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

bcbp-20230930x10q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2023

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 November 1, 2023, BCB Bancorp, Inc., had 16,848,006 shares of common stock, no par value, outstanding.

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BCB BANCORP INC. AND SUBSIDIARIES

INDEX



	Page
PART I. CONSOLIDATED FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition as of September 30, 2023 (unaudited) and December 31, 2022 (unaudited)		1
Consolidated Statements of Income for the three and nine months ended September 30, 2023 and 2022 (unaudited)		2
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 and 2022 (unaudited)		3
Consolidated Statement of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022 (unaudited)		4
Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2023 and 2022 (unaudited)		6
Notes to Unaudited Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		28
Item 3. Quantitative and Qualitative Disclosures about Market Risk		34
Item 4. Controls and Procedures		34

PART II. OTHER INFORMATION		35
Item 1. Legal Proceedings		35
Item 1A. Risk Factors		35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		35
Item 3. Defaults Upon Senior Securities		35
Item 4. Mine Safety Disclosures		35
Item 5. Other Information		35
Item 6. Exhibits		36
Signature		37

PART I. CONSOLIDATED FINANCIAL INFORMATION

ITEM I. CONSOLIDATED FINANCIAL STATEMENTS

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

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



	September 30,		December 31,
	2023		2022

ASSETS
Cash and amounts due from depository institutions	$	16,772	$	11,520
Interest-earning deposits		235,144		217,839
Total cash and cash equivalents		251,916		229,359

Interest-earning time deposits		735		735
Debt securities available for sale		86,172		91,715
Equity investments		8,272		17,686
Loans held for sale		472		658
Loans receivable, net of allowance for credit losses
of $31,914 and $32,373 respectively ⁽¹⁾		3,285,727		3,045,331
Federal Home Loan Bank of New York stock, at cost		31,629		20,113
Premises and equipment, net		13,363		10,508
Accrued interest receivable		16,175		13,455
Other real estate owned		75		75
Deferred income taxes		16,749		16,462
Goodwill and other intangibles		5,288		5,382
Operating lease right-of-use assets		12,953		13,520
Bank-owned life insurance ("BOLI")		72,810		71,656
Other assets		9,784		9,538
Total Assets	$	3,812,120	$	3,546,193

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Non-interest -bearing deposits	$	523,912	$	613,910
Interest bearing deposits		2,295,644		2,197,697
Total deposits		2,819,556		2,811,607
FHLB advances		622,674		382,261
Subordinated debentures		37,624		37,508
Operating lease liability		13,318		13,859
Other liabilities		15,312		9,704
Total Liabilities		3,508,484		3,254,939

STOCKHOLDERS' EQUITY
Preferred stock: $0.01 par value, 10,000,000 shares authorized; issued and outstanding 2,101 shares of Series H 3.5% and Series I 3.0%, (liquidation value $10,000 per share) noncumulative perpetual preferred stock at September 30, 2023 and 2,123 shares of Series H 3.5% and Series I 3.0% at December 31, 2022, respectively		-		-
Additional paid-in capital preferred stock		20,783		21,003
Common stock: no par value; 40,000,000 shares authorized; issued 20,081,977 and 19,898,197 at September 30, 2023 and December 31, 2022, respectively, outstanding 16,848,006 and 16,930,979, at September 30, 2023 and December 31, 2022, respectively		-		-
Additional paid-in capital common stock		198,097		196,164
Retained earnings		132,729		115,109
Accumulated other comprehensive loss		(9,626)		(6,491)
Treasury stock, at cost, 3,233,971 and 2,967,218 shares at September 30, 2023 and December 31, 2022, respectively		(38,347)		(34,531)
Total Stockholders' Equity		303,636		291,254
Total Liabilities and Stockholders' Equity	$	3,812,120	$	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.
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BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Income

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023			2022	2023		2022
Interest and dividend income:
Loans, including fees	$	44,133	$	32,302	$	125,666	$	87,404
Mortgage-backed securities		217		173		587		379
Other investment securities		1,045		1,103		3,235		2,990
FHLB stock and other interest earning assets		3,672		822		9,168		1,812
Total interest income		49,067		34,400		138,656		92,585

Interest expense:
Deposits:
Demand		4,556		1,169		11,900		2,873
Savings and club		182		113		443		331
Certificates of deposit		10,922		1,087		25,849		2,916
		15,660		2,369		38,192		6,120
Borrowings		7,727		1,080		20,324		2,701
Total interest expense		23,387		3,449		58,516		8,821

Net interest income		25,680		30,951		80,140		83,764
Provision (benefit) for credit losses ⁽¹⁾		2,205		-		4,177		(2,575)

Net interest income after (provision) benefit for credit losses		23,475		30,951		75,963		86,339

Non-interest income:
Fees and service charges		1,349		1,251		3,889		3,678
BOLI income		466		646		1,154		2,087
Gain on sales of loans		19		18		25		126
Realized and unrealized losses on equity investments		(494)		(559)		(4,390)		(5,546)
Other		66		90		182		188
Total non-interest income		1,406		1,446		860		533

Non-interest expense:
Salaries and employee benefits		7,524		6,944		22,853		20,395
Occupancy and equipment		2,622		2,608		7,734		7,976
Data processing and communications		1,787		1,520		5,247		4,454
Professional fees		560		614		1,748		1,597
Director fees		274		375		809		992
Regulatory assessments		1,111		264		2,443		812
Advertising and promotional		317		286		945		681
Other real estate owned, net		1		1		3		6
Other		1,267		841		2,241		2,555
Total non-interest expense		15,463		13,453		44,023		39,468

Income before income tax provision		9,418		18,944		32,800		47,404
Income tax provision		2,707		5,552		9,379		13,897

Net Income	$	6,711	$	13,392	$	23,421	$	33,507
Preferred stock dividends		173		174		520		624
Net Income available to common stockholders	$	6,538	$	13,218	$	22,901	$	32,883

Net Income per common share-basic and diluted
Basic	$	0.39	$	0.78	$	1.36	$	1.94
Diluted	$	0.39	$	0.76	$	1.35	$	1.89

Weighted average number of common shares outstanding
Basic		16,830		16,982		16,868		16,986
Diluted		16,854		17,356		16,951		17,369

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.

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(In thousands, Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022


Net Income	$	6,711	$	13,392	$	23,421	$	33,507
Other comprehensive loss, net of tax:
Unrealized losses on available-for-sale debt securities:
Unrealized holding losses arising during the period		(414)		(4,191)		(4,204)		(9,675)
Tax Effect		209		1,039		1,069		2,398
Other comprehensive loss		(205)		(3,152)		(3,135)		(7,277)
Comprehensive income	$	6,506	$	10,240	$	20,286	$	26,230

See accompanying notes to unaudited consolidated financial statements.

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity

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


	Preferred ‎Stock		Common ‎Stock		Additional ‎Paid-In ‎Capital		Retained ‎Earnings		Treasury ‎Stock		Accumulated ‎Other ‎Comprehensive ‎Income ‎(Loss)		Total
Balance at 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		-		-		-		23,421		-		-		23,421
Other comprehensive income		-		-		-		-		-		(3,135)		(3,135)
Exercise of stock options (61,000 shares)		-		-		418		-		-		-		418
Stock-based compensation expense		-		-		402		-		-		-		402
Treasury stock purchases (266,753 shares)		-		-		-		-		(3,816)		-		(3,816)
Dividends payable on Series H 3.5% and Series I 3.0% noncumulative perpetual preferred stock		-		-		-		(520)		-		-		(520)
Redemption of Series H Preferred Stock		-		-		(220)		-		-		-		(220)
Cash dividends on common stock ($0.48 per share declared)		-		-		-		(7,864)		-		-		(7,864)
Dividend reinvestment plan		-		-		287		(287)		-		-		-
Stock purchase plan		-		-		826		-		-		-		826
Balance at September 30, 2023	$	-	$	-	$	218,880	$	132,729	$	(38,347)	$	(9,626)	$	303,636


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

Balance at July 1, 2023	$	-	$	-	$	218,524	$	128,867	$	(38,347)	$	(9,421)	$	299,623
Net income		-		-		-		6,711		-		-		6,711
Other comprehensive income		-		-		-		-		-		(205)		(205)
Stock-based compensation expense		-		-		185		-		-		-		185
Dividends payable on Series H 3.5%, and Series I 3.0% noncumulative perpetual preferred stock		-		-		-		(173)		-		-		(173)
Redemption of Series H Preferred Stock		-		-		(220)		-		-		-		(220)
Cash dividends on common stock ($0.16 per share declared)		-		-		-		(2,584)		-		-		(2,584)
Dividend reinvestment plan		-		-		92		(92)		-		-		-
Stock purchase plan		-		-		299		-		-		-		299
Balance at September 30, 2023	$	-	$	-	$	218,880	$	132,729	$	(38,347)	$	(9,626)	$	303,636

See accompanying notes to unaudited consolidated financial statements.

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BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity

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


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

Balance at January 1, 2022	$	-	$	-	$	222,850	$	81,171	$	(31,125)	$	1,128	$	274,024
Net income		-		-		-		33,507		-		-		33,507
Other comprehensive income		-		-		-		-		-		(7,277)		(7,277)
Stock-based compensation expense		-		-		458		-		-		-		458
Exercise of stock options (111,950 shares)						3		-		-		-		3
Treasury stock purchases (71,513 shares)		-		-		-		-		(1,998)		-		(1,998)
Dividends payable on Series D 4.5%, Series G 6%, Series H 3.5%, and Series I 3.0% noncumulative perpetual preferred stock		-		-		-		(624)		-		-		(624)
Redemption of Series D and Series G preferred stock		-		-		(14,730)		-		-		-		(14,730)
Issuance of Series I Preferred Stock		-		-		6,809		-		-		-		6,809
Cash dividends on common stock ($0.48 per share declared)		-		-		-		(7,809)		-		-		(7,809)
Dividend reinvestment plan		-		-		351		(351)		-		-		-
Stock purchase plan		-		-		319		-		-		-		319
Balance at September 30, 2022	$	-	$	-	$	216,060	$	105,894	$	(33,123)	$	(6,149)	$	282,682


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

Balance at July 1, 2022	$	-	$	-	$	211,130	$	95,393	$	(31,889)	$	(2,997)	$	271,637
Net income		-		-		-		13,392		-		-		13,392
Other comprehensive income		-		-		-		-		-		(3,152)		(3,152)
Stock-based compensation expense		-		-		267		-		-		-		267
Exercise stock options expense (111,750 shares)		-		-		3		-		-		-		3
Treasury stock purchases (116,626 shares)		-		-		-		-		(1,234)		-		(1,234)
Dividends payable on Series H 3.5%, and Series I 3.0% noncumulative perpetual preferred stock		-		-		-		(174)		-		-		(174)
Issuance of Series I preferred stock		-		-		4,439		-		-		-		4,439
Cash dividends on common stock ($0.16 per share declared)		-		-		-		(2,596)		-		-		(2,596)
Dividend reinvestment plan		-		-		121		(121)		-		-		-
Stock purchase plan		-		-		100		-		-		-		100
Balance at September 30, 2022	$	-	$	-	$	216,060	$	105,894	$	(33,123)	$	(6,149)	$	282,682

See accompanying notes to unaudited consolidated financial statements.

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BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands, Unaudited)


	Nine Months Ended September 30,
	2023		2022
Cash Flows from Operating Activities:
Net Income	$	23,421	$	33,507
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment		1,480		1,735
Amortization and accretion, net		(1,835)		(1,005)
Provision (benefit) for credit losses		4,177		(2,575)
Deferred income tax expense (benefit)		782		(505)
Loans originated for sale		(1,528)		(5,733)
Proceeds from sales of loans		1,739		6,811
Gain on sales of loans originated for sale		(25)		(126)
Realized and unrealized losses on equity investments		4,390		5,546
Stock-based compensation expense		402		458
BOLI Income		(1,154)		(2,087)
(Increase) decrease in accrued interest receivable		(2,720)		(1,910)
(Increase) decrease in other assets		(246)		700
Increase (decrease) in accrued interest payable		2,662		(214)
Increase (decrease) in other liabilities		2,946		(1,841)
Net Cash Provided by Operating Activities		34,491		32,761
Cash flows from investing activities:
Proceeds from repayments, calls, and maturities on securities available for sale		13,653		9,310
Purchases of securities		(12,498)		(26,968)
Proceeds from sales of securities		5,024		1,232
Net increase in loans receivable		(239,035)		(477,429)
Proceeds from BOLI		-		3,500
Additions to premises and equipment		(4,335)		(221)
Purchase of Federal Home Loan Bank of New York stock		(11,516)		(6,304)
Net Cash Used In Investing Activities		(248,707)		(496,880)
Cash flows from financing activities:
Net increase in deposits		7,949		151,544
Proceeds from Federal Home Loan Bank of New York Long Term Advances		400,000		-
Net change in Federal Home Loan Bank of New York Short Term Advances		(160,000)		140,000
Purchases of treasury stock		(3,816)		(1,998)
Cash dividends paid on common stock		(7,864)		(7,809)
Cash dividends paid on preferred stock		(520)		(624)
Net proceeds from issuance of common stock		826		319
Net proceeds from issuance of preferred stock		-		6,809
Payments for redemption of preferred stock		(220)		(14,730)
Exercise of stock options		418		3
Net Cash Provided by Financing Activities		236,773		273,514

Net Increase (Decrease) in Cash and Cash Equivalents		22,557		(190,605)
Cash and Cash Equivalents-Beginning		229,359		411,629

Cash and Cash Equivalents-Ending	$	251,916	$	221,024

Supplementary Cash Flow Information:
Cash paid during the period for:
Income taxes	$	12,322	$	13,615
Interest		55,853		9,036

See accompanying notes to unaudited consolidated financial statements.

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BCB Bancorp Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

Note 1 – Basis of Presentation

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

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

These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the year ended December 31, 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 and nine months ended September 30, 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.

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

Under the 2018 Equity Incentive Plan, 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.

The Company, under the plan approved by its shareholders on April 27, 2023 (“2023 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 2023 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.

On June 30, 2023, an award of 25,252 shares of restricted stock was declared for a director and executive officer of the Bank and the Company, which fully vests on the anniversary of the award date.

‎

Note 4 – Equity Incentive Plans (Continued)

The following table presents a summary of the status of the Company’s restricted shares as of September 30, 2023 and 2022.


	Number of Shares Awarded		Weighted Average Grant Date Fair Value
Non-vested at January 1, 2023	48,150	$	14.83
Granted	52,252		15.01
Vested	(13,650)		14.60
Forfeited	-		-
Non-vested at September 30, 2023	86,752	$	14.98


	Number of Shares Awarded		Weighted Average Grant Date Fair Value
Non-vested at January 1, 2022	26,700	$	12.89
Granted	69,000		17.05
Vested	(9,150)		13.91
Forfeited	-		-
Non-vested at September 30, 2022	86,550	$	16.19

Restricted stock expense for the nine months ended September 30, 2023 and September 30, 2022 was $303,000 and $278,000, respectively. Expected future expenses relating to the non-vested restricted shares outstanding as of September 30, 2023 was approximately $960,000 over a weighted average period of 2.25 years.

The following table presents a summary of the status of the Company’s outstanding stock option awards as of September 30, 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 September 30, 2023	975,975	$	10.55-13.68	$	11.89

As of September 30, 2023, stock options which were granted and were exercisable totaled 800,895. It is Company policy to issue new shares upon share option exercise.

Compensation expense for the nine months ended September 30, 2023 and September 30, 2022 was $99,000 and $180,000, respectively. Expected future compensation expense relating to the 175,080 shares of unvested options outstanding as of September 30, 2023 was $302,000 over a weighted average period of 3.12 years.

‎

Note 5 – Net Income per Common Share

Basic net income per common share is computed by dividing net income less dividends on preferred stock by the weighted average number of shares of common stock outstanding. The diluted net income per common share is computed by adjusting the weighted average number of shares of common stock outstanding to include the effects of outstanding stock options, if dilutive, using the treasury stock method. Dilution is not applicable in periods of net loss. For the three and nine months ended September 30, 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. For the three and nine months ended September 30, 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 September 30,
	2023					2022
		Income	Shares		Per Share		Income	Shares		Per Share
		(Numerator)	(Denominator)		Amount		(Numerator)	(Denominator)		Amount
	(In Thousands, except per share data)

Basic earnings per share:
Income available to common stockholders	$	6,538	16,830	$	0.39	$	13,218	16,982	$	0.78

Effect of dilutive securities:
Stock options		-	24				-	374

Diluted earnings per share:
Income available to common stockholders	$	6,538	16,854	$	0.39	$	13,218	17,356	$	0.76


	For the Nine Months Ended September 30,
	2023					2022
		Income	Shares		Per Share		Income	Shares		Per Share
		(Numerator)	(Denominator)		Amount		(Numerator)	(Denominator)		Amount
	(In Thousands, except per share data)

Basic earnings per share:
Income available to common stockholders	$	22,901	16,868	$	1.36	$	32,883	16,986	$	1.94

Effect of dilutive securities:
Stock options		-	83				-	383

Diluted earnings per share:
Income available to common stockholders	$	22,901	16,951	$	1.35	$	32,883	17,369	$	1.89

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 and nine months ended September 30, 2023 and 2022:


	For the three months ended September 30,				For the nine months ended September 30,
(In Thousands)	2023		2022		2023		2022
Net losses recognized during the period on equity securities held at the reporting date	$	(436)	$	(559)	$	(4,157)	$	(5,487)
Net losses recognized during the period on equity securities sold during the period		(58)		-		(233)		(59)
Realized and unrealized losses on equity investments during the reporting period	$	(494)	$	(559)	$	(4,390)	$	(5,546)

‎

Note 6 - Securities (continued)

Debt Securities Available for Sale

The following tables present by maturity the amortized cost, gross unrealized gains and losses on, and fair value of, securities available for sale as of September 30, 2023 and December 31, 2022:




	September 30, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
	(In Thousands)
Residential Mortgage-backed securities:
More than one to five years	$	708	$	-	$	41	$	667
More than five to ten years		4,388		-		381		4,007
More than ten years		33,604		-		4,613		28,991
Sub-total:		38,700		-		5,035		33,665

Corporate Debt securities:
More than one to five years		6,000		-		115		5,885
More than five to ten years		53,564		-		6,942		46,622
Sub-total:		59,564		-		7,057		52,507

Total securities	$	98,264	$	-	$	12,092	$	86,172



	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 for Sale	$	99,602	$	-	$	7,887	$	91,715

‎

Note 6 - Securities (continued)

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



	12 Months or Less				More than 12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
	(In Thousands)
September 30, 2023
Residential Mortgage-backed securities	$	11,987	$	489	$	21,677	$	4,546	$	33,664	$	5,035
Corporate Debt securities		22,980		2,506		28,228		4,551		51,208		7,057
	$	34,967	$	2,995	$	49,905	$	9,097	$	84,872	$	12,092

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
Municipal Obligations		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 September 30, 2023 and December 31, 2022 by segment and class:



	September 30, 2023		December 31, 2022
		(In Thousands)
Residential one-to-four family	$	251,845	$	250,123
Commercial and multi-family		2,444,887		2,345,229
Construction		185,202		144,931
Commercial business⁽¹⁾		370,512		282,007
Home equity⁽²⁾		66,046		56,888
Consumer		3,647		3,240
		3,322,139		3,082,418

Less:
Deferred loan fees, net		(4,498)		(4,714)
Allowance for credit losses⁽³⁾		(31,914)		(32,373)

Total Loans, net	$	3,285,727	$	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 September 30, 2023, the allowance for credit losses was determined in accordance with ASC 326, “Financial Instruments-Credit Losses”.
‎

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.

‎

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 and nine months ended September 30, 2023, and the related portion of the allowances for credit losses that is allocated to each loan class, as of September 30, 2023 (in thousands):


	Residential			Commercial & Multi-family	Construction		Commercial Business ⁽¹⁾		Home Equity ⁽²⁾		Consumer		Unallocated		Total
Allowance for credit losses:
Beginning Balance, July 1, 2023	$	2,453	$	15,045	$	4,090	$	7,864	$	722	$	31		-	$	30,205

Charge-offs:		-		-		-		(515)				-		-		(515)
Recoveries:		14		-		-		5		-		-		-		19
Provision (benefit):		(23)		(595)		573		2,297		(54)		7		-		2,205
Ending Balance, September 30, 2023		2,444		14,450		4,663		9,651		668		38		-		31,914

Ending Balance attributable to loans:
Individually evaluated		-		-		608		2,164		-		-		-		2,772
Collectively evaluated		2,444		14,450		4,055		7,487		668		38		-		29,142
Ending Balance, September 30, 2023		2,444		14,450		4,663		9,651		668		38		-		31,914

Loans Receivables:
Individually evaluated		355		23,843		4,931		6,527		212		-		-		35,868
Collectively evaluated		251,490		2,421,044		180,271		363,985		65,834		3,647		-		3,286,271
Total Gross Loans:	$	251,845	$	2,444,887	$	185,202	$	370,512	$	66,046	$	3,647	$	-	$	3,322,139
(1) Includes business lines of credit.
(2) Includes home equity lines of credit.


	Residential			Commercial & Multi-family	Construction		Commercial Business ⁽¹⁾			Home Equity⁽²⁾	Consumer		Unallocated		Total
Allowance for credit losses:
Ending Balance December 31, 2022		2,474		21,749		2,094		5,367		485		24		180		32,373
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:		-		-		-		(555)		-		-		-		(555)
Recoveries:		38		-		-		30		16		-		-		84
Provision (benefit):		(212)		(176)		1,182		3,391		(15)		7		-		4,177
Ending Balance, September 30, 2023	$	2,444	$	14,450	$	4,663	$	9,651	$	668	$	38	$	-	$	31,914

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

‎

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 and nine months ended September 30, 2022, and the related portion of the allowances for credit losses that is allocated to each loan class, as of September 30, 2022 (in thousands):



	Residential			Commercial & Multi-family	Construction		Commercial Business ⁽¹⁾		Home Equity ⁽²⁾		Consumer		Unallocated		Total
Allowance for credit losses:
Beginning Balance, July 1, 2022	$	2,565	$	21,157	$	2,348	$	7,639	$	387	$	17	$	-	$	34,113

Charge-offs:		-		-		-		(931)		-		-		-		(931)
Recovery:		7		-		-		2		4		-		-		13
Provision (benefit):		(374)		390		96		(993)		75		3		803		-
Ending Balance September 30, 2022	$	2,198	$	21,547	$	2,444	$	5,717	$	466	$	20	$	803	$	33,195

Ending Balance attributable to loans:
Individually evaluated	$	204	$	-	$	519	$	3,509	$	6	$	-	$	-	$	4,238
Collectively evaluated		1,994		21,547		1,925		2,208		460		20		803		28,957
Ending Balance September 30, 2022	$	2,198	$	21,547	$	2,444	$	5,717	$	466	$	20	$	803	$	33,195

Loans Receivables:
Individually evaluated	$	4,914	$	27,090	$	3,180	$	4,607	$	733	$	-	$	-	$	40,524
Collectively evaluated		237,324		2,137,230		149,923		201,054		55,331		2,545		-		2,783,407
Total Gross Loans:	$	242,238	$	2,164,320	$	153,103	$	205,661	$	56,064	$	2,545	$	-	$	2,823,931

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.


	Residential			Commercial & Multi-family	Construction		Commercial Business (1)			Home Equity (2)	Consumer		Unallocated		Total
Allowance for credit losses:
Beginning Balance, January 1, 2022	$	4,094	$	22,065	$	2,231	$	8,000	$	533	$	14	$	182	$	37,119

Charge-offs:		-		-		-		(1,703)		-		-		-		(1,703)
Recovery:		9		-		-		138		9		198		-		354
Provision (benefit):		(1,905)		(518)		213		(718)		(76)		(192)		621		(2,575)
Ending Balance, September 30, 2022	$	2,198	$	21,547	$	2,444	$	5,717	$	466	$	20	$	803	$	33,195

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

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

‎

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

The following table presents the activity in the allowance for credit losses on off-balance sheet exposures for the three and nine months ended September 30, 2023 (in thousands):



		Three Months Ended September 30, 2023		Nine Months Ended September 30, 2023
		(In thousands)		(In thousands)
Allowance for Credit Losses:
Beginning Balance	$	254	$	-
Impact of adopting ASU No. 2016-13 ("CECL") effective January 1, 2022		-		1,266
Provision (benefit)		148		(864)
Balance at September 30, 2023	$	402	$	402

‎

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 measurement of troubled debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty. The Company did not have any loans that were both experiencing financial difficulty and modified during the nine months ending September 30, 2023.

The following table sets forth the delinquency status of total loans receivable as of September 30, 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	$	50	$	856	$	178	$	1,084	$	250,761	$	251,845	$	-
Commercial and multi-family		12,195		6,378		3,267		21,840		2,423,047		2,444,887		-
Construction		-		2,045		2,886		4,931		180,271		185,202		-
Commercial business⁽¹⁾		2,056		3,095		798		5,949		364,563		370,512		-
Home equity⁽²⁾		472		164		-		636		65,410		66,046		-
Consumer		-		1		-		1		3,646		3,647		-
Total	$	14,773	$	12,539	$	7,129	$	34,441	$	3,287,698	$	3,322,139	$	-

(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.

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 September 30, 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 September 30, 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 $303,000 at September 30, 2023 and $843,000 at December 31, 2022 in non-accrual loans that were less than ninety days past due.



		As of September 30, 2023		As of December 31, 2022
		(In Thousands)		(In Thousands)
Non-Accruing Loans:

Residential one-to-four family	$	178	$	243
Commercial and multi-family		3,267		346
Construction		2,886		3,180
Commercial business⁽¹⁾		1,600		1,340

Total	$	7,931	$	5,109

_________

(1) Includes business lines of credit.

Had non-accrual loans been performing in accordance with their original terms, the interest income recognized for the nine months ended September 30, 2023 and the twelve months ended December 31, 2022 would have been approximately $1.5 million 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 September 30, 2023 and December 31, 2022 there were no loans more than 90 days past due and still accruing interest.

‎

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.

‎

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

The following table summarizes the Company's loans by year of origination and internally assigned credit risk rating at September 30, 2023 and gross charge-offs for the nine months ended September 30, 2023.



Loans by Year of Origination at September 30, 2023
		2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans to Term Loans		Total
Residential one-to-four family
Pass	$	16,805	$	54,608	$	38,402	$	31,622	$	12,184	$	96,050	$	-	$	-	$	249,671
Special Mention		-		496		91		-		-		91		-		-		678
Substandard		-		-		1,318		-		-		178		-		-		1,496
Total one-to-four family	$	16,805	$	55,104	$	39,811	$	31,622	$	12,184	$	96,319	$	-	$	-	$	251,845

Commercial and multi-family
Pass	$	219,180	$	822,626	$	226,073	$	217,855	$	52,614	$	848,504	$	1,922	$	-	$	2,388,774
Special Mention		-		-		-		-		-		26,690		-		-		26,690
Substandard		-		3,071		4,079		3,575		-		18,698		-		-		29,423
Total Commercial and multi-family	$	219,180	$	825,697	$	230,152	$	221,430	$	52,614	$	893,892	$	1,922	$	-	$	2,444,887

Construction
Pass	$	15,108	$	75,672	$	57,434	$	20,499	$	-	$	5,878	$	5,681	$	-	$	180,272
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		1,458		-		586		-		2,886		-		-		4,930
Total Construction	$	15,108	$	77,130	$	57,434	$	21,085	$	-	$	8,764	$	5,681	$	-	$	185,202

Commercial business
Pass	$	2,553	$	305	$	3,314	$	4,333	$	7,143	$	36,487	$	304,133	$	-	$	358,268
Special Mention		-		-		-		-		369		1,666		3,582		-		5,617
Substandard		-		-		-		-		-		3,597		3,030		-		6,627
Total Commercial business	$	2,553	$	305	$	3,314	$	4,333	$	7,512	$	41,750	$	310,745	$	-	$	370,512

Home equity
Pass	$	4,189	$	1,704	$	565	$	782	$	1,306	$	6,601	$	50,074	$	496	$	65,717
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		117		212		329
Total Home equity	$	4,189	$	1,704	$	565	$	782	$	1,306	$	6,601	$	50,191	$	708	$	66,046

Consumer
Pass	$	1,463	$	493	$	1,524	$	112	$	47	$	-	$	8	$	-	$	3,647
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Total Consumer	$	1,463	$	493	$	1,524	$	112	$	47	$	-	$	8	$	-	$	3,647

Total Loans	$	259,298	$	960,433	$	332,800	$	279,364	$	73,663	$	1,047,326	$	368,547	$	708	$	3,322,139

Gross charge-offs	$	250	$	305	$	-	$	-	$	-	$	-	$	-	$	-	$	555

‎

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

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

‎

Note 8 – Stockholders’ Equity

On September 14, 2023, the Company redeemed 22 outstanding shares of its Series H 3.5% Noncumulative Perpetual Preferred Stock, at their face value of $10,000 per share, for a total redemption amount of $220,000.

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 September 30, 2023 the Bank had $72.8 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 September 30, 2023.

Amortization expense of the core deposit intangibles was $94,000 and $37,000 for the nine months ended September 30, 2023 and September 30, 2022, respectively. The unamortized balance of the core deposit intangibles and the amount of goodwill at September 30, 2023 was $35,000 and $5.2 million, respectively. The unamortized balance of the core deposits intangibles and the amount of goodwill at December 31, 2022 was $129,000 and $5.2 million, respectively.

‎

Note 11 – Fair Values of Financial Instruments

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

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

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

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

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

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
	Total		Assets		Inputs		Inputs
As of September 30, 2023:
Securities
Debt Securities Available for Sale	$	86,172	$	-	$	86,172	$	-
Marketable Equities	$	8,272	$	8,272	$	-	$	-
Total Securities	$	94,444	$	8,272	$	86,172	$	-

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	$	-

There were no transfers of assets or liabilities into or out of Level 1, Level 2, or Level 3 of the fair value hierarchy during the three months ended September 30, 2023 and 2022.
‎
‎There were no liabilities measured at fair value on a recurring basis at September 30, 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
	Total		Assets		Inputs		Inputs
As of September 30, 2023
Individually Evaluated	$	2,876	$	-	$	-	$	2,876
Other real estate owned	$	75	$	-	$	-	$	75

As of December 31, 2022:
Individually Evaluated	$	5,587	$	-	$	-	$	5,587
Other real estate owned	$	75	$	-	$	-	$	75

‎There were no liabilities measured at fair value on a nonrecurring basis at September 30, 2023 or December 31, 2022.
‎

Note 11 – Fair Values of Financial Instruments (Continued)

The following tables present additional quantitative information as of September 30, 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
September 30, 2023:
Individually Evaluated Loans	$	2,876	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 September 30, 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 (Lower of Cost or Market)

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.

‎

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 credit losses based on the fair value of the loan’s collateral, less estimated costs to sell. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value at September 30, 2023 and December 31, 2022 consisted of the loan balances of $7.1 million net of an allowance for credit losses of $4.2 million and $8.4 million net of an allowance for credit losses 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.

‎

Note 11 – Fair Values of Financial Instruments (Continued)

The carrying values and estimated fair values of financial instruments were as follows as of September 30, 2023 and December 31, 2022:


		As of September 30, 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	$	251,916	$	251,916	$	251,916	$	-	$	-
Interest-earning time deposits		735		735		-		735		-
Debt securities available for sale		86,172		86,172		-		86,172		-
Equity investments		8,272		8,272		8,272		-		-
Loans held for sale		472		472		-		472		-
Loans receivable, net		3,285,727		3,088,826		-		-		3,088,826
FHLB of New York stock, at cost		31,629		31,629		-		31,629		-
Accrued interest receivable		16,175		16,175		-		16,175		-

Financial liabilities:
Deposits		2,819,556		2,813,939		1,740,300		1,073,639		-
Borrowings		622,674		615,575		-		615,575		-
Subordinated debentures		37,624		39,262		-		39,262		-
Accrued interest payable		5,735		5,735		-		5,735		-


		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		-

‎

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 bore an interest at a fixed annual rate of 5.625% for the first five years of the term (the "Fixed Interest Rate Period"). On August 1, 2023, the interest rate was scheduled to adjust to a floating rate based on the three-month LIBOR plus 2.72% until redemption or maturity (the "Floating Interest Rate Period"). However LIBOR was replaced as the benchmark rate per the discussion below. The Notes are scheduled to mature on August 1, 2028. The Company will pay interest in arrears quarterly during the remaining 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 $0 and $116,000 at September 30, 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, and had been equal to the three-month LIBOR plus 2.65%.

In accordance with the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) and the regulation issued by the Board of Governors of the Federal Reserve System implementing the LIBOR Act, the Company has selected the three-month CME Term SOFR as the applicable successor rate for both the Notes and the trust preferred securities. The calculation of the amount of interest payable, based on the three-month CME Term SOFR, will also include the applicable tenor spread adjustment of 0.26161% per annum as specified in the LIBOR Act.

Note 13 – Lease Obligations

The Company leases 25 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 September 30, 2023		Three Months Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Operating lease expense	$	878	$	964	$	2,710	$	2,804
Variable lease expense-operating leases	$	269	$	258	$	793	$	734


		At September 30, 2023		At December 31, 2022
Supplemental balance sheet information related to leases:
Operating Leases
Operating lease right-of-use assets	$	12,953	$	13,520

Current liabilities	$	812	$	3,062
Operating lease liabilities (noncurrent portion)		13,833		12,218
Imputed Interest		(1,327)		(1,421)
Total operating lease liabilities	$	13,318	$	13,859

The weighted average remaining lease term for operating leases at September 30, 2023 and December 31, 2022 was 5.95 years and 6.49 years, respectively. The weighted average discount rate for operating leases at September 30, 2023 and December 31, 2022 was 2.95 percent and 2.83 percent, respectively.

The following table summarizes the Company’s maturity of lease obligations for operating leases at September 30, 2023 and December 31, 2022 (in thousands):


Maturities of lease liabilities:
		At September 30, 2023		At December 31, 2022
		Operating Leases		Operating Leases
One year or less	$	812	$	3,062
Over one year through three years		5,468		4,766
Over three years through five years		4,341		3,496
Over five years		4,024		3,956
Gross Operating Lease Liabilities	$	14,645	$	15,280
Imputed Interest		(1,327)		(1,421)
Total Operating Lease Liabilities	$	13,318	$	13,859

Note 14 – Subsequent Events

On October 18, 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 November 3, 2023, with a payment date of November 17, 2023.

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 and capital 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:

the global impact of the military conflicts in the Ukraine and the Middle East;

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

the Company’s ability to effectively attract and deploy deposits;

changes in the Company’s corporate strategies, the composition of its assets, or the way in which it funds those assets;

shifts in investor sentiment or behavior in the securities, capital, or other financial markets, including changes in market liquidity or volatility;

the effects of declines in 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;

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 September 30, 2023, we had $3.812 billion in consolidated assets, $2.820 billion in deposits and $303.6 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 September 30, 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 four 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.

The rapid rise in interest rates during 2022 and in the first nine months of 2023, the resulting industry-wide reduction in the fair value of securities portfolios, and the bank runs that led to the failures of some financial institutions in March of 2023, among other events, have resulted in a current state of volatility and uncertainty with respect to the health of the U.S. banking system. There is heightened awareness around liquidity, uninsured deposits, deposit composition, unrecognized investment losses, and capital. See further discussion around some of these items in the remaining sections of the Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

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

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

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

Critical Accounting 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 September 30, 2023, the Company considers the allowance for credit losses to be its critical accounting estimate.

See further discussion of this critical accounting estimate in Note 7 of this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2022.

Financial Condition

Total assets increased by $265.9 million, or 7.5 percent, to $3.812 billion at September 30, 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 $22.5 million, or 9.8 percent, to $251.9 million at September 30, 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 $240.4 million, or 7.9 percent, to $3.286 billion at September 30, 2023, from $3.045 billion at December 31, 2022. Total loan increases during 2023 included increases of $99.7 million in commercial real estate and multi-family loans, $88.5 million in commercial business loans, $40.3 million in construction loans, $1.7 million in residential one-to-four family loans and $9.6 million in home equity and consumer loans. The allowance for credit losses decreased $459,000 to $31.9 million, or 402.4 percent of non-accruing loans and 0.96 percent of gross loans, at September 30, 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. Upon adoption of the CECL methodology, the Day One CECL adjustment resulted in a $4.2 million reduction to our ACL.

Total investment securities decreased by $15.0 million, or 13.7 percent, to $94.4 million at September 30, 2023, from $109.4 million at December 31, 2022, representing unrealized losses, calls and maturities, and repayments.

Deposit liabilities increased by $7.9 million, or 0.3 percent, to $2.820 billion at September 30, 2023, from $2.812 billion at December 31, 2022. Certificates of deposits and money market accounts increased $273.6 million and $43.2 million respectively, offset by interest bearing demand, non-interest bearing and savings and club accounts which declined $308.9 million during the first nine months of 2023.

Debt obligations increased by $240.5 million to $660.3 million at September 30, 2023 from $419.8 million at December 31, 2022. The weighted average interest rate of FHLB advances was 4.45 percent at September 30, 2023 and 4.07 percent at December 31, 2022. The weighted average maturity of FHLB advances as of September 30, 2023 was 1.71 years. The interest rate of our subordinated debt balances was 8.35 percent at September 30, 2023 and 5.62 percent at December 31, 2022 due to the fixed-rate period on such debt ending as of July 31, 2023.

Stockholders’ equity increased by $12.4 million, or 4.3 percent, to $303.6 million at September 30, 2023, from $291.3 million at December 31, 2022. The increase was primarily attributable to the increase in retained earnings of $17.6 million, or 15.3 percent, to $132.7 million at September 30, 2023 from $115.1 million at December 31, 2022 partially offset by the $3.1 million increase in accumulated other comprehensive loss during the first nine months of 2023 due to the effect rising interest rates had on our investment portfolio.

‎

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 September 30,
		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)}	$	3,330,446	$	44,133	5.30%	$	2,699,093	$	32,302	4.79%
Investment securities⁽⁶⁾		96,723		1,262	5.22%		112,172		1,276	4.55%
Interest earning assets		270,729		3,672	5.43%		153,705		822	2.14%
Total interest-earning assets		3,697,898		49,067	5.31%		2,964,970		34,400	4.64%
Non-interest-earning assets		127,780					106,750
Total assets	$	3,825,678				$	3,071,720
Interest-bearing liabilities:
Interest-bearing demand accounts	$	628,804	$	2,244	1.43%	$	774,871	$	707	0.36%
Money market accounts		331,813		2,311	2.79%		353,821		462	0.52%
Savings accounts		300,484		182	0.24%		343,515		113	0.13%
Certificates of Deposit		1,024,900		10,923	4.26%		545,293		1,087	0.80%
Total interest-bearing deposits		2,286,001		15,660	2.74%		2,017,500		2,369	0.47%
Borrowed funds		660,773		7,727	4.68%		138,314		1,080	3.12%
Total interest-bearing liabilities		2,946,774		23,387	3.17%		2,155,814		3,449	0.64%
Non-interest-bearing liabilities		577,963					640,102
Total liabilities		3,524,737					2,795,916
Stockholders' equity		300,941					275,804
Total liabilities and stockholders' equity	$	3,825,678				$	3,071,720
Net interest income			$	25,680				$	30,951
Net interest rate spread⁽¹⁾					2.13%					4.00%
Net interest margin⁽²⁾					2.78%					4.18%

(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.

‎


		Nine Months Ended September 30,
		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)}	$	3,271,018	$	125,666	5.12%	$	2,521,375	$	87,404	4.62%
Investment securities⁽⁶⁾		102,143		3,822	4.99%		109,422		3,369	4.11%
Interest earning assets		252,999		9,168	4.83%		314,024		1,812	0.77%
Total Interest-earning assets		3,626,160		138,656	5.10%		2,944,821		92,585	4.19%
Non-interest-earning assets		123,262					105,368
Total assets	$	3,749,422				$	3,050,189
Interest-bearing liabilities:
Interest-bearing demand accounts	$	684,691	$	6,242	1.22%	$	759,307	$	1,674	0.29%
Money market accounts		325,923		5,657	2.31%		351,846		1,199	0.45%
Savings accounts		311,733		443	0.19%		342,199		331	0.13%
Certificates of Deposit		926,684		25,849	3.72%		573,951		2,916	0.68%
Total interest-bearing deposits		2,249,031		38,191	2.26%		2,027,303		6,120	0.40%
Borrowed funds		585,028		20,324	4.63%		119,059		2,701	3.02%
Total interest-bearing liabilities		2,834,059		58,515	2.75%		2,146,362		8,821	0.55%
Non-interest-bearing liabilities		618,037					631,097
Total liabilities		3,452,096					2,777,459
Stockholders' equity		297,326					272,730
Total liabilities and stockholders' equity	$	3,749,422				$	3,050,189
Net interest income			$	80,141				$	83,764
Net interest rate spread⁽¹⁾					2.35%					3.64%
Net interest margin⁽²⁾					2.95%					3.79%

(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.

Results of Operations comparison for the Three Months Ended September 30, 2023 and 2022

Net income was $6.7 million for the third quarter ended September 30, 2023 and $13.4 million for the third quarter ended September 30, 2022. The decline was primarily driven by lower net interest income, higher credit loss provisioning and higher non-interest expenses for the third quarter of 2023 as compared with the third quarter of 2022.

Net interest income decreased by $5.3 million, or 17.0 percent, to $25.7 million for the third quarter of 2023, from $31.0 million for the third quarter of 2022. The decrease in net interest income resulted from higher interest expense which was partially offset by higher interest income.

Interest income increased by $14.7 million, or 42.6 percent, to $49.1 million for the third quarter of 2023 from $34.4 million for the third quarter of 2022. The average balance of interest-earning assets increased $732.9 million, or 24.7 percent, to $3.698 billion for the third quarter of 2023 from $2.965 billion for the third quarter of 2022, while the average yield increased 67 basis points to 5.31 percent for the third quarter of 2023 from 4.64 percent for the third quarter of 2022.

Interest expense increased by $19.9 million to $23.4 million for the third quarter of 2023 from $3.4 million for the third quarter of 2022. The increase resulted primarily from an increase in the average rate on interest-bearing liabilities of 253 basis points to 3.17 percent for the third quarter of 2023 from 0.64 percent for the third quarter of 2022, while the average balance of interest-bearing liabilities increased by $791.0 million to $2.947 billion for the third quarter of 2023 from $2.156 billion for the third 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 2.78 percent for the third quarter of 2023 compared to 4.18 percent for the third quarter of 2022. The decrease in the net interest margin compared to the third 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.

During the third quarter of 2023, the Company experienced $496,000 in net charge-offs compared to $918,000 in net charge offs in the third quarter of 2022. The Bank had non-accrual loans totaling $7.93 million, or 0.24 percent of gross loans, at September 30, 2023 as compared to $8.51 million, or 0.30 percent of gross loans, at September 30, 2022. The allowance for credit losses on loans was $31.9 million, or 0.96 percent of gross loans at September 30, 2023, and $33.2 million, or 1.18 percent of gross loans at September 30, 2022. The provision for credit losses was $2.21 million for the third quarter of 2023 compared to no provisioning for credit losses for the third quarter of 2022. Management believes that the allowance for credit losses on loans was adequate at September 30, 2023 and September 30, 2022.

Non-interest income decreased by $40,000 to $1.41 million for the third quarter of 2023 from $1.45 million for third quarter of 2022. The decrease in total non-interest income was mainly related to the $180,000 decrease in BOLI income. This was offset by fees and service charges increasing by $98,000.

Non-interest expense increased by $2.0 million, or 14.9 percent, to $15.5 million for the third quarter of 2023 from $13.5 million for the third quarter of 2022. The increase in operating expenses for the third quarter of 2023 was primarily driven by higher regulatory assessment charges, higher salaries and employee benefits, and increased data processing expenses compared to the third quarter of 2022. The number of full-time equivalent employees for the third quarter of 2023 was 296, as compared to 301 for the same period in 2022.

The income tax provision decreased by $2.8 million, or 51.2 percent, to $2.7 million for the third quarter of 2023 from $5.6 million for the third quarter of 2022. The consolidated effective tax rate was 28.7 percent for the third quarter of 2023 compared to 29.3 percent for the third quarter of 2022.

Results of Operations comparison for the Nine Months Ended September 30, 2023 and 2022

Net income decreased by $10.1 million, or 30.1 percent, to $23.4 million for the first nine months of 2023 from $33.5 million for the first nine months of 2022. The decrease in net income was driven primarily by a higher provision for credit losses on loans and an increase in operating expenses for 2023 as compared to 2022.

Net interest income decreased by $3.6 million, or 4.3 percent, to $80.1 million for the first nine months of 2023 from $83.8 million for the first nine months of 2022. The decrease in net interest income resulted from a $49.7 million increase in interest expense, offset by an increase of $46.1 million in interest income.

The $46.1 million increase in interest income to $138.7 million for the first nine months of 2023, was a 49.8 percent increase from $92.6 million for the first nine months of 2022. The average balance of interest-earning assets increased $681.3 million, or 23.1 percent, to $3.626 billion for the first nine months of 2023, from $2.945 billion for the first nine months of 2022, while the average yield increased 91 basis points to 5.10 percent from 4.19 percent for the same comparable period. The increase in the average balance of interest-earning assets mainly related to an increase in the level of average loans receivable for the first nine months of 2023, as compared to the same period in 2022.

The increase in interest income mainly related to an increase in the average balance of loans receivable of $749.6 million to $3.271 billion for the first nine months of 2023, from $2.521 billion for the first nine months of 2022.

The $49.7 million increase in interest expense to $58.5 million for the first nine months of 2023, was a 563.4 percent increase from $8.8 million for the 2022 comparable period. This increase resulted primarily from an increase in the average rate on interest-bearing liabilities of 220 basis points to 2.75 percent for the first nine months of 2023, from 0.55 percent for the first nine months of 2022, and an increase in the average balance of interest-bearing liabilities of $687.7 million, or 32.0 percent, to $2.834 billion from $2.146 billion over the same comparable periods. The increase in the average cost of funds primarily resulted from the high interest rate environment and an increase in the level of borrowed funds in the first nine months of 2023 compared to the same period in 2022.

Net interest margin was 2.95 percent for the first nine months of 2023, compared to 3.79 percent for the first nine months of 2022. The decrease in the net interest margin compared to the prior period was the result of an increase in the average volume of interest-bearing liabilities as well as an increase in the cost of interest-bearing liabilities.

During the first nine months of 2023, the Company experienced $471,000 in net charge offs compared to $1.3 million in net charge offs for the same period in 2022.The Bank had non-accrual loans totaling $7.93 million, or 0.24 percent, of gross loans at September 30, 2023 as compared to $8.51 million, or 0.30 percent of gross loans at September 30, 2022. The allowance for credit losses was $31.9 million, or 0.96 percent of gross loans at September 30, 2023, and $33.2 million, or 1.18 percent of gross loans at September 30, 2022. The provision for credit losses was $4.2 million for the first nine months of 2023 compared to a credit to the provision for loan losses of $2.6 million for the same period in 2022. Management believes that the allowance for credit losses was adequate at September 30, 2023 and September 30, 2022.

Non-interest income increased by $327,000 to $860,000 for the first nine months of 2023 from $533,000 for the first nine months of 2022. The improvement in total noninterest income was mainly related to a decrease of $1.2 million in the realized and unrealized losses on equity securities, partially offset by a decrease of $933,000 in BOLI income. The realized and unrealized losses on equity securities are based on market conditions.

Non-interest expense increased by $4.6 million, or 11.5 percent, to $44.0 million for the first nine months of 2023 from $39.5 million for the same period in 2022. The increase in operating expenses for 2023 was driven primarily by an increase in salaries and employee benefits, an increase in regulatory assessments, and higher data processing expenses. The number of full-time equivalent employees for the period ended September 30, 2023 was 300, as compared with 302 for the same period in 2022.

The income tax provision decreased by $4.5 million or 32.5 percent, to $9.4 million for the first nine months of 2023 from $13.9 million for the same period in 2022. The decrease in the income tax provision was a result of the lower taxable income for the nine months ended September 30, 2023 compared to the same period in 2022. The consolidated effective tax rate was 28.6 percent for the first nine months of 2023 compared to 29.3 percent for the first nine months 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 September 30, 2023 and December 31, 2022, the Company had $0 and $60.0 million, respectively, 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 $622.7 million at September 30, 2023 and $382.3 million at December 31, 2022. The average rate of FHLB advances was 4.45 percent at September 30, 2023 and 4.07 percent at December 31, 2022.

The Company had the ability at September 30, 2023 to obtain additional funding from the FHLB of up to $321.4 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 $1.050 billion at September 30, 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 September 30, 2023, as well as wholesale borrowing capacity of over $1.906 billion.

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Subordinated Debentures

The Company has subordinated debentures outstanding, whose aggregate principal totaled $33.5 million at September 30, 2023. The subordinated debentures have a ten-year term and bore an interest at a fixed annual rate of 5.625% for the first five years of the term. Beginning August 1, 2023, the interest rate adjusted to a floating rate based on the CME Term Secured Overnight Financing Rate (“SOFR”) published by the Federal Reserve Bank of New York, as adjusted by the spread adjustment of 0.26161 percent, plus 2.72% until redemption or maturity. The Notes are scheduled to mature on August 1, 2028.

The Company also has $4.1 million of mandatory redeemable Trust Preferred securities. Effective September 18, 2023, the interest rate on these floating rate junior subordinated debentures adjusts quarterly based on the three-month CME Term SOFR, as adjusted by the spread adjustment of 0.26161 percent, plus 2.650%. Prior to September 18, 2023 the rate was based on the three-month LIBOR. The rate paid as of September 30, 2023 and 2022 was 8.320% and 6.177%, respectively. The trust preferred debenture became callable, at the Company’s option, on June 17, 2009, and quarterly thereafter.

In accordance with the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) and the regulation issued by the Board of Governors of the Federal Reserve System implementing the LIBOR Act, the Company selected the three-month CME Term SOFR as the applicable successor rate to LIBOR for both the subordinated debentures and the trust preferred securities. The calculation of the amount of interest payable, based on the three-month CME Term SOFR, also includes the applicable tenor spread adjustment of 0.26161% per annum as specified in the LIBOR Act. The Company does not anticipate there will be a significant financial statement impact from this change.

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 its assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.

We have opted in to the 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.

At September 30, 2023 and December 31, 2022, the Bank exceeded all of its regulatory capital requirements t. At September 30, 2023, although the Bank is below the required 9.00%, it is within the two-quarter grace period to be below 9.00% and still be considered well capitalized. The following table sets forth the regulatory capital ratios for the Bank as well as regulatory capital requirements for the periods presented. The following table sets forth the regulatory capital ratios for the Bank as well as the regulatory capital requirements for the periods presented.


		Actual				For Capital Adequacy Purposes				For Well Capitalized Under Prompt Corrective Action
	Dollars in Thousands
As of September 30, 2023:
Bank
Community Bank Leverage Ratio	$	343,086	8.96	%	$	306,344	8.00	%	$	344,637	9.00	%

As of December 31, 2022:
Bank
Community Bank Leverage Ratio	$	327,806	9.86	%	$	265,557	8.00	%	$	298,752	9.00	%

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ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Management of Market Risk

Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange prices, commodity prices, or equity prices. Financial instruments that are subject to market risk can be classified either as held for trading or held for purposes other than trading.

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 September 30, 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 September 30, 2023. The following sets forth the Company’s NPV as of September 30, 2023.



							NPV as a % of Assets
Change in Calculation	Net Portfolio Value		$ Change from PAR		% Change from PAR		NPV Ratio		Change

+200bp	$	269,042	$	(79,402)	(22.79)	%	7.77	%	(1.87)	%
+100bp		309,841		(38,604)	(11.08)		8.76		(0.88)
PAR		348,444		-	-		9.64		-
-100bp		385,323		36,879	10.58		10.43		0.79

____________

bps-basis point

The table above indicates that at September 30, 2023, in the event of a 100-basis point increase in interest rates, we would experience a 11.08 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 Chief Financial Officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this quarterly report, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Due to implementation of CECL issued by the FASB, the Bank has made updates to its internal control over financial reporting. Controls around the allowance for credit losses 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.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved, from time to time, as plaintiff or defendant in various legal actions arising in the normal course of business. As of September 30, 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

There have been no material changes to the risk factors set forth under the Part I, Item 1.A. Risk Factors as set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as amended by the risk factors set forth under the Part II, Item 1.A. Risk Factor set forth in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.

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

None.

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 10.1	Amendment to Employment Agreement dated August 4, 2023 among the Company, the Bank and Thomas M. Coughlin
Exhibit 10.2	Consulting Agreement dated August 4, 2023 among the Company, the Bank and Thomas M. Coughlin

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

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Signatures

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



	BCB BANCORP, INC.

Date: November 2, 2023	By:	/s/ Thomas Coughlin
		Thomas Coughlin
		President and Chief Executive Officer (Principal Executive Officer)

Date: November 2, 2023	By:	/s/ Jawad Chaudhry
		Jawad Chaudhry Chief Financial Officer
		(Principal Accounting and Financial Officer)