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BCBP > SEC Filings for BCBP > Form 10-Q on 10-May-2013All Recent SEC Filings

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Form 10-Q for BCB BANCORP INC


10-May-2013

Quarterly Report

Management's Discussion and Analysis of Financial Condition and Results of Operations

Financial Condition

Total assets decreased by $13.2 million or 1.1% to $1.158 billion at March 31, 2013 from $1.171 billion at December 31, 2012. The decrease in total assets occurred primarily as a result of a decrease in securities held to maturity of $22.4 million, partially offset by an increase in net loans receivable of $8.0 million. Management is concentrating on maintaining adequate liquidity in anticipation of funding loans in the loan pipeline as well as seeking opportunities in the secondary market that provide reasonable returns. It is our intention to grow the balance sheet at a measured pace consistent with our capital levels and as business opportunities permit.

Total cash and cash equivalents increased by $2.9 million or 8.5% to $37.0 million at March 31, 2013 from $34.1 million at December 31, 2012. Investment securities classified as held-to-maturity decreased by $22.4 million or 13.6% to $142.2 million at March 31, 2013 from $164.6 million at December 31, 2012. This decrease in investment securities resulted primarily from allowable sales of $6.3 million of mortgage-backed securities from the held-to-maturity portfolio and $17.1 million of repayments and prepayments in the mortgage-backed securities portfolio, partiallyoffset by purchases of $1.4 million in investment securities.

Net loans receivable increased by $8.0 million or 0.9% to $930.3 million at March 31, 2013 from $922.3 million at December 31, 2012. The increase resulted primarily from a $19.1 million increase in real estate mortgages comprising residential, commercial and multi-family, construction and participation loans with other financial institutions partially offset by a $8.5 million decrease in commercial loans comprising business loans and commercial lines of credit, net of amortization, and a $1.5 million decrease in consumer loans, net of amortization partially offset by a $981,000 increase in the allowance for loan losses. As of March 31, 2013, the allowance for loan losses was $13.3 million or 72.8% of non-performing loans and 1.41% of gross loans. As a result of the loans acquired in the business combination transactions being recorded at their fair value, the balances in the allowance for loan losses that were on the balance sheets of the former Pamrapo Bancorp, Inc., and Allegiance Community Bank are precluded from being reported in the allowance balance previously discussed, consistent with generally accepted accounting principles.

Deposit liabilities increased by $3.0 million or 0.3% to $943.8 million at March 31, 2013 from $940.8 million at December 31, 2012. The increase resulted primarily from a $16.1 million increase in non-interest bearing deposits along with an increase of $6.5 million in savings and club deposits which more than offset a $10.9 million decrease in certificate of deposits, a decrease of $7.7 million in NOW deposits and a decrease of $955,000 in money market interest bearing deposits. Consistent with our customer's preferences, we have attempted to shift our funding from higher cost time deposit accounts to more liquid and lower cost core deposits. During the quarter ended March 31, 2013, the Federal Open Market Committee (FOMC) has continued its mindset of a continuing accommodative monetary policy. This has resulted in historically low short term market rates that have further resulted in low time deposit account yields which in turn has had the effect of decreasing interest expense.

We had no short-term borrowed money at March 31, 2013 compared with $17.0 million in short-term borrowings at December 31, 2012. Long-term borrowed money remained constant at $114.1 million at March 31, 2013 and December 31, 2012, respectively. The purpose of the borrowings reflects the use of long term and short term Federal Home Loan Bank advances to augment deposits as the Bank's funding source for originating loans and investing in GSE investment securities.

Stockholders' equity increased by $1.1 million or 1.2% to $92.7 million at March 31, 2013 from $91.6 million at December 31, 2012. The increase in stockholders' equity is primarily attributable to net income of $2.4 million. During the period the Company repurchased 25,225 shares of the Company's common stock at a cost of $247,000, and paid a cash dividend during the quarter totaling $1.0 million on common shares and the accrued a dividend payable on the preferred shares of $130,000 payable in the second quarter. As of March 31, 2013, the Bank's Tier 1, Tier 1 Risk-Based and Total Risk Based Capital Ratios were 8.40%, 12.90% and 14.16% respectively.

Results of Operations

Net income increased by $822,000 or 51.8% to $2.41 million for the three months ended March 31, 2013 compared with net income of $1.59 million for three months ended March 31, 2012. The increase in net income was due to an increase in total interest income along with decreases in total interest expense and non-interest expense, partially offset by increases in the provision for loan losses and the income tax provision and a decrease in non-interest income.

Net interest income increased by $1.1 million or 10.8% to $11.4 million for the three months ended March 31, 2013 from $10.3 million for the three months ended March 31, 2012. The increase in net interest income resulted primarily from an increase in the average yield on interest earning assets of forty-three basis points to 4.97% for the three months ended March 31, 2013 from 4.54% for the three months ended March 31, 2012, partially offset by a decrease in the average balance of interest earning assets of $61.0 million or 5.1% to $1.132 billion for the three months ended March 31, 2013 from $1.193 billion for the three months ended March 31, 2012. While yields on the individual components of interest-earning assets generally declined, the overall yield on interest-earning assets increased due to a reallocation of such assets into higher yielding loans. The average balance of interest bearing liabilities decreased by $71.4 million or 6.9% to $967.6 million for the three months ended March 31, 2013 from $1.039 billion for the three months ended March 31, 2012, while the average cost of interest bearing liabilities decreased by fifteen basis points to 1.10% for the three months ended March 31, 2013 from 1.25% for the year three months ended March 31, 2012. As a consequence of the aforementioned, our net interest margin increased by fifty-eight basis points to 4.03% for the three months ended March 31, 2013 from 3.45% for the three months ended March 31, 2012.

Interest income on loans receivable increased by $1.02 million or 8.5% to $12.99 million for the three months ended March 31, 2013 from $11.97 million for the three months ended March 31, 2012. The increase was primarily attributable to an increase in the average balance of loans receivable of $82.1 million or 9.5% to $945.7 million for the three months ended March 31, 2013 from $863.6 million for the three months ended March 31, 2012, partially offset by a slight decrease in the average yield on loans receivable to 5.50% for the three months ended March 31, 2013 from 5.55% for the three months ended March 31, 2012. The decrease in average yield reflects the competitive price environment prevalent in the Bank's primary market area on loan facilities as well as the repricing downward of variable rate loans.

Interest income on securities decreased by $472,000 or 30.5% to $1.07 million for the three months ended March 31, 2013 from $1.55 million for the three months ended March 31, 2012. This decrease was primarily due to a decrease in the average balance of securities held-to-maturity of $54.1 million or 24.9% to $163.4 million for the three months ended March 31, 2013 from $217.5 million for the three months ended March 31, 2012, as well as a decrease in the average yield of securities held-to-maturity to 2.63% for the three months ended March 31, 2013 from 2.84% for the three months ended March 31, 2012. The decrease in the average yield reflects the persistent low interest rate environment for the three months ended March 31, 2013.

Interest income on other interest-earning assets decreased by $19,000 or 63.3% to $11,000 for the three months ended March 31, 2013 from $30,000 for the three months ended March 31, 2012. This decrease was primarily due to a decrease of $89.1 million or 79.3% in the average balance of other interest-earning assets to $23.3 million for the three months ended March 31, 2013 from $112.4 million for the three months ended March 31, 2012. The average yield on other interest-earning assets increased marginally to 0.19% for the three months ended March 31, 2013 from 0.11% for the three months ended March 31, 2012. The static nature of the average yield on other interest-earning assets reflects the current philosophy of the FOMC of keeping short term interest rates at historically low levels for the last several years. The decreased balance of other interest earning assets reflects management's decision to reallocate excess liquidity into higher yielding, regularly repricing loan product during a period of historically low money market interest rates.

Index

Total interest expense decreased by $592,000 or 18.2% to $2.66 million for the three months ended March 31, 2013 from $3.25 million for the three months ended March 31, 2012. The decrease resulted primarily from a decrease in the balance of average interest-bearing liabilities of $71.4 million or 6.9% to $967.6 million for the three months ended March 31, 2013 from $1.039 billion for the three months ended March 31, 2012, along with a decrease in the average cost of interest-bearing liabilities of fifteen basis points to 1.10% for the three months ended March 31, 2013 from 1.25% for the three months ended March 31, 2012. The decrease in the balance of average interest-bearing liabilities is primarily attributable to the decrease in the average balance of certificate of deposits of $46.8 million or 10.3% to $407.7 million for the three months ended March 31, 2013 from $454.5 million for the three months ended March 31, 2012 along with a decrease in the average balance of wholesale borrowings of $11.1 million or 8.7% to $116.6 million for the three months ended March 31, 2013 from $127.7 million for the three months ended March 31, 2012. The decrease in the average cost reflects the lower short term interest rate environment and our ability to reduce our pricing on a select number of retail deposit products.

The provision for loan losses totaled $1.2 million and $600,000 for the three months ended March 31, 2013 and 2012, respectively. The provision for loan losses is established based upon management's review of the Bank's loans and consideration of a variety of factors including, but not limited to, (1) the risk characteristics of the loan portfolio, (2) current economic conditions, (3) actual losses previously experienced, (4) the dynamic activity and fluctuating balance of loans receivable, and (5) the existing level of reserves for loan losses that are probable and estimable. During the three months ended March 31, 2013, the Bank experienced $219,000 in net charge-offs (consisting of $223,000 in charge-offs and $4,000 in recoveries). During the year ended December 31, 2012, the Bank experienced $3.05 million in net charge-offs (consisting of $3.08 million in charge-offs and $35,000 in recoveries). The Bank had non-performing loans totaling $18.3 million or 1.94% of gross loans at March 31, 2013 and $22.9 million or 2.45% of gross loans at December 31, 2012. The allowance for loan losses was $13.3 million or 1.41% of gross loans at March 31, 2013, $12.4 million or 1.32% of gross loans at December 31, 2012 and $10.9 million or 1.30% of gross loans at March 31, 2012. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates. Management assesses the allowance for loan losses on a quarterly basis and makes provisions for loan losses as necessary in order to maintain the adequacy of the allowance. While management uses available information to recognize losses on loans, future loan loss provisions may be necessary based on changes in the aforementioned criteria. In addition various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require the Bank to recognize additional provisions based on their judgment of information available to them at the time of their examination. Management believes that the allowance for loan losses was adequate at March 31, 2013, December 31, 2012 and March 31, 2012.

Total non-interest income decreased by $498,000 or 38.8% to $784,000 for the three months ended March 31, 2013 from $1.28 million for the three months ended March 31, 2012. The decrease in non-interest income resulted primarily from a decrease of $66,000 or 13.5% in fees and service charges to $424,000 for the three months ended March 31, 2013 from $490,000 for the three months ended March 31, 2012, a decrease of $521,000 or 81.4% in gain on sale of loans originated for sale to $119,000 for the three months ended March 31, 2013 from $640,000 for the three months ended March 31, 2012, and a decrease of $7,000 or 29.2% in other non-interest income to $17,000 for the three months ended March 31, 2013 from $24,000 for the three months ended March 31, 2012, partially offset by an increase of $96,000 or 75.0% in gain on sale of securities held to maturity to $224,000 for the three months ended March 31, 2013 from $128,000 for the three months ended March 31, 2012. The securities sold consisted of mortgage-backed securities that had already returned at least 85% of the original principal purchased. The decrease in fees and service charges is primarily due to decreased late fee income of $116,000 or 68.6% to $53,000 for the three months ended March 31, 2013 from $169,000 for the three months ended March 31, 2012, partially offset by an increase in deposit service charges of $74,000 or 40.2% to $258,000 for the three months ended March 31, 2013 from $184,000 for the three months ended March 31, 2012. The decrease in gain on sale of loans originated for sale occurred primarily as a result of a decrease in sales activity for the three months ended March 31, 2013 compared to March 31, 2012.

Total non-interest expense decreased by $1.48 million or 17.7% to $6.9 million for the three months ended March 31, 2013 from $8.38 million for the three months ended March 31, 2012. Salaries and employee benefits expense decreased by $467,000 or 11.9% to $3.47 million for the three months ended March 31, 2013 from $3.93 million for the three months ended March 31, 2012. The decrease resulted primarily from a decrease in employee benefits of $323,000 along with decreases in overtime paid of $43,000 and commissions paid to mortgage originators on loans held for sale of $56,000 compared to March 31, 2012. Occupancy expense decreased by $34,000 or 4.0% to $812,000 for the three months ended March 31, 2013 from $846,000 for the three months ended March 31, 2012. Equipment expense decreased by $282,000 or 19.5% to $1.17 million for the three months ended March 31, 2013 from $1.45 million for the three months ended March 31, 2012. The decrease resulted primarily from system conversion costs following the acquisition of Allegiance Community Bank of approximately $250,000 incurred in March 2012. Professional fees increased by $28,000 or 6.5% to $459,000 for the three months ended March 31, 2013 from $431,000 for the three months ended March 31, 2012. Director fees decreased by $42,000 or 20.0% to $168,000 for the three months ended March 31, 2013 from $210,000 for the three months ended March 31, 2012. Regulatory assessments decreased by $45,000 or 14.5% to $265,000 for the three months ended March 31, 2013 from $310,000 for the three months ended March 31, 2012 primarily due to the new assessment methodology instituted under the Dodd-Frank Act which lowered the Bank's insurance premium. Advertising expense decreased by $15,000 or 12.8% to $102,000 for the three months ended March 31, 2013 from $117,000 for the three months ended March 31, 2012. Other real estate owned (income)/expenses decreased by $329,000 or 134.3% to income of $84,000 for the three months ended March 31, 2013 from an expense of $245,000 for the three months ended March 31, 2012. The decrease in expenses was primarily due to an upward valuation adjustment of OREO property of $110,000 for the three months ended March 31, 2013 compared to no corresponding entry for the three months ended March 31, 2012, along with a gain on sale of OREO properties of ($21,000) for the three months ended March 31, 2013 from a loss on sale of OREO properties of $137,000 for the three months ended March 31, 2012 and a decrease in OREO expenses of $61,000 or 56.5% to $47,000 for the three months ended March 31, 2013 from $108,000 for the three months ended March 31, 2012. Other non-interest expense decreased by $292,000 or 34.7% to $550,000 for the three months ended March 31, 2013 from $842,000 for the three months ended March 31, 2012. The decrease was primarily due to the sale of the non-performing loan portfolio in 2012 which alleviated the carrying and legacy costs associated with these non-performing loans. Other non-interest expense is comprised of loan expense, stationary, forms and printing, check printing, correspondent bank fees, telephone and communication, and other fees and expenses.

Income taxes increased by $678,000 or 67.2% to $1.69 million for the three months ended March 31, 2013 from $1.01 million for the three months ended March 31, 2012, reflecting increased taxable income during the three month time period ended March 31, 2013. The consolidated effective tax rate for the three months ended March 31, 2013 was 41.2% compared to 38.9% for the three months ended March 31, 2012.

Index

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