Bank of the Carolinas Corporation Reports Second Quarter Financial Results

Jul 22, 2011, 16:45 ET from Bank of the Carolinas Corporation

MOCKSVILLE, N.C., July 22, 2011 /PRNewswire/ -- Bank of the Carolinas Corporation (Nasdaq: BCAR) today reported financial results for the three- and six-month periods ended June 30, 2011.

For the three-month period ended June 30, 2011, the Company reported a net loss available to common shareholders of $9.9 million as compared to a net loss of $3.4 million for the first quarter of 2011 and a net loss of $415,000 for the second quarter of 2010.  The net loss per diluted common share was $2.53 for the second quarter of 2011 compared with a net loss per share of $0.88 for the first quarter of 2011 and a net loss per share of $0.11 for the second quarter of 2010.

Second quarter results were significantly impacted by increased provisions for loan losses and by valuation provisions related to foreclosed real estate.  The continued decline in real estate values related to non-performing collateral dependent loans led to the provision for loan losses increasing to $6.6 million in the second quarter of 2011 as compared to $2.3 million in the first quarter of 2011 and $1.1 million in the second quarter a year ago.  Additionally, the Company did an extensive revaluation of its foreclosed real estate resulting in valuation provisions of $2.4 million in the second quarter of 2011.  Also during the second quarter, the Company took a $273,000 charge in connection with the prepayment of a $10.0 million long-term borrowing as part of a balance sheet restructuring that will be accretive to the Company's capital ratios, earnings, and net interest margin on a prospective basis starting in the third quarter.

For the six-month period ended June 30, 2011, the Company reported a net loss available to common shareholders of $13.3 million or $3.41 per common share, compared to a net loss of $877,000 or $0.23 per common share for the six month period of 2010.

The Company's net interest margin was 2.69% in the second quarter of 2011.  Excluding the one-time prepayment charge on the long-term borrowing referenced above, the net interest margin would have been 2.92% for the second quarter, down slightly from 3.02% in the previous quarter of 2011 and down from 3.39% in the second quarter in 2010.

Noninterest expense year to date, excluding the costs related to foreclosed real estate, only increased 1.1% in 2011 versus 2010 and for the three month periods increased 7.4% in the second quarter of 2011 versus 2010.  The increase quarter over quarter was mainly driven by increased FDIC premiums and costs related to the Company's compliance with the regulatory consent order put in place in the second quarter.

As of June 30, 2011, the Company's nonperforming assets decreased to $33.1 million and amounted to 6.35% of total assets as compared to $37.2 million or 6.93% of total assets as of the previous sequential quarter-end and compared to $20.8 million, or 3.86% of total assets as of June 30, 2010.  The allowance for loan losses was 1.93% of total loans as of June 30, 2011. Net loan charge-offs amounted to $8.2 million for the second quarter of 2011, an increase from $894,000 in the first quarter of 2011 and $957,000 in the second quarter of 2010.    

Total assets at June 30, 2011 amounted to $521.0 million, a decrease of 3.5% when compared to $539.9 million as of June 30, 2010.   Loans totaled $345.6 million at June 30, 2011, a decline of 6.3% from a year earlier, and deposits increased 2.9% over the prior year to $426.1 million.

The Company's banking subsidiary had a Tier 1 leverage capital ratio and Tier 1 capital to risk-weighted assets ratio of 5.95% and 7.92% respectively, while its total capital to risk-weighted assets ratio was 9.17% as of June 30, 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)

June 30,

2011

2010

Assets:

Cash and due from banks, noninterest-bearing

$     10,172

$       3,467

Temporary investments

12,431

7,462

Investment securities

118,534

121,916

Loans

345,617

368,843

Less, allowance for loan losses

(6,685)

(7,180)

    Total loans, net

338,932

361,663

Premises and equipment, net

12,681

13,496

Other real estate owned

6,066

9,181

Bank owned life insurance

10,549

10,189

Other assets

11,678

12,482

    Total Assets

$    521,043

$    539,856

Liabilities:

Noninterest bearing demand deposits

$     38,176

$     37,581

Interest-checking deposits

37,139

34,765

Savings and money market deposits

107,717

141,834

Time deposits

243,066

199,807

    Total deposits

426,098

413,987

Securities sold under repurchase agreements

45,710

45,755

Federal Home Loan Bank advances

10,000

25,000

Subordinated debt

7,855

7,855

Other liabilities

2,235

1,797

    Total Liabilities

491,898

494,394

Shareholders' Equity:

Preferred stock,  no par value

13,179

13,179

Discount on preferred stock

(856)

(1,121)

Common stock, $5 par value per share

19,486

19,486

Additional paid-in capital

12,983

12,990

Retained earnings (loss)

(16,571)

(576)

Accumulated other comprehensive income

924

1,504

    Total Shareholders' Equity

29,145

45,462

    Total Liabilities and Shareholders' Equity

$    521,043

$    539,856

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

$         4.10

$         8.28

Bank of the Carolinas Corporation

Consolidated Statements of Income

(In Thousands Except Share Data)

(Unaudited)

Three months ended

Six months ended

June 30

June 30

2011

2010

2011

2010

Interest income

  Interest and fees on loans

$    4,489

$    5,324

$    9,139

$   10,707

  Interest on securities

845

851

1,599

1,785

Other interest income

15

16

26

33

    Total interest income

5,349

6,191

10,764

12,525

Interest expense

  Interest on deposits

1,176

1,209

2,330

2,658

  Interest on borrowed funds

891

684

1,504

1,356

     Total interest expense

2,067

1,893

3,834

4,014

Net interest income

3,282

4,298

6,930

8,511

  Provision for loan losses

6,572

1,086

8,917

2,002

  Net interest income after provision for

    loan losses

(3,290)

3,212

(1,987)

6,509

Noninterest income

  Customer service fees

328

330

633

645

  Increase in value of banked owned life insurance

89

90

178

179

Gains on investment securities

6

94

6

190

  Other income (loss)

2

(2)

10

1

    Total noninterest income

425

512

827

1,015

Noninterest expense

  Salaries and benefits

1,604

1,799

3,190

3,714

  Occupancy and equipment

527

533

1,069

1,128

  FDIC insurance assessments

334

263

604

562

  Data processing expense

224

191

436

397

  Valuation provisions and net operating costs

associated with foreclosed real estate

2,747

343

2,997

712

  Other

1,323

952

2,386

1,803

    Total noninterest expenses

6,759

4,081

10,682

8,316

Loss before income taxes

(9,624)

(357)

(11,842)

(792)

  Provision for income taxes

-

(169)

996

(369)

Net loss

$   (9,624)

$      (188)

$  (12,838)

$      (423)

 Dividends and accretion on preferred stock

(232)

(227)

(464)

(454)

Net loss available to common shareholders

$   (9,856)

$      (415)

$  (13,302)

$      (877)

Loss per common share:

  Basic

$     (2.53)

$     (0.11)

$     (3.41)

$     (0.23)

  Diluted

$     (2.53)

$     (0.11)

$     (3.41)

$     (0.23)

Weighted Average Common Shares Outstanding:

  Basic

3,897,174

3,897,174

3,897,174

3,897,174

  Diluted

3,897,174

3,897,174

3,897,174

3,897,174

Bank of the Carolinas Corporation

Other Financial Data

(Dollars in thousands except per share amounts)

As of or for the

six months ended June 30

2011

2010

Change*

Average balance sheet data

Average loans

$  359,073

$  379,172

(5.30)

%

Average earning assets

489,116

523,961

(6.65)

Average total assets

539,518

570,948

(5.50)

Average common shareholders' equity

25,818

32,387

(20.28)

Average total shareholders' equity

38,997

45,566

(14.42)

Period-end balance sheet data:

Total loans

$  345,617

$  368,843

(6.30)

%

Allowance for loan losses

(6,685)

(7,180)

(6.89)

Total assets

521,043

539,856

(3.48)

Total deposits

426,098

413,987

2.93

Total common shareholders' equity

15,966

32,283

(50.54)

Total shareholders' equity

29,145

45,462

(35.89)

Asset quality indicators

Net loan charge-offs

$     9,095

$     2,989

204.23

%

Total nonperforming loans

27,032

11,642

132.21

Total nonperforming assets

33,098

20,822

58.96

Asset quality ratios

Net-chargeoffs (recoveries) to average loans **

5.11

%

1.59

%

352

BP

Nonperforming loans to total loans

7.82

3.16

467

Nonperforming assets to total assets

6.35

3.86

250

Nonperforming assets to loan-related assets

9.41

5.51

390

Allowance for loan losses to total loans

1.93

1.95

(1)

Financial ratios

Return on average assets **

(4.80)

%

(0.15)

%

(465)

BP

Return on average common shareholders' equity **

(103.90)

(5.46)

(9,844)

Net interest margin **

2.86

3.28

(42)

Per share amounts available to common shareholders

Basic earnings (loss) per common share

$      (3.41)

$      (0.23)

(1,382.61)

%

Diluted earnings (loss) per common share

(3.41)

(0.23)

(1,382.61)

Book value per common share

4.10

8.28

(50.54)

*   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 June 30

2011

2010

Change*

Average balance sheet data

Average loans

$  353,685

$  372,571

(5.07)

%

Average earning assets

488,919

508,996

(3.94)

Average total assets

538,516

555,762

(3.10)

Average common shareholders' equity

23,075

32,376

(28.73)

Average total shareholders' equity

36,254

45,555

(20.42)

Asset quality indicators

Net loan charge-offs

$     8,200

$        957

757.26

%

Asset quality ratios

Net-chargeoffs (recoveries) to average loans **

9.30

%

1.03

%

827

BP

Financial ratios

Return on average assets **

(7.17)

%

(0.14)

%

(703)

BP

Return on average common shareholders' equity **

(171.32)

(5.14)

(16,618)

Net interest margin **

2.69

3.39

(70)

Per share amounts available to common shareholders

Basic earnings (loss) per common share

$      (2.53)

$      (0.11)

(2,200.00)

%

Diluted earnings (loss) per common share

(2.53)

(0.11)

(2,200.00)

Book value per common share

4.10

8.28

(50.54)

*   bps denotes basis points.

** ratio annualized.

SOURCE Bank of the Carolinas Corporation