Balance Sheet Review

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, 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.

Third Quarter 2023 Income Statement Review

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 loan 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 decrease in BOLI income of $180,000. 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.

Year-to-Date Income Statement Review

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 loan loss provision 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.

Asset Quality

The Bank had non-accrual loans totaling $7.93 million, or 0.24 percent, of gross loans at September 30, 2023, as compared to $5.1 million, or 0.17 percent, of gross loans at December 31, 2022. The allowance for credit losses was $31.9 million, or 0.96 percent of gross loans at September 30, 2023, and $32.4 million, or 1.05 percent of gross loans at December 31, 2022. The allowance for credit losses was 402.4 percent of non-accrual loans at September 30, 2023, and 633.6 percent of non-accrual loans at December 31, 2022.

About BCB Bancorp, Inc.

Established in 2000 and headquartered in Bayonne, N.J., BCB Community Bank is the wholly-owned subsidiary of BCB Bancorp, Inc. (NASDAQ: BCBP). The Bank has 24 branch offices in Bayonne, Edison, Hoboken, Fairfield, Holmdel, Jersey City, Lyndhurst, Maplewood, Monroe Township, Newark, Parsippany, Plainsboro, River Edge, Rutherford, South Orange, Union, and Woodbridge, New Jersey, and four branches in Hicksville and Staten Island, New York. The Bank provides businesses and individuals a wide range of loans, deposit products, and retail and commercial banking services. For more information, please go to www.bcb.bank.

Forward-Looking Statements

This release, like many written and oral communications presented by BCB Bancorp, Inc., and our authorized officers, may contain certain forward-looking statements regarding our prospective performance and strategies within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of said safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies, and expectations of the Company, are generally identified by use of words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “seek,” “strive,” “try,” or future or conditional verbs such as “could,” “may,” “should,” “will,” “would,” or similar expressions. Our ability to predict results or the actual effects of our plans or strategies is inherently uncertain. Accordingly, actual results may differ materially from anticipated results.

The most significant factors that could cause future results to differ materially from those anticipated by our forward-looking statements include the ongoing impact of higher inflation levels, higher interest rates and general economic and recessionary concerns, all of which could impact economic growth and could cause a reduction in financial transactions and business activities, including decreased deposits and reduced loan originations; our ability to manage liquidity in a rapidly changing and unpredictable market; supply chain disruptions, labor shortages; and additional interest rate increases by the Federal Reserve. Other factors that could cause actual results to differ materially from forward-looking statements or historical performance: the inability to close loans in our pipeline; changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; supply chain disruptions; any future pandemics and the related adverse local and national economic consequences; civil unrest in the communities that the company serves; customer acceptance of the Bank’s products and services; customer borrowing, repayment, investment and deposit practices; customer disintermediation; the introduction, withdrawal, success and timing of business initiatives; competitive conditions; economic conditions; the impact, extent and timing of technological changes, capital management activities, actions of governmental agencies and legislative and regulatory actions and reforms, other factors discussed elsewhere in this release, 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 for the year-ended December 31, 2022, and in Part II, Item 1A of our quarterly report on Form 10-Q for the quarter-ended March 31, 2023, and our other periodic reports that we file with the SEC.

Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results.

Explanation of Non-GAAP Financial Measures

Reported amounts are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). This press release also contains certain supplemental Non-GAAP information that the Company’s management uses in its analysis of the Company’s financial results. The Company’s management believes that providing this information to analysts and investors allows them to better understand and evaluate the Company’s financial results for the periods in question.

The Company provides measurements and ratios based on tangible stockholders’ equity and efficiency ratios. These measures are utilized by regulators and market analysts to evaluate a company’s financial condition and, therefore, the Company’s management believes that such information is useful to investors. For a reconciliation of GAAP to Non-GAAP financial measures included in this press release, see “Reconciliation of GAAP to Non-GAAP Financial Measures” below.