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Capital Bank Corporation Announces Financial Results for the First Quarter of 2012

2012-05-07 19:28 ET - News Release

RALEIGH, N.C., May 7, 2012 /PRNewswire/ -- Capital Bank Corporation (the "Company") (Nasdaq: CBKN), a majority-owned subsidiary of Capital Bank Financial Corp. ("CBF," formerly known as North American Financial Holdings, Inc.), today reported financial results for the first quarter of 2012. Operating and financial highlights include the following:

  • Net income to common shareholders totaled $2.7 million, or $0.03 per share, in the three months ended March 31, 2012, which was an increase from a net loss to common shareholders of $574 thousand, or ($0.01) per share, in the successor period of January 29 to March 31, 2011 and $265 thousand, or ($0.02) per share, in the predecessor period of January 1 to January 28, 2011;
  • The Company held a 26% ownership interest in Capital Bank, NA, which has $6.5 billion in assets and operates 143 branches in Florida, North Carolina, South Carolina, Tennessee and Virginia; and
  • The Company increased the equity investment balance in Capital Bank, NA by $3.1 million based on its equity in Capital Bank, NA's net income and decreased the equity investment balance by $625 thousand based on its equity in Capital Bank, NA's other comprehensive income in the first quarter of 2012.

"I am very excited about CBF's agreement to acquire 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. Integration planning is already underway, and as I have gotten to know more of Southern Community's workforce, I have been impressed by their professionalism and their commitment to their customers and their communities," stated Gene Taylor, Chairman and Chief Executive Officer of CBF and Capital Bank Corporation.

"Organic loan production, deleveraging and core deposit growth is helping improve the Bank's profitability, and now that the integration of Tennessee is complete, we are in position to rationalize certain duplicative functions with the goal of continuing to improve our efficiency ratio," commented Chris Marshall, Chief Financial Officer of CBF and Capital Bank Corporation.

Equity Method Investment in Capital Bank, NA

On June 30, 2011, Capital Bank, formerly a wholly-owned subsidiary of the Company ("Old Capital Bank"), merged with and into NAFH National Bank, a national banking association, with NAFH National Bank as the surviving entity (the "Bank Merger"). In connection with the Bank Merger, NAFH National Bank changed its name to Capital Bank, NA. On September 7, 2011, CBF acquired a controlling interest in Green Bankshares and merged its banking subsidiary, GreenBank, with and into Capital Bank, NA. Following the GreenBank merger, Capital Bank, NA is now owned by the Company, CBF, TIB Financial Corp. ("TIB Financial") and Green Bankshares. CBF is the owner of approximately 83% of the Company's common stock, approximately 94% of TIB Financial's common stock and approximately 90% of Green Bankshares' common stock. Previously, on April 29, 2011, Capital Bank, NA merged with TIB Bank, then a wholly-owned subsidiary of TIB Financial.

The Bank Merger occurred pursuant to the terms of an Agreement of Merger entered into by and between Old Capital Bank and Capital Bank, NA, dated as of June 30, 2011. In the Bank Merger, each share of Old Capital Bank common stock was converted into the right to receive shares of Capital Bank, NA common stock based on each entity's relative tangible book value on March 31, 2011. Following the GreenBank merger, the Company now owns approximately 26% of Capital Bank, NA, with CBF having a direct ownership of 19%, TIB Financial owning 21%, and Green Bankshares owning the remaining 34%.

The Bank Merger, the preceding merger of TIB Bank and Capital Bank, NA, and the succeeding merger of GreenBank and Capital Bank, NA were restructuring transactions between commonly-controlled entities. At the time of the Bank Merger, due to the deconsolidation of Old Capital Bank, the balance of accumulated other comprehensive income was reclassified to common stock within shareholders' equity. Immediately following the Bank Merger, on June 30, 2011, CBF, the Company and TIB Financial made cash contributions of additional capital to Capital Bank, NA of $4.7 million, $6.1 million and $5.2 million, respectively, in proportion to their respective ownership interests in Capital Bank, NA. On September 30, 2011, the Company made a $10.0 million contribution of additional capital to Capital Bank, NA in exchange for additional shares of Capital Bank, NA. These capital contributions were made to provide additional capital support for the general business operations of Capital Bank, NA. As of March 31, 2012, Capital Bank, NA operated 143 branches in Florida, North Carolina, South Carolina, Tennessee and Virginia and had total assets of $6.5 billion, total deposits of $5.3 billion and shareholders' equity of $949.2 million.

The Company reports its investment in Capital Bank, NA on the Consolidated Balance Sheet as an equity method investment in that entity. As of March 31, 2012, the Company's investment in Capital Bank, NA totaled $246.2 million, which reflected the Company's pro rata ownership of Capital Bank, NA's total shareholders' equity. The Company also had an advance to Capital Bank, NA totaling $3.4 million as of March 31, 2012. In the first quarter of 2012, the Company increased the equity investment balance by $3.1 million based on its equity in Capital Bank, NA's net income and decreased the equity investment balance by $625 thousand based on its equity in Capital Bank, NA's other comprehensive income.

The following table presents summarized financial information for the Company's equity method investee, Capital Bank, NA, for each period presented:

Capital Bank, NA


Three Months
Ended
March 31, 2012


(Dollars in thousands)                                      








Interest income


$

74,132


Interest expense



8,725


Net interest income



65,407


Provision for loan losses



5,376


Noninterest income



14,614


Noninterest expense



55,217


Net income



11,907


 

Potential Merger of the Company and CBF

On September 1, 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 0.1354 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.

Net Interest Income

Net interest income in the first quarter of 2012 was significantly impacted by the Bank Merger, upon which Old Capital Bank's earning assets and interest-bearing liabilities were deconsolidated from the Company. Following the Bank Merger on June 30, 2011, the Company's interest-bearing liabilities, which consisted of subordinated debentures, significantly exceeded interest-earning assets, thus creating negative net interest income and a negative net interest margin.

Net interest income for the three months ended March 31, 2012 (Successor), the period of January 29 to March 31, 2011 (Successor) and the period of January 1 to January 28, 2011 (Predecessor) totaled ($277) thousand, $10.0 million and $4.0 million, respectively. The Company's net interest margin increased from 3.09% in the period of January 1 to January 28, 2011 (Predecessor) to 4.23% for the period of January 29 to March 31, 2011 (Successor), and decreased to (32.75)% for the three months ended March 31, 2012 (Successor) primarily due to the CBF Investment and the Bank Merger, respectively. Average earning assets decreased from $1.54 billion in the period of January 1 to January 28, 2011 (Predecessor) to $1.49 billion in the period of January 29 to March 31, 2011 (Successor) to $3.4 million in the three months ended March 31, 2012 (Successor). The decline in average earning assets in the successor period was primarily related to the Bank Merger, upon which Old Capital Bank's earning assets and interest-bearing liabilities were deconsolidated from the Company. As of March 31, 2012 (Successor), the Company's only earning asset was a $3.4 million advance to Capital Bank, NA.

Noninterest Income

Noninterest income for the three months ended March 31, 2012 (Successor), the period of January 29 to March 31, 2011 (Successor) and the period of January 1 to January 28, 2011 (Predecessor) totaled $3.1 million, $1.3 million and $832 thousand, respectively. Noninterest income in the first quarter of 2012 was solely related to the Company's equity income from its investment in Capital Bank, NA.

Noninterest Expense

Noninterest expense for the three months ended March 31, 2012 (Successor), the period from January 29 to March 31, 2011 (Successor) and the period from January 1 to January 28, 2011 (Predecessor) totaled $157 thousand, $12.2 million and $4.2 million, respectively. Expenses in the first quarter of 2012 were significantly reduced by the Bank Merger and related deconsolidation of Old Capital Bank. Additionally, expenses in the period from January 29 to March 31, 2011 (Successor) were impacted by a $3.6 million contract termination fee related to the conversion and integration of the Company's operations onto a common technology platform utilized across the CBF enterprise. Salaries and benefits expense increased in the period from January 29 to March 31, 2011 (Successor) from the accelerated vesting of stock options and restricted shares at closing of the CBF Investment.

Forward-looking Statements

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, 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 Old Capital 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, the fact that the Company has experienced net losses during the last three fiscal years, 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 Capital Bank Corporation'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. Capital Bank Corporation does not undertake a duty to update any forward-looking statements in this press release.

 

 

Capital Bank Corporation


Results of Operations






Successor
Company



Predecessor
Company

(Dollars in thousands except per share data)


Three Months
Ended
Mar. 31, 2012


Three Months
Ended
Dec. 31, 2011


Three Months
Ended
Sep. 30, 2011


Three Months
Ended
Jun. 30, 2011


Jan. 29, 2011
to
Mar. 31, 2011



Jan. 1, 2011
to
Jan. 28, 2011





















Interest income


$

85


$

85


$

85


$

18,990


$

12,281



$

5,955

Interest expense



362



362



355



3,551



2,260




1,996

Net interest income (loss)



(277)



(277)



(270)



15,439



10,021




3,959

Provision for loan losses









1,283



167




40

Net interest income (loss) after

     provision



(277)



(277)



(270)



14,156



9,854




3,919

Noninterest income



3,088



1,762



2,283



2,065



1,252




832

Noninterest expense



157



175



76



12,797



12,229




4,155

Net income (loss) before taxes



2,654



1,310



1,937



3,424



(1,123)




596

Income tax expense (benefit)



(89)



(168)



(117)



1,115



(549)




Net income (loss)



2,743



1,478



2,054



2,309



(574)




596

Dividends and accretion on

     preferred stock














861

Net income (loss) attributable to

     common shareholders


$

2,743


$

1,478


$

2,054


$

2,309


$

(574)



$

(265)





















Earnings (loss) per share – basic

     and diluted


$

0.03


$

0.02


$

0.02


$

0.03


$

(0.01)



$

(0.02)

 

 

End of Period Balances




Successor Company

(Dollars in thousands except per share data)


Mar. 31, 2012


Dec. 31, 2011


Sep. 30, 2011


Jun. 30, 2011


Mar. 31, 2011

















Total assets


$

251,985


$

249,742


$

248,249


$

248,562


$

1,702,798

Total earning assets



3,393



3,393



3,393



3,393



1,500,664

Cash and cash equivalents



1,820



2,163



2,435



12,477



116,650

Investment securities











304,902

Loans











1,094,558

Allowance for loan losses











167

Investment in and advance to Capital Bank, NA



249,584



247,121



245,506



235,657



Intangible assets











53,525

Deposits











1,349,661

Borrowings











93,513

Subordinated debentures



19,212



19,163



19,099



19,036



19,905

Shareholders' equity



226,985



224,864



223,532



229,419



228,760

















Per Share Data
















Book value


$

2.65


$

2.62


$

2.61


$

2.67


$

2.68

Tangible book value



2.26



2.23



2.22



2.25



2.07

















Common shares outstanding



85,802,164



85,802,164



85,802,164



85,802,164



85,489,260

 

 

CAPITAL BANK CORPORATION


Average Balances and Yields/Rates






Successor
Company



Predecessor
Company


(Dollars in thousands)


Three Months
Ended
Mar. 31, 2012


Three Months
Ended
Dec. 31, 2011


Three Months
Ended
Sep. 30, 2011


Three Months
Ended
Jun. 30, 2011


Jan. 29, 2011
to
Mar. 31, 2011



Jan. 1, 2011
to
Jan. 28, 2011























Average Balances





















Total assets


$

251,342


$

244,291


$

248,183


$

1,701,071


$

1,692,347



$

1,592,750


Total earning assets



3,393



3,393



3,393



1,488,645



1,490,146




1,542,617


Investment securities









338,035



242,622




223,854


Loans









1,097,413



1,107,666




1,249,787


Deposits









1,343,599



1,340,741




1,350,336


Borrowings









93,349



98,599




120,032


Subordinated debentures



19,191



19,142



19,078



19,323



19,563




34,323


Shareholders' equity



226,397



224,843



228,961



231,742



226,423




78,724























Yields/Rates 1





















Yield on earning assets



10.00

%


9.94

%


9.94

%


5.19

%


5.17

%



4.61

%

Cost of interest-bearing

    liabilities



7.46



7.50



7.38



1.07



1.04




1.69


Net interest spread



2.54



2.44



2.56



4.12



4.13




2.92


Net interest margin



(32.75)



(32.39)



(31.57)



4.23



4.23




3.09




1

Annualized and on a fully taxable equivalent basis.

 

 

CAPITAL BANK CORPORATION


CONDENSED CONSOLIDATED BALANCE SHEETS


(Unaudited)






Successor Company


(Dollars in thousands)


Mar. 31, 2012


Dec. 31, 2011










Assets








Cash and due from banks


$

1,820


$

2,163


Total cash and cash equivalents



1,820



2,163


Investment in and advance to Capital Bank, NA



249,584



247,121


Other assets



581



458


Total assets


$

251,985


$

249,742










Liabilities








Subordinated debentures


$

19,212


$

19,163


Other liabilities



5,788



5,715


Total liabilities



25,000



24,878










Shareholders' Equity








Common stock, no par value; 300,000,000 shares authorized; 85,802,164 and shares issued and outstanding



218,829



218,826


Retained earnings (accumulated deficit)



8,010



5,267


Accumulated other comprehensive income (loss)



146



771


Total shareholders' equity



226,985



224,864


Total liabilities and shareholders' equity


$

251,985


$

249,742


 

 

CAPITAL BANK CORPORATION


CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)




Successor
Company



Predecessor
Company


(Dollars in thousands except per share data)


Three Months
Ended
Mar. 31, 2012


Jan. 29, 2011
to
Mar. 31, 2011



Jan. 1, 2011
to
Jan. 28, 2011














Interest income:












Loans and loan fees


$


$

11,056



$

5,479


Investment securities:












Taxable interest income





990




391


Tax-exempt interest income





159




74


Dividends





29





Federal funds and other interest income



85



47




11


Total interest income



85



12,281




5,955


Interest expense:












Deposits





1,774




1,551


Borrowings and subordinated debentures



362



486




445


Total interest expense



362



2,260




1,996


Net interest income



(277)



10,021




3,959


Provision for loan losses





167




40


Net interest income (loss) after provision for loan losses



(277)



9,854




3,919


Noninterest income:












Equity income from investment in Capital Bank, NA



3,088







Service charges and other fees





548




291


Bank card services





300




174


Mortgage origination and other loan fees





263




210


Brokerage fees





96




78


Bank-owned life insurance





20




10


Other





25




69


Total noninterest income



3,088



1,252




832


Noninterest expense:












Salaries and employee benefits





3,957




1,977


Occupancy





1,140




548


Furniture and equipment





544




275


Data processing and telecommunications





276




180


Advertising and public relations





181




131


Office expenses





229




93


Professional fees





335




190


Business development and travel





246




87


Amortization of other intangible assets





191




62


ORE losses and miscellaneous loan costs





523




176


Directors' fees





40




68


FDIC deposit insurance





563




266


Contract termination fees





3,581





Other



157



423




102


Total noninterest expense



157



12,229




4,155


Net income (loss) before taxes



2,654



(1,123)




596


Income tax expense (benefit)



(89)



(549)





Net income (loss)



2,743



(574)




596


Dividends and accretion on preferred stock








861


Net income (loss) attributable to common shareholders


$

2,743


$

(574)



$

(265)














Earnings (loss) per common share – basic


$

0.03


$

(0.01)



$

(0.02)


Earnings (loss) per common share – diluted


$

0.03


$

(0.01)



$

(0.02)


 

 

Capital Bank Corporation




Average Balances, Interest Earned or Paid, and Interest Yields/Rates




Tax Equivalent Basis 1










Successor Company



Predecessor Company


(Dollars in thousands)


Three Months Ended
Mar. 31, 2012


Period of
Jan. 29 to Mar. 31, 2011



Period of
Jan. 1 to Jan. 28, 2011




Average
Balance


Amount
Earned


Average
Rate


Average
Balance


Amount
Earned


Average
Rate



Average
Balance


Amount
Earned


Average
Rate


Assets






























Loans 2


$


$



%

$

1,108,997


$

11,155



6.22

%


$

1,253,296


$

5,530



5.20

%

Investment securities 3









242,840



1,254



3.10




225,971



504



2.68


Interest-bearing deposits









138,309



47



0.21




63,350



11



0.20


Advance to Capital Bank, NA



3,393



85



10.00















Total interest-earning assets



3,393


$

85



10.00

%


1,490,146


$

12,456



5.17

%



1,542,617


$

6,045



4.61

%

Cash and due from banks



1,950









16,373










16,112








Other assets



245,999









185,828










34,021








Total assets


$

251,342








$

1,692,347









$

1,592,750






































Liabilities and Equity






























NOW and money market accounts


$


$



%

$

344,189


$

418



0.75

%


$

334,668


$

211



0.74

%

Savings accounts









31,521



6



0.12




30,862



3



0.11


Time deposits









851,424



1,350



0.98




870,146



1,337



1.81


Total interest-bearing deposits









1,227,134



1,774



0.89




1,235,676



1,551



1.48


Borrowings









98,599



254



1.59




120,032



343



3.36


Subordinated debentures



19,191



362



7.46



19,563



232



7.34




34,323



102



3.50


Total interest-bearing liabilities



19,191


$

362



7.46

%


1,345,296


$

2,260



1.04

%



1,390,031


$

1,996



1.69

%

Noninterest-bearing deposits











113,607










114,660








Other liabilities



5,754









7,021










9,635








Total liabilities



24,945









1,465,924










1,514,326








Shareholders' equity



226,397









226,423










78,424








Total liabilities and shareholders' equity


$

251,342








$

1,692,347









$

1,592,750






































Net interest spread 4









2.54

%








4.13

%









2.92

%

Tax equivalent adjustment





$








$

175









$

90





Net interest income and net interest margin 5





$

(277)



(32.75)

%




$

10,196



4.23

%





$

4,049



3.09

%































































 

1

The tax equivalent adjustment is computed using a federal tax rate of 34% and is applied to interest income from tax exempt municipal loans and investment securities.

2

Loans include mortgage loans held for sale in addition to nonaccrual loans for which accrual of interest has not been recorded.

3

The average balance for investment securities excludes the effect of their mark-to-market adjustment, if any.

4

Net interest spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

5

Net interest margin represents net interest income divided by average interest-earning assets.

 

SOURCE Capital Bank Corporation

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