8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): April 18, 2008

BANK OF THE CAROLINAS CORPORATION

(Exact name of registrant as specified in its charter)

North Carolina	000-52195	20-4989192
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

135 Boxwood Village Drive Mocksville, North Carolina	27028
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (336) 751-5755

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On April 18, 2008, we distributed a press release announcing our results of operations for the three months ended March 31, 2008. A copy of our press release is being furnished as Exhibit 99.1 to this Report.

Item 9.01. Financial Statements and Exhibits.

Exhibits. The following Exhibit is being furnished with this Report.

Exhibit No.	Exhibit Description
99.1	Copy of our press release dated April 18, 2008

Disclosures About Forward Looking Statements

This Report and its exhibits contain statements relating to our financial condition, results of operations, plans, strategies, trends, results of specific activities or investments, expectations or beliefs about future events or results, and other statements that are not descriptions of historical facts. Those statements, may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may be identified by terms such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “forecasts”, “potential” or “continue,” or similar terms or the negative of these terms, or other statements concerning opinions or judgments of our management about future events. Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, risk factors discussed in our Annual Report on Form 10-K and in other documents we file with the Securities and Exchange Commission from time to time. Copies of those reports are available directly through the Commission’s website at www.sec.gov. Other factors that could influence the accuracy of such forward-looking statements include, but are not limited to, (a) changes in competitive pressures among depository and other financial institutions or in our ability to compete successfully against the larger financial institutions in our banking markets; (b) the financial success or changing strategies of our customers; (c) actions of government regulators, or changes in laws, regulations or accounting standards that adversely affect our business; (d) changes in the interest rate environment and the level of market interest rates that reduce our net interest margins and/or the volumes and values of loans we make and securities we hold; and (e) changes in general economic or business conditions and real estate values in our banking market (particularly changes that affect our loan portfolio, the abilities of our borrowers to repay their loans, and the values of loan collateral). Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. All forward-looking statements attributable to us are expressly qualified in their entirety by the cautionary statements in this paragraph. We have no obligation, and do not intend, to update these forward-looking statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, we have duly caused this Report to be signed on our behalf by the undersigned thereunto duly authorized.

	BANK OF THE CAROLINAS CORPORATION
	(Registrant)
Date: April 21, 2008	By:	/S/ Eric E. Rhodes
		Eric E. Rhodes
		Chief Financial Officer

EX-99.1

Exhibit 99.1

PRESS RELEASE

For Immediate Release

Bank of the Carolinas Corporation Reports First Quarter Financial Results

MOCKSVILLE, NORTH CAROLINA, April 18, 2008 — Bank of the Carolinas Corporation (Nasdaq: BCAR), today reported financial results for the three months ended March 31, 2008.

For the three month period ended March 31, 2008, the Company reported a net loss of $5,000, as compared to net income of $780,000 in the first quarter of 2007. Diluted earnings per share were $0.00 for the first quarter compared to $0.20 per diluted share for the same period in 2007. First quarter results were significantly affected by the further compression of the Company’s net interest margin, increased provision for loan losses and higher levels of non-interest expense versus the year ago period.

For the three months ended March 31, 2008, the Company’s net interest margin declined to 2.77% compared to 3.31% for the first quarter of 2007. This decrease was due to the Federal Reserve’s aggressive rate cuts during the quarter which led to a 200 basis point drop in the prime rate. Since a significant portion of the Company’s loan portfolio adjusts with prime, rapidly declining rates have a negative impact on the Company’s margin in the near term. Non-interest income for 2008 grew 5.4%; while non-interest expense rose $594,000 or 21.3% over the year ago quarter. Non-interest expense for the current quarter was impacted by the addition of two full service offices opened during 2007. The Company implemented cost savings measures during the last quarter of 2007 and is committed to controlling non-interest expense during 2008.

The provision for loan losses totaled $314,000 for the quarter versus $62,000 in 2007. The allowance for loan losses was 1.07% of total loans as of March 31, 2008 and annualized net charge-offs were 0.21% of average loans outstanding. Non-performing assets stood at 2.09% of assets as of March 31, 2008, compared to 1.92% three months earlier and 0.72% a year ago. Included in non-performing assets at March 31, 2008, was a $4.9 million credit which has a 75% USDA guarantee.

Total assets at March 31, 2008 amounted to $513.4 million, an increase of 8.6% when compared to the prior year amount of $472.8 million. Net loans increased 13.6% over the prior year to $401.1 million while deposits grew to $427.4 million, a 5.0% increase over the prior year. The Company remains well capitalized and raised an additional $5 million of capital during the quarter through trust preferred securities financing, which is included in Tier 1 capital.

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, Concord, Harrisburg, King, Landis, Lexington and Winston-Salem. Common stock of the Company is traded on the NASDAQ Global 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 Corporation 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 Corporation

(336) 751-5755

Bank of the Carolinas Corporation

Consolidated Balance Sheets

(In Thousands Except Share Data)

(Unaudited)

	March 31,
	2008			2007
Assets
Cash and Due from Banks	$	7,909		$	5,594
Interest-Bearing Deposits in Banks		5,049			100
Federal Funds Sold		3,541			27,467
Securities Available for Sale		61,727			58,452
Loans		405,440			356,948
Less, Allowance for Loan Losses		(4,355	)		(3,735	)
Total Loans, Net		401,085			353,213
Properties and Equipment		14,251			11,391
Other Assets		19,795			16,626
Total Assets	$	513,357		$	472,843
Liabilities
Non-interest Bearing Demand Deposits	$	30,589		$	29,603
Interest Bearing Demand Deposits		57,518			64,377
Savings Deposits		26,340			11,428
Time Deposits		312,948			301,808
Total Deposits		427,395			407,216
Borrowings		43,155			23,000
Retail Repurchase Agreements		554			994
Other Liabilities		1,831			3,191
Total Liabilities		472,935			434,401
Shareholders’ Equity
Common Stock, Par Value $5 Per Share:
Authorized 15,000,000 Shares; Issued 3,920,752 Shares in 2008 and 3,831,692 Shares in 2007		19,604			19,158
Additional Paid-In Capital		11,721			11,471
Retained Earnings		8,275			7,881
Accumulated Other Comprehensive Income (Loss)		822			(68	)
Total Shareholders’ Equity		40,422			38,442
Total Liabilities and Shareholders’ Equity	$	513,357		$	472,843

Bank of the Carolinas Corporation

Consolidated Statements of Income

(In Thousands Except Share and Per Share Data)

(Unaudited)

	Three Months Ended March 31,
	2008			2007
Interest Income
Interest and Fees on Loans	$	7,091		$	7,309
Interest on Securities		726			614
Federal Funds Sold		76			177
Deposits in Other Banks		4			4
Total Interest Income		7,897			8,104
Interest Expense
Deposits		4,386			4,250
Borrowed Funds		273			285
Total Interest Expense		4,659			4,535
Net Interest Income		3,238			3,569
Provision for Loan Losses		314			62
Net Interest Income After Provision for Loan Losses		2,924			3,507
Other Income
Customer Service Fees		293			236
Mortgage Loan Broker Fees		36			31
Investment Services		9			43
Income from Bank Owned Life Insurance		88			82
Other Income		26			37
Total Other Income		452			429
Noninterest Expense
Salaries and Benefits		1,894			1,517
Occupancy and Equipment		499			418
Other Noninterest Expense		988			852
Total Noninterest Expense		3,381			2,787
Income (Loss) Before Income Taxes		(5	)		1,149
Income Taxes		—			369
Net Income (Loss)	$	(5	)	$	780
Earnings Per Share
Basic	$	—		$	0.20
Diluted	$	—		$	0.20
Weighted Average Shares Outstanding
Basic		3,920,752			3,826,706
Diluted		3,977,182			3,949,095

Bank of the Carolinas Corporation

Performance Ratios

	As of or for the Three Months Ended March 31,
	2008		2007		Change*
Financial Ratios
Return On Average Assets **	0.00	%	0.69	%	(69	)BP
Return On Average Shareholders’ Equity **	-0.05	%	8.27	%	(832	)
Net Interest Margin **	2.77	%	3.31	%	(54	)
Asset Quality Ratios
Net-chargeoffs to Average Loans **	0.21	%	0.07	%	14	BP
Nonperforming Loans To Total Loans	2.07	%	0.70	%	137
Nonperforming Assets To Total Assets	2.09	%	0.72	%	137
Allowance For Loan Losses To Total Loans	1.07	%	1.05	%	2

* BP denotes basis points.

** Ratio annualized.