BCB Bancorp, Inc. (NJ) (NASDAQ:BCBP) said it is continuing a broad review of its loan portfolios, capital position and holding-company structure as new President and CEO Thomas O’Brien works to address credit issues tied to prior years of aggressive growth.
O’Brien, who said the earnings call marked his first 60 days at the bank, said the company remains on the timetable he outlined in June and expects to provide more meaningful clarity around Labor Day. The company’s goal is to complete and announce its financial restructuring work during the third quarter.
Dividend Suspension, Margin and Governance Changes
During the quarter, BCB suspended dividends on both its common and preferred shares. O’Brien said the action was intended to retain liquidity at the holding company and build capital at the bank.
The company’s net interest margin increased by roughly 8 basis points during the quarter to above 3%, according to O’Brien. The quarterly loss included a $5.3 million goodwill write-off, which O’Brien said represented the company’s only intangible asset.
O’Brien also said tangible book value was affected by the quarterly loss and by equity compensation granted when he joined the company. While the compensation is earned over five years, it was included in fully diluted share calculations on the first day.
BCB’s board has also decided to change the company’s state of incorporation to Delaware and eliminate staggered director terms. O’Brien said the changes were intended to bring the company into a more contemporary corporate structure.
Credit Review Focuses on C&I and Commercial Real Estate
Management said the bank’s credit issues appear to have originated in a period of overly aggressive growth beginning around 2020 and extending through late 2023 or early 2024. O’Brien said the bank entered businesses it did not fully understand and, in some cases, did not structure or price loans appropriately.
The company is reviewing risk ratings across its portfolios and has found both positive and negative surprises, O’Brien said. While he said there have not been “huge changes” on average, the review is still underway.
Chief Financial Officer and Treasurer Jawad Chaudhry said $16.7 million of the quarter’s $19 million loan-loss provision was directed toward the commercial and industrial portfolio, excluding Business Express loans. The reserve build reflected elevated qualitative risk factors, losses in the portfolio and preliminary feedback from consultants, he said.
Chaudhry said BCB previously expected a major recovery in the C&I portfolio, but no longer holds that expectation. C&I portfolio losses fell to $0.8 million in the first quarter before rising to about $5.8 million in the second quarter.
O’Brien said most recent charge-offs involved Business Express loans, along with two pure C&I loans. He noted that several loans had required near-total write-offs, an outcome he characterized as unusual for banks. Chaudhry said the company recorded close to $13 million in loans charged off at 100% across the fourth quarter and second quarter.
- Management said it has substantially reviewed the smaller-balance Business Express portfolio, including site visits, FICO-score deterioration and payment histories.
- Business Express loan losses totaled about $10 million in 2025 and a similar amount in 2024, Chaudhry said.
- Year-to-date 2026 Business Express losses were $1.1 million, with reserve coverage at 15%.
- O’Brien said the C&I review was approximately halfway complete, while the majority of the commercial real estate portfolio still required additional analysis.
Management described the Business Express portfolio as weaker but said recent losses have moderated. O’Brien cautioned that the portfolio can be “binary,” with borrowers either continuing to perform or ceasing payments with little recovery value available.
Commercial real estate remains an active area of review. O’Brien said the level of criticized and classified loans, while declining somewhat, remains “pretty shockingly high.” He said real estate collateral can provide more value in a workout than a failed C&I loan, but added that the bank must evaluate each loan carefully.
Capital and Holding-Company Constraints
O’Brien said BCB will “always err on the side of keeping the bank well-capitalized,” adding that the bank continues to have a healthy capital base. However, he identified the holding company’s absolute level of double leverage as a key challenge.
Management is modeling multiple capital scenarios and has not yet made capital recommendations to the board. O’Brien said the company must consider all options, including the impact of deferred tax assets, and intends to disclose information as quickly and accurately as possible once its analysis is further advanced.
The company’s deferred tax asset was discussed during the call. O’Brien said management does not currently believe a valuation reserve will be necessary and expects the asset to be utilized efficiently after the credit cleanup. Chaudhry said BCB has consistently generated roughly $25 million of operating revenue per quarter, or approximately $100 million annually, though elevated credit costs have pushed the company into a loss position.
Management also acknowledged that subordinated debt and preferred stock create liquidity and cost pressures at the holding company. O’Brien said deferring interest on subordinated debt would constitute an event of default and is not an action the company plans to take. He said management is considering ways to moderate intermediate-term risks, including potentially creative approaches to the capital structure, but no decisions have been made.
Deposit Strategy and Other Portfolios
O’Brien said BCB has an attractive operating footprint and sees an opportunity to improve deposit gathering and funding costs. However, he said the company does not intend to grow the balance sheet until it has greater certainty around its financial needs.
The company has largely exited consumer lending, according to O’Brien, and its remaining legacy consumer portfolio has performed well. As a result, management has focused its review on portfolios where losses have occurred.
Chaudhry said the cannabis loan portfolio totaled approximately $69 million to $70 million at the end of the second quarter and was not past due to management’s knowledge. O’Brien said most cannabis loans are secured by real estate, though such properties can be specialized and may lose significant value if they must be repurposed.
O’Brien said BCB’s relationships with regulators are “quite good” and that he has maintained an open dialogue regarding the company’s findings and remediation plans. He said the company has no intention of providing surprises to either regulators or investors as the review progresses.
About BCB Bancorp, Inc. (NJ) (NASDAQ:BCBP)
BCB Bancorp, Inc is a bank holding company incorporated in New Jersey and traded on the NASDAQ under the symbol BCBP. Its primary subsidiary, Bergen Commercial Bank, operates as a full-service community bank focused on serving the financial needs of individuals and businesses in the New York metropolitan area. Headquartered in Clifton, New Jersey, the company has built its reputation on personalized banking relationships and local decision-making.
BCB Bancorp offers a comprehensive suite of deposit products, including checking accounts, savings accounts, money market accounts, and certificates of deposit.
