Continuing improvement in its loan portfolio, along with increased loan demand, enabled Capital Bank Financial Corp. to report Thursday $11.4 million in net income for the third quarter.
Capital is based in Coral Gables, Fla., but has a significant North Carolina presence in the Triad and Triangle. It paid $52.5 million in October to buy Southern Community Financial Corp. of Winston-Salem and its 22 branches.
The bank had $35.1 million in net income a year ago, but $32.4 million came from an income-tax benefit as a result of “an improvement in projected tax-deductible credit losses from acquired loans.”
The bank reported diluted earnings of 22 cents a share. The average earnings forecast was 20 cents by five analysts surveyed by Zacks Investment Research.
Gene Taylor, the bank’s chairman and chief executive, said he is pleased with “continued momentum in loan originations, which were up 68 percent year-over-year.”
The bank reported a provision for loan losses of $984,000, down 83 percent from a year ago and down 78 percent from the second quarter. Decreases to the loan-loss provision are considered pivotal by analysts because the provision comes directly off banks’ bottom line for net income.
Nonperforming loans were at $275.3 million on Sept. 30, down from $311.5 million on June 30.
Net charge-offs were at $1.4 million on Sept. 30, down from $4.8 million on June 30 and but up from $344,000 in loan recoveries on Sept. 30, 2012. The year-over-year comparison does not include Capital acquiring the Southern Community portfolio.
Capital reported a 4.4 percent increase in revenue from loans to $72.5 million, primarily from an increase in new commercial loans. The loan revenue was down 1 percent from the second quarter.
Its revenue from fees was down 24.6 percent year over year to $15.2 million, but up 11.6 percent from the second quarter. The biggest fee-income drivers were debit-card income (up 16.9 percent to $2.8 million) and service charges (up 19.3 percent to $6.03 million). Both, however, were down compared with second the quarter.
Mortgage banking fees were down 8.4 percent year over year to $1.48 million. Most banks, large and community, have experienced a significant decrease in mortgage banking fees as customer demand decreased for mortgage loans and refinancing.
“Our third-quarter results reflect consistent improvement across our company, but most importantly in our bottom line,” said Chris Marshall, the bank’s chief financial officer.
“Despite the sluggish economy, we continue to generate new business with top-tier clients, while carefully exiting less-profitable, higher-risk relationships.”
Total assets decreased by $205.9 million to $6.6 billion as of Sept. 30. The decrease came mostly from a decrease in deposits.
Blair Brantley, an analyst with BB&T Capital Markets, said Capital made more progress during the quarter toward “becoming one of the preeminent bank franchises in the Southeast.”
“While net loan growth remains elusive, due in part to proactive reduction of acquired problem assets, we expect an inflection point to occur in the near term, as loan origination activity and the current pipeline are solid.”
Brantley projects Capital having “reasonable growth in 2014, driven primarily by the Carolinas and Florida, while Tennessee remains a longer-term contributor.
“By product, commercial and consumer are the primary sources, while commercial real estate has reached a relative level where Capital is likely to be selective,” Brantley said.
“Although timing is uncertain, we expect the company will be opportunistic, while also maintaining their disciplined and conservative acquisition culture.”