Bank of the Carolinas Corporation Defers Dividend on TARP Preferred Stock

Bank of the Carolinas Corporation BCAR, the holding company for Bank of the Carolinas, announced today that it has notified the United States Department of Treasury (the "Treasury") of its intent to defer the February 2011 payment of its regular quarterly cash dividend on its Fixed Rate Cumulative Perpetual Preferred Stock, Series A, which the Company issued to the Treasury in connection with the Company's participation in the Treasury's TARP Capital Purchase Program. Under the terms of the TARP Preferred Stock, the Company is required to pay quarterly dividends at a rate of 5% per year for the first five years following the Treasury investment, after which the dividend rate automatically increases to 9% per year. The Company may defer dividend payments for up to six consecutive quarters without default or penalty, but the dividend is a cumulative dividend that accrues for payment in the future and will be reported as preferred dividends for financial statement purposes.