Exhibit 99.1
PRESS RELEASE
For Immediate Release
Bank of the Carolinas Corporation Reports Second Quarter Financial Results
MOCKSVILLE, NORTH CAROLINA, August 1, 2008 — Bank of the Carolinas Corporation (Nasdaq Capital Market: BCAR), today reported financial results for the three and six months ended June 30, 2008.
For the three-month period ended June 30, 2008, the Corporation incurred a net loss of $259,000, as compared to net income of $592,000 in the second quarter of 2007. Diluted income (loss) per share was ($.07) for the second quarter of 2008 compared to income of $.15 for the comparable quarter of 2007. For the six-month period ended June 30, 2008, the Bank reported a net loss of $264,000 compared to net income of $1,372,000 for the same six-month period of 2007. Diluted income (loss) per share amounted to ($.07) for the six-month period ended June 30, 2008 compared to income of $.35 per diluted share for the same period of 2007.
In discussing the Company’s results, Robert Marziano, President and CEO, stated, “We are very disappointed with our results, not only for the second quarter, but year-to-date in 2008. This is a trying economic environment, and our results reflect that. Along with many of our peers, Bank of the Carolinas has experienced increased levels of non-performing assets over the last year. However, based on our best determination of current market values, our bank has written down these assets to realizable amounts, reserved for potential losses and we remain well-capitalized. While excessive land development and construction credits have proven troublesome to the industry, these loans at Bank of the Carolinas remain relatively stable at a modest 14.6% of our portfolio.”
Addressing liquidity and expense control, Marziano continued, “As evidenced by a $19.7 million increase in our savings balances at June 30, 2008 compared to June 30, 2007, a key focal point for our bank is to increase core funding so that we are less dependent on volatile liabilities and, therefore, less sensitive to interest rate swings. Additionally, we have reduced and will continue to reduce costs where doing so does not adversely impact our ability to serve our loyal customers. We regard our customers as our greatest asset.”
The Company’s non-performing assets were $14.4 million at June 30, 2008, or 3.6% of outstanding loans. While the reported amount is at a historically high level, it is inflated by the inclusion of one credit relationship of approximately $4.9 million for which 75% of any loss incurred by the Bank is guaranteed by the US Department of Agriculture. Presently the Bank expects no significant loss with regard to that particular credit. Excluding this credit, non-performing assets would amount to $9.5 million, or 2.3% of outstanding loans.
Principal factors leading to the decrease in net income for the three and six-month periods ended in 2008, relative to 2007, were a decline in the Company’s net interest income, an increase in the provision for loan losses and increased non-interest expense. For the six-month period ended in 2008, the net interest margin declined to 2.75% from 3.35% in 2007. For the six-month period ended June
30, 2008, approximately $197,000 or 15.0% of the decline in our net interest margin was attributable to the loss of income associated with non-accrual loans. The increase in the provision for loan losses of $621,000 for the six-months ended June 30, 2008 relative to 2007 was related to additions to specific reserves for impaired loans the Company identified. While non-interest expense overall was stable from the first to second quarters of 2008, for the comparable six-month periods, 2008 non-interest expense increased approximately $1.1 million over 2007 levels. Salaries and benefits increased $761,000, occupancy expense increased $141,000 and other non-interest expense increased $204,000 for the current year period. The increased salary and benefit and occupancy expense levels are comprised of normal salary adjustments plus increased staffing and occupancy costs associated with two banking offices opened in mid-2007. The Company experienced growth in non-interest income of 9.7% and 7.7%, respectively, for the three and six month periods in 2008 versus 2007.
Total assets at June 30, 2008 amounted to $511.9 million, an increase of 12.1% when compared to the June 30, 2007 amount of $456.9 million. Net loans increased 14.1% over the prior year to $402.2 million, while deposits grew to $414.3 million, a 7.1% increase. The allowance for loan losses was 1.12% of total loans as of June 30, 2008, and the ratio of annualized net charge-offs to average loans was 0.40%.
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:
Michelle L. Clodfelter
Principal Financial Officer
Bank of the Carolinas
(336) 751-5755
Bank of the Carolinas Corporation
Consolidated Balance Sheets
(In Thousands, Except Share Data)
(Unaudited)
June 30 | ||||||||
2008 | 2007 | |||||||
Assets | ||||||||
Cash and Due from Banks | $ | 8,047 | $ | 5,364 | ||||
Interest-Bearing Deposits in Banks | 7,834 | 3,418 | ||||||
Federal Funds Sold | — | 969 | ||||||
Securities Held to Maturity | 1,000 | — | ||||||
Securities Available for Sale | 57,448 | 64,564 | ||||||
Loans | 406,713 | 355,750 | ||||||
Less, Allowance for Loan Losses | (4,538 | ) | (3,425 | ) | ||||
Total Loans, Net | 402,175 | 352,325 | ||||||
Properties and Equipment | 15,181 | 12,303 | ||||||
Other Assets | 20,228 | 17,910 | ||||||
Total Assets | $ | 511,913 | $ | 456,853 | ||||
Liabilities | ||||||||
Non-interest Bearing Demand Deposits | $ | 32,683 | $ | 30,613 | ||||
Interest Bearing Demand Deposits | 59,408 | 62,296 | ||||||
Savings Deposits | 31,672 | 12,012 | ||||||
Time Deposits | 290,582 | 282,072 | ||||||
Total Deposits | 414,345 | 386,993 | ||||||
Borrowings | 46,155 | 26,500 | ||||||
Fed Funds Purchased and Repurchase Agreements | 10,203 | 2,111 | ||||||
Other Liabilities | 1,446 | 2,556 | ||||||
Total Liabilities | 472,149 | 418,160 | ||||||
Shareholders’ Equity | ||||||||
Common Stock, Par Value $5 Per Share: | ||||||||
Authorized 15,000,000 Shares; Issued 3,987,374Shares in 2008 and 3,852,992 Shares in 2007 | 19,937 | 19,265 | ||||||
Additional Paid-In Capital | 11,828 | 11,505 | ||||||
Retained Earnings | 7,816 | 8,281 | ||||||
Accumulated Other Comprehensive Income (Loss) | 183 | (358 | ) | |||||
Total Shareholders’ Equity | 39,764 | 38,693 | ||||||
Total Liabilities and Shareholders' Equity | $ | 511,913 | $ | 456,853 | ||||
Bank of the Carolinas Corporation
Consolidated Statements of Operation
(In Thousands, Except Share and Per Share Data)
(Unaudited)
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||
Interest Income | ||||||||||||||
Interest and Fees on Loans | $ | 6,603 | $ | 7,285 | $ | 13,694 | $ | 14,594 | ||||||
Interest on Securities | 710 | 699 | 1,436 | 1,313 | ||||||||||
Federal Funds Sold | 38 | 184 | 114 | 361 | ||||||||||
Deposits in Other Banks | 2 | 1 | 6 | 5 | ||||||||||
Total Interest Income | 7,353 | 8,169 | 15,250 | 16,273 | ||||||||||
Interest Expense | ||||||||||||||
Deposits | 3,808 | 4,311 | 8,194 | 8,561 | ||||||||||
Borrowed Funds | 388 | 303 | 661 | 588 | ||||||||||
Total Interest Expense | 4,196 | 4,614 | 8,855 | 9,149 | ||||||||||
Net Interest Income | 3,157 | 3,555 | 6,395 | 7,124 | ||||||||||
Provision for Loan Losses | 781 | 412 | 1,095 | 474 | ||||||||||
Net Interest Income After Provision for Loan Losses | 2,376 | 3,143 | 5,300 | 6,650 | ||||||||||
Other Income | ||||||||||||||
Customer Service Fees | 347 | 266 | 639 | 502 | ||||||||||
Mortgage Loan Broker Fees | 31 | 31 | 67 | 62 | ||||||||||
Investment Services | 6 | 56 | 15 | 99 | ||||||||||
Increase in CSV of Life Insurance | 92 | 86 | 180 | 168 | ||||||||||
Other Income | 42 | 33 | 69 | 70 | ||||||||||
Total Other Income | 518 | 472 | 970 | 901 | ||||||||||
Noninterest Expense | ||||||||||||||
Salaries and Benefits | 1,802 | 1,418 | 3,696 | 2,935 | ||||||||||
Occupancy and Equipment | 481 | 421 | 980 | 839 | ||||||||||
Other Noninterest Expense | 1,008 | 940 | 1,996 | 1,792 | ||||||||||
Total Noninterest Expense | 3,291 | 2,779 | 6,672 | 5,566 | ||||||||||
Income (Loss) Before Income Taxes | (397 | ) | 836 | (402 | ) | 1,985 | ||||||||
Income Taxes | (138 | ) | 244 | (138 | ) | 613 | ||||||||
Net Income (Loss) | $ | (259 | ) | $ | 592 | $ | (264 | ) | $ | 1,372 | ||||
Net Income (Loss) Per Share | ||||||||||||||
Basic | $ | (0.07 | ) | $ | 0.15 | $ | (0.07 | ) | $ | 0.36 | ||||
Diluted | $ | (0.07 | ) | $ | 0.15 | $ | (0.07 | ) | $ | 0.35 | ||||
Weighted Average Shares Outstanding | ||||||||||||||
Basic | 3,967,400 | 3,837,533 | 3,944,205 | 3,833,146 | ||||||||||
Diluted | 3,967,400 | 3,943,364 | 3,944,205 | 3,947,383 |
Bank of the Carolinas Corporation
Performance Ratios
As of or for the Six Months Ended June 30 | |||||||||
2008 | 2007 | Change* | |||||||
Financial Ratios | |||||||||
Return On Average Assets ** | -0.10 | % | 0.60 | % | (70 | ) BP | |||
Return On Average Shareholders’ Equity ** | -1.33 | % | 7.18 | % | (851 | ) | |||
Net Interest Margin ** | 2.75 | % | 3.35 | % | (60 | ) | |||
Asset Quality Ratios | |||||||||
Net-chargeoffs to Average Loans ** | 0.40 | % | 0.44 | % | (4 | ) BP | |||
Nonperforming Loans To Total Loans | 2.95 | % | 0.95 | % | 200 | ||||
Nonperforming Assets To Total Assets | 2.82 | % | 0.96 | % | 186 | ||||
Allowance For Loan Losses To Total Loans | 1.12 | % | 0.96 | % | 16 |
* | BP denotes basis points |
** | Ratio Annualized |