##### 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, 2009
 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 
incorporation or organization)
    
    (I.R.S. Employer
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
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE
 1.
    
    Proxy Statement for the 2010 Annual Meeting of Shareholders (Part III).




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##### 



TABLE OF CONTENTS
 PART I
    
    
    1ITEM 1. BUSINESS
    
    
    1ITEM 1A. RISK FACTORS
    
    
    38ITEM 1B. UNRESOLVED STAFF COMMENTS
    
    
    43ITEM 2. PROPERTIES
    
    
    43ITEM 3. LEGAL PROCEEDINGS
    
    
    43ITEM 4. (RESERVED)
    
    
    44PART II
    
    
    44ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    44ITEM 6. SELECTED FINANCIAL DATA
    
    
    46ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
    
    
    47ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    
    
    70ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    70ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
    
    
    70ITEM 9A. CONTROLS AND PROCEDURES
    
    
    70ITEM 9B. OTHER INFORMATION
    
    
    71PART III
    
    
    71ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    71ITEM 11. EXECUTIVE COMPENSATION
    
    
    71ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
    
    
    71ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
    
    
    71ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    71PART IV
    
    
    72ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    72Exhibit 21Exhibit 23.1Exhibit 23.2Exhibit 31.1Exhibit 31.2Exhibit 32




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##### Table of Contents



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




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##### Table of Contents



Cape Bank
 General
   www.capebanknj.com
 Market Area
   2




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##### Table of Contents



Competition
 nd rd
  Lending Activities
    3




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##### Table of Contents



Loan Portfolio Composition.
 At December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(dollars in thousands)Real estate loans:Commercial mortgage
    
    $
    412,475
    
    
    
    51.3
    %
    
    $
    411,809
    
    
    
    51.8
    %
    
    $
    199,777
    
    
    
    43.0
    %
    
    $
    183,091
    
    
    
    40.6
    %
    
    $
    157,128
    
    
    
    37.9
    %Residential mortgage
    
    
    244,897
    
    
    
    30.5
    %
    
    
    226,963
    
    
    
    28.5
    %
    
    
    175,809
    
    
    
    37.8
    %
    
    
    183,692
    
    
    
    40.7
    %
    
    
    179,373
    
    
    
    43.2
    %Construction
    
    
    28,839
    
    
    
    3.6
    %
    
    
    54,187
    
    
    
    6.8
    %
    
    
    38,554
    
    
    
    8.3
    %
    
    
    38,669
    
    
    
    8.6
    %
    
    
    32,917
    
    
    
    7.9
    %Home equity loans and lines of credit
    
    
    52,806
    
    
    
    6.6
    %
    
    
    46,850
    
    
    
    5.9
    %
    
    
    37,308
    
    
    
    8.0
    %
    
    
    36,998
    
    
    
    8.2
    %
    
    
    36,472
    
    
    
    8.8
    %Commercial business loans
    
    
    62,685
    
    
    
    7.8
    %
    
    
    54,319
    
    
    
    6.8
    %
    
    
    12,018
    
    
    
    2.6
    %
    
    
    7,773
    
    
    
    1.7
    %
    
    
    8,096
    
    
    
    2.0
    %Other consumer loans
    
    
    1,284
    
    
    
    0.2
    %
    
    
    1,388
    
    
    
    0.2
    %
    
    
    1,257
    
    
    
    0.3
    %
    
    
    919
    
    
    
    0.2
    %
    
    
    798
    
    
    
    0.2
    %Total loans
    
    $
    802,986
    
    
    
    100.0
    %
    
    $
    795,516
    
    
    
    100.0
    %
    
    $
    464,723
    
    
    
    100.0
    %
    
    $
    451,142
    
    
    
    100.0
    %
    
    $
    414,784
    
    
    
    100.0
    %Less:Allowance for loan losses
    
    
    13,311
    
    
    
    
    
    
    
    11,240
    
    
    
    
    
    
    
    4,121
    
    
    
    
    
    
    
    4,009
    
    
    
    
    
    
    
    3,792Deferred loan fees, net
    
    
    202
    
    
    
    
    
    
    
    407
    
    
    
    
    
    
    
    666
    
    
    
    
    
    
    
    755
    
    
    
    
    
    
    
    960Total loans, net
    
    $
    789,473
    
    
    
    
    
    
    $
    783,869
    
    
    
    
    
    
    $
    459,936
    
    
    
    
    
    
    $
    446,378
    
    
    
    
    
    
    $
    410,032
  4




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##### Table of Contents



Loan Portfolio Maturities and Yields.
 Commercial
    
    
    Residential
    
    
    
    
    
    
    
    
    
    
    Home Equity LoansMortgage Loans
    
    
    Mortgage Loans
    
    
    Construction Loans
    
    
    and Lines of CreditWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageAt December 31, 2009
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(dollars in thousands)Due During the Years
Ending December 31,2010
    
    $
    12,934
    
    
    
    6.35
    %
    
    $
    436
    
    
    
    5.89
    %
    
    $
    16,593
    
    
    
    5.40
    %
    
    $
    1,757
    
    
    
    4.59
    %2011
    
    
    784
    
    
    
    5.21
    %
    
    
    157
    
    
    
    7.72
    %
    
    
    98
    
    
    
    6.00
    %
    
    
    682
    
    
    
    6.66
    %2012
    
    
    8,801
    
    
    
    6.14
    %
    
    
    967
    
    
    
    5.65
    %
    
    
    783
    
    
    
    5.96
    %
    
    
    407
    
    
    
    6.80
    %2013 to 2014
    
    
    2,016
    
    
    
    6.09
    %
    
    
    2,987
    
    
    
    5.61
    %
    
    
    308
    
    
    
    6.50
    %
    
    
    3,577
    
    
    
    5.88
    %2015 to 2019
    
    
    7,230
    
    
    
    6.81
    %
    
    
    25,015
    
    
    
    5.43
    %
    
    
    172
    
    
    
    6.91
    %
    
    
    10,902
    
    
    
    5.47
    %2020 to 2024
    
    
    32,543
    
    
    
    6.70
    %
    
    
    43,504
    
    
    
    5.22
    %
    
    
    844
    
    
    
    6.06
    %
    
    
    31,126
    
    
    
    5.54
    %2025 to 2027
    
    
    39,744
    
    
    
    7.12
    %
    
    
    5,209
    
    
    
    6.32
    %
    
    
    3,185
    
    
    
    6.77
    %
    
    
    2,613
    
    
    
    4.71
    %2028 to 2030
    
    
    46,648
    
    
    
    6.44
    %
    
    
    27,902
    
    
    
    5.26
    %
    
    
    533
    
    
    
    6.43
    %
    
    
    568
    
    
    
    6.12
    %2031 to 2032
    
    
    55,406
    
    
    
    7.21
    %
    
    
    3,633
    
    
    
    6.60
    %
    
    
    2,040
    
    
    
    7.55
    %
    
    
    306
    
    
    
    7.92
    %2033 to 2034
    
    
    48,907
    
    
    
    6.22
    %
    
    
    30,753
    
    
    
    5.51
    %
    
    
    652
    
    
    
    6.90
    %
    
    
    755
    
    
    
    8.14
    %2035 to 2037
    
    
    47,204
    
    
    
    7.43
    %
    
    
    43,983
    
    
    
    5.92
    %
    
    
    84
    
    
    
    5.88
    %
    
    
    
    
    
    
    2038 and beyond
    
    
    110,258
    
    
    
    6.18
    %
    
    
    60,351
    
    
    
    5.93
    %
    
    
    3,547
    
    
    
    6.01
    %
    
    
    113
    
    
    
    6.50
    %Total
    
    $
    412,475
    
    
    
    6.64
    %
    
    $
    244,897
    
    
    
    5.64
    %
    
    $
    28,839
    
    
    
    5.89
    %
    
    $
    52,806
    
    
    
    5.56
    %
 Commercial
    
    
    Other ConsumerBusiness Loans
    
    
    Loans (1)
    
    
    TotalWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageAmount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(dollars in thousands)Due During the Years
Ending December 31,2010
    
    $
    49,726
    
    
    
    5.24
    %
    
    $
    63
    
    
    
    5.26
    %
    
    $
    81,509
    
    
    
    5.44
    %2011
    
    
    2,290
    
    
    
    4.97
    %
    
    
    30
    
    
    
    10.95
    %
    
    
    4,041
    
    
    
    5.48
    %2012
    
    
    799
    
    
    
    8.45
    %
    
    
    56
    
    
    
    11.52
    %
    
    
    11,813
    
    
    
    6.29
    %2013 to 2014
    
    
    3,857
    
    
    
    6.47
    %
    
    
    27
    
    
    
    13.67
    %
    
    
    12,772
    
    
    
    6.06
    %2015 to 2019
    
    
    4,157
    
    
    
    6.83
    %
    
    
    
    
    
    
    
    
    
    
    47,476
    
    
    
    5.78
    %2020 to 2024
    
    
    974
    
    
    
    6.08
    %
    
    
    1,108
    
    
    
    4.87
    %
    
    
    110,099
    
    
    
    5.76
    %2025 to 2027
    
    
    65
    
    
    
    7.00
    %
    
    
    
    
    
    
    
    
    
    
    50,816
    
    
    
    6.89
    %2028 to 2030
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,651
    
    
    
    6.00
    %2031 to 2032
    
    
    354
    
    
    
    7.75
    %
    
    
    
    
    
    
    
    
    
    
    61,739
    
    
    
    7.19
    %2033 to 2034
    
    
    463
    
    
    
    4.25
    %
    
    
    
    
    
    
    
    
    
    
    81,530
    
    
    
    5.96
    %2035 to 2037
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91,271
    
    
    
    6.70
    %2038 and beyond
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174,269
    
    
    
    6.09
    %Total
    
    $
    62,685
    
    
    
    5.47
    %
    
    $
    1,284
    
    
    
    5.51
    %
    
    $
    802,986
    
    
    
    6.14
    %
 (1)
    
    Includes overdrawn DDA accounts.  5




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##### Table of Contents



Commercial
    
    
    Residential
    
    
    Construction
    
    
    Home Equity LoansMortgage Loans
    
    

Mortgage Loans
    
    
    Loans
    
    
    and Lines of CreditWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageAt December 31, 2008
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(dollars in thousands)Due During the Years
Ending December 31,2009
    
    $
    18,196
    
    
    
    4.38
    %
    
    $
    676
    
    
    
    7.56
    %
    
    $
    47,077
    
    
    
    5.14
    %
    
    $
    768
    
    
    
    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 to 2026
    
    
    45,510
    
    
    
    7.03
    %
    
    
    5,065
    
    
    
    6.68
    %
    
    
    
    
    
    
    
    
    
    
    2,213
    
    
    
    4.24
    %2027 to 2029
    
    
    41,530
    
    
    
    6.61
    %
    
    
    4,492
    
    
    
    6.90
    %
    
    
    
    
    
    
    
    
    
    
    1,179
    
    
    
    4.69
    %2030 to 2031
    
    
    52,271
    
    
    
    7.03
    %
    
    
    2,526
    
    
    
    7.15
    %
    
    
    310
    
    
    
    7.75
    %
    
    
    
    
    
    
    2032 to 2033
    
    
    70,453
    
    
    
    6.90
    %
    
    
    21,272
    
    
    
    5.94
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2034 to 2036
    
    
    45,766
    
    
    
    6.89
    %
    
    
    67,719
    
    
    
    6.00
    %
    
    
    86
    
    
    
    5.88
    %
    
    
    
    
    
    
    2037 and beyond
    
    
    80,616
    
    
    
    6.49
    %
    
    
    61,674
    
    
    
    6.22
    %
    
    
    768
    
    
    
    6.00
    %
    
    
    316
    
    
    
    7.50
    %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
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageAmount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(dollars in thousands)Due During the Years
Ending December 31,2009
    
    $
    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 to 2026
    
    
    
    
    
    
    
    
    
    
    1,069
    
    
    
    6.17
    %
    
    
    53,857
    
    
    
    6.87
    %2027 to 2029
    
    
    762
    
    
    
    6.59
    %
    
    
    
    
    
    
    
    
    
    
    47,963
    
    
    
    6.59
    %2030 to 2031
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,107
    
    
    
    7.04
    %2032 to 2033
    
    
    393
    
    
    
    5.75
    %
    
    
    
    
    
    
    
    
    
    
    92,118
    
    
    
    6.67
    %2034 to 2036
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    113,571
    
    
    
    6.36
    %2037 and beyond
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    143,374
    
    
    
    6.37
    %Total
    
    $
    54,319
    
    
    
    5.35
    %
    
    $
    1,388
    
    
    
    6.22
    %
    
    $
    795,516
    
    
    
    6.24
    %
 (1)
    
    Includes overdrawn DDA accounts.  6




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##### Table of Contents



At December 31, 2009Fixed Rate
    
    
    Adjustable RateDue Within
    
    
    Due After
    
    
    
    
    
    
    Due Within
    
    
    Due After
    
    
    
    
    
    
    TotalOne Year
    
    
    One Year
    
    
    Total
    
    
    One Year
    
    
    One Year
    
    
    Total
    
    
    Loans(in thousands)Real estate loans:Commercial mortgage
    
    $
    6,999
    
    
    $
    13,764
    
    
    $
    20,763
    
    
    $
    5,935
    
    
    $
    385,777
    
    
    $
    391,712
    
    
    $
    412,475Residential mortgage
    
    
    433
    
    
    
    201,057
    
    
    
    201,490
    
    
    
    3
    
    
    
    43,404
    
    
    
    43,407
    
    
    
    244,897Construction
    
    
    6,009
    
    
    
    12,069
    
    
    
    18,078
    
    
    
    10,584
    
    
    
    177
    
    
    
    10,761
    
    
    
    28,839Home equity loans and
lines of credit
    
    
    235
    
    
    
    30,303
    
    
    
    30,538
    
    
    
    1,522
    
    
    
    20,746
    
    
    
    22,268
    
    
    
    52,806Commercial business loans
    
    
    5,048
    
    
    
    10,307
    
    
    
    15,355
    
    
    
    44,678
    
    
    
    2,652
    
    
    
    47,330
    
    
    
    62,685Other consumer loans
    
    
    51
    
    
    
    105
    
    
    
    156
    
    
    
    12
    
    
    
    1,116
    
    
    
    1,128
    
    
    
    1,284Total
    
    $
    18,775
    
    
    $
    267,605
    
    
    $
    286,380
    
    
    $
    62,734
    
    
    $
    453,872
    
    
    $
    516,606
    
    
    $
    802,986
 At December 31, 2008Fixed Rate
    
    
    Adjustable RateDue Within
    
    
    Due After
    
    
    
    
    
    
    Due Within
    
    
    Due After
    
    
    
    
    
    
    TotalOne Year
    
    
    One Year
    
    
    Total
    
    
    One Year
    
    
    One Year
    
    
    Total
    
    
    Loans(in thousands)Real estate loans:Commercial mortgage
    
    $
    3,949
    
    
    $
    16,969
    
    
    $
    20,918
    
    
    $
    14,247
    
    
    $
    376,644
    
    
    $
    390,891
    
    
    $
    411,809Residential mortgage
    
    
    676
    
    
    
    176,225
    
    
    
    176,901
    
    
    
    
    
    
    
    50,062
    
    
    
    50,062
    
    
    
    226,963Construction
    
    
    19,072
    
    
    
    2,044
    
    
    
    21,116
    
    
    
    28,005
    
    
    
    5,066
    
    
    
    33,071
    
    
    
    54,187Home equity loans and
lines of credit
    
    
    574
    
    
    
    29,170
    
    
    
    29,744
    
    
    
    194
    
    
    
    16,912
    
    
    
    17,106
    
    
    
    46,850Commercial business loans
    
    
    8,098
    
    
    
    14,768
    
    
    
    22,866
    
    
    
    27,946
    
    
    
    3,507
    
    
    
    31,453
    
    
    
    54,319Other consumer loans
    
    
    157
    
    
    
    134
    
    
    
    291
    
    
    
    1
    
    
    
    1,096
    
    
    
    1,097
    
    
    
    1,388Total
    
    $
    32,526
    
    
    $
    239,310
    
    
    $
    271,836
    
    
    $
    70,393
    
    
    $
    453,287
    
    
    $
    523,680
    
    
    $
    795,516
  7




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##### Table of Contents



Percentage of Total Loan PortfolioAt December 31, 2009(dollars in thousands)Percent
    
    
    
    
    
    
    PercentFixed
    
    
    of Total
    
    
    Adjustable
    
    
    of TotalRate
    
    
    Loans
    
    
    Rate
    
    
    Loans
    
    
    TotalReal estate loans:Commercial mortgage
    
    $
    20,763
    
    
    
    2.6
    %
    
    $
    391,712
    
    
    
    48.7
    %
    
    $
    412,475Residential mortgage
    
    
    201,490
    
    
    
    25.1
    %
    
    
    43,407
    
    
    
    5.4
    %
    
    
    244,897Construction
    
    
    18,078
    
    
    
    2.3
    %
    
    
    10,761
    
    
    
    1.3
    %
    
    
    28,839Home equity loans and lines of credit
    
    
    30,538
    
    
    
    3.8
    %
    
    
    22,268
    
    
    
    2.8
    %
    
    
    52,806Commercial business loans
    
    
    15,355
    
    
    
    1.9
    %
    
    
    47,330
    
    
    
    5.9
    %
    
    
    62,685Other consumer loans
    
    
    156
    
    
    
    
    
    
    
    1,128
    
    
    
    0.2
    %
    
    
    1,284Total
    
    $
    286,380
    
    
    
    35.7
    %
    
    $
    516,606
    
    
    
    64.3
    %
    
    $
    802,986
 Percentage of Total Loan PortfolioAt December 31, 2008(dollars in thousands)Percent
    
    
    
    
    
    
    PercentFixed
    
    
    of Total
    
    
    Adjustable
    
    
    of TotalRate
    
    
    Loans
    
    
    Rate
    
    
    Loans
    
    
    TotalReal estate loans:Commercial mortgage
    
    $
    20,918
    
    
    
    2.7
    %
    
    $
    390,891
    
    
    
    49.1
    %
    
    $
    411,809Residential mortgage
    
    
    176,901
    
    
    
    22.2
    %
    
    
    50,062
    
    
    
    6.3
    %
    
    
    226,963Construction
    
    
    21,116
    
    
    
    2.7
    %
    
    
    33,071
    
    
    
    4.1
    %
    
    
    54,187Home equity loans and
lines of credit
    
    
    29,744
    
    
    
    3.7
    %
    
    
    17,106
    
    
    
    2.2
    %
    
    
    46,850Commercial business loans
    
    
    22,866
    
    
    
    2.9
    %
    
    
    31,453
    
    
    
    3.9
    %
    
    
    54,319Other consumer loans
    
    
    291
    
    
    
    
    
    
    
    1,097
    
    
    
    0.2
    %
    
    
    1,388Total
    
    $
    271,836
    
    
    
    34.2
    %
    
    $
    523,680
    
    
    
    65.8
    %
    
    $
    795,516
   8




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##### Table of Contents



At December 31, 2009Fixed Rate(dollars in thousands)Percent
    
    
    Ten to
    
    
    Percent
    
    
    Over
    
    
    PercentWithin
    
    
    of Total
    
    
    Twenty
    
    
    of Total
    
    
    Twenty
    
    
    of TotalTen Years
    
    
    Loans
    
    
    Years
    
    
    Loans
    
    
    Years
    
    
    Loans
    
    
    TotalReal estate loans:Commercial mortgage
    
    $
    16,542
    
    
    
    2.1
    %
    
    $
    1,725
    
    
    
    0.2
    %
    
    $
    2,496
    
    
    
    0.3
    %
    
    $
    20,763Residential mortgage
    
    
    27,958
    
    
    
    3.5
    %
    
    
    74,436
    
    
    
    9.3
    %
    
    
    99,096
    
    
    
    12.3
    %
    
    
    201,490Construction
    
    
    7,272
    
    
    
    0.9
    %
    
    
    4,484
    
    
    
    0.6
    %
    
    
    6,322
    
    
    
    0.8
    %
    
    
    18,078Home equity loans and
lines of credit
    
    
    11,662
    
    
    
    1.5
    %
    
    
    17,501
    
    
    
    2.1
    %
    
    
    1,375
    
    
    
    0.3
    %
    
    
    30,538Commercial business loans
    
    
    14,026
    
    
    
    1.7
    %
    
    
    974
    
    
    
    0.1
    %
    
    
    355
    
    
    
    0.0
    %
    
    
    15,355Other consumer loans
    
    
    156
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    156Total loans
    
    $
    77,616
    
    
    
    9.7
    %
    
    $
    99,120
    
    
    
    12.3
    %
    
    $
    109,644
    
    
    
    13.7
    %
    
    $
    286,380
 At December 31, 2009Adjustable Rate(dollars in thousands)Percent
    
    
    Ten to
    
    
    Percent
    
    
    Over
    
    
    PercentWithin
    
    
    of Total
    
    
    Twenty
    
    
    of Total
    
    
    Twenty
    
    
    of TotalTen Years
    
    
    Loans
    
    
    Years
    
    
    Loans
    
    
    Years
    
    
    Loans
    
    
    TotalReal estate loans:Commercial mortgage
    
    $
    15,223
    
    
    
    1.8
    %
    
    $
    96,439
    
    
    
    12.0
    %
    
    $
    280,050
    
    
    
    34.9
    %
    
    $
    391,712Residential mortgage
    
    
    1,604
    
    
    
    0.2
    %
    
    
    1,279
    
    
    
    0.2
    %
    
    
    40,524
    
    
    
    5.0
    %
    
    
    43,407Construction
    
    
    10,682
    
    
    
    1.3
    %
    
    
    79
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    10,761Home equity loans and
lines of credit
    
    
    5,663
    
    
    
    0.7
    %
    
    
    16,605
    
    
    
    2.1
    %
    
    
    
    
    
    
    0.0
    %
    
    
    22,268Commercial business loans
    
    
    46,803
    
    
    
    5.9
    %
    
    
    65
    
    
    
    0.0
    %
    
    
    462
    
    
    
    0.1
    %
    
    
    47,330Other consumer loans
    
    
    20
    
    
    
    0.0
    %
    
    
    25
    
    
    
    0.0
    %
    
    
    1,083
    
    
    
    0.2
    %
    
    
    1,128Total loans
    
    $
    79,995
    
    
    
    9.9
    %
    
    $
    114,492
    
    
    
    14.3
    %
    
    $
    322,119
    
    
    
    40.2
    %
    
    $
    516,606
 At December 31, 2009Total Loans(dollars in thousands)Percent
    
    
    Ten to
    
    
    Percent
    
    
    Over
    
    
    PercentWithin
    
    
    of Total
    
    
    Twenty
    
    
    of Total
    
    
    Twenty
    
    
    of TotalTen Years
    
    
    Loans
    
    
    Years
    
    
    Loans
    
    
    Years
    
    
    Loans
    
    
    TotalReal estate loans:Commercial mortgage
    
    $
    31,765
    
    
    
    3.9
    %
    
    $
    98,164
    
    
    
    12.2
    %
    
    $
    282,546
    
    
    
    35.2
    %
    
    $
    412,475Residential mortgage
    
    
    29,562
    
    
    
    3.7
    %
    
    
    75,715
    
    
    
    9.4
    %
    
    
    139,620
    
    
    
    17.4
    %
    
    
    244,897Construction
    
    
    17,954
    
    
    
    2.2
    %
    
    
    4,563
    
    
    
    0.6
    %
    
    
    6,322
    
    
    
    0.8
    %
    
    
    28,839Home equity loans and
lines of credit
    
    
    17,325
    
    
    
    2.2
    %
    
    
    34,106
    
    
    
    4.2
    %
    
    
    1,375
    
    
    
    0.2
    %
    
    
    52,806Commercial business loans
    
    
    60,829
    
    
    
    7.6
    %
    
    
    1,039
    
    
    
    0.1
    %
    
    
    817
    
    
    
    0.1
    %
    
    
    62,685Other consumer loans
    
    
    176
    
    
    
    0.0
    %
    
    
    25
    
    
    
    0.0
    %
    
    
    1,083
    
    
    
    0.1
    %
    
    
    1,284Total loans
    
    $
    157,611
    
    
    
    19.6
    %
    
    $
    213,612
    
    
    
    26.6
    %
    
    $
    431,763
    
    
    
    53.8
    %
    
    $
    802,986
  9




---



##### Table of Contents



Commercial Loan Concentration  December 31, 2009
 Hotels, Motels and Bed & Breakfast (non-casino)
    
    
    20.2
    %Full Service Restaurants
    
    
    10.4
    %Real Estate and Rental and Leasing
    
    
    20.2
    %Construction/Land Development
    
    
    9.5
    %Retail Trade
    
    
    12.3
    %Arts, Entertainment and Recreation
    
    
    7.9
    %Health Care and Social Assistance
    
    
    6.4
    %Other Services (except Public Administration)
    
    
    5.5
    %Professional, Scientific and Technical Services
    
    
    2.5
    %Agriculture, Forestry, Fishing and Hunting
    
    
    2.1
    %Transportation and Warehousing
    
    
    1.6
    %Wholesale Trade
    
    
    1.4
    %100.0
    %
 Commercial Mortgage Loans .
 The Wall Street Journal
    10




---



##### Table of Contents



One-to-Four Family Residential Mortgage Loans .
      11




---



##### Table of Contents



At December 31,2009
    
    
    2008Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(dollars in thousands)Single Family Mortgage Loans
    
    $
    228,964
    
    
    
    93.5
    %
    
    $
    214,090
    
    
    
    94.3
    %Multi-Family Mortgage Loans
    
    
    15,933
    
    
    
    6.5
    %
    
    
    12,873
    
    
    
    5.7
    %Total
    
    $
    244,897
    
    
    
    100.0
    %
    
    $
    226,963
    
    
    
    100.0
    %
  At December 31,2009
    
    
    2008Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(dollars in thousands)Loan to Value greater than 80%
    
    $
    3,347
    
    
    
    1.4
    %
    
    $
    3,237
    
    
    
    1.4
    %Loan to Value less than 80%
    
    
    241,550
    
    
    
    98.6
    %
    
    
    223,726
    
    
    
    98.6
    %Total Residential Mortgage Loans
    
    $
    244,897
    
    
    
    100.0
    %
    
    $
    226,963
    
    
    
    100.0
    %
 (1)
    
    All loans with an original loan-to-value greater than 80% were single family loans for both periods presented.  12




---



##### Table of Contents



Commercial Business Loans.
    Construction Loans.
  Home Equity Loans and Lines of Credit. The Wall Street Journal
 Other Consumer Loans.
  13




---



##### Table of Contents



Loan Originations, Sales, Purchases and Participations
 Correspondent Lending Relationships.
 Loan Approval Procedures and Authority.
 Loans to One Borrower.
 Loan Commitments.
  14




---



##### Table of Contents



Non-Performing and Problem Assets
 th th
  Non-Performing Assets.
  15




---



##### Table of Contents



At December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(dollars in thousands)Non-accrual loans:Real estate loans:Commercial mortgage
    
    $
    25,132
    
    
    $
    12,117
    
    
    $
    3,887
    
    
    $
    3,381
    
    
    $
    2,420Residential mortgage
    
    
    2,081
    
    
    
    692
    
    
    
    
    
    
    
    48
    
    
    
    Construction
    
    
    1,298
    
    
    
    4,109
    
    
    
    
    
    
    
    
    
    
    
    Home equity and line of credit
    
    
    398
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial business loans
    
    
    3,085
    
    
    
    3,287
    
    
    
    54
    
    
    
    141
    
    
    
    124Other consumer loans
    
    
    
    
    
    
    92
    
    
    
    11
    
    
    
    16
    
    
    
    10Total non-accrual loans
    
    
    31,994
    
    
    
    20,297
    
    
    
    3,952
    
    
    
    3,586
    
    
    
    2,554Loans greater than 90 days delinquent
and still
accruing:Real estate loans:Commercial mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Residential mortgage
    
    
    1,170
    
    
    
    504
    
    
    
    39
    
    
    
    225
    
    
    
    265Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Home equity and line of credit
    
    
    84
    
    
    
    250
    
    
    
    16
    
    
    
    
    
    
    
    Commercial business loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other consumer loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total loans 90 days and still accruing
    
    
    1,254
    
    
    
    754
    
    
    
    55
    
    
    
    225
    
    
    
    265Total non-performing loans
    
    
    33,248
    
    
    
    21,051
    
    
    
    4,007
    
    
    
    3,811
    
    
    
    2,819Other real estate owned
    
    
    4,817
    
    
    
    798
    
    
    
    
    
    
    
    
    
    
    
    Total non-performing assets
    
    $
    38,065
    
    
    $
    21,849
    
    
    $
    4,007
    
    
    $
    3,811
    
    
    $
    2,819Ratios:Non-performing loans to total loans
    
    
    4.14
    %
    
    
    2.65
    %
    
    
    0.86
    %
    
    
    0.84
    %
    
    
    0.68
    %Non-performing assets to total assets
    
    
    3.55
    %
    
    
    2.00
    %
    
    
    0.63
    %
    
    
    0.62
    %
    
    
    0.49
    %
   16




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##### Table of Contents



Loans Delinquent For60-89 Days
    
    
    90 Days and Over
    
    
    TotalNumber
    
    
    Amount
    
    
    Number
    
    
    Amount
    
    
    Number
    
    
    Amount(dollars in thousands)At December 31, 2009Real estate loans:Commercial mortgage
    
    
    4
    
    
    $
    802
    
    
    
    48
    
    
    $
    20,592
    
    
    
    52
    
    
    $
    21,394Residential mortgage
    
    
    3
    
    
    
    1,551
    
    
    
    16
    
    
    
    3,251
    
    
    
    19
    
    
    
    4,802Construction
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    1,298
    
    
    
    4
    
    
    
    1,298Home equity loans and
lines of credit
    
    
    1
    
    
    
    50
    
    
    
    6
    
    
    
    482
    
    
    
    7
    
    
    
    532Commercial business loans
    
    
    3
    
    
    
    101
    
    
    
    12
    
    
    
    3,085
    
    
    
    15
    
    
    
    3,186Other consumer loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    11
    
    
    $
    2,504
    
    
    
    86
    
    
    $
    28,708
    
    
    
    97
    
    
    $
    31,212At 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
    
    
    $
    3,483
  17




---



##### Table of Contents



Other Real Estate Owned .
 Classification of Assets.
 Allowance for Loan Losses
    18




---



##### Table of Contents



At or For the Years ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(dollars in thousands)Balance at beginning of year
    
    $
    11,240
    
    
    $
    4,121
    
    
    $
    4,009
    
    
    $
    3,792
    
    
    $
    3,603Allowance from acquired entity
    
    
    
    
    
    
    3,791
    
    
    
    
    
    
    
    
    
    
    
    Charge-offs:Real estate loans:Commercial mortgage
    
    
    (8,043
    )
    
    
    (2,406
    )
    
    
    
    
    
    
    
    
    
    
    Residential mortgage
    
    
    (239
    )
    
    
    (572
    )
    
    
    
    
    
    
    
    
    
    
    Construction
    
    
    (2,378
    )
    
    
    (1,806
    )
    
    
    
    
    
    
    
    
    
    
    Commercial business loans
    
    
    (872
    )
    
    
    (786
    )
    
    
    (119
    )
    
    
    
    
    
    
    Other consumer loans
    
    
    (124
    )
    
    
    (138
    )
    
    
    (113
    )
    
    
    (128
    )
    
    
    (4
    )Total charge-offs
    
    
    (11,656
    )
    
    
    (5,708
    )
    
    
    (232
    )
    
    
    (128
    )
    
    
    (4
    )Recoveries:Real estate loans:Commercial mortgage
    
    
    406
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Construction
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial business loans
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other consumer loans
    
    
    30
    
    
    
    27
    
    
    
    43
    
    
    
    33
    
    
    
    Total recoveries
    
    
    568
    
    
    
    27
    
    
    
    43
    
    
    
    33
    
    
    
    Net (charge-offs) recoveries
    
    
    (11,088
    )
    
    
    (5,681
    )
    
    
    (189
    )
    
    
    (95
    )
    
    
    (4
    )Provision for loan losses
    
    
    13,159
    
    
    
    9,009
    
    
    
    357
    
    
    
    312
    
    
    
    193Reclassification to other liabilities for
reserve on off-balance sheet items
    
    
    
    
    
    
    
    
    
    
    (56
    )
    
    
    
    
    
    
    Balance at end of year
    
    $
    13,311
    
    
    $
    11,240
    
    
    $
    4,121
    
    
    $
    4,009
    
    
    $
    3,792Ratios:Net charge-offs to average loans
outstanding
    
    
    1.37
    %
    
    
    0.74
    %
    
    
    0.06
    %
    
    
    0.02
    %
    
    
    0.01
    %Allowance for loan losses to non-
performing loans at end of year
    
    
    40.04
    %
    
    
    53.39
    %
    
    
    102.85
    %
    
    
    105.20
    %
    
    
    134.52
    %Allowance for loan losses to total loans
at
end of year
    
    
    1.66
    %
    
    
    1.41
    %
    
    
    0.89
    %
    
    
    0.89
    %
    
    
    0.91
    %
  19




---



##### Table of Contents



Allocation of Allowance for Loan Losses.
 At December 31,2009
    
    
    2008
    
    
    2007Percent 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
    
    $
    9,571
    
    
    
    71.9
    %
    
    $
    6,829
    
    
    
    51.8
    %
    
    $
    2,381
    
    
    
    43.0
    %Residential
mortgage
    
    
    2,048
    
    
    
    15.4
    %
    
    
    1,696
    
    
    
    28.5
    
    
    
    978
    
    
    
    37.8Construction
    
    
    388
    
    
    
    2.9
    %
    
    
    1,477
    
    
    
    6.8
    
    
    
    336
    
    
    
    8.3Home equity
loans and lines
of credit
    
    
    771
    
    
    
    5.8
    %
    
    
    346
    
    
    
    5.9
    
    
    
    208
    
    
    
    8.0Commercial
business loans
    
    
    492
    
    
    
    3.7
    %
    
    
    809
    
    
    
    6.8
    
    
    
    97
    
    
    
    2.6Other consumer
loans
    
    
    41
    
    
    
    0.3
    %
    
    
    83
    
    
    
    0.2
    
    
    
    121
    
    
    
    0.3Total allocated
allowance
    
    
    13,311
    
    
    
    100.0
    %
    
    
    11,240
    
    
    
    100.0
    %
    
    
    4,121
    
    
    
    100.0
    %Unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    13,311
    
    
    
    
    
    
    $
    11,240
    
    
    
    
    
    
    $
    4,121
 At December 31,2006
    
    
    2005Percent 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
    
    $
    2,165
    
    
    
    40.6
    %
    
    $
    1,799
    
    
    
    37.9
    %Residential mortgage
    
    
    1,071
    
    
    
    40.7
    
    
    
    1,137
    
    
    
    43.2Construction
    
    
    370
    
    
    
    8.6
    
    
    
    399
    
    
    
    7.9Home equity loans and
lines of credit
    
    
    222
    
    
    
    8.2
    
    
    
    255
    
    
    
    8.8Commercial business loans
    
    
    79
    
    
    
    1.7
    
    
    
    200
    
    
    
    2.0Other consumer loans
    
    
    102
    
    
    
    0.2
    
    
    
    2
    
    
    
    0.2Total allocated allowance
    
    
    4,009
    
    
    
    100.0
    %
    
    
    3,792
    
    
    
    100.0
    %Unallocated
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    4,009
    
    
    
    
    
    
    $
    3,792
  20




---



##### Table of Contents



Investment Activities
    Municipal Securities.
 U.S. Government and Federal Agency Obligations.
 Mortgage-Backed Securities.
   21




---



##### Table of Contents



Collateralized
Mortgage Obligations. Securities Impairment Management Discussion and Analysis of Financial
Condition and Result of Operations
 Collateralized Debt Obligations. Note 3  Investment Securities
 of the Notes to  Consolidated Financial Statements
  22




---



##### Table of Contents



Investment Securities Portfolio.
 At December 31,2009
    
    
    2008
    
    
    2007Amortized
    
    
    
    
    
    
    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
    
    $
    46,004
    
    
    $
    45,972
    
    
    $
    31,296
    
    
    $
    31,766
    
    
    $
    15,992
    
    
    $
    16,211Corporate bonds
    
    
    10,851
    
    
    
    11,046
    
    
    
    4,975
    
    
    
    4,777
    
    
    
    6,914
    
    
    
    6,908Municipal bonds
    
    
    33,901
    
    
    
    34,381
    
    
    
    11,024
    
    
    
    10,715
    
    
    
    
    
    
    
    Collateralized debt obligations
    
    
    13,038
    
    
    
    1,456
    
    
    
    11,832
    
    
    
    3,033
    
    
    
    
    
    
    
    Equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    247
    
    
    
    172Mortgage-backed securities:GNMA pass-through certificates
    
    
    677
    
    
    
    693
    
    
    
    773
    
    
    
    763
    
    
    
    1,083
    
    
    
    1,092FHLMC pass-through certificates
    
    
    5,338
    
    
    
    5,513
    
    
    
    20,449
    
    
    
    20,771
    
    
    
    17,473
    
    
    
    17,612FNMA pass-through certificates
    
    
    26,612
    
    
    
    27,588
    
    
    
    33,465
    
    
    
    33,397
    
    
    
    19,949
    
    
    
    20,133Collateralized mortgage obligations
    
    
    26,514
    
    
    
    26,166
    
    
    
    10,017
    
    
    
    9,433
    
    
    
    
    
    
    
    Total securities available-for-sale
    
    $
    162,935
    
    
    $
    152,815
    
    
    $
    123,831
    
    
    $
    114,655
    
    
    $
    61,658
    
    
    $
    62,128
 At December 31,2009
    
    
    2008
    
    
    2007Amortized
    
    
    
    
    
    
    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
    
    
    $
    19,786U.S. Government and agency
obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    1,000Mortgage-backed securities:GNMA pass-through certificates
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    18
    
    
    
    30
    
    
    
    31FHLMC pass-through certificates
    
    
    
    
    
    
    
    
    
    
    2,670
    
    
    
    2,715
    
    
    
    3,780
    
    
    
    3,811FNMA pass-through certificates
    
    
    
    
    
    
    
    
    
    
    10,897
    
    
    
    11,203
    
    
    
    11,063
    
    
    
    11,138Collateralized mortgage obligations
    
    
    
    
    
    
    
    
    
    
    9,922
    
    
    
    10,111
    
    
    
    9,609
    
    
    
    9,661Grantor Trust (money market fund)
    
    
    
    
    
    
    
    
    
    
    737
    
    
    
    737
    
    
    
    
    
    
    
    Total securities held-to-maturity
    
    $
    
    
    
    $
    
    
    
    $
    48,825
    
    
    $
    49,938
    
    
    $
    45,140
    
    
    $
    45,427
   23




---



##### Table of Contents



Portfolio Maturities and Yields.
 One Year or Less
    
    
    More than One Year
    
    
    More than Five 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 available-for-sale:Debt securities:U.S. Government and agency obligations
    
    $
    4,000
    
    
    
    0.93
    %
    
    $
    42,004
    
    
    
    1.72
    %
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    46,004
    
    
    $
    45,972
    
    
    
    1.65
    %Corporate bonds
    
    
    3,042
    
    
    
    1.44
    %
    
    
    7,809
    
    
    
    3.33
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,851
    
    
    
    11,046
    
    
    
    2.80
    %Municipal bonds
    
    
    1,923
    
    
    
    3.59
    %
    
    
    9,893
    
    
    
    3.52
    %
    
    
    11,363
    
    
    
    3.73
    %
    
    
    10,722
    
    
    
    4.47
    %
    
    
    33,901
    
    
    
    34,381
    
    
    
    3.90
    %Collateralized debt obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,038
    
    
    
    3.33
    %
    
    
    13,038
    
    
    
    1,456
    
    
    
    3.33
    %Mortgage-backed securities:GNMA pass-through certificates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    223
    
    
    
    4.35
    %
    
    
    454
    
    
    
    3.65
    %
    
    
    677
    
    
    
    693
    
    
    
    3.88
    %FHLMC pass-through certificates
    
    
    723
    
    
    
    4.21
    %
    
    
    565
    
    
    
    5.26
    %
    
    
    7
    
    
    
    2.62
    %
    
    
    4,043
    
    
    
    4.17
    %
    
    
    5,338
    
    
    
    5,513
    
    
    
    4.29
    %FNMA pass-through certificates
    
    
    102
    
    
    
    3.35
    %
    
    
    2,902
    
    
    
    5.45
    %
    
    
    4,278
    
    
    
    4.93
    %
    
    
    19,330
    
    
    
    4.69
    %
    
    
    26,612
    
    
    
    27,588
    
    
    
    4.81
    %Collateralized mortgage obligations
    
    
    
    
    
    
    
    
    
    
    4,452
    
    
    
    3.39
    %
    
    
    7,656
    
    
    
    3.99
    %
    
    
    14,406
    
    
    
    4.33
    %
    
    
    26,514
    
    
    
    26,166
    
    
    
    4.08
    %Total securities available-for-sale
    
    $
    9,790
    
    
    
    1.88
    %
    
    $
    67,625
    
    
    
    2.47
    %
    
    $
    23,527
    
    
    
    4.04
    %
    
    $
    61,993
    
    
    
    4.24
    %
    
    $
    162,935
    
    
    $
    152,815
    
    
    
    3.33
    %
  24




---



##### Table of Contents



Deposit Activities and Other Sources of Funds
 General .
 Deposit Accounts . ®
    25




---



##### Table of Contents



For the year ended December 31,2009
    
    
    2008Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Percent
    
    
    Rate
    
    
    Balance
    
    
    Percent
    
    
    Rate(dollars in thousands)Non-interest bearing
    
    $
    68,364
    
    
    
    9.0
    %
    
    
    n/a
    
    
    $
    68,158
    
    
    
    9.4
    %
    
    
    n/aSavings accounts
    
    
    80,248
    
    
    
    10.6
    
    
    
    0.48
    %
    
    
    82,309
    
    
    
    11.3
    
    
    
    1.29
    %NOW and money market
    
    
    236,984
    
    
    
    31.3
    
    
    
    0.89
    %
    
    
    224,647
    
    
    
    30.8
    
    
    
    1.81
    %Certificates of deposit
    
    
    371,664
    
    
    
    49.1
    
    
    
    2.66
    %
    
    
    353,501
    
    
    
    48.5
    
    
    
    3.55
    %Total deposits
    
    $
    757,260
    
    
    
    100.0
    %
    
    
    1.64
    %
    
    $
    728,615
    
    
    
    100.0
    %
    
    
    2.43
    %
 For the year ended December 31,2007WeightedAverage
    
    
    
    
    
    
    AverageBalance
    
    
    Percent
    
    
    Rate(dollars in thousands)Non-interest bearing
    
    $
    45,039
    
    
    
    9.7
    %
    
    
    n/aSavings accounts
    
    
    79,160
    
    
    
    17.2
    
    
    
    1.63
    %NOW and money market
    
    
    161,353
    
    
    
    35.0
    
    
    
    2.63
    %Certificates of deposit
    
    
    175,924
    
    
    
    38.1
    
    
    
    4.56
    %Total deposits
    
    $
    461,476
    
    
    
    100.0
    %
    
    
    2.94
    %
  26




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##### Table of Contents



At December 31,2009
    
    
    2008
    
    
    2007(in thousands)Interest RateLess than 2.00%
    
    $
    162,486
    
    
    $
    22,382
    
    
    $
    112.00% - 2.99%
    
    
    113,358
    
    
    
    79,179
    
    
    
    513.00% - 3.99%
    
    
    23,881
    
    
    
    170,565
    
    
    
    12,8784.00% - 4.99%
    
    
    33,737
    
    
    
    74,656
    
    
    
    145,3125.00% - 5.99%
    
    
    3,449
    
    
    
    9,403
    
    
    
    17,3986.00% - 6.99%
    
    
    
    
    
    
    8
    
    
    
    8Total
    
    $
    336,911
    
    
    $
    356,193
    
    
    $
    175,658
  Period to Maturity at December 31, 2009Less Than
    
    
    More Than
    
    
    More Than
    
    
    More Than
    
    
    Moreor Equal
    
    
    One to Two
    
    
    Two to
    
    
    Three to
    
    
    Than Fourto a Year
    
    
    Years
    
    
    Three Years
    
    
    Four Years
    
    
    Years
    
    
    Total(in thousands)Interest RateLess than 2.00%
    
    $
    147,242
    
    
    $
    12,902
    
    
    $
    1,358
    
    
    $
    222
    
    
    $
    762
    
    
    $
    162,4862.00% - 2.99%
    
    
    106,923
    
    
    
    3,617
    
    
    
    2,048
    
    
    
    230
    
    
    
    540
    
    
    
    113,3583.00% - 3.99%
    
    
    14,350
    
    
    
    3,892
    
    
    
    1,057
    
    
    
    2,230
    
    
    
    2,352
    
    
    
    23,8814.00% - 4.99%
    
    
    10,490
    
    
    
    7,418
    
    
    
    7,850
    
    
    
    7,879
    
    
    
    100
    
    
    
    33,7375.00% - 5.99%
    
    
    721
    
    
    
    1,151
    
    
    
    1,577
    
    
    
    
    
    
    
    
    
    
    
    3,449Total
    
    $
    279,726
    
    
    $
    28,980
    
    
    $
    13,890
    
    
    $
    10,561
    
    
    $
    3,754
    
    
    $
    336,911
  At December 31, 2009(in thousands)MaturitiesThree months or less
    
    $
    80,132Over three months through six months
    
    
    15,965Over six months through one year
    
    
    23,009Over one year to three years
    
    
    11,567Over three years
    
    
    4,935Total
    
    $
    135,608
 Borrowings .
  27




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##### Table of Contents



2009FHLB
    
    
    RepurchaseBorrowings
    
    
    Agreements
    
    
    Total(dollars in thousands)Average daily balance during the year
    
    $
    153,582
    
    
    $
    37,674
    
    
    $
    191,256Average interest rate during the year
    
    
    3.27
    %
    
    
    4.30
    %
    
    
    3.47
    %Maximum month-end balance during the year
    
    $
    193,897
    
    
    $
    37,778
    
    
    $
    231,675Weighted average interest rate at year-end
    
    
    3.09
    %
    
    
    4.32
    %
    
    
    3.32
    %
 Personnel
  SUPERVISION AND REGULATION
 General
    28




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##### Table of Contents



New Jersey Banking Regulation
 Activity Powers.
  Loans to One Borrower Limitations.
 Dividends.
 Minimum Capital Requirements.
 Examination and Enforcement.
  29




---



##### Table of Contents



Federal Banking Regulation
  Capital Requirements.
  
    
    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.
    30




---



##### Table of Contents




    
    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.
   Activity Restrictions on State-Chartered Banks.
   Federal Home Loan Bank System.
 Enforcement.
  31




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##### Table of Contents



Prompt Corrective Action.
  
    
    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.
  32




---



##### Table of Contents



Insurance of Deposit Accounts.
    Temporary Liquidity Guarantee Program.
   33




---



##### Table of Contents



U.S. Treasurys Troubled Asset Relief Program Capital Purchase Program
 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.
  34




---



##### Table of Contents



New Jersey Regulation.
 The USA PATRIOT Act
  Sarbanes-Oxley Act of 2002
   35




---



##### Table of Contents



Holding Company Regulation
 General.
  i.e.
 Acquisition of Control.
  Qualified Thrift Lender Test.
  36




---



##### Table of Contents



Federal Securities Laws
    37




---



##### Table of Contents



ITEM 1A.
    
    RISK FACTORS
  The United
States Economy Was In a Significant Recession. A Prolonged Economic Downturn, Especially One Affecting
Our Geographic Market Area, Will Continue to  Materially Affect our Business and Financial Results.
   38




---



##### 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 .
   Continuing Weakness 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.
   39




---



##### Table of Contents



Lack of Consumer Confidence in Financial Institutions May Decrease Our Level of Deposits.
  Our Emphasis on Commercial Real Estate Loans and Commercial Business Loans May Continue to 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.
   40




---



##### 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.
   41




---



##### 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
   42




---



##### 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
   43




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##### Table of Contents



ITEM 4.
    
    RESERVED
 
 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.
     44




---



##### Table of Contents



2009
    
    
    2008High
    
    
    Low
    
    
    High
    
    
    LowFirst Quarter
    
    $
    9.13
    
    
    $
    6.70
    
    
    $
    10.07
    
    
    $
    9.52Second Quarter
    
    $
    9.00
    
    
    $
    6.60
    
    
    $
    10.06
    
    
    $
    9.36Third Quarter
    
    $
    8.95
    
    
    $
    7.25
    
    
    $
    9.93
    
    
    $
    8.91Fourth Quarter
    
    $
    7.28
    
    
    $
    5.79
    
    
    $
    9.25
    
    
    $
    7.71
    45




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##### Table of Contents



ITEM 6.
    
    SELECTED FINANCIAL DATA
  At December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(in thousands)Selected Financial Condition Data:Total assets
    
    $
    1,072,821
    
    
    $
    1,090,735
    
    
    $
    613,811
    
    
    $
    609,764
    
    
    $
    574,524Cash and cash equivalents
    
    
    13,513
    
    
    
    22,501
    
    
    
    15,631
    
    
    
    17,492
    
    
    
    29,974Investment securities available for
sale, at fair value
    
    
    152,815
    
    
    
    114,655
    
    
    
    62,128
    
    
    
    62,484
    
    
    
    70,330Investment securities held to maturity
    
    
    
    
    
    
    48,825
    
    
    
    45,140
    
    
    
    38,731
    
    
    
    25,634Loans held for sale
    
    
    398
    
    
    
    
    
    
    
    350
    
    
    
    766
    
    
    
    Loans, net
    
    
    789,473
    
    
    
    783,869
    
    
    
    459,936
    
    
    
    446,378
    
    
    
    410,032Federal Home Loan Bank of New York
stock, at cost
    
    
    10,275
    
    
    
    11,602
    
    
    
    3,848
    
    
    
    5,268
    
    
    
    4,109Bank owned life insurance
    
    
    27,210
    
    
    
    26,446
    
    
    
    15,421
    
    
    
    14,503
    
    
    
    13,998Deposits
    
    
    736,587
    
    
    
    711,130
    
    
    
    465,648
    
    
    
    435,829
    
    
    
    432,385Borrowings
    
    
    203,981
    
    
    
    234,484
    
    
    
    65,000
    
    
    
    99,000
    
    
    
    73,530Total stockholders equity
    
    
    126,548
    
    
    
    140,725
    
    
    
    72,829
    
    
    
    68,943
    
    
    
    63,481
 Years ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(in thousands)Selected Operating Data:Interest income
    
    $
    54,533
    
    
    $
    58,127
    
    
    $
    36,629
    
    
    $
    34,357
    
    
    $
    28,564Interest expense
    
    
    19,028
    
    
    
    24,253
    
    
    
    17,146
    
    
    
    14,875
    
    
    
    9,691Net interest income
    
    
    35,505
    
    
    
    33,874
    
    
    
    19,483
    
    
    
    19,482
    
    
    
    18,873Provision for loan losses
    
    
    13,159
    
    
    
    9,009
    
    
    
    357
    
    
    
    312
    
    
    
    193Net interest income after provision
for loan losses
    
    
    22,346
    
    
    
    24,865
    
    
    
    19,126
    
    
    
    19,170
    
    
    
    18,680Non-interest income
    
    
    932
    
    
    
    (10,793
    )
    
    
    3,992
    
    
    
    4,438
    
    
    
    3,581Non-interest expense
    
    
    29,168
    
    
    
    64,717
    
    
    
    18,391
    
    
    
    16,379
    
    
    
    15,517Income (loss) before income tax expense
    
    
    (5,890
    )
    
    
    (50,645
    )
    
    
    4,727
    
    
    
    7,229
    
    
    
    6,744Income tax expense (benefit)
    
    
    12,011
    
    
    
    (8,154
    )
    
    
    1,299
    
    
    
    2,228
    
    
    
    2,320Net income (loss)
    
    $
    (17,901
    )
    
    $
    (42,491
    )
    
    $
    3,428
    
    
    $
    5,001
    
    
    $
    4,424
  46




---



##### Table of Contents



At or for the years ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Selected Financial Ratios and Other Data:Performance Ratios:Return on assets (ratio of net income to average total assets)
    
    
    (1.64
    %)
    
    
    (3.86
    %)
    
    
    0.56
    %
    
    
    0.84
    %
    
    
    0.80
    %Return on equity (ratio of net income to average equity)
    
    
    (12.89
    %)
    
    
    (24.47
    %)
    
    
    4.81
    %
    
    
    7.58
    %
    
    
    7.20
    %Earnings (loss) per share
    
    $
    (1.45
    )
    
    $
    (3.49
    )
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aAverage interest rate spread (1)
    
    
    3.27
    %
    
    
    3.14
    %
    
    
    3.02
    %
    
    
    3.14
    %
    
    
    3.48
    %Net interest margin (2)
    
    
    3.54
    %
    
    
    3.48
    %
    
    
    3.50
    %
    
    
    3.56
    %
    
    
    3.77
    %Efficiency ratio (3)
    
    
    69.19
    %
    
    
    167.31
    %
    
    
    78.34
    %
    
    
    68.47
    %
    
    
    69.11
    %Non-interest expense to average total assets
    
    
    2.67
    %
    
    
    5.87
    %
    
    
    2.99
    %
    
    
    2.74
    %
    
    
    2.81
    %Average interest-earning assets to average interest-bearing
liabilities
    
    
    114.11
    %
    
    
    113.67
    %
    
    
    115.76
    %
    
    
    115.73
    %
    
    
    115.04
    %Asset Quality Ratios:Non-performing assets to total assets
    
    
    3.55
    %
    
    
    1.93
    %
    
    
    0.63
    %
    
    
    0.62
    %
    
    
    0.49
    %Non-performing loans to total loans
    
    
    4.14
    %
    
    
    2.65
    %
    
    
    0.86
    %
    
    
    0.84
    %
    
    
    0.68
    %Allowance for loan losses to non-performing loans
    
    
    40.04
    %
    
    
    53.39
    %
    
    
    102.85
    %
    
    
    105.20
    %
    
    
    134.52
    %Allowance for loan losses to total loans
    
    
    1.66
    %
    
    
    1.41
    %
    
    
    0.89
    %
    
    
    0.89
    %
    
    
    0.91
    %Capital Ratios:Total capital (to risk-weighted assets)
    
    
    12.71
    %
    
    
    14.25
    %
    
    
    17.33
    %
    
    
    17.59
    %
    
    
    17.54
    %Tier I capital (to risk-weighted assets)
    
    
    11.45
    %
    
    
    13.00
    %
    
    
    16.34
    %
    
    
    16.59
    %
    
    
    16.53
    %Tier I capial (to average assets)
    
    
    9.37
    %
    
    
    9.87
    %
    
    
    11.11
    %
    
    
    11.00
    %
    
    
    10.89
    %Equity to assets
    
    
    11.80
    %
    
    
    12.90
    %
    
    
    11.49
    %
    
    
    11.31
    %
    
    
    11.05
    %Other Data:Number of full service offices
    
    
    18
    
    
    
    18
    
    
    
    13
    
    
    
    13
    
    
    
    13Full time equivalent employees
    
    
    201
    
    
    
    202
    
    
    
    133
    
    
    
    132
    
    
    
    132
 (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 2008 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%  47




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##### Table of Contents



ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 Overview
    1)
    
    Managing our credit underwriting and administration through the economic
recovery.
 2)
    
    Managing non-performing assets to performing status or disposal.
 3)
    
    Managing net interest income in a potentially rising rate environment.
 Managing our credit underwriting and administration through the economic recovery:
    Managing non-performing assets to performing status or disposal:
   48




---



##### Table of Contents



Managing net interest income in a potentially rising rate environment:
  2010 Outlook
      49




---



##### Table of Contents



Income .
     Allowance for Loan Losses .
  50




---



##### Table of Contents



Expenses.
   Anticipated Increase in Non-Interest Expense
   51




---



##### Table of Contents




    
    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, 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
 Note 2 of the Notes to Consolidated
Financial Statements.
  Allowance for Loan Losses.
  52




---



##### Table of Contents



See Note 2  Summary of Significant
Accounting Policies of the Notes to Consolidated Financial Statements.
 Securities Impairment .
   53




---



##### Table of Contents



Income
Taxes
   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 commercial lending in our primary market area and
expanding our existing commercial loan relationships .
 (1)
    
    our primary market area has historically experienced sustained
commercial development driven by the gaming industry and the seashore resort
communities;
 (2)
    
    we believe commercial relationships bring value to both the asset and
liability side of our balance sheet via loans and deposits;
 (3)
    
    we have attracted and retained local commercial loan officers who have
a sound understanding of our market area and long-standing relationships with
borrowers; and
 (4)
    
    commercial lending provides more flexibility than residential lending
in structuring the terms of the loan, including yield and maturity.
  (1)
    
    the yields available on commercial real estate loans are generally
greater than those available on single family residential mortgage loans and
commercial loans generate more significant banking relationships than single family
mortgage loans;
 (2)
    
    our credit concentrations are well dispersed, managed through
monitoring, and limited in exposure to any one sector; and
 (3)
    
    the key economic forces in our market area, casinos and the seashore
resort communities, are sufficiently diverse to limit economic decline across all
sectors of our commercial loan portfolio.
  54




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Use
prudent underwriting standards to maintain a high quality  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.
 Increasing our non-interest income through a broader range of products and services.
  Comparison of Financial Condition at December 31, 2009 and December 31, 2008
      55




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56




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57




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Comparison of Operating Results for the Years Ended December 31, 2009 and 2008
 General.
  58




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Interest Income .
  Interest Expense.
    59




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Net
Interest Income.
 Provision for Loan Losses.
       60




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Non-Interest Income.
 Non-Interest Expense .
 Income Tax Expense.
 Comparison of Operating Results for the Years Ended December 31, 2008 and 2007
 General.
 Interest Income .
   61




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Interest Expense.
   Net Interest Income.
 Provision for Loan Losses.
  62




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Non-Interest Income.
 Non-Interest Expense .
 Income Tax Expense.
  63




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##### Table of Contents



For the Years Ended December 31,2009
    
    
    2008
    
    
    2007Interest
    
    
    
    
    
    
    
    
    
    
    Interest
    
    
    
    
    
    
    
    
    
    
    InterestAverage
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    AverageBalance
    
    
    Expense
    
    
    Yield
    
    
    Balance
    
    
    Expense
    
    
    Yield
    
    
    Balance
    
    
    Expense
    
    
    Yield(dollars in thousands)AssetsInterest-earning
deposits
    
    $
    13,212
    
    
    $
    230
    
    
    
    1.74
    %
    
    $
    10,024
    
    
    $
    275
    
    
    
    2.74
    %
    
    $
    3,950
    
    
    $
    187
    
    
    
    4.73
    %Investments
    
    
    184,578
    
    
    
    7,742
    
    
    
    4.19
    %
    
    
    193,921
    
    
    
    9,854
    
    
    
    5.08
    %
    
    
    110,152
    
    
    
    5,327
    
    
    
    4.84
    %Loans
    
    
    806,586
    
    
    
    46,561
    
    
    
    5.77
    %
    
    
    768,458
    
    
    
    47,998
    
    
    
    6.25
    %
    
    
    455,222
    
    
    
    31,115
    
    
    
    6.84
    %Total interest-
earning assets
    
    
    1,004,376
    
    
    
    54,533
    
    
    
    5.43
    %
    
    
    972,403
    
    
    
    58,127
    
    
    
    5.98
    %
    
    
    569,324
    
    
    
    36,629
    
    
    
    6.43
    %Noninterest-earning
assets
    
    
    101,894
    
    
    
    
    
    
    
    
    
    
    
    138,464
    
    
    
    
    
    
    
    
    
    
    
    50,457Allowance for loan
losses
    
    
    (12,268
    )
    
    
    
    
    
    
    
    
    
    
    (8,955
    )
    
    
    
    
    
    
    
    
    
    
    (3,985
    )Total assets
    
    $
    1,094,002
    
    
    
    
    
    
    
    
    
    
    $
    1,101,912
    
    
    
    
    
    
    
    
    
    
    $
    615,796Liabilities and
Stockholders
EquityInterest-bearing
demand accounts
    
    $
    108,665
    
    
    
    414
    
    
    
    0.38
    %
    
    $
    106,826
    
    
    
    1,030
    
    
    
    0.96
    %
    
    $
    76,310
    
    
    
    1,043
    
    
    
    1.37
    %Savings accounts
    
    
    80,248
    
    
    
    385
    
    
    
    0.48
    %
    
    
    82,309
    
    
    
    1,062
    
    
    
    1.29
    %
    
    
    79,161
    
    
    
    1,290
    
    
    
    1.63
    %Money market
accounts
    
    
    128,319
    
    
    
    1,705
    
    
    
    1.33
    %
    
    
    117,821
    
    
    
    3,029
    
    
    
    2.57
    %
    
    
    84,020
    
    
    
    3,194
    
    
    
    3.80
    %Certificates of
deposit
    
    
    371,664
    
    
    
    9,886
    
    
    
    2.66
    %
    
    
    353,501
    
    
    
    12,562
    
    
    
    3.55
    %
    
    
    175,924
    
    
    
    8,029
    
    
    
    4.56
    %Borrowings
    
    
    191,256
    
    
    
    6,638
    
    
    
    3.47
    %
    
    
    193,203
    
    
    
    6,570
    
    
    
    3.40
    %
    
    
    75,359
    
    
    
    3,590
    
    
    
    4.76
    %Total interest-
bearing liabilities
    
    
    880,152
    
    
    
    19,028
    
    
    
    2.16
    %
    
    
    853,660
    
    
    
    24,253
    
    
    
    2.84
    %
    
    
    490,774
    
    
    
    17,146
    
    
    
    3.49
    %Noninterest-bearing
deposits
    
    
    68,364
    
    
    
    
    
    
    
    
    
    
    
    68,158
    
    
    
    
    
    
    
    
    
    
    
    46,061Other liabilities
    
    
    6,603
    
    
    
    
    
    
    
    
    
    
    
    6,417
    
    
    
    
    
    
    
    
    
    
    
    7,628Total liabilities
    
    
    955,119
    
    
    
    
    
    
    
    
    
    
    
    928,235
    
    
    
    
    
    
    
    
    
    
    
    544,463Stockholders equity
    
    
    138,883
    
    
    
    
    
    
    
    
    
    
    
    173,677
    
    
    
    
    
    
    
    
    
    
    
    71,333Total liabilities &
stockholders
equity
    
    $
    1,094,002
    
    
    
    
    
    
    
    
    
    
    $
    1,101,912
    
    
    
    
    
    
    
    
    
    
    $
    615,796Net interest income
    
    
    
    
    
    $
    35,505
    
    
    
    
    
    
    
    
    
    
    $
    33,874
    
    
    
    
    
    
    
    
    
    
    $
    19,483Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.27
    %
    
    
    
    
    
    
    
    
    
    
    3.14
    %
    
    
    
    
    
    
    
    
    
    
    2.94
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.54
    %
    
    
    
    
    
    
    
    
    
    
    3.48
    %
    
    
    
    
    
    
    
    
    
    
    3.42
    %Net interest income
and margin (tax
equivalent basis)
(1)
    
    
    
    
    
    $
    36,155
    
    
    
    3.60
    %
    
    
    
    
    
    $
    34,441
    
    
    
    3.54
    %
    
    
    
    
    
    $
    19,736
    
    
    
    3.47
    %Ratio of average
interest-earning
assets to average
interest-bearing
liabilities
    
    
    114.11
    %
    
    
    
    
    
    
    
    
    
    
    113.91
    %
    
    
    
    
    
    
    
    
    
    
    116.01
    %
 (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 35%, and has the effect of increasing interest income by $650,000, $587,000 and $263,000 for the
years ended December 31, 2009, 2008 and 2007 respectively. The average yield on investments
increased to 4.55% from 4.19% for the year ended December 31, 2009, increased to 5.52% from 5.08%
for the year ended December 31, 2008, and increased to 5.09% from 4.84% for the year ended December
31, 2007.  64




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Rate/Volume Analysis
  For the Year Ended December 31, 2009
    
    
    For the Year Ended December 31, 2008Compared to December 31, 2008
    
    
    Compared to December 31, 2007Increase (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
    
    $
    73
    
    
    $
    (118
    )
    
    $
    (45
    )
    
    $
    168
    
    
    $
    (80
    )
    
    $
    88Investments
    
    
    (487
    )
    
    
    (1,625
    )
    
    
    (2,112
    )
    
    
    4,267
    
    
    
    260
    
    
    
    4,527Loans
    
    
    2,256
    
    
    
    (3,693
    )
    
    
    (1,437
    )
    
    
    19,663
    
    
    
    (2,780
    )
    
    
    16,883Total interest
income
    
    
    1,842
    
    
    
    (5,436
    )
    
    
    (3,594
    )
    
    
    24,098
    
    
    
    (2,600
    )
    
    
    21,498Interest-Bearing
LiabilitiesInterest-bearing
demand accounts
    
    
    18
    
    
    
    (634
    )
    
    
    (616
    )
    
    
    226
    
    
    
    (239
    )
    
    
    (13
    )Savings accounts
    
    
    (26
    )
    
    
    (651
    )
    
    
    (677
    )
    
    
    41
    
    
    
    (269
    )
    
    
    (228
    )Money market
accounts
    
    
    248
    
    
    
    (1,572
    )
    
    
    (1,324
    )
    
    
    824
    
    
    
    (989
    )
    
    
    (165
    )Certificates of
deposit
    
    
    612
    
    
    
    (3,288
    )
    
    
    (2,676
    )
    
    
    6,342
    
    
    
    (1,809
    )
    
    
    4,533Borrowings
    
    
    (72
    )
    
    
    140
    
    
    
    68
    
    
    
    4,018
    
    
    
    (1,038
    )
    
    
    2,980Total interest
expense
    
    
    780
    
    
    
    (6,005
    )
    
    
    (5,225
    )
    
    
    11,451
    
    
    
    (4,344
    )
    
    
    7,107Total net interest
income
    
    $
    1,062
    
    
    $
    569
    
    
    $
    1,631
    
    
    $
    12,647
    
    
    $
    1,744
    
    
    $
    14,391
 Management of Market Risk
 General
  65




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
    
    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;
    
    obtaining general financing through lower cost deposits and advances from the
Federal Home Loan Bank; and
    
    lengthening the terms of borrowings and deposits
  Net Portfolio Value Analysis .
 Net Interest Income Analysis.
  66




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Net Portfolio Value
    
    
    Net Interest IncomeChanges in
    
    
    
    
    
    Increase (decrease) in
    
    
    
    
    
    
    Increase (decrease) in EstimatedInterest Rates
    
    Estimated NPV
    
    
    Estimated NPV
    
    
    Estimated Net
    
    
    Net Interest Income(basis points)(1)
    
    (2)
    
    
    Amount
    
    
    Percent
    
    
    Interest Income
    
    
    Amount
    
    
    Percent(dollars in thousands)+200
    
    $
    147,578
    
    
    $
    (19,604
    )
    
    
    -11.73
    %
    
    $
    34,402
    
    
    $
    (3,493
    )
    
    
    -9.22
    %+100
    
    $
    157,577
    
    
    $
    (9,605
    )
    
    
    -5.75
    %
    
    $
    36,210
    
    
    $
    (1,685
    )
    
    
    -4.45
    %0
    
    $
    167,182
    
    
    
    
    
    
    
    
    
    
    $
    37,895-100
    
    $
    165,746
    
    
    $
    (1,436
    )
    
    
    -0.86
    %
    
    $
    38,884
    
    
    $
    989
    
    
    
    2.61
    %-200
    
    $
    157,901
    
    
    $
    (9,281
    )
    
    
    -5.55
    %
    
    $
    37,987
    
    
    $
    92
    
    
    
    0.24
    %
 (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.   Liquidity and Capital Resources
   67




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Note 15 
Regulatory Matters of the Notes to Consolidated Financial Statements.
  68




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Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
 Commitments. Note 12  Financial Instruments with Off-Balance
Sheet Risk and Concentration of Credit Risk of the Notes to  Consolidated Financial Statements.
 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
    
    $
    59,950
    
    
    $
    50,000
    
    
    $
    45,000
    
    
    $
    49,031
    
    
    $
    203,981Operating leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capitalized leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Certificates of deposit
    
    
    279,726
    
    
    
    42,870
    
    
    
    14,315
    
    
    
    
    
    
    
    336,911Other long-term liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    339,676
    
    
    $
    92,870
    
    
    $
    59,315
    
    
    $
    49,031
    
    
    $
    540,892Commitments to extend
credit
    
    $
    85,592
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    85,592
  69




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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
 (a)
    
    Evaluation of Disclosure Controls and Procedures
  (b)
    
    Changes in internal controls
  (c)
    
    Management report on internal control over financial reporting
    70




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ITEM 9B.
    
    OTHER INFORMATION
  
 PART III
 
 ITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  
 ITEM 11.
    
    EXECUTIVE COMPENSATION
  
 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
   71




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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, 2009 and 2008(C)
    
    Consolidated Statements of Income for the years ended December
31, 2009, 2008 and 2007(D)
    
    Consolidated Statements of Changes in Equity for the years
ended December 31, 2009, 2008 and 2007(E)
    
    Consolidated Statements of Cash Flows for the years ended
December 31, 2009, 2008 and 2007(F)
    
    Notes to Consolidated Financial Statements.
 (a)(2)
    
    Financial Statement Schedules
  (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)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
    
    
    Form of Director Retirement Plan (1)10.8
    
    
    Benefit Equalization Plan (1)10.9
    
    
    2008 Equity Incentive Plan (3)14
    
    
    Code of Ethics (4)21
    
    
    Subsidiaries of Registrant23.1
    
    
    Consent of KPMG LLP23.2
    
    
    Consent of Crowe Horwath LLP31.1
    
    
    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.  72




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SIGNATURES
  CAPE BANCORP, INC.Date: March 16, 2010
    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, 2010/s/ Guy Hackney

Guy Hackney
    
    Chief Financial Officer
(Principal Financial and
Accounting Officer)
    
    March 16, 2010/s/ James J. Lynch

James J. Lynch
    
    Director
    
    March 16, 2010/s/ Agostino R. Fabietti

Agostino R. Fabietti
    
    Director
    
    March 16, 2010/s/ Robert F. Garrett, III

Robert F. Garrett, III
    
    Director
    
    March 16, 2010/s/ Frank J. Glaser

Frank J. Glaser
    
    Director
    
    March 16, 2010/s/ Louis H Griesbach, Jr.

Louis H. Griesbach, Jr.
    
    Director
    
    March 16, 2010/s/ David C. Ingersoll, Jr.

David C. Ingersoll, Jr.
    
    Director
    
    March 16, 2010/s/ Joanne D. Kay

Joanne D. Kay
    
    Director
    
    March 16, 2010/s/ Matthew J. Reynolds

Matthew J. Reynolds
    
    Director
    
    March 16, 2010/s/ Thomas K. Ritter

Thomas K. Ritter
    
    Director
    
    March 16, 2010
  73




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Financial StatementsConsolidated Balance Sheets as of December 31, 2009 and 2008
    
    
    F-5Consolidated Statements of Income for the years ended December 31, 2009, 2008 and 2007
    
    
    F-6Consolidated Statements of Changes in Equity for the years ended December 31, 2009, 2008 and 2007
    
    
    F-7Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007
    
    
    F-8Notes to Consolidated Financial Statements
    
    
    F-9
   74




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Report of Independent Registered Public Accounting Firm
 
 Internal
Control  Integrated Framework
    Internal Control 
Integrated Framework
   F-1




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F-2




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Report of Independent Registered Public Accounting Firm
 
    Investments  Debt and Equity Securities),
 Internal Control  Integrated Framework .
 
 
  F-3




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F-4




---



##### Table of Contents



December 31,2009
    
    
    2008(in thousands)ASSETSCash & due from financial institutions
    
    $
    9,573
    
    
    $
    10,117Interest-bearing
bank balances
    
    
    3,940
    
    
    
    12,384Cash and cash equivalents
    
    
    13,513
    
    
    
    22,501Interest-bearing time deposits
    
    
    7,451
    
    
    
    5,534Investment securities available for sale, at fair value (amortized
cost of $162,935 and $123,831 respectively)
    
    
    152,815
    
    
    
    114,655Investment securities held to maturity (fair value of $0 and $49,938
respectively)
    
    
    
    
    
    
    48,825Loans held for sale
    
    
    398
    
    
    
    Loans, net of allowance of $13,311 and $11,240 respectively
    
    
    789,473
    
    
    
    783,869Accrued interest receivable
    
    
    4,630
    
    
    
    4,736Premises and equipment, net
    
    
    26,383
    
    
    
    27,342Other real estate owned
    
    
    4,817
    
    
    
    798Federal Home Loan Bank (FHLB) stock, at cost
    
    
    10,275
    
    
    
    11,602Prepaid FDIC insurance premium
    
    
    4,377
    
    
    
    Deferred income taxes
    
    
    3,956
    
    
    
    17,247Bank owned life insurance (BOLI)
    
    
    27,210
    
    
    
    26,446Goodwill
    
    
    22,575
    
    
    
    22,575Intangible assets, net
    
    
    585
    
    
    
    786Assets held for sale
    
    
    1,828
    
    
    
    2,026Other assets
    
    
    2,535
    
    
    
    1,793Total assets
    
    $
    1,072,821
    
    
    $
    1,090,735LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesDepositsNoninterest-bearing deposits
    
    $
    62,365
    
    
    $
    63,258Interest-bearing deposits
    
    
    674,222
    
    
    
    647,872Borrowings
    
    
    203,981
    
    
    
    234,484Advances from borrowers for taxes and insurance
    
    
    542
    
    
    
    585Accrued interest payable
    
    
    807
    
    
    
    778Other liabilities
    
    
    4,356
    
    
    
    3,033Total liabilities
    
    
    946,273
    
    
    
    950,010Stockholders EquityCommon stock, $.01 par value: authorized 100,000,000 shares;
issued and outstanding 13,313,521 shares
    
    
    133
    
    
    
    133Additional paid-in capital
    
    
    126,695
    
    
    
    126,801Unearned ESOP shares
    
    
    (9,806
    )
    
    
    (10,232
    )Accumulated other comprehensive loss, net
    
    
    (6,645
    )
    
    
    (6,022
    )Retained earnings
    
    
    16,171
    
    
    
    30,045Total stockholders equity
    
    
    126,548
    
    
    
    140,725Total liabilities & stockholders equity
    
    $
    1,072,821
    
    
    $
    1,090,735
   F-5




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##### Table of Contents



Years ended December 31,2009
    
    
    2008
    
    
    2007(dollars in thousands, except share data)Interest income:Interest on loans
    
    $
    46,561
    
    
    $
    47,998
    
    
    $
    31,114Interest and dividends on investmentsTaxable
    
    
    2,961
    
    
    
    4,811
    
    
    
    2,123Tax-exempt
    
    
    1,359
    
    
    
    1,290
    
    
    
    610Interest on mortgage-backed securities
    
    
    3,652
    
    
    
    4,028
    
    
    
    2,782Total interest income
    
    
    54,533
    
    
    
    58,127
    
    
    
    36,629Interest expense:Interest on deposits
    
    
    12,390
    
    
    
    17,683
    
    
    
    13,556Interest on borrowings
    
    
    6,638
    
    
    
    6,570
    
    
    
    3,590Total interest expense
    
    
    19,028
    
    
    
    24,253
    
    
    
    17,146Net interest income before provision for loan losses
    
    
    35,505
    
    
    
    33,874
    
    
    
    19,483Provision for loan losses
    
    
    13,159
    
    
    
    9,009
    
    
    
    357Net interest income after provision for loan losses
    
    
    22,346
    
    
    
    24,865
    
    
    
    19,126Non-interest income:Service fees
    
    
    3,011
    
    
    
    3,202
    
    
    
    2,449Net gains on sale of loans
    
    
    130
    
    
    
    36
    
    
    
    299Net income from BOLI
    
    
    1,041
    
    
    
    1,005
    
    
    
    593Net rental income
    
    
    318
    
    
    
    342
    
    
    
    348Gain on sales of investment securities
available for sale, net
    
    
    1,195
    
    
    
    40
    
    
    
    Loss on disposal of other assets
    
    
    (7
    )
    
    
    (158
    )
    
    
    (7
    )Other
    
    
    377
    
    
    
    380
    
    
    
    310Gross other-than-temporary impairment losses
    
    
    (7,538
    )
    
    
    (15,640
    )
    
    
    Less: Portion of loss recognized in other
comprehensive income
    
    
    2,405
    
    
    
    
    
    
    
    Net other-than-temporary impairment losses
    
    
    (5,133
    )
    
    
    (15,640
    )
    
    
    Total non-interest income (expense)
    
    
    932
    
    
    
    (10,793
    )
    
    
    3,992Non-interest expense:Salaries and employee benefits
    
    
    14,950
    
    
    
    14,351
    
    
    
    11,108Occupancy and equipment
    
    
    3,480
    
    
    
    3,618
    
    
    
    1,949Federal insurance premiums
    
    
    1,729
    
    
    
    525
    
    
    
    53Data processing
    
    
    1,246
    
    
    
    1,370
    
    
    
    933Charitable Foundation contribution
    
    
    
    
    
    
    6,256
    
    
    
    Loan related expenses
    
    
    1,766
    
    
    
    280
    
    
    
    73Advertising
    
    
    358
    
    
    
    577
    
    
    
    473Telecommunications
    
    
    852
    
    
    
    870
    
    
    
    548Professional services
    
    
    816
    
    
    
    988
    
    
    
    235Goodwill impairment
    
    
    
    
    
    
    31,751
    
    
    
    OREO expenses
    
    
    628
    
    
    
    4
    
    
    
    Other operating
    
    
    3,343
    
    
    
    4,127
    
    
    
    3,019Total non-interest expense
    
    
    29,168
    
    
    
    64,717
    
    
    
    18,391Income (loss) before income taxes
    
    
    (5,890
    )
    
    
    (50,645
    )
    
    
    4,727Income tax expense (benefit)
    
    
    12,011
    
    
    
    (8,154
    )
    
    
    1,299Net income (loss)
    
    $
    (17,901
    )
    
    $
    (42,491
    )
    
    $
    3,428Earnings (loss) per share (see Note 16):Basic
    
    $
    (1.45
    )
    
    $
    (3.49
    )
    
    
    n/aDiluted
    
    $
    (1.45
    )
    
    $
    (3.49
    )
    
    
    n/aWeighted average number of shares outstanding:Basic
    
    
    12,312,714
    
    
    
    12,280,494
    
    
    
    n/aDiluted
    
    
    12,312,714
    
    
    
    12,280,494
    
    
    
    n/a
   F-6




---



##### Table of Contents



AccumulatedUnearned
    
    
    
    
    
    
    Other
    
    
    TotalCommon
    
    
    Paid-In
    
    
    ESOP
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Capital
    
    
    Shares
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Equity(in thousands)Balance, 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 loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42,491
    )
    
    
    
    
    
    
    (42,491
    )Net unrealized losses, net of
reclassification adjustments and taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,315
    )
    
    
    (6,315
    )Total comprehensive 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
    )
    
    
    140,725Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,901
    )
    
    
    
    
    
    
    (17,901
    )Net unrealized gains, net of
reclassification adjustments and taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,404
    
    
    
    3,404Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,497
    )Cumulative effect adjustment to reclassify
non-credit component of
previously recorded
other-than-temporary impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,027
    
    
    
    (4,027
    )
    
    
    ESOP shares earned
    
    
    
    
    
    
    (106
    )
    
    
    426
    
    
    
    
    
    
    
    
    
    
    
    320Balance, December 31, 2009
    
    $
    133
    
    
    $
    126,695
    
    
    $
    (9,806
    )
    
    $
    16,171
    
    
    $
    (6,645
    )
    
    $
    126,548
   F-7




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##### Table of Contents



Years ended December 31,2009
    
    
    2008
    
    
    2007(in thousands)Cash flows from operating activitiesNet income (loss)
    
    $
    (17,901
    )
    
    $
    (42,491
    )
    
    $
    3,428Adjustments to reconcile net income (loss) to net cash provided by operating activities:Provision for loan losses
    
    
    13,159
    
    
    
    9,009
    
    
    
    357Net gain on the sale of loans
    
    
    (130
    )
    
    
    (36
    )
    
    
    (299
    )Net (gain) loss on the sale of other real estate owned
    
    
    323
    
    
    
    (1
    )
    
    
    Impairment of goodwill
    
    
    
    
    
    
    31,751
    
    
    
    Loss on impairment of securities
    
    
    5,133
    
    
    
    15,640
    
    
    
    Net gain on sale of investments
    
    
    (1,195
    )
    
    
    (40
    )
    
    
    Loss on disposal of property and equipment
    
    
    
    
    
    
    158
    
    
    
    Write-down of assets held for sale
    
    
    198
    
    
    
    241
    
    
    
    Earnings on BOLI
    
    
    (1,041
    )
    
    
    (1,006
    )
    
    
    (593
    )Origination of loans held for sale
    
    
    (10,971
    )
    
    
    (1,794
    )
    
    
    (22,671
    )Proceeds from sale of loans
    
    
    10,573
    
    
    
    2,144
    
    
    
    23,087Depreciation and amortization
    
    
    1,850
    
    
    
    1,327
    
    
    
    881ESOP compensation expense
    
    
    320
    
    
    
    395
    
    
    
    Stock issuance for charitable contribution
    
    
    
    
    
    
    5,474
    
    
    
    Deferred income taxes
    
    
    11,537
    
    
    
    (8,372
    )
    
    
    (1,241
    )Changes in assets and liabilities that (used) provided cash:Accrued interest receivable
    
    
    106
    
    
    
    785
    
    
    
    (146
    )Other assets
    
    
    (4,400
    )
    
    
    3,457
    
    
    
    437Accrued interest payable
    
    
    29
    
    
    
    (146
    )
    
    
    (31
    )Other liabilities
    
    
    1,323
    
    
    
    (5,074
    )
    
    
    2,901Net cash provided by operating activities
    
    
    8,913
    
    
    
    11,421
    
    
    
    6,110Cash flows from investing activitiesProceeds from sales of AFS securities
    
    
    31,708
    
    
    
    2,535
    
    
    
    Proceeds from calls, maturities, and principal repayments of HTM securities
    
    
    8,643
    
    
    
    6,723
    
    
    
    8,065Proceeds from calls, maturities, and principal repayments of AFS securities
    
    
    83,884
    
    
    
    67,649
    
    
    
    42,891Purchases of HTM securities
    
    
    (2,998
    )
    
    
    (7,940
    )
    
    
    (14,461
    )Purchases of AFS securities
    
    
    (108,976
    )
    
    
    (57,186
    )
    
    
    (41,862
    )Redemption (purchase) of Federal Home Loan Bank stock
    
    
    1,327
    
    
    
    (3,925
    )
    
    
    1,420Purchase of BOLI policy
    
    
    
    
    
    
    
    
    
    
    (325
    )Proceeds from sale of other real estate owned
    
    
    2,299
    
    
    
    169
    
    
    
    (Increase)
decrease in interest-bearing time deposits
    
    
    (1,917
    )
    
    
    (1,869
    )
    
    
    Increase in loans, net
    
    
    (26,448
    )
    
    
    (20,481
    )
    
    
    (13,617
    )Purchase of property and equipment, net
    
    
    (544
    )
    
    
    (1,918
    )
    
    
    (3,337
    )Acquisition of Boardwalk Bancorp
    
    
    
    
    
    
    (46,839
    )
    
    
    Net cash used in investing activities
    
    
    (13,022
    )
    
    
    (63,082
    )
    
    
    (21,226
    )Cash flows from financing activitiesNet increase (decrease) in deposits
    
    
    25,614
    
    
    
    (74,084
    )
    
    
    29,819Increase (decrease) in advances from borrowers for taxes and insurance
    
    
    (43
    )
    
    
    (65
    )
    
    
    (28
    )Borrowings
    
    
    75,450
    
    
    
    123,300
    
    
    
    45,000Payments on borrowings
    
    
    (105,900
    )
    
    
    (36,212
    )
    
    
    (79,000
    )Net proceeds from stock issuance in conversion
    
    
    
    
    
    
    39,871
    
    
    
    Deferred stock issuance and acquisition costs
    
    
    
    
    
    
    
    
    
    
    (1,915
    )Proceeds from stock subscriptions
    
    
    
    
    
    
    
    
    
    
    21,500Net cash provided by (used in) financing activities
    
    
    (4,879
    )
    
    
    52,810
    
    
    
    15,376Net increase (decrease) in cash and cash equivalents
    
    
    (8,988
    )
    
    
    1,149
    
    
    
    260Cash and cash equivalents at beginning of year
    
    
    22,501
    
    
    
    21,352
    
    
    
    21,092Cash and cash equivalents at end of year
    
    $
    13,513
    
    
    $
    22,501
    
    
    $
    21,352Supplementary disclosure of cash flow information:Cash paid during period for:Interest
    
    $
    18,999
    
    
    $
    23,875
    
    
    $
    17,177Income taxes, net of refunds
    
    $
    17
    
    
    $
    1,209
    
    
    $
    1,418Supplementary disclosure of non-cash financing and investing activities:Fair value of held to maturity securities reclassified to available for sale
    
    $
    44,523
    
    
    $
    
    
    
    $
    Transfers from loans to other real estate owned
    
    $
    7,087
    
    
    $
    966
    
    
    $
    Stock subscriptions applied to equity
    
    $
    
    
    
    $
    21,500
    
    
    $
    Issuance of stock to charitable foundation
    
    $
    
    
    
    $
    5,474
    
    
    $
    Issuance of stock for acquisition of Boardwalk Bancorp
    
    $
    
    
    
    $
    49,461
    
    
    $
    
   F-8




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS 
 NOTE 1  ORGANIZATION
        NOTE 2
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Financial Statement Presentation:
   Use of Estimates:
  F-9




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS Cash and Cash Equivalents:
 Interest-Bearing Time Deposits:
 Investment Securities:
  Loans Held for Sale:
 Loans and Allowance for Loan Losses:
    F-10




---



##### Table of Contents



AUDITED FINANCIAL STATEMENTS   Other Real Estate Owned:
 Premises and Equipment:
 Federal Home Loan Bank (FHLB) Stock:
 Goodwill and Other Intangible Assets:
  Bank Owned Life Insurance (BOLI):
 Loan Commitments and Related Financial Instruments:
  F-11




---



##### Table of Contents



AUDITED FINANCIAL STATEMENTS Defined Benefit Plan:
 4 01(k) Plan:
 Employee Stock Ownership Plan (ESOP):
 Income Taxes:
 Accounting for
Uncertainty in Income Taxes, Income Taxes -
Overall
  Earnings Per Share:
  F-12




---



##### Table of Contents



AUDITED FINANCIAL STATEMENTS Comprehensive Income (Loss):
 Before Tax
    
    
    Tax Benefit
    
    
    Net of TaxAmount
    
    
    (Expense)
    
    
    AmountDecember 31, 2009Unrealized holding gains arising during the period
    
    $
    3,625
    
    
    $
    (1,233
    )
    
    $
    2,392Non-credit related unrealized loss on other-than-temporarily
impaired CDOs
    
    
    (2,405
    )
    
    
    818
    
    
    
    (1,587
    )Reclassification adjustment for gain on sale of AFS securities
    
    
    (1,195
    )
    
    
    406
    
    
    
    (789
    )Reclassification adjustment for credit related OTTI included in net income
    
    
    5,133
    
    
    
    (1,745
    )
    
    
    3,388Other comprehensive income, net
    
    $
    5,158
    
    
    $
    (1,754
    )
    
    $
    3,404December 31, 2008Unrealized holding losses arising during the period
    
    $
    (25,247
    )
    
    $
    8,722
    
    
    $
    (16,525
    )Reclassification adjustment for gain on sale of AFS securities
    
    
    (40
    )
    
    
    14
    
    
    
    (26
    )Reclassification adjustment for net losses realized in net income
    
    
    15,640
    
    
    
    (5,404
    )
    
    
    10,236Other comprehensive loss, net
    
    $
    (9,647
    )
    
    $
    3,332
    
    
    $
    (6,315
    )December 31, 2007Unrealized holding gains arising during the period
    
    $
    711
    
    
    $
    (254
    )
    
    $
    457Reclassification adjustment for net losses realized in net income
    
    
    
    
    
    
    
    
    
    
    Other comprehensive income, net
    
    $
    711
    
    
    $
    (254
    )
    
    $
    457
 Operating Segments:
  F-13




---



##### Table of Contents



AUDITED FINANCIAL STATEMENTS Effect of Newly Issued Accounting Standards:
       F-14




---



##### Table of Contents



AUDITED FINANCIAL STATEMENTS    F-15




---



##### Table of Contents



AUDITED FINANCIAL STATEMENTS NOTE 3  INVESTMENT SECURITIES
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(in thousands)December 31, 2009Investment securities available for saleDebt securitiesU.S. Government and agency
obligations
    
    $
    46,004
    
    
    $
    96
    
    
    $
    (128
    )
    
    $
    45,972Municipal bonds
    
    
    33,901
    
    
    
    953
    
    
    
    (473
    )
    
    
    34,381Collateralized debt obligations
    
    
    13,038
    
    
    
    58
    
    
    
    (11,640
    )
    
    
    1,456Corporate bonds
    
    
    10,851
    
    
    
    195
    
    
    
    
    
    
    
    11,046Total debt securities
    
    $
    103,794
    
    
    $
    1,302
    
    
    $
    (12,241
    )
    
    $
    92,855Mortgage-backed securitiesGNMA pass-through certificates
    
    $
    677
    
    
    $
    16
    
    
    $
    
    
    
    $
    693FHLMC pass-through certificates
    
    
    5,338
    
    
    
    175
    
    
    
    
    
    
    
    5,513FNMA pass-through certificates
    
    
    26,612
    
    
    
    1,001
    
    
    
    (25
    )
    
    
    27,588Collateralized mortgage obligations
    
    
    26,514
    
    
    
    567
    
    
    
    (915
    )
    
    
    26,166Total mortgage-backed securities
    
    $
    59,141
    
    
    $
    1,759
    
    
    $
    (940
    )
    
    $
    59,960Total securities available for sale
    
    $
    162,935
    
    
    $
    3,061
    
    
    $
    (13,181
    )
    
    $
    152,815
  F-16




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(in thousands)December 31, 2008Investment 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
    )
    
    $
    114,655Investment 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
    )
    
    $
    49,938
   F-17




---



##### Table of Contents



AUDITED FINANCIAL STATEMENTS  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
    
    $
    16,877
    
    
    $
    (128
    )
    
    $
    
    
    
    $
    
    
    
    $
    16,877
    
    
    $
    (128
    )Corporate and municipal bonds
    
    
    578
    
    
    
    (8
    )
    
    
    3,988
    
    
    
    (465
    )
    
    
    4,566
    
    
    
    (473
    )Collateralized debt obligations
    
    
    90
    
    
    
    (3,329
    )
    
    
    1,308
    
    
    
    (8,311
    )
    
    
    1,398
    
    
    
    (11,640
    )Mortgage-backed securities
    
    
    7,496
    
    
    
    (116
    )
    
    
    2,718
    
    
    
    (824
    )
    
    
    10,214
    
    
    
    (940
    )Total temporarily impaired
investment
securities
    
    $
    25,041
    
    
    $
    (3,581
    )
    
    $
    8,014
    
    
    $
    (9,600
    )
    
    $
    33,055
    
    
    $
    (13,181
    )
  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-18




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS   Pooled Trust Preferred Collateralized Debt Obligations
 Amount ofDeferrals
    
    
    Excessand
    
    
    SubordinationCurrent
    
    
    Defaults
    
    
    as a % ofNumber
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Credit
    
    
    Moodys/
    
    
    Number of
    
    
    as a % of
    
    
    Currentof
    
    
    
    
    
    
    Book
    
    
    Fair
    
    
    Unrealized
    
    
    Related
    
    
    Fitch
    
    
    Performing
    
    
    Current
    
    
    PerformingDeal
    
    Securities
    
    
    Class
    
    
    Value
    
    
    Value
    
    
    Loss
    
    
    Loss
    
    
    Ratings
    
    
    Issuers
    
    
    Collateral
    
    
    CollateralPreTSL II
    
    
    2
    
    
    Mezzanine
    
    $
    582
    
    
    $
    17
    
    
    $
    (565
    )
    
    $
    (422
    )
    
    Ca/CC
    
    
    27
    
    
    
    31.10
    %
    
    
    0.00
    %PreTSL VI
    
    
    1
    
    
    Mezzanine
    
    
    52
    
    
    
    6
    
    
    
    (46
    )
    
    
    (5
    )
    
    Caa1/CCC
    
    
    3
    
    
    
    68.71
    %
    
    
    0.00
    %PreTSL XIX
    
    
    2
    
    
    Mezzanine
    
    
    2,739
    
    
    
    48
    
    
    
    (2,691
    )
    
    
    (815
    )
    
    Ca/C
    
    
    60
    
    
    
    16.42
    %
    
    
    0.00
    %PreTSL XX
    
    
    1
    
    
    Mezzanine
    
    
    67
    
    
    
    13
    
    
    
    (54
    )
    
    
    (1,685
    )
    
    NR/C
    
    
    54
    
    
    
    26.23
    %
    
    
    0.00
    %PreTSL XXI
    
    
    1
    
    
    Mezzanine
    
    
    
    
    
    
    13
    
    
    
    13
    
    
    
    (1,736
    )
    
    NR/C
    
    
    57
    
    
    
    26.27
    %
    
    
    0.00
    %PreTSL XXII
    
    
    1
    
    
    Mezzanine
    
    
    277
    
    
    
    18
    
    
    
    (259
    )
    
    
    (2,320
    )
    
    NR/C
    
    
    74
    
    
    
    24.48
    %
    
    
    0.00
    %PreTSL XXIII
    
    
    1
    
    
    Mezzanine
    
    
    416
    
    
    
    3
    
    
    
    (413
    )
    
    
    (29
    )
    
    NR/CC
    
    
    105
    
    
    
    19.49
    %
    
    
    0.00
    %PreTSL XXIV
    
    
    3
    
    
    Mezzanine
    
    
    210
    
    
    
    20
    
    
    
    (190
    )
    
    
    (2,364
    )
    
    Ca/C
    
    
    69
    
    
    
    29.44
    %
    
    
    0.00
    %PreTSL XXV
    
    
    2
    
    
    Mezzanine
    
    
    
    
    
    
    22
    
    
    
    22
    
    
    
    (2,948
    )
    
    NR/C
    
    
    53
    
    
    
    30.96
    %
    
    
    0.00
    %I-PreTSL I
    
    
    2
    
    
    Mezzanine
    
    
    1,827
    
    
    
    299
    
    
    
    (1,528
    )
    
    
    
    
    
    NR/BB
    
    
    16
    
    
    
    17.36
    %
    
    
    7.38
    %I-PreTSL II
    
    
    2
    
    
    Mezzanine
    
    
    2,706
    
    
    
    447
    
    
    
    (2,259
    )
    
    
    
    
    
    NR/BB
    
    
    29
    
    
    
    4.81
    %
    
    
    14.32
    %I-PreTSL III
    
    
    3
    
    
    Mezzanine
    
    
    2,693
    
    
    
    448
    
    
    
    (2,245
    )
    
    
    
    
    
    B2/BB
    
    
    24
    
    
    
    11.16
    %
    
    
    8.49
    %I-PreTSL IV
    
    
    1
    
    
    Mezzanine
    
    
    437
    
    
    
    75
    
    
    
    (362
    )
    
    
    
    
    
    Ba2/B
    
    
    31
    
    
    
    4.16
    %
    
    
    8.30
    %MM Comm I
    
    
    1
    
    
    Mezzanine
    
    
    1,032
    
    
    
    20
    
    
    
    (1,012
    )
    
    
    (554
    )
    
    Ca/CCC
    
    
    9
    
    
    
    45.74
    %
    
    
    0.00
    %Alesco VI
    
    
    1
    
    
    Mezzanine
    
    
    
    
    
    
    7
    
    
    
    7
    
    
    
    (615
    )
    
    Ca/CC
    
    
    49
    
    
    
    31.39
    %
    
    
    0.00
    %Total
    
    
    24
    
    
    
    
    
    
    $
    13,038
    
    
    $
    1,456
    
    
    $
    (11,582
    )
    
    $
    (13,493
    )
    F-19




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS   Available for SaleAmortized 
Cost
    
    
    Fair Value(in thousands)Due within one year or less
    
    $
    8,964
    
    
    $
    9,018Due after one year but within five years
    
    
    59,707
    
    
    
    60,341Due after five years but within ten years
    
    
    11,364
    
    
    
    11,671Due after ten years
    
    
    23,759
    
    
    
    11,825Mortgage-backed securities
    
    
    59,141
    
    
    
    59,960Total investment securities
    
    $
    162,935
    
    
    $
    152,815
   F-20




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS  NOTE 4  LOANS RECEIVABLE
  December 31,2009
    
    
    2008(in thousands)Commercial mortgage
    
    $
    412,475
    
    
    $
    411,809Residential mortgage
    
    
    244,897
    
    
    
    226,963Construction
    
    
    28,839
    
    
    
    54,187Home equity loans and lines of credit
    
    
    52,806
    
    
    
    46,850Commercial business loans
    
    
    62,685
    
    
    
    54,319Other consumer loans
    
    
    1,284
    
    
    
    1,388Loans receivable, gross
    
    
    802,986
    
    
    
    795,516Less:Allowance for loan losses
    
    
    13,311
    
    
    
    11,240Deferred loan fees
    
    
    202
    
    
    
    407Loans receivable, net
    
    $
    789,473
    
    
    $
    783,869
  2009
    
    
    2008
    
    
    2007(in thousands)Balance at beginning of year
    
    $
    11,240
    
    
    $
    4,121
    
    
    $
    4,009Allowance from acquired entity
    
    
    
    
    
    
    3,791
    
    
    
    Provisions charged to operations
    
    
    13,159
    
    
    
    9,009
    
    
    
    357Reserve on loan commitments reclassified as other liabilities
    
    
    
    
    
    
    
    
    
    
    (56
    )Charge-offs
    
    
    (11,656
    )
    
    
    (5,708
    )
    
    
    (232
    )Recoveries
    
    
    568
    
    
    
    27
    
    
    
    43Balance at end of year
    
    $
    13,311
    
    
    $
    11,240
    
    
    $
    4,121
  F-21




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS  2009
    
    
    2008(in thousands)Period-end loans with no allocated allowance for loan losses
    
    $
    26,020
    
    
    $
    24,998Period-end loans with allocated allowance for loan losses
    
    
    7,228
    
    
    
    Total
    
    $
    33,248
    
    
    $
    24,998Amount of the allowance for loan losses allocated
    
    $
    3,016
    
    
    $
    
 2009
    
    
    2008(in thousands)Average of individually impaired loans during year
    
    $
    31,833
    
    
    $
    18,603Interest income recognized during impairment
    
    
    49
    
    
    
    10Cash basis interest income recognized
    
    
    
    
    
    
    2
   2009
    
    
    2008(in thousands)Mortgage loan portfolios serviced for FNMA
    
    $
    4,414
    
    
    $
    6,209
   2009
    
    
    2008(in thousands)Beginning balance
    
    $
    9,355
    
    
    $
    6,729New loans/advances
    
    
    5,550
    
    
    
    1,369Loans from acquired entity
    
    
    
    
    
    
    2,050Effect of changes in composition of related parties
    
    
    (42
    )
    
    
    (379
    )Repayments
    
    
    (5,840
    )
    
    
    (414
    )Ending balance
    
    $
    9,023
    
    
    $
    9,355
  F-22




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS NOTE 5  FAIR VALUE
          F-23




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS Assets and Liabilities Measured on a Recurring Basis
  Fair Value Measurements
    
    
    Fair Value Measurementsat December 31, 2009
    
    
    at December 31, 2008Quoted
    
    
    
    
    
    
    
    
    
    
    QuotedPrices
    
    
    
    
    
    
    
    
    
    
    Pricesin Active
    
    
    Significant
    
    
    Significant
    
    
    in Active
    
    
    Significant
    
    
    SignificantMarkets for
    
    
    Other
    
    
    Other
    
    
    Markets for
    
    
    Other
    
    
    OtherIdentical
    
    
    Observable
    
    
    Observable
    
    
    Identical
    
    
    Observable
    
    
    ObservableAssets
    
    
    Inputs
    
    
    Inputs
    
    
    Assets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(in thousands)
    
    
    (in thousands)Available for sale securities:U.S. Government and agency
obligations and municipal
bonds
    
    $
    
    
    
    $
    80,353
    
    
    $
    
    
    
    $
    
    
    
    $
    42,480
    
    
    $
    Corporate bonds and
mortgage-backed securities
    
    $
    
    
    
    $
    71,006
    
    
    $
    
    
    
    $
    
    
    
    $
    69,142
    
    
    $
    Collateralized debt obligations
    
    $
    
    
    
    $
    
    
    
    $
    1,456
    
    
    $
    
    
    
    $
    
    
    
    $
    3,033
  Fair Value MeasurementsUsing SignificantUnobservable Inputs(Level 3)CDO SecuritiesAvailable for Sale(in thousands)2009
    
    
    2008Beginning balance
    
    $
    3,033
    
    
    $
    Accretion of discount
    
    
    238
    
    
    
    65Payments received
    
    
    (2
    )
    
    
    (113
    )Increase in amortized cost (1)
    
    
    6,103
    
    
    
    Unrealized holding loss
    
    
    (2,783
    )
    
    
    (8,799
    )Other-than-temporary impairment included in earnings
    
    
    (5,133
    )
    
    
    (14,463
    )Transfers in and/or out of Level 3
    
    
    
    
    
    
    26,343Ending balance
    
    $
    1,456
    
    
    $
    3,033
 (1)
    
    Increase is due to FASB guidance regarding the recognition and presentation of
other-than-temporary impairments.  F-24




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS Assets and Liabilities Measured on a Non-Recurring Basis
  Fair Value Measurements
    
    
    Fair Value Measurementsat December 31, 2009
    
    
    at December 31, 2008Quoted
    
    
    
    
    
    
    
    
    
    
    QuotedPrices
    
    
    
    
    
    
    
    
    
    
    Pricesin Active
    
    
    Significant
    
    
    Significant
    
    
    in Active
    
    
    Significant
    
    
    SignificantMarkets for
    
    
    Other
    
    
    Other
    
    
    Markets for
    
    
    Other
    
    
    OtherIdentical
    
    
    Observable
    
    
    Unobservable
    
    
    Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs
    
    
    Assets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(in thousands)
    
    
    (in thousands)Assets:Impaired loans
    
    $
    
    
    
    $
    33,248
    
    
    $
    
    
    
    $
    
    
    
    $
    24,998
    
    
    $
    Loans held for sale
    
    
    
    
    
    
    398
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other real estate owned
    
    
    
    
    
    
    4,817
    
    
    
    
    
    
    
    
    
    
    
    798
    
    
    
    Assets held
for sale
    
    
    
    
    
    
    1,828
    
    
    
    
    
    
    
    
    
    
    
    2,026
    
    
    
    Goodwill
    
    
    
    
    
    
    
    
    
    
    22,575
    
    
    
    
    
    
    
    
    
    
    
    22,575Other intangibles
    
    
    
    
    
    
    
    
    
    
    585
    
    
    
    
    
    
    
    
    
    
    
    786
    F-25




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS At December 31, 2009
    
    
    At December 31, 2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    Value(in thousands)AssetsCash and cash equivalents
    
    $
    13,513
    
    
    $
    13,513
    
    
    $
    22,501
    
    
    $
    22,501Interest-bearing
time deposits
    
    
    7,451
    
    
    
    7,539
    
    
    
    5,534
    
    
    
    5,534Investment securities
    
    
    152,815
    
    
    
    152,815
    
    
    
    163,480
    
    
    
    164,593Loans held for sale
    
    
    398
    
    
    
    398
    
    
    
    
    
    
    
    Loans receivable
    
    
    789,473
    
    
    
    788,421
    
    
    
    783,869
    
    
    
    799,064FHLB Stock
    
    
    10,275
    
    
    
    10,275
    
    
    
    11,602
    
    
    
    11,602Bank owned
life insurance
    
    
    27,210
    
    
    
    27,210
    
    
    
    26,446
    
    
    
    26,446Accrued interest receivable
    
    
    4,630
    
    
    
    4,630
    
    
    
    4,736
    
    
    
    4,736LiabilitiesSavings deposits
    
    $
    79,368
    
    
    $
    79,368
    
    
    $
    79,494
    
    
    $
    79,494NOW, checking and MMDA deposits
    
    
    320,308
    
    
    
    320,308
    
    
    
    275,443
    
    
    
    275,443Certificates of deposit
    
    
    336,911
    
    
    
    340,084
    
    
    
    356,193
    
    
    
    360,717Borrowings
    
    
    203,981
    
    
    
    199,718
    
    
    
    234,484
    
    
    
    232,090Accrued interest payable
    
    
    807
    
    
    
    807
    
    
    
    778
    
    
    
    778
        See Note 12, Financial Instruments with Off-Balance Sheet
Risk and Concentrations of Credit Risk of Notes to
Consolidated Financial Statements,
  F-26




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS  NOTE 6  OTHER REAL ESTATE OWNED
   NOTE 7  PREMISES AND EQUIPMENT
  EstimatedUseful Lives
    
    
    2009
    
    
    2008(in thousands)Land, buildings, and improvements
    
    15 - 39 years
    
    
    $
    30,451
    
    
    $
    30,441Furniture and equipment
    
    3 - 7 years
    
    
    
    9,977
    
    
    
    10,223Construction-in-progress
    
    
    
    
    
    
    388
    
    
    
    132Total
    
    
    
    
    
    
    40,816
    
    
    
    40,796Accumulated depreciation
    
    
    
    
    
    
    (14,433
    )
    
    
    (13,454
    )Premises and equipment, net
    
    
    
    
    
    $
    26,383
    
    
    $
    27,342
   F-27




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS NOTE 8  GOODWILL AND INTANGIBLE ASSETS
  2009
    
    
    2008(in thousands)Beginning balance
    
    $
    22,575
    
    
    $
    Acquired goodwill
    
    
    
    
    
    
    54,478Impairment
    
    
    
    
    
    
    (31,751
    )Other, net
    
    
    
    
    
    
    (152
    )Ending balance
    
    $
    22,575
    
    
    $
    22,575
      2009
    
    
    2008Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amortization(in thousands)
    
    
    (in thousands)Amortized intangible assets:Core deposit intangibles
    
    $
    565
    
    
    $
    165
    
    
    $
    565
    
    
    $
    86Other customer relationship intangibles
    
    
    485
    
    
    
    300
    
    
    
    485
    
    
    
    178Total
    
    $
    1,050
    
    
    $
    465
    
    
    $
    1,050
    
    
    $
    264
   F-28




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS  (in thousands)2010
    
    $
    1402011
    
    $
    1102012
    
    $
    982013
    
    $
    432014
    
    $
    32Thereafter
    
    $
    162
 NOTE 9  DEPOSITS
  2009
    
    
    2008(in thousands)Savings accounts
    
    $
    79,368
    
    
    $
    79,494NOW accounts and money market funds
    
    
    257,943
    
    
    
    212,185Non-interest bearing checking
    
    
    62,365
    
    
    
    63,258Certificates of deposit of less than $100,000
    
    
    201,303
    
    
    
    229,533Certificates of deposit of $100,000 or more
    
    
    135,608
    
    
    
    126,660$
    736,587
    
    
    $
    711,130
  2009
    
    
    2008
    
    
    2007(in thousands)Savings accounts
    
    $
    385
    
    
    $
    1,062
    
    
    $
    1,290NOW accounts and money market funds
    
    
    2,119
    
    
    
    4,059
    
    
    
    4,237Certificates of deposit
    
    
    9,886
    
    
    
    12,562
    
    
    
    8,029$
    12,390
    
    
    $
    17,683
    
    
    $
    13,556
  F-29




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS  (in thousands)2010
    
    $
    279,7262011
    
    
    28,9802012
    
    
    13,8902013
    
    
    10,5612014
    
    
    3,654Thereafter
    
    
    100$
    336,911
  NOTE 10  BORROWINGS
   2009FHLB
    
    
    RepurchaseBorrowings
    
    
    Agreements
    
    
    Total2010
    
    $
    59,950
    
    
    $
    
    
    
    $
    59,9502011
    
    
    25,000
    
    
    
    
    
    
    
    25,0002012
    
    
    25,000
    
    
    
    
    
    
    
    25,0002013
    
    
    20,000
    
    
    
    
    
    
    
    20,0002014
    
    
    25,000
    
    
    
    
    
    
    
    25,000Thereafter
    
    
    11,541
    
    
    
    37,490
    
    
    
    49,031Principal due
    
    $
    166,491
    
    
    $
    37,490
    
    
    $
    203,981
    F-30




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS  2009
    
    
    2008FHLB
    
    
    Repurchase
    
    
    
    
    
    
    FHLB
    
    
    RepurchaseBorrowings
    
    
    Agreements
    
    
    Total
    
    
    Borrowings
    
    
    Agreements
    
    
    Total(dollars in thousands)
    
    
    (dollars in thousands)Average daily balance during the year
    
    $
    153,582
    
    
    $
    37,674
    
    
    $
    191,256
    
    
    $
    156,653
    
    
    $
    36,550
    
    
    $
    193,203Average interest rate during the year
    
    
    3.27
    %
    
    
    4.30
    %
    
    
    3.47
    %
    
    
    3.18
    %
    
    
    4.34
    %
    
    
    3.40
    %Maximum month-end balance during the year
    
    $
    193,897
    
    
    $
    37,778
    
    
    $
    231,675
    
    
    $
    197,121
    
    
    $
    37,363
    
    
    $
    234,484Weighted average interest rate at year-end
    
    
    3.09
    %
    
    
    4.32
    %
    
    
    3.32
    %
    
    
    2.28
    %
    
    
    4.32
    %
    
    
    2.60
    %
 NOTE 11  INCOME TAXES
  2009
    
    
    2008
    
    
    2007(in thousands)Current expense:Federal
    
    $
    464
    
    
    $
    440
    
    
    $
    2,369State
    
    
    10
    
    
    
    23
    
    
    
    171Total current
    
    
    474
    
    
    
    463
    
    
    
    2,540Deferred (benefit):Federal
    
    
    (3,176
    )
    
    
    (7,333
    )
    
    
    (958
    )State
    
    
    (801
    )
    
    
    (1,249
    )
    
    
    (283
    )Total deferred
    
    
    (3,977
    )
    
    
    (8,582
    )
    
    
    (1,241
    )Change in valuation allowance
    
    
    15,514
    
    
    
    (35
    )
    
    
    Income tax expense (benefit)
    
    $
    12,011
    
    
    $
    (8,154
    )
    
    $
    1,299
  F-31




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS  2009
    
    
    2008
    
    
    2007Tax statutory rate
    
    
    34.0
    %
    
    
    (34.0
    %)
    
    
    34.0
    %Adjustments resulting from:Goodwill impairment
    
    
    
    
    
    
    21.3
    
    
    
    State tax benefit, net of federal income tax expense
    
    
    8.9
    
    
    
    (1.6
    )
    
    
    (1.6
    )Tax-exempt income
    
    
    7.8
    
    
    
    (0.9
    )
    
    
    (11.3
    )Income on bank owned life insurance
    
    
    8.7
    
    
    
    (0.7
    )
    
    
    (12.5
    )Increase in valuation reserve
    
    
    (263.4
    )
    
    
    
    
    
    
    Other
    
    
    0.1
    
    
    
    (0.2
    )
    
    
    18.9Effective tax rate
    
    
    (203.9
    %)
    
    
    (16.1
    %)
    
    
    27.5
    %
  2009
    
    
    2008(in thousands)Deferred tax assets:Other than temporary impairment
    
    $
    4,533
    
    
    $
    4,917Allowance for loan losses
    
    
    4,949
    
    
    
    4,043Charitable foundation contribution carryforward
    
    
    2,457
    
    
    
    2,527Purchase accounting adjustments
    
    
    1,816
    
    
    
    1,660Non-accrual loan interest income
    
    
    1,819
    
    
    
    1,013Deferred compensation
    
    
    584
    
    
    
    667Net operating losses
    
    
    534
    
    
    
    913Net unrealized loss on available for sale securities
    
    
    3,496
    
    
    
    3,155Capital loss carryforward
    
    
    
    
    
    
    233AMT credit carryforward
    
    
    557
    
    
    
    231Other
    
    
    357
    
    
    
    156Valuation allowance
    
    
    (15,747
    )
    
    
    (233
    )5,355
    
    
    
    19,282Deferred tax liabilities:Depreciation
    
    
    (860
    )
    
    
    (837
    )Deferred loan fees
    
    
    (533
    )
    
    
    (667
    )Pension
    
    
    
    
    
    
    (175
    )Net unrealized gain on available for sale securities
    
    
    
    
    
    
    Other
    
    
    (6
    )
    
    
    (356
    )(1,399
    )
    
    
    (2,035
    )Net deferred tax asset
    
    $
    3,956
    
    
    $
    17,247
   F-32




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS     2009
    
    
    2008(in thousands)Balance at January 1
    
    $
    353
    
    
    $
    Additions based on tax positions related to the current year
    
    
    
    
    
    
    353Additions 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
    
    
    $
    353
     F-33




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS NOTE
12  FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT RISK
       At December 31, 2009
    
    
    At December 31, 2008Fixed
    
    
    Variable
    
    
    Fixed
    
    
    VariableRate
    
    
    Rate
    
    
    Rate
    
    
    Rate(in thousands)Commitments to make loans
    
    $
    10,915
    
    
    $
    1,236
    
    
    $
    9,333
    
    
    $
    1,428Unused lines of credit
    
    $
    
    
    
    $
    56,323
    
    
    $
    
    
    
    $
    57,429Construction loans in
process
    
    $
    2,786
    
    
    $
    7,403
    
    
    $
    2,920
    
    
    $
    18,899Standby letters of credit
    
    $
    
    
    
    $
    6,929
    
    
    $
    
    
    
    $
    10,778
   NOTE 13  BENEFIT PLANS
   F-34




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS  st The Wall Street
Journal
   2009
    
    
    2008(dollars in thousands)Allocated to participants
    
    
    85,206
    
    
    
    42,603Distributed to participants
    
    
    
    
    
    
    Unearned shares
    
    
    979,876
    
    
    
    1,022,479Total ESOP shares
    
    
    1,065,082
    
    
    
    1,065,082Fair value of unearned shares
    
    $
    6,585
    
    
    $
    9,458
    F-35




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS NOTE 14  COMMITMENTS AND CONTINGENCIES
  (in thousands)Due in one year or less
    
    $
    132Due after one year
    
    
    11$
    143
    NOTE 15  REGULATORY MATTERS
      F-36




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS  Per Regulatory GuidelinesActual
    
    
    Minimum
    
    
    Well CapitalizedAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(dollars in thousands)December 31, 2009Risk based capital ratios:Tier I
    
    $
    98,256
    
    
    
    11.45
    %
    
    $
    34,325
    
    
    
    4.00
    %
    
    $
    51,488
    
    
    
    6.00
    %Total capital
    
    $
    109,013
    
    
    
    12.71
    %
    
    $
    68,616
    
    
    
    8.00
    %
    
    $
    85,769
    
    
    
    10.00
    %Leverage ratio
    
    $
    98,256
    
    
    
    9.37
    %
    
    $
    41,945
    
    
    
    4.00
    %
    
    $
    52,431
    
    
    
    5.00
    %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
    %
   2009
    
    
    2008(in thousands)Total capital, computed in accordance with GAAP
    
    $
    114,772
    
    
    $
    128,950Accumulated other comprehensive (gain) loss
    
    
    6,645
    
    
    
    6,022Intangible assets
    
    
    (1
    )
    
    
    (2
    )Disallowed goodwill and other disallowed
intangible assets
    
    
    (23,160
    )
    
    
    (23,361
    )Deferred tax assets excluded
    
    
    
    
    
    
    (2,687
    )Tier I (tangible) capital
    
    
    98,256
    
    
    
    108,922Allowance for loan losses
    
    
    10,757
    
    
    
    10,481Total capital
    
    $
    109,013
    
    
    $
    119,403
    F-37




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS NOTE 16  EARNINGS PER SHARE
   Year ended December 31,2009
    
    
    2008(in thousands, except share data)Net loss
    
    $
    (17,901
    )
    
    $
    (42,491
    )Less: Net income from January 1, 2008 to January 31,
2008
    
    
    
    
    
    
    (402
    )Net loss post conversion for earnings per share
    
    $
    (17,901
    )
    
    $
    (42,893
    )Weighted average shares outstanding
    
    
    12,312,714
    
    
    
    12,280,494Basic earnings (loss) per share
    
    $
    (1.45
    )
    
    $
    (3.49
    )Diluted weighted average shares outstanding
    
    
    12,312,714
    
    
    
    12,280,494Diluted basic earnings (loss) per share
    
    $
    (1.45
    )
    
    $
    (3.49
    )
  F-38




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS NOTE 17  ACQUISITION OF BOARDWALK BANCORP
     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
  F-39




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS  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-40




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS NOTE 18  CAPE BANCORP (PARENT COMPANY)
  Condensed Balance Sheets
 December 31,2009
    
    
    2008(in thousands)ASSETSNon-interest bearing balances with bank subsidiary
    
    $
    1,782
    
    
    $
    1,427Loans due from bank subsidiary
    
    
    10,116
    
    
    
    10,410Investment in bank subsidiary
    
    
    114,772
    
    
    
    128,950Other assets
    
    
    69
    
    
    
    71Total assets
    
    $
    126,739
    
    
    $
    140,858LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesAccounts payable and accrued expenses
    
    $
    191
    
    
    $
    133Total liabilities
    
    
    191
    
    
    
    133Stockholders EquityCommon stock
    
    
    133
    
    
    
    133Additional paid in capital
    
    
    126,695
    
    
    
    126,801Unearned ESOP shares
    
    
    (9,806
    )
    
    
    (10,232
    )Accumulated other comprehensive loss
    
    
    (6,645
    )
    
    
    (6,022
    )Retained earnings
    
    
    16,171
    
    
    
    30,045Total stockholders equity
    
    
    126,548
    
    
    
    140,725Total liabilities and stockholders equity
    
    $
    126,739
    
    
    $
    140,858
  F-41




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS Condensed Statements of Income
 Years ended December 31,2009
    
    
    2008(in thousands)Income:Interest income from bank subsidiary
    
    $
    338
    
    
    $
    611Total income
    
    
    338
    
    
    
    611Expense:Interest expense
    
    
    
    
    
    
    28Legal expense
    
    
    207
    
    
    
    249Investor relations expense
    
    
    68
    
    
    
    99Audit and consulting fees
    
    
    8
    
    
    
    51Subscriptions and publications
    
    
    68
    
    
    
    29Other non-interest expenses
    
    
    13
    
    
    
    15Total expense
    
    
    364
    
    
    
    471Income (loss) before income taxes and equity in undistributed
net income (loss) of subsidiaries
    
    
    (26
    )
    
    
    140Income tax expense (benefit)
    
    
    (27
    )
    
    
    64Income before equity in undistributed net income (loss)
of subsidiaries
    
    
    1
    
    
    
    76Equity in undistributed loss of bank subsidiary
    
    
    (17,902
    )
    
    
    (42,567
    )Net loss
    
    $
    (17,901
    )
    
    $
    (42,491
    )
 Condensed Statements of Cash Flows
 Years ended December 31,2009
    
    
    2008(in thousands)Cash flows from operating activities:Net loss
    
    $
    (17,901
    )
    
    $
    (42,491
    )Adjustments to reconcile net income to
cash provided by operating activities:Equity in undistributed loss of bank subsidiary
    
    
    17,902
    
    
    
    42,567Change in
other assets and other liabilities, net
    
    
    60
    
    
    
    61Net cash provided by operating activities
    
    
    61
    
    
    
    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
    
    
    294
    
    
    
    248Net cash provided by (used in) investing activities
    
    
    294
    
    
    
    (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
    
    
    355
    
    
    
    1,427Cash and cash equivalents at beginning of year
    
    
    1,427
    
    
    
    Cash and cash equivalents at end of year
    
    $
    1,782
    
    
    $
    1,427
   F-42




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##### Table of Contents



AUDITED FINANCIAL STATEMENTS NOTE 19  SELECTED QUARTERLY DATA (UNAUDITED)
 Year Ended December 31,
    
    
    Year Ended December 31,2009
    
    
    2008Fourth
    
    
    Third
    
    
    Second
    
    
    First
    
    
    Fourth
    
    
    Third
    
    
    Second
    
    
    FirstQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(in thousands)
    
    
    (in thousands)Interest income
    
    $
    13,189
    
    
    $
    13,409
    
    
    $
    13,992
    
    
    $
    13,943
    
    
    $
    14,471
    
    
    $
    15,154
    
    
    $
    15,048
    
    
    $
    13,454Interest expense
    
    
    4,260
    
    
    
    4,487
    
    
    
    5,074
    
    
    
    5,207
    
    
    
    5,664
    
    
    
    6,084
    
    
    
    6,288
    
    
    
    6,217Net interest income
    
    
    8,929
    
    
    
    8,922
    
    
    
    8,918
    
    
    
    8,736
    
    
    
    8,807
    
    
    
    9,070
    
    
    
    8,760
    
    
    
    7,237Provision for loan losses
    
    
    785
    
    
    
    9,765
    
    
    
    1,864
    
    
    
    745
    
    
    
    6,860
    
    
    
    1,308
    
    
    
    558
    
    
    
    283Net interest income (expense)
after provision for loan
losses
    
    
    8,144
    
    
    
    (843
    )
    
    
    7,054
    
    
    
    7,991
    
    
    
    1,947
    
    
    
    7,762
    
    
    
    8,202
    
    
    
    6,954Non-interest income
    
    
    908
    
    
    
    888
    
    
    
    (431
    )
    
    
    (433
    )
    
    
    (11,997
    )
    
    
    (870
    )
    
    
    975
    
    
    
    1,099Non-interest expense
    
    
    7,822
    
    
    
    6,609
    
    
    
    6,653
    
    
    
    8,084
    
    
    
    38,251
    
    
    
    6,722
    
    
    
    7,470
    
    
    
    12,274Income (loss) before income
taxes
    
    
    1,230
    
    
    
    (6,564
    )
    
    
    (30
    )
    
    
    (526
    )
    
    
    (48,301
    )
    
    
    170
    
    
    
    1,707
    
    
    
    (4,221
    )Income tax expense (benefit)
    
    
    
    
    
    
    12,571
    
    
    
    (133
    )
    
    
    (427
    )
    
    
    (6,125
    )
    
    
    (424
    )
    
    
    370
    
    
    
    (1,975
    )Net income (loss)
    
    $
    1,230
    
    
    $
    (19,135
    )
    
    $
    103
    
    
    $
    (99
    )
    
    $
    (42,176
    )
    
    $
    594
    
    
    $
    1,337
    
    
    $
    (2,246
    )
 Year Ended December 31,2007Fourth
    
    
    Third
    
    
    Second
    
    
    FirstQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(in thousands)Interest income
    
    $
    9,307
    
    
    $
    9,231
    
    
    $
    9,117
    
    
    $
    8,974Interest expense
    
    
    4,318
    
    
    
    4,306
    
    
    
    4,320
    
    
    
    4,202Net interest income
    
    
    4,989
    
    
    
    4,925
    
    
    
    4,797
    
    
    
    4,772Provision for loan losses
    
    
    123
    
    
    
    78
    
    
    
    78
    
    
    
    78Net interest income after
provision for loan losses
    
    
    4,866
    
    
    
    4,847
    
    
    
    4,719
    
    
    
    4,694Non-interest income
    
    
    972
    
    
    
    970
    
    
    
    1,005
    
    
    
    1,045Non-interest expense
    
    
    6,072
    
    
    
    3,914
    
    
    
    4,204
    
    
    
    4,201Income (loss) before income taxes
    
    
    (234
    )
    
    
    1,903
    
    
    
    1,520
    
    
    
    1,538Income tax expense (benefit)
    
    
    (268
    )
    
    
    562
    
    
    
    540
    
    
    
    465Net income
    
    $
    34
    
    
    $
    1,341
    
    
    $
    980
    
    
    $
    1,073
    F-43




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##### 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
    
    
    Form of Director Retirement Plan (1)10.8
    
    
    Benefit Equalization Plan (1)10.9
    
    
    2008 Equity Incentive Plan (3)14
    
    
    Code of Ethics (4)21
    
    
    Subsidiaries of Registrant23.1
    
    
    Consent of KPMG LLP23.2
    
    
    Consent of Crowe Horwath LLP31.1
    
    
    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.