Published:
BNCCORP, Inc. Reports Net Income of $700 Thousand, or $0.21 Per Diluted Share, for Second Quarter
BISMARCK, N.D., July 28 /PRNewswire-FirstCall/ -- BNCCORP, Inc. (BNC)
(Pink Sheets: BNCC), which operates community banking and wealth management
businesses inArizona,Minnesota andNorth Dakota, and has mortgage banking
offices inIowa,Kansas andMissouri, today reported financial results for the
second quarter and six months ended June 30, 2008.
Net income from continuing operations was $700 thousand, or $0.21 per
diluted share, for the second quarter ended June 30, 2008. This compared to a
net loss from continuing operations of $(1.977) million, or $(0.56) per
diluted share, in the second quarter of 2007. Net income from continuing
operations for the first half of 2008 was $2.062 million, or $0.61 per diluted
share, compared to a net loss of $(1.716) million, or $(0.49) per diluted
share, for the first half of 2007.
BNC's increase in net income from continuing operations in the second
quarter of 2008 was primarily driven by higher net interest income, continued
growth in loans held for investment, non-interest income from mortgage banking
and wealth management revenues, as well as lower non-interest expenses.
Losses from continuing operations in the 2007 periods reflected various
charges arising from actions taken by BNC to position itself for improved
performance in its core businesses following the sale of its former insurance
segment.
Net income, which combines results of both continuing and discontinued
operations, was $700 thousand, or $0.21 per diluted share, in the second
quarter of 2008 compared to $1.827 million, or $0.52 per diluted share, in the
second quarter of 2007. Net income for the first half of 2008 was $2.062
million, or $0.61 per diluted share, compared to $3.384 million, or $0.96 per
diluted share, in the first half of 2007. Results from discontinued
operations in the 2007 periods included a gain on the sale of substantially
all of the assets of BNC's former insurance segment.
Gregory K. Cleveland, BNCCORP President and Chief Executive Officer,
stated, "Our profitable second quarter and year-to-date results represent a
solid accomplishment in the vortex of this turbulent financial marketplace. By
remaining focused on our core businesses, we have achieved growth in top-line
revenues while managing asset quality at a time when credit risk is elevating
throughout the industry. Fortunately, a significant portion of our business
is inNorth Dakota where economic conditions are relatively stable due to the
health of the energy and agribusiness industries."
Second Quarter Continuing Operations
Net interest income for the second quarter of 2008 was $6.765 million, an
increase of $1.405 million, or 26.2%, from $5.360 million in the same period
of 2007. The net interest margin for the current period increased to 3.74%
from 3.66% in the same period of 2007, due to a higher balance of loans and
investment securities and lower rates on interest bearing liabilities.
The provision for credit losses in the second quarter of 2008 was $2.000
million compared to $700 thousand in the same period of 2007. The provision
for credit losses increased due to higher balances of loans in our portfolio
and the decline in asset values occurring in the current environment.
Non-interest income for the second quarter of 2008 was $3.358 million,
compared to a loss of $(284) thousand in second quarter 2007. The increase can
be partially attributed to increases in our mortgage banking revenues of $702
thousand and wealth management revenues of $422 thousand. Our mortgage banking
capabilities have expanded with the addition of four residential loan
production offices inIowa,Kansas andMissouri, which primarily originate FHA
loans that are sold servicing released. Non-interest income also increased in
2008 due to a gain of approximately $800 thousand on the sale of the building
formerly occupied by our insurance agency. In 2007, non-interest income was
depressed by losses on sales of securities of $2.026 million related to a
balance sheet repositioning strategy.
In the second quarter of 2008, non-interest expense decreased by $661
thousand to $ 7.078 million, from $7.739 million in the same period of 2007.
Non-interest expenses in 2008 include increases in compensation related to
expanded mortgage banking operations and approximately $400 thousand of costs
associated with OREO properties. In 2007, non-interest expense included $1.535
million of costs incurred to prepay FHLB advances.
The effective tax rate on income from continuing operations during the
second quarter of 2008 was 33.0% as compared to 41.2% in the second quarter of
2007.
Overall, net income from continuing operations in the second quarter of
2008 was $700 thousand, or $0.21 per diluted share, compared to a net loss of
$(1.977), or $(0.56) per diluted share for the same period in 2007.
Continuing Operations for the Six Months ended June 30, 2008
Net interest income was $13.037 million, an increase of $2.878 million, or
28.3%, from $10.159 million in the same period of 2007, while the net interest
margin for the current period improved to 3.76% from 3.44%. The increase was
due to a higher balance of loans and investment securities and lower rates on
interest bearing liabilities.
The provision for credit losses was $2.800 million in the first half of
2008 compared to $950 thousand in the first half of 2007. The provision for
credit losses increased due to higher balances of loans in our portfolio and
the decline in asset values occurring in the current environment.
Non-interest income for the first half of 2008 was $5.658 million, an
increase of $4.245 million, or 300%, compared to the same period in 2007. The
increase can be attributed to increases in our mortgage banking and wealth
management businesses. Wealth management income increased due to an increase
of new products for which BNC is compensated to assemble documents and act as
a custodial trustee. Non-interest income in 2008 also includes a significant
gain on sale of property. In 2007, non-interest income included losses on
sales of securities.
In the first half of 2008, non-interest expense decreased by $908 thousand
to $12.817 million, from $13.725 million in the same period of 2007. The 2008
period reflected increases in compensation and real estate owned costs while
2007 included costs to terminate FHLB advances.
The effective tax rate of income taxes in 2008 was 33.0% while there was a
tax benefit of $1.387 million in the first half of 2007. The benefit in 2007
related to losses on sales of securities, prepayment penalties incurred and
interest on tax exempt securities.
Overall, net income from continuing operations in the first half of 2008
was $2.062 million, or $0.61 per diluted share, compared to a net loss of
$(1.716) million, or $(0.49) per diluted share for the same period in 2007.
Discontinued Operations
In the second quarter of 2007, BNC sold substantially all of the assets of
its insurance agency. As a result, discontinued operations in 2008 have only
nominal activity. In the 2007 periods, net income from discontinued operations
was $3.804 million, or $1.08 per diluted share for the second quarter, and was
$5.100 million, or $1.45 per diluted share, for the first six months.
Assets, Liabilities, Equity and Regulatory Capital
Total assets were $821.7 million at June 30, 2008, increasing from $699.6
million at December 31, 2007. Loans held for investment rose $28.3 million, to
$525.9 million, and investment securities increased $77.4 million to $200.3
million. Organic growth fueled the increase in loans, while investments
increased as a result of our strategy to leverage our balance sheet in order
to increase net interest income.
Total liabilities at June 30, 2008 were $764.8 million compared to $639.9
million at December 31, 2007. Deposit balances increased $83.5 million, to
$625.3 million, due to organic growth and issuances of callable brokered
deposits which were utilized to fund our leverage strategy. Short term,
variable rate borrowings increased as proceeds from these obligations were
used to fund assets that are expected to repay or re-price in the near term.
Total common stockholders' equity was $56.9 million at June 30, 2008,
compared to $59.7 million at December 31, 2007. The book value per common
share was $17.25 as of June 30, 2008, compared to $17.11 as of December 31,
2007.
In the first half of 2008, the Company repurchased 200,326 shares of its
previously outstanding common stock for approximately $2.582 million, at an
average cost of $12.43 per share.
The Company's tier 1 leverage ratio was 9.76% at June 30, 2008, compared
with 12.01% at December 31, 2007. The tier 1 risk-based capital ratio was
11.37% at June 30, 2008, versus 12.58% at December 31, 2007. The total risk-
based capital ratio was 12.99% at June 30, 2008, versus 14.26% at December 31,
2007.
At June 30, 2008, the Company's subsidiary, BNC National Bank, had a tier
1 leverage ratio of 10.20%, a tier 1 risk-based capital ratio of 11.88% and a
total risk-based capital ratio of 12.93%. BNC National Bank's total capital of
$86.8 million was $19.7 million greater than the $67.1 million that was
required to meet the "well-capitalized" threshold.
Trust assets under supervision declined to $338.1 million at June 30, 2008
from $358.6 million at December 31, 2007, mostly due to the effect of market
conditions on investment portfolios. Our wealth management business receives
custodial trustee fees for accumulating and maintaining documents for
insurance products sold by others. These fees have grown steadily in the last
eighteen months.
Asset Quality
The Company is carefully monitoring asset quality in response to the
current economic challenges and expects credit risk to remain elevated for the
remainder of 2008 and into 2009. The provision for credit losses in the recent
quarter is reflective of the environment, and we anticipated that provisions
for credit losses will be elevated for the foreseeable future.
The allowance for credit losses was $7.1 million and $6.6 million at
June 30, 2008 and December 31, 2007, respectively. The allowance for credit
losses as a percentage of total loans at June 30, 2008 was 1.27%, compared
with 1.26% at December 31, 2007. The allowance for credit losses as a
percentage of loans and leases held for investment at June 30, 2008 was 1.34%,
compared with 1.33% at December 31, 2007. The ratio of total nonperforming
assets to total assets was 1.57% at June 30, 2008, compared with 0.77% at
December 31, 2007. The ratio of the allowance for credit losses to total
nonperforming loans as of June 30, 2008 was 90% compared to 122% at December
31, 2007.
At June 30, 2008 BNC had $18.4 million of classified loans and $7.2
million of loans on non-accrual. This compares to $16.4 million of classified
loans and $5.4 million of loans on non-accrual at December 31, 2007. The
balances of classified loans and non-accrual loans are currently higher than
they have been in recent years. We expect these balances to remain elevated
for the foreseeable future.
BNC has concentrations of land and construction loans. At June 30, 2008
and December 31, 2007, the Company had construction loans of $34.1 million and
$68.8 million, respectively. At June 30, 2008 and December 31, 2007 the
Company had land and land development loans aggregating $68.5 million and
$79.0 million, respectively.
Outlook
Mr. Cleveland noted, "BNC is fortunate to have a footprint in the stable
North Dakota market and a significant base of regulatory capital. In many
regions of the country, however, real estate values are declining and we
expect this trend to continue to produce credit quality challenges for much of
the banking industry. While no institution is immune to these economic forces,
we believe our fundamental strengths will allow BNC to weather the credit
issues as we focus on growing our core businesses."
BNCCORP, Inc., headquartered inBismarck, 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, mortgage banking and wealth management businesses in
Arizona,Minnesota andNorth Dakota from 20 locations. BNC also conducts
mortgage banking from 4 locations inIowa,Kansas andMissouri.
This news release my contain "forward-looking statements" within the
meaning 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", "plan", "intend",
"estimate", "may", "will", "would", "could", "should", or other expressions.
We caution readers that these forward-looking statements, including, without
limitation, those relating to our future business prospects, revenues, working
capital, liquidity, capital needs, interest costs and income, are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those indicated in the forward-looking statements due to
several important factors. These factors include, but are not limited to:
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 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.
(Financial tables attached)
BNCCORP, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
For the Quarter For the Six Months
(In thousands, except Ended June 30, Ended June 30,
per share data) 2008 2007 2008 2007
SELECTED INCOME
STATEMENT DATA
Interest income $11,496 $11,133 $22,881 $22,009
Interest expense 4,731 5,773 9,844 11,850
Net interest income 6,765 5,360 13,037 10,159
Provision for credit
losses 2,000 700 2,800 950
Non-interest income
(loss) 3,358 (284) 5,658 1,413
Non-interest expense 7,078 7,739 12,817 13,725
Income (loss) from
continuing operations
before income taxes 1,045 (3,363) 3,078 (3,103)
Income tax provision
(benefit) 345 (1,386) 1,016 (1,387)
Income (loss) from
continuing operations 700 (1,977) 2,062 (1,716)
Discontinued operations:
Income from
discontinued
insurance segment - 6,084 - 8,154
Income tax provision - 2,280 - 3,054
Income from
discontinued
operations - 3,804 - 5,100
Net income $700 $1,827 $2,062 $3,384
For the Quarter For the Six Months
Ended June 30, Ended June 30,
(In thousands, except
per share data) 2008 2007 2008 2007
BASIC EARNINGS PER SHARE
Income (loss) from
continuing operations $0.22 $(0.56) $0.62 $(0.49)
Income from
discontinued
insurance segment,
net of income taxes - 1.08 - 1.45
Basic earnings per
common share $0.22 $0.52 $0.62 $0.96
DILUTED EARNINGS PER SHARE
Income (loss) from
continuing operations $0.21 $(0.56) $0.61 $(0.49)
Income from discontinued
insurance segment, net
of income taxes - 1.08 - 1.45
Diluted earnings per
common share $0.21 $0.52 $0.61 $0.96
BNCCORP, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(In thousands, except As of
share, per share and June 30, December 31, June 30,
full time equivalent data) 2008 2007 2007
SELECTED BALANCE SHEET DATA*
Total assets $821,721 $699,580 $623,751
Participating interests in
mortgage loans 25,333 24,357 18,183
Loans and leases held for
investment 525,875 497,556 423,975
Total loans 556,966 521,913 442,399
Allowance for credit losses (7,065) (6,599) (4,308)
Investment securities available
for sale 200,312 122,899 107,306
Other real estate owned and
repossessed assets 5,098 - -
Total deposits 625,339 541,873 503,388
Other borrowings 131,180 89,840 29,468
*From continuing operations
OTHER SELECTED DATA
Off-balance sheet
depository balances $74,798 $11,523 $ 58,461
Net unrealized gains (losses)
in investment portfolio,
pretax $(1,728) $2,278 $(1,069)
Trust assets under supervision $338,062 $358,611 $334,936
Total common stockholders'
equity $56,941 $59,730 $ 60,084
Book value per common share $17.25 $17.11 $16.75
Effect of net unrealized gains
(losses) on securities
available for sale, net of tax,
on book value per common share $(0.32) $0.40 $ (0.18)
Full time equivalent employees 228 169 170
Common shares outstanding 3,301,211 3,491,337 3,587,567
CAPITAL RATIOS
Tier 1 leverage 9.76% 12.01% 12.23%
Tier 1 risk-based capital 11.37% 12.58% 14.99%
Total risk-based capital 12.99% 14.26% 16.23%
BNCCORP, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
For the Quarter For the Six Months
Ended June 30, Ended June 30,
(In thousands) 2008 2007 2008 2007
AVERAGE BALANCES*
Total assets $782,001 $640,555 $751,512 $650,253
Participating
interests in
mortgage loans 25,121 29,153 23,914 35,336
Loans and leases held
for investment 520,678 388,012 513,783 369,735
Total loans 550,930 417,874 540,449 405,614
Earning assets 727,412 586,611 696,950 595,794
Deposits 601,915 515,613 574,846 522,327
Common stockholders'
equity 58,602 59,321 59,809 57,877
*From continuing operations
KEY RATIOS*
Return on average common
stockholders' equity 4.81% (13.37)% 6.93% (5.98)%
Return on average assets 0.36% (1.28)% 0.55% (0.53)%
Net interest margin 3.74% 3.66% 3.76% 3.44%
Efficiency ratio 69.92% 152.47% 68.56% 118.61%
*From continuing operations
KEY RATIOS
Return on average common
stockholders' equity - 12.35% - 11.79%
Return on average assets - 1.14% - 1.05%
BNCCORP, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
As of
June 30, December 31, June 30,
(In thousands) 2008 2007 2007
ASSET QUALITY*
Loans 90 days or more
delinquent and still
accruing interest $639 $- $1
Non-accrual loans 7,184 5,399 100
Total nonperforming loans $7,823 $5,399 101
Other real estate owned and
repossessed assets 5,098 - -
Total nonperforming assets $12,921 $5,399 $101
Allowance for credit losses $7,065 $6,599 $ 4,308
Ratio of total nonperforming
loans to total loans 1.40% 1.03% 0.02%
Ratio of total nonperforming
assets to total assets 1.57% 0.77% 0.02%
Ratio of allowance for credit
losses to loans and leases held
for investment 1.34% 1.33% 1.02%
Ratio of allowance for credit
losses to total loans 1.27% 1.26% 0.97%
Ratio of allowance for credit
losses to total nonperforming
loans 90% 122% 4,265%
*From continuing operations
For the Quarter For the Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Changes in Allowance
for Credit Losses:*
Balance, beginning of
period $7,178 $ 3,615 $6,599 $ 3,370
Provision charged to
operations expense 2,000 700 2,800 950
Loans charged off (2,145) (8) (2,377) (14)
Loan recoveries 32 1 43 2
Balance, end of period $7,065 $ 4,308 $7,065 $ 4,308
Ratio of net charge-
offs to average total
loans (0.384)% (0.002)% (0.432)% (0.003)%
Ratio of net charge-
offs to average total
loans, annualized (1.534)% (0.007)% (0.864)% (0.006)%
*From continuing operations
BNCCORP, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
For the Quarter For the Six Months
(In thousands, except Ended June 30, Ended June 30,
share data) 2008 2007 2008 2007
ANALYSIS OF NON-
INTEREST INCOME*
Bank charges and service
fees $518 $558 $1,009 $1,099
Wealth management revenues 768 346 1,524 802
Mortgage banking revenues 776 74 750 115
Gains on sales of
commercial loans 253 614 1,039 936
Net gain (loss) on
sales of assets 794 (2,026) 794 (2,026)
Other 249 150 542 487
Total non-interest
income (loss) $3,358 $(284) $5,658 $1,413
*From continuing operations
ANALYSIS OF NON-
INTEREST EXPENSE*
Salaries and employee
benefits $3,938 $3,674 $7,361 $7,114
Occupancy 547 537 989 1,074
Data processing fees 522 565 931 1,166
OREO expense 402 - 402 -
Depreciation and
amortization 327 429 669 890
Professional services 294 226 482 380
Marketing and promotion 267 159 462 349
Office supplies,
telephone and postage 169 122 376 253
FDIC and other assessments 56 59 110 116
Prepayment penalties on
early extinguishment of
FHLB advances - 1,535 - 1,535
Other 556 433 1,035 848
Total non-interest
expense $7,078 $7,739 $12,817 $13,725
*From continuing operations
WEIGHTED AVERAGE SHARES
Common shares
outstanding (a) 3,248,101 3,501,544 3,327,961 3,501,280
Incremental shares
from assumed conversion
of options and
contingent shares 46,458 71,637 44,059 63,405
Adjusted weighted
average shares (b) 3,294,559 3,573,181 3,372,020 3,564,685
(a) Denominator for Basic Earnings Per Common Share
(b) Denominator for Diluted Earnings Per Common Share
SOURCE BNCCORP, Inc.
Copyright © 2008, PRNewswire
Copyright © 2008, NewsBlaze,
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