BNCCORP’s 2014 Results

Some twelve months past we briefly profiled BNCCORP’s 2013 results. Casting aside the convention of geographic contiguity, BNCCORP, Inc. “operates community banking and wealth management businesses in North Dakota, Arizona and Minnesota, and has mortgage banking offices in Illinois, Kansas, Nebraska, Minnesota, Arizona and North Dakota.” (PR)

Initially it was the attractive price that drew my interest (uncovered frauds tend to provide such), but over the last few years, BNCCORP has also pleasantly surprised its investors with strong core banking results.  And 2014 offered more of the same.

As of 12/31/14, BNCCORP had a book value per common share of $18.28, and it produced a return on average assets and equity of  0.94% and 12.37%, respectively, through the year 2014.  Non-performing assets decreased to $317k at 12/31/14, compared to $6.7 million at 12/31/13.  For that performace, today’s buyer is willing to pay $15.75 per share, or roughly, .86x BV.

Last year I expressed some disappointment with BNCCORP’s modest loan book ($351 million in total loans at 12/31/13, vs. $436 million in securities), and the fact that they hadn’t yet redeemed their preferred stock and subordinated debt.  In 2014, progress was made on both fronts: the loan book increased to $408 million at 12/31/14 (vs. $449 million in securities), and the subordinated debt was redeemed in Q314.  Coupled together, these moves helped to prevent some of the net interest margin compression that peers have endured.

This year, one additional potential negative is the effect of lower oil prices on BNCCORP’s North Dakota loan book and demand deposits.  Though BNCCORP’s North Dakota loan book represents only $233 million of their $947 million total assets, it was the portion that many thought would offer the quickest and most profitable growth.

Disclosure: No position.

[P.S. On Seeking Alpha, Chris DeMuth has offered BNCCORP as his best long idea for 2015.]

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