FOR IMMEDIATE RELEASE

Capital Bank Announces Financial Results for Fourth Quarter and Full Year of 2010

RALEIGH, N.C., January 31, 2011 – Capital Bank Corporation (Nasdaq: CBKN), the parent company of Capital Bank, today reported financial results for the fourth quarter and full year of 2010. Key items for the fourth quarter and full year of 2010 and a subsequent event from early 2011 include the following:

"The Company's quarterly results continued to be impacted by elevated credit losses, as well as by an increase in the valuation allowance on our deferred tax assets," stated Gene Taylor, Chairman and CEO. "Many of our borrowers remain under stress, but we continue to work aggressively to resolve our problem loans and have experienced measurable success with many of these efforts. While the fourth quarter results are a disappointment, they were expected. We are excited to have closed our investment and are eager to proceed with accelerating improvements throughout the Company."

Net Interest Income

Net interest income decreased by $691 thousand, declining from $13.0 million in the fourth quarter of 2009 to $12.3 million in the fourth quarter of 2010. This decrease was primarily due to a 4.3% drop in average earning assets from the fourth quarter of 2009 to the fourth quarter of 2010. Among other things, principal paydowns and charge-offs on the loan portfolio contributed to the reduction in earning assets. Additionally, net interest margin decreased from 3.25% in the fourth quarter of 2009 to 3.16% in the fourth quarter of 2010. Net interest margin was negatively affected by a decline in asset yields, partially offset by a decline in funding costs. Yields on earning assets fell from 5.15% for the quarter ended December 31, 2009 to 4.68% for the quarter ended December 31, 2010, and rates on total interest-bearing liabilities fell from 2.18% for the quarter ended December 31, 2009 to 1.71% for the quarter ended December 31, 2010.

In 2010, net interest income increased by $2.1 million, rising from $48.9 million in 2009 to $51.0 million in 2010. This improvement was due to an increase in net interest margin from 3.14% in 2009 to 3.27% in 2010, partially offset by a 0.4% decline in average earning assets. Yields on earning assets fell from 5.27% in 2009 to 4.93% in 2010, and rates on total interest-bearing liabilities fell from 2.45% in 2009 to 1.88% in 2010. The Company's interest rate swap on prime-indexed commercial loans, which expired in October 2009, increased interest income by $3.5 million in 2009, representing a benefit to net interest margin of 0.22%. Since the swap expired in 2009, the Company received no benefit in 2010.

Provision for Loan Losses and Asset Quality

Provision for loan losses for the quarter ended December 31, 2010 totaled $ 20.0 million, an increase from $11.8 million for the quarter ended December 31, 2009 and an increase from $6.8 million for the quarter ended September 30, 2010. The loan loss provision increased significantly in the current quarter due to higher levels of nonperforming assets, increased charge-offs, and downgrades to risk ratings of certain loans in the portfolio. Net charge-offs totaled $20.2 million, or 6.24% of average loans (annualized), in the fourth quarter of 2010, an increase from $5.3 million, or 1.52% of average loans (annualized), in the fourth quarter of 2009 and an increase from $6.3 million, or 1.87% of average loans (annualized), in the third quarter of 2010. Of the fourth quarter 2010 charge-offs, $9.5 million was related to one residential development project in the Company's Triangle region.

Provision for loan losses totaled $58.5 million in 2010, an increase from $ 23.1 million in 2009. Net charge-offs increased from $11.8 million, or 0.89% of average loans, in 2009 to $48.6 million, or 3.60% of average loans, in 2010. The loan loss provision also increased significantly in 2010 due to higher levels of nonperforming assets, increased charge-offs, and downgrades to risk ratings of certain loans in the portfolio.

Nonperforming assets, which include nonperforming loans and other real estate, totaled 5.69% of total assets as of December 31, 2010, an increase from 5.32% as of September 30, 2010 and 2.90% as of December 31, 2009. Nonperforming assets, including accruing restructured loans, totaled 5.98% of total assets as of December 31, 2010, an increase from 5.69% as of September 30, 2010 and 4.87% as of December 31, 2009. Loans past due more than 30 days, excluding nonperforming loans, increased to 1.08% of total loans as of December 31, 2010 compared to 1.00% of total loans as of September 30, 2010 and 0.67% as of December 31, 2009. The allowance for loan losses increased to 2.87% of total loans as of December 31, 2010 compared to 2.74% as of September 30, 2010 and 1.88% as of December 31, 2009. The allowance for loan losses covered 50% of nonperforming loans as of December 31, 2010, which was a decrease from 52% as of September 30, 2010 and 66% as of December 31, 2009.

Prior to the fourth quarter of 2010, the Company provided specific reserves on many of its impaired loans as part of the allowance for loan losses and charged down impaired loans to estimated fair value only if legal action had begun against a borrower in default or where a "confirmed loss" existed. However, during the fourth quarter of 2010, the Company began charging down all impaired loans to current fair value, and specific reserves are no longer provided. This change in practice has not impacted the amount of loan loss provision, since under both methods impaired loans are valued the same, but the change does increase the amount of net charge-offs recorded and decreases the level of allowance for loan losses. As of December 31, 2010 and 2009, the Company had recorded cumulative charge-offs of $17.9 million and $6.7 million, respectively, on impaired loans. If these cumulative charge-offs had instead been recorded as specific reserves, the allowance for loan losses would have increased from 2.87% of total loans to 4.24% of total loans as of December 31, 2010 and would have increased from 1.88% of total loans to 2.35% of total loans as of December 31, 2009.

Noninterest Income

Noninterest income increased by $6.2 million, rising from $1.8 million in the fourth quarter of 2009 to $8.0 million in the fourth quarter of 2010. This increase was primarily related to net gains of $5.3 million recorded on the sale of investment securities during the fourth quarter of 2010. The Company sold a significant portion of its agency bond and mortgage-backed securities portfolios and reinvested the proceeds in an effort to reposition the investment portfolio to execute certain interest rate risk management, liquidity, and tax strategies. Further, mortgage origination and other loan fees increased by $338 thousand as robust demand for residential mortgage originations and refinancings benefited income. Noninterest income was decreased in the fourth quarter of 2009 by an other-than-temporary impairment loss of $498 thousand that was recorded on an investment in trust preferred securities issued by a single entity.

In 2010, noninterest income increased by $5.4 million, rising from $10.2 million in 2009 to $15.5 million in 2010. This increase was primarily related to net gains of $5.9 million recorded on the sale of investment securities in 2010 as compared to net gains of $173 thousand recorded in 2009. Additionally, noninterest income was decreased in 2009 as an other-than-temporary impairment loss was recorded on an investment in trust preferred securities. The increase in noninterest income was partially offset by a nonrecurring BOLI gain of $913 thousand recognized in 2009.

Noninterest Expense

Noninterest expense increased $446 thousand, or 3%, rising from $14.7 million in the fourth quarter of 2009 to $15.1 million in the fourth quarter of 2010. FDIC deposit insurance expense increased by $979 thousand as the Company's assessment rate was raised in 2010. Salaries and employee benefits expense increased by $871 thousand due to lower deferred loan costs, which decrease expense, and increased employee health insurance expense. Other real estate losses and miscellaneous loan costs increased by $440 thousand, of which $307 thousand was related to valuation adjustments to and losses on the sale of other real estate with the remaining increase representing higher loan workout, appraisal and foreclosure costs to resolve problem assets. Further, professional fees increased by $412 thousand due to higher legal and consulting expense. Partially offsetting the increase in noninterest expense, other expense declined by $2.0 million. In the fourth quarter of 2009, the Company incurred $1.9 million of direct nonrecurring expenses related to its proposed public stock offering. These expenses were recorded in other noninterest expense and primarily represented investment banking, legal and accounting costs related to the proposed offering.

In 2010, noninterest expense increased $4.5 million, or 9%, rising from $49.8 million in 2009 to $54.3 million in 2010. This increase was primarily due to a $ 3.4 million increase in other real estate losses and miscellaneous loan costs, of which $2.2 million was related to valuation adjustments to and losses on the sale of other real estate. FDIC deposit insurance expense increased by $1.1 million due to an increase in the Company's assessment rate in 2010. Professional fees increased by $1.0 million from higher legal and consulting expense. Partially offsetting the increase in noninterest expense, other expense declined by $1.3 million. In the fourth quarter of 2009, the Company incurred $ 1.9 million of direct nonrecurring expenses related to its proposed public stock offering. These expenses were recorded in other noninterest expense and primarily represented investment banking, legal and accounting costs related to the proposed offering. In the third quarter of 2010, the Company also incurred direct nonrecurring expenses related to a separate proposed public stock offering that was later withdrawn.

Income Taxes

Income taxes recorded in both the three months and year ended December 31, 2010 were primarily impacted by an increased valuation allowance recorded against deferred tax assets in those periods. Due to continued net operating losses in 2010 and ongoing stress on the Company's financial performance and tax positions from elevated credit losses, the Company had fully reserved its deferred tax assets as of December 31, 2010. The valuation allowance recorded against deferred tax assets increased to $33.3 million as of December 31, 2010 from $8.8 million as of September 30, 2010.

Deferred tax assets represent timing differences in the recognition of certain tax benefits for accounting and income tax purposes, including the expected value of future tax savings that will be available to the Company to offset future taxable income through the carry forward of net operating losses. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. In future periods, the Company may be able to reduce some or all of the valuation allowance upon a determination that it will be able to realize such tax savings.

Balance Sheet

Loan balances declined by $135.8 million in 2010 due in part to net charge- offs for the year as well as net principal paydowns on outstanding loans. The declining loan portfolio reflects an effort by the Company to de-leverage its balance sheet to preserve capital and reduce its exposure to certain sectors of the commercial real estate market. Total investment securities decreased by $ 22.2 million over the same period as management sold certain municipal bonds to reduce the duration of its fixed income portfolio earlier in the year and then repositioned its portfolio later in the year to execute certain interest rate risk, liquidity, and tax strategies. The cash surrender value of BOLI policies decreased by $15.8 million after the Company surrendered certain BOLI contracts on former employees and directors in 2010 for the purpose of repositioning the BOLI portfolio for capital, liquidity and tax planning purposes.

Total deposits declined by $34.7 million in 2010. Savings accounts and time deposits increased by $1.7 million and $24.6 million, respectively, during 2010 while checking accounts and money market accounts decreased by $14.3 million and $46.7 million, respectively. Borrowings and securities sold under agreements to repurchase decreased by $52.5 million in 2010 as the Company paid off certain borrowings with increased liquidity from paydowns on loans and investment securities as well as the surrender of certain BOLI contracts.

***

Capital Bank Corporation, headquartered in Raleigh, N.C., with approximately $ 1.6 billion in total assets, offers a broad range of financial services. Capital Bank operates 32 banking offices in Asheville (4), Burlington (3), Cary (2), Clayton, Fayetteville (4), Graham, Hickory, Holly Springs, Mebane, Morrisville, Oxford, Pittsboro, Raleigh (5), Sanford (3), Siler City, Wake Forest and Zebulon.  The Company's website is http://www.capitalbank-us.com.

Forward-looking Statements

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 management of our growth, the risks associated with Capital Bank's loan portfolio, the inability to comply with the requirements in our Memorandum of Understanding with the FDIC and the North Carolina Office of the Commissioner of Banks, local economic conditions affecting retail and commercial real estate, ability to integrate our new management and directors without encountering potential difficulties, competition within the industry, dependence on key personnel, government regulation and the risks associated with identification, completion and integration of any future acquisitions. 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.

All selected financial data presented below is unaudited.

Capital Bank Corporation

Quarterly Results

End of Period Balances

Average Quarterly Balances

capital bank corporation

Nonperforming Assets

Allowance for Loan Losses

Other Financial Data and Ratios

capital bank corporation

Other Financial Data and Ratios – Continued

Supplemental Loan Portfolio Analysis

CAPITAL BANK CORPORATION

Supplemental Commercial Real Estate Analysis

Residential Construction & Development Loan Analysis

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