BNC Bancorp (BNNC) 8-K BNC Bancorp Announces Net Income for Second Quarter 2009

Press Release

Source:	BNC Bancorp
Contact:	W. Swope Montgomery, Jr.
	President and CEO
	336-869-9200

BNC Bancorp Announces Net Income for Second Quarter 2009

THOMASVILLE, N.C., / — BNC Bancorp (NASDAQ: BNCN) today reported earnings for the second quarter of 2009.  For the second quarter, net income totaled $1.4 million, an increase of 56% from the $915,000 earned in the second quarter of 2008.  Results for the second quarter of 2009 include a $750,000 charge as part of the special deposit insurance assessment levied on all banks by the FDIC.

For the second quarter, net income available to common shareholders totaled $934,000, or $0.13 per diluted common share, compared to net income available to shareholders of $876,000, or $0.12 per diluted common share, for the first quarter of 2009, and net income available to common shareholders of $915,000, or $0.12 per diluted common share, for the second quarter of 2008.

For the first half of 2009, net income available to common shareholders totaled $1.8 million, or $0.25 per diluted common share, as compared to the first half of 2008 that resulted in net income available to shareholders of $2.6 million, or $.35 per diluted share.  As noted, FDIC assessments increased by $1.1 million in the first half of 2009 compared to the first half of 2008.  Additionally, the Company reported dividends and accretion on preferred stock in the amount of $987,000 in the first half of 2009.

Total assets as of June 30, 2009 were $1.6 billion, an increase of 32% compared with $1.2 billion as of June 30, 2008. Total loans on June 30, 2009 were $1.0 billion, an increase of 2% from the $999.2 million reported as of June 30, 2008.  Investment securities increased $355.6 million, or 378%, when compared to the $94.2 million outstanding at June 30, 2008.  Deposits increased 44% over the same one-year period. During the first quarter of 2009, management negotiated a $250 million money market funding arrangement which carries a fixed effective cost of 2.95% over the five year period.

Commenting on the results, W. Swope Montgomery, Jr., President and CEO, noted, “We are pleased with the results for the quarter, especially the continued growth in reported and recurring earnings, the improvement in our net interest margin, and the stability of our asset quality in this challenging credit environment.”

Mr. Montgomery continued, “Recurring earnings available to common shareholders were $0.20 per diluted share when adjusted for the $750,000 special assessment from the FDIC and the write-off of $119,000 of a correspondent bank’s stock, which represents a significant increase from the $0.12, $0.07, and $0.12, reported for the first quarter of 2009, and the fourth and second quarters of 2008, respectively.”

Provision for Loan Losses and Asset Quality

The provision for credit losses was $3.0 million in the second quarter of 2009, compared with $1.2 million in the second quarter of 2008 and $3.0 million in the first quarter of 2009.  Net charge-offs of loans during the recent quarter were $2.4 million, compared to $1.7 million for the first quarter of 2009 and $892,000 for the second quarter of 2008.  Expressed as an annualized percentage of average loans outstanding, net charge-offs were 0.98% and 0.70% in the second and first quarter of 2009, respectively, and 0.36% in 2008's second quarter.  Non-performing assets (NPA) as a percentage of total assets at June 30, 2009 were at 1.18%, an increase from the 1.12% at March 31, 2009 and 0.89% at June 30, 2008. The allowance for loan and lease losses at June 30, 2009 increased $2.6 million, or 21%, from levels a year ago and $563,000, or 4% from the first quarter of 2009.  The allowance for loan and lease losses of $15.1 million is 1.48% of total loans outstanding at June 30, 2009, up from the 1.44% of total loans outstanding for the first quarter of 2009, and up from the 1.25% reported at June 30, 2008. Total loans more than 30 days past due increased to $8.8 million at June 30, 2009 from $3.3 million at March 31, 2009, primarily as the result of two credits totaling $4.8 million.

Mr. Montgomery noted that, “Non-performing assets to total assets have remained relatively stable in the range of 1.12% to 1.18% over the first half of 2009.  This ratio compares very favorably to our Federal Reserve district, state and national peers, and while we have been aggressively moving these assets through our system, as indicated previously, we would expect to see an increase in non-performers as this challenging credit market lingers.  We experienced a significant increase in 30-89 day past dues compared to the first quarter, primarily the result of two relationships totaling $4.8 million, both of which have since been paid current.  Excluding these two relationships, past due statistics have continued to trend upward slightly, but still well below peer comparisons.”

Montgomery continued, “We have included additional tabular information this quarter that provides greater transparency into the mix and stratification within certain classifications of our loan portfolio.  It is important to note that we have made significant strides in the reduction of our Construction and Acquisition & Development (A&D) portfolios over the past year.  At the end of the second quarter of 2009, we have reduced our residential and commercial construction portfolios by over 34% from year ago levels, and have reduced speculative 1-4 family construction loans with balances above $400,000 to $13.5 million.  The total exposure in the residential and construction portfolio, which also includes undrawn commitments, has been worked down by over $81.0 million over the past twelve months.  Our Builder Participation Program continues to attract qualified buyers, and has been responsible for financing over $18 million of our residential construction portfolio into permanent mortgages.”

“Residential and Commercial A&D continues to be the area of our portfolio that is being most affected by the current economic downturn.   Over the past year we have reduced outstanding balances 10.5%, or $6.5 million.  As apparent in the tables, the three largest A&D loans in the portfolio are all less than $6 million each, of which two remain viable projects, with the third in a workout situation.  The remaining A&D exposure is diversified across our market area, with the largest single credit outside of the three mentioned above currently at $3.5 million, and the largest multi-credit exposure within any one city at $6.3 million in Winston-Salem,” said Mr. Montgomery.

Net interest income on a fully taxable equivalent (FTE) basis was $12.7 million for the second quarter of 2009, compared to $11.4 million for first quarter of 2009 and $8.6 million for the second quarter of 2008. The increase in net interest income in the second quarter 2009 is primarily due to average investment securities increasing to $461.6 million compared to $448.8 million for the first quarter of 2009 and $91.1 million for the second quarter of 2008.  The second quarter 2009 net interest margin on a fully taxable equivalent basis was 3.39%, compared to 3.11% and 3.19% for the first quarter of 2009 and second quarter of 2008, respectively.

In July, the Board of Directors declared a $0.05 per share quarterly dividend, payable August 28, 2009 to shareholders of record on August 14, 2009.

BNC Bancorp is the parent company of Bank of North Carolina, a $1.6 billion commercial bank that provides a complete line of banking and financial services to individuals and businesses through full-service banking offices located in the cities of Thomasville, High Point, Salisbury, Greensboro, Archdale, Lexington, Kernersville, Harrisburg, Welcome and Oak Ridge, North Carolina. In addition, the Bank operates limited service banking offices in Winston-Salem and Mooresville, North Carolina.  Bank of North Carolina is insured by the FDIC and is an equal housing lender. BNC Bancorp’s is current on its preferred dividend payments to the United States Treasury and its stock is quoted in the Nasdaq Capital Market under the symbol “BNCN.”

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 such as “core” or “recurring” earnings 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.

From time to time, we make written and oral forward-looking statements within the meaning of certain securities laws, including in this press release, in other filings with the U.S. Securities and Exchange Commission, in reports to shareholders and in other communications. These forward-looking statements include, among others, statements with respect to our objectives for 2009 and beyond, and the medium and long terms strategies to achieve those objectives, as well as statements with respect to our beliefs, plans, expectations, anticipations, estimates and intentions.

By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to, the strength of the North Carolina economy and real estate markets in general and the strength of the local economies and real estate markets within North Carolina in which we conduct operations; the economic conditions in the United States and the relative strength and stability of other financial institutions; the effects of changes in monetary and fiscal policy, including changes in interest rate policies of the Board of Governors of the Federal Reserve System in the United States; judicial decisions; the effects of competition in the markets in which we operate; inflation; the timely development and introduction of new products and services in receptive markets; the impact of changes in the laws and regulations regulating financial services (including banking, insurance and securities); changes in tax laws; technological changes; our ability to complete strategic acquisitions and to integrate acquisitions; judicial or regulatory proceedings; changes in consumer spending and saving habits; the possible impact on our businesses of international conflicts and other developments including those relating to the war on terrorism; and our anticipation of and success in managing the risks implicated by the foregoing.

QUARTERLY PERFORMANCE SUMMARY
BNC BANCORP
(Dollars in thousands, except per share data)
(Unaudited)	For the
	Three Months Ended
	June 30, 2009			June 30, 2008			% Change
SUMMARY STATEMENTS OF OPERATIONS
Interest income	$	19,848		$	17,182			15.5	%
Interest expense		8,264			8,983			(8.0	)
Net interest income		11,584			8,199			41.3
Provision for loan losses		3,000			1,150			160.9
Net interest income after provision for loan losses		8,584			7,049			21.8
Noninterest income		1,210			1,625			(25.5	)
Noninterest expense		8,494			7,675			10.7
Income before income tax expense		1,300			999			30.1
Provision for income taxes		(130	)		84			(254.8	)
Net income		1,430			915			56.3
Preferred stock dividends		496			-			(100.0	)
Net income available to common shareholders		934			915			2.1
PER SHARE DATA
Earnings per share, basic	$	0.13		$	0.13			0.0	%
Earnings per share, diluted		0.13			0.12			8.3
Book value per share		16.87			11.76			43.4
Tangible book value per share		9.12			7.93			15.0
Weighted average common shares outstanding:
Basic		7,339,809			7,299,672
Diluted		7,345,069			7,410,722
PERFORMANCE RATIOS
Return on average assets		0.23	%		0.31	%
Return on average common equity		3.92	%		4.20	%
Return on average tangible common equity		5.55	%		6.20	%
Net yield on earning assets (taxable equivalent)		3.39	%		3.19	%
Average equity to average assets		5.91	%		7.29	%
Allowance for loan losses as a % of total loans		1.48	%		1.25	%
Non-performing assets to total assets, end of period		1.18	%		0.89	%
Ratio of net charge-offs to average loans, annualized		0.98	%		0.36	%

QUARTERLY PERFORMANCE SUMMARY
BNC BANCORP
(Dollars in thousands, except per share data)
(Unaudited)	For the
	Six Months Ended
	June 30, 2009			June 30, 2008			% Change
SUMMARY STATEMENTS OF OPERATIONS
Interest income	$	39,389		$	35,584			10.7	%
Interest expense		17,390			19,193			(9.4	)
Net interest income		21,999			16,391			34.2
Provision for loan losses		6,000			1,875			220.0
Net interest income after provision for loan losses		15,999			14,516			10.2
Noninterest income		2,428			3,000			(19.1	)
Noninterest expense		15,880			14,121			12.5
Income before income tax expense		2,547			3,395			(25.0	)
Provision for income taxes		(250	)		780			(132.1	)
Net income		2,797			2,615			7.0
Preferred stock dividends		987			-			(100.0	)
Net income available to common shareholders		1,810			2,615			(30.8	)
PER SHARE DATA
Earnings per share, basic	$	0.25		$	0.36			(30.6	)%
Earnings per share, diluted	$	0.25		$	0.35			(28.6	)
Weighted average common shares outstanding:
Basic		7,339,337			7,289,160
Diluted		7,344,314			7,416,912
PERFORMANCE RATIOS
Return on average assets		0.23	%		0.45	%
Return on average common equity		3.90	%		6.05	%
Return on average tangible common equity		5.59	%		8.95	%
Net yield on earning assets (taxable equivalent)		3.24	%		3.24	%
Average equity to average assets		5.80	%		7.36	%
Allowance for loan losses as a % of total loans		1.48	%		1.25	%
Non-performing assets to total assets, end of period		1.18	%		0.89	%
Ratio of net charge-offs to average loans, annualized		0.83	%		0.25	%

QUARTERLY PERFORMANCE SUMMARY
BNC BANCORP
(Dollars in thousands, except per share data)
(Unaudited)	For the
	Three Months Ended
	June 30, 2009			March 31, 2009			Dec 31, 2008			Sept 30, 2008			June 30, 2008			Dec 31, 2007
SUMMARY STATEMENTS OF OPERATIONS
Interest income	$	19,848		$	19,541		$	18,041		$	17,409		$	17,182		$	19,262
Interest expense		8,264			9,126			9,340			8,893			8,983			11,003
Net interest income		11,584			10,415			8,701			8,516			8,199			8,259
Provision for loan losses		3,000			3,000			2,700			2,500			1,150			750
Net interest income after provision for loan losses		8,584			7,415			6,001			6,016			7,049			7,509
Noninterest income		1,210			1,218			1,323			1,328			1,625			1,483
Noninterest expense		8,494			7,386			6,945			6,716			7,675			6,839
Income before income tax expense		1,300			1,247			379			628			999			2,153
Provision for income taxes		(130	)		(120	)		(247	)		(119	)		84			600
Net income		1,430			1,367			626			747			915			1,553
Preferred stock dividends		496			491			143			-			-			-
Net income available to common shareholders		934			876			483			747			915			1,553
Net interest income, as reported	$	11,584		$	10,415		$	8,701		$	8,516		$	8,199		$	8,259
Tax-equivalent adjustment		1,134			970			548			424			421			360
Net interest income, tax-equivalent		12,718			11,385			9,249			8,940			8,620			8,619
PER SHARE DATA
Earnings per share, basic	$	0.13		$	0.12		$	0.07		$	0.10		$	0.13		$	0.22
Earnings per share, diluted		0.13			0.12			0.07			0.10			0.12			0.22
Weighted average common shares outstanding:
Basic		7,339,809			7,338,860			7,354,164			7,357,677			7,299,672			6,914,320
Diluted		7,345,069			7,343,529			7,367,906			7,402,167			7,410,722			7,097,902
PERFORMANCE RATIOS
Return on average assets		0.23	%		0.35	%		0.19	%		0.25	%		0.31	%		0.56	%
Return on average common equity		3.92	%		4.63	%		2.91	%		3.45	%		4.20	%		7.61	%
Return on average tangible common equity		5.55	%		6.03	%		4.33	%		5.10	%		6.20	%		11.70	%
Net yield on earning assets (taxable equivalent)		3.39	%		3.11	%		3.02	%		3.19	%		3.19	%		3.37	%
Average equity to average assets		5.91	%		7.51	%		6.43	%		7.14	%		7.29	%		7.29	%
Non-performing assets to total assets, end of period		1.18	%		1.12	%		1.17	%		0.89	%		0.89	%		0.54	%
Ratio of net charge-offs to average loans, annualized		0.98	%		0.70	%		1.31	%		0.46	%		0.36	%		0.26	%

QUARTERLY PERFORMANCE SUMMARY
BNC BANCORP
(Dollars in thousands)
(Unaudited)	As of
	June 30, 2009		June 30, 2008		% Change
SELECTED BALANCE SHEET DATA
End of period balances
Total loans	$	1,015,115	$	999,207		1.6	%
Allowance for loan losses		15,067		12,455		21.0
Loans, net of allowance for loan losses		1,000,048		986,752		1.4
Securities, available for sale		449,794		94,175		377.6
Total Assets		1,599,863		1,213,817		31.8
Deposits:
Noninterest-bearing deposits		62,929		67,969		(7.4	)
Interest-bearing demand and savings		479,218		191,287		150.5
CD's and other time deposits		800,281		670,070		19.4
Total deposits		1,342,428		929,326		44.5
Borrowed Funds		125,008		191,849		(34.8	)
Total interest-bearing liabilities		1,404,507		1,053,206		33.4
Shareholders' Equity		123,818		86,145		43.7

	As of
	June 30, 2009		March 31, 2009		Dec 31, 2008		Sept 30, 2008		June 30, 2008		Dec 31, 2007
SELECTED BALANCE SHEET DATA
End of period balances
Total loans	$	1,015,115	$	1,004,814	$	1,007,788	$	1,006,866	$	999,207	$	932,562
Allowance for loan losses		15,067		14,504		13,210		13,894		12,455		11,784
Loans, net of allowance for loan losses		1,000,048		990,310		994,578		992,972		986,752		920,778
Securities, available for sale		449,794		454,768		416,564		107,372		94,175		86,683
Total Assets		1,599,863		1,590,532		1,572,876		1,262,581		1,213,817		1,130,112
Deposits:
Noninterest-bearing deposits		62,929		60,465		61,927		64,880		67,969		67,552
Interest-bearing demand and savings		479,218		451,453		183,310		183,370		191,287		216,896
CD's and other time deposits		800,281		774,682		900,776		776,978		670,070		570,682
Total Deposits		1,342,428		1,286,600		1,146,013		1,025,228		929,326		855,130
Borrowed Funds		125,008		167,767		299,856		146,306		191,849		182,641
Total interest-bearing liabilities		1,404,507		1,393,902		1,383,942		1,106,654		1,053,206		970,219
Shareholders' Equity		123,818		118,023		120,680		84,885		86,145		86,392

QUARTERLY PERFORMANCE SUMMARY
BNC BANCORP
(Dollars in thousands)
(Unaudited)
	For the Three Month Period Ended
	June 30, 2009		March 31, 2009		Dec 31, 2008		Sept 30, 2008		June 30, 2008		Dec 31, 2007
SELECTED BALANCE SHEET DATA
Quarterly average balances
Loans, net of allowance for loan losses	$	998,214	$	993,306	$	998,644	$	992,383	$	982,923	$	909,571
Securities, available for sale		461,578		448,808		197,878		105,804		91,068		81,632
Total earning assets		1,502,674		1,484,754		1,222,102		1,110,553		1,085,176		1,008,427
Total Assets		1,619,859		1,594,331		1,328,919		1,219,177		1,200,266		1,109,313
Deposits:
Noninterest-bearing deposits		66,940		63,362		72,586		69,599		70,805		68,992
Interest-bearing demand and savings		464,048		320,930		173,218		181,599		197,135		215,630
CD's and other time deposits		798,282		861,504		822,048		721,192		658,980		590,648
Total Deposits		1,329,270		1,245,796		1,067,852		972,390		926,920		875,270
Borrowed Funds		149,312		222,520		169,431		154,906		180,267		149,254
Total interest-bearing liabilities		1,411,642		1,404,954		1,164,697		1,057,697		1,036,382		955,532
Shareholders' Equity		124,865		119,787		85,447		87,024		87,518		80,919

BNC Bancorp
Loan Mix and Stratification Statistics for Select Classifications- End of Period Balances
(Dollars in millions)
(Unaudited)	As of
	June 30, 2009		June 30, 2008		% Change
Construction, A&D, and Land	$	248.9	$	301.7		(17.5	)%
Residential Construction		63.2		92.5		(31.7	)
Presold		18.4		22.2		(17.1	)
Speculative		44.8		70.3		(36.3	)
Loan size - Over $400,000		13.5		25.2		(46.4	)
Loan size - $200,000 to $400,000		11.8		26.5		(55.5	)
Loan size - under $200,000		19.5		18.6		4.8
Commercial Construction		34.3		55.3		(38.0	)
Loan size - $3 million to $5 million		6.5		23.8		(72.7	)
Loan size - $1 million to $3 million		18.9		12.1		56.2
Loan size - under $1 million		8.9		19.4		(54.1	)
Residential and Commercial A&D		55.6		62.1		(10.5	)
��             Loan size - $5 million to $6 million		17.3		11.1		55.9
Loan size - $3 million to $5 million		9.8		12.1		(19.0	)
Loan size - $1 million to $3 million		22.1		28.1		(21.4	)
Loan size - under $1 million		6.4		10.8		(40.7	)
Land		95.8		91.8		4.4
Residential Buildable Lots		33.5		28.2		18.8
Commercial Buildable Lots		17.9		17.9		0.0
Land held for development		30.0		30.1		(0.3	)
Raw and Agricultural Land		14.4		15.6		(7.7	)
Commercial Real Estate	$	391.0	$	344.2		13.6	%
Multi-Family		28.0		10.5		166.7
Churches		13.1		13.3		(1.5	)
Retail		250.2		221.5		13.0
Owner Occupied		72.8		66.9		8.8
Investment		177.4		154.6		14.8
Loan size - $5 million to $6 million		20.2		12.3		64.2
Loan size - $3 million to $5 million		26.7		20.2		32.2
Loan size - $1 million to $3 million		67.5		60.8		11.0
Loan size - under $1 million		62.9		61.3		2.6
Industrial		94.1		93.3		0.9
Owner Occupied		34.0		35.4		(4.0	)
Investment		60.1		57.9		3.8
Loan size - $5 million to $6 million		5.1		5.1		0.0
Loan size - $3 million to $5 million		3.4		3.5		(2.9	)
Loan size - $1 million to $3 million		24.6		22.9		7.4
Loan size - under $1 million		27.0		26.4		2.3
Other		5.6		5.6		0.0

BNC Bancorp
Loan Mix and Stratification Statistics for Select Classifications- End of Period Balances
(Dollars in millions)
(Unaudited)	As of
	June 30, 2009		March 31, 2009		Dec 31, 2008		Sept 30, 2008		June 30, 2008
Construction, A&D, and Land	$	248.9	$	250.4	$	306.7	$	306.2	$	301.7
Residential Construction		63.2		73.1		78.9		89.3		92.5
Presold		18.4		19.4		20.2		19.2		22.2
Speculative		44.8		53.7		58.7		70.1		70.3
Loan size - Over $400,000		13.5		16.1		18.6		25.3		25.2
Loan size - $200,000 to $400,000		11.8		24.8		24.6		26.6		26.5
Loan size - under $200,000		19.5		12.8		15.5		18.2		18.6
Commercial Construction		34.3		30.9		73.7		65.8		55.3
Loan size - $3 million to $5 million		6.5		3.6		40.9		31.8		23.8
Loan size - $1 million to $3 million		18.9		16.8		15.6		19.6		12.1
Loan size - under $1 million		8.9		10.5		17.2		14.4		19.4
Residential and Commercial A&D		55.6		63.4		70.7		66.0		62.1
Loan size - $5 million to $6 million		17.3		17.0		16.8		11.7		11.1
Loan size - $3 million to $5 million		9.8		6.6		7.5		12.3		12.1
Loan size - $1 million to $3 million		22.1		31.4		36.0		31.3		28.1
Loan size - under $1 million		6.4		8.4		10.4		10.7		10.8
Land		95.8		83.0		83.7		85.1		91.8
Residential Buildable Lots		33.5		25.7		25.6		26.6		28.2
Commercial Buildable Lots		17.9		17.3		15.1		13.8		17.9
Land held for development		30.0		25.6		28.3		30.0		30.1
Raw and Agricultural Land		14.4		14.4		14.7		14.7		15.6
Commercial Real Estate	$	391.0	$	391.6	$	349.7	$	340.2	$	344.2
Multi-Family		28.0		26.4		11.3		10.8		10.5
Churches		13.1		12.8		13.0		13.4		13.3
Retail		250.2		253.1		225.9		217.7		221.5
Owner Occupied		72.8		73.3		71.3		66.8		66.9
Investment		177.4		179.8		154.6		150.9		154.6
Loan size - $5 million to $6 million		20.2		20.3		12.0		12.1		12.3
Loan size - $3 million to $5 million		26.7		30.2		22.0		19.1		20.2
Loan size - $1 million to $3 million		67.5		69.0		63.5		59.4		60.8
Loan size - under $1 million		62.9		60.3		57.1		60.3		61.3
Industrial		94.1		93.7		93.8		93.0		93.3
Owner Occupied		34.0		35.0		35.2		34.5		35.4
Investment		60.1		58.7		58.7		58.5		57.9
Loan size - $5 million to $6 million		5.1		5.1		5.1		5.1		5.1
Loan size - $3 million to $5 million		3.4		3.4		3.4		3.5		3.5
Loan size - $1 million to $3 million		24.6		22.7		22.8		22.9		22.9
Loan size - under $1 million		27.0		27.5		27.4		27.0		26.4
Other		5.6		5.6		5.7		5.3		5.6