BNC Bancorp (BNCN)

[Enterprising Investor]

BNC Bancorp Announces Increase in Earnings for First Quarter 2013 (4/29/13)

HIGH POINT, N.C., April 29, 2013 /PRNewswire/ -- BNC Bancorp (NASDAQ: BNCN) ("Company"), parent company for Bank of North Carolina ("Bank"), today reported financial results for the quarter ended March 31, 2013.

For the quarter ended March 31, 2013, net income totaled $4.3 million, an increase of $2.6 million, or 148.1%, when compared to net income of $1.7 million for the first quarter of 2012. Net income available to common shareholders for the quarter ended March 31, 2013 was $3.8 million, or $0.14 per diluted share, compared to $1.1 million, or $0.11 per diluted share, for the first quarter of 2012.

Total assets at March 31, 2013 were $2.93 billion, an increase of $520.3 million, or 21.6%, compared to $2.41 billion at March 31, 2012. The increase was due to continued growth in our North Carolina franchise, along with the acquisition and integration of First Trust Bank ("First Trust"), 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 2012.

Total assets at March 31, 2013 decreased by $154.6 million, or 5.0%, to $2.93 billion, as compared to total assets of $3.08 billion at December 31, 2012. As part of the KeySource and First Trust acquisitions, management's intention was to utilize excess liquidity and the acquired securities portfolios to repay wholesale and non-core deposits as they matured. The Company has been successful at reducing this inefficient component of the acquired balance sheets, and thus has experienced a decline in total assets during the first quarter of 2013 as compared to year end 2012. This deleveraging has helped the Company execute on its strategic initiative to improve capital ratios and net interest margin during the first quarter of 2013.

Included in the financial results for the quarters ended March 31, 2013 and 2012 are $491,000 and $1.6 million, respectively, of net gains from securities and acquisitions and $1.0 million and $847,000, respectively, of transaction-related expenses.

Average common shares outstanding have increased significantly since the first quarter of 2012 as a result of the $72.5 million capital raise in the second quarter of 2012 and the acquisitions of both KeySource and First Trust during the second half of 2012. For the quarters ended March 31, 2013 and 2012, average fully-diluted shares outstanding were 26.5 million and 10.9 million, respectively.

Highlights for 2013:

•Announced redemption of Series A Preferred Stock with non-dilutive term loan;

•Net income available to common shareholders of $3.8 million for the first quarter of 2013, an increase of 233.6% compared to first quarter of 2012;

•Diluted earnings per share for first quarter of 2013 was $0.14, an increase of 27.3% compared to first quarter of 2012;

•Net interest margin increased to a healthy 4.20% for the first quarter of 2013, compared to 3.80% for the first quarter of 2012;

•Net interest margin, before hedging costs, increased to 4.54% for the first quarter of 2013, compared to 4.17% for the first quarter of 2012;

•Successful core conversion of the First Trust customer base, with integration and cost savings on schedule;

•Converted all Series B Convertible Preferred Stock to non-voting common; and

•Tangible common equity ratio of 7.64% at March 31, 2013, compared to 3.73% at March 31, 2012.

W. Swope Montgomery, Jr., President and CEO, stated, "While 2012 was a year of strategic growth and diversification, in 2013 we have further enhanced our focus on integration, operating efficiency, and earnings. We continue to actively pursue strategic acquisitions that provide depth in our key markets; however, we are cultivating the investments made over the past several years in growth markets, non-interest income sources, a more diversified deposit base, and an elite-level senior management team into key drivers of financial performance. Our first quarter earnings are evidence that our internal focus on efficiency, integration, and execution are on track.

Our net interest margin, with and without fair value accretion, is up significantly from year ago levels, due to an aggressive repricing of deposit accounts and a more efficient earning asset base. Our mortgage department continues to increase origination volumes and related revenues by double digit rates on a quarter-to-quarter basis, while remaining at or above 55% in purchase volume. Credit metrics, despite the impact of acquisitions on the nominal amounts, continue to show overall positive trends, especially when including the reduction in performing troubled debt restructurings in the first quarter.

With this being the Company's last earnings release before my retirement as CEO, I am very proud of the strength and soundness of our balance sheet, and the upwards momentum of earnings that I pass to my dear friend and very deserving successor, Rick Callicutt, currently our Executive Vice President and Chief Operating Officer. Our Company is in great shape as we head into the future in terms of financial strength, positioning, and leadership."

"We were pleased to announce that after receiving regulatory approval, on April 26, 2013 we closed on a $30 million term loan at the holding company level and used the proceeds to redeem the $31.26 million of Series A preferred stock initially issued under the Capital Purchase Program of the U.S. Treasury. This transaction will have minimal to no impact on Bank-level capital ratios, and will save the Company approximately $1.0 million after-tax annually from current levels and $1.8 million if the preferred stock had stepped up to the 9% coupon on December 5, 2013," said Rick Callicutt.

Operating Results

Fully taxable-equivalent ("FTE") net interest income for the first quarter of 2013 was $27.5 million, an increase of $1.9 million from $25.6 million in the fourth quarter of 2012, and an increase of $7.5 million from $20.0 million in the first quarter of 2012. FTE net interest margin was 4.20% for the first quarter of 2013, an increase of 11 basis points from 4.09% for the fourth quarter of 2012, and an increase of 40 basis points from FTE net interest margin of 3.80% for the first quarter of 2012.

Average interest-earning assets were $2.65 billion for the first quarter of 2013, an increase of $155.2 million from $2.50 billion during the fourth quarter of 2012, and an increase of $537.2 million from $2.11 billion for the first quarter of 2012. The increase from the fourth quarter of 2012 is due to the full quarter impact of the interest-earning assets purchased from First Trust in November 2012, while the increase from first quarter 2012 is primarily due to the interest-earning assets acquired from First Trust, KeySource, BHR and Carolina Federal during 2012.

The Company's average yield on interest-earning assets decreased 5 basis points from 5.38% in the fourth quarter of 2012 to 5.33% in the first quarter of 2013, as compared to 5.43% for the first quarter of 2012. The decrease from the fourth quarter of 2012, as well as the first quarter of 2012, is due to the maturity and replacement of higher yielding investment securities with investment securities with lower yields. Loan accretion during the first quarter of 2013 totaled $3.3 million, an increase of $247,000 from loan accretion of $3.1 million for the fourth quarter of 2012, and an increase of $1.9 million from the first quarter of 2012.

Average interest-bearing liabilities were $2.41 billion for the first quarter of 2013, an increase of $119.1 million from $2.30 billion for the fourth quarter of 2012, and an increase of $317.7 million from $2.10 billion for the first quarter of 2012. The increase from the fourth quarter of 2012 is due to the full quarter impact of the liabilities assumed from First Trust in November 2012, while the increase from first quarter 2012 is primarily due to the acquisition of First Trust, KeySource, BHR and Carolina Federal.

The Company's average cost of interest-bearing liabilities was 1.24% for the first quarter of 2013, a decrease of 17 basis points compared to 1.41% for the fourth quarter of 2012, and a decrease of 40 basis points from 1.64% for the first quarter of 2012. This decrease is due to the Company's decision to reduce exposure to higher cost deposit products and aggressively reduce deposit rates over the past two quarters. Decreases in the average cost of deposits were slightly offset by an increase in cash flow hedging expense, which totaled $2.2 million for the first quarter of 2013, compared to $2.1 million for the fourth quarter of 2012 and $1.9 million for the first quarter of 2012. Without the cash flow hedging expense, FTE net interest margin for the first quarter of 2013 was 4.54%, compared to 4.43% for the fourth quarter of 2012 and 4.17% for the first quarter of 2012.

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