CBF Capital Bank Financial Corp. (MM)

Capital Bank Financial Corp. (Nasdaq:CBF) (the “Company”) today reported fourth quarter net income of $12.4 million, which declined 17% year-over-year due to non-core costs largely associated with the acquisition of CommunityOne. GAAP net income equated to $0.24 per diluted share. Core net income rose 22% to $22.3 million, or $0.44 per diluted share. Core adjustments for the fourth quarter included $18.5 million of acquisition and integration expenses, a $1.9 million gain on the sale of securities, a $1.4 million charge related to a legal settlement, and a tax adjustment of $1.4 million.

Highlights of the quarter include:

• Closing the CommunityOne acquisition on October 26, 2016;
• Achieving CommunityOne cost savings of 35%, to date, versus our original 39% final target; 
• Managing the Balance Sheet through year-end with $9.9 billion in assets;
• Rolling out a new payments platform, including new debit card, credit card and merchant service offerings;
• Reporting a GAAP efficiency ratio of 78.0% and reduced core efficiency ratio of 58.2%; and
• Declaring a quarterly dividend of $0.12 per common share.

Gene Taylor, Chairman and Chief Executive Officer of Capital Bank Financial Corp., commented, “Capital Bank ended 2016 with very strong results, thanks to the productivity of our teammates, the trust extended us by our clients, and the confidence of our investors.  We believe the bank is very well positioned for 2017 in all of our geographies, and we're especially pleased to have our new teammates from CommunityOne now contributing to the bank's growth and profitability.”

Chris Marshall, Chief Financial Officer of Capital Bank Financial Corp., added, “We closed the CommunityOne merger with financial metrics that are slightly better than the original estimates, and we're on track for a smooth systems conversion next month. We are extremely well positioned for consistent improvements in efficiency and profitability throughout 2017.”

Loan Portfolio and Composition

During the fourth quarter, the loan portfolio increased by $1.5 billion to $7.4 billion due to the acquisition of CommunityOne. New loans of $445.2 million were offset by $100 million in low yielding loan sales associated with our balance sheet optimization strategy, as well as payoffs totaling $333.6 million and special asset resolutions of $39.1 million.  

The relative composition of the Company’s loan portfolio at the end of the fourth quarter of 2015 and third and fourth quarters of 2016 was as follows:

		Dec 31,  2016			Sep 30,  2016			Dec 31,2015
Commercial real estate		23	%		22	%		22	%
C&I		38	%		43	%		43	%
Consumer		36	%		32	%		32	%
Other		3	%		3	%		3	%
Total		100	%		100	%		100	%

Deposits Composition and Cost of Funds

During the fourth quarter, total deposits increased by $1.8 billion to $7.9 billion due to the acquisition of CommunityOne. The cost of deposits decreased two basis points to 0.39%, and the cost of core deposits was flat at 0.19%. The contractual cost of total deposits, which excludes purchase accounting, was flat sequentially at 0.41%.

Net Interest Income and Net Interest Margin

Net interest income increased $15.2 million to $77.8 million from $62.6 million for the third quarter of 2016 and increased $15.7 million from $62.1 million for the fourth quarter of 2015. The increase was due to the acquisition of CommunityOne and organic loan growth. The net interest margin for the fourth quarter of 2016 was 3.67%, an increase of nine basis points sequentially and a decrease of three basis points year-over-year. The quarterly increase in net interest margin was primarily due to a recovery of interest income on previous non-performing loans, the deleveraging of lower yielding loans and the pay-down of high cost brokered deposits.

Non-Interest Income

Non-interest income increased $4.6 million to $17.0 million from $12.4 million for the third quarter of 2016 and $6.4 million from $10.6 million for the fourth quarter of 2015. The sequential increase was mainly due to the acquisition of CommunityOne and an increase of $1.8 million in investment securities gains. The year-over-year increase was mainly due to the acquisition of CommunityOne, an increase of $1.8 million in investment securities gains and the absence of $1.5 million of FDIC indemnification asset expense recorded in the prior year.

Provision for Loan Losses and Credit Quality

The provision of $2.0 million recorded for the fourth quarter of 2016 included a $2.6 million provision for new and acquired non-impaired loans, offset by a $0.6 million provision reversal due to changes in cash flow estimates for certain acquired impaired loan pools. The changes in cash flow estimates mainly resulted from improvements in the Company’s expectations of future cash flows due to higher than anticipated payoffs and resolutions. Net charge-offs for the fourth quarter of 2016 were $2.9 million.

At December 31, 2016, the allowance for loan losses was $43.1 million, of which $23.0 million related to acquired impaired loans and $20.1 million related to new and acquired non-impaired loans. The allowance for loan losses represents 0.58% of the Company’s total $7.4 billion loan portfolio.

Non-Interest Expense

Non-interest expense increased $26.5 million to $74.0 million from $47.5 million for the third quarter of 2016 and increased $26.2 million from $47.8 million for the fourth quarter of 2015. The sequential increase was mainly due to an $18.1 million increase of conversion and merger related expenses related to the CommunityOne acquisition and additional CommunityOne expenses related to the acquisition. The year-over-year increase was mainly due to a $17.8 million increase of conversion and merger related expenses as described above and additional CommunityOne expenses related to the acquisition. Partially offsetting the increase was the absence of $4.2 million in contract termination.

Income Tax Expense

Income tax expense was $6.4 million for the fourth quarter of 2016, an effective income tax rate of 34.1%, as compared to income tax expense of $8.4 million for the third quarter, an effective income tax rate of 31.2%. Income tax expense was $8.8 million for the fourth quarter of 2015, an effective income tax rate of 37.0%. The sequential increase in the effective rate is due to a favorable tax adjustment reported during the third quarter for discrete items.  The year-over-year decrease in the effective tax rate is due to a favorable tax adjustment for discrete tax items reported during the fourth quarter of 2016.

Financial Position

Total assets increased by $2.1 billion to $9.9 billion as of December 31, 2016, from $7.8 billion as of September 30, 2016. During the quarter, the Company’s loan portfolio increased by $1.5 billion to $7.4 billion. Deposits increased by $1.8 billion to $7.9 billion and FHLB borrowings decreased by $30.1 million. Tangible book value per share was $20.01 as of December 31, 2016, a decrease of $0.52 and an increase of $0.48 over September 30, 2016 and December 31, 2015, respectively. During the fourth quarter, the Company repurchased 0.4 million shares of common stock for $13.7 million at an average price of $34.79 per share. The Company has $88 million remaining under the current board authorized stock repurchase program.

The Company’s bank subsidiary, Capital Bank Corporation, has preliminary Tier 1 Leverage, Tier 1 Common, Tier 1 Risk-Based and Total Risk-Based capital ratios of 11.2%, 12.7%, 12.4% and 13.0%, respectively, as of December 31, 2016, under currently applicable regulations.

The Company declared a cash dividend of $0.12 per share, payable on February 22, 2017, to shareholders of record as of February 8, 2017.

Conference Call

The Company will host a conference call today at 10:00 a.m. Eastern Time. The number to call for this interactive teleconference is (913) 312-1496, and the confirmation pass code is 4273196. Please dial in 10 minutes prior to the beginning of the call. A telephonic replay of the conference call will be available through February 3, 2017, by dialing (719) 457-0820 and entering pass code 4273196. The live broadcast of the conference call will be available online at the Company’s web site at www.capitalbank-us.com, by following the link to Investor Relations. An on-line replay of the call will be available at the same site for 90 days.

Forward-Looking Statements

Information in this press release contains forward-looking statements. Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. Accordingly, these statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of several factors more fully described under the caption “Risk Factors” in the 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, the 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 total shareholders’ equity.

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 $9.9 billion in total assets as of December 31, 2016, and 196 full-service banking offices throughout Florida, North and South Carolina, Tennessee and Virginia. To learn more about Capital Bank Financial Corporation, 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
		Dec 31,  2016				Sep 30,  2016				Jun 30,  2016				Mar 31,  2016				Dec 31,  2015
Interest and dividend income		$	87,746			$	70,929			$	69,579			$	69,472			$	69,553
Interest expense		9,927				8,302				8,064				8,105				7,475
Net Interest Income		77,819				62,627				61,515				61,367				62,078
Provision for loan and lease losses		1,980				586				1,172				1,375				1,089
Net interest income after provision for loan and lease losses		75,839				62,041				60,343				59,992				60,989
Non-Interest Income
Service charges on deposit accounts		5,949				4,777				4,486				4,811				4,911
Debit card income		4,211				3,389				3,235				3,086				3,029
Fees on mortgage loans originated and sold		1,402				1,334				1,140				971				875
Investment advisory and trust fees		591				290				455				497				597
FDIC indemnification asset expense		—				—				—				—				(1,526		)
Termination of loss share agreements		—				—				—				(9,178		)		—
Investment securities gains		1,894				71				117				40				54
Other income		2,969				2,509				2,489				2,339				2,657
Total non-interest income		17,016				12,370				11,922				2,566				10,597
Non-Interest Expense
Salaries and employee benefits		26,134				20,935				20,139				22,162				20,219
Stock-based compensation expense		531				790				467				317				—
Net occupancy and equipment expense		8,374				7,340				7,355				7,703				7,385
Computer services		4,364				3,153				3,274				3,575				3,479
Software expense		2,391				1,948				2,000				2,036				2,061
Telecommunication expense		2,147				1,790				1,558				1,532				1,168
OREO valuation expense		677				742				1,119				467				341
Net gains on sales of OREO		(150		)		(159		)		(413		)		(679		)		(801		)
Foreclosed asset related expense		513				397				399				285				405
Loan workout expense		327				206				71				244				650
Conversion and merger related expense		18,525				394				1,236				1,687				704
Professional fees		1,761				1,642				1,353				1,612				1,529
Restructuring charges, net		4				(113		)		5				142				4,248
Legal settlement expense		1,361				1,500				—				—				—
Regulatory assessments		1,092				841				1,259				1,275				1,486
Other expense		5,943				6,124				4,714				4,580				4,882
Total non-interest expense		73,994				47,530				44,536				46,938				47,756
Income before income taxes		18,861				26,881				27,729				15,620				23,830
Income tax expense		6,427				8,393				10,327				5,780				8,809
Net income		$	12,434			$	18,488			$	17,402			$	9,840			$	15,021
Earnings per share:
Basic		$	0.25			$	0.43			$	0.40			$	0.23			$	0.35
Diluted		$	0.24			$	0.42			$	0.40			$	0.22			$	0.34
Weighted average shares outstanding:
Basic		49,334				43,028				43,011				43,063				43,499
Diluted		50,387				43,909				43,879				43,904				44,550

CAPITAL BANK FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands)
(Unaudited)
	Dec 31,  2016				Sep 30,  2016				Dec 31,  2015
Assets
Cash and due from banks	$	107,707			$	88,171			$	87,985
Interest-bearing deposits in other banks	201,348				116,136				56,711
Total cash and cash equivalents	309,055				204,307				144,696
Trading securities	3,791				3,701				3,013
Investment securities available-for-sale at fair value (amortized cost $927,266,  $639,687 and $640,455, respectively)	912,250				652,945				637,329
Investment securities held-to-maturity at amortized cost (fair value $460,911,  $474,834 and $475,134, respectively)	463,959				466,063				472,505
Loans held for sale	12,874				95,253				10,569
Loans, net of deferred loan costs and fees	7,393,318				5,840,680				5,622,147
Less: Allowance for loan and lease losses	43,065				43,984				45,034
Loans, net	7,350,253				5,796,696				5,577,113
Other real estate owned	53,482				46,007				52,776
FDIC indemnification asset	—				—				6,725
Receivable from FDIC	—				—				678
Premises and equipment, net	205,425				157,863				159,149
Goodwill	235,500				134,522				134,522
Intangible assets, net	33,370				12,288				15,100
Deferred income tax asset, net	150,272				80,418				105,316
Other assets	200,426				142,395				129,988
Total Assets	$	9,930,657			$	7,792,458			$	7,449,479
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Non-interest bearing demand	$	1,590,164			$	1,207,800			$	1,121,160
Interest bearing demand	1,930,143				1,463,520				1,382,732
Money market	1,725,838				1,291,948				1,190,121
Savings	497,171				401,205				418,879
Time deposits	2,137,312				1,668,784				1,747,318
Total deposits	7,880,628				6,033,257				5,860,210
Federal Home Loan Bank advances	545,701				575,751				460,898
Short-term borrowings	19,157				15,428				12,410
Long-term borrowings	116,456				87,445				85,777
Accrued expenses and other liabilities	76,668				50,736				43,919
Total liabilities	$	8,638,610			$	6,762,617			$	6,463,214
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, 46,178  issued and 34,911 outstanding, 37,253 issued and 26,381 outstanding and 37,012 issued and 26,589 outstanding, respectively.	462				373				370
Common stock-Class B $0.01 par value: 200,000 shares authorized, 18,627  issued and 16,854 outstanding, 18,627 issued and 16,854 outstanding and 18,327 issued and 16,554 outstanding, respectively.	186				186				183
Additional paid in capital	1,368,459				1,078,746				1,076,415
Retained earnings	247,758				241,554				208,742
Accumulated other comprehensive loss (gain)	(12,434		)		7,621				(5,196		)
Treasury stock, at cost, 13,040, 12,645 and 12,196 shares, respectively	(312,384		)		(298,639		)		(294,249		)
Total shareholders’ equity	1,292,047				1,029,841				986,265
Total Liabilities and Shareholders’ Equity	$	9,930,657			$	7,792,458			$	7,449,479

CAPITAL BANK FINANCIAL CORP.
KEY METRICS
(Dollars in thousands)
(Unaudited)
	Three Months Ended
	Dec 31,  2016				Sep 30,  2016				Jun 30, 2016				Mar 31, 2016				Dec 31, 2015
Performance Ratios
Interest rate spread	3.53		%		3.43		%		3.48		%		3.50		%		3.57		%
Net interest margin	3.67		%		3.58		%		3.62		%		3.64		%		3.70		%
Return on average assets	0.53		%		0.97		%		0.93		%		0.53		%		0.82		%
Return on average shareholders’ equity	4.05		%		7.24		%		6.87		%		3.96		%		5.99		%
Efficiency ratio	78.02		%		63.38		%		60.65		%		73.42		%		65.71		%
Average interest-earning assets to average   interest-bearing liabilities	130.22		%		131.43		%		131.21		%		129.54		%		129.55		%
Average loans receivable to average deposits	94.57		%		98.46		%		96.56		%		95.66		%		96.68		%
Yield on interest-earning assets	4.13		%		4.05		%		4.09		%		4.11		%		4.14		%
Cost of interest-bearing liabilities	0.61		%		0.62		%		0.62		%		0.62		%		0.57		%
Asset and Credit Quality Ratios-Total Loans
Non-accrual loans	$	11,449			$	11,873			$	9,016			$	8,526			$	8,945
Acquired impaired loans > 90 days past due and still accruing	$	63,668			$	48,477			$	56,108			$	56,041			$	59,194
Nonperforming loans to loans receivable	1.01		%		1.02		%		1.13		%		1.15		%		1.21		%
Nonperforming assets to total assets	1.30		%		1.37		%		1.44		%		1.51		%		1.63		%
Covered loans to total gross loans	—		%		—		%		—		%		—		%		1.30		%
ALLL to nonperforming assets	33.45		%		41.29		%		40.98		%		39.97		%		37.13		%
ALLL to total gross loans	0.58		%		0.75		%		0.78		%		0.80		%		0.80		%
Annualized net charge-offs/average loans	0.17		%		0.10		%		0.11		%		0.08		%		0.17		%
Asset and Credit Quality Ratios-New Loans
Nonperforming new loans to total new loans receivable	0.18		%		0.19		%		0.12		%		0.11		%		0.11		%
New loans ALLL to total gross new loans	0.41		%		0.43		%		0.46		%		0.47		%		0.47		%
Asset and Credit Quality Ratios-Acquired Loans
Nonperforming acquired loans to total acquired loans receivable	2.66		%		4.65		%		5.08		%		4.67		%		4.69		%
Covered acquired loans to total gross acquired loans	—		%		—		%		—		%		—		%		5.43		%
Acquired loans ALLL to total gross acquired loans	0.93		%		2.15		%		2.04		%		1.93		%		1.83		%
Capital Ratios (Company)
Total average shareholders’ equity to total average assets	13.15		%		13.46		%		13.55		%		13.35		%		13.67		%
Tangible common equity ratio (1)	10.59		%		11.55		%		11.62		%		11.57		%		11.46		%
Tier 1 leverage ratio (2)	12.21		%		12.89		%		12.64		%		12.49		%		12.67		%
Tier 1 risk-based capital ratio (2)	12.40		%		13.27		%		13.38		%		13.38		%		14.73		%
Tier 1 common capital ratio (2)	13.49		%		14.44		%		14.57		%		14.58		%		13.63		%
Total risk-based capital ratio (2)	14.02		%		15.12		%		15.29		%		15.32		%		15.47		%
Capital Ratios (Bank)
Tangible common equity ratio (1)	11.07		%		10.74		%		10.71		%		11.45		%		11.20		%
Tier 1 leverage ratio (2)	11.22		%		10.53		%		10.42		%		11.10		%		11.09		%
Tier 1 common capital ratio (2)	12.41		%		11.98		%		11.97		%		12.95		%		12.89		%
Tier 1 risk-based capital ratio (2)	12.41		%		11.98		%		11.97		%		12.95		%		12.89		%
Total risk-based capital ratio (2)	12.95		%		12.70		%		12.72		%		13.72		%		13.68		%

(1) See “Reconciliation of Non-GAAP Measures”(2) December 31, 2016 regulatory capital ratios are preliminary. The Company became subject to Basel III capital rules on January 1, 2015.

CAPITAL BANK FINANCIAL CORP.
LOANS AND DEPOSITS
(Dollars in thousands)
(Unaudited)
	Dec 31,  2016				Sep 30,  2016				Jun 30,  2016				Mar 31,  2016				Dec 31,2015
Loans
Non-owner occupied commercial real estate	$	1,130,883			$	920,521			$	891,830			$	850,766			$	866,392
Other commercial construction and land	327,622				222,794				212,315				194,971				196,795
Multifamily commercial real estate	117,515				76,296				74,328				75,737				80,708
1-4 family residential construction and land	140,030				111,954				100,306				96,703				93,242
Total commercial real estate	1,716,050				1,331,565				1,278,779				1,218,177				1,237,137
Owner occupied commercial real estate	1,321,405				1,072,586				1,075,306				1,095,460				1,104,972
Commercial and industrial	1,468,874				1,458,523				1,448,698				1,375,233				1,309,704
Lease financing	—				525				877				1,088				1,256
Total commercial	2,790,279				2,531,634				2,524,881				2,471,781				2,415,932
1-4 family residential	1,714,702				1,168,468				1,039,309				1,015,071				1,017,791
Home equity loans	507,759				364,117				364,169				368,510				375,276
Indirect auto loans	226,717				254,736				285,618				317,863				351,817
Other consumer loans	222,255				94,277				85,964				84,108				84,661
Total consumer	2,671,433				1,881,598				1,775,060				1,785,552				1,829,545
Other	228,430				191,136				166,185				159,447				150,102
Total loans	$	7,406,192			$	5,935,933			$	5,744,905			$	5,634,957			$	5,632,716
Deposits
Non-interest bearing demand	$	1,590,164			$	1,207,800			$	1,172,481			$	1,190,831			$	1,121,160
Interest bearing demand	1,930,143				1,463,520				1,456,558				1,402,342				1,382,732
Money market	1,651,023				1,166,918				1,105,460				1,162,546				1,040,086
Savings	497,171				401,205				403,106				420,073				418,879
Total core deposits	5,668,501				4,239,443				4,137,605				4,175,792				3,962,857
Wholesale money market	74,815				125,030				50,015				100,035				150,035
Time deposits	2,137,312				1,668,784				1,619,507				1,663,906				1,747,318
Total deposits	$	7,880,628			$	6,033,257			$	5,807,127			$	5,939,733			$	5,860,210

CAPITAL BANK FINANCIAL CORP.
LEGACY CREDIT EXPENSES
(Dollars in thousands)
(Unaudited)
	Three Months Ended
	Dec 31,  2016				Sep 30, 2016				Jun 30, 2016				Mar 31, 2016				Dec. 31, 2015
Provision (reversal) on legacy loans	$	(638	)		$	48			$	(778	)		$	9			$	(1,161	)
FDIC indemnification asset expense	—				—				—				—				1,526
OREO valuation expense	677				742				1,119				467				341
Termination of loss share agreements	—				—				—				9,178				—
Net gains on sales of OREO	(150		)		(159		)		(413		)		(679		)		(801		)
Foreclosed asset related expense	513				397				399				285				405
Loan workout expense	327				206				71				244				650
Salaries and employee benefits	510				511				519				522				549
Total legacy credit expenses	$	1,239			$	1,745			$	917			$	10,026			$	1,509

CAPITAL BANK FINANCIAL CORP.
QUARTERLY AVERAGE BALANCES AND YIELDS
(Dollars in thousands)
(Unaudited)
		Three Months Ended  December 31, 2016											Three Months Ended  September 30, 2016
		Average Balances				Interest				Yield / Rate			Average Balances				Interest				Yield / Rate
Interest earning assets
Loans (1)		$	6,977,690			$	79,690			4.54	%		$	5,786,171			$	64,055			4.40	%
Investment securities (1)		1,347,554				8,065				2.38	%		1,133,031				6,924				2.43	%
Interest-bearing deposits in other banks		143,446				166				0.46	%		60,373				69				0.45	%
Other earning assets (2)		30,904				382				4.92	%		29,788				337				4.50	%
Total interest earning assets		8,499,594				$	88,303			4.13	%		7,009,363				$	71,385			4.05	%
Non-interest earning assets		829,740											583,413
Total assets		$	9,329,334										$	7,592,776
Interest bearing liabilities
Time deposits		$	2,049,066			$	4,526			0.88	%		$	1,613,502			$	3,992			0.98	%
Money market		1,601,167				1,498				0.37	%		1,225,743				1,132				0.37	%
Interest bearing demand		1,748,269				935				0.21	%		1,444,305				752				0.21	%
Savings		471,466				219				0.18	%		404,187				205				0.20	%
Total interest bearing deposits		5,869,968				7,178				0.49	%		4,687,737				6,081				0.52	%
Short-term borrowings and FHLB advances		548,667				662				0.48	%		558,313				635				0.45	%
Long-term borrowings		108,276				2,087				7.67	%		87,095				1,586				7.24	%
Total interest bearing liabilities		6,526,911				$	9,927			0.61	%		5,333,145				$	8,302			0.62	%
Non-interest bearing demand		1,508,496											1,188,771
Other liabilities		66,710											48,997
Shareholders’ equity		1,227,217											1,021,863
Total liabilities and shareholders’ equity		$	9,329,334										$	7,592,776
Net interest income and spread						$	78,376			3.53	%						$	63,083			3.43	%
Net interest margin										3.67	%										3.58	%

		Three Months Ended  December 31, 2016											Three Months Ended  December 31, 2015
		Average Balances				Interest				Yield / Rate			Average Balances				Interest				Yield / Rate
Interest earning assets
Loans (1)		$	6,977,690			$	79,690			4.54	%		$	5,496,222			$	63,035			4.55	%
Investment securities (1)		1,347,554				8,065				2.38	%		1,119,848				6,355				2.25	%
Interest-bearing deposits in other banks		143,446				166				0.46	%		40,177				23				0.23	%
Other earning assets (2)		30,904				382				4.92	%		42,473				553				5.17	%
Total interest earning assets		8,499,594				$	88,303			4.13	%		6,698,720				$	69,966			4.14	%
Non-interest earning assets		829,740											633,796
Total assets		$	9,329,334										$	7,332,516
Interest bearing liabilities
Time deposits		$	2,049,066			$	4,526			0.88	%		$	1,774,732			$	4,124			0.92	%
Money market		1,601,167				1,498				0.37	%		1,081,968				780				0.29	%
Interest bearing demand		1,748,269				935				0.21	%		1,286,737				529				0.16	%
Savings		471,466				219				0.18	%		426,686				236				0.22	%
Total interest bearing deposits		5,869,968				7,178				0.49	%		4,570,123				5,669				0.49	%
Short-term borrowings and FHLB advances		548,667				662				0.48	%		515,302				365				0.28	%
Long-term borrowings		108,276				2,087				7.67	%		85,438				1,441				6.69	%
Total interest bearing liabilities		6,526,911				$	9,927			0.61	%		5,170,863				$	7,475			0.57	%
Non-interest bearing demand		1,508,496											1,114,932
Other liabilities		66,710											44,479
Shareholders’ equity		1,227,217											1,002,242
Total liabilities and shareholders’ equity		$	9,329,334										$	7,332,516
Net interest income and spread						$	78,376			3.53	%						$	62,491			3.57	%
Net interest margin										3.67	%										3.70	%

(1) Presented on a fully tax equivalent basis(2) Includes Federal Home Loan Bank stocks

CAPITAL BANK FINANCIAL CORP.
FULL YEAR AVERAGE BALANCES AND YIELDS
(Dollars in thousands)
(Unaudited)
		Year Ended  December 31, 2016											Year Ended  December 31, 2015
		Average Balances				Interest				Yield / Rate			Average Balances				Interest				Yield / Rate
Interest earning assets
Loans (1)		$	6,009,297			$	269,752			4.49	%		$	5,222,014			$	247,912			4.75	%
Investment securities (1)		1,184,034				28,084				2.37	%		1,065,699				22,679				2.13	%
Interest-bearing deposits in other banks		85,542				393				0.46	%		47,664				112				0.23	%
Other earning assets (2)		28,143				1,363				4.84	%		48,976				2,646				5.40	%
Total interest earning assets		7,307,016				$	299,592			4.10	%		6,384,353				$	273,349			4.28	%
Non-interest earning assets		659,923											657,146
Total assets		$	7,966,939										$	7,041,499
Interest bearing liabilities
Time deposits		$	1,743,543			$	16,655			0.96	%		$	1,574,100			$	14,481			0.92	%
Money market		1,315,234				4,725				0.36	%		979,650				2,591				0.26	%
Interest bearing demand		1,504,305				3,085				0.21	%		1,338,766				2,239				0.17	%
Savings		426,745				860				0.20	%		464,840				1,002				0.22	%
Total interest bearing deposits		4,989,827				25,325				0.51	%		4,357,356				20,313				0.47	%
Short-term borrowings and FHLB advances		513,650				2,342				0.46	%		381,786				960				0.25	%
Long-term borrowings		92,243				6,731				7.30	%		108,987				6,225				5.71	%
Total interest bearing liabilities		5,595,720				$	34,398			0.61	%		4,848,129				$	27,498			0.57	%
Non-interest bearing demand		1,256,284											1,105,553
Other liabilities		50,152											44,787
Shareholders’ equity		1,064,783											1,043,030
Total liabilities and shareholders’ equity		$	7,966,939										$	7,041,499
Net interest income and spread						$	265,194			3.49	%						$	245,851			3.71	%
Net interest margin										3.63	%										3.85	%

(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
		December 31, 2016								September 30, 2016								December 31, 2015
Net Income		$	12,434			$	12,434			$	18,488			$	18,488			$	15,021			$	15,021
		Pre-Tax				After-Tax				Pre-Tax				After-Tax				Pre-Tax				After-Tax
Adjustments
Non-interest income
Security gains*		(1,894		)		(1,170		)		(71		)		(44		)		(54		)		(33		)
Non-interest expense
Legal settlement *		1,361				841				1,500				927				—				—
Tax adjustment		(1,350		)		(1,350		)		(1,067		)		(1,067		)		—				—
Severance expense *		7				4				—				—				—				—
Restructuring expense *		4				3				(113		)		(70		)		32				20
Conversion costs and merger tax deductible *		18,245				11,270				331				205				33				20
Legal non-deductible		280				280				61				61				673				673
Contract Termination*		—				—				—				—				4,215				2,594
Tax effect of adjustments*		(6,775		)		N/A				(629		)		N/A				(1,625		)		N/A
Core Net Income		$	22,312			$	22,312			$	18,500			$	18,500			$	18,295			$	18,295
Diluted shares		$	50,387							$	43,909							$	44,550
Core Net Income per share		$	0.44							$	0.42							$	0.41
Average Assets		$	9,329,334							$	7,592,776							$	7,332,516
ROA**		0.53		%						0.97		%						0.82		%
Core ROA***		0.96		%						0.97		%						1.00		%

* Tax effected at an income tax rate of 38%** ROA: Annualized net income / Average assets*** Core ROA: Annualized core net income / Average assets

CAPITAL BANK FINANCIAL CORP.
RECONCILIATION OF NON-GAAP MEASURES (Continuation)
(Dollars in thousands)
(Unaudited)
CORE EFFICIENCY RATIO		Three Months Ended
		Dec 31  2016				Sep 30  2016				Jun 30  2016				Mar 31  2016				Dec 31  2015
Net interest income		$	77,819			$	62,627			$	61,515			$	61,367			$	62,078
Reported non-interest income		17,016				12,370				11,922				2,566				10,597
Indemnification asset termination		—				—				—				(9,178		)		—
Less: Securities gains (losses)		1,894				71				117				40				54
Core non-interest income		$	15,122			$	12,299			$	11,805			$	11,704			$	10,543
Reported non-interest expense		$	73,994			$	47,530			$	44,536			$	46,938			$	47,756
Less: Stock-based compensation expense		—				—				—				—				—
Severance expense		7				—				—				75				—
Restructuring expense		4				(113		)		5				142				33
Loss on extinguishment of debt		—				—				—				—				—
Conversion costs and merger tax deductible		18,245				331				881				1,107				31
Legal settlement		1,361				1,500				—				—				—
Legal non-deductible		280				61				355				580				673
Contract termination		—				—				—				—				4,215
Core non-interest expense		$	54,097			$	45,751			$	43,295			$	45,034			$	42,804
Efficiency ratio*		78.02		%		63.38		%		60.65		%		73.42		%		65.71		%
Core efficiency ratio**		58.21		%		61.06		%		59.05		%		61.63		%		58.94		%

  * Efficiency Ratio: Non-interest expense / (Non-interest income + Net interest income)** 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
		Dec 31,  2016				Sep 30,  2016				Jun 30,  2016				Mar 31,  2016				Dec 31,  2015
Total shareholders' equity		$	1,292,047			$	1,029,841			$	1,016,498			$	996,993			$	986,265
Less: goodwill, core deposits intangibles, net of taxes		(256,176		)		(142,141		)		(142,725		)		(143,304		)		(143,863		)
Tangible book value*		$	1,035,871			$	887,700			$	873,773			$	853,689			$	842,402
Common shares outstanding		51,765				43,235				43,219				43,189				43,143
Tangible book value per share		$	20.01			$	20.53			$	20.22			$	19.77			$	19.53

* Tangible book value is equal to book value less goodwill and core deposit intangibles, net of related deferred tax liabilities.

TANGIBLE COMMON EQUITY RATIO		Three Months Ended
		Dec 31,  2016				Sep 30,  2016				Jun 30,  2016				Mar 31,  2016				Dec 31,  2015
Total shareholders' equity		$	1,292,047			$	1,029,841			$	1,016,498			$	996,993			$	986,265
Less: goodwill, core deposits intangibles		(268,870		)		(146,810		)		(147,753		)		(148,688		)		(149,622		)
Tangible common equity		$	1,023,177			$	883,031			$	868,745			$	848,305			$	836,643
Total assets		$	9,930,657			$	7,792,458			$	7,621,225			$	7,479,798			$	7,449,479
Less: goodwill, core deposits intangibles		(268,870		)		(146,810		)		(147,753		)		(148,688		)		(149,622		)
Tangible assets		$	9,661,787			$	7,645,648			$	7,473,472			$	7,331,110			$	7,299,857
Tangible common equity ratio		10.59		%		11.55		%		11.62		%		11.57		%		11.46		%

CONTACT:
Kenneth A. Posner
Chief of Strategic Planning and Investor Relations
Phone: (212) 399-4020
E-mail: Kposner@cbfcorp.com