BNCCORP, Inc. (BNCC)

[norweger1979]

Rangeley Capital Calls For Full Review Of Strategic Alternatives For BNCC

http://seekingalpha.com/article/4017284-rangeley-capital-calls-full-review-strategic-alternatives-bncc


Summary


•BNCC's board needs a shareholder representative.

•They should also launch a full review of strategic alternatives.

•Owners interested in maximizing their shares' value should contact the board.




Rangeley Capital ("Rangeley") believes BNCCORP (OTCQX:BNCC) is deeply undervalued and that the company should immediately begin an exploration of all strategic alternatives. We also call on the board to immediately explore adding a director with significant share ownership and financial expertise to help oversee the process.

Rangeley Capital owns over 200,000 shares of BNCC, or just shy of 6% of the bank. We are long-term shareholders in BNCC, as we have held shares in the bank for years and, in December 2014, we called the bank our best investment idea for 2015.

In addition to our significant shareholdings, we also have significant experience investing in other deeply undervalued community banks. We were major shareholders in OBA Financial (NASDAQ:OBAF) before their sale to F.N.B. Corporation, and we remain major shareholders in Ocean Shore Financial (NASDAQ:OSHC), which is currently undergoing a sale to OceanFirst Financial Corp. (NASDAQ:OCFC). Our experience with both of those banks as well as our individual diligence on BNCC suggests that now is an ideal time to pursue strategic alternatives, as BNCC's small size creates operational inefficiencies in dealing with a growing regulatory cost burden.

In addition to the operational inefficiencies brought on by the bank's small size, we are concerned by BNCC's investment portfolio. As of June 30th, BNCC had $375m in fair value available-for-sale securities that have more than ten years until they are due. While many of these securities have benefited from the significant declines in interest rates over the past few years, any future rate increases would result in a decline in fair value and could severely impair shareholder value.


We have communicated these concerns to both management and the board several times, and we would have preferred to keep both the communications and our concerns private. While we believe the likely outcome of any strategic evaluation would be the sale of BNCC to a strategic buyer for a significant premium, we remain open to any outcome provided all options are explored with a goal of maximizing long-term shareholder value. Our one request to date has been for the board to add a major shareholder of their choice to the board to help oversee the process; however, the board has refused to engage in any form of dialogue with us, leaving us no choice but to take our thoughts and concerns public.

While we would continue to prefer to work constructively with the current board and management, our significant shareholdings demand that we act like good owners and continue to review all options for maximizing the bank's value, including running an alternative slate of directors at the next annual meeting. Until then, we would encourage any like-minded shareholders to make their voices heard by mailing the board at the address below.

“
Tracy J. Scott

Chairman of the BNCCORP Inc. Board of Directors

322 East Main PO Box 4050

Bismarck, ND 58502

Disclosure: I am/we are long BNCC, OSHC.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Chris DeMuth Jr and Andrew Walker are portfolio managers at Rangeley Capital. We invest with a margin of safety by buying securities at discounts to their intrinsic value and unlocking that value through corporate events. To maximize returns for our investors, we reserve the right to make investment decisions regarding any security without notification except where notification is required by law. This post may contain affiliate links, consistent with the disclosure in such links. We manage diversified portfolios with a multi-year time horizon. Positions disclosed in articles may vary in sizing, hedges, and place within the capital structure. Disclosed ideas are related to a specific price, value, and time. If any of these attributes change, then the position might change (and probably will).


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