Geographic terms are treated somewhat differently under the trademark laws. They are generally not protectable as trademarks UNLESS the owner can prove that the term has "acquired distinctiveness." In other words, that when consumers see the geographic term in connection with the goods or services they view it as trademark and not merely as a geographic term.
However, a party cannot obtain a trademark registration for a geographic term that is considered "primarily geographically deceptively misdescriptive." In other words, a mark that misrepresents the quality, function, characteristic, etc. of the goods or services because of the place identified in the mark. For instance, if North Carolina was known for a type of bread because of the wheat, yeast, and/or other natural resources only found in North Carolina, someone couldn't protect and own the mark Carolina Bread if, in fact, it was made in New Jersey without those North Carolina ingredients so that consumers would likely be deceived by the misdescription.
Moreover, there are also things called geographic indication marks where you can only use the term if it meets certain geographic rules or standards. A good example is that only sparkling wine from the Champagne region of France are allowed to be called "champagne." See
http://www.geographicindications.com/ and
http://www.champagne.us/ for more on this concept.
As to the use of "NC" described in your post, I would need more info. Trademarks are not protectable against everything else. They are not a monopoly right. It's a question of whether consumers are likely to be confused based on a comparison of the marks and the goods/services, but I don't think a past (and abandoned) use on a street sign would adversely affect their rights to enforce (assuming they had rights to enforce, which would only be limited to the stylization since the letter combo NC is a geographic term afforded little protection as a trademark). For instance, I believe there was a recent case that held that the letters OBX were not protectable or enforceable as a trademark without acquired distinctiveness, as I described above.