Bank of the Carolinas Corporation Reports First Quarter Financial Results

MOCKSVILLE, N.C., April 18 /PRNewswire-FirstCall/ -- Bank of the Carolinas Corporation (NASDAQ:BCAR), today reported financial results for the three months ended March 31, 2008.

For the three month period ended March 31, 2008, the Company reported a net loss of $5,000, as compared to net income of $780,000 in the first quarter of 2007. Diluted earnings per share were $0.00 for the first quarter compared to $0.20 per diluted share for the same period in 2007. First quarter results were significantly affected by the further compression of the Company's net interest margin, increased provision for loan losses and higher levels of non-interest expense versus the year ago period.

For the three months ended March 31, 2008, the Company's net interest margin declined to 2.77% compared to 3.31% for the first quarter of 2007. This decrease was due to the Federal Reserve's aggressive rate cuts during the quarter which led to a 200 basis point drop in the prime rate. Since a significant portion of the Company's loan portfolio adjusts with prime, rapidly declining rates have a negative impact on the Company's margin in the near term. Non-interest income for 2008 grew 5.4%; while non-interest expense rose $594,000 or 21.3% over the year ago quarter. Non-interest expense for the current quarter was impacted by the addition of two full service offices opened during 2007. The Company implemented cost savings measures during the last quarter of 2007 and is committed to controlling non-interest expense during 2008.

The provision for loan losses totaled $314,000 for the quarter versus $62,000 in 2007. The allowance for loan losses was 1.07% of total loans as of March 31, 2008 and annualized net charge-offs were 0.21% of average loans outstanding. Non-performing assets stood at 2.09% of assets as of March 31, 2008, compared to 1.92% three months earlier and 0.72% a year ago. Included in non-performing assets at March 31, 2008, was a $4.9 million credit which has a 75% USDA guarantee.

Total assets at March 31, 2008 amounted to $513.4 million, an increase of 8.6% when compared to the prior year amount of $472.8 million. Net loans increased 13.6% over the prior year to $401.1 million while deposits grew to $427.4 million, a 5.0% increase over the prior year. The Company remains well capitalized and raised an additional $5 million of capital during the quarter through trust preferred securities financing, which is included in Tier 1 capital.

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 Global 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 Corporation
(336) 751-5755

Bank of the Carolinas Corporation
Consolidated Balance Sheets
(In Thousands Except Share Data)
(Unaudited)
March 31,
2008 2007

Assets
Cash and Due from Banks $ 7,909 $ 5,594
Interest-Bearing Deposits in Banks 5,049 100
Federal Funds Sold 3,541 27,467
Securities Available for Sale 61,727 58,452

Loans 405,440 356,948
Less, Allowance for Loan Losses (4,355) (3,735)
Total Loans, Net 401,085 353,213
Properties and Equipment 14,251 11,391
Other Assets 19,795 16,626
Total Assets $ 513,357 $ 472,843

Liabilities
Non-interest Bearing Demand Deposits $ 30,589 $ 29,603
Interest Bearing Demand Deposits 57,518 64,377
Savings Deposits 26,340 11,428
Time Deposits 312,948 301,808
Total Deposits 427,395 407,216

Borrowings 43,155 23,000
Retail Repurchase Agreements 554 994
Other Liabilities 1,831 3,191
Total Liabilities 472,935 434,401

Shareholders' Equity
Common Stock, Par Value $5 Per Share:
Authorized 15,000,000 Shares;
Issued 3,920,752
Shares in 2008 and 3,831,692
Shares in 2007 19,604 19,158
Additional Paid-In Capital 11,721 11,471
Retained Earnings 8,275 7,881
Accumulated Other Comprehensive
Income (Loss) 822 (68)
Total Shareholders' Equity 40,422 38,442
Total Liabilities and
Shareholders' Equity $ 513,357 $ 472,843

Bank of the Carolinas Corporation
Consolidated Statements of Income
(In Thousands Except Share and Per Share Data)
(Unaudited)
Three Months Ended
March 31,
2008 2007

Interest Income
Interest and Fees on Loans $ 7,091 $ 7,309
Interest on Securities 726 614
Federal Funds Sold 76 177
Deposits in Other Banks 4 4
Total Interest Income 7,897 8,104

Interest Expense
Deposits 4,386 4,250
Borrowed Funds 273 285
Total Interest Expense 4,659 4,535

Net Interest Income 3,238 3,569
Provision for Loan Losses 314 62
Net Interest Income After
Provision for
Loan Losses 2,924 3,507

Other Income
Customer Service Fees 293 236
Mortgage Loan Broker Fees 36 31
Investment Services 9 43
Income from Bank Owned Life
Insurance 88 82
Other Income 26 37
Total Other Income 452 429

Noninterest Expense
Salaries and Benefits 1,894 1,517
Occupancy and Equipment 499 418
Other Noninterest Expense 988 852
Total Noninterest Expense 3,381 2,787
Income (Loss) Before Income Taxes (5) 1,149
Income Taxes - 369
Net Income (Loss) $ (5) $ 780

Earnings Per Share
Basic $ - $ 0.20
Diluted $ - $ 0.20

Weighted Average Shares Outstanding
Basic 3,920,752 3,826,706
Diluted 3,977,182 3,949,095

Bank of the Carolinas Corporation
Performance Ratios

As of or for the
Three Months Ended March 31,
2008 2007 Change*

Financial Ratios
Return On Average Assets ** 0.00% 0.69% (69)BP
Return On Average Shareholders'
Equity ** -0.05% 8.27% (832)
Net Interest Margin ** 2.77% 3.31% (54)

Asset Quality Ratios
Net-chargeoffs to Average Loans ** 0.21% 0.07% 14 BP
Nonperforming Loans To Total
Loans 2.07% 0.70% 137
Nonperforming Assets To Total
Assets 2.09% 0.72% 137
Allowance For Loan Losses To
Total Loans 1.07% 1.05% 2

* BP denotes basis points.
** Ratio annualized.

First Call Analyst:
FCMN Contact:

Source: Bank of the Carolinas Corporation

CONTACT: Eric E. Rhodes, Chief Financial Officer of Bank of the
Carolinas Corporation, +1-336-751-5755

2008-04-18 17:11:16 0339893 PRNEWSWIRE