BNCCORP, INC. Reports 2012 Third Quarter Net Income Of $15.0 Million, Or $4.41 Per Diluted Share

BISMARCK, N.D., Oct. 17, 2012 /PRNewswire/ --

To All BNCCORP, INC. Shareholders:

I wanted to take this opportunity to share with you some very significant positive developments that have taken place at the Company this year.  I can summarize these developments by saying that BNC today is in the strongest financial position we've been in for several years—in terms of capital, earnings, asset quality, and growth potential.  We have diligently worked our way through various operational and legal distractions and we look forward to building on our strengths to enhance shareholder value.

I also want to take this opportunity to set the record straight about the Board of Directors' decision to terminate the capital offering that was pending—a decision that was made from a position of strength and that we believe is in the best interests of shareholders. 

But first, let me recap our recent financial and operating progress.  I encourage you to refer to the attached press release reporting results for the third quarter of 2012.

Earnings Performance.  We have announced BNC's financial results for the third quarter and nine months ended September 30, 2012.  I'm pleased to inform you that the Company had net income of $15.0 million for the 2012 third quarter, or nearly 10 times the $1.6 million earned in the same quarter a year ago.  Diluted earnings per share were $4.41, up from $0.38 per share in the third quarter of 2011.  For the nine months ended September 30, 2012, net income was $21.6 million or $6.21 per diluted share, compared with $2.8 million or $0.54 per diluted share for the same period of 2011.

In addition to these results from our core operations, our earnings benefitted from two special items.  BNC recognized a tax benefit of $5.8 million in the third quarter of 2012.  This benefit resulted from the reversal of a significant portion of our valuation allowance on deferred tax assets, due to the fact that we had achieved several consecutive profitable quarters and the likelihood that future pre-tax earnings will utilize the remaining deferred tax assets.

Also in the 2012 third quarter, we reached a settlement with our insurance carriers on claims related to the fraudulent activity that we reported in April of 2010 by an external company that was servicing some of our residential mortgage loans. After reflecting costs associated with pursing the insurance claim, this settlement contributed approximately $5.0 million to pre-tax earnings in the recent quarter.  I want to thank the BNC personnel and outside advisors who worked tirelessly over more than two years to achieve this result.

Capital Strength.  Strengthening the Company's capital has been a major priority since the onset of the financial downturn in 2008.  I am pleased to report that our increased earnings have enabled BNC to replenish its capital level without resorting to an equity offering.  At September 30, 2012, our tangible common equity was $44.9 million, versus $19.3 million a year earlier.  All of the Bank's capital ratios are now well in excess of the regulatory standards for "well-capitalized" banking institutions.  Our progress can best be summed up by this fact: BNC's tangible common book value per share was $13.60 at September 30, 2012, up from $5.85 per common share a year earlier.  Our strong capital base not only provides a cushion in difficult economic times, but also will support our business growth going forward.

Business Focus.  Our performance throughout 2012 has continued to reflect our sharp focus on growing our business by strategically providing our core banking services and opportunistically providing related financial services solutions to our customers.  For example, we increased our mortgage origination activity in recent years, anticipating the recovery of the housing market from the depths of the recession.  We have emphasized products and services that respond to specific customer needs in our markets, such as commercial banking in North Dakota and SBA lending in Arizona.  You can see the results of these efforts in our business volume: total assets have grown by $77 million in the past year to reach $742 million, total loans are up 3.3% to $374 million, and our total core deposits rose by $37 million to reach $553 million.    

Credit Quality.  Restoring our credit quality has been another of our most vital—and most successful—initiatives.  Through a disciplined process to credit quality, we slashed net charge-offs for bad loans to $209 thousand for the first nine months of 2012, compared to $5.2 million in the same period of 2011.  Non-performing assets are down to $10.7 million or 1.44% of total assets, versus $22.7 million or 3.39% of total assets a year earlier.  And our loan loss provision declined to $100 thousand for the recent nine-month period, from $1.4 million in the same period a year ago.

Terminating the Capital Offering. BNC is on a very solid footing today. Just one year ago, however, the Company was faced with insufficient common capital levels, and the prospect of an uncertain economic environment.  Your Board of Directors, along with outside financial advisors, explored a range of alternatives and determined that the best course of action for the Company and our shareholders was to pursue a capital offering.  Accordingly, we entered into an agreement for a private placement of $17 million of equity.  However, the Board prudently negotiated an "opt-out" provision, giving us the right to terminate the offering if it would not be in the best interests of our shareholders to proceed with the same.

The offering process and related regulatory approvals took an inordinate and unexpected amount of time.  In the interim, our capital base improved significantly through core earnings, as well as the insurance settlement and tax benefit I noted earlier.  And our efforts to attack credit quality issues were gaining traction.  In short, BNC was a much healthier, better capitalized and more profitable institution than when we embarked upon the equity offering.  There was no longer any business logic to support an offering that would have been priced at a fraction of our newly enhanced book value per common share and that would have diluted our shareholders.  In consultation with our investment bankers and our legal counsel the Board exercising our "opt-out" rights, decided to terminate the offering.  Any suggestion that the Board responded to outside pressures in making this decision is simply not true.  We believed then—and believe now—that we acted in the best interests of our shareholders at all times.

Moving Forward.  As I previously indicated, BNC is now in its strongest financial position in the past several years.  Our business is profitable and growing.  Our capital base has been rebuilt and fortified and our credit quality has been stabilized.  However, there are still clouds of uncertainty on the horizon, including a weak national and global economy, an interest rate environment that penalizes financial institution earnings, and evolving regulations that may impose burdens on community banks.  We continue to defer interest and dividend payments on our $23 million of subordinated debt and $21 million of preferred stock issued under the TARP program.  Additionally, we are concerned about the appropriateness of maintaining this amount of leverage in the current environment and will continue to evaluate prudent alternatives.  Yet, we are confident that the Company has the financial health and operational focus to withstand these challenges and to capture the opportunities in our marketplace, while creating greater value for our shareholders.

As always, we are grateful for your continued support of BNC and look forward to reporting to you on our continuing progress.

Sincerely,

Gregory K. Cleveland
President and Chief Executive Officer

BNCCORP, INC. REPORTS 2012 THIRD QUARTER NET INCOME OF $15.0 MILLION, OR $4.41 PER DILUTED SHARE

2012 Third Quarter Overview

  • Credit quality continues to improve: Nonperforming assets are $10.7 million, a decrease of $2.1 million, or 16.5%, in the third quarter
  • The ratio of total nonperforming assets to total assets declined to 1.44% from 3.39% at September 30, 2011
  • Mortgage banking revenues increase to $7.787 million, rising 183.8%, contributing to 177.0% rise in non-interest income
  • Insurance claim for fraud reported in 2010 is resolved, resulting in an increase to pre-tax earnings of approximately $5.0 million
  • Deferred tax valuation allowance is reversed and tax benefit of $5.8 million is recorded in third quarter 2012
  • Regulatory capital ratio of Bank for tier 1 leverage ratio is 11.73% and total risk based capital of Bank is 22.41%
  • Book value per common share is $13.60 as of September 30, 2012

BNCCORP, INC. (BNC or the Company) (OTC Markets: BNCC), which operates community banking and wealth management businesses in Arizona, Minnesota and North Dakota, and has mortgage banking offices in Illinois, Kansas, Nebraska, Missouri, Minnesota, Arizona and North Dakota, today reported financial results for the third quarter ended September 30, 2012.  

Net income for the 2012 third quarter was $15.045 million, or $4.41 per diluted share. This compared to net income of $1.594 million, or $0.38 per diluted share, in the third quarter of 2011. The 2012 third quarter results reflect higher non-interest income which was bolstered by mortgage banking revenues and the settlement of an insurance claim. A tax benefit was recorded in the quarter when substantially all of the valuation allowance for deferred tax assets was reversed. These positive contributions to earnings were enhanced by higher net interest income and partially offset by higher non-interest expense when compared to the third quarter of 2011. The provisions for credit losses and OREO valuation allowances in the third quarter of 2012 were $0 compared to $900 thousand in the third quarter of 2011. Credit quality remained stable as nonperforming assets declined to $10.7 million at September 30, 2012; compared to $12.8 million at June 30, 2012; $16.3 million at December 31, 2011; and $22.7 million at September 30, 2011.

Gregory K. Cleveland, BNCCORP President and Chief Executive Officer, said, "Our results for the 2012 third quarter reflected several positive developments that have strengthened the Company for the future and have added significant value for our common shareholders. Earnings continued to benefit from our robust mortgage banking business, our North Dakota market is enjoying good deposit growth and asset quality has stabilized. The settlement with the insurance carriers of the mortgage servicing fraud lawsuit, after more than two years, enables our team to focus even more sharply on our core business. The tax benefit recorded this quarter added more value and is very important because it represents a return to normalcy for us and transitions us from the most challenging period in BNC's history. We emerge from this period battle tested, ready for new frontiers and new opportunities."

Mr. Cleveland continued, "We also announced the termination of our proposed equity offering this quarter. Due to our strong financial performance since announcing the offering, certain benefits associated with the proposed offering were achieved without raising capital, which is a very positive and value-added development."

Third Quarter Results

Net interest income for the third quarter of 2012 was $4.767 million, an increase of $155 thousand, or 3.4%, from $4.612 million in the same period of 2011. The net interest margin for the recent quarter decreased to 2.90%, compared to 3.11% in the same period of 2011. Net interest income was impacted by the low interest rate environment which reduced the yield on earning assets to 3.71% in the third quarter of 2012, compared to 4.18% in the third quarter of 2011. The cost of interest bearing liabilities was 1.02% in the current quarter, compared to 1.27% in the same period of 2011. The interest cost of liabilities in the third quarter of 2012 included $116 thousand of previously deferred costs associated with $10 million of brokered deposits. These costs were recognized when we exercised our option to call the deposits in order to replace them with lower cost deposits. During the third quarter of 2012 the average balance of earning assets was approximately $653.8 million, compared to approximately $588.3 million in the third quarter of the prior year. Assets increased as we have started to deploy capital.

The provision for credit losses was $0 in the third quarter of 2012, compared to $275 thousand in the 2011 period. The lower provision reflects the fact that nonperforming loans have stabilized, aggregating $4.9 million at September 30, 2012; compared to $4.9 million at June 30, 2012; $6.2 million at December 31, 2011; and $8.7 million at September 30, 2011.

Non-interest income for the third quarter of 2012 was $16.826 million, an increase of $10.752 million, or 177.0% from $6.074 million in the same period of 2011. Included in non-interest income is $7.5 million of income associated with the settlement of our claims against insurers related to a fraud perpetrated upon the Company. Non-interest income also reflected a significant increase in revenues from our mortgage banking operations, as mortgage volume continues to benefit from low interest rates. Third quarter mortgage banking revenues aggregated $7.787 million, an increase of $5.043 million, or 183.8%, compared to the third quarter of 2011. In the near term, we expect mortgage banking revenues to be elevated. Over a longer horizon, mortgage banking volume may not be sustained at current levels as interest rates will inevitably rise. There were $181 thousand of gains on sales of investment securities during the recent quarter, compared to $1.535 million in the third quarter of 2011. The opportunity to sell assets at attractive prices can vary significantly from period to period. The 2012 third quarter included gains on sales of SBA loans of $245 thousand, compared to $410 thousand in the same period of 2011. While gains on sales of loans can vary significantly, the secondary market for SBA loans is currently acquisitive and loans can be sold for attractive prices.

Non-interest expense increased by $3.484 million, or 39.5%, to $12.303 million in the third quarter of 2012 compared to $8.819 million in the same period of 2011. Third quarter non-interest expense included a significant increase in professional fees due to costs associated with settling the insurance claim for the mortgage servicing fraud lawsuit. These costs included contingent fees paid to professionals that advised us as we pursued our claim. Compensation costs increased by $1.090 million, or 31.0%, due to higher volume in mortgage banking, additional producers in our banking and mortgage banking businesses, and incentives accrued for producers. Other real estate costs were $48 thousand, a decrease of $721 thousand, or 93.8%, compared to $769 thousand in the third quarter of 2011. This decrease results from reduced valuation adjustments on foreclosed assets, which were $0 in the third quarter of 2012 compared to $625 thousand in the same quarter of 2011. Marketing expenses increased due to mortgage banking activities. Other expenses increased to $1.339 million in the third quarter from $720 thousand in the same period for 2011 partially due to a non-recurring write-off of previously deferred costs associated with our terminated capital offering. These increases were partially offset by lower regulatory costs as depository premiums paid by BNC to the FDIC to insure its deposits decreased after our branch sale in early 2011.

In the third quarter of 2012, the Company recognized a tax benefit of $5.755 million. This benefit resulted primarily from the reversal of a significant portion of the valuation allowance on deferred tax assets. This tax benefit was offset by a provision for income taxes related to interim periods. The valuation allowance was reversed because we had achieved several consecutive profitable quarters and the likelihood that future pre-tax earnings will utilize the remaining deferred tax assets. A tax benefit of $2 thousand was recognized during the third quarter of 2011.

Net income available to common shareholders was $14.676 million, or $4.41 per diluted share, for the third quarter of 2012 after accounting for dividends accrued on preferred stock and the amortization of issuance discounts on preferred stock. These costs aggregated $369 thousand in the third quarter of 2012 and $354 thousand in the same period of 2011. Net income available to common shareholders in the third quarter of 2011 was $1.240 million, or $0.38 per diluted share.

Fraud Loss on Assets Serviced by Others

As previously reported, the Company discovered fraudulent activity in April of 2010 by an external company that was servicing residential mortgage loans for BNC. Subsequently, the Company and its advisors have been diligently addressing this matter.

In 2010, we submitted claims under our fidelity insurance policies seeking to recover the insured portion of these losses. The policies together provided for total coverage of $15 million. However, in the fourth quarter of 2010, our insurance carriers commenced a declaratory judgment action against the Company in an Arizona federal court seeking a judicial determination that the losses associated with the servicing fraud were not covered by the policies. We subsequently countersued the insurance carriers for failure to honor the policies and for acting in bad faith.  In the third quarter of 2012, we reached a settlement with the insurers and collected $7.5 million, which was recognized in non-interest income. After reflecting costs associated with pursing the insurance claim, the net increase to pre-tax earnings from the settlement of this claim in the quarter was approximately $5.0 million.

Nine Months Ended September 30, 2012

Net interest income for the nine month period ended September 30, 2012 was $13.811 million, a decrease of $657 thousand, or 4.5%, from $14.468 million in the same period of 2011. Low interest rates impacted the net interest margin for the recent nine month period, which decreased to 2.88%, compared to 3.06% in the same period of 2011. The yield on earning assets was 3.78%, in the nine month period ended September 30, 2012, compared to 4.09% in the same period of 2011. The cost of interest bearing liabilities was 1.13%, in the first nine months of 2012, compared to 1.26% in the first nine months of 2011. The interest cost of liabilities in 2012 includes $542 thousand of previously deferred costs associated with $60 million of brokered deposits. These costs were recognized when we exercised our option to call the deposits in order to replace them with lower cost deposits. During the first nine months of 2012 the average balance of earning assets was approximately $639.8 million, compared to approximately $632.5 million in the same period of the prior year. We sold approximately $65.7 million of assets in March 2011 and have subsequently been regenerating earning assets and deposits.

The provision for credit losses was $100 thousand in the first nine months of 2012, compared to $1.375 million in the first nine months of 2011. Nonperforming loans have decreased $1.3 million, or 21.3%, to $4.9 million at September 30, 2012, from $6.2 million at December 31, 2011.

Non-interest income for the first nine months of 2012 was $33.276 million, an increase of $18.449 million, or 124.4% from $14.827 million in the same period of 2011. Included in non-interest income is $7.5 million of income associated with the settlement of our claims against insurers related to a fraud perpetrated upon the Company. Non-interest income was also significantly influenced by mortgage banking revenues, which aggregated $21.427 million in the first nine months of 2012, an increase of $14.333 million, or 202.0%, compared to the first nine months of 2011. There were $279 thousand of gains on sales of investment securities in the first nine months of 2012, compared to $2.731 million in the first nine months of 2011. The first nine months of 2012 included gains on sales of SBA loans of $864 thousand, compared to $1.310 million in the same period of 2011.

Non-interest expense increased by $5.892 million, or 23.5%, to $30.996 million in the first nine months of 2012 compared to $25.104 million in the same period of 2011. Non-interest expense included a significant increase in professional fees due to costs associated with settling the insurance claim, including contingent fees paid to professionals. Compensation costs increased by $1.614 million, or 14.4%, primarily due to higher volume in mortgage banking, additional banking and mortgage banking producers, and incentives accrued for producers. Other real estate costs were $1.988 million, an increase of $542 thousand, or 37.5%, compared to $1.446 million in the first nine months of 2011. This increase results from aggressively addressing nonperforming assets as valuation adjustments on foreclosed assets, which were $1.700 million in the nine months ended September 30, 2012, compared to $1.025 million in the same period of 2011. Marketing expenses increased due to mortgage banking activities. Other expenses increased to $3.025 million in the first nine months of 2012 from $1.790 million in the same period of 2011 partially due to increases in the cost of insurance and a non-recurring write-off of previously deferred costs associated with our terminated equity offering. These increases were partially offset by lower regulatory costs as depository premiums paid by BNC to the FDIC to insure its deposits decreased after our branch sale in early 2011.

The Company has recognized a tax benefit of $5.652 million in the nine-month period ended September 30, 2012, resulting primarily from the reversal of a significant portion of our valuation allowance on deferred tax assets as noted previously. The tax benefit recorded was reduced by estimated income tax expense for the first nine months of 2012. No tax expense was recognized during the nine month period ended September 30, 2011.

Net income available to common shareholders was $20.554 million, or $6.21 per diluted share, for the nine months ended September 30, 2012 after accounting for dividends accrued on preferred stock and the amortization of issuance discounts on preferred stock. These costs aggregated $1.089 thousand in the first nine months of 2012 and $1.038 million in the same period of 2011. Net income available to common shareholders for the nine months ended September 30, 2011 was $1.778 million, or $0.54 per diluted share.

Assets, Liabilities and Equity

Total assets were $742.5 million at September 30, 2012, an increase of $77.3 million, or 11.6%, compared to $665.2 million at December 31, 2011. Cash and investment securities have increased by $58.4 million since December 31, 2011 as we are emphasizing liquidity. The investment portfolio had net unrealized gains aggregating $7.257 million as of September 30, 2012, compared to unrealized gains of $4.145 million as of December 31, 2011. Loans held for investment decreased by $7.7 million as we have implemented measures to reduce our exposure to credit risk and concentrations within certain segments of our loan portfolio. Loans held for sale have increased by $20.3 million since 2011 due to robust mortgage banking operations.

Total deposits were $623.0 million at September 30, 2012, increasing by $46.7 million from 2011 year-end. This increase relates primarily to growth in our North Dakota branches.

Total equity was $65.7 million at September 30, 2012 and $41.9 million at December 31, 2011. The book value per common share was $13.60 as of September 30, 2012, compared to $6.42 as of December 31, 2011. At September 30, 2012 the tangible common equity as a percent of assets was approximately 6.06%.

On February 16, 2012 we announced an equity offering which was expected to close in the middle of 2012. The equity offering was terminated in the third quarter.

Trust assets under supervision were $212.2 million at September 30, 2012, compared to $228.9 million at December 31, 2011.

Regulatory Capital

Banks and their bank holding companies operate under separate regulatory capital requirements.

At September 30, 2012, BNCCORP's tier 1 leverage ratio was 10.31%, the tier 1 risk-based capital ratio was 18.60%, and the total risk-based capital ratio was 21.03%.

At September 30, 2012, BNC National Bank had a tier 1 leverage ratio of 11.73%, a tier 1 risk-based capital ratio of 21.14%, and a total risk-based capital ratio of 22.41%.

As previously disclosed, our holding company entered into a memorandum of understanding with the Federal Reserve Bank (the Fed) in 2010 that restricts payments related to the company's common stock, preferred stock and debt without prior written permission from the Fed. At September 30, 2012 we have accrued deferred amounts aggregating $7.8 million related to preferred stock dividends and interest payable. Payments related to our holding company's obligations cannot be deferred indefinitely and we will need to address these obligations in future periods.

In the second quarter of 2012 the Federal Reserve Bank issued proposed regulatory standards for community banks which appear to incorporate many of the capital requirements addressed in the Basel III framework. We have not completed our assessment of the proposed standards, but it is generally believed the proposed standards will impose higher capital ratios.

Asset Quality

In recent years, challenging economic conditions have led to elevated credit risk throughout the banking industry. As a result, the Company is carefully monitoring asset quality and taking what it believes to be prudent and appropriate action to reduce credit risk.

Nonperforming assets declined to $10.7 million at September 30, 2012; from $12.8 million at June 30, 2012; $16.3 million at December 31, 2011; and $22.7 million at September 30, 2011. The ratio of total nonperforming assets to total assets was 1.44% at September 30, 2012; 1.84% at June 30, 2012; 2.45% at December 31, 2011; and 3.39% at September 30, 2011. The provision for credit losses and other real estate costs was $0 million in the third quarter of 2012 and $900 thousand in the third quarter of 2011.

Nonperforming loans were $4.9 million at September 30, 2012; $4.9 million at June 30, 2012; $6.2 million at December 31, 2011; and $8.7 million at September 30, 2011. The ratio of the allowance for credit losses to total nonperforming loans as of September 30, 2012 was 217%; compared with 216% at June 30, 2012; 172% at December 31, 2011; and 127% at September 30, 2011. There was no provision for credit losses in the third quarter of 2012, compared to $275 thousand in the third quarter of 2011 due to the decline of problem loans.

The allowance for credit losses was $10.5 million at September 30, 2012; $10.6 million at December 31, 2011; and $11.0 million at September 30, 2011. The allowance for credit losses as a percentage of total loans at September 30, 2012 was 2.81%; compared with 2.94% at December 31, 2011; and 3.17% at September 30, 2011. The allowance for credit losses as a percentage of loans and leases held for investment at September 30, 2012 was 3.69%; compared with 3.63% at December 31, 2011; and 3.70% at September 30, 2011.

At September 30, 2012, BNC had $17.4 million of classified loans, $4.8 million of loans on non-accrual and $5.9 million of other real estate owned. At December 31, 2011, BNC had $24.2 million of classified loans, $6.2 million of loans on non-accrual and $10.1 million of other real estate owned. At September 30, 2011, BNC had $25.1 million of classified loans, $8.7 million of loans on non-accrual and $14.0 million of other real estate owned.

BNCCORP, INC., headquartered in Bismarck, 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 and wealth management businesses in Arizona, Minnesota and North Dakota from 14 locations. BNC also conducts mortgage banking from 12 locations in Illinois, Kansas, Nebraska, Missouri, Minnesota, Arizona and North Dakota. 

This news release may 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, financial condition, results of operations, 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 DATA

(Unaudited)

 



For the Quarter

Ended September 30,


For the Nine Months

Ended September 30,

(In thousands, except per share data)


2012


2011


2012


2011

SELECTED INCOME STATEMENT DATA













Interest income


$

6,095


$

6,199


$

18,130


$

19,362

Interest expense



1,328



1,587



4,319



4,894

Net interest income



4,767



4,612



13,811



14,468

Provision for credit losses



-



275



100



1,375

Non-interest income



16,826



6,074



33,276



14,827

Non-interest expense



12,303



8,819



30,996



25,104

Income before income taxes



9,290



1,592



15,991



2,816

Income tax benefit



(5,755)



(2)



(5,652)



-

Net income



15,045



1,594



21,643



2,816

Preferred stock costs



(369)



(354)



(1,089)



(1,038)

Net income available to common shareholders


$

14,676


$

1,240


$

20,554


$

1,778



























EARNINGS PER SHARE DATA


























Basic earnings per common share


$

4.46


$

0.38


$

6.24


$

0.54

Diluted earnings per common share


$

4.41


$

0.38


$

6.21


$

0.54

 


BNCCORP, INC.

CONSOLIDATED FINANCIAL DATA

(Unaudited)

 



For the Quarter

Ended September 30,


For the Nine Months

Ended September 30,

(In thousands, except share data)


2012


2011


2012


2011

ANALYSIS OF NON-INTEREST INCOME













Bank charges and service fees


$

626


$

534


$

1,754


$

1,667

Wealth management revenues



266



285



912



1,002

Mortgage banking revenues



7,787



2,744



21,427



7,094

Gains on sales of loans, net



245



410



864



1,310

Gains on sales of securities, net



181



1,535



279



2,731

Insurance claim settlement



7,500



-



7,500



-

Other



221



566



540



1,023

Total non-interest income


$

16,826


$

6,074


$

33,276


$

14,827

ANALYSIS OF NON-INTEREST EXPENSE













Salaries and employee benefits


$

4,607


$

3,517


$

12,799


$

11,185

Professional services



3,832



1,369



5,903



3,206

Data processing fees



735



625



2,116



2,006

Marketing and promotion



516



453



1,482



1,173

Occupancy



478



482



1,440



1,548

Regulatory costs



304



442



901



1,434

Depreciation and amortization



278



291



836



883

Office supplies and postage



166



151



506



433

Other real estate costs



48



769



1,988



1,446

Other



1,339



720



3,025



1,790

Total non-interest expense


$

12,303


$

8,819


$

30,996


$

25,104

WEIGHTED AVERAGE SHARES













Common shares outstanding (a)



3,291,569



3,289,756



3,291,793



3,283,839

Incremental shares from assumed conversion of options and contingent shares



37,536



-



20,391



-

Adjusted weighted average shares (b)



3,329,105



3,289,756



3,312,184



3,283,839

 

 

(a)

Denominator for basic earnings per common share

(b)

Denominator for diluted earnings per common share

 

BNCCORP, INC.

CONSOLIDATED FINANCIAL DATA

(Unaudited)



As of

(In thousands, except share, per share and full time equivalent data)


September 30,

2012


December 31, 2011


September 30,

2011











SELECTED BALANCE SHEET DATA










Total assets


$

742,475


$

665,158


$

669,518

Loans held for sale-mortgage banking



88,926



68,622



49,848

Loans and leases held for investment



285,472



293,211



297,371

Total loans



374,398



361,833



347,344

Allowance for credit losses



(10,521)



(10,630)



(11,014)

Investment securities available for sale



283,835



242,630



227,842

Other real estate, net



5,859



10,145



14,036

Earning assets



674,197



604,151



604,448

Total deposits



622,997



576,255



572,646

Core deposits



553,067



516,436



512,827

Other borrowings



34,691



31,062



39,848

Cash and cash equivalents



36,520



19,296



46,351











OTHER SELECTED DATA










Net unrealized gains in investment portfolio, pretax


$

7,257


$

4,145


$

3,348

Trust assets under supervision


$

212,188


$

228,932


$

221,942

Total common stockholders' equity


$

44,895


$

21,180


$

19,305

Book value per common share


$

13.60


$

6.42


$

5.85

Full time equivalent employees



285



261



270

Common shares outstanding



3,299,969



3,301,007



3,301,856











CAPITAL RATIOS










Tier 1 leverage (Consolidated)



10.31%



7.59%



7.63%

Tier 1 risk-based capital (Consolidated)



18.60%



13.71%



13.21%

Total risk-based capital (Consolidated)



21.03%



17.56%



17.15%

Tangible common equity (Consolidated)



6.06%



3.17%



2.87%











Tier 1 leverage (BNC National Bank)



11.73%



9.41%



9.46%

Tier 1 risk-based capital (BNC National Bank)



21.14%



16.95%



16.33%

Total risk-based capital (BNC National Bank)



22.41%



18.22%



17.60%

Tangible capital (BNC National Bank)



12.31%



10.12%



9.65%











 

BNCCORP, INC.

CONSOLIDATED FINANCIAL DATA

(Unaudited)

 



For the Quarter

Ended September 30,


For the Nine Months

Ended September 30,

(In thousands)



2012



2011



2012



2011














AVERAGE BALANCES













Total assets


$

719,416


$

650,120


$

700,912


$

694,538

Loans held for sale-mortgage banking



75,350



28,873



62,013



22,017

Loans and leases held for investment



283,016



303,742



283,529



339,396

Total loans



358,366



333,632



345,542



362,880

Investment securities available for sale



288,120



225,152



266,881



201,497

Earning assets



653,773



588,287



639,838



632,484

Total deposits



605,999



560,506



600,030



607,679

Core deposits



541,522



500,646



538,312



544,925

Total equity



58,064



39,527



49,324



37,494

Cash and cash equivalents



24,380



45,967



44,857



87,504














KEY RATIOS













Return on average common stockholders' equity



156.76%



26.03%



96.15%



14.03%

Return on average assets



8.32%



0.97%



4.12%



0.54%

Net interest margin



2.90%



3.11%



2.88%



3.06%

Efficiency ratio



56.98%



82.53%



65.83%



85.69%

Efficiency ratio, excluding gains on sales of securities, provisions for real estate losses



57.46%



89.54%



62.59%



90.65%

Efficiency ratio, excluding provisions for real estate losses (BNC National Bank)



53.90%



73.14%



59.18%



78.53%

 

BNCCORP, INC.

CONSOLIDATED FINANCIAL DATA

(Unaudited)

 



As of

(In thousands)


September 30,

2012


December 31,

2011


September 30,

2011








ASSET QUALITY










Loans 90 days or more delinquent and still accruing interest


$

23


$

-


$

3

Non-accrual loans



4,833



6,169



8,654

Total nonperforming loans


$

4,856


$

6,169


$

8,657

Other real estate, net



5,859



10,145



14,036

Total nonperforming assets


$

10,715


$

16,314


$

22,693

Allowance for credit losses


$

10,521


$

10,630


$

11,014

Ratio of total nonperforming loans to total loans



1.30%



1.70%



2.49%

Ratio of total nonperforming assets to total assets



1.44%



2.45%



3.39%

Ratio of nonperforming loans to total assets



0.65%



0.93%



1.29%

Ratio of allowance for credit losses to loans and leases held for investment



3.69%



3.63%



3.70%

Ratio of allowance for credit losses to total loans



2.81%



2.94%



3.17%

Ratio of allowance for credit losses to nonperforming loans



217%



172%



127%

 

 



For the Quarter


For the Nine Months

(In thousands)


Ended September 30,


Ended September 30,



2012


2011


2012


2011

Changes in Nonperforming Loans:













Balance, beginning of period


$

4,893


$

10,892


$

6,169


$

17,862

Additions to nonperforming



40



42



74



6,300

Charge-offs



-



(317)



(317)



(3,262)

Reclassified back to performing



-



-



(815)



(1,967)

Principal payments received



(77)



(90)



(255)



(4,224)

Transferred to other real estate owned



-



(1,870)



-



(6,052)

Balance, end of period


$

4,856


$

8,657


$

4,856


$

8,657

 

BNCCORP, INC.

CONSOLIDATED FINANCIAL DATA

(Unaudited)

 

(In thousands)


For the Quarter

Ended September 30,


For the Nine Months

Ended September 30,



2012


2011


2012


2011

Changes in Allowance for Credit Losses:













Balance, beginning of period


$

10,565


$

11,045


$

10,630


$

16,476

Provision



-



275



100



1,375

Loans charged off



(57)



(335)



(383)



(5,356)

Loan recoveries



13



29



174



150

Transferred with branch divestiture



-



-



-



(1,631)

Balance, end of period


$

10,521


$

11,014


$

10,521


$

11,014














Ratio of net charge-offs to average total loans



(0.012)%



(0.092)%



(0.060)%



(1.435)%

Ratio of net charge-offs to average total loans, annualized



(0.049)%



(0.367)%



(0.081)%



(1.913)%

 

(In thousands)


For the Quarter

Ended September 30,


For the Nine Months

Ended September 30,



2012


2011


2012


2011

Changes in Other Real Estate:













Balance, beginning of period


$

7,932


$

13,952


$

10,145


$

12,706

Transfers from nonperforming loans



-



1,870



-



6,052

Real estate sold



(1,971)



(1,213)



(2,458)



(3,799)

Net gains (losses) on sale of assets



(102)



52



(128)



102

Provision



-



(625)



(1,700)



(1,025)

Balance, end of period


$

5,859


$

14,036


$

5,859


$

14,036

 

(In thousands)


As of September 30,



2012


2011

Other real estate


$

10,349


$

19,472

Valuation allowance



(4,490)



(5,436)

Other real estate, net


$

5,859


$

14,036

 

BNCCORP, INC.

CONSOLIDATED FINANCIAL DATA

(Unaudited)

 


As of

(In thousands)

September 30, 2012


December 31, 2011

CREDIT CONCENTRATIONS






North Dakota






     Commercial and industrial

$

62,805


$

65,986

     Construction


2,286



2,533

     Agricultural


16,615



13,043

     Land and land development


11,814



10,579

     Owner-occupied commercial real estate


25,013



25,526

     Commercial real estate


18,335



12,100

     Small business administration


2,389



2,333

     Consumer


24,958



15,175

       Subtotal

$

164,215


$

147,275

Arizona






     Commercial and industrial

$

1,102


$

2,552

     Construction


-



-

     Agricultural


-



-

     Land and land development


5,765



5,832

     Owner-occupied commercial real estate


535



550

     Commercial real estate


17,191



14,070

     Small business administration


10,020



7,085

     Consumer


2,903



2,813

       Subtotal

$

37,516


$

32,902

Minnesota






     Commercial and industrial

$

1,177


$

1,316

     Construction


-



2,090

     Agricultural


24



28

     Land and land development


1,151



1,649

     Owner-occupied commercial real estate


-



-

     Commercial real estate


14,858



14,665

     Small business administration


48



77

     Consumer


1,772



893

       Subtotal

$

19,030


$

20,718

 

SOURCE BNCCORP, INC.



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