BCB Bancorp, Inc. — Q1 2024 Form 10-Q
Business context and period: Unaudited consolidated results for the three months ended March 31, 2024, compared primarily with Q1 2023. BCB Bancorp is the holding company for BCB Community Bank, a New Jersey-based community bank focused on deposits, commercial and multifamily real estate lending, and other loans.
Key financial results
- Profit: Net income was $5.9 million, down from $8.1 million; net income available to common shareholders was $5.4 million and diluted EPS was $0.32, versus $7.9 million and $0.46, respectively.
- Net interest income and margin: Net interest income fell 15.8% to $23.1 million. Net interest margin declined to 2.50% from 3.15%. Interest income rose 16.4% to $49.3 million, but interest expense increased to $26.1 million from $14.9 million as funding costs rose.
- Credit costs: Provision for credit losses was $2.1 million, compared with $0.6 million. Net charge-offs were $1.1 million, versus net recoveries of $52,000.
- Other income and expenses: Non-interest income was $2.1 million, compared with a $1.7 million loss, mainly reflecting a $3.4 million year-over-year improvement in equity investment results. Non-interest expense rose 7.1% to $14.8 million, driven primarily by higher regulatory assessments and other expenses, including off-balance-sheet reserves.
- Cash flow: Operating activities provided $8.3 million, down from $16.4 million. Investing activities provided $51.9 million, principally reflecting a $51.4 million net decrease in loans. Financing activities provided $12.7 million. Cash and cash equivalents increased $72.9 million during the quarter.
Financial position and changes
- Total assets were $3.849 billion, up 0.4% from year-end 2023. Cash and cash equivalents were $352.4 million, up from $279.5 million.
- Net loans were $3.227 billion, down 1.6%. Gross loans were $3.265 billion; commercial and multifamily real estate loans were the largest portfolio category at $2.393 billion.
- The allowance for credit losses was $34.6 million, or 1.06% of gross loans, compared with $33.6 million, or 1.01%, at year-end. Nonaccrual loans increased to $22.2 million from $18.8 million, or 0.68% of gross loans versus 0.57%.
- Deposits increased 0.4% to $2.992 billion. Certificates of deposit rose $51.7 million, partly offset by a $39.1 million decline in other deposit categories.
- Stockholders’ equity increased to $320.1 million from $314.1 million, including $2.7 million of proceeds from a March private placement of Series J preferred stock.
- Total borrowings were $510.6 million, including $472.9 million of FHLB advances and $37.6 million of subordinated debentures. The FHLB advance weighted-average rate was 4.21%; subordinated debt rates were approximately 8.29%.
- Available-for-sale debt securities had a fair value of $87.0 million and gross unrealized losses of $9.6 million. Total investment securities, including equity investments, were $96.2 million.
Liquidity, capital, and outlook
- Management described liquidity as adequate. The company reported $191.6 million of additional FHLB borrowing capacity and $589.0 million available from the Federal Reserve Discount Window, subject to available collateral. Time deposits maturing within one year totaled $1.256 billion.
- The Bank’s community bank leverage ratio was 9.33%, above the 9.00% well-capitalized threshold. Bancorp reported total capital of 11.56%, Tier 1 capital of 9.73%, and common equity Tier 1 capital of 8.77% of risk-weighted assets.
- The filing gives no quantitative earnings or operating guidance. Management identifies higher inflation and interest rates, economic weakness, deposit competition and flows, liquidity and funding access, real estate values, credit quality, and regulatory changes among significant risks. Interest-rate sensitivity analysis estimates an 8.56% decline in net portfolio value under a 100-basis-point increase; the filing cautions that the model is not a precise forecast.
- The Board declared a $0.16-per-share common dividend on April 11, payable May 19, 2024, to holders of record May 3.
Other notable disclosures
- Management said disclosure controls were effective and reported no material quarterly change in internal control over financial reporting.
- The company reported no material legal proceedings and no material changes to the risk factors in its 2023 Form 10-K.
- The filing corrected errors in the 2024 proxy statement concerning the CEO’s change-in-control payment: the stated amount should be three times base salary plus the specified bonus, and the qualifying-termination table amount should be $1.15 million rather than $700,000.
Important facts for investors to verify
- Whether deposit pricing and funding costs stabilize enough to arrest the decline in net interest margin.
- Trends in nonaccrual loans, commercial real estate credit quality, charge-offs, and the adequacy of the allowance for credit losses.
- Deposit retention and concentration, upcoming certificate maturities, and actual availability of stated borrowing capacity under stressed conditions.
- The effect of securities unrealized losses and interest-rate movements on liquidity, capital, and earnings.
- The terms and economics of the Series J preferred stock issuance and the corrected executive change-in-control disclosures.