Bank of the Carolinas Corporation Reports First Quarter Financial Results

MOCKSVILLE, N.C., May 17 /PRNewswire-FirstCall/ -- Bank of the Carolinas Corporation (Nasdaq: BCAR) reported today financial results for the three month period ended March 31, 2010.

For the three month period ended March 31, 2010, the Company reported a net loss of $235,000, as compared to a net loss of $655,000 in the first quarter of 2009.  The net loss available to common shareholders for the three months ended March 31, 2010 was $462,000, or $0.12 per common share, compared to a net loss of $0.17 per common share for the first quarter of 2009.

The economic downturn, which began in late 2007, continues to adversely affect the Company's operating results manifested by increased loan loss provisions and costs associated with foreclosed real estate. These costs have been partially mitigated in the first quarter of 2010 by improved net interest margins driven by lower funding costs.  Net interest income totaled $4.2 million in the first quarter of 2010, a 32.3% increase from the comparable 2009 quarter.  The net interest margin in the first quarter of 2010 increased to 3.17%, compared to 2.38% in 2009.

As of March 31, 2010, the Company's other real estate owned and nonaccrual loans totaled $20.8 million and amounted to 3.64% of total assets.  These levels of nonperforming assets compares to nonperforming assets totaling $17.5 million, or 2.86% of total assets as of December 31, 2009 and $15.9 million, or 2.65% of total assets at March 31, 2009.

The provision for loan losses totaled $916,000 for the quarter ended March 31, 2010, an increase of 30.9% from the provision of $700,000 for the first quarter of 2009.  The allowance for loan losses was 1.85% of total loans as of March 31, 2010, and net charge-offs for the current quarter represented an annualized percentage of 2.14% of average loans outstanding.    

Noninterest expenses totaled $4.2 million for the first quarter of 2010, an increase of 9.7% from the comparable quarter of 2009.  The most significant drivers in the cost increase for 2010 were significantly higher costs related to ownership and disposal of other real estate and increased salaries and benefits from bringing our special asset functions in-house.  Offsetting a portion of the above described increases in 2010 noninterest expenses were reductions in professional services, data processing services, and advertising.  Noninterest income, exclusive of securities gains, remains relatively flat for the first quarter compared to 2009.  

Total assets at March 31, 2010 amounted to $570.7 million, a decrease of 6.5% when compared to the $610.4 million as of December 31, 2009 and a decrease of 5.0% when compared to $600.6 million as of March 31, 2009.  The decrease in assets was a planned strategy by the Company to improve its net interest margin and capital ratios.  Loans totaled $380.9 million at March 31, 2010, a decline of 6.3% from a year earlier, and deposits fell 8.3% over the prior year to $445.1 million.

The Company continues to be well-capitalized with a Tier 1 leverage ratio of 7.87%, a Tier 1 capital to risk-weighted assets ratio of 10.07% and a total capital to risk-weighted assets ratio of 11.92% as of March 31, 2010.

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:




Robert E. Marziano


Chief Executive Officer


Bank of the Carolinas


(336) 751-5755



DISCLOSURES ABOUT FORWARD LOOKING STATEMENTS

This press release may contain statements relating to our financial condition, results of operations, plans, strategies, 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.  Those statements, may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements may be identified by terms such as "may," "will," "should," "could," "expects," "plans," "intends," "anticipates," "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.  Forward-looking information is inherently subject to risks and uncertainties, and our actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, risk 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 Commission's website at www.sec.gov.  Other factors that could influence the accuracy of forward-looking statements include, but are not limited to, (a) pressures on the earnings, capital and liquidity of financial institutions resulting from current and future adverse conditions in the credit and equity markets and the banking industry in general; (b) changes in competitive pressures among depository and other financial institutions or in our ability to compete successfully against the larger financial institutions in our banking markets; (c) the financial success or changing strategies of our customers; (d) actions of government regulators, or changes in laws, regulations or accounting standards, that adversely affect our business; (e) changes in the interest rate environment and the level of market interest rates that reduce our net interest margins and/or the volumes and values of loans we make and securities we hold; (f) changes in general economic or business conditions and real estate values in our banking markets (particularly changes that affect our loan portfolio, the abilities of our borrowers to repay their loans, and the values of loan collateral); and (g) other developments or changes in our business that we do not expect.  Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  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 we do not intend, to update these forward-looking statements.

Bank of the Carolinas Corporation 

Consolidated Balance Sheets

(In Thousands Except Share Data)




March 31,


December 31,



2010


2009*

Assets:


(unaudited)



Cash and due from banks, noninterest-bearing


$       20,318


$          3,524

Temporary investments


33,904


33,835

Investment securities


95,674


140,004

Loans


380,890


391,265

Less, allowance for loan losses


(7,050)


(8,167)

    Total loans, net


373,840


383,098

Premises and equipment, net


13,767


14,010

Other real estate owned


9,023


8,233

Bank owned life insurance


10,099


10,010

Other assets


14,093


17,673

    Total Assets


$     570,718


$      610,387






Liabilities:





Noninterest bearing demand deposits


$       37,448


$        36,418

Interest-checking deposits


34,697


34,614

Savings and money market deposits


180,554


235,541

Time deposits


192,424


187,344

    Total deposits


445,123


493,917

Securities sold under repurchase agreements


45,914


46,682

Federal home loan bank advances


25,000


15,000

Subordinated debt


7,855


7,855

Other liabilities


1,921


1,941

    Total Liabilities


525,813


565,395

Shareholders' Equity:





Preferred stock,  no par value


13,179


13,179

Discount on preferred stock


(1,183)


(1,245)

Common stock, $5 par value per share


19,486


19,486

Additional paid-In capital


12,985


12,978

Retained earnings (loss)


(162)


300

Accumulated other comprehensive income


600


294

    Total Shareholders' Equity


44,905


44,992

    Total Liabilities and Shareholders' Equity


$     570,718


$      610,387






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


$           8.14


$            8.16






* Derived from audited information



Bank of the Carolinas Corporation 

Consolidated Statements of Income

(In Thousands Except Share Data)

(Unaudited)



Three Months Ended


March 31,


2010


2009



Interest income




  Interest and fees on loans

$      5,383


$      6,052

  Interest on securities

934


1,463

  Other interest income

17


22

    Total interest income

6,334


7,537





Interest expense




  Interest on deposits

1,449


3,542

  Interest on borrowed funds

672


811

     Total interest expense

2,121


4,353





Net Interest income

4,213


3,184

  Provision for loan losses

916


700

  Net interest income after provision for




    loan losses

3,297


2,484





Noninterest income




  Customer service fees

315


312

  Increase in value of bank owned life insurance

89


89

Gains on investment securities

96


-

  Other income (loss)

3


5

    Total non-interest income

503


406





Noninterest expense




  Salaries and benefits

1,915


1,671

  Occupancy and equipment

595


562

FDIC insurance assessments

299


335

  Data processing services

206


243

Valuation provisions and net operating costs




associated with foreclosed real estate

369


136

  Other

851


913

    Total non-interest expense

4,235


3,860

Income (loss) before income taxes

(435)


(970)

  Provision for Income taxes

(200)


(315)

Net income (loss)

(235)


(655)

Dividends and accretion on preferred stock

(227)


-

Net income (loss) available




to common shareholders

(462)


(655)





Earnings (loss) per common share:  




  Basic

$      (0.12)


$      (0.17)

  Diluted

$      (0.12)


$      (0.17)







Bank of the Carolinas Corporation 

Other Financial Data

(In Thousands Except Share Data)

(Unaudited)




As of or for the



three months ended March 31,



2010

2009

Change*

Average balance sheet data








Average loans

$ 385,847


$ 408,543


(5.56)

%


Average earning assets

539,093


541,622


(0.47)



Average total assets

586,301


582,971


0.57



Average common shareholders' equity

32,398


37,989


(14.72)



Average total shareholders' equity

45,577


37,989


19.97


















Period-end balance sheet data:








Total loans

$ 380,890


$ 406,449


(6.29)

%


Allowance for loan losses

(7,050)


(6,969)


1.16



Total assets

570,718


600,644


(4.98)



Total deposits

445,123


485,273


(8.27)



Common shareholders' equity

31,726


36,135


(12.20)



Total shareholders' equity

44,905


36,135


24.27


















Asset quality indicators








Net loan charge-offs

$     2,033


$          39


n/m

%


Total nonperforming loans

11,732


9,913


18.35



Total nonperforming assets

20,754


15,916


30.40


















Asset quality ratios








Net-chargeoffs (recoveries) to average loans **

2.14

%

0.04

%

210

BP


Nonperforming loans to total loans

3.08


2.44


64



Nonperforming assets to total assets

3.64


2.65


99



Nonperforming assets to loan-related assets

5.32


3.86


146



Allowance for loan losses to total loans

1.85


1.71


14


















Financial ratios








Return on average assets **

(0.16)

%

(0.46)

%

29

BP


Return on average common shareholders' equity **

(5.78)


(7.35)


157



Net interest margin **

3.17


2.38


79


















Per share amounts available to common shareholders








Basic earnings (loss) per common share

$     (0.12)


$     (0.17)


29.57

%


Diluted earnings (loss) per common share

(0.12)


(0.17)


29.57



Book value per common share

8.14


8.16


(0.27)


















*   BP denotes basis points.

** ratio annualized.



SOURCE Bank of the Carolinas Corporation



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