Bank of the Carolinas Corporation Reports First Quarter Financial Results

MOCKSVILLE, N.C., May 10, 2011 /PRNewswire/ -- Bank of the Carolinas Corporation (Nasdaq: BCAR) today reported financial results for the three-month period ended March 31, 2011.

For the three-month period ended March 31, 2011, the Company reported a net loss available to common shareholders of $3.4 million as compared to a net loss of $2.5 million for the fourth quarter of 2010 and a net loss of $462 thousand for the first quarter of 2010.  The net loss per diluted common share was $0.88 for the first quarter of 2011 compared with a net loss per share of $0.65 for the fourth quarter of 2010 and a net loss per share of $0.12 for the first quarter of 2010.

First quarter results were negatively impacted by the provision for loan losses and by a valuation allowance on deferred tax assets.  The provision for loan losses increased to $2.3 million in the first quarter of 2011 as compared to $916,000 in the first quarter of 2010.  While this was a substantial increase over the prior year period this was a decrease from the 2010 fourth quarter amount of $3.6 million.  Additionally, the Company provided for a valuation allowance of $1.7 million on deferred tax assets in the first quarter of 2011 which resulted in the Company having tax expense of $996,000 in the first quarter versus a tax benefit of $200,000 in the comparable quarter of 2010.  

The Company's net interest margin decreased slightly to 3.02% in the first quarter of 2011 down from 3.12% in the previous quarter and down from 3.17% in the first quarter in 2010.  The margin compression was driven by an increase in nonperforming loans.  Cost saving initiatives implemented in the second half of 2010 resulted in a decrease in noninterest expenses of $312 thousand or 7.4% in the first quarter of 2011 versus the first quarter of 2010.

As of March 31, 2011, the Company's nonperforming assets totaled $37.2 million and amounted to 6.93% of total assets as compared to $33.0 million or 6.17% of total assets as of the previous quarter end and compared to $20.8 million, or 3.64% of total assets as of March 31, 2010.  The allowance for loan losses increased to 2.31% of total loans as of March 31, 2011. Net loan charge-offs amounted to $894 thousand for the first quarter of 2011, a decrease from $3.1 million in the fourth quarter of 2010 and $2.0 million in the first quarter of 2010.

Total assets at March 31, 2011 amounted to $537.1 million, a decrease of 5.9% when compared to $570.7 million as of March 31, 2010.   Loans totaled $359.6 million at March 31, 2011, a decline of 5.6% from a year earlier, and deposits fell 4.8% over the prior year to $423.7 million.

The Company's capital ratios continue to exceed the regulatory requirements of "well capitalized", with a Tier 1 leverage ratio of 7.20% and a total capital to risk-weighted assets ratio of 11.06% as of March 31, 2011.

Bank of the Carolinas Corporation is the holding company for Bank of the Carolinas, a North Carolina chartered bank headquartered in Mocksville, NC with offices in Advance, Asheboro, Cleveland, Concord, Harrisburg, King, Landis, Lexington and Winston-Salem.  The common stock of the Company is traded on the NASDAQ Global Market under the symbol "BCAR".

For further information contact:




Eric E. Rhodes


Executive Vice President and Chief Financial Officer


Bank of the Carolinas Corporation


(336) 998-1799 x 2231



DISCLOSURES ABOUT FORWARD LOOKING STATEMENTS

Statements in this press release relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments, expectations or beliefs about future events or results, and other statements that are not descriptions of historical facts, may be forward-looking statements as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors which include, but are not limited to, factors discussed in our Annual Report on Form 10-K and in other documents we file with the Securities and Exchange Commission from time to time.  Copies of those reports are available directly through the SEC's Internet website at www.sec.gov.  Forward-looking statements may be identified by terms such as "may," "will," "should," "could," "expects," "plans," "intends," "anticipates," "feels," "believes," "estimates," "predicts," "forecasts," "potential" or "continue," or similar terms or the negative of these terms, or other statements concerning opinions or judgments of our management about future events.  Factors that could influence the accuracy of forward-looking statements include, but are not limited to (a) pressures on our earnings, capital and liquidity resulting from current and future conditions in the credit and capital markets, (b) continued or unexpected increases in nonperforming loans and credit losses in our loan portfolio, (c) continued adverse conditions in the economy and in the real estate market in our banking markets (particularly those conditions that affect our loan portfolio, the abilities of our borrowers to repay their loans, and the values of collateral that secures our loans), (d) the financial success or changing strategies of our customers, (e) actions of government regulators, or change in laws, regulations or accounting standards, that adversely affect our business, (f) changes in the interest rate environment and the level of market interest rates that reduce our net interest margins and/or the values of loans we make and securities we hold,  (g) changes in competitive pressures among depository and other financial institutions or in our ability to compete effectively against other financial institutions in our banking markets, and (h) other developments or changes in our business that we do not expect.  Although we believe that the expectations reflected in the forward-looking statements included in this press release are reasonable, they represent our management's judgments only as of the date they are made, and we cannot guarantee future results, levels of activity, performance or achievements.  As a result, readers are cautioned not to place undue reliance on these forward-looking statements.  All forward-looking statements attributable to us are expressly qualified in their entirety by the cautionary statements in this paragraph.  We have no obligation, and do not intend, to update these forward-looking statements.

Bank of the Carolinas Corporation

Consolidated Balance Sheets

(In Thousands Except Share Data)

(Unaudited)








March 31,



2011


2010

Assets:





Cash and due from banks, noninterest-bearing


$       4,174


$     20,318

Temporary investments


19,193


33,904

Investment securities


116,879


95,674

Loans


359,561


380,890

Less, allowance for loan losses


(8,314)


(7,050)

    Total loans, net


351,247


373,840

Premises and equipment, net


12,859


13,767

Other real estate owned


9,375


9,023

Bank owned life insurance


10,460


10,099

Other assets


12,871


14,093

    Total Assets


$    537,058


$    570,718






Liabilities:





Noninterest bearing demand deposits


$     36,411


$     37,448

Interest-checking deposits


35,221


34,697

Savings and money market deposits


110,401


180,554

Time deposits


241,706


192,424

    Total deposits


423,739


445,123

Securities sold under repurchase agreements


45,458


45,914

Federal Home Loan Bank advances


20,000


25,000

Subordinated debt


7,855


7,855

Other liabilities


1,819


1,921

    Total Liabilities


498,871


525,813

Shareholders' Equity:





Preferred stock,  no par value


13,179


13,179

Discount on preferred stock


(923)


(1,183)

Common stock, $5 par value per share


19,486


19,486

Additional paid-in capital


12,984


12,985

Retained earnings (loss)


(6,715)


(162)

Accumulated other comprehensive income


176


600

    Total Shareholders' Equity


38,187


44,905

    Total Liabilities and Shareholders' Equity


$    537,058


$    570,718






Preferred shares authorized


3,000,000


3,000,000

Preferred shares issued and outstanding


13,179


13,179

Common shares authorized


15,000,000


15,000,000

Common shares issued and outstanding


3,897,174


3,897,174






Book value per common share


$         6.42


$         8.14








Bank of the Carolinas Corporation

Consolidated Statements of Income

(In Thousands Except Share Data)

(Unaudited)


Three Months Ended


March 31,


2011


2010



Interest income




  Interest and fees on loans

$           4,650


$           5,383

  Interest on securities

754


934

  Other interest income

11


17

    Total interest income

5,415


6,334





Interest expense




  Interest on deposits

1,154


1,449

  Interest on borrowed funds

613


672

     Total interest expense

1,767


2,121





Net interest income

3,648


4,213

  Provision for loan losses

2,345


916

  Net interest income after provision for




    loan losses

1,303


3,297





Noninterest income




  Customer service fees

305


315

  Increase in value of bank owned life insurance

89


89

Gains on investment securities

-


96

  Other income (loss)

8


3

    Total non-interest income

402


503





Noninterest expense




  Salaries and benefits

1,586


1,915

  Occupancy and equipment

542


595

FDIC insurance assessments

270


299

  Data processing services

212


206

Valuation provisions and net operating costs




associated with foreclosed real estate

250


369

  Other

1,063


851

    Total non-interest expense

3,923


4,235

Income (loss) before income taxes

(2,218)


(435)

  Provision for Income taxes

996


(200)

Net income (loss)

(3,214)


(235)

Dividends and accretion on preferred stock

(232)


(227)

Net income (loss) available




to common shareholders

(3,446)


(462)





Earnings (loss) per common share:  




  Basic

$           (0.88)


$           (0.12)

  Diluted

$           (0.88)


$           (0.12)





Weighted Average Common Shares Outstanding:




  Basic

3,897,174


3,897,174

  Diluted

3,897,174


3,897,174







Bank of the Carolinas Corporation

Other Financial Data

(In Thousands Except Share Data)

(Unaudited)




As of or for the




three months ended March 31,




2011

2010

Change*

Average balance sheet data








Average loans

$ 364,522


$385,847


(5.53)

%


Average earning assets

489,314


539,093


(9.23)



Average total assets

540,531


586,301


(7.81)



Average common shareholders' equity

28,592


32,398


(11.75)



Average total shareholders' equity

41,771


45,577


(8.35)




















Period-end balance sheet data:








Total loans

$ 359,561


$380,890


(5.60)

%


Allowance for loan losses

(8,314)


(7,050)


17.93



Total assets

537,058


570,718


(5.90)



Total deposits

423,739


445,123


(4.80)



Common shareholders' equity

25,008


31,726


(21.18)



Total shareholders' equity

38,187


44,905


(14.96)




















Asset quality indicators








Net loan charge-offs

$         894


$     2,033


n/m

%


Total nonperforming loans

27,860


11,732


137.47



Total nonperforming assets

37,235


20,754


79.41




















Asset quality ratios








Net-chargeoffs (recoveries) to average loans **

0.99

%

2.14

%

(114)

BP


Nonperforming loans to total loans

7.75


3.08


467



Nonperforming assets to total assets

6.93


3.64


330



Nonperforming assets to loan-related assets

10.09


5.32


477



Allowance for loan losses to total loans

2.31


1.85


46




















Financial ratios








Return on average assets **

(2.41)

%

(0.16)

%

(225)

BP


Return on average common shareholders' equity **

(48.88)


(5.78)


(4,310)



Net interest margin **

3.02


3.17


(15)




















Per share amounts available to common shareholders








Basic earnings (loss) per common share

$       (0.88)


$      (0.12)


(645.89)

%


Diluted earnings (loss) per common share

(0.88)


(0.12)


(645.89)



Book value per common share

6.42


8.14


(21.18)




















*   BP denotes basis points.

** ratio annualized.



SOURCE Bank of the Carolinas Corporation



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