8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): April 22, 2008

CAPITAL BANK CORPORATION

(Exact name of registrant as specified in its charter)

North Carolina	000-30062	56-2101930
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

333 Fayetteville Street, Suite 700

Raleigh, North Carolina 27601

(Address of principal executive offices)

 (919) 645-6400

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

£ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

£ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

£ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

£ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 2.02 Results of Operations and Financial Condition.

On April 22, 2008, Capital Bank Corporation (Nasdaq: CBKN) issued a press release announcing its financial results for the quarterly period and year ended March 31, 2008. A copy of the press release is attached as Exhibit 99.1 hereto and is incorporated herein by reference.

Pursuant to General Instruction B.2 of the Current Report on Form 8-K, the information in this Current Report on Form 8-K, including the press release appearing in Exhibit 99.1, is furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Furthermore, the information in this Current Report on Form 8-K, including the press release appearing in Exhibit 99.1, shall not be deemed to be incorporated by reference into the filings of the registrant under the Securities Act of 1933, as amended.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Description of Document
Exhibit 99.1	Press release dated April 22, 2008

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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 hereunto duly authorized.

Date: April 22, 2008	CAPITAL BANK CORPORATION
	By:  /s/  B. Grant Yarber
	B. Grant Yarber
	Chief Executive Officer

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Exhibit Index

Exhibit No.	Description of Document
Exhibit 99.1	Press release dated April 22, 2008

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EX-99.1

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 First Quarter 2008 Financial Results and Improved Asset Quality

RALEIGH, N.C. – April 22, 2008 – Capital Bank Corporation (Nasdaq: CBKN), the parent company of Capital Bank, today reported net income for the quarter ended March 31, 2008 of $2.2 million compared to $2.4 million for the quarter ended March 31, 2007. Earnings per share on a fully diluted basis were $0.19 for the first quarter of 2008 compared to $0.21 for the first quarter 2007.

“The current banking environment is extremely challenging; however, I am pleased with the stability and positive trends that Capital Bank has been able to achieve. Asset quality has improved both from the first quarter one year ago as well as the end of 2007. Loans have grown by $125 million, or 12.2%, over the last twelve months. More recently, we have experienced positive deposit growth in our core checking account products,” stated Grant Yarber, President and CEO.

Nonperforming assets, which includes loans on nonaccrual and other real estate owned, decreased to 0.33% of total assets at the end of March 2008 compared to 0.50% at the end of December 2007 and 0.63% at the end of March 2007. In addition, past due loans declined to 0.82% of total loans as of end March 2008 compared to 0.98% at the end of December 2007 and 1.58% at the end of March 2007. Allowance for loan losses totaled 1.18% of total loans at the end of March 2008 compared to 1.32% at the end of March 2007. The allowance for loan losses as a percent of nonperforming loans was 319% at end of the first quarter 2008 compared to 184% at the end of the first quarter 2007.

“We continue to closely monitor our portfolio and the economy, and remain cautiously optimistic that we and our borrowers will weather this economic downturn,” commented Mark Redmond, EVP and Chief Credit Officer.

Capital Bank achieved $55.4 million in loan growth during the first quarter. Much of the growth has occurred in the Triangle and Western North Carolina markets, which continue to present excellent growth opportunities. Comparing balances as of December 31, 2007 to those as of March 31, 2008, deposits increased $52.2 million from $1.10 billion to $1.15 billion, checking accounts increased $26.3 million as the bank continued to emphasize growth in this critical product area, time deposits increased $55.5 million, and money market deposits decreased $29.7 million. Much of the growth in time deposits was due to retail customers shifting funds from money market savings products to CDs.

Net interest income for the first quarter of 2008 increased $186 thousand compared to the first quarter of 2007. This improvement was primarily due to the higher level of average earning assets partially offset by the decline in net interest margin from 3.52% in the quarter ended March 31, 2007 to 3.23% in the quarter ended March 31, 2008. The decline in the net interest margin is a result of the 3.00% reduction in the Prime Rate over the last twelve months.

In the quarter ended March 31, 2008, noninterest income increased $37 thousand compared to the same period one year ago. Mortgage revenue was down $256 thousand from one year ago due to the slower housing market and the company’s recent decision to focus efforts on other areas of its business that have greater potential to produce positive results in the present economy. On the other hand, service charge income, bank card income, and brokerage income increased a combined $218 thousand compared to the first quarter of 2007.

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Noninterest expense increased 4.0% to $9.6 million in the quarter ended March 31, 2008, from $9.2 million in the quarter ended March 31, 2007. Employment and occupancy cost were flat when compared to the first quarter of 2007. Other noninterest expense increased primarily from increases in equipment expense of $132 thousand and professional fees of $187 thousand. The increase in equipment expense was due to equipment upgrades and increased maintenance cost.

Capital Bank Corporation, headquartered in Raleigh, N.C., with approximately $1.6 billion in total assets, offers a broad range of financial services. Capital Bank operates 27 banking offices in Asheville (3), Burlington (4), Cary, Graham (2), Greensboro, Hickory, Mebane, Morrisville, Oxford, Pittsboro, Raleigh (5), Sanford (3), Siler City, Wake Forest and Zebulon. The Company’s website is http://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

(Unaudited)

	Three Months Ended March 31, 2008		Three Months Ended March 31, 2007
(In thousands except per share data)
Interest income	$	22,718	$	23,175
Interest expense		11,809		12,452
Net interest income		10,909		10,723
Provision for loan losses		565		337
Net interest income after provision for loan losses		10,344		10,386
Noninterest income		2,227		2,190
Noninterest expense		9,605		9,236
Income before taxes		2,966		3,340
Income tax expense		799		956
Net income	$	2,167	$	2,384
Income per share – basic	$	0.19	$	0.21
Income per share – fully diluted	$	0.19	$	0.21
Weighted average shares outstanding:
Basic		11,289		11,493
Fully diluted		11,306		11,573

End of Period Balances

(Unaudited)

	2008		2007
	March 31		December 31		September 30		June 30		March 31
(Dollars in thousands except per share data)
Total assets	$	1,575,301	$	1,517,603	$	1,490,244	$	1,440,240	$	1,481,141
Investment securities		258,086		259,116		249,083		241,666		248,726
Loans (gross)*		1,150,497		1,095,107		1,070,656		1,022,147		1,025,464
Allowance for loan losses		13,563		13,571		13,366		13,339		13,531
Total earning assets		1,419,174		1,362,048		1,335,434		1,285,715		1,327,718
Deposits		1,150,897		1,098,698		1,090,589		1,072,979		1,120,251
Shareholders’ equity		167,967		164,300		164,089		162,402		163,855
Book value per share	$	14.95	$	14.71	$	14.58	$	14.17	$	14.32
Tangible book value per share	$	9.33	$	9.04	$	8.93	$	8.59	$	8.71
*Includes loans held for sale

Average Balances

(Unaudited)

	2008		2007
	March 31		December 31		September 30		June 30		March 31
(Dollars in thousands)
Total assets	$	1,555,986	$	1,492,563	$	1,445,915	$	1,436,584	$	1,437,234
Investments		256,538		242,272		252,090		248,850		243,732
Loans (gross)*		1,142,728		1,090,801		1,042,635		1,021,517		1,012,483
Total earning assets		1,407,345		1,347,727		1,302,859		1,292,651		1,292,811
Deposits		1,139,106		1,066,438		1,064,174		1,078,430		1,084,418
Shareholders’ equity		167,610		166,222		163,850		164,877		163,291
*Includes loans held for sale

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CAPITAL BANK CORPORATION

Quarterly Results

(Unaudited)

	2008		2007
	March 31		December 31			September 30		June 30			March 31
(In thousands except per share data)
Net interest income	$	10,909	$	10,952		$	11,185	$	11,254		$	10,723
Provision (credit) for loan losses		565		3,099			261		(91	)		337
Net interest income after provision for loan losses		10,344		7,853			10,924		11,345			10,386
Noninterest income		2,227		2,176			2,233		2,307			2,190
Noninterest expense		9,605		10,109			9,299		9,788			9,236
Income (loss) before taxes		2,966		(80	)		3,858		3,864			3,340
Income tax expense (benefit)		799		(125	)		1,105		1,188			956
Net income	$	2,167	$	45		$	2,753	$	2,676		$	2,384
Income per share – basic	$	0.19	$	–		$	0.24	$	0.23		$	0.21
Income per share – fully diluted	$	0.19	$	–		$	0.24	$	0.23		$	0.21
Weighted average shares outstanding:
Basic		11,289		11,252			11,451		11,503			11,493
Fully diluted		11,306		11,316			11,510		11,574			11,573

Quarterly Net Interest Margin*

(Unaudited)

	2008			2007
	March 31			December 31		September 30		June 30		March 31
Yield on earning assets		6.60	%	7.17	%	7.42	%	7.51	%	7.43	%
Cost of interest bearing liabilities		3.76		4.33		4.32		4.34		4.36
Net interest spread		2.83		2.84		3.10		3.17		3.07
Net interest margin		3.23		3.38		3.57		3.65		3.52
*Annualized and on a fully taxable equivalent basis

Nonperforming Assets

(Unaudited)

	2008		2007
	March 31		December 31		September 30		June 30		March 31
(Dollars in thousands)
Commercial and commercial real estate	$	2,919	$	4,489	$	7,304	$	6,089	$	5,725
Consumer		61		28		23		67		241
Equity lines		579		397		491		471		433
Construction		230		562		–		–		–
Mortgage		463		506		2,414		975		957
Total nonperforming loans		4,252		5,982		10,232		7,602		7,356
Other real estate owned		890		1,571		309		866		1,961
Total nonperforming assets	$	5,142	$	7,553	$	10,541	$	8,468	$	9,317
Nonperforming assets include loans that are 90 days or more past due or in nonaccrual status and other real estate owned.

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CAPITAL BANK CORPORATION

Key Ratios

(Unaudited)

	2008			2007
	March 31			December 31			September 30			June 30			March 31
(Dollars in thousands)
Past due loans	$	9,380		$	10,769		$	13,157		$	13,008		$	16,241
Past due loans as a percent of total loans		0.82	%		0.98	%		1.23	%		1.27	%		1.58	%
Net charge-offs	$	573		$	2,894		$	234		$	101		$	153
Net charge-offs as a percent of average loans (annualized)		0.20	%		1.06	%		0.09	%		0.04	%		0.06	%
Allowance for loan losses as a percent of total loans		1.18	%		1.24	%		1.25	%		1.30	%		1.32	%
Nonperforming assets as a percent of total assets		0.33	%		0.50	%		0.71	%		0.59	%		0.63	%
Allowance for loan losses as a percent of nonperforming loans		319	%		227	%		131	%		175	%		184	%

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CAPITAL BANK CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2008 and December 31, 2007

Unaudited

	March 31, 2008		December 31, 2007 (a)		$ Change			% Change
(Dollars in thousands)
ASSETS
Cash and due from banks:
Interest earning	$	10,487	$	7,815	$	2,672			34.19	%
Noninterest earning		32,661		32,347		314			0.97
Federal funds sold and short term investments		104		10		94			940.00
Total cash and cash equivalents		43,252		40,172		3,080			7.67
Investment securities – available for sale, at fair value		252,191		249,094		3,097			1.24
Investment securities – held to maturity, at amortized cost		5,895		10,022		(4,127	)		(41.18	)
Loans – net of unearned income and deferred fees		1,150,497		1,095,107		55,390			5.06
Allowance for loan losses		13,563		13,571		(8	)		(0.06	)
Net loans		1,136,934		1,081,536		55,398			5.12
Premises and equipment, net		24,584		23,863		721			3.02
Bank-owned life insurance		21,702		21,589		113			0.52
Deposit premium and goodwill, net		63,087		63,345		(258	)		(0.41	)
Deferred tax assets		5,010		5,829		(819	)		(14.05	)
Accrued interest receivable		6,961		7,789		(828	)		(10.63	)
Other assets		15,685		14,364		1,321			9.20
Total assets	$	1,575,301	$	1,517,603	$	57,698			3.80	%
LIABILITIES
Deposits:
Demand, noninterest bearing	$	117,186	$	114,780	$	2,406			2.10	%
Savings and interest-bearing demand deposits		375,547		381,258		(5,711	)		(1.49	)
Time deposits		658,164		602,660		55,504			9.21
Total deposits		1,150,897		1,098,698		52,199			4.75
Repurchase agreements and federal funds purchased		35,762		45,295		(9,533	)		(21.05	)
Borrowings		178,000		163,347		14,653			8.97
Subordinated debentures		30,930		30,930		–			–
Other liabilities		11,745		15,033		(3,288	)		(21.87	)
Total liabilities		1,407,334		1,353,303		54,031			3.99
SHAREHOLDERS’ EQUITY
Common stock, no par value; 20,000,000 authorized; 11,237,085 and 11,169,777 issued and outstanding as of March 31, 2008 and December 31, 2007, respectively		136,845		136,154		691			0.51
Retained earnings		29,251		27,985		1,266			4.52
Accumulated other comprehensive loss		1,871		161		1,710			1,062.11
Total shareholders’ equity		167,967		164,300		3,667			2.23
Total liabilities and shareholders’ equity	$	1,575,301	$	1,517,603	$	57,698			3.80	%
(a) Derived from audited financial statements

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CAPITAL BANK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31, 2008 and 2007

(Unaudited)

	March 31, 2008		March 31, 2007		$ Change			% Change
(In thousands, except share and per share data)
Interest income:
Loans and loan fees	$	19,499	$	19,883	$	(384	)		(1.93	)%
Investment securities		3,164		2,807		357			12.72
Federal funds and other interest income		55		485		(430	)		(88.66	)
Total interest income		22,718		23,175		(457	)		(1.97	)
Interest expense:
Deposits		9,072		10,006		(934	)		(9.33	)
Borrowings and repurchase agreements		2,737		2,446		291			11.90
Total interest expense		11,809		12,452		(643	)		(5.16	)
Net interest income		10,909		10,723		186			1.73
Provision for loan losses		565		337		228			67.66
Net interest income after provision for loan losses		10,344		10,386		(42	)		(0.40	)
Noninterest income:
Service charges and other fees		959		877		82			9.35
Mortgage fees and revenues		272		528		(256	)		(48.48	)
Brokerage fees		156		103		53			51.46
Bank card services		299		216		83			38.43
Netgain on sale of securities		71		–		71			–
Bank-owned life insurance		302		197		105			53.30
Other		168		269		(101	)		(37.55	)
Total noninterest income		2,227		2,190		37			1.69
Noninterest expense:
Salaries and employee benefits		5,036		5,042		(6	)		(0.12	)
Occupancy		958		956		2			0.21
Furniture and equipment		747		615		132			21.46
Data processing and telecommunications		432		388		44			11.34
Advertising		315		298		17			5.70
Office expenses		365		333		32			9.61
Professional fees		370		183		187			102.19
Business development and travel		333		313		20			6.39
Amortization of deposit premiums		257		300		(43	)		(14.33	)
Miscellaneous loan handling costs		94		186		(92	)		(49.46	)
Directors fees		267		268		(1	)		(0.37	)
Insurance		95		90		5			5.56
Other		336		264		72			27.27
Total noninterest expenses		9,605		9,236		369			4.00
Net income before tax expense		2,966		3,340		(374	)		(11.20	)
Income tax expense		799		956		(157	)		(16.42	)
Net income	$	2,167	$	2,384	$	(217	)		(9.10	)%
Earnings per share – basic	$	0.19	$	0.21	$	(0.02	)
Earnings per share – diluted	$	0.19	$	0.21	$	(0.02	)
Weighted average shares:
Basic		11,289,453		11,492,749		(203,296	)
Fully diluted		11,306,096		11,573,094		(266,998	)

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CAPITAL BANK CORPORATION

Average Balances, Interest Earned or Paid, and Interest Yields/Rates

For the Three Months Ended March 31, 2008, March 31, 2007,and December 31, 2007

Tax Equivalent Basis (1)

	1st Quarter 2008								1st Quarter 2007								4th Quarter 2007
(Dollars in thousands)	Average Balance			Amount Earned		Average Rate			Average Balance			Amount Earned		Average Rate			Average Balance			Amount Earned		Average Rate
Assets
Loans receivable: (2)
Commercial	$	986,205		$	16,777		6.82	%	$	852,128		$	16,756		7.97	%	$	933,847		$	17,820		7.57	%
Consumer		46,700			910		7.81			30,822			652		8.58			43,042			895		8.25
Home equity		79,564			1,321		6.66			82,298			1,727		8.51			78,221			1,547		7.85
Residential mortgages		30,259			491		6.51			47,235			748		6.42			35,691			572		6.36
Total loans		1,142,728			19,499		6.84			1,012,483			19,883		7.96			1,090,801			20,834		7.58
Investment securities (3)		256,538			3,590		5.61			243,732			3,303		5.50			242,272			3,347		5.48
Federal funds sold and other interest on short-term investments		8,079			55		2.72			36,596			485		5.37			14,654			170		4.59
Total interest earning assets		1,407,345		$	23,144		6.60	%		1,292,811		$	23,671		7.43	%		1,347,727		$	24,351		7.17	%
Cash and due from banks		26,232								27,593								27,617
Other assets		136,071								130,126								130,340
Allowance for loan losses		(13,662	)							(13,296	)							(13,121	)
Total assets	$	1,555,986							$	1,437,234							$	1,492,563
Liabilities and Equity
Savings deposits	$	30,382		$	46		0.61	%	$	34,370		$	42		0.50	%	$	32,800		$	56		0.68	%
Interest-bearing demand deposits		333,108			1,856		2.23			342,814			2,922		3.46			350,580			2,750		3.11
Time deposits		657,609			7,171		4.37			600,865			7,042		4.75			568,604			7,124		4.97
Total interest-bearing deposits		1,021,099			9,072		3.56			978,049			10,006		4.15			951,984			9,930		4.14
Borrowed funds		171,645			2,022		4.73			113,686			1,503		5.36			156,853			2,009		5.08
Subordinated debt		30,930			526		6.82			30,930			586		7.68			30,930			593		7.61
Repurchase agreements and fed funds purchased		35,563			189		2.13			34,328			357		4.22			38,499			339		3.49
Total interest-bearing liabilities		1,259,237		$	11,809		3.76	%		1,156,993		$	12,452		4.36	%		1,178,266		$	12,870		4.33	%
Noninterest-bearing deposits		118,007								106,369								114,454
Other liabilities		11,132								10,581								33,621
Total liabilities		1,388,376								1,273,943								1,326,341
Shareholders’ equity		167,610								163,291								166,222
Total liabilities and shareholders’ equity	$	1,555,986							$	1,437,234							$	1,492,563
Net interest spread (4)							2.83	%							3.07	%							2.84	%
Tax equivalent adjustment				$	426							$	496							$	511
Net interest income and net interest margin (5)				$	11,334		3.23	%				$	11,219		3.52	%				$	11,480		3.38	%

  (1) The tax equivalent basis is computed using a blended federal and state tax rate of approximately 38%.

  (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.

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