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BCB Bancorp, Inc. Reports Record Earnings of $16.8 Million for the Year 2018

BCB Bancorp, Inc. Reports Record Earnings of $16.8 Million for the Year 2018

BAYONNE, N.J., Jan. 31, 2019 (GLOBE NEWSWIRE) -- BCB Bancorp, Inc. (the “Company”), Bayonne, NJ (BCBP), the holding company for BCB Community Bank (the “Bank”), today reported record profits for 2018, fueled by positive operating leverage from the acquisition of IA Bancorp, Inc. (“IAB”) in the second quarter of 2018, lower federal income taxes and a strong net interest margin.  Net income for the full year 2018 increased by $6.8 million, or 67.9 percent, to $16.8 million, or $1.02 per basic share, compared to $10.0 million, or $0.76 per basic share, in 2017.  For the fourth quarter of 2018, net income increased to $5.2 million, or $0.31 per basic share, compared to $4.6 million, or $0.27 per basic share, in the preceding quarter.  In the fourth quarter of 2017, following the reevaluation of the Company’s net deferred tax asset by $2.2 million due to tax reforms enacted in 2017, net income was $1.3 million, or $0.08 per basic share.

“We generated record fourth quarter and full year 2018 financial results, highlighted by strong net interest income, a stable net interest margin and the successful integration of the IAB acquisition which we completed earlier this year,” stated Thomas Coughlin, President and Chief Executive Officer.  “The tax reform legislation enacted last year has provided us with a lower corporate tax rate, which will continue to benefit us as we grow our franchise.  We remain focused on looking for additional growth opportunities both within our existing footprint and surrounding markets.” 

The IAB acquisition, which was completed during the second quarter of 2018, added approximately $215.8 million in assets, $178.4 million in deposits and $182.5 million in net loans.

2018 Financial Highlights

  • Net income was $16.8 million, or $1.02 per basic share, in 2018, compared to $10.0 million, or $0.76 per basic share, in 2017.
  • Earnings per diluted share increased to $1.01 in 2018 compared to $0.75 in 2017.
  • Net interest income, before the provision for loan losses, increased 25.5 percent to $77.7 million in 2018 compared to $61.9 million in 2017.
  • Net interest margin was 3.31 percent in 2018 compared to 3.49 percent in 2017.
  • Total assets increased 37.7 percent to $2.675 billion at December 31, 2018, compared to $1.943 billion a year earlier.
  • Net loans receivable increased 38.6 percent to $2.278 billion at December 31, 2018, compared to $1.644 billion a year earlier.
  • Allowance for loan loss as a percentage of non-accrual loans was 309.6 percent, as compared to 133.3 percent at December 31, 2017.
  • Issued $33.5 million of subordinated debt in July 2018 to support our growth and strengthen our capital position. For regulatory purposes, treated as Tier 1 capital for the Bank and Tier 2 capital for the Company. 
  • Tangible book value was $11.00 at December 31, 2018.
  • Earlier this month, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.14 per share. The dividend will be payable February 22, 2019, to common shareholders of record on February 8, 2019. 

Balance Sheet Review

Total assets increased by $731.9 million, or 37.7 percent, to $2.675 billion at December 31, 2018 from $1.943 billion at December 31, 2017. The increase in total assets included the acquisition of IAB, which added approximately $215.8 million in assets.

Loans receivable, net increased by $634.8 million, or 38.6 percent, to $2.278 billion at December 31, 2018 from $1.644 billion at December 31, 2017. The increase in loans over the prior year resulted from the acquisition of IAB, which added $182.5 million in loans as of the merger date, as well as strong organic growth.  Total increases for 2018, including loans acquired from IAB, included $437.1 million in commercial real estate and multi-family loans, $94.4 million in commercial business loans, $57.3 million in construction loans, $26.3 million in residential one-to-four family loans, and $25.2 million in home equity loans. The allowance for loan losses increased $5.0 million to $22.4 million, or 309.6 percent of non-accruing loans and 0.97 percent of gross loans, at December 31, 2018 as compared to an allowance for loan losses of $17.4 million, or 133.3 percent of non-accruing loans and 1.05 percent of gross loans, a year ago.

Total cash and cash equivalents increased by $71.0 million, or 57.2 percent, to $195.3 million at December 31, 2018 from $124.3 million at December 31, 2017 primarily due to the Company’s strategy to further strengthen liquidity and its deposit base.  Total investment securities increased by $4.4 million, or 3.6 percent, to $127.0 million at December 31, 2018 from $122.6 million at December 31, 2017, as the Company deployed excess cash to improve returns on interest-earning assets and liquidity.

Deposit liabilities increased by $611.4 million, or 39.0 percent, to $2.181 billion at December 31, 2018 from $1.569 billion at December 31, 2017. The increases in deposit liabilities related to the acquisition of IAB, which approximated $178.4 million in the balance of deposits added as of the merger date, as well as the continued maturation of the seven branches opened in 2016 as a result of our organic growth initiative. Total increases for 2018, including deposits acquired from IAB, included $439.2 million in certificates of deposit, including listing service and brokered deposits, $62.9 million in non-interest bearing deposit accounts, $73.9 million in money market checking accounts, $33.4 million in NOW deposit accounts, and $1.9 million in savings and club accounts. Listing service and brokered certificates of deposit, which were used as additional sources of deposit liquidity to fund loan growth, totaled $36.9 million and $175.5 million, respectively, at December 31, 2018.

Debt obligations increased by $93.3 million, or 49.3 percent, to $282.4 million at December 31, 2018 from $189.1 million a year ago. The year-over-year increases are the net result of the issuance of new FHLB advances and scheduled maturities of FHLB advances, and the issuance of $33.5 million of subordinated debentures in a private placement in July 2018. The increase in FHLB borrowings reflected the use of long-term advances to augment deposits as the Company’s funding source for originating loans and investing in investment securities. The weighted average interest rate of FHLB advances was 2.18 percent at December 31, 2018. The issuance of subordinated debt was to maintain adequate capital ratios for further growth.

Stockholders’ equity increased by $23.8 million, or 13.5 percent, to $200.2 million at December 31, 2018 from $176.4 million a year ago. The increase in stockholders’ equity was primarily attributable to an increase in additional paid-in capital of $17.4 million from common stock and preferred stock issued as part of the acquisition of IAB. Retained earnings increased by $7.2 million to $38.4 million at December 31, 2018 from $31.2 million at December 31, 2017. Accumulated other comprehensive loss increased $1.9 million to $5.1 million at December 31, 2018 from $3.2 million a year ago.

Fourth Quarter Income Statement Review

Net interest income increased by $4.5 million, or 27.2 percent, to $21.2 million for the fourth quarter of 2018 from $16.7 million for the fourth quarter of 2017. The increase in net interest income resulted primarily from an increase in the average balance of interest-earning assets of $749.0 million, or 40.1 percent, to $2.617 billion for the fourth quarter of 2018 from $1.868 billion for the fourth quarter a year ago. Net interest margin was 3.24 percent for the fourth quarter of 2018 compared to 3.56 percent for the fourth quarter a year ago. “The decrease in the net interest margin was the result of the rising rate environment, with the increase in the cost of funds outpacing the return on interest earning assets,” said Coughlin.

Total non-interest income decreased by $356,000, or 23.5 percent, to $1.2 million for the fourth quarter of 2018 from $1.5 million for the fourth quarter of 2017. The decrease in total non-interest income was primarily related to the recording of $380,000 of unrealized losses on equity investments in accordance with a new accounting standard which became effective at the beginning of 2018.

Fourth quarter non-interest expense increased by $1.9 million, or 15.4 percent, to $13.9 million for the fourth quarter of 2018 from $12.0 million for the fourth quarter of 2017. The increases in non-interest expense over the prior year are largely attributable to the inclusion of IAB costs since the merger in April 2018.

The income tax provision decreased by $2.1 million, or 46.1 percent, to $2.4 million for the third quarter of 2018 from $4.5 million for the fourth quarter of 2017.  The decrease in the income tax provision comes as a result of the lower tax provision as mandated by enactment of the Tax Cuts and Jobs Act of 2017, which lowered the federal corporate tax rate from 35% to 21% beginning in 2018. There was an additional provision of $2.2 million in the fourth quarter of 2017 to revalue the net deferred tax assets at the newly enacted tax rate. Partly offsetting the decrease from the prior year was higher taxable income for the fourth quarter of 2018 as compared to the fourth quarter of 2017.  The consolidated effective tax rate for the fourth quarter of 2018 was 31.5 percent compared to 76.9 percent for the fourth quarter of 2017.

Full Year 2018 Income Statement Review

Net interest income increased by $15.8 million, or 25.5 percent, to $77.7 million for the full year 2018 from $61.9 million for 2017. The increase in net interest income resulted primarily from an increase in the average balance of interest-earning assets of $572.1 million, or 32.3 percent, to $2.345 billion for 2018 from $1.773 billion for 2017. There was an increase in the average yield on interest-earning assets of eleven basis points to 4.48 percent for 2018 from 4.37 percent in 2017.

Net interest margin was 3.31 percent in 2018 compared to 3.49 percent in 2017. The decrease in the net interest margin was the result of the rising interest rate environment, with the increase in the cost of funds outpacing the return on interest earning assets for the short term.

Interest income on loans receivable increased by $24.5 million, or 33.4 percent, to $97.8 million for the year 2018 from $74.3 million in 2017. The increase was primarily attributable to an increase in the average balance of loans receivable of $468.8 million, or 29.5 percent, to $2.060 billion for the year 2018 from $1.591 billion for 2017, as well as an increase in the average yield on loans of 14 basis points to 4.75 percent for 2018 from 4.61 percent for 2017. Interest income on loans also included $1.7 million of accretion of purchase credit adjustments related to the acquisition of IAB for 2018, which added approximately 7 basis points to the average yield on interest earning assets.

Total interest expense increased by $11.7 million, or 74.8 percent, to $27.4 million for 2018 from $15.7 million for 2017. This increase resulted primarily from an increase in the average balance of interest-bearing liabilities of $474.4 million, or 32.0 percent, to $1.958 billion for the year 2018 from $1.484 billion for 2017, as well as an increase in the average rate on interest-bearing liabilities of 34 basis points to 1.40 percent for the year 2018 from 1.06 percent for 2017. Interest expense also included $471,000 of amortization of purchase credit fair value adjustments related to the acquisition of IAB for the year 2018, which added approximately two basis points to the average cost of funds on an annualized basis.  Interest expense, related to the issuance of subordinated debt in July 2018, totaled $917,000 for the year 2018, which added approximately five basis points to the average cost of funds.

Total non-interest income increased by $477,000, or 6.4 percent, to $8.0 million for the year 2018 from $7.5 million for 2017. The increase in total non-interest income was primarily related to an increase in other non-interest income of $2.1 million to $2.5 million for the year from $343,000 in 2017, which was primarily attributed to $2.0 million received from a legal settlement in the first quarter of 2018. The increase in total non-interest income was partly offset by a decrease in the gains on sale of OREO properties of $1.6 million, which primarily related to the gain on the sale of one property in 2017, and a loss on equity securities of $622,000 in accordance with a new accounting standard which became effective at the beginning of 2018.

Total non-interest expense increased by $9.2 million, or 19.6 percent, to $56.3 million for the year 2018 from $47.1 million in 2017. Merger-related costs increased by $1.6 million, to $2.4 million for the year, from $802,000 in 2017. The increases in non-interest expense over the prior year were largely attributable to the inclusion of IAB expenses since the merger in April 2018.

The income tax provision decreased by $2.7 million, or 26.9 percent, to $7.5 million for the year 2018 from $10.2 million in 2017. The decrease in the income tax provision comes as a result of the lower tax provision as mandated by enactment of the Tax Cuts and Jobs Act of 2017, which lowered the federal corporate tax rate from 35% to 21% beginning in 2018. There was an additional provision of $2.2 million in the fourth quarter of 2017 to revalue the net deferred tax assets at the newly enacted tax rate. Partly offsetting the decrease from the prior year was higher taxable income for 2018 as compared to 2017. The consolidated effective tax rate for the year 2018 was 30.9 percent compared to 50.6 percent in 2017.

Asset Quality

The fourth quarter provision for loan losses was $821,000, compared to $907,000 in the preceding quarter and $325,000 in the fourth quarter a year ago.  For the year, the provision for loan losses increased by $3.0 million, to $5.1 million compared to $2.1 million in 2017.

Non-accruing loans improved to $7.2 million, or 0.31 percent of gross loans at December 31, 2018, compared to $11.1 million, or 0.49 percent of gross loans at September 30, 2018, and $13.0 million, or 0.78 percent of gross loans, a year earlier. Non-accruing loans exclude $7.0 million of Purchased Credit-Impaired loans acquired through the merger with IAB.

Performing troubled debt restructured loans that were not included in nonaccrual loans at December 31, 2018, were $22.5 million, compared to $20.6 million at September 30, 2018 and $20.1 million at December 31, 2017. Borrowers who are in financial difficulty and who have been granted concessions that may include interest rate reductions, term extensions, or payment alterations are categorized as restructured loans. 

The allowance for loan losses was $22.4 million, or 0.97 percent of gross loans at December 31, 2018, compared to $21.5 million, or 0.96 percent of gross loans at September 30, 2018, and $17.4 million, or 1.05 percent of gross loans a year ago.  The decline in allowance coverage was primarily driven by the addition of IAB acquired loans with no allowance for loan losses as these loans were recorded at fair value at the acquisition date. The Company’s outstanding credit mark recorded on acquired portfolios of $249.5 million totaled $6.6 million at December 31, 2018. The Company’s combined coverage of allowance for loan loss and credit mark on the acquired portfolios totaled $28.9 million, or 1.25% of the overall loan portfolio, at December 31, 2018.

As of December 31, 2018, the allowance for loan losses represented 309.6 percent of nonaccrual loans compared to 193.9 percent three months earlier, and 133.3 percent one year earlier.  Other real estate owned (OREO) totaled $1.3 million at December 31, 2018, compared to $1.2 million at September 30, 2018, and $532,000 at December 31, 2017.  Net charge-offs were $146,000 in 2018, compared to $1.9 million in 2017.

About BCB Bancorp, Inc.

Established in 2000 and headquartered in Bayonne, N.J., BCB Community Bank is the wholly-owned subsidiary of BCB Bancorp, Inc. (BCBP). The Bank has 28 branch offices in Bayonne, Carteret, Colonia, Edison, Hoboken, Fairfield, Holmdel, Jersey City, Lodi, Lyndhurst, Maplewood, Monroe Township, Parsippany, Plainsboro, Rutherford, South Orange, Union, and Woodbridge, New Jersey and three branches in Hicksville and Staten Island, New York.  The Bank provides business and individuals a wide range of loans, deposit products, and retail and commercial banking services.  For more information, please go to www.bcb.bank.

Forward-Looking Statements

This release, like many written and oral communications presented by BCB Bancorp, Inc., and our authorized officers, may contain certain forward-looking statements regarding our prospective performance and strategies within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of said safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies, and expectations of the Company, are generally identified by use of words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “seek,” “strive,” “try,” or future or conditional verbs such as “could,” “may,” “should,” “will,” “would,” or similar expressions. Our ability to predict results or the actual effects of our plans or strategies is inherently uncertain. Accordingly, actual results may differ materially from anticipated results.

In addition to factors previously disclosed in the Company’s reports filed with the U.S. Securities and Exchange Commission (the "SEC") and those identified elsewhere in this document, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: difficulties and delays in integrating the Indus-American Bank business or fully realizing cost savings and other benefits of the Merger; business disruption following the Merger; changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer acceptance of BCB products and services; customer borrowing, repayment, investment and deposit practices; customer disintermediation; the introduction, withdrawal, success and timing of business initiatives; competitive conditions; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with mergers, acquisitions and divestitures; economic conditions; and the impact, extent and timing of technological changes, capital management activities, and actions of governmental agencies and legislative and regulatory actions and reforms.

Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results.

 
BCB BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(In Thousands, Except Share and Per Share Data, Unaudited)
               
  December 31,
2018
  September 30,
2018
    December 31,
2017
  December 31, 2018 vs
September 30, 2018
  December 31, 2018 vs
December 31, 2017
                                   
ASSETS                    
Cash and amounts due from depository institutions $ 18,970     $ 32,459     $ 16,460     (41.6 %)   15.2 %
Interest-earning deposits   176,294       174,251       107,775     1.2 %   63.6 %
Total cash and cash equivalents   195,264       206,710       124,235     (5.5 %)   57.2 %
                     
Interest-earning time deposits   735       980       980     (25.0 %)   (25.0 %)
Securities available for sale   119,335       119,811       114,295     (0.4 %)   4.4 %
Equity investments   7,672       8,052       8,294     (4.7 %)   (7.5 %)
Loans held for sale   1,153       1,772       1,295     (34.9 %)   (11.0 %)
Loans receivable, net of allowance for loan losses of                    
$22,359, $21,504, and $17,375, respectively   2,278,492       2,225,001       1,643,677     2.4 %   38.6 %
Federal Home Loan Bank of New York stock, at cost   13,405       14,755       10,211     (9.1 %)   31.3 %
Premises and equipment, net   20,293       20,392       18,768     (0.5 %)   8.1 %
Accrued interest receivable   8,378       8,635       6,153     (3.0 %)   36.2 %
Other real estate owned   1,333       1,232       532     8.2 %   150.6 %
Deferred income taxes   13,601       11,607       5,144     17.2 %   164.4 %
Goodwill and other intangible assets   5,699       5,714       -     -     -  
Other assets   9,371       13,207       9,253     (37.6 %)   5.0 %
Total Assets $ 2,674,731     $ 2,637,868     $ 1,942,837     1.4 %   37.7 %
                     
LIABILITIES AND STOCKHOLDERS' EQUITY                    
                     
LIABILITIES                    
Non-interest bearing deposits $ 263,960     $ 276,998     $ 201,043     (4.7 %)   31.3 %
Interest bearing deposits   1,916,764       1,839,626       1,368,327     4.2 %   40.1 %
Total deposits   2,180,724       2,116,624       1,569,370     3.0 %   39.0 %
FHLB Advances   245,800       275,800       185,000     (10.9 %)   32.9 %
Subordinated debentures   36,577       36,519       4,124     0.2 %   786.9 %
Other liabilities   11,415       13,162       7,889     (13.3 %)   44.7 %
Total Liabilities   2,474,516       2,442,105       1,766,383     1.3 %   40.1 %
                     
STOCKHOLDERS' EQUITY                    
Preferred stock: $0.01 par value, 10,000,000 shares authorized   -       -       -    

-
   

-
 
Additional paid-in capital preferred stock   19,706       19,706       13,241     -     48.8 %
Common stock; no par value; 20,000,000 shares authorized   -       -       -     -     -  
Additional paid-in capital common stock   176,259       175,970       164,230     0.2 %   7.3 %
Retained earnings   38,442       35,693       31,241     7.7 %   23.0 %
Accumulated other comprehensive (loss)   (5,076 )     (6,490 )     (3,142 )   (21.8 %)   61.6 %
Treasury stock, at cost   (29,116 )     (29,116 )     (29,116 )   -     -  
Total Stockholders' Equity   200,215       195,763       176,454     2.3 %   13.5 %
                     
Total Liabilities and Stockholders' Equity $ 2,674,731     $ 2,637,868     $ 1,942,837     1.4 %   37.7 %
                                   
Outstanding common shares   15,889       15,782       15,042              
                                   


 
BCB BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In Thousands, Except for Per Share Amounts, Unaudited)
             
    Year Ended
December 31,
2018
    Year Ended
December 31,
2017
  2018 vs. 2017
Interest and dividend income:                
  Loans, including fees $ 97,831     $ 73,355   33.4 %
  Mortgage-backed securities   3,154       2,360   33.6 %
  Municipal bonds and other debt   607       544   11.6 %
  FHLB stock dividends and other interest earning assets   3,505       1,312   167.1 %
  Total interest and dividend income   105,097       77,571   35.5 %
                 
Interest expense:                
  Deposits:                
  Demand   4,314       2,816   53.2 %
  Savings and club   444       397   11.8 %
  Certificates of deposit   16,400       8,838   85.6 %
    21,158       12,051   75.6 %
  Borrowings   6,258       3,636   72.1 %
  Total interest expense   27,416       15,687   74.8 %
                 
Net interest income   77,681       61,884   25.5 %
Provision for loan losses   5,130       2,110   143.1 %
                 
Net interest income, after provision for loan losses   72,551       59,774   21.4 %
                 
Non-interest income:                
  Fees and service charges   3,785       3,101   22.1 %
  Gain on sales of loans   2,333       2,357   (1.0 %)
  Loss on bulk sale of impaired loans held in portfolio    (24 )     -   -  
  Gain on sales of other real estate owned   30       1,585   (98.1 %)
  Gain on sale of investment securities   -       97   -  
  Unrealized loss on equity investments   (622 )     -   -  
  Other   2,458       343   616.6 %
  Total non-interest income   7,960       7,483   6.4 %
                 
Non-interest expense:                
  Salaries and employee benefits   27,590       23,706   16.4 %
  Occupancy and equipment   9,579       8,274   15.8 %
  Data processing service fees   3,375       2,747   22.9 %
  Professional fees   1,937       2,834   (31.7 %)
  Director fees   752       691   8.8 %
  Regulatory assessments   1,435       1,127   27.3 %
  Advertising and promotional   422       433   (2.5 %)
  Other real estate owned, net   272       146   86.3 %
  Merger related expenses   2,408       802   200.2 %
  Other   8,496       6,284   35.2 %
  Total non-interest expense   56,266       47,044   19.6 %
                 
Income before income tax provision   24,245       20,213   19.9 %
Income tax provision   7,482       10,231   (26.9 %)
                 
Net Income $ 16,763     $ 9,982   67.9 %
Preferred stock dividends   953       614   55.2 %
Net Income available to common stockholders $ 15,810     $ 9,368   68.8 %
                 
Net Income per common share-basic and diluted                
Basic $ 1.02     $ 0.76   34.2 %
Diluted $ 1.01     $ 0.75   34.7 %
                 
Weighted average number of common shares outstanding                
Basic   15,567       12,403   25.5 %
Diluted   15,661       12,508   25.2 %
                   


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BCB BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In Thousands, Except for Per Share Amounts, Unaudited)
                     
  Three Months Ended,    
      December 31,
2018
    September 30,
2018
    December 31,
2017
December 31, 2018
vs September 30,
2018
December 31, 2018
vs December 31,
2017
                     
       
Interest and dividend income:                    
Loans, including fees $ 28,243     $ 26,019     $ 19,388 8.5 % 45.7 %
Mortgage-backed securities   791       827       648 (4.4 %) 22.1 %
Municipal bonds and other debt   191       116       167 64.7 % 14.4 %
FHLB stock dividends and other interest earning assets   1,263       1,009       438 25.2 % 188.4 %
Total interest and dividend income   30,488       27,971       20,641 9.0 % 47.7 %
                     
Interest expense:                    
Deposits:                    
Demand   1,412       1,130       766 25.0 % 84.3 %
Savings and club   126       116       98 8.6 % 28.6 %
Certificates of deposit   5,674       4,591       2,401 23.6 % 136.3 %
    7,212       5,837       3,265 23.6 % 120.9 %
Borrowings   2,105       2,054       734 2.5 % 186.8 %
Total interest expense   9,317