4/28/2006 - CapitalSouth Bancorp Posts First Quarter Results

Birmingham, Alabama (April 28, 2006) - CapitalSouth Bancorp ("CapitalSouth") (NASDAQ-NM: CAPB) today announced results for the first quarter of 2006.

Total assets at the end of the quarter were $435.7 million, a 22.5% increase over the $355.6 million at the end of the first quarter 2005. Deposits grew 34.5% during the same period, ending the first quarter 2006 at $363.0 million. Shareholders' equity ended the first quarter at $38.9 million, or $13.13 per share, up $1.71 from March 31, 2005.

For the quarter ended March 31, 2006, CapitalSouth reported earnings of $464,246, down 27.6% from the first quarter 2005. Diluted earnings per share of $.15 were down 46.4% from the $.28 reported for the first quarter 2005. Earnings in the first quarter 2006 resulted in a return on average shareholders' equity (ROE) of 4.84% compared to 10.16% in the same quarter of 2005, and a return on average assets (ROA) of .44% compared to .74% for the same quarter of 2005.

"With the significant investments made in 2005 in opening three new branch offices and the additional equity raised from the IPO, we anticipated the negative impact on our earnings, ROE, and per share ratios. We believe that these investments are necessary for the Company to continue to grow at higher than peer bank levels and should result in greater shareholder value," said W. Dan Puckett, Chairman and Chief Executive Officer. "I appreciate the confidence our shareholders have placed in us in support of this growth strategy."

During the first quarter 2006, CapitalSouth recognized $44,000 in net loan losses, representing .05% of average total loans for the period. During the fourth quarter 2005, CapitalSouth recognized $44,000 in loan losses, representing .06% of average loans for the period. At March 31, 2006, nonperforming assets were .72% of period end loans and other real estate, compared to .55% at December 31, 2005. The allowance for loan losses as a percentage of period end nonperforming loans was 189.60% at March 31, 2006, down from 228.98% at December 31, 2005.

CapitalSouth presently expects to record a gain of approximately $674,000 after tax in the second quarter of 2006 from stock that CapitalSouth owns in Consumer National Bank, a national banking association based in Jackson, Mississippi ("CNB"), in connection with the acquisition of CNB by another bank. The merger consideration is valued at $10.59 per share and generally is comprised of equal parts cash and stock of the acquirer, subject to exceptions for certain classes of shareholders of CNB who will exclusively receive cash in the amount of $10.59 per share. The acquirer has indicated that shareholders, subject to maintaining the overall allocation of types of consideration between cash and stock, will be permitted to make elections between cash and stock consideration. CapitalSouth is desirous of receiving solely cash for its CNB stock and voted against the merger in order to preserve its right to dissent in the future and be paid solely in cash at either a negotiated value or at an appraised value set by the Comptroller of the Currency. CapitalSouth presently intends to pursue all avenues in order to obtain payment solely in cash for its shares of CNB stock. The amount of this gain could change if CapitalSouth decides to dissent from the transaction. Certain conditions to the transaction, including receipt of regulatory approvals, have not yet been satisfied.

CapitalSouth Bancorp is a bank holding company operating nine full service banking offices and one loan production office through two bank subsidiaries as follows: CapitalSouth Bank with seven full service banking offices in Birmingham and Huntsville Alabama, and Jacksonville Florida, as well as a loan production office in Fort Lauderdale Florida; and Capital Bank with two full service banking offices in Montgomery Alabama. CapitalSouth targets small to medium-sized businesses in the markets it serves. Two of CapitalSouth Bank's offices operate under the name "Banco Hispano" and provide financial services to the growing Latino community prevalent in their areas. CapitalSouth offers SBA lending services and other similar programs for business owners through its Business Capital Group, which operates through full-service offices as well as the loan production offices. CapitalSouth also provides Internet banking services at www.capitalsouthbank.com and www.capitalbankal.com as well as personal investment services.

CapitalSouth Bancorp common stock is traded on the NASDAQ National Market System under the symbol "CAPB".

This press release contains "forward-looking" statements as defined by the Private Securities Litigation Reform Act of 1995, which is based on CapitalSouth's current expectations, estimates and projections about future events and financial trends affecting the financial condition of its business. These statements are not historical facts or guarantees of future performance, events, or results. Such statements involve potential risks and uncertainties and, accordingly, actual performance results may differ materially. CapitalSouth undertakes no obligation to publicly update or revise forward-looking statements, whether as a result of new, updated information, future events, or otherwise.