BCB Bancorp, Inc. ($BCBP)

[Audio Gap] is an enormous amount of detail and history that I need to get smart on as soon as possible -- has been my practice, I'll probably spend about the first 90 days getting as much knowledge and perspective as I may have. There are a few matters that I can tell you now will warrant my attention. The company has a somewhat complex capital stack along with fixed debt obligations of some significance. This is not very dissimilar to the capital components at several of the previous companies that I have joined. In addition, I think it's well known, the level of criticized and classified loans and recent actual losses have challenged the market's comfort with our tangible book value. The bank had previously drifted into a few lending categories where the risk-adjusted returns and credit losses have created some volatility and market wariness. I believe that needs to be quantified and ring-fenced as quickly as we can. I'm a believer in tangible common equity, capital simplicity and have a focus on the growth of tangible book value per share from good long-term core earnings. Needless complexity and business models, financial structure or operations and to elevate risk in my experience. That said, I have a little concern for short-term things like quarterly earnings, loan growth statistics, pipelines and things like that. I try to make sound decisions based on the best long-term interest of the company and its shareholders. I try to avoid earnings forecast and heading missing earnings estimates. I've seen far too many banks kick the can down the road because of the fear of a bad quarter, and again, in my experience, decisions made for purely timing, accounting or tax reasons tend to be pretty shortsighted. I've never played that game. I believe that best multiples come from transparency and clarity. The subsidiary bank as the federal insured depository must always be comfortably well capitalized. And in this case, if that requires restructuring or capital raise, I would never hesitate to do what's necessary to protect the bank. That shouldn't come as a surprise to any who know me. You should expect to hear from me more formally and comprehensively probably about the time of the third quarter earnings call, and probably be a lot smarter on the subject we're engaged in today, but we'll work diligently to get that out and get you all informed. So BCB has an engaged Board of Directors, many with substantial personal investment. We all want the same outcome. We are strategically aligned and committed I look forward to working with them, the team at the bank and for our shareholders. I'm happy to take a few questions after the short remarks, but don't know that I have much in a way of more specifics than what I've said here. But Ryan, if we can allow some questions, that's fine.

Sure. For those of you that may want to ask a question, please just raise your hand in the chat or I can unmute you. First one is going to come from Justin Crowley over at Piper Sandler.

If I could start out with one for you, Tom. Obviously, you've been doing this a long time across a number of different organizations. And I now know each situation has a unique set of challenges. But when you take the [indiscernible] and with BCB, how would you compare the complexity of what needs to be addressed here that has to do versus your time in some prior institutions?

So from 40,000 feet, many of them look the same. It's usually risk acceptance, pacing after a particular loan category, to the exclusion of all else concentrations, credit risk management. So in that sense, I think there's some similarity. Obviously, my last bank had criminal elements to it. This does not. So pleased I'm not doing that kind of work anymore. I think there's -- got a lot of similarities at the high level, but each bank is different individually. Systems are different. The controls are different. Fortunately, I haven't seen any compliance issues here, which would be a challenge. I think it's just trying to get under the hood and understanding and communicating -- what we see in the credit risk side, to a point that kind of takes away some of the market uncertainty.

Got it. That's helpful. And then with any credit remediation process, which I think we can all agree is top focus here. The big questions are always what that looks like as far as length of time? And then also just on the loss variance. I know it's early days and you'll be able to share more as time goes on, but just curious how you think about weighing those factors more broadly against one another. Just any initial thoughts you may have on how aggressive or decisive you think you'll end up needing to be on that end of things?

I've never been accused of being not aggressive enough. So I'd say past is prologue, faster the better. Within the confines of what we can do and what the market allows. It's hard for me to get a sense of the -- the loss component, just because this -- these portfolios are smaller in terms of dollar denomination per loan and they are mostly -- at least as I've seen so far in the cannabis place and in the small business, I think they call them Business Express Loans. So that's going to be an interesting process. But sooner is better than later. I'm not someone to take a long time and dribble things out and it is what it is. I'm not going to change it. And if it's better than market thinks that's good news. If it's less than that, then we'll address it forth rightly. I hope -- again, I hope to have some pretty good transparency and clarity by the end of the third quarter.

Great. And then maybe just one last one. If we think longer term, I'm sure this will also evolve over time. But how do you take you evaluate success in turning things around here? What's strategic goals, at least at this juncture, do you think need to be met? And are there certain financial objectives that you think about to go alongside that?

Well, I tend to look at the the ratings process that the regulators use. The Camel's ratings, I look at the relative stock price performance, the multiples to the extent we're at market levels better than market levels, I think that's a good metric. But at the end of the day, it's mostly do we have a company that provides shareholders and all the stakeholders, frankly, employees and the Board customers with a credible resource and opportunity and a solid balance sheet.

Our next question comes from Chris Marinac at Brean Capital.

Good morning. Tom look forward to working with you in this next chapter. I wanted to ask you velocity about deposits and kind of what your early impressions are the deposits at BCB and kind of where you'd like to take it?

So I -- it's actually a really good question. One of the things that I always focus on -- the different things that [indiscernible] is what is the deposit mix, what's the structure? What's the opportunity? BCB has a -- what I said in the press release, the kind of an enviable footprint -- and I think the deposit mix is reasonably good for a community commercial bank I like deposits that track, to some extent, the business, especially in the C&I space. I only have limited patients for credit exposures where we don't have full a full view of the the customer's financial activity. And -- but as I said, I think BCB is a fairly good deposit base. I know the the operating system that we're on was the same one I've had at another bank. And we'll look at each of the branches and see what, if anything, they need to continue to be successful. But I think deposits are always kind of the mother's milk of the community bank space. So we'll spend a lot of time looking at those and trying to do the best we can with cost management. I'm not a wholesale funding guy. I don't really think there's any value created by wholesale deposits or advances or things like that, other than short-term funding needs, but as a liability product -- you're not going to see that from me.

Our next question comes from David Conrad at KBW.

Just a question as you're kind of putting together your plan over the next year to 3 years. You talked about your focus on tangible book value and growth there. and maybe protection of tangible book value. But just kind of as you put together your plan, how do you emphasize the asset quality issue versus a strategy underneath for growth? Is it all hands on deck on credit first and then move to a strategy? Or can you kind of work both and at the same time?

I would say it's really all hands on deck with getting -- the stock has been trading at 50%, 60% of books. So that tells you, somebody doesn't agree with our tangible book value today. So I want to get that answered for my satisfaction, the board satisfaction, investor satisfaction. Let's be sure. Let's be sure we have it right. And to me, I wouldn't say the first year, but in the first couple of quarters, I'd say that's probably job 1 through 10.

Our next question comes from Robert Hader at Mount Grade Partners.

Can you guys hear me now?

Yes.

I was just hoping to ask a question about the Board complexion. I've followed the company for a number of years, really dating back to the IPO. And like you have always felt the bank had a pretty strong core deposit franchise, particularly in the markets that it's in, but it's been clearly masked by recent events and credit concerns and whatnot. So one of my primary concerns has been just around the Board and specifically Board independents. Maybe just spend a moment, if you don't mind talking about your views of the Board and the construction of the Board, support for any changes that you may or may not, I think, are necessary. And I think that would be helpful just to get your thoughts on the Board?

Yes, sure. I'm happy to do that. So I have spent a little bit of time talking to the Board in this -- probably the last 2 months or so probably little more than that. So as I said in my remarks, I mean, the Board is engaged. We've had very, very good discussions on my view of things, their view of things, I would say we are totally aligned and in sync with the kind of the action agenda. There's always some concern when there's affiliate transactions, and we do have a few. So I've told the Board that probably would make sense to bring in a couple of additional directors that are purely independent. But again, as I said, everybody in the boardroom is engaged and cares. A lot of them are big stockholders. Like a lot of newer charters in the beginning. Board members tend to be involved in different aspects of the business, different than what you might see in a longer-standing existing public companies. And -- but as they mature, those things tend to drift off and Again, I'm conscious of them. They're pretty well disclosed. And I don't have a concern. But on the other hand, optics are important, and I think we probably should -- and I think they will agree and have agreed the the more we can satisfy those kind of concerns, the better off the price of the stock is and the less overhang there might be in terms of how people view the company.

Okay. At this time, there appear to be no other questions or hands raised or questions in the chat. So I think that will conclude our call for this morning.

Great. Thank you. Thanks, Ryan, and we'll be in touch.

Thanks, everybody.