BCB Bancorp(BCBP) - 2019 Q4 - Annual Report

PART I Business BCB Bancorp, Inc. is a community-focused financial institution with $2.91 billion in assets, specializing in commercial and multi-family real estate lending across New Jersey and New York - BCB Bancorp, Inc. is the holding company for BCB Community Bank, with consolidated assets of approximately $2.907 billion as of December 31, 2019[5] - The Bank operates 30 locations across various counties in New Jersey and three branches in New York, focusing on community-oriented financial services[6][11] - The company's business strategy emphasizes maintaining a community focus, concentrating on real estate-based lending (particularly commercial and multi-family properties), and capitalizing on market dynamics from banking industry consolidation[9][10] - In April 2018, the Company completed its acquisition of IA Bancorp, Inc. ("IAB"), integrating its operations and expanding its market presence[7][8] Lending Activities Lending activities are concentrated in real estate, with commercial and multi-family loans comprising 72.8% of the $2.20 billion portfolio, showing improved asset quality and increased allowance for loan losses Loan Portfolio Composition (December 31, 2019 vs 2018) | Loan Type | 2019 Amount ($ thousands) | 2019 Percent | 2018 Amount ($ thousands) | 2018 Percent | | :--- | :--- | :--- | :--- | :--- | | Commercial and multi-family | 1,606,976 | 72.9% | 1,697,837 | 73.7% | | Residential one-to-four family | 248,381 | 11.3% | 258,085 | 11.2% | | Commercial business | 177,642 | 8.1% | 165,193 | 7.2% | | Construction | 104,996 | 4.8% | 107,783 | 4.7% | | Home equity | 64,638 | 2.9% | 72,895 | 3.2% | | Consumer | 682 | 0.0% | 809 | 0.0% | | Total Loans | 2,203,315 | 100.0% | 2,302,602 | 100.0% | Non-Performing Assets Trend (2017-2019) | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Total non-performing assets ($ thousands) | 6,578 | 9,976 | 13,883 | | Non-performing assets as a % of total assets | 0.23% | 0.37% | 0.71% | | Non-performing loans as a % of total loans | 0.22% | 0.38% | 0.80% | Allowance for Loan Losses Analysis (2018-2019) | Metric ($ thousands) | 2019 | 2018 | | :--- | :--- | :--- | | Beginning Balance | 22,359 | 17,375 | | Net Charge-offs | 694 | 146 | | Provisions charged to operations | 2,069 | 5,130 | | Ending Balance | 23,734 | 22,359 | Investment Activities The investment portfolio, primarily for liquidity, totaled $107.9 million in 2019, mainly comprising mortgage-backed securities with a 2.79% weighted average yield Investment Securities Portfolio (December 31) | Security Type ($ thousands) | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Mortgage-backed securities | 91,613 | 115,640 | 111,793 | | Municipal obligations | - | 3,695 | 2,502 | | Equity investments | 2,500 | 7,672 | 8,294 | | FHLB stock | 13,821 | 13,405 | 10,211 | | Total investment securities | 107,934 | 140,412 | 132,800 | Sources of Funds Deposits, the primary funding source, grew 8.3% to $2.36 billion in 2019, with certificates of deposit as the largest component, supplemented by $1.45 billion in FHLB borrowing capacity Deposit Composition (December 31) | Deposit Type ($ thousands) | 2019 | 2018 | | :--- | :--- | :--- | | Noninterest bearing accounts | 271,702 | 263,960 | | Interest bearing checking | 394,074 | 330,474 | | Savings and club accounts | 260,545 | 260,547 | | Money market | 305,790 | 221,898 | | Certificates of deposit | 1,129,952 | 1,103,845 | | Total Deposits | 2,362,063 | 2,180,724 | - Total deposits increased by 8.32% in 2019, following a significant 38.96% increase in 2018 which was partly driven by an acquisition[38] - At December 31, 2019, the Bank had a total credit exposure limit with the FHLB of $1.454 billion, representing 50% of its total assets[43] Supervision and Regulation The company and its bank subsidiary are extensively regulated by federal and state authorities, subject to laws governing capital, consumer protection, and lending, requiring adherence to specific capital ratios - The Dodd-Frank Act significantly changed bank regulation, affecting lending, investment, and operating activities, and created the Consumer Financial Protection Bureau (CFPB)[48] - The Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 eased regulations for banks with less than $10 billion in assets, including simplifying capital calculations via an optional community bank leverage ratio[51][56] - As a bank holding company, the Company is regulated by the Federal Reserve Board and is subject to restrictions on non-banking activities, dividend payments, and capital distributions[52][53] - The Bank must meet minimum capital standards, including a common equity Tier 1 ratio of 4.5%, a Tier 1 capital ratio of 6.0%, and a total capital ratio of 8.0%; to be 'well capitalized', it must maintain higher ratios (e.g., 6.5% CET1, 8.0% Tier 1, 10.0% Total Capital)[55][56] Risk Factors The company faces significant risks from its high concentration in commercial and multi-family real estate loans, geographic concentration, interest rate fluctuations, and regulatory scrutiny - A high concentration of loans secured by commercial and multi-family real estate ($1.607 billion, or 72.93% of the loan portfolio) exposes the company to greater risk of nonpayment and loss compared to one-to-four family residential loans[61] - The company's business and the collateral for its loans are geographically concentrated in New Jersey and the New York metropolitan area, exposing it to risks from a potential local economic downturn[63][64] - The company depends primarily on net interest income for earnings, making it vulnerable to changes in interest rates which could compress margins or introduce reinvestment risk[65][66] - The company's concentration in commercial real estate lending (372.0% of total capital) subjects it to additional regulatory scrutiny and may require heightened risk management practices and higher capital levels[74] Unresolved Staff Comments The company has no unresolved staff comments from the Securities and Exchange Commission - None[78] Properties As of December 31, 2019, the Bank operates 30 branch offices with a total net book value of $19.9 million for premises and equipment - The Bank operates 30 branch offices and its total premises and equipment had a net book value of $19.9 million at year-end 2019[80][81] Legal Proceedings The company is not involved in any material legal proceedings that would adversely affect its financial condition as of December 31, 2019 - As of December 31, 2019, the company was not involved in any material legal proceedings[83] Mine Safety Disclosures This item is not applicable to the company - Not applicable[84] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under "BCBP," with consistent quarterly cash dividends of $0.14 per share for the past three years - The Company's common stock trades on the Nasdaq Global Market under the symbol "BCBP"[84] - The Company has declared and paid a quarterly cash dividend of $0.14 per share for each quarter in the three years ended December 31, 2019[84] Selected Consolidated Financial Data This section presents a five-year financial summary, showing total assets growing to $2.91 billion and net income increasing to $21.0 million in 2019, with improved ROAA and ROAE Selected Financial Data (2015-2019) | Metric ($ thousands, except per share) | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total assets | 2,907,468 | 2,674,731 | 1,942,837 | 1,708,208 | 1,618,406 | | Loans receivable, net | 2,178,407 | 2,278,492 | 1,643,677 | 1,485,159 | 1,420,118 | | Deposits | 2,362,063 | 2,180,724 | 1,569,370 | 1,392,205 | 1,273,929 | | Stockholders' equity | 239,473 | 200,215 | 176,454 | 131,081 | 133,544 | | Net income | 21,034 | 16,763 | 9,982 | 8,003 | 7,030 | | Diluted EPS | $1.20 | $1.01 | $0.75 | $0.63 | $0.69 | Selected Financial Ratios (2015-2019) | Ratio | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Return on average assets | 0.76% | 0.70% | 0.55% | 0.47% | 0.48% | | Return on average stockholders' equity | 9.66% | 8.86% | 7.02% | 6.11% | 6.52% | | Net interest margin | 3.07% | 3.31% | 3.49% | 3.32% | 3.72% | | Non-performing assets to total assets | 0.23% | 0.37% | 0.71% | 1.29% | 1.55% | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A highlights an 8.7% asset increase to $2.91 billion, a 4.4% loan decrease, and an 8.3% deposit growth, with net income rising 25.5% to $21.0 million despite net interest margin compression - Total assets increased by $232.7 million (8.7%) to $2.907 billion at Dec 31, 2019, mainly due to a $355.1 million increase in cash and cash equivalents[102][103] - Net loans receivable decreased by $100.1 million (4.4%) to $2.178 billion, a result of management's efforts to curtail loan growth in 2019[104] - Net income increased by $4.3 million (25.5%) to $21.0 million for 2019, driven by higher net interest income and a lower provision for loan losses[115] - Net interest margin decreased to 3.07% in 2019 from 3.31% in 2018, as the average rate on interest-bearing liabilities increased by 42 basis points, outpacing the 11 basis point increase in the average yield on interest-earning assets[115][119] - The provision for loan losses decreased by $3.1 million to $2.1 million for 2019, primarily due to the reduction in net loans receivable[119] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, with NPV sensitivity analysis showing an 18.42% decrease for a 300-basis point rate increase Net Portfolio Value (NPV) Sensitivity Analysis (as of Dec 31, 2019) | Change in Interest Rates (Basis Points) | Net Portfolio Value ($ thousands) | $ Change from PAR | % Change from PAR | | :--- | :--- | :--- | :--- | | +300bp | 220,051 | (49,684) | (18.42)% | | +200bp | 237,862 | (31,873) | (11.82)% | | +100bp | 255,770 | (13,965) | (5.18)% | | PAR | 269,735 | - | - | | -100bp | 282,243 | 12,508 | 4.64% | Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for 2019 and 2018, including the independent auditor's report and detailed notes - The independent auditor, Wolf & Company, P.C., issued an unqualified opinion on the consolidated financial statements, stating they present fairly, in all material respects, the financial position and results of operations of the Company[130] Consolidated Statement of Financial Condition Highlights (as of Dec 31) | ($ thousands) | 2019 | 2018 | | :--- | :--- | :--- | | Total Assets | 2,907,468 | 2,674,731 | | Loans receivable, net | 2,178,407 | 2,278,492 | | Total Deposits | 2,362,063 | 2,180,724 | | Total Liabilities | 2,667,995 | 2,474,516 | | Total Stockholders' Equity | 239,473 | 200,215 | Consolidated Statement of Operations Highlights (Year Ended Dec 31) | ($ thousands) | 2019 | 2018 | | :--- | :--- | :--- | | Net interest income | 82,604 | 77,681 | | Provision for loan losses | 2,069 | 5,130 | | Non-interest income | 5,391 | 7,960 | | Non-interest expense | 55,583 | 56,266 | | Net Income | 21,034 | 16,763 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure This item is not applicable to the company - Not applicable[326] Controls and Procedures Management and the independent auditor concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2019 - Based on an evaluation as of December 31, 2019, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[328] - Management assessed the company's internal control over financial reporting as effective as of December 31, 2019, based on the COSO framework; the independent registered public accounting firm also issued an unqualified audit report on internal controls[328] Other Information The company reports no other information for this item - None[329] PART III Directors, Executive Officers, Corporate Governance, Compensation, and Related Matters Information for Items 10-14, covering governance, compensation, and related matters, is incorporated by reference from the 2020 Proxy Statement - Information required for Items 10, 11, 12, 13, and 14 is incorporated by reference from the Company's 2020 Proxy Statement[330][331][332][333] PART IV Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including corporate governance and executive certifications - This section lists all financial statements and exhibits filed with the Form 10-K, including corporate governance documents, equity plans, and executive certifications[335][336] Form 10-K Summary The company indicates there is no Form 10-K summary - None[343]