Bank of the Carolinas Corporation Reports Third Quarter Financial Results

MOCKSVILLE, N.C., Oct. 28 /PRNewswire-FirstCall/ -- Bank of the Carolinas Corporation (Nasdaq: BCAR) today reported financial results for the three- and nine-month periods ended September 30, 2010.

For the three-month period ended September 30, 2010, the Company reported a net income of $82,000, as compared to a net income of $782,000 in the third quarter of 2009.  Excluding the effect of one-time gains on sale of the securities in the periods, the current year quarter would have been an improvement over the previous year.  On a linked quarterly basis, net income of $82,000 in the third quarter of 2010 compares to net losses of $188,000 and $235,000 in the second and first quarters of 2010, respectively.  After payment of dividends on preferred stock, the net loss available to common shareholders for the three months ended September 30, 2010 was $147,000, or $0.04 per common share, compared to a net income of $470,000, or $0.12 per common share, for the third quarter of 2009.

For the nine-month period ended September 30, 2010, the Company reported a net loss of $341,000, as compared to a net loss of $1,352,000 for the nine-month period of 2009.  The net loss available to common shareholders for the nine months ended September 30, 2010 was $1,024,000, or $0.26 per common share, compared to a net loss of $1,763,000, or $0.45 per common share, for the nine month period of 2009.

The improvement in year-to-date 2010 results versus the previous year was driven by stronger core operating results which helped offset increased provisions for loan losses.  Operating results have improved due to both an increased net interest margin and reductions in noninterest expenses.  The Company's year-to-date net interest margin increased to 3.30% in 2010 as compared to 2.43% in the previous year.  Noninterest expense has been reduced throughout 2010, decreasing from $4.2 million in the first quarter to $3.8 million in the third quarter of 2010.

As of September 30, 2010, the Company's nonperforming assets totaled $20.2 million and amounted to 3.77% of total assets, compared to total nonperforming assets of $17.5 million, or 2.86% of total assets, as of December 31, 2009, and $15.5 million, or 2.33% of total assets at September 30, 2009.

For the nine-month period ended September 30, 2010, the loan loss provision totaled $2,860,000, an increase of 16.0% from the $2,466,000 recorded in the same period 2009.  The allowance for loan losses was 1.73% of total loans as of September 30, 2010, and net charge-offs for the nine-month period represented an annualized percentage of 1.67% of average loans outstanding.    

Total assets at September 30, 2010 amounted to $535.5 million, a decrease of 12.3% when compared to the $610.4 million as of December 31, 2009 and a decrease of 19.4% when compared to $664.1 million as of September 30, 2009.  The decrease in assets has been a successful strategic decision by the Company to improve its net interest margin and capital ratios.  Loans totaled $367.0 million at September 30, 2010, a decline of 6.3% from a year earlier, and deposits fell 23.9% over the prior year to $415.0 million.

The Company continues to be well capitalized with a Tier 1 leverage ratio of 8.57% and a total capital to risk-weighted assets ratio of 12.43% as of September 30, 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".

For further information contact:


Eric E. Rhodes

Chief Financial Officer

Bank of the Carolinas

(336) 998-1799 x 220



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)





September 30,


2010


2009

Assets:




Cash and due from banks, noninterest-bearing

$     11,690


$      44,519

Temporary investments

5,557


24,136

Investment securities

113,021


165,499

Loans

367,021


391,592

Less, allowance for loan losses

(6,342)


(6,197)

    Total loans, net

360,679


385,395

Premises and equipment, net

13,370


14,289

Other real estate owned

8,571


8,471

Bank owned life insurance

10,280


9,917

Other assets

12,321


11,875

    Total Assets

$   535,489


$    664,101





Liabilities:




Noninterest bearing demand deposits

$     35,531


$      38,139

Interest-checking deposits

32,768


31,529

Savings and money market deposits

126,782


275,749

Time deposits

219,877


199,827

    Total deposits

414,958


545,244

Securities sold under repurchase agreements

45,870


46,358

Federal Home Loan Bank advances

20,000


15,000

Subordinated debt

7,855


7,855

Other liabilities

1,509


1,651

    Total Liabilities

490,192


616,108

Shareholders' Equity:




Preferred stock,  no par value

13,179


13,179

Discount on preferred stock

(1,056)


(1,306)

Common stock, $5 par value per share

19,486


19,486

Additional paid-in capital

12,989


12,972

Retained earnings (loss)

(724)


2,304

Accumulated other comprehensive income

1,423


1,358

    Total Shareholders' Equity

45,297


47,993

    Total Liabilities and Shareholders' Equity

$   535,489


$    664,101





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

$         8.24


$          8.93



Bank of the Carolinas Corporation

Consolidated Statements of Income

(In Thousands Except Share Data)

(Unaudited)

Three months ended


Nine months ended


September 30


September 30


2010


2009


2010


2009

Interest income








  Interest and fees on loans

$      5,102


$      5,875


$    15,809


$    17,904

  Interest on securities

822


1,641


2,607


4,539

Other interest income

12


13


45


56

    Total interest income

5,936


7,529


18,461


22,499

Interest expense








  Interest on deposits

1,181


2,657


3,839


9,843

  Interest on borrowed funds

641


776


1,997


2,364

     Total interest expense

1,822


3,433


5,836


12,207

Net interest income

4,114


4,096


12,625


10,292

  Provision for loan losses

858


1,046


2,860


2,466

  Net interest income after provision for








    loan losses

3,256


3,050


9,765


7,826

Noninterest income








  Customer service fees

316


369


961


1,019

  Increase in value of banked owned life insurance

91


92


270


272

Gains on sale of investment securities

178


1,246


368


1,341

  Other income

4


8


5


31

    Total noninterest income

589


1,715


1,604


2,663

Noninterest expense








  Salaries and benefits

1,686


1,611


5,400


4,959

  Occupancy and equipment

537


553


1,665


1,647

  FDIC insurance assessments

155


217


717


932

  Data processing expense

210


330


607


785

  Valuation provisions and net operating costs








associated with foreclosed real estate

349


297


1,061


1,759

  Other

857


838


2,660


2,735

    Total noninterest expenses

3,794


3,846


12,110


12,817

Income (loss) before income taxes

51


919


(741)


(2,328)

  Provision for income taxes

(31)


137


(400)


(976)

Net income (loss)

$           82


$         782


$       (341)


$    (1,352)

 Dividends and accretion on preferred stock

(229)


(312)


(683)


(411)

Net income (loss) available to common shareholders

$       (147)


$         470


$    (1,024)


$    (1,763)









Loss per common share:








  Basic

$      (0.04)


$        0.12


$      (0.26)


$      (0.45)

  Diluted

$      (0.04)


$        0.12


$      (0.26)


$      (0.45)









Weighted Average Common Shares Outstanding:








  Basic

3,897,174


3,897,174


3,897,174


3,893,350

  Diluted

3,897,174


3,901,735


3,897,174


3,893,350



Bank of the Carolinas Corporation

Other Financial Data

(Dollars in thousands except per share amounts)




As of or for the


As of or for the




three months ended September 30


nine months ended September 30




2010


2009


Change*


2010


2009


Change*

Average balance sheet data



















Average loans

$ 367,820



$ 399,173



(7.85)

%


$ 375,346



$ 404,860



(7.29)

%


Average earning assets

486,638



594,599



(18.16)



511,383



566,571



(9.74)



Average total assets

537,258



669,202



(19.72)



559,594



618,918



(9.59)



Average common shareholders' equity

32,703



42,907



(23.78)



32,494



35,946



(9.60)



Average total shareholders' equity

45,882



56,086



(18.19)



45,673



44,008



3.78






















Period-end balance sheet data:



















Total loans










$ 367,021



$ 391,592



(6.27)

%


Allowance for loan losses










(6,342)



(6,197)



2.34



Total assets










535,489



664,101



(19.37)



Total deposits










414,958



545,244



(23.89)



Total common shareholders' equity










32,118



34,814



(7.74)



Total shareholders' equity










45,297



47,993



(5.62)






















Asset quality indicators



















Net loan charge-offs

$     1,695



$     1,563



n/m

%


$     4,685



$     2,577



81.78

%


Total nonperforming loans










11,634



7,021



65.70



Total nonperforming assets










20,205



15,492



30.42






















Asset quality ratios



















Net-chargeoffs (recoveries) to average loans **

1.83

%


1.55

%


28

BP


1.67

%


0.85

%


82

BP


Nonperforming loans to total loans










3.17



1.79



138



Nonperforming assets to total assets










3.77



2.33



144



Nonperforming assets to loan-related assets










5.38



3.87



151



Allowance for loan losses to total loans










1.73



1.58



15






















Financial ratios



















Return on average assets **

0.06

%


0.46

%


(40)

BP


(0.08)

%


(0.29)

%


21

BP


Return on average common shareholders' equity **

(1.78)



(2.88)



110



(4.21)



(6.76)



255



Net interest margin **

3.35



2.73



62



3.30



2.43



87






















Per share amounts available to common shareholders



















Basic earnings (loss) per common share

$     (0.04)



$       0.12



133.33

%


$     (0.26)



$     (0.45)



42.22

%


Diluted earnings (loss) per common share

(0.04)



0.12



133.33



(0.26)



(0.45)



42.22



Book value per common share

8.24



8.93



(7.74)



8.24



8.93



(7.74)










































*   bps denotes basis points.

** ratio annualized.



SOURCE Bank of the Carolinas Corporation



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