Exhibit 99.1

	CONTACT:
	B. Grant Yarber
	President and Chief Executive Officer
	Phone: (919) 645-3494
FOR IMMEDIATE RELEASE	Email: gyarber@capitalbank-nc.com

Capital Bank Reports 90% Increase in Second Quarter Net Income to $3.1 Million

RALEIGH, N.C. – July 19, 2006 – Capital Bank Corporation (Nasdaq: CBKN), the parent company of Capital Bank, today announced its financial results for the second quarter of 2006. Net income for the quarter ended June 30, 2006 increased 90% to $3.1 million, from $1.6 million in the quarter ended June 30, 2005. Fully diluted earnings per share increased 13% to $0.26 for the quarter ended June 30, 2006 compared to $0.23 for the quarter ended June 30, 2005. For the first six months ended June 30, 2006 and 2005, net income was $5.8 million and $3.2 million, respectively, and fully diluted earnings per share were $0.50 and $0.46, respectively.

During the first quarter of 2006, the Company completed its acquisition of 1st State Bancorp, Inc., the parent company of 1st State Bank, which has had a significant impact on the Company’s financial results for the second quarter of 2006 and thus the comparison of year over year results. The acquisition was accounted for as a purchase business combination and, accordingly, there was no restatement of prior period financial information. In conjunction with this acquisition, the Company issued 4,882,630 shares of common stock, increasing its common shares outstanding to 11.6 million shares at June 30, 2006 compared to 6.9 million shares at December 31, 2005. Shareholders’ equity increased to $157.8 million at June 30, 2006 compared to $83.5 million at December 31, 2005.

Commenting on the Company’s results, B. Grant Yarber, President and CEO, stated, “Our continued focus on core deposit growth, disciplined loan growth and improving credit quality is clearly indicated in our results. Our Smart Checking campaign, launched in the second quarter, is proving to be widely accepted in our markets, with 1,523 new accounts opened in just a few weeks.”

As of June 30, 2006, total assets were $1.36 billion compared to $1.31 billion at March 31, 2006 and $961 million at December 31, 2005. During the quarter ended June 30, 2006, net loans receivable increased $22 million to $952 million compared to $930 million and $659 million at March 31, 2006 and December 31, 2005, respectively. During the quarter ended June 30, 2006, total deposits increased $54 million to $1.0 billion compared to $972 million and $699 million at March 31, 2006 and December 31, 2005, respectively. Core deposits increased $24 million, or 6%, to $447 million at June 30, 2006 from $423 million at March 31, 2006. Approximately $230 million of net loans and $267 million of total deposits were acquired in the 1st State acquisition.

**more**

P. O. Box 18949  •  Raleigh, NC 27619-8949  •  Phone (919) 645-6400  •  Fax (919) 645-6353  •  www.capitalbank-nc.com

Net interest income for the quarter ended June 30, 2006 increased $4.4 million, or 62%, compared to the quarter ended June 30, 2005. Net interest income totaled $11.6 million for the quarter ended June 30, 2006 and the net interest margin on a tax equivalent basis was 4.05%. The increase in net interest income was attributable to growth in the loan portfolio, higher interest rates and the infusion of 1st State’s interest-earning assets. Increases in interest rates have improved the yield on earning assets; however, the cost of funds is also increasing due to competitive deposit rates in our markets.

The Company’s allowance for loan losses was $14.0 million, or 1.45% of total loans and 225% of nonperforming loans at June 30, 2006, compared to 1.55% of total loans and 97% of nonperforming loans at June 30, 2005 as the credit quality of the loan portfolio continues to improve. The provision for loan losses for the quarter ended June 30, 2006 was $249,000 compared to a credit in the quarter ended June 30, 2005 of $156,000. Net charge-offs for the quarter ended June 30, 2006 were $523,000, or 0.22% of average loans, compared to charge-offs of $138,000, or 0.09% of average loans, for the quarter ended June 30, 2005. Nonperforming loans were $6.2 million at June 30, 2006 compared to $10.4 million at June 30, 2005. Total past due loans were $9.2 million, or 0.96% of total loans, at June 30, 2006, compared to $9.6 million, or 1.48% of total loans, at June 30, 2005.

The Company’s non-interest income for the quarter ended June 30, 2006 increased $1.0 million to $2.6 million compared to the quarter ended June 30, 2005. This increase is primarily due to a higher volume of transaction accounts, including those acquired in the 1st State transaction, improving levels of deposit service charges, and higher NSF fees, mortgage fees and revenues and brokerage commissions.

Non-interest expenses were $9.3 million for the quarter ended June 30, 2006 compared to $6.5 million for the quarter ended June 30, 2005. The increase in non-interest expenses is primarily due to the consummation of the 1st State transaction as well as higher costs associated with the Company’s growth. During the quarter ended June 30, 2006, the Company completed its successful migration to in-house processing. The Company expects to realize further efficiencies from this in-house processing in the last half of 2006.

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 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.

###

Capital Bank Corporation
Summary of Operations

(In thousands except per share data)	Three Months Ended June 30, 2006		Three Months Ended June 30, 2005			Six Months Ended June 30, 2006		Six Months Ended June 30, 2005
Interest income	$	21,109	$	12,248		$	40,779	$	23,704
Interest expense		9,501		5,088			17,781		9,638
Net interest income		11,608		7,160			22,998		14,066
Provision (credit) for loan losses		249		(156	)		661		(406	)
Net interest income after provision for loan losses		11,359		7,316			22,337		14,472
Non-interest income		2,612		1,579			4,627		2,919
Non-interest expense		9,341		6,489			18,155		12,639
Income before taxes		4,630		2,406			8,809		4,752
Income tax expense		1,579		803			2,995		1,594
Net income	$	3,051	$	1,603		$	5,814	$	3,158
Income per share - basic	$	0.26	$	0.24		$	0.50	$	0.47
Income per share - fully diluted	$	0.26	$	0.23		$	0.50	$	0.46
Weighted average shares outstanding:
Basic		11,639		6,731			11,628		6,743
Fully diluted		11,727		6,871			11,716		6,906

End of Period Balances

	2006				2005
(In thousands except per share data)	June 30		March 31		December 31		September 30		June 30
Total assets	$	1,364,030	$	1,308,567	$	960,906	$	927,077	$	917,392
Investment securities		189,669		181,032		161,600		161,389		161,822
Loans (gross) *		965,484		944,325		668,982		646,448		648,765
Allowance for loan losses		14,007		14,209		9,592		9,844		10,075
Total earning assets		1,191,014		1,151,739		843,942		847,296		840,607
Deposits		1,025,949		972,232		698,480		703,183		689,997
Shareholders' equity		157,770		158,095		83,492		82,268		79,499
Book value per share	$	13.66	$	13.60	$	12.18	$	12.11	$	12.00
Tangible book value per share	$	7.86	$	7.82	$	10.31	$	10.21	$	10.04

Average Balances

	2006				2005
(In thousands)	June 30		March 31		December 31		September 30		June 30
Total assets	$	1,315,535	$	1,311,145	$	932,332	$	922,142	$	897,178
Investments (at amortized cost)		190,045		194,535		160,928		162,282		160,955
Loans (gross) *		954,420		923,950		653,475		637,743		648,269
Total earning assets		1,164,098		1,158,324		846,780		843,992		826,361
Deposits		990,037		957,693		696,335		697,311		671,307
Shareholders' equity		161,321		159,841		83,380		81,606		78,706

* Includes loans held for sale.

Capital Bank Corporation
Quarterly Results

	2006				2005
(In thousands except per share data)	June 30		March 31		December 31		September 30			June 30
Interest income	$	21,109	$	19,670	$	13,967	$	13,078		$	12,248
Interest expense		9,501		8,280		6,172		5,649			5,088
Net interest income		11,608		11,390		7,795		7,429			7,160
Provision (credit) for loan losses		249		412		38		(28	)		(156	)
Net interest income after provision		11,359		10,978		7,757		7,457			7,316
Non-interest income		2,612		2,015		2,022		1,790			1,579
Non-interest expense		9,341		8,814		7,171		6,644			6,489
Income before taxes		4,630		4,179		2,608		2,603			2,406
Income tax expense		1,579		1,416		801		869			803
Net income	$	3,051	$	2,763	$	1,807	$	1,734		$	1,603
Income per share - basic	$	0.26	$	0.24	$	0.26	$	0.26		$	0.24
Income per share - fully diluted	$	0.26	$	0.24	$	0.26	$	0.25		$	0.23
Weighted average shares outstanding:
Basic		11,639		11,617		6,875		6,801			6,731
Fully diluted		11,727		11,704		6,962		6,904			6,871

Quarterly Net Interest Margin *

	2006						2005
	June 30			March 31			December 31			September 30			June 30
Yield on earning assets		7.34	%		6.96	%		6.62	%		6.22	%		6.02	%
Cost of interest bearing liabilities		3.64	%		3.27	%		3.26	%		2.97	%		2.76	%
Net interest spread		3.70	%		3.69	%		3.36	%		3.25	%		3.26	%
Net interest margin		4.05	%		4.06	%		3.73	%		3.57	%		3.55	%

* Annualized and on a fully taxable equivalent basis

Nonperforming Assets

	2006						2005
(In thousands)	June 30			March 31			December 31		September 30		June 30
Commercial and commercial real estate	$	3,801		$	5,149		$	5,040	$	3,915	$	6,094
Consumer		106			100			176		239		218
Equity lines		418			398			497		592		427
Construction		193			807			737		1,302		1,674
Mortgage		1,695			1,588			1,628		1,711		2,014
Total nonperforming loans		6,213			8,042			8,078		7,759		10,427
Other real estate owned		879	(1)		888	(1)		771		1,608		1,508
Total nonperforming assets	$	7,092		$	8,930		$	8,849	$	9,367	$	11,935

  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 $776 and $1,854 as of June 30, 2006 and March 31, 2006, respectively, related to branch locations that are held for sale.

Key Ratios

	2006						2005
(Dollars in thousands)	June 30			March 31			December 31			September 30			June 30
Past due loans	$	9,179		$	11,678		$	7,008		$	10,089		$	9,576
Past due loans as a percent of total loans		0.96	%		1.26	%		1.07	%		1.58	%		1.48	%
Net charge-offs	$	523		$	3,360	(2)	$	433		$	117		$	138
Net charge-offs as a percent of average loans (annualized)		0.22	%		1.45%	(2)		0.27	%		0.07	%		0.09	%
Allowance for loan losses as a percent of total loans		1.45	%		1.50	%		1.43	%		1.52	%		1.55	%
Nonperforming assets as a percent of total assets		0.52	%		0.68	%		0.92	%		1.01	%		1.30	%
Allowance for loan losses as a percent of nonperforming loans		225	%		177	%		119	%		127	%		97	%

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

CAPITAL BANK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, 2006 and December 31, 2005

(In thousands, except share data)	June 30, 2006			December 31, 2005			Changes			% Change
	(Unaudited)
ASSETS
Cash and due from banks:
Interest-earning	$	6,084		$	4,603		$	1,481			32	%
Non-interest-earning		48,313			30,544			17,769			58	%
Cash held in escrow		—			33,185			(33,185	)		-100	%
Federal funds sold and short term investments		29,777			8,757			21,020			NM
Investment securities - available for sale, at fair value		177,725			149,266			28,459			19	%
Investment securities - held to maturity, at amortized cost		11,944			12,334			(390	)		-3	%
Loans-net of unearned income and deferred fees		965,484			668,982			296,502			44	%
Allowance for loan losses		(14,007	)		(9,592	)		(4,415	)		46	%
Net loans		951,477			659,390			292,087			44	%
Premises and equipment, net		23,005			14,868			8,137			55	%
Bank owned life insurance		20,157			19,857			300			2	%
Deposit premium and goodwill, net		66,959			12,853			54,106			421	%
Deferred tax assets		10,436			6,305			4,131			66	%
Other assets		18,153			8,944			9,209			103	%
Total assets	$	1,364,030		$	960,906		$	403,124			42	%
LIABILITIES
Deposits:
Demand, non-interest bearing	$	105,667		$	77,847		$	27,820			36	%
Savings, money market accounts and interest checking		340,981			237,005			103,976			44	%
Time deposits		579,301			383,628			195,673			51	%
Total deposits		1,025,949			698,480			327,469			47	%
Repurchase agreements and federal funds purchased		28,004			14,514			13,490			93	%
Borrowings		107,402			93,173			14,229			15	%
Short-term debt		—			30,000			(30,000	)		-100	%
Subordinated debentures		30,930			30,930			—			0	%
Other liabilities		13,975			10,317			3,658			35	%
Total liabilities		1,206,260			877,414			328,846			37	%
STOCKHOLDERS’ EQUITY
Common stock, no par value; 20,000,000 shares authorized;
11,552,494 and 6,852,156 issued and outstanding as of June 30, 2006 and December 31, 2005, respectively		142,426			70,985			71,441			101	%
Retained earnings		18,605			14,179			4,426			31	%
Accumulated other comprehensive income		(3,261	)		(1,672	)		(1,589	)		n/a
Total stockholders’ equity		157,770			83,492			74,278			89	%
Total liabilities and stockholders’ equity	$	1,364,030		$	960,906		$	403,124			42	%

CAPITAL BANK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended June 30, 2006 and 2005

(In thousands, except share and per share data)	2006		2005			Changes			% Change
	(Unaudited)
Interest income:
Loans and loan fees	$	35,664	$	20,147		$	15,517			77	%
Investment securities		4,265		3,424			841			25	%
Federal funds and other interest income		850		133			717			539	%
Total interest income		40,779		23,704			17,075			72	%
Interest expense:
Deposits		13,438		6,858			6,580			96	%
Borrowings and repurchase agreements		4,343		2,780			1,563			56	%
Total interest expense		17,781		9,638			8,143			84	%
Net interest income		22,998		14,066			8,932			64	%
Provision for loan losses		661		(406	)		1,067			n/a
Net interest income after provision for loan losses		22,337		14,472			7,865			54	%
Noninterest income:
Deposit service charges and other fees		2,026		1,371			655			48	%
Mortgage fees and revenues		1,018		658			360			55	%
Net gain on sale of securities		—		7			(7	)		-100	%
Bank owned life insurance		329		224			105			47	%
Other noninterest income		1,254		659			595			90	%
Total noninterest income		4,627		2,919			1,708			59	%
Noninterest expenses:
Salaries and employee benefits		9,393		6,628			2,765			42	%
Occupancy		1,716		1,240			476			38	%
Furniture and equipment		1,054		737			317			43	%
Director fees		659		395			264			67	%
Data processing		600		629			(29	)		-5	%
Advertising		579		379			200			53	%
Amortization of deposit premiums		686		107			579			541	%
Professional fees		566		532			34			6	%
Telecommunications		385		283			102			36	%
Other expenses		2,517		1,709			808			47	%
Total noninterest expenses		18,155		12,639			5,516			44	%
Net income before tax expense		8,809		4,752			4,057			85	%
Income tax expense		2,995		1,594			1,401			88	%
Net income	$	5,814	$	3,158		$	2,656			84	%
Earnings per share - basic	$	0.50	$	0.47		$	0.03			6	%
Earnings per share - diluted	$	0.50	$	0.46		$	0.04			9	%
Weighted Average Shares:
Basic		11,628,015		6,742,712			4,885,303			72	%
Fully Diluted		11,715,510		6,906,233			4,809,277			70	%

CAPITAL BANK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended June 30, 2006 and 2005

(In thousands, except share and per share data)	2006		2005			Changes			% Change
		(Unaudited)
Interest income:
Loans and loan fees	$	18,646	$	10,405		$	8,241			79	%
Investment securities		2,155		1,727			428			25	%
Federal funds and other interest income		308		116			192			166	%
Total interest income		21,109		12,248			8,861			72	%
Interest expense:
Deposits		7,328		3,676			3,652			99	%
Borrowings and repurchase agreements		2,173		1,412			761			54	%
Total interest expense		9,501		5,088			4,413			87	%
Net interest income		11,608		7,160			4,448			62	%
Provision for loan losses		249		(156	)		405			n/a
Net interest income after provision for loan losses		11,359		7,316			4,043			55	%
Noninterest income:
Service charges and other fees		1,061		714			347			49	%
Mortgage fees and revenues		654		386			268			69	%
Net gain on sale of securities		—		1			(1	)		-100	%
Bank owned life insurance		160		123			37			30	%
Other noninterest income		737		355			382			108	%
Total noninterest income		2,612		1,579			1,033			65	%
Noninterest expenses:
Salaries and employee benefits		4,851		3,479			1,372			39	%
Occupancy		938		626			312			50	%
Furniture and equipment		562		370			192			52	%
Director fees		283		347			(64	)		-18	%
Data processing		111		318			(207	)		-65	%
Advertising		324		163			161			99	%
Amortization of deposit premiums		343		53			290			547	%
Professional fees		354		210			144			69	%
Telecommunications		209		143			66			46	%
Other expenses		1,366		780			586			75	%
Total noninterest expenses		9,341		6,489			2,852			44	%
Net income before tax expense		4,630		2,406			2,224			92	%
Income tax expense		1,579		803			776			97	%
Net income	$	3,051	$	1,603		$	1,448			90	%
Earnings per share - basic	$	0.26	$	0.24		$	0.02			8	%
Earnings per share - diluted	$	0.26	$	0.23		$	0.03			13	%
Weighted Average Shares:
Basic		11,639,014		6,730,979			4,908,035			73	%
Fully Diluted		11,726,584		6,870,821			4,855,763			71	%