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): February 1, 2013

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

Not Applicable

(Former name or former address, if changed since last report.)

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 February 1, 2013, Bank of the Carolinas Corporation (the “Registrant”) issued a press release announcing its results of operations for the three months and year ended December 31, 2012. A copy of the Registrant’s press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.

The information contained in Item 2.02 of this Current Report shall not be deemed “filed” for purposes of section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description of Exhibit
99.1	Press Release dated February 1, 2013, regarding the Registrant’s results of operations for the three months and year ended December 31, 2012

This Current Report on Form 8-K (including information included or incorporated by reference herein) may contain, among other things, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements regarding certain of the Registrant’s goals and expectations with respect to earnings, income per share, revenue, expenses and the growth rate in such items, as well as other measures of economic performance, including statements relating to estimates of credit quality trends, and (ii) statements preceded by, followed by, or that include the words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “projects,” “outlook” or similar expressions. These statements are based upon the current belief and expectations of the Registrant’s management and are subject to significant risks and uncertainties that are subject to change based on various factors (many of which are beyond the Registrant’s control).

SIGNATURES

Pursuant to 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 hereunto duly authorized.

BANK OF THE CAROLINAS CORPORATION
By:	/s/ Stephen R. Talbert
	Stephen R. Talbert
	President and Chief Executive Officer

Dated: February 7, 2013

EXHIBIT INDEX

Exhibit No.	Description of Exhibit
99.1	Press Release dated February 1, 2013, regarding the Registrant’s results of operations for the three months and year ended December 31, 2012

EX-99.1

Exhibit 99.1

PRESS RELEASE

For Immediate Release

Bank of the Carolinas Corporation Reports

Fourth Quarter and Year-End Financial Results

MOCKSVILLE, NORTH CAROLINA, February 1, 2013 - Bank of the Carolinas Corporation (OTCQB: BCAR) today reported financial results for the three- and twelve-month periods ended December 31, 2012.

For the three-month period ended December 31, 2012, the Company reported a net loss available to common shareholders of $56,000 as compared to a net loss of $3.2 million for the third quarter of 2012 and a net loss of $8.8 million for the fourth quarter of 2011. Prior to the accrual for dividends and accretion on preferred stock, the Company had a net income of $186,000 for the three-month period ended December 31, 2012. The net loss per diluted common share was $0.02 for the fourth quarter of 2012 compared with a net loss per share of $0.82 for the third quarter of 2012 and a net loss per share of $2.26 for the fourth quarter of 2011.

For the year ended December 31, 2012, the Company reported a net loss available to common shareholders of $6.1 million, or $1.58 per common share, compared to a net loss of $29.2 million, or $7.49 per common share, for the year ended December 31, 2011.

The Company’s net interest margin was 2.73% in the fourth quarter of 2012, which is a decrease from 2.79% in the fourth quarter of 2011. Noninterest expense for the year, excluding the costs related to foreclosed real estate, decreased 1.4% in 2012 versus 2011 and for the three month periods decreased 13.9% in the fourth quarter of 2012 versus 2011. The Company made an effort to reduce its other noninterest expenses in order to offset the increased FDIC premiums, legal expenses, and costs related to the Company’s compliance with the regulatory consent order put in place in the second quarter of 2011.

The Company continues with significant improvement in the levels of nonperforming assets for the seventh consecutive quarter. As of December 31, 2012, the Company’s nonperforming assets decreased to $12.7 million and amounted to 2.91% of total assets as compared to $13.5 million or 3.02% of total assets as of September 30, 2012 and compared to $27.6 million, or 5.68% of total assets as of December 31, 2011. The allowance for loan losses was 2.55% of total loans as of December 31, 2012. Net loan recoveries amounted to $77,000 for the fourth quarter of 2012, as compared to net loan charge-offs of $1.6 million in the third quarter of 2012 and $3.6 million in the fourth quarter of 2011. The fourth quarter of 2012 is the Company’s first quarter of net loan recoveries in five years.

Total assets at December 31, 2012 amounted to $436.8 million, a decrease of 10.1% when compared to $486.0 million as of December 31, 2011. Loans totaled $270.4 million at December 31, 2012, a decline of 12.2% from a year earlier, and deposits decreased 10.4% over the prior year to $373.0 million. The Company’s deposit mix has improved by decreasing non-core brokered deposits by $27.6 million, or 64.7%, since December 31, 2011.

The Company’s banking subsidiary had a Tier 1 leverage capital ratio and Tier 1 capital to risk-weighted assets ratio of 3.55% and 4.99% respectively, while its total capital to risk-weighted assets ratio was 6.25% as of December 31, 2012.

Bank of the Carolinas Corporation is the holding company for Bank of the Carolinas, a North Carolina chartered bank headquartered in Mocksville, NC with offices in Advance, Asheboro, Cleveland, Concord, Harrisburg, King, Landis, Lexington and Winston-Salem. The common stock of the Company is quoted under the symbol “BCAR” on the OTCQB marketplace operated by OTC Markets Group Inc.

For further information contact:

Stephen R. Talbert

President and Chief Executive Officer

Bank of the Carolinas Corporation

(336) 751-5755

DISCLOSURES ABOUT FORWARD LOOKING STATEMENTS

Statements in this press release relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments, expectations or beliefs about future events or results, and other statements that are not descriptions of historical facts, may be forward-looking statements as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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, 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 SEC’s Internet website at www.sec.gov. Forward-looking statements may be identified by terms such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “feels,” “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. Factors that could influence the accuracy of forward-looking statements include, but are not limited to (a) pressures on our earnings, capital and liquidity resulting from current and future conditions in the credit and capital markets, (b) continued or unexpected increases in nonperforming loans and credit losses in our loan portfolio, (c) continued adverse conditions in the economy and in the real estate market in our banking markets (particularly those conditions that affect our loan portfolio, the abilities of our borrowers to repay their loans, and the values of collateral that secures our loans), (d) the financial success or changing strategies of our customers, (e) actions of government regulators, or change in laws, regulations or accounting standards, that adversely affect our business, (f) changes in the interest rate environment and the level of market interest rates that reduce our net interest margins and/or the values of loans we make and securities we hold, (g) changes in competitive pressures among depository and other financial institutions or in our ability to compete effectively against other financial institutions in our banking markets, and (h) other developments or changes in our business that we do not expect. Although we believe that the expectations reflected in the forward-looking statements included in this press release are reasonable, they represent our management’s judgments only as of the date they are made, and we cannot guarantee future results, levels of activity, performance or achievements. As a result, readers are cautioned not to place undue reliance on these forward-looking statements. 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.

Bank of the Carolinas Corporation

Consolidated Balance Sheets

(In Thousands Except Share Data)

	December 31,
	2012			2011
	(Unaudited)			*
Assets:
Cash and due from banks, noninterest-bearing	$	5,942		$	5,044
Temporary investments		29,214			30,722
Investment securities		106,931			112,404
Loans		270,374			307,907
Less, allowance for loan losses		(6,890	)		(8,101	)
Total loans, net		263,484			299,806
Premises and equipment, net		11,843			12,229
Other real estate owned		4,976			8,524
Bank owned life insurance		10,536			10,732
Other assets		3,859			6,506
Total Assets	$	436,785		$	485,967
Liabilities:
Noninterest bearing demand deposits	$	36,622		$	34,034
Interest-checking deposits		37,768			37,306
Savings and money market deposits		111,459			106,308
Time deposits		187,123			238,565
Total deposits		372,972			416,213
Securities sold under repurchase agreements		45,362			45,381
Federal Home Loan Bank advances		—			—
Subordinated debt		7,855			7,855
Other liabilities		2,138			1,903
Total Liabilities		428,327			471,352
Shareholders’ Equity:
Preferred stock, no par value		13,179			13,179
Discount on preferred stock		(419	)		(716	)
Common stock, $5 par value per share		19,479			19,479
Additional paid-in capital		12,991			12,991
Retained earnings (loss)		(37,355	)		(31,871	)
Accumulated other comprehensive income		583			1,553
Total Shareholders’ Equity		8,458			14,615
Total Liabilities and Shareholders’ Equity	$	436,785		$	485,967
Preferred shares authorized		3,000,000			3,000,000
Preferred shares issued and outstanding		13,179			13,179
Unaccrued preferred stock dividend		1,405,760			582,072
Common shares authorized		15,000,000			15,000,000
Common shares issued and outstanding		3,895,840			3,895,840
Book value per common share	$	(1.57	)	$	0.22

* Derived from audited financial statements

Bank of the Carolinas Corporation

Consolidated Statements of Income

(In Thousands Except Share Data)

(Unaudited)

	Three months ended December 31						Year ended December 31
	2012			2011			2012			2011
	(Unaudited)			*			(Unaudited)			*
Interest income
Interest and fees on loans	$	3,398		$	3,983		$	14,303		$	17,398
Interest on securities		626			753			2,669			3,175
Other interest income		18			17			77			59
Total interest income		4,042			4,753			17,049			20,632
Interest expense
Interest on deposits		695			982			3,225			4,387
Interest on borrowed funds		570			578			2,268			2,653
Total interest expense		1,265			1,560			5,493			7,040
Net interest income		2,777			3,193			11,556			13,592
Provision for loan losses		(637	)		2,998			2,359			17,565
Net interest income (loss) after provision for loan losses		3,414			195			9,197			(3,973	)
Noninterest income
Customer service fees		309			299			1,176			1,250
Increase in value of bank owned life insurance		89			92			774			361
Gains on investment securities		43			(397	)		2,190			(391	)
Other income		8			3			28			19
Total noninterest income		449			(3	)		4,168			1,239
Noninterest expense
Salaries and benefits		1,611			1,737			6,877			6,684
Occupancy and equipment		452			503			1,903			2,074
FDIC insurance assessments		375			567			1,600			1,516
Data processing expense		252			231			989			885
Valuation provisions and net operating costs associated with foreclosed real estate		2			1,172			2,417			5,222
Other		787			1,002			4,158			4,593
Total noninterest expenses		3,479			5,212			17,944			20,974
Income (Loss) before income taxes		384			(5,020	)		(4,579	)		(23,708	)
Provision for income taxes		198			3,547			607			4,543
Net income (loss)	$	186		$	(8,567	)	$	(5,186	)	$	(28,251	)
Dividends and accretion on preferred stock		(242	)		(236	)		(956	)		(934	)
Net loss available to common shareholders	$	(56	)	$	(8,803	)	$	(6,142	)	$	(29,185	)
Loss per common share:
Basic	$	(0.02	)	$	(2.26	)	$	(1.58	)	$	(7.49	)
Diluted	$	(0.02	)	$	(2.26	)	$	(1.58	)	$	(7.49	)
Weighted Average Common Shares Outstanding:
Basic		3,895,840			3,895,840			3,895,840			3,896,428
Diluted		3,895,840			3,895,840			3,895,840			3,896,428

* Derived from audited financial statements

Bank of the Carolinas Corporation

Other Financial Data

(Dollars in thousands except per share amounts)

	As of or for the year ended December 31
	2012			2011			Change*
Average balance sheet data
Average loans	$	287,764		$	341,459			(15.73	)%
Average earning assets		425,385			475,297			(10.50	)
Average total assets		464,541			524,196			(11.38	)
Average common shareholders’ equity		(2,691	)		18,679			(114.41	)
Average total shareholders’ equity		10,488			31,858			(67.08	)
Period-end balance sheet data:
Total loans	$	270,374		$	307,907			(12.19	)%
Allowance for loan losses		(6,890	)		(8,101	)		(14.95	)
Total assets		436,785			485,967			(10.12	)
Total deposits		372,972			416,213			(10.39	)
Total common shareholders’ equity		(4,721	)		1,436			(428.76	)
Total shareholders’ equity		8,458			14,615			(42.13	)
Asset quality indicators
Net loan charge-offs	$	3,570		$	16,327			(78.14	)%
Total nonperforming loans		7,733			19,062			(59.43	)
Total nonperforming assets		12,709			27,585			(53.93	)
Asset quality ratios
Net-chargeoffs (recoveries) to average loans **		1.24	%		4.78	%		(354	)BP
Nonperforming loans to total loans		2.86			6.19			(333	)
Nonperforming assets to total assets		2.91			5.68			(277	)
Nonperforming assets to loan-related assets		4.62			8.72			(410	)
Allowance for loan losses to total loans		2.55			2.63			(8	)
Financial ratios
Return on average assets **		(1.12	)%		(5.39	)%		427	BP
Return on average common shareholders’ equity **		N/M			(156.25	)		N/M
Net interest margin **		2.72			2.86			(14	)
Per share amounts available to common shareholders
Basic earnings (loss) per common share	$	(1.58	)	$	(7.49	)		78.91	%
Diluted earnings (loss) per common share		(1.58	)		(7.49	)		78.91
Book value per common share		(1.57	)		0.22			(817.48	)

* BP denotes basis points. N/M denotes not meaningful.

** ratio annualized.

Bank of the Carolinas Corporation

Other Financial Data (continued)

(Dollars in thousands except per share amounts)

	As of or for the three months ended December 31
	2012			2011			Change*
Average balance sheet data
Average loans	$	275,572		$	313,836			(12.19	)%
Average earning assets		404,738			453,976			(10.85	)
Average total assets		441,352			501,894			(12.06	)
Average common shareholders’ equity		(4,649	)		8,163			(156.95	)
Average total shareholders’ equity		8,530			21,342			(60.03	)
Asset quality indicators
Net loan charge-offs (recoveries)	$	(77	)	$	3,588			(102.14	)%
Asset quality ratios
Net-chargeoffs (recoveries) to average loans **		(0.11	)%		4.54	%		(465	)BP
Financial ratios
Return on average assets **		0.17	%		(6.77	)%		694	BP
Return on average common shareholders’ equity **		N/M			(427.84	)		N/M
Net interest margin **		2.73			2.79			(6	)
Per share amounts available to common shareholders
Basic earnings (loss) per common share	$	(0.02	)	$	(2.26	)		99.56	%
Diluted earnings (loss) per common share		(0.02	)		(2.26	)		99.56
Book value per common share		(1.57	)		0.22			(817.48	)

* BP denotes basis points. N/M denotes not meaningful.

** ratio annualized.