The corporate parent of Raleigh-based Capital Bank posted a $1.3 million profit in the second quarter, down 39 percent from a year ago.
The company managed to return to profitability in the latest quarter “despite the current recessionary environment,” CEO Grant Yarber said in a prepared statement today.
The bank also disclosed that it is planning to close two branches in Alamance County.
The company plans to consolidate its two branches in Burlington and Graham into one branch in each town.
“There just isn’t enough business growth there” to justify two branches, said chief financial officer Mike Moore.
But the bank previously announced it is opening new branches in West Cary and Holly Springs – targeted to open in August and September, respectively – so it will continue to have 32 branches in all. Those two locations offer more “growth opportunity,” Moore said.
In the second quarter, a higher provision for loan losses and increased expenses, including a $998,000 hike in payments to the Federal Deposit Insurance Corp., led to the lower profit. The FDIC is charging higher insurance premiums and recently levied a special assessment against all banks to shore up its insurance fund, which has been depleted by a wave of bank failures.
On the plus side, the bank’s net interest margin – a measure of its profitability on loans and investments – improved in the quarter compared to a year ago thanks to lower interest rates paid on deposits and higher loan rates.
“We remain cautiously optimistic that an improved net interest margin will have a positive impact on future earnings,” Yarber said in a statement.
The bank’s provision for loan losses nearly doubled to $1.7 million due to an expanded loan portfolio and weak real estate markets.
The percent of past due loans compared to total loans was 1.17 percent. That was up from 1.09 percent a year ago, but marked a decline from 1.34 percent in the first quarter.
Net income available to shareholders –- after dividends and other deductions related to the preferred stock issued when the bank accepted federal stimulus funds -- was $762,000, or 7 cents a share. That compares to 20 cents a share a year ago.