- Key takeaway: BCB's recovery from credit-quality issues is a work in progress, as some C&I loans called total losses emerge as a cause for concern.
- Supporting data: About $30 million of C&I loans at BCB have been categorized as total losses.
- Expert quote: "For them to have total losses, that means multiple structures need to have failed." — Westgate Capital Ventures founder and CEO Nick Panize
CEO Tom O'Brien said Monday that he's had "good days and bad days" since
Credit-quality issues lie at the heart of BCB's difficulties. The Bayonne, New Jersey-based lender reported a provision for credit losses of $19 million on Monday, and said the total could grow as it continues scrubbing its loan portfolio.
While BCB, the holding company for BCB Community Bank, has largely completed reviewing its troubled book of Business Express small-business loans, "there's more to do" on commercial-and-industrial loans and commercial real estate loans, O'Brien told analysts on a conference call Monday.
Much of the attention paid to BCB has centered around problems with
But problems have also emerged in BCB's portfolio of commercial-and-industrial loans, including a number of credits that have been classified as near-total losses.
"We've had several loans that were, if not total write-offs, essentially total write-offs," O'Brien said Monday. "For a bank, that's kind of unusual."
In an interview shortly after O'Brien was hired, he told American Banker: "There's a temptation among a lot of bankers to chase loan growth. … At least in my experience, that tends to be a little undisciplined."
O'Brien, who served as CEO of five banks prior to joining BCB, underscored that point Monday, calling BCB's growth "just too aggressive." BCB grew its loan portfolio by $1 billion to $3.3 billion between 2020 and 2023.
More than 85% of the bank's second-quarter provision — $16.7 million of the $19 million total — was tied to the C&I loan book, according to Chaudhry. The CFO added that BCB has abandoned a previous forecast predicting a "major" C&I recovery.
"We no longer have that expectation," Chaudhry said on the conference call.
The dollar volume of C&I loans now judged to be complete losses is $30 million, Chaudhry said.
Nick Panize, founder and CEO of Westgate Capital Ventures in Los Angeles, said Monday that it is indeed uncommon for banks to experience complete losses on C&I loans.
Typically, banks have some "downside protection" in place, according to Panize, who has experience making and underwriting loans.
"For them to have total losses, that means multiple structures need to have failed," he told American Banker. "To have total losses, two, three or four [protective] tranches failed."
"I wouldn't treat it as a broad indicator for the entire banking industry, but it's certainly something investors should pay attention to, because total losses at that scale aren't what you'd typically expect," Panize said.
At BCB, the outsized provision for credit losses swung the company, which posted a first-quarter profit totaling $4.9 million, to a $14.8 million loss for the three months ended June 30. In addition to the $19 million provision, BCB reported a $5.3 million non-cash goodwill impairment charge and a $2.6 million loss on a loan transferred to held-for-sale status.
Nonaccrual loans totaled 2.73% of total loans at June 30, up from 2.22% three months earlier. Together, criticized loans and classified loans declined about 9% from the first quarter, but they still totaled $367.4 million on June 30, a figure that O'Brien termed "shockingly high."
Christopher Marinac, who covers the company for Brean Capital, credited O'Brien for swiftly tackling the bank's credit problems. Though tangible book value per share fell by 7.7% to $14.73 during the second quarter, Marinac speculated that could be the bottom point.
BCB shares closed down about 2% at $9.79 Monday.
