BCB Bancorp, Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. BCB Bancorp is the holding company for BCB Community Bank, a New Jersey-focused community bank serving New Jersey and the New York metropolitan area. Its lending is concentrated in commercial and multifamily real estate.
Financial and operating results
| Metric | 2020 | 2019 |
|---|---|---|
| Total assets | $2.821 billion | $2.907 billion |
| Loans, net | $2.295 billion | $2.178 billion |
| Deposits | $2.318 billion | $2.362 billion |
| Borrowings | $228.2 million | $282.6 million |
| Stockholders’ equity | $249.2 million | $239.5 million |
| Net interest income | $80.4 million | $82.6 million |
| Provision for loan losses | $9.4 million | $2.1 million |
| Net income | $20.9 million | $21.0 million |
| Diluted EPS | $1.14 | $1.20 |
| Net interest margin | 2.83% | 3.07% |
| Return on average assets / equity | 0.71% / 8.70% | 0.76% / 9.66% |
Net cash provided by operating activities was $139.3 million, versus $24.3 million in 2019. Investing activities used $315.5 million and financing activities used $113.0 million; cash and cash equivalents fell $289.1 million to $261.2 million. Management reported more than $770 million of wholesale borrowing capacity; separately, it disclosed $245.7 million of additional FHLB funding capacity using unencumbered loan collateral.
At year-end, the Bank’s community bank leverage ratio was 9.85%, above the then-applicable 8.0% threshold. The filing states the Bank exceeded regulatory capital requirements. The Company’s equity-to-assets ratio was 8.83%.
Material changes from 2019
- Net income declined 0.8%; diluted EPS declined from $1.20 to $1.14. Net interest income fell 2.7%, and net interest margin contracted 24 basis points as lower market rates reduced asset yields.
- Credit costs increased: provision expense rose to $9.4 million. The allowance increased to $33.6 million, or 1.44% of gross loans, from $23.7 million, or 1.08%.
- Asset quality weakened: nonperforming loans increased to $16.7 million, or 0.72% of loans, from $5.0 million, or 0.22%. Classified assets rose to $68.6 million from $13.5 million. The filing reports $16.4 million of nonaccrual loans.
- Loans, net increased 5.4%, including $48.4 million of purchased loans. Commercial and multifamily loans were 72.57% of the portfolio; construction loans also grew materially.
- Deposits declined 1.9%, chiefly as high-rate certificates matured. Noninterest-bearing deposits increased to $402.1 million from $271.7 million, while certificates of deposit fell to $689.1 million from $1.130 billion.
- Borrowings decreased 19.3%. The Company prepaid or extinguished high-cost FHLB advances, recording $1.15 million of extinguishment expense.
Outlook, risks and unusual items
- COVID-19: Management cited pandemic-related uncertainty and possible further effects on borrowers, collateral values, delinquencies, credit losses, liquidity and earnings. Of 1,049 loans with prior or active deferral requests and $888.3 million in balances, 91.16% were reported in full-payment status at year-end; $56.3 million were classified as impaired and $14.2 million delinquent. Management said stress testing and reserve estimates would continue as conditions evolved.
- Credit concentration: Approximately 95% of total loans were secured by real estate. Commercial real estate concentration under the cited regulatory guidance was 410.7% of total capital, exposing the Bank to heightened scrutiny and local property-market risk.
- Liquidity and funding: Management described liquidity as adequate, citing $261.2 million of cash and cash equivalents and wholesale borrowing capacity above $770 million. Risks include deposit outflows, funding costs and the maturity of $581.3 million of certificates due within one year.
- Unusual income items: Noninterest income rose to $12.5 million from $5.4 million, including a $4.4 million gain on a sale-leaseback of offices, $1.8 million of realized and unrealized equity investment gains, $1.0 million of BOLI income and $964,000 of securities-sale gains. The Company purchased $60 million of bank-owned life insurance.
- PPP: The Bank funded approximately $133 million of nearly 1,100 Paycheck Protection Program loans, sold substantially all in December, and recognized a $333,000 net gain on sale. It reported approximately $908,000 of net PPP fees in one discussion; another section reports approximately $980,000, so the filing’s fee figure is not consistent across sections.
- Capital returns: The Company paid common dividends of $0.14 per share each quarter ($0.56 for the year) and stated its current intention was to continue quarterly dividends at $0.14, subject to conditions and regulatory limits. It authorized a new repurchase program for up to 500,000 shares in December; no fourth-quarter repurchases occurred. The filing also reports 500,000 shares repurchased earlier in 2020.
- Other risks and contingencies: Interest-rate changes, LIBOR transition, CECL adoption (effective for the Company in 2023), cyber and third-party service disruptions, competition, and the regional economy are identified risks. The auditor issued unqualified opinions on the financial statements and internal controls; the allowance for loan losses and goodwill were critical audit matters. No material legal proceedings were reported.
No quantified earnings or revenue guidance is provided in the filing.
Important facts for investors to verify
- Whether pandemic-related credit deterioration continues, including trends in nonaccrual loans, classified assets, impaired loans, deferrals and the allowance for loan losses.
- The sustainability of earnings after the $4.4 million sale-leaseback gain, equity-security gains and other nonrecurring or market-sensitive income items.
- Deposit retention and repricing, including the runoff or renewal of large certificates and the cost and availability of alternative funding.
- Commercial real estate concentration, collateral valuations and the Bank’s capital and stress-testing response to regulatory scrutiny.
- Common-dividend and repurchase capacity under the Bank’s capital, liquidity and regulatory constraints, and the timing and impact of CECL adoption.
- Reconcile the filing’s differing PPP fee disclosures and confirm the reported cash-flow and wholesale borrowing-capacity figures against the audited statements and notes.