UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )

 

Check the appropriate box:

Southcoast Financial Corporation

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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PROXY STATEMENT/PROSPECTUS

Proxy Statement of Southcoast Financial Corporation		Prospectus of BNC Bancorp

MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT

To the Shareholders of Southcoast Financial Corporation:

Southcoast Financial Corporation (“Southcoast”) will hold a special meeting of Southcoast shareholders on January 29, 2016, at 10:00 a.m., at the main office of Southcoast, 534 Johnnie Dodds Boulevard, Mt. Pleasant, South Carolina 29464. At the special meeting, you will be asked to vote on (1) the merger of Southcoast with and into BNC Bancorp (“BNC”) described in more detail herein, (2) the approval, on a non-binding advisory basis, of the compensation that certain executive officers of Southcoast will receive in connection with the merger pursuant to existing agreements or arrangements with Southcoast, and (3) the approval of a proposal to adjourn or postpone the special meeting, if necessary or appropriate, including to solicit additional proxies to approve the merger agreement.

On August 14, 2015, Southcoast entered into an Agreement and Plan of Merger, as amended September 15, 2015 (the “merger agreement”) with BNC that provides for the merger of the two holding companies. If approved by Southcoast shareholders, under the merger agreement, Southcoast will merge with and into BNC (the “merger”), and Southcoast Community Bank will merge with and into Bank of North Carolina (the “bank merger”).

If the merger is approved and consummated, unless adjusted pursuant to the terms of the merger agreement, holders of Southcoast common stock will be entitled to receive shares of BNC common stock based upon the volume weighted average price of BNC common stock for a 20-day trading period prior to the closing of the merger (the “VWAP”), subject to minimum and maximum exchange ratios as follows:

The market value of the merger consideration may fluctuate with the market price of BNC common stock and will not be known at the time Southcoast shareholders vote on the merger. Furthermore, pursuant to the termination provisions contained in the merger agreement, under certain circumstances, BNC may increase the exchange ratio or make a cash payment to Southcoast shareholders to avoid termination of the merger. Based on the $25.44 per share closing price of BNC’s common stock on the Nasdaq Capital Market on December 22, 2015, the last practicable date before the mailing of these materials, the value of the per share merger consideration payable to holders of Southcoast common stock was approximately $15.44, and the aggregate merger consideration was approximately $109.7 million. We urge you to obtain current market quotations for BNC (Nasdaq Capital Market trading symbol “BNCN”) because the value of the per share merger consideration will fluctuate.

As of December 7, 2015, the record date for the Southcoast special meeting of shareholders, there were 7,103,751 shares of Southcoast common stock outstanding and entitled to vote at the special meeting. Based on such outstanding common stock of Southcoast, BNC will issue between 4,310,556 and 4,991,095 shares of common stock to Southcoast shareholders in the aggregate upon completion of the merger if the merger is approved and consummated and there is no adjustment to the stock consideration paid by BNC. The exact number of shares of BNC common stock that will be issued in the merger will be dependent on the exchange ratio, which will not be determined until the date of the merger, and the number of shares of Southcoast common stock outstanding immediately prior to the merger.

This document, which serves as a proxy statement for the special meeting of Southcoast shareholders and as a prospectus with respect to the offering and issuance of the maximum of 4,991,095 shares of BNC common stock to be issued to Southcoast shareholders in the merger, describes the Southcoast special meeting, and includes important information about the proposed merger, the companies participating in the merger, and the agreement and plan of merger pursuant to which the merger will be consummated if approved. We encourage you to read the entire document carefully, including the “Risk Factors” section beginning on page 23, for a discussion of the risks related to the proposed merger.

Southcoast’s board of directors has determined that the merger agreement and the transactions contemplated thereby, including the merger, are in the best interests of Southcoast and its shareholders, has approved the merger agreement and the transactions contemplated thereby and recommends that Southcoast shareholders vote “FOR” all of the proposals described in this document.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of these materials. Any representation to the contrary is a criminal offense. Shares of common stock of BNC are not savings accounts, deposits or other obligations of any bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.

The date of these materials is December 23, 2015, and they are expected to be first mailed to shareholders on or about December 29, 2015.

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SOUTHCOAST FINANCIAL CORPORATION

534 Johnnie Dodds Boulevard
Mt. Pleasant, South Carolina 29464

 

Notice of Special Meeting of Shareholders
To be held On January 29, 2016

 

A special meeting of shareholders of Southcoast Financial Corporation will be held on January 29, 2016, at 10:00 a.m., at the main office of Southcoast Financial Corporation, 534 Johnnie Dodds Boulevard, Mt. Pleasant, South Carolina 29464 for the following purposes:

Only shareholders of record at the close of business on December 7, 2015 are entitled to notice of and to vote at the special meeting and any adjournment thereof. Southcoast’s board of directors has adopted a resolution approving the merger and the merger agreement and unanimously recommends that you vote “FOR” all of the proposals described in the accompanying materials.

Business and financial information about Southcoast is available without charge to you upon written or oral request made to William C. Heslop, Southcoast Financial Corporation, 534 Johnnie Dodds Boulevard, Mt. Pleasant, South Carolina 29464, telephone number (843) 884-0504. To obtain delivery of such business and financial information before the special meeting, your request must be received no later than January 21, 2016.

YOUR VOTE IS VERY IMPORTANT. If you hold your shares of record in your name, you can vote your shares over the Internet or by telephone, or by signing, dating and returning the enclosed proxy card. If you are the record holder of the shares, you may change your vote by: (1) if you voted over the Internet or by telephone, voting again over the Internet or by telephone by the applicable deadline described herein; (2) if you previously completed and returned a proxy card, submitting a new proxy card with a later date and returning it to Southcoast prior to the vote at the special meeting; (3) submitting timely written notice of revocation to Southcoast’s Corporate Secretary, Robert M. Scott, at Southcoast Financial Corporation, 534 Johnnie Dodds Boulevard, Mt. Pleasant, South Carolina 29464, at any time prior to the vote at the special meeting; or (4) attending the special meeting in person and voting your shares at the special meeting. If your shares are held in street name, you may vote your shares by following the instructions provided by your brokerage firm, bank or other similar entity. If your shares are held in street name, you may change your vote by submitting new voting instructions to your brokerage firm, bank or other similar entity or, if you have obtained a legal proxy from your brokerage firm, bank, or other similar entity giving you the right to vote your shares, you may change your vote by attending the special meeting and voting in person.

		By Order of the Board of Directors,
December 23, 2015 Mt. Pleasant, South Carolina		L. Wayne Pearson, Chairman

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WHERE YOU CAN FIND MORE INFORMATION

Both BNC and Southcoast are subject to the information requirements of the Securities Exchange Act of 1934, which means that they are both required to file certain reports, proxy statements, and other business and financial information with the Securities and Exchange Commission (the “SEC”). You may read and copy any materials that either BNC or Southcoast files with the SEC at the Public Reference Room of the SEC at 100 F. Street N.E., Washington, D.C. 20549. You may also obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website at http://www.sec.gov where you can access reports, proxy, information and registration statements, and other information regarding registrants that file electronically with the SEC. Such filings are also available free of charge at BNC’s website at http://www.bncbancorp.com under the “Investor Relations” link or from Southcoast Community Bank’s website at http://www.southcoastbank.com under the “About Us” tab and then under the “Investor Relations” link at the bottom of the website. Except as specifically incorporated by reference into this document, information on those websites or filed with the SEC is not part of this document.

BNC has filed a registration statement on Form S-4 of which this document forms a part. As permitted by SEC rules, this document does not contain all of the information included in the registration statement or in the exhibits or schedules to the registration statement. You may read and copy the registration statement, including any amendments, schedules and exhibits, at the addresses set forth below. Statements contained in this document as to the contents of any contract or other documents referred to in this document are not necessarily complete. In each case, you should refer to the copy of the applicable contract or other document filed as an exhibit to the registration statement. This document incorporates by reference documents that BNC and Southcoast have previously filed, and that they may file through the date of the special meeting of Southcoast shareholders, with the SEC. These documents are not included in or delivered with this document, and they contain important business and financial information about the companies. For further information, please see the section entitled “Incorporation of Certain Documents by Reference” on page 80. These documents are available without charge to you upon written or oral request to the applicable company’s principal executive offices. The respective addresses and telephone numbers of such principal executive offices are listed below.

BNC Bancorp 3980 Premier Drive, Suite 210 High Point, North Carolina 27265 Attention: Investor Relations (336) 869-9200		Southcoast Financial Corporation 534 Johnnie Dodds Boulevard Mt. Pleasant, South Carolina 29464 Attention: William C. Heslop (843) 884-0504

To obtain timely delivery of these documents, you must request the information no later than January 21, 2016 in order to receive them before Southcoast’s special meeting of shareholders.

BNC common stock is traded on the Nasdaq Capital Market under the symbol “BNCN,” and Southcoast common stock is traded on the Nasdaq Global Market under the symbol “SOCB.”

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		Page
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING			1
SUMMARY			6
The Companies			6
The Merger Agreement			8
Special Shareholders’ Meeting			12
SUMMARY CONSOLIDATED FINANCIAL INFORMATION OF BNC			14
SUMMARY CONSOLIDATED FINANCIAL INFORMATION OF SOUTHCOAST			18
COMPARATIVE PER COMMON SHARE DATA			21
RECENT DEVELOPMENTS			22
RISK FACTORS			23
A WARNING ABOUT FORWARD-LOOKING STATEMENTS			26
THE SOUTHCOAST SPECIAL MEETING			27
PROPOSAL NO. 1 — APPROVAL OF THE PLAN OF MERGER			31
Background of the Merger			31
BNC’s Reasons for the Merger			34
Southcoast’s Reasons for the Merger and Recommendation of the Southcoast Board of Directors			35
Southcoast’s Unaudited Prospective Financial Information			37
Opinion of Southcoast’s Financial Advisor			38
The Merger Consideration			48
Merger Consideration Adjustment and Termination Rights			48
The Merger Agreement			49
Interests of the Directors and Officers of Southcoast in the Merger			55
Quantification of Potential Payments to Southcoast’s Named Executive Officers in Connection with the Merger			61
Differences in Legal Rights between Shareholders of Southcoast and BNC			63
Dividends			69
Accounting Treatment			69
Regulatory Approvals			69
No Dissenters’ Rights in the Merger			70
Material U.S. Federal Income Tax Consequences and Opinion of Tax Counsel			70
Litigation Related to the Merger			72
PROPOSAL NO. 2 — NON-BINDING ADVISORY VOTE ON MERGER-RELATED COMPENSATION			74
INFORMATION ABOUT BNC BANCORP			75
General			75
Securities			75
Certain Restrictions in the Amended Articles of Incorporation Having Potential Anti-Takeover Effect			77

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		Page
INFORMATION ABOUT SOUTHCOAST FINANCIAL CORPORATION			78
Security Ownership of Certain Beneficial Owners			78
Security Ownership of Southcoast Management			78
INTERESTS OF CERTAIN PERSONS IN THE MERGER			78
PROPOSAL NO. 3 — ADJOURNMENT OR POSTPONEMENT OF THE MEETING			79
LEGAL MATTERS			79
EXPERTS			79
OTHER MATTERS			79
ANNUAL REPORT TO SHAREHOLDERS			79
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS			80
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K			80
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE			80
Appendix A — Agreement and Plan of Merger
Appendix B — Fairness Opinion of BSP Securities, LLC
Appendix C — Unaudited Consolidated Financial Information of Southcoast Financial Corporation            and BNC Bancorp

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

The following are some questions that you, as a Southcoast shareholder, may have regarding the merger agreement, the merger and the other matters being considered at the special meeting and the answers to those questions. BNC and Southcoast urge you to read carefully the remainder of this document because the information in this section does not provide all the information that might be important to you with respect to the merger and the other matters being considered at the special meeting. Additional important information is also contained in the appendices to this document and in the documents incorporated herein by reference.

Southcoast shareholders will also be asked to vote on (i) a non-binding advisory proposal concerning the compensation that certain executive officers of Southcoast will receive under existing agreements or arrangements with Southcoast in connection with the merger, and (ii) a proposal to adjourn the Southcoast special meeting, if necessary or appropriate, including to solicit additional proxies in favor of the proposal to approve the merger agreement, if there are insufficient votes at the time of such adjournment to approve such proposals.

We are sending you this document because the Southcoast board is soliciting your proxy to vote your shares at the special meeting. It also serves as BNC’s prospectus with respect to the shares of BNC common stock BNC will issue to Southcoast shareholders in connection with the merger. This document contains important information about the merger and the other proposals being voted on at the Southcoast special meeting, and you should carefully read it, together with the appendices and the information incorporated by reference.

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To review what you will receive in the merger in greater detail, see “Proposal No. 1 — Approval of the Plan of Merger — The Merger Consideration” beginning on page 48.

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Record Holder:  You do not have to attend the special meeting to vote. The Southcoast board of directors is soliciting proxies so that you can vote before the special meeting. Even if you currently plan to attend the special meeting, we recommend that you vote by proxy before the special meeting so that your vote will be counted if you later decide not to attend. However, if you attend the special meeting and vote your shares by ballot, your vote at the special meeting will revoke any vote you submitted previously by proxy. If you are the record holder of your shares, there are three ways you can vote by proxy:

If you vote over the Internet or by telephone, please do NOT return any documents through the mail.

If you vote using one of the methods described above, you will be designating L. Wayne Pearson and William C. Heslop as your proxies to vote your shares as you instruct. If you vote over the Internet or by telephone or by signing and returning your proxy card without giving specific voting instructions, these individuals will vote your shares by following the recommendations of the Southcoast board of directors. If any other business properly comes before the special meeting, these individuals will vote on those matters in a manner they consider appropriate.

Street Holder:  If your shares are held in street name, you may vote your shares before the special meeting by mail, by completing, signing and returning the voting instruction form you received from your broker, bank or other nominee. You should check your voting instruction form to see if any alternative method, such as Internet or telephone voting, is available to you.

You should instruct your broker, bank or other nominee to vote your shares by following the instructions provided by the broker, bank or nominee with this document. Please note that you may not vote shares held in street name by returning a proxy card directly to Southcoast or by voting in person at the special meeting unless you provide a “legal proxy,” which you must obtain from your bank, broker or nominee and bring to the special meeting.

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Yes. Southcoast shareholders currently have the right to vote in the election of the Southcoast board of directors and on other matters affecting Southcoast. Upon the completion of the merger, each Southcoast shareholder will be a shareholder of BNC with a percentage ownership of BNC that is much smaller than such shareholder’s current percentage ownership of Southcoast. It is currently expected that the former shareholders of Southcoast as a group will receive shares in the merger constituting approximately 10.4% of the outstanding shares of BNC’s common stock immediately after the merger. Accordingly, former Southcoast shareholders will have significantly less influence on the management and policies of BNC than they now have on the management and policies of Southcoast.

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SUMMARY

This summary highlights selected information from these materials regarding the proposed merger and the special meeting of shareholders. For a more complete description of the terms of the proposed merger and the other matters to be voted on at the special meeting of shareholders, you should carefully read this entire document and the documents incorporated by reference into this document. The Agreement and Plan of Merger, which is the legal document that governs the proposed merger, is in Appendix A to these materials. In addition, the sections entitled “Where You Can Find More Information,” in the forepart of this document, and “Incorporation of Certain Documents By Reference,” on page 80, contain references to additional sources of information about BNC and Southcoast. Each item in this summary refers to the page of this document on which that subject is discussed in more detail.

Unless otherwise indicated in this document or the context otherwise requires, all references in this document to “BNC” refer to BNC Bancorp, all references to BNC’s common stock refer to BNC’s voting common stock, all references to “Southcoast” refer to Southcoast Financial Corporation, all references to the “merger agreement” refer to the Agreement and Plan of Merger dated August 14, 2015, as amended September 15, 2015, between BNC and Southcoast, all references to the “merger” refer to the merger of Southcoast with and into BNC, with BNC continuing as the surviving company, and all references to the “bank merger” refer to the merger of Southcoast Community Bank, a wholly-owned subsidiary of Southcoast, with and into Bank of North Carolina, a wholly-owned subsidiary of BNC, with Bank of North Carolina continuing as the surviving bank.

BNC Bancorp
3980 Premier Drive, Suite 210
High Point, North Carolina 27265
(336) 869-9200

BNC was incorporated under the laws of the State of North Carolina on September 23, 2002 to serve as a one-bank holding company of Bank of North Carolina. BNC is registered with the Board of Governors of the Federal Reserve System, or the Federal Reserve, under the Bank Holding Company Act of 1956, as amended (the “BHCA”), and the bank holding company laws of North Carolina. BNC’s only business at this time is owning Bank of North Carolina and its primary source of income is any dividends that are declared and paid by Bank of North Carolina on its capital stock.

Bank of North Carolina is a full service commercial bank that was incorporated under the laws of the State of North Carolina on November 15, 1991 and opened for business on December 3, 1991. Bank of North Carolina provides a wide range of banking services tailored to the particular banking needs of the communities it serves. It is principally engaged in the business of attracting deposits from the general public and using such deposits, together with other funding from the Bank of North Carolina’s lines of credit, to make primarily consumer and commercial loans. Bank of North Carolina has pursued a strategy that emphasizes its local affiliations. This business strategy stresses the provision of high quality banking services to individuals and small to medium-sized local businesses. Specifically, Bank of North Carolina makes business loans secured by real estate, personal property and accounts receivable; unsecured business loans; consumer loans, which are secured by consumer products, such as automobiles and boats; unsecured consumer loans; commercial real estate loans; and other loans. Bank of North Carolina also offers a wide range of banking services, including checking and savings accounts, commercial, installment and personal loans, safe deposit boxes, and other associated services.

As of September 30, 2015, BNC had consolidated assets, deposits and shareholders’ equity of approximately $5.2 billion, $4.4 billion and $522.5 million, respectively. BNC’s common stock is listed and traded on the Nasdaq Capital Market under the symbol “BNCN.” Its principal executive offices are located at 3980 Premier Drive, Suite 210, High Point, North Carolina 27265, and its telephone number is (336) 869-9200. Its website is http://www.bncbancorp.com. Information on BNC’s website is not incorporated into this document by reference and is not a part hereof.

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For a complete description of BNC’s business, financial condition, results of operations and other important information, please refer to BNC’s filings with the SEC that are incorporated by reference in this document, including its Annual Report on Form 10-K for the year ended December 31, 2014, and its quarterly report on Form 10-Q for the quarter ended September 30, 2015. For instructions on how to find copies of these documents, see “Where You Can Find More Information.”

Southcoast Financial Corporation
534 Johnnie Dodds Boulevard
Mt. Pleasant, South Carolina 29464
(843) 884-0504

Southcoast is a South Carolina corporation organized in 1999 under the laws of the State of South Carolina for the purpose of being a holding company for Southcoast Community Bank. Southcoast Community Bank is a South Carolina state bank incorporated in June, 1998, which commenced operations as a commercial bank in July, 1998. Southcoast Community Bank operates from its offices in Mt. Pleasant, Charleston, Moncks Corner, Johns Island, Summerville, Goose Creek and North Charleston, South Carolina. The main office is located at 530 Johnnie Dodds Boulevard, in Mt. Pleasant; other Mt. Pleasant offices are located at 602 Coleman Boulevard and 3305 South Morgan’s Point Road; the Charleston offices are located at 802 Savannah Highway and 1654 Sam Rittenberg Boulevard; the Moncks Corner office is located at 337 East Main Street; the Johns Island office is located at 2753 Maybank Highway; the Summerville office is located at 302 N. Main Street; the Goose Creek office is located at 597 Old Mount Holly Road; and the North Charleston office is located at 8420 Dorchester Road.

Southcoast Community Bank offers a full array of commercial banking services. Deposit services include business and personal checking accounts, NOW accounts, savings accounts, money market accounts, various term certificates of deposit, IRA accounts, and other deposit services. Most of Southcoast Community Bank’s deposits are attracted from individuals and small businesses. Southcoast Community Bank does not offer trust services.

Southcoast Community Bank offers secured and unsecured, short-to-intermediate term loans, with floating and fixed interest rates for commercial, consumer and residential purposes. Consumer loans include, among others: car loans, home equity improvement loans (secured by first and second mortgages), personal expenditure loans, education loans, overdraft lines of credit, and the like. Southcoast Community Bank makes commercial loans to small and middle market businesses. Commercial loans may be unsecured if they are of short duration and made to a customer with demonstrated ability to pay, but most often they are secured. Collateral for commercial loans may be listed securities, equipment, inventory, accounts receivable or other business assets but will usually be local real estate. Southcoast Community Bank usually makes commercial loans to businesses to provide working capital, expand physical assets or acquire assets. Commercial loans will typically not exceed a 20-year maturity and will usually have regular amortization payments. Commercial loans to most business entities require guarantees by their principals. Southcoast Community Bank also makes loans guaranteed by the U.S. Small Business Administration.

As of September 30, 2015, Southcoast had consolidated assets, deposits and shareholders’ equity of approximately $481.9 million, $350.9 million and $51.4 million, respectively. Southcoast’s common stock is listed and traded on the Nasdaq Global Market under the symbol “SOCB.” Its principal executive offices are located at 534 Johnnie Dodds Boulevard, Mt. Pleasant, South Carolina 29464, and its telephone number is (843) 884-0504. Its website is http://www.southcoastbank.com. Information on Southcoast’s website is not incorporated into this document by reference and is not a part hereof.

For a complete description of Southcoast’s business, financial condition, results of operations and other important information, please refer to Southcoast’s filings with the SEC that are incorporated by reference in this document, including its Annual Report on Form 10-K for the year ended December 31, 2014 and its quarterly report on Form 10-Q for the quarter ended September 30, 2015. For instructions on how to find copies of these documents, see “Where You Can Find More Information.”

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Merger Consideration (see page 48)

If Southcoast shareholders approve the merger agreement, subject to receipt of the required regulatory approvals and satisfaction of the other closing conditions, Southcoast will be merged with and into BNC. Unless adjusted pursuant to the terms of the merger agreement, holders of Southcoast common stock will be entitled to receive shares of BNC common stock based upon the volume weighted average price of BNC common stock for a 20-day trading period prior to the closing of the merger (the “VWAP”), subject to minimum and maximum exchange ratios as follows:

You will also receive a cash payment, without interest, for the value of any fraction of a share of BNC common stock that you would otherwise be entitled to receive in an amount equal to such fraction multiplied by the VWAP.

Following the merger, Southcoast’s subsidiary, Southcoast Community Bank, will be merged with and into Bank of North Carolina, BNC’s wholly-owned North Carolina bank subsidiary, and Bank of North Carolina will be the surviving bank.

Southcoast’s Reasons for the Merger and Recommendation of the Southcoast Board of Directors (see page 35)

Southcoast’s board of directors supports the merger and believes that it is in the best interests of Southcoast and its shareholders. Southcoast’s board of directors believes that the merger will result in expanded service to Southcoast’s customers and markets and that the merger will permit Southcoast shareholders to have an equity interest in a resulting financial institution with greater financial resources, more significant economies of scale, and a larger shareholder base, and with greater liquidity than the Southcoast common stock. The board of directors of Southcoast believes that the terms of the merger are fair to and in the best interests of Southcoast and its shareholders.

Southcoast’s board of directors unanimously recommends a vote “FOR” approval of the merger agreement.

Accounting Treatment (see page 69)

The merger will be accounted for as a purchase of a business for financial reporting and accounting purposes under generally accepted accounting principles in the United States.

Conditions, Termination, Regulatory Approvals and Closing of the Merger (see pages 51 and 69)

The merger will not occur unless certain conditions are met, and BNC or Southcoast can terminate the merger agreement if specified events occur or fail to occur. Following the merger, Southcoast’s subsidiary, Southcoast Community Bank, will be merged into BNC’s North Carolina bank subsidiary, Bank of North Carolina.

The merger and the bank merger must be approved by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the North Carolina Office of the Commissioner of Banks and the South Carolina State Board of Financial Institutions. As of the date of this document, we have only received approvals of the North Carolina Office of the Commissioner of Banks and the South Carolina State Board of Financial Institutions.

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The closing of the merger will not occur until after the merger is approved by the foregoing regulators and by the Southcoast shareholders, the other conditions to closing have been satisfied and the articles of merger are filed as required under North Carolina law and South Carolina law, respectively.

Litigation Related to the Merger (see page 72)

On October 12, 2015, a purported shareholder of Southcoast filed a class action lawsuit in the Court of Common Pleas for the Ninth Judicial District, State of South Carolina, County of Charleston, captioned Matthew Sciabucuchi v. Southcoast Financial Corporation, Case No. 2015-CP10-5500. On October 26, 2015, the lawsuit was removed to the United States District Court for the District of South Carolina and assigned Case No. 2:15-cv-04352-DCN. The Complaint names as defendants Southcoast, the current members of Southcoast’s board of directors, whom we refer to as the director defendants, and BNC. The complaint is brought on behalf of a putative class of shareholders of Southcoast common stock and seeks an order that it is properly maintainable as a class action. The complaint alleges that the director defendants breached their fiduciary duties by failing to maximize shareholder value in connection with the merger and also alleges that BNC aided and abetted those alleged breaches of fiduciary duties. The complaint further alleges that the director defendants breached their fiduciary duties to Southcoast’s shareholders by improperly securing for themselves certain benefits not shared equally by Southcoast’s shareholders and by approving certain terms and conditions in the merger agreement that may be adverse to potential alternate acquirors of Southcoast. The complaint was amended on November 11, 2015 to add disclosure claims related to the preliminary registration statement filed by BNC in connection with the merger. The complaint, as amended, seeks injunctive relief to prevent the completion of the merger or rescission of the merger and rescissory damages, an accounting to determine damages sustained by the putative class, and costs including plaintiffs’ attorneys’ and experts’ fees. On November 25, 2015, the defendants filed motions to dismiss the plaintiffs amended complaint for failure to state a claim upon which relief can be granted. The defendants’ motions remain pending. At this stage, it is not possible to predict the outcome of the proceedings or their impact on BNC, Southcoast or the merger. BNC and Southcoast believe that the claims asserted are without merit and intend to defend themselves vigorously.

Federal Income Tax Consequences (see page 70)

Southcoast’s shareholders generally will not recognize gain or loss for federal income tax purposes on the receipt of shares of BNC common stock in the merger in exchange for the shares of Southcoast common stock surrendered. Southcoast shareholders will be taxed, however, on any cash they receive instead of any fractional shares of BNC common stock and on any cash they may receive upon an adjustment in the merger consideration under the circumstances explained in “Proposal No. 1 — Approval of the Plan of Merger — Merger Consideration Adjustment and Termination Rights” on page 48. Tax matters are complicated, and the tax consequences of the merger may vary among Southcoast shareholders. We urge each Southcoast shareholder to contact his or her own tax advisor to fully understand the tax implications of the merger.

Opinion of Southcoast’s Financial Advisor (see page 38)

BSP Securities, LLC (“Banks Street Partners”) has rendered an opinion to Southcoast that, based on and subject to the procedures, matters, and limitations described in its opinion and other matters it considered relevant, as of the date of its opinion, the merger consideration is fair from a financial point of view to the shareholders of Southcoast. A summary of Banks Street Partners’ opinion begins on page 38 and the full opinion is attached as Appendix B to these materials.

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Markets for Common Stock

BNC’s common stock trades on the Nasdaq Capital Market under the ticker symbol “BNCN”. Southcoast’s common stock trades on the Nasdaq Global Market under the ticker symbol “SOCB”. The following table sets forth, for the periods indicated, the high, low and closing sales prices per share of BNC’s and Southcoast’s common stock as quoted on the Nasdaq Capital Market and Nasdaq Global Market, respectively.

		BNC Common Stock												Southcoast Common Stock
		High				Low				Close				High				Low				Close
2015
Fourth Quarter (through December 22, 2015)		$	26.29			$	21.52			$	25.44			$	17.90			$	12.58			$	15.25
Third Quarter			23.32				18.92				22.23				13.47				7.94				13.33
Second Quarter			19.48				17.67				19.33				9.16				7.16				8.51
First Quarter			18.24				15.52				18.10				7.75				6.82				7.24
2014
Fourth Quarter			17.86				15.51				17.21				7.21				4.92				7.05
Third Quarter			17.69				15.66				15.66				7.45				6.69				7.10
Second Quarter			18.95				15.63				17.07				7.45				6.32				7.27
First Quarter			18.90				16.36				17.33				7.42				5.78				7.29
2013
Fourth Quarter			17.34				11.67				17.14				6.00				5.41				5.80
Third Quarter			14.35				11.26				13.34				6.00				5.00				5.75
Second Quarter			11.47				9.56				11.42				5.83				4.81				5.25
First Quarter			10.10				7.85				10.02				6.00				4.52				5.05

As of the record date, directors and executive officers of Southcoast and their affiliates owned and were entitled to vote 1,157,120 shares of Southcoast common stock, representing approximately 16.29% of the shares of Southcoast outstanding and entitled to vote on that date.

As of the record date, directors and executive officers of BNC and their affiliates did not own any shares of Southcoast common stock.

Equivalent Southcoast Per Share Value

The following table presents the closing price of BNC common stock and Southcoast common stock on August 13, 2015, the last trading day before the merger agreement was announced, and December 22, 2015, the most recent date feasible for inclusion in these materials. The table also presents the equivalent value of the merger consideration per share of Southcoast common stock on those dates.

Date		BNC closing sales price				Southcoast closing sales price				Exchange Ratio				Equivalent Southcoast per share value(1)
August 13, 2015		$	22.15			$	9.05				0.6068			$	13.44
December 22, 2015		$	25.44			$	15.25				0.6068			$	15.44

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The value of the shares of BNC common stock to be issued in the merger may fluctuate between now and the closing date of the merger. Southcoast shareholders should obtain current sale prices for the BNC common stock.

There were 1,390 shareholders of record of Southcoast common stock as of December 7, 2015.

Dividends (see page 69)

BNC declared cash dividends of $0.05 per share of common stock in the third quarter of 2015, $0.05 per share of common stock in the second quarter of 2015, $0.05 per share of common stock in the first quarter of 2015, and $0.20 per share in each of 2014, 2013 and 2012. BNC intends to continue paying cash dividends, but the amount and frequency of cash dividends, if any, will be determined by BNC’s board of directors in its sole discretion after consideration of certain non-financial and financial factors including earnings, capital requirements, and the financial condition of BNC, and will depend on cash dividends paid to it by Bank of North Carolina. The ability of Bank of North Carolina to pay dividends to BNC is restricted by certain regulatory requirements.

Southcoast has never paid cash dividends, and it is not anticipated that Southcoast will pay cash dividends in the near future.

Differences in Legal Rights between Shareholders of Southcoast and BNC (see page 63)

Following the merger you will no longer be a Southcoast shareholder, and your rights as a shareholder will no longer be governed by Southcoast’s articles of incorporation and bylaws and the South Carolina Business Corporation Act. You will be a BNC shareholder, and your rights as a BNC shareholder will be governed by BNC’s articles of incorporation, as amended, and amended and restated bylaws and the North Carolina Business Corporation Act. Your former rights as a Southcoast shareholder and your new rights as a BNC shareholder are different in certain ways, including the following:

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Interests of Directors and Officers of Southcoast and Southcoast Community Bank in the Merger (see page 55)

Some of the directors and officers of Southcoast have interests in the merger in addition to their interests as shareholders generally, including the following:

No Dissenters’ Rights in the Merger (see page 70)

Southcoast shareholders are not entitled to appraisal or dissenters’ rights under South Carolina law in connection with the merger because Southcoast common stock was listed on the Nasdaq Global Market on the record date for the special meeting.

Recent Developments (see page 22)

On November 13, 2015, BNC entered into an Agreement and Plan of Merger with High Point Bank Corporation (“HPTB”), under which BNC will acquire HPTB. The acquisition of HPTB is subject to customary closing conditions, including the approval of regulators and HPTB shareholders. BNC and HPTB anticipate closing the merger in the second quarter of 2016.

Date, Time, and Place

The special meeting of shareholders of Southcoast will be held on January 29, 2016 at 10:00 a.m., at the main office of Southcoast, 534 Johnnie Dodds Boulevard, Mt. Pleasant, South Carolina 29464.

Matters to be Considered at the Special Meeting

At the special meeting, Southcoast shareholders will be asked to:

Record Date and Shares Entitled to Vote

You are entitled to vote at the shareholders’ meeting if you were a shareholder of record of Southcoast common stock as of the close of business on December 7, 2015, the record date. As of the record date, 7,103,751 shares of Southcoast common stock were outstanding and entitled to vote at the special meeting.

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Support Agreements

All of the directors of Southcoast have agreed to vote their shares in favor of the merger agreement; provided that such voting support agreements terminate in the event that the Southcoast board of directors withdraws its recommendation in favor of the merger or approves or recommends an acquisition proposal from another party. A form of the voting support agreement entered into by each of the directors of Southcoast is included as Exhibit B to Appendix A of these materials. As of the record date, Southcoast’s directors own 1,157,120 shares, or 16.29%, of outstanding Southcoast common stock.

Vote Required

As of the record date, 7,103,751 shares of Southcoast common stock were issued and outstanding, each of which is entitled to one vote per share.

Approval of the merger agreement requires the affirmative vote of two-thirds, or 4,735,834 shares, of the outstanding shares of Southcoast common stock entitled to vote at the special meeting. Your failure to vote your shares (including your failure to instruct your broker to vote shares you hold in street name) or your abstaining from voting will have the same effect as a vote against the merger agreement. The Southcoast board of directors has unanimously adopted and approved the merger agreement and unanimously recommends that Southcoast shareholders vote “FOR” approval of the merger agreement.

As referenced above, each of the directors of Southcoast has agreed, among other things, to recommend, subject to any applicable fiduciary duty, to Southcoast shareholders approval of the merger and to vote any and all shares of Southcoast common stock owned by him in a non-fiduciary capacity in favor of the merger. As of the record date, Southcoast’s directors owned 1,157,120 shares, or 16.29%, of outstanding Southcoast common stock.

The proposal to approve the compensation that may become payable to Southcoast’s named executive officers in connection with the merger is advisory and non-binding on Southcoast and its board of directors. If the votes cast in favor of the proposal exceed the votes cast against the proposal, the proposal will be deemed to have been approved by Southcoast’s shareholders, though, as noted above, it will not be binding on Southcoast or on its board of directors. Abstentions and broker non-votes will have no effect on the results. The Southcoast board of directors unanimously recommends that Southcoast shareholders vote “FOR” approval of the compensation payable under existing agreements that certain of its officers will receive from Southcoast in connection with the merger.

Approval of the merger agreement and approval of the compensation payable under existing agreements that certain Southcoast officers will receive in connection with the merger are subject to separate votes of the Southcoast shareholders, and approval of the compensation is not a condition to completion of the merger.

Approval of the proposal to adjourn or postpone the special meeting, if necessary or appropriate, including to solicit additional proxies to approve the merger agreement, requires that the number of votes cast in favor of the proposal exceeds the number of votes cast against the proposal. Abstentions and broker non-votes will have no effect on the results. The Southcoast board of directors unanimously recommends that shareholders vote “FOR” this proposal.

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SUMMARY CONSOLIDATED FINANCIAL INFORMATION OF BNC

We are providing the following information to help you analyze the financial aspects of the merger. The following tables set forth summary historical operations and financial condition data and summary performance, asset quality and other information of BNC at and for the periods indicated. You should read this data in conjunction with BNC’s Consolidated Financial Statements and notes thereto incorporated herein by reference from BNC’s Annual Report on Form 10-K for the year ended December 31, 2014 and BNC’s quarterly report on Form 10-Q for the quarter ended September 30, 2015. Financial amounts as of and for the nine months ended September 30, 2015 and 2014 are unaudited and are not necessarily indicative of the results of operations for the full year or any other interim period, and management of BNC believes that such amounts reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of its results of operations and financial position as of the dates and for the periods indicated. You should not assume the results of operations for past years and for the nine months ended September 30, 2015 and 2014 indicate results for any future period. BNC’s “net operating income” is determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). Please see the “Reconciliation of Non-GAAP Financial Measures” below for a reconciliation of the difference between BNC’s non-GAAP net operating income and its GAAP net income.

		At or for the Nine Months Ended September 30,								For the Years Ended December 31,
		2015				2014				2014				2013				2012				2011				2010
		(in thousands, except per share data; taxable equivalent)
Operating Data:
Total interest income		$	142,247			$	115,227			$	158,142			$	138,670			$	113,515			$	103,343			$	95,010
Total interest expense			19,185				14,472				19,926				30,063				32,891				32,920				34,747
Net interest income			123,062				100,755				138,216				108,607				80,624				70,423				60,263
Provision for loan losses			609				6,005				7,006				12,188				22,737				18,214				26,382
Net interest income after provision for loan losses			122,453				94,750				131,210				96,419				57,887				52,209				33,881
Non-interest income			24,162				17,237				25,022				22,806				33,138				20,802				28,813
Non-interest expense			101,575				84,111				116,477				97,933				82,272				67,864				55,172
Income before income tax expense (benefit)			45,040				27,876				39,755				21,292				8,753				5,147				7,522
Income tax expense (benefit)			13,329				6,991				10,365				4,045				(1,700	)			(1,783	)			(204	)
Net income			31,711				20,885				29,390				17,247				10,453				6,930				7,726
Less preferred stock dividends and discount accretion			—				—				—				1,060				2,404				2,404				2,196
Net income available to common shareholders		$	31,711			$	20,885			$	29,390			$	16,187			$	8,049			$	4,526			$	5,530
Per Common Share Data:
Basic earnings per share		$	0.92			$	0.73			$	1.01			$	0.61			$	0.48			$	0.45			$	0.62
Diluted earnings per share			0.92				0.73				1.01				0.61				0.48				0.45				0.61
Cash dividends declared			0.15				0.15				0.20				0.20				0.20				0.20				0.20
Book value			13.70				11.22				11.98				9.94				9.51				12.80				11.63
Tangible book value(1)			9.86				9.12				9.41				8.66				8.20				9.60				8.49
Weighted average shares outstanding:
Basic			34,461				28,559				29,050				26,683				17,595				10,878				9,262
Diluted			34,545				28,666				29,152				26,714				17,599				10,894				9,337
Period-end common shares outstanding			38,138				29,475				32,599				27,303				24,650				9,101				9,053

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		At or for the Nine Months Ended September 30,								For the Years Ended December 31,
		2015				2014				2014				2013				2012				2011				2010
		(in thousands, except per share data; taxable equivalent)
Selected Period-End Balance Sheet Data:
Total assets		$	5,201,118			$	3,735,816			$	4,072,508			$	3,229,576			$	3,083,788			$	2,454,930			$	2,149,932
Investment securities available-for-sale			404,594				250,107				269,920				270,417				341,539				282,174				352,824
Investment securities held-to-maturity			241,138				239,156				237,092				247,378				114,805				97,036				6,000
Portfolio loans			3,978,633				2,763,669				3,075,098				2,276,517				2,035,258				1,709,483				1,508,180
Allowance for loan losses			30,833				30,722				30,399				32,875				40,292				31,008				24,813
Goodwill			146,623				61,716				69,749				28,384				27,111				26,129				26,129
Deposits			4,374,491				3,084,208				3,396,397				2,706,730				2,656,309				2,118,187				1,828,070
Short-term borrowings			77,409				171,898				127,934				125,592				32,382				70,211				60,207
Long-term debt			189,661				126,744				133,814				101,509				88,173				93,713				97,713
Shareholders’ equity			522,497				330,647				390,388				271,330				282,244				163,855				152,224
Selected Average Balances:
Total assets		$	4,481,400			$	3,478,053			$	3,561,719			$	3,009,367			$	2,544,718			$	2,208,525			$	2,027,261
Investment securities			547,321				499,012				495,251				483,984				353,040				339,067				352,099
Total loans			3,453,281				2,542,342				2,633,829				2,139,281				1,813,899				1,561,257				1,359,107
Total interest-earning assets			4,059,611				3,124,418				3,202,958				2,696,475				2,244,423				1,936,069				1,799,324
Interest-bearing deposits			3,126,453				2,549,856				2,579,633				2,236,046				2,002,595				1,770,106				1,613,886
Total interest-bearing liabilities			3,403,522				2,739,521				2,783,555				2,429,817				2,126,818				1,914,179				1,765,391
Shareholders’ equity			437,699				313,575				323,183				269,123				212,955				156,968				149,959
Selected Performance Ratios:
Return on average assets(2)			0.95	%			0.80	%			0.83	%			0.54	%			0.32	%			0.20	%			0.27	%
Return on average common equity(3)			9.69	%			8.90	%			9.09	%			6.28	%			5.11	%			4.12	%			5.47	%
Return on average tangible common equity(4)			13.43	%			11.13	%			11.51	%			7.50	%			6.57	%			5.88	%			7.89	%
Net interest margin(5)			4.24	%			4.56	%			4.56	%			4.29	%			3.85	%			3.93	%			3.65	%
Average equity to average assets			9.77	%			9.02	%			9.07	%			8.94	%			8.37	%			7.11	%			7.40	%
Efficiency ratio(6)			66.45	%			67.93	%			68.12	%			70.67	%			68.85	%			70.09	%			58.38	%
Dividend payout ratio			16.30	%			20.55	%			19.80	%			32.79	%			41.67	%			44.44	%			32.26	%
Asset Quality Ratios:
Allowance for loan losses to portfolio loans(7)			0.77	%			1.11	%			0.99	%			1.44	%			1.98	%			1.81	%			1.65	%
Allowance for loan losses to nonperforming loans(8)			152.37	%			109.73	%			122.95	%			80.46	%			58.04	%			33.44	%			25.96	%
Nonperforming assets to total assets(9)			1.11	%			1.99	%			1.65	%			2.74	%			3.93	%			6.57	%			6.29	%
Net loan charge-offs (recoveries) to average portfolio loans			(0.03	)%			0.37	%			0.30	%			0.98	%			1.74	%			1.33	%			1.39%

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		At or for the Nine Months Ended September 30,								For the Years Ended December 31,
		2015				2014				2014				2013				2012				2011				2010
		(in thousands, except per share data; taxable equivalent)
Capital Ratios:(10)
Total risk-based capital			11.65	%			12.34	%			12.21	%			12.66	%			13.91	%			11.51	%			13.01	%
Tier 1 risk-based capital			9.36	%			9.26	%			11.26	%			11.41	%			12.77	%			9.99	%			11.19	%
Leverage ratio			8.23	%			7.44	%			9.74	%			8.96	%			9.71	%			7.38	%			7.42	%
Tier 1 common equity			8.58	%			N/A				N/A				N/A				N/A				N/A				N/A
Other Data:
Number of full service banking offices			57				47				48				39				35				30				23
Number of limited service offices			4				3				3				3				1				1				1
Number of full time employee equivalents			856				687				823				620				541				442				358

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Reconciliation of Non-GAAP Financial Measures

		At or for the Nine Months Ended September 30,								For the Years Ended December 31,
		2015				2014				2014				2013				2012				2011				2010
										(in thousands, except per share data)
Tangible Common Book Value per Share:
Shareholders’ equity (GAAP)		$	522,497			$	330,647			$	390,388			$	271,330			$	282,244			$	163,855			$	152,224
Less: Preferred stock (GAAP)			—				—				—				—				47,878				47,398				46,918
Intangible assets (GAAP)			146,623				61,716				83,701				34,966				32,193				29,115				28,445
Tangible common shareholders’ equity (non-GAAP)			375,874				268,931				306,687				236,364				202,173				87,342				76,861
Common shares outstanding			38,138				29,475				32,599				27,303				24,650				9,101				9,053
Tangible common book value per share (non-GAAP)		$	9.86			$	9.12			$	9.41			$	8.66			$	8.20			$	9.60			$	8.49
Return on Average Tangible Common Equity:
Net income available to common shareholders (GAAP)		$	31,711			$	20,885			$	29,390			$	16,187			$	8,049			$	4,526			$	5,530
Plus: Amortization of intangibles, net of tax (GAAP)			1,752				1,021				1,474				723				348				256				229
Tangible net income available to common shareholders (non-GAAP)			33,463				21,906				30,864				16,910				8,397				4,782				5,759
Average common shareholders’ equity (non-GAAP)			437,699				313,575				323,183				257,678				157,471				109,810				101,104
Less: Average intangible assets (non-GAAP)			104,519				50,332				55,026				32,361				29,581				28,433				28,072
Average tangible common shareholders’ equity (non-GAAP)			333,180				263,243				268,157				225,317				127,890				81,377				73,032
Return on average tangible common equity (non-GAAP)			13.43	%			11.13	%			11.51	%			7.50	%			6.57	%			5.88	%			7.89	%

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SUMMARY CONSOLIDATED FINANCIAL INFORMATION OF SOUTHCOAST

We are providing the following information to help you analyze the financial aspects of the merger. The following tables set forth summary historical operations and financial condition data and summary performance, asset quality and other information of Southcoast at and for the periods indicated. You should read this data in conjunction with Southcoast’s Consolidated Financial Statements and notes thereto incorporated herein by reference from Southcoast’s Annual Report on Form 10-K for the year ended December 31, 2014 and Southcoast’s quarterly report on Form 10-Q for the quarter ended September 30, 2015. Financial amounts as of and for the nine months ended September 30, 2015 and 2014 are unaudited and are not necessarily indicative of the results of operations for the full year or any other interim period, and management of Southcoast believes that such amounts reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of its results of operations and financial position as of the dates and for the periods indicated. You should not assume the results of operations for past years and for the nine months ended September 30, 2015 and 2014 indicate results for any future period.

		At or for the Nine Months Ended September 30,								For the Years Ended December 31,
		2015				2014				2014				2013				2012				2011				2010
		(in thousands, except per share data; taxable equivalent)
Operating Data:
Total interest income		$	14,557			$	13,565			$	18,181			$	17,561			$	18,236			$	18,905			$	21,444
Total interest expense			2,574				2,706				3,581				3,858				4,860				6,647				9,423
Net interest income			11,983				10,859				14,600				13,703				13,376				12,258				12,021
Provision for loan losses			(900	)			—				(600	)			400				880				10,023				3,801
Net interest income after provision for loan losses			12,883				10,859				15,200				13,303				12,496				2,235				8,220
Non-interest income			2,433				1,630				2,146				2,360				3,277				2,798				4,337
Non-interest expense			9,819				8,983				12,005				13,188				12,118				16,937				12,681
Income (loss) before income tax expense (benefit)			5,497				3,506				5,341				2,475				3,655				(11,904	)			(124	)
Income tax expense (benefit)			1,976				1,121				1,604				(6,590	)			137				4,576				(193	)
Net income (loss)			3,521				2,385				3,737				9,065				3,518				(16,480	)			69
Less preferred stock dividends and discount accretion			—				—				—				—				—				—				—
Net income (loss) available to common shareholders		$	3,521			$	2,385			$	3,737			$	9,065			$	3,518			$	(16,480	)		$	69
Per Common Share Data(1):
Basic earnings (loss) per share		$	0.50			$	0.34			$	0.53			$	1.28			$	0.50			$	(2.36	)		$	0.01
Diluted earnings (loss) per share			0.50				0.34				0.53				1.28				0.50				(2.36	)			0.01
Cash dividends declared			—				—				—				—				—				—				—
Book value			7.24				6.44				6.67				6.01				4.85				4.39				6.58
Weighted average shares outstanding:
Basic			7,102,498				7,089,630				7,091,361				7,076,157				7,044,365				6,992,076				6,727,699
Diluted			7,102,498				7,089,630				7,091,361				7,076,157				7,044,365				6,992,076				6,727,699
Period-end common shares outstanding			7,103,751				7,093,132				7,096,574				7,082,062				7,065,516				7,017,953				6,954,901

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		At or for the Nine Months Ended September 30,								For the Years Ended December 31,
		2015				2014				2014				2013				2012				2011				2010
		(in thousands, except per share data; taxable equivalent)
Selected Period-End Balance Sheet Data:
Total assets		$	481,923			$	464,433			$	476,833			$	447,384			$	438,221			$	427,522			$	478,326
Investment securities available-for-sale			32,946				35,530				35,269				39,822				44,849				48,958				72,306
Investment securities held-to-maturity			—				—				—				—				—				—				—
Portfolio loans			387,528				354,938				364,148				331,906				327,469				319,739				336,449
Allowance for loan losses			(4,772	)			(5,938	)			(5,602	)			(6,041	)			(8,159	)			(10,691	)			(9,513	)
Goodwill			—				—				—				—				—				—				—
Deposits			350,913				323,879				331,034				315,828				319,632				316,147				344,602
Short-term borrowings			3,904				9,664				3,802				4,818				5,949				6,850				3,963
Long-term debt			72,310				80,310				90,310				79,310				74,310				70,310				79,310
Shareholders’ equity			51,401				45,662				47,305				42,569				34,264				30,812				45,778
Selected Average Balances:
Total assets		$	480,524			$	448,349			$	447,535			$	433,354			$	432,791			$	454,912			$	497,575
Investment securities			39,055				44,572				43,752				47,266				53,913				69,419				82,145
Total loans			370,747				335,285				339,081				320,286				310,279				308,791				319,742
Total interest-earning assets			428,680				392,903				395,533				379,810				376,526				392,283				420,040
Interest-bearing deposits			291,018				274,175				271,256				268,834				285,269				307,784				324,006
Total interest-bearing liabilities			365,497				349,388				348,770				343,276				355,361				380,130				417,032
Shareholders’ equity			49,353				44,115				44,937				38,417				32,538				38,538				45,429
Selected Performance Ratios:
Return on average assets(2)			0.98	%			0.71	%			0.84	%			2.09	%			0.81	%			(3.62	)%			0.01	%
Return on average common equity(3)			9.51	%			7.21	%			8.32	%			23.60	%			10.81	%			(42.76	)%			0.15	%
Net interest margin(4)			3.73	%			3.69	%			3.71	%			3.63	%			3.59	%			3.12	%			2.86	%
Average equity to average assets			10.27	%			9.84	%			10.04	%			8.87	%			7.52	%			8.47	%			9.13	%
Efficiency ratio(5)			67.82	%			71.57	%			71.33	%			81.61	%			72.76	%			112.49	%			77.52	%
Dividend payout ratio			—				—				—				—				—				—				—
Asset Quality Ratios:
Allowance for loan losses to portfolio loans			1.23	%			1.67	%			1.54	%			1.82	%			2.49	%			3.34	%			2.83	%
Allowance for loan losses to nonperforming loans(6)			104.28	%			74.08	%			112.74	%			61.31	%			83.99	%			50.27	%			48.39	%
Nonperforming assets to total assets(7)			1.53	%			2.60	%			1.82	%			3.38	%			4.41	%			7.16	%			5.98	%
Net loan charge-offs (recoveries) to average portfolio loans(8)			(0.02	%)			0.03	%			(0.05	)%			0.79	%			1.10	%			2.86	%			1.35	%
Capital Ratios:(9)
Total risk-based capital			18.64	%			17.11	%			17.43	%			15.80	%			15.25	%			14.18	%			16.81	%
Tier 1 risk-based capital			17.39	%			15.86	%			16.18	%			14.54	%			13.99	%			12.90	%			15.52	%
Leverage ratio			12.61	%			11.46	%			11.98	%			11.10	%			10.47	%			9.73	%			11.70	%

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		At or for the Nine Months Ended September 30,								For the Years Ended December 31,
		2015				2014				2014				2013				2012				2011				2010
		(in thousands, except per share data; taxable equivalent)
Other Data:
Number of full service banking offices			10				10				10				10				10				10				10
Number of limited service offices			—				—				—				—				—				—				—
Number of full time employee equivalents			87				88				88				93				89				94				95

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COMPARATIVE PER COMMON SHARE DATA

The following table shows per common share data regarding basic and diluted earnings, cash dividends and book value for (i) BNC and Southcoast on a historical basis, (ii) BNC on a pro forma combined basis, and (iii) Southcoast on a pro forma equivalent basis. The pro forma information has been derived from and should be read in conjunction with BNC’s and Southcoast’s audited consolidated financial statements for the year ended December 31, 2014 and unaudited consolidated financial statements for the nine months ended September 30, 2015, incorporated herein by reference. This information is presented for illustrative purposes only. The pro forma combined information does not give effect to the announced acquisition by BNC of HPTB. See “Recent Developments” on page 22. You should not rely on the pro forma combined or pro forma equivalent amounts as they are not necessarily indicative of the operating results or financial position that would have occurred if the merger had been completed as of the dates indicated, nor are they necessarily indicative of the future operating results or financial position of the combined company. The pro forma information, although helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the benefits of expected cost savings, opportunities to earn additional revenue, the impact of restructuring and merger-related costs, or other factors that may result as a consequence of the merger and, accordingly, does not attempt to predict or suggest future results.

		Unaudited Comparative Per Common Share Data
		BNC				Prior Acquisitions Pro Forma				BNC and Prior Acquisitions Pro Forma(1)				Southcoast				BNC Pro Forma Combined				Southcoast Pro Forma Equivalent Per Share(2)
Basic Earnings (Loss)
Year ended December 31, 2014		$	1.01			$	3.36			$	1.27			$	0.53			$	1.25			$	0.76
Nine months ended September 30, 2015		$	0.92			$	(1.16	)		$	0.75			$	0.50			$	0.77			$	0.47
Diluted Earnings (Loss)
Year ended December 31, 2014		$	1.01			$	3.36			$	1.27			$	0.53			$	1.25			$	0.76
Nine months ended September 30, 2015		$	0.92			$	(1.16	)		$	0.75			$	0.50			$	0.77			$	0.47
Cash Dividends Declared(3)
Year ended December 31, 2014		$	0.20				—			$	0.20				—			$	0.20			$	0.12
Nine months ended September 30, 2015		$	0.15				N/A			$	0.15				—			$	0.15			$	0.09
Book Value
December 31, 2014		$	11.98				N/A				N/A			$	6.67				N/A				N/A
September 30, 2015		$	13.70				N/A				N/A			$	7.24			$	14.57			$	8.84

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RECENT DEVELOPMENTS

On November 13, 2015, BNC entered into an Agreement and Plan of Merger with High Point Bank Corporation (“HPTB”), under which BNC will acquire HPTB. If the merger is approved and consummated, holders of HPTB common stock will be entitled to receive, in exchange for each share of HPTB common stock, shares of BNC common stock or cash, without interest, at an exchange ratio and subject to proration based upon the volume weighted average price of BNC common stock for a 20-day trading period prior to the closing of the merger (the “VWAP”). If the VWAP immediately prior to the merger is:

HPTB has approximately 470,876 shares of common stock outstanding as of November 13, 2015. The acquisition of HPTB is subject to customary closing conditions, including the approval of regulators and HTPB shareholders. BNC and HPTB anticipate closing the merger in the second quarter of 2016. Additional information on BNC’s proposed acquisition of HPTB may be found in BNC’s reports filed with the SEC, including the Form 8-K/A filed with the SEC on November 17, 2015. BNC will also file a registration statement on Form S-4, which will include a proxy statement of HPTB that will be mailed to HPTB shareholders describing the proposed acquisition of HPTB and containing other important information.

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RISK FACTORS

In addition to the other information, including risk factors, incorporated by reference herein from BNC’s and Southcoast’s Annual Reports on Form 10-K for the year ended December 31, 2014, you should carefully read and consider the following factors in evaluating the merger.

Because the market price of BNC common stock will fluctuate, Southcoast shareholders cannot be sure of the value of the merger consideration they will receive.

Upon completion of the merger, each share of Southcoast common stock will be converted into the merger consideration consisting of shares of BNC common stock. The market value of the merger consideration received by Southcoast shareholders will vary with the price of BNC’s common stock. BNC’s stock price changes daily as a result of a variety of factors in addition to the business and relative prospects of BNC, including general market and economic conditions, industry trends, and the regulatory environment. These factors are beyond BNC’s control.

Southcoast’s officers and directors have interests in the merger in addition to or different from the interests that they share with you as a Southcoast shareholder.

Some of Southcoast’s executive officers participated in negotiations of the merger agreement with BNC, and Southcoast’s board of directors approved the merger agreement and is recommending that Southcoast shareholders vote for the merger agreement. In considering these facts and the other information contained in these materials, you should be aware that certain of Southcoast’s executive officers and directors have economic interests in the merger that are different from or in addition to the interests that they share with you as a Southcoast shareholder. These interests include, as a result of the completion of the merger, the payment or transfer to, or survival of, certain benefits to which L. Wayne Pearson, William B. Seabrook, William R. Billings, Robert A. Daniel, Jr., William C. Heslop, Robert M. Scott, William A. Coates, Stephen F. Hutchinson and James P. Smith are entitled under existing agreements and arrangements with Southcoast, as well as the employment of four Southcoast executive officers by BNC following completion of the merger. See “Proposal No. 1 — The Merger — Interests of the Directors and Officers of Southcoast in the Merger” on page 55.

BNC may be unable to successfully integrate Southcoast Community Bank’s operations and retain its key employees.

The merger involves the integration of two companies that previously operated independently. The difficulties of combining the companies’ operations include integrating personnel, departments, systems, operating procedures and information technologies and retaining key employees. Failures in integrating operations or the loss of key personnel could have a material adverse effect on the business and results of operations of the combined company.

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or cannot be met.

Before the transactions contemplated by the merger agreement, including the merger and the bank merger, may be completed, various approvals must be obtained from bank regulatory authorities. These governmental entities may impose conditions on the granting of such approvals. Such conditions or changes and the process of obtaining regulatory approvals could have the effect of delaying completion of the merger or of imposing additional costs or limitations on BNC following the merger. The regulatory approvals may not be received at all, may not be received in a timely fashion, and may contain conditions on the completion of the merger that are not anticipated or cannot be met. If the consummation of the merger is delayed, including by a delay in receipt of necessary governmental approvals, the business, financial condition and results of operations of each company may also be materially adversely affected.

If the merger is not completed, BNC common stock and Southcoast common stock could be materially adversely affected.

The merger is subject to customary conditions to closing, including the approval of the Southcoast shareholders. In addition, BNC and Southcoast may terminate the merger agreement under certain circumstances. If BNC and Southcoast do not complete the merger, the market price of BNC’s common stock

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or Southcoast’s common stock may fluctuate to the extent that the current market prices of those shares reflect a market assumption that the merger will be completed. Further, whether or not the merger is completed, BNC and Southcoast will also be obligated to pay certain investment banking, legal and accounting fees and related expenses in connection with the merger, which could negatively impact results of operations when incurred. In addition, neither company would realize any of the expected benefits of having completed the merger. If the merger is not completed, BNC and Southcoast cannot assure their respective shareholders that additional risks will not materialize or not materially adversely affect the business, results of operations and stock prices of BNC and Southcoast.

The termination fee contained in the merger agreement may discourage other companies from trying to acquire Southcoast.

Southcoast has agreed to pay a termination fee of $3.0 million to BNC if, under certain circumstances, the merger agreement is terminated and, at the time of termination, a competing offer is outstanding or such offer has been accepted by Southcoast. This fee could discourage other companies from trying to acquire Southcoast, even if any such company were prepared to pay a higher price than that proposed by BNC.

Southcoast shareholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.

Southcoast shareholders currently have the right to vote in the election of the Southcoast board of directors and on other matters affecting Southcoast. Upon the completion of the merger, each Southcoast shareholder will be a shareholder of BNC with a percentage ownership of BNC that is much smaller than such shareholder’s current percentage ownership of Southcoast. In addition, under the merger agreement, none of the Southcoast directors or executive officers will become a director of BNC following the merger. It is currently expected that the former shareholders of Southcoast as a group will receive shares in the merger constituting approximately 10.4% of the outstanding shares of BNC’s common stock immediately after the merger. Accordingly, former Southcoast shareholders will own significantly less than a majority of the outstanding voting stock of the combined company and could, as a result, be outvoted by current BNC shareholders if such current BNC shareholders voted together as a group. Consequently, Southcoast shareholders will have significantly less influence on the management and policies of BNC than they now have on the management and policies of Southcoast. The recently announced acquisition of HPTB may further reduce the influence of Southcoast shareholders as may future acquisitions or sales of stock by BNC.

BNC and Southcoast will incur significant transaction and merger-related integration costs in connection with the merger.

BNC and Southcoast expect to incur significant costs associated with completing the merger and integrating the operations of the two companies and are continuing to assess the impact of these costs. Although BNC and Southcoast believe that the elimination of duplicate costs, as well as the realization of other efficiencies related to the integration of the businesses, will offset incremental transaction and merger-related costs over time, this net benefit may not be achieved in the near term, or at all.

The market price of BNC common stock after the merger may be affected by factors different from those affecting the shares of Southcoast or BNC currently.

The businesses and current markets of BNC and Southcoast differ and, accordingly, the results of operations of the combined company and the market price of the combined company’s shares of common stock may be affected by factors different from those currently affecting the independent results of operations of either BNC or Southcoast. For a discussion of the business of BNC and Southcoast and of certain factors to consider in connection with its business, see the documents incorporated by reference into this document and referred to under “Where You Can Find More Information” and “Incorporation of Certain Documents by Reference.”

The opinion obtained by Southcoast from Banks Street Partners will not reflect changes in circumstances between signing the merger agreement and the closing of the merger.

Banks Street Partners rendered an opinion to Southcoast, dated August 13, 2015, to address the fairness of the merger consideration from a financial point of view as of that date. Subsequent changes in the

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operations and prospects of BNC or Southcoast, general market and economic conditions and other factors that may be beyond the control of BNC and Southcoast, and on which the Banks Street Partners opinion was based, may significantly alter the value of BNC or Southcoast or the prices of shares of BNC common stock by the time the merger is completed. The opinion does not speak as of the time the merger will be completed or as of any date other than the date of such opinion. Because Southcoast currently does not anticipate asking Banks Street Partners to update its opinion, the opinion will not address the fairness of the common stock merger consideration, from a financial point of view, at the time the merger is completed. For a description of the opinion that Southcoast received from Banks Street Partners, see “Proposal No. 1 — Approval of the Plan of Merger — Opinion of Southcoast’s Financial Advisor” beginning on page 38. For a description of the other factors considered by the Southcoast Board in determining to approve the merger, see “Proposal No. 1 — Approval of the Plan of Merger — Southcoast’s Reasons for the Merger and Recommendation of the Southcoast Board of Directors” beginning on page 35.

In connection with the announcement of the merger agreement, a lawsuit is pending, seeking, among other things, to enjoin the merger, and an adverse judgment in this lawsuit may prevent the merger from becoming effective within the expected time frame (if at all).

On October 12, 2015, a purported shareholder of Southcoast filed a class action lawsuit in the Court of Common Pleas for the Ninth Judicial District, State of South Carolina, County of Charleston, captioned Matthew Sciabucuchi v. Southcoast Financial Corporation, Case No. 2015-CP10-5500. On October 26, 2015, the lawsuit was removed to the United States District Court for the District of South Carolina and assigned Case No. 2:15-cv-04352-DCN. The Complaint names as defendants Southcoast, the current members of Southcoast’s board of directors, whom we refer to as the director defendants, and BNC. The complaint is brought on behalf of a putative class of shareholders of Southcoast common stock and seeks an order that it is properly maintainable as a class action. The complaint alleges that the director defendants breached their fiduciary duties by failing to maximize shareholder value in connection with the merger and also alleges that BNC aided and abetted those alleged breaches of fiduciary duties. The complaint further alleges that the director defendants breached their fiduciary duties to Southcoast’s shareholders by improperly securing for themselves certain benefits not shared equally by Southcoast’s shareholders and by approving certain terms and conditions in the merger agreement that may be adverse to potential alternate acquirors of Southcoast. The complaint was amended on November 11, 2015 to add disclosure claims related to the preliminary registration statement filed by BNC in connection with the merger. The complaint, as amended, seeks injunctive relief to prevent the completion of the merger or rescission of the merger and rescissory damages, an accounting to determine damages sustained by the putative class, and costs including plaintiffs’ attorneys’ and experts’ fees. On November 25, 2015, the defendants filed motions to dismiss the plaintiffs amended complaint for failure to state a claim upon which relief can be granted. The defendants’ motions remain pending. At this stage, it is not possible to predict the outcome of the proceedings or their impact on BNC, Southcoast or the merger. If the plaintiffs are successful in enjoining the consummation of the merger, the lawsuit may prevent the merger from becoming effective within the expected time frame (if at all). Furthermore, the defense or settlement of this lawsuit may adversely affect BNC’s business, financial condition, results of operations and cash flows following the completion of the merger.

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A WARNING ABOUT FORWARD-LOOKING STATEMENTS

This document and the documents that are incorporated by reference herein contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 about BNC, Southcoast, their subsidiaries, and the combined company after the proposed merger. These forward-looking statements are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact, and can be identified by the use of forward-looking terminology such as “believes”, “expects”, “may”, “will”, “could”, “should”, “projects”, “plans”, “goal”, “targets”, “potential”, “estimates”, “pro forma”, “seeks”, “intends”, or “anticipates” or the negative thereof or comparable terminology. Forward-looking statements include discussions of strategy, financial projections, guidance and estimates (including their underlying assumptions), statements regarding plans, objectives, expectations or consequences of various transactions, and statements about the future performance, operations, products and services of BNC, Southcoast, their subsidiaries and the combined company after the proposed merger. Forward-looking statements involve risks, uncertainties, assumptions, and certain other factors that could cause actual results to differ from results expressed or implied by the forward-looking statements, including, but not limited to the factors set forth under the “Risk Factors” section above or in BNC’s or Southcoast’s respective Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the SEC, as well as the following factors:

We believe the forward-looking statements contained in or incorporated by reference into this document are reasonable, but we caution that the foregoing list of factors that could cause actual results to differ materially from those anticipated in such forward-looking statements is not exclusive and that you should not place undue reliance on such forward-looking statements, because the future results and shareholder values of BNC following completion of the merger may differ materially from those expressed or implied by these forward-looking statements. We do not intend to update any forward-looking statement, whether written or oral, relating to the matters discussed in these materials.

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THE SOUTHCOAST SPECIAL MEETING

Date, Time and Place

Southcoast will hold a special meeting of shareholders on January 29, 2016, at 10:00 a.m., at the main office of Southcoast Financial Corporation, 534 Johnnie Dodds Boulevard, Mt. Pleasant, South Carolina 29464.

Matters to be Considered and Voted on at the Special Meeting

At the special meeting, Southcoast’s shareholders will be asked to consider and vote upon the following proposals:

Recommendation of the Southcoast Board of Directors

Southcoast’s board of directors has adopted a resolution approving the merger and the merger agreement and unanimously recommends that you vote “FOR” the proposal to approve the merger agreement; “FOR” approval of the merger-related compensation proposal; and “FOR” the adjournment proposal.

Record date and Voting Securities

The Southcoast board of directors has set December 7, 2015 as the record date for determining shareholders entitled to notice of, and to vote at, the special meeting. As of the record date, there were 7,103,751 shares of Southcoast common stock outstanding and entitled to vote at the special meeting.

Quorum and Voting

Each share outstanding as of the record date will be entitled to one vote upon each matter submitted at the special meeting. You are only entitled to notice of and to vote at the special meeting if you were a record shareholder at the close of business on December 7, 2015, the record date. At the close of business on the record date, 7,103,751 shares of Southcoast common stock were outstanding and entitled to vote at the special meeting.

A majority of the shares entitled to be voted at the special meeting constitutes a quorum. If a share is represented for any purpose at the special meeting by the presence of the registered owner or a person holding a valid proxy for the registered owner, it is deemed to be present for purposes of establishing a quorum. Therefore, valid proxies which are marked “Abstain” or “Withhold” and shares that are not voted, including proxies submitted by brokers that are the record owners of shares and that either choose not to vote or do not have authority to vote (so-called “broker non-votes”), will be included in determining the number of votes present or represented at the special meeting. If a quorum is not present or represented at the special meeting, or if there are not sufficient votes to approve the merger, it is expected that the special meeting will be adjourned to solicit additional proxies. If the special meeting is to be reconvened within thirty days, no notice of the reconvened meeting will be given other than an announcement at the adjourned meeting. If the special meeting is to be adjourned for thirty days or more, notice of the reconvened meeting will be given as provided in Southcoast’s bylaws. At any reconvened meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the special meeting as originally noticed.

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Vote Required and Method of Counting Votes

The Merger

Approval of the merger will require the affirmative vote of at least two-thirds of the outstanding shares of Southcoast common stock, or at least 4,735,834 shares. Abstentions will have the same effect as votes against the merger proposal. If a broker indicates that it does not have discretionary authority as to certain shares to vote on the merger, such shares will not be voted with respect to the merger. Therefore, broker non-votes will also have the same effect as votes against the merger proposal.

Non-binding Advisory Vote on Merger-Related Compensation

The proposal to approve the compensation that may become payable to Southcoast’s named executive officers in connection with the merger is advisory and non-binding on Southcoast, BNC and their respective boards of directors. If the votes cast in favor of the proposal exceed the votes cast against the proposal, the proposal will be deemed to have been approved by Southcoast’s shareholders, though, as noted above, it will not be binding on Southcoast, BNC or their respective boards of directors. Abstentions and broker non-votes will have no effect on the results.

Adjournment of the Special Meeting

The proposal to adjourn the special meeting, if necessary, including to solicit additional proxies, will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal. Accordingly, abstentions and broker non-votes will have no effect on the results.

How to Vote — Shares Held of Record

Voting in Person

If you hold your shares of record in your own name, you may vote in person by submitting a ballot at the special meeting. Nevertheless, Southcoast recommends that you vote by proxy or electronically via telephone or the Internet as promptly as possible, even if you plan to attend the special meeting. This will ensure your vote is received. However, if you attend the special meeting and vote your shares by ballot, your vote at the special meeting will revoke any proxy you previously submitted.

Voting by Proxy

If you hold your shares of record in your own name, you may vote your shares by marking the enclosed proxy form, dating and signing it, and returning it to Southcoast in the enclosed postage-paid envelope.

Voting by Telephone

If you hold your shares of record in your own name, you may use the toll-free number shown on your proxy card to vote your shares.

Voting by Internet

If you hold your shares of record in your own name, you may vote your shares by visiting the website shown on your proxy card to vote via the Internet.

Actions to be taken by Proxies

If you hold your shares of record in your own name, in each case where you have appropriately specified how your shares are to be voted, they will be voted in accordance with your specifications. If, however, you are a shareholder of record and sign, date, and return your proxy card without indicating how you want to vote on one or more matters, or vote by telephone or the Internet and do not vote on one or more matters, with respect to any matters as to which you have not voted, the persons named on the form of proxy as the board of directors’ proxy agents will vote your proxy:

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Southcoast’s board of directors is not aware of any other matters that may be presented for action at the special meeting, but if other matters do properly come before the special meeting, the persons named as proxies on the proxy card intend to vote on such matters in accordance with their best judgment.

How to Vote — Shares held in “Street Name”

If you hold your shares in street name with a broker, bank or other nominee, you can direct their vote by submitting voting instructions to your broker, bank or other nominee in accordance with the procedure in the voting instructions provided by your broker, bank or nominee. Under the rules that relate to broker voting, your broker is not permitted to vote your shares on approval of the merger agreement, the non-binding advisory vote on compensation that may become payable to Southcoast’s named executive officers in connection with the merger, or adjournment of the special meeting, unless you provide voting instructions. If you hold your shares in street name and fail to instruct your broker how to vote on these matters, a broker non-vote will occur with respect to your shares. Therefore, to be sure your shares are voted, please instruct your broker as to how you wish it to vote.

If you hold your shares in street name, you may attend the special meeting, but you may not vote in person without a proxy appointment from a shareholder of record.

YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, SOUTHCOAST’S BOARD OF DIRECTORS URGES YOU TO COMPLETE, DATE, AND SIGN THE ACCOMPANYING PROXY CARD, OR SUCH OTHER DOCUMENT AS YOUR BROKER, BANK OR OTHER NOMINEE INSTRUCTS YOU TO USE IF YOUR SHARES ARE HELD IN “STREET NAME,” AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE, OR VOTE BY TELEPHONE OR THE INTERNET.

Revocation of Proxy by Record Shareholder

If you hold your shares of record in your own name and execute and deliver a proxy, you may revoke the proxy at any time before it is voted by any of the following methods:

Your attendance at the special meeting will not in itself, constitute revocation of a proxy. However, if you attend the special meeting and vote your shares by ballot, your vote at the special meeting will revoke any proxy you previously submitted.

Revocation of Proxy by Shareholders whose Shares are held in “Street Name”

If you hold your shares in street name with a broker, bank or other nominee you may change or revoke your proxy instructions only by submitting new voting instructions to the broker, bank or other nominee in accordance with the procedures provided by the broker, bank or other nominee.

Solicitation of Proxies

The proxies for the special meeting are being solicited on behalf of the Southcoast board of directors. Southcoast will bear the entire cost of soliciting proxies from you. Southcoast will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of Southcoast common stock. Proxies will be solicited principally by mail, but may also be solicited by the directors, officers and other employees of Southcoast in person or by telephone, facsimile or other means of electronic communication. Directors, officers and employees of Southcoast will receive no compensation for these activities in addition to their regular compensation.

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Southcoast has also retained Regan & Associates, Inc., a proxy solicitation firm, to assist in the solicitation of proxies for a fee of approximately $10,000. Southcoast will also pay certain expenses of Regan & Associates in connection with the solicitation.

Attending the Special Meeting

All holders of Southcoast common stock, including holders of record and holders who hold their shares in street name through brokers or other nominees, are cordially invited to attend the special meeting. Holders of record can vote in person at the special meeting. If you are not a holder of record and would like to vote in person at the special meeting, you must produce a legal proxy executed in your favor by the record holder of your shares. In addition, you must bring a form of personal photo identification with you in order to be admitted at the special meeting. Southcoast reserves the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the special meeting is prohibited without Southcoast’s express written consent.

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PROPOSAL NO. 1 — APPROVAL OF THE PLAN OF MERGER

Background of the Merger

The management and board of directors of Southcoast traditionally hold an annual strategic planning session. These annual strategic planning sessions focus on addressing major operational and regulatory issues facing Southcoast as well as how Southcoast could best provide value to its shareholders. The recent financial crisis, the related recession and the slow recovery brought with them a significant increase in the regulatory burdens on community banks without corresponding benefits. Although Southcoast has the benefit of being in a desirable, growing market, it became increasingly apparent to Southcoast’s management and board of directors that, if Southcoast were to remain independent, it would need to grow to more than double its size in order to achieve economies of scale and results of operations comparable to those of larger financial institutions in the southeastern United States. Substantial growth in a short period of time typically involves heightened risks, and Southcoast’s board of directors noted that the benefits of such growth for shareholders might be better achieved through a merger with a larger financial institution on favorable terms.

By 2014, based on numerous informal conversations with, and analyses and presentations by various investment bankers, Southcoast’s board of directors concluded that, if Southcoast’s results of operations for 2014 met the board of director’s expectations, and the southeastern merger environment continued to improve, it might be in the best interest of the Southcoast shareholders to explore the possibility of a business combination with a larger, successful financial institution. During the summer and fall of 2014, Southcoast’s board of directors invited five investment banking firms active in southeastern financial institutions mergers to make presentations and proposals for representation of Southcoast in exploring a possible business combination. In January 2015, Southcoast’s board of directors engaged Banks Street Partners, LLC to provide financial advisory and investment banking services in connection with the exploration of a potential merger or sale of Southcoast.

On February 3, 2015, Banks Street Partners held an organizational meeting with Southcoast management to discuss the process for a potential transaction and the related schedule and roles and responsibilities. On February 19, 2015, Banks Street Partners then made a presentation to and discussed with the Southcoast board of directors techniques for obtaining desirable proposals, the process for obtaining bids, a proposed schedule, and Banks Street Partners’ assessment of potential buyers with the ability and interest to engage in a transaction that would be favorable to Southcoast shareholders. Also present at the meeting was a representative of Haynsworth Sinkler Boyd, P.A. (“Haynsworth”), legal counsel to Southcoast, who reviewed with Southcoast’s board of directors their legal obligations in connection with any transaction that would result in the sale of Southcoast. Haynsworth has represented Southcoast since its inception as corporate, securities, and bank regulatory counsel. Haynsworth has extensive experience with bank mergers and acquisitions, and it was, therefore, natural for Southcoast to engage Haynsworth in connection with a proposed transaction.

From February 2015 through April 2015, with the assistance of the management of Southcoast, Banks Street Partners performed due diligence on Southcoast, reviewed due diligence materials, prepared marketing materials and placed relevant due diligence materials into a virtual data room for potential buyers to review.

On April 13, 2015, Banks Street Partners presented to and discussed with Southcoast’s board of directors an update on the transaction process to date, next steps and an updated list of potential buyers that Banks Street Partners intended to contact.

During the week of April 20, 2015, Banks Street Partners and Southcoast management finalized marketing materials and the list of potential buyers to be contacted.

On April 24, 2015, Banks Street Partners began the process of making initial calls to potential buyers. Banks Street Partners contacted twenty-eight parties on a no-name basis regarding their possible interest in a potential acquisition in the Charleston, South Carolina area. Sixteen of the parties expressed interest in evaluating the opportunity, executed a nondisclosure agreement, and received initial marketing materials. Shortly thereafter, one party dropped out of the process, and the remaining fifteen parties were granted access to a virtual data room containing Southcoast due diligence materials.

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During the period from April 24, 2015 to June 22, 2015, seven of the fifteen interested parties hired financial advisors to help them evaluate the transaction and all of the fifteen interested potential buyers performed preliminary due diligence, including: reviewing virtual data room information; conference calls with Banks Street Partners and Southcoast management; and onsite meetings with the Southcoast management team in Mount Pleasant, South Carolina.

On May 14, 2015, Banks Street Partners provided the Southcoast board of directors with an update of the process to date and information regarding the parties involved in the process.

On June 23, 2015, eight parties submitted nonbinding indications of interest. The indications of interest had approximate values ranging between $9.50 and $13.00 per share of Southcoast common stock.

On June 24, 2015, based upon analysis of the bidders’ estimated maximum pricing ability and after conferring with Southcoast management, Banks Street Partners contacted one bidder to discuss the pricing necessary for the bidder to be invited to the final round and it responded by raising its bid.

On June 25, 2015, the Southcoast board of directors reviewed each of the indications of interest with Banks Street Partners, including the proposed form of transaction consideration, the transaction consideration per share of Southcoast common stock, any proposed changes to the acquirer’s board or management that would result from the transaction, the treatment of Southcoast employees in the transaction, time requirements for additional due diligence, indemnification or insurance of Southcoast’s officers and directors following the transaction, any special contingencies, and Banks Street Partners’ analysis of each bidder’s ability to make a better bid, and the potential effect of a transaction with Southcoast on the bidder. Southcoast’s board of directors then instructed Banks Street Partners to:

On June 26, 2015, the three bidders invited to continue all accepted their invitations to continue and no other parties increased their offers in response to pricing guidance.

From June 30 through July 16, 2015, each of the three remaining parties performed credit due diligence remotely and sent personnel to conduct onsite due diligence and meet with Southcoast management in Mount Pleasant, South Carolina.

During the week of July 13, 2015, Banks Street Partners contacted each of the three remaining parties to answer any final questions and to encourage each party to increase its price per share of Southcoast common stock.

On July 16, 2015, the party that had previously raised its bid informed Banks Street Partners that it was withdrawing from the process and would not submit a final indication of interest as its pricing had dropped below its revised offer and it did not believe it would be competitive.

On July 17, 2015, the final two parties remaining in the process submitted revised indications of interest. Due to the closeness of the two proposals, acting on Banks Street Partners’ recommendation, Southcoast invited both parties to present their proposals to the Southcoast board of directors.

On July 23, 2015, the Southcoast board of directors, together with representatives of Banks Street Partners and Haynsworth as well as non-director senior officers of Southcoast met separately with and received proposal presentations from the two remaining parties. One party was represented by its Chief Executive Officer and Chief Financial Officer, while the other party was represented by its Chief Executive Officer and Chief Financial Officer as well as a member of its board of directors. Each presentation covered

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the history of the party, the details of its proposal and plans for the transactions, including the anticipated impact on Southcoast’s executive officers and other employees and customers. Each party’s participants responded to questions from the Southcoast directors and non-director senior officers. After the conclusion of the presentations, Banks Street Partners reviewed the two proposals with Southcoast’s board of directors, identifying the differences in the proposals. Banks Street Partners also discussed with Southcoast’s board of directors the two parties and the comparative strengths and weaknesses of the consideration being proposed. Included in the discussions were the differences in the approximate value of the offered consideration, the different ways the consideration could change between entry into an agreement and consummation of the transaction, the difference in the proposed treatment of senior officers and employees, and the differences in the impact on the customers and communities served by Southcoast. The Southcoast board of directors then met with only members of the board of directors and legal counsel present to discuss and consider the two proposals. In order to give members of Southcoast’s board of directors more time to reflect and consider their decision, Southcoast’s board of directors decided to adjourn the meeting and resume via a conference call the next day.

On July 24, 2015, the Southcoast board of directors meeting reconvened via conference call. It was noted that the question before Southcoast’s board of directors was whether or not to enter into a non-binding letter of intent with one of the parties and, if so, with which party. The Southcoast board of directors unanimously agreed to enter into the letter of intent proposed by BNC and to thank the other party for its participation in the process.

Over the next several days, Southcoast, BNC and their respective legal counsel and financial advisers negotiated the terms and conditions of the merger agreement and related agreements. During this time, representatives of Southcoast and representatives of BNC engaged in a number of additional due diligence conversations.

On August 13, 2015, the Southcoast board of directors met again with Banks Street Partners and Haynsworth to consider the BNC proposal and draft merger agreement. Haynsworth reviewed with Southcoast’s board of directors their obligations to Southcoast and its shareholders and reminded them that the letter of intent signed with BNC did not obligate Southcoast to enter into the merger agreement. Haynsworth then reviewed in detail the terms of the most recent draft of the merger agreement. Banks Street Partners made a presentation which summarized the financial matters associated with the proposed transaction and included comparisons to certain publicly traded companies similar to BNC and Southcoast, an analysis of recently completed mergers and acquisitions similar to the merger, an analysis of the estimated future earnings and terminal value of Southcoast and other analyses relevant to the financial terms of the merger. The presentation also described the model used to estimate the impact of the proposed transaction on BNC. Banks Street Partners advised the Southcoast board of directors that, in its opinion, the transaction would be fair to Southcoast’s shareholders from a financial point of view. Haynsworth then presented to Southcoast’s board of directors draft resolutions to approve and authorize the signing of the merger agreement and the submission of the merger agreement to Southcoast’s shareholders for approval with the recommendation of Southcoast’s board of directors that Southcoast’s shareholders vote for approval of the merger agreement. After discussion, Southcoast’s board of directors voted to adopt the resolutions and approve the signing of the merger agreement.

Thereafter, on August 14, 2015, the merger agreement was executed by officers of BNC and Southcoast, and, before market open on August 14, 2015, BNC and Southcoast issued a joint press release announcing the execution of the merger agreement and the terms of the proposed acquisition of Southcoast by BNC. The merger agreement was amended on September 15, 2015 in order to clarify certain provisions of the merger agreement. The amendment to the merger agreement did not contain any material changes to the merger agreement.

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BNC’s Reasons for the Merger

BNC’s board of directors believes that the completion of the merger presents a unique opportunity for BNC to further its strategic plan by expanding its franchise and banking operations in the Charleston and Mt. Pleasant, South Carolina markets, which BNC believes is an attractive market area in South Carolina. BNC’s board of directors also noted that the merger furthered BNC’s strategic focused regional growth plan, would add a solid core deposit base, would diversify its loan portfolio composition, would reduce its wholesale funding, would be accretive to future earnings and would lead to significant cost efficiencies.

The terms of the merger, including the merger consideration, are the result of arm’s-length negotiations between representatives of BNC and Southcoast. In reaching its decision to approve the merger, BNC’s board of directors consulted with its legal advisors regarding the terms of the transaction and with management of BNC. In approving the entry into the merger agreement, BNC’s board of directors considered the following material factors:

BNC’s board of directors also considered potential risks associated with the merger in connection with its deliberations of the proposed transaction, including the challenges of integrating Southcoast’s business, operations and workforce with those of BNC, the potential negative impact on BNC’s stock price and the need to obtain shareholder and regulatory approvals in order to complete the transaction.

BNC’s board of directors considered all of these factors as a whole and, on balance, BNC’s board of directors believes that the opportunities created by the merger to increase the value of BNC’s franchise more than offset any integration or other risks inherent in the merger.

The foregoing discussion of the information and factors considered by BNC’s board of directors is not exhaustive, but includes the material factors considered by BNC’s board of directors. In view of the wide variety of factors considered by BNC’s board of directors in connection with its evaluation of the merger and the complexity of these matters, BNC’s board of directors did not consider it practical to, nor did it attempt to, quantify, rank or otherwise assign relative weights to the specific factors that it considered in reaching its decision. In considering the factors described above, individual members of BNC’s board of directors may have given different weights to different factors.

On the basis of these considerations, BNC’s entry into the merger agreement was unanimously approved by BNC’s board of directors on August 13, 2015.

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Southcoast’s Reasons for the Merger and Recommendation of the Southcoast Board of Directors

After careful consideration at its meetings on February 19, 2015, April 13, 2015, June 25, 2015, July 23 – 24, 2015, and August 13, 2015, Southcoast’s board of directors determined that the merger agreement is in the best interests of Southcoast and its shareholders and that the consideration to be received in the merger is fair to the Southcoast shareholders. Accordingly, Southcoast’s board of directors adopted and approved the merger agreement and unanimously recommends that Southcoast shareholders vote “FOR” approval of the merger agreement.

In reaching its decision to adopt and approve the merger agreement and recommend the merger to its shareholders, Southcoast’s board of directors consulted with Southcoast’s management, as well as its legal and financial advisors, and considered as part of its process a number of positive factors, including the following material factors:

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Southcoast’s board of directors also considered as a part of its process potential risks and potentially negative factors concerning the merger in connection with its deliberations of the proposed transaction, including the following material factors: