BCB BANCORP INC - Quarter Report: 2021 September (Form 10-Q)

bcbp-20210930x10q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number: 0-50275

BCB Bancorp, Inc.

(Exact name of registrant as specified in its charter)

New Jersey		26-0065262
(State or other jurisdiction of incorporation or organization)		(IRS Employer I.D. No.)

104-110 Avenue C Bayonne, New Jersey		07002
(Address of principal executive offices)		(Zip Code)

(201) 823-0700

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year if changed since last report)

Securities registered pursuant to section 12(b) of the Securities and Exchange Act of 1934:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	BCBP	The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. T Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes o No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	o	Accelerated Filer	x

Non-Accelerated Filer	o	Smaller Reporting Company	x

		Emerging Growth Company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). o Yes T No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of November 2, 2021, BCB Bancorp, Inc., had 17,033,147 shares of common stock, no par value, outstanding.

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BCB BANCORP INC. AND SUBSIDIARIES

INDEX



	Page
PART I. CONSOLIDATED FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition as of September 30, 2021 (unaudited) and December 31, 2020 (unaudited)		1
Consolidated Statements of Income for the three and nine months ended September 30, 2021 and 2020 (unaudited)		2
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020 (unaudited)		3
Consolidated Statement of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020 (unaudited)		4
Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited)		6
Notes to Unaudited Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3. Quantitative and Qualitative Disclosures about Market Risk		31
Item 4. Controls and Procedures		31

PART II. OTHER INFORMATION		32
Item 1. Legal Proceedings		32
Item 1A. Risk Factors		32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		32
Item 3. Defaults Upon Senior Securities		32
Item 4. Mine Safety Disclosures		32
Item 5. Other Information		32
Item 6. Exhibits		33

PART I. CONSOLIDATED FINANCIAL INFORMATION

ITEM I. CONSOLIDATED FINANCIAL STATEMENTS

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

(In thousands, Except Share and Per Share Data, Unaudited)



	September 30,		December 31,
	2021		2020

ASSETS
Cash and amounts due from depository institutions	$	8,569	$	23,201
Interest-earning deposits		434,369		238,028
Total cash and cash equivalents		442,938		261,229

Interest-earning time deposits		735		735
Debt securities available for sale		82,603		99,756
Equity investments		23,534		17,717
Loans held for sale		913		3,530
Loans receivable, net of allowance for loan losses
of $38,156 and $33,639 respectively		2,289,854		2,295,021
Federal Home Loan Bank of New York stock, at cost		8,193		11,324
Premises and equipment, net		12,998		15,272
Accrued interest receivable		10,388		12,924
Other real estate owned		-		414
Deferred income taxes		13,515		12,574
Goodwill and other intangibles		5,445		5,488
Operating lease right-of-use assets		13,245		14,988
Bank-owned life insurance ("BOLI")		71,728		61,033
Other assets		7,698		9,011
Total Assets	$	2,983,787	$	2,821,016

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Non-interest -bearing deposits	$	544,619	$	402,100
Interest bearing deposits		1,996,786		1,915,950
Total deposits		2,541,405		2,318,050
FHLB advances		118,573		191,161
Subordinated debentures		37,217		37,042
Operating lease liability		13,533		15,224
Other liabilities		9,978		10,328
Total Liabilities		2,720,706		2,571,805

STOCKHOLDERS' EQUITY
Preferred stock: $0.01 par value, 10,000,000 shares authorized; issued and outstanding 2,596 shares of Series D 4.5%, Series G 6%, and Series H 3.5%, (liquidation value $10,000 per share) noncumulative perpetual preferred stock at September 30, 2021 and December 31, 2020		-		-
Additional paid-in capital preferred stock		25,723		25,723
Common stock: no par value; 40,000,000 shares authorized; issued 19,692,259 and 19,574,858 at September 30, 2021 and December 31, 2020, respectively, outstanding 17,035,675 shares and 17,107,640 shares, at September 30, 2021 and December 31, 2020, respectively		-		-
Additional paid-in capital common stock		193,613		192,276
Retained earnings		73,388		58,335
Accumulated other comprehensive loss		(214)		(205)
Treasury stock, at cost, 2,656,584 and 2,467,218 shares at September 30, 2021 and December 31, 2020, respectively		(29,429)		(26,918)
Total Stockholders' Equity		263,081		249,211
Total Liabilities and Stockholders' Equity	$	2,983,787	$	2,821,016

See accompanying notes to unaudited consolidated financial statements.

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BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Income

(In thousands, Except for Per Share Amounts, Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Interest and dividend income:
Loans, including fees	$	26,922	$	27,126	$	80,673	$	80,063
Mortgage-backed securities		159		393		532		1,450
Other investment securities		814		693		2,345		947
FHLB stock and other interest earning assets		249		254		673		2,631
Total interest income		28,144		28,466		84,223		85,091

Interest expense:
Deposits:
Demand		1,059		1,157		3,407		4,927
Savings and club		131		113		376		324
Certificates of deposit		1,344		4,531		4,975		16,658
		2,534		5,801		8,758		21,909
Borrowings		997		1,775		3,226		5,523
Total interest expense		3,531		7,576		11,984		27,432

Net interest income		24,613		20,890		72,239		57,659
Provision for loan losses		680		2,726		4,840		7,526

Net interest income after provision for loan losses		23,933		18,164		67,399		50,133

Non-interest income:
Fees and service charges		713		875		2,853		2,138
BOLI income		765		385		2,195		385
Gain on sales of loans		83		174		575		292
Loss on sale of impaired loans held in portfolio		-		-		(64)		-
Gain on sales of other real estate owned		11		-		11		-
Gain on sales of premises		-		4,378		371		4,378
Gain on sale of investment securities		-		306		-		306
Realized and unrealized (losses) gains on equity investments		(307)		778		(4)		820
Other		52		59		150		427
Total non-interest income		1,317		6,955		6,087		8,746

Non-interest expense:
Salaries and employee benefits		6,511		6,385		19,568		19,456
Occupancy and equipment		2,983		2,996		8,604		8,730
Data processing and communications		1,511		1,394		4,493		4,256
Professional fees		543		421		1,446		1,289
Director fees		233		471		790		1,194
Regulatory assessments		303		311		993		883
Advertising and promotional		200		59		392		825
Other real estate owned, net		(11)		11		12		58
Loss from extinguishment of debt		337		313		1,071		313
Other		918		981		2,899		2,654
Total non-interest expense		13,528		13,342		40,268		39,658

Income before income tax provision		11,722		11,777		33,218		19,221
Income tax provision		3,400		3,465		9,729		5,662

Net Income	$	8,322	$	8,312	$	23,489	$	13,559
Preferred stock dividends		286		332		852		1,014
Net Income available to common stockholders	$	8,036	$	7,980	$	22,637	$	12,545

Net Income per common share-basic and diluted
Basic	$	0.47	$	0.47	$	1.33	$	0.73
Diluted	$	0.47	$	0.47	$	1.31	$	0.73

Weighted average number of common shares outstanding
Basic		17,019		17,069		17,085		17,250
Diluted		17,222		17,069		17,242		17,268

See accompanying notes to unaudited consolidated financial statements.

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(In thousands, Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020


Net Income	$	8,322	$	8,312	$	23,489	$	13,559
Other comprehensive (loss) income, net of tax:
Unrealized (losses) gains on available-for-sale debt securities:
Unrealized holding (losses) gains arising during the period		(161)		(129)		(12)		3,783
Tax Effect		40		32		3		(938)
Other comprehensive (loss) income		(121)		(97)		(9)		2,845
Comprehensive income	$	8,201	$	8,215	$	23,480	$	16,404

See accompanying notes to unaudited consolidated financial statements.

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity

(In thousands, Except Share and Per Share Data, Unaudited)


	Preferred ‎Stock		Common ‎Stock		Additional ‎Paid-In ‎Capital		Retained ‎Earnings		Treasury ‎Stock		Accumulated ‎Other ‎Comprehensive ‎Income ‎(Loss)		Total

Balance at January 1, 2021	$	-	$	-	$	217,999	$	58,335	$	(26,918)	$	(205)	$	249,211
Net income		-		-		-		23,489		-		-		23,489
Other comprehensive income		-		-		-		-		-		(9)		(9)
Stock-based compensation expense		-		-		337		-		-		-		337
Exercise of stock options (31,000 shares)		-		-		281		-		-		-		281
Treasury stock purchases (189,366 shares)		-		-		-		-		(2,511)		-		(2,511)
Dividends payable on Series D 4.5%, Series G 6%, and Series H 3.5% noncumulative perpetual preferred stock		-		-		-		(852)		-		-		(852)
Cash dividends on common stock ($0.14 per share declared for the first two quarters ended June 30, 2021 and $0.16 per share for the quarter ended September 30, 2021)		-		-		-		(7,241)		-		-		(7,241)
Dividend reinvestment plan		-		-		343		(343)		-		-		-
Stock purchase plan		-		-		376		-		-		-		376
Balance at September 30, 2021	$	-	$	-	$	219,336	$	73,388	$	(29,429)	$	(214)	$	263,081

	Preferred ‎Stock		Common ‎Stock		Additional ‎Paid-In ‎Capital		Retained ‎Earnings		Treasury ‎Stock		Accumulated ‎Other ‎Comprehensive ‎Income (Loss)		Total

Balance at July 1, 2021	$	-	$	-	$	218,691	$	68,123	$	(28,197)	$	(93)	$	258,524
Net income		-		-		-		8,322		-		-		8,322
Other comprehensive income		-		-		-		-		-		(121)		(121)
Stock-based compensation expense		-		-		86		-		-		-		86
Exercise Stock Option Expense (31,000 shares)		-		-		281		-		-		-		281
Treasury stock purchases (91,491 shares)		-		-		-		-		(1,232)		-		(1,232)
Dividends payable on Series D 4.5%, Series G 6%, and Series H 3.5% noncumulative perpetual preferred stock		-		-		-		(286)		-		-		(286)
Cash dividends on common stock ($0.16 per share declared)		-		-		-		(2,647)		-		-		(2,647)
Dividend reinvestment plan		-		-		124		(124)		-		-		-
Stock purchase plan		-		-		154		-		-		-		154
Balance at September 30, 2021	$	-	$	-	$	219,336	$	73,388	$	(29,429)	$	(214)	$	263,081

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BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity

(In thousands, Except Share and Per Share Data, Unaudited)


	Preferred ‎Stock		Common ‎Stock		Additional ‎Paid-In ‎Capital		Retained ‎Earnings		Treasury ‎Stock		Accumulated ‎Other ‎Comprehensive ‎Income ‎(Loss)		Total

Balance at January 1, 2020	$	-	$	-	$	215,310	$	48,429	$	(22,048)	$	(2,218)	$	239,473
Net income		-		-		-		13,559		-		-		13,559
Other comprehensive income		-		-		-		-		-		2,845		2,845
Cost for issuance of common stock		-		-		(126)		-		-		-		(126)
Issuance of Series H Preferred Stock		-		-		8,950		-		-		-		8,950
Redemption of Series D Preferred Stock		-		-		(10,485)		-		-		-		(10,485)
Exercise of stock options (500 shares)		-		-		5		-		-		-		5
Stock-based compensation expense		-		-		944		-		-		-		944
Treasury stock purchases (500,000 shares)		-		-		-		-		(4,870)		-		(4,870)
Dividends payable on Series C 6%, Series D 4.5%, Series F 6%, and Series G 6% noncumulative perpetual preferred stock		-		-		-		(1,014)		-		-		(1,014)
Cash dividends on common stock ($0.14 per share declared)		-		-		-		(6,915)		-		-		(6,915)
Dividend reinvestment plan		-		-		317		(317)		-		-		-
Stock purchase plan		-		-		321		-		-		-		321
Balance at September 30, 2020	$	-	$	-	$	215,236	$	53,742	$	(26,918)	$	627	$	242,687

	Preferred ‎Stock		Common ‎Stock		Additional ‎Paid-In ‎Capital		Retained ‎Earnings		Treasury ‎Stock		Accumulated ‎Other ‎Comprehensive ‎Income ‎(Loss)		Total

Balance at July 1, 2020	$	-	$	-	$	219,116	$	48,097	$	(26,918)	$	724	$	241,019
Net income		-		-		-		8,312		-		-		8,312
Other comprehensive income		-		-		-		-		-		(97)		(97)
Issuance of Series H Preferred Stock		-		-		5,870		-		-		-		5,870
Redemption of Series C and F preferred stock		-		-		(10,345)		-		-		-		(10,345)
Stock-based compensation expense		-		-		385		-		-		-		385
Dividends payable on Series C 6%, Series D 4.5%, Series F 6%, and Series G 6% noncumulative perpetual preferred stock		-		-		-		(332)		-		-		(332)
Cash dividends on common stock ($0.14 per share declared)		-		-		-		(2,227)		-		-		(2,227)
Dividend reinvestment plan		-		-		108		(108)		-		-		-
Stock purchase plan		-		-		102		-		-		-		102
Balance at September 30, 2020	$	-	$	-	$	215,236	$	53,742	$	(26,918)	$	627	$	242,687

See accompanying notes to unaudited consolidated financial statements.
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BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands, Unaudited)


	Nine Months Ended September 30,
	2021		2020
Cash Flows from Operating Activities:
Net Income	$	23,489	$	13,559
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment		2,156		2,216
Amortization and accretion, net		(406)		(1,864)
Provision for loan losses		4,840		7,526
Deferred income tax benefit		(938)		(1,942)
Loans originated for sale		(21,927)		(13,112)
Proceeds from sales of loans		25,119		12,811
Gain on sales of loans originated for sale		(575)		(292)
Gain on sales of investment securities		-		(306)
Gain on sale of premises		(371)		(4,378)
Realized and unrealized losses (gains) on equity investments		4		(820)
Gain on sales of other real estate owned		(11)		-
Loss on sale of impaired loans held in portfolio		64		-
Stock-based compensation expense		337		944
BOLI income		(2,195)		(385)
Decrease (increase) in interest receivable		2,536		(9,428)
Decrease (increase) in other assets		1,313		(1,739)
Decrease in accrued interest payable		(803)		(1,223)
Increase in other liabilities		454		4,987
Net Cash Provided by Operating Activities		33,086		6,554
Cash flows from investing activities:
Proceeds from repayments, calls, and maturities on securities available for sale		29,245		24,663
Purchases of securities		(18,345)		(70,561)
Proceeds from sale of impaired loans		3,442		-
Proceeds from sales of securities		-		10,419
Purchase of loans		-		(48,360)
Net increase in loans receivable		(1,671)		(170,233)
Purchases of BOLI		(8,500)		(60,000)
Proceeds from sales of other real estate owned		425		-
Additions to premises and equipment		(254)		(1,305)
Proceeds from the sale of fixed assets and premises		742		7,419
Redemption of Federal Home Loan Bank of New York stock		3,131		661
Net Cash Provided by (Used In) Investing Activities		8,215		(307,297)
Cash flows from financing activities:
Net increase (decrease) in deposits		223,355		(88,725)
Proceeds from Federal Home Loan Bank of New York advances		10,000		48,800
Repayments of Federal Home Loan Bank of New York advances		(83,000)		(35,000)
Purchases of treasury stock		(2,511)		(4,870)
Cash dividends paid on common stock		(7,241)		(6,915)
Cash dividends paid on preferred stock		(852)		(1,014)
Net proceeds from issuance of common stock		376		195
Net proceeds from issuance of preferred stock		-		8,950
Net payment on redemption of preferred stock		-		(10,485)
Exercise of stock options		281		5
Net Cash Provided by (Used In) Financing Activities		140,408		(89,059)

Net Increase (Decrease) in Cash and Cash Equivalents		181,709		(389,802)
Cash and Cash Equivalents-Beginning		261,229		550,353

Cash and Cash Equivalents-Ending	$	442,938	$	160,551

Supplementary Cash Flow Information:
Cash paid during the year for:
Income taxes	$	10,150	$	10,554
Interest		12,787		28,656

See accompanying notes to unaudited consolidated financial statements

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BCB Bancorp Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of BCB Bancorp, Inc. (the “Company”) and the Company’s wholly owned subsidiaries, BCB Community Bank (the “Bank”), BCB Holding Company Investment Corporation, Special Asset REO I, LLC., and Special Asset REO II, LLC. The Company’s business is conducted principally through the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Regulation S-X and, therefore, do not necessarily include all information that would be included in audited consolidated financial statements. The information furnished reflects all adjustments that are, in the opinion of management, necessary for a fair presentation of consolidated financial condition and results of operations. All such adjustments are of a normal recurring nature. These results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, or any other future period. The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statement of financial condition and revenues and expenses for the periods then ended. Actual results could differ significantly from those estimates.

These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the year ended December 31, 2020, which are included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission. In preparing these consolidated financial statements, the Company evaluated the events and transactions that occurred between December 31, 2020 and the date these consolidated financial statements were issued.

Risks and Uncertainties - We are subject to risks and uncertainties as a result of the ongoing COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company's business is highly uncertain and difficult to predict.

The severity of the impact of the ongoing COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers and any government or governmental responses thereto, including legislative or regulatory changes as well as the distribution and effectiveness of COVID-19 vaccines, all of which are uncertain and cannot be predicted. The Company's future results of operations and liquidity could be adversely impacted. As of the date of issuance of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain.

Note 2 - Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses ASU 2016-13, and related guidance, requires entities to report “expected” credit losses on financial instruments and other commitments to extend credit rather than the current “incurred loss” model. These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU will also require enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the consolidated financial statements. The amendments are effective for the Company in 2023. The Company has begun evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements and results of operations. The effect of this change cannot be ascertained at this point, and will depend upon factors including asset components, asset quality and market conditions at the adoption date. The Company has created a Current Expected Credit Loss (“CECL”) task group comprised of members of its finance, credit administration, lending, internal audit, loan operations, compliance, and information systems units. The CECL task group has become familiar with the provisions of ASU 2016-13 and is in the process of implementing the new guidance, which includes, but is not limited to: (1) identifying segments and sub-segments within the loan portfolio that have similar risk characteristics; (2) determining the appropriate methodology for each segment; (3) implementing changes that are necessary to its core operating system and interfaces to be able to capture appropriate data requirements; and (4) evaluating qualitative and economic factors to develop appropriate forecasts for integration into the model. The Company is currently evaluating the effect this guidance may have on its operating results and/or financial position, including assessing any potential impact on its capital.

Note 3 – Reclassification

Certain amounts as of December 31, 2020 and for the three-month and nine-month periods ended September 30, 2020 have been reclassified to conform to the current period’s presentation. These changes had no effect on the Company’s results of operations or financial position.

Note 4 – Equity Incentive Plans

Equity Incentive Plans

The Company, under the plan approved by its shareholders on April 28, 2011 (“2011 Stock Plan”), authorized the issuance of up to 900,000 shares of common stock of the Company pursuant to grants of stock options. Employees and directors of the Company and the Bank were eligible to participate in the 2011 Stock Plan. All stock options were granted in the form of either "incentive" stock options or "non-qualified" stock options. Incentive stock options have certain tax advantages that must comply with the requirements of Section 422 of the Internal Revenue Code. Only employees were permitted to receive incentive stock options. No awards may be granted under this Plan after April 28, 2021.

The Company, under the plan approved by its shareholders on April 26, 2018 (“2018 Equity Incentive Plan”), authorized the issuance of up to 1,000,000 shares of common stock of the Company pursuant to grants of stock options and restricted stock units. Employees and directors of the Company and the Bank are eligible to participate in the 2018 Stock Plan. All stock options will be granted in the form of either "incentive" stock options or "non-qualified" stock options. Incentive stock options have certain tax advantages that must comply with the requirements of Section 422 of the Internal Revenue Code. Only employees are permitted to receive incentive stock options.

Under the 2018 Equity Incentive Plan, on February 10, 2021, grants of 66,000 options, in aggregate, were declared for members of the Board of Directors of the Bank and the Company which vest over a 5-year period, commencing on the first anniversary of the grant date. The exercise price was recorded as of close of business on February 10, 2021. On February 10, 2021, awards of 26,400 shares of restricted stock, in aggregate, were declared for members of the Board of Directors of the Bank and the Company, which vest over a 4-year period, commencing on the anniversary of the award date. On February 19, 2021, an award of 300 shares of restricted stock was declared for an officer of the Bank and the Company, which vests over a 2-year period, commencing on the anniversary of the award date.

Further, on April 26, 2021, grants of 6,800 options, in aggregate, were declared for certain officers of the Bank and the Company, which vest over a 5-year period commencing on the first anniversary of the grant date. The exercise price was recorded as of close of business on April 26, 2021.

‎

Note 4 – Equity Incentive Plans (Continued)

The following table presents a summary of the status of the Company’s restricted shares as of September 30, 2021 and 2020.


	Number of Shares Awarded		Weighted Average Grant Date Fair Value
Non-vested at January 1, 2021	22,304	$	12.46
Granted	26,700		12.89
Vested	(22,304)		12.46
Forfeited	-		-
Non-vested at September 30, 2021	26,700	$	12.89


	Number of Shares Awarded		Weighted Average Grant Date Fair Value
Non-vested at January 1, 2020	81,278	$	11.96
Granted	-		-
Vested	(25,232)		12.40
Forfeited	(2,332)		11.97
Non-vested at September 30, 2020	53,714	$	11.78

Expected future expenses relating to the non-vested restricted shares outstanding as of September 30, 2021 was approximately $270,000 over a weighted average period of 3.34 years.

The following tables present a summary of the status of the Company’s outstanding stock option awards as of September 30, 2021 and 2020.


	Number of Option Shares		Range of Exercise Prices		Weighted Average Exercise Price

Outstanding at January 1, 2021	1,192,348	$	8.93-13.32	$	11.45

Options granted	72,800		12.89-13.68		12.96
Options exercised	(67,623)		8.93-12.46		9.83
Options forfeited	-		-		-
Options expired	-		-		-

Outstanding at September 30, 2021	1,197,525	$	9.03-13.68	$	11.64

As of September 30, 2021, stock options which were granted and were exercisable totaled 854,725 stock options.

It is Company policy to issue new shares upon share option exercise. Expected future compensation expense relating to the 342,800 shares of unvested options outstanding as of September 30, 2021 was $620,000 over a weighted average period of 4.66 years.



	Number of Option Shares		Range of Exercise Prices		Weighted Average Exercise Price

Outstanding at January 1, 2020	1,200,975	$	8.93-13.32	$	11.45

Options granted	-		-		-
Options exercised	(500)		10.55		10.55
Options forfeited	(8,127)		11.26-12.46		11.68
Options expired	-		-		-

Outstanding at September 30, 2020	1,192,348	$	8.93-13.32	$	11.45

As of September 30, 2020, stock options which were granted and were exercisable totaled 660,736 stock options.

‎

Note 5 – Net Income per Common Share

Basic net income per common share is computed by dividing net income less dividends on preferred stock by the weighted average number of shares of common stock outstanding. The diluted net income per common share is computed by adjusting the weighted average number of shares of common stock outstanding to include the effects of outstanding stock options, if dilutive, using the treasury stock method. Dilution is not applicable in periods of net loss. For the three and nine months ended September 30, 2021 and 2020, the difference in the weighted average number of basic and diluted common shares was due solely to the effects of outstanding stock options. No adjustments to net income were necessary in calculating basic and diluted net income per share. For the three months ended September 30, 2021 and 2020, the weighted average number of outstanding options considered to be anti-dilutive were 1,144 and 0, respectively. For the nine months ended September 30, 2021 and 2020, the weighted average number of outstanding options considered to be anti-dilutive were 7,015 and 0, respectively.

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations:



	For the Three Months Ended September 30,
	2021					2020
		Income	Shares		Per Share		Income	Shares		Per Share
		(Numerator)	(Denominator)		Amount		(Numerator)	(Denominator)		Amount
	(In Thousands, except per share data)
Net income available to common stockholders	$	8,036				$	7,980

Basic earnings per share:
Income available to common stockholders	$	8,036	17,019	$	0.47	$	7,980	17,069	$	0.47

Effect of dilutive securities:
Stock options		-	203				-	-

Diluted earnings per share:
Income available to common stockholders	$	8,036	17,222	$	0.47	$	7,980	17,069	$	0.47


	For the Nine Months Ended September 30,
	2021					2020
		Income	Shares		Per Share		Income	Shares		Per Share
		(Numerator)	(Denominator)		Amount		(Numerator)	(Denominator)		Amount
	(In Thousands, except per share data)
Net income available to common stockholders	$	22,637				$	12,545

Basic earnings per share:
Income available to common stockholders	$	22,637	17,085	$	1.33	$	12,545	17,250	$	0.73

Effect of dilutive securities:
Stock options		-	157				-	18

Diluted earnings per share:
Income available to common stockholders	$	22,637	17,242	$	1.31	$	12,545	17,268	$	0.73

Note 6 - Securities

Equity Securities

Equity securities are defined to include (a) preferred, common and other ownership interests in entities including partnerships, joint ventures and limited liability companies and (b) rights to acquire or dispose of ownership interest in entities at fixed or determinable prices.

The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three and nine months ended September 30, 2021 and 2020:


	For the three months ended September 30,				For the nine months ended September 30,
(In Thousands)	2021		2020		2021		2020
Net (losses) gains recognized during the period on equity securities	$	(307)	$	778	$	(4)	$	780
Less: Net gains recognized during the period on equity securities sold during the period		-		-		-		40
Realized and unrealized (losses) gains on equity investments still held at the reporting date	$	(307)	$	778	$	(4)	$	820

Note 6 - Securities (continued)

Debt Securities Available for Sale

The following tables present by maturity the amortized cost, gross unrealized gains and losses on, and fair value of, securities available for sale as of September 30, 2021 and December 31, 2020:




	September 30, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
	(In Thousands)
Residential Mortgage-backed securities:
Less than one year	$	2,974	$	-	$	103	$	2,871
More than one to five years		81		-		-		81
More than five to ten years		5,045		153		19		5,179
More than ten years		26,196		523		258		26,461
		34,296		676		380		34,592
Corporate Debt securities:
More than five to ten years		41,506		2,525		271		43,760

Municipal obligations:
More than ten years		4,131		120		-		4,251

Total securities	$	79,933	$	3,321	$	651	$	82,603



	December 31, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
	(In Thousands)
Residential Mortgage-backed securities:
More than one to five years	$	3,208	$	10	$	67	$	3,151
More than five to ten years		4,799		163		-		4,962
More than ten years		40,531		741		60		41,212
Sub-total:		48,538		914		127		49,325

Corporate Debt securities:
More than five to ten years		32,279		1,719		13		33,985
Sub-total:		32,279		1,719		13		33,985

Municipal obligations:
Due within one year		12,048		-		-		12,048
Due after ten years		4,209		189		-		4,398
Sub-total:		16,257		189		-		16,446

Total Debt Securities Available	$	97,074	$	2,822	$	140	$	99,756

‎

Note 6 - Securities (continued)

The unrealized losses, categorized by the length of time of continuous loss position, and fair value of related securities available for sale were as follows:



	12 Months or Less				More than 12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
	(In Thousands)
September 30, 2021
Residential mortgage-backed securities	$	8,073	$	196	$	3,570	$	184	$	11,643	$	380
Corporate Debt securities		5,954		271		-		-		5,954		271
	$	14,027	$	467	$	3,570	$	184	$	17,597	$	651

December 31, 2020
Residential mortgage-backed securities	$	6,126	$	60	$	1,278	$	67	$	7,404	$	127
Corporate Debt Securities		5,487		13		-		-		5,487		13
	$	11,613	$	73	$	1,278	$	67	$	12,891	$	140

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) whether the Company intends to sell the security or more likely than not will be required to sell the security before its anticipated recovery. At September 30, 2021 and December 31, 2020, management performed an assessment for possible OTTI of the Company’s residential mortgage-backed securities and corporate debt on an issue-by-issue basis, relying on information obtained from various sources, including publicly available financial data, ratings by external agencies, brokers and other sources. The extent of individual analysis applied to each security depended on the size of the Company’s investment, as well as management’s perception of the credit risk associated with each security. Based on the results of the assessment, management believes impairment of these securities, at September 30, 2021 and December 31, 2020, to be temporary.

Note 7 - Loans Receivable and Allowance for Loan Losses

The following tables present the recorded investment in loans receivable as of September 30, 2021 and December 31, 2020 by segment and class:



	September 30, 2021		December 31, 2020
		(In Thousands)
Residential one-to-four family	$	224,330	$	244,369
Commercial and multi-family		1,739,976		1,690,836
Construction		149,076		155,967
Commercial business⁽¹⁾		161,416		184,357
Home equity⁽²⁾		52,109		53,667
Consumer		2,730		822
		2,329,637		2,330,018

Less:
Deferred loan fees, net		(1,627)		(1,358)
Allowance for loan losses		(38,156)		(33,639)
Sub-total		(39,783)		(34,997)

Total Loans, net	$	2,289,854	$	2,295,021
(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

‎

Note 7 – Loans Receivable and Allowance for Loan Losses (Continued)

Allowance for Loan Losses

The allowance for loan loss is evaluated regularly by management and reflects consideration of all significant factors that affect the collectability of the loan portfolio. The Company’s methodology for assessing the adequacy of the allowance for loan losses consists of several key elements. These elements include a general allocated reserve for performing loans, a specific reserve for impaired loans and an unallocated portion.

The Company consistently applies the following comprehensive methodology. During the quarterly review of the allowance for loan losses, the Company considers a variety of qualitative factors that include:

Lending Policies and Procedures

Personnel responsible for the particular portfolio - relative to experience and ability of staff

Trend for past due, criticized and classified loans

Relevant economic factors

Quality of the loan review system

Value of collateral for collateral dependent loans

The effect of any concentrations of credit and the changes in the level of such concentrations

Other external factors

The methodology includes the segregation of the loan portfolio into two divisions. Loans that are performing and loans that are impaired. Loans which are performing are evaluated by loan class or loan type. The allowance for performing loans is evaluated based on historical loan loss experience with an adjustment for qualitative factors referred to above. Impaired loans are loans which are more than 90 days delinquent, troubled debt restructured, or adversely classified. These loans are individually evaluated for loan loss either by current appraisal, or net present value. Management reviews the overall estimate for feasibility and establishes the loan loss provision accordingly. Loan categories for specific business types were stressed due to rising delinquencies within those market sectors (hospitality, restaurants, office space, and commercial condos) to determine the potential for collateral shortfalls.

The loan portfolio is segmented into the following loan segments, where the risk level for each class is analyzed when determining the allowance for loan losses:

Residential one-to-four family real estate loans involve certain risks such as interest rate risk and risk of non-repayment. Adjustable-rate residential real estate loans decrease the interest rate risk to the Bank that is associated with changes in interest rates but involve other risks, primarily because as interest rates rise, the payment by the borrower rises to the extent permitted by the terms of the loan, thereby increasing the potential for default. At the same time, the marketability of the underlying properties may be adversely affected by higher interest rates. Repayment risk may be affected by a number of factors including, but not necessarily limited to, job loss, divorce, illness and personal bankruptcy of the borrower.

Commercial and multi-family real estate lending entails additional risks as compared with residential family property lending. Such loans typically involve large loan balances to single borrowers or groups of related borrowers. The payment experience on such loans is typically dependent on the successful operation of the real estate project. The success of such projects is sensitive to changes in supply and demand conditions in the market for commercial real estate as well as economic conditions generally.

Construction lending is generally considered to involve a high risk due to the concentration of principal in a limited number of loans and borrowers and the effects of the general economic conditions on developers and builders. Moreover, a construction loan can involve additional risks because of the inherent difficulty in estimating both a property’s value at completion of the project and the estimated cost (including interest) of the project. The nature of these loans is such that they are generally difficult to evaluate and monitor. In addition, speculative construction loans to a builder are not necessarily pre-sold and thus pose a greater potential risk to the Bank than construction loans to individuals on their personal residence.

Commercial business lending, including lines of credit, is generally considered higher risk due to the concentration of principal in a limited number of loans and borrowers and the effects of general economic conditions on the business. Commercial business loans are primarily secured by inventories and other business assets. In many cases, any repossessed collateral for a defaulted commercial business loans will not provide an adequate source of repayment of the outstanding loan balance.

Home equity lending entails certain risks such as interest rate risk and risk of non-repayment. The marketability of the underlying property may be adversely affected by higher interest rates, decreasing the collateral value securing the loan. Repayment risk can be affected by job loss, divorce, illness and personal bankruptcy of the borrower. Home equity line of credit lending entails securing an equity interest in the borrower’s home. In many cases, the Bank’s position in these loans is as a junior lien holder to another institution’s superior lien. This type of lending is often priced on an adjustable rate basis with the rate set at or above a predefined index. Adjustable-rate loans decrease the interest rate risk to the Bank that is associated with changes in interest rates but involve other risks, primarily because as interest rates rise, the payment by the borrower rises to the extent permitted by the terms of the loan, thereby increasing the potential for default.

Consumer loans generally have more credit risk because of the type and nature of the collateral and, in certain cases, the absence of collateral. Consumer loans generally have shorter terms and higher interest rates than other lending. In addition, consumer lending collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness, and personal bankruptcy. In many cases, any repossessed collateral for a defaulted consumer loan will not provide an adequate source of repayment of the outstanding loan.

An unallocated component is maintained to cover uncertainties that could affect management’s estimates of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio.

‎

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table sets forth the activity in the Company’s allowance for loan losses for the three and nine months ended September 30, 2021, and the related portion of the allowances for loan losses that is allocated to each loan class, as of September 30, 2021 (in thousands):


	Residential			Commercial & Multi-family	Construction		Commercial Business ⁽¹⁾		Home Equity ⁽²⁾		Consumer		Unallocated		Total
Allowance for loan losses:
Beginning Balance, June 30, 2021	$	2,911	$	24,438	$	2,341	$	6,852	$	294	$	3	$	633	$	37,472

Charge-offs:		-		-		-		-		-		-		-		-
Recovery:		-		-		-		1		3		-		-		4
Provisions:		(75)		370		(307)		879		19		20		(226)		680
Ending Balance, September 30, 2021:		2,836		24,808		2,034		7,732		316		23		407		38,156

Ending Balance attributable to loans:
Individually evaluated for impairment		276		1,469		150		5,770		16		-		-		7,681
Collectively evaluated for impairment		2,560		23,339		1,884		1,962		300		23		407		30,475
Ending Balance, September 30, 2021		2,836		24,808		2,034		7,732		316		23		407		38,156

Loans Receivables:
Individually evaluated for impairment		5,104		39,356		2,787		10,343		1,273		-		-		58,863
Collectively evaluated for impairment		219,226		1,700,620		146,289		151,073		50,836		2,730		-		2,270,774
Total Gross Loans:	$	224,330	$	1,739,976	$	149,076	$	161,416	$	52,109	$	2,730	$	-	$	2,329,637
_____________________________
(1) Includes business lines of credit.
(2) Includes home equity lines of credit.


	Residential			Commercial & Multi-family	Construction		Commercial Business (1)			Home Equity (2)	Consumer		Unallocated		Total
Allowance for loan losses:
Beginning Balance, January 1, 2021	$	3,293	$	21,772	$	1,977	$	6,306	$	286	$	-	$	5	$	33,639

Charge-offs:		(60)		-		-		(103)		-		(198)		-		(361)
Recovery:		27		-		-		2		-		9		-		38
Provisions:		(424)		3,036		57		1,527		30		212		402		4,840
Ending Balance, September 30, 2021	$	2,836	$	24,808	$	2,034	$	7,732	$	316	$	23	$	407	$	38,156
_____________________________
(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

‎

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table sets forth the activity in the Company’s allowance for loan losses for the three and nine months ended September 30, 2020 (in thousands):



	Residential			Commercial & Multi-family	Construction		Commercial Business ⁽¹⁾		Home Equity ⁽²⁾			Consumer		Unallocated		Total
Allowance for loan losses:
Beginning Balance, June 30, 2020	$	3,076	$	16,942	$	1,334	$	4,311	$	684	-	$	6	$	2,489	$	28,842

Recovery:		-		-		-		190		2			-		-		192
Provisions:		58		1,731		395		2,891		(63)			6		(2,292)		2,726
Ending Balance September 30, 2020	$	3,134	$	18,673	$	1,729	$	7,392	$	623		$	12	$	197	$	31,760

Ending Balance attributable to loans:
Individually evaluated for impairment	$	385	$	313	$	-	$	3,128	$	27		$	-	$	-	$	3,853
Collectively evaluated for impairment		2,749		18,360		1,729		4,264		596			12		197		27,907
Ending Balance September 30, 2020	$	3,134	$	18,673	$	1,729	$	7,392	$	623		$	12	$	197	$	31,760

Loans Receivables:
Individually evaluated for impairment	$	8,533	$	13,980	$	-	$	7,163	$	1,642		$	-	$	-	$	31,318
Collectively evaluated for impairment		233,263		1,663,688		134,769		304,041		59,331			770		-		2,395,862
Total Gross Loans:	$	241,796	$	1,677,668	$	134,769	$	311,204	$	60,973		$	770	$	-	$	2,427,180
_____________________________
(1) Includes business lines of credit.
(2) Includes home equity lines of credit.


	Residential			Commercial & Multi-family	Construction		Commercial Business (1)			Home Equity (2)	Consumer		Unallocated		Total
Allowance for loan losses:
Beginning Balance, January 1, 2020	$	2,722	$	15,372	$	1,244	$	3,790	$	333	$	-	$	273	$	23,734

Charge-offs:		(4)		-		-		-		-		-		-		(4)
Recovery:		-		-		-		492		8		4		-		504
Provisions:		416		3,301		485		3,110		282		8		(76)		7,526
Ending Balance, September 30, 2020	$	3,134	$	18,673	$	1,729	$	7,392	$	623	$	12	$	197	$	31,760
_____________________________
(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

The following table sets forth the amount recorded in loans receivable at December 31, 2020. The table also details the amount of total loans receivable that are evaluated individually, and collectively, for impairment and the related portion of the allowance for loan losses that is allocated to each loan class (in thousands):


		Residential		Commercial & Multi-family		Construction		Commercial Business ⁽¹⁾		Home Equity ⁽²⁾		Consumer		Unallocated		Total
Allowance for credit losses:
Ending Balance attributable to loans:
Individually evaluated for impairment	$	416	$	378	$	-	$	3,640	$	27	$	-	$	-	$	4,461
Collectively evaluated for impairment		2,877		21,394		1,977		2,666		259		-		5		29,178
Ending Balance, December 31, 2020	$	3,293	$	21,772	$	1,977	$	6,306	$	286	$	-	$	5	$	33,639

Loans Receivables:																-
Individually evaluated for impairment	$	7,281	$	61,854	$	-	$	12,492	$	1,574	$	-	$	-	$	83,201
Collectively evaluated for impairment		237,088		1,628,982		155,967		171,865		52,093		822		-		2,246,817
Total Gross Loans:	$	244,369	$	1,690,836	$	155,967	$	184,357	$	53,667	$	822	$	-	$	2,330,018

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

‎

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes the average recorded investment and interest income recognized on impaired loans with no related allowance recorded by portfolio class for the three and nine months ended September 30, 2021 and 2020 (in thousands):


		Three Months Ended September 30,								Nine Months Ended September 30,
		2021		2021		2020		2020		2021		2021		2020		2020

	Average		Interest		Average		Interest		Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income		Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized		Investment		Recognized		Investment		Recognized
Loans with no related allowance recorded:
Residential one-to-four family	$	3,050	$	37	$	4,664	$	16	$	2,973	$	108	$	4,652	$	120
Commercial and Multi-family		29,742		271		10,632		36		30,614		830		9,974		234
Construction		-		-		-		-		929		36		-		-
Commercial business⁽¹⁾		2,465		65		4,380		53		3,143		104		3,541		208
Home equity⁽²⁾		938		12		1,204		6		1,048		35		1,091		25
Consumer		-		-		-		-		-		-		-		-
Total Impaired Loans with no allowance recorded:	$	36,195	$	385	$	20,880	$	111	$	38,707	$	1,113	$	19,258	$	587

Loans with an allowance recorded:
Residential one-to-four family	$	2,110	$	66	$	3,720	$	3	$	2,302	$	165	$	3,714	$	50
Commercial and Multi-family		10,942		100		1,221		-		11,204		331		1,225		20
Construction		2,787		3		-		-		1,858		6		-		-
Commercial business⁽¹⁾		8,197		24		2,830		82		8,388		141		2,420		140
Home equity⁽²⁾		340		-		431		2		368		2		440		8
Consumer		-		-		-		-		-		-		-		-
Total Impaired Loans with an allowance recorded:	$	24,376	$	193	$	8,202	$	87	$	24,120	$	645	$	7,799	$	218

Total Impaired Loans:	$	60,571	$	578	$	29,082	$	198	$	62,827	$	1,758	$	27,057	$	805

__________

(1)Includes business lines of credit.

(2)Includes home equity lines of credit.

The following table summarizes the recorded investment by portfolio class at September 30, 2021 and December 31, 2020. (in thousands):



		As of September 30, 2021						As of December 31, 2020
		Recorded		Unpaid Principal		Related		Recorded		Unpaid Principal		Related
		Investment		Balance		Allowance		Investment		Balance		Allowance
Loans with no related allowance recorded:
Residential one-to-four family	$	2,998	$	3,343	$	-	$	4,084	$	4,660	$	-
Commercial and multi-family		28,438		29,892		-		57,558		58,739		-
Construction		-		-		-		-		-		-
Commercial business⁽¹⁾		1,869		6,473		-		5,844		17,687		-
Home equity⁽²⁾		934		936		-		1,124		1,126		-
Total Impaired Loans with no related allowance recorded:	$	34,239	$	40,644	$	-	$	68,610	$	82,212	$	-

Loans with an allowance recorded:
Residential one-to-four family	$	2,106	$	2,134	$	276	$	3,197	$	3,252	$	416
Commercial and Multi-family		10,918		14,551		1,469		4,296		4,501		378
Construction		2,787		2,787		150		-		-		-
Commercial business⁽¹⁾		8,474		21,284		5,770		6,648		12,511		3,640
Home equity⁽²⁾		339		339		16		450		458		27
Total Impaired Loans with an allowance recorded:	$	24,624	$	41,095	$	7,681	$	14,591	$	20,722	$	4,461

Total Impaired Loans:	$	58,863	$	81,739	$	7,681	$	83,201	$	102,934	$	4,461

__________

(1) Includes business lines of credit.
‎(2) Includes home equity lines of credit.

‎

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

A troubled debt restructured loan (“TDR”) is a loan that has been modified whereby the Company has agreed to make certain concessions to a borrower to meet the needs of both the borrower and the Company to maximize the ultimate recovery of a loan. A TDR occurs when a borrower is experiencing, or is expected to experience, financial difficulties and the loan is modified using a concession that would otherwise not be granted to the borrower. Pursuant to the CARES Act, a loan that was current at December 31, 2019 and modified due to the COVID-19 pandemic is not considered a TDR. The types of concessions granted generally include, but are not limited to, interest rate reductions, limitations on the accrued interest charged, term extensions, and deferment of principal. All TDRs were considered impaired and therefore were individually evaluated for impairment in the calculation of the allowance for loan losses. Prior to their classification as TDRs, certain of these loans had been collectively evaluated for impairment in the calculation of the allowance for loan losses.


		At September 30, 2021		At December 31, 2020
		(In thousands)
Recorded investment in TDRs:
Accrual status	$	12,568	$	13,760
Non-accrual status		3,823		2,303
Total recorded investment in TDRs	$	16,391	$	16,063

The Company originated one TDR loan totaling $168,102 and five new TDR loans totaling $458,181 for the three months ended September 30, 2021 and September 30, 2020, respectively.

For the three months ended September 30, 2021 and September 30, 2020, TDRs, for which there was a payment default within twelve months of restructuring, totaled $232,072 for one loan and $602,274 for two loans respectively.

The following table sets forth the delinquency status of total loans receivable as of September 30, 2021:



													Loans Receivable
	30-59 Days		60-90 Days		Greater Than		Total Past				Total Loans		>90 Days
	Past Due		Past Due		90 Days		Due		Current		Receivable		and Accruing
		(In Thousands)

Residential one-to-four family	$	463	$	-	$	152	$	615	$	223,715	$	224,330	$	-
Commercial and multi-family		2,992		-		6,047		9,039		1,730,937		1,739,976		651
Construction		-		-		2,787		2,787		146,289		149,076		-
Commercial business⁽¹⁾		723		434		3,352		4,509		156,907		161,416		-
Home equity⁽²⁾		32		-		33		65		52,044		52,109		-
Consumer		-		-		-		-		2,730		2,730		-
Total	$	4,210	$	434	$	12,371	$	17,015	$	2,312,622	$	2,329,637	$	651

_________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

The following table sets forth the delinquency status of total loans receivable at December 31, 2020:



													Loans Receivable
	30-59 Days		60-90 Days		Greater Than		Total Past				Total Loans		>90 Days
	Past Due		Past Due		90 Days		Due		Current		Receivable		and Accruing
		(In Thousands)
Originated loans:
Residential one-to-four family	$	507	$	266	$	664	$	1,437	$	242,932	$	244,369	$	125
Commercial and multi-family		15,910		2,996		1,334		20,240		1,670,596		1,690,836		-
Construction		-		-		-		-		155,967		155,967		-
Commercial business⁽¹⁾		3,889		904		3,354		8,147		176,210		184,357		133
Home equity⁽²⁾		541		12		502		1,055		52,612		53,667		75
Consumer		-		-		-		-		822		822		-

Total	$	20,847	$	4,178	$	5,854	$	30,879	$	2,299,139	$	2,330,018	$	333

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The table below sets forth the amounts and types of non-accrual loans in the Bank’s loan portfolio at September 30, 2021 and December 31, 2020, respectively. Loans are placed on non-accrual status when they become more than 90 days delinquent, or when the collection of principal and/or interest become doubtful. As of September 30, 2021, and December 31, 2020, non-accrual loans differed from the amount of total loans past due greater than 90 days due to loans which are maintained on non-accrual status for a minimum of six months until the borrower has demonstrated its ability to satisfy the terms of the loan. There were $9.5 million at September 30, 2021 and $11.9 million at December 31, 2020 in nonaccrual loans that were less than ninety days past due. Nonaccrual loans do not include loans acquired with deteriorated credit quality which were recorded at their fair value at acquisition and totaled $667,000 at September 30, 2021 and $1.1 million at December 31, 2020.



		As of September 30, 2021		As of December 31, 2020
		(In Thousands)		(In Thousands)
Non-Accruing Loans:

Residential one-to-four family	$	455	$	1,736
Commercial and multi-family		13,322		8,721
Construction		2,787		-
Commercial business⁽¹⁾		4,128		5,383
Home equity⁽²⁾		33		556

Total	$	20,725	$	16,396

_________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

Had non-accrual loans been performing in accordance with their original terms, the interest income recognized for the nine months ended September 30, 2021 and the twelve months ended December 31, 2020 would have been approximately $998,000 and $1.2 million, respectively. The Bank has not committed to lend additional funds to the borrowers whose loans have been placed on nonaccrual status. At September 30, 2021 and December 31, 2020, there were $651,000 and $333,000, respectively, of loans which were more than ninety days past due and still accruing interest.

‎

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

Criticized and Classified Assets

Company policies provide for a classification system for problem assets. Under this classification system, problem assets are classified as “substandard,” “doubtful,” or “loss.”

When the Company classifies problem assets, the Company may establish general allowances for loan losses in an amount deemed prudent by management. General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. A portion of general loss allowances established to cover possible losses related to assets classified as substandard or doubtful may be included in determining our regulatory capital. Specific valuation allowances for loan losses generally do not qualify as regulatory capital. The loans classified as substandard are secured either by residential real estate, commercial real estate or heavy equipment. The loans that have been classified substandard were classified as such primarily due to payment status, because updated financial information has not been timely provided, or the collateral underlying the loan is in the process of being revalued.

The Company’s internal credit risk grades are based on the definitions currently utilized by the banking regulatory agencies. The grades assigned and definitions are as follows, and loans graded excellent, above average, good and watch list (risk ratings 1-5) are treated as “pass” for grading purposes. The “criticized” risk rating (6) and the “classified” risk ratings (7-9) are detailed below:

6 – Special Mention- Loans currently performing but with potential weaknesses including adverse trends in borrower’s operations, credit quality, financial strength, or possible collateral deficiency.

7 – Substandard- Loans that are inadequately protected by current sound worth, paying capacity, and collateral support. Loans on “nonaccrual” status. The loan needs special and corrective attention.

8 – Doubtful- Weaknesses in credit quality and collateral support make full collection improbable, but pending reasonable factors remain sufficient to defer the loss status.

9 – Loss- Continuance as a bankable asset is not warranted. However, this does not preclude future attempts at partial recovery.

The following table presents the loan portfolio types summarized by the aggregate pass rating and the classified ratings of special mention and substandard within the Company’s internal risk rating system as of September 30, 2021 (in thousands). As of September 30, 2021, the Company had no loans with the classified rating of doubtful or loss.


	Pass		Special Mention		Substandard		Total

Residential one-to-four family	$	223,275	$	511	$	544	$	224,330
Commercial and multi-family		1,661,477		43,551		34,948		1,739,976
Construction		146,289		-		2,787		149,076
Commercial business⁽¹⁾		146,549		4,844		10,023		161,416
Home equity⁽²⁾		51,802		62		245		52,109
Consumer		2,730		-		-		2,730

Total Gross Loans	$	2,232,122	$	48,968	$	48,547	$	2,329,637

_________

(1) Includes business lines of credit and PPP loans.

(2) Includes home equity lines of credit.

The following table presents the loan portfolio types summarized by the aggregate pass rating and the classified ratings of special mention and substandard within the Company’s internal risk rating system as of December 31, 2020 (In thousands). As of December 31, 2020, the Company had no loans with the classified rating of doubtful or loss.



	Pass		Special Mention		Substandard		Total

Residential one-to-four family	$	241,237	$	1,087	$	2,045	$	244,369
Commercial and multi-family		1,631,838		2,152		56,846		1,690,836
Construction		155,967		-		-		155,967
Commercial business⁽¹⁾		173,833		1,497		9,027		184,357
Home equity⁽²⁾		53,005		-		662		53,667
Consumer		822		-		-		822

Total Gross Loans	$	2,256,702	$	4,736	$	68,580	$	2,330,018

________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

‎

Note 8 – Stockholders’ Equity

On December 15, 2020, the Company closed a private placement of its Series H 3.5% Noncumulative Perpetual Preferred Stock, resulting in gross proceeds of $2.2 million for 225 shares.

On September 1, 2020, the Company closed a private placement of its Series H 3.5% Noncumulative Perpetual Preferred Stock, resulting in gross proceeds of $5.9 million for 590 shares.

On August 31, 2020, the Company redeemed all 6,465 outstanding shares of its Series F 6.0% Noncumulative Perpetual Preferred Stock, at their face value of $1,000 per share, for a total redemption amount of $6.5 million.

On August 10, 2020, the Company redeemed all 388 outstanding shares of its Series C 6.0% Noncumulative Perpetual Preferred Stock, at their face value of $10,000 per share, for a total redemption amount of $3.9 million.

On July 13, 2020, the Company closed a private placement of its Series H 3.5% Noncumulative Perpetual Preferred Stock, resulting in gross proceeds of $3.1 million for 308 shares, effective June 29, 2020.

Note 9 – Bank Owned Life Insurance

The Bank purchased $60 million of bank owned life insurance (“BOLI”) in August, 2020 and an additional $8.5 million in January, 2021. BOLI involves life insurance purchased by the Bank on a chosen group of employees, and the Bank is owner and beneficiary of the policies. At September 30, 2021, the Bank had $71.7 million in BOLI. BOLI is accounted for using the cash surrender value method and is recorded at its net realizable value.

Note 10 – Goodwill and Other Intangible Assets

The Company’s intangible assets consist of goodwill and core deposit intangibles in connection with the acquisition of IA Bancorp, Inc. as of April 17, 2018. The initial recording of goodwill and other intangible assets requires subjective judgments concerning estimates of the fair value of the acquired assets and assumed liabilities. Goodwill is not amortized but is subject to annual tests for impairment or more often if events or circumstances indicate it may be impaired.

The Company’s core deposit intangibles are amortized on an accelerated basis using an estimated life of 10 years and in accordance with U.S. GAAP are evaluated annually for impairment. An impairment loss will be recognized if the carrying amount of the intangible asset is not recoverable and exceeds fair value. The carrying amount of the intangible asset is not considered recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset.

The Company believes that the fair values of our goodwill and other intangible assets were in excess of their carrying amounts and there was no impairment at September 30, 2021.

Amortization expense of the core deposit intangibles was $14,000 and $43,000 for the three and nine months ended September 30, 2021, respectively, and $16,000 and $49,000 for the three and nine months ended September 30, 2020, respectively. The unamortized balance of the core deposit intangibles and the amount of goodwill at September 30, 2021 was $191,000 and $5.3 million, respectively, and at September 30, 2020 was $250,000 and $5.2 million, respectively.
‎

Note 11 – Fair Values of Financial Instruments

Guidance on fair value measurements establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported with little or no market activity).

An asset or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The only assets or liabilities that the Company measured at fair value on a recurring basis were as follows. (In thousands):


			(Level 1)		(Level 2)
			Quoted Prices in		Significant		(Level 3)
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
Description	Total		Assets		Inputs		Inputs
As of September 30, 2021:
Securities
Debt Securities Available for Sale	$	82,603	$	-	$	82,603	$	-
Marketable Equities	$	23,534	$	23,534	$	-	$	-
Total Securities	$	106,137	$	23,534	$	82,603	$	-

As of December 31, 2020:
Securities
Debt Securities Available for Sale	$	99,756	$	-	$	99,756	$	-
Marketable Equities	$	17,717	$	17,717	$	-	$	-
Total Securities	$	117,473	$	17,717	$	99,756	$	-

The Company’s policy is to recognize transfers between levels as of the actual date of the event or change in circumstances that caused the transfer. There were no transfers of assets or liabilities into or out of Level 1, Level 2, or Level 3 of the fair value hierarchy during the three months ended September 30, 2021 and 2020.

The only assets or liabilities that the Company measured at fair value on a nonrecurring basis were as follows. (In thousands):




			(Level 1)		(Level 2)
			Quoted Prices in		Significant		(Level 3)
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
Description	Total		Assets		Inputs		Inputs
As of September 30, 2021
Impaired Loans	$	16,943	$	-	$	-	$	16,943
Other real estate owned	$	-	$	-	$	-	$	-

As of December 31, 2020:
Impaired Loans	$	10,130	$	-	$	-	$	10,130
Other real estate owned	$	414	$	-	$	-	$	414

‎

Note 11 – Fair Values of Financial Instruments (Continued)

The following tables present additional quantitative information as of September 30, 2021 and December 31, 2020 about assets measured at fair value on a nonrecurring basis and for which the Company has utilized adjusted Level 3 inputs to determine fair value. (Dollars in thousands):


Quantitative Information about Level 3 Fair Value Measurements
		Fair Value	Valuation	Unobservable
		Estimate	Techniques	Input	Range
September 30, 2021:
Impaired Loans	$	16,943	Appraisal of collateral (1)	Appraisal adjustments (2)	0%-10%
Other real estate owned	$	-	Appraisal of collateral (1)	Appraisal adjustments (2)	0%-10%


		Fair Value	Valuation	Unobservable
		Estimate	Techniques	Input	Range
December 31, 2020:
Impaired Loans	$	10,130	Appraisal of collateral (1)	Appraisal adjustments (2)	0%-10%
Other real estate owned	$	414	Appraisal of collateral (1)	Appraisal adjustments (2)	0%-10%

(1)Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not objectively determinable.

(2)Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments as of September 30, 2021 and December 31, 2020.

Cash and Cash Equivalents and Interest-Earning Time Deposits (Carried at Cost)

The carrying amounts reported in the consolidated statements of financial condition for cash and short-term instruments approximate fair values.

Securities Available for Sale

The fair value of securities available for sale (carried at fair value) are determined by matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.

Equity Securities

The fair values of available-for-sale securities are based on quoted market prices (Level 1).

Loans Held for Sale (Carried at Lower of Cost or Fair Value)

The fair value of loans held for sale is determined, when possible, using quoted secondary-market prices. If no such quoted prices exist, the fair value of a loan is determined using quoted prices for a similar loan or loans, adjusted for specific attributes of that loan. Loans held for sale are carried at the lower of cost or fair value.

Loans Receivable (Carried at Cost)

The fair values of loans, except for certain impaired loans, are estimated using discounted cash flow analyses, using market rates at the date of the Statement of Financial Condition that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.
‎

Note 11 – Fair Values of Financial Instruments (Continued)

Impaired Loans (Generally Carried at Fair Value)

Impaired loans are those for which the Company has measured and recorded an impairment generally based on the fair value of the loan’s collateral, less estimated costs to sell. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value at September 30, 2021 and December 31, 2020 consisted of the loan balances of $24.6 million net of a valuation allowance of $7.7 million and $14.6 million net of a valuation of loan allowance of $4.5 million, respectively.

Other Real Estate Owned (Generally Carried at Lower of Cost or Fair Value)

Real Estate Owned is generally carried at fair value less estimated costs to sell which is determined based upon independent third-party appraisals of the properties or based upon the expected proceeds from a pending sale. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

FHLB of New York Stock (Carried at Cost)

The carrying amount of restricted investment in bank stock approximates fair value and considers the limited marketability of such securities.

Interest Receivable and Payable (Carried at Cost)

The carrying amount of interest receivable and interest payable approximates its fair value.

Deposits (Carried at Cost)

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Borrowings and Subordinated Debt (Carried at Cost)

Fair values are estimated using discounted cash flow analysis, based on quoted prices for new long-term debt with similar credit risk characteristics, terms and remaining maturity. Prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party.

Off-Balance Sheet Financial Instruments (Carried at Cost)

Fair values for the Company’s off-balance sheet financial instruments (lending commitments and unused lines of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties’ credit standing. The fair value of these commitments was deemed immaterial and is not presented in the accompanying table.

‎

Note 11 – Fair Values of Financial Instruments (Continued)

The carrying values and estimated fair values of financial instruments were as follows as of September 30, 2021 and December 31, 2020:


		As of September 30, 2021

					Quoted Prices in Active		Significant		Significant
	Carrying				Markets for Identical Assets		Other Observable Inputs		Unobservable Inputs
	Value		Fair Value		(Level 1)		(Level 2)		(Level 3)

	(In Thousands)
Financial assets:
Cash and cash equivalents	$	442,938	$	442,938	$	442,938	$	-	$	-
Interest-earning time deposits		735		735		-		735		-
Debt securities available for sale		82,603		82,603		-		82,603		-
Equity investments		23,534		23,534		23,534		-		-
Loans held for sale		913		913		-		913		-
Loans receivable, net		2,289,854		2,237,471		-		-		2,237,471
FHLB of New York stock, at cost		8,193		8,193		-		8,193		-
Accrued interest receivable		10,388		10,388		-		10,388		-

Financial liabilities:
Deposits		2,541,405		2,429,607		1,750,043		679,564		-
Borrowings		118,573		120,049		-		120,049		-
Subordinated debentures		37,217		45,913		-		45,913		-
Accrued interest payable		660		660		-		660		-


		As of December 31, 2020

					Quoted Prices in Active		Significant		Significant
	Carrying				Markets for Identical Assets		Other Observable Inputs		Unobservable Inputs
	Value		Fair Value		(Level 1)		(Level 2)		(Level 3)

	(In Thousands)
Financial assets:
Cash and cash equivalents	$	261,229	$	261,229	$	261,229	$	-	$	-
Interest-earning time deposits		735		735		-		735		-
Debt securities available for sale		99,756		99,756		-		99,756		-
Equity investments		17,717		17,717		17,717		-		-
Loans held for sale		3,530		3,530		-		3,530		-
Loans receivable, net		2,295,021		2,309,118		-		-		2,309,118
FHLB of New York stock, at cost		11,324		11,324		-		11,324		-
Accrued interest receivable		12,924		12,924		-		12,924		-
Other Real Estate Owned		-		-		-		-		-

Financial liabilities:
Deposits		2,318,050		2,323,561		1,627,871		695,690		-
Borrowings		191,161		194,899		-		194,899		-
Subordinated debentures		37,042		37,252		-		37,252		-
Accrued interest payable		1,463		1,463		-		1,463		-

‎

Note 12 – Subordinated debt

On July 30, 2018, the Company issued $33.5 million of fixed-to-floating rate subordinated debentures (the “Notes”) in a private placement. The Notes have a 10-year term and bear interest at a fixed annual rate of 5.625% for the first five years of the term (the "Fixed Interest Rate Period"). From and including August 1, 2023, the interest rate will adjust to a floating rate based on the three-month LIBOR plus 2.72% until redemption or maturity (the "Floating Interest Rate Period"). The Notes are scheduled to mature on August 1, 2028. Subject to limited exceptions, the Company cannot redeem the Notes for the first five years of the term. The Company will pay interest in arrears semi-annually during the Fixed Interest Rate Period and quarterly during the Floating Interest Rate Period during the term of the Notes. The Notes constitute an unsecured and subordinated obligation of the Company and rank junior in right of payment to any senior indebtedness and obligations to general and secured creditors. The Notes qualify as Tier 2 capital for the Company for regulatory purposes, when applicable, and the portion that the Company contributes to the Bank will qualify as Tier 1 capital for the Bank. The additional capital will be used for general corporate purposes including organic growth initiatives. Subordinated debt includes associated deferred costs of $407,000 and $582,000 at September 30, 2021 and December 31, 2020, respectively.

The Company also has $4,124,000 of mandatory redeemable trust preferred securities. The interest rate on these floating rate junior subordinated debentures adjusts quarterly, equal to the three-month LIBOR plus 2.65%.

As it is anticipated that LIBOR will be discontinued after 2021, the Company is reviewing the agreements for the above debentures to determine alternative reference rates and does not anticipate there will be a significant financial statement impact.

Note 13 – Lease Obligations

The Company leases 28 of its offices under various operating lease agreements. The leases have remaining terms of one year to 12 years. The leases contain provisions for the payment by the Company of its pro-rata share of real estate taxes, insurance, common area maintenance and other variable expenses. The Company will allocate payments made under such leases between lease and non-lease components. Some leases contain renewal options and options to purchase the assets.

The Company has elected not to recognize a lease liability and a right of use asset for leases with a lease term of 12 or fewer months.

The following tables present certain information related to the Company’s leases (in thousands):


		Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Operating lease cost	$	917	$	850	$	2,801	$	2,559
Variable lease cost-operating leases	$	236	$	201	$	726	$	599

		At September 30, 2021		At December 31, 2020
Supplemental balance sheet information related to leases:
Operating Leases
Operating lease right-of-use assets	$	13,245	$	14,988

Current liabilities	$	3,375	$	3,348
Operating lease liabilities (noncurrent portion)		11,315		13,298
Deferred expenses		(1,157)		(1,422)
Total operating lease liabilities	$	13,533	$	15,224

The weighted average remaining lease term for operating leases at September 30, 2021 and December 31, 2020 was 6.10 years and 6.57 years, respectively. The weighted average discount rate for operating leases at September 30, 2021 and December 31, 2020 was 2.60 percent and 2.67 percent, respectively.

The following table summarizes the Company’s maturity of lease obligations for operating leases at September 30, 2021 and December 31, 2020 (in thousands):


Maturities of lease liabilities:
		At September 30, 2021		At December 31, 2020
		Operating Leases		Operating Leases
One year or less	$	3,375	$	3,348
Over one year through three years		4,783		5,424
Over three years through five years		3,154		3,459
Over five years		3,378		4,415
Gross Operating Lease Liabilities	$	14,690	$	16,646
Deferred Expenses		(1,157)		(1,422)
Total Operating Lease Liabilities	$	13,533	$	15,224

Note 14 – Subsequent Events

On October 13, 2021, the Board of Directors of the Company declared a cash dividend of $0.16 per share to shareholders of record of its common stock on November 1, 2021 with a payment date of November 15, 2021.

ITEM 2.

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

Forward-Looking Statements

This report on Form 10-Q contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, or the PSLRA. Such forward-looking statements, in addition to historical information, involve risk and uncertainties, and are based on the beliefs, assumptions and expectations of our management team. Words such as “expects,” “believes,” “should,” “plans,” “anticipates,” “will,” “potential,” “could,” “intend,” “may,” “outlook,” “predict,” “project,” “would,” “estimated,” “assumes,” “likely,” and variation of such similar expressions are intended to identify such forward-looking statements. Forward-looking statements speak only as of the

date they are made. Because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those that we anticipated in our forward-looking statements and future results could differ materially from historical performance.

Factors that could cause future results to vary from current management expectations as reflected in our forward-looking statements include, but are not limited to:

unfavorable economic conditions in the United States generally and particularly in our primary market area;

the effects of declines in housing markets and real estate values that may adversely impact the collateral underlying our loans;

increase in unemployment levels and slowdowns in economic growth;

our level of non-performing assets and the costs associated with resolving any problem loans including litigation and other costs;

the impact of changes in interest rates and the credit quality and strength of underlying collateral and the effect of such changes on the market value of our loan and investment securities portfolios;

the credit risk associated with our loan portfolio;

changes in the quality and composition of the Bank’s loan and investment portfolios;

changes in our ability to access cost-effective funding;

deposit flows;

legislative and regulatory changes, including increases in Federal Deposit Insurance Corporation, or FDIC, insurance rates;

monetary and fiscal policies of the federal and state governments;

changes in tax policies, rates and regulations of federal, state and local tax authorities;

inflation;

demands for our loan products;

demand for financial services;

competition;

changes in the securities or secondary mortgage markets;

changes in management’s business strategies;

our ability to enter new markets successfully;

our ability to successfully integrate acquired businesses;

changes in consumer spending;

our ability to retain key employees;

the effects of any reputational, credit, interest rate, market, operational, legal, liquidity, or regulatory risk;

expanded regulatory requirements as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which could adversely affect operating results;

civil unrest in the communities that we serve;

the global spread of the Coronavirus Disease 2019 (“COVID-19”) and the impact that it is having on the United States, in general, and New Jersey and New York, in particular (see Item 1.A. Risk Factors in the Company’s Annual Report on Form 10-K); and

other factors discussed elsewhere in this report, and in other reports we filed with the SEC, including under “Risk Factors” in Part I, Item 1A of our annual Report on Form 10-K, in Part II, Item 1A of our quarterly reports on Form 10-Q, and our other periodic reports that we file with the SEC.

You should not place undue reliance on these forward-looking statements, which reflect our expectations only as of the date of this Form 10-Q. We do not assume any obligation to revise forward-looking statements except as may be required by law.

Overview

BCB Bancorp, Inc. is a New Jersey corporation, and is the holding company parent of BCB Community Bank, or the Bank. The Company has not engaged in any significant business activity other than owning all of the outstanding common stock of BCB Community Bank. Our executive office is located at 104-110 Avenue C, Bayonne, New Jersey 07002. At September 30, 2021, we had approximately $2.984 billion in consolidated assets, $2.541 billion in deposits and $263.1 million in consolidated stockholders’ equity.

BCB Community Bank opened for business on November 1, 2000 as Bayonne Community Bank, a New Jersey chartered commercial bank. The Bank changed its name from Bayonne Community Bank to BCB Community Bank in April 2007. At September 30, 2021, the Bank operated through 29 branches in Bayonne, Carteret, Edison, Jersey City, Hoboken, Fairfield, Holmdel, Lyndhurst, Maplewood, Monroe Township, Newark, Parsippany, Plainsboro, River Edge, Rutherford, South Orange, Union, and Woodbridge, New Jersey, as well as three branches in Hicksville and Staten Island, NY, and through executive offices located at 104-110 Avenue C and an administrative office located at 591-595 Avenue C, Bayonne, New Jersey 07002. The Bank’s deposit accounts are insured by the FDIC, and the Bank is a member of the Federal Home Loan Bank System.

We are a community-oriented financial institution. Our business is to offer FDIC-insured deposit products and to invest funds held in deposit accounts at the Bank, together with funds generated from operations, in loans and investment securities. We offer our customers:

loans, including commercial and multi-family real estate loans, one- to four-family mortgage loans, home equity loans, construction loans, consumer loans and commercial business loans. In recent years the primary growth in our loan portfolio has been in loans secured by commercial real estate and multi-family properties;

FDIC-insured deposit products, including savings and club accounts, interest and non-interest bearing demand accounts, money market accounts, certificates of deposit and individual retirement accounts; and

retail and commercial banking services including wire transfers, money orders, safe deposit boxes, a night depository, debit cards, online banking, mobile banking, gift cards, fraud detection (positive pay), and automated teller services.

Critical Accounting Policies

The preparation of the Consolidated Financial Statements in accordance with U.S. GAAP requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues and expenses. We regularly evaluate these estimates and assumptions including those used to determine the allowance for loan losses, deferred taxes, fair value measurements, goodwill and other intangible assets. We base our estimates on historical experience and various other factors and assumptions that are believed to be reasonable under the circumstances. These form the basis for making judgments on the carrying value of assets and liabilities that are not readily apparent from other sources. Although our current estimates contemplate current economic conditions and how we expect them to change in the future, for the remainder of 2021, it is reasonably possible that actual conditions may be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition. Actual results may differ from these estimates under different assumptions or conditions.

See further discussion of these critical accounting policies in our Annual Report on Form 10-K for the year ended December 31, 2020 and Note 2, Basis of Presentation, to the unaudited Consolidated Financial Statements. There has been no change in critical accounting policies since the Company’s last annual report on Form 10-K.

COVID-19 Response

With the global outbreak of COVID-19, the Company remains focused on protecting the health and well-being of its employees and the communities in which it operates while assuring the continuity of its business operations.

The Company activated its dedicated pandemic team that proactively implemented its business continuity plans and has taken a variety of measures to ensure the ongoing availability of services, while taking health and safety measures, including enhanced cleaning and hygiene protocols in all of its facilities and remote work policies, where possible. To date, as a result of these business continuity measures, the Company has not experienced significant disruptions in its operations.

Operational Initiatives

oManagement meets on an as-needed basis and actively monitors guidance released by regulators, banking associations as well as state, federal and local government.

oMost employees have returned to work; however social distancing is still encouraged for those that are unvaccinated.

oBarriers are in place in branches and back offices to provide protection.

oBranch and operational offices are cleaned and sanitized as needed and employees have access to masks, gloves and disinfectant.

oManagement provides updates to employees as needed.

oThe Call Center is open seven days a week to assist with customer inquiries.

oBranch offices are open; however, customers have the ability to make an appointment if they choose. The Bank is encouraging customers to utilize the ATM, drive-through and electronic banking services whenever possible.

oThe Bank worked with a local provider in April/May 2021 to have the vaccine administered at one of the bank’s locations.

Allowance for Loan Losses (“ALLL”)

oThe Bank increased its loan loss reserves through the addition of $680,000 in loan loss provisions for the third quarter of 2021, as compared to $2.7 million for the same period last year. The Bank considered qualitative factors, such as changes in underwriting policies, current economic conditions, delinquency statistics, the adequacy of the underlying collateral and the financial strength of borrowers in arriving at its loan loss provision. All of these factors are likely to be affected by the COVID-19 pandemic. Loan categories for specific business types were stressed due to rising delinquencies within those market sectors (restaurants, mixed use/office space, and commercial condos) to determine the potential for collateral shortfalls. The impact of COVID-19 is likely to be felt over the next several quarters. Adjustments to the ALLL may be required as the full impact of COVID-19 on the borrowers’ capacity to make payments and the value of the underlying collateral becomes known.

Loan Deferments

oThe Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law on March 27, 2020, and provided over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic. Under Section 4013 of the CARES Act, loans less than 30 days past due as of December 31, 2019 will be considered current for COVID-19 modifications. A financial institution can then suspend the requirements under GAAP for loan modifications related to COVID-19 that would otherwise be categorized as a TDR, and suspend any determination of a loan modified as a result of COVID-19 as being a TDR, including the requirement to determine impairment for accounting purposes. As of September 30, 2021, most of these loans are accruing interest and the Bank is considering the loans within the overall allowance for loan loss analysis.

oThe Bank has worked with customers that previously requested loan deferments and entered into COVID-19 modifications. The loan balances for these customers at September 30, 2021 was approximately $38.8 million. The modifications generally provide a short-term, interest-only period. The Bank does not believe that these modified loans will result in losses, so long as the borrowers' representation of cash flows is realized. Borrowers that have requested modifications with less definitive cash flow projections have been denied and are being analyzed as part of the loan stress testing and Allowance for Loan Loss calculation.

Paycheck Protection Program (PPP)

oThe Bank has partnered with The Loan Source, Inc. and recognized $495,000 in referral fees for the second round of PPP loans in the nine months ended September 30, 2021.

IT Changes

oTo protect the well-being of our staff and customers, the Company has set up resources for some employees to work from home. To facilitate the move, we allocated laptop computers to staff and enhanced our ability to access the network offsite. We have taken additional steps to minimize the increased risk of security breaches (including privacy breaches and cyber-attacks), given the increased number of employees working remotely.

Liquidity and Capital Resources

oThe Company was well positioned with adequate levels of cash and liquid assets as of September 30, 2021, as well as wholesale borrowing capacity of over $800 million. At September 30, 2021, the Bank’s community bank leverage ratio (tier 1 capital to average consolidated assets) (“CBLR”) was 9.93 percent and the Bank is considered “well capitalized” under its regulatory requirements. The Company will continue to monitor the effects of COVID-19 in determining future cash dividends and any requirement for additional capital each quarter.

Financial Condition

Total assets increased by $162.8 million, or 5.8 percent, to $2.984 billion at September 30, 2021, from $2.821 billion at December 31, 2020. The increase in total assets was mainly related to increases in total cash and cash equivalents.

Total cash and cash equivalents increased by $181.7 million, or 69.6 percent, to $442.9 million at September 30, 2021 from $261.2 million at December 31, 2020. This increase was primarily due to an increase in deposits, partly offset by net repayments of borrowings.

Loans receivable, net, decreased by $5.2 million, or 0.20 percent, to $2.290 billion at September 30, 2021 from $2.295 billion at December 31, 2020. Total loan decreases for the first nine months of 2021 included decreases of $23.0 million in commercial business loans, $20.1 million in residential one-to-four family loans, $6.9 million in construction loans, and $1.6 million in home equity loans, partly offset by increases of $49.0 million in commercial real estate and multi-family loans and $1.9 million in consumer loans. This reduction in loans receivable, net, is partially due to loan prepayments for the period. The allowance for loan losses increased $4.5 million to $38.2 million, or 184.1 percent of non-accruing loans and 1.64 percent of gross loans, at September 30, 2021 as compared to an allowance for loan losses of $33.6 million, or 205.2 percent of non-accruing loans and 1.44 percent of gross loans, at December 31, 2020.

Total investment securities decreased by $11.3 million, or 9.6 percent, to $106.1 million at September 30, 2021 from $117.4 million at December 31, 2020, representing repayments, calls and maturities, partly offset by purchases of $18.3 million.

Deposit liabilities increased by $223.4 million, or 9.6 percent, to $2.541 billion at September 30, 2021 from $2.318 billion at December 31, 2020. The increase in deposit liabilities mainly related to the recent payments to individuals under the American Rescue Plan Act of 2021, adopted in March 2021 to provide additional relief for individuals and businesses affected by the coronavirus pandemic, and proceeds from the second round of Paycheck Protection Program (“PPP”) loans. Total increases for the nine months ended September 30, 2021, included $142.5 million in non-interest-bearing deposit accounts, $36.3 million in money market checking accounts, $30.6 million in NOW deposit accounts and $29.1 million in savings and club accounts. The increase in deposits was partly offset by a decrease of $15.1 million in certificates of deposit, including listing service and brokered deposit accounts. The Company utilizes listing service and brokered certificates of deposit when needed as additional sources of deposit liquidity to fund loan growth. At September 30, 2021, the Company had $16.7 million in listing service deposits and no brokered certificates of deposit.

Debt obligations decreased by $72.4 million, or 31.7 percent, to $155.8 million at September 30, 2021 from $228.2 million at December 31, 2020. During the nine months ended September 30, 2021, the Company opted to extinguish $83.0 million in FHLB advances which held a weighted average rate of 1.96%. The advances were originally set to mature in 2021 through 2024. The effect of the extinguishment of the debt reduced the weighted average cost of FHLB borrowings by approximately 26 basis points on an annualized basis. The related expense for the extinguishment of this debt is included in noninterest expense. The weighted average interest rate of FHLB advances was 1.35 percent at September 30, 2021 and 1.66 percent at December 31, 2020. The fixed interest rate of our subordinated debt balances was 5.625 percent at September 30, 2021 and December 31, 2020.

Stockholders’ equity increased by $13.9 million, or 5.6 percent, to $263.1 million at September 30, 2021 from $249.2 million at December 31, 2020. The increase was primarily attributable to the increase in retained earnings of $15.1 million, or 25.8 percent, to $73.4 million at September 30, 2021 from $58.3 million at December 31, 2020, related to the net effect of net income less dividends paid for the nine months ended September 30, 2021.

Net Interest Income Analysis

Net interest income represents the difference between income earned on our interest-earning assets and the expense incurred on our interest-bearing liabilities, and is analyzed and monitored by the Company on a regular basis. The following tables set forth average balance sheets, yields, and costs. The yields include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or expense.


		Three Months Ended September 30,
		2021					2020
		Average Balance		Interest Earned/Paid	Average Yield/Rate (3)			Average Balance		Interest Earned/Paid	Average Yield/Rate (3)
		(Dollars in thousands)
Interest-earning assets:
Loans Receivable	$	2,340,690	$	26,922	4.60%	$		2,394,997	$	27,126	4.53%
Investment Securities		105,595		973	3.69%			138,736		1,086	3.13%
FHLB Stock and other interest earnings assets		402,618		249	0.25%			273,620		254	0.37%
Total Interest-earning assets		2,848,903		28,144	3.95%			2,807,353		28,466	4.06%
Non-interest-earning assets		105,399						94,623
Total assets	$	2,954,302				$		2,901,976
Interest-bearing liabilities:
Interest-bearing demand accounts	$	638,812	$	648	0.41%	$		498,287	$	650	0.52%
Money market accounts		344,142		411	0.48%			315,658		508	0.64%
Savings accounts		321,783		131	0.16%			283,684		113	0.16%
Certificates of Deposit		674,558		1,344	0.80%			875,497		4,530	2.07%
Total interest-bearing deposits		1,979,295		2,534	0.51%			1,973,126		5,801	1.18%
Borrowed funds		163,814		997	2.43%			274,144		1,775	2.59%
Total interest-bearing liabilities		2,143,109		3,531	0.66%			2,247,270		7,576	1.35%
Non-interest-bearing liabilities		551,938						418,184
Total liabilities		2,695,047						2,665,454
Stockholders' equity		259,255						236,522
Total liabilities and stockholders' equity	$	2,954,302				$		2,901,976
Net interest income			$	24,613					$	20,890
Net interest rate spread⁽¹⁾					3.29%						2.71%
Net interest margin⁽²⁾					3.46%						2.98%

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

(2)Net interest margin represents net interest income divided by average total interest-earning assets.

(3)Annualized.


		Nine Months Ended September 30,
		2021					2020
		Average Balance		Interest Earned/Paid	Average Yield/Rate (3)		Average Balance		Interest Earned/Paid	Average Yield/Rate (3)
		(Dollars in thousands)
Interest-earning assets:
Loans Receivable	$	2,336,950	$	80,673	4.60%	$	2,285,854	$	80,063	4.67%
Investment Securities		108,492		2,877	3.54%		115,910		2,397	2.76%
FHLB Stock and other interest earning assets		330,500		673	0.27%		480,221		2,631	0.73%
Total Interest-earning assets		2,775,942		84,223	4.05%		2,881,985		85,091	3.94%
Non-interest-earning assets		107,319					68,397
Total assets	$	2,883,261				$	2,950,382
Interest-bearing liabilities:
Interest-bearing demand accounts	$	627,193	$	2,108	0.47%	$	457,546	$	2,305	0.67%
Money market accounts		332,489		1,299	0.54%		321,453		2,623	1.09%
Savings accounts		313,315		376	0.16%		270,948		324	0.16%
Certificates of Deposit		677,868		4,975	1.07%		1,007,796		16,657	2.20%
Total interest-bearing deposits		1,950,865		8,758	0.64%		2,057,743		21,909	1.42%
Borrowed funds		179,913		3,226	2.39%		281,574		5,523	2.62%
Total interest-bearing liabilities		2,130,778		11,984	0.75%		2,339,317		27,432	1.56%
Non-interest-bearing liabilities		497,358					372,976
Total liabilities		2,628,136					2,712,293
Stockholders' equity		255,125					238,089
Total liabilities and stockholders' equity	$	2,883,261				$	2,950,382
Net interest income			$	72,239				$	57,659
Net interest rate spread⁽¹⁾					3.30%					2.38%
Net interest margin⁽²⁾					3.47%					2.67%

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

(2)Net interest margin represents net interest income divided by average total interest-earning assets.

(3)Annualized.

Results of Operations comparison for the Three Months Ended September 30, 2021 and 2020

Net income was $8.3 million for each of the third quarters ended September 30, 2021 and 2020. There were decreases in total interest expense, the provision for loan losses and the income tax provision in the quarter ended September 30, 2021, that were offset by decreases in interest and non-interest income, and an increase in non-interest expense, for such quarter as compared with the third quarter of 2020.

Net interest income increased by $3.7 million, or 17.8 percent, to $24.6 million for the third quarter of 2021 from $20.9 million for the third quarter of 2020. The increase in net interest income resulted from a $4.0 million decrease in interest expense, partly offset by a decrease of $322,000 in interest income.

Interest income decreased by $322,000, or 1.1 percent, to $28.1 million for the third quarter of 2021 from $28.4 million for the third quarter of 2020. The decrease in interest income mainly related to a decrease in the average balance of loans receivable of $54.3 million, or 2.3 percent, to $2.341 billion for the third quarter of 2021 from $2.395 billion for the third quarter of 2020. This decrease was partly offset by an increase in the average yield on loans of 7 basis points to 4.60 percent for the third quarter of 2021 from 4.53 percent for the third quarter of 2020. Interest income on loans also included $179,000 of amortization of purchase credit fair value adjustments related to a prior acquisition for the third quarter of 2021, which added approximately three basis points to the average yield on interest earning assets.

Interest expense decreased by $4.0 million, or 53.4 percent, to $3.5 million for the third quarter of 2021 from $7.5 million for the third quarter of 2020. This decrease resulted primarily from a decrease in the average rate on interest-bearing liabilities of 69 basis points to 0.66 percent for the third quarter of 2021 from 1.35 percent for the third quarter of 2020, as well as a decrease in the average balance of interest-bearing liabilities of $104.2 million, or 4.6 percent, to $2.143 billion for the third quarter of 2021 from $2.247 billion for the third quarter of 2020. The decrease in the average cost of funds primarily resulted from the declining interest rate environment and an increased focus on managing funding costs. The decrease in the average balance of interest-bearing liabilities primarily resulted the Company’s strategy of continued deleveraging.

Net interest margin was 3.46 percent for the third quarter of 2021, compared to 2.98 percent for the third quarter of 2020. The increase in the net interest margin compared to the third quarter of 2020 was the result of the current volatile financial markets attributable to the COVID-19 pandemic and the low interest rate environment. Management has been proactive in managing the Company’s cost of funds and has significantly decreased the average cost of total interest-bearing liabilities for the third quarter of 2021 compared to the third quarter of 2020. The decrease in cost of funds highlight management’s efforts to maintain a strong net interest margin.

The provision for loan losses decreased by $2.0 million, to $680,000 for the third quarter of 2021 from $2.7 million for the third quarter of 2020, primarily due to COVID-19 related factors. During the third quarter of 2021, the Company experienced $4,000 in net recoveries compared to $192,000 in net recoveries for the third quarter of 2020. The Bank had non-accrual loans totaling $20.7 million, or 0.89 percent, of gross loans at September 30, 2021 as compared to $7.1 million, or 0.29 percent of gross loans at September 30, 2020. The allowance for loan losses was $38.2 million, or 1.64 percent of gross loans at September 30, 2021, and $31.8 million, or 1.31 percent of gross loans at September 30, 2020.

Noninterest income decreased by $5.6 million, or 81.1 percent, to $1.3 million for the third quarter of 2021 from $6.9 million for third quarter of 2020. The decrease in total noninterest income was mainly related to a gain on sale of premises of $4.4 million recognized in the prior year and a decrease in the realized and unrealized gain of equity securities of $1.1 million. These decreases were partly offset by an increase in BOLI income of $380,000 to $765,000 for the third quarter of 2021 from $385,000 for the third quarter of 2020. The gain on sale of premises related to the completion of a sale/leaseback of certain offices that the Company sold to a private investor group in September, 2020. The realized and unrealized gains or losses on equity securities are based on market conditions. The increase in BOLI income relates to an initial purchase of $60.0 million of BOLI in the third quarter of 2020, and an additional purchase of $8.5 million in the first quarter of 2021.

Noninterest expense increased by $186,000, or 1.4 percent, to $13.5 million for the third quarter of 2021 from $13.3 million for the third quarter of 2020. Salaries and employee benefits expense increased by $126,000, or 2.0 percent, to $6.5 million for the third quarter of 2021 from $6.4 million for the third quarter of 2020. The increase related to normal compensation increases, and was partly offset by fewer full-time equivalent employees, as well as $200,000 of costs deferred for PPP loans in the prior-year period. The costs deferred in the prior-year period represented salaries and benefit costs associated with direct PPP loan origination costs, which were amortized over the life of the loan. The number of full-time equivalent employees for the third quarter of 2021 was 291, as compared to 303 for the same period in 2020. Director fees decreased by $238,000, or 50.5 percent, to $233,000 for the third quarter of 2021 from $471,000 for the third quarter of 2020, as a result of lower amortization expense for stock option and restricted stock awards in the current period.

The income tax provision decreased by $65,000, or 1.9 percent, to $3.4 million for the third quarter of 2021 from $3.5 million for the third quarter of 2020. The decrease in the income tax provision was a result of slightly lower taxable income for the third quarter of 2021 as compared with that same period for 2020. The consolidated effective tax rate for the third quarter of 2021 was 29.0 percent compared to 29.4 percent for the third quarter of 2020. The lower rate in the current period related primarily to higher non-taxable BOLI income in the current year period.

Results of Operations comparison for the Nine Months Ended September 30, 2021 and 2020

Net income increased by $9.9 million, or 73.2 percent, to $23.5 million for the nine months ended September 30, 2021 from $13.6 million for the nine months ended September 30, 2020. The increase in net income was primarily the result of decreases in total interest expense and the provision for loan losses, partly offset by decreases in interest and non-interest income and increases in non-interest expense and the income tax provision for the first nine months of 2021 as compared to the first nine months of 2020.

Net interest income increased by $14.6 million, or 25.3 percent, to $72.2 million for the first nine months of 2021 from $57.6 million for the first nine months of 2020. The increase in net interest income resulted from a $15.4 million decrease in interest expense, partly offset by a decrease of $868,000 in interest income.

Interest income decreased by $868,000, or 1.0 percent, to $84.2 million for the first nine months of 2021 from $85.1 million for the first nine months of 2020. The decrease in interest income mainly related to a $2.0 million reduction in interest income from FHLB stock and other interest earning assets relating to a decrease in the average balance of FHLB stock and other interest-earning deposits of $149.7 million, or 31.2 percent, to $330.5 million for the first nine months of 2021 from $480.2 million for the first nine months of 2020, as well as a decrease in the average rate on these funds of 46 basis points to 0.27 percent for the first nine months of 2021 from 0.73 percent for the first nine months of 2020. The decrease in the average balance of interest-earning deposits mainly relates to decreases in the average balances of deposits and FHLB advances. This decrease in interest income was partly offset by an increase in loan interest income due to an increase in the average balance of loans receivable of $51.1 million, or 2.2 percent, to $2.337 billion for the first nine months of 2021 from $2.286 billion for the first nine months of 2020, while the average rate on loans decreased seven basis points. Interest income on investment securities also increased, mainly related to an in increase in the average rate of 78 basis points to 3.54 percent for the first nine months of 2021 from 2.76 percent for the first nine months of 2020, relating to the purchase of higher yielding securities in the current year period. Interest income on loans also included $591,000 representing the amortization of purchase credit fair value adjustments related to a prior acquisition for the nine months ended September 30, 2021, which added approximately three basis points to the average yield on interest earning assets.

Interest expense decreased by $15.4 million, or 56.3 percent, to $12.0 million for the first nine months of 2021 from $27.4 million for the first nine months of 2020. This decrease resulted primarily from a decrease in the average rate on interest-bearing liabilities of 81 basis points to 0.75 percent for the first nine months of 2021 from 1.56 percent for the first nine months of 2020, as well as a decrease in the average balance of interest-bearing liabilities of $208.5 million, or 8.9 percent, to $2.131 billion for the first nine months of 2021 from $2.339 billion for the first nine months of 2020. The decrease in the average cost of funds primarily resulted from the declining interest rate environment and an increased focus on managing funding costs. The decrease in the average balance of interest-bearing liabilities primarily resulted the Company’s strategy of continued deleveraging. The Company also opted to extinguish $110.0 million of FHLB advances over the 12-month period ended September 30, 2021, which held an average rate of 1.99%. The related non-recurring expense for the extinguishment of this debt was included in noninterest expense.

Net interest margin was 3.47 percent for the nine months ended September 30, 2021 and 2.67 percent for the nine months ended September 30, 2020. The increase in the net interest margin compared to the prior-year period was the result of the volatile financial markets in 2020 attributable to the COVID-19 pandemic, and the current low interest rate environment. Management has been proactive in managing the Company’s cost of funds and has significantly decreased the average cost of total interest-bearing liabilities, while slightly improving the average yield on interest-earning assets for the first nine months of 2021 compared to the first nine months of 2020.

The provision for loan losses decreased by $2.7 million to $4.8 million for the nine months ended September 30, 2021 from $7.5 million for the nine months ended September 30, 2020, primarily due to factors related to the beginning of the COVID-19 pandemic in 2020. During the nine months ended September 30, 2021, the Company experienced $323,000 in net charge offs compared to $500,000 in net recoveries for the nine months ended September 30, 2020. The Bank had non-accrual loans totaling $20.7 million, or 0.89 percent, of gross loans at September 30, 2021 as compared to $7.1 million, or 0.29 percent, of gross loans at September 30, 2020. The allowance for loan losses was $38.2 million, or 1.64 percent of gross loans at September 30, 2021, and $31.8 million, or 1.31 percent of gross loans at September 30, 2020. Management believes that the allowance for loan losses was adequate at September 30, 2021 and September 30, 2020.

Total noninterest income decreased by $2.7 million, or 30.4 percent, to $6.1 million for the nine months ended September 30, 2021 from $8.8 million for the nine months ended September 30, 2020. The decrease in total noninterest income was mainly related to a decrease in gain on sale of premises of $4.0 million, a decrease in realized and unrealized gains of investments of $824,000, a decrease in gain on sale of investment securities of $306,000, and a decrease other noninterest income of $277,000 in the current period compared to the same period in the prior year. Partly offsetting these decreases in noninterest income was an increase in BOLI income of $1.8 million, an increase in fees and service charges of $715,000, and an increase of $219,000 in gains on the sale of loans in the current period compared to the same period in the prior year. The gain on sale of premises related to the completion of a sale/leaseback of certain offices that the Company sold to a private investor group in September, 2020. The realized and unrealized gains on equity investments are based on market conditions. The BOLI income relates to an initial purchase of $60.0 million of BOLI product in the third quarter of 2020 and an additional purchase of $8.5 million in the first quarter of 2021. The higher fees and service charges related primarily to $495,000 of referral fees for PPP loans in the current period. The decrease in other noninterest income related primarily to the reversal of certain liabilities previously recorded for acquired loans in a prior acquisition that paid off in the first nine months of 2020.

Total noninterest expense increased by $610,000, or 1.5 percent, to $40.3 million for the nine months ended September 30, 2021 from $39.7 million for the nine months ended September 30, 2020. Salaries and employee benefits expense increased by $112,000, or 0.6 percent, to $19.6 million for the nine months ended September 30, 2021 from $19.5 million for the same period in 2020. Excluding the $1.3 million of costs deferred for PPP loans in the prior-year period, salaries and benefits expense decreased $1.2 million, relating to fewer full-time equivalent employees, partly offset by normal compensation increases. The costs deferred in the prior-year period represented salaries and benefit costs associated with direct PPP loan origination costs, which were amortized over the life of the loan. The number of full-time equivalent employees for the nine months ended September 30, 2021 was 297, as compared with 338 for the same period in 2020. Occupancy and equipment expense decreased by $126,000, or 1.4 percent, to $8.6 million for the nine months ended September 30, 2021 from $8.7 million for the nine months ended September 30, 2020, largely related to the termination of building sanitization costs associated with the COVID-19 pandemic in the prior-year period and the closure of two of the Company’s branch offices in the fourth quarter of 2020. Data processing and communication expenses increased by $237,000, or 5.57 percent, to $4.5 million for the nine months ended September 30, 2021 from $4.3 million for the nine months ended September 30, 2020, largely attributable to additional system applications. Director fees decreased by $404,000, or 33.8 percent, to $790,000 for the nine months ended September 30, 2021 from $1.2 million for the nine months ended September 30, 2020, as a result of lower amortization expense for stock option and restricted stock awards in the current period. Advertising and promotion expenses decreased by $433,000, or 52.5 percent, to $392,000 for the nine months ended September 30, 2021 from $825,000 for the nine months ended September 30, 2020, as management curtailed certain business promotion activities

in the current period. The Company recognized expenses of $1.1 million for losses on extinguishment of debt for the nine months ended September 30, 2021, and $313,000 for the nine months ended September 30, 2020, related to the prepayment of higher-cost FHLB borrowings.

The income tax provision increased by $4.1 million, or 71.8 percent, to $9.7 million for the nine months ended September 30, 2021 from $5.6 million for the nine months ended September 30, 2020. The increase in the income tax provision was a result of higher taxable income for the nine months ended September 30, 2021 as compared to that same period for 2020. The consolidated effective tax rate for the nine months ended September 30, 2021 was 29.3 percent compared to 29.5 percent for the nine months ended September 30, 2020. The lower rate in the current period related primarily to higher non-taxable BOLI income in the current year period.

Liquidity and Capital Resources

Liquidity

The overall objective of our liquidity management practices is to ensure the availability of sufficient funds to meet financial commitments and to take advantage of lending and investment opportunities. The Company manages liquidity in order to meet deposit withdrawals on demand or at contractual maturity, to repay borrowings and other obligations as they mature, and to fund loan and investment portfolio opportunities as they arise.

The Company’s primary sources of funds to satisfy its objectives are net growth in deposits (primarily retail), principal and interest payments on loans and investment securities, proceeds from the sale of originated loans and FHLB and other borrowings. The scheduled amortization of loans is a predictable source of funds. Deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. The Company has other sources of liquidity if a need for additional funds arises, including unsecured overnight lines of credit and other collateralized borrowings from the FHLB and other correspondent banks.

At September 30, 2021 and December 31, 2020, the Company had no overnight borrowings outstanding with the FHLB. The Company utilizes overnight borrowings from time to time to fund short-term liquidity needs. The Company had total FHLB borrowings of $133.3 million at September 30, 2021 and $191.2 million at December 31, 2020. The average rate of FHLB advances was 1.38 percent at September 30, 2021 and 1.66 percent at December 31, 2020. The subordinated debentures have a ten-year term and bear interest at a fixed annual rate of 5.625% for the first five years of the term. From and including August 1, 2023, the interest rate will adjust to a floating rate based on the LIBOR plus 2.72% until redemption or maturity. The Notes are scheduled to mature on August 1, 2028.

The Company had the ability at September 30, 2021 to obtain additional funding from the FHLB of up to $245.7 million, utilizing unencumbered loan collateral. The Company expects to have sufficient funds available to meet current loan commitments in the normal course of business through typical sources of liquidity. Time deposits scheduled to mature in one year or less totaled $586.0 million at September 30, 2021. Based upon historical experience, management estimates that a significant portion of such deposits will remain with the Company.

The Company was well positioned with adequate levels of cash and liquid assets as of September 30, 2021, as well as wholesale borrowing capacity of over $800 million, to cover the decrease in cash flow resulting from COVID-19 loan deferments and the increased non-accrual loans.

Capital Resources

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet the minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.

On September 17, 2019, the FDIC passed a final rule providing qualifying community banking organizations the ability to opt-in to a new community bank leverage ratio (tier 1 capital to average consolidated assets) (“CBLR”) framework, with a minimum requirement of 9% for institutions under $10 billion in assets. Such institutions meeting that requirement may elect to utilize the CBLR in lieu of the general applicable risk-based capital requirements under Basel III. Such institutions that meet the CBLR and certain other qualifying criteria will automatically be deemed to be well-capitalized. The Bank decided to opt-in to the new CBLR, effective for the quarter ended March 31, 2020. Pursuant to the CARES Act, the federal banking regulators in April 2020 issued interim final rules to set the CBLR at 8.0% beginning in the second quarter of 2020 through the end of 2020. Beginning in 2021, the CBLR increased to 8.5% for the calendar year. Community banks will have until January 1, 2022 before the CBLR requirement will return to 9%.

At September 30, 2021 and December 31, 2020, BCB Community Bank exceeded all of its regulatory capital requirements to which it was subject. The following table sets forth the regulatory capital ratios for BCB Community Bank as well as regulatory capital requirements for the periods presented.


		Actual				For Capital Adequacy Purposes				For Well Capitalized Under Prompt Corrective Action
	Dollars in Thousands
As of September 30, 2021:
Bank
Community Bank Leverage Ratio	$	292,222	9.93	%	$	206,029	7.50	%		250,178	8.50	%

As of December 31, 2020:
Bank
Community Bank Leverage Ratio	$	278,229	9.85	%	$	197,169	7.00	%	$	225,336	8.00	%

The Company will continue to monitor the effects of COVID-19 in determining future cash dividends and any requirement for additional capital each quarter. The Company had $2.5 million of stock repurchases for the nine months ended September 30, 2021.

‎

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not required for smaller reporting companies.

ITEM 4.

Controls and Procedures

Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this quarterly report, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There has been no change in the Company’s internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

‎

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved, from time to time, as plaintiff or defendant in various legal actions arising in the normal course of business. As of September 30, 2021, we were not involved in any material legal proceedings the outcome of which, if determined in a manner adverse to the Company, would have a material adverse effect on our financial condition or results of operations.

ITEM 1.A. RISK FACTORS

There have been no material changes to the risk factors set forth under the Item 1.A. Risk Factors as set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On December 11, 2020, the Company issued a press release announcing the adoption of a new stock repurchase program, effective December 16, 2020. Under the stock repurchase program, management is authorized to repurchase up to 500,000 shares of the Company’s common stock.

The following table provides certain information related to shares repurchased by the Company during the nine months ended September 30, 2021:


Period	Total Number of Shares Purchased		Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 - January 31, 2021	-	$	-	-	-
February 1 - February 29, 2021	-		-	-	-
March 1 - March 31, 2021	32,093		12.79	32,093	467,907
April 1 - April 30, 2021	-		-	-	-
May 1 - May 31, 2021	-		-	-	-
June 1 - June 30, 2021	65,782		13.16	65,782	402,125
July 1 - July 31, 2021	74,428		13.21	74,428	327,697
August 1 - August 31, 2021	-		-	-	-
September 1 - September 30, 2021	17,063		14.40	17,063	310,634
Total	189,366	$	13.23	189,366	310,634

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFTEY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS


Exhibit 31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2	Certification of Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32	Officers’ Certification filed pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 101.INS	XBRL Instance Document
Exhibit 101.SCH	XBRL Taxonomy Extension Schema
Exhibit 101.CAL	XBRL Taxonomy Extension Calculation LinkBase
Exhibit 101.DEF	XBRL Taxonomy Extension Definition LinkBase
Exhibit 101.LAB	XBRL Taxonomy Extension Label LinkBase
Exhibit 101.PRE	XBRL Taxonomy Extension Presentation LinkBase
Exhibit 104	Cover page Interactive Data File (embedded within the Inline XBRL document)

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Signatures

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.



	BCB BANCORP, INC.

Date: November 5, 2021	By:	/s/ Thomas Coughlin
		Thomas Coughlin
		President and Chief Executive Officer (Principal Executive Officer)

Date: November 5, 2021	By:	/s/ Thomas P. Keating
		Thomas P. Keating Senior Vice President and Chief Financial Officer
		(Principal Accounting and Financial Officer)