RALEIGH, N.C., Oct. 20 /PRNewswire-FirstCall/ -- Capital Bank Corporation (Nasdaq: CBKN), the parent company of Capital Bank, today reported net income of $3.5 million for the quarter ended September 30, 2009 compared to net income of $2.0 million for the quarter ended September 30, 2008. After dividends and accretion on preferred stock issued under the Capital Purchase Program, net income available to common shareholders was $3.0 million, or $0.26 per diluted share, for the third quarter of 2009 compared with $2.0 million, or $0.18 per diluted share, for the same period one year ago. The third quarter results reflect further improvement in net interest margin coupled with recognized tax benefits.
"Capital Bank continued to realize significant margin improvement and positive earnings during the third quarter," stated B. Grant Yarber, president and CEO. "Management remains focused on asset quality but also considers margin management a key priority. Through highly disciplined margin controls and continued repricing of customer deposits in an increasingly favorable interest rate environment, our net interest margin increased to 3.41% in the third quarter of 2009 from 3.17% in the second quarter. While we continue to face a difficult economy, we are encouraged by the positive trends in our net interest margin and core earnings."
Net Interest Income
Net interest income increased by $2.7 million for the quarter ended September 30, 2009 from the same quarter one year ago. This improvement was due to an increase in net interest margin by 30 basis points, from 3.11% for the third quarter of 2008 to 3.41% for the third quarter of 2009, coupled with a 14% 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 customer deposits fell 79 basis points, from 2.96% for the third quarter of 2008 to 2.17% for the third quarter of 2009. Partially offsetting declining funding costs was a rapid decline in market interest rates late in 2008 which contributed to a decrease in loan yields from 6.03% for the third quarter of 2008 to 5.61% for the third 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 the commercial loan portfolio. The swap, which expired on October 9, 2009, increased loan interest income by $1.1 million and $675 thousand for the quarters ended September 30, 2009 and 2008, respectively, representing a benefit to net interest margin of 27 and 19 basis points, respectively, during the quarters.
Provision for Loan Losses and Asset Quality
Provision for loan losses for the quarter ended September 30, 2009 totaled $3.6 million, an increase of $2.8 million from the same period one year ago. The increase in the provision was partially due to loan growth of $163.1 million, or 14%, from September 30, 2008, but the increase was also driven by continued deteriorating economic conditions and weakness in the local real estate markets which resulted in higher net charge-offs and downgrades to the credit ratings of certain loans in the portfolio. Net charge-offs increased from $653 thousand during the third quarter of 2008 to $2.7 million during the third quarter of 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 1.55% as a percent of total assets at September 30, 2009 compared to 0.63% at December 31, 2008 and 0.47% at September 30, 2008. Past due loans, which include loans at least 30 days past due, increased to 1.86% as a percent of total loans at September 30, 2009 compared to 1.09% at December 31, 2008 and 0.75% at September 30, 2008. As a result of the deteriorating credit quality, the Company increased the allowance for loan losses to 1.44% of total loans at September 30, 2009 compared to 1.18% at December 31, 2008 and 1.17% at September 30, 2008. The allowance for loan losses was 105% of nonperforming loans at September 30, 2009, which was a decline from 162% at December 31, 2008 and 219% at September 30, 2008.
"Weakness in the residential and commercial real estate markets from the global recession and credit crisis continues to severely impact the financial health and stability of many businesses within the communities we serve. While we believe our markets represent some of the most resilient in the country, the Company again took steps to increase the provision for loan losses compared to the same quarter one year ago," commented Mr. Yarber. "Despite the difficult economic conditions, our practice of working proactively with borrowers and dealing with problem loans has enabled Capital Bank to maintain credit quality that is superior to peer banks and other banks across the country. In fact, our nonperforming assets to total assets ratio of 1.55% at September 30, 2009 is significantly better than reported regional and national averages have been in recent quarters. While higher loan loss provisions have negatively impacted our earnings in recent quarters, we continue to believe our focused approach to managing asset quality will position us well to take advantage of a future market recovery."
Loans grew by $102.9 million during the first nine months of 2009 while deposits increased by $69.9 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 $37.0 million during the nine months ended September 30, 2009 as Capital Bank continued to emphasize growth in these critical product areas. Time deposits also increased $45.7 million over the same period while money market accounts declined by $12.7 million. Reliance on brokered and wholesale funding remained low as the Company executed successful strategies to attract customer deposits through its branch network. Customer deposits, which exclude brokered deposits, increased to 77% of total assets at September 30, 2009 from 75% of total assets at December 31, 2008 and 68% of total assets at September 30, 2008. Brokered deposits and borrowed funds, which include customer repurchase agreements and subordinated debt, decreased to 14% of total assets at September 30, 2009 from 15% of total assets at December 31, 2008 and 21% of total assets at September 30, 2008.
Noninterest Income
Noninterest income decreased $760 thousand, or 23%, in the third quarter of 2009 compared to the same period one year ago. Included in this decrease was a nonrecurring gain of $426 thousand recorded on the sale of the Company's Greensboro branch in the third quarter of 2008. Service charge income, which includes overdraft and non-sufficient funds charges, fell by $248 thousand primarily from a decline in consumer spending during the current economic recession. Other loan fees declined by $335 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 these declines was a $211 thousand increase in mortgage fees, which rose primarily as a result of higher mortgage origination volume that was benefited by a continued favorable interest rate environment for residential mortgage refinancing and home purchase activity.
Noninterest Expense
Noninterest expense increased $581 thousand, from $10.5 million during the third quarter of 2008 to $11.1 million during the third quarter of 2009. This increase included higher FDIC deposit insurance expense of $260 thousand due to increases in deposit insurance assessment rates in order to cover higher monitoring costs and claims from the increasing number of failed insured depository institutions. On September 29, 2009, the FDIC announced its intention to require insured institutions to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for the following three years. This announcement had no impact on our financial results for the quarter ended September 30, 2009, and if the prepaid assessment is charged as announced, the cost will be recognized as expense ratably over the three year assessment period. Additionally, occupancy expense increased $374 thousand as new branches were opened during the past year in addition to the four branches purchased in the Fayetteville market during December 2008.
Income Taxes
Income taxes represented a benefit of $2.1 million for the quarter ended September 30, 2009 compared to tax expense of $805 thousand for the quarter ended September 30, 2008. Contributing to the benefit during the third quarter of 2009 was a nonrecurring benefit of $504 thousand related to income tax refunds to be received from federal and state tax authorities upon the amendment of multiple tax returns from previous years. These amended returns were filed during the third quarter following a thorough review by the Company's tax professionals of previously filed federal and state tax returns. These refunds do not represent uncertain tax positions. The majority of the remaining decline in income taxes was related to a change in the Company's estimated annual effective tax rate given higher than normal levels of nontaxable income, which include municipal bond and loan income and bank-owned life insurance income, as well as higher levels of loan loss provisions over the year to date period. The change in estimated annual effective tax rate increased the tax benefit by $1.8 million for the third quarter of 2009.
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-nc.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, 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 (Unaudited) 2009 2008 September June March December September 30 30 31 31(a) 30 (In thousands except per share data) Interest income $21,858 $20,755 $19,668 $20,088 $20,931 Interest expense 8,303 8,591 9,487 10,156 10,104 Net interest income 13,555 12,164 10,181 9,932 10,827 Provision for loan losses 3,564 1,692 5,986 1,701 760 Net interest income after provision for loan losses 9,991 10,472 4,195 8,231 10,067 Noninterest income 2,507 3,724 2,106 2,297 3,267 Noninterest expense 11,098 12,465 11,564 76,286 10,517 Net income (loss) before taxes 1,400 1,731 (5,263) (65,758) 2,817 Income tax (benefit) Expense (2,143) 382 (800) (3,680) 805 Net income (loss) $3,543 $1,349 $(4,463) $(62,078) $2,012 Earnings (loss) per common share - basic $0.26 $0.07 $(0.45) $(5.50) $0.18 Earnings (loss) per common share - fully diluted $0.26 $0.07 $(0.45) $(5.50) $0.18 Weighted average shares outstanding: Basic 11,469 11,448 11,293 11,309 11,302 Fully diluted 11,469 11,448 11,293 11,309 11,313 (a) Results of operations for the quarter ended December 31, 2008 includes a goodwill impairment charge of $65,191. End of Period Balances (Unaudited) 2009 2008 September June March December September 30 30 31 31(a) 30 (Dollars in thousands except per share data) Total assets $1,734,950 $1,695,342 $1,665,611 $1,654,232 $1,594,402 Investment Securities 262,499 268,224 286,310 278,138 244,310 Loans (gross) 1,357,243 1,293,340 1,277,064 1,254,368 1,194,149 Allowance for loan losses 19,511 18,602 18,480 14,795 14,017 Total earning Assets 1,663,271 1,615,164 1,580,140 1,559,256 1,444,727 Deposits 1,385,250 1,380,842 1,340,974 1,315,314 1,197,721 Shareholders' equity 149,525 143,306 142,674 148,514 166,521 Book value per common share $9.58 $9.03 $8.97 $9.54 $14.83 Tangible book value per common share $9.31 $8.74 $8.66 $9.20 $9.26 (a) Derived from audited consolidated financial statements. Average Quarterly Balances (Unaudited) 2009 2008 September June March December September 30 30 31 31 30 (Dollars in thousands) Total assets $1,705,290 $1,665,387 $1,659,767 $1,620,817 $1,574,810 Investments 265,976 279,607 289,368 246,658 245,408 Loans (gross) 1,330,199 1,285,571 1,265,438 1,213,027 1,176,491 Total earning Assets 1,632,707 1,588,502 1,574,017 1,473,422 1,434,041 Deposits 1,375,931 1,324,507 1,307,827 1,238,343 1,164,362 Shareholders' equity 145,487 145,216 149,285 171,227 166,570 CAPITAL BANK CORPORATION Quarterly Net Interest Margin (a) (Unaudited) 2009 2008 September June March December September 30 30 31 31 30 Yield on earning assets 5.43% 5.34% 5.17% 5.51% 5.90% Cost of interest-bearing Liabilities 2.33 2.50 2.80 3.05 3.12 Net interest spread 3.10 2.84 2.37 2.46 2.78 Net interest margin 3.41 3.17 2.72 2.78 3.11 (a) Annualized and on a fully taxable equivalent basis. Asset Quality - Nonperforming Assets (a) (Unaudited) 2009 2008 September June March December September 30 30 31 31(b) 30 (Dollars in thousands) Commercial and industrial $586 $1,060 $652 $348 $440 Commercial real estate 15,701 14,885 13,783 6,754 5,072 Residential mortgage 1,905 2,426 2,477 1,738 620 Home equity 330 140 96 275 275 Consumer - 19 - - 4 Total nonperforming loans 18,522 18,530 17,008 9,115 6,411 Other real estate owned (c) 8,441 5,170 3,616 1,347 1,019 Total nonperforming assets $26,963 $23,700 $20,624 $10,462 $7,430 Nonperforming loans to total loans 1.36% 1.43% 1.33% 0.73% 0.54% Nonperforming assets to total assets 1.55% 1.40% 1.24% 0.63% 0.47% (a) Nonperforming assets include loans that are 90 days or more past due or in nonaccrual status and other real estate owned. (b) Derived from audited consolidated financial statements. (c) Other real estate owned at September 30, 2009 includes $1,297 of real estate from a closed branch office that is held for sale. Asset Quality and Funding Sources - Other Key Ratios (Unaudited) 2009 2008 September June March December September 30 30 31 31 30 (Dollars in thousands) Past due loans (a) $25,245 $15,196 $17,064 $13,642 $8,933 Past due loans to total loans 1.86% 1.17% 1.34% 1.09% 0.75% Net charge-offs $2,655 $1,570 $2,301 $1,768 $653 Net charge-offs to average loans (annualized) 0.80% 0.49% 0.73% 0.58% 0.22% Provision for loan losses $3,564 $1,692 $5,986 $1,701 $760 Provision for loan losses to average loans (annualized) 1.07% 0.53% 1.89% 0.56% 0.26% Allowance for loan losses to total loans 1.44% 1.44% 1.45% 1.18% 1.17% Allowance for loan losses to nonperforming loans 105% 100% 109% 162% 219% Customer deposits to total assets 77% 77% 77% 75% 68% Brokered deposits and borrowed funds to total assets (b) 14% 13% 14% 15% 21% (a) Past due loans include loans that are 30 days or more past due. (b) Borrowed funds include customer repurchase agreements and subordinated debt. CAPITAL BANK CORPORATION Asset Quality - Loan Portfolio Analysis (Unaudited) As of September 30, 2009 Nonaccrual Allowance Loans to for ALLL to Loans Nonaccrual Loans Loan Loans Outstanding Loans Outstanding Losses Outstanding (Dollars in thousands) Commercial: Commercial and industrial $178,879 $586 0.33% $2,222 1.24% Municipal 18,382 - - 10 0.05 Agriculture 15,670 - - 112 0.71 Other 1,967 - - 12 0.61 Total commercial 214,898 586 0.27 2,356 1.10 Commercial real estate: Residential acquisition, development and construction 288,016 13,254 4.60 8,394 2.91 Other commercial real estate 410,729 1,737 0.42 4,243 1.03 Owner occupied 191,112 710 0.37 2,434 1.27 Total commercial real estate 889,857 15,701 1.76 15,071 1.69 Consumer 9,749 - - 303 3.11 Residential: First lien, closed-end 129,355 1,809 1.40 1,028 0.79 Junior lien, closed-end 16,498 96 0.58 303 1.84 Home equity lines 96,886 330 0.34 450 0.46 Total residential 242,739 2,235 0.92 1,781 0.73 Total loans $1,357,243 $18,522 1.36% $19,511 1.44% Asset Quality - Commercial Real Estate Residential Acquisition, Development and Construction Portfolio Analysis by Type (Unaudited) As of September 30, 2009 Residential Land / Residential Development Construction Total (Dollars in thousands ) Loans outstanding $170,206 $117,810 $288,016 Loans outstanding in category to total loans 12.54% 8.68% 21.22% Nonaccrual loans $9,238 $4,016 $13,254 Nonaccrual loans to total loans in category 5.43% 3.41% 4.60% Allowance for loan losses $6,365 $2,029 $8,394 Allowance for loan losses to total loans in category 3.74% 1.72% 2.91% CAPITAL BANK CORPORATION Asset Quality - Commercial Real Estate Residential Acquisition, Development and Construction Portfolio Analysis by Region (Unaudited) Percent Nonaccrual Allow- ALLL Total Loans to ance to Loans Loans Non- Loans for Loans Outst- Outst- accrual Outst- Loan Outst- anding anding Loans anding Losses anding (Dollars in thousands) Triangle $213,382 74.09% $7,657 3.59% $6,630 3.11% Sandhills 19,900 6.91 - - 481 2.42 Triad 5,732 1.99 - - 61 1.06 Western 49,002 17.01 5,597 11.42 1,222 2.49 Total $288,016 100.00% $13,254 4.60% $8,394 2.91% Asset Quality - Commercial Real Estate Other Commercial Real Estate Portfolio Analysis by Type (Unaudited) As of September 30, 2009 Commercial C&I Land/ Commercial Real Estate Development Construction Multifamily Secured Total (Dollars in thousands) Loans outstanding $121,479 $57,261 $43,583 $188,406 $410,729 Loans outstanding in category to total loans 8.95% 4.22% 3.21% 13.88% 30.26% Nonaccrual loans $32 $- $- $1,705 $1,737 Nonaccrual loans to total loans category 0.03% 0.00% 0.00% 0.90% 0.42% Allowance for loan losses $1,361 $367 $356 $2,159 $4,243 Allowance for loan losses to total loans in category 1.12% 0.64% 0.82% 1.15% 1.03% Asset Quality - Commercial Real Estate Other Commercial Real Estate Portfolio Analysis by Region (Unaudited) As of September 30, 2009 Percent Nonaccrual Allow- ALLL Total Loans to ance to Loans Loans Non- Loans for Loans Outst- Outst- accrual Outst- Loan Outst- anding anding Loans anding Losses anding (Dollars in thousands) Triangle $283,002 8.90% $37 0.01% $2,929 1.03% Sandhills 37,920 9.23 709 1.87 510 1.34 Triad 33,751 8.22 971 2.88 384 1.14 Western 56,056 13.65 20 0.04 420 0.75 Total $410,729 100.00% $1,737 0.42% $4,243 1.03% CAPITAL BANK CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 2009 and December 31, 2008 September 30, 2009 December 31, 2008 (Dollars in thousands except (Unaudited) share data) Assets Cash and due from banks: Interest-earning $43,529 $26,621 Noninterest-earning 9,165 27,705 Federal funds sold and short term investments - 129 Total cash and cash equivalents 52,694 54,455 Investment securities - available for sale, at fair value 258,619 272,944 Investment securities - held to maturity, at amortized cost 3,880 5,194 Loans - net of unearned income and deferred fees 1,357,243 1,254,368 Allowance for loan losses (19,511) (14,795) Net loans 1,337,732 1,239,573 Premises and equipment, net 23,762 24,640 Bank-owned life insurance 22,571 22,368 Deposit premium, net 2,995 3,857 Deferred income tax 5,733 9,342 Accrued interest receivable 6,910 6,225 Other assets 20,054 15,634 Total assets $1,734,950 $1,654,232 Liabilities Deposits: Demand, noninterest-bearing $136,228 $125,281 Savings and interest-bearing checking 199,726 173,711 Money market deposit accounts 200,052 212,780 Time deposits less than $100,000 503,628 509,231 Time deposits $100,000 and greater 345,616 294,311 Total deposits 1,385,250 1,315,314 Repurchase agreements and federal funds purchased 9,464 15,010 Borrowings 147,000 132,000 Subordinated debentures 30,930 30,930 Other liabilities 12,781 12,464 Total liabilities 1,585,425 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) 40,055 39,839 Common stock, no par value; 20,000,000 shares authorized; 11,300,369 and 11,238,085 shares issued and outstanding 139,784 139,209 Retained deficit (35,465) (31,420) Accumulated other comprehensive income 5,151 886 Total shareholders' equity 149,525 148,514 Total liabilities and shareholders' equity $1,734,950 $1,654,232 CAPITAL BANK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the Three and Nine Months Ended September 30, 2009 and 2008 (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 (Dollars in thousands except per share data) Interest income: Loans and loan fees $18,720 $17,875 $52,224 $55,485 Investment securities: Taxable interest income 2,348 2,182 7,708 6,616 Tax-exempt interest income 759 801 2,286 2,435 Dividends 13 58 26 293 Federal funds and other interest income 18 15 34 103 Total interest income 21,858 20,931 62,278 64,932 Interest expense: Deposits 6,797 7,837 21,596 24,935 Borrowings and repurchase agreements 1,506 2,267 4,782 7,333 Total interest expense 8,303 10,104 26,378 32,268 Net interest income 13,555 10,827 35,900 32,664 Provision for loan losses 3,564 760 11,242 2,175 Net interest income after provision for loan losses 9,991 10,067 24,658 30,489 Noninterest income: Service charges and other fees 990 1,238 2,901 3,463 Mortgage fees and revenues 353 142 971 768 Other loan fees 57 392 549 892 Brokerage fees 155 169 468 570 Bank card services 409 357 1,133 1,010 Bank-owned life insurance 240 255 1,663 817 Net gain on investment securities 148 109 164 249 Gain on sale of branch - 426 - 426 Other 155 179 488 559 Total noninterest income 2,507 3,267 8,337 8,754 Noninterest expense: Salaries and employee benefits 5,128 5,065 16,945 15,237 Occupancy 1,471 1,097 4,192 3,297 Furniture and equipment 771 778 2,340 2,318 Data processing and telecommunications 555 565 1,759 1,525 Advertising 394 480 940 1,000 Office expenses 386 298 1,043 978 Professional fees 358 362 1,171 1,013 Business development and travel 268 360 843 1,033 Amortization of deposit premiums 287 256 862 770 Miscellaneous loan handling costs 339 252 874 570 Directors fees 295 360 1,131 949 Insurance 121 138 365 336 FDIC deposit insurance 474 214 1,882 442 Other 251 292 780 908 Total noninterest expense 11,098 10,517 35,127 30,376 Net income (loss) before tax (benefit) expense 1,400 2,817 (2,132) 8,867 Income tax (benefit) expense (2,143) 805 (2,561) 2,473 Net income $3,543 $2,012 $429 $6,394 Dividends and accretion on preferred stock 590 - 1,764 - Net income (loss) attributable to common shareholders $2,953 $2,012 $(1,335) $6,394 Earnings (loss) per common share - basic $0.26 $0.18 $(0.12) $0.57 Earnings (loss) per common share - diluted $0.26 $0.18 $(0.12) $0.57 CAPITAL BANK CORPORATION Average Balances, Interest Earned or Paid, and Interest Yields/Rates For the Three Months Ended September 30, 2009, June 30, 2009 and September 30, 2008 Tax Equivalent Basis (1) September 30, 2009 (Dollars in thousands) Average Amount Average Balance Earned Rate Assets Loans receivable: (2) Commercial $1,153,514 $16,550 5.69% Home equity 93,651 983 4.16 Consumer and residential mortgage 83,034 1,276 6.15 Total loans 1,330,199 18,809 5.61 Investment securities (3) 263,513 3,512 5.33 Federal funds sold and interest- -earning cash (4) 38,995 18 0.18 Total interest-earning assets 1,632,707 $22,339 5.43% Cash and due from banks 8,256 Other assets 83,589 Allowance for loan losses (19,262) Total assets $1,705,290 Liabilities and Equity Savings deposits $29,267 $11 0.15% Interest-bearing demand deposits 366,632 1,095 1.18 Time deposits 845,311 5,691 2.67 Total interest-bearing deposits 1,241,210 6,797 2.17 Borrowed funds 130,098 1,260 3.84 Subordinated debt 30,930 240 3.08 Repurchase agreements and fed funds purchased 10,646 6 0.22 Total interest-bearing liabilities 1,412,884 $8,303 2.33% Noninterest-bearing deposits 134,721 Other liabilities 12,198 Total liabilities 1,559,803 Shareholders' equity 145,487 Total liabilities and shareholders' equity $1,705,290 Net interest spread (5) 3.10% Tax equivalent adjustment $481 Net interest income and net interest margin (6) $14,036 3.41% June 30, 2009 Average Amount Average Balance Earned Rate (Dollars in thousands) Assets Loans receivable: (2) Commercial $1,115,003 $15,244 5.48% Home equity 94,054 974 4.15 Consumer and residential mortgage 76,514 1,194 6.24 Total loans 1,285,571 17,412 5.43 Investment securities (3) 278,033 3,731 5.37 Federal funds sold and interest- -earning cash (4) 24,898 6 0.10 Total interest-earning assets 1,588,502 $21,149 5.34% Cash and due from banks 15,294 Other assets 80,296 Allowance for loan losses (18,705) Total assets $1,665,387 Liabilities and Equity Savings deposits $29,609 $13 0.18% Interest-bearing demand deposits 368,132 1,152 1.26 Time deposits 796,306 5,868 2.96 Total interest-bearing deposits 1,194,047 7,033 2.36 Borrowed funds 140,682 1,273 3.63 Subordinated debt 30,930 278 3.61 Repurchase agreements and fed funds purchased 12,010 7 0.23 Total interest-bearing liabilities 1,377,669 $8,591 2.50% Noninterest-bearing deposits 130,460 Other liabilities 12,042 Total liabilities 1,520,171 Shareholders' equity 145,216 Total liabilities and shareholders' equity $1,665,387 Net interest spread (5) 2.84% Tax equivalent adjustment $394 Net interest income and net interest margin (6) $12,558 3.17% September 30, 2008 (Dollars in thousands) Average Amount Average Balance Earned Rate Assets Loans receivable: (2) Commercial $1,018,947 $15,469 6.02% Home equity 84,441 1,133 5.32 Consumer and residential mortgage 73,103 1,273 6.97 Total loans 1,176,491 17,875 6.03 Investment securities (3) 250,896 3,452 5.50 Federal funds sold and interest- earning cash (4) 6,654 15 0.89 Total interest-earning assets 1,434,041 $21,342 5.90% Cash and due from banks 22,517 Other assets 132,304 Allowance for loan losses (14,052) Total assets $1,574,810 Liabilities and Equity Savings deposits $30,169 $30 0.39% Interest-bearing demand deposits 342,575 1,802 2.09 Time deposits 679,162 6,005 3.51 Total interest-bearing deposits 1,051,906 7,837 2.96 Borrowed funds 174,735 1,786 4.06 Subordinated debt 30,930 407 5.22 Repurchase agreements and fed funds purchased 27,039 74 1.09 Total interest-bearing liabilities 1,284,610 $10,104 3.12% Noninterest-bearing deposits 112,456 Other liabilities 11,174 Total liabilities 1,408,240 Shareholders' equity 166,570 Total liabilities and shareholders' equity $1,574,810 Net interest spread (5) 2.78% Tax equivalent adjustment $411 Net interest income and net interest margin (6) $11,238 3.11% (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) The Federal Reserve began paying interest on cash balances in the quarter ended December 31, 2008. 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. CAPITAL BANK CORPORATION Average Balances, Interest Earned or Paid, and Interest Yields/Rates For the Nine Months Ended September 30, 2009 and 2008 Tax Equivalent Basis (1) September 30, 2009 September 30, 2008 (Dollars in thousands) Average Amount Average Average Amount Average Balance Earned Rate Balance Earned Rate Assets Loans receivable: (2) Commercial $1,121,652 $45,736 5.45 %$1,005,400 $47,959 6.35% Home equity 93,855 2,923 4.16 81,626 3,555 5.80 Consumer and residential mortgage 78,467 3,654 6.21 75,032 3,971 7.06 Total loans 1,293,974 52,313 5.41 1,162,058 55,485 6.36 Investment securities (3) 276,649 11,200 5.40 251,028 10,596 5.63 Federal funds sold and interest- earning cash (4) 28,001 34 0.16 9,203 103 1.49 Total interest- earnings assets 1,598,624 $63,547 5.31% 1,422,289 $66,184 6.20% Cash and due From banks 15,171 22,893 Other assets 80,917 138,346 Allowance for loan losses (17,731) (13,791) Total assets $1,676,981 $1,569,737 Liabilities and Equity Savings deposits $29,225 $37 0.17% $30,363 $112 0.49% Interest-bearing demand deposits 362,724 3,449 1.27 337,198 5,291 2.09 Time deposits 814,328 18,110 2.97 668,526 19,532 3.89 Total interest- bearing deposits 1,206,277 21,596 2.39 1,036,087 24,935 3.21 Borrowed funds 138,945 3,923 3.77 176,069 5,628 4.26 Subordinated debt 30,930 839 3.63 30,930 1,336 5.75 Repurchase agreements and fed funds purchased 12,156 20 0.22 32,575 369 1.51 Total interest- bearing liabilities 1,388,308 $26,378 2.54% 1,275,661 $32,268 3.37% Noninterest- bearing deposits 130,061 114,676 Other liabilities 11,963 11,032 Total liabilities 1,530,332 1,401,369 Shareholders' equity 146,649 168,368 Total liabilities and shareholders' equity $1,676,981 $1,569,737 Net interest spread (5) 2.77% 2.83% Tax equivalent adjustment $1,269 $1,252 Net interest income and net interest margin (6) $37,169 3.11% $33,916 3.18% (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 heir mark-to-market adjustment, if any. (4) The Federal Reserve began paying interest on cash balances in the quarter ended December 31, 2008. 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.
SOURCE Capital Bank Corporation