Green Bankshares Announces Financial Results for the First Quarter 2012
Green Bankshares, Inc. (NASDAQ:GRNB), a majority-owned subsidiary of Capital Bank Financial Corp. ("CBF," formerly known as North American Financial Holdings, Inc.), today reported unaudited financial results for the first quarter of 2012. Operating and financial highlights include the following:
CBF is a bank holding company formed with the goal of creating a high performing regional banking franchise in the southeastern region of the United States through organic growth and acquisition of distressed and underperforming banks. CBF is the controlling owner of Capital Bank, NA, a $6.5 billion bank with 143 branches in Florida, North Carolina, South Carolina, Tennessee and Virginia.
As previously announced, CBF agreed to acquire 100% of Southern Community Financial Corp., which it expects to close, pending shareholder and regulatory approvals, during the second quarter of 2012. Upon closing, Southern Community's regulated subsidiary, Southern Community Bank and Trust, will be merged into Capital Bank, NA.
"I am very excited about CBF's agreement to acquire Southern Community Financial Corp. While shareholder and regulatory approvals are still pending, Southern Community will expand the Bank's franchise throughout North Carolina, where we see significant growth opportunities. Integration planning is already underway, and as I have gotten to know more of Southern Community's workforce, I have been impressed by their professionalism and their commitment to their customers and their communities," stated Gene Taylor, Chairman and Chief Executive Officer of CBF and Green Bankshares, Inc.
"Organic loan production, deleveraging and core deposit growth are helping improve the Bank's profitability, and now that the integration of Tennessee is complete, we are in position to rationalize certain duplicative functions with the goal of continuing to improve our efficiency ratio," commented Chris Marshall, Chief Financial Officer of CBF and Green Bankshares, Inc.
On September 7, 2011, GreenBank, which was formerly a wholly owned subsidiary of the Company, merged (the "Bank Merger") with and into Capital Bank, NA, a national banking association and subsidiary of TIB Financial Corp. ("TIB Financial"), a corporation organized under the laws of the State of Florida, Capital Bank Corporation, a corporation organized under the laws of the state of North Carolina ("Capital Bank Corp.") and CBF, with Capital Bank, NA as the surviving entity. CBF is the owner of approximately 90% of the Company's common stock, approximately 83% of Capital Bank Corp.'s common stock and approximately 94% of TIB Financial's common stock.
As of March 31, 2012, Capital Bank, NA had total assets of $6.5 billion, total deposits of $5.3 billion and shareholders' equity of $949.3 million. As of March 31, 2012, following the Bank Merger, Capital Bank, NA operated 143 branches in Tennessee, Florida, North Carolina, South Carolina, and Virginia.
Through the subsidiary bank mergers the common stock of the subsidiary banks was converted into shares of Capital Bank, NA common stock based on each entity's relative tangible book value. As a result of the mergers of TIB Bank, Capital Bank and Green Bank into Capital Bank, NA, the Company now owns approximately 34% of Capital Bank, NA, with CBF directly owning 19%, Capital Bank Corp. directly owning 26% and TIB Financial owning the remaining 21%.
Due to its ownership level and significant influence, the Company's investment in Capital Bank, NA is recorded as an equity-method investment in that entity. As of March 31, 2012, the Company's investment in Capital Bank, NA totaled $318.5 million, which reflected the Company's pro rata ownership of Capital Bank, NA's total shareholders' equity as a result of the Bank Merger. In periods subsequent to the Bank Merger, the Company will adjust this equity investment balance based on its equity in Capital Bank, NA's net income and comprehensive income. In connection with the Bank Merger, assets and liabilities of GreenBank were deconsolidated from the Company's balance sheet, resulting in a significant decrease in total assets and total liabilities of the Company in the third quarter of 2011.
Potential Merger of the Company and CBF
On September 8, 2011, the Boards of Directors of CBF and the Company approved and adopted a merger agreement. The merger agreement provides for the merger, following the receipt of shareholder approval by the Company's shareholders (including CBF), of the Company with and into CBF, with CBF continuing as the surviving entity. In the merger, each share of the Company's common stock issued and outstanding immediately prior to the completion of the merger, except for shares for which appraisal rights are properly exercised and certain shares held by CBF or the Company, will be converted into the right to receive 0.0915 of a share of CBF Class A common stock. No fractional shares of Class A common stock will be issued in connection with the merger, and holders of the Company's common stock will be entitled to receive cash in lieu thereof.
Since CBF is the majority shareholder of the Company, CBF will be able to determine the outcome of the shareholder vote needed to approve the merger.
Financial results for the first quarter of 2012 were significantly impacted by the controlling investment in the Company by CBF. The Company applied push-down accounting. Accordingly, the Company's assets and liabilities were adjusted to estimated fair values at the September 7, 2011, CBF investment date, resulting in elimination of the allowance for loan losses. Financial results prior to the CBF Investment have been labeled with "Predecessor Company" while results subsequent to the CBF Investment have been labeled with "Successor Company."
The Successor Company reported net income of $3.3 million for the first quarter of 2012, versus net income of $1.7 million for the fourth quarter of 2011, while the Predecessor Company reported a net loss available to common shareholders of $11.6 million for the first quarter of 2011.
Due to the Merger discussed above and the resulting deconsolidation of GreenBank on September 7, 2011, the operating results for the first quarter of 2012 do not include the results of GreenBank and therefore are generally not comparable to results for the first quarter of 2011.
The $3.3 million net income reported in the first quarter of 2012 reflected the Company's $4.0 million equity method income in Capital Bank, NA, less $842 thousand of subordinated debenture interest expense, $194 thousand of non-interest expenses, and a $298 thousand tax benefit.
The loss reported in the first quarter of 2011 was primarily due to a $13.9 million provision for loan losses and $3.8 million in foreclosed asset related expenses.
Predecessor Company net interest margin for the first quarter of 2011 was 3.77%. Subsequent to the deconsolidation of GreenBank on September 7, 2011, the net interest margin is not meaningful as the Company has no interest earning assets.
About Green Bankshares
Headquartered in Greeneville, Tennessee, Green Bankshares, Inc. is a financial services company with a 34% equity method investment in Capital Bank, NA, a national banking association with approximately $6.5 billion in total assets and 143 branches serving communities in Tennessee, Florida, North Carolina, South Carolina, and Virginia.
To learn more about Capital Bank, NA, visit www.capitalbank-us.com. For more information, contact Christopher G. Marshall, Chief Financial Officer, at (704) 554-5901.
Information in this press release contains forward-looking statements. Such forward looking statements can be identified by the use of forward looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “believe,” or “continue,” or the negative thereof or other variations thereof or comparable terminology. These statements involve risks and uncertainties that could cause actual results to differ materially, including without limitation, market and economic conditions, the management of our growth, the risks associated with Capital Bank NA’s loan portfolio and real estate holdings, local economic conditions affecting retail and commercial real estate, the ability to integrate our new management and directors without encountering potential difficulties, the Company’s geographic concentration in the southeastern region of the United States, ability to integrate the operations of the Bank with those of Capital Bank, NA, the potential for the interests of the other shareholders of Capital Bank, NA to differ from those of the Company, restrictions imposed by Capital Bank, NA’s loss sharing agreements with the FDIC, the assumptions and judgments required by loss share accounting and the acquisition method of accounting, competition within the industry, dependence on key personnel, government legislation and regulation, the risks associated with identification, completion and integration of any future acquisitions, risks related to Capital Bank NA’s technology and information systems, risks associated with the controlling interest of NAFH in the Company, and risks associated with the limited liquidity of the Company’s common stock. Additional factors that could cause actual results to differ materially are discussed in the Company’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. The Company does not undertake a duty to update any forward-looking statements in this press release.
SUPPLEMENTAL FINANCIAL DATA IS ATTACHED
Christopher G. Marshall, 704-554-5901
Chief Financial Officer
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