10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2014

Commission File No.: 000-52195

BANK OF THE CAROLINAS CORPORATION

(Exact name of registrant as specified in its charter)

NORTH CAROLINA	20-4989192
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
135 Boxwood Village Drive Mocksville, North Carolina (Address of principal executive offices)	27028 (Zip Code)

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

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 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	¨	Smaller reporting company	x

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

On November 14, 2014 there were 462,028,831 outstanding shares of the registrant’s common stock.

BANK OF THE CAROLINAS CORPORATION

FORM 10-Q

September 30, 2014

INDEX

Part I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
	Consolidated Balance Sheets at September 30, 2014 and December 31, 2013	3
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2014 and 2013	4
	Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September  30, 2014 and 2013	5
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2014 and 2013	6
	Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2014 and 2013	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34
Item 4.	Controls and Procedures	34
Part II. OTHER INFORMATION		34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
SIGNATURES		36
EXHIBIT INDEX		37

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Bank of the Carolinas Corporation

Consolidated Balance Sheets

(amounts in thousands, except share data)

	September 30 2014			December 31 2013*
	(Unaudited)
Assets:
Cash and due from banks, noninterest-bearing	$	9,349		$	12,778
Interest-bearing deposits in banks		44,076			2,064
Cash and cash equivalents		53,425			14,842
Federal funds sold		—			19,580
Investment securities available-for-sale, at fair value		40,997			90,315
Loans receivable		281,696			278,510
Less: Allowance for loan losses		(5,183	)		(6,015	)
Total loans, net		276,513			272,495
Premises and equipment		10,951			11,274
Other real estate owned		1,220			1,233
Bank owned life insurance		11,146			10,888
Accrued interest receivable		845			1,156
Other assets		1,182			1,867
Total Assets	$	396,279		$	423,650
Liabilities:
Deposits:
Noninterest-bearing demand deposits	$	34,857		$	35,243
Interest-checking deposits		41,540			40,939
Savings and money market deposits		114,284			109,419
Time deposits		157,486			180,549
Total deposits		348,167			366,150
Securities sold under agreements to repurchase		394			45,388
Subordinated debt		—			7,855
Other liabilities		1,527			2,509
Total Liabilities		350,088			421,902
Commitments and contingencies (Note 6)		—			—
Stockholders’ Equity:
Preferred stock, net of discount, no par value		—			13,079
Common stock, no par value at September 30, 2014, $5 per share par value at December 31, 2013		—			19,479
Additional paid-in capital		73,815			12,991
Retained deficit		(27,324	)		(38,422	)
Accumulated other comprehensive loss		(300	)		(5,379	)
Total Stockholders’ Equity		46,191			1,748
Total Liabilities and Stockholders’ Equity	$	396,279		$	423,650
Preferred shares authorized		3,000,000			3,000,000
Preferred shares issued and outstanding		—			13,179
Unaccrued preferred stock dividend	$	—		$	1,894
Common shares authorized		580,000,000			15,000,000
Common shares issued and outstanding		462,028,831			3,895,840

* Derived from audited consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

3

Bank of the Carolinas Corporation

Consolidated Statements of Operations

(Unaudited)

(dollars in thousands, except per share data)

	Three Months Ended September 30						Nine Months Ended September 30
	2014			2013			2014			2013
Interest income
Interest and fees on loans	$	3,269		$	3,264		$	9,697		$	9,704
Interest on securities		317			520			1,392			1,606
Other interest income		22			17			55			56
Total interest income		3,608			3,801			11,144			11,366
Interest expense
Interest on deposits		509			561			1,561			1,761
Interest on borrowed funds		102			569			1,223			1,689
Total interest expense		611			1,130			2,784			3,450
Net interest income		2,997			2,671			8,360			7,916
Provision for (recovery of) loan losses		(535	)		(920	)		(760	)		(2,078	)
Net interest income after provision for loan losses		3,532			3,591			9,120			9,994
Noninterest income
Customer service fees		294			285			878			857
Increase in value of bank owned life insurance		87			89			258			263
Losses on sales of investment securities		(1,275	)		—			(1,275	)		—
Extinguishment of debt		5,443			—			5,443			—
Other income		4			6			23			9
Total noninterest income		4,553			380			5,327			1,129
Noninterest expense
Salaries and benefits		1,434			1,611			4,571			4,804
Occupancy and equipment		471			459			1,399			1,337
FDIC insurance assessments		371			360			1,102			1,096
Data processing services		260			257			788			809
Valuation provisions and net operating costs associated with foreclosed real estate		(26	)		144			1			676
Debt prepayment penalty		4,353			—			4,353			—
Other		852			748			2,498			2,297
Total noninterest expense		7,715			3,579			14,712			11,019
Income (loss) before income taxes		370			392			(265	)		104
Provision for income taxes		—			152			—			790
Net income (loss)		370			240			(265	)		(686	)
Dividends and accretion on preferred stock		165			(245	)		65			(731	)
Gain on redemption of preferred stock		10,203			—			10,203			—
Net income (loss) available to common stockholders	$	10,738		$	(5	)	$	10,003		$	(1,417	)
Earnings (Loss) per common share:
Basic	$	0.028		$	—		$	0.075		$	(0.36	)
Diluted	$	0.028		$	—		$	0.075		$	(0.36	)

The accompanying notes are an integral part of these consolidated financial statements.

4

Bank of the Carolinas Corporation

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(dollars in thousands)

	Three Months Ended September 30					Nine Months Ended September 30
	2014		2013			2014			2013
Net income (loss)	$	370	$	240		$	(265	)	$	(686	)
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities available-for-sale		138		(655	)		3,804			(4,792	)
Reclassification adjustment for losses realized in net income (loss)		1,275		—			1,275			—
Income tax effect		—		—			—			335
Total other comprehensive income (loss), net of income tax effect		1,413		(655	)		5,079			(4,457	)
Total comprehensive income (loss)	$	1,783	$	(415	)	$	4,814		$	(5,143	)

The accompanying notes are an integral part of these consolidated financial statements.

5

Bank of the Carolinas Corporation

Consolidated Statements of Cash Flows

(Unaudited)

(dollars in thousands)

	Nine Months Ended September 30
	2014			2013
Cash flows from operating activities:
Net loss	$	(265	)	$	(686	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Provision for loan losses		(760	)		(2,078	)
Deferred tax expense		—			790
Depreciation and amortization		506			508
Change in valuation allowance on other real estate owned		—			475
(Gain) loss on sale of other real estate owned		(65	)		41
Loss on disposal of premises and equipment		1			8
Loss on sale of securities		1,275			—
Extinguishment of debt		(5,443	)		—
Increase in bank owned life insurance		(258	)		(263	)
Net amortization/accretion of premiums and discounts on investments		830			427
Net change in other assets		702			609
Net change in other liabilities		25			475
Net cash provided (used) by operating activities		(3,452	)		306
Cash flows from investing activities:
Net change in federal funds sold		19,580			735
Purchases of premises and equipment		(184	)		(102	)
Purchases of securities		—			(16,640	)
Proceeds from sales, calls, maturities and principal repayments of securities available for sale		51,292			25,460
Proceeds from maturity of security held to maturity		1,000			—
Redemption of FHLB stock		140			205
Proceeds from sales of other real estate owned		1,266			3,699
Net increase in loans		(4,446	)		(7,351	)
Net cash provided by investing activities		68,648			6,006
Cash flows from financing activities:
Net increase (decrease) in deposits		(17,983	)		(7,278	)
Net increase (decrease) in repurchase agreements		(44,994	)		182
Repayment of borrowing		(3,100	)		—
Issuance of common stock, net of cost		42,759			—
Repurchase of preferred stock		(3,295	)		—
Net cash used by financing activities		(26,613	)		(7,096	)
Net increase (decrease) in cash and cash equivalents		38,583			(784	)
Cash and cash equivalents at beginning of period		14,842			7,786
Cash and cash equivalents at end of period	$	53,425		$	7,002
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	3,009		$	3,287
Noncash investing and financing activities:
Change in fair value of securities available for sale	$	5,079		$	(4,457	)
Transfer from loans to other real estate owned	$	1,188		$	625

The accompanying notes are an integral part of these consolidated financial statements.

6

Bank of the Carolinas Corporation

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

(dollars in thousands)

	Preferred Stock						Discount on Preferred			Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive			Total Stockholders’
	Shares			Amount			Stock			Shares		Amount			Capital			Deficit			Income (Loss)			Equity
Balance, December 31, 2012		13,179		$	13,179		$	(419	)		3,895,840	$	19,479		$	12,991		$	(36,748	)	$	583		$	9,065
Net income		—			—			—			—		—			—			(686	)		—			(686	)
Other comprehensive loss		—			—			—			—		—			—			—			(4,457	)		(4,457	)
Discount accretion on preferred stock		—			—			236			—		—			—			(236	)		—			—
Balance, September 30, 2013		13,179		$	13,179		$	(183	)		3,895,840	$	19,479		$	12,991		$	(37,670	)	$	(3,874	)	$	3,922
Balance, December 31, 2013		13,179		$	13,179		$	(100	)		3,895,840	$	19,479		$	12,991		$	(38,422	)	$	(5,379	)	$	1,748
Net loss		—			—			—			—		—			—			(265	)		—			(265	)
Other comprehensive income		—			—			—			—		—			—			—			5,079			5,079
Reclass due to no par value		—			—			—			—		(19,479	)		19,479			—			—			—
Issuance of common stock		—			—			—			458,132,991		—			45,813			—			—			45,813
Cost of issuing common stock		—			—			—			—		—			(3,054	)		—			—			(3,054	)
Repurchase of preferred stock		(13,179	)		(13,179	)		—			—		—			(319	)		10,203			—			(3,295	)
Discount accretion on preferred stock		—			—			100			—		—			—			(100	)		—			—
Dividends accrued on preferred stock		—			—			—			—		—			—			165			—			165
Balance, September 30, 2014		—		$	—		$	—			462,028,831	$	—		$	74,910		$	(28,419	)	$	(300	)	$	46,191

The accompanying notes are an integral part of these consolidated financial statements.

7

Bank of the Carolinas Corporation

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1. BASIS OF PRESENTATION

In the opinion of management, the financial information included in these unaudited financial statements reflects all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial information as of September 30, 2014 and December 31, 2013 and for the three- and nine-month periods ended September 30, 2014 and 2013, in conformity with accounting principles generally accepted in the United States of America.

The preparation of 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, 2014 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2014.

The results presented here are for Bank of the Carolinas Corporation (“the Company”), the parent company of Bank of the Carolinas (“the Bank”). 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 annual report on Form 10-K for the year ended December 31, 2013, as amended. This quarterly report should be read in conjunction with the annual report. Because the Company has no separate operations and conducts no business on its own other than owning the Bank, this discussion concerns primarily the business of the Bank. However, because the financial statements are presented on a consolidated basis, the Company and the Bank are collectively referred to as “the Company” unless otherwise noted.

NOTE 2. EARNINGS PER SHARE

Basic earnings (loss) per share represents income (loss) available to common stockholders divided by the weighted average number of common shares outstanding during the period. When applicable, the weighted average shares outstanding for the diluted earnings per share computations are adjusted to reflect the assumed conversion of shares available under stock options using the treasury stock method.

Earnings (loss) per share have been computed based on the following (dollars in thousands):

	Three months ended					Nine months ended
	September 30,					September 30,
	2014		2013			2014		2013
Net income (loss) applicable to common stockholders	$	10,573	$	(5	)	$	9,938	$	(1,417	)
Weighted average number of common shares outstanding		387,333,235		3,895,840			133,112,837		3,895,840
Weighted average number of diluted common shares outstanding		387,333,235		3,895,840			133,112,837		3,895,840
Common stock options and common stock warrants - anti-dilutive		20,000		497,605			20,000		497,605
Earnings (Loss) per common share:
Basic	$	0.028	$	—		$	0.075	$	(0.36	)
Diluted	$	0.028	$	—		$	0.075	$	(0.36	)

The common stock warrants referred to above were issued to the United States Treasury in connection with the Company’s April 17, 2009 participation in the Capital Purchase Program, which was authorized as a part of the TARP legislation passed by Congress during 2008.

For the three and nine months ended September 30, 2014 there were 20,000 common stock options outstanding that were anti-dilutive as the average market price for the shares was less than the exercise price.

8

NOTE 3. INVESTMENT SECURITIES

The amortized cost, estimated fair values and carrying values of the investment securities portfolios at the indicated dates are summarized as follows (dollars in thousands):

	September 30, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Carrying Value
Investment securities available for sale:
U.S. Government agencies securities	$	4,896	$	70	$	31	$	4,935	$	4,935
State and municipal bonds		6,175		43		152		6,066		6,066
Mortgage-backed securities		30,226		42		272		29,996		29,996
Total investment securities available for sale	$	41,297	$	155	$	455	$	40,997	$	40,997

	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Carrying Value
Investment securities available for sale:
U.S. Government agencies securities	$	44,077	$	87	$	3,234	$	40,930	$	40,930
State and municipal bonds		11,159		—		978		10,181		10,181
Mortgage-backed securities		39,458		34		1,288		38,204		38,204
Total investment securities available for sale		94,694		121		5,500		89,315		89,315
Investment securities held to maturity:
Corporate securities		1,000		—		180		820		1,000
Total investment securities	$	95,694	$	121	$	5,680	$	90,135	$	90,315

Management of the Bank believes all unrealized losses on available for sale securities as of September 30, 2014 represent temporary impairments related to market fluctuations. The unrealized losses on our securities are a nominal portion of the total value of the portfolio.

9

The fair values of securities with unrealized losses at September 30, 2014 and December 31, 2013 are as follows (dollars in thousands):

September 30, 2014:
	Less than 12 Months				12 Months or More				Total
Temporarily impaired securities:	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
U.S. Government agency securities	$	—	$	—	$	1,674	$	31	$	1,674	$	31
State and municipal bonds		—		—		4,151		152		4,151		152
Mortgage-backed securities		11,449		50		14,325		222		25,774		272
Corporate securities		—		—		—		—		—		—
Total	$	11,449	$	50	$	20,150	$	405	$	31,599	$	455

December 31, 2013:
	Less than 12 Months				12 Months or More				Total
Temporarily impaired securities:	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
U.S. Government agency securities	$	35,679	$	2,731	$	3,482	$	503	$	39,161	$	3,234
State and municipal bonds		7,835		723		2,346		255		10,181		978
Mortgage-backed securities		34,564		1,287		528		1		35,092		1,288
Corporate securities		—		—		820		180		820		180
Total	$	78,078	$	4,741	$	7,176	$	939	$	85,254	$	5,680

The Company does not believe that the investment securities that were in an unrealized loss position as of September 30, 2014, which were comprised of 25 securities, represent an other-than-temporary impairment. Total gross unrealized losses were primarily attributable to change in interest rates, relative to the when the investment securities were purchased, and not due to the credit quality of the investment securities. As of September 30, 2014 and December 31, 2013, the gross unrealized losses reported for mortgage-backed securities were primarily related to investment securities issued by Government National Mortgage Association. The Company does not intend to sell the investment securities that were in an unrealized loss position and it is not more likely than not that the Company will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity.

10

NOTE 4. LOANS

The loan portfolio as of the dates indicated is summarized below (dollars in thousands):

	September 30, 2014			December 31, 2013
Real estate loans:
Residential, 1-4 family	$	90,786		$	84,855
Commercial real estate		111,850			117,463
Construction and development		23,130			27,049
Home equity		28,233			28,217
Total real estate loans		253,999			257,584
Commercial business and other loans		23,504			17,428
Consumer loans		3,099			2,554
Other		1,094			944
Gross loans receivable		281,696			278,510
Allowance for loan losses		(5,183	)		(6,015	)
Loans, net	$	276,513		$	272,495

11

Impaired loans, segregated by class of loans, are summarized as follows as of the dates indicated (dollars in thousands):

	September 30, 2014										December 31, 2013
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial - Non Real Estate	$	381	$	448	$	—	$	465	$	19	$	1,099	$	1,305	$	—	$	1,384	$	79
Commercial Real Estate
Owner occupied		2,121		2,446		—		2,658		106		3,480		4,062		—		4,365		239
Income producing		3,299		3,483		—		3,518		120		3,734		3,887		—		3,938		183
Multifamily		—		—		—		—		—		—		—		—		—		—
Construction & Development
1 - 4 Family		—		—		—		—		—		—		—		—		—		—
Other		2,257		3,280		—		3,523		57		1,545		1,881		—		1,981		112
Farmland		110		131		—		160		9		252		273		—		340		26
Residential
Equity Lines		69		77		—		77		2		95		101		—		105		3
1 - 4 Family		5,109		5,512		—		5,562		176		5,632		6,198		—		6,281		322
Junior Liens		413		436		—		444		18		196		218		—		223		12
Consumer - Non Real Estate		16		16		—		17		1		68		68		—		70		4
Total loans with no allowance	$	13,775	$	15,829	$	—	$	16,424	$	508	$	16,101	$	17,993	$	—	$	18,687	$	980
With an allowance recorded:
Commercial - Non Real Estate	$	1,613	$	1,615	$	26	$	1,677	$	53	$	1,205	$	1,205	$	25	$	1,282	$	45
Commercial Real Estate
Owner occupied		4,416		4,471		829		4,505		146		3,666		3,666		77		3,727		166
Income producing		7,173		7,229		164		7,388		284		7,287		7,343		126		7,465		382
Multifamily		1,206		1,239		74		1,248		33		1,226		1,259		12		1,273		45
Construction & Development
1 - 4 Family		353		359		9		363		14		360		366		8		371		19
Other		731		736		14		750		25		3,176		3,181		107		3,224		118
Farmland		—		—		—		—		—		—		—		—		—		—
Residential
Equity Lines		40		40		41		40		1		—		—		—		—		—
1 - 4 Family		6,292		6,335		271		6,417		219		6,778		6,795		204		6,893		279
Junior Liens		104		106		3		107		4		339		341		4		345		19
Consumer - Non Real Estate		54		54		5		57		3		8		8		—		11		—
Total loans with an allowance	$	21,982	$	22,184	$	1,436	$	22,552	$	782	$	24,045	$	24,164	$	563	$	24,591	$	1,073
Total:
Commercial - Non Real Estate	$	1,994	$	2,063	$	26	$	2,142	$	72	$	2,304	$	2,510	$	25	$	2,666	$	124
Commercial Real Estate	$	18,215	$	18,868	$	1,067	$	19,317	$	689	$	19,393	$	20,217	$	215	$	20,768	$	1,015
Construction & Development	$	3,451	$	4,506	$	23	$	4,796	$	105	$	5,333	$	5,701	$	115	$	5,916	$	275
Residential	$	12,027	$	12,506	$	315	$	12,647	$	420	$	13,040	$	13,653	$	208	$	13,847	$	635
Consumer - Non Real Estate	$	70	$	70	$	5	$	74	$	4	$	76	$	76	$	—	$	81	$	4
Totals	$	35,757	$	38,013	$	1,436	$	38,976	$	1,290	$	40,146	$	42,157	$	563	$	43,278	$	2,053

12

Impaired loans include loans whose contractual terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties. Troubled debt restructurings (TDRs) are a subset of impaired loans and totaled $34.3 million at September 30, 2014 and $37.5 million at December 31, 2013.

The following tables provide a summary of loans modified as TDRs (dollars in thousands):

	Accrual		Nonaccrual		Total TDRs		Allowance for Loan Losses Allocated
September 30, 2014
Commercial real estate	$	17,333	$	—	$	17,333	$	983
Commercial construction		1,784		1,667		3,451		23
Commercial and industrial		1,817		176		1,993		26
Residential mortgage		11,176		256		11,432		265
Consumer and other		65		—		65		—
Total modifications	$	32,175	$	2,099	$	34,274	$	1,297
Total contracts		133		10		143

	Accrual		Nonaccrual		Total TDRs		Allowance for Loan Losses Allocated
December 31, 2013
Commercial real estate	$	17,461	$	1,016	$	18,477	$	216
Commercial construction		4,319		612		4,931		8
Commercial and industrial		2,421		301		2,722		25
Residential mortgage		11,051		230		11,281		314
Consumer and other		70		—		70		—
Total modifications	$	35,322	$	2,159	$	37,481	$	563
Total contracts		133		12		145

The following tables illustrate new TDR information for the three- and nine-months ended September 30, 2014 and 2013 (dollars in thousands):

	For the three months ended September 30, 2014						For the nine months ended September 30, 2014
Troubled Debt Restructuring	Number of Contracts		Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Number of Contracts		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
Commercial - Non Real Estate		—	$	—	$	—		1	$	61	$	61
Commercial - Real Estate		—		—		—		2		458		458
Construction & Development		—		—		—		—		—		—
Residential		2		75		75		3		101		101
Consumer - Non Real Estate		—		—		—		—		—		—
Totals		2	$	75	$	75		6	$	620	$	620

	For the three months ended September 30, 2013						For the nine months ended September 30, 2013
Troubled Debt Restructuring	Number of Contracts		Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Number of Contracts		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
Commercial - Non Real Estate		—	$	—	$	—		1	$	32	$	32
Commercial - Real Estate		—		—		—		1		238		238
Construction & Development		1		129		129		2		621		621
Residential		2		95		96		5		543		544
Consumer - Non Real Estate		—		—		—		—		—		—
Totals		3	$	224	$	225		9	$	1,434	$	1,435

13

For the purposes of this report, default is defined as being 90-days past due or on non-accrual status without performance. There were no loans restructured in the twelve months prior to September 30, 2014 and 2013 that went into default during the three-month periods ended September 30, 2014 and 2013.

Some loan modifications classified as TDRs may not ultimately result in the full collection of principal and interest, as modified, and may result in potential incremental losses. These potential incremental losses have been factored into our overall allowance for loan losses estimate. The level of any re-defaults will likely be affected by future economic conditions. Once a loan becomes a TDR, it will continue to be reported as a TDR until it is ultimately repaid in full, reclassified to loans held for sale, or foreclosed and sold. Included in the allowance for loan losses at September 30, 2014 and 2013 was an impairment reserve for TDRs in the amount of $1.3 million and $617,000, respectively.

Non-accrual loans and an age analysis of past due loans, segregated by class of loans, were as follows (dollars in thousands):

	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		90 Days Past Due and Still Accruing		Non-accrual Loans
September 30, 2014:
Commercial - Non Real Estate	$	—	$	170	$	—	$	170	$	23,334	$	23,504	$	—	$	176
Commercial Real Estate
Owner occupied		116		—		—		116		55,229		55,345		—		355
Income producing		—		—		—		—		47,588		47,588		—		304
Multifamily		—		—		—		—		8,917		8,917		—		—
Construction & Development
1 - 4 Family		—		—		—		—		3,028		3,028		—		—
Other		—		—		—		—		19,722		19,722		—		1,557
Farmland		—		—		110		110		270		380		—		110
Residential
Equity Lines		—		40		—		40		28,193		28,233		—		69
1 - 4 Family		518		—		83		601		89,354		89,955		—		693
Junior Liens		—		—		27		27		804		831		—		49
Consumer - Non Real Estate		2		—		—		2		3,097		3,099		—		5
Other		—		—		—		—		1,094		1,094		—		—
Total	$	636	$	210	$	220	$	1,066	$	280,630	$	281,696	$	—	$	3,318

	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		90 Days Past Due and Still Accruing		Non-accrual Loans
December 31, 2013:
Commercial - Non Real Estate	$	46	$	—	$	154	$	200	$	17,228	$	17,428	$	—	$	463
Commercial Real Estate
Owner occupied		—		77		684		761		57,154		57,915		—		1,689
Income producing		—		—		503		503		51,297		51,800		—		503
Multifamily		—		—		—		—		7,748		7,748		—		—
Construction & Development
1 - 4 Family		—		—		—		—		1,745		1,745		—		—
Other		158		—		240		398		24,375		24,773		—		599
Farmland		—		—		252		252		279		531		—		252
Residential
Equity Lines		75		9		—		84		28,133		28,217		—		95
1 - 4 Family		157		242		355		754		82,995		83,749		—		1,128
Junior Liens		—		—		26		26		1,080		1,106		—		53
Consumer - Non Real Estate		1		2		—		3		2,551		2,554		—		6
Other		—		—		—		—		944		944		—		—
Total	$	437	$	330	$	2,214	$	2,981	$	275,529	$	278,510	$	—	$	4,788

14

The Bank categorizes loans and leases into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. This categorization is made on all commercial, commercial real estate, and construction and development loans. The Bank uses the following definitions for risk ratings:

Pass – Loans and leases classified as pass should be performing relatively close to expectations, with adequate evidence that the borrower is continuing to generate adequate cash flow to service debt. There should be no significant departure from the intended source and timing of repayment, and there should be no undue reliance on secondary sources of repayment. To the extent that some variance exists in one or more criteria being measured, it may be offset by the relative strength of other factors and/or collateral pledged to secure the transaction.

Special Mention - Loans and leases classified as special mention, while still adequately protected by the borrower’s capital adequacy and payment capability, exhibit distinct weakening trends and/or elevated levels of exposure to external conditions. If left unchecked or uncorrected, these potential weaknesses may result in deteriorated prospects of repayment. These exposures require management’s close attention so as to avoid becoming undue or unwarranted credit exposures.

Substandard - Loans and leases classified as substandard are inadequately protected by the borrower’s current financial condition and payment capability or of the collateral pledged, if any. Loans and leases so classified have a well-defined weakness or weaknesses that jeopardize the orderly repayment of debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful - Loans and leases classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, its classification as an estimated loss is deferred until its more exact status may be determined. The Company’s practice is to charge-off the portion of the loan amount determined to be doubtful in the quarter that the determination is made if the repayment of the loan is collateral dependent.

Loss - Loans and leases classified as loss are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean the loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future. Losses are taken in the period in which they surface as uncollectible.

15

Commercial loans that do not require individual analysis as part of the above described process are considered to be pass-rated loans. As of September 30, 2014 and December 31, 2013, and based on the most recent analysis performed, the loans and leases were categorized as follows (dollars in thousands):

	September 30, 2014
Internal Risk Rating Grades	Pass		Special Mention		Substandard		Doubtful		Loss
Commercial - Non Real Estate	$	19,918	$	2,885	$	701	$	—	$	—
Commercial Real Estate
Owner occupied		47,386		3,831		4,128		—		—
Income producing		31,050		13,891		2,647		—		—
Multifamily		7,177		1,740		—		—		—
Construction & Development
1 - 4 Family		2,480		195		353		—		—
Other		15,228		1,865		2,629		—		—
Farmland		270		—		110		—		—
Other		1,094		—		—		—		—
Totals	$	124,603	$	24,407	$	10,568	$	—	$	—
Total:
Commercial - Non Real Estate	$	19,918	$	2,885	$	701	$	—	$	—
Commercial Real Estate	$	85,613	$	19,462	$	6,775	$	—	$	—
Construction & Development	$	17,978	$	2,060	$	3,092	$	—	$	—
Other	$	1,094	$	—	$	—	$	—	$	—
Totals	$	123,509	$	24,407	$	10,568	$	—	$	—

	December 31, 2013
Internal Risk Rating Grades	Pass		Special Mention		Substandard		Doubtful		Loss
Commercial - Non Real Estate	$	13,289	$	3,157	$	982	$	—	$	—
Commercial Real Estate
Owner occupied		47,207		6,009		4,699		—		—
Income producing		33,875		10,501		7,424		—		—
Multifamily		5,925		1,823		—		—		—
Construction & Development
1 - 4 Family		1,133		252		360		—		—
Other		17,122		3,265		4,386		—		—
Farmland		279		—		252		—		—
Other		944		—		—		—		—
Totals	$	119,774	$	25,007	$	18,103	$	—	$	—
Total:
Commercial - Non Real Estate	$	13,289	$	3,157	$	982	$	—	$	—
Commercial Real Estate	$	87,007	$	18,333	$	12,123	$	—	$	—
Construction & Development	$	18,534	$	3,517	$	4,998	$	—	$	—
Other	$	944	$	—	$	—	$	—	$	—
Totals	$	118,830	$	25,007	$	18,103	$	—	$	—

16

All consumer-related loans, including residential real estate and non-real estate, are evaluated and monitored based upon payment activity. Once a consumer-related loan becomes past due on a recurring basis, the Company will pull that loan out of the homogenized pool and evaluate it individually for impairment. At this time, the consumer-related loan may be placed on the Company’s internal watch list and risk rated either special mention or substandard, depending upon the individual circumstances. Consumer-related loans at September 30, 2014 and December 31, 2013, segregated by class of loans, were as follows (dollars in thousands):

	September 30, 2014				December 31, 2013
Risk Based on Payment Activity	Performing		Non- Performing		Performing		Non- Performing
Residential
Equity Lines	$	28,165	$	68	$	28,122	$	95
1 - 4 Family		89,562		393		83,092		657
Junior Liens		805		26		1,080		26
Consumer - Non Real Estate
Credit Cards		—		—		—		—
Other		3,094		5		2,548		6
Totals	$	121,626	$	492	$	114,842	$	784
Total:
Residential	$	118,532	$	487	$	112,294	$	778
Consumer - Non Real Estate	$	3,094	$	5	$	2,548	$	6
Totals	$	121,626	$	492	$	114,842	$	784

NOTE 5. ALLOWANCE FOR LOAN LOSSES

Changes in the allowance for loan losses by segment, since their respective year-end, are as follows (dollars in thousands):

	September 30, 2014												September 30, 2013
	Beginning Balance		Chargeoffs			Recoveries		Provision			Ending Balance		Beginning Balance		Chargeoffs			Recoveries		Provision			Ending Balance
Commercial - Non Real Estate	$	176	$	(58	)	$	806	$	(768	)	$	156	$	1,209	$	(107	)	$	1,605	$	(2,320	)	$	387
Commercial Real Estate
Owner occupied		1,224		—			11		44			1,279		1,359		(290	)		549		(284	)		1,334
Income producing		831		(104	)		—		303			1,030		773		(21	)		20		13			785
Multifamily		50		—			—		116			166		78		—			—		(19	)		59
Construction & Development
1 - 4 Family		52		(719	)		—		740			73		78		(5	)		—		(24	)		49
Other		580		—			55		(22	)		613		728		—			9		(177	)		560
Farmland		3		—			—		2			5		—		(21	)		—		24			3
Residential
Equity Lines		332		(123	)		6		154			369		314		(207	)		33		210			350
1 - 4 Family		1,218		(15	)		77		(64	)		1,216		1,267		(620	)		468		247			1,362
Consumer - Non Real Estate		44		(24	)		16		16			52		98		(38	)		28		(29	)		59
Unallocated		1,505		—			—		(1,281	)		224		986		—			—		281			1,267
Total	$	6,015	$	(1,043	)	$	971	$	(760	)	$	5,183	$	6,890	$	(1,309	)	$	2,712	$	(2,078	)	$	6,215

17

Changes in the allowance for loan losses by segment, since the prior quarter ended June 30, 2014 and 2013, respectively, are as follows (dollars in thousands):

	June 30, 2014 - September 30, 2014													June 30, 2013 - September 30, 2013
	Beginning Balance		Chargeoffs			Recoveries			Provision			Ending Balance		Beginning Balance		Chargeoffs			Recoveries		Provision			Ending Balance
Commercial - Non Real Estate	$	33	$	(9	)	$	709		$	(577	)	$	156	$	584	$	—		$	241	$	(438	)	$	387
Commercial Real Estate
Owner occupied		488		—			4			787			1,279		1,568		—			537		(771	)		1,334
Income producing		1,403		(104	)		—			(269	)		1,030		756		—			—		29			785
Multifamily		113		—			—			53			166		67		—			—		(8	)		59
Construction & Development
1 - 4 Family		52		—			—			21			73		85		—			—		(36	)		49
Other		525		—			4			84			613		551		—			3		6			560
Farmland		3		—			—			2			5		3		—			—		—			3
Residential
Equity Lines		149		(41	)		1			260			369		354		—			3		(7	)		350
1 - 4 Family		809		(7	)		12			402			1,216		1,171		(42	)		5		228			1,362
Consumer - Non Real Estate		36		(1	)		(3	)		20			52		90		(16	)		6		(21	)		59
Unallocated		1,542		—			—			(1,318	)		224		1,169		—			—		98			1,267
Total	$	5,153	$	(162	)	$	727		$	(535	)	$	5,183	$	6,398	$	(58	)	$	795	$	(920	)	$	6,215

As of September 30, 2014 and December 31, 2013, loans were evaluated for impairment as follows (dollars in thousands):

	Individually Evaluated for Impairment
	September 30, 2014				December 31, 2013
	Allowance		Total Loans		Allowance		Total Loans
Commercial - Non Real Estate	$	26	$	1,994	$	25	$	2,304
Commercial Real Estate
Owner occupied		829		6,537		77		7,146
Income producing		164		10,472		126		11,021
Multifamily		74		1,206		12		1,226
Construction & Development
1 - 4 Family		9		353		8		360
Other		14		2,988		107		4,721
Farmland		—		110		—		252
Residential
Equity Lines		41		109		—		95
1 - 4 Family		274		11,918		208		12,945
Consumer - Non Real Estate		5		70		—		76
Unallocated		—		—		—		—
Total	$	1,436	$	35,757	$	563	$	40,146

	Collectively Evaluated for Impairment
	September 30, 2014				December 31, 2013
	Allowance		Total Loans		Allowance		Total Loans
Commercial - Non Real Estate	$	130	$	21,510	$	151	$	15,124
Commercial Real Estate
Owner occupied		450		48,808		1,147		50,769
Income producing		866		37,116		705		40,779
Multifamily		92		7,711		38		6,522
Construction & Development
1 - 4 Family		64		2,675		44		1,385
Other		599		16,734		473		20,052
Farmland		5		270		3		279
Residential
Equity Lines		328		28,124		332		28,122
1 - 4 Family		942		78,868		1,010		71,910
Consumer - Non Real Estate		47		3,029		44		2,478
Unallocated		224		1,094		1,505		944
Total	$	3,747	$	245,939	$	5,452	$	238,364

18

NOTE 6. COMMITMENTS AND CONTINGENCIES

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, lines of credit and standby letters of credit. These instruments involve elements of credit risk in excess of amounts recognized in the accompanying financial statements.

The Company’s risk of loss related to unfunded loan commitments and lines of credit or standby letters of credit is represented by the contractual amount of these instruments. The Company uses the same credit policies in making commitments under such instruments as it does for on-balance sheet instruments. The amount of collateral obtained, if any, is based on management’s credit evaluation of the borrower. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The following table presents a summary of outstanding financial instruments whose contract amounts represent credit risk as of September 30, 2014 (dollars in thousands):

Unfunded loan commitments	$	31,096
Financial standby letters of credit		209
Total unused commitments	$	31,305

NOTE 7. RECENT ACCOUNTING PRONOUNCEMENTS

In June 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-11, Transfers and Servicing (Topic 860). The amendments in this ASU require that repurchase-to-maturity transactions be accounted for as secured borrowings consistent with the accounting for other repurchase agreements. In addition, the amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty (a repurchase financing), which will result in secured borrowing accounting for the repurchase agreement. The amendments require an entity to disclose information about transfers accounted for as sales in transactions that are economically similar to repurchase agreements, in which the transferor retains substantially all of the exposure to the economic return on the transferred financial asset throughout the term of the transaction. In addition the amendments require disclosure of the types of collateral pledged in repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions and the tenor of those transactions. This ASU is effective for first interim or annual periods beginning after December 15, 2014. The Company will evaluate the impact this ASU may have on its consolidated financial statements.

In January 2014, the FASB issued ASU 2014-04, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40). The amendments in this Update clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this Update are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. For entities other than public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015. The amendments are not expected to have a significant impact on the Company.

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740). An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be

19

combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. For example, an entity should not evaluate whether the deferred tax asset expires before the statute of limitations on the tax position or whether the deferred tax asset may be used prior to the unrecognized tax benefit being settled. The amendments in this Update do not require new recurring disclosures. The amendments are not expected to have a significant impact on the Company.

NOTE 8. FAIR VALUE

Accounting principles generally accepted in the United States of America require that companies measure and record certain assets and liabilities at fair value and record any adjustments to the fair value of those assets. Securities are recorded at fair value on a recurring basis while other assets, such as impaired loans, are recorded at fair value on a non-recurring basis.

The Company uses three levels of measurement to group those assets measured at fair value. These groupings are made based on the markets the assets are traded in and the reliability of the assumptions used to determine fair value. The groupings include:

• Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 – observable inputs other than the quoted prices included in Level 1.

• Level 3 – unobservable inputs.

Investment Securities – The Company’s investment securities are measured on a recurring basis through a model used by our bond agent. All of our bond price adjustments meet level 2 criteria. Prices are derived from a model which uses actively quoted rates, prepayment models and other underlying credit and collateral data.

Impaired 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. Impaired loans are recorded at fair value less estimated selling costs. Once a loan is identified as individually impaired, the Company measures impairment. Fair values of impaired loans are generally estimated using one of several methods, including collateral value, liquidation value, discounted cash flows and, in rare cases, the market value of the note. Those impaired loans not requiring an allowance represent loans for which the net present value of the expected cash flows or fair value of the collateral less costs to sell exceed the recorded investments in such loans. At September 30, 2014 and December 31, 2013, a majority of the total impaired loans were evaluated based on the fair value of the collateral. When the fair value of the collateral is based on an executed sales contract with an independent third party, the Company records the impaired loans as nonrecurring Level 1. If the collateral is based on another observable market price or a current appraised value, the Company records the impaired loans as nonrecurring Level 2. When an appraised value is not available or the Company 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. Impaired loans can also be evaluated for impairment using the present value of expected future cash flows discounted at the loan’s effective interest rate. The measurement of impaired loans using future cash flows discounted at the loan’s effective interest rate rather than the market rate of interest is not a fair value measurement and is therefore excluded from fair value disclosure requirements. Appraised values may be discounted to reflect current market conditions and ultimate collectability. These discounts typically range from 0% to 20% for each of the respective periods. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly.

Other Real Estate Owned – Properties acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less costs to sell at the date of foreclosure. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying value or the new fair value less estimated selling costs. Fair value is generally based upon current appraisals, comparable sales, and other estimates of value obtained principally from independent sources, adjusted for selling costs. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the asset as nonrecurring Level 2. However, the Company also considers other factors or recent developments which could result in adjustments to the collateral value estimates indicated in the appraisals such as changes in absorption rates or market conditions from the time of valuation. In situations where an

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appraisal less estimated selling costs is used to determine fair value, management adjustments are significant to the fair value measurements, or other means are used to estimate fair value in the absence of an appraisal, the Company records the impaired loan as nonrecurring Level 3 within the valuation hierarchy. Appraised values may be discounted to reflect current market conditions and ultimate collectability. These discounts typically range from 0% to 20% for each of the respective periods.

The following table summarizes the Company’s assets measured at fair value at the dates indicated (dollars in thousands):

	At September 30, 2014
	Total		Level 1		Level 2		Level 3
Assets valued on a recurring basis
Investment securities:
U.S. government agency	$	4,935	$	—	$	4,935	$	—
State and municipals		6,066		—		6,066		—
Mortgage-backed		29,996		—		29,996		—
Assets valued on a non-recurring basis
Impaired loans		34,321		—		—		34,321
Other real estate owned		1,220		—		—		1,220
Total	$	76,538	$	—	$	40,997	$	35,541
	At December 31, 2013
	Total		Level 1		Level 2		Level 3
Assets valued on a recurring basis
Investment securities:
U.S. government agency	$	40,930	$	—	$	40,930	$	—
State and municipals		10,181		—		10,181		—
Mortgage-backed		38,204		—		38,204		—
Assets valued on a non-recurring basis
Impaired loans		39,583		—		—		39,583
Other real estate owned		1,233		—		—		1,233
Total	$	130,131	$	—	$	89,315	$	40,816

NOTE 9. BORROWED FUNDS

A summary of the Company’s outstanding borrowings and the annual rate of interest currently payable on each category is presented in the following table at the dates indicated (dollars in thousands):

	September 30, 2014					December 31, 2013
	Outstanding Balance		Annual Interest Rate			Outstanding Balance		Annual Interest Rate
Securities sold under overnight repurchase agreements	$	394		0.15	%	$	388		0.14	%
Securities sold under term repurchase agreements		—		—			45,000		4.38
Trust preferred securities		—		—			5,155		3.19
Subordinated debt		—		—			2,700		4.00
Total borrowed funds	$	394		0.15	%	$	53,243		4.21	%

The Bank engages from time-to-time in federal funds purchases from upstream correspondent institutions to meet temporary funding needs. There were none of these transactions outstanding at the close of either period presented in the above table.

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The Bank had a total of $45.0 million of borrowings in the form of securities sold under term repurchase agreements that were entered into during 2008. These borrowings are secured by marketable investment securities equal to approximately 109.5% of the principal balances outstanding plus accrued interest and the value of an imbedded interest rate cap.

The borrowings were repaid as of July 18, 2014. There was prepayment expense of $4.4 million. The security interests in the pledged investment securities were released in connection with the Company’s repayment of these borrowings.

The Bank utilizes borrowings from the Federal Home Loan Bank (“FHLB”) as a source of liquidity. At September 30, 2014, the Bank had immediately available credit of $6.7 million. There were no advances from the FHLB at quarter-end.

During 2008, the Company issued $5.2 million of junior subordinated debentures to its wholly owned capital trust, Bank of the Carolinas Trust I (the “Trust”), which, in turn, issued $5.0 million in trust preferred securities having a like liquidation amount and $155,000 in common securities (all common securities are owned by the Company). The Company fully and unconditionally guaranteed the Trust’s obligations related to the trust preferred securities.

On July 16, 2014, the Company repurchased all of its floating rate trust preferred securities issued through the Trust from the holders of those securities for an aggregate cash payment of $1.75 million. The holders of the trust preferred securities agreed to forgive any unpaid interest on the securities.

In 2008, the Company issued $2.7 million of subordinated debt in a private transaction with another financial institution. On July 16, 2014, the Company agreed to repurchase the subordinated note representing this debt from the holder of the note for a cash payment of $1.35 million. The noteholder also agreed to forgive any unpaid interest on the note.

Under the terms of a written agreement between the Company and the Federal Reserve Bank of Richmond, the Company and the Trust may not make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Federal Reserve Bank of Richmond and the Director of the Division of Banking Supervision and Regulation of the Federal Reserve Board of Governors.

NOTE 10. STOCKHOLDERS’ EQUITY

The Company completed a private placement of common stock resulting in gross proceeds of approximately $45.8 million on July 16, 2014. In connection with the private placement, the Company repurchased all 13,179 shares of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A, issued under the Capital Purchase Program from the U.S. Treasury for a cash payment of $3.3 million. The Treasury also agreed to waive any unpaid dividends on the Series A Preferred Stock, and to cancel the warrant to purchase 475,204 shares of the Company’s common stock held by the Treasury. The Company invested $34.8 million into its banking subsidiary.

Preferred Stock:

The Company has 3.0 million shares of preferred stock authorized. There were 13,179 shares of preferred stock issued and outstanding with a $1,000 per share liquidation preference on December 31, 2013. All of the shares were issued on April 17, 2009 in connection with the Company’s participation in the U.S. Treasury’s TARP Capital Purchase Program.

On July 16, 2014, in connection with the private placement, the Company repurchased all 13,179 shares of its Series A Preferred Stock for a cash payment of $3.3 million. The Treasury also agreed to waive any unpaid dividends on the Series A Preferred Stock, and to cancel the warrant to purchase 475,204 shares of the Company’s common stock held by the Treasury.

Common Stock:

The Company has 580.0 million shares with no par value common stock authorized as of September 30, 2014. There were 462,028,831 and 3,895,840 shares of common stock issued and outstanding at September 30, 2014 and December 31, 2013, respectively.

Warrants:

In connection with the issuance of the preferred shares under the U.S. Treasury’s TARP Capital Purchase Program, the Company issued the U.S. Treasury a warrant to purchase 475,204 shares of its common stock for $4.16 per share. The warrant expires April 17, 2019.

The warrants were cancelled on July 16, 2014 as disclosed above.

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NOTE 11. INCOME TAXES

The Company utilizes the liability method of computing income taxes. Under the liability method, deferred tax liabilities and assets are established for future tax return effects of the temporary differences between the stated value of assets and liabilities for financial reporting purposes and their tax bases. The focus is on accruing the appropriate balance sheet deferred tax amount, with the statement of income effect being the result of the changes in the balance sheet amounts from period to period. The current portion of income tax expense is provided based upon the actual tax liability incurred for tax return purposes.

An evaluation of the probability of being able to realize the future benefits of deferred tax assets is made. A valuation allowance is provided for the deferred tax asset when it is more likely than not that some portion or all of the deferred tax asset will not be realized. Management has established a deferred tax asset valuation allowance of $15.8 million and $17.7 as of September 30, 2014 and December 31, 2013, respectively. The change in the valuation allowance is due to the change in unrealized losses in the bond portfolio from $5.4 million at December 31, 2013 to $300,000 at September 30, 2014. The valuation allowance has been established because management believes current overall credit trends, as well as actual and forecasted performance, raise significant concern over the ability of the Company to realize the components of its deferred tax assets relating to net operating losses and the allowances for losses on loans and OREO. The Company does not expect to have taxable income for year ended December 31, 2014.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Introduction

Bank of the Carolinas Corporation (“the Company”) is the parent holding company of Bank of the Carolinas (“the Bank”). Because the Company has no separate operations and conducts no business on its own other than owning the Bank, the discussion contained in this Management’s Discussion and Analysis concerns primarily the business of the Bank. However, because the financial statements are presented on a consolidated basis, the Company and the Bank are collectively referred to herein as “the Company” unless otherwise noted.

The Bank began operations in December 1998 as a state chartered bank and currently has eight offices in the Piedmont region of North Carolina. The Bank competes for loans and deposits throughout the markets it serves. The Bank, like most community banks, derives most of its revenue from net interest income which is the difference between the income it earns from loans and securities and the interest expense it incurs on deposits and borrowings.

Written Agreement with Federal Reserve

The Company entered into a written agreement (the “Agreement”) with the Federal Reserve Bank of Richmond on August 26, 2011. The description of the Agreement set forth below is qualified in its entirety by reference to the full text of the Agreement, a copy of which is included as Exhibit 10.01 to the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on November 14, 2011, and incorporated herein by reference.

Source of Strength. The Agreement requires that the Company take appropriate steps to fully utilize its financial and managerial resources to serve as a source of strength to the Bank and ensure that the Bank complies with the requirements of the consent order entered into between the North Carolina Commissioner of Banks, the FDIC, and the Bank.

Dividends, Distributions, and other Payments. The Agreement prohibits the Company’s payment of any dividends without the prior approval of the Federal Reserve Bank of Richmond and the Director of the Division of Banking Supervision and Regulation of the Federal Reserve Board of Governors. It also prohibits the Company from directly or indirectly taking any dividends or any other form of payment representing a reduction in capital from the Bank without the prior written approval of the Federal Reserve Bank of Richmond.

Under the terms of the Agreement, the Company and Bank of the Carolinas Trust I may not make any distributions of interest, principal or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Federal Reserve Bank of Richmond and the Director of the Division of Banking Supervision and Regulation.

Debt and Stock Redemption. The Agreement requires that the Company and any non-bank subsidiary of the Company not, directly or indirectly, incur, increase or guarantee any debt without the prior written approval of the Federal Reserve Bank. The Agreement also requires that the Company not, directly or indirectly, purchase or redeem any shares of its capital stock without the prior written approval of the Federal Reserve Bank of Richmond.

Capital Plan, Cash Flow Projections and Progress Reports. The Agreement requires that the Company file an acceptable capital plan and certain cash flow projections with the Federal Reserve Bank of Richmond. It also requires that the Company file a written progress report within 30 days after the end of each calendar quarter while the Agreement remains in effect.

The Agreement will remain in effect until modified or terminated by the Federal Reserve Bank of Richmond.

Consent Order with Regulators

The Bank entered into a Stipulation to the Issuance of a Consent Order (the “Stipulation”) with the Federal Deposit Insurance Corporation (the “FDIC”) and the North Carolina Office of the Commissioner of Banks (the “Commissioner”) and the FDIC and the Commissioner issued the related Consent Order (the “Order”), effective April 27, 2011. The description of the Stipulation and the Order set forth below is qualified in its entirety by reference to the Stipulation and the Order, copies of which are included as exhibits 10.1 and 10.2, respectively, to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 3, 2011, and incorporated herein by reference.

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Management. The Order required that the Bank have and retain qualified management, including a chief executive officer, senior lending officer, and chief operating officer with qualifications and experience commensurate with their assigned duties and responsibilities within 60 days from the effective date of the Order. Within 30 days of the effective date of the Order, the board of directors was required to retain a bank consultant to develop a written analysis and assessment of the Bank’s management needs. Within 60 days from receipt of the consultant’s management report, the Bank was required to formulate a written management plan that incorporated the findings of the management report, a plan of action in response to each recommendation contained in the management report, and a time frame for completing each action.

Capital Requirements. While the Order is in effect, the Bank must maintain a leverage ratio (the ratio of Tier 1 capital to total assets) of at least 8% and a total risk-based capital ratio (the ratio of qualifying total capital to risk-weighted assets) of at least 10%. If the Bank’s capital ratios are below these levels as of the date of any call report or regulatory examination, the Bank must, within 30 days from receipt of a written notice of capital deficiency from its regulators, present a plan to increase capital to meet the requirements of the Order. At September 30, 2014, the Bank was in compliance with the capital requirements contained in the Order.

Allowance for Loan and Lease Losses and Call Report. Upon issuance of the Order, the Bank was required to make a provision to replenish the allowance for loan and lease losses (“ALLL”). Within 30 days of the effective date of the Order, the Bank was required to review its call reports filed with its regulators on or after December 31, 2010, and was required to amend those reports if necessary to accurately reflect the financial condition of the Bank. Within 60 days of the effective date of the Order, the Bank was required to submit a comprehensive policy for determining the adequacy of the ALLL.

Concentrations of Credit. Within 60 days of the issuance of the Order, the Bank was required to perform a risk segmentation analysis with respect to its concentrations of credit and develop a written plan for systematically reducing and monitoring the Bank’s commercial real estate and acquisition, construction, and development loans to an amount commensurate with the Bank’s business strategy, management expertise, size, and location.

Charge-Offs, Credits. The Order required that the Bank eliminate from its books, by charge-off or collection, all assets or portions of assets classified “loss” and 50% of those assets classified “doubtful.” If an asset is classified “doubtful,” the Bank may alternatively charge off the amount that is considered uncollectible in accordance with the Bank’s written analysis of loan or lease impairment. The Order also prevents the Bank from extending, directly or indirectly, any additional credit to, or for the benefit of, any borrower who has a loan or other extension of credit from the Bank that has been charged off or classified, in whole or in part, “loss” or “doubtful” and is uncollected. The Bank may not extend, directly or indirectly, any additional credit to any borrower who has a loan or other extension of credit from the Bank that has been classified “substandard.” These limitations do not apply if the Bank’s failure to extend further credit to a particular borrower would be detrimental to the best interests of the Bank.

Asset Growth. While the Order is in effect, the Bank must notify its regulators at least 60 days prior to undertaking asset growth that exceeds 10% or more per year or initiating material changes in asset or liability composition. The Bank’s asset growth cannot result in noncompliance with the capital maintenance provisions of the Order unless the Bank receives prior written approval from its regulators.

Restriction on Dividends and Other Payments. While the Order is in effect, the Bank cannot declare or pay dividends, pay bonuses, or pay any form of payment outside the ordinary course of business resulting in a reduction of capital without the prior written approval of its regulators. In addition, the Bank cannot make any distributions of interest, principal, or other sums on subordinated debentures without prior regulatory approval.

Brokered Deposits. The Order provides that the Bank may not accept, renew, or roll over any brokered deposits unless it is in compliance with the requirements of the FDIC regulations governing brokered deposits. These regulations prohibit undercapitalized institutions from accepting, renewing, or rolling over any brokered deposits and also prohibit undercapitalized institutions from soliciting deposits by offering an effective yield that exceeds by more than 75 basis points the prevailing effective yields on insured deposits of comparable maturity in the institution’s market area. An “adequately capitalized” institution may not accept, renew, or roll over brokered deposits unless it has applied for and been granted a waiver by the FDIC. As of September 30, 2014, the Bank was classified as “well capitalized.”

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Written Plans and Other Material Terms. Under the terms of the Order, the Bank was required to prepare and submit the following written plans or reports to the FDIC and the Commissioner:

• Plan to improve liquidity, contingency funding, interest rate risk, and asset liability management

• Plan to reduce assets of $500,000 or greater classified “doubtful” and “substandard”

• Revised lending and collection policy to provide effective guidance and control over the Bank’s lending and credit administration functions

• Effective internal loan review and grading system

• Policy for managing the Bank’s other real estate

• Business/strategic plan covering the overall operation of the Bank

• Plan and comprehensive budget for all categories of income and expense for the year 2011

• Policy and procedures for managing interest rate risk

• Assessment of the Bank’s information technology function

Under the Order, the Bank’s board of directors agreed to increase its participation in the affairs of the Bank, including assuming full responsibility for the approval of policies and objectives for the supervision of all of the Bank’s activities. The Bank was also required to establish a board committee to monitor and coordinate compliance with the Order.

The Order will remain in effect until modified or terminated by the FDIC and the Commissioner.

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CHANGES IN FINANCIAL CONDITION

The Company completed a private placement of common stock resulting in gross proceeds of approximately $45.8 million on July 16, 2014. In connection with the private placement, the Company repurchased all 13,179 shares of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A, issued under the Capital Purchase Program from the U.S. Treasury for a cash payment of $3.3 million. The Treasury also agreed to waive any unpaid dividends on the Series A Preferred Stock, and to cancel the warrant to purchase 475,204 shares of the Company’s common stock held by the Treasury. The Company also repurchased all of its floating rate trust preferred securities issued through its subsidiary, Bank of the Carolinas Trust I, from the holders of those securities for an aggregate cash payment of $1.75 million. The holders of the trust preferred securities agreed to forgive any unpaid interest on the securities. The Company also agreed to repurchase a subordinated note from the holder of the note for a cash payment of $1.35 million. The noteholder agreed to forgive any unpaid interest on the note. As of July 31, 2014, the Company and its subsidiaries have no debt obligations. The Company injected $34.8 million from the private placement into the Company’s banking subsidiary.

Total Assets

At September 30, 2014, total assets were $396.3 million, a decrease of 6.5% compared to $423.7 million at December 31, 2013. The asset decrease was primarily the result of prepaying the Company’s term repurchase agreements of $45.0 million. The Company had earning assets of $366.7 million at September 30, 2014 consisting of $281.7 million in loans, $41.0 million in investment securities, and $44.1 million in temporary investments. Stockholders’ equity was $46.2 million at September 30, 2014 compared to $1.7 million at December 31, 2013. The increase in stockholders’ equity was due to the completion of the private placement transaction described above.

Investment Securities

Investment securities totaled $41.0 million at September 30, 2014, compared to $90.3 million at December 31, 2013. The decrease was as a result of restructuring the investment portfolio to address interest rate risk. The Company sold investment securities of $46.6 million for a loss of $1.3 million. A summary of the Company’s investment securities holdings by major category at September 30, 2014 and December 31, 2013 is included in Note 3 of “Notes to Consolidated Financial Statements”.

Loans and Allowance for Loan Losses

At September 30, 2014, the loan portfolio totaled $281.7 million and represented 71.1% of total assets compared to $278.5 million or 65.7% of total assets at December 31, 2013. Total loans at September 30, 2014 increased $3.2 million or 1.1% from December 31, 2013. The increase in loans outstanding in the nine-month period is the result of new loans originated in excess of net chargeoffs and principal repayments. Loan demand has increased over the last year. Real estate loans, including commercial real estate, constituted approximately 91% of the loan portfolio, and commercial business and other loans represented approximately 9% of the total loan portfolio at both September 30, 2014 and December 31, 2013.

The allowance for loan losses is created by direct charges to income. Losses on loans are charged against the allowance in the period in which such loans, in management’s opinion, become uncollectible. Recoveries during the period are credited to this allowance. The factors that influence management’s judgment in determining the amount charged to operating expense include past loan experience, composition of the loan portfolio, current economic conditions and probable losses.

The appropriateness of the allowance for loan losses is measured on a quarterly basis using an allocation model that assigns reserves to various components of the loan portfolio in order to provide for probable inherent losses. It must be emphasized, however, that the determination of the reserve using the Company’s procedures and methods rests upon various judgments and assumptions about current economic conditions and other factors affecting loans. No assurance can be given that the Company will not in any particular period sustain loan losses that are sizable in relation to amounts reserved or that subsequent evaluations of the loan portfolio, in light of conditions and factors then prevailing, will not require significant changes in the allowance for loan losses or future charges to earnings. In addition, bank regulatory agencies, as an integral part of their routine examination process, periodically review the Company’s allowance. Those agencies may require the Company to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examinations. The Company believes the allowance is appropriate based on management’s current analysis.

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The allowance for loan losses at September 30, 2014, amounted to $5.2 million, a decrease of $832,000, or 13.8% from December 31, 2013. The allowance consists of specific reserves of $1.4 million and a general allowance $3.8 million. The Bank’s provisions for loan losses amounted to a recovery of $760,000 during the nine months ended September 30, 2014 compared to a $2.1 million recovery during the nine months ended September 30, 2013. The loan loss provision for 2014 reflects a specific impairment of $1.1 million to one of the Bank’s top ten largest loan relationships. While the Company has not participated in “subprime” lending activities, we were affected by the economic downturn in our markets. We continue to work with our customers with troubled credit relationships to the extent that it is reasonably possible.

Certain credit risks are inherent in making loans, particularly commercial and consumer loans. Management prudently assesses these risks and attempts to manage them effectively. The Company also attempts to reduce default risks by adhering to internal credit underwriting policies and procedures. These policies and procedures include officer and customer limits, periodic loan documentation review and follow up on exceptions to credit policies. A loan is placed in nonaccrual status when, in management’s judgment, the collection of interest appears doubtful.

The following table summarizes information regarding our nonaccrual loans, other real estate owned, and 90-day and over past due loans as of September 30, 2014 and December 31, 2013 (dollars in thousands):

	September 30,			December 31,
	2014			2013
Loans accounted for on a nonaccrual basis:
Real estate loans:
1-4 family residential	$	742		$	1,276
Commercial real estate		659			2,192
Construction and development		1,667			851
Home equity		69			—
Total real estate loans		3,137			4,319
Commercial business and other loans		176			463
Consumer loans		5			6
Total nonaccrual loans		3,318			4,788
Accruing loans which are contractually past due 90 days or more		—			—
Total nonperforming loans		3,318			4,788
Other real estate owned		1,220			1,233
Total nonperforming assets	$	4,538		$	6,021
Total nonperforming loans as a percentage of loans		1.18	%		1.72	%
Allowance for loan losses as a percentage of total nonperforming loans		156.21	%		125.63	%
Allowance for loan losses as a percentage of total loans		1.84	%		2.16	%
Total nonperforming assets as a percentage of loans and other real estate owned		1.60	%		2.15	%
Total nonperforming assets as a percentage of total assets		1.15	%		1.42	%

Deposits

The Company’s deposit services include business and individual checking accounts, interest bearing checking accounts, savings accounts, money market accounts, IRA deposits and certificates of deposit. At September 30, 2014, total deposits were $348.2 million compared to $366.2 million at December 31, 2013. The September 30, 2014 amount represents a decrease of 4.9% from December 31, 2013, which is mainly recognized in customer time deposit accounts, as well as, noninterest bearing checking accounts. At September 30, 2014, the deposit mix was comparable to December 31, 2013, with the exception of customer time deposit accounts. Currently, the Company has chosen to not renew non-core institutional certificates of deposit due to excess liquidity.

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The following table presents a breakdown of our deposit base at September 30, 2014 and December 31, 2013 (dollars in thousands):

	September 30, 2014			December 31, 2013
Noninterest bearing demand deposits	$	34,857		$	35,243
Interest checking deposits		41,540			40,939
Savings deposits		16,298			15,637
Money market deposits		97,986			93,782
Customer time deposits		157,486			180,549
Brokered certificates of deposit		—			—
Total deposits	$	348,167		$	366,150
Time deposits $100,000 or more:
Brokered certificates of deposit	$	—		$	—
Customer time deposits issued in denominations of $100,000 or more		97,273			115,926
Total time deposits issued in denominations of $100,000 or more	$	97,273		$	115,926
As a percent of total deposits:
Noninterest bearing demand deposits		10.01	%		9.63	%
Interest checking deposits		11.93			11.18
Savings deposits		4.68			4.27
Money market deposits		28.14			25.61
Customer time deposits		45.23			49.31
Brokered certificates of deposit		—			—
Total time deposits issued in denominations of $100,000 or more		27.94			31.66

Liquidity

Liquidity management is the process of managing assets and liabilities, as well as their maturities, to ensure adequate funding for loan and deposit activities. Sources of liquidity come from both balance sheet and off-balance sheet sources. We define balance sheet liquidity as the relationship that net liquid assets have to unsecured liabilities. Net liquid assets are the sum of cash and cash items, less required reserves on demand and interest checking deposits, plus demand deposits due from banks, plus temporary investments, including federal funds sold, plus the fair value of investment securities, less collateral requirements related to public funds on deposit and repurchase agreements. Unsecured liabilities are equal to total liabilities less required cash reserves on noninterest-bearing demand deposits and interest checking deposits less the outstanding balances of all secured liabilities, whether secured by liquid assets or not. We consider off-balance sheet liquidity to include unsecured federal funds lines from other banks and loan collateral which may be used for additional advances from the Federal Home Loan Bank. As of September 30, 2014 our balance sheet liquidity ratio (net liquid assets as a percent of unsecured liabilities) amounted to 24.46% and our total liquidity ratio (balance sheet plus off-balance sheet liquidity) was 25.91%. As of December 31, 2014, our balance sheet liquidity ratio was 17.04% and our total liquidity ratio was 18.78%.

In addition, we have the ability to borrow up to $10.0 million from the discount window of the Federal Reserve subject to our pledge of marketable securities, which could be used for temporary funding needs. We also have the ability to borrow from the Federal Home Loan Bank on similar terms. While we consider these arrangements sources of back-up funding, we do not consider them as liquidity sources because they require our pledge of liquid assets as collateral. We regularly borrow from the Federal Home Loan Bank as a normal part of our business. These advances, of which there were none at September 30, 2014, are secured by various types of real estate-secured loans. The Company closely monitors and evaluates its overall liquidity position. The Company believes its liquidity position at September 30, 2014 is adequate to meet its operating needs.

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Interest Rate Sensitivity

Fluctuating interest rates, increased competition, and changes in the regulatory environment continue to significantly affect the importance of interest rate sensitivity management. Rate sensitivity arises when interest rates on assets change in a different period of time or in a different proportion to interest rates on liabilities. The primary objective of interest rate sensitivity management is to prudently structure the balance sheet so that movements of interest rates on assets and liabilities are highly correlated and produce a reasonable net interest margin even in periods of volatile interest rates. The Company uses an asset/liability simulation model to project potential changes to the Company’s net interest margin, net income, and economic value of equity based on simulated changes to market interest rates, namely the prime rate. Our goal is to maintain an interest rate sensitivity position as close to neutral as practicable whereby little or no change in interest income would occur as interest rates change. On September 30, 2014, we were cumulatively liability sensitive for the next twelve months, which means that our interest bearing liabilities would reprice more quickly than our interest bearing assets. Theoretically, our net interest margin will decrease if market interest rates rise or increase if market interest rates fall. However, the repricing characteristic of assets is different from the repricing characteristics of funding sources. Therefore, net interest income can be impacted by changes in interest rates even if the repricing opportunities of assets and liabilities are perfectly matched.

Capital Adequacy

Regulatory guidelines require banks to hold minimum levels of capital based upon the risk weighting of certain categories of assets as well as any off-balance sheet contingencies. Federal regulators have adopted risk-based capital and leverage capital guidelines for measuring the capital adequacy of banks and bank holding companies. All applicable capital standards must be satisfied for the Company and the Bank to be considered in compliance with regulatory requirements.

As described above, the Bank is subject to a consent order issued by the FDIC and the North Carolina Office of the Commissioner of Banks and the Company is party to a written agreement with the Federal Reserve Bank of Richmond. These regulatory agreements require that the Bank maintain capital levels in excess of normal regulatory minimums, including a Leverage Capital Ratio of at least 8.0% and a Total Risk-Based Capital Ratio of at least 10.0%, and that the Company and the Bank seek the approval of their respective regulators prior to the payment of any cash dividend. At September 30, 2014, the Bank was in compliance with the minimum capital requirements set forth in the consent order.

At September 30, 2014, the Company’s leverage and Tier 1 risk-weighted Capital Ratios were 11.14 % and 15.09%, respectively, which are above the minimum level required by regulatory guidelines. At September 30, 2014, the Company’s Total risk-weighted Capital Ratio was 16.35%, which is above the minimum level required by regulatory guidelines. At September 30, 2014 the Bank’s leverage and Tier 1 risk-weighted Capital Ratios were 10.77% and 14.46%, respectively, which are above the minimum levels required by regulatory guidelines. At September 30, 2014, the Bank’s Total risk-weighted Capital Ratio was 15.72%, which is above the minimum level required by regulatory guidelines. At September 30, 2014, the Bank’s leverage and Total risk-weighted Capital Ratios were both compliant with the levels specified in the above referenced consent order with bank regulators.

Revised Capital Requirements. On July 2, 2013, the Federal Reserve and the Office of the Comptroller of the Currency adopted a final rule that will revise the current risk-based and leverage capital requirements for banking organizations. The final rule is a continuation of joint notices of proposed rulemaking originally published in the Federal Register during August 2012.

The final rule implements a revised definition of regulatory capital, a new common equity Tier 1 minimum capital requirement, and a higher overall minimum Tier 1 capital requirement, incorporating these new requirements into the existing prompt corrective action (PCA) framework. It also establishes limits on a banking organization’s capital distributions and certain discretionary bonus payments if the organization does not hold a specified amount of common equity Tier 1 capital in addition to the amount necessary to meet its minimum risk-based capital requirements. This additional capital is referred to as the “capital conservation buffer.” The “countercyclical capital buffer” provisions from the proposed rule have also been adopted, however, they apply only to large financial institutions (banks and bank holding companies with total consolidated assets of $250 billion or more) implementing the “advanced approaches” framework and are not applicable to the Bank.

The final rule permanently grandfathers the Tier 1 capital treatment for certain non-qualifying capital instruments, including trust preferred securities, outstanding as of May 19, 2010.

30

Under the proposed rules released in August 2012, banking organizations would have been required to recognize in regulatory capital all components of accumulated other comprehensive income (excluding accumulated net gains and losses on cash-flow hedges that relate to the hedging of items that are not recognized at fair value on the balance sheet). The final rule carries this requirement forward, with an exception for smaller banking organizations, such as the Bank, which are not subject to the “advanced approaches” rule. Such organizations may make a one-time election not to include most elements of accumulated other comprehensive income (including unrealized gains and losses on securities designated as available-for-sale) in regulatory capital under the final rule. Organizations making this election will be permitted to use the currently existing treatment under the general risk-based capital rules that exclude most accumulated other comprehensive income elements from regulatory capital. The election must be made with the first call report or FR Y-9 report filed after the banking organization becomes subject to the final rule (January 2015 in the Bank’s case).

The new rule also amends the existing methodologies for determining risk-weighted assets for all banking organizations. Specifically, the final rule assigns a 50% or 100% risk weight to mortgage loans secured by one-to-four family residential properties. Generally, residential mortgage loans secured by a first lien on a one- to-four family residential property that are prudently underwritten and that are performing according to their original terms receive a 50% risk weight. All other one-to-four family residential mortgage loans, including loans secured by a junior lien on residential property, are assigned a 100% risk weight.

The mandatory compliance date for the Bank will be January 1, 2015, with a transition period for the capital conservation buffer until January 1, 2016, and additional transition periods for certain other measures under the new rule.

Management will continue to evaluate the potential effect of the new final rule over the coming quarters.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2014 and 2013

Overview. For the three months ended September 30, 2014, the Company had net income available to common shareholders of $10.6 million, or $0.028 per common share. This compares to a net loss of $5,000, or $0.00 per common share, for the three months ended September 30, 2013. The increase in net income was primarily due to the gain on redemption of preferred stock.

Net Interest Income. The Company’s net interest income for the three months ended September 30, 2014 totaled $3.0 million compared to net interest income of $2.7 million at September 30, 2013. Net interest income increased due to the increase in loan balances and reductions in non-performing loans compared to September 30, 2013. The net interest margin was 3.20% for the third quarter of 2014 compared to 2.74% for the third quarter of 2013.

Provision for Loan Losses. The loan loss provision amounted to a recovery of $535,000 for the quarter ended September 30, 2014, a decrease of $385,000, from the $920,000 recovery recorded in the comparable quarter of 2013. Net recoveries totaled $565,000 in the third quarter of 2014 compared to net recoveries of $737,000 in the third quarter of 2013. The recovery for the quarter was primarily based on a $700,000 recovery from a previously charged off loan.

Noninterest Income. Noninterest income totaled $4.6 million for the three months ended September 30, 2014 compared to $380,000 for the comparable three-month period of 2013. Noninterest income includes customer service charges on deposit accounts, bank owned life insurance, and gains or losses on investment securities. The private placement transaction included discounts and interest forgiveness on the Company’s trust preferred securities and subordinated debt in the amount of $5.4 million. The Company restructured its investment security portfolio resulting in a $1.3 million loss on sale of securities. Excluding these transactions, noninterest income would have been $397,000. Excluding the extraordinary items, noninterest income increased 4.5% for the three months ended September 30, 2014 as compared to the same three months of 2013, primarily as a result of increases in the Company’s fee schedule.

Noninterest Expenses. Noninterest expenses totaled $7.7 million and $3.6 million for the three months ended September 30, 2014 and 2013, respectively. The Company prepaid two term repurchase agreements at a prepayment expense of $4.4 million. Excluding the one-time prepayment expense, noninterest expenses for the three months ended September 30, 2014 was $3.4 million and along with the decrease in other real estate expenses of $170,000, noninterest expenses for the three months ended September 30, 2014 decreased by $47,000. The Company is performing due diligence in all cost categories to minimize expense.

31

Income Taxes. There was no provision for income taxes made for the third quarter of 2014 as compared to an income tax expense of $152,000 for the third quarter of 2013. Our deferred tax asset had no value at September 30, 2014 and at December 31, 2013.

Nine Months Ended September 30, 2014 and 2013

Overview. For the nine months ended September 30, 2014, the Company had a net income available to common shareholders of $10.0 million, or $0.075 per common share. This compares to a net loss of $1.4 million, or $0.36 per common share, for the nine months ended September 30, 2013. The increase in net income was primarily due to the gain on redemption of preferred stock. There was no provision for income taxes for the first nine months of 2014 as compared to an income tax expense of $790,000 the first nine months of 2013.

Net Interest Income. The Company’s net interest income for the nine months ended September 30, 2014 totaled $8.4 million compared to $7.9 million at September 30, 2013. Net interest income increased due to the increase in loan balances and reductions in non-performing loans compared to September 30, 2013. The net interest margin has increased to 2.89% for the first nine months of 2014 compared to 2.72% for the first nine months of 2013.

Provision for Loan Losses. The loan loss provision amounted to a recovery of $760,000 for the nine months ended September 30, 2014, compared to the $2.1 million recovery recorded in the comparable nine months of 2013. Net chargeoffs totaled $72,000 in the first nine months of 2014 compared to net recoveries of $1.4 million in the first nine months of 2013.

Noninterest Income. Noninterest income totaled $5.3 million for the nine months ended September 30, 2014 compared to $1.1 million for the comparable nine-month period of 2013. Noninterest income includes customer service charges on deposit accounts, bank owned life insurance, and gains or losses on investment securities. The private placement transaction included discounts and interest forgiveness on the Company’s trust preferred securities and subordinated debt in the amount of $5.4 million. The Company restructured its investment security portfolio resulting in a $1.3 million loss on sale of securities. Excluding these extraordinary items, noninterest income would have been $1.2 million. Excluding the extraordinary items, noninterest income increased 3.7% for the nine months ended September 30, 2014 as compared to the same nine months of 2013, primarily as a result of increases in the Company’s fee schedule.

Noninterest Expenses. Noninterest expenses totaled $14.7 million and $11.0 million for the nine months ended September 30, 2014 and 2013, respectively. The Company prepaid two term repurchase agreements at a prepayment expense of $4.4 million. Excluding the one-time prepayment expense, noninterest expenses for the nine months ended September 30, 2014 was $10.4 million and along with the decrease in other real estate expenses of $675,000 and reimbursement of out-of-pocket expenses related to a loan for which $245,000 of life insurance premiums were paid to ensure final collection, noninterest expenses for the nine months ended September 30, 2014 increased by $15,000. The Company is performing due diligence in all cost categories to minimize expense.

Income Taxes. There was no provision for income taxes made for the first nine months of 2014 as compared to an income tax expense of $790,000 for the first nine months of 2013. Our deferred tax asset had no value at September 30, 2014 and at December 31, 2013.

DISCLOSURES ABOUT FORWARD LOOKING STATEMENTS

Statements in this Report 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. 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

32

nonperforming loans and credit losses in our loan portfolio, (c) 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 changes 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, and changes in general economic 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), (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 Report 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.

33

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Smaller reporting companies such as the Company are not required to provide the information required by this item.

Item 4. CONTROLS AND PROCEDURES

The Company’s management, under the supervision and with the participation of its principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures in accordance with Rule 13a-15 of the Securities Exchange Act of 1934 (the “Exchange Act”). Based on their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that it is able to record, process, summarize and report in a timely manner the information required to be disclosed in reports it files under the Exchange Act.

In connection with the above evaluation of the effectiveness of the Company’s disclosure controls and procedures, no change in the Company’s internal control over financial reporting was identified that occurred during the most recent quarterly period that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

There are no material pending legal proceedings to which the Company or the Bank is a party, or of which any of their property is the subject other than routine litigation that is incidental to their business.

Item 1A. Risk Factors

Smaller reporting companies such as the Company are not required to provide the information required by this item.

Item 2. Unregistered Sales of Equity Securities and Use of

As described in Item 2, the Company completed a private placement of common stock on July 16, 2014. The information required by Item 701 of Regulation S-K was included in the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 21, 2014.

Item 3. Defaults Upon Senior Securities.

None at September 30, 2014.

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

34

Item 6. Exhibits

The following exhibits are filed with this report.

3.01	Articles of Amendment of Bank of the Carolinas Corporation, filed July 24, 2014 (incorporated by reference from Exhibit 3.1 to our Current Report on Form 8-K dated July 30, 2014)
4.01	Tax Benefits Preservation Plan (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K/A (Amendment No. 1) dated July 18, 2014)
10.01	Form of Stock Purchase Agreement dated July 15, 2014 (incorporated by reference from exhibits to our Current Report on Form 8-K dated July 21, 2014)
10.02	Form of Registration Rights Agreement dated July 15, 2014 (incorporated by reference from exhibits to our Current Report on Form 8-K dated July 21, 2014)
10.03	Side Letter Agreement with FJ Capital Management, LLC, dated July 15, 2014 (incorporated by reference from exhibits to our Current Report on Form 8-K dated July 21, 2014)
10.04	Side Letter Agreement with Bridge Equities III, LLC, dated July 15, 2014 (incorporated by reference from exhibits to our Current Report on Form 8-K dated July 21, 2014)
10.05	Side Letter Agreement with RMB Capital Management LLC, dated July 15, 2014 (incorporated by reference from exhibits to our Current Report on Form 8-K dated July 21, 2014)
10.06	Side Letter Agreement with Sandler O’Neill Asset Management, dated July 15, 2014 (incorporated by reference from exhibits to our Current Report on Form 8-K dated July 21, 2014)
10.07	Side Letter Agreement with TFO Financial Institutions Restructuring Fund II LLC, dated July 15, 2014 (incorporated by reference from exhibits to our Current Report on Form 8-K dated July 21, 2014)
31.01	Certification of our principal executive officer pursuant to Rule 13a-14(a)
31.02	Certification of our principal financial officer pursuant to Rule 13a-14(a)
32.01	Certification of our principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350
101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013; (ii) Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2014 and 2013; (iii) Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2014 and 2013; (iv) Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2014 and 2013; (v) Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2014 and 2013; and (vi) Notes to Consolidated Financial Statements as of September 30, 2014 and December 31, 2013 and for the Nine Months Ended September 30, 2014 and 2013

35

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 thereunto duly authorized.

BANK OF THE CAROLINAS CORPORATION
Date: November 14, 2014	By:	/s/ Stephen R. Talbert
	Stephen R. Talbert
	President and Chief Executive Officer
	(principal executive officer)
Date: November 14, 2014	By:	/s/ Megan W. Patton
	Megan W. Patton
	Senior Vice President and Chief Financial Officer
	(principal financial officer)

36

EXHIBIT INDEX

Exhibit Number	Description
3.01	Articles of Amendment of Bank of the Carolinas Corporation, filed July 24, 2014 (incorporated by reference from Exhibit 3.1 to our Current Report on Form 8-K dated July 30, 2014)
4.01	Tax Benefits Preservation Plan (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K/A (Amendment No. 1) dated July 18, 2014)
10.01	Form of Stock Purchase Agreement dated July 15, 2014 (incorporated by reference from exhibits to our Current Report on Form 8-K dated July 21, 2014)
10.02	Form of Registration Rights Agreement dated July 15, 2014 (incorporated by reference from exhibits to our Current Report on Form 8-K dated July 21, 2014)
10.03	Side Letter Agreement with FJ Capital Management, LLC, dated July 15, 2014 (incorporated by reference from exhibits to our Current Report on Form 8-K dated July 21, 2014)
10.04	Side Letter Agreement with Bridge Equities III, LLC, dated July 15, 2014 (incorporated by reference from exhibits to our Current Report on Form 8-K dated July 21, 2014)
10.05	Side Letter Agreement with RMB Capital Management LLC, dated July 15, 2014 (incorporated by reference from exhibits to our Current Report on Form 8-K dated July 21, 2014)
10.06	Side Letter Agreement with Sandler O’Neill Asset Management, dated July 15, 2014 (incorporated by reference from exhibits to our Current Report on Form 8-K dated July 21, 2014)
10.07	Side Letter Agreement with TFO Financial Institutions Restructuring Fund II LLC, dated July 15, 2014 (incorporated by reference from exhibits to our Current Report on Form 8-K dated July 21, 2014)
31.01	Certification of our principal executive officer pursuant to Rule 13a-14(a)
31.02	Certification of our principal financial officer pursuant to Rule 13a-14(a)
32.01	Certification of our principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350
101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013; (ii) Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2014 and 2013; (iii) Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2014 and 2013; (iv) Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2014 and 2013; (v) Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2014 and 2013; and (vi) Notes to Consolidated Financial Statements as of September 30, 2014 and December 31, 2013 and for the Nine Months Ended September 30, 2014 and 2013

37

EX-31.01

EXHIBIT 31.01

CERTIFICATION

(Pursuant to Rule 13a-14(a))

I, Stephen R. Talbert, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Bank of the Carolinas Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2014	/s/ Stephen R. Talbert
	Stephen R. Talbert
	President and Chief Executive Officer
	(principal executive officer)

EX-31.02

EXHIBIT 31.02

CERTIFICATION

(Pursuant to Rule 13a-14(a))

I, Megan W. Patton, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Bank of the Carolinas Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2014	/s/ Megan W. Patton
	Megan W. Patton
	Senior Vice President and Chief Financial Officer
	(principal financial officer)

EX-32.01

EXHIBIT 32.01

CERTIFICATIONS

(Pursuant to 18 U.S.C. Section 1350)

The undersigned hereby certifies that (i) the foregoing Quarterly Report on Form 10-Q filed by Bank of the Carolinas Corporation (the “Registrant”) for the quarter ended September 30, 2014, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in that Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: November 14, 2014	/s/ Stephen R. Talbert
	Stephen R. Talbert
	President and Chief Executive Officer
	(principal executive officer)
Date: November 14, 2014	/s/ Megan W. Patton
	Megan W. Patton
	Senior Vice President and Chief Financial Officer
	(principal financial officer)

XML

Consumer Related Loans, Segregated by Class of Loans (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment [Line Items]
Totals	$ 281,696	$ 278,510
Residential | Equity Lines
Financing Receivable, Recorded Investment [Line Items]
Totals	28,233	28,217
Residential | 1-4 Family Residential
Financing Receivable, Recorded Investment [Line Items]
Totals	89,955	83,749
Residential | Junior Liens
Financing Receivable, Recorded Investment [Line Items]
Totals	831	1,106
Consumer - Non Real Estate
Financing Receivable, Recorded Investment [Line Items]
Totals	3,099	2,554
Performing Financing Receivable
Financing Receivable, Recorded Investment [Line Items]
Totals	121,626	114,842
Performing Financing Receivable | Residential
Financing Receivable, Recorded Investment [Line Items]
Totals	118,532	112,294
Performing Financing Receivable | Residential | Equity Lines
Financing Receivable, Recorded Investment [Line Items]
Totals	28,165	28,122
Performing Financing Receivable | Residential | 1-4 Family Residential
Financing Receivable, Recorded Investment [Line Items]
Totals	89,562	83,092
Performing Financing Receivable | Residential | Junior Liens
Financing Receivable, Recorded Investment [Line Items]
Totals	805	1,080
Performing Financing Receivable | Consumer - Non Real Estate
Financing Receivable, Recorded Investment [Line Items]
Totals	3,094	2,548
Performing Financing Receivable | Consumer - Non Real Estate | Consumer Other Financing Receivable
Financing Receivable, Recorded Investment [Line Items]
Totals	3,094	2,548
Nonperforming Financing Receivable
Financing Receivable, Recorded Investment [Line Items]
Totals	492	784
Nonperforming Financing Receivable | Residential
Financing Receivable, Recorded Investment [Line Items]
Totals	487	778
Nonperforming Financing Receivable | Residential | Equity Lines
Financing Receivable, Recorded Investment [Line Items]
Totals	68	95
Nonperforming Financing Receivable | Residential | 1-4 Family Residential
Financing Receivable, Recorded Investment [Line Items]
Totals	393	657
Nonperforming Financing Receivable | Residential | Junior Liens
Financing Receivable, Recorded Investment [Line Items]
Totals	26	26
Nonperforming Financing Receivable | Consumer - Non Real Estate
Financing Receivable, Recorded Investment [Line Items]
Totals	5	6
Nonperforming Financing Receivable | Consumer - Non Real Estate | Consumer Other Financing Receivable
Financing Receivable, Recorded Investment [Line Items]
Totals	$ 5	$ 6

XML

Stockholders' Equity - Additional Information (Detail) (USD $)	0 Months Ended	9 Months Ended
	Jul. 16, 2014	Sep. 30, 2014	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Preferred stock authorized		3,000,000	3,000,000	[1]
Preferred shares issued		13,179	13,179	[1]
Preferred shares outstanding		13,179	13,179	[1]
Preferred shares, liquidation preference		$ 1,000	$ 1,000
Proceeds from issuance of private placement	$ 45,800,000
Proceeds from issuance of private placement invested in banking subsidiary	34,800,000
Repurchase of preferred stock		3,295,000
Common stock authorized		580,000,000	15,000,000	[1]
Common stock par value		$ 0	$ 5	[1]
Common shares issued		462,028,831	3,895,840	[1]
Common shares outstanding		462,028,831	3,895,840	[1]
Private placement
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares repurchased	13,179
US Treasury Securities
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Repurchase of preferred stock	$ 3,300,000
Company issued the U.S. Treasury a warrant to purchase common shares		475,204
Common stock par value		4.16
Warrant, expiration date		Apr. 17, 2019

[1] Derived from audited consolidated financial statements.

XML

Outstanding Borrowings and Annual Rate of Interest (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Assets Sold under Agreements to Repurchase [Line Items]
Outstanding Balance	$ 394	$ 53,243
Annual Interest Rate	0.15%	4.21%
Securities sold under overnight repurchase agreements
Assets Sold under Agreements to Repurchase [Line Items]
Outstanding Balance	394	388
Annual Interest Rate	0.15%	0.14%
Securities sold under term repurchase agreements
Assets Sold under Agreements to Repurchase [Line Items]
Outstanding Balance		45,000
Annual Interest Rate		4.38%
Trust preferred securities
Assets Sold under Agreements to Repurchase [Line Items]
Outstanding Balance		5,155
Annual Interest Rate		3.19%
Subordinated debt
Assets Sold under Agreements to Repurchase [Line Items]
Outstanding Balance	$ 2,700	$ 2,700
Annual Interest Rate		4.00%

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Impaired Loans, Segregated by Class of Loans (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
Financing Receivable, Impaired [Line Items]
With No Related Allowance, Recorded Investment	$ 13,775	$ 16,101
With No Related Allowance, Unpaid Principal Balance	15,829	17,993
With No Related Allowance, Related Allowance
With No Related Allowance, Average Recorded Investment	16,424	18,687
With No Related Allowance, Interest Income Recognized	508	980
With Related Allowance, Recorded Investment	21,982	24,045
With Related Allowance, Unpaid Principal Balance	22,184	24,164
With Related Allowance, Related Allowance	1,436	563
With Related Allowance, Average Recorded Investment	22,552	24,591
With Related Allowance, Interest Income Recognized	782	1,073
Recorded Investment, Total	35,757	40,146
Unpaid Principal Balance, Total	38,013	42,157
Related Allowance, Total	1,436	563
Average Recorded Investment, Total	38,976	43,278
Interest Income Recognized, Total	1,290	2,053
Commercial - Non Real Estate
Financing Receivable, Impaired [Line Items]
With No Related Allowance, Recorded Investment	381	1,099
With No Related Allowance, Unpaid Principal Balance	448	1,305
With No Related Allowance, Related Allowance
With No Related Allowance, Average Recorded Investment	465	1,384
With No Related Allowance, Interest Income Recognized	19	79
With Related Allowance, Recorded Investment	1,613	1,205
With Related Allowance, Unpaid Principal Balance	1,615	1,205
With Related Allowance, Related Allowance	26	25
With Related Allowance, Average Recorded Investment	1,677	1,282
With Related Allowance, Interest Income Recognized	53	45
Recorded Investment, Total	1,994	2,304
Unpaid Principal Balance, Total	2,063	2,510
Related Allowance, Total	26	25
Average Recorded Investment, Total	2,142	2,666
Interest Income Recognized, Total	72	124
Commercial Real Estate
Financing Receivable, Impaired [Line Items]
Recorded Investment, Total	18,215	19,393
Unpaid Principal Balance, Total	18,868	20,217
Related Allowance, Total	1,067	215
Average Recorded Investment, Total	19,317	20,768
Interest Income Recognized, Total	689	1,015
Commercial Real Estate | Owner occupied
Financing Receivable, Impaired [Line Items]
With No Related Allowance, Recorded Investment	2,121	3,480
With No Related Allowance, Unpaid Principal Balance	2,446	4,062
With No Related Allowance, Related Allowance
With No Related Allowance, Average Recorded Investment	2,658	4,365
With No Related Allowance, Interest Income Recognized	106	239
With Related Allowance, Recorded Investment	4,416	3,666
With Related Allowance, Unpaid Principal Balance	4,471	3,666
With Related Allowance, Related Allowance	829	77
With Related Allowance, Average Recorded Investment	4,505	3,727
With Related Allowance, Interest Income Recognized	146	166
Commercial Real Estate | Income Producing
Financing Receivable, Impaired [Line Items]
With No Related Allowance, Recorded Investment	3,299	3,734
With No Related Allowance, Unpaid Principal Balance	3,483	3,887
With No Related Allowance, Related Allowance
With No Related Allowance, Average Recorded Investment	3,518	3,938
With No Related Allowance, Interest Income Recognized	120	183
With Related Allowance, Recorded Investment	7,173	7,287
With Related Allowance, Unpaid Principal Balance	7,229	7,343
With Related Allowance, Related Allowance	164	126
With Related Allowance, Average Recorded Investment	7,388	7,465
With Related Allowance, Interest Income Recognized	284	382
Commercial Real Estate | Multifamily
Financing Receivable, Impaired [Line Items]
With No Related Allowance, Related Allowance
With Related Allowance, Recorded Investment	1,206	1,226
With Related Allowance, Unpaid Principal Balance	1,239	1,259
With Related Allowance, Related Allowance	74	12
With Related Allowance, Average Recorded Investment	1,248	1,273
With Related Allowance, Interest Income Recognized	33	45
Construction & Development
Financing Receivable, Impaired [Line Items]
Recorded Investment, Total	3,451	5,333
Unpaid Principal Balance, Total	4,506	5,701
Related Allowance, Total	23	115
Average Recorded Investment, Total	4,796	5,916
Interest Income Recognized, Total	105	275
Construction & Development | 1-4 Family Residential
Financing Receivable, Impaired [Line Items]
With No Related Allowance, Related Allowance
With Related Allowance, Recorded Investment	353	360
With Related Allowance, Unpaid Principal Balance	359	366
With Related Allowance, Related Allowance	9	8
With Related Allowance, Average Recorded Investment	363	371
With Related Allowance, Interest Income Recognized	14	19
Construction & Development | Construction & Development, Other
Financing Receivable, Impaired [Line Items]
With No Related Allowance, Recorded Investment	2,257	1,545
With No Related Allowance, Unpaid Principal Balance	3,280	1,881
With No Related Allowance, Related Allowance
With No Related Allowance, Average Recorded Investment	3,523	1,981
With No Related Allowance, Interest Income Recognized	57	112
With Related Allowance, Recorded Investment	731	3,176
With Related Allowance, Unpaid Principal Balance	736	3,181
With Related Allowance, Related Allowance	14	107
With Related Allowance, Average Recorded Investment	750	3,224
With Related Allowance, Interest Income Recognized	25	118
Construction & Development | Farmland
Financing Receivable, Impaired [Line Items]
With No Related Allowance, Recorded Investment	110	252
With No Related Allowance, Unpaid Principal Balance	131	273
With No Related Allowance, Related Allowance
With No Related Allowance, Average Recorded Investment	160	340
With No Related Allowance, Interest Income Recognized	9	26
Residential
Financing Receivable, Impaired [Line Items]
Recorded Investment, Total	12,027	13,040
Unpaid Principal Balance, Total	12,506	13,653
Related Allowance, Total	315	208
Average Recorded Investment, Total	12,647	13,847
Interest Income Recognized, Total	420	635
Residential | 1-4 Family Residential
Financing Receivable, Impaired [Line Items]
With No Related Allowance, Recorded Investment	5,109	5,632
With No Related Allowance, Unpaid Principal Balance	5,512	6,198
With No Related Allowance, Related Allowance
With No Related Allowance, Average Recorded Investment	5,562	6,281
With No Related Allowance, Interest Income Recognized	176	322
With Related Allowance, Recorded Investment	6,292	6,778
With Related Allowance, Unpaid Principal Balance	6,335	6,795
With Related Allowance, Related Allowance	271	204
With Related Allowance, Average Recorded Investment	6,417	6,893
With Related Allowance, Interest Income Recognized	219	279
Residential | Equity Lines
Financing Receivable, Impaired [Line Items]
With No Related Allowance, Recorded Investment	69	95
With No Related Allowance, Unpaid Principal Balance	77	101
With No Related Allowance, Related Allowance
With No Related Allowance, Average Recorded Investment	77	105
With No Related Allowance, Interest Income Recognized	2	3
With Related Allowance, Recorded Investment	40
With Related Allowance, Unpaid Principal Balance	40
With Related Allowance, Related Allowance	41
With Related Allowance, Average Recorded Investment	40
With Related Allowance, Interest Income Recognized	1
Residential | Junior Liens
Financing Receivable, Impaired [Line Items]
With No Related Allowance, Recorded Investment	413	196
With No Related Allowance, Unpaid Principal Balance	436	218
With No Related Allowance, Related Allowance
With No Related Allowance, Average Recorded Investment	444	223
With No Related Allowance, Interest Income Recognized	18	12
With Related Allowance, Recorded Investment	104	339
With Related Allowance, Unpaid Principal Balance	106	341
With Related Allowance, Related Allowance	3	4
With Related Allowance, Average Recorded Investment	107	345
With Related Allowance, Interest Income Recognized	4	19
Consumer - Non Real Estate
Financing Receivable, Impaired [Line Items]
With No Related Allowance, Recorded Investment	16	68
With No Related Allowance, Unpaid Principal Balance	16	68
With No Related Allowance, Related Allowance
With No Related Allowance, Average Recorded Investment	17	70
With No Related Allowance, Interest Income Recognized	1	4
With Related Allowance, Recorded Investment	54	8
With Related Allowance, Unpaid Principal Balance	54	8
With Related Allowance, Related Allowance	5
With Related Allowance, Average Recorded Investment	57	11
With Related Allowance, Interest Income Recognized	3
Recorded Investment, Total	70	76
Unpaid Principal Balance, Total	70	76
Related Allowance, Total	5
Average Recorded Investment, Total	74	81
Interest Income Recognized, Total	$ 4	$ 4

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FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2014

Assets Measured on Recurring Basis

The following table summarizes the Company’s assets measured at fair value at the dates indicated (dollars in thousands):

	At September 30, 2014
	Total		Level 1		Level 2		Level 3
Assets valued on a recurring basis
Investment securities:
U.S. government agency	$	4,935	$	—	$	4,935	$	—
State and municipals		6,066		—		6,066		—
Mortgage-backed		29,996		—		29,996		—
Assets valued on a non-recurring basis
Impaired loans		34,321		—		—		34,321
Other real estate owned		1,220		—		—		1,220
Total	$	76,538	$	—	$	40,997	$	35,541
	At December 31, 2013
	Total		Level 1		Level 2		Level 3
Assets valued on a recurring basis
Investment securities:
U.S. government agency	$	40,930	$	—	$	40,930	$	—
State and municipals		10,181		—		10,181		—
Mortgage-backed		38,204		—		38,204		—
Assets valued on a non-recurring basis
Impaired loans		39,583		—		—		39,583
Other real estate owned		1,233		—		—		1,233
Total	$	130,131	$	—	$	89,315	$	40,816

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Collectively Evaluated for Impairment (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively Evaluated for Impairment, Allowance	$ 3,747	$ 5,452
Collectively Evaluated for Impairment, Total Loans	245,939	238,364
Commercial - Non Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively Evaluated for Impairment, Allowance	130	151
Collectively Evaluated for Impairment, Total Loans	21,510	15,124
Commercial Real Estate | Owner occupied
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively Evaluated for Impairment, Allowance	450	1,147
Collectively Evaluated for Impairment, Total Loans	48,808	50,769
Commercial Real Estate | Income Producing
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively Evaluated for Impairment, Allowance	866	705
Collectively Evaluated for Impairment, Total Loans	37,116	40,779
Commercial Real Estate | Multifamily
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively Evaluated for Impairment, Allowance	92	38
Collectively Evaluated for Impairment, Total Loans	7,711	6,522
Construction & Development | 1-4 Family Residential
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively Evaluated for Impairment, Allowance	64	44
Collectively Evaluated for Impairment, Total Loans	2,675	1,385
Construction & Development | Construction & Development, Other
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively Evaluated for Impairment, Allowance	599	473
Collectively Evaluated for Impairment, Total Loans	16,734	20,052
Construction & Development | Farmland
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively Evaluated for Impairment, Allowance	5	3
Collectively Evaluated for Impairment, Total Loans	270	279
Residential | 1-4 Family Residential
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively Evaluated for Impairment, Allowance	942	1,010
Collectively Evaluated for Impairment, Total Loans	78,868	71,910
Residential | Equity Lines
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively Evaluated for Impairment, Allowance	328	332
Collectively Evaluated for Impairment, Total Loans	28,124	28,122
Consumer - Non Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively Evaluated for Impairment, Allowance	47	44
Collectively Evaluated for Impairment, Total Loans	3,029	2,478
Unallocated
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively Evaluated for Impairment, Allowance	224	1,505
Collectively Evaluated for Impairment, Total Loans	$ 1,094	$ 944

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Non-accrual Loans and Age Analysis of Past Due Loans, Segregated by Class of Loans (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 to 59 Days Past Due	$ 636	$ 437
60 - 89 Days Past Due	210	330
Equal to Greater than 90 Days Past Due	220	2,214
Past Due	1,066	2,981
Current	280,630	275,529
Gross loans receivable	281,696	278,510
90 Days Past Due and Still Accruing
Non-accrual Status	3,318	4,788
Commercial - Non Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 to 59 Days Past Due		46
60 - 89 Days Past Due	170
Equal to Greater than 90 Days Past Due		154
Past Due	170	200
Current	23,334	17,228
Gross loans receivable	23,504	17,428
90 Days Past Due and Still Accruing
Non-accrual Status	176	463
Commercial Real Estate | Owner occupied
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 to 59 Days Past Due	116
60 - 89 Days Past Due		77
Equal to Greater than 90 Days Past Due		684
Past Due	116	761
Current	55,229	57,154
Gross loans receivable	55,345	57,915
90 Days Past Due and Still Accruing
Non-accrual Status	355	1,689
Commercial Real Estate | Income Producing
Financing Receivable, Recorded Investment, Past Due [Line Items]
Equal to Greater than 90 Days Past Due		503
Past Due		503
Current	47,588	51,297
Gross loans receivable	47,588	51,800
90 Days Past Due and Still Accruing
Non-accrual Status	304	503
Commercial Real Estate | Multifamily
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	8,917	7,748
Gross loans receivable	8,917	7,748
90 Days Past Due and Still Accruing
Construction & Development | 1-4 Family Residential
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	3,028	1,745
Gross loans receivable	3,028	1,745
90 Days Past Due and Still Accruing
Construction & Development | Construction & Development, Other
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 to 59 Days Past Due		158
Equal to Greater than 90 Days Past Due		240
Past Due		398
Current	19,722	24,375
Gross loans receivable	19,722	24,773
90 Days Past Due and Still Accruing
Non-accrual Status	1,557	599
Construction & Development | Farmland
Financing Receivable, Recorded Investment, Past Due [Line Items]
Equal to Greater than 90 Days Past Due	110	252
Past Due	110	252
Current	270	279
Gross loans receivable	380	531
90 Days Past Due and Still Accruing
Non-accrual Status	110	252
Residential | 1-4 Family Residential
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 to 59 Days Past Due	518	157
60 - 89 Days Past Due		242
Equal to Greater than 90 Days Past Due	83	355
Past Due	601	754
Current	89,354	82,995
Gross loans receivable	89,955	83,749
90 Days Past Due and Still Accruing
Non-accrual Status	693	1,128
Residential | Equity Lines
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 to 59 Days Past Due		75
60 - 89 Days Past Due	40	9
Past Due	40	84
Current	28,193	28,133
Gross loans receivable	28,233	28,217
90 Days Past Due and Still Accruing
Non-accrual Status	69	95
Residential | Junior Liens
Financing Receivable, Recorded Investment, Past Due [Line Items]
Equal to Greater than 90 Days Past Due	27	26
Past Due	27	26
Current	804	1,080
Gross loans receivable	831	1,106
90 Days Past Due and Still Accruing
Non-accrual Status	49	53
Consumer - Non Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 to 59 Days Past Due	2	1
60 - 89 Days Past Due		2
Past Due	2	3
Current	3,097	2,551
Gross loans receivable	3,099	2,554
90 Days Past Due and Still Accruing
Non-accrual Status	5	6
Others
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	1,094	944
Gross loans receivable	1,094	944
90 Days Past Due and Still Accruing

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Borrowed Funds - Additional Information (Detail) (USD $)	3 Months Ended	9 Months Ended			0 Months Ended	9 Months Ended						0 Months Ended
	Sep. 30, 2014	Sep. 30, 2014	Dec. 31, 2013		Jul. 16, 2014 Bank of Carolinas Trust I	Sep. 30, 2014 Securities sold under term repurchase agreements	Dec. 31, 2013 Securities sold under term repurchase agreements	Sep. 30, 2014 Junior Subordinated Debt	Sep. 30, 2014 Trust preferred securities	Dec. 31, 2013 Trust preferred securities	Sep. 30, 2014 Trust preferred securities Bank of Carolinas Trust I	Jul. 16, 2014 Subordinated debt	Sep. 30, 2014 Subordinated debt	Dec. 31, 2013 Subordinated debt
Debt Instrument [Line Items]
Securities sold under agreements to repurchase	$ 394,000	$ 394,000	$ 45,388,000	[1]		$ 45,000,000
Percentage of marketable investment securities used to secure borrowings						109.50%
Prepayment expense	4,353,000	4,353,000
Immediately available credit	6,700,000	6,700,000
Advances from the FHLB	0	0
Borrowings in the form of securities sold	394,000	394,000	53,243,000				45,000,000	5,200,000		5,155,000			2,700,000	2,700,000
Issued trust preferred securities											5,000,000
Preferred securities, liquidation amount									155,000
Payment for repurchase of private placement					$ 1,750,000							$ 1,350,000

[1] Derived from audited consolidated financial statements.

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EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2014

EARNINGS PER SHARE

NOTE 2. EARNINGS PER SHARE

Basic earnings (loss) per share represents income (loss) available to common stockholders divided by the weighted average number of common shares outstanding during the period. When applicable, the weighted average shares outstanding for the diluted earnings per share computations are adjusted to reflect the assumed conversion of shares available under stock options using the treasury stock method.

Earnings (loss) per share have been computed based on the following (dollars in thousands):

	Three months ended					Nine months ended
	September 30,					September 30,
	2014		2013			2014		2013
Net income (loss) applicable to common stockholders	$	10,573	$	(5	)	$	9,938	$	(1,417	)
Weighted average number of common shares outstanding		387,333,235		3,895,840			133,112,837		3,895,840
Weighted average number of diluted common shares outstanding		387,333,235		3,895,840			133,112,837		3,895,840
Common stock options and common stock warrants - anti-dilutive		20,000		497,605			20,000		497,605
Earnings (Loss) per common share:
Basic	$	0.028	$	—		$	0.075	$	(0.36	)
Diluted	$	0.028	$	—		$	0.075	$	(0.36	)

The common stock warrants referred to above were issued to the United States Treasury in connection with the Company’s April 17, 2009 participation in the Capital Purchase Program, which was authorized as a part of the TARP legislation passed by Congress during 2008.

For the three and nine months ended September 30, 2014 there were 20,000 common stock options outstanding that were anti-dilutive as the average market price for the shares was less than the exercise price.

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Summary of Outstanding Financial Instruments Whose Contract Amounts Represent Credit Risk (Detail) (Commitments, USD $) In Thousands, unless otherwise specified	Sep. 30, 2014
Loss Contingencies [Line Items]
Commitments	$ 31,305
Unfunded loan commitments
Loss Contingencies [Line Items]
Commitments	31,096
Financial standby letters of credit
Loss Contingencies [Line Items]
Commitments	$ 209

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Amortized Cost, Estimated Fair Values and Carrying Values of Investment Securities Portfolios (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Investment [Line Items]
Investment securities available for sale, Amortized Cost	$ 41,297	$ 94,694
Investment securities available for sale, Gross Unrealized Gains	155	121
Investment securities available for sale, Gross Unrealized Losses	455	5,500
Investment securities available for sale, Estimated Fair Value	40,997	89,315
Investment securities available for sale, Carrying Value	40,997	89,315
Investment securities held to maturity, Gross Unrealized Gains
Total Investment Securities, Amortized Cost		95,694
Total Investment Securities, Gross Unrealized Gains		121
Total Investment Securities, Gross Unrealized Losses		5,680
Total Investment Securities, Estimated Fair Value		90,135
Total Investment Securities, Carrying Value	40,997	90,315	[1]
U.S. Government agency securities
Investment [Line Items]
Investment securities available for sale, Amortized Cost	4,896	44,077
Investment securities available for sale, Gross Unrealized Gains	70	87
Investment securities available for sale, Gross Unrealized Losses	31	3,234
Investment securities available for sale, Estimated Fair Value	4,935	40,930
Investment securities available for sale, Carrying Value	4,935	40,930
State and municipal bonds
Investment [Line Items]
Investment securities available for sale, Amortized Cost	6,175	11,159
Investment securities available for sale, Gross Unrealized Gains	43
Investment securities available for sale, Gross Unrealized Losses	152	978
Investment securities available for sale, Estimated Fair Value	6,066	10,181
Investment securities available for sale, Carrying Value	6,066	10,181
Mortgage-backed securities
Investment [Line Items]
Investment securities available for sale, Amortized Cost	30,226	39,458
Investment securities available for sale, Gross Unrealized Gains	42	34
Investment securities available for sale, Gross Unrealized Losses	272	1,288
Investment securities available for sale, Estimated Fair Value	29,996	38,204
Investment securities available for sale, Carrying Value	29,996	38,204
Corporate securities
Investment [Line Items]
Investment securities held to maturity, Amortized Cost		1,000
Investment securities held to maturity, Gross Unrealized Gains
Investment securities held to maturity, Gross Unrealized Losses		180
Investment securities held to maturity, Estimated Fair Value		820
Investment securities held to maturity, Carrying Value		$ 1,000

[1] Derived from audited consolidated financial statements.

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Earnings Per Share - Additional Information (Detail)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Earnings Per Share Note [Line Items]
Common stock options outstanding that were anti-dilutive	20,000	497,605	20,000	497,605

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Fair Value - Additional Information (Detail)	9 Months Ended	12 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
Impaired Loans | Minimum
Fair Value of Financial Instruments [Line Items]
Discount rate	0.00%	0.00%
Impaired Loans | Maximum
Fair Value of Financial Instruments [Line Items]
Discount rate	20.00%	20.00%
Other real estate owned | Minimum
Fair Value of Financial Instruments [Line Items]
Discount rate	0.00%	0.00%
Other real estate owned | Maximum
Fair Value of Financial Instruments [Line Items]
Discount rate	20.00%	20.00%

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Fair Values of Securities with Unrealized Losses (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Estimated Fair Value	$ 11,449	$ 78,078
Less than 12 Months, Unrealized Losses	50	4,741
12 Months or More, Estimated Fair Value	20,150	7,176
12 Months or More, Unrealized Losses	405	939
Total, Estimated Fair Value	31,599	85,254
Total, Unrealized Losses	455	5,680
U.S. Government agency securities
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Estimated Fair Value		35,679
Less than 12 Months, Unrealized Losses		2,731
12 Months or More, Estimated Fair Value	1,674	3,482
12 Months or More, Unrealized Losses	31	503
Total, Estimated Fair Value	1,674	39,161
Total, Unrealized Losses	31	3,234
State and municipal bonds
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Estimated Fair Value		7,835
Less than 12 Months, Unrealized Losses		723
12 Months or More, Estimated Fair Value	4,151	2,346
12 Months or More, Unrealized Losses	152	255
Total, Estimated Fair Value	4,151	10,181
Total, Unrealized Losses	152	978
Mortgage-backed securities
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Estimated Fair Value	11,449	34,564
Less than 12 Months, Unrealized Losses	50	1,287
12 Months or More, Estimated Fair Value	14,325	528
12 Months or More, Unrealized Losses	222	1
Total, Estimated Fair Value	25,774	35,092
Total, Unrealized Losses	272	1,288
Corporate securities
Schedule of Available-for-sale Securities [Line Items]
12 Months or More, Estimated Fair Value		820
12 Months or More, Unrealized Losses		180
Total, Estimated Fair Value		820
Total, Unrealized Losses		$ 180

XML

Investment Securities - Additional Information (Detail)	Sep. 30, 2014 Securities
Investment [Line Items]
Number of securities, in unrealized loss position	25

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BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2014

BASIS OF PRESENTATION

NOTE 1. BASIS OF PRESENTATION

In the opinion of management, the financial information included in these unaudited financial statements reflects all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial information as of September 30, 2014 and December 31, 2013 and for the three- and nine-month periods ended September 30, 2014 and 2013, in conformity with accounting principles generally accepted in the United States of America.

The preparation of 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, 2014 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2014.

The results presented here are for Bank of the Carolinas Corporation (“the Company”), the parent company of Bank of the Carolinas (“the Bank”). 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 annual report on Form 10-K for the year ended December 31, 2013, as amended. This quarterly report should be read in conjunction with the annual report. Because the Company has no separate operations and conducts no business on its own other than owning the Bank, this discussion concerns primarily the business of the Bank. However, because the financial statements are presented on a consolidated basis, the Company and the Bank are collectively referred to as “the Company” unless otherwise noted.

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Loan Portfolio (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Jun. 30, 2014	Dec. 31, 2013		Sep. 30, 2013	Jun. 30, 2013	Dec. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total real estate loans	$ 253,999		$ 257,584
Commercial business and other loans	23,504		17,428
Consumer loans	3,099		2,554
Other	1,094		944
Gross loans receivable	281,696		278,510
Allowance for loan losses	(5,183)	(5,153)	(6,015)	[1]	(6,215)	(6,398)	(6,890)
Loans, net	276,513		272,495	[1]
1-4 Family Residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total real estate loans	90,786		84,855
Commercial Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total real estate loans	111,850		117,463
Construction & Development
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total real estate loans	23,130		27,049
Equity Lines
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total real estate loans	$ 28,233		$ 28,217

[1] Derived from audited consolidated financial statements.

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Changes in Allowance for Loan Losses by Segment (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended			3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended	9 Months Ended			3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014		Sep. 30, 2013	Sep. 30, 2014 Commercial - Non Real Estate	Sep. 30, 2013 Commercial - Non Real Estate	Sep. 30, 2014 Commercial - Non Real Estate	Sep. 30, 2013 Commercial - Non Real Estate	Sep. 30, 2014 Commercial Real Estate Owner occupied	Sep. 30, 2013 Commercial Real Estate Owner occupied	Sep. 30, 2014 Commercial Real Estate Owner occupied	Sep. 30, 2013 Commercial Real Estate Owner occupied	Sep. 30, 2014 Commercial Real Estate Income Producing	Sep. 30, 2013 Commercial Real Estate Income Producing	Sep. 30, 2014 Commercial Real Estate Income Producing	Sep. 30, 2013 Commercial Real Estate Income Producing	Sep. 30, 2014 Commercial Real Estate Multifamily	Sep. 30, 2013 Commercial Real Estate Multifamily	Sep. 30, 2014 Commercial Real Estate Multifamily	Sep. 30, 2013 Commercial Real Estate Multifamily	Sep. 30, 2014 Construction & Development 1-4 Family Residential	Sep. 30, 2013 Construction & Development 1-4 Family Residential	Sep. 30, 2014 Construction & Development 1-4 Family Residential	Sep. 30, 2013 Construction & Development 1-4 Family Residential	Sep. 30, 2014 Construction & Development Construction & Development, Other	Sep. 30, 2013 Construction & Development Construction & Development, Other	Sep. 30, 2014 Construction & Development Construction & Development, Other	Sep. 30, 2013 Construction & Development Construction & Development, Other	Sep. 30, 2014 Construction & Development Farmland	Sep. 30, 2014 Construction & Development Farmland	Sep. 30, 2013 Construction & Development Farmland	Jun. 30, 2013 Construction & Development Farmland	Sep. 30, 2014 Residential 1-4 Family Residential	Sep. 30, 2013 Residential 1-4 Family Residential	Sep. 30, 2014 Residential 1-4 Family Residential	Sep. 30, 2013 Residential 1-4 Family Residential	Sep. 30, 2014 Residential Equity Lines	Sep. 30, 2013 Residential Equity Lines	Sep. 30, 2014 Residential Equity Lines	Sep. 30, 2013 Residential Equity Lines	Sep. 30, 2014 Consumer - Non Real Estate	Sep. 30, 2013 Consumer - Non Real Estate	Sep. 30, 2014 Consumer - Non Real Estate	Sep. 30, 2013 Consumer - Non Real Estate	Sep. 30, 2014 Unallocated	Sep. 30, 2013 Unallocated	Sep. 30, 2014 Unallocated	Sep. 30, 2013 Unallocated
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	$ 5,153	$ 6,398	$ 6,015	[1]	$ 6,890	$ 33	$ 584	$ 176	$ 1,209	$ 488	$ 1,568	$ 1,224	$ 1,359	$ 1,403	$ 756	$ 831	$ 773	$ 113	$ 67	$ 50	$ 78	$ 52	$ 85	$ 52	$ 78	$ 525	$ 551	$ 580	$ 728	$ 3	$ 3		$ 3	$ 809	$ 1,171	$ 1,218	$ 1,267	$ 149	$ 354	$ 332	$ 314	$ 36	$ 90	$ 44	$ 98	$ 1,542	$ 1,169	$ 1,505	$ 986
Chargeoffs	(162)	(58)	(1,043)		(1,309)	(9)		(58)	(107)				(290)	(104)		(104)	(21)							(719)	(5)							(21)		(7)	(42)	(15)	(620)	(41)		(123)	(207)	(1)	(16)	(24)	(38)
Recoveries	727	795	971		2,712	709	241	806	1,605	4	537	11	549				20									4	3	55	9					12	5	77	468	1	3	6	33	(3)	6	16	28
Provision	(535)	(920)	(760)		(2,078)	(577)	(438)	(768)	(2,320)	787	(771)	44	(284)	(269)	29	303	13	53	(8)	116	(19)	21	(36)	740	(24)	84	6	(22)	(177)	2	2	24		402	228	(64)	247	260	(7)	154	210	20	(21)	16	(29)	(1,318)	98	(1,281)	281
Ending Balance	$ 5,183	$ 6,215	$ 5,183		$ 6,215	$ 156	$ 387	$ 156	$ 387	$ 1,279	$ 1,334	$ 1,279	$ 1,334	$ 1,030	$ 785	$ 1,030	$ 785	$ 166	$ 59	$ 166	$ 59	$ 73	$ 49	$ 73	$ 49	$ 613	$ 560	$ 613	$ 560	$ 5	$ 5	$ 3	$ 3	$ 1,216	$ 1,362	$ 1,216	$ 1,362	$ 369	$ 350	$ 369	$ 350	$ 52	$ 59	$ 52	$ 59	$ 224	$ 1,267	$ 224	$ 1,267

[1] Derived from audited consolidated financial statements.

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Consolidated Balance Sheets (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Assets:
Cash and due from banks, noninterest-bearing	$ 9,349	$ 12,778	[1]
Interest-bearing deposits in banks	44,076	2,064	[1]
Cash and cash equivalents	53,425	14,842	[1]
Federal funds sold		19,580	[1]
Investment securities available-for-sale, at fair value	40,997	90,315	[1]
Loans receivable	281,696	278,510	[1]
Less: Allowance for loan losses	(5,183)	(6,015)	[1]
Loans, net	276,513	272,495	[1]
Premises and equipment	10,951	11,274	[1]
Other real estate owned	1,220	1,233	[1]
Bank owned life insurance	11,146	10,888	[1]
Accrued interest receivable	845	1,156	[1]
Other assets	1,182	1,867	[1]
Total Assets	396,279	423,650	[1]
Deposits:
Noninterest-bearing demand deposits	34,857	35,243	[1]
Interest-checking deposits	41,540	40,939	[1]
Savings and money market deposits	114,284	109,419	[1]
Time deposits	157,486	180,549	[1]
Total deposits	348,167	366,150	[1]
Securities sold under agreements to repurchase	394	45,388	[1]
Subordinated debt		7,855	[1]
Other liabilities	1,527	2,509	[1]
Total Liabilities	350,088	421,902	[1]
Commitments and contingencies (Note 6)			[1]
Stockholders' Equity:
Preferred stock, net of discount, no par value		13,079	[1]
Common stock, no par value at September 30, 2014, $5 per share par value at December 31, 2013		19,479	[1]
Additional paid-in capital	73,815	12,991	[1]
Retained deficit	(27,324)	(38,422)	[1]
Accumulated other comprehensive loss	(300)	(5,379)	[1]
Total Stockholders' Equity	46,191	1,748	[1]
Total Liabilities and Stockholders' Equity	396,279	423,650	[1]
Preferred shares authorized	3,000,000	3,000,000	[1]
Preferred shares issued	13,179	13,179	[1]
Preferred shares outstanding	13,179	13,179	[1]
Unaccrued preferred stock dividend		$ 1,894	[1]
Common shares authorized	580,000,000	15,000,000	[1]
Common shares issued	462,028,831	3,895,840	[1]
Common shares outstanding	462,028,831	3,895,840	[1]

[1] Derived from audited consolidated financial statements.

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Assets Measured on Recurring and Non-recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	$ 76,538	$ 130,131
U.S. Government agency securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets valued on a recurring basis	4,935	40,930
State and municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets valued on a recurring basis	6,066	10,181
Mortgage-backed
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets valued on a recurring basis	29,996	38,204
Impaired Loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets valued on a non-recurring basis	34,321	39,583
Other real estate owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets valued on a non-recurring basis	1,220	1,233
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	40,997	89,315
Level 2 | U.S. Government agency securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets valued on a recurring basis	4,935	40,930
Level 2 | State and municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets valued on a recurring basis	6,066	10,181
Level 2 | Mortgage-backed
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets valued on a recurring basis	29,996	38,204
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	35,541	40,816
Level 3 | Impaired Loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets valued on a non-recurring basis	34,321	39,583
Level 3 | Other real estate owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets valued on a non-recurring basis	$ 1,220	$ 1,233

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013
Cash flows from operating activities:
Net loss	$ (265)		$ (686)
Adjustments to reconcile net loss to net cash provided by operating activities:
Provision for loan losses	(760)		(2,078)
Deferred tax expense			790
Depreciation and amortization	506		508
Change in valuation allowance on other real estate owned			475
(Gain) loss on sale of other real estate owned	(65)		41
Loss on disposal of premises and equipment	1		8
Loss on sale of securities	1,275
Extinguishment of debt	(5,443)
Increase in bank owned life insurance	(258)		(263)
Net amortization/accretion of premiums and discounts on investments	830		427
Net change in other assets	702		609
Net change in other liabilities	25		475
Net cash provided (used) by operating activities	(3,452)		306
Cash flows from investing activities:
Net change in federal funds sold	19,580		735
Purchases of premises and equipment	(184)		(102)
Purchases of securities			(16,640)
Proceeds from sales, calls, maturities and principal repayments of securities available for sale	51,292		25,460
Proceeds from maturity of security held to maturity	1,000
Redemption of FHLB stock	140		205
Proceeds from sales of other real estate owned	1,266		3,699
Net increase in loans	(4,446)		(7,351)
Net cash provided by investing activities	68,648		6,006
Cash flows from financing activities:
Net increase (decrease) in deposits	(17,983)		(7,278)
Net increase (decrease) in repurchase agreements	(44,994)		182
Repayment of borrowing	(3,100)
Issuance of common stock, net of cost	42,759
Repurchase of preferred stock	(3,295)
Net cash used by financing activities	(26,613)		(7,096)
Net increase (decrease) in cash and cash equivalents	38,583		(784)
Cash and cash equivalents at beginning of period	14,842	[1]	7,786
Cash and cash equivalents at end of period	53,425		7,002
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	3,009		3,287
Noncash investing and financing activities:
Change in fair value of securities available for sale	5,079		(4,457)
Transfer from loans to other real estate owned	$ 1,188		$ 625

[1] Derived from audited consolidated financial statements.

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Summary of Loans Modified as TDRs (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2014 Loan	Dec. 31, 2013 Loan	Sep. 30, 2013
Financing Receivable, Modifications [Line Items]
Total modifications, accrual	$ 32,175	$ 35,322
Total modifications, non-accrual	2,099	2,159
Total modifications, total TDRs	34,274	37,481
Total modifications, allowances for loan losses allocated	1,297	563	617
Total contracts, accrual	133	133
Total contracts, non-accrual	10	12
Total contracts, total TDRs	143	145
Commercial Real Estate
Financing Receivable, Modifications [Line Items]
Total modifications, accrual	17,333	17,461
Total modifications, non-accrual		1,016
Total modifications, total TDRs	17,333	18,477
Total modifications, allowances for loan losses allocated	983	216
Commercial Construction
Financing Receivable, Modifications [Line Items]
Total modifications, accrual	1,784	4,319
Total modifications, non-accrual	1,667	612
Total modifications, total TDRs	3,451	4,931
Total modifications, allowances for loan losses allocated	23	8
Commercial and Industrial
Financing Receivable, Modifications [Line Items]
Total modifications, accrual	1,817	2,421
Total modifications, non-accrual	176	301
Total modifications, total TDRs	1,993	2,722
Total modifications, allowances for loan losses allocated	26	25
Residential
Financing Receivable, Modifications [Line Items]
Total modifications, accrual	11,176	11,051
Total modifications, non-accrual	256	230
Total modifications, total TDRs	11,432	11,281
Total modifications, allowances for loan losses allocated	265	314
Customer and Other
Financing Receivable, Modifications [Line Items]
Total modifications, accrual	65	70
Total modifications, total TDRs	$ 65	$ 70

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LOANS (Tables)

9 Months Ended

Sep. 30, 2014

Loan Portfolio

The loan portfolio as of the dates indicated is summarized below (dollars in thousands):

	September 30, 2014			December 31, 2013
Real estate loans:
Residential, 1-4 family	$	90,786		$	84,855
Commercial real estate		111,850			117,463
Construction and development		23,130			27,049
Home equity		28,233			28,217
Total real estate loans		253,999			257,584
Commercial business and other loans		23,504			17,428
Consumer loans		3,099			2,554
Other		1,094			944
Gross loans receivable		281,696			278,510
Allowance for loan losses		(5,183	)		(6,015	)
Loans, net	$	276,513		$	272,495

Impaired Loans, Segregated by Class of Loans

Impaired loans, segregated by class of loans, are summarized as follows as of the dates indicated (dollars in thousands):

	September 30, 2014										December 31, 2013
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial - Non Real Estate	$	381	$	448	$	—	$	465	$	19	$	1,099	$	1,305	$	—	$	1,384	$	79
Commercial Real Estate
Owner occupied		2,121		2,446		—		2,658		106		3,480		4,062		—		4,365		239
Income producing		3,299		3,483		—		3,518		120		3,734		3,887		—		3,938		183
Multifamily		—		—		—		—		—		—		—		—		—		—
Construction & Development
1 - 4 Family		—		—		—		—		—		—		—		—		—		—
Other		2,257		3,280		—		3,523		57		1,545		1,881		—		1,981		112
Farmland		110		131		—		160		9		252		273		—		340		26
Residential
Equity Lines		69		77		—		77		2		95		101		—		105		3
1 - 4 Family		5,109		5,512		—		5,562		176		5,632		6,198		—		6,281		322
Junior Liens		413		436		—		444		18		196		218		—		223		12
Consumer - Non Real Estate		16		16		—		17		1		68		68		—		70		4
Total loans with no allowance	$	13,775	$	15,829	$	—	$	16,424	$	508	$	16,101	$	17,993	$	—	$	18,687	$	980
With an allowance recorded:
Commercial - Non Real Estate	$	1,613	$	1,615	$	26	$	1,677	$	53	$	1,205	$	1,205	$	25	$	1,282	$	45
Commercial Real Estate
Owner occupied		4,416		4,471		829		4,505		146		3,666		3,666		77		3,727		166
Income producing		7,173		7,229		164		7,388		284		7,287		7,343		126		7,465		382
Multifamily		1,206		1,239		74		1,248		33		1,226		1,259		12		1,273		45
Construction & Development
1 - 4 Family		353		359		9		363		14		360		366		8		371		19
Other		731		736		14		750		25		3,176		3,181		107		3,224		118
Farmland		—		—		—		—		—		—		—		—		—		—
Residential
Equity Lines		40		40		41		40		1		—		—		—		—		—
1 - 4 Family		6,292		6,335		271		6,417		219		6,778		6,795		204		6,893		279
Junior Liens		104		106		3		107		4		339		341		4		345		19
Consumer - Non Real Estate		54		54		5		57		3		8		8		—		11		—
Total loans with an allowance	$	21,982	$	22,184	$	1,436	$	22,552	$	782	$	24,045	$	24,164	$	563	$	24,591	$	1,073
Total:
Commercial - Non Real Estate	$	1,994	$	2,063	$	26	$	2,142	$	72	$	2,304	$	2,510	$	25	$	2,666	$	124
Commercial Real Estate	$	18,215	$	18,868	$	1,067	$	19,317	$	689	$	19,393	$	20,217	$	215	$	20,768	$	1,015
Construction & Development	$	3,451	$	4,506	$	23	$	4,796	$	105	$	5,333	$	5,701	$	115	$	5,916	$	275
Residential	$	12,027	$	12,506	$	315	$	12,647	$	420	$	13,040	$	13,653	$	208	$	13,847	$	635
Consumer - Non Real Estate	$	70	$	70	$	5	$	74	$	4	$	76	$	76	$	—	$	81	$	4
Totals	$	35,757	$	38,013	$	1,436	$	38,976	$	1,290	$	40,146	$	42,157	$	563	$	43,278	$	2,053

Summary of Loans Modified as TDRs

The following tables provide a summary of loans modified as TDRs (dollars in thousands):

	Accrual		Nonaccrual		Total TDRs		Allowance for Loan Losses Allocated
September 30, 2014
Commercial real estate	$	17,333	$	—	$	17,333	$	983
Commercial construction		1,784		1,667		3,451		23
Commercial and industrial		1,817		176		1,993		26
Residential mortgage		11,176		256		11,432		265
Consumer and other		65		—		65		—
Total modifications	$	32,175	$	2,099	$	34,274	$	1,297
Total contracts		133		10		143

	Accrual		Nonaccrual		Total TDRs		Allowance for Loan Losses Allocated
December 31, 2013
Commercial real estate	$	17,461	$	1,016	$	18,477	$	216
Commercial construction		4,319		612		4,931		8
Commercial and industrial		2,421		301		2,722		25
Residential mortgage		11,051		230		11,281		314
Consumer and other		70		—		70		—
Total modifications	$	35,322	$	2,159	$	37,481	$	563
Total contracts		133		12		145

Troubled Debt Restructuring

The following tables illustrate new TDR information for the three- and nine-months ended September 30, 2014 and 2013 (dollars in thousands):

	For the three months ended September 30, 2014						For the nine months ended September 30, 2014
Troubled Debt Restructuring	Number of Contracts		Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Number of Contracts		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
Commercial - Non Real Estate		—	$	—	$	—		1	$	61	$	61
Commercial - Real Estate		—		—		—		2		458		458
Construction & Development		—		—		—		—		—		—
Residential		2		75		75		3		101		101
Consumer - Non Real Estate		—		—		—		—		—		—
Totals		2	$	75	$	75		6	$	620	$	620

	For the three months ended September 30, 2013						For the nine months ended September 30, 2013
Troubled Debt Restructuring	Number of Contracts		Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Number of Contracts		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
Commercial - Non Real Estate		—	$	—	$	—		1	$	32	$	32
Commercial - Real Estate		—		—		—		1		238		238
Construction & Development		1		129		129		2		621		621
Residential		2		95		96		5		543		544
Consumer - Non Real Estate		—		—		—		—		—		—
Totals		3	$	224	$	225		9	$	1,434	$	1,435

Non-Accrual Loans and Age Analysis of Past Due Loans, Segregated by Class of Loans

Non-accrual loans and an age analysis of past due loans, segregated by class of loans, were as follows (dollars in thousands):

	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		90 Days Past Due and Still Accruing		Non-accrual Loans
September 30, 2014:
Commercial - Non Real Estate	$	—	$	170	$	—	$	170	$	23,334	$	23,504	$	—	$	176
Commercial Real Estate
Owner occupied		116		—		—		116		55,229		55,345		—		355
Income producing		—		—		—		—		47,588		47,588		—		304
Multifamily		—		—		—		—		8,917		8,917		—		—
Construction & Development
1 - 4 Family		—		—		—		—		3,028		3,028		—		—
Other		—		—		—		—		19,722		19,722		—		1,557
Farmland		—		—		110		110		270		380		—		110
Residential
Equity Lines		—		40		—		40		28,193		28,233		—		69
1 - 4 Family		518		—		83		601		89,354		89,955		—		693
Junior Liens		—		—		27		27		804		831		—		49
Consumer - Non Real Estate		2		—		—		2		3,097		3,099		—		5
Other		—		—		—		—		1,094		1,094		—		—
Total	$	636	$	210	$	220	$	1,066	$	280,630	$	281,696	$	—	$	3,318

	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		90 Days Past Due and Still Accruing		Non-accrual Loans
December 31, 2013:
Commercial - Non Real Estate	$	46	$	—	$	154	$	200	$	17,228	$	17,428	$	—	$	463
Commercial Real Estate
Owner occupied		—		77		684		761		57,154		57,915		—		1,689
Income producing		—		—		503		503		51,297		51,800		—		503
Multifamily		—		—		—		—		7,748		7,748		—		—
Construction & Development
1 - 4 Family		—		—		—		—		1,745		1,745		—		—
Other		158		—		240		398		24,375		24,773		—		599
Farmland		—		—		252		252		279		531		—		252
Residential
Equity Lines		75		9		—		84		28,133		28,217		—		95
1 - 4 Family		157		242		355		754		82,995		83,749		—		1,128
Junior Liens		—		—		26		26		1,080		1,106		—		53
Consumer - Non Real Estate		1		2		—		3		2,551		2,554		—		6
Other		—		—		—		—		944		944		—		—
Total	$	437	$	330	$	2,214	$	2,981	$	275,529	$	278,510	$	—	$	4,788

Risk Category of Loans and Leases

As of September 30, 2014 and December 31, 2013, and based on the most recent analysis performed, the loans and leases were categorized as follows (dollars in thousands):

	September 30, 2014
Internal Risk Rating Grades	Pass		Special Mention		Substandard		Doubtful		Loss
Commercial - Non Real Estate	$	19,918	$	2,885	$	701	$	—	$	—
Commercial Real Estate
Owner occupied		47,386		3,831		4,128		—		—
Income producing		31,050		13,891		2,647		—		—
Multifamily		7,177		1,740		—		—		—
Construction & Development
1 - 4 Family		2,480		195		353		—		—
Other		15,228		1,865		2,629		—		—
Farmland		270		—		110		—		—
Other		1,094		—		—		—		—
Totals	$	124,603	$	24,407	$	10,568	$	—	$	—
Total:
Commercial - Non Real Estate	$	19,918	$	2,885	$	701	$	—	$	—
Commercial Real Estate	$	85,613	$	19,462	$	6,775	$	—	$	—
Construction & Development	$	17,978	$	2,060	$	3,092	$	—	$	—
Other	$	1,094	$	—	$	—	$	—	$	—
Totals	$	123,509	$	24,407	$	10,568	$	—	$	—

	December 31, 2013
Internal Risk Rating Grades	Pass		Special Mention		Substandard		Doubtful		Loss
Commercial - Non Real Estate	$	13,289	$	3,157	$	982	$	—	$	—
Commercial Real Estate
Owner occupied		47,207		6,009		4,699		—		—
Income producing		33,875		10,501		7,424		—		—
Multifamily		5,925		1,823		—		—		—
Construction & Development
1 - 4 Family		1,133		252		360		—		—
Other		17,122		3,265		4,386		—		—
Farmland		279		—		252		—		—
Other		944		—		—		—		—
Totals	$	119,774	$	25,007	$	18,103	$	—	$	—
Total:
Commercial - Non Real Estate	$	13,289	$	3,157	$	982	$	—	$	—
Commercial Real Estate	$	87,007	$	18,333	$	12,123	$	—	$	—
Construction & Development	$	18,534	$	3,517	$	4,998	$	—	$	—
Other	$	944	$	—	$	—	$	—	$	—
Totals	$	118,830	$	25,007	$	18,103	$	—	$	—

Consumer Related Loans, Segregated by Class of Loans

Consumer-related loans at September 30, 2014 and December 31, 2013, segregated by class of loans, were as follows (dollars in thousands):

	September 30, 2014				December 31, 2013
Risk Based on Payment Activity	Performing		Non- Performing		Performing		Non- Performing
Residential
Equity Lines	$	28,165	$	68	$	28,122	$	95
1 - 4 Family		89,562		393		83,092		657
Junior Liens		805		26		1,080		26
Consumer - Non Real Estate
Credit Cards		—		—		—		—
Other		3,094		5		2,548		6
Totals	$	121,626	$	492	$	114,842	$	784
Total:
Residential	$	118,532	$	487	$	112,294	$	778
Consumer - Non Real Estate	$	3,094	$	5	$	2,548	$	6
Totals	$	121,626	$	492	$	114,842	$	784

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Troubled Debt Restructuring (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014 Contract	Sep. 30, 2013 Contract	Sep. 30, 2014 Contract	Sep. 30, 2013 Contract
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring, Number of Contracts	2	3	6	9
Troubled Debt Restructuring, Pre-Modification Recorded Investment	$ 75	$ 224	$ 620	$ 1,434
Troubled Debt Restructuring, Post- Modification Recorded Investment	75	225	620	1,435
Commercial - Non Real Estate
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring, Number of Contracts			1	1
Troubled Debt Restructuring, Pre-Modification Recorded Investment			61	32
Troubled Debt Restructuring, Post- Modification Recorded Investment			61	32
Commercial Real Estate
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring, Number of Contracts			2	1
Troubled Debt Restructuring, Pre-Modification Recorded Investment			458	238
Troubled Debt Restructuring, Post- Modification Recorded Investment			458	238
Construction & Development
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring, Number of Contracts		1		2
Troubled Debt Restructuring, Pre-Modification Recorded Investment		129		621
Troubled Debt Restructuring, Post- Modification Recorded Investment		129		621
Residential
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring, Number of Contracts	2	2	3	5
Troubled Debt Restructuring, Pre-Modification Recorded Investment	75	95	101	543
Troubled Debt Restructuring, Post- Modification Recorded Investment	$ 75	$ 96	$ 101	$ 544

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COMMITMENTS AND CONTINGENCIES (Tables)

9 Months Ended

Sep. 30, 2014

Summary of Outstanding Financial Instruments Whose Contract Amounts Represent Credit Risk

The following table presents a summary of outstanding financial instruments whose contract amounts represent credit risk as of September 30, 2014 (dollars in thousands):

Unfunded loan commitments	$	31,096
Financial standby letters of credit		209
Total unused commitments	$	31,305

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Consolidated Statements of Changes in Stockholders' Equity (USD $) In Thousands, except Share data	Total		Preferred Stock	Discount on Preferred Stock	Common Stock	Additional Paid-In Capital	Retained Deficit	Accumulated Other Comprehensive Income (Loss)
Beginning Balance at Dec. 31, 2012	$ 9,065		$ 13,179	$ (419)	$ 19,479	$ 12,991	$ (36,748)	$ 583
Beginning Balance (in shares) at Dec. 31, 2012			13,179		3,895,840
Net income (loss)	(686)						(686)
Other comprehensive income (loss)	(4,457)							(4,457)
Discount accretion on preferred stock				236			(236)
Ending Balance at Sep. 30, 2013	3,922		13,179	(183)	19,479	12,991	(37,670)	(3,874)
Ending Balance (in shares) at Sep. 30, 2013			13,179		3,895,840
Beginning Balance at Dec. 31, 2013	1,748	[1]	13,179	(100)	19,479	12,991	(38,422)	(5,379)
Beginning Balance (in shares) at Dec. 31, 2013			13,179		3,895,840
Net income (loss)	(265)						(265)
Other comprehensive income (loss)	5,079							5,079
Reclass due to no par value					(19,479)	19,479
Issuance of common stock (in shares)					458,132,991
Issuance of common stock	45,813					45,813
Cost of issuing common stock	(3,054)					(3,054)
Repurchase of preferred stock	(3,295)		(13,179)			(319)	10,203
Repurchase of preferred stock (in shares)			(13,179)
Discount accretion on preferred stock				100			(100)
Dividends accrued on preferred stock	165						165
Ending Balance at Sep. 30, 2014	$ 46,191					$ 74,910	$ (28,419)	$ (300)
Ending Balance (in shares) at Sep. 30, 2014					462,028,831

[1] Derived from audited consolidated financial statements.

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Consolidated Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Preferred stock, par value			[1]
Common stock, par value	$ 0	$ 5	[1]

[1] Derived from audited consolidated financial statements.

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STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2014

STOCKHOLDERS' EQUITY

NOTE 10. STOCKHOLDERS’ EQUITY

The Company completed a private placement of common stock resulting in gross proceeds of approximately $45.8 million on July 16, 2014. In connection with the private placement, the Company repurchased all 13,179 shares of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A, issued under the Capital Purchase Program from the U.S. Treasury for a cash payment of $3.3 million. The Treasury also agreed to waive any unpaid dividends on the Series A Preferred Stock, and to cancel the warrant to purchase 475,204 shares of the Company’s common stock held by the Treasury. The Company invested $34.8 million into its banking subsidiary.

Preferred Stock:

The Company has 3.0 million shares of preferred stock authorized. There were 13,179 shares of preferred stock issued and outstanding with a $1,000 per share liquidation preference on December 31, 2013. All of the shares were issued on April 17, 2009 in connection with the Company’s participation in the U.S. Treasury’s TARP Capital Purchase Program.

On July 16, 2014, in connection with the private placement, the Company repurchased all 13,179 shares of its Series A Preferred Stock for a cash payment of $3.3 million. The Treasury also agreed to waive any unpaid dividends on the Series A Preferred Stock, and to cancel the warrant to purchase 475,204 shares of the Company’s common stock held by the Treasury.

Common Stock:

The Company has 580.0 million shares with no par value common stock authorized as of September 30, 2014. There were 462,028,831 and 3,895,840 shares of common stock issued and outstanding at September 30, 2014 and December 31, 2013, respectively.

Warrants:

In connection with the issuance of the preferred shares under the U.S. Treasury’s TARP Capital Purchase Program, the Company issued the U.S. Treasury a warrant to purchase 475,204 shares of its common stock for $4.16 per share. The warrant expires April 17, 2019.

The warrants were cancelled on July 16, 2014 as disclosed above.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2014	Nov. 14, 2014
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Trading Symbol	BCAR
Entity Registrant Name	Bank of the Carolinas CORP
Entity Central Index Key	0001365997
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		462,028,831

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INCOME TAXES

9 Months Ended

Sep. 30, 2014

INCOME TAXES

NOTE 11. INCOME TAXES

The Company utilizes the liability method of computing income taxes. Under the liability method, deferred tax liabilities and assets are established for future tax return effects of the temporary differences between the stated value of assets and liabilities for financial reporting purposes and their tax bases. The focus is on accruing the appropriate balance sheet deferred tax amount, with the statement of income effect being the result of the changes in the balance sheet amounts from period to period. The current portion of income tax expense is provided based upon the actual tax liability incurred for tax return purposes.

An evaluation of the probability of being able to realize the future benefits of deferred tax assets is made. A valuation allowance is provided for the deferred tax asset when it is more likely than not that some portion or all of the deferred tax asset will not be realized. Management has established a deferred tax asset valuation allowance of $15.8 million and $17.7 as of September 30, 2014 and December 31, 2013, respectively. The change in the valuation allowance is due to the change in unrealized losses in the bond portfolio from $5.4 million at December 31, 2013 to $300,000 at September 30, 2014. The valuation allowance has been established because management believes current overall credit trends, as well as actual and forecasted performance, raise significant concern over the ability of the Company to realize the components of its deferred tax assets relating to net operating losses and the allowances for losses on loans and OREO. The Company does not expect to have taxable income for year ended December 31, 2014.

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Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Interest income
Interest and fees on loans	$ 3,269	$ 3,264	$ 9,697	$ 9,704
Interest on securities	317	520	1,392	1,606
Other interest income	22	17	55	56
Total interest income	3,608	3,801	11,144	11,366
Interest expense
Interest on deposits	509	561	1,561	1,761
Interest on borrowed funds	102	569	1,223	1,689
Total interest expense	611	1,130	2,784	3,450
Net interest income	2,997	2,671	8,360	7,916
Provision for (recovery of) loan losses	(535)	(920)	(760)	(2,078)
Net interest income after provision for loan losses	3,532	3,591	9,120	9,994
Noninterest income
Customer service fees	294	285	878	857
Increase in value of bank owned life insurance	87	89	258	263
Losses on sales of investment securities	(1,275)		(1,275)
Extinguishment of debt	5,443		5,443
Other income	4	6	23	9
Total noninterest income	4,553	380	5,327	1,129
Noninterest expense
Salaries and benefits	1,434	1,611	4,571	4,804
Occupancy and equipment	471	459	1,399	1,337
FDIC insurance assessments	371	360	1,102	1,096
Data processing services	260	257	788	809
Valuation provisions and net operating costs associated with foreclosed real estate	(26)	144	1	676
Debt prepayment penalty	4,353		4,353
Other	852	748	2,498	2,297
Total noninterest expense	7,715	3,579	14,712	11,019
Income (loss) before income taxes	370	392	(265)	104
Provision for income taxes		152		790
Net income (loss)	370	240	(265)	(686)
Dividends and accretion on preferred stock	165	(245)	65	(731)
Gain on redemption of preferred stock	10,203		10,203
Net income (loss) available to common stockholders	$ 10,738	$ (5)	$ 10,003	$ (1,417)
Earnings (Loss) per common share:
Basic	$ 0.028		$ 0.075	$ (0.360)
Diluted	$ 0.028		$ 0.075	$ (0.360)

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ALLOWANCE FOR LOAN LOSSES

9 Months Ended

Sep. 30, 2014

ALLOWANCE FOR LOAN LOSSES

NOTE 5. ALLOWANCE FOR LOAN LOSSES

Changes in the allowance for loan losses by segment, since their respective year-end, are as follows (dollars in thousands):

	September 30, 2014												September 30, 2013
	Beginning Balance		Chargeoffs			Recoveries		Provision			Ending Balance		Beginning Balance		Chargeoffs			Recoveries		Provision			Ending Balance
Commercial - Non Real Estate	$	176	$	(58	)	$	806	$	(768	)	$	156	$	1,209	$	(107	)	$	1,605	$	(2,320	)	$	387
Commercial Real Estate
Owner occupied		1,224		—			11		44			1,279		1,359		(290	)		549		(284	)		1,334
Income producing		831		(104	)		—		303			1,030		773		(21	)		20		13			785
Multifamily		50		—			—		116			166		78		—			—		(19	)		59
Construction & Development
1 - 4 Family		52		(719	)		—		740			73		78		(5	)		—		(24	)		49
Other		580		—			55		(22	)		613		728		—			9		(177	)		560
Farmland		3		—			—		2			5		—		(21	)		—		24			3
Residential
Equity Lines		332		(123	)		6		154			369		314		(207	)		33		210			350
1 - 4 Family		1,218		(15	)		77		(64	)		1,216		1,267		(620	)		468		247			1,362
Consumer - Non Real Estate		44		(24	)		16		16			52		98		(38	)		28		(29	)		59
Unallocated		1,505		—			—		(1,281	)		224		986		—			—		281			1,267
Total	$	6,015	$	(1,043	)	$	971	$	(760	)	$	5,183	$	6,890	$	(1,309	)	$	2,712	$	(2,078	)	$	6,215

Changes in the allowance for loan losses by segment, since the prior quarter ended June 30, 2014 and 2013, respectively, are as follows (dollars in thousands):

	June 30, 2014 - September 30, 2014													June 30, 2013 - September 30, 2013
	Beginning Balance		Chargeoffs			Recoveries			Provision			Ending Balance		Beginning Balance		Chargeoffs			Recoveries		Provision			Ending Balance
Commercial - Non Real Estate	$	33	$	(9	)	$	709		$	(577	)	$	156	$	584	$	—		$	241	$	(438	)	$	387
Commercial Real Estate
Owner occupied		488		—			4			787			1,279		1,568		—			537		(771	)		1,334
Income producing		1,403		(104	)		—			(269	)		1,030		756		—			—		29			785
Multifamily		113		—			—			53			166		67		—			—		(8	)		59
Construction & Development
1 - 4 Family		52		—			—			21			73		85		—			—		(36	)		49
Other		525		—			4			84			613		551		—			3		6			560
Farmland		3		—			—			2			5		3		—			—		—			3
Residential
Equity Lines		149		(41	)		1			260			369		354		—			3		(7	)		350
1 - 4 Family		809		(7	)		12			402			1,216		1,171		(42	)		5		228			1,362
Consumer - Non Real Estate		36		(1	)		(3	)		20			52		90		(16	)		6		(21	)		59
Unallocated		1,542		—			—			(1,318	)		224		1,169		—			—		98			1,267
Total	$	5,153	$	(162	)	$	727		$	(535	)	$	5,183	$	6,398	$	(58	)	$	795	$	(920	)	$	6,215

As of September 30, 2014 and December 31, 2013, loans were evaluated for impairment as follows (dollars in thousands):

	Individually Evaluated for Impairment
	September 30, 2014				December 31, 2013
	Allowance		Total Loans		Allowance		Total Loans
Commercial - Non Real Estate	$	26	$	1,994	$	25	$	2,304
Commercial Real Estate
Owner occupied		829		6,537		77		7,146
Income producing		164		10,472		126		11,021
Multifamily		74		1,206		12		1,226
Construction & Development
1 - 4 Family		9		353		8		360
Other		14		2,988		107		4,721
Farmland		—		110		—		252
Residential
Equity Lines		41		109		—		95
1 - 4 Family		274		11,918		208		12,945
Consumer - Non Real Estate		5		70		—		76
Unallocated		—		—		—		—
Total	$	1,436	$	35,757	$	563	$	40,146

	Collectively Evaluated for Impairment
	September 30, 2014				December 31, 2013
	Allowance		Total Loans		Allowance		Total Loans
Commercial - Non Real Estate	$	130	$	21,510	$	151	$	15,124
Commercial Real Estate
Owner occupied		450		48,808		1,147		50,769
Income producing		866		37,116		705		40,779
Multifamily		92		7,711		38		6,522
Construction & Development
1 - 4 Family		64		2,675		44		1,385
Other		599		16,734		473		20,052
Farmland		5		270		3		279
Residential
Equity Lines		328		28,124		332		28,122
1 - 4 Family		942		78,868		1,010		71,910
Consumer - Non Real Estate		47		3,029		44		2,478
Unallocated		224		1,094		1,505		944
Total	$	3,747	$	245,939	$	5,452	$	238,364

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LOANS

9 Months Ended

Sep. 30, 2014

LOANS

NOTE 4. LOANS

The loan portfolio as of the dates indicated is summarized below (dollars in thousands):

	September 30, 2014			December 31, 2013
Real estate loans:
Residential, 1-4 family	$	90,786		$	84,855
Commercial real estate		111,850			117,463
Construction and development		23,130			27,049
Home equity		28,233			28,217
Total real estate loans		253,999			257,584
Commercial business and other loans		23,504			17,428
Consumer loans		3,099			2,554
Other		1,094			944
Gross loans receivable		281,696			278,510
Allowance for loan losses		(5,183	)		(6,015	)
Loans, net	$	276,513		$	272,495

Impaired loans, segregated by class of loans, are summarized as follows as of the dates indicated (dollars in thousands):

	September 30, 2014										December 31, 2013
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial - Non Real Estate	$	381	$	448	$	—	$	465	$	19	$	1,099	$	1,305	$	—	$	1,384	$	79
Commercial Real Estate
Owner occupied		2,121		2,446		—		2,658		106		3,480		4,062		—		4,365		239
Income producing		3,299		3,483		—		3,518		120		3,734		3,887		—		3,938		183
Multifamily		—		—		—		—		—		—		—		—		—		—
Construction & Development
1 - 4 Family		—		—		—		—		—		—		—		—		—		—
Other		2,257		3,280		—		3,523		57		1,545		1,881		—		1,981		112
Farmland		110		131		—		160		9		252		273		—		340		26
Residential
Equity Lines		69		77		—		77		2		95		101		—		105		3
1 - 4 Family		5,109		5,512		—		5,562		176		5,632		6,198		—		6,281		322
Junior Liens		413		436		—		444		18		196		218		—		223		12
Consumer - Non Real Estate		16		16		—		17		1		68		68		—		70		4
Total loans with no allowance	$	13,775	$	15,829	$	—	$	16,424	$	508	$	16,101	$	17,993	$	—	$	18,687	$	980
With an allowance recorded:
Commercial - Non Real Estate	$	1,613	$	1,615	$	26	$	1,677	$	53	$	1,205	$	1,205	$	25	$	1,282	$	45
Commercial Real Estate
Owner occupied		4,416		4,471		829		4,505		146		3,666		3,666		77		3,727		166
Income producing		7,173		7,229		164		7,388		284		7,287		7,343		126		7,465		382
Multifamily		1,206		1,239		74		1,248		33		1,226		1,259		12		1,273		45
Construction & Development
1 - 4 Family		353		359		9		363		14		360		366		8		371		19
Other		731		736		14		750		25		3,176		3,181		107		3,224		118
Farmland		—		—		—		—		—		—		—		—		—		—
Residential
Equity Lines		40		40		41		40		1		—		—		—		—		—
1 - 4 Family		6,292		6,335		271		6,417		219		6,778		6,795		204		6,893		279
Junior Liens		104		106		3		107		4		339		341		4		345		19
Consumer - Non Real Estate		54		54		5		57		3		8		8		—		11		—
Total loans with an allowance	$	21,982	$	22,184	$	1,436	$	22,552	$	782	$	24,045	$	24,164	$	563	$	24,591	$	1,073
Total:
Commercial - Non Real Estate	$	1,994	$	2,063	$	26	$	2,142	$	72	$	2,304	$	2,510	$	25	$	2,666	$	124
Commercial Real Estate	$	18,215	$	18,868	$	1,067	$	19,317	$	689	$	19,393	$	20,217	$	215	$	20,768	$	1,015
Construction & Development	$	3,451	$	4,506	$	23	$	4,796	$	105	$	5,333	$	5,701	$	115	$	5,916	$	275
Residential	$	12,027	$	12,506	$	315	$	12,647	$	420	$	13,040	$	13,653	$	208	$	13,847	$	635
Consumer - Non Real Estate	$	70	$	70	$	5	$	74	$	4	$	76	$	76	$	—	$	81	$	4
Totals	$	35,757	$	38,013	$	1,436	$	38,976	$	1,290	$	40,146	$	42,157	$	563	$	43,278	$	2,053

Impaired loans include loans whose contractual terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties. Troubled debt restructurings (TDRs) are a subset of impaired loans and totaled $34.3 million at September 30, 2014 and $37.5 million at December 31, 2013.

The following tables provide a summary of loans modified as TDRs (dollars in thousands):

	Accrual		Nonaccrual		Total TDRs		Allowance for Loan Losses Allocated
September 30, 2014
Commercial real estate	$	17,333	$	—	$	17,333	$	983
Commercial construction		1,784		1,667		3,451		23
Commercial and industrial		1,817		176		1,993		26
Residential mortgage		11,176		256		11,432		265
Consumer and other		65		—		65		—
Total modifications	$	32,175	$	2,099	$	34,274	$	1,297
Total contracts		133		10		143

	Accrual		Nonaccrual		Total TDRs		Allowance for Loan Losses Allocated
December 31, 2013
Commercial real estate	$	17,461	$	1,016	$	18,477	$	216
Commercial construction		4,319		612		4,931		8
Commercial and industrial		2,421		301		2,722		25
Residential mortgage		11,051		230		11,281		314
Consumer and other		70		—		70		—
Total modifications	$	35,322	$	2,159	$	37,481	$	563
Total contracts		133		12		145

The following tables illustrate new TDR information for the three- and nine-months ended September 30, 2014 and 2013 (dollars in thousands):

	For the three months ended September 30, 2014						For the nine months ended September 30, 2014
Troubled Debt Restructuring	Number of Contracts		Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Number of Contracts		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
Commercial - Non Real Estate		—	$	—	$	—		1	$	61	$	61
Commercial - Real Estate		—		—		—		2		458		458
Construction & Development		—		—		—		—		—		—
Residential		2		75		75		3		101		101
Consumer - Non Real Estate		—		—		—		—		—		—
Totals		2	$	75	$	75		6	$	620	$	620

	For the three months ended September 30, 2013						For the nine months ended September 30, 2013
Troubled Debt Restructuring	Number of Contracts		Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Number of Contracts		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
Commercial - Non Real Estate		—	$	—	$	—		1	$	32	$	32
Commercial - Real Estate		—		—		—		1		238		238
Construction & Development		1		129		129		2		621		621
Residential		2		95		96		5		543		544
Consumer - Non Real Estate		—		—		—		—		—		—
Totals		3	$	224	$	225		9	$	1,434	$	1,435

For the purposes of this report, default is defined as being 90-days past due or on non-accrual status without performance. There were no loans restructured in the twelve months prior to September 30, 2014 and 2013 that went into default during the three-month periods ended September 30, 2014 and 2013.

Some loan modifications classified as TDRs may not ultimately result in the full collection of principal and interest, as modified, and may result in potential incremental losses. These potential incremental losses have been factored into our overall allowance for loan losses estimate. The level of any re-defaults will likely be affected by future economic conditions. Once a loan becomes a TDR, it will continue to be reported as a TDR until it is ultimately repaid in full, reclassified to loans held for sale, or foreclosed and sold. Included in the allowance for loan losses at September 30, 2014 and 2013 was an impairment reserve for TDRs in the amount of $1.3 million and $617,000, respectively.

Non-accrual loans and an age analysis of past due loans, segregated by class of loans, were as follows (dollars in thousands):

	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		90 Days Past Due and Still Accruing		Non-accrual Loans
September 30, 2014:
Commercial - Non Real Estate	$	—	$	170	$	—	$	170	$	23,334	$	23,504	$	—	$	176
Commercial Real Estate
Owner occupied		116		—		—		116		55,229		55,345		—		355
Income producing		—		—		—		—		47,588		47,588		—		304
Multifamily		—		—		—		—		8,917		8,917		—		—
Construction & Development
1 - 4 Family		—		—		—		—		3,028		3,028		—		—
Other		—		—		—		—		19,722		19,722		—		1,557
Farmland		—		—		110		110		270		380		—		110
Residential
Equity Lines		—		40		—		40		28,193		28,233		—		69
1 - 4 Family		518		—		83		601		89,354		89,955		—		693
Junior Liens		—		—		27		27		804		831		—		49
Consumer - Non Real Estate		2		—		—		2		3,097		3,099		—		5
Other		—		—		—		—		1,094		1,094		—		—
Total	$	636	$	210	$	220	$	1,066	$	280,630	$	281,696	$	—	$	3,318

	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		90 Days Past Due and Still Accruing		Non-accrual Loans
December 31, 2013:
Commercial - Non Real Estate	$	46	$	—	$	154	$	200	$	17,228	$	17,428	$	—	$	463
Commercial Real Estate
Owner occupied		—		77		684		761		57,154		57,915		—		1,689
Income producing		—		—		503		503		51,297		51,800		—		503
Multifamily		—		—		—		—		7,748		7,748		—		—
Construction & Development
1 - 4 Family		—		—		—		—		1,745		1,745		—		—
Other		158		—		240		398		24,375		24,773		—		599
Farmland		—		—		252		252		279		531		—		252
Residential
Equity Lines		75		9		—		84		28,133		28,217		—		95
1 - 4 Family		157		242		355		754		82,995		83,749		—		1,128
Junior Liens		—		—		26		26		1,080		1,106		—		53
Consumer - Non Real Estate		1		2		—		3		2,551		2,554		—		6
Other		—		—		—		—		944		944		—		—
Total	$	437	$	330	$	2,214	$	2,981	$	275,529	$	278,510	$	—	$	4,788

The Bank categorizes loans and leases into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. This categorization is made on all commercial, commercial real estate, and construction and development loans. The Bank uses the following definitions for risk ratings:

Pass – Loans and leases classified as pass should be performing relatively close to expectations, with adequate evidence that the borrower is continuing to generate adequate cash flow to service debt. There should be no significant departure from the intended source and timing of repayment, and there should be no undue reliance on secondary sources of repayment. To the extent that some variance exists in one or more criteria being measured, it may be offset by the relative strength of other factors and/or collateral pledged to secure the transaction.

Special Mention - Loans and leases classified as special mention, while still adequately protected by the borrower’s capital adequacy and payment capability, exhibit distinct weakening trends and/or elevated levels of exposure to external conditions. If left unchecked or uncorrected, these potential weaknesses may result in deteriorated prospects of repayment. These exposures require management’s close attention so as to avoid becoming undue or unwarranted credit exposures.

Substandard - Loans and leases classified as substandard are inadequately protected by the borrower’s current financial condition and payment capability or of the collateral pledged, if any. Loans and leases so classified have a well-defined weakness or weaknesses that jeopardize the orderly repayment of debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful - Loans and leases classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, its classification as an estimated loss is deferred until its more exact status may be determined. The Company’s practice is to charge-off the portion of the loan amount determined to be doubtful in the quarter that the determination is made if the repayment of the loan is collateral dependent.

Loss - Loans and leases classified as loss are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean the loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future. Losses are taken in the period in which they surface as uncollectible.

Commercial loans that do not require individual analysis as part of the above described process are considered to be pass-rated loans. As of September 30, 2014 and December 31, 2013, and based on the most recent analysis performed, the loans and leases were categorized as follows (dollars in thousands):

	September 30, 2014
Internal Risk Rating Grades	Pass		Special Mention		Substandard		Doubtful		Loss
Commercial - Non Real Estate	$	19,918	$	2,885	$	701	$	—	$	—
Commercial Real Estate
Owner occupied		47,386		3,831		4,128		—		—
Income producing		31,050		13,891		2,647		—		—
Multifamily		7,177		1,740		—		—		—
Construction & Development
1 - 4 Family		2,480		195		353		—		—
Other		15,228		1,865		2,629		—		—
Farmland		270		—		110		—		—
Other		1,094		—		—		—		—
Totals	$	124,603	$	24,407	$	10,568	$	—	$	—
Total:
Commercial - Non Real Estate	$	19,918	$	2,885	$	701	$	—	$	—
Commercial Real Estate	$	85,613	$	19,462	$	6,775	$	—	$	—
Construction & Development	$	17,978	$	2,060	$	3,092	$	—	$	—
Other	$	1,094	$	—	$	—	$	—	$	—
Totals	$	123,509	$	24,407	$	10,568	$	—	$	—

	December 31, 2013
Internal Risk Rating Grades	Pass		Special Mention		Substandard		Doubtful		Loss
Commercial - Non Real Estate	$	13,289	$	3,157	$	982	$	—	$	—
Commercial Real Estate
Owner occupied		47,207		6,009		4,699		—		—
Income producing		33,875		10,501		7,424		—		—
Multifamily		5,925		1,823		—		—		—
Construction & Development
1 - 4 Family		1,133		252		360		—		—
Other		17,122		3,265		4,386		—		—
Farmland		279		—		252		—		—
Other		944		—		—		—		—
Totals	$	119,774	$	25,007	$	18,103	$	—	$	—
Total:
Commercial - Non Real Estate	$	13,289	$	3,157	$	982	$	—	$	—
Commercial Real Estate	$	87,007	$	18,333	$	12,123	$	—	$	—
Construction & Development	$	18,534	$	3,517	$	4,998	$	—	$	—
Other	$	944	$	—	$	—	$	—	$	—
Totals	$	118,830	$	25,007	$	18,103	$	—	$	—

All consumer-related loans, including residential real estate and non-real estate, are evaluated and monitored based upon payment activity. Once a consumer-related loan becomes past due on a recurring basis, the Company will pull that loan out of the homogenized pool and evaluate it individually for impairment. At this time, the consumer-related loan may be placed on the Company’s internal watch list and risk rated either special mention or substandard, depending upon the individual circumstances. Consumer-related loans at September 30, 2014 and December 31, 2013, segregated by class of loans, were as follows (dollars in thousands):

	September 30, 2014				December 31, 2013
Risk Based on Payment Activity	Performing		Non- Performing		Performing		Non- Performing
Residential
Equity Lines	$	28,165	$	68	$	28,122	$	95
1 - 4 Family		89,562		393		83,092		657
Junior Liens		805		26		1,080		26
Consumer - Non Real Estate
Credit Cards		—		—		—		—
Other		3,094		5		2,548		6
Totals	$	121,626	$	492	$	114,842	$	784
Total:
Residential	$	118,532	$	487	$	112,294	$	778
Consumer - Non Real Estate	$	3,094	$	5	$	2,548	$	6
Totals	$	121,626	$	492	$	114,842	$	784

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ALLOWANCE FOR LOAN LOSSES (Tables)

9 Months Ended

Sep. 30, 2014

Schedule of Changes in Allowance for Loan Losses by Segment

Changes in the allowance for loan losses by segment, since their respective year-end, are as follows (dollars in thousands):

	September 30, 2014												September 30, 2013
	Beginning Balance		Chargeoffs			Recoveries		Provision			Ending Balance		Beginning Balance		Chargeoffs			Recoveries		Provision			Ending Balance
Commercial - Non Real Estate	$	176	$	(58	)	$	806	$	(768	)	$	156	$	1,209	$	(107	)	$	1,605	$	(2,320	)	$	387
Commercial Real Estate
Owner occupied		1,224		—			11		44			1,279		1,359		(290	)		549		(284	)		1,334
Income producing		831		(104	)		—		303			1,030		773		(21	)		20		13			785
Multifamily		50		—			—		116			166		78		—			—		(19	)		59
Construction & Development
1 - 4 Family		52		(719	)		—		740			73		78		(5	)		—		(24	)		49
Other		580		—			55		(22	)		613		728		—			9		(177	)		560
Farmland		3		—			—		2			5		—		(21	)		—		24			3
Residential
Equity Lines		332		(123	)		6		154			369		314		(207	)		33		210			350
1 - 4 Family		1,218		(15	)		77		(64	)		1,216		1,267		(620	)		468		247			1,362
Consumer - Non Real Estate		44		(24	)		16		16			52		98		(38	)		28		(29	)		59
Unallocated		1,505		—			—		(1,281	)		224		986		—			—		281			1,267
Total	$	6,015	$	(1,043	)	$	971	$	(760	)	$	5,183	$	6,890	$	(1,309	)	$	2,712	$	(2,078	)	$	6,215

Changes in the allowance for loan losses by segment, since the prior quarter ended June 30, 2014 and 2013, respectively, are as follows (dollars in thousands):

	June 30, 2014 - September 30, 2014													June 30, 2013 - September 30, 2013
	Beginning Balance		Chargeoffs			Recoveries			Provision			Ending Balance		Beginning Balance		Chargeoffs			Recoveries		Provision			Ending Balance
Commercial - Non Real Estate	$	33	$	(9	)	$	709		$	(577	)	$	156	$	584	$	—		$	241	$	(438	)	$	387
Commercial Real Estate
Owner occupied		488		—			4			787			1,279		1,568		—			537		(771	)		1,334
Income producing		1,403		(104	)		—			(269	)		1,030		756		—			—		29			785
Multifamily		113		—			—			53			166		67		—			—		(8	)		59
Construction & Development
1 - 4 Family		52		—			—			21			73		85		—			—		(36	)		49
Other		525		—			4			84			613		551		—			3		6			560
Farmland		3		—			—			2			5		3		—			—		—			3
Residential
Equity Lines		149		(41	)		1			260			369		354		—			3		(7	)		350
1 - 4 Family		809		(7	)		12			402			1,216		1,171		(42	)		5		228			1,362
Consumer - Non Real Estate		36		(1	)		(3	)		20			52		90		(16	)		6		(21	)		59
Unallocated		1,542		—			—			(1,318	)		224		1,169		—			—		98			1,267
Total	$	5,153	$	(162	)	$	727		$	(535	)	$	5,183	$	6,398	$	(58	)	$	795	$	(920	)	$	6,215

Schedule of Loans Individually Evaluated for Impairment

As of September 30, 2014 and December 31, 2013, loans were evaluated for impairment as follows (dollars in thousands):

	Individually Evaluated for Impairment
	September 30, 2014				December 31, 2013
	Allowance		Total Loans		Allowance		Total Loans
Commercial - Non Real Estate	$	26	$	1,994	$	25	$	2,304
Commercial Real Estate
Owner occupied		829		6,537		77		7,146
Income producing		164		10,472		126		11,021
Multifamily		74		1,206		12		1,226
Construction & Development
1 - 4 Family		9		353		8		360
Other		14		2,988		107		4,721
Farmland		—		110		—		252
Residential
Equity Lines		41		109		—		95
1 - 4 Family		274		11,918		208		12,945
Consumer - Non Real Estate		5		70		—		76
Unallocated		—		—		—		—
Total	$	1,436	$	35,757	$	563	$	40,146

	Collectively Evaluated for Impairment
	September 30, 2014				December 31, 2013
	Allowance		Total Loans		Allowance		Total Loans
Commercial - Non Real Estate	$	130	$	21,510	$	151	$	15,124
Commercial Real Estate
Owner occupied		450		48,808		1,147		50,769
Income producing		866		37,116		705		40,779
Multifamily		92		7,711		38		6,522
Construction & Development
1 - 4 Family		64		2,675		44		1,385
Other		599		16,734		473		20,052
Farmland		5		270		3		279
Residential
Equity Lines		328		28,124		332		28,122
1 - 4 Family		942		78,868		1,010		71,910
Consumer - Non Real Estate		47		3,029		44		2,478
Unallocated		224		1,094		1,505		944
Total	$	3,747	$	245,939	$	5,452	$	238,364

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RECENT ACCOUNTING PRONOUNCEMENTS (Policies)

9 Months Ended

Sep. 30, 2014

Transfers and Servicing

In June 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-11, Transfers and Servicing (Topic 860). The amendments in this ASU require that repurchase-to-maturity transactions be accounted for as secured borrowings consistent with the accounting for other repurchase agreements. In addition, the amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty (a repurchase financing), which will result in secured borrowing accounting for the repurchase agreement. The amendments require an entity to disclose information about transfers accounted for as sales in transactions that are economically similar to repurchase agreements, in which the transferor retains substantially all of the exposure to the economic return on the transferred financial asset throughout the term of the transaction. In addition the amendments require disclosure of the types of collateral pledged in repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions and the tenor of those transactions. This ASU is effective for first interim or annual periods beginning after December 15, 2014. The Company will evaluate the impact this ASU may have on its consolidated financial statements.

Receivables - Troubled Debt Restructurings by Creditors

In January 2014, the FASB issued ASU 2014-04, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40). The amendments in this Update clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this Update are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. For entities other than public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015. The amendments are not expected to have a significant impact on the Company.

Income Taxes

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740). An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. For example, an entity should not evaluate whether the deferred tax asset expires before the statute of limitations on the tax position or whether the deferred tax asset may be used prior to the unrecognized tax benefit being settled. The amendments in this Update do not require new recurring disclosures. The amendments are not expected to have a significant impact on the Company.

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FAIR VALUE

9 Months Ended

Sep. 30, 2014

FAIR VALUE

NOTE 8. FAIR VALUE

Accounting principles generally accepted in the United States of America require that companies measure and record certain assets and liabilities at fair value and record any adjustments to the fair value of those assets. Securities are recorded at fair value on a recurring basis while other assets, such as impaired loans, are recorded at fair value on a non-recurring basis.

The Company uses three levels of measurement to group those assets measured at fair value. These groupings are made based on the markets the assets are traded in and the reliability of the assumptions used to determine fair value. The groupings include:

• Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 – observable inputs other than the quoted prices included in Level 1.

• Level 3 – unobservable inputs.

Investment Securities – The Company’s investment securities are measured on a recurring basis through a model used by our bond agent. All of our bond price adjustments meet level 2 criteria. Prices are derived from a model which uses actively quoted rates, prepayment models and other underlying credit and collateral data.

Impaired 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. Impaired loans are recorded at fair value less estimated selling costs. Once a loan is identified as individually impaired, the Company measures impairment. Fair values of impaired loans are generally estimated using one of several methods, including collateral value, liquidation value, discounted cash flows and, in rare cases, the market value of the note. Those impaired loans not requiring an allowance represent loans for which the net present value of the expected cash flows or fair value of the collateral less costs to sell exceed the recorded investments in such loans. At September 30, 2014 and December 31, 2013, a majority of the total impaired loans were evaluated based on the fair value of the collateral. When the fair value of the collateral is based on an executed sales contract with an independent third party, the Company records the impaired loans as nonrecurring Level 1. If the collateral is based on another observable market price or a current appraised value, the Company records the impaired loans as nonrecurring Level 2. When an appraised value is not available or the Company 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. Impaired loans can also be evaluated for impairment using the present value of expected future cash flows discounted at the loan’s effective interest rate. The measurement of impaired loans using future cash flows discounted at the loan’s effective interest rate rather than the market rate of interest is not a fair value measurement and is therefore excluded from fair value disclosure requirements. Appraised values may be discounted to reflect current market conditions and ultimate collectability. These discounts typically range from 0% to 20% for each of the respective periods. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly.

Other Real Estate Owned – Properties acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less costs to sell at the date of foreclosure. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying value or the new fair value less estimated selling costs. Fair value is generally based upon current appraisals, comparable sales, and other estimates of value obtained principally from independent sources, adjusted for selling costs. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the asset as nonrecurring Level 2. However, the Company also considers other factors or recent developments which could result in adjustments to the collateral value estimates indicated in the appraisals such as changes in absorption rates or market conditions from the time of valuation. In situations where an appraisal less estimated selling costs is used to determine fair value, management adjustments are significant to the fair value measurements, or other means are used to estimate fair value in the absence of an appraisal, the Company records the impaired loan as nonrecurring Level 3 within the valuation hierarchy. Appraised values may be discounted to reflect current market conditions and ultimate collectability. These discounts typically range from 0% to 20% for each of the respective periods.

The following table summarizes the Company’s assets measured at fair value at the dates indicated (dollars in thousands):

	At September 30, 2014
	Total		Level 1		Level 2		Level 3
Assets valued on a recurring basis
Investment securities:
U.S. government agency	$	4,935	$	—	$	4,935	$	—
State and municipals		6,066		—		6,066		—
Mortgage-backed		29,996		—		29,996		—
Assets valued on a non-recurring basis
Impaired loans		34,321		—		—		34,321
Other real estate owned		1,220		—		—		1,220
Total	$	76,538	$	—	$	40,997	$	35,541
	At December 31, 2013
	Total		Level 1		Level 2		Level 3
Assets valued on a recurring basis
Investment securities:
U.S. government agency	$	40,930	$	—	$	40,930	$	—
State and municipals		10,181		—		10,181		—
Mortgage-backed		38,204		—		38,204		—
Assets valued on a non-recurring basis
Impaired loans		39,583		—		—		39,583
Other real estate owned		1,233		—		—		1,233
Total	$	130,131	$	—	$	89,315	$	40,816

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2014

COMMITMENTS AND CONTINGENCIES

NOTE 6. COMMITMENTS AND CONTINGENCIES

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, lines of credit and standby letters of credit. These instruments involve elements of credit risk in excess of amounts recognized in the accompanying financial statements.

The Company’s risk of loss related to unfunded loan commitments and lines of credit or standby letters of credit is represented by the contractual amount of these instruments. The Company uses the same credit policies in making commitments under such instruments as it does for on-balance sheet instruments. The amount of collateral obtained, if any, is based on management’s credit evaluation of the borrower. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The following table presents a summary of outstanding financial instruments whose contract amounts represent credit risk as of September 30, 2014 (dollars in thousands):

Unfunded loan commitments	$	31,096
Financial standby letters of credit		209
Total unused commitments	$	31,305

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RECENT ACCOUNTING PRONOUNCEMENTS

9 Months Ended

Sep. 30, 2014

RECENT ACCOUNTING PRONOUNCEMENTS

NOTE 7. RECENT ACCOUNTING PRONOUNCEMENTS

In June 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-11, Transfers and Servicing (Topic 860). The amendments in this ASU require that repurchase-to-maturity transactions be accounted for as secured borrowings consistent with the accounting for other repurchase agreements. In addition, the amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty (a repurchase financing), which will result in secured borrowing accounting for the repurchase agreement. The amendments require an entity to disclose information about transfers accounted for as sales in transactions that are economically similar to repurchase agreements, in which the transferor retains substantially all of the exposure to the economic return on the transferred financial asset throughout the term of the transaction. In addition the amendments require disclosure of the types of collateral pledged in repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions and the tenor of those transactions. This ASU is effective for first interim or annual periods beginning after December 15, 2014. The Company will evaluate the impact this ASU may have on its consolidated financial statements.

In January 2014, the FASB issued ASU 2014-04, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40). The amendments in this Update clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this Update are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. For entities other than public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015. The amendments are not expected to have a significant impact on the Company.

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740). An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. For example, an entity should not evaluate whether the deferred tax asset expires before the statute of limitations on the tax position or whether the deferred tax asset may be used prior to the unrecognized tax benefit being settled. The amendments in this Update do not require new recurring disclosures. The amendments are not expected to have a significant impact on the Company.

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BORROWED FUNDS

9 Months Ended

Sep. 30, 2014

BORROWED FUNDS

NOTE 9. BORROWED FUNDS

A summary of the Company’s outstanding borrowings and the annual rate of interest currently payable on each category is presented in the following table at the dates indicated (dollars in thousands):

	September 30, 2014					December 31, 2013
	Outstanding Balance		Annual Interest Rate			Outstanding Balance		Annual Interest Rate
Securities sold under overnight repurchase agreements	$	394		0.15	%	$	388		0.14	%
Securities sold under term repurchase agreements		—		—			45,000		4.38
Trust preferred securities		—		—			5,155		3.19
Subordinated debt		—		—			2,700		4.00
Total borrowed funds	$	394		0.15	%	$	53,243		4.21	%

The Bank engages from time-to-time in federal funds purchases from upstream correspondent institutions to meet temporary funding needs. There were none of these transactions outstanding at the close of either period presented in the above table.

The Bank had a total of $45.0 million of borrowings in the form of securities sold under term repurchase agreements that were entered into during 2008. These borrowings are secured by marketable investment securities equal to approximately 109.5% of the principal balances outstanding plus accrued interest and the value of an imbedded interest rate cap.

The borrowings were repaid as of July 18, 2014. There was prepayment expense of $4.4 million. The security interests in the pledged investment securities were released in connection with the Company’s repayment of these borrowings.

The Bank utilizes borrowings from the Federal Home Loan Bank (“FHLB”) as a source of liquidity. At September 30, 2014, the Bank had immediately available credit of $6.7 million. There were no advances from the FHLB at quarter-end.

During 2008, the Company issued $5.2 million of junior subordinated debentures to its wholly owned capital trust, Bank of the Carolinas Trust I (the “Trust”), which, in turn, issued $5.0 million in trust preferred securities having a like liquidation amount and $155,000 in common securities (all common securities are owned by the Company). The Company fully and unconditionally guaranteed the Trust’s obligations related to the trust preferred securities.

On July 16, 2014, the Company repurchased all of its floating rate trust preferred securities issued through the Trust from the holders of those securities for an aggregate cash payment of $1.75 million. The holders of the trust preferred securities agreed to forgive any unpaid interest on the securities.

In 2008, the Company issued $2.7 million of subordinated debt in a private transaction with another financial institution. On July 16, 2014, the Company agreed to repurchase the subordinated note representing this debt from the holder of the note for a cash payment of $1.35 million. The noteholder also agreed to forgive any unpaid interest on the note.

Under the terms of a written agreement between the Company and the Federal Reserve Bank of Richmond, the Company and the Trust may not make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Federal Reserve Bank of Richmond and the Director of the Division of Banking Supervision and Regulation of the Federal Reserve Board of Governors.

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Loans Receivable - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable Modifications Recorded Investment	$ 34,274	$ 37,481
Impairment reserve for troubled debt restructurings	$ 1,297	$ 563	$ 617

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INVESTMENT SECURITIES (Tables)

9 Months Ended

Sep. 30, 2014

Amortized Cost, Estimated Fair Values and Carrying Values of Investment Securities Portfolios

The amortized cost, estimated fair values and carrying values of the investment securities portfolios at the indicated dates are summarized as follows (dollars in thousands):

	September 30, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Carrying Value
Investment securities available for sale:
U.S. Government agencies securities	$	4,896	$	70	$	31	$	4,935	$	4,935
State and municipal bonds		6,175		43		152		6,066		6,066
Mortgage-backed securities		30,226		42		272		29,996		29,996
Total investment securities available for sale	$	41,297	$	155	$	455	$	40,997	$	40,997

	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Carrying Value
Investment securities available for sale:
U.S. Government agencies securities	$	44,077	$	87	$	3,234	$	40,930	$	40,930
State and municipal bonds		11,159		—		978		10,181		10,181
Mortgage-backed securities		39,458		34		1,288		38,204		38,204
Total investment securities available for sale		94,694		121		5,500		89,315		89,315
Investment securities held to maturity:
Corporate securities		1,000		—		180		820		1,000
Total investment securities	$	95,694	$	121	$	5,680	$	90,135	$	90,315

Fair Values of Securities with Unrealized Losses

The fair values of securities with unrealized losses at September 30, 2014 and December 31, 2013 are as follows (dollars in thousands):

September 30, 2014:
	Less than 12 Months				12 Months or More				Total
Temporarily impaired securities:	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
U.S. Government agency securities	$	—	$	—	$	1,674	$	31	$	1,674	$	31
State and municipal bonds		—		—		4,151		152		4,151		152
Mortgage-backed securities		11,449		50		14,325		222		25,774		272
Corporate securities		—		—		—		—		—		—
Total	$	11,449	$	50	$	20,150	$	405	$	31,599	$	455

December 31, 2013:
	Less than 12 Months				12 Months or More				Total
Temporarily impaired securities:	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
U.S. Government agency securities	$	35,679	$	2,731	$	3,482	$	503	$	39,161	$	3,234
State and municipal bonds		7,835		723		2,346		255		10,181		978
Mortgage-backed securities		34,564		1,287		528		1		35,092		1,288
Corporate securities		—		—		820		180		820		180
Total	$	78,078	$	4,741	$	7,176	$	939	$	85,254	$	5,680

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BORROWED FUNDS (Tables)

9 Months Ended

Sep. 30, 2014

Outstanding Borrowings and Annual Rate of Interest

A summary of the Company’s outstanding borrowings and the annual rate of interest currently payable on each category is presented in the following table at the dates indicated (dollars in thousands):

	September 30, 2014					December 31, 2013
	Outstanding Balance		Annual Interest Rate			Outstanding Balance		Annual Interest Rate
Securities sold under overnight repurchase agreements	$	394		0.15	%	$	388		0.14	%
Securities sold under term repurchase agreements		—		—			45,000		4.38
Trust preferred securities		—		—			5,155		3.19
Subordinated debt		—		—			2,700		4.00
Total borrowed funds	$	394		0.15	%	$	53,243		4.21	%

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Income Taxes - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Income Tax [Line Items]
Valuation allowance established against deferred tax asset	$ 15.8	$ 17.7
Unrealized losses in bond portfolio	$ (0.3)	$ (5.4)

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Individually Evaluated for Impairment (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Individually Evaluated for Impairment, Allowance	$ 1,436	$ 563
Individually Evaluated for Impairment, Total Loans	35,757	40,146
Commercial - Non Real Estate
Individually Evaluated for Impairment, Allowance	26	25
Individually Evaluated for Impairment, Total Loans	1,994	2,304
Commercial Real Estate | Owner occupied
Individually Evaluated for Impairment, Allowance	829	77
Individually Evaluated for Impairment, Total Loans	6,537	7,146
Commercial Real Estate | Income Producing
Individually Evaluated for Impairment, Allowance	164	126
Individually Evaluated for Impairment, Total Loans	10,472	11,021
Commercial Real Estate | Multifamily
Individually Evaluated for Impairment, Allowance	74	12
Individually Evaluated for Impairment, Total Loans	1,206	1,226
Construction & Development | 1-4 Family Residential
Individually Evaluated for Impairment, Allowance	9	8
Individually Evaluated for Impairment, Total Loans	353	360
Construction & Development | Construction & Development, Other
Individually Evaluated for Impairment, Allowance	14	107
Individually Evaluated for Impairment, Total Loans	2,988	4,721
Construction & Development | Farmland
Individually Evaluated for Impairment, Total Loans	110	252
Residential | 1-4 Family Residential
Individually Evaluated for Impairment, Allowance	274	208
Individually Evaluated for Impairment, Total Loans	11,918	12,945
Residential | Equity Lines
Individually Evaluated for Impairment, Allowance	41
Individually Evaluated for Impairment, Total Loans	109	95
Consumer - Non Real Estate
Individually Evaluated for Impairment, Allowance	5
Individually Evaluated for Impairment, Total Loans	$ 70	$ 76

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Consolidated Statements of Comprehensive Income (Loss) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Net income (loss)	$ 370	$ 240	$ (265)	$ (686)
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities available-for-sale	138	(655)	3,804	(4,792)
Reclassification adjustment for losses realized in net income (loss)	1,275		1,275
Income tax effect				335
Total other comprehensive income (loss), net of income tax effect	1,413	(655)	5,079	(4,457)
Total comprehensive income (loss)	$ 1,783	$ (415)	$ 4,814	$ (5,143)

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INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2014

INVESTMENT SECURITIES

NOTE 3. INVESTMENT SECURITIES

The amortized cost, estimated fair values and carrying values of the investment securities portfolios at the indicated dates are summarized as follows (dollars in thousands):

	September 30, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Carrying Value
Investment securities available for sale:
U.S. Government agencies securities	$	4,896	$	70	$	31	$	4,935	$	4,935
State and municipal bonds		6,175		43		152		6,066		6,066
Mortgage-backed securities		30,226		42		272		29,996		29,996
Total investment securities available for sale	$	41,297	$	155	$	455	$	40,997	$	40,997

	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Carrying Value
Investment securities available for sale:
U.S. Government agencies securities	$	44,077	$	87	$	3,234	$	40,930	$	40,930
State and municipal bonds		11,159		—		978		10,181		10,181
Mortgage-backed securities		39,458		34		1,288		38,204		38,204
Total investment securities available for sale		94,694		121		5,500		89,315		89,315
Investment securities held to maturity:
Corporate securities		1,000		—		180		820		1,000
Total investment securities	$	95,694	$	121	$	5,680	$	90,135	$	90,315

Management of the Bank believes all unrealized losses on available for sale securities as of September 30, 2014 represent temporary impairments related to market fluctuations. The unrealized losses on our securities are a nominal portion of the total value of the portfolio.

The fair values of securities with unrealized losses at September 30, 2014 and December 31, 2013 are as follows (dollars in thousands):

September 30, 2014:
	Less than 12 Months				12 Months or More				Total
Temporarily impaired securities:	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
U.S. Government agency securities	$	—	$	—	$	1,674	$	31	$	1,674	$	31
State and municipal bonds		—		—		4,151		152		4,151		152
Mortgage-backed securities		11,449		50		14,325		222		25,774		272
Corporate securities		—		—		—		—		—		—
Total	$	11,449	$	50	$	20,150	$	405	$	31,599	$	455

December 31, 2013:
	Less than 12 Months				12 Months or More				Total
Temporarily impaired securities:	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
U.S. Government agency securities	$	35,679	$	2,731	$	3,482	$	503	$	39,161	$	3,234
State and municipal bonds		7,835		723		2,346		255		10,181		978
Mortgage-backed securities		34,564		1,287		528		1		35,092		1,288
Corporate securities		—		—		820		180		820		180
Total	$	78,078	$	4,741	$	7,176	$	939	$	85,254	$	5,680

The Company does not believe that the investment securities that were in an unrealized loss position as of September 30, 2014, which were comprised of 25 securities, represent an other-than-temporary impairment. Total gross unrealized losses were primarily attributable to change in interest rates, relative to the when the investment securities were purchased, and not due to the credit quality of the investment securities. As of September 30, 2014 and December 31, 2013, the gross unrealized losses reported for mortgage-backed securities were primarily related to investment securities issued by Government National Mortgage Association. The Company does not intend to sell the investment securities that were in an unrealized loss position and it is not more likely than not that the Company will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity.

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Computation of Earnings (Loss) Per Share (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Earnings Per Share [Line Items]
Net income (loss) applicable to common stockholders	$ 10,738	$ (5)	$ 10,003	$ (1,417)
Weighted average number of common shares outstanding	387,333,235	3,895,840	133,112,837	3,895,840
Weighted average number of diluted common shares outstanding	387,333,235	3,895,840	133,112,837	3,895,840
Common stock options and common stock warrants - anti-dilutive	20,000	497,605	20,000	497,605
Earnings (Loss) per common share:
Basic	$ 0.028		$ 0.075	$ (0.360)
Diluted	$ 0.028		$ 0.075	$ (0.360)

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Risk Category of Loans and Leases (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment [Line Items]
Totals	$ 281,696	$ 278,510
Commercial - Non Real Estate
Financing Receivable, Recorded Investment [Line Items]
Totals	23,504	17,428
Commercial Real Estate | Owner occupied
Financing Receivable, Recorded Investment [Line Items]
Totals	55,345	57,915
Commercial Real Estate | Income Producing
Financing Receivable, Recorded Investment [Line Items]
Totals	47,588	51,800
Commercial Real Estate | Multifamily
Financing Receivable, Recorded Investment [Line Items]
Totals	8,917	7,748
Construction & Development | Construction & Development, Other
Financing Receivable, Recorded Investment [Line Items]
Totals	19,722	24,773
Construction & Development | Farmland
Financing Receivable, Recorded Investment [Line Items]
Totals	380	531
Pass
Financing Receivable, Recorded Investment [Line Items]
Totals	124,603	119,774
Pass | Commercial - Non Real Estate
Financing Receivable, Recorded Investment [Line Items]
Totals	19,918	13,289
Pass | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Totals	85,613	87,007
Pass | Commercial Real Estate | Owner occupied
Financing Receivable, Recorded Investment [Line Items]
Totals	47,386	47,207
Pass | Commercial Real Estate | Income Producing
Financing Receivable, Recorded Investment [Line Items]
Totals	31,050	33,875
Pass | Commercial Real Estate | Multifamily
Financing Receivable, Recorded Investment [Line Items]
Totals	7,177	5,925
Pass | Construction & Development
Financing Receivable, Recorded Investment [Line Items]
Totals	17,978	18,534
Pass | Construction & Development | 1-4 Family
Financing Receivable, Recorded Investment [Line Items]
Totals	2,480	1,133
Pass | Construction & Development | Construction & Development, Other
Financing Receivable, Recorded Investment [Line Items]
Totals	15,228	17,122
Pass | Construction & Development | Farmland
Financing Receivable, Recorded Investment [Line Items]
Totals	270	279
Pass | Other
Financing Receivable, Recorded Investment [Line Items]
Totals	1,094	944
Special Mention
Financing Receivable, Recorded Investment [Line Items]
Totals	24,407	25,007
Special Mention | Commercial - Non Real Estate
Financing Receivable, Recorded Investment [Line Items]
Totals	2,885	3,157
Special Mention | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Totals	19,462	18,333
Special Mention | Commercial Real Estate | Owner occupied
Financing Receivable, Recorded Investment [Line Items]
Totals	3,831	6,009
Special Mention | Commercial Real Estate | Income Producing
Financing Receivable, Recorded Investment [Line Items]
Totals	13,891	10,501
Special Mention | Commercial Real Estate | Multifamily
Financing Receivable, Recorded Investment [Line Items]
Totals	1,740	1,823
Special Mention | Construction & Development
Financing Receivable, Recorded Investment [Line Items]
Totals	2,060	3,517
Special Mention | Construction & Development | 1-4 Family
Financing Receivable, Recorded Investment [Line Items]
Totals	195	252
Special Mention | Construction & Development | Construction & Development, Other
Financing Receivable, Recorded Investment [Line Items]
Totals	1,865	3,265
Substandard
Financing Receivable, Recorded Investment [Line Items]
Totals	10,568	18,103
Substandard | Commercial - Non Real Estate
Financing Receivable, Recorded Investment [Line Items]
Totals	701	982
Substandard | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Totals	6,775	12,123
Substandard | Commercial Real Estate | Owner occupied
Financing Receivable, Recorded Investment [Line Items]
Totals	4,128	4,699
Substandard | Commercial Real Estate | Income Producing
Financing Receivable, Recorded Investment [Line Items]
Totals	2,647	7,424
Substandard | Construction & Development
Financing Receivable, Recorded Investment [Line Items]
Totals	3,092	4,998
Substandard | Construction & Development | 1-4 Family
Financing Receivable, Recorded Investment [Line Items]
Totals	353	360
Substandard | Construction & Development | Construction & Development, Other
Financing Receivable, Recorded Investment [Line Items]
Totals	2,629	4,386
Substandard | Construction & Development | Farmland
Financing Receivable, Recorded Investment [Line Items]
Totals	$ 110	$ 252

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EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2014

Computation of Earnings (Loss) Per Share

Earnings (loss) per share have been computed based on the following (dollars in thousands):

	Three months ended					Nine months ended
	September 30,					September 30,
	2014		2013			2014		2013
Net income (loss) applicable to common stockholders	$	10,573	$	(5	)	$	9,938	$	(1,417	)
Weighted average number of common shares outstanding		387,333,235		3,895,840			133,112,837		3,895,840
Weighted average number of diluted common shares outstanding		387,333,235		3,895,840			133,112,837		3,895,840
Common stock options and common stock warrants - anti-dilutive		20,000		497,605			20,000		497,605
Earnings (Loss) per common share:
Basic	$	0.028	$	—		$	0.075	$	(0.36	)
Diluted	$	0.028	$	—		$	0.075	$	(0.36	)