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 23, 2009

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:

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

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

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

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

Item 2.02 Results of Operations and Financial Condition.

On April 23, 2009, Capital Bank Corporation (Nasdaq: CBKN) issued a press release announcing its financial results for the quarterly period ended March 31, 2009. 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 23, 2009

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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 23, 2009	CAPITAL BANK CORPORATION
	By:  /s/ B. Grant Yarber
	B. Grant Yarber
	President and Chief Executive Officer

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Exhibit Index

Exhibit No.	Description of Document
Exhibit 99.1	Press release dated April 23, 2009

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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 Announces Financial Results for First Quarter of 2009

RALEIGH, N.C., April 23, 2009 – Capital Bank Corporation (Nasdaq: CBKN), the parent company of Capital Bank, today reported a net loss of $4.5 million, or $0.45 per diluted share, for the quarter ended March 31, 2009 compared to net income of $2.2 million, or $0.19 per diluted share, for the quarter ended March 31, 2008. The decline in earnings was primarily due to an increase in provision for loan losses and a decrease in net interest margin.

“Further weakening in the residential and commercial real estate markets from the global recession and credit crisis has severely impacted the financial health and stability of many businesses within the communities we serve. While our markets continue to remain some of the most resilient in the country, the Company took steps to significantly increase the provision for loan losses in the first quarter in response to softening experienced in the loan portfolio as reflected by certain credit quality ratios,” stated B. Grant Yarber, president and CEO. “Increases in nonperforming assets and the loan loss provision reflect aggressive efforts to identify and resolve problem credits in this uncertain economic environment. Despite the difficult economic conditions, our proactive working with borrowers and dealing with problem loans has enabled Capital Bank to maintain credit quality that is superior to peer banks and other banks across the country. In fact, our nonperforming assets to total assets ratio of 1.24% at March 31, 2009 is significantly better than reported regional and national averages of 1.66% and 1.55%, respectively, at the end of the fourth quarter. While the increased loan loss provision has negatively impacted our earnings in the short-term, we believe our strong asset quality will position us well to take advantage of a future market recovery.”

Past due loans as a percent of total loans increased to 1.34% at March 31, 2009 from 1.09% at December 31, 2008 and 0.82% at March 31, 2008. Nonperforming assets, which include loans on nonaccrual and other real estate owned, increased to 1.24% as a percent of total assets at March 31, 2009 compared to 0.63% at December 31, 2008 and 0.33% at March 31, 2008. As a result of the weakening credit quality experienced, the Company increased the allowance for loan losses to 1.45% of total loans at March 31, 2009 compared to 1.18% at both December 31, 2008 and March 31, 2008. The allowance for loan losses was 109% of nonperforming loans at March 31, 2009, a decline from 162% at December 31, 2008 and 319% at March 31, 2008.

Provision for loan losses increased $5.4 million for the quarter ended March 31, 2009 compared to the same period one year ago. The increase in the provision was partially due to loan growth of $126.6 million, or 11%, from March 31, 2008, but the increase was primarily driven by deteriorating economic conditions and weaknesses in the local real estate markets which resulted in downgrades to the credit ratings of certain loans in the portfolio. Additionally, the decline in real estate values securing certain nonperforming loans required increased provision during the first quarter. Management continues to thoroughly review its loan portfolio and the adequacy of its allowance for loan losses.

Partially contributing to lower profitability during the first quarter of 2009 was a decline in net interest income. Net interest income decreased $728 thousand, falling from $10.9 million for the quarter ended March 31, 2008 to $10.2 million for the quarter ended March 31, 2009, 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 3.23% in the first quarter of 2008 to 2.76% in the first quarter of 2009. The margin compression was partially offset by 10.6% growth in average earning assets over the same periods.

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“While our net interest margin has been negatively impacted by dramatic cuts to the prime lending rate and intense competition for retail deposits in late 2008, we have seen positive trends in the margin in recent months and experienced positive growth in net interest income from the fourth quarter,” stated Mr. Yarber. “Additionally, earnings before taxes and loan provision, excluding securities gains/losses, were $1.0 million for the first quarter, which was in line with our expectations. The fundamental operations of the bank remain strong, and while economic conditions are difficult and are likely to remain volatile for some time, we believe that Capital Bank is well positioned for the future.”

Loans grew by $22.7 million during the first quarter of 2009 while deposits increased by $25.7 million. Much of the loan growth, $19.3 million, occurred in the Triangle region of North Carolina, which we believe continues to present quality growth opportunities. On the deposit side, checking and savings accounts increased $33.5 million during the three months ended March 31, 2009 as the bank continued to emphasize growth in these critical product areas. Time deposits decreased $1.2 million over the same period while money market accounts declined by $6.6 million.

“Despite tremendous economic uncertainty, we have continued lending to qualified borrowers within the communities we serve as evidenced by our first quarter loan growth,” commented Mr. Yarber. “We are committed to doing our part to ensure that capital continues to remain available to qualified borrowers in our markets while maintaining prudent lending standards that we believe to be in the best interests of the Company and its shareholders. We were well capitalized last year but still accepted a capital investment from the Federal Government so that we could continue lending and be part of the economic recovery in our local markets. While the significant provision increase negatively impacted our profitability this quarter, we remain far above the well capitalized threshold and still have the balance sheet strength necessary to further our lending initiatives.”

Noninterest income declined $134 thousand, or 6.0%, in the first quarter of 2009 compared to the same period one year ago. The primary reason for the decline was an other-than-temporary impairment charge of $320 thousand recorded on an equity investment in a financial institution during the three months ended March 31, 2009 compared to a gain of $71 thousand on the sale of certain investment securities during the three months ended March 31, 2008. The impairment charge this quarter represents the full amount of the Company’s investment in that institution. Mortgage and other loan fees increased a net of $142 thousand, or 37%, compared to the same quarter last year primarily as a result of management’s emphasis on increasing loan-related fee income as well as favorable interest rates for the refinancing of residential and commercial loans. Bank-owned life insurance income declined by $44 thousand as the Company recorded a nonrecurring gain during the three months ended March 31, 2008 from the receipt of insurance proceeds. Other noninterest income increased $119 thousand primarily due to a reclassification of certain sublease receipts.

Noninterest expense increased from $9.6 million during the first quarter of 2008 to $11.6 million during the first quarter of 2009. Salaries and employee benefits, occupancy, furniture and equipment, and data processing costs increased a combined $1.6 million primarily due additional costs incurred as new branches were opened during the past year in Asheville (May 2008) and Clayton (December 2008) in addition to the four branches purchased in the Fayetteville market in December 2008. FDIC deposit insurance costs rose $182 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 March 31, 2009			Three Months Ended March 31, 2008
(In thousands except per share data)
Interest income	$	19,668		$	22,718
Interest expense		9,487			11,809
Net interest income		10,181			10,909
Provision for loan losses		5,986			565
Net interest income after provision for loan losses		4,195			10,344
Noninterest income		2,106			2,240
Noninterest expense		11,564			9,618
(Loss) income before taxes		(5,263	)		2,966
Income tax (benefit) expense		(800	)		799
Net (loss) income	$	(4,463	)	$	2,167
(Loss) earnings per common share – basic	$	(0.45	)	$	0.19
(Loss) earnings per common share – fully diluted	$	(0.45	)	$	0.19
Weighted average shares outstanding:
Basic		11,293			11,289
Fully diluted		11,293			11,306

End of Period Balances

(Unaudited)	2009		2008
	March 31		December 31(a)		September 30		June 30		March 31
(Dollars in thousands except per share data)
Total assets	$	1,665,611	$	1,654,232	$	1,594,402	$	1,592,034	$	1,575,301
Investment securities		286,310		278,138		244,310		246,468		258,086
Loans (gross)		1,277,064		1,254,368		1,194,149		1,178,157		1,150,497
Allowance for loan losses		18,480		14,795		14,017		13,910		13,563
Total earning assets		1,563,777		1,533,354		1,444,727		1,435,020		1,419,174
Deposits		1,340,974		1,315,314		1,197,721		1,182,615		1,150,897
Shareholders’ equity		142,674		148,514		166,521		165,731		167,967
Book value per common share	$	8.97	$	9.54	$	14.83	$	14.76	$	14.95
Tangible book value per common share	$	8.66	$	9.20	$	9.26	$	9.16	$	9.33

(a) Derived from audited consolidated financial statements

Average Quarterly Balances

(Unaudited)	2009		2008
	March 31		December 31		September 30		June 30		March 31
(Dollars in thousands)
Total assets	$	1,659,767	$	1,620,817	$	1,574,810	$	1,578,357	$	1,555,986
Investment securities		289,368		246,658		245,408		256,406		256,538
Loans (gross)		1,265,438		1,213,027		1,176,491		1,166,795		1,142,728
Total earning assets		1,556,243		1,473,422		1,425,516		1,429,301		1,407,345
Deposits		1,308,960		1,238,343		1,164,362		1,148,671		1,139,106
Shareholders’ equity		149,285		171,227		166,570		170,945		167,610

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CAPITAL BANK CORPORATION

Quarterly Results

(Unaudited)	2009			2008
	March 31			December 31			September 30		June 30		March 31
(In thousands except per share data)
Net interest income	$	10,181		$	9,932		$	10,827	$	10,928	$	10,909
Provision for loan losses		5,986			1,701			760		850		565
Net interest income after provision for loan losses		4,195			8,231			10,067		10,078		10,344
Noninterest income		2,106			2,297			3,513		3,001		2,240
Noninterest expense		11,564			76,286			10,763		9,995		9,618
(Loss) income before taxes		(5,263	)		(65,758	)		2,817		3,084		2,966
Income tax (benefit) expense		(800	)		(3,680	)		805		869		799
Net (loss) income	$	(4,463	)	$	(62,078	)	$	2,012	$	2,215	$	2,167
(Loss) earnings per common share – basic	$	(0.45	)	$	(5.50	)	$	0.18	$	0.20	$	0.19
(Loss) earnings per common share – fully diluted	$	(0.45	)	$	(5.50	)	$	0.18	$	0.20	$	0.19
Weighted average shares outstanding:
Basic		11,293			11,309			11,302		11,310		11,289
Fully diluted		11,293			11,309			11,313		11,324		11,306

Quarterly Net Interest Margin*

(Unaudited)	2009			2008
	March 31			December 31			September 30			June 30			March 31
Yield on earning assets		5.23	%		5.51	%		5.94	%		6.09	%		6.60	%
Cost of interest-bearing liabilities		2.80			3.05			3.12			3.24			3.76
Net interest spread		2.43			2.46			2.82			2.85			2.83
Net interest margin		2.76			2.78			3.13			3.18			3.23

*Annualized and on a fully taxable equivalent basis

Nonperforming Assets

(Unaudited)	2009		2008
	March 31		December 31(a)		September 30		June 30		March 31
(Dollars in thousands)
Commercial	$	6,231	$	4,682	$	4,343	$	3,650	$	2,919
Construction		10,259		3,843		1,570		418		230
Consumer		33		92		25		42		61
Home equity		96		275		275		515		579
Residential mortgage		389		223		198		582		463
Total nonperforming loans		17,008		9,115		6,411		5,207		4,252
Other real estate owned		3,616		1,347		1,019		663		890
Total nonperforming assets	$	20,624	$	10,462	$	7,430	$	5,870	$	5,142

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)	2009			2008
	March 31			December 31			September 30			June 30			March 31
(Dollars in thousands)
Past due loans	$	17,064		$	13,642		$	8,933		$	9,239		$	9,380
Past due loans as a percent of total loans		1.34	%		1.09	%		0.75	%		0.78	%		0.82	%
Net charge-offs	$	2,301		$	1,768		$	653		$	503		$	573
Net charge-offs as a percent of average loans (annualized)		0.73	%		0.58	%		0.22	%		0.17	%		0.20	%
Allowance for loan losses as a percent of total loans		1.45	%		1.18	%		1.17	%		1.18	%		1.18	%
Nonperforming assets as a percent of total assets		1.24	%		0.63	%		0.47	%		0.37	%		0.33	%
Allowance for loan losses as a percent of nonperforming loans		109	%		162	%		219	%		267	%		319	%

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CAPITAL BANK CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2009 and December 31, 2008

	March 31, 2009			December 31, 2008
(Dollars in thousands except share data)	(Unaudited)
Assets
Cash and due from banks:
Interest-earning	$	378		$	719
Noninterest-earning		39,514			53,607
Federal funds sold and short term investments		25			129
Total cash and cash equivalents		39,917			54,455
Investment securities – available for sale, at fair value		281,505			272,944
Investment securities – held to maturity, at amortized cost		4,805			5,194
Loans – net of unearned income and deferred fees		1,277,064			1,254,368
Allowance for loan losses		(18,480	)		(14,795	)
Net loans		1,258,584			1,239,573
Premises and equipment, net		24,810			24,640
Bank-owned life insurance		22,646			22,368
Deposit premium, net		3,569			3,857
Deferred income tax		9,462			9,342
Accrued interest receivable		6,114			6,225
Other assets		14,199			15,634
Total assets	$	1,665,611		$	1,654,232
Liabilities
Deposits:
Demand, noninterest-bearing	$	127,062		$	125,281
Savings and interest-bearing checking		205,402			173,711
Money market deposit accounts		206,194			212,780
Time deposits less than $100,000		499,063			509,231
Time deposits $100,000 and greater		303,253			294,311
Total deposits		1,340,974			1,315,314
Repurchase agreements and federal funds purchased		11,650			15,010
Borrowings		127,000			132,000
Subordinated debentures		30,930			30,930
Other liabilities		12,383			12,464
Total liabilities		1,522,937			1,505,718
Commitments and contingencies
Shareholders’ Equity
Preferred stock, $1,000 par value; 100,000 shares authorized; 41,279 shares issued and outstanding (liquidation preference of $41,279)		39,910			39,839
Common stock, no par value; 20,000,000 shares authorized; 11,300,369 and 11,238,085 shares issued and outstanding		139,495			139,209
Retained deficit		(37,373	)		(31,420	)
Accumulated other comprehensive income		642			886
Total shareholders’ equity		142,674			148,514
Total liabilities and shareholders’ equity	$	1,665,611		$	1,654,232

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CAPITAL BANK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended March 31, 2009 and 2008 (Unaudited)

	March 31, 2009			March 31, 2008
(Dollars in thousands except per share data)
Interest income:
Loans and loan fees	$	16,092		$	19,499
Investment securities:
Taxable interest income		2,799			2,218
Tax-exempt interest income		764			829
Dividends		–			117
Federal funds and other interest income		13			55
Total interest income		19,668			22,718
Interest expense:
Deposits		7,769			9,072
Borrowings and repurchase agreements		1,718			2,737
Total interest expense		9,487			11,809
Net interest income		10,181			10,909
Provision for loan losses		5,986			565
Net interest income after provisionfor loan losses		4,195			10,344
Noninterest income:
Service charges and other fees		952			959
Mortgage fees and revenues		233			272
Other loan fees		294			113
Brokerage fees		163			156
Bank card services		339			299
Bank-owned life insurance		258			302
Net gain (loss) on investment securities		(320	)		71
Other		187			68
Total noninterest income		2,106			2,240
Noninterest expense:
Salaries and employee benefits		6,013			5,036
Occupancy		1,373			997
Furniture and equipment		830			747
Data processing and telecommunications		631			432
Advertising		323			315
Office expenses		335			365
Professional fees		379			370
Business development and travel		328			333
Amortization of deposit premiums		288			257
Miscellaneous loan handling costs		163			94
Directors fees		307			267
Insurance		104			95
FDIC deposit insurance		229			47
Other		261			263
Total noninterest expense		11,564			9,618
Net (loss) income before tax (benefit) expense		(5,263	)		2,966
Income tax (benefit) expense		(800	)		799
Net (loss) income	$	(4,463	)	$	2,167
Dividends and accretion on preferred stock		587			–
Net (loss) income attributable to common shareholders	$	(5,050	)	$	2,167
(Loss) earnings per common share – basic	$	(0.45	)	$	0.19
(Loss) earnings per common share – diluted	$	(0.45	)	$	s0.19

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CAPITAL BANK CORPORATION

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

For the Three Months Ended March 31, 2009, December 31, 2008and March 31, 2008 (Unaudited)

Tax Equivalent Basis (1)

	March 31, 2009								December 31, 2008								March 31, 2008
(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	$	1,095,804		$	13,942		5.16	%	$	1,052,172		$	14,719		5.55	%	$	986,205		$	16,777		6.82	%
Consumer		52,873			910		6.98			47,537			888		7.41			46,700			910		7.82
Home equity		93,861			966		4.17			89,125			1,047		4.66			79,564			1,321		6.66
Residential mortgages		22,900			274		4.79			24,193			355		5.87			30,259			491		6.49
Total loans		1,265,438			16,092		5.16			1,213,027			17,009		5.56			1,142,728			19,499		6.84
Investment securities (3)		289,368			3,957		5.47			246,658			3,430		5.56			256,538			3,590		5.60
Federal funds sold and other interest on short-term investments		1,437			13		3.67			13,737			25		0.72			8,079			55		2.73
Total interest-earning assets		1,556,243		$	20,062		5.23	%		1,473,422		$	20,464		5.51	%		1,407,345		$	23,144		6.60	%
Cash and due from banks		40,578								25,018								26,232
Other assets		78,126								136,387								136,071
Allowance for loan losses		(15,180	)							(14,010	)							(13,662	)
Total assets	$	1,659,767							$	1,620,817							$	1,555,986
Liabilities and Equity
Savings deposits	$	28,793		$	13		0.18	%	$	27,948		$	11		0.16	%	$	30,382		$	46		0.61	%
Interest-bearing demand deposits		353,262			1,205		1.38			336,011			1,363		1.61			333,108			1,855		2.23
Time deposits		800,879			6,551		3.32			758,491			6,733		3.52			657,609			7,171		4.37
Total interest-bearing deposits		1,184,067			7,769		2.66			1,122,450			8,107		2.87			1,021,099			9,072		3.56
Borrowed funds		146,233			1,389		3.85			145,962			1,605		4.36			171,645			2,022		4.72
Subordinated debt		30,930			322		4.22			30,930			424		5.44			30,930			526		6.82
Repurchase agreements and fed funds purchased		13,849			7		0.20			22,050			20		0.36			35,563			189		2.13
Total interest-bearing liabilities		1,373,946		$	9,487		2.80	%		1,321,392		$	10,156		3.05	%		1,259,237		$	11,809		3.76	%
Noninterest-bearing deposits		124,893								115,893								118,007
Other liabilities		11,643								12,305								11,132
Total liabilities		1,510,482								1,449,590								1,388,376
Shareholders’ equity		149,285								171,227								167,610
Total liabilities and shareholders’ equity	$	1,659,767							$	1,620,817							$	1,555,986
Net interest spread (4)							2.43	%							2.46	%							2.83	%
Tax equivalent adjustment				$	394							$	376							$	426
Net interest income and net interest margin (5)				$	10,575		2.76	%				$	10,308		2.78	%				$	11,335		3.23	%

(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.

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