BNCCORP, INC. REPORTS FIRST QUARTER NET INCOME OF $1.5 MILLION, OR $0.41 PER DILUTED SHARE
BNCCORP, INC. REPORTS FIRST QUARTER NET INCOME OF .5 MILLION, OR alt=

Highlights

  • Net income in the first quarter of 2022 was $1.5 million, or $0.41 per diluted share, compared to $9.8 million, or $2.73 per diluted share during the same period of 2021.

  • Mortgage revenue, as anticipated, decreased to $4.1 million in the first quarter of 2022, compared to $16.1 million during the same period of 2021.

  • Return on assets and return on equity was 0.57% and 5.28%, respectively, for the quarter ended March 31, 2022, compared to 3.60% and 32.70%, respectively, for the quarter ended March 31, 2021.

  • The tangible common equity ratio was 11.14% at March 31, 2022, compared to 10.98% at December 31, 2021.

  • Solid new origination activity during the first quarter drove an increase in loans held for investment, excluding $2.7 million of Small Business Administration (SBA) Paycheck Protection Program (PPP) loans, to $529.5 million at March 31, 2022, compared to $499.1 million and $517.9 million at September 30, 2021, and December 31, 2021, respectively.

  • BNC released $550 thousand of its allowance for credit losses in the first quarter of 2022 compared to $0 provision for credit losses during the same period of 2021.

  • Allowance for credit losses at March 31, 2022, was 1.60% of loans held for investment, excluding $2.7 million of Small Business Administration (SBA) Paycheck Protection Program (PPP) loans, compared to 1.75% at December 31, 2021.

BISMARCK, N.D., May 2, 2022 /PRNewswire/ — BNCCORP, INC. (BNC or the Company) (OTCQX Markets: BNCC), which operates community banking and wealth management businesses in North Dakota and Arizona, and has mortgage banking offices in Illinois, Kansas, Michigan, Arizona, and North Dakota, today reported financial results for the first quarter ended March 31, 2022.

BNCCORP Logo (PRNewsfoto/BNCCORP, INC.)

BNCCORP Logo (PRNewsfoto/BNCCORP, INC.)

Overview of Quarter

Net income in the first quarter of 2022, was $1.5 million, compared to $9.8 million in the same period of 2021. First quarter 2022 earnings per diluted share was $0.41, versus $2.73 in the first quarter 2021. The year-over-year decrease was primarily due to lower mortgage revenues and lower net interest income, partially offset by lower non-interest expense and a reduction in the allowance for credit losses.

First quarter 2022 net interest income decreased by $2.1 million to $6.9 million, or 23.7%, from the comparable 2021 quarter. Interest income decreased by $2.4 million, or 24.9%, from the 2021 first quarter due to lower balances and yields on loans partially offset by higher balances of interest-bearing cash and debt securities. PPP fees were $227 thousand in the first quarter of 2022 compared to $1.8 million in the first quarter of 2021. First quarter 2022 interest expense decreased by $270 thousand, or 40.8%, versus the first quarter of 2021 due to a reduction in the cost of deposits and a reduction in certificates of deposit balances.

Non-interest income in the first quarter of 2022 decreased by $12.0 million, from the same period in 2021. In the first quarter of 2022, mortgage banking revenues were $4.1 million, $11.9 million lower than the same period a year ago, during which the Company experienced a combination of historically high refinance originations and margins. The sale of SBA loans resulted in gains on sales of loans of $20 thousand in the first quarter of 2022, compared to $97 thousand in the prior year period. The Company received profit distributions of $86 thousand from SBIC investments during the 2022 first quarter compared to $100 thousand in the same period in 2021. Gains on sales of loans and profit distributions from SBIC investments can vary significantly from period to period.

Non-interest expense in the 2022 first quarter decreased by $2.6 million, or 18.9%, versus the first quarter of 2021. Non-interest expenses related to mortgage operations activity decreased by $2.5 million, or 32.0%, as management adjusted the scale of operations based on the marketplace opportunity.

Nonperforming assets were $1.5 million at March 31, 2022, down from $1.7 million at December 31, 2021 and $2.6 million at March 31, 2021. The ratio of nonperforming assets-to-total-assets was 0.15% at March 31, 2022, down from 0.16% at December 31, 2021 and 0.21% at March 31, 2021. The Company released $550 thousand of its allowance for credit losses in the 2022 first quarter, compared to no provision for credit losses in the first quarter of 2021. The allowance for credit losses decreased to 1.60% of loans held for investment (excluding $2.7 million of PPP loans) at March 31, 2022, compared to 1.75% at December 31, 2021 and 1.98% at March 31, 2021. The Company continues to monitor key industry data and will prudently adjust its allowance for credit losses as appropriate.

Tangible book value per common share at March 31, 2022, was $30.91, compared to $32.35 at December 31, 2021. The decline in tangible book value per common share was driven by the negative impact of higher long-term rates on accumulated other comprehensive income partially offset by retained earnings. The Company’s tangible common equity capital ratio was 11.14% at March 31, 2022, compared to 10.98% at December 31, 2021.

Total assets were $987.2 million at March 31, 2022, compared to $1.0 billion at December 31, 2021. Total deposits were $854.4 million at March 31, 2022, compared to $906.7 million at December 31, 2021.

Management Commentary

“BNC continues to drive performance and maintain a stable financial position despite macroeconomic and geopolitical headwinds that are impacting the entire banking industry – particularly within the mortgage sector,” said Daniel J. Collins, BNC’s President and Chief Executive Officer. “Over the past four quarters, we have successfully transitioned our mortgage business from refinancing activity to purchased home loan originations to reflect marketplace dynamics and customers’ needs. As anticipated, our mortgage revenue declined in the first quarter due to normal loan seasonality, a volatile interest rate environment and inflation pressures. That said, we saw sequential gains in mortgage loan origination during the first quarter and maintain the capability to scale and maximize mortgage opportunities as they emerge.”

Collins continued, “Across BNC, we remain intently focused on our strengths: cultivating community banking relationships, maintaining sensible lending practices and continuing to enhance our strong, stable and forward-looking marketplace position. These activities helped drive an $11.6 million first-quarter increase in loans held for investment. We also released an additional $550 thousand from our allowance for credit losses as pandemic related risks have subsided, in addition to the $350 thousand released at 2021-year end.

“As we look ahead to the rest of 2022, we are bolstered by BNC’s strong balance sheet and fiscal prudence. Our organization remains committed to improving financial performance and efficiently managing recently elevated liquidity levels. Operationally, we have several initiatives under way that target further efficiency, productivity and stronger customer experiences. Additionally, we are encouraged to see momentum in generating organic loan growth in the businesses and communities that we serve. Our superior customer service and support give us confidence in our ability to meet this need with a broad range of financial products and services.”

2022 Versus 2021 First Quarter Comparison

Net interest income for the first quarter of 2022 was $6.9 million, a decrease of $2.1 million, or 23.7%, from $9.1 million in the first quarter of 2021. The decrease primarily reflected lower loan balances and yields on loans partially offset by higher interest-bearing cash and debt securities, lower cost of deposits, and a reduction in certificates of deposit. PPP fees were $227 thousand in first quarter of 2022 compared to $1.8 million in the first quarter of 2021. Net interest margin decreased to 2.80% in the 2022 first quarter, compared to 3.57% in the year-earlier period.

First quarter interest income decreased $2.4 million, or 24.9%, to $7.3 million in 2022, compared to $9.7 million in the first quarter of 2021. The decrease is the result of lower loan balances, primarily lower balances of loans held for sale and PPP loans, in addition to lower yields on loans held for investment. The yield on average interest-earning assets was 2.96% in the first quarter of 2022, compared to 3.83% in the 2021 first quarter.

The average balance of interest-earning assets in the 2022 first quarter decreased by $29.4 million versus the same period of 2021, primarily due to $135.6 million and $25.2 million increases in interest-bearing cash and debt securities, respectively, more than offset by decreases in average loans held for sale and loans held for investment including PPP loans. Interest income for loans held for investment decreased $1.9 million. The average balance of loans held for investment decreased by $51.4 million with PPP loans accounting for $53.7 million of the decrease. The average balance of mortgage loans held for sale was $60.0 million, $140.1 million lower than the same period of 2021. Interest income from loans held for sale decreased $766 thousand due to lower average balances. The average balance of debt securities in the first quarter of 2022 was $204.4 million, $25.2 million higher than in the first quarter of 2021. Interest income from debt securities was $126 thousand higher compared to the same period of 2021.

Interest expense in the first quarter of 2022 was $392 thousand, a decrease of $270 thousand, or 40.8%, from the 2021 period. The cost of interest-bearing liabilities was 0.21% during the quarter, compared to 0.35% in the same period of 2021. The cost of core deposits in the first quarters of 2022 and 2021 was 0.15% and 0.26%, respectively.

At March 31, 2022, credit metrics remained stable with $1.5 million of nonperforming assets, representing a 0.15% nonperforming assets-to-total-asset ratio, compared to $1.7 million and 0.16% at December 31, 2021. The Company also released $550 thousand of its allowance for credit losses in the first quarter of 2022, compared to no provision recorded in the first quarter of 2021.

Non-interest income for the first quarter of 2022 was $5.5 million, compared to $17.5 million in the 2021 first quarter. The decrease was driven by mortgage banking revenues of $4.1 million in the first quarter of 2022, versus $16.1 million in the prior-year period. The Company’s mortgage business has managed through a transition to a lower level of originations compared to the pandemic-related historically high level of refinance activity and margins in the prior-year period. In the first quarter of 2022, BNC funded 760 mortgage loans with combined balances of $300.2 million, compared to 2,426 mortgage loans with combined balances of $874.8 million in the first quarter of 2021. Wealth management revenues decreased $9 thousand, or 1.7%, as assets under administration decreased as a result of overall market declines relative to the 2021 period.

Non-interest expense for the first quarter of 2022 decreased $2.6 million, or 18.9%, to $11.0 million, from $13.6 million in the first quarter of 2021. Non-interest expenses related to mortgage operations activity decreased by $2.5 million, or 32.0%, as management adjusted the scale of operations based on the marketplace opportunity. There were 140 full-time equivalent employees related to mortgage operations at March 31, 2022, compared to 163 at March 31, 2021. Combined expenses for community banking and the holding company decreased by $95 thousand, or 1.6%, compared to the 2021 period primarily due to reduced salary and data processing expense offset by higher professional services.

In the first quarter of 2022, income tax expense was $453 thousand, compared to $3.2 million in the first quarter of 2021. The effective tax rate was 23.5% in the first quarter of 2022, compared to 24.5% in the same period of 2021.

Net income was $1.5 million, or $0.41 per diluted share, in the first quarter of 2022, versus $9.8 million, or $2.73 per diluted share, in the first quarter of 2021.

Assets and Liabilities

Total assets were $987.2 million at March 31, 2022, and $1.0 billion at December 31, 2021.

Total loans held for investment were $532.2 million at March 31, 2022 compared to $529.8 million at December 31, 2021. PPP loan balances, included in loans held for investment, were $2.7 million at March 31, 2022 compared to $11.9 million at December 31, 2021. Loans held for sale at March 31, 2022, were $61.8 million, a decrease of $19.1 million when compared to December 31, 2021. Debt securities decreased $12.9 million from year-end 2021 while cash and cash equivalent balances totaled $155.0 million at March 31, 2022, compared to $188.1 million at December 31, 2021.

Total deposits decreased $52.3 million to $854.4 million at March 31, 2022, from $906.7 million at December 31, 2021. The Company was able to decrease deposit balances at the end of the first quarter of 2022 by moving non-core deposits off the balance sheet through the use of an associated banking network.

Trust assets under administration decreased 3.3%, or $13.5 million, to $396.0 million at March 31, 2022, from $409.5 million at December 31, 2021.

Asset Quality

The allowance for credit losses was $8.5 million at March 31, 2022, and $9.1 million at December 31, 2021. The allowance as a percentage of loans held for investment at March 31, 2022 decreased to 1.59% from 1.71% at December 31, 2021. Excluding $2.7 million of PPP loans, which are 100% guaranteed by the SBA, the allowance for credit losses as a percentage of loans held for investment at March 31, 2022, decreased to 1.60% compared to 1.75% at December 31, 2021.

Nonperforming assets, consisting of loans, were $1.5 million at March 31, 2022, and $1.7 million at December 31, 2021. The ratio of nonperforming assets-to-total-assets was 0.15% at March 31, 2022, and 0.16% at December 31, 2021. The Company did not hold any other real estate owned or repossessed assets at March 31, 2022. The Company did not hold any other real estate owned and held $17 thousand in repossessed assets at December 31, 2021.

At March 31, 2022, BNC had $8.0 million of classified loans and $1.5 million of loans on non-accrual. At December 31, 2021, BNC had $8.5 million of classified loans and $1.7 million of loans on non-accrual. BNC had $6.3 million of potentially problematic loans, which are risk rated “watch list”, at March 31, 2022, compared with $6.5 million as of December 31, 2021.

The Company continues to monitor the effects of the pandemic and its potential impact on customers. BNC considers the pandemic, along with other macroeconomic and geopolitical factors, when monitoring the performance of its loan portfolio and adjusting its allowance for credit losses.

BNC’s loans held for investment are concentrated geographically in North Dakota and Arizona which comprise 62% and 23% of the Company’s total loan portfolio, respectively. The North Dakota economy is influenced by the energy and agriculture industries. Energy supply and demand factors have recently increased oil prices, benefiting the oil industry and ancillary services. Legislation and economic conditions remain potential risks to energy markets and production activity and can present potential challenges to credit quality in North Dakota. Drought conditions were the primary risk factor in the North Dakota agriculture industry during the 2021 operating year and continue as we proceed through the first quarter of 2022. North Dakota livestock and grain operators face challenges that require close monitoring and could have an adverse impact on the state overall. The Arizona economy is influenced by the leisure and travel industries. Positive trends in both industries have been noted, but an extended slowdown in these industries may negatively impact credit quality in Arizona. BNC’s portfolio is constructed of various sized loans spread over a large number of industry sectors, although the Company manages meaningful concentrations of loans in hospitality and commercial real estate.

The following table approximates the Company’s significant concentrations by industry, excluding PPP loans of $2.7 million and $11.9 million, as of March 31, 2022 and December 31, 2021, respectively (in thousands):

Loans Held for Investment by Industry Sector

March 31, 2022

December 31, 2021

Non-owner occupied commercial real estate – not
otherwise categorized

$

170,764

32

%

$

157,608

30

%

Consumer, not otherwise categorized

75,557

14

75,519

14

Hotels

73,096

14

78,473

15

Healthcare and social assistance

35,870

7

36,531

7

Retail trade

32,198

6

35,173

7

Agriculture, forestry, fishing and hunting

27,954

5

26,922

5

Transportation and warehousing

22,270

4

21,499

4

Non-hotel accommodation and food service

19,655

4

18,838

4

Construction contractors

12,717

2

11,458

2

Other service

11,984

2

12,543

2

Mining, oil and gas extraction

10,080

2

10,327

2

Arts, entertainment and recreation

5,820

1

5,936

1

Professional, scientific, and technical services

5,209

1

3,738

1

Educational Services

5,158

1

1,724

Manufacturing

5,054

1

4,697

1

Real estate and rental and leasing support services

3,692

1

3,750

1

Public administration

3,481

1

3,108

1

Wholesale trade

2,969

1

3,325

1

All other

5,305

1

6,336

2

Gross loans held for investment (excluding PPP loans)

$

528,833

100

%

$

517,505

100

%

The hospitality industry is still in the process of recovering from the economic effects of the COVID-19 pandemic with a primary focus on hotel occupancy and restaurant utilization trends. Hotel operators in BNC’s loan portfolio are reporting positive trends, and in some cases stronger balance sheets. Despite positive trends within the hospitality industry, caution remains as labor shortages limit capacity in some cases, and government and financial institution support is expiring.

The Company’s loan portfolio and credit risk could still experience adversity from pandemic related risks, and this potential risk remains qualitatively captured in the Company’s allowance for credit losses.

Capital

Banks and bank holding companies operate under separate regulatory capital requirements. At March 31, 2022, the Company’s capital ratios exceeded all regulatory capital thresholds, including the capital conservation buffer.

A summary of BNC’s capital ratios at March 31, 2022, and December 31, 2021, is presented below:

March 31,

2022

December 31,

2021

BNCCORP, INC. (Consolidated)

Tier 1 leverage

12.14%

11.74%

Common equity tier 1 risk based capital

16.64%

16.54%

Tier 1 risk based capital

18.85%

18.77%

Total risk based capital

20.09%

20.02%

Tangible common equity

11.14%

10.98%

BNC National Bank

Tier 1 leverage

11.03%

10.65%

Common equity tier 1 risk based capital

17.13%

17.02%

Tier 1 risk based capital

17.13%

17.02%

Total risk based capital

18.38%

18.27%

The Common Equity Tier 1 ratio, which is generally a comparison of a bank’s core equity capital to its total risk weighted assets, is a measure of the current risk profile of the Bank’s asset base from a regulatory perspective. The Tier 1 leverage ratio, which is based on average assets, does not consider the mix of risk-weighted assets.

The Company routinely evaluates the sufficiency of its capital to ensure compliance with regulatory capital standards and to serve as a source of strength for the Bank. The Company manages capital by assessing the composition of capital and the amounts available for growth, risk, or other purposes.

About BNCCORP, INC.

BNCCORP, INC., headquartered in Bismarck, N.D., is a registered bank holding company dedicated to providing banking and wealth management services to businesses and consumers in its local markets. The Company operates community banking and wealth management businesses in North Dakota and Arizona from 11 locations. BNC also conducts mortgage banking from 9 locations in Illinois, Kansas, Michigan, Arizona and North Dakota.

This news release may contain “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of BNC. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of our management and on information currently available to management are generally identifiable by the use of words such as “expect”, “believe”, “anticipate”, “at the present time”. “plan”, “optimistic”, “intend”, “estimate”, “may”, “will”, “would”, “could”, “should”, “future” and other expressions relating to future periods. Examples of forward-looking statements include, among others, statements we make regarding our expectations regarding future market conditions and our ability to capture opportunities and pursue growth strategies, our expected operating results such as revenue growth and earnings and our expectations of the effects of the regulatory environment or current or future pandemics on our earnings for the foreseeable future. Forward-looking statements are neither historical facts nor assurances of future performance. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, but are not limited to: the impact of pandemics, the impact of current and future regulation; the risks of loans and investments, including dependence on local and regional economic conditions; competition for our customers from other providers of financial services; possible adverse effects of changes in interest rates, including the effects of such changes on mortgage banking revenues and derivative contracts and associated accounting consequences; risks associated with our acquisition and growth strategies; and other risks which are difficult to predict and many of which are beyond our control. In addition, all statements in this news release, including forward-looking statements, speak only of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.

This press release contains references to financial measures, which are not defined in GAAP. Such non-GAAP financial measures include tangible common equity to total period end assets ratio. These non-GAAP financial measures have been included as the Company believes they are helpful for investors to analyze and evaluate the Company’s financial condition.

(Financial tables attached)

# # #

BNCCORP, INC.

CONSOLIDATED FINANCIAL DATA

(Unaudited)

For the Quarter Ended,

(In thousands, except per share data)

March 31,

2022

December 31,

2021

March 31,

2021

SELECTED INCOME STATEMENT DATA

Interest income

$

7,301

$

7,785

$

9,719

Interest expense

392

410

662

Net interest income

6,909

7,375

9,057

Credit for credit losses

(550)

(350)

Non-interest income

5,512

7,725

17,490

Non-interest expense

11,045

11,291

13,621

Income before income taxes

1,926

4,159

12,926

Income tax expense

453

864

3,161

Net income

$

1,473

$

3,295

$

9,765

EARNINGS PER SHARE DATA

Basic earnings per common share

$

0.41

$

0.92

$

2.73

Diluted earnings per common share

$

0.41

$

0.92

$

2.73

BNCCORP, INC.

CONSOLIDATED FINANCIAL DATA

(Unaudited)

For the Quarter Ended,

(In thousands, except share data)

March 31,

2022

December 31,

2021

March 31,

2021

ANALYSIS OF NON-INTEREST INCOME

Bank charges and service fees

$

600

$

631

$

554

Wealth management revenues

536

549

545

Mortgage banking revenues

4,142

5,671

16,058

Gains on sales of loans, net

20

389

97

Other

214

485

236

Total non-interest income

$

5,512

$

7,725

$

17,490

ANALYSIS OF NON-INTEREST EXPENSE

Salaries and employee benefits

$

5,941

$

5,991

$

7,614

Professional services

950

1,171

1,772

Data processing fees

973

1,187

1,165

Marketing and promotion

1,355

931

999

Occupancy

583

543

550

Regulatory costs

119

123

115

Depreciation and amortization

311

313

328

Office supplies and postage

110

106

133

Other

703

926

945

Total non-interest expense

$

11,045

$

11,291

$

13,621

WEIGHTED AVERAGE SHARES

Common shares outstanding (a)

3,572,405

3,570,875

3,573,257

Dilutive effect of share-based compensation

960

613

410

Adjusted weighted average shares (b)

3,573,365

3,571,488

3,573,667

(a)

Denominator for basic earnings per common share

(b)

Denominator for diluted earnings per common share

BNCCORP, INC.

CONSOLIDATED FINANCIAL DATA

(Unaudited)

As of

(In thousands, except share, per-share and full-time
equivalent data)

March 31,

2022

December 31,

2021

March 31,

2021

SELECTED BALANCE SHEET DATA

Total assets

$

987,156

$

1,047,372

$

1,227,151

Loans held for sale-mortgage banking

61,821

80,923

179,453

Loans held for investment

532,182

529,793

588,974

Total loans

594,003

610,716

768,427

Allowance for credit losses

(8,475)

(9,080)

(10,277)

Cash and cash equivalents

155,020

188,060

242,713

Debt securities available for sale

196,030

208,978

171,755

Earning assets

928,439

LEAVE A REPLY

Please enter your comment!
Please enter your name here