BCB Bancorp(BCBP) - 2020 Q2 - Quarterly Report

PART I. CONSOLIDATED FINANCIAL INFORMATION Item 1. Consolidated Financial Statements The unaudited financial statements show increased assets but a significant decline in net income due to the COVID-19 pandemic Consolidated Statements of Financial Condition Total assets grew to $2.99 billion, driven by loan growth, while deposits and stockholders' equity also increased Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total Assets | $2,986,876 | $2,907,468 | | Total cash and cash equivalents | $412,249 | $550,353 | | Loans receivable, net | $2,343,593 | $2,178,407 | | Total Liabilities | $2,745,857 | $2,667,995 | | Total deposits | $2,442,233 | $2,362,063 | | Total Stockholders' Equity | $241,019 | $239,473 | Consolidated Statements of Income Net income declined significantly in Q2 and the first half of 2020 due to lower net interest income and higher loan loss provisions Income Statement Summary (in thousands, except per share data) | Metric | Q2 2020 | Q2 2019 | YTD 2020 | YTD 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $17,991 | $20,865 | $36,769 | $41,767 | | Provision for Loan Losses | $3,300 | $755 | $4,800 | $1,644 | | Net Income | $2,726 | $5,227 | $5,247 | $10,678 | | Diluted EPS | $0.14 | $0.30 | $0.26 | $0.62 | Consolidated Statements of Cash Flows Cash and cash equivalents decreased by $138.1 million in the first half of 2020, driven by net loan growth and security purchases Six-Month Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $2,609 | $10,813 | | Net Cash Used In Investing Activities | ($210,681) | ($12,649) | | Net Cash Provided by Financing Activities | $69,968 | $34,214 | | Net (Decrease) Increase In Cash | ($138,104) | $32,378 | Notes to Unaudited Consolidated Financial Statements Notes detail the financial impact of COVID-19, loan portfolio composition, credit loss allowances, and subsequent events - The company is subject to risks and uncertainties from the COVID-19 pandemic, the full extent of which on future financial condition is uncertain[12] - The company will adopt the new Current Expected Credit Loss (CECL) standard in 2023 and is currently evaluating its impact[13] - Subsequent events include the redemption of preferred stock, a new branch opening, and the declaration of a $0.14 per share common stock dividend[78] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial and operational impacts of COVID-19, including increased loan loss provisions and participation in PPP COVID-19 Overview and Response The company increased its allowance for loan losses, provided significant loan deferments, and funded $127 million in PPP loans - The provision for loan losses was increased by $4.8 million for the six-month period ended June 30, 2020, due to the COVID-19 pandemic[81] - Through July 15, 2020, the Bank had closed and funded approximately $127 million for almost 1,000 Paycheck Protection Program (PPP) loans[83] Loan Deferment Summary by Type (in thousands) | Loan Type | Principal Balance (June 30, 2020) | Principal Balance (July 21, 2020) | | :--- | :--- | :--- | | Residential 1-4 family | $50,073 | $27,979 | | Commercial & multi-family | $473,861 | $384,736 | | Construction | $17,959 | $13,645 | | Commercial business | $32,185 | $33,077 | | Home equity | $4,388 | $2,229 | | Total | $578,466 | $461,666 | Financial Condition Analysis Total assets grew 2.7% to $2.99 billion, driven by a 7.6% increase in net loans including PPP and purchased loans - Loans receivable, net increased by $165.2 million (7.6%) to $2.344 billion, which included $127.0 million from the PPP loan program[85] - Deposit liabilities increased by $80.2 million (3.4%), primarily due to a $119.2 million increase in non-interest-bearing deposits[85] Results of Operations Analysis Q2 net income fell 47.8% year-over-year due to net interest margin compression and a higher provision for loan losses - For Q2 2020, net interest income decreased by $2.9 million (13.8%) to $18.0 million compared to Q2 2019, as the average yield on assets fell 95 basis points[90] - The provision for loan losses increased by $2.5 million to $3.3 million for Q2 2020, primarily due to COVID-19 related factors[90] - Salaries and employee benefits expense decreased by $1.2 million in Q2 2020, related to $1.1 million of deferred costs for originating PPP loans[93] Liquidity and Capital Resources The company maintained strong liquidity and capital, with a Community Bank Leverage Ratio of 8.96% exceeding regulatory requirements - The company had wholesale borrowing capacity of over $700 million as of June 30, 2020[98] Bank Regulatory Capital Ratios (June 30, 2020) | Ratio | Actual | Well-Capitalized Requirement | | :--- | :--- | :--- | | Community Bank Leverage Ratio | 8.96% | 8.00% | Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate risk, with analysis showing a 3.98% NPV decrease for a 100bp rate increase Net Portfolio Value (NPV) Sensitivity Analysis (June 30, 2020) | Change in Interest Rates | % Change from PAR | | :--- | :--- | | +300bp | (10.00)% | | +200bp | (6.51)% | | +100bp | (3.98)% | | PAR | - | | -100bp | 12.37% | Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of the quarter's end - The CEO and CFO concluded that the company's disclosure controls and procedures are effective[101] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company was not involved in any material legal proceedings as of June 30, 2020 - The company reports no material legal proceedings as of June 30, 2020[101] Item 1A. Risk Factors No material changes to previously disclosed risk factors were reported for the quarter - No material changes to risk factors are reported for the quarter[104] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company completed its 500,000 share repurchase program during the second quarter at an average price of $9.71 per share - The stock repurchase program for 500,000 shares was completed in the second quarter of 2020 and is now closed[105] Share Repurchase Summary (Q2 2020) | Period | Total Shares Purchased | Average Price Paid | | :--- | :--- | :--- | | March 2020 | 127,058 | $10.10 | | April 2020 | 141,724 | $9.77 | | May 2020 | 231,218 | $9.46 | | Total | 500,000 | $9.71 |