Bank of the Carolinas Corporation Reports Second Quarter Financial Results

MOCKSVILLE, N.C., July 27, 2012 /PRNewswire/ -- Bank of the Carolinas Corporation (OTCQB: BCAR) today reported financial results for the three- and six-month periods ended June 30, 2012.

For the three-month period ended June 30, 2012, the Company reported a net loss available to common shareholders of $170,000 as compared to a net loss of $2.7 million for the first quarter of 2012 and a net loss of $9.9 million for the second quarter of 2011.  Prior to the dividends and accretion accrual, the Company had a net income of $68,000 for the three-month period ended June 30, 2012. The net loss per diluted common share was $0.04 for the second quarter of 2012 compared with a net loss per share of $0.70 for the first quarter of 2012 and a net loss per share of $2.53 for the second quarter of 2011.

During the second quarter of 2012, the Company realized gains on investment securities of $1.4 million, which resulted in income tax expense of $424,000.  The Company also had a non-recurring gain on bank owned life insurance of $415,000 during the second quarter of 2012.  The Company continues to reevaluate and maintain its foreclosed real estate resulting in expenses of $252,000 in the second quarter 2012 as compared to $2.7 million in the second quarter of 2011. 

For the six-month period ended June 30, 2012, the Company reported a net loss available to common shareholders of $2.9 million or $0.74 per common share, compared to a net loss of $13.3 million or $3.41 per common share for the six month period ended June 30, 2011.

The Company's net interest margin was 2.51% in the second quarter of 2012, which is a decrease from 2.69% in the second quarter of 2011.  Noninterest expense through June 30, excluding the costs related to foreclosed real estate, only increased 6.0% in 2012 versus 2011 and for the three month periods decreased 1.1% in the second quarter of 2012 versus 2011.  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.

The Company continues with significant improvement in the levels of nonperforming assets for the fifth consecutive quarter.  As of June 30, 2012, the Company's nonperforming assets decreased to $16.9 million and amounted to 3.58% of total assets as compared to $23.4 million or 4.87% of total assets as of the previous sequential quarter-end and compared to $33.1 million, or 6.35% of total assets as of June 30, 2011.  The allowance for loan losses was 2.64% of total loans as of June 30, 2012. Net loan charge-offs amounted to $740,000 for the second quarter of 2012, a decrease from $1.4 million in the first quarter of 2012 and $8.2 million in the second quarter of 2011.    

Total assets at June 30, 2012 amounted to $473.6 million, a decrease of 9.1% when compared to $521.0 million as of June 30, 2011.   Loans totaled $285.2 million at June 30, 2012, a decline of 17.5% from a year earlier, and deposits decreased 4.4% over the prior year to $407.4 million. The Company's deposit mix has improved by decreasing non-core brokered deposits by 43.5% since June 30, 2011.

The Company's banking subsidiary had a Tier 1 leverage capital ratio and Tier 1 capital to risk-weighted assets ratio of 3.80% and 5.33% respectively, while its total capital to risk-weighted assets ratio was 6.59% as of June 30, 2012.

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 quoted under the symbol "BCAR" on the OTCQB marketplace operated by the OTC Markets Groups Inc.

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)





(Unaudited)







June 30,



2012


2011

Assets:





Cash and due from banks, noninterest-bearing


$       3,884


$     10,172

Temporary investments


51,691


12,431

Investment securities


105,609


118,534

Loans


285,186


345,617

 Less, allowance for loan losses


(7,541)


(6,685)

     Total loans, net


277,645


338,932

Premises and equipment, net


12,091


12,681

Other real estate owned


7,403


6,066

Bank owned life insurance


10,359


10,549

Other assets


4,924


11,678

     Total Assets


$    473,606


$    521,043






Liabilities:





Noninterest bearing demand deposits


$     38,486


$     38,176

Interest-checking deposits


38,363


37,139

Savings and money market deposits


103,613


107,717

Time deposits


226,986


243,066

     Total deposits


407,448


426,098

Securities sold under repurchase agreements


45,249


45,710

Federal Home Loan Bank advances


-


10,000

Subordinated debt


7,855


7,855

Other liabilities


3,023


2,235

     Total Liabilities


463,575


491,898

Shareholders' Equity:





Preferred stock,  no par value


13,179


13,179

Discount on preferred stock 


(570)


(856)

Common stock, $5 par value per share


19,479


19,486

Additional paid-in capital


12,992


12,983

Retained earnings (loss)


(35,336)


(16,571)

Accumulated other comprehensive income


287


924

     Total Shareholders' Equity


10,031


29,145

     Total Liabilities and Shareholders' Equity


$    473,606


$    521,043






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


$        (0.81)


$         4.10






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



2012


2011


2012


2011

Interest income









   Interest and fees on loans


$    3,548


$    4,489


$    7,334


$    9,139

   Interest on securities


583


845


1,320


1,599

 Other interest income


29


15


46


26

     Total interest income


4,160


5,349


8,700


10,764

Interest expense









   Interest on deposits


852


1,176


1,751


2,330

   Interest on borrowed funds


564


891


1,128


1,504

      Total interest expense


1,416


2,067


2,879


3,834

Net interest income


2,744


3,282


5,821


6,930

   Provision for loan losses


233


6,572


1,525


8,917

   Net interest income (loss) after
     provision for 
loan losses










2,511


(3,290)


4,296


(1,987)

Noninterest income









   Customer service fees


289


328


570


633

   Increase in value of banked owned life
     insurance


505


89


596


178

Gains on investment securities


1,399


6


2,147


6

   Other income


8


2


15


10

     Total noninterest income


2,201


425


3,328


827

Noninterest expense









   Salaries and benefits


1,785


1,604


3,543


3,190

   Occupancy and equipment


479


527


983


1,069

   FDIC insurance assessments


402


334


820


604

   Data processing expense


241


224


480


436

   Valuation provisions and net operating
     costs
associated with foreclosed real
     estate










252


2,747


1,091


2,997

   Other


1,061


1,323


2,323


2,386

     Total noninterest expenses


4,220


6,759


9,240


10,682

Income (Loss) before income taxes


492


(9,624)


(1,616)


(11,842)

   Provision for income taxes


424


-


792


996

Net income (loss)


$         68


$   (9,624)


$   (2,408)


$ (12,838)

  Dividends and accretion on preferred
     stock


(238)


(232)


(475)


(464)

Net loss available to common
  shareholders


$      (170)


$   (9,856)


$   (2,883)


$ (13,302)










Loss per common share:









   Basic


$     (0.04)


$     (2.53)


$     (0.74)


$     (3.41)

   Diluted


$     (0.04)


$     (2.53)


$     (0.74)


$     (3.41)










Weighted Average Common Shares
  Outstanding:









   Basic


3,895,840


3,897,174


3,895,840


3,897,174

   Diluted


3,895,840


3,897,174


3,895,840


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




2012


2011


Change*

Average balance sheet data










Average loans

$  296,518



$359,073



(17.42)

%


Average earning assets

439,339



489,116



(10.18)



Average total assets

480,189



539,518



(11.00)



Average common shareholders'
  equity

(806)



25,818



(103.12)



Average total shareholders'
  equity

12,373



38,997



(68.27)













Period-end balance sheet data:










Total loans

$  285,186



$345,617



(17.48)

%


Allowance for loan losses

(7,541)



(6,685)



12.80



Total assets

473,606



521,043



(9.10)



Total deposits

407,448



426,098



(4.38)



Total common shareholders' equity

(3,148)



15,966



(119.72)



Total shareholders' equity

10,031



29,145



(65.58)













Asset quality indicators










Net loan charge-offs 

$     2,085



$   9,095



(77.08)

%


Total nonperforming loans

9,544



27,032



(64.70)



Total nonperforming assets

16,947



33,098



(48.80)













Asset quality ratios










Net-chargeoffs (recoveries) to
  average loans **

1.41

%


5.11

%


(370)

BP


Nonperforming loans to total
  loans

3.35



7.82



(447)



Nonperforming assets to total
  assets

3.58



6.35



(277)



Nonperforming assets to loan-
  related assets

5.79



9.41



(362)



Allowance for loan losses to
  total loans

2.64



1.93



71













Financial ratios










Return on average assets **

(1.01)

%


(4.80)

%


379

BP


Return on average common
  shareholders' equity **

 N/M 



(103.90)



 N/M 



Net interest margin **

2.66



2.86



(20)













Per share amounts available to common shareholders










Basic earnings (loss) per
  common share

$      (0.74)



$   (3.41)



78.30

%


Diluted earnings (loss) per
  common share

(0.74)



(3.41)



78.30



Book value per common share

(0.81)



4.10



(119.72)
























*   BP denotes basis points. N/M denotes not meaningful.





** 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




2012


2011


Change*

Average balance sheet data










Average loans

$  291,034



$  353,685



(17.71)

%


Average earning assets

438,908



488,919



(10.23)



Average total assets

477,264



538,516



(11.37)



Average common shareholders' equity

(1,847)



23,075



(108.01)



Average total shareholders' equity

11,332



36,254



(68.74)













Asset quality indicators










Net loan charge-offs 

$        740



$     8,200



(90.98)

%












Asset quality ratios










Net-chargeoffs (recoveries) to
 average loans **

1.02

%


9.30

%


(828)

BP












Financial ratios










Return on average assets **

0.06

%


(7.17)

%


723

BP


Return on average common shareholders' equity **

 N/M 



(171.32)



 N/M 



Net interest margin **

2.51



2.69



(18)













Per share amounts available to common shareholders










Basic earnings (loss) per common
 share

$      (0.04)



$      (2.53)



98.42

%


Diluted earnings (loss) per common
 share

(0.04)



(2.53)



98.42



Book value per common share

(0.81)



4.10



(119.72)
























*   BP denotes basis points. N/M denotes not meaningful.





** ratio annualized.





 

SOURCE Bank of the Carolinas Corporation



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