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Bank of the Carolinas Corporation Reports Second Quarter


Earnings

MOCKSVILLE, N.C., July 23 /PRNewswire-FirstCall/ -- Bank of the Carolinas Corporation (Nasdaq: BCAR), today reported financial results for the three and six months ended June 30, 2007.

For the three month period ended June 30, 2007, net income was $592,000, as compared to $841,000 in the second quarter of 2006. Diluted earnings per share were $.15 as compared to $.21 for the second quarter of 2006.

For the six months ended June 30, 2007, the Bank reported net income of $1,372,000, a decrease of 16.6% when compared to $1,645,000 for the six month period in 2006. Diluted earnings per share decreased to $.35 for the six month period, a 16.7% decrease when compared to $.42 per diluted share for the same period in 2006.

Total assets at June 30, 2007 amounted to $456.9 million, an increase of 7.6% when compared to the June 30, 2006 amount of $424.7 million. Net loans increased 6.7% over the prior year to $352.3 million, while deposits grew to $387.0 million, a 10.6% increase. The allowance for loan losses was .96% of total loans as of June 30, 2007, and the ratio of annualized net charge-offs to average loans was 0.44%.

The biggest factors leading to the decrease in net income for the three and six month periods ended in 2007 were a decline in the Company's net interest margin and an increase in the provision for loan losses. For the six month period ended in 2007, the net interest margin declined to 3.35% from 3.92% in 2006. While there was a significant decline year over year, the net interest margin did increase slightly in the second quarter versus the first quarter of 2007. The increase in the provision for loan losses was mainly the result of an increased level of charge-offs during the quarter, a significant portion of which was related to one problem credit. Excluding the charge-off related to this one problem credit, the Company's annualized net charge-off ratio would have been .17% as opposed to .44% as reported.

The Company experienced growth in non-interest income of 28.3% and 24.3%, respectively, for the three and six month periods in 2007 versus 2006. While non-interest expense rose over the previous year, it decreased as a percentage of average assets, falling to 2.44% in 2007 from 2.59% for the comparable six month period.

As was previously announced on April 12, 2007, the Company has entered into a definitive agreement with Randolph Bank & Trust Company (Pink Sheets: RDBN) whereby Randolph Bank will be merged into Bank of the Carolinas. The transaction is subject to shareholder and regulatory approval and is expected to be consummated in the fourth quarter of 2007.

Bank of the Carolinas Corporation is the holding company for Bank of the Carolinas, a state chartered bank headquartered in Mocksville, NC with offices in Advance, Asheboro, Cleveland, Concord, Harrisburg, King, Landis, Lexington and Winston-Salem. Common stock of the Company is traded on the NASDAQ Capital Market under the symbol BCAR.

This press release contains forward-looking statements as defined by federal securities laws. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. Actual results could differ materially from current projections. Bank of the Carolinas Corporation undertakes no obligation to revise these statements following the date of this press release.


    For further information contact:
    Eric E. Rhodes
    Chief Financial Officer
    Bank of the Carolinas
    (336) 751-5755
    Additional Information and Where To Find It

The proposed merger of Randolph Bank & Trust Company ("Randolph") into Bank of the Carolinas will be submitted to the shareholders of Bank of the Carolinas Corporation ("BOC") and Randolph for their consideration and approval. BOC has filed a registration statement, a prospectus (which will be combined with Randolph's and BOC's joint proxy statements) and other related documents with the SEC concerning the proposed merger. The joint proxy statement/prospectus and other relevant materials, any amendments or supplements to those documents, and any other filings containing information about Randolph or BOC, contain important information. Randolph's and BOC's shareholders are urged to read those documents when they become available and before making any voting or investment decision with respect to the proposed merger. You will be able to obtain a free copy of the joint proxy statement/prospectus and any other documents filed by BOC with the SEC at the SEC's Internet site (http://www.sec.gov). Copies of the proxy statement and other reports Randolph files with the FDIC will be available for inspection at the offices of the FDIC's Accounting and Securities Disclosure Section located at Room F-6043, 550 17th Street, N.W., Washington, DC 20429. You also may obtain copies of Randolph's reports by calling the FDIC's Accounting and Securities Disclosure Section at (202) 898-8913, by facsimile at (202) 898-8505, or by email at mfields@fdic.gov. In addition, you may obtain copies of the joint proxy statement/prospectus and any other documents filed with the SEC by BOC, without charge, by directing a request to the President, Bank of the Carolinas Corporation, 135 Boxwood Village, Mocksville, N.C. 27028-2941 or P.O. Box 129, Mocksville, N.C. 27028-0129, telephone (336) 751-5755. You may obtain copies of any documents filed with the FDIC by Randolph, without charge, by directing a request to the President, Randolph Bank & Trust Company, 175 N. Fayetteville Street, Asheboro, N.C. 27203-5513, or P.O. Box 1888, Asheboro, N.C. 27204-1888, telephone (336) 625-1000.

This press release does not constitute an offer of any securities for sale. Any offer will be made only by the joint proxy statement/prospectus.

Participants in the Solicitation

BOC and Randolph, and their respective directors and executive officers, may be deemed to be participants in the solicitation of proxies from the shareholders of BOC and Randolph in favor of the proposed merger. Information about BOC's directors and executive officers and their ownership of BOC's capital stock will be contained in the proxy statement that will be distributed by BOC in connection with the merger, which will be filed with the SEC. Information about Randolph's directors and executive officers and their ownership of Randolph's capital stock will be contained in the proxy statement that will be distributed by Randolph in connection with its 2007 annual meeting of shareholders and the merger, which will be filed with the FDIC. Additional information regarding the interests of those participants in the proposed merger may be obtained by reading the joint proxy statement/prospectus regarding the merger when it becomes available. You may obtain free copies of those documents when they become available as described above.


    Bank of the Carolinas Corporation
    Consolidated Balance Sheets
    (In Thousands, Except Share Data)
    (Unaudited)
                                                              June 30
                                                         2007          2006
    Assets
    Cash and Due from Banks                             $5,364        $4,367
    Interest-Bearing Deposits in Banks                   3,418         6,558
    Federal Funds Sold                                     969         3,784
    Securities Available for Sale                       64,564        54,031
    Loans                                              355,750       333,777
     Less, Allowance for Loan Losses                    (3,425)       (3,504)
         Total Loans, Net                              352,325       330,273
    Properties and Equipment                            12,303        11,402
    Other Assets                                        17,910        14,236
         Total Assets                                 $456,853      $424,651
    Liabilities
    Non-interest Bearing Demand Deposits               $30,613       $29,732
    Interest Bearing Demand Deposits                    62,296        67,612
    Savings Deposits                                    12,012        11,673
    Time Deposits                                      282,072       241,028
         Total Deposits                                386,993       350,045
    Borrowings                                          26,500        37,000
    Retail Repurchase Agreements                         2,111             -
    Other Liabilities                                    2,556         1,808
         Total Liabilities                             418,160       388,853
    Shareholders' Equity
    Common Stock, Par Value $5 Per Share:
       Authorized 15,000,000 Shares; Issued
        3,852,992 Shares in 2007 and 3,825,192
        Shares in 2006                                  19,265        19,126
    Additional Paid-In Capital                          11,505        11,425
    Retained Earnings                                    8,281         5,845
    Accumulated Other Comprehensive Loss                  (358)         (598)
         Total Shareholders' Equity                     38,693        35,798
         Total Liabilities and Shareholders'
          Equity                                      $456,853      $424,651
    Bank of the Carolinas Corporation
    Consolidated Statements of Income
    (In Thousands, Except Share and Per Share Data)
    (Unaudited)
                                        Three Months Ended    Six Months Ended
                                             June 30              June 30
                                         2007       2006       2007       2006
    Interest Income
       Interest and Fees on Loans      $7,285     $6,558    $14,594    $12,363
       Interest on Securities             699        544      1,313      1,021
       Federal Funds Sold                 184         31        361        169
       Deposits in Other Banks              1          5          5          6
         Total Interest Income          8,169      7,138     16,273     13,559
    Interest Expense
       Deposits                         4,311      2,993      8,561      5,669
       Borrowed Funds                     303        374        588        645
          Total Interest Expense        4,614      3,367      9,149      6,314
    Net Interest Income                 3,555      3,771      7,124      7,245
       Provision for Loan Losses          412        180        474        297
       Net Interest Income After
        Provision for Loan Losses       3,143      3,591      6,650      6,948
    Other Income
       Customer Service Fees              266        245        502        466
       Mortgage Loan Broker Fees           31         22         62         81
       Investment Services                 56          -         99          -
       Increase in CSV of Life
        Insurance                          86         51        168        100
       Other Income                        33         50         70         78
         Total Other Income               472        368        901        725
    Noninterest Expense
       Salaries and Benefits            1,418      1,462      2,935      2,817
       Occupancy and Equipment            421        335        839        672
       Other Noninterest Expense          940        854      1,792      1,628
         Total Noninterest Expense      2,779      2,651      5,566      5,117
       Income Before Income Taxes         836      1,308      1,985      2,556
       Income Taxes                       244        467        613        911
    Net Income                           $592       $841     $1,372     $1,645
    Earnings Per Share
       Basic                            $0.15      $0.22      $0.36      $0.43
       Diluted                          $0.15      $0.21      $0.35      $0.42
    Weighted Average Shares
     Outstanding
       Basic                        3,837,533  3,825,192  3,833,146  3,825,192
       Diluted                      3,943,364  3,964,660  3,947,383  3,963,642
    Bank of the Carolinas Corporation
    Performance Ratios
                                                      As of or for the
                                                  Six Months Ended June 30
                                                    2007    2006    Change*
    Financial Ratios
             Return On Average Assets **           0.60%   0.83%     (23)BP
             Return On Average Shareholders'
             Equity **                             7.18%   9.36%    (218)
             Net Interest Margin **                3.35%   3.92%     (57)
    Asset Quality Ratios
             Net-chargeoffs to Average Loans **    0.44%   0.07%      37 BP
             Nonperforming Loans To Total Loans    0.95%   0.69%      26
             Nonperforming Assets To Total
             Assets                                0.96%   0.86%      10
             Allowance For Loan Losses To Total
             Loans                                 0.96%   1.05%      (9)
    *   BP denotes basis points
    **  Ratio Annualized



SOURCE Bank of the Carolinas

CONTACT: Eric E. Rhodes, Chief Financial Officer of Bank of the Carolinas, +1-336-751-5755 -0- Jul/23/2007 22:14 GMT

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