BNCCORP : Quarterly Report

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Quarterly Report

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For the quarter ended June 30, 2023

BNCCORP, INC.

(OTCQX: BNCC)

322 East Main Avenue

Bismarck, North Dakota 58501

[phone]

BNCCORP, INC.

INDEX TO QUARTERLY REPORT

June 30, 2023

TABLE OF CONTENTS

	Page
Financial Statements (Interim periods are unaudited)
Consolidated Balance Sheets as of June 30, 2023, and December 31, 2022	3
Consolidated Statements of Income for the Three and Six Months Ended June 30, 2023, and 2022	4
Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended
June 30, 2023, and 2022	5
Consolidated Statements of Stockholders' Equity for the Six Months Ended June 30, 2023, and
2022	6
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023, and 2022	7
Notes to Consolidated Financial Statements	9
Management's Discussion and Analysis of Financial Condition and Results of Operations
Comparison of Results for the Three and Six Months Ended June 30, 2023, and 2022	34
Comparison of Financial Condition as of June 30, 2023, and December 31, 2022	41
Quantitative and Qualitative Disclosures about Market Risk	48
Legal Proceedings	50
Submission of Matters to a Vote of Stockholders	50

2

Financial Statements

BNCCORP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (In thousands, except share data)

			June 30,			December 31,
			2023			2022
ASSETS		(unaudited)
Cash and cash equivalents	$	16,640	$	73,968
Debt securities available for sale		165,745			174,876
Federal Reserve Bank and Federal Home Loan Bank stock		2,938			3,063
Loans held for sale-mortgage banking		67,228			37,764
Loans held for investment		640,989			616,645
Allowance for credit losses (1)		(9,000)			(8,831)
Net loans held for investment		631,989			607,814
Premises and equipment, net		11,247			11,764
Operating lease right of use asset		867			1,521
Accrued interest receivable		3,458			3,312
Other		29,661			29,239
Total assets	$	929,773	$	943,321
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Non-interest-bearing	$	181,508	$	207,232
Interest-bearing -
Savings, interest checking and money market		563,878			554,577
Time deposits		59,111			57,775
Total deposits		804,497			819,584
Guaranteed preferred beneficial interest in Company's subordinated
debentures		15,000			15,000
Accrued interest payable		451			312
Accrued expenses		4,987			5,482
Operating lease liabilities		986			1,660
Other		1,026			937
Total liabilities		826,947			842,975
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value - Authorized 11,300,000 shares; 3,561,334
and 3,559,334 shares issued and outstanding		36			36
Capital surplus - common stock		26,634			26,399
Retained earnings		89,528			87,575
Treasury stock (107,319 and 109,319 shares, respectively)		(1,664)			(1,622)
Accumulated other comprehensive loss		(11,708)			(12,042)
Total stockholders' equity		102,826			100,346
Total liabilities and stockholders' equity		$	929,773		$	943,321

1. The Company adopted ASU 2016-13 as of January 1, 2023. The prior year amounts presented are calculated under the prior accounting standard.
   See accompanying notes to consolidated financial statements.

3

BNCCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(In thousands, except per share data, unaudited)

			For the Three Months			For the Six Months
			Ended June 30,			Ended June 30,
			2023			2022			2023			2022
INTEREST INCOME:
Interest and fees on loans	$	8,942	$	6,504	$	17,101	$	12,671
Interest and dividends on investments
Taxable		1,719			1,195			3,511			2,235
Tax-exempt		-			57			19			115
Dividends		36			37			72			73
Total interest income		10,697			7,793			20,703			15,094
INTEREST EXPENSE:
Deposits		2,405			325			3,733			658
Federal Home Loan Bank advances		-			1			6			1
Subordinated debentures		249			89			480			148
Total interest expense		2,654			415			4,219			807
Net interest income		8,043			7,378			16,484			14,287
PROVISION (CREDIT) FOR CREDIT LOSSES:		165			-			405			(550)
Net interest income after provision for credit losses		7,878			7,378			16,079			14,837
NON-INTEREST INCOME:
Bank charges and service fees		885			753			1,977			1,353
Wealth management revenues		483			492			970			1,028
Mortgage banking revenues, net		2,292			3,782			4,148			7,924
Gains on sales of loans, net		2			219			10			239
Gains on sales of debt securities, net		-			-			12			-
Other		50			532			226			746
Total non-interest income		3,712			5,778			7,343			11,290
NON-INTEREST EXPENSE:
Salaries and employee benefits		5,061			5,219			10,004			11,160
Professional services		1,689			966			2,586			1,916
Data processing fees		1,064			998			2,053			1,971
Marketing and promotion		1,360			1,437			2,729			2,792
Occupancy		482			527			994			1,110
Regulatory costs		94			121			200			240
Depreciation and amortization		284			306			577			617
Office supplies and postage		132			107			228			217
Other		674			849			1,375			1,552
Total non-interest expense		10,840			10,530			20,746			21,575
Income before income taxes		750			2,626			2,676			4,552
Income tax expense		176			617			629			1,070
NET INCOME	$	574		$	2,009		$	2,047		$	3,482
Basic earnings per common share	$	0.16		$	0.56		$	0.57		$	0.97
Diluted earnings per common share		$	0.16		$	0.56		$	0.57		$	0.97

See accompanying notes to consolidated financial statements.

4

BNCCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive (Loss) Income

(In thousands, unaudited)

			For the Three Months						For the Six Months
					Ended June 30,							Ended June 30,
		2023				2022				2023			2022
NET INCOME		$	574			$	2,009			$	2,047	$	3,482
Unrealized (loss) gain on
debt securities available
for sale	$	(2,060)				$	(5,518)				$	455				$ (14,498)
Reclassification adjustment
for gains included in net
income		-						-						(12)				-
Other comprehensive
(loss) income before
tax		(2,060)						(5,518)						443				(14,498)
Income tax benefit
(expense) related to items
of other comprehensive
(loss) income		507						1,160						(109)				3,567
Other comprehensive (loss)
income	$	(1,553)			(1,553)	$	(4,358)			(4,358)	$	334			334	$ (10,931)			(10,931)
TOTAL COMPREHENSIVE
(LOSS) INCOME			$	(979)				$	(2,349)				$	2,381		$	(7,449)

See accompanying notes to consolidated financial statements.

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