Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
BCBP > SEC Filings for BCBP > Form 10-K/A on 20-Mar-2014All Recent SEC Filings

Show all filings for BCB BANCORP INC

Form 10-K/A for BCB BANCORP INC


20-Mar-2014

Annual Report


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

This discussion, and other written material, and statements management may make, may contain certain forward-looking statements regarding the Company's 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. The Company intends 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 is including this statement for purposes of said safe harbor provisions.

Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in the Company's Annual Report on Form 10-K and in other documents filed by the Company with the Securities and Exchange Commission. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identified by the use of the words "plan," "believe," "expect," "intend," "anticipate," "estimate," "project," "may," "will," "should," "could," "predicts," "forecasts," "potential," or "continue" or similar terms or the negative of these terms. The Company's ability to predict results or the actual effects of its plans or strategies is inherently uncertain. Accordingly, actual results may differ materially from anticipated results.

Factors that could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, changes in market interest rates, general economic conditions, legislation, and regulation; changes in monetary and fiscal policies of the United States Government, including policies of the United States Treasury and Federal Reserve Board; changes in the quality or composition of the loan or investment portfolios; changes in deposit flows, competition, and demand for financial services, loans, deposits and investment products in the Company's local markets; changes in accounting principles and guidelines; war or terrorist activities; and other economic, competitive, governmental, regulatory, geopolitical and technological factors affecting the Company's operations, pricing and services.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this discussion. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law or regulation, the Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.


Critical Accounting Policies

Critical accounting policies are those accounting policies that can have a significant impact on the Company's financial position and results of operations that require the use of complex and subjective estimates based upon past experiences and management's judgment. Because of the uncertainty inherent in such estimates, actual results may differ from these estimates. Below are those policies applied in preparing the Company's consolidated financial statements that management believes are the most dependent on the application of estimates and assumptions. For additional accounting policies, see Note 2 of "Notes to Consolidated Financial Statements."

Allowance for Loan Losses

Loans receivable are presented net of an allowance for loan losses and net deferred loan fees. In determining the appropriate level of the allowance, management considers a combination of factors, such as economic and industry trends, real estate market conditions, size and type of loans in portfolio, nature and value of collateral held, borrowers' financial strength and credit ratings, and prepayment and default history. The calculation of the appropriate allowance for loan losses requires a substantial amount of judgment regarding the impact of the aforementioned factors, as well as other factors, on the ultimate realization of loans receivable. In addition, our determination of the amount of the allowance for loan losses is subject to review by the New Jersey Department of Banking and Insurance and the FDIC, as part of their examination process. After a review of the information available, our regulators might require the establishment of an additional allowance. Any increase in the loan loss allowance required by regulators would have a negative impact on our earnings.

Other-than-Temporary Impairment of Securities

If the fair value of a security is less than its amortized cost, the security is deemed to be impaired. Management evaluates all securities with unrealized losses quarterly to determine if such impairments are "temporary" or "other-than-temporary" in accordance with Accounting Standards Codification ("ASC") Topic 320,

Investments - Debt and Equity Securities.

Accordingly, temporary impairments are accounted for based upon the classification of the related securities as either available for sale or held to maturity. Temporary impairments on available for sale securities are recognized, on a tax-effected basis, through Other Comprehensive Income ("OCI") with offsetting entries adjusting the carrying value of the securities and the balance of deferred taxes. Conversely, the carrying values of held to maturity securities are not adjusted for temporary impairments. Information concerning the amount and duration of temporary impairments on both available for sale and held to maturity securities is generally disclosed in the notes to the consolidated financial statements.

Other-than-temporary impairments are accounted for based upon several considerations. First, other-than-temporary impairments on debt securities that the Company has decided to sell as of the close of a fiscal period, or will, more likely than not, be required to sell prior to the full recovery of fair value to a level equal to or exceeding amortized cost, are recognized in earnings. If neither of these conditions regarding the likelihood of the sale of debt securities are applicable, then the other-than-temporary impairment is bifurcated into credit-related and noncredit-related components. A credit-related impairment represents the amount by which the present value of the cash flows that are expected to be collected on a debt security fall below its amortized cost. The noncredit-related component represents the remaining portion of the impairment not otherwise designated as credit-related. Credit-related other-than-temporary impairments are recognized in earnings and noncredit-related other-than-temporary impairments are recognized in OCI. Equity securities on which there is an unrealized loss that is deemed other-than-temporary are written down to fair value with the write-down recognized in earnings.

Deferred Income Taxes

The Company records income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities: (i) are recognized for the expected future tax consequences of events that have been recognized in the consolidated financial statements or the consolidated and separate entity tax returns; (ii) are attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases; and (iii) are measured using enacted tax rates expected to apply in the years when those temporary differences are expected to be recovered or settled.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of the deferred tax assets will not be realized. In making this assessment, management considers the profitability of current core operations, future market growth, forecasted earnings, future taxable income, and ongoing, feasible and permissible tax planning strategies. Deferred tax assets have been reduced by a valuation allowance for all portions determined not likely to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period of enactment. The valuation allowance is adjusted, by a charge or credit to income tax expense, as changes in facts and circumstances warrant.

Fair Value Measurements

Management uses its best judgment in estimating fair value measurements of the Company's financial instruments; however, there are inherent weaknesses in any estimation technique. Management utilized various inputs to determine fair value including but not limited to the use of, valuation techniques based on various assumptions, including, but not limited to cash flows, discount rates, rate of return, adjustments for nonperformance and liquidity, quoted market prices, and appraisals. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective year-ends and have not been re-evaluated or updated for purposes of these consolidated financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end.


Financial Condition

Total assets increased by $36.6 million or 3.1% to $1.208 billion at December 31, 2013 from $1.171 billion at December 31, 2012. The increase in total assets occurred as a result of an increase in net loans receivable of $98.0 million, partially offset by a decrease in securities held to maturity of $50.4 million and a decrease in total cash and cash equivalents of $4.3 million. Management has historically concentrated on maintaining adequate liquidity in anticipation of funding loans in the loan pipeline as well as seeking opportunities in the secondary market that provide competitive returns in a risk-mitigated environment. During 2013 we have utilized our liquidity to take advantage of lending opportunities. 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 decreased by $4.3 million or 12.6% to $29.8 million at December 31, 2013 from $34.1 million at December 31, 2012. Investment securities classified as held-to-maturity decreased by $50.4 million or 30.6% to $114.2 million at December 31, 2013 from $164.6 million at December 31, 2012. This decrease in investment securities held-to-maturity resulted primarily from allowable sales of $9.5 million of mortgage-backed securities from the held-to-maturity portfolio and $46.0 million of repayments and prepayments in the mortgage-backed securities portfolio, partially offset by purchases of $5.1 million in investment securities. The cash proceeds received from the sales and normal amortization discussed above have been utilized to fund loan originations.

Loans receivable, net increased by $98.0 million or 10.6% to $1.020 billion at December 31, 2013 from $922.3 million at December 31, 2012. The increase resulted primarily from a $104.1 million increase in real estate mortgages comprising commercial and multi-family, construction and participation loans with other financial institutions along with a $3.8 million increase in business loans and commercial lines of credit partially offset by a decrease of $2.6 million in residential real estate loans, along with a $4.3 million decrease in home equity and home equity lines of credit, partially offset by a $2.0 million increase in the allowance for loan losses. During the second quarter of 2013, the Company sold at par $24.2 million in commercial real estate participation loans in which no gain or loss was incurred. During the fourth quarter the Company purchased $16.7 million in commercial real estate loans. As of December 31, 2013, the allowance for loan losses was $14.3 million or 69.7% of non-performing loans and 1.38% 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 $27.9 million or 3.0% to $968.7 million at December 31, 2013 from $940.8 million at December 31, 2012. The increase resulted primarily from a $21.7 million increase in non-interest bearing deposits, an increase of $28.0 million in NOW deposits, an increase of $7.6 million in savings and club deposits and an increase of $3.3 million in money market interest bearing deposits which more than offset a $32.7 million decrease in time deposits. Consistent with our customers' 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 December 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.

Short-term borrowings increased by $1.0 million or 5.9% to $18.0 million at December 31, 2013 from $17.0 million at December 31, 2012. Long-term borrowings remained constant at $114.1 million at December 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 Company's funding source for originating loans and investing in GSE investment securities.

Stockholders' equity increased by $8.5 million or 9.3% to $100.1 million at December 31, 2013 from $91.6 million at December 31, 2012. The increase in stockholders' equity is primarily attributable to net income of $9.4 million offset by the Company repurchasing during the period 184,808 shares of the Company's common stock at a cost of $1.9 million along with cash dividends paid during the period totaling $4.0 million on outstanding common shares of stock and $559,000 on outstanding preferred shares of stock. The Company accrued a dividend payable for the fourth quarter on the preferred shares for $170,000 which will be paid in the first quarter of 2014. As of December 31, 2013, the Bank's Tier 1, Tier 1 Risk-Based and Total Risk Based Capital Ratios were 8.70%, 12.41% and 13.66% respectively.


Analysis of Net Interest Income

Net interest income is the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. Net interest income depends on the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them, respectively.

The following tables set forth balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. The yields set forth below include the effect of deferred fees, discounts and premiums, which are included in interest income.

                                     At December 31, 2013                         Year ended December 31, 2013                                 Year ended December 31, 2012
                                                       Actual                                                      Average                                                     Average
                                                       Yield/                                  Interest           Yield/Cost                               Interest           Yield/Cost
                               Actual Balance           Cost         Average Balance          earned/paid            (5)           Average Balance        earned/paid            (5)

                                                                                                (Dollars in Thousands)
Interest-earning assets:
Loans receivable (1)         $     1,034,686            5.17  %    $        980,844         $     53,521               5.46  %   $        864,561       $     47,756               5.52  %
Investment securities(2)             123,160            3.07                140,403                3,786               2.70               204,417              5,779               2.83
Interest-earning deposits             19,987            0.26                 31,989                   52               0.16                88,798                112               0.13
Total interest-earning
assets                             1,177,833            4.87  %           1,153,236               57,359               4.97  %          1,157,776             53,647               4.63  %


Interest-earning
liabilities:
Total interest-bearing
demand deposits              $       148,804            0.17  %    $        131,096         $        247               0.19  %   $        119,175       $        297               0.25  %
Money market deposits                 67,153            0.29                 64,955                  197               0.30                67,825                267               0.39
Savings deposits                     264,319            0.14                264,346                  363               0.14               260,314                477               0.18
Certificates of deposit              380,781            1.26                396,646                4,795               1.21               439,757              5,849               1.33
Borrowings                           132,124            3.77                117,658                4,978               4.23               117,651              5,057               4.30
Total interest-bearing
liabilities                          993,181            1.07  %             974,701               10,580               1.09  %          1,004,722             11,947               1.19  %

Net interest income                                                                         $     46,779                                                $     41,700

Interest rate spread(3)                                 3.80  %                                                        3.89  %                                                     3.44  %
Net interest margin(4)                                  3.97  %                                                        4.06  %                                                     3.60  %
Ratio of interest-earning
assets to
interest-bearing
liabilities                           118.59  %                              118.32   %                                                    115.23   %


(1) Excludes allowance for loan losses.

(2)Includes Federal Home Loan Bank of New York stock.

(3)Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(4)Net interest margin represents net interest income as a percentage of average interest-earning assets.

(5)Average yields are computed using annualized interest income and expense for the periods.


Analysis of Net Interest Income (Continued)









                                                      Year ended December 31, 2011
                                                         (Dollars in Thousands)
Interest-earning assets:
Loans receivable (1)                            $      804,026   $   45,023     5.60   %
Investment securities(2)                               217,444        7,769     3.57
Interest-earning deposits                               78,814           87     0.11
Total interest-earning assets                        1,100,284       52,879     4.81   %

Interest-earning liabilities:
Interest-bearing demand deposits                $       92,624   $      500     0.54   %
Money market deposits                                   51,553          349     0.68
Savings deposits                                       257,065        1,020     0.40
Certificates of deposit                                429,375        6,421     1.50
Borrowings                                             117,642        5,007     4.26
Total interest-bearing liabilities                     948,259       13,297    1.41%

Net interest income                                              $   39,582

Interest rate spread(3)                                                         3.40   %
Net interest margin(4)                                                          3.60   %
Ratio of interest-earning assets to
interest-bearing liabilities                            116.03   %


(1) Excludes allowance for loan losses.

(2)Includes Federal Home Loan Bank of New York stock.

(3)Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(4)Net interest margin represents net interest income as a percentage of average interest-earning assets.

(5)Average yields are computed using annualized interest income and expense for the periods.


Rate/Volume Analysis

The table below sets forth certain information regarding changes in our interest income and interest expense for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in average volume (changes in average volume multiplied by old rate); (ii) changes in rate (change in rate multiplied by old average volume); (iii) changes due to combined changes in rate and volume; and (iv) the net change.

                                                                             Years Ended December 31,
                                                    2013 vs. 2012                                                 2012 vs. 2011
                                             Increase (Decrease) Due to                                   Increase (Decrease) Due to
                                                                              Total                                                         Total
                                                                             Increase                                                      Increase
                               Volume         Rate        Rate/Volume       (Decrease)       Volume        Rate         Rate/Volume       (Decrease)

                                                                                  (In thousands)
Interest income:
Loans receivable             $  6,423      $  (580)     $        (78)     $     5,765      $ 3,390      $   (611)     $        (46)     $     2,733
Investment securities          (1,810)        (267)               84           (1,993)        (465)       (1,622)               97           (1,990)
Interest-earning deposits
with other banks                  (72)          32               (20)             (60)          11            12                 2               25
Total interest-earning
assets                          4,541         (815)              (14)           3,712        2,936        (2,221)               53              768

Interest expense:
Interest-bearing demand
accounts                           30          (72)               (8)             (50)         143          (269)              (77)            (203)
Money market                      (11)         (61)                2              (70)         110          (146)              (46)             (82)
Savings and club                    7         (119)               (2)            (114)          13          (549)               (7)            (543)
Certificates of Deposits         (573)        (533)               52           (1,054)         155          (710)              (17)            (572)
Borrowed funds                       -         (79)                 -             (79)            -           50                  -              50

Total interest-bearing
liabilities                      (547)        (864)               44           (1,367)         421        (1,624)             (147)          (1,350)
Change in net interest
income                       $  5,088      $    49      $        (58)     $     5,079      $ 2,515      $   (597)     $        200      $     2,118


Results of Operations for the Years Ended December 31, 2013 and 2012

Net income was $9.42 million for the year ended December 31, 2013 compared with a net loss of ($2.06) million for the year ended December 31, 2012. Our net income reflects increases in net interest income and non-interest income and decreases in non-interest expense and provision for loan losses, partially offset by an increase in income tax provision.

Net interest income increased by $5.1 million or 12.2% to $46.8 million for the year ended December 31, 2013 from $41.70 million for the year ended December 31, 2012. This increase in net interest income resulted primarily from an increase in the average yield of interest earning assets to 4.97% for the year ended December 31, 2013 from 4.63% for the year ended December 31, 2012, partially offset by a decrease of $4.5 million or 0.4% in the average balance of interest earning assets to $1.153 billion for the year ended December 31, 2013 from $1.158 billion for the year ended December 31, 2012. The average balance of interest bearing liabilities decreased by $30.0 million or 3.0% to $974.7 million for the year ended December 31, 2013 from $1.005 billion for the year ended December 31, 2012, while the average cost of interest bearing liabilities decreased to 1.09% for the year ended December 31, 2013 from 1.19% for the year ended December 31, 2012. As a consequence of the aforementioned, our net interest margin increased to 4.06% for the year ended December 31, 2013 from 3.60% for the year ended December 31, 2012. The increase in the average yield of interest earning assets and the decrease in the average cost of interest bearing liabilities represents management's efforts to competitively price certain products to maximize profitability. The decrease in the average balance of both interest earning assets and interest bearing liabilities represents a pre-planned minor deleveraging of the balance sheet.

Interest income on loans receivable increased by $5.76 million or 12.1% to $53.52 million for the year ended December 31, 2013 from $47.76 million for the year ended December 31, 2012. The increase was primarily attributable to an increase in the average balance of loans receivable of $116.2 million or 13.4% to $980.8 million for the year ended December 31, 2013 from $864.6 million for the year ended December 31, 2012, partially offset by a slight decrease in the average yield of loans receivable to 5.46% for the year ended December 31, 2013 . . .

  Add BCBP to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for BCBP - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.