form10k-105974_bcb.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

(Mark One)

T           Annual Report  Pursuant To Section 13 Or 15(D) Of The Securities Exchange Act of 1934
For the fiscal ended December 31, 2009.
or
o           Transition Report Pursuant To Section 13 Or 15(D) Of The Securities Exchange Act of 1934
For the transition period from ______________ to ______________.

Commission file number: 000-50275

BCB BANCORP, INC.
(Exact name of registrant as specified in its charter)

New Jersey
 
26-0065262
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
104-110 Avenue C, Bayonne, New Jersey
 
07002
(Address of principal executive offices)
 
(Zip Code)

Registrant's telephone number, including area code:  (201) 823-0700

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
 
Name of each exchange on which registered
Common Stock, $0.01 par value
 
The NASDAQ Stock Market, LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES o                       NO T

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES o                      NO T

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.
YES T                      NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.T

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the Registrant was required to submit and post such files).      YES  o       NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o
Accelerated filer  o
Non-accelerated filer  o
Smaller reporting company  T
 
(Do not check if a smaller reporting company)
       

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   YES o     NO T

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, computed by reference to the last sale price on June 30, 2009, as reported by the Nasdaq Capital Market, was approximately $32.2 million.

As of March 1, 2010, there were issued 5,201,502 shares of the Registrant’s Common Stock.
 


 
 

 

DOCUMENTS INCORPORATED BY REFERENCE:

(1) Proxy Statement for the 2010 Annual Meeting of Stockholders of the Registrant (Part III).
(2) Annual Report to Stockholder (Part II and IV).

 
2

 

TABLE OF CONTENTS
Item
     
Page Number
         
ITEM 1.
   
1
ITEM 1A.
   
29
ITEM 1B.
   
33
ITEM 2.
   
33
ITEM 3.
   
33
ITEM 4.
   
33
ITEM 5.
   
34
ITEM 6.
   
36
ITEM 7.
   
37
ITEM 7A.
   
54
ITEM 8.
   
55
ITEM 9.
   
56
ITEM 9A.(T.)
   
56
ITEM 9B.
   
57
ITEM 10.
   
57
ITEM 11.
   
58
ITEM 12.
   
58
ITEM 13.
   
58
ITEM 14.
   
58
ITEM 15.
   
58


This report on Form 10-K contains forward-looking statements that are based on assumptions and may describe future plans, strategies and expectations of BCB Bancorp, Inc. and subsidiaries. This document may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These 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 the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “seek,” “strive,” “try,” or future or conditional verbs such as “will,” “would,” “should,” “could,” “may,” or similar expressions. Although we believe that our plans, intentions and expectations, as reflected in these forward-looking statements are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved or realized.  By identifying these statements for you in this manner, we are alerting you to the possibility that our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Important factors that could cause our actual results and financial condition to differ from those indicated in the forward-looking statements include, among others, those discussed below and under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. You should not place undue reliance on these forward-looking statements, which reflect our expectations only as of the date of this report. We do not assume any obligation to revise forward-looking statements except as may be required by law.


PART I

BUSINESS

BCB Bancorp, Inc.

BCB Bancorp, Inc. (the “Company”) is a New Jersey corporation, which on May 1, 2003 became the holding company parent of BCB Community Bank (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. Our telephone number is (201) 823-0700. At December 31, 2009 we had $631.5 million in consolidated assets, $463.7 million in deposits and $51.4 million in consolidated stockholders’ equity. The Company is subject to extensive regulation by the Board of Governors of the Federal Reserve System.

BCB Community Bank

BCB Community Bank, formerly known as Bayonne Community Bank, was chartered as a New Jersey bank on October 27, 2000, and we opened for business on November 1, 2000.  We changed our name from Bayonne Community Bank to BCB Community Bank in April of 2007. We operate through three branches in Bayonne and Hoboken, New Jersey and through our executive office located at 104-110 Avenue C, Bayonne, New Jersey 07002. Our deposit accounts are insured by the Federal Deposit Insurance Corporation (FDIC) and we are a member of the Federal Home Loan Bank System.

We are a community-oriented financial institution. Our business is to offer FDIC-insured deposit products and to invest funds held in deposit accounts at the Bank, together with funds generated from operations, in investment securities and loans. 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, non-interest bearing accounts, money market accounts, certificates of deposit and individual retirement accounts; and
 
·
retail and commercial banking services including wire transfers, money orders, traveler’s checks, safe deposit boxes, a night depository, federal payroll tax deposits, bond coupon redemption and automated teller services.

Recent Developments

On June 29, 2009, BCB Bancorp, Inc., (the “Company”), the parent company of BCB Community Bank, and Pamrapo Bancorp, Inc., (“Pamrapo”), the parent company of Pamrapo Savings Bank, S.L.A., jointly announced the signing of an Agreement and Plan of Merger, dated as of June 29, 2009 (the “Merger Agreement”) pursuant to which Pamrapo will merge with and into the Company. Pamrapo Savings Bank, S.L.A., (“Pamrapo Bank”), a New Jersey-chartered stock savings and loan association and a wholly-owned subsidiary of Pamrapo, and BCB


Community Bank, a New Jersey-chartered bank and a wholly-owned subsidiary of the Company (“BCB Bank”), will also enter into a subsidiary agreement and plan of merger that provides for the merger of Pamrapo Bank with and into BCB Bank, with BCB Bank as the surviving institution.

Pursuant to the terms of the Merger Agreement, shareholders of Pamrapo will receive 1.0 share of Company common stock for each share of Pamrapo common stock. In addition, all outstanding unexercised options to purchase Pamrapo common stock will be converted into options to purchase Company common stock.

On December 17, 2009, at a special meeting of stockholders, the stockholders of BCB Bancorp, Inc., (the “Company”) approved the adoption of the Agreement and Plan of Merger, as amended, by and between the Company and Pamrapo Bancorp Inc. In addition, at the special meeting of stockholders, the Company approved an amendment to the Company’s certificate of incorporation to increase the authorized shares of the Company’s common stock to 20 million shares.

On February 11, 2010, at a special meeting of stockholders, the stockholders of Pamrapo Bancorp, Inc., approved the adoption of the Agreement and Plan of Merger, as amended, by and between Pamrapo Bancorp Inc., and BCB Bancorp, Inc.

The transaction is expected to close by the end of the second quarter of 2010, pending regulatory approvals and the satisfaction of other customary closing conditions.

Business Strategy

Our business strategy is to operate as a well-capitalized, profitable and independent community-oriented financial institution dedicated to providing quality customer service.  Managements’ and the Board of Directors’ extensive knowledge of the Hudson County market differentiates us from our competitors. Our business strategy incorporates the following elements: maintaining a community focus, focusing on profitability, continuing our growth, concentrating on real estate based lending, capitalizing on market dynamics, providing attentive and personalized service and attracting highly qualified and experienced personnel.

Maintaining a community focus.  Our management and Board of Directors have strong ties to the Bayonne community.  Many members of the management team are Bayonne natives and are active in the community through non-profit board membership, local business development organizations, and industry associations.  In addition, our board members are well established professionals and business people in the Bayonne area.  Management and the Board are interested in making a lasting contribution to the Bayonne community and have succeeded in attracting deposits and loans through attentive and personalized service.

Focusing on profitability.  On an operational basis, we achieved profitability in our tenth month of operation. For the year ended December 31, 2009, our return on average equity was 7.34% and our return on average assets was 0.61%. Our earnings per diluted share decreased from $1.20 for the year ended December 31, 2005 to $0.80 for the year ended December 31, 2009. Although earnings per share results have come under pressure recently, primarily as a result of the pervasive economic downturn in both the national and local economy as well as


several one-time events, management is committed to maintaining profitability by diversifying the products, pricing and services we offer.

Continuing our growth.  We have consistently increased our assets.  From December 31, 2005 to December 31, 2009, our assets have increased from $466.2 million to $631.5 million.  Over the same time period, our loan balances have increased from $284.5 million to $401.9 million, while deposits have increased from $362.9 million to $463.7 million. In addition, we have maintained our asset quality ratios while growing the loan portfolio. At December 31, 2009, our non-performing assets to total assets ratio was 2.09%.

Concentrating on real estate-based lending.  A primary focus of our business strategy is to originate loans secured by commercial and multi-family properties.  Such loans provide higher returns than loans secured by one- to four-family real estate.  As a result of our underwriting practices, including debt service requirements for commercial real estate and multi-family loans, management believes that such loans offer us an opportunity to obtain higher returns.

Capitalizing on market dynamics. The consolidation of the banking industry in Hudson County has created the need for a customer focused banking institution.  This consolidation has moved decision making away from local, community-based banks to much larger banks headquartered outside of New Jersey.

Providing attentive and personalized service.  Management believes that providing attentive and personalized service is the key to gaining deposit and loan relationships in Bayonne and its surrounding communities.  Since we began operations, our branches have been open seven (7) days a week.

Attracting highly experienced and qualified personnel.   An important part of our strategy is to hire bankers who have prior experience in the Hudson County market as well as pre-existing business relationships.  Our management team has an average of 30 years of banking experience, while our lenders and branch personnel have significant prior experience at community banks and regional banks in Hudson County.  Management believes that its knowledge of the Hudson County market has been a critical element in the success of BCB Community Bank.  Management’s extensive knowledge of the local communities has allowed us to develop and implement a highly focused and disciplined approach to lending and has enabled the Bank to attract a high percentage of low cost deposits.

Our Market Area

We are located in the City of Bayonne and Hoboken, Hudson County, New Jersey.  The Bank’s locations are easily accessible to provide convenient services to businesses and individuals throughout our market area.

Our market area includes the City of Bayonne, Jersey City and portions of Hoboken, New Jersey. These areas are all considered “bedroom” or “commuter” communities to Manhattan.  Our market area is well-served by a network of arterial roadways including Route 440 and the New Jersey Turnpike.


Our market area has a high level of commercial business activity.  Businesses are concentrated in the service sector and retail trade areas.  Major employers in our market area include Bayonne Medical Center and the Bayonne Board of Education.

Competition

The banking business in New Jersey is extremely competitive. We compete for deposits and loans with existing New Jersey and out-of-state financial institutions that have longer operating histories, larger capital reserves and more established customer bases. Our competition includes large financial service companies and other entities in addition to traditional banking institutions such as savings and loan associations, savings banks, commercial banks and credit unions.

Our larger competitors have a greater ability to finance wide-ranging advertising campaigns through their greater capital resources. Our marketing efforts depend heavily upon referrals from officers, directors, stockholders, selective advertising in local media and direct mail solicitations. We compete for business principally on the basis of personal service to customers, customer access to our officers and directors and competitive interest rates and fees.

In the financial services industry in recent years, intense market demands, technological and regulatory changes and economic pressures have eroded industry classifications that were once clearly defined. Banks have diversified their services, increased rates paid on deposits and become more cost effective as a result of competition with one another and with new types of financial service companies, including non-banking competitors. Some of the results of these market dynamics in the financial services industry have been a number of new bank and non-bank competitors, increased merger activity, and increased customer awareness of product and service differences among competitors.


Lending Activities

Analysis of Loan Portfolio. Set forth below is selected data relating to the composition of our loan portfolio by type of loan as a percentage of the respective portfolio.

   
At December 31,
 
   
2009
   
2008
   
2007
   
2006
   
2005
 
                                                             
   
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
 
Type of loans:
                         
(Dollars in Thousands)
                         
Real estate loans:
                                                           
One- to four-family
  $ 76,490       18.70 %   $ 74,039       17.94 %   $ 55,248       14.96 %   $ 43,993       13.64 %   $ 34,901       12.11 %
Construction
    51,330       12.55       62,483       15.14       49,984       13.53       38,882       12.06       28,743       9.98  
Home equity
    34,298       8.39       38,065       9.22       35,397       9.58       32,321       10.02       24,297       8.43  
Commercial and multi-family
    223,792       54.71       223,179       54.07       208,108       56.35       192,141       59.60       185,170       64.26  
Commercial business
    22,487       5.50       14,098       3.42       19,873       5.38       14,705       4.56       14,578       5.06  
Consumer
    641       0.15       920       0.21       739       0.20       396       0.12       456       0.16  
Total
    409,038       100.00 %     412,784       100.00 %     369,349       100.00 %     322,438       100.00 %     288,145       100.00 %
Less:
                                                                               
Deferred loan fees, net
    522               654               630               575               604          
Allowance for loan losses
    6,644               5,304               4,065               3,733               3,090          
Total loans, net
  $ 401,872             $ 406,826             $ 364,654             $ 318,130             $ 284,451          


Loan Maturities.  The following table sets forth the contractual maturity of our loan portfolio at December 31, 2009.  The amount shown represents outstanding principal balances.  Demand loans, loans having no stated schedule of repayments and no stated maturity and overdrafts are reported as being due in one year or less.  Variable-rate loans are shown as due at the time of repricing.  The table does not include prepayments or scheduled principal repayments.

   
Due within
1 Year
   
Due after 1
through
5 Years
   
Due after
5 Years
   
Total
 
   
(In Thousands)
 
One- to four-family
  $ 2,632     $ 10,369     $ 63,489     $ 76,490  
Construction
    45,452       2,105       3,773       51,330  
Home equity
    506       4,286       29,506       34,298  
Commercial and multi-family
    20,126       44,375       159,291       223,792  
Commercial business
    13,892       6,279       2,316       22,487  
Consumer
    310       331             641  
Total amount due
  $ 82,918     $ 67,745     $ 258,375     $ 409,038  

Loans with Predetermined or Floating or Adjustable Rates of Interest.  The following table sets forth the dollar amount of all loans at December 31, 2009 that are due after December 31, 2010, and have predetermined interest rates and that have floating or adjustable interest rates.

   
Fixed Rates
   
Floating or Adjustable Rates
   
Total
 
   
(In Thousands)
 
One- to four-family
  $ 41,394     $ 32,464     $ 73,858  
Construction
    2,598       3,280       5,878  
Home equity
    26,944       6,848       33,792  
Commercial and multi-family
    40,113       163,553       203,666  
Commercial business
    5,198       3,397       8,595  
Consumer
    331             331  
Total amount due
  $ 116,578     $ 209,542     $ 326,120  

The Bank has strengthened certain loan underwriting criteria in an effort to more prudently make loan facility determinations and mitigate increased potential loan loss provisions prospectively.

Commercial and Multi-family Real Estate Loans. Our commercial and multi-family real estate loans are secured by commercial real estate (for example, shopping centers, medical buildings, retail offices) and multi-family residential units, consisting of five or more units. Permanent loans on commercial and multi-family properties are generally originated in amounts up to 75% of the appraised value of the property. Our commercial real estate loans are secured by improved property such as office buildings, retail stores, warehouses, church buildings and other non-residential buildings. Commercial and multi-family real estate loans are generally made at rates that adjust above the five year U.S. Treasury interest rate, with terms of up to 25 years, or are balloon loans with fixed interest rates which generally mature in three to five years with principal amortization for a period of up to 30 years. Our largest commercial loan had a principal balance of $2.9 million at December 31, 2009, was secured by a mixed use property comprised of residential and commercial facilities, and was performing in accordance with its terms on that date. Our largest multi-family loan had a principal balance of $4.4 million at December 31, 2009. This loan is presently under the terms of a work-out plan paying interest only at a reduced rate, and has performed according to its adjusted terms since institution of the


work-out plan. This plan is temporary in nature and any interest not received presently as a result of the work-out terms will be capitalized at the conclusion of such plan.

Loans secured by commercial and multi-family real estate are generally larger and involve a greater degree of risk than one- to four-family residential mortgage loans.  The borrower’s creditworthiness and the feasibility and cash flow potential of the project is of primary concern in commercial and multi-family real estate lending. Loans secured by income properties are generally larger and involve greater risks than residential mortgage loans because payments on loans secured by income properties are often dependent on the successful operation or management of the properties.  As a result, repayment of such loans may be subject to a greater extent than residential real estate loans to adverse conditions in the real estate market or the economy.  We intend to continue emphasizing the origination of loans secured by commercial real estate and multi-family properties.

One- to Four-Family Lending. Our one- to four-family residential mortgage loans are secured by property located in the State of New Jersey. We generally originate one- to four-family residential mortgage loans in amounts up to 80% of the lesser of the appraised value or selling price of the mortgaged property without requiring mortgage insurance.  We will originate loans with loan to value ratios up to 90% provided the borrowers obtain private mortgage insurance.  We originate both fixed rate and adjustable rate loans.  One- to four-family loans may have terms of up to 30 years.  The majority of one- to four-family loans we originate for retention in our portfolio have terms no greater than 15 years.  We offer adjustable rate loans with fixed rate periods of up to five years, with principal and interest calculated using a maximum 30-year amortization period. We offer these loans with a fixed rate for the first five years with repricing following every year after the initial period. Adjustable rate loans may adjust up to 200 basis points annually and 600 basis points over the term of the loan.  We also broker for a third party lender one- to four-family residential loans, which are primarily fixed rate loans with terms of 30 years.  Our loan brokerage activities permit us to offer customers longer-term fixed rate loans we would not otherwise originate while providing a source of fee income.  During 2009, we brokered $16.9 million in one- to four-family loans and recognized gains of $225,000 from the sale of such loans.

All of our one- to four-family mortgages include “due on sale” clauses, which are provisions giving us the right to declare a loan immediately payable if the borrower sells or otherwise transfers an interest in the property to a third party.

Property appraisals on real estate securing our single-family residential loans are made by state certified and licensed independent appraisers approved by our Board of Directors. Appraisals are performed in accordance with applicable regulations and policies.  At our discretion, we obtain either title insurance policies or attorneys’ certificates of title on all first mortgage real estate loans originated.  We also require fire and casualty insurance on all properties securing our one- to four-family loans.  We also require the borrower to obtain flood insurance where appropriate.  In some instances, we charge a fee equal to a percentage of the loan amount commonly referred to as points.

Construction Loans. We offer loans to finance the construction of various types of commercial and residential property.  We originated $16.0 million of such loans during the year


ended December 31, 2009.  Construction loans to builders generally are offered with terms of up to eighteen months and interest rates are tied to the prime rate plus a margin.  These loans generally are offered as adjustable rate loans.  We will originate residential construction loans for individual borrowers and builders, provided all necessary plans and permits are in order.  Construction loan funds are disbursed as the project progresses. At December 31, 2009, our largest construction loan was $5.0 million, of which $2.1 million was disbursed. This construction loan has been made for the construction of twelve residential condominiums. At December 31, 2009, this loan was performing in accordance with its terms.

Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate.  Risk of loss on a construction loan is dependent largely upon the accuracy of the initial estimate of the property’s value at completion of construction and development and the estimated cost (including interest) of construction.  During the construction phase, a number of factors could result in delays and cost overruns.  If the estimate of construction costs proves to be inaccurate, we may be required to advance funds beyond the amount originally committed to permit completion of the project.  Additionally, if the estimate of value proves to be inaccurate, we may be confronted, at or prior to the maturity of the loan, with a project having a value which is insufficient to assure full repayment.

Home Equity Loans and Home Equity Lines of Credit.  We offer home equity loans and lines of credit that are secured by the borrower’s primary residence.  Our home equity loans can be structured as loans that are disbursed in full at closing or as lines of credit.  Home equity loans and lines of credit are offered with terms up to 15 years.  Virtually all of our home equity loans are originated with fixed rates of interest and home equity lines of credit are originated with adjustable interest rates tied to the prime rate.  Home equity loans and lines of credit are underwritten under the same criteria that we use to underwrite one- to four-family loans.  Home equity loans and lines of credit may be underwritten with a loan-to-value ratio of 80% when combined with the principal balance of the existing mortgage loan.  At the time we close a home equity loan or line of credit, we file a mortgage to perfect our security interest in the underlying collateral.  At December 31, 2009, the outstanding balances of home equity loans and lines of credit totaled $34.3 million, or 8.39% of our loan portfolio.

Commercial Business Loans.  Our commercial business loans are underwritten on the basis of the borrower’s ability to service such debt from income.  Our underwriting standards for commercial business loans include a review of the applicant’s tax returns, financial statements, credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan based on cash flow generated by the applicant’s business.  Commercial business loans are generally made to small and mid-sized companies located within the State of New Jersey. In most cases, we require collateral of real estate, equipment, accounts receivable, inventory, chattel or other assets before making a commercial business loan.  Our largest commercial business loan at December 31, 2009 had a principal balance of $2.7 million and was secured by marketable equity securities. We have also received personal guarantees from the borrower, principals of the borrower and a director of BCB Bancorp, Inc.

Commercial business loans generally have higher rates and shorter terms than one- to four-family residential loans, but they may also involve higher average balances and a higher


risk of default since their repayment generally depends on the successful operation of the borrower’s business.

Consumer Loans.  We make various types of secured and unsecured consumer loans and loans that are collateralized by new and used automobiles. Consumer loans generally have terms of three years to ten years.

Consumer loans are advantageous to us because of their interest rate sensitivity, but they also involve more credit risk than residential mortgage loans because of the higher potential for default, the nature of the collateral and the difficulty in disposing of the collateral.

The following table shows our loan origination, purchase, sale and repayment activities for the periods indicated.

   
Years Ended December 31,
 
   
2009
   
2008
   
2007
   
2006
   
2005
 
   
(In Thousands)
 
       
Beginning of period
  $ 412,784     $ 369,349     $ 322,438     $ 288,145     $ 249,315  
                                         
Originations by Type:
                                       
Real estate mortgage:
                                       
One- to four-family residential
    19,509       9,683       6,454       9,203       4,299  
Construction
    16,060       15,591       48,415       34,889       35,765  
Home equity
    3,015       9,699       14,512       15,821       13,998  
Commercial and multi-family
    33,809       63,601       55,892       51,542       70,471  
Commercial business
    17,843       11,624       16,987       7,946       8,968  
Consumer
    132       492       215       222       203  
Total loans originated
    90,368       110,690       142,475       119,623       133,704  
                                         
Purchases:
                                       
Real estate mortgage:
                                       
One- to four-family residential
                             
Construction
    1,744       113       3,726       4,870       3,645  
Home equity
                             
Commercial and multi-family
                5,267       1,737        
Commercial business
                600       400       1,000  
Consumer
                             
Total loans purchased
    1,744       113       9,593       7,007       4,645  
                                         
Sales:
                                       
Real estate mortgage:
                                       
One- to four-family residential
                             
Construction
    1,238       2,523       5,040       2,044       1,273  
Home equity
                             
Commercial and multi-family
                1,275       3,388        
Commercial business
                             
Consumer
                             
Total loans sold
    1,238       2,523       6,315       5,432       1,273  
                                         
Principal repayments
    94,549       63,651       97,396       86,905       98,246  
Transfer of loans to real estate owned
    71       1,194       1,446              
Total reductions
    94,620       64,845       98,842       92,337       99,519  
                                         
Net (decrease) increase
    (3,746 )     43,435       46,911       34,293       38,830  
                                         
Ending balance
  $ 409,038     $ 412,784     $ 369,349     $ 322,438     $ 288,145  

Loan Approval Authority and Underwriting. We establish various lending limits for executive management and also maintain a loan committee. The loan committee is comprised of the Chairman of the Board, the President, the Senior Lending Officer and five non-employee


members of the Board of Directors.  The President or the Senior Lending Officer, together with one other loan officer, have authority to approve applications for real estate loans up to $500,000, other secured loans up to $500,000 and unsecured loans up to $25,000. The loan committee considers all applications in excess of the above lending limits and the entire board of directors ratifies all such loans.

Upon receipt of a completed loan application from a prospective borrower, a credit report is ordered. Income and certain other information is verified. If necessary, additional financial information may be requested. An appraisal is required for the underwriting of all one- to four-family loans.  We may rely on an estimate of value of real estate performed by our Senior Lending Officer for home equity loans or lines of credit of up to $250,000.  Appraisals are processed by state certified independent appraisers approved by the Board of Directors.

An attorney’s certificate of title is required on all newly originated real estate mortgage loans.  In connection with refinancing and home equity loans or lines of credit in amounts up to $250,000, we will obtain a record owner’s search in lieu of an attorney’s certificate of title.  Borrowers also must obtain fire and casualty insurance. Flood insurance is also required on loans secured by property that is located in a flood zone.

Loan Commitments. Written commitments are given to prospective borrowers on all approved real estate loans. Generally, we honor commitments for up to 60 days from the date of issuance. At December 31, 2009, our outstanding loan origination commitments totaled $7.2 million, standby letters of credit totaled $471,000, outstanding construction loans in progress totaled $5.4 million and undisbursed lines of credit totaled $11.9 million.

Loan Delinquencies.  We send a notice of nonpayment to borrowers when their loan becomes 15 days past due.  If such payment is not received by month end, an additional notice of nonpayment is sent to the borrower.  After 60 days, if payment is still delinquent, a notice of right to cure default is sent to the borrower giving 30 additional days to bring the loan current before foreclosure is commenced. If the loan continues in a delinquent status for 90 days past due and no repayment plan is in effect, foreclosure proceedings will be initiated. In an effort to more closely monitor the performance of our loan portfolio and asset quality, the Bank has created various concentration of credit reports, specifically as it relates to our construction and commercial real estate portfolios. These reports stress test declining values in the aforementioned portfolios up to and including a 25% value deprecation to the original appraised value to ascertain our potential exposure.

Loans are reviewed and are placed on a non-accrual status when the loan becomes more than 90 days delinquent or when, in our opinion, the collection of additional interest is doubtful. Interest accrued and unpaid at the time a loan is placed on nonaccrual status is charged against interest income and the accrual of interest income is discontinued. Income is subsequently recognized only to the extent that cash payments are received until delinquency status is reduced to less than ninety days, in which case the loan is returned to accrual status.  At December 31, 2009, we had $11.9 million in non-accruing loans. Our largest exposure of non-performing loans at that date consisted of two loans, with one specific borrower with a combined principal balance of $3.0 million, collateralized by two multi-unit apartment complexes whose total appraised value was approximately $6.9 million as of that date. Another loan relationship consisting of two


loans with one specific borrower and a balance of $2.3 million is also in non-accrual status. This borrower is in foreclosure and while there has been a certain level of depreciation of the underlying collateral, the Bank believes that upon conveyance and disposition of the properties, the Bank will not incur a loss on these facilities.

A loan is considered impaired when it is probable the borrower will not repay the loan according to the original contractual terms of the loan agreement. We have determined that first mortgage loans on one- to four-family properties and all consumer loans represent large groups of smaller-balance homogeneous loans that are collectively evaluated. Additionally, we have determined that an insignificant delay (less than 90 days) will not cause a loan to be classified as impaired and a loan is not impaired during a period of delay in payment, if we expect to collect all amounts due including interest accrued at the contractual interest rate for the period of delay.  We independently evaluate all loans identified as impaired. We estimate credit losses on impaired loans based on the present value of expected cash flows or the fair value of the underlying collateral if the loan repayment will be derived from the sale or operation of such collateral. Impaired loans, or portions of such loans, are charged off when we determine that a realized loss has occurred. Until such time, an allowance for loan losses is maintained for estimated losses. Cash receipts on impaired loans are applied first to accrued interest receivable unless otherwise required by the loan terms, except when an impaired loan is also a nonaccrual loan, in which case the portion of the receipts related to interest is recognized as income. At December 31, 2009, we had twenty-six loans totaling $15.4 million which are classified as impaired and on which loan loss allowances totaling $1.4 million have been established.  During 2009, interest income of $464,000 was recognized on impaired loans during the time of impairment.

The following table sets forth delinquencies in our loan portfolio as of the dates indicated:

   
At December 31, 2009
   
At December 31, 2008
 
   
60-89 Days
   
90 Days or More
   
60-89 Days
   
90 Days or More
 
   
Number
of Loans
   
Principal
Balance
of Loans
   
Number
of Loans
   
Principal
Balance
of Loans
   
Number
of Loans
   
Principal
Balance
of Loans
   
Number
of Loans
   
Principal
Balance
of Loans
 
   
(Dollars in Thousands)
 
Real estate mortgage:
                                               
One- to four-family residential
    3     $ 3,973       5     $ 1,559       3     $ 1,507       4     $ 1,213  
Construction
                7       4,343       1       360              
Home equity
    2       517       2       251                          
Commercial and multi-family
    5       2,729       8       5,280       2       265       5       2,515  
Total
    10       7,219       22       11,433       6       2,132       9       3,728  
                                                                 
Commercial business
    1       369       1       500                          
Consumer                                 
                                               
Total delinquent loans
    11     $ 7,588       23     $ 11,933       6     $ 2,132       9     $ 3,728  
                                                                 
Delinquent loans to total loans
            1.86 %             2.92 %             0.51 %             0.90 %
 
 
   
At December 31, 2007
   
At December 31, 2006
 
   
60-89 Days
   
90 Days or More
   
60-89 Days
   
90 Days or More
 
   
Number
of Loans
   
Principal
Balance
of Loans
   
Number
of Loans
   
Principal
Balance
of Loans
   
Number
of Loans
   
Principal
Balance
of Loans
   
Number
of Loans
   
Principal
Balance
of Loans
 
   
(Dollars in Thousands)
 
Real estate mortgage:
                                               
One- to four-family residential
        $       1     $ 319           $           $  
Construction
                1       1,247       1       1,356              
Home equity
                1       149                          
Commercial and multi-family
    2       1,770       5       2,558                   1       307  
Total
    2       1,770       8       4,273       1       1,356       1       307  
                                                                 
Commercial business
                                               
Consumer
                            1       2       1       16  
Total delinquent loans
    2     $ 1,770       8     $ 4,273       2     $ 1,358       2     $ 323  
                                                                 
Delinquent loans to total loans
            0.48 %             1.16 %             0.42 %             0.10 %

   
At December 31, 2005
 
   
60-89 Days
   
90 Days or More
 
   
Number
of Loans
   
Principal
Balance
of Loans
   
Number
of Loans
   
Principal
Balance
of Loans
 
   
(Dollars in Thousands)
 
Real estate mortgage:
     
One- to four-family residential
        $       1     $ 79  
Construction
                       
Home equity
                       
Commercial and multi-family
                4       803  
Total
                5       882  
                                 
Commercial business
                1       150  
Consumer
                       
Total delinquent loans
        $       6     $ 1,032  
                                 
Delinquent loans to total loans
            %             0.36 %

 
The table below sets forth the amounts and categories of non-performing assets in the Bank’s loan portfolio. Loans are placed on non-accrual status when delinquent more than 90 days or when the collection of principal and/or interest become doubtful.  For all years presented, BCB Community Bank has had no troubled debt restructurings (which involve forgiving a portion of interest or principal on any loans or making loans at a rate materially less than that of market rates).  Foreclosed assets include assets acquired in settlement of loans.

   
At December 31,
 
   
2009
   
2008
   
2007
   
2006
   
2005
 
   
(Dollars in Thousands)
 
Non-accruing loans:
                             
One- to four-family residential
  $ 1,559     $ 1,213     $ 319     $     $  
Construction
    4,343             1,247              
Home equity
    251             149              
Commercial and multi-family
    5,280       2,515       2,039       307       637  
Commercial business
    500                         150  
Consumer
                      16        
Total
    11,933       3,728       3,754       323       787  
                                         
Accruing loans delinquent more than 90 days:
                                       
One- to four-family residential
                             
Construction
                             
Home equity
                             
Commercial and multi-family
                519             166  
Commercial business
                             
Consumer
                            79  
Total
                519             245  
                                         
Total non-performing loans
    11,933       3,728       4,273       323       1,032  
Foreclosed assets
    1,270       1,435       287              
                                         
Total non-performing assets
  $ 13,203     $ 5,163     $ 4,560     $ 323     $ 1,032  
Total non-performing assets as a percentage of total assets
    2.09 %     0.89 %     0.81 %     0.06 %     0.22 %
Total non-performing loans as a percentage of total loans
    2.92 %     0.90 %     1.16 %     0.10 %     0.36 %

For the year ended December 31, 2009, gross interest income which would have been recorded had our non-accruing loans been current in accordance with their original terms amounted to $1.1 million.  We received and recorded $282,000 in interest income for such loans for the year ended December 31, 2009.

Classified Assets.  Our policies provide for a classification system for problem assets.  Under this classification system, problem assets are classified as “substandard,” “doubtful,” “loss” or “special mention.”  An asset is considered substandard if it is inadequately protected by its current net worth and paying capacity of the borrower or of the collateral pledged, if any. Substandard assets include those characterized by the “distinct possibility” that “some loss” will be sustained if the deficiencies are not corrected.  Assets classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weakness present makes “collection or liquidation in full” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.”  Assets classified as loss are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted, and the loan, or a portion thereof, is charged-off.  Assets may be designated special mention because of potential weaknesses that do not currently warrant classification in one of the aforementioned categories.

 
When we classify problem assets, we may establish general allowances for loan losses in an amount deemed prudent by management.  General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. A portion of general loss allowances established to cover possible losses related to assets classified as substandard or doubtful may be included in determining our regulatory capital. Specific valuation allowances for loan losses generally do not qualify as regulatory capital. At December 31, 2009, we had $500,000 in assets classified as doubtful, all of which was classified as impaired, $11.0 million in assets classified as substandard, of which $8.2 million was classified as impaired and $18.6 million in assets classified as special mention, of which $6.7 million was classified as impaired. The loans classified as substandard represent primarily commercial loans secured either by residential real estate, commercial real estate or heavy equipment.  The loans that have been classified substandard were classified as such primarily because either updated financial information has not been timely provided, or the collateral underlying the loan is in the process of being revalued.

Allowances for Loan Losses.  A provision for loan losses is charged to operations based on management’s evaluation of the losses that may be incurred in our loan portfolio.  The evaluation, including a review of all loans on which full collectability of interest and principal may not be reasonably assured, considers: (1) the risk characteristics of the loan portfolio; (2) current economic conditions; (3) actual losses previously experienced; (4) the level of loan growth; and (5) the existing level of reserves for loan losses that are probable and estimable.

We monitor our allowance for loan losses and make additions to the allowance as economic conditions dictate. Although we maintain our allowance for loan losses at a level that we consider adequate for the inherent risk of loss in our loan portfolio, future losses could exceed estimated amounts and additional provisions for loan losses could be required.  In addition, our determination of the amount of the allowance for loan losses is subject to review by the New Jersey Department of Banking and Insurance and the FDIC, as part of their examination process. After a review of the information available, our regulators might require the establishment of an additional allowance. Any increase in the loan loss allowance required by regulators would have a negative impact on our earnings.


The following table sets forth an analysis of the Bank’s allowance for loan losses.

    Years Ended December 31,  
   
2009
   
2008
   
2007
   
2006
   
2005
 
   
(Dollars in Thousands)
 
                               
Balance at beginning of period
  $ 5,304     $ 4,065     $ 3,733     $ 3,090     $ 2,506  
                                         
Charge-offs:
                                       
One- to four-family residential
                             
Construction
          90       270              
Home equity
                             
Commercial and multi-family
    205                          
Commercial business
          3             66       522  
Consumer
    7       8       15       1       24  
Total charge-offs
    212       101       285       67       546  
                                         
Recoveries
    2       40       17       85       12  
Net charge-offs (recoveries)
    210       61       268       (18 )     534  
Provisions charged to operations
    1,550       1,300       600       625       1,118  
Ending balance
  $ 6,644     $ 5,304     $ 4,065     $ 3,733     $ 3,090  
                                         
Ratio of non-performing assets to total assets at the end of period
    2.09 %     0.89 %     0.81 %     0.06 %     0.22 %
                                         
Allowance for loan losses as a percent of total loans outstanding
    1.62 %     1.28 %     1.10 %     1.16 %     1.07 %
                                         
Ratio of net charge-offs (recoveries) during the period to total loans outstanding at end of the period
    0.05 %     0.01 %     0.07 %     (0.01 )%     0.19 %
                                         
Ratio of net charge-offs (recoveries) during the period to non-performing loans
    1.79 %     1.64 %     6.27 %     (5.57 )%     51.74 %


Allocation of the Allowance for Loan Losses.  The following table illustrates the allocation of the allowance for loan losses for each category of loan.  The allocation of the allowance to each category is not necessarily indicative of future loss in any particular category and does not restrict our use of the allowance to absorb losses in other loan categories.

   
At December 31,
 
   
2009
   
2008
   
2007
   
2006
   
2005
 
   
Amount
   
Percent of Loans in each Category in Total Loans
   
Amount
   
Percent of Loans in each Category in Total Loans
   
Amount
   
Percent of Loans in each Category in Total Loans
   
Amount
   
Percent of Loans in each Category in Total Loans
   
Amount
   
Percent of Loans in each Category in Total Loans
 
   
(Dollars in Thousands)
 
Type of loan:
                                                           
One- to four-family
  $ 430       18.70 %   $ 688       17.94 %   $ 221       14.96 %   $ 69       13.64 %   $ 76       12.11 %
Construction
    1,437       12.55       941       15.14       885       13.53       1,068       12.06       329       9.98  
Home equity
    186       8.39       167       9.22       172       9.58       126       10.02       91       8.43  
Commercial and multi-family
    4,184       54.71       3,175       54.07       2,476       56.35       2,285       59.60       2,180       64.26  
Commercial business
    365       5.50       216       3.42       262       5.38       168       4.56       401       5.06  
Consumer
    42       0.15       117       0.21       49       0.20       17       0.12       13       0.16  
Total
  $ 6,644       100.00 %   $ 5,304       100.00 %   $ 4,065       100.00 %   $ 3,733       100.00 %   $ 3,090       100.00 %


Investment Activities

Investment Securities. We are required under federal regulations to maintain a minimum amount of liquid assets that may be invested in specified short-term securities and certain other investments. The level of liquid assets varies depending upon several factors, including: (i) the yields on investment alternatives, (ii) our judgment as to the attractiveness of the yields then available in relation to other opportunities, (iii) expectation of future yield levels, and (iv) our projections as to the short-term demand for funds to be used in loan origination and other activities. Investment securities, including mortgage-backed securities, are classified at the time of purchase, based upon management’s intentions and abilities, as securities held-to-maturity or securities available for sale. Debt securities acquired with the intent and ability to hold to maturity are classified as held-to-maturity and are stated at cost and adjusted for amortization of premium and accretion of discount, which are computed using the level yield method and recognized as adjustments of interest income. All other and equity debt securities are classified as available for sale to serve principally as a source of liquidity.

Current regulatory and accounting guidelines regarding investment securities require us to categorize securities as held-to-maturity, available for sale or trading. As of December 31, 2009, we had $132.6 million of securities classified as held-to-maturity, $1.3 million in securities classified as available for sale, and no securities classified as trading.  Securities classified as available for sale are reported for financial reporting purposes at the fair value with net changes in the fair value from period to period included as a separate component of stockholders’ equity, net of income taxes. At December 31, 2009, our securities classified as held-to-maturity had a fair value of $133.1 million. Changes in the fair value of securities classified as held-to-maturity do not affect our income, unless we determine there to be an other-than-temporary impairment for those securities in an unrealized loss position. At December 31, 2008, the Bank recorded such a charge of $2.9 million on a $3.0 million investment in FNMA preferred stock. At December 31, 2009, management concluded that all unrealized losses were temporary in nature since they are related to interest rate fluctuations rather than any underlying credit quality of the issuers. Additionally, the Company has no plans to sell these securities and has concluded that it is unlikely it would have to sell these securities prior to the anticipated recovery of the unrealized losses. During the year ended December 31, 2009, we had no securities sales.

At December 31, 2009, our investment policy allowed investments in instruments such as: (i) U.S. Treasury obligations; (ii) U.S. federal agency or federally sponsored agency obligations; (iii) mortgage-backed securities; and (iv) certificates of deposit.  The Board of Directors may authorize additional investments.  At December 31, 2009, our U.S. Government agency securities totaled $98.0 million, all of which were classified as held-to-maturity and which primarily consisted of callable securities issued by government sponsored enterprises.

As a source of liquidity and to supplement our lending activities, we have invested in residential mortgage-backed securities.  Mortgage-backed securities generally yield less than the loans that underlie such securities because of the cost of payment guarantees or credit enhancements that reduce credit risk.  Mortgage-backed securities can serve as collateral for borrowings and, through repayments, as a source of liquidity.  Mortgage-backed securities represent a participation interest in a pool of single-family or other type of mortgages.  Principal and interest payments are passed from the mortgage originators, through intermediaries


(generally government-sponsored enterprises) that pool and repackage the participation interests in the form of securities, to investors, like us.  The government-sponsored enterprises guarantee the payment of principal and interest to investors and include Freddie Mac, Ginnie Mae, and Fannie Mae.

Mortgage-backed securities typically are issued with stated principal amounts.  The securities are backed by pools of mortgage loans that have interest rates that are within a set range and have varying maturities.  The underlying pool of mortgages can be composed of either fixed rate or adjustable rate mortgage loans.  Mortgage-backed securities are generally referred to as mortgage participation certificates or pass-through certificates.  The interest rate risk characteristics of the underlying pool of mortgages (i.e., fixed rate or adjustable rate) and the prepayment risk, are passed on to the certificate holder.  The life of a mortgage-backed pass-through security is equal to the life of the underlying mortgages.  Expected maturities will differ from contractual maturities due to scheduled repayments and because borrowers may have the right to call or prepay obligations with or without prepayment penalties.

Securities Portfolio.  The following table sets forth the carrying value of our securities portfolio and Federal funds at the dates indicated.

   
At December 31,
 
   
2009
   
2008
   
2007
 
   
(In Thousands)
 
Securities available for sale:
                 
Equity securities
  $ 1,346     $ 888     $ 2,056  
Securities held to maturity:
                       
U.S. Government and Agency securities
    98,023       98,607       130,156  
Mortgage-backed securities
    34,621       42,673       34,861  
Total securities held to maturity
    132,644       141,280       165,017  
Money market funds
                3,500  
FHLB stock
    5,714       5,736       5,560  
Total investment securities
  $ 139,704     $ 147,904     $ 176,133  


The following table shows our securities held-to-maturity purchase, sale and repayment activities for the periods indicated.

   
Years Ended December 31,
 
   
2009
   
2008
   
2007
 
   
(In Thousands)
 
                   
Purchases:
                 
Fixed-rate
  $ 147,647     $ 60,606     $ 37,338  
Total purchases
  $ 147,647     $ 60,606     $ 37,338  
                         
Sales:
                       
Fixed-rate
  $     $     $  
Total sales
  $     $     $  
                         
Principal Repayments:
                       
Repayment of principal
  $ 155,553     $ 84,400     $ 21,010  
Increase (decrease) in other items, net
    730       (58 )     17  
Net (decreases) increases
  $ (8,636 )   $ (23,850 )   $ 16,345  


Maturities of Securities Portfolio.  The following table sets forth information regarding the scheduled maturities, carrying values, estimated market values, and weighted average yields for the Bank’s securities portfolio at December 31, 2009 by contractual maturity. The following table does not take into consideration the effects of scheduled repayments or the effects of possible prepayments.

   
As of December 31, 2009
   
Within one year
   
More than
One to five years
   
More than five to
ten years
   
More than ten years
   
Total investment
securities
 
   
Carrying
Value
   
Average
Yield
   
Carrying
Value
   
Average
Yield
   
Carrying
Value
   
Average
Yield
   
Carrying
Value
   
Average
Yield
   
Fair
Value
   
Carrying Value
   
Average
Yield