BCB Bancorp, Inc. — 2022 Form 10-K
Business context and reporting period. BCB Bancorp is the holding company for BCB Community Bank, a community-oriented bank serving New Jersey and the New York metropolitan area. This annual report covers the fiscal year ended December 31, 2022, with comparisons to 2021. The company reported $3.546 billion in assets, $2.812 billion in deposits, and 301 full-time equivalent employees at year-end.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Net income | $45.6 million | $34.2 million |
| Diluted earnings per common share | $2.58 | $1.92 |
| Net interest income | $113.9 million | $97.4 million |
| Net interest margin | 3.78% | 3.46% |
| Net cash provided by operating activities | $40.9 million | $45.9 million |
| Cash and cash equivalents at year-end | $229.4 million | $411.6 million |
| Loans receivable, net | $3.045 billion | $2.305 billion |
| Deposits | $2.812 billion | $2.561 billion |
| Total stockholders’ equity | $291.3 million | $274.0 million |
- Return on average assets was 1.46% and return on average equity was 16.99% for 2022. The effective tax rate was 27.8%, versus 29.0% in 2021.
- Gross loans grew 31.5% to $3.082 billion, led by $625.1 million growth in commercial real estate and multifamily loans. Those loans were 76.08% of the portfolio; about 92% of total loans were secured by real estate.
- The allowance for loan losses was $32.4 million, or 1.05% of gross loans, compared with $37.1 million, or 1.58%, in 2021. Nonaccrual loans fell to $5.1 million (0.17% of gross loans) from $14.9 million (0.64%). Net charge-offs rose to $1.7 million from $375,000.
- Total borrowings were $419.8 million, up from $109.0 million. Year-end FHLB advances were $382.3 million; subordinated debentures were $37.5 million. The Bank’s community bank leverage ratio was 9.86%, above the 9.0% well-capitalized threshold stated for the framework.
- The Bank reported $1.087 billion of uninsured deposits and $370.0 million of brokered deposits, including $335.0 million in brokered certificates and $35.0 million in brokered demand deposits. Management reported $289.5 million of additional FHLB funding capacity using unencumbered loan collateral and wholesale borrowing capacity exceeding $1.161 billion.
Material changes versus 2021
- Net income rose 33.1%; net interest income increased 17.0%, reflecting higher average loan balances and yields. Net interest margin expanded 32 basis points, while interest expense increased 15.3%.
- Assets increased 19.5%, primarily as loan growth absorbed liquidity: cash and cash equivalents declined 44.3%. Deposits increased 9.8%, while debt obligations increased $310.8 million.
- Noninterest income fell 81.7% to $1.6 million, largely because equity investments moved from a $147,000 gain to a $6.3 million loss. Noninterest expense rose 2.8% to $55.5 million, including $1.6 million of consulting fees without a comparable 2021 expense.
- The company recorded a $3.1 million credit for loan losses in 2022, compared with $3.9 million of provision expense in 2021. Accumulated other comprehensive income shifted from $1.1 million to a $6.5 million loss, primarily reflecting unrealized losses on available-for-sale securities as interest rates rose.
- The company redeemed $14.7 million of Series D and Series G preferred stock and issued $6.8 million of Series I preferred stock. It repurchased 198,976 common shares and paid $0.16 per share in each quarter.
Outlook, risks, contingencies and unusual items
- Management described a strategy focused on community banking, profitability, real estate lending, balance-sheet strength, and potential organic growth and acquisitions. The filing provides no specific earnings or growth guidance.
- Management said it expected sufficient liquidity for normal-course loan commitments and considered liquidity and capital adequate at year-end. It estimated a significant portion of $766.8 million in certificates of deposit maturing within one year would remain with the company.
- Key risks include the high concentration of commercial real estate and multifamily lending, local economic and property-value deterioration, interest-rate and funding-cost changes, competition for deposits, and reliance in part on brokered deposits. The company’s CRE concentration under the cited regulatory measure was 487.3% of risk-based capital.
- The company planned to adopt the CECL expected-credit-loss standard in the first quarter of 2023. Management did not expect a material effect on regulatory capital, but the filing does not provide a clear quantified adoption adjustment.
- The company stated it would become subject to larger bank holding company capital requirements on March 31, 2023, after no longer meeting the small bank holding company criteria at year-end. Its $33.5 million fixed-to-floating subordinated debenture was scheduled to reset in August 2023; the filing describes a LIBOR-linked rate, while also discussing the transition away from LIBOR.
- Available-for-sale securities had $7.9 million of gross unrealized losses at year-end. Management considered these temporary and said it did not expect to need to sell the securities before recovery.
- Off-balance-sheet commitments totaled $485.1 million, including $165.6 million of loan commitments, $96.9 million of undisbursed construction funds, and $218.9 million of unused credit lines. The company reported no material pending legal proceedings.
- Auditors issued unqualified opinions on the financial statements and internal control over financial reporting. The allowance for loan losses was identified as a critical audit matter.
Important facts for investors to verify
- Whether CRE and multifamily loan growth, the 76.08% portfolio concentration, and collateral performance remain consistent with underwriting and loss assumptions.
- Deposit retention and pricing as certificates mature, especially given uninsured and brokered deposit balances, and whether available borrowing capacity remains accessible on expected terms.
- The actual CECL adoption effect on the allowance, earnings, and capital ratios, along with the company’s capital requirements after March 31, 2023.
- How rising rates affect deposit costs, net interest margin, securities values, and the subordinated debt’s reference-rate transition.
- Whether the $6.3 million equity-investment loss and other noninterest-income fluctuations recur, and whether consulting and other expenses normalize.
- The sustainability of the $0.16 quarterly common dividend and the company’s capital allocation decisions, including further share repurchases.