BKWW Bank OF Wilmington

WILMINGTON, N.C., May 9 /PRNewswire-FirstCall/ -- Bank of Wilmington Corporation (NASDAQ:BKWW) reported net income for the first quarter of 2006 of $579,000 compared with $241,000 for the first quarter of 2005, an increase of 140.2 percent. Diluted earnings per share were $0.17 compared with $0.07 for the prior-year first quarter, an increase of 142.9 percent. Year-over-year performance reflects exceptional loan and deposit growth. Cameron Coburn, Chairman, President and CEO, commented, "Our growth reflects the strong economy of the Cape Fear region, driven by population growth and a diversified industrial base. As the leading community bank in this metro area, Bank of Wilmington has benefited handsomely from the exceptional loan demand and deposit growth we witnessed during 2005. As we enter 2006, however, we are seeing the impact of rising interest rates on our local real estate market, which has moderated loan demand across all real estate-related categories. The pace of this first quarter is still strong, but more importantly, it is also more sustainable. We've been able to devote more attention to deposit generation, and one of our most outstanding accomplishments this year is the growth of our demand deposit accounts. "Early in the second quarter," Mr. Coburn continued, "we completed the conversion of our Surf City office to a full-service branch, and opened our fifth full-service banking office in Waterford. Expense growth reflects the additional costs associated with this expansion. However, the value provided by our expanded branch network has the potential for further growth of our low-cost deposits." Total revenue, comprised of net interest income and non-interest income, was $3.3 million for the first quarter, an increase of 58.4 percent over the $2.1 million reported for the prior-year period. Net interest income for the current quarter increased 66.6 percent over 2005 to $3.1 million, reflecting a 71.8 percent growth in average earning assets partially offset by an 11 basis point decline in the net interest margin to 3.49 percent. Mr. Coburn commented, "Although our net interest margin has declined year-over-year, we experienced a two basis point improvement since the fourth quarter of 2005 as growth in low-cost deposits, primarily demand and money market accounts, offset the rising cost of time deposits." Non-interest income was $240,000 for the first quarter of 2006 compared with $248,000 for last year's first quarter. Excluding a $10,000 loss on the sale of securities in 2006 and a $1,000 gain in the first quarter of 2005, non-interest income of $250,000 was virtually unchanged from the prior-year quarter; our demand deposit campaign over the current period translated into lower service fee income in exchange for an improved net interest margin. As a result of expansion initiatives, non-interest expense increased $706,000, or 50.7 percent, to $2.1 million this year from $1.4 million for the prior-year first quarter. Expenses increased in all categories; salaries and benefits grew 38.0 percent over the past twelve months from a combination of 22 additional FTE employees and $104,000 of expenses associated with the first-time expensing of stock options and an increase in deferred compensation expense from a supplemental retirement program newly-implemented in 2005. Nine of the 22 newly-added FTE employees were hired to staff the two branches opened in the second quarter of 2006, and the remaining 13 are employed in growth-related positions such as operations and loan production. Occupancy and equipment expense also grew $116,000, or 55.0 percent. Other expense was $719,000 for the 2006 quarter, up $300,000, or 71.6 percent, from last year's first quarter, reflecting additional growth-related processing costs and new product introductions (business bill pay and business debit cards), as well as the increased costs of regulatory reporting. The efficiency ratio improved to 63.09 percent for the 2006 quarter compared with 66.30 percent for the prior- year first quarter. Mr. Coburn commented, "Asset quality remains sound. The $402,000 we charged off this quarter represents primarily non-real estate related commercial loans where we felt there was a deficiency of collateral. However, we have since recovered $63,000 of the amount charged-off, and assets representing an additional $117,000 are under contract to be sold during the second quarter." Net charge-offs for the quarter were $401,000, or 0.56 percent of average loans on an annualized basis, compared with $42,000 or 0.06 percent annualized for the December 31, 2005 quarter, and $80,000 or 0.19 percent annualized for the year-ago quarter. Non-performing assets were $948,000, or 0.25 percent of total assets at March 31, 2006, compared with $1.2 million, or 0.34 percent of assets at year-end 2005, and $1.4 million, or 0.59 percent, twelve months ago. Loan loss reserves at March 31, 2006 were $3.4 million, or 1.17 percent of total loans compared with 1.28 percent a year ago when nonperforming assets were substantially higher. Total assets were $381.8 million at March 31, 2006, an increase of $152.9 million, or 66.8 percent, from twelve months ago. Year-over-year, loans outstanding grew $103.3 million, or 55.2 percent, from $187.2 million a year ago to $290.5 million for the current quarter. Residential construction lending accounted for the majority of this growth due to population increases in the Bank's market area. Year-to-date, loan growth moderated to $12.1 million, or 4.4 percent (17.6 percent annualized). Coburn added, "We welcome a respite in this market; at this quarter's pace, we have an opportunity to focus on building deeper relationships that will enhance our profitability and our reputation as a full-service community bank." Loan growth over the past twelve months was funded primarily by a $126.8 million, or 64.8 percent, increase in deposits, to $322.6 million. For the recent quarter, deposits grew $38.5 million, or 13.6 percent. Core deposits, which include retail CDs, grew 12.1 percent. The lowest cost accounts (transaction accounts plus money market and savings) increased by $13.8 million, or 21.6 percent; they now constitute 24.1 percent of the deposit mix compared to 22.5 percent at year-end 2005, regaining ground from the prior- year first quarter, where they comprised 28.3 percent of deposits. Non- interest bearing checking account balances increased $9.6 million since March 31, 2005, or 42.0 percent; of this total, $6.3 million was generated in the first quarter of 2006, representing a growth rate of 24.2 percent quarterly, and 98.3 percent annualized. Mr. Coburn noted, "Our new branches are just getting up to speed; we believe they will make an increasing contribution as a low-cost source of funds." Shareholders' equity at March 31, 2006 was $25.1 million, a twelve-month increase of $1.7 million, or 7.3 percent. The Company's total risk-based capital ratio at quarter-end was 12.80 percent. Total shares outstanding at March 31, 2006 were 3,416,068. Mr. Coburn concluded, "Our economy continues to perform well. We are benefiting from a balanced mix of tourism, construction, and diverse industrial expansion. Bank of Wilmington is well-positioned to respond to the diverse financial needs of our local communities." 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) Quarterly 2006 2005 2005 2005 (dollars in thousands except per share data) 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr EARNINGS Net interest income $3,087 2,797 2,469 2,180 Provision for loan and lease losses $293 388 355 392 NonInterest income $240 292 264 246 NonInterest expense $2,099 1,794 1,735 1,459 Net income $579 637 422 383 Basic earnings per share $0.17 0.19 0.12 0.11 Diluted earnings per share $0.17 0.18 0.12 0.11 Average shares outstanding 3,416,068 3,416,068 3,416,068 3,416,068 Average diluted shares outstanding 3,505,309 3,503,383 3,508,993 3,486,601 Period-end common shares outstanding 3,416,068 3,416,068 3,416,068 3,416,068 PERFORMANCE RATIOS Return on average assets 0.63% 0.77% 0.59% 0.61% Return on average common equity 9.17% 10.34% 6.92% 6.41% Net interest margin (fully tax-equivalent) 3.49% 3.47% 3.54% 3.59% Efficiency ratio 63.09% 58.08% 63.48% 60.14% Full-time equivalent employees 73 62 54 53 CAPITAL Equity to assets 6.58% 7.18% 7.78% 8.93% Regulatory leverage ratio 9.33% 10.69% 8.59% 9.57% Tier 1 capital ratio 11.23% 12.09% 9.43% 11.50% Total risk-based capital ratio 12.80% 13.29% 10.65% 12.84% Book value per share $7.35 7.21 7.10 7.02 Cash dividend per share $0.00 0.00 0.00 0.00 ASSET QUALITY Gross loan charge-offs $402 53 45 5 Net loan charge-offs $401 42 1 (28) Net loan charge-offs to average loans 0.56% 0.06% 0.00% -0.05% Allowance for loan losses $3,402 3,510 3,165 2,811 Allowance for losses to total loans 1.17% 1.26% 1.28% 1.30% Nonperforming loans $948 1,174 751 1,043 Other real estate and repossessed assets $0 0 13 195 Nonperforming assets to total assets 0.25% 0.34% 0.25% 0.46% END OF PERIOD BALANCES Loans $290,524 278,386 246,757 216,140 Total earning assets (before allowance) $371,661 334,053 303,133 257,755 Total assets $381,777 342,974 311,813 268,654 Deposits $322,634 284,134 258,084 229,775 Shareholders' equity $25,110 24,636 24,245 23,985 AVERAGE BALANCES Loans $285,654 261,652 230,140 204,684 Total earning assets (before allowance) $358,991 320,139 276,848 243,380 Total assets $368,403 329,152 285,444 251,829 Deposits $308,702 269,824 238,439 211,684 Shareholders' equity $25,270 24,642 24,383 23,886 *Shares for all periods restated for 5 for 4 split effective 6/30/05 Bank of Wilmington Corporation CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) Quarterly Year Ending 2005 (dollars in thousands except per share data) 1st Qtr 2005 2004 EARNINGS Net interest income 1,853 9,299 5,854 Provision for loan and lease losses 365 1,499 892 NonInterest income 248 1,048 746 NonInterest expense 1,393 6,381 4,626 Net income 241 1,682 1,148 Basic earnings per share 0.07 0.49 0.41 Diluted earnings per share 0.07 0.48 0.40 Average shares outstanding 3,414,411 3,415,582 2,768,040 Average diluted shares outstanding 3,488,551 3,496,780 2,840,524 Period-end common shares outstanding 3,416,068 3,416,068 3,405,183 PERFORMANCE RATIOS Return on average assets 0.44% 0.62% 0.70% Return on average common equity 4.06% 6.96% 6.45% Net interest margin (fully tax- equivalent) 3.60% 3.54% 3.68% Efficiency ratio 66.30% 61.67% 70.09% Full-time equivalent employees 51 62 50 CAPITAL Equity to assets 10.23% 7.18% 11.57% Regulatory leverage ratio 10.92% 10.69% 12.29% Tier 1 capital ratio 12.09% 12.09% 13.64% Total risk-based capital ratio 13.31% 13.29% 14.87% Book value per share 6.85 7.21 6.85 Cash dividend per share 0.00 0.00 0.00 ASSET QUALITY Gross loan charge-offs 81 184 503 Net loan charge-offs 80 95 447 Net loan charge-offs to average loans 0.19% 0.04% 0.34% Allowance for loan losses 2,391 3,510 2,106 Allowance for losses to total loans 1.28% 1.26% 1.30% Nonperforming loans 1,162 1,174 993 Other real estate and repossessed assets 195 0 195 Nonperforming assets to total assets 0.59% 0.34% 0.59% END OF PERIOD BALANCES Loans 187,152 278,386 162,399 Total earning assets (before allowance) 220,604 334,053 193,650 Total assets 228,863 343,327 201,533 Deposits 195,833 284,134 170,168 Shareholders' equity 23,404 24,635 23,338 AVERAGE BALANCES Loans 172,826 217,604 130,734 Total earning assets (before allowance) 208,932 262,669 159,404 Total assets 217,222 271,258 164,220 Deposits 186,301 226,823 140,356 Shareholders' equity 23,745 24,167 17,803 *Shares for all periods restated for 5 for 4 split effective 6/30/05 Bank of Wilmington Corporation CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS THREE MONTHS TWELVE MONTHS TWELVE MONTHS ENDED ENDED ENDED ENDED March 31, March 31, December 31, December 31, 2006 2005 2005 2004 (Unaudited) (Unaudited) (Audited) (Audited) INTEREST INCOME Loans $5,402 $2,638 $14,728 $7,663 Investment securities, available for sale 571 280 1,453 855 Short-term investments 193 37 231 78 Total interest income 6,166 2,955 16,412 8,596 INTEREST EXPENSE Money market, NOW and savings deposits 309 86 619 267 Time deposits 2,422 975 5,702 2,378 Short-term borrowings 228 41 0 97 Long-term borrowings 120 0 792 0 Total interest expense 3,079 1,102 7,113 2,742 Net interest income 3,087 1,853 9,299 5,854 Provision for loan and lease losses 293 365 1,499 892 Net interest income after provision for loan and lease losses 2,794 1,488 7,800 4,962 NON INTEREST INCOME Service fees & charges 150 141 644 540 Net gain (loss) on sales of securities (10) 1 (10) (5) Income from bank owned life insurance 47 53 199 97 Other income 53 53 215 114 Total non interest income 240 248 1,048 746 NON INTEREST EXPENSE Salaries and employee benefits 1,053 763 3,438 2,577 Occupancy and Equipment 327 211 977 782 Other expense 719 419 1,966 1,267 Total non interest expense 2,099 1,393 6,381 4,626 Income before federal income tax expense 935 343 2,467 1,082 Federal income tax expense (benefit) 356 102 785 (66) Net income $579 $241 $1,682 $1,148 Basic earnings per share* $0.17 $0.07 $0.49 $0.41 Diluted earnings per share* $0.17 $0.07 $0.48 $0.40 Average shares outstanding * 3,416,068 3,414,411 3,415,582 2,768,040 Average diluted shares outstanding * 3,505,309 3,488,551 3,496,780 2,840,524 *All per share and outstanding share data has been restated for the 5 for 4 stock split effected 6/30/05 Bank of Wilmington Corporation CONSOLIDATED BALANCE SHEETS MARCH 31, DECEMBER 31, 2006 2005 (Unaudited) (Audited) ASSETS Cash and due from banks $2,010 $1,854 Interest earning deposits in other banks 24,912 5,419 Total cash and cash equivalents 26,922 7,273 Investment securities available for sale 54,350 48,655 Time deposits in other banks 199 199 Total loans 290,524 278,386 Allowance for loan losses (3,402) (3,510) Total Loans, net 287,122 274,876 Accrued interest receivable 1,710 1,645 Premises and equipment, net 2,101 1,845 Federal Home Loan Bank stock 1,676 1,394 Bank owned life insurance 5,343 5,296 Other assets 2,354 2,144 Total assets $381,777 $343,327 LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Demand $32,335 $26,025 Savings 2,697 2,594 Money market and NOW 42,748 35,339 Time 244,854 220,176 Total deposits 322,634 284,134 Long-term borrowings 32,310 32,310 Accrued interest payable 538 457 Accrued expenses and other liabilities 1,185 1,791 Total liabilities 356,667 318,692 SHAREHOLDERS' EQUITY Common stock 11,956 11,956 Additional Paid in Capital 11,052 11,052 Retained earnings 2,761 2,153 Accumulated other comprehensive loss (659) (526) Total shareholders' equity 25,110 24,635 Total liabilities and shareholders' equity $381,777 $343,327 DATASOURCE: Bank of Wilmington Corporation CONTACT: J. Cameron Coburn, Chairman, President & CEO, +1-910-509-3901, or , or Betty V. Norris, SVP & Chief Financial Officer, +1-910-509-3914, or , both of Bank of Wilmington Corporation

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