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BCB BANCORP INC - Quarter Report: 2023 March (Form 10-Q)

bcbp-20230331x10q

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 March 31, 2023

Or

 

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

o

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 May 2, 2023, BCB Bancorp, Inc., had 16,843,767 shares of common stock, no par value, outstanding.



 

BCB BANCORP INC. AND SUBSIDIARIES

INDEX

 

 

 

 

 

 

 

  

Page

 

PART I. CONSOLIDATED FINANCIAL INFORMATION

  

 

 

 

Item 1. Consolidated Financial Statements

  

 

 

 

Consolidated Statements of Financial Condition as of March 31, 2023 (unaudited) and December 31, 2022 (unaudited)

  

 

1

  

Consolidated Statements of Income for the three months ended March 31, 2023 and 2022 (unaudited)

  

 

2

  

Consolidated Statements of Comprehensive Income for the three months ended March 31, 2023 and 2022 (unaudited)

  

3

Consolidated Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2023 and 2022 (unaudited)

  

 

4

  

Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)

  

 

5

  

Notes to Unaudited Consolidated Financial Statements

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

 

26

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

Signature

34


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)

 

 

March 31,

December 31,

2023

2022

ASSETS

Cash and amounts due from depository institutions

$

13,213 

$

11,520 

Interest-earning deposits

247,862 

217,839 

Total cash and cash equivalents

261,075 

229,359 

Interest-earning time deposits

735 

735 

Debt securities available for sale

86,988 

91,715 

Equity investments

14,458 

17,686 

Loans held for sale

-

658 

Loans receivable, net of allowance for credit losses

of $28,882 and $32,373 respectively (1)

3,231,864 

3,045,331 

Federal Home Loan Bank of New York stock, at cost

26,875 

20,113 

Premises and equipment, net

10,106 

10,508 

Accrued interest receivable

14,717 

13,455 

Other real estate owned

75 

75 

Deferred income taxes

15,178 

16,462 

Goodwill and other intangibles

5,359 

5,382 

Operating lease right-of-use assets

15,111 

13,520 

Bank-owned life insurance ("BOLI")

72,077 

71,656 

Other assets

8,438 

9,538 

Total Assets

$

3,763,056 

$

3,546,193 

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Non-interest -bearing deposits

$

604,935 

$

613,910 

Interest-bearing deposits

2,262,274 

2,197,697 

Total deposits

2,867,209 

2,811,607 

FHLB advances

532,399 

382,261 

Subordinated debentures

37,566 

37,508 

Operating lease liability

15,436 

13,859 

Other liabilities

12,828 

9,704 

Total Liabilities

3,465,438 

3,254,939 

STOCKHOLDERS' EQUITY

Preferred stock: $0.01 par value, 10,000,000 shares authorized; issued and outstanding 2,123 shares Series H 3.5% and Series I 3.0%, (liquidation value $10,000 per share) noncumulative perpetual preferred stock at March 31, 2023 and December 31, 2022

-

-

Additional paid-in capital preferred stock

21,003 

21,003 

Common stock: no par value; 40,000,000 shares authorized; issued 20,002,738 and 19,898,197 at March 31, 2023 and December 31, 2022, respectively, outstanding 16,883,767 and 16,930,979, at March 31, 2023 and December 31, 2022, respectively

-

-

Additional paid-in capital common stock

197,197 

196,164 

Retained earnings

123,121 

115,109 

Accumulated other comprehensive loss

(6,613)

(6,491)

Treasury stock, at cost, 3,118,971 and 2,967,218 shares at March 31, 2023 and December 31, 2022, respectively

(37,090)

(34,531)

Total Stockholders' Equity

297,618 

291,254 

Total Liabilities and Stockholders' Equity

$

3,763,056 

$

3,546,193 

See accompanying notes to unaudited consolidated financial statements.

(1) The Company adopted ASU 2016-13 as of January 1, 2023. Prior year periods have not been restated.

1


BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Income

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

 

Three Months Ended March 31,

2023

2022

Interest and dividend income:

Loans, including fees

$

38,889 

$

26,321 

Mortgage-backed securities

186 

159 

Other investment securities

1,120 

948 

FHLB stock and other interest earning assets

2,157 

296 

Total interest income

42,352 

27,724 

Interest expense:

Deposits:

Demand

3,154 

758 

Savings and club

118 

108 

Certificates of deposit

6,453 

980 

9,725 

1,846 

Borrowings

5,156 

806 

Total interest expense

14,881 

2,652 

Net interest income

27,471 

25,072 

Provision (credit) for loan losses (1)

622 

(2,575)

Net interest income after provision (credit) for loan losses

26,849 

27,647 

Non-interest income:

Fees and service charges

1,098 

1,214 

BOLI income

421 

755 

Gain on sales of loans

6 

65 

Realized and unrealized (losses) on equity investments

(3,227)

(2,685)

Other

38 

51 

Total non-interest income

(1,664)

(600)

Non-interest expense:

Salaries and employee benefits

7,618 

6,736 

Occupancy and equipment

2,552 

2,695 

Data processing and communications

1,665 

1,465 

Professional fees

566 

494 

Director fees

265 

321 

Regulatory assessments

536 

304 

Advertising and promotional

278 

141 

Other real estate owned, net

1 

1 

Other

373 

802 

Total non-interest expense

13,854 

12,959 

Income before income tax provision

11,331 

14,088 

Income tax provision

3,225 

4,136 

Net Income

$

8,106 

$

9,952 

Preferred stock dividends

173 

276 

Net Income available to common stockholders

$

7,933 

$

9,676 

Net Income per common share-basic and diluted

Basic

$

0.47 

$

0.57 

Diluted

$

0.46 

$

0.56 

Weighted average number of common shares outstanding

Basic

16,949 

16,980 

Diluted

17,208 

17,343 

See accompanying notes to unaudited consolidated financial statements.

(1) The Company adopted ASU 2016-13 as of January 1, 2023. Prior year periods have not been restated.

2


BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(In thousands, Unaudited)

Three Months Ended March 31,

2023

2022

Net Income

$

8,106

$

9,952 

Other comprehensive loss, net of tax:

Unrealized gains (losses) on available-for-sale debt securities:

Unrealized holding gains (losses) arising during the period

13

(3,195)

Tax Effect

(135)

792 

Other comprehensive loss

(122)

(2,403)

Comprehensive income

$

7,984

$

7,549 

See accompanying notes to unaudited consolidated financial statements.

 

3


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 December 31, 2022

$

-

$

-

$

217,167 

$

115,109 

$

(34,531)

$

(6,491)

$

291,254 

Effect of Adopting ASU No. 2016 -13 ("CECL")

-

-

-

2,870 

-

-

2,870 

Beginning Balance at January 1, 2023

-

-

217,167 

117,979 

(34,531)

(6,491)

294,124 

Net income

-

-

-

8,106 

-

-

8,106 

Other comprehensive loss

-

-

-

-

-

(122)

(122)

Exercise of stock options (61,000 shares)

-

-

418 

-

-

-

418 

Stock-based compensation expense

-

-

106 

-

-

-

106 

Treasury Stock Purchases (151,753 shares)

-

-

-

-

(2,559)

-

(2,559)

Dividends payable on Series H 3.5% and Series I 3.0% noncumulative perpetual preferred stock

-

-

-

(173)

-

-

(173)

Cash dividends on common stock ($0.16 per share declared)

-

-

-

(2,687)

-

-

(2,687)

Dividend reinvestment plan

 

 

104 

(104)

-

Stock Purchase Plan

-

-

405 

-

-

-

405 

Balance at March 31, 2023

$

-

$

-

$

218,200 

$

123,121 

$

(37,090)

$

(6,613)

$

297,618 

Preferred
Stock

Common
Stock

Additional
Paid-In
Capital

Retained
Earnings

Treasury
Stock

Accumulated
Other
Comprehensive
Income (Loss)

Total

Balance at January 1, 2022

$

-

$

-

$

222,850 

$

81,171 

$

(31,125)

$

1,128 

$

274,024 

Net income

-

-

-

9,952 

-

-

9,952 

Other comprehensive loss

 

 

-

-

-

(2,403)

(2,403)

Stock-based compensation expense

-

-

95 

-

-

-

95 

Treasury Stock Purchases (515 shares)

-

-

-

-

(8)

-

(8)

Dividends payable on Series D 4.5%, Series H 3.5%, and Series I 3.0% noncumulative perpetual preferred stock

-

-

-

(276)

-

-

(276)

Redemption of Series G Preferred Stock

-

-

(5,330)

-

-

-

(5,330)

Issuance of Series I Preferred Stock

-

-

2,620 

-

-

-

2,620 

Cash dividends on common stock ($0.16 per share declared)

-

-

-

(2,601)

-

-

(2,601)

Dividend reinvestment plan

-

-

114 

(114)

-

Stock Purchase Plan

-

-

86 

-

-

-

86 

Balance at March 31, 2022

$

-

$

-

$

220,435 

$

88,132 

$

(31,133)

$

(1,275)

$

276,159 

See accompanying notes to unaudited consolidated financial statements.


4


BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands, Unaudited)

Three Months Ended March 31,

2023

2022

Cash Flows from Operating Activities:

Net Income

$

8,106 

$

9,952 

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of premises and equipment

478 

629 

Amortization and accretion, net

(474)

(375)

Provision (credit) for loan losses

622 

(2,575)

Deferred income tax expense

1,149 

735 

Loans originated for sale

-

(2,452)

Proceeds from sales of loans

664 

3,144 

Gain on sales of loans originated for sale

(6)

(65)

Realized and unrealized losses on equity investments

3,227

2,685 

Stock-based compensation expense

106 

95 

BOLI income

(421)

(755)

Increase in accrued interest receivable

(1,262)

(410)

Decrease (increase) in other assets

1,100

(107)

Increase (decrease) in accrued interest payable

1,304 

(497)

Increase in other liabilities

1,821

1,748 

Net Cash Provided by Operating Activities

16,414

11,752 

Cash flows from investing activities:

Proceeds from repayments, calls, and maturities on securities available for sale

4,661 

3,068 

Purchases of securities available for sale

-

(7,488)

Proceeds from sales of securities available for sale

-

1,233 

Net increase in loans receivable

(183,527)

(87,723)

Additions to premises and equipment

(76)

(38)

Purchase of Federal Home Loan Bank of New York stock

(6,762)

(44)

Net Cash Used In Investing Activities

(185,704)

(90,992)

Cash flows from financing activities:

Net increase in deposits

55,602 

69,773 

Proceeds from Federal Home Loan Bank of New York Long Term Advances

50,000 

-

Net proceeds from Federal Home Loan Bank of New York Short Term Advances

100,000 

-

Purchases of treasury stock

(2,559)

(8)

Cash dividends paid on common stock

(2,687)

(2,601)

Cash dividends paid on preferred stock

(173)

(276)

Net proceeds from issuance of common stock

405 

86 

Net proceeds from issuance of preferred stock

-

2,620 

Payments for redemption of preferred stock

-

(5,330)

Exercise of Stock Options

418 

-

Net Cash Provided by Financing Activities

201,006 

64,264 

Net (Decrease) Increase in Cash and Cash Equivalents

31,716

(14,976)

Cash and Cash Equivalents-Beginning

229,359 

411,629 

Cash and Cash Equivalents-Ending

$

261,075

$

396,653 

Supplementary Cash Flow Information:

Cash paid during the period for:

Income taxes

$

797 

$

411 

Interest

13,578 

3,150 

See accompanying notes to unaudited consolidated financial statements.


5


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, 2022, 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, 2022 and the date these consolidated financial statements were issued.

Risks and Uncertainties - The occurrence of events which adversely affect the global, national and regional economies may have a negative impact on our business. Like other financial institutions, our business relies upon the ability and willingness of our customers to transact business with us, including banking, borrowing and other financial transactions. A strong and stable economy at each of the local, federal and global levels is often a critical component of consumer confidence and typically correlates positively with our customers’ ability and willingness to transact certain types of business with us. Local and global events outside of our control which disrupt the New Jersey, New York, United States and/or global economy may therefore negatively impact our business and financial condition. A public health crisis such as the COVID-19 pandemic is no exception, and its adverse health and economic effects may adversely impact our business and financial condition.

 

Note 2 - Recent Accounting Pronouncements

In December 2022, the financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. The amendments in this ASU defer the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. The ASU is effective upon issuance. The FASB had previously issued 2020-04 - Facilitation of the Effects of Reference Rate Reform on Financial Reporting and related amendments in 2020 to ease the potential burden in accounting for reference rate reform. The amendments in ASU 2020-04 were elective and applied to all entities that have contracts, hedging relationships, and other transactions that reference the London Inter-bank Offer Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. The company does not expect such adoption of the new ASU to have an impact on the Company’s consolidated financial instruments.

The Company adopted ASU 2016-13 on January 1, 2023 for all financial assets measured at amortized cost and off-balance sheet credit exposures using the modified retrospective method. Results for the three months ended March 31, 2023 are presented under Accounting Standards Codification 326, Financial Instruments – Credit Losses, while prior period amounts continue to be reported with previously applicable GAAP and have not been restated. Effective January 1,2023, the Company recorded a $4.2 million decrease in allowance for credit losses on loans that is referred to as the current expected credit loss (“CECL”) methodology (previously allowance for loan losses), an elimination of $1.1 million of reserves related to acquired loans, and a $1.3 million increase related to allowance for off balance sheet credit exposures included in other liabilities section of the consolidated statements of financial condition, which resulted in a total cumulative effect adjustment of $2.9 million and an increase to retained earnings a component of the stockholders’ equity(net of tax). Further information regarding the impact of CECL can be found in Note 7 – Loan Receivable and Allowance for Credit Losses.

Allowance for Credit Losses

The allowance for credit losses represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The measurement of expected credit losses is applicable to loans receivable and securities measured at amortized cost. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The allowance is established through a provision for credit losses that is charged against income. The methodology for determining the allowance for credit losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded allowance for credit losses. The allowance for credit losses is reported separately as a contra-asset on the consolidated statement of financial condition. The expected credit loss for unfunded lending commitments and unfunded loan commitments is reported on the Consolidated Statement of Financial Condition in other liabilities while the provision for credit losses related to unfunded commitments is reported in other non-interest expense.

Allowance for Credit Losses on Loans Receivable

The allowance for credit losses on loans is deducted from the amortized cost basis of the loan to present the net amount expected to be collected. Expected losses are evaluated and calculated on a collective, or pooled, basis for those loans which share similar risk characteristics. If the loan does not share risk characteristics with other loans, the Company will evaluate the loan on an individual basis. Individually evaluated loans are primarily non-accrual and collateral dependent loans. Furthermore, the Company evaluates the pooling methodology at least annually to ensure that loans with similar risk characteristics are pooled appropriately. Loans are charged off against the allowance for credit losses when the Company believes the balances to be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged off or expected to be charged off.

The Company has chosen to segment its portfolio consistent with the manner in which it manages credit risk. The Company calculates estimated credit losses for these loan segments using quantitative models and qualitative factors. Further information on loan segmentation and the credit loss estimation is included in Note 7 – Loan Receivables and Allowance for Credit Losses.

Individually Evaluated Loans

On a case-by-case basis, the Company may conclude that a loan should be evaluated on an individual basis based on its disparate risk characteristics. When the Company determines that a loan no longer shares similar risk characteristics with other loans in the portfolio, the allowance will be determined on an individual basis using the present value of expected cash flows or, for collateral-dependent loans, the fair value of the collateral as of the reporting date, less estimated selling costs, as applicable. If the fair value of the collateral is less than the amortized cost basis of the loan, the Company will charge off the difference between the fair value of the collateral, less costs to sell at the reporting date and the amortized cost basis of the loan.

6


Allowance for Credit Losses on Off-Balance Sheet Commitments

The Company is required to include unfunded commitments that are expected to be funded in the future within the allowance calculation, other than those that are unconditionally cancelable. To arrive at that reserve, the reserve percentage for each applicable segment is applied to the unused portion of the expected commitment balance and is multiplied by the expected funding rate. As noted above, the allowance for credit losses on unfunded loan commitments is included in other liabilities on the consolidated statement of financial condition and the related credit expense is recorded in other non-interest expense in the consolidated statements of income.

Allowance for Credit Losses on Available for Sale Securities

For available for sale securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more than likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities available for sale that do not meet the above criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost and adverse conditions related to the security, among other factors.  If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of tax. The Company elected the practical expedient of zero loss estimates for securities issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rate by major agencies and have a long history of no credit losses.

Changes in the allowance for credit losses are recorded as provision for, or reversal of, credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available for sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

 

Note 3 – Reclassification

Certain amounts 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 were permitted to be granted under this Plan after April 26, 2021 pursuant to the terms of the 2011 Equity Incentive Plan (defined below).

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, restricted stock awards, restricted stock units, and performance awards. Employees and directors of the Company and the Bank are eligible to participate in the 2018 Equity Incentive 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.

On January 12, 2022, awards of 33,000 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 September 30, 2022, awards of 36,000 shares of restricted stock, in aggregate, were declared for certain executive officers of the Bank and the Company, which fully vested on November 30, 2022.

On January 31, 2023, awards of 27,000 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.


7


Note 4 – Equity Incentive Plans (Continued)

The following table presents a summary of the status of the Company’s restricted shares as of March 31, 2023 and 2022.

Number of Shares Awarded

Weighted Average Grant Date Fair Value

Non-vested at January 1, 2023

48,150 

$

14.83 

Granted

27,000 

17.99 

Vested

(13,650)

14.60 

Forfeited

-

-

Non-vested at March 31, 2023

61,500 

$

16.27 

 

Number of Shares Awarded

Weighted Average Grant Date Fair Value

Non-vested at January 1, 2022

26,700 

$

12.89 

Granted

33,000 

16.00 

Vested

(6,750)

12.89 

Forfeited

-

-

Non-vested at March 31, 2022

52,950 

$

14.83 

Restricted stock expense for the three months ended March 31, 2023 and March 31, 2022 was $73,000 and $50,000, respectively. Expected future expenses relating to the non-vested restricted shares outstanding as of March 31, 2023 was approximately $883,000 over a weighted average period of 3.16 years.

The following table presents a summary of the status of the Company’s outstanding stock option awards as of March 31, 2023.

 

  

Number of Option Shares

Range of Exercise Prices

Weighted Average Exercise Price

Outstanding at January 1, 2023

1,036,975

$

9.03-13.68

$

11.72

Options granted

-

-

-

Options exercised

(61,000)

9.03

9.03

Options forfeited

-

-

-

Options expired

-

-

-

Outstanding at March 31, 2023

975,975

$

10.55-13.68

$

11.89

As of March 31, 2023, stock options which were granted and were exercisable totaled 771,535. It is Company policy to issue new shares upon share option exercise.

Compensation expense for the three months ended March 31, 2023 and March 31, 2022 was $33,000 and $45,000, respectively. Expected future compensation expense relating to the 204,440 shares of unvested options outstanding as of March 31, 2023 was $359,000 over a weighted average period of 3.52 years.


8


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 months ended March 31, 2023 and 2022, 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 March 31, 2023 and 2022, there were no outstanding options considered to be anti-dilutive.

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

For the Three Months Ended March 31,

2023

2022

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

$

7,933

$

9,676 

Basic earnings per share:

Income available to common stockholders

$

7,933

16,949

$

0.47

$

9,676 

16,980 

$

0.57 

Effect of dilutive securities:

Stock options

-

259

-

363 

Diluted earnings per share:

Income available to common stockholders

$

7,933

17,208

$

0.46

$

9,676 

17,343 

$

0.56 

 

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 months ended March, 2023 and 2022:

For the three months ended March 31,

(In Thousands)

2023

2022

Net losses recognized during the period on equity securities held at the reporting period

$

(3,227)

$

(2,626)

Net losses recognized during the period on equity securities sold during the period

-

(59)

Realized and unrealized losses on equity investments during the reporting period

$

(3,227)

$

(2,685)


9


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 March 31, 2023 and December 31, 2022:

March 31, 2023

  

Gross

  

Gross

  

Amortized

Unrealized

Unrealized

Cost

Gains

Losses

Fair Value

(In Thousands)

Residential Mortgage-backed securities:

  

  

  

More than one to five years

$

446 

$

-

$

12 

$

434 

More than five to ten years

5,280 

-

315 

4,965 

More than ten years

22,234 

  

-

  

2,879 

  

19,355 

Sub-total:

27,960 

-

3,206 

24,754 

Corporate Debt securities:

Less than one year

7,306 

-

110 

7,196 

More than five to ten years

59,596 

-

4,558 

55,038 

Sub-total:

66,902 

-

4,668 

62,234 

Total securities

$

94,862 

  

$

-

  

$

7,874 

  

$

86,988 

December 31, 2022

  

Gross

  

Gross

  

Amortized

Unrealized

Unrealized

Cost

Gains

Losses

Fair Value

(In Thousands)

Residential Mortgage-backed securities:

  

  

  

More than five to ten years

$

5,445 

$

-

$

350 

$

5,095 

More than ten years

23,210 

-

3,435 

19,775 

Sub-total:

28,655 

-

3,785 

24,870 

Corporate Debt securities:

Due within one year

7,321 

91 

7,230 

More than five to ten years

59,629 

-

4,005 

55,624 

Sub-total:

66,950 

-

4,096 

62,854 

Municipal obligations:

Due after ten years

3,997 

-

6 

3,991 

Sub-total:

3,997 

-

6 

3,991 

Total Debt Securities Available

$

99,602 

$

-

$

7,887 

$

91,715 


10


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)

March 31, 2023

  

  

  

  

  

Residential mortgage-backed securities

$

3,575

  

$

164

  

$

21,179

  

$

3,042

  

$

24,754

  

$

3,206

Corporate Debt securities

44,440

2,851

16,494

1,817

60,934

4,668

$

48,015

  

$

3,015

  

$

37,673

  

$

4,859

  

$

85,688

  

$

7,874

December 31, 2022

  

  

  

  

  

Residential mortgage-backed securities

$

17,362 

  

$

2,022 

  

$

7,508 

  

$

1,763 

  

$

24,870 

  

$

3,785 

Corporate Debt Securities

51,607 

3,199 

9,948 

897 

61,555 

4,096 

Muni Bond

3,991 

6 

-

-

3,991 

6 

$

72,960 

  

$

5,227 

  

$

17,456 

  

$

2,660 

  

$

90,416 

  

$

7,887 

Note 7 - Loans Receivable and Allowance for Credit Losses

The following tables present the recorded investment in loans receivable as of March 31, 2023 and December 31, 2022 by segment and class:

March 31, 2023

December 31, 2022

(In Thousands)

Residential one-to-four family

$

246,683 

$

250,123 

Commercial and multi-family

2,466,932 

2,345,229 

Construction

162,553 

144,931 

Commercial business(1)

327,598 

282,007 

Home equity(2)

58,822 

56,888 

Consumer

3,383 

3,240 

3,265,971 

3,082,418 

Less:

Deferred loan fees, net

(5,225)

(4,714)

Allowance for credit losses(3)

(28,882)

(32,373)

Total Loans, net

$

3,231,864 

$

3,045,331 

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

(3) The company adopted ASU 2016-13 on January 1, 2023 with a modified retrospective approach. Accordingly, at March 31, 2023, the allowance for credit losses was determined in accordance with ASSC 326, “Financial Instruments-Credit Losses”.

11


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

Allowance for Credit Losses

The Company engages a third-party vendor to assist in the CECL calculation and has established a robust internal governance framework to oversee the quarterly estimation process for the allowance for credit losses (“ACL”). The ACL calculation methodology relies on regression-based discounted cash flow (“DCF”) models that correlate relationships between certain financial metrics and external market and macroeconomic variables. Following are some of the key factors and assumptions that are used in the Company’s CECL calculations:

methods based on probability of default and loss given default which are modeled based on macroeconomic scenarios;

a reasonable and supportable forecast period determined based on management’s current review of macroeconomic environment;

a reversion period after the reasonable and supportable forecast period;

estimated prepayment rates based on the Company’s historical experience and future macroeconomic environment;

estimated credit utilization rates based on the Company’s historical experience and future macroeconomic environment; and

incorporation of qualitative factors not captured within the modeled results. The qualitative factors include but are not limited to changes in lending policies, business conditions, changes in the nature and size of the portfolio, portfolio concentrations, and external factors such as competition.

Allowance for Credit Losses are aggregated for the major loan segments, with similar risk characteristics, summarized below. However, for the purposes of calculating the reserves, these segments may be further broken down into loan classes by risk characteristics that include but are not limited to regulatory call codes, industry type, geographic location, and collateral type.

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 general economic conditions.

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.

Other 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.


12


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

The following table sets forth the activity in the Company’s allowance for credit losses for the three ended March 31, 2023, and the related portion of the allowances for credit losses that is allocated to each loan class, as of March 31, 2023 (in thousands):

Residential

Commercial & Multi-family

Construction

Commercial Business (1)

Home Equity (2)

Consumer

Unallocated

Total

Allowance for credit losses:

Ending Balance December 31, 2022

$

2,474 

$

21,749 

$

2,094 

$

5,367 

$

485 

$

24 

$

180 

$

32373

Effect of adopting ASU No. 2016-13 ("CECL")

144 

(7,123)

1,387 

1,418 

182 

7 

(180)

(4,165)

Beginning Balance, January 1, 2023

2,618 

14,626 

3,481 

6,785 

667 

31 

-

28,208 

Charge-offs:

-

-

-

(1)

-

-

-

(1)

Recoveries:

12 

-

-

25 

16 

-

-

53 

Provision (credit):

(269)

340 

369 

182 

(3)

3 

-

622 

Ending Balance, March 31, 2023

2,361 

14,966 

3,850 

6,991 

680 

34 

-

28,882 

Ending Balance attributable to loans:

Individually evaluated

-

2 

605 

1,981 

-

-

-

2,588 

Collectively evaluated

2,361 

14,964 

3,245 

5,010 

680 

34 

-

26,294 

Ending Balance, March 31, 2023

2,361 

14,966 

3,850 

6,991 

680 

34 

-

28,882 

Loans Receivables:

Individually evaluated

358 

10,114 

3,217 

3,684 

212 

358 

-

17,943 

Collectively evaluated

246,325 

2,456,818 

159,336 

323,914 

58,610 

3,025 

-

3,248,028 

Total Gross Loans:

$

246,683 

$

2,466,932 

$

162,553 

$

327,598 

$

58,822 

$

3,383 

$

-

$

3,265,971 

_____________________________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

The following table sets forth the activity in the Company’s allowance for credit losses for the three months ended March 31, 2022, and the related portion of the allowance for credit losses that is allocated to each class as of March 31, 2022 (in thousands):

Residential

Commercial & Multi-family

Construction

Commercial Business (1)

Home Equity (2)

Consumer

Unallocated

Total

Allowance for loan losses:

Beginning Balance, January 1, 2022

$

4,094 

$

22,065 

$

2,231 

$

8,000 

$

533 

-

$

14 

$

182 

$

37,119 

Charge-offs:

-

-

-

(766)

-

-

-

(766)

Recovery:

-

-

-

1 

3 

198 

-

202 

Provisions (credit):

(1,593)

(1,245)

(266)

901 

(202)

(197)

27 

(2,575)

Ending Balance March 31, 2022

$

2,501 

$

20,820 

$

1,965 

$

8,136 

$

334 

$

15 

$

209 

$

33,980 

Ending Balance attributable to loans:

Individually evaluated

$

221 

$

618 

$

295 

$

6,000 

$

10 

$

-

$

-

$

7,144 

Collectively evaluated

2,280 

20,202 

1,670 

2,136 

324 

15 

209 

26,836 

Ending Balance March 31, 2022

$

2,501 

$

20,820 

$

1,965 

$

8,136 

$

334 

$

15 

$

209 

$

33,980 

Loans Receivables:

Individually evaluated

$

4,836 

$

24,901 

$

2,954 

$

7,517 

$

747 

$

-

$

-

$

40,955 

Collectively evaluated

228,415 

1,779,914 

138,128 

190,699 

51,532 

2,726 

-

2,391,414 

Total Gross Loans:

$

233,251 

$

1,804,815 

$

141,082 

$

198,216 

$

52,279 

$

2,726 

$

-

$

2,432,369 

_____________________________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.


13


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

The following table sets forth the amount recorded in loans receivable at December 31, 2022. 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 credit 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

$

196 

$

-

$

518 

$

2,066 

$

4 

$

-

$

-

$

2,784 

Collectively evaluated

2,278 

21,749 

1,576 

3,301 

481 

24 

180 

29,589 

Ending Balance, December 31, 2022

$

2,474 

$

21,749 

$

2,094 

$

5,367 

$

485 

$

24 

$

180 

$

32,373 

Loans Receivables:

Individually evaluated

$

5,147 

$

15,397 

$

3,180 

$

3,821 

$

727 

$

-

$

-

$

28,272 

Collectively evaluated

244,976 

2,329,832 

141,751 

278,186 

56,161 

3,240 

-

3,054,146 

Total Gross Loans:

$

250,123 

$

2,345,229 

$

144,931 

$

282,007 

$

56,888 

$

3,240 

$

-

$

3,082,418 

_____________________________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

The Following table presents the activity in the allowance for credit losses on off balance sheet exposures for the three months ended March 31, 2023 (in thousands):

Three Months Ended March 31, 2023

(In thousands)

Allowance for Credit Losses:

Balance at December 31, 2022

$

-

Impact of adopting ASU 2016-13 ("CECL") effective January 1, 2022

1,266

Provision for credit losses

(577)

Balance at March 31, 2023

$

689


14


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

The Company adopted Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) effective January 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measure of troubled debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty. The Company did have any loans that were both experiencing financial difficulty and modified during the three months ended March 31, 2023.

The following table sets forth the delinquency status of total loans receivable as of March 31, 2023:

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

$

2,189

$

-

$

-

$

2,189

$

244,494

$

246,683

$

-

Commercial and multi-family

2,835

-

-

2,835

2,464,097

2,466,932

-

Construction

928

-

3,217

4,145

158,408

162,553

-

Commercial business(1)

369

-

804

1,173

326,425

327,598

-

Home equity(2)

249

-

499

748

58,074

58,822

499

Consumer

-

-

-

-

3,383

3,383

-

Total

$

6,570

$

-

$

4,520

$

11,090

$

3,254,881

$

3,265,971

$

499

_________

(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, 2022:

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

$

253

$

314

$

-

$

567

$

249,556

$

250,123

$

-

Commercial and multi-family

2,163

428

-

2,591

2,342,638

2,345,229

-

Construction

-

-

3,180

3,180

141,751

144,931

-

Commercial business(1)

190

1,115

1,086

2,391

279,616

282,007

-

Home equity(2)

699

-

-

699

56,189

56,888

-

Consumer

-

-

-

-

3,240

3,240

-

Total

$

3,305

$

1,857

$

4,266

$

9,428

$

3,072,990

$

3,082,418

$

-

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

15


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

The table below sets forth the amounts and types of non-accrual loans in the Bank’s loan portfolio at March 31, 2023 and December 31, 2022, 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 March 31, 2023, and December 31, 2022, non-accrual loans differed from the amount of total loans past due 90 days due to loans 90 days past due and still accruing, or loans that were previously 90 days past due 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 $1.0 million at March 31, 2023 and $843,000 at December 31, 2022 in non-accrual loans that were less than ninety days past due.

As of March 31, 2023

As of December 31, 2022

(In Thousands)

(In Thousands)

Non-Accruing Loans:

Residential one-to-four family

$

237

$

243

Commercial and multi-family

340

346

Construction

3,217

3,180

Commercial business(1)

1,264

1,340

Home equity(2)

-

-

Total

$

5,058

$

5,109

_________

(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 three months ended March 31, 2023 and the twelve months ended December 31, 2022 would have been approximately $431,000 and $1.0 million, respectively. The Bank has not committed to lend additional funds to the borrowers whose loans have been placed on non-accrual status. At March 31, 2023 there were $499,000 of loans which were more than ninety days past due and still accruing interest. There were no loans more than ninety days past due and still accruing at December 31, 2022.


16


Note 7 - Loans Receivable and Allowance for Credit 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.”

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 “non-accrual” 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.


17


The following table summarizes the Company's loans by year of origination and internally assigned credit risk rating at March 31, 2023 and gross charge-offs for the three months ended March 31, 2023.

Loans by Year of Origination at March 31, 2023

2023

2022

2021

2020

2019

Prior

Revolving Loans

Revolving Loans to Term Loans

Total

Residential one-to-four family

Pass

$

2,602 

$

54,989 

$

40,097 

$

32,801 

$

12,427 

$

103,409 

$

-

$

-

$

246,325 

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

178 

-

-

180 

-

-

358 

Total one-to-four family

$

2,602 

$

54,989 

$

40,275 

$

32,801 

$

12,427 

$

103,589 

$

-

$

-

$

246,683 

Commercial and multi-family

Pass

$

165,350 

$

849,009 

$

232,502 

$

228,676 

$

55,126 

$

913,116 

$

-

$

-

$

2,443,779 

Special Mention

-

-

-

-

-

13,039 

-

-

13,039 

Substandard

-

597 

-

-

-

9,517 

-

-

10,114 

Total Commercial and multi-family

$

165,350 

$

849,606 

$

232,502 

$

228,676 

$

55,126 

$

935,672 

$

-

$

-

$

2,466,932 

Construction

Pass

$

4,244 

$

65,049 

$

58,553 

$

19,388 

$

-

$

5,880 

$

6,222 

$

-

$

159,336 

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

-

-

-

3,217 

-

-

3,217 

Total Construction

$

4,244 

$

65,049 

$

58,553 

$

19,388 

$

-

$

9,097 

$

6,222 

$

-

$

162,553 

Commercial business

Pass

$

1,266 

$

320 

3,040 

5,394 

$

7,813 

$

41,161 

$

259,567 

$

-

$

318,561 

Special Mention

-

-

-

-

410 

1,562 

3,382 

-

5,354 

Substandard

-

-

-

-

-

3,313 

370 

-

3,683 

Total Commercial business

$

1,266 

$

320 

$

3,040 

$

5,394 

$

8,223 

$

46,036 

$

263,319 

$

-

$

327,598 

Home equity

Pass

$

1,034 

$

1,757 

$

602 

$

815 

$

1,364 

$

7,511 

$

45,021 

$

506 

$

58,610 

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

-

-

-

-

-

212 

212 

Total Home equity

$

1,034 

$

1,757 

$

602 

$

815 

$

1,364 

$

7,511 

$

45,021 

$

718 

$

58,822 

Consumer

Pass

$

627 

$

533 

$

2,031 

$

129 

$

57 

$

-

$

6 

$

-

$

3,383 

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

-

-

-

-

-

-

-

Total Consumer

$

627 

$

533 

$

2,031 

$

129 

$

57 

$

-

$

6 

$

-

$

3,383 

Total Loans

$

175,123 

$

972,254 

$

337,003 

$

287,203 

$

77,197 

$

1,101,905 

$

314,568 

$

718 

$

3,265,971 

Gross charge-offs

$

-

$

-

$

-

$

-

$

-

$

1 

$

-

$

-

$

1 


18


The following table summarizes the Company's loans by year of origination and internally assigned credit risk rating at December 31, 2022.

Loans by Year of Origination at December 31, 2022

2022

2021

2020

2019

2018

Prior

Revolving Loans

Revolving Loans to Term Loans

Total

Residential one-to-four family

Pass

$

56,893 

$

40,465 

$

33,019 

$

12,959 

$

23,918 

$

82,144 

$

-

$

-

$

249,398 

Special Mention

-

-

-

-

-

303 

-

-

303 

Substandard

-

179 

-

-

-

243 

-

-

422 

Total one-to-four family

$

56,893 

$

40,644 

$

33,019 

$

12,959 

$

23,918 

$

82,690 

$

-

$

-

$

250,123 

Commercial and multi-family

Pass

$

854,299 

$

234,441 

$

235,830 

$

55,752 

$

312,353 

$

628,191 

$

-

$

-

$

2,320,866 

Special Mention

-

-

-

-

-

14,183 

-

-

14,183 

Substandard

599 

-

-

-

8,000 

1,581 

-

-

10,180 

Total Commercial and multi-family

$

854,898 

$

234,441 

$

235,830 

$

55,752 

$

320,353 

$

643,955 

$

-

$

-

$

2,345,229 

Construction

Pass

$

51,783 

$

58,827 

$

17,518 

$

-

$

1,794 

$

4,031 

$

7,798 

$

-

$

141,751 

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

-

-

3,180 

-

-

-

3,180 

Total Construction

$

51,783 

$

58,827 

$

17,518 

$

-

$

4,974 

$

4,031 

$

7,798 

$

-

$

144,931 

Commercial business

Pass

$

70 

$

5,331 

$

5,470 

$

8,070 

$

22,940 

$

19,487 

$

212,402 

$

-

$

273,770 

Special Mention

-

-

-

431 

-

1,600 

2,385 

-

4,416 

Substandard

-

-

-

-

2,686 

758 

377 

-

3,821 

Total Commercial business

$

70 

$

5,331 

$

5,470 

$

8,501 

$

25,626 

$

21,845 

$

215,164 

$

-

$

282,007 

Home equity

Pass

$

1,541 

$

643 

$

830 

$

1,390 

$

1,465 

$

6,437 

$

43,857 

$

513 

$

56,676 

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

-

-

-

-

-

212 

212 

Total Home equity

$

1,541 

$

643 

$

830 

$

1,390 

$

1,465 

$

6,437 

$

43,857 

$

725 

$

56,888 

Consumer

Pass

$

994 

$

2,034 

$

139 

$

67 

$

-

$

-

$

6 

$

-

$

3,240 

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

-

-

-

-

-

-

-

Total Consumer

$

994 

$

2,034 

$

139 

$

67 

$

-

$

-

$

6 

$

-

$

3,240 

Total Loans

$

966,179 

$

341,920 

$

292,806 

$

78,669 

$

376,336 

$

758,958 

$

266,825 

$

725 

$

3,082,418 


19


Note 8 – Stockholders’ Equity

On September 23, 2022, the Company closed a round of private placement of Series I Noncumulative Perpetual Preferred Stock, par value $0.01 per share (the “Series I Preferred Stock”), resulting in gross proceeds of $4,440,000 for 444 shares.

On May 1, 2022, the Company redeemed all 940 outstanding shares of it’s Series D 4.5% Noncumulative Perpetual Preferred Stock, at their face value of $10,000 per share, for a total redemption amount of $9.4 million.

On March 24, 2022, BCB Bancorp, Inc. (the “Company”) closed a round of private placement of Series I Noncumulative Perpetual Preferred Stock, par value $0.01 per share (the “Series I Preferred Stock”), resulting in gross proceeds of $2,620,000 for 260 shares.

On February 4, 2022, the Company redeemed all 533 outstanding shares of its Series G 6.0% Noncumulative Perpetual Preferred Stock, at their face value of $10,000 per share, for a total redemption amount of $5.3 million.

Note 9 – Bank Owned Life Insurance

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 March 31, 2023 the Bank had $72.1 million in BOLI. BOLI 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 its goodwill and other intangible assets were in excess of their carrying amounts and there was no impairment at March 31, 2023.

Amortization expense of the core deposit intangibles was $23,000 and $14,000 for the three months ended March 31, 2023 and March 31, 2022, respectively. The unamortized balance of the core deposit intangibles and the amount of goodwill at March 31, 2023 was $122,000 and $5.2 million, respectively. The unamortized balance of the core deposits intangibles and the amount of goodwill at March 31, 2022 was $199,000 and $5.3 million, respectively.


20


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.

 

Assets 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 March 31, 2023:

  

  

  

Securities

  

  

  

Debt Securities Available for Sale

$

86,988

$

-

$

86,988

$

-

Marketable Equities

$

14,458

$

14,458

$

-

$

-

Total Securities

$

101,446

$

14,458

$

86,988

$

-

As of December 31, 2022:

  

  

  

Securities

  

  

Debt Securities Available for Sale

$

91,715

$

-

$

91,715

$

-

Marketable Equities

$

17,686

$

17,686

$

-

$

-

Total Securities

$

109,401

$

17,686

$

91,715

$

-

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 March 31, 2023 and 2022.

There were no liabilities measured at fair value on a recurring basis at March 31, 2023 or December 31, 2022.

Assets 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 March 31, 2023

  

  

  

Individually Evaluated Loans

$

3,591

  

$

-

  

$

-

  

$

3,591

Other real estate owned

$

75

  

$

-

  

$

-

  

$

75

As of December 31, 2022:

  

  

  

Individually Evaluated Loans

$

5,587

$

-

$

-

$

5,587

Other real estate owned

$

75

  

$

-

  

$

-

  

$

75


There were no liabilities measured at fair value on a recurring basis at March 31, 2023 or December 31, 2022.

21


Note 11 – Fair Values of Financial Instruments (Continued)

The following tables present additional quantitative information as of March 31, 2023 and December 31, 2022 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

March 31, 2023:

Individually Evaluated Loans

$

3,591

Appraisal of collateral (1)

Appraisal adjustments (2)

0%-10%

Other real estate owned

$

75

Appraisal of collateral (1)

Appraisal adjustments (2)

0%-10%

Fair Value

Valuation

Unobservable

Estimate

Techniques

Input

Range

December 31, 2022:

Individually Evaluated Loans

$

5,587

Appraisal of collateral (1)

Appraisal adjustments (2)

0%-10%

Other real estate owned

$

75

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 March 31, 2023 and December 31, 2022.

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 (Carried at Fair Value)

The fair value of securities is determined by obtaining quoted market prices on nationally recognized security exchanges (Level 1) or, 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.

Loans Held for Sale (Carried at Cost)

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 individually evaluated 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.


22


Note 11 – Fair Values of Financial Instruments (Continued)

Individually Evaluated Loans (Generally Carried at Fair Value)

Individually evaluated 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 March 31, 2023 and December 31, 2022 consisted of the loan balances of $6.2 million net of a valuation allowance of $2.6 million and $8.4 million net of a valuation of loan allowance of $2.8 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.

Accrued Interest Receivable and Payable (Carried at Cost)

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

Deposits (Carried at Cost)

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, savings and money market accounts1) 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.

Debt Including Subordinated Debentures (Carried at Cost)

Fair values of debt 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 (Disclosed 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.

 


23


Note 11 – Fair Values of Financial Instruments (Continued)

The carrying values and estimated fair values of financial instruments were as follows as of March 31, 2023 and December 31, 2022:

 

As of March 31, 2023

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

$

261,075 

$

261,075 

  

$

261,075 

  

$

-

$

-

Interest-earning time deposits

735 

735 

  

-

  

735 

-

Debt securities available for sale

86,988 

86,988 

-

86,988 

-

Equity investments

14,458 

14,458 

  

14,458 

  

-

-

Loans receivable, net

3,231,864 

3,179,864 

  

-

  

-

3,179,864 

FHLB of New York stock, at cost

26,875 

26,875 

  

-

  

26,875 

-

Accrued interest receivable

14,717 

14,717 

  

-

  

14,717 

-

Financial liabilities:

  

  

Deposits

2,867,209 

2,570,016 

  

1,695,835 

  

874,181 

-

Borrowings

532,399 

528,408 

-

  

528,408 

-

Subordinated debentures

37,566 

40,681 

-

40,681 

-

Accrued interest payable

3,072 

3,072 

  

-

  

3,072 

-

As of December 31, 2022

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

$

229,359

$

229,359

  

$

229,359

  

$

-

$

-

Interest-earning time deposits

735 

735 

  

-

  

735 

-

Debt securities available for sale

91,715

91,715

-

91,715

-

Equity investments

17,686

17,686

  

17,686

  

-

-

Loans held for sale

658

658

  

-

  

658

-

Loans receivable, net

3,045,331

2,876,925

  

-

  

-

2,876,925

FHLB of New York stock, at cost

20,113

20,113

  

-

  

20,113

-

Accrued interest receivable

13,455

13,455

  

-

  

13,455

-

Financial liabilities:

  

  

Deposits

2,811,607

2,499,978

  

1,713,754

  

786,224

-

Debt

382,261

377,227

  

-

  

377,227

-

Subordinated debentures

37,508

40,113

-

40,113

-

Accrued interest payable

3,073

3,073

  

-

  

3,073

-


24


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"). Beginning 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 is used for general corporate purposes including organic growth initiatives. Subordinated debt includes associated deferred costs of $58,000 and $116,000 at March 31, 2023 and December 31, 2022, respectively.

The Company also has $4.1 million 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 not be supported in its current form after June 30, 2023, the Company will transition LIBOR-based products to a benchmark replacement recommended by the Board of Governors of the Federal Reserve System (the “Board”). The Board recommended benchmark is based on the Secured Overnight Financing Rate (“SOFR”) published by the Federal Reserve Bank of New York, including any recommended spread adjustment and benchmark replacement conforming changes. The Company does not expect such adoption to have a material impact on its accounting and disclosures.

Note 13 – Lease Obligations

The Company leases 26 of its offices under various operating lease agreements. The leases have remaining terms of one year to 10 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 March 31, 2023

Three Months Ended March 31, 2022

Operating lease cost

$

936

$

902 

Variable lease cost-operating leases

$

268

$

218 

At March 31, 2022

At December 31, 2022

Supplemental balance sheet information related to leases:

Operating Leases

Operating lease right-of-use assets

$

15,111

$

13,520

Current liabilities

$

3,252

$

3,062

Operating lease liabilities (noncurrent portion)

13,678

12,218

Imputed Interest

(1,494)

(1,421)

Total operating lease liabilities

$

15,436

$

13,859

The weighted average remaining lease term for operating leases at March 31, 2023 and December 31, 2022 was 5.86 years and 6.49 years, respectively. The weighted average discount rate for operating leases at March 31, 2023 and December 31, 2022 was 2.58 percent and 2.83 percent, respectively.

The following table summarizes the Company’s maturity of lease obligations for operating leases at March 31, 2023 and December 31, 2022 (in thousands):

Maturities of lease liabilities:

At March 31, 2023

At December 31, 2022

Operating Leases

Operating Leases

One year or less

$

3,252

$

3,062

Over one year through three years

5,302

4,766

Over three years through five years

4,007

3,496

Over five years

4,369

3,956

Gross Operating Lease Liabilities

$

16,930

$

15,280

Imputed Interest

(1,494)

(1,421)

Total Operating Lease Liabilities

$

15,436

$

13,859

 

Note 14 – Subsequent Events

On April 12, 2023, 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 May 5, 2023, with a payment date of May 19, 2023.

On April 27, 2023, the shareholders of the Company approved the 2023 Equity Incentive plan.

 

25


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.

The most significant factor that could cause future results to differ materially from those anticipated by our forward-looking statements include the ongoing impact of higher inflation levels, higher interest rates and general economic and recessionary concerns, all of which could impact economic growth and could cause a reduction in financial transactions and business activities, including decreased deposits and reduced loan originations, our ability to manage liquidity in a rapidly changing and unpredictable market, supply chain disruptions, labor shortages and additional interest rate increases by the Federal Reserve. Other factors that could cause future results to vary materially 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;

expanding regulatory requirements which could adversely affect operating results;

civil unrest in the communities that we serve;

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 March 31, 2023, we had $3.763 billion in consolidated assets, $2.867 billion in deposits and $297.6 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 March 31, 2023, the Bank operated through 24 branches in Bayonne, 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.

26


Critical Accounting Estimates

Estimates and assumptions are necessary in the application of certain accounting policies and can be susceptible to significant change. Critical accounting estimates are defined as those that involve a significant level of estimation uncertainty and have had, or could have, a material impact on the Company’s financial conditions or results of operation. At March 31, 2023, the Company considers the allowance for credit losses to be its critical accounting estimate.

See further discussion of this critical accounting estimate in our Annual Report on Form 10-K for the year ended December 31, 2022.

Financial Condition

Total assets increased by $216.9 million, or 6.1 percent, to $3.763 billion at March 31, 2023, from $3.546 billion at December 31, 2022. The increase in total assets was mainly related to increases in total loans and in cash and cash equivalents.

Total cash and cash equivalents increased by $31.7 million, or 13.8 percent, to $261.1 million at March 31, 2023, from $229.4 million at December 31, 2022. The increase was primarily due to an increase in Federal Home Loan Bank (“FHLB”) borrowings and in deposits.

Loans receivable, net, increased by $186.5 million, or 6.1 percent, to $3.232 billion at March 31, 2023, from $3.045 billion at December 31, 2022. Total loan increases for the first three months of 2023 included increases of $121.7 million in commercial real estate and multi-family loans, $45.6 million in commercial business loans, $17.6 million in construction loans, and $2.1 million in home equity and consumer loans, partly offset by a decrease of $3.4 million in residential one-to-four family loans. Due to the adoption of the CECL methodology (discussed in the notes to the consolidated financial statements above), the allowance for credit losses decreased $3.5 million to $28.9 million, or 571.0 percent of non-accruing loans and 0.89 percent of gross loans, at March 31, 2023, as compared to an allowance for credit losses of $32.4 million, or 633.6 percent of non-accruing loans and 1.05 percent of gross loans, at December 31, 2022.

Total investment securities decreased by $8.0 million, or 7.3 percent, to $101.4 million at March 31, 2023, from $109.4 million at December 31, 2022, representing unrealized losses, calls and maturities, and repayments.

Deposit liabilities increased by $55.6 million, or 2.0 percent, to $2.867 billion at March 31, 2023, from $2.812 billion at December 31, 2022. The increase in deposits was primarily driven by an increase of $43.3 million in non-brokered deposits during the first quarter of 2023.

Debt obligations increased by $150.2 million to $570.0 million at March 31, 2023 from $419.8 million at December 31, 2022. The weighted average interest rate of FHLB advances was 4.52 percent at March 31, 2023 and 4.07 percent at December 31, 2022. The weighted average maturity of FHLB advances as of March 31, 2023 was 0.78 years. The fixed interest rate of our subordinated debt balances was 5.62 percent at March 31, 2023 and December 31, 2022.

Stockholders’ equity increased by $6.4 million, or 2.2 percent, to $297.6 million at March 31, 2023, from $291.3 million at December 31, 2022. The increase was primarily attributable to the increase in retained earnings of $8.0 million, or 7.0 percent, to $123.1 million at March 31, 2023 from $115.1 million at December 31, 2022, partially offset by the cost of repurchasing 151,753 shares during the first quarter.


27


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. No tax equivalent adjustments have been made as the effects would not be significant.

Three Months Ended March 31,

2023

2022

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 (4) (5)

$

3,165,678

$

38,889

4.91%

$

2,343,845

$

26,321

4.49%

Investment securities (6)

108,869

1,306

4.80%

108,960

1,107

4.06%

Interest earnings assets

208,842

2,157

4.13%

447,080

296

0.26%

Total interest-earning assets

3,483,389

42,352

4.86%

2,899,885

27,724

3.82%

Non-interest-earning assets

116,770

102,118

Total assets

$

3,600,159

$

3,002,003

Interest-bearing liabilities:

Interest-bearing demand accounts

$

713,788

$

1,789

1.00%

$

706,067

$

398

0.23%

Money market accounts

314,427

1,365

1.74%

345,564

360

0.42%

Savings accounts

322,760

118

0.15%

336,575

108

0.13%

Certificates of Deposit

848,447

6,453

3.04%

611,813

980

0.64%

Total interest-bearing deposits

2,199,422

9,725

1.77%

2,000,019

1,846

0.37%

Borrowed funds

461,415

5,156

4.47%

109,105

806

2.95%

Total interest-bearing liabilities

2,660,837

14,881

2.24%

2,109,124

2,652

0.50%

Non-interest-bearing liabilities

645,883

621,574

Total liabilities

3,306,720

2,730,698

Stockholders' equity

293,439

271,305

Total liabilities and stockholders' equity

$

3,600,159

$

3,002,003

Net interest income

$

27,471

$

25,072

Net interest rate spread(1)

2.62%

3.32%

Net interest margin(2)

3.15%

3.46%

(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.

(4)Excludes allowance for credit losses.

(5)Includes non-accrual loans which are immaterial to the yield.

(6)Includes Federal Home Loan Bank of New York Stock


28


Results of Operations comparison for the Three Months Ended March 31, 2023 and 2022

Net income was $8.1 million for the first quarter ended March 31, 2023 and $10.0 million for the first quarter ended March 31, 2022. The decline was primarily driven by higher loan loss provisioning and unrealized losses on equity investments for the first quarter of 2023 as compared with the first quarter of 2022.

Net interest income increased by $2.4 million, or 9.6 percent, to $27.5 million for the first quarter of 2023, from $25.1 million for the first quarter of 2022. The increase in net interest income resulted from higher interest income which was partially offset by higher interest expense.

Interest income increased by $14.6 million, or 52.8 percent, to $42.4 million for the first quarter of 2023 from $27.7 million for the first quarter of 2022. The average balance of interest-earning assets increased $583.5 million, or 20.1 percent, to $3.483 billion for the first quarter of 2023 from $2.900 billion for the first quarter of 2022, while the average yield increased 104 basis points to 4.86 percent for the first quarter of 2023 from 3.82 percent for the first quarter of 2022. Compared to the first quarter of 2023, the interest income on loans for the first quarter of 2022 also included $147,000 of amortization of purchase credit fair value adjustments related to a prior acquisition, which added approximately three basis points to the average yield on interest-earning assets.

Interest expense increased by $12.2 million to $14.9 million for the first quarter of 2023 from $2.7 million for the first quarter of 2022. The increase resulted primarily from an increase in the average rate on interest-bearing liabilities of 174 basis points to 2.24 percent for the first quarter of 2023 from 0.50 percent for the first quarter of 2022, while the average balance of interest-bearing liabilities also increased by $551.7 million to $2.661 billion for the first quarter of 2023 from $2.109 billion for the first quarter of 2022. The increase in the average cost of funds resulted primarily from the persistently high interest rate environment.

The net interest margin was 3.15 percent for the first quarter of 2023 compared to 3.46 percent for the first quarter of 2022. The decrease in the net interest margin compared to the first quarter of 2022 was the result of the increase in the cost of interest-bearing liabilities partially offset by the increase in the yield on interest-earning assets. In a persistently high interest rate environment, management has been proactive in managing both the yield on earning assets and the cost of funds to protect net interest margin and continue to support the growth of net interest income.

During the first quarter of 2023, the Company experienced $48,000 in net recoveries of previously charged off loans compared to $564,000 in the first quarter of 2022. The Bank had non-accrual loans totaling $5.06 million, or 0.16 percent of gross loans, at March 31, 2023 as compared to $9.2 million, or 0.38 percent of gross loans, at March 31, 2022. The allowance for credit losses on loans was $28.9 million, or 0.89 percent of gross loans at March 31, 2023, and $34.0 million, or 1.40 percent of gross loans at March 31, 2022. The provision for credit losses was $622,000 for the first quarter of 2023 compared to a credit for loan losses of $2.6 million for the first quarter of 2022. Management believes that the allowance for credit losses on loans was adequate at March 31, 2023 and March 31, 2022.

Non-interest income decreased by $1.1 million to a loss of $1.7 million for the first quarter of 2023 from a loss of $600,000 for first quarter of 2022. The decrease in total non-interest income was mainly related to an increase in unrealized losses on equity securities from $2.7 million to $3.2 million and a decrease in BOLI income of $334,000. The unrealized losses on equity securities are based on market conditions.

Non-interest expense increased by $895,000, or 6.9 percent, to $13.9 million for the first quarter of 2023 from $13.0 million for the first quarter of 2022. The increase in operating expenses for the first quarter of 2023 was primarily driven by the higher salaries and employee benefits and increased spending for advertising and promotions compared to the first quarter of 2022. The increase in salaries related to normal compensation increases, higher commission expenses from strong loan production, and the increased cost of newly hired staff. The higher advertising and promotional spending is intended to continue the strong growth in our business. The number of full-time equivalent employees for the first quarter of 2023 was 298, as compared to 303 for the same period in 2022.

The income tax provision decreased by $911,000 or 22.0 percent, to $3.2 million for the first quarter of 2023 from $4.1 million for the first quarter of 2022. The consolidated effective tax rate was 28.5 percent for the first quarter of 2023 compared to 29.4 percent for the first quarter of 2022.

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 certain correspondent banks. The Federal Reserve Board also has announced a Bank Term Funding Program available to eligible depository institutions secured by U.S. treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral at par, to mitigate the risk of potential losses on the sale of such instruments.

At March 31, 2023 and December 31, 2022, the Company had $10.0 million and $60.0 million in 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 $532.4 million at March 31, 2023 and $382.3 million at December 31, 2022. The average rate of FHLB advances was 4.52 percent at March 31, 2023 and 4.07 percent at December 31, 2022.

The Company had the ability at March 31, 2023 to obtain additional funding from the FHLB of up to $385.0 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 $858.0 million at March 31, 2023. 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 March 31, 2023, as well as wholesale borrowing capacity of over $800 million.

Subordinated Debentures

The Company has subordinated debentures outstanding, whose aggregate principal totaled $33.4 million at March 31, 2023, which includes $58,000 remaining unamortized debt issuance costs. The debt issuance costs are being amortized over the expected life of the issue. 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. Beginning 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.

29


The Company also has $4.1 million of mandatory redeemable Trust Preferred securities. The interest rate on these floating rate junior subordinated debentures adjusts quarterly based on the three-month LIBOR plus 2.650%. The rate paid as of March 31, 2023 and 2022 was 7.557% and 7.388%, respectively. The trust preferred debenture became callable, at the Company’s option, on June 17, 2009, and quarterly thereafter.

As it is anticipated that LIBOR will not be supported in its current form after June 30, 2023, 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.

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.

At March 31, 2023 and December 31, 2022, 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 March 31, 2023:

Bank

Community Bank Leverage Ratio

$

333,643

9.26

%

$

288,107

8.00

%

324,121

9.00

%

As of December 31, 2022:

Bank

Community Bank Leverage Ratio

$

327,806

9.86

%

$

265,557

8.00

%

$

298,752

9.00

%


30


ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Management of Market Risk

Qualitative Analysis. The majority of our assets and liabilities are monetary in nature. Consequently, one of our most significant forms of market risk is interest rate risk. Our assets, consisting primarily of mortgage loans, have longer maturities than our liabilities, consisting primarily of deposits. As a result, a principal part of our business strategy is to manage interest rate risk and reduce the exposure of our net interest income to changes in market interest rates. Accordingly, our Board of Directors has established an Asset/Liability Committee which is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the Board of Directors. Senior management monitors the level of interest rate risk on a regular basis and the Asset/Liability Committee, which consists of senior management and outside directors operating under a policy adopted by the Board of Directors, meets as needed to review our asset/liability policies and interest rate risk position.

Quantitative Analysis. The following table presents the Company’s net portfolio value (“NPV”). These calculations were based upon assumptions believed to be fundamentally sound, although they may vary from assumptions utilized by other financial institutions. The information set forth below is based on data that included all financial instruments as of March 31, 2023. Assumptions have been made by the Company relating to interest rates, loan prepayment rates, core deposit duration, and the market values of certain assets and liabilities under the various interest rate scenarios. Actual maturity dates were used for fixed rate loans and certificate accounts. Investment securities were scheduled at either the maturity date or the next scheduled call date based upon management’s judgment of whether the particular security would be called in the current interest rate environment and under assumed interest rate scenarios. Variable rate loans were scheduled as of their next scheduled interest rate repricing date. The NPV at “PAR” represents the difference between the Company’s estimated value of assets and estimated value of liabilities assuming no change in interest rates. The NPV for a decrease of 200 to 300 basis points has been excluded since it would not be meaningful in the interest rate environment as of March 31, 2023. The following sets forth the Company’s NPV as of March 31, 2023.

NPV as a % of Assets

Change in calculation

Net Portfolio Value

$ Change from PAR

% Change from PAR

NPV Ratio

Change

(Dollars in Thousands)

+300bp

$

522,256 

$

(34,057)

(6.12)

%

14.91

%

(0.03)

bps

+200bp

537,115 

(19,197)

(3.45)

15.03

0.09

bps

+100bp

549,471 

(6,841)

(1.23)

15.07

0.13

bps

PAR

556,313 

-

0.00

14.94

0.00

bps

-100bp

554,007 

(2,305)

(0.41)

14.57

(0.37)

bps

____________

bps-basis point

The table above indicates that at March 31, 2023, in the event of a 100-basis point increase in interest rates, we would experience a 1.23 basis point decrease in NPV, as compared to a 1.92 percent decrease at December 31, 2022.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in NPV require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the NPV table presented assumes that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the NPV table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income, and will differ from actual results.

 

ITEM 4. Controls and Procedures

Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Interim 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 Interim 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.

Due to implementation of CECL issued by the FASB, the Bank has made updates to its internal control over financial reporting. Controls around ALLL were replaced with CECL controls, including processes and control owners. With the exception of these changes, there was no change to our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


31


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 March 31, 2023, 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

The following represents a material change in our risk factors from those disclosed in Part I – “Item 1A. Risk Factors” in the 2022 Form 10-K.

Recent negative developments in the banking industry could adversely affect our current and projected business operations and our financial condition and results of operations.

The recent bank failures and related negative media attention have generated significant market trading volatility among publicly traded bank holding companies and, in particular, regional, as well as community banks like the Company. These developments have negatively impacted customer confidence in regional and community banks, which could prompt customers to maintain their deposits with larger financial institutions. Further, competition for deposits has increased in recent periods, and the cost of funding has similarly increased, putting pressure on our net interest margin. If we were required to sell a portion of our securities portfolio to address liquidity needs, we may incur losses, including as a result of the negative impact of rising interest rates on the value of our securities portfolio, which could negatively affect our earnings and our capital. If we were required to raise additional capital in the current environment, any such capital raise may be on unfavorable terms, thereby negatively impacting book value and profitability. While we have taken actions to improve our funding, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs.

We also anticipate increased regulatory scrutiny – in the course of routine examinations and otherwise – and new regulations directed towards banks of similar size to the Bank, designed to address the recent negative developments in the banking industry, all of which may increase our costs of doing business and reduce our profitability. Among other things, there may be an increased focus by both regulators and investors on deposit composition, the level of uninsured deposits, losses embedded in our securities portfolio, contingent liquidity, CRE composition and concentration, capital position and our general oversight and internal control structures regarding the foregoing. As a result, the Bank could face increased scrutiny or be viewed as higher risk by regulators and the investor community.

Rising interest rates have decreased the value of a portion of the Company’s securities portfolio, and the Company would realize losses if it were required to sell such securities to meet liquidity needs.

As a result of inflationary pressures and the resulting rapid increases in interest rates over the last year, the fair value of our securities classified as available for sale has declined. These securities make up a majority of the securities portfolio of the Company, resulting in unrealized losses embedded in other comprehensive income as a part of shareholders’ equity. If the Company were required to sell such securities to meet liquidity needs, including in the event of deposit outflows or slower deposit growth, it may incur losses, which could impair the Company’s capital, financial condition, and results of operations and require the Company to raise additional capital on unfavorable terms, thereby negatively impacting its profitability. While the Company has taken actions to maximize its funding sources, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs. Furthermore, while the Federal Reserve Board has announced a Bank Term Funding Program available to eligible depository institutions secured by U.S. treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral at par, to mitigate the risk of potential losses on the sale of such instruments, there is no guarantee that such programs will be effective in addressing liquidity needs as they arise.

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

The following table provides certain information related to shares repurchased by the Company during the three months ended March 31, 2023:

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, 2023

-

$

-

-

417,650

February 1 - February 28, 2023

57,953

17.45

57,953

359,697

March 1 - March 31, 2023

93,800

16.45

93,800

265,897

Total

151,753

$

16.83

151,753

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 3.1

Amended and Restated Bylaws of BCB Bancorp, Inc. (Incorporated by reference to Exhibit 3.1 to registrant’s Current Report on Form 8-k filed on February 22, 2023)

Exhibit 10.1

BCB Community Bank Executive and Director Deferred Compensation Plan (Incorporated by reference to Exhibit 10.1 to registrant’s Current Report on Form 8-K filed on March 21, 2023)

Exhibit 10.14

Conflicts of Interest, Usurpation of Corporate Opportunity & Code of Conduct Policy (Incorporated by reference to Exhibit 10.2 to registrant's Current Report on Form 8-k filed on March 21, 2023)

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)


33


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: May 4, 2023

 

By:

 

/s/ Thomas Coughlin

 

 

 

 

Thomas Coughlin

 

 

 

 

President and Chief Executive Officer

(Principal Executive Officer)

 

 

 

Date: May 4, 2023

 

By:

 

/s/ Jawad Chaudhry

 

 

 

 

Jawad Chaudhry

Chief Financial Officer

 

 

 

 

(Principal Accounting and Financial Officer)

 

34