CAPITAL BANK CORPORATION 
By
"Although economic conditions continue to deteriorate beyond all of our
expectations, Capital Bank continues to focus on asset quality and revenue
enhancements, and this focus paid off with stable financial performance.
During this time of financial crisis, many of our customers have come to see
us as a refuge of trust and consistency which has enabled us to exceed our
loan and deposit growth objectives. In addition, we were presented with the
opportunity to expand into our neighboring market,
Asset quality continued to improve compared to both the second quarter of
2008 and the third quarter of 2007. Past due loans as a percent of total loans
declined to 0.75% at
Capital Bank achieved
Net interest income for the first nine months of 2008 decreased
Provision for loan losses increased
Noninterest income increased
"Our noninterest income improvement strategies, which were implemented
early in the second quarter, continue to show success. These strategies are
based on fee collection efforts, restructured pricing and innovative product
enhancements, including our Smart Checking product," stated
Noninterest expense increased from
Capital Bank Corporation, headquartered in
Information in this press release contains forward-looking statements. These statements involve risks and uncertainties that could cause actual results to differ materially, including without limitation, the effects of future economic conditions, governmental fiscal and monetary policies, legislative and regulatory changes, the risks of changes in interest rates, and the effects of competition. Additional factors that could cause actual results to differ materially are discussed in Capital Bank Corporation's filings with the Securities and Exchange Commission, including without limitation its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K. Capital Bank Corporation does not undertake a duty to update any forward-looking statements in this press release.
CAPITAL BANK CORPORATION
Summary of Operations
(Unaudited) Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
(In thousands except per share
data)
Interest income $20,931 $23,955 $64,932 $70,697
Interest expense 10,104 12,775 32,268 37,548
Net interest income 10,827 11,810 32,664 33,149
Provision for loan losses 760 261 2,175 507
Net interest income after
provision for loan losses 10,067 10,919 30,489 32,642
Noninterest income 3,267 2,522 8,754 7,056
Noninterest expense 10,517 9,583 30,376 28,636
Income before taxes 2,817 3,858 8,867 11,062
Income tax expense 805 1,105 2,473 3,249
Net income $2,012 $2,753 $6,394 $7,813
Income per share - basic $0.18 $0.24 $0.57 $0.68
Income per share - fully diluted $0.18 $0.24 $0.57 $0.68
Weighted average shares outstanding:
Basic 11,302 11,451 11,301 11,482
Fully diluted 11,313 11,510 11,314 11,552
End of Period Balances
(Unaudited) 2008 2007
September June March December
September
30 30 31 31(a) 30
(Dollars in
thousands
except per
share data)
Total assets $1,594,402 $1,592,034 $1,575,301 $1,517,603 $1,490,244
Investment
securities 244,310 246,468 258,086 259,116 249,083
Loans (gross)* 1,194,149 1,178,157 1,150,497 1,095,107 1,070,656
Allowance for
loan losses 14,017 13,910 13,563 13,571 13,366
Total earning
assets 1,444,727 1,435,020 1,419,174 1,362,048 1,335,434
Deposits 1,197,721 1,182,615 1,150,897 1,098,698 1,090,589
Shareholders'
equity 166,521 165,731 167,967 164,300 164,089
Book value per
share $14.83 $14.76 $14.95 $14.71 $14.58
Tangible book
value per
share $9.26 $9.16 $9.33 $9.04 $8.93
(a) Derived from audited consolidated financial statements
Average Balances
(Unaudited) 2008 2007
September June March December September
30 30 31 31(a) 30
(Dollars in
thousands)
Total assets $1,574,810 $1,578,357 $1,555,986 $1,492,563 $1,445,915
Investments 245,408 256,406 256,538 242,272 252,090
Loans (gross)* 1,176,491 1,166,795 1,142,728 1,090,801 1,042,635
Total earning
assets 1,425,516 1,429,301 1,407,345 1,347,727 1,302,859
Deposits 1,164,362 1,148,671 1,139,106 1,066,438 1,064,174
Shareholders'
equity 166,570 170,945 167,610 166,222 163,850
(a) Derived from audited consolidated financial statements
*Includes loans held for sale
CAPITAL BANK CORPORATION
Quarterly Results
(Unaudited) 2008 2007
September June March December September
30 30 31 31(a) 30
(In thousands except per
share data)
Net interest income $10,827 $10,928 $10,909 $10,952 $11,810
Provision for loan losses 760 850 565 3,099 261
Net interest income after
provision for loan
losses 10,067 10,078 10,344 7,853 10,919
Noninterest income 3,267 2,974 2,227 2,176 2,522
Noninterest expense 10,517 9,968 9,605 10,109 9,583
Income (loss) before taxes 2,817 3,084 2,966 (80) 3,858
Income tax expense
(benefit) 805 869 799 (125) 1,105
Net income $2,012 $2,215 $2,167 $45 $2,753
Income per share - basic $0.18 $0.20 $0.19 $- $0.24
Income per share - fully
diluted $0.18 $0.20 $0.19 $- $0.24
Weighted average shares
outstanding:
Basic 11,302 11,310 11,289 11,252 11,451
Fully diluted 11,313 11,324 11,306 11,316 11,510
(a) Derived from audited consolidated financial statements
Quarterly Net Interest Margin*
(Unaudited) 2008 2007
September June March December September
30 30 31 31(a) 30
Yield on earning assets 5.94% 6.09% 6.60% 7.17% 7.45%
Cost of interest bearing
liabilities 3.12 3.24 3.76 4.33 4.36
Net interest spread 2.82 2.85 2.83 2.84 3.10
Net interest margin 3.13 3.18 3.23 3.38 3.56
*Annualized and on a fully taxable equivalent basis
(a) Derived from audited consolidated financial statements
Nonperforming Assets
(Unaudited) 2008 2007
September June March December September
30 30 31 31(a) 30
(Dollars in thousands)
Commercial $4,343 $3,650 $2,919 $4,489 $7,304
Construction 1,570 418 230 562 -
Consumer 25 42 61 28 23
Home equity 275 515 579 397 491
Residential mortgage 198 582 463 506 2,414
Total nonperforming
loans 6,411 5,207 4,252 5,982 10,232
Other real estate owned 1,019 663 890 1,571 309
Total nonperforming
assets $7,430 $5,870 $5,142 $7,553 $10,541
Nonperforming assets include loans that are 90 days or more past due or in nonaccrual status and other real estate owned.
(a) Derived from audited consolidated financial statements
CAPITAL BANK CORPORATION
Key Ratios
(Unaudited) 2008 2007
September June March December September
30 30 31 31(a) 30
(Dollars in thousands)
Past due loans $8,933 $9,239 $9,380 $10,769 $13,157
Past due loans as a
percent
of total loans 0.75% 0.78% 0.82% 0.98% 1.23%
Net charge-offs $653 $503 $573 $2,894 $234
Net charge-offs as a
percent of average loans
(annualized) 0.22% 0.17% 0.20% 1.06% 0.09%
Allowance for loan losses
as a percent of total
loans 1.17% 1.18% 1.18% 1.24% 1.25%
Nonperforming assets as a
percent of total assets 0.47% 0.37% 0.33% 0.50% 0.71%
Allowance for loan losses
as a percent of
nonperforming loans 219% 267% 319% 227% 131%
(a) Derived from audited consolidated financial statements
CAPITAL BANK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2008 and December 31, 2007
September December
30, 2008 31, 2007
(Dollars in thousands except share data) (Unaudited)
Assets
Cash and due from banks:
Interest earning $6,245 $7,815
Noninterest earning 29,255 32,347
Federal funds sold and short term
investments 23 10
Total cash and cash equivalents 35,523 40,172
Investment securities - available for sale,
at fair value 238,963 249,094
Investment securities - held to maturity, at
amortized cost 5,347 10,022
Loans - net of unearned income and deferred
fees 1,194,149 1,095,107
Allowance for loan losses (14,017) (13,571)
Net loans 1,180,132 1,081,536
Premises and equipment, net 20,701 23,863
Bank-owned life insurance 22,215 21,589
Goodwill and deposit premium, net 62,575 63,345
Deferred income tax 7,396 5,829
Accrued interest receivable 6,683 7,789
Other assets 14,867 14,364
Total assets $1,594,402 $1,517,603
Liabilities
Deposits:
Demand, noninterest bearing $109,056 $114,780
Savings and interest bearing checking 176,396 151,698
Money market deposit accounts 198,391 229,560
Time deposits less than $100,000 463,498 370,416
Time deposits $100,000 and greater 250,380 232,244
Total deposits 1,197,721 1,098,698
Repurchase agreements and federal funds
purchased 22,290 45,295
Borrowings 164,000 163,347
Subordinated debentures 30,930 30,930
Other liabilities 12,940 15,033
Total liabilities 1,427,881 1,353,303
Commitments and contingencies
Shareholders' Equity
Common stock, no par value; 20,000,000
shares authorized; 11,227,085 and
11,169,777 shares issued and outstanding
as of September 30, 2008 and December 31,
2007, respectively 136,771 136,154
Retained earnings 31,682 27,985
Accumulated other comprehensive (loss)
income (1,932) 161
Total shareholders' equity 166,521 164,300
Total liabilities and shareholders'
equity $1,594,402 $1,517,603
CAPITAL BANK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2008 and 2007
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
(Dollars in thousands except per
share data)
Interest income:
Loans and loan fees $17,875 $20,830 $55,485 $61,231
Investment securities:
Taxable interest income 2,182 2,074 6,616 5,842
Tax-exempt interest income 801 828 2,435 2,412
Dividends 58 116 293 329
Federal funds and other
interest income 15 107 103 883
Total interest income 20,931 23,955 64,932 70,697
Interest expense:
Deposits 7,837 9,847 24,935 29,771
Borrowings and repurchase
agreements 2,267 2,928 7,333 7,777
Total interest expense 10,104 12,775 32,268 37,548
Net interest income 10,827 11,180 32,664 33,149
Provision for loan losses 760 261 2,175 507
Net interest income after
provision for loan
losses 10,067 10,919 30,489 32,642
Noninterest income:
Service charges and other fees 1,209 963 3,405 2,769
Mortgage fees and revenues 142 549 768 1,645
Other loan fees 392 150 892 431
Brokerage fees 169 156 570 409
Bank card services 357 285 1,010 755
Net gain on sale of investment
securities 109 - 249 -
Gain on sale of branch 426 - 426 -
Bank-owned life insurance 255 218 817 623
Other 208 201 617 424
Total noninterest income 3,267 2,522 8,754 7,056
Noninterest expense:
Salaries and employee benefits 5,122 4,881 15,484 15,121
Occupancy 1,097 1,062 3,297 3,053
Furniture and equipment 778 664 2,318 1,926
Data processing and
telecommunications 565 416 1,525 1,201
Advertising 480 394 1,000 992
Office expenses 298 345 978 1,064
Professional fees 362 264 1,013 869
Business development and
travel 360 252 1,033 909
Amortization of deposit
premiums 256 300 770 900
Miscellaneous loan handling
costs 252 247 570 545
Directors fees 303 72 702 569
Insurance 138 86 336 263
FDIC deposit insurance 214 72 442 199
Other 292 528 908 1,025
Total noninterest expense 10,517 9,583 30,376 28,636
Net income before tax
expense 2,817 3,858 8,867 11,062
Income tax expense 805 1,105 2,473 3,249
Net income $2,012 $2,753 $6,394 $7,813
Earnings per share - basic $0.18 $0.24 $0.57 $0.68
Earnings per share - diluted $0.18 $0.24 $0.57 $0.68
Average Balances, Interest Earned or Paid, and Interest Yields/Rates
For the Three Months Ended September 30, 2008, June 30, 2008 and September
30, 2007
Tax Equivalent Basis (1)
September 30, 2008
(Dollars in Average Amount Average
thousands) Balance Earned Rate
Assets
Loans receivable:(2)
Commercial $1,018,947 $15,469 6.02%
Consumer 46,480 875 7.47
Home equity 84,441 1,133 5.32
Residential mortgages 26,623 398 5.98
Total loans 1,176,491 17,875 6.03
Investment securities (3) 245,408 3,452 5.63
Federal funds sold and
other interest on short-
term investments 3,617 15 1.65
Total interest-earning assets 1,425,516 $21,342 5.94%
Cash and due from banks 25,554
Other assets 137,792
Allowance for loan losses (14,052)
Total assets $1,574,810
Liabilities and
Equity
Savings deposits $30,169 $30 0.39%
Interest-bearing demand
deposits 342,575 1,802 2.09
Time deposits 679,162 6,005 3.51
Total interest-bearing
deposits 1,051,906 7,837 2.96
Borrowed funds 174,735 1,786 4.06
Subordinated debt 30,930 407 5.22
Repurchase agreements and
fed funds purchased 27,039 74 1.09
Total interest-bearing
liabilities 1,284,610 $10,104 3.12%
Noninterest-bearing deposits 112,456
Other liabilities 11,174
Total liabilities 1,408,240
Shareholders' equity 166,570
Total liabilities and
shareholders' equity $1,574,810
Net interest spread (4) 2.82%
Tax equivalent adjustment $411
Net interest income and
net interest margin (5) $11,238 3.13%
June 30, 2008
(Dollars in Average Amount Average
thousands) Balance Earned Rate
Assets
Loans receivable:(2)
Commercial $1,010,809 $15,713 6.23%
Consumer 46,344 869 7.53
Home equity 80,842 1,101 5.46
Residential mortgages 28,710 427 5.95
Total loans 1,166,795 18,111 6.23
Investment securities (3) 256,406 3,555 5.55
Federal funds sold and
other interest on short-
term investments 6,100 33 2.18
Total interest-earning assets 1,429,301 $21,699 6.09%
Cash and due from banks 26,736
Other assets 135,976
Allowance for loan losses (13,656)
Total assets $1,578,357
Liabilities and Equity
Savings deposits $30,540 $35 0.46%
Interest-bearing demand
deposits 335,851 1,635 1.95
Time deposits 668,690 6,356 3.81
Total interest-bearing
deposits 1,035,081 8,025 3.11
Borrowed funds 181,841 1,820 4.01
Subordinated debt 30,930 403 5.23
Repurchase agreements and
fed funds purchased 35,183 106 1.21
Total
interest-bearing
liabilities 1,283,035 $10,355 3.24%
Noninterest-bearing deposits 113,590
Other liabilities 10,787
Total liabilities 1,407,412
Shareholders' equity 170,945
Total liabilities and
shareholders' equity $1,578,357
Net interest spread (4) 2.85%
Tax equivalent adjustment $416
Net interest income and
net interest margin (5) $11,344 3.18%
September 30, 2007
(Dollars in Average Amount Average
thousands) Balance Earned Rate
Assets
Loans receivable:(2)
Commercial $880,319 $17,620 7.94%
Consumer 40,490 881 8.63
Home equity 78,453 1,682 8.51
Residential mortgages 43,373 646 5.91
Total loans 1,042,635 20,829 7.93
Investment securities (3) 252,090 3,543 5.58
Federal funds sold
and other interest on
short-term investments 8,134 108 5.27
Total interest-earning assets 1,302,859 $24,480 7.45%
Cash and due from banks 28,261
Other assets 128,078
Allowance for loan losses (13,283)
Total assets $1,445,915
Liabilities and
Equity
Savings deposits $33,402 $51 0.61%
Interest-bearing demand deposits 366,824 3,230 3.49
Time deposits 549,968 6,566 4.74
Total interest-bearing deposits 950,194 9,847 4.11
Borrowed funds 147,843 1,946 5.22
Subordinated debt 30,930 599 7.68
Repurchase agreements and
fed funds purchased 34,233 383 4.44
Total interest-bearing
liabilities 1,163,200 $12,775 4.36%
Noninterest-bearing deposits 113,980
Other liabilities 4,885
Total liabilities 1,282,065
Shareholders' equity 163,850
Total liabilities and
shareholders' equity $1,445,915
Net interest spread (4) 3.10%
Tax equivalent adjustment $525
Net interest income and net
interest margin (5) $11,705 3.56%
(1) The tax equivalent basis is computed using a blended federal and state tax rate of approximately 34%.
(2) Loans receivable include nonaccrual loans for which accrual of interest has not been recorded.
(3) The average balance for investment securities excludes the effect of their mark-to-market adjustment, if any.
(4) Net interest spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
(5) Net interest margin represents net interest income divided by average interest-earning assets.
Average Balances, Interest Earned or Paid, and Interest Yields/Rates
For the Nine Months Ended September 30, 2008 and 2007
Tax Equivalent Basis (1)
September 30, 2008
(Dollars in thousands) Average Amount Average
Balance Earned Rate
Assets
Loans receivable: (2)
Commercial $1,005,400 $47,959 6.35%
Consumer 46,508 2,654 7.60
Home equity 81,626 3,555 5.80
Residential mortgages 28,524 1,317 6.15
Total Loans 1,162,058 55,485 6.36
Investment securities(3) 252,757 10,597 5.59
Federal funds sold and
other interest on short-term
investments 5,924 103 2.32
Total interest-earnings
assets 1,420,738 $66,184 6.21%
Cash and due from banks 26,172
Other assets 136,617
Allowance for loan losses (13,791)
Total assets $1,569,736
Liabilities and
Equity
Savings deposits $30,363 $112 0.49%
Interest-bearing demand
deposits 337,198 5,291 2.09
Time deposits 668,526 19,532 3.89
Total interest-bearing
deposits 1,036,087 24,935 3.21
Borrowed funds 176,069 5,628 4.26
Subordinated debt 30,930 1,336 5.75
Repurchase agreements and
fed funds purchased 32,575 368 1.51
Total interest-bearing
liabilities 1,275,660 $32,268 3.37%
Noninterest-bearing
deposits 114,676
Other liabilities 11,032
Total liabilities 1,401,368
Shareholders' equity 168,368
Total liabilities and
shareholders' equity $1,569,736
Net interest spread(4) 2.84%
Tax equivalent adjustment $1,252
Net interest income and net
interest margin (5) $33,916 3.18%
Tax Equivalent Basis (1)
September 30, 2007
(Dollars in Average Amount Average
thousands) Balance Earned Rate
Assets
Loans receivable: (2)
Commercial $859,219 $51,383 8.00%
Consumer 39,758 2,563 8.62
Home equity 80,829 5,135 8.49
Residential mortgages 45,739 2,150 6.28
Total Loans 1,025,545 61,231 7.98
Investment securities(3) 248,224 10,128 5.46
Federal funds sold and
other interest on short-term
investments 22,338 883 5.29
Total interest-earnings assets 1,296,107 $72,243 7.45%
Cash and due from banks 27,781
Other assets 129,392
Allowance for loan losses (13,369)
Total assets $1,439,911
Liabilities and
Equity
Savings deposits $33,812 $138 0.55%
Interest-bearing demand
deposits 362,304 9,415 3.47
Time deposits 568,604 20,218 4.75
Total interest-bearing
deposits 964,720 29,771 4.13
Borrowed funds 127,169 4,923 5.18
Subordinated debt 30,930 1,777 7.68
Repurchase agreements and
fed funds purchased 33,419 1,077 4.31
Total interest-bearing
liabilities 1,156,238 $37,548 4.34%
Noninterest-bearing deposits 110,954
Other liabilities 8,713
Total liabilities 1,275,905
Shareholders' equity 164,006
Total liabilities and
shareholders' equity $1,439,911
Net interest spread(4) 3.11%
Tax equivalent adjustment $1,546
Net interest income and
net interest margin (5) $34,695 3.58%
(1) The tax equivalent basis is computed using a blended federal and state tax rate of approximately 34%.
(2) Loans receivable include nonaccrual loans for which accrual of interest has not been recorded.
(3) The average balance for investment securities excludes the effect of their mark-to-market adjustment, if any.
(4) Net interest spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
(5) Net interest margin represents net interest income divided by average interest-earning assets.
SOURCE Capital Bank Corporation
