COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2013

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

NOTE 14 - COMMITMENTS AND CONTINGENCIES

From time to time, we are involved in routine legal matters incidental to our business. In the opinion of management, the ultimate resolution of such matters will not have a material adverse effect on our financial position, results of operations or liquidity.

Consistent with Item 103 of Regulation S-K, we are presently involved in the following material pending legal proceedings not incidental to the business of the Company:

In December 2011, a lawsuit was filed in the South Carolina Circuit Court in Charleston, South Carolina against Tidelands Bancshares, Inc. and Tidelands Bank, as well as certain current and former officers and directors, by Robert E. Coffee, Jr., our former President and Chief Executive Officer.  The lawsuit alleges causes of action for breach of employment contract, fraud and negligent misrepresentation and asks for actual damages, punitive damages and attorneys’ fees.  Mr. Coffee is seeking actual damages of $780,000 related to a severance payment that Mr. Coffee claims is due under his employment contract.  The Bank and holding company are prohibited from making any payments to Mr. Coffee without the FDIC’s approval, and the FDIC has informed the Bank that it does not approve of any such severance payments being made to Mr. Coffee.  Mr. Coffee is also seeking continuation of certain insurance benefits.  The lawsuit is currently in the discovery stage. The Company cannot provide assurances as to the outcome of this matter at this time.