2014

Bank of the Carolinas Corporation Reports Fourth Quarter and Year End Financial Results

MOCKSVILLE, N.C., Feb. 2, 2011 /PRNewswire/ -- Bank of the Carolinas Corporation (Nasdaq: BCAR) today reported financial results for the three- and twelve-month periods ended December 31, 2010.

For the three-month period ended December 31, 2010, the Company reported a net loss of $2.3 million as compared to a net loss of $1.8 million in the fourth quarter of 2009.  After payment of dividends on preferred stock, the net loss available to common shareholders for the three months ended December 31, 2010 was $2.5 million, or $0.65 per common share, compared to a net loss of $2.0 million, or $0.51 per common share, for the fourth quarter of 2009.

For the year ended December 31, 2010, the Company reported a net loss of $2.7 million, as compared to a net loss of $3.1 million for the year ended December 31, 2009.  The net loss available to common shareholders for the year ended December 31, 2010 was $3.6 million, or $0.92 per common share, compared to a net loss of $3.8 million, or $0.97 per common share, for the year ended December 31, 2009.

Fourth quarter and year end results were negatively impacted by the provision for loan losses and valuation provisions and costs related to foreclosed real estate.  Those combined costs totaled $4.3 million in the fourth quarter of 2010, an increase of 35.0% over the same quarter in 2009.  For the full year period of 2010, credit related costs totaled $8.3 million, or an 11.1% increase over the previous year.  Excluding these credit related costs, the Company had improved operating results in 2010 due to both an increased net interest margin and reductions in noninterest expenses.  The Company's year-to-date net interest margin increased to 3.26% in 2010 as compared to 2.56% in 2009.  Noninterest expense, excluding the costs related to foreclosed real estate, was reduced by 23.9% in the fourth quarter of 2010 versus the fourth quarter of 2009 and for the year end period was reduced 7.0% in 2010 versus 2009.

As of December 31, 2010, the Company's nonperforming assets totaled $33.0 million and amounted to 6.17% of total assets as compared to total nonperforming assets of $17.5 million, or 2.86% of total assets, as of December 31, 2009.  The allowance for loan losses was 1.87% of total loans as of December 31, 2010, and net charge-offs for the year end period represented 2.08% of average loans outstanding.    

Total assets at December 31, 2010 amounted to $535.0 million, a decrease of 12.4% when compared to $610.4 million as of December 31, 2009.  The decrease in assets was part of a strategic decision by the Company to improve its net interest margin and capital ratios.  Loans totaled $366.2 million at December 31, 2010, a decline of 6.4% from a year earlier, and deposits fell 15.7% over the prior year to $416.2 million.

The Company continues to be well capitalized, exceeding all regulatory capital requirements, with a Tier 1 leverage ratio of 7.79% and a total capital to risk-weighted assets ratio of 11.51% as of December 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".

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)








December 31,



2010


2009

Assets:


(Unaudited)


*

Cash and due from banks, noninterest-bearing


$       4,303


$       3,524

Temporary investments


15,592


33,835

Investment securities


110,373


140,004

Loans


366,153


391,265

Less, allowance for loan losses


(6,863)


(8,167)

    Total loans, net


359,290


383,098

Premises and equipment, net


13,106


14,010

Other real estate owned


8,314


8,233

Bank owned life insurance


10,371


10,010

Other assets


13,621


17,673

    Total Assets


$    534,970


$    610,387






Liabilities:





Noninterest bearing demand deposits


$     33,730


$     36,418

Interest-checking deposits


34,004


34,614

Savings and money market deposits


114,923


235,541

Time deposits


233,512


187,344

    Total deposits


416,169


493,917

Securities sold under repurchase agreements


45,603


46,682

Federal Home Loan Bank advances


22,000


15,000

Subordinated debt


7,855


7,855

Other liabilities


1,639


1,941

    Total Liabilities


493,266


565,395

Shareholders' Equity:





Preferred stock,  no par value


13,179


13,179

Discount on preferred stock


(991)


(1,245)

Common stock, $5 par value per share


19,486


19,486

Additional paid-in capital


12,988


12,978

Retained earnings (loss)


(3,268)


300

Accumulated other comprehensive income


310


294

    Total Shareholders' Equity


41,704


44,992

    Total Liabilities and Shareholders' Equity


$    534,970


$    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


$         7.32


$         8.16






* Derived from audited financial statements



Bank of the Carolinas Corporation

Consolidated Statements of Income

(In Thousands Except Share Data)


Three months ended


Year ended


December 31,


December 31,


2010


2009


2010


2009

Interest income


(Unaudited)


*


(Unaudited)


*

  Interest and fees on loans


$    4,914


$    5,781


$   20,723


$   23,685

  Interest on securities


711


1,321


3,318


5,860

Other interest income


8


20


53


76

    Total interest income


5,633


7,122


24,094


29,621

Interest expense









  Interest on deposits


1,197


2,025


5,036


11,868

  Interest on borrowed funds


627


723


2,624


3,087

     Total interest expense


1,824


2,748


7,660


14,955

Net interest income


3,809


4,374


16,434


14,666

  Provision for loan losses


3,581


3,081


6,441


5,547

  Net interest income after provision for









    loan losses


228


1,293


9,993


9,119

Noninterest income









  Customer service fees


342


316


1,303


1,335

  Increase in value of banked owned life insurance


91


93


361


365

Gains (loss) on sale of investment securities


(24)


189


344


1,530

  Other income


24


36


29


67

    Total noninterest income


433


634


2,037


3,297

Noninterest expense









  Salaries and benefits


1,559


2,081


6,959


7,040

  Occupancy and equipment


573


574


2,238


2,221

  FDIC insurance assessments


258


573


975


1,505

  Data processing expense


214


257


821


1,042

  Valuation provisions and net operating costs









associated with foreclosed real estate


768


140


1,829


1,899

  Other


866


1,072


3,526


3,807

    Total noninterest expenses


4,238


4,697


16,348


17,514

Income (loss) before income taxes


(3,577)


(2,770)


(4,318)


(5,098)

  Provision for income taxes


(1,263)


(992)


(1,663)


(1,968)

Net income (loss)


$   (2,314)


$   (1,778)


$   (2,655)


$   (3,130)

 Dividends and accretion on preferred stock


(231)


(226)


(914)


(637)

Net income (loss) available to common shareholders


$   (2,545)


$   (2,004)


$   (3,569)


$   (3,767)










Loss per common share:









  Basic


$     (0.65)


$     (0.51)


$     (0.92)


$     (0.97)

  Diluted


$     (0.65)


$     (0.51)


$     (0.92)


$     (0.97)










Weighted Average Common Shares Outstanding:









  Basic


3,897,174


3,897,174


3,897,174


3,894,314

  Diluted


3,897,174


3,897,174


3,897,174


3,894,314










* Derived from audited financial statements



Bank of the Carolinas Corporation

Other Financial Data

(Dollars in thousands except per share amounts)





As of or for the





year ended December 31,





2010


2009


Change*

Average balance sheet data











Average loans


$  373,156



$  401,511



(7.06)

%


Average earning assets


504,582



573,018



(11.94)



Average total assets


553,639



624,508



(11.35)



Average common shareholders' equity


32,494



35,625



(8.79)



Average total shareholders' equity


45,673



44,976



1.55














Period-end balance sheet data:











Total loans


$  366,153



$  391,265



(6.42)

%


Allowance for loan losses


(6,863)



(8,167)



(15.97)



Total assets


534,970



610,387



(12.36)



Total deposits


416,169



493,917



(15.74)



Total common shareholders' equity


28,525



31,813



(10.34)



Total shareholders' equity


41,704



44,992



(7.31)














Asset quality indicators











Net loan charge-offs


$     7,745



$     3,688



110.04

%


Total nonperforming loans


24,690



9,224



167.67



Total nonperforming assets


33,004



17,457



89.06














Asset quality ratios











Net-chargeoffs (recoveries) to average loans **


2.08

%


0.92

%


116

BP


Nonperforming loans to total loans


6.74



2.36



439



Nonperforming assets to total assets


6.17



2.86



331



Nonperforming assets to loan-related assets


8.81



4.37



444



Allowance for loan losses to total loans


1.87



2.09



(21)














Financial ratios











Return on average assets **


(0.48)

%


(0.50)

%


2

BP


Return on average common shareholders' equity **


(10.98)



(10.57)



(41)



Net interest margin **


3.26



2.56



70














Per share amounts available to common shareholders











Basic earnings (loss) per common share


$      (0.92)



$      (0.97)



5.15

%


Diluted earnings (loss) per common share


(0.92)



(0.97)



5.15



Book value per common share


7.32



8.16



(10.34)


























*   bps denotes basis points.

** ratio annualized.



Bank of the Carolinas Corporation

Other Financial Data (continued)

(Dollars in thousands except per share amounts)





                      As of or for the





three months ended December 31





2010


2009


Change*

Average balance sheet data











Average loans


$  366,658



$  391,574



(6.36)

%


Average earning assets


484,401



592,150



(18.20)



Average total assets


535,968



641,095



(16.40)



Average common shareholders' equity


32,494



34,672



(6.28)



Average total shareholders' equity


45,673



47,851



(4.55)














Asset quality indicators











Net loan charge-offs


$     3,061



$     1,110



175.64

%













Asset quality ratios











Net-chargeoffs (recoveries) to average loans **


3.31

%


1.13

%


218

BP













Financial ratios











Return on average assets **


(1.71)

%


(1.10)

%


(61)

BP


Return on average common shareholders' equity **


(31.07)



(22.93)



(814)



Net interest margin **


3.12



2.93



19














Per share amounts available to common shareholders











Basic earnings (loss) per common share


$      (0.65)



$      (0.51)



(27.45)

%


Diluted earnings (loss) per common share


(0.65)



(0.51)



(27.45)



Book value per common share


7.32



8.16



(10.34)


























*   bps denotes basis points.

** ratio annualized.



For further information contact:




Eric E. Rhodes


Chief Financial Officer


Bank of the Carolinas


(336) 998-1799 x 220





SOURCE Bank of the Carolinas Corporation



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