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BNC Bancorp Reports Earnings for Third Quarter 2012

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HIGH POINT, N.C. , Oct. 29, 2012 /PRNewswire/ -- BNC Bancorp (NASDAQ: BNCN) ("Company"), parent company for Bank of North Carolina ("Bank"), today reported financial results for the third quarter of 2012.

(Logo: http://photos.prnewswire.com/prnh/20030917/BNCLOGO )

For the quarter ended September 30, 2012, excluding one-time transaction related expenses, adjusted net income totaled $2.6 million, an increase of 4% compared to the $2.5 million exclusive of one-time costs for the quarter ended September 30, 2011.  During the three months ended September 30, 2012 and 2011, the Company incurred $1.9 million and $109,000, respectively, of expenses associated with merger and acquisition activities.   

For the nine months ended September 30, 2012, excluding one-time transaction related expenses, adjusted net income totaled $7.8 million, an increase of 34% compared to the $5.8 million exclusive of one-time costs for the nine months ended September 30, 2011.  During the nine months ended September 30, 2012 and 2011, the Company incurred $3.8 million and $368,000, respectively, of expenses associated with merger and acquisition activities.   

Total assets at September 30, 2012 were $2.71 billion, an increase of $256.2 million, or 10%, compared to $2.45 billion at December 31, 2011.  The increase was due to strong organic growth in our North Carolina franchise, along with the acquisition and integration of KeySource Financial ("KeySource"), Carolina Federal Savings Bank ("Carolina Federal") and, to a lesser extent, two branches that were acquired from The Bank of Hampton Roads ("BHR") during this period.

On a GAAP basis, for the quarter ended September 30, 2012, net income totaled $1.4 million, a decrease of 43% compared to the $2.4 million for the quarter ended September 30, 2011.  Net income available to common shareholders was $788,000, or $0.04 per diluted share, which is a decrease of 57% compared to the $1.8 million, or $0.18 per diluted share, reported for the third quarter in 2011.  As noted above, during the three months ended September 30, 2012, the Company incurred $1.9 million of expenses associated with merger and acquisition activities, which reduced after-tax diluted earnings per share by $0.05.    

On a GAAP basis, for the nine months ended September 30, 2012, net income totaled $5.4 million, a slight decrease when compared to net income of $5.5 million for the nine months ended September 30, 2011.  Net income available to common shareholders for the nine months ended September 30, 2012 was $3.6 million, or $0.25 per diluted share, compared to $3.7 million, or $0.37 per diluted share, for the nine months ended September 30, 2011.  During the nine months ended September 30, 2012, the Company incurred $3.8 million of expenses associated with merger and acquisition activities, which reduced after-tax diluted earnings per share by $0.15.  

Highlights for Quarter ended September 30, 2012:

  • $72.5 million private placement of preferred stock was converted to common equity in July
    • Fully converted tangible common equity ratio at 7.12%
  • All Series A Preferred Stock issued through the United States Treasury's Capital Purchase Program was auctioned to private investors on August 29
    • BNC repurchased the related warrants issued to the Treasury
  • Closed and successfully converted the core systems and operations of KeySource in Durham
  • Closed and successfully converted the accounts and operations of the Cary and Chapel Hill branch purchases from BHR
  • Classified assets declined from $116 million to $113 million, during a quarter when total assets increased by $268 million
  • Grew core deposits by $210 million and reduced wholesale deposits to 23% of assets
  • Mortgage division closed over $80 million in new loan originations during the quarter, resulting in income and fees of over $1.9 million
  • Loan pipeline remains strong in each of our newer markets, despite growing competition from the larger regional and national banks. 

W. Swope Montgomery, Jr., President and CEO, stated, "As noted in the highlights above, for another quarter our Company made significant strides towards integrating our many strategic initiatives, all which should propel the Company into the future with greater diversity, momentum and financial strength.  Successfully integrating operations of both KeySource in Durham and the BHR offices during the quarter is a testament to our internal integration and support teams.  The feedback has been incredibly positive and we are already aggressively playing offense in these new markets.

I am also pleased to report that during the quarter the Treasury auctioned their ownership in our Series A preferred stock to private investors and we subsequently repurchased the related warrants from the Treasury, officially ending our participation in the Treasury's Capital Purchase Program.  During the period we were in the CPP program, the Treasury earned a return of 16.7%, BNC originated more than $850 million in loans to local individuals and small-businesses, and added an additional 369 employees.  We view this as a definite win for the taxpayers and for our local communities."

Montgomery noted, "We continue to see results from our aggressive workout efforts in our credit portfolio, primarily isolated to our 2006-2008 vintage credits, as evidenced by our non-covered classified assets declining to $113 million from a high of $143 million at the end of the first quarter 2012.  We continue to attack this issue from two fronts.  One, we continue to reduce the nominal dollars outstanding in these vintages through impairment recognition and liquidations, and two, as we grow the balance sheet and revenues both organically and through acquisitions, these vintage credits become a smaller relative piece of the Company.  With the expected close of the First Trust transaction in the fourth quarter, acquired loans carried at fair value will constitute approximately 32% of outstanding loans; and the construction, acquisition and development, and land portfolio originated prior to 2009, which has been reduced to $63 million, will account for less than 3% of the total portfolio. 

Since 2008, when we were primarily a Triad based bank with 60% reliance on wholesale funding, we have transitioned our Company to a regional bank serving the top markets across the Carolinas.  Today I am proud that this expansion has allowed us to reduce our reliance on wholesale funding to under 30% and heading lower, create asset generation opportunities in markets that are recovering and growing much faster than the Triad, and built a senior management team that has been referred to by a seasoned industry analyst as the strongest of any community bank in the Carolinas.  Over these past four years we have concentrated on fortifying and diversifying our balance sheet, and we are pleased with the results.  As we look to the coming quarters, through many internal initiatives we will be taking the next step in our transition, which we believe will return our operating performance to levels that are indicative of a well-balanced, high performance company."

Operating Results

Net interest income for the third quarter of 2012 was $19.8 million, an increase of $2.9 million from the comparable period last year.  Net interest income for the nine months ended September 30, 2012 was $56.5 million, an increase of $6.2 million from the comparable period last year.  Fully taxable-equivalent ("FTE") net interest margin at 3.75% decreased by 4 basis points from the third quarter of 2011.  Compared to the second quarter of 2012, net interest margin (FTE) increased 4 basis points from 3.71%.

During the third quarter of 2012, the Company's average yield on interest-earning assets decreased 29 basis points and 7 basis points when compared to the third quarter of 2011 and second quarter of 2012, respectively.  Loan accretion during the third quarter of 2012 totaled $1.1 million, compared to $1.0 million in the third quarter of 2011 and $1.0 million in the second quarter of 2012. 

During the third quarter of 2012, the Company's average cost of interest-bearing liabilities decreased 18 basis points and 5 basis points when compared to the third quarter of 2011 and the second quarter of 2012, respectively.  Decreases in the average cost of deposits were offset by cash flow hedging expenses totaling $2.0 million for the third quarter of 2012, compared to $1.4 million for the third quarter of 2011 and $1.9 million for the second quarter of 2012.  Without the cash flow hedging expense included in deposit expenses, net interest margin (FTE) for the third quarter of 2012 was 4.11%, compared to 4.12% for the third quarter of 2011 and 4.08% for the second quarter of 2012.   

 



Quarterly Average Yields / Costs (FTE)



(unaudited)























9/30/2012



6/30/2012



3/31/2012



12/31/2011



9/30/2011

Earning asset yield

5.19%



5.26%



5.43%



5.80%



5.48%

Cost of interest-bearing liabilities

1.55%



1.60%



1.64%



1.62%



1.73%

Cost of funds

1.42%



1.47%



1.53%



1.52%



1.62%

Net interest spread

3.64%



3.65%



3.79%



4.18%



3.76%

Net interest margin

3.75%



3.71%



3.80%



4.18%



3.79%





















Net interest margin w/o hedging expense

4.11%



4.08%



4.17%



4.51%



4.12%

 

Non-interest income was $5.3 million for the third quarter of 2012, compared to non-interest income of $3.8 million for the third quarter of 2011 and $11.7 million for the second quarter of 2012.  Excluding the acquisition gain from a FDIC-assisted transaction recorded in the second quarter of 2012, FDIC-related income, and gains on sale of securities, non-interest income was $3.8 million for the three months ended September 30, 2012, an increase of 49.6% from the comparable period of 2011 and 3.1% from the second quarter of 2012.  The increase was primarily driven by increases in mortgage fee income.

Non-interest income was $22.7 million for the nine months ended September 30, 2012, compared to $8.6 million for the comparable period of 2011.  Included in non-interest income for the nine months ended September 30, 2012 was $7.7 million of acquisition gain from a FDIC-assisted transaction, $2.4 million of gains on sale of securities, and $2.1 million of income associated with FDIC receivable and related loss-share receipts.  Excluding FDIC-related income, acquisition gains, and gains on sale of securities, non-interest income was $10.6 million for the nine months ended September 30, 2012, an increase of 46.5% from the comparable period of 2011.  The increase was primarily driven by increased mortgage fee income and SBA income.

Non-interest expense was $20.4 million for the third quarter of 2012, compared to $14.7 million for the third quarter of 2011 and $19.2 million for the second quarter of 2012.  In comparison to the third quarter of 2011, salaries and employee benefits increased $2.1 million, primarily as a result of acquisitions made since the fourth quarter of 2011, as well as continued franchise growth. Professional services expenses also increased by $1.5 million in comparison to the same period in the prior year due to acquisitions and other strategic initiatives. In addition, we recorded a $1.6 million valuation adjustment related to our other real estate owned ("OREO") properties, as compared to a $936,000 valuation adjustment in the same period of 2011.

Non-interest expense was $57.4 million for the nine months ended September 30, 2012, compared to $44.3 million for the comparable period of 2011.  These increases were due to the addition of full-time equivalent employees and facilities as a result of the acquisitions that have been made since the fourth quarter of 2011, as well as continued investments in mortgage originations and overall franchise growth.  These personnel additions are expected to contribute to our long-term focus on driving both top line and fee income growth.  We also recorded $4.3 million of valuation adjustments for OREO during the nine months ended September 30, 2012, an increase from the $3.0 million recorded in the comparable period of 2011.

Included in non-interest expense for the three and nine months ended September 30, 2012 was merger and transactional costs totaling $1.9 million and $3.8 million, respectively.  Included in merger and transactional costs were expenses associated with professional fees, contract cancellations, personnel costs, and data processing and system conversion expenses.  The following is a summary of merger and transactional costs by transaction:

 



Merger and Transaction Costs - Nonrecurring



(dollars in thousands; unaudited)















Transaction

Three Months Ended 9/30/12



Nine Months Ended 9/30/12



Anticipated Future Costs



  Blue Ridge Savings Bank

$                       75



$                819



-



  Regent Bank

1



429



-



  Carolina Federal

352



537



240



  KeySource

950



1,339



225



  BHR

105



136



125



  First Trust Bank

141



309



1,800



  CPP/TARP*

237



237



-



  Total

$                  1,861



$             3,806



$            2,390

















* - Costs associated with auction of CPP Preferred Stock and repurchase of related warrants from the United States Treasury

 

The following table represents the components of non-interest income and non-interest expense:

 

Non-Interest Income / Non-Interest Expense

(dollars in thousands; unaudited)























Three Months Ended



Nine Months Ended



9/30/2012



6/30/2012



9/30/2011



9/30/2012



9/30/2011

Non-interest income



















  Mortgage fees

$             1,773



$             1,378



$                581



$            4,267



$            1,186

  Service charges

746



749



744



2,233



2,439

  SBA income

335



669



207



1,232



308

  Investment brokerage fees

206



229



357



675



741

  Earnings on bank-owned life insurance

425



395



414



1,230



1,259

  Gain on sale of securities

756



-



1,032



2,375



1,168

  Gain on acquisition

-



7,734



-



7,734



-

  Other

1,012



528



504



2,998



1,534

     Total non-interest income

$             5,253



$           11,682



$             3,839



$          22,744



$            8,635





















Non-interest expense



















  Salaries and employee benefits

$           10,291



$             9,692



$             8,152



$          29,884



$          23,014

  Occupancy 

1,240



1,078



961



3,438



2,752

  Furniture and equipment

993



952



632



3,019



1,924

  Data processing and supply

619



696



514



2,012



1,678

  Advertising/business development

509



375



326



1,272



1,252

  Insurance, professional and other
    services

2,136



1,221



668



4,702



2,538

  FDIC insurance assessments

609



500



485



1,709



1,945

  Loan, foreclosure and other real
    estate owned

2,658



3,145



1,975



7,279



5,967

  Other

1,344



1,518



1,002



4,086



3,270

     Total non-interest expense

20,399



19,177



14,715



57,401



44,340

     Less: Merger and transaction costs

1,861



1,098



109



3,806



368

     Adjusted non-interest expense

$           18,538



$           18,079



$           14,606



$          53,595



$          43,972

 

Additional Operating Highlights

Since September 2011, total portfolio loans have increased $327.8 million, or 20.8%.  At September 30, 2012, the Company's loan portfolio included $269.4 million in loans covered under loss-share agreements and $1.63 billion of non-covered loans.  The Company's acquisition of Blue Ridge increased loans covered under loss-share agreements by $65.6 million and the acquisitions of KeySource, Carolina Federal and Regent increased loans not covered by loss-share agreements by $209.5 million.  Loans acquired in connection with these transactions are reported at fair value and shown net of any related credit and yield adjustments, from acquisition date. 

 



Gross Loan Growth



(dollars in thousands; unaudited)























9/30/2012



6/30/2012



3/31/2012



12/31/2011



9/30/2011

Loans covered by loss-share, at fair value

$    257,103



273,509



$    307,097



$    320,033



$    262,673

Loans not covered by loss-share, at fair value

193,274



61,568



30,074



31,734



-

Loans, other (1)

1,450,015



1,425,210



1,387,455



1,357,716



1,309,893

Total portfolio loans

$ 1,900,392



$ 1,760,287



$ 1,724,626



$ 1,709,483



$ 1,572,566





















Loan growth (quarter/quarter):



















  Total portfolio loans

8.0%



2.1%



0.9%



8.7%



2.9%

  Loans not covered by loss-share

10.5%



4.9%



2.0%



6.1%



5.2%

Annual growth of non-covered loans

25.5%





































(1) Includes $12,285 of loans covered by loss share agreement not recorded at fair value as of 9/30/12

 

Total deposits at September 30, 2012 were $2.31 billion, an increase of $190.9 million from December 31, 2011.  This increase was due to the $229.1 million of deposits assumed from the acquisitions of KeySource, Carolina Federal and, to a lesser extent, the branches acquired from BHR.  This increase was partially offset by a $172.0 million decrease in wholesale deposits from December 31, 2011.  Wholesale deposits represent 31.5% of total deposits as of September 30, 2012, a decrease from 42.5% as of December 31, 2011.  While overall deposit growth continues to be an emphasis, more important is the increase in transactional account deposits.  Over the one-year period, transactional accounts, which are comprised of non-interest bearing and interest-bearing demand accounts, increased $311.6 million, or 32.3%, while wholesale deposits declined $67.8 million.  At September 30, 2012, time deposits were 44.7% of total deposits, compared to 50.2% and 47.5% at December 31, 2011 and September 30, 2011, respectively. 

 



Total Deposit Growth



(dollars in thousands; unaudited)























9/30/2012



6/30/2012



3/31/2012



12/31/2011



9/30/2011

Non-interest bearing demand

$        207,928



$        180,238



$        162,857



$       145,688



$        130,978

Interest-bearing demand

1,067,855



960,597



956,784



909,402



833,190

Time deposits

1,033,304



948,658



996,831



1,063,097



871,436

Total

$     2,309,087



$     2,089,493



$     2,116,472



$    2,118,187



$     1,835,604





















Deposit growth (quarter/quarter)

10.5%



-1.3%



-0.1%



15.4%



-0.8%





















Annual deposit growth

25.8%

















 

Asset Quality

Net loan charge-offs for the third quarter of 2012 were $10.1 million, which included $4.0 million on loans covered under loss-share agreements and $6.1 million on loans not covered under loss-share agreements.  The Company's cost for the covered net loan charge-offs was $803,000, with the remainder being reimbursed by the FDIC. Combined with the $6.0 million of non-covered charge-offs, the Company incurred $6.8 million in charge-off losses, or 1.54% of average annualized loans, during the third quarter of 2012, as compared to $5.1 million, or 1.17% reported in the second quarter of 2012.

Nonperforming assets were 5.14% of total assets at September 30, 2012, compared to 5.97% at June 30, 2012.  Nonperforming assets not covered by loss-share were 2.27% of total assets not covered by loss-share as of September 30, 2012, compared to 2.31% at June 30, 2012.  The covered assets are covered by FDIC loss-share agreements that provide 80% protection on those assets and are being carried at estimated fair value.

 



Asset Quality Information



(dollars in thousands;  unaudited)























9/30/2012



6/30/2012



3/31/2012



12/31/2011



9/30/2011

Nonaccrual loans not covered by loss-share

$       25,114



$       25,351



$       17,481



$       19,443



$       29,841

Nonaccrual loans covered by loss-share 

54,427



61,695



69,797



67,854



61,712

OREO not covered by loss-share

25,589



23,655



25,212



20,927



22,736

OREO covered by loss-share 

30,077



35,105



43,603



47,577



22,747

90 days past due not covered by loss-share (2)

4,137



-



-



-



-

90 days past due covered by loss-share

1



5



652



5,425



23

Total nonperforming assets

$     139,345



$     145,811



$     156,745



$     161,226



$     137,059

  Nonperforming assets not covered by loss-share

$       54,840



$       49,006



$       42,693



$       40,370



$       52,577





















Total assets

$  2,711,173



$  2,442,815



$  2,408,890



$  2,454,930



$  2,197,758

Total assets less covered assets

2,411,708



2,123,131



2,058,190



2,087,320



1,912,338





















Total portfolio loans

1,900,392



1,760,287



1,724,626



1,709,483



1,572,566

Total accruing loans

1,820,851



1,673,241



1,637,348



1,622,186



1,481,013

Total portfolio loans less fair value loans

1,450,015



1,425,210



1,387,455



1,357,716



1,309,893

Total portfolio loans less covered loans

1,631,004



1,475,708



1,417,529



1,389,450



1,309,893





















Total allowance for loan losses

34,823



40,856



36,722



31,008



24,177

Allowance for loans not covered by loss-share

24,831



27,284



24,290



25,599



24,177

Allowance for loans covered by loss-share

9,992



13,572



12,432



5,409



-





















Ratio of nonperforming assets to total assets

5.14%



5.97%



6.51%



6.57%



6.24%

  Not covered by loss-share 

2.27%



2.31%



2.07%



1.93%



2.75%





















Ratio of nonperforming loans to total portfolio loans

4.40%



4.95%



5.10%



5.42%



5.82%

  Not covered by loss-share 

1.79%



1.72%



1.23%



1.40%



2.28%





















Ratio of allowance for loan losses to total portfolio loans

1.83%



2.32%



2.13%



1.81%



1.54%

  Total portfolio loans less fair value loans to allowance not 



















    covered by loss-share

1.71%



1.91%



1.75%



1.89%



1.85%





















Net charge-offs, QTD

$       10,094



$         9,077



$         5,723



$       10,036



$         2,720

Net charge-offs, non-covered portion, QTD (1)

6,882



5,053



3,779



7,015



2,720

  Ratio of net charge-offs, non-covered portion, 



















    QTD to average portfolio loans, annualized (1)

1.54%



1.17%



0.89%



1.70%



0.70%





















Loans restructured/modified not included in above,



















  (not 90 days past due or on nonaccrual)

$       38,239



$       36,674



$       29,617



$       41,516



$       32,294





















(1) Non-covered portion represents the Company's non-covered charge-offs and the 20% portion of the charge-offs relating to loans covered under loss-share agreements.





















(2) Local city and county zoning change requirements delayed the closing of this loan for over 90 days.  The loan has since been closed 

During the third quarter of 2012, the Company recorded a provision for loan losses of $3.7 million, an increase from the $3.5 million recorded during the third quarter of 2011 and a decrease of $4.6 million from the amount recorded during the second quarter of 2012.  Of the $3.7 million in provision expense, $3.6 million related to legacy non-covered loans.  During the third quarter of 2012, the Company recorded a gross provision of $380,000 for loss-share loans, of which $304,000 was recorded through a FDIC indemnification asset and the remaining $76,000 was recorded through the Company's provision expense.  The allowance for loan losses was $34.8 million at September 30, 2012, $40.9 million at June 30, 2012 and $31.0 million at December 31, 2011.  Loan loss reserves to total portfolio loans were 1.83% and 2.32% at September 30, 2012 and June 30, 2012, respectively, compared to 1.81% reported at December 31, 2011.  Excluding the loans acquired that are marked to fair value, loan loss reserves to period-end loans not covered by loss-share decreased from 1.91% reported at June 30, 2012 to 1.71% at September 30, 2012. 

 



Allowance for Loan Loss Summary



(dollars in thousands; unaudited)



At September 30, 2012

















Allowance

for

Loan Losses

%





Loans



Allowance

for 

Loan Losses



Net

Loans



Loans covered by loss-share, at fair value

$        257,103



$         (9,992)



$        247,111



3.89%



Loans not covered, at fair value

193,274



-



193,274



-



Loans, other (1)

1,450,015



(24,831)



1,425,184



1.71%



Total portfolio loans

$     1,900,392



$       (34,823)



$     1,865,569



1.83%





















(1) Includes $12,285 of loans covered by loss share agreement not recorded at fair value as of 9/30/12



Nonaccrual loans not covered by loss-share agreements totaled $25.1 million at September 30, 2012, a slight decrease from $25.4 million at June 30, 2012.  Non-covered loans migrating into nonaccrual status during the quarter totaled $14.0 million, of which $2.8 million were from performing Troubled Debt Restructurings ("TDRs"), which was offset by write-downs and movements to OREO totaling $14.3 million during the third quarter of 2012.  Nonaccrual loans covered by loss-share agreements totaled $54.4 million, a decrease of $7.3 million compared to $61.7 million at June 30, 2012. 

TDRs decreased $2.9 million during the third quarter of 2012 to $50.3 million, of which $10.0 million is covered under loss-share.  The decrease is primarily due to charge-offs and movement of restructurings to OREO during the quarter, offset by $4.9 million of new restructurings entered into in the third quarter of 2012.

OREO at September 30, 2012 totaled $55.7 million, a decrease of $3.1 million and $12.8 million from June 30, 2012 and December 31, 2011, respectively.  For the third quarter of 2012 sales and valuation adjustments totaled $10.0 million and $3.1 million, respectively, which were partially offset by additions of $9.6 million.  At September 30, 2012, the carrying value of loans and OREO covered by loss-share agreements was $269.4 million and $30.1 million, respectively, with a corresponding indemnification receivable from the FDIC of $56.0 million.  OREO not covered by loss-share agreements totaled $25.6 million at September 30, 2012, an increase of $1.9 million from the $23.7 million reported at June 30, 2012. 

Capital Position

On September 30, 2012, shareholders' equity was $252.2 million, an increase of $88.3 million from December 31, 2011 and an increase of $14.6 million from June 30, 2012.  During the second quarter of 2012, the Company successfully closed a $72.5 million private capital raise.  Proceeds from the capital raise, after deducting issuance costs, totaled $68.3 million.  The Company issued convertible preferred stock at the time of closing the capital raise.  On July 17, 2012, shareholders of the Company approved the conversion of the preferred stock into common stock.  

During the third quarter of 2012, the Treasury completed the auction to private investors of the Company's preferred stock that was issued to the Treasury in 2008 under the Capital Purchase Program.  No proceeds were received in connection with this auction.  Subsequent to the auction, the Company repurchased from the Treasury the Company's outstanding warrants to purchase shares of the Company's common stock in the amount of $940,000.  This warrant has been cancelled.

All of the Bank's and Company's capital ratios exceeded the minimum thresholds established for a well-capitalized bank by regulatory measures. 

On October 16, 2012, the Board of Directors of BNC Bancorp declared a $0.05 per share quarterly cash dividend on its common stock and Series B Preferred stock, payable November 23, 2012 to shareholders of record on November 9, 2012.

About BNC Bancorp and Bank of North Carolina

Headquartered in High Point, NC, BNC Bancorp is the parent company of Bank of North Carolina, a commercial bank with $2.7 billion in assets.  Bank of North Carolina provides a complete line of banking and financial services to individuals and businesses through its 35 banking offices in North and South Carolina.  The Bank's eight locations in South Carolina operate as BNC Bank.  Bank of North Carolina is insured by the FDIC and is an equal housing lender.  BNC Bancorp's stock is traded and quoted in the NASDAQ Capital Market under the symbol "BNCN."

Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States.  BNC Bancorp's management uses these "non-GAAP" measures in their analysis of the Company's performance.  Management believes that these non-GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods as well as demonstrating the effects of significant gains and charges in the current period. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. See the attached tabular disclosures for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measure.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:

Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information about companies' anticipated future financial performance.  This act provides a safe harbor for such disclosure, which protects the companies from unwarranted litigation if actual results are different from management expectations.   This press release contains forward-looking statements relating to the financial condition, results of operations and business of BNC Bancorp and the Bank.  These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of the management of BNC Bancorp, and the information available to management at the time that this press release was prepared.  Factors that could cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following: (i) general economic or business conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit or other services; (ii) expected cost savings and other benefits anticipated in connection with our acquisitions of KeySource, Carolina Federal, Beach First, Regent, and Blue Ridge may not be fully realized or realized within the expected time frame; (iii) the performance of our mortgage and SBA division; and (iv) anticipated acquisition opportunities may be available on terms acceptable to BNC Bancorp or at all.  Additional factors affecting BNC Bancorp and the Bank are discussed in BNC Bancorp's filings with the Securities and Exchange Commission (the "SEC"), Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K.  Please refer to the Securities and Exchange Commission's website at www.sec.gov where you can review those documents.  BNC Bancorp does not undertake a duty to update any forward-looking statements made in this press release. 

 

QUARTERLY PERFORMANCE SUMMARY

BNC BANCORP

(Dollars in thousands, except share and per share data)

(Unaudited)

For the











Three Months Ended













September 30, 2012



September 30, 2011



% Change

SUMMARY STATEMENTS OF OPERATIONS













Interest income

$           27,814



$             25,065



11.0 %



Interest expense

8,063



8,197



(1.6)



Net interest income

19,751



16,868



17.1



Provision for loan losses

3,708



3,524



5.2



Net interest income after provision for loan losses

16,043



13,344



20.2



Non-interest income

5,253



3,839



36.8



Non-interest expense

20,399



14,715



38.6



Income before income tax expense (benefit)

897



2,468



(63.7)



Income tax expense (benefit)

(492)



46



(1,169.6)



Net income

1,389



2,422



(42.7)



Preferred stock dividends and discount accretion

601



601



0.0



Net income available to common shareholders

$                788



$               1,821



(56.7)



















PER SHARE DATA













Earnings per share, basic

$               0.04



$                 0.18



(77.8)



Earnings per share, diluted

0.04



0.18



(77.8)



Tangible common book value per share

8.14



9.59



(15.2)



















Weighted average participating common shares:













Basic

21,644,642



10,884,801







Diluted

21,646,037



10,899,653





Period-end number of shares:













Common

21,359,239



9,085,580







Convertible preferred

1,804,566



1,804,566























PERFORMANCE RATIOS













Return on average assets

0.22%



0.44%







Return on average common equity

1.75%



6.47%







Return on average tangible common equity

2.30%



9.00%







Net interest margin (FTE)

3.75%



3.79%







Net interest margin w/o hedging expense (FTE)

4.11%



4.12%







Average equity to average assets

9.55%



7.29%







Allowance for loan losses as a % of portfolio loans

1.83%



1.54%







Nonperforming assets to total assets, end of period

5.14%



6.24%









Nonperforming assets not covered by loss share

2.27%



2.75%







Ratio of net charge-offs, with covered portion, to















average total loans, annualized

1.54%



0.70%























SELECTED FINANCIAL DATA













Gain on sale of investment securities, net

$                756



$               1,032







Acquisition gains

-



-







Fair value accretion

1,068



1,020







FDIC related income

673



250







Hedging instrument expense

2,014



1,375







OREO valuation adjustments

1,603



936







Merger related expenses

1,861



109





 

QUARTERLY PERFORMANCE SUMMARY

BNC BANCORP

(Dollars in thousands, except share and per share data)

(Unaudited)

For the











Nine Months Ended













September 30, 2012



September 30, 2011



% Change

SUMMARY STATEMENTS OF OPERATIONS













Interest income

$           81,291



$             74,894



8.5 %



Interest expense

24,772



24,582



0.8



Net interest income

56,519



50,312



12.3



Provision for loan losses

17,217



10,056



71.2



Net interest income after provision for loan losses

39,302



40,256



(2.4)



Non-interest income

22,744



8,635



163.4



Non-interest expense

57,401



44,340



29.5



Income before income tax benefit

4,645



4,551



2.1



Income tax benefit

(760)



(982)



(22.6)



Net income

5,405



5,533



(2.3)



Preferred stock dividends and discount accretion

1,803



1,803



0.0



Net income available to common shareholders

$             3,602



$               3,730



(3.4)



















PER SHARE DATA













Earnings per share, basic

$               0.25



$                 0.37



(32.4)



Earnings per share, diluted

0.25



0.37



(32.4)



Tangible common book value per share

8.14



9.59



(15.2)



















Weighted average participating common shares:













Basic

15,353,121



10,871,790







Diluted

15,358,455



10,888,171





Period-end number of shares:













Common

21,359,239



9,085,580







Convertible preferred

1,804,566



1,804,566























PERFORMANCE RATIOS













Return on average assets

0.29%



0.34%







Return on average common equity

3.50%



4.60%







Return on average tangible common equity

4.73%



6.60%







Net interest margin (FTE)

3.75%



3.83%







Net interest margin w/o hedging expense (FTE)

4.11%



4.07%







Average equity to average assets

7.96%



7.21%







Allowance for loan losses as a % of portfolio loans

1.83%



1.54%







Nonperforming assets to total assets, end of period

5.14%



6.24%









Nonperforming assets not covered by loss share

2.27%



2.75%







Ratio of net charge-offs, with covered portion, to















average total loans, annualized

1.21%



0.93%























SELECTED FINANCIAL DATA













Gain on sale of investment securities, net

$             2,375



$               1,168







Acquisition gains

7,734



-







Fair value accretion

3,568



3,545







FDIC related income

2,063



250







Hedging instrument expense

5,807



3,419







OREO valuation adjustments

4,344



2,967







Merger related expenses

3,806



368





 

QUARTERLY PERFORMANCE SUMMARY 

BNC BANCORP

(Dollars in thousands, except share and per share data)

(Unaudited)

For the









Three Months Ended









September 30,
2012



June 30,
2012



March 31, 

2012



December 31, 2011



September 30,      2011

SUMMARY STATEMENTS OF OPERATIONS





















Interest income

$           27,814



$             26,298



$             27,179



$             28,449



$             25,065



Interest expense

8,063



8,142



8,567



8,338



8,197



Net interest income

$           19,751



18,156



18,612



20,111



16,868



Provision for loan losses

3,708



8,330



5,179



8,158



3,524



Net interest income after provision for loan losses

$           16,043



9,826



13,433



11,953



13,344



Non-interest income

5,253



11,682



5,809



12,168



3,839



Non-interest expense

20,399



19,177



17,825



23,525



14,715



Income before income tax expense (benefit)

$                897



2,331



1,417



596



2,468



Income tax expense (benefit)

(492)



40



(308)



(801)



46



Net income

$             1,389



2,291



1,725



1,397



2,422



Preferred stock dividends and discount accretion

601



601



601



601



601



Net income available to common shareholders

$                788



$               1,690



$               1,124



$                  796



$               1,821





























Net interest income, as reported

$           19,751



$             18,156



$             18,612



$             20,111



$             16,868





Tax-equivalent adjustment 

1,349



1,467



1,365



1,406



1,392



Net interest income, tax-equivalent

$           21,100



$             19,623



$             19,977



$             21,517



$             18,260



























PER SHARE DATA





















Earnings per share, basic

$               0.04



$                 0.13



$                 0.11



$                 0.08



$                 0.18



Earnings per share, diluted

0.04



0.13



0.11



0.08



0.18



























Weighted average participating common shares:





















Basic

21,644,642



13,549,642



10,910,515



10,894,799



10,884,801



Diluted

21,646,037



13,556,434



10,920,400



10,913,746



10,899,653

Period-end number of shares:





















Common

21,359,239



9,153,886



9,113,501



9,100,890



9,085,580



Convertible preferred

1,804,566



1,877,066



1,804,566



1,804,566



1,804,566



























PERFORMANCE RATIOS





















Return on average assets

0.22%



0.38%



0.29%



0.24%



0.44%



Return on average common equity

1.75%



5.63%



4.09%



2.78%



6.47%



Return on average tangible common equity

2.30%



7.89%



5.94%



4.32%



9.00%



Net interest margin (FTE)

3.75%



3.71%



3.80%



4.18%



3.79%



Net interest margin w/o hedging expense (FTE)

4.11%



4.08%



4.17%



4.51%



4.12%



Average equity to average assets

9.55%



7.69%



6.55%



6.83%



7.29%



Allowance for loan losses as a % of portfolio loans

1.83%



2.32%



2.13%



1.81%



1.54%



Nonperforming assets to total assets, end of period

5.14%



5.97%



6.51%



6.57%



6.24%





Nonperforming assets not covered by loss share

2.27%



2.31%



2.07%



1.93%



2.75%



Ratio of net charge-offs, with covered portion, to























average total loans, annualized

1.54%



1.17%



0.89%



1.70%



0.70%



























SELECTED FINANCIAL DATA





















Gain on sale of investment securities, net

$                756



$                      -



$               1,619



$                  170



$               1,032



Acquisition gains

-



7,734



-



7,800



-



Fair value accretion

1,068



1,028



1,472



3,113



1,020



FDIC related income

673



238



1,152



1,286



250



Hedging instrument expense

2,014



1,874



1,919



1,699



1,375



OREO valuation adjustments

1,603



2,038



703



6,549



936



Merger related expenses

1,861



1,098



847



723



109

 

 

QUARTERLY PERFORMANCE SUMMARY

BNC BANCORP

(Dollars in thousands)

(Unaudited)

As of  























September 30,
2012



December 31,      2011



% Change











SELECTED BALANCE SHEET DATA























End of period balances























Portfolio loans:

























Loans not covered by loss share

$     1,631,004



$       1,389,450



17.4 %















Loans covered by loss share

269,388



320,033



(15.8)















Allowance for loan losses

(34,823)



(31,008)



12.3















Net portfolio loans

1,865,569



1,678,475



11.2













Loans held for sale

29,883



9,596



211.4













Investment securities

360,678



379,257



(4.9)













Total interest-earning assets

2,390,126



2,117,793



12.9













Total assets

2,711,173



2,454,930



10.4









































Deposits:

























Non-interest bearing deposits

207,928



145,688



42.7















Interest-bearing demand and savings

1,067,855



909,402



17.4















Time deposits

1,033,304



1,063,097



(2.8)















Total deposits

2,309,087



2,118,187



9.0













Borrowed funds

129,484



163,924



(21.0)













Total interest-bearing liabilities

2,230,643



2,136,423



4.4













Shareholders' equity:

























Preferred equity

47,758



47,398



0.8















Common equity

199,200



115,447



72.6















Accumulated other comprehensive income

5,222



1,010



417.0















Total shareholders' equity

252,180



163,855



53.9















































As of  









September 30,
2012



June 30,
2012



March 31,    2012



December 31, 2011



September 30, 

2011



SELECTED BALANCE SHEET DATA























End of period balances























Portfolio loans:

























Loans not covered by loss share

$     1,631,004



$       1,475,708



$       1,417,529



$       1,389,450



$       1,309,893







Loans covered by loss share

269,388



284,579



307,097



320,033



262,673







Allowance for loan losses

(34,823)



(40,856)



(36,722)



(31,008)



(24,177)







Net portfolio loans

1,865,569



1,719,431



1,687,904



1,678,475



1,548,389





Loans held for sale

29,883



17,793



19,967



9,596



6,753





Investment securities

360,678



334,382



342,739



379,257



348,989





Total interest-earning assets

2,390,126



2,125,730



2,095,346



2,117,793



1,936,945





Total assets

2,711,173



2,442,815



2,408,890



2,454,930



2,197,758

































Deposits:

























Non-interest bearing deposits

207,928



180,238



162,857



145,688



130,978







Interest-bearing demand and savings

1,067,855



960,597



956,784



909,402



833,190







Time deposits

1,033,304



948,658



996,831



1,063,097



871,436







Total deposits

2,309,087



2,089,493



2,116,472



2,118,187



1,835,604





Borrowed funds

129,484



106,184



117,844



163,924



190,172





Total interest-bearing liabilities

2,230,643



2,015,439



2,071,459



2,136,423



1,894,798





Shareholders' equity:

























Preferred equity

47,758



115,946



47,518



47,398



47,278







Common equity

199,200



117,843



116,284



115,447



114,924







Accumulated other comprehensive income

5,222



3,750



1,561



1,010



373







Total shareholders' equity

252,180



237,539



165,363



163,855



162,575



 

 

QUARTERLY PERFORMANCE SUMMARY

BNC BANCORP

(Dollars in thousands)

(Unaudited)



































For the Three Month Period Ended









September 30,
2012



June 30,
2012



March  30,
2012



December 31, 

2011



September 30,  

2011

SELECTED BALANCE SHEET DATA





















Quarterly average balances





















Loans:























Loans not covered by loss share

$     1,501,953



$       1,453,521



$       1,406,611



$       1,358,455



$       1,274,531





Loans covered by loss share

276,984



295,838



313,339



291,353



273,179





Total loans

$     1,778,937



1,749,359



1,719,950



1,649,808



1,547,710



Investment securities, at amortized cost

336,353



324,010



346,192



345,613



334,709



Total interest-earning assets

2,236,808



2,124,972



2,112,991



2,040,766



1,913,794



Total assets

2,523,287



2,431,193



2,415,639



2,359,374



2,179,220





























Deposits:























Non-interest bearing deposits

194,006



181,983



152,239



139,928



129,390





Interest-bearing demand and savings

991,293



952,747



936,871



887,136



832,536





Time deposits

955,657



969,292



1,034,249



1,015,273



889,363





Total deposits

2,140,956



2,104,022



2,123,359



2,042,337



1,851,289



Borrowed funds

123,325



121,946



125,624



135,118



159,213



Total interest-bearing liabilities

2,070,276



2,043,985



2,096,744



2,037,527



1,881,112



Shareholders' equity

241,041



186,987



158,114



161,039



158,926

 

 

LOAN MIX AND STRATIFICATION STATISTICS

BNC BANCORP

(Dollars in millions)

(Unaudited)











 As of September 30, 













2012



2011



% Change

Loans Not Covered Under Loss Share Agreements:













Construction, A&D, and Land

$             200.3



$               212.8



(5.9)





Residential Construction

25.7



25.2



2.0







Presold

17.8



13.6



30.9







Speculative

7.9



11.6



(31.9)







  Loan size - over $400,000

1.5



1.5



0.0







  Loan size - $200,000 to $400,000

1.9



1.0



90.0







  Loan size - under $200,000

4.5



9.1



(50.6)























Commercial Construction

78.7



73.5



7.1







Loan size - $5 million and over

14.5



14.1



2.8







Loan size - $3 million to $5 million

3.2



8.7



(63.2)







Loan size - $1 million to $3 million

43.9



34.5



27.3







Loan size - under $1 million

17.1



16.2



5.6























Residential and Commercial A&D

19.7



21.6



(8.8)







Loan size - $5 million to $6 million

-



6.1



(100.0)







Loan size - $3 million to $5 million

4.0



-



-







Loan size - $1 million to $3 million

10.2



11.1



(8.1)







Loan size - under $1 million

5.5



4.4



25.0























Land

76.2



92.5



(17.6)







Residential Buildable Lots

25.0



33.1



(24.5)







Commercial Buildable Lots

11.3



13.5



(16.3)







Land Held for Development

22.0



26.1



(15.7)







Raw and Agricultural Land

17.9



19.8



(9.6)





















Commercial Real Estate

$             910.2



$               649.5



40.1





Multi-Family

43.7



34.4



27.0





Churches

43.9



36.2



21.3





Retail

662.6



457.7



44.8







Owner Occupied

204.1



137.5



48.4







Investment

458.5



319.9



43.3







  Loan size - $5 million to $9 million

102.0



61.9



64.8







  Loan size - $3 million to $5 million

64.8



61.2



5.9







  Loan size - $1 million to $3 million

182.8



107.8



69.6







  Loan size - under $1 million

108.9



89.0



22.4























Industrial

160.0



121.2



32.0







Owner Occupied

86.9



61.1



42.2







Investment

73.1



60.1



21.6







  Loan size - $5 million to $6 million

-



-



-







  Loan size - $3 million to $5 million

4.2



7.6



(44.7)







  Loan size - $1 million to $3 million

39.5



27.2



45.2







  Loan size - under $1 million

29.4



25.3



16.2

 

LOAN MIX AND STRATIFICATION STATISTICS

BNC BANCORP

(Dollars in millions)

(Unaudited)

 Trends 









September 30,
2012



June 30,
2012



March 30,
2012



December 31,

2011



September 30,  

2011

Loans Not Covered Under Loss Share Agreements:





















Construction, A&D, and Land

$             200.3



$               189.2



$               194.5



$               203.2



$               212.8





Residential Construction

25.7



22.1



25.6



25.0



25.2







Presold

17.8



12.6



14.5



13.4



13.6







Speculative

7.9



9.5



11.1



11.6



11.6







  Loan size - over $400,000

1.5



2.4



2.7



2.9



1.5







  Loan size - $200,000 to $400,000

1.9



2.2



3.3



3.4



1.0







  Loan size - under $200,000

4.5



4.9



5.1



5.3



9.1































Commercial Construction

78.7



71.3



72.3



71.7



73.5







Loan size - $5 million and over

14.5



9.5



9.5



9.3



14.1







Loan size - $3 million to $5 million

3.2



8.4



7.7



8.5



8.7







Loan size - $1 million to $3 million

43.9



36.9



39.2



32.4



34.5







Loan size - under $1 million

17.1



16.5



15.9



21.5



16.2































Residential and Commercial A&D

19.7



15.0



14.1



14.0



21.6







Loan size - $5 million to $6 million

-



-



-



-



6.1







Loan size - $3 million to $5 million

4.0



3.1



-



-



-







Loan size - $1 million to $3 million

10.2



7.4



10.1



10.1



11.1







Loan size - under $1 million

5.5



4.5



4.0



3.9



4.4































Land

76.2



80.8



82.5



92.5



92.5







Residential Buildable Lots

25.0



25.6



26.8



32.8



33.1







Commercial Buildable Lots

11.3



13.3



13.1



15.3



13.5







Land Held for Development

22.0



25.2



25.3



25.4



26.1







Raw and Agricultural Land

17.9



16.7



17.3



19.0



19.8





























Commercial Real Estate

$             910.2



$               803.5



$               759.9



$               723.5



$               649.5





Multi-Family

43.7



43.2



38.2



38.1



34.4





Churches

43.9



36.8



37.0



36.5



36.2





Retail

662.6



585.1



552.7



515.9



457.7







Owner Occupied

204.1



179.3



162.0



153.4