Bank of the Carolinas Corporation Reports Third Quarter Financial Results

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



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