THOMASVILLE, N.C., Aug 01, 2008 /PRNewswire-FirstCall via COMTEX/ ----BNC Bancorp (Nasdaq: BNCN) today reported operating results for the quarter and six-month periods ended June 30, 2008.

(Logo: http://www.newscom.com/cgi-bin/prnh/20030917/BNCLOGO )

Total assets as of June 30, 2008 were $1.2 billion, an increase of 7.4 percent from the $1.13 billion at December 31, 2007, and a 13.4 percent increase compared with the $1.07 billion as of June 30, 2007. Total loans were $999.2 million, up 7.1 percent and 14.1 percent compared to total loans at December 31, 2007 and June 30, 2007, respectively.

For the quarter ended June 30, 2008, the Company reported a decline in net income of 56.8 percent to $915,000 from $2.1 million a year earlier. Diluted per-share earnings were $0.12, down 60.0 percent from the $0.30 reported for the second quarter of 2007. Adjusted for the one time pre-tax charges of $650,000 relating to the separation of employment settlement with a former executive officer, net income for the quarter was $1.3 million, or $0.18 per diluted share, a 36.7 percent and 39.7 percent decline respectively.

For the six-month period ended June 30, 2008, the Company reported net income of $2.62 million, a decrease of 35.2% when compared to the $4.04 million reported for the first six months of 2007. Diluted earnings per share decreased to $0.35 for the six-month period, compared to $0.57 reported for same period in 2007. Adjusted for the $650,000 pre-tax charge outline above, net income for the first six months of 2008 was $3.04 million, or $0.41 per diluted share, a 24.6 percent and 28.1 percent decline respectively.

Tax equivalent net interest income for the second quarter of 2008 increased $163,000 or 1.9 percent compared to the same three-month period in 2007. Components of the change in net interest income were: the increase in earning assets contributed a $1.18 million increase, while the reduction in net interest margin reduced net interest income by $1.02 million. The Company reported a tax equivalent net interest margin of 3.19% for the second quarter of 2008, compared to 3.29% for the first quarter of 2008, and 3.71% for the second quarter of 2007. The decrease in net interest margin over the last year resulted from the recent actions by the Federal Reserve to aggressively reduce key benchmark rates coupled by elevated short-term deposit rates.

W. Swope Montgomery, Jr., President and Chief Executive Officer, said, "While the results for the quarter were not on par with historical expectations, there are many positives, as well as obvious challenges, highlighted below."

-- Despite net interest margin declining from 3.71% in the second quarter of 2007 to 3.19% in the current quarter, tax equivalent net interest income increased by 1.9 percent when comparing corresponding quarters. The strong dynamics of our markets and the established following of our talented bankers continues to propel the growth of our Company despite the economic slowdown.

-- During the first half of 2008, we continued to recruit and attract seasoned bankers to further fortify and expand our support infrastructure and market coverage. We moved into a new office in Mooresville, and are preparing to open our second full-service office in High Point. We expect to open the new High Point office without additional FTE's; the staff will come from our existing employee base.

-- Because non-taxable income from municipal bonds and bank owned life insurance represent a substantially larger portion of income before income taxes, the effective tax rate for the quarter was 8.4 percent, down from 29.7 percent for the second quarter of 2007 and 29.0 percent for the first quarter of 2008. The effective tax rate was 23.0 percent for the first six months of 2008, down from 29.7 percent for the same period in 2007.

-- Increases in non-interest expense during the first six months were abnormally high, with much of the increase related to one-time events, or in areas where initiatives are underway to produce significant savings going forward, including the following:

1. One-time separation of employment charges: The Company incurred one-time contract resolution costs of $558,000, and a one-time post-retirement split dollar accrual equaled to $92,000. We anticipate this action will produce annual savings of approximately $400,000 going forward.

2. Legal fees: The Company incurred legal fees during the first half of 2008 of $150,000 more than for the comparable six month period in 2007. Much of this increase related to several one-time projects.

3. Accounting and Auditing: Expenses in these areas increased approximately $200,000 versus the first six months of 2007. To address this increase, BNC has recently added staff to its in-house audit department sufficient to handle most general and SEC regulatory related audit responsibilities going forward. We expect this move to result in a net savings of $200,000 annually in audit related costs. In addition, as a measure of prudence and caution, $50,000 of the increase in audit costs for the first six months of 2008 relates to greater third-party credit review and assessment. We anticipate this additional cost will be ongoing for the remainder of 2008.

4. FDIC insurance: The FDIC began reassessing premiums in the second quarter of 2007. After exhausting credits we incurred minimal charges in the first half of 2007, compared to charges for the first six months of 2008 of approximately $330,000.

5. Other Real Estate: 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.

"Despite the challenges facing our industry, management is continuously evaluating ways to make our Company stronger and more profitable. We are excited about the many strategic initiatives currently being implemented that should lead to stronger financial results in future periods. While Ralph Strayhorn, the President of SterlingSouth Bank prior to our acquisition in 2006, has been very instrumental in uniting our two organizations over the past two years, the separation was a mutual decision benefiting both parties. This settlement contributed significantly to an internal goal of identifying and extracting $1.5 million+ in annual non-interest expense savings. Another area of significant savings going forward will be from expenses associated with professional and service related fees. We have primarily utilized an "out-sourcing" approach for most data processing, audit, and financial reporting services. We are enhancing our internal infrastructure in certain of these areas which will provide significant cost savings going forward," said Montgomery.

Non-performing assets as a percentage of total assets at June 30, 2008 were at .89 percent, up from .54 percent as of December 31, 2007, and up from .31 percent at June 30, 2007. The allowance for loan and lease losses has increased $1.21 million, or 10.8 percent, from a year ago. The allowance for loan and lease losses of $12.45 million is 1.25 percent of June 30, 2008 total loans outstanding, up from 1.24 percent at the prior quarter end, and down from 1.28 percent in the second quarter last year. The second quarter provision for loan losses expense was $1.15 million, an increase of $500,000 from the same quarter in 2007. Net charge-offs for the quarter were $893,000, or at an annualized rate of 0.36 percent, an increase compared to the $155,000, or 0.08 percent level in the second quarter of 2007.

"As anticipated, we did see an increase in non-performing assets (NPA's) during the quarter and an uptick in the level of net charge-offs relative to historical averages," Montgomery continued. "The increase in NPA's for the quarter was primarily attributable to one large residential construction and development relationship of $4.5 million that was placed on non-accrual during the quarter. Based on recent appraisals and conversations with interested parties, we are confident that we have allocated sufficient reserves within our allowance for loan losses to cover potential losses. Our company is working very diligently during this challenging period to resolve each of the non-performing relationships and keep our charge-offs at manageable levels," Montgomery explained.

Montgomery continued, "There are challenges that our Company and our industry are facing which are new to us all. I am very proud of the way our entire team has rallied around our strategic initiatives, and adapted to the many changes necessary to continue to elevate performance in this environment. With capital markets seized up for financial institutions, we are fully aware that new capital will come primarily from internally generated earnings, and across our footprint and throughout our team we are committed to making an already efficient growth company even more so. We are in strong markets with a wealth of experience on the ground in each of these areas. Despite our efforts at creating greater efficiency, it's now more than ever we are delighted to have invested in the experienced and seasoned bankers that represent our company daily."

BNC Bancorp is the parent Company of Bank of North Carolina, a $1.2 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 stock is quoted in the Nasdaq Capital Market under the symbol "BNCN."

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

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 2008 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 in general and the strength of the local economies within North Carolina in which we conduct operations; the strength of the United States economy; 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, June 30, 2008 2007
   SUMMARY STATEMENTS OF OPERATIONS Interest income $17,182 $18,146 -5.3 % Interest expense 8,983 10,090 (11.0) Net interest
   income 8,199 8,056 1.8 Provision for loan losses 1,150 650 76.9 Net interest income after provision for loan losses 7,049
   7,406 (4.8) Noninterest income 1,625 1,307 24.3 Noninterest expense 7,675 5,700 34.7 Income before income tax expense 999
   3,013 (66.8) Provision for income taxes 84 895 (90.6) Net income 915 2,118 (56.8) PER SHARE DATA Earnings per share, basic
   $0.13 $0.31 -58.1% Earnings per share, diluted $0.12 0.30 (60.0) Weighted average common shares outstanding: Basic 7,299,672
   6,848,914 Diluted 7,410,722 7,088,178 PERFORMANCE RATIOS Return on average assets 0.31% 0.84% Return on average equity 4.20%
   11.44% Return on average tangible equity 6.20% 18.52% Net yield on earning assets (taxable equivalent) 3.19% 3.71% Average
   equity to average assets 7.29% 7.32% Ratio of net charge-offs to average loans, annualized 0.36% 0.08% QUARTERLY PERFORMANCE
   SUMMARY BNC BANCORP (Dollars in thousands, except per share data) (Unaudited) For the Six Months Ended June 30, June 30, 2008
   2007 % Change SUMMARY STATEMENTS OF OPERATIONS Interest income $35,584 $34,988 1.7 % Interest expense 19,193 19,272 (0.4)
   Net interest income 16,391 15,716 4.3 Provision for loan losses 1,875 1,200 56.3 Net interest income after provision for loan
   losses 14,516 14,516 0.0 Noninterest income 3,000 2,511 19.5 Noninterest expense 14,121 11,288 25.1 Income before income tax
   expense 3,395 5,739 (40.8) Provision for income taxes 780 1,704 (54.2) Net income 2,615 4,035 (35.2) PER SHARE DATA Earnings
   per share, basic $0.36 $0.59 -39.0% Earnings per share, diluted $0.35 $0.57 (38.6) Weighted average common shares outstanding:
   Basic 7,289,160 6,824,935 Diluted 7,416,912 7,080,921 PERFORMANCE RATIOS Return on average assets 0.45% 0.82% Return on average
   equity 6.05% 11.04% Return on average tangible equity 8.95% 17.95% Net yield on earning assets (taxable equivalent) 3.24%
   3.75% Average equity to average assets 7.36% 7.47% Allowance for loan losses as a % of total loans 1.25% 1.28% Non-performing
   assets to total assets, end of period 0.89% 0.31% Ratio of net charge-offs to average loans, annualized 0.25% 0.09% QUARTERLY
   PERFORMANCE SUMMARY BNC BANCORP (Dollars in thousands, except per share data) (Unaudited) For the Three Months Ended June
   30, March 31, Dec. 31, Sept. 30, June 30, Dec. 31, 2008 2008 2007 2007 2007 2006 SUMMARY STATEMENTS OF OPERATIONS Interest
   income $17,182 $18,402 $19,262 $19,420 $18,146 $16,616 Interest expense 8,983 10,210 11,003 10,990 10,090 8,509 Net interest
   income 8,199 8,192 8,259 8,430 8,056 8,107 Provision for loan losses 1,150 725 750 1,140 650 780 Net interest income after
   provision for loan losses 7,049 7,467 7,509 7,290 7,406 7,327 Noninterest income 1,625 1,375 1,483 1,255 1,307 1,152 Noninterest
   expense 7,675 6,446 6,839 5,941 5,700 5,540 Income before income tax expense 999 2,396 2,153 2,604 3,013 2,939 Provision for
   income taxes 84 696 600 754 895 878 Net income 915 1,700 1,553 1,850 2,118 2,041 Net interest income, as reported $8,199 $8,192
   $8,259 $8,430 $8,056 $8,107 Tax-equivalent adjustment 421 412 360 422 401 411 Net interest income, tax-equivalent 8,620 8,604
   8,619 8,852 8,457 8,518 PER SHARE DATA Earnings per share, basic $ 0.13 $0.23 $0.22 $0.27 $0.31 $0.30 Earnings per share,
   diluted 0.12 0.23 0.22 0.26 0.30 0.29 Weighted average common shares outstanding: Basic 7,299,672 7,278,648 6,914,320 6,895,012
   6,848,914 6,698,899 Diluted 7,410,722 7,422,815 7,097,902 7,093,801 7,088,178 7,026,623 PERFORMANCE RATIOS Return on average
   assets 0.31% 0.59% 0.56% 0.68% 0.84% 0.88% Return on average equity 4.20% 7.90% 7.61% 9.67% 11.44% 11.32% Return on average
   tangible equity 6.20% 11.73% 11.70% 15.44% 18.52% 19.13% Net yield on earning assets (taxable equivalent) 3.19% 3.29% 3.37%
   3.55% 3.71% 4.09% Average equity to average assets 7.29% 7.43% 7.29% 7.03% 7.32% 7.77% QUARTERLY PERFORMANCE SUMMARY BNC BANCORP
   (Dollars in thousands) (Unaudited) As of June 30, June 30, 2008 2007 % Change SELECTED BALANCE SHEET DATA End of period balances
   Total loans $999,207 $875,505 14.1 % Allowance for loan losses 12,455 11,243 10.8 Loans, net of allowance for loan losses
   986,752 864,262 14.2 Securities, available for sale 94,175 79,133 19.0 Total Assets 1,213,817 1,070,615 13.4 Deposits: Noninterest-bearing
   deposits 67,969 71,653 (5.1) Interest-bearing demand and savings 191,287 205,170 (6.8) CD's and other time deposits 670,070
   621,160 7.9 Total deposits 929,326 897,983 3.5 Borrowed Funds 191,849 92,149 108.2 Total interest-bearing liabilities 1,053,206
   918,479 14.7 Shareholders' Equity 86,145 74,970 14.9 As of June 30, March 31, Dec. 31, Sept. 30, June 30, Dec. 31, 2008 2008
   2007 2007 2007 2006 SELECTED BALANCE SHEET DATA End of period balances Total loans $ 999,207 $983,076 $932,562 $905,259 $875,505
   $774,664 Allowance for loan losses 12,455 12,197 11,784 11,479 11,243 10,400 Loans, net of allowance for loan losses 986,752
   970,879 920,778 893,780 864,262 764,264 Securities, available for sale 94,175 88,646 86,683 84,917 79,133 76,700 Total Assets
   1,213,817 1,186,172 1,130,112 1,098,263 1,070,615 951,731 Deposits: Noninterest- bearing deposits 67,969 72,647 67,552 69,399
   71,653 65,932 Interest-bearing demand and savings 191,287 208,639 216,896 216,865 205,170 189,624 CD's and other time deposits
   670,070 647,342 570,682 611,674 621,160 531,221 Total Deposits 929,326 928,628 855,130 897,938 897,983 786,777 Borrowed Funds
   191,849 163,663 182,641 117,482 92,149 86,386 Total interest- bearing liabilities 1,053,206 1,019,644 970,219 946,021 918,479
   807,231 Shareholders' Equity 86,145 86,776 86,392 78,242 74,970 72,523 QUARTERLY PERFORMANCE SUMMARY BNC BANCORP (Dollars
   in thousands) (Unaudited) For the Three Month Period Ended June 30, March 31, Dec. 31, Sept. 30, June 30, Dec. 31, 2008 2008
   2007 2007 2007 2006 SELECTED BALANCE SHEET DATA Quarterly average balances Loans, net of allowance for loan losses 982,923
   949,627 909,571 886,557 824,509 745,829 Securities, available for sale 91,068 88,336 81,632 84,064 75,982 72,504 Total earning
   assets 1,085,176 1,048,980 1,008,427 990,099 914,527 826,706 Total Assets 1,200,266 1,160,622 1,109,313 1,080,473 1,014,860
   922,335 Deposits: Noninterest-bearing deposits 70,805 73,139 68,992 68,204 69,438 70,140 Interest-bearing demand and savings
   197,135 214,563 215,630 215,094 202,839 186,793 CD's and other time deposits 658,980 592,452 590,648 619,084 563,500 495,338
   Total Deposits 926,920 880,154 875,270 902,382 835,777 752,271 Borrowed Funds 180,267 188,195 149,254 96,114 98,548 95,948
   Total interest- bearing liabilities 1,036,382 995,210 955,532 930,292 864,887 778,079 Shareholders' Equity 87,518 86,278 80,919
   75,931 74,258 71,752 

SOURCE BNC Bancorp

http://www.bankofnc.com 

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