Bank Of The Carolinas Corp fka BCAR

[56Chevy]

Amended Annual Report (10-k/a)

Date : 05/16/2014 @ 3:16PM
Source : Edgar (US Regulatory)
Stock : Bank Of The Carolinas Corp. (QB) (BCAR)
Quote : $0.45 -0.01 (-2.17%) @ 5:00PM

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EXPLANATORY NOTE

The purpose of this Amendment No. 1 to Bank of the Carolinas Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (the “Form 10-K”), as filed with the Securities and Exchange Commission on March 26, 2014, is to furnish amended consolidated financial statements and its footnotes as appropriate. This Amendment No. 1 to the Form 10-K continues to speak as of the original filing date of the Form 10-K and does not reflect events that may have occurred subsequent to the original filing date.

At December 31, 2013, the Company had a total deferred tax asset of $17.7 million. There was an established valuation allowance of $14.7 million at December 31, 2013. The balance of the deferred tax asset of $3.0 million related directly to the unrealized losses in investment securities.

As a result of a recent regulatory examination, the Company conducted an evaluation as to whether the $3.0 million deferred tax asset should also be fully reserved. The Company consulted with an accounting expert, who is familiar with the Company and its deferred tax asset, and concluded that the deferred tax asset should have been fully reserved at year end 2013. The Company’s external auditor concurred after reviewing the documentation.

Consequently, the Company is restating its financial statements for December 31, 2013 to reflect a full reserve of its deferred tax asset. The net effect is the Company’s total stockholders’ equity at year end was $3.0 million less than previously reported. In addition, the Company’s income statement now reflects income tax expense of $942,000 as of December 31, 2013. The income tax expense was related to the deferred tax liability on unrealized gains in investment securities. The changes in the market value throughout 2013 reduced these unrealized gains to unrealized losses and the deferred tax liability is adjusted appropriately through income tax expense.

The amount of the deferred tax asset that is available to offset future taxes has not changed and the Company’s ability to utilize the deferred tax asset has not changed. The restatement reduces pro forma book value and book value per share. Should the Company be able to demonstrate sustained profitability in the future, we expect to be able to recognize some or all of the deferred tax asset.

The Company and Bank’s leverage ratios were not adversely impacted as the deferred tax asset was disallowed for Tier 1 capital purposes.

To reflect the changes, the Company has restated the Form 10-K for 2013 and the Bank has also restated its December 2013 Consolidated Report of Condition and Income filed with the federal banking regulators.

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Bank Of The Carolina (BCAR)
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