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GREEN BANKSHARES INC
Symbol U : GRNB
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Green Bankshares Reports Financial Results for the Second Quarter 2012

2012-08-08 23:43 ET - News Release

GREENEVILLE, TN -- (Marketwire) -- 08/08/12

Green Bankshares, Inc. (NASDAQ: GRNB), a majority-owned subsidiary of Capital Bank Financial Corp. ("CBF," formerly known as North American Financial Holdings, Inc.), today reported unaudited financial results for the second quarter of 2012. Operating and financial highlights include the following:

  • Regarding the periods subsequent to the September 7, 2011 CBF investment, the Company reported net income of $3.0 million, or $0.02 per diluted share, for the second quarter of 2012, a decrease of approximately $224,000 from first quarter 2012 net income of $3.3 million or $0.02 per diluted share. The Company reported a net loss available to common shareholders of $12.4 million, or $0.94 per diluted share, for the second quarter of 2011.

  • The Company held a 34% ownership in Capital Bank, National Association ("Capital Bank, NA") as of June 30, 2012. CBF is the controlling owner of Capital Bank, NA, a $6.3 billion bank with 143 branches in Florida, North Carolina, South Carolina, Tennessee and Virginia.

  • As previously announced, CBF agreed to acquire 100% of Southern Community Financial Corp., which it expects to close, pending shareholder and regulatory approvals, during the third quarter of 2012. Upon closing, Southern Community's regulated subsidiary, Southern Community Bank and Trust, will be merged into Capital Bank, NA.

  • The Company increased the equity investment balance in Capital Bank, NA by $3.8 million based on its equity in Capital Bank, NA's net income and increased the equity investment balance by $2.0 million based on its equity in Capital Bank, NA's other comprehensive income in the second quarter of 2012.

"Our team has been working hard in planning for the pending acquisition of Southern Community Financial Corp. While shareholder and regulatory approvals are still pending, Southern Community will expand the Bank's franchise throughout North Carolina, where we see significant growth opportunities. Our recent renegotiation of the investment agreement to change the consideration mix to 100% cash represents our continued commitment to this strategic complement to our organization and eliminates obstacles on the road to a successful merger," stated Gene Taylor, Chairman and Chief Executive Officer of the Company and Capital Bank.

"Our strongest quarter to date for organic loan production, successes in resolution of problem assets and continued aggressive deposit repricing resulted in continued improvement in the Bank's loan mix, net interest margin and profitability. The consolidation of certain duplicative functions during the second quarter is expected to result in further improvement of our efficiency ratio and our overall returns," commented Chris Marshall, Chief Financial Officer of the Company and Capital Bank.

As previously announced, CBF agreed to acquire 100% of Southern Community Financial Corp., which it expects to close, pending shareholder and regulatory approvals, during the third quarter of 2012. Upon closing, Southern Community's regulated subsidiary, Southern Community Bank and Trust, will be merged into Capital Bank, NA.

Bank Mergers

On September 7, 2011, GreenBank, which was formerly a wholly owned subsidiary of the Company, merged (the "Bank Merger") with and into Capital Bank, NA, a national banking association and subsidiary of TIB Financial Corp. ("TIB Financial"), a corporation organized under the laws of the State of Florida, Capital Bank Corporation, a corporation organized under the laws of the state of North Carolina ("Capital Bank Corp.") and CBF, with Capital Bank, NA as the surviving entity. Through the subsidiary bank mergers the common stock of the subsidiary banks was converted into shares of Capital Bank, NA common stock based on each entity's relative tangible book value. As a result of the mergers of TIB Bank, Capital Bank and Green Bank into Capital Bank, NA, the Company now owns approximately 34% of Capital Bank, NA, with CBF directly owning 19%, Capital Bank Corp. directly owning 26% and TIB Financial owning the remaining 21%. As of June 30, 2012, Capital Bank, NA had total assets of $6.3 billion, total deposits of $5.1 billion and shareholders' equity of $966.5 million. As of June 30, 2012, following the Bank Merger, Capital Bank, NA operated 143 branches in Tennessee, Florida, North Carolina, South Carolina, and Virginia. CBF is the owner of approximately 90% of the Company's common stock, approximately 83% of Capital Bank Corp.'s common stock and approximately 94% of TIB Financial's common stock.

The Company's investment in Capital Bank, NA is recorded as an equity-method investment in that entity. As of June 30, 2012, the Company's investment in Capital Bank, NA totaled $324.3 million, which reflected the Company's pro rata ownership of Capital Bank, NA's total shareholders' equity as a result of the Bank Merger. In periods subsequent to the Bank Merger, the Company will adjust this equity investment balance based on its equity in Capital Bank, NA's net income and comprehensive income. In connection with the Bank Merger, the assets and liabilities of GreenBank were deconsolidated from the Company's balance sheet, resulting in a significant decrease in total assets and total liabilities of the Company in the third quarter of 2011.

Financial Discussion

Financial results for the second quarter of 2012 were significantly impacted by the controlling investment in the Company by CBF pursuant to which the Company applied push-down accounting for adjustments required due to the acquisition method of accounting. Accordingly, the Company's assets and liabilities were adjusted to estimated fair values as of the September 7, 2011 CBF investment date, resulting in elimination of the allowance for loan losses. Financial results prior to the CBF Investment have been labeled with "Predecessor Company" while results subsequent to the CBF Investment have been labeled with "Successor Company."

The Successor Company reported net income of $3.0 million for the second quarter of 2012; these results reflected the Company's $3.8 million equity method income in Capital Bank, NA, $430,000 of non-interest expenses, and a $503,000 tax benefit. In comparison to the first quarter of 2012, the Successor Company reported net income of $3.3 million. The decrease of $0.3 million was mainly driven by a $0.2 million reduction in equity in income in Capital Bank, NA and $0.1 million of merger related expenses stemming from professional service expenses.

Due to the Merger discussed above and the resulting deconsolidation of GreenBank on September 7, 2011, the operating results for the second quarter of 2012 do not include the results of GreenBank and therefore are generally not comparable to results for the second quarter of 2011.

The Predecessor Company reported a net loss available to common shareholders of $12.4 million for the second quarter of 2011. The loss reported in the second quarter of 2011 was primarily due to a $14.3 million provision for loan losses and $6.3 million in foreclosed asset related expenses.

Predecessor Company net interest margin for the second quarter of 2011 was 3.91%. Subsequent to the deconsolidation of GreenBank on September 7, 2011, the net interest margin is not meaningful as the Company has no interest earning assets.

The following table presents summarized financial information for Capital Bank, NA:


                                    Three months ended    Six months ended
                                       June 30, 2012        June 30, 2012

                                   -------------------- --------------------
Interest income                    $             72,893 $            147,025
Interest expense                                  8,000               16,725
                                   -------------------- --------------------
Net interest income                              64,893              130,300
Provision for loan losses                         6,608               11,984
Non-interest income                              12,298               26,912
Non-interest expense                             52,799              108,017
Net income                                       11,326               23,234

Potential Merger of the Company and CBF

On September 8, 2011, the Boards of Directors of CBF and the Company approved and adopted a merger agreement. The merger agreement provides for the merger, following the receipt of shareholder approval by the Company's shareholders (including CBF), of the Company with and into CBF, with CBF continuing as the surviving entity.

In the merger, each share of the Company's common stock issued and outstanding immediately prior to the completion of the merger, except for shares for which appraisal rights are properly exercised and certain shares held by CBF or the Company, will be converted into the right to receive 0.0915 of a share of CBF Class A common stock. No fractional shares of Class A common stock will be issued in connection with the merger, and holders of the Company's common stock will be entitled to receive cash in lieu thereof.

Since CBF is the majority shareholder of the Company, CBF will be able to determine the outcome of the shareholder vote needed to approve the merger.

About Green Bankshares

Headquartered in Greeneville, Tennessee, Green Bankshares, Inc. is a financial services company with a 34% equity method investment in Capital Bank, NA, a national banking association with approximately $6.3 billion in total assets and 143 branches serving communities in Tennessee, Florida, North Carolina, South Carolina, and Virginia.

To learn more about Capital Bank, NA, visit www.capitalbank-us.com. For more information, contact Christopher G. Marshall, Chief Financial Officer, at (704) 554-5901.

Information in this press release contains forward-looking statements. Such forward looking statements can be identified by the use of forward looking terminology such as "may," "will," "expect," "anticipate," "estimate," "believe," or "continue," or the negative thereof or other variations thereof or comparable terminology. These statements involve risks and uncertainties that could cause actual results to differ materially, including without limitation, market and economic conditions, the management of our growth, the risks associated with Capital Bank NA's loan portfolio and real estate holdings, local economic conditions affecting retail and commercial real estate, the ability to integrate our new management and directors without encountering potential difficulties, the Company's geographic concentration in the southeastern region of the United States, ability to integrate the operations of Green Bank with those of Capital Bank, NA, the potential for the interests of the other shareholders of Capital Bank, NA to differ from those of the Company, restrictions imposed by Capital Bank, NA's loss sharing agreements with the FDIC, the assumptions and judgments required by loss share accounting and the acquisition method of accounting, competition within the industry, dependence on key personnel, government legislation and regulation, the risks associated with identification, completion and integration of any future acquisitions, risks related to Capital Bank NA's technology and information systems, risks associated with the controlling interest of CBF in the Company, and risks associated with the limited liquidity of the Company's common stock. Additional factors that could cause actual results to differ materially are discussed in the Company's filings with the Securities and Exchange Commission, including without limitation its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K. The Company does not undertake a duty to update any forward-looking statements in this press release.

SUPPLEMENTAL FINANCIAL DATA IS ATTACHED



                           GREEN BANKSHARES, INC.
               UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                (Dollars in thousands, except per share data)

                           Successor Company            Predecessor Company
                ------------------------------------------------------------
                  Three     Three                                    Three
                  Months   Months     Three                         Months
                  Ended     Ended    Months   Sept. 8 - July 1 -    Ended
                 June 30, March 31,Ended Dec. Sept. 30, Sept. 7,   June 30,
                   2012     2012    31, 2011    2011      2011       2011
                ------------------------------------------------------------


Interest income       $ -       $ -       $ -       $ -  $ 18,480   $ 26,075
Interest
 expense              841       842       741       236     4,422      6,623
                ------------------------------------------------------------
NET INTEREST
 INCOME
 (EXPENSE)          (841)     (842)     (741)     (236)    14,058     19,452
Provision for
 loan losses            -         -         -         -    15,513     14,333
                ------------------------------------------------------------

NON-INTEREST
 INCOME             3,817     4,011     2,297     1,169    11,940      8,236
NON-INTEREST
 EXPENSE              430       194       188        95    29,585     24,770
                ------------------------------------------------------------
Income (loss)
 before income
 taxes              2,546     2,975     1,368       838  (19,100)   (11,415)
Income tax
 provision
 (benefit)          (503)     (298)     (318)     (123)       974      (281)
                ------------------------------------------------------------
NET INCOME
 (LOSS)             3,049     3,273     1,686       961  (20,074)   (11,134)
Preferred stock
 dividend and
 accretion of
 discount on
 warrants               -         -         -         -     (909)    (1,250)
Gain on
 retirement of
 Series A
 preferred
 allocated to
 common
 stockholders           -         -         -         -    11,188          -
                ------------------------------------------------------------
Net income
 (loss)
 available to
 common
 shareholders     $ 3,049   $ 3,273   $ 1,686     $ 961 $ (9,795) $ (12,384)
                ============================================================

Per Share of
 Common Stock:
  Basic
   earnings
   (loss)          $ 0.02    $ 0.02    $ 0.01    $ 0.01  $ (0.75)   $ (0.94)
  Diluted
   earnings
   (loss)          $ 0.02    $ 0.02    $ 0.01    $ 0.01  $ (0.75)   $ (0.94)



                           GREEN BANKSHARES, INC.
                  (Unaudited) Consolidated Balance Sheets
          (Dollars and shares in thousands except per share data)


Assets                                     June 30, 2012     Dec. 31, 2011
                                         ----------------  ----------------
Cash and due from banks                  $            653  $          2,091
                                         ----------------  ----------------
  Cash and cash equivalents                           653             2,091
Equity method investment in Capital
 Bank, NA                                         324,281           315,293
Other assets                                        4,451             3,804
                                         ----------------  ----------------
  Total assets                           $        329,385  $        321,188
                                         ================  ================

Liabilities
Subordinated debentures                            45,798            45,180
Deferred Tax Liability                             15,620            15,608
Accrued interest payable and other
 liabilities                                          307               255
                                         ----------------  ----------------
  Total liabilities                                61,725            61,043
                                         ----------------  ----------------

Shareholders' Equity
Preferred stock: no par value, 1,000
 shares authorized; 0 shares outstanding                -                 -
Common stock: par value; 300,000 shares
 authorized; 133,160, shares outstanding            1,332             1,332
Additional paid in capital                        257,628           257,627
Retained earnings                                   8,969             2,647
Accumulated other comprehensive loss                 (269)           (1,461)
                                         ----------------  ----------------
  Total shareholders' equity                      267,660           260,145
                                         ----------------  ----------------
  Total liabilities & shareholders'
   equity                                $        329,385  $        321,188
                                         ================  ================



                           GREEN BANKSHARES, INC.
                           SELECTED FINANCIAL DATA
           (Dollars and shares in thousands except per share data)

                           Successor Company            Predecessor Company
                -------------------------------------- ---------------------
                                                          As of or For the
                     As of or For the Period Ended          Period Ended
                -------------------------------------- ---------------------
                                             Sept. 8 -  July 1 -
                June 30, March 31, December  Sept. 30,  Sept. 7,   June 30,
                  2012      2012   31, 2011     2011      2011       2011
                -------- ------------------- --------- ---------- ----------


Net loan
 charge-offs          $-        $-        $-        $-     $6,496    $16,714
Allowance for
 loan losses          $-        $-        $-        $-    $71,745    $62,728
Total average
 interest-
 earning assets       $-        $-        $-        $- $1,918,543 $2,011,228
Other real
 estate owned
 and
 repossessed
 assets               $-        $-        $-        $-    $71,914    $79,690
Core deposit
 and
 intangibles,
 net of
 accumulated
 amortization         $-        $-        $-        $-     $5,084     $5,502

Tax equivalent
 net interest
 margin               NM        NM        NM        NM      3.91%      3.91%
Non-interest
 expense/tax
 equivalentnet
 interest
 income and
 non-interest
 income           14.45%     6.12%    12.08%    10.18%    113.80%     89.46%
Average diluted
 common shares   133,160   133,160   133,160   133,174     13,146     13,127
End of quarter
 common shares
 outstanding     133,160   133,160   133,084   133,084     13,274     13,258
Total equity    $267,660  $262,609  $260,145  $258,678    $99,600   $122,046
Book value per
 common share      $2.01     $1.97     $1.95     $1.94      $2.30      $4.02
Tangible book
 value per
 commonshare       $1.68     $1.64     $1.62     $1.61      $1.92      $3.60
Tier 1 capital
 to average
 assets -
 Capital Bank,
 NA                11.4%     10.8%     10.4%     13.8%        N/A        N/A
Tier 1 capital
 to risk
 weighted
 assets -
 Capital Bank,
 NA                16.4%     16.1%     15.8%     16.0%        N/A        N/A
Total capital
 to risk
 weighted
 assets -
 Capital Bank,
 NA                17.6%     17.2%     16.7%     16.5%        N/A        N/A

Total assets    $329,385  $323,899  $321,188  $319,389 $2,241,339 $2,293,815
                -------- ------------------- --------- ---------- ----------



                           GREEN BANKSHARES, INC.
          Consolidated Average Balances, Interest Rates and Yields

                                            Predecessor Company
                                -------------------------------------------
                                            Three Months Ended
                                               June 30, 2011
                                -------------------------------------------
                                    Average
                                    Balance       Interest     Average Rate
                                -------------- -------------- -------------
Interest-earning assets:
  Loans(1)(2)                   $    1,482,864 $       23,816          6.44%
  Investment securities (2)            251,231          2,254          3.60%
  Other short-term investments         277,133            170          0.24%
                                -------------- -------------- -------------
    Total interest-earning
     assets                          2,011,228         26,240          5.23%
                                -------------- -------------- -------------
  Non-interest earning assets          335,683
                                --------------
    Total assets                $    2,346,911
                                ==============


Interest-bearing liabilities:
  Deposits:
    Interest checking, money
     market and savings         $    1,070,869 $        1,428          0.53%
    Time deposits                      691,008          3,133          1.82%
                                -------------- -------------- -------------
      Total interest bearing-
       deposits                      1,761,877          4,561          1.04%
                                -------------- -------------- -------------

    Securities sold under
     repurchase and short-term
     borrowings                         16,710              4          0.10%
    Notes payable                      158,493          1,570          3.97%
    Subordinated debentures             88,662            488          2.21%
                                -------------- -------------- -------------
      Total interest-bearing
       liabilities                   2,025,742          6,623          1.31%
                                -------------- -------------- -------------

Non-interest bearing
 liabilities:
  Demand deposits                      166,387
  Other liabilities                     19,064
                                --------------
    Total non-interest bearing
     liabilities                       185,451
                                --------------
    Total liabilities                2,211,193
                                --------------
  Shareholders' equity                 135,718
                                --------------
    Total liabilities &
     shareholders' equity       $    2,346,911
                                ==============

Net interest income                            $       19,617
                                               ==============
Interest rate spread                                                   3.91%
                                                              =============
Net yield on interest-earning
 assets (net interest margin)                                          3.91%
                                                              =============

(1)   Average loan balances exclude nonaccrual loans for the period
      presented.
(2)   Fully Taxable Equivalent ("FTE") at the rate of 35%. The FTE basis
      adjusts for the tax benefits of income on certain tax-exempt loans and
      investments using the federal statutory rate of 35%. The Company
      believes this measure to be the preferred industry measurement of net
      interest income and provides relevant comparison between taxable and
      non-taxable amounts.


CONTACT:
Christopher G. Marshall
Chief Financial Officer
Phone: (704) 554-5901
E-mail: cmarshall@nafhinc.com

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