BCB Bancorp (BCBP) 10-K 2007 FY Annual report

EXHIBIT 13

CONSOLIDATED FINANCIAL STATEMENTS

BCB Bancorp, Inc. and Subsidiaries

Consolidated Financial Report

December 31, 2007

BCB Bancorp, Inc. and Subsidiaries

Table of Contents

	Page
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm		1
Consolidated Statements of Financial Condition		2
Consolidated Statements of Income		3
Consolidated Statements of Changes in Stockholders’ Equity		4
Consolidated Statements of Cash Flows		5
Notes to Consolidated Financial Statements		6

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

BCB Bancorp, Inc.

Bayonne, New Jersey

We have audited the accompanying consolidated statements of financial condition of BCB Bancorp, Inc. and Subsidiaries (the “Company”) as of December 31, 2007 and 2006, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2007. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of BCB Bancorp, Inc. and Subsidiaries as of December 31, 2007 and 2006, and the consolidated results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

Beard Miller Company LLP

Pine Brook, New Jersey

March 18, 2008

BCB Bancorp, Inc. and Subsidiaries

Consolidated Statements of Financial Condition

	December 31,
	2007			2006
	(In Thousands, except for share data)
Assets
Cash and amounts due from depository institutions	$	2,970		$	3,400
Interest-bearing deposits		8,810			22,437
Cash and Cash Equivalents		11,780			25,837
Securities available for sale		2,056			-
Securities held to maturity, fair value $165,660 and $146,018    respectively		165,017			148,672
Loans held for sale		2,132			2,976
Loans receivable, net of allowance for loan losses of $4,065 and $3,733 respectively		364,654			318,130
Premises and equipment		5,929			5,885
Federal Home Loan Bank of New York stock		5,560			3,724
Interest receivable		3,776			3,697
Real Estate Owned		287			-
Deferred income taxes		1,352			1,238
Other assets		934			676
Total Assets	$	563,477		$	510,835
Liabilities and Stockholders’ Equity
Liabilities
Non-interest bearing deposits	$	35,897		$	35,275
Interest bearing deposits		362,922			347,472
Total deposits		398,819			382,747
Long-term debt		114,124			74,124
Other liabilities		2,024			2,001
Total Liabilities		514,967			458,872
Stockholders’ Equity
Common stock, stated value $0.06; 10,000,000 shares authorized; 5,078,858 and 5,063,432 shares, respectively, issued		325			324
Paid-in capital		45,795			45,632
Treasury stock, at cost, 440,651 and 55,293 shares, respectively		(7,385	)		(859	)
Retained earnings		9,749			6,866
Accumulated other comprehensive income		26			-
Total Stockholders’ Equity		48,510			51,963
Total Liabilities and Stockholders’ Equity	$	563,477		$	510,835

See notes to consolidated financial statements.

2

BCB Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income

	Years Ended December 31,
	2007		2006		2005
	(In Thousands, Except for Per Share Data)
Interest Income
Loans, including fees	$	24,365	$	22,770	$	18,760
Securities		8,843		8,046		6,297
Other interest-earning assets		1,182		445		71
Total Interest Income		34,390		31,261		25,128

Non-Interest  Income
Fees and service charges	629	595	541
Gain on sales of loans originated for sale	420	635	313
Gain on sale of real estate owned	13	-	-
Gain on sales of securities held to maturity	-	-	28
Other	30	30	33
Total Non-Interest Income	1,092	1,260	915

Non-Interest Expenses
Salaries and employee benefits		5,699		5,210		4,428
Occupancy expense of premises		1,000		900		701
Equipment		1,906		1,734		1,581
Advertising		326		329		164
Other		1,787		1,459		1,332
Total Non-Interest Expenses		10,718		9,632		8,206
Income before Income Taxes		6,947		8,787		7,474
Income Taxes		2,509		3,220		2,745
Net Income	$	4,438	$	5,567	$	4,729

Net Income per Common Share
Basic	$	0.92	$	1.11	$	1.25
Diluted	$	0.90	$	1.08	$	1.20
Weighted Average Number of Common Shares Outstanding
Basic		4,818		5,005		3,769
Diluted		4,943		5,172		3,944

See notes to consolidated financial statements.

3

BCB Bancorp, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

	Common Stock		Paid-In Capital			Treasury Stock			Retained  Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income		Total
	(In Thousands, except for share and per share amounts)
Balance - December 31, 2004	$	239	$	27,725		$	-		$	(1,928	)	$	-	$	26,036
Net sale of common stock (1,265,000 shares)		81		17,409			-			-			-		17,490
Exercise of stock options (43,500 shares)		3		384			-			-			-		387
Treasury stock purchases (51,316 shares)		-		-			(795	)		-			-		(795	)
Net income		-		-			-			4,729			-		4,729
Balance - December 31, 2005		323		45,518			(795	)		2,801			-		47,847
Stock-based compensation		-		25			-			-			-		25
Stock issuance cost		-		(9	)		-			-			-		(9	)
Exercise of stock options (12,816 shares)		1		98			-			-			-		99
Treasury stock purchases (3,977 shares)		-		-			(64	)		-			-		(64	)
Cash dividend ($0.30 per share) declared		-		-			-			(1,502	)		-		(1,502	)
Net income		-		-			-			5,567			-		5,567
Balance - December 31, 2006		324		45,632			(859	)		6,866			-		51,963
Stock-based compensation		-		6			-			-			-		6
Exercise of stock options (15,426 shares)		1		157			-			-			-		158
Treasury stock purchases (385,358 shares)		-		-			(6,526	)		-			-		(6,526	)
Cash dividend ($0.32 per share) declared		-		-			-			(1,555	)		-		(1,555	)
Net income		-		-			-			4,438			-		4,438
Unrealized gain on securities        available for sale, net of        deferred income tax of $18		-		-			-			-			26		26
Total Comprehensive income															4,460
Balance - December 31, 2007	$	325	$	45,795		$	(7,385	)	$	9,749		$	26	$	48,510

See notes to consolidated financial statements.

4

BCB Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

	Years Ended December 31,
	2007			2006			2005
	(In Thousands)
Cash Flows from Operating Activities
Net income	$	4,438		$	5,567		$	4,729
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment		394			342			352
Amortization (accretion), net		(664	)		(657	)		(548	)
Provision for loan losses		600			625			1,118
Stock-based compensation		6			25			-
Deferred income tax (benefit)		(132	)		(241	)		(225	)
Gain on sales of securities held to maturity		-			-			(28	)
Loans originated for sale		(22,993	)		(36,277	)		(17,900	)
Proceeds from sales of loans originated for sale		24,257			34,716			17,433
Gain on sales of loans originated for sale		(420	)		(635	)		(313	)
Gain on sale of real estate owned		(13	)		-			-
(Increase) in interest receivable		(79	)		(593	)		(775	)
Decrease (Increase) in stock subscriptions receivable		-			2,353			(2,353	)
Decrease (Increase) in other assets		(258	)		436			(497	)
Increase in accrued interest payable		214			313			323
Increase (decrease) in other liabilities		(191	)		268			211
Net Cash Provided by Operating Activities		5,159			6,242			1,527

Cash Flows from Investing Activities
Proceeds from repayments on securities held to maturity	21,010		28,845		25,531
Proceeds from sales of securities held to maturity	-		-		7,373
Purchases of securities held to maturity	(37,338	)	(37,500	)	(55,815	)
Purchases of securities available for sale	(2,012	)	-		-
Proceeds from sales of participation interests in loans	6,315		5,432		1,273
Proceeds from sale of real estate owned	1,172		-		-
Purchases of loans	(9,593	)	(7,007	)	(4,645	)
Net increase in loans receivable	(44,645	)	(32,087	)	(35,296	)
Additions to premises and equipment	(438	)	(709	)	(191	)
Purchases of Federal Home Loan Bank of      New York stock	(1,836	)	(946	)	(1,834	)
Net Cash Used in Investing Activities	(67,365	)	(43,972	)	(63,604	)

Cash Flows from Financing Activities
Net increase in deposits		16,072			19,896			25,608
Proceeds of long-term debt		55,000			70,000			50,000
Repayment  of long-term debt		(15,000	)		(50,000	)		-
Net change in short-term borrowings		-			-			(10,000	)
Purchase of treasury stock		(6,526	)		(64	)		(795	)
Cash dividends paid		(1,555	)		(1,502	)		-
Net proceeds from issuance of common stock		158			90			17,877
Net Cash Provided by Financing Activities		48,149			38,420			82,690
Net Increase (Decrease) in Cash and Cash Equivalents		(14,057	)		690			20,613
Cash and Cash Equivalents - Beginning		25,837			25,147			4,534
Cash and Cash Equivalents - Ending	$	11,780		$	25,837		$	25,147
Supplementary Cash Flows Information
Cash paid during the year for:
Income taxes	$	2,860		$	3,120		$	2,905
Interest	$	17,003		$	13,164		$	8,922
Transfer of loans to real estate owned	$	1,446		$	-		$	-

See notes to consolidated financial statements.

5

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 1 - Organization and Stock Offerings

BCB Bancorp, Inc. (the “Company”) is incorporated in the State of New Jersey and is a bank holding company. The common stock  of the Company is listed on the Nasdaq Electronic Bulletin Board and trades under the symbol “BCBP.”

On September 12, 2005, the Company filed a registration statement with the Securities and Exchange Commission proposing to sell approximately 800,000 shares (subsequently amended to 1,100,000 shares) of its common stock, subject to a 15% underwriter’s over-allotment.  On December 19, 2005, 1,100,000 shares of common stock were sold at $15.25 per share, resulting in net proceeds, after offering expenses of $1,167,000, of $15,608,000.  In December 2005, the underwriter exercised their right to purchase 165,000 shares of common stock at $14.26 per share ($15.25 less underwriter’s discount of $0.99), resulting in net proceeds of $2,353,000.  The sale of shares to the underwriter closed on January 5, 2006, at which time the Company received the sale proceeds.  At December 31, 2005, the amount due on the shares purchased by the underwriter are reflected in the consolidated statement of financial condition as stock subscriptions receivable

On April 27, 2005, the Company announced that the Board of Directors had approved a stock repurchase program for the repurchase of up to 5% of the Company’s outstanding common stock equal to approximately 187,096 shares.  The repurchases may be made from time to time as market conditions warrant.  Through December 31, 2005, a total of 51,316 shares of Company common stock were repurchased at a cost of approximately $795,000 or $15.49 per share.  As a consequence of the Company’s decision to raise additional capital, as discussed in the next paragraph, the Company suspended its stock repurchase program until the capital raise was completed.

 During 2006, 3,977 shares were purchased under the repurchase program at an approximate cost of $64,000 or $15.93 per share.  In 2007, the company was actively engaged in the initial stock repurchase plan.  As a result of this active engagement, on April 26, 2007,  the company announced a second stock repurchase plan which provided for the repurchase of  5% or 249,080 shares of the company’s common stock.  During 2007, the bank began and completed the repurchase of all of the shares associated with second 5% stock repurchase plan. Consequently, on November 20, 2007, the company announced a third stock repurchase plan which provided for the repurchase of 5% or 234,002 shares of the Company’s common stock.  During 2007, a total of 385,358 shares of the Company’s common stock was repurchased at a cost of approximately $6.5 million or $16.93 per share.

The Company’s primary business is the ownership and operation of BCB Community Bank (the “Bank”).  The Bank is a New Jersey commercial bank which, as of December 31, 2007, operated at four locations in Bayonne and Hoboken, New Jersey, and is subject to regulation, supervision, and examination by the New Jersey Department of Banking and Insurance and the Federal Deposit Insurance Corporation.  The Bank is principally engaged in the business of attracting deposits from the general public and using these deposits, together with borrowed funds, to invest in securities and to make loans  collateralized by residential and commercial real estate and, to a lesser extent, consumer loans.  BCB Holding Company Investment Corp. (the “Investment Company”) was organized in January 2005 under New Jersey law as a New Jersey investment company primarily to hold investment and mortgage-backed securities.

6

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 2 - Summary of Significant Accounting Policies

Basis of Consolidated Financial Statement Presentation

The consolidated financial statements which include the accounts of the Company and its wholly-owned subsidiaries, the Bank and  the Investment Company, have been prepared in conformity with accounting principles generally accepted in the United States of America.  All significant intercompany accounts and transactions have been eliminated in consolidation.

In preparing the consolidated financial statements, management is required 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.  A material estimate that is particularly susceptible to significant change relates to the determination of the allowance for loan losses.  Management believes that the allowance for loan losses is adequate.  While management uses available information to recognize losses on loans, future additions to the allowance for loan losses may be necessary based on changes in economic conditions in the market area.

In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses.  Such agencies may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

Cash and Cash Equivalents

Cash and cash equivalents include cash and amounts due from depository institutions and interest-bearing deposits in other banks having original maturities of three months or less.

Securities Available for Sale and Held to Maturity

Investments in debt securities that the Company has the positive intent and ability to hold to maturity are classified as held to maturity securities and reported at amortized cost. Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized holding gains and losses included in earnings.  Debt and equity securities not classified as trading securities nor as held to maturity securities are classified as available for sale securities and reported at fair value, with unrealized holding gains or losses, net of applicable deferred income taxes, reported in the accumulated other comprehensive income component of stockholders’ equity.

On a quarterly basis, the Company makes an assessment to determine whether there have been any events or economic circumstances to indicate that a security on which there is an unrealized loss is impaired on an other-than-temporary basis.  The Company considers many factors including the severity and duration of the impairment; the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value; recent events specific to the issuer or industry; and for debt securities, external credit ratings and recent downgrades.  Securities on which there is an unrealized loss that is deemed to be other-than-temporary are written down to fair value with the write-down recorded as a realized loss.

Premiums and discounts on all securities are amortized/accreted to maturity using the interest method.  Interest and dividend income on securities, which includes amortization of premiums and accretion of discounts, are recognized in the financial statements when earned.  Gains or losses on sales are recognized based on the specific identification method.

7

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 2 – Summary of Significant Accounting Policies (Continued)

Loans Held For Sale

Loans held for sale consist primarily of residential mortgage loans intended for sale and are carried at the lower of cost or estimated fair market value using the aggregate method. These loans are generally sold with servicing rights released. Gains and losses recognized on loan sales are based upon the cash proceeds received and the cost of the related loans sold.

Loans Receivable

Loans receivable are carried at unpaid principal balances less net deferred loan origination fees and the allowance for loan losses.  Loan origination fees and certain direct loan origination costs are deferred and amortized, as an adjustment of yield, over the contractual lives of the related loans.

Accrued interest on loans that are contractually delinquent ninety days or more is charged off and the related loans placed on nonaccrual status.  Income is subsequently recognized only to the extent that cash payments are received until delinquency status is reduced to less than ninety days, in which case the loan is returned to an accrual status.

Allowance for Loan Losses

The allowance for loan losses is increased through provisions charged to operations and by recoveries, if any, on previously charged-off loans and reduced by charge-offs on loans which are determined to be a loss in accordance with Bank policy.

The allowance for loan losses is maintained at a level considered adequate to absorb loan losses.  Management, in determining the allowance for loan losses, considers the risks inherent in its loan portfolio and changes in the nature and volume of its loan activities, along with the general economic and real estate market conditions.  The Bank utilizes a two tier approach:  (1) identification of impaired loans and establishment of specific loss allowances on such loans; and (2) establishment of general valuation allowances on the remainder of its loan portfolio.  The Bank maintains a loan review system which allows for a periodic review of its loan portfolio and the early identification of potentially impaired loans.  Such a system takes into consideration, but is not limited to, delinquency status, size of loans, and types and value of collateral and financial condition of the borrowers.  Specific loan loss allowances are established for identified loans based on a review of such information and/or appraisals of the underlying collateral.  General loan loss allowances are based upon a combination of factors including, but not limited to, actual loan loss experience, composition of the loan portfolio, current economic conditions, and management’s judgment.  Although management believes that adequate specific and general allowances for loan losses are established, actual losses are dependent upon future events and, as such, further additions to the level of specific and general loan loss allowances may be necessary.

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 loan’s observable market price or the fair value of the collateral if the loan is collateral dependent.  A loan evaluated for impairment is deemed to be impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement.  All loans identified as impaired are evaluated independently.  The Bank does not aggregate such loans for evaluation purposes. Payments received on impaired loans are applied first to accrued interest receivable and then to principal.

8

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 2 – Summary of Significant Accounting Policies (Continued)

Concentration of Risk

Financial instruments which potentially subject the Company and its subsidiaries to concentrations of credit risk consist of cash and cash equivalents, investment and mortgage-backed securities and loans.

Cash and cash equivalents include amounts placed with highly rated financial institutions.  Securities include securities backed by the U.S. Government and other highly rated instruments.  The Bank’s lending activity is primarily concentrated in loans collateralized by real estate in the State of New Jersey.  As a result, credit risk is broadly dependent on the real estate market and general economic conditions in the State.

Premises and Equipment

Land is carried at cost.  Buildings, building improvements, leasehold improvements and furniture, fixtures and equipment are carried at cost, less accumulated depreciation and amortization.  Significant renovations and additions are charged to the property and equipment account.  Maintenance and repairs are charged to expense in the period incurred.  Depreciation charges are computed on the straight-line method over the following estimated useful lives of each type of asset.

	Years
Buildings	40
Building improvements	7 - 40
Furniture, fixtures and equipment	3 - 40
Leasehold improvements	Shorter of useful life or term of lease

Federal Home Loan Bank (“FHLB”) of New York Stock

Federal law requires a member institution of the FHLB system to hold stock of its district FHLB according to a predetermined formula. Such stock is carried at cost.

Real Estate Owned

Assets acquired through, or in lieu of, loan foreclosures are held for sale and are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net expenses from foreclosed assets. At December 31, 2007, the Bank owned one property totaling $287,000.

Interest Rate Risk

The Bank is principally engaged in the business of attracting deposits from the general public and using these deposits, together with other funds, to make loans secured by real estate and to purchase securities. The potential for interest-rate risk exists as a result of the difference in duration of the Bank’s interest-sensitive liabilities compared to its interest-sensitive assets.  For this reason, management regularly monitors the maturity structure of the Bank’s interest-earning assets and interest-bearing liabilities in order to measure its level of interest-rate risk and to plan for future volatility.

9

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 2 – Summary of Significant Accounting Policies (Continued)

Income Taxes

The Company and its subsidiaries file a consolidated federal income tax return.  Income taxes are allocated to the Company and its subsidiaries based upon their respective income or loss included in the consolidated income tax return.  Separate state income tax returns are filed by the Company and its subsidiaries.

Federal and state income tax expense has been provided on the basis of reported income.  The amounts reflected on the tax returns differ from these provisions due principally to temporary differences in the reporting of certain items for financial reporting and income tax reporting purposes. The tax effect of these temporary differences is accounted for as deferred taxes applicable to future periods.  Deferred income tax expense or (benefit) is determined by recognizing deferred tax assets and liabilities for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. The realization of deferred tax assets is assessed and a valuation allowance provided, when necessary, for that portion of the asset which is not more likely than not to be realized.

Effective January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes.” The Interpretation provides clarification on accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB No. 109, “Accounting for Income Taxes.” The Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the Company’s evaluation of the implementation of FIN 48, no significant income tax uncertainties were identified. Therefore, the Company recognized no adjustment for unrecognized income tax benefits for the year ended December 31, 2007. Our policy is to recognize interest and penalties on unrecognized tax benefits in income taxes expense in the Consolidated Statement of Income. The Company did not recognize any interest and penalties for the year ended December 31, 2007. The tax years subject to examination by the taxing authorities are the years ended December 31, 2006, 2005, 2004 and 2003.

Net Income per Common Share

Basic net income per common share is computed by dividing net income 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.  For the years ended December 31, 2007, 2006 and 2005, 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.

10

BCB Bancorp, Inc. and Subsidiaries

Note 2 – Summary of Significant Accounting Policies (Continued)

Stock-Based Compensation Plans

The Company, under plans approved by its stockholders in 2003 and 2002, has granted stock options to employees and outside directors.  See note 12 for additional information as to option grants.  Through December 31, 2005, the Company accounted for options granted using the intrinsic value method, in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Under APB No. 25, generally, when the exercise price of the Company’s stock options equaled the market price of the underlying stock on the date of the grant, no compensation expense was recognized. Accordingly, prior to January 1, 2006, no compensation expense has been reflected in net income for the options granted as all such grants have an exercise price equal to the market price of the underlying stock at the date of grant.

On January 1, 2006, we adopted Statement of Financial Accounting Standards (“Statement”) No. 123(R) using the modified prospective method and, accordingly, implemented a policy of recording compensation expense for all new awards granted and any awards modified after January 1, 2006.  In addition, the transition rules under SFAS No. 123(R) require that, for all awards outstanding at January 1, 2006, for which the requisite service had not yet been rendered, compensation cost be recorded as such service is rendered after January 1, 2006.  Statement No. 123(R) also requires that the benefits of realized tax deductions in excess of previously recognized tax benefits on compensation expense are to be reported as a financing cash flow rather than an operating cash flow, as previously required. In accordance with Staff Accounting Bulletin (“SAB”) No. 107, the Company classifies share-based compensation within salaries and employee benefits and directors compensation expenses to correspond with the same line items as the cash compensation paid to such individuals.

Compensation expense recognized for all option grants is net of estimated forfeitures and is recognized over the awards’ respective requisite service periods. The fair values relating to all options granted are estimated using a Black-Scholes option pricing model. Expected volatilities are based on historical volatility of our stock and other factors, such as implied market volatility. As permitted by SAB No. 107 or SAB 110, we use the mid-point of the original vesting period and original option life to estimate the options’ expected term, which represents the period of time that the options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. We recognize compensation expense for the fair values of these option awards, which have graded vesting, on a straight-line basis over the requisite service period of these awards.

11

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 2 - Summary of Significant Accounting Policies (Continued)

Stock-Based Compensation Plans (Continued)

The following table provides information as to net income and earnings per share for the year ended December 31, 2005, as if the Company had applied the fair value recognition provisions of Statement No. 123, as amended, to all option grants prior to January 1, 2006.

	Year Ended  December 31,
	2005
	(In Thousands, except for per share  amounts)
Net income as reported	$	4,729
Less:  Total stock-based compensation expense, net of  income taxes, included in reported net income		-
Add:  Total stock-based compensation expense, net of income taxes, that would have been included in the determination of net income if the fair value method had been applied to all grants		(1,273	)
Pro Forma Net Income	$	3,456
Net income per common share, as reported:
Basic	$	1.25
Diluted	$	1.20
Pro forma net income per common share:
Basic	$	0.92
Diluted	$	0.88

12

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 2 - Summary of Significant Accounting Policies (Continued)

Comprehensive Income

The Company records unrealized gains and losses, net of deferred income taxes, on securities available for sale in accumulated other comprehensive income.  Realized gains and losses, if any, are reclassified to non-interest income upon sale of the related securities or upon the recognition of an impairment loss.  The Company has elected to report the effects of other comprehensive income in the consolidated statements of changes in stockholders’ equity.

Reclassification

Certain amounts for prior periods have been reclassified to conform to the current period’s presentation.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value under U. S. GAAP, and expands disclosures about fair value measurements. Statement No. 157 applies to other accounting pronouncements that require or permit fair value measurements. Statement No. 157 is effective for our Company January 1, 2008. The Company does not expect that the adoption of Statement No. 157 will have a material impact on our consolidated financial position, results of operations and cash flows.

In February 2007, the FASB issued Statement No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115." Statement No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. Statement No. 159 is effective for our Company January 1, 2008. The Company does not expect that the adoption of Statement No. 159 will have a material impact on our consolidated financial statements.

In March 2007, the FASB ratified Emerging Issues Task Force (“EITF”) Issue No. 06-10 “Accounting for Collateral Assignment Split-Dollar Life Insurance Agreements” (“EITF 06-10”). EITF 06-10 provides guidance for determining a liability for the postretirement benefit obligation as well as recognition and measurement of the associated asset on the basis of the terms of the collateral assignment agreement. EITF 06-10 is effective for fiscal years beginning after December 15, 2007. The Company does not expect the impact of  EITF 06-10 to have a material impact on its consolidated financial position and results of operations.

In June 2007, the EITF reached a consensus on Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards” (“EITF 06-11”). EITF 06-11 states that an entity should recognize a realized tax benefit associated with dividends on nonvested equity shares, nonvested equity share units and outstanding equity share options charged to retained earnings as an increase in additional paid in capital. The amount recognized in additional paid in capital should be included in the pool of excess tax benefits available to absorb potential future tax deficiencies on share-based payment awards. EITF 06-11 should be applied prospectively to income tax benefits of dividends on equity-classified share-based payment awards that are declared in fiscal years beginning after December 15, 2007. The Company does not expect that EITF 06-11 will  have an impact on its consolidated financial statements.

FASB Statement No. 160 “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” was issued in December of 2007. This Statement establishes accounting and reporting standards

13

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 2 - Summary of Significant Accounting Policies (Continued)

for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance will become effective as of the beginning of a company’s fiscal year beginning after December 15, 2008. The Company believes that this new pronouncement will not have an material impact on its consolidated financial statements.

SAB No. 109, "Written Loan Commitments Recorded at Fair Value Through Earnings" expresses the views of the staff regarding written loan commitments that are accounted for at fair value through earnings under generally accepted accounting principles. To make the staff's views consistent with current authoritative accounting guidance, the SAB revises and rescinds portions of SAB No. 105, "Application of Accounting Principles to Loan Commitments."  Specifically, the SAB revises the SEC staff's views on incorporating expected net future cash flows related to loan servicing activities in the fair value measurement of a written loan commitment. The SAB retains the staff's views on incorporating expected net future cash flows related to internally-developed intangible assets in the fair value measurement of a written loan commitment. The staff expects registrants to apply the views in Question 1 of SAB No. 109 on a prospective basis to derivative loan commitments issued or modified in fiscal quarters beginning after December 15, 2007. The Company does not expect SAB 109 to have a material impact on its consolidated financial statements.

In December 2007, the FASB issued proposed FASB Staff Position (FSP) 157-b, “Effective Date of FASB Statement No. 157,” that would permit a one-year deferral in applying the measurement provisions of Statement No. 157 to non-financial assets and non-financial liabilities (non-financial items) that are not recognized or disclosed at fair value in an entity’s financial statements on a recurring basis (at least annually). Therefore, if the change in fair value of a non-financial item is not required to be recognized or disclosed in the financial statements on an annual basis or more frequently, the effective date of application of Statement No. 157 to that item is deferred until fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. This deferral does not apply, however, to an entity that applies Statement No. 157 in interim or annual financial statements before proposed FSP 157-b is finalized. The Company is currently evaluating the impact, if any, that the adoption of FSP 157-b will have on the Company’s consolidated financial statements.

SAB No. 110 amends and replaces Question 6 of Section D.2 of Topic 14, “Share-Based Payment,” of the Staff Accounting Bulletin series. Question 6 of Section D.2 of Topic 14 expresses the views of the staff regarding the use of the “simplified” method in developing an estimate of expected term of “plain vanilla” share options and allows usage of the “simplified” method for share option grants prior to December 31, 2007. SAB No. 110 allows public companies which do not have historically sufficient experience to provide a reasonable estimate to continue use of the “simplified” method for estimating the expected term of “plain vanilla” share option grants after December 31, 2007. SAB No. 110 is effective January 1, 2008. The Company uses the “simplified” method as permitted under SAB No. 110. See Note 12 for additional information on stock options.

Note 3 - Related Party Transactions

The Bank leases a property from NEW BAY LLC (“NEW BAY”), a limited liability corporation 100% owned by a majority of the directors and officers of the Bank.  In conjunction with the lease, NEW BAY substantially removed the pre-existing structure on the site and constructed a new building suitable to the Bank for its banking operations.  Under the terms of the lease, the cost of this project was reimbursed to NEW BAY by the Bank.  The amount reimbursed, which occurred during the year 2000, was approximately

14

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 3 - Related Party Transactions (Continued)

$943,000, and is included in property and equipment under the caption “Building and improvements” (see  Note 7).

The original lease term began on November 1, 2000, and concluded on October 31, 2005, and provided for an annual base rent of $108,000 for the first three years and $111,240 for the remaining two years.  The Bank has the option to renew the lease for four consecutive five-year periods, subject to a rent escalation clause.  In addition, at each renewal date, the Bank has the option to purchase the property from NEW BAY, at the then current fair market value less a credit equal to the lesser of (a) the funds previously reimbursed to NEW BAY, for the new building construction, less any subsequent depreciation, or (b) $750,000.  The authority to exercise the purchase option is solely vested in an officer who has no ownership interest in NEW BAY.  On May 1, 2006, the Company renegotiated the lease to a  twenty-five year term.  The Company will pay NEW BAY $165,000 a year ( $13,750 per month) for the first 60 months. The rent shall be reset every five years thereafter at the fair market rental value at the end of each  preceding five year period.

On July 1, 2002, the Bank acquired a tract of real estate in the Bergen Point section of the City of Bayonne, New Jersey.  The property was purchased for $889,686 from 104 L.L.C., a limited liability corporation 100% owned by a majority of the directors and officers of the Bank.  This property is included in land (see Note 7).

Note 4 - Securities Available for Sale

	December 31, 2007
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In Thousands)
Equity securities	$	2,012	$	44	$	-	$	2,056

15

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 5 - Securities Held to Maturity

	December 31, 2007
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In Thousands)
U.S. Government Agencies:
Due within one year	$	4,000	$	-	$	1	$	3,999
Due after one through five years		25,312		153		12		25,453
Due after five through ten years		15,988		25		20		15,993
Due after ten years		84,856		744		23		85,577
		130,156		922		56		131,022
Mortgage-backed securities:
Due after one year through five years		157		3		-		160
Due after five years through ten years		1,334		29		-		1,363
Due after ten years		33,370		28		283		33,115
		34,861		60		283		34,638
	$	165,017	$	982	$	339	$	165,660

16

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 5 - Securities Held to Maturity (Continued)

	December 31, 2006
	Amortized  Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In Thousands)
U.S. Government Agencies:
Due within one year	$	2,000	$	-	$	29	$	1,971
Due after one through five years		19,996		-		350		19,646
Due after five through ten years		38,300		-		621		37,679
Due after ten years		62,298		-		1,028		61,270
		122,594		-		2,028		120,566
Mortgage-backed securities:
Due after one year through five years		244		2		-		246
Due after five years through ten years		1,029		10		-		1,039
Due after ten years		24,805		16		654		24,167
		26,078		28		654		25,452
	$	148,672	$	28	$	2,682	$	146,018

There were no sales of securities during the years ended December 31, 2007 and 2006. During the year ended December 31, 2005, proceeds from sales of securities held to maturity totaled $7,373,000, including gross gains of $37,000 and gross losses of $9,000.  The securities sold consisted of mortgage-backed securities on which we had already collected more than eighty-five percent of the principal outstanding at the purchase date and U.S. Government Agency bonds which were within three months of their call dates and on which the exercise of the call was determined to be probable.    At December 31, 2007 and 2006, mortgage-backed securities with a carrying value of approximately $924,000 and $1,128,000, respectively, were pledged to secure public deposits (see Note 10 for information on securities pledged for borrowings).

17

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 5 - Securities Held to Maturity (Continued)

The age of unrealized losses and fair value of related securities held to maturity were as follows:

	Less than 12 Months				More than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
December 31, 2007:
U.S. Government Agencies	$	-	$	-	$	11,440	$	56	$	11,440	$	56
Mortgage-backed securities		7,291		10		16,592		273		23,883		283
	$	7,291	$	10	$	28,032	$	329	$	35,323	$	339

December 31, 2006:
U.S. Government Agencies	$	19,900	$	100	$	100,666	$	1,928	$	120,566	$	2,028
Mortgage-backed securities		335		-		22,865		654		23,200		654
	$	20,235	$	100	$	123,531	$	2,582	$	143,766	$	2,682

At December 31, 2007, management concluded that the unrealized losses above (which related to 4 U.S. Government Agency bonds and 18 Fannie Mae or Freddie Mac mortgage-backed securities) are temporary in nature since they are not related to the underlying credit quality of the issuers and the Company has the ability and intent to hold these securities for a time necessary to recover their cost.  The losses above are primarily related to market interest rates.

18

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 6 - Loans Receivable

	December 31,
	2007		2006
	(In Thousands)
Real estate mortgage:
Residential	$	55,248	$	43,993
Commercial		208,108		192,141
Construction		49,984		38,882
		313,340		275,016
Commercial:
Business loans		17,933		7,355
Lines of credit		1,940		7,350
		19,873		14,705
Consumer:
Passbook or certificate		92		106
Home equity lines of credit		4,343		3,752
Home equity		31,054		28,569
Automobile		51		57
Personal		93		83
		35,633		32,567
Deposit overdrafts		503		150
Total Loans		369,349		322,438
Deferred loan fees, net		630		575
Allowance for loan losses		4,065		3,733
		4,695		4,308
	$	364,654	$	318,130

At December 31, 2007, 2006, and 2005, loans serviced by the Bank for the benefit of others, which consist of participation interests in loans originated by the Bank, totaled approximately $10,451,000, $4,786,000, and $5,030,000, respectively.

19

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 6 - Loans Receivable (Continued)

The Bank grants loans to its officers and directors and to their associates.  Related party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than normal risk of collectibility.  The activity with respect to loans to directors, officers and associates of such persons, is as follows:

	Years Ended December 31,
	2007			2006
	(In Thousands)
Balance – beginning	$	8,575		$	6,714
Loans originated		1,566			6,133
Collections of principal		(3,316	)		(4,272	)
		-			-
Balance - ending	$	6,825		$	8,575

The following is an analysis of the allowance for loan losses:

	Years Ended December 31,
	2007			2006			2005
	(In Thousands)
Balance - beginning	$	3,733		$	3,090		$	2,506
Provision charged to operations		600			625			1,118
Recoveries of loans previously charged off		17			85			12
Loans charged off		(285	)		(67	)		(546	)
Balance - ending	$	4,065		$	3,733		$	3,090

At December 31, 2007, 2006 and 2005, nonaccrual loans for which the accrual of interest had been discontinued totaled approximately $3,754,000, $323,000 and $787,000, respectively.  Had these loans been performing in accordance with their original terms, the interest income recognized for the years ended December 31, 2007, 2006 and 2005 would have been approximately $287,000, $26,000, and $66,000, respectively.  Interest income recognized on such loans was approximately $64,000, $6,000, and $10,000, respectively.  The Bank is not committed to lend additional funds to the borrowers whose loans have been placed on a nonaccrual status.

At December 31, 2007, 2006, and 2005, impaired loans were $3,754,000, $323,000 and $705,000, respectively, and the related specific allocation of allowance for loan losses totaled $728,000, $81,000 and $214,000, respectively.  There were no impaired loans which did not have a specific allocation of the allowance for loan losses.  During the years ended December 31, 2007, 2006, and 2005, the average balance of impaired loans was $2,104,000,  $568,000, and $1,141,000, respectively, and interest income recognized during the period of impairment totaled $64,000, $43,000, and $7,000, respectively.

20

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 7 - Premises and Equipment

	December 31,
	2007			2006
	(In Thousands)
Land	$	890		$	890
Buildings and improvements		3,558			3,546
Leasehold improvements		976			347
Furniture, fixtures and equipment		2,281			1,905
Construction in progress		-			579
		7,705			7,267
Accumulated depreciation and amortization		(1,776	)		(1,382	)
	$	5,929		$	5,885

Buildings and improvements include a building constructed on property leased from a related party (see Note 3).

Rental expenses related to the occupancy of premises totaled $413,000, $386,000, and $205,000 for the years ended December 31, 2007, 2006 and 2005, respectively.  The minimum obligation under lease agreements expiring through April 30, 2031, for each of the years ended December 31 is as follows (in thousands):

2008	$	415
2009		425
2010		366
2011		244
2012		237
Thereafter		3,025
	$	4,712

Note 8 - Interest Receivable

	December 31,
	2007		2006
	(In Thousands)
Loans	$	2,048	$	1,806
Securities		1,728		1,891
	$	3,776	$	3,697

21

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 9 - Deposits

	December 31,
	2007		2006
	(In Thousands)
Demand:
Non-interest bearing	$	35,897	$	35,275
NOW		20,260		21,007
Money market		27,697		8,022
		83,854		64,304
Savings and club		100,441		117,617
Certificates of deposit		214,524		200,826
	$	398,819	$	382,747

At December 31, 2007 and 2006, certificates of deposit of $100,000 or more totaled approximately $102,830,000 and $84,480,000, respectively.

The scheduled maturities of certificates of deposit at December 31, 2007, were as follows (in thousands):

	Amount
2008	$	187,105
2009		22,293
2010		4,625
2011		216
2012		233
Thereafter		52
	$	214,524

22

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 10 - Short-Term Borrowings and Long-Term Debt

Long-term debt consists of the following:

	December 31,
	2007		2006
	(In Thousands)
Long-term borrowings:
Federal Home Loan Bank of New York (“FHLB”) Fixed Rate Repurchase Agreements:
4.50% maturing May 22, 2016	$	10,000	$	10,000
4.33% maturing July 28, 2016		-		15,000
4.30% maturing August 16, 2016		20,000		20,000
4.17% maturing August 31, 2016		25,000		25,000
4.76% maturing June 18, 2017		20,000		-
4.30% maturing July 30, 2017		15,000		-
4.08% maturing July 30, 2017		20,000		-
Trust preferred floating rate junior subordinated debenture maturing June 17, 2034; interest rate adjusts quarterly to LIBOR plus 2.65% (7.64% at December 31, 2007 and 8.01% at December 31, 2006)		4,124		4,124
	$	114,124	$	74,124

Additional information regarding short-term borrowings is as follows:

	December 31,
	2007		2006			2005
	(In Thousands)
Average balance outstanding during the year	$	-	$	705		$	9,691
Highest month-end balance during the year		-		1,000			21,400
Average interest rate during the year		-		4.93	%		3.14	%
Weighted average interest rate at year-end		-		-			-

The trust preferred debenture is callable, at the Company’s option, on June 17, 2009, and quarterly thereafter.

At December 31, 2007, 2006, and 2005 securities held to maturity with a carrying value of approximately $146,811,000, $92,771,000 and $75,968,000, respectively, were pledged to secure the above noted Federal Home Loan Bank of New York borrowings.

At December 31, 2007, the Bank has available to it two borrowing facilities aggregating $103,179,000 from the FHLB of New York, an overnight line of credit and a companion commitment, both of which expire on July 31, 2008. No amounts were outstanding under these borrowing facilities at December 31, 2007 and 2006.

23

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 11 - Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Bank.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices.  The Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures, established by regulation to ensure capital adequacy, require the Bank to maintain minimum amounts and ratios of Total and Tier 1 capital (as defined in the regulations), to risk-weighted assets, (as defined), and of Tier 1 capital to average assets (as defined).  The following table presents information as to the Bank’s capital levels.

Actual

For Capital Adequacy  Purposes

To be Well Capitalized  under Prompt  Corrective Action Provisions

Amount

Ratio

Amount

Ratio

Amount

Ratio

(Dollars in Thousands)

As of December 31, 2007:

Total capital (to risk-weighted assets)

$

53,761

14.12

%

$

30,457

³  8.00

%

$

³38,072

³10.00

%

Tier 1 capital (to risk-weighted assets)

49,696

13.05

³ -

³ -

³22,843

³ 6.00

Tier 1 capital (to average assets)

49,696

8.81

³22,566

³4.00

³28,207

³ 5.00

As of December 31, 2006:

Total capital (to risk-weighted assets)

$

57,260

16.43

%

$

>27,882

>8.00

%

$

>34,853

>10.00

%

Tier 1 capital (to risk-weighted assets)

53,527

15.36

>-

>-

>20,912

>6.00

Tier 1 capital (to average assets)

53,527

10.48

>20,437

>4.00

>25,546

>5.00

As of December 31, 2007, the most recent notification from the Bank’s regulators categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. There are no conditions or events occurring since that notification that management believes have changed the Bank’s category.

Note 12 - Benefits Plan

Stock Options

The Company has two stock-related compensation plans, the 2002 Stock Option Plan and the 2003 Stock Option Plan (the “Plans”). All stock options granted have a ten year term and were scheduled to vest and become exercisable on a cumulative basis in equal installments (20% immediately upon grant and an additional 20% at each of the four succeeding grant anniversary dates). As of December 31, 2007, all options authorized under the Plans had been granted.

24

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 12 - Benefits Plan (Continued)

Stock Options (Continued)

In anticipation of the adoption of Statement No. 123(R) on January 1, 2006, the Board of Directors of the Company, on December 14, 2005, approved the accelerated vesting and exercisability of all unvested and unexercisable stock options granted as a part of the 2003 and 2002 Stock Option Plans of the Company held by directors, officers or employees.  As a result, options to purchase 218,195 shares of common stock, which would otherwise have vested and become exercisable from time to time over the next three years, became fully vested and immediately exercisable on December 20, 2005.  The number of shares and exercise prices of the options subject to acceleration were unchanged. The accelerated options have exercise prices that range from $5.29 to $11.84 per share. The accelerated options include 194,964 options held by directors and executive officers and 23,231 options held by other employees.  The acceleration of the vesting and exercisability of these options eliminates compensation expense, net of income tax, that would otherwise have been recorded in the Company’s income statements for the years ending December 31, 2006, 2007, and 2008 of $379,000, $301,000, and $128,000, respectively. As required, the Company estimated the number of options that were expected to be exercised in the future which would not have been exercisable under their original vesting terms and recorded an expense therefore. This estimate is updated on a quarterly basis.

During the years ended December 31, 2007 and 2006, the Company recorded $6,000 ($4,000 after tax) and $25,000 ($15,000 after tax) of share-based compensation expense, respectively. No compensation expense related to stock options was recorded during the years ended December 31, 2005, as we recognized compensation cost for stock options granted based on the intrinsic value method, as permitted by Statement No. 123, instead of the fair value based method now required under Statement No. 123(R).

A summary of stock option activity, adjusted to retroactively reflect subsequent stock dividends, follows:

	Number of Option Shares			Range of Exercise Prices		Weighted Average Exercise Price
Outstanding at December 31, 2004		444,436		$	5.29-$11.84	$	9.32
Options granted		28,575			15.60-15.65		15.64
Options exercised		(43,500	)		5.29-11.84		8.24
Options cancelled		(1,058	)		5.29		5.29
Outstanding at December 31, 2005		428,454			5.29-15.65		9.79
Options exercised		(12,816	)		5.29-11.84		7.69
Outstanding at December 31, 2006		415,638			5.29-15.65		9.86
Options granted		2,000			15.11		15.11
Options exercised		(15,426	)		5.29-15.65		10.42
Options cancelled		(2,000	)		15.60		15.60
Outstanding at December 31, 2007		400,212			5.29-15.65		9.83

25

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 12 - Benefits Plan (Continued)

Stock Options (Continued)

At December 31, 2007, all stock options outstanding were exercisable, having a weighted-average remaining contractual term of 5.7 years and an aggregate intrinsic value of $2,289,000. The total intrinsic value of options exercised during the years ended December 31, 2007, 2006 and 2005, was $85,000, $102,000 and $294,000, respectively. It is Company policy to issue new shares upon share option exercise.

The weighted average grant-date fair values of the stock options granted during 2007 and 2005, all of which have exercise prices equal to the market price of the common stock at the grant date, were estimated using the Black-Scholes option-pricing model.  Such fair value and the weighted average assumptions used for estimating fair value are as follows:

	Years Ended December 31,
	2007			2006		2005
Grant-date fair value per share	$	2.91			N/A	$	9.92
Assumptions:
Expected common stock dividend yield		2.38	%		N/A		0.00	%
Expected option life	5.0 years				N/A	5.0 years
Risk-free interest rate		4.30	%		N/A		4.36	%
Volatility		19.96	%		N/A		73.84	%

Note 13 - Dividend Restrictions

Payment of cash dividends is conditional on earnings, financial condition, cash needs, the discretion of the Board of Directors, and compliance with regulatory requirements.  State and federal law and regulations impose substantial limitations on the Bank’s ability to pay dividends to the Company.  Under New Jersey law, the Bank is permitted to declare dividends on its common stock only if, after payment of the dividend, the capital stock of the Bank will be unimpaired and either the Bank will have a surplus of not less than 50% of its capital stock or the payment of the dividend will not reduce the Bank’s surplus. During the year, the bank paid the Company a total of $8,500,000. 

26

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 14 - Income Taxes

The components of income tax expense (benefit) are summarized as follows:

	Years Ended December 31,
	2007			2006			2005
	(In Thousands)
Current income tax expense:
Federal	$	2,391		$	2,998		$	2,600
State		250			463			370
		2,641			3,461			2,970
Deferred income tax (benefit):
Federal		(102	)		(193	)		(174	)
State		(30	)		(48	)		(51	)
		(132	)		(241	)		(225	)
	$	2,509		$	3,220		$	2,745

The tax effects of existing temporary differences that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities are as follows:

	December 31,
	2007		2006
	(In Thousands)
Deferred income tax assets:
Allowance for loan losses	$	1,623	$	1,491
Other		10		10
		1,633		1,501
Deferred income tax liabilities:
Depreciation		263		263
Unrealized gain on securities available for sale		18		-
		281		263
Net Deferred Tax Asset	$	1,352	$	1,238

27

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 14 - Income Taxes (Continued)

The following table presents a reconciliation between the reported income tax expense and the income tax expense which would be computed by applying the normal federal income tax rate of 34% to income before income tax expense:

	Years Ended December 31,
	2007			2006			2005
	(In Thousands)
Federal income tax expense at statutory rate	$	2,362		$	2,988		$	2,541
Increases (reductions) in income taxes resulting from:
State income tax, net of federal income tax effect		145			274			211
Other items, net		2			(42	)		(7	)
Effective Income Tax	$	2,509		$	3,220		$	2,745
Effective Income Tax Rate		36.1	%		36.6	%		36.7	%

The Investment Company commenced operations in January 2005.  Under New Jersey tax law, the Investment Company is subject to a 3.6% state income tax rate as compared to the 9.0% rate to which the Company and Bank are subject.  The presence of the Investment Company during the year ended December 31, 2007, 2006 and 2005, resulted in an income tax savings of approximately $297,000, $282,000 and $223,000 respectively, and reduced the consolidated effective income tax rate by approximately 4.3%, 3.2% and 3.0%, respectively.

Note 15- Commitments and Contingencies

The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments primarily include commitments to extend credit.  The Bank’s exposure to credit loss, in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

Outstanding loan related commitments were as follows:

	December 31,
	2007		2006
	(In Thousands)
Loan origination	$	2,885	$	8,980
Construction loans in process		40,023		28,586
Unused lines of credit		14,470		10,789
	$	57,378	$	48,355

28

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 15- Commitments and Contingencies (Continued)

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments are expected to expire without being drawn upon, total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the counterparty.  Collateral held varies but primarily includes residential real estate properties.

The Company and its subsidiaries also have, in the normal course of business, commitments for services and supplies.  Management does not anticipate losses on any of these transactions.

The Company and its subsidiaries, from time to time, may be party to litigation which arises primarily in the ordinary course of business.  In the opinion of management, the ultimate disposition of such litigation should not have a material effect on the financial statements.  As of December 31, 2007, the Company and its subsidiaries were not parties to any material litigation.

Note 16 - Estimated Fair Value of Financial Instruments

The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than a forced or liquidation sale.  Significant estimations were used for the purposes of this disclosure.  Estimated fair values have been determined using the best available data and estimation methodology suitable for each category of financial instruments.  For those loans and deposits with floating interest rates, it is presumed that estimated fair values generally approximate their carrying values.  The estimation methodologies used and the estimated fair values and carrying values of financial instruments are set forth below:

Cash and Cash Equivalents, Interest Receivable and Interest Payable

The carrying amounts for cash and cash equivalents,  interest receivable and interest payable approximate fair value.

Securities

The fair values for securities are based on quoted market prices or dealer prices, if available.  If quoted market prices or dealer prices are not available, fair value is estimated using quoted market prices or dealer prices for similar securities.

Loans Held for Sale

The fair value of loans held for sale is estimated based on market price quoted by the investors.

Loans Receivable

The fair value of loans is estimated by discounting future cash flows, using the current rates at which similar loans with similar remaining maturities would be made to borrowers with similar credit ratings.

FHLB of New York Stock

The carrying value of FHLB of New York stock approximates fair value.

29

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 16- Estimated Fair Value of Financial Instruments (Continued)

Deposits

For demand, savings and club accounts, fair value is the carrying amount reported in the financial statements.  For certificates of deposit, fair value is estimated by discounting future cash flows, using rates currently offered for deposits of similar remaining maturities.

Long-Term Debt

The fair value of  long-term debt is estimated by discounting future cash flows using rates currently available for liabilities of similar remaining maturities.

Commitments to Extend Credit

The fair value of credit commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties.  For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates.  The carrying value, represented by the net deferred fee arising from the unrecognized commitment, and the fair value, determined by discounting the remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, are not considered material for disclosure.  The contractual amounts of unfunded commitments are presented in Note 15.

30

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 16- Estimated Fair Value of Financial Instruments (Continued)

The carrying values and estimated fair values of financial instruments are as follows:

	December 31,
	2007				2006
	Carrying Value		Fair  Value		Carrying  Value		Fair Value
	(In Thousands)
Financial assets:
Cash and cash equivalents	$	11,780	$	11,780	$	25,837	$	25,837
Securities available for sale		2,056		2,056		-		-
Securities held to maturity		165,017		165,660		148,672		146,018
Loans held for sale		2,132		2,141		2,976		2,976
Loans receivable		364,654		367,336		318,130		313,962
FHLB of New York stock		5,560		5,560		3,724		3,724
Interest receivable		3,776		3,776		3,697		3,697
Financial liabilities:
Deposits		398,819		399,178		382,747		382,616
Long-term debt		114,124		115,679		74,124		74,230
Accrued interest payable		1,026		1,026		812		812

Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular financial instrument.  Because no market value exists for a significant portion of the financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors.  These estimates are subjective in nature, involve uncertainties and matters of judgment and, therefore, cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.

In addition, fair value estimates are based on existing on-and-off balance sheet financial instruments without attempting to estimate the value of anticipated future business, and exclude the value of assets and liabilities that are not considered financial instruments.  Other significant assets and liabilities that are not considered financial assets and liabilities include premises and equipment, and advance payments by borrowers for taxes and insurance.  In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.

Finally, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates which must be made given the absence of active secondary markets for many of the financial instruments.  This lack of uniform valuation methodologies introduces a greater degree of subjectivity to these estimated fair values.

31

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 17- Parent Only Condensed Financial Information

STATEMENTS OF FINANCIAL CONDITION
	December 31,
	2007			2006
Assets	(In Thousands)
Cash and due from banks	$	2,719		$	2,356
Investment in subsidiaries		49,722			53,527
Restricted common stock		124			124
Other assets		83			92
Total Assets	$	52,648		$	56,099
Liabilities and Stockholders’ Equity
Liabilities
Long-term debt	$	4,124		$	4,124
Other liabilities		14			12
Total Liabilities		4,138			4,136
Stockholders’ equity
Common stock		325			324
Paid-in capital		45,795			45,632
Treasury stock		(7,385	)		(859	)
Retained earnings		9,749			6,866
Accumulated other comprehensive income		26			-
Total Stockholders’ Equity		48,510			51,963
Total Liabilities and Stockholders’ Equity	$	52,648		$	56,099

32

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 17- Parent Only Condensed Financial Information (Continued)

STATEMENTS OF INCOME
	Years Ended in December 31,
	2007			2006			2005
	(In Thousands)
Dividends from subsidiary	$	8,500		$	-		$	-
Interest Income		10			27			-
Total Income		8,510			27			-
Interest Expense, borrowed money		329			310			245
Stock-Based Compensation		6			25			-
Other		-			3			-
Total Expense		335			338			245
Income (Loss) before Income Tax Benefit and Equity in Undistributed Earnings of Subsidiaries		8,175			(311	)		(245	)
Income tax benefit		95			96			93
Income (Loss) before Equity in Undistributed  Earnings (Losses) of Subsidiaries		8,270			(215	)		(152	)
Equity in undistributed earnings (losses) of subsidiaries		(3,832	)		5,782			4,881
Net Income	$	4,438		$	5,567		$	4,729

33

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 17 - Parent Only Condensed Financial Information (Continued)

STATEMENTS OF CASH FLOW
	Years Ended December 31,
	2007			2006			2005
	(In Thousands)
Cash Flows from Operating Activities
Net income	$	4,438		$	5,567		$	4,729
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity in undistributed (earnings) losses of  subsidiaries		3,832			(5,782	)		(4,881	)
��            Stock based compensation		6			25			-
Decrease in other assets		8			5			121
(Increase) decrease in stock subscriptions receivable		-			2,353			(2,353	)
(Decrease) in due to subsidiaries		-			-			(47	)
Increase (decrease) in other liabilities		2			(142	)		141
Net Cash Provided By (Used in) Operating Activities		8,286			2,026			(2,290	)
Cash Flows from Investing Activities
Additional investment in subsidiaries		-			(13,000	)		-
Net Cash Used in Investing Activities		-			(13,000	)		-
Cash Flows from Financing Activities
Proceeds from issuance of common stock		158			90			17,877
Cash dividends paid		(1,555	)		(1,502	)		-
Purchase of treasury stock		(6,526	)		(64	)		(795	)
Net Cash Provided by (Used in) Financing Activities		(7,923	)		(1,476	)		17,082
Net Increase (Decrease) in Cash and Cash Equivalents		363			(12,450	)		14,792
Cash and Cash Equivalents - Beginning		2,356			14,806			14
Cash and Cash Equivalents - Ending	$	2,719		$	2,356		$	14,806

34

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 18 - Quarterly Financial Data (Unaudited)

	Quarter Ended
	March 31, 2007		June 30, 2007		September 30, 2007			December 31, 2007
	(In Thousands, Except Per Share Amounts)
Interest income	$	8,088	$	8,259		$	8,947		$	9,096
Interest expense		3,896		4,073			4,585			4,663
Net Interest Income		4,192		4,186			4,362			4,433
Provision for loan losses		-		-			200			400
Net Interest Income after Provision for Loan Losses		4,192		4,186			4,162			4,033
Non-interest income		270		287			261			274
Non-interest expenses		2,477		2,723			2,777			2,741
Income before Income Taxes		1,985		1,750			1,646			1,566
Income taxes		722		624			616			547
Net Income	$	1,263	$	1,126		$	1,030		$	1,019
Net income per common share:
Basic	$	0.25	$	0.23		$	0.22		$	0.22
Diluted	$	0.25	$	0.23		$	0.21		$	0.21
Weighted average number of common shares outstanding:
Basic		5,006		4,849			4,743			4,676
Diluted		5,136		4,982			4,862			4,794

35

BCB Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 18- Quarterly Financial Data (Unaudited) (Continued)

	Quarter Ended
	March 31, 2006		June 30,  2006		September 30, 2006		December 31, 2006
	(In Thousands, Except Per Share Amounts)
Interest income	$	7,333	$	7,695	$	8,020	$	8,213
Interest expense		2,902		3,059		3,593		3,923
Net Interest Income		4,431		4,636		4,427		4,290
Provision for loan losses		250		325		50		-
Net Interest Income after Provision for Loan Losses		4,181		4,311		4,377		4,290
Non-interest income		298		343		308		311
Non-interest expenses		2,361		2,402		2,396		2,473
Income before Income Taxes		2,118		2,252		2,289		2,128
Income taxes		789		838		824		769
Net Income	$	1,329	$	1,414	$	1,465	$	1,359
Net income per common share:
Basic	$	0.27	$	0.28	$	0.29	$	0.27
Diluted	$	0.26	$	0.27	$	0.28	$	0.26
Weighted average number of common shares outstanding:
Basic		5,002		5,003		5,006		5,006
Diluted		5,159		5,185		5,181		5,164

36