Exhibit 99.1

PRESS RELEASE

For Immediate Release

Bank of the Carolinas Corporation Reports Third Quarter Earnings

MOCKSVILLE, NORTH CAROLINA, October 25, 2006 — Bank of the Carolinas Corporation (Nasdaq Capital Market: BCAR), today reported financial results for the three months and nine months ended September 30, 2006.

For the three month period ended September 30, 2006, the Company reported net income of $1,148,000, an increase of 80.2% when compared to $637,000 in the third quarter of 2005. Diluted earnings per share increased to $.29 for the third quarter, an 81.3% increase when compared to $.16 per diluted share for the same period in 2005.

For the nine months ended September 30, 2006, the Company reported net income of $2,793,000, an increase of 70.4% when compared to $1,639,000 in the nine month period of 2005. Diluted earnings per share increased to $.70 for the nine month period, a 70.7% increase when compared to $.41 per diluted share for the same period in 2005.

During the third quarter of 2006, the Company consummated the sale of its branch location in Carthage, NC to First Bancorp, in a deal previously announced in April 2006. Excluding a one time gain on that sale, net income for the quarter would have decreased over the comparable period for 2005. Factors that negatively affected earnings for the third quarter included an increased loan loss provision, losses on repossessed real estate, expenses related to the formation of a holding company, and increased marketing expenses related to a branding campaign that culminated in the third quarter.

Total assets at September 30, 2006 amounted to $431.4 million, an increase of 16.5% when compared to the September 30, 2005 amount of $370.3 million. Net loans increased 14.2% over the prior year to $334.8 million while deposits grew to $364.1 million, a 19.6% increase over the prior year. The allowance for loan losses was 1.12% of total loans as of September 30, 2006 and net year to date charge-offs were 0.20% of average loans outstanding.

Bank of the Carolinas Corporation is the holding company for Bank of the Carolinas, a state chartered bank headquartered in Mocksville, NC with offices in Advance, Asheboro, Cleveland, Harrisburg, King, Landis, and Lexington. Common stock of the company is traded on the NASDAQ Capital Market under the symbol BCAR.

This press release contains forward-looking statements as defined by federal securities laws. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. Actual results could differ materially from current projections. Bank of the Carolinas undertakes no obligation to revise these statements following the date of this press release.

For further information contact:

Eric E. Rhodes

Chief Financial Officer

Bank of the Carolinas

(336) 751-5755

Bank of the Carolinas Corporation

Consolidated Balance Sheets

(In Thousands—Unaudited)

	September 30,
	2006			2005
Assets
Cash and Due from Banks	$	4,820		$	4,132
Interest-Bearing Deposits in Banks		4,679			3,681
Federal Funds Sold		5,554			18
Securities Available for Sale		56,277			46,682
Loans		338,651			296,390
Less, Allowance for Loan Losses		(3,802	)		(3,103	)
Total Loans, Net		334,849			293,287
Properties and Equipment		11,062			10,074
Other Assets		14,181			12,394
Total Assets	$	431,422		$	370,268
Liabilities
Non-interest Bearing Demand Deposits	$	25,969		$	26,569
Interest Bearing Demand Deposits		62,432			49,953
Savings Deposits		9,864			12,008
Time Deposits		265,859			215,918
Total Deposits		364,124			304,448
Borrowings		27,500			30,400
Other Liabilities		2,873			1,204
Total Liabilities		394,497			336,052
Shareholders’ Equity
Common Stock, Par Value $5 Per Share:
Authorized 15,000,000 Shares; Issued 3,825,192 Shares in 2006 and 3,168,047 Shares in 2005		19,126			15,840
Additional Paid-In Capital		11,431			14,548
Retained Earnings		6,803			4,080
Accumulated Other Comprehensive Loss		(435	)		(252	)
Total Shareholders’ Equity		36,925			34,216
Total Liabilities and Shareholders’ Equity	$	431,422		$	370,268

Bank of the Carolinas Corporation

Consolidated Statements of Income

(In Thousands, Except Share and Per Share Data)

	Three Months Ended Sept. 30,				Nine Months Ended Sept. 30,
	2006		2005		2006		2005
Interest Income
Interest and Fees on Loans	$	7,044	$	5,043	$	19,407	$	13,318
Interest on Securities		577		397		1,598		1,064
Fed Funds Sold		124		68		293		95
Deposits in Other Banks		8		1		14		13
Total Interest Income		7,753		5,509		21,312		14,490
Interest Expense
Deposits		3,629		2,089		9,276		5,041
Borrowed Funds		311		251		978		687
Total Interest Expense		3,940		2,340		10,254		5,728
Net Interest Income		3,813		3,169		11,058		8,762
Provision for Loan Losses		678		322		975		848
Net Interest Income After Provision for
Loan Losses		3,135		2,847		10,083		7,914
Other Income
Customer Service Fees		247		216		713		608
Mortgage Loan Broker Fees		54		46		135		136
Increase in CSV of Life Insurance		51		50		151		152
Gain on sale of branch		1,755		—		1,755		—
Other Income		98		23		176		67
Total Other Income		2,205		335		2,930		963
Noninterest Expense
Salaries and Benefits		1,773		1,227		4,590		3,513
Occupancy and Equipment		357		311		1,029		909
Other Noninterest Expense		1,414		680		3,042		1,969
Total Noninterest Expense		3,544		2,218		8,661		6,391
Income Before Income Taxes		1,796		964		4,352		2,486
Income Taxes		648		327		1,559		847
Net Income	$	1,148	$	637	$	2,793	$	1,639
Earnings Per Share (1)
Basic	$	0.30	$	0.17	$	0.73	$	0.43
Diluted	$	0.29	$	0.16	$	0.70	$	0.41
Weighted Average Shares Outstanding (1)
Basic		3,825,192		3,801,656		3,825,192		3,795,329
Diluted		3,963,896		3,976,418		3,964,123		3,962,144

⁽¹⁾ Share and per share data reflect a 6-for-5 stock split effected October 28, 2005.

Bank of the Carolinas Corporation

Performance Ratios

	Nine Months Ended Sept. 30,
	2006		2005		Change*
Financial Ratios
Return On Average Assets	0.92	%	0.67	%	25	BP
Return On Average Shareholders’ Equity	10.41	%	6.49	%	392
Net Interest Margin	3.87	%	3.85	%	2
Asset Quality Ratios
Net-chargeoffs to Average Loans	0.20	%	0.10	%	10	BP
Nonperforming Loans To Total Loans	0.78	%	0.99	%	(21	)
Nonperforming Assets To Total Assets	0.87	%	0.90	%	(3	)
Allowance For Loan Losses To Total Loans	1.12	%	1.05	%	7

* BP denotes basis points.