2024
ANNUAL
REPORT
BNCCORP, INC. (BNCCORP or the Company) is a bank
holding company registered under the Bank Holding
Company Act of 1956 headquartered in Bismarck, North
Dakota. It is the parent company of BNC National Bank
(the Bank). The Company operates community banking
and wealth management businesses in North Dakota and
Arizona from eleven locations.
BNCCORP, INC. (BNCCORP or the Company) is a bank holding company and the
parent of BNC National Bank (BNC or the Bank), which is a diversified community
bank with three primary areas of focus: commercial banking, retail banking and
wealth management.
Commercial Banking
We meet the needs of small- to mid-sized businesses with a range of commercial
banking services, including business financing, commercial real estate lending, SBA
loans, business checking, cash management, corporate credit cards and merchant
services. Our commercial banking relationships are primarily in North Dakota and
Arizona. North Dakota relationships are mainly in the capital region of Bismarck/
Mandan. Beyond Bismarck, we serve communities to the north and west that are
economically influenced by oil and energy, as well as the agricultural communities of
central North Dakota.
Retail Banking
BNC’s retail banking services are provided through a network of locations in North
Dakota and Arizona along with online access and transaction capabilities. Among our
broad array of retail banking services are personal checking and savings products,
personal loans, and card services. Our branch network is concentrated in North
Dakota, where we have been rewarded by our customers’ loyalty by being responsive
to their preferences for convenient face-to-face transactional banking.
Wealth Management
We seek to be a trusted advisor to our clients as they plan for retirement and manage
their investments by providing wealth management solutions, including, personal
wealth advisory services, 401(k) and other retirement plan administration. Many of
our wealth management clients come to us from commercial banking relationships;
we administer, for example, retirement savings plans for the employees of some
of our business clients. In this way, we are well positioned to help clients manage
wealth and transfer assets in a manner that enables them to accomplish their business
and personal financial goals.
CORPORATE PROFILE
BNCCORP, INC. Annual Report 2024
1
Daniel J. Collins
President & Chief Executive Officer
Michael M. Vekich
Chairman, Board of Directors
Committed, confident and resolute. Regular readers of our annual reports will find
these words repeated across a number of years, in a range of economic conditions and
in times both settled and uncertain. These values endure because they reflect our team’s
personal values and because they have proven themselves as guideposts for helping the
Company meet challenges and seize opportunities.
These values helped guide us through last year’s period of banking liquidity stress
brought on by unprecedented interest rate increases. They reaffirm why our customers
and communities view BNC as a trusted, customer-focused partner that understands—
and embraces—its leadership role in the communities it serves. They are the foundation
of our unwavering commitment to building trusted relationships, supporting the
communities we serve, and meeting our customers’ needs.
FINANCIAL PERFORMANCE
In 2024, the Company reported net income of $7.9 million or $2.23 per diluted share
compared to $5.7 million, or $1.59 per diluted share in 2023. These results speak to
the success of the strategic plan to exit the mortgage business, executed in June of
2023, which has allowed management to focus all its attention on the execution of its
Community Banking strategy.
TO OUR SHAREHOLDERS, CUSTOMERS,
EMPLOYEES, AND THE COMMUNITIES
WE SERVE:
B N C C O R P, I N C . 2 0 2 4 Q U A R T E R LY N E T I N C O M E
$2,500
$2,000
$1,500
$1,000
$500
$0.00
QUARTER 1
QUARTER 2
QUARTER 3
QUARTER 4
(dollars in thousands)
$1,740
$1,473
$1,860
$574
$2,071
$1,507
$ 2,257
$2,151
2023 Net Income
2024 Net Income
2
BNCCORP, INC. Annual Report 2024
The renewed focus on our community banking strategy has allowed us to build quality loan
relationships at increased yields while maintaining deposits at responsible liquidity and cost
levels.
Our deliberate and disciplined approach to balance
sheet management continues to provide a strong and
stable platform for growth.
NE T INTEREST MARGIN
4.00%
3.75%
3.50%
3.25%
3.00%
2.75%
2.50%
2.25%
2.00%
2020
2021
2022
2023
2024
3.27%
3.02%
3.41%
3.70%
3.54%
STRATEGIC PROGRESS AND BALANCE SHEET STRENGTH
Our deliberate and disciplined approach to balance sheet management continues to
provide a strong and stable platform for growth. Guided by sound risk management
and thoughtful capital allocation, we delivered solid financial results in 2024. Loan
balances continued to replace lower-yielding assets in 2024 while deposit costs were
prudently managed. This approach produced strong net interest margins compared to the
community banking industry and underscores our dedication to supporting our customers
and communities in a dynamic economic environment.
BNCCORP, INC. Annual Report 2024
3
ALLOWANCE FOR CREDIT LOSSES TO LOANS HELD FOR INVESTMENT
2.00%
1.80%
1.60%
1.40%
1.20%
2020
2021
2022
2023
2024
1.81%
1.71%
1.43%
1.39%
1.32%
Application of prudent underwriting standards and appropriate risk management policies
has allowed the Company to continue building quality loan relationships.
$800,000
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$0
L O A N S H E L D F O R I N V E S T M E N T (PERIOD-END)
2020
2021
2022
2023
2024
$520,306
$50,584
$145
$668,663
$ 49
$698,675
$11,896
$517,897
$195
$616,450
(dollars in thousands)
All other loans held for investment
SBA PPP Loans
Incorporating insights from our strategic initiatives, we’ve remained focused on
enhancing operational efficiency while continuing to invest appropriately and deliberately
in technology and digital capabilities. These efforts have not only positioned us for
long-term growth but have also allowed us to navigate challenges while maintaining our
commitment to quality service and financial strength.
4
BNCCORP, INC. Annual Report 2024
COMMUNITY BANKING AT ITS CORE
Across our service area, our team takes pride in building meaningful relationships with
customers, providing personalized service, and supporting the local economy. This
approach resulted in notable growth in loans and strong deposit retention, along with
sustained high levels of credit quality and liquidity.
Our North Dakota lenders have as much as 30 years of tenure with BNC and have
developed deep relationships in our communities. Furthermore, we are particularly
proud to be recognized in our Arizona market as a leader in small business lending
partnering with the Small Business Administration to assist small businesses establish
and grow their businesses.
These results are attributable to the resilience and skill of our team and the trust placed
in us by our customers. These assets drive our success and distinguish us as a trusted
partner in the communities we call home.
CREATING VALUE FOR OUR SHAREHOLDERS
Our philosophy has always been to return capital to shareholders when it is not required
to support the business, maintain liquidity, or manage risk. Over the past several years,
this has been demonstrated through a consistent track record of dividend distributions,
including the decision at the end of 2024 to declare a special cash dividend. This
philosophy reflects our financial strength and our commitment to reward shareholders
even as we continue to maintain a strong capital base.
Cumulatively over the last five years, BNC has declared dividends totaling $79 million
($22.00 per common share) and repurchased 50,000 shares of common stock, while
reporting a $26.60 tangible book value per common share as of year-end 2024.
CUMULATIVE DIVIDENDS DECLARED
$80,000
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$0
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0
2020
2021
2022
2023
2024
$26,680
$50,248
$56,551
$56,551
$78,998
$8.00
$14.00
$15.75
$15.75
$22.00
Cumulative Dividends Declared
Cumulative Dividends Per Share
(dollars in thousands, except dividends per share)
BNCCORP, INC. Annual Report 2024
5
Forward-Looking Statements
Statements included in this cover letter to our Annual Report which are not historical in nature are intended to be, and are hereby identified
as “forward-looking statements” for purposes of the safe harbor provided by Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. We caution readers that these forward-looking statements, including without limitation, those relating
to our future business prospects, revenues, working capital, liquidity, capital needs, interest costs, income and expenses, 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. Important factors that could cause our actual results and financial condition to differ materially from
those indicated in the forward-looking statements include, but are not limited to: the impact of current and future regulation; the 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; risks associated with our acquisition and growth
strategies; and other risks which are difficult to predict and many of which are beyond our control. 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. In addition, we encourage readers to review the financial information included
in this cover letter in conjunction with the Consolidated Financial Statements of BNCCORP, INC. and Subsidiaries included in the
accompanying Annual Report.
Michael M. Vekich
Daniel J. Collins
Chairman, Board of Directors
President & Chief Executive Officer
LOOKING AHEAD
As we enter 2025, we are leaning into the future with optimism, from a foundation of
stability, and with a clear sense of purpose.
We see opportunity ahead for our customers, employees and shareholders. We have a
solid platform, one built with care, caution and discipline, from which to seize those
opportunities. Our purpose has never been clearer: Delivering responsible growth,
deepening customer relationships, and adding value to all our stakeholders. We believe
our commitment to our communities, our customers, and our team will continue to fuel
our success.
On behalf of our Board of Directors, leadership team, and the entire BNC family, thank
you for your trust and support. Together, we will continue to strengthen the communities
we serve, create long-term value for our shareholders, and achieve our vision of being a
trusted and stable partner for years to come.
Sincerely,
6
BNCCORP, INC. Annual Report 2024
____________________________
Year End Financial Report
____________________________
For the Year Ended December 31, 2024
BNCCORP, INC.
(OTCQX: BNCC)
322 East Main Avenue
Bismarck, North Dakota 58501
(701) 250-3040
BNCCORP, INC. Annual Report 2024
7
BNCCORP, INC.
INDEX TO YEAR END FINANCIAL REPORT
December 31, 2024
TABLE OF CONTENTS
Page
Selected Financial Data
9
Operating Strategy
11
Management’s Discussion and Analysis of Financial Condition and Results of Operations
12
Quantitative and Qualitative Disclosures about Market Risk
31
Consolidated Financial Statements
34
8
BNCCORP, INC. Annual Report 2024
Selected Financial Data
The selected consolidated financial data presented below should be read in conjunction with the consolidated
financial statements and the notes thereto (dollars in thousands, except share and per share data):
For the Years Ended December 31,
2024
2023
2022
2021
2020
Income Statement Data:
Total interest income
$
46,455
$
43,278
$
33,613
$
33,457
$
36,546
Total interest expense
15,397
10,968
2,655
2,137
4,238
Net interest income
31,058
32,310
30,958
31,320
32,308
Provision (Credit) for credit losses
635
815
(150)
(350)
2,670
Non-interest income
5,893
10,004
19,128
44,683
85,954
Non-interest expense
26,052
34,183
41,907
47,647
57,107
Income tax expense
2,336
1,611
1,829
6,751
13,871
Net income
$
7,928
$
5,705
$
6,500
$
21,955
$
44,614
Balance Sheet Data: (at end of period)
Total assets
$
966,681
$
968,205
$
943,321
$
1,047,372
$
1,074,131
Investments securities available for sale
129,522
159,772
174,876
208,978
183,717
Loans held for sale-mortgage banking
-
-
37,764
80,923
250,083
Loans held for investment, net of unearned income
698,724
668,808
616,645
529,793
570,890
Allowance for credit losses
(9,223)
(9,284)
(8,831)
(9,080)
(10,324)
Total deposits
837,500
837,203
819,584
906,668
853,158
Federal Home Loan Bank advances
-
-
-
-
30,900
Guaranteed preferred beneficial interests in Company’s subordinated
debentures
15,464
15,464
15,000
15,001
15,004
Dividends declared on common stock
22,447
-
6,303
21,568
28,680
Common stockholders’ equity
93,667
108,418
100,346
114,986
118,229
Book value per common share outstanding
$
26.60
$
30.38
$
28.19
$
32.35
$
33.39
Tangible common equity ratio
9.68%
11.19%
10.63%
10.98%
11.01%
Earnings Performance / Share Data:
Return on average total assets
0.85%
0.62%
0.67%
2.00%
4.21%
Return on average common stockholders’ equity, excluding accumulated
other comprehensive income
6.97%
4.94%
5.81%
17.87%
38.84%
Efficiency ratio
70.50%
80.78%
83.67%
62.69%
48.29%
Net interest margin
3.54%
3.70%
3.41%
3.02%
3.27%
Net interest spread
2.91%
3.22%
3.30%
2.94%
3.14%
Basic earnings per common share
$
2.24
$
1.59
$
1.82
$
6.15
$
12.52
Diluted earnings per common share
$
2.23
$
1.59
$
1.82
$
6.15
$
12.52
Average common shares outstanding
3,545,575
3,577,421
3,573,934
3,568,579
3,563,203
Average common and common equivalent shares
3,548,853
3,580,239
3,574,864
3,569,134
3,564,783
Shares outstanding at year end
3,521,375
3,569,210
3,559,334
3,554,983
3,540,522
Other Key Ratios
Nonperforming assets to total assets
0.65%
0.35%
0.15%
0.16%
0.24%
Nonperforming loans to total assets
0.65%
0.35%
0.14%
0.16%
0.24%
Nonperforming loans to loans held for investment
0.90%
0.50%
0.22%
0.32%
0.46%
Allowance for credit losses to loans held for investment
1.32%
1.39%
1.43%
1.71%
1.81%
BNCCORP, INC. Annual Report 2024
9
Quarterly Financial Data
2024
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Full
Year
Interest income
$
11,677
$
11,251
$
11,644
$
11,883
$
46,455
Interest expense
3,818
3,654
3,965
3,960
15,397
Net interest income
7,859
7,597
7,679
7,923
31,058
Provision for credit losses
215
30
110
280
635
Net interest income after credit for credit
losses
7,644
7,567
7,569
7,643
30,423
Non-interest income
1,538
1,468
1,414
1,473
5,893
Non-interest expense
6,907
6,604
6,276
6,265
26,052
Income before income taxes
2,275
2,431
2,707
2,851
10,264
Income tax expense
535
571
636
594
2,336
Net income
$
1,740
$
1,860
$
2,071
$
2,257
$
7,928
Basic earnings per common share
$
0.49
$
0.53
$
0.59
$
0.64
$
2.24
Diluted earnings per common share
$
0.49
$
0.53
$
0.59
$
0.64
$
2.23
Average common shares:
Basic
3,581,466
3,533,359
3,533,413
3,538,667
3,545,575
Diluted
3,586,983
3,539,152
3,534,606
3,539,278
3,548,853
2023
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Full
Year
Interest income
$
10,006
$
10,697
$
11,086
$
11,489
$
43,278
Interest expense
1,565
2,654
3,226
3,523
10,968
Net interest income
8,441
8,043
7,860
7,966
32,310
Provision for credit losses
240
165
230
180
815
Net interest income after provision for credit
losses
8,201
7,878
7,630
7,786
31,495
Non-interest income
3,631
3,712
1,118
1,543
10,004
Non-interest expense
9,906
10,840
6,778
6,659
34,183
Income before income taxes
1,926
750
1,970
2,670
7,316
Income tax expense
453
176
463
519
1,611
Net income
$
1,473
$
574
$
1,507
$
2,151
$
5,705
Basic earnings per common share
$
0.41
$
0.16
$
0.42
$
0.60
$
1.59
Diluted earnings per common share
$
0.41
$
0.16
$
0.42
$
0.60
$
1.59
Average common shares:
Basic
3,575,520
3,578,029
3,578,029
3,578,029
3,577,421
Diluted
3,577,837
3,580,273
3,581,222
3,581,546
3,580,239
10
BNCCORP, INC. Annual Report 2024
Operating Strategy
BNC National Bank is a community bank that focuses on business banking, retail banking, and wealth management.
We build value for shareholders by providing relationship-based financial services to small and mid-sized
businesses, business owners, their employees and professionals. The key elements of our strategy include:
Providing individualized, high-level customer service. We provide a high level of customer service to establish
and maintain long-term relationships. We believe that many of our competitors emphasize retail banking or
focus on large companies, leaving the small and mid-sized business market underserved. Our consistent focus
on the needs of such small and mid-sized businesses allows us to compete effectively in this market segment.
Diversification of products and services. We offer banking and wealth management products and services to
meet the financial needs of our customers, establish new relationships and expand our business opportunities.
We seek to leverage our existing relationships by cross-selling our products and services.
Expand opportunistically. We emphasize organic growth within the markets that we serve and look to
opportunistically expand into new lines of business. Organic growth in North Dakota is an emphasis as we
believe in the viability of the energy and agricultural industries over the long term. In Arizona, our organic loan
growth focuses on small businesses and the SBA arena.
Managing risk. Community banking is faced with several forms of inherent risk. We strive to manage risk by
balancing the potential costs of various risks and the various rewards of banking opportunities.
Emphasize quality loan and deposit growth. Providing loans and gathering deposits is a key strategy as our
products are good for customers, communities, and shareholders. Growing low-cost core deposits is a key
strategy. Our platforms and technology offers us a strategic opportunity to deliver high level deposit services
to the businesses and professionals we serve and permits us to attract funds at a low cost.
BNCCORP, INC. Annual Report 2024
11
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The following table summarizes selected income statement data and earnings per share data (in thousands, except
per share data):
2024
2023
Selected Income Statement Data
Interest income
$
46,455
$
43,278
Interest expense
15,397
10,968
Net interest income
31,058
32,310
Provision for credit losses
635
815
Non-interest income
5,893
10,004
Non-interest expense
26,052
34,183
Income before income taxes
10,264
7,316
Income tax expense
2,336
1,611
Net income
$
7,928
$
5,705
Earnings Per Share Data
Basic earnings per common share
$
2.24
$
1.59
Diluted earnings per common share
$
2.23
$
1.59
Comparison of 2024 to 2023 Net Income:
Interest income increased 7.3% when compared to 2023. The increase in interest income reflects higher
yields and balances of loans held for investment along with higher rates on interest bearing cash and debt
securities. Offsetting these increases was a $4.4 million increase in interest expense as the cost of deposits
increased with market conditions. Net interest margin decreased to 3.54% in 2024, compared to 3.70% in
2023.
A provision of $635 thousand was recorded in 2024 resulting in a 1.32% ratio of allowance for credit losses
to loans held for investment compared to a $815 thousand provision and 1.39% ratio in 2023. At December
31, 2024, non-performing assets were 0.65% of total assets, compared to 0.35% at December 31, 2023.
Non-interest income decreased $4.1 million, or 41.1%, when comparing 2024 to 2023. The decrease
primarily relates to a $3.8 million decrease in mortgage banking revenue, net. In 2023, the Company
divested its mortgage business by selling certain assets to and the assumption of certain operating liabilities
by another financial institution. Other income in 2024 was $203 thousand higher than 2023 because of a
reduction of $113 thousand on losses on sale of fixed assets when compared to the 2023 period along with
higher SBIC and BOLI revenue recorded in 2024.
Non-interest expense decreased by $8.1 million, or 23.8%, from 2023 to 2024. During 2024, non-interest
expense for the Community Banking Segment increased $55 thousand, or 0.2%, year-over year. The modest
increase is a result of expense management efforts that have been largely offset by inflationary pressures
on salary and benefits and data processing expense.
The effective tax rate was 22.8% in 2024, compared to 22.0% in 2023.
12
BNCCORP, INC. Annual Report 2024
General
Net income in 2024 was $7.9 million compared to net income of $5.7 million in 2023. Earnings per diluted share
was $2.23 in 2024 and $1.59 in 2023.
Net Interest Income
The following table sets forth information relating to the Company’s average balance sheet, yields on interest-
earning assets and costs on interest-bearing liabilities (dollars are in thousands):
For the Year ended December 31,
For the Year ended December 31,
For the Year ended December 31,
2024
2023
2022
Interest
Average
Interest
Average
Interest
Average
Average
Earned
Yield or
Average
Earned
Yield or
Average
Earned
Yield or
Balance
or Owed
Cost
Balance
or Owed
Cost
Balance
or Owed
Cost
Assets
Interest-bearing due from banks
$
64,757 $
3,414
5.27% $
40,901 $
2,107
5.15% $
109,950 $
1,262
1.15%
FHLB Stock
577
36
6.24%
1,144
35
3.02%
1,268
38
3.01%
Federal Reserve Stock
1,807
109
6.00%
1,807
108
6.00%
1,807
109
6.00%
Debt securities-taxable
138,059
4,716
3.42%
164,380
5,427
3.30%
186,380
4,225
2.27%
Debt securities-tax exempt
-
-
0.00%
1,568
19
3.71%
5,937
230
3.88%
Loans held for sale-mortgage banking
-
-
0.00%
26,743
1,531
5.72%
49,862
2,025
4.06%
Loans held for investment
680,815
38,180
5.61%
644,536
34,051
5.28%
561,318
25,724
4.58%
Allowance for credit losses
(9,384)
-
0.00%
(8,952)
-
0.00%
(8,651)
-
0.00%
Total interest-earning assets
876,631 $
46,455
5.30%
872,127 $
43,278
4.96%
907,871 $
33,613
3.70%
Non-interest-earning assets:
Cash and due from banks
10,173
10,550
10,038
Other
43,669
44,407
46,565
Total assets
$
930,473
$
927,084
$
964,474
Liabilities and Stockholders’ Equity
Deposits:
Interest checking and money
market accounts
$
510,928 $
11,766
2.30% $
509,434 $
8,965
1.76% $
522,240 $
1,838
0.35%
Savings
43,323
47
0.11%
46,746
47
0.10%
51,510
20
0.04%
Certificates of deposit
75,344
2,547
3.38%
59,273
937
1.58%
65,238
304
0.47%
Total interest-bearing deposits
629,595
14,360
2.28%
615,453
9,949
1.62%
638,988
2,162
0.34%
Borrowings:
Short-term borrowings
-
-
0.00%
136
-
0.00%
241
1
0.41%
FHLB advances
-
-
0.00%
113
5
4.87%
118
3
2.44%
Subordinated debentures
15,464
1,037
6.70%
15,039
1,014
6.74%
15,000
489
3.25%
Total interest-bearing liabilities
645,059 $
15,397
2.39%
630,741 $
10,968
1.74%
654,347 $
2,655
0.40%
Non-interest-bearing demand
accounts
173,584
186,197
195,021
Total deposits and interest-bearing
liabilities
818,643
816,938
849,368
Other non-interest-bearing liabilities
7,895
6,456
9,575
Total liabilities
826,538
823,394
858,943
Stockholders’ equity
103,935
103,690
105,531
Total liabilities and
stockholders’ equity
$
930,473
$
927,084
$
964,474
Net interest income
$
31,058
$
32,310
$
30,958
Net interest spread
2.91%
3.22%
3.30%
Net interest margin
3.54%
3.70%
3.41%
Ratio of average interest-earning assets
to average interest-bearing liabilities
135.90%
138.27%
138.74%
BNCCORP, INC. Annual Report 2024
13
The following table allocates changes in the Company’s interest income and interest expense between the changes
related to volume and interest rates (in thousands):
For the Years Ended December 31,
For the Years Ended December 31,
2024 Compared to 2023
2023 Compared to 2022
Change Due to
Change Due to
Volume
Rate
Total
Volume
Rate
Total
Interest Earned on Interest-
Earning Assets
Interest-bearing due from banks
$
1,257
$
50
$
1,307
$
(1,214)
$
2,059
$
845
FHLB Stock
(23)
24
1
(3)
-
(3)
Federal Reserve Stock
-
1
1
-
(1)
(1)
Debt securities-taxable
(893)
183
(710)
(545)
1,747
1,202
Debt securities-tax exempt
(10)
(10)
(20)
(109)
(102)
(211)
Loans held for sale- mortgage
banking
(765)
(766)
(1,531)
(1,143)
649
(494)
Loans held for investment
1,982
2,147
4,129
4,113
4,214
8,327
Total increase in interest income
1,548
1,629
3,177
1,098
8,567
9,665
Interest Expense on Interest-
Bearing Liabilities
Interest checking and money
market accounts
914
1,887
2,801
367
6,760
7,127
Savings
(3)
3
-
(2)
29
27
Certificates of deposit
362
1,248
1,610
(20)
653
633
Short-term borrowings
-
-
-
-
(1)
(1)
FHLB advances
(2)
(3)
(5)
-
2
2
Subordinated debentures
29
(6)
23
1
524
525
Total increase in interest expense
1,300
3,129
4,429
346
7,967
8,313
Increase (decrease) in net interest
income
$
248
$
(1,500)
$
(1,252)
$
752
$
600
$
1,352
Net interest income was $31.1 million in 2024 compared to $32.3 million in 2023, a decrease of $1.2 million, or
3.9%. The net interest margin decreased to 3.54% for the year ended December 31, 2024, from 3.70% in 2023. The
yields on average earning assets in 2024 of 5.30% was higher than the 4.96% average yield in 2023 because of a
$36.3 million year-over-year increase in the average balance of loans held for investment at higher yields and higher
yields and balances of cash and cash equivalents. Those increases were partially offset by lower average balances
of debt securities and loans held for sale.
In line with the overall increase in interest rates, the cost of interest bearing deposits was 2.28% in 2024 and 1.62%
in 2023. The cost of interest-bearing liabilities was 2.39% during 2024, compared to 1.74% in the same period of
2023. The Company has managed its overall cost of deposits at levels well below the prevailing brokered deposit
rates offered by national brokerage firms while staying focused on maintaining strong liquidity levels.
Net interest income was $32.3 million in 2023 compared to $31.0 million in 2022, an increase of $1.3 million, or
4.4%. The net interest margin increased to 3.70% for the year ended December 31, 2023, from 3.41% in 2022.
Overall, yields on earning assets were 4.96% in 2023 and 3.70% in 2022. Average loans held for investment
increased $83.2 million in 2023, or 14.8%, compared to 2022. Average loans held for sale decreased $23.1 million
when compared to 2022. The increase in interest income is the result of higher yields on interest earning assets and
an $83.2 million increase in average balances of loans held for investment partially offset by lower average balances
of loans held for sale. The average balance of debt securities decreased $26.4 million from 2022.
In line with the overall increase in interest rates, the cost of interest bearing deposits was 1.62% in 2023 and 0.34%
in 2022. The Company has experienced elevated levels of customers deploying excess deposit balances to national
brokered deposits to capture short-term rates offered in the market, most often by non-bank brokerage firms. The
14
BNCCORP, INC. Annual Report 2024
cost of interest-bearing liabilities was 1.74% during 2023, compared to 0.40% in the same period of 2022. The
Company has managed its overall cost of deposits at levels well below the prevailing brokered deposit rates offered
by national brokerage firms while staying focused on maintaining liquidity.
Non-interest Income
The following table presents the major categories of the Company’s non-interest income (dollars are in thousands):
For the Years Ended
December 31,
Increase (Decrease)
2024
2023
$
%
Bank charges and service fees
$
2,990
$
3,615
$
(625)
(17) % (a)
Wealth management revenues
2,036
1,948
88
5 %
Mortgage banking revenues, net
-
3,771
(3,771)
(100) % (b)
Gains on sales of loans, net
22
16
6
38 % (c)
Gains on sales of debt securities, net
-
12
(12)
100 % (d)
Other
845
642
203
32 % (e)
Total non-interest income
$
5,893
$
10,004
$
(4,111)
(41) %
(a)
Bank charges and services fees decreased year-over-year primarily due to lower fees earned from the movement of deposits
to a one-way sell position.
(b)
Mortgage banking revenues decreased as the Company divested its mortgage business by selling certain assets to and
assumption of certain operating liabilities by another financial institution during 2023.
(c)
Gains on sales of loans increased as the Company experienced slightly higher gains on loan participations.
(d)
Gains on sales of debt securities may vary significantly from period to period as the Company manages its risk and return
profile through changing economic conditions.
(e)
The increase in year-to-date other income is primarily due to recording a loss on the sale of fixed assets related to the
mortgage divestiture in the 2023 period along with higher SBIC and BOLI revenue in the 2024 period.
Non-interest Expense
The following table presents the major categories of the Company’s non-interest expense (dollars are in thousands):
For the Years Ended
December 31,
Increase (Decrease)
2024
2023
$
%
Salaries and employee benefits
$
15,005
$
17,517
$
(2,512)
(14) %
(a)
Professional services
1,108
3,419
(2,311)
(68) %
(b)
Data processing fees
3,414
3,722
(308)
(8) %
(c)
Marketing and promotion
813
3,127
(2,314)
(74) %
(d)
Occupancy
1,556
1,785
(229)
(13) %
(e)
Regulatory costs
539
470
69
15 %
(f)
Depreciation and amortization
1,086
1,094
(8)
(1) %
Office supplies and postage
364
415
(51)
(12) %
(g)
Other
2,167
2,634
(467)
(18) %
(h)
Total non-interest expense
$
26,052
$
34,183
$
(8,131)
(24) %
Efficiency ratio
70.50%
80.78%
(10.28)%
(a)
Salaries and employee benefits decreased primarily due to lower salaries within the mortgage banking segment as a result of
the mortgage business divestiture.
(b)
Professional services expense decreased due to lower mortgage operating costs in addition to lower legal and consulting
expenses.
(c)
Data processing fees decreased due to lower software and licensing fees associated with the mortgage banking segment that
was divested in 2023 being partially offset by increased card processing charges in the community banking segment.
(d)
Marketing and promotion decreased primarily due to lower marketing costs within the mortgage segment.
(e)
Occupancy expense decreased due to fewer locations within the mortgage banking segment.
(f)
Regulatory costs increased primarily due to higher FDIC assessments.
(g)
Postage expense decreased primarily due to the mortgage divestiture in 2023.
(h)
Other expense decreased primarily due to reversal from the mortgage banking obligation reserve accounts.
BNCCORP, INC. Annual Report 2024
15
Income Tax Expense
During 2024, the Company recorded tax expense of $2.3 million, which resulted in an effective tax rate of 22.8%
compared to tax expense of $1.6 million in 2023, which resulted in an effective tax rate of 22.0%.
Subject to certain statutory limitations, the Company is able to carry forward state tax net operating losses
aggregating $17 thousand as of December 31, 2024. The state tax net operating losses expire between 2025 and
2031.
Financial Condition
Total assets were $966.7 million at December 31, 2024, a decrease of $1.5 million, compared to $968.2 million at
December 31, 2023. This decrease is primarily due to lower cash and cash equivalents and debt securities being
partially offset by higher loans held for investment.
Total loans held for investment aggregated $698.7 million at December 31, 2024, an increase of $29.9 million, or
4.5%, compared to December 31, 2023. Debt securities decreased $30.3 million from year-end 2023. Cash and cash
equivalent balances were $100.8 million as of December 31, 2024.
Assets
The following table presents assets by category (dollars are in thousands):
As of December 31,
Increase (Decrease)
2024
2023
$
%
Cash and cash equivalents
$
100,815
$
102,454
$
(1,639)
(2) %
Debt securities available for sale
129,522
159,772
(30,250)
(19) % (a)
Federal Reserve Bank and Federal Home
Loan Bank stock
2,387
2,372
15
1 %
Loans held for investment, net
689,501
659,524
29,977
5 % (b)
Premises and equipment, net
10,893
10,955
(62)
(1) %
Operating lease right of use asset
618
938
(320)
(34) % (c)
Accrued interest receivable
4,108
4,206
(98)
(2) %
Other assets
28,837
27,984
853
3 %
Total assets
$
966,681
$
968,205
$
(1,524)
- %
(a)
Debt securities available for sale decreased as the Company utilized the cash flow from the portfolio to provide liquidity for
loan growth.
(b)
The increase is a result of the Company continued focus on organic loan growth in its core markets.
(c)
Decrease is a result of normal amortization of operating leases.
16
BNCCORP, INC. Annual Report 2024
Debt Securities Available for Sale
The following table presents the composition of the available-for-sale investment portfolio (in thousands):
As of December 31,
2024
2023
Estimated
Estimated
Amortized
Fair Market
Amortized
Fair Market
Cost
Value
Cost
Value
U.S. treasury securities
$
10,929
$
10,130
$
25,872
$
24,880
U.S. government agency mortgage-backed
securities issued by FNMA/FHLMC
19,189
15,996
21,282
18,095
U.S. government agency small business
administration pools guaranteed by SBA
9,534
8,944
12,020
11,265
Collateralized mortgage obligations guaranteed
by GNMA
6,373
6,137
8,051
7,764
Collateralized mortgage obligations issued by
FNMA/FHLMC
48,099
43,137
55,750
50,890
Commercial mortgage-backed securities issued
by FHLMC
16,682
15,530
16,927
15,714
Other commercial mortgage-backed securities
24,405
22,783
26,349
24,213
State and municipal bonds
8,051
6,865
8,062
6,951
Total investments
$
143,262
$
129,522
$
174,313
$
159,772
The following table presents contractual maturities for securities available for sale and yields thereon at December
31, 2024 (dollars are in thousands):
After 1 But
After 5 But
Within 1 Year
Within 5 Years
Within 10 Years
After 10 Years
Total
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
U.S. treasury securities(1)
$
-
0.00%
$
10,929
1.33%
$
-
0.00%
$
-
0.00%
$
10,929
1.33%
U.S. government agency
mortgage-backed securities
issued by FNMA/FHLMC(1)
(2)
-
0.00%
-
0.00%
1,250
3.18%
17,939
2.65%
19,189
2.68%
U.S. government agency small
business administration
pools guaranteed by SBA(1)(2)
-
0.00%
3,148
4.22%
-
0.00%
6,386
4.78%
9,534
4.59%
Collateralized mortgage
obligations guaranteed by
GNMA(1) (2)
-
0.00%
-
0.00%
3,175
3.92%
3,198
3.94%
6,373
3.93%
Collateralized mortgage
obligations issued by
FNMA/FHLMC(1) (2)
-
0.00%
234
4.69%
10,594
3.96%
37,271
2.81%
48,099
3.07%
Commercial mortgage-backed
securities issued by
FHLMC(1) (2)
-
0.00%
13,090
3.15%
-
0.00%
3,592
3.58%
16,682
3.24%
Other commercial mortgage-
backed securities(1) (2)
-
0.00%
3,428
3.26%
-
0.00%
20,977
3.26%
24,405
3.26%
State and municipal bonds(1) (2)
-
0.00%
-
0.00%
8,051
2.74%
-
0.00%
8,051
2.74%
Total book value of debt
securities
$
-
0.00%
$
30,829
2.64%
$
23,070
3.48%
$
89,363
3.09%
143,262
Net unrealized loss on debt
securities available for sale
(13,740)
Total investment in debt
securities available for sale
$
129,522
3.42%
(1)
Based on amortized cost rather than fair value.
(2)
Maturities are based on contractual maturities. Actual cash flows from securities may vary from contractual maturities due to call options, cash flow
structures of securitizations, and prepayments
BNCCORP, INC. Annual Report 2024
17
As of December 31, 2024, the Company had $129.5 million of debt securities available for sale compared to $159.8
million at December 31, 2023. In 2024, the cash flow from debt securities was being retained as liquidity and to
fund increases in loans held for investment.
At December 31, 2024, all classifications of debt securities available for sale exceeded 10% of stockholders’ equity
with exception of Collateralized Mortgage Obligations (CMO’s) guaranteed by GNMA and State and Municipal
bonds.
See Note 2 of the Consolidated Financial Statements for more information about debt securities available for sale.
Federal Reserve Bank and Federal Home Loan Bank
The Company’s equity securities consisted of $1.8 million of Federal Reserve Bank (“FRB”) stock and $580
thousand of Federal Home Loan Bank (“FHLB”) stock as of December 31, 2024 and $1.8 million of FRB stock
and $565 thousand of FHLB stock as of December 31, 2023.
Loans
The following table presents the Company’s loan portfolio as of December 31 (dollars are in thousands):
2024
2023
2022
2021
2020
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Loans held for sale-
mortgage banking
$
-
-
$
-
-
$
37,764
100.0
$
80,923
100.0
$
250,083
100.0
Loans held for investment:
Commercial and industrial
$
231,441
33.1
$
216,055
32.3
$
205,429
33.3
$
157,995
29.8
$
165,994
29.1
Commercial real estate
244,364
35.0
245,939
36.8
230,243
37.4
201,043
38.0
190,939
33.4
SBA
84,799
12.1
63,836
9.5
48,638
7.9
58,759
11.1
102,064
17.9
Consumer
120,032
17.2
111,872
16.7
95,891
15.5
78,297
14.8
81,783
14.3
Land and land development
11,243
1.6
8,416
1.3
10,758
1.7
17,185
3.2
8,603
1.5
Construction
5,903
0.9
21,648
3.2
24,690
4.0
16,121
3.0
21,748
3.8
697,782
99.9
667,766
99.8
615,649
99.8
529,400
99.9
571,131
100.0
Unearned income and
net unamortized
deferred fees and costs
942
0.1
1,042
0.2
996
0.2
393
0.1
(241)
-
Loans, net of unearned
income and
unamortized fees and
costs
$
698,724
100.0
$
668,808
100.0
$
616,645
100.0
$
529,793
100.0
$
570,890
100.0
18
BNCCORP, INC. Annual Report 2024
The following table presents the change in the Company’s loan portfolio (dollars are in thousands):
December 31,
Increase (Decrease)
2024
2023
$
%
Loans held for investment:
Commercial and industrial
$
231,441
$
216,055
$
15,386
7.1 %
Commercial real estate
244,364
245,939
(1,575)
(0.6) %
SBA
84,799
63,836
20,963
32.8 %
Consumer
120,032
111,872
8,160
7.3 %
Land and land development
11,243
8,416
2,827
33.6 %
Construction
5,903
21,648
(15,745)
(72.7) %
697,782
667,766
30,016
4.5 %
Unearned income and net unamortized
deferred fees and costs
942
1,042
(100)
(9.6) %
Loans, net of unearned income and
unamortized fees and costs
$
698,724
$
668,808
$
29,916
4.5 %
Loan Participations
Pursuant to the Company’s lending policy, loans may not exceed 85% of the Bank’s legal lending limit (except to
the extent collateralized by U.S. Treasury securities or Bank deposits and, accordingly, excluded from the Bank’s
legal lending limit) unless the Chief Credit Officer and the Executive Credit Committee grant prior approval. To
accommodate customers whose financing needs exceed lending limits and internal loan concentration limits, the
Bank sells loan participations to outside participants without recourse.
Loan participations sold on a nonrecourse basis to outside financial institutions were as follows as of December 31
(in thousands):
2024
$
127,308
2023
130,621
2022
123,683
2021
106,077
2020
130,356
Concentrations of Credit
The following table summarizes the location of the Company’s borrowers as of December 31 (dollars are in
thousands):
2024
2023
North Dakota
$
423,400
61 %
$
411,971
62 %
Arizona
136,907
20 %
117,607
18 %
Minnesota
38,044
5 %
38,509
5 %
Other
99,431
14 %
99,679
15 %
Total gross loans held for investment
$
697,782
100 %
$
667,766
100 %
BNCCORP, INC. Annual Report 2024
19
The Company’s borrowers use loan proceeds for projects in various geographic areas. The following table
summarizes the locations where its borrowers are using loan proceeds as of December 31 (dollars are in thousands):
2024
2023
North Dakota
$
390,232
56 %
$
387,708
58 %
Arizona
161,402
23 %
151,401
23 %
Minnesota
29,679
4 %
28,918
4 %
California
24,347
3 %
24,212
4 %
South Dakota
23,188
3 %
24,332
4 %
Montana
19,948
3 %
10,435
1 %
Nevada
10,427
2 %
5,617
1 %
Colorado
10,006
2 %
10,447
1 %
Other
28,553
4 %
24,696
4 %
Total gross loans held for investment
$
697,782
100 %
$
667,766
100 %
The following table describes the Company’s approximate concentrations by industry as of December 31 (dollars
are in thousands):
2024
2023
Non-owner occupied commercial real estate – not otherwise
categorized
$
192,741
28 %
$
198,428
30 %
Consumer, not otherwise categorized
99,243
14
99,702
15
Hotels
86,863
12
83,985
13
Agriculture, forestry, fishing and hunting
36,763
5
33,503
5
Retail trade
34,186
5
35,827
5
Healthcare and social assistance
32,447
5
32,011
5
Transportation and warehousing
31,124
5
27,905
4
Art, entertainment and recreation
27,747
4
27,507
4
Non-hotel accommodation and food service
27,288
4
24,637
4
Mining, oil and gas extraction
23,685
4
22,149
3
Real estate and rental and leasing support services
15,385
2
9,804
2
Manufacturing
15,333
2
7,801
1
Other service
14,325
2
11,940
2
Construction contractors
13,938
2
16,082
2
Educational services
13,595
2
4,246
1
Professional, scientific, and technical services
9,854
1
9,570
1
Finance and insurance
8,586
1
6,781
1
Public administration
7,357
1
7,837
1
All other
7,322
1
8,051
1
Total gross loans held for investment
$
697,782
100 %
$
667,766
100 %
20
BNCCORP, INC. Annual Report 2024
The following table presents loans by type as of December 31 (in thousands):
2024
2023
North Dakota
Commercial and industrial
$
69,391
$
62,019
Construction
1,056
5,247
Agricultural
39,301
35,220
Land and land development
7,803
7,992
Owner-occupied commercial real estate
38,393
35,260
Commercial real estate
121,985
135,858
Small business administration
19,658
18,046
Consumer
92,645
88,066
Subtotal gross loans held for investment
$
390,232
$
387,708
Consolidated
Commercial and industrial
$
107,778
$
93,949
Construction
5,903
21,648
Agricultural
42,103
37,720
Land and land development
11,243
8,416
Owner-occupied commercial real estate
81,560
84,386
Commercial real estate
244,364
245,939
Small business administration
84,799
63,836
Consumer
120,032
111,872
Total gross loans held for investment
$
697,782
$
667,766
Loan Maturities (1)
The following table sets forth the remaining maturities of loans held for investment in the Company’s portfolio as
of December 31, 2024 (in thousands):
Over 1 Year
Through 5 Years
Over 5 Years
Total
Loans
Held for
Investment
One Year
or Less
Fixed
Rate
Indexed
Rate
Fixed
Rate
Indexed
Rate
Commercial and industrial
$
25,156
$
20,725
$
7,583
$
62,636
$
115,341
$
231,441
Commercial real estate
775
22,614
4,202
28,698
188,075
244,364
SBA
3,243
1,084
6,472
13,069
60,931
84,799
Consumer
847
4,873
6,023
85,156
23,133
120,032
Land and land development
240
4,428
2,211
222
4,142
11,243
Construction
454
-
2,142
-
3,307
5,903
Total principal amount of loans
$
30,715
$
53,724
$
28,633
$
189,781
$
394,929
$
697,782
(1)
Maturities are based on contractual maturities. Indexed rate loans include loans that would reprice prior to maturity if base rates change.
Actual maturities may differ from the contractual maturities shown above as a result of renewals and prepayments.
Loan renewals are evaluated in substantially the same manner as new credit applications.
BNCCORP, INC. Annual Report 2024
21
Provision for Credit Losses
The Company is required to estimate the credit losses expected over the life of the loan, including expected credit
losses on off-balance sheet commitments. The measurement of expected credit losses is based on relevant
information about past events, including historical experience, current conditions, and reasonable and supportable
forecasts that affect the estimated collectability of the loan portfolio. In 2024, a $635 thousand provision was
recorded compared to an $815 thousand provision in 2023.
Allowance for Credit Losses
See Notes 1 and 5 of the Consolidated Financial Statements and “Significant Accounting Policies” for further
information concerning accounting policies associated with the allowance for credit losses.
Analysis of Allowance for Credit Losses
The following table summarizes activity in the allowance for credit losses and certain ratios (dollars are in
thousands):
For the Years Ended December 31,
2024
2023
2022
2021
2020
Balance of allowance for credit losses, beginning
of period
$
9,284
$
8,831
$
9,080
$
10,324
$
8,141
Cumulative effect of CECL Adoption
-
(64)
-
-
-
Charge-offs:
Commercial and industrial
(392)
(100)
-
(927)
(88)
Commercial real estate
-
-
-
-
(453)
SBA
(159)
(55)
-
-
-
Consumer
(195)
(213)
(159)
(82)
(38)
Land and land development
-
-
-
-
-
Construction
-
-
-
-
-
Total charge-offs
(746)
(368)
(159)
(1,009)
(579)
Recoveries:
Commercial and industrial
-
28
-
69
17
Commercial real estate
-
-
-
1
45
SBA
-
-
7
5
9
Consumer
40
28
33
24
12
Land and land development
-
-
20
16
9
Construction
-
-
-
-
-
Total recoveries
40
56
60
115
92
Net charge-offs
(706)
(312)
(99)
(894)
(487)
Provision (credit) for credit losses charged to
operations
645
829
(150)
(350)
2,670
Balance of allowance for credit losses, end of
period
$
9,223
$
9,284
$
8,831
$
9,080
$
10,324
Ratio of net charge-offs to average loans held for
investment
(0.104)%
(0.046)%
(0.018)%
(0.162)%
(0.085)%
Average gross loans held for investment
$
680,815
$
644,536
$
561,318
$
553,493
$
573,040
Ratio of allowance for credit losses to loans held
for investment
1.32%
1.39%
1.43%
1.71%
1.81%
Ratio of nonperforming loans to total assets
0.65%
0.35%
0.14%
0.16%
0.24%
22
BNCCORP, INC. Annual Report 2024
Allocation of the Allowance for Credit Losses
The table below presents an allocation of the allowance for credit losses among the various loan categories and sets
forth the percentage of loans in each category to gross loans as of December 31 (dollars are in thousands).
2024
2023
2022
2021
2020
Allocation of
Allowance
Loans as a
% of Gross
Loans Held
for
Investment
Allocation of
Allowance
Loans as a
% of Gross
Loans Held
for
Investment
Allocation of
Allowance
Loans as a
% of Gross
Loans Held
for
Investment
Allocation of
Allowance
Loans as a
% of Gross
Loans Held
for
Investment
Allocation of
Allowance
Loans as a
% of Gross
Loans Held
for
Investment
Commercial and
industrial
$
3,128
33%
$
3,378
32%
$
2,519
33%
$
2,173
30%
$
3,275
29%
Commercial real
estate
3,234
35%
3,368
37%
3,621
37%
4,129
38%
3,923
33%
SBA
1,286
12%
1,014
10%
1,396
8%
1,641
11%
1,779
18%
Consumer
1,280
17%
1,092
17%
982
16%
836
15%
948
14%
Land and land
development
208
2%
169
1%
87
2%
148
3%
170
2%
Construction
87
1%
263
3%
226
4%
153
3%
229
4%
Total
$
9,223
100%
$
9,284
100%
$
8,831
100%
$
9,080
100%
$
10,324
100%
The amount of the allowance for credit losses can vary depending on macroeconomic conditions and risk in the
portfolio. The allocation of the allowance for credit losses can vary depending on relative volume of asset groups
in the portfolio and risks therein. The allocation of the allowance for credit losses as shown in the table above should
neither be interpreted as an indication of future charge-offs, nor as an indication that charge-offs in future periods
will necessarily occur in these amounts or in the indicated proportions.
Allowance for Credit Losses; Impact on Earnings
The Company is required to estimate the credit losses expected over the life of the loan. The measurement of
expected credit losses is based on relevant information about past events, including historical experience, current
conditions, and reasonable and supportable forecasts that affect the estimated collectibility of the loan portfolio.
The allowance for credit losses is an estimate based on several judgmental factors. The Company is not aware of
known trends, commitments or other events that could reasonably occur that would materially affect its
methodology or the assumptions used to estimate the allowance for credit losses. However, changes in qualitative
and quantitative factors could occur at any time and such changes could be of a material nature. In addition,
economic situations, financial conditions of borrowers, and other factors the Company considers in arriving at its
estimates may change. To the extent that these matters have negative developments, future earnings could be
reduced by provisions for credit losses. See the Concentrations of Credit section within this report for additional
information.
BNCCORP, INC. Annual Report 2024
23
Nonperforming Loans and Assets
The following table sets forth nonperforming assets, the allowance for credit losses and certain related ratios (dollars
are in thousands):
As of December 31,
2024
2023
2022
2021
2020
Nonperforming loans:
Loans 90 days or more delinquent and still
accruing interest
$
-
$
832
$
1
$
-
$
1
Non-accrual loans
6,275
2,519
1,354
1,673
2,611
Total nonperforming loans
6,275
3,351
1,355
1,673
2,612
Repossessed assets, net
33
33
64
17
-
Total nonperforming assets
$
6,308
$
3,384
$
1,419
$
1,690
$
2,612
Allowance for credit losses
$
9,223
$
9,284
$
8,831
$
9,080
$
10,324
Ratio of total nonperforming loans to total loans
0.90%
0.50%
0.21%
0.27%
0.32%
Ratio of total nonperforming loans to loans held
for investment
0.90%
0.50%
0.22%
0.32%
0.46%
Ratio of total nonperforming assets to total assets
0.65%
0.35%
0.15%
0.16%
0.24%
Ratio of total nonperforming loans to total assets
0.65%
0.35%
0.14%
0.16%
0.24%
Ratio of allowance for credit losses to total
nonperforming loans
147%
277%
652%
543%
395%
Nonperforming Loans
The following table sets forth information concerning the Company’s nonperforming loans as of December 31 (in
thousands):
2024
2023
Balance, beginning of period
$
3,351
$
1,355
Additions to nonperforming
5,981
2,393
Charge-offs
(606)
(145)
Reclassified back to performing
(1,716)
(1)
Principal payments received
(666)
(200)
Transferred to repossessed assets
(69)
(51)
Balance, end of period
$
6,275
$
3,351
Loans 90 days or more delinquent and still accruing interest include loans over 90 days past due which the
Company believes, based on its specific analysis of the loans, do not present doubt about the collection of interest
and principal in accordance with the loan contract. Loans in this category must be well secured and in the process
of collection.
Non-accrual loans include loans on which the accrual of interest has been discontinued. Accrual of interest is
discontinued when the Company believes that the borrower’s financial condition is such that the collection of
interest is doubtful. A delinquent loan is generally placed on non-accrual status when it becomes 90 days or more
past due unless the loan is well secured and in the process of collection. When a loan is placed on non-accrual status,
accrued but uncollected interest income is reversed against interest income. No additional interest is accrued on the
loan balance until the collection of both principal and interest becomes reasonably certain.
24
BNCCORP, INC. Annual Report 2024
Loan Modifications
With the adoption of ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt
Restructurings and Vintage Disclosures, the Company is required to evaluate all modification to loans where the
borrower is experiencing financial difficulty. For the year-ended December 31, 2024 the Company had total
modified loans of $4.8 million, representing 0.7% of total loans held for investment. For the year-ended December
31, 2023 the Company had total modified loans of $5.1 million, representing 0.8% of total loans held for investment.
Other real estate owned and repossessed assets represent properties and other assets acquired through, or in lieu
of, loan foreclosure, and property transferred from premises and equipment. They are initially recorded at fair value
less cost to sell at the date of acquisition establishing a new cost basis. Write-downs to fair value at the time of
acquisition are charged to the allowance for credit losses. After foreclosure, the Company performs valuations
periodically and the real estate is recorded at fair value less cost to sell. Reductions to other real estate owned and
repossessed assets are considered valuation allowances. Expenses incurred to record valuation allowances
subsequent to foreclosure are charged to non-interest expense.
Potential Problem Loans
The Company attempts to quantify potential problem loans with more immediate credit risk. The table below
summarizes the amounts of potential problem loans as of December 31 (in thousands):
Special Mention
Substandard
Doubtful
2024
$
12,207
$
3,873
$
873
2023
2,393
3,780
1,480
2022
2,472
2,598
1,017
2021
6,508
7,276
1,190
2020
9,121
5,201
2,132
A significant portion of these potential problem loans are not in default but may have characteristics such as recent
adverse operating cash flows or general risk characteristics that the loan officer feels might jeopardize the future
timely collection of principal and interest payments. The ultimate resolution of these credits is subject to changes
in economic conditions and other factors. These loans are closely monitored to ensure that the Company’s position
as creditor is protected to the fullest extent possible.
BNCCORP, INC. Annual Report 2024
25
Liabilities and Stockholders’ Equity
The following table presents the Company’s liabilities and stockholders’ equity (dollars are in thousands):
As of December 31,
Increase (Decrease)
2024
2023
$
%
Deposits:
Non-interest-bearing
$
172,456
$
184,442
$
(11,986)
(6) %
(a)
Interest-bearing
Savings, interest checking and money
market
579,608
582,855
(3,247)
(1) %
(a)
Time deposits
85,436
69,906
15,530
22 %
(a)
Guaranteed preferred beneficial interests in
Company's subordinated debentures
15,464
15,464
-
- %
Accrued interest payable
1,248
937
311
33 %
(b)
Accrued expenses
2,832
4,105
(1,273)
(31) %
(c)
Operating lease liabilities
700
1,048
(348)
(33) %
(d)
Dividends payable
14,304
-
14,304
100 %
(e)
Other liabilities
966
1,030
(64)
(6) %
(f)
Total liabilities
873,014
859,787
13,227
2 %
Stockholders' equity
93,667
108,418
(14,751)
(14) %
Total liabilities and stockholders’
equity
$
966,681
$
968,205
$
(1,524)
- %
(a)
Overall, deposits are relatively flat period-over-period. Increased time deposit balance reflect customer demands for
interest bearing products. The Company continues to enjoy strong and enduring customer relationships and continues to
focus on developing new deposit relationships.
(b)
Accrued interest payable increased primarily due to increased cost of deposits.
(c)
Accrued expenses decreased primarily due to lower incentive accruals, a reduction in 401k matching contributions, and a
reduction of the mortgage banking obligation reserve.
(d)
Decrease is due to normal amortization of operating leases.
(e)
Increase primarily relates to recording of the $14.3 million dividend declared on December 18, 2024, which was paid on
January 14, 2025.
(f)
Decrease is primarily due to lower income taxes payable.
Included in accrued expenses is an estimate of mortgage banking reimbursement obligations which aggregated $218
thousand and $644 thousand at December 31, 2024, and 2023, respectively. Although the Company sold mortgage
banking loans without recourse, industry standards require standard representations and warranties which require
sellers to reimburse investors for economic losses if loans default or prepay after the sale. Repurchase risk is also
evident within the mortgage banking industry as disputes arise between lenders and investors. Such requests for
repurchase are commonly due to purported fraudulent or faulty representations and generally emerge at varied
timeframes subsequent to the original sale of the loan. To estimate the obligation, the Company tracks historical
reimbursements and calculates the ratio of reimbursement to loan production volumes. Using reimbursement ratios
and recent production levels, the Company estimates the future reimbursement amounts and records the estimated
obligation. See Note 17 of the Consolidated Financial Statements for a description of financial instruments with
off-balance-sheet risk.
26
BNCCORP, INC. Annual Report 2024
Deposits
The following table sets forth, for the periods indicated, the distribution of the Company’s average deposit account
balances and average cost of funds rates on each category of deposits (dollars are in thousands):
For the Years Ended December 31,
2024
2023
2022
Percent
Wgtd.
Percent
Wgtd.
Percent
Wgtd.
Average
of
Avg.
Average
of
Avg.
Average
of
Avg.
Balance
Deposits
Rate
Balance
Deposits
Rate
Balance
Deposits
Rate
Interest checking and
MMDAs
$ 510,928
63.6%
2.30%
$
509,434
63.6%
1.76%
$
522,240
62.6%
0.35%
Savings deposits
43,323
5.4%
0.11%
46,746
5.8%
0.10%
51,510
6.2%
0.04%
Time deposits
75,344
9.4%
3.38%
59,273
7.4%
1.58%
65,238
7.8%
0.47%
Total interest-bearing
deposits
629,595
78.4%
2.28%
615,453
76.8%
1.62%
638,988
76.6%
0.34%
Non-interest-bearing
demand deposits
173,584
21.6%
0.00%
186,197
23.2%
0.00%
195,021
23.4%
0.00%
Total deposits
$ 803,179
100.0%
1.72%
$
801,650
100.0%
1.24%
$
834,009
100.0%
0.26%
Time deposits, in denominations of $250 thousand and over, totaled $20.4 million at December 31, 2024, as
compared to $20.6 million at December 31, 2023. The following table sets forth the amount and maturities of time
deposits of $250 thousand and over as of December 31, 2024 (in thousands):
Maturing in:
3 months or less
$
3,472
Over 3 months through 6 months
8,379
Over 6 months through 12 months
7,096
Over 12 months
1,492
$
20,439
The following table provides additional detail to the Company’s total deposit relationships:
As of December 31,
(In thousands)
2024
2023
2022
Deposits:
Non-interest-bearing
$
172,456
$
184,442
$
207,232
Interest-bearing –
Savings, interest checking and money market
579,608
582,855
554,577
Time deposits
85,436
69,906
57,775
Total on balance sheet deposits
837,500
837,203
819,584
Off-balance sheet deposits (1)
18,531
34,792
187,407
Total available deposits
$
856,031
$
871,995
$
1,006,991
(1)
The off-balance sheet deposits above do not include off-balance sheet time deposits that can be brought back on the balance sheet at various
future maturity dates. As of December 31, 2024, the Company managed off-balance sheet time deposit balances of $13.9 million, compared to
$18.7 million of time deposit balances as of December 31, 2023 and none as of December 31, 2022.
The Company remains highly focused on meeting the needs of its customers and ensuring deposit rates reflect
changing market conditions. The Company estimates that deposit insurance and other deposit protection programs
secure greater than 70% of its customer’s deposit balances. This fact, combined with a strong balance sheet and
relationship-focused culture has allowed the Company to maintain a significant deposit base.
Off-balance sheet accounts are primarily utilized to custody larger business customer deposits that require daily
access to funds and provide for FDIC insurance coverage. The Company began moving deposits off balance sheet
BNCCORP, INC. Annual Report 2024
27
in the first quarter of 2022 and proceeded to further expand its use throughout 2022. Off-balance sheet deposits can
fluctuate greatly as customers balance utilization demands evolve.
Borrowed Funds
There were no FHLB advances outstanding at December 31, 2024 and December 31, 2023.
Notes 9 and 10 of the Consolidated Financial Statements summarize the general terms of the Company’s FHLB
advances and other borrowings at December 31, 2024 and 2023.
Guaranteed Preferred Beneficial Interests in Company’s Subordinated Debentures
See Note 11 of the Consolidated Financial Statements for a description of the subordinated debentures.
Capital Resources
2024
2023
2022
2021
2020
Tier 1 leverage (Consolidated)
12.75%
14.52%
13.99%
11.74%
11.74%
Total risk-based capital (Consolidated)
15.35%
17.64%
17.57%
20.02%
17.88%
Common equity tier 1 risk-based capital (Consolidated)
12.36%
14.58%
14.48%
16.54%
14.65%
Tier 1 risk-based capital (Consolidated)
14.22%
16.49%
16.43%
18.77%
16.63%
Tangible common equity (Consolidated) (a)
9.68%
11.19%
10.63%
10.98%
11.01%
Tier 1 leverage (Bank)
11.89%
12.54%
11.97%
10.65%
10.92%
Total risk-based capital (Bank)
14.38%
15.40%
15.19%
18.27%
16.72%
Common equity tier 1 risk-based capital (Bank)
13.25%
14.25%
14.04%
17.02%
15.47%
Tier 1 risk-based capital (Bank)
13.25%
14.25%
14.04%
17.02%
15.47%
(a)
Tangible common equity is calculated by dividing common equity, less intangible assets, by total period end assets.
See Note 12 and Note 13 of the Consolidated Financial Statements for a discussion of stockholders equity and
regulatory capital and the current operating environment.
The Common equity tier 1 (CET 1) ratio, which is generally a comparison of a bank’s core equity capital with its
total risk weighted assets, is a measure of the current risk profile of the Company’s asset base from a regulatory
perspective. The Tier 1 leverage ratio, which is calculated by dividing Tier 1 capital by average total assets, does
not consider the mix of risk weighted assets. Regulators have required Tier 1 ratios that significantly exceed the
“Well Capitalized” ratio levels. As such, the Company is managing its Tier 1 leverage ratio to levels above the
“Well Capitalized” thresholds. Although Tangible Common Equity (TCE) is not a regulatory capital measure, TCE
is a ratio that is commonly used to assess the capital strength of banking entities. Accordingly, the Company has
included the ratio in the regulatory capital table above.
The Company routinely evaluates the sufficiency of its capital in order to ensure compliance with regulatory capital
standards and to provide a source of strength for the Bank. The Company manages capital by assessing the
composition of capital and the amounts available for growth, risk, or other purposes.
The following table sets forth, for the periods indicated, the special cash dividends that the Company has declared
(dollars in thousands, except dividend per share):
Dividend
Declaration Date
Dividend
Payment Date
Dividend
Per Share
Total Dividend
Payment
December 18, 2024
January 14, 2025
$
4.00
$
14,304
February 2, 2024
March 25, 2024
2.25
8,143
May 3, 2022
June 21, 2022
1.75
6,303
October 28, 2021
December 15, 2021
6.00
21,568
December 17, 2020
February 1, 2021
8.00
28,680
28
BNCCORP, INC. Annual Report 2024
Off-Balance-Sheet Arrangements
In the normal course of business, the Company is a party to various financial instruments with off-balance-sheet
risk. These instruments include commitments to extend credit, standby and commercial letters of credit, and
performance and financial standby letters of credit. Such instruments help the Company meet the needs of its
customers, manage its interest rate risk and effectuate various transactions. These instruments and commitments,
which the Company enters into for purposes other than trading, carry varying degrees of credit, interest rate or
liquidity risk. See Note 17 of the Consolidated Financial Statements for a detailed description of each of these
instruments.
Contractual Obligations, Contingent Liabilities and Commitments
The Company is a party to financial instruments with risks that can be subdivided into three categories:
Cash financial instruments, generally characterized as on-balance-sheet items, include investments, loans,
mortgage-backed securities, deposits and debt obligations.
Credit-related financial instruments, generally characterized as off-balance-sheet items, include such
instruments as commitments to extend credit, commitments to sell mortgage loans, commercial letters of credit
and performance and financial standby letters of credit. See Note 17 of the Consolidated Financial Statements.
Investment-related financial instruments, characterized as an off-balance-sheet item, include potential funding
for investments in Small Business Investment Companies (SBIC). See Note 18 of the Consolidated Financial
Statements.
At December 31, 2024, the aggregate contractual obligations (excluding bank deposits) and commitments were as
follows (in thousands):
Payments due by period
Less Than
Contractual Obligations:
1 Year
1 to 3 Years
3 to 5 Years
After 5 Years
Total
Total borrowings
$
-
$
-
$
-
$
-
$
-
Future minimum lease payments under
non-cancelable operating leases
324
222
76
78
700
Total
$
324
$
222
$
76
$
78
$
700
Amount of Commitment - Expiration by Period
Less Than
Other Commitments:
1 Year
1 to 3 Years
3 to 5 Years
After 5 Years
Total
Commitments to originate loans
$
66,219
$
33,360
$
9,975
$
1,605
$
111,159
Standby and commercial letters of
credit
2,163
675
-
83
2,921
Commitments to fund SBIC
-
200
505
-
705
Total
$
68,382
$
34,235
$
10,480
$
1,688
$
114,785
BNCCORP, INC. Annual Report 2024
29
Liquidity Risk Management
Liquidity risk is the possibility of being unable to meet present and future financial obligations in a timely manner.
Liquidity risk management encompasses the Company’s ability to meet all present and future financial obligations
in a timely manner. The objectives of the Company’s liquidity management policies are to maintain adequate liquid
assets, liability diversification among instruments, maturities and customers and a presence in both the wholesale
purchased funds market and the retail deposit market.
The Consolidated Statements of Cash Flows in the Consolidated Financial Statements present data on cash and cash
equivalents provided by and used in operating, investing, and financing activities. In addition to liquidity from core
deposit growth, together with repayments and maturities of loans and debt securities, the Company may utilize
brokered deposits, sell debt securities under agreements to repurchase and borrow overnight Federal funds. The
Bank is a member of the FHLB of Des Moines. Advances from the FHLB are collateralized by the Bank’s mortgage
loans. Funding through the issuance of subordinated notes, subordinated debentures, and long-term borrowings also
has been utilized.
The Company’s liquidity is defined by its ability to meet cash and collateral obligations at a reasonable cost and
with a minimum loss of income. Given the uncertain nature of customers’ demands, as well as the Company’s desire
to take advantage of earnings enhancement opportunities, the Company must have adequate sources of on- and off-
balance-sheet funds that can be acquired in time of need.
The Company’s liquidity position is measured on an as-needed basis, but no less frequently than monthly using
each of the following items:
1.
Estimated liquid assets and certain off-balance sheet considerations less estimated volatile liabilities using
the aforementioned methodology ($125.2 million as of December 31, 2024);
2.
Borrowing capacity from the FHLB ($114.1 million as of December 31, 2024); and
3.
Capacity to issue brokered deposits with maturities of less than 12 months ($134.5 million as of December
31, 2024).
On an ongoing basis, the Company uses a variety of factors to assess the Company’s liquidity position including,
but not limited to, the following:
Stability of its deposit base;
Amount of unpledged debt securities;
Liquidity of its loan portfolio; and
Potential loan demand.
The Company’s liquidity assessment process segregates its balance sheet into liquid assets along with certain off-
balance sheet considerations and short-term liabilities assumed to be vulnerable to non-replacement over a 30-day
horizon in abnormally stringent conditions. Assumptions for the vulnerable short-term liabilities are based upon
historical factors. The Company has a targeted range for its liquidity position over this horizon and manage
operations to achieve these targets.
The Company further projects cash flows over a 12-month horizon based on its assets and liabilities and sources
and uses of funds for anticipated events.
Pursuant to the Company’s contingency funding plan, it estimates cash flows over a 12-month horizon under a
variety of stressed scenarios to identify potential funding needs and funding sources. The Company’s contingency
plan identifies actions that could be taken in response to adverse liquidity events.
The Company believes this process, combined with its policies and guidelines, should provide for adequate levels
of liquidity to fund the anticipated needs of on- and off- balance sheet items.
30
BNCCORP, INC. Annual Report 2024
Forward-Looking Statements
Statements included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
which are not historical in nature are intended to be, and are hereby identified as “forward-looking statements” for
purposes of the safe harbor provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Company cautions readers that these forward-looking statements, including without
limitation, those relating to its future business prospects, revenues, working capital, liquidity, capital needs, interest
costs, income and expenses, 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; the impact of lower oil prices in its major market; competition for its 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 its acquisition and growth
strategies; and other risks which are difficult to predict and many of which are beyond its control.
Recently Issued and Adopted Accounting Pronouncements
Note 1 of the Consolidated Financial Statements includes a summary of recently issued and adopted accounting
pronouncements and their related or anticipated impact on the Company.
Accounting Policies
Note 1 of the Consolidated Financial Statements includes a summary of accounting policies and their related impact
on the Company.
Quantitative and Qualitative Disclosures about Market Risk
Market risk arises from changes in interest rates, exchange rates, and commodity prices and equity prices and
represents the possibility that changes in future market rates or prices will have a negative impact on the Company’s
earnings or value. The Company’s principal market risk is interest rate risk.
Interest rate risk arises from changes in interest rates. Interest rate risk can result from: (1) Repricing risk – timing
differences in the maturity/repricing of assets, liabilities, and off-balance-sheet contracts; (2) Options risk – the
effect of embedded options, such as loan prepayments, interest rate caps/floors, and deposit withdrawals; (3) Basis
risk – risk resulting from unexpected changes in the spread between two or more different rates of similar maturity,
and the resulting impact on the behavior of lending and funding rates; and (4) Yield curve risk – risk resulting from
unexpected changes in the spread between two or more rates of different maturities from the same type of
instrument. The Company has risk management policies to monitor and limit exposure to interest rate risk. The
Company’s asset/liability management process is utilized to manage its interest rate risk. The measurement of
interest rate risk associated with financial instruments is meaningful only when all related and offsetting on- and
off-balance-sheet transactions are aggregated, and the resulting net positions are identified.
The Company’s interest rate risk exposure is actively managed with the objective of managing the level and
potential volatility of net interest income in addition to the long-term growth of equity, bearing in mind that it will
always be in the business of taking on rate risk and that rate risk immunization is not entirely possible. Also, it is
recognized that as exposure to interest rate risk is reduced, so too may the overall level of net interest income and
equity.
The Company’s primary tool for measuring and managing interest rate risk is net interest income simulation. This
exercise includes assumptions regarding the changes in interest rates and the impact on the Company’s current
balance sheet. Interest rate caps and floors are included to the extent that they are exercised in the 12-month
simulation period. Additionally, changes in prepayment behavior of the residential mortgage, CMOs, and mortgage-
backed securities portfolios in each rate environment are captured using industry estimates of prepayment speeds
for various coupon segments of the portfolio. For purposes of this simulation, projected month-end balances of the
various balance sheet accounts are held constant at their December 31, 2024, levels. Cash flows from a given
account are reinvested back into the same account so as to keep the month end balance constant at its December 31,
2024, level. The static balance sheet assumption is made so as to project the interest rate risk to net interest income
embedded in the existing balance sheet. With knowledge of the balance sheet’s existing net interest income profile,
more informed strategies and tactics may be developed as it relates to the structure/mix of growth.
BNCCORP, INC. Annual Report 2024
31
The Company monitors the results of net interest income simulation on a regular basis. Net interest income is
generally simulated for the upcoming 12-month horizon in seven interest rate scenarios. The scenarios generally
modeled are parallel interest rate ramps of +/- 100bp, 200bp, and 300bp along with a rates unchanged scenario.
Given the current level of interest rates as of December 31, 2024, the downward scenarios for interest rate
movements is limited to -200bp. The parallel movement of interest rates means all projected market interest rates
move up or down by the same amount. A ramp in interest rates means that the projected change in market interest
rates occurs over the 12-month horizon on a pro-rata basis. For example, in the +100bp scenario, the projected
Prime rate increases from 7.50% to 8.50% 12 months later. The Prime rate in this example will increase 1/12th of
the overall increase of 100 basis points each month.
The net interest income simulation result for the 12-month horizon that covers the calendar year of 2024 is shown
below (dollars in thousands):
Net Interest Income Simulation
Movement in interest rates
-200bp
-100bp
Unchanged
+100bp
+200bp
+300bp
Projected 12-month net interest
income
$
34,207
$
33,847
$
33,215
$
32,315
$
31,440
$
30,559
Dollar change from unchanged
scenario
$
992
$
632
$
-
$
(900)
$
(1,775)
$
(2,656)
Percentage change from
unchanged scenario
2.99%
1.90%
-
(2.71)%
(5.34)%
(8.00)%
Since there are limitations inherent in any methodology used to estimate the exposure to changes in market interest
rates, these analyses are not intended to be a forecast of the actual effect of changes in market interest rates, such as
those indicated above on the Company. Further, these analyses are based on assets and liabilities as of December
31, 2024 (without forward adjustments for planned growth and anticipated business activities) and do not
contemplate any actions the Company might undertake in response to changes in market interest rates.
Static gap analysis is another tool that may be used for interest rate risk measurement. The net differences between
the amount of assets, liabilities, equity and off-balance-sheet instruments repricing within a cumulative calendar
period is typically referred to as the “rate sensitivity position” or “gap position.” The following table sets forth the
Company’s rate sensitivity position as of December 31, 2024. Assets and liabilities are classified by the earliest
possible repricing date or maturity, whichever occurs first.
32
BNCCORP, INC. Annual Report 2024
Interest Sensitivity Gap Analysis
Estimated maturity or repricing at December 31, 2024
0–3
4–12
1–5
Over
Months
Months
Years
5 years
Total
(dollars are in thousands)
Interest-earning assets:
Interest-bearing deposits with banks
$
78,464
$
-
$
-
$
-
$
78,464
Debt securities (a)
11,049
12,510
70,807
41,616
135,982
FRB and FHLB stock
2,387
-
-
-
2,387
Loans held for investment, fixed rate
35,154
53,626
139,764
24,888
253,432
Loans held for investment, indexed rate
103,353
70,228
260,260
10,509
444,350
Total interest-earning assets
$
230,407
$
136,364
$
470,831
$
77,013
$
914,615
Interest-bearing liabilities:
Interest checking and money market accounts
$
535,822
$
-
$
-
$
-
$
535,822
Savings
43,786
-
-
-
43,786
Time deposits
25,213
52,628
7,560
35
85,436
Subordinated debentures
-
15,464
-
-
15,464
Total interest-bearing liabilities
$
604,821
$
68,092
$
7,560
$
35
$
680,508
Interest rate gap
$
(374,414)
$
68,272
$
463,271
$
76,978
$
234,107
Cumulative interest rate gap at December 31, 2024
$
(374,414)
$
(306,142)
$
157,129
$
234,107
Cumulative interest rate gap to total assets
(38.73%)
(31.67%)
16.25%
24.22%
(a) Values for debt securities reflect the timing of the estimated principal cash flows from the securities based on par
values, which vary from the amortized cost and fair value.
The table assumes that all savings and interest-bearing demand deposits reprice in the earliest period presented,
however, management believes a significant portion of these accounts are generally not rate sensitive. The
Company’s position is supported by the fact that reductions in interest rates paid on these deposits historically have
not caused notable reductions in balances in net interest income because the repricing of certain assets and liabilities
is discretionary and is subject to competitive and other pressures. As a result, assets and liabilities indicated as
repricing within the same period may in fact reprice at different times and at different rate levels.
Static gap analysis does not fully capture the impact of embedded options, lagged interest rate changes, administered
interest rate products, or certain off-balance-sheet sensitivities to interest rate movements. Therefore, this tool
generally cannot be used in isolation to determine the level of interest rate risk exposure in banking institutions.
Since there are limitations inherent in any methodology used to estimate the exposure to changes in market interest
rates, these analyses are not intended to be a forecast of the actual effect of changes in market interest rates such as
those indicated above on the Company. Further, these analyses are based on the Company’s assets and liabilities as
of December 31, 2024, and do not contemplate any actions the Company might undertake in response to changes
in market interest rates.
BNCCORP, INC. Annual Report 2024
33
BNCCORP, INC. AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 2024 and 2023
(With Independent Auditors’ Report Thereon)
34
BNCCORP, INC. Annual Report 2024
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors’ Report
36
Consolidated Balance Sheets as of December 31, 2024 and 2023
39
Consolidated Statements of Income for the Years Ended December 31, 2024 and 2023
40
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2024 and 2023
41
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2024 and 2023
42
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023
43
Notes to Consolidated Financial Statements
45
BNCCORP, INC. Annual Report 2024
35
CLA (CliftonLarsonAllen LLP) is an independent network member of CLA Global. See CLAglobal.com/disclaimer.
CliftonLarsonAllen LLP
CLAconnect.com
INDEPENDENT AUDITORS' REPORT
Board of Directors
BNCCORP, INC. and Subsidiaries
Bismarck, North Dakota
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the accompanying consolidated financial statements of BNCCORP, INC. and
Subsidiaries, which comprise the consolidated balance sheets as of December 31, 2024 and 2023, and
the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash
flows for the years then ended, and the related notes to the consolidated financial statements.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of BNCCORP, INC. and Subsidiaries as of December 31, 2024 and
2023, and the results of their operations and their cash flows for the years then ended in accordance
with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States
of America (GAAS). Our responsibilities under those standards are further described in the Auditors’
Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are
required to be independent of BNCCORP, INC. and Subsidiaries and to meet our other ethical
responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Responsibilities of Management for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in the United States of
America, and for the design, implementation, and maintenance of internal control relevant to the
preparation and fair presentation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is required to evaluate whether there
are conditions or events, considered in the aggregate, that raise substantial doubt about BNCCORP,
INC. and Subsidiaries’ ability to continue as a going concern for one year after the date the
consolidated financial statements are available to be issued.
36
BNCCORP, INC. Annual Report 2024
Board of Directors
BNCCORP, INC. and Subsidiaries
Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’
report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute
assurance and, therefore, is not a guarantee that an audit conducted in accordance with GAAS will
always detect a material misstatement when it exists. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control. Misstatements are
considered material if there is a substantial likelihood that, individually or in the aggregate, they would
influence the judgment made by a reasonable user based on the consolidated financial statements.
In performing an audit in accordance with GAAS, we:
Exercise professional judgment and maintain professional skepticism throughout the audit.
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, and design and perform audit procedures responsive to those
risks. Such procedures include examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of BNCCORP, INC. and Subsidiaries’ internal control. Accordingly,
no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluate the overall presentation of the
consolidated financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate,
that raise substantial doubt about BNCCORP, INC. and Subsidiaries’ ability to continue as a
going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters,
the planned scope and timing of the audit, significant audit findings, and certain internal control related
matters that we identified during the audit.
Other Information Included in the Annual Report
Management is responsible for the other information included in the annual report. The other
information comprises selected financial data, operating strategy, management’s discussion and
analysis of financial condition and results of operations, and quantitative and qualitative disclosures
about market risk but does not include the consolidated financial statements and our auditors’ report
thereon. Our opinion on the consolidated financial statements does not cover the other information, and
we do not express an opinion or any form of assurance thereon.
BNCCORP, INC. Annual Report 2024
37
Board of Directors
BNCCORP, INC. and Subsidiaries
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and consider whether a material inconsistency exists between the other information
and the consolidated financial statements, or the other information otherwise appears to be materially
misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of
the other information exists, we are required to describe it in our report.
CliftonLarsonAllen LLP
Minneapolis, Minnesota
March 12, 2025
38
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
As of December 31,
(In thousands, except share data)
2024
2023
ASSETS
Cash and cash equivalents
$
100,815
$
102,454
Debt securities available for sale
129,522
159,772
Federal Reserve Bank and Federal Home Loan Bank stock
2,387
2,372
Loans held for investment
698,724
668,808
Allowance for credit losses
(9,223)
(9,284)
Net loans held for investment
689,501
659,524
Premises and equipment, net
10,893
10,955
Operating lease right of use asset
618
938
Accrued interest receivable
4,108
4,206
Other
28,837
27,984
Total assets
$
966,681
$
968,205
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Non-interest-bearing
$
172,456
$
184,442
Interest-bearing –
Savings, interest checking and money market
579,608
582,855
Time deposits
85,436
69,906
Total deposits
837,500
837,203
Guaranteed preferred beneficial interest in Company’s subordinated
debentures
15,464
15,464
Accrued interest payable
1,248
937
Accrued expenses
2,832
4,105
Operating lease liabilities
700
1,048
Dividends payable
14,304
-
Other
966
1,030
Total liabilities
873,014
859,787
STOCKHOLDERS’ EQUITY:
Common stock, $.01 par value – Authorized 11,300,000 shares; 3,668,653
issued; 3,521,375 and 3,569,210 shares outstanding
36
36
Capital surplus – common stock
26,904
26,572
Retained earnings
78,667
93,186
Treasury stock (147,278 and 99,443 shares, respectively)
(2,696)
(1,528)
Accumulated other comprehensive loss, net
(9,244)
(9,848)
Total stockholders’ equity
93,667
108,418
Total liabilities and stockholders’ equity
$
966,681
$
968,205
See accompanying notes to consolidated financial statements.
BNCCORP, INC. Annual Report 2024
39
BNCCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
For the Years Ended December 31,
(In thousands, except per share data)
2024
2023
INTEREST INCOME:
Interest and fees on loans
$
38,180
$
35,582
Interest and dividends on investments
Taxable
8,130
7,534
Tax-exempt
-
19
Dividends
145
143
Total interest income
46,455
43,278
INTEREST EXPENSE:
Deposits
14,360
9,949
Federal Home Loan Bank advances
-
5
Subordinated debentures
1,037
1,014
Total interest expense
15,397
10,968
Net interest income
31,058
32,310
PROVISION FOR CREDIT LOSSES
635
815
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES
30,423
31,495
NON-INTEREST INCOME:
Bank charges and service fees
2,990
3,615
Wealth management revenues
2,036
1,948
Mortgage banking revenues, net
-
3,771
Gains on sales of loans, net
22
16
Gains on sales of debt securities, net
-
12
Other
845
642
Total non-interest income
5,893
10,004
NON-INTEREST EXPENSE:
Salaries and employee benefits
15,005
17,517
Professional services
1,108
3,419
Data processing fees
3,414
3,722
Marketing and promotion
813
3,127
Occupancy
1,556
1,785
Regulatory costs
539
470
Depreciation and amortization
1,086
1,094
Office supplies and postage
364
415
Other
2,167
2,634
Total non-interest expense
26,052
34,183
Income before income taxes
10,264
7,316
Income tax expense
2,336
1,611
Net income
$
7,928
$
5,705
Basic earnings per common share
$
2.24
$
1.59
Diluted earnings per common share
$
2.23
$
1.59
See accompanying notes to consolidated financial statements.
40
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
For the Years Ended December 31,
(In thousands)
2024
2023
NET INCOME
$
7,928
$
5,705
Unrealized gain on debt securities available for
sale
$
801
$
2,922
Reclassification adjustment for gains on sales of
securities, net, included in net income
-
(12)
Other comprehensive income before tax
801
2,910
Income tax effect related to items of other
comprehensive income
(197)
(716)
Other comprehensive income
$
604
604
$
2,194
2,194
TOTAL COMPREHENSIVE INCOME
$
8,532
$
7,899
See accompanying notes to consolidated financial statements.
BNCCORP, INC. Annual Report 2024
41
BNCCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
For the Years Ended December 31,
(In thousands, except share data)
Capital
Accumulated
Surplus
Other
Common Stock
Common
Retained
Treasury
Comprehensive
Shares
Outstanding
Amount
Stock
Earnings
Stock
Income (Loss), net
Total
BALANCE, December 31, 2022
3,559,334 $
36
$
26,399
$
87,575
$
(1,622)
$
(12,042)
$
100,346
Cumulative effect adjustment for
adoption of ASU 2016-13,
Measurement of Credit Losses on
Financial Instruments
-
-
-
(94)
-
-
(94)
Net income
-
-
-
5,705
-
-
5,705
Other comprehensive income
-
-
-
-
-
2,194
2,194
Share-based compensation
9,876
-
173
-
94
-
267
BALANCE, December 31, 2023
3,569,210 $
36
$
26,572
$
93,186
$
(1,528)
$
(9,848)
$
108,418
Net income
-
-
-
7,928
-
-
7,928
Other comprehensive income
-
-
-
-
-
604
604
Impact of share-based compensation
2,165
-
332
-
(5)
-
327
Common stock repurchased
(50,000)
-
-
-
(1,163)
-
(1,163)
Dividends declared on common stock
($6.25)
-
-
-
(22,447)
-
-
(22,447)
BALANCE, December 31, 2024
3,521,375 $
36
$
26,904
$
78,667
$
(2,696)
$
(9,244)
$
93,667
See accompanying notes to consolidated financial statements.
42
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31,
(In thousands)
2024
2023
OPERATING ACTIVITIES:
Net income
$
7,928
$
5,705
Adjustments to reconcile net income to net cash provided by operating
activities -
Provision for credit losses
635
815
Depreciation
1,086
1,094
Amortization of right of use assets
342
566
Net amortization of premiums and (discounts) on debt securities and
subordinated debentures
1,375
1,522
Share-based compensation
327
267
Change in accrued interest receivable and other assets, net
(886)
(469)
Loss on sale of bank premises and equipment
30
144
Net realized gain on sales of debt securities
-
(12)
Deferred tax benefit
(90)
(76)
Change in other liabilities, net
(1,363)
(1,214)
Funding of loans held for sale, mortgage banking
-
(439,449)
Proceeds from sales of loans held for sale, mortgage banking
-
477,272
Fair value adjustment for loans held for sale, mortgage banking
-
52
Fair value adjustment on mortgage banking derivatives
-
409
Gains on sales of loans, net
(22)
(16)
Net cash provided by operating activities
9,362
46,610
INVESTING ACTIVITIES:
Purchases of debt securities available for sale
-
(9,555)
Proceeds from sales of debt securities available for sale
-
9,483
Proceeds from maturities of debt securities available for sale
29,677
16,575
Purchases of Federal Reserve and Federal Home Loan Bank Stock
(15)
(1,640)
Sales of Federal Reserve and Federal Home Loan Bank Stock
-
2,331
Net increase in loans held for investment
(30,600)
(52,508)
Proceeds from sales of premises and equipment
-
102
Purchases of premises and equipment
(1,054)
(531)
Net cash used in investing activities
(1,992)
(35,743)
See accompanying notes to consolidated financial statements.
BNCCORP, INC. Annual Report 2024
43
BNCCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
For the Years Ended December 31,
(In thousands)
2024
2023
FINANCING ACTIVITIES:
Net increase in deposits
$
297
$
17,619
Repayments of Federal Home Loan Bank advances
-
(41,001)
Proceeds from Federal Home Loan Bank advances
-
41,001
Dividends paid on common stock
(8,143)
-
Common stock repurchase
(1,163)
-
Net cash (used in) provided by financing activities
(9,009)
17,619
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(1,639)
28,486
CASH AND CASH EQUIVALENTS, beginning of period
102,454
73,968
CASH AND CASH EQUIVALENTS, end of period
$
100,815
$
102,454
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid
$
15,086
$
10,344
Income taxes paid
$
2,547
$
1,457
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Additions to repossessed assets in the settlement of loans
$
88
$
101
Right of use assets obtained in exchange for lease obligations
$
23
$
340
Dividends declared on common stock not yet paid
$
14,304
$
-
See accompanying notes to consolidated financial statements.
44
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1. Description of Business and Significant Accounting Policies
Description of Business
BNCCORP, INC. (“BNCCORP”) is a registered bank holding company incorporated under the laws of Delaware.
It is the parent company of BNC National Bank (the “Bank”). BNC National Bank operates community banking
and wealth management businesses through 11 locations in North Dakota and Arizona. During 2023, the Bank
conducted mortgage banking through a consumer-direct channel complemented by relationship based retail
channels. The consumer direct channel emphasized technology (internet leads and call center) to originate mortgage
loans throughout the United States. The retail channel is primarily relationship driven and originations are generally
near mortgage banking locations. On June 16, 2023, the Company sold certain operating assets and assigned certain
liabilities related to the Company’s mortgage segment to First Federal Bank.
With respect to group concentrations of credit risk, most of the Company’s business activity is with customers in
North Dakota. At December 31, 2024, the Company did not have any significant credit concentrations in any
particular industry.
The consolidated financial statements included herein are for BNCCORP and subsidiaries. The accounting and
reporting policies of BNCCORP and subsidiaries (collectively, the “Company”) conform to U.S. generally accepted
accounting principles (GAAP) and general practices within the financial services industry. The more significant
accounting policies are summarized below.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of BNCCORP and its wholly owned
subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Significant items subject to such estimates and assumptions include the allowance for
credit losses, fair value measurements for financial instruments, and income taxes. Ultimate results could materially
differ from those estimates.
SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash due from banks and federal funds sold.
Debt Securities
Debt securities that the Bank intends to hold indefinitely as part of its asset/liability strategy, or that may be sold in
response to changes in interest rates, liquidity needs, or prepayment risk are classified as available for sale. Available
for sale securities are carried at fair value. Net unrealized gains and losses, net of deferred income taxes, on securities
available for sale are reported as a separate component of stockholders’ equity until realized (see Comprehensive
Income).
Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield
using the effective interest method. For callable securities purchased at a premium, such premium is amortized over
the period to the earliest call date. Dividend and interest income is recognized when earned. Realized gains and
losses on the sale of debt securities are determined using the specific-identification method and recognized in non-
interest income on the trade date.
BNCCORP, INC. Annual Report 2024
45
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Federal Reserve Bank and Federal Home Loan Bank
Investments in Federal Reserve Bank and Federal Home Loan Bank stock qualify as restricted stock, which is not
subject to equity security accounting treatment, and is reported at cost, subject to impairment.
Loans Held For Sale-Mortgage Banking
Loans held for sale-mortgage banking are accounted for at fair value pursuant to the fair value option permitted by
ASC 825, Financial Instruments. Gains and losses from the changes in fair value are included in mortgage banking
revenues, net.
Loans Held For Investment
Loans held for investment are stated at their outstanding principal amount net of unearned income, unamortized
deferred fees and costs, and an allowance for credit losses. Interest income is recognized on the accrual basis using
the interest method prescribed in the loan agreement except when collectibility is in doubt.
Loans are reviewed regularly by management and are placed on non-accrual status when the collection of interest
or principal is 90 days or more past due, unless the loan is adequately secured and in the process of collection. When
a loan is placed on non-accrual status, interest accrued and uncollected is reversed against interest income in the
current period. Interest payments received on non-accrual loans are generally applied to principal unless the
remaining principal balance has been determined to be fully collectible. Accrual of interest may be resumed when
it is determined that all amounts due are expected to be collected and the loan has exhibited a sustained level of
performance, generally at least six months.
Loan Origination Fees and Costs; Other Lending Fees
For Loans Held for Investment, origination fees and costs incurred to extend credit are deferred and amortized over
the term of the loan as an adjustment to yield using the interest method, except where the net amount is deemed to
be immaterial.
The Company occasionally originates lines of credit where the customer is charged a non-usage fee if the line of
credit is not used. In such instances, the Company periodically reviews use of lines on a retrospective basis and
recognizes non-usage fees in non-interest income.
Loan Servicing and Transfers of Financial Assets
The Bank sells commercial business loans to third parties. The loans are generally sold on a non-recourse basis.
Subsequent to the sale, the loans continue to be serviced by the Bank. Sold loans are not included in the
accompanying consolidated balance sheets.
The sales of loans are accounted for pursuant to ASC 860, Transfers and Servicing of Financial Assets.
The Bank originated certain residential mortgage loans with the intent to sell to secondary market investors. The
mortgage servicing rights associated with these loans were sold to third parties.
Allowance for Credit Losses
The Company’s allowance for credit losses is comprised of an allowance for loans held for investment, allowance
for unfunded commitments, and allowance for debt securities available for sale. The Company is required to
estimate the credit losses expected over the life of the loan. The measurement of expected credit losses is based on
relevant information about past events, including historical experience, current conditions, and reasonable and
supportable forecasts that affect the estimated collectibility of the loan portfolio.
46
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Allowance for Credit Losses – Loans Held for Investment
The Company’s methodology for estimating the allowance for credit losses is applied consistently to the loan
portfolio. The following identifies the methodology by which the Company estimates the allowance for credit
losses:
Collective Pools. The Company makes a significant number of loans that, due to their underlying similar
characteristics, are assessed for loss as “collective” pools. The Bank segments the pools by type of loan and
using historical loss and peer group loss information estimates an expected credit loss for each individual
loan or lease within the pool. Historical loss rates are derived by tracking the historical net charge-offs. The
historical loss rates for each type of loan are then averaged to calculate an overall loss rate, which is applied
to the current loan balance. Loans of this nature are generally internally designated as a “pass” rated credit.
Loans within this category are identified and segmented based on internal loan type. Each loan is then given
a historical loss rate based on its identified loan type, which is then applied to the life of the loan. Loss rates
for each loan type are determined by comparing the Company’s historic loss rates and peer loss rates. The
maximum loss rate for each loan type becomes the loss rate utilized.
Collective Risk Grade. The Company has loans where the risk grade classification deteriorates below an
internally assigned grade of “pass”. In these cases, the Company generally experiences higher historical
loss rates and expects the credit losses on the contractual balance to increase. Loans in this category are
pooled by risk grade and historic loss rates are applied to the contractual balances of each individual loan
or lease. Loss rates are established based on the Company’s historic loss rates for criticized loans. This loss
rate is then applied to each loan which maintains a risk rating below “pass”. Loans that fall within the
collective risk grade segment are not included in the collective pool segment.
Individual Reserves. The Company estimates reserves for individually evaluated loans through a loan-by-
loan analysis of problem loans that considers expected future cash flows, the value of collateral and other
factors that may impact the borrower’s ability to make payments when due. Included in this group are loans
in nonaccrual status or modified loans. Individual reserves are determined through evaluation of collateral
values, expected future cash flow and other factors that may impact the borrower’s ability to make
contractual payments. An individual reserve is then applied to individual loans based on the level of
expected loss. Loans evaluated within the individual reserve segment are excluded from all other segments.
Qualitative / Forecast Reserve. The Company also considers qualitative adjustments to the quantitative
baseline. Utilizing a framework based on the Interagency Policy Statement on Allowance for Credit Losses,
the Company considers prevailing and anticipated economic trends, such as current and forecasted
economic conditions, economic trends, an assessment of credit risk inherent in the loan portfolio, and
delinquency trends. The Company also considers information to the extent the Company expects current
conditions and reasonable and supportable forecasts to differ from the conditions that existed for the period
over which historical information was evaluated. The Company maintains a scorecard that includes nine
qualitative factors and performs a review on a quarterly basis. Upon evaluation of the qualitative factors, a
qualitative loss rate will be established and applied to all loans outside of those included in the Individual
Reserve component. The Company’s forecast period is generally 1 to 2 years.
Allowance for Credit Losses – Unfunded Commitments
The allowance for unfunded commitments represents the expected credit losses on off-balance sheet commitments,
such as commitments to extend credit and financial standby letters of credit. The allowance for unfunded
commitments is included in other liabilities on the consolidated balance sheets. The allowance for unfunded
commitments is determined by estimating future draws and applying the expected loss rates on those draws. Future
draws are based on historical utilization rates along with individual assessment for specific loan types. Loss rates
are estimated through the same methodology as defined within the “collective pools” segment of the allowance for
loans held for investment.
BNCCORP, INC. Annual Report 2024
47
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Allowance for Credit Losses – Debt Securities Available for Sale
The Company’s evaluation first assesses whether it intends to sell, or it is more likely than not that it will be required
to sell the security before recovery of its amortized cost basis. If either criteria is met, the security’s amortized cost
basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned
criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In
making this assessment, management considers the extent to which fair value is less than amortized cost, any
changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security,
among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected
to be collected from the security are compared to the amortized cost basis of the security. If the present value of
cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for
credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost
basis. Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit losses and
can change over time.
The Company does not believe that the debt securities available for sale that were in an unrealized loss position as
of December 31, 2024 represent a credit loss impairment. As of December 31, 2024, the gross unrealized loss
positions were primarily related to mortgage-backed securities issued by U.S. government agencies or U.S.
government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S.
government and have a history of zero credit loss. Total gross unrealized losses were attributable to changes in
interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the debt
securities. The Company does not intend to sell the debt securities that were in an unrealized loss position and it is
unlikely that the Company will be required to sell the debt securities before recovery of their amortized cost basis,
which may be at maturity.
Collateral-Dependent Loans
A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and
repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of
loans deemed collateral-dependent, the Company elected the practical expedient to estimate expected credit losses
based on the collateral’s fair value less cost to sell. In most cases, the Company records a partial charge-off to reduce
the loan’s carrying value to the collateral’s fair value less cost to sell. Substantially all of the collateral consists of
various types of commercial business assets; agriculture machinery; and other consumer property.
Other Real Estate Owned and Repossessed Assets, net
Real estate properties and other assets acquired through loan foreclosures are recorded at fair value less estimated
costs to sell. If the carrying amount of an asset acquired through foreclosure is in excess of the fair value less
estimated costs to sell, the excess amount is charged to the allowance for credit losses. Fair value is primarily
determined based upon appraisals of the assets involved and management periodically assesses appraised values to
ascertain continued relevancy of the valuation. If subsequent declines in fair value in excess of the carrying amount
of foreclosed assets are identified, the Company establishes a valuation allowance against the asset. Net operating
income from and gains on disposition of these assets are included in other non-interest income. Net operating
expenses, losses on disposition, and subsequent declines in the estimated fair value of these assets are charged to
other non-interest expense.
Premises and Equipment
Land is carried at cost. Premises and equipment are reported at cost less accumulated depreciation and amortization.
Depreciation and amortization for financial reporting purposes is charged to non-interest expense using the straight-
line method over the estimated useful lives of the assets. Estimated useful lives are up to forty years for buildings
and three to ten years for furniture and equipment. Leasehold improvements are capitalized and amortized over the
shorter of the lease term or the estimated useful life of the improvement. Maintenance and repairs, as well as gains
and losses on dispositions of premises and equipment, are included in non-interest income or expense as incurred.
48
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment periodically or whenever events or changes in
circumstances indicate that the carrying amount of any such asset may not be recoverable. The impairment review
includes a comparison of future cash flows (undiscounted and without interest charges) expected to be generated
by the assets to their current carrying value. If impairment is identified, the assets are written down to their fair
value through a charge to non-interest expense.
Securities Sold Under Agreements to Repurchase
From time to time, the Bank enters into sales of securities under agreements to repurchase, generally for periods of
less than 90 days. These agreements are treated as financings, and the obligations to repurchase securities sold are
reflected as a liability in the consolidated balance sheets as short-term borrowings. The costs of securities underlying
the agreements remain in the asset accounts.
Fair Value
Several accounting standards require recording assets and liabilities based on their fair values. Determining the fair
value of assets and liabilities can be highly subjective. The Company utilizes valuation techniques that maximize
the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company
determines fair value based on assumptions that market participants would use in pricing an asset or liability in the
principal or most advantageous market.
ASC 820, Fair Value Measurement, defines fair value and establishes a framework for measuring fair value of
assets and liabilities using a hierarchy system consisting of three levels based on the markets in which the assets
and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:
Level 1: Valuation is based upon quoted prices for identical instruments traded in active markets that the
Company has the ability to access.
Level 2: Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for
identical or similar instruments in markets that are less active, and model-based valuation techniques for
which significant assumptions are observable in the market.
Level 3: Valuation is generated from model-based techniques that use significant assumptions not
observable in the market and are used only to the extent that observable inputs are not available. These
unobservable assumptions reflect the Company’s own estimates of assumptions that market participants
would use in pricing the asset or liability.
Management assigns levels to assets and liabilities accounted for at fair value.
Fair Values of Financial Instruments
The Company is required to disclose the estimated fair value of financial instruments. Fair value estimates are
subjective in nature, involving uncertainties and matters of significant judgment, and therefore cannot be determined
with precision. Changes in assumptions could significantly affect the estimates. The following methods and
assumptions are used by the Company in estimating fair value disclosures for its financial instruments.
Debt Securities Available for Sale. The fair value of the Company’s securities, other than U.S. Treasury
securities, are based upon quoted prices for similar instruments in active markets, quoted prices for identical or
similar instruments in markets that are less active, and model-based valuation techniques for which significant
assumptions are observable in the market. U.S. Treasury securities are based upon quoted prices for identical
instruments traded in active markets.
Loans Held for Sale-Mortgage Banking. Loans held for sale-mortgage banking are accounted for at fair value
pursuant to the fair value option permitted by ASC 825, Financial Instruments. Fair value measurements on
BNCCORP, INC. Annual Report 2024
49
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
loans held for sale are based on quoted market prices for similar loans in the secondary market, market quotes
from anticipated sales contracts and commitments, or contract prices from firm sales commitments.
Derivative Financial Instruments. The fair value of the Company’s derivatives are based upon quoted prices
for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are
less active, and model-based valuation techniques for which significant assumptions are observable in the
market.
Financial Instruments with Off-Balance-Sheet Risk. The fair values of the Company’s commitments to
extend credit and commercial and standby letters of credit are estimated using fees currently charged to enter
into similar agreements.
Derivative Financial Instruments
ASC 815, Derivatives and Hedging, establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for hedging activities. Accordingly, the
Company records all derivatives at fair value.
In 2023, the Company entered into interest rate lock commitments on certain mortgage loans originated by its
mortgage banking operations on a best efforts basis, which are commitments to originate loans whereby the interest
rate on the loan is determined prior to funding. The Company also had corresponding forward sales contracts related
to these interest rate lock commitments. Both the mortgage loan commitments and the related forward sales
contracts are accounted for as derivatives and carried at fair value in other assets with changes in fair value recorded
in mortgage banking revenues, net.
The Company also committed to originate and sell certain loans through its mortgage banking operations on a
mandatory delivery basis. To hedge interest rate risk, the Company sold short positions in mortgage backed
securities related to the loans sold on a mandatory delivery basis. The commitments to originate and short positions
are accounted for as derivatives and carried at fair value in other liabilities with changes in fair value recorded in
mortgage banking revenues, net.
Share-Based Compensation
ASC 718, Compensation – Stock Compensation, requires the Company to measure the cost of employee services
received in exchange for an award of equity instruments based on the fair value of the award on the grant date.
At December 31, 2024, the Company had two stock-based compensation plans, which are described more fully in
Note 22 and Note 23 to these consolidated financial statements.
Revenue from Contracts with Customers
The majority of the Company’s performance obligations for revenue from contracts with customers are satisfied at
a point in time and are typically collected from customers at the time of the transaction or shortly thereafter.
The following is a description of the principal activities from which the Company generates revenue that are within
the scope of ASC 606:
Service charges on deposits – Service charges on deposit accounts represent daily and monthly analysis fees
recognized for the services related to customer deposit accounts, including account maintenance, overdraft
fees, and depository transactions processing fees. Depository accounts charge fees in accordance with the
customer’s pricing schedule or may be assessed a flat service fee per month. The Company satisfies the
performance obligation related to providing depository accounts daily as transactions are processed and
deposit service charge revenue is recognized daily.
Bankcard fees – Bankcard fees primarily represent income earned from interchange revenue from Visa for
the Company’s processing of debit card transactions. The performance obligation for interchange revenue is
50
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
the processing of each transaction through the Company’s access to the banking system. This performance
obligation is completed for each individual transaction and revenue is recognized per transaction in
accordance with interchange rates established by Visa.
Wealth management revenue – Wealth management revenue consists of fees earned on personal trust
accounts, retirement plan administration, and wealth management services. The performance obligations
related to this revenue include items such as performing trustee service administration, investment
management services, custody and record-keeping services, and retirement plan administration. These fees
are part of contractual agreements and the performance obligations are satisfied upon completion of services.
The fees are generally a fixed-flat annual rate or based on a percentage of the account’s market value per the
contract with the customer and revenue is recognized over time as earned.
Other income – The Company recognizes other miscellaneous income through a variety of other revenue
streams, the most material of which includes revenue from investments in Small Business Investment
Companies (SBIC), gains on sales of financial assets, and bank-owned life insurance income. These revenue
streams are outside of the scope of ASC 606 and are recognized in accordance with the applicable U.S.
GAAP. The remainder of other income is primarily earned through transactions with personal banking
customers, including stop payment charges and fees for cashier’s checks. The performance obligations of
these types of fees are satisfied as transactions are completed and revenue is recognized upon transaction
execution according to established fee schedules with the customers.
Note 14 to these consolidated financial statements includes disclosure of revenue from contracts with customers.
Income Taxes
The Company files consolidated federal and unitary state income tax returns where allowed.
The determination of current and deferred income taxes is based on analyses of many factors including interpretation
of federal and state income tax laws, differences between tax and financial reporting basis of assets and liabilities,
expected reversals of temporary differences, estimates of amounts due or owed and current financial accounting
standards. Actual results could differ significantly from the estimates and interpretations used in determining the
current and deferred income taxes.
Deferred income taxes are accounted for using the asset and liability method. Under this method, deferred tax assets
and liabilities are recognized for the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effects of changes in tax rates on deferred tax
assets and liabilities are recognized in income in the period of enactment regardless of the balance sheet
classification of the underlying deferred tax asset or liability.
Management evaluates deferred tax assets to determine whether they are realizable based upon accounting standards
and specific facts and circumstances. A valuation allowance is established to reduce deferred tax assets to amounts
that are more likely than not expected to be realized.
Earnings Per Share
Basic earnings per share (EPS) excludes dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding during the applicable period. Diluted
EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common stock that then shared in the
earnings of the Company. Such potential dilutive instruments include stock options and contingently issuable stock.
Note 20 to these consolidated financial statements includes disclosure of the Company’s EPS calculations.
BNCCORP, INC. Annual Report 2024
51
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Comprehensive Income
Comprehensive income is the total of net income and other comprehensive income, which for the Company, is
generally comprised of unrealized gains and losses on securities available for sale, net of corresponding tax effects.
Subsequent Events
In preparing these consolidated financial statements, the Company has evaluated events and transactions for
potential recognition or disclosure through March 12, 2025, the date the consolidated financial statements were
available to be issued.
RECENTLY ISSUED OR ADOPTED ACCOUNTING PRONOUNCEMENTS &
INTERPRETATIONS
In December of 2023, the FASB issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740):
Improvements to Income Tax Disclosures. This standard establishes new income tax disclosure requirements in
addition to modifying and eliminating certain existing requirements. Under the new guidance, entities must
consistently categorize and provide greater disaggregation of information in the rate reconciliation. They must also
further disaggregate income taxes paid. The ASU is effective for fiscal years beginning after December 15, 2024.
The adoption of the ASU is not expected to have a material impact on the Company’s financial statements.
52
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 2. Debt Securities Available For Sale
Debt securities have been classified in the consolidated balance sheets according to management’s intent. The
Company had no securities designated as trading or held-to-maturity in its portfolio at December 31, 2024, or 2023.
The amortized cost of debt securities available for sale and their estimated fair values were as follows as of
December 31 (in thousands):
2024
Gross
Gross
Estimated
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
U.S. treasury securities
$
10,929
$
-
$
(799)
$
10,130
U.S. government sponsored entity mortgage-
backed securities issued by FNMA/FHLMC
19,189
-
(3,193)
15,996
U.S. government agency small business
administration pools guaranteed by SBA
9,534
-
(590)
8,944
Collateralized mortgage obligations
guaranteed by GNMA
6,373
-
(236)
6,137
Collateralized mortgage obligations issued by
FNMA/FHLMC
48,099
-
(4,962)
43,137
Commercial mortgage-backed securities
issued by FHLMC
16,682
-
(1,152)
15,530
Other commercial mortgage-backed securities
24,405
-
(1,622)
22,783
State and municipal bonds
8,051
-
(1,186)
6,865
$
143,262
$
-
$
(13,740)
$
129,522
2023
Gross
Gross
Estimated
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
U.S. treasury securities
$
25,872
$
-
$
(992)
$
24,880
U.S. government sponsored entity mortgage-
backed securities issued by FNMA/FHLMC
21,282
-
(3,187)
18,095
U.S. government agency small business
administration pools guaranteed by SBA
12,020
-
(755)
11,265
Collateralized mortgage obligations
guaranteed by GNMA
8,051
-
(287)
7,764
Collateralized mortgage obligations issued by
FNMA/FHLMC
55,750
-
(4,860)
50,890
Commercial mortgage-backed securities
issued by FHLMC
16,927
-
(1,213)
15,714
Other commercial mortgage-backed securities
26,349
-
(2,136)
24,213
State and municipal bonds
8,062
-
(1,111)
6,951
$
174,313
$
-
$
(14,541)
$
159,772
The Company elected to exclude accrued interest receivable from the amortized cost basis of debt securities
available for sale throughout this footnote. Total accrued interest receivable for debt securities was $586 thousand
and $700 thousand as of December 31, 2024 and 2023, respectively, and is included in the accrued interest
receivable line item on the Company’s consolidated balance sheets.
BNCCORP, INC. Annual Report 2024
53
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The amortized cost and estimated fair value of debt securities available for sale classified according to their
contractual maturities at December 31, 2024, were as follows (in thousands):
Amortized
Estimated
Cost
Fair Value
Due in one year or less
$
-
$
-
Due after one year through five years
30,829
29,130
Due after five years through ten years
23,070
21,316
Due after ten years
89,363
79,076
Total
$
143,262
$
129,522
The table above is not intended to reflect actual maturities, cash flows or interest rate risk. Actual maturities may
differ from the contractual maturities shown above as a result of prepayments.
Debt securities available for sale with estimated fair values of $31.6 million and $41.1 million at December 31,
2024, and 2023, respectively, were pledged as collateral for public and trust deposits and borrowings, including
borrowings from the FHLB and repurchase agreements with customers.
The Company had no sales of debt securities during 2024. This compares to $9.5 million of sales proceeds and $12
thousand of net realized gains in 2023.
54
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table shows the Company’s gross unrealized losses and fair value of debt securities available for sale
aggregated by investment category and length of time that individual securities have been in a continuous unrealized
loss position at December 31 (in thousands):
2024
Less Than 12 Months
12 Months or More
Total
Description of
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Securities
#
Value
Loss
#
Value
Loss
#
Value
Loss
U.S. treasury securities
-
$
-
$
-
3
$
10,130
$
(799)
3
$
10,130
$
(799)
U.S. government sponsored entity
mortgage-backed securities
issued by FNMA/FHLMC
-
-
-
8
15,996
(3,193)
8
15,996
(3,193)
U.S. government agency small
business administration pools
guaranteed by SBA
-
-
-
4
8,944
(590)
4
8,944
(590)
Collateralized mortgage
obligations guaranteed by
GNMA
-
-
-
8
6,137
(236)
8
6,137
(236)
Collateralized mortgage
obligations issued by
FNMA/FHLMC
1
156
(2)
18
42,981
(4,960)
19
43,137
(4,962)
Commercial mortgage-backed
securities issued by FHLMC
-
-
-
3
15,530
(1,152)
3
15,530
(1,152)
Other commercial mortgage-
backed securities
-
-
-
10
22,783
(1,622)
10
22,783
(1,622)
State and municipal bonds
-
-
-
2
6,865
(1,186)
2
6,865
(1,186)
Total temporarily impaired
securities
1
$
156
$
(2)
56
$
129,366
$ (13,738)
57
$
129,522
$ (13,740)
2023
Less Than 12 Months
12 Months or More
Total
Description of
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Securities
#
Value
Loss
#
Value
Loss
#
Value
Loss
U.S. treasury securities
1
$
9,963
$
(6)
4
$
14,917
$
(986)
5
$
24,880
$
(992)
U.S. government sponsored entity
mortgage-backed securities
issued by FNMA/FHLMC
-
-
-
8
18,095
(3,187)
8
18,095
(3,187)
U.S. government agency small
business administration pools
guaranteed by SBA
-
-
-
4
11,265
(755)
4
11,265
(755)
Collateralized mortgage
obligations guaranteed by
GNMA
-
-
-
8
7,764
(287)
8
7,764
(287)
Collateralized mortgage
obligations issued by
FNMA/FHLMC
1
175
(2)
18
50,715
(4,858)
19
50,890
(4,860)
Commercial mortgage-backed
securities issued by FHLMC
-
-
-
3
15,714
(1,213)
3
15,714
(1,213)
Other commercial mortgage-
backed securities
-
-
-
11
24,213
(2,136)
11
24,213
(2,136)
State and municipal bonds
-
-
-
2
6,951
(1,111)
2
6,951
(1,111)
Total temporarily impaired
securities
2
$
10,138
$
(8)
58
$
149,634
$ (14,533)
60
$
159,772
$ (14,541)
The Company does not believe that the debt securities available for sale that were in an unrealized loss position as
of December 31, 2024 and December 31, 2023 represent a credit loss impairment. For both periods presented, the
BNCCORP, INC. Annual Report 2024
55
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
gross unrealized loss positions were primarily related to mortgage-backed securities issued by U.S. government
agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of
the U.S. government and have a history of zero credit loss. Total gross unrealized losses were attributable to changes
in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the
debt securities. The Company does not intend to sell the debt securities that were in an unrealized loss position and
it is unlikely that the Company will be required to sell the debt securities before recovery of their amortized cost
basis, which may be at maturity.
NOTE 3. Federal Reserve Bank and Federal Home Loan Bank Stock
The carrying amounts of FRB and FHLB stock, which approximate their fair values, consisted of the following as
of December 31 (in thousands):
2024
2023
Federal Reserve Bank stock, at cost
$
1,807
$
1,807
Federal Home Loan Bank, at cost
580
565
Total
$
2,387
$
2,372
NOTE 4. Loans
The composition of loans is as follows at December 31 (in thousands):
2024
2023
Commercial and industrial
$
231,441
$
216,055
Commercial real estate
244,364
245,939
SBA
84,799
63,836
Consumer
120,032
111,872
Land and land development
11,243
8,416
Construction
5,903
21,648
Gross loans held for investment
697,782
667,766
Unearned income and net unamortized deferred fees and costs
942
1,042
Loans, net of unearned income and unamortized fees and costs
698,724
668,808
Allowance for credit losses
(9,223)
(9,284)
Net loans held for investment
$
689,501
$
659,524
The Company elected to exclude accrued interest receivable from the amortized cost basis of loans held for
investment throughout this footnote. Total accrued interest receivable for loans held for investment was $3.5 million
as of December 31, 2024 and 2023, and is included in the accrued interest receivable line item on the Company’s
consolidated balance sheets.
To accommodate customers whose financing needs exceed the Bank’s lending limits, the Bank sells loan
participations on a nonrecourse basis to outside financial institutions and derecognizes the portion of the loan
balance sold. The Bank retains the servicing rights of the participations sold. At December 31, 2024, and 2023, loan
participations sold on a nonrecourse basis to outside financial institutions totaled $127.3 million and $130.6 million,
respectively.
Loans to Related Parties
Note 21 to these consolidated financial statements includes information relating to loans to executive officers,
directors, principal shareholders and associates of such persons.
56
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Loans Pledged as Collateral
The table below present’s loans pledged as collateral to the FHLB and FRB as of December 31(in thousands):
2024
2023
Commercial and industrial
$
70,907
$
67,767
Commercial real estate
132,217
125,828
Total
$
203,124
$
193,595
NOTE 5. Allowance for Credit Losses
Transactions in the allowance for credit losses were as follows for the years ended December 31 (in thousands):
2024
Commercial
and
Industrial
Commercial
Real Estate
SBA
Consumer
Land and
Land
Development
Construction
Total
Balance, beginning
of period
$
3,378
$
3,368
$
1,014
$
1,092
$
169
$
263
$
9,284
Provision (credit)
142
(134)
431
343
39
(176)
645
Loans charged off
(392)
-
(159)
(195)
-
-
(746)
Loan recoveries
-
-
-
40
-
-
40
Balance, end of
period
$
3,128
$
3,234
$
1,286
$
1,280
$
208
$
87
$
9,223
2023
Commercial
and
Industrial
Commercial
Real Estate
SBA
Consumer
Land and
Land
Development
Construction
Total
Balance, beginning
of period
$
2,519
$
3,621
$
1,396
$
982
$
87
$
226
$
8,831
Cumulative effect-
CECL adoption
511
(300)
(467)
(13)
66
139
(64)
Provision (credit)
420
47
140
308
16
(102)
829
Loans charged off
(100)
-
(55)
(213)
-
-
(368)
Loan recoveries
28
-
-
28
-
-
56
Balance, end of
period
$
3,378
$
3,368
$
1,014
$
1,092
$
169
$
263
$
9,284
The Company recorded a $635 thousand provision for credit losses in 2024. A provision of $645 thousand was
recorded as an allowance for loan losses and a credit of $10 thousand was recorded as a reduction of allowance for
unfunded commitments. This compares to an $815 thousand provision for credit losses in 2023. A provision of
$829 thousand was recorded as an allowance for loan losses and a credit of $14 thousand was recorded as a reduction
of allowance for unfunded commitments.
At December 31, 2024, the Company maintained an allowance for unfunded commitments of $165 thousand. At
December 31, 2023, the Company maintained an allowance for unfunded commitments of $175 thousand. The
allowance for unfunded commitments are included as part of the other liabilities line on the Company’s
Consolidated Balance Sheets.
BNCCORP, INC. Annual Report 2024
57
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Credit Quality Indicators
The Company maintains an internal risk rating process in order to increase the precision and effectiveness of credit
risk management. Loans are assigned one of the following four internally assigned grades: pass, special mention,
substandard, and doubtful. The following are the definitions of the Company’s credit quality indicators:
Pass. Loans designated as pass are not adversely rated, are contractually current as to principal and interest,
and are otherwise in compliance with the contractual terms of the loan or lease agreement. Management
believes that there is a low likelihood of loss related to those loans and leases that are considered Pass.
Special Mention. Loans designated as special mention are loans that possess some credit deficiency that
deserves close attention due to emerging problems. Such loans pose unwarranted financial risk that, if left
uncorrected, may result in deterioration of the repayment prospects for the asset or in the Bank’s credit
position at some future date.
Substandard. Loans graded as substandard or doubtful are considered “Classified” loans for regulatory
purposes. Loans classified as substandard are loans that are generally inadequately protected by the current
net worth and paying capacity of the obligor, or by the collateral pledged, if any. Loans classified as
substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the loan.
Substandard loans are characterized by the distinct possibility that the Bank will sustain some loss if the
deficiencies are not corrected.
Doubtful. Loans classified as doubtful have the weaknesses of those classified as substandard, with
additional characteristics that make collection in full on the basis of currently existing facts, conditions and
values questionable, and there is a higher probability of loss.
Below is a summary of the segments and certain of the inherent risks in the Company’s loan portfolio:
Commercial and industrial and SBA. These portfolio segments include guaranteed, secured and
unsecured commercial loans. Credit risks inherent in this portfolio segment include fluctuations in the local
and national economy.
Commercial real estate. The commercial real estate portfolio segment includes all commercial loans that
are secured by real estate, other than those included in the construction and development. Risks inherent in
this portfolio segment include fluctuations in property values and changes in the local and national economy
impacting the sale or lease of the finished structures.
Construction and Land Development. These portfolio segments include loans for the purpose of
construction. Credit risks inherent in these portfolios include fluctuations in property values,
unemployment, and changes in the local and national economy.
Consumer. This portfolio segment consists of real estate and non-real estate loans to consumers. This
includes mortgages, secured loans, and unsecured loans. The risks inherent in this portfolio segment include
those factors that would impact the consumer’s ability to meet their obligations under the loan, such as the
local unemployment rate.
58
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following presents by credit quality indicator, loan class, and year of origination, the amortized cost basis of
the Company’s loans (in thousands):
Term Loans by Origination Year
December 31, 2024
2024
2023
2022
2021
2020
Prior
Revolving
Loans
Total
Commercial and Industrial
Pass
$
52,138
$
23,624
$
59,852
$
18,853
$
15,035
$
30,169
$
27,313
$
226,984
Special mention
-
-
-
1,101
-
553
577
2,231
Substandard
-
-
274
144
-
1,525
-
1,943
Doubtful
-
-
283
-
-
-
-
283
Total commercial and industrial $
52,138
$
23,624
$
60,409
$
20,098
$
15,035
$
32,247
$
27,890
$
231,441
Commercial and industrial loans:
Current period gross write-offs
$
-
$
-
$
-
$
-
$
-
$
392
$
-
$
392
Commercial Real Estate
Pass
$
8,408
$
30,883
$
42,751
$
48,117
$
16,793
$
85,625
$
2,431
$
235,008
Special mention
-
-
6,906
-
-
-
2,450
9,356
Substandard
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
Total commercial real estate
$
8,408
$
30,883
$
49,657
$
48,117
$
16,793
$
85,625
$
4,881
$
244,364
Commercial real estate:
Current period gross write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Small Business Administration
Pass
$
23,066
$
12,116
$
20,102
$
8,312
$
1,861
$
16,645
$
787
$
82,889
Special mention
-
80
174
351
-
15
-
620
Substandard
-
-
508
-
-
191
-
699
Doubtful
-
-
-
38
-
553
-
591
Total small business
administration
$
23,066
$
12,196
$
20,784
$
8,701
$
1,861
$
17,404
$
787
$
84,799
Small business administration
loans:
Current period gross write-offs
$
-
$
-
$
-
$
-
$
-
$
159
$
-
$
159
Consumer
Pass
$
23,859
$
25,093
$
26,299
$
10,491
$
7,296
$
10,155
$
15,608
$
118,801
Special mention
-
-
-
-
-
-
-
-
Substandard
168
873
34
69
33
3
51
1,231
Doubtful
-
-
-
-
-
-
-
-
Total consumer
$
24,027
$
25,966
$
26,333
$
10,560
$
7,329
$
10,158
$
15,659
$
120,032
Consumer loans:
Current period gross write-offs
$
10
$
21
$
68
$
42
$
23
$
31
$
-
$
195
-
Land and Land Development
-
Pass
$
996
$
2,143
$
1,169
$
861
$
307
$
-
$
5,767
$
11,243
Special mention
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
Total land and land
development
$
996
$
2,143
$
1,169
$
861
$
307
$
-
$
5,767
$
11,243
Land and land development loans:
Current period gross write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Construction
Pass
$
-
$
601
$
-
$
-
$
-
$
-
$
5,302
$
5,903
Special mention
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
Total Construction
$
-
$
601
$
-
$
-
$
-
$
-
$
5,302
$
5,903
Construction loans:
Current period gross write-offs:
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Total gross loans
$
108,635
$
95,413
$
158,352
$
88,337
$
41,325
$
145,434
$
60,286
$
697,782
Total gross write-offs
$
10
$
21
$
68
$
42
$
23
$
582
$
-
$
746
BNCCORP, INC. Annual Report 2024
59
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Term Loans by Origination Year
December 31, 2023
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Total
Commercial and Industrial
Pass
$
29,495
$
70,079
$
26,465
$
19,142
$
7,516
$
26,733
$
32,913
$
212,343
Special mention
-
13
-
26
-
-
-
39
Substandard
27
36
57
120
959
1,768
-
2,967
Doubtful
-
573
-
-
133
-
-
706
Total commercial and industrial $
29,522
$
70,701
$
26,522
$
19,288
$
8,608
$
28,501
$
32,913
$
216,055
Commercial and industrial loans:
Current period gross write-offs
$
29
$
-
$
71
$
-
$
-
$
-
$
-
$
100
Commercial Real Estate
Pass
$
24,193
$
53,823
$
37,076
$
18,672
$
9,959
$
88,948
$
11,384
$
244,055
Special mention
-
-
1,884
-
-
-
-
1,884
Substandard
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
Total commercial real estate
$
24,193
$
53,823
$
38,960
$
18,672
$
9,959
$
88,948
$
11,384
$
245,939
Commercial real estate:
Current period gross write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Small Business Administration
Pass
$
11,959
$
19,165
$
9,067
$
1,874
$
11,027
$
8,034
$
744
$
61,870
Special mention
-
192
-
192
86
-
-
470
Substandard
-
517
-
-
-
205
-
722
Doubtful
-
-
31
-
265
478
-
774
Total small business
administration
$
11,959
$
19,874
$
9,098
$
2,066
$
11,378
$
8,717
$
744
$
63,836
Small business administration
loans:
Current period gross write-offs
$
4
$
-
$
-
$
51
$
-
$
-
$
-
$
55
Consumer
Pass
$
31,317
$
32,557
$
13,181
$
9,639
$
3,900
$
6,332
$
14,855
$
111,781
Special mention
-
-
-
-
-
-
-
-
Substandard
-
14
22
29
-
26
-
91
Doubtful
-
-
-
-
-
-
-
-
Total consumer
$
31,317
$
32,571
$
13,203
$
9,668
$
3,900
$
6,358
$
14,855
$
111,872
Consumer loans:
Current period gross write-offs
$
123
$
31
$
21
$
1
$
-
$
37
$
-
$
213
Land and Land Development
Pass
$
2,665
$
1,373
$
1,629
$
276
$
-
$
219
$
2,254
$
8,416
Special mention
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
Total land and land
development
$
2,665
$
1,373
$
1,629
$
276
$
-
$
219
$
2,254
$
8,416
Land and land development loans:
Current period gross write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Construction
Pass
$
2,593
$
1,042
$
-
$
-
$
-
$
-
$
18,013
$
21,648
Special mention
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
Total Construction
$
2,593
$
1,042
$
-
$
-
$
-
$
-
$
18,013
$
21,648
Construction loans:
Current period gross write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Total gross loans
$
102,249
$
179,384
$
89,412
$
49,970
$
33,845
$
132,743
$
80,163
$
667,766
Total gross write-offs
$
156
$
31
$
92
$
52
$
-
$
37
$
-
$
368
60
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Performing and non-accrual loans
The Bank’s key credit quality indicator is a loan’s performance status, defined as accrual or non-accrual. Performing
loans are considered to have a lower risk of loss and are on accrual status. Non-accrual loans include loans on which
the accrual of interest has been discontinued. Accrual of interest is discontinued when the Bank believes that the
borrower’s financial condition is such that the collection of interest is doubtful. A delinquent loan is generally
placed on non-accrual status when it becomes 90 days or more past due unless the loan is well secured and in the
process of collection. When a loan is placed on non-accrual status, accrued but uncollected interest income is
reversed against interest income in the current period. No additional interest is accrued on the loan balance until the
collection of both principal and interest becomes reasonably certain. Delinquent balances are determined based on
the contractual terms of the loan adjusted for charge-offs and payments applied to principal.
The following table sets forth information regarding the Bank’s performing and non-accrual loans at December 31
(in thousands):
2024
Current
31-89 Days
Past Due
90 Days or
More Past
Due And
Accruing
Total
Performing
Non-accrual
Total
Commercial and industrial:
Business loans
$
107,206
$
-
$
-
$
107,206
$
571
$
107,777
Agriculture
41,914
-
-
41,914
189
42,103
Owner-occupied commercial real
estate
81,561
-
-
81,561
-
81,561
Commercial real estate
244,364
-
-
244,364
-
244,364
SBA
79,423
-
-
79,423
5,376
84,799
Consumer:
Automobile
6,066
45
-
6,111
24
6,135
Home equity
14,247
-
-
14,247
33
14,280
1st mortgage
31,940
873
-
32,813
-
32,813
Other
66,415
307
-
66,722
82
66,804
Land and land development
11,243
-
-
11,243
-
11,243
Construction
5,903
-
-
5,903
-
5,903
Total gross loans
$
690,282
$
1,225
$
-
$
691,507
$
6,275
$
697,782
BNCCORP, INC. Annual Report 2024
61
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
2023
Current
31-89 Days
Past Due
90 Days or
More Past
Due And
Accruing
Total
Performing
Non-accrual
Total
Commercial and industrial:
Business loans
$
93,110
$
2
$
-
$
93,112
$
837
$
93,949
Agriculture
37,720
-
-
37,720
-
37,720
Owner-occupied commercial real
estate
84,143
243
-
84,386
-
84,386
Commercial real estate
245,939
-
-
245,939
-
245,939
SBA
58,155
3,236
828
62,219
1,617
63,836
Consumer:
Automobile
9,488
50
-
9,538
-
9,538
Home equity
13,405
-
-
13,405
-
13,405
1st mortgage
26,427
1,051
-
27,478
-
27,478
Other
61,157
225
4
61,386
65
61,451
Land and land development
8,416
-
-
8,416
-
8,416
Construction
21,648
-
-
21,648
-
21,648
Total gross loans
$
659,608
$
4,807
$
832
$
665,247
$
2,519
$
667,766
The following table sets forth information on the Bank’s non-accrual loans as of December 31 (in thousands):
2024
Non-accrual loans
with a related ACL
Non-accrual loans
without a related
ACL
Total Non-Accrual
Loans
Commercial and industrial:
Business loans
$
288
$
283
$
571
Agriculture
189
-
189
SBA
5,231
145
5,376
Consumer:
Automobile
24
-
24
Home equity
33
-
33
Other
82
-
82
Total
$
5,847
$
428
$
6,275
2023
Non-accrual loans
with a related ACL
Non-accrual loans
without a related
ACL
Total Non-Accrual
Loans
Commercial and industrial: Business loans
$
837
$
-
$
837
SBA
1,617
-
1,617
Consumer: Other
65
-
65
Total
$
2,519
$
-
$
2,519
62
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table indicates the effect on interest income on loans if interest on non-accrual loans outstanding at
year end had been recognized at original contractual rates during the year ended December 31 (in thousands):
2024
2023
Interest income that would have been recorded
$
369
$
181
Interest income recorded
-
-
Effect on interest income on loans
$
369
$
181
Loan Modifications
The Company individually evaluates all modification to loans where the borrower is experiencing financial
difficulty. In cases where the modification is determined to be at least as favorable to the Company as the terms for
comparable loans to other borrowers with similar risk characteristics the loan is considered a new origination. In
the event the evaluation determines that the modification is not in-line with terms for comparable loans, the
Company considers these loans to be a modified loan. These types of modifications generally take the form of
principal forgiveness, interest rate reduction, other-than-insignificant payment delay, or a term extension.
The following presents the amortized cost of loans to borrowers experiencing financial difficulty that were modified
during 2024 and 2023 by loan segment and modification type (in thousands):
For year ended December 31, 2024
Term Extension
and Payment
Deferment (1)
Payment
Deferral (2)
Total
Percentage of
Total Loans
SBA
$
937
$
3,895
$
4,832
0.7 %
Total
$
937
$
3,895
$
4,832
0.7 %
(1)
Modifications extended term by seven months and deferred payments up to seven months.
(2)
Modifications deferred payment by six months.
Loan modifications to borrowers experiencing financial difficulty in 2024 did not result in principal forgiveness.
For year ended December 31, 2023
Term Extension
and Payment
Deferment (1)
Term Extension,
Payment
Modification,
Interest Rate
Reduction (2)
Payment
Deferral (3)
Total
Percentage of
Total Loans
Commercial and industrial
$
133
$
57
$
-
$
190
0.1 %
SBA
1,791
-
3,103
4,894
0.7
Total
$
1,924
$
57
$
3,103
$
5,084
0.8 %
(1)
Modifications extended term by seven months and deferred payments up to seven months.
(2)
Modifications extended term by twelve months, reduced payment, and reduced interest rate by 8.75%.
(3)
Modifications deferred payment by six months.
Loan modifications to borrowers experiencing financial difficulty in 2023 did not result in principal forgiveness.
BNCCORP, INC. Annual Report 2024
63
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table sets forth information regarding the performing status of loans to borrowers experiencing
financial difficulty at December 31 (in thousands):
As of December 31, 2024
Current
31-89 Days
Past Due
90 Days or
More Past Due
Total
SBA
$
-
$
-
$
4,832
$
4,832
Total
$
-
$
-
$
4,832
$
4,832
As of December 31, 2023
Current
31-89 Days
Past Due
90 Days or
More Past Due
Total
Commercial and industrial
$
57
$
133
$
-
$
190
SBA
-
4,066
828
4,894
Total
$
57
$
4,199
$
828
$
5,084
Collateral-Dependent Loans
A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and
repayment is expected to be provided substantially through the sale or operation of the collateral. The following
tables present the amortized cost basis of collateral-dependent loans by class and the specific allowance at December
31 (in thousands):
2024
Principal
Balance
Specific
Allowance
Commercial and industrial: Business loans
$
2,086
$
381
Commercial and industrial: Agriculture
189
54
SBA
4,999
535
Consumer: Automobile
24
5
Consumer: Home equity
33
6
Consumer: Other
57
10
Total
$
7,388
$
991
2023
Principal
Balance
Specific
Allowance
Commercial and industrial: Business loans
$
2,605
$
604
SBA
1,029
102
Consumer: Other
65
11
Total
$
3,699
$
717
64
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 6. Premises and Equipment, net
Premises and equipment, net consisted of the following at December 31 (in thousands):
2024
2023
Land and improvements
$
1,667
$
1,667
Buildings and improvements
16,054
15,896
Leasehold improvements
318
307
Furniture, fixtures, and equipment
9,489
9,091
Total cost
27,528
26,961
Less accumulated depreciation and amortization
(16,635)
(16,006)
Net premises and equipment
$
10,893
$
10,955
Depreciation and amortization expense totaled $1.1 million and $1.1 million for the years ended December 31,
2024, and 2023, respectively.
NOTE 7. Leases
The Company has operating leases, primarily for office space, that expire over the next seven years. These leases
generally contain renewal options for periods ranging from one to five years. The Company has evaluated each
individual lease to determine if exercising the renewal option was reasonably certain and considered the renewal
into determining the lease term and associated payments. The Company’s leases generally do not include
termination options for either party to the lease or restrictive financial or other covenants. Payments due under the
lease contracts include both fixed and variable payments. The variable payments are for the Company’s
proportionate share of the building’s property taxes, insurance and common area maintenance. As most of the
Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the
information available at the lease commencement date in determining the present value of the lease payments.
The components of lease cost for the years ended December 31 were as follows (in thousands):
2024
2023
Operating lease cost
$
422
$
586
Variable lease cost
44
64
Short-term lease cost
-
11
$
466
$
661
Amounts reported in the consolidated balance sheet as of December 31, 2024, and December 31, 2023, are as
follows (in thousands):
As of
As of
December 31, 2024
December 31, 2023
Operating lease right of use (ROU) asset
$
618
$
938
Operating lease liabilities
700
1,048
BNCCORP, INC. Annual Report 2024
65
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Other supplementary information related to leases as of December 31, was as follows (dollars are in thousands):
2024
2023
Cash paid for lease liabilities
$
421
$
606
Amortization of ROU assets
342
566
As of
As of
December 31, 2024
December 31, 2023
Weighted average remaining lease term
3.31 years
3.71 years
Weighted average discount rate
5.26%
5.79%
Maturities of lease liabilities under non-cancellable leases as of December 31, 2024, are as follows (in thousands):
Operating
Leases
2025
$
353
2026
202
2027
41
2028
42
2029
44
Thereafter
81
Total future minimum lease payments
763
Amounts representing interest
(63)
Total lease liabilities
$
700
NOTE 8. Deposits
The scheduled maturities of time deposits as of December 31, 2024, are as follows (in thousands):
2025
$
77,841
2026
5,523
2027
714
2028
205
2029
1,118
Thereafter
35
$
85,436
At December 31, 2024 and 2023, the Bank had no time deposits that had been acquired through a traditional broker
channel. The Company had no interest-bearing deposits that meet the regulatory definition of a brokered deposit as
of December 31, 2024 and December 31, 2023.
At December 31, 2024, and 2023, the Bank had $20.4 million and $20.6 million, respectively, in time deposits
greater than $250 thousand.
66
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table shows a summary of interest expense by product type as of December 31 (in thousands):
2024
2023
Savings
$
47
$
47
Interest checking
5,657
4,166
Money market
6,109
4,799
Time deposits
2,547
937
$
14,360
$
9,949
Deposits Received from Related Parties
Note 21 to these consolidated financial statements includes information relating to deposits received from executive
officers, directors, principal shareholders and associates of such persons.
NOTE 9. Federal Home Loan Bank Advances
As of December 31, 2024, the Bank had no FHLB advances outstanding. At December 31, 2024, the Bank had
loans with unamortized principal balances of approximately $200.0 million pledged as collateral to the FHLB.
As of December 31, 2023, the Bank had no FHLB advances outstanding. At December 31, 2023, the Bank had
loans with unamortized principal balances of approximately $190.4 million pledged as collateral to the FHLB.
As of December 31, 2024, the Bank had the ability to draw advances up to approximately $114.1 million based
upon the aggregate collateral that is currently pledged, subject to additional FHLB stock purchase requirement.
NOTE 10. Other Borrowings
The following table presents selected information regarding other borrowings at December 31 (in thousands):
2024
Unsecured Borrowing Lines:
Line
Outstanding
Available
BNC National Bank lines (1)
$
34,500
$
-
$
34,500
Secured Borrowing Lines:
Collateral
Pledged
Line
Outstanding
Available
BNC National Bank line
$
3,116
$
1,683
$
-
$
1,683
BNCCORP line
101,376
10,000
-
10,000
Total
$
104,492
$
11,683
$
-
$
11,683
(1)
The unsecured BNC National Bank Lines consists of three separate lines with three institutions in individual amounts of $12.5 million, $12
million, and $10 million.
BNCCORP, INC. Annual Report 2024
67
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At December 31, 2024, the pledged collateral for the secured BNC National Bank line was comprised of commercial
real estate loans and the pledged collateral for the secured BNCCORP line is the common stock of BNC National
Bank.
2023
Unsecured Borrowing Lines:
Line
Outstanding
Available
BNC National Bank lines (1)
$
34,500
$
-
$
34,500
Secured Borrowing Lines:
Collateral
Pledged
Line
Outstanding
Available
BNC National Bank line
$
3,249
$
1,509
$
-
$
1,509
BNCCORP line
106,014
10,000
-
10,000
Total
$
109,263
$
11,509
$
-
$
11,509
(1)
The unsecured BNC National Bank Lines consists of three separate lines with three institutions in individual amounts of $12.5 million, $12
million, and $10 million.
At December 31, 2023, the pledged collateral for the secured BNC National Bank line was comprised of commercial
real estate loans and the pledged collateral for the secured BNCCORP line is the common stock of BNC National
Bank.
NOTE 11. Guaranteed Preferred Beneficial Interests in Company’s Subordinated
Debentures
In July 2007, the Company issued $15.5 million of floating rate subordinated debentures. During the third quarter
of 2023 the index rate and spread converted from three-month LIBOR plus 1.40% to three-month SOFR plus 1.66%.
The interest rate at December 31, 2024, and December 31, 2023, was 6.25% and 7.06%, respectively. The
subordinated debentures mature on October 1, 2037. The subordinated debentures may be redeemed at par and the
corresponding debentures may be prepaid at the option of BNCCORP, subject to approval by the Federal Reserve
Board.
NOTE 12. Stockholders’ Equity
Regulatory restrictions exist on the ability of the Bank to transfer funds to BNCCORP in the form of cash dividends.
Approval of the Office of the Comptroller of the Currency (OCC), the Bank’s principal regulator, is required for
BNC National Bank to pay dividends to BNCCORP in excess of the Bank’s net profits from the current year plus
retained net profits for the preceding two years.
BNCCORP is required to consult with the Federal Reserve Board prior to declaring a cash dividend to stockholders.
On February 2, 2024, BNCCORP’s Board of Directors declared a $2.25 per share special cash dividend that was
paid on March 25, 2024, and on December 18, 2024, BNCCORP’s Board of Directors declared a $4.00 per share
special cash dividend that was paid on January 14, 2025.
BNCCORP’s Board of Directors approved a share repurchase program authorizing the Company to repurchase up
to 175,000 of BNCCORP, INC. outstanding common stock. During the first quarter of 2024, the Company
repurchased 50,000 shares of common stock for a total cost of $1.2 million, or $23.25 per share, excluding the cost
of commissions, transaction charges and taxes. No other share repurchases of common stock were made by the
Company during 2024. As of December 31, 2024, 125,000 shares remained under the Board of Directors' current
authorized share repurchase program. Share repurchases can be made through open market purchases, unsolicited
and solicited privately negotiated transactions, or in accordance with terms of Rule 10b-18 promulgated under the
68
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Securities Exchange Act of 1934. The Company will not repurchase shares from directors or officers of the
Company under the authorization. The Company will contemplate share repurchases subject to market conditions
and other factors, including legal and regulatory restrictions and required approvals.
NOTE 13. Regulatory Capital and Current Operating Environment
BNCCORP and BNC National Bank are subject to various regulatory capital requirements administered by the
federal banking agencies. Failure to meet capital requirements mandated by regulators can trigger certain mandatory
and discretionary actions by regulators. Such actions, if undertaken, could have a direct material adverse effect on
the Company’s financial condition and results of operations. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, BNCCORP and BNC National Bank must meet specific capital guidelines
that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under
regulatory accounting practices. Regulators may also impose capital requirements that are specific to individual
institutions. The requirements are generally above the statutory ratios.
At December 31, 2024, the capital ratios exceeded all regulatory capital thresholds and maintained sufficient capital
conservation buffers to avoid limitations on certain types of capital distributions.
BNCCORP, INC. Annual Report 2024
69
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The capital amounts and ratios presented below for December 31, 2024, and December 31, 2023, were as follows
(dollars in thousands):
Actual
For Capital Adequacy
Purposes
To be Well Capitalized
Amount in Excess of
Well Capitalized
Amount
Ratio
Amount
Ratio
Amount
Ratio
Amount
Ratio
2024
Total Risk-Based Capital:
Consolidated
$ 127,627
15.35 %
$
66,524
≥8.00 %
$
N/A
N/A %
$
N/A
N/A%
BNC National Bank
119,461
14.38
66,445
≥8.00
83,056
10.00
36,405
4.38
Tier 1 Risk-Based Capital:
Consolidated
118,239
14.22
49,893
≥6.00
N/A
N/A
N/A
N/A
BNC National Bank
110,073
13.25
49,833
≥6.00
66,445
8.00
43,628
5.25
Common Equity Tier 1
Risk-Based Capital:
Consolidated
102,774
12.36
37,419
≥4.50
N/A
N/A
N/A
N/A
BNC National Bank
110,073
13.25
37,375
≥4.50
53,986
6.50
56,087
6.75
Tier 1 Leverage Capital:
Consolidated
118,239
12.75
37,104
≥4.00
N/A
N/A
N/A
N/A
BNC National Bank
110,073
11.89
37,045
≥4.00
46,306
5.00
63,767
6.89
Tangible Common Equity
(to total assets): (a)
Consolidated
93,586
9.68
N/A
N/A
N/A
N/A
N/A
N/A
BNC National Bank
101,294
10.49
N/A
N/A
N/A
N/A
N/A
N/A
Actual
For Capital Adequacy
Purposes
To be Well Capitalized
Amount in Excess of
Well Capitalized
Amount
Ratio
Amount
Ratio
Amount
Ratio
Amount
Ratio
2023
Total Risk-Based Capital:
Consolidated
$ 142,868
17.64 %
$
64,806
≥8.00 %
$
N/A
N/A %
$
N/A
N/A%
BNC National Bank
124,592
15.40
64,726
≥8.00
80,908
10.00
43,684
5.40
Tier 1 Risk-Based Capital:
Consolidated
133,584
16.49
48,605
≥6.00
N/A
N/A
N/A
N/A
BNC National Bank
115,308
14.25
48,545
≥6.00
64,726
8.00
50,582
6.25
Common Equity Tier 1
Risk-Based Capital:
Consolidated
118,120
14.58
36,453
≥4.50
N/A
N/A
N/A
N/A
BNC National Bank
115,308
14.25
36,409
≥4.50
52,590
6.50
62,718
7.75
Tier 1 Leverage Capital:
Consolidated
133,584
14.52
36,813
≥4.00
N/A
N/A
N/A
N/A
BNC National Bank
115,308
12.54
36,778
≥4.00
45,973
5.00
69,335
7.54
Tangible Common Equity
(to total assets): (a)
Consolidated
108,329
11.19
N/A
N/A
N/A
N/A
N/A
N/A
BNC National Bank
105,926
10.96
N/A
N/A
N/A
N/A
N/A
N/A
(a)
Tangible common equity is calculated by dividing common equity, less intangible assets, by total period end assets.
70
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The most recent notifications from the OCC categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. Management believes the Bank remains well capitalized through the date
for which subsequent events have been evaluated.
The Bank must adhere to various U.S. Department of Housing and Urban Development (HUD) regulatory
guidelines including required minimum capital and liquidity to maintain their Federal Housing Administration
approval status. Failure to comply with the HUD guidelines could result in withdrawal of this certification. As of
December 31, 2024 and 2023 the Bank was in compliance with HUD guidelines.
NOTE 14. Revenue from Contracts with Customers
The following table disaggregates non-interest income subject to ASC 606 (in thousands):
2024
2023
Service charges on deposits
$
591
$
649
Bankcard fees
1,096
1,162
Bank charges and service fees not within scope of ASC 606
1,303
1,804
Total bank charges and service fees
2,990
3,615
Wealth management revenue
2,036
1,948
Total wealth management revenues
2,036
1,948
Other
46
44
Other not within the scope of ASC 606 (a)
799
598
Total other
845
642
Other non-interest income not within the scope of ASC 606 (a)
22
3,799
Total non-interest income
$
5,893
$
10,004
(a)
This revenue is not within the scope of ASC 606, and includes fees related to mortgage banking operations, gains on sale of loans, net gains on sale
of debt securities, revenue from investments in SBIC, and various other transactions.
The Company had no material contract assets or remaining performance obligations as of December 31, 2024. Total
receivables from revenue recognized under the scope of ASC 606 were $539 thousand and $492 thousand as of
December 31, 2024, and December 31, 2023, respectively. These receivables are included as part of the Other assets
line on the Company’s Consolidated Balance Sheets.
BNCCORP, INC. Annual Report 2024
71
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 15. Fair Value Measurements
The following table summarizes the financial assets and liabilities of the Company for which fair values are
determined on a recurring basis as of December 31 (in thousands):
Carrying Value at December 31, 2024
Twelve Months
Ended
December 31, 2024
Total
Level 1
Level 2
Level 3
Total
Gains/(Losses)
ASSETS
Debt securities available for sale
$
129,522
$
10,130
$
119,392
$
-
$
-
Total assets at fair value
$
129,522
$
10,130
$
119,392
$
-
$
-
Carrying Value at December 31, 2023
Twelve Months
Ended
December 31, 2023
Total
Level 1
Level 2
Level 3
Total
Gains/(Losses)
ASSETS
Debt securities available for sale
$
159,772
$
24,880
$
134,892
$
-
$
12
Loans held for sale
-
-
-
-
(52)
Commitments to originate mortgage loans
-
-
-
-
57
Commitments to sell mortgage loans
-
-
-
-
(434)
Mortgage banking short positions
-
-
-
-
(32)
Total assets at fair value
$
159,772
$
24,880
$
134,892
$
-
$
(449)
In 2023, the Company sold short positions in mortgage-backed securities to manage interest rate risk on the loans
committed for mandatory delivery. The commitments to originate and sell mortgage banking loans and the short
positions are derivatives and are recorded at fair value.
72
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 16. Fair Value of Financial Instruments
The estimated fair values of the Company’s financial instruments are as follows as of December 31 (in thousands):
Level in
Fair Value
Measurement
Hierarchy
December 31, 2024
December 31, 2023
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Assets:
Cash and cash equivalents
Level 1
$
100,815
$
100,815
$
102,454
$
102,454
Federal Reserve Bank and Federal
Home Loan Bank stock
Level 2
2,387
2,387
2,372
2,372
Gross loans held for investment
Level 2
697,782
681,736
667,766
654,919
Accrued interest receivable
Level 2
4,108
4,108
4,206
4,206
$
805,092
$
789,046
$
776,798
$
763,951
Liabilities and Stockholders’ Equity:
Deposits, noninterest-bearing
Level 2
$
172,456
$
172,456
$
184,442
$
184,442
Deposits, interest-bearing
Level 2
665,044
664,286
652,761
651,581
Accrued interest payable
Level 2
1,248
1,248
937
937
Guaranteed preferred beneficial
interests in Company’s
subordinated debentures
Level 2
15,464
12,122
15,464
12,678
$
854,212
$
850,112
$
853,604
$
849,638
Financial instruments with off-balance-
sheet risk:
Commitments to extend credit
Level 2
$
-
$
219
$
-
$
224
Standby and commercial letters of
credit
Level 2
$
-
$
29
$
-
$
30
The Company discloses the estimated fair value of financial instruments as it is useful to the reader of financial
statements. Fair value estimates are subjective in nature, involving uncertainties and matters of significant judgment,
and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
NOTE 17. Financial Instruments with Off-Balance-Sheet Risk
In the normal course of business, the Company is a party to various financial instruments with off-balance-sheet
risk, primarily to meet the needs of customers as well as to manage interest rate risk. These instruments, which are
issued by the Company for purposes other than trading, carry varying degrees of credit, interest rate or liquidity risk
in excess of the amounts reflected in the consolidated balance sheets.
Commitments to Extend Credit
Commitments to extend credit are agreements to lend to a customer, which are binding, provided there is no
violation of any condition in the contract, and generally have fixed expiration dates or other termination clauses.
The contractual amount represents the Bank’s exposure to credit losses in the event of default by the borrower. The
Bank manages this credit risk by using the same credit policies it applies to loans. Collateral is obtained to secure
commitments based on management’s credit assessment of the borrower. The collateral may include marketable
securities, receivables, inventory, equipment or real estate. Since the Bank expects many of the commitments to
expire without being drawn, total commitment amounts do not necessarily represent the Bank’s future liquidity
requirements related to such commitments.
BNCCORP, INC. Annual Report 2024
73
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Standby and Commercial Letters of Credit
Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a
customer to a third party. Commercial letters of credit are issued on behalf of customers to ensure payment or
collection in connection with trade transactions. In the event of a customer’s nonperformance, the Bank’s credit
loss exposure is up to the letter’s contractual amount. At December 31, 2024, based on current information, no
losses were anticipated as a result of these commitments. Management assesses the borrower’s creditworthiness to
determine the necessary collateral, which may include marketable securities, real estate, accounts receivable and
inventory. Since the conditions requiring the Bank to fund letters of credit may not occur, the Bank expects the
liquidity requirements related to such letters of credit to be less than the total outstanding commitments.
The contractual amounts of these financial instruments were as follows as of December 31 (in thousands):
2024
2023
Fixed
Variable
Fixed
Variable
Rate
Rate
Rate
Rate
Commitments to extend credit
$
23,392
$
87,767
$
27,119
$
89,476
Standby and commercial letters of credit
741
1,842
659
1,798
Performance and Financial Standby Letters of Credit
As of December 31, 2024, the Bank had no performance standby letters of credit and $337 thousand of financial
standby letters of credit compared to no performance standby letters of credit and $372 thousand of financial standby
letters of credit as of December 31, 2023. Performance standby letters of credit are irrevocable obligations to the
beneficiary on the part of the Bank to make payment on account in an event of default by the account party in the
performance of a nonfinancial or commercial obligation. Financial standby letters of credit are irrevocable
obligations to the beneficiary on the part of the Bank to repay money for the account of the account party or to make
payment on account of any indebtedness undertaken by the account party, in the event that the account party fails
to fulfill its obligation to the beneficiary. Under these arrangements, the Bank could, in the event of the account
party’s nonperformance, be required to pay a maximum of the amount of issued letters of credit. The Bank has
recourse against the account party up to and including the amount of the performance standby letter of credit. The
Bank evaluates each account party’s creditworthiness on a case-by-case basis and the amount of collateral obtained
varies and is based on management’s credit evaluation of the account party.
74
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Mortgage Banking Obligations
Through its mortgage banking operations, the Company originated and sold residential mortgage loans with
servicing released to third parties. These loans were sold without recourse to the Company. Although the Company
sold mortgage banking loans without recourse, industry standards require standard representations and warranties
which require sellers to reimburse investors for economic losses if loans default or prepay after the sale. Repurchase
risk is also present within the mortgage banking industry as continued disputes arise between lenders and
investors. Such requests for repurchase are commonly due to faulty representation and generally emerge at varied
timeframes subsequent to the original sale of the loan. To estimate the contingent obligation, the Company tracks
historical reimbursements and calculates the ratio of reimbursement to loan production volumes. Using
reimbursement ratios and recent production levels, the Company estimates the future reimbursement amounts and
records the estimated obligation.
The following is a summary of activity related to mortgage banking reimbursement obligations at December 31 (in
thousands):
2024
2023
Balance, beginning of period
$
644
$
656
Provision
(345)
91
Write offs, net
(81)
(103)
Balance, end of period
$
218
$
644
NOTE 18. Commitments and Contingencies
Small Business Investment Companies (SBIC)
The Bank has made investments in the Small Business Administration’s SBIC program to enhance small business
access to venture capital. At December 31, 2024, the Bank may be required to fund $705 thousand of additional
capital calls related to its SBIC investments.
Legal Proceedings
From time to time, the Company may be a party to legal proceedings arising from lending, deposit operations or
other activities. While the Company is not aware of any such actions or allegations that should reasonably give rise
to any material adverse effect, it is possible that the Company could be subject to such a claim in an amount that
could be material. Based upon a review with legal counsel, the Company believes that the ultimate disposition of
any such litigation will not have a material effect on the Company’s financial condition, results of operations or
cash flows.
NOTE 19. Income Taxes
Income tax expense (benefit) consists of the following for the years ended December 31 (in thousands):
2024
2023
Current:
Federal
$
1,962
$
1,363
State
464
324
2,426
1,687
Deferred:
Federal
(16)
(56)
State
(74)
(20)
(90)
(76)
Total
$
2,336
$
1,611
BNCCORP, INC. Annual Report 2024
75
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The reconciliation between income tax expense computed by applying the statutory federal income tax rate of 21.0%
is as follows for the years ended December 31 (in thousands):
2024
2023
Statutory federal income tax expense
$
2,155
$
1,536
State income taxes, net of federal income tax benefit
320
219
Tax-exempt interest income
(51)
(58)
Tax-exempt life insurance
(107)
(99)
Other, net
19
13
Total
$
2,336
$
1,611
Deferred tax assets are included in other assets on the Company’s consolidated balance sheets. Temporary
differences between the financial statement carrying amounts and tax bases of assets and liabilities that result in
significant portions of the Company’s deferred tax assets and liabilities are as follows as of December 31 (in
thousands):
2024
2023
Deferred tax assets:
Loans, primarily due to credit losses
$
2,446
$
2,443
Compensation
606
574
Unrealized loss on debt securities available for sale
3,374
3,571
Acquired intangibles
121
121
Other
189
216
Deferred tax assets
6,736
6,925
Deferred tax liabilities:
Discount accretion on securities
85
170
Premises and equipment
179
57
Other
546
625
Deferred tax liabilities
810
852
5,926
6,073
Valuation allowance
(14)
(14)
Net deferred tax assets
$
5,912
$
6,059
Subject to certain limiting statutes, the Company is able to carry forward state tax net operating losses aggregating
$17 thousand as of December 31, 2024. The state net operating losses expire between 2025 and 2031.
Tax years ended December 31, 2021 through 2024 remain open to federal examination. Tax years ended December
31, 2020 through 2024 remain open to certain state examinations.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by taxing authorities, based upon the technical merits of the position. The
tax benefit recognized in the consolidated financial statements from such a position would be measured based on
the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Also, interest
and penalties expense would be recognized on the full amount of deferred benefits for uncertain tax positions. The
Company’s policy is to include interest and penalties related to unrecognized tax benefits in income tax expense
within the consolidated statements of income. At December 31, 2024, and 2023, the Company did not have any
uncertain tax positions.
76
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 20. Earnings Per Share
The following table shows the amounts used in computing per share results (in thousands, except share and per
share data):
2024
2023
Denominator for basic earnings per share:
Average common shares outstanding
3,545,575
3,577,421
Dilutive effect of share-based compensation
3,278
2,818
Denominator for diluted earnings per share
3,548,853
3,580,239
Numerator (in thousands):
Net income
$
7,928
$
5,705
Basic earnings per common share
$
2.24
$
1.59
Diluted earnings per common share
$
2.23
$
1.59
NOTE 21. Related-Party Transactions
The Bank has entered into transactions with related parties, such as opening deposit accounts for and extending
credit to employees of the Company. The related-party transactions have been made under terms substantially the
same as those offered by the Bank to unrelated parties.
In the normal course of business, loans are granted to, and deposits are received from, executive officers, directors,
principal stockholders and associates of such persons. The aggregate dollar amount of these loans was $250
thousand and $450 thousand at December 31, 2024, and 2023, respectively. Advances and other increases of loans
to related parties in 2024 and 2023 totaled $120 thousand and $101 thousand, respectively. Loan pay downs and
other reductions by related-parties in 2024 and 2023 were $320 thousand and $194 thousand, respectively.
Commitments to extend credit to related parties decreased to $85 thousand at December 31, 2024, from $180
thousand at December 31, 2023. The total amount of deposits received from these parties was $2.6 million at
December 31, 2024, and $1.8 million at December 31, 2023. Loans to, and deposits received from, these parties
were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with unrelated persons and do not involve more than the normal risk of collection.
The Federal Reserve Act limits amounts of, and requires collateral on, extensions of credit by the Bank to
BNCCORP, and with certain exceptions, its non-bank affiliates. There are also restrictions on the amounts of
investment by the Bank in stocks and other subsidiaries of BNCCORP and such affiliates and restrictions on the
acceptance of their securities as collateral for loans by the Bank. As of December 31, 2024, BNCCORP and its
affiliates were in compliance with these requirements.
NOTE 22. Benefit Plans
BNCCORP has a qualified 401(k) savings plan covering all employees of BNCCORP and subsidiaries who meet
specified age and service requirements. Under the plan, eligible employees may elect to defer up to 75% of
compensation each year not to exceed the dollar limits set by law. At their discretion, BNCCORP and its subsidiaries
may provide matching contributions to the plan. In 2024 and 2023, BNCCORP and subsidiaries made matching
contributions of up to 50% of eligible employee deferrals up to a maximum employer contribution of 5% of
employee compensation. Generally, all participant contributions and earnings are fully and immediately vested. The
Company makes its matching contribution during the first calendar quarter following the last day of each calendar
year and an employee must be employed by the Company on the last day of the calendar year in order to receive
BNCCORP, INC. Annual Report 2024
77
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
the current year’s employer matching contribution. The anticipated matching contribution is expensed monthly over
the course of the calendar year based on employee contributions made throughout the year. The Company made
matching contributions of $442 thousand and $468 thousand for 2024 and 2023, respectively. Under the investment
options available under the 401(k) savings plan, prior to January 28, 2008, employees could elect to invest their
salary deferrals in BNCCORP common stock. At December 31, 2024, the assets in the plan totaled $41.5 million
and included $720 thousand (22,496 shares) invested in BNCCORP common stock. At December 31, 2023, the
assets in the plan totaled $37.6 million and included $641 thousand (22,496 shares) invested in BNCCORP common
stock. On January 28, 2008, the Company voluntarily delisted from the NASDAQ Global Market and deregistered
its common stock under the Securities Exchange Act of 1934 (as amended). As a result, the participants are
prohibited from making new investments of the Company’s common stock in the plan.
During 2015, the Company adopted a non-qualified deferred compensation plan for the benefit of select employees.
The plan structure permits the Company to make discretionary awards into an in-service account or a retirement
account of a plan participant established under the plan. The Company recognizes the expense for discretionary
awards in the period it commits to such awards. Additionally, plan participants may defer some or all of their annual
cash incentive awards into their in-service accounts. Company discretionary awards to the participant’s in-service
account are generally vested 50% upon initial participation with the remainder vesting ratably over 5 years. A
participant’s retirement account generally vests 50% upon an initial contribution and ratably thereafter over 10
years. Participants may allocate their in-service account balance among a fixed number of investment options. The
value of the payout from the in-service account will depend on the performance of such investment options.
Company discretionary awards into a participant’s retirement account are denominated in shares of BNCCORP
common stock and upon retirement, the plan participant will receive the number of shares of BNCCORP common
stock credited to the participant’s retirement account at that time. A separate Rabbi Trust has been established by
the Company to offset the change in value of this liability. Assets in the trust offsetting in-service liabilities are
recorded in other assets. BNCCORP common stock held in the trust related to the Company’s retirement account
obligation is recorded in treasury stock and equates to 21,649 and 19,069 shares as of December 31, 2024, and
2023, respectively. As of December 31, 2024, the plan obligation totaled $1.3 million and $1.1 million as of
December 31, 2023.
In December of 2015, the Company adopted a non-qualified deferred compensation plan for directors of
BNCCORP. Effective with 2016 service, a director may voluntarily make contributions of earned director
compensation to a deferred account that is ultimately payable with BNCCORP common stock at the time of
separation from service with the Company. The deferred shares of BNCCORP common stock were 33,525 shares
and 28,232 shares as of December 31, 2024, and 2023, respectively.
NOTE 23. Share-Based Compensation
The Company has two share-based plans for certain key employees and directors whereby shares of BNCCORP
common stock have been reserved for awards in the form of stock options, restricted stock, or common stock
equivalent awards. Pursuant to each plan, the compensation committee may grant options at prices equal to the fair
value of BNCCORP common stock at the grant date. The Company generally issues shares held in treasury when
options are exercised and restricted stock is granted.
Total shares in plan and total shares available as of December 31, 2024, are as follows:
1995
2015
Total
Total shares in plan
250,000
50,000
300,000
Total shares available
40,951
14,189
55,140
The Company recognized share-based compensation expense of $80 thousand and $78 thousand for the years ended
December 31, 2024, and 2023, respectively, related to grants of restricted stock.
78
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The tax benefits associated with share-based compensation was approximately $40 thousand for the year ended
December 31, 2024, and was approximately $2 thousand for the year ended December 31, 2023.
At December 31, 2024, the Company had $84 thousand of unamortized restricted stock compensation, which is
expected to be recognized over a period of four years. Restricted shares of stock granted have vesting and
amortization periods of up to four years.
Following is a summary of restricted stock activities for the years ended December 31:
2024
2023
Number
Weighted
Number
Weighted
Restricted
Average
Restricted
Average
Stock
Grant Date
Stock
Grant Date
Shares
Fair Value
Shares
Fair Value
Non-vested, beginning of year
10,250
$
31.83
5,500
$
39.91
Granted
-
-
5,000
23.10
Vested
(6,500)
36.87
(250)
34.77
Forfeited
-
-
-
-
Non-vested, end of year
3,750
23.10
10,250
31.83
Following is a summary of stock grants to directors for the years ended December 31:
2024
2023
Number of
Grant Date
Number of
Grant Date
Shares
Fair Value
Shares
Fair Value
Shares granted
2,500
$
27.00
2,000
$
30.97
NOTE 24. Segment Reporting
The Company determines reportable segments based on the way that management organizes the segments within
the Company for making operating decisions, allocating resources, and assessing performance. The Company has
determined that it has three reportable segments: Community Banking, Mortgage Banking, and Holding Company.
Community Banking
The Community Banking segment serves the needs of businesses and consumers through 11 locations in North
Dakota and Arizona. Within this segment, the following products and services are provided: business and personal
loans, commercial real estate loans, SBA loans, business and personal checking, savings products, and cash
management, as well as trust and wealth management services and retirement plan administration. These products
and services are supported through web and mobile based applications. Revenues for community banking consist
primarily of interest earned on loans and debt securities, bankcard fees, loan fees, services charges on deposits and
fees for wealth management services.
Mortgage Banking
The Mortgage Banking segment originated residential mortgage loans for the primary purpose of sale on the
secondary market. The segment consisted of both a consumer direct channel located in Kansas utilizing internet
leads and a call center to originate residential mortgage loans throughout the United States complemented by a
relationship based retail channels. Revenues for mortgage banking consisted primarily of interest earned on
mortgage loans held for sale, gains on sales of loans, unrealized gains or losses on mortgage financial instruments,
and loan origination fees. On June 16, 2023, the Company sold certain operating assets and assigned certain
liabilities related to the Company’s mortgage segment to First Federal Bank as the Company exited the mortgage
banking segment.
BNCCORP, INC. Annual Report 2024
79
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Holding Company
The Holding Company segment represents BNCCORP, the parent company of BNC National Bank. Revenue for
the Holding Company segment primarily consists of interest earned on cash and cash equivalents and management
fees charged to the Community Banking and Mortgage Banking segments for management services. Interest
expense for the Holding Company segment consists of interest expense on the Company’s subordinated debentures.
Non-interest expense for the segment includes parent company costs for certain centralized functions such as
corporate administration, accounting, audit, consulting, and governance.
The Company’s operating segments are presented based on its management structure and management accounting
practices. The structure and practices are specific to the Company and therefore, the financial results of the
Company’s business segments are not necessarily comparable with similar information for other financial
institutions.
2024
Community
Mortgage
Holding
Intercompany
BNCCORP
Banking
Banking
Company
Eliminations (1)
Consolidated
Interest income
$
46,452
$
-
$
98
$
(95)
$
46,455
Interest expense
14,455
-
1,037
(95)
15,397
Net interest income (expense)
31,997
-
(939)
-
31,058
Provision for credit losses
635
-
-
-
635
Net interest income (expense) after
credit for credit losses
31,362
-
(939)
-
30,423
Non-interest income
6,196
-
2,288
(2,591)
5,893
Non-interest expense
25,645
-
2,998
(2,591)
26,052
Income (loss) before income taxes
11,913
-
(1,649)
-
10,264
Income tax expense (benefit)
2,755
-
(419)
-
2,336
Net income (loss)
$
9,158
$
-
$
(1,230)
$
-
$
7,928
Total Assets at December 31, 2024
$
965,288
$
-
$
23,224
$
(21,831)
$
966,681
2023
Community
Mortgage
Holding
Intercompany
BNCCORP
Banking
Banking
Company
Eliminations (1)
Consolidated
Interest income
$
42,709
$
1,514
$
139
$
(1,084)
$
43,278
Interest expense
10,092
946
1,014
(1,084)
10,968
Net interest income (expense)
32,617
568
(875)
-
32,310
Provision for credit losses
815
-
-
-
815
Net interest income (expense) after
provision for credit losses
31,802
568
(875)
-
31,495
Non-interest income
7,354
3,641
2,134
(3,125)
10,004
Non-interest expense
25,590
8,768
2,950
(3,125)
34,183
Income (loss) before income taxes
13,566
(4,559)
(1,691)
-
7,316
Income tax expense (benefit)
3,181
(1,131)
(439)
-
1,611
Net income (loss)
$
10,385
$
(3,428)
$
(1,252)
$
-
$
5,705
Total Assets at December 31, 2023
$
966,807
$
-
$
19,138
$
(17,740)
$
968,205
(1) Intercompany eliminations remove internal shared service costs for intercompany use of funds to originate mortgage loans held for sale and costs
related to internal services rendered to segments by centralized function of the Company such as administration, audit, accounting, compliance,
governance, consulting, and technology expense.
46
80
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 25. Condensed Financial Information-Parent Company Only
Condensed financial information of BNCCORP, INC. on a parent company only basis is as follows:
Parent Company Only
Condensed Balance Sheets
As of December 31,
(In thousands, except per share data)
2024
2023
Assets:
Cash and cash equivalents
$
21,662
$
17,625
Investment in subsidiaries
101,056
105,565
Receivable from subsidiaries
599
560
Other
503
495
Total assets
$
123,820
$
124,245
Liabilities and stockholders’ equity:
Subordinated debentures
$
15,464
$
15,464
Payable to subsidiaries
77
60
Accrued expenses and other liabilities
14,612
303
Total liabilities
30,153
15,827
Common stock, $.01 par value – Authorized 11,300,000 shares; 3,668,653
issued; 3,521,375 and 3,569,210 shares outstanding
36
36
Capital surplus – common stock
26,904
26,572
Retained earnings
78,667
93,186
Treasury stock (147,278 and 99,443 shares, respectively)
(2,696)
(1,528)
Accumulated other comprehensive income, net
(9,244)
(9,848)
Total stockholders’ equity
93,667
108,418
Total liabilities and stockholders’ equity
$
123,820
$
124,245
BNCCORP, INC. Annual Report 2024
81
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Parent Company Only
Condensed Statements of Income
For the Years Ended December 31,
(In thousands)
2024
2023
Income:
Management fee income
$
2,270
$
2,123
Interest
98
139
Other
51
43
Total income
2,419
2,305
Expenses:
Interest
1,069
1,045
Salaries and benefits
1,151
1,156
Legal and other professional
756
823
Other
1,092
971
Total expenses
4,068
3,995
Loss before income tax benefit and equity in earnings of subsidiaries
(1,649)
(1,690)
Income tax benefit
419
439
Loss before equity in earnings of subsidiaries
(1,230)
(1,251)
Equity in earnings of subsidiaries
9,158
6,956
Net income
$
7,928
$
5,705
82
BNCCORP, INC. Annual Report 2024
BNCCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Parent Company Only
Condensed Statements of Cash Flows
For the Years Ended December 31,
(In thousands)
2024
2023
Operating activities:
Net income
$
7,928
$
5,705
Adjustments to reconcile net income to net cash provided by operating
activities -
Equity in earnings of subsidiaries
(9,158)
(6,956)
Dividends received from subsidiaries
14,400
-
Share-based compensation
327
267
Change in other assets
(48)
(195)
Change in other liabilities
(106)
96
Net cash provided by (used in) operating activities
13,343
(1,083)
Financing activities:
Dividends paid on common stock
(8,143)
-
Purchase of treasury stock
(1,163)
-
Net cash used in financing activities
(9,306)
-
Net increase (decrease) in cash and cash equivalents
4,037
(1,083)
Cash and cash equivalents, beginning of year
17,625
18,708
Cash and cash equivalents, end of year
$
21,662
$
17,625
Supplemental cash flow information:
Interest paid
$
1,074
$
969
Income taxes paid
$
2,175
$
1,269
BNCCORP, INC. Annual Report 2024
83
This Page Left Intentionally Blank
84
BNCCORP, INC. Annual Report 2024
CORPORATE DATA
Investor Relations
Email Inquiries:
corp@bncbank.com
General Inquiries:
BNCCORP, INC.
322 East Main Avenue, Bismarck, North Dakota 58501
Telephone (701) 250-3040 | Facsimile (701) 222-3653
Daniel J. Collins
Justin C. Currie
President & Chief Executive Officer
Chief Financial Officer
(612) 305-2210
(701) 250-3042
Annual Meeting
The 2025 annual meeting of stockholders will be held at 8:30 a.m. (Central
Daylight time) on Wednesday, June 18, 2025 by virtual meeting.
Independent Public Accountants
CliftonLarsonAllen LLP
220 South Sixth Street, Suite 300
Minneapolis, MN 55402-1436
Securities Listing
BNCCORP, INC.’s common stock is traded on the OTCQX Markets under the
symbol: “BNCC”.
COMMON STOCK PRICES
For the Years Ended December 31,
2024(1)
2023(1)
High
Low
High
Low
First Quarter
$28.70
$22.94
$31.29
$21.95
Second Quarter
$23.40
$21.00
$23.90
$20.70
Third Quarter
$26.50
$23.50
$24.00
$22.18
Fourth Quarter
$35.45
$25.75
$28.70
$21.90
(1) The quotes represent the high and low closing sales prices as reported by OTCQX Markets.
Stock Transfer Agent and Registrar
Broadridge Financial Solutions, Inc.
51 Mercedes Way
Edgewood, New York 11717
(877) 830-4936
Corporate Broker
D.A. Davidson Community Banking and Wealth Management Group
1-800-288-2811 | cbwm@dadco.com
BNC National Bank
Directors, BNCCORP, INC.
Michael M. Vekich,
Chairman of the Board &
CEO, Vekich Chartered
Nathan P. Brenna,
Owner, Brenna Farm & Ranch
Former Attorney
Gaylen Ghylin,
Retired EVP, Secretary & CFO of
Tiller Corporation d/b/a Barton Sand
& Gravel Co., Commercial Asphalt
Co. & Barton Enterprises, Inc.
John W. Palmer,
Principal & Managing Member,
PL Capital Advisors, LLC
Tom Redmann,
Retired Loan Officer
Bank of North Dakota
Directors, BNC National Bank
Nathan P. Brenna
Gaylen Ghylin
John W. Palmer
Tom Redmann
Michael M. Vekich
Daniel J. Collins
BANK BRANCHES – ND:
Bismarck Main
322 East Main Avenue
Bismarck, ND 58501
Bismarck South
219 South 3rd Street
Bismarck, ND 58504
Bismarck North
801 East Century Avenue
Bismarck, ND 58503
Bismarck Sunrise
3000 Yorktown Drive
Bismarck, ND 58503
Mandan
2711 Sunset Drive NW
Mandan, ND 58554
Crosby
206 South Main Street
Crosby, ND 58730
Garrison
92 North Main
Garrison, ND 58540
Linton
104 North Broadway
Linton, ND 58552
Stanley
210 South Main
Stanley, ND 58784
Watford City
205 North Main
Watford City, ND 58854
BANK BRANCHES - AZ
Glendale – Charter Address
20175 North 67th Ave
Glendale, AZ 85308