BCB Bancorp, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2020. BCB Bancorp is the holding company for BCB Community Bank, a community bank operating in New Jersey and New York. Figures are unaudited; amounts are in U.S. dollars.
Financial performance and position
| Metric | Q3 2020 / Sep. 30, 2020 | Comparable period / prior date |
|---|---|---|
| Net income | $8.3 million; diluted EPS $0.47 | Q3 2019: $5.2 million; $0.30 |
| Net income available to common shareholders | Nine months: $12.5 million; diluted EPS $0.73 | Nine months 2019: $14.9 million; $0.91 |
| Net interest income | Q3: $20.9 million; nine months: $57.7 million | Q3 2019: $20.8 million; nine months 2019: $62.5 million |
| Net interest margin | Q3: 2.98%; nine months: 2.67% | Q3 2019: 3.06%; nine months 2019: 3.14% |
| Provision for loan losses | Q3: $2.7 million; nine months: $7.5 million | Q3 2019: $0.9 million; nine months 2019: $2.5 million |
| Total assets | $2.842 billion | $2.907 billion at Dec. 31, 2019 |
| Loans, net | $2.392 billion | $2.178 billion at Dec. 31, 2019 |
| Deposits | $2.273 billion | $2.362 billion at Dec. 31, 2019 |
| Cash and cash equivalents | $160.6 million | $550.4 million at Dec. 31, 2019 |
| Total borrowings | $296.6 million | $282.6 million at Dec. 31, 2019 |
| Stockholders’ equity | $242.7 million; 8.5% equity-to-assets ratio | $239.5 million at Dec. 31, 2019 |
| Operating cash flow | Nine months: $6.6 million | Nine months 2019: $15.0 million |
Material changes and notable items
- Q3 net income rose 58.9% year over year, while nine-month net income declined 14.8%. Q3 results included a $4.4 million gain from a sale-leaseback of certain offices; the gain materially boosted noninterest income.
- Net interest income edged up in Q3 as lower funding costs offset lower asset yields. For the first nine months, net interest income and margin declined, reflecting lower market rates and yields.
- Loan balances grew 9.8% from year-end, including approximately $127 million of PPP loans and $48.4 million of purchased loans. Deposits declined 3.8%, mainly as higher-rate certificates matured; noninterest-bearing deposits increased $123.9 million.
- The allowance for loan losses rose to $31.8 million, or 1.31% of gross loans, from $23.7 million at year-end. Nonaccrual loans were $7.2 million, compared with $4.2 million at year-end 2019. Management cited pandemic-related economic and borrower risks.
- Nine-month investing cash outflow was $307.3 million, including loan growth, securities purchases and a $60 million BOLI purchase. Financing cash outflow was $89.1 million, including deposit runoff, dividends and stock repurchases. Cash declined by $389.8 million over the nine months.
- The company repurchased $4.9 million of common stock in the first half; the prior program concluded in May. In October, the board approved a new repurchase program, but its size and start date were still undetermined.
Outlook, risks and contingencies
- No specific earnings or revenue guidance is provided. Management said approximately $445.5 million of certificates of deposit, at a 2.04% weighted-average rate, would mature over the next six months and could be replaced at lower rates.
- COVID-19 remains the principal disclosed uncertainty. Management said the full effect on borrowers, collateral values, credit losses, liquidity and future results was uncertain, and further allowance adjustments may be needed.
- Loan deferments peaked at $730.1 million in mid-June. At September 30, 58 loans totaling $59.7 million remained deferred; by October 16, this had fallen to 11 loans totaling $5.2 million. Management reported a 99% reduction from the peak. Deferrals generally ran three months, with possible extensions.
- BCB reported more than $160 million of cash and over $700 million of wholesale borrowing capacity at September 30. The Bank’s community bank leverage ratio was 9.37%, above the 8.00% well-capitalized threshold then applicable.
- Other notable items: the company issued $9.0 million of 3.5% Series H preferred stock and redeemed $10.5 million of preferred stock; it prepaid a $15 million FHLB advance, recording a $313,000 extinguishment loss. Management reported no material legal proceedings and effective disclosure controls.
Investor facts to verify
- Whether credit quality, nonaccrual loans and the allowance remain adequate as pandemic-related deferments end and borrower conditions develop.
- How much of loan growth reflects PPP and purchased loans, and the underlying performance and yields of those balances.
- Whether deposit outflows continue and whether maturing certificates reprice as management expects; also confirm available borrowing capacity and liquidity.
- How recurring earnings and margins compare with Q3 results after excluding the $4.4 million property-sale gain and considering BOLI income and PPP fee recognition.
- The size, timing and execution of the new share repurchase program, and the effects of capital distributions and preferred-stock changes.