BNCCORP, which operates community banking and wealth management businesses in North Dakota, Arizona, and Minnesota, and has mortgage banking offices in Illinois, Kansas, Missouri, Michigan, Arizona, and North Dakota, reported financial results for the fourth quarter and year ended December 31, 2020.
Net income in the fourth quarter of 2020, grew significantly to $12.4 million, compared to $1.5 million in the same period of 2019.
Fourth quarter 2020 earnings per diluted share rose 711.6% to $3.49 from $0.43 in the prior-year fourth quarter.
The year-over-year period increase was primarily due to higher net interest income, significantly increased mortgage revenues, and the absence of losses resulting from the sales of debt securities that occurred in the 2019 period, while being partially offset by higher non-interest expense.
Fourth quarter 2020 net interest income increased by $1.1 million to $8.5 million, or 14.7%, from the comparable 2019 quarter.
Fourth quarter 2020 interest income decreased by $354 thousand from the 2019 fourth quarter as the impact of loan growth including PPP loans was offset by lower yields on loans and lower balances and yields on debt securities.
Fourth quarter 2020 interest expense decreased by $1.4 million, or 66.9%, due to a reduction in the cost of deposits and borrowings, fewer Federal Home Loan Bank (FHLB) advances, and the redemption of $10.0 million of subordinated debt in the fourth quarter 2019.
Non-interest income in the fourth quarter of 2020 grew by $18.0 million, or 319.5%, from the same period in 2019.
In the fourth quarter of 2020, mortgage banking revenues were $22.3 million, $14.7 million higher than the same period a year ago.
Mortgage banking revenues were driven primarily by refinance activity stemming from continued favorable interest rates.
Mortgage-related margins also increased relative to the year-ago period.
There were no gains or losses on sales of debt securities in the fourth quarter of 2020 compared to losses on sales of debt securities of $3.3 million related to deleveraging activities in the same period of 2019.
As expected, non-interest expense in the 2020 fourth quarter increased by $5.0 million, or 45.1%, versus the fourth quarter of 2019 due primarily to increases in mortgage banking operating costs.
The ratio of nonperforming assets to total assets was 0.24% at December 31, 2020, compared to 0.21% at December 31, 2019.
The Company's provision for credit losses was $270 thousand in the 2020 fourth quarter versus $200 thousand in the fourth quarter of 2019.
The allowance for credit losses was 1.98% of loans and leases held for investment (excluding $50.6 million of PPP loan) at December 31, 2020, compared to 1.60% at December 31, 2019.
The Company continues to monitor key industry data and will prudently adjust its provision for credit losses as appropriate.
At December 31, 2020, loans modified consistent with Section 4013 of the CARES Act totaled $42 million compared to $205 million earlier in 2020.
The majority of these modified loans (55%) are in the hotel industry.
Other services to the hospitality industry and the accommodation and food service industry comprise another 10% and 8% of CARES Act modified loans, respectively.
Approximately 25% of these modified loans will reach the end of their payment modification period by March 31, 2021 with the remaining 75% of payment modifications expiring by June 30, 2021.
Economic conditions, including pandemic-related challenges, may result in the Company agreeing to additional loan modifications to assist borrowers consistent with CARES Act legislation extended through January 1, 2022.
Tangible book value per common share at December 31, 2020, was $33.39, compared to $27.39 at December 31, 2019, an increase of $6.00 per common share.
During the fourth quarter of 2020, the Company recorded a dividend payable of $28.7 million or $8.00 per common share for a previously announced special cash dividend declared in December 2020 and payable on February 1, 2021.
Tangible common equity increased to 11.01% of total assets at December 31, 2020, from 9.95% at December 31, 2019. ■