Bank of Wilmington Corp. Reports Second Quarter 2006 Results


WILMINGTON, N.C., July 31, 2006 (PRIMEZONE) -- Bank of Wilmington Corporation (Nasdaq:BKWW) reported net income for the second quarter of 2006 of $497,000 compared with $383,000 for the second quarter of 2005, an increase of 29.8 percent. Diluted earnings per share were $0.13 compared with $0.10 for the prior-year second quarter, an increase of 30.0 percent. Performance reflects a continuation of strong loan growth and sound asset quality, tempered by recent expansion-related spending.

For the first six months of 2006, the Company reported net income of $1.1 million, compared with $624,000 for the same period in 2005, an increase of $452,000, or 72.4%. Diluted earnings per share were $0.29 for the 2006 year-to-date period compared with $0.17 for the prior-year period, an increase of 70.6%.

Cameron Coburn, Chairman, President and CEO, commented, "Our year-to-date performance reflects a more sustainable level from the rapid loan growth experienced in 2005, but still provides significant lending opportunities. Second quarter loan growth improved over the more moderate first quarter. We anticipate that lower cost transaction accounts will grow as our branch network expands and matures, helping us to offset the impact of our rising cost of funds."

Total revenue, consisting of net interest income and non-interest income, was $3.5 million for the second quarter, an increase of 44.6 percent over the $2.4 million reported for the prior-year period. Net interest income for the current quarter increased 45.4 percent over 2005 to $3.2 million, reflecting a 52.8 percent growth in average earning assets partially offset by a 17 basis point decline in the net interest margin to 3.42 percent. Net interest margin declined seven basis points from the 3.49 percent reported for the first quarter of 2006.

Non-interest income was $337,000 for the second quarter of 2006 compared with $246,000 for the 2005 second quarter, an increase of $91,000 or 37.0 percent, due to the collection this quarter of approximately $91,000 of expenses associated with a loan charged off in 2003.

Non-interest expense increased $846,000, or 58.0 percent, to $2.3 million this quarter, from $1.5 million for the 2005 quarter. Salaries and benefits were $1.2 million, up $512,000 or 71.3 percent from a year ago, reflecting the addition of 21 full-time equivalent employees, as well as newly-added 2006 costs associated with the expensing of stock options and the supplemental retirement program implemented in the third quarter of 2005. Occupancy and equipment expense grew $145,000, or 63.3 percent. Other expense was $701,000 for the 2006 quarter, up $189,000, or 36.9 percent, from last year's second quarter, reflecting higher costs of regulation and expenses associated with the holding company. The efficiency ratio increased to 65.73 percent for the 2006 quarter compared with 63.09 for the prior quarter and 60.14 percent for the prior-year second quarter.

According to Mr. Coburn, "Asset quality strengthened further this quarter. There were no charge-offs at all, and we had net recoveries of $75,000, of which $63,000 represents a portion of a loan charged off in the first quarter. Our level of nonperforming assets has remained relatively stable over the past five quarters, but continues to decline as a percentage of our growing portfolio." For the second quarter of 2006, net recoveries were $75,000, or 0.10 percent of average loans on an annualized basis, compared with net charge-offs of $401,000, or 0.56 percent annualized, for the March 31, 2006 quarter, and net recoveries of $28,000, or 0.05 percent annualized, for the year-ago quarter. Non-performing assets were $920,000, or 0.23 percent of assets at June 30, 2006 compared with $948,000, or 0.25 percent of total assets at March 31, 2006, and $1.0 million, or 0.46 percent, twelve months ago. Loan loss reserves at June 30, 2006 were $3.9 million, or 1.23 percent of total loans compared with 1.17 percent of total loans at March 31, 2006 and 1.30 percent a year ago.

Total assets were $397.3 million at June 30, 2006, an increase of $128.7 million, or 47.9 percent, from twelve months ago. Year-over-year, loans outstanding grew $99.0 million, or 45.8 percent, from $216.1 million a year ago to $315.1 million for the current quarter. While there were increases in virtually every category, construction lending, up $53.1 million or 63.2 percent, commercial real estate, up $19.7 million or 27.3 percent, and 1-4 family mortgages, up $14.9 million or 68.3 percent, accounted for the majority of this growth.

The pace of loan growth increased in the second quarter of this year; loans increased $24.6 million, or 8.5 percent, compared with an increase of $12.1 million, or 4.4 percent, in the first quarter of 2006. Construction lending accounted for $16.6 million of this increase, while commercial real estate lending has slowed.

Loan growth over the past twelve months was funded primarily by a $99.5 million, or 43.3 percent, increase in deposits, to $329.2 million. For the recent quarter, deposits grew $6.6 million, or 2.1 percent. Core deposits, which include retail CDs, grew 2.2 percent. The lowest cost accounts (transaction accounts plus money market and savings) increased by $4.2 million, or 5.4 percent; they now constitute 24.9 percent of the deposit mix compared to 22.5 percent at December 31, 2005, and 27.9 percent a year ago.

Shareholders' equity at June 30, 2006 was $25.1 million, a twelve-month increase of $1.1 million, or 4.6 percent. The Company's total risk-based capital ratio at quarter-end was 12.23 percent. Total shares outstanding at June 30, 2006 were 3,586,518.

About the Company

Bank of Wilmington (the "Bank") was established in 1998 as a local bank, developed and managed by local people committed to improving the quality of life and the quality of the banking experience in the communities it serves. Bank of Wilmington Corporation, the parent company, was formed in June 2005. The Bank's market area includes the counties of New Hanover, Pender, and Brunswick, serving southeastern North Carolina, through five full-service banking locations: 1117 Military Cutoff Road; 3702 South College Road in the Pine Valley neighborhood; 14572 US Highway 17 in Hampstead; 206 North Topsail Drive in Surf City, and 503 Olde Waterford Way in Leland. The Company's stock is listed on the Nasdaq Capital Market under the symbol 'BKWW.'

Forward-Looking Statements

This news release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Actual results may differ materially from the results expressed in forward-looking statements. Factors that might cause such a difference include changes in interest rates and interest rate relationships; changes in demand for products and services; changes in the degree of competition by traditional and non-traditional competitors; changes in banking regulation; changes in tax laws; changes in prices, levies, and assessments; the impact of technological advances; governmental and regulatory policy changes; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; changes in the national and local economy; and other factors, including risk factors, referred to from time to time in filings made by Bank of Wilmington Corporation with the Securities and Exchange Commission. Bank of Wilmington Corporation undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.


                    Bank of Wilmington Corporation
                   CONSOLIDATED FINANCIAL HIGHLIGHTS
                              (Unaudited)

             (dollars in thousands except per share data)

                                       Quarterly
                 -----------------------------------------------------
                   2006       2006       2005       2005       2005
                  2nd Qtr    1st Qtr    4th Qtr    3rd Qtr    2nd Qtr
                 ---------  ---------  ---------  ---------  ---------
 EARNINGS
  Net interest
   income        $   3,170      3,087      2,797      2,469      2,180
  Provision for
   loan and
   lease losses  $     391        293        388        355        392
  NonInterest
   income        $     337        240        292        264        246
  NonInterest
   expense       $   2,305      2,099      1,794      1,735      1,459
  Net income     $     497        579        637        422        383
  Basic earnings
   per share (a) $    0.14       0.16       0.18       0.12       0.11
  Diluted
   earnings per
   share (a)     $    0.13       0.16       0.17       0.11       0.10
  Average
   shares out-
   standing (a)  3,586,518  3,586,518  3,586,518  3,586,518  3,586,518
  Average diluted
   shares out-
   standing (a)  3,712,586  3,680,149  3,678,552  3,684,443  3,660,931
  Actual common
   shares out-
   standing (a)  3,586,518  3,586,518  3,586,518  3,586,518  3,586,518

 PERFORMANCE
 RATIOS
  Return on
   average assets     0.52%      0.63%      0.77%      0.59%      0.61%
  Return on
   average common
   equity             7.99%      9.17%     10.34%      6.92%      6.41%
  Net interest
   margin (fully
   tax-equivalent)    3.42%      3.49%      3.47%      3.54%      3.59%
  Efficiency ratio   65.73%     63.09%     58.08%     63.48%     60.14%
  Full-time
   equivalent
    employees           74         73         62         54         53

 CAPITAL
  Equity to assets    6.32%      6.58%      7.18%      7.78%      8.93%
  Regulatory
   leverage ratio     9.14%      9.33%     10.69%      8.59%      9.57%
  Tier 1 capital
   ratio             10.68%     11.23%     12.09%      9.43%     11.50%
  Total risk-based
   capital ratio     12.23%     12.80%     13.29%     10.65%     12.84%
  Book value per
   share (a)     $    7.00       7.00       6.87       6.76       6.69

 ASSET QUALITY
  Gross loan
   charge-offs   $       0        402         53         45          5
  Net loan
   charge-offs
   (recoveries)  $     (75)       401         42          1        (28)
  Net loan
   charge-offs to
   average loans     -0.10%      0.56%      0.06%      0.00%     -0.05%
  Allowance for
   loan losses   $   3,868      3,402      3,510      3,165      2,811
  Allowance for
   losses to
   total loans        1.23%      1.17%      1.26%      1.28%      1.30%
  Nonperforming
   loans         $     920        948      1,174        751      1,043
  Other real
   estate and
   repossessed
   assets        $       0          0          0         13        195
  Nonperforming
   assets to
   total assets       0.23%      0.25%      0.34%      0.25%      0.46%

 END OF PERIOD
 BALANCES
  Loans          $ 315,113    290,524    278,386    246,757    216,140
  Total earning
   assets (before
   allowance)    $ 386,167    371,661    334,053    303,134    257,755
  Total assets   $ 397,321    381,777    343,327    311,813    268,654
  Deposits       $ 329,248    322,634    284,134    258,084    229,775
  Shareholders'
   equity        $  25,097     25,110     24,635     24,245     23,985

 AVERAGE BALANCES
  Loans          $ 302,759    285,654    261,652    230,140    204,684
  Total earning
   assets (before
   allowance)    $ 371,984    358,991    320,139    276,848    243,381
  Total assets   $ 383,697    368,403    329,152    285,444    251,829
  Deposits       $ 318,983    308,702    269,824    238,439    211,684
  Shareholders'
   equity        $  24,894     25,270     24,642     24,383     23,886

                                                    Year to Date
                                              -----------------------
                                                 2006        2005
                                              ----------   ----------
 EARNINGS
  Net interest income                         $    6,256        4,033
  Provision for loan and lease losses         $      684          757
  NonInterest income                          $      578          494
  NonInterest expense                         $    4,404        2,852
  Net income                                  $    1,076          624
  Basic earnings per share (a)                $     0.30         0.17
  Diluted earnings per share (a)              $     0.29         0.17
  Average shares outstanding (a)               3,586,518    3,585,845
  Average diluted shares outstanding (a)       3,696,368    3,661,733
  Actual common shares outstanding (a)         3,586,518    3,586,518

 PERFORMANCE RATIOS
  Return on average assets                          0.57%        0.53%
  Return on average common equity                   8.58%        5.24%
  Net interest margin (fully tax-equivalent)        3.45%        3.59%
  Efficiency ratio                                 64.44%       63.00%
  Full-time equivalent employees                      74           53

 CAPITAL
  Equity to assets                                  6.32%        8.93%
  Regulatory leverage ratio                         9.14%        9.57%
  Tier 1 capital ratio                             10.68%       11.50%
  Total risk-based capital ratio                   12.23%       12.84%
  Book value per share (a)                    $     7.00         6.69

 ASSET QUALITY
  Gross loan charge-offs                      $      402           86
  Net loan charge-offs (recoveries)           $      326           52
  Net loan charge-offs to average loans             0.22%        0.06%
  Allowance for loan losses                   $    3,868        2,811
  Allowance for losses to total loans               1.23%        1.30%
  Nonperforming loans                         $      920        1,043
  Other real estate and repossessed assets    $        0          195
  Nonperforming assets to total assets              0.23%        0.46%

 END OF PERIOD BALANCES
  Loans                                       $  315,113      216,140
  Total earning assets (before allowance)     $  386,167      257,755
  Total assets                                $  397,321      268,654
  Deposits                                    $  329,248      229,775
  Shareholders' equity                        $   25,097       23,985

 AVERAGE BALANCES
  Loans                                       $  294,254      188,843
  Total earning assets (before allowance)     $  365,524      226,251
  Total assets                                $  376,093      234,621
  Deposits                                    $  313,871      199,062
  Shareholders' equity                        $   25,081       23,816

 (a) Restated for 5% stock dividend for shareholders of record
     6/22/06, paid out effective 6/30/06


                    BANK OF WILMINGTON CORPORATION
           CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
 ---------------------------------------------------------------------

                           Three Months Ended       Six Months Ended
                                 June 30,               June 30,
                          ---------------------   ---------------------
                            2006        2005        2006        2005
                          ---------   ---------   ---------   ---------
                        (In thousands, except share and per share data)
 INTEREST INCOME
  Loans                   $   5,983   $   3,324   $  11,385   $   5,962
  Investment securities,
   available for sale           695         318       1,285         585
  Federal funds sold and
   interest-earning
   deposits                      79          34         253          84
                          ---------   ---------   ---------   ---------
    TOTAL INTEREST INCOME     6,757       3,676      12,923       6,631
                          ---------   ---------   ---------   ---------
 INTEREST EXPENSE
  Money market, NOW and
   savings deposits             369         131         678         217
  Time deposits               2,685       1,227       5,108       2,202
  Short-term borrowings          57          31          59          39
  Long-term borrowings          476         107         822         140
                          ---------   ---------   ---------   ---------
    TOTAL INTEREST EXPENSE    3,587       1,496       6,667       2,598
                          ---------   ---------   ---------   ---------
    NET INTEREST INCOME       3,170       2,180       6,256       4,033

 PROVISION FOR LOAN LOSSES      391         392         684         757
                          ---------   ---------   ---------   ---------
   NET INTEREST INCOME
    AFTER PROVISION FOR
    LOAN LOSSES               2,779       1,788       5,572       3,276
                          ---------   ---------   ---------   ---------
 NON-INTEREST INCOME            337         246         578         494
                          ---------   ---------   ---------   ---------
 NON INTEREST EXPENSE
  Salaries and employee
   benefits                   1,230         718       2,283       1,481
  Occupancy and equipment       374         229         701         439
  Other                         701         512       1,420         932
                          ---------   ---------   ---------   ---------
    TOTAL NON-INTEREST
     EXPENSE                  2,305       1,459       4,404       2,852
                          ---------   ---------   ---------   ---------
    INCOME BEFORE INCOME
     TAXES                      811         575       1,746         918

 INCOME TAXES                   314         192         670         294
                          ---------   ---------   ---------   ---------
    NET INCOME            $     497   $     383   $   1,076   $     624
                          =========   =========   =========   =========
 NET INCOME PER COMMON
  SHARE
   Basic (a)              $    0.14   $    0.11   $    0.30   $    0.17
                          =========   =========   =========   =========
   Diluted (a)            $    0.13   $    0.10   $    0.29   $    0.17
                          =========   =========   =========   =========
 WEIGHTED AVERAGE COMMON
  SHARES OUTSTANDING
    Basic (a)             3,586,518   3,586,871   3,586,518   3,585,845
    Effect of dilutive
     stock options (a)      126,068      74,060     109,850      75,888
                          ---------   ---------   ---------   ---------
    Diluted (a)           3,712,586   3,660,931   3,696,368   3,661,733
                          =========   =========   =========   =========

 (a) All per share and outstanding share data has been restated for
     the 5% stock dividend effective 6/30/06


                    BANK OF WILMINGTON CORPORATION
                      CONSOLIDATED BALANCE SHEETS
 ---------------------------------------------------------------------

                                               June 30,
                                                 2006     December 31,
                                              (Unaudited)    2005(a)
                                               ---------    ---------
                                               (In thousands, except
                                                     share data)
 ASSETS
  Cash and due from banks                      $   2,445    $   1,854
  Interest earning deposits in other banks        10,055        5,419
  Investment securities available for sale,
   at fair value                                  58,643       48,655
  Time deposits in other banks                       298          199

  Loans                                          315,113      278,386
  Allowance for loan losses                       (3,868)      (3,510)
                                               ---------    ---------
      NET LOANS                                  311,245      274,876

  Accrued interest receivable                      1,860        1,645
  Premises and equipment, net                      2,610        1,845
  Stock in Federal Home Loan Bank of Atlanta,
   at cost                                         2,058        1,394
  Bank owned life insurance                        5,391        5,296
  Other assets                                     2,716        2,144
                                               ---------    ---------
      TOTAL ASSETS                             $ 397,321    $ 343,327
                                               =========    =========
 LIABILITIES AND STOCKHOLDERS' EQUITY
 Deposits
  Demand                                       $  38,216    $  26,025
  Savings                                          2,419        2,594
  Money market and NOW                            41,320       35,339
  Time                                           247,293      220,176
                                               ---------    ---------
      TOTAL DEPOSITS                             329,248      284,134

  Short-term borrowings                            7,500            0
  Long-term borrowings                            33,310       32,310
  Accrued interest payable                           672          457
  Accrued expenses and other liabilities           1,494        1,791
                                               ---------    ---------
      TOTAL LIABILITIES                          372,224      318,692

 Shareholders' Equity
  Common stock, $3.50 par value,
   12,500,000 shares authorized;
   3,586,518 shares issued and outstanding        12,553       12,553
  Additional paid in capital                      12,679       10,455
  Accumulated retained earnings                    1,064        2,153
  Accumulated other comprehensive loss            (1,199)        (526)
                                               ---------    ---------
      TOTAL SHAREHOLDERS' EQUITY                  25,097       24,635

      TOTAL LIABILITIES AND
       SHAREHOLDERS' EQUITY                    $ 397,321    $ 343,327
                                               =========    =========

 (a) Derived from audited financial statements


            

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