BNC Bancorp Reports Earnings for Third Quarter 2012

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