BCB Bancorp, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021; comparisons are with the corresponding 2020 periods. The filing is unaudited. BCB Bancorp is the holding company for BCB Community Bank, a community bank operating primarily in New Jersey and New York.
Key financial results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Net interest income | $24.6 million | $20.9 million | $72.2 million | $57.7 million |
| Provision for loan losses | $0.7 million | $2.7 million | $4.8 million | $7.5 million |
| Net income | $8.3 million | $8.3 million | $23.5 million | $13.6 million |
| Net income available to common stockholders | $8.0 million | $8.0 million | $22.6 million | $12.5 million |
| Basic / diluted earnings per share | $0.47 / $0.47 | $0.47 / $0.47 | $1.33 / $1.31 | $0.73 / $0.73 |
| Net interest margin | 3.46% | 2.98% | 3.47% | 2.67% |
Interest and dividend income was $28.1 million in Q3 and $84.2 million year to date; total noninterest income was $1.3 million and $6.1 million, respectively. The filing does not present a single total-revenue measure.
Financial condition and liquidity
- At September 30, 2021, assets were $2.984 billion, up 5.8% from year-end 2020. Deposits were $2.541 billion, up 9.6%, while cash and cash equivalents rose to $442.9 million from $261.2 million.
- Net loans were $2.290 billion, down slightly from $2.295 billion at year-end. Commercial and multifamily loans grew $49.0 million; commercial business and residential one-to-four-family loans declined $23.0 million and $20.1 million, respectively.
- The allowance for loan losses was $38.2 million, or 1.64% of gross loans, versus $33.6 million, or 1.44%, at year-end. Nonaccrual loans rose to $20.7 million (0.89% of gross loans) from $16.4 million (0.70%) at year-end.
- Stockholders’ equity was $263.1 million, compared with $249.2 million at December 31, 2020. The Bank reported a 9.93% community bank leverage ratio and was considered well capitalized.
- Debt obligations (FHLB advances and subordinated debentures) totaled approximately $155.8 million, down from $228.2 million at year-end. The company repaid $83.0 million of FHLB advances during the first nine months and recorded $1.1 million of related debt-extinguishment expense.
- For the first nine months, operating cash flow was $33.1 million, investing cash flow was $8.2 million, and financing cash flow was $140.4 million. The cash increase was primarily associated with deposit growth.
- Management reported more than $800 million of wholesale borrowing capacity and adequate liquidity. The Bank had $245.7 million of additional FHLB funding capacity using unencumbered loan collateral.
Changes versus prior periods
- Q3 net income was essentially unchanged year over year despite a 17.8% increase in net interest income. Lower interest expense and provision expense were offset by lower noninterest income, particularly the absence of the prior-year $4.4 million gain on sale of premises.
- Nine-month net income increased 73.2%; net interest income rose 25.3%, mainly as funding costs declined. Interest expense fell 56.3%, while the net interest margin increased to 3.47% from 2.67%.
- Nine-month noninterest income declined 30.4%, largely because the 2020 period included the premises-sale gain. The 2021 period benefited from $2.2 million of BOLI income and $495,000 of PPP referral fees.
- Deposits increased substantially, including growth in noninterest-bearing accounts; management attributed the increase partly to government relief payments and PPP proceeds. The company also continued deleveraging and repurchasing shares, buying back 189,366 shares for $2.5 million during the nine months.
Outlook, risks and notable items
- The filing provides no quantified earnings or revenue guidance. Management said it would continue monitoring COVID-19 effects when assessing dividends and capital needs.
- COVID-19 remains a material uncertainty. The company reported $38.8 million of balances on COVID-related loan modifications at September 30, 2021; management said repayment depends on borrowers’ projected cash flows. Management cautioned that the pandemic’s effects on borrowers, collateral values, results and liquidity remained uncertain.
- Credit quality warrants attention: nonaccrual loans increased year over year, and the company stressed portfolios exposed to hospitality, restaurants, office space and commercial condominiums. Management considered the allowance adequate, but estimates may change as borrower conditions and collateral values develop.
- Other stated risks include economic and real-estate conditions, interest-rate changes, credit quality, funding access and deposit flows, competition, regulation, and operational and cybersecurity risks. The filing reported no material change to previously disclosed risk factors and no material legal proceedings.
- The company declared a $0.16 per-share common dividend on October 13, 2021, payable November 15, 2021. It was reviewing alternative reference rates for LIBOR-based debt and did not anticipate a significant financial statement impact.
Investor verification points
- Track whether rising nonaccrual loans and stressed commercial-property exposures lead to further credit losses or provision increases.
- Assess the durability of the higher net interest margin as interest rates, deposit costs and asset yields change.
- Confirm the composition and persistence of deposit growth and the company’s reported borrowing capacity.
- Separate recurring earnings from one-time items, including the prior-year premises-sale gain and current-period debt-extinguishment costs.
- Monitor COVID-related modified loans, the allowance for loan losses, capital levels, dividends and share repurchases.