Attached files
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 27, 2011
BANK OF THE CAROLINAS CORPORATION
(Exact name of Registrant as specified in its charter)
NORTH CAROLINA | 000-52195 | 20-4989192 | ||
(State or other jurisdiction of incorporation) |
(Commission File No.) |
(IRS Employer Identification number) |
135 BOXWOOD VILLAGE DRIVE, MOCKSVILLE, NORTH CAROLINA | 27028 | |||
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (336) 751-5755
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01 | Entry into a Material Definitive Agreement. |
Bank of the Carolinas (the Bank), the wholly owned subsidiary of Bank of the Carolinas Corporation (the Company), has 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 have 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 herewith as exhibits 10.1 and 10.2, respectively, and incorporated herein by reference.
Management. The Order requires 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 must retain a bank consultant to develop a written analysis and assessment of the Banks management needs. Within 60 days from receipt of the consultants management report, the Bank must formulate a written management plan that incorporates 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 Banks 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.
Allowance for Loan and Lease Losses and Call Report. Upon issuance of the Order, the Bank must 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 must review its call reports filed with its regulators on or after December 31, 2010, and must 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 must 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 must perform a risk segmentation analysis with respect to its concentrations of credit and must develop a written plan for systematically reducing and monitoring the Banks commercial real estate and acquisition, construction, and development loans to an amount commensurate with the Banks business strategy, management expertise, size, and location.
Charge-Offs, Credits. The Order requires 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 Banks 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, on 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 Banks 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 Banks 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 institutions 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.
Written Plans and Other Material Terms. Under the terms of the Order, the Bank is 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 Banks lending and credit administration functions |
| Effective internal loan review and grading system |
| Policy for managing the Banks 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 Banks information technology function |
Under the Order, the Banks board of directors has 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 Banks activities. The Bank must also 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.
Item 9.01 | Financial Statements and Exhibits |
(d) | Exhibits |
Exhibit |
Description of Exhibit | |
10.1 | Stipulation to the Issuance of a Consent Order | |
10.2 | Consent Order Issued by the Federal Deposit Insurance Corporation and the North Carolina Office of the Commissioner of Banks | |
99.1 | Press Release |
Caution About Forward-Looking Statements
This Current Report on Form 8-K (including information included or incorporated by reference herein) may contain, among other things, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements regarding certain of Registrants goals and expectations with respect to earnings, income per share, revenue, expenses and the growth rate in such items, as well as other measures of economic performance, including statements relating to estimates of credit quality trends, and (ii) statements preceded by, followed by or that include the words may, could, should, would, believe, anticipate, estimate, expect, intend, plan, projects, outlook or similar expressions. These statements are based upon the current belief and expectations of Registrants management and are subject to significant risks and uncertainties that are subject to change based on various factors (many of which are beyond Registrants control).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
BANK OF THE CAROLINAS CORPORATION | ||
By: | /s/ Stephen R. Talbert | |
Stephen R. Talbert | ||
President and Chief Executive Officer |
Dated: May 3, 2011
EXHIBIT INDEX
Exhibit |
Description of Exhibit | |
10.1 | Stipulation to the Issuance of a Consent Order | |
10.2 | Consent Order Issued by the Federal Deposit Insurance Corporation and the North Carolina Office of the Commissioner of Banks | |
99.1 | Press Release |