Commercial Finance Latest Venture for Ambitious North Dakota Bank

Bismarck, N.D.-based BNC Corp. continues to spread its wings. The $240 million-asset company got approval last week to start a commercial finance subsidiary.

The move is the latest in an aggressive growth plan aimed at making the company a "dominant provider" of integrated services to small and midsize businesses, said Gregory K. Cleveland, president.

"The finance company merely provides us the flexibility and option to do asset-based lending with customers who don't ... qualify for bank-qualified loans," Mr. Cleveland said.

The subsidiary, dubbed BNC Financial, also may buy restructured debt from other financial institutions at a discount.

The Federal Reserve has permitted the new unit to take an active part in restructuring defaulted debt but barred it from acquiring equity in companies other than that used as loan collateral. This should assure that it will remain primarily a creditor. It also can't buy loans for which the collateral is stock in another financial institution.

"The Fed doesn't want to have bank holding company subsidiaries taking equity holdings in other institutions," Mr. Cleveland said.

On Monday, BNC Financial paid $85,000 for the assets of Cambridge Bank Professionals, a St. Cloud, Minn., firm that specializes in analyzing businesses' credit needs for lenders.

BNC went public last July, beginning an active 10 months. Later, it reconfigured its North Dakota offices, buying several branches from First Bank System and selling a bank in Beach, N.D., west of its primary market area.

Early this year, BNC opened a bank in downtown Minneapolis - its first foray outside North Dakota.

The company also got approval last year to acquire a data processor but ultimately didn't complete an acquisition, Mr. Cleveland said.

These myriad activities are "a lot to be doing - and it's a major challenge," said Ben Crabtree, an analyst at Minneapolis' Dain Bosworth Inc., which underwrote BNC's stock offering. "I think you can see that pretty clearly in the fact that earnings have been disappointing in the past couple of quarters."

BNC blamed a first-quarter earnings decrease - $142,000 versus $311,000 the year before - largely on a delay in opening the Minnesota bank, which racked up expenses without the anticipated income.

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