BNC Bancorp (BNCN)

[Enterprising Investor]

BNCN Announces Increase in Earnings for Second Quarter 2012 (7/30/12)

HIGH POINT, N.C., July 30, 2012 /PRNewswire/ -- BNC Bancorp (NASDAQ: BNCN) ("Company"), parent company for Bank of North Carolina ("Bank"), today reported financial results for the second quarter of 2012.

For the quarter ended June 30, 2012, net income totaled $2.3 million, an increase of 44% compared to the $1.6 million for the quarter ended June 30, 2011. Net income available to common shareholders was $1.7 million, or $0.13 per diluted share, an increase of 70% compared to the $992,000, or $0.10 per diluted share, reported for the second quarter in 2011. During the three months ended June 30, 2012, the Company incurred $1.1 million of expenses associated with merger and acquisition activities, which reduced after-tax diluted earnings per share by $0.05.

For the six months ended June 30, 2012, net income totaled $4.0 million, an increase of 29% compared to $3.1 million for the six months ended June 30, 2011. Net income available to common shareholders for the six months ended June 30, 2012 was $2.8 million, or $0.24 per diluted share, compared to $1.9 million, or $0.19 per diluted share, for the six months ended June 30, 2011. During the six months ended June 30, 2012, the Company incurred $2.3 million of expenses associated with merger and acquisition activities, which reduced after-tax diluted earnings per share by $0.11.

Total assets at June 30, 2012 were $2.44 billion, an increase of $296.1 million, or 14%, compared to $2.15 billion at June 30, 2011. The increase was due to strong organic growth in our North Carolina franchise, along with the acquisition and integration of Carolina Federal Savings Bank ("Carolina Federal"), Regent Bank of South Carolina ("Regent") and Blue Ridge Saving Bank ("Blue Ridge") during this period.

Highlights for Quarter ended June 30, 2012:

Marketed and closed a $72.5 million private capital raise which converted to common equity as of July 20, 2012

Priced at a 6% discount to the 30 day average trading price

Announced the agreement to acquire First Trust Bank in Charlotte, North Carolina

$438 million in assets; $228 million in loans; and $374 million in deposits

Acquired Carolina Federal Savings Bank in Charleston, South Carolina through a FDIC-assisted transaction

$53 million in deposits; $29 million in performing loans; and no non-performing assets

Announced the agreement to acquire two full-service offices in Cary and Chapel Hill, North Carolina

Completed our annual Safety and Soundness examination

Classified assets declined from $143 million to $116 million

Grew core deposits by $108 million and reduced wholesale funding by $135 million

Net income available to common shareholders increased to $0.13 per diluted share, compared to $0.10 in Q2 of 2011, and $0.11 in Q1 of 2012

Mortgage division closed over $68 million in new loan originations during the quarter, resulting in income and fees of over $1.5 million

Loan pipeline remains strong in each of our newer markets

W. Swope Montgomery, Jr., President and CEO, noted, "The accomplishments during the second quarter will certainly transform our Company and propel us into the future with even greater momentum and financial strength. The closing of the institutionally based $72.5 million capital raise provides much needed capital to continue our strategic and opportunistic expansion plans, as well as increasing our daily trading volume. The announcement of the First Trust acquisition in Charlotte further expands our presence in the fastest growing market in the Carolinas, and creates greater efficiencies in that region. The FDIC assisted transaction of Carolina Federal in the Charleston, SC market was a strategic fit to our coastal franchise and resulted in a $7.7 million one-time financial gain. Also during the quarter we announced the agreement to purchase branches in Cary and Chapel Hill, NC that will expand our presence in the dynamic Triangle market, further complementing our announced acquisition of KeySource Commercial Bank in Durham.

With sizable one-time revenues and expenses in the second quarter, management felt it was prudent to continue to aggressively reserve for potential credit impairments in both the covered and non-covered portfolios. The covered loan portfolio at the South Carolina coast required additional reserves for identified impairments and cash flow variances, particularly in the land category, as new appraisals were obtained on a majority of the troubled portfolio. Despite charge-offs in the non-covered portfolio increasing from prior quarters, the outsized quarterly provision brought our allowance to 1.91% of portfolio loans less fair value loans and 112% of non-covered non-performing loans. Despite the increase in the allowance, we are very pleased that classified assets declined during the quarter from $143 million to $116 million."

Montgomery continued, "We remain confident that the franchise we are building throughout the Carolinas is providing a solid foundation on which to optimize long-term shareholder returns in this new era of banking. Over the past four years the investment in a diversified footprint has been expensive; however, the recovery is taking hold much more quickly in our franchise that is concentrated in the higher growth counties, and the opportunities to leverage our regional and central infrastructure continue to be numerous. The accomplishments during the second quarter resulted in significant progress in executing our strategic plan to be the community bank of choice in the Carolinas."

Additional Operating Highlights from Second Quarter

Since June 2011, total portfolio loans have increased $231.7 million, or 15.2%. At June 30, 2012, the Company's loan portfolio included $284.6 million in loans covered under loss-share agreements and $1.48 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 Carolina Federal and Regent increased loans not covered by loss-share agreements by $61.2 million. Loans acquired in connection with these transactions are accounted for under fair value and shown net of any related credit and yield adjustments, from acquisition date.

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