Notes to Financial Statements – Modified Cash Basis
December 31, 2019 and 2018
The following brief description of the provisions of the BCB Community Bank 401(k) Plan (the "Plan") is provided for general
information purposes only. Participants should refer to the Plan Agreement for more complete information.
General
The Plan is a defined contribution plan which covers all eligible employees who have elected to participate. Employees are
eligible to participate in the Plan following the completion of one year of service, as defined in the Plan Agreement, and are age 21 or older. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
The
Plan’s trustee is Voya Institutional Trust Company.
Plan Sponsor
BCB Bancorp, Inc. (the “Company”) is a New Jersey corporation, which is the holding company parent of BCB Community Bank located
in Bayonne, New Jersey.
Plan Transfers
On April 17, 2018, BCB Bancorp, Inc. acquired IA Bancorp, Inc. Effective June 1, 2018, IA Bancorp, Inc. participant account balances in the ADP Total
Source Retirement Savings Plan were transferred into the Plan. For eligibility and vesting purposes, IA Bancorp, Inc. employees are credited with service at IA Bancorp, Inc. prior to June 1, 2018.
Participant Contributions
Participants may elect to contribute a flat dollar amount or a percentage from 1% to 100% of their pretax compensation, in
increments of 1% each Plan year. Participants who have attained the age of 50 before the end of the Plan year are eligible to make catch-up contributions. Participants may also make rollover contributions to the Plan.
Employer Contributions
BCB Community Bank (the “Bank") provides a safe harbor matching contribution to meet certain nondiscrimination requirements. The
safe harbor contribution matches employee contributions that do not exceed 3% of compensation for the Plan year plus another 50% of elective deferrals that exceed 3% of compensation for the Plan year, but do not exceed 5% of compensation. The Bank
may also make a profit sharing contribution to the Plan each year. To be eligible to receive the profit sharing contribution, certain requirements, which are stated in the Plan document, must be satisfied. There were no profit sharing contributions
made to the Plan in 2019 and 2018.
Participant Accounts
All contributions are directed by the participant into various investment options offered by the Plan. Each participant's account
is credited with the participant's contributions and the Bank’s matching contribution and an allocation of the Bank’s profit sharing contribution (if applicable) and Plan earnings or losses. Participant accounts are charged with an allocation
BCB Community Bank 401(k) Plan
Notes to Financial Statements – Modified Cash Basis
December 31, 2019 and 2018
of administrative expenses that are paid by the Plan. Allocations are based on participant earnings, account balances or specific
participant transactions, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the vested balance in the participant's account. The value of participant accounts will fluctuate with the market values
of the securities in which the accounts are invested.
Vesting
A participant has at all times, a vested and nonforfeitable right to the entire balance in his or her contribution and rollover
contribution accounts. Each participant attains a vested and nonforfeitable right in the Bank’s profit sharing contributions according to the following schedule.
Vesting in the Bank’s safe harbor and any qualified matching contributions is 100% at the time the contribution is made.
A participant becomes 100% vested in profit sharing contributions upon death or disability.
Plan Sponsor Stock
Participants may invest in common stock of BCB Bancorp, Inc. (the "Stock") through a common stock fund.
Benefit Distributions
On termination of service in the event of death, disability, retirement or other reasons, a participant or designated beneficiary
in the event of death, may elect to receive either a lump-sum amount equal to the value of the participant's vested interest in his or her account or a direct rollover to an eligible retirement plan including an individual retirement account or
individual retirement annuity.
Notes Receivable from Participants
Participants may borrow from their accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their
vested account balance, whichever is less. The loans are secured by the vested balance in the participants’ account and bear interest at the rate designated by the Plan Administrator. Interest rates range from 3.50% to 5.50% as of December 31,
2019. Terms range from one to five years or greater if used for the purchase of a principal residence.
BCB Community Bank 401(k) Plan
Notes to Financial Statements – Modified Cash Basis
December 31, 2019 and 2018
Forfeitures
Forfeited balances of terminated participating non-vested accounts may be used to reduce future Bank contributions to the Plan. At
December 31, 2019 and 2018 forfeited amounts were $0. Forfeitures of $0 and $16,158 were used to reduce bank contributions and $0 and $436 were used to pay plan administrative expenses in 2019 and 2018, respectively.
2. Summary of Significant Accounting Policies
Basis of Accounting
The Plan's financial statements are prepared on the modified cash basis of accounting. Although not in accordance with accounting principles generally
accepted in the United States of America (GAAP), this method of accounting is permitted under the Department of Labor's Rules and Regulations for Reporting and Disclosure under ERISA and is a comprehensive basis of accounting other than GAAP.
Therefore, certain additions and related assets are recognized when received rather than when earned and certain liabilities and expenses are recognized when paid rather than when the obligations are incurred.
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value (except for fully benefit-responsive investment contracts, which are reported at contract value). Fair
value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Note 5 for a discussion of fair value measurements. The assets of the
Plan are subject to market fluctuations which could affect balances available for benefits.
Interest and dividend income, capital gains and losses are recorded at the time the proceeds are received.
Net appreciation (depreciation) includes the Plan’s gains and losses on investments bought and sold as well as held during the year.
Investment Fees
Net investment returns reflect certain fees paid by the investment funds to their affiliated investment advisors, transfer agents, and others as
further described in each fund prospectus or other published documents. These fees are deducted prior to allocation of the Plan's investment earnings activity and thus are not separately identifiable as an expense.
Notes Receivable from Participants
Notes receivable from participants are valued at their outstanding principal balance.
Use of Estimates
The preparation of financial statements in conformity with the modified cash basis of accounting requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
BCB Community Bank 401(k) Plan
Notes to Financial Statements – Modified Cash Basis
December 31, 2019 and 2018
during the reporting period. Significant estimates include the determination of the fair value of the Plan's assets. Actual
results could differ from those estimates.
Benefit Payments
Benefit payments are recorded when paid.
Administrative Expenses
The Company intends to pay all of the administrative expenses of the Plan directly, but reserves the right to authorize such expenses be paid by the
Plan. Any such payment of administrative expenses by the Plan will be allocated among the various investment funds in proportion to the fair value of the assets on the last valuation date and allocated to the various accounts in the same manner as
a gain on investments. Fees related to the administration of notes receivable from participants are charged directly to the participant’s account and are included in administrative expenses. Investment related expenses are included in net
appreciation/ depreciation of fair value of investments.
Although it has not expressed intent to do so, the Bank has the right under the Plan to terminate the Plan, at any time, subject
to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their account. Any unallocated assets of the Plan shall be allocated to participant accounts and distributed in such a manner as set forth in the
Plan document.
The Plan owns shares of the common stock of the Company. The Plan permits that Bank matching contributions may be used to purchase
common stock of the Company, and participants may also elect to invest in the Company’s Stock. These transactions qualify as related party and party-in-interest transactions. The Plan owns 101,696 and 102,648 shares of the common stock of the
Company as of December 31,2019 and 2018, respectively. Total purchases related to the Company’s Stock at market value for 2019 and 2018 were approximately $237,000 and $317,000, respectively. Total sales related to the Company’s Stock at market
value for 2019 and 2018 were approximately $158,000 and $175,000, respectively. No shares were released in connection with the payment of benefits in 2019 and 2018.
Certain administrative functions of the Plan are performed by officers or employees of the Bank. No such officer or employee
receives compensation from the Plan.
The Plan’s investments are managed by Voya, the trustee. These transactions qualify as
party-in-interest transactions. Administrative fees for newly originated loans to participants are deducted from the loan proceeds by the trustee and are reflected in the statement of changes in net assets available for benefits as
administrative expenses. Fees for accounting and other administrative services are paid for by the Bank.
BCB Community Bank 401(k) Plan
Notes to Financial Statements – Modified Cash Basis
December 31, 2019 and 2018
The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The three levels of the fair value
hierarchy under FASB ASC 820 are described as follows:
Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets
that the Plan has the ability to access.
Level 2 - Inputs to the valuation methodology include
If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term
of the asset or liability.
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input
that is significant to the fair value measurement. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs.
Following is a description of the valuation methodologies used for investments measured at fair value. There have been no
significant changes in the methodologies used during the years ended December 31, 2019 and 2018.
The fair value of the common stock fund is valued at the closing price reported on the active market on which the individual
securities are traded adjusted to unitized value to reflect the cash component within the fund.
Pooled separate accounts are valued based upon the units of such pooled separate accounts held by the Plan at year end multiplied
by the respective unit value. As of December 31, 2019 and 2018, pooled separate accounts held by Voya are valued at their “accumulation unit value” (AUV). These are valued daily as the number of accumulation
units held multiplied by the AUV. The AUV is determined daily based on the net asset value of shares of the underlying fund, the
fund’s dividends and the contract’s separate account charges. Investments in the pooled separate accounts are measured at fair value using the net asset value per share
(or its equivalent) as a practical expedient and in accordance with Subtopic 820-10 have not been classified in the fair value hierarchy.
BCB Community Bank 401(k) Plan
Notes to Financial Statements – Modified Cash Basis
December 31, 2019 and 2018
Due to the nature of the pooled separate accounts discussed above, there are no unfunded commitments or redemption restrictions.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective
of future fair values. Furthermore, while the Plan's management believes the valuation methodologies are appropriate and consistent with those used by other market participants, the use of different methodologies or assumptions to determine the
fair value of certain investments could result in a different fair value measurement at the reporting date.
The following table sets forth by level, within the fair value hierarchy, the Plan's investments at fair value as of December 31,
2019 and 2018:
BCB Community Bank 401(k) Plan
Notes to Financial Statements – Modified Cash Basis
December 31, 2019 and 2018
6. Guaranteed Annuity Contract with Voya
The Plan offers the option to invest in a guaranteed annuity contract with Voya who maintains the
contributions in a general account. The contract is considered fully benefit-responsive and is reported at contract value. Contract value, as reported to the Plan by Voya, of $1,356,460 at December 31, 2019 and $1,379,146 at December 31, 2018
represents contributions made under the contract, plus earnings, less participant withdrawals and administrative expenses.
Voya is contractually obligated to repay the principal and interest at the specified
interest rate that is guaranteed to the Plan. The crediting rate is based on a formula established by Voya but may not be less than 1%.
This contract meets the fully benefit-responsive investment contract criteria and therefore is reported at
contract value. Contract value is the relevant measure for the portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount
participants normally would receive if they were to initiate permitted transactions under the Plan. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value.
The Plan’s ability to receive amounts due in accordance with the contract is dependent on Voya’s ability to
meet its financial obligations. Voya’s ability to meet its contractual obligations may be affected by future economic and regulatory developments.
Certain events might limit the ability of the Plan to transact at contract value with Voya. These events may
be different under each contract. Examples of such events include the following:
1. The Plan’s failure to qualify under Section 401(a) of the Internal Revenue Code or the failure of the trust
to be tax-exempt under Section 501(a) of the Internal Revenue Code
2. Premature termination of the contract
3. Plan termination or merger
4. Changes to the Plan’s prohibition on competing investment options
5. Bankruptcy of the Bank or other events (for example, divestitures or spinoffs of a subsidiary) that
significantly affect the Plan’s normal operations.
No events are probable of occurring that might limit the ability of the Plan to transact at contract value
with Voya and that also would limit the ability of the Plan to transact at contract value with the participants.
In addition, certain events allow Voya to terminate the contract with the Plan and settle at an amount
different from contract value. Those events may be different under each contract. Examples of such events may include the following:
1. An uncured violation of the Plan’s investment guidelines
BCB Community Bank 401(k) Plan
Notes to Financial Statements – Modified Cash Basis
December 31, 2019 and 2018
2. A breach of material obligation under the contract
3. A material misrepresentation
4. An amendment to the agreement without the consent of Voya.
The Plan offers investment options in various investment securities, including the Company common stock fund, pooled separate
accounts and a guaranteed annuity contract which are exposed to various risks such as interest rate, market, and credit risk. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in
the value of investment securities will occur in the near term and that such changes could materially affect participants' account balances and the amounts reported in the statement of net assets available for benefits.
As of December 31, 2019, the Plan had investments of $2,883,531 concentrated in 2 funds representing 24% of the net assets
available for benefits.
The Plan adopted CCH Incorporated DBA FTWilliam Com’s Volume Submitter Profit Sharing
Plan with Cash or Deferred Arrangement (“CODA”). The IRS determined and informed the Volume Submitter by letter dated March 31, 2014, that the Volume Submitter Profit Sharing Plan with CODA was accepted under Section 401a of the IRC for use by
employers for the benefit of their employees. Although the Plan has been amended since receiving the opinion letter, the plan administrator believes that the Plan is designed and is currently being operated in compliance with the applicable
requirements of the IRC and therefore, believes that the Plan is qualified, and the related trust is tax exempt. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The Trustees of the
Plan are not aware of any course of action or series of events that have occurred that might adversely affect the Plan's qualified status.
Plan management is required to evaluate tax positions taken by the plan. Since the Plan utilizes the modified cash basis of
accounting the resulting tax impact of these tax positions are recognized in the financial statements when they are actually paid, based on the result of this evaluation. The Plan is subject to examination by taxing authorities, however, there are
currently no examinations for any periods in progress. The Plan administrator believes it is no longer subject to income tax examinations for years prior to 2016.
BCB Community Bank 401(k) Plan
Notes to Financial Statements – Modified Cash Basis
December 31, 2019 and 2018
9. Subsequent Events
The Plan is currently evaluating the effects of the recent outbreak of COVID-19 and at this time is uncertain of the impact this event may have on operations.