BNC Bancorp Reports Earnings for Third Quarter 2012

Oct 29, 2012, 20:04 ET from BNC Bancorp

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)