FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2004
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _____ to ____
Commission File Number 0-30062
CAPITAL BANK CORPORATION
(Exact name of registrant as specified in its charter)
North Carolina 56-2101930
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4901 Glenwood Avenue
Raleigh, North Carolina 27612
(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (919) 645-6400
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. |X| Yes |_| No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). |X| Yes |_| No
As of May 7, 2004, there were 6,571,132 shares outstanding of the registrant's
common stock, no par value.
Capital Bank Corporation
CONTENTS
PART I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Condensed consolidated statements of financial condition at March 31, 2004
(Unaudited) and December 31, 2003 1
Condensed consolidated statements of income for the three months
ended March 31, 2004 and 2003 (Unaudited) 2
Condensed consolidated statements of changes in shareholders' equity for
the three months ended March 31, 2004 and 2003 (Unaudited) 3
Condensed consolidated statements of comprehensive income for the
three months ended March 31, 2004 and 2003 (Unaudited) 4
Condensed consolidated statements of cash flows for the three months
ended March 31, 2004 and 2003 (Unaudited) 5 - 6
Notes to condensed consolidated financial statements 7 - 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9 - 20
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Item 4. Controls and Procedures 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21 - 22
Signatures 23
CAPITAL BANK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, 2004 and December 31, 2003
March 31, December 31,
2004 2003
- ---------------------------------------------------------------------------------------------
(Dollars in thousands) (Unaudited)
ASSETS
Cash and due from banks:
Interest earning $ 7,460 $ 569
Noninterest earning 23,918 21,839
Federal funds sold 18,507 3,202
Investment securities - available for sale, at fair value 159,349 165,913
Loans-net of unearned income and deferred fees 642,407 625,945
Allowance for loan losses (11,221) (11,613)
----------- -----------
Net loans 631,186 614,332
----------- -----------
Premises and equipment, net 14,582 14,190
Bank owned life insurance 9,591 9,429
Deposit premium and goodwill, net 14,465 14,530
Deferred tax assets 5,516 6,492
Other assets 7,129 7,238
----------- -----------
Total assets $ 891,703 $ 857,734
=========== ===========
LIABILITIES
Deposits:
Demand, noninterest bearing $ 62,703 $ 58,350
Savings and interest bearing demand deposits 207,696 200,452
Time deposits 408,418 370,817
----------- -----------
Total deposits 678,817 629,619
----------- -----------
Repurchase agreements 9,922 11,014
Borrowings 97,523 114,591
Trust preferred securities 20,620 20,620
Other liabilities 9,381 8,967
----------- -----------
Total liabilities 816,263 784,811
----------- -----------
SHAREHOLDERS' EQUITY
Common stock, no par value; 20,000,000 shares authorized;
6,571,132 and 6,541,495 issued and outstanding as of
2004 and 2003, respectively 67,724 67,381
Retained earnings 6,216 5,165
Accumulated other comprehensive income 1,500 377
----------- -----------
Total shareholders' equity 75,440 72,923
----------- -----------
Total liabilities and shareholders' equity $ 891,703 $ 857,734
=========== ===========
See Notes to Condensed Consolidated Financial Statements
- 1 -
CAPITAL BANK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 2004 and 2003
2004 2003
- ----------------------------------------------------------------------------------------------------------
(In thousands except per share data) (Unaudited)
Interest income:
Loans and loan fees $ 8,471 $ 8,478
Investment securities 1,718 1,628
Federal funds and other interest income 42 71
------------ ------------
Total interest income 10,231 10,177
------------ ------------
Interest expense:
Deposits 2,862 3,156
Borrowings and repurchase agreements 1,100 1,086
------------ ------------
Total interest expense 3,962 4,242
------------ ------------
Net interest income 6,269 5,935
Provision for loan losses 116 600
------------ ------------
Net interest income after provision for loan losses 6,153 5,335
------------ ------------
Noninterest income:
Mortgage origination fees and related gains 337 1,206
Deposit service charges and other fees 727 656
Investment securities gains, net 13 251
Other noninterest income 524 492
------------ ------------
Total noninterest income 1,601 2,605
------------ ------------
Noninterest expenses:
Salaries and employee benefits 2,842 3,428
Occupancy 572 532
Furniture and equipment 365 368
Data processing 322 279
Advertising 202 191
Amortization of deposit premium 65 74
Other expenses 1,269 1,076
------------ ------------
Total noninterest expenses 5,637 5,948
------------ ------------
Net income before income tax expense 2,117 1,992
Income tax expense 737 711
------------ ------------
Net income $ 1,380 $ 1,281
============ ============
Earnings per share - basic $ 0.21 $ 0.19
============ ============
Earnings per share - diluted $ 0.20 $ 0.19
============ ============
Weighted average shares
Basic 6,688,946 6,729,505
============ ============
Fully diluted 6,886,567 6,904,526
============ ============
See Notes to Condensed Consolidated Financial Statements
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Capital Bank Corporation
Consolidated Statements of Changes in Shareholders' Equity
For the Three Months Ended March 31, 2004 and 2003
(In thousands)
Retained
Shares of Other Earnings
Common Common Comp. Retained
Stock Stock Income Earnings Total
---------- ---------- ---------- ---------- ----------
Balance at January 1, 2003 6,595,784 $ 68,697 $ 1,293 $ 5,481 $ 75,471
Repurchase of outstanding common stock (5,000) (72) -- -- (72)
Reissuance of common stock
for options exercised 35,308 253 -- -- 253
Net income -- -- -- 1,281 1,281
Other comprehensive income -- -- (89) -- (89)
----------
Comprehensive income 1,192
----------
Cash dividends -- -- -- (332) (332)
---------- ---------- ---------- ---------- ----------
Balance at March 31, 2003 6,626,092 $ 68,878 $ 1,204 $ 6,430 $ 76,512
========== ========== ========== ========== ==========
Balance at January 1, 2004 6,541,495 $ 67,381 $ 377 $ 5,165 $ 72,923
Issuance of common stock
for options exercised 29,637 343 -- -- 343
Net income -- -- -- 1,380 1,380
Other comprehensive income -- -- 1,123 -- 1,123
----------
Comprehensive income 2,503
----------
Cash dividends -- -- -- (329) (329)
---------- ---------- ---------- ---------- ----------
Balance at March 31, 2004 6,571,132 $ 67,724 $ 1,500 $ 6,216 $ 75,440
========== ========== ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
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CAPITAL BANK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended March 31, 2004 and 2003
2004 2003
- -----------------------------------------------------------------------------------------
(In thousands) (Unaudited)
Three month period ended March 31, 2004 and 2003:
Net income $ 1,380 $ 1,281
Reclassification of gains recognized in net income (13) (251)
Unrealized gains on securities available for sale 1,852 130
Income Tax benefit (expense) (716) 32
---------- ----------
Comprehensive income $ 2,503 $ 1,192
========== ==========
See Notes to Condensed Consolidated Financial Statements
- 4 -
CAPITAL BANK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2004 and 2003
2004 2003
- ------------------------------------------------------------------------------------------------
(In thousands) (Unaudited)
Cash Flows From Operating Activities
Net income $ 1,380 $ 1,281
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deposit premium 65 74
Depreciation 362 382
Investment securities gains, net (13) (251)
Change in loans held for sale 2,613 (2,262)
Amortization of premiums on securities, net 173 462
Deferred income tax (benefit) expense 272 (112)
Provision for loan losses 116 600
Changes in assets and liabilities:
Accrued interest receivable and other assets 257 (195)
Accrued interest payable and other liabilities 413 411
Other operating activities, net 9 --
---------- ----------
Net cash provided by operating activities 5,647 390
---------- ----------
Cash Flows From Investing Activities
Loan originations, net of principal repayments (19,893) (19,455)
Additions to premises and equipment (770) (252)
Net (purchase) sale of Federal Home Loan Bank stock 852 (432)
Purchase of securities available for sale (17,643) (24,141)
Proceeds from maturities of securities available for sale 9,009 15,384
Proceeds from sale of securities available for sale 16,013 8,301
Other investing activities, net 7 (37)
---------- ----------
Net cash used in investing activities (12,425) (20,632)
---------- ----------
Cash Flows From Financing Activities
Net increase in deposits 49,198 7,803
Net decrease in repurchase agreements (1,092) (1,088)
Net increase (decrease) in borrowings (17,068) 6,933
Cash dividends paid (328) (332)
Issuance of common stock for options 343 253
Purchase of common stock -- (72)
---------- ----------
Net cash provided by financing activities 31,053 13,497
---------- ----------
Net change in cash and cash equivalents 24,275 (6,745)
Cash and cash equivalents:
Beginning 25,610 51,533
---------- ----------
Ending $ 49,885 $ 44,788
========== ==========
(continued on next page)
See Notes to Condensed Consolidated Financial Statements
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CAPITAL BANK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Three Months Ended March 31, 2004 and 2003
2004 2003
- ---------------------------------------------------------------------------------
(In thousands) (Unaudited)
Supplemental Disclosure of Cash Flow Information
Transfer from loans to real estate acquired
through foreclosure $ 310 $ 240
========== ==========
Dividends payable $ 329 $ 332
========== ==========
Cash paid for:
Income taxes $ 63 $ 781
========== ==========
Interest $ 3,875 $ 4,276
========== ==========
See Notes to Condensed Consolidated Financial Statements
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Notes to the Condensed Consolidated Financial Statements
1. Significant Accounting Policies and Interim Reporting
The accompanying unaudited condensed consolidated financial statements include
the accounts of Capital Bank Corporation (the "Company") and its wholly owned
subsidiaries, Capital Bank (the "Bank") and Capital Bank Investment Services
("CBIS"). In addition, the Company has interest in two trusts, Capital Bank
Statutory Trust I and II (hereinafter collectively referred to as the "Trusts").
The Trusts have not been consolidated with the financial statements of the
Company. The interim financial statements have been prepared in accordance with
generally accepted accounting principles. They do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements and therefore should be read in conjunction
with the audited financial statements and accompanying footnotes in the
Company's Annual Report on Form 10-K for the year ended December 31, 2003. In
the opinion of management, all adjustments necessary for a fair presentation of
the financial position and results of operations for the periods presented have
been included and all significant intercompany transactions have been eliminated
in consolidation. The results of operations for the three month period ended
March 31, 2004 are not necessarily indicative of the results of operations that
may be expected for the year ended December 31, 2004.
The balance sheet at December 31, 2003 has been derived from the Company's
audited consolidated financial statements.
The accounting policies followed are as set forth in Note 1 of the Notes to
Financial Statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 2003.
2. Comprehensive Income
Comprehensive income includes net income and all other changes to the Company's
equity, with the exception of transactions with shareholders ("other
comprehensive income"). The Company's only components of other comprehensive
income relate to unrealized gains and losses on securities available for sale,
net of the applicable income tax effect. The Company's comprehensive income and
information concerning the Company's other comprehensive income items for the
three month period ended March 31, 2004 and 2003 are as shown in the Company's
Condensed Consolidated Statements of Comprehensive Income for the three months
ended March 31, 2004 and 2003 (unaudited).
3. Earnings Per Share
The Company is required to report both basic and diluted earnings per share
("EPS"). Basic EPS excludes dilution and is computed by dividing income
available to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted EPS assumes the conversion, exercise or
issuance of all potential common stock instruments, such as stock options,
unless the effect is to reduce a loss or increase earnings per share. For the
Company, EPS is adjusted for outstanding stock options using the Treasury Stock
method in order to compute diluted EPS. The following tables provide a
computation and reconciliation of basic and diluted EPS for the three month
period ended March 31, 2004 and 2003.
- 7 -
2004 2003
--------------------------
(Dollars in thousands) (Unaudited)
Three month periods ended March 31, 2004 and 2003:
Income available to shareholders - basic and diluted $ 1,380 $ 1,281
========== ==========
Shares used in the computation of earnings per share:
Weighted average number of shares outstanding - basic 6,688,946 6,729,505
Incremental shares from assumed exercise of stock
options 197,621 175,021
---------- ----------
Weighted average number of shares outstanding - diluted 6,886,567 6,904,526
========== ==========
Options to purchase 667,000 shares of common stock were used in the diluted
calculation. All options currently issued under existing plans were included in
the diluted calculation because the average fair market value of a common share
of stock was greater than each option exercise price.
4. Stock Based Compensation
The Company has a stock option plan under which options to purchase Company
common stock may be granted periodically to certain employees. Grants of options
are made by the Board of Directors or its Compensation Committee. All grants
must be at no less than fair market value on the date of grant, must be
exercised no later than 10 years from the date of grant, and may be subject to
some vesting provisions.
The Company accounts for its stock options under the provisions of APB Opinion
No. 25 ("APB 25"), Accounting for Stock Issued to Employees. However, under the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 123 ("FAS
123"), Accounting for Stock-Based Compensation, the Company is required to
disclose the pro forma effects on net income as if it had recorded compensation
based on the fair value of options granted. The fair value of each option grant
is estimated on the date of grant using the Black-Scholes option-pricing model
with certain assumptions. Option pricing models require the use of highly
subjective assumptions, including expected stock price volatility, which if
changed can materially affect fair value estimates. Accordingly, the model does
not necessarily provide a reliable single measure of the fair value of the
Company's stock options.
Under SFAS No. 148 ("FAS 148"), Accounting for Stock-Based Compensation--
Transition and Disclosure, companies are required to disclose for each period
for which an income statement is presented an accounting policy footnote that
includes (i) the method of accounting for stock options; (ii) total stock
compensation cost that is recognized in the income statement and would have been
recognized had FAS 123 been adopted for recognition purposes as of its effective
date; and (iii) pro forma net income and earnings per share (where applicable)
that would have been reported had FAS 123 been adopted for recognition purposes
as of its effective date. These disclosures are required to be made in annual
financial statements and in quarterly information provided to shareholders
without regard to whether the entity has adopted FAS 123 for recognition
purposes.
The Company did not grant any options to purchase its shares of common stock
during the first three months of 2004. For the three month periods ended March
31, 2004 and 2003, the
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following table summarizes the net income and stock-based compensation expense,
as reported, compared to pro forma amounts had the fair value method been
applied:
2004 2003
-------------------------
(Dollars in thousands) (Unaudited)
Three month periods ended March 31, 2004 and 2003:
Net income, as reported $ 1,380 $ 1,281
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards, net
of related tax effects (42) (48)
-------------------------
Pro forma net income $ 1,338 $ 1,233
=========================
Earnings per share:
Basic - as reported $ 0.21 $ 0.19
Basic - pro forma $ 0.20 $ 0.19
Diluted - as reported $ 0.20 $ 0.18
Diluted - pro forma $ 0.19 $ 0.18
5. Loans
The composition of the loan portfolio by loan classification at March 31, 2004
and December 31, 2003 is as follows:
March 31, December 31,
(Dollars in thousands) 2004 2003
---------- -----------
Commercial $ 495,473 $ 474,104
Consumer 39,355 42,929
Home equity lines 61,031 58,430
Residential mortgages 46,427 50,437
---------- ----------
642,286 625,900
Less deferred loan fees (costs), net 121 (45)
---------- ----------
$ 642,407 $ 625,855
========== ==========
Loans held for sale as of March 31, 2004 and December 31, 2003 were $2.2 million
and $4.8 million, respectively.
Item 2
Management's Discussion and Analysis Of Financial Condition and Results of
Operations
The following discussion presents an overview of the unaudited financial
statements for the three month period ended March 31, 2004 and 2003 for Capital
Bank Corporation (the "Company") and its wholly owned subsidiaries. This
discussion and analysis is intended to provide pertinent information concerning
financial position, results of operations, liquidity, and capital resources
- 9 -
for the periods covered. It should be read in conjunction with the unaudited
financial statements and related footnotes contained in Part I, Item 1 of this
report.
Information set forth below contains various forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which statements represent the Company's judgment concerning the future
and are subject to risks and uncertainties that could cause the Company's actual
operating results to differ materially. Such forward-looking statements can be
identified by the use of forward-looking terminology, such as "may", "will",
"expect", "anticipate", "estimate", "believe", or "continue", or the negative
thereof or other variations thereof or comparable terminology. The Company
cautions that such forward-looking statements are further qualified by important
factors that could cause the Company's actual operating results to differ
materially from those in the forward-looking statements, as well as the factors
set forth in this discussion and analysis, and the Company's periodic reports
and other filings with the Securities and Exchange Commission.
Risk Factors
You should consider the following material risk factors carefully before
deciding to invest in Capital Bank Corporation securities. If any of the events
described below occur, the Company's business, financial condition, or results
of operations could be materially adversely affected. In that event, the trading
price of the Company's common stock may decline, in which case the value of your
investment may decline as well.
Our Results Are Impacted by the Economic Conditions of Our Principal Operating
Regions
Our operations are concentrated throughout Central and Western North Carolina.
As a result of this geographic concentration, our results may correlate to the
economic conditions in these areas. Deterioration in economic conditions in any
of these market areas, particularly in the industries on which these geographic
areas depend, may adversely affect the quality of our loan portfolio and the
demand for our products and services, and accordingly, our results of
operations.
We Are Exposed to Risks in Connection with the Loans We Make
A significant source of risk for us arises from the possibility that losses will
be sustained because borrowers, guarantors and related parties may fail to
perform in accordance with the terms of their loans. We have underwriting and
credit monitoring procedures and credit policies, including the establishment
and review of the allowance for loan losses, that we believe are appropriate to
minimize this risk by assessing the likelihood of nonperformance, tracking loan
performance and diversifying our loan portfolio. Such policies and procedures,
however, may not prevent unexpected losses that could adversely affect our
results of operations.
We Compete With Larger Companies for Business
The banking and financial services business in our market areas continues to be
a competitive field and is becoming more competitive as a result of:
o Changes in regulations;
o Changes in technology and product delivery systems; and
o The accelerating pace of consolidation among financial services
providers.
We may not be able to compete effectively in our markets, and our results of
operations could be adversely affected by the nature or pace of change in
competition. We compete for loans, deposits
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and customers with various bank and nonbank financial services providers, many
of which have substantially greater resources including higher total assets and
capitalization, greater access to capital markets and offering a broader array
of financial services.
Our Trading Volume Has Been Low Compared With Larger Banks
The trading volume in the Company's common stock on the NASDAQ National Market
has been comparable to other similarly-sized banks. Nevertheless, this trading
is relatively low when compared with more seasoned companies listed on the
NASDAQ National Market or other consolidated reporting systems or stock
exchanges. Thus, the market in the Company's common stock may be limited in
scope relative to other companies.
We Depend Heavily on Our Key Management Personnel
The Company's success depends in part on its ability to retain key executives
and to attract and retain additional qualified management personnel who have
experience both in sophisticated banking matters and in operating a small to
mid-size bank. Competition for such personnel is strong in the banking industry
and we may not be successful in attracting or retaining the personnel we
require. We expect to effectively compete in this area by offering financial
packages that include incentive-based compensation and the opportunity to join
in the rewarding work of building a growing bank.
Technological Advances Impact Our Business
The banking industry is undergoing technological changes with frequent
introductions of new technology-driven products and services. In addition to
improving customer services, the effective use of technology increases
efficiency and enables financial institutions to reduce costs. The Company's
future success will depend, in part, on our ability to address the needs of our
customers by using technology to provide products and services that will satisfy
customer demands for convenience as well as to create additional efficiencies in
our operations. Many of our competitors have substantially greater resources
than we do to invest in technological improvements. We may not be able to
effectively implement new technology-driven products and services or
successfully market such products and services to our customers.
Government Regulations May Prevent or Impair Our Ability to Pay Dividends,
Engage in Acquisitions or Operate in Other Ways
Current and future legislation and the policies established by federal and state
regulatory authorities will affect our operations. We are subject to supervision
and periodic examination by the Federal Deposit Insurance Corporation and the
North Carolina State Banking Commission. Banking regulations, designed primarily
for the protection of depositors, may limit our growth and the return to you,
our investors, by restricting certain of our activities, such as:
o The payment of dividends to our shareholders;
o Possible mergers with or acquisitions of or by other institutions;
o Our desired investments;
o Loans and interest rates on loans;
o Interest rates paid on our deposits;
o The possible expansion of our branch offices; and/or
o Our ability to provide securities or trust services.
We also are subject to capitalization guidelines set forth in federal
legislation, and could be subject to enforcement actions to the extent that we
are found by regulatory examiners to be
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undercapitalized. We cannot predict what changes, if any, will be made to
existing federal and state legislation and regulations or the effect that such
changes may have on our future business and earnings prospects. The cost of
compliance with regulatory requirements including those imposed by the
Securities and Exchange Commission may adversely affect our ability to operate
profitably.
There Are Potential Risks Associated With Future Acquisitions
We intend to continue to explore expanding our branch system through selective
acquisitions of existing banks or bank branches in the Research Triangle area
and other North Carolina markets. We cannot say with any certainty that we will
be able to consummate, or if consummated, successfully integrate, future
acquisitions, or that we will not incur disruptions or unexpected expenses in
integrating such acquisitions. In the ordinary course of business, we evaluate
potential acquisitions that would bolster our ability to cater to the small
business, individual and residential lending markets in North Carolina. In
attempting to make such acquisitions, we anticipate competing with other
financial institutions, many of which have greater financial and operational
resources. In addition, since the consideration for an acquired bank or branch
may involve cash, notes or the issuance of shares of common stock, existing
shareholders could experience dilution in the value of their shares of the
Company's common stock in connection with such acquisitions. Any given
acquisition, if and when consummated, may adversely affect our results of
operations or overall financial condition.
Overview
Capital Bank Corporation is a financial holding company incorporated under the
laws of the state of North Carolina on August 10, 1998. The Company's primary
function is to serve as the holding company for its wholly-owned subsidiaries,
Capital Bank (the "Bank") and Capital Bank Investment Services, Inc. ("CBIS").
In addition, the Company has interest in two trusts, Capital Bank Statutory
Trust I and II (hereinafter collectively referred to as the "Trusts"). The
Trusts have not been consolidated with the financial statements of the Company.
The Bank was incorporated under the laws of the State of North Carolina on May
30, 1997, and commenced operations as a state-chartered banking corporation on
June 20, 1997. The Bank is not a member of the Federal Reserve System and has no
subsidiaries. CBIS was incorporated under the laws of the State of North
Carolina on January 3, 2001 and commenced operations as a full service
investment company on March 1, 2001. In the third quarter of 2003, the Company
discontinued the operations of CBIS.
Capital Bank is a community bank engaged in the general commercial banking
business in Wake, Chatham, Northampton, Granville, Warren, Alamance, Lee,
Buncombe, and Catawba Counties of North Carolina. Wake County has a diversified
economic base, comprised primarily of services, retail trade, government and
manufacturing and includes the City of Raleigh, the state capital. Lee,
Northampton, Granville, Warren and Chatham counties are significant centers for
various industries, including agriculture, manufacturing, lumber and tobacco.
Alamance County has a diversified economic base, comprised primarily of
manufacturing, agriculture, retail and wholesale trade, government, services and
utilities. Catawba County, which includes Hickory, is a regional center for
manufacturing and wholesale trade. The economic base of Buncombe County is
comprised primarily of services, medical, tourism and manufacturing industries
and includes the city of Asheville.
- 12 -
The Bank offers a full range of banking services, including the following:
checking accounts; savings accounts; NOW accounts; money market accounts;
certificates of deposit; loans for real estate, construction, businesses,
agriculture, personal uses, home improvement and automobiles; home equity lines
of credit; consumer loans; individual retirement accounts; safe deposit boxes;
bank money orders; internet banking; electronic funds transfer services
including wire transfers; traveler's checks; various investments; and free
notary services to all Bank customers. In addition, the Bank provides automated
teller machine access to its customers for cash withdrawals through nationwide
ATM networks. At present, the Bank does not provide the services of a trust
department.
The Trusts were formed for the sole purpose of issuing trust preferred
securities. The proceeds from such issuances were loaned to the Company in
exchange for the Debentures, which are the sole assets of the Trust. A portion
of the proceeds from the issuance of the Debentures were used by the Company to
repurchase shares of Company common stock. The Company's obligation under the
Debentures constitutes a full and unconditional guarantee by the Company of the
Trust's obligations under the trust preferred securities. The Trusts have no
operations other than those that are incidental to the issuance of the trust
preferred securities.
Financial Condition
Total consolidated assets of the Company at March 31, 2004 were $891.7 million
compared to $857.7 million at December 31, 2003, an increase of $34.0 million,
or 4%. This increase was due to strong internal growth primarily due to a
successful deposit campaign during the quarter. On March 31, 2004, loans,
including loans held for sale of $2.2 million, were $642.4 million, up $16.5
million, or 3%, compared to December 31, 2003. Loan growth increased in part due
to the addition of new commercial lenders in the Company's higher growth regions
and the decision to expand the Company's market around those high growth areas.
At March 31, 2004, investment securities were $159.3 million, down $6.6 million
from December 31, 2003. Due to the current fixed income market conditions, the
Company made a decision to not reinvest the principal cash flows from its
investment portfolio in certain interest rate environments. Federal funds sold
were $18.5 million, up $15.3 million from December 31, 2003. As the Company
increased its cash position due to the significant amount of funds brought in as
a result of the deposit campaign, most of that cash was invested in Federal
Funds after repaying short-term borrowings rather than being invested in long
term securities. As loan demand increases, the Company intends to use these
short term investments to fund additional loans.
Earning assets represented 92.82% of total assets as of March 31, 2004. The
allowance for loan losses as of March 31, 2004 was $11.2 million and represented
approximately 1.75% of total loans. The allowance for loan losses decreased
$400,000 or 3% from the December 31, 2003 balance of $11.6 million due to the
overall improvement in loan quality in the portfolio. Management believes that
the amount of the allowance is adequate to absorb probable losses inherent in
the current loan portfolio. See "Asset Quality" for additional discussion.
Deposits as of March 31, 2004 were $678.8 million, an increase of $49.2 million
or 8% from December 31, 2003, primarily as a result of strong internal growth
fueled by a successful deposit campaign run during the period. During the first
quarter, the Company experienced an increase of $37.6 million, or 10%, in
certificates of deposit compared to December 31, 2003. This movement was largely
attributable to a promotion running from January to March, 2004. At March 31,
2004, certificates of deposit represented 60.17% of total deposits compared to
58.90% at
- 13 -
December 31, 2003. At the same time, non-interest bearing demand deposit
accounts increased to $62.7 million at March 31, 2004, an increase of $4.4
million, or 7%, from $58.4 million at December 31, 2003. Savings, interest
bearing demand deposit, and money market accounts increased to $207.7 million at
March 31, 2004, an increase of $7.2 million, or 4%, from $200.5 million at
December 31, 2003. Borrowings decreased to $97.5 million, or 15%, at March 31,
2004 from $114.6 million as of December 31, 2003. The Company used some of the
funds received from the deposit campaign to pay off all of its short-term
borrowings during the recent quarter.
Total consolidated shareholders' equity was $75.4 million as of March 31, 2004,
an increase of $2.5 million from December 31, 2003. The increase can be
primarily attributed to retained earnings of $1.1 million, reflecting net income
during the period. See the Consolidated Statements of Changes in Shareholders'
Equity for additional information.
Results of Operations
Three month period ended March31, 2004
For the three month period ended March 31, 2004, the Company reported net income
of $1.4 million, or $.20 per diluted share, compared to income of $1.3 million,
or $.19 per diluted share, for the same three month period ended March 31, 2003.
Net interest income increased 6%, or $334,000, from $5.9 million for the three
month period ended March 31, 2003, to $6.3 million for the same period in 2004.
The rise in net interest income is primarily the result of an $18 million
increase in average earning assets due to internal growth. The net interest
margin on a fully taxable equivalent basis increased 11 basis points
year-over-year to 3.19% for the three months ended March 31, 2004 from 3.08% for
the same time period for 2003. The increase in the net interest margin can be
largely attributed to a decrease in the rate paid on interest-bearing
liabilities and the benefit from noninterest bearing liabilities. The Company's
balance sheet remains asset-sensitive and, as a result, its interest earning
assets reprice quicker than its interest bearing liabilities after interest rate
movements.
The following table reflects the Company's effective yield on earning assets and
cost of funds. Yields and costs are computed by dividing income or expense for
the year by the respective daily average asset or liability balance.
- 14 -
Average Balances, Interest Earned or Paid, and Interest Yields/Rates
Three Months Ended March 31, 2004 and 2003
(Tax Equivalent Basis - Dollars in Thousands) (1)
2004 2003
-------------------------------------------------------------------------------------
Average Amount Average Average Amount Average
Balance Earned Rate Balance Earned Rate
-------------------------------------------------------------------------------------
Assets
Loans receivable: (2)
Commercial $ 482,844 $ 6,344 5.26% $ 444,546 $ 5,890 5.34%
Consumer 39,149 663 6.77% 49,686 851 6.91%
Home equity 59,299 722 4.87% 45,429 634 5.63%
Residential mortgages 47,972 742 6.19% 69,077 1,103 6.44%
-------------------------------------------------------------------------------------
Total loans 629,264 8,471 5.38% 608,738 8,478 5.62%
Investment securities (3) 162,290 1,886 4.65% 155,428 1,715 4.45%
Federal funds sold and other
interest on short term investments 14,847 42 1.13% 24,649 71 1.16%
-------------------------------------------------------------------------------------
Total interest earning assets 806,401 $ 10,399 5.16% 788,815 $ 10,264 5.25%
======================= =======================
Cash and due from banks 24,022 21,168
Other assets 51,765 43,204
Reserve for loan losses (11,715) (9,618)
--------- ---------
Total assets $ 870,473 $ 843,569
========= =========
Liabilities and Equity
Savings deposits $ 17,287 $ 11 0.25% $ 19,545 $ 22 0.45%
Interest-bearing demand deposits 184,229 493 1.07% 179,760 523 1.17%
Time deposits 387,597 2,358 2.43% 389,378 2,611 2.70%
-------------------------------------------------------------------------------------
Total interest bearing deposits 589,113 2,862 1.94% 588,683 3,156 2.16%
Borrowed funds 110,760 869 3.14% 107,727 1,063 3.98%
Trust preferred debt 20,620 216 4.19% -- -- 0.00%
Repurchase agreements 11,183 15 0.54% 12,974 23 0.71%
-------------------------------------------------------------------------------------
Total interest-bearing liabilities 731,676 $ 3,962 2.17% 709,384 $ 4,242 2.41%
======================= =======================
Non-interest bearing deposits 55,919 47,577
Other liabilities 8,399 10,057
--------- ---------
Total liabilities 795,994 767,018
Shareholders' equity 74,479 76,551
--------- ---------
Total liabilities and equity $ 870,473 $ 843,569
========= =========
Net interest spread (4) 2.99% 2.84%
Tax equivalent adjustment $ 168 $ 87
Net interest income and net
interest margin (5) $ 6,437 3.19% $ 6,022 3.08%
(1) The taxable equivalent basis is computed using a blended federal and
state 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 exclude 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 the net interest income divided by
average interest-earning assets.
- 15 -
For the three month period ended March 31, 2004, the provision for loan losses
was $116,000 compared to $600,000 for the same period in 2003, a decrease of
$484,000. The decrease in the provision during the quarter was due to an overall
improvement in credit quality in the Company's loan portfolio from December 31,
2003, primarily related to a decline in nonperforming loans. At March 31, 2004,
the allowance for loan losses was 1.75% of total loans compared with 1.91% at
December 31, 2003. See "Asset Quality" for further discussion.
Non-interest income for the three month period ended March 31, 2004, was $1.6
million compared to $2.6 million for the same period in 2003, a decrease of 39%.
The decrease was primarily attributable to a substantial drop in fee income
recorded by the Bank's mortgage department as a result of industry-wide
decreased mortgage refinance business caused by increases in mortgage loan
interest rates. For the same reason, mortgage origination fees fell 72% to
$337,000 in the first quarter of 2004 from the $1.2 million earned in the three
month period ended March 31, 2003. Securities gains also fell 95% during the
period from $251,000 during the first three months of 2003 to $13,000 during the
same period of 2004.
Fees for non-sufficient funds increased to $474,000 during the three months
ended March 31, 2004 from $410,000 during the same period in 2003, primarily as
a result of the growth in the number of deposit accounts on which these fees are
charged. Other categories that improved include ATM fees, which increased 14%
from $63,000 in the three month period ended March 31, 2003 to $72,000 in the
three month period ended March 31, 2004, and other non-interest income, which
includes fees earned by the government lending department. One other component
of the year-over-year increase in other noninterest income is a $108,000 gain on
sale of repossessed property recorded in first quarter of 2004.
Non-interest expense for the three month period ended March 31, 2004 was $5.6
million compared to $5.9 million for the corresponding period in 2003. Salaries
and employee benefits, representing the largest non-interest expense category,
decreased to $2.8 million, for the three month period ended March 31, 2004 from
$3.4 million for the same period in 2003. This decrease reflects a drop in the
number of personnel employed by the Company due to the consolidation of certain
operations and the cessation of the operations of CBIS. It remains management's
intention to maintain adequate staffing levels to meet customer needs and keep
pace with expected growth. Decreases in non-interest expense also reflect a
significant drop in commissions paid on mortgage originations and government
lending as a result of slowed business in those areas. Commission expense for
the three month period ended March 31, 2004 was $160,000 compared to $547,000
for the same period in 2003. As of March 31, 2004, the Company had 204 full-time
equivalent employees compared to 231 for the same date in 2003 and 190 at
December 31, 2003.
Occupancy costs, the second largest component of non-interest expenses,
increased 8%, or $40,000, to $572,000 for the three month period ended March 31,
2004 from $532,000 for the same period in 2003. This increase is primarily the
result of one time costs incurred to move the operations and credit
administration functions to a new facility to consolidate operations and
locations.
Other expenses increased from $1.1 million for the three month period ended
March 31, 2003 to $1.3 million for the same period in 2004. Largest components
of other expenses for the first
- 16 -
quarter of 2004 includes audit and accounting fees, which increased from $45,000
in 2003 to $131,000 in 2004, primarily a result of additional services required
for the Federal Deposit Insurance Incorporation Improvement Act ("FDICIA") as a
result of the Bank having reached over $500 million in assets as of January 1,
2003. Travel and entertainment increased year-over-year from $58,000 in 2003 to
$89,000 in 2004 as the footprint of the organization expanded and travel between
locations increased. Franchise taxes increased $13,000 to $46,000 from $25,000
in the comparable prior year due to the increase in the net capital of the
Company, on which the franchise tax is assessed.
The Company recorded an income tax expense of $737,000 during the three month
period ended March 31, 2004 compared to an expense of $711,000 during the same
period in 2003. At March 31, 2004, the Company had net deferred tax assets of
$5.5 million resulting from timing differences associated primarily with the
deductibility of certain expenses reflected on the financial statements. The
effective tax rate dropped from 35.7% in the first quarter of 2003 to 34.8% for
the comparable period in 2004. The decrease is primarily due to an increase in
nontaxable income in 2004 as a result of an additional investment in bank owned
life insurance during the second quarter of 2003.
Asset Quality
Determining the allowance for loan losses is based on a number of factors. At
the origination of each commercial loan, management assesses the relative risk
of the loan and assigns a corresponding risk grade. To insure that the credit
quality is maintained after the loan is booked, the Bank has a procedure whereby
a loan review officer does an annual review of all loans over a certain
threshold, all unsecured loans over a certain loan amount, a sampling of loans
within a lender's authority, and a sampling of the entire loan pool. Loans are
reviewed for credit quality, sufficiency of credit and collateral documentation,
proper loan approval, covenant, policy and procedure adherence, and continuing
accuracy of the loan grade. This officer reports directly to the Chief Credit
Officer and will report on a sampling of loans each month to the Board of
Directors' Loan Committee. On an as needed basis, the Bank will hire an outside
third party firm to do a review of loans to ensure quality standards and
accurate risk assessment.
The Company calculates the amount of allowance needed to cover the probable
losses in the portfolio by applying a reserve percentage to each risk grade.
Consumer loans and mortgages are not risk graded but a percentage is reserved
for these loans based on historical losses. The reserve percentages have been
developed based on historical losses and industry trends. In addition to this
quantitative analysis, a qualitative assessment of the general economic trends,
portfolio concentration and the trend of delinquencies are taken into
consideration. The allowance is adjusted accordingly to an amount that
management believes will be adequate to absorb probable losses on existing loans
that may become uncollectible.
The allowance for loan losses is established through a provision for loan losses
charged to expense. Loans are charged against the allowance for loan losses when
management believes that the collectibility of the principal is unlikely. Based
on this allowance calculation, management charged operations in the amount of
$116,000 for the three month period ended March 31, 2004 to provide for probable
losses related to uncollectible loans. Loan loss reserves were 1.75% and 1.59%
of gross loans, respectively, as of March 31, 2004 and 2003. The following table
presents an analysis of changes in the allowance for loan losses for the three
month period ended March 31, 2004 and 2003:
- 17 -
Three Months
Ended March 31,
2004 2003
--------- ---------
(Dollars in thousands)
Allowance for loan losses, beginning of period $ 11,613 $ 9,390
Net charge-offs:
Loans charged off:
Commercial 447 63
Consumer 185 75
Mortgage -- 38
--------- ---------
Total charge-offs 632 176
--------- ---------
Recoveries of loans previously charged off:
Commercial 54 104
Consumer 4 1
Mortgage 66 --
--------- ---------
Total recoveries 124 105
--------- ---------
Total net charge-offs 508 71
--------- ---------
Loss provisions charged to operations 116 600
--------- ---------
Allowance for loan losses, end of period $ 11,221 $ 9,919
========= =========
Net charge-offs to average loans during the
period (annualized) 0.32% 0.05%
Allowance as a percent of gross loans 1.75% 1.59%
The following table presents an analysis of nonperforming assets as of March 31,
2004 and 2003 and December 31, 2003:
Period
Period Ended
Ended March 31, December 31,
2004 2003 2003
---------- ---------- ------------
(Dollars in thousands)
Nonperforming assets:
Nonaccrual loans:
Commercial real estate $ 2,896 $ 3,726 $ 3,376
Construction 580 379 1,444
Commercial 443 546 390
Consumer 578 330 529
Mortgage 1,980 1,284 2,271
---------- ---------- ----------
Total nonaccrual loans 6,477 6,265 8,010
Foreclosed property held 416 888 978
---------- ---------- ----------
Total nonperforming assets $ 6,893 $ 7,153 $ 8,988
========== ========== ==========
Nonperforming loans to total loans 1.01% 1.01% 1.44%
Nonperforming assets to total assets 0.77% 0.84% 1.05%
Allowance coverage of nonperforming loans 173% 158% 140%
- 18 -
On March 31, 2004, nonperforming assets were $6.5 million, a $212,000 increase
from the same date in 2003. Nonperforming assets, which includes nonperforming
loans and foreclosed property, decreased both on an absolute basis and as a
percent of total assets. Nonperforming assets as a percent of total assets
decreased to .77% as of March 31, 2004 from .84% as of March 31, 2003.
A loan is considered impaired, based on current information and events, if it is
probable that the Bank will be unable to collect the scheduled payments of
principal and interest when due according to the contractual terms of the loan
agreement. Uncollateralized loans are measured for impairment based on the
present value of expected future cash flows discounted at the historical
effective interest rate, while all collateral-dependent loans are measured for
impairment based on the fair value of the collateral.
Loans deemed to be impaired at March 31, 2004 and 2003 amounted to $3.0 million
and $6.0 million, respectively. Average impaired loans during the first quarter
of 2004 were $3.0 million.
The Bank uses several factors in determining if a loan is impaired. The internal
asset classification procedures include a review of significant loans and
lending relationships by both management and third party credit review firms and
includes the accumulation of related data. This data includes loan payment
status, borrowers' financial data and borrowers' operating factors such as cash
flows, operating income or loss, etc. It is possible that these factors and
management's evaluation of the adequacy of the allowance for loan losses will
change.
Foreclosed property decreased to $416,000 at March 31, 2004 from $888,000
million at March 31, 2003. The Company is actively marketing all of its
foreclosed property. All nonperforming assets, including nonperforming loans and
foreclosed assets, are recorded at the lower of cost or market.
Liquidity and Capital Resources
The Company's liquidity management involves planning to meet the Company's
anticipated funding needs at a reasonable cost. Liquidity management is guided
by policies formulated by the Company's senior management and the
Asset/Liability Management Committee of the Company's Board of Directors. The
Company had $49.8 million in its most liquid assets, cash and cash equivalents,
as of March 31, 2004. The Company's principal sources of funds are loan
repayments, deposits, Federal Home Loan Bank borrowings and capital. Core
deposits (total deposits less certificates of deposits in the amount of $100,000
or more), one of the most stable sources of liquidity, together with equity
capital, funded 93.66% of total assets at March 31, 2004. In addition, the
Company has the ability to take advantage of various other funding programs
available from the Federal Home Loan Bank of Atlanta.
Shareholders' equity was $75.4 million or $11.48 per share at March 31, 2004.
Management believes this level of shareholders' equity provides adequate capital
to support the Company's growth and to maintain a well-capitalized position.
To be categorized as well capitalized, the Company and the Bank must maintain
minimum amounts and ratios. The Company's actual capital amounts and ratios as
of March 31, 2004 and the minimum requirements are presented in the following
table.
- 19 -
Minimum
Requirements To Be
Actual Well Capitalized
---------------------- ---------------------
(Dollars in thousands) Amount Ratio Amount Ratio
-------- ----- -------- -----
Capital Bank Corporation
Total Capital (to Risk Weighted Assets) $ 87,967 12.23% $ 71,942 10.00%
Tier I Capital (to Risk Weighted Assets) 78,596 10.92% 43,165 6.00%
Tier I Capital (to Average Assets) 78,596 9.19% 42,774 5.00%
Capital Bank
Total Capital (to Risk Weighted Assets) $ 84,545 11.76% $ 71,876 10.00%
Tier I Capital (to Risk Weighted Assets) 75,533 10.51% 43,126 6.00%
Tier I Capital (to Average Assets) 75,533 8.87% 42,554 5.00%
Effects of Inflation
Inflation can have a significant effect on the operating results of all
industries. However, management believes the inflationary factors are not as
critical to the banking industry as they are to other industries, due to the
high concentration of relatively short-duration monetary assets in the banking
industry. Inflation does, however, have some impact on the Company's growth,
earnings and total assets, and on its need to closely monitor capital levels.
Interest rates are significantly affected by inflation, but it is difficult to
assess the impact, since neither the timing nor the magnitude of the changes in
the various inflation indices coincides with changes in interest rates.
Inflation does impact the economic value of longer-term interest-bearing assets
and liabilities, but the Company attempts to limit its long-term assets and
liabilities.
Item 3 Quantitative and Qualitative Disclosures About Market Risk
The Company has not experienced any material change in the risk of its portfolio
of interest earning assets and interest bearing liabilities from December 31,
2003 to March 31, 2004.
Item 4 Controls and Procedures
As required by paragraph (b) of Rule 13a-15 under the Exchange Act, the
Company's management, with the participation of the Chief Executive Officer and
the Chief Financial Officer, has evaluated the effectiveness of the Company's
disclosure controls and procedures (as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Exchange Act) as of the end of the period covered by
this report. Based on such evaluation, the Company's Chief Executive Officer and
the Chief Financial Officer provide that, as of the end of the period covered by
this report, the Company's disclosure controls and procedures are effective, in
that they provide reasonable assurance that the information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods required by the United States Securities and Exchange Commission's rules
and forms. There have been no changes in the Company's internal control over
financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during the period covered by this report that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
- 20 -
Part II - Other Information
Item 1 Legal Proceedings
There are no material pending legal proceedings to which the Company is a party
or to which any of its property is subject. In addition, the Company is not
aware of any threatened litigation, unasserted claims or assessments that could
have a material adverse effect on the Company's business, operating results or
condition.
Item 2 Changes in Securities and Use of Proceeds
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
--------
Exhibit 4.1 In accordance with Item 601(b)(4)(iii)(A) of
Regulation S-K, certain instruments respecting
long-term debt of the registrant have been omitted but
will be furnished to the Commission upon request.
Exhibit 10.1 Employment agreement dated April 21, 2004 between B.
Grant Yarber and Capital Bank Corporation
Exhibit 10.2 Employment agreement dated April 16, 2004 between
Richard W. Edwards and Capital Bank Corporation
Exhibit 31.1 Certification of B. Grant Yarber pursuant to Rule
13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2 Certification of Richard W. Edwards pursuant to Rule
13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1 Certification of B. Grant Yarber pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 [This exhibit is being
furnished pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 and shall not, except to the extent
required by that act, be deemed to be incorporated by
reference into any document or filed herewith for
purposes of liability under the Securities Exchange
Act of 1934, as amended or the Securities Act of 1933,
as amended, as the case may be.]
- 21 -
Exhibit 32.2 Certification of Richard W. Edwards pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 [This exhibit is
being furnished pursuant to Section 906 of the
Sarbanes- Oxley Act of 2002 and shall not, except to
the extent required by that act, be deemed to be
incorporated by reference into any document or filed
herewith for purposes of liability under the
Securities Exchange Act of 1934, as amended or the
Securities Act of 1933, as amended, as the case may
be.]
(b) Reports on Form 8-K
On February 4, 2004, the Company furnished a Current Report on Form
8-K containing a press release reporting financial results for the
quarterly period ended December 31, 2003, which included selected
financial data for the quarter ended December 31, 2003 and for other
selected periods. Information furnished in the Form 8-K referenced
in the prior sentence is not deemed to be filed with the SEC.
On April 22, 2004, the Company furnished a Current Report on Form
8-K containing a press release on the appointment of Richard W.
Edwards as Chief Financial Officer and also reporting financial
results for the quarterly period ended March 31, 2004, which
included selected financial data for the quarter ended March 31,
2004 and for other selected periods. Information furnished in the
Form 8-K referenced in the prior sentence is not deemed to be filed
with the SEC.
On April 23, 2004, the Company furnished a Current Report on Form
8-K containing a press release on the appointment of B. Grant Yarber
as Chief Executive Officer. Information furnished in the Form 8-K
referenced in the prior sentence is not deemed to be filed with the
SEC.
- 22 -
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 thereunto duly authorized.
CAPITAL BANK CORPORATION
Date: May 7, 2004 By: /s/ Richard W. Edwards
------------------------------
Richard W. Edwards
Chief Financial Officer
- 23 -
Exhibit Index
- --------------------------------------------------------------------------------
Exhibit 4.1 In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K,
certain instruments respecting long-term debt of the
registrant have been omitted but will be furnished to the
Commission upon request.
- --------------------------------------------------------------------------------
Exhibit 10.1 Employment agreement dated April 21, 2004 between B. Grant
Yarber and Capital Bank Corporation
- --------------------------------------------------------------------------------
Exhibit 10.2 Employment agreement dated April 16, 2004 between Richard W.
Edwards and Capital Bank Corporation
- --------------------------------------------------------------------------------
Exhibit 31.1 Certification of B. Grant Yarber pursuant to Rule 13a-14(a)
and 15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
- --------------------------------------------------------------------------------
Exhibit 31.2 Certification of Richard W. Edwards pursuant to Rule 13a-14(a)
and 15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
- --------------------------------------------------------------------------------
Exhibit 32.1 Certification of B. Grant Yarber pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 [This exhibit is being furnished pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 and shall not,
except to the extent required by that act, be deemed to be
incorporated by reference into any document or filed herewith
for purposes of liability under the Securities Exchange Act of
1934, as amended, or the Securities Act of 1933, as amended,
as the case may be.]
- --------------------------------------------------------------------------------
Exhibit 32.2 Certification of Richard W. Edwards pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 [This exhibit is being furnished
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and
shall not, except to the extent required by that act, be
deemed to be incorporated by reference into any document or
filed herewith for purposes of liability under the Securities
Exchange Act of 1934, as amended, or the Securities Act of
1933, as amended, as the case may be.]
- --------------------------------------------------------------------------------
- 24 -