UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the Quarterly Period Ended March 31, 1999

              [ ] 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.)

                            4400 Falls of Neuse Road
                          Raleigh, North Carolina 27609
               (Address of Principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (919) 878-3100

                                  Capital Bank
                            4400 Falls of Neuse Road
                          Raleigh, North Carolina 27609
                                December 31, 1998
      (Former name, address, and fiscal year, if changed since last report)

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

As of May 9, 1999,  there were issued and  outstanding  3,658,689  shares of the
Registrant's common stock, no par value.
<PAGE>
                            Capital Bank Corporation

CONTENTS

PART I - FINANCIAL INFORMATION          

         Item 1. Condensed Financial Statements

         Consolidated statements of financial condition at March 31, 1999
              and December 31, 1998 (Unaudited)  

         Consolidated statements of income (loss) for the three months
              ended March 31, 1999 and March 31, 1998 (Unaudited)

         Consolidated statements of cash flows for the three months ended
              March 31, 1999 and March 31, 1998 (Unaudited) 

         Notes to consolidated financial statements   

         Item 2. Management's Discussion and Analysis of Financial Condition and
                 Results of Operations  

         Item 3. Quantitative and Qualitative Disclosures About Market Risk 


PART II - OTHER INFORMATION

         Item 1. Legal Proceedings  

         Item 2. Changes in Securities and Use of Proceeds 

         Item 3. Defaults Upon Senior Securities 

         Item 4. Submission of Matters to a Vote of Security Holders 

         Item 5. Other Information  

         Item 6. Exhibits and Reports on Form 8-K   


         Signatures   
<PAGE>
<TABLE>
<CAPTION>
CAPITAL BANK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, 1999 and December 31, 1998
                                                               March 31,     December 31,
ASSETS                                                           1999           1998
                                                               ---------      ---------
                                                             (In thousands)  (Unaudited)
<S>                                                            <C>            <C>      
Cash and due from banks ..................................     $   7,143      $  10,365
Federal funds sold .......................................         5,085         16,400
Investment securities
      Available for sale, at fair value ..................        46,929         34,066
      Held-to-maturity, at amortized cost ................         2,000          3,560
                                                               ---------      ---------
           Total investment securities ...................        48,929         37,626
                                                               ---------      ---------
Loans-net of unearned income .............................       119,221        110,779
Allowance for loan losses ................................        (1,621)        (1,457)
                                                               ---------      ---------
           Net loans .....................................       117,600        109,322
                                                               ---------      ---------
Premises and equipment, net ..............................         2,805          2,592
Accrued interest receivable ..............................         1,020            853
Deposit premium and goodwill, net ........................         1,779          1,833
Other assets .............................................           781          1,002
                Total assets .............................     $ 185,142      $ 179,993
                                                               =========      =========
LIABILITIES
Deposits
      Demand, non-interest bearing .......................     $   7,256      $   7,539
      Savings and interest bearing demand deposits .......        35,615         35,689
      Time deposits ......................................        96,511         94,115
                                                               ---------      ---------
           Total deposits ................................       139,382        137,343
                                                               ---------      ---------
Accrued interest payable .................................           539            501
Repurchase agreements ....................................         2,477          2,501
Borrowings ...............................................         8,652          5,066
Other liabilities ........................................         2,414          1,075
                                                               ---------      ---------
                Total liabilities ........................       153,464        146,486

STOCKHOLDERS' EQUITY
Common stock, no par value; 20,000,000 shares
      authorized; 3,658,689 shares issued and outstanding         34,788         34,788
Accumulated deficit ......................................        (2,956)        (1,255)
Unearned ESOP shares .....................................           (52)           (66)
Deferred stock awards ....................................          --             (195)
Accumulated other comprehensive income (loss) ............          (102)           235
                                                               ---------      ---------
                Total stockholders' equity ...............        31,678         33,507
                                                               ---------      ---------
                Total liabilities and stockholders' equity     $ 185,142      $ 179,993
                                                               =========      =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPITAL BANK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Three Months Ended March 31, 1999 and 1998
                                                                     1999        1998
                                                                   -------      -------
                                                               (In thousands) (Unaudited)
<S>                                                                <C>          <C>    
Interest income:
      Loans and loan fees ....................................     $ 2,389      $ 1,388
      Investment securities ..................................         737          524
      Federal funds and other interest income ................          99          301
                                                                   -------      -------
           Total interest income .............................       3,225        2,213
                                                                   -------      -------
Interest expense:
      Deposits ...............................................       1,547        1,122
      Borrowings and repurchase agreements ...................         118            5
                                                                   -------      -------
           Total interest expense ............................       1,665        1,127
                                                                   -------      -------
           Net interest income ...............................       1,560        1,086
      Provision for loan losses ..............................         204          174
                                                                   -------      -------
           Net interest income after provision for loan losses       1,356          912
Noninterest income:
      Service charges and other fees .........................          97           66
      Other noninterest income ...............................         175           15
                                                                   -------      -------
           Total noninterest income ..........................         272           81
Noninterest expenses:
      Salaries and employee benefits .........................         869          597
      Occupancy ..............................................         112           81
      Data processing ........................................          81           50
      Directors fees .........................................          79           35
      Advertising ............................................          63           53
      Furniture and equipment ................................          63           56
      Amortization of intangibles ............................          54           54
      Merger related expenses ................................       1,647         --
      Other expenses .........................................         214          176
                                                                   -------      -------
           Total noninterest expenses ........................       3,182        1,102
                                                                   -------      -------
                Net loss before tax expense ..................      (1,554)        (109)
      Income tax expense (benefit) ...........................         (36)           1
                                                                   -------      -------

                Net loss .....................................     $(1,518)     $  (110)
                                                                   =======      ======= 
Earnings per share - basic and diluted .......................     $ (0.41)     $ (0.03)
                                                                   =======      ======= 
Dividends per share ..........................................     $  0.05      $  0.05
                                                                   =======      ======= 
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPITAL BANK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1999 and 1998
                                                                      1999          1998
                                                                    --------      -------- 
                                                                 (In thousands)   (Unaudited)
<S>                                                                 <C>           <C>      
Cash Flows From Operating Activities
      Net loss ................................................     $ (1,518)     $   (110)
      Adjustments to reconcile net loss to net cash provided
           by (used in) operating activities:
           Amortization of deposit premium and goodwill .......           54            54
           Depreciation .......................................          118            47
           Amortization of premium on securities, net .........            3             2
           MRP and ESOP compensation ..........................          209            25
           Provision for loan losses ..........................          204           174
           Changes in assets and liabilities:
                Accrued interest receivable ...................         (167)          123
                Prepaid expenses and other assets .............          221          (154)
                Other liabilities .............................        1,377           (99)
                                                                    --------      -------- 
                     Net cash provided by operating activities           501            62
                                                                    --------      -------- 
Cash Flows From Investing Activities
      Loan originations, net of principal repayments ..........       (8,482)      (14,191)
      Additions to premises and equipment .....................         (331)       (1,110)
      Purchase of Federal Home Loan Bank stock ................         (193)          (63)
      Purchase of securities available for sale ...............      (16,281)       (3,234)
      Proceeds from maturities of securities available for sale        3,271         4,700
      Proceeds from maturities of securities held to maturity .        1,560         1,000
                                                                    --------      -------- 
                     Net cash used by investing activities ....      (20,456)      (12,898)
                                                                    --------      -------- 
Cash Flows From Financing Activities
      Net increase in deposits ................................        2,039         5,042
      Net decrease in repurchase agreements ...................          (24)         --
      Net increase (decrease) in borrowings ...................        3,586            (4)
      Cash dividends ..........................................         (183)         (181)
                                                                    --------      -------- 
                     Net cash provided by financing activities         5,418         4,857
                                                                    --------      -------- 
                     Net change in cash and cash equivalents ..      (14,537)       (7,979)
      Cash and cash equivalents:
           Beginning ..........................................       26,765        30,046
           Ending .............................................     $ 12,228      $ 22,067
                                                                    ========      ========
</TABLE>
<PAGE>
Notes to the Consolidated Financial Statements

1.     Significant Accounting Policies and Interim Reporting

The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial  information,  with the  instructions to Form 10-Q and Regulation S-X.
Accordingly,  they do not include all of the information and footnotes  required
by generally accepted accounting  principles for complete financial  statements.
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.  The results of operations for the three month period ended
March 31, 1999 are not necessarily  indicative of the results of operations that
may be expected for the year ended December 31, 1999.

The  accounting  policies  followed  are as set  forth in Note 1 of the Notes to
Financial Statements in the 1998 Capital Bank Corporation annual report.

2.     Changes in Operating Structure

Capital Bank (the "Bank") was  incorporated  under the laws of North Carolina on
May 30, 1997 and commenced  operations  on June 20, 1997.  The Bank is a locally
owned  community bank engaged in general  commercial  banking,  providing a full
range of banking services.  The majority of the Bank's customers are individuals
and small to  medium-size  businesses.  The Bank's  primary source of revenue is
interest earned from loans to customers and from invested cash and securities.

Prior to March 31,  1999,  the Bank  operated  through its  corporate  office in
Raleigh,  North Carolina,  two branches in Cary, North Carolina and two branches
in Sanford,  North Carolina.  At a special meeting of shareholders held on March
26, 1999,  the  shareholders  of Capital Bank  approved  the  reorganization  of
Capital Bank into a bank holding company named "Capital Bank  Corporation"  (the
"Company").  In the holding company reorganization,  the shareholders of Capital
Bank each  received  a right to one  share of  Company  stock for each  share of
Capital  Bank stock that they owned.  Thus,  the  shareholders  of Capital  Bank
before  the  holding  company  reorganization  are now the  shareholders  of the
Company. In addition, on March 31, 1999 the Company completed its acquisition of
Home  Savings Bank of Siler City,  Inc.,  SSB in a  stock-for-stock  exchange in
which the Company issued  1,181,038  shares of its Common Stock. As used in this
report,   the  term  "Company"  refers  to  Capital  Bank  Corporation  and  its
subsidiaries, Capital Bank and Home Savings Bank of Siler City, Inc., SSB, after
the holding company reorganization.

As a result  of the  reorganization  and  acquisition  which  was  treated  as a
pooling-of-interest transaction, all amounts in these statements are restated to
reflect on a consolidated basis as if the current organization had been in place
during both operating periods.

3.     Comprehensive Income

On January 1, 1998,  the  Company  adopted  Statement  of  Financial  Accounting
Standards  No.  130  "Reporting   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.  The  Company's  total
comprehensive loss and information  concerning the Company's other comprehensive
income  items for the three month  periods  ended March 31, 1999 and 1998 are as
follows:
<PAGE>
<TABLE>
<CAPTION>
                                                                      1999          1998
                                                                     -------      ------- 
(In thousands)                                                            (Unaudited)
<S>                                                                  <C>          <C>     
      Net loss before comprehensive items ......................     $(1,544)     $  (173)
      Unrealized gains/(losses) on securities available for sale        (337)           6
                                                                     -------      ------- 
      Comprehensive net loss ...................................     $(1,881)     $  (167)
                                                                     =======      ======= 
</TABLE>

4.     Earnings Per Share

The Bank adopted Statement of Financial  Accounting  Standards ("SFAS") No. 128,
"Earnings Per Share" as of December 31, 1997.  In accordance  with SFAS 128, the
Bank has  presented  both basic and diluted EPS on the face of the  Statement of
Income (loss).  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.  For loss periods,  diluted EPS is the same as basic
EPS due to the fact that including common stock equivalents computed as a result
of the 215,248 stock options outstanding in the calculation of diluted EPS would
be antidilutive.

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, 1999 for Capital  Bank
Corporation  and its wholly  owned  subsidiaries,  Capital Bank and Home Savings
Bank of Siler City, SSB, Inc. As a result of the reorganization and acquisition,
all amount in these  statements are reflected on a consolidated  basis as if the
current  organization  had been in place  during both  operating  periods.  This
discussion and analysis is intended to provide pertinent information  concerning
financial position, results of operations,  liquidity, and capital resources. 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 and Section 21E of the
Securities  Exchange  Act of 1934,  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  under  Exhibit
99.01,  "Risk  Factors," in the Company's  Annual Report on Form 10-K filed with
the FDIC and included as an exhibit to the Company's S-8 Registration  Statement
filed with the SEC on April 23, 1999.
<PAGE>
Overview

Capital Bank was  incorporated  under the laws of North Carolina on May 30, 1997
and commenced banking operations on June 20, 1997 in its main office in Raleigh,
North Carolina,  and two branch locations in Sanford,  North Carolina.  In March
1998,  the Bank opened a branch in Cary,  North  Carolina,  closely  followed by
another branch in the Cary area, which opened in September of that same year.

On August 6,  1998,  the Bank  announced  its plan to  organize  a bank  holding
company to be known as Capital Bank  Corporation.  In September,  1998, the Bank
entered  into a definite  agreement  to acquire Home Savings Bank of Siler City,
SSB, Inc. (Home Savings). Home Savings had total assets in excess of $59 million
and operated from its main office in Siler City.

On October 19, 1998, Capital Bank Corporation filed a Registration  Statement on
Form S-4 with the  Securities  and  Exchange  Commission  to register  under the
Securities  Act of 1933 up to 3,694,651  shares of its common stock to be issued
in connection  with Capital Bank's holding company  reorganization  and the Home
Savings acquisition.

Regulatory  and  shareholder  approval  was  completed  for  both  of the  above
transactions in 1999 and the Corporation was formed in March, 1999. On that same
day,  Capital Bank and Home Savings Bank of Siler City,  SSB, Inc. became wholly
owned subsidiaries of the Company.

The  Company  has no  operations  other  than  those  of its  subsidiaries.  The
subsidiaries  are  full-service  community  banks.  The Company's  profitability
depends  principally  upon the net interest  income,  provision for loan losses,
noninterest income and noninterest expenses of the banks.

Financial Condition

Total  consolidated  assets of the Company for the quarter  ended March 31, 1999
were $185.1 million compared to $180.0 million at December 31, 1998, an increase
of $5.1 million or 3%. On March 31,  1999,  loans were $119.2  million,  up $8.4
million or 8% compared to December 31, 1998.  Investment  securities  were $48.9
million and Federal funds sold were $5.1 million at period end. During the three
month  period,  Federal  Funds  sold  declined  by $11.3  million  as this asset
category was redeployed into higher yielding loans and securities. The allowance
for loan losses on March 31, 1999 was $1.6 million and represented approximately
1.36% of total loans.  Management  believes  that the amount of the allowance is
adequate at this time.

Deposits on March 31, 1999 were $139.4  million,  an increase of $2.0 million or
1% from December 31, 1998.  Earning  assets  represented  94% of total assets on
March 31, 1999. Total  consolidated  stockholders'  equity was $ 31.7 million at
March 31, 1999.

Results of Operations

First Quarter 1998 vs. First Quarter 1997
-----------------------------------------

The  Company  incurred a net loss for the  quarter  ended March 31, 1999 of $1.5
million or $.41 a share  compared to a loss of $110,000 or $.03 per share in the
first quarter of 1998.  Included in the loss for 1999 were certain  nonrecurring
charges  related  to the  establishment  of the  Bank  Holding  Company  and the
acquisition of Home Savings Bank of Siler City,  SSB of $1.6 million.  Excluding
those  costs,  the  Company  has  consolidated  net income  from  operations  of
approximately $129,000 or $0.04 per share.
<PAGE>
Net interest  income in the first quarter was $1.6  million,  up 44% compared to
$1.1 million in the first quarter of 1998.  The  Company's  net interest  margin
(net interest  income as a percent of average  earning  assets) was 3.59% in the
first quarter of 1999.

The provision  for loan losses was $204,000 for the first quarter of 1999.  This
provision  was used to build the allowance for loan losses to a prudent level to
support the Company's  actual loan growth.  At March 31, 1999, the allowance for
loan  losses was 1.36% of total  loans.  Loans 30 days or more past due  totaled
$281,000 and represented .71% of total loans on March 31, 1999.

Non-interest  income for the first  quarter  of 1999 was  $272,000  compared  to
$81,000 in the first  quarter of 1998.  The increase in  non-interest  income is
primarily  attributable  to mortgage  origination  fees and loan  servicing fees
associated with accounts  receivable  financing.  These two business  activities
were new revenue sources in latter part of 1998.

Non-interest  expense was $3.2  million for the first  quarter of 1999  compared
with $1.1 million in the first quarter of 1998.  Nonrecurring charges related to
the Home Savings  acquisition and the setup of the Capital Bank Corporation bank
holding  company  represented  the  largest  expense  category.  Those  expenses
amounted  to  approximately  $1.6  million.   Salaries  and  employee  benefits,
representing the next largest expense  category,  increased from $597,000 in the
first  quarter of 1998 to  $869,000 in the same  period in 1999.  This  increase
reflects an increase in the number of  personnel  employed by the Company as the
Company must maintain  adequate  staffing levels in order to meet customer needs
and to keep pace with its expected growth.  As of March 31, 1999 the Company had
63 full-time equivalent employees.  Occupancy costs, the third highest component
of  non-interest  expenses,  increased from $81,000 in 1998 to $112,000 in 1999.
This  increase is primarily  associated  with the leasing of  additional  office
space as a result of growth in the lending  area and the  related  growth in the
number of  personnel  needed in that  department.  Although  management  expects
noninterest  expense to increase on an absolute  basis as the Company  continues
its growth,  these expenses as a percentage of asset size and operating  revenue
are anticipated to decrease over time.

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 Board. The Company had $12.2 million
in its most  liquid  assets,  cash and cash  equivalents  at  quarter  end.  The
Company's  principal  sources of funds are deposits,  short term  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 85% of total assets at March 31, 1999. In
addition,  the  Company  has the ability to take  advantage  of various  funding
programs available from the Federal Home Loan Bank of Atlanta.
<PAGE>
Stockholder's  equity was $31.7  million  or $8.62 per share at March 31,  1999.
Management believes this level of shareholders' equity provides adequate capital
to  support  the  Company's  growth  for the next 12 months  and to  maintain  a
well-capitalized  position. At March 31, 1999, Capital Bank had a leverage ratio
of 18.1%, a Tier 1 capital ratio of 22.5%, and a total risk-based  capital ratio
of 23.7% and Home Savings Bank had a leverage  ratio of 13.8%,  a Tier 1 capital
ratio of 36.5%, and a total risk-based  capital ratio of 37.8%. These ratios far
exceed the federal  regulatory  minimum  requirements  for a  "well-capitalized"
bank".  Management's  challenge  is to use this  capital to  implement a prudent
growth  strategy of branch and bank  acquisitions  while  growing  the  existing
branch structure  through quality service and  responsiveness  to its customers'
needs,  although  there  is no  assurance  that  the  Company  will  meet  these
objectives.

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.

Year 2000

As the Year 2000 approaches,  an important  business issue has emerged regarding
whether or not existing computer systems and other operating systems can process
this date value  properly.  The problem is the result of computer  programs  and
related  logic which use a two digit value to define a particular  calendar year
(i.e. 99 for 1999). When this logic is used,  computer systems can not recognize
the two digit code "00"  associated  with the Year 2000 as coming  after 99. The
issue is  significant  because many computer  systems  deployed  throughout  the
business world, not just in banks, use software which contain the two digit date
logic.

Both Capital Bank and Home  Savings Bank use outside data  processing  companies
(service  bureaus) to provide  computer  processing  systems  for their  primary
banking products including loans, deposits,  ATM's, check processing and general
ledger.  Currently,  Capital Bank and Home Savings use different service bureaus
for all of the above products.  However,  before  December 31, 1999,  management
intends  to have  all of the  above  systems  converted  to the  service  bureau
currently  used by Capital Bank except for the Mortgage  Lending  system,  which
will remain at Home Savings current service bureau.

The computer  software used by the Capital Bank service bureau was developed and
is maintained by a third party vendor.  This same software is used by many banks
throughout  the country and uses a five-digit  date logic  designed to avoid the
problems associated with the two digit logic discussed above.
<PAGE>
In addition to the service  bureau,  the  Company  utilizes  personal  computers
configured into six local area networks (LANS) which are, in turn,  connected to
each  other  through a wide  area  network  (WAN).  All key  equipment  has been
purchased  new  since  1997 and has  subsequently  been  tested  for  Year  2000
readiness  by an  independent  consultant.  The test results  indicate  that all
equipment will function properly into the Year 2000.

In addition to the  service  bureau  applications,  the  Company  uses  software
distributed  through the LAN/WAN network for functions such as word  processing,
E-mail, spreadsheet,  teller transactions,  document preparation and new account
setup.  All these  software  products are purchased or licensed from third party
vendors.  It should be noted that  Capital  Bank  Corporation  does not write or
develop any of its own  computer  applications  and all key third party  vendors
have provided the Company with written certification that their software is Year
2000 ready with the exception of one public utility company used by Home Savings
Bank. That notification is still pending.

In addition to receiving  these  assurances from third party vendors the Company
has instituted a Year 2000  compliance  program whereby it is reviewing the year
2000 issue on a comprehensive,  Company-wide basis. This program is administered
by project teams at both Banks consisting of executive and senior  management as
well as a representative from the Board of Directors.

As of March 31,  1999,  the Company had  completed  its  assessment  of existing
computer  systems  and   applications   and  had  identified   mission  critical
applications.  Where  possible,  the Bank is testing these systems and is in the
process of  reviewing  third  party test  results.  However,  the Year 2000 is a
global issue which extends  beyond the control of Capital Bank  Corporation  and
may effect the providers of services such as power and telecommunications. These
services  are  critical  to the  ongoing  operations  of the  Company and in the
unlikely event of an interruption in these services,  it is management's opinion
that such a failure will be quickly resolved.

As testing of the Company's  mission critical systems is completed,  the Company
will  develop  detailed  contingency  plans as necessary  for each  system.  The
Company  has  developed a general  business  resumption  contingency  plan which
provides for the  implementation of manual processes on a temporary basis should
any computer application malfunction on or after January 1, 2000.

The  Company  has  budgeted  $93,000  for the Year  2000  program  and has spent
approximately $67,000 to date.

As a lending  institution  the Company is exposed to potential risk if borrowers
suffer year 2000 related  difficulties  and are unable to repay their loans.  In
July 1998, the Company sent informational material and a year 2000 questionnaire
to all large borrowers  which focuses on their year 2000  readiness.  During the
third quarter 1998,  the Company's  loan officers and account  managers met with
these customers to personally review the answers to these  questionnaires and to
discuss  the  impact  of the  Year  2000 on their  operations.  The  Company  is
evaluating  the  information  obtained from these meetings in order to determine
what  impact the Year 2000 will have on their  financial  performance  and their
ability to make loan  payments.  Thus far none of the Company's  borrowers  have
reported the  expectation  of material  adverse  impacts as a result of the year
2000 issue.

Based on the information now available, the Company anticipates that the systems
it uses will  properly  process  dates in the year 2000 and  beyond and that the
costs  incurred in achieving full year 2000  compliance  will not be material to
the Company's results of operation, liquidity or capital resources.
<PAGE>
Item 3                Quantitative and Qualitative Disclosures About Market Risk
------                ----------------------------------------------------------

The Company has not experienced  any  substantive  change in it's portfolio risk
during the 3 month period ended March 31, 1999.

Part II - Other Information

Item 1                Legal Proceedings
------                -----------------

There are no pending  legal  proceedings  to which the  Company is a party or of
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
------                -----------------------------------------

At a special meeting of shareholders held on March 26, 1999, the shareholders of
Capital  Bank  approved the  reorganization  of Capital Bank into a bank holding
company named "Capital Bank Corporation" (the "Company"). In the holding company
reorganization,  the  shareholders  of Capital Bank each received a right to one
share of Company  stock for each share of  Capital  Bank stock that they  owned.
Thus, the shareholders of Capital Bank before the holding company reorganization
are now the  shareholders  of the Company.  In  addition,  on March 31, 1999 the
Company  completed its acquisition of Home Savings Bank of Siler City, Inc., SSB
in a  stock-for-stock  exchange  with a 1.28  Capital Bank  Corporation  to Home
Savings Bank exchange ratio in which the Company issued  1,181,038 shares of its
Common Stock.

Item 3                Defaults Upon Senior Securities
------                -------------------------------

None

Item 4                Submission of Matters to a Vote of Security Holders
------                ---------------------------------------------------

On March 26, 1999, a special  meeting of  stockholders  was held to consider and
vote  upon two  issues;  the  Agreement  and Plan of  Reorganization  and  Share
Exchange  in  connection  with the  reorganization  of Capital  Bank into a bank
holding  company and the  approval of the  issuance of  1,181,038  Capital  Bank
Corporation  shares to the  shareholders of Home Savings Bank of Siler City, SSB
in connection  with the Company's  acquisition  of Home Savings.  All items were
approved by the stockholders as shown below:

Vote concerning the Reorganization and Share Exchange:



           For          Against                Abstain                 Total
           ---          -------                -------                 -----

         1,948,344       19,204                 8,767                1,976,315


<PAGE>
Vote  concerning the issuance of shares to  shareholders of Home Savings Bank of
Siler City, SSB:

           For         Against                Abstain                 Total
           ---         -------                -------                 -----

         1,946,516       21,554                8,245                 1,976,315


In each case, the affirmative vote of at least a majority of all shares entitled
to vote was required to approve the action and was obtained.

Item 5                  Other Information

None

Item 6                  Exhibits and Reports on Form 8-K
------                  --------------------------------

 (a)        Exhibits
            --------

27.01       Financial Data Schedule


 (b)        Reports on Form 8-K
            -------------------

            During the quarter  ended March 31, 1999,  a Current  Report on Form
            8-K,  dated March 31,  1999,  was filed with the  Commission  by the
            Company.  This  report  included  information  about  the  Company's
            acquisition of Home Savings and Capital Bank's reorganization into a
            bank holding  company.  The report also included or incorporated the
            following financial statements: (i) Home Savings as of September 30,
            1998 and 1997 and for the years ended September 30, 1998,  1997, and
            1996, (ii) certain interim  financial  statements of Home Savings as
            of and for the  quarter  ended  December  31,  1998  (to be filed by
            amendment  within  75 days of March 31,  1999);  and (iii) pro forma
            financial  statements for the Company and Home Savings as of and for
            the year ended December 31, 1998 (to be filed by amendment within 75
            days of March 31, 1999).
<PAGE>




                                   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


Date:  May 11, 1999                      By:  /s/Allen T. Nelson, Jr.,
                                              ------------------------
                                              Allen T. Nelson, Jr.,
                                              Senior Vice President and CFO