Bank of the Carolinas Corporation Reports Third Quarter Financial Results

03 Nov, 2011, 16:45 ET from Bank of the Carolinas Corporation

MOCKSVILLE, N.C., Nov. 3, 2011 /PRNewswire/ -- Bank of the Carolinas Corporation (Nasdaq: BCAR) today reported financial results for the three- and nine-month periods ended September 30, 2011.

For the three-month period ended September 30, 2011, the Company reported a net loss available to common shareholders of $7.1 million as compared to a net loss of $9.9 million for the second quarter of 2011 and a net loss of $147,000 for the third quarter of 2010.  The net loss per diluted common share was $1.82 for the third quarter of 2011 compared with a net loss per share of $2.53 for the second quarter of 2011 and a net loss per share of $0.04 for the third quarter of 2010.

For the nine-month period ended September 30, 2011, the Company reported a net loss available to common shareholders of $20.4 million or $5.23 per common share, compared to a net loss of $1.0 million or $0.26 per common share for the nine-month period ended September 30, 2010.

Third quarter losses were driven 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 $5.6 million in the third quarter of 2011 as compared to $6.6 million in the second quarter of 2011 and $858,000 in the third quarter a year ago.  Costs related to foreclosed real estate were $1.1 million for the third quarter of 2011 as compared to $2.7 million in the second quarter of 2011.

The Company had significant improvement in the level of nonperforming assets for the second consecutive quarter as they decreased to $28.9 million or 5.72% of total assets at September 30, 2011 down from $33.1 million at June 30, 2011 and down from $37.2 million at March 31, 2011.  The Company continued to build its allowance for loan losses in the third quarter bringing it to 2.68% of total loans as of September 30, 2011. Net loan charge-offs decreased to $3.6 million for the third quarter of 2011 from $8.2 million in the second quarter of 2011; this compared to $1.7 million in the third quarter of 2010.

The Company's net interest margin was 2.93% in the third quarter of 2011, an increase from 2.69% in the second quarter of 2011 and down from 3.35% in the third quarter in 2010.  Noninterest expense year to date, excluding the costs related to foreclosed real estate, increased 6.0% 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.

Total assets at September 30, 2011 amounted to $505.9 million, a decrease of 5.5% when compared to $535.5 million as of September 30, 2010.   Loans totaled $324.8 million at September 30, 2011, a decline of 11.5% from a year earlier, and deposits increased 0.6% over the prior year to $417.6 million.

The Company's banking subsidiary had a Tier 1 leverage capital ratio and Tier 1 capital to risk-weighted assets ratio of 4.97% and 6.68% respectively, while its total capital to risk-weighted assets ratio was 7.92% as of September 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)

September 30,

2011

2010

Assets:

Cash and due from banks, noninterest-bearing

$       4,922

$     11,690

Temporary investments

27,061

5,557

Investment securities

113,768

113,021

Loans

324,757

367,021

Less, allowance for loan losses

(8,691)

(6,342)

    Total loans, net

316,066

360,679

Premises and equipment, net

12,448

13,370

Other real estate owned

9,825

8,571

Bank owned life insurance

10,640

10,280

Other assets

11,147

12,321

    Total Assets

$    505,877

$    535,489

Liabilities:

Noninterest bearing demand deposits

$     34,446

$     35,531

Interest-checking deposits

38,527

32,768

Savings and money market deposits

103,163

126,782

Time deposits

241,422

219,877

    Total deposits

417,558

414,958

Securities sold under repurchase agreements

45,412

45,870

Federal Home Loan Bank advances

10,000

20,000

Subordinated debt

7,855

7,855

Other liabilities

2,226

1,509

    Total Liabilities

483,051

490,192

Shareholders' Equity:

Preferred stock,  no par value

13,179

13,179

Discount on preferred stock

(787)

(1,056)

Common stock, $5 par value per share

19,486

19,486

Additional paid-in capital

12,984

12,989

Retained earnings (loss)

(23,650)

(724)

Accumulated other comprehensive income

1,614

1,423

    Total Shareholders' Equity

22,826

45,297

    Total Liabilities and Shareholders' Equity

$    505,877

$    535,489

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

$         2.48

$         8.24

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

2011

2010

2011

2010

Interest income

Interest and fees on loans

$    4,276

$    5,102

$   13,415

$   15,809

Interest on securities

823

822

2,422

2,607

Other interest income

16

12

42

45

    Total interest income

5,115

5,936

15,879

18,461

Interest expense

  Interest on deposits

1,075

1,181

3,405

3,839

  Interest on borrowed funds

571

641

2,075

1,997

     Total interest expense

1,646

1,822

5,480

5,836

Net interest income

3,469

4,114

10,399

12,625

  Provision for loan losses

5,650

858

14,567

2,860

  Net interest income after provision for

    loan losses

(2,181)

3,256

(4,168)

9,765

Noninterest income

Customer service fees

318

316

951

961

Increase in value of bank owned life insurance

91

91

269

270

Gains on investment securities

-

178

6

368

Other income (loss)

6

4

16

5

    Total noninterest income

415

589

1,242

1,604

Noninterest expense

  Salaries and benefits

1,757

1,686

4,947

5,400

  Occupancy and equipment

502

537

1,571

1,665

  FDIC insurance assessments

345

155

949

717

  Data processing expense

218

210

654

607

  Valuation provisions and net operating costs

associated with foreclosed real estate

1,053

349

4,050

1,061

  Other

1,205

857

3,591

2,660

    Total noninterest expenses

5,080

3,794

15,762

12,110

Loss before income taxes

(6,846)

51

(18,688)

(741)

  Provision for income taxes

-

(31)

996

(400)

Net loss

$   (6,846)

$         82

$  (19,684)

$      (341)

 Dividends and accretion on preferred stock

(234)

(229)

(698)

(683)

Net loss available to common shareholders

$   (7,080)

$      (147)

$  (20,382)

$   (1,024)

Loss per common share:

  Basic

$     (1.82)

$     (0.04)

$     (5.23)

$     (0.26)

  Diluted

$     (1.82)

$     (0.04)

$     (5.23)

$     (0.26)

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

nine months ended September 30

2011

2010

Change*

Average balance sheet data

Average loans

$  350,768

$  375,346

(6.55)

%

Average earning assets

482,482

511,383

(5.65)

Average total assets

531,712

559,594

(4.98)

Average common shareholders' equity

22,222

32,494

(31.61)

Average total shareholders' equity

35,401

45,673

(22.49)

Period-end balance sheet data:

Total loans

$  324,757

$  367,021

(11.52)

%

Allowance for loan losses

(8,691)

(6,342)

37.04

Total assets

505,877

535,489

(5.53)

Total deposits

417,558

414,958

0.63

Total common shareholders' equity

9,647

32,118

(69.96)

Total shareholders' equity

22,826

45,297

(49.61)

Asset quality indicators

Net loan charge-offs

$    12,739

$     4,685

171.93

%

Total nonperforming loans

19,116

11,634

64.31

Total nonperforming assets

28,941

20,205

43.24

Asset quality ratios

Net-chargeoffs (recoveries) to average loans **

4.86

%

1.67

%

319

BP

Nonperforming loans to total loans

5.89

3.17

272

Nonperforming assets to total assets

5.72

3.77

195

Nonperforming assets to loan-related assets

8.65

5.38

327

Allowance for loan losses to total loans

2.68

1.73

95

Financial ratios

Return on average assets **

(4.95)

%

(0.08)

%

(487)

BP

Return on average common shareholders' equity **

(122.63)

(4.21)

(11,842)

Net interest margin **

2.88

3.30

(42)

Per share amounts available to common shareholders

Basic earnings (loss) per common share

$      (5.23)

$      (0.26)

(1,911.54)

%

Diluted earnings (loss) per common share

(5.23)

(0.26)

(1,911.54)

Book value per common share

2.48

8.24

(69.96)

*   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 September 30

2011

2010

Change*

Average balance sheet data

Average loans

$  334,427

$  367,820

        (9.08)

%

Average earning assets

    469,433

    486,638

        (3.54)

Average total assets

    516,355

    537,258

        (3.89)

Average common shareholders' equity

     15,148

     32,703

      (53.68)

Average total shareholders' equity

     28,327

     45,882

      (38.26)

Asset quality indicators

Net loan charge-offs

$     3,645

$     1,695

     114.98

%

Asset quality ratios

Net-chargeoffs (recoveries) to average loans **

         4.32

%

         1.83

%

          249

BP

Financial ratios

Return on average assets **

        (5.26)

%

         0.06

%

         (532)

BP

Return on average common shareholders' equity **

    (185.44)

        (1.78)

    (18,366)

Net interest margin **

         2.93

         3.35

           (42)

Per share amounts available to common shareholders

Basic earnings (loss) per common share

$      (1.82)

$      (0.04)

  (4,450.00)

%

Diluted earnings (loss) per common share

        (1.82)

        (0.04)

  (4,450.00)

Book value per common share

         2.48

         8.24

      (69.96)

*   bps denotes basis points.

** ratio annualized.

SOURCE Bank of the Carolinas Corporation