BCBP 10-K & 10-Q changes, risk factors and insider trading

The Bank has further segregated its commercial real estate portfolio into cannabis related loans and its commercial business portfolio into commercial business express loans, as these portfolios carry higher risk relative to other commercial real estate and commercial business loans. The portfolio amounts and percentages presented above in this narrative reflect total loans before reclassifications of specialty portfolios. Footnote disclosures present specialty loan segments separately, so the amounts will not directly reconcile.

On December 31, 2025, the size of the business express loans portfolio was $74.9 million and the total loan loss reserves for the portfolio totaled $10.4 million. The significantly higher level of loan loss reserves established for business express loans reflect the higher losses experienced in the portfolio. During the twelve months of 2025, the Company experienced $9.8 million in net charge offs compared to $8.0 million in net charge offs for the same period in 2024. The elevated charge-offs experienced were driven by the deterioration experienced in the business express loans.

Under New Jersey law, the Company may not make a distribution, if, after giving effect to the distribution, it would be unable to pay its debts as they become due in the usual course of business or if its total assets would be less than its liabilities. It is also the policy of the Federal Reserve that a bank holding company generally may only pay dividends on common stock out of net income available to common shareholders over the past twelve months and only if the prospective rate of earnings retention appears consistent with a bank holding company’s capital needs, asset quality, and overall financial condition. A bank holding company also should not maintain a dividend level that places undue pressure on the capital of such institution’s subsidiaries, or that may undermine the bank holding company’s ability to serve as a source of strength for such subsidiaries.

Interruption of our customers’ supply chains and federal funding could negatively impact their business and operations and impact their ability to repay their loans.

Any material interruption in our customers’ supply chains, such as a material interruption of the resources required to conduct their business, such as those resulting from interruptions in service by third-party providers, trade restrictions, such as increased tariffs or quotas, embargoes or customs restrictions, reductions in federal subsidies or grants, social or labor unrest, or political disputes and military conflicts, that cause a material disruption in our customers’ supply chains, could have a negative impact on their business and ability to repay their borrowings with us. In the event of disruptions in our customers’ supply chains, the labor and materials they rely on in the ordinary course of business may not be available at reasonable rates or at all. Additionally, changes in distribution of federal funds or freezing of federal funds, including Congressional federal budget impasses and reductions in federal workforce causing unemployment, could have an adverse effect on the ability of consumers and businesses to pay debts and/or affect the demand for loans and deposits.

Deposits decreased by $77.3 million, or 2.8 percent, to $2.674 billion at December 31, 2025, from $2.751 billion at December 31, 2024. Brokered deposits, transaction accounts and savings accounts decreased $97.1 million, $41.8 million and $8.8 million, respectively, and were offset by increases in money market accounts and certificate of deposit accounts which totaled $70.7 million.

Results of Operations for the Years Ended December 31, 2025 and 2024

Net income decreased by $31.2 million to a net loss of $12.5 million for the twelve months ended December 31, 2025, from earnings of $18.6 million for the twelve months ended December 31, 2024. The decrease in net income was driven primarily by provisioning for loan loss expense being $30.4 million higher and non-interest expense being $20.8 million higher. This was offset by the tax provision being $13.4 million lower, non-interest income being $5.6 million higher, and the net interest income being $1.0 million higher.

Net interest income was $1.0 million higher as interest expense decreased by $22.1 million, or 21.6 percent, to $79.9 million for the twelve months ended December 31, 2025, from $102.0 million for the twelve months ended December 31, 2024. Offsetting the decrease in interest expense, interest income decreased by $21.1 million, or 10.9 percent, to $173.0 million for 2025, from $194.0 million for 2024. The average balance of interest-earning assets decreased $308.5 million, or 8.6 percent, to $3.296 billion at December 31, 2025, from $3.605 billion at December 31, 2024. The average yield decreased 13 basis points to 5.25 percent from 5.38 percent when comparing the twelve months ended December 31, 2025, with the twelve months ended December 31, 2024. The decrease in interest earning assets was primarily a result of loans and interest-bearing bank balances declining, on average, $298.6 million and $38.8 million, respectively. This was offset by an increase in average investment securities of $28.9 million.

Net interest margin increased to 2.82 percent for the twelve months ended December 31, 2025, compared to 2.55 percent for the twelve months ended December 31, 2024. The increase in the net interest margin compared to the prior period was the result of a decrease in the cost of the Company’s interest-bearing liabilities by 43 basis points to 3.14 percent. Offsetting that, somewhat, was a decrease in the rate earned on earning assets, which decreased 13 basis points to 5.25 percent.

During the twelve months ended December 31, 2025, the Company experienced $43.1 million in net charge-offs compared to $10.4 million in net charge-offs for the twelve months ended December 31, 2024. The elevated net charge-offs were partly driven by the $12.7 million of net charge-off recorded in connection with the elimination of specific reserves for a cannabis-related relationship. Additionally, the Bank recorded higher net charge-offs in the C&I portfolio of $29.2 million of which $9.8 million were related to the Bank’s Business Express loans. The provision for credit losses increased from $11.6 million for the twelve months ended December 31, 2024, to $42.0 million for the twelve months ended December 31, 2025.

The following table summarizes the Company’s classified loans greater than $5 million at December 31, 2025 (in thousands):

(1)Based on the most recent appraised values available.

Non-interest income increased by $5.6 million to $8.6 million for the twelve months ended December 31, 2025, from $2.9 million for the twelve months ended December 31, 2024. In 2024, the Bank recorded a loss on sale of loans of $5.3 million compared to a slight gain in 2025. BOLI income and fees and service charges also increased $692 thousand and $245 thousand, respectively, in 2025. Offsetting these items was a decrease in 2025 on realized and unrealized losses and gains on equity investments of $679 thousand.

Non-interest expense increased by $20.8 million, or 36.3 percent, to $77.9 million for the twelve months ended December 31, 2025, from $57.1 million for the twelve months ended December 31, 2024. The increase in operating expenses for 2025 was driven primarily by the Bank recording a one-time $15.1 million expense on the previously disclosed cannabis-related OREO property in the fourth quarter of 2025 and salaries and employee benefits increasing $3.2 million for the twelve months ended December 31, 2025, compared to the same period in 2024. Data processing costs also increased $959 thousand when comparing the twelve months ended December 31, 2025 with the same period one year earlier.

The income tax provision decreased by $13.4 million to an income tax benefit of $5.8 million for the twelve months ended December 31, 2025 when compared to a $7.6 million provision for the twelve-month period ended December 31, 2024.

changes in the credit performance of our loan portfolio, including levels of criticized and classified loans, nonaccrual loans, and charge-offs;

changes in liquidity levels, funding sources, or funding costs, and our ability to manage our liquidity risks;

Executive Summary of Second Quarter Performance

As of June 30, 2026, the Company had total consolidated assets of $3.118 billion, a decrease of $161.3 million, or 4.9 percent, from $3.279 billion at December 31, 2025, total consolidated deposits of $2.636 billion, a decrease of $37.6 million, or 1.4 percent, from December 31, 2025, and total consolidated stockholders’ equity of $291.9 million, compared to $304.3 million at December 31, 2025. The decrease in total assets was driven primarily by a decrease in net loans and cash and cash equivalents, reflecting the Bank’s paydown of higher-cost brokered deposits and FHLB advances, offset by an increase in debt securities. Total criticized and classified loans were $367.4 million at June 30, 2026, compared to $403.0 million at March 31, 2026. The allowance for credit losses on loans as a percentage of non-accrual loans was 62.5 percent at June 30, 2026, compared to 54.5 percent at March 31, 2026 and 49.8 percent at June 30, 2025, while total non-accrual loans were $72.0 million at June 30, 2026, $59.8 million at March 31, 2026, and $101.8 million at June 30, 2025.

The Company reported a net loss of $14.8 million, or $(0.85) per diluted share, for the second quarter of 2026, compared to net income of $4.9 million, or $0.26 per diluted share, for the first quarter of 2026, and net income of $3.6 million, or $0.18 per diluted share, for the second quarter of 2025. The net loss for the second quarter of 2026 was primarily driven by a $19.0 million provision for credit losses, reflecting higher reserve requirements within the Company’s commercial business loan portfolio, a $5.3 million non-cash goodwill impairment charge, and a $2.6 million loss on the sale of a loan transferred to held-for-sale. These factors were partially offset by a decrease in income tax provision of $4.9 million. Net interest margin improved to 3.03 percent for the second quarter of 2026, compared to 2.95 percent for the first quarter of 2026 and 2.80 percent for the second quarter of 2025, reflecting a decrease in the cost of the Company’s interest-bearing liabilities. The efficiency ratio for the second quarter was 96.8 percent compared to 62.4 percent in the prior quarter, and 60.6 percent in the second quarter of 2025.

Since June 1, 2026, the Company has been engaged in a comprehensive re-evaluation of its credit portfolios with the assistance of independent consultants, as part of its broader effort to strengthen the balance sheet and position the franchise for long-term success. The initial feedback from this re-evaluation has been reflected in the Company’s loan loss reserving decisions for the second quarter, and the Company is working toward completion of the review by the end of the third quarter of 2026. With respect to the Company’s commercial real estate portfolio, the Company’s analysis remains in the early stages, given the absolute size and complexity of this portfolio.

In connection with these efforts, the Company’s Board of Directors approved the suspension of both common and preferred stock dividends during the quarter in order to preserve capital at the Bank and liquidity at the holding company. Additionally, the Company announced in June, and subsequently distributed a notice to the participants in its 2026 Amended and Restated Dividend Reinvestment and Stock Purchase Plan, that the Plan has been suspended in accordance with its terms, effective August 6, 2026. The Company also announced on August 3, 2026, that its Board of Directors approved changing the Company’s state of incorporation from New Jersey to Delaware, subject to shareholder approval. The Company intends to call a special meeting of shareholders later in 2026 to seek approval of the reincorporation.

Critical accounting estimates are those accounting policies that can have a significant impact on the Company’s financial position and results of operations that require the use of complex and subjective estimates based upon past experiences and management’s judgment. Because of the uncertainty inherent in such estimates, actual results may differ from these estimates. Below are those policies applied in preparing the Company’s consolidated financial statements that management believes are the most dependent on the application of estimates and assumptions.

Allowance for Credit Losses on Loans Receivable

The allowance for credit losses represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The measurement of expected credit losses is applicable to loans receivable and securities measured at amortized cost. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The allowance is established through a provision for credit losses that is charged against income. The methodology for determining the allowance for credit losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded allowance for credit losses. The allowance for credit losses is reported separately as a contra-asset on the consolidated statement of financial condition. The expected credit loss for unfunded loan commitments is reported on the consolidated statement of financial condition in other liabilities while the provision for credit losses related to unfunded commitments is reported in other non-interest expense. Changes in the allowance for credit losses are recorded as provision for, or reversal of, credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of a receivable is confirmed or when either of the criteria regarding intent or requirement to sell is met.

The allowance for credit losses on loans is deducted from the amortized cost basis of the loan to present the net amount expected to be collected. Expected losses are evaluated and calculated on a collective, or pooled, basis for those loans which share similar risk characteristics. If the loan does not share risk characteristics with other loans, the Company will evaluate the loan on an individual basis. Individually evaluated loans are primarily non-accrual and collateral dependent loans. Furthermore, the Company evaluates the pooling methodology at least annually to ensure that loans with similar risk characteristics are pooled appropriately. Loans are charged off against the allowance for credit losses when the Company believes the balances to be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged off or expected to be charged off.

The Company has chosen to segment its portfolio consistent with the manner in which it manages credit risk. The Company calculates estimated credit losses for these loan segments using quantitative models and qualitative factors. Further information on loan segmentation and the credit loss estimation is included in Note 7 – Loans Receivable and Allowance for Credit Losses.

On a case-by-case basis, the Company may conclude that a loan should be evaluated on an individual basis based on its disparate risk characteristics. When the Company determines that a loan no longer shares similar risk characteristics with other loans in the portfolio, the allowance will be determined on an individual basis using the present value of expected cash flows or, for collateral-dependent loans, the fair value of the collateral as of the reporting date, less estimated selling costs, as applicable. If the fair value of the collateral is less than the amortized cost basis of the loan, the Company will charge-off the difference between the fair value of the collateral, less costs to sell at the reporting date and the amortized cost basis of the loan.

Allowance for Credit Losses on Off-Balance Sheet Commitments

The Company is required to include unfunded commitments that are expected to be funded in the future within the allowance calculation, other than those that are unconditionally cancelable. To arrive at that reserve, the reserve percentage for each applicable segment is applied to the unused portion of the expected commitment balance and is multiplied by the expected funding rate. As noted above, the allowance for credit losses on unfunded loan commitments is included in other liabilities on the consolidated statements of financial condition and the related credit expense is recorded in other non-interest expense in the consolidated statements of operations.

Allowance for Credit Losses on Available-for-Sale Securities

For available-for-sale securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more than likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities available-for-sale that do not meet the above criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income (loss), net of tax. The Company elected the practical expedient of zero loss estimates for securities issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major agencies and have a long history of no credit losses.

Accrued Interest Receivable

The Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of loans and available-for-sale securities. Accrued interest receivable on loans and securities is reported as a component of accrued interest receivable on the consolidated statements of financial condition.

During the quarter ended June 30, 2026, the Company recorded a non-cash goodwill impairment charge of $5.3 million. The goodwill impairment charge resulted from an interim quantitative impairment assessment triggered by the Company’s significant quarterly loss and the continued trading of its stock at a substantial discount to book value. The non-cash impairment charge reduced the goodwill recorded on its balance sheet to zero.

The allowance for credit losses on loans increased $11.3 million to $45.0 million, or 62.5 percent of non-accruing loans and 1.71 percent of gross loans, at June 30, 2026, as compared to an allowance for credit losses on loans of $33.7 million, or 53.3 percent of non-accruing loans and 1.24 percent of gross loans, at December 31, 2025. Additional details are provided in the Asset Quality portion of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

During the second quarter, the Company also transferred one loan on non-accrual status to held-for-sale, which was written down to fair market value resulting in a loss of $2.6 million reflected in non-interest income under the line item for net loss on the sale of loans. The remaining carrying value of the loan is $10.8 million. Loans held-for-sale are not included in past due loans or classified loans.

Asset Quality

Since June 1, 2026, the Company has been engaged in a comprehensive re-evaluation of its credit portfolios with the assistance of independent consultants as part of its broader effort to strengthen the balance sheet and position the franchise for long-term success. The initial feedback from this re-evaluation has been reflected in the loan loss reserving decisions made during the second quarter, and the Company is working toward completion of that review by the end of the third quarter of 2026. With respect to the Company’s commercial real estate portfolio, the Company’s analysis remains in the early stages, given the absolute size and complexity of this portfolio. As the evaluation continues in the third quarter, the Company will fully explore various alternatives to strengthen the credits or exit the relationships, which may include workouts and loan restructurings, such as potentially seeking additional collateral, interest rate adjustments, as well as select loan sale.

The allowance for credit losses on loans of $45.0 million, as of June 30, 2026, increased by $11.3 million, or 33.5 percent, compared to December 31, 2025. The $11.3 million increase compared to December 31, 2025, was driven by a $21.8 million provision expense for the first six months of 2026 that was partially offset by $10.5 million in net charge-offs primarily attributable to the commercial business portfolio, which continued to exhibit elevated levels of credit deterioration. Net charge-offs within the commercial business portfolio totaled $6.6 million for the six months ended June 30, 2026, with $5.8 million recognized in the second quarter compared to $824,000 in the first quarter. In addition, the Bank concluded that full recovery is no longer expected on a previously charged-off $6.3 million commercial business relationship. In light of this development, along with broader adverse credit trends observed within the commercial business portfolio, management performed a targeted qualitative assessment of the portfolio during the second quarter. As a result of this evaluation, the Bank increased the allowance associated with the commercial business portfolio by $10.8 million. For reference and as presented in Note 7, $16.7 million of the $19 million of loan loss provision expense booked in the 2026 second quarter was attributed to the build-up of loan loss reserves for the commercial business portfolio.

During the three months ended June 30, 2026, there were $7.5 million of charge-offs and $904,000 of recoveries, compared to $6.0 million of charge-offs and $313,000 in recoveries for the three months ended June 30, 2025.

For the six months ended June 30, 2026, there were $11.6 million charge-offs and $1.1 million recoveries, compared to $10.2 million of charge-offs and $361,000 of recoveries for the six months ended June 30, 2025.

Loans receivable classified as Substandard totaled $160.5 million at June 30, 2026, compared to $188.7 million at December 31, 2025, and $266.8 million at June 30, 2025. The decreases were primarily attributed to charge-offs, payoffs and paydowns, as well as upgrades in borrower risk ratings. Also, during the second quarter of 2026, the Bank transferred a classified non-accrual loan with a carrying value of $13.4 million to held-for-sale, resulting in a loss of $2.6 million reflected in non-interest income under the line item for net loss on the sale of loans. The remaining value of the loan is $10.8 million. Loans classified as held-for-sale are excluded from both past due loans and classified loan balances.

As of June 30, 2026, loans classified as substandard have specific reserves of $5.1 million.

Loans receivable classified as Special Mention totaled $207.0 million at June 30, 2026, compared to $170.8 million at December 31, 2025, and $229.9 million at June 30, 2025. While loans classified as Special Mention increased during the year, they remain below the level reported a year ago. The increase from December 31, 2025, reflects the Bank’s proactive efforts to identify, monitor, and transfer higher credit risks earlier in the process for closer oversight and resolution.

Total Substandard and Special Mention loans were $367.4 million, or 13.94 percent of gross loans, at June 30, 2026, as compared to $360.0 million, or 13.19 percent of gross loans, at December 31, 2025.

The Bank had non-accrual loans totaling $72.0 million, or 2.73 percent of gross loans, at June 30, 2026, as compared to $63.3 million, or 2.32 percent of gross loans at December 31, 2025, and $101.8 million or 3.50 percent of gross loans at June 30, 2025. Excluding the classified loan transferred to held-for-sale during the second quarter of 2026, non-accrual loan balances remained fairly stable when compared to December 31, 2025, and declined significantly from a year ago. The year over year decrease was primarily due to the charge-off and subsequent transfer to Other Real Estate Owned of a $33.5 million cannabis related loan in the third and fourth quarters of 2025, respectively.

The allowance for credit losses on loans was 62.5 percent of non-accrual loans at June 30, 2026, compared to 53.3 percent of non-accrual loans at December 31, 2025, and 49.8 percent at June 30, 2025. The increase in coverage reflects the results of the Bank’s ongoing evaluation of its credit portfolio. Loans are generally returned to accrual status after six months of satisfactory loan payment performance and when management determines that full collection of principal and interest is reasonably assured.

Total loans receivable greater than 30 days past due were $122.8 million, or 4.66 percent of gross loans, at June 30, 2026, as compared to $99.1 million, or 3.64 percent of gross loans, at December 31, 2025, and $111.0 million, or 3.81 percent of gross loans at June 30, 2025. The increase in past due loans during the six months ended June 30, 2026, was primarily reflected in loans 30-59 days past due within the Commercial and multi-family loan portfolio. The increase was largely driven by a one large credit of approximately $16 million, secured by raw land that the Bank anticipates entering into litigation. Management believes tht this land loan is adequately secured, with collateral value expected to support full recovery of the outstanding balance. An additional $8 million increase was attributable to a mixed-use office / garage building that the Bank is in process of restructuring for payment relief.

The following table summarizes the Company’s classified loans greater than $5 million at June 30, 2026 (in thousands):

(1) Weighted Average LTV based upon the most recent appraised values available.

(2) Borrower has two loans that are classified and collectively exceed $5 million.

(3) Borrower has ten loans that are classified and collectively exceed $5 million.

The following table summarizes the Bank’s top ten relationship loans at June 30, 2026 excluding classified loans which are presented in the table above.

(1) Weighted Average LTV based upon the most recent appraised values available.

(2) Balance includes outstanding and committed amounts.

(3) LTV adjusted to account for commercial business loans with no credit for UCC filing.

(1)Net interest rate spread represents the difference between the average yield on average interest-earning assets and the average cost of average interest-bearing liabilities.

(2)Net interest margin represents net interest income divided by average total interest-earning assets.

(3)Annualized.

(4)Excludes allowance for credit losses.