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

Feb 10, 2012, 16:45 ET from Bank of the Carolinas Corporation

MOCKSVILLE, N.C., Feb. 10, 2012 /PRNewswire/ -- Bank of the Carolinas Corporation (Nasdaq: BCAR) today reported financial results for the three- and twelve-month periods ended December 31, 2011.

For the three-month period ended December 31, 2011, the Company reported a net loss available to common shareholders of $8.8 million as compared to a net loss of $2.5 million for the fourth quarter of 2010.  The net loss per common share was $2.26 for the fourth quarter of 2011 compared with a net loss per share of $0.65 for the fourth quarter of 2010.

For the year ended December 31, 2011, the Company reported a net loss available to common shareholders of $29.2 million, or $7.49 per common share, compared to a net loss of $3.6 million, or $0.92 per common share, for the year ended December 31, 2010.

Fourth quarter and year-end results were negatively impacted by elevated levels of loan loss provisions and expenses related to foreclosed real estate as the Bank continues to aggressively work on reducing problem assets.  The provision for loan losses totaled $3.0 million in the fourth quarter of 2011 as compared to $3.6 million in the fourth quarter a year ago.  Costs related to foreclosed real estate were $1.2 million for the fourth quarter of 2011 as compared to $768,000 in the fourth quarter of 2010.  For the full year of 2011, total credit-related costs totaled $22.8 million, or an 175.5% increase over the previous year's costs of $8.3 million.

In addition, as of year-end the Company updated its evaluation of the likelihood of realization of a net deferred tax asset that had arisen principally as a result of operating losses incurred during the last four years.  Based upon that evaluation, the Company determined that it is unlikely that any significant realization of any portion of the net deferred tax asset is likely to occur within a timeframe that would support a decision to continue to include a net deferred tax asset in the Company's consolidated balance sheet.  Accordingly, the Company recorded a provision for income taxes of $3.5 million during the fourth quarter to reduce the carrying value of the Company's net deferred tax asset to zero, increasing the total provision for income taxes for the full year to $4.5 million.

The Company had significant improvement in the level of nonperforming assets for the third consecutive quarter as they decreased to $27.6 million or 5.68% of total assets at December 31, 2011 down from $33.0 million at December 31, 2010.  The Company continued to build its allowance for loan losses in the fourth quarter bringing it to 2.63% of total loans as of December 31, 2011 as compared to 1.87% as of December 31, 2010. Net loan charge-offs amounted to $3.6 million for the fourth quarter of 2011 as compared to $3.1 million in the fourth quarter of 2010.

The Company's net interest margin was 2.79% in the fourth quarter of 2011, which is a decrease from 3.12% in the fourth quarter in 2010.  Noninterest expense year to date, excluding the costs related to foreclosed real estate, increased 8.5% in 2011 versus 2010. The increase year over year was mainly driven by increased FDIC premiums, legal expenses, and costs related to the Company's compliance with the regulatory consent order put in place in the second quarter of 2011.  Noninterest expense, excluding the costs related to foreclosed real estate, was reduced by 16.4% in the fourth quarter of 2011 versus 2010.

Total assets at December 31, 2011 amounted to $486.0 million, a decrease of 9.2% when compared to $535.0 million as of December 31, 2010.   Loans totaled $307.9 million at December 31, 2011, a decline of 15.9% from a year earlier, and deposits increased 0.01% over the prior year to $416.2 million.

The Company's banking subsidiary had a Tier 1 leverage capital ratio and Tier 1 capital to risk-weighted assets ratio of 4.09% and 5.66% respectively, while its total capital to risk-weighted assets ratio was 6.92% as of December 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:

Stephen R. Talbert President and Chief Executive Officer Bank of the Carolinas Corporation (336) 751-5755

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,

2011

2010

Assets:

(Unaudited)

*

Cash and due from banks, noninterest-bearing

$       5,044

$       4,303

Temporary investments

30,722

15,592

Investment securities

112,404

110,373

Loans

307,907

366,153

Less, allowance for loan losses

(8,101)

(6,863)

    Total loans, net

299,806

359,290

Premises and equipment, net

12,229

13,106

Other real estate owned

8,524

8,314

Bank owned life insurance

10,732

10,371

Other assets

6,506

13,621

    Total Assets

$    485,967

$    534,970

Liabilities:

Noninterest bearing demand deposits

$     34,034

$     33,730

Interest-checking deposits

37,306

34,004

Savings and money market deposits

106,308

114,923

Time deposits

238,565

233,512

    Total deposits

416,213

416,169

Securities sold under repurchase agreements

45,381

45,603

Federal Home Loan Bank advances

-

22,000

Subordinated debt

7,855

7,855

Other liabilities

2,485

1,639

    Total Liabilities

471,934

493,266

Shareholders' Equity:

Preferred stock,  no par value

13,179

13,179

Discount on preferred stock

(716)

(991)

Common stock, $5 par value per share

19,479

19,486

Additional paid-in capital

12,991

12,988

Retained earnings (loss)

(32,453)

(3,268)

Accumulated other comprehensive income

1,553

310

    Total Shareholders' Equity

14,033

41,704

    Total Liabilities and Shareholders' Equity

$    485,967

$    534,970

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

3,895,840

3,897,174

Book value per common share

$         0.22

$         7.32

* 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

2011

2010

2011

2010

Interest income

(Unaudited)

*

(Unaudited)

*

  Interest and fees on loans

$    3,983

$    4,914

$   17,398

$   20,723

  Interest on securities

753

711

3,175

3,318

Other interest income

17

8

59

53

    Total interest income

4,753

5,633

20,632

24,094

Interest expense

  Interest on deposits

982

1,197

4,387

5,036

  Interest on borrowed funds

578

627

2,653

2,624

     Total interest expense

1,560

1,824

7,040

7,660

Net interest income

3,193

3,809

13,592

16,434

  Provision for loan losses

2,998

3,581

17,565

6,441

  Net interest income after provision for

    loan losses

195

228

(3,973)

9,993

Noninterest income

  Customer service fees

299

342

1,250

1,303

  Increase in value of bank owned life insurance

92

91

361

361

Gains on investment securities

(397)

(24)

(391)

344

  Other income (loss)

3

24

19

29

    Total noninterest income

(3)

433

1,239

2,037

Noninterest expense

  Salaries and benefits

1,737

1,559

6,684

6,959

  Occupancy and equipment

503

573

2,074

2,238

  FDIC insurance assessments

567

258

1,516

975

  Data processing expense

231

214

885

821

  Valuation provisions and net operating costs

associated with foreclosed real estate

1,172

768

5,222

1,829

  Other

1,002

866

4,593

3,526

    Total noninterest expenses

5,212

4,238

20,974

16,348

Loss before income taxes

(5,020)

(3,577)

(23,708)

(4,318)

  Provision for income taxes

3,547

(1,263)

4,543

(1,663)

Net loss

$   (8,567)

$   (2,314)

$  (28,251)

$   (2,655)

 Dividends and accretion on preferred stock

(236)

(231)

(934)

(914)

Net loss available to common shareholders

$   (8,803)

$   (2,545)

$  (29,185)

$   (3,569)

Loss per common share:

  Basic

$     (2.26)

$     (0.65)

$     (7.49)

$     (0.92)

  Diluted

$     (2.26)

$     (0.65)

$     (7.49)

$     (0.92)

Weighted Average Common Shares Outstanding:

  Basic

3,895,840

3,897,174

3,896,428

3,897,174

  Diluted

3,895,840

3,897,174

3,896,428

3,897,174

* 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

2011

2010

Change*

Average balance sheet data

Average loans

$  341,459

$  373,156

(8.49)

%

Average earning assets

475,297

504,582

(5.80)

Average total assets

524,196

553,639

(5.32)

Average common shareholders' equity

18,679

32,494

(42.52)

Average total shareholders' equity

31,858

45,673

(30.25)

Period-end balance sheet data:

Total loans

$  307,907

$  366,153

(15.91)

%

Allowance for loan losses

(8,101)

(6,863)

18.04

Total assets

485,967

534,970

(9.16)

Total deposits

416,213

416,169

0.01

Total common shareholders' equity

854

28,525

(97.01)

Total shareholders' equity

14,033

41,704

(66.35)

Asset quality indicators

Net loan charge-offs

$    16,327

$     7,745

110.80

%

Total nonperforming loans

19,062

24,690

(22.80)

Total nonperforming assets

27,585

33,004

(16.42)

Asset quality ratios

Net-chargeoffs (recoveries) to average loans **

4.78

%

2.08

%

270

BP

Nonperforming loans to total loans

6.19

6.74

(55)

Nonperforming assets to total assets

5.68

6.17

(49)

Nonperforming assets to loan-related assets

8.72

8.81

(10)

Allowance for loan losses to total loans

2.63

1.87

76

Financial ratios

Return on average assets **

(5.39)

%

(0.48)

%

(491)

BP

Return on average common shareholders' equity **

(156.25)

(10.98)

(14,527)

Net interest margin **

2.86

3.26

(40)

Per share amounts available to common shareholders

Basic earnings (loss) per common share

$      (7.49)

$      (0.92)

(714.13)

%

Diluted earnings (loss) per common share

(7.49)

(0.92)

(714.13)

Book value per common share

0.22

7.32

(97.01)

*   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

2011

2010

Change*

Average balance sheet data

Average loans

$  313,836

$  366,658

(14.41)

%

Average earning assets

453,976

484,401

(6.28)

Average total assets

501,894

535,968

(6.36)

Average common shareholders' equity

8,163

32,494

(74.88)

Average total shareholders' equity

21,342

45,673

(53.27)

Asset quality indicators

Net loan charge-offs

$     3,588

$     3,061

17.23

%

Asset quality ratios

Net-chargeoffs (recoveries) to average loans **

4.54

%

3.31

%

123

BP

Financial ratios

Return on average assets **

(6.77)

%

(1.71)

%

(506)

BP

Return on average common shareholders' equity **

(427.84)

(31.07)

(39,677)

Net interest margin **

2.79

3.12

(33)

Per share amounts available to common shareholders

Basic earnings (loss) per common share

$      (2.26)

$      (0.65)

(247.69)

%

Diluted earnings (loss) per common share

(2.26)

(0.65)

(247.69)

Book value per common share

0.22

7.32

(97.01)

*   bps denotes basis points.

** ratio annualized.

SOURCE Bank of the Carolinas Corporation