UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June30, 2017

Or

☐ 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)

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    ☐  No

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 for such shorter period that the registrant was required to submit and post such files).    ☒  Yes    ☐  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 “accelerated filer, larger accelerated filer, non-accelerated filer, smaller reporting company, or emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☐	Accelerated Filer	☒
Non-Accelerated Filer	☐(Do not check if a smaller reporting company)	Smaller Reporting Company	☐
		Emerging Growth Company	☐

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).    ☐ Yes    ☒ 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 July 28th, 2017, BCB Bancorp, Inc., had 11,300,740 shares of common stock, no par value, outstanding.

BCB BANCORP INC. AND SUBSIDIARIES

INDEX

	Page
PART I. CONSOLIDATED FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition as of June 30, 2017 (unaudited) and December 31, 2016		1
Consolidated Statements of Income for the three and six months ended June 30, 2017 and 2016 (unaudited)		2
Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2017 and 2016 (unaudited)		3
Consolidated Statement of Changes in Stockholders’ Equity for the six months ended June 30, 2017 and 2016 (unaudited)		4
Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016 (unaudited)		5
Notes to Unaudited Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		43
Item 3. Quantitative and Qualitative Disclosures about Market Risk		49
Item 4. Controls and Procedures		50
PART II. OTHER INFORMATION		51
Item 1. Legal Proceedings		51
Item 1A. Risk Factors		51
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		51
Item 3. Defaults Upon Senior Securities		51
Item 4. Mine Safety Disclosures		51
Item 5. Other Information		51
Item 6. Exhibits		51

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)

	June 30,		December 31,
	2017		2016
ASSETS
Cash and amounts due from depository institutions	$	15,961	$	12,121
Interest-earning deposits		59,086		52,917
Total cash and cash equivalents		75,047		65,038
Interest-earning time deposits		980		980
Securities available for sale		105,803		94,765
Loans held for sale		536		4,153
Loans receivable, net of allowance for loan losses
of $17,964 and $17,209 respectively		1,577,181		1,485,159
Federal Home Loan Bank of New York stock, at cost		9,913		9,306
Premises and equipment, net		19,679		19,382
Accrued interest receivable		5,666		5,573
Other real estate owned		2,626		3,525
Deferred income taxes		8,414		9,953
Other assets		9,998		10,374
Total Assets	$	1,815,843	$	1,708,208
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Non-interest bearing deposits	$	168,885	$	158,523
Interest bearing deposits		1,327,375		1,233,682
Total deposits		1,496,260		1,392,205
Short-term debt		11,000		20,000
Long-term debt		163,000		155,000
Subordinated debentures		4,124		4,124
Other liabilities and accrued interest payable		8,678		5,798
Total Liabilities		1,683,062		1,577,127
STOCKHOLDERS' EQUITY
Preferred stock: $0.01 par value, 10,000,000 shares authorized,
issued and outstanding 1,342 shares of series C 6% and series D 4.5% noncumulative
perpetual preferred stock (liquidation value $10,000 per share) at June 30, 2017 and 1,560 shares
of series A, B, C 6% noncumulative preferred stock at December 31, 2016		-		-
Additional paid-in capital preferred stock		13,241		15,464
Common stock; no par value; 20,000,000 shares authorized, issued 13,831,203 and 13,797,088
at June 30, 2017 and December 31, 2016, respectively, outstanding 11,300,740 shares and
11,267,225 shares, respectively		-		-
Additional paid-in capital common stock		120,980		120,417
Retained earnings		30,144		28,159
Accumulated other comprehensive income (loss)		(2,473)		(3,856)
Treasury stock, at cost, 2,530,463 and 2,529,863 shares, respectively, at June 30, 2017 and December 31, 2016		(29,111)		(29,103)
Total Stockholders' Equity		132,781		131,081
Total Liabilities and Stockholders' Equity	$	1,815,843	$	1,708,208

See accompanying notes to unaudited consolidated financial statements.

1

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Income

(In Thousands, except for per share amounts, Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
		2017		2016		2017		2016
Interest income:
Loans, including fees	$	18,026	$	17,263	$	35,568	$	34,756
Mortgage-backed securities		603		50		1,131		124
Municipal bonds and other debt		159		-		264		-
FHLB stock and other interest earning assets		281		368		561		632
Total interest income		19,069		17,681		37,524		35,512
Interest expense:
Deposits:
Demand		677		470		1,350		832
Savings and club		100		93		199		182
Certificates of deposit		2,142		2,126		4,153		4,160
		2,919		2,689		5,702		5,174
Borrowed money		1,087		1,629		2,154		3,277
Total interest expense		4,006		4,318		7,856		8,451
Net interest income		15,063		13,363		29,668		27,061
Provision for loan losses		776		37		1,274		226
Net interest income after provision for loan losses		14,287		13,326		28,394		26,835
Non-interest income:
Fees and service charges		838		736		1,634		1,447
Gain on sales of loans		733		1,029		1,071		1,953
Loss on bulk sale of impaired loans held in portfolio		-		(285)		-		(285)
Gain on sales of other real estate owned		197		-		1,348		-
Other		254		26		282		45
Total non-interest income		2,022		1,506		4,335		3,160
Non-interest expense:
Salaries and employee benefits		5,878		6,160		11,968		12,184
Occupancy and equipment		1,989		2,043		4,147		3,915
Data processing and service fees		678		833		1,331		1,895
Professional fees		1,383		483		1,746		910
Director fees		198		183		378		336
Regulatory assessments		331		360		692		710
Advertising and promotional		115		390		258		753
Other real estate owned, net		13		94		55		110
Other		1,563		1,620		3,135		3,090
Total non-interest expense		12,148		12,166		23,710		23,903
Income before income tax provision		4,161		2,666		9,019		6,092
Income tax provision		1,648		1,085		3,593		2,476
Net Income	$	2,513	$	1,581	$	5,426	$	3,616
Preferred stock dividends		165		234		283		468
Net Income available to common stockholders	$	2,348	$	1,347	$	5,143	$	3,148
Net Income per common share-basic and diluted
Basic	$	0.21	$	0.12	$	0.46	$	0.28
Diluted	$	0.21	$	0.12	$	0.45	$	0.28
Weighted average number of common shares outstanding
Basic		11,295		11,229		11,287		11,223
Diluted		11,405		11,233		11,383		11,226

See accompanying notes to unaudited consolidated financial statements.

2

BCB BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In Thousands, Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Net Income	$	2,513	$	1,581	$	5,426	$	3,616
Other comprehensive income, net of tax:
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during the period (a)		524		47		1,383		153
Benefit plans (b)		-		(15)		-		(15)
Other comprehensive income		524		32		1,383		138
Comprehensive income	$	3,037	$	1,613	$	6,809	$	3,754

(a) Represents the net change of the unrealized gain on available-for-sale securities. Represents unrealized gains of $885,000,  80,000,  2,338,000and $259,000, respectively, less deferred taxes of $361,000,  33,000,  955,000and $106,000,  respectively.

(b) Represents the net change of unrecognized loss included in net periodic pension cost. Represents a gross change of $0,  $25,000,  $0, and $25,000, respectively, less deferred taxes of $0,  $10,000,  $0, and$10,000, respectively. The Consolidated Statements of Income line items impacted by these amounts are salaries and employee benefits and income tax provision.

See accompanying notes to unaudited consolidated financial statements.

3

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity

(In Thousands, except share and per share data, Unaudited)

	Preferred Stock		Common Stock		Additional             Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Total
Beginning Balance at January 1, 2017	$	-	$	-	$	135,881	$	28,159	$	(29,103)	$	(3,856)	$	131,081
Redemption of Series A and B Preferred Stock		-		-		(11,720)		-		-		-		(11,720)
Issuance of Series D Preferred Stock		-		-		9,497		-		-		-		9,497
Exercise of Stock Options (200 shares)		-		-		2		-		-		-		2
Stock-based compensation expense		-		-		78		-		-		-		78
Treasury Stock purchases		-		-		-		-		(8)		-		(8)
Dividends payable on Series C 6% and Series D 4.5% noncumulative perpetual preferred stock		-		-		-		(283)		-		-		(283)
Cash dividends on common stock ($0.14 per share declared)		-		-		-		(3,012)		-		-		(3,012)
Dividend Reinvestment Plan		-		-		146		(146)		-		-		-
Stock Purchase Plan		-		-		337		-		-		-		337
Net income		-		-		-		5,426		-		-		5,426
Other comprehensive income		-		-		-		-		-		1,383		1,383
Ending Balance at June 30, 2017	$	-	$	-	$	134,221	$	30,144	$	(29,111)	$	(2,473)	$	132,781

	Preferred Stock		Common Stock		Additional             Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Total
Beginning Balance at January 1, 2016	$	-	$	879	$	135,977	$	27,382	$	(29,096)	$	(1,598)	$	133,544
Redemption of Series A Preferred Stock		-		-		(1,710)		-		-		-		(1,710)
Stock-based compensation expense		-		-		51		-		-		-		51
Dividends payable on Series A, B and C 6% noncumulative perpetual preferred stock		-		-		-		(468)		-		-		(468)
Cash dividends on Common Stock ($0.14 per share) declared		-		-		-		(3,008)		-		-		(3,008)
Dividend Reinvestment Plan		-		-		134		(134)		-		-		-
Stock Purchase Plan		-		2		141		-		-		-		143
Net income		-		-		-		3,616		-		-		3,616
Other comprehensive income		-		-		-		-		-		138		138
Ending Balance at June 30, 2016	$	-	$	881	$	134,593	$	27,388	$	(29,096)	$	(1,460)	$	132,306

See accompanying notes to unaudited consolidated financial statements.

4

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In Thousands, Unaudited)

	Six Months Ended June 30,
	2017		2016
Cash Flows from Operating Activities :
Net Income	$	5,426	$	3,616
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment		1,326		1,162
Amortization and accretion, net		(872)		(964)
Provision for loan losses		1,274		226
Deferred income tax		584		(75)
Loans originated for sale		(13,257)		(17,309)
Proceeds from sales of loans originated for sale		17,945		16,370
Gain on sales of loans originated for sale		(1,071)		(1,953)
Fair value adjustment of OREO		-		(207)
Loss on bulk sale of impaired loans held in portfolio		-		285
Stock compensation expense		78		51
(Increase) in interest receivable		(93)		(162)
Decrease in other assets		376		947
(Decrease) in accrued interest payable		(50)		(1)
Increase in other liabilities		2,930		775
Net Cash Provided by Operating Activities		14,596		2,761
Cash flows from investing activities:
Proceeds from calls on securities available for sale		16,715		793
Purchases of securities available for sale		(25,489)		(9,304)
Proceeds from sales of other real estate owned		3,375		901
Proceeds from bulk sale of impaired loans held		-		1,180
Gains on sales of other real estate owned		(1,348)		-
Redemption of interest-bearing time deposits		-		258
Net increase in loans receivable		(93,478)		(5,930)
Additions to premises and equipment		(1,623)		(2,548)
Redemption of Federal Home Loan Bank of New York stock		(607)		(305)
Net Cash Used In Investing Activities		(102,455)		(14,955)
Cash flows from financing activities:
Net increase in deposits		104,055		120,376
Net change in long-term debt		8,000		-
Net change in short-term debt		(9,000)		-
Purchases/adjustments of treasury stock		(8)		-
Cash dividend paid on common stock		(3,012)		(3,008)
Cash dividend paid on preferred stock		(283)		(468)
Net proceeds from issuance of common stock		337		143
Net proceeds from issuance of preferred stock		9,497		-
Net payment on redemption of preferred stock		(11,720)		(1,710)
Exercise of stock options		2		-
Net Cash Provided by Financing Activities		97,868		115,333
Net Increase In Cash and Cash Equivalents		10,009		103,139
Cash and Cash Equivalents-Beginning		65,038		132,635
Cash and Cash Equivalents-Ending	$	75,047	$	235,774
Supplementary Cash Flow Information:
Cash paid during the year for:
Income taxes	$	2,960	$	1,727
Interest	$	7,905	$	8,453
Non-cash items:
Transfer of loans to other real estate owned	$	1,128	$	458

5

BCB Bancorp Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of BCB Bancorp, Inc. (the “Company”) and the Company’s wholly owned subsidiaries, BCB Community Bank (the “Bank”), BCB Holding Company Investment Company, BCB New York Asset Management, Inc. and Pamrapo Service Corporation. 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 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, 2017 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, 2016, 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 June 30, 2017, and the date these consolidated financial statements were issued. See Note 9 related to subsequent events.

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which will supersede the current revenue recognition requirements in Topic 605, Revenue Recognition. The ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 by one year.  The new guidance will be effective for public companies for periods beginning after December 15, 2017 with private companies provided a one-year deferral until periods beginning after December 15, 2018. This update does not impact net interest income or other revenues associated with financial assets and liabilities, including loans, leases, securities and derivatives, so it is expected there will be minimal effect on the Company's revenues.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which will supersede the current lease requirements in Topic 840. The ASU requires lessees to recognize a right of use asset and related lease liability for all leases, with a limited exception for short-term leases. Leases will be classified as either finance or operating, with the classification affecting the pattern of expense recognition in the statement of income. Currently, leases are classified as either capital or operating, with only capital leases recognized on the balance sheet. The reporting of lease related expenses in the statements of operations and cash flows will be generally consistent with the current guidance. The new guidance will be effective for years beginning after December 15, 2018 for public companies and for years beginning after December 15, 2019 for private companies. Once effective, the standard will be applied using a modified retrospective transition method to the beginning of the earliest period presented. The Company is currently assessing the impacts this new standard will have on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718).  This ASU was issued as part of FASB’s Simplification Initiative.  The areas for simplification in this Update include income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows for share-based payment transactions.  For public companies, this ASU will be effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company has determined that the impact this new standard has on its consolidated financial statements is minimal.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses. ASU 2016-13 requires entities to report “expected” credit losses on financial instruments and other commitments to extend credit rather than the current “incurred loss” model. These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU will also require enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. For public business entities that are U.S. Securities and Exchange Commission filers, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements and results of operations.

6

Note 2 – Reclassification

Certain amounts as of December 31, 2016 and the three and sixmonth periods ended June 30, 2016, respectively 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 3 – Pension and Other Postretirement Plans

The Company assumed, through the merger with Pamrapo Bancorp, Inc., a non-contributory defined benefit pension plan covering all eligible employees of Pamrapo Savings Bank. Effective January 1, 2010, the defined benefit pension plan (“Pension Plan”), was frozen by Pamrapo Savings Bank. All benefits for eligible participants accrued in the “Pension Plan” to the freeze date have been retained. Accordingly, no employees are permitted to commence participation in the Pension Plan and future salary increases and future years of service are not considered when computing an employee’s benefits under the Pension Plan. The Pension Plan is funded in conformity with the funding requirements of applicable government regulations. The Company also acquired through the merger with Pamrapo Bancorp, Inc. a supplemental executive retirement plan (“SERP”) in which certain former employees of Pamrapo Savings Bank are covered. A SERP is an unfunded non-qualified deferred retirement plan. Participants who retire at the age of 65 (the “Normal Retirement Age”), are entitled to an annual retirement benefit equal to 75% of compensation reduced by their retirement plan annual benefits. Participants retiring before the Normal Retirement Age receive the same benefits reduced by a percentage based on years of service to the Company and the number of years prior to the Normal Retirement Age that participants retire.

Periodic pension and SERP cost, which is recorded as part of salaries and employee benefits expense in our Consolidated Statements of Income, is comprised of the following. (In Thousands):

	Three months ended June 30,				Six months ended June 30,
		2017		2016		2017		2016
Pension plan:
Interest cost	$	75	$	82	$	150	$	164
Expected return on plan assets		(113)		(131)		(226)		(262)
Amortization of unrecognized loss		29		36		58		72
Net periodic pension benefit		(9)		(13)		(18)		(26)
SERP plan:
Interest cost	$	4	$	3	$	8	$	6
Net periodic postretirement cost	$	4	$	3	$	8	$	6

7

Note 3 – Pension and Other Postretirement Plans(Continued)

The Company, under the plan approved by its stockholders on April 28, 2011 (“2011 Stock Plan”), authorized the issuance of up to 900,000 shares of common stock of the Company pursuant to grants of stock options. Employees and directors of the Company and the Bank are eligible to participate in the 2011 Stock Plan. All stock options will be granted in the form of either "incentive" stock options or "non-qualified" stock options. Incentive stock options have certain tax advantages that must comply with the requirements of Section 422 of the Internal Revenue Code.  Only employees are permitted to receive incentive stock options.On September 16, 2016, a grant of 110,000 options was declared for members of the Board of Directors which vest at a rate of 10% per year commencing on the first anniversary of the grant date. On December 2, 2015, a grant of 120,000 options and on March 7, 2014, a grant of 110,000 options was declared for certain members of the Board of Directors which vest at a rate of 10% per year, over ten years commencing on the first anniversary of the grant date.

	Number of  Option
	Shares		Range of Exercise Prices		Weighted Average Exercise Price
Outstanding at December 31, 2016	575,000	$	8.93-13.32	$	10.78
Options granted	-
Options exercised	(700)		10.55		0.00
Options forfeited	(35,000)		9.03-13.32		-
Options expired	-
Outstanding at June 30, 2017	539,300	$	8.93-13.32	$	10.78

As of June 30, 2017, stock options which were granted and were exercisable totaled 107,700 stock options.

It is Company policy to issue new shares upon share option exercise. Expected future compensation expense relating to the 431,600 shares of unvested options outstanding as of June 30, 2017 was $1,016,000 over a weighted average period of 6.80years.

	Number of  Option
	Shares		Range of Exercise Prices		Weighted Average Exercise Price
Outstanding at December 31, 2015	417,000	$	8.93-15.65	$	10.75
Options granted	-		-		-
Options exercised	-		-		-
Options forfeited	-		-		-
Options expired	-		-		-
Outstanding at June 30, 2016	417,000	$	8.93-15.65	$	10.75

As of June 30, 2016, stock options which are granted and were exercisable totaled 75,700 stock options.

It is Company policy to issue new shares upon share option exercise. Expected future compensation expense relating to 341,300 shares of unvested options outstanding as of June 30, 2017 was $846,070 over a weighted average period of 7.56years.

8

Note 4 – 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 six months ended June 30, 2017 and 2016, the difference in the weighted average number of basic and diluted common shares was due solely to the effects of outstanding stock options. No adjustments to net income were necessary in calculating basic and diluted net income per share. For the three months ended June  30, 2017 and 2016 the weighted average number of outstanding options considered to be anti-dilutive were 1,280 and 39,828 respectively. For the six months ended June 30, 2017 and 2016 the weighted average number of outstanding options considered to be anti-dilutive were 5,019 and 37,332 respectively.

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

	For the Three Months Ended June 30,
	2017					2016
		Income	Shares		Per Share		Income	Shares		Per Share
		(Numerator)	(Denominator)		Amount		(Numerator)	(Denominator)		Amount
	(In Thousands, Except per share data)
Net income available to common stockholders	$	2,348				$	1,347
Basic earnings per share-
Income available to
Common stockholders	$	2,348	11,295	$	0.21	$	1,347	11,229	$	0.12
Effect of dilutive securities:
Stock options		-	110				-	4
Diluted earnings per share-
Income available to
Common stockholders	$	2,348	11,405	$	0.21	$	1,347	11,233	$	0.12

	For the Six Months Ended June 30,
	2017					2016
		Income	Shares		Per Share		Income	Shares		Per Share
		(Numerator)	(Denominator)		Amount		(Numerator)	(Denominator)		Amount
	(In Thousands, Except per share data)
Net income available to common stockholders	$	5,143				$	3,148
Basic earnings per share-
Income available to
Common stockholders	$	5,143	11,287	$	0.46	$	3,148	11,223	$	0.28
Effect of dilutive securities:
Stock options		-	96				-	3
Diluted earnings per share-
Income available to
Common stockholders	$	5,143	11,383	$	0.45	$	3,148	11,226	$	0.28

9

Note 5 – 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 June 30,  2017 and December 31, 2016:

	June 30, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
	(In Thousands)
Residential mortgage-backed securities:
Due after one year through five years	$	3,313	$	30	$	58	$	3,285
Due after five years through ten years		6,474		-		22		6,452
Due after ten years		87,424		86		2,322		85,188
Municipal obligations:
Due within one year		2,518		-		5		2,513
Preferred Stock:
Due after 10 years		8,119		255		9		8,365
	$	107,848	$	371	$	2,416	$	105,803

	December 31, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
	(In Thousands)
Residential mortgage-backed securities:
Due after five years through ten years	$	6,230	$	23	$	86	$	6,167
Due after ten years		80,594		65		4,354		76,305
Municipal obligations:
Due within one year		6,968		-		7		6,961
Preferred Stock:
Due after 10 years		5,356		-		24		5,332
	$	99,148	$	88	$	4,471	$	94,765

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:

	Less than 12 Months				More than 12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
	(In Thousands)
June 30, 2017
Residential mortgage-backed securities	$	76,704	$	2,283	$	3,344	$	119	$	80,048	$	2,402
Municipal obligations		2,513		5		-		-		2,513		5
Preferred stock		2,518		9		-		-		2,518		9
	$	81,735	$	2,297	$	3,344	$	119	$	85,079	$	2,416
December 31, 2016
Residential mortgage-backed securities	$	74,672	$	4,313	$	3,379	$	127	$	78,051	$	4,440
Municipal obligations		6,961		7		-		-		6,961		7
Preferred stock		1,983		24		-		-		1,983		24
	$	83,616	$	4,344	$	3,379	$	127	$	86,995	$	4,471

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) whether the Company  intends to sell the security or more likely than not will be required to sell the security before its anticipated recovery.At June 30, 2017 and December 31, 2016, the unrealized losses on the municipal obligations and preferred stock were very minimal and all less than 12 months in duration. At June 30, 2017 and December 31, 2016, management performed an assessment for possible OTTI of the Company’s residential mortgage-backed securities on an issue-by-issue basis, relying on information obtained from various sources, including publicly available financial data, ratings by external agencies, brokers and other sources. The extent of individual analysis applied to each security depended on the size of the Company’s investment, as well as management’s perception of the

10

credit risk associated with each security. Based on the results of the assessment, management believes impairment of these securities, atJune 30, 2017 and December 31, 2016 to be temporary.

Note 6 - Loans Receivable and Allowance for Loan Losses

The following table presents the recorded investment in loans receivable as of June 30, 2017 and December 31, 2016 by segment and class:

	June 30, 2017		December 31, 2016
		(In Thousands)
Originated loans:
Residential one-to-four family	$	164,562	$	142,081
Commercial and multi-family		1,130,902		1,056,806
Construction		73,376		70,867
Commercial business(1)		68,230		63,444
Home equity(2)		38,058		32,417
Consumer		1,196		1,269
Sub-total		1,476,324		1,366,884
Acquired loans recorded at fair value:
Residential one-to-four family		52,382		56,310
Commercial and multi-family		51,933		60,422
Construction		-		-
Commercial business(1)		3,752		4,460
Home equity(2)		10,304		13,877
Consumer		176		225
Sub-total		118,547		135,294
Acquired loans with deteriorated credit:
Residential one-to-four family		1,425		1,443
Commercial and multi-family		742		753
Construction		-		-
Commercial business(1)		-		-
Home equity(2)		-		-
Consumer		-		-
Sub-total		2,167		2,196
Total Loans		1,597,038		1,504,374
Less:
Deferred loan fees, net		(1,893)		(2,006)
Allowance for loan losses		(17,964)		(17,209)
		(19,857)		(19,215)
Total Loans, net	$	1,577,181	$	1,485,159
_____________________________
(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

11

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

Allowance for Loan Losses

Management reviews the adequacy of the allowance on at least a quarterly basis to ensure that the provision for loan losses has been charged against earnings in an amount necessary to maintain the allowance at a level that is adequate based on management’s assessment of probable estimated losses.  The Company’s methodology for assessing the adequacy of the allowance for loan losses consists of several key elements. These elements include a general allocated reserve for performing loans, a specific reserve for impaired loans and an unallocated portion.  

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

•   General economic conditions.

•   Trends in charge-offs.

•   Trends and levels of delinquent loans.

•   Trends and levels of non-performing loans, including loans over 90 days delinquent.

•   Trends in volume and terms of loans.

•   Levels of allowance for specific classified loans.

•   Credit concentrations.

The methodology includes the segregation of the loan portfolio into two divisions.  Loans that are performing and loans that are impaired. Loans which are performing are evaluated homogeneously by loan class or loan type. The allowance for performing loans is evaluated based on historical loan experience, including consideration of peer loss analysis, with an adjustment for qualitative factors referred to above. Impaired loans are loans which are more than 90 days delinquent or troubled debt restructured.  These loans are individually evaluated for loan loss either by current appraisal, or net present value. Management reviews the overall estimate for feasibility and bases the loan loss provision accordingly.

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

Residential single family real estate loans involve certain risks such as interest rate risk and risk of non-repayment. Adjustable-rate residential family real estate loans decreases 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 property 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.

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

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 most 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 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 decreases 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 effected by job loss, divorce, illness and personal bankruptcy. In most cases, any repossessed collateral for a defaulted consumer loan will not provide an adequate source of repayment of the outstanding loan.

The Company also maintains an unallocated allowance.  The unallocated allowance is used to cover any factors or conditions which may cause a potential loan loss but are not specifically identifiable.  It is prudent to maintain an unallocated portion of the allowance because no matter how detailed an analysis of potential loan losses is performed, these estimates lack some element of precision.  Management must make estimates using assumptions and information that is often subjective and changing rapidly.

12

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

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.”

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. As of June 30, 2017, we had $152,000 in assets classified as losses, of which $152,000were classified as impaired, $27.3 million in assets classified as substandard, of which $27.3 million were classified as impaired, and $14.9million in assets classified as special mention, of which $8.9 million were 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 due to payment status, because updated financial information has not been timely provided, or the collateral underlying the loan is in the process of being revalued.

The Company’s internal credit risk grades are based on the definitions currently utilized by the banking regulatory agencies.  The grades assigned and definitions are as follows, and loans graded excellent, above average, good and watch list (risk ratings 1-4) are treated as “pass” for grading purposes:

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

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

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

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

13

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table sets forth the activity in the Company’s allowance for loan losses for the three months ended June 30, 2017. The table also details the amount of total loans receivable, loans receivable that are evaluated individually and collectively for impairment, and the related portion of the allowance for loan losses that is allocated to each loan class, as of June 30, 2017. (In Thousands):

	Residential			Commercial & Multi-family	Construction		Commercial Business (1)		Home Equity (2)		Consumer		Unallocated		Total
Allowance for loan losses:
Originated Loans:	$	2,151	$	10,850	$	756	$	3,117	$	335	$	2	$	150	$	17,361
Acquired loans recorded at fair value:		112		-		-		-		-		-		-		112
Acquired loans with deteriorated credit:		41		12		-		-		-		-		-		53
Beginning Balance, March 31, 2017		2,304		10,862		756		3,117		335		2		150		17,526
Charge-offs:
Originated Loans:		-		119		-		-		-		-		-		119
Acquired loans recorded at fair value:		219		-		-		-		-		-		-		219
Acquired loans with deteriorated credit:		-				-		-		-		-		-		-
Sub-total:		219		119		-		-		-		-		-		338
Recoveries:
Originated Loans:		-		-		-		-		-		-		-		-
Acquired loans recorded at fair value:		-		-		-		-		-		-		-		-
Acquired loans with deteriorated credit:		-		-		-		-		-		-		-		-
Sub-total:		-		-		-		-		-		-		-		-
Provisions:
Originated Loans:		(59)		451		(3)		112		12		3		(51)		465
Acquired loans recorded at fair value:		310		-		-		-		-		-		-		310
Acquired loans with deteriorated credit:		-		1		-		-		-		-		-		1
Sub-total:		251		452		(3)		112		12		3		(51)		776
Totals:
Originated Loans:		2,092		11,182		753		3,229		347		5		99		17,707
Acquired loans recorded at fair value:		203		-		-		-		-		-		-		203
Acquired loans with deteriorated credit:		41		13		-		-		-		-		-		54
Ending Balance, June 30, 2017	$	2,336	$	11,195	$	753	$	3,229	$	347	$	5	$	99	$	17,964
Loans Receivable:
Ending Balance Originated Loans:	$	164,562	$	1,130,902	$	73,376	$	68,230	$	38,058	$	1,196	$	-	$	1,476,324
Ending Balance Acquired loans recorded at fair value:		52,382		51,933		-		3,752		10,304		176		-		118,547
Ending Balance Acquired loans with deteriorated credit:		1,425		742		-		-		-		-		-		2,167
Total Gross Loans:	$	218,369	$	1,183,577	$	73,376	$	71,982	$	48,362	$	1,372	$	-	$	1,597,038
Ending Balance: Loans individually evaluated
for impairment:
Ending Balance Originated Loans:	$	9,038	$	12,783	$	-	$	4,180	$	1,093	$	-	$	-	$	27,094
Ending Balance Acquired loans recorded at fair value:		7,771		5,832		-		-		685		-		-		14,288
Ending Balance Acquired loans with deteriorated credit:		1,425		519		-		-		-		-		-		1,944
Ending Balance Loans individually evaluated
for impairment:	$	18,234	$	19,134	$	-	$	4,180	$	1,778	$	-	$	-	$	43,326
Ending Balance: Loans collectively evaluated
for impairment:
Ending Balance Originated Loans:	$	155,524	$	1,118,119	$	73,376	$	64,050	$	36,965	$	1,196	$	-	$	1,449,230
Ending Balance Acquired loans recorded at fair value:		44,611		46,101		-		3,752		9,619		176		-		104,259
Ending Balance Acquired loans with deteriorated credit:		-		223		-		-		-		-		-		223
Ending Balance Loans collectively evaluated
for impairment:	$	200,135	$	1,164,443	$	73,376	$	67,802	$	46,584	$	1,372	$	-	$	1,553,712
_____________________________
(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

14

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table set forth the activity in the Company’s allowance for loan losses for the six months ended June 30, 2017, and the related portion of the allowance for loan losses that is allocated to each loan class (in thousands):

	Residential			Commercial & Multi-family	Construction		Commercial Business (1)			Home Equity (2)	Consumer		Unallocated		Total
Allowance for credit losses:
Originated Loans:	$	2,098	$	10,621	$	736	$	3,079	$	374	$	2	$	69	$	16,979
Acquired loans recorded at fair value:		170		-		-		-		4		-		-		174
Acquired loans with deteriorated credit:		43		13		-		-		-		-		-		56
Beginning Balance, December 31, 2016		2,311		10,634		736		3,079		378		2		69		17,209
Charge-offs:
Originated Loans:		-	-	190		-	-	-	-	-	-	6	-	-	-	196
Acquired loans recorded at fair value:		308	-	-		-	-	-	-	34	-	-	-	-	-	342
Acquired loans with deteriorated credit:		-	-	-		-	-	-	-	-	-	-	-	-	-	-
Sub-total:		308		190		-		-		34		6		-		538
Recoveries:
Originated Loans:		-		-		-		-		-		-		-		-
Acquired loans recorded at fair value:		-		-		-		-		-		-		-		-
Acquired loans with deteriorated credit:		-		-		-		19		-		-		-		19
Sub-total:		-		-		-		19		-		-		-		19
Provisions:
Originated Loans:		(6)		751		17		150		(27)		9		30		924
Acquired loans recorded at fair value:		341		-		-		-		30		-		-		371
Acquired loans with deteriorated credit:		(2)		-		-		(19)		-		-		-		(21)
Sub-total:		333		751		17		131		3		9		30		1,274
Totals:
Originated Loans:		2,092		11,182		753		3,229		347		5		99		17,707
Acquired loans recorded at fair value:		203		-		-		-		-		-		-		203
Acquired loans with deteriorated credit:		41		13		-		-		-		-		-		54
Ending Balance, June 30, 2017	$	2,336	$	11,195	$	753	$	3,229	$	347	$	5	$	99	$	17,964
_____________________________
(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

15

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table sets forth the activity in the Company’s allowance for loan losses for the year ended December 31, 2016. The table also details the amount of total loans receivable that are evaluated individually and collectively for impairment, and the related portion of the allowance for loan losses that is allocated to each loan class, as of December 31, 2016. (In Thousands):

____

		Residential		Commercial & Multi-family		Construction		Commercial Business (1)			Home Equity (2)			Consumer		Unallocated		Total
Allowance for credit losses:
Originated Loans:	$	2,107	$	11,643	$	722	$	1,749		$	369		$	879	$	168	$	17,637
Acquired loans recorded at fair value:		270		17		-		-			50			-		-		337
Acquired loans with deteriorated credit:		47		14		-		4			3			-		-		68
Beginning Balance, December 31, 2016		2,424		11,674		722		1,753			422			879		168		18,042
Charge-offs:
Originated Loans:		-		367		-		160	-		-			-		-		527
Acquired loans recorded at fair value:		459		38		-		3			54			-		-		554
Acquired loans with deteriorated credit:		-		-		-		-			-			-		-		-
Sub-total:		459		405		-		163			54			-		-		1,081
Recoveries:
Originated Loans:		-		74		-		-			-			-		-		74
Acquired loans recorded at fair value:		-		4		-		-			14	-		-		-		18
Acquired loans with deteriorated credit:		-		-		-		129			-			-		-		129
Sub-total:		-		78		-		129			14			-		-		221
Provisions:
Originated Loans:		(9)		(729)		14		1,490			5			(877)		(99)		(205)
Acquired loans recorded at fair value:		359		17		-		3			(6)			-		-		373
Acquired loans with deteriorated credit:		(4)		(1)		-		(133)			(3)			-		-		(141)
Sub-total:		346		(713)		14		1,360			(4)			(877)		(99)		27
Totals:
Originated Loans:		2,098		10,621		736		3,079			374			2		69		16,979
Acquired loans recorded at fair value:		170		-		-		-			4			-		-		174
Acquired loans with deteriorated credit:		43		13		-		-			-			-		-		56
Ending Balance, December 31, 2016	$	2,311	$	10,634	$	736	$	3,079		$	378		$	2	$	69	$	17,209
Loans Receivables:
Ending Balance Originated Loans:	$	142,081	$	1,056,806	$	70,867	$	63,444		$	32,417		$	1,269	$	-	$	1,366,884
Ending Balance Acquired Loans:		56,310		60,422		-		4,460			13,877			225		-		135,294
Ending Balance Acquired loans with deteriorated credit:		1,443		753		-		-			-			-		-		2,196
Total Gross Loans:	$	199,834	$	1,117,981	$	70,867	$	67,904		$	46,294		$	1,494	$	-	$	1,504,374
Ending Balance: Loans individually evaluated
for impairment:
Ending Balance Originated Loans:	$	10,651	$	12,325	$	6	$	4,088		$	1,362		$	-	$	-	$	28,432
Ending Balance Acquired Loans:		7,600		6,356		-		-			1,065			-		-		15,021
Ending Balance Acquired loans with deteriorated credit:		1,443		523		-		-			-			-		-		1,966
Ending Balance Loans individually evaluated
for impairment:	$	19,694	$	19,204	$	6	$	4,088		$	2,427		$	-	$	-	$	45,419
Ending Balance: Loans collectively evaluated
for impairment:
Ending Balance Originated Loans:	$	131,430	$	1,044,481	$	70,861	$	59,356		$	31,055		$	1,269	$	-	$	1,338,452
Ending Balance Acquired Loans:		48,710		54,066		-		4,460			12,812			225		-		120,273
Ending Balance Acquired loans with deteriorated credit:		-		230		-		-			-			-		-		230
Ending Balance Loans collectively evaluated
for impairment:	$	180,140	$	1,098,777	$	70,861	$	63,816		$	43,867		$	1,494	$	-	$	1,458,955

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

16

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table sets forth the activity in the Company’s allowance for loan losses for the three months ended June 30, 2016. The table also details the amount of total loans receivable that are evaluated individually and collectively for impairment, and the related portion of the allowance for loan losses that is allocated to each loan class, as of June 30, 2016 (In Thousands):

	Residential			Commercial & Multi-family	Construction		Business (1)		Equity (2)		Consumer		Unallocated		Total
Allowance for credit losses:
Originated Loans:	$	2,238	$	11,575	$	833	$	1,662	$	342	$	925	$	264	$	17,839
Acquired loans recorded at fair value:		208		10		-		-		44		-		-		262
Acquired loans with deteriorated credit:		47		13		-		4		3		-		-		67
Beginning Balance, March 31, 2016		2,493		11,598		833		1,666		389		925		264		18,168
Charge-offs:
Originated Loans:		-	-	-		-		-	-	-	-	-	-	-	-	-
Acquired loans recorded at fair value:		-	-	-		-		-		-	-	-	-	-	-	-
Acquired loans with deteriorated credit:		-		-		-		-		-		-		-		-
Sub-total:		-		-		-		-		-		-		-		-
Recoveries:
Originated Loans:		-		-		-		-		-		-		-		-
Acquired loans recorded at fair value:		-		-		-		-		3		-		-		3
Acquired loans with deteriorated credit:		-		-		-		130		-		-		-		130
Sub-total:		-		-		-		130		3		-		-		133
Provisions:
Originated Loans:		(243)		155		(69)		97		33		104		(48)		29
Acquired loans recorded at fair value:		149		(10)		-		-		9		-				148
Acquired loans with deteriorated credit:		(4)		1		-		(134)		(3)		-		-		(140)
Sub-total:		(98)		146		(69)		(37)		39		104		(48)		37
Totals:
Originated Loans:		1,995		11,730		764		1,759		375		1,029		216		17,868
Acquired loans recorded at fair value:		357		-		-		-		56		-		-		413
Acquired loans with deteriorated credit:		43		14		-		-		-		-		-		57
Ending Balance, June 30, 2016	$	2,395	$	11,744	$	764	$	1,759	$	431	$	1,029	$	216	$	18,338
Loans Receivable:
Ending Balance Originated Loans:	$	119,329	$	1,008,498	$	71,770	$	57,500	$	31,609	$	1,703	$	-	$	1,290,409
Ending Balance Acquired loans recorded at fair value:		62,309		68,767		-		4,903		16,580		240		-		152,799
Ending Balance Acquired loans with deteriorated credit:		1,458		764		-		-		-		-		-		2,222
Total Gross Loans:	$	183,096	$	1,078,029	$	71,770	$	62,403	$	48,189	$	1,943	$	-	$	1,445,430
Ending Balance: Loans individually evaluated
for impairment:
Ending Balance Originated Loans:	$	10,356	$	14,512	$	-	$	3,798	$	1,126	$	1,263	$	-	$	31,055
Ending Balance Acquired loans recorded at fair value:		8,751		6,281		-		-		1,276		-		-		16,308
Ending Balance Acquired loans with deteriorated credit:		1,458		528		-		-		-		-		-		1,986
Ending Balance Loans individually evaluated
for impairment:	$	20,565	$	21,321	$	-	$	3,798	$	2,402	$	1,263	$	-	$	49,349
Ending Balance: Loans collectively evaluated
for impairment:
Ending Balance Originated Loans:	$	108,973	$	993,986	$	71,770	$	53,702	$	30,483	$	440	$	-	$	1,259,354
Ending Balance Acquired loans recorded at fair value:		53,558		62,486		-		4,903		15,304		240		-		136,491
Ending Balance Acquired loans with deteriorated credit:		-		236		-		-		-		-		-		236
Ending Balance Loans collectively evaluated
for impairment:	$	162,531	$	1,056,708	$	71,770	$	58,605	$	45,787	$	680	$	-	$	1,396,081
_____________________________
(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

17

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table sets forth the activity in the Company’s allowance for loans losses for the six months ended June 30, 2016, and the related portion of the allowance for loan losses that is allocated to each loan class (in thousands):

	Residential			Commercial & Multi-family	Construction		Commercial Business (1)			Home Equity (2)	Consumer		Unallocated		Total
Allowance for credit losses:
Originated Loans:	$	2,107	$	11,643	$	722	$	1,749	$	369	$	879	$	168	$	17,637
Acquired loans recorded at fair value:		270		17		-		-		50		-		-		337
Acquired loans with deteriorated credit:		47		14		-		4		3		-		-		68
Beginning Balance, December 31, 2015		2,424		11,674		722		1,753		422		879		168		18,042
Charge-offs:
Originated Loans:		-		-		-		-		-		-		-	-	-
Acquired loans recorded at fair value:		67		-		-		3		3		-		-	-	73
Acquired loans with deteriorated credit:		-		-		-		-		-		-		-	-	-
Sub-total:		67		-		-		3		3		-		-		73
Recoveries:
Originated Loans:		-		-		-		-		-		-		-		-
Acquired loans recorded at fair value:		-		-		-		-		14		-		-		14
Acquired loans with deteriorated credit:		-		-		-		129		-		-		-		129
Sub-total:		-		-		-		129		14		-		-		143
Provisions:
Originated Loans:		(112)		87		42		10		6		150		48		231
Acquired loans recorded at fair value:		154		(17)		-		3		(5)		-		-		135
Acquired loans with deteriorated credit:		(4)		-		-		(133)		(3)		-		-		(140)
Sub-total:		38		70		42		(120)		(2)		150		48		226
Totals:
Originated Loans:		1,995		11,730		764		1,759		375		1,029		216		17,868
Acquired loans recorded at fair value:		357		-		-		-		56		-		-		413
Acquired loans with deteriorated credit:		43		14		-		-		-		-		-		57
Ending Balance, June 30, 2016	$	2,395	$	11,744	$	764	$	1,759	$	431	$	1,029	$	216	$	18,338
_____________________________
(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

18

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The table below sets forth the amounts and types of non-accrual loans in the Company’s loan portfolio as of June 30, 2017 and December 31, 2016. 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 June 30, 2017 and December 31, 2016, total non-accrual loans differed from the amount of total loans past due greater than 90 days due to troubled debt restructuring of loans which are maintained on non-accrual status for a minimum of six months and until the borrower has demonstrated its ability to satisfy the terms of the restructured loan.   

		As of June 30, 2017		As of December 31, 2016
		(In Thousands)		(In Thousands)
Non-Accruing Loans:
Originated loans:
Residential one-to-four family	$	3,076	$	3,693
Commercial and multi-family		7,040		5,437
Construction		-		-
Commercial business(1)		785		726
Home equity(2)		208		416
Consumer		-		6
Sub-total:	$	11,109	$	10,278
Acquired loans recorded at fair value:
Residential one-to-four family	$	3,460	$	3,429
Commercial and multi-family		726		1,182
Construction		-		-
Commercial business(1)		-		-
Home equity(2)		161		763
Consumer		-		-
Sub-total:	$	4,347	$	5,374
Acquired loans with deteriorated credit:
Residential one-to-four family	$	-	$	-
Commercial and multi-family		-		-
Construction		-		-
Commercial business(1)		-		-
Home equity(2)		-		-
Consumer		-		-
Sub-total:	$	-	$	-
Total	$	15,456	$	15,652

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

19

Note 6-Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes the average recorded investment and interest income recognized on impaired loans with no related allowance recorded by portfolio class for the three and sixmonths ended June 30, 2017 and 2016 (In Thousands):

		Three Months Ended June 30,								Six Months Ended June 30,
		2017		2017		2016		2016		2017		2017		2016		2016
		Average		Interest		Average		Interest		Average		Interest		Average		Interest
		Recorded		Income		Recorded		Income		Recorded		Income		Recorded		Income
Originated loans		Investment		Recognized		Investment		Recognized		Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Residential one-to-four family	$	3,640	$	24	$	4,085	$	23	$	4,299	$	49	$	3,938	$	47
Commercial and Multi-family		12,365		63		10,313		58		11,287		125		10,687		115
Construction		-		-		1,492		-		-		-		-		-
Commercial business(1)		712		11		2,030		27		1,095		21		2,046		53
Home equity(2)		865		9		1,039		8		941		18		1,106		16
Consumer		-		-		-		-		3		-		-		-
Sub-total:	$	17,582	$	107	$	18,959	$	116	$	17,625	$	213	$	17,777	$	231
Acquired loans recorded at fair value
With no related allowance recorded:
Residential one-to-four family	$	5,306	$	35	$	5,308	$	31	$	4,998	$	71	$	6,223	$	62
Commercial and Multi-family		4,127		56		4,637		52		4,845		112		4,703		104
Construction		-		-		-		-		-		-		-		-
Commercial business(1)		-		-		-		-		-		-		-		-
Home equity(2)		628		-		589		5		563		12		708		9
Consumer		-		6		-		-		-		-		-		-
Sub-total	$	10,061	$	97	$	10,534	$	88	$	10,406	$	195	$	11,634	$	175
Acquired loans with deteriorated credit
With no related allowance recorded:
Residential one-to-four family	$	1,430	$	22	$	1,462	$	22	$	1,434	$	44	$	1,466	$	45
Commercial and Multi-family		520		7		529		7		521		14		477		14
Construction		-		-		-		-		-		-		-		-
Commercial business(1)		-		-		-		-		-		-		-		-
Home equity(2)		-		-		37		-		-		-		36		-
Consumer		-		-		-		-		-		-		-		-
Sub-total:	$	1,950	$	29	$	2,028	$	29	$	1,955	$	58	$	1,979	$	59
Total Impaired Loans
With no related allowance recorded:	$	29,593	$	233	$	31,521	$	233	$	29,986	$	466	$	31,390	$	465

__________

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

20

Note 6-Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes the average recorded investment and interest income recognized on impaired loans with allowance recorded by portfolio class for the three and six months ended June 30, 2017 and 2016. (In Thousands):

		Three Months Ended June 30,								Six Months Ended June 30,
		2017		2017		2016		2016		2017		2017		2016		2016
		Average		Interest		Average		Interest		Average		Interest		Average		Interest
		Recorded		Income		Recorded		Income		Recorded		Income		Recorded		Income
Originated loans		Investment		Recognized		Investment		Recognized		Investment		Recognized		Investment		Recognized
with an allowance recorded:
Residential one-to-four family	$	6,026	$	48	$	5,620	$	64	$	5,546	$	96	$	5,801	$	128
Commercial and Multi-family		839		10		4,258		6		1,267		19		3,910		12
Construction		-		-		-		-		-		-		-		-
Commercial business(1)		3,427		35		1,921		20		3,039		69		1,955		39
Home equity(2)		284		3		214		2		287		5		186		5
Consumer		-		-		1,263		-		-		-		1,363		-
Sub-total:	$	10,576	$	96	$	13,276	$	92	$	10,139	$	189	$	13,215	$	184
Acquired loans recorded at fair value
with an allowance recorded:
Residential one-to-four family	$	2,590	$	21	$	3,782	$	20	$	2,688	$	43	$	3,096	$	39
Commercial and Multi-family		1,718		16		1,360		16		1,249		32		1,826		16
Construction		-		-		-		-		-		-		-		-
Commercial business(1)		-		-		-		-		-		-		-		-
Home equity(2)		106		2		730		5		313		3		612		27
Consumer		-		-		-		-		-		-		-		-
Sub-total	$	4,414	$	39	$	5,872	$	41	$	4,250	$	78	$	5,534	$	82
Acquired loans with deteriorated credit
with an allowance recorded:
Residential one-to-four family	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Commercial and Multi-family		-		-		-		-		-		-		-		-
Construction		-		-		-		-		-		-		-		-
Commercial business(1)		-		-		82		-		-		-		84		-
Home equity(2)		-		-		-		-		-		-		-		-
Consumer		-		-		-		-		-		-		-		-
Sub-total:	$	-	$	-	$	82	$	-	$	-	$	-	$	84	$	-
Total Impaired Loans
with an allowance recorded:	$	14,990	$	135	$	19,230	$	133	$	14,389	$	267	$	18,833	$	266

__________

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

21

Note 6-Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes the recorded investment and unpaid principal balances where there is no related allowance on impaired loans by portfolio class at

June 30, 2017 and December 31, 2016. (In Thousands):

		As of June 30, 2017						As of December 31, 2016
		Recorded		Unpaid Principal		Related		Recorded		Unpaid Principal		Related
Originated loans		Investment		Balance		Allowance		Investment		Balance		Allowance
with no related allowance recorded:
Residential one-to-four family	$	3,440	$	3,608	$	-	$	5,158	$	5,341	$	-
Commercial and multi-family		12,076		12,676		-		10,498		10,722		-
Construction		-		6		-		6		6		-
Commercial business(1)		1,168		2,338		-		1,022		1,966		-
Home equity(2)		860		930		-		1,022		1,101		-
Consumer		-		-		-		-		-		-
Sub-total:	$	17,544	$	19,558	$	-	$	17,706	$	19,136	$	-
Acquired loans recorded at fair
value with no related allowance
recorded:
Residential one-to-four family	$	4,419	$	5,174	$	-	$	5,577	$	6,149	$	-
Commercial and Multi-family		4,115		4,188		-		5,575		5,710		-
Construction		-		-		-		-		-		-
Commercial business(1)		-		-		-		-		-		-
Home equity(2)		580		727		-		545		650		-
Consumer		-		-		-		-		-		-
Sub-total:	$	9,114	$	10,089	$	-	$	11,697	$	12,509	$	-
Acquired loans with deteriorated
credit with no related allowance
recorded:
Residential one-to-four family	$	1,425	$	2,051	$	-	$	1,443	$	2,069	$	-
Commercial and Multi-family		519		545		-		523		552		-
Construction		-		-		-		-		-		-
Commercial business(1)		-		-		-		-		-		-
Home equity(2)		-		-		-		-		-		-
Consumer		-		-		-		-		-		-
Sub-total:	$	1,944	$	2,596	$	-	$	1,966	$	2,621	$	-
Total Impaired Loans
with no related allowance recorded:	$	28,602	$	32,243	$	-	$	31,369	$	34,266	$	-

__________

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

22

Note 6-Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes the recorded investment, unpaid principal balance, and the related allowance on impaired loans by portfolio class at June 30, 2017 and December 31, 2016. (In Thousands):

		As of June 30, 2017						As of December 31, 2016
		Recorded		Unpaid Principal		Related		Recorded		Unpaid Principal		Related
Originated loans		Investment		Balance		Allowance		Investment		Balance		Allowance
with an allowance recorded:
Residential one-to-four family	$	5,598	$	5,687	$	394	$	5,493	$	5,493	$	496
Commercial and Multi-family		707		707		32		1,827		1,866		380
Construction		-		-		-		-		-		-
Commercial business(1)		3,012		3,826		2,480		3,066		4,006		2,359
Home equity(2)		233		233		28		340		340		32
Consumer		-		-		-		-		-		-
Sub-total:	$	9,550	$	10,453	$	2,934	$	10,726	$	11,705	$	3,267
Acquired loans recorded at fair
value with an allowance
recorded:
										-
Residential one-to-four family	$	3,352	$	3,597	$	251	$	2,023	$	2,080	$	202
Commercial and Multi-family		1,717		1,770		193		781		781		37
Construction		-		-		-		-		-		-
Commercial business(1)		-		-		-		-		-		-
Home equity(2)		105		106		12		520		571		24
Consumer		-		-		-		-		-		-
Sub-total	$	5,174	$	5,473	$	456	$	3,324	$	3,432	$	263
Acquired loans with deteriorated
credit with an allowance
recorded:
Residential one-to-four family	$	-	$	-	$	-	$	-	$	-	$	-
Commercial and Multi-family		-		-		-		-		-		-
Construction		-		-		-		-		-		-
Commercial business(1)		-		-		-		-		-		-
Home equity(2)		-		-		-		-		-		-
Consumer		-		-		-		-		-		-
Sub-total:	$	-	$	-	$	-	$	-	$	-	$	-
Total Impaired Loans
with an allowance recorded:	$	14,724	$	15,926	$	3,390	$	14,050	$	15,137	$	3,530
Total Impaired Loans
with no related allowance recorded:	$	28,602	$	32,243	$	-	$	31,369	$	34,266	$	-
Total Impaired Loans:	$	43,326	$	48,169	$	3,390	$	45,419	$	49,403	$	3,530

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

23

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table presents the total troubled debt restructured loans at June 30, 2017, excluding the purchase impairment mark on the acquired loans with deteriorated credit. (Dollars In Thousands):

	Accrual			Non-accrual			Total
June 30, 2017	# of Loans		Amount	# of Loans		Amount	# of Loans		Amount
Originated loans:
Residential one-to-four family	5	$	1,932	2	$	1,445	7	$	3,377
Commercial and multi-family	8		4,858	8		5,567	16		10,425
Construction	-		-	-		-	-		-
Commercial business(1)	2		1,902	1		315	3		2,217
Home equity(2)	5		802	1		44	6		846
Consumer	-		-	-		-	-		-
Sub-total:	20	$	9,494	12	$	7,371	32	$	16,865
Acquired loans recorded at fair value:
Residential one-to-four family	18	$	4,122	7	$	1,950	25	$	6,072
Commercial and Multi-family	13		4,752	1		590	14		5,342
Construction	-		-	-		-	-		-
Commercial business(1)	-		-	-		-	-		-
Home equity(2)	3		490	-		-	3		490
Consumer	-		-	-		-	-		-
Sub-total:	34	$	9,364	8	$	2,540	42	$	11,904
Acquired loans with deteriorated credit:
Residential one-to-four family	5	$	2,051	-	$	-	5	$	2,051
Commercial and Multi-family	1		545	-		-	1		545
Construction	-		-	-		-	-		-
Commercial business(1)	-		-	-		-	-		-
Home equity(2)	-		-	-		-	-		-
Consumer	-		-	-		-	-		-
Sub-total:	6	$	2,596	-	$	-	6	$	2,596
Total	60	$	21,454	20	$	9,911	80	$	31,365

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

24

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table presents the total troubled debt restructured loans at December 31, 2016, excluding the purchase impairment mark on the acquired loans with deteriorated credit. (Dollars In Thousands):

	Accrual			Non-accrual			Total
December 31, 2016	# of Loans		Amount	# of Loans		Amount	# of Loans		Amount
Originated loans:
Residential one-to-four family	8	$	2,687	-	$	-	8	$	2,687
Commercial and multi-family	9		5,141	8		2,297	17		7,438
Construction	-		-	-		-	-		-
Commercial business(1)	2		1,868	1		345	3		2,213
Home equity(2)	5		817	1		46	6		863
Consumer	-		-	-		-	-		-
Sub-total:	24	$	10,513	10	$	2,688	34	$	13,201
Acquired loans recorded at fair value:
Residential one-to-four family	18	$	3,979	5	$	1,893	23	$	5,872
Commercial and Multi-family	13		4,807	1		583	14		5,390
Construction	-		-	-		-	-		-
Commercial business(1)	-		-	-		-	-		-
Home equity(2)	2		265	1		219	3		484
Consumer	-		-	-		-	-		-
Sub-total:	33	$	9,051	7	$	2,695	40	$	11,746
Acquired loans with deteriorated credit:
Residential one-to-four family	5	$	2,069	-	$	-	5	$	2,069
Commercial and Multi-family	1		552	-		-	1		552
Construction	-		-	-		-	-		-
Commercial business(1)	-		-	-		-	-		-
Home equity(2)	-		-	-		-	-		-
Consumer	-		-	-		-	-		-
Sub-total:	6	$	2,621	-	$	-	6	$	2,621
Total	63	$	22,185	17	$	5,383	80	$	27,568

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

25

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

A troubled debt restructuring (“TDR”) is a loan that has been modified whereby the Company has agreed to make certain concessions to a borrower to meet the needs of both the borrower and the Company to maximize the ultimate recovery of a loan. A TDR occurs when a borrower is experiencing, or is expected to experience, financial difficulties and the loan is modified using a modification that would otherwise not be granted to the borrower. The types of concessions granted generally include, but are not limited to interest rate reductions, limitations on the accrued interest charged, term extensions, and deferment of principal.

The following table summarizes information with regards to troubled debt restructurings which occurred during the three months ended June  30, 2017. (Dollars in Thousands):

Three Months Ended June 30, 2017			Pre-Modification Outstanding		Post-Modification Outstanding
	Number of Contracts		Recorded Investments		Recorded Investments
Originated loans:
Residential one-to-four family	-	$	-	$	-
Commercial and multi-family	1		2,804		2,851
Construction	-		-		-
Commercial business(1)	-		-		-
Home equity(2)	-		-		-
Consumer	-		-		-
Sub-total:	1	$	2,804	$	2,851
Acquired loans recorded at fair value:
Residential one-to-four family	3	$	767	$	919
Commercial and Multi-family	-		-		-
Construction	-		-		-
Commercial business(1)	-		-		-
Home equity(2)	-		-		-
Consumer	-		-		-
Sub-total:	3	$	767	$	919
Acquired loans with deteriorated credit:
Residential one-to-four family	-	$	-	$	-
Commercial and Multi-family	-		-		-
Construction	-		-		-
Commercial business(1)	-		-		-
Home equity(2)	-		-		-
Consumer	-		-		-
Sub-total:	-	$	-	$	-
Total	4	$	3,571	$	3,770

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

The loans included above are considered TDRs as a result of the Company implementing one or more of the following concessions: granting a material extension of time, issuing a forbearance agreement, adjusting the interest rate to a below market rate, accepting interest only for a period of time or a change in amortization period. All TDRs were considered impaired and therefore were individually evaluated for impairment in the calculation of the allowance for loan losses. Prior to their classification as TDRs, certain of these loans had been collectively evaluated for impairment in the calculation of the allowance for loan losses.

26

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes information in regards to troubled debt restructurings for which there was a payment default within twelve months of restructuring during the three months ended June 30, 2017.

Three Months Ended June 30, 2017
	Number of Contracts		Recorded Investment
Originated loans:
Residential one-to-four family	-	$	-
Commercial and multi-family	1		220
Construction	-		-
Commercial business(1)	1		1,138
Home equity(2)	-		-
Consumer	-		-
Sub-total:	2	$	1,358
Acquired loans recorded at fair value:
Residential one-to-four family	-	$	-
Commercial and Multi-family	-		-
Construction	-		-
Commercial business(1)	-		-
Home equity(2)	-		-
Consumer	-		-
Sub-total:	0	$	0
Acquired loans with deteriorated credit:
Residential one-to-four family	-	$	-
Commercial and Multi-family	-		-
Construction	-		-
Commercial business(1)	-		-
Home equity(2)	-		-
Consumer	-		-
Sub-total:	0	$	0
Total	2	$	1,358

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

27

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes information with regards to troubled debt restructurings which occurred during the six months ended June  30, 2017 (dollars in thousands):

Six Months Ended June 30, 2017				Pre-Modification Outstanding		Post-Modification Outstanding
		Number of Contracts		Recorded Investments		Recorded Investments
Originated loans:
Residential one-to-four family	$	2	$	1,445	$	1,556
Commercial and multi-family		3		4,441		4,608
Construction		-		-		-
Commercial business(1)		-		-		-
Home equity(2)		-		-		-
Consumer		-		-		-
Sub-total:	$	5	$	5,886	$	6,164
Acquired loans recorded at fair value:
Residential one-to-four family	$	4	$	840	$	1,023
Commercial and Multi-family		-		-		-
Construction		-		-		-
Commercial business(1)		-		-		-
Home equity(2)		-		-		-
Consumer		-		-		-
Sub-total:	$	4	$	840	$	1,023
Acquired loans with deteriorated credit:
Residential one-to-four family	$	-	$	-	$	-
Commercial and Multi-family		-		-		-
Construction		-		-		-
Commercial business(1)		-		-		-
Home equity(2)		-		-		-
Consumer		-		-		-
Sub-total:	$	-	$	-	$	-
Total	$	9	$	6,726	$	7,187

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

28

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes information in regard to troubled debt restructurings for which there was a payment default within twelve months of restructuring during the six months ended June 30, 2017. (Dollars in Thousands)

Six Months Ended June 30, 2017
	Number of Contracts		Recorded Investment
Originated loans:
	-	$	-
Commercial and multi-family	1		220
Construction	-		-
Commercial business(1)	1		1,138
Home equity(2)	-		-
Consumer	-		-
Sub-total:	2	$	1,358
Acquired loans recorded at fair value:
Residential one-to-four family	-	$	-
Commercial and Multi-family	1		422
Construction	-		-
Commercial business(1)	-		-
Home equity(2)	-		-
Consumer	-		-
Sub-total:	1	$	422
Acquired loans with deteriorated credit:
Residential one-to-four family	-	$	-
Commercial and Multi-family	-		-
Construction	-		-
Commercial business(1)	-		-
Home equity(2)	-		-
Consumer	-		-
Sub-total:	-	$	-
Total	3	$	1,780

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

29

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes information in regards to troubled debt restructurings which occurred during the three months ended June 30, 2016 (dollars in thousands):

Three Months Ended June 30, 2016				Pre-Modification Outstanding		Post-Modification Outstanding
		Number of Contracts		Recorded Investments		Recorded Investments
Originated loans:
Residential one-to-four family	$	-	$	-	$	-
Commercial and multi-family		-		-		-
Construction		-		-		-
Commercial business(1)		-		-		-
Home equity(2)		-		-		-
Consumer		-		-		-
Sub-total:	$	0	$	0	$	0
Acquired loans recorded at fair value:
Residential one-to-four family	$	-	$	-	$	-
Commercial and Multi-family		-		-		-
Construction		-		-		-
Commercial business(1)		-		-		-
Home equity(2)		-		-		-
Consumer		-		-		-
Sub-total:	$	0	$	0	$	0
Acquired loans with deteriorated credit:
Residential one-to-four family	$	-	$	-	$	-
Commercial and Multi-family		-		-		-
Construction		-		-		-
Commercial business(1)		-		-		-
Home equity(2)		-		-		-
Consumer		-		-		-
Sub-total:	$	-	$	-	$	-
Total	$	-	$	-	$	-

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

30

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes information in regards to troubled debt restructurings for which there was a payment default within twelve months of restructuring during the three months ended June 30, 2016 (dollars in thousands):

Three Months Ended June 30, 2016
	Number of Contracts		Recorded Investment
Originated loans:
Residential one-to-four family	-	$	-
Commercial and multi-family	-		-
Construction	-		-
Commercial business(1)	1		226
Home equity(2)	-		-
Consumer	-		-
Sub-total:	1	$	226
Acquired loans recorded at fair value:
Residential one-to-four family	-	$	-
Commercial and Multi-family	-		-
Construction	-		-
Commercial business(1)	-		-
Home equity(2)	-		-
Consumer	-		-
Sub-total:	-	$	-
Acquired loans with deteriorated credit:
Residential one-to-four family	-	$	-
Commercial and Multi-family	-		-
Construction	-		-
Commercial business(1)	-		-
Home equity(2)	-		-
Consumer	-		-
Sub-total:	-	$	-
Total	1	$	226

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

31

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes information in regard to troubled debt restructurings which occurred during the six months ended June 30, 2016 (dollars in thousands):

Six Months Ended June 30, 2016				Pre-Modification Outstanding		Post-Modification Outstanding
		Number of Contracts		Recorded Investments		Recorded Investments
Originated loans:
Residential one-to-four family	$	1	$	71	$	71
Commercial and multi-family		-		-		-
Construction		-		-		-
Commercial business(1)		-		-		-
Home equity(2)		-		-		-
Consumer		-		-		-
Sub-total:	$	1	$	71	$	71
Acquired loans recorded at fair value:
Residential one-to-four family	$	-	$	-	$	-
Commercial and Multi-family		-		-		-
Construction		-		-		-
Commercial business(1)		-		-		-
Home equity(2)		1		223		223
Consumer		-		-		-
Sub-total:	$	1	$	223	$	223
Acquired loans with deteriorated credit:
Residential one-to-four family	$	-	$	-	$	-
Commercial and Multi-family		-		-		-
Construction		-		-		-
Commercial business(1)		-		-		-
Home equity(2)		-		-		-
Consumer		-		-		-
Sub-total:	$	-	$	-	$	-
Total	$	2	$	294	$	294

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

32

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes information in regard to troubled debt restructurings for which there was a payment default within twelve months of restructuring during the six months ended June 30, 2016 (dollars in thousands):

Six Months Ended June 30, 2016
	Number of Contracts		Recorded Investment
Originated loans:
Residential one-to-four family	-	$	-
Commercial and multi-family	-		-
Construction	-		-
Commercial business(1)	-		-
Home equity(2)	1		246
Consumer	-		-
Sub-total:	1	$	246
Acquired loans recorded at fair value:
Residential one-to-four family	-	$	-
Commercial and Multi-family	-		-
Construction	-		-
Commercial business(1)	-		-
Home equity(2)	-		-
Consumer	-		-
Sub-total:	-	$	-
Acquired loans with deteriorated credit:
Residential one-to-four family	-	$	-
Commercial and Multi-family	-		-
Construction	-		-
Commercial business(1)	-		-
Home equity(2)	-		-
Consumer	-		-
Sub-total:	-	$	-
Total	1	$	246

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

33

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued

The following table sets forth the delinquency status of total loans receivable as of June  30, 2017. (In Thousands):

													Loans Receivable
	30-59 Days		60-90 Days		Greater Than		Total Past				Total Loans		>90 Days
	Past Due		Past Due		90 Days		Due		Current		Receivable		and Accruing
		(In Thousands)
Originated loans:
Residential one-to-four family	$	3,189	$	37	$	2,302	$	5,528	$	159,034	$	164,562	$	813
Commercial and multi-family		6,456		1,511		779		8,746		1,122,156		1,130,902		227
Construction		-		-		-		-		73,376		73,376		-
Commercial business(1)		430		1,137		727		2,294		65,936		68,230		227
Home equity(2)		428		-		44		472		37,586		38,058		-
Consumer		-		5		-		5		1,191		1,196		-
Sub-total:	$	10,503	$	2,690	$	3,852	$	17,045	$	1,459,279	$	1,476,324	$	1,267
Acquired loans recorded at fair value:
Residential one-to-four family	$	522	$	396	$	2,337	$	3,255	$	49,127		52,382	$	-
Commercial and multi-family		1,606		721		726		3,053		48,880		51,933		-
Construction		-		-		-		-		-		-		-
Commercial business(1)		-		-		-		-		3,752		3,752		-
Home equity(2)		197		144		26		367		9,937		10,304		-
Consumer		-		-		-		-		176		176		-
Sub-total:	$	2,325	$	1,261	$	3,089	$	6,675	$	111,872	$	118,547	$	-
Acquired loans with deteriorated credit:
Residential one-to-four family	$	-	$	-	$	-	$	-	$	1,425		1,425	$	-
Commercial and multi-family		-		-		-		-		742		742		-
Construction		-		-		-		-		-		-		-
Commercial business(1)		-		-		-		-		-		-		-
Home equity(2)		-		-		-		-		-		-		-
Consumer		-		-		-		-		-		-		-
Sub-total:	$	-	$	-	$	-	$	-	$	2,167	$	2,167	$	-
Total	$	12,828	$	3,951	$	6,941	$	23,720	$	1,573,318	$	1,597,038	$	1,267

_________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

34

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table sets forth the delinquency status of total loans receivable at December 31, 2016. (In Thousands):

													Loans Receivable
	30-59 Days		60-90 Days		Greater Than		Total Past				Total Loans		>90 Days
	Past Due		Past Due		90 Days		Due		Current		Receivable		and Accruing
		(In Thousands)
Originated loans:
Residential one-to-four family	$	2,873	$	963	$	1,889	$	5,725	$	136,356	$	142,081	$	-
Commercial and multi-family		10,472		989		5,182		16,643		1,040,163		1,056,806		2,828
Construction		348		-		-		348		70,519		70,867		-
Commercial business(1)		491		69		315		875		62,569		63,444		-
Home equity(2)		78		218		-		296		32,121		32,417		-
Consumer		-		-		6		6		1,263		1,269		-
Sub-total:	$	14,262	$	2,239	$	7,392	$	23,893	$	1,342,991	$	1,366,884	$	2,828
Acquired loans recorded at fair value:
Residential one-to-four family	$	498	$	515	$	3,138	$	4,151	$	52,159		56,310	$	-
Commercial and multi-family		1,958		221		737		2,916		57,506		60,422		-
Construction		-		-		-		-		-		-		-
Commercial business(1)		-		-		-		-		4,460		4,460		-
Home equity(2)		309		132		280		721		13,156		13,877		-
Consumer		-		-		-		-		225		225		-
Sub-total:	$	2,765	$	868	$	4,155	$	7,788	$	127,506	$	135,294	$	-
Acquired loans with deteriorated credit:
Residential one-to-four family	$	-	$	-	$	-	$	-	$	1,443	$	1,443	$	-
Commercial and multi-family		-		-		-		-		753		753		-
Construction		-		-		-		-		-		-		-
Commercial business(1)		-		-		-		-		-		-		-
Home equity(2)		-		-		-		-		-		-		-
Consumer		-		-		-		-		-		-		-
Sub-total:	$	-	$	-	$	-	$	-	$	2,196	$	2,196	$	-
Total	$	17,027	$	3,107	$	11,547	$	31,681	$	1,472,693	$	1,504,374	$	2,828

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

35

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table presents the loan portfolio types summarized by the aggregate pass rating and the classified ratings of special mention, substandard, doubtful, and loss within the Company’s internal risk rating system as of June  30, 2017. (In Thousands):

	Pass		Special Mention		Substandard		Doubtful		Loss		Total
Originated loans:
Residential one-to-four family	$	155,621	$	5,865	$	3,076	$	-	$	-	$	164,562
Commercial and multi-family		1,116,020		3,366		11,445		-		71		1,130,902
Construction		72,906		470		-		-		-		73,376
Commercial business(1)		62,323		1,727		4,106		-		74		68,230
Home equity(2)		36,720		943		395		-		-		38,058
Consumer		1,186		10		-		-		-		1,196
Sub-total:	$	1,444,776	$	12,381	$	19,022	$	-	$	145	$	1,476,324
Acquired loans recorded at fair value:
Residential one-to-four family	$	47,815	$	616	$	3,951	$	-	$	-		52,382
Commercial and multi-family		47,856		674		3,403		-		-		51,933
Construction		-		-		-		-		-		-
Commercial business(1)		3,752		-		-		-		-		3,752
Home equity(2)		9,982		126		189		-		7		10,304
Consumer		176		-		-		-		-		176
Sub-total:	$	109,581	$	1,416	$	7,543	$	-	$	7	$	118,547
Residential one-to-four family	$	146	$	574	$	705	$	-	$	-		1,425
Commercial and multi-family		224		518		-		-		-		742
Construction		-		-		-		-		-		-
Commercial business(1)		-		-		-		-		-		-
Home equity(2)		-		-		-		-		-		-
Consumer		-		-		-		-		-		-
Sub-total:	$	370	$	1,092	$	705	$	-	$	-	$	2,167
Total Gross Loans	$	1,554,727	$	14,889	$	27,270	$	-	$	152	$	1,597,038

_________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

36

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table presents the loan portfolio types summarized by the aggregate pass rating and the classified ratings of special mention, substandard, doubtful, and loss within the Company’s internal risk rating system as of December 31, 2016. (In Thousands):

	Pass		Special Mention		Substandard		Doubtful		Loss		Total
Originated loans:
Residential one-to-four family	$	131,807	$	6,393	$	3,881	$	-	$	-	$	142,081
Commercial and multi-family		1,039,519		6,263		10,811		-		213		1,056,806
Construction		70,391		476		-		-		-		70,867
Commercial business(1)		57,567		1,789		4,000		-		88		63,444
Home equity(2)		31,052		816		549		-		-		32,417
Consumer		1,249		14		6		-		-		1,269
Sub-total:	$	1,331,585	$	15,751	$	19,247	$	-	$	301	$	1,366,884
Acquired loans recorded at fair value:
Residential one-to-four family	$	51,628	$	626	$	4,056	$	-	$	-		56,310
Commercial and multi-family		55,216		1,311		3,895		-		-		60,422
Construction		-		-		-		-		-		-
Commercial business(1)		4,460		-		-		-		-		4,460
Home equity(2)		12,652		424		782		-		19		13,877
Consumer		225		-		-		-		-		225
Sub-total:	$	124,181	$	2,361	$	8,733	$	-	$	19	$	135,294
Acquired loans with deteriorated credit:
Residential one-to-four family	$	147	$	272	$	1,024	$	-	$	-		1,443
Commercial and multi-family		230		523		-		-		-		753
Construction		-		-		-		-		-		-
Commercial business(1)		-		-		-		-		-		-
Home equity(2)		-		-		-		-		-		-
Consumer		-		-		-		-		-		-
Sub-total:	$	377	$	795	$	1,024	$	-	$	-	$	2,196
Total Gross Loans	$	1,456,143	$	18,907	$	29,004	$	-	$	320	$	1,504,374

________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

37

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table presents the unpaid principal balance and the related recorded investment of acquired loans included in our Consolidated Statements of Financial Condition. (In Thousands):

	June 30,		December 31,
	2017		2016
Unpaid principal balance	$	120,243	$	140,049
Recorded investment		120,715		137,045

The following table presents changes in the accretable discount on loans acquired for the three and sixmonths ended June 30, 2017 and 2016. (In Thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Balance, Beginning of Period	$	38,245	$	49,879	$	39,119	$	53,612
Accretion		(5,605)		(3,674)		(6,559)		(7,602)
Net Reclassification from Non-Accretable Difference		80		127		160		322
Balance, End of Period	$	32,720	$	46,332	$	32,720	$	46,332

The following table presents changes in the non-accretable yield on loans acquired for the three and six months ended June 30, 2017 and 2016. (In Thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Balance, Beginning of Period	$	2,478	$	2,846	$	2,558	$	3,041
Loans Sold		-				-
Net Reclassification to Accretable Difference		(80)		(127)		(160)		(322)
Balance, End of Period	$	2,398	$	2,719	$	2,398	$	2,719

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Note 7 – Fair Values of Financial Instruments

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

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

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

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

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

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

			(Level 1)		(Level 2)
			Quoted Prices in		Significant		(Level 3)
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
Description	Total		Assets		Inputs		Inputs
As of June 30, 2017:
Securities available for sale - Residential mortgage-backed securities, Municipal obligations and Preferred Stock	$	105,803	$	-	$	105,803	$	-
As of December 31, 2016:
Securities available for sale — Residential mortgage-backed securities, Municipal obligations and Preferred Stock	$	94,765	$	-	$	94,765	$	-

The Company’s policy is to recognize transfers between levels as of the actual date of the event or change in circumstances that caused the transfer. There were no transfers of assets or liabilities into or out of Level 1, Level 2, or Level 3 of the fair value hierarchy during the six months endedJune30, 2017 and 2016.

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

			(Level 1)		(Level 2)
			Quoted Prices in		Significant		(Level 3)
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
Description	Total		Assets		Inputs		Inputs
As of June 30, 2017
Impaired Loans	$	11,334	$	-	$	-	$	11,334
Other real estate owned	$	2,626	$	-	$	-	$	2,626
As of December 31, 2016:
Impaired Loans	$	10,519	$	-	$	-	$	10,519
Other real estate owned	$	3,525	$	-	$	-	$	3,525

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Note 7 – Fair Values of Financial Instruments (Continued)

The following tables present additional quantitative information as of June30, 2017 and December 31, 2016 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	Range
		Estimate	Techniques	Input
June 30, 2017:
Impaired Loans	$	11,334	Appraisal of collateral (1)	Appraisal adjustments (2)	0%-10%
				Liquidation expenses (3)	0%-10%
Other real estate owned	$	2,626	Appraisal of collateral (1)	Appraisal adjustments (2)	0%-10%
				Liquidation expenses (3)	0%-10%

		Fair Value	Valuation	Unobservable	Range
		Estimate	Techniques	Input
December 31, 2016:
Impaired Loans	$	10,519	Appraisal of collateral (1)	Appraisal adjustments (2)	0%-10%
				Liquidation expenses (3)	0%-10%
Other real estate owned	$	3,525	Appraisal of collateral (1)	Appraisal adjustments (2)	0%-10%
				Liquidation expenses (3)	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 identifiable.

(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.

(3) Includes qualitative adjustments by management and estimated liquidation expenses.

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 June 30, 2017 and December 31, 2016.

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 those assets’ fair values.

Securities

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

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

The fair value of loans held for sale is determined, when possible, using quoted secondary-market prices. If no such quoted prices exist, the fair value of a loan is determined using quoted prices for a similar loan or loans, adjusted for specific attributes of that loan. Loans held for sale are carried at their cost as of June 30, 2017 and December 31, 2016.

Loans Receivable (Carried at Cost)

The fair value of loans are estimated using discounted cash flow analyses, using market rates at the balance sheet date 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.

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Note 7 – Fair Values of Financial Instruments (Continued)

Impaired Loans (Generally Carried at Fair Value)

A loan is impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or as a practical expedient, at the loans observable market price or the fair value of the collateral if the loan is collateral dependent. 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 June 30, 2017 and December 31, 2016 consisted of the loan balances of $14.72 million and $14.05 million, net of a valuation allowance of $3.39 million and $3.53 million, respectively.

Real Estate Owned (Generally Carried at Fair Value)

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

FHLB of New York Stock (Carried at Cost)

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

Interest Receivable and Payable (Carried at Cost)

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

Deposits (Carried at Cost)

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

Long-Term Debt (Carried at Cost)

Fair values of long-term 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. These 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

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.

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Note 7 – Fair Values of Financial Instruments (Continued)

The carrying values and estimated fair values of financial instruments were as follows as of June30, 2017 and December 31, 2016:

		As of June 30, 2017
					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	$	75,047	$	75,047	$	75,047	$	-	$	-
Interest-earning time deposits		980		980		980		-		-
Securities available for sale		105,803		105,803		-		105,803		-
Loans held for sale		536		542		-		542		-
Loans receivable, net		1,577,181		1,590,340		-		-		1,590,340
FHLB of New York stock, at cost		9,913		9,913		-		9,913		-
Accrued interest receivable		5,666		5,666		-		5,666		-
Financial liabilities:
Deposits		1,496,260		1,499,088		881,731		617,357		-
Borrowings		174,000		173,500		-		173,500		-
Subordinated debentures		4,124		4,112		-		4,112		-
Accrued interest payable		775		775		-		775		-

		As of December 31, 2016
					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	$	65,038	$	65,038	$	65,038	$	-	$	-
Interest-earning time deposits		980		980		980		-		-
Securities available for sale		94,765		94,765		-		94,765		-
Loans held for sale		4,153		4,273		-		4,273		-
Loans receivable, net		1,485,159		1,515,088		-		-		1,515,088
FHLB of New York stock, at cost		9,306		9,306		-		9,306		-
Accrued interest receivable		5,573		5,573		-		5,573		-
Financial liabilities:
Deposits		1,392,205		1,384,578		834,665		549,913		-
Borrowings		175,000		176,109		-		176,109		-
Subordinated debentures		4,124		4,150		-		4,150		-
Accrued interest payable		825		825		-		825		-

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Note 8 – Definitive Merger Agreement

On June 7, 2017, the Company entered into an Agreement and Plan of Reorganization (the "Agreement") with IA Bancorp, Inc. ("IAB"), providing for, among other things, the merger of IAB with and into the Company (the "Merger"), with the Company as the surviving entity. The Agreement also provides for the merger of Indus-American Bank, a New Jersey chartered bank and wholly owned subsidiary of IAB, with and into the Bank, with the Bank as the surviving entity. The Agreement has been unanimously approved by the boards of directors of each of the Company and IAB.

Subject to the terms and conditions of the Agreement, at the effective time of the Merger (the "Effective Time"), IAB shareholders will have the right to receive, for each share of IAB common stock, either (i) 0.189 of a share of the Company’s common stock, or (ii) $3.05 in cash, at the election of such holder, subject to adjustment if IAB's tangible common equity falls below a certain level. All such elections are subject to adjustment on a pro rata basis, so that approximately 20% of the aggregate consideration paid to IAB shareholders will be cash and approximately 80% will be the Company’s common stock. In addition, the Company is issuing two series of preferred stock in exchange for two outstanding series of IAB preferred stock. The two series of the Company’s preferred stock will have terms substantially similar to the terms of the two series of IAB preferred stock.

At the Effective Time, each option granted by IAB to purchase shares of IAB common stock under IAB's equity plan that is unexpired, unexercised and outstanding, whether vested or unvested, will be canceled and converted into the right to receive a cash payment equal to the difference, if positive, between $3.05 and the exercise price of the option.

The Agreement contains certain termination rights for both the Company and IAB and further provides that a termination fee of $800,000 will be payable by IAB to the Company upon termination of the Agreement under certain specified circumstances. Subject to regulatory and shareholder approval, we anticipate the Merger to close in the fourth quarter of 2017.

Note 9 – Subsequent Events

The Company received a court order, dated July 5, 2017 (the “Order”), requiring the Company to pay $1.0 million to counsel for the plaintiff class for that counsel’s fees and other costs in the previously disclosed shareholder class action lawsuit, Kube v. Pamrapo Bancorp, Inc., et al. (the “Kube Action”). The award in the aforesaid Order was related to the Order and Final Judgment, entered by the court on September 21, 2015.The full amount of the Order has been accrued and recorded to non-interest expense through June 30, 2017.  

The Company is involved in an on-going lawsuit with its insurance carrier (see “Legal Proceedings”) to recover the above amount and other additional costs incurred in the Kube action.

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, possible materially, from those that we anticipated in our forward-looking statements and future results could differ materially from historical performance.

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

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

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

· increase in unemployment levels and slowdowns in economic growth;

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

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

· the credit risk associated with our loan portfolio;

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

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

· deposit flows;

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

· monetary and fiscal policies of the federal government;

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

· inflation;

· demands for our loan products;

· demand for financial services;

· competition;

· changes in the securities or secondary mortgage markets;

· changes in management’s business strategies;

· our ability to enter new markets successfully;

· our ability to successfully integrate acquired businesses;

· changes in consumer spending;

· our ability to retain key employees;

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

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

43

· 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 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 June 30, 2017 we had approximately $1.816 billion in consolidated assets, $1.496 billion in deposits and $132.8 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 June 30, 2017 the Bank operated through twenty-two branches in Bayonne, Carteret, Colonia, Edison, Jersey City, Hoboken, Fairfield, Holmdel, Lodi, Lyndhurst, Monroe Township, Rutherford, South Orange, Union, and Woodbridge, New Jersey, as well as two branches in Staten Island, NY, and through executive offices located at 104-110 Avenue C and an administrative office located at 591-595 Avenue C, Bayonne, New Jersey 07002. The Bank’s deposit accounts are insured by the FDIC, and the Bank is a member of the Federal Home Loan Bank System.

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

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

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

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

For a description of the merger recently entered into by the Company and a recent judgment against the Company, see Notes 8 and 9 to the Company’s unaudited financial statements.

Critical Accounting Policies

The preparation of the Consolidated Financial Statements in accordance with U.S. GAAP requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenue and expenses. We regularly evaluate these estimates and assumptions including those used to determine the allowance for loan losses, deferred taxes, fair value measurements, goodwill and other intangible assets. We base our estimates on historical experience and various other factors and assumptions that are believed to be reasonable under the circumstances. These form the basis for making judgments on the carrying value of assets and liabilities that are not readily apparent from other sources. Although our current estimates contemplate current economic conditions and how we expect them to change in the future, for the remainder of 2017, it is reasonably possible that actual conditions may be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition. Actual results may differ from these estimates under different assumptions or conditions.

See further discussion of these critical accounting policies in our Annual Report on Form 10-K for the year ended December 31, 2016 and Note 1, Basis of Presentation, to the unaudited Consolidated Financial Statements. There has been no change in critical accounting policies since the Company’s last reported Form 10-K.

Financial Condition

Total assets increased by $107.6 million, or 6.3 percent, to $1.816 billion at June 30, 2017 from $1.708 billion at December 31, 2016. The increase in total assets occurred primarily as a result of an increase in loans receivable of $92.0 million, an increase in cash and cash equivalents of $10.0 million, and an increase in securities available for sale of $11.0 million. Management is concentrating on maintaining adequate liquidity in anticipation of funding loans in the loan pipeline as well as seeking opportunities to purchase securities in the secondary market that provide competitive returns in a risk-mitigated environment. It is our intention to grow our assets at a measured pace consistent with our capital levels and as business opportunities permit.

Loans receivable increased by $92.0 million, or 6.2 percent, to $1.577 billion at June 30, 2017 from $1.485 billion at December 31, 2016, and is consistent with the Company’s growth strategy for 2017. The increase resulted primarily from increases of $18.5 million in residential real estate loans, $65.6 million in commercial real estate and multi-family loans, $2.5 million in construction loans, $4.1 million in commercial business loans and $2.1 million in home equity loans and home equity lines of credit. As of June 30, 2017, the allowance for loan losses was $18.0 million, or 116.2 percent, of non-performing loans and 0.97 percent of gross loans.

Total cash and cash equivalents increased by $10.0 million, or 15.4 percent, to $75.0 million at June 30, 2017 from $65.0 million at December 31, 2016 due to the Company’s strategy to increase our deposit base and success of our 17-month promotional CD product in the first quarter of 2017.

Securities available for sale increased by $11.0 million, or 11.6 percent, to $105.8 million at June 30, 2017 from $94.8 million at December 31, 2016 as the Company deployed excess cash to improve returns on earning assets and liquidity.

Deposit liabilities increased by $104.1 million, or 7.5 percent, to $1.496 billion at June 30, 2017 from $1.392 billion at December 31, 2016. The increase resulted primarily from increases of $69.5 million in certificates of deposit, $11.1 million in NOW deposit accounts, $10.4 million in non-interest bearing deposit accounts, $9.3 million in money market checking accounts and $6.5 million in savings and club accounts. In addition to organic deposit growth resulting from the opening of seven additional branches over the last 18 months, the Company has also added listing service certificates of deposit and brokered certificates of deposit to fund loan growth, which totaled $31.8 million and $17.9 million, respectively, at June 30, 2017.

44

Long-term debt increased by $8.0 million, or 5.2 percent, to $163.0 million at June 30, 2017 from $155.0 million at December 31, 2016. The purpose of these borrowings reflected the use of long-term Federal Home Loan Bank advances to augment deposits as the Company’s funding source for originating loans and investing in investment securities. Short-term debt decreased by $9.0 million, or 45.0 percent, to $11.0 million at June 30, 2017 from $20.0 million at December 31, 2016. The weighted average interest rate of borrowings was 2.26 percent at June 30, 2017.

Stockholders’ equity increased by $1.7 million, or 1.3 percent, to $132.8 million at June 30, 2017 from $131.1 million at December 31, 2016. The increase in stockholders’ equity was primarily attributable to proceeds received from the issuance of $9.5 million of series D 4.5 percent non-cumulative perpetual preferred stock, as well as an increase in retained earnings of $2.0 million for the six months ended June 30, 2017, partly offset by the redemption of $11.7 million of series A and B 6 percent noncumulative perpetual preferred stock that occurred in the first quarter of 2017. The Company accrued a dividend payable for the second quarter on our outstanding preferred stock of $166,000 which will be paid in the third quarter.

45

Results of Operations comparison for the Three Months Ended June 30, 2017 and 2016

Net income increased $932,000, or 59.0 percent, to $2.5 million for the three months ended June 30, 2017, compared with $1.6 million for the three months ended June 30, 2016. The increase in net income was primarily related to an increase in total interest income, a decrease in total interest expense, an increase in total non-interest income, partly offset by a higher provision for loan losses and a higher income tax provision for the three months ended June 30, 2017 as compared to the three months ended June 30, 2016.

Net interest income increased by $1.7 million, or 12.7 percent, to $15.1 million for the three months ended June 30, 2017 from $13.4 million for the three months ended June 30, 2016. The increase in net interest income resulted primarily from an increase in the average balance on total interest earning assets of $72.1 million, or 4.31 percent, to $1.747 billion for the three months ended June 30, 2017 from $1.675 billion for the three months ended June 30, 2016, as well as an increase in the average yield on total interest earning assets of 15 basis points, or 3.40 percent, to 4.37 percent for the three months ended June 30, 2017 from 4.22 percent for the three months ended June 30, 2016.

Interest income on loans receivable increased by $763,000, or 4.4 percent, to $18.0 million for the three months ended June 30, 2017 from $17.3 million for the three months ended June 30, 2016. The increase was primarily attributable to an increase in the average balance of loans receivable of $129.3 million, or 8.9 percent, to $1.578 billion for the three months ended June 30, 2017 from $1.448 billion for the three months ended June 30, 2016, partly offset by a decrease in the average yield on loans receivable of 20 basis points, or 4.14 percent, to 4.57 percent for the three months ended June 30, 2017 from 4.77 percent for the three months ended June 30, 2016. The increase in the average balance of loans receivable was in accordance with the Company’s growth strategy, which included growing the Bank’s geographic footprint vis-à-vis our organic branching strategy and the hiring of seasoned loan and business development officers. The decrease in average yield on loans reflected the competitive price environment prevalent in the Company’s primary market area on loan facilities, as well as the repricing downward of certain variable rate loans.

Interest income on investment securities increased by $712,000, to $762,000 for the three months ended June 30, 2017 from $50,000 for the three months ended June 30, 2016. The increase was primarily attributable to an increase in the average balance of investment securities of $94.8 million, or 928.0 percent, to $105.0 million for the three months ended June 30, 2017 from $10.2 million for the three months ended June 30, 2016, and an increase in the average yield on investment securities of 34 basis points, or 17.3 percent, to 2.30 percent, for the three months ended June 30, 2017 from 1.96 percent for the three months ended June 30, 2016.

Interest income on other interest-earning assets decreased by $87,000, or 23.6 percent, to $281,000 for the three months ended June 30, 2017 from $368,000 for the three months ended June 30, 2016. The decrease was primarily attributable to a decrease in the average balance of other interest-earning deposits of $152.0 million, or 70.4 percent, to $63.9 million for the three months ended June 30, 2017 from $215.9 million for the three months ended June 30, 2016, partly offset by an increase in the average yield on other interest-earning assets of 108 basis points, or 158.0 percent, to 1.76 percent for the three months ended June 30, 2017 from 0.68 percent for the three months ended June 30, 2016. The decrease in the average balance of other interest-earning assets related to a decrease in cash as funds were deployed for repayment of Federal Home Loan Bank (“FHLB”) borrowings, purchases of investment securities and to fund loan growth, while the increase in the average yield primarily resulted from increases in the Fed Funds rate.

Total interest expense decreased by $312,000, or 7.2 percent, to $4.0 million for the three months ended June 30, 2017 from $4.3 million for the three months ended June 30, 2016, primarily due to the decrease in borrowing expense. Despite an increase in the average balance of interest-bearing liabilities of $49.7 million, or 3.5 percent, to $1.472 billion for the three months ended June 30, 2017 from $1.422 billion for the three months ended June 30, 2016, the average cost of funds decreased 12 basis points, or 10.4 percent, to 1.09 percent for the three months ended June 30, 2017 from 1.21 percent for the three months ended June 30, 2016. The average balance of total deposit liabilities increased by $94.2 million, or 7.8 percent, to $1.306 billion for the three months ended June 30, 2017 from $1.212 billion for the three months ended June 30, 2016, and the average cost of deposits remained unchanged at 0.89 percent for both three-month periods. The average balance of high-cost borrowings decreased by $44.5 million, or 21.2 percent, to $165.5 million for the three months ended June 30, 2017 from $210.0 million for the three months ended June 30, 2016, and the average cost of borrowings decreased 47 basis points, or 15.4 percent, to 2.63 percent, for the three months ended June 30, 2017 from 3.10 percent for the three months ended June 30, 2016. The decrease in borrowings was the result of scheduled repayments of Federal Home Loan Bank advances.

Net interest margin was 3.45 percent for the three-month period ended June 30, 2017 and 3.19 percent for the three-month period ended June 30, 2016. The improvement in the net interest margin was the result of the repayment of higher cost FHLB borrowings in mid-2016, partly offset by competitive pressures in attracting new loans and deposits, as evidenced by a decline in the average yield on loans.

The provision for loan losses increased by $739,000, to $776,000 for the three months ended June 30, 2017 from $37,000 for the three months ended June 30, 2016. The provision for loan losses is established based upon management’s review of the Company’s loans and consideration of a variety of factors, including but not limited to: (1) the risk characteristics of the loan portfolio; (2) current economic conditions; (3) actual losses previously experienced; (4) the dynamic activity and fluctuating balance of loans receivable; and (5) the existing level of reserves for loan losses that are probable and estimable. During the three months ended June 30, 2017, the Company experienced $338,000 in net charge-offs compared to $133,000 in net recoveries for the three months ended June 30, 2016. The Bank had non-performing loans totaling $15.5 million, or 0.97 percent, of gross loans at June 30, 2017 and $15.7 million, or 1.04 percent, of gross loans at December 31, 2016. The allowance for loan losses was $18.0 million, or 1.13 percent, of gross loans at June 30, 2017, $17.2 million, or 1.15 percent, of gross loans at December 31, 2016 and $18.3 million, or 1.27 percent, of gross loans at June 30, 2016. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates. Management assesses the allowance for loan losses on a quarterly basis and makes provisions for loan losses as necessary in order to maintain the adequacy of the allowance. While management uses available information to recognize losses on loans, future loan loss provisions may be necessary based on changes in the aforementioned criteria. In addition various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require the Company to recognize additional provisions based on their judgment of information available to them at the time of their examination. Management believes that the allowance for loan losses was adequate at June 30, 2017 and December 31, 2016.

Total non-interest income increased by $516,000, or 34.3 percent, to $2.0 million for the three months ended June 30, 2017 from $1.5 million for the three months ended June 30, 2016. The increase was primarily attributable to income gained from sales on other real estate owned properties of $197,000 for the three months ended June 30, 2017 with no comparable figure for the three months ended June 30, 2016, an increase in fees and service charges of $102,000, or 13.9 percent, to $838,000 for the three months ended June 30, 2017 from $736,000 for the three months ended June 30, 2016, a loss on bulk sale of impaired loans held in the portfolio of $285,000 for the three months ended June 30, 2016 with no comparable figure for the three months ended June 30, 2017, as well as an increase in other non-interest income of $228,000, or 876.9 percent, to $254,000 for the three months ended June 30, 2017 from $26,000 for the three months ended June 30, 2016. The increase in total non-interest income was partly offset by a decrease in gains on sale of loans of $296,000, or 28.8 percent, to $733,000 for the three months ended June 30, 2017 from $1.0 million for the three months ended June 30, 2016. The increase in other non-interest income related to $237,000 of proceeds from a legal settlement in the second quarter of 2017.

Total non-interest expense decreased by $18,000, or 0.1 percent, to $12.1 million for the three months ended June 30, 2017 as compared to the three months ended June 30, 2016. Salaries and employee benefits decreased by $282,000, or 4.6 percent, to $5.9 million for the three months ended June 30, 2017 from $6.2 million for the three months ended June 30, 2016, primarily related to a reduction in workforce over the last 12 months. Data processing expense decreased by $155,000, or 18.6 percent, to $678,000 for the three months ended June 30, 2017 from $833,000 for the three months ended June 30, 2016, primarily related to cost efficiencies achieved with the conversion to a new core system. Advertising expense decreased by $275,000, or 70.5 percent, to $115,000 for the three months ended June 30, 2017 from $390,000 for

46

the three months ended June 30, 2016, partly related to advertising efforts with the opening of several de novo branches in 2016. Professional fee expense increased by $900,000, or 186.3% percent, to $1.4 million for the three months ended June 30, 2017 from $483,000 for the three months ended June 30, 2016, primarily related to counsel fees and litigation expenses awarded to the plaintiff’s class counsel of $1.0 million in the matter of Kube v. Pamrapo Bancorp, Inc. et al. Other non-interest expense consisted of occupancy and equipment, director fees, regulatory assessments, other real estate owned (net), and other fees/expenses.

The income tax provision increased by $563,000, or 51.9 percent, to $1.6 million for the three months ended June 30, 2017 from $1.1 million for the three months ended June 30, 2016. The increase in income tax provision was a result of higher taxable income during the three-month period ended June 30, 2017 as compared with the three months ended June 30, 2016. The consolidated effective tax rate for the three months ended June 30, 2017 was 39.6 percent compared to 40.7 percent for the three months ended June 30, 2016.

Results of Operations comparison for the Six Months Ended June 30, 2017 and 2016

Net income increased $1.8 million, or 50.1 percent, to $5.4 million for the six months ended June 30, 2017 compared with $3.6 million for the six months ended June 30, 2016. The increase in net income was primarily related to increases in net interest income and non-interest income, and a decrease in non-interest expense, partly offset by an increase in the provision for loan losses and a higher income tax provision for the six months ended June 30, 2017 as compared to the six months ended June 30, 2016.

Net interest income increased by $2.6 million, or 9.6 percent, to $29.7 million for the six months ended June 30, 2017 from $27.1 million for the six months ended June 30, 2016. The increase in net interest income was primarily related to an increase in the average balance of total interest-earning assets of $74.3 million, or 4.5 percent, to $1.724 billion for the six months ended June 30, 2017 as compared to $1.650 billion for the six months ended June 30, 2016 as well as an increase in the average yield in total interest-earning assets of 4 basis points, or 1.1 percent, to 4.35 percent for the six months ended June 30, 2017 from 4.31 percent for the six months ended June 30, 2016.

Interest income on loans receivable increased by $812,000, or 2.3 percent, to $35.6 million for the six months ended June 30, 2017 from $34.8 million for the six months ended June 30, 2016. The increase was primarily attributable to an increase in the average balance of loans receivable of $105.2 million, or 7.3 percent, to $1.550 billion for the six months ended June 30, 2017 from $1.445 billion for the six months ended June 30, 2016, partly offset by a decrease in the average yield on loans receivable of 22 basis points, or 4.6 percent, to 4.59 percent for the six months ended June 30, 2017 from 4.81 percent for the six months ended June 30, 2016. The increase in the average balance of loans receivable was in accordance with the Company’s growth strategy, which included the hiring of additional loan production and business development personnel and the opening of seven additional branches over the last 18 months. The decrease in average yield on loans reflected the competitive price environment prevalent in the Company’s primary market area on loan facilities, as well as the repricing downward of certain variable rate loans.

Interest income on investment securities increased by $1.3 million, to $1.4 million for the six months ended June 30, 2017 from $124,000 for the six months ended June 30, 2016. The increase in interest income on investment securities was primarily related to an increase in the average balance of investment securities of $79.5 million, or 378.8 percent, to $100.5 million for the six months ended June 30, 2017 from $21.0 million for the six months ended June 30, 2016 and an increase in the average yield of 38 basis points, or 13.1 percent, to 3.27 percent, for the six months ended June 30, 2017 from 2.89 percent for the six months ended June 30, 2016.

Interest income on other interest-earning assets decreased by $71,000, or 11.2 percent, to $561,000 for the six months ended June 30, 2017 from $632,000 for the six months ended June 30, 2016, primarily due to the decrease in borrowing expense. The decrease was primarily related to a decrease in the average balance of other interest-earning assets of $110.5 million, or 60.1 percent, to $73.3 million for the six months ended June 30, 2017 from $183.8 million for the six months ended June 30, 2016, partly offset by an increase in the average yield on other interest-earning assets of 43 basis points, or 104.3 percent, to 0.85 percent, for the six months ended June 30, 2017 from 0.42 percent for the six months ended June 30, 2016. The decrease in the average balance of other interest-earning assets related to a decrease in cash as funds were deployed for repayment of Federal Home Loan Bank (“FHLB”) borrowings, purchases of investment securities, and to fund loan growth, while the increase in the average yield resulted primarily from increases in the Fed Funds rate.

Total interest expense decreased by $595,000, or 7.0 percent, to $7.9 million for the six months ended June 30, 2017 from $8.5 million for the six months ended June 30, 2016, primarily due to the increase in borrowing expense. Despite an increase in the average balance of interest-bearing liabilities of $61.1 million, or 4.4 percent, to $1.460 billion for the six months ended June 30, 2017 from $1.399 billion for the six months ended June 30, 2016, the average cost of funds decreased 13 basis points, or 11.0 percent, to 1.08 percent for the six months ended June 30, 2017 from 1.21 percent for the six months ended June 30, 2016. The average balance of total deposit liabilities increased by $106.7 million, or 9.0 percent, to $1.296 billion for the six months ended June 30, 2017 from $1.190 billion for the six months ended June 30, 2016, and the average cost of deposits increased 1 basis point to 0.88 percent for the six months ended June 30, 2017 from 0.87 percent for the six months ended June 30, 2016. The average balance of high-cost borrowings decreased by $45.7 million, or 21.8 percent, to $163.7 million for the six months ended June 30, 2017 from $209.4 million for the six months ended June 30, 2016, and the average cost of borrowings decreased 50 basis points, or 16.0 percent, to 2.63 percent for the six months ended June 30, 2017 from 3.13 percent for the six months ended June 30, 2016. The decrease in borrowings was the result of scheduled repayments of Federal Home Loan Bank advances.

The net interest margin was 3.44 percent for the six-month period ended June 30, 2017 and 3.28 percent for the six month period ended June 30, 2016. The improvement in the net interest margin was partly the result of the repayment of higher cost FHLB borrowings in mid-2016, partly offset by competitive pressures in attracting new loans and deposits, as evidenced by a decline in the average yield on loans and an increase in the average cost of deposits.

The provision for loan losses increased by $1.0 million, or 463.7 percent, to $1.3 million for the six months ended June 30, 2017 from $226,000 for the six months ended June 30, 2016. The provision for loan losses is established based upon management’s review of the Company’s loans and consideration of a variety of factors, including but not limited to: (1) the risk characteristics of the loan portfolio; (2) current economic conditions; (3) actual losses previously experienced; (4) the dynamic activity and fluctuating balance of loans receivable; and (5) the existing level of reserves for loan losses that are probable and estimable. During the six months ended June 30, 2017, the Company experienced $519,000 in net charge-offs compared to $70,000 in net recoveries for the six months ended June 30, 2016. The Bank had non-performing loans totaling $15.5 million, or 0.97 percent, of gross loans at June 30, 2017 and $15.7 million, or 1.04 percent, of gross loans at December 31, 2016. The allowance for loan losses was $18.0 million, or 1.13 percent, of gross loans at June 30, 2017, $17.2 million, or 1.15 percent, of gross loans at December 31, 2016 and $18.3 million, or 1.27 percent, of gross loans at June 30, 2016.  The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates. Management assesses the allowance for loan losses on a quarterly basis and makes provisions for loan losses as necessary in order to maintain the adequacy of the allowance. While management uses available information to recognize losses on loans, future loan loss provisions may be necessary based on changes in the aforementioned criteria. In addition various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require the Company to recognize additional provisions based on their judgment of information available to them at the time of their examination. The increase in the allowance for loan loss reflected growth in the loan portfolio. Management believes that the allowance for loan losses was adequate at June 30, 2017 and December 31, 2016.

Total non-interest income increased by $1.1 million, or 37.2 percent, to $4.3 million for the six months ended June 30, 2017 from $3.2 million for the six months ended June 30, 2016. Total non-interest income increased primarily as a result of increased gain on sale of other real estate owned properties which increased by $1.3 million for the six months ended June 30, 2017 with no comparable gain for the six months ended June 30, 2016, an increase in fees and service charges of $187,000, or 12.9 percent, to $1.6 million for the six months ended June 30, 2017 from $1.4 million for the six months ended June 30, 2016, an increase in other non-interest income of

47

$237,000, or 526.7 percent, to $282,000 for the six months ended June 30, 2017 from $45,000 for the six months ended June 30, 2016 and a loss on the bulk sale of impaired loans held in the portfolio of $285,000 for the six months ended June 30, 2016 with no comparable sale for the six months ended June 30, 2017. The increase in total non-interest income was partly offset by a decrease in gain on sale of loans of $882,000, or 45.2 percent, to $1.1 million for the six months ended June 30, 2017 from $2.0 million for the six months ended June 30, 2016. The sales of loans and other real estate loans is generally based on market conditions. The increase in other non-interest income related to $237,000 of proceeds from a legal settlement in the second quarter of 2017.

Total non-interest expense decreased by $193,000, or 0.8 percent, to $23.7 million for the six months ended June 30, 2017 from $23.9 million for the six months ended June 30, 2016. Salaries and benefits expense decreased by $216,000, or 1.8 percent, to $12.0 million for the six months ended June 30, 2017 from $12.2 million for the six months ended June 30, 2016, primarily related to a reduction in workforce over the last 12 months. Data processing expense decreased by $564,000, or 29.8 percent, to $1.3 million for the six months ended June 30, 2017 from $1.9 million for the six months ended June 30, 2016, primarily related to cost efficiencies achieved with the conversion to a new core system. Advertising expense decreased by $495,000, or 65.7 percent, to $258,000 for the six months ended June 30, 2017 from $753,000 for the six months ended June 30, 2016, partly related to advertising efforts with the opening of several de novo branches in 2016. Professional fee expense increased by $836,000, or 91.9 percent, to $1.7 million for the six months ended June 30, 2017 from $910,000 for the six months ended June 30, 2016, primarily related to counsel fees and litigation expenses awarded to the plaintiff’s class counsel of $1.0 million in the matter of Kube v. Pamrapo Bancorp, Inc. et al. Other non-interest expense consisted of occupancy and equipment, director fees, regulatory assessments, other real estate owned (net), and other fees/expenses.

Income tax provision increased by $1.1 million, or 45.1 percent, to $3.6 million for the six months ended June 30, 2017 from $2.5 million for the six months ended June 30, 2016. The increase in income tax provision was a result of higher taxable income during the six months ended June 30, 2017 as compared with the six months ended June 30, 2016. The consolidated effective tax rate for the six months ended June 30, 2017 was 39.8 percent compared to 40.6 percent for the six months ended June 30, 2016.

Liquidity and Capital Resources

Liquidity

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

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

At June30, 2017 and December 31, 2016, the Company had $11.0 million and $20.0 million ofovernight borrowings, respectively, outstanding with the FHLB. The Company utilizes overnight borrowings from time to time to fund short-term liquidity needs. The Company had total borrowings of $178.1 million at June 30, 2017and  $179.1 million at December 31, 2016. The average rate of these FHLB borrowings was 2.19 percent at June 30, 2017, as compared with 2.45 percent at December 31, 2016.

The Company had the ability at June 30, 2017 to obtain additional funding from the FHLB of up to $65.5 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 $364.7million at June30, 2017. Based upon historical experience data, management estimates that a significant portion of such deposits will remain with the Company.

Capital Resources

At June 30, 2017, and December 31, 2016, BCB Community Bank exceeded all of its regulatory capital requirements to which it was subject. The following table sets forth the regulatory capital ratios for BCB Community Bank as well as regulatory capital requirements for the periods presented.

		Actual				For Capital Adequacy Purposes				For Well Capitalized Under Prompt Corrective Action
As of June 30, 2017:
Bank
Total capital (to risk-weighted assets)	$	155,915	10.88	%	$	114,635	8.00	%	$	143,293	10.00	%
Tier 1 capital (to risk-weighted assets)		138,003	9.63			85,976	6.00			114,635	8.00
Common Equity Tier 1 Capital (to risk-weighted assets)		138,003	9.63			64,482	4.50			93,141	6.50
Tier 1 capital (to average assets)		138,003	7.65			72,141	4.00			90,177	5.00
As of December 31, 2016:
Bank
Common Equity Tier 1 Capital (to risk-weighted assets)	$	154,923	11.34	%	$	109,330	8.00	%	$	136,663	10.00	%
Tier 1 capital (to risk-weighted assets)		137,839	10.09			81,998	6.00			109,330	8.00
Common Equity Tier 1 Capital (to risk-weighted assets)		137,839	10.09			61,498	4.50			88,831	6.50
Tier 1 capital (to average assets)		137,839	8.10			68,074	4.00			85,092	5.00

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In July 2013, the FDIC and the other federal bank regulatory agencies issued a final rule that revised their leverage and risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act.  Among other things, the new rule established a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), increased the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and assigned a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property.  The final rule also requires unrealized gains and losses on certain available-for-sale securities holdings and defined benefit plan obligations to be included for purposes of calculating regulatory capital requirements unless a one-time opt-in or opt-out is exercised.  The Bank exercised the opt-out election. The rule limits a banking organization's capital distributions and certain discretionary bonus payments if the banking organization does not hold a "capital conservation buffer" consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements. 

The final rule became effective for the Bank and the Company on January 1, 2015.  The capital conservation buffer requirement is being phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and will increase each subsequent year by an additional 0.625% until reaching its final level of 2.5% on January 1, 2019. For 2017, it is 1.25% of risk-weighted assets. The Bank and the Company currently comply with the minimum capital requirements set forth in the final rule.

At June 30, 2017  and December 31, 2016, the capital ratios of the Bank and the Company exceeded the quantitative capital ratios required for an institution to be considered “well-capitalized.”

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Management of Market Risk

General. 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 quarterly to review our asset/liability policies and interest rate risk position.

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 June 30, 2017. 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. Additional assumptions made in the preparation of the NPV table include prepayment rates on loans and mortgage-backed securities, core deposits without stated maturity dates were scheduled with an assumed term of 48 months, and money market and non-interest bearing accounts were scheduled with an assumed term of 24 months. 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 June 30, 2017. The following sets forth the Company’s NPV as of that date.

							NPV as a % of Assets
Change in Calculation	Net Portfolio Value		$ Change from PAR		% Change from PAR		NPV Ratio		Change
+300bp	$	150,957	$	(59,622)	(28.31)	%	8.91	%	(248)	bps
+200bp		171,769		(38,809)	(18.43)		9.84		(155)	bps
+100bp		193,941		(16,637)	(7.90)		10.79		(60)	bps
PAR		210,579		-	-		11.39		-	bps
-100bp		230,860		20,281	9.63		12.11		72	bps

bp – basis points

The table above indicates that as ofJune 30, 2017, in the event of a 100 basis point increase in interest rates, we would experience a 7.90%  decrease in NPV.

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.

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ITEM 4.

Controls and Procedures

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

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

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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. Other than as set forth below, as of June 30, 2017, 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.

The Company, as the successor to Pamrapo Bancorp, Inc., and in its own corporate capacity, was a named defendant in a shareholder class action lawsuit, Kube v. Pamrapo Bancorp, Inc., et al., filed in the Superior Court of New Jersey, Hudson County, Chancery Division, General Equity (the "Action”).

On September 21, 2015, the court entered an Order and Final Judgment (“Judgment”), whereby the Stipulation of Settlement ("Stipulation") agreed to by the plaintiff class, the Company and the remaining defendants was approved.

Pursuant to the Stipulation, the plaintiff class's counsel reserved the right to seek an award of counsel fees and litigation expenses (“Fees Motion”). The maximum amount which may be awarded as a result of the Fees Motion is $1,000,000. The plaintiff class’s counsel made a Fee Motion to the court seeking a final award of counsel fees and litigation expenses of approximately $1,000,000.The full amount of the Order has been recorded to non-interest expense during the quarter ended June 30, 2017.

The Company and the other defendants in the Action ("Plaintiffs") brought an action ("Carrier Suit") against Progressive Insurance Company ("Progressive"), the Directors' and Officers' Liability insurance carrier for Pamrapo Bancorp, Inc., at the time of its merger with the Company on July 6, 2010, and Colonial American Insurance Company ("Colonial"), the Directors' and Officers' Liability insurance carrier for the Company at the time of the merger. The Carrier Suit seeks, among other claims, indemnification, payment of and/or contribution toward the above settlement, payment of and/or contribution toward the above awards of attorney's fees to the plaintiff class's counsel, and reimbursement of the attorney's fees and defense costs incurred by the Plaintiffs in defending the Action and pursuing the Carrier Suit.

Progressive made a motion to dismiss the Carrier Suit in 2014. The Plaintiffs opposed that motion. That motion was administratively terminated by Order of the court, dated December 3, 2014. By Order of the court, dated December 3, 2014, the Plaintiffs' motion to file an Amended Complaint was granted.  

On or about January 6, 2015, Progressive again made a motion to dismiss the Carrier Suit. The Plaintiffs opposed that motion. That motion was denied by oral decision on October 22, 2015, and by written Order, dated January 20, 2016.   

A Mediation session ("Mediation") was held on March 11, 2015, among the parties. Following the Mediation, the Plaintiffs and Colonial agreed to settle the Plaintiffs’ claims against Colonial for $1,750,000. A Settlement Agreement and Release, dated June 30, 2015, was entered into by the Plaintiffs and Colonial. The Plaintiffs received the settlement amount of $1,750,000 from Colonial on July 9, 2015.   

The Plaintiffs and Progressive did not settle their respective claims at the Mediation. The Carrier Suit continues with respect to these parties. Initial discovery has been exchanged between the parties.

By Order of the court, dated August 10, 2016, the parties were granted permission to serve and file motions for summary judgment by November 9, 2016. Prior to consideration of these motions, a Settlement Conference was held before the court on November 16, 2016. The Plaintiffs and Progressive did not settle their respective claims at that Settlement Conference.  

The parties have filed motions for summary judgment. These motions were returnable before the court on December 5, 2016. A decision on these motions has not been received from the court to date. All discovery has been stayed until disposition of these motions.

The Plaintiffs are vigorously pursuing full recovery.

ITEM 1.A. RISK FACTORS

There have been no changes to the risk factors set forth under Item 1.A Risk Factors as set forth in the Company’s Form 10-K for the year ended December 31, 2016.

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

On June 28, 2012, the Company announced a seventh stock repurchase plan to repurchase 5% or 440,000 shares of the Company’s common stock. On July 17, 2013, the Company announced an eighth stock repurchase plan to repurchase 5% or 400,000 shares of the Company’s common stock. There were no stock purchases for the three months endedJune 30, 2017.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFTEY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit 11.0Computation of Earnings per Share.

Exhibit 31.1 and 31.2  Officers’ Certification filed 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

Signatures

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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: August 7th, 2017	By:	/s/ Thomas Coughlin
		Thomas Coughlin
		President and Chief Executive Officer (Principal Executive Officer)
Date: August 7th, 2017	By:	/s/ Thomas P. Keating
		Thomas P. Keating Senior Vice President and Chief Financial Officer
		(Principal Accounting and Financial Officer)

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