Management's Discussion and Analysis of Financial Condition and Results of Operations

Completion of Acquisition

On October 14, 2011, the Bank completed its merger with Allegiance Community Bank, as contemplated by the Agreement and Plan of Merger by and between BCB Bancorp, and Allegiance Community Bank dated April 4, 2011 (the "Agreement"). Under the terms of the Agreement, each share of Allegiance Community Bank stock was converted into 0.35 of a share of BCB Bancorp common stock. The transaction is valued at approximately $6.2 million based on BCB Bancorp's closing share price of $9.57 per share on October 13, 2011, resulting in the issuance of 644,434 shares.

Financial Condition

Total assets decreased by $37.9 million or 3.1% to $1.179 billion at June 30, 2012 from $1.217 billion at December 31, 2011. The decrease in total assets occurred primarily as a result of decreases in loans receivable of $15.0 million, securities held to maturity of $6.9 million, loans held for sale of $2.9 million and cash and cash equivalents of $13.9 million. Management is concentrating on controlled balance sheet growth and maintaining adequate liquidity in the anticipation of funding loans in the loan pipeline as well as seeking opportunities in the secondary market that provide reasonable returns. During the second quarter, the composition of the Bank's statement of financial condition remained relatively similar to the composition of the statement of financial condition at year end December 31, 2011, with the exception of a decrease of $15.0 million or 1.8% in the balance of loans receivable to $825.8 million at June 30, 2012, from $840.8 million at December 31, 2011. During the three months ended June 30, 2012 the Bank sold a portion of the non-performing loan portfolio which totaled approximately $17.6 million. Additionally, the Company took advantage of favorable market conditions to prepay certain advances from the Federal Home Loan Bank of New York during the six months ended June 30, 2012 that were acquired through the business combination transaction with Allegiance Community Bank. This decrease totaled $15.4 million or 11.9% to $114.1 million at June 30, 2012 from $129.5 million at December 31, 2011. It is our intention to grow at a measured pace consistent with our capital levels and as business opportunities permit.

Total cash and cash equivalents decreased by $13.9 million or 11.9% to $103.2 million at June 30, 2012 from $117.1 million at December 31, 2011. Investment securities classified as held-to-maturity decreased by $6.9 million or 3.3% to $200.1 million at June 30, 2012 from $207.0 million at December 31, 2011. This decrease in investment securities resulted primarily from purchases of $47.9 million for the six months ended June 30, 2012 more than offset by allowable sales of $19.8 million of mortgage-backed securities from the held-to-maturity portfolio, $27.4 million of repayments and prepayments in the mortgage-backed securities portfolio, $3.3 million in maturities of certain Government Sponsored Enterprise bonds and $3.0 million of call options exercised on certain callable agency securities for the six months ended June 30, 2012.

Loans receivable decreased by $15.0 million or 1.8% to $825.8 million at June 30, 2012 from $840.8 million at December 31, 2011. The decrease resulted primarily from the sale of certain commercial loans acquired from Allegiance Community Bank totaling approximately $10.8 million. This sale resulted in a gain on sale of loans of approximately $286,000. Further, as previously mentioned, the Bank sold approximately $17.6 million of loans from the loan portfolio that were non-performing loans. The sale of this sub-set of the non-performing loan portfolio resulted in a pre-tax loss of approximately $7.3 million. The balance in the loan pipeline at June 30, 2012 totaled $72.1 million. As of June 30, 2012, the allowance for loan losses was $11.4 million or 33.1% of non-performing loans and 1.36% of gross loans. As a result of the loans acquired in the recent business combination transactions being recorded at their fair value, the balance in the allowance for loan losses that were on the balance sheet of the former Pamrapo Bancorp, Inc., and Allegiance Community Bank are precluded from being reported in the allowance balance previously discussed, consistent with generally accepted accounting principles.

Deposit liabilities decreased by $12.8 million or 1.3% to $964.8 million at June 30, 2012 from $977.6 million at December 31, 2011. The decrease resulted primarily from a $15.6 million decrease in interest bearing deposits which more than offset a $2.8 million increase in non-interest bearing deposits. During the six months ended June 30, 2012, the Federal Open Market Committee (FOMC) has continued its low interest rate accommodative monetary philosophy. This has resulted in persistent low short term market rates that have further resulted in low time deposit account yields which in turn has had the effect of decreasing interest expense.

Index

The balance of borrowed money decreased by $15.4 million or 11.9% to $114.1 million at June 30, 2012 from $129.5 million at December 31, 2011. The decrease in borrowed money resulted primarily from the pre-payment of $15.4 million in Federal Home Loan Bank Advances that were acquired in the business combination transaction with Allegiance Community Bank. As a result, a pre-payment penalty of $49,000 was recognized in interest expense. The purpose of the borrowings reflects the use of long term Federal Home Loan Bank advances to augment deposits as the Bank's funding source for originating loans and investing in GSE investment securities.

Stockholders' equity decreased by $11.21 million or 11.2% to $88.84 million at June 30, 2012 from $100.05 million at December 31, 2011. The decrease in stockholders' equity is primarily attributable to the repurchase of 715,842 shares of the Company's common stock at a cost of $7.4 million, consistent with the 10b5-1 stock repurchase plan in place during the six months ended June 30, 2012, as well as the payment of a two quarterly cash dividends totaling $2.2 million, along with a net loss for the six months ended June 30, 2012 of $1.8 million, partially offset by an increase of $55,000 resulting from the exercise of stock options totaling 18,258 shares, and a $145,000 decrease in accumulated other comprehensive loss. As of June 30, 2012, the Bank's Tier 1, Tier 1 Risk-Based and Total Risk Based Capital Ratios were 7.75%, 13.37% and 14.58% respectively.

Three Months of Operations

Net income decreased by $5.31 million or 272.3% to a net loss of $3.36 million for the three months ended June 30, 2012 compared with net income of $1.95 million for the three months ended June 30, 2011. The decrease in net income was due to increases in non-interest expense and the provision for loan losses and a decrease in non-interest income, partially offset by an increase in net interest income and a decrease in income taxes. Net interest income increased by $366,000 or 3.7% to $10.25 million for the three months ended June 30, 2012 from $9.88 million for the three months ended June 30, 2011. The increase in net interest income resulted primarily from an increase in the average balance of interest earning assets of $96.0 million or 8.9% to $1.175 billion for the three months ended June 30, 2012 from $1.079 billion for the three months ended June 30, 2011, partially offset by a decrease in the average yield on interest earning assets of thirty-eight basis points to 4.53% for the three months ended June 30, 2012 from 4.91% for the three months ended June 30, 2011. The average balance of interest bearing liabilities increased by $89.0 million or 9.6% to $1.012 billion for the three months ended June 30, 2012 from $923.0 million for the three months ended June 30, 2011, and the average cost of interest bearing liabilities decreased by twenty-five basis points to 1.21% for the three months ended June 30, 2012 from 1.46% for the three months ended June 30, 2011. The decrease of thirty-eight basis points in the average yield of interest earning assets more than offset the decrease of twenty-five basis points on the average cost of interest bearing liabilities. As a consequence and in contrast to the increase in net interest income, our net interest margin decreased to 3.49% for the three months ended June 30, 2012 from 3.66% for the three months ended June 30, 2011. The increase in the average balance of interest earning assets and the average balance of interest bearing liabilities reflects the completion of the business combination transaction with Allegiance Community Bank.

Interest income on loans receivable increased by $666,000 or 6.0% to $11.76 million for the three months ended June 30, 2012 from $11.09 million for the three months ended June 30, 2011. The increase was primarily attributable to an increase in the average balance of loans receivable of $71.0 million or 9.1% to $855.0 million for the three months ended June 30, 2012 from $784.0 million for the three months ended June 30, 2011, partially offset by a decrease in the average yield on loans receivable to 5.50% for the three months ended June 30, 2012 from 5.66% for the three months ended June 30, 2011. The increase in the average balance of loans is primarily attributable to the acquisition of Allegiance Community Bank. The decrease in average yield reflects the competitive price environment prevalent in the Bank's primary market area on loan facilities as well as the repricing downward of variable rate loans.

Interest income on securities decreased by $611,000 or 28.6% to $1.52 million for the three months ended June 30, 2012 from $2.13 million for the three months ended June 30, 2011. This decrease was primarily due to a decrease in the average yield of securities held-to-maturity to 2.89% for the three months ended June 30, 2012 from 3.64% for the three months ended June 30, 2011.The decrease in the average yield reflects the continuing low interest rate environment during the three months ended June 30, 2012. Also contributing to the decrease was a decrease in the average balance of securities held-to-maturity of $23.2 million or 7.9% to $211.9 million for the three months ended June 30, 2012 from $235.1 million for the three months ended June 30, 2011.

Interest income on other interest-earning assets increased by $16,000 or 88.9% to $34,000 for the three months ended June 30, 2012 from $18,000 for the three months ended June 30, 2011. This increase was primarily due to an increase of $48.6 million or 81.1% in the average balance of other interest-earning assets to $108.5 million for the three months ended June 30, 2012 from $59.9 million for the three months ended June 30, 2011. The average yield on other interest-earning assets increased slightly to 0.13% for the three months ended June 30, 2012 from 0.12% for the three month ended June 30, 2011. The static nature of the average yield on other interest earning assets reflects the philosophy by the FOMC of keeping short term interest rates at historically low levels for the last two years. The increase in the average balance of other interest earning assets is primarily attributable to the completion of the acquisition of Allegiance Community Bank.

Total interest expense decreased by $295,000 or 8.8% to $3.07 million for the three months ended June 30, 2012 from $3.37 million for the three months ended June 30, 2011. The decrease resulted primarily from a decrease in the average cost of interest bearing liabilities of twenty-five basis points to 1.21% for the three months ended June 30, 2012 from 1.46% for the three months ended June 30, 2011, partially offset by an increase in the balance of average interest bearing liabilities of $89.0 million or 9.6% to $1.012 billion for the three months ended June 30, 2012 from $923.0 million for the three months ended June 30, 2011. The increase in the balance of average interest bearing liabilities is primarily attributable to the completion of the acquisition of Allegiance Community Bank. The decrease in the average cost reflects the Company's reaction to the lower short term interest rate environment and our ability to reduce our pricing on a select number of retail deposit products.

The provision for loan losses totaled $1.2 million and $450,000 for the three month periods ended June 30, 2012 and 2011, respectively. The provision for loan losses is established based upon management's review of the Bank's loans and consideration of a variety of factors including, but not limited to, (1) the risk characteristics of the loan portfolio, (2) current economic conditions,
(3) actual losses previously experienced, (4) our level of loan growth and
(5) the existing level of reserves for loan losses that are probable and estimable. During the three months ended June 30, 2012, the Bank experienced $723,000 in net charge-offs, (consisting of $723,000 in charge-offs and no recoveries). During the three months ended June 30, 2011, the Bank experienced $121,000 in net charge-offs, (consisting of $146,000 in charge-offs and $25,000 in recoveries). The Bank had non-performing loans totaling $34.5 million or 4.11% of gross loans at June 30, 2012, $47.8 million or 5.61% of gross loans at December 31, 2011 and $42.5 million or 5.49% of gross loans at June 30, 2011. The decrease in non-performing loans resulted primarily from the sale of approximately $17.6 million in non-performing loans during the three months ended June 30, 2012. The sale resulted in a pre-tax loss of approximately $7.3 million. Management continues to evaluate its non-performing loans and, based upon market conditions and the ability to obtain satisfactory pricing, may consider sales of a portion of its non-performing loan portfolio in the future. The allowance for loan losses was $11.4 million or 1.36% of gross loans at June 30, 2012, $10.5 million or 1.23% of gross loans at December 31, 2011 and $8.7 million or 1.13% of gross loans at June 30, 2011. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates. Management assesses the allowance for loan losses on a quarterly basis and makes provisions for loan losses as necessary in order to maintain the adequacy of the allowance. While management uses available information to recognize losses on loans, future loan loss provisions may be necessary based on changes in the aforementioned criteria. In addition various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require the Bank to recognize additional provisions based on their judgment of information available to them at the time of their examination. Management believes that the allowance for loan losses was adequate as of June 30, 2012, December 31, 2011 and June 30, 2011.

Index

Total non-interest income (loss) decreased by $6.7 million to a $6.3 million loss for the three months ended June 30, 2012 from income of $429,000 for the three months ended June 30, 2011. The decrease in non-interest income resulted primarily from the aforementioned $7.3 million loss on the sale of non-performing loans partially offset by a $384,000 or 144.9% increase in fees and service charges and other non-interest income to $649,000 for the three months ended June 30, 2012 from $265,000 for the three months ended June 30, 2011, an increase in gain on sale of securities of $48,000 or 266.7% to $66,000 for the three months ended June 30, 2012 from $18,000 for the three months ended June 30, 2011 and an increase of $90,000 or 39.8% in gain on sale of loans to $316,000 for the three months ended June 30, 2012 from $226,000 for the three months ended June 30, 2011. The increase in gain on sale of loans occurred primarily as a result of the active local market for refinancing one-to four-family residential mortgages, aided in large part by the low interest rate environment. The Bank also recorded an increase on gain (loss) on sale of real estate owned of $118,000 or 147.5% to $38,000 for the three months ended June 30, 2012 from a loss of $80,000 for the three months ended June 30, 2011. Loss on sale of loans held in portfolio increased to $7.3 million for the three months ended June 30, 2012 from no such corresponding entry for the three months ended June 30, 2011. As previously discussed, the Bank sold approximately $17.4 million of loans previously categorized as non-performing and realized a pre-tax loss of $7.3 million. The primary reason for this transaction was the elimination of carrying and legacy costs associated with these non-interest earning assets.

Total non-interest expense increased by $1.48 million or 22.6% to $8.04 million for the three months ended June 30, 2012 from $6.56 million for the three months ended June 30, 2011. Unless specified otherwise, the increase in the categories of non-interest expense occurred primarily as a result of the acquisition of Allegiance Community Bank. Salaries and employee benefits expense increased by $991,000 or 34.2% to $3.89 million for the three months ended June 30, 2012 from $2.90 million for the three months ended June 30, 2011. This increase occurred primarily as a result of an increase in the number of full time equivalent employees to 205 at June 30, 2012, from 168 at June 30, 2011. Occupancy expense increased by $164,000 or 22.7% to $887,000 for the three months ended June 30, 2012 from $723,000 for the three months ended June 30, 2011. Equipment expense increased by $83,000 or 7.8% to $1.15 million for the three months ended June 30, 2012 from $1.07 million for the three months ended June 30, 2011. The primary component of this expense item is data service provider expense which increases with the growth in the Bank's assets. Professional fees increased by $337,000 or 130.6% to $595,000 for the three months ended June 30, 2012 from $258,000 for the three months ended June 30, 2011. The increase is due to the various legal actions the Bank is involved with during the normal course of business. Directors' fees increased by $2,000 or 1.1% to $182,000 for the three months ended June 30, 2012 from $180,000 for the three months ended June 30, 2011. Regulatory assessments decreased by $60,000 or 16.9% to $295,000 for the three months ended June 30, 2012 from $355,000 for the three months ended June 30, 2011 primarily due to the new assessment base methodology pursuant to the Dodd- Frank Act which lowered the Bank's insurance premium. Advertising expense increased by $23,000 or 21.7% to $129,000 for the three months ended June 30, 2012 from $106,000 for the three months ended June 30, 2011. Other non-interest expense increased by $196,000 or 27.6% to $907,000 for the three months ended June 30, 2012 from $711,000 for the three months ended June 30, 2011. Other non-interest expense is comprised of loan expense, stationary, forms and printing, check printing, correspondent bank fees, telephone and communication, and other fees and expenses.

Income taxes decreased by $3.25 million or 240.7% to a tax benefit of $1.9 million for the three months ended June 30, 2012 compared with a tax provision of $1.35 million for the three months ended June 30, 2011, reflecting decreased taxable income during the three months ended June 30, 2012 primarily as a result of the previously mentioned non-performing loan sale completed during the three months ended June 30, 2012. The consolidated effective tax rate for the three months ended June 30, 2012 was a tax benefit of 36.1% compared to a tax provision of 40.9% for the three months ended June 30, 2011.

Six Months of Operations

Net income decreased by $5.65 million or 145.7% to a net loss of $1.77 million for the six months ended June 30, 2012 compared with net income of $3.87 million for the six months ended June 30, 2011. The decrease in net income was due to increases in the non-interest expense and provision for loans losses, and a decrease in non-interest income (loss) partially offset by an increase in net interest income and a decrease in income taxes. Net interest income increased by $991,000 or 5.1% to $20.55 million for the six months ended June 30, 2012 from $19.55 million for the six months ended June 30, 2011. This increase in net interest income resulted primarily from an increase of $102.0 million or 9.4% in the average balance of interest earning assets to $1.184 billion for the six months ended June 30, 2012 from $1.082 billion for the six months ended June 30, 2011, partially offset by a decrease in the average yield on interest earning assets to 4.54% for the six months ended June 30, 2011 from 4.86% for the six months ended June 30, 2011. The average balance of interest bearing liabilities increased by $99.1 million or 10.7% to $1.026 billion for the six months ended June 30, 2012 from $926.9 million for the six months ended June 30, 2011, while the average cost of interest bearing liabilities decreased to 1.23% for the six months ended June 30, 2012 from 1.46% for the six months ended June 30, 2011. As a consequence of the aforementioned, our net interest margin decreased to 3.47% for the six months ended June 30, 2012 from 3.62% for the six months ended June 30, 2011. The increase in the average balance of interest earning assets and the average balance of interest bearing liabilities reflects the completion of the business combination transaction with Allegiance Community Bank.

Interest income on loans receivable increased by $1.38 million or 6.2% to $23.73 million for the six months ended June 30, 2012 from $22.35 million for the six months ended June 30, 2011. The increase was primarily attributable to an increase in the average balance of loans receivable of $69.9 million or 8.9% to $859.3 million for the six months ended June 30, 2012 from $789.4 million for the six months ended June 30, 2011, partially offset by a decrease in the average yield on loans receivable to 5.52% for the six months ended June 30, 2012 from 5.66% for the six months ended June 30, 2011. The increase in the average balance of loans is primarily attributable to the completion of the business combination transaction with Allegiance Community Bank. The decrease in average yield reflects the competitive price environment prevalent in the Bank's primary market area on loan facilities as well as the repricing downward of variable rate loans.

Interest income on securities decreased by $830,000 or 21.2% to $3.08 million for the six months ended June 30, 2012 from $3.91 million for the six months ended June 30, 2011. This decrease was primarily due to a decrease in the average balance of securities held-to-maturity of $3.8 million or 1.7% to $214.7 million for the six months ended June 30, 2012 from $218.5 million for the six months ended June 30, 2011, as well as a decrease in the average yield of securities held-to-maturity to 2.87% for the six months ended June 30, 2012 from 3.58% for the six months ended June 30, 2011. The decrease in the average yield reflects the low interest rate environment during the six months ended June 30, 2012.

Interest income on other interest-earning assets increased by $19,000 or 41.3% to $65,000 for the six months ended June 30, 2012 from $46,000 for the six months ended June 30, 2011. This increase was primarily due to an increase of $36.6 million or 49.5% in the average balance of other interest-earning assets to $110.5 million for the six months ended June 30, 2012 from $73.9 million for the six months ended June 30, 2011. The average yield on other interest-earning assets remained static at 0.12% for the six months ended June 30, 2012 and June 30, 2011. The static nature of the average yield on other interest-earning assets reflects the philosophy by the FOMC of keeping short term interest rates at historically low levels for the last two years.

Total interest expense decreased by $424,000 or 6.3% to $6.33 million for the six months ended June 30, 2012 from $6.75 million for the six months ended June 30, 2011. The decrease resulted primarily from a decrease in the average cost of interest-bearing liabilities of twenty-three basis points to 1.23% for the six months ended June 30, 2012 from 1.46% for the six months ended June 30, 2011, partially offset by an increase in the balance of average interest-bearing liabilities of $99.1 million or 10.7% to $1.026 billion for the six months ended June 30, 2012 from $926.9 million for the six months ended June 30, 2011. The increase in the balance of average interest- bearing liabilities is primarily attributable to the completion of the business combination transaction with Allegiance Community Bank. The decrease in the average cost reflects the Company's reaction to the lower short term interest rate environment and our ability to reduce our pricing on a select number of retail deposit products.

The provision for loan losses totaled $1.8 million for the six months ended June 30, 2012 and $800,000 for the six months ended June 30, 2011. The provision for loan losses is established based upon management's review of the Bank's loans and consideration of a variety of factors including, but not limited to, (1) the risk characteristics of the loan portfolio, (2) current economic conditions, (3) actual losses previously experienced, (4) the dynamic activity and fluctuating balance of loans receivable, and (5) the existing level of reserves for loan losses that are probable and estimable. During the six months ended June 30, 2012, the Bank experienced $896,000 in net charge-offs (consisting of $896,000 in charge-offs and no recoveries). During the six months ended June 30, 2011, the Bank experienced $501,000 in net charge-offs (consisting of $526,000 in charge-offs and $25,000 in recoveries). The Bank had non-performing loans totaling $34.5 million or 4.11% of gross loans at June 30, 2012, $47.8 million or 5.61% of gross loans at December 31, 2011 and $42.5 million or 5.49% of gross loans at June 30, 2011. The decrease in non-performing loans resulted primarily from the sale of approximately $17.6 million in non-performing loans during the second quarter of 2012. The sale resulted in a pre-tax loss of approximately $7.3 million.

Index

Management continues to evaluate its non-performing loans and, based upon market conditions and the ability to obtain satisfactory pricing, may consider sales of a portion of its non-performing loan portfolio in the future. The allowance for loan losses was $11.4 million or 1.36% of gross loans at June 30, 2012, $10.5 million or 1.23% of gross loans at December 31, 2011 and $8.7 million or 1.13% of gross loans at June 30, 2011. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates. Management assesses the allowance for loan losses on a quarterly basis and makes provisions for loan losses as necessary in order to maintain the adequacy of the allowance. While management uses available information to recognize losses on loans, future loan loss provisions may be necessary based on changes in the aforementioned criteria. In addition various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require the Bank to recognize additional provisions based on their judgment of information available to them at the time of their examination. Management believes that the allowance for loan losses was adequate at June 30, 2012, December 31, 2011 and June 30, 2011.

Total non-interest income (loss) decreased by $6.0million for the six months ended June 30, 2012 from $906,000 for the six months ended June 30, 2011. The decrease in non-interest income resulted primarily from the aforementioned $7.3 million loss on the sale of non-performing loans partially offset by an increase of $551,000 or 136.4% in gain on sale of loans originated for sale to $669,000 for the six months ended June 30, 2012 from $404,000 for the six months ended June 30, 2011. The increase in gain on sale of loans originated for sale occurred primarily as a result of the active local market for refinancing one-four family residential mortgages, aided in large part by the low interest rate environment. In addition, the Bank sold approximately $10.7 million of commercial business loans acquired in the Allegiance Community Bank acquisition which resulted in a gain of approximately $286,000. Gain on sale of securities held to maturity increased by $175,000 or 972.2% to $193,000 for the six months ended June 30, 2012 from $18,000 for the six months ended June 30, 2011. Fees and service charges and other non-interest income increased by $544,000 or 87.7% to $1.16 million for the six months ended June 30, 2012 from $620,000 for the six months ended June 30, 2011. The aforementioned increases were partially offset by a $99,000 loss on the sale of certain REO properties for the six months ended June 30, 2012 compared to $136,000 loss for the six months ended June 30, 2011. . . .