A release of $920,000 from its loan-loss provision spurred Bank of the Carolinas Corp. to a $140,000 profit in the third quarter.
By comparison, the Mocksville bank reported a loss of $3.2 million a year ago.
The bank, which has a Winston-Salem branch, reported Friday diluted earnings of 4 cents a share compared with a loss of 82 cents a year ago.
The bank, like many local community banks, has made some progress in resolving problem commercial and residential mortgage loans since the financial crisis began in late 2007.
As such, the provision for loan losses has become a key metric for investors and customers for evaluating a bank's financial health since it directly affects a bank's bottom line.
The bank said it was able to release funds from the loan-loss provision through two primary methods. The first was its cost related to foreclosed real estate dropped to $144,000 in the quarter compared with $1.3 million year over year. The second was the bank was able to recovery $737,000 in its loan portfolio compared with net charge-offs of $88,000 in the second quarter and $1.6 million in the third quarter of 2012.
Nonperforming assets were at $8.7 million on Sept. 30 compared with $7 million on June 30 and $13.5 million on Sept. 30, 2012.
Bank of the Carolinas still remains off pace for making a profit in fiscal 2013. It reported a loss of $627,000 through the third quarter, though improved from a loss of $6.1 million in the same period in fiscal 2012.
Stephen Talbert, the bank's president and chief executive, said in a brief statement he was pleased with the overall progress made during the quarter. He could not be reached for immediate comment Monday.
The bank did not provide an update from its August regulatory filing about its overall financial status.
In June 2011, the board of directors hired a consultant to explore "strategic alternatives," including the sale of the bank.
In the August filing, the bank said "management is actively evaluating a number of potential capital sources, asset reductions and other balance sheet management strategies with the goal of increasing the level of regulatory capital to support the balance sheet long term. The bank closed its King branch in June as one way to lower costs.
"Should these efforts be unsuccessful, due to existing regulatory restrictions on cash payments and dividends between the bank and the company, the company may be unable to discharge its liabilities in the normal course of business," the bank stated in August.
The capital sources may include issuing common stock, preferred stock or a combination of both, debt financing or other financing alternatives "that may be treated as capital for capital adequacy ratio purposes."
New common stock may prove unappetizing to investors. The bank's share price began trading Monday at 85 cents.
"There are no assurances that an offering will be completed or that the company will succeed in this endeavor," the bank said.
In recent quarters, many community banks have accelerated foreclosure proceedings and the process of writing off bad loans as a "castor oil" way of easing the pressure on their bottom lines.
Several community banks — such as BNC Bancorp, NewBridge Bancorp and Yadkin Financial Corp. — have been successful in raising capital. The results have been improved profitability, but at the loss of some independence.
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