BNC Bancorp Announces Earnings for Fourth Quarter and Fiscal Year 2015

HIGH POINT, N.C., Jan. 25, 2016 /PRNewswire/ -- BNC Bancorp (NASDAQ: BNCN) ("Company"), parent company for Bank of North Carolina ("Bank"), today reported financial results for the quarter and year ended December 31, 2015.  Highlights for the fourth quarter 2015 include the following:

• Operating earnings for the fourth quarter of 2015 totaled $15.4 million, or $0.39 per diluted share, compared to $15.0 million, or $0.39 per diluted share, for the third quarter of 2015 
  
  
  • Per share results for the fourth quarter 2015 were impacted by the public stock offering detailed below;
  • Diluted earnings per share totaled $0.32, compared to $0.31 for the third quarter of 2015;
  • Net income for the quarter was $12.7 million, compared to $11.9 million for third quarter of 2015; and
  • Operating earnings for the year ended December 31, 2015 were $52.7 million, or $1.47 per diluted share, compared to $35.3 million, or $1.21 per diluted share, for the year ended December 31, 2014.
    
    
• Continued balance sheet growth, both organically and through acquisitions, during the fourth quarter
  
  
  • Originated loans increased $128.2 million, or 5.0%, excluding loans that were reclassified from acquired;
  • Total deposits increased $367.7 million, or 8.4%;
  • Transactional deposit base increased $218.1 million, or 7.5%; and
  • Total assets increased $455.5 million, or 8.8%.
    
    
• Continued trend of strong operating performance ratios during fourth quarter of 2015
  
  
  • Operating return of average assets of 1.13%, compared to 1.15% for the third quarter of 2015;
  • Operating return of average tangible common equity of 15.99%, compared to 16.79% for third quarter 2015; and
  • Operating efficiency ratio of 54.48%, compared to 55.59% for third quarter 2015.
    
    
• Announced pending acquisition of High Point Bank Corporation
  
  
  • Expected to close during the second quarter of 2016, subject to regulatory approval, approval of High Point Bank Corporation shareholders, and other customary closing conditions.
    
    
• Completed acquisition and conversion of seven branches from CertusBank, N.A.
  
  
  • Expands the Company's presence in attractive Upstate South Carolina markets.
    
    
• Completed public offering of 2.59 million shares of voting common stock
  
  
  • Net proceeds of approximately $57.6 million after underwriting discount and expenses

Richard D. Callicutt, II, President and CEO, stated, "As noted in the highlights above, our Company made significant strides during the quarter towards attaining many of our near term strategic initiatives, all which should propel the Company into the future with greater diversity, momentum and financial strength.  Successfully integrating operations of the seven Certus offices in the Upstate of South Carolina during the quarter, while making significant progress in our preparation for our upcoming closing and integration of Southcoast Bank in the Charleston area, is a testament to the outstanding efforts of our internal integration and support teams.  We could not be one of the most acquisitive banks in the United States, and also one of the highest in stock price appreciation, if not for the tireless efforts of our integration and support teams.  I am humbled each and every day by their dedication, skill, and unrelenting desire for excellence. 

Also during the quarter we announced one of the most important events in our history, as High Point Bank agreed to join forces with BNC.  High Point Bank has been the benchmark that all other banks have been measured in High Point and the surrounding communities for over 100 years, and both companies are extremely excited about the opportunity for even greater success and service as we come together.  Along with the High Point Bank transaction, we announced the closing of a $60 million common equity raise that was extremely beneficial to our existing shareholders as it added over $0.70 to tangible book value. These two announcements, when viewed together, were accretive to future earnings, immediately accretive to tangible book value, grew our already strong capital ratios, and further enhanced our core deposit portfolio, primarily in the checking account areas.    

While 2015 was another year of double-digit growth, in earnings, loans and deposits, it was also a year where we gained further depth in each of our six key target regions.  The Valley transaction gave us a very efficient and profitable $800 million operation in the Southwest Virginia market, while the Certus and Southcoast transactions will provide over $650 million and eighteen offices in the two most dynamic markets in South Carolina; Charleston/Mount Pleasant and Greenville/Spartanburg.  In the Charlotte and Raleigh/Durham/Chapel-Hill markets, while there were no major announcements, our talent base continued to grow and the loan originations in these two markets totaled over $1 billion in 2015.  As we continue our mission to build the most profitable and valuable franchise in the Carolinas and Southwest VA, we are ever aware that our executive management team and staff must manage an ever increasing level of risk in our industry, and a more complex, yet highly convenient, multi-channel delivery platform.  This is why our dedication to building a senior team with years of experience in their particular areas, an ability to process information and make good decisions, and a personality and leadership style that promotes teamwork is one of my highest priorities as CEO."

Operating earnings for the fourth quarter of 2015 totaled $15.4 million, or $0.39 per diluted share, compared to $15.0 million, or $0.39 per diluted share, for the third quarter of 2015.  Operating earnings exclude non-operating income and expenses, which primarily consists of transaction-related expenses and gain (loss) on sale of investment securities, net of income taxes.  The increase was due to increased net interest income, due to continued organic loan growth, as well as loans purchased from CertusBank, N.A. ("Certus").  This increase was partially offset by increased provision for loan losses and increased non-interest expenses. 

Net income for the fourth quarter of 2015 totaled $12.7 million, or $0.32 per diluted share, compared to $11.9 million, or $0.31 per diluted share, for the third quarter of 2015. 

Total non-interest income was $8.3 million for the fourth quarter of 2015, a decrease from $9.2 million for the third quarter of 2015.  Excluding gains on securities sales, non-interest income decreased by $0.1 million from third quarter 2015.  Mortgage fees decreased as compared to third quarter of 2015 due to a seasonal reduction in loan closings.  Many of the other non-interest income sources, such as income from recoveries on acquired loans, income derived from the sale of loans partially guaranteed by the Small Business Administration and income derived from our investment brokerage services, are volatile and can vary significantly from period to period. 

Total non-interest expense was $37.6 million for the fourth quarter of 2015, a decrease from $38.2 million for the third quarter of 2015.  Excluding transaction-related expenses and other non-operating items, non-interest expense for the fourth quarter was $33.3 million, as compared to $32.5 million for the third quarter of 2015.  The increase is due to additional employees and facilities from the acquired Certus branches, as well as traditional year-end compensation-related expenses.  These increased charges were slightly offset by a reduction in loan and other real estate owned ("OREO") expenses during the fourth quarter of 2015.

At December 31, 2015, the Company's total assets were $5.7 billion, an increase from $5.2 billion at September 30, 2015 and from $4.1 billion at December 31, 2014.  During the fourth quarter of 2015, originated loans increased $128.2 million, net of loans that were reclassified from acquired.  The Company also had increases in investment securities and interest-bearing cash due to the Company's desire to increase its on-balance sheet liquidity.  Funding this growth were continued increases in deposits, both organically and from the acquisition of branches from Certus, and from additional short-term borrowings.  The Company continues to grow transactional deposits, which increased by $218.1 million during the fourth quarter.  Wholesale deposits comprised 27.5% of total deposits at December 31, 2015, as compared to 26.1% at September 30, 2015 and 25.7% at December 31, 2014.  Goodwill and net core deposit intangibles increased by $6.4 million during the quarter due to the Certus branch acquisition. 

Shareholder's equity increased by $69.7 million during the fourth quarter due to the sale of 2.59 million common shares in a public offering.  All of the Bank's and Company's capital ratios exceed the minimum thresholds established for a well-capitalized bank by regulatory measures. 

Overall asset quality continued to improve during the fourth quarter of 2015, as total nonperforming assets were $51.3 million, or 0.91% of total assets, as compared to $57.5 million, or 1.11% of total assets, at September 30, 2015, and $67.3 million, or 1.65% of total assets, at December 31, 2014. 

Excluding nonperforming assets acquired by the Company, nonperforming assets were $22.2 million, or 0.81% of non-acquired loans and OREO at December 31, 2015, as compared to $24.7 million, or 0.95% of non-acquired loans and OREO, at September 30, 2015, and $32.5 million, or 1.52% of non-acquired loans and OREO, at December 31, 2014. 

The Company experienced $0.4 million of net charge-offs during the fourth quarter of 2015, compared to net recoveries of $0.3 million during the third quarter of 2015.  Gross charge-offs were $1.5 million during the fourth quarter of 2015, a slight increase compared to $1.2 million during the third quarter of 2015.

The allowance for loan losses was $31.6 million at December 31, 2015, an increase from $30.8 million at September 30, 2015 and $30.4 million at December 31, 2014.  The Company recorded a provision for loan losses of $1.3 million during the fourth quarter of 2015, as compared to $0.2 million recorded during the third quarter of 2015.  The provision for loan losses recorded during the fourth quarter of 2015 was allocated to loans not acquired by the Company.  The additional provision was recorded due to the high levels of loan growth in the originated loan portfolio.

Fully-taxable equivalent ("FTE") net interest income for the fourth quarter of 2015 was $50.7 million, an increase from $48.2 million for the third quarter of 2015.  FTE net interest margin was 4.08% for the fourth quarter of 2015, a slight decrease from 4.10% for the third quarter of 2015.  The average yield on interest-earning assets decreased two basis points during the fourth quarter of 2015, while the rate paid on interest-bearing liabilities increased by one basis point.  Accretion earned on the Company's acquired loan portfolio was $5.6 million during the fourth quarter of 2015, an increase as compared to $4.8 million earned in the third quarter of 2015.  Excluding accretion, the average yield on loans was 4.27% for the fourth quarter 2015, as compared to 4.33% for the third quarter of 2015. 

Average interest-earnings assets for the fourth quarter of 2015 were $4.97 billion, an increase from $4.66 billion for the third quarter of 2015.  These increases are primarily due to higher average loan balances from the Certus branch acquisition and organic loan growth in our markets, as well as additional investment securities purchased during the fourth quarter of 2015.  Average interest-bearing liabilities were $4.07 billion for the fourth quarter of 2015, an increase from $3.87 billion during the third quarter of 2015.  This increase was due to the deposits acquired in the Certus branch acquisition, as well as organic deposit growth and additional borrowings during the fourth quarter.

Total portfolio loans were $4.2 billion at December 31, 2015, an increase from $4.0 billion at September 30, 2015 and from $3.1 billion at December 31, 2014.  Loans that were originated by the Company, excluding loans that were reclassified from acquired, increased by $128.2 million, or 5.0%, on an annualized basis.   The Company has experienced organic loan growth across all loan types, with the majority of loan growth in commercial real estate and commercial and industrial loans.

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 total assets of $5.7 billion.  Bank of North Carolina provides a complete line of banking and financial services to individuals and businesses through its 64 current banking offices in Virginia, North and South Carolina.  The Bank's 19 locations in South Carolina and nine locations in Virginia 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."  The Company's website is www.bncbancorp.com.

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.

Forward Looking Statements

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) the economic recovery may face challenges causing its momentum to falter or a further recession; (ii) expected cost savings and other benefits anticipated in connection with our acquisitions may not be fully realized or realized within the expected time frame; (iii) our ability to integrate acquisitions and retain existing customers and attract new ones; and (iv) adverse changes in credit quality trends. 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.