CAPITAL BANK CORPORATION 
By RALEIGH, N.C., July 30 /PRNewswire-FirstCall/ -- Capital Bank Corporation (Nasdaq: CBKN), the parent company of Capital Bank, today reported financial results for the second quarter of 2010.
Key Items in Second Quarter of 2010:
-- Regulatory capital ratios were in excess of "well capitalized" levels as
of June 30, 2010;
-- Net loss attributable to common shareholders was $14.2 million, or $1.09
per share, in the second quarter of 2010 compared with net income
available to common shareholders of $762 thousand, or $0.07 per share,
in the second quarter of 2009;
-- Net interest margin increased to 3.25% in the second quarter of 2010
from 3.22% in the first quarter of 2010 and 3.17% in the second quarter
of 2009;
-- Nonperforming assets and restructured loans were 5.76% of total assets
as of June 30, 2010 compared with 5.67% as of March 31, 2010 and 4.87%
as of December 31, 2009;
-- Allowance for loan losses increased to 2.65% of total loans as of June
30, 2010 from 2.12% as of March 31, 2010 and 1.88% as of December 31,
2009;
-- Provision for loan losses increased to $20.0 million in the second
quarter of 2010 from $1.7 million in the second quarter of 2009; and
-- Valuation allowance of $3.3 million was recorded against deferred tax
assets in the second quarter of 2010.
Key Items in First Half of 2010:
-- Successfully completed $8.5 million private placement offering of common
stock and subordinated debt to qualified investors;
-- Net loss attributable to common shareholders was $20.1 million, or $1.60
per share, in the first half of 2010 compared with net loss attributable
to common shareholders of $4.3 million, or $0.38 per share, in the first
half of 2009;
-- Net interest margin increased to 3.23% in the first half of 2010 from
2.95% in the first half of 2009; and
-- Provision for loan losses increased to $31.8 million in first half of
2010 from $7.7 million in the first half of 2009.
"Our quarterly financial results were again significantly impacted by an elevated provision for loan losses," stated B. Grant Yarber, president and CEO. "We continue to work aggressively to resolve our problem loans and have experienced success with these efforts. Through our special financing program introduced in mid-2009, we have sold 135 new houses for an aggregate purchase price in excess of $49 million to qualified homeowners. This program has helped to significantly reduce our residential construction portfolio and has provided a boost to our borrowers and the surrounding communities. However, many of our borrowers remain under significant stress from a protracted economic recession that has been more severe than we or most experts ever predicted. Our core operations remain strong, but we anticipate that future increases to our allowance for loan losses and elevated provisions may be necessary as we continue working through this credit cycle."
Net Interest Income
Net interest income increased by $580 thousand, rising from $12.2 million in the second quarter of 2009 to $12.7 million in the second quarter of 2010. This improvement was due to an increase in net interest margin from 3.17% in the second quarter of 2009 to 3.25% in the second quarter of 2010, coupled with 2.2% 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 from 2.50% for the quarter ended June 30, 2009 to 1.97% for the quarter ended June 30, 2010. The Company's interest rate swap on prime-indexed commercial loans, which expired in October 2009, increased interest income by $1.1 million in the second quarter of 2009, representing a benefit to net interest margin of 0.28% in that quarter. Since the swap expired in 2009, the Company received no benefit in the second quarter of 2010.
Year-to-date net interest income increased by $2.9 million, rising from $22.3 million in the first half of 2009 to $25.3 million in the first half of 2010. This improvement was due to an increase in net interest margin from 2.95% in the first half of 2009 to 3.23% in the first half of 2010, coupled with 3.2% growth in average earning assets over the same period. The interest rate swap contributed $2.3 million to interest income in the first half of 2009, representing a benefit to net interest margin of 0.29% in that period.
A significant increase in loans placed on nonaccrual status negatively affected net interest income during the first half of 2010. When loans are placed on nonaccrual status, any accrued but unpaid interest is immediately reversed and has a direct impact on net interest income and net interest margin. Reversal of accrued interest on loans placed on nonaccrual reduced net interest income by approximately $679 thousand and $164 thousand for the quarters ended June 30, 2010 and 2009, respectively, representing a negative impact to net interest margin of 0.17% and 0.04%, respectively. Reversal of accrued interest reduced net interest income by approximately $1.4 million and $614 thousand for the six months ended June 30, 2010 and 2009, respectively, representing a negative impact to net interest margin of 0.17% and 0.08%, respectively.
Provision for Loan Losses and Asset Quality
Provision for loan losses for the quarter ended June 30, 2010 totaled $20.0 million, a significant increase from $1.7 million for the quarter ended June 30, 2009. The increase in the loan loss provision was primarily due to difficult economic conditions and troubled real estate markets which resulted in continued rising levels of nonperforming assets and impaired loans. Additionally, higher default and charge-off rates as well as downgrades to the credit ratings of certain loans in the portfolio increased general reserves applied to performing loan groupings. Further, declining real estate values contributed to higher levels of charge-offs on impaired loans. Net charge-offs increased from $1.6 million, or 0.49% of average loans, in the second quarter of 2009 to $13.4 million, or 3.91% of average loans, in the second quarter of 2010.
Provision for loan losses totaled $31.8 million for the first half of 2010, an increase from $7.7 million for the first half of 2009. Net charge-offs increased from $3.9 million, or 0.61% of average loans, in the first half of 2009 to $22.1 million, or 3.19% of average loans, in the first half of 2010.
Nonperforming assets, which include loans on nonaccrual and other real estate, increased to 5.37% of total assets as of June 30, 2010 compared to 2.90% as of December 31, 2009 and 1.40% as of June 30, 2009. Nonperforming assets and restructured loans increased to 5.76% of total assets as of June 30, 2010 compared to 4.87% as of December 31, 2009 and 2.27% as of June 30, 2009. Loans past due more than 30 days, excluding nonperforming loans, increased to 0.72% of total loans as of June 30, 2010 compared to 0.67% as of December 31, 2009 and 0.43% as of June 30, 2009.
As a result of deteriorating credit quality, the Company increased the allowance for loan losses to 2.65% of total loans as of June 30, 2010 compared to 1.88% as of December 31, 2009 and 1.44% as of June 30, 2009. The allowance for loan losses was 48% of nonperforming loans as of June 30, 2010, which was a decline from 66% as of December 31, 2009 and 100% as of June 30, 2009. The allowance for loan losses was 295% of nonperforming loans, net of loans charged down to fair value, which was a significant increase from 115% as of December 31, 2009 and 167% as of June 30, 2009.
Noninterest Income
Noninterest income decreased by $1.2 million, or 33%, declining from $3.7 million in the second quarter of 2009 to $2.5 million in the second quarter of 2010. This decrease was primarily related to a nonrecurring bank-owned life insurance ("BOLI") gain of $913 thousand recorded in the quarter ended June 30, 2009. Also contributing to the noninterest income decrease, the Company realized net gains from sales of certain debt securities totaling $69 thousand in the second quarter of 2010 compared with net gains of $336 thousand in the same quarter last year. Further, mortgage origination and other loan fees declined by $244 thousand. Partially offsetting the decline in noninterest income was an improvement in bank card service income of $158 thousand from a higher volume of debit card transactions as well as an increase of $135 thousand in brokerage fees from improved sales efforts.
Year-to-date noninterest income decreased by $785 thousand, or 14%, declining from $5.8 million in the first half of 2009 to $5.0 million in the first half of 2010. This decrease was primarily related to the nonrecurring BOLI gain in the first half of 2009. Mortgage origination and other loan fees declined by $444 thousand, which also contributed to the noninterest income decrease. Partially offsetting the decline in noninterest income was an increase in net gains on investment securities which totaled $397 thousand in the first half of 2010 compared with $16 thousand in the first half of 2009.
Noninterest Expense
Noninterest expense decreased $85 thousand, or 1%, declining from $12.5 million in the second quarter of 2009 to $12.4 million in the second quarter of 2010. This decrease was due in part to a $537 thousand decline in salaries and employee benefits from the suspension of the Company's 401(k) match in mid-2009 and higher deferred loan costs, which reduce expense. FDIC deposit insurance expense decreased by $528 thousand primarily due to the FDIC's special assessment on all insured depository institutions in the second quarter of last year. Further, directors' fees decreased by $183 thousand primarily due to acceleration of benefit payments on a retirement plan upon the death of a former director and in part due the board reduction late in 2009. Partially offsetting the decrease in noninterest expense was an increase of $376 thousand in advertising and public relations expense due in part from radio and television ads promoting the Company's special financing programs. Other real estate losses and loan-related costs increased $310 thousand as higher loan workout, appraisal and foreclosure costs were incurred. Professional fees increased $250 thousand primarily due to higher legal costs. Other noninterest expense increased $232 thousand in part from a loss incurred upon the repurchase of a previously sold mortgage loan and from higher reserve levels for unfunded lending commitments.
Year-to-date noninterest expense increased $941 thousand, or 4%, rising from $24.0 million in the first half of 2009 to $25.0 million in the first half of 2010. This increase was primarily due to $1.5 million in higher other real estate and loan-related costs, of which $949 thousand was related to valuation adjustments to and losses on the sale of other real estate with the remaining increase representing higher loan workout, appraisal and foreclosure costs. Advertising and public relations expense increased $483 thousand in part from ads promoting the Company's special financing programs. Partially offsetting the increase in noninterest expense was a decrease of $1.1 million in salaries and employee benefits from the suspension of the Company's 401(k) match and higher deferred loan costs.
Income Taxes
Income tax benefits recorded in both the three and six-month periods ended June 30, 2010 were primarily impacted by net losses before income taxes and were partially offset by a valuation allowance of $3.3 million recorded against deferred income taxes in the second quarter of 2010.
Balance Sheet
Loan balances declined by $39.2 million in the first half of 2010 due in part to net charge-offs in the period as well as net principal paydowns on outstanding loans. The declining loan portfolio reflects an effort by the Company to de-leverage its balance sheet to preserve capital and reduce its exposure to certain sectors of the commercial real estate market. Total investment securities decreased by $16.7 million over the same period as management has continued to sell certain municipal bonds to reduce the duration of its fixed income portfolio and to mitigate its exposure to a future rising interest rate environment. The Company's portfolio has also experienced higher levels of paydowns on U.S. government sponsored mortgage-backed securities. Total deposits declined by $7.2 million in the first half of 2010. Checking accounts and time deposits increased by $10.8 million and $16.1 million, respectively, during the six months ended June 30, 2010 while money market accounts decreased by $36.3 million in the same period.
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.
CAPITAL BANK CORPORATION
Quarterly Results
2010
----
June 30 March 31
------- --------
(Dollars in thousands)
Interest income $19,794 $20,066
Interest expense 7,050 7,516
----- -----
Net interest income 12,744 12,550
Provision for loan losses 20,037 11,734
------ ------
Net interest income (loss)
after provision for loan
losses (7,293) 816
Noninterest income 2,514 2,531
Noninterest expense 12,380 12,590
------ ------
Net income (loss) before
taxes (17,159) (9,243)
Income tax expense (benefit) (3,576) (3,909)
------ ------
Net income (loss) $(13,583) $(5,334)
======== =======
Dividends and accretion on
preferred stock 589 589
--- ---
Net income (loss)
attributable to common
shareholders $(14,172) $(5,923)
======== =======
2009
----
December September
31 30 June 30
--------- ---------- -------
(Dollars in thousands)
Interest income $20,863 $21,858 $20,755
Interest expense 7,885 8,303 8,591
----- ----- -----
Net interest income 12,978 13,555 12,164
Provision for loan losses 11,822 3,564 1,692
------ ----- -----
Net interest income (loss)
after provision for loan
losses 1,156 9,991 10,472
Noninterest income 1,830 2,507 3,724
Noninterest expense 14,683 11,098 12,465
------ ------ ------
Net income (loss) before
taxes (11,697) 1,400 1,731
Income tax expense (benefit) (4,452) (2,143) 382
------ ------ ---
Net income (loss) $(7,245) $3,543 $1,349
======= ====== ======
Dividends and accretion on
preferred stock 588 590 587
--- --- ---
Net income (loss)
attributable to common
shareholders $(7,833) $2,953 $762
======= ====== ====
End of Period Balances
2010
----
June 30 March 31
------- --------
(Dollars in thousands)
Total assets $1,694,336 $1,739,857
Total earning assets 1,602,891 1,639,864
Cash and cash equivalents 41,417 53,341
Investment securities 228,812 232,780
Loans 1,351,101 1,376,085
Allowance for loan losses 35,762 29,160
Intangible assets 2,241 2,475
Deposits 1,370,777 1,380,539
Borrowings 153,000 172,000
Subordinated debentures 34,323 34,323
Shareholders' equity 125,479 138,792
Tangible common equity 81,959 95,038
2009
----
December September
31 30 June 30
--------- ---------- -------
(Dollars in thousands)
Total assets $1,734,668 $1,734,950 $1,695,342
Total earning assets 1,640,305 1,634,119 1,615,164
Cash and cash equivalents 29,513 52,694 72,694
Investment securities 245,492 262,499 268,224
Loans 1,390,302 1,357,243 1,293,340
Allowance for loan losses 26,081 19,511 18,602
Intangible assets 2,711 2,995 3,282
Deposits 1,377,965 1,385,250 1,380,842
Borrowings 167,000 147,000 117,000
Subordinated debentures 30,930 30,930 30,930
Shareholders' equity 139,785 149,525 143,306
Tangible common equity 95,795 105,251 98,745
Average Quarterly Balances
2010
----
June 30 March 31
------- --------
(Dollars in thousands)
Total assets $1,719,240 $1,732,940
Total earning assets 1,623,279 1,639,214
Investment securities 230,138 231,916
Loans 1,373,613 1,393,169
Deposits 1,382,527 1,374,520
Borrowings 153,264 170,956
Subordinated debentures 34,323 31,232
Shareholders' equity 136,949 140,907
2009
----
December September
31 30 June 30
--------- ---------- -------
(Dollars in thousands)
Total assets $1,736,421 $1,705,290 $1,665,387
Total earning assets 1,648,872 1,632,707 1,588,502
Investment securities 254,383 265,976 279,607
Loans 1,384,285 1,330,199 1,285,571
Deposits 1,379,554 1,375,931 1,324,507
Borrowings 155,989 130,098 140,682
Subordinated debentures 30,930 30,930 30,930
Shareholders' equity 150,007 145,487 145,216
CAPITAL BANK CORPORATION
Nonperforming Assets
2010
----
June 30 March 31
------- --------
(Dollars in thousands)
Nonperforming loans:
Commercial real estate $61,181 $44,086
Consumer real estate 4,742 3,809
Commercial owner occupied 4,854 6,085
Commercial and industrial 3,311 4,217
Consumer 7 8
Other loans 781 -
--- ---
Total nonperforming loans 74,876 58,205
Other real estate 16,088 15,635
------ ------
Total nonperforming assets 90,964 73,840
Performing restructured
loans 6,570 24,814
----- ------
Total nonperforming assets
and restructured loans $97,534 $98,654
======= =======
2009
----
December September
31 30 June 30
--------- ---------- -------
(Dollars in thousands)
Nonperforming loans:
Commercial real estate $25,593 $14,991 $12,888
Consumer real estate 3,330 2,235 2,566
Commercial owner occupied 6,607 710 1,997
Commercial and industrial 3,974 586 1,060
Consumer 8 - 19
Other loans - - -
--- --- ---
Total nonperforming loans 39,512 18,522 18,530
Other real estate 10,732 8,441 5,170
------ ----- -----
Total nonperforming assets 50,244 26,963 23,700
Performing restructured
loans 34,177 29,040 14,715
------ ------ ------
Total nonperforming assets
and restructured loans $84,421 $56,003 $38,415
======= ======= =======
Other Financial Data and Ratios
2010
----
June 30 March 31
------- --------
Per Share Data
Net income (loss) - basic
and diluted $(1.09) $(0.49)
Book value 6.54 7.57
Tangible book value 6.36 7.38
Common shares outstanding 12,880,954 12,881,354
Average shares outstanding 13,021,208 12,014,430
Net Interest Margin 1
Yield on earning assets 4.99% 5.08%
Cost of interest-bearing
liabilities 1.97 2.10
Net interest spread 3.02 2.98
Net interest margin 3.25 3.22
Asset Quality Ratios
Nonperforming loans to total
loans 5.54% 4.23%
Nonperforming assets to
total assets 5.37 4.24
Nonperforming assets and
restructured loans to total
assets 5.76 5.67
Allowance for loan losses to
total loans 2.65 2.12
Allowance to nonperforming
loans 48 50
Allowance to nonperforming
loans, net of loans charged
down to fair value 295 132
Net charge-offs to average
loans 3.91 2.48
Past due loans, excluding
nonperforming loans, to
total loans 0.72 1.24
2009
----
December September
31 30 June 30
--------- ---------- -------
Per Share Data
Net income (loss) - basic
and diluted $(0.68) $0.26 $0.07
Book value 8.68 9.58 9.03
Tangible book value 8.44 9.31 8.74
Common shares outstanding 11,348,117 11,300,369 11,300,369
Average shares outstanding 11,528,693 11,469,064 11,447,619
Net Interest Margin 1
Yield on earning assets 5.15% 5.43% 5.34%
Cost of interest-bearing
liabilities 2.18 2.33 2.50
Net interest spread 2.96 3.10 2.84
Net interest margin 3.25 3.41 3.17
Asset Quality Ratios
Nonperforming loans to total
loans 2.84% 1.36% 1.43%
Nonperforming assets to
total assets 2.90 1.55 1.40
Nonperforming assets and
restructured loans to total
assets 4.87 3.23 2.27
Allowance for loan losses to
total loans 1.88 1.44 1.44
Allowance to nonperforming
loans 66 105 100
Allowance to nonperforming
loans, net of loans charged
down to fair value 115 182 167
Net charge-offs to average
loans 1.52 0.80 0.49
Past due loans, excluding
nonperforming loans, to
total loans 0.67 1.20 0.43
CAPITAL BANK CORPORATION
Other Financial Data and Ratios - Continued
2010
----
June 30 March 31
------- --------
Capital Ratios
Tangible equity to tangible
assets 7.28% 7.85%
Tangible common equity to
tangible assets 4.84 5.47
Average shareholders' equity
to average total assets 7.97 8.13
Tier 1 leverage 2 7.75 8.80
Tier 1 risk-based capital 2 9.09 10.24
Total risk-based capital 2 10.59 11.73
2009
----
December September
31 30 June 30
--------- ---------- -------
Capital Ratios
Tangible equity to tangible
assets 7.91% 8.46% 8.28%
Tangible common equity to
tangible assets 5.53 6.08 5.84
Average shareholders' equity
to average total assets 8.64 8.53 8.72
Tier 1 leverage 2 8.94 9.87 9.94
Tier 1 risk-based capital 2 10.16 11.17 11.52
Total risk-based capital 2 11.41 12.42 12.77
1 Annualized and on a fully taxable equivalent basis.
2 Regulatory capital ratios as of June 30, 2010 are preliminary and
subject to change pending filing of regulatory financial reports.
Supplemental Loan Portfolio Analysis
As of June 30, 2010
-------------------
Loans Nonaccrual Nonaccrual Allowance
Outstanding Loans Loans for Loan
to
----------- ----- Loans Losses
Outstanding ------
-----------
(Dollars in
thousands)
Commercial RE:
Residential C&D $225,974 $44,265 19.59% $8,072
Commercial C&D 245,323 11,981 4.88 5,724
Other commercial
RE 211,234 4,935 2.34 3,704
------- ----- ---- -----
Total commercial
RE 682,531 61,181 8.96 17,500
------- ------ ---- ------
Consumer RE:
Residential
mortgages 169,983 4,557 2.68 2,934
Home equity lines 93,717 185 0.20 750
------ --- ---- ---
Total consumer RE 263,700 4,742 1.80 3,684
------- ----- ---- -----
Commercial owner
occupied RE 180,904 4,854 2.68 3,843
Commercial and
industrial 175,247 3,311 1.89 9,949
Consumer 6,962 7 0.10 551
Other loans 41,757 781 1.87 235
------ --- ---- ---
Total $1,351,101 $74,876 5.54% $35,762
========== ======= ==== =======
As of June 30, 2010
-------------------
YTD Net
Charge-
YTD Net offs to
Charge- Average
Allowance offs Loans
to Loans -------- --------
Outstanding
-----------
(Dollars in
thousands)
Commercial RE:
Residential C&D 3.57% $13,540 11.07%
Commercial C&D 2.33 1,426 1.31
Other commercial
RE 1.75 263 0.23
---- --- ----
Total commercial
RE 2.56 15,229 4.41
---- ------ ----
Consumer RE:
Residential
mortgages 1.73 1,972 2.35
Home equity lines 0.80 286 0.60
---- --- ----
Total consumer RE 1.40 2,258 1.72
---- ----- ----
Commercial owner
occupied RE 2.12 1,886 2.01
Commercial and
industrial 5.68 2,325 2.59
Consumer 7.91 183 4.40
Other loans 0.56 209 1.00
---- --- ----
Total 2.65% $22,090 3.19%
==== ======= ====
Supplemental Commercial Real Estate Analysis
Residential Construction & Development Loan Analysis by Type
As of June 30, 2010
-------------------
Residential Residential Total
Land / Construction -----
Development ------------
-----------
(Dollars in thousands)
Loans outstanding $134,298 $91,676 $225,974
Nonaccrual loans 40,565 3,700 44,265
Allowance for loan losses 4,825 3,247 8,072
YTD net charge-offs 10,557 2,983 13,540
Loans outstanding to total loans 9.94% 6.79% 16.73%
Nonaccrual loans to loans in category 30.21 4.04 19.59
Allowance to loans in category 3.59 3.54 3.57
YTD net charge-offs to average loans
in category (annualized) 14.22 6.20 11.07
CAPITAL BANK CORPORATION
Supplemental Commercial Real Estate Analysis - Continued
Residential Construction & Development Loan Analysis by Region
As of June 30, 2010
-------------------
Percent
Loans of Nonaccrual
Total
Outstanding Loans Loans
----------- Outstanding -----
-----------
(Dollars in
thousands)
Triangle $162,417 71.88% $35,738
Sandhills 28,430 12.58 1,110
Triad 5,201 2.30 -
Western 29,926 13.24 7,417
------ ----- -----
Total $225,974 100.00% $44,265
======== ====== =======
As of June 30, 2010
-------------------
Allowance
Nonaccrual for Allowance
Loan
Loans Losses to Loans
to Loans ------- Outstanding
Outstanding -----------
-----------
(Dollars in
thousands)
Triangle 22.00% $5,529 3.40%
Sandhills 3.90 1,029 3.62
Triad - 277 5.33
Western 24.78 1,237 4.13
----- ----- ----
Total 19.59% $8,072 3.57%
===== ====== ====
Commercial Construction & Development and Other CRE Loan Analysis by Type
As of June 30, 2010
-------------------
Commercial Commercial Multifamily
Land / Construction -----------
Development ------------
-----------
(Dollars in thousands)
Loans outstanding $150,995 $94,328 $40,808
Nonaccrual loans 11,981 - -
Allowance for loan losses 3,725 1,999 564
YTD net charge-offs 1,426 - 15
Loans outstanding to
total loans 11.18% 6.98% 3.02%
Nonaccrual loans to loans
in category 7.93 - -
Allowance to loans in
category 2.47 2.12 1.38
YTD net charge-offs to
average loans in
category (annualized) 2.04 - 0.07
As of June 30, 2010
-------------------
Commercial Total
Non-Owner -----
Occupied
RE
---------
(Dollars in thousands)
Loans outstanding $170,426 $456,557
Nonaccrual loans 4,935 16,916
Allowance for loan losses 3,140 9,428
YTD net charge-offs 248 1,689
Loans outstanding to
total loans 12.61% 33.79%
Nonaccrual loans to loans
in category 2.90 3.71
Allowance to loans in
category 1.84 2.07
YTD net charge-offs to
average loans in
category (annualized) 0.27 0.76
Commercial Construction & Development and Other CRE Loan Analysis by
Region
As of June 30, 2010
-------------------
Percent
Loans of Nonaccrual
Total
Outstanding Loans Loans
----------- Outstanding -----
-----------
(Dollars in
thousands)
Triangle $294,328 64.47% $15,821
Sandhills 68,321 14.97 610
Triad 38,553 8.44 280
Western 55,355 12.12 205
------ ----- ---
Total $456,557 100.00% $16,916
======== ====== =======
As of June 30, 2010
-------------------
Allowance
Nonaccrual for Allowance
Loan
Loans Losses to Loans
to Loans ------- Outstanding
Outstanding -----------
-----------
(Dollars in
thousands)
Triangle 5.38% $5,877 2.00%
Sandhills 0.89 1,917 2.81
Triad 0.73 757 1.96
Western 0.37 877 1.58
---- --- ----
Total 3.71% $9,428 2.07%
==== ====== ====
CAPITAL BANK CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 2010 and December 31, 2009
December 31,
June 30, 2010 2009
------------- -------------
(Dollars in thousands)
Assets
Cash and cash equivalents:
Cash and due from banks $20,332 $25,002
Interest-bearing deposits with
banks 21,085 4,511
------ -----
Total cash and cash equivalents 41,417 29,513
Investment securities:
Investment securities -
available for sale, at fair
value 217,243 235,426
Investment securities - held to
maturity, at amortized cost 3,082 3,676
Other investments 8,487 6,390
----- -----
Total investment securities 228,812 245,492
Mortgage loans held for sale 1,893 -
Loans:
Loans - net of unearned income
and deferred fees 1,351,101 1,390,302
Allowance for loan losses (35,762) (26,081)
------- -------
Net loans 1,315,339 1,364,221
Premises and equipment, net 24,128 23,756
Bank-owned life insurance 23,264 22,746
Core deposit intangible, net 2,241 2,711
Deferred income tax 18,702 12,096
Accrued interest receivable 5,766 6,590
Other assets 32,774 27,543
------ ------
Total assets $1,694,336 $1,734,668
========== ==========
Liabilities
Deposits:
Demand, noninterest checking $130,768 $141,069
NOW accounts 196,171 175,084
Money market deposit accounts 147,815 184,146
Savings accounts 31,229 28,958
Time deposits 864,794 848,708
------- -------
Total deposits 1,370,777 1,377,965
Repurchase agreements and
federal funds purchased - 6,543
Borrowings 153,000 167,000
Subordinated debentures 34,323 30,930
Other liabilities 10,757 12,445
------ ------
Total liabilities 1,568,857 1,594,883
Shareholders' Equity
Preferred stock, $1,000 par
value; 100,000 shares
authorized; 41,279 shares
issued and outstanding
(liquidation preference of
$41,279) 40,273 40,127
Common stock, no par value;
50,000,000 shares authorized;
12,880,954 and 11,348,117
shares issued and outstanding 145,297 139,909
Accumulated deficit (64,301) (44,206)
Accumulated other comprehensive
income 4,210 3,955
----- -----
Total shareholders' equity 125,479 139,785
------- -------
Total liabilities and
shareholders' equity $1,694,336 $1,734,668
========== ==========
CAPITAL BANK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2010 and 2009
Three Months Ended
June 30,
2010 2009
---- ----
(Dollars in thousands except per
share data)
Interest income:
Loans and loan fees $17,312 $17,412
Investment securities:
Taxable interest income 1,971 2,561
Tax-exempt interest income 483 763
Dividends 18 13
Federal funds and other interest
income 10 6
--- ---
Total interest income 19,794 20,755
------ ------
Interest expense:
Deposits 5,604 7,033
Borrowings and repurchase
agreements 1,446 1,558
----- -----
Total interest expense 7,050 8,591
----- -----
Net interest income 12,744 12,164
Provision for loan losses 20,037 1,692
------ -----
Net interest income (loss) after
provision for loan losses (7,293) 10,472
------ ------
Noninterest income:
Service charges and other fees 854 959
Bank card services 543 385
Mortgage origination and other
loan fees 339 583
Brokerage fees 285 150
Bank-owned life insurance 255 1,165
Net gain on investment
securities 69 336
Other 169 146
--- ---
Total noninterest income 2,514 3,724
----- -----
Noninterest expense:
Salaries and employee benefits 5,319 5,856
Occupancy 1,456 1,348
Furniture and equipment 700 739
Data processing and
telecommunications 525 573
Advertising and public relations 599 223
Office expenses 288 322
Professional fees 684 434
Business development and travel 307 247
Amortization of deposit premiums 235 287
Other real estate losses and
other loan-related losses 708 398
Directors' fees 294 477
FDIC deposit insurance 651 1,179
Other 614 382
--- ---
Total noninterest expense 12,380 12,465
------ ------
Net income (loss) before income
taxes (17,159) 1,731
Income tax expense (benefit) (3,576) 382
------ ---
Net income (loss) $(13,583) $1,349
======== ======
Dividends and accretion on
preferred stock 589 587
--- ---
Net income (loss) attributable
to common shareholders $(14,172) $762
======== ====
Net income (loss) per common
share - basic $(1.09) $0.07
====== =====
Net income (loss) per common
share - diluted $(1.09) $0.07
====== =====
Six Months Ended
June 30,
2010 2009
---- ----
(Dollars in thousands except per
share data)
Interest income:
Loans and loan fees $34,723 $33,504
Investment securities:
Taxable interest income 3,997 5,360
Tax-exempt interest income 1,084 1,527
Dividends 36 13
Federal funds and other interest
income 20 16
--- ---
Total interest income 39,860 40,420
------ ------
Interest expense:
Deposits 11,755 14,799
Borrowings and repurchase
agreements 2,811 3,276
----- -----
Total interest expense 14,566 18,075
------ ------
Net interest income 25,294 22,345
Provision for loan losses 31,771 7,678
------ -----
Net interest income (loss) after
provision for loan losses (6,477) 14,667
------ ------
Noninterest income:
Service charges and other fees 1,722 1,911
Bank card services 958 724
Mortgage origination and other
loan fees 666 1,110
Brokerage fees 472 313
Bank-owned life insurance 494 1,423
Net gain on investment
securities 397 16
Other 336 333
--- ---
Total noninterest income 5,045 5,830
----- -----
Noninterest expense:
Salaries and employee benefits 10,719 11,817
Occupancy 2,958 2,721
Furniture and equipment 1,445 1,569
Data processing and
telecommunications 1,042 1,204
Advertising and public relations 1,029 546
Office expenses 620 657
Professional fees 1,159 813
Business development and travel 574 575
Amortization of deposit premiums 470 575
Other real estate losses and
other loan-related losses 2,025 568
Directors' fees 592 836
FDIC deposit insurance 1,316 1,408
Other 1,021 740
----- ---
Total noninterest expense 24,970 24,029
------ ------
Net income (loss) before income
taxes (26,402) (3,532)
Income tax expense (benefit) (7,485) (418)
------ ----
Net income (loss) $(18,917) $(3,114)
======== =======
Dividends and accretion on
preferred stock 1,178 1,174
----- -----
Net income (loss) attributable
to common shareholders $(20,095) $(4,288)
======== =======
Net income (loss) per common
share - basic $(1.60) $(0.38)
====== ======
Net income (loss) per common
share - diluted $(1.60) $(0.38)
====== ======
CAPITAL BANK CORPORATION
Average Balances, Interest Earned or Paid, and Interest Yields/Rates
For the Three Months Ended June 30, 2010, March 31, 2010 and June 30, 2009
Tax Equivalent Basis 1
June 30, 2010
-------------
(Dollars in Average Amount Average
thousands) Balance Earned Rate
-------- ------- --------
Assets
Loans 2:
Commercial $1,158,238 $14,825 5.13%
Consumer 215,375 2,640 4.92
------- ----- ----
Total loans 1,373,613 17,465 5.10
Investment
securities 3 224,366 2,722 4.85
Interest-
bearing
deposits 25,300 10 0.16
------ --- ----
Total interest-
earning assets 1,623,279 $20,197 4.99%
======= ====
Cash and due
from banks 17,819
Other assets 111,383
Allowance for
loan losses (33,241)
-------
Total assets $1,719,240
==========
Liabilities and
Equity
Savings accounts $30,721 $10 0.13%
Interest-
bearing demand
deposits 326,706 648 0.80
Time deposits 891,645 4,946 2.22
------- ----- ----
Total interest-
bearing
deposits 1,249,072 5,604 1.80
Borrowed funds 153,264 1,146 3.00
Subordinated
debt 34,323 298 3.48
Repurchase
agreements 1,590 2 0.50
----- --- ----
Total interest-
bearing
liabilities 1,438,249 $7,050 1.97%
====== ====
Noninterest-
bearing
deposits 133,455
Other
liabilities 10,587
------
Total
liabilities 1,582,291
Shareholders'
equity 136,949
-------
Total
liabilities and
shareholders'
equity $1,719,240
==========
Net interest
spread 4 3.02%
Tax equivalent
adjustment $403
Net interest
income and net
interest margin
5 $13,147 3.25%
======= ====
March 31, 2010
--------------
(Dollars in Average Amount Average
thousands) Balance Earned Rate
-------- ------- --------
Assets
Loans 2:
Commercial $1,187,760 $15,089 5.15%
Consumer 205,409 2,473 4.88
------- ----- ----
Total loans 1,393,169 17,562 5.11
Investment
securities 3 225,819 2,956 5.24
Interest-
bearing
deposits 20,226 10 0.20
------ --- ----
Total interest-
earning assets 1,639,214 $20,528 5.08%
======= ====
Cash and due
from banks 19,450
Other assets 102,321
Allowance for
loan losses (28,045)
-------
Total assets $1,732,940
==========
Liabilities and
Equity
Savings accounts $28,992 $10 0.14%
Interest-
bearing demand
deposits 342,048 886 1.05
Time deposits 871,507 5,255 2.45
------- ----- ----
Total interest-
bearing
deposits 1,242,547 6,151 2.01
Borrowed funds 170,956 1,145 2.72
Subordinated
debt 31,232 218 2.83
Repurchase
agreements 4,667 2 0.17
----- --- ----
Total interest-
bearing
liabilities 1,449,402 $7,516 2.10%
====== ====
Noninterest-
bearing
deposits 131,973
Other
liabilities 10,658
------
Total
liabilities 1,592,033
Shareholders'
equity 140,907
-------
Total
liabilities and
shareholders'
equity $1,732,940
==========
Net interest
spread 4 2.98%
Tax equivalent
adjustment $462
Net interest
income and net
interest margin
5 $13,012 3.22%
======= ====
June 30, 2009
-------------
(Dollars in Average Amount Average
thousands) Balance Earned Rate
-------- ------- --------
Assets
Loans 2:
Commercial $1,115,003 $15,244 5.48%
Consumer 170,568 2,168 5.10
------- ----- ----
Total loans 1,285,571 17,412 5.43
Investment
securities 3 278,033 3,731 5.37
Interest-
bearing
deposits 24,898 6 0.10
------ --- ----
Total interest-
earning assets 1,588,502 $21,149 5.34%
