BNC Bancorp (BNNC) 10-Q 2008 Q2 Quarterly report

U.S. Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

x Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2008

¨ Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period ended                    

Commission File Number 000-50128

BNC Bancorp

(Exact name of registrant as specified in its charter)

North Carolina	47-0898685
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
831 Julian Avenue Thomasville, North Carolina	27360
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (336) 476-9200

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of August 5, 2008, the registrant had outstanding 7,346,604 shares of Common Stock, no par value.

		Page No.
Part I.	FINANCIAL INFORMATION
Item 1 -	Financial Statements (Unaudited)
	Consolidated Balance Sheets June 30, 2008 and December 31, 2007	3
	Consolidated Statements of Income Three Months and Six Months Ended June 30, 2008 and 2007	4
	Consolidated Statements of Comprehensive Income Three Months and Six Months Ended June 30, 2008 and 2007	5
	Consolidated Statement of Shareholders’ Equity Six Months Ended June 30, 2008	6
	Consolidated Statements of Cash Flows Six Months Ended June 30, 2008 and 2007	7
	Notes to Consolidated Financial Statements	8
Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3 -	Quantitative and Qualitative Disclosures about Market Risk	18
Item 4 -	Controls and Procedures	18
Part II.	Other Information
Item 1A-	Risk Factors	19
Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 4 -	Submission of Matters to a Vote of Security Holders	19
Item 6 -	Exhibits	20

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Part I. FINANCIAL INFORMATION

Item 1 - Financial Statements

BNC BANCORP

CONSOLIDATED BALANCE SHEETS

	June 30, 2008 (Unaudited)			December��31, 2007*
	(Amounts in thousands, except share data)
Assets
Cash and due from banks	$	18,928		$	16,387
Interest-earning deposits in other banks		8,827			4,667
Securities available for sale, at fair value		94,175			86,683
Federal Home Loan Bank stock, at cost		8,300			7,233
Loans held for sale		446			2,315
Loans		999,207			932,562
Less allowance for loan losses		(12,455	)		(11,784	)
Net loans		986,752			920,778
Accrued interest receivable		5,061			5,074
Premises and equipment, net		24,600			23,120
Investment in life insurance		26,071			24,001
Goodwill		26,129			26,129
Other assets		14,528			13,725
Total assets	$	1,213,817		$	1,130,112
Liabilities and Shareholders’ Equity
Deposits:
Non-interest bearing demand	$	67,969		$	67,552
Interest-bearing demand		180,312			206,923
Savings		10,975			9,973
Time deposits of $100,000 and greater		491,108			418,493
Other time		178,962			152,189
Total deposits		929,326			855,130
Short-term borrowings		71,136			80,928
Long-term debt		120,713			101,713
Accrued expenses and other liabilities		6,497			5,949
Total liabilities		1,127,672			1,043,720
Shareholders’ Equity:
Common stock, no par value; authorized 80,000,000 shares; 7,329,758 and 7,257,532 issued and outstanding at June 30, 2008 and December 31, 2007, respectively		70,439			70,042
Retained earnings		14,695			14,496
Stock in directors rabbi trust		(1,118	)		(1,001	)
Directors deferred fees obligation		1,118			1,001
Accumulated other comprehensive income		1,011			1,854
Total shareholders’ equity		86,145			86,392
Total liabilities and shareholders’ equity	$	1,213,817		$	1,130,112

* Derived from audited consolidated financial statements.

See accompanying notes.

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BNC BANCORP

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2008		2007		2008		2007
	(In thousands, except per share data)
INTEREST INCOME
Interest and fees on loans	$	15,978	$	17,090	$	33,230	$	32,939
Investment securities:
Taxable		324		199		617		386
Tax-exempt		748		695		1,480		1,382
Interest on interest-earning balances		17		109		37		171
Other interest income		115		53		220		110
TOTAL INTEREST INCOME		17,182		18,146		35,584		34,988
INTEREST EXPENSE
Interest on demand deposits		525		1,544		1,517		2,909
Interest on savings deposits		4		15		7		32
Interest on time deposits of $100,000 and greater		5,175		4,704		10,071		9,096
Interest on other time deposits		1,601		2,482		3,854		4,671
Interest on short-term borrowings		550		51		1,237		89
Interest on long-term debt		1,128		1,294		2,507		2,475
TOTAL INTEREST EXPENSE		8,983		10,090		19,193		19,272
NET INTEREST INCOME		8,199		8,056		16,391		15,716
PROVISION FOR LOAN LOSSES		1,150		650		1,875		1,200
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		7,049		7,406		14,516		14,516
NON-INTEREST INCOME
Mortgage fee income		227		232		494		448
Service charges on deposit accounts		751		727		1,449		1,394
Investment brokerage fees		111		111		220		186
Increase in cash surrender value of life insurance		274		202		549		424
Gain (loss) on sale of investment securities available for sale		236		—		236		—
Other income		26		35		52		59
TOTAL NON-INTEREST INCOME		1,625		1,307		3,000		2,511
NON-INTEREST EXPENSE
Salaries and employee benefits		4,416		3,597		8,420		7,217
Occupancy expenses		499		407		987		788
Furniture and equipment expense		278		225		527		421
Data processing and supply expense		293		295		536		541
Advertising and business development expenses		115		147		233		258
Insurance, professional and other services		945		398		1,637		807
Other operating expenses		1,129		631		1,781		1,256
TOTAL NON-INTEREST EXPENSE		7,675		5,700		14,121		11,288
INCOME BEFORE INCOME TAX EXPENSE		999		3,013		3,395		5,739
INCOME TAX EXPENSE		84		895		780		1,704
NET INCOME	$	915	$	2,118	$	2,615	$	4,035
BASIC NET INCOME PER SHARE	$	.13	$	.31	$	.36	$	.59
DILUTED NET INCOME PER SHARE	$	.12	$	.30	$	.35	$	.57

See accompanying notes.

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BNC BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
	(In thousands, except per share data)
Net income	$	915		$	2,118		$	2,615		$	4,035
Other comprehensive loss:
Securities available for sale:
Unrealized holding losses on available for sale securities		(1,499	)		(1,595	)		(1,497	)		(1,457	)
Tax effect		543			582			542			532
Reclassification of gains recognized in net income		(236	)		—			(236	)		—
Tax effect		91			—			91			—
Net of tax amount		(1,101	)		(1,013	)		(1,100	)		(925	)
Cash flow hedging activities:
Unrealized holding gains (losses) on cash flow hedging activities		(1,237	)		(830	)		418			(571	)
Tax effect		477			320			(161	)		220
Net of tax amount		(760	)		(510	)		257			(351	)
Total other comprehensive loss		(1,861	)		(1,523	)		(843	)		(1,276	)
Comprehensive income (loss)	$	(946	)	$	595		$	1,772		$	2,759

See accompanying notes.

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BNC BANCORP

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (Unaudited)

						Retained earnings			Stock in directors rabbi trust			Directors deferred fees obligation		Accumulated other comprehensive income			Total
	Common stock
	Shares		Amount
	(Amounts in thousands, except share and per share data)
Balance, December 31, 2007	7,257,532		$	70,042		$	14,496		$	(1,001	)	$	1,001	$	1,854		$	86,392
Adjustment resulting from adoption of EITF 06-4	—			—			(959	)		—			—		—			(959	)
Comprehensive income:
Net income	—			—			2,615			—			—		—			2,615
Other comprehensive loss	—			—			—			—			—		(843	)		(843	)
Director deferred fees	—			—			—			(117	)		117		—			—
Common stock issued pursuant to:
Stock options exercised	82,820			374			—			—			—		—			374
Current income tax benefit	—			160			—			—			—		—			160
Shares traded to exercise options	(10,594	)		(164	)		—			—			—		—			(164	)
Stock-based compensation	—			27			—			—			—		—			27
Cash dividend of $.20 per share	—			—			(1,457	)		—			—		—			(1,457	)
Balance, June 30, 2008	7,329,758		$	70,439		$	14,695		$	(1,118	)	$	1,118	$	1,011		$	86,145

See accompanying notes.

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BNC BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Six Months Ended June 30,
	2008			2007
	(Amounts in thousands)
Operating Activities
Net income	$	2,615		$	4,035
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		728			558
Amortization (accretion) of premiums and discounts, net		(163	)		(76	)
Amortization of core deposit intangible		124			125
Stock-based compensation		27			74
Deferred compensation		322			—
Provision for loan losses		1,875			1,200
Net increase in cash surrender value of life insurance		(549	)		(424	)
(Gain) loss on disposal of premises and equipment		—			10
Gain on sale of securities		(236	)		—
(Gain) loss on sales of foreclosed assets		317			—
Changes in assets and liabilities:
(Increase) decrease in loans held for sale		1,869			(900	)
(Increase) decrease in accrued interest receivable		13			(230	)
(Increase) decrease in other assets		1,287			(547	)
Increase (decrease) in accrued expenses and other liabilities		(733	)		(351	)
Net cash provided by operating activities		7,496			3,474
Investing Activities
Purchases of securities available for sale		(18,778	)		(5,542	)
Proceeds from sales of securities		4,775			—
Proceeds from calls and maturities of securities available for sale		5,029			1,647
Purchase (redemption) of Federal Home Loan Bank stock		(1,067	)		(135	)
Investment in life insurance		(1,521	)		—
Net increase in loans		(68,307	)		(101,713	)
Purchase of premises and equipment		(2,208	)		(2,876	)
Capitalization of costs for foreclosed assets		—			(69	)
Proceeds from sales of foreclosed assets		(1,026	)		273
Net cash used by investing activities		(83,103	)		(108,415	)
Financing Activities
Net increase in deposits		74,187			111,136
Net increase (decrease) in short-term borrowings		(9,792	)		763
Net increase in long-term debt		19,000			5,000
Proceeds from exercise of stock options		210			331
Excess tax benefits from stock options exercised		160			545
Cash dividends paid		(1,457	)		(1,262	)
Net cash provided by financing activities		82,308			116,513
Net increase in cash and cash equivalents		6,701			11,572
Cash and cash equivalents, beginning of period		21,054			24,697
Cash and cash equivalents, end of period	$	27,755		$	36,269

See accompanying notes.

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BNC BANCORP

Notes to Consolidated Financial Statements

NOTE A - BASIS OF PRESENTATION

In management’s opinion, the financial information, which is unaudited, reflects all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the financial information as of and for the three-month and six-month periods ended June 30, 2008 and 2007, in conformity with accounting principles generally accepted in the United States of America. The consolidated financial statements include the accounts of BNC Bancorp (the “Company”) and its wholly-owned subsidiary Bank of North Carolina (the “Bank”). All significant intercompany transactions and balances have been eliminated in consolidation.

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements, as well as the amounts of income and expense during the reporting period. Actual results could differ from those estimates. Operating results for the three-month and six-month periods ended June 30, 2008 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2008.

The organization and business of the Company, accounting policies followed by the Company and other relevant information are contained in the notes to the consolidated financial statements filed as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007. This quarterly report should be read in conjunction with the Annual Report.

NOTE B - COMMITMENTS

At June 30, 2008, loan commitments were as follows (in thousands):

Commitments to extend credit	$	74,913
Undisbursed lines of credit		120,172
Letters of credit		17,042
Commitments to sell loans held for sale		446

NOTE C - NET INCOME PER SHARE

Basic and diluted net income per share has been computed based on the weighted average number of shares outstanding during each period after adjusting for a 10% stock dividend that was distributed on January 22, 2007. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares and restricted stock had been issued, as well as any adjustment to income that would result from the assumed issuance.

The weighted average numbers of shares outstanding or assumed to be outstanding are summarized below:

	Three Months Ended June 30,		Six Months Ended June 30,
	2008	2007	2008	2007
Weighted average number of common shares used in computing basic net income per share	7,299,672	6,848,914	7,289,160	6,824,935
Effects of dilutive stock options and restricted stock	111,050	239,264	127,752	255,986
Weighted average number of common shares and dilutive potential common shares used in computing diluted net income per share	7,410,722	7,088,178	7,416,912	7,080,921

For the quarter ended June 30, 2008, there were 89,375 options that were anti-dilutive because the exercise price exceeded the average share value for the quarter.

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BNC BANCORP

Notes to Consolidated Financial Statements

NOTE D - FAIR VALUE MEASUREMENT

On January 1, 2008, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements,” which defines fair value, establishes a framework for measuring fair value under accounting principles generally accepted in the United States, and enhances disclosures about fair value measurements. The Company elected not to delay the application of SFAS No. 157 to nonfinancial assets and nonfinancial liabilities, as allowed by Financial Accounting Standards Board (“FASB”) Staff Position SFAS 157-2. SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value and, therefore, does not expand the use of fair value in any new circumstances. Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS No. 157 clarifies that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. SFAS No. 157 requires fair value measurements to be separately disclosed by level within the fair value hierarchy. Under SFAS No. 157, the Company bases fair values on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. For assets and liabilities recorded at fair value, it is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy in SFAS No. 157.

Fair value measurements for assets and liabilities where there exists limited or no observable market data and, therefore, are based primarily upon estimates, are often calculated based on the economic and competitive environment, the characteristics of the asset or liability and other factors. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future values.

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available-for-sale and derivatives are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

Under SFAS No. 157, the Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 — Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. The Company has no Level 1 assets or liabilities at June 30, 2008.

Level 2 — Valuations are obtained from readily available pricing sources via independent providers for market transactions involving similar assets or liabilities. The Company’s principal market for these securities is the secondary institutional markets and valuations are based on observable market data in those markets. Level 2 securities include U. S. Government agency obligations, state and municipal bonds and mortgage-backed securities.

Level 3 — Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. Level 3 financial instruments consist of the Company’s derivative financial instruments. The Company obtains pricing for these instruments from third parties who have experience in valuing these types of securities.

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BNC BANCORP

Notes to Consolidated Financial Statements

NOTE D - FAIR VALUE MEASUREMENT (Continued)

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

Investment Securities Available-for-Sale

Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Loans Held for Sale

Loans held for sale are carried at the lower of cost or market value. The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, the Company classifies loans subjected to nonrecurring fair value adjustments as Level 2. There were no fair value adjustments related to the $446,000 of loans held for sale at June 30, 2008.

Loans

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with SFAS No. 114, “Accounting by Creditors for Impairment of a Loan.” The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At June 30, 2008, substantially all of the total impaired loans were evaluated based on the fair value of the collateral. In accordance with SFAS No. 157, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3. Impaired loans totaled $8.7 million at June 30, 2008. Of such loans, $8.4 million had specific loss allowances aggregating $1.3 million at that date.

Derivative Assets and Liabilities

Derivative instruments held or issued by the Company for risk management purposes are traded in over-the-counter markets where quoted market prices are not readily available. For those derivatives, the Company measures fair value using models that use primarily market observable inputs, such as yield curves and option volatilities, and include the value associated with counterparty credit risk. The Company classifies derivatives instruments held or issued for risk management purposes as Level 2. As of June 30, 2008 the Company’s derivative instruments consist solely of interest rate swaps.

Foreclosed Assets

Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the foreclosed asset as nonrecurring Level 2. When an appraised value is not available or management determines the

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BNC BANCORP

Notes to Consolidated Financial Statements

fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the foreclosed asset as nonrecurring Level 3. There were no fair value adjustments related to foreclosed real estate of $1.8 million at June 30, 2008.

NOTE D - FAIR VALUE MEASUREMENT (Continued)

Goodwill and Other Intangible Assets

Goodwill and identified intangible assets are subject to impairment testing. When appropriate, a projected cash flow valuation method is used in the completion of impairment testing. This valuation method requires a significant degree of management judgment. In the event the projected undiscounted net operating cash flows are less than the carrying value, the asset is recorded at fair value as determined by the valuation model. As such, the Company classifies goodwill and other intangible assets subjected to nonrecurring fair value adjustments as Level 3. There were no fair value adjustments related to goodwill of $26.1 million and other intangible assets of $1.9 million at June 30, 2008.

Below is a table that presents information about certain assets and liabilities measured at fair value on a recurring basis:

					Fair Value Measurements at June 30, 2008, Using
Description	Total Carrying Amount in The Consolidated Balance Sheet 6/30/2008		Assets/Liabilities Measured at Fair Value 6/30/2008		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities	$	94,175	$	94,175	$	—	$	94,175	$	—
Interest rate swaps		2,349		2,349		—		2,349		—

NOTE E - OTHER RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB ratified the consensuses reached by the FASB’s Emerging Issues Task Force (“EITF”) relating to EITF 06-4 “Accounting for the Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements”. EITF 06-4 states that an employer accounting for endorsement split-dollar life insurance arrangements that provide a benefit to an employee that extends to postretirement periods should recognize a liability for future benefits in accordance with SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions”, or Accounting Principles Board (“APB”) Opinion No. 12, “Omnibus Opinion—1967”. The Company adopted EITF 06-4 on January 1, 2008, and in connection therewith recorded a liability of $959,000 as a reduction of retained earnings. Subsequent increases in this liability will be reflected as an expense in determining operating results.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS No. 159 allows entities to measure financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Unrealized gains and losses on items for which the fair value option has been elected must be reported in earnings at each subsequent reporting date. The fair value option can be applied instrument by instrument, however the election is irrevocable. The Company’s adoption of SFAS No. 159 on January 1, 2008 had no financial statement impact because the Company did not elect the fair value option for any of its financial assets or liabilities.

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BNC BANCORP

Notes to Consolidated Financial Statements

NOTE E - OTHER RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

In December 2007, the FASB issued SFAS No. 141(revised 2007), “Business Combinations,” (“SFAS No. 141(R)”), which replaces SFAS No. 141. SFAS No. 141(R) establishes principles and requirements for recognition and measurement of assets, liabilities and any noncontrolling interest acquired due to a business combination. SFAS No. 141(R) expands the definitions of a business and a business combination, resulting in an increased number of transactions or other events that will qualify as business combinations. Under SFAS No. 141(R) the entity that acquires the business (the “acquirer”) will record 100 percent of all assets and liabilities of the acquired business, including goodwill, generally at their fair values. As such, an acquirer will not be permitted to recognize the allowance for loan losses of the acquiree. SFAS No. 141(R) requires the acquirer to recognize goodwill as of the acquisition date, measured as a residual. In most business combinations, goodwill will be recognized to the extent that the consideration transferred plus the fair value of any noncontrolling interests in the acquiree at the acquisition date exceeds the fair values of the identifiable net assets acquired. Under SFAS No. 141(R), acquisition-related transaction and restructuring costs will be expensed as incurred rather than treated as part of the cost of the acquisition and included in the amount recorded for assets acquired. SFAS No. 141(R) is effective for fiscal years beginning after December 15, 2008. Accordingly, for acquisitions completed after December 31, 2008, the Company will apply the provisions of SFAS No. 141(R).

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51,” which defines noncontrolling interest as the portion of equity in a subsidiary not attributable, directly or indirectly, to the parent. SFAS No. 160 requires the ownership interests in subsidiaries held by parties other than the parent (previously referred to as minority interest) to be clearly presented in the consolidated statement of financial position within equity, but separate from the parent’s equity. The amount of consolidated net income attributable to the parent and to any noncontrolling interest must be clearly presented on the face of the consolidated statement of income. Changes in the parent’s ownership interest while the parent retains its controlling financial interest (greater than 50 percent ownership) are to be accounted for as equity transactions. Upon a loss of control, any gain or loss on the interest sold will be recognized in earnings. Additionally, any ownership interest retained will be remeasured at fair value on the date control is lost, with any gain or loss recognized in earnings. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008. Accordingly, the Company will adopt the provisions of SFAS No. 160 in the first quarter 2009. The Company does not expect the adoption of the provisions of SFAS No. 160 to have a material effect on the its financial condition and results of operations.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133.” SFAS No. 161 applies to all derivative instruments and related hedged items accounted for under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 161 requires entities to provide greater transparency about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, results of operations and cash flows. To meet those objectives, SFAS No. 161 requires (1) qualitative disclosures about objectives for using derivatives by primary underlying risk exposure (e.g., interest rate, credit or foreign exchange rate) and by purpose or strategy (fair value hedge, cash flow hedge, net investment hedge, and non-hedges), (2) information about the volume of derivative activity in a flexible format that the preparer believes is the most relevant and practicable, (3) tabular disclosures about balance sheet location and gross fair value amounts of derivative instruments, income statement and other comprehensive income location of gain and loss amounts on derivative instruments by type of contract, and (4) disclosures about credit-risk related contingent features in derivative agreements. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Accordingly, the Company will adopt the provisions of SFAS No. 161 in the first quarter 2009. The Company does not expect the adoption of the provisions of SFAS No. 161 to have a material effect on the its financial condition and results of operations.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations and cash flows.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q may contain certain forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statement will include words such as we “believe,” “anticipate,” “expect” or words of similar meaning. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those currently anticipated, including general and local economic conditions; changes in interest rates, deposit flows, loan demand, real estate values and competition; changes in accounting principles, policies or guidelines; changes in legislation or regulation; and other competitive, technological, governmental and regulatory factors affecting our operations, pricing, products, and services.

Management’s discussion and analysis is intended to assist readers in understanding and evaluating our consolidated financial condition and results of operations. This discussion should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2007.

We are a commercial bank holding company that was incorporated on December 16, 2002. The accompanying consolidated financial statements include the accounts and transactions of BNC Bancorp and its wholly owned subsidiary, Bank of North Carolina. All significant intercompany transactions and balances are eliminated in consolidation.

Bank of North Carolina (the “Bank”) was incorporated and began banking operations in 1991. The Bank is engaged in commercial banking predominantly in Davidson, Randolph and Guilford Counties, North Carolina, and to a lesser extent, Forsyth, Cabarrus, Iredell and Rowan Counties, North Carolina. The Bank is operating under the banking laws of North Carolina and the rules and regulations of the Federal Deposit Insurance Corporation (FDIC) and the North Carolina Commissioner of Banks. The Bank’s primary source of revenue is derived from loans to customers, who are predominantly individuals and small to medium size businesses in Davidson, Forsyth, Guilford, Randolph, Cabarrus, Iredell and Rowan Counties.

Financial Condition at June 30, 2008 and December 31, 2007

During the six-month period ending June 30, 2008, our total assets increased by $83.7 million to $1.21 billion from $1.13 billion at December 31, 2007. At June 30, 2008, our loans totaled $999.2 million, an increase of $66.6 million, or 7.1%, during the first six months of the year. Increases in funding through deposits and borrowings were consistent with our loan growth for the six months. Total liquid assets, which include cash and cash equivalents and securities available for sale, ended the quarter at 10.7 % of total assets, or $130.2 million, a $22.5 million increase from the $107.7 reported at December 31, 2007. At June 30, 2007, premises and equipment, net of depreciation, increased by $1.5 million during the six months as we continue to invest in our Company’s branch office infrastructure, primarily the new office in High Point and the limited service facility in Mooresville.

Deposits continue to be our primary funding source. At June 30, 2008, deposits totaled $929.3 million, an increase of $74.2 million, or 8.7%, from year-end 2007. This change was due to an increase of $50.1 million in our CD totals greater than $100,000, predominantly from wholesale sources, and a $49.2 million increase in local time deposits less than $100,000. In addition, we continue to utilize borrowings to support balance sheet management and growth. We had $120.7 million of long-term debt outstanding at June 30, 2008, compared to $101.7 million outstanding at year-end 2007. During the period ended June 30, 2008, short-term borrowings decreased by $9.8 million to $71.1 million. With short-term CD rates elevated relative to Libor swap rates, management has chosen to utilize borrowings through correspondents and the Federal Home Loan Board (FHLB), which have tended to be less expensive funding sources. During the first six months of 2008 much of the large overnight borrowing position at the FHLB at the end of 2007 has been refinanced into $60 million of longer term convertible advances. All of these convertible advances will become callable within the next twelve months. Short-term borrowings consist of FHLB term advances with remaining maturities of less than one year, Federal funds purchased from correspondent banks and securities sold under repurchase agreements.

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Our capital position remains above all necessary regulatory thresholds to be considered well capitalized. At June 30, 2008, our shareholders’ equity totaled $86.1 million, a decrease of $237,000 from the December 31, 2007 balance. The changes in shareholders’ equity were an increase in net income for the six-month period in the amount of $2.6 million, a decrease in the unrealized gains on securities and off balance sheet derivative contracts of $843,000, mostly offset by the cash dividends paid to shareholders and the one time retroactive adjustment for the new accounting pronouncement on the recognition of post retirement insurance obligations. At June 30, 2008, the Bank was considered to be “well capitalized” while the Company was categorized as “adequately capitalized” as such terms are defined in applicable regulations.

Results of Operations for the

Three Months Ended June 30, 2008 and 2007

Net Income. Net income for the three months ended June 30, 2008 was $915,000, a decrease of $1.2 million from net income of $2.1 million for the same three-month period in 2007. Net income per share was $.12 diluted for the three months ended June 30, 2008, a decrease from the $.30 reported for the same period in 2007. The Company experienced strong growth, with total assets averaging $1.20 billion during the current three-month period as compared to $1.01 billion in the prior year period, an increase of $185.4 million, or 18.3%, largely as a result of the continued expansion of our franchise into new locations and the ongoing efforts to attract experienced bankers to our existing offices. In September of 2007 the Company moved into their permanent banking facility in Harrisburg, and in October of 2007 the Mooresville loan production office opened. Increases in net interest income and non-interest income for the quarter ended June 30, 2008 of $143,000 and $318,000, respectively, failed to cover the increase of $1.98 million in non-interest expenses.

Net Interest Income. Net interest income increased by $143,000, or 1.8%, to $8.2 million for the three months ended June 30, 2008. Our total interest income benefited from strong growth in the level of average earning assets, primarily in the loan portfolio, however this growth was offset by a declining net interest margin as a result of rate cuts initiated by the Federal Reserve. Average interest-earning assets for the current three-month period amounted to $1.09 billion, an increase of 18.7% compared with the same period in 2007. The average tax equivalent yield on total interest-earning assets for the current three month period was 6.51%, a 162 basis point decrease from the 8.13% in the second quarter of 2007 that reflects the downward trend in interest rates from period to period.

Average total interest-bearing liabilities increased by $171.5 million, or 19.8%, consistent with our increase in interest-earning assets. Our average cost of total interest-bearing liabilities decreased by 120 basis points from 4.68% to 3.48%, as the Federal Reserve sharply cut rates in the fourth quarter of 2007 and the first quarter of 2008. For the three months ended June 30, 2008, our tax equivalent net interest spread was 3.03% and our tax equivalent net interest margin was 3.19%. For the three months ended June 30, 2007, our tax equivalent net interest rate spread was 3.46%, and our tax equivalent net interest margin was 3.71%.

Provision for Loan Losses. The provision for loan losses for the three months ended June 30, 2008 was $1.15 million, representing an increase of $500,000, or 76.9%, from the $650,000 provision for the three months ended June 30, 2007. Net loan charge-offs were $893,000 during the three months ended June 30, 2008, as compared with net loan charge-offs of $155,000 in the same period of 2007. The level of our non-performing assets at June 30, 2008 amounted to $10.8 million, 0.89% of total assets compared to 0.31% at June 30, 2007. The level of our allowance expressed as a percentage of gross loans decreased from 1.28% at June 30, 2007 to 1.25% at the end of the current quarter.

Non-Interest Income. For the three months ended June 30, 2008, non-interest income increased $318,000, or 24.3%, to $1.63 million from $1.31 million reported for the same period in the prior year. This increase resulted principally from gains on the sale of investment securities of $236,000 and increases in the cash surrender value of life insurance. All other non-interest income categories remained relatively stable, with minimal changes reported.

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Non-Interest Expense. We strive to maintain levels of non-interest expense that we believe are appropriate given the nature of our operations and the investments in personnel and facilities that have been necessary to generate growth. One of the keys to the momentum we have experienced in our lending activities has been our continuous investment in our banking franchise, both in people and locations. As we strive to maintain this momentum, we will incur costs associated with investments in people, facilities, and technology that we anticipate will benefit our shareholders as these investments reach their potential. In July of 2007 we leased a 14,000 square foot office building that houses all of our administrative functions, including executive management, accounting, compliance, marketing, human resources, and training. In addition, over the past twelve months we have moved our Harrisburg office into a new permanent facility, opened a loan production office in Mooresville, and continued to add bankers at most of our offices.

For the three months ended June 30, 2008, total non-interest expenses increased $1.98 million, primarily as a result of growth achieved from period to period, increases in FDIC insurance premiums, a one-time separation of employment settlement with a former executive officer, professional fees and the regulatory costs associated with the compliance with the Sarbanes Oxley Act of 2002 (Sarbanes Oxley) compliance. The largest component of non-interest expense for the current period was personnel expense. Salaries and employee benefits expense increased by $819,000, or 22.8%, to $4.4 million for the current year period compared to $3.6 million for the same period in the prior year. The largest contributor to this increase related to the $650,000 in charges incurred in the separation of employment with a former executive officer. These charges included a $558,000 severance payment under his employment contract and a $92,000 charge relating to post retirement split dollar benefits. This was a mutual separation and will contribute significant cost savings in future quarters. The move into the permanent facility in Harrisburg, the opening of a loan production office in Mooresville, adding bankers to our existing offices to further leverage our investment in facilities has an effect on our personnel expense. Insurance, professional and other services increase by 65.5% as a result of increasing costs associated with higher audit and accounting fees, and greater regulatory compliance and reporting obligations. Due to the FDIC reinstating insurance assessments, during the second quarter of 2008 the Company incurred $160,000 in FDIC insurance premiums versus $25,000 for the same period in 2007.

Also in the second quarter of 2008, the Company took a one-time charge of $350,000 on a single family residential property in OREO where structural issues resulted in the sales price being 40% below comparable homes in the subject neighborhood. We currently have executed contracts at carrying value or above on $1.5 million of the remaining $1.8 million in OREO. All other non-interest expense categories remained relatively stable, with minimal changes reported.

Provision for Income Taxes. The provision for income taxes, as a percentage of income before income taxes, was 8.4% and 29.7%, respectively, for the three months ended June 30, 2008 and 2007. These effective rates are lower than the blended federal/North Carolina statutory rate of 38.55% primarily due to tax-exempt income from municipal bonds and bank-owned life insurance. During the second quarter of 2008, because non-taxable income from municipal bonds and bank owned life insurance represented a substantially larger portion of income before income taxes compared to prior period, the effective tax rate was reduced to the 8.4%.

Results of Operations for the

Six Months Ended June 30, 2008 and 2007

Net Income. Net income for the six months ended June 30, 2008 was $2.6 million, a decrease of $1.4 million from net income of $4.0 million for the same six-month period in 2007. Net income per share was $.35 diluted for the six months ended June 30, 2008, a decrease from the $.57 reported for the same period in 2007. We have experienced strong growth, with total assets averaging $1.18 billion during the current six-month period as compared to $987.1 million in the prior year period, an increase of $193.3 million, or 19.6%, largely as a result of the continued expansion of our franchise into new locations and the ongoing efforts to attract experienced bankers to our existing offices. In September of 2007 the Company moved into their permanent banking facility in Harrisburg, and in October of 2007 the Mooresville loan production office opened. Increases in net interest income of $657,000 and non-interest income of $489,000 for the six-month period ended June 30, 2008 failed to cover the increase of $2.8 million in non-interest expenses.

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Net Interest Income. Net interest income increased by $675,000, or 4.3%, to $16.4 million for the six months ended June 30, 2008. Our total interest income benefited from strong growth in the level of average earning assets, primarily in the loan portfolio, however this growth was offset by a declining net interest margin as a result of rate cuts initiated by the Federal Reserve. Average interest-earning assets for the current six-month period amounted to $1.07 billion, an increase of 20.1% compared with the same period in 2007. The average tax equivalent yield on total interest-earning assets for the current six month period was 6.84%, a 128 basis point decrease from the 8.12% in the first six months of 2007 that reflects the downward trend in interest rates from period to period.

Average total interest-bearing liabilities increased by $175.3 million, or 20.9%, consistent with our increase in interest-earning assets. Our average cost of total interest-bearing liabilities decreased by 83 basis points from 4.62% to 3.79%, as the Federal Reserve sharply cut rates in the fourth quarter of 2007 and the first quarter of 2008. For the six months ended June 30, 2008, our tax equivalent net interest spread was 3.05% and our tax equivalent net interest margin was 3.24%. For the six months ended June 30, 2007, our tax equivalent net interest rate spread was 3.50%, and our tax equivalent net interest margin was 3.75%.

Provision for Loan Losses. The provision for loan losses for the six months ended June 30, 2008 was $1.88 million, representing an increase of $675,000, or 56.3%, from the $1.2 million provision for the six months ended June 30, 2007. Net loan charge-offs were $1.2 million during the six months ended June 30, 2008, as compared with net loan charge-offs of $357,000 in the same period of 2007. The level of our non-performing assets at June 30, 2008 amounted to $10.8 million, 0.89% of total assets compared to 0.31% at June 30, 2007. The level of our allowance expressed as a percentage of gross loans decreased from 1.28% at June 30, 2007 to 1.25% at the end of the current quarter.

Non-Interest Income. For the six months ended June 30, 2008, non-interest income increased $489,000, or 19.5%, to $3.0 million from $2.5 million reported for the same period in the prior year. This increase resulted principally from gains on the sale of investment securities of $236,000 and increases in the cash surrender value of life insurance. All other non-interest income categories remained relatively stable, with minimal changes reported.

Non-Interest Expense. We strive to maintain levels of non-interest expense that we believe are appropriate given the nature of our operations and the investments in personnel and facilities that have been necessary to generate growth. One of the keys to the momentum we have experienced in our lending activities has been our continuous investment in our loan platform, both in people and locations. As we strive to maintain this momentum, we will incur costs associated with investments in people, facilities, and technology that we anticipate will benefit our shareholders as these investments reach their potential. In July of 2007 we leased a 14,000 square foot office building that houses all of our administrative functions, including executive management, accounting, compliance, marketing, human resources, and training. In addition, over the past twelve months we have moved our Harrisburg office into a new permanent facility, opened a loan production office in Mooresville, and continued to add bankers at most of our offices.

For the six months ended June 30, 2008, total non-interest expenses increased $2.8 million, primarily as a result of growth achieved from period to period, increases in FDIC insurance premiums, a one-time separation of employment settlement with a former executive officer, professional fees and the regulatory costs associated with Sarbanes Oxley compliance. The largest component on non-interest expense for the current period was personnel expense. Salaries and employee benefits expense increased by $1.2 million, or 16.7%, to $8.4 million for the current year period compared to $7.2 million for the same period in the prior year. The largest contributor to this increase related to the $650,000 in charges incurred in the separation of employment with a former executive officer. These charges included a $558,000 severance payment under his employment contract and a $92,000 charge relating to post retirement split dollar benefits. This was a mutual separation and will contribute significant cost savings in future quarters. The move into the permanent facility in Harrisburg, the opening of a loan production office in Mooresville, adding bankers to our existing offices to further leverage our investment in facilities has an effect on our personnel expense. Insurance, professional and other services increase by 67.0% as a result of increasing costs associated with higher audit and accounting fees, and greater regulatory compliance and reporting obligations. Due to the FDIC reinstating insurance assessments, during the second quarter of 2008 the Company incurred $320,000 in FDIC insurance premiums versus $25,000 for the same period in 2007.

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Also in the second quarter of 2008, the Company took a one-time charge of $350,000 on a single family residential property in OREO where structural issues resulted in the sales price being 40 percent below comparable homes in the subject neighborhood. Of the remaining $1.8 million in OREO, we currently have executed contracts at carrying value or above on $1.5 million. All other non-interest expense categories remained relatively stable, with minimal changes reported.

Provision for Income Taxes. The provision for income taxes, as a percentage of income before income taxes, was 23.0% and 29.7%, respectively, for the six months ended June 30, 2008 and 2007. These effective rates are lower than the blended federal/North Carolina statutory rate of 38.55% principally due to tax-exempt income from municipal bonds and bank-owned life insurance. During the first half of 2008, because non-taxable income from municipal bonds and bank owned life insurance represented a substantially larger portion of income before income taxes compared to prior periods, the effective tax rate was reduced to the 23.0%.

LIQUIDITY AND CAPITAL RESOURCES

Market and public confidence in our financial strength and in the strength of financial institutions in general will largely determine our access to appropriate levels of liquidity. This confidence is significantly dependent on our ability to maintain sound asset quality and appropriate levels of capital resources.

Liquidity is defined as our ability to meet anticipated customer demands for funds under credit commitments and deposit withdrawals at a reasonable cost and on a timely basis, pay operating expenses and meet regulatory liquidity requirements. Management measures our liquidity position by giving consideration to both on-and off-balance sheet sources of, and demands for, funds on a daily and weekly basis.

Sources of liquidity include cash and cash equivalents, net of federal requirements to maintain reserves against deposit liabilities, investment securities eligible for pledging to secure borrowings from dealers and customers pursuant to securities sold under repurchase agreements; investments available for sale; loan repayments; loan sales; deposits, both from our local markets and the wholesale markets; borrowings from the FHLB; and borrowings from correspondent banks under unsecured overnight federal funds credit lines and secured lines of credit. In addition to interest rate-sensitive deposits, the Bank’s primary demand for liquidity is anticipated funding under credit commitments to customers.

Because of our anticipated and continued growth, we maintain an unusually high position of liquidity in the form of cash and due from banks, interest-earning bank deposits and investment securities relative to prior periods. These aggregated $130.2 million at June 30, 2008 compared to $107.7 million at December 31, 2007. Supplementing customer deposits as a source of funding, we have the ability to borrow up to $140 million from the FHLB of Atlanta, with $139.3 million outstanding at June 30, 2008. We believe that our combined aggregate liquidity position is sufficient to meet the funding requirements of loan demand and deposit maturities and withdrawals in the near term.

At June 30, 2008, our Tier I risk-based capital ratio for the Bank was 8.40% and all other capital ratios exceeded the minimums established for a well-capitalized bank by regulatory measures. Total risk-based capital ratio at the Company was 9.80%, thus classifying the Company at “satisfactorily capitalized” for regulatory purposes.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk reflects the risk of economic loss resulting from adverse changes in market prices and interest rates. The risk of loss can be reflected in diminished current market values and/or reduced potential net interest income in future periods.

The Company’s primary market risk is interest rate risk. Interest rate risk is the result of differing maturities or repricing intervals of interest-earning assets and interest-bearing liabilities and the fact that rates on these financial instruments do not change uniformly. These conditions may impact the earnings generated by the Company’s interest-earning assets or the cost of its interest-bearing liabilities, thus directly impacting the Company’s overall earnings. The Company’s management actively monitors and manages interest rate risk. One way this is accomplished is through the development of, and adherence to, the Company’s asset/liability policy. This policy sets forth management’s strategy for matching the risk characteristics of the Company’s interest-earning assets and interest-bearing liabilities so as to mitigate the effect of changes in the rate environment. The Company’s market risk profile has not changed significantly since December 31, 2007.

Item 4. - Controls and Procedures

(a) As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e)) pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective.

(b) No change in the Company’s internal control over financial reporting occurred during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2007.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no purchases of Company’s common stock during the three months ended June 30, 2008 made by or on behalf of the Company or any “affiliated purchases” (as defined in Rule 10b-18(a) (3) under the Securities Exchange Act of 1934).

The maximum amount of shares that may be purchased in the stock repurchase program is limited to 10% of the outstanding common stock within any 12 month period. As of June 30, 2008, the maximum number of shares able to be purchased by the Company amounted to 691,045 shares, with 218,981 repurchased. On Friday, July 11, 2008, the Company announced that the Board of Directors has authorized the repurchase of up to $1 million of its common stock under the existing stock repurchase plan adopted in May 2003. Under the terms of the stock repurchase plan, BNC Bancorp will be able to repurchase shares of its outstanding common stock in the open market or in privately negotiated transactions at appropriate times to allow it to enhance the value of its stock for its shareholders in concert with its ongoing emphasis on managing its capital position.

Item 4. Submission of Matters to a Vote of Securities Holders

The Annual Meeting of Shareholders was held on May 20, 2008. Of the 7,285,267 shares entitled to vote at the meeting, 5,699,102 voted. The following matters were voted on at the meeting:

Proposal 1: The election of five persons to serve as Directors for three-year terms or until their successors are duly elected and qualify. Votes for each nominee were as follows:

Three-year terms until the Annual Meeting of Shareholders in 2011:

Name	For	Withheld
W. Groome Fulton, Jr.	5,679,882	19,220
Joseph M. Coltrane, Jr.	5,680,028	19,074
Larry L. Callahan	5,685,556	13,546
Richard F. Wood	5,595,373	103,729
Ralph N. Strayhorn III	5,666,795	32,307

Proposal 2: To ratify the appointment of Cherry Bekaert & Holland LLP as the Company’s independent auditors for the year ending December 31, 2008.

For	Against	Abstain
5,679,561	6,595	12,946

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Item 6. Exhibits

Exhibit No.	Description
Exhibit (2)	Agreement and Plan of Reorganization and Merger dated February 6, 2006, incorporated herein by reference to Exhibit (10) to the Form 425 filed with the SEC on February 6, 2006.
Exhibit (3)(i)	Articles of Incorporation, incorporated herein by reference to Exhibit (3) (i) to the Form 8-K - Rule 12g-3, filed with the SEC on December 17, 2002.
Exhibit (3)(ii)	Bylaws, incorporated herein by reference to Exhibit (3) (ii) to the Form 8-K - Rule 12g-3, filed with the SEC on December 17, 2002.
Exhibit (4)	Form of Stock Certificate, incorporated herein by reference to the Form 8-K - Rule 12g-3, filed with the SEC on December 17, 2002.
Exhibit (10)(i)(a)	Amended Employment Agreement dated as of December 18, 2007 among the Company, the Bank and W. Swope Montgomery, Jr., incorporated herein by reference to Exhibit 10(i) (a) to the Form 8-K filed with the SEC on December 27, 2007.
Exhibit (10)(i)(b)	Amended Employment Agreement dated as of December 18, 2007 among the Company, the Bank and Richard D. Callicutt, II, incorporated herein by reference to Exhibit 10(i) (b) to the Form 8-K filed with the SEC on December 27, 2007.
Exhibit (10)(i)(c)	Amended Employment Agreement dated as of December 18, 2007 among the Company, the Bank and David B. Spencer, incorporated herein by reference to Exhibit 10(i) (c) to the Form 8-K filed with the SEC on December 27, 2007.
Exhibit (10)(ii)(a)	Amended Salary Continuation Agreement dated as of December 18, 2007 between the Bank and W. Swope Montgomery, Jr., incorporated herein by reference to Exhibit 10(ii) (a) to the Form 8-K filed with the SEC on December 27, 2007.
Exhibit (10)(ii)(b)	Amended Salary Continuation Agreement dated as of December 18, 2007 between the Bank and Richard D. Callicutt, II, incorporated herein by reference to Exhibit 10(ii) (b) to the Form 8-K filed with the SEC on December 27, 2007.
Exhibit (10)(ii)(c)	Amended Salary Continuation Agreement dated as of December 18, 2007 between the Bank and David B. Spencer, incorporated herein by reference to Exhibit 10(ii) (c) to the Form 8-K filed with the SEC on December 27, 2007.
Exhibit (10)(iii)	Bank of North Carolina Stock Option Plan for Directors, incorporated by reference to Exhibit 10(iii) to the Form F-1, filed with the FDIC on September 1, 1992.
Exhibit (10)(iv)	Bank of North Carolina Stock Option Plan for Key Employees, incorporated by reference to Exhibit 10(iv) of the Form F-1, filed with the FDIC on September 1, 1992.
Exhibit (10)(v)	Directors Deferred Compensation Plan, incorporated by reference to Exhibit 10(v) of the Form F-2 filed with the FDIC.
Exhibit (10)(vi)(a)	Amended Endorsement Split Dollar Agreement dated December 18, 2007 between the Bank and W. Swope Montgomery, Jr., incorporated herein by reference to Exhibit (10)(vi)(a) to the Form 8-K filed with the SEC on December 27, 2007.
Exhibit (10)(vi)(b)	Amended Endorsement Split Dollar Agreement dated December 18, 2007 between the Bank and Richard D. Callicutt II, incorporated herein by reference to Exhibit (10)(vi)(b) to the Form 8-K filed with the SEC on December 27, 2007.
Exhibit (10)(vi)(c)	Amended Endorsement Split Dollar Agreement dated December 18, 2007 between the Bank and David b. Spencer, incorporated herein by reference to Exhibit (10)(vi)(c) to the Form 8-K filed with the SEC on December 27, 2007.

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Exhibit (10)(vii)	BNC Bancorp Omnibus Stock Ownership and Long Term Incentive Plan incorporated herein by reference to Exhibit (10) (vii) of Form 10-K filed with the SEC on June 30, 2005.
Exhibit (11)	Statement Re: Computation of Per Share Earnings (See the information in Note C).
Exhibit (31)	Rule 13a-14(a)\15d-14 (a) Certifications.
Exhibit (32)	Section 1350 Certification.

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SIGNATURES

Under the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BNC BANCORP
Date: August 11, 2008	By:	/s/ W. Swope Montgomery, Jr.
		W. Swope Montgomery, Jr.
		President and Chief Executive Officer
Date: August 11, 2008	By:	/s/ David B. Spencer
		David B. Spencer
		Chief Financial Officer

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