Capital Pacific Bank (OTCBB: CPFB) has reported a solid second quarter marked by strong loan growth, above average interest margin and continued stable credit quality.

Total loans grew by $12 million to nearly $92 million, the second best quarter in the history of Portland's emerging business bank. The strong loan growth, funded with a combination of demand and time certificates of deposit, resulted in 8% growth in the bank's net interest income, totaling $1.1 million for the quarter, and a net interest margin of 5.22%. The bank reported total assets of $98 million as of June 30, 2006.

Capital Pacific closed its second quarter with net income of $32,000. That figure was impacted by one-time, pre-tax charges of $77,000 associated with a separation agreement with a former executive. Absent those charges, net income would have been $78,000, twice that of the previous quarter.

"As Capital Pacific Bank approaches its third full year of operation, we're pleased to report steady increases in key financial performance measures," said CEO Mark C. Stevenson. "This consistent growth is an indication of the quality of our clients, our staff, and the products and services we offer. It provides us with a solid foundation from which to expand and enhance our services over time."

Stevenson noted that the second quarter also marked the launch of several new initiatives designed to accelerate the bank's growth, and the addition of Mercy Corps' chief financial officer, Steve Mitchell, to the bank's board of directors.

Capital Pacific Bank (OTCBB: CPFB) serves businesses, professionals and nonprofit organizations with comprehensive banking solutions and an elite level of service. Headquartered in the Fox Tower in downtown Portland, the bank's full array of products and services are delivered through a strategic combination of highly experienced client service officers and the innovative application of technology. For more information, visit www.capitalpacificbank.com.

(unaudited and dollars in thousands, except per share data)

As of June 30, As of December 31, Condensed Balance Sheets 2006 2005 ---------------------- ---------------------- Cash and due from banks $ 2,435 $ 851 Investments 2,573 2,460 Loans: Commercial 59,330 48,104 Real estate 30,900 24,855 Other 1,393 1,403 ---------------------- ---------------------- Total loans 91,623 74,362 Loan loss reserve (1,015) (865) ---------------------- ---------------------- Total loans, net of loan loss reserve 90,608 73,497 Other assets 1,978 1,711 ---------------------- ---------------------- Total assets $ 97,594 $ 78,519 ====================== ======================

Deposits: Non interest-bearing demand $ 13,559 $ 11,893 Interest-bearing demand 26,869 20,952 Certificates of deposit 41,278 29,718 ---------------------- ---------------------- Total deposits 81,706 62,563

Other liabilities 2,681 2,817 Shareholders' equity 13,207 13,139 ---------------------- ---------------------- Total liabilities and shareholders' equity $ 97,594 $ 78,519 ====================== ======================

Condensed Statements of For the three months For the three months Operations ending June 30, 2006 ending June 30, 2005 ---------------------- ---------------------- Interest income $ 1,827 $ 889 Interest expense 680 249 ---------------------- ---------------------- Net interest income 1,147 640 Provision for loan losses 110 43 ---------------------- ---------------------- Net interest income, net of provision for loan losses 1,037 597 Deposit fees and other non-interest income 124 36 Income associated with the sale of loans 56 58 Non-interest expense (3) 1,165 767 ---------------------- ---------------------- Net income (loss) before tax expense 52 (76) Income tax expense 20 - ---------------------- ---------------------- Net income (loss) $ 32 $ (76) ====================== ====================== Net income (loss) per share, basic $ 0.02 $ (0.05) ====================== ====================== Net income (loss) per share, fully diluted $ 0.02 $ (0.05) ====================== ====================== Basic average shares oustanding 1,511,178 1,509,845 ====================== ====================== Fully diluted average shares outstanding 1,580,348 1,509,845 ====================== ======================

Condensed Statements of For the six months For the six months Operations ending June 30, 2006 ending June 30, 2005 ---------------------- ---------------------- Interest income $ 3,383 $ 1,646 Interest expense 1,177 420 ---------------------- ---------------------- Net interest income 2,206 1,226 Provision for loan losses 150 116 ---------------------- ---------------------- Net interest income, net of provision for loan losses 2,056 1,110 Deposit fees and other non-interest income 259 73 Income associated with the sale of loans 65 133 Non-interest expense 2,264 1,525 ---------------------- ---------------------- Net income (loss) before tax expense 116 (209) Income tax expense 46 - ---------------------- ---------------------- Net income (loss) $ 70 $ (209) ====================== ====================== Net income (loss) per share, basic $ 0.05 $ (0.14) ====================== ====================== Net income (loss) per share, fully diluted $ 0.04 $ (0.14) ====================== ====================== Basic average shares oustanding 1,511,178 1,509,845 ====================== ====================== Fully diluted average shares outstanding 1,577,758 1,509,845 ====================== ======================

Performance by Quarter 6/30/06 3/31/06 12/31/05 9/30/05 ---------- ---------- ---------- ----------

Loans $ 91,623 $ 80,085 $ 74,362 $ 58,611 Non-performing loans and loans past due 90 days $ 314 $ - $ - $ - Loan loss reserve as a percentage of loans 1.11% 1.13% 1.16% 1.24%

Deposits $ 81,706 $ 69,938 $ 62,563 $ 51,340

Net interest income $ 1,147 $ 1,059 $ 963 $ 791 Net income before tax expense $ 52 $ 64 $ 173 $ 54 Net income $ 32 $ 38 $ 101 $ 965 Net income per share, basic $ 0.02 $ 0.02 $ 0.07 $ 0.64 Net income per share, fully diluted $ 0.02 $ 0.02 $ 0.07 $ 0.62

Return on average equity(1) 0.98% 1.16% 3.07% 1.02% Return on average assets(1) 0.14% 0.19% 0.54% 0.20% Net interest margin 5.22% 5.47% 5.20% 5.11% Efficiency ratio (2) (3) 88% 91% 76% 84%

(1) Excludes one-time tax benefit of $934,000 recognized in the third quarter of 2005. (2) Calculated by dividing non-interest expense by net interest income and non-interest income. (3) Includes one-time separation costs of $77,000, pre-tax.

Analyst Contact: Mark Stevenson CEO Felice Belfiore Chief Financial Officer Capital Pacific Bank (503) 796-0100

Media Contact: Nancy Carter Carter PR (503) 452-3333 Email Contact

SOURCE: Capital Pacific Bank

Source: marketwire