##### 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, 2010
 OR
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission File No. 001-33934
 Cape Bancorp, Inc.
  Maryland
    
    26-1294270(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)225 North Main Street, Cape May Court House, New Jersey
    
    08210(Address of Principal Executive Offices)
    
    Zip Code
 (609) 465-5600  (Registrants telephone number)
  Title of each class
    
    Name of each exchange on which registeredCommon Stock, $0.01 par value
    
    The NASDAQ Stock Market, LLC
  YES o NO þ
 YES o NO þ
 þ o
 þ
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 YES o NO þ
   DOCUMENTS INCORPORATED BY REFERENCE
 1.
    
    Proxy Statement for the 2011 Annual Meeting of Shareholders (Part III).




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##### 



TABLE OF CONTENTS
 PART I
    
    
    1ITEM 1. BUSINESS
    
    
    1ITEM 1A. RISK FACTORS
    
    
    42ITEM 1B. UNRESOLVED STAFF COMMENTS
    
    
    48ITEM 2. PROPERTIES
    
    
    48ITEM 3. LEGAL PROCEEDINGS
    
    
    48ITEM 4. (RESERVED)
    
    
    48PART II
    
    
    48ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    48ITEM 6. SELECTED FINANCIAL DATA
    
    
    50ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    52ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    
    
    71ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    71ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    71ITEM 9A. CONTROLS AND PROCEDURES
    
    
    72ITEM 9B. OTHER INFORMATION
    
    
    72PART III
    
    
    72ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    72ITEM 11. EXECUTIVE COMPENSATION
    
    
    73ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    73ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
    
    
    73ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    73PART IV
    
    
    73ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    73Exhibit 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
   Overview
     1




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##### Table of Contents



Cape Bank
 General
    www.capebanknj.com
  2




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##### Table of Contents



Market Area
   a.
    
    casino revenue in total was down 9.6% in 2010 from 2009;
 b.
    
    all 11 casinos had revenue declines during the period 2009 to 2010;
 c.
    
    2010 was the worst year for casino revenue during the past 10 years;
 d.
    
    employment levels at the casinos has declined consistently since 2007;
 e.
    
    visitors to Atlantic City have declined consistently from 2007 to 2009
(2010 data not yet available); and
 f.
    
    2009 net income per casino indicates that 7 of 11 casinos reported losses for the year.
   3




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##### Table of Contents



a.
    
    Established a New Jersey State-run Tourism District within
Atlantic City.
 b.
    
    Tax reimbursement incentives for the Revel Casino (assuming
financing is obtained by the Revel) up to $261 million of which $125 million
will be used to fund various upgrades to the Boardwalk and other parts of the
city that surround the Revel Casino. These tax incentives are being provided
by New Jerseys Economic Development Authority under the Economic
Redevelopment and Growth Grant Program which is designated to stimulate jobs
and investment. It is anticipated the construction of the Revel Casino will
create 2,000 construction jobs and upon completion, which is estimated to be
June 2012, 5,500 full time positions will be created.
 c.
    
    Consideration of permitting small (minimum 200 rooms and gaming
floor area of 24,000 square feet) casino hotels in Atlantic City, and interest
in this market has been expressed by certain companies.
 d.
    
    Casino Reinvestment Development Authority (CRDA) will oversee
operations of the Atlantic City Convention and Visitors Authority.
 e.
    
    A discount shopping outlet in Atlantic City is expanding and the
CRDA is assisting with this project by lending the developer $9 million
towards this project.
  Competition
 nd rd
   4




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##### Table of Contents



Lending Activities
   Loan Portfolio Composition.
 At December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(dollars in thousands)Real estate loans:Commercial mortgage
    
    $
    413,487
    
    
    
    52.7
    %
    
    $
    412,475
    
    
    
    51.3
    %
    
    $
    411,809
    
    
    
    51.8
    %
    
    $
    199,777
    
    
    
    43.0
    %
    
    $
    183,091
    
    
    
    40.6
    %Residential mortgage
    
    
    258,047
    
    
    
    32.9
    %
    
    
    244,897
    
    
    
    30.5
    %
    
    
    226,963
    
    
    
    28.5
    %
    
    
    175,809
    
    
    
    37.8
    %
    
    
    183,692
    
    
    
    40.7
    %Construction
    
    
    15,191
    
    
    
    1.9
    %
    
    
    28,839
    
    
    
    3.6
    %
    
    
    54,187
    
    
    
    6.8
    %
    
    
    38,554
    
    
    
    8.3
    %
    
    
    38,669
    
    
    
    8.6
    %Home equity loans and
lines
of credit
    
    
    47,875
    
    
    
    6.1
    %
    
    
    52,806
    
    
    
    6.6
    %
    
    
    46,850
    
    
    
    5.9
    %
    
    
    37,308
    
    
    
    8.0
    %
    
    
    36,998
    
    
    
    8.2
    %Commercial business loans
    
    
    48,223
    
    
    
    6.1
    %
    
    
    62,685
    
    
    
    7.8
    %
    
    
    54,319
    
    
    
    6.8
    %
    
    
    12,018
    
    
    
    2.6
    %
    
    
    7,773
    
    
    
    1.7
    %Other consumer loans
    
    
    2,207
    
    
    
    0.3
    %
    
    
    1,284
    
    
    
    0.2
    %
    
    
    1,388
    
    
    
    0.2
    %
    
    
    1,257
    
    
    
    0.3
    %
    
    
    919
    
    
    
    0.2
    %Total loans
    
    $
    785,030
    
    
    
    100.0
    %
    
    $
    802,986
    
    
    
    100.0
    %
    
    $
    795,516
    
    
    
    100.0
    %
    
    $
    464,723
    
    
    
    100.0
    %
    
    $
    451,142
    
    
    
    100.0
    %Less:Allowance for loan losses
    
    
    12,538
    
    
    
    
    
    
    
    13,311
    
    
    
    
    
    
    
    11,240
    
    
    
    
    
    
    
    4,121
    
    
    
    
    
    
    
    4,009Deferred loan fees, net
    
    
    174
    
    
    
    
    
    
    
    202
    
    
    
    
    
    
    
    407
    
    
    
    
    
    
    
    666
    
    
    
    
    
    
    
    755Total loans, net
    
    $
    772,318
    
    
    
    
    
    
    $
    789,473
    
    
    
    
    
    
    $
    783,869
    
    
    
    
    
    
    $
    459,936
    
    
    
    
    
    
    $
    446,378
  5




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##### Table of Contents



Loan Portfolio Maturities and Yields.
 Commercial Mortgage
    
    
    Residential Mortgage
    
    
    
    
    
    
    
    
    
    
    Home Equity Loans andLoans
    
    
    Loans
    
    
    Construction Loans
    
    
    Lines of CreditWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageAt December 31, 2010
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(dollars in thousands)Due During the Years
Ending December 31,2011
    
    $
    7,377
    
    
    
    5.57
    %
    
    $
    347
    
    
    
    3.27
    %
    
    $
    13,825
    
    
    
    4.76
    %
    
    $
    142
    
    
    
    4.11
    %2012
    
    
    2,748
    
    
    
    6.96
    %
    
    
    740
    
    
    
    5.44
    %
    
    
    
    
    
    
    
    
    
    
    345
    
    
    
    5.37
    %2013
    
    
    6,473
    
    
    
    6.62
    %
    
    
    1,186
    
    
    
    5.25
    %
    
    
    1,200
    
    
    
    5.75
    %
    
    
    807
    
    
    
    5.63
    %2014 to 2015
    
    
    2,309
    
    
    
    6.31
    %
    
    
    1,628
    
    
    
    5.68
    %
    
    
    
    
    
    
    
    
    
    
    2,210
    
    
    
    5.44
    %2016 to 2020
    
    
    8,324
    
    
    
    6.93
    %
    
    
    22,992
    
    
    
    5.37
    %
    
    
    166
    
    
    
    6.50
    %
    
    
    11,931
    
    
    
    5.21
    %2021 to 2025
    
    
    48,495
    
    
    
    6.80
    %
    
    
    43,007
    
    
    
    4.96
    %
    
    
    
    
    
    
    
    
    
    
    31,331
    
    
    
    5.15
    %2026 to 2028
    
    
    31,361
    
    
    
    7.10
    %
    
    
    4,788
    
    
    
    5.26
    %
    
    
    
    
    
    
    
    
    
    
    1,109
    
    
    
    3.75
    %2029 to 2031
    
    
    52,853
    
    
    
    6.52
    %
    
    
    27,677
    
    
    
    5.20
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2032 to 2033
    
    
    64,674
    
    
    
    6.79
    %
    
    
    12,132
    
    
    
    5.65
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2034 to 2035
    
    
    33,961
    
    
    
    6.35
    %
    
    
    36,707
    
    
    
    5.17
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2036 to 2038
    
    
    81,048
    
    
    
    6.64
    %
    
    
    45,124
    
    
    
    6.05
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2039 and beyond
    
    
    73,864
    
    
    
    6.17
    %
    
    
    61,719
    
    
    
    5.14
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    413,487
    
    
    
    6.58
    %
    
    $
    258,047
    
    
    
    5.33
    %
    
    $
    15,191
    
    
    
    4.86
    %
    
    $
    47,875
    
    
    
    5.15
    %
 Commercial Business
    
    
    Other Consumer LoansLoans
    
    
    (1)
    
    
    TotalWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageAmount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(dollars in thousands)Due During the Years
Ending December 31,2011
    
    $
    34,962
    
    
    
    5.54
    %
    
    $
    1,153
    
    
    
    11.40
    %
    
    $
    57,806
    
    
    
    5.46
    %2012
    
    
    3,279
    
    
    
    5.50
    %
    
    
    34
    
    
    
    11.97
    %
    
    
    7,146
    
    
    
    6.08
    %2013
    
    
    1,656
    
    
    
    6.53
    %
    
    
    24
    
    
    
    13.72
    %
    
    
    11,346
    
    
    
    6.32
    %2014 to 2015
    
    
    3,195
    
    
    
    6.47
    %
    
    
    17
    
    
    
    13.50
    %
    
    
    9,359
    
    
    
    6.06
    %2016 to 2020
    
    
    3,514
    
    
    
    6.89
    %
    
    
    
    
    
    
    
    
    
    
    46,927
    
    
    
    5.72
    %2021 to 2025
    
    
    334
    
    
    
    6.53
    %
    
    
    979
    
    
    
    4.27
    %
    
    
    124,146
    
    
    
    5.73
    %2026 to 2028
    
    
    653
    
    
    
    6.55
    %
    
    
    
    
    
    
    
    
    
    
    37,911
    
    
    
    6.76
    %2029 to 2031
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,530
    
    
    
    6.07
    %2032 to 2033
    
    
    442
    
    
    
    4.25
    %
    
    
    
    
    
    
    
    
    
    
    77,248
    
    
    
    6.60
    %2034 to 2035
    
    
    188
    
    
    
    7.25
    %
    
    
    
    
    
    
    
    
    
    
    70,856
    
    
    
    5.74
    %2036 to 2038
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    126,172
    
    
    
    6.43
    %2039 and beyond
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    135,583
    
    
    
    5.70
    %Total
    
    $
    48,223
    
    
    
    5.75
    %
    
    $
    2,207
    
    
    
    8.29
    %
    
    $
    785,030
    
    
    
    6.00
    %
 (1)
    
    Includes overdrawn DDA accounts.
  6




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##### Table of Contents



Commercial Mortgage
    
    
    Residential Mortgage
    
    
    
    
    
    
    
    
    
    
    Home Equity Loans andLoans
    
    
    Loans
    
    
    Construction Loans
    
    
    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 Business
    
    
    Other Consumer LoansLoans
    
    
    (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.
  7




---



##### Table of Contents



At December 31, 2010Fixed 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
    
    $
    7,323
    
    
    $
    21,455
    
    
    $
    28,778
    
    
    $
    54
    
    
    $
    384,655
    
    
    $
    384,709
    
    
    $
    413,487Residential mortgage
    
    
    345
    
    
    
    219,078
    
    
    
    219,423
    
    
    
    2
    
    
    
    38,622
    
    
    
    38,624
    
    
    
    258,047Construction
    
    
    1,499
    
    
    
    1,366
    
    
    
    2,865
    
    
    
    12,326
    
    
    
    
    
    
    
    12,326
    
    
    
    15,191Home equity loans and lines
of credit
    
    
    120
    
    
    
    23,115
    
    
    
    23,235
    
    
    
    22
    
    
    
    24,618
    
    
    
    24,640
    
    
    
    47,875Commercial business loans
    
    
    6,392
    
    
    
    9,460
    
    
    
    15,852
    
    
    
    28,570
    
    
    
    3,801
    
    
    
    32,371
    
    
    
    48,223Other consumer loans
    
    
    1,146
    
    
    
    73
    
    
    
    1,219
    
    
    
    7
    
    
    
    981
    
    
    
    988
    
    
    
    2,207Total
    
    $
    16,825
    
    
    $
    274,547
    
    
    $
    291,372
    
    
    $
    40,981
    
    
    $
    452,677
    
    
    $
    493,658
    
    
    $
    785,030
 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
  8




---



##### Table of Contents



Percentage of Total Loan PortfolioAt December 31, 2010(dollars in thousands)Percent
    
    
    
    
    
    
    PercentFixed
    
    
    of Total
    
    
    Adjustable
    
    
    of TotalRate
    
    
    Loans
    
    
    Rate
    
    
    Loans
    
    
    TotalReal estate loans:Commercial mortgage
    
    $
    28,778
    
    
    
    3.7
    %
    
    $
    384,709
    
    
    
    49.0
    %
    
    $
    413,487Residential mortgage
    
    
    219,423
    
    
    
    27.9
    %
    
    
    38,624
    
    
    
    4.9
    %
    
    
    258,047Construction
    
    
    2,865
    
    
    
    0.4
    %
    
    
    12,326
    
    
    
    1.6
    %
    
    
    15,191Home equity loans and lines of credit
    
    
    23,235
    
    
    
    3.0
    %
    
    
    24,640
    
    
    
    3.1
    %
    
    
    47,875Commercial business loans
    
    
    15,852
    
    
    
    2.0
    %
    
    
    32,371
    
    
    
    4.1
    %
    
    
    48,223Other consumer loans
    
    
    1,219
    
    
    
    0.2
    %
    
    
    988
    
    
    
    0.1
    %
    
    
    2,207Total
    
    $
    291,372
    
    
    
    37.2
    %
    
    $
    493,658
    
    
    
    62.8
    %
    
    $
    785,030
 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
 Managements Discussion and Analysis
of Financial Condition and Results of Operations  Management of Market Risk.
  9




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##### Table of Contents



Fixed Rate at December 31, 2010(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
    
    $
    18,158
    
    
    
    2.3
    %
    
    $
    2,005
    
    
    
    0.3
    %
    
    $
    8,615
    
    
    
    1.1
    %
    
    $
    28,778Residential mortgage
    
    
    25,496
    
    
    
    3.2
    %
    
    
    73,694
    
    
    
    9.4
    %
    
    
    120,233
    
    
    
    15.3
    %
    
    
    219,423Construction
    
    
    2,865
    
    
    
    0.4
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    2,865Home equity loans
and lines
of credit
    
    
    9,522
    
    
    
    1.2
    %
    
    
    13,713
    
    
    
    1.7
    %
    
    
    
    
    
    
    0.0
    %
    
    
    23,235Commercial business loans
    
    
    14,739
    
    
    
    1.9
    %
    
    
    926
    
    
    
    0.1
    %
    
    
    187
    
    
    
    0.0
    %
    
    
    15,852Other consumer loans
    
    
    1,219
    
    
    
    0.2
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    1,219Total loans
    
    $
    71,999
    
    
    
    9.2
    %
    
    $
    90,338
    
    
    
    11.5
    %
    
    $
    129,035
    
    
    
    16.4
    %
    
    $
    291,372
 Adjustable Rate at December 31, 2010(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
    
    $
    9,072
    
    
    
    1.2
    %
    
    $
    112,332
    
    
    
    14.3
    %
    
    $
    263,305
    
    
    
    33.5
    %
    
    $
    384,709Residential mortgage
    
    
    1,397
    
    
    
    0.2
    %
    
    
    1,028
    
    
    
    0.1
    %
    
    
    36,199
    
    
    
    4.6
    %
    
    
    38,624Construction
    
    
    12,326
    
    
    
    1.6
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    12,326Home equity loans
and lines
of credit
    
    
    5,913
    
    
    
    0.8
    %
    
    
    18,727
    
    
    
    2.4
    %
    
    
    
    
    
    
    0.0
    %
    
    
    24,640Commercial business loans
    
    
    31,867
    
    
    
    4.0
    %
    
    
    61
    
    
    
    0.0
    %
    
    
    443
    
    
    
    0.1
    %
    
    
    32,371Other consumer loans
    
    
    9
    
    
    
    0.0
    %
    
    
    979
    
    
    
    0.1
    %
    
    
    
    
    
    
    0.0
    %
    
    
    988Total loans
    
    $
    60,584
    
    
    
    7.8
    %
    
    $
    133,127
    
    
    
    16.9
    %
    
    $
    299,947
    
    
    
    38.2
    %
    
    $
    493,658
 Total Loans at December 31, 2010(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
    
    $
    27,230
    
    
    
    3.5
    %
    
    $
    114,337
    
    
    
    14.6
    %
    
    $
    271,920
    
    
    
    34.6
    %
    
    $
    413,487Residential mortgage
    
    
    26,893
    
    
    
    3.4
    %
    
    
    74,722
    
    
    
    9.5
    %
    
    
    156,432
    
    
    
    19.9
    %
    
    
    258,047Construction
    
    
    15,191
    
    
    
    2.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    15,191Home equity loans
and lines
of credit
    
    
    15,435
    
    
    
    2.0
    %
    
    
    32,440
    
    
    
    4.1
    %
    
    
    
    
    
    
    0.0
    %
    
    
    47,875Commercial business loans
    
    
    46,606
    
    
    
    5.9
    %
    
    
    987
    
    
    
    0.1
    %
    
    
    630
    
    
    
    0.1
    %
    
    
    48,223Other consumer loans
    
    
    1,228
    
    
    
    0.2
    %
    
    
    979
    
    
    
    0.1
    %
    
    
    
    
    
    
    0.0
    %
    
    
    2,207Total loans
    
    $
    132,583
    
    
    
    17.0
    %
    
    $
    223,465
    
    
    
    28.4
    %
    
    $
    428,982
    
    
    
    54.6
    %
    
    $
    785,030
  10




---



##### Table of Contents



Fixed Rate at December 31, 2009(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
 Adjustable Rate at December 31, 2009(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
 Total Loans at December 31, 2009(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
  11




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##### Table of Contents



Commercial Loan Concentrations
December 31, 2010
 Accomodation and Food Services
    
    
    29.4
    %Real Estate and Rental and Leasing
    
    
    23.8
    %Retail Trade
    
    
    11.3
    %Health Care and Social Assistance
    
    
    6.9
    %Construction
    
    
    6.7
    %Arts, Entertainment and Recreation
    
    
    6.5
    %Other Services
    
    
    5.8
    %Professional, Scientific, Technical and Information Services
    
    
    2.5
    %Agriculture, Forestry, Fishing and Hunting
    
    
    1.9
    %Transportation and Warehousing
    
    
    1.4
    %Wholesale Trade
    
    
    1.2
    %Manufacturing
    
    
    1.1
    %Administrative, Educational and Support Services
    
    
    0.8
    %Finance and Insurance
    
    
    0.7
    %100.0
    %
 Commercial Mortgage Loans .
 The Wall Street Journal
  12




---



##### Table of Contents



Risk
Factors  Our Emphasis on Commercial Real Estate and Commercial Business Loans May Continue to
Expose us to Increased Lending Risks
   One-to-Four Family Residential Mortgage Loans .
   13




---



##### Table of Contents



At December 31,2010
    
    
    2009Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(dollars in thousands)Single Family Mortgage Loans
    
    $
    243,902
    
    
    
    94.5
    %
    
    $
    228,964
    
    
    
    93.5
    %Multi-Family Mortgage Loans
    
    
    14,145
    
    
    
    5.5
    %
    
    
    15,933
    
    
    
    6.5
    %Total
    
    $
    258,047
    
    
    
    100.0
    %
    
    $
    244,897
    
    
    
    100.0
    %
  At December 31,2010
    
    
    2009Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(dollars in thousands)Loan to Value greater than 80%
    
    $
    3,196
    
    
    
    1.2
    %
    
    $
    3,347
    
    
    
    1.4
    %Loan to Value less than or equal to 80%
    
    
    254,851
    
    
    
    98.8
    %
    
    
    241,550
    
    
    
    98.6
    %Total Residential Mortgage Loans
    
    $
    258,047
    
    
    
    100.0
    %
    
    $
    244,897
    
    
    
    100.0
    %
 (1)
    
    All loans with an original loan-to-value greater than 80% were single family loans for both
periods presented.  14




---



##### Table of Contents



Commercial Business Loans.
  Risk Factors  Our Emphasis on
Commercial Real Estate and Commercial Business Loans May Continue to Expose us to Increased Lending
Risks.
 Construction Loans
 Home Equity Loans and Lines of Credit. The Wall Street Journal
 Other Consumer Loans. Managements Discussion and Analysis of Financial Condition and Results of
OperationsManagement of Market Risk.
  15




---



##### Table of Contents



Loan Originations, Sales, Purchases and Participations
 Loan Underwriting.
   Correspondent Lending Relationships.
 Loan Approval Procedures and Authority.
  16




---



##### Table of Contents



Loans-to-One Borrower.
 Loan Commitments.
 Non-Performing and Problem Assets
 th th
   17




---



##### Table of Contents



Non-Performing Assets.
 At December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(dollars in thousands)Non-accrual loans:Real estate loans:Commercial mortgage (1)
    
    $
    27,781
    
    
    $
    25,132
    
    
    $
    12,117
    
    
    $
    3,887
    
    
    $
    3,381Residential mortgage
    
    
    2,449
    
    
    
    2,081
    
    
    
    692
    
    
    
    
    
    
    
    48Construction
    
    
    3,980
    
    
    
    1,298
    
    
    
    4,109
    
    
    
    
    
    
    
    Home equity and line of credit
    
    
    363
    
    
    
    398
    
    
    
    
    
    
    
    
    
    
    
    Commercial business loans
    
    
    6,254
    
    
    
    3,085
    
    
    
    3,287
    
    
    
    54
    
    
    
    141Other consumer loans
    
    
    
    
    
    
    
    
    
    
    92
    
    
    
    11
    
    
    
    16Total non-accrual loans
    
    
    40,827
    
    
    
    31,994
    
    
    
    20,297
    
    
    
    3,952
    
    
    
    3,586Loans greater than 90 days delinquent
and still accruing:Real estate loans:Commercial mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Residential mortgage
    
    
    2,207
    
    
    
    1,170
    
    
    
    504
    
    
    
    39
    
    
    
    225Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Home equity and line of credit
    
    
    432
    
    
    
    84
    
    
    
    250
    
    
    
    16
    
    
    
    Commercial business loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other consumer loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total loans 90 days and still
accruing
    
    
    2,639
    
    
    
    1,254
    
    
    
    754
    
    
    
    55
    
    
    
    225Total non-performing loans
    
    
    43,466
    
    
    
    33,248
    
    
    
    21,051
    
    
    
    4,007
    
    
    
    3,811Other real estate owned
    
    
    3,255
    
    
    
    4,817
    
    
    
    798
    
    
    
    
    
    
    
    Non-accrual investment securities
    
    
    71
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total non-performing assets
    
    $
    46,792
    
    
    $
    38,065
    
    
    $
    21,849
    
    
    $
    4,007
    
    
    $
    3,811Performing TDRs
    
    $
    7,732
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Ratios:Non-performing loans to total loans
    
    
    5.54
    %
    
    
    4.14
    %
    
    
    2.65
    %
    
    
    0.86
    %
    
    
    0.84
    %Non-performing assets to total assets
    
    
    4.41
    %
    
    
    3.55
    %
    
    
    2.00
    %
    
    
    0.63
    %
    
    
    0.62
    %
 (1)
    
    includes $11.8 million in non-accruing TDRs paying in accordance with restructured terms.   18




---



##### Table of Contents



Loans Delinquent For60-89 Days
    
    
    90 Days and Over
    
    
    TotalNumber
    
    
    Amount
    
    
    Number
    
    
    Amount
    
    
    Number
    
    
    Amount(dollars in thousands)At December 31, 2010Real estate loans:Commercial mortgage
    
    
    1
    
    
    $
    94
    
    
    
    46
    
    
    $
    18,250
    
    
    
    47
    
    
    $
    18,344Residential mortgage
    
    
    4
    
    
    
    477
    
    
    
    26
    
    
    
    4,655
    
    
    
    30
    
    
    
    5,132Construction
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    3,980
    
    
    
    9
    
    
    
    3,980Home equity loans and
lines of credit
    
    
    2
    
    
    
    103
    
    
    
    9
    
    
    
    795
    
    
    
    11
    
    
    
    898Commercial business loans
    
    
    0
    
    
    
    
    
    
    
    27
    
    
    
    4,031
    
    
    
    27
    
    
    
    4,031Other consumer loans
    
    
    2
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    16Total
    
    
    9
    
    
    $
    690
    
    
    
    117
    
    
    $
    31,711
    
    
    
    126
    
    
    $
    32,401At 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
    
    
    $
    4,096
  19




---



##### Table of Contents



Classification of Loans
        Other Real Estate Owned .
  20




---



##### Table of Contents



Allowance for Loan Losses
 Managements Discussion and Analysis of Financial Condition and Results of
Operations-Critical Accounting Policies-Allowance for Loan Losses.
   21




---



##### Table of Contents



At or For the Years ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(dollars in thousands)Balance at beginning of year
    
    $
    13,311
    
    
    $
    11,240
    
    
    $
    4,121
    
    
    $
    4,009
    
    
    $
    3,792Allowance from acquired entity
    
    
    
    
    
    
    
    
    
    
    3,791
    
    
    
    
    
    
    
    Charge-offs:Real estate loans:Commercial mortgage
    
    
    (4,159
    )
    
    
    (8,043
    )
    
    
    (2,406
    )
    
    
    
    
    
    
    Residential mortgage
    
    
    (677
    )
    
    
    (239
    )
    
    
    (572
    )
    
    
    
    
    
    
    Construction
    
    
    (1,160
    )
    
    
    (2,378
    )
    
    
    (1,806
    )
    
    
    
    
    
    
    Commercial business loans
    
    
    (2,751
    )
    
    
    (872
    )
    
    
    (786
    )
    
    
    (119
    )
    
    
    Other consumer loans
    
    
    (90
    )
    
    
    (124
    )
    
    
    (138
    )
    
    
    (113
    )
    
    
    (128
    )Total charge-offs
    
    
    (8,837
    )
    
    
    (11,656
    )
    
    
    (5,708
    )
    
    
    (232
    )
    
    
    (128
    )Recoveries:Real estate loans:Commercial mortgage
    
    
    436
    
    
    
    406
    
    
    
    
    
    
    
    
    
    
    
    Construction
    
    
    
    
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    Commercial business loans
    
    
    103
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    Other consumer loans
    
    
    29
    
    
    
    30
    
    
    
    27
    
    
    
    43
    
    
    
    33Total recoveries
    
    
    568
    
    
    
    568
    
    
    
    27
    
    
    
    43
    
    
    
    33Net (charge-offs) recoveries
    
    
    (8,269
    )
    
    
    (11,088
    )
    
    
    (5,681
    )
    
    
    (189
    )
    
    
    (95
    )Provision for loan losses
    
    
    7,496
    
    
    
    13,159
    
    
    
    9,009
    
    
    
    357
    
    
    
    312Reclassification to other liabilities for
reserve on off-balance sheet items
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (56
    )
    
    
    Balance at end of year
    
    $
    12,538
    
    
    $
    13,311
    
    
    $
    11,240
    
    
    $
    4,121
    
    
    $
    4,009Ratios:Net charge-offs to average loans
outstanding
    
    
    1.05
    %
    
    
    1.37
    %
    
    
    0.74
    %
    
    
    0.06
    %
    
    
    0.02
    %Allowance for loan losses to non-
performing loans at end of year
    
    
    28.84
    %
    
    
    40.04
    %
    
    
    53.39
    %
    
    
    102.85
    %
    
    
    105.20
    %Allowance for loan losses to total loans
at
end of year
    
    
    1.60
    %
    
    
    1.66
    %
    
    
    1.41
    %
    
    
    0.89
    %
    
    
    0.89
    %
  22




---



##### Table of Contents



Allocation of Allowance for Loan Losses.
 At December 31,2010
    
    
    2009
    
    
    2008Percent 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
    
    $
    9,809
    
    
    
    82.7
    %
    
    $
    9,571
    
    
    
    71.9
    %
    
    $
    6,829
    
    
    
    51.8
    %Residential mortgage
    
    
    879
    
    
    
    7.4
    %
    
    
    2,048
    
    
    
    15.4
    %
    
    
    1,696
    
    
    
    28.5Construction
    
    
    736
    
    
    
    6.2
    %
    
    
    388
    
    
    
    2.9
    %
    
    
    1,477
    
    
    
    6.8Home equity loans and lines
of credit
    
    
    195
    
    
    
    1.6
    %
    
    
    771
    
    
    
    5.8
    %
    
    
    346
    
    
    
    5.9Commercial business loans
    
    
    236
    
    
    
    2.0
    %
    
    
    492
    
    
    
    3.7
    %
    
    
    809
    
    
    
    6.8Other consumer loans
    
    
    13
    
    
    
    0.1
    %
    
    
    41
    
    
    
    0.3
    %
    
    
    83
    
    
    
    0.2Total allocated allowance
    
    
    11,868
    
    
    
    100.0
    %
    
    
    13,311
    
    
    
    100.0
    %
    
    
    11,240
    
    
    
    100.0
    %Unallocated
    
    
    670
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    12,538
    
    
    
    
    
    
    $
    13,311
    
    
    
    
    
    
    $
    11,240
 At December 31,2007
    
    
    2006Percent 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
    
    $
    2,381
    
    
    
    43.0
    %
    
    $
    2,165
    
    
    
    40.6
    %Residential mortgage
    
    
    978
    
    
    
    37.8
    
    
    
    1,071
    
    
    
    40.7Construction
    
    
    336
    
    
    
    8.3
    
    
    
    370
    
    
    
    8.6Home equity loans and lines of credit
    
    
    208
    
    
    
    8.0
    
    
    
    222
    
    
    
    8.2Commercial business loans
    
    
    97
    
    
    
    
    
    
    
    79
    
    
    
    1.7Other consumer loans
    
    
    121
    
    
    
    2.6
    
    
    
    102
    
    
    
    0.2Total allocated allowance
    
    
    4,121
    
    
    
    0.3
    
    
    
    4,009
    
    
    
    100.0
    %Unallocated
    
    
    
    
    
    
    100.0
    %
    
    
    Total
    
    $
    4,121
    
    
    
    
    
    
    $
    4,009
 Investment Activities
    23




---



##### Table of Contents



Municipal Securities.
 U.S. Government and Federal Agency Obligations.
 Mortgage-Backed Securities.
    24




---



##### 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
  25




---



##### Table of Contents



Investment Securities Portfolio.
 At December 31,2010
    
    
    2009
    
    
    2008Amortized
    
    
    
    
    
    
    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
    
    $
    72,470
    
    
    $
    71,735
    
    
    $
    46,004
    
    
    $
    45,972
    
    
    $
    31,296
    
    
    $
    31,766Corporate bonds
    
    
    17,994
    
    
    
    18,135
    
    
    
    10,851
    
    
    
    11,046
    
    
    
    4,975
    
    
    
    4,777Municipal bonds
    
    
    25,811
    
    
    
    25,406
    
    
    
    33,901
    
    
    
    34,381
    
    
    
    11,024
    
    
    
    10,715Collateralized debt obligations
    
    
    9,715
    
    
    
    1,134
    
    
    
    13,038
    
    
    
    1,456
    
    
    
    11,832
    
    
    
    3,033Mortgage-backed securities:GNMA pass-through certificates
    
    
    2,318
    
    
    
    2,368
    
    
    
    677
    
    
    
    693
    
    
    
    773
    
    
    
    763FHLMC pass-through certificates
    
    
    3,299
    
    
    
    3,433
    
    
    
    5,338
    
    
    
    5,513
    
    
    
    20,449
    
    
    
    20,771FNMA pass-through certificates
    
    
    16,542
    
    
    
    17,266
    
    
    
    26,612
    
    
    
    27,588
    
    
    
    33,465
    
    
    
    33,397Collateralized mortgage obligations
    
    
    17,728
    
    
    
    17,930
    
    
    
    26,514
    
    
    
    26,166
    
    
    
    10,017
    
    
    
    9,433Total securities available-for-sale
    
    $
    165,877
    
    
    $
    157,407
    
    
    $
    162,935
    
    
    $
    152,815
    
    
    $
    123,831
    
    
    $
    114,655
 At December 31,2010
    
    
    2009
    
    
    2008Amortized
    
    
    
    
    
    
    Amortized
    
    
    
    
    
    
    AmortizedCost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair Value(in thousands)Investment securities
held-to-maturity:Municipal bonds
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    24,582
    
    
    $
    25,154U.S. Government and agency obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mortgage-backed securities:GNMA pass-through certificates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    18FHLMC pass-through certificates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,670
    
    
    
    2,715FNMA pass-through certificates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,897
    
    
    
    11,203Collateralized mortgage obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,922
    
    
    
    10,111Grantor Trust (money market fund)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    737
    
    
    
    737Total securities held-to-maturity
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    48,825
    
    
    $
    49,938
   26




---



##### 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
    
    $
    3,000
    
    
    
    1.22
    %
    
    $
    67,470
    
    
    
    1.56
    %
    
    $
    2,000
    
    
    
    2.00
    %
    
    $
    
    
    
    $
    
    
    
    $
    72,470
    
    
    $
    71,735
    
    
    
    1.56
    %Corporate bonds
    
    
    2,517
    
    
    
    2.75
    %
    
    
    15,477
    
    
    
    2.44
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,994
    
    
    
    18,135
    
    
    
    2.48
    %Municipal bonds
    
    
    2,013
    
    
    
    3.35
    %
    
    
    7,521
    
    
    
    3.56
    %
    
    
    6,105
    
    
    
    3.70
    %
    
    
    10,172
    
    
    
    4.48
    %
    
    
    25,811
    
    
    
    25,406
    
    
    
    3.94
    %Collateralized debt
obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,715
    
    
    
    2.41
    %
    
    
    9,715
    
    
    
    1,134
    
    
    
    2.41
    %Mortgage-backed
securities:GNMA pass-through
certificates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    180
    
    
    
    3.52
    %
    
    
    2,138
    
    
    
    4.36
    %
    
    
    2,318
    
    
    
    2,368
    
    
    
    4.29
    %FHLMC pass-through
certificates
    
    
    7
    
    
    
    6.94
    %
    
    
    297
    
    
    
    5.26
    %
    
    
    5
    
    
    
    1.97
    %
    
    
    2,990
    
    
    
    3.53
    %
    
    
    3,299
    
    
    
    3,433
    
    
    
    3.69
    %FNMA pass-through
certificates
    
    
    1,839
    
    
    
    6.20
    %
    
    
    294
    
    
    
    5.17
    %
    
    
    2,756
    
    
    
    4.86
    %
    
    
    11,653
    
    
    
    4.39
    %
    
    
    16,542
    
    
    
    17,266
    
    
    
    4.68
    %Collateralized
mortgage
obligations
    
    
    
    
    
    
    
    
    
    
    3,138
    
    
    
    3.77
    %
    
    
    1,831
    
    
    
    4.56
    %
    
    
    12,759
    
    
    
    3.23
    %
    
    
    17,728
    
    
    
    17,930
    
    
    
    3.46
    %Total securities
available-for-sale
    
    $
    9,376
    
    
    
    3.07
    %
    
    $
    94,197
    
    
    
    1.96
    %
    
    $
    12,877
    
    
    
    3.80
    %
    
    $
    49,427
    
    
    
    3.67
    %
    
    $
    165,877
    
    
    $
    157,407
    
    
    
    2.68
    %
  27




---



##### Table of Contents



Deposit Activities and Other Sources of Funds
 General .
 Deposit Accounts . ®
    28




---



##### Table of Contents



For the year ended December 31,2010
    
    
    2009Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Percent
    
    
    Rate
    
    
    Balance
    
    
    Percent
    
    
    Rate(dollars in thousands)Non-interest bearing
    
    $
    69,439
    
    
    
    9.0
    %
    
    
    n/a
    
    
    $
    68,364
    
    
    
    9.0
    %
    
    
    n/aSavings accounts
    
    
    82,146
    
    
    
    10.7
    
    
    
    0.38
    %
    
    
    80,248
    
    
    
    10.6
    
    
    
    0.48
    %NOW and money market
    
    
    270,206
    
    
    
    35.2
    
    
    
    0.80
    %
    
    
    236,984
    
    
    
    31.3
    
    
    
    0.89
    %Certificates of deposit
    
    
    346,322
    
    
    
    45.1
    
    
    
    1.77
    %
    
    
    371,664
    
    
    
    49.1
    
    
    
    2.66
    %Total deposits
    
    $
    768,113
    
    
    
    100.0
    %
    
    
    1.12
    %
    
    $
    757,260
    
    
    
    100.0
    %
    
    
    1.64
    %
 For the year ended December 31,2008WeightedAverage
    
    
    
    
    
    
    AverageBalance
    
    
    Percent
    
    
    Rate(dollars in thousands)Non-interest bearing
    
    $
    68,158
    
    
    
    9.4
    %
    
    
    n/aSavings accounts
    
    
    82,309
    
    
    
    11.3
    
    
    
    1.29
    %NOW and money market
    
    
    224,647
    
    
    
    30.8
    
    
    
    1.81
    %Certificates of deposit
    
    
    353,501
    
    
    
    48.5
    
    
    
    3.55
    %Total deposits
    
    $
    728,615
    
    
    
    100.0
    %
    
    
    2.43
    %
  29




---



##### Table of Contents



At December 31,2010
    
    
    2009
    
    
    2008(in thousands)Interest RateLess than 2.00%
    
    $
    232,374
    
    
    $
    162,486
    
    
    $
    22,3822.00%  2.99%
    
    
    38,270
    
    
    
    113,358
    
    
    
    79,1793.00%  3.99%
    
    
    10,405
    
    
    
    23,881
    
    
    
    170,5654.00%  4.99%
    
    
    23,066
    
    
    
    33,737
    
    
    
    74,6565.00%  5.99%
    
    
    2,668
    
    
    
    3,449
    
    
    
    9,4036.00%  6.99%
    
    
    
    
    
    
    
    
    
    
    8Total
    
    $
    306,783
    
    
    $
    336,911
    
    
    $
    356,193
  Period to Maturity at December 31, 2010Less Than
    
    
    More Than
    
    
    More Than
    
    
    More Than
    
    
    Moreor Equal to
    
    
    One to Two
    
    
    Two to
    
    
    Three to
    
    
    Than Foura Year
    
    
    Years
    
    
    Three Years
    
    
    Four Years
    
    
    Years
    
    
    Total(in thousands)Interest RateLess than 2.00%
    
    $
    203,821
    
    
    $
    23,175
    
    
    $
    3,183
    
    
    $
    974
    
    
    $
    1,221
    
    
    $
    232,3742.00%  2.99%
    
    
    4,234
    
    
    
    18,228
    
    
    
    4,911
    
    
    
    1,269
    
    
    
    9,628
    
    
    
    38,2703.00%  3.99%
    
    
    4,183
    
    
    
    1,055
    
    
    
    2,318
    
    
    
    2,276
    
    
    
    573
    
    
    
    10,4054.00%  4.99%
    
    
    7,241
    
    
    
    7,731
    
    
    
    8,094
    
    
    
    
    
    
    
    
    
    
    
    23,0665.00%  5.99%
    
    
    1,065
    
    
    
    1,603
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,668Total
    
    $
    220,544
    
    
    $
    51,792
    
    
    $
    18,506
    
    
    $
    4,519
    
    
    $
    11,422
    
    
    $
    306,783
  At December 31, 2010(in thousands)MaturitiesThree months or less
    
    $
    47,871Over three months through six months
    
    
    33,462Over six months through one year
    
    
    24,120Over one year to three years
    
    
    24,073Over three years
    
    
    6,733Total
    
    $
    136,259
 Borrowings .
  30




---



##### Table of Contents



2010FHLB
    
    
    RepurchaseBorrowings
    
    
    Agreements
    
    
    Total(dollars in thousands)Average daily balance during the year
    
    $
    123,307
    
    
    $
    37,594
    
    
    $
    160,901Average interest rate during the year
    
    
    3.49
    %
    
    
    4.30
    %
    
    
    3.68
    %Maximum month-end balance during the year
    
    $
    165,182
    
    
    $
    37,605
    
    
    $
    202,787Weighted average interest rate at year-end
    
    
    3.09
    %
    
    
    3.46
    %
    
    
    3.36
    %
 Personnel
  SUPERVISION AND REGULATION
 General
    31




---



##### Table of Contents



New Jersey Banking Regulation
 Activity Powers.
 Federal Banking
RegulationActivity Restrictions on State-Chartered Banks
  32




---



##### Table of Contents



Loan-to-One Borrower Limitations.
 Dividends. Federal Banking RegulationPrompt Corrective Action
 Minimum Capital Requirements. Federal Banking RegulationCapital Requirements.
 Examination and Enforcement.
 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.
  33




---



##### Table of Contents




    
    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 pre-tax net unrealized holding gains on available-for-sale equity
securities with readily determinable fair market values.
    
    
    the quality of the banks interest rate risk management process;
 
    
    the overall financial condition of the bank; and
 
    
    the level of other risks at the bank for which capital is needed.
   Activity Restrictions on State-Chartered Banks.
  34




---



##### Table of Contents



Federal Home Loan Bank System.
 Enforcement.
 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.
  35




---



##### Table of Contents




    
    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.
  Insurance of Deposit Accounts. Temporary Liquidity
Guarantee Program.
  36




---



##### Table of Contents



Temporary Liquidity Guarantee Program.
  37




---



##### 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.
   38




---



##### Table of Contents



Prohibitions Against Tying Arrangements.
 Community Reinvestment Act and Fair Lending Laws.
 Loans to a Banks Insiders
 Federal Regulation. New Jersey Banking
RegulationLoans to One Borrower Limitation.
   New Jersey Regulation.
  39




---



##### Table of Contents



The USA PATRIOT Act
  Sarbanes-Oxley Act of 2002
  Holding Company Regulation
 General.
   i.e.
  40




---



##### Table of Contents



Acquisition of Control.
  Qualified Thrift Lender Test.
  41




---



##### Table of Contents



Federal Securities Laws
   
 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.
  Continuing Weakness in the Financial Services Industry And the Credit Markets May Subject Us to
Additional Regulation.
   42




---



##### Table of Contents



Our Emphasis on Commercial Real Estate Loans and Commercial Business Loans May Continue to Expose
us to Increased Lending Risks.
  BusinessLending Activities
 Our Continuing Concentration of Loans in Our Primary Market Area May Increase Our Risk.
   a.
    
    casino revenue in total was down 9.6% in 2010 from 2009;b.
    
    all 11 casinos had revenue declines during the period 2009 to 2010;c.
    
    2010 was the worst year for casino revenue during the past 10 years;d.
    
    employment levels at the casinos has declined consistently since 2007;e.
    
    visitors to Atlantic City have declined consistently from 2007 to 2009
(2010 data not yet available); andf.
    
    2009 net income per casino indicates that 7 of 11 casinos reported losses for the year.
   43




---



##### Table of Contents



a.
    
    Established a New Jersey State-run Tourism District within
Atlantic City.b.
    
    Tax reimbursement incentives for the Revel Casino (assuming
financing is obtained by the Revel) up to $261 million of which $125 million
will be used to fund various upgrades to the Boardwalk and other parts of the
city that surround the Revel Casino. These tax incentives are being provided
by New Jerseys Economic Development Authority under the Economic
Re-development and Growth Grant Program which is designated to stimulate jobs
and investment. It is anticipated the construction of the Revel Casio will
create 2,000 construction jobs and upon completion, which is estimated to be
June 2012, 5,500 full time positions will be created.c.
    
    Consideration of permitting small (minimum 200 rooms and gaming
floor area of 24,000 square feet) casino hotels in Atlantic City, and interest
in this market has been expressed by certain companies.d.
    
    Casino Reinvestment Development Authority (CRDA) will oversee
operations of the Atlantic City Convention and Visitors Authority.e.
    
    A discount shopping outlet in Atlantic City is expanding and the
CRDA is assisting with this project by lending the developer $9 million
towards this project.
 Future Changes in Interest Rates Could Reduce Our Profits
    Net Interest
Income Analysis,
   44




---



##### Table of Contents



Item 7, Managements
Discussion and Analysis of Financial Condition and Results of OperationsManagement of Market
Risk.
 An Inadequate Allowance for Loan Losses Would Negatively Affect Our Results of Operations.
  Future Legislative or Regulatory Actions Responding to Perceived Financial and Market Problems
Could Impair Our Rights Against Borrowers
   45




---



##### Table of Contents



We Are Subject to Extensive Regulatory Oversight
  The Need to Account for Assets at Market Prices May Adversely Affect Our Results of Operations.
  Other-Than-Temporary Impairment (OTTI) Could Reduce Our Earnings.
  Lack of Consumer Confidence in Financial Institutions May Decrease Our Level of Deposits.
  A Breach of Information Security Could Negatively Affect Our Earnings.
   46




---



##### Table of Contents



Changes in the Value of Goodwill and Intangible Assets Could Reduce Our Earnings.
  Our Expenses May Increase as a Result of Possible Increases in FDIC Insurance Premiums.
  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.
   47




---



##### Table of Contents



ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
  
 ITEM 2.
    
    PROPERTIES
  
 ITEM 3.
    
    LEGAL PROCEEDINGS
  
 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.
   48




---



##### Table of Contents



CAPE BANCORP
 
 Period EndingIndex
    
    02/01/08
    
    
    06/30/08
    
    
    12/31/08
    
    
    06/30/09
    
    
    12/31/09
    
    
    06/30/10
    
    
    12/31/10Cape Bancorp
    
    
    100.00
    
    
    
    97.01
    
    
    
    92.04
    
    
    
    85.87
    
    
    
    66.87
    
    
    
    71.14
    
    
    
    84.58NASDAQ Composite
    
    
    100.00
    
    
    
    95.38
    
    
    
    65.94
    
    
    
    77.13
    
    
    
    95.84
    
    
    
    89.50
    
    
    
    113.23SNL Mid-Atlantic Thrift Index
    
    
    100.00
    
    
    
    89.18
    
    
    
    76.78
    
    
    
    63.09
    
    
    
    73.23
    
    
    
    74.47
    
    
    
    84.07
  2010
    
    
    2009High
    
    
    Low
    
    
    High
    
    
    LowFirst Quarter
    
    $
    8.07
    
    
    $
    5.86
    
    
    $
    9.13
    
    
    $
    6.70Second Quarter
    
    $
    8.06
    
    
    $
    6.89
    
    
    $
    9.00
    
    
    $
    6.60Third Quarter
    
    $
    7.74
    
    
    $
    7.10
    
    
    $
    8.95
    
    
    $
    7.25Fourth Quarter
    
    $
    8.90
    
    
    $
    7.34
    
    
    $
    7.28
    
    
    $
    5.79
    49




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##### Table of Contents



ITEM 6.
    
    SELECTED FINANCIAL DATA
  At December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(in thousands)Selected Financial Condition Data:Total assets
    
    $
    1,061,042
    
    
    $
    1,072,821
    
    
    $
    1,090,735
    
    
    $
    613,811
    
    
    $
    609,764Cash and cash equivalents
    
    $
    14,997
    
    
    $
    13,513
    
    
    $
    22,501
    
    
    $
    15,631
    
    
    $
    17,492Investment securities available for sale, at fair value
    
    $
    157,407
    
    
    $
    152,815
    
    
    $
    114,655
    
    
    $
    62,128
    
    
    $
    62,484Investment securities held to maturity
    
    $
    
    
    
    $
    
    
    
    $
    48,825
    
    
    $
    45,140
    
    
    $
    38,731Loans held for sale
    
    $
    1,224
    
    
    $
    398
    
    
    $
    
    
    
    $
    350
    
    
    $
    766Loans, net
    
    $
    772,318
    
    
    $
    789,473
    
    
    $
    783,869
    
    
    $
    459,936
    
    
    $
    446,378Federal Home Loan Bank of New York stock, at cost
    
    $
    8,721
    
    
    $
    10,275
    
    
    $
    11,602
    
    
    $
    3,848
    
    
    $
    5,268Bank owned life insurance
    
    $
    28,252
    
    
    $
    27,210
    
    
    $
    26,446
    
    
    $
    15,421
    
    
    $
    14,503Deposits
    
    $
    753,068
    
    
    $
    736,587
    
    
    $
    711,130
    
    
    $
    465,648
    
    
    $
    435,829Borrowings
    
    $
    169,637
    
    
    $
    203,981
    
    
    $
    234,484
    
    
    $
    65,000
    
    
    $
    99,000Total stockholders equity
    
    $
    132,154
    
    
    $
    126,548
    
    
    $
    140,725
    
    
    $
    72,829
    
    
    $
    68,943
 Years ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(in thousands)Selected Operating Data:Interest income
    
    $
    50,269
    
    
    $
    54,533
    
    
    $
    58,127
    
    
    $
    36,629
    
    
    $
    34,357Interest expense
    
    
    14,539
    
    
    
    19,028
    
    
    
    24,253
    
    
    
    17,146
    
    
    
    14,875Net interest income
    
    
    35,730
    
    
    
    35,505
    
    
    
    33,874
    
    
    
    19,483
    
    
    
    19,482Provision for loan losses
    
    
    7,496
    
    
    
    13,159
    
    
    
    9,009
    
    
    
    357
    
    
    
    312Net interest income after
provision for loan losses
    
    
    28,234
    
    
    
    22,346
    
    
    
    24,865
    
    
    
    19,126
    
    
    
    19,170Non-interest income
    
    
    2,851
    
    
    
    932
    
    
    
    (10,793
    )
    
    
    3,992
    
    
    
    4,438Non-interest expense
    
    
    28,534
    
    
    
    29,168
    
    
    
    64,717
    
    
    
    18,391
    
    
    
    16,379Income (loss) before income tax expense
    
    
    2,551
    
    
    
    (5,890
    )
    
    
    (50,645
    )
    
    
    4,727
    
    
    
    7,229Income tax expense (benefit)
    
    
    (1,490
    )
    
    
    12,011
    
    
    
    (8,154
    )
    
    
    1,299
    
    
    
    2,228Net income (loss)
    
    $
    4,041
    
    
    $
    (17,901
    )
    
    $
    (42,491
    )
    
    $
    3,428
    
    
    $
    5,001
  50




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At or for the years ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Selected Financial Ratios and Other Data:Performance Ratios:Return on assets (ratio of net income to average
total assets)
    
    
    0.38
    %
    
    
    (1.64
    %)
    
    
    (3.86
    %)
    
    
    0.56
    %
    
    
    0.84
    %Return on equity (ratio of net income to average
equity)
    
    
    3.06
    %
    
    
    (12.89
    %)
    
    
    (24.47
    %)
    
    
    4.81
    %
    
    
    7.58
    %Earnings (loss) per share
    
    $
    0.33
    
    
    $
    (1.45
    )
    
    $
    (3.49
    )
    
    
    n/a
    
    
    
    n/aAverage interest rate spread (1)
    
    
    3.46
    %
    
    
    3.27
    %
    
    
    3.14
    %
    
    
    3.02
    %
    
    
    3.14
    %Net interest margin (2)
    
    
    3.66
    %
    
    
    3.54
    %
    
    
    3.48
    %
    
    
    3.50
    %
    
    
    3.56
    %Efficiency ratio (3)
    
    
    68.59
    %
    
    
    69.19
    %
    
    
    167.31
    %
    
    
    78.34
    %
    
    
    68.47
    %Non-interest expense to average total assets
    
    
    2.68
    %
    
    
    2.67
    %
    
    
    5.87
    %
    
    
    2.99
    %
    
    
    2.74
    %Average interest-earning assets to average
interest-bearing liabilities
    
    
    113.67
    %
    
    
    114.11
    %
    
    
    113.67
    %
    
    
    115.76
    %
    
    
    115.73
    %Asset Quality Ratios:Non-performing assets to total assets
    
    
    4.41
    %
    
    
    3.55
    %
    
    
    1.93
    %
    
    
    0.63
    %
    
    
    0.62
    %Non-performing loans to total loans
    
    
    5.54
    %
    
    
    4.14
    %
    
    
    2.65
    %
    
    
    0.86
    %
    
    
    0.84
    %Allowance for loan losses to non-performing loans
    
    
    28.84
    %
    
    
    40.04
    %
    
    
    53.39
    %
    
    
    102.85
    %
    
    
    105.20
    %Allowance for loan losses to total loans
    
    
    1.60
    %
    
    
    1.66
    %
    
    
    1.41
    %
    
    
    0.89
    %
    
    
    0.89
    %Capital Ratios:Total capital (to risk-weighted assets)
    
    
    13.90
    %
    
    
    12.71
    %
    
    
    14.25
    %
    
    
    17.33
    %
    
    
    17.59
    %Tier I capital (to risk-weighted assets)
    
    
    12.65
    %
    
    
    11.45
    %
    
    
    13.00
    %
    
    
    16.34
    %
    
    
    16.59
    %Tier I capial (to average assets)
    
    
    9.96
    %
    
    
    9.37
    %
    
    
    9.87
    %
    
    
    11.11
    %
    
    
    11.00
    %Equity to assets
    
    
    12.46
    %
    
    
    11.80
    %
    
    
    12.90
    %
    
    
    11.49
    %
    
    
    11.31
    %Other Data:Number of full service offices
    
    
    17
    
    
    
    18
    
    
    
    18
    
    
    
    13
    
    
    
    13Full time equivalent employees
    
    
    205
    
    
    
    201
    
    
    
    202
    
    
    
    133
    
    
    
    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%  51




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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:
     52




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Managing non-performing assets to performing status or disposal:
     53




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##### Table of Contents



Managing net interest income in a potentially rising rate environment:
 Net Interest Income
Analysis,
 2011 Outlook
   Income .
  54




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##### Table of Contents



Allowance for Loan Losses .
    55




---



##### Table of Contents



Expenses.
   Anticipated Increase in Non-Interest Expense
 Note 13  Benefit Plans.
  Critical Accounting Policies
 Note 2 of the Notes to
Consolidated Financial Statements.
  56




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Allowance for Loan Losses.
  See Note 2  Summary of Significant Accounting Policies of the Notes
to Consolidated Financial Statements.
 Securities Impairment .
   57




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##### Table of Contents



Income Taxes .
   Business Strategy
  
    
    Pursuing loan growth, particularly commercial loans. Efforts will focus on both
Atlantic and Cape May counties and Burlington and Camden counties with the new loan
production office
    
    Using underwriting standards that will minimize the potential for future problem loans
    
    Returning to active engagement with both existing relationships and potential customers
    
    Being alert to opportunities to maintain non-interest income
    
    Originating residential mortgages both for sale and for the portfolio
 Pursuing loan growth, particularly commercial loans. Efforts will focus on both Atlantic and Cape
May counties and Burlington and Camden counties with the new loan production office.
    58




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Using underwriting standards that will minimize the potential for future problem loans
  Returning to active engagement with both existing relationships and potential customers
  Being alert to opportunities to maintain non-interest income
  Originating residential mortgages both for sale and for the portfolio
  Comparison of Financial Condition at December 31, 2010 and December 31, 2009
       59




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60




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##### Table of Contents



Comparison of Operating Results for the Years Ended December 31, 2010 and 2009
 General.
 Interest Income .
  Interest Expense.
   61




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##### Table of Contents



Net Interest Income.
 Provision for Loan Losses.
     62




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##### Table of Contents



Non-Interest Income.
 Non-Interest Expense .
 Income Tax Expense.
 Comparison of Operating Results for the Years Ended December 31, 2009 and 2008
 General.
  63




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##### Table of Contents



Interest Income .
  Interest Expense.
    64




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##### Table of Contents



Net Interest Income.
 Provision for Loan Losses.
      65




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##### Table of Contents



Non-Interest Income.
 Non-Interest Expense .
 Income Tax Expense.
  66




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##### Table of Contents



For the Years Ended December 31,2010
    
    
    2009
    
    
    2008Interest
    
    
    
    
    
    
    
    
    
    
    Interest
    
    
    
    
    
    
    
    
    
    
    InterestAverage
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    AverageBalance
    
    
    Expense
    
    
    Yield
    
    
    Balance
    
    
    Expense
    
    
    Yield
    
    
    Balance
    
    
    Expense
    
    
    Yield(dollars in thousands)AssetsInterest-earning deposits
    
    $
    16,727
    
    
    $
    157
    
    
    
    0.94
    %
    
    $
    13,212
    
    
    $
    230
    
    
    
    1.74
    %
    
    $
    10,024
    
    
    $
    275
    
    
    
    2.74
    %Investments
    
    
    171,213
    
    
    
    4,980
    
    
    
    2.91
    %
    
    
    184,578
    
    
    
    7,742
    
    
    
    4.19
    %
    
    
    193,921
    
    
    
    9,854
    
    
    
    5.08
    %Loans
    
    
    789,101
    
    
    
    45,132
    
    
    
    5.72
    %
    
    
    806,586
    
    
    
    46,561
    
    
    
    5.77
    %
    
    
    768,458
    
    
    
    47,998
    
    
    
    6.25
    %Total interest-earning assets
    
    
    977,041
    
    
    
    50,269
    
    
    
    5.15
    %
    
    
    1,004,376
    
    
    
    54,533
    
    
    
    5.43
    %
    
    
    972,403
    
    
    
    58,127
    
    
    
    5.98
    %Noninterest-earning assets
    
    
    102,325
    
    
    
    
    
    
    
    
    
    
    
    101,894
    
    
    
    
    
    
    
    
    
    
    
    138,464Allowance for loan losses
    
    
    (12,739
    )
    
    
    
    
    
    
    
    
    
    
    (12,268
    )
    
    
    
    
    
    
    
    
    
    
    (8,955
    )Total assets
    
    $
    1,066,627
    
    
    
    
    
    
    
    
    
    
    $
    1,094,002
    
    
    
    
    
    
    
    
    
    
    $
    1,101,912Liabilities and Stockholders
EquityInterest-bearing demand accounts
    
    $
    114,917
    
    
    
    401
    
    
    
    0.35
    %
    
    $
    108,665
    
    
    
    414
    
    
    
    0.38
    %
    
    $
    106,826
    
    
    
    1,030
    
    
    
    0.96
    %Savings accounts
    
    
    82,146
    
    
    
    316
    
    
    
    0.38
    %
    
    
    80,248
    
    
    
    385
    
    
    
    0.48
    %
    
    
    82,309
    
    
    
    1,062
    
    
    
    1.29
    %Money market accounts
    
    
    155,289
    
    
    
    1,767
    
    
    
    1.14
    %
    
    
    128,319
    
    
    
    1,705
    
    
    
    1.33
    %
    
    
    117,821
    
    
    
    3,029
    
    
    
    2.57
    %Certificates of deposit
    
    
    346,323
    
    
    
    6,138
    
    
    
    1.77
    %
    
    
    371,664
    
    
    
    9,886
    
    
    
    2.66
    %
    
    
    353,501
    
    
    
    12,562
    
    
    
    3.55
    %Borrowings
    
    
    160,901
    
    
    
    5,917
    
    
    
    3.68
    %
    
    
    191,256
    
    
    
    6,638
    
    
    
    3.47
    %
    
    
    193,203
    
    
    
    6,570
    
    
    
    3.40
    %Total interest-bearing liabilities
    
    
    859,576
    
    
    
    14,539
    
    
    
    1.69
    %
    
    
    880,152
    
    
    
    19,028
    
    
    
    2.16
    %
    
    
    853,660
    
    
    
    24,253
    
    
    
    2.84
    %Noninterest-bearing deposits
    
    
    69,438
    
    
    
    
    
    
    
    
    
    
    
    68,364
    
    
    
    
    
    
    
    
    
    
    
    68,158Other liabilities
    
    
    5,647
    
    
    
    
    
    
    
    
    
    
    
    6,603
    
    
    
    
    
    
    
    
    
    
    
    6,417Total liabilities
    
    
    934,661
    
    
    
    
    
    
    
    
    
    
    
    955,119
    
    
    
    
    
    
    
    
    
    
    
    928,235Stockholders equity
    
    
    131,966
    
    
    
    
    
    
    
    
    
    
    
    138,883
    
    
    
    
    
    
    
    
    
    
    
    173,677Total liabilities and
stockholders equity
    
    $
    1,066,627
    
    
    
    
    
    
    
    
    
    
    $
    1,094,002
    
    
    
    
    
    
    
    
    
    
    $
    1,101,912Net interest income
    
    
    
    
    
    $
    35,730
    
    
    
    
    
    
    
    
    
    
    $
    35,505
    
    
    
    
    
    
    
    
    
    
    $
    33,874Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.46
    %
    
    
    
    
    
    
    
    
    
    
    3.27
    %
    
    
    
    
    
    
    
    
    
    
    3.14
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.66
    %
    
    
    
    
    
    
    
    
    
    
    3.54
    %
    
    
    
    
    
    
    
    
    
    
    3.48
    %Net interest income and margin
(tax equivalent basis) (1)
    
    
    
    
    
    $
    36,314
    
    
    
    3.72
    %
    
    
    
    
    
    $
    36,155
    
    
    
    3.60
    %
    
    
    
    
    
    $
    34,441
    
    
    
    3.54
    %Ratio of average interest-earning
assets to average
interest-bearing liabilities
    
    
    113.67
    %
    
    
    
    
    
    
    
    
    
    
    114.11
    %
    
    
    
    
    
    
    
    
    
    
    113.91
    %
 
 (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 $584,000, $650,000 and $567,000 for the
years ended December 31, 2010, 2009 and 2008 respectively. The average yield on investments increased to 3.25% from 2.91%
for the year ended December 31, 2010, increased to 4.55% from 4.19% for the year ended December 31, 2009, and increased to
5.52% from 5.08% for the year ended December 31, 2008.
  67




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Rate/Volume Analysis
  For the Year Ended December 31, 2010
    
    
    For the Year Ended December 31, 2009Compared to December 31, 2009
    
    
    Compared to December 31, 2008Increase (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
    
    $
    51
    
    
    $
    (124
    )
    
    $
    (73
    )
    
    $
    73
    
    
    $
    (118
    )
    
    $
    (45
    )Investments
    
    
    (532
    )
    
    
    (2,230
    )
    
    
    (2,762
    )
    
    
    (487
    )
    
    
    (1,625
    )
    
    
    (2,112
    )Loans
    
    
    (1,100
    )
    
    
    (329
    )
    
    
    (1,429
    )
    
    
    2,256
    
    
    
    (3,693
    )
    
    
    (1,437
    )Total interest income
    
    
    (1,581
    )
    
    
    (2,683
    )
    
    
    (4,264
    )
    
    
    1,842
    
    
    
    (5,436
    )
    
    
    (3,594
    )Interest-Bearing LiabilitiesInterest-bearing demand accounts
    
    
    23
    
    
    
    (36
    )
    
    
    (13
    )
    
    
    18
    
    
    
    (634
    )
    
    
    (616
    )Savings accounts
    
    
    9
    
    
    
    (78
    )
    
    
    (69
    )
    
    
    (26
    )
    
    
    (651
    )
    
    
    (677
    )Money market accounts
    
    
    325
    
    
    
    (263
    )
    
    
    62
    
    
    
    248
    
    
    
    (1,572
    )
    
    
    (1,324
    )Certificates of deposit
    
    
    (640
    )
    
    
    (3,108
    )
    
    
    (3,748
    )
    
    
    612
    
    
    
    (3,288
    )
    
    
    (2,676
    )Borrowings
    
    
    (1,111
    )
    
    
    390
    
    
    
    (721
    )
    
    
    (72
    )
    
    
    140
    
    
    
    68Total interest expense
    
    
    (1,394
    )
    
    
    (3,095
    )
    
    
    (4,489
    )
    
    
    780
    
    
    
    (6,005
    )
    
    
    (5,225
    )Total net interest income
    
    $
    (187
    )
    
    $
    412
    
    
    $
    225
    
    
    $
    1,062
    
    
    $
    569
    
    
    $
    1,631
 Management of Market Risk
 General
  
    
    originating commercial loans that generally tend to have shorter repricing or reset
periods and higher interest rates than residential mortgage loans;
 
    
    investing in shorter duration investment grade corporate securities, U.S. Government
agency obligations and mortgage-backed securities;
 
    
    obtaining general financing through lower cost deposits, brokered deposits and
advances from the Federal Home Loan Bank;
 
    
    originating adjustable rate and short-term consumer loans;
 
    
    selling a portion of our long-term residential mortgage loans; and
 
    
    lengthening the terms of borrowings and deposits.
   68




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##### Table of Contents



Net Portfolio Value Analysis .
 Net Interest Income Analysis.
  Net Portfolio Value
    
    
    Net Interest IncomeChanges in
    
    
    
    
    
    Increase (decrease) in
    
    
    
    
    
    
    Increase (decrease) inInterest Rates
    
    Estimated NPV
    
    
    Estimated NPV
    
    
    Estimated Net
    
    
    Estimated Net Interest Income(basis points) (1)
    
    (2)
    
    
    Amount
    
    
    Percent
    
    
    Interest Income
    
    
    Amount
    
    
    Percent(dollars in thousands)+200
    
    $
    170,683
    
    
    $
    (8,753
    )
    
    
    -4.88
    %
    
    $
    34,282
    
    
    $
    (2,220
    )
    
    
    -6.08
    %+100
    
    $
    176,765
    
    
    $
    (2,671
    )
    
    
    -1.49
    %
    
    $
    35,457
    
    
    $
    (1,045
    )
    
    
    -2.86
    %0
    
    $
    179,436
    
    
    
    
    
    
    
    
    
    
    $
    36,502-100
    
    $
    164,098
    
    
    $
    (15,338
    )
    
    
    -8.55
    %
    
    $
    37,866
    
    
    $
    1,364
    
    
    
    3.74
    %-200
    
    $
    148,525
    
    
    $
    (30,911
    )
    
    
    -17.23
    %
    
    $
    36,027
    
    
    $
    (475
    )
    
    
    -1.30
    %
 (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.
    69




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##### Table of Contents



Liquidity and Capital Resources
    Supervision and RegulationFederal
Banking RegulationCapital Requirements Note 15, Regulatory Matters of the Notes to
Consolidated Financial Statements.
 Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
 Commitments. see Note 12, Financial
Instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk of the Notes to
Consolidated Financial Statements.
 Contractual Obligations.
  70




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##### Table of Contents



Payments Due by PeriodLess Than
    
    
    One to Three
    
    
    Three to Five
    
    
    More thanContractual Obligations
    
    One Year
    
    
    Years
    
    
    Years
    
    
    Five Years
    
    
    Total(in thousands)Borrowings
    
    $
    45,600
    
    
    $
    45,000
    
    
    $
    45,000
    
    
    $
    34,037
    
    
    $
    169,637Operating leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capitalized leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Certificates of deposit
    
    
    220,544
    
    
    
    70,298
    
    
    
    15,941
    
    
    
    
    
    
    
    306,783Other long-term liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    266,144
    
    
    $
    115,298
    
    
    $
    60,941
    
    
    $
    34,037
    
    
    $
    476,420Commitments to extend
credit
    
    $
    73,647
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    73,647
 Impact of Inflation and Changing Prices
  
 ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 Item 7- Managements Discussion and Analysis of
Financial Condition and Results of Operation.
 
 ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
   71




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##### Table of Contents



ITEM 9A.
    
    CONTROLS AND PROCEDURES
            
 ITEM 9B.
    
    OTHER INFORMATION
  
 PART III
 
 ITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Proposal IElection of
Directors
  72




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##### Table of Contents



ITEM 11.
    
    EXECUTIVE COMPENSATION
 Executive Compensation
 
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 Voting Securities
and Principal Holder Thereof
 
 ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 Transactions with Certain Related
Persons
 
 ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Proposal II-Ratification of
Appointment of Auditors
 
 PART IV
 
 ITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 Financial Statements
  (A)
    
    Report of Independent Registered Public Accounting Firm
 (B)
    
    Consolidated Balance Sheets as of December 31, 2010 and 2009
 (C)
    
    Consolidated Statements of Income for the years ended December
31, 2010, 2009 and 2008
 (D)
    
    Consolidated Statements of Changes in Equity for the years
ended December 31, 2010, 2009 and 2008
 (E)
    
    Consolidated Statements of Cash Flows for the years ended
December 31, 2010, 2009 and 2008
 (F)
    
    Notes to Consolidated Financial Statements.
  73




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##### Table of Contents



Financial Statement Schedules
  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 Robert J. Boyer (3)10.3
    
    
    Employment Agreement for Michael D. Devlin (4)10.4
    
    
    Change in Control Agreement for Guy Hackney (4)10.5
    
    
    Change in Control Agreement for James McGowan, Jr. (4)10.6
    
    
    Change in Control Agreement for Michele Pollack (4)10.7
    
    
    Change in Control Agreement for Donald Dodson (4)10.8
    
    
    Form of Director Retirement Plan (1)10.9
    
    
    2008 Equity Incentive Plan (5)14
    
    
    Code of Ethics (6)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 Current Report filed on November 4, 2010,
indicating that such agreement would not be renewed.(4)
    
    Incorporated by reference to the Companys Current Report filed on October 6, 2010.(5)
    
    Incorporated by reference to the Companys Definitive Proxy Statement filed with the
Securities and Exchange Commission on July 16, 2008.(6)
    
    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.  74




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##### Table of Contents



SIGNATURES
  CAPE BANCORP, INC.Date: March 11, 2011
    By:
    /s/ Michael D. DevlinMichael D. DevlinChief Executive Officer and President
(Duly Authorized Representative)  Signatures
    
    Title
    
    Date/s/ Michael D. Devlin
    
    Chief Executive Officer and President
    
    March 11, 2011Michael D. Devlin
    
    (Principal Executive Officer)/s/ Guy Hackney
    
    Chief Financial Officer
    
    March 11, 2011Guy Hackney
    
    (Principal Financial and Accounting Officer)/s/ James J. Lynch
    
    Director
    
    March 11, 2011James J. Lynch/s/ Roy Goldberg
    
    Director
    
    March 11, 2011Roy Goldberg/s/ Mark A. Benevento
    
    Director
    
    March 11, 2011Mark A. Benevento/s/ Agostino R. Fabietti
    
    Director
    
    March 11, 2011Agostino R. Fabietti/s/ Robert F. Garrett, III
    
    Director
    
    March 11, 2011Robert F. Garrett, III/s/ Frank J. Glaser
    
    Director
    
    March 11, 2011Frank J. Glaser/s/ Louis H Griesbach, Jr.
    
    Director
    
    March 11, 2011Louis H. Griesbach, Jr./s/ David C. Ingersoll, Jr.
    
    Director
    
    March 11, 2011David C. Ingersoll, Jr./s/ Joanne D. Kay
    
    Director
    
    March 11, 2011Joanne D. Kay/s/ Matthew J. Reynolds
    
    Director
    
    March 11, 2011Matthew J. Reynolds/s/ Thomas K. Ritter
    
    Director
    
    March 11, 2011Thomas K. Ritter
  75




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Financial StatementsConsolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    F-3Consolidated Statements of Income for the years ended December 31, 2010, 2009 and 2008
    
    
    F-4Consolidated Statements of Changes in Equity for the years ended December 31, 2010, 2009
and 2008
    
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7
   76




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
 Internal Control  Integrated
Framework Management Report on Internal Control over Financial Reporting
    Internal Control 
Integrated Framework
  (KPMG logo) 
  F-1




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Investments  Debt and Equity Securities),
 Internal Control  Integrated Framework .
 (KPMG sig) 
  F-2




---



##### Table of Contents



Crowe Horwath LLP
  
    
 
  F-3




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##### Table of Contents



December 31,2010
    
    
    2009(in thousands)ASSETSCash & due from financial institutions
    
    $
    10,181
    
    
    $
    9,573Interest-bearing bank balances
    
    
    4,816
    
    
    
    3,940Cash and cash equivalents
    
    
    14,997
    
    
    
    13,513Interest-bearing time deposits
    
    
    9,361
    
    
    
    7,451Investment securities available for sale, at fair value (amortized
cost of $165,877 and $162,935 respectively)
    
    
    157,407
    
    
    
    152,815Loans held for sale
    
    
    1,224
    
    
    
    398Loans, net of allowance of $12,538 and $13,311 respectively
    
    
    772,318
    
    
    
    789,473Accrued interest receivable
    
    
    4,029
    
    
    
    4,630Premises and equipment, net
    
    
    25,212
    
    
    
    26,383Other real estate owned
    
    
    3,255
    
    
    
    4,817Federal Home Loan Bank (FHLB) stock, at cost
    
    
    8,721
    
    
    
    10,275Prepaid FDIC insurance premium
    
    
    3,195
    
    
    
    4,377Deferred income taxes
    
    
    6,054
    
    
    
    3,956Bank owned life insurance (BOLI)
    
    
    28,252
    
    
    
    27,210Goodwill
    
    
    22,575
    
    
    
    22,575Intangible assets, net
    
    
    445
    
    
    
    585Assets held for sale
    
    
    479
    
    
    
    1,828Other assets
    
    
    3,518
    
    
    
    2,535Total assets
    
    $
    1,061,042
    
    
    $
    1,072,821LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesDepositsNoninterest-bearing deposits
    
    $
    68,267
    
    
    $
    62,365Interest-bearing deposits
    
    
    684,801
    
    
    
    674,222Borrowings
    
    
    169,637
    
    
    
    203,981Advances from borrowers for taxes and insurance
    
    
    554
    
    
    
    542Accrued interest payable
    
    
    714
    
    
    
    807Other liabilities
    
    
    4,915
    
    
    
    4,356Total liabilities
    
    
    928,888
    
    
    
    946,273Stockholders EquityCommon stock, $.01 par value: authorized 100,000,000 shares; issued
13,324,521
shares in 2010 and 13,313,521 shares in 2009; outstanding 13,313,521 shares
at December 31, 2010 and 2009
    
    
    133
    
    
    
    133Additional paid-in capital
    
    
    126,864
    
    
    
    126,695Treasury stock at cost - 11,000 shares
    
    
    (85
    )
    
    
    Unearned ESOP shares
    
    
    (9,380
    )
    
    
    (9,806
    )Accumulated other comprehensive loss, net
    
    
    (5,590
    )
    
    
    (6,645
    )Retained earnings
    
    
    20,212
    
    
    
    16,171Total stockholders equity
    
    
    132,154
    
    
    
    126,548Total liabilities & stockholders equity
    
    $
    1,061,042
    
    
    $
    1,072,821
   F-4




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##### Table of Contents



Years ended December 31,2010
    
    
    2009
    
    
    2008(dollars in thousands, except share data)Interest income:Interest on loans
    
    $
    45,132
    
    
    $
    46,561
    
    
    $
    47,998Interest and dividends on investmentsTaxable
    
    
    1,612
    
    
    
    2,961
    
    
    
    4,811Tax-exempt
    
    
    1,189
    
    
    
    1,359
    
    
    
    1,290Interest on mortgage-backed securities
    
    
    2,336
    
    
    
    3,652
    
    
    
    4,028Total interest income
    
    
    50,269
    
    
    
    54,533
    
    
    
    58,127Interest expense:Interest on deposits
    
    
    8,622
    
    
    
    12,390
    
    
    
    17,683Interest on borrowings
    
    
    5,917
    
    
    
    6,638
    
    
    
    6,570Total interest expense
    
    
    14,539
    
    
    
    19,028
    
    
    
    24,253Net interest income before provision for loan losses
    
    
    35,730
    
    
    
    35,505
    
    
    
    33,874Provision for loan losses
    
    
    7,496
    
    
    
    13,159
    
    
    
    9,009Net interest income (expense) after provision for loan losses
    
    
    28,234
    
    
    
    22,346
    
    
    
    24,865Non-interest income:Service fees
    
    
    3,427
    
    
    
    3,011
    
    
    
    3,202Net gains on sale of loans
    
    
    168
    
    
    
    130
    
    
    
    36Net income from BOLI
    
    
    1,042
    
    
    
    1,041
    
    
    
    1,005Net rental income
    
    
    233
    
    
    
    318
    
    
    
    342Gain on sale of investment securities held for sale, net
    
    
    832
    
    
    
    1,195
    
    
    
    40Net gain (loss) on sale of OREO
    
    
    271
    
    
    
    (323
    )
    
    
    1Gain (loss) on disposal of other assets
    
    
    30
    
    
    
    (7
    )
    
    
    (158
    )Other
    
    
    273
    
    
    
    700
    
    
    
    379Gross other-than-temporary impairment losses
    
    
    (5,382
    )
    
    
    (7,538
    )
    
    
    (15,640
    )Less: Portion of loss recognized in other comprehensive
income
    
    
    1,957
    
    
    
    2,405
    
    
    
    Net other-than-temporary impairment losses
    
    
    (3,425
    )
    
    
    (5,133
    )
    
    
    (15,640
    )Total non-interest income
    
    
    2,851
    
    
    
    932
    
    
    
    (10,793
    )Non-interest expense:Salaries and employee benefits
    
    
    13,977
    
    
    
    14,950
    
    
    
    14,351Occupancy and equipment
    
    
    3,659
    
    
    
    3,480
    
    
    
    3,618Federal insurance premiums
    
    
    1,267
    
    
    
    1,729
    
    
    
    525Data processing
    
    
    1,341
    
    
    
    1,159
    
    
    
    1,370Charitable Foundation contribution
    
    
    
    
    
    
    
    
    
    
    6,256Loan related expenses
    
    
    2,037
    
    
    
    1,844
    
    
    
    280Advertising
    
    
    397
    
    
    
    358
    
    
    
    577Telecommunications
    
    
    985
    
    
    
    852
    
    
    
    870Professional services
    
    
    624
    
    
    
    816
    
    
    
    988Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    31,751OREO expenses
    
    
    956
    
    
    
    628
    
    
    
    4Other operating
    
    
    3,291
    
    
    
    3,343
    
    
    
    4,127Total non-interest expense
    
    
    28,534
    
    
    
    29,168
    
    
    
    64,717Income (loss) before income taxes
    
    
    2,551
    
    
    
    (5,890
    )
    
    
    (50,645
    )Income tax expense (benefit)
    
    
    (1,490
    )
    
    
    12,011
    
    
    
    (8,154
    )Net income (loss)
    
    $
    4,041
    
    
    $
    (17,901
    )
    
    $
    (42,491
    )Earnings (loss) per share (see Note 16):Basic
    
    $
    0.33
    
    
    $
    (1.45
    )
    
    $
    (3.49
    )Diluted
    
    $
    0.33
    
    
    $
    (1.45
    )
    
    $
    (3.49
    )Weighted average number of shares outstanding:Basic
    
    
    12,351,902
    
    
    
    12,312,714
    
    
    
    12,280,494Diluted
    
    
    12,354,952
    
    
    
    12,312,714
    
    
    
    12,280,494
   F-5




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##### Table of Contents



AccumulatedUnearned
    
    
    Other
    
    
    
    
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Treasury
    
    
    ESOP
    
    
    Comprehensive
    
    
    Retained
    
    
    StockholdersStock
    
    
    Capital
    
    
    Stock
    
    
    Shares
    
    
    Income (Loss)
    
    
    Earnings
    
    
    Equity(in thousands)Balance, December 31, 2007
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    293
    
    
    $
    72,536
    
    
    $
    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
    )
    
    
    (6,022
    )
    
    
    30,045
    
    
    
    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
    )
    
    
    (6,645
    )
    
    
    16,171
    
    
    
    126,548Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,041
    
    
    
    4,041Stock option compensation expense
    
    
    
    
    
    
    268
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    268Restricted stock compensation expense
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Net unrealized gains, net of
reclassification adjustments and taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,055
    
    
    
    
    
    
    
    1,055Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,372Common stock repurchased - 11,000 shares
    
    
    
    
    
    
    
    
    
    
    (85
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (85
    )ESOP shares earned
    
    
    
    
    
    
    (107
    )
    
    
    
    
    
    
    426
    
    
    
    
    
    
    
    
    
    
    
    319Balance, December 31, 2010
    
    $
    133
    
    
    $
    126,864
    
    
    $
    (85
    )
    
    $
    (9,380
    )
    
    $
    (5,590
    )
    
    $
    20,212
    
    
    $
    132,154
   F-6




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##### Table of Contents



Years ended December 31,2010
    
    
    2009
    
    
    2008(in thousands)Cash flows from operating activitiesNet income (loss)
    
    $
    4,041
    
    
    $
    (17,901
    )
    
    $
    (42,491
    )Adjustments to reconcile net income (loss) to net cash provided by operating activities:Provision for loan losses
    
    
    7,496
    
    
    
    13,159
    
    
    
    9,009Net gain on the sale of loans
    
    
    (168
    )
    
    
    (130
    )
    
    
    (36
    )Net (gain) loss on the sale of other real estate owned
    
    
    (271
    )
    
    
    323
    
    
    
    (1
    )Write-down of other real estate owned
    
    
    501
    
    
    
    513
    
    
    
    Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    31,751Loss on impairment of securities
    
    
    3,425
    
    
    
    5,133
    
    
    
    15,640Net gain on sale of investments
    
    
    (832
    )
    
    
    (1,195
    )
    
    
    (40
    )(Gain) loss on disposal of other assets
    
    
    (30
    )
    
    
    7
    
    
    
    158Write-down of assets held for sale
    
    
    
    
    
    
    198
    
    
    
    241Earnings on BOLI
    
    
    (1,042
    )
    
    
    (1,041
    )
    
    
    (1,006
    )Originations of loans held for sale
    
    
    (16,471
    )
    
    
    (10,971
    )
    
    
    (1,794
    )Proceeds from sales of loans
    
    
    15,645
    
    
    
    10,573
    
    
    
    2,144Depreciation and amortization
    
    
    1,910
    
    
    
    1,850
    
    
    
    1,327ESOP and stock-based compensation expense
    
    
    596
    
    
    
    320
    
    
    
    395Stock issuance for charitable contribution
    
    
    
    
    
    
    
    
    
    
    5,474Deferred income taxes
    
    
    (2,694
    )
    
    
    11,537
    
    
    
    (8,372
    )Changes in assets and liabilities that (used) provided cash:Accrued interest receivable
    
    
    601
    
    
    
    106
    
    
    
    785Other assets
    
    
    1,589
    
    
    
    (4,400
    )
    
    
    3,457Accrued interest payable
    
    
    (93
    )
    
    
    29
    
    
    
    (146
    )Other liabilities
    
    
    559
    
    
    
    1,323
    
    
    
    (5,074
    )Net cash provided by operating activities
    
    
    14,762
    
    
    
    9,433
    
    
    
    11,421Cash flows from investing activitiesProceeds from sales of AFS securities
    
    
    16,889
    
    
    
    31,708
    
    
    
    2,535Proceeds from calls, maturities, and principal repayments of HTM securities
    
    
    
    
    
    
    8,643
    
    
    
    6,723Proceeds from calls, maturities, and principal repayments of AFS securities
    
    
    112,031
    
    
    
    83,884
    
    
    
    67,649Purchases of HTM securities
    
    
    
    
    
    
    (2,998
    )
    
    
    (7,940
    )Purchases of AFS securities
    
    
    (134,323
    )
    
    
    (108,976
    )
    
    
    (57,186
    )Redemption (purchase) of Federal Home Loan Bank stock
    
    
    1,554
    
    
    
    1,327
    
    
    
    (3,925
    )Repurchase of common stock
    
    
    (85
    )
    
    
    
    
    
    
    Proceeds from sale of other real estate owned
    
    
    5,082
    
    
    
    1,786
    
    
    
    169Increase in interest-bearing time deposits
    
    
    (1,909
    )
    
    
    (1,917
    )
    
    
    (1,869
    )(Increase) decrease in loans, net
    
    
    5,601
    
    
    
    (26,448
    )
    
    
    (20,481
    )Purchase of property and equipment, net
    
    
    (281
    )
    
    
    (551
    )
    
    
    (1,918
    )Acquisition of Boardwalk Bancorp
    
    
    
    
    
    
    
    
    
    
    (46,839
    )Net cash provided by (used in) investing
activities
    
    
    4,559
    
    
    
    (13,542
    )
    
    
    (63,082
    )Cash flows from financing activitiesNet increase (decrease) in deposits
    
    
    16,502
    
    
    
    25,614
    
    
    
    (74,084
    )Increase (decrease) in advances from borrowers for taxes and insurance
    
    
    11
    
    
    
    (43
    )
    
    
    (65
    )Increase in long-term borrowings
    
    
    5,000
    
    
    
    50,000
    
    
    
    40,000Repayments of long-term borrowings
    
    
    (30,000
    )
    
    
    (14,000
    )
    
    
    (36,212
    )Net change in short-term borrowings
    
    
    (9,350
    )
    
    
    (66,450
    )
    
    
    83,300Net proceeds from stock issuance in conversion
    
    
    
    
    
    
    
    
    
    
    39,871Net cash provided by (used in) financing
activities
    
    
    (17,837
    )
    
    
    (4,879
    )
    
    
    52,810Net increase (decrease) in cash and cash equivalents
    
    
    1,484
    
    
    
    (8,988
    )
    
    
    1,149Cash and cash equivalents at beginning of year
    
    
    13,513
    
    
    
    22,501
    
    
    
    21,352Cash and cash equivalents at end of year
    
    $
    14,997
    
    
    $
    13,513
    
    
    $
    22,501Supplementary disclosure of cash flow information:Cash paid during period for:Interest
    
    $
    14,632
    
    
    $
    18,999
    
    
    $
    23,875Income taxes, net of refunds
    
    $
    1,465
    
    
    $
    17
    
    
    $
    1,209Supplementary 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
    
    $
    3,750
    
    
    $
    7,087
    
    
    $
    966Stock subscriptions applied to equity
    
    $
    
    
    
    $
    
    
    
    $
    21,500Issuance of stock to charitable foundation
    
    $
    
    
    
    $
    
    
    
    $
    5,474Issuance of stock for acquisition of Boardwalk Bancorp
    
    $
    
    
    
    $
    
    
    
    $
    49,461
   F-7




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##### Table of Contents



NOTES TO AUDITED FINANCIAL STATEMENTS
 NOTE 1  ORGANIZATION
     NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Financial Statement Presentation:
   Use of Estimates:
  F-8




---



##### Table of Contents



Cash and Cash Equivalents:
 Interest-Bearing Time Deposits:
 Investment Securities:
  Loans Held for Sale:
 Loans and Allowance for Loan Losses:
    F-9




---



##### Table of Contents



Other Real Estate Owned:
 Premises and Equipment:
 Federal Home Loan Bank of New York (FHLB) Stock:
 Goodwill and Other Intangible Assets:
  Bank Owned Life Insurance (BOLI):
 Loan Commitments and Related Financial Instruments:
  F-10




---



##### Table of Contents



Defined Benefit Plan:
 4 01(k) Plan:
 Employee Stock Ownership Plan (ESOP):
 Stock Benefit Plan:
 Income Taxes:
 Accounting for Uncertainty in
Income Taxes, Income Taxes  Overall
  Earnings Per Share:
  F-11




---



##### Table of Contents



Comprehensive Income (Loss):
 Before Tax
    
    
    Tax Benefit
    
    
    Net of TaxAmount
    
    
    (Expense)
    
    
    Amount(in thousands)December 31, 2010Unrealized holding gains arising during the period
    
    $
    1,015
    
    
    $
    (379
    )
    
    $
    636Non-credit related unrealized loss on other-than-temporarily
impaired CDOs
    
    
    (1,957
    )
    
    
    665
    
    
    
    (1,292
    )Reclassification adjustment for gain on sale of AFS securities
    
    
    (832
    )
    
    
    283
    
    
    
    (549
    )Reclassification adjustment for credit related OTTI included in
net income
    
    
    3,425
    
    
    
    (1,165
    )
    
    
    2,260Other comprehensive income, net
    
    $
    1,651
    
    
    $
    (596
    )
    
    $
    1,055December 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
    )
 Operating Segments:
 Effect of Newly Issued Accounting Standards:
   F-12




---



##### Table of Contents



F-13




---



##### Table of Contents



NOTE 3  INVESTMENT SECURITIES
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(in thousands)December 31, 2010Investment securities available for saleDebt securitiesU.S. Government and agency
obligations
    
    $
    72,470
    
    
    $
    52
    
    
    $
    (787
    )
    
    $
    71,735Municipal bonds
    
    
    25,811
    
    
    
    456
    
    
    
    (861
    )
    
    
    25,406Collateralized debt obligations
    
    
    9,715
    
    
    
    
    
    
    
    (8,581
    )
    
    
    1,134Corporate bonds
    
    
    17,994
    
    
    
    187
    
    
    
    (46
    )
    
    
    18,135Total debt securities
    
    $
    125,990
    
    
    $
    695
    
    
    $
    (10,275
    )
    
    $
    116,410Mortgage-backed securitiesGNMA pass-through certificates
    
    $
    2,318
    
    
    $
    50
    
    
    $
    
    
    
    $
    2,368FHLMC pass-through certificates
    
    
    3,299
    
    
    
    134
    
    
    
    
    
    
    
    3,433FNMA pass-through certificates
    
    
    16,542
    
    
    
    765
    
    
    
    (41
    )
    
    
    17,266Collateralized mortgage obligations
    
    
    17,728
    
    
    
    309
    
    
    
    (107
    )
    
    
    17,930Total mortgage-backed securities
    
    $
    39,887
    
    
    $
    1,258
    
    
    $
    (148
    )
    
    $
    40,997Total securities available for sale
    
    $
    165,877
    
    
    $
    1,953
    
    
    $
    (10,423
    )
    
    $
    157,407
  F-14




---



##### Table of Contents



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
   Less Than 12 Months
    
    
    12 Months or Longer
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesDescription of Securities
    
    (in thousands)U.S. Government and agency
obligations
    
    $
    52,688
    
    
    $
    (787
    )
    
    $
    
    
    
    $
    
    
    
    $
    52,688
    
    
    $
    (787
    )Municipal bonds
    
    
    6,853
    
    
    
    (220
    )
    
    
    2,916
    
    
    
    (641
    )
    
    
    9,769
    
    
    
    (861
    )Corporate bonds
    
    
    9,427
    
    
    
    (46
    )
    
    
    
    
    
    
    
    
    
    
    9,427
    
    
    
    (46
    )Collateralized debt obligations
    
    
    35
    
    
    
    (364
    )
    
    
    1,099
    
    
    
    (8,217
    )
    
    
    1,134
    
    
    
    (8,581
    )Mortgage-backed securities
    
    
    6,675
    
    
    
    (110
    )
    
    
    3,140
    
    
    
    (38
    )
    
    
    9,815
    
    
    
    (148
    )Total temporarily impaired investment
securities
    
    $
    75,678
    
    
    $
    (1,527
    )
    
    $
    7,155
    
    
    $
    (8,896
    )
    
    $
    82,833
    
    
    $
    (10,423
    )
  F-15




---



##### Table of Contents



Less Than 12 Months
    
    
    12 Months or Longer
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesDescription of Securities
    
    (in thousands)U.S. Government and agency
obligations
    
    $
    16,877
    
    
    $
    (128
    )
    
    $
    
    
    
    $
    
    
    
    $
    16,877
    
    
    $
    (128
    )Municipal bonds
    
    
    578
    
    
    
    (8
    )
    
    
    3,988
    
    
    
    (465
    )
    
    
    4,566
    
    
    
    (473
    )Corporate bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
    )
     F-16




---



##### Table of Contents



Pooled Trust Preferred Collateralized Debt Obligations
 Amount ofDeferrals
    
    
    Excessand
    
    
    SubordinationCurrent
    
    
    Defaults
    
    
    as a % ofNumber
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Moodys/
    
    
    Number of
    
    
    as a % of
    
    
    Currentof
    
    
    
    
    
    
    Book
    
    
    Fair
    
    
    Unrealized
    
    
    Realized
    
    
    Fitch
    
    
    Performing
    
    
    Current
    
    
    PerformingDeal
    
    Securities
    
    
    Class
    
    
    Value
    
    
    Value
    
    
    Loss
    
    
    Loss
    
    
    Ratings
    
    
    Issuers
    
    
    Collateral
    
    
    CollateralPreTSL II
    
    
    2
    
    
    Mezzanine
    
    $
    419
    
    
    $
    15
    
    
    $
    (403
    )
    
    $
    (635
    )
    
    Ca/C
    
    
    
    23
    
    
    
    37.70
    %
    
    
    0.00
    %PreTSL VI
    
    
    1
    
    
    Mezzanine
    
    
    43
    
    
    
    1
    
    
    
    (41
    )
    
    
    (16
    )
    
    Ca/D
    
    
    
    2
    
    
    
    81.00
    %
    
    
    0.00
    %PreTSL XIX
    
    
    1
    
    
    Mezzanine
    
    
    1,168
    
    
    
    20
    
    
    
    (1,148
    )
    
    
    (614
    )
    

    C/C
    
    
    
    52
    
    
    
    24.60
    %
    
    
    0.00
    %I-PreTSL I
    
    
    2
    
    
    Mezzanine
    
    
    1,833
    
    
    
    251
    
    
    
    (1,582
    )
    
    
    
    
    
    NR/CCC
    
    
    
    16
    
    
    
    17.36
    %
    
    
    9.11
    %I-PreTSL II
    
    
    2
    
    
    Mezzanine
    
    
    2,715
    
    
    
    375
    
    
    
    (2,340
    )
    
    
    
    
    
    NR/B
    
    
    
    29
    
    
    
    4.87
    %
    
    
    14.33
    %I-PreTSL III
    
    
    3
    
    
    Mezzanine
    
    
    2,701
    
    
    
    375
    
    
    
    (2,326
    )
    
    
    
    
    
    B2/CCC
    
    
    
    24
    
    
    
    11.16
    %
    
    
    10.75
    %I-PreTSL IV
    
    
    1
    
    
    Mezzanine
    
    
    439
    
    
    
    63
    
    
    
    (376
    )
    
    
    
    
    
    Ba2/CCC
    
    
    
    29
    
    
    
    11.58
    %
    
    
    2.82
    %MM Comm I
    
    
    1
    
    
    Mezzanine
    
    
    399
    
    
    
    35
    
    
    
    (364
    )
    
    
    (1,153
    )
    
    NR/C
    
    
    
    7
    
    
    
    61.80
    %
    
    
    0.00
    %Total
    
    
    13
    
    
    
    
    
    
    $
    9,715
    
    
    $
    1,134
    
    
    $
    (8,581
    )
    
    $
    (2,418
    )
   Pooled Trust Preferred Collateralized Debt Obligations
 Amount ofDeferrals
    
    
    Excessand
    
    
    SubordinationCurrent
    
    
    Defaults
    
    
    as a % ofNumber
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Moodys/
    
    
    Number of
    
    
    as a % of
    
    
    Currentof
    
    
    
    
    
    
    Book
    
    
    Fair
    
    
    Unrealized
    
    
    Realized
    
    
    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-17




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##### Table of Contents



F-18




---



##### Table of Contents



Available for SaleAmortizedCost
    
    
    Fair Value(in thousands)Due within one year or less
    
    $
    7,530
    
    
    $
    7,568Due after one year but within five years
    
    
    90,468
    
    
    
    90,169Due after five years but within ten years
    
    
    8,105
    
    
    
    8,195Due after ten years
    
    
    19,887
    
    
    
    10,478Mortgage-backed securities
    
    
    39,887
    
    
    
    40,997Total investment securities
    
    $
    165,877
    
    
    $
    157,407
  For the year ended December 31,2010
    
    
    2009Beginning balance of cumulative credit losses on CDO securities (1)
    
    $
    (13,493
    )
    
    $
    (9,899
    )Additional credit losses for which other than temporary impairment
was previously recognized
    
    
    (3,425
    )
    
    
    (3,594
    )Ending balance of cumulative credit losses on CDO securities,
December 31, 2010
    
    $
    (16,918
    )
    
    $
    (13,493
    )
 
 (1)
    
    On April 1, 2009, we recognized a cumulative effect adjustment based upon FASB guidance
regarding the recognition and presentation of other-than-temporary impairment and determined that
$9.9 million of previously recorded OTTI write-downs represented credit losses.    F-19




---



##### Table of Contents



NOTE 4  LOANS RECEIVABLE
  December 31,2010
    
    
    2009(in thousands)Commercial mortgage
    
    $
    413,487
    
    
    $
    412,475Residential mortgage
    
    
    258,047
    
    
    
    244,897Construction
    
    
    15,191
    
    
    
    28,839Home equity loans and lines of credit
    
    
    47,875
    
    
    
    52,806Commercial business loans
    
    
    48,223
    
    
    
    62,685Other consumer loans
    
    
    2,207
    
    
    
    1,284Loans receivable, gross
    
    
    785,030
    
    
    
    802,986Less:Allowance for loan losses
    
    
    12,538
    
    
    
    13,311Deferred loan fees
    
    
    174
    
    
    
    202Loans receivable, net
    
    $
    772,318
    
    
    $
    789,473
  2010
    
    
    2009
    
    
    2008(in thousands)Balance at beginning of year
    
    $
    13,311
    
    
    $
    11,240
    
    
    $
    4,121Allowance from acquired entity
    
    
    
    
    
    
    
    
    
    
    3,791Provisions charged to operations
    
    
    7,496
    
    
    
    13,159
    
    
    
    9,009Charge-offs
    
    
    (8,837
    )
    
    
    (11,656
    )
    
    
    (5,708
    )Recoveries
    
    
    568
    
    
    
    568
    
    
    
    27Balance at end of year
    
    $
    12,538
    
    
    $
    13,311
    
    
    $
    11,240
  At or for the Years ended December 31, 2010(in thousands)Commercial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Home EquitySecured by
    
    
    Commercial
    
    
    
    
    
    
    Other
    
    
    Residential
    
    
    & Lines
    
    
    OtherReal Estate
    
    
    Term Loans
    
    
    Construction
    
    
    Commercial (1)
    
    
    Mortgage
    
    
    of Credit
    
    
    Consumer
    
    
    Unallocated
    
    
    TotalBalance at beginning
of year
    
    $
    8,109
    
    
    $
    128
    
    
    $
    388
    
    
    $
    1,826
    
    
    $
    2,048
    
    
    $
    771
    
    
    $
    41
    
    
    $
    
    
    
    $
    13,311Charge-offs
    
    
    (5,156
    )
    
    
    
    
    
    
    (1,160
    )
    
    
    (1,754
    )
    
    
    (677
    )
    
    
    
    
    
    
    (90
    )
    
    
    
    
    
    
    (8,837
    )Recoveries
    
    
    472
    
    
    
    9
    
    
    
    
    
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    568Provision for
loan losses
    
    
    6,090
    
    
    
    (53
    )
    
    
    1,508
    
    
    
    334
    
    
    
    (510
    )
    
    
    (576
    )
    
    
    33
    
    
    
    670
    
    
    
    7,496Balance at end of
year
    
    $
    9,515
    
    
    $
    84
    
    
    $
    736
    
    
    $
    464
    
    
    $
    861
    
    
    $
    195
    
    
    $
    13
    
    
    $
    670
    
    
    $
    12,538
 (1)
    
    includes commercial lines of
credit  F-20




---



##### Table of Contents



December 31,2010
    
    
    2009(in thousands)Non-accrual loans (1)
    
    $
    40,827
    
    
    $
    31,994Loans delinquent greater than 90 days
and still accruing
    
    
    2,639
    
    
    
    1,254Troubled debt restructured loans
    
    
    7,732
    
    
    
    Loans less than 90 days and still accruing
    
    
    8,514
    
    
    
    Total impaired loans
    
    $
    59,712
    
    
    $
    33,248
 (1)
    
    includes $11.8 million in non-accruing TDRs paying in accordance with restructured terms. December 31,2010
    
    
    2009(in thousands)Impaired loans with no allocated allowance for loan losses
    
    $
    30,389
    
    
    $
    26,020Impaired loans with an allocated allowance for loan losses
    
    
    29,323
    
    
    
    7,228Total
    
    $
    59,712
    
    
    $
    33,248Amount of the allowance for loan losses allocated
    
    $
    4,234
    
    
    $
    3,016
 2010
    
    
    2009(in thousands)Average of individually impaired loans during year
    
    $
    41,910
    
    
    $
    31,833Interest income recognized during impairment
    
    $
    383
    
    
    $
    49Cash basis interest income recognized
    
    $
    
    
    
    $
    
   F-21




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##### Table of Contents



Unpaid
    
    
    
    
    
    
    Average
    
    
    InterestRecorded
    
    
    Principal
    
    
    Related
    
    
    Recorded
    
    
    IncomeInvestment
    
    
    Balance
    
    
    Allowance
    
    
    Investment
    
    
    Recognized(in thousands)Impaired loans with a related
allowanceCommercial secured by real estate
    
    $
    21,449
    
    
    $
    21,689
    
    
    $
    3,510
    
    
    $
    21,826
    
    
    $
    273Commercial secured by other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Construction
    
    
    4,966
    
    
    
    4,966
    
    
    
    603
    
    
    
    4,623
    
    
    
    Other commercial
    
    
    2,223
    
    
    
    2,249
    
    
    
    67
    
    
    
    2,166
    
    
    
    Residential mortgage
    
    
    619
    
    
    
    663
    
    
    
    19
    
    
    
    183
    
    
    
    5Home equity loans and lines of
credit
    
    
    66
    
    
    
    66
    
    
    
    35
    
    
    
    66
    
    
    
    Other consumer loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Impaired loans with a
related allowance
    
    $
    29,323
    
    
    $
    29,633
    
    
    $
    4,234
    
    
    $
    28,864
    
    
    $
    278Impaired loans with no related
allowanceCommercial secured by real estate
    
    $
    18,923
    
    
    $
    24,426
    
    
    $
    
    
    
    $
    20,999
    
    
    $
    84Commercial secured by other
    
    
    86
    
    
    
    411
    
    
    
    
    
    
    
    337
    
    
    
    Construction
    
    
    3,980
    
    
    
    6,671
    
    
    
    
    
    
    
    2,790
    
    
    
    Other commercial
    
    
    2,162
    
    
    
    3,398
    
    
    
    
    
    
    
    2,362
    
    
    
    Residential mortgage
    
    
    4,508
    
    
    
    4,903
    
    
    
    
    
    
    
    4,600
    
    
    
    21Home equity loans and lines of
credit
    
    
    730
    
    
    
    772
    
    
    
    
    
    
    
    576
    
    
    
    Other consumer loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Impaired loans with no
related allowance
    
    $
    30,389
    
    
    $
    40,581
    
    
    $
    
    
    
    $
    31,664
    
    
    $
    105Total impaired loansCommercial secured by real estate
    
    $
    40,372
    
    
    $
    46,115
    
    
    $
    3,510
    
    
    $
    42,825
    
    
    $
    357Commercial secured by other
    
    
    86
    
    
    
    411
    
    
    
    
    
    
    
    337
    
    
    
    Construction
    
    
    8,946
    
    
    
    11,637
    
    
    
    603
    
    
    
    7,413
    
    
    
    Other commercial
    
    
    4,385
    
    
    
    5,647
    
    
    
    67
    
    
    
    4,528
    
    
    
    Residential mortgage
    
    
    5,127
    
    
    
    5,566
    
    
    
    19
    
    
    
    4,783
    
    
    
    26Home equity loans and lines of
credit
    
    
    796
    
    
    
    838
    
    
    
    35
    
    
    
    642
    
    
    
    Other consumer loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total impaired loans
    
    $
    59,712
    
    
    $
    70,214
    
    
    $
    4,234
    
    
    $
    60,528
    
    
    $
    383
  F-22




---



##### Table of Contents



90 Daysor More
    
    
    Total30-59 Days
    
    
    60-89 Days
    
    
    Delinquent
    
    
    Delinquent
    
    
    
    
    
    
    
    
    
    
    TotalDelinquent
    
    
    Delinquent
    
    
    and Accruing
    
    
    and Accruing
    
    
    Non-accrual
    
    
    Current
    
    
    Loans(in thousands)Real estate loans:Commercial mortgage
    
    $
    1,305
    
    
    $
    94
    
    
    $
    
    
    
    $
    1,399
    
    
    $
    27,781
    
    
    $
    384,307
    
    
    $
    413,487Residential mortgage
    
    
    796
    
    
    
    477
    
    
    
    2,207
    
    
    
    3,480
    
    
    
    2,449
    
    
    
    252,118
    
    
    
    258,047Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,980
    
    
    
    11,211
    
    
    
    15,191Home equity loans and lines of credit
    
    
    164
    
    
    
    103
    
    
    
    432
    
    
    
    699
    
    
    
    363
    
    
    
    46,813
    
    
    
    47,875Commercial business
loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,254
    
    
    
    41,969
    
    
    
    48,223Other consumer loans
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    2,191
    
    
    
    2,207Total
    
    $
    2,265
    
    
    $
    690
    
    
    $
    2,639
    
    
    $
    5,594
    
    
    $
    40,827
    
    
    $
    738,609
    
    
    $
    785,030
         F-23




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##### Table of Contents



Risk RatingsGrades
    
    
    Grade
    
    
    Grade
    
    
    Grade
    
    
    Grade1-5
    
    
    6
    
    
    7
    
    
    7.5
    
    
    7.9
    
    
    Total(in thousands)Commercial secured
by real estate
    
    $
    348,166
    
    
    $
    12,064
    
    
    $
    23,720
    
    
    $
    14,248
    
    
    $
    26,730
    
    
    $
    424,928Commercial term loans
    
    
    4,887
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    86
    
    
    
    4,987Construction
    
    
    3,725
    
    
    
    120
    
    
    
    2,400
    
    
    
    
    
    
    
    8,946
    
    
    
    15,191Other commercial
    
    
    24,262
    
    
    
    1,252
    
    
    
    3,297
    
    
    
    822
    
    
    
    2,162
    
    
    
    31,795$
    381,040
    
    
    $
    13,450
    
    
    $
    29,417
    
    
    $
    15,070
    
    
    $
    37,924
    
    
    $
    476,901
  30-89 Days
    
    
    
    
    
    
    ImpairedCurrent
    
    
    Delinquent
    
    
    Non-accrual
    
    
    Loans
    
    
    Total(in thousands)Real estate loans:Residential mortgage
    
    $
    252,118
    
    
    $
    1,273
    
    
    $
    2,449
    
    
    $
    2,207
    
    
    $
    258,047Home equity loans
and lines of credit
    
    
    46,813
    
    
    
    267
    
    
    
    363
    
    
    
    432
    
    
    
    47,875Other consumer loans
    
    
    2,191
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    2,207Total consumer
loans
    
    $
    301,122
    
    
    $
    1,556
    
    
    $
    2,812
    
    
    $
    2,639
    
    
    $
    308,129
  December 31,2010
    
    
    2009(in thousands)Mortgage loan portfolios serviced
    
    $
    3,265
    
    
    $
    4,414
   F-24




---



##### Table of Contents



December 31,2010
    
    
    2009(in thousands)Beginning balance
    
    $
    9,023
    
    
    $
    9,355New loans/advances
    
    
    300
    
    
    
    5,550Effect of changes in composition of related parties
    
    
    5,634
    
    
    
    (42
    )Repayments
    
    
    (404
    )
    
    
    (5,840
    )Ending balance
    
    $
    14,553
    
    
    $
    9,023
 NOTE 5  FAIR VALUE
         F-25




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##### Table of Contents



Assets and Liabilities Measured on a Recurring Basis
  Fair Value Measurements
    
    
    Fair Value Measurementsat December 31, 2010
    
    
    at December 31, 2009Quoted
    
    
    
    
    
    
    
    
    
    
    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)Investment securities
available
for sale:U.S. Government and agency
obligations
    
    $
    
    
    
    $
    71,735
    
    
    $
    
    
    
    $
    
    
    
    $
    45,972
    
    
    $
    Municipal bonds
    
    
    
    
    
    
    25,406
    
    
    
    
    
    
    
    
    
    
    
    34,381
    
    
    
    Collateralized debt
obligations
    
    
    
    
    
    
    
    
    
    
    1,134
    
    
    
    
    
    
    
    
    
    
    
    1,456Corporate bonds
    
    
    
    
    
    
    18,135
    
    
    
    
    
    
    
    
    
    
    
    11,046
    
    
    
    Mortgage-backed securities
    
    
    
    
    
    
    40,997
    
    
    
    
    
    
    
    
    
    
    
    59,960
    
    
    
    Total securities
available for
sale
    
    $
    
    
    
    $
    156,273
    
    
    $
    1,134
    
    
    $
    
    
    
    $
    151,359
    
    
    $
    1,456
  F-26




---



##### Table of Contents



Fair Value MeasurementsUsing SignificantUnobservable Inputs(Level 3)CDO SecuritiesAvailable for SaleTwelve months ended December 31,2010
    
    
    2009(in thousands)Beginning balance
    
    $
    1,456
    
    
    $
    3,033Accretion of discount
    
    
    102
    
    
    
    238Payments received
    
    
    
    
    
    
    (2
    )Increase in amortized cost (1)
    
    
    
    
    
    
    6,103Unrealized holding gain (loss)
    
    
    3,001
    
    
    
    (2,783
    )Other-than-temporary impairment included in
earnings
    
    
    (3,425
    )
    
    
    (5,133
    )Ending balance
    
    $
    1,134
    
    
    $
    1,456
 (1)
    
    Increase is due to FASB guidance regarding the recognition and presentation of
other-than-temporary impairments.  F-27




---



##### Table of Contents



Assets and Liabilities Measured on a Non-Recurring Basis
  Fair Value Measurements
    
    
    Fair Value Measurementsat December 31, 2010
    
    
    at December 31, 2009Quoted
    
    
    
    
    
    
    
    
    
    
    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 (1):Commercial secured by real
estate
    
    $
    
    
    
    $
    35,891
    
    
    $
    4,481
    
    
    $
    
    
    
    $
    25,132
    
    
    $
    Commercial term loans
    
    
    
    
    
    
    86
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Construction
    
    
    
    
    
    
    8,657
    
    
    
    289
    
    
    
    
    
    
    
    1,298
    
    
    
    Other commercial
    
    
    
    
    
    
    3,947
    
    
    
    438
    
    
    
    
    
    
    
    
    
    
    
    Residential mortgage
    
    
    
    
    
    
    5,127
    
    
    
    
    
    
    
    
    
    
    
    3,251
    
    
    
    Home equity loans
    
    
    
    
    
    
    796
    
    
    
    
    
    
    
    
    
    
    
    482
    
    
    
    Total impaired loans
    
    $
    
    
    
    $
    54,504
    
    
    $
    5,208
    
    
    $
    
    
    
    $
    33,248
    
    
    $
    Other real estate owned:Commercial
    
    $
    
    
    
    $
    2,257
    
    
    $
    
    
    
    $
    
    
    
    $
    3,532
    
    
    $
    Residential mortgage
    
    
    
    
    
    
    998
    
    
    
    
    
    
    
    
    
    
    
    1,285
    
    
    
    Total other real estate owned
    
    $
    
    
    
    $
    3,255
    
    
    $
    
    
    
    $
    
    
    
    $
    4,817
    
    
    $
    Loans held for sale
    
    $
    
    
    
    $
    1,224
    
    
    $
    
    
    
    $
    
    
    
    $
    398
    
    
    $
    Assets held for sale
    
    $
    
    
    
    $
    479
    
    
    $
    
    
    
    $
    
    
    
    $
    1,828
    
    
    $
    Goodwill
    
    $
    
    
    
    $
    
    
    
    $
    22,575
    
    
    $
    
    
    
    $
    
    
    
    $
    22,575Other intangibles
    
    $
    
    
    
    $
    
    
    
    $
    445
    
    
    $
    
    
    
    $
    
    
    
    $
    585
 (1)
    
    Includes loans delinquent 90 days, loans less than 90 days delinquent but
not accruing and troubled debt restructured loans.   F-28




---



##### Table of Contents



At December 31, 2010
    
    
    At December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    Value(in thousands)AssetsCash and cash equivalents
    
    $
    14,997
    
    
    $
    14,997
    
    
    $
    13,513
    
    
    $
    13,513Interest-bearing time deposits
    
    $
    9,361
    
    
    $
    9,440
    
    
    $
    7,451
    
    
    $
    7,539Investment securities
    
    $
    157,407
    
    
    $
    157,407
    
    
    $
    152,815
    
    
    $
    152,815Loans held for sale
    
    $
    1,224
    
    
    $
    1,224
    
    
    $
    398
    
    
    $
    398Loans receivable
    
    $
    772,318
    
    
    $
    780,277
    
    
    $
    789,473
    
    
    $
    788,421FHLB Stock
    
    $
    8,721
    
    
    $
    8,721
    
    
    $
    10,275
    
    
    $
    10,275Bank owned life insurance
    
    $
    28,252
    
    
    $
    28,252
    
    
    $
    27,210
    
    
    $
    27,210Accrued interest receivable
    
    $
    4,029
    
    
    $
    4,029
    
    
    $
    4,630
    
    
    $
    4,630LiabilitiesSavings deposits
    
    $
    84,312
    
    
    $
    84,312
    
    
    $
    79,368
    
    
    $
    79,368NOW, checking and MMDA deposits
    
    $
    361,973
    
    
    $
    361,973
    
    
    $
    320,308
    
    
    $
    320,308Certificates of deposit
    
    $
    306,783
    
    
    $
    309,897
    
    
    $
    336,911
    
    
    $
    340,084Borrowings
    
    $
    169,637
    
    
    $
    174,553
    
    
    $
    203,981
    
    
    $
    199,718Accrued interest payable
    
    $
    714
    
    
    $
    714
    
    
    $
    807
    
    
    $
    807
        See Note 12, Financial Instruments with
Off-Balance Sheet Risk and Concentrations of Credit Risk of Notes to Consolidated Financial
Statements,
   F-29




---



##### Table of Contents



NOTE 6  OTHER REAL ESTATE OWNED
     NOTE 7  PREMISES AND EQUIPMENT
  EstimatedUseful Lives
    
    2010
    
    
    2009(in thousands)Land, buildings, and improvements
    
    10  39 years
    
    $
    30,451
    
    
    $
    30,451Furniture and equipment
    
    3  7 years
    
    
    10,251
    
    
    
    9,977Construction-in-progress
    
    
    
    
    28
    
    
    
    388Total
    
    
    
    
    40,730
    
    
    
    40,816Accumulated depreciation
    
    
    
    
    (15,518
    )
    
    
    (14,433
    )Premises and equipment, net
    
    
    
    $
    25,212
    
    
    $
    26,383
   F-30




---



##### Table of Contents



NOTE 8  GOODWILL AND INTANGIBLE ASSETS
  2010
    
    
    2009(in thousands)Beginning balance
    
    $
    22,575
    
    
    $
    22,575Acquired goodwill
    
    
    
    
    
    
    Impairment
    
    
    
    
    
    
    Other, net
    
    
    
    
    
    
    Ending balance
    
    $
    22,575
    
    
    $
    22,575
      2010
    
    
    2009Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amortization(in thousands)
    
    
    (in thousands)Amortized intangible assets:Core deposit intangibles
    
    $
    565
    
    
    $
    231
    
    
    $
    565
    
    
    $
    165Other customer
relationship intangibles
    
    
    485
    
    
    
    374
    
    
    
    485
    
    
    
    300Total
    
    $
    1,050
    
    
    $
    605
    
    
    $
    1,050
    
    
    $
    465
  F-31




---



##### Table of Contents



(in thousands)2011
    
    $
    1102012
    
    $
    982013
    
    $
    432014
    
    $
    322015
    
    $
    31Thereafter
    
    $
    131
 NOTE 9  DEPOSITS
  December 31,2010
    
    
    2009(in thousands)Savings accounts
    
    $
    84,312
    
    
    $
    79,368NOW accounts and money market funds
    
    
    293,706
    
    
    
    257,943Non-interest bearing checking
    
    
    68,267
    
    
    
    62,365Certificates of deposit of less than $100,000
    
    
    170,524
    
    
    
    201,303Certificates of deposit of $100,000 or more
    
    
    136,259
    
    
    
    135,608$
    753,068
    
    
    $
    736,587
  For the Years Ended December 31,2010
    
    
    2009
    
    
    2008(in thousands)Savings accounts
    
    $
    316
    
    
    $
    385
    
    
    $
    1,062NOW accounts and money market funds
    
    
    2,168
    
    
    
    2,119
    
    
    
    4,059Certificates of deposit
    
    
    6,138
    
    
    
    9,886
    
    
    
    12,562$
    8,622
    
    
    $
    12,390
    
    
    $
    17,683
  F-32




---



##### Table of Contents



(in thousands)2011
    
    $
    220,5442012
    
    
    51,7922013
    
    
    18,5062014
    
    
    4,5192015
    
    
    11,422$
    306,783
  NOTE 10  BORROWINGS
   December 31, 2010FHLB
    
    
    RepurchaseBorrowings
    
    
    Agreements
    
    
    Total2011
    
    $
    45,600
    
    
    $
    
    
    
    $
    45,6002012
    
    
    25,000
    
    
    
    
    
    
    
    25,0002013
    
    
    20,000
    
    
    
    
    
    
    
    20,0002014
    
    
    25,000
    
    
    
    
    
    
    
    25,0002015
    
    
    12,500
    
    
    
    7,500
    
    
    
    20,000Thereafter
    
    
    4,030
    
    
    
    30,007
    
    
    
    34,037Principal due
    
    $
    132,130
    
    
    $
    37,507
    
    
    $
    169,637
    F-33




---



##### Table of Contents



FHLB BorrowingsDecember 31, 2010
    
    
    December 31, 2009Weighted
    
    
    
    
    
    
    WeightedAverage Rate
    
    
    
    
    
    
    Average RateBalance
    
    
    at Year End
    
    
    Balance
    
    
    at Year End(dollars in thousands)
    
    
    (dollars in thousands)Fixed rate advances
    
    $
    111,530
    
    
    
    3.77
    %
    
    $
    174,031
    
    
    
    3.83
    %Variable rate advances
    
    
    20,600
    
    
    
    0.40
    %
    
    
    29,950
    
    
    
    0.32
    %Total
    
    $
    132,130
    
    
    
    3.36
    %
    
    $
    203,981
    
    
    
    3.32
    %
  2010
    
    
    2009FHLB
    
    
    Repurchase
    
    
    
    
    
    
    FHLB
    
    
    RepurchaseBorrowings
    
    
    Agreements
    
    
    Total
    
    
    Borrowings
    
    
    Agreements
    
    
    Total(dollars in thousands)
    
    
    (dollars in thousands)Average daily balance
during the year
    
    $
    123,307
    
    
    $
    37,594
    
    
    $
    160,901
    
    
    $
    153,582
    
    
    $
    37,674
    
    
    $
    191,256Average interest rate during
the year
    
    
    3.49
    %
    
    
    4.30
    %
    
    
    3.68
    %
    
    
    3.27
    %
    
    
    4.30
    %
    
    
    3.47
    %Maximum month-end
balance during the year
    
    $
    165,182
    
    
    $
    37,605
    
    
    $
    202,787
    
    
    $
    193,897
    
    
    $
    37,778
    
    
    $
    231,675Weighted average interest
rate at year-end
    
    
    3.09
    %
    
    
    3.46
    %
    
    
    3.36
    %
    
    
    3.09
    %
    
    
    4.32
    %
    
    
    3.32
    %
 NOTE 11  INCOME TAXES
   F-34




---



##### Table of Contents



For the Years Ended December 31,2010
    
    
    2009
    
    
    2008(in thousands)Current expense:Federal
    
    $
    1,211
    
    
    $
    464
    
    
    $
    440State
    
    
    10
    
    
    
    10
    
    
    
    23Total current
    
    
    1,221
    
    
    
    474
    
    
    
    463Deferred (benefit):Federal
    
    
    (766
    )
    
    
    (3,176
    )
    
    
    (7,333
    )State
    
    
    57
    
    
    
    (801
    )
    
    
    (1,249
    )Total deferred
    
    
    (709
    )
    
    
    (3,977
    )
    
    
    (8,582
    )Change in valuation allowance
    
    
    (2,002
    )
    
    
    15,514
    
    
    
    (35
    )Income tax expense (benefit)
    
    $
    (1,490
    )
    
    $
    12,011
    
    
    $
    (8,154
    )
  For the Years Ended December 31,2010
    
    
    2009
    
    
    2008Tax statutory rate
    
    
    34.0
    %
    
    
    (34.0
    %)
    
    
    (34.0
    %)Adjustments resulting from:Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    21.3State tax benefit, net of federal
income tax expense
    
    
    1.7
    
    
    
    (8.9
    )
    
    
    (1.6
    )Tax-exempt income
    
    
    (15.8
    )
    
    
    (7.8
    )
    
    
    (0.9
    )Income on bank owned life insurance
    
    
    (13.9
    )
    
    
    (8.7
    )
    
    
    (0.7
    )Change in valuation reserve
    
    
    (66.6
    )
    
    
    263.4
    
    
    
    Other
    
    
    2.3
    
    
    
    (0.1
    )
    
    
    (0.2
    )Effective tax rate
    
    
    (58.3
    %)
    
    
    203.9
    %
    
    
    (16.1
    %)
  F-35




---



##### Table of Contents



December 31,2010
    
    
    2009(in thousands)Deferred tax assets:Other than temporary impairment
    
    $
    5,697
    
    
    $
    4,533Allowance for loan losses
    
    
    4,809
    
    
    
    4,949Charitable foundation contribution carryforward
    
    
    2,251
    
    
    
    2,457Purchase accounting adjustments
    
    
    2,057
    
    
    
    1,816Non-accrual loan interest income
    
    
    2,166
    
    
    
    1,819Deferred compensation
    
    
    557
    
    
    
    584Net operating losses
    
    
    459
    
    
    
    534Net unrealized loss on available for sale securities
    
    
    2,880
    
    
    
    3,496AMT credit carryforward
    
    
    169
    
    
    
    557Other
    
    
    215
    
    
    
    357Valuation allowance
    
    
    (13,745
    )
    
    
    (15,747
    )7,515
    
    
    
    5,355Deferred tax liabilities:Depreciation
    
    
    (980
    )
    
    
    (860
    )Deferred loan fees
    
    
    (478
    )
    
    
    (533
    )Other
    
    
    (3
    )
    
    
    (6
    )(1,461
    )
    
    
    (1,399
    )Net deferred tax asset
    
    $
    6,054
    
    
    $
    3,956
       F-36




---



##### Table of Contents



2010
    
    
    2009(in thousands)Balance at January 1
    
    $
    353
    
    
    $
    353Additions based on tax positions related to the current year
    
    
    
    
    
    
    Additions for tax positions of prior years
    
    
    
    
    
    
    Reductions for tax positions of prior years
    
    
    
    
    
    
    Reductions due to the statute of limitations
    
    
    
    
    
    
    Settlements
    
    
    
    
    
    
    Balance at December 31
    
    $
    353
    
    
    $
    353
    NOTE 12 
    
    FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT RISK
      F-37




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##### Table of Contents



At December 31, 2010
    
    
    At December 31, 2009Fixed
    
    
    Variable
    
    
    Fixed
    
    
    VariableRate
    
    
    Rate
    
    
    Rate
    
    
    Rate(in thousands)Commitments to make loans
    
    $
    11,564
    
    
    $
    2,614
    
    
    $
    10,915
    
    
    $
    1,236Unused lines of credit
    
    $
    
    
    
    $
    52,328
    
    
    $
    
    
    
    $
    56,323Construction loans in process
    
    $
    719
    
    
    $
    1,042
    
    
    $
    2,786
    
    
    $
    7,403Standby letters of credit
    
    $
    
    
    
    $
    5,380
    
    
    $
    
    
    
    $
    6,929
    NOTE 13  BENEFIT PLANS
 Defined Benefit Plan
  401K Plan
   F-38




---



##### Table of Contents



Employee Stock Ownership Plan
 st The Wall Street Journal
   At December 31,2010
    
    
    2009(dollars in thousands)Allocated to participants
    
    
    127,809
    
    
    
    85,206Distributed to participants
    
    
    
    
    
    
    Unearned shares
    
    
    937,273
    
    
    
    979,876Total ESOP shares
    
    
    1,065,082
    
    
    
    1,065,082Fair value of unearned shares
    
    $
    7,967
    
    
    $
    6,585
 Director Retirement Plan
    F-39




---



##### Table of Contents



Equity Incentive Plan
    Assumption
    
    December 31, 2010Expected average risk-free interest rate
    
    
    2.46
    %Expected average life (in years)
    
    
    6.5Expected volatility
    
    
    41.63
    %Expected dividend yield
    
    
    0.00
    %Weighted average per share fair value
    
    $
    3.30
  WeightedWeighted
    
    
    AverageAverage
    
    
    RemainingNumber of
    
    
    Exercise
    
    
    ContractualOptions
    
    
    Price
    
    
    LifeOutstanding at January 1, 2010
    
    
    
    
    
    $
    
    
    
    
    Granted
    
    
    763,600
    
    
    
    7.30
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    Outstanding at December 31, 2010
    
    
    763,600
    
    
    $
    7.30
    
    
    9.5 yearsExercisable at December 31, 2010
    
    
    
    
    
    $
    
    
    
    
    Aggregate Intrinsic Value at December 31, 2010
    
    
    
    
    
    $
    
    
    
    
    
    F-40




---



##### Table of Contents



Restricted
    
    
    Weighted AverageCommon
    
    
    Fair Value atShares
    
    
    Grant DateOutstanding at January 1, 2010
    
    
    
    
    
    $
    Granted
    
    
    11,000
    
    
    
    7.68Forfeited
    
    
    
    
    
    
    Outstanding at December 31, 2010
    
    
    11,000
    
    
    $
    7.68
   2010(in thousands)Compensation expense:Common stock options
    
    $
    268Restricted common stock
    
    
    8Total compensation expense
    
    
    276Tax benefit
    
    
    5Net income effect
    
    $
    271
   F-41




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##### Table of Contents



NOTE 14  COMMITMENTS AND CONTINGENCIES
  (in thousands)Due in one year or less
    
    $
    155Due after one year
    
    
    58$
    213
    NOTE 15  REGULATORY MATTERS
      F-42




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##### Table of Contents



Per Regulatory GuidelinesActual
    
    
    Minimum
    
    
    Well CapitalizedAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(dollars in thousands)December 31, 2010Risk based capital
ratios:Tier I
    
    $
    103,092
    
    
    
    12.65
    %
    
    $
    32,598
    
    
    
    4.00
    %
    
    $
    48,897
    
    
    
    6.00
    %Total capital
    
    $
    113,313
    
    
    
    13.90
    %
    
    $
    65,216
    
    
    
    8.00
    %
    
    $
    81,520
    
    
    
    10.00
    %Leverage ratio
    
    $
    103,092
    
    
    
    9.96
    %
    
    $
    41,402
    
    
    
    4.00
    %
    
    $
    51,753
    
    
    
    5.00
    %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
    %
   At December 31,2010
    
    
    2009(in thousands)Total capital, computed in accordance with GAAP
    
    $
    120,523
    
    
    $
    114,772Accumulated other comprehensive (gain) loss
    
    
    5,590
    
    
    
    6,645Intangible assets
    
    
    (1
    )
    
    
    (1
    )Disallowed goodwill and other disallowed intangible assets
    
    
    (23,020
    )
    
    
    (23,160
    )Tier I (tangible) capital
    
    
    103,092
    
    
    
    98,256Allowance for loan losses
    
    
    10,221
    
    
    
    10,757Total regulatory capital
    
    $
    113,313
    
    
    $
    109,013
  F-43




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##### Table of Contents



NOTE 16  EARNINGS PER SHARE
   Year ended December 31,2010
    
    
    2009
    
    
    2008(in thousands, except share data)Net income (loss)
    
    $
    4,041
    
    
    $
    (17,901
    )
    
    $
    (42,491
    )Weighted average shares outstanding
    
    
    12,351,902
    
    
    
    12,312,714
    
    
    
    12,280,494Basic earnings (loss) per share
    
    $
    0.33
    
    
    $
    (1.45
    )
    
    $
    (3.49
    )Diluted weighted average shares outstanding
    
    
    12,354,952
    
    
    
    12,312,714
    
    
    
    12,280,494Diluted basic earnings (loss) per share
    
    $
    0.33
    
    
    $
    (1.45
    )
    
    $
    (3.49
    )
  F-44




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##### Table of Contents



NOTE 17  ACQUISITION OF BOARDWALK BANCORP
 Note 1 Organization.
 Year endedDecember 31,2008(in thousands)Interest and dividend income
    
    $
    60,517Interest expense
    
    
    25,612Net interest income
    
    
    34,905Provision for loan losses
    
    
    9,009Net interest income after provision for loan losses
    
    
    25,896Non-interest income
    
    
    (10,672
    )Non-interest expense
    
    
    67,291Income (loss) before income taxes
    
    
    (52,067
    )Income tax expense (benefit)
    
    
    (8,360
    )Net income (loss)
    
    $
    (43,707
    )Basic EPS
    
    $
    (3.56
    )
   F-45




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##### Table of Contents



NOTE 18  CAPE BANCORP (PARENT COMPANY)
  Condensed Balance Sheets
 December 31,2010
    
    
    2009(in thousands)ASSETSNon-interest bearing balances with bank subsidiary
    
    $
    2,070
    
    
    $
    1,782Loans due from bank subsidiary
    
    
    9,814
    
    
    
    10,116Investment in bank subsidiary
    
    
    120,523
    
    
    
    114,772Other assets
    
    
    159
    
    
    
    69Total assets
    
    $
    132,566
    
    
    $
    126,739LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesAccounts payable and accrued expenses
    
    $
    412
    
    
    $
    191Total liabilities
    
    
    412
    
    
    
    191Stockholders EquityCommon stock
    
    
    133
    
    
    
    133Additional paid in capital
    
    
    126,864
    
    
    
    126,695Treasury stock at cost  11,000 shares
    
    
    (85
    )
    
    
    Unearned ESOP shares
    
    
    (9,380
    )
    
    
    (9,806
    )Accumulated other comprehensive loss
    
    
    (5,590
    )
    
    
    (6,645
    )Retained earnings
    
    
    20,212
    
    
    
    16,171Total stockholders equity
    
    
    132,154
    
    
    
    126,548Total liabilities and stockholders equity
    
    $
    132,566
    
    
    $
    126,739
  F-46




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##### Table of Contents



Condensed Statements of Income
 Years ended December 31,2010
    
    
    2009
    
    
    2008(in thousands)Income:Interest income from bank subsidiary
    
    $
    327
    
    
    $
    338
    
    
    $
    611Total income
    
    
    327
    
    
    
    338
    
    
    
    611Expense:Interest expense
    
    
    
    
    
    
    
    
    
    
    28Legal expense
    
    
    45
    
    
    
    207
    
    
    
    249Investor relations expense
    
    
    31
    
    
    
    68
    
    
    
    99Audit and consulting fees
    
    
    243
    
    
    
    8
    
    
    
    51Subscriptions and publications
    
    
    83
    
    
    
    68
    
    
    
    29Other non-interest expenses
    
    
    21
    
    
    
    13
    
    
    
    15Total expense
    
    
    423
    
    
    
    364
    
    
    
    471Income (loss) before income taxes and equity in
undistributed
net income (loss) of subsidiaries
    
    
    (96
    )
    
    
    (26
    )
    
    
    140Income tax expense (benefit)
    
    
    (29
    )
    
    
    (27
    )
    
    
    64Income before equity in undistributed net income (loss)
of subsidiaries
    
    
    (67
    )
    
    
    1
    
    
    
    76Equity in undistributed net income (loss) of bank subsidiary
    
    
    4,108
    
    
    
    (17,902
    )
    
    
    (42,567
    )Net income (loss)
    
    $
    4,041
    
    
    $
    (17,901
    )
    
    $
    (42,491
    )
 Condensed Statements of Cash Flows
 Years ended December 31,2010
    
    
    2009
    
    
    2008(in thousands)Cash flows from operating activities:Net income (loss)
    
    $
    4,041
    
    
    $
    (17,901
    )
    
    $
    (42,491
    )Adjustments to reconcile net income to cash
provided by operating activities:Equity in undistributed net income (loss) of bank
subsidiary
    
    
    (4,108
    )
    
    
    17,902
    
    
    
    42,567Stock-based compensation expense
    
    
    8
    
    
    
    
    
    
    
    Change in other assets and other liabilities, net
    
    
    130
    
    
    
    60
    
    
    
    61Net cash provided by operating activities
    
    
    71
    
    
    
    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
    
    
    302
    
    
    
    294
    
    
    
    248Purchase of Treasury Stock
    
    
    (85
    )
    
    
    
    
    
    
    Net cash provided by (used in) investing activities
    
    
    217
    
    
    
    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
    
    
    288
    
    
    
    355
    
    
    
    1,427Cash and cash equivalents at beginning of year
    
    
    1,782
    
    
    
    1,427
    
    
    
    Cash and cash equivalents at end of year
    
    $
    2,070
    
    
    $
    1,782
    
    
    $
    1,427
  F-47




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##### Table of Contents



NOTE 19  SELECTED QUARTERLY DATA (UNAUDITED)
 Year Ended December 31,
    
    
    Year Ended December 31,2010
    
    
    2009Fourth
    
    
    Third
    
    
    Second
    
    
    First
    
    
    Fourth
    
    
    Third
    
    
    Second
    
    
    FirstQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(in thousands)
    
    
    (in thousands)Interest income
    
    $
    12,220
    
    
    $
    12,655
    
    
    $
    12,829
    
    
    $
    12,565
    
    
    $
    13,189
    
    
    $
    13,409
    
    
    $
    13,992
    
    
    $
    13,943Interest expense
    
    
    3,277
    
    
    
    3,558
    
    
    
    3,736
    
    
    
    3,968
    
    
    
    4,260
    
    
    
    4,487
    
    
    
    5,074
    
    
    
    5,207Net interest income
    
    
    8,943
    
    
    
    9,097
    
    
    
    9,093
    
    
    
    8,597
    
    
    
    8,929
    
    
    
    8,922
    
    
    
    8,918
    
    
    
    8,736Provision for loan losses
    
    
    2,844
    
    
    
    2,700
    
    
    
    1,708
    
    
    
    244
    
    
    
    785
    
    
    
    9,765
    
    
    
    1,864
    
    
    
    745Net interest income (expense)
after provision for loan
losses
    
    
    6,099
    
    
    
    6,397
    
    
    
    7,385
    
    
    
    8,353
    
    
    
    8,144
    
    
    
    (843
    )
    
    
    7,054
    
    
    
    7,991Non-interest income (expense)
    
    
    1,886
    
    
    
    1,388
    
    
    
    732
    
    
    
    (1,155
    )
    
    
    908
    
    
    
    888
    
    
    
    (431
    )
    
    
    (433
    )Non-interest expense
    
    
    7,123
    
    
    
    6,899
    
    
    
    7,418
    
    
    
    7,094
    
    
    
    7,822
    
    
    
    6,609
    
    
    
    6,653
    
    
    
    8,084Income (loss) before income
taxes
    
    
    862
    
    
    
    886
    
    
    
    699
    
    
    
    104
    
    
    
    1,230
    
    
    
    (6,564
    )
    
    
    (30
    )
    
    
    (526
    )Income tax expense (benefit)
    
    
    
    
    
    
    (959
    )
    
    
    
    
    
    
    (531
    )
    
    
    
    
    
    
    12,571
    
    
    
    (133
    )
    
    
    (427
    )Net income (loss)
    
    $
    862
    
    
    $
    1,845
    
    
    $
    699
    
    
    $
    635
    
    
    $
    1,230
    
    
    $
    (19,135
    )
    
    $
    103
    
    
    $
    (99
    )
 Year Ended December 31,2008Fourth
    
    
    Third
    
    
    Second
    
    
    FirstQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(in thousands)Interest income
    
    $
    14,471
    
    
    $
    15,154
    
    
    $
    15,048
    
    
    $
    13,454Interest expense
    
    
    5,664
    
    
    
    6,084
    
    
    
    6,288
    
    
    
    6,217Net interest income
    
    
    8,807
    
    
    
    9,070
    
    
    
    8,760
    
    
    
    7,237Provision for loan losses
    
    
    6,860
    
    
    
    1,308
    
    
    
    558
    
    
    
    283Net interest income after
provision for loan losses
    
    
    1,947
    
    
    
    7,762
    
    
    
    8,202
    
    
    
    6,954Non-interest income
    
    
    (11,997
    )
    
    
    (870
    )
    
    
    975
    
    
    
    1,099Non-interest expense
    
    
    38,251
    
    
    
    6,722
    
    
    
    7,470
    
    
    
    12,274Income (loss) before income
taxes
    
    
    (48,301
    )
    
    
    170
    
    
    
    1,707
    
    
    
    (4,221
    )Income tax expense (benefit)
    
    
    (6,125
    )
    
    
    (424
    )
    
    
    370
    
    
    
    (1,975
    )Net income
    
    $
    (42,176
    )
    
    $
    594
    
    
    $
    1,337
    
    
    $
    (2,246
    )
  F-48




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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 Robert J. Boyer (3)10.3
    
    
    Employment Agreement for Michael D. Devlin (4)10.4
    
    
    Change in Control Agreement for Guy Hackney (4)10.5
    
    
    Change in Control Agreement for James McGowan, Jr. (4)10.6
    
    
    Change in Control Agreement for Michele Pollack (4)10.7
    
    
    Change in Control Agreement for Donald Dodson (4)10.8
    
    
    Form of Director Retirement Plan (1)10.9
    
    
    2008 Equity Incentive Plan (5)14
    
    
    Code of Ethics (6)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 Current Report filed on November 4, 2010,
indicating that such agreement would not be renewed.(4)
    
    Incorporated by reference to the Companys Current Report filed on October 6, 2010.(5)
    
    Incorporated by reference to the Companys Definitive Proxy Statement filed with the
Securities and Exchange Commission on July 16, 2008.(6)
    
    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.