EX-99
2
firststateexb99dec9.txt

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Press Release - December 9, 2005                   For Immediate Release

1st State Bancorp, Inc.                            For more information contact:
                                                                James C. McGill
                                                                (336) 227 - 8861

                   1st State Bancorp, Inc. announces earnings

Burlington, North Carolina      1st State Bancorp, Inc.   (Nasdaq: FSBC)


1st State Bancorp, Inc. (Nasdaq: FSBC), the parent holding company for 1st State
Bank, has reported earnings for the quarter and year ended September 30, 2005.


Net income for the quarter ended September 30, 2005 was $907,000 or basic and
diluted earnings per share of $0.33 and $0.31, respectively. These results
compare with net income of $954,000 or basic and diluted earnings per share of
$0.34 and $0.32, respectively, reported in the prior year's quarter. The
decrease in earnings during the quarter ended September 30, 2005 was due in part
to the Company's increased loan loss provision. The Company recorded a loan loss
provision of $156,000 for the quarter ended September 30, 2005 compared to
$60,000 for the same period last year.


Net interest income increased to $3.2 million for the quarter ended September
30, 2005 from $3.0 million in the prior year's quarter. The increased net
interest income results primarily from higher net interest margins. This
improvement results primarily from increased interest income from the recent
rise in short term rates by the Federal Reserve Board.


Net income for the year ended September 30, 2005 was $3,381,000 or basic and
diluted earnings per share of $1.21 and $1.14, respectively. These results
compare with net income of $3,464,000 or basic and diluted earnings of $1.23 and
$1.17, respectively. The decrease in earnings was due in part to the Company's
increased loan loss provision. The Company recorded a loan loss provision of
$1,046,000 for the year ended September 30, 2005 compared to $240,000 in the
prior year. Net interest income increased to $12.5 million for the current year
compared to $11.5 million in the prior year.


Nonperforming assets totaled $2.8 million a September 30, 2005 compare with $4.0
million at September 30, 2004. The allowance for loan losses was $4,292,000 at
year-end which represents 1.82% of loans held for investment compared to 1.68%
at September 30, 2004. The increase in the provision for loan losses took into
account, among other factors, this year's net chargeoffs of $710,000 and the
creation of a specific reserve of $900,000 on a credit that has been identified
as a potential loan problem.


At September 30, 2005, 1st State Bancorp, Inc. had total assets of $368 million,
deposits of $273 million and stockholders' equity of $66.2 million. The book
value per share of common stock was $22.85 per share at September 30, 2005.


As announced on June 29, 2005, 1st State Bancorp, Inc. executed a definitive
merger agreement with Capital Bank Corporation, headquartered in Raleigh, North
Carolina whereby the Company will be merged with and into Capital Bank. The
transaction is expected to be completed in January 2006, subject to approval of
shareholders of both companies and regulators and other normal and customary
closing conditions.

 2

1st State Bancorp, Inc., through its subsidiary 1st State Bank, currently
services its customers from seven full service banking offices in Alamance
County.


Statements contained in this release, which are not historical facts, are
forward-looking statements as defined in the Private Litigation Reform Act of
1995. Such forward-looking statements are subject to risks and uncertainties
which could cause actual results to differ materially from those currently
anticipated due to a number of factors which include the effects of future
economic conditions, governmental fiscal and monetary policies, legislative and
regulatory changes, the risks of changes in interest rates, the effects of
competition, and including without limitation to other factors that could cause
actual results to differ materially as discussed in documents filed by the
Company with the Securities and Exchange Commission from time to time.


 3

1st State Bancorp, Inc. (Nasdaq: FSBC - News)
                                 ----   ----
Summary of Financial Highlights

Selected Financial Data:                       Sep 30,                Sep 30,
(in thousands - unaudited)                      2005                   2004

Total assets                                  $367,839                $377,714
Loans receivable, net                          231,667                 231,763
Loans held for sale                              1,010                     930
Investment securities                          110,515                 119,612
Cash and cash equivalents                        8,016                   9,854
Deposit accounts                               272,825                 262,734
Advances from Federal Home Loan Bank            25,000                  44,000
Dividend payable                                   290                     296
Total stockholders' equity                      66,235                  65,914

Selected Operating Data:           Three months ended            Year ended
(in thousands - unaudited)        9/30/2005  9/30/2004      9/30/2005  9/30/2004

Interest income                    5,024      4,235          18,658     16,342
Interest expense                   1,784      1,199           6,122      4,793
Net interest income                3,240      3,036          12,536     11,549

Provision for loan losses            156         60           1,046        240
Net interest income after
   provision for loan losses       3,084      2,976          11,490     11,309

Non-interest income                  487        539           2,121      2,341
Non-interest expense               2,126      2,048           8,330      8,280

Income before taxes                1,445      1,467           5,281      5,370

Income tax expense                   537        513           1,900      1,906

Net income                           908        954           3,381      3,464

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Per Share Data: Three months ended Year ended (unaudited) 9/30/2005 9/30/2004 9/30/2005 9/30/2004 Basic earnings per share $0.33 $0.34 $1.21 $1.23 Diluted earnings per share 0.31 0.32 1.14 1.17 Average shares outstanding - basic 2,792,167 2,827,413 2,805,440 2,818,510 Average shares outstanding - diluted 2,975,190 2,968,525 2,966,346 2,966,711 Cash dividends per share $0.10 $0.10 $0.40 $0.40 Book value at September 30 $22.85 $22.25 Shares outstanding at September 30 2,898,637 2,962,323
Interest Margin Three months ended Year ended (% of average assets - unaudited) 9/30/2005 9/30/2004 9/30/2005 9/30/2004 Yield on interest earning assets 5.74% 4.75% 5.32% 4.72% Cost of interest bearing liabilities 2.55% 1.66% 2.18% 1.69% Interest rate spread 3.19% 3.09% 3.14% 3.03% Net interest income as a percentage of average interest earning assets 3.70% 3.41% 3.57% 3.34%
Asset Quality Sep 30, Sep 30, ( unaudited) 2005 2004 Allowance for loan losses to gross loans held for investment 1.82% 1.68% Nonperforming assets to total assets 0.77% 1.05%

The following information was filed by 1St State Bancorp Inc on Friday, December 9, 2005 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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