BCB Bancorp, Inc. — Q1 2023 Form 10-Q
Business context and reporting period. Community-oriented bank holding company operating primarily through BCB Community Bank in New Jersey and New York. The filing covers the three months ended March 31, 2023; balance-sheet comparisons are to December 31, 2022. Figures are unaudited.
Key financial results
| Metric | Q1 2023 / March 31, 2023 | Comparable period / prior year-end |
|---|---|---|
| Interest income | $42.4 million | $27.7 million in Q1 2022 |
| Net interest income | $27.5 million | $25.1 million in Q1 2022 |
| Net interest margin | 3.15% | 3.46% in Q1 2022 |
| Net income | $8.1 million; diluted EPS $0.46 | $10.0 million; diluted EPS $0.56 in Q1 2022 |
| Net income available to common shareholders | $7.9 million; basic EPS $0.47 | $9.7 million; basic EPS $0.57 in Q1 2022 |
| Total assets | $3.763 billion | $3.546 billion at December 31, 2022 |
| Gross loans / net loans | $3.266 billion / $3.232 billion | Net loans were $3.045 billion at December 31, 2022 |
| Deposits | $2.867 billion | $2.812 billion at December 31, 2022 |
| FHLB advances / subordinated debentures | $532.4 million / $37.6 million | FHLB advances were $382.3 million at December 31, 2022 |
| Cash and cash equivalents | $261.1 million | $229.4 million at December 31, 2022 |
| Stockholders’ equity | $297.6 million | $291.3 million at December 31, 2022 |
Operating cash flow was $16.4 million, investing cash flow was negative $185.7 million, and financing cash flow was positive $201.0 million. Cash increased $31.7 million during the quarter. The Bank’s community bank leverage ratio was 9.26%, above the 9.00% well-capitalized threshold disclosed in the filing.
Material changes versus comparable periods
- Net income fell 18.6% year over year. Net interest income rose 9.6%, but interest expense increased to $14.9 million from $2.7 million as funding costs and average interest-bearing liabilities increased. Net interest margin declined 31 basis points.
- Loan growth drove the balance-sheet expansion: net loans rose 6.1% from year-end. Commercial and multifamily loans increased $121.7 million, commercial business loans $45.6 million, and construction loans $17.6 million; residential one-to-four-family loans declined $3.4 million.
- Deposits increased $55.6 million from year-end, including a $43.3 million increase in non-brokered deposits. FHLB advances increased $150.1 million.
- Non-interest income was a loss of $1.7 million, compared with a loss of $0.6 million in Q1 2022, primarily reflecting $3.2 million of realized and unrealized equity-investment losses and lower BOLI income.
- Non-interest expense increased 6.9% to $13.9 million, mainly from salaries and benefits and advertising. The company repurchased 151,753 shares during the quarter for $2.6 million.
- The allowance for credit losses on loans was $28.9 million, or 0.89% of gross loans, versus $32.4 million, or 1.05%, at year-end. The quarter included a $0.6 million provision, versus a $2.6 million provision credit in Q1 2022.
Outlook, risks, and unusual items
- Outlook: The filing gives no quantified earnings, revenue, or margin guidance. Management said it expected to have sufficient funds for normal-course loan commitments and reported $261.1 million of cash, up to $385 million of additional FHLB borrowing capacity against unencumbered loan collateral, and wholesale borrowing capacity exceeding $800 million.
- Liquidity and funding: Time deposits scheduled to mature within one year totaled $858 million. Management estimated that a significant portion would remain, based on historical experience. The filing cautions that deposit outflows or slower growth could require securities sales or additional funding.
- Interest-rate and securities risk: Available-for-sale debt securities had $7.9 million of gross unrealized losses at quarter-end; accumulated other comprehensive loss was $6.6 million. The company warned that selling securities to meet liquidity needs could realize losses and adversely affect earnings and capital.
- Credit concentration and quality: Commercial and multifamily loans were $2.467 billion of $3.266 billion gross loans. Non-accrual loans were $5.1 million, or 0.16% of gross loans; $499,000 of loans more than 90 days past due were still accruing. Management stated it considered the loan allowance adequate.
- Accounting change: CECL was adopted January 1, 2023. The transition reduced the loan allowance by $4.2 million, eliminated $1.1 million of acquired-loan reserves, and added $1.3 million for off-balance-sheet exposures, for a $2.9 million net-of-tax increase to retained earnings. Prior-year figures were not restated, limiting direct allowance comparisons.
- Other risks and items: The filing identifies recent banking-industry concerns, deposit competition, higher funding costs, inflation, interest rates, real-estate collateral values, credit risk, and potential regulatory scrutiny. Subordinated debt begins floating-rate pricing in August 2023; the company was evaluating LIBOR replacement terms. No material legal proceedings were reported. Management concluded disclosure controls were effective.
Important facts for investors to verify
- Deposit composition, retention and pricing, including upcoming maturities and the company’s exposure to deposit competition.
- FHLB and other borrowing costs, availability, collateral requirements, and the effect of funding mix on net interest margin.
- Commercial real-estate and multifamily concentrations, criticized/classified loan trends, non-accruals, and the adequacy and assumptions of the CECL allowance.
- Unrealized securities losses, liquidity contingencies, and whether any securities sales or additional capital actions become necessary.
- Interest-rate sensitivity and the terms and cost of replacing LIBOR in floating-rate debt.
- Subsequent-event dividend: the board declared a $0.16-per-share common dividend on April 12, 2023, payable May 19, 2023.