BNCCORP, INC. REPORTS FOURTH QUARTER NET INCOME OF $1.5 MILLION, OR $0.41 PER DILUTED SHARE

2022 Versus 2021 Fourth Quarter Comparison

Net income in the fourth quarter of 2022 was $1.5 million compared to $3.3 million in the same period of 2021. Fourth quarter 2022 earnings per diluted share was $0.41 versus $0.92 in the fourth quarter of 2021. The year-over-year decrease was primarily due to lower mortgage revenues, reduced gains on sale of loans, and provision for credit losses, partially offset by higher net interest income, increased bank fees and service charges, and lower non-interest expense.

Net interest income for the fourth quarter of 2022 was $8.6 million, an increase of $1.2 million, or 16.1%, from $7.4 million in the fourth quarter of 2021. The increase was primarily the result of growth in loans held for investment and higher yields and was partially offset by reductions in PPP loans and the associated fees and increased cost of deposits and subordinated debentures. PPP fees included in interest income were $471 thousand higher in the fourth quarter of 2021 compared to the same period of 2022. Net interest margin substantially increased to 3.94% in the 2022 fourth quarter from 2.88% in the year-earlier period.

Fourth quarter interest income increased by $1.9 million, or 24.2%, to $9.7 million in 2022, compared to $7.8 million in the fourth quarter of 2021. The increase is the result of higher yields on interest-bearing cash, higher yields on loans and a $26.0 million quarter-over-quarter increase in average loan balances. As a result of these improvements, the yield on average interest-earning assets substantially improved to 4.45% in the fourth quarter of 2022, compared to 3.04% in the 2021 fourth quarter. It is noteworthy that the Company's variable rate assets have started to re-price in step with recent interest rate movements by the Federal Reserve as well as in response to higher yields on new loan originations.

The average balance of interest-earning assets in the 2022 fourth quarter decreased by $154.7 million versus the same period of 2021, primarily due to a $147.8 million decrease in interest-bearing cash, $46.2 million decrease in average loans held for sale, offset by a $72.2 million increase in average loans held for investment, including the forgiveness of $22.6 million of PPP loans. Interest income from loans held for investment increased $1.2 million on a quarter-over-quarter basis. The quarterly average balance of mortgage loans held for sale was $34.3 million, $46.2 million lower than the same period of 2021. Interest income from loans held for sale decreased $52 thousand primarily due to lower average balances, partially offset by a 2.87% increase in yield. The average balance of debt securities in the fourth quarter of 2022 was $177.3 million, $34.4 million lower than in the fourth quarter of 2021. Despite that decrease, interest income from debt securities was $209 thousand higher compared to the same period of 2021.

Interest expense in the fourth quarter of 2022 was $1.1 million, an increase of $692 thousand, or 168.8%, from the 2021 period. The 2022 fourth quarter average balance of deposits decreased by $118.6 million when compared to fourth quarter 2021.  The primary driver of the decrease was the movement of deposits off the balance sheet at the end of the first quarter of 2022 through the use of an associated banking network coupled with managing the balances of our certificates of deposit. The cost of interest-bearing liabilities was 0.72% during the fourth quarter of 2022, compared to 0.22% in the same period of 2021. The cost of core deposits in the fourth quarters of 2022 and 2021 was 0.45% and 0.15%, respectively, as the Company continues to manage its overall cost of deposits while indexed rates continue to substantially increase.

As of December 31, 2022, credit metrics remained stable with $1.4 million of nonperforming assets, representing a 0.15% nonperforming assets-to-total-asset ratio. These results compare favorably to $1.7 million in nonperforming assets, a 0.16% ratio of nonperforming assets-to-total-asset on December 31, 2021. The Company recorded a $250 thousand provision for credit losses in the fourth quarter of 2022 compared to $350 thousand in released provisions in the fourth quarter of 2021. The allowance for credit losses decreased to 1.43% of loans held for investment (excluding $195 thousand of PPP loans) on December 31, 2022, compared to 1.75% on December 31, 2021 (excluding $11.9 million of PPP loans).

Non-interest income for the fourth quarter of 2022 was $3.4 million, compared to $7.7 million in the 2021 fourth quarter. The decrease was driven by a reduction in mortgage banking revenues to $1.1 million in the fourth quarter of 2022, versus $5.7 million in the same prior-year period. Consistent with the overall performance of the industry, the Company's mortgage business was negatively impacted by higher interest rates and higher home values which impacted both purchase and refinance originations. BNC funded 352 mortgage loans in the fourth quarter of 2022 with combined balances of $144.1 million. That compares to 1,147 mortgage loans with combined balances of $420.5 million in the fourth quarter of 2021. Bank charges and service fees were $520 thousand higher quarter-over-quarter due to higher letter of credit fees, deposit account charges, and from the movement of deposits to one-way sell positions. Through the use of an associated banking network, the Company is able to generate fee income on deposits that are not otherwise deployed. The deposits are placed with another financial institution by the associated banking network to meet their liquidity needs, but can be recaptured for future liquidity use by the Company at any time. Wealth management revenues decreased $85 thousand, or 15.5%, as strong growth in new assets under administration has been more than offset by elevated distributions and overall market declines relative to the 2021 period. Gains on sales of loans were $20 thousand in the fourth quarter of 2022, compared to $389 thousand in the prior year's quarter, reflecting a normal level of volatility in the sale of SBA loans.

Non-interest expense for the fourth quarter of 2022 decreased $1.4 million, or 12.0%, to $9.9 million from $11.3 million in the fourth quarter of 2021. Non-interest expenses related to mortgage operations decreased by $1.7 million, or 32.3%, as management continues to scale its operations to match marketplace opportunity. There were 66 full-time equivalent employees engaged in mortgage operations as of December 31, 2022 compared to 139 on December 31, 2021. Combined expenses for community banking and the holding company increased by $367 thousand, or 6.2%, compared to the 2021 period primarily due to higher salary, occupancy, and other expenses.

In the fourth quarter of 2022, income tax expense was $284 thousand compared to $864 thousand in the fourth quarter of 2021. The effective tax rate was 16.2% in the fourth quarter of 2022, compared to 20.8% in the same period of 2021.

Tangible book value per common share on December 31, 2022, was $28.19, compared to $32.35 at December 31, 2021. The decline in tangible book value per common share was driven by dividends declared in May 2022 as well as by the negative impact of higher long-term rates on the tax-effected fair value of the debt securities available for sale portfolio that reduced accumulated other comprehensive income (losses) that were, in turn, partially offset by retained earnings. Net of these factors the Company's tangible common equity capital ratio was 10.63% on December 31, 2022, compared to 10.98% on December 31, 2021.

Total assets were $943.3 million as of December 31, 2022, compared to $1.0 billion on December 31, 2021. Total deposits were $819.6 million at December 31, 2022, compared to $906.7 million on December 31, 2021.

2022 Versus 2021 Year-End Comparison

Net interest income in 2022 was $31.0 million, a decrease of $362 thousand, or 1.2%, from $31.3 million in 2021. The decrease primarily reflects lower balances of loans held for sale and lower yield on loans held for investment partially offset by lower deposit balances and higher yield on interest-bearing cash. Net interest margin increased to 3.41% in 2022 compared to 3.02% in 2021.

Interest income increased $156 thousand, or 0.5%, to $33.6 million in 2022, compared to $33.5 million in 2021. The increase is the result of higher yields on interest-bearing cash partially offset by lower loans held for sale balances and PPP loans. PPP fees included in interest income were $294 thousand in 2022 compared to $3.5 million in 2021. The yield on average interest-earning assets was 3.70% in 2022, compared to 3.22% in 2021.

The average balance of interest-earning assets in 2022 decreased by $129.6 million versus the same period of 2021, driven by decreases in interest-bearing cash of $67.4 million, a decrease in loans held for sale of $75.0 million, and partially offset by an increase in loans held for investment of $7.8 million (including PPP loans) and a $3.4 million increase in debt securities year-over-year. Interest income for loans held for investment decreased $322 thousand year-over-year. The $7.8 million increase in average balance of loans held for investment was comprised of an increase of $53.6 million increase in average loans held for investment, partially offset by a $45.8 million decrease in average PPP loans. Interest income from loans held for sale decreased by $1.1 million due to lower average balances partially offset by higher yields. Interest income from debt securities was $597 thousand higher in 2022 compared to 2021 as a result of higher yields.

Interest expense in 2022 was $2.7 million, an increase of $518 thousand, or 24.2%, from the 2021 period. The cost of interest-bearing liabilities was 0.41% in 2022, compared to 0.28% in the same period of 2021. The cost of core deposits in 2022 and 2021 were 0.26% and 0.20%, respectively.

During 2022, the Company credited provision expense to release $150 thousand of its allowance for credit losses, which was comprised of a $550 thousand credit to provision expense in the first quarter of 2022, a provision of $150 thousand in the third quarter of 2022, and a provision of $250 thousand in the fourth quarter of 2022. By comparison, the Company released $350 thousand of its allowance for credit losses in 2021. Early in 2022, the Company reduced its allowance for credit losses due to pandemic risks subsiding. During the third and fourth quarters of 2022, the Company increased its allowance for credit losses due to significant loan growth accompanied by increased economic uncertainty.

Non-interest income in 2022 was $19.1 million compared to $44.7 million in 2021, driven by a reduction in mortgage banking revenues to $11.5 million in 2022 versus $37.8 million in the prior year. In 2022, the Company's mortgage business was negatively impacted by higher interest rates and higher home values affecting both purchase and refinance activity. In line with the overall industry, BNC funded 2,522 mortgage loans in 2022 with combined balances of $1.0 billion compared to 6,448 mortgage loans with combined balances of $2.4 billion in 2021. Bank charges and service fees were $3.7 million, or 59.8%, higher when comparing 2022 to 2021 due to higher fees for letters of credit, deposit account charges, and from the movement of deposits to one-way sell positions. Wealth management revenues decreased $224 thousand, or 10.2%, as strong growth in new assets under administration was more than offset by elevated distributions and overall market declines relative to 2021. Other income includes $532 thousand from the sale of the Company's Golden Valley, MN property in 2022 compared to $589 thousand from the sale of the loans and deposits from the same location in 2021.

Non-interest expense in 2022 decreased $5.7 million, or 12.0%, to $41.9 million, from $47.6 million in 2021. Non-interest expenses related to mortgage activity decreased by $6.1 million, or 24.7%, as management continues to scale its operations to match market opportunities. Combined expenses for community banking and the holding company increased $365 thousand when compared to the 2021 due to a combination of lower salary, data processing, and depreciation expense largely offset by higher marketing, occupancy, and other expenses.

In 2022, income tax expense was $1.8 million, compared to $6.8 million in 2021. The Company's effective tax rate was 22.0% in 2022, compared to 23.5% in 2021.

Net income was $6.5 million, or $1.82 per diluted share, in 2022, versus $22.0 million, or $6.15 per diluted share, in 2021.

Assets and Liabilities

Total assets were $943.3 million at December 31, 2022 versus $1.0 billion at December 31, 2021.

Total loans held for investment were $616.6 million on December 31, 2022 compared to $529.8 million on December 31, 2021. PPP loan balances, included in loans held for investment, were $195 thousand on December 31, 2022 compared to $11.9 million at December 31, 2021. Loans held for sale as of December 31, 2022, were $37.8 million, a decrease of $43.2 million compared to December 31, 2021. Debt securities decreased $34.1 million from year-end 2021 while cash and cash equivalent balances totaled $74.0 million on December 31, 2022 compared to $188.1 million on December 31, 2021.

Total deposits decreased $87.1 million to $819.6 million on December 31, 2022, from $906.7 million on December 31, 2021. The Company was able to decrease deposit balances beginning late in the first quarter of 2022 by moving deposits off the balance sheet through the use of an associated banking network.

Trust assets under administration decreased 13.9%, or $56.8 million, to $352.7 million at December 31, 2022, from $409.5 million at December 31, 2021 as the Company's strong growth in new assets was more than offset by elevated distributions and overall market declines during 2022.

Asset Quality

The allowance for credit losses was $8.8 million as of December 31, 2022, versus $9.1 million on December 31, 2021. The allowance as a percentage of loans held for investment on December 31, 2022 decreased to 1.43% from 1.71% as of December 31, 2021. Excluding PPP loans, which are 100% guaranteed by the SBA, the allowance for credit losses as a percentage of loans held for investment on December 31, 2022, decreased to 1.43% compared to 1.75% on December 31, 2021.

Nonperforming assets, consisting of loans, decreased to $1.4 million on December 31, 2022 compared to $1.7 million on December 31, 2021. The ratio of nonperforming assets-to-total-assets was 0.15% at December 31, 2022 and 0.16% at December 31, 2021. As of December 31, 2022, the Company did not hold any other real estate and held $64 thousand in repossessed assets. By comparison as of December 31, 2021, the Company did not hold any other real estate and held $17 thousand in repossessed assets.

As of December 31, 2022, classified loans decreased to $3.6 million with $1.4 million of loans on non-accrual. These results compare favorably to year-end 2021 where the Company reported $8.5 million of classified loans and $1.7 million of loans on non-accrual. Similarly, as of year-end 2022 the Company had $2.5 million of potentially problematic loans, which are risk rated as "watch list", compared with $6.5 million of such loans as of December 31, 2021.

The Company continues to monitor the lingering but diminishing effects of the pandemic and its potential impact on customers. Additional macroeconomic and geopolitical factors have emerged in recent months and are being monitored for their possible impact on the performance of the loan portfolio.

BNC's loans held for investment are geographically concentrated in North Dakota and Arizona, comprising 59% and 24% of the Company's total loans held for investment portfolio, respectively.

The North Dakota economy is influenced by the energy and agriculture industries. Changes in energy supply and demand have recently caused an increase in oil prices to the benefit of the oil industry and ancillary services. Potential risks to North Dakota's energy industry include the possibility of adverse legislation and changes in economic conditions that reduce energy demand. Depending on the severity of their impact, these factors could present potential challenges to credit quality in North Dakota. 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. While the Company's portfolio includes various sized loans spread over a large number of industry sectors, it has meaningful concentrations of loans in hospitality and commercial real estate.

The following table approximately describes the Company's concentrations by industry. The amounts exclude PPP loans of $195 thousand and $11.9 million as of December 31, 2022 and December 31, 2021, respectively:

Loans Held for Investment by Industry Sector
(in thousands)	December 31, 2022						December 31, 2021
Non-owner occupied commercial real estate – not otherwise categorized	$	177,674		29	%		$	157,608		30	%
Hotels		91,388		15				78,473		15
Consumer, not otherwise categorized		85,648		14				75,519		14
Retail trade		36,607		6				35,173		7
Healthcare and social assistance		33,327		5				36,531		7
Agriculture, forestry, fishing and hunting		30,641		5				26,922		5
Transportation and warehousing		23,951		4				21,499		4
Mining, oil and gas extraction		22,480		4				10,327		2
Non-hotel accommodation and food service		21,538		4				18,838		4
Arts, entertainment and recreation		19,024		3 Werbung Mehr Nachrichten zur BNC Aktie kostenlos abonnieren E-Mail-Adresse Bitte überprüfe deine die E-Mail-Adresse. Benachrichtigungen von ARIVA.DE (Mit der Bestellung akzeptierst du die Datenschutzhinweise) -1 Vielen Dank, dass du dich für unseren Newsletter angemeldet hast. Du erhältst in Kürze eine E-Mail mit einem Aktivierungslink. Hinweis: ARIVA.DE veröffentlicht in dieser Rubrik Analysen, Kolumnen und Nachrichten aus verschiedenen Quellen. Die ARIVA.DE AG ist nicht verantwortlich für Inhalte, die erkennbar von Dritten in den „News“-Bereich dieser Webseite eingestellt worden sind, und macht sich diese nicht zu Eigen. Diese Inhalte sind insbesondere durch eine entsprechende „von“-Kennzeichnung unterhalb der Artikelüberschrift und/oder durch den Link „Um den vollständigen Artikel zu lesen, klicken Sie bitte hier.“ erkennbar; verantwortlich für diese Inhalte ist allein der genannte Dritte. Andere Nutzer interessierten sich auch für folgende News 10:30 - PR Newswire Cadogan Energy Solutions Plc - Notice of AGM 07:42 - PR Newswire BlackRock Sustainable American Income Trust Plc - Mandatory Closed Period Compliance with MAR 02:00 - PR Newswire FirstGroup Plc - Transaction in Own Shares