Exhibit 99.1
P.O. Box 18949 | Raleigh, NC 27619-8949 | Phone 919.645.6400 | Fax 919.645.6353 | capitalbank-us.com
CONTACT:
B. Grant Yarber
President and Chief Executive Officer
Phone: (919) 645-3494
Email: gyarber@capitalbank-us.com
FOR IMMEDIATE RELEASE
Capital Bank Announces Financial Results for 2009
RALEIGH, N.C., February 1, 2010 – Capital Bank Corporation (Nasdaq: CBKN), the parent company of Capital Bank, today reported a net loss of $7.2 million for the quarter ended December 31, 2009 compared to a net loss of $62.1 million for the quarter ended December 31, 2008. After dividends and accretion on preferred stock issued under the Capital Purchase Program, net loss attributable to common shareholders was $7.8 million, or $0.68 per diluted share, for the fourth quarter of 2009 compared with net loss attributable to common shareholders of $62.2 million, or $5.50 per diluted share, for the fourth quarter of 2008. The fourth quarter 2008 results include a goodwill impairment charge of $62.0 million, net of taxes. The Company’s financial results reflect a significant increase in provision for loan losses, higher FDIC insurance costs, and nonrecurring expenses related to the Company’s recent proposed public stock offering, partially offset by improved net interest income and a larger income tax benefit.
The Company reported a net loss of $6.8 million for the year ended December 31, 2009 compared to a net loss of $55.7 million for the year ended December 31, 2008. Net loss attributable to common shareholders was $9.2 million, or $0.80 per diluted share, for 2009 compared with net loss attributable to common shareholders of $55.8 million, or $4.94 per diluted share, for 2008. The full-year 2008 results also include the goodwill impairment charge of $62.0 million, net of taxes.
Capital Bank Corporation also announced today that its Board of Directors voted to suspend payment of the Company’s quarterly cash dividend. The Board will continue to evaluate the payment of a cash dividend on a quarterly basis.
“Weakness in local residential and commercial real estate markets continues to severely impact the financial health and stability of many businesses within the communities we serve,” stated B. Grant Yarber, president and CEO. “The Company took steps in 2009 to significantly increase its provision for loan losses in response to the deteriorating financial condition of certain borrowers and declining real estate values underlying certain impaired loans. We believe increased nonperforming assets, net charge-offs and the allowance for loan losses reflect the economic climate in our markets and consistent application of our policy to recognize losses as they occur. Despite elevated problem loans and increased loan losses, Capital Bank remains well capitalized and maintains credit quality ratios which are better than reported regional and national peer averages have been in recent quarters. We remain confident in the overall strength of our franchise and believe that as the economy begins to recover, these trends will begin to reverse.”
“The suspension of our quarterly dividend, while disappointing, is a prudent step in preserving our capital during this protracted economic crisis,” continued Mr. Yarber. “We proactively took this step and believe that cash dividends should be paid from current and expected earnings, preserving our capital.”
Net Interest Income
For the quarterly period, net interest income increased by $3.0 million, rising from $9.9 million in the fourth quarter of 2008 to $13.0 million in the fourth quarter of 2009. This improvement was due to an increase in net interest margin from 2.75% in the fourth quarter of 2008 to 3.25% in the fourth quarter of 2009, coupled with 11% growth in average earning assets over the same period. Net interest margin benefited from a significant decline in funding costs as rates on total interest-bearing liabilities fell 87 basis points, from 3.05% for the quarter ended December 31, 2008 to 2.18% for the quarter ended December 31, 2009. Partially offsetting declining funding costs was a rapid decline in the prime lending rate late in 2008 which contributed to a decrease in loan yields from 5.56% in the fourth quarter of 2008 to 5.19% in the fourth quarter of 2009. In October 2006, the Company entered into a three-year, $100 million (notional) interest rate swap to help mitigate its exposure to interest rate volatility in the prime-based portion of its commercial loan portfolio. The swap, which expired in October 2009, increased loan interest income by $114 thousand and $906 thousand for the quarters ended December 31, 2009 and 2008, respectively, representing a benefit to net interest margin of 3 and 24 basis points, respectively.
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For 2009, net interest income increased by $6.3 million, rising from $42.6 million in 2008 to $48.9 million in 2009. This improvement was due to an increase in net interest margin from 3.07% in 2008 to 3.14% in 2009, coupled with 11% growth in average earning assets over the same period. The prime swap increased loan interest income by $3.5 million and $2.6 million for the years ended December 31, 2009 and 2008, respectively, representing a benefit to net interest margin of 21 and 18 basis points, respectively.
“Despite a decline in loan yields from the dramatic reduction to market interest rates in 2008, increased levels of nonaccrual loans in 2009, and expiration of our prime swap in October 2009, Capital Bank realized substantial net interest income improvement during the year,” stated Mr. Yarber. “Management remains primarily focused on asset quality but also considers margin management a key priority. Through highly disciplined margin controls in a favorable interest rate environment, our net interest margin increased to 3.25% in the fourth quarter of 2009 from 2.75% in the fourth quarter of 2008. While we continue to face a difficult economy, we are encouraged by the positive trends in our net interest margin.”
Provision for Loan Losses and Asset Quality
Provision for loan losses for the quarter ended December 31, 2009 totaled $11.8 million, an increase from $1.7 million in the fourth quarter of 2008. The increase in the loan loss provision was driven by continued deteriorating economic conditions and weakness in local real estate markets which resulted in significantly higher levels of nonperforming assets and impaired loans as well as downgrades to the credit ratings of certain loans in the portfolio. Further, a significant decline in commercial real estate values contributed to higher levels of specific reserves or charge-offs on impaired loans. Net charge-offs increased from $1.8 million, or 0.58% of average loans, in the fourth quarter of 2008 to $5.3 million, or 1.52% of average loans, in the fourth quarter of 2009.
Provision for loan losses for the year ended December 31, 2009 totaled $23.1 million, an increase of $19.2 million from 2008. Net charge-offs increased from $3.5 million, or 0.30% of average loans, during 2008 to $11.8 million, or 0.89% of average loans, during 2009. Management continues to thoroughly review its loan portfolio and the adequacy of its allowance for loan losses.
Nonperforming assets, which include loans on nonaccrual and other real estate owned, increased to 2.90% of total assets at December 31, 2009 compared to 0.63% at December 31, 2008. Past due loans, which include all loans past due 30 days or more, increased to 2.80% of total loans at December 31, 2009 compared to 1.09% at December 31, 2008. As a result of the deteriorating credit quality, the Company increased the allowance for loan losses to 1.88% of total loans at December 31, 2009 compared to 1.18% at December 31, 2008. The allowance for loan losses was 66% of nonperforming loans at December 31, 2009, which was a decline from 162% at December 31, 2008.
Loans grew by $135.9 million during 2009 while deposits increased by $62.7 million. Much of the loan growth occurred in the Triangle region of North Carolina, which we believe continues to present quality growth opportunities in certain sectors. On the deposit side, checking and savings accounts increased $46.1 million during the year ended December 31, 2009 as Capital Bank continued to realize success in attracting low-cost, core deposits. Time deposits also increased $45.2 million over the same period while money market accounts declined by $28.6 million.
Noninterest Income
Noninterest income decreased $1.1 million, or 48%, declining from $2.2 million in the fourth quarter of 2008 to $1.2 million in the fourth quarter of 2009. The Company recorded an other-than-temporary impairment charge of $498 thousand during the quarter ended December 31, 2009 related to an investment in trust preferred securities issued by a financial institution. Following an analysis of the financial condition of the issuer and a decision by the issuer to suspend interest payments on the securities, management determined the unrealized loss to be credit related and therefore wrote the securities down to estimated fair market value with the loss charged to earnings. The Company also recorded an aggregate write down of $217 thousand on certain foreclosed properties reflecting declining real estate market values and recognized a loss of $361 thousand on the repurchase of a mortgage loan previously sold to an investor in the secondary market. Both of these collateral-related losses were recorded as reductions to other noninterest income in the fourth quarter of 2009.
For 2009, noninterest income decreased $1.5 million, or 14%, declining from $11.0 million in 2008 to $9.5 million in 2009. Included in this decrease was a gain of $374 thousand recorded on the sale of the Company’s Greensboro branch in 2008 as well as the other-than-temporary impairment charge and collateral-related losses recorded in the fourth quarter of 2009. Service charge income, which includes overdraft and non-sufficient funds charges, fell by $662 thousand primarily from a decline in consumer spending during the recent economic recession. Other loan fees declined by $543 thousand due to a drop in prepayment penalties charged as fewer business loans were prepaid given the current interest rate and economic environment. Partially offsetting the noninterest income decline was an $878 thousand increase in bank-owned life insurance (“BOLI”) income, which was primarily due to collection of BOLI policy proceeds during 2009. Additionally, mortgage fees increased by $330 thousand, which was primarily a result of higher levels of brokered mortgage originations benefited by a continued favorable interest rate environment for residential mortgage refinancing and home purchase activity.
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Noninterest Expense
Noninterest expense decreased $62.2 million, or 82%, declining from $76.2 million in the fourth quarter of 2008 to $14.0 million in the fourth quarter of 2009, primarily due to a goodwill impairment charge of $65.2 million in 2008. The remaining increase in noninterest expense included higher FDIC deposit insurance expense of $596 thousand, which was primarily due to increases in deposit insurance assessment rates to cover losses incurred by the FDIC’s deposit insurance fund. Growth in core deposits during 2009 also partially contributed to the increase in FDIC deposit insurance expense. The Company incurred $1.9 million of direct nonrecurring expenses related to its recent proposed public stock offering. These expenses are recorded in other noninterest expense and represent investment banking, legal and accounting costs as well as other miscellaneous filing and printing costs related to the proposed offering.
For 2009, noninterest expense decreased $57.5 million, or 54%, declining from $106.6 million in 2008 to $49.2 million in 2009, primarily due to the goodwill impairment charge in 2008. The remaining increase in noninterest expense included higher FDIC deposit insurance expense of $2.0 million, which included the FDIC’s special assessment of $765 thousand in 2009, and the $1.9 million of direct nonrecurring expenses related to its recent proposed public stock offering. Salaries and employee benefits also increased $1.2 million primarily due to increased staffing requirements as new branches were opened during 2008 and 2009 in addition to the four branches purchased in the Fayetteville market during December 2008. Partially offsetting increased costs from personnel requirements at new branches was a reduction in bonus expense as the Company suspended its incentive plan in light of market conditions and paid no bonuses for 2009. Occupancy expense increased $1.2 million from higher levels of facilities costs related to the new branch locations.
***
Capital Bank Corporation, headquartered in Raleigh, N.C., with approximately $1.7 billion in total assets, offers a broad range of financial services. Capital Bank operates 32 banking offices in Asheville (4), Burlington (3), Cary (2), Clayton, Fayetteville (4), Graham, Hickory, Holly Springs, Mebane, Morrisville, Oxford, Pittsboro, Raleigh (5), Sanford (3), Siler City, Wake Forest and Zebulon. The Company’s website is http://www.capitalbank-us.com.
Information in this press release contains forward-looking statements. These statements involve risks and uncertainties that could cause actual results to differ materially, including without limitation, the management of our growth, the risks associated with Capital Bank’s loan portfolio, local economic conditions affecting retail and commercial real estate, competition within the industry, dependence on key personnel, government regulation and the risks associated with possible or completed acquisitions. 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.
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CAPITAL BANK CORPORATION
Quarterly Results
(Unaudited) | 2009 | 2008 | ||||||||||||||
December 31 | September 30 | June 30 | March 31 | December 31(a) | ||||||||||||
(In thousands except per share data) | ||||||||||||||||
Interest income | $ | 20,863 | $ | 21,858 | $ | 20,755 | $ | 19,668 | $ | 20,088 | ||||||
Interest expense | 7,885 | 8,303 | 8,591 | 9,487 | 10,156 | |||||||||||
Net interest income | 12,978 | 13,555 | 12,164 | 10,181 | 9,932 | |||||||||||
Provision for loan losses | 11,822 | 3,564 | 1,692 | 5,986 | 1,701 | |||||||||||
Net interest income after provision for loan losses | 1,156 | 9,991 | 10,472 | 4,195 | 8,231 | |||||||||||
Noninterest income | 1,180 | 2,507 | 3,724 | 2,106 | 2,247 | |||||||||||
Noninterest expense | 14,033 | 11,098 | 12,465 | 11,564 | 76,236 | |||||||||||
Net (loss) income before taxes | (11,697 | ) | 1,400 | 1,731 | (5,263 | ) | (65,758 | ) | ||||||||
Income tax (benefit) expense | (4,452 | ) | (2,143 | ) | 382 | (800 | ) | (3,680 | ) | |||||||
Net (loss) income | $ | (7,245 | ) | $ | 3,543 | $ | 1,349 | $ | (4,463 | ) | $ | (62,078 | ) | |||
Earnings (loss) per common share – basic | $ | (0.68 | ) | $ | 0.26 | $ | 0.07 | $ | (0.45 | ) | $ | (5.50 | ) | |||
Earnings (loss) per common share – fully diluted | $ | (0.68 | ) | $ | 0.26 | $ | 0.07 | $ | (0.45 | ) | $ | (5.50 | ) | |||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 11,529 | 11,469 | 11,448 | 11,293 | 11,309 | |||||||||||
Fully diluted | 11,529 | 11,469 | 11,448 | 11,293 | 11,309 |
(a) Includes a goodwill impairment charge to noninterest expense of $65.2 million
End of Period Balances
(Unaudited) | 2009 | 2008 | ||||||||||||||
December 31 | September 30 | June 30 | March 31 | December 31(a) | ||||||||||||
(Dollars in thousands except per share data) | ||||||||||||||||
Total assets | $ | 1,734,668 | $ | 1,734,950 | $ | 1,695,342 | $ | 1,665,611 | $ | 1,654,232 | ||||||
Investment securities | 245,492 | 262,499 | 268,224 | 286,310 | 278,138 | |||||||||||
Loans (gross) | 1,390,302 | 1,357,243 | 1,293,340 | 1,277,064 | 1,254,368 | |||||||||||
Allowance for loan losses | 26,081 | 19,511 | 18,602 | 18,480 | 14,795 | |||||||||||
Total earning assets | 1,640,305 | 1,634,119 | 1,615,164 | 1,580,140 | 1,559,256 | |||||||||||
Deposits | 1,377,965 | 1,385,250 | 1,380,842 | 1,340,974 | 1,315,314 | |||||||||||
Shareholders’ equity | 139,785 | 149,525 | 143,306 | 142,674 | 148,514 | |||||||||||
Book value per common share | $ | 8.68 | $ | 9.58 | $ | 9.03 | $ | 8.97 | $ | 9.54 | ||||||
Tangible book value per common share | $ | 8.44 | $ | 9.31 | $ | 8.74 | $ | 8.66 | $ | 9.20 |
(a) Derived from audited consolidated financial statements
Average Quarterly Balances
(Unaudited) | 2009 | 2008 | ||||||||||||||
December 31 | September 30 | June 30 | March 31 | December 31 | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Total assets | $ | 1,736,421 | $ | 1,705,290 | $ | 1,665,387 | $ | 1,659,767 | $ | 1,620,817 | ||||||
Investments | 254,383 | 265,976 | 279,607 | 289,368 | 246,658 | |||||||||||
Loans (gross) | 1,384,285 | 1,330,199 | 1,285,571 | 1,265,438 | 1,213,027 | |||||||||||
Total earning assets | 1,648,872 | 1,632,707 | 1,588,502 | 1,574,017 | 1,484,680 | |||||||||||
Deposits | 1,379,554 | 1,375,931 | 1,324,507 | 1,307,827 | 1,238,343 | |||||||||||
Shareholders’ equity | 150,007 | 145,487 | 145,216 | 149,285 | 171,227 |
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CAPITAL BANK CORPORATION
Quarterly Net Interest Margin (a)
(Unaudited) | 2009 | 2008 | ||||||||||||||
December 31 | September 30 | June 30 | March 31 | December 31 | ||||||||||||
Yield on earning assets | 5.15 | % | 5.43 | % | 5.34 | % | 5.17 | % | 5.47 | % | ||||||
Cost of interest-bearing liabilities | 2.18 | 2.33 | 2.50 | 2.80 | 3.05 | |||||||||||
Net interest spread | 2.96 | 3.10 | 2.84 | 2.37 | 2.42 | |||||||||||
Net interest margin | 3.25 | 3.41 | 3.17 | 2.72 | 2.75 |
(a) Annualized and on a fully taxable equivalent basis
Asset Quality – Nonperforming Assets (a)
(Unaudited) | 2009 | 2008 | ||||||||||||||
December 31 | September 30 | June 30 | March 31 | December 31(b) | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Commercial real estate | $ | 32,200 | $ | 15,701 | $ | 14,885 | $ | 13,783 | $ | 6,754 | ||||||
Commercial | 3,974 | 586 | 1,060 | 652 | 348 | |||||||||||
Residential mortgage | 3,170 | 1,905 | 2,426 | 2,477 | 1,738 | |||||||||||
Home equity lines | 160 | 330 | 140 | 96 | 275 | |||||||||||
Consumer – other | 8 | – | 19 | – | – | |||||||||||
Total nonperforming loans | 39,512 | 18,522 | 18,530 | 17,008 | 9,115 | |||||||||||
Other real estate owned (c)(d) | 10,732 | 8,441 | 5,170 | 3,616 | 1,347 | |||||||||||
Total nonperforming assets | $ | 50,244 | $ | 26,963 | $ | 23,700 | $ | 20,624 | $ | 10,462 | ||||||
Nonperforming loans to total loans | 2.84 | % | 1.36 | % | 1.43 | % | 1.33 | % | 0.73 | % | ||||||
Nonperforming assets to total assets | 2.90 | % | 1.55 | % | 1.40 | % | 1.24 | % | 0.63 | % |
(a) Represents loans that are 90 days or more past due or in nonaccrual status in addition to other real estate owned
(b) Derived from audited consolidated financial statements
(c) Includes $1.3 million of real estate from a closed branch office that was held for sale at December 31, 2009
(d) Includes $3.3 million of residential properties sold to individuals prior to December 31, 2009 where the Company financed 100% of the purchase price of the home at closing
Asset Quality – Other Key Ratios
(Unaudited) | 2009 | 2008 | ||||||||||||||
December 31 | September 30 | June 30 | March 31 | December 31 | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Past due loans (a) | $ | 38,984 | $ | 25,245 | $ | 15,196 | $ | 17,064 | $ | 13,642 | ||||||
Past due loans to total loans | 2.80 | % | 1.86 | % | 1.17 | % | 1.34 | % | 1.09 | % | ||||||
Net charge-offs | $ | 5,252 | $ | 2,655 | $ | 1,570 | $ | 2,301 | $ | 1,768 | ||||||
Net charge-offs to average loans | 1.52 | % | 0.80 | % | 0.49 | % | 0.73 | % | 0.58 | % | ||||||
Provision for loan losses | $ | 11,822 | $ | 3,564 | $ | 1,692 | $ | 5,986 | $ | 1,701 | ||||||
Provision for loan losses to average loans | 3.42 | % | 1.07 | % | 0.53 | % | 1.89 | % | 0.56 | % | ||||||
Allowance for loan losses to total loans | 1.88 | % | 1.44 | % | 1.44 | % | 1.45 | % | 1.18 | % | ||||||
Allowance for loan losses to nonperforming loans | 66 | % | 105 | % | 100 | % | 109 | % | 162 | % |
(a) Represents all loans 30 days or more past due
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CAPITAL BANK CORPORATION
Asset Quality – Loan Portfolio Analysis
(Unaudited)
As of December 31, 2009 | ||||||||||||||||
Loans Outstanding | Nonaccrual Loans | Nonaccrual Loans to Loans Outstanding | Allowance for Loan Losses | ALLL to Loans Outstanding | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Commercial real estate: | ||||||||||||||||
Residential ADC | $ | 263,457 | $ | 24,037 | 9.12 | % | $ | 9,276 | 3.52 | % | ||||||
Other commercial real estate | 434,337 | 1,556 | 0.36 | 5,711 | 1.31 | |||||||||||
Total non-owner occupied CRE | 697,794 | 25,593 | 3.67 | 14,987 | 2.15 | |||||||||||
Commercial owner occupied real estate | 194,729 | 6,607 | 3.39 | 2,650 | 1.36 | |||||||||||
Commercial: | ||||||||||||||||
Commercial and industrial | 183,733 | 3,974 | 2.16 | 5,536 | 3.01 | |||||||||||
Municipal | 24,826 | – | – | 25 | 0.10 | |||||||||||
Agriculture | 15,089 | – | – | 148 | 0.98 | |||||||||||
Other | 1,936 | – | – | 26 | 1.34 | |||||||||||
Total commercial | 225,584 | 3,974 | 1.76 | 5,735 | 2.54 | |||||||||||
Residential mortgage: | ||||||||||||||||
First lien, closed-end | 149,033 | 2,868 | 1.92 | 1,575 | 1.06 | |||||||||||
Junior lien, closed-end | 16,341 | 302 | 1.85 | 298 | 1.82 | |||||||||||
Total residential mortgage | 165,374 | 3,170 | 1.92 | 1,873 | 1.13 | |||||||||||
Home equity lines | 97,129 | 160 | 0.16 | 510 | 0.53 | |||||||||||
Consumer – other | 9,692 | 8 | 0.08 | 326 | 3.36 | |||||||||||
Total gross loans | $ | 1,390,302 | $ | 39,512 | 2.84 | % | $ | 26,081 | 1.88 | % |
Asset Quality – Commercial Real Estate
Residential Acquisition, Development and Construction Portfolio Analysis by Type
(Unaudited)
As of December 31, 2009 | ||||||||||
Residential Land / Development | Residential Construction | Total | ||||||||
(Dollars in thousands) | ||||||||||
Loans outstanding | $ | 162,733 | $ | 100,724 | $ | 263,457 | ||||
Loans outstanding to total loans | 11.70 | % | 7.24 | % | 18.95 | % | ||||
Nonaccrual loans | $ | 16,935 | $ | 7,102 | $ | 24,037 | ||||
Nonaccrual loans to loans in category | 10.41 | % | 7.05 | % | 9.12 | % | ||||
Allowance for loan losses | $ | 7,569 | $ | 1,707 | $ | 9,276 | ||||
ALLL to loans in category | 4.65 | % | 1.69 | % | 3.52 | % |
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CAPITAL BANK CORPORATION
Asset Quality – Commercial Real Estate
Residential Acquisition, Development and Construction Portfolio Analysis by Region
(Unaudited)
As of December 31, 2009 | |||||||||||||||||||
Loans Outstanding | Percent of Total Loans Outstanding | Nonaccrual Loans | Nonaccrual Loans to Loans Outstanding | Allowance for Loan Losses | ALLL to Loans Outstanding | ||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Triangle | $ | 185,319 | 70.34 | % | $ | 14,349 | 7.74 | % | $ | 7,325 | 3.95 | % | |||||||
Sandhills | 31,257 | 11.86 | – | – | 412 | 1.32 | |||||||||||||
Triad | 5,509 | 2.09 | 106 | 1.92 | 86 | 1.56 | |||||||||||||
Western | 41,372 | 15.70 | 9,582 | 23.16 | 1,453 | 3.51 | |||||||||||||
Total | $ | 263,457 | 100.00 | % | $ | 24,037 | 9.12 | % | $ | 9,276 | 3.52 | % |
Asset Quality – Commercial Real Estate
Other Commercial Real Estate Portfolio Analysis by Type
(Unaudited)
As of December 31, 2009 | ||||||||||||||||
Commercial Land / Development | Commercial Construction | Multifamily | Other Non-Residential CRE | Total | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Loans outstanding | $ | 128,745 | $ | 59,918 | $ | 43,379 | $ | 202,295 | $ | 434,337 | ||||||
Loans outstanding to total loans | 9.26 | % | 4.31 | % | 3.12 | % | 14.55 | % | 31.24 | % | ||||||
Nonaccrual loans | $ | 529 | $ | – | $ | 325 | $ | 702 | $ | 1,556 | ||||||
Nonaccrual loans to loans in category | 0.41 | % | – | 0.75 | % | 0.35 | % | 0.36 | % | |||||||
Allowance for loan losses | $ | 1,732 | $ | 462 | $ | 474 | $ | 3,043 | $ | 5,711 | ||||||
ALLL to loans in category | 1.35 | % | 0.77 | % | 1.09 | % | 1.50 | % | 1.31 | % |
Asset Quality – Commercial Real Estate
Other Commercial Real Estate Portfolio Analysis by Region
(Unaudited)
As of December 31, 2009 | |||||||||||||||||||
Loans Outstanding | Percent of Total Loans Outstanding | Nonaccrual Loans | Nonaccrual Loans to Loans Outstanding | Allowance for Loan Losses | ALLL to Loans Outstanding | ||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Triangle | $ | 281,664 | 64.85 | % | $ | 361 | 0.13 | % | $ | 3,653 | 1.30 | % | |||||||
Sandhills | 60,593 | 13.95 | 605 | 1.00 | 937 | 1.55 | |||||||||||||
Triad | 35,987 | 8.29 | 41 | 0.11 | 576 | 1.60 | |||||||||||||
Western | 56,093 | 12.91 | 549 | 0.98 | 545 | 0.97 | |||||||||||||
Total | $ | 434,337 | 100.00 | % | $ | 1,556 | 0.36 | % | $ | 5,711 | 1.31 | % |
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CAPITAL BANK CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 2009 and 2008
December 31, 2009 | December 31, 2008 | ||||||
(Dollars in thousands except share data) | (Unaudited) | ||||||
Assets | |||||||
Cash and due from banks: | |||||||
Interest-earning | $ | 4,511 | $ | 26,621 | |||
Noninterest-earning | 25,002 | 27,705 | |||||
Federal funds sold and short term investments | – | 129 | |||||
Total cash and cash equivalents | 29,513 | 54,455 | |||||
Investment securities: | |||||||
Investment securities – available for sale, at fair value | 235,426 | 266,656 | |||||
Investment securities – held to maturity, at amortized cost | 3,676 | 5,194 | |||||
Other investments | 6,390 | 6,288 | |||||
Total investment securities | 245,492 | 278,138 | |||||
Loans – net of unearned income and deferred fees | 1,390,302 | 1,254,368 | |||||
Allowance for loan losses | (26,081 | ) | (14,795 | ) | |||
Net loans | 1,364,221 | 1,239,573 | |||||
Premises and equipment, net | 23,756 | 24,640 | |||||
Bank-owned life insurance | 22,746 | 22,368 | |||||
Deposit premium, net | 2,711 | 3,857 | |||||
Accrued interest receivable | 6,590 | 6,225 | |||||
Other assets | 39,639 | 24,976 | |||||
Total assets | $ | 1,734,668 | $ | 1,654,232 | |||
Liabilities | |||||||
Deposits: | |||||||
Demand, noninterest-bearing | $ | 141,069 | $ | 125,281 | |||
Savings and interest-bearing checking | 204,042 | 173,711 | |||||
Money market deposit accounts | 184,146 | 212,780 | |||||
Time deposits less than $100,000 | 507,348 | 509,231 | |||||
Time deposits $100,000 and greater | 341,360 | 294,311 | |||||
Total deposits | 1,377,965 | 1,315,314 | |||||
Repurchase agreements and federal funds purchased | 6,543 | 15,010 | |||||
Borrowings | 167,000 | 132,000 | |||||
Subordinated debentures | 30,930 | 30,930 | |||||
Other liabilities | 12,445 | 12,464 | |||||
Total liabilities | 1,594,883 | 1,505,718 | |||||
Commitments and contingencies | |||||||
Shareholders’ Equity | |||||||
Preferred stock, $1,000 par value; 100,000 shares authorized; 41,279 shares issued and outstanding (liquidation preference of $41,279) | 40,127 | 39,839 | |||||
Common stock, no par value; 50,000,000 shares authorized; 11,348,117 and 11,238,085 shares issued and outstanding | 139,909 | 139,209 | |||||
Retained deficit | (44,206 | ) | (31,420 | ) | |||
Accumulated other comprehensive income | 3,955 | 886 | |||||
Total shareholders’ equity | 139,785 | 148,514 | |||||
Total liabilities and shareholders’ equity | $ | 1,734,668 | $ | 1,654,232 |
- 8 - -
CAPITAL BANK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Year Ended December 31, 2009 and 2008
(Unaudited)
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||
2009 | 2008 | 2009 | 2008 | ||||||||||
(Dollars in thousands except per share data) | |||||||||||||
Interest income: | |||||||||||||
Loans and loan fees | $ | 17,954 | $ | 17,009 | $ | 70,178 | $ | 72,494 | |||||
Investment securities: | |||||||||||||
Taxable interest income | 2,141 | 2,319 | 9,849 | 8,935 | |||||||||
Tax-exempt interest income | 740 | 734 | 3,026 | 3,169 | |||||||||
Dividends | 20 | 1 | 46 | 294 | |||||||||
Federal funds and other interest income | 8 | 25 | 42 | 128 | |||||||||
Total interest income | 20,863 | 20,088 | 83,141 | 85,020 | |||||||||
Interest expense: | |||||||||||||
Deposits | 6,441 | 8,107 | 28,037 | 33,042 | |||||||||
Borrowings and repurchase agreements | 1,444 | 2,049 | 6,226 | 9,382 | |||||||||
Total interest expense | 7,885 | 10,156 | 34,263 | 42,424 | |||||||||
Net interest income | 12,978 | 9,932 | 48,878 | 42,596 | |||||||||
Provision for loan losses | 11,822 | 1,701 | 23,064 | 3,876 | |||||||||
Net interest income after provision for loan losses | 1,156 | 8,231 | 25,814 | 38,720 | |||||||||
Noninterest income: | |||||||||||||
Service charges and other fees | 982 | 1,082 | 3,883 | 4,545 | |||||||||
Bank card services | 406 | 322 | 1,539 | 1,332 | |||||||||
Mortgage origination and other loan fees | 415 | 488 | 1,935 | 2,148 | |||||||||
Brokerage fees | 230 | 162 | 698 | 732 | |||||||||
Bank-owned life insurance | 167 | 135 | 1,830 | 952 | |||||||||
Gain on sale of branch | – | (52 | ) | – | 374 | ||||||||
Net gain on investment securities | (61 | ) | – | 103 | 249 | ||||||||
Total other-than-temporary impairment losses | (1,082 | ) | – | (1,082 | ) | – | |||||||
Portion of impairment losses recognized in other comprehensive loss | 584 | – | 584 | – | |||||||||
Net impairment losses recognized in earnings | (498 | ) | – | (498 | ) | – | |||||||
Other | (461 | ) | 110 | 27 | 669 | ||||||||
Total noninterest income | 1,180 | 2,247 | 9,517 | 11,001 | |||||||||
Noninterest expense: | |||||||||||||
Salaries and employee benefits | 5,167 | 5,714 | 22,112 | 20,951 | |||||||||
Occupancy | 1,438 | 1,161 | 5,630 | 4,458 | |||||||||
Furniture and equipment | 815 | 817 | 3,155 | 3,135 | |||||||||
Data processing and telecommunications | 558 | 610 | 2,317 | 2,135 | |||||||||
Advertising | 670 | 515 | 1,610 | 1,515 | |||||||||
Office expenses | 340 | 339 | 1,383 | 1,317 | |||||||||
Professional fees | 317 | 466 | 1,488 | 1,479 | |||||||||
Business development and travel | 401 | 360 | 1,244 | 1,393 | |||||||||
Amortization of deposit premiums | 284 | 267 | 1,146 | 1,037 | |||||||||
Miscellaneous loan handling costs | 482 | 278 | 1,356 | 848 | |||||||||
Directors fees | 287 | 95 | 1,418 | 1,044 | |||||||||
FDIC deposit insurance | 839 | 243 | 2,721 | 685 | |||||||||
Goodwill impairment charge | – | 65,191 | – | 65,191 | |||||||||
Other | 2,435 | 180 | 3,580 | 1,424 | |||||||||
Total noninterest expense | 14,033 | 76,236 | 49,160 | 106,612 | |||||||||
Net (loss) income before tax (benefit) expense | (11,697 | ) | (65,758 | ) | (13,829 | ) | (56,891 | ) | |||||
Income tax (benefit) expense | (4,452 | ) | (3,680 | ) | (7,013 | ) | (1,207 | ) | |||||
Net (loss) income | $ | (7,245 | ) | $ | (62,078 | ) | $ | (6,816 | ) | $ | (55,684 | ) | |
Dividends and accretion on preferred stock | 588 | 124 | 2,352 | 124 | |||||||||
Net (loss) income attributable to common shareholders | $ | (7,833 | ) | $ | (62,202 | ) | $ | (9,168 | ) | $ | (55,808 | ) | |
Earnings (loss) per common share – basic | $ | (0.68 | ) | $ | (5.50 | ) | $ | (0.80 | ) | $ | (4.94 | ) | |
Earnings (loss) per common share – diluted | $ | (0.68 | ) | $ | (5.50 | ) | $ | (0.80 | ) | $ | (4.94 | ) |
- 9 - -
CAPITAL BANK CORPORATION
Average Balances, Interest Earned or Paid, and Interest Yields/Rates
For the Three Months Ended December 31, 2009, September 30, 2009 and December 31, 2008
Tax Equivalent Basis (1)
December 31, 2009 | September 30, 2009 | December 31, 2008 | ||||||||||||||||||||||||||
(Dollars in thousands) | Average Balance | Amount Earned | Average Rate | Average Balance | Amount Earned | Average Rate | Average Balance | Amount Earned | Average Rate | |||||||||||||||||||
Assets | ||||||||||||||||||||||||||||
Loans receivable: (2) | ||||||||||||||||||||||||||||
Commercial | $ | 1,190,645 | $ | 15,668 | 5.22 | % | $ | 1,153,514 | $ | 16,550 | 5.69 | % | $ | 1,052,172 | $ | 14,719 | 5.55 | % | ||||||||||
Home equity | 93,765 | 985 | 4.17 | 93,651 | 983 | 4.16 | 89,125 | 1,047 | 4.66 | |||||||||||||||||||
Consumer and residential mortgage | 99,875 | 1,446 | 5.79 | 83,034 | 1,276 | 6.15 | 71,730 | 1,243 | 6.93 | |||||||||||||||||||
Total loans | 1,384,285 | 18,099 | 5.19 | 1,330,199 | 18,809 | 5.61 | 1,213,027 | 17,009 | 5.56 | |||||||||||||||||||
Investment securities (3) | 247,253 | 3,283 | 5.31 | 263,513 | 3,512 | 5.33 | 253,412 | 3,430 | 5.41 | |||||||||||||||||||
Federal funds sold and interest-earning cash (4) | 17,334 | 8 | 0.18 | 38,995 | 18 | 0.18 | 18,241 | 25 | 0.54 | |||||||||||||||||||
Total interest-earning assets | 1,648,872 | $ | 21,390 | 5.15 | % | 1,632,707 | $ | 22,339 | 5.43 | % | 1,484,680 | $ | 20,464 | 5.47 | % | |||||||||||||
Cash and due from banks | 18,169 | 8,256 | 20,514 | |||||||||||||||||||||||||
Other assets | 90,303 | 83,589 | 129,633 | |||||||||||||||||||||||||
Allowance for loan losses | (20,923 | ) | (19,262 | ) | (14,010 | ) | ||||||||||||||||||||||
Total assets | $ | 1,736,421 | $ | 1,705,290 | $ | 1,620,817 | ||||||||||||||||||||||
Liabilities and Equity | ||||||||||||||||||||||||||||
Savings deposits | $ | 29,012 | $ | 11 | 0.15 | % | $ | 29,267 | $ | 11 | 0.15 | % | $ | 27,948 | $ | 11 | 0.16 | % | ||||||||||
Interest-bearing demand deposits | 365,889 | 1,078 | 1.17 | 366,632 | 1,095 | 1.18 | 336,011 | 1,363 | 1.61 | |||||||||||||||||||
Time deposits | 844,776 | 5,352 | 2.51 | 845,311 | 5,691 | 2.67 | 758,491 | 6,733 | 3.52 | |||||||||||||||||||
Total interest-bearing deposits | 1,239,677 | 6,441 | 2.06 | 1,241,210 | 6,797 | 2.17 | 1,122,450 | 8,107 | 2.87 | |||||||||||||||||||
Borrowed funds | 155,989 | 1,224 | 3.11 | 130,098 | 1,260 | 3.84 | 145,962 | 1,605 | 4.36 | |||||||||||||||||||
Subordinated debt | 30,930 | 216 | 2.77 | 30,930 | 240 | 3.08 | 30,930 | 424 | 5.44 | |||||||||||||||||||
Repurchase agreements and fed funds purchased | 7,246 | 4 | 0.22 | 10,646 | 6 | 0.22 | 22,050 | 20 | 0.36 | |||||||||||||||||||
Total interest-bearing liabilities | 1,433,842 | $ | 7,885 | 2.18 | % | 1,412,884 | $ | 8,303 | 2.33 | % | 1,321,392 | $ | 10,156 | 3.05 | % | |||||||||||||
Noninterest-bearing deposits | 139,877 | 134,721 | 115,893 | |||||||||||||||||||||||||
Other liabilities | 12,695 | 12,198 | 12,305 | |||||||||||||||||||||||||
Total liabilities | 1,586,414 | 1,559,803 | 1,449,590 | |||||||||||||||||||||||||
Shareholders’ equity | 150,007 | 145,487 | 171,227 | |||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 1,736,421 | $ | 1,705,290 | $ | 1,620,817 | ||||||||||||||||||||||
Net interest spread (5) | 2.96 | % | 3.10 | % | 2.42 | % | ||||||||||||||||||||||
Tax equivalent adjustment | $ | 527 | $ | 481 | $ | 376 | ||||||||||||||||||||||
Net interest income and net interest margin (6) | $ | 13,505 | 3.25 | % | $ | 14,036 | 3.41 | % | $ | 10,308 | 2.75 | % |
(1) | The tax equivalent basis is computed using a federal tax rate of 34%. |
(2) | Loans receivable include 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) | For comparison purposes, average balances have been adjusted for all periods presented to include cash held at the Federal Reserve as interest earning. |
(5) | Net interest spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. |
(6) | Net interest margin represents net interest income divided by average interest-earning assets. |
- 10 - -
CAPITAL BANK CORPORATION
Average Balances, Interest Earned or Paid, and Interest Yields/Rates
For the Years Ended December 31, 2009 and 2008
Tax Equivalent Basis (1)
December 31, 2009 | December 31, 2008 | ||||||||||||||||||
(Dollars in thousands) | Average Balance | Amount Earned | Average Rate | Average Balance | Amount Earned | Average Rate | |||||||||||||
Assets | |||||||||||||||||||
Loans receivable: (2) | |||||||||||||||||||
Commercial | $ | 1,139,042 | $ | 61,403 | 5.39 | % | $ | 1,017,157 | $ | 62,678 | 6.16 | % | |||||||
Home equity | 93,832 | 3,908 | 4.16 | 83,511 | 4,602 | 5.51 | |||||||||||||
Consumer and residential mortgage | 83,863 | 5,101 | 6.08 | 74,202 | 5,214 | 7.03 | |||||||||||||
Total loans | 1,316,737 | 70,412 | 5.35 | 1,174,870 | 72,494 | 6.17 | |||||||||||||
Investment securities (3) | 269,240 | 14,483 | 5.38 | 254,216 | 14,026 | 5.52 | |||||||||||||
Federal funds sold and interest-earning cash (4) | 25,312 | 42 | 0.17 | 11,293 | 128 | 1.13 | |||||||||||||
Total interest-earnings assets | 1,611,289 | $ | 84,937 | 5.27 | % | 1,440,379 | $ | 86,648 | 6.02 | % | |||||||||
Cash and due from banks | 15,927 | 22,477 | |||||||||||||||||
Other assets | 83,283 | 133,566 | |||||||||||||||||
Allowance for loan losses | (18,535 | ) | (13,846 | ) | |||||||||||||||
Total assets | $ | 1,691,964 | $ | 1,582,576 | |||||||||||||||
Liabilities and Equity | |||||||||||||||||||
Savings deposits | $ | 29,171 | $ | 47 | 0.16 | % | $ | 29,756 | $ | 122 | 0.41 | % | |||||||
Interest-bearing demand deposits | 363,522 | 4,527 | 1.25 | 336,899 | 6,655 | 1.98 | |||||||||||||
Time deposits | 822,003 | 23,463 | 2.85 | 691,140 | 26,265 | 3.80 | |||||||||||||
Total interest-bearing deposits | 1,214,696 | 28,037 | 2.31 | 1,057,795 | 33,042 | 3.12 | |||||||||||||
Borrowed funds | 143,241 | 5,147 | 3.59 | 168,501 | 7,234 | 4.29 | |||||||||||||
Subordinated debt | 30,930 | 1,055 | 3.41 | 30,930 | 1,761 | 5.69 | |||||||||||||
Repurchase agreements and fed funds purchased | 10,919 | 24 | 0.22 | 29,929 | 387 | 1.29 | |||||||||||||
Total interest-bearing liabilities | 1,399,786 | $ | 34,263 | 2.45 | % | 1,287,155 | $ | 42,424 | 3.30 | % | |||||||||
Noninterest-bearing deposits | 132,535 | 114,982 | |||||||||||||||||
Other liabilities | 12,148 | 11,352 | |||||||||||||||||
Total liabilities | 1,544,469 | 1,413,489 | |||||||||||||||||
Shareholders’ equity | 147,495 | 169,087 | |||||||||||||||||
Total liabilities and shareholders’ equity | $ | 1,691,964 | $ | 1,582,576 | |||||||||||||||
Net interest spread (5) | 2.82 | % | 2.72 | % | |||||||||||||||
Tax equivalent adjustment | $ | 1,796 | $ | 1,628 | |||||||||||||||
Net interest income and net interest margin (6) | $ | 50,674 | 3.14 | % | $ | 44,224 | 3.07 | % |
(1) | The tax equivalent basis is computed using a federal tax rate of 34%. |
(2) | Loans receivable include 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) | For comparison purposes, average balances have been adjusted for all periods presented to include cash held at the Federal Reserve as interest earning. |
(5) | Net interest spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. |
(6) | Net interest margin represents net interest income divided by average interest-earning assets. |
- 11 - -