BCB Bancorp, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. BCB Bancorp is the holding company for BCB Community Bank, a community bank operating primarily in New Jersey and New York. Amounts below are in U.S. dollars; financial statement amounts are generally in millions.
Financial results and key metrics
| Metric | Q2 2022 / June 30, 2022 | Comparable period / prior date |
|---|---|---|
| Net interest income | $27.7 million; six-month total $52.8 million | Q2 2021: $24.1 million; six months 2021: $47.6 million |
| Net income | $10.2 million; six-month total $20.1 million | Q2 2021: $8.1 million; six months 2021: $15.2 million |
| Diluted earnings per share | $0.58; six-month total $1.13 | Q2 2021: $0.45; six months 2021: $0.85 |
| Net interest margin | 3.74% for Q2; 3.60% for six months | 3.47% and 3.48%, respectively |
| Total assets | $3,072.8 million | $2,967.5 million at December 31, 2021 |
| Gross loans / deposits | $2,657.9 million / $2,655.0 million | $2,343.9 million / $2,561.4 million at December 31, 2021 |
| Cash and cash equivalents | $206.2 million | $411.6 million at December 31, 2021 |
| Allowance for loan losses | $34.1 million; 1.28% of gross loans | $37.1 million; 1.58% at December 31, 2021 |
| Debt obligations | $124.4 million, including $87.0 million FHLB advances and $37.4 million subordinated debentures | $109.0 million at December 31, 2021 |
| Stockholders’ equity | $271.6 million | $274.0 million at December 31, 2021 |
For the six months, operating cash flow was $19.7 million, investing activities used $315.3 million, and financing activities provided $90.1 million. Cash and cash equivalents declined by $205.5 million. The filing does not provide a clear company-wide net profit margin figure.
Material changes versus comparable periods
- Q2 net income rose 26.2% year over year, and six-month net income increased to $20.1 million from $15.2 million. Higher net interest income and lower credit-loss provisions supported results.
- Q2 net interest income increased 15.3%; six-month net interest income increased 10.9%. Management attributed the improvement to loan growth and lower funding costs. Q2 net interest margin expanded to 3.74% from 3.47%.
- Gross loans grew $313.9 million, or 13.4%, from year-end, principally from $310.5 million of commercial and multifamily real estate growth. Deposits increased $93.6 million; growth in transaction, money-market, savings, and non-interest-bearing accounts more than offset a $96.4 million decline in certificates of deposit.
- Q2 non-interest income was a loss of $0.3 million versus income of $2.8 million a year earlier, mainly because of $2.3 million in equity-investment losses and the absence of prior-year premises-sale gains. For the six months, equity-investment losses were $5.0 million, versus a gain of $0.3 million in 2021.
- The six-month loan-loss provision was a $2.6 million credit, compared with a $4.2 million provision in 2021. Management said the credit was recorded in Q1 and reflected improved qualitative and quantitative factors in its allowance analysis. No provision was recorded in Q2 2022, versus a $2.3 million provision in Q2 2021.
- Accumulated other comprehensive loss moved to $3.0 million from $1.1 million of income at year-end, principally reflecting unrealized losses on available-for-sale debt securities. Management considered the securities impairment temporary.
Liquidity, credit, capital, and other matters
- Non-accrual loans were $9.2 million, or 0.35% of gross loans, down from $14.9 million at year-end. Loans past due totaled $14.0 million, and none over 90 days was reported as accruing. The allowance covered 370.7% of non-accrual loans.
- Management reported $289.6 million of additional FHLB borrowing capacity secured by unencumbered loans and wholesale borrowing capacity exceeding $800 million. Time deposits due within one year totaled $492.3 million; management expected a significant portion to remain. The company stated it expected adequate liquidity to meet commitments.
- The Bank’s community bank leverage ratio was 9.91% at June 30, 2022, above the 9.00% applicable requirement. The ratio was 9.92% at year-end 2021.
- During 2022, the company redeemed $9.4 million of Series D and $5.3 million of Series G preferred stock, partly offset by $2.4 million of Series I preferred stock issuance. It repurchased 44,598 common shares in Q2 for $0.8 million. A $0.16-per-share common dividend was declared after quarter-end, payable August 15, 2022.
- Q2 salary expense included payments to the estate of former CFO Thomas Keating under his employment agreement. The company reported no material changes to previously disclosed risk factors and no material legal proceedings; the legal-proceedings statement refers to status as of March 31, 2022.
- CECL expected-credit-loss accounting is scheduled to become effective for the company in 2023. The company was still evaluating its effects, including any impact on capital; the amount cannot yet be determined. The filing also identifies COVID-19 and economic, real-estate, credit, interest-rate, funding, deposit-flow, regulatory, and market risks. No specific earnings or growth guidance is provided.
Important facts for investors to verify
- Whether rapid commercial and multifamily loan growth changes portfolio concentration, underwriting quality, collateral risk, or future credit losses.
- How deposit growth, certificate maturities, funding costs, and the sharp decline in cash affect liquidity as interest rates and competition change.
- Whether equity-investment and securities valuation losses persist, and how market-rate changes affect earnings and accumulated other comprehensive income.
- The eventual CECL adoption impact on the allowance, earnings, and regulatory capital, and the Bank’s ability to maintain capital above required levels.
- Future rate terms and replacement reference rates for debt currently tied to LIBOR, including the subordinated notes’ planned transition to floating-rate pricing in August 2023.