UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition period from __________________ to _______________________
Commission File Number 000-21329
TIB FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
FLORIDA | 65-0655973 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
599 9th STREET NORTH, SUITE 101, NAPLES, FLORIDA 34102-5624
(Address of principal executive offices) (Zip Code)
(239) 263-3344
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “accelerated filer”, “ large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer | ||||||
¨ | ||||||
Accelerated filer | ¨ | |||||
Non-accelerated filer | ||
x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Common Stock, $0.10 Par Value | 12,349,935 | |
Class | Outstanding as of |
FORM 10-Q
For the Quarter Ended SeptemberJune 30, 2011
INDEX
(UNAUDITED) CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands, except per share amounts)
(Dollars and shares in thousands, except per share data) | June 30, 2012 | December 31, 2011 | ||||||
Assets | ||||||||
Cash and due from banks | $ | 621 | $ | 1,159 | ||||
Interest-bearing deposits with banks | 651 | 1,062 | ||||||
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Cash and cash equivalents | 1,272 | 2,221 | ||||||
Intangible assets, net | 219 | 235 | ||||||
Accrued interest receivable and other assets | 1,619 | 1,324 | ||||||
Equity method investment in Capital Bank, NA | 206,536 | 200,812 | ||||||
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Total assets | $ | 209,646 | $ | 204,592 | ||||
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Liabilities and Shareholders’ Equity | ||||||||
Liabilities | ||||||||
Long-term borrowings | $ | 23,324 | $ | 23,176 | ||||
Deferred income tax liability | 3,589 | 3,641 | ||||||
Other liabilities | 721 | 428 | ||||||
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Total liabilities | 27,634 | 27,245 | ||||||
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Shareholders’ Equity | ||||||||
Preferred stock – $.10 par value: 5,000 shares authorized, 0 shares issued and outstanding | — | — | ||||||
Common stock – $.10 par value: 50,000 shares authorized, 12,350 shares issued and outstanding, respectively | 1,235 | 1,235 | ||||||
Additional paid in capital | 170,770 | 170,770 | ||||||
Retained earnings | 7,266 | 3,360 | ||||||
Accumulated other comprehensive income | 2,741 | 1,982 | ||||||
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Total shareholders’ equity | 182,012 | 177,347 | ||||||
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Total Liabilities and Shareholders’ Equity | $ | 209,646 | $ | 204,592 | ||||
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See accompanying notes to consolidated financial statements
TIB FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars and shares in thousands, except per share amounts)
Three Months Ended June 30, 2012 | Three Months Ended June 30, 2011 | Six Months Ended June 30, 2012 | Six Months Ended June 30, 2011 | |||||||||||||
Interest and dividend income | ||||||||||||||||
Loans, including fees | $ | — | $ | 4,347 | $ | — | $ | 17,745 | ||||||||
Investment securities: | ||||||||||||||||
Taxable | — | 902 | — | 3,238 | ||||||||||||
Tax-exempt | — | 4 | — | 19 | ||||||||||||
Interest-bearing deposits in other banks | 1 | 31 | 3 | 101 | ||||||||||||
Federal Home Loan Bank stock | — | 6 | — | 31 | ||||||||||||
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Total interest and dividend income | 1 | 5,290 | 3 | 21,134 | ||||||||||||
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Interest expense | ||||||||||||||||
Deposits | — | 822 | — | 3,276 | ||||||||||||
Federal Home Loan Bank advances | — | 64 | — | 301 | ||||||||||||
Short-term borrowings | — | 4 | — | 19 | ||||||||||||
Long-term borrowings | 440 | 466 | 902 | 922 | ||||||||||||
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Total interest expense | 440 | 1,356 | 902 | 4,518 | ||||||||||||
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Net interest income (loss) | (439 | ) | 3,934 | (899 | ) | 16,616 | ||||||||||
Provision for loan losses | — | 136 | — | 621 | ||||||||||||
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Net interest income (loss) after provision for loan losses | (439 | ) | 3,798 | (899 | ) | 15,995 | ||||||||||
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Non-interest income | ||||||||||||||||
Equity in income from investment in Capital Bank, NA | 2,420 | 658 | 4,965 | 658 | ||||||||||||
Investment advisory and trust fees | 85 | 379 | 216 | 766 | ||||||||||||
Service charges on deposit accounts | — | 257 | — | 1,070 | ||||||||||||
Fees on mortgage loans originated and sold | — | 144 | — | 498 | ||||||||||||
Other income | — | 464 | — | 1,669 | ||||||||||||
Investment securities gains, net | — | — | — | 12 | ||||||||||||
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Total non-interest income | 2,505 | 1,902 | 5,181 | 4,673 | ||||||||||||
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Non-interest expense | ||||||||||||||||
Salaries and employee benefits | 103 | 2,250 | 209 | 8,751 | ||||||||||||
Net occupancy and equipment expense | 3 | 692 | 9 | 2,740 | ||||||||||||
Foreclosed asset related expense | — | 43 | — | 565 | ||||||||||||
Other expense | 428 | 1,614 | 776 | 5,868 | ||||||||||||
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Total non-interest expense | 534 | 4,599 | 994 | 17,924 | ||||||||||||
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Income before income taxes | 1,532 | 1,101 | 3,288 | 2,744 | ||||||||||||
Income tax expense (benefit) | (369 | ) | 141 | (618 | ) | 716 | ||||||||||
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Net income | $ | 1,901 | $ | 960 | $ | 3,906 | $ | 2,028 | ||||||||
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Basic net income per common share | $ | 0.15 | $ | 0.08 | $ | 0.32 | $ | 0.17 | ||||||||
Diluted net income per common share | $ | 0.15 | $ | 0.07 | $ | 0.32 | $ | 0.14 |
See accompanying notes to consolidated financial statements
TIB FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME
(Unaudited)
(Dollars and shares in thousands, except per share amounts)
Three Months Ended June 30, 2012 | Three Months Ended June 30, 2011 | Six Months Ended June 30, 2012 | Six Months Ended June 30, 2011 | |||||||||||||
Net income | $ | 1,901 | $ | 960 | $ | 3,906 | $ | 2,028 | ||||||||
Other comprehensive income: | ||||||||||||||||
Unrealized holding gains on available for sale securities | — | 2,263 | — | 4,498 | ||||||||||||
Reclassification adjustments for losses recognized in income | — | — | — | (11 | ) | |||||||||||
Unrealized holding gains from investment in Capital Bank, NA, | 2,075 | 2,100 | 1,235 | 2,100 | ||||||||||||
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Net unrealized holding gains on available for sale securities | 2,075 | 4,363 | 1,235 | 6,587 | ||||||||||||
Tax effect | 800 | 1,642 | 476 | 2,479 | ||||||||||||
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Other comprehensive income, net of tax | 1,275 | 2,721 | 759 | 4,108 | ||||||||||||
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Comprehensive income | $ | 3,176 | $ | 3,681 | $ | 4,665 | $ | 6,136 | ||||||||
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See accompanying notes to consolidated financial statements
TIB FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Six Months Ended June 30, 2012 | Six Months Ended June 30, 2011 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 3,906 | $ | 2,028 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Equity in income from investment in Capital Bank, NA | (4,965 | ) | (658 | ) | ||||
Accretion of acquired loans | — | (17,059 | ) | |||||
Depreciation and amortization | 164 | 337 | ||||||
Provision for loan losses | — | 621 | ||||||
Deferred income tax expense | (52 | ) | 287 | |||||
Investment securities net realized gains | — | (12 | ) | |||||
Net amortization of investment premium/discount | — | 1,967 | ||||||
Loss on sales of OREO | — | (121 | ) | |||||
Other | — | (656 | ) | |||||
Mortgage loans originated for sale | — | (17,154 | ) | |||||
Proceeds from sales of mortgage loans originated for sale | — | 24,854 | ||||||
Fees on mortgage loans sold | — | (498 | ) | |||||
Change in accrued interest receivable and other assets | (295 | ) | (2,641 | ) | ||||
Change in accrued interest payable and other liabilities | 293 | 5,063 | ||||||
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Net cash used in operating activities | (949 | ) | (3,642 | ) | ||||
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Cash flows from investing activities: | ||||||||
Net change in cash due to merger of TIB Bank with and into Capital Bank, NA | — | (103,654 | ) | |||||
Investment in Capital Bank, NA | — | (5,241 | ) | |||||
Purchases of investment securities available for sale | — | (15,474 | ) | |||||
Sales of investment securities available for sale | — | 2,319 | ||||||
Repayments of principal and maturities of investment securities available for sale | — | 43,101 | ||||||
Sales of FHLB Stock | — | 244 | ||||||
Principal repayments on loans, net of loans originated or acquired | — | (7,069 | ) | |||||
Purchases of premises and equipment | — | (405 | ) | |||||
Proceeds from sale of OREO | — | 8,844 | ||||||
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Net cash provided by investing activities | — | (77,335 | ) | |||||
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Cash flows from financing activities: | ||||||||
Net increase in demand, money market and savings accounts | — | 78,957 | ||||||
Net decrease in time deposits | — | (138,414 | ) | |||||
Net decrease in federal funds purchased and securities sold under agreements to repurchase | — | (4,979 | ) | |||||
Repayment of long term FHLB advances | — | (10,000 | ) | |||||
Net proceeds from common stock rights offering | — | 7,764 | ||||||
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Net cash used in financing activities | — | (66,672 | ) | |||||
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Net decrease in cash and cash equivalents | (949 | ) | (147,649 | ) | ||||
Cash and cash equivalents at beginning of period | 2,221 | 153,794 | ||||||
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Cash and cash equivalents at end of period | $ | 1,272 | $ | 6,145 | ||||
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Supplemental disclosures of cash paid: | ||||||||
Interest | $ | 322 | $ | 5,304 | ||||
Supplemental information: | ||||||||
Transfer of loans to OREO | $ | — | $ | 4,752 | ||||
Transfer of non-cash assets to Capital Bank, N.A. | — | 1,390,516 | ||||||
Transfer of non-cash liabilities to Capital Bank, N.A. | — | 1,473,981 | ||||||
Acquisitions of Equity Method investment in Capital Bank, N.A. | — | 190,200 |
See accompanying notes to consolidated financial statements
TIB Financial Corp. and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars and shares in thousands except per share data)
(Unaudited) | ||||||||
September 30, 2011 | December 31, 2010 | |||||||
Assets | ||||||||
Cash and due from banks | $ | 1,112 | $ | 22,209 | ||||
Interest-bearing deposits with banks | 1,186 | 131,585 | ||||||
Investment securities available for sale | - | 418,092 | ||||||
Loans, net of deferred loan costs and fees | - | 1,004,630 | ||||||
Less: Allowance for loan losses | - | 402 | ||||||
Loans, net | - | 1,004,228 | ||||||
Premises and equipment, net | - | 43,153 | ||||||
Goodwill | - | 29,999 | ||||||
Intangible assets, net | 3,198 | 11,406 | ||||||
Other real estate owned | - | 25,673 | ||||||
Deferred income tax asset | - | 19,973 | ||||||
Accrued interest receivable and other assets | 1,518 | 50,548 | ||||||
Equity method investment in Capital Bank, NA | 198,983 | - | ||||||
Total Assets | $ | 205,997 | $ | 1,756,866 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Liabilities | ||||||||
Deposits: | ||||||||
Noninterest-bearing demand | $ | - | $ | 198,092 | ||||
Interest-bearing | - | 1,168,933 | ||||||
Total deposits | - | 1,367,025 | ||||||
Federal Home Loan Bank (FHLB) advances | - | 131,116 | ||||||
Short-term borrowings | - | 47,158 | ||||||
Long-term borrowings | 23,103 | 22,887 | ||||||
Accrued interest payable and other liabilities | 5,106 | 11,930 | ||||||
Total liabilities | 28,209 | 1,580,116 | ||||||
Shareholders’ equity | ||||||||
Common stock - $.10 par value per share: 50,000 shares authorized, 12,350 and 11,817 shares issued and outstanding, respectively | 1,235 | 1,182 | ||||||
Additional paid in capital | 170,440 | 177,316 | ||||||
Retained earnings | 4,081 | 560 | ||||||
Accumulated other comprehensive income (loss) | 2,032 | (2,308 | ) | |||||
Total shareholders’ equity | 177,788 | 176,750 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 205,997 | $ | 1,756,866 | ||||
See accompanying notes to consolidated financial statements |
(Unaudited)
Successor Company | Predecessor Company | Successor Company | Predecessor Company | |||||||||||||
Three Months Ended September 30, 2011 | Three Months Ended September 30, 2010 | Nine Months Ended September 30, 2011 | Nine Months Ended September 30, 2010 | |||||||||||||
Interest and dividend income | ||||||||||||||||
Loans, including fees | $ | - | $ | 14,836 | $ | 17,745 | $ | 45,471 | ||||||||
Investment securities: | ||||||||||||||||
Taxable | - | 2,106 | 3,238 | 6,479 | ||||||||||||
Tax-exempt | - | 29 | 19 | 137 | ||||||||||||
Interest-bearing deposits in other banks | 10 | 55 | 111 | 204 | ||||||||||||
Federal Home Loan Bank stock | - | 16 | 31 | 26 | ||||||||||||
Total interest and dividend income | 10 | 17,042 | 21,144 | 52,317 | ||||||||||||
Interest expense | ||||||||||||||||
Deposits | - | 4,392 | 3,276 | 13,803 | ||||||||||||
Federal Home Loan Bank advances | - | 1,195 | 301 | 3,590 | ||||||||||||
Short-term borrowings | - | 21 | 19 | 69 | ||||||||||||
Long-term borrowings | 471 | 648 | 1,393 | 1,973 | ||||||||||||
Total interest expense | 471 | 6,256 | 4,989 | 19,435 | ||||||||||||
Net interest income | (461 | ) | 10,786 | 16,155 | 32,882 | |||||||||||
Provision for loan losses | - | 17,072 | 621 | 29,697 | ||||||||||||
Net interest income after provision for loan losses | (461 | ) | (6,286 | ) | 15,534 | 3,185 | ||||||||||
Non-interest income | ||||||||||||||||
Service charges on deposit accounts | - | 831 | 1,070 | 2,585 | ||||||||||||
Fees on mortgage loans originated and sold | - | 455 | 498 | 1,219 | ||||||||||||
Investment advisory and trust fees | 407 | 328 | 1,173 | 948 | ||||||||||||
Loss on sale of indirect auto loans | - | 2 | - | (344 | ) | |||||||||||
Equity in income from investment in Capital Bank, NA | 1,875 | - | 2,533 | - | ||||||||||||
Other income | - | 802 | 1,669 | 2,283 | ||||||||||||
Investment securities gains (losses), net | - | - | 12 | 2,635 | ||||||||||||
Other-than-temporary impairment losses on investments | ||||||||||||||||
Gross impairment losses | - | - | - | - | ||||||||||||
Less: Impairments recognized in other comprehensive income | - | - | - | - | ||||||||||||
Net impairment losses recognized in earnings | - | - | - | - | ||||||||||||
Total non-interest income | 2,282 | 2,418 | 6,955 | 9,326 | ||||||||||||
Non-interest expense | ||||||||||||||||
Salaries and employee benefits | 240 | 6,610 | 8,991 | 19,859 | ||||||||||||
Net occupancy and equipment expense | 14 | 2,391 | 2,754 | 6,948 | ||||||||||||
Foreclosed asset related expense | - | 15,438 | 565 | 21,687 | ||||||||||||
Management fee expense | 128 | - | 214 | - | ||||||||||||
Other expense | 217 | 5,348 | 5,999 | 16,822 | ||||||||||||
Total non-interest expense | 599 | 29,787 | 18,523 | 65,316 | ||||||||||||
Income (loss) before income taxes | 1,222 | (33,655 | ) | 3,966 | (52,805 | ) | ||||||||||
Income tax expense (benefit) | (271 | ) | - | 445 | - | |||||||||||
Net income (loss) | $ | 1,493 | $ | (33,655 | ) | $ | 3,521 | $ | (52,805 | ) | ||||||
Preferred dividends earned by preferred shareholders and discount accretion | - | 680 | - | 2,009 | ||||||||||||
Gain on retirement of Series A preferred allocated to common shareholders | - | (24,276 | ) | - | (24,276 | ) | ||||||||||
Net loss allocated to common shareholders | $ | 1,493 | $ | (10,059 | ) | $ | 3,521 | $ | (30,538 | ) | ||||||
Basic income (loss) per common share | $ | 0.12 | $ | (67.68 | ) | $ | 0.29 | $ | (205.64 | ) | ||||||
Diluted income (loss) per common share | $ | 0.12 | $ | (67.68 | ) | $ | 0.27 | $ | (205.64 | ) | ||||||
Successor Company | Common Shares | Common Stock | Additional Paid in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | ||||||||||||||||||
Balance, July 1, 2011 | 12,350 | $ | 1,235 | $ | 174,903 | $ | 2,588 | $ | 1,310 | $ | 180,036 | |||||||||||||
Comprehensive income: | ||||||||||||||||||||||||
Net income | 1,493 | 1,493 | ||||||||||||||||||||||
Net market valuation adjustment on securities available for sale | 722 | |||||||||||||||||||||||
Less: reclassification adjustment for gains | - | |||||||||||||||||||||||
Other comprehensive income, net of tax expense of $453 | 722 | |||||||||||||||||||||||
Comprehensive income | 2,215 | |||||||||||||||||||||||
Effects of merger of TIB Bank into Capital Bank, NA | (4,463 | ) | (4,463 | ) | ||||||||||||||||||||
Balance, September 30, 2011 | 12,350 | $ | 1,235 | $ | 170,440 | $ | 4,081 | $ | 2,032 | $ | 177,788 | |||||||||||||
Predecessor Company | Preferred Shares | Preferred Stock | Common Shares | Common Stock | Additional Paid in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive (Loss) | Treasury Stock | Total Shareholders’ Equity | |||||||||||||||||||||||||||
Balance, July 1, 2010 | 37 | $ | 34,110 | 149 | $ | 15 | $ | 76,410 | $ | (69,524 | ) | $ | (1,406 | ) | $ | (569 | ) | $ | 39,036 | |||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||||||
Net loss | (33,655 | ) | (33,655 | ) | ||||||||||||||||||||||||||||||||
Net market valuation adjustment on securities available for sale | 849 | |||||||||||||||||||||||||||||||||||
Other comprehensive income | 849 | |||||||||||||||||||||||||||||||||||
Comprehensive loss | (32,806 | ) | ||||||||||||||||||||||||||||||||||
Preferred stock discount accretion | 192 | (192 | ) | - | ||||||||||||||||||||||||||||||||
Stock-based compensation and related tax effect | 529 | 529 | ||||||||||||||||||||||||||||||||||
Balance, September 30, 2010 | 37 | $ | 34,302 | 149 | $ | 15 | $ | 76,939 | $ | (103,371 | ) | $ | (557 | ) | $ | (569 | ) | $ | 6,759 | |||||||||||||||||
Successor Company | Common Shares | Common Stock | Additional Paid in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | ||||||||||||||||||
Balance, January 1, 2011 | 11,817 | $ | 1,182 | $ | 177,316 | $ | 560 | $ | (2,308 | ) | $ | 176,750 | ||||||||||||
Comprehensive income: | ||||||||||||||||||||||||
Net income | 3,521 | 3,521 | ||||||||||||||||||||||
Net market valuation adjustment on securities available for sale | 4,837 | |||||||||||||||||||||||
Less: reclassification adjustment for gains | (7 | ) | ||||||||||||||||||||||
Other comprehensive income, net of tax expense of $2,932 | 4,830 | |||||||||||||||||||||||
Comprehensive income | 8,351 | |||||||||||||||||||||||
Common stock issued in Rights Offering | 533 | 53 | 7,710 | 7,763 | ||||||||||||||||||||
Effects of merger of TIB Bank into Capital Bank, NA | (14,586 | ) | (490 | ) | (15,076 | ) | ||||||||||||||||||
Balance, September 30, 2011 | 12,350 | $ | 1,235 | $ | 170,440 | $ | 4,081 | $ | 2,032 | $ | 177,788 | |||||||||||||
Predecessor Company | Preferred Shares | Preferred Stock | Common Shares | Common Stock | Additional Paid in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive (Loss) | Treasury Stock | Total Shareholders’ Equity | |||||||||||||||||||||||||||
Balance, January 1, 2010 | 37 | $ | 33,730 | 149 | $ | 15 | $ | 76,154 | $ | (49,994 | ) | $ | (3,818 | ) | $ | (569 | ) | $ | 55,518 | |||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||||||
Net loss | (52,805 | ) | (52,805 | ) | ||||||||||||||||||||||||||||||||
Net market valuation adjustment on securities available for sale | 5,896 | |||||||||||||||||||||||||||||||||||
Less: reclassification adjustment for gains | (2,635 | ) | ||||||||||||||||||||||||||||||||||
Other comprehensive income | 3,261 | |||||||||||||||||||||||||||||||||||
Comprehensive loss | (49,544 | ) | ||||||||||||||||||||||||||||||||||
Preferred stock discount accretion | 572 | (572 | ) | - | ||||||||||||||||||||||||||||||||
Stock-based compensation and related tax effect | 785 | 785 | ||||||||||||||||||||||||||||||||||
Balance, September 30, 2010 | 37 | $ | 34,302 | 149 | $ | 15 | $ | 76,939 | $ | (103,371 | ) | $ | (557 | ) | $ | (569 | ) | $ | 6,759 | |||||||||||||||||
Successor Company | Predecessor Company | |||||||
Nine Months Ended September 30, 2011 | Nine Months Ended September 30, 2010 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 3,521 | $ | (52,805 | ) | |||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||
Accretion of acquired loans | (17,059 | ) | - | |||||
Equity in income from investment in Capital Bank, NA | (2,533 | ) | - | |||||
Depreciation and amortization | 500 | 3,572 | ||||||
Provision for loan losses | 621 | 29,697 | ||||||
Deferred income tax expense | 204 | - | ||||||
Investment securities net realized gains | (12 | ) | (2,635 | ) | ||||
Net amortization of investment premium/discount | 1,967 | 2,330 | ||||||
Stock-based compensation | - | 785 | ||||||
(Gain)/Loss on sales of OREO | (121 | ) | 55 | |||||
OREO valuation adjustments | - | 19,116 | ||||||
Loss on the sale of indirect auto loans | - | 344 | ||||||
Other | (656 | ) | 193 | |||||
Mortgage loans originated for sale | (17,154 | ) | (56,265 | ) | ||||
Proceeds from sales of mortgage loans originated for sale | 24,854 | 55,384 | ||||||
Fees on mortgage loans sold | (498 | ) | (1,219 | ) | ||||
Change in accrued interest receivable and other assets | (3,417 | ) | 4,681 | |||||
Change in accrued interest payable and other liabilities | 2,294 | 6,576 | ||||||
Net cash (used in) provided by operating activities | (7,489 | ) | 9,809 | |||||
Cash flows from investing activities: | ||||||||
Net change in cash due to merger of TIB Bank with and into Capital Bank, NA | (103,654 | ) | - | |||||
Investment in Capital Bank, NA | (5,241 | ) | - | |||||
Purchases of investment securities available for sale | (15,474 | ) | (335,038 | ) | ||||
Sales of investment securities available for sale | 2,319 | 188,601 | ||||||
Repayments of principal and maturities of investment securities available for sale | 43,101 | 90,955 | ||||||
Acquisition of Naples Capital Advisors business | - | (296 | ) | |||||
Sales of FHLB Stock | 244 | 749 | ||||||
Principal repayments on loans, net of loans originated or acquired | (7,069 | ) | 27,168 | |||||
Purchases of premises and equipment | (405 | ) | (12,629 | ) | ||||
Proceeds from sales of loans | - | 26,902 | ||||||
Proceeds from sale of OREO | 8,844 | 6,794 | ||||||
Proceeds from disposal of equipment | - | 41 | ||||||
Net cash used in investing activities | (77,335 | ) | (6,753 | ) | ||||
Cash flows from financing activities: | ||||||||
Net increase (decrease) in demand, money market and savings accounts | 78,957 | (107,167 | ) | |||||
Net increase (decrease) in time deposits | (138,414 | ) | 60,181 | |||||
Net decrease in federal funds purchased and securities sold under agreements to repurchase | (4,979 | ) | (36,647 | ) | ||||
Repayment of long term FHLB advances | (10,000 | ) | - | |||||
Net change in long term repurchase agreements | - | (20,000 | ) | |||||
Net proceeds from North American Financial Holdings, Inc. Investment | - | 162,840 | ||||||
Net proceeds from common stock rights offering | 7,764 | - | ||||||
Net cash (used in) provided by financing activities | (66,672 | ) | 59,207 | |||||
Net decrease in cash and cash equivalents | (151,496 | ) | 62,263 | |||||
Cash and cash equivalents at beginning of period | 153,794 | 167,402 | ||||||
Cash and cash equivalents at end of period | $ | 2,298 | $ | 229,665 | ||||
Supplemental disclosures of cash paid: | ||||||||
Interest | $ | 9,116 | $ | 16,303 | ||||
Supplemental information: | ||||||||
Exchange of Series A Preferred Stock for common shares issued in NAFH Investment | - | 12,160 | ||||||
Transfer of loans to OREO | 4,752 | 35,007 | ||||||
See accompanying notes to consolidated financial statements |
Note 1 – Basis of Presentation & Accounting Policies
TIB Financial Corp. (the “Company”) is a bank holding company headquartered in Naples, Florida. Prior to April 29, 2011, TIB Financial Corp. (the “Company”) conducted its business primarily through its wholly-owned subsidiaries, TIB Bank (together with its successor entities following the Bank Merger (as defined below), the “Bank”) and Naples Capital Advisors, Inc. As described in additional detail in Note 2, on April 29, 2011 (the “Merger Date”), the Bank merged (the “Merger”“Bank Merger”) with and into NAFH National Bank (“NAFH Bank”), a subsidiary of our majority shareholder, Capital Bank Financial Corp. (formerly known as North American Financial Holdings, Inc.); (“NAFH”CBF”) in an all-stock transaction, with NAFH Bank as the surviving entity. On June 30, 2011, NAFH Bank merged with Capital Bank, a wholly-owned subsidiary of Capital Bank Corporation, a controlled subsidiary of our majority shareholder, with NAFH Bank as the surviving entity (the “Capital Bank Merger”). On June 30, 2011, NAFH Bank changed its name to Capital Bank, National Association (“Capital Bank, NA”). Subsequently, GreenBank, a previously wholly-owned subsidiary of Green Bankshares, Inc. (“Green”), merged with and into Capital Bank, NA when Green became a controlled subsidiary of NAFHCBF on September 7, 2011. Collectively the subsidiary bank mergers discussed above are referred to herein as the “Subsidiary Bank Mergers”.
Subsequent to the Subsidiary Bank Mergers, the Company holds an approximately 21% ownership interest in Capital Bank, NA which is recorded as an equity-method investment in that entity. As of SeptemberJune 30, 2011,2012, the Company’s investment in Capital Bank, NA totaled $198,983,$206,536, which reflected the Company’s pro rata ownership of Capital Bank, NA’s total shareholders’ equity. In periods subsequent to the Merger Date, the Company has and 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 the Bank were de-consolidated from the Company’s balance sheet resulting in a significant decrease in the total assets and total liabilities of the Company in the second quarter of 2011. Accordingly, as of SeptemberJune 30, 2012 and December 31, 2011, no investments, loans or deposits are reported on the Company’s Consolidated Balance Sheet. Subsequent to the Merger Date, the Company’s significant assets and liabilities included in the Consolidated Balance Sheet are comprised of a customer relationship intangible associated with Naples Capital Advisors, Inc., the company’s wholly-owned registered investment advisor, along with the Company’s equity method investment in Capital Bank, NA, current and deferred income tax accounts and trust preferred securities. The Company’s operating results subsequent to the Merger Date include the Company’s proportional share of the equity method earnings of Capital Bank, NA and interest income and interest expense resulting from cash deposited in Capital Bank, NA and the outstanding trust preferred securities issued by the Company, respectively.respectively and investment advisory fees earned from the Company’s wholly owned subsidiary Naples Capital Advisories, Inc. (“NCA”). Unless otherwise specified, this report describes TIB Financial Corp., NCA and its subsidiaries including TIB Bank through the Merger Date, and subsequent to that date, includes TIB Financial Corp. and Naples Capital Advisors, Inc.
As used in this document, the terms “we,” “us,” “our,” “TIB Financial,” and “Company” mean TIB Financial Corp. and its subsidiaries (unless the context indicates another meaning) and the term “Bank” means TIB Bank, and, after the Bank Merger, its successor entities.
Capital Bank Financial Holdings, Inc.Corp. Investment
On September 30, 2010, (the “Transaction Date”) the Company completed the issuance and sale to NAFHCBF of 7,000 shares of common stock, 70 shares of Series B Preferred Stock and a warrant (the “Warrant”) to purchase up to 11,667 shares of Common Stock of the Company (the “Warrant Shares”) for aggregate consideration of $175,000 (the “Investment”). The consideration was comprised of approximately $162,840 in cash and approximately $12,160 in the form of a contribution to the Company of all 37 outstanding shares of Series A Preferred Stock previously issued to the U.S. Treasury Department (“Treasury”) under the TARP Capital Purchase Program and the related warrant to purchase shares of the Company’s common stock, which NAFHCBF purchased directly from the Treasury. The Series A Preferred Stock and the related warrant were retired on September 30, 2010 and are no longer outstanding. The 70 shares of Series B Preferred Stock received by NAFHCBF converted into an aggregate of 4,667 shares of common stock following shareholder approval of an amendment to increase the number of authorized shares of common stock to 50,000. The Warrant iswas exercisable, in whole or in part, and from time to time, from September 30, 2010 to March 30, 2012, at an exercise price of $15.00 per Warrant Share.
As a result of the Investment, pursuant to which NAFHCBF acquired approximately 99%97% (which has subsequently been reduced to approximately 94% as a result of the Rights Offering)Offering described below) of the voting securities of the Company, the Company followed the acquisition method of accounting as required by the Business Combinations Topic of the FASB Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). Under the accounting guidance the application of “push down” accounting was required.
TIB Financial Corp. and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars and shares in thousands except per share data)
(Unaudited)
In addition to the new accounting basis established for assets, liabilities and noncontrolling interests, acquisition accounting also requires the reclassification of any retained earnings from periods prior to the acquisition to be recognized as common share equity and the elimination of any accumulated other comprehensive income or loss and surplus within the Company’s Shareholders’ Equity section of the Company’s Consolidated Financial Statements. Accordingly, retained earnings and accumulated other comprehensive income at SeptemberJune 30, 20112012 and December 31, 20102011 represent only the results of operations subsequent to September 30, 2010, the date of the NAFHCBF Investment.
Critical Accounting Policies
The accounting and reporting policies ofaccompanying unaudited consolidated financial statements for the Company arehave been prepared in accordance with accounting principles generally accepted withinin the United States of America (“U.S. GAAP”) for interim financial information and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statement presentation. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information and an additional description of the Company’s accounting policies, refer to the Company’s consolidated financial statements for the year ended December 31, 2011.
The accounting and reporting policies conform to general practices withinU.S. GAAP. The following is a summary of the banking industry.
Earnings (Loss) Per Common Share
Basic earnings (loss) per share is net income (loss) allocated to common shareholders divided by the weighted average number of common shares and vested restricted shares outstanding during the period. Diluted earnings per share includes the dilutive effect of additional potential common shares issuable under stock options, warrants and restricted shares computed using the treasury stock method.
Earnings (loss) per share have been computed based on the following for the periods ended:
Successor Company | Predecessor Company | Successor Company | Predecessor Company | |||||||||||||
Three Months Ended September 30, 2011 | Three Months Ended September 30, 2010 | Nine Months Ended September 30, 2011 | Nine Months Ended September 30, 2010 | |||||||||||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic | 12,350 | 149 | 12,189 | 149 | ||||||||||||
Dilutive effect of options outstanding | - | - | - | - | ||||||||||||
Dilutive effect of restricted shares | - | - | - | - | ||||||||||||
Dilutive effect of warrants outstanding | - | - | 723 | - | ||||||||||||
Diluted | 12,350 | 149 | 12,912 | 149 |
Three Months Ended June 30, 2012 | Three Months Ended June 30, 2011 | Six Months Ended June 30, 2012 | Six Months Ended June 30, 2011 | |||||||||||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic | 12,350 | 12,350 | 12,350 | 12,055 | ||||||||||||
Dilutive effect of options outstanding | — | — | — | — | ||||||||||||
Dilutive effect of restricted shares | — | — | — | — | ||||||||||||
Dilutive effect of warrants outstanding | — | 1,080 | — | 1,993 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Diluted | 12,350 | 13,430 | 12,350 | 14,048 | ||||||||||||
|
|
|
|
|
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The dilutive effect of stock options and warrants and the dilutive effect of unvested restricted shares are the only common stock equivalents for purposes of calculating diluted earnings per common share.
TIB Financial Corp. and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars and shares in thousands except per share data)
(Unaudited)
Weighted average anti-dilutive stock options and warrants and unvested restricted shares excluded from the computation of diluted earnings per share are as follows:
Successor Company | Predecessor Company | Successor Company | Predecessor Company | |||||||||||||
Three Months Ended September 30, 2011 | Three Months Ended September 30, 2010 | Nine Months Ended September 30, 2011 | Nine Months Ended September 30, 2010 | |||||||||||||
Anti-dilutive stock options | 5 | 8 | 6 | 8 | ||||||||||||
Anti-dilutive restricted stock awards | - | - | - | - | ||||||||||||
Anti-dilutive warrants | 11,667 | 24 | 3 | 24 |
Three Months Ended June 30, 2012 | Three Months Ended June 30, 2011 | Six Months Ended June 30, 2012 | Six Months Ended June 30, 2011 | |||||||||||||
Anti-dilutive stock options | 2 | 6 | 2 | 7 | ||||||||||||
Anti-dilutive restricted stock awards | — | — | — | — | ||||||||||||
Anti-dilutive warrants | — | — | 5,769 | 5 |
Income Taxes
Income tax expense (or benefit) is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax basis of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.
A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company recognizes interest and/or penalties related to income tax matters in income tax expense.
The Company is included in CBF’s consolidated Federal and Subsidiaries
(Dollars and shares in thousands except per share data)
In December 2011, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income in Accounting Stands Update No. 2011-05. ASU 2011-12 amended one of the requirements of Update 2011-05. Under the amendments in Update 2011-05, entities are required to present reclassification adjustments and the effect of those reclassification adjustments on the face of the financial statements where net income is presented, by component of net income, and on the face of the financial statements where other comprehensive income is presented, by component of other comprehensive income. In addition, the amendments in Update 2011-05 require that reclassification adjustments be presented in interim financial periods. The amendments in this Update are effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of ASU 2011-12 did not have an impact on the Company’s consolidated financial condition or results of operations but did alter disclosures.
Also in December 2011, the FASB issued ASU No. 2011-12,Comprehensive Income(Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income in Accounting Stands Update No. 2011-05. ASU 2011-12 amended one of the requirements of Update 2011-05. Under the amendments in Update 2011-05, entities are required to present reclassification adjustments and the effect of those reclassification adjustments on the face of the financial statements where net income is presented, by component of net income, and on the face of the financial statements where other comprehensive income is presented, by component of other comprehensive income. In addition, the amendments in Update 2011-05 require that reclassification adjustments be presented in interim financial periods. The amendments in this Update are effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of ASU 2011-12 did not have an impact on the Company’s consolidated financial condition or results of operations but did alter disclosures.
In September 2011, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU 2011-08”). ASU 2011-08 amended guidance on the annual goodwill impairment test performed by the Company. Under the amended guidance, the Company will have the option to first assess qualitative factors to determine whether it is necessary to perform a two-step impairment test. If the Company believes, as a result of the qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than the carrying value, the quantitative impairment test is required. If the Company believes the fair value of a reporting unit is greater than the carrying value, no further testing is required. A company can choose to perform the qualitative assessment on some or none of its reporting entities. The amended guidance includes examples of events and circumstances that might indicate that a reporting unit’s fair value is less than its carrying amount. These include macro-economic conditions such as deterioration in the entity’s operating environment, entity-specific events such as declining financial performance, and other events such as an expectation that a reporting unit will be sold. The amended guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. However, an entity can choose to early adopt even if its annual test date is before the issuance of the final standard, provided that the entity has not yet performed its 2011 annual impairment test or issued its financial statements. The adoption of ASU 2011-08 willdid not have an impact on the Company’s consolidated financial condition or results of operations.
TIB Financial Corp. and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars and shares in thousands except per share data)
(Unaudited)
In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 amends current guidance by (i) eliminating the option to present components of other comprehensive income (OCI) as part of the statement of changes in shareholders’ equity, (ii) requiring the presentation of each component of net income and each component of OCI either in a single continuous statement or in two separate but consecutive statements, and (iii) requiring the presentation of reclassification adjustments on the face of the statement. The amendments of ASU 2011-05 do not change the option to present components of OCI either before or after related income tax effects, the items that must be reported in OCI, when an item of OCI should be reclassified to net income, or the computation of earnings per share (which continues to be based on net income). ASU 2011-05 is effective for interim and annual periods beginning on or after December 15, 2011 for public companies, with early adoption permitted and retrospective application required. The adoption of ASU 2011-05 willdid not have an impact on the Company’s consolidated financial condition or results of operations but willdid alter disclosures.
In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). The amended guidance of ASU 2011-04 (i) clarifies how a principal market is determined, (ii) establishes the valuation premise for the highest and best use of nonfinancial assets, (iii) addresses the fair value measurement of instruments with offsetting market or counterparty credit risks, (iv) extends the prohibition on blockage factors to all three levels of the fair value hierarchy, and (v) requires additional disclosures including transfers between Level 1 and Level 2 of the fair value hierarchy, quantitative and qualitative information and a description of an entity’s valuation process for Level 3 fair value measurements, and fair value hierarchy disclosures for financial instruments not measured at fair value. ASU 2011-04 is effective for interim and annual periods beginning on or after December 15, 2011, with early adoption prohibited. The adoption of ASU 2011-04 isdid not expected to have a material impact on the Company’s consolidated financial condition or results of operations.
In April 2011, the FASB issued ASU 2011-02, Receivables. The new guidance amended existing guidance for assisting a creditor in determining whether a restructuring is a troubled debt restructuring. The amendments clarify the guidance for a creditor’s evaluation of whether it has granted a concession and whether a debtor is experiencing financial difficulties. This guidance is effective for interim and annual reporting periods beginning after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. Management is currently evaluating the impact the new guidance will have on the consolidated financial statements.
In July 2010,January 2011, the FASB issued ASU 2010-20,2011-01,Deferral of the Effective Date of Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses,Troubled Debt Restructurings in Update No. 2010-20, to amend ASC Topic 320, Receivables.310,Receivables. The amendments in this update aretemporarily delay the effective date of the disclosures about troubled debt restructurings in ASU 2010-20 for public entities. The delay is intended to provide disclosures that facilitate financial statement users’ evaluationallow the FASB time to complete its deliberations on what constitutes a troubled debt restructuring. The effective date of the nature of credit risk inherent in the entity’s portfolio of financing receivables, how that risk is analyzed and assessed in arriving at the allowancenew disclosures about troubled debt restructurings for credit losses,public entities and the changesguidance for determining what constitutes a troubled debt restructuring will then be coordinated.
TIB Financial Corp. and reasons for those changesSubsidiaries
Notes to Consolidated Financial Statements
(Dollars and shares in the allowance for credit losses. The disclosures as of the end of a reporting period are effective for interim and annual periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. Adoption of this update did not have a material impact on the Company’s consolidated financial statements.
(Unaudited)
Note 2 – Equity Method Investment in Capital Bank, NA
On April 29, 2011, the Company’s primary operating subsidiary, TIB Bank, was merged with and into NAFH Bank, an affiliate institution which had been wholly-owned by the Company’s controlling shareholder, NAFH,CBF, preceding the Bank Merger. Pursuant to the merger agreement dated April 27, 2011, between NAFH Bank and the Bank, the Company exchanged its 100% ownership interest in TIB Bank for an approximately 53% ownership interest in the surviving combined entity, NAFH Bank. NAFHBank (which subsequently changed its name to Capital Bank National Association). CBF is deemed to control NAFHCapital Bank, NA due to NAFH’sCBF’s 94% ownership interest in the Company and NAFH’sCBF’s direct ownership of the remaining 47% interest in NAFHCapital Bank, NA subsequent to the Bank Merger. Accordingly, subsequent to April 29, 2011, the Company began to account for its ownership in NAFHCapital Bank, NA under the equity method of accounting and the assets and liabilities of the Bank were de-consolidated from the Company’s balance sheet. The deconsolidation resulted in a significant decrease in the total assets and total liabilities of the Company in the second quarter of 2011. Additionally, at the time of the Bank Merger, due to the de-consolidation of the Bank, the balance of accumulated other comprehensive income was reclassified as additional paid in capital. Accordingly, as of SeptemberJune 30, 2011,2012, no investments, loans or deposits are reported on the Company’s Consolidated Balance Sheet and subsequent to the Merger Date, interest income and interest expense are the result of cash deposited in Capital Bank, NA and the outstanding trust preferred securities issued by the Company, respectively.
On June 30, 2011, Capital Bank, a wholly-owned subsidiary of Capital Bank Corp.,Corporation, an affiliated bank holding company in which NAFHCBF has an 83% ownership interest, was merged with and into NAFHCapital Bank, NA, with NAFHCapital Bank, NA as the surviving entity. Subsequently and as a result of that transaction, the Company’s ownership interest in NAFHCapital Bank, NA was reduced to 33%. In connection with the transaction, NAFH Bank also changed its name to Capital Bank, National Association.
Subsequent to the mergers on June 30, 2011, NAFH,CBF, the Company and Capital Bank Corp.Corporation made contributions of additional capital to Capital Bank, NA of $4,695, $5,241 and $6,063, respectively, in proportion to their respective ownership interests in Capital Bank NA. The contributions were made to provide additional capital support for the general business operations of Capital Bank, NA.
On September 7, 2011, GreenBank, a wholly-owned subsidiary of Green Bankshares Inc., an affiliated bank holding company in which NAFHCBF has a 90% ownership interest, was merged with and into Capital Bank, NA., with Capital Bank, NA as the surviving entity. On September 30, 2011, Capital Bank Corp.Corporation made a contribution of additional capital to Capital Bank, NA of $10,000. Subsequently and as a result of these transactions, the Company’s ownership interest in Capital Bank, NA was reduced to 21%.
The mergers of the Bank, Capital Bank and GreenBank into Capital Bank, NA were restructuring transactions between commonly-controlled entities. The difference between the amount of the Company’s initial equity method investment in NAFH Bank, subsequent to the merger,Bank Merger, and the Company’s investment in the Bank, immediately preceding the merger,Bank Merger, was accounted for as a reduction in additional paid in capital. The amount of the equity method investment in NAFH Bank on April 29, 2011, immediately subsequent to the merger,Bank Merger, was equal to approximately 53% of the total shareholders’ equity of NAFH Bank post-merger (the combined entity). Additionally, at the time of the merger,Bank Merger, due to the de-consolidation of the Bank, the balance of accumulated other comprehensive income was reclassified as additional paid in capital. As the Company began to account for its investment in the combined entity under the equity method the change in the balance of the Company’s equity method investment betweensubsequent to April 29, 2011, and September 30, 2011 resulting from the Company’s proportional share of earnings of $1,875$2,420 and $2,533$4,965, respectively, was recorded in “Equity in income from investment in Capital Bank, NA.” in the Company’s Consolidated Statements of Income for the three and ninesix months ended SeptemberJune 30, 2011,2012, the related other comprehensive income net of tax was $1,275 and $759, respectively. Other changes in the Company’s equity method investment in Capital Bank, NA resulted from the subsidiary bank mergers of Capital Bank and GreenBank into Capital Bank, NA, as the Company’s equity method investment was adjusted at each merger date to equal its proportional ownership of Capital Bank, NA with the net change being recorded as cumulative net decrease in the total shareholders’ equity of the Company of $14,586.
At SeptemberJune 30, 2011,2012, the Company’s net investment of $198,983$206,536 in Capital Bank, NA, was recorded in the Consolidated Balance Sheet as “Equity method investment in Capital Bank NA.”
The initial estimated fair values of assets and liabilities acquired were based upon information that was available at the time to make preliminary estimates of fair value. The Company expected to obtain additional information during the measurement period which could result in changes to the estimated fair value amounts. The Company is still within the measurement period and has not yet finalized its estimates of fair value. However, as required by the acquisition method of accounting, the Company has retrospectively adjusted certain preliminary estimates to reflect refinements of estimates of fair values and new information obtained about facts and circumstances that existed as of the acquisition date. As a result of the Bank Merger, such changes are principally reflected in the accompanying financial statements as changes in the Company’s equity method investment in Capital Bank, NA. The most significant refinements include: (1) increases in the collectability of certain legacy bank fully charged-off loan balances and fees; (2) an increase in the estimated fair value of the core deposit intangible asset; (3) an increase in deferred tax assets related to the other fair value estimate changes offset by a reduction of expected realization of items considered to be built in losses; and (4) an increase in Goodwill caused by the net effect of these adjustments. Accordingly, the financial statements herein reflect an decrease of $31 in the Company’s investment in Capital Bank, NA and addition paid in capital for the reported period and as of December 31, 2011.
TIB Financial Corp. and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars and shares in thousands except per share data)
(Unaudited)
The following table presents summarized financial information for the Company’s equity method investee; Capital Bank, NA:
Three Months Ended September 30, 2011 | Period From April 29, 2011 Through September 30, 2011 | |||||||
Interest income | $ | 60,782 | $ | 81,492 | ||||
Interest expense | 8,543 | 11,823 | ||||||
Net interest income | 52,239 | 69,669 | ||||||
Provision for loan losses | 9,764 | 16,260 | ||||||
Non-interest income | 12,840 | 17,305 | ||||||
Non-interest expense | 44,778 | 58,166 | ||||||
Net income | 6,858 | 8,106 |
(Successor Company) | December 31, 2010 | |||||||||||||||
Amortized Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value | |||||||||||||
U.S. Government agencies and corporations | $ | 40,980 | $ | 15 | $ | 296 | $ | 40,699 | ||||||||
States and political subdivisions—tax exempt | 3,082 | 2 | 25 | 3,059 | ||||||||||||
States and political subdivisions—taxable | 2,308 | - | 151 | 2,157 | ||||||||||||
Marketable equity securities | 102 | - | 28 | 74 | ||||||||||||
Mortgage-backed securities—residential | 372,409 | 946 | 4,152 | 369,203 | ||||||||||||
Corporate bonds | 2,104 | 1 | - | 2,105 | ||||||||||||
Collateralized debt obligation | 807 | - | 12 | 795 | ||||||||||||
$ | 421,792 | $ | 964 | $ | 4,664 | $ | 418,092 |
(Successor Company) | Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||
December 31, 2010 | Estimated Fair Value | Unrealized Losses | Estimated Fair Value | Unrealized Losses | Estimated Fair Value | Unrealized Losses | ||||||||||||||||||
U.S. Government agencies and corporations | $ | 14,304 | $ | 296 | - | - | $ | 14,304 | $ | 296 | ||||||||||||||
States and political subdivisions—tax exempt | 2,458 | 25 | - | - | 2,458 | 25 | ||||||||||||||||||
States and political subdivisions-taxable | 2,157 | 151 | - | - | 2,157 | 151 | ||||||||||||||||||
Marketable equity securities | 74 | 28 | - | - | 74 | 28 | ||||||||||||||||||
Mortgage-backed securities - residential | 213,153 | 4,152 | - | - | 213,153 | 4,152 | ||||||||||||||||||
Corporate bonds | - | - | - | - | - | - | ||||||||||||||||||
Collateralized debt obligation | 795 | 12 | - | - | 795 | 12 | ||||||||||||||||||
Total temporarily impaired | $ | 232,941 | $ | 4,664 | $ | - | $ | - | $ | 232,941 | $ | 4,664 | ||||||||||||
(Successor Company) | December 31, 2010 | |||
Real estate mortgage loans: | ||||
Commercial | $ | 612,455 | ||
Residential | 225,850 | |||
Construction and vacant land | 38,956 | |||
Commercial and agricultural loans | 60,642 | |||
Indirect auto loans | 28,038 | |||
Home equity loans | 29,658 | |||
Other consumer loans | 8,730 | |||
Total loans | 1,004,329 | |||
Net deferred loan costs | 301 | |||
Loans, net of deferred loan costs | $ | 1,004,630 |
(Successor Company) | Three Months Ended September 30, 2011 | Nine Months Ended September 30, 2011 | ||||||
Balance, beginning of period | $ | - | $ | 263,381 | ||||
New loans purchased | - | - | ||||||
Accretion of income | - | (17,059 | ) | |||||
Reclassifications from nonaccretable difference | - | - | ||||||
Reduction due to deconsolidation of the Bank | - | (246,322 | ) | |||||
Balance, end of period | $ | - | $ | - |
Successor Company | Predecessor Company | Successor Company | Predecessor Company | |||||||||||||
Three Months Ended September 30, 2011 | Three Months Ended September 30, 2010 | Nine Months Ended September 30, 2011 | Nine Months Ended September 30, 2010 | |||||||||||||
Balance, beginning of period | $ | - | $ | 27,710 | $ | 402 | $ | 29,083 | ||||||||
Provision for loan losses charged to expense | - | 17,072 | 621 | 29,697 | ||||||||||||
Loans charged off | - | (12,445 | ) | (24 | ) | (27,432 | ) | |||||||||
Recoveries of loans previously charged off | - | 69 | - | 1,058 | ||||||||||||
Reduction due to deconsolidation of the Bank | - | - | (999 | ) | - | |||||||||||
Balance, end of period | $ | - | $ | 32,406 | $ | - | $ | 32,406 | ||||||||
Successor Company | Successor Company | |||||||||||||||
Acquisition accounting adjustment | $ | (32,406 | ) | $ | (32,406 | ) | ||||||||||
Balance, September 30 | $ | - | $ | - | $ | - | $ | - |
(Successor Company) | December 31, 2010 | Provision | Net Charge-offs | Reduction Due to Deconsolidation of the Bank | September 30, 2011 | |||||||||||||||
Real estate mortgage loans: | ||||||||||||||||||||
Commercial | $ | 7 | $ | 201 | $ | - | $ | (208 | ) | $ | - | |||||||||
Residential | 164 | 206 | - | (370 | ) | - | ||||||||||||||
Construction and vacant land | - | 75 | - | (75 | ) | - | ||||||||||||||
Commercial and agricultural loans | 24 | 13 | - | (37 | ) | - | ||||||||||||||
Indirect auto loans | 184 | 108 | (24 | ) | (268 | ) | - | |||||||||||||
Home equity loans | 14 | 11 | - | (25 | ) | - | ||||||||||||||
Other consumer loans | 9 | 7 | - | (16 | ) | - | ||||||||||||||
Total loans | $ | 402 | $ | 621 | $ | (24 | ) | $ | (999 | ) | $ | - |
December 31, 2010 | Allowance for Loan Losses | Loans | ||||||||||||||||||||||
Individually Evaluated for Impairment | Collectively Evaluated for Impairment | Purchased Credit-Impaired | Individually Evaluated for Impairment | Collectively Evaluated for Impairment | Purchased Credit-Impaired | |||||||||||||||||||
Real estate mortgage loans: | ||||||||||||||||||||||||
Commercial | $ | - | $ | 7 | $ | - | $ | - | $ | 552 | $ | 599,820 | ||||||||||||
Residential | - | 164 | - | - | 11,868 | 213,983 | ||||||||||||||||||
Farmland | - | - | - | - | - | 12,083 | ||||||||||||||||||
Construction and vacant land | - | - | - | - | - | 38,956 | ||||||||||||||||||
Commercial and agricultural | - | 24 | - | - | 4,901 | 55,740 | ||||||||||||||||||
Indirect auto loans | - | 184 | - | - | 6,295 | 21,744 | ||||||||||||||||||
Home equity loans | - | 14 | - | - | 25,305 | 4,353 | ||||||||||||||||||
Other consumer loans | - | 9 | - | - | 5,546 | 3,183 | ||||||||||||||||||
Total loans | $ | - | $ | 402 | $ | - | $ | - | $ | 54,467 | $ | 949,862 |
Three Months Ended June 30, 2012 | Six Months Ended June 30, 2012 | Period From April 29, 2011 Through June 30, 2011 | ||||||||||
Interest income | $ | 72,893 | $ | 147,025 | $ | 20,710 | ||||||
Interest expense | 8,000 | 16,725 | 3,280 | |||||||||
|
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|
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| |||||||
Net interest income | 64,893 | 130,300 | 17,430 | |||||||||
Provision for loan losses | 6,608 | 11,984 | 6,496 | |||||||||
Non-interest income | 12,298 | 26,912 | 4,465 | |||||||||
Non-interest expense | 52,799 | 108,017 | 13,388 | |||||||||
Net income | 11,326 | 23,234 | 1,248 |
Note 63 – Capital Adequacy
The Company (on a consolidated basis) is subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements resultresults in certain discretionary and required actions by regulators that, if undertaken, could have ana direct material effect on the Company’s financial position and results of operations. The regulations require the Company to meet specific capital adequacy guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Capital Adequacy and Ratios
To be considered well capitalized and adequately capitalized (as defined) under the regulatory framework for prompt corrective action, the CompanyBank must maintain minimum Tier 1 leverage, Tier 1 risk-based, and total risk-based ratios. At SeptemberJune 30, 20112012 the Company maintained capital ratios exceeding the requirement to be considered adequately capitalized. These minimum amounts and ratios along with the actual amounts and ratios for the Company as of SeptemberJune 30, 20112012 and December 31, 20102011 are presented in the following table.
(Successor Company) | Adequately Capitalized Requirement | September 30, 2011 Actual | December 31, 2010 Actual |
Tier 1 Capital (to Average Assets) | ≥ 4.0% | 93.5 % | 8.2% |
Tier 1 Capital (to Risk Weighted Assets) | ≥ 4.0% | 97.4 % | 13.3% |
Total Capital (to Risk Weighted Assets) | ≥ 8.0% | 97.4 % | 13.4% |
Well Capitalized Requirement | Adequately Capitalized Requirement | Actual | ||||||||||||||||||||||
June 30, 2012 | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||
Tier 1 Capital (to Average Assets) | ||||||||||||||||||||||||
TIB Financial Corp. | N/A | N/A | ³$ | 8,330 | ³ | 4.0 | % | $ | 208,262 | 97.2 | % | |||||||||||||
Tier 1 Capital ( to Risk Weighted Assets) | ||||||||||||||||||||||||
TIB Financial Corp. | N/A | N/A | ³$ | 8,336 | ³ | 4.0 | % | $ | 208,409 | 97.1 | % | |||||||||||||
Total Capital (to Risk Weighted Assets) | ||||||||||||||||||||||||
TIB Financial Corp. | N/A | N/A | ³$ | 16,672 | ³ | 8.0 | % | $ | 208,409 | 97.1 | % |
TIB Financial Corp. and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars and shares in thousands except per share data)
(Unaudited)
Well Capitalized Requirement | Adequately Capitalized Requirement | Actual | ||||||||||||||||||||||
December 31, 2011 | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||
Tier 1 Capital (to Average Assets) | ||||||||||||||||||||||||
TIB Financial Corp. | N/A | N/A | ³$ | 8,229 | ³ | 4.0 | % | $ | 205,737 | 96.4 | % | |||||||||||||
Tier 1 Capital ( to Risk Weighted Assets) | ||||||||||||||||||||||||
TIB Financial Corp. | N/A | N/A | ³$ | 8,103 | ³ | 4.0 | % | $ | 202,580 | 97.9 | % | |||||||||||||
Total Capital (to Risk Weighted Assets) | ||||||||||||||||||||||||
TIB Financial Corp. | N/A | N/A | ³$ | 16,206 | ³ | 8.0 | % | $ | 202,580 | 97.9 | % |
Management believes, as of SeptemberJune 30, 2011,2012, that the Company metmeets all capital requirements to which the it is subject. Tier 1 Capital for the Company includes the trust preferred securities that were issued in September 2000, July 2001 and June 2006 to the extent allowable.
On September 22, 2010 the Federal Reserve Bank of Atlanta (“FRB”) and the Company entered into a written agreement (the “Written Agreement”) where the Company agreed, among other things, that it willwould not make any payments on the outstanding trust preferred securities or declare or pay any dividends without the prior written approval of the FRB. On September 28, 2011, pursuant to approval by the FRB of a written request by the Company, the Company maderesumed payments of all amounts due for current and deferred interest through the nextsubsequent payment date for each of its trust preferred securities.
On January 18, 2011, the Company concluded a rights offering (the “Rights Offering”) wherein legacy shareholders ofreceived rights to purchase up to 1,489 shares of common stock, at a price of $15.00 per share, and acquired 533 shares of newly issued common stock. The rights offering resulted in net proceeds of $7,764.$7,763. The record date for the rights offering was July 12, 2010.
Subsidiary Dividend Limitations
In August 2010, Capital Bank, NA entered into an Operating Agreement (the “OCC Operating Agreement”) with the Office of the Comptroller of the Currency (the “OCC”). Currently, the OCC Operating Agreement with Capital Bank, NA prohibits the Bank from paying a dividend for three years following July 16, 2010, the date Capital Bank, NA acquired the assets and Subsidiaries
Dividends that may be paid by a national bank without express approval of the OCC are limited to that bank’s retained net profits for the preceding two years plus retained net profits up to the date of any dividend declaration in thousands except per share data)
Note 74 – Fair Value Measurements
FASB guidance on fair value measurements defines fair value, establishes a framework for measuring fair value, and requires fair value disclosures for certain assets and liabilities measured at fair value on a recurring and non-recurring basis.
This guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability.
TIB Financial Corp. and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars and shares in thousands except per share data)
(Unaudited)
This guidance establishes a fair value hierarchy which requires an entityfor disclosure of fair value measurements to maximize the use of observable inputs, and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value:
The three levels of inputs and the classification of financial instruments within the fair value hierarchy are as follows:
Level 1: | Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. | |
Level 2: | Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data; and | |
Level 3: | Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. |
Cash & cash equivalents
For cash & cash equivalents, the carrying value is primarily utilized as a reasonable estimate of fair value.
Valuation of securities available for sale
The fair values of securities available for sale are determined by (1) obtaining quoted prices on nationally recognized securities exchanges when available (Level 1 inputs), (2) matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs) and (5) for collateralized debt obligations, custom discounted cash flow modeling (Level 3 inputs).
As discussed in Note 2 Equity Method Investment in Capital Bank, NA, due to the deconsolidation of the Bank during the second quarter of 2011, the Company had no assets or liabilities measured at fair value on a recurring or non recurring basis as of SeptemberJune 30, 2012 and December 31, 2011.
Assets and Liabilities Measured on a Recurring Basis
As discussed in Note 2 Equity Method Investment in Capital Bank, NA, due to the deconsolidation of Securities Available for Sale
Sensitivity to Changes in connection with the applicationSignificant Unobservable Inputs
For recurring fair value estimates categorized within Level 3 of the acquisition methodfair value hierarchy, as of accounting, custom discounted cash flow modeling (Level 3 inputs).
Discount rates utilized in the modeling of this security arewere estimated based upon a variety of factors including the market yields of publicly traded trust preferred securities of larger financial institutions and other non-investment grade corporate debt. Cash flows utilized in the modeling of this security were based upon actual default history of the underlying issuers and issuer specific assumptions of estimated future defaults of the underlying issuers.
As discussed in Note 2 Equity Method Investment in Capital Bank, NA, due to the deconsolidation of the allowance for loan losses and other real estate owned is generally based on recent real estate appraisals and other available observable market information. These appraisals may utilize a single valuation approach or a combinationBank during the second quarter of approaches including comparable sales and2011, the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in aCompany no longer had any Level 3 classification of the inputs for determining fair value.
(Successor Company) | Fair Value Measurements at December 31, 2010 Using | |||||||||||||||
December 31, 2010 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
U.S. Government agencies and corporations | $ | 40,699 | $ | - | $ | 40,699 | $ | - | ||||||||
States and political subdivisions—tax exempt | 3,059 | - | 3,059 | - | ||||||||||||
States and political subdivisions—taxable | 2,157 | - | 2,157 | - | ||||||||||||
Marketable equity securities | 74 | 74 | - | - | ||||||||||||
Mortgage-backed securities—residential | 369,203 | - | 369,203 | - | ||||||||||||
Corporate bonds | 2,105 | - | 2,105 | - | ||||||||||||
Collateralized debt obligations | 795 | - | - | 795 | ||||||||||||
Available for sale securities | $ | 418,092 | $ | 74 | $ | 417,223 | $ | 795 |
TIB Financial Corp. and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars and shares in thousands except per share data)
(Unaudited)
The table below presents a reconciliation and income statement classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and ninesix months ended SeptemberJune 30, 2010 and held at September 30, 2010, respectively.
(Predecessor Company) | Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Collateralized Debt Obligations | |||||||
Three months Ended September 30, 2010 | Nine months Ended September 30, 2010 | |||||||
Balance, beginning of period | $ | 758 | $ | 759 | ||||
Included in earnings – other than temporary impairment | - | - | ||||||
Included in other comprehensive income | 115 | 114 | ||||||
Transfer in to Level 3 | - | - | ||||||
Balance, end of period | $ | 873 | $ | 873 |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Collateralized Debt Obligations | ||||
June 30, 2011 | ||||
Beginning balance, April 1, | $ | 791 | ||
Included in earnings – other than temporary impairment | — | |||
Included in other comprehensive income | — | |||
Transfer into Level 3 | — | |||
Reduction due to deconsolidation of the Bank | (791 | ) | ||
|
| |||
Ending balance June 30, | $ | — | ||
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Collateralized Debt Obligations | ||||
June 30, 2011 | ||||
Beginning balance, January 1, | $ | 795 | ||
Included in earnings – other than temporary impairment | — | |||
Included in other comprehensive income | (4 | ) | ||
Transfer into Level 3 | — | |||
Reduction due to deconsolidation of the Bank | (791 | ) | ||
|
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Ending balance June 30, | $ | — | ||
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|
Assets and Liabilities Measured on a Non-Recurring Basis
As discussed in Note 2 Equity Method Investment in Capital Bank, NA, due to the deconsolidation of the Bank during the second quarter of 2011, the Company had no assets or liabilities measured at fair value on a non-recurringrecurring or non recurring basis as of June 30, 2012 and December 31, 2011.
Fair values of cash and cash equivalents are summarized below:
(Successor Company) | Fair Value Measurements at December 31, 2010 Using | |||||||||||||||
December 31, 2010 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
Other real estate owned | 25,673 | - | - | 25,673 | ||||||||||||
Other repossessed assets | 104 | - | 104 | - | ||||||||||||
The carrying amounts, and estimated fair values and the fair value measurement levels, of financial instruments at SeptemberJune 30, 20112012 and December 31, 20102011 are as follows:
September 30, 2011 | December 31, 2010 | |||||||||||||||
Successor Company | Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | ||||||||||||
Financial assets: | ||||||||||||||||
Cash and cash equivalents | $ | 2,298 | $ | 2,298 | $ | 153,794 | $ | 153,794 | ||||||||
Investment securities available for sale | - | - | 418,092 | 418,092 | ||||||||||||
Loans, net | - | - | 1,004,228 | 995,744 | ||||||||||||
Federal Home Loan Bank and Independent Bankers’ Bank stock | - | - | 9,621 | NM | ||||||||||||
Accrued interest receivable | - | - | 4,917 | 4,917 | ||||||||||||
Financial liabilities: | ||||||||||||||||
Non-contractual deposits | $ | - | $ | - | $ | 648,019 | $ | 648,019 | ||||||||
Contractual deposits | - | - | 719,006 | 719,328 | ||||||||||||
Federal Home Loan Bank Advances | - | - | 131,116 | 130,906 | ||||||||||||
Short-term borrowings | - | - | 47,158 | 47,156 | ||||||||||||
Subordinated debentures | 23,103 | 25,406 | 22,887 | 25,267 | ||||||||||||
Accrued interest payable | - | - | 7,260 | 7,260 | ||||||||||||
Fair Value Measurements | ||||||||||||||||||||
June 30, 2012 | Carrying Value | Estimated Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 1,272 | $ | 1,272 | $ | 1,272 | $ | — | $ | — | ||||||||||
Financial liabilities: | ||||||||||||||||||||
Subordinated debentures | 23,324 | 24,199 | — | — | 24,199 | |||||||||||||||
December 31, 2011 | ||||||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 2,221 | $ | 2,221 | $ | 2,221 | $ | — | $ | — | ||||||||||
Financial liabilities: | ||||||||||||||||||||
Subordinated debentures | 23,176 | 24,093 | — | — | 24,093 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Item 2. Management’sForward-looking Statements
Certain of the matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion addresses the factors that have affected the financial condition and results of operations of the Company as reflected in the unaudited consolidated statement of condition as of SeptemberJune 30, 2011,2012, and statements of operationsincome for the three and ninesix months ended SeptemberJune 30, 2011.2012 and comparative periods when appropriate. Except as otherwise noted, dollar and share amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are not in thousands.
CBF Investment
On September 30, 2010 (the “Transaction Date”), the Company completed the issuance and sale to NAFHCBF of 7,000,000 shares of Common Stock, 70,000 shares of Series B Preferred Stock and a warrant (the “Warrant”) to purchase up to 11,666,667 shares of Common Stock of the Company (the “Warrant Shares”) for aggregate consideration of $175,000,000 (the “Investment”). The consideration was comprised of approximately $162,840,000 in cash and approximately $12,160,000 in the form of a contribution to the Company of all 37,000 outstanding shares of Series A Preferred Stock previously issued to the United States Department of the Treasury under the TARP Capital Purchase Program and the related warrant to purchase shares of the Company’s Common Stock, which NAFHCBF purchased directly from the Treasury. The Series A Preferred Stock and the related warrant were retired on September 30, 2010 and are no longer outstanding. The 70,000 shares of Series B Preferred Stock received by NAFHCBF converted into an aggregate of 4,666,667 shares of Common Stock following shareholder approval of an amendment to the Company’s Restated Articles of Incorporation to increase the number of authorized shares of Common Stock to 50,000,000. The Warrant iswas exercisable, in whole or in part, and from time to time, from September 30, 2010 to March 30, 2012, at an exercise price of $15.00 per Warrant Share.
As a result of the Investment and following the completion on January 18, 2011 of a rights offering, pursuant to which shareholders of the Company as of July 12, 2010 purchased 533,029 shares of Common Stock, NAFHCBF owns approximately 94%94.5% of the issued and outstanding voting power of the Company. Upon the completion of the Investment, R. Eugene Taylor (Chairman), Christopher G. Marshall, Peter N. Foss, William A. Hodges and R. Bruce Singletary were named to board of directors of the Company (the “Company Board”). Mr. Howard Gutman and Mr. Brad Boaz, currentlyexisting members of the Company Board, remained as such following the closing of the Investment. All other members of the board of directors of the Company Board resigned effective September 30, 2010.
Because of the controlling proportion of voting securities in the Company acquired by NAFH,CBF, the Investment iswas considered an acquisition for accounting purposes and requires the application and push down of the acquisition method of accounting. The accounting guidance for acquisition accounting requires that the assets acquired and liabilities assumed be recorded at their respective fair values as of the acquisition date. Any purchase price in excess of the net assets acquired is recorded as goodwill.
The most significant fair value adjustments resulting from the application of the acquisition method of accounting were made to loans. Accounting guidance requiresrequired that all loans held by the Company on the Transaction Date be recorded at their fair value. The fair value of these acquired loans takestook into account both the differences in loan interest rates and market rates and any deterioration in their credit quality. Because concerns about the probability of receiving the full amount of the contractual payments from the borrowers was considered in estimating the fair value of the loans, stating the loans at their fair value results in no allowance for loan loss being provided for these loans as of the Transaction Date. As of September 30, 2010, certain loans had evidence of credit deterioration since origination, and it was probable that not all contractually required principal and interest payments would be collected. Such loans identified at the time of the acquisition were accounted for using the measurement provision for purchased credit-impaired (“PCI”) loans, according to the FASB Accounting Standards Codification (“ASC”) 310-30. The special accounting for PCI loans not only requires that they are recorded at fair value at the date of acquisition and that any related allowance for loan and lease losses is not permitted to be carried forward past the Transaction Date, but it also governs how interest income will be recognized on these loans and how any further deterioration in credit quality after the Transaction Date will be recognized and reported.
TIB Bank Merger with Capital Bank, NA
On April 29, 2011 (the “Merger Date”), the Company’s primary operating subsidiary, TIB Bank, was merged with and into NAFH National Bank (the “Bank Merger”), an affiliate institution which had been wholly-owned by the Company’s controlling shareholder, NAFH,CBF, preceding the Bank Merger. NAFH National Bank was formed on July 16, 2010 in connection with the purchase and assumption of the operations of three banks – Metro Bank of Dade County (Miami, Florida), Turnberry Bank (Aventura, Florida) and First National Bank of the South (Spartanburg, South Carolina) – from the Federal Deposit Insurance Corporation (the “FDIC”). As of June 30, 2012, following the mergers of TIB Bank, Capital Bank and GreenBank, as discussed above, Capital Bank, NA had total assets of $6.3 billion, total deposits of $5.1 billion and shareholders’ equity of $966,5 million and operated 143 branches in Florida, North Carolina, South Carolina, Tennessee and Virginia.
Pursuant to the merger agreement dated April 27, 2011, between NAFH National Bank and TIB Bank, the Company exchanged its 100% ownership interest in TIB Bank for an approximately 53% ownership interest in the surviving combined entity, NAFH National Bank. Following the Bank Merger, NAFHCBF was deemed to control NAFH National Bank due to NAFH’sCBF’s 94% ownership interest in the Company and NAFH’sCBF’s direct ownership of the remaining 47% interest in NAFH National Bank subsequent to the Bank Merger. In addition, five of the Company’s seven directors, and the Company’s Chief Executive Officer, Chief Financial Officer and Chief Risk Officer are affiliated with NAFH.CBF. Accordingly, subsequent to April 29, 2011, the Company began to account for its ownership in NAFH National Bank under the equity method of accounting.
On June 30, 2011, Capital Bank, a wholly-owned subsidiary of Capital Bank Corp.,Corporation, an affiliated bank holding company in which NAFHCBF has an 83% ownership interest, was merged with and into NAFH National Bank, with NAFH National Bank as the surviving entity. In connection with the transaction, NAFH National Bank also changed its name to Capital Bank, National Association. On September 7, 2011, GreenBank, a wholly-owned subsidiary of Green Bankshares Inc., an affiliated bank holding company in which NAFHCBF has a 90% ownership interest, was merged with and into Capital Bank, NA. Subsequently, and as a result of those transactions, the Company’s ownership interest in Capital Bank, NA was reduced to approximately 21%. At SeptemberJune 30, 2011,2012, the Company’s net investment of $199.0$206.5 million in Capital Bank, NA, was recorded in the Consolidated Balance Sheet as “Equity method investment in Capital Bank, NA” which represented the Company’s pro rata ownership of Capital Bank, NA’s total shareholders’ equity. In periods subsequent to the Merger Date, the Company has and 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 the Bank were de-consolidated from the Company’s balance sheet resulting in a significant decrease in the total assets and total liabilities of the Company in the second quarter of 2011. Accordingly, as of SeptemberJune 30, 2011,2012, no investments, loans or deposits are reported on the Company’s Consolidated Balance Sheet and subsequent to the Merger Date, interest income and interest expense are the result of cash deposited in Capital Bank, NA and the outstanding trust preferred securities issued by the Company, respectively.
Potential Merger of TIB Financial Corp. and NAFH Inc.
On September 1, 2011, NAFH'sCBF’s Board of Directors approved and adopted a plan of merger. The plan of merger provides for the merger of TIB Financial Corp. with and into NAFH,CBF, with NAFHCBF continuing as the surviving entity.entity (the “merger”). In the merger, each share of TIB Financial Corp.’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 NAFHCBF or TIB Financial Corp., will be converted into the right to receive 0.7205 of a share of NAFHCBF Class A common stock. No fractional shares of Class A common stock will be issued in connection with the merger, and holders of TIB Financial Corp. common stock will be entitled to receive cash in lieu thereof.
Since NAFHCBF currently owns more than 90% of common stock of TIB Financial Corp., under Delaware and Florida law, no vote of our stockholders is required to complete the merger. NAFHCBF will determine when and if the merger will ultimately take place.
Consent Order and Written Agreement
On July 2, 2010, TIB Bank entered into a Consent Order, which is a formal agreement, with the bank regulatory agencies under which, among other things, the Bank had agreed to maintain a Tier 1 capital ratio of at least 8% of total assets and a total risk based capital ratio of at least 12% within 90 days. The Consent Order terminated on April 29, 2011 when TIB Bank was merged with and into NAFH National Bank. On September 22, 2010 the Federal Reserve Bank of Atlanta and the Company entered into a written agreement (the “Written Agreement”) where the Company agreed, among other things, that it will not make any payments on the outstanding trust preferred securities or declare or pay any dividends without the prior written approval of the FRB. The Company submitted a written request to the FRB to authorize the payment of deferred and current interest payments through the next payment date and future interest payments when due as scheduled on the three trust preferred securities. On September 28, 2011, pursuant to receipt of the FRB’s approval, concurrent interest payments were made for each of the trust preferred securities and the Company began the process of exiting from the deferral period.
Quarterly Summary
For the thirdsecond quarter of 2011,2012, the Company reported net income of $1.5$1.9 million. Basic and diluted income per common share was $0.12.$0.15. Net income during the quarter reflects equity income from the Company’s investment in Capital Bank, NA of $1.9$2.4 million, net of tax and interest expense of $471,000approximately $440,000 related to trust preferred securities. Excluding the equity income of $1.9 million, the Company reported a net loss before tax in the third quarter of $653,000 which resulted in a tax benefit of $271,000 being recorded.
Operating and financial highlights include the following:
Net income totaled $1.9 million, or $0.15 per share, basic and diluted, in the second quarter of 2012 and net income of $1.0 million or $0.08 and $0.07 per share, respectively in the second quarter of 2011.
The Company held a 21% ownership interest in Capital Bank, NA, which has $6.3 billion in assets and operates 143 branches in Florida, North Carolina, South Carolina, Tennessee and Virginia.
CBF, the Company’s majority shareholder agreed to acquire 100% of Southern Community Financial Corp. reported total(“Southern Community”), which it expects to close, pending shareholder and regulatory approvals, during the third quarter of 2012. Southern Community has assets of $206.0 million as of September 30, 2011.$1.5 billion and operates 22 branches in North Carolina. Upon closing, we expect that Southern Community’s wholly owned bank subsidiary, Southern Community Bank and Trust, will be merged into Capital Bank, NA.
The following table presents summarized financial information for the Company’s equity method investee; Capital Bank, NA:
Three Months Ended September 30, 2011 | Period From April 29, 2011 Through September 30, 2011 | |||||||
Interest income | $ | 60,782 | $ | 81,492 | ||||
Interest expense | 8,543 | 11,823 | ||||||
Net interest income | 52,239 | 69,669 | ||||||
Provision for loan losses | 9,764 | 16,260 | ||||||
Non-interest income | 12,840 | 17,305 | ||||||
Non-interest expense | 44,778 | 58,166 | ||||||
Net income | 6,858 | 8,106 |
Three Months Ended June 30, 2012 | Six Months Ended June 30, 2012 | Period From April 29, 2011 Through June 30, 2011 | ||||||||||
Interest income | $ | 72,893 | $ | 147,025 | $ | 20,710 | ||||||
Interest expense | 8,000 | 16,725 | 3,280 | |||||||||
|
|
|
|
|
| |||||||
Net interest income | 64,893 | 130,300 | 17,430 | |||||||||
Provision for loan losses | 6,608 | 11,984 | 6,496 | |||||||||
Non-interest income | 12,298 | 26,912 | 4,465 | |||||||||
Non-interest expense | 52,799 | 108,017 | 13,388 | |||||||||
Net income | 11,326 | 23,234 | 1,248 |
Results of Operations
Net income
Three months ended SeptemberJune 30, 2011 (Successor Company):
The Company reported net income of $1.5$1.9 million for the three months ended SeptemberJune 30, 2011.2012. Basic and diluted income per common share was $0.12.$0.15. The Company’s consolidated net income includes three months of equity in income from its investment in Capital Bank, NA which amounted to $1.9$2.4 million, net of tax. Net income also included interest expense of $471,000approximately $440,000 for the thirdsecond quarter relatedrelating to trust preferred securities. Excluding the equity incomesecurities, and approximately $127,000 of $1.9 million, the Company reported a net loss before tax in the third quarter of $653,000 which resulted in a tax benefit of $271,000 being recorded.
Three months ended SeptemberJune 30, 2010 (Predecessor Company):
The Company reported net income of $3.5$1.0 million for the ninethree months ended SeptemberJune 30, 2011. Basic and diluted income per common share was $0.29$0.08 and $0.27,$0.07, respectively. The provision for loan losses recorded during the periodquarter of $621,000approximately $136,000 reflects the current period increase in the allowance for loan losses for non-PCI loans. Other operating expense includes a favorable resolution of a vendor dispute which resulted in a refund of approximately $208,000.loans originated during the quarter prior to the Bank Merger. Due to the Bank Merger discussed above and in Note 2, the Company’s consolidated net income reflects four monthsincludes one month of the operations of TIB Bank and fivetwo months of equity in income from its investment in Capital Bank NA which amounted to $2.5approximately $658,000, net of tax.
Six months ended June 30, 2012:
The Company reported net income of $3.9 million for the six months ended June 30, 2012. Basic and diluted income per common share was $0.32. The Company’s consolidated net income includes six months of equity in income from its investment in Capital Bank, NA which amounted to $5.0 million, net of tax.
Six months of 2010, theended June 30, 2011:
The Company reported a net loss before dividends on preferred stockincome of $52.8 million. The loss allocated to common shareholders was $205.64 per share$2.0 million for the ninesix months ended SeptemberJune 30, 2010.2011. Basic and diluted income per common share was $0.17 and $0.14, respectively. The loss was primarily due to no tax benefitprovision for loan losses recorded during the period as a resultof approximately $621,000 reflects the increase in the allowance for loan losses for loans originated during the period. Due to the Bank Merger discussed above and in Note 2, the Company’s consolidated net income includes four months of the Company’s deferred tax assets being fully reserved; a $29.7 million provision for loan losses; $21.7 millionoperations of TIB Bank and two months of equity in valuation adjustments, losses on sale and operating expenses associated with OREO; and $2.1 millionincome from its investment in expense incurred in connection with our capital raising activities and the terminationCapital Bank, NA which amounted to approximately $658,000, net of a related consulting agreement.
Net Interest Income
Net interest incomeInterest loss in the third quarter of 2011three and six months ended June 30, 2012 was significantly impacted by the Bank Merger discussed above. Accordingly, as a result of the deconsolidation of the Bank, interest-bearing liabilities which consisted of trust preferred securities significantly exceeded interest-earning assets, thus creating negative net interest income and a negative net interest margin.
Net interest income for the first four months of 2011 and for the three and ninesix months ended SeptemberJune 30, 2010 represents2011 represented the amount by which interest income on interest-earning assets exceedsexceeded interest expense incurred on interest-bearing liabilities. Net interest income was the largest component of our income, and was affected by the interest rate environment and the volume and the composition of interest-earning assets and interest-bearing liabilities. Our interest-earning assets included loans, federal funds sold and securities purchased under agreements to resell, interest-bearing deposits in other banks and investment securities. Our interest-bearing liabilities includeincluded deposits, federal funds purchased, subordinated debentures, advances from the FHLB and other short term borrowings.
Rate and volume variance analyses allocate the change in interest income and interest expense between that which is due to changes in the rate earned or paid for specific categories of assets and liabilities and that which is due to changes in the average balance between two periods. Because of the purchase accounting adjustments and theBank Merger, the amounts for the three and nine month periodssix months ended SeptemberJune 30, 20112012 are not comparable to the three and nine month periodssix months ended SeptemberJune 30, 2010.
Three months ended SeptemberJune 30, 2011 (Successor Company):
Net interest incomeloss was $(461,000)approximately $439,000 for the three months ended SeptemberJune 30, 2011.2012. The net interest margin was (37.52%(212.47%). Due to the Bank Merger and subsequent deconsolidation discussed above, the net interest loss and reported average balances includes only interest income and interest expense from interest earning assets includes only interest earning cash and trust preferred subordinated debt securities.
Three months ended June 30, 2011:
Net interest income was $3.9 million for the three months ended June 30, 2011. Due to the Bank Merger discussed above and in Note 2, net interest income for the quarter includes only interest income on interest earning cash and interest expense on trust preferred securities.one month of the operating results of TIB Bank. Accordingly, as a result of the deconsolidation of the Bank, the reported average balances of interest earning assets and liabilities along with interest income and expense for the quarter decreased significantly. The Company’s net interest margin was 3.08%. The high level of cash and highly liquid investment securities maintained during the three months ended June 30, 2011, while available to be redeployed to fund higher yielding assets as such opportunities arise, had an unfavorable impact on the margin and the overall yield on earning assets was unfavorably impacted by these lower yielding assets.
Six months ended June 30, 2012:
Net interest loss was approximately $902,000 for the six months ended June 30, 2012. The net interest margin was (210.31%). Due to the Bank Merger and subsequent deconsolidation discussed above, the net interest loss and reported average balances includes only interest income and interest expense from interest earning assets includes only interest earning cash and liabilities includes trust preferred subordinated debt securities.
Six months ended SeptemberJune 30, 2010 (Predecessor Company):
Net interest income was $10.8$16.6 million for the threesix months ended September 30, 2010 while the net interest margin was 2.85%. The net interest margin reflected the continued reduction of the cost of interest bearing deposits and the repricing or replacement of maturing higher priced time deposits with lower cost funding during the quarter. These factors were partially offset by the continued maintenance of higher levels of liquid investment securities and cash equivalents and a change in asset mix resulting in lower volumes of higher yielding loans. The net interest margin was adversely impacted by the level of nonaccrual loans and non-performing assets during the period, which reduced the margin by approximately 25 basis points during the third quarter of 2010.
Successor Company | Predecessor Company | |||||||||||||||||||||||
2011 | 2010 | |||||||||||||||||||||||
(Dollars in thousands) | Average Balances | Income/ Expense | Yields/ Rates | Average Balances | Income/ Expense | Yields/ Rates | ||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans (1)(2) | $ | - | $ | - | - | $ | 1,100,135 | $ | 14,858 | 5.36 | % | |||||||||||||
Investment securities (2) | - | - | �� | - | 310,053 | 2,150 | 2.75 | % | ||||||||||||||||
Interest-bearing deposits in other banks | 4,875 | 10 | 0.81 | % | 86,492 | 55 | 0.25 | % | ||||||||||||||||
Federal Home Loan Bank stock | - | - | - | 9,946 | 16 | 0.64 | % | |||||||||||||||||
Total interest-earning assets | 4,875 | 10 | 0.81 | % | 1,506,626 | 17,079 | 4.50 | % | ||||||||||||||||
Non-interest-earning assets: | ||||||||||||||||||||||||
Cash and due from banks | 1,072 | 20,592 | ||||||||||||||||||||||
Premises and equipment, net | - | 51,239 | ||||||||||||||||||||||
Equity method investment in Capital Bank, NA | 201,231 | - | ||||||||||||||||||||||
Other assets | 4,081 | 52,438 | ||||||||||||||||||||||
Total non-interest-earning assets | 206,384 | 124,269 | ||||||||||||||||||||||
Total assets | $ | 211,259 | $ | 1,630,895 | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Interest-bearing deposits: | ||||||||||||||||||||||||
Time deposits | $ | - | $ | - | - | $ | 722,464 | $ | 3,653 | 2.01 | % | |||||||||||||
Money market | - | - | - | 175,588 | 461 | 1.04 | % | |||||||||||||||||
NOW accounts | - | - | - | 184,285 | 150 | 0.32 | % | |||||||||||||||||
Savings deposits | - | - | - | 73,093 | 128 | 0.69 | % | |||||||||||||||||
Total interest-bearing deposits | - | - | - | 1,155,430 | 4,392 | 1.51 | % | |||||||||||||||||
Other interest-bearing liabilities: | ||||||||||||||||||||||||
Short-term borrowings and FHLB advances | - | - | - | 185,466 | 1,216 | 2.60 | % | |||||||||||||||||
Long-term borrowings | 23,056 | 471 | 8.10 | % | 59,087 | 648 | 4.35 | % | ||||||||||||||||
Total interest-bearing liabilities | 23,056 | 471 | 8.10 | % | 1,399,983 | 6,256 | 1.77 | % | ||||||||||||||||
Non-interest-bearing liabilities and shareholders’ equity: | ||||||||||||||||||||||||
Demand deposits | - | 173,295 | ||||||||||||||||||||||
Other liabilities | 7,033 | 17,829 | ||||||||||||||||||||||
Shareholders’ equity | 181,170 | 39,788 | ||||||||||||||||||||||
Total non-interest-bearing liabilities and shareholders’ equity | 188,203 | 230,912 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 211,259 | $ | 1,630,895 | ||||||||||||||||||||
Interest rate spread (tax equivalent basis) | (7.29 | )% | 2.73 | % | ||||||||||||||||||||
Net interest income (tax equivalent basis) | $ | (461 | ) | $ | 10,823 | |||||||||||||||||||
Net interest margin (3) (tax equivalent basis) | (37.52 | )% | 2.85 | % | ||||||||||||||||||||
_______ (1) Average loans include non-performing loans. | ||||||||||||||||||||||||
(2) Interest income and rates include the effects of a tax equivalent adjustment using applicable statutory tax rates in adjusting tax exempt interest on tax exempt investment securities and loans to a fully taxable basis. | ||||||||||||||||||||||||
(3) Net interest margin is net interest income divided by average total interest-earning assets. |
The following table presents average balances of assets, liabilities and equity of the Company, the taxable-equivalent interest earned, and the rate paid thereon during the ninethree months ended SeptemberJune 30, 20112012 and September2011.
2012 | 2011 | |||||||||||||||||||||||
(Dollars in thousands) | Average Balances | Income/ Expense | Yields/ Rates | Average Balances | Income/ Expense | Yields/ Rates | ||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans (1)(2) | $ | — | $ | — | — | $ | 339,036 | $ | 4,355 | 5.15 | % | |||||||||||||
Investment securities (2) | — | — | — | 133,543 | 908 | 2.73 | % | |||||||||||||||||
Interest-bearing deposits in other banks | 831 | 1 | 0.48 | % | 37,091 | 31 | 0.34 | % | ||||||||||||||||
Federal Home Loan Bank stock | — | — | — | 3,110 | 6 | 0.77 | % | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total interest-earning assets | 831 | 1 | 0.48 | % | 512,780 | 5,300 | 4.15 | % | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Non-interest-earning assets: | ||||||||||||||||||||||||
Cash and due from banks | 739 | 8,423 | ||||||||||||||||||||||
Premises and equipment, net | — | 14,118 | ||||||||||||||||||||||
Other assets | 205,888 | 164,149 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total non-interest-earning assets | 206,627 | 186,690 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total assets | $ | 207,458 | $ | 699,470 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Interest-bearing deposits: | ||||||||||||||||||||||||
Time deposits | $ | — | $ | — | — | $ | 196,358 | $ | 580 | 1.18 | % | |||||||||||||
Money market | — | — | — | 70,570 | 129 | 0.73 | % | |||||||||||||||||
NOW accounts | — | — | — | 60,135 | 50 | 0.33 | % | |||||||||||||||||
Savings deposits | — | — | — | 37,353 | 63 | 0.68 | % | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total interest-bearing deposits | — | — | — | 364,416 | 822 | 0.90 | % | |||||||||||||||||
Other interest-bearing liabilities: | ||||||||||||||||||||||||
Short-term borrowings and FHLB advances | — | — | — | 54,076 | 69 | 0.51 | % | |||||||||||||||||
Long-term borrowings | 23,279 | 440 | 7.60 | % | 22,984 | 466 | 8.13 | % | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total interest-bearing liabilities | 23,279 | 440 | 7.60 | % | 441,476 | 1,357 | 1.23 | % | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Non-interest-bearing liabilities and shareholders’ equity: | ||||||||||||||||||||||||
Demand deposits | — | 72,545 | ||||||||||||||||||||||
Other liabilities | 4,116 | 5,513 | ||||||||||||||||||||||
Shareholders’ equity | 180,063 | 179,936 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total non-interest-bearing liabilities and shareholders’ equity | 184,179 | 257,994 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 207,458 | $ | 699,470 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Interest rate spread (2) | (7.12 | )% | 2.92 | % | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Net interest income (2) | $ | (439 | ) | $ | 3,943 | |||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Net interest margin (2) (3) | (212.47 | )% | 3.08 | % | ||||||||||||||||||||
|
|
|
|
(1) | Average loans include non-performing loans. |
(2) | Interest income and rates include the effects of a tax equivalent adjustment using applicable statutory tax rates in adjusting tax exempt interest on tax exempt investment securities and loans to a fully taxable basis. |
(3) | Net interest margin is net interest income divided by average total interest-earning assets. |
The following table presents average balances of the Company, the taxable-equivalent interest earned, and the rate paid thereon during the six months ended June 30, 2010.
Successor Company | Predecessor Company | |||||||||||||||||||||||
2011 | 2010 | |||||||||||||||||||||||
(Dollars in thousands) | Average Balances | Income/ Expense | Yields/ Rates | Average Balances | Income/ Expense | Yields/ Rates | ||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans (1)(2) | $ | 447,017 | $ | 17,717 | 5.30 | % | $ | 1,131,509 | $ | 45,532 | 5.38 | % | ||||||||||||
Investment securities (2) | 179,065 | 3,266 | 2.44 | % | 301,584 | 6,687 | 2.96 | % | ||||||||||||||||
Interest-bearing deposits in other banks | 51,128 | 111 | 0.29 | % | 108,716 | 204 | 0.25 | % | ||||||||||||||||
Federal Home Loan Bank stock | 4,114 | 31 | 1.01 | % | 10,278 | 26 | 0.34 | % | ||||||||||||||||
Total interest-earning assets | 681,324 | 21,125 | 4.15 | % | 1,552,087 | 52,449 | 4.52 | % | ||||||||||||||||
Non-interest-earning assets: | ||||||||||||||||||||||||
Cash and due from banks | 10,816 | 22,070 | ||||||||||||||||||||||
Premises and equipment, net | 18,880 | 47,711 | ||||||||||||||||||||||
Equity method investment in Capital Bank, NA | 110,476 | - | ||||||||||||||||||||||
Other assets | 49,858 | 50,448 | ||||||||||||||||||||||
Total non-interest-earning assets | 190,030 | 120,229 | ||||||||||||||||||||||
Total assets | $ | 871,354 | $ | 1,672,316 | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Interest-bearing deposits: | ||||||||||||||||||||||||
Time deposits | $ | 277,727 | $ | 2,368 | 1.14 | % | $ | 708,892 | $ | 11,391 | 2.15 | % | ||||||||||||
Money market | 90,503 | 497 | 0.73 | % | 185,821 | 1,460 | 1.05 | % | ||||||||||||||||
NOW accounts | 77,921 | 180 | 0.31 | % | 201,570 | 534 | 0.35 | % | ||||||||||||||||
Savings deposits | 46,495 | 231 | 0.66 | % | 78,661 | 418 | 0.71 | % | ||||||||||||||||
Total interest-bearing deposits | 492,646 | 3,276 | 0.89 | % | 1,174,944 | 13,803 | 1.57 | % | ||||||||||||||||
Other interest-bearing liabilities: | ||||||||||||||||||||||||
Short-term borrowings and FHLB advances | 74,617 | 320 | 0.57 | % | 190,912 | 3,659 | 2.56 | % | ||||||||||||||||
Long-term borrowings | 22,984 | 1,393 | 8.10 | % | 61,681 | 1,973 | 4.28 | % | ||||||||||||||||
Total interest-bearing liabilities | 590,247 | 4,989 | 1.13 | % | 1,427,537 | 19,435 | 1.82 | % | ||||||||||||||||
Non-interest-bearing liabilities and shareholders’ equity: | ||||||||||||||||||||||||
Demand deposits | 92,944 | 182,073 | ||||||||||||||||||||||
Other liabilities | 6,266 | 14,002 | ||||||||||||||||||||||
Shareholders’ equity | 181,897 | 48,704 | ||||||||||||||||||||||
Total non-interest-bearing liabilities and shareholders’ equity | 281,107 | 244,779 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 871,354 | $ | 1,672,316 | ||||||||||||||||||||
Interest rate spread (tax equivalent basis) | 3.02 | % | 2.70 | % | ||||||||||||||||||||
Net interest income (tax equivalent basis) | $ | 16,136 | $ | 33,014 | ||||||||||||||||||||
Net interest margin (3) (tax equivalent basis) | 3.17 | % | 2.84 | % | ||||||||||||||||||||
_______ (1) Average loans include non-performing loans. | ||||||||||||||||||||||||
(2) Interest income and rates include the effects of a tax equivalent adjustment using applicable statutory tax rates in adjusting tax exempt interest on tax exempt investment securities and loans to a fully taxable basis. | ||||||||||||||||||||||||
(3) Net interest margin is net interest income divided by average total interest-earning assets. |
2012 | 2011 | |||||||||||||||||||||||
(Dollars in thousands) | Average Balances | Income/ Expense | Yields/ Rates | Average Balances | Income/ Expense | Yields/ Rates | ||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans (1)(2) | $ | — | $ | — | — | $ | 674,231 | $ | 17,776 | 5.32 | % | |||||||||||||
Investment securities (2) | — | — | — | 270,081 | 3,266 | 2.44 | % | |||||||||||||||||
Interest-bearing deposits in other banks | 862 | 3 | 0.70 | % | 74,638 | 101 | 0.27 | % | ||||||||||||||||
Federal Home Loan Bank stock | — | — | — | 6,205 | 31 | 1.01 | % | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total interest-earning assets | 862 | 3 | 0.70 | % | 1,025,155 | 21,174 | 4.17 | % | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Non-interest-earning assets: | ||||||||||||||||||||||||
Cash and due from banks | 895 | 15,768 | ||||||||||||||||||||||
Premises and equipment, net | — | 28,476 | ||||||||||||||||||||||
Other assets | 204,496 | 139,863 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total non-interest-earning assets | 205,391 | 184,107 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total assets | $ | 206,253 | $ | 1,209,262 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Interest-bearing deposits: | ||||||||||||||||||||||||
Time deposits | $ | — | $ | — | — | $ | 418,892 | $ | 2,368 | 1.14 | % | |||||||||||||
Money market | — | — | — | 136,504 | 497 | 0.73 | % | |||||||||||||||||
NOW accounts | — | — | — | 117,528 | 180 | 0.31 | % | |||||||||||||||||
Savings deposits | — | — | — | 70,128 | 231 | 0.66 | % | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total interest-bearing deposits | — | — | — | 743,052 | 3,276 | 0.89 | % | |||||||||||||||||
Other interest-bearing liabilities: | ||||||||||||||||||||||||
Short-term borrowings and FHLB advances | — | — | — | 112,544 | 320 | 0.57 | % | |||||||||||||||||
Long-term borrowings | 23,240 | 902 | 7.78 | % | 22,948 | 922 | 8.10 | % | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total interest-bearing liabilities | 23,240 | 902 | 7.78 | % | 878,544 | 4,518 | 1.04 | % | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Non-interest-bearing liabilities and shareholders’ equity: | ||||||||||||||||||||||||
Demand deposits | — | 140,187 | ||||||||||||||||||||||
Other liabilities | 4,030 | 8,265 | ||||||||||||||||||||||
Shareholders’ equity | 178,983 | 182,266 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total non-interest-bearing liabilities and shareholders’ equity | 183,013 | 330,718 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 206,253 | $ | 1,209,262 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Interest rate spread (2) | (7.12 | )% | 3.13 | % | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Net interest income (2) | $ | (899 | ) | $ | 16,656 | |||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Net interest margin (2) (3) | (210.31 | )% | 3.28 | % | ||||||||||||||||||||
|
|
|
|
(1) | Average loans include non-performing loans. |
(2) | Interest income and rates include the effects of a tax equivalent adjustment using applicable statutory tax rates in adjusting tax exempt interest on tax exempt investment securities and loans to a fully taxable basis. |
(3) | Net interest margin is net interest income divided by average total interest-earning assets. |
Non-interest Income
The following table presents the principal components of non-interest income for the three and ninesix months ended SeptemberJune 30, 20112012 and September 30, 2010.
(Dollars in thousands) | Successor Company | Predecessor Company | Successor Company | Predecessor Company | ||||||||||||
Three Months Ended September 30,2011 | Three Months Ended September 30, 2010 | Nine Months Ended September 30, 2011 | Nine Months Ended September 30, 2010 | |||||||||||||
Equity in income from investment in Capital Bank, NA | $ | 1,875 | $ | - | $ | 2,533 | $ | - | ||||||||
Investment advisory fees | 407 | 328 | 1,173 | 948 | ||||||||||||
Service charges on deposit accounts | - | 831 | 1,070 | 2,585 | ||||||||||||
Management fee income | - | - | 700 | - | ||||||||||||
Debit card income | - | 369 | 559 | 1,101 | ||||||||||||
Fees on mortgage loans sold | - | 455 | 498 | 1,219 | ||||||||||||
Other | - | 312 | 251 | 694 | ||||||||||||
Earnings on bank owned life insurance policies | - | 123 | 159 | 353 | ||||||||||||
Investment securities gains, net | - | - | 12 | 2,635 | ||||||||||||
Loss on sale of indirect loans | - | - | - | (344 | ) | |||||||||||
Life insurance gain | - | - | - | 135 | ||||||||||||
Total non-interest income | $ | 2,282 | $ | 2,418 | $ | 6,955 | $ | 9,326 | ||||||||
(Dollars in thousands) | Three Months Ended June 30, 2012 | Three Months Ended June 30, 2011 | Six Months Ended June 30, 2012 | Six Months Ended June 30, 2011 | ||||||||||||
Equity in income from investment in Capital Bank, NA | $ | 2,420 | $ | 658 | $ | 4,965 | $ | 658 | ||||||||
Investment advisory fees | 85 | 379 | 216 | 766 | ||||||||||||
Service charges on deposit accounts | — | 257 | — | 1,070 | ||||||||||||
Investment securities gains, net | — | — | — | 12 | ||||||||||||
Fees on mortgage loans sold | — | 144 | — | 498 | ||||||||||||
Debit card income | — | 146 | — | 559 | ||||||||||||
Earnings on bank owned life insurance policies | — | 58 | — | 159 | ||||||||||||
Management fee income | — | 196 | — | 721 | ||||||||||||
Other | — | 64 | — | 230 | ||||||||||||
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Total non-interest income | $ | 2,505 | $ | 1,902 | $ | 5,181 | $ | 4,673 | ||||||||
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The Company is unable to provide a comparable analysis in this discussion of non-interest income because there are no comparable periods due to the Bank Merger discussed above.
Three months ended SeptemberJune 30, 2011 (Successor Company):
The non-interest income for the three months ended SeptemberJune 30, 20112012 includes equity in income from investment in Capital Bank, NA of $1.9$2.4 million net of tax. Investment advisory fees of $407,000approximately $85,000 were earned during the quarter through the Company’s wholly-owned registered investment advisor, Naples Capital Advisors, Inc. (“NCA”).
Three months ended SeptemberJune 30, 2010 (Predecessor Company):
The non-interest income for the for the three months ended SeptemberJune 30, 2010,2011 includes only one month of the operations of TIB Bank and two months of equity in income from investment in Capital Bank, NA of approximately $658,000 net of tax. Investment advisory fees of approximately $379,000 were earned by NCA during the quarter. Prior to the Bank Merger, the Bank earned fees of approximately $144,000 from the origination and sale of $18.5$5.2 million of residential mortgages in the secondary market were $455,000.market. Additionally, the Company recorded approximately $175,000 of management fee income pursuant to a third party reliance agreement which covered services provided by TIB Bank employees on behalf of the Company’s affiliate, NAFH Bank prior to the merger.
Six months ended June 30, 2012:
The non-interest income for the six months ended June 30, 2012 includes equity in income from investment in Capital Bank, NA of $5.0 million net of tax. Investment advisory fees of $328,000approximately $216,000 were earned during the quarterperiod through NCA.
Six months ended SeptemberJune 30, 2011 (Successor Company):
The non-interest income for the for the ninesix months ended SeptemberJune 30, 2011 includes only four months of the operations of TIB Bank and fivetwo months of equity in income from investment in Capital Bank NA of $2.5 million,$658,000, net of tax. Investment advisory fees of $1.2 millionapproximately $706,000 were earned by NCA during the period. Prior to the Bank Merger, the Bank earned fees of approximately $498,000 from the origination and sale of $23.5 million of residential mortgages in the secondary market. Additionally, the Company recorded approximately $700,000 of management fee income pursuant to a third party reliance agreement which covered services provided by TIB Bank employees on behalf of the Company’s affiliate, NAFH Bank prior to the Merger.
Non-interest Expense
The following table represents the principal components of non-interest expense for the three and six months ended SeptemberJune 30, 20112012 and 2010:
(Dollars in thousands) | Successor Company | Predecessor Company | Successor Company | Predecessor Company | ||||||||||||
Three Months Ended September 30,2011 | Three Months Ended September 30, 2010 | Nine Months Ended September 30, 2011 | Nine Months Ended September 30,2010 | |||||||||||||
Salary and employee benefits | $ | 240 | $ | 6,610 | $ | 8,991 | $ | 19,859 | ||||||||
Net occupancy expense | 14 | 2,391 | 2,754 | 6,948 | ||||||||||||
Management Fee Expense | 128 | - | 214 | - | ||||||||||||
Legal, and other professional | 79 | 795 | 1,352 | 2,435 | ||||||||||||
Computer services | - | 652 | 628 | 2,022 | ||||||||||||
Other operating expense | 38 | 449 | 633 | 1,510 | ||||||||||||
Amortization of intangibles | 91 | 389 | 643 | 1,168 | ||||||||||||
FDIC and state assessments | - | 1,200 | 1,278 | 3,515 | ||||||||||||
Insurance, non-building | 2 | 519 | 529 | 1,171 | ||||||||||||
Postage, courier and armored car | - | 271 | 377 | 823 | ||||||||||||
Marketing and community relations | 2 | 202 | 266 | 860 | ||||||||||||
Foreclosed asset related expense | - | 15,438 | 565 | 21,687 | ||||||||||||
Travel expenses | 2 | 88 | 75 | 254 | ||||||||||||
Operating supplies | - | 127 | 175 | 402 | ||||||||||||
Directors’ fees | 3 | 186 | 43 | 595 | ||||||||||||
Capital raise expenses | - | 470 | - | 2,067 | ||||||||||||
Total non-interest expense | $ | 599 | $ | 29,787 | $ | 18,523 | $ | 65,316 | ||||||||
(Dollars in thousands) | Three Months Ended June 30, 2012 | Three Months Ended June 30, 2011 | Six Months Ended June 30, 2012 | Six Months Ended June 30, 2011 | ||||||||||||
Salary and employee benefits | $ | 103 | $ | 2,250 | $ | 209 | $ | 8,751 | ||||||||
Net occupancy expense | 3 | 692 | 9 | 2,740 | ||||||||||||
Legal, and other professional | 265 | 528 | 580 | 1,555 | ||||||||||||
Conversion/merger expense | 127 | 17 | 127 | 17 | ||||||||||||
Amortization of intangibles | 8 | 189 | 17 | 552 | ||||||||||||
Foreclosed asset related expense | — | 43 | — | 565 | ||||||||||||
Computer services | — | 214 | — | 628 | ||||||||||||
Postage, courier and armored car | — | 109 | — | 377 | ||||||||||||
Marketing and community relations | — | 58 | 1 | 264 | ||||||||||||
Operating supplies | 1 | 33 | 1 | 175 | ||||||||||||
Directors’ fees | 4 | 9 | 4 | 40 | ||||||||||||
Travel expenses | 3 | 34 | 4 | 73 | ||||||||||||
FDIC and state assessments | — | 157 | — | 1,278 | ||||||||||||
Insurance, non-building | — | 144 | 3 | 527 | ||||||||||||
Other operating expense | 20 | 122 | 39 | 382 | ||||||||||||
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Total non-interest expense | $ | 534 | $ | 4,599 | $ | 994 | $ | 17,924 | ||||||||
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The Company is unable to provide a comparable analysis in this discussion of non-interest expense because there are no comparable periods due to the Bank Merger discussed above.
Three months ended SeptemberJune 30, 2011 (Successor Company):
Non-interest expense for the three months ended SeptemberJune 30, 20112012 includes approximately $265,000 of legal and other professional fees, (which included approximately $128,000 of management fee expense for services provided to the Company by employees of Capital Bank NANA.) and $56,000approximately $127,000 of professional feesmerger related to the Company’s potential merger with and into NAFH.
Three months ended SeptemberJune 30, 2010 (Predecessor Company):
Non-interest expense for the third quarterthree months ended June 30, 2011 includes only one month of 2010, foreclosedthe operations of TIB Bank. Due to the NAFH Investment, the corresponding improvement in our financial condition and capital position and the Bank Merger, the rate paid by the Bank for FDIC insurance declined during the quarter. Foreclosed asset related expenses were $15.4 million. Of this amount, $14.3 milliontotaling approximately $43,000 during the second quarter of 2011 includes OREO workout related to OREO valuation adjustments reflecting the decline in real estate values determined by updated appraisals, comparable sales and local market trends in asking prices and data from recent closed transactions. Other OREO operating andexpenses along with ownership expenses were $1.1 million. Such costs includedsuch as real estate taxes, insurance, and other costs to own and maintain the properties. Duringproperties and were reduced by net gains on the third quartersale of 2010, $470,000 inOREO of approximately $121,000.
Six months ended June 30, 2012:
Non-interest expense was related to our capital raise initiatives; $561,000for the six months ended June 30, 2012 includes approximately $580,000 of stock based compensationlegal and other professional fees, (approximately $256,000 of management fee expense related to accelerated vesting of stock options and restricted stock duefor services provided to the closingCompany by employees of the investment with North American Financial Holdings, Inc. on September 30, 2010Capital Bank NA.) and FDIC insurance costsapproximately $127,000 of $1.2 millionmerger related to higher deposit insurance premium rates in effect since the second quarter of 2010.
Six months ended SeptemberJune 30, 2011 (Successor Company):
The non-interest expense for the ninesix months ended SeptemberJune 30, 2011 includes only four months of the operations of TIB Bank. Due to the NAFH Investment, the corresponding improvement in our financial condition and capital position and the Bank Merger, the rate paid for FDIC insurance costs declined.declined during the six months ended June 30, 2011. Foreclosed asset related expenses of approximately $565,000 during the ninesix months ended 2011 includes OREO workout related expenses along with ownership costs such as real estate taxes, insurance, and other costs to own and maintain the properties and were reduced by net gains on the sale of OREO of approximately $121,000. Non-interest expense also includes management fee expense related to services provided to the Company by employees of Capital Bank, NA of $214,000 and $106,000 of professional fees associated with the bank mergers and the Company’s potential merger with and into NAFH.
Provision for income taxes
The provision for income taxes includes federal and state income taxes. Fluctuations in effective tax rates reflect the effect of the differences in the inclusion or deductibility of certain income and expenses, respectively, for income tax purposes. The effective income tax ratesrate for the three and ninesix months ended SeptemberJune 30, 2012 were approximately (24%) and (19%), respectively. Due to the equity method of accounting for the Company’s investment in Capital Bank, NA, the effective tax rate reflected in the current period was lower than the statutory tax rate. As the equity in income from investment in Capital Bank, NA is net of income tax expense, such earnings are treated as a permanent difference and are not included in taxable income. Excluding the impact of the equity method earnings from Capital Bank, NA, the effective income tax rate for the three and six months ended June 30, 2012 would have been approximately 42% and 37%, respectively.
The effective income tax rate for the three and six months ended June 30, 2011 were approximately (22%)13% and 11%26%, respectively. Due to the Bank Merger discussed above, the deconsolidation of the Bank and the equity method of accounting for the Company’s investment in Capital Bank, NA, the effective tax rates reflected in the current periods were lower than the statutory tax rates. The equity method of accounting results in the Company recording its proportional share of the income of Capital Bank, NA, net of income tax expense. Additionally, the equity method earnings are treated as a permanent difference and are not included in taxable income. Excluding the impact of the equity in earnings of Capital Bank, NA, the effective income tax rates for the three and ninesix months ended SeptemberJune 30, 2011 would have been approximately 42%32% and 31%34%, respectively. As of SeptemberJune 30, 2011, and December 31, 2010, management considered the need for a valuation allowance and, based upon its assessment of the relative weight of the positive and negative evidence available at the time of the analysis, concluded that a valuation allowance was not necessary.
Our future effective income tax rate will fluctuate based on the mixamount of taxable and tax free investments we makethe equity in income from our investment in Capital Bank, NA and our overall level of taxable income. Additionally, there were no unrecognized tax benefits at SeptemberJune 30, 2011,2012, and we do not expect the total of unrecognized tax benefits to significantly increase in the next twelve months.
Balance Sheet
Total assets at SeptemberJune 30, 20112012 were $206.0 million.$209.6 million as compared to $204.6 million as of December 31, 2011. The increase was caused by an increase in the investment in Capital Bank, NA. As discussed above, due to the Bank Merger, the Company began to account for its ownership in Capital Bank, NA under the equity method of accounting and the assets and liabilities of the Bank were de-consolidated from the Company’s balance sheet. The deconsolidation resulted in a significant decrease in the total assets and total liabilities of the Company in the second quarter of 2011. Accordingly, as of SeptemberJune 30, 2012 and December 31, 2011, no investments, loans or deposits are reported on the Company’s Consolidated Balance Sheet.
At SeptemberJune 30, 2011,2012, trust preferred securities, had a carrying value of $23.1$23.3 million, and a notional value of $33.0 million which was comparable to the balance at December 31, 2010.
Shareholders’ equity totaled $177.8$182.0 million at SeptemberJune 30, 2011,2012, increasing $1.0$4.7 million from December 31, 2010.
Capital and Liquidity
Capital
As of SeptemberJune 30, 20112012 and December 31, 2010,2011, the Company’s ratios of total capital to risk-weighted assets were 97.4%97.1% and 13.4%97.9%, respectively, and the leverage ratios were 93.5%97.2% and 8.2%96.4%, respectively, which exceeded the levels required to be considered adequately capitalized. Due to the Bank Merger discussed above, the deconsolidation of the Bank and the equity method of accounting for the Company’s investment in Capital Bank, NA the regulatory capital ratios for the Company are not meaningful. Subsequent to the Bank Merger, the primary source of support for Capital Bank, NA is the Company’s majority shareholder, NAFH.
On September 30, 2010, the Company completed the issuance and sale to NAFHCBF of 7,000,000 shares of Common Stock, 70,000 shares of Series B Preferred Stock and a warrant to purchase up to 11,666,667 shares of Common Stock of the Company for aggregate consideration of $175.0 million. The consideration was comprised of approximately $162.8 million in cash and approximately $12.2 million in the form of a contribution to the Company of all 37,000 outstanding shares of Series A Preferred Stock previously issued to the United States Department of the Treasury under the TARP Capital Purchase Program and the related warrant to purchase shares of the Company’s Common Stock, which NAFHCBF purchased directly from the Treasury. The Series A Preferred Stock and the related warrant were retired on September 30, 2010 and are no longer outstanding. The 70,000 shares of Series B Preferred Stock received by NAFHCBF mandatorily converted into an aggregate of 4,666,667 shares of Common Stock following shareholder approval of an amendment to the Company’s Restated Articles of Incorporation to increase the number of authorized shares of Common Stock to 50,000,000. The Warrant iswas exercisable, in whole or in part, and from time to time, from September 30, 2010 to March 30, 2012, at an exercise price of $15.00 per Warrant Share.
On January 18, 2011, the Company concluded a rights offering wherein legacy shareholders ofwith rights to purchase up to 1,488,792 shares of common stock, at a price of $15.00 per share, acquired 533,029 shares of newly issued common stock. The rights offering resulted in net proceeds of $7.8 million.
Liquidity
Liquidity represents the ability to provide sufficient funds to cover operating obligations. The record dateCompany is obligated to repay its $8.0 million trust preferred security in 2030, its $5.0 million trust preferred security in 2031 and its $20.0 million trust preferred security in 2036. Funds for such payments can be obtained by capital contributions from the rights offering was July 12, 2010.
On April 29, 2011, the Company’s primary operating subsidiary, TIB Bank, was merged with and into NAFH Bank, an affiliate institution which had been wholly-owned by the Company’s controlling shareholder, NAFH,CBF, preceding the Bank Merger. Pursuant to the merger agreement dated April 27, 2011, between NAFH Bank and TIB Bank, the Company exchanged its 100% ownership interest in TIB Bank for an approximately 53% ownership interest in the surviving combined entity, NAFH Bank. NAFHCBF is deemed to control NAFH Bank due to NAFH’s 94% ownership interest in the Company and NAFH’sCBF’s direct ownership of the remaining 47% interest in NAFH Bank subsequent to the Bank Merger. Accordingly, subsequent to April 29, 2011, the Company began to account for its ownership in NAFH Bank under the equity method of accounting and the assets and liabilities of the Bank were de-consolidated from the Company’s balance sheet. The deconsolidation resulted in a significant decrease in the total assets and total liabilities of the Company in the second quarter of 2011. Accordingly, as of SeptemberJune 30, 2011,2012, no investments, loans or deposits are reported on the Company’s Consolidated Balance Sheet and subsequent to the Merger Date, interest income and interest expense are the result of cash deposited in Capital Bank, NA and the outstanding trust preferred securities issued by the Company, respectively.
On June 30, 2011, Capital Bank, a wholly-owned subsidiary of Capital Bank Corp.,Corporation, an affiliated bank holding company in which NAFHCBF has an 83% ownership interest, was merged with and into NAFH Bank, with NAFH Bank as the surviving entity. Subsequently and as a result of that transaction, the Company’s ownership interest in NAFH Bank was reduced to 33%. In connection with the transaction, NAFH Bank also changed its name to Capital Bank, NA. On September 7, 2011, GreenBank, a wholly-owned subsidiary of Green Bankshares Inc., an affiliated bank holding company in which NAFHCBF has a 90% ownership, was merged with and into Capital Bank, NA. On September 30, 2011, Capital Bank Corp.Corporation made a contribution of $10.0 million additional capital to Capital Bank, NA. Subsequently and as a result of these transactions, the Company’s ownership interest in Capital Bank, NA was reduced to 21%.
On September 1, 2011, CBF’s Board of September 30,Directors approved and adopted a plan of merger. The plan of merger provides for the merger of TIB Financial Corp. with and into CBF, with CBF continuing as the surviving entity. In the merger, each share of TIB Financial Corp.’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 TIB Financial Corp., will be converted into the right to receive 0.7205 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 TIB Financial Corp. common stock will be entitled to receive cash in lieu thereof. Since CBF currently owns more than 90% of the common stock of TIB Financial Corp., under Delaware and Florida law, no vote of our stockholders is required to complete the merger.
During 2011, our holding company had cashthe Company launched a rights offering to shareholders of record as of July 12, 2010 which resulted in approximately $1.8 million. This cash is available for providing$7.8 million of additional capital support toand compliance with the continued listing requirements of the NASDAQ Capital Market.
Currently, the OCC Operating Agreement with Capital Bank NA andprohibits the Bank from paying a dividend for three years following July 16, 2010. Once the three-year period has elapsed, the agreement imposes other general corporate purposes. As discussed above,restrictions on October 5, 2009,Capital Bank’s ability to pay dividends including requiring prior approval from the OCC before any distribution is made. Therefore, the Company adopteddoes not expect to receive dividends from the Bank in the foreseeable future.
Dividends that may be paid by a resolution that it will not declare or pay any dividends on its outstanding common or preferred stock, nor will make any payments or distributions on the outstanding trust preferred securities or corresponding subordinated debenturesnational bank without the prior writtenexpress approval of the FRB. The Company notifiedOCC are limited to that bank’s retained net profits for the trusteespreceding two years plus retained net profits up to the date of its $20 million trust preferred securities due July 7, 2036 and its $5 million trust preferred securities due July 31, 2031 of its election to defer interest paymentsany dividend declaration in the current calendar year. Based on the trust preferred securities beginning withretained net profits of the payments due in October 2009. In January 2010,Bank, declaration of dividends by the Bank to the Company notified the trustees of its $8 million trust preferred securities due September 7, 2030 of its electionduring 2012, if not subject to defer interest payments on the trust preferred securities beginning with the payment due March 2010. Deferral of the trust preferred securities is allowed for upother restrictions, would have been limited to 60 months without being considered an event of default. Additionally, the Company may not declare or pay dividends on its capital stock, including dividends on preferred stock, or, with certain exceptions, repurchase capital stock without first having paid all trust preferred interest and all cumulative preferred dividends that are due. The Company submitted a written request to the FRB to authorize the payment of deferred and current interest payments through the next payment date and future interest payments when due as scheduled on the three trust preferred securities. On September 28, 2011, pursuant to receipt of the FRB’s approval, concurrent interest payments were made on each of the trust preferred securities and the Company began the process of exiting from the deferral period.
Asset and Liability Management
Closely related to liquidity management is the management of the relative interest rate sensitivity of interest-earning assets and interest-bearing liabilities. As of SeptemberJune 30, 2011,2012, our interest-earning assets consisted of cash on deposit with Capital Bank, NA and our interest-bearing liabilities consist of trust preferred securities. Accordingly, our net interest income and margin are sensitive to changes in interest rates. As the most significant component of our future operating results will be derived from our 21% investment in Capital Bank, NA, which represents approximately 97%99% of the Company’s total assets at SeptemberJune 30, 2011, we anticipate that2012, net interest income will becomeis a less significant measure of the operating results of the Company in future periods. However, it is anticipated that, over time, theThe effects on interest expense from changes in liability cost will be greater than the effects of changes in asset yield on interest income. Generally, we expect interest rates to remain relatively stable over the near term. However, increases in LIBOR, the index to which the interest rate on our trust preferred securities are tied could increase. Such an increase could have a material adverse impact on the financial condition and operating results of the Company.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Market risk is the risk that a financial institution’s earnings and capital, or its ability to meet its business objectives, will be adversely affected by movements in market rates or prices such as interest rates, foreign exchange rates, equity rates, equity prices, credit spreads and/or commodity prices. The Company has assessed its market risk as predominately interest rate risk. As of SeptemberJune 30, 2011,2012, our interest earning assets consisted of cash on deposit with Capital Bank, NA and our interest-bearing liabilities consist of trust preferred securities with a notional amount of $33.0 million. Accordingly, our net interest income and margin are sensitive to changes in interest rates. As the most significant component of our future operating results will be derived from our 21% investment in Capital Bank, NA, which represents approximately 97%99% of the Company’s total assets at SeptemberJune 30, 2011,2012, we anticipate that net interest income will become a less significant measure of the operating results of the Company in future periods. As $25.0 million of notional value of trust preferred securities are tied to the three month LIBOR rate, changes in net interest income would be directly correlated to changes in this rate. Accordingly, 100 and 200 basis point changes in this rate would result in $250,000 and $500,000 changes in annual interest expense, respectively. As the Company’s only interest earning asset is cash on deposit at Capital Bank, NA, which at SeptemberJune 30, 20112012 totaled approximately $2.3 million$651,000, changes in interest rates would not have a significant impact on interest income.
Item 4. | Controls and Procedures |
(a) | Evaluation of Disclosure Controls and Procedures |
The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the Corporation’sCompany’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, they have concluded that the Corporation’sCompany’s disclosure controls and procedures (as defined in rules 13a.15(e) and 15d-15(e) of the Securities and Exchange Act of 1934, as amended) are effective to ensurein ensuring that the information required to be disclosed is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and are also designed to ensure that the information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
(b) | Internal Control Over Financial Reporting |
Changes in Internal Control Over Financial Reporting
There have been no significant changes in the Company'sCompany’s internal control over financial reporting during the nine month period ended SeptemberJune 30, 20112012 that have materially affected, or are reasonably likely to materially affect, the Company'sCompany’s internal control over financial reporting.
Item 1. | Legal Proceedings |
While the Company and the Bank are no material pendingfrom time to time parties to various legal proceedings to whicharising in the ordinary course of their business, management believes after consultation with legal counsel that at June 30, 2012 there were no proceedings threatened or pending against the Company or its subsidiaries is a partythe Bank that will, individually or to which any ofin the Company’s or its subsidiaries’ property is subject. In addition, the Company is not aware of any threatened litigation, unasserted claims or assessments that couldaggregate, have a material adverse effect on the Company’s business, operatingconsolidated results of operations or condition.
Item 1a. | Risk Factors |
There have been no material changes to our risk factors as previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2010:
There were no repurchases (both open market and private transactions) during the ninesix months ended SeptemberJune 30, 20112012 of any of the Company’s securities registered under Section 12 of the Exchange Act, by or on behalf of the Company, or any affiliated purchaser of the Company.
The Company has not completed any unregistered sales of equity securities during the ninesix months ended SeptemberJune 30, 2011.
Item 6. | Exhibits |
Exhibit 31.1 | - | Chief Executive Officer’s certification required under Section 302 of Sarbanes-Oxley Act of 2002 | |||
Exhibit 31.2 | - | Chief Financial Officer’s certification required under Section 302 of Sarbanes-Oxley Act of 2002 | |||
Exhibit 32.1 | - | Chief Executive Officer’s certification required under Section 906 of Sarbanes-Oxley Act of 2002 | |||
Exhibit 32.2 | - | Chief Financial Officer’s certification required under Section 906 of Sarbanes-Oxley Act of 2002 | |||
Exhibit 101.INS* | - | XBRL Instance Document | |||
Exhibit 101.SCH* | |||||
- | |||||
XBRL Taxonomy Extension Schema Document | ||||
Exhibit 101.CAL* | ||||
XBRL Taxonomy Extension Calculation Linkbase Document | ||||
Exhibit 101.DEF* | ||||
XBRL Taxonomy Extension Definition Linkbase Document | ||||
Exhibit 101.LAB* | ||||
XBRL Taxonomy Extension Label Linkbase Document | ||||
Exhibit 101.PRE* | ||||
XBRL Taxonomy Extension Presentation Linkbase Document | ||||
* | Users of this data are advised that pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TIB FINANCIAL CORP. | ||||||
Date: August 10, 2012 | /s/ R. Eugene Taylor | |||||
R. Eugene Taylor Chairman and Chief Executive Officer | ||||||
Date : August 10, 2012 | /s/ Christopher G. Marshall | |||||
Christopher G. Marshall Chief Financial Officer (Principal Accounting Officer) |
EXHIBIT INDEX
Exhibit | Description | |
31.1 | Certification of R. Eugene Taylor pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of Christopher G. Marshall pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | Certification of R. Eugene Taylor pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | Certification of Christopher G. Marshall pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS* | XBRL Instance Document | |
101.SCH* | XBRL Taxonomy Extension Schema Document | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
* | Users of this data are advised that pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections. |
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