Update: Bnccorp Q2 2014 Earnings

Jul.28.14 | About: BNCCORP, INC. (BNCC)

Summary

Bnccorp reported Q2 '14 earnings.

The earnings confirm the original thesis that Bnccorp is capable of significant growth despite the downturn in mortgage-related fee income.

Improved earnings were anticipated, but the presence of several irregular items means the bank may still be a few quarters away from producing its true earnings picture.

For 2Q 2014, Bnccorp, Inc. (OTCQB:BNCC) reported net income down 11% from the prior year period, but up 23% from the first quarter of 2014. Margins are still suffering from low yields, but assets keep flowing inward, and some one-time benefits were in play to help keep the bank's 6-month earnings trend in-line with my forecast for 2014 of $6 million.

For the quarter, the company earned $0.50 per share, or $2.2 million. Loan sales of $760,000 and a provision benefit of $400,000 contributed a sizable amount to pre-tax income, but the real story is a pickup in mortgage banking revenues (up 48%) that have been falling significantly over the past year. This was positive news, of course, but I tend to think that investors are going to need a few more quarters before they see where this high variable source of income finds some real traction.

Shares still look attractive based on my original thesis, but there is no denying that there is a lot of work to do, and I'm not sure how investors will react to seeing so many one-time benefits supporting the bottom line. Tangible equity benefited from appreciation in the growing investment portfolio, but all of these improvements in book value will go a long way toward helping the bank afford to redeem its costly preferred shares. Trading with a low price to book value ratio of 1.09, BNCC is still one of my favorite regional bank stocks, as it is one of the only ones at this price level capable of producing a ROE in the mid-teens.

Disclosure: The author is long BNCC. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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