BCB Bancorp, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. BCB Bancorp is the holding company for BCB Community Bank, operating primarily in New Jersey and New York. Financial figures below are consolidated; dollar amounts are in millions unless stated otherwise.
Financial performance and condition
- Q3 earnings: Net income was $6.7 million, down 49.9% from $13.4 million in Q3 2022. Net income available to common shareholders was $6.5 million; basic and diluted EPS were $0.39, compared with $0.78 basic and $0.76 diluted.
- First nine months: Net income was $23.4 million, down 30.1% from $33.5 million. Common net income was $22.9 million and diluted EPS was $1.35, versus $32.9 million and $1.89.
- Net interest income and margin: Q3 net interest income fell 17.0% to $25.7 million; net interest margin was 2.78%, versus 4.18%. Nine-month net interest income declined 4.3% to $80.1 million; margin was 2.95%, versus 3.79%. Higher asset yields and balances were outweighed by higher funding costs.
- Other income and expenses: Q3 non-interest income was $1.4 million, nearly unchanged; non-interest expense rose 14.9% to $15.5 million, including higher regulatory assessments, compensation and data-processing costs. For nine months, non-interest income was $0.9 million and expense rose 11.5% to $44.0 million.
- Credit costs and asset quality: Credit-loss provision was $2.2 million in Q3 and $4.2 million for nine months, compared with zero and a $2.6 million provision benefit, respectively, in 2022. The allowance was $31.9 million, or 0.96% of gross loans, at quarter-end. Non-accrual loans were $7.9 million, or 0.24% of gross loans; total past-due loans increased to $34.4 million from $9.4 million at December 2022. Q3 net charge-offs were $0.5 million.
- Balance sheet: Total assets increased 7.5% from year-end to $3.812 billion. Net loans rose 7.9% to $3.286 billion, with growth concentrated in commercial and multifamily real estate, commercial business and construction lending. Deposits increased 0.3% to $2.820 billion. Stockholders’ equity was $303.6 million.
- Funding and liquidity: Cash and cash equivalents were $251.9 million. FHLB advances rose to $622.7 million from $382.3 million at year-end; the reported weighted-average rate was 4.45%. Management reported $321.4 million of additional FHLB capacity against unencumbered loan collateral and wholesale borrowing capacity exceeding $1.906 billion. Certificates of deposit scheduled to mature within one year totaled $1.050 billion.
- Capital and debt: The Bank’s community bank leverage ratio was 8.96% at September 30, below the 9.00% well-capitalized threshold but within the disclosed two-quarter grace period; it exceeded the 8.00% capital-adequacy minimum. Subordinated debentures totaled $33.5 million and trust-preferred securities $4.1 million. Rates on subordinated debt reset to floating rates in August 2023.
- Cash flow: For nine months, operating activities provided $34.5 million, investing activities used $248.7 million (including $239.0 million of net loan growth), and financing activities provided $236.8 million. Cash and cash equivalents increased $22.6 million.
Material changes, outlook and risks
- Rising market rates sharply increased deposit and borrowing costs, compressing margins despite higher loan yields and interest income. Deposit composition shifted: certificates of deposit and money-market accounts grew, while demand, non-interest-bearing and savings balances declined overall.
- The company adopted CECL on January 1, 2023. The adoption reduced the loan allowance by approximately $4.2 million, eliminated $1.1 million of acquired-loan reserves and added $1.3 million of off-balance-sheet reserves; the net after-tax cumulative adjustment increased retained earnings by $2.9 million. Prior-year results were not restated.
- Available-for-sale securities had $12.1 million of gross unrealized losses at September 30, 2023; accumulated other comprehensive loss increased $3.1 million during the first nine months. These losses were attributed to market-value changes; the filing describes the portfolio as available for sale.
- Management cited elevated uncertainty in the banking sector and risks from inflation, high interest rates, economic slowdown or recession, deposit competition and flows, liquidity and funding access, real-estate values, credit quality, and regulatory or geopolitical developments. The filing provides no specific earnings or revenue guidance and states that results are not necessarily indicative of future periods.
- The company reported effective disclosure controls, no material change in internal control apart from CECL-related updates, no material legal proceedings, and no material changes to previously disclosed risk factors. A $0.16-per-share common dividend was declared after quarter-end, payable November 17, 2023.
Key facts for investors to verify
- Whether deposit pricing, deposit mix and reliance on FHLB or other wholesale funding continue to pressure net interest margin and liquidity.
- Whether the increase in past-due loans and non-accrual commercial real-estate loans leads to higher provisions, charge-offs or allowance requirements.
- The Bank’s capital-ratio trajectory, including its position relative to the 9.00% well-capitalized threshold and the disclosed grace period.
- How much of the securities portfolio’s unrealized losses may persist or affect capital if securities must be sold before recovery.
- Whether the reported borrowing capacity, maturing certificates of deposit and management’s liquidity assumptions remain valid as market conditions change.