UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 14, 2014
BANK OF THE CAROLINAS CORPORATION
(Exact name of Registrant as specified in its charter)
| NORTH CAROLINA | 000-52195 | 20-4989192 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
135 BOXWOOD VILLAGE DRIVE,
MOCKSVILLE, NORTH CAROLINA 27028
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (336) 751-5755
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02 | Results of Operations and Financial Condition. |
On August 14, 2014, Bank of the Carolinas Corporation (the “Registrant”) issued a press release announcing its results of operations for the three- and six-month periods ended June 30, 2014. A copy of the Registrant’s press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.
The information contained in Item 2.02 of this Current Report shall not be deemed “filed” for purposes of section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits. |
| Exhibit No. |
Description of Exhibit | |
| 99.1 | Press Release dated August 14, 2014, regarding the Registrant’s results of operations for the three- and six-month periods ended June 30, 2014 | |
This Current Report on Form 8-K (including information included or incorporated by reference herein) may contain, among other things, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements regarding certain of the Registrant’s goals and expectations with respect to earnings, income per share, revenue, expenses and the growth rate in such items, as well as other measures of economic performance, including statements relating to estimates of credit quality trends, and (ii) statements preceded by, followed by, or that include the words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “projects,” “outlook” or similar expressions. These statements are based upon the current belief and expectations of the Registrant’s management and are subject to significant risks and uncertainties that are subject to change based on various factors (many of which are beyond the Registrant’s control).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BANK OF THE CAROLINAS CORPORATION | ||
| By: | /s/ Stephen R. Talbert | |
| Stephen R. Talbert President and Chief Executive Officer | ||
Dated: August 20, 2014
EXHIBIT INDEX
| Exhibit No. |
Description of Exhibit | |
| 99.1 | Press Release dated August 14, 2014, regarding the Registrant’s results of operations for the three- and six-month periods ended June 30, 2014 | |
Exhibit 99.1
PRESS RELEASE
For Immediate Release
Bank of the Carolinas Corporation Reports
Second Quarter Financial Results
MOCKSVILLE, NORTH CAROLINA, August 14, 2014—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 | ) | ||||
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|
|
|
|
|||||
| 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 | ||||||
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|
|
|
|||||
| Total Assets |
$ | 427,827 | $ | 427,072 | ||||
|
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|||||
| 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 | ||||||
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|
|
|||||
| Total deposits |
367,012 | 366,308 | ||||||
| Securities sold under repurchase agreements |
45,267 | 45,939 | ||||||
| Subordinated debt |
7,855 | 7,855 | ||||||
| Other liabilities |
2,914 | 2,633 | ||||||
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|
|
|||||
| Total Liabilities |
423,048 | 422,735 | ||||||
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|
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| 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, 2013 |
— | 19,479 | ||||||
| Additional paid-in capital |
32,470 | 12,991 | ||||||
| Retained losses |
(39,157 | ) | (37,830 | ) | ||||
| Accumulated other comprehensive income (loss) |
(1,713 | ) | (3,219 | ) | ||||
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|
|
|
|||||
| Total Shareholders’ Equity |
4,779 | 4,337 | ||||||
|
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|
|
|
|||||
| Total Liabilities and Shareholders’ Equity |
$ | 427,827 | $ | 427,072 | ||||
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| 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 | ) | ||
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Bank of the Carolinas Corporation
Consolidated Statements of Income
(In Thousands Except Share Data)
(Unaudited)
| Three months ended June 30 |
Six months ended 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 | ||||||||||||
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|
|||||||||
| Total interest income |
3,787 | 3,746 | 7,536 | 7,565 | ||||||||||||
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|
|
|
|
|||||||||
| Interest expense |
||||||||||||||||
| Interest on deposits |
525 | 579 | 1,052 | 1,200 | ||||||||||||
| Interest on borrowed funds |
564 | 563 | 1,121 | 1,120 | ||||||||||||
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|
|||||||||
| Total interest expense |
1,089 | 1,142 | 2,173 | 2,320 | ||||||||||||
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|
|||||||||
| Net interest income |
2,698 | 2,604 | 5,363 | 5,245 | ||||||||||||
| Provision for loan losses |
(1,287 | ) | (12 | ) | (225 | ) | (1,158 | ) | ||||||||
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|||||||||
| Net interest income after provision for loan losses |
3,985 | 2,616 | 5,588 | 6,403 | ||||||||||||
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| Noninterest income |
||||||||||||||||
| Customer service fees |
293 | 291 | 584 | 572 | ||||||||||||
| Increase in value of bank owned life insurance |
86 | 87 | 171 | 174 | ||||||||||||
| Gains on investment securities |
— | — | — | — | ||||||||||||
| Other income |
5 | 5 | 19 | 3 | ||||||||||||
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|||||||||
| Total noninterest income |
384 | 383 | 774 | 749 | ||||||||||||
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| Noninterest expense |
||||||||||||||||
| Salaries and benefits |
1,547 | 1,595 | 3,137 | 3,193 | ||||||||||||
| Occupancy and equipment |
456 | 426 | 928 | 878 | ||||||||||||
| FDIC insurance assessments |
368 | 369 | 731 | 736 | ||||||||||||
| Data processing expense |
267 | 283 | 528 | 552 | ||||||||||||
| Valuation provisions and net operating costs associated with foreclosed real estate |
(12 | ) | 167 | 27 | 532 | |||||||||||
| Other |
856 | 881 | 1,646 | 1,549 | ||||||||||||
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| Total noninterest expenses |
3,482 | 3,721 | 6,997 | 7,440 | ||||||||||||
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| Income (Loss) before income taxes |
887 | (722 | ) | (635 | ) | (288 | ) | |||||||||
| Provision for income taxes |
— | 341 | — | 638 | ||||||||||||
| Net income (loss) |
$ | 887 | $ | (1,063 | ) | $ | (635 | ) | $ | (926 | ) | |||||
| Dividends and accretion on preferred stock |
(288 | ) | (243 | ) | (537 | ) | (486 | ) | ||||||||
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| Net loss available to common shareholders |
$ | 599 | $ | (1,306 | ) | $ | (1,172 | ) | $ | (1,412 | ) | |||||
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| 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 |
$ | 278,401 | $ | 268,747 | 3.59 | % | ||||||
| Average earning assets |
394,996 | 391,043 | 1.01 | |||||||||
| Average total assets |
427,982 | 429,698 | (0.40 | ) | ||||||||
| Average common shareholders’ equity |
(10,081 | ) | (4,472 | ) | 125.42 | |||||||
| Average total shareholders’ equity |
3,098 | 8,707 | (64.42 | ) | ||||||||
| Period-end balance sheet data: |
||||||||||||
| Total loans |
$ | 279,437 | $ | 269,497 | 3.69 | % | ||||||
| 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’ equity |
(8,400 | ) | (8,842 | ) | (5.00 | ) | ||||||
| Total shareholders’ equity |
4,779 | 4,337 | 10.19 | |||||||||
| Asset quality indicators |
||||||||||||
| Net loan charge-offs (recoveries) |
$ | 637 | $ | (666 | ) | (195.65 | )% | |||||
| 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 average loans ** |
0.46 | % | (0.50 | )% | 96 | BP | ||||||
| Nonperforming loans to total loans |
1.38 | 2.02 | (64 | ) | ||||||||
| Nonperforming assets to total assets |
1.36 | 1.64 | (29 | ) | ||||||||
| Nonperforming assets to loan-related assets |
2.07 | 2.60 | (53 | ) | ||||||||
| Allowance for loan losses to total loans |
1.84 | 2.37 | (53 | ) | ||||||||
| Financial ratios |
||||||||||||
| Return on average assets ** |
(0.30 | )% | (0.43 | )% | 13 | BP | ||||||
| Return on average common shareholders’ equity ** |
(23.44 | ) | (63.67 | ) | 4,023 | |||||||
| Net interest margin ** |
2.74 | 2.70 | 4 | |||||||||
| Per share amounts available to common shareholders |
||||||||||||
| Basic loss per common share |
$ | (0.30 | ) | $ | (0.36 | ) | 16.67 | % | ||||
| 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 |
$ | 278,525 | $ | 268,947 | 3.56 | % | ||||||
| Average earning assets |
395,675 | 391,200 | 1.14 | |||||||||
| Average total assets |
430,066 | 430,190 | (0.03 | ) | ||||||||
| Average common shareholders’ equity |
(10,144 | ) | (4,385 | ) | 131.34 | |||||||
| Average total shareholders’ equity |
3,035 | 8,794 | (65.49 | ) | ||||||||
| Asset quality indicators |
||||||||||||
| Net loan charge-offs |
$ | 671 | $ | 88 | 662.50 | % | ||||||
| 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 shareholders’ equity ** |
23.68 | (119.46 | ) | 14,314 | ||||||||
| Net interest margin ** |
2.73 | 2.67 | 6 | |||||||||
| Per share amounts available to common shareholders |
||||||||||||
| Basic loss per common share |
$ | 0.15 | $ | (0.33 | ) | 144.12 | % | |||||
| 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. |