Bank of the Carolinas Corporation Reports Second Quarter Financial Results

MOCKSVILLE, N.C., Aug. 14, 2014 /PRNewswire/ -- Bank of the Carolinas Corporation (OTCQB: BCAR) today reported financial results for the three- and six-month periods ended June 30, 2014.

For the three-month period ended June 30, 2014, the Company reported net income available to common shareholders of $599,000 as compared to a net loss of $1.8 million for the first quarter of 2014 and a net loss of $1.3 million for the second quarter of 2013.  Net income per diluted common share was $0.15 for the second quarter of 2014 compared with a net loss per share of $0.45 for the first quarter of 2014 and a net loss per share of $0.33 for the second quarter of 2013.

For the six-month period ended June 30, 2014, the Company reported a net loss available to common shareholders of $1.2 million or $0.30 per common share, compared to a net loss of $1.4 million or $0.36 per common share for the six-month period ended June 30, 2013.

The provision for loan losses recognized a recovery of $1.3 million in the second quarter of 2014 compared to a recovery of $12,000 in the second quarter a year ago.  For the six-month period ended June 30, 2014, the provision for loan losses recognized a recovery of $225,000 compared to a recovery of $1.2 million for the same six-month period of 2013.  The Company recovered $12,000 of costs related to foreclosed real estate for the second quarter of 2014 as compared to $167,000 of expense in the second quarter of 2013.  For the six-month period ended June 30, 2014, costs related to foreclosed real estate were $27,000 as compared to $532,000 for the same six-month period of 2013.  Through June 30, 2014, credit-related costs totaled a recovery of $163,000, or a 79.7% decrease over the previous year's recovery of $803,000 through June 30, 2013.

The Company continues its progress in reducing the level of nonperforming assets.  As of June 30, 2014, the Company's nonperforming assets decreased to $5.8 million and amounted to 1.36% of total assets as compared to $7.4 million or 1.74% of total assets as of March 31, 2014 and compared to $7.0 million, or 1.64% of total assets as of June 30, 2013.  The allowance for loan losses was 1.84% of total loans as of June 30, 2014. Net loan chargeoffs amounted to $671,000 for the second quarter of 2014, as compared to net loan recoveries of $34,000 in the first quarter of 2014 and net loan chargeoffs of $88,000 in the second quarter of 2013.

The Company's net interest margin was 2.73% in the second quarter of 2014, which is an increase of 6 basis points from 2.67% in the second quarter of 2013.  Noninterest expense through June 30 decreased 5.95% in 2014 versus 2013 and for the three-month period decreased 6.42% in the second quarter of 2014 versus 2013.  Cost savings of $717,000 for the first six months of 2013 have been recognized in salary and benefits, legal fees, and costs related to foreclosed real estate.

Total assets at June 30, 2014 amounted to $427.8 million, an increase of 0.2% when compared to $427.1 million as of June 30, 2013.   Loans totaled $279.4 million at June 30, 2014, an increase of 3.7% from a year earlier, and deposits increased 0.2% over the prior year to $367.0 million. The Company's deposit mix has improved by decreasing non-core brokered deposits by $3.5 million June 30, 2013.

The Company's banking subsidiary had a Tier 1 leverage capital ratio and Tier 1 capital to risk-weighted assets ratio of 3.43% and 4.70% respectively, while its total capital to risk-weighted assets ratio was 5.96% as of June 30, 2014.

The Company completed a private placement of $45.8 million on July 16, 2014.  In connection with the private placement, the Company repurchased all 13,179 shares of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A, issued under the Capital Purchase Program from the U.S. Treasury. The Company also repurchased all of its floating rate trust preferred securities issued through its subsidiary, Bank of the Carolinas Trust I, from the holders of those securities. The Company also repurchased a subordinated note from the holder of the note.  As of July 31, 2014, the Company and its subsidiaries have no outstanding third-party debt obligations.

The Company injected $34.8 million from the proceeds of the private placement into the Company's banking subsidiary.  As of July 31, 2014, the Company's banking subsidiary had a Tier 1 leverage capital ratio and Tier 1 capital to risk-weighted assets ratio of 10.58% and 14.86% respectively, while its total capital to risk-weighted assets ratio was 16.12%.

President and CEO, Stephen R. Talbert, said, "We are pleased to release our second quarter earnings.  We continue to have success in reducing our levels of nonperforming assets and decreasing our noninterest expense.  I am proud of our successful $45.8 million private placement.  I am grateful to the many people who helped us through this complicated transaction.  We believe the Company is now positioned for continued success."

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, Concord, Harrisburg, Landis, Lexington and Winston-Salem.  The common stock of the Company is quoted under the symbol "BCAR" on the OTCQB marketplace operated by OTC Markets Group 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,


2014


2013

Assets:








Cash and due from banks, noninterest-bearing

$             18,342


$               4,374

Temporary investments

20,209


39,182

Investment securities

88,335


93,202

Loans

279,437


269,497

 Less, allowance for loan losses

(5,153)


(6,398)

     Total loans, net

274,284


263,099

Premises and equipment, net

11,097


11,542

Other real estate owned

1,951


1,589

Bank owned life insurance

11,059


10,710





Other assets

2,550


3,374


     Total Assets

$           427,827


$           427,072





Liabilities:




Noninterest bearing demand deposits

$             34,657


$             33,353

Interest-checking deposits

42,466


41,131

Savings and money market deposits

111,385


111,783

Time deposits

178,504


180,041

     Total deposits

367,012


366,308

Securities sold under repurchase agreements

45,267


45,939

Subordinated debt

7,855


7,855

Other liabilities

2,914


2,633

     Total Liabilities

423,048


422,735





Shareholders' Equity:








Preferred stock,  no par value

13,179


13,179





Discount on preferred stock 

-


(263)

Common stock, no par value at June 30, 2014,




   $5 par value per share at June 30, 2013

-


19,479

Additional paid-in capital

32,470


12,991

Retained losses

(39,157)


(37,830)

Accumulated other comprehensive income (loss)

(1,713)


(3,219)





     Total Shareholders' Equity

4,779


4,337


     Total Liabilities and Shareholders' Equity

$           427,827


$           427,072





Preferred shares authorized

3,000,000


3,000,000

Preferred shares issued and outstanding

13,179


13,179

Unaccrued preferred stock dividend

2,331


1,565

Common shares authorized

500,000,000


15,000,000

Common shares issued and outstanding

3,895,840


3,895,840





Book value per common share

$                (2.75)


$                (2.67)

 

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



2014


2013


2014


2013

Interest income









   Interest and fees on loans


$              3,235


$        3,224


$              6,428


$        6,440

   Interest on securities


537


497


1,075


1,086

Other interest income


15


25


33


39

     Total interest income


3,787


3,746


7,536


7,565

Interest expense









   Interest on deposits


525


579


1,052


1,200

   Interest on borrowed funds


564


563


1,121


1,120

      Total interest expense


1,089


1,142


2,173


2,320

Net interest income


2,698


2,604


5,363


5,245

   Provision for loan losses


(1,287)


(12)


(225)


(1,158)

   Net interest income after provision for









     loan losses


3,985


2,616


5,588


6,403

Noninterest income









   Customer service fees


293


291


584


572

   Increase in value of bank owned life insurance


86


87


171


174

Gains on investment securities


-


-


-


-

   Other income


5


5


19


3

     Total noninterest income


384


383


774


749

Noninterest expense









   Salaries and benefits


1,547


1,595


3,137


3,193

   Occupancy and equipment


456


426


928


878

   FDIC insurance assessments


368


369


731


736

   Data processing expense


267


283


528


552

   Valuation provisions and net operating costs









associated with foreclosed real estate


(12)


167


27


532

   Other


856


881


1,646


1,549

     Total noninterest expenses


3,482


3,721


6,997


7,440

Income (Loss) before income taxes


887


(722)


(635)


(288)

   Provision for income taxes


-


341


-


638

Net income (loss)


$                 887


$       (1,063)


$                (635)


$          (926)

  Dividends and accretion on preferred stock


(288)


(243)


(537)


(486)

Net loss available to common shareholders


$                 599


$       (1,306)


$             (1,172)


$       (1,412)










Loss per common share:









   Basic


$                0.15


$         (0.33)


$               (0.30)


$         (0.36)

   Diluted


$                0.15


$         (0.33)


$               (0.30)


$         (0.36)










Weighted Average Common Shares Outstanding:









   Basic


3,895,840


3,895,840


3,895,840


3,895,840

   Diluted


3,895,840


3,895,840


3,895,840


3,895,840

 

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





2014


2013


Change*

Average balance sheet data











Average loans


$         278,401



$   268,747



3.59

%


Average earning assets


394,996



391,043



1.01



Average total assets


427,982



429,698



(0.40)



Average common shareholders' equity


(10,081)



(4,472)



125.42



Average total shareholders' equity


3,098



8,707



(64.42)














Period-end balance sheet data:











Total loans


$         279,437



$   269,497



3.69

%


Allowance for loan losses


(5,153)



(6,398)



(19.46)



Total assets


427,827



427,072



0.18



Total deposits


367,012



366,308



0.19



Total common shareholders' equity


(8,400)



(8,842)



(5.00)



Total shareholders' equity


4,779



4,337



10.19














Asset quality indicators











Net loan charge-offs (recoveries)


$                637



$        (666)



(195.65)

%


Total nonperforming loans


3,865



5,455



(29.15)



Total nonperforming assets


5,816



7,044



(17.44)














Asset quality ratios











Net-chargeoffs (recoveries) to average loans **


0.46

%


(0.50)

%


96

BP


Nonperforming loans to total loans


1.38



2.02



(64)



Nonperforming assets to total assets


1.36



1.64



(29)



Nonperforming assets to loan-related assets


2.07



2.60



(53)



Allowance for loan losses to total loans


1.84



2.37



(53)














Financial ratios











Return on average assets **


(0.30)

%


(0.43)

%


13

BP


Return on average common shareholders' equity **


(23.44)



(63.67)



4,023



Net interest margin **


2.74



2.70



4














Per share amounts available to common shareholders











Basic loss per common share


$              (0.30)



$       (0.36)



16.67

%


Diluted loss per common share


(0.30)



(0.36)



16.67



Book value per common share


(2.75)



(2.67)



3.11
























*   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



2014


2013


Change*

Average balance sheet data











Average loans


$        278,525



$     268,947



3.56

%


Average earning assets


395,675



391,200



1.14



Average total assets


430,066



430,190



(0.03)



Average common shareholders' equity


(10,144)



(4,385)



131.34



Average total shareholders' equity


3,035



8,794



(65.49)














Asset quality indicators











Net loan charge-offs 


$               671



$              88



662.50

%













Asset quality ratios











Net-chargeoffs to average loans **


0.97

%


0.13

%


84

BP













Financial ratios











Return on average assets **


0.83

%


(0.99)

%


182

BP


Return on average common shareholders' equity **


23.68



(119.46)



14,314



Net interest margin **


2.73



2.67



6














Per share amounts available to common shareholders











Basic loss per common share


$              0.15



$          (0.33)



144.12

%


Diluted loss per common share


0.15



(0.33)



144.12



Book value per common share


(2.75)



(2.67)



3.11


























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

** ratio annualized.

 

SOURCE Bank of the Carolinas Corporation



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