U.S. Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2011

or

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period ended from              to             

Commission File Number 000-50400

New Century Bancorp, Inc.

(Exact name of Registrant as specified in its charter)

North Carolina	20-0218264
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
700 W. Cumberland Street Dunn, North Carolina	28334
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (910) 892-7080

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of November 3, 2011, the Registrant had outstanding 6,860,367 shares of Common Stock, $1 par value per share.

		Page No.
Part I.	FINANCIAL INFORMATION
Item 1 -	Financial Statements (Unaudited)
	Consolidated Balance Sheets September 30, 2011 and December 31, 2010		3
	Consolidated Statements of Operations Three Months and Nine Months Ended September 30, 2011 and  2010		4
	Consolidated Statements of Changes in Shareholders’ Equity Nine Months Ended September 30, 2011 and 2010		5
	Consolidated Statements of Cash Flows Nine Months Ended September 30, 2011 and 2010		6
	Notes to Consolidated Financial Statements		8
Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations		36
Item 4 -	Controls and Procedures		50
Part II.	OTHER INFORMATION
Item 6 -	Exhibits		51
	Signatures		52
	Exhibit Index		53

2

Part I. FINANCIAL INFORMATION

Item 1 - Financial Statements

NEW CENTURY BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

	September 30, 2011			December 31,
	(Unaudited)			2010*
	(In thousands, except share
	and per share data)
ASSETS
Cash and due from banks	$	15,857		$	7,071
Interest-earning deposits in other banks		55,637			21,648
Federal funds sold		3,028			7,183
Investment securities available for sale, at fair value		74,735			89,899
Loans		439,410			470,484
Allowance for loan losses		(10,338	)		(10,015	)
NET LOANS		429,072			460,469
Accrued interest receivable		2,212			2,488
Stock in Federal Home Loan Bank of Atlanta (“FHLB”), at cost		1,325			1,448
Other non marketable securities		1,132			1,082
Foreclosed real estate		3,230			3,655
Premises and equipment, net		12,501			12,930
Bank owned life insurance		7,917			7,727
Core deposit intangible		583			699
Other assets		9,351			10,597
TOTAL ASSETS	$	616,580		$	626,896
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Demand	$	76,120		$	70,363
Savings		25,491			22,541
Money market and NOW		95,793			97,096
Time		329,768			344,599
TOTAL DEPOSITS		527,172			534,599
Short term debt		23,850			23,666
Long term debt		14,372			16,372
Accrued interest payable		321			395
Accrued expenses and other liabilities		1,916			2,172
TOTAL LIABILITIES		567,631			577,204
Shareholders’ Equity
Common stock, $1 par value, 25,000,000 and 10,000,000 shares authorized; 6,860,367 and 6,913,636 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively		6,860			6,914
Additional paid-in capital		41,836			41,887
Accumulated deficit		(1,049	)		(287	)
Accumulated other comprehensive income		1,302			1,178
TOTAL SHAREHOLDERS’ EQUITY		48,949			49,692
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	616,580		$	626,896

* Derived from audited consolidated financial statements.

See accompanying notes. 3

NEW CENTURY BANCORP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	(In thousands, except share and per share data)
INTEREST INCOME
Loans	$	7,050		$	7,789		$	21,605		$	23,190
Federal funds sold and interest-earning deposits in other banks		29			25			68			48
Investments		505			614			1,624			2,047
TOTAL INTEREST INCOME		7,584			8,428			23,297			25,285
INTEREST EXPENSE
Money market, NOW and savings deposits		149			293			546			925
Time deposits		1,812			1,993			5,565			5,958
Other short term debt		54			72			189			208
Long term debt		74			81			222			227
TOTAL INTEREST EXPENSE		2,089			2,439			6,522			7,318
NET INTEREST INCOME		5,495			5,989			16,775			17,967
PROVISION FOR LOAN LOSSES		2,194			12,457			5,900			14,366
NET INTEREST INCOME (LOSS) AFTER PROVISION FOR LOAN LOSSES		3,301			(6,468	)		10,875			3,601
NON-INTEREST INCOME
Fees from pre-sold mortgages		47			73			134			154
Service charges on deposit accounts		363			370			1,121			1,247
Other fees and income		233			205			921			574
TOTAL NON-INTEREST INCOME		643			648			2,176			1,975
NON-INTEREST EXPENSE
Personnel		1,985			2,335			6,660			6,957
Occupancy and equipment		348			393			1,068			1,163
Deposit insurance		209			241			706			710
Professional fees		329			571			1,462			1,454
Information systems		383			356			1,210			1,257
Net loss on sale and write downs of foreclosed real estate		156			96			1,059			122
Other		704			755			2,366			2,179
TOTAL NON-INTEREST EXPENSE		4,114			4,747			14,531			13,842
LOSS BEFORE INCOME TAX BENEFIT		(170	)		(10,567	)		(1,480	)		(8,266	)
INCOME TAX BENEFIT		(148	)		(3,956	)		(718	)		(3,186	)
NET LOSS	$	(22	)	$	(6,611	)	$	(762	)	$	(5,080	)
NET LOSS PER COMMON SHARE
Basic	$	(.00	)	$	(.96	)	$	(.11	)	$	(.74	)
Diluted	$	(.00	)	$	(.96	)	$	(.11	)	$	(.74	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic		6,861,034			6,908,466			6,896,102			6,864,543
Diluted		6,861,034			6,908,466			6,896,102			6,864,543

See accompanying notes. 4

NEW CENTURY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

	Common stock						Common stock received as collateral on		Additional paid-in			Retained earnings (Accumulated			Accumulated other comprehensive		Total Shareholders’
	Shares			Amount			loan default		capital			deficit)			income		Equity
	(Amounts in thousands, except share and per share data)
Balance at December 31, 2009		6,837,952		$	6,838		$	—	$	41,467		$	4,668		$	1,436	$	54,409
Net loss		—			—			—		—			(5,080	)		—		(5,080	)
Other comprehensive income, net		—			—			—		—			—			130		130
Exercise of stock options		75,684			76			—		256			—			—		332
Tax benefit from stock option exercises		—			—			—		16			—			—		16
Stock based compensation		—			—			—		100			—			—		100
Balance at September 30, 2010		6,913,636		$	6,914		$	—	$	41,839		$	(412	)	$	1,566	$	49,907
Balance at December 31, 2010		6,913,636		$	6,914		$	—	$	41,887		$	(287	)	$	1,178	$	49,692
Net loss		—			—			—		—			(762	)		—		(762	)
Common stock received as collateral on loan default		(53,269	)		(54	)		—		(111	)		—			—		(165	)
Other comprehensive income, net		—			—			—		—			—			124		124
Stock based compensation		—			—			—		60			—			—		60
Balance at September 30, 2011		6,860,367		$	6,860		$	—	$	41,836		$	(1,049	)	$	1,302	$	48,949

See accompanying notes. 5

NEW CENTURY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Nine Months Ended September 30,
	2011			2010
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(762	)	$	(5,080	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Provision for loan losses		5,900			14,366
Depreciation and amortization of premises and equipment		500			569
Amortization and accretion of investment securities		572			630
Amortization of deferred loan fees and costs		(152	)		(126	)
Amortization of core deposit intangible		115			115
Stock-based compensation		60			100
(Gain) loss on write down on other assets		82			(2	)
Increase in cash surrender value of bank owned life insurance		(190	)		(196	)
Net loss on sale and write-downs of foreclosed real estate		1,059			122
Net loss on investment security sales		47			14
Change in assets and liabilities:
Net change in accrued interest receivable		276			(83	)
Net change in other assets		693			(3,902	)
Net change in accrued expenses and other liabilities		(332	)		691
NET CASH PROVIDED BY OPERATING ACTIVITIES		7,868			7,218
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of FHLB stock		—			(315	)
Redemption of FHLB stock		123			—
Purchase of investment securities available for sale		(16,209	)		(7,291	)
Maturities of investment securities available for sale		22,737			12,711
Mortgage-backed securities pay-downs		7,750			7,733
Sale of investment securities available for sale		500			—
Net change in loans outstanding		23,544			(8,138	)
Proceeds from sale of loans		—			2,019
Proceeds from sale of foreclosed real estate		1,583			1,495
Proceeds from sale of premises and equipment		1			5
Purchases of premises and equipment		(34	)		(1,208	)
NET CASH PROVIDED BY INVESTING ACTIVITIES		39,995			7,011
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits		(7,427	)		8,604
Proceeds from short term debt		2,184			3,976
Repayments from short term debt		(2,000	)		—
Proceeds from long term debt		—			4,000
Repayments from long term debt		(2,000	)		—
Tax benefit from exercise of stock options		—			16
Proceeds from the exercise of stock options		—			332
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES		(9,243	)		16,928
NET CHANGE IN CASH AND CASH EQUIVALENTS		38,620			31,157
CASH AND CASH EQUIVALENTS, BEGINNING		35,902			28,935
CASH AND CASH EQUIVALENTS, ENDING	$	74,522		$	60,092

See accompanying notes. 6

NEW CENTURY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued)

	Nine Months Ended September 30,
	2011			2010
	(In thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest paid	$	6,596		$	7,279
Income taxes paid		—			939
Non-cash transactions:
Unrealized gains on investment securities available for sale, net of tax		124			130
Transfers from loans to foreclosed real estate		2,217			2,901
Common stock received as collateral on loan default		(165	)		—

See accompanying notes. 7

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE A - BASIS OF PRESENTATION

New Century Bancorp, Inc. (the “Company”) is a bank holding company whose principal business activity consists of ownership of New Century Bank (the “Bank”). The Bank is engaged in general commercial and retail banking and operates under the banking laws of North Carolina and the rules and regulations of the Federal Deposit Insurance Corporation and the North Carolina Commissioner of Banks. The Bank undergoes periodic examinations by those regulatory authorities.

All significant inter-company transactions and balances have been eliminated in consolidation. In management’s opinion, the financial information, which is unaudited, reflects all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the financial information as of and for the three and nine month periods ended September 30, 2011 and 2010, in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements, as well as the amounts of income and expense during the reporting period. Actual results could differ from those estimates. Operating results for the three and nine month periods ended September 30, 2011 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2011.

The organization and business of the Company, accounting policies followed by the Company and other relevant information are contained in the notes to the financial statements filed as part of the Company’s 2010 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on April 1, 2011. This quarterly report should be read in conjunction with the Annual Report.

Certain reclassifications have been made to conform prior year financial information to current period presentation. These reclassifications had no material impact on the unaudited consolidated financial statements.

NOTE B - PER SHARE RESULTS

Basic net income per share is computed based upon the weighted average number of shares of common stock outstanding during the period. Diluted net income per share includes the dilutive effect of stock options outstanding during the period. At September 30, 2011 and 2010 there were 426,929 and 424,336 anti-dilutive options for each three and nine month period, respectively, due to repeated net losses for each period.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Weighted average shares used for basic net loss per share		6,861,034		6,908,466		6,896,102		6,864,543
Effect of dilutive stock options		—		—		—		—
Weighted average shares used for diluted net loss per share		6,861,034		6,908,466		6,896,102		6,864,543

8

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE C - COMPREHENSIVE LOSS

A summary of comprehensive loss is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	(Amounts in thousands)
Net loss	$	(22	)	$	(6,611	)	$	(762	)	$	(5,080	)
Other comprehensive income (loss):
Unrealized gain (loss) on investment securities- available for sale		149			(116	)		279			195
Tax effect		(81	)		46			(126	)		(74	)
		68			(70	)		153			121
Reclassification adjustment for gains (losses) included in net income		(21	)		13			(47	)		14
Tax effect		8			(5	)		18			(5	)
		(13	)		8			(29	)		9
Total		55			(62	)		124			130
Total comprehensive income (loss)	$	33		$	(6,673	)	$	(638	)	$	(4,950	)

NOTE D - RECENT ACCOUNTING PRONOUNCEMENTS

The following summarizes recent accounting pronouncements and their expected impact on the Company:

In April, 2011, the Financial Accounting Standards Board (“FASB”) issued A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring Accounting Standards Update (“ASU”) No. 2011-02. In an effort to increase comparability, ASU 2011-02 seeks to clarify when a creditor has granted a concession in a modification and whether a borrower is experiencing financial difficulty. The amendments in this update are effective for the first interim or annual period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. The adoption of the provisions of ASU 2011-02 did not have a material impact on the Company’s financial condition, results of operations or liquidity. However, the guidance did result in an increase in troubled debt restructured loans.

ASU No. 2011-03, Transfers and Servicing (Topic 860) - Reconsideration of Effective Control for Repurchase Agreements. ASU 2011-03 is intended to improve financial reporting of repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. ASU 2011-03 removes from the assessment of effective control (i) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (ii) the collateral maintenance guidance related to that criterion. ASU 2011-03 will be effective for the Company on January 1, 2012 and is not expected to have a significant impact on the Company’s financial statements.

9

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE D - RECENT ACCOUNTING PRONOUNCEMENTS (continued)

ASU 2011-04, Fair Value Measurement (Topic 820) - Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs. ASU 2011-04 amends Topic 820, Fair Value Measurements and Disclosures, to converge the fair value measurement guidance in U.S. generally accepted accounting principles and International Financial Reporting Standards. ASU 2011-04 clarifies the application of existing fair value measurement requirements, changes certain principles in Topic 820 and requires additional fair value disclosures. ASU 2011-04 is effective for annual periods beginning after December 15, 2011, and is not expected to have a significant impact on the Company’s financial statements.

ASU 2011-05, Comprehensive Income (Topic 220) - Presentation of Comprehensive Income. ASU 2011-05 amends Topic 220, Comprehensive Income, to require that all non-owner changes in stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Additionally, ASU 2011-05 requires entities to present, on the face of the financial statements, reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement or statements where the components of net income and the components of other comprehensive income are presented. The option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was eliminated. ASU 2011-05 is effective for annual periods beginning after December 15, 2011, and is not expected to have a significant impact on the Company’s financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations and cash flows.

From time to time, the FASB issues exposure drafts for proposed statements of financial accounting standards. Such exposure drafts are subject to comment from the public, to revisions by the FASB and to final issuance by the FASB as statements of financial accounting standards. Management considers the effect of the proposed statements on the consolidated financial statements of the Company and monitors the status of changes to and proposed effective dates of exposure drafts.

NOTE E - FAIR VALUE MEASUREMENTS

ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but clarifies and standardizes some divergent practices that have emerged since prior guidance was issued. ASC 820 creates a three-level hierarchy under which individual fair value estimates are to be ranked based on the relative reliability of the inputs used in the valuation.

Financial instruments include cash and due from banks, interest-earning deposits with banks, investments, loans, deposit accounts and borrowings. Fair value estimates are made at a specific moment in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.

10

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE E - FAIR VALUE MEASUREMENTS (continued)

Because no active market readily exists for a portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Fair Value Hierarchy

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

• Level 1 - Valuation is based upon quoted prices for identical instruments traded in active markets.

• Level 2 - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.

• Level 3 - Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flows models and similar techniques.

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value on a recurring basis.

Investment Securities Available-for-Sale (“AFS”)

Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include U.S. government agencies, mortgage-backed securities issued by government sponsored entities, and municipal bonds.

11

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE E - FAIR VALUE MEASUREMENTS (continued)

The following tables summarize quantitative disclosures about the fair value measurement for each category of assets carried at fair value on a recurring basis as of September 30, 2011 and December 31, 2010 (dollars in thousands):

Investment securities available for sale September 30, 2011	Fair value		Quoted Prices in Active  Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. government agencies	$	29,589	$	—	$	29,589	$	—
Mortgage-backed securities - Government Sponsored - Enterprises (“GSE’s”)		38,943		—		38,943		—
Municipal bonds		6,203		—		6,203		—
Total	$	74,735	$	—	$	74,735	$	—

Investment securities available for sale December 31, 2010	Fair value		Quoted Prices in Active  Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. government agencies	$	47,087	$	—	$	47,087	$	—
Mortgage-backed securities - GSE’s		35,512		—		35,512		—
Municipal bonds		7,300		—		7,300		—
Total	$	89,899	$	—	$	89,899	$	—

The following is a description of valuation methodologies used for assets recorded at fair value on a nonrecurring basis.

Loans

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with ASC 310, “Receivables”. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, or liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At September 30, 2011 and December 31, 2010, substantially all of the total impaired loans were evaluated based on the fair value of the collateral. Impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as nonrecurring Level 2.

12

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE E - FAIR VALUE MEASUREMENTS (continued)

When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3. There were no transfers between levels from the prior reporting periods.

Foreclosed Real Estate

Foreclosed real estate are properties recorded at the balance of the loan or an estimated fair value less estimated selling costs, whichever is less. Inputs include appraised values on the properties or recent sales activity for similar assets in the property’s market. Therefore, foreclosed real estate is classified within Level 3 of the hierarchy.

The following tables summarize quantitative disclosures about the fair value measurement for each category of assets carried at fair value on a nonrecurring basis as of September 30, 2011 and December 31, 2010 (dollars in thousands):

Asset Category September 30, 2011	Fair value		Quoted Prices in Active  Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	12,168	$	—	$	—	$	12,168
Foreclosed real estate		3,230		—		—		3,230
Total	$	15,398	$	—	$	—	$	15,398

Asset Category December 31, 2010	Fair value		Quoted Prices in Active  Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	9,393	$	—	$	—	$	9,393
Foreclosed real estate		3,655		—		—		3,655
Total	$	13,048	$	—	$	—	$	13,048

13

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE F - INVESTMENT SECURITIES

The amortized cost and fair value of securities available for sale, with gross unrealized gains and losses, follow:

	September 30, 2011
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
			(In thousands)
Securities available for sale:
U.S. government agencies
Within 1 year	$	13,549	$	81	$	—		$	13,630
After 1 year but within 5 years		15,632		327		—			15,959
Mortgage-backed securities -GSE’s
Within 1 year		2,340		65		—			2,405
After 1 year but within 5 years		19,891		1,178		—			21,069
After 5 years but within 10 years		15,362		159		(52	)		15,469
Municipal bonds
After 1 year but within 5 years		1,371		75		—			1,446
After 5 years but within 10 years		2,693		246		—			2,939
After 10 years		1,747		71		—			1,818
	$	72,585	$	2,202	$	(52	)	$	74,735

As of September 30, 2011, accumulated other comprehensive income included unrealized net gains of $2.1 million, net of deferred income taxes of $847,000.

14

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE F - INVESTMENT SECURITIES (continued)

	December 31, 2010
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
	(In thousands)
Securities available for sale:
U.S. government agencies
Within 1 year	$	23,783	$	174	$	11	$	23,946
After 1 year but within 5 years		22,723		418		—		23,141
Mortgage-backed securities - GSE’s
Within 1 year		2,538		118		75		2,581
After 1 year but within 5 years		27,614		1,131		—		28,745
After 5 years but within 10 years		4,150		36		—		4,186
Municipal bonds
Within 1 year		200		3		—		203
After 1 year but within 5 years		1,543		41		—		1,584
After 5 years but within 10 years		3,608		152		—		3,760
After 10 years		1,822		—		69		1,753
	$	87,981	$	2,073	$	155	$	89,899

As of December 31, 2010, accumulated other comprehensive income included unrealized net gains of $1.9 million net of deferred income taxes of $800,000.

The following tables show investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2011 and December 31, 2010.

	September 30, 2011
	Less Than 12 Months				12 Months or More				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
	(In thousands)
Securities available for sale:
Mortgage-backed securities - GSE’s	$	8,916	$	52	$	—	$	—	$	8,916	$	52
Total temporarily impaired securities	$	8,916	$	52	$	—	$	—	$	8,916	$	52

At September 30, 2011, the Company had no AFS securities with an unrealized loss for twelve or more consecutive months. Eight GSE’s had unrealized losses for less than twelve months totaling $52,000 at September 30, 2011. All unrealized losses are attributable to the general trend of interest rates and the abnormal spreads of all debt instruments to U.S. Treasury securities.

15

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE F - INVESTMENT SECURITIES (continued)

	December 31, 2010
	Less Than 12 Months				12 Months or More				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
	(In thousands)
Securities available for sale:
U.S. government agencies	$	6,177	$	11	$	—	$	—	$	6,177	$	11
Mortgage-backed securities - GSE’s		8,395		75		—		—		8,395		75
Municipal bonds		1,678		69		—		—		1,678		69
Total temporarily impaired securities	$	16,250	$	155	$	—	$	—	$	16,250	$	155

At December 31, 2010, the Company had no AFS securities with an unrealized loss for twelve or more consecutive months. Five U.S. government agencies, seven GSE’s and five municipal bonds had unrealized losses for less than twelve months totaling $155,000 at December 31, 2010. All unrealized losses are attributable to the general trend of interest rates and the abnormal spreads of all debt instruments to U.S. Treasury securities.

16

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - LOANS

Following is a summary of loans at September 30, 2011 and December 31, 2010:

	2011						2010
	Amount			Percent of total			Amount			Percent of total
	(Dollars in thousands)
Real estate loans:
1 to 4 family residential	$	56,615			12.89	%	$	60,385			12.83	%
Commercial real estate		200,681			45.69	%		193,502			41.13	%
Multi-family residential		26,078			5.94	%		30,088			6.40	%
Construction		72,858			16.58	%		84,550			17.97	%
Home equity lines of credit (“HELOC”)		38,829			8.84	%		39,938			8.49	%
Total real estate loans		395,061			89.94	%		408,463			86.82	%
Other loans:
Commercial and industrial		36,691			8.35	%		49,437			10.51	%
Loans to individuals		7,940			1.79	%		12,860			2.73	%
Overdrafts		73			.02	%		107			0.02	%
Total other loans		44,704			10.16	%		62,404			13.26	%
Gross loans		439,765						470,867
Less deferred loan origination fees, net		(355	)		(.08	%)		(383	)		(0.08	)%
Total loans		439,410			100.00	%		470,484			100.00	%
Allowance for loan losses		(10,338	)					(10,015	)
Total loans, net	$	429,072					$	460,469

Loans are primarily made in southeastern North Carolina. Real estate loans can be affected by the condition of the local real estate market and by the local economic conditions.

At September 30, 2011, the Company had pre-approved but unused lines of credit totaling $58 million. In management’s opinion, these commitments, and undisbursed proceeds on construction loans in process represent no more than normal lending risk to the Company and will be funded from normal sources of liquidity.

17

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - LOANS (continued)

Construction loans are non-revolving extensions of credit secured by real property of which the proceeds are used to acquire and develop land and to construct commercial or residential buildings. The primary source of repayment for these types of loans is the sale of the improved property or permanent financing in which case the property is expected to generate the cash flow necessary for repayment on a permanent loan basis. Property cash flow may be supplemented with financial support from the borrowers/guarantors. Proper underwriting of a construction loan consists of the initial process of obtaining, analyzing, and approving various aspects of information pertaining to: the analysis of the permanent financing source, creditworthiness of the borrower and guarantors, ability of contractor to perform under the terms of the contract, and the feasibility, marketability, and valuation of the project. Also much consideration needs to be given to the cost of the project and sources of funds needed to complete construction as well as identifying any sources of equity funding. Construction loans are traditionally considered to be higher risk loans involving technical and legal requirements inherently different from other types of loans; however with thorough credit underwriting, proper loan structure, and diligent loan servicing, these risks can be mitigated. Some examples of risks inherent in this type of lending include: underestimated costs, inflation of material and labor costs, site difficulties (i.e. rock, soil), project not built to plans, weather delays and natural disasters, borrower/contractor/subcontractor disputes which prompt liens, interest rates increasing beyond budget.

Commercial real estate loans are underwritten based on the borrower’s ability to generate adequate cash flow to repay the subject debt within reasonable terms. Commercial real estate loans typically include both owner and non-owner occupied properties with higher principal loan amounts and the repayment of these loans is generally dependent on the successful management of the property. Commercial real estate loans are sensitive to market and general economic conditions. Repayment analysis must be performed and consists of an identified primary/cash flow source of repayment and a secondary/liquidation source of repayment. The primary source of repayment is cash flow from income generated from rental or lease of the property. However, the cash flow can be supplemented with the borrower’s and guarantor’s global cash flow position. Other credit issues such as the business fundamentals and financial strength of the borrower/guarantor can be considered in determining adequacy of repayment ability. The secondary source of repayment is liquidation of the collateral, supplemented by liquidation cushion provided by the financial assets of the borrower/guarantor. Management monitors and evaluates commercial real estate loans based on collateral, market area, and risk grade.

Commercial and industrial loans are underwritten after evaluating and understanding the borrower’s ability to generate positive cash flow, operate profitably and prudently expand its business. Underwriting standards are designed to promote relationships to include a full range of loan, deposit, and cash management services. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower and the guarantors. The cash flows of the borrower, however, may not be as expected and the collateral securing these loans may fluctuate in value. In the case of loans secured by accounts receivable, the availability of funds for repayment can be impacted by the borrower’s ability to collect amounts due from its customers.

18

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - LOANS (continued)

Residential 1 to 4 family loans are mortgage loans that typically convert from construction loans into permanent financing and are secured by properties within the Bank’s market areas. Also included in 1 to 4 family residential are loans that the Bank underwrites which are secured by second lien positions.

Multi-family residential loans are typically nonfarm properties with 5 or more dwelling units in structures which include apartment buildings used primarily to accommodate households on a more or less permanent basis. Successful performance of these types of loans is primarily dependant on occupancy rates, rental rates, and property management.

Home equity lines of credit are consumer-purpose revolving extensions of credit which are secured by first or second liens on owner-occupied residential real estate. Appropriate risk management and compliance practices are exercised to ensure that loan-to-value, lien perfection, and compliance risks are addressed and managed within the Bank’s established guidelines. The degree of utilization of revolving commitments within this loan segment is reviewed periodically to identify changes in the behavior of this borrowing group.

Consumer loans are approved using Bank policies and procedures established to evaluate each credit request. All lending decisions and credit risks are clearly documented. Several factors are considered in making these decisions such as credit score, adjusted net worth, liquidity, debt ratio, disposable income, credit history, and loan-to-value of the collateral. This process combined with the relatively smaller loan amounts spreads the risk among many individual borrowers.

19

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - LOANS (continued)

The following tables present an age analysis of past due loans, segregated by class of loans as of September 30, 2011 and December 31, 2010, respectively:

	September 30, 2011
	30+ Days Past Due		Non- Accrual Loans		Total Past Due		Current		Total Loans
	(In thousands)
Commercial and industrial	$	—	$	221	$	221	$	36,470	$	36,691
Construction		1,349		2,861		4,210		68,648		72,858
Multi-family residential		—		—		—		26,078		26,078
Commercial real estate		1,906		11,056		12,962		187,719		200,681
Loans to individuals & overdrafts		79		196		275		7,738		8,013
1 to 4 family residential and HELOCs		740		3,428		4,168		91,276		95,444
Deferred loan (fees) cost, net										(355	)
	$	4,074	$	17,762	$	21,836	$	417,929	$	439,410

There were two loans in the construction loan category totaling $341,000 and one loan in the loans to individuals and overdrafts category totaling $44,000 that were over 90 days past due and still accruing at September 30, 2011. The average balance of non-accrual loans was $13.8 million for the nine month period ended September 30, 2011.

	December 31, 2010
	30+ Days Past Due		Non- Accrual Loans		Total Past Due		Current		Total Loans
	(In thousands)
Commercial and industrial	$	1,227	$	435	$	1,662	$	47,775	$	49,437
Construction		103		938		1,041		83,509		84,550
Multi-family residential		—		—		—		30,088		30,088
Commercial real estate		46		5,789		5,835		187,667		193,502
Loans to individuals & overdrafts		135		180		315		12,652		12,967
1 to 4 family residential and HELOCs		633		3,220		3,853		96,470		100,323
Deferred loan (fees) cost, net										(383	)
	$	2,144	$	10,562	$	12,706	$	458,161	$	470,484

There were no loans that were 90 days past due and still accruing at December 31, 2010. The average balance of non-accrual loans was $14.5 million for the year ended December 31, 2010.

20

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - LOANS (continued)

Impaired Loans

The following tables present information on loans that were considered to be impaired as of September 30, 2011 and December 31, 2010:

							September 30, 2011
							Quarter to Date				Year to Date
	Recorded Investment		Contractual Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized on Impaired Loans		Average Recorded Investment		Interest Income Recognized on Impaired Loans
	(In thousands)
With no related allowance recorded:
Commercial and industrial	$	331	$	598	$	—	$	323	$	3	$	243	$	9
Construction		3,743		4,657		—		2,041		—		1,671		39
Commercial real estate		12,461		14,137		—		8,897		6		7,562		99
Loans to individuals & overdrafts		165		214		—		169		1		165		1
Multi-family residential		1,543		1,543		—		1,222		102		916		102
1 to 4 family residential and HELOCs		3,352		4,539		—		2,161		30		1,983		49
Subtotal:		21,595		25,688		—		14,813		142		12,540		299
With an allowance recorded:
Commercial and industrial		50		50		50		321		—		340		—
Construction		397		422		116		774		11		746		13
Commercial real estate		2,096		2,582		439		3,277		35		3,794		92
Loans to individuals & overdrafts		86		86		70		142		1		123		2
Multi-family residential		—		—		—		—		—		—		—
1 to 4 family residential and HELOCs		1,206		1,267		605		2,043		14		2,614		14
Subtotal:		3,835		4,407		1,280		6,557		61		7,617		121
Totals:
Commercial		20,621		23,989		605		16,855		157		15,272		354
Consumer		251		300		70		311		2		288		3
Residential		4,558		5,806		605		4,204		44		4,597		63
Grand Total:	$	25,430	$	30,095	$	1,280	$	21,370	$	203	$	20,157	$	420

Impaired loans at September 30, 2011 were approximately $25.4 million and were comprised of $17.8 million in non-accrual loans and $7.6 million in loans still in accruing status. Approximately, $3.8 million of the $25.4 million in impaired loans at September 30, 2011 had specific allowances provided while the remaining $21.6 million had no specific allowances recorded. Of the $21.6 million with no allowance recorded, $9.6 million of those loans have had partial chargeoffs recorded.

21

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - LOANS (continued)

Impaired Loans (continued)

			Contractual				December 31, 2010 Year to Date
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized  on Impaired Loans
	(In thousands)
With no related allowance recorded:
Commercial and industrial	$	—	$	88	$	—	$	297	$	—
Construction		562		570		—		1,143		11
Commercial real estate		3,557		4,830		—		3,375		149
Loans to individuals & overdrafts		152		204		—		113		—
1 to 4 family residential and HELOCs		1,449		2,062		—		1,519		—
Subtotal:		5,720		7,754		—		6,447		160
With an allowance recorded:
Commercial and industrial		396		429		132		567		—
Construction		662		1,048		159		529		—
Commercial real estate		5,346		5,746		1,317		4,068		32
Loans to individuals & overdrafts		67		67		13		96		—
1 to 4 family residential and HELOCs		4,324		4,779		1,697		3,056		12
Subtotal:		10,795		12,069		3,318		8,316		44
Totals:
Commercial		10,523		12,711		1,608		9,979		192
Consumer		219		271		13		209		—
Residential		5,773		6,841		1,697		4,575		12
Grand Total:	$	16,515	$	19,823	$	3,318	$	14,763	$	204

Impaired loans at December 31, 2010 were approximately $16.5 million and were comprised of $16.0 million in non-accrual loans and $0.5 million in loans still in accruing status. Approximately $10.8 million of the $16.5 million in impaired loans at December 31, 2010 had specific allowances provided while the remaining $5.7 million had no allowances recorded.

Loans are placed on non-accrual basis when it has been determined that all contractual principal and interest will not be received. Any payments received on these loans are applied to principal first and then to interest only after all principal has been collected. In the case of an impaired loan that is still on accrual basis, payments are applied to both principal and interest.

22

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - LOANS (continued)

Troubled Debt Restructured

The following table presents loans that were modified as troubled debt restructurings (“TDRs”) within the previous 12 months for which there was a payment default together with a breakdown of the types of concessions made by loan class during the three and nine months ended September 30, 2011:

	Three months ended September 30, 2011						Nine months ended September 30, 2011
	Number of loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
					(Dollars in thousands)
Below market interest rate:		—	$	—	$	—		—	$	—	$	—
Commercial and Industrial		—		—		—		—		—		—
Construction		—		—		—		—		—		—
Commercial real estate		—		—		—		—		—		—
Loans to individuals and overdrafts		—		—		—		—		—		—
1 to 4 family residential and HELOCs		—		—		—		—		—		—
Total		—		—		—		—		—		—
Extended payment terms:
Commercial and Industrial		—		—		—
Construction		—		—		—		1		1,170		1,170
Commercial real estate		—		—		—		1		1,486		1,472
Loans to individuals and overdrafts		—		—		—		—		—		—
1 to 4 family residential and HELOCs		—		—		—		—		—		—
Total		—		—		—		2	$	2,656	$	2,642
Forgiveness of principal:
Commercial and Industrial		—		—		—		—		—		—
Construction		—		—		—		—		—		—
Commercial real estate		—		—		—		—		—		—
Loans to individuals and overdrafts		—		—		—		—		—		—
1 to 4 family residential and HELOCs		—		—		—		—		—		—
Total		—		—		—		—		—		—
Total		—	$	—		—		2	$	2,656	$	2,642

23

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - LOANS (continued)

Troubled Debt Restructured (continued)

The following table presents loans that were modified as TDRs within the previous 12 months with a breakdown of the types of concessions made by loan class during the three and nine months ended September 30, 2011:

	Three months ended September 30, 2011				Nine months ended September 30, 2011
	Number of loans		Recorded investment		Number of loans		Recorded investment
			(Dollars in thousands)
Below market interest rate:
Commercial and Industrial		—	$	—		—	$	—
Construction		—		—		—		—
Commercial real estate		—		—		—		—
Loans to individuals and overdrafts		—		—		—		—
1 to 4 family residential and HELOCs		—		—		—		—
Total		—		—		—		—
Extended payment terms:
Commercial and Industrial		3		682		3		682
Construction		2		2,056		3		3,226
Commercial real estate		2		2,052		8		5,672
Loans to individuals and overdrafts		—		—		—		—
1 to 4 family residential and HELOCs		2		163		3		225
Total		9		4,953		17		9,805
Forgiveness of principal:
Commercial and Industrial		—		—		—		—
Construction		—		—		—		—
Commercial real estate		1		635		1		635
Loans to individuals and overdrafts		—		—		—		—
1 to 4 family residential and HELOCs		—		—		—		—
Total		1		635		1		635
Total		10	$	5,588		18	$	10,440

The following table presents the successes and failures of the types of modifications within the previous 12 months as of September 30, 2011:

	Paid in full				Paying as restructured				Converted to non-accrual				Foreclosure/Default
	Number of loans		Recorded Investment		Number of loans		Recorded Investment		Number of loans		Recorded Investment		Number of loans		Recorded Investment
							(Dollars in thousands)
Below market interest rate		—	$	—		—	$	—		—	$	—		—	$	—
Extended payment terms		—		—		5		2,052		10		5,111		2		2,642
Forgiveness of principal		—		—		1		635		—		—		—		—
Total		—	$	—		6	$	2,687		10	$	5,111		2	$	2,642

24

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - LOANS (continued)

Troubled Debt Restructured (continued)

At September 30, 2011, the Company had sixteen loans with a balance of $8.4 million that were considered to be troubled debt restructured. Of those TDRs, four loans with a balance totaling $2.3 million were still accruing as of September 30, 2011 with one of these loans with a balance of $752,000 in delinquent status. The remaining twelve TDRs with a balance totaling $6.1 million as of September 30, 2011 were in nonaccrual status which included two TDRs listed as performing as restructured but included with nonaccrual TDRs as a result of insufficient time to evaluate performance. Specific reserves in the allowance for loan losses totaling $195,000 were provided for nonaccruing and delinquent TDRs. In addition, two TDRs were placed in foreclosure or defaulted totaling $2.6 million as of September 30, 2011. These loans were comprised of a commercial real estate loan totaling $1.4 million and a construction loan totaling $1.2 million.

Credit Quality Indicators

As part of the on-going monitoring of the credit quality of the loan portfolio, management utilizes a risk grading matrix to assign a risk grade to each of the Company’s loans. Commercial loans are graded on a scale of 1 to 9. A description of the general characteristics of the 9 risk grades is as follows:

• Risk Grade 1 (Superior) - Credits in this category are virtually risk-free and are well-collateralized by cash-equivalent instruments. The repayment program is well-defined and achievable. Repayment sources are numerous. No material documentation deficiencies or exceptions exist.

• Risk Grade 2 (Very Good) - This grade is reserved for loans secured by readily marketable collateral, or loans within guidelines to borrowers with liquid financial statements. A liquid financial statement is a financial statement with substantial liquid assets relative to debts. These loans have excellent sources of repayment, with no significant identifiable risk of collection, and conform in all respects to Bank policy, guidelines, underwriting standards, and Federal and State regulations (no exceptions of any kind).

• Risk Grade 3 (Good) - This grade is reserved for the Bank’s top quality loans. These loans have excellent sources of repayment, with no significant identifiable risk of collection. Generally, loans assigned this risk grade will demonstrate the following characteristics:

• Conformity in all respects with Bank policy, guidelines, underwriting standards, and Federal and State regulations (no exceptions of any kind).

• Documented historical cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources.

• Adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor.

25

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - LOANS (continued)

Credit Quality Indicators (continued)

• Risk Grade 4 (Acceptable) - This grade is given to acceptable loans. These loans have adequate sources of repayment, with little identifiable risk of collection. Loans assigned this risk grade will demonstrate the following characteristics:

• General conformity to the Bank’s policy requirements, product guidelines and underwriting standards, with limited exceptions. Any exceptions that are identified during the underwriting and approval process have been adequately mitigated by other factors.

• Documented historical cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources.

• Adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor

• Risk Grade 5 (Acceptable With Care) - This grade is given to acceptable loans that show signs of weakness in either adequate sources of repayment or collateral, but have demonstrated mitigating factors that minimize the risk of delinquency or loss. Loans assigned this grade may demonstrate some or all of the following characteristics:

• Additional exceptions to the Bank’s policy requirements, product guidelines or underwriting standards that present a higher degree of risk to the Bank. Although the combination and/or severity of identified exceptions is greater, all exceptions have been properly mitigated by other factors.

• Unproved, insufficient or marginal primary sources of repayment that appear sufficient to service the debt at this time. Repayment weaknesses may be due to minor operational issues, financial trends, or reliance on projected (not historic) performance.

• Marginal or unproven secondary sources to liquidate the debt, including combinations of liquidation of collateral and liquidation value to the net worth of the borrower or guarantor.

26

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - LOANS (continued)

Credit Quality Indicators (continued)

• Risk Grade 6 (Watch List or Special Mention) - Loans in this category can have the following characteristics:

• Loans with underwriting guideline tolerances and/or exceptions and with no mitigating factors.

• Extending loans that are currently performing satisfactorily but with potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Bank’s position at some future date. Potential weaknesses are the result of deviations from prudent lending practices.

• Loans where adverse economic conditions that develop subsequent to the loan origination do not jeopardize liquidation of the debt but do substantially increase the level of risk may also warrant this rating.

• Risk Grade 7 (Substandard) - A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Loans consistently not meeting the repayment schedule should be downgraded to substandard. Loans in this category are characterized by deterioration in quality exhibited by any number of well-defined weaknesses requiring corrective action.

• Risk Grade 8 (Doubtful) - Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. However, these loans are not yet rated as loss because certain events may occur which would salvage the debt.

27

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - LOANS (continued)

Credit Quality Indicators (continued)

• Risk Grade 9 (Loss) - Loans classified Loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be affected in the future.

Consumer loans are graded on a scale of 1 to 9. A description of the general characteristics of the 9 risk grades is as follows:

• Risk Grades 1 - 5 (Pass) - The loans in this category range from loans secured by cash with no risk of principal deterioration (Risk Grade 1) to loans that show signs of weakness in either adequate sources of repayment or collateral but have demonstrated mitigating factors that minimize the risk of delinquency or loss (Risk Grade 5).

• Risk Grade 6 (Watch List or Special Mention) - Watch list or Special Mention loans include the following characteristics:

• Loans within guideline tolerances or with exceptions of any kind that have not been mitigated by other economic or credit factors.

• Extending loans that are currently performing satisfactorily but with potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Bank’s position at some future date. Potential weaknesses are the result of deviations from prudent lending practices.

• Loans where adverse economic conditions that develop subsequent to the loan origination do not jeopardize liquidation of the debt but do substantially increase the level of risk may also warrant this rating.

• Risk Grade 7 (Substandard) - A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

• Risk Grade 8 (Doubtful) - Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. However, these loans are not yet rated as loss because certain events may occur which would salvage the debt

• Risk Grade 9 (Loss) - Loans classified Loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be affected in the future.

28

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - LOANS (continued)

The following tables present information on risk ratings of the commercial and consumer loan portfolios, segregated by loan class as of September 30, 2011 and December 31, 2010, respectively:

September 30, 2011
Commercial Credit Exposure By Internally Assigned Grade	Commercial and industrial		Construction		Commercial real estate		Multi-family residential
(In thousands)
Superior	$	665	$	61	$	—	$	—
Very good		160		7		434		—
Good		5,556		2,638		18,013		1,080
Acceptable		9,421		7,303		70,853		12,996
Acceptable with care		16,880		55,421		61,372		10,459
Special mention		3,485		3,722		28,916		—
Substandard		524		3,698		21,093		1,543
Doubtful		—		8		—		—
Loss		—		—		—		—
	$	36,691	$	72,858	$	200,681	$	26,078

Consumer Credit Exposure By Internally Assigned Grade	1 to 4 Family residential and HELOCs
Pass	$	81,827
Special mention		5,201
Substandard		8,416
	$	95,444

Consumer Credit Exposure Based On Payment Activity	Loans to individuals & overdrafts
Performing	$	7,689
Non performing		324
	$	8,013

29

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - LOANS (continued)

December 31, 2010
Commercial Credit Exposure By Internally Assigned Grade	Commercial and industrial		Construction		Commercial real estate		Multi-family residential
(In thousands)
Superior	$	1,298	$	67	$	—	$	—
Very good		177		130		1,605		—
Good		7,744		5,159		20,444		2,959
Acceptable		17,707		15,467		67,322		13,432
Acceptable with care		18,232		58,056		71,854		9,750
Special mention		2,505		1,506		20,139		2,377
Substandard		1,765		4,165		11,756		1,570
Doubtful		9		—		382		—
Loss		—		—		—		—
	$	49,437	$	84,550	$	193,502	$	30,088

Consumer Credit Exposure By Internally Assigned Grade	1 to 4 Family residential and HELOCs
Pass	$	86,262
Special mention		6,389
Substandard		7,672
	$	100,323

Consumer Credit Exposure Based On Payment Activity	Loans to individuals & overdrafts
Performing	$	12,581
Non performing		386
	$	12,967

Nonperforming assets at September 30, 2011 and December 31, 2010 consist of the following:

	September 30, 2011		December 31, 2010
	(In thousands)
Non-accrual loans	$	17,762	$	10,562
Restructured loans		2,354		1,688
Total non-performing loans		20,116		12,250
Foreclosed real estate		3,230		3,655
Total non-performing assets	$	23,346	$	15,905

30

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - LOANS (continued)

Allowance for Loan Losses

The allowance for loan losses is a reserve established through provisions for loan losses charged to income and represents management’s best estimate of probable loans losses that have been incurred within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated losses and risk inherent in the loan portfolio. The Company’s allowance for loan loss methodology is based on historical loss experience by type of credit and internal risk grade, specific homogeneous risk pools and specific loss allocations, with adjustments for current events and conditions. The Company’s process for determining the appropriate level of reserves is designed to account for changes in credit quality as they occur The provision for loan losses reflect loan quality trends, including the levels of and trends related to past due loans and economic conditions at the local and national levels. It also considers the quality and risk characteristics of the Company’s loan origination and servicing policies and practices.

Individual reserves are calculated according to ASC Section 310-10-35 against loans evaluated individually and deemed to most likely be impaired. All loans in non-accrual status and all substandard loans that are deemed to be collateral dependent are assessed for impairment.

Loans are deemed uncollectible at the discretion of the Chief Credit Officer, based on a variety of credit, collateral, documentation and other issues. In the case of uncollectible receivables, the collateral is considered unsecured and therefore fully charged off.

The following tables present a roll forward of the Company’s allowance for loan losses by loan segment for the three and nine month periods ended September 30, 2011 and the twelve month period ended December 31, 2010, respectively:

				Three months ended September 30, 2011
Allowance for loan losses	Commercial and industrial			Construction			Commercial real estate			1 to 4 Family residential & HELOCs			Loans to individuals & overdrafts			Multi-family residential			Total
							(In thousands)
Balance, beginning of period 6/30/2011	$	1,052		$	1,172		$	4,502		$	3,342		$	136		$	174		$	10,378
Provision for loan losses		(134	)		4			1,068			1,223			55			(22	)		2,194
Other		(5	)		(10	)		(26	)		(13	)		(1	)		(4	)		(59	)
Loans charged-off		(186	)		(83	)		(783	)		(1,192	)		(53	)		—			(2,297	)
Recoveries		19			9			34			42			18			—			122
Balance, end of period 9/30/2011	$	746		$	1,092		$	4,795		$	3,402		$	155		$	148		$	10,338
Ending balance: individually evaluated for impairment	$	50		$	116		$	440		$	604		$	70		$	—		$	1,280
Ending balance: collectively evaluated for impairment	$	696		$	976		$	4,355		$	2,798		$	85		$	148		$	9,058
Loans:
Ending balance	$	36,691		$	72,858		$	200,681		$	95,444		$	8,013		$	26,078		$	439,765
Ending balance: individually evaluated for impairment	$	381		$	4,140		$	14,557		$	4,558		$	251		$	1,543		$	25,430
Ending balance: collectively evaluated for impairment	$	36,310		$	68,718		$	186,124		$	90,886		$	7,762		$	24,535		$	414,335

31

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - LOANS (continued)

Allowance for Loan Losses (continued)

				Nine months ended September 30, 2011
Allowance for loan losses	Commercial and industrial			Construction			Commercial real estate			1 to 4 Family residential & HELOCs			Loans to individuals & overdrafts			Multi-family residential			Total
							(In thousands)
Balance, beginning of period 01/01/2011	$	1,052		$	349		$	3,111		$	3,333		$	1,530		$	640		$	10,015
Provision for loan losses		26			1,718			4,201			1,750			(1,307	)		(488	)		5,900
Other		(5	)		(10	)		(79	)		(13	)		(1	)		(4	)		(112	)
Loans charged-off		(4,066	)		(974	)		(2,482	)		(1,926	)		(140	)		—			(9,588	)
Recoveries		3,739			9			44			258			73			—			4,123
Balance, end of period 9/30/2011	$	746		$	1,092		$	4,795		$	3,402		$	155		$	148		$	10,338
Ending balance: individually evaluated for impairment	$	50		$	116		$	440		$	604		$	70		$	—		$	1,280
Ending balance: collectively evaluated for impairment	$	696		$	976		$	4,355		$	2,798		$	85		$	148		$	9,058
Loans:
Ending balance	$	36,691		$	72,858		$	200,681		$	95,444		$	8,013		$	26,078		$	439,765
Ending balance: individually evaluated for impairment	$	381		$	4,140		$	14,557		$	4,558		$	251		$	1,543		$	25,430
Ending balance: collectively evaluated for impairment	$	36,310		$	68,718		$	186,124		$	90,886		$	7,762		$	24,535		$	414,335

				Twelve months ended December 31, 2010
Allowance for loan losses	Commercial and industrial			Construction			Commercial real estate			1 to 4 Family residential & HELOCs			Loans to individuals & overdrafts			Multi-family residential		Total
							(In thousands)
Balance, beginning of period 01/01/2009	$	1,699		$	629		$	4,281		$	3,043		$	507		$	200	$	10,359
Provision for loan losses		10,199			47			618			2,981			1,349			440		15,634
Other		—			—			—			—			—			—		—
Loans charged-off		(11,967	)		(464	)		(2,811	)		(2,750	)		(421	)		—		(18,413	)
Recoveries		1,121			137			1,023			59			95			—		2,435
Balance, end of period 12/31/2010	$	1,052		$	349		$	3,111		$	3,333		$	1,530		$	640	$	10,015
Ending balance: individually evaluated for impairment	$	132		$	159		$	1,317		$	1,697		$	13		$	—	$	3,318
Ending balance: collectively evaluated for impairment	$	920		$	190		$	1,794		$	1,636		$	1,517		$	640	$	6,697
Loans:
Ending balance	$	49,437		$	84,550		$	193,502		$	100,323		$	12,967		$	30,088	$	470,867
Ending balance: individually evaluated for impairment	$	396		$	1,224		$	8,903		$	5,773		$	219		$	—	$	16,515
Ending balance: collectively evaluated for impairment	$	49,041		$	83,326		$	184,599		$	94,550		$	12,748		$	30,088	$	454,352

32

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE H - FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents the carrying values and estimated fair values of the Company’s financial instruments at September 30, 2011 and December 31, 2010:

	2011				2010
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
			(In thousands)
Financial assets:
Cash and due from banks	$	15,857	$	15,857	$	7,071	$	7,071
Interest-earning deposits in other banks		55,637		55,637		21,648		21,648
Federal funds sold		3,028		3,028		7,183		7,183
Investment securities available for sale		74,735		74,735		89,899		89,899
Loans, net		429,072		449,506		460,469		458,167
Accrued interest receivable		2,212		2,212		2,488		2,488
Stock in the FHLB		1,325		1,325		1,448		1,448
Other non marketable securities		1,132		1,132		1,082		1,082
Bank owned life insurance		7,917		7,917		7,727		7,727
Financial liabilities:
Deposits	$	527,172	$	534,667	$	534,599	$	541,394
Short term debt		23,850		23,850		23,666		23,666
Long term debt		14,372		10,453		16,372		12,453
Accrued interest payable		321		321		395		395

Cash and Due from Banks, Interest-Earning Deposits in Other Banks and Federal Funds Sold

The carrying amounts for cash and due from banks, interest-earning deposits in other banks and federal funds sold approximate fair value because of the short maturities of those instruments.

Investment Securities Available for Sale

Fair value for investment securities available for sale equals quoted market price if such information is available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Loans

For certain homogenous categories of loans, such as residential mortgages, fair value is estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics. The fair value of other types of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. However, the values likely do not represent exit prices due to distressed market conditions. No liquidity discount is applied at September 30, 2011 due to lack of comparable metrics. The liquidity discount for December 31, 2010 was 0.5% based on local economic conditions impacting employment, volatile energy costs, and extended periods of time to sell or liquidate assets.

33

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE H - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

Stock in Federal Home Loan Bank of Atlanta and Other Non Marketable Securities

The fair value for FHLB stock approximates carrying value, based on the redemption provisions of the Federal Home Loan Bank. The fair value of stock in other non marketable securities is assumed to approximate carrying value.

Bank Owned Life Insurance

The carrying value of life insurance approximates fair value because this investment is carried at cash surrender value, as determined by the insurer.

Deposits

The fair value of demand deposits is the amount payable on demand at the reporting date. The fair values of time deposits are estimated using the rates currently offered for instruments of similar remaining maturities.

Short Term Debt

The fair values of short term debt (sweep accounts that re-price daily and short term FHLB advances) are based on discounting expected cash flows at the interest rate for debt with the same or similar remaining maturities and collateral requirements.

Long Term Debt

The fair values of long term debt are based on discounting expected cash flows at the interest rate for debt with the same or similar remaining maturities and collateral requirements.

Accrued Interest Receivable and Accrued Interest Payable

The carrying amounts of accrued interest receivable and payable approximate fair value, because of the short maturities of these instruments.

Financial Instruments with Off-Balance Sheet Risk

With regard to financial instruments with off-balance sheet risk, it is not practicable to estimate the fair value of future financing commitments.

34

NEW CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE I - AUTHORIZED SHARES OF COMMON STOCK AND PREFERRED STOCK OF THE COMPANY

The Company’s Board of Directors adopted amendments on June 9, 2011 increasing the authorized shares of common stock from 10,000,000 to 25,000,000 and authorized up to 5,000,000 shares of preferred stock. Shareholders of the Company voted in favor of these amendments at the Annual Meeting of Shareholders on August 23, 2011. These shares may be issued in one or more series with such preferences, limitations, and relative rights per share as the Board of Directors shall designate.

35

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis is intended to assist readers in the understanding and evaluation of the financial condition and results of operations of New Century Bancorp, Inc. (the “Company”). This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 relating to, without limitation, our future economic performance, plans and objectives for future operations, and projections of revenues and other financial items that are based on our beliefs, as well as assumptions made by and information currently available to us. The words “may,” “will,” “anticipate,” “should,” “would,” “believe,” “contemplate,” “could,” “project,” “predict,” “expect,” “estimate,” “continue,” and “intend,” as well as other similar words and expressions of the future, are intended to identify forward-looking statements. Our actual results, performance or achievements may differ materially from the results expressed or implied by our forward-looking statements. Factors that could influence actual results, performance or achievements include changes in national, regional and local market conditions, legislative and regulatory conditions, and the interest rate environment.

Overview

The Company is a commercial bank holding company and has one banking subsidiary, New Century Bank (referred to as the “Bank”) and one unconsolidated subsidiary, New Century Statutory Trust I, which issued trust preferred securities in 2004 to provide additional capital for general corporate purposes. The Company’s only business activity is the ownership of the Bank and New Century Statutory Trust I. This discussion focuses primarily on the financial condition and operating results of the Bank.

The Bank’s lending activities are oriented to the consumer/retail customer as well as to the small-to medium-sized businesses located in Harnett, Hoke, Cumberland, Johnston, Pitt, Robeson, Sampson, and Wayne counties in North Carolina. The Bank offers the standard complement of commercial, consumer, and mortgage lending products, as well as the ability to structure products to fit specialized needs. The deposit services offered by the Bank include small business and personal checking accounts, savings accounts and certificates of deposit. Deposit services are not offered in Pitt County. The Bank concentrates on customer relationships in building its customer deposit base and competes aggressively in the area of transaction accounts.

Comparison of Financial Condition at

September 30, 2011 and December 31, 2010

During the first nine months of 2011, total assets decreased by $10.3 million to $616.6 million as of September 30, 2011. Earning assets at September 30, 2011 totaled $565.0 million and consisted of $429.1 million in net loans, $74.7 million in investment securities, $58.7 million in overnight investments and interest-bearing deposits in other banks and $2.5 million in non-marketable equity securities. Total deposits and shareholders’ equity at the end of the third quarter of 2011 were $527.2 million and $48.9 million, respectively.

Since the end of 2010, gross loans have decreased by $31.1 million to $439.4 million as of September 30, 2011 due to continued soft loan demand and efforts to reduce concentration levels in construction and commercial real estate loans. Gross loans consisted of $36.7 million in commercial and industrial loans, $200.7 million in commercial real estate loans, $26.1 million in multi-family residential loans, $8.0 million in consumer loans, $95.4 million in residential real estate, and $72.8 million in construction loans. The deferred loan fees and costs on these loans was ($355,000).

36

At September 30, 2011, the Company held $3.0 million in federal funds sold, a decrease of $4.2 million from December 31, 2010. Interest-earning deposits in other banks were $55.6 million at September 30, 2011, a $34.0 million increase from December 31, 2010. The Company’s investment securities at September 30, 2011 were $74.7 million, a decrease of $15.2 million from December 31, 2010. The investment portfolio as of September 30, 2011 consisted of $29.2 million in government agency debt securities, $37.6 million in mortgage-backed securities and $5.8 million in municipal securities. The unrealized gain on these securities was $2.1 million.

At September 30, 2011, the Company also held an investment of $1.3 million in the form of Federal Home Loan Bank (“FHLB”) stock and $1.1 million in other non marketable securities, each of which was approximately the same at December 31, 2010. The FHLB redeemed $123,000 in stock in 2011.

At September 30, 2011, non-earning assets were $51.7 million, which reflects an increase of $6.5 million from the $45.2 million as of December 31, 2010. Non-earning assets as of September 30, 2011 included $15.9 million in cash and due from banks, bank premises and equipment of $12.5 million, core deposit intangible of $583,000, accrued interest receivable of $2.2 million, foreclosed real estate of $3.2 million, and other assets which consisted of $7.9 million in bank owned life insurance (“BOLI”), $4.7 million in deferred tax assets, $2.0 million in taxes receivable, $2.1 million in prepaid expenses, and $0.9 million in all other assets. Since the income on BOLI is included in non-interest income, this asset is not included in the Company’s calculation of earning assets.

Total deposits at September 30, 2011 were $527.2 million and consisted of $76.1 million in non-interest-bearing demand deposits, $95.8 million in money market and NOW accounts, $25.5 million in savings accounts, and $329.8 million in time deposits. Total deposits decreased by $7.4 million from $534.6 million as of December 31, 2010. The Bank had $2.6 million in brokered demand deposits and no brokered time deposits as of September 30, 2011.

As of September 30, 2011, the Company had $23.9 million in short-term debt and $14.4 million in long-term debt. Short-term debt consisted of $21.9 million of repurchase agreements with local customers and $2.0 million of FHLB advances. Long-term debt consisted of $12.4 million of junior subordinated debentures that were issued in September 2004 and $2.0 million in FHLB advances.

Total shareholders’ equity at September 30, 2011 was $48.9 million, a decrease of $0.8 million from $49.7 million as of December 31, 2010. Other comprehensive income relating to available for sale securities increased $124,000 for the nine months ended September 30, 2011. Other changes in shareholders’ equity included increases of $60,000 in stock-based compensation, and a net loss of $762,000 for the nine months ending September 30, 2011, and the addition of $165,000 in common stock received as collateral on loan default.

Past Due Loans, Nonperforming Assets, and Asset Quality

At September 30, 2011, the Company had $4.1 million in loans that were past due with $3.7 million being 30-89 days past due and $400,000 being 90 or more days past due and still accruing. This represented 0.93% of gross loans outstanding on that date. This is an increase from December 31, 2010 when there were $2.1 million in loans that were 30-89 days past due and no loans that were 90 days or more past due and still accruing. This represented 0.46% of gross loans outstanding. The increase in past dues is due primarily to the continued weak economic conditions. Non-accrual loans increased $7.2 million during the first nine months of 2011 to $17.8 million as of September 30, 2011.

37

The percentage of non-performing loans (non-accrual loans and restructured loans) to total loans increased 198 basis points from 2.60% at December 31, 2010 to 4.58% at September 30, 2011.

The Company had four loans totaling $2.3 million that were considered troubled debt restructured loans (“TDRs”) that were not included in nonaccrual loans at September 30, 2011.

The table below sets forth, for the periods indicated, information about the Company’s non-accrual loans, loans past due 90 days or more and still accruing interest, total non-performing loans (non-accrual loans plus restructured loans), and total non-performing assets.

	For Periods Ended
	September 30, 2011			December 31, 2010
	(Dollars in thousands)
Non-accrual loans	$	17,762		$	10,562
Restructured loans		2,354			1,688
Total non-performing loans		20,116			12,250
Foreclosed real estate		3,230			3,655
Repossessed assets		—			—
Total non-performing assets	$	23,346		$	15,905
Accruing loans past due 90 days or more	$	385		$	—
Allowance for loan losses	$	10,338		$	10,015
Non-performing loans to period end loans		4.58	%		2.60	%
Non-performing loans and accruing loans past due 90 days or more to period end loans		4.67	%		2.60	%
Allowance for loans losses to period end loans		2.35	%		2.13	%
Allowance for loan losses to non-performing loans		51.39	%		81.76	%
Allowance for loan losses to non-performing assets		44.28	%		62.97	%
Allowance for loan losses to non-performing assets and accruing loans past due 90 days or more		43.56	%		62.97	%
Non-performing assets to total assets		3.79	%		2.54	%
Non-performing assets and accruing loans past due 90 days or more to total assets		3.85	%		2.54	%

The total non-performing assets (non-accrual loans, restructured loans, and foreclosed real estate), at September 30, 2011 and December 31, 2010 were $23.3 million and $15.9 million. The allowance for loan losses at September 30, 2011 represented 44.28% of non-performing assets compared to 62.97% at December 31, 2010.

Total impaired loans at September 30, 2011 were $25.4 million, this includes $17.8 million in loans that were classified as impaired because they were in non-accrual and $7.6 million in loans that were determined to be impaired for other reasons. Of these loans, $3.8 million required a specific reserve of $1.3 million at September 30, 2011. Total impaired loans at December 31, 2010 were $16.5 million. This includes $10.6 million in loans that were considered to be impaired due to being in non-accrual status and $5.9 million in loans that were deemed to be impaired for other reasons. Of these loans, $10.8 required a specific reserve of $3.3 million at December 31, 2010.

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The allowance for loan losses was $10.3 million at September 30, 2011 or 2.35% of gross loans outstanding. This is an increase of 22 basis points from the 2.13% of gross loans at December 31, 2010. The allowance for loan losses at September 30, 2011 represented 40.65% of impaired loans compared to 60.64% at December 31, 2010. This increase in the allowance for the nine months of 2011 resulted from provisions for loan losses of $5.9 million, partially offset by net charge-offs of $5.5 million. It is management’s assessment that the allowance for loan losses as of September 30, 2011 is appropriate in light of the risk inherent within the Company’s loan portfolio. No assurances, however, can be made that further adjustments to the allowance for loan losses may not be deemed necessary.

Other Lending Risk Factors

Besides monitoring nonperforming loans and past due loans, Management also monitors trends in the loan portfolio that may indicate more than normal risk. A discussion of other risk factors follows. Some loans or groups of loans may contain one or more of these individual loan risk factors. Therefore, an accumulation of the amounts or percentages of the individual loan risk factors may not necessarily be an indication of the cumulative risk in the total loan portfolio.

Regulatory Loan to Value

The Company monitors its exposure to loans that exceed the guidelines established by regulators for loan to value (“LTV”) ratios.

The Company had $11.9 million at September 30, 2011 and $6.9 million at December 31, 2010 in non 1-4 family residential loans that exceeded the regulatory LTV limits and $15.9 million at September 30, 2011 and $12.7 million at December 31, 2010 of 1-4 family residential loans that exceeded the regulatory LTV limits. The total amount of these loans represented 47.5% and 30.7% of total risk based capital as of September 30, 2011 and December 31, 2010, which is less than the 100% maximum allowed. These loans may provide more than ordinary risk to the Company if the real estate market continues to weaken in terms of both market activity and collateral valuations.

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Business Sector Concentrations

Loan concentrations in certain business sectors impacted by lower than normal retail sales, higher unemployment, higher vacancy rates, and weakened real estate market values may also pose additional risk to the Company’s capital position. The Company has established an internal commercial real estate guideline of 40% of Risk-Based Capital for any single product line.

The tables below set forth, for the periods indicated, information about the Company’s business sector concentrations.

	At September 30, 2011 (In thousands)		% of Risk Based Capital
1 to 4 Family Rental	$	24,061		41	%
Office Building	$	27,742		47	%
Real Estate Construction Speculative and Presold	$	24,544		42	%
Real Estate Multifamily Residential	$	23,740		41	%

At September 30, 2011 the Company had four product type groups which exceeded this guideline; 1-4 Family Rental, Office Buildings, Real Estate Construction Speculative and Presold and Real Estate Multifamily Residential. The 1-4 Family Rental group represented 41% of Risk-Based Capital or $24.1 million, Office Buildings were 47% of Risk-Based Capital or $27.7 million, Real Estate Construction Speculative and Presold were 42% of Risk-Based Capital or $24.5 million and Real Estate Multifamily Residential were 41% of Risk-Based Capital or $23.7 million. All other commercial real estate groups were under the 40% threshold.

	At December  31, 2010 (In thousands)		% of Risk Based Capital
1 to 4 Family Rental	$	26,992		42	%
Office Building	$	30,265		47	%
Real Estate Construction Speculative and Presold	$	24,546		38	%
Real Estate Multifamily Residential	$	23,814		37	%

At December 31, 2010 the Company had two product type groups which exceeded this guideline; 1-4 Family Rental and Office Buildings. The 1-4 Family Rental group represented 42% of Risk-Based Capital or $27.0 million and Office Buildings were 47% of Risk-Based Capital or $30.3 million. All other commercial real estate groups were under the 40% threshold.

The Company’s concentration in the 1–4 Family Rental group decreased from 42% of Risk-Based Capital at December 31, 2010 to 41% of Risk-Based Capital at September 30, 2011.

The Company’s concentration in the Office Building group remained approximately the same at 47% of Risk-Based Capital at September 30, 2011 compared to December 31, 2010.

The Company’s concentration in the Real Estate Construction Speculative and Presold group increased from 38% of Risk-Based Capital at December 31, 2010 to 42% of Risk-Based Capital at September 30, 2011.

The Company’s concentration in the Real Estate Multifamily Residential group increased from 37% of Risk-Based Capital at December 31, 2010 to 41% of Risk-Based Capital at September 30, 2011.

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Acquisition, Development, and Construction Loans (“ADC”)

The table below sets forth construction loans the Company originates for the purpose of acquisition, development, and construction of both residential and commercial properties.

ADC Loans

As of September 30, 2011

(Dollars in thousands)

	Construction			Land and Land Development			Total
Total ADC loans	$	51,609		$	21,249		$	72,858
Average Loan Size	$	159		$	299
Percentage of total loans		11.77	%		4.85	%		16.62	%
Nonaccrual loans	$	343		$	1,208		$	1,551

At September 30, 2011 the ADC portfolio consisted of $51.6 million in construction loans and $21.2 million in land and land development loans. The average loan size is less than $0.2 million for construction loans and $0.3 million for land and land development loans. Total ADC loans represent 16.62% or $72.9 million of the total loan portfolio. Nonaccrual loans in the ADC category total $1.6 million or 2.13% of ADC loans. Management closely monitors the ADC portfolio as to collateral value, funding based on project completeness, and the performance of similar loans in the Company’s market area.

ADC Loans

As of December 31, 2010

(Dollars in thousands)

	Construction			Land and Land Development			Total
Total ADC loans	$	60,043		$	24,507		$	84,550
Average Loan Size	$	170		$	345
Percentage of total loans		12.76	%		5.21	%		17.97	%
Nonaccrual loans	$	510		$	428		$	938

At December 31, 2010 the ADC portfolio consisted of $60.0 million in construction loans and $24.5 million in land and land development loans. The average loan size is less than $0.2 million for construction loans and $0.4 million for land and land development loans. At December 31, 2010, total ADC loans represented 17.97% or $84.6 million of the total loan portfolio. $0.9 million of the ADC portfolio was in non-accrual status as of December 31, 2010. This represented 1.11% of all ADC loans at December 31, 2010.

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Geographic Concentrations

Certain risks exist arising from the geographic location of specific types of higher than normal risk real estate loans. Below is a table showing geographic concentrations for ADC and HELOC loans at September 30, 2011.

	ADC Loans		Percent			HELOC		Percent
	(Dollars in thousands)
Harnett County	$	7,252		9.9	%	$	8,083		20.8	%
Cumberland County		20,098		27.6	%		6,173		15.9	%
All other locations		45,508		62.5	%		24,573		63.3	%
Total	$	72,858		100.0	%	$	38,829		100.0	%

Below is a table showing geographic concentrations for ADC and HELOC loans at December 31, 2010.

	ADC Loans		Percent			HELOC		Percent
	(Dollars in thousands)
Harnett County	$	6,029		7.1	%	$	7,572		19.0	%
Cumberland County		26,113		30.9	%		5,142		12.9	%
All other locations		52,408		62.0	%		27,224		68.1	%
Total	$	84,550		100.0	%	$	39,938		100.0	%

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Interest Only Payments

Another risk factor that exists in the total loan portfolio pertains to loans with interest only payment terms. At September 30, 2011, the Company had $132.2 million in loans that had terms permitting interest only payments. This represented 30.1% of the total loan portfolio. At December 31, 2010, the Company had $140.6 million in loans that had terms permitting interest only payments. This represented 29.9% of the total loan portfolio. Recognizing the risk inherent with interest only loans, it is customary and general industry practice that loans in the ADC portfolio require interest only payments during the acquisition, development, and construction phases of such projects.

Large Dollar Concentrations

Concentrations of high dollar loans or large customer relationships may pose additional risk in the total loan portfolio. The Company’s ten largest loans or lines of credit totaled $49.1 million or 11.2% of total loans at September 30, 2011 compared to $52.1 million or 11.1% of total loans at December 31, 2010. The Company’s ten largest customer relationships totaled $73.9 million or 16.8% of total loans at September 30, 2011 compared to $72.1 million or 15.3% of total loans at December 31, 2010. Deterioration or loss in any one or more of these high dollar loan or customer concentrations could have an immediate, significant adverse impact on the Company’s capital position.

Comparison of Results of Operations for the

Three months ended September 30, 2011 and 2010

General. During the third quarter of 2011, the Company had a net loss of $22,000 as compared with a net loss of $6.6 million for the same quarter in 2010. Net loss per share for the third quarter of 2011 was $0.00 per share, basic and diluted, compared with net loss per share of $0.96 per share, basic and diluted, for the third quarter of 2010. Third quarter 2011 results were impacted by a higher net loss and write downs of foreclosed real estate of $156,000, compared to $96,000 for the same period in 2010 and a lower provision for loan losses of $2.2 million for the third quarter 2011 compared to $12.5 for the same period in 2010 when the previous reported loan fraud was discovered. The Company also experienced a decrease in net interest margin of 5 basis points to 3.82% for the period ending September 30, 2011 as compared to the same period in 2010.

Net Interest Income. Net interest income decreased by $0.5 million to $5.5 million for the third quarter of 2011. The Company’s total interest income was affected by a reduction in the yield on interest-earning assets combined with a decrease in those assets. Average total interest-earning assets were $574.9 million in the third quarter of 2011 compared with $614.7 million during the same period in 2010 and the yield on those assets decreased 18 basis points from 5.44% to 5.26%. Total interest income reversed on loans transferred to non-accrual status for the three months ended September 30, 2011 and 2010 was $53,000 and $39,000, respectively, or 1 basis point on average interest-earning assets for both periods mentioned.

The Company’s average interest-bearing liabilities decreased by $26.6 million to $495.6 million for the quarter ended September 30, 2011 from $522.2 million for the same period one year earlier and the cost of those funds decreased from 1.85% to 1.67% or 18 basis points. During the third quarter of 2011, the Company’s net interest margin was 3.82% and net interest spread was 3.59%. For the quarter ended September 30, 2010, net interest margin was 3.87% and net interest spread was 3.59%

Provision for Loan Losses. Provisions for loan losses are charged to income to bring the allowance for loan losses to a level deemed appropriate by management. In evaluating the allowance for loan losses, management considers factors that include growth, composition and industry diversification of the portfolio, historical loan loss experience, current delinquency levels, adverse situations that may affect a borrower’s ability to repay, estimated value of any underlying collateral, prevailing economic conditions and other relevant factors. The Company recorded a $2.2 million provision for loan losses in the third quarter of 2011, representing a decrease of $10.3 million from the $12.5 million provision made in the same period of 2010 when the previously reported loan fraud was discovered.

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Non-Interest Income. Non-interest income for the quarter ended September 30, 2011 was $643,000, a decrease of $5,000 from the third quarter of 2010. Service charges on deposit accounts decreased $7,000 to $363,000 for the quarter ended September 30, 2011 as compared to $370,000 for the same period in 2010. Mortgage fee income decreased $26,000 to $47,000 for the quarter ended September 30, 2011 as compared to the same period in 2010. Other non-deposit fees and income increased $28,000 to $233,000 for the quarter ended September 30, 2011 as compared to the same period in 2010.

Non-Interest Expenses. Non-interest expenses decreased by $633,000 to $4.1 million for the quarter ended September 30, 2011, from $4.7 million for the same period in 2010. The following are highlights of the significant differences in non-interest expenses during the third quarter of 2010 versus the third quarter of 2011:

• Personnel expenses decreased $350,000 to $2.0 million in the third quarter of 2011 as compared to the same period of 2010 primarily as the result of a decrease in staff size to 114 at September 30, 2011 as compared to 137 at September 30, 2010.

• FDIC insurance expense was $209,000 for the quarter ended September 30, 2011 compared to $241,000 for the same quarter in 2010.

• Professional fees decreased $242,000 to $329,000 for the quarter ended September 30, 2011 compared to $571,000 for the quarter ended September 30, 2010, primarily as a result of decreased legal expenses relating to the resolution of the previously reported loan fraud that was initially reported in the third quarter of 2010.

• Information systems expenses increased by $27,000 to $383,000 for the quarter ending September 30, 2011 compared to the same period in 2010.

• Net loss on sale and write downs of foreclosed real estate increased by $60,000 to $156,000 for the quarter ending September 30, 2011 compared to the same period for 2010, primarily as a result of obtaining current market appraisals and accelerated liquidation of foreclosed real estate.

Provision for Income Taxes. The Company’s effective tax rate was (87.1%) for the quarter ended September 30, 2011 as a result of permanent tax differences that were in excess of taxable income and (37.4%) for the quarter ended September 30, 2010.

In evaluating whether the Company will realize the full benefit of the net deferred tax asset, management considered both positive and negative evidence, including among other things recent earnings trends and projected earnings, and asset quality, etc. As of September 30, 2011 and December 31 2010, management concluded that the net deferred tax assets were fully realizable. The Company will continue to monitor deferred tax assets closely to evaluate whether the full benefit of the net deferred tax asset will require a valuation allowance. Significant negative trends in credit quality or losses from operations, among other trends, could impact the realization of the deferred tax asset in the future.

Comparison of Results of Operations for the

Nine months ended September 30, 2011 and 2010

General. During the first nine months of 2011, the Company had a net loss of $762,000 as compared with a net loss of $5.1 million for the same period in 2010. Net loss per share for the first nine months of 2011 was $0.11 per share, basic and diluted, compared with net loss per share of $0.74 per share, basic and diluted, for the same periods in 2010. Results for the nine months ended September 30, 2011 were impacted by a higher net loss and write downs of foreclosed real estate of $1.1 million, compared to $122,000 for the same period in 2010 and a lower provision for loan losses of $5.9 million for the nine months ended September 30, 2011 compared to $14.4 million for the same period in 2010 when the

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previously reported loan fraud was discovered. The Company also experienced a decrease in net interest margin of 9 basis points to 3.90% for the nine month period ending September 30, 2011 compared to the same period in 2010.

Net Interest Income. Net interest income decreased by $1.2 million to $16.8 million for the nine month period ended September 30, 2011. The Company’s total interest income was affected by a reduction in the yield on interest-earning assets and a decrease in those assets. Average total interest-earning assets were $580.3 million in the first nine months of 2011 compared with $602.0 million during the same period in 2010 and the yield on those assets decreased 22 basis points from 5.62% to 5.40%. Total interest income reversed on loans transferred to non-accrual status for the nine months ended September 30, 2011 and 2010 was $183,000 and $234,000, respectively, or 3 and 4 basis points on average interest-earning assets for the respective periods mentioned.

The Company’s average interest-bearing liabilities decreased by $10.5 million to $500.3 million for the nine months ended September 30, 2011 from $510.8 million for the same period one year earlier and the cost of those funds decreased from 1.92% to 1.74% or 18 basis points. During the first nine months of 2011, the Company’s net interest margin was 3.90% and net interest spread was 3.66%. For the same period in 2010, net interest margin was 3.99% and net interest spread was 3.70%.

Provision for Loan Losses. Provisions for loan losses are charged to income to bring the allowance for loan losses to a level deemed appropriate by management. In evaluating the allowance for loan losses, management considers factors that include growth, composition and industry diversification of the portfolio, historical loan loss experience, current delinquency levels, adverse situations that may affect a borrower’s ability to repay, estimated value of any underlying collateral, prevailing economic conditions and other relevant factors. The Company recorded a $5.9 million provision for loan losses in the first nine months of 2011, representing a decrease of $8.5 million from the $14.4 million provision made in the same period of 2010 when the previously reported loan fraud was discovered.

Non-Interest Income. Non-interest income for the nine months ended September 30, 2011 was $2.2 million, an increase of $201,000 from the same period in 2010. Service charges on deposit accounts decreased $126,000 to $1.1 million for the nine months ended September 30, 2011 compared to $1.2 million for the same period for 2010. Mortgage fee income decreased $20,000 to $134,000 for the nine months ended September 30, 2011 as compared to the same period in 2010. Other non-deposit fees and income increased $347,000 to $921,000 for the nine months ended September 30, 2011 as compared to the same period in 2010, primarily as a result of $247,000 in consideration received in connection with the resolution of a loan participation transaction that was related to the previously reported loan fraud. The Bank intends to continue to pursue all possible avenues of collection.

Non-Interest Expenses. Non-interest expenses increased by $689,000 to $14.5 million for the nine months ended September 30, 2011, from $13.8 million for the same period in 2010.

The following are highlights of the significant differences in non-interest expenses during the first nine months of 2010 versus the same period 2011:

• Personnel expenses decreased $297,000 to $6.7 million for the nine months ended September 30, 2011 compared to $7.0 million for the same period in 2010 primarily as the result of a decrease in staff size to 114 at September 30, 2011 compared to 137 at September 30, 2010.

• Information systems expenses decreased by $47,000 to $1.2 million for the nine months ended September 30, 2011 as compared to the same period in 2010 primarily as a result of the 2010 costs pertaining to the Company’s core processing system conversion not being a recurring expense.

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• Net loss on sale and write downs of foreclosed real estate increased by $937,000 to $1.1 million for the nine months ended September 30, 2011 compared to the same period for 2010, primarily as a result of obtaining current market appraisals and accelerated liquidation of foreclosed real estate.

Provision for Income Taxes. The Company’s effective tax rate was (48.5%) for the nine months ended September 30, 2011 as a result of permanent tax differences that were in excess of taxable income and (38.5%) for the same period in 2010.

In evaluating whether the Company will realize the full benefit of the net deferred tax asset, management considered both positive and negative evidence, including among other things recent earnings trends and projected earnings, and asset quality, etc. As of September 30, 2011 and December 31, 2010, management concluded that the net deferred tax assets were fully realizable.

The Company will continue to monitor deferred tax assets closely to evaluate whether the full benefit of the net deferred tax asset will require a valuation allowance. Significant negative trends in credit quality or losses from operations, among other trends, could impact the realization of the deferred tax asset in the future.

Liquidity

The Company’s liquidity is a measure of its ability to fund loans, withdrawals and maturities of deposits, and other cash outflows in a cost effective manner. The principal sources of liquidity are deposits, scheduled payments and prepayments of loan principal, maturities of investment securities, access to liquid deposits, and funds provided by operations. While scheduled loan payments and maturing investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Liquid assets (consisting of cash and due from banks, interest-earning deposits with other banks, federal funds sold and investment securities classified as available for sale) comprised 24.21% of total assets at September 30, 2011.

The Company has been a net seller of federal funds since its inception and strives to maintain a position of liquidity sufficient to fund future loan demand and to satisfy fluctuations in deposit levels. Should the need arise the Company would have the capability to sell securities classified as available for sale or to borrow funds as necessary. The Company has established, as of September 30, 2011, new credit lines with other financial institutions to purchase up to $44.0 million in federal funds. Also, as a member of the FHLB of Atlanta, the Company may obtain advances of up to 10% of total assets, subject to available collateral. A floating lien of $26.1 million of qualifying loans is pledged to the FHLB to secure borrowings. At September 30, 2011, the Company had $4.0 million outstanding in FHLB advances. Another source of short-term borrowings is securities sold under agreements to repurchase. At September 30, 2011, total borrowings consisted of securities sold under agreements to repurchase of $21.9 million and junior subordinated debentures of $12.4 million.

Total deposits were $527.2 million at September 30, 2011. Time deposits, which are the only deposit accounts that have stated maturity dates, are generally considered to be rate sensitive. Time deposits represented 62.55% of total deposits at September 30, 2011. Time deposits of $100,000 or more represented 31.52% of the Company’s total deposits at September 30, 2011. At quarter end, the Company had no brokered time deposits and $2.6 million in brokered demand deposits. Management believes most other time deposits are relationship-oriented. While the Bank will need to pay competitive rates to retain these deposits at their maturities, there are other subjective factors that will determine their continued retention. Based upon prior experience, the Company anticipates that a substantial portion of outstanding certificates of deposit will renew upon maturity.

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Management believes that current sources of funds provide adequate liquidity for the Bank’s current cash flow needs. New Century Bancorp maintains minimal cash balances at the parent holding company level. Management believes that the current cash balances plus taxes receivable will provide adequate liquidity for the Company’s current cash flow needs. Chapter 53, Article 7 of the North Carolina General Statutes prohibits banks, including New Century Bank, from declaring and paying dividends at any time during the period that a bank has an accumulated deficit. At September 30, 2011, the Bank has an accumulated deficit of $1.7 million.

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Capital Resources

A significant measure of the strength of a financial institution is its capital base. Federal regulations have classified and defined capital into the following components: (1) Tier 1 capital, which includes common shareholders’ equity and qualifying preferred equity, and (2) Tier 2 capital, which includes a portion of the allowance for loan losses, certain qualifying long-term debt and preferred stock which does not qualify as Tier 1 capital. Minimum capital levels are regulated by risk-based capital adequacy guidelines, which require a financial institution to maintain capital as a percentage of its assets, and certain off-balance sheet items adjusted for predefined credit risk factors (risk-adjusted assets). The Company’s equity to assets ratio was 7.94% at September 30, 2011.

Effective June 10, 2011, the Board of Directors of New Century Bank entered into a Memorandum of Understanding (“MOU”) with the Federal Deposit Insurance Corporation (“FDIC”) and the North Carolina Commissioner of Banks. The MOU represents an informal agreement between the Board of Directors of New Century Bank, the Regional Director of the FDIC’s Atlanta Regional Office and the North Carolina Commissioner of Banks and requires that New Century Bank’s management take certain actions to improve the bank’s lending function. The Memorandum also requires the Bank to maintain minimum Tier 1 Leverage and Total Risk Based Capital Ratios of 8.0% and 11.5%, respectively, during the life of the Memorandum. The Memorandum also restricts the ability of the Bank to grow its total assets at a rate in excess of 10% per year or to declare cash dividends without the prior approval of the Commissioner and the FDIC.

The Bank intends to comply fully with all terms of the MOU.

As the following table indicates, at September 30, 2011, the Company and related Bank subsidiary both exceeded minimum regulatory capital requirements as specified in the tables below.

New Century Bancorp, Inc.	Actual Ratio			Minimum Requirement
Total risk-based capital ratio		12.78	%		8.00	%
Tier 1 risk-based capital ratio		11.52	%		4.00	%
Leverage ratio		8.78	%		4.00	%

New Century Bank	Actual Ratio			Regulatory Minimum Requirement			Well-Capitalized Requirement
Total risk-based capital ratio		12.44	%		11.50	%		10.00	%
Tier 1 risk-based capital ratio		11.17	%		8.00	%		6.00	%
Leverage ratio		8.50	%		8.00	%		5.00	%

During 2004, the Company issued $12.4 million of junior subordinated debentures to a newly formed subsidiary, New Century Statutory Trust I, which in turn issued $12.0 million of trust preferred securities. The proceeds from the sale of the trust preferred securities provided additional capital for the growth and expansion of the Bank. Under the current applicable regulatory guidelines, all of the proceeds from the issuance of these trust preferred securities qualify as Tier 1 capital as of September 30, 2011. The Company is currently required to obtain prior regulatory approval before making interest payments on its outstanding junior subordinated debentures.

Management expects that the Company and the Bank will remain “well-capitalized” for regulatory purposes, although there can be no assurance that additional capital will not be required in the near future.

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Legal Proceedings

The Company is not currently engaged in, nor are any of its properties subject to, any material legal proceedings. From time to time, the Bank is a party to legal proceedings within the ordinary course of business wherein it enforces its security interest in loans, and other matters of similar nature.

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Item 4. Controls and Procedures

Disclosure Controls and Procedures. At the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15.

Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective (1) to provide reasonable assurance that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) to provide reasonable assurance that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.

Changes in internal control over financial reporting. Management of the Company has evaluated, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, changes in the Company’s internal controls over financial reporting (as defined in Rule 13a–15(f) and 15d–15(f) of the Exchange Act) during the third quarter of 2011. In connection with such evaluation, the Company has determined that there have been no changes in internal control over financial reporting during the third quarter that have materially affected or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 6. Exhibits

Exhibit Number	Description of Exhibit
31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act (Filed herewith)
31.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act (Filed herewith)
32.1	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes Oxley Act (Filed herewith)
32.2	Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes Oxley Act (Filed herewith)
101	Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011, in XBRL(eXtensible Business Reporting Language)*

* Pursuant to Regulation 406T of Regulation S-T, these interactive data files are furnished and not filed or part of a registration statement or prospectus for purposes of section 11 or 12 of the Securities Act of 1933, as amended, or section 18 of the Securities Exchange Act of 1934, as amended, and are otherwise not subject to liability.

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SIGNATURES

Under 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 thereunto duly authorized.

	NEW CENTURY BANCORP, INC.
Date: November 9, 2011	By:	/s/ William L. Hedgepeth II
		William L. Hedgepeth II
		President and Chief Executive Officer
Date: November 9, 2011	By:	/s/ Lisa F. Campbell
		Lisa F. Campbell
		Executive Vice President and Chief Financial Officer and Chief Operating Officer

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EXHIBIT INDEX

Exhibit Number	Description of Exhibit
31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act (Filed herewith)
31.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act (Filed herewith)
32.1	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act (Filed herewith)
32.2	Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act (Filed herewith)
101	Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011, in XBRL(eXtensible Business Reporting Language)*

* Pursuant to Regulation 406T of Regulation S-T, these interactive data files are furnished and not filed or part of a registration statement or prospectus for purposes of section 11 or 12 of the Securities Act of 1933, as amended, or section 18 of the Securities Exchange Act of 1934, as amended, and are otherwise not subject to liability.

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