##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 450 Fifth Street, N.W.
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Year Ended December 31, 2008
 OR
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission File No. 001-33934
 Cape Bancorp, Inc.
  Maryland
    
    26-1294270(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)225 North Main Street, Cape May Court House, New Jersey
    
    08210(Address of Principal Executive Offices)
    
    Zip Code
 (609) 465-5600
   Title of each class
    
    Name of each exchange on which registeredCommon Stock, $0.01 par value
    
    The NASDAQ Stock Market, LLC
  o þ
 o þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




---



##### 



TABLE OF CONTENTS
 PART I
    
    
    1ITEM 1. BUSINESS
    
    
    1ITEM 1A. RISK FACTORS
    
    
    32ITEM 1B. UNRESOLVED STAFF COMMENTS
    
    
    37ITEM 2. PROPERTIES
    
    
    37ITEM 3. LEGAL PROCEEDINGS
    
    
    37ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    38PART II
    
    
    38ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
    
    
    38ITEM 6. SELECTED FINANCIAL DATA
    
    
    39ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    41ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    
    
    57ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    57ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    57ITEM 9A. CONTROLS AND PROCEDURES
    
    
    57ITEM 9B. OTHER INFORMATION
    
    
    58PART III
    
    
    58ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    58ITEM 11. EXECUTIVE COMPENSATION
    
    
    58ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
    
    
    59ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
    
    
    59ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    59PART IV
    
    
        59ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    59Exhibit 21Exhibit 31.1Exhibit 31.2Exhibit 32




---



##### Table of Contents



PART I
 
 ITEM 1. BUSINESS
 Forward Looking Statements
   Cape Bancorp, Inc.
        1




---



##### Table of Contents



Cape Bank
 General
   www.capebanknj.com
 Market Area
   2




---



##### Table of Contents



Competition
 nd nd
  Lending Activities
    3




---



##### Table of Contents



Loan Portfolio Composition.
 At December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(dollars in thousands)Real estate loans:Commercial mortgage
    
    $
    411,809
    
    
    
    51.8
    %
    
    $
    199,777
    
    
    
    43.0
    %
    
    $
    183,091
    
    
    
    40.6
    %
    
    $
    157,128
    
    
    
    37.9
    %
    
    $
    139,839
    
    
    
    38.1
    %Residential mortgage
    
    
    226,963
    
    
    
    28.5
    %
    
    
    175,809
    
    
    
    37.8
    %
    
    
    183,692
    
    
    
    40.7
    %
    
    
    179,373
    
    
    
    43.2
    %
    
    
    167,321
    
    
    
    45.5
    %Construction
    
    
    54,187
    
    
    
    6.8
    %
    
    
    38,554
    
    
    
    8.3
    %
    
    
    38,669
    
    
    
    8.6
    %
    
    
    32,917
    
    
    
    7.9
    %
    
    
    16,834
    
    
    
    4.6
    %Home equity loans and lines of credit
    
    
    46,850
    
    
    
    5.9
    %
    
    
    37,308
    
    
    
    8.0
    %
    
    
    36,998
    
    
    
    8.2
    %
    
    
    36,472
    
    
    
    8.8
    %
    
    
    36,916
    
    
    
    10.1
    %Commercial business loans
    
    
    54,319
    
    
    
    6.8
    %
    
    
    12,018
    
    
    
    2.6
    %
    
    
    7,773
    
    
    
    1.7
    %
    
    
    8,096
    
    
    
    2.0
    %
    
    
    5,497
    
    
    
    1.5
    %Other consumer loans
    
    
    1,388
    
    
    
    0.2
    %
    
    
    1,257
    
    
    
    0.3
    %
    
    
    919
    
    
    
    0.2
    %
    
    
    798
    
    
    
    0.2
    %
    
    
    813
    
    
    
    0.2
    %Total loans
    
    $
    795,516
    
    
    
    100.0
    %
    
    $
    464,723
    
    
    
    100.0
    %
    
    $
    451,142
    
    
    
    100.0
    %
    
    $
    414,784
    
    
    
    100.0
    %
    
    $
    367,220
    
    
    
    100.0
    %Less:Allowance for loan losses
    
    
    11,240
    
    
    
    
    
    
    
    4,121
    
    
    
    
    
    
    
    4,009
    
    
    
    
    
    
    
    3,792
    
    
    
    
    
    
    
    3,603Deferred loan fees, net
    
    
    407
    
    
    
    
    
    
    
    666
    
    
    
    
    
    
    
    755
    
    
    
    
    
    
    
    960
    
    
    
    
    
    
    
    793Total loans, net
    
    $
    783,869
    
    
    
    
    
    
    $
    459,936
    
    
    
    
    
    
    $
    446,378
    
    
    
    
    
    
    $
    410,032
    
    
    
    
    
    
    $
    362,824
  4




---



##### Table of Contents



Loan Portfolio Maturities and Yields.
 Commercial
    
    
    Residential
    
    
    
    
    
    
    
    
    
    
    Home Equity LoansMortgage Loans
    
    
    Mortgage Loans
    
    
    Construction Loans
    
    
    and Lines of CreditWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedDue During the Years
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageEnding December 31,
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(dollars in thousands)2009
    
    $
    18,198
    
    
    
    4.38%
    
    
    $
    675
    
    
    
    7.56%
   
    
    $
    47,077
    
    
    
    5.14%
    
    
    $
    767
    
    
    
    4.73%2010
    
    
    3,020
    
    
    
    5.64%
    
    
    
    11
    
    
    
    7.68%
    
    
    
    4,650
    
    
    
    3.77%
    
    
    
    422
    
    
    
    6.59%2011
    
    
    1,102
    
    
    
    3.99%
    
    
    
    220
    
    
    
    7.60%
    
    
    
    
    
    
    
    
    
    
    
    516
    
    
    
    6.71%2012 to 2013
    
    
    12,282
    
    
    
    6.19%
    
    
    
    4,694
    
    
    
    5.42%
    
    
    
    1,296
    
    
    
    6.50%
    
    
    
    2,830
    
    
    
    6.30%2014 to 2018
    
    
    11,086
    
    
    
    6.41%
    
    
    
    28,099
    
    
    
    5.61%
    
    
    
    
    
    
    
    
    
    
    
    8,817
    
    
    
    6.06%2019 to 2023
    
    
    29,977
    
    
    
    7.12%
    
    
    
    30,515
    
    
    
    5.80%
    
    
    
    
    
    
    
    
    
    
    
    29,789
    
    
    
    6.03%2024 and beyond
    
    
    336,144
    
    
    
    6.80%
    
    
    
    162,749
    
    
    
    6.14%
    
    
    
    1,164
    
    
    
    6.46%
    
    
    
    3,709
    
    
    
    4.66%Total
    
    $
    411,809
    
    
    
    6.67%
    
    
    $
    226,963
    
    
    
    6.02%
    
    
    $
    54,187
    
    
    
    5.08%
    
    
    $
    46,850
    
    
    
    5.93%
 Commercial
    
    
    Other ConsumerBusiness Loans
    
    
    Loans (1)
    
    
    TotalWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedDue During the Years
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageEnding December 31,
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(dollars in thousands)2009
    
    $
    36,044
    
    
    
    4.77%
    
    
    $
    158
    
    
    
    1.54%
    
    
    $
    102,919
    
    
    
    4.88%2010
    
    
    1,518
    
    
    
    4.98%
    
    
    
    64
    
    
    
    11.60%
    
    
    
    9,685
    
    
    
    4.72%2011
    
    
    2,702
    
    
    
    6.63%
    
    
    
    40
    
    
    
    10.82%
    
    
    
    4,580
    
    
    
    6.09%2012 to 2013
    
    
    3,879
    
    
    
    6.38%
    
    
    
    57
    
    
    
    10.93%
    
    
    
    25,038
    
    
    
    6.12%2014 to 2018
    
    
    7,914
    
    
    
    6.72%
    
    
    
    
    
    
    
    
    
    
    
    55,916
    
    
    
    6.00%2019 to 2023
    
    
    1,107
    
    
    
    7.42%
    
    
    
    
    
    
    
    
    
    
    
    91,388
    
    
    
    6.33%2024 and beyond
    
    
    1,155
    
    
    
    6.30%
    
    
    
    1,069
    
    
    
    6.17%
    
    
    
    505,990
    
    
    
    6.57%Total
    
    $
    54,319
    
    
    
    5.35%
    
    
    $
    1,388
    
    
    
    6.22%
    
    
    $
    795,516
    
    
    
    6.24%
 
 (1)
    
    Includes overdrawn DDA accounts.  Due After December 31, 2009Fixed Rate
    
    
    Adjustable Rate
    
    
    Total(in thousands)Real estate loans:Commercial mortgage
    
    $
    16,969
    
    
    $
    376,644
    
    
    $
    393,613Residential mortgage
    
    
    176,225
    
    
    
    50,062
    
    
    
    226,287Construction
    
    
    2,044
    
    
    
    5,066
    
    
    
    7,110Home equity loans and lines of credit
    
    
    29,170
    
    
    
    16,912
    
    
    
    46,082Commercial business loans
    
    
    14,768
    
    
    
    3,507
    
    
    
    18,275Other consumer loans
    
    
    134
    
    
    
    1,096
    
    
    
    1,230Total
    
    $
    239,310
    
    
    $
    453,287
    
    
    $
    692,597
  5




---



##### Table of Contents



Commercial Mortgage Loans .
 The Wall Street Journal
    One-to-Four Family Residential Mortgage Loans .
   6




---



##### Table of Contents



Commercial Business Loans. The Wall Street Journal
    Construction Loans.
  7




---



##### Table of Contents



Home Equity Loans and Lines of Credit. The Wall Street Journal
 Other Consumer Loans.
   Loan Originations, Sales, Purchases and Participations.
 Correspondent Lending Relationships.
  8




---



##### Table of Contents



Loan Approval Procedures and Authority.
 Loans to One Borrower.
 Loan Commitments.
 Non-Performing and Problem Assets
 th th
  Non-Performing Assets.
  9




---



##### Table of Contents



At December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(dollars in thousands)Non-accrual loans:Real estate loans:Commercial mortgage
    
    $
    12,117
    
    
    $
    3,887
    
    
    $
    3,381
    
    
    $
    2,420
    
    
    $
    689Residential mortgage
    
    
    692
    
    
    
    
    
    
    
    48
    
    
    
    
    
    
    
    Construction
    
    
    4,109
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Home equity and line of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial business loans
    
    
    3,287
    
    
    
    54
    
    
    
    141
    
    
    
    124
    
    
    
    129Other consumer loans
    
    
    92
    
    
    
    11
    
    
    
    16
    
    
    
    10
    
    
    
    18Total non-accrual loans
    
    
    20,297
    
    
    
    3,952
    
    
    
    3,586
    
    
    
    2,554
    
    
    
    836Loans greater than 90 days delinquent
and still accruing:Real estate loans:Commercial mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Residential mortgage
    
    
    504
    
    
    
    39
    
    
    
    225
    
    
    
    265
    
    
    
    399Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Home equity and line of credit
    
    
    250
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    8Commercial business loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other consumer loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total loans 90 days and still
accruing
    
    
    754
    
    
    
    55
    
    
    
    225
    
    
    
    265
    
    
    
    407Total non-performing loans
    
    
    21,051
    
    
    
    4,007
    
    
    
    3,811
    
    
    
    2,819
    
    
    
    1,243Other real estate owned
    
    
    798
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total non-performing assets
    
    $
    21,849
    
    
    $
    4,007
    
    
    $
    3,811
    
    
    $
    2,819
    
    
    $
    1,243Ratios:Non-performing loans to total loans
    
    
    2.65
    %
    
    
    0.86
    %
    
    
    0.84
    %
    
    
    0.68
    %
    
    
    0.34
    %Non-performing assets to total assets
    
    
    2.00
    %
    
    
    0.63
    %
    
    
    0.62
    %
    
    
    0.49
    %
    
    
    0.23
    %
   10




---



##### Table of Contents



Loans Delinquent For60-89 Days
    
    
    90 Days and Over
    
    
    TotalNumber
    
    
    Amount
    
    
    Number
    
    
    Amount
    
    
    Number
    
    
    Amount(dollars in thousands)At December 31, 2008Real estate loans:Commercial mortgage
    
    
    7
    
    
    $
    4,142
    
    
    
    26
    
    
    $
    12,117
    
    
    
    33
    
    
    $
    16,259Residential mortgage
    
    
    2
    
    
    
    105
    
    
    
    8
    
    
    
    1,196
    
    
    
    10
    
    
    
    1,301Construction
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    4,109
    
    
    
    8
    
    
    
    4,109Home equity loans and
lines of credit
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    250
    
    
    
    1
    
    
    
    250Commercial business loans
    
    
    8
    
    
    
    1,909
    
    
    
    12
    
    
    
    3,287
    
    
    
    20
    
    
    
    5,196Other consumer loans
    
    
    5
    
    
    
    122
    
    
    
    5
    
    
    
    89
    
    
    
    10
    
    
    
    211Total
    
    
    22
    
    
    $
    6,278
    
    
    
    60
    
    
    $
    21,048
    
    
    
    82
    
    
    $
    27,326At December 31, 2007Real estate loans:Commercial mortgage
    
    
    4
    
    
    $
    3,234
    
    
    
    5
    
    
    $
    3,887
    
    
    
    9
    
    
    $
    7,121Residential mortgage
    
    
    4
    
    
    
    601
    
    
    
    1
    
    
    
    39
    
    
    
    5
    
    
    
    640Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Home equity loans and
lines of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial business loans
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    54
    
    
    
    3
    
    
    
    54Other consumer loans
    
    
    2
    
    
    
    72
    
    
    
    5
    
    
    
    21
    
    
    
    7
    
    
    
    93Total
    
    
    10
    
    
    $
    3,907
    
    
    
    14
    
    
    $
    4,001
    
    
    
    24
    
    
    $
    7,908At December 31, 2006Real estate loans:Commercial mortgage
    
    
    
    
    
    $
    
    
    
    
    5
    
    
    $
    3,381
    
    
    
    5
    
    
    $
    3,381Residential mortgage
    
    
    6
    
    
    
    252
    
    
    
    3
    
    
    
    273
    
    
    
    9
    
    
    
    525Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Home equity loans and
lines of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial business loans
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    141
    
    
    
    3
    
    
    
    141Other consumer loans
    
    
    2
    
    
    
    33
    
    
    
    2
    
    
    
    16
    
    
    
    4
    
    
    
    49Total
    
    
    8
    
    
    $
    285
    
    
    
    13
    
    
    $
    3,811
    
    
    
    21
    
    
    $
    4,096At December 31, 2005Real estate loans:Commercial mortgage
    
    
    1
    
    
    $
    493
    
    
    
    3
    
    
    $
    2,420
    
    
    
    4
    
    
    $
    2,913Residential mortgage
    
    
    2
    
    
    
    57
    
    
    
    3
    
    
    
    265
    
    
    
    5
    
    
    
    322Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Home equity loans and
lines of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial business loans
    
    
    1
    
    
    
    39
    
    
    
    3
    
    
    
    124
    
    
    
    4
    
    
    
    163Other consumer loans
    
    
    5
    
    
    
    75
    
    
    
    1
    
    
    
    10
    
    
    
    6
    
    
    
    85Total
    
    
    9
    
    
    $
    664
    
    
    
    10
    
    
    $
    2,819
    
    
    
    19
    
    
    $
    3,483At December 31, 2004Real estate loans:Commercial mortgage
    
    
    2
    
    
    $
    705
    
    
    
    3
    
    
    $
    689
    
    
    
    5
    
    
    $
    1,394Residential mortgage
    
    
    6
    
    
    
    304
    
    
    
    5
    
    
    
    399
    
    
    
    11
    
    
    
    703Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Home equity loans and
lines of credit
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    8
    
    
    
    1
    
    
    
    8Commercial business loans
    
    
    1
    
    
    
    29
    
    
    
    3
    
    
    
    129
    
    
    
    4
    
    
    
    158Other consumer loans
    
    
    1
    
    
    
    15
    
    
    
    2
    
    
    
    18
    
    
    
    3
    
    
    
    33Total
    
    
    10
    
    
    $
    1,053
    
    
    
    14
    
    
    $
    1,243
    
    
    
    24
    
    
    $
    2,296
  11




---



##### Table of Contents



Other
Real Estate Owned.
 Classification of Assets.
 Allowance for Loan Losses
    12




---



##### Table of Contents



At or For the Years Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(dollars in thousands)Balance at beginning of period
    
    $
    4,121
    
    
    $
    4,009
    
    
    $
    3,792
    
    
    $
    3,603
    
    
    $
    3,057Allowance from acquired entity
    
    
    3,791
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Charge-offs:Real estate loans:Commercial mortgage
    
    
    (2,406
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Residential mortgage
    
    
    ( 572
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Construction
    
    
    (1,806
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial business loans
    
    
    (786
    )
    
    
    (119
    )
    
    
    
    
    
    
    
    
    
    
    Other consumer loans
    
    
    (138
    )
    
    
    (113
    )
    
    
    (128
    )
    
    
    (4
    )
    
    
    (4
    )Total charge-offs
    
    
    (5,708
    )
    
    
    (232
    )
    
    
    (128
    )
    
    
    (4
    )
    
    
    (4
    )Recoveries:Other consumer loans
    
    
    27
    
    
    
    43
    
    
    
    33
    
    
    
    
    
    
    
    Total recoveries
    
    
    27
    
    
    
    43
    
    
    
    33
    
    
    
    
    
    
    
    Net (charge-offs) recoveries
    
    
    (5,681
    )
    
    
    (189
    )
    
    
    (95
    )
    
    
    (4
    )
    
    
    (4
    )Provision for loan losses
    
    
    9,009
    
    
    
    357
    
    
    
    312
    
    
    
    193
    
    
    
    550Reclassification to other
liabilities for reserve on
off-balance sheet items
    
    
    
    
    
    
    (56
    )
    
    
    
    
    
    
    
    
    
    
    Balance at end of period
    
    $
    11,240
    
    
    $
    4,121
    
    
    $
    4,009
    
    
    $
    3,792
    
    
    $
    3,603Ratios:Net charge-offs to average
loans outstanding
(annualized)
    
    
    0.74
    %
    
    
    0.06
    %
    
    
    0.02
    %
    
    
    0.01
    %
    
    
    0.00
    %Allowance for loan losses to
non-performing loans at end
of period
    
    
    53.39
    %
    
    
    102.85
    %
    
    
    105.20
    %
    
    
    134.52
    %
    
    
    289.86
    %Allowance for loan losses to
total loans at end of period
    
    
    1.41
    %
    
    
    0.89
    %
    
    
    0.89
    %
    
    
    0.91
    %
    
    
    0.98
    %
  13




---



##### Table of Contents



Allocation of Allowance for Loan Losses.
 At December 31,2008
    
    
    2007
    
    
    2006Percent of
    
    
    
    
    
    
    Percent of
    
    
    
    
    
    
    Percent ofLoans in Each
    
    
    
    
    
    
    Loans in Each
    
    
    
    
    
    
    Loans in EachAllowance for
    
    
    Category to
    
    
    Allowance for
    
    
    Category to
    
    
    Allowance for
    
    
    Category toLoan Losses
    
    
    Total Loans
    
    
    Loan Losses
    
    
    Total Loans
    
    
    Loan Losses
    
    
    Total Loans(dollars in thousands)Real estate loans:Commercial mortgage
    
    $
    6,829
    
    
    
    51.8
    %
    
    $
    2,381
    
    
    
    43.0
    %
    
    $
    2,165
    
    
    
    40.6
    %Residential mortgage
    
    
    1,696
    
    
    
    28.5
    
    
    
    978
    
    
    
    37.8
    
    
    
    1,071
    
    
    
    40.7Construction
    
    
    1,477
    
    
    
    6.8
    
    
    
    336
    
    
    
    8.3
    
    
    
    370
    
    
    
    8.6Home equity loans and lines
of credit
    
    
    346
    
    
    
    5.9
    
    
    
    208
    
    
    
    8.0
    
    
    
    222
    
    
    
    8.2Commercial business loans
    
    
    809
    
    
    
    6.8
    
    
    
    97
    
    
    
    2.6
    
    
    
    79
    
    
    
    1.7Other consumer loans
    
    
    83
    
    
    
    0.2
    
    
    
    121
    
    
    
    0.3
    
    
    
    102
    
    
    
    0.2Total allocated allowance
    
    
    11,240
    
    
    
    100.0
    %
    
    
    4,121
    
    
    
    100.0
    %
    
    
    4,009
    
    
    
    100.0
    %Unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    11,240
    
    
    
    
    
    
    $
    4,121
    
    
    
    
    
    
    $
    4,009
 At December 31,2005
    
    
    2004Percent of
    
    
    
    
    
    
    Percent ofLoans in Each
    
    
    
    
    
    
    Loans in EachAllowance for
    
    
    Category to
    
    
    Allowance for
    
    
    Category toLoan Losses
    
    
    Total Loans
    
    
    Loan Losses
    
    
    Total Loans(dollars in thousands)Real estate loans:Commercial mortgage
    
    $
    1,799
    
    
    
    37.9
    %
    
    $
    1,945
    
    
    
    38.1
    %Residential mortgage
    
    
    1,137
    
    
    
    43.2
    
    
    
    1,116
    
    
    
    45.5Construction
    
    
    399
    
    
    
    7.9
    
    
    
    205
    
    
    
    4.6Home equity loans and lines
of credit
    
    
    255
    
    
    
    8.8
    
    
    
    270
    
    
    
    10.1Commercial business loans
    
    
    200
    
    
    
    2.0
    
    
    
    65
    
    
    
    1.5Other consumer loans
    
    
    2
    
    
    
    0.2
    
    
    
    2
    
    
    
    0.2Total allocated allowance
    
    
    3,792
    
    
    
    100.0
    %
    
    
    3,603
    
    
    
    100.0
    %Unallocated
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    3,792
    
    
    
    
    
    
    $
    3,603
 Investment Activities
    14




---



##### Table of Contents



Municipal Securities.
 U.S. Government and Federal Agency Obligations.
 Mortgage-Backed Securities.
    15




---



##### Table of Contents



Collateralized
Mortgage Obligations (CMOs).
 Collateralized Debt Obligations.
  16




---



##### Table of Contents



Investment Securities Portfolio.
 At December 31,2008
    
    
    2007
    
    
    2006Amortized
    
    
    
    
    
    
    Amortized
    
    
    
    
    
    
    AmortizedCost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair Value(in thousands)Investment securities held-to-maturity:Municipal bonds
    
    $
    24,582
    
    
    $
    25,154
    
    
    $
    19,658
    
    
    $
    19,786
    
    
    $
    13,936
    
    
    $
    13,839U.S. Government and agency obligations
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000
    
    
    
    976Mortgage-backed securities:Ginnie Mae pass-through certificates
    
    
    17
    
    
    
    18
    
    
    
    30
    
    
    
    31
    
    
    
    76
    
    
    
    77Freddie Mac pass-through certificates
    
    
    2,670
    
    
    
    2,715
    
    
    
    3,780
    
    
    
    3,811
    
    
    
    3,998
    
    
    
    3,982Fannie Mae pass-through certificates
    
    
    10,897
    
    
    
    11,203
    
    
    
    11,063
    
    
    
    11,138
    
    
    
    13,084
    
    
    
    12,928Collateralized mortgage obligations
    
    
    9,922
    
    
    
    10,111
    
    
    
    9,609
    
    
    
    9,661
    
    
    
    6,637
    
    
    
    6,575Grantor Trust (money market fund)
    
    
    737
    
    
    
    737
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total securities held-to-maturity
    
    $
    48,825
    
    
    $
    49,938
    
    
    $
    45,140
    
    
    $
    45,427
    
    
    $
    38,731
    
    
    $
    38,377
 At December 31,2008
    
    
    2007
    
    
    2006Amortized
    
    
    
    
    
    
    Amortized
    
    
    
    
    
    
    AmortizedCost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair Value(in thousands)Investment securities available-for-sale:Debt securities:U.S. Government and agency obligations
    
    $
    31,296
    
    
    $
    31,766
    
    
    $
    15,992
    
    
    $
    16,211
    
    
    $
    24,997
    
    
    $
    24,794Corporate bonds
    
    
    4,975
    
    
    
    4,777
    
    
    
    6,914
    
    
    
    6,908
    
    
    
    8,270
    
    
    
    8,244Municipal bonds
    
    
    11,024
    
    
    
    10,715
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Collateralized debt obligations
    
    
    11,832
    
    
    
    3,033
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity securities
    
    
    
    
    
    
    
    
    
    
    247
    
    
    
    172
    
    
    
    247
    
    
    
    224Mortgage-backed securities:Ginnie Mae pass-through certificates
    
    
    773
    
    
    
    763
    
    
    
    1,083
    
    
    
    1,092
    
    
    
    1,429
    
    
    
    1,424Freddie Mac pass-through certificates
    
    
    20,449
    
    
    
    20,771
    
    
    
    17,473
    
    
    
    17,612
    
    
    
    10,931
    
    
    
    10,908Fannie Mae pass-through certificates
    
    
    33,465
    
    
    
    33,397
    
    
    
    19,949
    
    
    
    20,133
    
    
    
    16,851
    
    
    
    16,890Collateralized mortgage obligations
    
    
    10,017
    
    
    
    9,433
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total securities available-for-sale
    
    $
    123,831
    
    
    $
    114,655
    
    
    $
    61,658
    
    
    $
    62,128
    
    
    $
    62,725
    
    
    $
    62,484
   17




---



##### Table of Contents



Portfolio Maturities and Yields.
 More than One Year
    
    
    More than Five YearsOne Year or Less
    
    
    through Five Years
    
    
    through Ten Years
    
    
    More than Ten Years
    
    
    Total SecuritiesWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAmortized
    
    
    Average
    
    
    Amortized
    
    
    Average
    
    
    Amortized
    
    
    Average
    
    
    Amortized
    
    
    Average
    
    
    Amortized
    
    
    
    
    
    
    AverageCost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Fair Value
    
    
    Yield(dollars in thousands)Investment securities held-to-maturity:Municipal bonds
    
    $
    1,541
    
    
    
    3.55%
    
    
    $
    9,339
    
    
    
    3.50%
    
    
    $
    12,861
    
    
    
    3.68%
    
    
    $
    841
    
    
    
    4.03%
    
    
    $
    24,582
    
    
    $
    25,154
    
    
    
    3.62%U.S. Government and agency obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mortgage-backed securities:Ginnie Mae pass-through certificates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    7.47%
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    18
    
    
    
    7.49%Freddie Mac pass-through certificates
    
    
    396
    
    
    
    6.73%
    
    
    
    2,261
    
    
    
    5.18%
    
    
    
    13
    
    
    
    6.90%
    
    
    
    
    
    
    
    
    
    
    
    2,670
    
    
    
    2,715
    
    
    
    5.42%Fannie Mae pass-through certificates
    
    
    
    
    
    
    
    
    
    
    3,156
    
    
    
    5.53%
    
    
    
    2,151
    
    
    
    4.95%
    
    
    
    5,590
    
    
    
    5.38%
    
    
    
    10,897
    
    
    
    11,203
    
    
    
    5.34%Collateralized mortgage obligations
    
    
    
    
    
    
    
    
    
    
    1,346
    
    
    
    4.85%
    
    
    
    3,820
    
    
    
    5.33%
    
    
    
    4,756
    
    
    
    5.09%
    
    
    
    9,922
    
    
    
    10,111
    
    
    
    5.15%Grantor Trust (money market fund)
    
    
    737
    
    
    
    1.89%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    737
    
    
    
    737
    
    
    
    1.89%Total securities held-to-maturity
    
    $
    2,674
    
    
    
    4.20%
    
    
    $
    16,102
    
    
    
    4.25%
    
    
    $
    18,862
    
    
    
    4.16%
    
    
    $
    11,187
    
    
    
    5.16%
    
    
    $
    48,825
    
    
    $
    49,938
    
    
    
    4.39%Investment securities available-for-sale:Debt securities:U.S. Government and agency obligations
    
    $
    5,009
    
    
    
    3.55%
    
    
    $
    7,745
    
    
    
    5.10%
    
    
    $
    13,623
    
    
    
    5.06%
    
    
    $
    4,919
    
    
    
    4.66%
    
    
    $
    31,296
    
    
    $
    31,766
    
    
    
    4.77%Corporate bonds
    
    
    2,944
    
    
    
    3.42%
    
    
    
    1,994
    
    
    
    5.28%
    
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    2.16%
    
    
    
    4,975
    
    
    
    4,777
    
    
    
    4.16%Municipal bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    419
    
    
    
    3.62%
    
    
    
    10,605
    
    
    
    4.47%
    
    
    
    11,024
    
    
    
    10,715
    
    
    
    4.44%Collateralized debt obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,832
    
    
    
    5.18%
    
    
    
    11,832
    
    
    
    3,033
    
    
    
    5.45%Mortgage-backed securities:Ginnie Mae pass-through certificates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    257
    
    
    
    5.19%
    
    
    
    516
    
    
    
    4.66%
    
    
    
    773
    
    
    
    763
    
    
    
    4.84%Freddie Mac pass-through certificates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    4.61%
    
    
    
    20,440
    
    
    
    5.05%
    
    
    
    20,449
    
    
    
    20,771
    
    
    
    5.05%Fannie Mae pass-through certificates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    4.40%
    
    
    
    33,453
    
    
    
    4.86%
    
    
    
    33,465
    
    
    
    33,397
    
    
    
    4.86%Collateralized mortgage obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,624
    
    
    
    3.74%
    
    
    
    8,393
    
    
    
    5.20%
    
    
    
    10,017
    
    
    
    9,433
    
    
    
    4.96%Total securities available-for-sale
    
    $
    7,953
    
    
    
    3.51%
    
    
    $
    9,739
    
    
    
    5.14%
    
    
    $
    15,944
    
    
    
    4.89%
    
    
    $
    90,195
    
    
    
    4.94%
    
    
    $
    123,831
    
    
    $
    114,655
    
    
    
    4.87%
  18




---



##### Table of Contents



Deposit Activities and Other Sources of Funds
 General .
 Deposit Accounts . ®
    19




---



##### Table of Contents



For the year ended December 31, 2008
    
    

For the year ended December 31, 2007Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    AverageBalance
    
    
    Percent
    
    
    Rate
    
    
    Balance
    
    
    Percent
    
    
    Rate(dollars in thousands)Non-interest bearing
    
    $
    68,158
    
    
    
    9.4
    %
    
    
    n/a
    
    
    $
    45,039
    
    
    
    9.7
    %
    
    
    n/aSavings accounts
    
    
    82,309
    
    
    
    11.3
    
    
    
    1.01%
    
    
    
    79,160
    
    
    
    17.2
    
    
    
    1.63%NOW and money market
    
    
    224,647
    
    
    
    30.8
    
    
    
    1.91%
    
    
    
    161,353
    
    
    
    35.0
    
    
    
    2.63%Certificates of deposit
    
    
    353,501
    
    
    
    48.5
    
    
    
    3.55%
    
    
    
    175,924
    
    
    
    38.1
    
    
    
    4.56%Total deposits
    
    $
    728,615
    
    
    
    100.0
    %
    
    
    2.43%
    
    
    $
    461,476
    
    
    
    100.0
    %
    
    
    2.94%
 For the year ended December 31, 2006WeightedAverageBalance
    
    
    Percent
    
    
    Rate(dollars in thousands)Non-interest bearing
    
    $
    46,802
    
    
    
    10.6
    %
    
    
    n/aSavings accounts
    
    
    88,715
    
    
    
    20.2
    
    
    
    1.43%NOW and money market
    
    
    139,645
    
    
    
    31.8
    
    
    
    2.21%Certificates of deposit
    
    
    164,570
    
    
    
    37.4
    
    
    
    4.01%Total deposits
    
    $
    439,732
    
    
    
    100.0
    %
    
    
    2.49%
  20




---



##### Table of Contents



At December 31,2008
    
    
    2007
    
    
    2006(in thousands)Interest RateLess than 2.00%
    
    $
    22,382
    
    
    $
    11
    
    
    $
    292.00% - 2.99%
    
    
    79,179
    
    
    
    51
    
    
    
    1,5393.00% - 3.99%
    
    
    170,565
    
    
    
    12,878
    
    
    
    26,1424.00% - 4.99%
    
    
    74,656
    
    
    
    145,312
    
    
    
    129,7245.00% - 5.99%
    
    
    9,403
    
    
    
    17,398
    
    
    
    10,9136.00% - 6.99%
    
    
    8
    
    
    
    8
    
    
    
    87.00% - 7.99%
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    356,193
    
    
    $
    175,658
    
    
    $
    168,355
  Period to Maturity at December 31, 2008Less Than
    
    
    More Than
    
    
    More Than
    
    
    More Than
    
    
    More Thanor Equal to
    
    
    One to Two
    
    
    Two to
    
    
    Three to
    
    
    Foura Year
    
    
    Years
    
    
    Three Years
    
    
    Four Years
    
    
    Years
    
    
    Total(in thousands)Interest RateLess than 2.00%
    
    $
    22,382
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    22,3822.00% - 2.99%
    
    
    75,745
    
    
    
    2,663
    
    
    
    771
    
    
    
    
    
    
    
    
    
    
    
    79,1793.00% - 3.99%
    
    
    149,585
    
    
    
    14,024
    
    
    
    3,975
    
    
    
    1,060
    
    
    
    1,921
    
    
    
    170,5654.00% - 4.99%
    
    
    42,354
    
    
    
    10,087
    
    
    
    7,223
    
    
    
    7,862
    
    
    
    7,130
    
    
    
    74,6565.00% - 5.99%
    
    
    6,101
    
    
    
    599
    
    
    
    1,119
    
    
    
    1,584
    
    
    
    
    
    
    
    9,4036.00% - 6.99%
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Total
    
    $
    296,175
    
    
    $
    27,373
    
    
    $
    13,088
    
    
    $
    10,506
    
    
    $
    9,051
    
    
    $
    356,193
  At December 31, 2008(in thousands)MaturitiesThree months or less
    
    $
    44,259Over three months through six months
    
    
    49,686Over six months through one year
    
    
    16,282Over one year to three years
    
    
    9,207Over three years
    
    
    7,226Total
    
    $
    126,660
 Borrowings .
  21




---



##### Table of Contents



At or For the Years Ended December 31,2008
    
    
    2007
    
    
    2006(dollars in thousands)Balance at end of period
    
    $
    234,484
    
    
    $
    65,000
    
    
    $
    99,000Average balance during period
    
    $
    193,203
    
    
    $
    75,359
    
    
    $
    84,860Maximum outstanding at any month end
    
    $
    234,484
    
    
    $
    104,000
    
    
    $
    104,083Weighted average interest rate at end of period
    
    
    2.60
    %
    
    
    4.38
    %
    
    
    4.85
    %Average interest rate during period
    
    
    3.40
    %
    
    
    4.76
    %
    
    
    4.62
    %
 Personnel
  SUPERVISION AND REGULATION
 General
    22




---



##### Table of Contents



New Jersey Banking Regulation
 Activity Powers.
  Loans to One Borrower Limitations.
 Dividends.
 Minimum Capital Requirements.
 Examination and Enforcement.
 Federal Banking Regulation
 Capital Requirements.
  23




---



##### Table of Contents




    
    common stockholders equity, excluding the unrealized appreciation or depreciation,
net of tax, from available-for-sale securities;
 
    
    non-cumulative perpetual preferred stock, including any related retained earnings;
and
 
    
    minority interests in consolidated subsidiaries minus all intangible assets, other
than qualifying servicing rights and any net unrealized loss on marketable equity
securities.
  
    
    cumulative perpetual preferred stock;
 
    
    certain perpetual preferred stock for which the dividend rate may be reset
periodically;
 
    
    hybrid capital instruments, including mandatory convertible securities;
 
    
    term subordinated debt;
 
    
    intermediate term preferred stock;
 
    
    allowance for loan losses; and
 
    
    up to 45% of pretax net unrealized holding gains on available-for-sale equity
securities with readily determinable fair market values.
    
    
    the quality of the banks interest rate risk management process;
 
    
    the overall financial condition of the bank; and
 
    
    the level of other risks at the bank for which capital is needed.
  24




---



##### Table of Contents



Activity Restrictions on State-Chartered Banks.
   Federal Home Loan Bank System.
 Enforcement.
 Prompt Corrective Action.
  25




---



##### Table of Contents




    
    its ratio of total capital to risk-weighted assets is at least 10%;
 
    
    its ratio of Tier 1 capital to risk-weighted assets is at least 6%; and
 
    
    its ratio of Tier 1 capital to total assets is at least 5%, and it is not subject to
any order or directive by the FDIC to meet a specific capital level.
  
    
    its ratio of total capital to risk-weighted assets is at least 8%;
 
    
    its ratio of Tier 1 capital to risk-weighted assets is at least 4%; and
 
    
    its ratio of Tier 1 capital to total assets is at least 4% (3% if the bank receives
the highest rating under the Uniform Financial Institutions Rating System) and it is
not a well-capitalized institution.
  
    
    its ratio of total capital to risk-based capital is less than 8%;
 
    
    its ratio of Tier 1 capital to risk-weighted assets is less than 4%; and
 
    
    its ratio of Tier 1 capital to total assets is less than 4% (or less than 3% if the
institution receives the highest rating under the Uniform Financial Institutions Rating
System).
  
    
    its ratio of total capital to risk-weighted assets is less than 6%;
 
    
    its ratio of Tier 1 capital to risk-weighted assets is less than 3%; or
 
    
    its leverage ratio is less than 3%.
   
    
    insolvency, or when the assets of the bank are less than its liabilities;
 
    
    substantial dissipation of assets or earnings through violations of law or unsafe or
unsound practices;
 
    
    existence of an unsafe or unsound condition to transact business;
 
    
    likelihood that the bank will be unable to meet the demands of its depositors or to
pay its obligations in the normal course of business; or
 
    
    insufficient capital, or the incurring or likely incurring of losses that will
deplete substantially all of the institutions capital with no reasonable prospect of
replenishment of capital without federal assistance.
   26




---



##### Table of Contents



Insurance of Deposit Accounts.
    Temporary Liquidity Guarantee Program.
  U.S.
Treasurys Troubled Asset Relief Program Capital Purchase
Program
  27




---



##### Table of Contents



Transactions with Affiliates of Cape Bank.
  
    
    limits the extent to which the bank or its subsidiaries may engage in covered
transactions with any one affiliate to an amount equal to 10% of such banks capital
stock and retained earnings, and limits all such transactions with all affiliates to an
amount equal to 20% of such capital stock and retained earnings; and
 
    
    requires that all such transactions be on terms that are consistent with safe and
sound banking practices.
  Prohibitions Against Tying Arrangements.
 Community Reinvestment Act and Fair Lending Laws.
 Loans to a Banks Insiders
 Federal Regulation.
  28




---



##### Table of Contents



New Jersey Regulation.
 The USA PATRIOT Act
  Sarbanes-Oxley Act of 2002
  Holding Company Regulation
 General.
  29




---



##### Table of Contents



i.e.
 Acquisition of Control.
  Qualified Thrift Lender Test.
  30




---



##### Table of Contents



Federal Securities Laws
   FEDERAL AND STATE TAXATION
 Federal Income Taxation
 General .
   Method of Accounting .
 Bad Debt Reserves .
 Taxable Distributions and Recapture .
 Alternative Minimum Tax .
  31




---



##### Table of Contents



Net Operating Loss Carryforwards . .
 State Taxation
 New Jersey State Taxation.
  
 ITEM 1A. RISK FACTORS
  The United States Economy Is In Recession. A Prolonged Economic Downturn, Especially One Affecting
Our Geographic Market Area, Could Materially Affect our Business and Financial Results.
   32




---



##### Table of Contents



Legislative or Regulatory Actions Responding to Financial and Market Weakness Could Affect Us
Adversely. There Can Be No Assurance that Actions of the U.S. Government, Federal Reserve and Other
Governmental and Regulatory Bodies For the Purpose of Stabilizing the Financial Markets Will
Achieve the Intended Effect.
   Recent Negative Developments in the Financial Services Industry And the Credit Markets May Subject
Us to Additional Regulation.
  Our Expenses Will Increase as a Result of Increases in FDIC Insurance Premiums.
  Lack of Consumer Confidence in Financial Institutions May Decrease Our Level of Deposits.
   33




---



##### Table of Contents



Our Emphasis on Commercial Real Estate Loans and Commercial Business Loans May Expose us to
Increased Lending Risks.
   An Inadequate Allowance for Loan Losses Would Negatively Affect Our Results of Operations.
  The Need to Account for Assets at Market Prices May Adversely Affect Our Results of Operations.
   34




---



##### Table of Contents



Changes in the Value of Goodwill and Intangible Assets Could Reduce Our Earnings.
  Other-Than-Temporary Impairment (OTTI) Could Reduce Our Earnings.
  Our Continuing Concentration of Loans in Our Primary Market Area May Increase Our Risk.
  Future Changes in Interest Rates Could Reduce Our Profits
  1.
    
    the interest income we earn on our interest-earning assets, such as loans and
securities; and
 2.
    
    the interest expense we pay on our interest-bearing liabilities, such as
deposits and borrowings.
   35




---



##### Table of Contents



If Our Investment in The Federal Home Loan Bank Of New York is Classified as Other-Than-Temporarily
Impaired or as Permanently Impaired, Our Earnings and Stockholders Equity Could Decrease.
   If the Federal Home Loan Bank of New York Stops Paying Dividends, This Will Negatively Affect Our
Earnings.
  Future Legislative or Regulatory Actions Responding to Perceived Financial and Market Problems
Could Impair Our Rights Against Borrowers
   36




---



##### Table of Contents



A Breach of Information Security Could Negatively Affect Our Earnings.
  We Are Subject to Extensive Regulatory Oversight.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  
 ITEM 3. LEGAL PROCEEDINGS
   37




---



##### Table of Contents



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5.
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
  Stock Performance Graph
 The following Performance Graph and related information shall not be deemed soliciting
material or to be filed with the Securities and Exchange Commission, nor shall such information
be incorporated by reference into any future filing under the Securities Act of 1933 or Securities
Exchange Act of 1934, each as amended, except to the extent that the Company specifically
incorporates it by reference into such filing.
     38




---



##### Table of Contents



High
    
    
    Low2008:First Quarter
    
    $
    10.07
    
    
    $
    9.52Second Quarter
    
    $
    10.06
    
    
    $
    9.36Third Quarter
    
    $
    9.93
    
    
    $
    8.91Fourth Quarter
    
    $
    9.25
    
    
    $
    7.71
 (b)
    Not applicable(c)
    There were no issuer repurchases of securities during the period covered by this
report.
 
 ITEM 6.
    SELECTED FINANCIAL DATA
   39




---



##### Table of Contents



At December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(in thousands)Selected Financial Condition Data:Total assets
    
    $
    1,090,735
    
    
    $
    613,811
    
    
    $
    609,764
    
    
    $
    574,524
    
    
    $
    532,584Cash and cash equivalents
    
    
    10,117
    
    
    
    15,631
    
    
    
    17,492
    
    
    
    29,974
    
    
    
    19,231Investment securities available for sale, at fair value
    
    
    114,655
    
    
    
    62,128
    
    
    
    62,484
    
    
    
    70,330
    
    
    
    82,902Investment securities held to maturity
    
    
    48,825
    
    
    
    45,140
    
    
    
    38,731
    
    
    
    25,634
    
    
    
    31,505Loans held for sale
    
    
    
    
    
    
    350
    
    
    
    766
    
    
    
    
    
    
    
    Loans, net
    
    
    783,869
    
    
    
    459,936
    
    
    
    446,378
    
    
    
    410,032
    
    
    
    362,824Federal Home Loan Bank stock, at cost
    
    
    11,602
    
    
    
    3,848
    
    
    
    5,268
    
    
    
    4,109
    
    
    
    2,550Bank owned life insurance
    
    
    26,446
    
    
    
    15,421
    
    
    
    14,503
    
    
    
    13,998
    
    
    
    13,216Deposits
    
    
    711,130
    
    
    
    465,648
    
    
    
    435,829
    
    
    
    432,385
    
    
    
    420,218Borrowings
    
    
    234,484
    
    
    
    65,000
    
    
    
    99,000
    
    
    
    73,530
    
    
    
    484,897Total stockholders equity
    
    
    140,725
    
    
    
    72,829
    
    
    
    68,943
    
    
    
    63,481
    
    
    
    59,425
 Years Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(in thousands)Selected Operating Data:Interest income
    
    $
    58,127
    
    
    $
    36,629
    
    
    $
    34,357
    
    
    $
    28,564
    
    
    $
    25,452Interest expense
    
    
    24,253
    
    
    
    17,146
    
    
    
    14,875
    
    
    
    9,691
    
    
    
    6,816Net interest income
    
    
    33,874
    
    
    
    19,483
    
    
    
    19,482
    
    
    
    18,873
    
    
    
    18,636Provision for loan losses
    
    
    9,009
    
    
    
    357
    
    
    
    312
    
    
    
    193
    
    
    
    550Net interest income after provision
for loan losses
    
    
    24,865
    
    
    
    19,126
    
    
    
    19,170
    
    
    
    18,680
    
    
    
    18,086Non-interest income
    
    
    (10,793
    )
    
    
    3,992
    
    
    
    4,438
    
    
    
    3,581
    
    
    
    2,890Non-interest expense
    
    
    64,717
    
    
    
    18,391
    
    
    
    16,379
    
    
    
    15,517
    
    
    
    14,474Income (loss) before income tax expense
    
    
    (50,645
    )
    
    
    4,727
    
    
    
    7,229
    
    
    
    6,744
    
    
    
    6,502Income tax expense (benefit)
    
    
    (8,154
    )
    
    
    1,299
    
    
    
    2,228
    
    
    
    2,320
    
    
    
    2,238Net income (loss)
    
    $
    (42,491
    )
    
    $
    3,428
    
    
    $
    5,001
    
    
    $
    4,424
    
    
    $
    4,264
 At or For the Years Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Selected Financial Ratios and Other Data:Performance Ratios:Return on assets (ratio of net income to
average total assets)
    
    
    (3.86
    %)
    
    
    0.56
    %
    
    
    0.84
    %
    
    
    0.80
    %
    
    
    0.83
    %Return on equity (ratio of net income to
average equity)
    
    
    (24.47
    %)
    
    
    4.81
    %
    
    
    7.58
    %
    
    
    7.20
    %
    
    
    7.39
    %Earnings
(loss) per share
    
    $
    (3.49
    )
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aAverage interest rate spread (1)
    
    
    3.14
    %
    
    
    3.02
    %
    
    
    3.14
    %
    
    
    3.48
    %
    
    
    3.78
    %Net interest margin (2)
    
    
    3.48
    %
    
    
    3.50
    %
    
    
    3.56
    %
    
    
    3.77
    %
    
    
    4.00
    %Efficiency ratio (3)
    
    
    167.31
    %
    
    
    78.34
    %
    
    
    68.47
    %
    
    
    69.11
    %
    
    
    67.24
    %Non-interest expense to average total assets
    
    
    5.87
    %
    
    
    2.99
    %
    
    
    2.74
    %
    
    
    2.81
    %
    
    
    2.82
    %Average interest-earning assets to average
interest-bearing liabilities
    
    
    113.67
    %
    
    
    115.76
    %
    
    
    115.73
    %
    
    
    115.04
    %
    
    
    114.58
    %Asset Quality Ratios:Non-performing assets to total assets
    
    
    1.93
    %
    
    
    0.63
    %
    
    
    0.62
    %
    
    
    0.49
    %
    
    
    0.23
    %Non-performing loans to total loans
    
    
    2.65
    %
    
    
    0.86
    %
    
    
    0.84
    %
    
    
    0.68
    %
    
    
    0.34
    %Allowance for loan losses to non-performing
loans
    
    
    53.39
    %
    
    
    102.85
    %
    
    
    105.20
    %
    
    
    134.52
    %
    
    
    289.86
    %Allowance for loan losses to total loans
    
    
    1.41
    %
    
    
    0.89
    %
    
    
    0.89
    %
    
    
    0.91
    %
    
    
    0.98
    %Capital Ratios:Total capital (to risk-weighted assets)
    
    
    14.25
    %
    
    
    17.33
    %
    
    
    17.59
    %
    
    
    17.54
    %
    
    
    18.30
    %Tier I capital (to risk-weighted assets)
    
    
    13.00
    %
    
    
    16.34
    %
    
    
    16.59
    %
    
    
    16.53
    %
    
    
    17.22
    %Tier I capital (to average assets)
    
    
    9.87
    %
    
    
    11.11
    %
    
    
    11.00
    %
    
    
    10.89
    %
    
    
    10.93
    %Equity to assets
    
    
    12.90
    %
    
    
    11.49
    %
    
    
    11.31
    %
    
    
    11.05
    %
    
    
    11.16
    %Other Data:Number of full service offices
    
    
    18
    
    
    
    13
    
    
    
    13
    
    
    
    13
    
    
    
    13Full time equivalent employees
    
    
    202
    
    
    
    133
    
    
    
    132
    
    
    
    132
    
    
    
    134
 (1)
    
    Represents the difference between the weighted average yield on average
interest-earning assets and the weighted average cost of average interest-bearing
liabilities.(2)
    
    Represents net interest income as a percent of average interest-earning assets.(3)
    
    Represents non-interest expense divided by the sum of net interest income and
non-interest income.
Recalculating the efficiency ratio excluding the Goodwill Impairment
($31.751 million) and CapeBank Charitable Foundation
Contribution ($6.2 million) results in an efficiency ratio of
69.2%  40




---



##### Table of Contents



ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 Overview
   Income .
  Allowance for Loan Losses .
 Expenses.
    41




---



##### Table of Contents



Anticipated Increase in Non-Interest Expense
   
    
    The ESOP completed its purchase of 1,065,082 shares of common stock on February 26,
2008 with a $10.65 million loan that is expected to be repaid over 25 years, resulting
in an average annual pre-tax expense of approximately $425,000 (assuming that the
common stock maintains a value of $10.00 per share).
 
    
    The 2008 Equity Incentive Plan authorizes the grants of options to purchase up to
10% of the shares issued in the offering (including shares issued to The CapeBank
Charitable Foundation and shares issued in the merger), or 1,331,352 shares, to
eligible participants, which would result in compensation expense over the vesting
period of the options. Assuming the market price of the common stock is $10.00 per
share; the options are granted with an exercise price of $10.00 per share; the dividend
yield on the stock is 0%; the expected option life is ten years; the risk free interest
rate is 5.03% (based on the seven-year Treasury rate) and the volatility rate on the
 shares of common stock is 11.31% (based on an index of publicly traded thrift holding
companies), the estimated grant-date fair value of the options (and corresponding
pre-tax expense to us) using a Black-Scholes option pricing analysis is $4.05 per
option granted. Assuming this value is amortized over the five-year vesting period,
the corresponding annual pre-tax expense associated with the stock options is
approximately $1.5 million.
 
    
    The 2008 Equity Incentive Plan authorizes the award of shares of common stock equal
to 4% of the shares issued in the offering (including shares issued to The CapeBank
Charitable Foundation and shares issued in the merger), or 532,540 shares, to eligible
participants, which would be expensed as the awards vest. Assuming that all shares are
awarded under the 2008 Equity Incentive Plan at a price of $10.00 per share, and that
the awards vest over a five-year period, the corresponding annual pre-tax expense
associated with shares awarded under the 2008 Equity Incentive Plan is approximately
$1.1 million.
  Critical Accounting Policies
   42




---



##### Table of Contents



Allowance for Loan Losses.
 Accounting for
Contingencies, Accounting by Creditors for Impairment
of a Loan, an Amendment of FASB Statements No. 5 and 15 Accounting by Creditors
for Impairment of a Loan  Income Recognition and Disclosures,
an Amendment of SFAS No. 114
  Securities
Impairment.
  43




---



##### Table of Contents



Business Strategy
  
    
    pursuing new opportunities to increase commercial lending in our primary market area
and expanding our existing commercial loan relationships;
 
    
    continuing to use prudent underwriting standards to maintain the high quality of our
loan portfolio;
 
    
    continuing to originate residential mortgage loans in our primary market area;
 
    
    building profitable business and consumer relationships by providing superior
customer service with an emphasis on increasing transaction deposit accounts; and
 
    
    increasing our non-interest income, through a broader range of products and
services.
 Pursuing new opportunities to increase our commercial lending in our primary market area and
expanding our existing commercial loan relationships.
 Continuing to use prudent underwriting standards to maintain the high quality of our loan
portfolio.
 Continuing to originate residential mortgage loans in our primary market area.
  44




---



##### Table of Contents



Building profitable business and consumer relationships by providing superior customer service
with an emphasis on increasing transaction deposit accounts.
 Increasing our non-interest income through a broader range of products and services.
  Comparison
of Financial Condition at December 31, 2008 and December 31, 2007
       45




---



##### Table of Contents



46




---



##### Table of Contents



Comparison of Financial Condition at December 31, 2007 and December 31, 2006
        Comparison of Operating Results for the Years Ended December 31, 2008 and 2007
 General.
 Interest Income .
  47




---



##### Table of Contents



Interest Expense.
   Net Interest Income.
  48




---



##### Table of Contents



Provision for Loan Losses.
   Non-Interest Income.
 Non-Interest Expense .
 Income Tax Expense.
  49




---



##### Table of Contents



Comparison of Operating Results for the Years Ended December 31, 2007 and 2006
 General.
 Interest Income.
   Interest Expense.
    50




---



##### Table of Contents



Net Interest Income.
 Provision for Loan Losses.
 Non-Interest Income.
 Non-Interest Expense .
 Income Tax Expense.
  51




---



##### Table of Contents



For the Years Ended December 31,2008
    
    
    2007
    
    
    2006Interest
    
    
    
    
    
    
    
    
    
    
    Interest
    
    
    
    
    
    
    
    
    
    
    InterestAverage
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    AverageBalance
    
    
    Expense
    
    
    Yield
    
    
    Balance
    
    
    Expense
    
    
    Yield
    
    
    Balance
    
    
    Expense
    
    
    Yield(dollars in thousands)AssetsInterest-earning deposits
    
    $
    10,024
    
    
    $
    275
    
    
    
    2.74%
    
    
    $
    3,950
    
    
    $
    187
    
    
    
    4.73%
    
    
    $
    1,344
    
    
    $
    63
    
    
    
    4.69%Investments
    
    
    115,034
    
    
    
    5,826
    
    
    
    5.06%
    
    
    
    55,370
    
    
    
    2,545
    
    
    
    4.60%
    
    
    
    72,708
    
    
    
    2,907
    
    
    
    4.00%Mortgage-backed securities
    
    
    78,887
    
    
    
    4,028
    
    
    
    5.11%
    
    
    
    54,782
    
    
    
    2,782
    
    
    
    5.08%
    
    
    
    46,571
    
    
    
    2,150
    
    
    
    4.62%Loans
    
    
    768,458
    
    
    
    47,998
    
    
    
    6.25%
    
    
    
    455,222
    
    
    
    31,115
    
    
    
    6.84%
    
    
    
    432,303
    
    
    
    29,237
    
    
    
    6.76%Total
interest-earning assets
    
    
    972,403
    
    
    
    58,127
    
    
    
    5.98%
    
    
    
    569,324
    
    
    
    36,629
    
    
    
    6.43%
    
    
    
    552,926
    
    
    
    34,357
    
    
    
    6.21%Noninterest-earning assets
    
    
    138,464
    
    
    
    
    
    
    
    
    
    
    
    50,457
    
    
    
    
    
    
    
    
    
    
    
    47,791Allowance for loan losses
    
    
    (8,955
    )
    
    
    
    
    
    
    
    
    
    
    (3,985
    )
    
    
    
    
    
    
    
    
    
    
    (3,902
    )Total assets
    
    $
    1,101,912
    
    
    
    
    
    
    
    
    
    
    $
    615,796
    
    
    
    
    
    
    
    
    
    
    $
    596,815Liabilities and Stockholders EquityInterest-bearing demand accounts
    
    $
    106,826
    
    
    
    1,030
    
    
    
    0.96%
    
    
    $
    76,310
    
    
    
    1,043
    
    
    
    1.37%
    
    
    $
    61,615
    
    
    
    306
    
    
    
    0.50%Savings accounts
    
    
    82,309
    
    
    
    1,062
    
    
    
    1.29%
    
    
    
    79,161
    
    
    
    1,290
    
    
    
    1.63%
    
    
    
    88,715
    
    
    
    1,272
    
    
    
    1.43%Money market accounts
    
    
    117,821
    
    
    
    3,029
    
    
    
    2.57%
    
    
    
    84,020
    
    
    
    3,194
    
    
    
    3.80%
    
    
    
    78,030
    
    
    
    2,786
    
    
    
    3.57%Certificates of deposit
    
    
    353,501
    
    
    
    12,562
    
    
    
    3.55%
    
    
    
    175,924
    
    
    
    8,029
    
    
    
    4.56%
    
    
    
    164,570
    
    
    
    6,592
    
    
    
    4.01%Borrowings
    
    
    193,203
    
    
    
    6,570
    
    
    
    3.40%
    
    
    
    75,359
    
    
    
    3,590
    
    
    
    4.76%
    
    
    
    84,860
    
    
    
    3,919
    
    
    
    4.62%Total
interest-bearing liabilities
    
    
    853,660
    
    
    
    24,253
    
    
    
    2.84%
    
    
    
    490,774
    
    
    
    17,146
    
    
    
    3.49%
    
    
    
    477,790
    
    
    
    14,875
    
    
    
    3.11%Noninterest-bearing deposits
    
    
    68,158
    
    
    
    
    
    
    
    
    
    
    
    46,061
    
    
    
    
    
    
    
    
    
    
    
    46,803Other liabilities
    
    
    6,417
    
    
    
    
    
    
    
    
    
    
    
    7,628
    
    
    
    
    
    
    
    
    
    
    
    6,214Total liabilities
    
    
    928,235
    
    
    
    
    
    
    
    
    
    
    
    544,463
    
    
    
    
    
    
    
    
    
    
    
    530,807Stockholders equity
    
    
    173,677
    
    
    
    
    
    
    
    
    
    
    
    71,333
    
    
    
    
    
    
    
    
    
    
    
    66,008Total liabilities & stockholders
equity
    
    $
    1,101,912
    
    
    
    
    
    
    
    
    
    
    $
    615,796
    
    
    
    
    
    
    
    
    
    
    $
    596,815Net interest income
    
    
    
    
    
    $
    33,874
    
    
    
    
    
    
    
    
    
    
    $
    19,483
    
    
    
    
    
    
    
    
    
    
    $
    19,482Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.14%
    

    
    
    
    
    
    
    
    
    
    
    2.94%
    
    
    
    
    
    
    
    
    
    
    
    3.10%Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.48%
    
    
    
    
    
    
    
    
    
    
    
    3.42%
    
    
    
    
    
    
    
    
    
    
    
    3.52%Net interest income and margin (tax
equivalent basis)(1)
    
    
    
    
    
    $
    34,441
    
    
    
    3.54%
    
    
    
    
    
    
    $
    19,736
    
    
    
    3.47%
    
    
    
    
    
    
    $
    19,658
    
    
    
    3.56%Ratio of average interest-earning
assets to average interest-bearing
liabilities
    
    
    113.91
    %
    
    
    
    
    
    
    
    
    
    
    116.01
    %
    
    
    
    
    
    
    
    
    
    
    115.73
    %
 
 (1)
    
    In order to present pre-tax income and resultant yields on tax-exempt investments on a basis comparable to those on taxable investments, a tax equivalent yield
adjustment is made to interest income. The tax equilvalent adjustment has been computed using a Federal income tax rate of 34%, and has the effect of increasing
interest income by $567,000, $253,000 and $176,000 for the years ended December 31, 2008, 2007 and 2006, respectively. The average yield on investments
increased to 5.56% from 5.06% for the year ended December 31, 2008, increased to 5.05% from 4.60% for the year ended December 31, 2007,
and increased to 4.24% from 4.00% for the year ended December 31, 2006.  52




---



##### Table of Contents



Rate/Volume Analysis
  For the Year Ended December 31, 2008
    
    
    For the Year Ended December 31, 2007Compared to December 31, 2007
    
    
    Compared to December 31, 2006Increase (decrease) due to changes in:
    
    
    Increase (decrease) due to changes in:Average
    
    
    Average
    
    
    Net
    
    
    Average
    
    
    Average
    
    
    NetVolume
    
    
    Rate
    
    
    Change
    
    
    Volume
    
    
    Rate
    
    
    Change(in thousands)
    
    
    (in thousands)Interest Earning AssetsInterest-earning deposits
    
    $
    168
    
    
    $
    (80
    )
    
    $
    88
    
    
    $
    123
    
    
    $
    1
    
    
    $
    124Investments
    
    
    3,028
    
    
    
    253
    
    
    
    3,281
    
    
    
    (797
    )
    
    
    435
    
    
    
    (362
    )Mortgage-backed securities
    
    
    1,239
    
    
    
    7
    
    
    
    1,246
    
    
    
    417
    
    
    
    215
    
    
    
    632Loans
    
    
    19,663
    
    
    
    (2,780
    )
    
    
    16,883
    
    
    
    1,567
    
    
    
    311
    
    
    
    1,878Total interest income
    
    
    24,098
    
    
    
    (2,600
    )
    
    
    21,498
    
    
    
    1,310
    
    
    
    962
    
    
    
    2,272Interest-Bearing LiabilitiesInterest-bearing demand accounts
    
    
    226
    
    
    
    (239
    )
    
    
    (13
    )
    
    
    201
    
    
    
    536
    
    
    
    737Savings accounts
    
    
    41
    
    
    
    (269
    )
    
    
    (228
    )
    
    
    (156
    )
    
    
    174
    
    
    
    18Money market accounts
    
    
    824
    
    
    
    (989
    )
    
    
    (165
    )
    
    
    228
    
    
    
    180
    
    
    
    408Certificates of deposit
    
    
    6,342
    
    
    
    (1,809
    )
    
    
    4,533
    
    
    
    518
    
    
    
    919
    
    
    
    1,437Borrowings
    
    
    4,018
    
    
    
    (1,038
    )
    
    
    2,980
    
    
    
    (453
    )
    
    
    124
    
    
    
    (329
    )Total interest expense
    
    
    11451
    
    
    
    (4,344
    )
    
    
    7,107
    
    
    
    338
    
    
    
    1,933
    
    
    
    2,271Total net interest income
    
    $
    12,647
    
    
    $
    1,744
    
    
    $
    14,391
    
    
    $
    972
    
    
    $
    (971
    )
    
    $
    1
 Management of Market Risk
 General.
  
    
    originating commercial loans that generally tend to have shorter repricing or reset
periods and higher interest rates than residential mortgage loans;
 
    
    investing in shorter duration investment grade corporate securities and
mortgage-backed securities;
 
    
    originating adjustable-rate and short-term consumer loans;
 
    
    selling a portion of our long-term residential mortgage loans; and
 
    
    obtaining general financing through lower cost deposits and advances from the
Federal Home Loan Bank.
  53




---



##### Table of Contents



Net Portfolio Value Analysis .
 Net Interest Income Analysis.
  NPV
    
    
    Net Interest IncomeChange in
    
    
    
    
    
    
    
    
    Increase (Decrease) in Estimated
    
    
    
    
    
    
    Increase (Decrease) in EstimatedInterest Rates
    
    
    
    
    
    
    
    NPV
    
    
    Estimated Net
    
    
    Net Interest Income(basis points)(1)
    
    

Estimated NPV (2)
    
    
    
    
    Amount
    
    
    Percent
    
    
    Interest Income
    
    
    Amount
    
    
    Percent(dollars in thousands)+200
    
    
    $
    105,490
    
    
    
    
    $
    (50,491
    )
    
    
    (32
    )%
    
    $
    36,348
    
    
    $
    (1,722
    )
    
    
    (4
    )%+100
    
    
    
    134,009
    
    
    
    
    
    (21,972
    )
    
    
    (14
    )
    
    
    37,327
    
    
    
    (743
    )
    
    
    (2
    )0
    
    
    
    155,981
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,070
    
    
    
    
    
    
    
    -100
    
    
    
    164,666
    
    
    
    
    
    8,686
    
    
    
    6
    
    
    
    38,889
    
    
    
    819
    
    
    
    2-200
    
    
    
    165,795
    
    
    
    
    
    9,814
    
    
    
    6
    
    
    
    38,757
    
    
    
    687
    
    
    
    2
 
 (1)
    
    Assumes an instantaneous and sustained uniform change in interest rates at all
maturities.(2)
    
    NPV is the discounted present value of expected cash flows from interest-earning
assets and interest-bearing liabilities.    54




---



##### Table of Contents



Liquidity and Capital Resources
    (i)
    
    expected loan demand;(ii)
    
    expected deposit flows;(iii)
    
    yields available on interest-earning deposits and securities; and(iv)
    
    the objectives of our asset/liability management program.
      55




---



##### Table of Contents



Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
 Commitments.
 Contractual Obligations.
  Payments Due by PeriodLess than
    
    
    One to Three
    
    
    Three to Five
    
    
    More thanContractual Obligations
    
    One Year
    
    
    Years
    
    
    Years
    
    
    Five Years
    
    
    Total(in thousands)Borrowings
    
    $
    110,453
    
    
    $
    65,018
    
    
    $
    25,013
    
    
    $
    34,000
    
    
    $
    234,484Operating leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capitalized leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Certificates of deposit
    
    
    296,175
    
    
    
    50,967
    
    
    
    9,051
    
    
    
    
    
    
    
    356,193Other long-term liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    406,628
    
    
    $
    115,985
    
    
    $
    34,064
    
    
    $
    34,000
    
    
    $
    590,677Commitments to extend credit
    
    $
    100,787
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    100,787
  56




---



##### Table of Contents



Recent Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Impact of Inflation and Changing Prices
  
 ITEM 7A.

    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  
 ITEM 8.

    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9.

    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
  
 ITEM 9A.

    CONTROLS AND PROCEDURES
      57




---



##### Table of Contents



ITEM 9B.

    OTHER INFORMATION
  
 PART III
 
 ITEM 10.

    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  
 ITEM 11.

    EXECUTIVE COMPENSATION
   58




---



##### Table of Contents



ITEM 12.

    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
  
 ITEM 13.

    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14.

    PRINCIPAL ACCOUNTANT FEES AND SERVICES
  
 PART IV
 
 ITEM 15.
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)(1)
    
    Financial Statements
  (A)
    
    Report of Independent Registered Public Accounting Firm(B)
    
    Consolidated Balance Sheets as of December 31, 2008 and 2007(C)
    
    Consolidated Statements of Income for the years ended December
31, 2008, 2007 and 2006(D)
    
    Consolidated Statements of Changes in Equity for the years
ended December 31, 2008, 2007 and 2006(E)
    
    Consolidated Statements of Cash Flows for the years ended
December 31, 2008, 2007 and 2006(F)
    
    Notes to Consolidated Financial Statements.
 (a)(2)
    
    Financial Statement SchedulesNone.(a)(3)
    
    Exhibits
 3.1
    
    Articles of Incorporation of Cape Bancorp, Inc. (1)3.2
    
    Amended and Restated Bylaws of Cape Bancorp, Inc. (2)4
    
    Form of Common Stock Certificate of Cape Bancorp, Inc. (1)10.1
    
    Form of Employee Stock Ownership Plan (1)10.2
    
    Employment Agreement for Herbert L. Hornsby Jr. (1)10.3
    
    Employment Agreement for Robert J. Boyer (1)
  59




---



##### Table of Contents



10.4
    
    Employment Agreement for Michael D. Devlin (1)10.5
    
    Employment Agreement for Guy A. Deninger (1)10.6
    
    Form of Change in Control Agreement (1)10.7
    
    Change in Control Agreement for Wayne S. Hardenbrook(1)10.8
    
    Form of Director Retirement Plan (1)10.9
    
    Benefit Equalization Plan (1)10.10
    
    2008 Equity Incentive Plan (3)10.11
    
    Agreement with James. J. Lynch and Patriot Financial Partners, L.P. (5)14
    
    Code of Ethics (4)21
    
    Subsidiaries of Registrant31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Incorporated by reference to the Registration Statement on Form S-1 of Cape Bancorp, Inc..
(file no. 333-146178), originally filed with the Securities and Exchange Commission on
September 19, 2007.(2)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed with the
Securities and Exchange Commission on July 18, 2008.(3)
    
    Incorporated by reference to the Companys Definitive Proxy Statement filed with the
Securities and Exchange Commission on July 16, 2008.(4)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the Year ended
December 31, 2007 filed with the Securities and Exchange Commission on March 31, 2008.(5)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed with the
Securities Exchange Commission on February 10, 2009.  60




---



##### Table of Contents



SIGNATURES
  CAPE BANCORP, INC.Date: March 16, 2009
    By:
    /s/ Michael D. DevlinMichael D. DevlinChief Executive Officer and President
(Duly Authorized Representative)  Signatures
    
    Title
    
    Date/s/ Michael D. Devlin

Michael D. Devlin
    
    Chief Executive Officer
and President (Principal
Executive Officer)
    
    March 16, 2009/s/ Guy Hackney

Guy Hackney
    
    Chief Financial Officer
(Principal Financial and
Accounting Officer)
    
    March 16, 2009/s/ James J. Lynch

James J. Lynch
    
    Director
    
    March 16, 2009/s/ Agostino R. Fabietti

Agostino R. Fabietti
    
    Director
    
    March 16, 2009/s/ Robert F. Garrett, III

Robert F. Garrett, III
    
    Director
    
    March 16, 2009/s/ Frank J. Glaser

Frank J. Glaser
    
    Director
    
    March 16, 2009/s/ Louis H Griesbach, Jr.

Louis H. Griesbach, Jr.
    
    Director
    
    March 16, 2009/s/ David C. Ingersoll, Jr.

David C. Ingersoll, Jr.
    
    Director
    
    March 16, 2009/s/ Joanne D. Kay

Joanne D. Kay
    
    Director
    
    March 16, 2009/s/ Matthew J. Reynolds

Matthew J. Reynolds
    
    Director
    
    March 16, 2009/s/ Thomas K. Ritter

Thomas K. Ritter
    
    Director
    
    March 16, 2009
  61




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Financial StatementsConsolidated Balance Sheets as of December 31, 2008 and 2007
    
    
    F-2Consolidated Statements of Income for the years ended December 31, 2008, 2007 and 2006
    
    
    F-3Consolidated Statements of Changes in Equity for the years ended December 31, 2008, 2007 and 2006
    
    
    F-4Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006
    
    
    F-5Notes
to Consolidated Financial Statements as of years ended
December 31, 2008, 2007 and 2006
    
    
    F-6
   62




---



##### Table of Contents



Management Report of Internal Control Over Financial Reporting
     
  F-1




---



##### Table of Contents



December 31,2008
    
    
    2007(in thousands)ASSETSCash & due from financial institutions
    
    $
    10,117
    
    
    $
    14,596Federal funds sold
    
    
    
    
    
    
    1,035Cash and cash equivalents
    
    
    10,117
    
    
    
    15,631Interest-earning deposits in other financial institutions
    
    
    17,918
    
    
    
    5,721Investment securities available for sale, at fair value
    
    
    114,655
    
    
    
    62,128Investment securities held to maturity (fair value of $49,938
at December 31, 2008 and $45,427 at December 31, 2007)
    
    
    48,825
    
    
    
    45,140Loans held for sale
    
    
    
    
    
    
    350Loans, net of allowance of $11,240 and $4,121
    
    
    783,869
    
    
    
    459,936Accrued interest receivable
    
    
    4,736
    
    
    
    3,081Premises and equipment, net
    
    
    27,342
    
    
    
    16,131Other real estate owned
    
    
    798
    
    
    
    Federal Home Loan Bank (FHLB) stock, at cost
    
    
    11,602
    
    
    
    3,848Deferred income taxes
    
    
    17,247
    
    
    
    3,162Bank owned life insurance (BOLI)
    
    
    26,446
    
    
    
    15,421Deferred stock issuance and acquisition costs
    
    
    
    
    
    
    1,916Goodwill
    
    
    22,575
    
    
    
    Intangible assets
    
    
    786
    
    
    
    Assets held for sale
    
    
    2,026
    
    
    
    Other assets
    
    
    1,793
    
    
    
    1,346Total assets
    
    $
    1,090,735
    
    
    $
    633,811LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesDepositsNoninterest-bearing deposits
    
    $
    63,258
    
    
    $
    40,860Interest-bearing deposits
    
    
    647,872
    
    
    
    424,788Stock subscriptions
    
    
    
    
    
    
    21,500Borrowings
    
    
    234,484
    
    
    
    65,000Advances from borrowers for taxes and insurance
    
    
    585
    
    
    
    651Accrued interest payable
    
    
    778
    
    
    
    401Other liabilities
    
    
    3,033
    
    
    
    7,782Total liabilities
    
    
    950,010
    
    
    
    560,982Stockholders EquityCommon stock, $.01 par value: authorized 100,000,000 shares and 13,313,521 issued and outstanding in 2008
    
    
    133
    
    
    
    Additional paid-in capital
    
    
    126,801
    
    
    
    Unearned ESOP shares
    
    
    (10,232
    )
    
    
    Accumulated other comprehensive income (loss)
    
    
    (6,022
    )
    
    
    293Retained earnings
    
    
    30,045
    
    
    
    72,536Total stockholders equity
    
    
    140,725
    
    
    
    72,829Total liabilities & stockholders equity
    
    $
    1,090,735
    
    
    $
    633,811
   F-2




---



##### Table of Contents



Years ended December 31,2008
    
    
    2007
    
    
    2006(dollars in thousands, except share data)Interest income:Interest on loans
    
    $
    47,998
    
    
    $
    31,114
    
    
    $
    29,238Interest and dividends on investmentsTaxable
    
    
    4,811
    
    
    
    2,123
    
    
    
    2,556Tax-exempt
    
    
    1,290
    
    
    
    610
    
    
    
    414Interest on mortgage-backed securities
    
    
    4,028
    
    
    
    2,782
    
    
    
    2,149Total interest income
    
    
    58,127
    
    
    
    36,629
    
    
    
    34,357Interest expense:Interest on deposits
    
    
    17,683
    
    
    
    13,556
    
    
    
    10,956Interest on borrowings
    
    
    6,570
    
    
    
    3,590
    
    
    
    3,919Total interest expense
    
    
    24,253
    
    
    
    17,146
    
    
    
    14,875Net interest income before provision for loan losses
    
    
    33,874
    
    
    
    19,483
    
    
    
    19,482Provision for loan losses
    
    
    9,009
    
    
    
    357
    
    
    
    312Net interest income after provision for loan losses
    
    
    24,865
    
    
    
    19,126
    
    
    
    19,170Non-interest income:Service fees
    
    
    3,202
    
    
    
    2,449
    
    
    
    2,306Net gains on sale of loans
    
    
    36
    
    
    
    299
    
    
    
    215Net income from BOLI
    
    
    1,005
    
    
    
    593
    
    
    
    506Net rental income
    
    
    342
    
    
    
    348
    
    
    
    343Gain/ (loss) on sales of investment
securities available for sale, net
    
    
    40
    
    
    
    
    
    
    
    779Other than temporary impairment
    
    
    (15,640
    )
    
    
    
    
    
    
    Loss on disposal of other assets
    
    
    (158
    )
    
    
    (7
    )
    
    
    Other
    
    
    380
    
    
    
    310
    
    
    
    289Total non-interest income
    
    
    (10,793
    )
    
    
    3,992
    
    
    
    4,438Non-interest expense:Salaries and employee benefits
    
    
    14,351
    
    
    
    11,108
    
    
    
    9,634Occupancy & equipment
    
    
    3,618
    
    
    
    1,949
    
    
    
    1,912Federal insurance premiums
    
    
    525
    
    
    
    53
    
    
    
    55Data processing
    
    
    1,370
    
    
    
    933
    
    
    
    955Charitable Foundation contribution
    
    
    6,256
    
    
    
    
    
    
    
    Advertising
    
    
    577
    
    
    
    473
    
    
    
    768Telecommunications
    
    
    870
    
    
    
    548
    
    
    
    497Professional services
    
    
    988
    
    
    
    235
    
    
    
    199Goodwill impairment
    
    
    31,751
    
    
    
    
    
    
    
    Other operating
    
    
    4,411
    
    
    
    3,092
    
    
    
    2,360Total non-interest expense
    
    
    64,717
    
    
    
    18,391
    
    
    
    16,380Income (loss) before income taxes
    
    
    (50,645
    )
    
    
    4,727
    
    
    
    7,228Income tax expense (benefit)
    
    
    (8,154
    )
    
    
    1,299
    
    
    
    2,227Net income (loss)
    
    $
    (42,491
    )
    
    $
    3,428
    
    
    $
    5,001Earnings (loss) per share (see Note 16):Basic
    
    $
    (3.49
    )
    
    
    n/a
    
    
    
    n/aDiluted
    
    $
    (3.49
    )
    
    
    n/a
    
    
    
    n/aWeighted average number of shares outstanding:Basic
    
    
    12,280,494
    
    
    
    n/a
    
    
    
    n/aDiluted
    
    
    12,280,494
    
    
    
    n/a
    
    
    
    n/a
   F-3




---



##### Table of Contents



AccumulatedOther
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Unearned ESOP
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Capital
    
    
    Shares
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Equity(in thousands)Balance, January 1,
2006
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    64,106
    
    
    $
    (625
    )
    
    $
    63,481Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,001
    
    
    
    
    
    
    
    5,001Net unrealized
gains, net of
reclassification
adjustments and
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    461
    
    
    
    461Total
comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,462Balance, December
31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69,107
    
    
    
    (164
    )
    
    
    68,943Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,429
    
    
    
    
    
    
    
    3,429Net unrealized
gains, net of
reclassification
adjustments and
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    457
    
    
    
    457Total
comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,886Balance, December
31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,536
    
    
    
    293
    
    
    
    72,829Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42,491
    )
    
    
    
    
    
    
    (42,491
    )Net unrealized
losses, net of
reclassification
adjustments and
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,315
    )
    
    
    (6,315
    )Total
comprehensive
income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48,806
    )Conversion from
mutual to stock
company and
simultaneous
acquisition of
Boardwalk Bancorp
    
    
    133
    
    
    
    126,832
    
    
    
    (10,658
    )
    
    
    
    
    
    
    
    
    
    
    116,307ESOP shares earned
    
    
    
    
    
    
    (31
    )
    
    
    426
    
    
    
    
    
    
    
    
    
    
    
    395Balance, December
31, 2008
    
    $
    133
    
    
    $
    126,801
    
    
    $
    (10,232
    )
    
    $
    30,045
    
    
    $
    (6,022
    )
    
    $
    140,725
   F-4




---



##### Table of Contents



Years ended December 31,2008
    
    
    2007
    
    
    2006(in thousands)Cash Flows from Operating ActivitiesNet income (loss)
    
    $
    (42,491
    )
    
    $
    3,428
    
    
    $
    5,001Adjustments to reconcile net income (loss) to net cash provided by
operating activities:Provision for loan losses
    
    
    9,009
    
    
    
    357
    
    
    
    312Net gain on the sale of loans
    
    
    (36
    )
    
    
    (299
    )
    
    
    (215
    )Net gain on the sale of other real estate owned
    
    
    (1
    )
    
    
    
    
    
    
    Impairment of goodwill
    
    
    31,751
    
    
    
    
    
    
    
    Loss on impairment of securities
    
    
    15,640
    
    
    
    
    
    
    
    Net gain on sale of investments
    
    
    (40
    )
    
    
    
    
    
    
    (779
    )Loss on disposal of property and equipment
    
    
    158
    
    
    
    
    
    
    
    Write-down of assets held for sale
    
    
    241
    
    
    
    
    
    
    
    Earnings on BOLI
    
    
    (1,006
    )
    
    
    (593
    )
    
    
    (505
    )Depreciation and amortization
    
    
    1,327
    
    
    
    881
    
    
    
    1,027ESOP compensation expense
    
    
    395
    
    
    
    
    
    
    
    Stock issuance for charitable contribution
    
    
    5,474
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    (8,372
    )
    
    
    (1,241
    )
    
    
    (238
    )Changes in assets and liabilities that (used) provided cash:Loans held for sale
    
    
    350
    
    
    
    416
    
    
    
    (766
    )Accrued interest receivable
    
    
    785
    
    
    
    (146
    )
    
    
    (575
    )Other assets
    
    
    3,457
    
    
    
    437
    
    
    
    (262
    )Accrued interest payable
    
    
    (146
    )
    
    
    (31
    )
    
    
    160Other liabilities
    
    
    (5,074
    )
    
    
    2,901
    
    
    
    684Net cash provided by operating activities
    
    
    11,421
    
    
    
    6,110
    
    
    
    3,844Cash Flows from Investing ActivitiesProceeds from calls, maturities, and principal repayments of investment securities and mortgage-backed
securities
    
    
    74,372
    
    
    
    53,052
    
    
    
    36,369Purchases of investment securities and mortgage-backed securities
    
    
    (65,126
    )
    
    
    (56,999
    )
    
    
    (46,385
    )Purchase of Federal Home Loan Bank stock
    
    
    (3,925
    )
    
    
    
    
    
    
    Proceeds from sale of investments
    
    
    2,535
    
    
    
    
    
    
    
    5,049Proceeds from sale of other real estate owned
    
    
    169
    
    
    
    
    
    
    
    Increase in interest-earning deposits in other financial institutions
    
    
    (8,532
    )
    
    
    (2,121
    )
    
    
    (3,410
    )Increase in loans, net
    
    
    (20,481
    )
    
    
    (13,617
    )
    
    
    (36,443
    )Purchase of property and equipment, net
    
    
    (1,918
    )
    
    
    (3,337
    )
    
    
    (439
    )Acquisition of Boardwalk Bancorp
    
    
    (46,839
    )
    
    
    
    
    
    
    Purchase of BOLI policy
    
    
    
    
    
    
    (325
    )
    
    
    Net cash used in investing activities
    
    
    (69,745
    )
    
    
    (23,347
    )
    
    
    (45,259
    )Cash Flows from financing activitiesNet increase (decrease) in deposits
    
    
    (74,084
    )
    
    
    29,819
    
    
    
    3,445Increase (decrease) in advances from borrowers for taxes and
insurance
    
    
    (65
    )
    
    
    (28
    )
    
    
    18Borrowings
    
    
    123,300
    
    
    
    45,000
    
    
    
    31,000Payments on borrowings
    
    
    (36,212
    )
    
    
    (79,000
    )
    
    
    (5,530
    )Net proceeds from stock issuance in conversion
    
    
    39,871
    
    
    
    
    
    
    
    Deferred stock issuance and acquisition costs
    
    
    
    
    
    
    (1,915
    )
    
    
    Proceeds from stock subscriptions
    
    
    
    
    
    
    21,500
    
    
    
    Net cash provided by financing activities
    
    
    52,810
    
    
    
    15,376
    
    
    
    28,933Net increase (decrease) in cash and cash equivalents
    
    
    (5,514
    )
    
    
    (1,861
    )
    
    
    (12,482
    )Cash and cash equivalents at beginning of period
    
    
    15,631
    
    
    
    17,492
    
    
    
    29,974Cash and cash equivalents at end of period
    
    $
    10,117
    
    
    $
    15,631
    
    
    $
    17,492Supplementary disclosure of cash flow information:Cash paid during period for:Interest
    
    $
    23,875
    
    
    $
    17,177
    
    
    $
    14,715Income taxes, net of refunds
    
    $
    1,209
    
    
    $
    1,418
    
    
    $
    2,403Supplementary disclosure of non-cash financing and investing activities:Transfers from loans to other real estate owned
    
    $
    966
    
    
    
    n/a
    
    
    
    n/aTransfers from property and equipment to assets held for sale
    
    $
    2,267
    
    
    
    n/a
    
    
    
    n/aStock subscriptions applied to equity
    
    $
    21,500
    
    
    
    n/a
    
    
    
    n/aIssuance of stock to charitable foundation
    
    $
    5,474
    
    
    
    n/a
    
    
    
    n/aIssuance of stock for acquisition of Boardwalk Bancorp
    
    $
    49,461
    
    
    
    n/a
    
    
    
    n/a
   F-5




---



##### Table of Contents



NOTE 1  ORGANIZATION
        NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     F-6




---



##### Table of Contents



Use of Estimates:
 Cash and Cash Equivalents:
 Interest-Bearing Deposits in Other Financial Institutions:
 Investment Securities:
  Loans Held for Sale:
 Loans and Allowance for Loan Losses:
    F-7




---



##### Table of Contents



Other Real Estate Owned:
 Premises and Equipment:
 Federal Home Loan Bank (FHLB) Stock:
 Bank Owned Life Insurance (BOLI):
 Goodwill and Other Intangible Assets:
  Loan Commitments and Related Financial Instruments:
   F-8




---



##### Table of Contents



Defined Benefit Plan:
 4 01(k) Plan:
 Employee Stock Ownership Plan (ESOP):
 Income Taxes:
    F-9




---



##### Table of Contents



Comprehensive Income (Loss):
 Before Tax
    
    
    Tax Benefit
    
    
    Net of TaxAmount
    
    
    (Expense)
    
    
    Amount(in thousands)December 31, 2008Unrealized losses on securitiesUnrealized holding losses arising during the period
    
    $
    (25,247
    )
    
    $
    8,722
    
    
    $
    (16,525
    )Reclassification adjustment for net losses realized in net income
    
    
    15,600
    
    
    
    (5,390
    )
    
    
    10,210Other comprehensive loss, net
    
    $
    (9,647
    )
    
    $
    3,332
    
    
    $
    (6,315
    )December 31, 2007Unrealized gains on securitiesUnrealized holding gains arising during the period
    
    $
    711
    
    
    $
    (254
    )
    
    $
    457Reclassification adjustment for net losses realized in net income
    
    
    
    
    
    
    
    
    
    
    Other comprehensive income, net
    
    $
    711
    
    
    $
    (254
    )
    
    $
    457December 31, 2006Unrealized gains on securitiesUnrealized holding gains arising during the period
    
    $
    918
    
    
    $
    (404
    )
    
    $
    514Reclassification adjustment for net gains realized in net income
    
    
    (94
    )
    
    
    41
    
    
    
    (53
    )Other comprehensive income, net
    
    $
    824
    
    
    $
    (363
    )
    
    $
    461
 Operating Segments:
 Recent Accounting Pronouncements: Determining the Fair Value of a Financial Asset when the
Market for That Asset Is Not Active.
     F-10




---



##### Table of Contents



Effect of Newly Issued But Not Yet Effective Accounting Standards:
 NOTE 3  INVESTMENT SECURITIES
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(in thousands)December 31, 2008Investment securities held to maturityMunicipal bonds
    
    $
    24,582
    
    
    $
    604
    
    
    $
    (32
    )
    
    $
    25,154Mortgage-backed securitiesGNMA pass-through certificates
    
    
    17
    
    
    
    1
    
    
    
    
    
    
    
    18FHLMC pass-through certificates
    
    
    2,670
    
    
    
    45
    
    
    
    
    
    
    
    2,715FNMA pass-through certificates
    
    
    10,897
    
    
    
    323
    
    
    
    (17
    )
    
    
    11,203Collateralized mortgage obligations
    
    
    9,922
    
    
    
    199
    
    
    
    (10
    )
    
    
    10,111Grantor Trust (money market fund)
    
    
    737
    
    
    
    
    
    
    
    
    
    
    
    737Total securities held to maturity
    
    $
    48,825
    
    
    $
    1,172
    
    
    $
    (59
    )
    
    $
    49,938Investment securities available for saleDebt securitiesU.S. Government and agency obligations
    
    $
    31,296
    
    
    $
    480
    
    
    $
    (10
    )
    
    $
    31,766Municipal bonds
    
    
    11,024
    
    
    
    26
    
    
    
    (336
    )
    
    
    10,714Collateralized debt obligations
    
    
    11,832
    
    
    
    
    
    
    
    (8,799
    )
    
    
    3,033Corporate bonds
    
    
    4,975
    
    
    
    
    
    
    
    (197
    )
    
    
    4,778Total debt securities
    
    
    59,127
    
    
    
    506
    
    
    
    (9,342
    )
    
    
    50,291Mortgage-backed securitiesGNMA pass-through certificates
    
    
    773
    
    
    
    2
    
    
    
    (12
    )
    
    
    763FHLMC pass-through certificates
    
    
    20,449
    
    
    
    352
    
    
    
    (31
    )
    
    
    20,770FNMA pass-through certificates
    
    
    33,465
    
    
    
    472
    
    
    
    (539
    )
    
    
    33,398Collateralized mortgage obligations
    
    
    10,017
    
    
    
    31
    
    
    
    (615
    )
    
    
    9,433Total mortgage-backed securities
    
    
    64,704
    
    
    
    857
    
    
    
    (1,197
    )
    
    
    64,364Total securities available for sale
    
    $
    123,831
    
    
    $
    1,363
    
    
    $
    (10,539
    )
    
    $
    114,655
   F-11




---



##### Table of Contents



NOTE 3  INVESTMENT SECURITIES (Continued)
 Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(in thousands)December 31, 2007Investment securities held to maturityMunicipal bonds
    
    $
    19,658
    
    
    $
    168
    
    
    $
    (39
    )
    
    $
    19,787U.S. Government and agency obligations
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    1,000Mortgage-backed securitiesGNMA pass-through certificates
    
    
    30
    
    
    
    1
    
    
    
    
    
    
    
    31FHLMC pass-through certificates
    
    
    3,780
    
    
    
    33
    
    
    
    (2
    )
    
    
    3,811FNMA pass-through certificates
    
    
    11,063
    
    
    
    150
    
    
    
    (75
    )
    
    
    11,138Collateralized mortgage obligations
    
    
    9,609
    
    
    
    116
    
    
    
    (65
    )
    
    
    9,660Total securities held to maturity
    
    $
    45,140
    
    
    $
    468
    
    
    $
    (181
    )
    
    $
    45,427Investment securities available for saleDebt securitiesU.S. Government and agency obligations
    
    $
    15,992
    
    
    $
    222
    
    
    $
    (3
    )
    
    $
    16,211Corporate bonds
    
    
    6,914
    
    
    
    10
    
    
    
    (16
    )
    
    
    6,908Total debt securities
    
    
    22,906
    
    
    
    232
    
    
    
    (19
    )
    
    
    23,119Equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    

FHLMC stock
    
    
    247
    
    
    
    
    
    
    
    (75
    )
    
    
    172Total equity securities
    
    
    247
    
    
    
    
    
    
    
    (75
    )
    
    
    172Mortgage-backed securitiesGNMA pass-through certificates
    
    
    1,083
    
    
    
    10
    
    
    
    (1
    )
    
    
    1,092FHLMC pass-through certificates
    
    
    17,473
    
    
    
    156
    
    
    
    (16
    )
    
    
    17,613FNMA pass-through certificates
    
    
    19,949
    
    
    
    230
    
    
    
    (47
    )
    
    
    20,132Total mortgage-backed securities
    
    
    38,505
    
    
    
    396
    
    
    
    (64
    )
    
    
    38,837Total securities available for sale
    
    $
    61,658
    
    
    $
    628
    
    
    $
    (158
    )
    
    $
    62,128
  Less Than 12 Months
    
    
    12 Months or Longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses(in thousands)U.S. Government and
agency obligations
    
    $
    2,507
    
    
    $
    (10
    )
    
    $
    
    
    
    $
    
    
    
    $
    2,507
    
    
    $
    (10
    )Corporate and municipal
bonds
    
    
    12,145
    
    
    
    (416
    )
    
    
    3,426
    
    
    
    (149
    )
    
    
    15,571
    
    
    
    (565
    )Collateralized debt obligations
    
    
    1,505
    
    
    
    (8,799
    )
    
    
    
    
    
    
    
    
    
    
    1,505
    
    
    
    (8,799
    )Mortgage-backed securities
    
    
    13,423
    
    
    
    (1,196
    )
    
    
    2,287
    
    
    
    (28
    )
    
    
    15,710
    
    
    
    (1,224
    )Total temporarily impaired
investment securities
    
    $
    29,580
    
    
    $
    (10,421
    )
    
    $
    5,713
    
    
    $
    (177
    )
    
    $
    35,293
    
    
    $
    (10,598
    )
   F-12




---



##### Table of Contents



NOTE 3  INVESTMENT SECURITIES (Continued)
  Less Than 12 Months
    
    
    12 Months or Longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses(in thousands)U.S. Government and
agency obligations
    
    $
    
    
    
    $
    
    
    
    $
    1,997
    
    
    $
    (3
    )
    
    $
    1,997
    
    
    $
    (3
    )Corporate and municipal
bonds
    
    
    2,910
    
    
    
    (16
    )
    
    
    4,813
    
    
    
    (40
    )
    
    
    7,723
    
    
    
    (56
    )Equity securities
    
    
    
    
    
    
    
    
    
    
    172
    
    
    
    (75
    )
    
    
    172
    
    
    
    (75
    )Mortgage-backed securities
    
    
    9,496
    
    
    
    (51
    )
    
    
    9,158
    
    
    
    (154
    )
    
    
    18,654
    
    
    
    (205
    )Total temporarily impaired
investment securities
    
    $
    12,406
    
    
    $
    (67
    )
    
    $
    16,140
    
    
    $
    (272
    )
    
    $
    28,546
    
    
    $
    (339
    )
     Available for Sale
    
    
    Held to MaturityAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    Value(in thousands)December 31, 2008Due in one year or less
    
    $
    7,953
    
    
    $
    7,920
    
    
    $
    2,278
    
    
    $
    2,299Due after one year through five years
    
    
    9,740
    
    
    
    9,693
    
    
    
    9,339
    
    
    
    9,544Due after five years through ten years
    
    
    14,042
    
    
    
    14,285
    
    
    
    12,861
    
    
    
    13,217Due after ten years
    
    
    27,392
    
    
    
    18,393
    
    
    
    841
    
    
    
    831Mortgage-backed securities
    
    
    64,704
    
    
    
    64,364
    
    
    
    23,506
    
    
    
    24,047Total investment securities
    
    $
    123,831
    
    
    $
    114,655
    
    
    $
    48,825
    
    
    $
    49,938
    F-13




---



##### Table of Contents



NOTE 4  LOANS RECEIVABLE
  2008
    
    
    2007(in thousands)Commercial mortgage
    
    $
    411,809
    
    
    $
    199,777Residential mortgage
    
    
    226,963
    
    
    
    175,809Construction
    
    
    54,187
    
    
    
    38,554Home equity loans and lines of credit
    
    
    46,850
    
    
    
    37,308Commercial business loans
    
    
    54,319
    
    
    
    12,018Other consumer loans
    
    
    1,388
    
    
    
    1,257Total loans
    
    
    795,516
    
    
    
    464,723Less:Allowance for loan losses
    
    
    (11,240
    )
    
    
    (4,121
    )Deferred loan fees
    
    
    (407
    )
    
    
    (666
    )Loans receivable, net
    
    $
    783,869
    
    
    $
    459,936
  2008
    
    
    2007
    
    
    2006(in thousands)Balance at beginning of year
    
    $
    4,121
    
    
    $
    4,009
    
    
    $
    3,792Allowance from acquired entity
    
    
    3,791
    
    
    
    
    
    
    
    Provisions charged to operations
    
    
    9,009
    
    
    
    357
    
    
    
    312Reserve on loan commitments re-classified as other liabilities
    
    
    
    
    
    
    (56
    )
    
    
    Charge-offs
    
    
    (5,708
    )
    
    
    (232
    )
    
    
    (128
    )Recoveries
    
    
    27
    
    
    
    43
    
    
    
    33Balance at end of period
    
    $
    11,240
    
    
    $
    4,121
    
    
    $
    4,009
   F-14




---



##### Table of Contents



NOTE 4  LOANS RECEIVABLE (Continued)
  2008
    
    
    2007(in thousands)Period-end loans with no allocated allowance for loan losses
    
    $
    24,998
    
    
    $
    633Period-end loans with allocated allowance for loan losses
    
    
    
    
    
    
    3,319Total
    
    $
    24,998
    
    
    $
    3,952
 2008
    
    
    2007(in thousands)Average of individually impaired loans during year
    
    $
    18,603
    
    
    $
    3,508Interest income recognized during impairment
    
    
    10
    
    
    
    21Cash-basis interest income recognized
    
    
    2
    
    
    
    21
   2008
    
    
    2007(in thousands)Mortgage loan portfolios serviced for FNMA
    
    $
    6,209
    
    
    $
    7,464
   2008
    
    
    2007(in thousands)Beginning balance
    
    $
    6,729
    
    
    $
    6,894New loans/advances
    
    
    285
    
    
    
    1,158Loans from acquired entity
    
    
    2,259
    
    
    
    Effect of changes in composition of related parties
    
    
    (397
    )
    
    
    Repayments
    
    
    (411
    )
    
    
    (1,323
    )Ending balance
    
    $
    8,465
    
    
    $
    6,729
   F-15




---



##### Table of Contents



NOTE 5  FAIR VALUE
           F-16




---



##### Table of Contents



NOTE 5  FAIR VALUE (Continued)
 Assets and Liabilities Measured on a Recurring Basis
  Fair Value Measurementsat December 31, 2008 Using(in thousands)Quoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Available for sale securities
    
    $
    42,481
    
    
    $
    69,141
    
    
    $
    3,033
  Fair Value Measurements 
Using SignificantUnobservable Inputs 
(Level 3)CDO Securities 
Available for Sale(in thousands)Beginning balance, January 1, 2008
    
    $
    Accretion/amortization of discount or premium
    
    
    65Payments received
    
    
    (113
    )Decrease in market value of securities included in
other comprehensive income
    
    
    (8,799
    )Other-than-temporary impairment included in earnings
    
    
    (14,463
    )Transfers in and/or out of Level 3
    
    
    26,343Ending balance, December 31, 2008
    
    $
    3,033
   F-17




---



##### Table of Contents



NOTE 5  FAIR VALUE (Continued)
 Assets and Liabilities Measured on a Non-Recurring Basis
  Fair Value Measurementsat December 31, 2008 Using(in thousands)Quoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Impaired loans
    
    $
    
    
    
    $
    24,998
    
    
    $
    
    F-18




---



##### Table of Contents



NOTE 5  FAIR VALUE (Continued)
  At December 31, 2008
    
    
    At December 31, 2007(in thousands)Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueAssetsCash and cash equivalents
    
    $
    10,117
    
    
    $
    10,117
    
    
    $
    15,631
    
    
    $
    15,631Interest bearing deposits in
other banks
    
    
    17,918
    
    
    
    17,918
    
    
    
    5,721
    
    
    
    5,721Investment securities
    
    
    163,480
    
    
    
    164,593
    
    
    
    107,269
    
    
    
    107,555Loans held for sale
    
    
    
    
    
    
    
    
    
    
    350
    
    
    
    350Loans receivable
    
    
    783,869
    
    
    
    799,064
    
    
    
    459,936
    
    
    
    460,993FHLB stock
    
    
    11,602
    
    
    
    n/a
    
    
    
    3,848
    
    
    
    n/aAccrued interest receivable
    
    
    4,736
    
    
    
    4,736
    
    
    
    3,081
    
    
    
    3,081LiabilitiesSavings deposits
    
    $
    79,494
    
    
    $
    79,494
    
    
    $
    79,554
    
    
    $
    79,554NOW, checking and MMDA deposits
    
    
    275,443
    
    
    
    275,443
    
    
    
    210,436
    
    
    
    210,436Certificates of deposit
    
    
    356,193
    
    
    
    360,717
    
    
    
    175,658
    
    
    
    176,497Borrowings
    
    
    234,484
    
    
    
    232,090
    
    
    
    65,000
    
    
    
    65,265Accrued interest payable
    
    
    778
    
    
    
    778
    
    
    
    401
    
    
    
    401
           F-19




---



##### Table of Contents



NOTE 6  OTHER REAL ESTATE OWNED
   NOTE 7  PREMISES AND EQUIPMENT
  EstimatedUseful Lives
    
    
    2008
    
    
    2007(in thousands)Land, buildings, and improvements
    
    15  39 years
    
    
    $
    30,441
    
    
    $
    20,752Furniture and equipment
    
    3  7 years
    
    
    
    10,223
    
    
    
    5,408Construction-in-progress
    
    
    
    
    
    
    132
    
    
    
    25Total
    
    
    
    
    
    
    40,796
    
    
    
    26,185Accumulated depreciation
    
    
    
    
    
    
    (13,454
    )
    
    
    (10,054
    )Premises and equipment, net
    
    
    
    
    
    $
    27,342
    
    
    $
    16,131
    F-20




---



##### Table of Contents



NOTE 8  GOODWILL AND INTANGIBLE ASSETS
  2008
    
    
    2007(in thousands)Beginning of year
    
    $
    
    
    
    $
    Acquired goodwill
    
    
    54,478
    
    
    
    Impairment (1)
    
    
    (31,751
    )
    
    
    Other, net
    
    
    (152
    )
    
    
    End of year
    
    $
    22,575
    
    
    $
    
     2008GrossCarrying
    
    
    AccumulatedAmount
    
    
    Amortization(in thousands)Amortized intangible assets:Core deposit intangibles
    
    $
    565
    
    
    $
    86Other customer relationship intangibles
    
    
    485
    
    
    
    178Total
    
    $
    1,050
    
    
    $
    264
   (in thousands)2009
    
    $
    2882010
    
    
    2122011
    
    
    1692012
    
    
    1482013
    
    
    84
   F-21




---



##### Table of Contents



NOTE 9  DEPOSITS
  2008
    
    
    2007(in thousands)Savings accounts
    
    $
    79,494
    
    
    $
    79,554NOW accounts and money market funds
    
    
    212,185
    
    
    
    169,576Non-interest bearing checking
    
    
    63,258
    
    
    
    40,860Certificates of deposit of less than $100,000
    
    
    229,533
    
    
    
    131,958Certificates of deposit of $100,000 or more
    
    
    126,660
    
    
    
    43,700$
    711,130
    
    
    $
    465,648
  2008
    
    
    2007
    
    
    2006(in thousands)Savings
    
    $
    1,062
    
    
    $
    1,290
    
    
    $
    1,272NOW accounts and money market funds
    
    
    4,059
    
    
    
    4,237
    
    
    
    3,092Certificates of deposit
    
    
    12,562
    
    
    
    8,029
    
    
    
    6,592$
    17,683
    
    
    $
    13,556
    
    
    $
    10,956
  (in thousands)2009
    
    $
    296,1752010
    
    
    27,3732011
    
    
    13,0882012
    
    
    10,5062013
    
    
    9,051Thereafter
    
    
    $
    356,193
    F-22




---



##### Table of Contents



NOTE 10  BORROWINGS
   2008
    
    
    2007(in thousands)2008
    
    $
    
    
    
    $
    25,0002009
    
    
    110,468
    
    
    
    5,0002010
    
    
    30,023
    
    
    
    15,0002011
    
    
    15,019
    
    
    
    10,0002012
    
    
    20,022
    
    
    
    10,0002013
    
    
    10,089
    
    
    
    Thereafter
    
    
    11,500
    
    
    
    Principal due
    
    $
    197,121
    
    
    $
    65,000
    2008(dollars in thousands)Average daily balance during the year
    
    $
    36,550Average interest rate during the year
    
    
    4.34
    %Maximum month-end balance during the year
    
    $
    37,363Weighted average interest rate at year-end
    
    
    4.32
    %
    F-23




---



##### Table of Contents



NOTE 11  INCOME TAXES
  2008
    
    
    2007
    
    
    2006(in thousands)Current expense (benefit):Federal
    
    $
    440
    
    
    $
    2,369
    
    
    $
    2,045State
    
    
    23
    
    
    
    171
    
    
    
    421Total current
    
    
    463
    
    
    
    2,540
    
    
    
    2,466Deferred (benefit):Federal
    
    
    (7,333
    )
    
    
    (958
    )
    
    
    (186
    )State
    
    
    (1,249
    )
    
    
    (283
    )
    
    
    (53
    )Total deferred
    
    
    (8,582
    )
    
    
    (1,241
    )
    
    
    (239
    )Change in valuation allowance
    
    
    (35
    )
    
    
    
    
    
    
    Income tax expense (benefit)
    
    $
    (8,154
    )
    
    $
    1,299
    
    
    $
    2,227
  2008
    
    
    2007
    
    
    2006Tax statutory rate
    
    
    (34.0
    %)
    
    
    34.0
    %
    
    
    34.0
    %Adjustments resulting from:Goodwill impairment
    
    
    21.3
    
    
    
    
    
    
    
    State tax benefit, net of federal income tax expense
    
    
    (1.6
    )
    
    
    (1.6
    )
    
    
    3.3Tax-exempt income
    
    
    (0.9
    )
    
    
    (11.3
    )
    
    
    (5.2
    )Income on bank owned life insurance
    
    
    (0.7
    )
    
    
    (12.5
    )
    
    
    (7.0
    )Other
    
    
    (0.2
    )
    
    
    18.9
    
    
    
    5.7Effective tax rate per consolidated statements of income
    
    
    (16.1
    %)
    
    
    27.5
    %
    
    
    30.8
    %
   F-24




---



##### Table of Contents



NOTE 11  INCOME TAXES (Continued)
  2008
    
    
    2007(in thousands)Deferred tax assets:Other than temporary impairment
    
    $
    4,917
    
    
    $
    Allowance for loan losses
    
    
    4,043
    
    
    
    1,678Charitable foundation contribution carryforward
    
    
    2,527
    
    
    
    Purchase accounting adjustments
    
    
    1,660
    
    
    
    Non-accrual loan interest income
    
    
    1,013
    
    
    
    Deferred compensation
    
    
    667
    
    
    
    2,424Net operating losses
    
    
    913
    
    
    
    Net unrealized loss on available for sale securities
    
    
    3,155
    
    
    
    Capital loss carryforward
    
    
    233
    
    
    
    AMT credit carryforward
    
    
    231
    
    
    
    Other
    
    
    156
    
    
    
    243Valuation allowance
    
    
    (233
    )
    
    
    19,282
    
    
    
    4,345Deferred tax liabilities:Depreciation
    
    
    (837
    )
    
    
    (236
    )Deferred loan fees
    
    
    (667
    )
    
    
    (513
    )Pension
    
    
    (175
    )
    
    
    (238
    )Net unrealized gain on available for sale securities
    
    
    
    
    
    
    (178
    )Other
    
    
    (356
    )
    
    
    (18
    )(2,035
    )
    
    
    (1,183
    )Net deferred tax asset
    
    $
    17,247
    
    
    $
    3,162
      F-25




---



##### Table of Contents



NOTE 11  INCOME TAXES (Continued)
  2008
    
    
    2007(in thousands)Balance at January 1
    
    $
    
    
    
    $
    Additions based on tax positions related to the current year
    
    
    353
    
    
    
    Additions for tax positions of prior years
    
    
    
    
    
    
    Reductions for tax positions of prior years
    
    
    
    
    
    
    Reductions due to the statute of limitations
    
    
    
    
    
    
    Settlements
    
    
    
    
    
    
    Balance at December 31
    
    $
    353
    
    
    $
    
      F-26




---



##### Table of Contents



NOTE 12  FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND CONCENTRATIONS OF CREDIT RISK
       At December 31, 2008
    
    
    At December 31, 2007Fixed
    
    
    Variable
    
    
    Fixed
    
    
    VariableRate
    
    
    Rate
    
    
    Rate
    
    
    Rate(in thousands)Commitments to make loans
    
    $
    9,333
    
    
    $
    1,428
    
    
    $
    5,269
    
    
    $
    12,012Unused lines of credit
    
    
    
    
    
    
    57,429
    
    
    
    
    
    
    
    37,013Construction loans in process
    
    
    2,920
    
    
    
    18,899
    
    
    
    
    
    
    
    12,473Standby letters of credit
    
    
    
    
    
    
    10,778
    
    
    
    
    
    
    
    4,774
    F-27




---



##### Table of Contents



NOTE 12  FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND
CONCENTRATIONS OF CREDIT RISK (Continued)
  NOTE 13  BENEFIT PLANS
        F-28




---



##### Table of Contents



NOTE 14  COMMITMENTS AND CONTINGENCIES
  (in thousands)Due in less than 12 months
    
    $
    310Due in 1 to 2 years
    
    
    90$
    400
    NOTE 15  REGULATORY MATTERS
    F-29




---



##### Table of Contents



NOTE 15  REGULATORY MATTERS (Continued)
     Per Regulatory GuidelinesActual
    
    
    Minimum
    
    
    Well CapitalizedAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(dollars in thousands)December 31, 2008Risk based capital
ratios:Tier I
    
    $
    108,922
    
    
    
    13.00
    %
    
    $
    33,514
    
    
    
    4.00
    %
    
    $
    50,272
    
    
    
    6.00
    %Total capital
    
    $
    119,403
    
    
    
    14.25
    %
    
    $
    67,033
    
    
    
    8.00
    %
    
    $
    83,792
    
    
    
    10.00
    %Leverage ratio
    
    $
    108,922
    
    
    
    9.87
    %
    
    $
    44,143
    
    
    
    4.00
    %
    
    $
    55,178
    
    
    
    5.00
    %December 31, 2007Risk based capital
ratios:Tier I
    
    $
    69,295
    
    
    
    16.34
    %
    
    $
    16,959
    
    
    
    4.00
    %
    
    $
    25,439
    
    
    
    6.00
    %Total capital
    
    $
    73,471
    
    
    
    17.33
    %
    
    $
    33,919
    
    
    
    8.00
    %
    
    $
    42,399
    
    
    
    10.00
    %Leverage ratio
    
    $
    69,295
    
    
    
    11.11
    %
    
    $
    24,938
    
    
    
    4.00
    %
    
    $
    31,173
    
    
    
    5.00
    %
   F-30




---



##### Table of Contents



NOTE 15  REGULATORY MATTERS (Continued)
   2008
    
    
    2007(in thousands)Total capital, computed in accordance with GAAP
    
    $
    128,950
    
    
    $
    72,829Accumulated other comprehensive (gain)/loss
    
    
    6,022
    
    
    
    (368
    )Intangible assets
    
    
    (2
    )
    
    
    (4
    )Disallowed goodwill and other disallowed intangible assets
    
    
    (23,361
    )
    
    
    Deferred tax assets excluded
    
    
    (2,687
    )
    
    
    (3,162
    )Tier I (tangible) capital
    
    
    108,922
    
    
    
    69,295Allowance for loan losses
    
    
    10,481
    
    
    
    4,176Total capital
    
    $
    119,403
    
    
    $
    73,471
   NOTE 16  EARNINGS PER SHARE
   Year endedDecember 31,2008(in thousands,except share data)Net income (loss)
    
    $
    (42,491
    )Less: Net income from January 1 to January 31
    
    
    (402
    )Net income (loss) post conversion for earnings per share
    
    $
    (42,893
    )Weighted average shares outstanding
    
    
    12,280,494Basic earnings (loss) per share
    
    $
    (3.49
    )
  F-31




---



##### Table of Contents



NOTE 17  ACQUISITION OF BOARDWALK BANCORP
     F-32




---



##### Table of Contents



NOTE 17  ACQUISITION OF BOARDWALK BANCORP (Continued)
  (in thousands)Securities available for sale
    
    $
    92,949Loans, net
    
    
    314,471Goodwill
    
    
    54,523Core deposit and other intangibles
    
    
    1,050Other assets
    
    
    40,027Total assets acquired
    
    $
    503,020Deposits
    
    $
    (320,520
    )Borrowings
    
    
    (82,729
    )Other liabilities
    
    
    (848
    )Total liabilities assumed
    
    $
    (404,097
    )Net assets acquired
    
    $
    98,923
  Years ended December 31,2008
    
    
    2007(in thousands)Interest and dividend income
    
    $
    60,517
    
    
    $
    65,388Interest expense
    
    
    25,612
    
    
    
    33,045Net interest income
    
    
    34,905
    
    
    
    32,343Provision for loan losses
    
    
    9,009
    
    
    
    877Net interest income after provision for loan losses
    
    
    25,896
    
    
    
    31,466Non-interest income
    
    
    (10,672
    )
    
    
    3,982Non-interest expense
    
    
    67,291
    
    
    
    30,319Income (loss) before income taxes
    
    
    (52,067
    )
    
    
    5,129Income tax expense (benefit)
    
    
    (8,360
    )
    
    
    1,288Net income (loss)
    
    $
    (43,707
    )
    
    $
    3,841Basic EPS
    
    $
    (3.56
    )
    
    
    N/A
   F-33




---



##### Table of Contents



NOTE 18  CAPE BANCORP (PARENT COMPANY)
  Condensed Balance Sheet
 December 31,2008(in thousands)ASSETSNon-interest bearing balances with bank subsidiary
    
    $
    1,427Loans due from bank subsidiary
    
    
    10,410Investment in bank subsidiary
    
    
    128,950Other assets
    
    
    71Total assets
    
    $
    140,858LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesAccounts payable and accrued expenses
    
    $
    133Total liabilities
    
    
    133Stockholders equityCommon stock
    
    
    133Additional paid in capital
    
    
    126,801Retained earnings
    
    
    30,045Accumulated other comprehensive income (loss)
    
    
    (6,022
    )Unearned ESOP shares
    
    
    (10,232
    )Total stockholders equity
    
    
    140,725Total liabilities and stockholders equity
    
    $
    140,858
  F-34




---



##### Table of Contents



NOTE 18  CAPE BANCORP (PARENT COMPANY) (Continued)
 Condensed Statement of Income
 Year ended December 31,2008(in thousands)Income:Interest income from bank subsidiary
    
    $
    611Total income
    
    
    611Expense:Interest expense
    
    
    28Legal expense
    
    
    249Investor relations expense
    
    
    99Audit and consulting fees
    
    
    51Other non-interest expenses
    
    
    44Total expense
    
    
    471Income
before income taxes and equity in undistributed
net income (loss) of subsidiaries
    
    
    140Income tax expense
    
    
    64Income
before equity in undistributed net income (loss)
of subsidiaries
    
    
    76Equity in undistributed net income (loss) of subsidiaries
    
    
    (42,567
    )Net income (loss)
    
    $
    (42,491
    )
  Condensed Statement of Cash Flows
 Year ended December 31,2008(in thousands)Cash flows from operating activities:Net loss
    
    $
    (42,491
    )Adjustments to reconcile net income to cash provided by operating activities:Equity in undistributed loss of bank subsidiary
    
    
    42,567Change in other, net
    
    
    61Net cash used by operating activities
    
    
    137Cash flows from investing activities:Capital contribution to bank subsidiary
    
    
    (115,034
    )Loan to ESOP to finance purchase of shares
    
    
    (10,658
    )Repayment of ESOP loan
    
    
    248Net cash used for investing activities
    
    
    (125,444
    )Cash flows from financing activities:Issuance of common stock related to initial public offering
    
    
    126,734Net cash provided by financing activities
    
    
    126,734Net increase in cash and cash equivalents
    
    
    1,427Cash and cash equivalents at beginning of period
    
    
    Cash and cash equivalents at end of period
    
    $
    1,427
  F-35




---



##### Table of Contents



NOTE 19  SELECTED QUARTERLY DATA
 Year Ended December 31,
    
    
    Year Ended December 31,2008
    
    
    2007Fourth
    
    
    Third
    
    
    Second
    
    
    First
    
    
    Fourth
    
    
    Third
    
    
    Second
    
    
    First(unaudited)
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(in thousands)
    
    
    (in thousands)Interest income
    
    $
    14,471
    
    
    $
    15,154
    
    
    $
    15,048
    
    
    $
    13,454
    
    
    $
    9,307
    
    
    $
    9,231
    
    
    $
    9,117
    
    
    $
    8,974Interest expense
    
    
    5,664
    
    
    
    6,084
    
    
    
    6,288
    
    
    
    6,217
    
    
    
    4,318
    
    
    
    4,306
    
    
    
    4,320
    
    
    
    4,202Net interest income
    
    
    8,807
    
    
    
    9,070
    
    
    
    8,760
    
    
    
    7,237
    
    
    
    4,989
    
    
    
    4,925
    
    
    
    4,797
    
    
    
    4,772Provision for loan losses
    
    
    6,860
    
    
    
    1,308
    
    
    
    558
    
    
    
    283
    
    
    
    123
    
    
    
    78
    
    
    
    78
    
    
    
    78Net interest income after provision for loan losses
    
    
    1,947
    
    
    
    7,762
    
    
    
    8,202
    
    
    
    6,954
    
    
    
    4,866
    
    
    
    4,847
    
    
    
    4,719
    
    
    
    4,694Non-interest income
    
    
    (11,997
    )
    
    
    (870
    )
    
    
    975
    
    
    
    1,099
    
    
    
    972
    
    
    
    970
    
    
    
    1,005
    
    
    
    1,045Non-interest expense
    
    
    38,251
    
    
    
    6,722
    
    
    
    7,470
    
    
    
    12,274
    
    
    
    6,072
    
    
    
    3,914
    
    
    
    4,204
    
    
    
    4,201Income (loss) before income taxes
    
    
    (48,301
    )
    
    
    170
    
    
    
    1,707
    
    
    
    (4,221
    )
    
    
    (234
    )
    
    
    1,903
    
    
    
    1,520
    
    
    
    1,538Income tax expense (benefit)
    
    
    (6,125
    )
    
    
    (424
    )
    
    
    370
    
    
    
    (1,975
    )
    
    
    (268
    )
    
    
    562
    
    
    
    540
    
    
    
    465Net income (loss)
    
    $
    (42,176
    )
    
    $
    594
    
    
    $
    1,337
    
    
    $
    (2,246
    )
    
    $
    34
    
    
    $
    1,341
    
    
    $
    980
    
    
    $
    1,073
    F-36




---



##### Table of Contents



Exhibit No.
    
    Description3.1
    
    Articles of Incorporation of Cape Bancorp, Inc. (1)3.2
    
    Amended and Restated Bylaws of Cape Bancorp, Inc. (2)4
    
    Form of Common Stock Certificate of Cape Bancorp, Inc. (1)10.1
    
    Form of Employee Stock Ownership Plan (1)10.2
    
    Employment Agreement for Herbert L. Hornsby Jr. (1)10.3
    
    Employment Agreement for Robert J. Boyer (1)10.4
    
    Employment Agreement for
Michael D. Devlin (1)10.5
    
    Employment Agreement for
Guy A. Deninger (1)10.6
    
    Form of Change in Control Agreement (1)10.7
    
    Change in Control Agreement for Wayne S. Hardenbrook (1)10.8
    
    Form of Director Retirement Plan (1)10.9
    
    Benefit Equalization Plan (1)10.10
    
    2008 Equity Incentive Plan (3)10.11
    
    Agreement with James. J. Lynch and Patriot Financial Partners, L.P. (5)14
    
    Code of Ethics (4)21
    
    Subsidiaries of Registrant31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
200232
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Incorporated by reference to the Registration Statement on Form S-1 of Cape Bancorp, Inc..
(file no. 333-146178), originally filed with the Securities and Exchange Commission on
September 19, 2007.(2)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed with the
Securities and Exchange Commission on July 18, 2008.(3)
    
    Incorporated by reference to the Companys Definitive Proxy Statement filed with the
Securities and Exchange Commission on July 16, 2008.(4)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the Year ended
December 31, 2007 filed with the Securities and Exchange Commission on March 31, 2008.(5)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed with the
Securities Exchange Commission on February 10, 2009.