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): October 25, 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 October 25, 2013, Bank of the Carolinas Corporation (the “Registrant”) issued a press release announcing its results of operations for the three-and nine-month periods ended September 30, 2013. 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 October 25, 2013, regarding the Registrant’s results of operations for the three- and nine-month periods ended September 30, 2013

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: October 30, 2013

EXHIBIT INDEX

Exhibit No.	Description of Exhibit
99.1	Press Release dated October 25, 2013, regarding the Registrant’s results of operations for the three- and nine-month periods ended September 30, 2013

EX-99.1

Exhibit 99.1

PRESS RELEASE

For Immediate Release

Bank of the Carolinas Corporation Reports

Third Quarter Financial Results

MOCKSVILLE, NORTH CAROLINA, October 25, 2013 - Bank of the Carolinas Corporation (OTCQB: BCAR) today reported financial results for the three- and nine-month periods ended September 30, 2013.

For the three-month period ended September 30, 2013, the Company reported net income available to common shareholders of $147,000 as compared to a net loss of $965,000 for the second quarter of 2013 and a net loss of $3.2 million for the third quarter of 2012. Net income per diluted common share was $0.04 for the third quarter of 2013 compared with a net loss per share of $0.25 for the second quarter of 2013 and a net loss per share of $0.82 for the third quarter of 2012.

For the nine-month period ended September 30, 2013, the Company reported a net loss available to common shareholders of $627,000 or $0.16 per common share, compared to a net loss of $6.1 million or $1.56 per common share for the nine-month period ended September 30, 2012.

The provision for loan losses recognized a recovery of $920,000 in the third quarter of 2013 compared to an expense of $1.5 million in the third quarter a year ago. For the nine-month period ended September 30, 2013, the provision for loan losses recognized a recovery of $2.1 million compared to an expense of $3.0 million for the same nine-month period of 2012. Costs related to foreclosed real estate were $144,000 for the third quarter of 2013 as compared to $1.3 million in the third quarter of 2012. For the nine-month period ended September 30, 2013, costs related to foreclosed real estate were $676,000 as compared to $2.4 million for the same nine-month period of 2012. Through September 30, 2013, credit-related costs totaled a recovery of $1.6 million, or a 128.7% decrease over the previous year’s costs of $5.5 million through September 30, 2012.

Although nonperforming assets increased in the third quarter of 2013 as compared to the second quarter of 2013, the Company continues its overall progress in reducing the level of nonperforming assets. As of September 30, 2013, the Company’s nonperforming assets were $8.7 million and amounted to 2.03% of total assets as compared to $7.0 million or 1.64% of total assets as of June 30, 2013 and compared to $13.5 million, or 3.02% of total assets as of September 30, 2012. The allowance for loan losses was 2.23% of total loans as of September 30, 2013. Net loan recoveries amounted to $737,000 for the third quarter of 2013, as compared to net loan chargeoffs of $88,000 in the second quarter of 2013 and net loan chargeoffs of $1.6 million in the third quarter of 2012.

The Company’s net interest margin was 2.74% in the third quarter of 2013, which is a decrease of 7 basis points from 2.81% in the third quarter of 2012. Noninterest expenses, excluding the costs related to foreclosed real estate, for the three-month period decreased 11.9% in the third quarter of 2013 versus 2012 and decreased 14.2% for the nine-month period. Cost savings of $1.2 million for the first nine months of 2013 have been recognized in salary and benefits, occupancy and equipment, and consultant and legal fees.

Total assets at September 30, 2013 amounted to $427.9 million, a decrease of 4.5% when compared to $448.3 million as of September 30, 2012. Loans totaled $278.5 million at September 30, 2013, an increase of $9.0 million or 3.3% compared to June 30, 2013 and a decline of $2.2 million or 0.8% from a year earlier. Deposits decreased 4.9% over the prior year to $365.7 million. The Company’s deposit mix has improved by reducing $27.6 million in non-core brokered deposits since September 30, 2012.

The Company’s banking subsidiary had a Tier 1 leverage capital ratio and Tier 1 capital to risk-weighted assets ratio of 3.38% and 4.51% respectively, while its total capital to risk-weighted assets ratio was 5.77% as of September 30, 2013.

President and CEO, Stephen R. Talbert, said, “We are proud of the progress we have made for our shareholders, particularly with the loan growth this quarter. Our staff continues to work hard on further improvements to make Bank of the Carolinas better each day.”

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, Concord, Harrisburg, 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)

(Unaudited)

	September 30,
	2013			2012
Assets:
Cash and due from banks, noninterest-bearing	$	4,941		$	3,987
Temporary investments		28,696			17,553
Investment securities		92,891			121,387
Loans		278,503			280,671
Less, allowance for loan losses		(6,215	)		(7,450	)
Total loans, net		272,288			273,221
Premises and equipment, net		11,429			11,911
Other real estate owned		1,386			5,424
Bank owned life insurance		10,799			10,447
Other assets		5,498			4,343
Total Assets	$	427,928		$	448,273
Liabilities:
Noninterest bearing demand deposits	$	35,323		$	34,756
Interest-checking deposits		39,790			39,138
Savings and money market deposits		111,913			106,541
Time deposits		178,668			204,095
Total deposits		365,694			384,530
Securities sold under repurchase agreements		45,544			45,379
Subordinated debt		7,855			7,855
Other liabilities		2,613			1,919
Total Liabilities		421,706			439,683
Shareholders’ Equity:
Preferred stock, no par value		13,179			13,179
Discount on preferred stock		(183	)		(496	)
Common stock, $5 par value per share		19,479			19,479
Additional paid-in capital		12,991			12,991
Retained losses		(36,880	)		(37,463	)
Accumulated other comprehensive income (loss)		(2,364	)		900
Total Shareholders’ Equity		6,222			8,590
Total Liabilities and Shareholders’ Equity	$	427,928		$	448,273
Preferred shares authorized		3,000,000			3,000,000
Preferred shares issued and outstanding		13,179			13,179
Unaccrued preferred stock dividend		1,730			1,071
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	$	(2.23	)	$	(1.45	)

Bank of the Carolinas Corporation

Consolidated Statements of Income

(In Thousands Except Share Data)

(Unaudited)

	Three months ended September 30						Nine months ended September 30
	2013			2012			2013			2012
Interest income
Interest and fees on loans	$	3,264		$	3,571		$	9,704		$	10,905
Interest on securities		520			723			1,606			2,043
Other interest income		17			13			56			59
Total interest income		3,801			4,307			11,366			13,007
Interest expense
Interest on deposits		561			779			1,761			2,530
Interest on borrowed funds		569			570			1,689			1,698
Total interest expense		1,130			1,349			3,450			4,228
Net interest income		2,671			2,958			7,916			8,779
Provision for loan losses		(920	)		1,471			(2,078	)		2,996
Net interest income after provision for loan losses		3,591			1,487			9,994			5,783
Noninterest income
Customer service fees		285			297			857			867
Increase in value of bank owned life insurance		89			89			263			685
Gains on investment securities		—			—			—			2,147
Other income		6			5			9			20
Total noninterest income		380			391			1,129			3,719
Noninterest expense
Salaries and benefits		1,611			1,723			4,804			5,266
Occupancy and equipment		459			468			1,337			1,451
FDIC insurance assessments		360			405			1,096			1,225
Data processing expense		257			257			809			737
Valuation provisions and net operating costs associated with foreclosed real estate		144			1,324			676			2,415
Other		748			1,048			2,297			3,371
Total noninterest expenses		3,579			5,225			11,019			14,465
Income (Loss) before income taxes		392			(3,347	)		104			(4,963	)
Provision for income taxes		—			(383	)		—			409
Net income (loss)	$	392		$	(2,964	)	$	104		$	(5,372	)
Dividends and accretion on preferred stock		(245	)		(239	)		(731	)		(714	)
Net loss available to common shareholders	$	147		$	(3,203	)	$	(627	)	$	(6,086	)
Loss per common share:
Basic	$	0.04		$	(0.82	)	$	(0.16	)	$	(1.56	)
Diluted	$	0.04		$	(0.82	)	$	(0.16	)	$	(1.56	)
Weighted Average Common Shares Outstanding:
Basic		3,895,840			3,895,840			3,895,840			3,895,840
Diluted		3,895,840			3,895,840			3,895,840			3,895,840

Bank of the Carolinas Corporation

Other Financial Data

(Dollars in thousands except per share amounts)

	As of or for the
	nine months ended September 30
	2013			2012			Change*
Average balance sheet data
Average loans	$	270,352		$	291,858			(7.37	)%
Average earning assets		389,543			432,317			(9.89	)
Average total assets		427,136			472,327			(9.57	)
Average common shareholders’ equity		(5,375	)		(2,034	)		164.30
Average total shareholders’ equity		7,804			11,145			(29.98	)
Period-end balance sheet data:
Total loans	$	278,503		$	280,671			(0.77	)%
Allowance for loan losses		(6,215	)		(7,450	)		(16.58	)
Total assets		427,928			448,273			(4.54	)
Total deposits		365,694			384,530			(4.90	)
Total common shareholders’ equity		(6,957	)		(4,589	)		51.60
Total shareholders’ equity		6,222			8,590			(27.57	)
Asset quality indicators
Net loan charge-offs (recoveries)	$	(1,403	)	$	3,647			(138.47	)%
Total nonperforming loans		7,305			8,124			(10.09	)
Total nonperforming assets		8,692			13,549			(35.85	)
Asset quality ratios
Net-chargeoffs (recoveries) to average loans **		(0.69	)%		1.67	%		(236	)BP
Nonperforming loans to total loans		2.62			2.89			(27	)
Nonperforming assets to total assets		2.03			3.02			(99	)
Nonperforming assets to loan-related assets		3.11			4.74			(163	)
Allowance for loan losses to total loans		2.23			2.65			(42	)
Financial ratios
Return on average assets **		0.03	%		(1.52	)%		155	BP
Return on average common shareholders’ equity **		N/M			N/M			N/M
Net interest margin **		2.72			2.71			1
Per share amounts available to common shareholders
Basic loss per common share	$	(0.16	)	$	(1.56	)		89.74	%
Diluted loss per common share		(0.16	)		(1.56	)		89.74
Book value per common share		(2.23	)		(1.45	)		53.48

* 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 September 30
	2013			2012			Change*
Average balance sheet data
Average loans	$	273,510		$	282,639			(3.23	)%
Average earning assets		386,592			418,426			(7.61	)
Average total assets		422,096			456,774			(7.59	)
Average common shareholders’ equity		(7,152	)		(4,462	)		60.27
Average total shareholders’ equity		6,027			8,717			(30.85	)
Asset quality indicators
Net loan charge-offs	$	(737	)	$	1,562			(147.18	)%
Asset quality ratios
Net-chargeoffs to average loans **		(1.07	)%		2.20	%		(327	)BP
Financial ratios
Return on average assets **		0.37	%		(2.58	)%		295	BP
Return on average common shareholders’ equity **		N/M			N/M			N/M
Net interest margin **		2.74			2.81			(7	)
Per share amounts available to common shareholders
Basic loss per common share	$	0.04		$	(0.82	)		104.88	%
Diluted loss per common share		0.04			(0.82	)		104.88
Book value per common share		(2.23	)		(1.45	)		53.48

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

** ratio annualized.