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Tuesday, 07/28/2015 10:33:25 AM

Tuesday, July 28, 2015 10:33:25 AM

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BNCCORP, INC. Reports Second Quarter Net Income Of $2.3 Million, Or $0.52 Per Diluted Share
2015 Second Quarter Highlights

- Income before taxes increases by 9.4%

- Net interest income increases 1.5%, non-interest income increases by 25.7% and non-interest expense increases by 8.7% compared to 2014 second quarter

- The provision for credit losses was $0 in the second quarter compared to a reversal of previous credit provisions of $400 thousand in the second quarter of 2014

- Nonperforming assets were 0.11% of total assets as of June 30, 2015

- Return on equity was 11.78% and return on assets was 0.99% in the second quarter of 2015

- Year-to-date net income is $5.501 million or $1.30 per diluted share

- Book value per common share was $19.23 at June 30, 2015

- Total assets were $904.9 million at June 30, 2015 compared to $934.4 million at December 31, 2014

PR Newswire

BISMARCK, N.D., July 28, 2015

BISMARCK, N.D., July 28, 2015 /PRNewswire/ -- BNCCORP, INC. (BNC or the Company) (OTCQX Markets: BNCC), which operates community banking and wealth management businesses in North Dakota, Arizona and Minnesota, and has mortgage banking offices in Arkansas, Illinois, Kansas, Nebraska, Minnesota, Arizona and North Dakota, today reported financial results for the second quarter ended June 30, 2015.

Net income for the 2015 second quarter increased to $2.287 million, or $0.52 per diluted share compared to net income of $2.207 million, or $0.50 per diluted share, in the second quarter of 2014. The increase in earnings for the second quarter of 2015 reflected higher net interest income and non-interest income, partially offset by higher non-interest expense. No provision for credit losses was taken in the second quarter of 2015 compared to a reversal of provisions for credit losses, which increased pre-tax earnings by $400 thousand, in the second quarter of 2014. The ratio of nonperforming assets to total assets was 0.11% at June 30, 2015 compared to 0.03% at December 31, 2014. Book value per common share at June 30, 2015 was $19.23 compared to $18.28 and $16.64 at December 31, 2014 and June 30, 2014, respectively.

Timothy J. Franz, BNCCORP President and Chief Executive Officer, said, "We are pleased to have generated a 11.78% return on common equity this quarter, and our 0.99% return on assets is commendable in the current operating environment. The nearly 4% growth in earnings was driven, in particular, by the performance of our mortgage banking business, as well as higher net interest income and net gains on sales of investments. Year to date we have delivered exceptional results and created value for BNC's common shareholders with our earnings per share of $1.30 and a 15.22% return on common equity."

Mr. Franz added, "We continue to closely monitor our clients and the economic conditions in North Dakota. While we have observed energy related activity slowing down in the marketplace, our review of a segment of loans in North Dakota to energy related businesses through the end of the second quarter has not revealed significant credit deterioration. We long understood that energy dependent economies will have fluctuations from time to time and operate accordingly and continue to believe in the North Dakota market."

Second Quarter Results

Net interest income for the second quarter of 2015 was $6.416 million, an increase of $93 thousand, or 1.5%, from $6.323 million in the same period of 2014. Interest income declined slightly by $159 thousand or 2.2% as the $21.2 million increase in average balance of interest earning assets was offset by decreased yields on investments when compared to the second quarter of 2014. Average loans held for investment increased $23.8 million, or 7.2%, compared to the prior year second quarter. On average, loans held for sale increased by $37.5 million when compared to the second quarter of 2014, as lower interest rates have spurred significant refinancing activity in our mortgage banking operations. The yield on earning assets decreased to 3.25% in the second quarter of 2015 compared to 3.41% in the second quarter of 2014. The lower yield on earning assets is the result of lower yields in our investment portfolio as yields have generally declined period-over-period on SBA securities. Overall, the net interest margin declined to 2.93% in the second quarter of 2015 from 2.96% in the second quarter of 2014.

Interest expense in the second quarter of 2015 decreased from the same period in 2014 despite an increase in average deposits of $4.0 million, or 0.5%. The cost of core deposits declined to 0.16% in the current quarter, compared to 0.18% in the same period of 2014. In aggregate, the cost of interest bearing liabilities declined to 0.42% in the current quarter, compared to 0.55% in the same period of 2014 despite incurring $87 thousand of charges related to exercising our right to call $20.0 million of brokered deposits in the second quarter of 2015. The redemption of $7.5 million of subordinated debentures in the third quarter of 2014 reduced the second quarter of 2015 interest expense by approximately $230 thousand. In addition, our call of $10.0 million of brokered deposits in the second quarter 2014 contributed to reducing interest expense in the current quarter by $27 thousand.

No provision for credit losses was taken in the second quarter of 2015, while a reversal of previous provisions for credit losses increased pre-tax earnings by $400 thousand in the second quarter of 2014.

Non-interest income for the second quarter of 2015 was $6.740 million, an increase of $1.379 million, or 25.7% from $5.361 million in the second quarter of 2014. The increase primarily relates to an 18.4% increase in mortgage banking revenues, which aggregated $4.015 million in the second quarter of 2015, compared to $3.391 million in the second quarter of 2014. Mortgage banking revenues benefited from lower rates in the second quarter of 2015 as we continue to sell residential mortgage loans with servicing released. During the second quarter of 2015, we recorded a net gain on sales of investments of $964 thousand, compared to a $5 thousand net gain on sales of investments in the same period of 2014. The 2015 second quarter included gains on sales of SBA loans of $257 thousand, compared to $760 thousand in the same period of 2014. Gains on sales of investments and SBA loans can vary significantly from period to period.

Non-interest expense for the second quarter of 2015 was $9.658 million, an increase of $771 thousand, or 8.7%, from $8.887 million in the second quarter of 2014. This increase is primarily related to compensation for producers and costs related to higher mortgage banking activity.

In the second quarter of 2015, we recorded a tax expense of $1.211 million, an increase from the $990 thousand income tax expense in the second quarter of 2014. The effective tax rate was 34.62% in the second quarter of 2015 compared to 30.97% in same period of 2014. The higher effective tax rate in the second quarter of 2015 is the result of an adjustment to the annual estimated effective tax rate to achieve a rate of 32% correlating to higher estimated full year taxable income.

Net income available to common shareholders was $1.813 million, or $0.52 per diluted share, for the second quarter of 2015 after accounting for dividends accrued on preferred stock. These costs aggregated $474 thousand in the second quarter of 2015 and $475 thousand in the same period of 2014. Net income available to common shareholders in the second quarter of 2014 was $1.732 million, or $0.50 per diluted share.

Six Months Ended June 30, 2015

Net interest income in the first half of 2015 was $13.023 million, an increase of $495 thousand, or 4.0%, from $12.528 million in the first half of 2014. Interest income decreased by $45 thousand as the $59.5 million increase in the average balance of interest earning assets was offset by lower investment portfolio yields, and a lower yielding mix of loans when compared to the first half of 2014. Average loans held for investment increased $26.2 million, or 8.0%, compared to the first half of the prior year. On average, loans held for sale increased by $30.2 million when compared to the first six months of 2014, as lower interest rates have spurred significant refinancing activity in our mortgage banking operations. The yield on earning assets decreased to 3.28% in the six month period ended June 30, 2015 compared to 3.53% in the same period of 2014. Overall, the net interest margin declined to 2.98% in the first six months of 2015 from 3.07% in the first six months of 2014.

Interest expense during the second quarter of 2015 decreased from the same period in 2014 despite an increase in average deposits of $46.2 million, or 6.1%. The cost of core deposits declined to 0.16% in the first six months of 2015, compared to 0.18% in the same period of 2014. In aggregate, the cost of interest bearing liabilities declined to 0.39% in the first half, compared to 0.56% in the same period of 2014. As previously noted, we recognized increased interest expense associated with exercising our right to call $20.0 million and $10.0 million of brokered deposits, in the second quarter of 2015 and 2014, respectively. However, our redemption of brokered deposits and subordinate debentures in 2014 enabled us to decrease interest expense by $515 thousand during the six month period ending June 30, 2015 when compared to the same time period in 2014.

No provision for credit losses was taken in the first six months of 2015, while a reversal of previous provisions for credit losses increased pre-tax earnings by $600 thousand in the first six months of 2014.

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July 28, 2015 07:00 ET (11:00 GMT)