EX-99.1 2 exhibit99-1.htm CAPITAL BANK CORP RELEASE 012009 exhibit99-1.htm
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 2008 Financial Results

RALEIGH, N.C., January 20, 2009 – Capital Bank Corporation (Nasdaq: CBKN), the parent company of Capital Bank, today reported net income for the year ended December 31, 2008 of $6.3 million compared to $7.9 million for the year ended December 31, 2007. Earnings per share on a fully diluted basis were $0.54 for 2008 compared to $0.68 for 2007.

“The past five quarters, beginning with the fourth quarter of 2007 through today, have been the most challenging for the banking industry since the Great Depression,” stated B. Grant Yarber, president and CEO. “Although Capital Bank has fared much better than many of our peers, we have nevertheless been profoundly affected by the economy and the monetary policy of the Federal Reserve. Throughout 2008, and particularly in the fourth quarter, the significant reduction in the prime lending rate along with the severe liquidity crisis in the marketplace compressed our margin and impacted our profits. At the same time, our clients’ businesses have also suffered. It has been our policy and our practice to proactively work with our clients in good times and bad; therefore, we continued to identify and resolve problem loans throughout the year, which increased our provision expense. Despite these adverse circumstances, the relative strength of Capital Bank has provided the opportunity to grow our franchise by adding the Fayetteville market to our footprint. Further, Capital Bank participated in the U.S. Treasury’s Capital Purchase Plan, which injected an additional $41.3 million dollars of capital into our bank during December 2008. As evidenced by our strong loan growth in 2008, we plan to continue to grow our loans throughout 2009 and 2010, making full use of our strengthened capital position. Specifically, we recently announced that we would increase our mortgage lending practices, continue our flexible treatment of homebuyers that may be in financial distress, and provide low-cost mortgage products for buyers of existing inventories of homes throughout our markets. Capital Bank remains committed to doing our part to keep credit flowing in the markets we serve during this difficult economic environment.”

Partially contributing to lower profitability during 2008 was a decline in net interest income. Net interest income decreased $1.5 million during the year, falling from $44.1 million in 2007 to $42.6 million in 2008, largely due to unprecedented steps taken by the Federal Reserve to revive an ailing national economy. One of the actions taken by the Federal Reserve was to lower the Prime Rate by 400 basis points during 2008. This rapid decline in rates, coupled with competitive pressures in the marketplace for retail deposits, compressed the net interest margin from 3.53% in 2007 to 3.08% in 2008. The margin compression was partially offset by 9.6% growth in average earning assets over the same periods.

Loans grew by $159.3 million during 2008 while deposits increased by $216.6 million. Much of the loan growth occurred in our Triangle and Western N.C. markets, which we believe continue to present quality growth opportunities. On the deposit side, checking and savings accounts increased $32.5 million during the year as the bank continued to emphasize growth in this critical product area. Time deposits increased $200.9 million over the same period. Some of the growth in time deposits was due to a new deposit product offering through CDARS, which provides large-balance customers the opportunity for increased FDIC insurance through the convenience of working with one financial institution. Another reason for growth in time deposits was due to retail customers electing to shift funds from money market savings products to CDs as evidenced by a decline in money market deposits of $16.8 million during 2008. Another contributor to balance sheet growth was the entrance into the Fayetteville market through the purchase of four branches during December 2008, which added $42.3 million and $101.9 million to loans and deposits, respectively.

 
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Due to continued weakening in the overall economy, asset quality remained a major focus throughout 2008. While our markets remain some of the most resilient in the country, the Company took steps to increase the provision for loan losses in the fourth quarter in response to some softening experienced in the loan portfolio as reflected by certain credit quality ratios. Past due loans as a percent of total loans increased to 1.09% at December 31, 2008 from 0.75% at September 30, 2008 and 0.98% at December 31, 2007. Nonperforming assets, which include loans on nonaccrual and other real estate owned, increased to 0.61% as a percent of total assets at December 31, 2008 compared to 0.47% at September 30, 2008 and 0.50% at December 31, 2007. Allowance for loan losses totaled 1.18% of total loans at December 31, 2008 compared to 1.17% at September 30, 2008 and 1.24% at December 31, 2007. Finally, the allowance for loan losses was 162% of nonperforming loans at December 31, 2008, a decline from 219% at September 30, 2008 and 227% at December 31, 2007.

Provision for loan losses increased $270 thousand for the year ended December 31, 2008 compared to the same period one year ago. The increase in the provision was partially due to loan growth and softening credit quality but was also partially due to enhancements in the methodology for calculating the allowance for loan losses. The enhancements to the allowance methodology were implemented during 2007 based on updated guidance issued through an interagency policy statement by the FDIC, Federal Reserve, and other regulatory agencies. Management continues to thoroughly review its loan portfolio and the adequacy of its allowance for loan losses.

Noninterest income increased $1.5 million, or 16.2%, during 2008 compared to last year despite a $976 thousand decline in mortgage revenue. Service charge income, bank card income and other loan-related fees increased a combined $1.5 million, or 28.4%, compared to last year primarily as a result of management’s continued emphasis on increasing income from these sources. Gains on the sale of certain investment securities and the sale of a branch in Greensboro contributed $249 thousand and $374 thousand, respectively, to the increase in noninterest income.

“Our noninterest income improvement strategies, which were implemented early in the second quarter, continue to show success,” stated Mr. Yarber. “These strategies are based on fee collection efforts, restructured pricing and innovative product enhancements, including our Smart Checking product. Capital Bank remains committed to providing our customers with value added products and services that also allow our shareholders to benefit from a greater diversity of revenue-generating services. Most recently we announced that we will expand our mortgage origination staff to assist customers with either the purchase or refinancing of their primary residence.”

Noninterest expense increased from $39.0 million during 2007 to $41.5 million during 2008. Salaries, furniture and equipment, and data processing costs increased a combined $2.4 million over the same periods. Salaries increased 8.0% from last year due to routine annual compensation adjustments and staffing needs at branches opened in Asheville, Clayton and Zebulon in addition to the four branches purchased in the Fayetteville market. Furniture and equipment expense rose due to equipment and building upgrades as well as higher maintenance costs. Data processing costs increased partially due to system upgrades and enhancements to support growth in the Company’s primary business lines as well as the implementation of an internet-based phone system. Noninterest expense also increased from additional training costs necessary to prepare new associates for the transition at our recently purchased Fayetteville branches as well as additional legal costs from professional advice related to several transactions completed during 2008. In addition, FDIC deposit insurance rose $415 thousand as the regulatory agency continued to increase premiums to cover higher monitoring costs and claims.
 
Capital Bank Corporation, headquartered in Raleigh, N.C., with approximately $1.7 billion in total assets, offers a broad range of financial services. Capital Bank operates 32 banking offices in Asheville (4), Burlington (4), Cary, Clayton, Fayetteville (3), Graham (2), Hickory, Mebane, Morrisville, Oxford, Parkton, 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
December 31,
  
Year Ended
December 31,
   
2008
  
2007
  
2008
  
2007
  
(In thousands except per share data)
                  
                   
Interest income
  
$
20,088
  
$
23,840
  
$
85,020
  
$
94,537
  
Interest expense
    
10,156
    
12,875
    
42,424
    
50,423
  
Net interest income
    
9,932
    
10,965
    
42,596
    
44,114
  
Provision for loan losses
    
1,701
    
3,099
    
3,876
    
3,606
  
Net interest income after provision for loan losses
    
8,231
    
7,866
    
38,720
    
40,508
  
Noninterest income
    
2,297
    
2,455
    
11,051
    
9,511
  
Noninterest expense
    
11,095
    
10,401
    
41,471
    
39,037
  
Income (loss) before taxes
    
(567
)
  
(80
)
  
8,300
    
10,982
  
Income tax expense (benefit)
    
(500
)
  
(125
)
  
1,973
    
3,124
  
Net income (loss)
  
$
(67
)
$
45
  
$
6,327
  
$
7,858
  
                           
Earnings (loss) per common share – basic
  
$
(0.02
)
$
–
  
$
0.55
  
$
0.69
  
Earnings (loss) per common share – fully diluted
  
$
(0.02
)
$
–
  
$
0.54
  
$
0.68
  
Weighted average shares outstanding:
                          
Basic
    
11,309
    
11,252
    
11,303
    
11,424
  
Fully diluted
    
11,325
    
11,316
    
11,426
    
11,493
  
 
 
End of Period Balances
(Unaudited)
  
2008
  
2007
   
December 31
  
September 30
  
June 30
  
March 31
  
December 31(a)
(Dollars in thousands except per share data)
                                
                                 
Total assets
  
$
1,716,198
  
$
1,594,402
  
$
1,592,034
  
$
1,575,301
  
$
1,517,603
  
Investment securities
    
278,138
    
244,310
    
246,468
    
258,086
    
259,116
  
Loans (gross)*
    
1,254,368
    
1,194,149
    
1,178,157
    
1,150,497
    
1,095,107
  
Allowance for loan losses
    
14,795
    
14,017
    
13,910
    
13,563
    
13,571
  
Total earning assets
    
1,533,354
    
1,444,727
    
1,435,020
    
1,419,174
    
1,362,048
  
Deposits
    
1,315,314
    
1,197,721
    
1,182,615
    
1,150,897
    
1,098,698
  
Shareholders’ equity
    
210,525
    
166,521
    
165,731
    
167,967
    
164,300
  
                                 
Book value per common share
  
$
15.06
  
$
14.83
  
$
14.76
  
$
14.95
  
$
14.71
  
Tangible book value per common share
  
$
8.92
  
$
9.26
  
$
9.16
  
$
9.33
  
$
9.04
  
                                 
(a) Derived from audited consolidated financial statements
*Includes loans held for sale
 
 
Average Quarterly Balances
(Unaudited)
  
2008
  
2007
   
December 31
  
September 30
  
June 30
  
March 31
  
December 31
(Dollars in thousands)
                                
                                 
Total assets
  
$
1,620,817
  
$
1,574,810
  
$
1,578,357
  
$
1,555,986
  
$
1,492,563
  
Investment securities
    
246,658
    
245,408
    
256,406
    
256,538
    
242,272
  
Loans (gross)*
    
1,213,027
    
1,176,491
    
1,166,795
    
1,142,728
    
1,090,801
  
Total earning assets
    
1,473,422
    
1,425,516
    
1,429,301
    
1,407,345
    
1,347,727
  
Deposits
    
1,238,343
    
1,164,362
    
1,148,671
    
1,139,106
    
1,066,438
  
Shareholders’ equity
    
171,227
    
166,570
    
170,945
    
167,610
    
166,222
  
                                 
*Includes loans held for sale

 
- 3 -
 
CAPITAL BANK CORPORATION
Quarterly Results
(Unaudited)
  
2008
  
2007
   
December 31
  
September 30
  
June 30
  
March 31
  
December 31
(In thousands except per share data)
                                
                                 
Net interest income
  
$
9,932
  
$
10,827
  
$
10,928
  
$
10,909
  
$
10,965
  
Provision for loan losses
    
1,701
    
760
    
850
    
565
    
3,099
  
Net interest income after provision for loan losses
    
8,231
    
10,067
    
10,078
    
10,344
    
7,866
  
Noninterest income
    
2,297
    
3,267
    
2,974
    
2,227
    
2,455
  
Noninterest expense
    
11,095
    
10,517
    
9,968
    
9,605
    
10,401
  
Income (loss) before taxes
    
(567
)
  
2,817
    
3,084
    
2,966
    
(80
)
Income tax expense (benefit)
    
(500
)
  
805
    
869
    
799
    
(125
)
Net income (loss)
  
$
(67
)
$
2,012
  
$
2,215
  
$
2,167
  
$
45
  
                                 
Earnings (loss) per common share – basic
  
$
(0.02
)
$
0.18
  
$
0.20
  
$
0.19
  
$
–
  
Earnings (loss) per common share – fully diluted
  
$
(0.02
)
$
0.18
  
$
0.20
  
$
0.19
  
$
–
  
Weighted average shares outstanding:
                                
Basic
    
11,309
    
11,302
    
11,310
    
11,289
    
11,252
  
Fully diluted
    
11,325
    
11,313
    
11,324
    
11,306
    
11,316
  
                                 


Quarterly Net Interest Margin*
(Unaudited)
  
2008
  
2007
   
December 31
  
September 30
  
June 30
  
March 31
  
December 31
                                 
Yield on earning assets
    
5.51
%
  
5.94
%
  
6.09
%
  
6.60
%
  
7.17
%
Cost of interest bearing liabilities
    
3.05
    
3.12
    
3.24
    
3.76
    
4.34
  
Net interest spread
    
2.46
    
2.82
    
2.85
    
2.83
    
2.83
  
Net interest margin
    
2.78
    
3.13
    
3.18
    
3.23
    
3.38
  
                                 
*Annualized and on a fully taxable equivalent basis


Nonperforming Assets
(Unaudited)
  
2008
  
2007
   
December 31
  
September 30
  
June 30
  
March 31
  
December 31(a)
(Dollars in thousands)
                                
                                 
Commercial
  
$
4,682
  
$
4,343
  
$
3,650
  
$
2,919
  
$
4,489
  
Construction
    
3,843
    
1,570
    
418
    
230
    
562
  
Consumer
    
92
    
25
    
42
    
61
    
28
  
Home equity
    
275
    
275
    
515
    
579
    
397
  
Residential mortgage
    
223
    
198
    
582
    
463
    
506
  
Total nonperforming loans
    
9,115
    
6,411
    
5,207
    
4,252
    
5,982
  
Other real estate owned
    
1,347
    
1,019
    
663
    
890
    
1,571
  
Total nonperforming assets
  
$
10,462
  
$
7,430
  
$
5,870
  
$
5,142
  
$
7,553
  
                                 
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

 
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CAPITAL BANK CORPORATION
Key Ratios
(Unaudited)
  
2008
  
2007
   
December 31
  
September 30
  
June 30
  
March 31
  
December 31
(Dollars in thousands)
                                
                                 
Past due loans
  
$
13,642
  
$
8,933
  
$
9,239
  
$
9,380
  
$
10,769
  
Past due loans as a percent of total loans
    
1.09
%
  
0.75
%
  
0.78
%
  
0.82
%
  
0.98
%
                                 
Net charge-offs
  
$
1,768
  
$
653
  
$
503
  
$
573
  
$
2,894
  
Net charge-offs as a percent of average loans (annualized)
    
0.58
%
  
0.22
%
  
0.17
%
  
0.20
%
  
1.06
%
Allowance for loan losses as a percent of total loans
    
1.18
%
  
1.17
%
  
1.18
%
  
1.18
%
  
1.24
%
Nonperforming assets as a percent of total assets
    
0.61
%
  
0.47
%
  
0.37
%
  
0.33
%
  
0.50
%
Allowance for loan losses as a percent of nonperforming loans
    
162
%
  
219
%
  
267
%
  
319
%
  
227
%

 
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CAPITAL BANK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2008 and 2007
   
December 31, 2008
  
December 31, 2007
  
(Dollars in thousands except share data)
  
(Unaudited)
      
           
Assets
          
Cash and due from banks:
          
Interest earning
  
$
719
  
$
7,815
  
Noninterest earning
    
53,607
    
32,347
  
Federal funds sold and short term investments
    
129
    
10
  
Total cash and cash equivalents
    
54,455
    
40,172
  
Investment securities – available for sale, at fair value
    
272,944
    
249,094
  
Investment securities – held to maturity, at amortized cost
    
5,194
    
10,022
  
Loans – net of unearned income and deferred fees
    
1,254,368
    
1,095,107
  
Allowance for loan losses
    
(14,795
)
  
(13,571
)
Net loans
    
1,239,573
    
1,081,536
  
Premises and equipment, net
    
24,640
    
23,863
  
Bank-owned life insurance
    
22,368
    
21,589
  
Goodwill and deposit premium, net
    
69,002
    
63,345
  
Deferred income tax
    
6,163
    
5,829
  
Accrued interest receivable
    
6,225
    
7,789
  
Other assets
    
15,634
    
14,364
  
Total assets
  
$
1,716,198
  
$
1,517,603
  
               
Liabilities
              
Deposits:
              
Demand, noninterest bearing
  
$
125,281
  
$
114,780
  
Savings and interest bearing checking
    
173,711
    
151,698
  
Money market deposit accounts
    
212,780
    
229,560
  
Time deposits less than $100,000
    
509,231
    
370,416
  
Time deposits $100,000 and greater
    
294,311
    
232,244
  
Total deposits
    
1,315,314
    
1,098,698
  
Repurchase agreements and federal funds purchased
    
15,010
    
45,295
  
Borrowings
    
132,000
    
163,347
  
Subordinated debentures
    
30,930
    
30,930
  
Other liabilities
    
12,419
    
15,033
  
Total liabilities
    
1,505,673
    
1,353,303
  
               
Commitments and contingencies
              
               
Shareholders’ Equity
              
Preferred stock, $1,000 par value; 100,000 and 0 shares authorized; 41,279 and 0 issued and outstanding as of December 31, 2008 and 2007, respectively (liquidation preference of $41,279,000 as of December 31, 2008)
    
39,839
    
–
  
Common stock, no par value; 20,000,000 shares authorized; 11,238,085 and 11,169,777 shares issued and outstanding as of December 31, 2008 and 2007, respectively
    
139,209
    
136,154
  
Retained earnings
    
30,591
    
27,985
  
Accumulated other comprehensive income
    
886
    
161
  
Total shareholders’ equity
    
210,525
    
164,300
  
Total liabilities and shareholders’ equity
  
$
1,716,198
  
$
1,517,603
  

 
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CAPITAL BANK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Twelve Month Periods Ended December 31, 2008 and 2007 (Unaudited)

   
Three Months Ended
December 31,
  
Twelve Months Ended
December 31,
  
   
2008
  
2007
  
2008
  
2007
  
(Dollars in thousands except per share data)
                          
                           
Interest income:
                          
Loans and loan fees
  
$
17,009
  
$
20,835
  
$
72,494
  
$
82,066
  
Investment securities:
                          
Taxable interest income
    
2,319
    
1,889
    
8,935
    
7,731
  
Tax-exempt interest income
    
734
    
825
    
3,169
    
3,237
  
Dividends
    
1
    
122
    
294
    
451
  
Federal funds and other interest income
    
25
    
169
    
128
    
1,052
  
Total interest income
    
20,088
    
23,840
    
85,020
    
94,537
  
Interest expense:
                          
Deposits
    
8,107
    
9,929
    
33,042
    
39,700
  
Borrowings and repurchase agreements
    
2,049
    
2,946
    
9,382
    
10,723
  
Total interest expense
    
10,156
    
12,875
    
42,424
    
50,423
  
Net interest income
    
9,932
    
10,965
    
42,596
    
44,114
  
Provision for loan losses
    
1,701
    
3,099
    
3,876
    
3,606
  
Net interest income after provision for loan losses
    
8,231
    
7,866
    
38,720
    
40,508
  
Noninterest income:
                          
Service charges and other fees
    
1,054
    
1,011
    
4,459
    
3,780
  
Mortgage fees and revenues
    
237
    
336
    
1,005
    
1,981
  
Other loan fees
    
251
    
124
    
1,143
    
555
  
Brokerage fees
    
162
    
192
    
732
    
601
  
Bank card services
    
322
    
309
    
1,332
    
1,064
  
Bank-owned life insurance
    
135
    
218
    
952
    
841
  
Net gain (loss) on sale of investment securities
    
–
    
(49
)
  
249
    
(49
)
Gain on sale of branch
    
(52
)
  
–
    
374
    
–
  
Other
    
188
    
314
    
805
    
738
  
Total noninterest income
    
2,297
    
2,455
    
11,051
    
9,511
  
Noninterest expense:
                          
Salaries and employee benefits
    
5,771
    
4,553
    
21,255
    
19,674
  
Occupancy
    
1,161
    
1,844
    
4,458
    
4,897
  
Furniture and equipment
    
817
    
933
    
3,135
    
2,859
  
Data processing and telecommunications
    
610
    
436
    
2,135
    
1,637
  
Advertising
    
515
    
450
    
1,515
    
1,442
  
Office expenses
    
339
    
325
    
1,317
    
1,389
  
Professional fees
    
466
    
420
    
1,479
    
1,289
  
Business development and travel
    
360
    
308
    
1,393
    
1,217
  
Amortization of deposit premiums
    
267
    
298
    
1,037
    
1,198
  
Miscellaneous loan handling costs
    
278
    
198
    
848
    
743
  
Directors fees
    
38
    
(145
)
  
740
    
424
  
Insurance
    
(61
)
  
172
    
275
    
435
  
FDIC deposit insurance
    
243
    
71
    
685
    
270
  
Other
    
291
    
538
    
1,199
    
1,563
  
Total noninterest expense
    
11,095
    
10,401
    
41,471
    
39,037
  
Net income (loss) before tax expense (benefit)
    
(567
)
  
(80
)
  
8,300
    
10,982
  
Income tax expense (benefit)
    
(500
)
  
(125
)
  
1,973
    
3,124
  
Net income (loss)
  
$
(67
)
$
45
  
$
6,327
  
$
7,858
  
Net income (loss) applicable to preferred shareholder
    
124
    
–
    
124
    
–
  
Net income (loss) applicable to common shareholders
  
$
(191
)
$
45
  
$
6,203
  
$
7,858
  
                           
Earnings (loss) per common share – basic
  
$
(0.02
)
$
–
  
$
0.55
  
$
0.69
  
Earnings (loss) per common share – diluted
  
$
(0.02
)
$
–
  
$
0.54
  
$
0.68
  

 
- 7 -
 
CAPITAL BANK CORPORATION
Average Balances, Interest Earned or Paid, and Interest Yields/Rates
For the Three Months Ended December 31, 2008, September 30, 2008 and December 31, 2007 (Unaudited)
Tax Equivalent Basis (1)

   
December 31, 2008
  
September 30, 2008
  
December 31, 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
  
$
1,052,172
  
$
14,719
    
5.55
%
$
1,018,947
  
$
15,469
    
6.02
%
$
933,847
  
$
17,821
    
7.57
%
Consumer
    
47,537
    
888
    
7.41
    
46,480
    
875
    
7.47
    
43,042
    
895
    
8.25
  
Home equity
    
89,125
    
1,047
    
4.66
    
84,441
    
1,133
    
5.32
    
78,221
    
1,547
    
7.85
  
Residential mortgages
    
24,193
    
355
    
5.87
    
26,623
    
398
    
5.98
    
35,691
    
572
    
6.36
  
Total loans
    
1,213,027
    
17,009
    
5.56
    
1,176,491
    
17,875
    
6.03
    
1,090,801
    
20,835
    
7.58
  
Investment securities (3)
    
246,658
    
3,430
    
5.56
    
245,408
    
3,452
    
5.63
    
242,272
    
3,347
    
5.48
  
Federal funds sold and other interest on short-term investments
    
13,737
    
25
    
0.72
    
3,617
    
15
    
1.65
    
14,654
    
169
    
4.58
  
Total interest-earning assets
    
1,473,422
  
$
20,464
    
5.51
%
  
1,425,516
  
$
21,342
    
5.94
%
  
1,347,727
  
$
24,351
    
7.17
%
Cash and due from banks
    
25,018
                
25,554
                
27,617
              
Other assets
    
136,387
                
137,792
                
130,340
              
Allowance for loan losses
    
(14,010
)
              
(14,052
)
              
           (13,121
)
            
Total assets
  
$
1,620,817
              
$
1,574,810
              
$
1,492,563
              
                                                         
Liabilities and Equity
                                                        
Savings deposits
  
$
27,948
  
$
11
    
0.16
%
$
30,169
  
$
30
    
0.39
%
$
32,800
  
$
56
    
0.68
%
Interest-bearing demand deposits
    
336,011
    
1,363
    
1.61
    
342,575
    
1,802
    
2.09
    
350,580
    
2,749
    
3.11
  
Time deposits
    
758,491
    
6,733
    
3.52
    
679,162
    
6,005
    
3.51
    
568,604
    
7,124
    
4.97
  
Total interest-bearing deposits
    
1,122,450
    
8,107
    
2.87
    
1,051,906
    
7,837
    
2.96
    
951,984
    
9,929
    
4.14
  
Borrowed funds
    
145,962
    
1,605
    
4.36
    
174,735
    
1,786
    
4.06
    
156,853
    
2,010
    
5.08
  
Subordinated debt
    
30,930
    
424
    
5.44
    
30,930
    
407
    
5.22
    
30,930
    
597
    
7.66
  
Repurchase agreements and fed funds purchased
    
22,050
    
20
    
0.34
    
27,039
    
74
    
1.09
    
38,499
    
339
    
3.49
  
Total interest-bearing liabilities
    
1,321,392
  
$
10,156
    
3.05
%
  
1,284,610
  
$
10,104
    
3.12
%
  
1,178,266
  
$
12,875
    
4.34
%
Noninterest-bearing deposits
    
115,893
                
112,456
                
114,454
              
Other liabilities
    
12,305
                
11,174
                
33,621
              
Total liabilities
    
1,449,590
                
1,408,240
                
1,326,341
              
Shareholders’ equity
    
171,227
                
166,570
                
166,222
              
Total liabilities and shareholders’ equity
  
$
1,620,817
              
$
1,574,810
              
$
1,492,563
              
                                                         
Net interest spread (4)
                
2.46
%
              
2.82
%
              
2.83
%
Tax equivalent adjustment
        
$
376
              
$
411
              
$
511
        
Net interest income and net interest margin (5)
        
$
10,308
    
2.78
%
      
$
11,238
    
3.13
%
      
$
11,476
    
3.38
%

(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.

 
- 8 -
 
CAPITAL BANK CORPORATION
Average Balances, Interest Earned or Paid, and Interest Yields/Rates
For the Years Ended December 31, 2008 and 2007 (Unaudited)
Tax Equivalent Basis (1)

   
December 31, 2008
  
December 31, 2007
  
(Dollars in thousands)
  
Average Balance
  
Amount Earned
  
Average Rate
  
Average Balance
  
Amount Earned
  
Average Rate
  
                           
Assets
                          
Loans receivable: (2)
                                      
Commercial
  
$
1,017,157
  
$
62,678
    
6.15
%
$
877,876
  
$
69,203
    
7.88
%
Consumer
    
46,767
    
3,542
    
7.55
    
40,579
    
3,459
    
8.52
  
Home equity
    
83,511
    
4,602
    
5.50
    
80,177
    
6,682
    
8.33
  
Residential mortgages
    
27,435
    
1,672
    
6.09
    
43,227
    
2,722
    
6.30
  
Total Loans
    
1,174,870
    
72,494
    
6.15
    
1,041,859
    
82,066
    
7.88
  
Investment securities (3)
    
251,224
    
14,026
    
5.58
    
246,736
    
13,476
    
5.46
  
Federal funds sold and other interest on short-term investments
    
7,888
    
128
    
1.62
    
20,417
    
1,052
    
5.15
  
Total interest-earnings assets
    
1,433,981
  
$
86,648
    
6.03
%
  
1,309,012
  
$
96,594
    
7.38
%
Cash and due from banks
    
25,882
                
27,740
              
Other assets
    
136,559
                
129,629
              
Allowance for loan losses
    
(13,846
)
              
(13,307
)
            
Total assets
  
$
1,582,576
              
$
1,453,074
              
                                       
Liabilities and Equity
                                      
Savings deposits
  
$
29,756
  
$
122
    
0.41
%
$
33,559
  
$
194
    
0.58
%
Interest-bearing demand deposits
    
336,899
    
6,655
    
1.97
    
359,373
    
12,165
    
3.38
  
Time deposits
    
691,140
    
26,265
    
3.79
    
568,604
    
27,341
    
4.81
  
Total interest-bearing deposits
    
1,057,795
    
33,042
    
3.12
    
961,536
    
39,700
    
4.13
  
Borrowed funds
    
168,501
    
7,234
    
4.28
    
134,590
    
6,920
    
5.14
  
Subordinated debt
    
30,930
    
1,761
    
5.68
    
30,930
    
2,387
    
7.72
  
Repurchase agreements and fed funds purchased
    
29,929
    
387
    
1.29
    
34,689
    
1,416
    
4.08
  
Total interest-bearing liabilities
    
1,287,156
  
$
42,424
    
3.29
%
  
1,161,745
  
$
50,423
    
4.34
%
Noninterest-bearing deposits
    
114,982
                
111,829
              
Other liabilities
    
11,352
                
14,940
              
Total liabilities
    
1,413,489
                
1,288,514
              
Shareholders’ equity
    
169,087
                
164,560
              
Total liabilities and shareholders’ equity
  
$
1,582,576
              
$
1,453,074
              
                                       
Net interest spread (4) 
                
2.74
%
              
3.04
%
Tax equivalent adjustment
        
$
1,628
              
$
2,057
        
Net interest income and net interest margin (5)
        
$
44,224
    
3.08
%
      
$
46,171
    
3.53
%

(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.

 
- 9 -