BNCCORP, Inc. (BNCC)

[Enterprising Investor]

BNCC continues to suffer from TARP Overhang Syndrome.

Net income available to common shareholders was $1.540 million, or $0.44 per diluted share, for the fourth quarter of 2013 after accounting for dividends accrued on preferred stock and the amortization of issuance discounts on preferred stock. These costs aggregated $339 thousand in the fourth quarter of 2013 and $373 thousand in the same period of 2012. The costs associated with $20.1 million of preferred stock will increase in the first quarter of 2014 when the rate of dividends increases to 9% from 5%. Net income available to common shareholders in the fourth quarter of 2012 was $4.608 million, or $1.34 per diluted share.

If there are any banks in American where still having TARP preferred stock outstanding makes good sense - even at a 9 percent dividend rate - BNCC is one.

Why?

BNCC continues to grow at a very healthy pace. Total assets grew by $72.3 million or 9.4 percent, while deposits jumped 73.6 million. Most of this growth relates primarily to North Dakota branches serving the Bakken Formation, where deposits have grown 60 percent from 2010 to 2013.

The faster a business grows, the more capital it will take to keep up. BNCC would most likely have to replace TARP preferred stock by issuing more common stock.