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Bank of the Carolinas Corporation Reports Second Quarter Financial Results

  Bank of the Carolinas Corporation Reports Second Quarter Financial Results  PR Newswire  MOCKSVILLE, N.C., Aug. 14, 2014  MOCKSVILLE, N.C., Aug. 14, 2014 /PRNewswire/ --Bank of the Carolinas Corporation (OTCQB: BCAR) today reported financial results for the three- and six-month periods ended June 30, 2014.  For the three-month period ended June 30, 2014, the Company reported net income available to common shareholders of $599,000 as compared to a net loss of $1.8 million for the first quarter of 2014 and a net loss of $1.3 million for the second quarter of 2013. Net income per diluted common share was $0.15 for the second quarter of 2014 compared with a net loss per share of $0.45 for the first quarter of 2014 and a net loss per share of $0.33 for the second quarter of 2013.  For the six-month period ended June 30, 2014, the Company reported a net loss available to common shareholders of $1.2 million or $0.30 per common share, compared to a net loss of $1.4 million or $0.36 per common share for the six-month period ended June 30, 2013.  The provision for loan losses recognized a recovery of $1.3 million in the second quarter of 2014 compared to a recovery of $12,000 in the second quarter a year ago. For the six-month period ended June 30, 2014, the provision for loan losses recognized a recovery of $225,000 compared to a recovery of $1.2 million for the same six-month period of 2013. The Company recovered $12,000 of costs related to foreclosed real estate for the second quarter of 2014 as compared to $167,000 of expense in the second quarter of 2013. For the six-month period ended June 30, 2014, costs related to foreclosed real estate were $27,000 as compared to $532,000 for the same six-month period of 2013. Through June 30, 2014, credit-related costs totaled a recovery of $163,000, or a 79.7% decrease over the previous year's recovery of $803,000 through June 30, 2013.  The Company continues its progress in reducing the level of nonperforming assets. As of June 30, 2014, the Company's nonperforming assets decreased to $5.8 million and amounted to 1.36% of total assets as compared to $7.4 million or 1.74% of total assets as of March 31, 2014 and compared to $7.0 million, or 1.64% of total assets as of June 30, 2013. The allowance for loan losses was 1.84% of total loans as of June 30, 2014. Net loan chargeoffs amounted to $671,000 for the second quarter of 2014, as compared to net loan recoveries of $34,000 in the first quarter of 2014 and net loan chargeoffs of $88,000 in the second quarter of 2013.  The Company's net interest margin was 2.73% in the second quarter of 2014, which is an increase of 6 basis points from 2.67% in the second quarter of 2013. Noninterest expense through June 30 decreased 5.95% in 2014 versus 2013 and for the three-month period decreased 6.42% in the second quarter of 2014 versus 2013. Cost savings of $717,000 for the first six months of 2013 have been recognized in salary and benefits, legal fees, and costs related to foreclosed real estate.  Total assets at June 30, 2014 amounted to $427.8 million, an increase of 0.2% when compared to $427.1 million as of June 30, 2013. Loans totaled $279.4 million at June 30, 2014, an increase of 3.7% from a year earlier, and deposits increased 0.2% over the prior year to $367.0 million. The Company's deposit mix has improved by decreasing non-core brokered deposits by $3.5 million June 30, 2013.  The Company's banking subsidiary had a Tier 1 leverage capital ratio and Tier 1 capital to risk-weighted assets ratio of 3.43% and 4.70% respectively, while its total capital to risk-weighted assets ratio was 5.96% as of June 30, 2014.  The Company completed a private placement of $45.8 million on July 16, 2014. In connection with the private placement, the Company repurchased all 13,179 shares of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A, issued under the Capital Purchase Program from the U.S. Treasury. The Company also repurchased all of its floating rate trust preferred securities issued through its subsidiary, Bank of the Carolinas Trust I, from the holders of those securities. The Company also repurchased a subordinated note from the holder of the note. As of July 31, 2014, the Company and its subsidiaries have no outstanding third-party debt obligations.  The Company injected $34.8 million from the proceeds of the private placement into the Company's banking subsidiary. As of July 31, 2014, the Company's banking subsidiary had a Tier 1 leverage capital ratio and Tier 1 capital to risk-weighted assets ratio of 10.58% and 14.86% respectively, while its total capital to risk-weighted assets ratio was 16.12%.  President and CEO, Stephen R. Talbert, said, "We are pleased to release our second quarter earnings. We continue to have success in reducing our levels of nonperforming assets and decreasing our noninterest expense. I am proud of our successful $45.8 million private placement. I am grateful to the many people who helped us through this complicated transaction. We believe the Company is now positioned for continued success."  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, Concord, Harrisburg, Landis, Lexington and Winston-Salem. The common stock of the Company is quoted under the symbol "BCAR" on the OTCQB marketplace operated by OTC Markets Group Inc.  For further information contact:  Stephen R. Talbert President and Chief Executive Officer Bank of the Carolinas Corporation (336) 751-5755  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)                                           June 30,                                           2014                 2013 Assets: Cash and due from banks,                  $              $        noninterest-bearing                       18,342               4,374 Temporary investments                     20,209               39,182 Investment securities                     88,335               93,202 Loans                                     279,437              269,497 Less, allowance for loan losses          (5,153)              (6,398)  Total loans, net                     274,284              263,099 Premises and equipment, net               11,097               11,542 Other real estate owned                   1,951                1,589 Bank owned life insurance                 11,059               10,710 Other assets                              2,550                3,374  Total Assets                         $      427,827  $                                                                     427,072 Liabilities: Noninterest bearing demand deposits       $              $                                                 34,657               33,353 Interest-checking deposits                42,466               41,131 Savings and money market deposits         111,385              111,783 Time deposits                             178,504              180,041  Total deposits                       367,012              366,308 Securities sold under repurchase          45,267               45,939 agreements Subordinated debt                         7,855                7,855 Other liabilities                         2,914                2,633  Total Liabilities                    423,048              422,735 Shareholders' Equity: Preferred stock, no par value            13,179               13,179 Discount on preferred stock              -                    (263) Common stock, no par value at June 30, 2014,  $5 par value per share at June 30,     -                    19,479 2013 Additional paid-in capital                32,470               12,991 Retained losses                           (39,157)             (37,830) Accumulated other comprehensive income    (1,713)              (3,219) (loss)  Total Shareholders' Equity           4,779                4,337  Total Liabilities and Shareholders'  $      427,827  $      Equity                                                         427,072 Preferred shares authorized               3,000,000            3,000,000 Preferred shares issued and outstanding   13,179               13,179 Unaccrued preferred stock dividend        2,331                1,565 Common shares authorized                  500,000,000          15,000,000 Common shares issued and outstanding      3,895,840            3,895,840 Book value per common share               $             $                                                  (2.75)              (2.67)    Bank of the Carolinas Corporation Consolidated Statements of Income (In Thousands Except Share Data) (Unaudited)                 Three months ended        Six months ended                             June 30                   June 30                             2014           2013       2014           2013 Interest income  Interest and fees on     $        $       $        $    loans                       3,235         3,224     6,428         6,440  Interest on securities   537            497        1,075          1,086 Other interest income       15             25         33             39  Total interest income  3,787          3,746      7,536          7,565 Interest expense  Interest on deposits     525            579        1,052          1,200  Interest on borrowed     564            563        1,121          1,120 funds  Total interest        1,089          1,142      2,173          2,320 expense Net interest income         2,698          2,604      5,363          5,245  Provision for loan       (1,287)        (12)       (225)          (1,158) losses  Net interest income after provision for  loan losses            3,985          2,616      5,588          6,403 Noninterest income  Customer service fees    293            291        584            572  Increase in value of     86             87         171            174 bank owned life insurance Gains on investment         -              -          -              - securities  Other income             5              5          19             3  Total noninterest      384            383        774            749 income Noninterest expense  Salaries and benefits    1,547          1,595      3,137          3,193  Occupancy and equipment  456            426        928            878  FDIC insurance           368            369        731            736 assessments  Data processing expense  267            283        528            552  Valuation provisions and net operating costs associated with foreclosed  (12)           167        27             532 real estate  Other                    856            881        1,646          1,549  Total noninterest      3,482          3,721      6,997          7,440 expenses Income (Loss) before        887            (722)      (635)          (288) income taxes  Provision for income     -              341        -              638 taxes Net income (loss)           $        $       $        $                                   887        (1,063)     (635)       (926)  Dividends and accretion   (288)          (243)      (537)          (486) on preferred stock Net loss available to       $        $       $        $    common shareholders           599        (1,306)    (1,172)        (1,412) Loss per common share:  Basic                    $        $      $        $                                  0.15        (0.33)      (0.30)       (0.36)  Diluted                  $        $      $        $                                  0.15        (0.33)      (0.30)       (0.36) Weighted Average Common Shares Outstanding:  Basic                    3,895,840      3,895,840  3,895,840      3,895,840  Diluted                  3,895,840      3,895,840  3,895,840      3,895,840    Bank of the Carolinas Corporation Other Financial Data (Dollars in thousands except per share amounts)                                  As of or for the                                  six months ended June 30                                  2014               2013           Change* Average balance sheet data  Average loans                   $              $  268,747    3.59     %                                  278,401  Average earning assets          394,996            391,043        1.01  Average total assets            427,982            429,698        (0.40)  Average common shareholders'    (10,081)           (4,472)        125.42  equity  Average total shareholders'     3,098              8,707          (64.42)  equity Period-end balance sheet data:  Total loans                     $              $  269,497    3.69     %                                  279,437  Allowance for loan losses       (5,153)            (6,398)        (19.46)  Total assets                    427,827            427,072        0.18  Total deposits                  367,012            366,308        0.19  Total common shareholders'      (8,400)            (8,842)        (5.00)  equity  Total shareholders' equity      4,779              4,337          10.19 Asset quality indicators  Net loan charge-offs            $           $           (195.65) %  (recoveries)                    637               (666)  Total nonperforming loans       3,865              5,455          (29.15)  Total nonperforming assets      5,816              7,044          (17.44) Asset quality ratios  Net-chargeoffs (recoveries) to  0.46            %  (0.50)      %  96       BP  average loans **  Nonperforming loans to total    1.38               2.02           (64)  loans  Nonperforming assets to total   1.36               1.64           (29)  assets  Nonperforming assets to         2.07               2.60           (53)  loan-related assets  Allowance for loan losses to    1.84               2.37           (53)  total loans Financial ratios  Return on average assets **     (0.30)          %  (0.43)      %  13       BP  Return on average common        (23.44)            (63.67)        4,023  shareholders' equity **  Net interest margin **          2.74               2.70           4 Per share amounts available to common shareholders  Basic loss per common share     $            $           16.67    %                                  (0.30)            (0.36)  Diluted loss per common share   (0.30)             (0.36)         16.67  Book value per common share     (2.75)             (2.67)         3.11 * BP denotes basis points. N/M denotes not meaningful. ** 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 June 30                                   2014             2013             Change* Average balance sheet data  Average loans                    $             $   268,947    3.56    %                                   278,525  Average earning assets           395,675          391,200          1.14  Average total assets             430,066          430,190          (0.03)  Average common shareholders'     (10,144)         (4,385)          131.34  equity  Average total shareholders'      3,035            8,794            (65.49)  equity Asset quality indicators  Net loan charge-offs            $          $          662.50  %                                    671            88 Asset quality ratios  Net-chargeoffs to average loans  0.97          %  0.13          %  84      BP  ** Financial ratios  Return on average assets **      0.83          %  (0.99)        %  182     BP  Return on average common         23.68            (119.46)         14,314  shareholders' equity **  Net interest margin **           2.73             2.67             6 Per share amounts available to common shareholders  Basic loss per common share      $          $            144.12  %                                   0.15            (0.33)  Diluted loss per common share    0.15             (0.33)           144.12  Book value per common share      (2.75)           (2.67)           3.11 * BP denotes basis points. N/M denotes not meaningful. ** ratio annualized.    SOURCE Bank of the Carolinas Corporation  
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