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

02 Feb, 2011, 16:50 ET from Bank of the Carolinas Corporation

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