Capital Bank Corp Release 101806

Exhibit 99.1

CONTACT:

B. Grant Yarber

President and Chief Executive Officer

Phone: (919) 645-3494

Email: gyarber@capitalbank-nc.com

FOR IMMEDIATE RELEASE

Capital Bank Corporation Announces Record Net Income in 2006

RALEIGH, N.C. - January 24, 2007 - Capital Bank Corporation (Nasdaq: CBKN), the parent company of Capital Bank, today reported 2006 net income of $12.3 million compared to $6.7 million for the year ended December 31, 2005. Fully diluted earnings per share were $1.06 for the year ended December 31, 2006 compared to $0.97 for the year ended December 31, 2005, a 9% increase. For the quarter ended December 31, 2006, net income and fully diluted earnings per share were $3.3 million and $0.28, respectively, compared to $1.8 million and $0.26, respectively, for the quarter ended December 31, 2005. The comparability of balance sheet amounts, earnings, and earnings per share between 2006 and 2005 has been significantly impacted by the acquisition of 1st State Bancorp, Inc., which occurred on January 3, 2006. Total assets increased to $1.4 billion at December 31, 2006 compared to $961 million at December 31, 2005. As of December 31, 2006, loans and deposits exceeded $1 billion, which increased by $339.1 million and $356.8 million, respectively, compared to December 31, 2005. Shareholders’ equity increased to $161.7 million at December 31, 2006 compared to $83.5 million at December 31, 2005.

Commenting on the Company’s results, B. Grant Yarber, President and CEO, stated, “We are very proud of our associates’ extraordinary achievements that produced record earnings in 2006. We began the year with the acquisition of 1st State Bank in Alamance County. By mid year, we had our companies fully integrated and completed a brand new state-of-the-art operations center in Burlington. We also opened our new corporate headquarters, Capital Bank Plaza, on the revitalized Fayetteville Street in thriving downtown Raleigh. Always striving to find the ideal mix of big-bank technology and hometown service philosophy, we launched a new, innovative product, Smart Checking, with great success.

“Organic loan growth of $101 million, or 11% during 2006 exceeded expectations. New loan growth was funded primarily with core deposit growth of $68 million during the year, an increase of 16%. Our highest cost funding source, certificates of deposit, remained relatively flat during the year, increasing only $14 million or 3%.

“We look forward to 2007 with great anticipation. We will continue our drive for core deposit and loan growth with continued innovative marketing plans throughout the franchise.”

Net interest income increased by $16.9 million for the year ended December 31, 2006 to $46.2 million. The Company’s net interest margin, on a tax equivalent basis, increased to 3.94% for the year ended December 31, 2006 from 3.59% for the year ended December 31, 2005 as a result of increased average earning assets and the higher interest rate environment in 2006 compared to 2005. During the quarter ended December 31, 2006, the net interest margin, on a tax equivalent basis, increased 7 basis points to 3.78% from the quarter ended December 31, 2005. The Company experienced margin compression during the quarter ended December 31, 2006 compared to the quarter ended September 30, 2006, as the net interest margin, on a tax equivalent basis, decreased 13 basis points to 3.78% from 3.91%. This compression was primarily the result of increased cost of funds, which reflects the ongoing competitive pressures that have affected the rate and mix of our deposits as well as the continued impact of a flat yield curve.

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The provision for loan losses for the year ended December 31, 2006 was $587,000 compared to a credit of ($346,000) for the year ended December 31, 2005. Net charge-offs for the year ended December 31, 2006 were $4.5 million, including a $2.9 million net charge-off related to one loan relationship that had been fully reserved by 1st State Bancorp as of December 31, 2005, compared to $800,000 in net charge-offs for the year ended December 31, 2005. Excluding the charge-off related to this loan relationship, the ratio of net charge-offs to average loans was 0.17% for the year ended December 31, 2006 compared to 0.12% for the year ended December 31, 2005. The Company continued to see improvement in the overall credit quality of the Company’s commercial loan portfolio during 2006. Nonperforming loans were $4.9 million at December 31, 2006 compared to $8.1 million at December 31, 2005. Total nonperforming assets were $6.0 million or 0.42% of total assets at December 31, 2006 compared to $8.8 million or 1.07% of total assets at December 31, 2005. The allowance for loan losses at December 31, 2006 was 1.32% of total loans and 272% of nonperforming loans compared to 1.43% of total loans and 119% of nonperforming loans at December 31, 2005, respectively. The provision for loan losses for the quarter ended December 31, 2006 was $154,000 compared to $38,000 for the quarter ended December 31, 2005.

The Company’s noninterest income for the year ended December 31, 2006 increased $2.6 million compared to the year ended December 31, 2005. The increase is primarily due to a higher volume of transaction accounts, including those acquired in the 1st State Bancorp transaction, increased levels of deposit service charges and mortgage banking revenues, and gains realized on investment security sales and an early extinguishment of debt. Noninterest income for the quarter ended December 31, 2006 was $2.4 million compared to $2.0 million in the quarter ended December 31, 2005.

Noninterest expense was $36.3 million for the year ended December 31, 2006, an increase of $9.9 million compared to the year ended December 31, 2005. Part of this increase is attributable to the consummation of the 1st State Bancorp transaction, which added five additional branches, as well as higher costs associated with the Company’s growth. Since December 31, 2005, employee salaries and employee benefits increased $4.5 million or 32% reflecting additional employees, higher salaries and increased performance-based pay; occupancy costs increased $1.1 million due to the addition of new branch locations and expenses associated with the Company’s new headquarters; and deposit premium amortization increased $1.2 million as a result of the amortization of the deposit premium from the 1st State Bancorp acquisition. Noninterest expense for the quarter ended December 31, 2006 was $9.1 million compared to $7.2 million in the quarter ended December 31, 2005. This $1.9 million increase was primarily due to higher salaries and employee benefit costs.

Capital Bank Corporation, headquartered in Raleigh, N.C., with approximately $1.4 billion in total assets, offers a broad range of financial services. Capital Bank operates 26 banking offices in Asheville (3), Burlington (4), Cary, Graham (2), Greensboro, Hickory, Mebane, Morrisville, Oxford, Pittsboro, Raleigh (5), Sanford (3), Siler City, and Wake Forest. The company’s website is www.capitalbank-nc.com.

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.

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CAPITAL BANK CORPORATION

SUMMARY OF OPERATIONS	Three Months Ended December 31, 2006		Three Months Ended December 31, 2005		Year Ended December 31, 2006		Year Ended December 31, 2005
(In thousands except per share data)

Interest income	$	23,505	$	13,967	$	86,952	$	50,749
Interest expense		11,898		6,172		40,754		21,459
Net interest income		11,607		7,795		46,198		29,290
Provision (credit) for loan losses		154		38		587		(396	)
Net interest income after provision for loan losses		11,453		7,757		45,611		29,686
Noninterest income		2,448		2,022		9,333		6,731
Noninterest expense		9,098		7,171		36,335		26,454
Income before taxes		4,803		2,608		18,609		9,963
Income tax expense		1,546		801		6,271		3,264
Net income	$	3,257	$	1,807	$	12,338	$	6,699

Income per share - basic	$	0.28	$	0.26	$	1.06	$	0.99
Income per share - fully diluted	$	0.28	$	0.26	$	1.06	$	0.97
Weighted average shares outstanding:
Basic		11,536		6,875		11,601		6,791
Fully diluted		11,618		6,962		11,687		6,920

END OF PERIOD BALANCES	2006								2005
	December 31		September 30		June 30		March 31		December 31
(Dollars in thousands except per share data)

Total assets	$	1,422,384	$	1,399,673	$	1,364,030	$	1,308,567	$	960,906
Investment securities		239,047		200,647		189,669		181,032		161,600
Loans (gross)*		1,008,052		1,003,835		965,484		944,325		668,982
Allowance for loan losses		13,347		13,894		14,007		14,209		9,592
Total earning assets		1,267,927		1,237,684		1,191,014		1,151,739		877,127
Deposits		1,055,209		1,043,755		1,025,949		972,232		698,480
Shareholders’ equity		161,681		160,871		157,770		158,095		83,492

Book value per share	$	14.19	$	13.98	$	13.66	$	13.60	$	12.18
Tangible book value per share	$	8.53	$	8.19	$	7.86	$	7.82	$	10.31

*Includes loans held for sale

AVERAGE BALANCES	2006								2005
	December 31		September 30		June 30		March 31		December 31
(Dollars in thousands)

Total assets	$	1,410,668	$	1,365,832	$	1,322,781	$	1,311,145	$	932,332
Investments		219,765		195,323		190,045		194,535		164,272
Loans (gross)*		1,008,053		982,037		954,420		923,950		653,475
Total earning assets		1,258,780		1,213,002		1,171,648		1,158,324		850,124
Deposits		1,050,139		1,020,143		990,037		957,693		696,335
Shareholders’ equity		162,525		161,901		161,321		159,841		83,380

*Includes loans held for sale

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QUARTERLY RESULTS	2006									2005
	December 31		September 30			June 30		March 31		December 31
(In thousands except per share data)

Interest income	$	23,505	$	22,668		$	21,109	$	19,670	$	13,967
Interest expense		11,898		11,075			9,501		8,280		6,172
Net interest income		11,607		11,593			11,608		11,390		7,795
Provision (credit) for loan losses		154		(215	)		249		399		38
Net interest income after provision for loan losses		11,453		11,808			11,359		10,991		7,757
Noninterest income		2,448		2,258			2,612		2,015		2,022
Noninterest expense		9,098		9,069			9,341		8,827		7,171
Income before taxes		4,803		4,997			4,630		4,179		2,608
Income tax expense		1,546		1,730			1,579		1,416		801
Net income	$	3,257	$	3,267		$	3,051	$	2,763	$	1,807

Income per share - basic	$	0.28	$	0.28		$	0.26	$	0.24	$	0.26
Income per share - fully diluted	$	0.28	$	0.28		$	0.26	$	0.24	$	0.26
Weighted average shares outstanding:
Basic		11,536		11,611			11,639		11,617		6,875
Fully diluted		11,618		11,694			11,727		11,704		6,962

QUARTERLY NET INTEREST MARGIN*	2006				2005
	December 31	September 30	June 30	March 31	December 31
Yield on earning assets	7.53%	7.53%	7.29%	6.95%	6.59%
Cost of interest bearing liabilities	4.18%	4.02%	3.63%	3.26%	3.26%
Net interest spread	3.35%	3.51%	3.66%	3.69%	3.33%
Net interest margin	3.78%	3.91%	4.04%	4.06%	3.71%

*Annualized and on a fully taxable equivalent basis

NONPERFORMING ASSETS	2006												2005
	December 31			September 30			June 30			March 31			December 31
(Dollars in thousands)

Commercial and commercial real estate	$	2,783		$	3,885		$	3,728		$	5,149		$	5,040
Consumer		50			259			106			100			176
Equity lines		410			440			418			398			497
Construction		616			71			193			807			737
Mortgage		1,043			1,453			1,695			1,588			1,628
Total nonperforming loans		4,902			6,108			6,140			8,042			8,078
Other real estate owned		1,111	¹		637	¹		879	¹		888	¹		771
Total nonperforming assets	$	6,013		$	6,745		$	7,019		$	8,930		$	8,849

Nonperforming assets include loans that are 90 days or more past due or in nonaccrual status and other real estate owned.

¹ Other real estate owned excludes $739, $776, $776 and $1,854 as of December 31, 2006, September 30, 2006, June 30, 2006 and March 31, 2006, respectively, related to branch locations that are held for sale.

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KEY RATIOS	2006									2005
	December 31		September 30		June 30		March 31			December 31
(Dollars in thousands)

Past due loans	$	11,237	$	9,491	$	9,179	$	11,678		$	7,008
Past due loans as a percent of total loans		1.11%		0.97%		0.96%		1.26%			1.07%

Net charge-offs	$	701	$	(102)	$	451	$	3,432	²	$	433
Net charge-offs as a percent of average loans (annualized)		0.28%		(0.04%)		0.19%		1.49%	²		0.27%
Allowance for loan losses as a percent of total loans		1.32%		1.38%		1.45%		1.50%			1.43%
Nonperforming assets as a percent of total assets		0.42%		0.48%		0.51%		0.68%			0.92%
Allowance for loan losses as a percent of nonperforming loans		272%		227%		228%		177%			119%

² Includes $3.2 million related to one 1st State Bank loan relationship that was fully reserved as of 12/31/05.

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CAPITAL BANK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

December 31, 2006 and December 31, 2005

	December 31, 2006			December 31, 2005			Change			% Change
(Dollars in thousands)	(Unaudited)

ASSETS
Cash and due from banks:
Interest earning	$	12,348		$	4,603		$	7,745			168%
Noninterest earning		33,504			30,544			2,960			10%
Cash held in escrow		-			33,185			(33,185	)		-100%
Federal funds sold and short term investments		8,480			8,757			(277	)		-3%
Investment securities - available for sale, at fair value		228,214			149,266			78,948			53%
Investment securities - held to maturity, at amortized cost		10,833			12,334			(1,501	)		-12%
Loans - net of unearned income and deferred fees		1,008,052			668,982			339,070			51%
Allowance for loan losses		(13,347	)		(9,592	)		(3,755	)		39%
Net loans		994,705			659,390			335,315			51%
Premises and equipment, net		23,125			14,868			8,257			56%
Bank owned life insurance		20,662			19,857			805			4%
Goodwill and deposit premium, net		64,543			12,853			51,690			402%
Other assets		25,970			15,249			10,721			70%
Total assets	$	1,422,384		$	960,906		$	461,478			48%

LIABILITIES
Deposits:
Demand, noninterest bearing	$	120,945		$	77,847		$	43,098			55%
Savings and interest bearing demand deposits		366,243			237,005			129,238			55%
Time deposits		568,021			383,628			184,393			48%
Total deposits		1,055,209			698,480			356,729			51%
Repurchase agreements and federal funds purchased		34,238			14,514			19,724			136%
Borrowings		125,924			93,173			32,751			35%
Short-term debt		-			30,000			(30,000	)		-100%
Subordinated debentures		30,930			30,930			-			0%
Other liabilities		14,402			10,317			4,085			40%
Total liabilities		1,260,703			877,414			383,289			44%

SHAREHOLDERS’ EQUITY
Common stock, no par value; 20,000,000 authorized; 11,393,990 and 6,852,156 issued and outstanding as of December 31, 2006 and December 31, 2005, respectively		139,484			70,985			68,499			96%
Retained earnings		23,754			14,179			9,575			68%
Accumulated other comprehensive loss		(1,557	)		(1,672	)		115			7%
Total shareholders’ equity		161,681			83,492			78,189			94%
Total liabilities and shareholders’ equity	$	1,422,384		$	960,906		$	461,478			48%

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CAPITAL BANK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Twelve Months Ended December 31, 2006 and 2005

	2006		2005			Change			% Change
(Dollars in thousands, except share and per share data)	(Unaudited)

Interest income:
Loans and loan fees	$	76,180	$	43,047		$	33,133			77%
Investment securities		9,049		6,900			2,149			31%
Federal funds and other interest income		1,723		802			921			115%
Total interest income		86,952		50,749			36,203			71%
Interest expense:
Deposits		31,424		15,577			15,847			102%
Borrowings and repurchase agreements		9,330		5,882			3,448			59%
Total interest expense		40,754		21,459			19,295			90%
Net interest income		46,198		29,290			16,908			58%
Provision (credit) for loan losses		587		(396	)		983			248%
Net interest income after provision for loan losses		45,611		29,686			15,925			54%
Noninterest income:
Service charges and other fees		3,865		2,862			1,003			35%
Mortgage fees and revenues		2,102		1,733			369			21%
Net gain on sale of securities		188		7			181			N/M
Bank owned life insurance		833		546			287			53%
Gain on early extinguishment of debt		276		-			276			100%
Other		2,069		1,583			486			31%
Total noninterest income		9,333		6,731			2,602			39%
Noninterest expenses:
Salaries and employee benefits		18,532		13,999			4,533			32%
Occupancy		3,693		2,565			1,128			44%
Furniture and equipment		2,342		1,468			874			60%
Data processing		1,070		1,263			(193	)		-15%
Director fees		1,264		1,138			126			11%
Advertising		1,041		876			165			19%
Amortization of deposit premiums		1,370		212			1,158			N/M
Professional fees		1,164		867			297			34%
Telecommunications		703		592			111			19%
Other		5,156		3,474			1,682			48%
Total noninterest expenses		36,335		26,454			9,881			37%
Net income before tax expense		18,609		9,963			8,646			87%
Income tax expense		6,271		3,264			3,007			92%
Net income	$	12,338	$	6,699		$	5,639			84%

Earnings per share - basic	$	1.06	$	0.99		$	0.07			7%
Earnings per share - diluted	$	1.06	$	0.97		$	0.09			9%

Weighted average shares:
Basic		11,598,502		6,790,846			4,807,656			71%
Fully diluted		11,683,674		6,920,388			4,763,286			69%

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CAPITAL BANK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended December 31, 2006 and 2005

	2006		2005		Change			% Change
(Dollars in thousands, except share and per share data)	(Unaudited)

Interest income:
Loans and loan fees	$	20,534	$	11,907	$	8,627			72%
Investment securities		2,561		1,756		805			46%
Federal funds and other interest income		410		304		106			35%
Total interest income		23,505		13,967		9,538			68%
Interest expense:
Deposits		9,309		4,562		4,747			104%
Borrowings and repurchase agreements		2,589		1,610		979			61%
Total interest expense		11,898		6,172		5,726			93%
Net interest income		11,607		7,795		3,812			49%
Provision for loan losses		154		38		116			305%
Net interest income after provision for loan losses		11,453		7,757		3,696			48%
Noninterest income:
Service charges and other fees		944		720		224			31%
Mortgage fees and revenues		577		521		56			11%
Net gain on sale of securities		60		-		60			100%
Bank owned life insurance		236		161		75			47%
Gain on early extinguishment of debt		276		-		276			100%
Other		355		620		(265	)		-43%
Total noninterest income		2,448		2,022		426			21%
Noninterest expenses:
Salaries and employee benefits		4,852		3,835		1,017			27%
Occupancy		933		659		274			42%
Furniture and equipment		613		375		238			63%
Director fees		236		417		(181	)		-43%
Data processing		256		333		(77	)		-23%
Advertising		228		280		(52	)		-19%
Amortization of deposit premiums		342		52		290			558%
Professional fees		308		128		180			141%
Telecommunications		124		164		(40	)		-24%
Other		1,206		928		278			30%
Total noninterest expenses		9,098		7,171		1,927			27%
Net income before tax expense		4,803		2,608		2,195			84%
Income tax expense		1,546		801		745			93%
Net income	$	3,257	$	1,807	$	1,450			80%

Earnings per share - basic	$	0.28	$	0.26	$	0.02			8%
Earnings per share - diluted	$	0.28	$	0.26	$	0.02			8%

Weighted average shares:
Basic		11,535,931		6,874,721		4,751,210			68%
Fully diluted		11,618,603		6,962,340		4,656,263			67%