CapitalSouth Bancorp Announces First Quarter 2006 Results.BIRMINGHAM Birmingham, cities, United States Birmingham (bûr`mĭnghăm') 1 City (1990 pop. 265,968), seat of Jefferson co., N central Ala., in the Jones Valley near the southern end of the Appalachian system; founded and inc. , Ala ALA aminolevulinic acid. Ala alanine. ala (a´lah) pl. a´lae [L.] a winglike process. . -- CapitalSouth Bancorp ("CapitalSouth") (NASDAQ-NM:CAPB CAPB Curriculum and Assessment Policy Branch ) today announced results for the first quarter of 2006. Total assets at the end of the quarter were $435.7 million, a 22.5% increase over the $355.6 million at the end of the first quarter 2005. Deposits grew 34.5% during the same period, ending the first quarter 2006 at $363.0 million. Shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. ended the first quarter at $38.9 million, or $13.13 per share, up $1.71 from March 31, 2005. For the quarter ended March 31, 2006, CapitalSouth reported earnings of $464,246, down 27.6% from the first quarter 2005. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $.15 were down 46.4% from the $.28 reported for the first quarter 2005. Earnings in the first quarter 2006 resulted in a return on average shareholders' equity (ROE A fictitious surname used for an unknown or anonymous person or for a hypothetical person in an illustration. A lawsuit is generally named for the persons who are parties to it. ) of 4.84% compared to 10.16% in the same quarter of 2005, and a return on average assets (ROA ROA See: Return on assets ROA See: Right of accumulation ROA See return on assets (ROA). ) of .44% compared to .74% for the same quarter of 2005. "With the significant investments made in 2005 in opening three new branch offices and the additional equity raised from the IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. , we anticipated the negative impact on our earnings, ROE, and per share ratios. We believe that these investments are necessary for the Company to continue to grow at higher than peer bank levels and should result in greater shareholder value," said W. Dan Puckett Puckett can refer to:
During the first quarter 2006, CapitalSouth recognized $44,000 in net loan losses, representing .05% of average total loans for the period. During the fourth quarter 2005, CapitalSouth recognized $44,000 in loan losses, representing .06% of average loans for the period. At March 31, 2006, nonperforming assets Nonperforming asset An asset that is not effectively producing income, such as an overdue loan. nonperforming asset An asset that produces no income. were .72% of period end loans and other real estate, compared to .55% at December December: see month. 31, 2005. The allowance for loan losses as a percentage of period end nonperforming loans was 189.60% at March 31, 2006, down from 228.98% at December 31, 2005. CapitalSouth presently expects to record a gain of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $674,000 after tax in the second quarter of 2006 from stock that CapitalSouth owns in Consumer National Bank, a national banking association based in Jackson, Mississippi Jackson is the capital and the most populous city of the U.S. State of Mississippi. It is one of the county seats of Hinds County; Raymond is the other county seat. As of the 2000 census Jackson's population was 184,256. ("CNB CNB Czech National Bank CNB Centro Nacional de Biotecnologia CNB City National Bank CNB Citizens National Bank CNB Croatian National Bank CNB Chloronitrobenzene CNB Corresponsales No Bancarios (Spanish, Colombia) "), in connection with the acquisition of CNB by another bank. The merger consideration is valued at $10.59 per share and generally is comprised of equal parts cash and stock of the acquirer, subject to exceptions for certain classes of shareholders of CNB who will exclusively receive cash in the amount of $10.59 per share. The acquirer has indicated that shareholders, subject to maintaining the overall allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as of types of consideration between cash and stock, will be permitted to make elections between cash and stock consideration. CapitalSouth is desirous de·sir·ous adj. Having or expressing desire; desiring: Both sides were desirous of finding a quick solution to the problem. de·sir of receiving solely cash for its CNB stock and voted against the merger in order to preserve its right to dissent An explicit disagreement by one or more judges with the decision of the majority on a case before them. A dissent is often accompanied by a written dissenting opinion, and the terms dissent and dissenting opinion are used interchangeably. in the future and be paid solely in cash at either a negotiated value or at an appraised value An appraised value (USA) or mortgage valuation (Australia) pertains to the assessed value of real property in the opinion of a qualified appraiser or valuer. It is usually used as a pre-qualification & risk-based pricing factor related to the issuance of mortgage loans by a set by the Comptroller of the Currency Comptroller of the Currency A government official, appointed by the President of the United States, who keeps control over all national banks, and receives reports from the banks at least quarterly, to be published in newspapers. . CapitalSouth presently intends to pursue all avenues in order to obtain payment solely in cash for its shares of CNB stock. The amount of this gain could change if CapitalSouth decides to dissent from the transaction. Certain conditions to the transaction, including receipt of regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. approvals, have not yet been satisfied. CapitalSouth Bancorp is a bank holding company operating nine full service banking offices and one loan production office through two bank subsidiaries as follows: CapitalSouth Bank with seven full service banking offices in Birmingham and Huntsville Huntsville, town, Canada Huntsville, town (1991 pop. 14,997), SE Ont., Canada, on the Muskoka River. It has lumber mills and a woodworking plant, but it is sustained mainly by its year-round tourist trade. Alabama Alabama, indigenous people of North America Alabama (ăləbăm`ə), indigenous people of North America whose language belongs to the Muskogean branch of the Hokan-Siouan linguistic stock (see Native American languages). , and Jacksonville Jacksonville. 1 City (1990 pop. 29,101), Pulaski co., central Ark., inc. 1941. The city has varied industries, including printing and publishing and the manufacture of electronic equipment, ordnance, and plastic and metal products. Florida Florida, state, United States Florida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and , as well as a loan production office in Fort Lauderdale Fort Lauderdale (lô`dərdāl), residential, commercial, and resort city (1990 pop. 149,377), seat of Broward co., SE Fla., on the Atlantic coast; settled around a fort built (c.1837) in the Seminole War, inc. 1911. Florida; and Capital Bank with two full service banking offices in Montgomery Montgomery, city, United States Montgomery, city (1990 pop. 187,106), state capital and seat of Montgomery co., E central Ala., near the head of navigation on the Alabama River just below the confluence of the Coosa and Tallapoosa rivers, and in the rich Alabama. CapitalSouth targets small to medium-sized Me´di`um-sized` a. 1. Having a medium size; as, a medium-sized man s>. Adj. 1. medium-sized - intermediate in size medium-size, moderate-size, moderate-sized businesses in the markets it serves. Two of CapitalSouth Bank's offices operate under the name "Banco Hispano His·pa·no n. pl. His·pa·nos 1. A native or resident of Spanish descent living in the southwest United States. 2. A Hispanic. " and provide financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. to the growing Latino community prevalent prevalent widespread occurrence. in their areas. CapitalSouth offers SBA SBA abbr. Small Business Administration Noun 1. SBA - an independent agency of the United States government that protects the interests of small businesses and ensures that they receive a fair share of government lending services and other similar programs for business owners through its Business Capital Group, which operates through full-service full-ser·vice adj. Associated with or offering complete service: full-service gasoline pumps; full-service banks. offices as well as the loan production offices. CapitalSouth also provides Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the banking services at www.capitalsouthbank.com and www.capitalbankal.com as well as personal investment services. CapitalSouth Bancorp common stock is traded on the NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on National Market System under the symbol "CAPB". This press release contains "forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. " statements as defined by the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, which is based on CapitalSouth's current expectations, estimates and projections about future events and financial trends affecting the financial condition of its business. These statements are not historical facts or guarantees of future performance, events, or results. Such statements involve potential risks and uncertainties and, accordingly, actual performance results may differ materially. CapitalSouth undertakes no obligation to publicly update or revise forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , whether as a result of new, updated information, future events, or otherwise.
CapitalSouth Bancorp
(Unaudited Financial Highlights)
(in thousands, except for per share amounts and percentages)
Three Months
Ended
March 31 Percentage
2006 2005 Change
-------- -------- ----------
Net interest income $3,631 $2,962 22.6%
Provision for loan losses 236 156 51.3%
Noninterest income 550 588 -6.5%
Noninterest expense 3,273 2,465 32.8%
Income before provision for income taxes 672 929 -27.7%
Provision for income taxes 208 288 -27.8%
Net income $464 $641 -27.6%
Weighted average common and common
equivalent shares outstanding
Basic 2,942 2,242 31.2%
Diluted 3,003 2,273 32.1%
Net income per common share
Basic $0.16 $0.29 -44.8%
Diluted $0.15 $0.28 -46.4%
Return on average assets 0.44% 0.74%
Return on average tangible assets 0.44% 0.74%
Return on average equity 4.84% 10.16%
Return on average tangible equity 5.00% 10.17%
Noninterest Income
Service charges on deposits $256 $239 7.1%
Investment banking income, net 72 22 227.3%
Gain on sale of available for sale
securities, net - - 0.0%
Business Capital Group loan income 132 244 -45.9%
Other 90 83 8.4%
-----------------
Total noninterest income $550 $588 -6.5%
=================
Noninterest Expense
Salaries and employee benefits $1,926 $1,356 42.0%
Occupancy and equipment expense 521 438 18.9%
Professional fees 327 182 79.7%
Advertising 169 114 48.2%
Other 330 375 -12.0%
-----------------
Total noninterest expense $3,273 $2,465 32.8%
=================
March 31, March 31, Percentage
Period End Balances: 2006 2005 Change
-------------------- -------- -------- ----------
Total assets $435,707 $355,614 22.5%
Earning assets 406,341 337,559 20.4%
Securities 69,950 62,689 11.6%
Loans held for sale - 94 -100.0%
Loans 336,345 272,907 23.2%
Allowance for loan losses 4,048 3,195 26.7%
Deposits 363,021 269,862 34.5%
Borrowings 29,437 57,183 -48.5%
Stockholders' equity 38,883 25,649 51.6%
Equity to assets 8.92% 7.21%
Leverage ratio 10.76% 8.91%
Book value per common share $ 13.13 $ 11.42 15.0%
Tangible book value per common share $ 12.70 $ 11.42 11.2%
Ending shares outstanding 2,962 2,245 31.9%
Asset Quality Analysis
(in thousands, except percentages)
As of / For the Three Months Ended
Mar 31, Dec 31, Sept 30, June 30, Mar 31,
2006 2005 2005 2005 2005
------- ------- -------- -------- -------
Nonacrrual loans $2,135 $1,684 $1,281 $1,283 $1,050
Loans past due 90 days or
more and still accruing - - - - -
Other real estate owned and
repossessions 298 111 320 329 444
Total nonperforming assets 2,433 1,795 1,601 1,612 1,494
Total nonperforming assets
as a percentage of
period-end loans and
other real estate 0.72% 0.55% 0.56% 0.58% 0.55%
Allowance for loan losses $4,048 $3,856 $3,744 $3,526 $3,195
Provision for loan losses 236 156 257 345 156
Loans charged off 67 75 67 36 174
Loan recoveries 23 31 28 22 13
Net loan losses 44 44 39 14 161
Allowance for loan losses as
a percentage of period-end
loans 1.20% 1.18% 1.31% 1.27% 1.17%
Allowance for loan losses as
a percentage of period-end
nonperforming loans 189.60% 228.98% 292.27% 274.82% 304.29%
Net losses to average loans
(annualized) 0.05% 0.06% 0.06% 0.02% 0.24%
GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). Reconciliation and Management Explanation for Non-GAAP Financial Measures The information set forth above contains certain financial information determined by methods other than in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP. These non-GAAP financial measures are "return on average tangible Possessing a physical form that can be touched or felt. Tangible refers to that which can be seen, weighed, measured, or apprehended by the senses. A tangible object is something that is real and substantial. An automobile is an example of tangible Personal Property. equity," "return on average tangible assets Tangible Asset An asset that has a physical form such as machinery, buildings and land. Notes: This is the opposite of an intangible asset such as a patent or trademark. Whether an asset is tangible or intangible isn't inherently good or bad. ," and "tangible book value per common share Book Value Per Common Share A measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly. Formula: ." Our management uses these non-GAAP measures in its analysis of CapitalSouth's performance. "Return on average tangible equity" is defined as annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. earnings for the period divided by average equity reduced by average goodwill and other intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. . "Return on average tangible assets" is defined as annualized earnings for the period divided by the difference of average assets reduced by average goodwill and other intangible assets. Our management includes these measures because it believes that they are important when measuring CapitalSouth's performance against entities with higher levels of goodwill and other intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. . These measures are used by many investors as part of their analysis of the bank holding company's performance. "Tangible book value per common share" is defined as total equity reduced by recorded intangible assets divided by total common shares outstanding. This measure is important to many investors in the marketplace who are interested in changes from period to period in book value per share exclusive of changes in intangible assets. Goodwill, an intangible asset that is recorded in a purchase business combination, has the effect of increasing total book value while not increasing the tangible assets of the company. These disclosures should not be viewed as a substitute for results determined in accordance with GAAP, and are not necessarily comparable to non-GAAP performance measures which may be presented by other bank holding companies. The following reconciliation table provides a more detailed analysis of these non-GAAP performance measures.
As of / For the Three Months
Ended March 31,
2006 2005
-------------- --------------
Book value of equity $ 38,883 $ 25,649
Intangible assets 1,277 7
-------------- --------------
Book value of tangible equity $ 37,606 $ 25,642
============== ==============
Average assets $ 426,963 $ 349,173
Average intangible assets 1,277 7
-------------- --------------
Average tangible assets $ 425,686 $ 349,166
============== ==============
Return on average assets 0.44% 0.74%
Effect of average intangible assets 0.00% 0.00%
-------------- --------------
Return on average tangible assets 0.44% 0.74%
============== ==============
Average equity $ 38,888 $ 25,577
Average intangible assets 1,277 7
-------------- --------------
Average tangible equity $ 37,611 $ 25,570
============== ==============
Return on average equity 4.84% 10.16%
Effect of average intangible assets 0.16% 0.01%
-------------- --------------
Return on average tangible equity 5.00% 10.17%
============== ==============
Per Share:
Book value $ 13.13 $ 11.42
Effect of intangible assets 0.43 -
-------------- --------------
Tangible book value $ 12.70 $ 11.42
============== ==============
CAPITALSOUTH BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2006 and 2005
Assets 2006 2005
------------ ------------
Cash and cash equivalents $ 11,522,377 6,052,936
Federal funds sold 46,179 1,869,153
Securities available-for-sale 39,323,120 27,605,650
Securities held-to-maturity, fair values of
$27,565,539 and $31,949,564 at March 31,
2006 and 2005, respectively 28,449,275 32,042,952
Federal Home Loan Bank stock 1,436,200 2,446,100
Federal Reserve Bank stock 741,700 594,250
Loans held-for-sale -- 94,309
Loans 336,344,805 272,907,038
Allowance for loan losses (4,048,384) (3,195,432)
------------ ------------
Net loans 332,296,421 269,711,606
Premises and equipment, net 10,858,315 6,880,821
Bank-owned life insurance 4,424,689 4,248,903
Other assets 6,609,101 4,067,168
------------ ------------
Total assets $435,707,377 355,613,848
============ ============
Liabilities and Stockholders' Equity
Deposits:
Interest-bearing $312,078,998 230,955,347
Noninterest-bearing 50,942,301 38,906,760
------------ ------------
Total deposits 363,021,299 269,862,107
Federal funds purchased 4,705,300 26,929,000
Borrowed funds 6,000,000 10,745,278
Repurchase agreements 10,998,985 13,303,343
Note payable -- 1,205,000
Subordinated debentures 7,733,000 5,000,000
Other liabilities 4,365,519 2,919,832
------------ ------------
Total liabilities 396,824,103 329,964,560
------------ ------------
Stockholders' equity:
Preferred stock, $0.01 par value.
Authorized 500,000 shares;
issued and outstanding none -- --
Common stock, $1 par value. Authorized
7,500,000 and 5,000,000 shares,
respectively; issued 3,046,416 and
2,329,368 shares at March 31, 2006 and
2005, respectively; outstanding 2,961,586
2,244,538 shares at March 31, 2006 and
2005, respectively 3,046,416 2,329,368
Treasury stock, at cost, 84,830 shares in
2006 and 2005 (1,255,060) (1,255,060)
Paid-in surplus 25,954,239 14,916,672
Retained earnings 11,735,461 10,113,432
Accumulated other comprehensive loss, net (597,782) (455,124)
------------ ------------
Total stockholders' equity 38,883,274 25,649,288
------------ ------------
Total liabilities and
stockholders' equity $435,707,377 355,613,848
============ ============
CAPITALSOUTH BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
Three Months Ended March 31, 2006 and 2005
2006 2005
---------- ----------
Interest income:
Interest and fees on loans $6,162,535 4,096,412
Interest on securities 669,713 562,598
Interest on federal funds sold 16,650 11,821
---------- ----------
Total interest income 6,848,898 4,670,831
---------- ----------
Interest expense:
Interest on deposits 2,713,034 1,300,850
Interest on debt 505,220 408,215
---------- ----------
Total interest expense 3,218,254 1,709,065
---------- ----------
Net interest income 3,630,644 2,961,766
Provision for loan losses 236,006 156,380
---------- ----------
Net interest income after
provision for loan losses 3,394,638 2,805,386
---------- ----------
Noninterest income:
Service charges on deposits 256,123 239,421
Investment banking income, net 72,242 21,545
Gain on sale of available-for-sale securities,
net -- --
Business Capital Group loan income 132,192 244,462
Bank-owned life insurance 42,348 44,479
Other noninterest income 47,589 37,745
---------- ----------
Total noninterest income 550,494 587,652
---------- ----------
Noninterest expense:
Salaries and employee benefits 1,926,472 1,355,816
Occupancy and equipment expense 520,768 438,601
Professional fees 327,401 181,780
Advertising 169,238 113,634
Other noninterest expense 328,854 374,564
---------- ----------
Total noninterest expense 3,272,733 2,464,395
---------- ----------
Income before provision for
income taxes 672,399 928,643
Provision for income taxes 208,153 287,616
---------- ----------
Net income $ 464,246 641,027
========== ==========
Basic earnings per share $ 0.16 0.29
Basic weighted average shares outstanding 2,942,229 2,242,235
Diluted earnings per share $ 0.15 0.28
Diluted weighted average shares outstanding 3,003,440 2,273,005
Average Balance Sheet and Net Interest
Analysis on a Fully Tax-Equivalent Basis For
the Three Months Ended March 31,
-------------------------------------------------
2006 2005
------------------------ ------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
--------- ------- ------ --------- ------- ------
(Dollar amounts in thousands)
Assets
Earning assets:
Loans, net of
unearned income $331,941 $6,168 7.54% $266,964 $4,099 6.22%
Investment
securities 66,701 667 4.06 60,834 556 3.71
Other earning assets 3,514 50 5.77 4,667 34 2.95
--------- ------- ------ --------- ------- ------
Total earning
assets 402,156 6,885 6.94 332,465 4,689 5.72
------- ------ ------- ------
Other assets 24,807 16,708
--------- ---------
Total assets $426,963 $349,173
========= =========
Liabilities and
stockholders' equity
Interest-bearing
liabilities:
NOW accounts 10,875 12 0.45 14,515 15 0.42
Money market
accounts 86,736 716 3.35 65,328 346 2.15
Savings deposits 3,811 3 0.32 3,761 3 0.32
Time deposits less
than $100,000 165,534 1,678 4.11 116,936 762 2.64
Time deposits
greater than
$100,000 25,748 242 3.81 25,870 142 2.23
State of Alabama
time deposits 5,983 61 4.13 5,780 32 2.25
Federal funds
purchased 10,264 125 4.94 21,556 149 2.80
FHLB advances 8,133 125 6.23 11,000 99 3.65
Repurchase
agreements 11,103 115 4.20 13,492 76 2.28
Subordinated
debentures 7,733 140 7.34 5,000 75 6.08
Other borrowings - - 1,205 10 3.37
--------- ------- ------ --------- ------- ------
Total interest-
bearing liabilities 335,920 3,217 3.88 284,443 1,709 2.44
--------- ------- ------ --------- ------- ------
Net interest spread $3,668 3.06 $2,980 3.28
======= =======
Noninterest-bearing
demand deposits 48,178 36,520
Accrued expenses and
other liabilities 3,977 2,633
Stockholders' equity 39,451 25,871
Unrealized gain
(loss) on
securities (563) (294)
--------- ---------
Total
liabilities
and
stockholders'
equity $426,963 $349,173
========= =========
Impact of
noninterest-bearing
sources and other
changes in balance
sheet composition 0.64 0.36
------ ------
Net interest margin 3.70% 3.64%
====== ======
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