Highlights Net income during the first quarter of 2024 increased $267 thousand, or 18.1%, to $1.7 million, or $0.49 per diluted share, from $1.5 million, or $0.41 per diluted share, in the 2023 period. First quarter 2024 return on average assets of 0.74% compared to 0.65% in the 2023 period. During the quarter, the Company declared a one-time special dividend of $2.25 and repurchased 50,000 shares of its common stock. For the quarter, the Community Banking segment reported net income of $2.1 million, or $0.58 per diluted share, compared to net income of $3.0 million, or $0.84 per diluted share, in the same period of 2023. Yields on loans held for investment was 5.51% for the first quarter of 2024 compared to 5.05% in the first quarter of 2023. The Company increased loans held for investment balances by $9.1 million, or 1.4%, to $677.9 million as of March 31, 2024 from $668.8 million at December 31, 2023. The ratio of loans held for investment-to-deposits increased to 84.1% at March 31, 2024 from 79.9% at December 31, 2023. Allowance for credit losses as of March 31, 2024, increased to 1.40% of loans held for investment compared to 1.39% as of December 31, 2023. BISMARCK, N.D., May 3, 2024 /PRNewswire/ -- BNCCORP, INC. (BNC or the Company) (OTCQX Markets: BNCC), which operates community banking and wealth management businesses in North Dakota and Arizona, today reported financial results for the first quarter ended March 31, 2024. Management Commentary "The first quarter was characterized by a solid performance as compared with a year ago, with net income increasing by 18.1% to $1.7 million. This growth is a testament to our community banking operations, to our inherently conservative management style, our disciplined approach to growth and loan underwriting and affirms our decision to exit the mortgage business in 2023," said Daniel J. Collins, BNC's President and Chief Executive Officer. Mr. Collins added, "We are pleased to report growth in our loans held for investment, which have expanded by $9.1 million this quarter at an average yield of 7.60%, a critical component, along with disciplined expense management, of defending our profitability in an inverted yield curve and inflationary environment. Given the recent comments by the Federal Reserve indicating that inflation, while declining gradually, remains stubbornly resistant, we anticipate the pressure on margins to continue." "We were also pleased to have declared a one-time special dividend of $2.25 per share during the quarter, a reflection of our longstanding belief that capital not needed for growth or liquidity should be returned to our shareholders. Together with our stock repurchase of 50,000 shares during the first quarter, this action underscores both our commitment to shareholder value and our confidence in the Company's financial health and strategic direction." "Looking ahead, our strategy remains to deliver sustainable growth, tempered by strong risk management, and to enhance shareholder value. We believe that our disciplined approach to lending and our focus on high-quality customer service continues to serve us well as we navigate the dynamic economic landscape." 2024 Versus 2023 First Quarter Comparison SEGMENT DATA For the Quarter Ended March 31, 2024 (in thousands) Community Banking Mortgage Banking (a) Holding Company Intercompany Eliminations BNCCORP Consolidated Net interest income (expense) $ 8,081 $ - $ (222) $ - $ 7,859 Provision for credit losses 215 - - - 215 Non-interest income 1,618 - 541 (621) 1,538 Non-interest expense 6,745 - 783 (621) 6,907 Income (loss) before taxes 2,739 - (464) - 2,275 Income tax expense (benefit) 644 - (109) - 535     Net income (loss) $ 2,095 $ - $ (355) $ - $ 1,740 For the Quarter Ended March 31, 2023 Community Banking Mortgage Banking Holding Company Intercompany Eliminations BNCCORP Consolidated Net interest income (expense) $ 8,497 $ 155 $ (211) $ - $ 8,441 Provision for credit losses 240 - - - 240 Non-interest income 2,227 1,847 550 (993) 3,631 Non-interest expense 6,511 3,614 774 (993) 9,906 Income (loss) before taxes 3,973 (1,612) (435) - 1,926 Income tax expense (benefit) 955 (400) (102) - 453     Net income (loss) $ 3,018 $ (1,212) $ (333) $ - $ 1,473 (a)The Company divested the mortgage banking segment in 2023. The Community Banking Segment reported net income of $2.1 million, or $0.58 per diluted share, for the quarter compared to $3.0 million in the first quarter of 2023. Interest expense increased by $2.3 million when compared to the 2023 period due to the impact of rate changes made by the Federal Reserve in addition to the $48.3 million increase in average interest bearing deposits when compared to the prior year period. The increase in interest expense was offset by $1.7 million higher interest income from loan growth and increased yields on earning assets. The Community Banking Segment reported $609 thousand lower non-interest income primarily due to a $300 thousand decrease in off balance sheet deposit income and $376 thousand less in management fee income from the Mortgage Segment that was partially offset by higher SBIC revenues when compared to the first quarter of 2023. Non-interest expense was slightly higher in the 2024 period due to normal inflationary pressures on salaries and benefits, increased regulatory and other expense that was partially offset by lower professional services and depreciation compared to the same period in 2023. Additionally, the Company has lowered the number of its full-time equivalent employees by 2.8% when compared to December, 31, 2023. Consolidated net interest income for the first quarter of 2024 was $7.9 million, a decrease of $582 thousand, or 6.9%, from $8.4 million in the first quarter of 2023. Net interest margin was 3.52% in the first quarter of 2024 compared to 3.97% reported in the prior year period. The increase in loans held for investment at higher yields was more than offset by a lower volume of loans held for sale and a significant increase in the cost of deposits. On a consolidated basis, first-quarter interest income increased $1.7 million, or 16.7%, from $10.0 million to $11.7 million. The 5.23% average yield on interest-earning assets in the quarter was higher than the 4.71% average yield in the first quarter of 2023 because of higher yields on interest-earning assets, a $48.8 million year-over-year increase in the average balance of loans held for investment and higher yields and balances of cash and cash equivalents. Those increases were offset by lower debt securities and loans held for sale. It is noteworthy that the Company's variable rate assets have continued to re-price with interest rate movements by the Federal Reserve. The weighted average interest rate on loans held for investment originated in the first quarter of 2024 was 7.60%, compared to 5.07% during the first quarter 2023. Consolidated interest expense in the first quarter of 2024 was $3.8 million, an increase of $2.3 million from the 2023 period. As a result, the cost of core deposits in the first quarter of 2024 rose to 1.74% versus 0.68% in the first quarter of 2023. The average balance of deposits increased by $30.0 million when comparing the first quarter of 2024 to the first quarter of 2023. The cost of interest-bearing liabilities was 2.33% during the first quarter of 2024, compared to 1.04% 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 even while staying focused on maintaining strong liquidity levels. As of March 31, 2024, nonperforming assets were $3.5 million, representing a ratio of nonperforming assets to total assets of 0.38%. These results are comparable to the $3.4 million in nonperforming assets, and a 0.35% ratio of nonperforming assets to total assets held on December 31, 2023. At March 31, 2024, $1.6 million of the nonperforming loans were SBA loans that are supported by material government guarantees. The Company recorded a $215 thousand provision for credit losses in the first quarter of 2024 compared to a $240 thousand provision in the first quarter of 2023. The allowance for credit losses increased slightly to 1.40% of loans held for investment on March 31, 2024 from 1.39% on December 31, 2023. Non-interest income for the Community Banking Segment during the first quarter of 2024 was $1.6 million, compared to $2.2 million in the 2023 first quarter. Bank charges and service fees were $300 thousand lower quarter-over-quarter due to lower deposits held in one-way sell positions. Using an associated banking network, the Company is able to generate fee income on deposits not otherwise deployed by placing those deposits with another financial institution to meet their liquidity needs. The deposits can be reclaimed for future liquidity use by the Company at any time. Fees derived from the movement of deposits off the balance sheet began late in the first quarter of 2022 and can fluctuate significantly based on our customers' excess funding needs. As of March 31, 2024, off-balance sheet deposits amounted to $38.9 million compared to $34.8 million as of December 31, 2023. Consolidated other income in the first quarter of 2024 increased by $71 thousand compared to the first quarter of 2023 as the Company received higher SBIC and BOLI revenue in 2024. Non-interest expense for the Community Banking Segment during the first quarter of 2024 increased just $234 thousand, or 3.6%, year-over-year. The increase is primarily due to higher salaries, data processing fees, regulatory costs, and other expenses being partially offset by lower professional service and occupancy expense. In the first quarter of 2024, consolidated income tax expense was $535 thousand, compared to $453 thousand in the first quarter of 2023. The Company's effective tax rate was 23.5% in the first quarter of 2024, unchanged from the same period of 2023. Tangible book value per common share on March 31, 2024, was $28.51, compared to $30.38 at December 31, 2023. The decrease in tangible book value per common share was driven by the $2.25 dividend declared on February 2, 2024 and the repurchase by the Company of 50,000 shares of the Company's stock during the first quarter of 2024 at a total cost of $1,162,500 excluding the cost of commissions, transaction charges, and taxes. The Company's tangible common equity capital ratio was 10.81% on March 31, 2024, compared to 11.19% on December 31, 2023. Assets and Liabilities At the consolidated level, total assets were $928.3 million at March 31, 2024 versus $968.2 million at December 31, 2023. Total loans held for investment were $677.9 million on March 31, 2024 compared to $668.8 million on December 31, 2023. Debt securities decreased $20.3 million from year-end 2023, primarily due to normal amortization, while cash and cash equivalent balances totaled $73.6 million on March 31, 2024 compared to $102.5 million on December 31, 2023. Total deposits decreased $31.1 million to $806.1 million as of March 31, 2024, from an elevated deposit balance of $837.2 million on December 31, 2023 and moved down to levels that were in-line with deposit balances reported during the second and third quarters of 2023. During 2023, the Company experienced higher 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. As the Company experienced during 2023, off-balance sheet deposits can fluctuate significantly as a significant portion of these deposits moved to higher rate opportunities in the short-term markets. The Company continues to focus on developing new deposit relationships and is keenly focused on the importance of liquidity. The following table provides additional detail to the Company's total deposit relationships: As of (In thousands) March 31, 2024 December 31, 2023 March 31, 2023 Deposits: Non-interest-bearing $ 170,976 $ 184,442 $ 195,125 Interest-bearing – Savings, interest checking and money market 565,151 582,855 525,644 Time deposits 69,984 69,906 51,609 Total on balance sheet deposits 806,111 837,203 772,378 Off-balance sheet deposits (1) 38,875 34,792 124,971 Total available deposits $ 844,986 $ 871,995 $ 897,349 (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 variousfuture maturity dates. As of March 31, 2024, the Company managed off-balance sheet time deposit balances of $19.7 million, compared to$18.7 million time deposit balances as of December 31, 2023 and $25.8 million time deposit balances as of March 31, 2023. 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 customers' deposit balances. This fact, combined with our strong balance sheet and sustained management focus on the Company's relationship-focused culture, has contributed to the Company's ability to maintain a significant deposit base. Off-balance sheet accounts are primarily utilized to accommodate larger business customers with significant deposits who require daily access to funds and desire FDIC insurance coverage. These off-balance sheet deposits were $34.8 million at year-end 2023 and increased to $38.9 million at March 31, 2024. Off-balance sheet deposits can fluctuate greatly as customers' needs and objectives evolve. The Company earns non-interest income through the associated banking network for the utilization of these funds. Trust assets under administration increased 5.2%, or $20.1 million, to $408.9 million at March 31, 2024, from $388.8 million at December 31, 2023. During the first quarter of 2024, the Company benefited from material market value increases coupled with the acquisition of new assets under administration. Asset Quality The allowance for credit losses was $9.5 million as of March 31, 2024, versus $9.3 million on December 31, 2023. The allowance as a percentage of loans held for investment on March 31, 2024 increased slightly from 1.39% as of December 31, 2023 to 1.40% at current quarter end. Past due loans for a period of 31-89 days decreased to $1.3 million as of March 31, 2024, compared to $4.8 million as of December 31, 2023. Nonperforming assets were $3.5 million on March 31, 2024, compared to $3.4 million on December 31, 2023. The ratio of nonperforming assets-to-total-assets was 0.38% at March 31, 2024 versus 0.35% at December 31, 2023. At March 31, 2024, $1.6 million of the nonperforming loans were SBA loans that are supported by material government guarantees. As of March 31, 2024, the Company did not hold any other real estate and held $49 thousand in repossessed assets. As of December 31, 2023, the Company did not hold any other real estate and held $33 thousand in repossessed assets. As of March 31, 2024, classified loans were $6.3 million with $2.6 million of the balance on non-accrual. These results compare to year-end 2023 where the Company held $5.3 million of classified loans with $2.5 million of those loans on non-accrual. As of March 31, 2024 and December 31, 2023, the Company had $4.9 million and $2.4 million, respectively, of potentially problematic loans, which are risk-rated as "watch list". Significant macroeconomic and geopolitical factors are present and evolving and the Company continues to monitor their possible impact on the performance of the loan portfolio. BNC's loans held for investment are geographically concentrated in North Dakota and Arizona, comprising 57% and 24%, respectively, of the Company's total loans held for investment portfolio. The North Dakota economy is influenced by the energy and agriculture industries. Changes in energy supply and demand have recently caused an increase in oil prices to the benefit of the oil industry and ancillary services. Potential risks to North Dakota's energy industry include the possibility of adverse national legislation and changes in economic conditions that reduce energy production. Depending on the severity of their impact, these factors could present potential challenges to credit quality in North Dakota. The Arizona economy continues to diversify, but continues to be influenced by the leisure and travel industries. Positive trends in both industries have been noted, but an extended slowdown in these industries may negatively impact credit quality in Arizona. While the Company's portfolio includes various sized loans spread over a large number of industry sectors, it has meaningful concentrations of loans to the hospitality and commercial real estate industries. The following table approximately describes the Company's concentrations by industry as of March 31, 2024 and December 31, 2023, respectively: Loans Held for Investment by Industry Sector (in thousands) March 31, 2024 December 31, 2023 Non-owner Occupied Commercial Real estate – nototherwise categorized $ 191,650 28 % $ 198,428 30 % Consumer, not otherwise categorized 99,268 15 99,702 15 Hotels 83,042 12 83,985 13 Retail trade 38,696 6 35,827 5 Healthcare and social assistance 35,238 5 32,011 5 Agriculture, forestry, fishing and hunting 32,732 5 33,503 5 Transportation and warehousing 28,460 4 27,905 4 Art, entertainment and recreation 28,130 4 27,507 4 Non-hotel accommodation and food service 25,593 4 24,637 4 Mining, oil and gas extraction 21,837 3 22,149 3 Construction contractors 16,591 3 16,082 3 Other service 13,007 2 11,940 2 Professional, scientific, and technical services 11,248 2 9,570 1 Manufacturing 9,729 1 7,801 1 Real estate and rental and leasing support services 9,126 1 9,804 1 Educational services 8,415 1 4,246 1 Finance and insurance 8,165 1 6,781 1 All other 15,867 3