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Bank of the Carolinas Corporation Reports Third Quarter Earnings

MOCKSVILLE, N.C., Oct. 31 /PRNewswire-FirstCall/ -- Bank of the Carolinas
Corporation (Nasdaq: BCAR), today reported financial results for the three and
nine months ended September 30, 2007. 
For the three month period ended September 30, 2007, net income was
$605,000, as compared to $1,148,000 in the third quarter of 2006.  Diluted
earnings per share were $.15 as compared to $.29 for the third quarter of
2006. For the nine months ended September 30, 2007, the Bank reported net
income of $1,977,000, compared to $2,793,000 for the nine month period in
2006.  Diluted earnings per share were $.50 for the nine month period,
compared to $.70 per diluted share for the same period in 2006. 
The decrease in net income in 2007 is due to the fact that net income in
the third quarter of 2006 included a pre-tax gain of $1,755,000 on the sale of
a branch location.  Excluding this one time gain, net income for both the
three and nine month periods in 2007 would have shown an increase compared to
2006. 
During the third quarter of the 2007 the Bank opened its tenth full
service office, located in Concord, NC.  This is the second full service
office the Bank has opened in 2007. The Bank's new Winston-Salem office opened
in February. 
Total assets at September 30, 2007 amounted to $480.2 million, an increase
of 11.3% when compared to the September 30, 2006 amount of $431.4 million.
Net loans increased 11.3% over the prior year to $372.8 million, while
deposits grew to $410.4 million, a 12.7% increase.  The allowance for loan
losses was 1.00% of total loans as of September 30, 2007, and the ratio of
annualized net charge-offs to average loans for the nine-month period was
0.36%. 
For the nine month period ended in 2007, the net interest margin declined
to 3.40% from 3.87% in 2006.  While this was a significant year over year
decline, the net interest margin has remained stable over the last three
linked quarters and did increase slightly in the third quarter versus the
second quarter of 2007. 
Excluding the one-time gain in 2006 mentioned above, the Company
experienced growth in non-interest income of 23.1% and 23.8%, respectively,
for the three and nine month periods in 2007 versus 2006.  Non-interest
expense decreased over the previous year for both the three and nine month
periods. As a percentage of average assets, non-interest expense decreased to
2.48% for the nine month period in 2007 from 2.84% for the comparable nine
month period in 2006. 
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 has received regulatory approval but is subject to
shareholder 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 is
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 before making any voting or
investment decision with respect to the proposed merger.  You may 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 filed by Randolph with the
FDIC are 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 is 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 is contained in the proxy statement distributed by BOC in
connection with the merger, which has been filed with the SEC.  Information
about Randolph's directors and executive officers and their ownership of
Randolph's capital stock is contained in the proxy statement distributed by
Randolph in connection with its 2007 annual meeting of shareholders and the
merger, which has been 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.  You may
obtain free copies of those documents as described above. 


    Bank of the Carolinas Corporation
    Consolidated Balance Sheets
    (In Thousands Except Share Data)
    (Unaudited)
                                                          September  30,
                                                      2007              2006
    Assets
    Cash and Due from Banks                         $6,728            $4,820
    Interest-Bearing Deposits in Banks                 165             4,679
    Federal Funds Sold                               4,220             5,554
    Securities Available for Sale                   63,997            56,277
    Loans                                          376,560           338,651
     Less, Allowance for Loan Losses                (3,778)           (3,802)
         Total Loans, Net                          372,782           334,849
     Properties and Equipment                       13,284            11,062
     Other Assets                                   19,042            14,181
         Total Assets                             $480,218          $431,422
    Liabilities
    Non-interest Bearing Demand Deposits           $31,337           $25,969
    Interest Bearing Demand Deposits                67,214            62,432
    Savings Deposits                                14,344             9,864
    Time Deposits                                  297,544           265,859
         Total Deposits                            410,439           364,124
    Borrowings                                      27,000            27,500
    Other Liabilities                                3,133             2,873
         Total Liabilities                         440,572           394,497
    Shareholders' Equity
    Common Stock, Par Value $5 Per Share:
       Authorized 15,000,000 Shares; Issued
        3,869,062 Shares in 2007 and
        3,825,192 Shares in 2006                    19,345            19,126
    Additional Paid-In Capital                      11,562            11,431
    Retained Earnings                                8,692             6,803
    Accumulated Other Comprehensive
     Income (Loss)                                      47              (435)
         Total Shareholders' Equity                 39,646            36,925
         Total Liabilities and
          Shareholders' Equity                    $480,218          $431,422
    Bank of the Carolinas Corporation
    Consolidated Statements of Income
    (In Thousands Except Share and Per Share Data)
    (Unaudited)                       Three Months Ended    Nine Months Ended
                                          Sept. 30,             Sept. 30,
                                       2007       2006       2007       2006
    Interest Income
       Interest and Fees on Loans     $7,659     $7,044    $22,253    $19,407
       Interest on Securities            757        577      2,070      1,598
       Federal Funds Sold                 22        124        383        293
       Deposits in Other Banks             4          8          9         14
         Total Interest Income         8,442      7,753     24,715     21,312
    Interest Expense
       Deposits                        4,296      3,607     12,857      9,276
       Borrowed Funds                    333        333        921        978
          Total Interest Expense       4,629      3,940     13,778     10,254
    Net Interest Income                3,813      3,813     10,937     11,058
       Provision for Loan Losses         546        678      1,020        975
       Net Interest Income After
        Provision for Loan Losses      3,267      3,135      9,917     10,083
    Other Income
       Customer Service Fees             259        247        761        713
       Mortgage Loan Broker Fees          78         54        140        135
       Investment Services                99         66        198         66
       Income from Bank Owned Life
        Insurance                         89         51        257        151
       Gain on Sale of Branch              -      1,755          -      1,755
       Other Income                       29         32         99        110
         Total Other Income              554      2,205      1,455      2,930
    Noninterest Expense
       Salaries and Benefits           1,543      1,773      4,478      4,590
       Occupancy and Equipment           447        357      1,286      1,029
       Other Noninterest Expense         979      1,414      2,771      3,042
         Total Noninterest Expense     2,969      3,544      8,535      8,661
       Income Before Income Taxes        852      1,796      2,837      4,352
       Income Taxes                      247        648        860      1,559
    Net Income                          $605     $1,148     $1,977     $2,793
    Earnings Per Share
       Basic                           $0.16      $0.30      $0.52      $0.73
       Diluted                         $0.15      $0.29      $0.50      $0.70
    Weighted Average Shares Outstanding
       Basic                       3,856,660  3,825,192  3,841,070  3,825,192
       Diluted                     3,940,105  3,963,896  3,945,242  3,964,123
    Bank of the Carolinas Corporation
    Performance Ratios
                                                  As of or for the
                                              Nine Months Ended Sept. 30,
                                              2007        2006      Change*
    Financial Ratios
         Return On Average Assets **          0.57%       0.92%       (35)BP
         Return On Average Shareholders'
          Equity **                           6.84%      10.41%      (357)
         Net Interest Margin **               3.40%       3.87%       (47)
    Asset Quality Ratios
         Net-chargeoffs to Average Loans **   0.36%       0.20%        16 BP
         Nonperforming Loans To Total Loans   0.55%       0.78%       (23)
         Nonperforming Assets To Total Assets 0.83%       0.87%        (4)
         Allowance For Loan Losses To
          Total Loans                         1.00%       1.12%       (12)
    *  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- Oct/31/2007 17:28 GMT
 
 
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