares of common stock. 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 November 13, 2017, to shareholders of record as of November 3, 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 September 30, 2017, and 178 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
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Interest and dividend income$99,711 $97,286 $92,937 $87,746 $70,929
Interest expense13,795 12,044 10,821 9,927 8,302
Net interest income85,916 85,242 82,116 77,819 62,627
Provision for loan and lease losses3,042 2,303 3,392 1,980 586
Net interest income after provision for loan and lease losses82,874 82,939 78,724 75,839 62,041
Non-interest income
Service charges on deposit accounts5,311 5,237 5,375 5,949 4,777
Debit card income4,822 5,051 4,765 4,211 3,389
Fees on mortgage loans originated and sold931 1,150 1,248 1,402 1,334
Investment advisory and trust fees537 596 641 591 290
Investment securities gains, net98 70 67 1,894 71
Other income3,074 3,896 3,756 2,969 2,509
Total non-interest income14,773 16,000 15,852 17,016 12,370
Non-interest expense
Salaries and employee benefits26,708 27,662 29,166 26,134 20,935
Stock-based compensation expense1,441 964 900 531 790
Net occupancy and equipment expense8,894 8,826 8,992 8,374 7,340
Computer services3,794 4,280 3,873 4,364 3,153
Software expense2,524 2,573 2,662 2,391 1,948
Telecommunication expense1,968 1,939 2,424 2,147 1,790
OREO valuation expense249 262 247 677 742
Net losses (gains) on sales of OREO1 (204) (308) (150) (159)
Foreclosed asset related expense487 376 364 513 397
Loan workout expense281 281 201 327 206
Conversion and merger related expense, net591 981 3,037 18,525 394
Professional fees2,071 1,800 2,096 1,761 1,642
Restructuring charges, net595 2,978 1,912 4 (113)
Legal settlement expense 45 1,361 1,500
Regulatory assessments1,020 1,145 719 1,092 841
Other expense6,360 7,077 6,418 5,943 6,124
Total non-interest expense56,984 60,985 62,703 73,994 47,530
Income before income taxes40,663 37,954 31,873 18,861 26,881
Income tax expense (1)14,905 14,148 10,990 6,509 8,370
Net income (1)$25,758 $23,806 $20,883 $12,352 $18,511
Earnings per share:
Basic (1)$0.50 $0.46 $0.40 $0.25 $0.43
Diluted (1)$0.48 $0.45 $0.39 $0.24 $0.42
Weighted average shares outstanding:
Basic51,705 51,683 51,634 49,334 43,028
Diluted (1)53,226 53,226 53,127 50,722 44,118

(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 September 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. See "Adoption of New Accounting Guidance" above for additional information.

CAPITAL BANK FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands)
(Unaudited)
Sep 30,
2017
Jun 30,
2017
Dec 31,
2016
Assets
Cash and due from banks$97,147 $106,164 $107,707
Interest-bearing deposits in other banks86,982 49,247 201,348
Total cash and cash equivalents184,129 155,411 309,055
Trading securities4,458 4,290 3,791
Investment securities available-for-sale at fair value (amortized cost $1,161,024, $1,152,613, and $927,266, respectively)1,155,694 1,145,712 912,250
Investment securities held-to-maturity at amortized cost (fair value $415,238, $431,269, and $460,911, respectively)412,051 430,411 463,959
Loans held for sale3,060 3,533 12,874
Loans, net of deferred loan costs and fees7,609,540 7,566,581 7,393,318
Less: Allowance for loan and lease losses45,428 44,638 43,065
Loans, net7,564,112 7,521,943 7,350,253
Other real estate owned44,416 41,364 53,482
Premises and equipment held for sale17,378 18,494 2,599
Premises and equipment, net183,734 184,939 205,425
Goodwill231,292 234,158 235,500
Intangible assets, net27,938 29,750 33,370
Deferred income tax asset, net113,073 134,452 150,272
Bank owned life insurance100,611 100,672 99,702
Other assets98,039 88,572 98,125
Total Assets$10,139,985 $10,093,701 $9,930,657
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Non-interest bearing demand$1,631,526 $1,662,416 $1,590,164
Interest bearing demand1,846,172 1,884,674 1,930,143
Money market1,885,180 1,828,889 1,725,838
Savings471,931 480,590 497,171
Time deposits2,286,815 2,218,444 2,137,312
Total deposits8,121,624 8,075,013 7,880,628
Federal Home Loan Bank advances440,549 470,600 545,701
Short-term borrowings34,802 32,637 19,157
Long-term borrowings118,929 118,096 116,456
Accrued expenses and other liabilities69,462 65,271 76,668
Total liabilities$8,785,366 $8,761,617 $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, 50,632 issued and 39,365 outstanding, 46,624 issued 35,357 outstanding, and 46,178 issued and 34,911 outstanding, respectively.506 466 462
Common stock-Class B $0.01 par value: 200,000 shares authorized, 14,435 issued and 12,661 outstanding, 18,407 issued and 16,634 outstanding, and 18,627 issued and 16,854 outstanding, respectively.144 184 186
Additional paid in capital1,373,227 1,371,224 1,368,459
Retained earnings299,432 279,914 247,758
Accumulated other comprehensive loss(6,306) (7,320) (12,434)
Treasury stock, at cost, 13,040, 13,040, and 13,040 shares, respectively(312,384) (312,384) (312,384)
Total shareholders’ equity1,354,619 1,332,084 1,292,047
Total Liabilities and Shareholders’ Equity$10,139,985 $10,093,701 $9,930,657


CAPITAL BANK FINANCIAL CORP.
KEY METRICS
(Dollars in thousands)
(Unaudited)
Three Months Ended
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Performance Ratios
Interest rate spread (1)3.53% 3.59% 3.58% 3.53% 3.43%
Net interest margin (1)3.71% 3.75% 3.73% 3.67% 3.58%
Return on average assets (2)1.02% 0.95% 0.84% 0.53% 0.98%
Return on average shareholders’ equity (2)7.66% 7.20% 6.43% 4.03% 7.25%
Efficiency ratio56.59% 60.24% 64.00% 78.02% 63.38%
Average interest-earning assets to average interest-bearing liabilities131.12% 130.70% 129.53% 130.22% 131.43%
Average loans receivable to average deposits93.46% 93.97% 93.41% 94.57% 98.46%
Yield on interest-earning assets (1)4.31% 4.27% 4.21% 4.13% 4.05%
Cost of interest-bearing liabilities0.78% 0.69% 0.63% 0.61% 0.62%
Asset and Credit Quality Ratios-Total Loans
Non-accrual loans$18,126 $13,821 $13,608 $11,449 $11,873
Nonperforming purchase credit impaired loans$45,674 $54,399 $57,969 $63,668 $48,477
Nonperforming loans to loans receivable0.84% 0.90% 0.95% 1.01% 1.02%
Nonperforming assets to total assets1.07% 1.09% 1.22% 1.30% 1.37%
ALLL to nonperforming assets41.85% 40.64% 35.73% 33.45% 41.29%
ALLL to loans held for investment0.60% 0.59% 0.58% 0.58% 0.75%
Annualized net charge-offs/average loans0.12% 0.08% 0.14% 0.17% 0.10%

(1) Presented on a fully tax equivalent basis.
(2) 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 September 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 the three months ended September 30, 2016. See "Adoption of New Accounting Guidance" above for additional information.

CAPITAL BANK FINANCIAL CORP.
LOANS AND DEPOSITS
(Dollars in thousands)
(Unaudited)
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Loans
Non-owner occupied commercial real estate$1,293,647 $1,265,576 $1,187,344 $1,130,883 $920,521
Other commercial construction and land402,250 384,581 350,401 327,622 222,794
Multifamily commercial real estate148,192 147,365 115,996 117,515 76,296
1-4 family residential construction and land143,807 153,761 157,920 140,030 111,954
Total commercial real estate1,987,896 1,951,283 1,811,661 1,716,050 1,331,565
Owner occupied commercial real estate1,226,211 1,287,811 1,313,086 1,321,405 1,072,586
Commercial and industrial1,502,939 1,424,862 1,443,828 1,468,874 1,458,523
Lease financing 525
Total commercial2,729,150 2,712,673 2,756,914 2,790,279 2,531,634
1-4 family residential1,787,690 1,782,799 1,787,097 1,714,702 1,168,468
Home equity loans481,696 489,497 502,099 507,759 364,117
Indirect auto loans155,371 174,861 199,951 226,717 254,736
Other consumer loans229,357 220,946 222,824 222,255 94,277
Total consumer2,654,114 2,668,103 2,711,971 2,671,433 1,881,598
Other241,440 238,055 231,409 228,430 191,136
Total loans$7,612,600 $7,570,114 $7,511,955 $7,406,192 $5,935,933
Deposits
Non-interest bearing demand$1,631,526 $1,662,416 $1,680,243 $1,590,164 $1,207,800
Interest bearing demand1,846,172 1,884,674 1,960,187 1,930,143 1,463,520
Money market1,735,107 1,678,842 1,746,444 1,651,023 1,166,918
Savings471,931 480,590 496,230 497,171 401,205
Total core deposits5,684,736 5,706,522 5,883,104 5,668,501 4,239,443
Wholesale money market150,073 150,047 75,030 74,815 125,030
Time deposits2,286,815 2,218,444 2,134,473 2,137,312 1,668,784
Total deposits$8,121,624 $8,075,013 $8,092,607 $7,880,628 $6,033,257


CAPITAL BANK FINANCIAL CORP.
QUARTERLY AVERAGE BALANCES AND YIELDS
(Dollars in thousands)
(Unaudited)
Three Months Ended
September 30, 2017
Three Months Ended
June 30, 2017
Average
Balances
Interest Yield /
Rate
Average
Balances
Interest Yield /
Rate
Interest earning assets
Loans (1) $7,557,263 $90,064 4.73% $7,515,169 $86,405 4.61%
Investment securities (1) 1,589,185 9,704 2.42% 1,596,382 11,005 2.77%
Interest bearing deposits in other banks 68,435 198 1.15% 42,140 93 0.89%
Other earning assets (2) 28,249 367 5.15% 32,074 388 4.85%
Total interest earning assets (1) 9,243,132 $100,333 4.31% 9,185,765 $97,891 4.27%
Non-interest earning assets 857,224 884,900
Total assets $10,100,356 $10,070,665
Interest bearing liabilities
Time deposits $2,274,258 $5,896 1.03% $2,152,086 $4,789 0.89%
Money market 1,858,223 2,451 0.52% 1,787,200 1,963 0.44%
Interest bearing demand 1,839,844 1,296 0.28% 1,914,622 1,255 0.26%
Savings 477,530 219 0.18% 488,123 220 0.18%
Total interest bearing deposits 6,449,855 9,862 0.61% 6,342,031 8,227 0.52%
Short-term borrowings and FHLB advances 480,830 1,457 1.20% 568,575 1,433 1.01%
Long-term borrowings 118,423 2,476 8.30% 117,576 2,384 8.13%
Total interest bearing liabilities 7,049,108 13,795 0.78% 7,028,182 12,044 0.69%
Non-interest bearing demand 1,636,625 1,655,233
Other liabilities 70,245 64,318
Shareholders’ equity 1,344,378 1,322,932
Total liabilities and shareholders’ equity $10,100,356 $10,070,665
Net interest income and spread (1) $86,538 3.53% $85,847 3.59%
Net interest margin (1) 3.71% 3.75%
Net interest income (FTE) (1) $86,538 $85,847
Tax equivalent adjustment (622) (605)
Net interest income $85,916 $85,242

(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
September 30, 2017
Three Months Ended
September 30, 2016
Average
Balances
Interest Yield /
Rate
Average
Balances
Interest Yield /
Rate
Interest earning assets
Loans (1) $7,557,263 $90,064 4.73% $5,786,171 $64,055 4.40%
Investment securities (1) 1,589,185 9,704 2.42% 1,133,031 6,924 2.43%
Interest bearing deposits in other banks 68,435 198 1.15% 60,373 69 0.45%
Other earning assets (2) 28,249 367 5.15% 29,788 337 4.50%
Total interest earning assets (1) 9,243,132 $100,333 4.31% 7,009,363 $71,385 4.05%
Non-interest earning assets 857,224 583,413
Total assets $10,100,356 $7,592,776
Interest bearing liabilities
Time deposits $2,274,258 $5,896 1.03% $1,613,502 $3,992 0.98%
Money market 1,858,223 2,451 0.52% 1,225,743 1,132 0.37%
Interest bearing demand 1,839,844 1,296 0.28% 1,444,305 752 0.21%
Savings 477,530 219 0.18% 404,187 205 0.20%
Total interest bearing deposits 6,449,855 9,862 0.61% 4,687,737 6,081 0.52%
Short-term borrowings and FHLB advances 480,830 1,457 1.20% 558,313 635 0.45%
Long-term borrowings 118,423 2,476 8.30% 87,095 1,586 7.24%
Total interest bearing liabilities 7,049,108 13,795 0.78% 5,333,145 8,302 0.62%
Non-interest bearing demand 1,636,625 1,188,771
Other liabilities 70,245 48,997
Shareholders’ equity 1,344,378 1,021,863
Total liabilities and shareholders’ equity $10,100,356 $7,592,776
Net interest income and spread (1) $86,538 3.53% $63,083 3.43%
Net interest margin (1) 3.71% 3.58%
Net interest income (FTE) (1) $86,538 $63,083
Tax equivalent adjustment (622) (456)
Net interest income $85,916 $62,627

(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)
Nine Months Ended
September 30, 2017
Nine Months Ended
September 30, 2016
Average
Balances
Interest Yield /
Rate
Average
Balances
Interest Yield /
Rate
Interest earning assets
Loans (1) $7,494,448 $260,222 4.64% $5,684,143 $190,063 4.47%
Investment securities (1) 1,562,781 30,022 2.57% 1,129,129 20,020 2.37%
Interest bearing deposits in other banks 56,319 388 0.92% 66,100 227 0.46%
Other earning assets (2) 29,789 1,113 4.99% 27,216 981 4.81%
Total interest earning assets (1) 9,143,337 $291,745 4.27% 6,906,588 $211,291 4.09%
Non-interest earning assets 883,562 602,904
Total assets $10,026,899 $7,509,492
Interest bearing liabilities
Time deposits $2,189,869 $15,224 0.93% $1,640,959 $12,130 0.99%
Money market 1,807,885 6,171 0.46% 1,219,227 3,227 0.35%
Interest bearing demand 1,892,081 3,689 0.26% 1,422,389 2,149 0.20%
Savings 486,668 659 0.18% 411,729 640 0.21%
Total interest bearing deposits 6,376,503 25,743 0.54% 4,694,304 18,146 0.52%
Short-term borrowings and FHLB advances 514,303 3,777 0.98% 501,892 1,680 0.45%
Long-term borrowings 117,587 7,140 8.12% 86,860 4,644 7.14%
Total interest bearing liabilities 7,008,393 36,660 0.70% 5,283,056 24,470 0.62%
Non-interest bearing demand 1,629,334 1,171,599
Other liabilities 66,787 44,593
Shareholders’ equity 1,322,385 1,010,244
Total liabilities and shareholders’ equity $10,026,899 $7,509,492
Net interest income and spread (1) $255,085 3.57% $186,821 3.47%
Net interest margin (1) 3.73% 3.61%
Net interest income (FTE) (1) $255,085 $186,821
Tax equivalent adjustment (1,811) (1,312)
Net interest income $253,274 $185,509

(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
Sep 30, 2017 Jun 30, 2017 Dec 31, 2016
Net Income (1) $25,758 $25,758 $23,806 $23,806 $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) (98) (61) (70) (43) (1,894) (1,170)
Non-interest expense
Conversion and merger related expense tax deductible, net (2) 589 364 (237) (146) 18,245 11,270
Conversion and merger related expense non-tax deductible 2 2 1,218 1,218 280 280
Restructuring expense (2) 595 367 2,978 1,840 4 3
Legal Settlement (2) 45 28 1,361 841
Tax Adjustment (1,350) (1,350)
Severance expense (2) 33 21 7 4
Tax effect of adjustments (2) (428) N/A (1,037) N/A (6,775) N/A
Core Net Income (1) $26,451 $26,451 $26,703 $26,703 $22,230 $22,230
Diluted shares (1) 53,226 53,226 50,722
Core Net Income per share (1) $0.50 $0.50 $0.44
Average Assets 10,100,356 10,070,665 9,329,334
ROA (1) (3) 1.02% 0.95% 0.53%
Core ROA (1) (4) 1.05% 1.06% 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
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Net interest income$85,916 $85,242 $82,116 $77,819 $62,627
Reported non-interest income14,773 16,000 15,852 17,016 12,370
Less: Securities gains, net98 70 67 1,894 71
Core non-interest income$14,675 $15,930 $15,785 $15,122 $12,299
Reported non-interest expense$56,984 $60,985 $62,703 $73,994 $47,530
Less: Conversion and merger related expense tax deductible, net589 (237) 3,037 18,245 331
Conversion and merger related expense non-tax deductible2 1,218 280 61
Restructuring expense, net595 2,978 1,912 4 (113)
Legal settlement 45 1,361 1,500
Severance expense33 7
Core non-interest expense$55,765 $56,981 $57,754 $54,097 $45,751
Efficiency ratio (1)56.59% 60.24% 64.00% 78.02% 63.38%
Core efficiency ratio (2)55.44% 56.32% 58.99% 58.21% 61.06%

(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
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Total shareholders’ equity $1,354,619 $1,332,084 $1,307,931 $1,292,047 $1,029,841
Less: goodwill (231,292) (234,158) (234,158) (235,500) (134,522)
Less: intangibles (27,938) (29,750) (31,553) (33,370) (12,288)
Tax effect on intangible assets (1) 10,480 11,159 12,003 12,694 4,669
Tangible book value (2) $1,105,869 $1,079,335 $1,054,223 $1,035,871 $887,700
Common shares outstanding 52,027 51,991 51,966 51,765 43,235
Book Value per share $26.04 $25.62 $25.17 $24.96 $23.82
Tangible book value per share $21.26 $20.76 $20.29 $20.01 $20.53

(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.