UNITED STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 FORM
10-K/A
 (Amendment
No. 1)
  FOR
ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
 OF
THE SECURITIES EXCHANGE ACT OF 1934
 (Mark
One)
 x ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For
the fiscal year ended: December 31, 2008
 
  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. 0-20957
  Sun
Bancorp, Inc.
 (Exact
Name of Registrant as Specified in Its Charter)
  New
      Jersey
              
              52-1382541(State
      or Other Jurisdiction of Incorporation or Organization)
              
              (IRS
      Employer Identification No.)226
      Landis Avenue, Vineland, New Jersey
              
              08360(Address
      of Principal Executive Offices)
              
              (Zip
      Code)
  Registrant’s
telephone number, including area code:   (856)
691-7700
  Securities
registered pursuant to Section 12(b) of the Exchange Act:
  Title
      of each class
              
              Name
      of each exchange on which registeredCommon
      Stock, $1.00 par value
              
              The
      NASDAQ Stock Market LLC
  Securities
registered pursuant to Section 12(g) of the Exchange Act:  None
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  YES  NO x
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  YES  NO x
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  YES x NO 
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.x
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definitions of “large accelerated filer,” “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.  (Check one):
 
 Large
      accelerated filer 
              Accelerated
      filer x
              Non-accelerated
      filer 
              Smaller
      reporting company 
 
 Indicate
by check mark whether the registrant is a shell company (as defined by Rule
12b-2 of the Exchange Act).YES NO x
 
 The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant, based on the closing price of the registrant’s
Common Stock as of June 30, 2008 was approximately $152.9 million.
  As of
March 12, 2009, there were 21,956,017 outstanding shares of the registrant’s
Common Stock.
  DOCUMENTS
INCORPORATED BY REFERENCE
  1.
              Portions
      of the Annual Report to Shareholders for the Fiscal Year Ended December
      31, 2008.  (Parts II and
IV)
  
  SUN
BANCORP, INC
 FORM 10-K /A
 TABLE OF
CONTENTS
  PageExplanatory
      Note
              
              1PART
      IIIITEM
      10.
              
              Directors,
      Executive Officers and Corporate Governance
              
              2ITEM
      11.
              
              Executive
      Compensation
              
              6ITEM
      12.
              
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
              
              17ITEM
      13.
              
              Certain
      Relationships and Related Transactions and Director
      Independence
              
              19ITEM
      14.
              
              Principal
      Accounting Fees and Services
              
              19PART
      IVITEM
      15.
              
              Exhibits and
      Financial Statement Schedules
              
              21SIGNATURES
              
              23
 
  
  EXPLANATORY
NOTE
 
 
 This
Amendment No. 1 on Form 10-K/A (the “Amendment”) amends the Annual Report on
Form 10-K of Sun Bancorp, Inc. for the fiscal year ended December 31, 2008,
originally filed with the Securities and Exchange Commission (“SEC”) on March
16, 2009 (the “Original Filing”).  We are filing this Amendment to
amend Part III of the Original Filing to include the information required by and
not included in Part III of the Original Filing because it was incorporated by
reference to our Proxy Statement which, as of the date of the Original Filing,
we intended to file within 120 days of the end of our fiscal year but which will
not be filed by that deadline.  The cover page of the Amendment
reflects this fact.  In connection with the filing of this Amendment
and pursuant to the rules of the SEC, we are including with this Amendment
certain new certifications by our principal executive officer and principal
financial officer. Accordingly, Item 15 of Part IV has also been amended to
reflect the filing of these new certifications.
  Except as
described above, no other changes have been made to the Original Filing. The
Original Filing continues to speak as of the date of the Original Filing, and
other than expressly indicated in this Amendment, we have not updated the
disclosures contained therein to reflect any events which occurred at a date
subsequent to the filing of the Original Filing, including, but not limited to,
the declaration of a 5% stock dividend by the Board of Directors of Sun Bancorp,
Inc. (the “Company”) which was declared on April 16, 2009 to be paid on May 14,
2009 to stockholders of record as of April 30, 2009.
 
  - 1
-
 PART
III
  Item
10.  Directors, Executive Officers and Corporate
Governance.
 
 The
following table sets forth information with respect to the directors and the
executive officers of the Company and Sun National Bank (the “Bank”), including
their names, ages, and the years they first became directors or executive
officers of the Company or the Bank.  The term of office of each
director expires at the 2009 Annual Meeting of Stockholders.
 
 Name
              
              Age
              
              Year First Elected or
      Appointed(1)DIRECTORSBernard
      A. Brown
              
              84
              
              1985Anthony
      Russo, III
              
              66
              
              1985Sidney
      R. Brown
              
              51
              
              1990Peter
      Galetto, Jr.
              
              55
              
              1990Anne
      E. Koons
              
              56
              
              1990Douglas
      J. Heun
              
              62
              
              1997Edward
      H. Salmon
              
              66
              
              1997Ike
      Brown
              
              54
              
              1998Jeffrey
      S. Brown
              
              49
              
              1999Alfonse
      M. Mattia
              
              67
              
              2001George
      A. Pruitt
              
              62
              
              2001Eli
      Kramer
              
              54
              
              2004John
      A. Fallone
              
              55
              
              2006Anat
      Bird
              
              57
              
              2007Thomas
      X. Geisel
              
              47
              
              2008EXECUTIVE
      OFFICERS OF
                THE
      COMPANY AND THE BANKBart
      A. Speziali
              
              59
              
              1992Dan
      A. Chila
              
              61
              
              2000A.
      Bruce Dansbury
              
              55
              
              2001
 
 (1)
              For
      directors, refers to the year such individual became a director of the
      Company or the Bank.  For officers, refers to the year such
      individual joined the Company or the
Bank.
 
 Biographical
Information
 
 All
directors and executive officers have held their present positions for at least
five years unless otherwise stated.
 
 Bernard A. Brownhas been
Chairman of the Board of Directors of the Company since its inception in January
1985, as well as Chairman of the Board of Directors of the Bank.  Mr.
Brown is also the Chairman of the Board of Directors of NFI, a trucking
conglomerate headquartered in Vineland, New Jersey.  He is also
Chairman of the Board of Vineland Construction Company and owns several other
real estate companies with extensive property holdings.  Directors Ike
Brown, Sidney R. Brown, Anne E. Koons and Jeffrey S. Brown are the children of
Bernard A. Brown.
 
 Anthony Russo, IIIhas been a
director of the Company since May 2002.  Mr. Russo is also a director
of the Bank and was one of its founding directors in 1985.  He is a
lifetime resident of Tabernacle, NJ, where he is President of Russo’s Fruit
& Vegetable Farm & Greenhouses, Inc., a 400 acre fruit and vegetable,
greenhouse, wholesale and retail operation that has been in business for over 60
years.  Mr. Russo is an investor and founder of Medsun Bank
Properties.  Mr. Russo is Vice President of the Tabernacle
Co-operative Growers Association, serves on the Board of Directors of the
Trenton Farmers Market Growers Cooperative and is actively involved in New
Jersey Farm Bureau and New Jersey Department of Agriculture
activities.
 - 2
-
 Sidney R. Brownis Vice
Chairman of the Board of Directors of the Company and has served as a director,
treasurer and secretary since 1990.  He is also a director of the
Bank.  Mr. Brown served as Acting President and CEO of the Company
from February 2007 to January 2008.  Mr. Brown is the Chief Executive
Officer of NFI, its subsidiaries and affiliates.  NFI has a national
scope servicing its customers’ transportation, leasing, distribution,
warehousing and third party logistics needs.  Mr. Brown is a general
partner of various real estate companies having extensive holdings with an
emphasis on development and management of commercial and industrial real
estate.  Mr. Brown is also a director of J & J Snack Foods
Corp.
 
 Peter Galetto, Jr. has been a
director of the Company since April 1990.  He is also a director of
the Bank.  Mr. Galetto also served as the Secretary of the Company
from April 1990 to March 1997.  Mr. Galetto is the President of
Stanker & Galetto, Inc., an industrial building contractor located in
Vineland, New Jersey.  He is the Secretary/Treasurer of Tri-Mark
Building Contractors, Inc.  Mr. Galetto is also a board member of
South Jersey Healthcare, Cumberland Cape Atlantic YMCA, Hendricks House and St.
John Bosco Finance Committee.  Mr. Galetto has been honored by several
organizations for his community service.  He has been awarded
Entrepreneur of the Year by the South Jersey Development Council, Gregor Mendal
Award from St. Augustine Prep in 1999, Vineland Rotary Club Outstanding
Vocational Accomplishments in 1994 and the Order Sons of Italy in America
Distinguished Golden Lion Award, 2000.  Mr. Galetto is also an officer
and director of several other corporations and organizations.
 
 Anne E. Koonshas been a
director of the Company since April 1990.  She is also a director of
the Bank.  Ms. Koons is a real estate agent with Prudential Fox &
Roach.  Ms. Koons is a member of the Cooper Hospital University
Foundation Board and serves on the board of directors of Woodcrest Country
Club.  She is also an officer and director of several other
companies.
 
 Douglas J. Heunhas been a
director of the Company since May 2002.  He is also a director of the
Bank.  Mr. Heun is a Certified Public Accountant and a founding
partner of Tracey Heun Brennan & Co., an accounting and consulting firm in
Southern New Jersey.  He is a Certified Financial Planner
(CFP).  He is licensed by the AICPA as an Accredited Business Valuator
(ABV), a Certified in Financial Forensics (CFF), and a Personal Financial
Specialist (PFS).  In addition to his membership in the AICPA, he is
also a member of the New Jersey Society of CPAs.  Mr. Heun is a
partner in a number of real estate partnerships and other business
activities.  Mr. Heun is President of the Challenged Children’s
Charities Corporation, Vice President of the Helen L. Diller Vacation Home for
Blind Children, Member of the Board of Trustees for the Richard Stockton College
of New Jersey Foundation, and Committee Member of The Stainton
Society.
 
 Edward H. Salmon has been a
director of the Company since May 2002.  He is also a director of the
Bank.  For 27 years, Dr. Salmon served as a teacher, coach and school
administrator in the Millville Public School System.  In addition, he
has 26 years of public service as the Mayor of Millville, Freeholder Director of
Cumberland County, New Jersey State Legislator, and a member of the Governor’s
Cabinet serving as President of the New Jersey Board of Public
Utilities.  As a State Utilities Regulator, Dr. Salmon served as Vice
President of the National Association of Regulatory Utility Commissioners,
Trustee of the National Regulatory Research Institute, President of the Great
Lakes Conference (16 States) and on the Board of Directors for the National
Society of Rate of Return Analysts.  Dr. Salmon formerly served as
Vice Chairman of AUS, Inc. and President/CEO of AUS
Consultants.  Currently, Dr. Salmon is Chairman of Salmon Ventures
Limited, a company providing national consulting to utilities, industry,
business, education and government.
 
 Ike Brownhas been a director
of the Company since March 1998.  He is also a director of the
Bank.  Mr. Brown is Vice Chairman and director of NFI, President of
NFI RoadRail, and is one of the general partners of The Four B’s, a partnership
which has extensive real estate holdings in the Eastern United States and which
primarily engages in investment in, and the consequent development of,
commercial real estate, leasing and/or sale.  Mr. Brown is currently
an officer and director of several other corporations and partnerships in the
transportation, equipment leasing, insurance, warehousing and real estate
industries.  He is also a major investor in two Dallas Texas area
restaurants.  Mr. Brown is also very active in philanthropic
activities in the Dallas/Ft. Worth Texas area.
 - 3
-
 
 Jeffrey S. Brownhas been a
director of the Company since April 1999.  He is also a director of
the Bank.  Mr. Brown is Vice Chairman of NFI, a comprehensive provider
of freight transportation, warehousing, third party logistics, contract
manufacturing, and real estate development.  He is also President of
NFI Real Estate, one of the top real estate development companies in the
industry.  Mr. Brown is one of the general partners of The Four B’s, a
partnership with extensive holdings primarily in the Eastern United
States.  He is also an officer and director of several other
corporations and partnerships in the transportation, equipment leasing,
insurance, warehousing and real estate industries.
 
 Alfonse M. Mattiahas been a
director of the Company since May 2001.  He is also a director of the
Bank.  Mr. Mattia is a Certified Public Accountant and a founding
partner of Amper Politziner & Mattia, a regional accounting and consulting
firm with offices in New Jersey, New York and Pennsylvania.  He served
as Co-Chairman of the Rutgers University Family Business Forum and has served as
a member of “The Group of 100,” a national group formed by the American
Institute of Certified Public Accountants to protect the public interest and
position the accounting profession for the future.  A member of the
American Institute of Certified Public Accountants, he served three years on the
Assurance Services Executive Committee at the AICPA and is the firm
representative to the Major Firms Group where he chaired the annual meeting in
2000.  Mr. Mattia is a member of the Harvard Business School Club and
the Columbus Citizens Foundation, both in New York.  He is also a
member of the Board of Trustees at Rider University.
 
 George A. Pruitt has been a
director of the Company since May 2002.  He is also a director of the
Bank.  Dr. Pruitt has been President of Thomas Edison State College
since 1982.  He is a member, and Past Board Chairman, of the Mercer
County Chamber of Commerce, Trenton, NJ; and is a past member of the National
Advisory Committee on Institutional Quality and Integrity, United States
Department of Education.  He sits on the Boards of Directors of Rider
University, Lawrenceville, NJ; Structured Employment Economic Development
Corporation, New York, NY; the Union Institute, Cincinnati, OH;  and
is a member of the board of directors of the American Association of State
Colleges and Universities.  He is a former director of the Trenton
Savings Bank.  He has served in an advisory capacity to three
Secretaries of Education.  He is the recipient of three honorary
degrees in addition to numerous awards, honors, and commendations.  In
a study of presidential leadership funded by the Exxon Education Foundation, Dr.
Pruitt was identified as one of the most effective college presidents in the
United States.
 
 Eli Kramerhas been a
director of the Company since July 2004.  He is also a director of the
Bank.  Mr. Kramer has been a principal in real estate development companies
since 1976 and is a partner in Central Jersey Management Co.  He is
also a principal in Arcturus Group, a real estate advisory and asset management
firm serving the financial industry.  He was a co-founder and Vice Chairman
of the Board of Directors of Community Bancorp of New Jersey, prior to its
acquisition by the Company.  He also served as a Director and Chairman of
the Board of Colonial State Bank.  Mr. Kramer is a co-founder and principal
in L. J. Kushner and Associates, L.L.C., an executive recruiting firm
specializing in Information Security.  Mr. Kramer serves as a Trustee on
the Boards of the Jewish Educational Center, Elizabeth, NJ and the
Holocaust Resource Center at Kean University.
 
 John A. Fallonehas been a
director of the Company since January 2006.  He is also a director of
the Bank.  Mr. Fallone has been involved in various real estate
ventures including residential developments, commercial centers and active adult
communities.  He has owned and managed recreational facilities such as
indoor tennis, fitness and swim clubs, developed day care facilities/restaurants
and various office complexes.  Mr. Fallone was a founder and served as
Chairman of the Board of Directors of Advantage Bank.  Prior to that,
he served on the Board of Directors of Unity Bank.  He has served as a
director and officer of the New Jersey Builders Association and has been active
in the National Home Builders Association.  Mr. Fallone has been
honored for community service, including hosting fund raising events for the
Somerset County Special Olympics and was recently named “Volunteer of the Year”
by the New Jersey Special Olympic Committee.
 - 4
-
 
 Anat Birdhas been a director
of the Company since January 2007.  She is also a director of the
Bank.  Ms. Bird is the President and Chief Executive Officer of SCB
Forums, Ltd., which she founded in 1994.  SCB Forums arranges and
facilitates peer group meetings for bank CEO’s and other executive positions as
well as provides consulting services to financial services
companies.  From March to November 2001, Ms. Bird was President and
CEO of California Community Bancshares.  Prior to that, she was an
Executive Vice President for Wells Fargo Bank and served as Region President for
Northern California; she was Group Head and an Executive Vice President for
Norwest Bank in Minnesota prior to Norwest’s merger with Wells Fargo in
1998.  Before joining Norwest in 1997, Ms. Bird had been Chief
Operating Officer and a director of Roosevelt Financial Group, Inc. in
Chesterfield, Missouri.  Ms. Bird currently serves on the board of
directors of Sterling Bancshares, Inc. in Houston, Texas, AmTrust Bank in
Cleveland, Ohio and. MidFirst Bank based in Oklahoma City,
Oklahoma.
  Thomas X. Geiseljoined the
Company as President and Chief Executive Officer in January 2008 and is also a
director of the Company.  Mr. Geisel also serves as the President and
Chief Executive Officer of the Bank and is a director of the
Bank.  Prior to joining Sun, Mr. Geisel held a number of positions
with KeyBank. He joined Key in July 1999 in New York City where he served as
Managing Director of Investment Banking for the East and West Regions of KeyBanc
Capital Markets (formerly McDonald Investments’ Key Business Advisory Services
division).  In 2002, he was promoted to President of Key’s Capital
Region New York District and subsequently to Regional Executive for Commercial
Banking for which he relocated to Albany, New York.  From 2005 through
2007, he served as President for KeyBank’s Northeast Region, which comprised
eight districts across New York, New England and Florida, with assets of
approximately $20 billion and revenue exceeding $550 million.  Mr.
Geisel’s other experience includes representing the U.S. Department of Justice
in various capacities domestically and as a diplomat in Latin America and the
Caribbean.  As an active member of the community, Mr. Geisel serves on
the board of directors of the New Jersey State Chamber of Commerce and the
Atlantic County Community Development Corporation (CDC), a part of the Greater
Atlantic City Chamber of Commerce.  He also currently serves as the
chairman of the American Heart Association’s 2009 Southern New Jersey Spring
Heart Walk.  Additionally, he is a member of the CEO
Group.
 
 Bart A. Spezialihas been
with the Bank since 1992 and serves as Executive Vice President and Senior
Lending Officer and manages the Wholesale Lending Division for the Southern
Region.  Mr. Speziali has over 30 years of banking experience in the
New Jersey marketplace.  He presently serves on the Executive Council
of the American Heart Association for Cumberland County.  Mr. Speziali
also is a trustee for the Southern New Jersey Development Council and is a
member of their Economic Development Committee.  He also serves as
treasurer and a member of the Board of Directors of the United Way of Atlantic
County and is a member of the Center City Vineland Redevelopment Plan Advisory
Committee and trustee of the Quinton Sportsmen’s Club.  He also has
served as president of the Cumberland Cape Atlantic YMCA and the Exchange Club
of Vineland and was a member of the Neighborhood Empowerment Council on Housing
for the City of Vineland.
 
 Dan A. Chilajoined the
Company in April 2000 as the Executive Vice President and Chief Financial
Officer.  Mr. Chila also serves as Executive Vice President and Chief
Financial Officer of the Bank.  He has over 30 years of banking
experience and is a Certified Public Accountant.  Prior to joining the
Company, Mr. Chila was Senior Vice President and Chief Financial Officer of
Peoples Bancorp, Lawrenceville, New Jersey.  Prior to that, Mr. Chila
was a Senior Vice President in the Financial Division of CoreStates Financial
Corporation where he held positions of CFO at several CoreStates banking
subsidiaries and Business Divisions.  Mr. Chila is a member of the
American Institute of Certified Public Accountants, the New Jersey Society of
Certified Public Accountants, and the Pennsylvania Institute of Certified Public
Accountants.  He is a Trustee of Salesianum School, Wilmington, DE and
is also a member of the President’s Advisory Council of LaSalle
University.
 
 A. Bruce Dansburyjoined the
Bank in April 2001 and serves as Executive Vice President, Chief Operating
Officer, and Chief Credit Policy Officer for the Bank.  Mr. Dansbury
also serves as Executive Vice President and Chief Operating Officer of the
Company.  Mr. Dansbury has over 32 years of banking experience in New
Jersey and prior to joining the Bank held the title of Business Bank Executive
for First Union National Bank.  His professional affiliations and
activities include: past director and past president, Trenton Downtown
Association; past member of Shoprite LPGA Classic Board; Rider University
Business Advisory Board; and director of the Mercer County Chamber of
Commerce.
 - 5
-
 
 Section
16(A) Beneficial Ownership Reporting Compliance
 
 Section
16(a) of the Securities Exchange Act of 1934 requires the Company’s officers and
directors, and persons who own more than ten percent of the Company’s common
stock, to file reports of ownership and changes in ownership of the Company’s
common stock with the Securities and Exchange Commission.  Based upon
a review of the copies of the forms furnished to the Company, or written
representations from certain reporting persons, the Company believes that all
Section 16(a) filing requirements applicable to its executive officers and
directors were complied with during the year ended December 31, 2008 with the
exception of one untimely filing by Mr. Al Mattia and Mr. Jeff Brown due to an
inadvertent error for each.
  Director
Nomination Process
 
 The
Company does not currently pay fees to any third party to identify or evaluate
or assist in identifying or evaluating potential nominees for director
positions.  The Nominating and Corporate Governance Committee gives a
recommendation to the Board of Directors of the persons to be nominated by the
Company for election.  The Committee’s process for identifying and
evaluating potential nominees includes soliciting recommendations from directors
and officers of the Company and its wholly-owned subsidiary, Sun National
Bank.  Additionally, the Committee will consider persons recommended
by shareholders of the Company in selecting the Committee’s nominees for
election.  There is no difference in the manner in which the Committee
evaluates persons recommended by directors or officers and persons recommended
by shareholders in selecting Board nominees.
 
 Audit
Committee
 
 The Audit
Committee met 10 times during 2008.  This committee currently consists
of Directors Galetto, Heun, Kramer, Mattia and Salmon. Both Mr. Heun and Mr.
Mattia meet the definition of an audit committee financial expert under the
regulations of the Securities and Exchange Commission.
 
 The
Company has adopted a Code of Ethics and Conduct that applies to its principal
executive officer, principal financial officer, principal accounting officer or
controller or persons performing similar functions.  A copy of the
Code of Ethics and Conduct is posted at the Company’s website at www.sunnb.com.
 
 Item
11.  Executive Compensation.
  COMPENSATION
DISCUSSION AND ANALYSIS
 
 This
Compensation Discussion and Analysis describes the material elements of the
Company’s compensation program for the last fiscal year applicable to the
principal executive officer, principal financial officer and the other officers
included in the summary compensation table (referred to as the “Named Executive
Officers” or the “named officers”).
 
 Compensation Philosophy And
Objectives.The underlying goal of the Company’s compensation
program is to promote increases in long-term shareholder value by closely
aligning the financial interests of the Company and its shareholders with the
Named Executive Officers and other members of senior management (collectively,
“Executive Management”).
 
 In
accordance with the Charter of the Company’s Compensation Committee, the
Compensation Committee seeks to design and administer executive compensation
programs that will achieve the following primary objectives:
 
 §
              Support
      a pay-for-performance policy that differentiates compensation based on
      corporate and individual
performance;
  §
              Motivate
      employees to assume increased responsibility and reward them for their
      achievement;
  §
              Provide
      total compensation opportunities that are comparable to those offered by
      other leading companies, allowing the Company to recruit and retain top
      quality, dedicated executives who are critical to its long-term success;
      and
  - 6
-
 §
              Align
      the interests of executives with the long-term interests of shareholders
      by providing executives with equity award opportunities that will result
      in favorable long term compensation opportunities as long-term shareholder
      value grows.
  Annually, the Company establishes specific financial performance targets that
are defined by the Compensation Committee and are incorporated into the
budgeting process.  The Company’s goal is to promote and administer a
comprehensive pay-for-performance program consistent with such financial
performance targets.
  The
Company’s compensation program is designed to promote performance by the Named
Executive Officers and the entire Executive Management group as a
team.  For 2008, performance of the Named Executive Officers was
primarily evaluated based upon Company performance targets measured by projected
earnings per share.  The Company strives to provide each Named
Executive Officer with a total compensation opportunity that the Compensation
Committee deems to be market competitive with comparably-sized, community banks,
both nationally and regionally, assuming the Company’s performance is at
budgeted, targeted levels.  The Company believes that this market
positioning is appropriate to attract and retain top-caliber talent in a highly
competitive labor market for executive staff.
 
 The
Company maintains programs to create short-term and longer-term incentive
compensation opportunities for its Executive Management.  In 2008, the
Company made additional awards of stock options and stock awards to its Named
Executive Officers and other members of the Executive Management team consistent
with its long-term compensation goals.  Such equity awards become
earned and non-forfeitable over a four or five year period in order to serve as
a retention tool in addition to a compensation incentive.
 
 Role of the Compensation
Committee.The Compensation Committee’s primary responsibility
is to assist the Board in discharging the Board’s responsibilities relating to
compensation of the Company’s Executive Management.  The Committee
evaluates and recommends to the Board appropriate policies and decisions
relative to salary, annual cash incentives, long-term equity-based incentives
and other compensation programs for the Executive Management.  For
2008, the members of the Company’s Compensation Committee were Anat Bird,
Committee Chairman, Eli Kramer, Alfonse M. Mattia, and George A.
Pruitt.
 
 The
Compensation Committee has periodically engaged compensation consultants and
advisors to provide advice on both board and executive compensation
issues.  During 2008, the Compensation Committee did not receive
specific guidance from any such consultants with respect to compensation for the
Named Executive Officers.
 
 Role of Executives in Compensation
Committee Deliberations.The Compensation Committee has
frequently requested the Company’s Vice Chairman to assist in analyzing existing
compensation programs and studying proposed compensation program
changes.  Additionally, the Vice Chairman has provided guidance to the
Committee regarding Executive Management performance evaluation, bonus plan
recommendations, and other executive compensation matters.  As
appropriate, the Committee requests the presence of the Company’s Vice Chairman
and/or its President and CEO at Committee meetings to discuss executive
compensation matters and to evaluate Company and individual
performance.  Occasionally, other executives may be requested to
attend a Committee meeting to provide pertinent financial, tax, accounting, or
operational information.  Executives in attendance may provide their
insights and suggestions, but only independent Compensation Committee members
vote on decisions regarding executive compensation.
 
 The
Compensation Committee discusses the compensation of the Company’s President and
CEO directly with him, but final deliberations and all votes regarding the
President and CEO’s compensation are made in executive session, without the
President and CEO being present.  The Committee also determines the
compensation for other Named Executive Officers, based on the President and
CEO’s recommendations and input from outside advisors and counsel.
 
 Compensation
Framework.In developing and administering the Company’s
executive compensation policies and programs, the Committee considers the three
aspects of the Compensation program:
 
 §
              Pay
      components - each element of total compensation, including the rationale
      for each component and how each component relates to the total
      compensation structure;
  - 7
-
 §
              Pay
      level - the factors used to determine the total compensation opportunity,
      or potential payment amount at different performance levels, for each pay
      component; and
  §
              Relationship
      of executive compensation to performance - how the Company determines
      appropriate performance measures and goals for incentive plan purposes, as
      well as how pay levels change as a function of
  performance.
  Pay
Components.The Company’s executive compensation program
includes the components listed below:
 
 1.
              Salary - a fixed base
      salary, generally set at competitive levels that reflects each executive’s
      position, individual performance, experience, and
      expertise.  Such base salary levels are reviewed annually by the
      Compensation Committee.
  2.
              Annual Cash Incentive -
      a bonus pay program that varies based on individual and Company
      performance against annual business objectives; the Company communicates
      the associated performance metrics, goals, and bonus award opportunities
      to the executives as early in the fiscal year as is
      practical.  Final bonus determinations are made following the
      end of each fiscal year based upon a review of the stated performance
      metrics and bonus opportunities as well as the discretionary
      considerations of the Compensation Committee.  For 2008, the
      Compensation Committee determined that Annual Cash Incentive awards for
      the Executive Management would be funded based upon projected earnings per
      share, and would be allocated based on earnings per share and individual
      performance.
  3.
              Long-Term Incentives -
      equity-based awards with the compensation values driven by the long-term
      market performance of the Company’s stock price in order to align
      executive pay with long-term shareholder interests.  In 2008,
      the Compensation Committee awarded additional stock awards to Executive
      Management to serve as long-term compensation
  incentives.
  4.
              Change-in-Control Severance
      Agreements - These types of agreements detail the rights and
      obligations of the employer and executive in the event of termination of
      employment following a change-in-control transaction or other involuntary
      termination of employment.
  5.
              Other Compensation -
      perquisites consistent with industry practices in comparable banks and
      broad-based employee benefits such as medical, dental, disability, and
      life insurance coverage.
  Pay Component #1.
Salary
 
 The
Company pays its executives salaries that are intended to be competitive and
take into account the individual’s experience, performance, responsibilities,
and past and potential contribution to the Company, with annual salary reviews
determined in conjunction with an annual performance assessment.  The
Committee intends that salary, together with annual cash incentive and long-term
incentives at targeted Company performance levels, will fall between the market
median and upper quartile when compared to market competitors for similar
executive talent.
 
 In
February 2008, the Compensation Committee approved the 2008 base salary levels
for the Named Executive Officers based on Company performance achieved in 2007
and a review of competitive market data.  In February 2008, the
Compensation Committee approved increasing the 2008 base salary levels for Bruce
Dansbury, EVP and Chief Operating Officer, from $300,000 to $310,000, and Dan
Chila, EVP and Chief Financial Officer, from $289,275 to
$300,000.  The Compensation Committee met in February 2009 and
determined not to provide base salary increases to the Named Executive
Officers.
 
 Pay Component #2. Annual
Cash Incentive
 
 The
Company uses annual discretionary cash incentives to focus management’s
attention on current strategic priorities and to drive achievement of short-term
corporate objectives.  This program, referred to as the Annual Cash
Incentive Plan, provides annual cash incentive compensation for the Named
Executive Officers and other Company employees.
 - 8
-
  For the
2008 fiscal year, the Compensation Committee established both team and
individual performance goals for the Named Executive Officers under the Annual
Cash Incentive Plan.  The team goals are to be measured against
Company performance targets mutually agreed upon by both management and the
Compensation Committee.  Bonus awards under this Plan were determined
for 2008 primarily based upon earnings per share.  To the extent that
100% of the earnings per share targets are achieved, the Annual Cash Incentives
for the Named Executive Officers will be 35% of base salary.  If the
earnings per share target is at least 95% achieved, then 50% of the Annual Cash
Incentive will be awarded on a non-discretionary basis and 50% will be awarded
within the discretion of the Compensation Committee on a case by case basis
based upon an evaluation of individual performance and Company
performance.  If the earnings per share target is at least 90%
achieved, then the Annual Cash Incentive will be awarded within the discretion
of the Compensation Committee on a case by case basis based upon an evaluation
of individual performance and Company performance.  If less than 90%
of the earnings per share target is achieved, then there will be no Annual Cash
Incentive award.  To the extent that 110% of the earnings per share
targets are achieve, the Annual Cash Incentives for the Named Executive Officers
will be 50% of base salary.
 
 The
Annual Cash Incentive program for Mr. Geisel, President and CEO, was detailed in
Mr. Geisel’s letter of employment.  Such program provides for a
payment of a cash bonus calculated as a percentage of his base salary and is
dependent upon the Company’s attainment of annually agreed upon financial
targets.  For example, upon attainment of 100% of the Company’s agreed
upon financial targets, his bonus would be 70% of base salary; attainment of
110% of the approved financial targets will result in a bonus of 100% of base
salary; attainment of 105% of the approved financial targets will result in a
bonus of 80% of base salary; attainment of 95% of the approved financial targets
will result in a bonus of 65% of salary; attainment of 90% of the approved
financial targets will result in a bonus of 60% of salary.  Attainment
of Company performance below 90% of the approved financial targets may result in
a bonus payment determined within the discretion of the Compensation Committee;
attainment of Company performance above 110% of the approved financial targets
may result in an additional bonus payment (in addition to a bonus of 100% of
base salary) determined within the discretion of the Compensation
Committee.  Such bonus will be paid on or before March 15 following
the completion of the Company’s fiscal year and its annual audit.
 
 Pay Component #3. Long-Term
Incentives (“LTI”)
 
 The
Company believes that equity ownership by the Named Executive Officers and
Directors aligns executive and director interests with those of the
shareholders.  In 2004, the Company adopted the 2004 Stock-Based
Incentive Plan.  This omnibus stock plan, as amended in 2007, provides
for granting of up to 1,428,977 shares in the form of incentive stock options,
non-qualified stock options and full-value stock awards, such as restricted
stock.  The Plan further permits the vesting of stock awards based
upon achievement of Company performance measures as well as continued
service.  In prior years, the Company has used stock options as the
primary vehicle for long-term incentive compensation for management and
full-value shares of Company stock for the Directors.  In 2008,
additional stock awards were made to the Named Executive Officers and other
members of the Executive Management as a long-term retention incentive and as
part of an effort to adjust the cash-equity mix of compensation for these
respective positions, in order to better align compensation with long-term
shareholder interests.  Such awards will vest over a four year
period.
 
 The
Compensation Committee does not have a specific policy or practice related to
the timing of equity awards other than it reviews the opportunity to make such
awards from time to time during the year based upon a variety of factors,
including recruitment and promotion opportunities that might arise during the
year, and achievement of the annual performance goals and operating results of
the Company throughout the year.  Stock options that are awarded have
an exercise price equal to no less than the fair market value of such Company
stock on the date of such award grant, and option awards are not subject to
re-pricing.  Although the Company encourages its Executive Management
and Directors to maintain investments in Company stock, the Company does not
have any specific equity ownership requirements or guidelines.  The
Company does not have any policy regarding members of Executive Management or
Directors hedging the economic risks of equity ownership of Company stock, and
the Company does not participate in any programs to facilitate this
practice.
 - 9
-
 
 In
February 2009, the Compensation Committee reviewed the 2008 performance goals
and actual performance achieved.  The Compensation Committee has not
approved Annual Cash Incentive Awards in 2009 for any Named Executive Officers
based upon its consideration of individual job performance and overall Company
performance.  In February 2009, the Compensation Committee granted
Restricted Stock Awards which become earned and non-forfeitable in February 2013
as a retention incentive to the following Named Executive
Officers:   Dan Chila – 9,182 shares; Bruce Dansbury – 8,273
shares.
  Pay Component #4.
Change-in-Control Severance Agreements
 
 The
Company has Change-in-Control severance agreements with each of the Named
Executive Officers.  These arrangements provide executives with income
security including severance benefits in the event of a termination of
employment following a change-in-control transaction.  The primary
provisions of these agreements include that each Named Executive Officer will be
entitled to a severance payment of 2.999 times their average prior five year’s
W-2 earnings in the event of termination of employment following a change of
control transaction.  In addition, such individuals may continue
medical and dental coverage for a period of up to eighteen months following
termination of employment at the executive’s expense in accordance with
COBRA.  Such agreements with the Named Executive Officers (except for
Mr. Bernard Brown, Chairman) also include a provision for a tax gross-up related
to any excise taxes payable by the employee under Internal Revenue Code Sections
280G and 4999.  The agreement for Mr. Thomas Geisel provides for a
severance payment in the event of his termination by the Company prior to
completion of two years of employment equal to 21 months of salary and bonus
payments, and severance protection after completion of two years of employment
of 18 months of salary and bonus payments.  In addition, the
agreements for the other Named Executive Officers (except for Mr. Bernard Brown,
Chairman and Mr. Sidney Brown, Vice Chairman) include a provision for the
payment of severance compensation equal to fifteen months of base salary and
bonus in the event of the involuntary termination of employment of such
executive officer independent of any change in control transaction, absent
termination for “cause” as defined in such agreement.  Such severance
payments are conditioned upon the executive complying with certain
post-termination limitations on his or her business activities in competition
with the Company following such termination of employment.
 
 Pay Component #5. Other
Compensation
 
 The Named
Executive Officers (except Mr. Bernard Brown, Chairman and Mr. Sidney Brown,
Vice Chairman) participate in the Company’s broad-based employee benefit plans,
such as medical, dental and supplemental disability insurance programs and the
401(k)  plan with a Company matching contribution. Mr. Dansbury
receives an allowance for Country Club Membership, and Messrs. Chila and
Dansbury have an auto lease arrangement with the Company.  Mr. Geisel
receives a monthly automobile allowance.  As of December 2008, Mr.
Chila has use of a company owned vehicle, as does Mr. Dansbury as of February
2009.
 
 Summary of Pay
Components
 
 The
Company uses the pay components discussed above in an effort to balance various
objectives.  The Company seeks to balance short-term and longer-term
performance targets, so annual incentives are combined with long-term
incentives.  The compensation framework seeks to balance the
executives’ need for current cash, economic security, and funds to cover taxes
due on long-term incentives (with salary and annual cash incentives) with the
need for alignment of executives’ long-term interests with those of shareholders
through vehicles such as equity grants.  These components provide some
measure of security with competitive base salaries and overall employee benefit
programs, while motivating executives to focus on the strategic goals that will
produce outstanding Company financial performance, increases in long-term
shareholder value and long-term wealth creation for the executives.
 
 Pay Level.Pay
levels for executives are determined based on a number of factors, including the
desire to maintain a team-based management culture, the individual’s roles and
responsibilities within the Company, the individual’s experience and expertise,
the pay levels for other members of the management team within the Company, pay
levels in the marketplace for similar positions, individual performance and
Company operating results.  The Compensation Committee is responsible
for approving pay levels for the Named Executive Officers.
 - 10
-
 
 As noted
earlier, the Company’s compensation program is designed to position an
executive’s total compensation opportunity at competitive levels among
comparable regional and national community banks, assuming the Company’s
financial performance is at expected target levels.  Total
compensation consists of base salary, annual cash incentives, and long-term
incentives in the form of stock options and stock awards and all other forms of
compensation, including the 401(k) Company matching contribution, insurance
premiums, and perquisites, including car leasing and fees for country club
memberships.
  The
primary data source used in setting competitive market levels for executive
officer pay is the information publicly disclosed by other comparable community
banks.  These comparable companies are reviewed annually and may
change from year-to-year.  These companies, which have been carefully
reviewed and considered by the Compensation Committee, include community banks
of similar size and business strategy both nationally and those located in the
New York, New Jersey, Pennsylvania, Delaware and Maryland region.  The
Compensation Committee reviews such data collected in order to determine market
competitive levels of compensation as well as reviewing internal pay levels
within the executive group.  The Compensation Committee makes
decisions regarding each individual executive’s target total compensation
opportunity with consideration of the goal of motivating and retaining an
experienced and effective management team.  There is no formulaic
approach between the market data reviewed each year, year-to-year changes in the
market data, and the compensation decisions made by the Compensation
Committee.
 
 Notwithstanding
the Company’s overall pay positioning objectives, pay opportunities for specific
individuals may vary materially based on a number of factors such as scope of
duties, tenure, institutional knowledge and/or difficulty in recruiting a new
executive with necessary skill levels and experience.  Actual total
compensation in a given year will vary above or below the target compensation
levels based primarily on the attainment of operating goals and the creation of
shareholder value.  In some instances, the amount and structure of
compensation is also a result of arm’s-length negotiations with executives,
which reflect an increasingly competitive market for quality, proven managerial
talent.
 
 Relationship of Executive
Compensation to Performance. The Compensation Committee believes
that in order for the Company to be successful in its efforts to increase and
maintain long term shareholder value and increase the Company’s operating
efficiencies, it is important to focus compensation programs for Executive
Management, and particularly the Named Executive Officers, to be dependent upon
the principles of pay-for-performance.  The compensation program
implemented for Thomas X. Geisel, the Company’s President and CEO, effective
January 7, 2008, has a base salary of $500,000 per year and is strongly focused
on providing increased incentives, including cash, stock and stock option
awards, based upon attainment of financial performance
measures  (specifically, achievement of annual earnings per share
targets).  Similar incentives were implemented for the other Named
Executive Officers and other members of the Executive Management team in
2008.  The Company has never been required to restate performance
measures upon which performance-based compensation is determined.  The
Company does not have a policy regarding recovery of performance-based
compensation awards in the event of such financial restatements or
recalculations of goals; provided, however, effective January 9, 2009, the
Company elected to participate in the Troubled Asset Relief Program Capital
Purchase Program (“CPP”) under the Emergency Economic Stabilization Act of 2008
(“EESA”).  During the period that the Company has Preferred Stock and
Stock Warrants outstanding to investors under the CPP, the Company will be
required to recapture any incentive compensation paid to the Named Executive
Officers that is determined based upon performance metrics that are subsequently
determined to require restatement or recalculation.  In addition, the
Compensation Committee has reviewed the Company’s incentive compensation
programs with the Company’s senior risk officers to ensure that the Company’s
incentive compensation programs do not encourage the Named Executive Officers to
take unnecessary and excessive risks that threaten the value of the financial
institution.
 
 Tax and Accounting
Considerations. The Company takes into account tax and accounting
implications in the design of its compensation programs.  For example,
in the selection of long-term incentive instruments, the Compensation Committee
reviews the projected expense amounts and expense timing associated with
alternative types of awards.  Under current accounting rules (i.e.,
SFAS 123(R)), the Company must expense the grant-date fair value of share-based
grants such as stock option awards, restricted stock, performance shares, and
SARs settled in stock.  The grant-date value is amortized and expensed
over the service period or vesting period of the grant.  In selecting
appropriate incentive devices, the Compensation Committee reviews appropriate
expense analyses and considers the related tax and accounting
issues.
 - 11
-
  Section
162(m) of the Internal Revenue Code places an annual limit on the tax deduction
for certain compensation paid in excess of $1 million to the chief executive
officer and the three most highly compensated executive officers of a
corporation.  All of the compensation the Company paid in 2008 to the
Named Executive Officers is expected to be deductible under Section
162(m).  Whether all elements of compensation paid by the Company in
future years will be fully deductible is dependent upon many factors as required
by Section 162(m) of the Code and applicable regulations.  Such
factors include the aggregate level of taxable income received by an executive
in each year, the structure of various compensation plans, the manner in which
incentive compensation goals are established and a determination of satisfaction
of those goals, and the relationship between the Company and the directors
serving on the committee determining the performance goals related to incentive
compensation and the satisfaction of such performance goals.  The
Committee retains the flexibility to pay both compensation that will be fully
deductible and compensation that may not be deductible in structuring the
Company’s compensation programs in its actions to promote the best interests of
the Company and its shareholders.
  Upon a
change in control of the Company, some portion of the severance payments may
exceed the deductible limitations under Section 280G of the Internal Revenue
Code, and the Company has included a 280G tax gross-up provision in the change
in control agreements with the Named Executive Officers (except for Mr. Bernard
Brown, the Chairman).  Although the Compensation Committee does not
anticipate that any such non-deductible payments or tax gross-up payments, if
applicable, will constitute a material portion of the total shareholder
consideration that might be paid in connection with such a change in control
transaction, it believes that it is necessary for the Company to have
flexibility in designing its compensation programs to meet necessary business
objectives and pay strategies.  During 2008, the Compensation
Committee determined that it would phase-out the use of such tax-gross-up
provisions included in its Change-in-Control Severance Agreement within a three
year period.  The Compensation Committee is reviewing alternative
methods of compensating the Named Executive Officers in a manner that balances
the economic security interests of the executives and the economic interests of
the Company’s shareholders.
  Executive Compensation Restrictions
Under TARP CPP Program.  On January 9, 2009, our CEO, CFO and
three of our most highly compensated senior executive officers voluntarily
executed SEO Waiver Forms and SEO Letter Agreements in connection with our
participation in the U.S. Treasury’s TARP Capital Purchase Program
(CPP).  By executing these documents, the SEOs waived any claims they
may have as individuals against the Treasury as a result of modifications to
their existing compensation arrangements that are made or will be made in order
to be in compliance with Section 111 of the Emergency Economic Stabilization Act
(EESA).
 
 Such
modifications on executive compensation matters include (i) ensuring that
incentive compensation for the SEOs does not encourage unnecessary and excessive
risks that threaten our value; (ii) requiring a forfeiture or repayment of any
bonus or incentive compensation paid to a SEO based on statements of earnings,
gains or other criteria that are later proven to be materially inaccurate; (iii)
limiting severance payments to SEOs to the limits under Section 280G of the
Internal Revenue Service Code for terminations not related to a change in
control transaction.
 
 The
Company repaid the CPP funds to the U.S. Treasury as of April 8,
2009.
 
 COMPENSATION
COMMITTEE REPORT
 
 In
performing its oversight role, the Compensation Committee considered and
discussed the foregoing Compensation Discussion and Analysis (CD&A) with
executive management and gave its recommendation to the Board of Directors that
the CD&A be included in this proxy statement.
 
 The
Compensation Committee has reviewed with the senior risk officers of the Company
the senior executive officer incentive compensation arrangements and has made
reasonable efforts to ensure that such arrangements do not encourage such senior
executive officers to take unnecessary and excessive risks that threaten the
value of the Company
 
 Compensation
Committee:
 Anat
Bird, Committee Chair, Eli Kramer, Alfonse M. Mattia, and George A.
Pruitt.
 - 12
-
 Compensation
Committee Interlocks and Insider Participation
 
 Company
directors who served as members of the Compensation Committee of the Company’s
Board of Directors during the year ended December 31, 2008 were Anat Bird
(Committee Chair), Alfonse M. Mattia, Eli Kramer and George A. Pruitt.  Jeffrey S. Brown
and Sidney R. Brown attend Compensation Committee meetings but are not committee
members.
 
 None of
the individuals who served on the committee during 2008 was an executive officer
of another company whose board of directors has a comparable committee on which
one of the Company’s executive officers serves. In addition, during 2008 no
executive officer of the Company was a member of a comparable compensation
committee of a company of which any of the directors of the Company is an
executive officer.
 
 EXECUTIVE
COMPENSATION
 
 Summary.The following table sets
forth the cash and non-cash compensation awarded to or earned during the last
three fiscal years by our principal executive officer, principal financial
officer and the three other most highly compensated executive officers whose
total compensation (excluding compensation attributable to changes in pension
value and non-qualified deferred compensation earnings) during the fiscal year
ended December 31, 2008 exceeded $100,000 for services rendered in all
capacities to the Company and the Bank.
  Year
                
                Salary
                
                Bonus(1)
                
                Stock
                  Awards
      (2)
                
                Options(3)
                
                All
      Other Compensation(4)
                
                TotalBernard
      A. Brown
                2008
                
                $370,108
                
                -
                
                -
                
                $  31,690
                
                -
                
                $  
      401,798Chairman
                2007
                
                $356,400
                
                -
                
                -
                
                $  31,604
                
                -
                
                $  
      388,0042006
                
                $400,638
                
                -
                
                -
                
                $  50,874
                
                -
                
                $  
      451,513Sidney
      R. Brown
                2008
                
                $185,054
                
                -
                
                $229,451
                
                $  87,732
                
                -
                
                $  
      502,237Vice
      Chairman,
                2007
                
                $178,200
                
                -
                
                $154,072
                
                $  15,802
                
                -
                
                $  
      348,074Treasurer
      and Secretary
                2006
                
                $200,319
                
                -
                
                -
                
                $  33,653
                
                -
                
                $  
      233,972Thomas
      X. Geisel(5)
                2008
                
                $490,384
                
                $250,000
                
                $  
       9,286
                
                $114,522
                
                $151,741
                
                $1,095,933President
      and CEODan
      A. Chila
                2008
                
                $309,476
                
                -
                
                $
        9,353
                
                $  14,613
                
                $  16,094
                
                $  
      349,536Executive
      Vice
                2007
                
                $286,626
                
                $
      86,783
                
                -
                
                $    6,411
                
                $  16,351
                
                $  
      396,171President
      and Chief Financial Officer
                2006
                
                $277,106
                
                -
                
                -
                
                $  17,323
                
                $  16,695
                
                $  
      311,124A.
      Bruce Dansbury
                2008
                
                $320,000
                
                -
                
                $118,423
                
                $
      24,355
                
                $  17,775
                
                $  
      480,553Executive
      Vice
                2007
                
                $277,729
                
                $
      90,000
                
                $  21,991
                
                $
      10,684
                
                $  20,698
                
                $  
      421,102President
      and Chief Operating Officer
                2006
                
                $262,813
                
                -
                
                -
                
                $
      10,393
                
                $  15,260
                
                $  
      288,466
 
  _________________
 (1)
              No
      cash bonuses for 2006 and 2008 were awarded to senior management because
      earnings were substantially below budget targets.  Discretionary
      cash bonuses for 2007 were earned by senior management in 2007 but paid in
      2008: Mr. Dansbury - $90,000; Mr. Chila - $86,783.   A part
      of his employment agreement, Mr. Geisel was awarded a sign-on bonus of
      $250,000 in 2008.
 (2)
              The
      amount represents all of the SFAS 123(R) expense recorded by the Company
      during 2008 and 2007 for restricted stock units awarded to the named
      officers.  See Note 2 to the Company’s Audited Financial
      Statements for a discussion of SFAS 123(R) valuations
      methodology.
 (3)
              The
      amount shown represents all of the SFAS 123(R) expense recorded by the
      Company during 2008, 2007 and 2006, respectively, for options granted to
      the named officers.
 (4)
              The
      components of all other compensation in 2008 for Mr. Geisel are an
      automobile allowance, including gross up for employment taxes, of $26,180,
      and moving related expenses, including gross up for employment taxes of
      $125,561.  All other compensation in 2008 for Mr. Chila consists
      of personal use auto expenses of $9,194 and contributions under the 401(k)
      plan of $6,900.  All other compensation in 2008 for Mr. Dansbury
      are club membership payments of $9,487, personal use auto expenses of
      $1,388 and contributions under the 401(k) plan of
  $6,900.
 (5)
              Mr.
      Geisel joined the Company on January 7,
2008.
 
 - 13
-
 Stock Option
Plans.The Company’s stock option plans include the 1995 Stock
Option Plan, the 1997 Stock Option Plan, the 2002 Stock Option Plan and the 2004
Stock-Based Incentive Plan.  Each of these plans has been approved by
the Company’s shareholders.
  Options
granted may be either incentive stock options (options that afford favorable tax
treatment to recipients upon compliance with certain restrictions pursuant to
Section 422 of the Internal Revenue Code and that do not normally result in tax
deductions to the Company) or non-incentive stock options.  The option
price may not be less than 100% of the fair market value of the shares on the
date of the grant.  Option shares may be paid for in cash, shares of
the common stock, or a combination of both.  Options are exercisable
for a period of ten years from the date of grant.
 
 The
following table sets forth information concerning the stock options and stock
awards granted to the named officers during 2008.
 
 Name
              
              Grant
      Date
              
              Number
      of Shares of Stock
              
              Number
      of Securities Underlying Options
              
              Exercise
      Price
              
              Grant Date
                Fair Value(1)Bernard
      A. Brown
              
              -
              
              -
              
              -
              
              -
              
              -Sidney
      R. Brown
              
              01/22/2008
              
              -
              
              92,715(2)
              
              $11.30
              
              $   381,79201/31/2008
              
              490(3)
              
              -
              
              -
              
              $       6,771Thomas
      X. Geisel
              
              01/07/2008
              
              40,044(4)
              
              194,249(4)
              
              $12.49
              
              $1,141,292Dan
      A. Chila
              
              03/20/2008
              
              4,341(5)
              
              -
              
              $13.32
              
              $     57,849A.
      Bruce Dansbury
              
              03/20/2008
              
              4,503(5)
              
              -
              
              $13.32
              
              $     60,003
 ______________
 (1)
              The
      grant date fair value is calculated in accordance with SFAS 123(R). See
      Note 2 to the Company’s Audited Financial Statements for additional
      discussion on SFAS 123(R) valuation
methodology.
 (2)
              These
      stock options vest one-fifth per year starting on the one-year anniversary
      of the date of grant.
 (3)
              These
      restricted stock units vest one-twelfth per month over the twelve months
      following the date of award.
 (4)
              These
      restricted stock units and stock options vest 25% on the second-year
      anniversary of the date of grant and 25% annually
    thereafter.
 (5)
              These
      restricted stock units cliff vest on the fourth-year anniversary of the
      date of grant.
 
 The
following table sets forth information concerning the stock options and
restricted stock units held by the named officers as of the end of
2008.
  Number
      of Securities Underlying
                Unexercised
      Options
              
              Option
      Exercise
              
              Option
      Expiration
              
              Stock
      Awards Not
              
              Market
      Value of Stock Awards NotName
              
              Exercisable
              
              Unexercisable
              
              Price
              
              Date
              
              Vested
      (#)
              
              Vested
      ($)(7)Bernard
      A. Brown
              
              246,241
              
              -
              
              $  8.49
              
              02/02/2012
              
              -
              
              -411,102
              
              -
              
              $  9.18
              
              10/31/2009
              
              -
              
              -11,285
              
              -
              
              $11.05
              
              04/22/2009
              
              -
              
              -2,506
              
              -
              
              $11.51
              
              01/18/2009
              
              -
              
              -11,264
              
              16,893(1)
              
              $16.10
              
              05/08/2016
              
              -
              
              -Sidney
      R. Brown
              
              35,177
              
              -
              
              $  8.49
              
              02/02/2012
              
              -
              
              -154,779
              
              -
              
              $  8.49
              
              01/23/2012
              
              -
              
              -62,051
              
              -
              
              $  9.18
              
              10/31/2009
              
              -
              
              -11,285
              
              -
              
              $11.05
              
              04/22/2009
              
              -
              
              --
              
              92,715(1)
              
              $11.30
              
              01/22/2018
              
              -
              
              -16,287
              
              -
              
              $11.51
              
              01/08/2009
              
              -
              
              -5,632
              
              8,446(1)
              
              $16.10
              
              05/08/2016
              
              -
              
              --
              
              -
              
              -
              
              -
              
              41(4)
              
              $       564Thomas
      X. Geisel
              
              -
              
              194,249(2)
              
              $12.49
              
              01/07/2018
              
              40,044(2)
              
              $499,989Dan
      A. Chila
              
              7,756
              
              -
              
              $  4.51
              
              04/10/2010
              
              -
              
              -7,386
              
              -
              
              $  5.08
              
              12/21/2010
              
              -
              
              -140,708
              
              -
              
              $  8.49
              
              01/23/2012
              
              -
              
              -4,200
              
              8,400(3)
              
              $15.43
              
              07/19/2017
              
              -
              
              --
              
              -
              
              -
              
              -
              
              4,341(5)
              
              $ 
      57,849A.
      Bruce Dansbury
              
              7,386
              
              -
              
              $  5.59
              
              04/02/2011
              
              -
              
              -84,422
              
              -
              
              $  8.49
              
              01/23/2012
              
              -
              
              -6,999
              
              14,000(3)
              
              $15.43
              
              07/19/2017
              
              -
              
              --
              
              -
              
              -
              
              -
              
              21,000(6)
              
              $349,800-
              
              -
              
              -
              
              -
              
              4,503(5)
              
              $ 
      60,300
 
 
 - 14
-
 _______________
 (1)
              These
      stock options vest one-fifth per year starting on the one-year anniversary
      of the date of grant.
 (2)
              These
      restricted stock units and stock options vest 25% on the second-year
      anniversary of the date of grant and 25% annually
    thereafter.
 (3)
              These
      stock options vest one-third per year starting on the one-year anniversary
      of the date of the grant.
 (4)
              These
      restricted stock units vest one-twelfth per month over the twelve months
      following the date of award.
 (5)
              These
      restricted stock units cliff vest on the fourth-year anniversary of the
      date of grant.
 (6)
              These
      restricted stock units vest one-half on the eighteen-month anniversary of
      the date of the award and the remaining amount vesting on the four-year
      anniversary of the date of the
award.
 (7)
              Represents
      the market value of the Company’s common stock on the date of
      award.
 
 The
following table shows stock option exercises by the named officers and stock
vesting during 2008.
 
 Option
      Awards
              
              Stock
      AwardsName
              
              Number
      of Shares Acquired on Exercise
              
              Value
      Realized on Exercise(1)
              
              Number
      Vested
              
              Value
      Realized on Vesting(2)Bernard
      A. Brown
              
              -
              
              -
              
              -
              
              -Sidney
      R. Brown
              
              -
              
              -
              
              14,068
              
              $166,654Thomas
      X. Geisel
              
              -
              
              -
              
              -
              
              -Dan
      A. Chila
              
              -
              
              -
              
              -
              
              -A.
      Bruce Dansbury
              
              -
              
              -
              
              -
              
              -
 __________
 (1)
              Value
      represents market value of the Company’s common stock at exercise less the
      exercise price
 (2)
              Value
      represents the market value of the Company’s common stock on the vesting
      date.
 
 Potential Payments on Termination or
Change in Control.The Company has entered into change in control
severance agreements with certain executive officers.
 
 The
agreement with Bernard Brown is for a three-year term.  If Mr. Brown
is terminated without just cause within two years following a “change in
control” of the Company, as defined in the agreement, he will be entitled to
receive a payment equal to 2.999 times his average annual aggregate taxable
compensation for the prior five years.  If such payment were to be
made under the agreement as of December 31, 2008, such payment to Mr. Brown
would equal approximately $7.7 million.  The agreement may be renewed
annually by the Board of Directors upon a determination of satisfactory
performance within the Board’s sole discretion.
 
 The
agreement with Sidney Brown is for a three-year term and the agreements with
Thomas Geisel, Dan Chila, and Bruce Dansbury are for twenty-four month
terms.  If the officer is terminated without just cause within
eighteen months following a change in control, the officer would be entitled to
a payment equal to 2.999 times his average annual taxable compensation for the
prior five years.  If payments were to be made under the agreements
with these individuals as of December 31, 2008, the amount of such payments
would equal approximately: $1.3 million for Sidney Brown; $2.6 million for
Thomas Geisel; $1.0 million for Dan Chila; and $924,000 for Bruce
Dansbury.  No payments are due under the agreements if the officer is
terminated for cause following a change in control of the Company or the
Bank.
 
 The
agreements with Sidney Brown, Thomas Geisel, Dan Chila, and Bruce Dansbury
provide that the severance payments to be made upon a change in control will not
be limited by amounts that are tax deductible to the Company or the
Bank.  As such, such payments may result in these officers receiving
payments that are subject to a 20% excise tax, and the Company and the Bank
might incur non-deductible payments related to such compensation.  If
the officers were to be subject to an excise tax on such change in control
severance payments, such officers would also receive a tax gross-up payment
whereby the officers receiving such payments will have any adverse tax
consequences ameliorated by additional payments from the Company and the Bank as
may be necessary in order to protect the intended economic benefits under the
severance agreements.  Such tax gross-up payments, if any, by the
Company or the Bank to the officer would be non-deductible payments for federal
tax purposes.  The agreement with Bernard Brown does not contain such
provisions and is limited by the amount that is tax deductible to the Company or
the Bank.
 - 15
-
 The
agreements with Thomas Geisel, Dan Chila, and Bruce Dansbury also provide for a
severance payment representing fifteen months (twenty-four months in the case of
Mr. Geisel) of continued salary and bonus payments in the event of a termination
of employment (absent termination for cause) initiated by the Company or the
Bank independent of a change in control transaction and provided that the
executive complies with the non-competition requirements of such agreement. In
addition, the Executive and his dependents shall be eligible to continue
coverage under the Company’s or the Bank's medical and dental insurance
reimbursement plans similar to that in effect on the date of termination of
employment for a period of eighteen months following the date of termination of
employment at the Company’s expense.  In the event that such
individuals were terminated as of December 31, 2008, such severance payment
amounts would have been approximately $1.4 million for Thomas Geisel, $456,000
for Dan Chila; and $487,000 for Bruce Dansbury, respectively.
  DIRECTOR
COMPENSATION
 
 Meeting Fees.For
the year ended December 31, 2008, director meeting fees were as follows: each
member of the Board of Directors (excluding the Chairman, Vice Chairman and
President – who are compensated as executive officers of the Company) received a
fee of $1,500 for each board meeting and $1,000 for each committee meeting
attended.  For the year ended December 31, 2008, the aggregate meeting
fees totaled $278,500 and this was paid entirely in the form of shares of the
Company’s common stock, 32,054 shares in aggregate.  Effective May 15,
2008, payment of fees for special conference call meetings of the Board of
Directors and Committees is determined by the Chairman, Vice Chairman, President
or Committee Chair; if a determination is made to pay a meeting fee, the fee
paid is $1,000.
 
 Other
Compensation.As part of their director compensation for 2008,
each director (excluding the Chairman, Vice Chairman and President) received
shares of the Company’s common stock worth $6,000.
 
 Retainers.For
2008, the Audit Committee chairman received an annual retainer of $23,000, other
committee chairmen received an annual retainer of $20,500 and each other
director, except the Chairman, Vice Chairman and employee directors of the
Company, received an annual retainer of $18,000.  Approximately 66% of
these retainers were paid in shares of the Company’s common stock and 34% in
cash.
 
 Set forth
below is a table providing information concerning the compensation of the
directors of the Company for 2008.  The amount shown as “Cash
Compensation” represents the portion of the director’s retainer which that
particular director elected to receive in cash.  All other director
compensation was paid in the form of shares of the Company’s common
stock.
 
 Name
              
              Cash
      Compensation
              
              Stock
      Compensation(3)
              
              TotalBernard
      A. Brown(1)
              
              -
              
              -
              
              -Ike
      Brown
              
              -
              
              $37,000
              
              $37,000Jeffrey
      S. Brown
              
              -
              
              $36,000
              
              $36,000Sidney
      R. Brown(1)
              
              -
              
              -
              
              -John
      A. Fallone
              
              $20,500
              
              $23,500
              
              $44,000Peter
      Galetto, Jr.
              
              -
              
              $59,500
              
              $59,500Douglas
      J. Heun
              
              -
              
              $54,000
              
              $54,000Anne
      E. Koons
              
              -
              
              $39,500
              
              $39,500Eli
      Kramer
              
              $18,000
              
              $40,500
              
              $58,500Alfonse
      M. Mattia
              
              -
              
              $56,500
              
              $56,500George
      A. Pruitt
              
              $15,000
              
              $32,500
              
              $47,500Anthony
      Russo, III
              
              $18,000
              
              $21,500
              
              $39,500Edward
      H. Salmon
              
              -
              
              $57,000
              
              $57,000Anat
      Bird
              
              -
              
              $48,000
              
              $48,000Thomas
      X. Geisel(1)
              
              -
              
              -
              
              -Charles
      A. Kaempffer(2)
              
              $9,000
              
              $12,000
              
              $21,000
 ______________
  (1)
              These
      individuals served as executive officers of the Company during 2008 and
      were compensated as executive officers.  They did not receive
      compensation in their capacity as directors during 2008.  Their
      compensation is discussed above under Executive
    Compensation.
  (2)
              Mr.
      Kaempffer retired from the Boards effective May 15, 2008 and was appointed
      to serve Director Emeritus for one year; amount reported as stock
      compensation includes 585 shares at a fair value of $7.69 received as
      Director Emeritus for attending
meetings.
  - 16
-
 (3)
              Stock
      compensation includes shares received with a fair value of $10.95 and
      $7.69, respectively, for each individual:  Ike Brown – 1,598 and
      2,535; Jeffrey Brown – 1,507 and 2,535; John Fallone - 776 and 1,950;
      Peter Galetto – 2,374 and 4,356; Douglas Heun – 2,077 and 4,064; Anne E.
      Koons – 1,598 and 2,861; Eli Kramer – 1,506 and 3,121; Alfonse Mattia –
      2,328 and 4,031; George Pruitt – 1,278 and 2,406; Anthony Russo – 685 and
      1,820; Edward Salmon – 2,260 and 4,194; Anat Bird – 1,986 and 3,413;
      Charles Kaempffer – 685 and 585.
 
 Item
12.  Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.
  (a)           Security
Ownership of Certain Beneficial Owners
  Persons
and groups owning in excess of 5% of the outstanding shares of the Company’s
common stock are required to file reports regarding such ownership with the
Securities and Exchange Commission. Other than as set forth in the following
table, management knows of no person or group that owns more than 5% of the
outstanding shares of the Company’s common stock as of March 31,
2009.
 
 Name
      and Address of Beneficial Owner
              
              Amount
      and Nature of Beneficial Ownership
              
              Percent
      of Shares of Common Stock OutstandingBernard
      A. Brown71
      West Park AvenueVineland,
      New Jersey 08360
              
              5,189,648(1)
              
              22.9%Dimensional
      Fund Advisors LPPalisades
      West, Building One6300
      Bee Cave RoadAustin,
      Texas 78746
              
              1,890,556(2)
              
              8.6%
 ________________
 (1)
              Includes
      shares held directly as well as by spouse, in trust and other indirect
      ownership, over which shares Mr. Brown effectively exercises sole voting
      and investment power.  Includes 685,523 shares that can be
      acquired pursuant to options that are currently exercisable or that will
      become exercisable within 60 days of March 31,
  2009.
 (2)
              Number
      of shares is based on an amended Schedule 13G dated February 9, 2009 as
      filed with the Securities and Exchange
  Commission.
 
 (b)           Security
Ownership of Management
  The
following table sets forth information with respect to security ownership of
directors and the executive officers of the Company and the Bank, including the
number of and percentage of shares of the Company’s common stock beneficially
owned by each as of March 31, 2009.
 
 Name
              
              Shares of Common Stock
      Beneficially Owned(1),(2)
              
              Percent
      of Shares of Common Stock OutstandingDIRECTORSBernard
      A. Brown
              
              5,189,648
              
              22.9%Anthony
      Russo, III
              
              35,965
              
              *Sidney
      R. Brown
              
              973,268
              
              4.4%Peter
      Galetto, Jr.
              
              507,655
              
              2.3%Anne
      E. Koons
              
              465,215
              
              2.1%Douglas
      J. Heun
              
              57,412
              
              *Edward
      H. Salmon
              
              27,689
              
              *Ike
      Brown
              
              430,627
              
              2.0%Jeffrey
      S. Brown
              
              430,318
              
              2.0%Alfonse
      M. Mattia
              
              130,194
              
              *George
      A. Pruitt
              
              18,799
              
              *Eli
      Kramer
              
              141,566
              
              *John
      A. Fallone
              
              109,240
              
              *Anat
      Bird
              
              7,993
              
              *Thomas
      X. Geisel
              
              20,816
              
              *
 
 - 17
-
  Name
              
              Shares of Common
                Stock Beneficially
                Owned(1),(2)
              
              Percent
      of Shares
                of
      Common Stock
                OutstandingEXECUTIVE
      OFFICERS OF
                THE
      COMPANY AND THE BANKBart
      A. Speziali
              
              226,373
              
              1.0%Dan
      A. Chila
              
              187,088
              
              *A.
      Bruce Dansbury (3)
              
              125,259
              
              *Total
      of all directors and executive officers of the Company and the Bank as a
      group(3)
              
              9,085,125
              
              38.7%
 __________
 *      Less
than 1.0%
  (1)
              Includes
      shares held directly by the individual as well as by such individual’s
      spouse, or minor children, in trust and other forms of indirect ownership
      over which shares the individual effectively exercises sole voting and
      investment power, unless otherwise
indicated.
  (2)
              Includes
      shares that can be acquired pursuant to options that are currently
      exercisable or that will become exercisable within 60 days of March 31,
      2009.  The number of options included for each individual is as
      follows: Bernard Brown – 685,523; Anthony Russo – 4,219; Sidney Brown –
      290,283; Peter Galetto – 28,141; Douglas Heun – 4,219; Edward Salmon –
      4,219; Ike Brown 4,219; Jeffrey Brown – 4,219; Alfonse Mattia – 4,219;
      George Pruitt – 4,219; Eli Kramer – 13,834; John Fallone – 19,209; Bart
      Speziali – 155,119; Dan Chila – 160,050; Bruce Dansbury –
      98,807.
  (3)
              Includes
      restricted stock units held which shall be earned and non-forfeitable
      within 60 days of March 31, 2009.  The number
      of  restricted stock units included for each individual is as
      follows: Bruce Dansbury – 10,500.
  (c)           Change
in  Control
 Management
of the Company knows of no arrangements, including any pledge by any person of
securities of the Company, the operation of which may at a subsequent date
result in a change in control of the Company.
 
 (d)           Securities
Authorized for Issuance Under Equity Compensation Plans
  Set forth below is information as of
December 31, 2008 with respect to compensation plans under which equity
securities of the Company are authorized for issuance.
 
 EQUITY
      COMPENSATION PLAN INFORMATION(a)
              
              (b)
              
              (c)Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights (3)
              
              Weighted-average
      exercise price of outstanding options, warrants and rights
    (4)
              
              Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in
                column
      (a))Equity
      compensation plans approved by shareholders (1)
              2,620,924
              
              $
              10.27
              
              433,197Equity
      compensation plans not approved by shareholders (2)
              -
              
              
              -
              
              -Total
              2,620,924
              
              $
              10.27
              
              433,197
 
 (1)
              Plans
      approved by shareholders include the 1997 Stock Option Plan, the 2002
      Stock Option Plan and the 2004 Stock Based-Incentive Plan, as
      amended.  The amount of securities includes options for 171,282
      shares of our common stock as a result of our assuming obligations under
      stock option plans of Advantage Bank in connection with an acquisition in
      2006 and Community Bancorp of New Jersey in connection with an acquisition
      in 2004.  While we assumed the obligations existing under these
      plans as of the time of merger, we have not and will not in the future,
      use them to make further grants.
 (2)
              Not
      applicable.
 (3)
              Amount
      includes 100,934 restricted stock units that have been granted, but
      not yet issued, and are therefore not included in shares
      outstanding.
 (4)
              Amount
      does not reflect the market value of 100,934 restricted stock units
      included in columns (a) herein.
  - 18
-
 
 Item 13.  Certain
Relationships and Related Transactions and DirectorIndependence.
  Related
Party Transactions
 
 Bernard
A. Brown, the Chairman of the Board of Directors, is an owner of Vineland
Construction Company which leases office space to the Company and has been
engaged by the Company to act as project manager for various matters. In
addition, Arctic Realty Company LLC has been engaged by the Company to act as
project manager and the Company has entered into an agreement with Arctic Realty
Company LLC as of December 31, 2008 to lease office space beginning in
2009.  The Company paid approximately $2.1 million and $134,000 to
Vineland Construction Co. and Arctic Realty Company LLC during
2008.
 
 Anne E.
Koons, a director, is the sole owner of ABK Realty, which leases office space
and land to the Company.  The Company paid approximately $360,000 to
ABK Realty during 2008.
 
 Anthony
Russo, III, a director, is an owner of Medsun Bank Properties, which leases
office space to the Company.  The Company paid approximately $96,000
to Medsun Bank Properties during 2008.
 
 It is the
Company’s policy that any transactions between the Company or the Bank on the
one hand and a director or executive officer on the other hand, be reviewed and
approved by the independent directors of the Company as part of the independent
directors’ regular meetings.  Only transactions that the independent
directors have determined to be on terms substantially the same, or at least as
favorable to the Company and the Bank, as those that would be provided by a
non-affiliate are approved.
 
 In its
normal course of business, the Bank makes various types of loans to officers,
directors and employees of the Bank and of the Company.  These loans
are made on substantially the same terms and conditions (including interest
rates and collateral requirements) as, and following credit underwriting
procedures that are not less stringent than, those prevailing at the time for
comparable transactions by the Bank with its other unaffiliated customers and do
not involve more than the normal risk of collectibility, nor present other
unfavorable features.  All of these loans were current at December 31,
2008.
 
 The
Company’s independent directors, as determined by the standards of the NASDAQ
Stock Market, are: Anat Bird, John A. Fallone, Peter Galetto, Jr., Douglas J.
Heun, Eli Kramer, Alfonse M. Mattia, George A. Pruitt, Anthony Russo, III and
Edward H. Salmon.
 
 Item
14.  Principal Accounting Fees and Services.
  Audit
Fees and Services
  
 Audit Fees.The
following table summarizes the aggregate fees billed by Deloitte & Touche
LLP, the member firms of Deloitte Touche Tohmatsu, and their respective
affiliates (collectively, “D&T”) to the Company for professional services
rendered for the fiscal years ended December 31, 2008 and 2007:
 
 2008
              
              2007(In
      thousands)Audit
      Fees
              
              $648
              
              $757Audit-Related
      Fees
              
              6
              
              62Tax
      Fees
              
              89
              
              81All
      Other Fees
              
              -
              
              -Total
              
              $773
              
              $900
 
 Fees for
audit services billed consisted of:
 
 ·
              Audit
      of the Company’s annual financial
statements;
 ·
              Review
      of the Company’s quarterly financial statements;
  and
 ·
              Comfort
      letters, consents and other services related to SEC
    matters.
  - 19
-
 Fees for
audit-related services billed consisted of:
 
 ·
              Due
      diligence associated with
mergers/acquisitions;
 ·
              Financial
      accounting and reporting consultations;
and
 ·
              Employee
      benefit plan audits.
 
 Fees for
tax services billed consisted of:
 
 ·
              Tax
      compliance services - services rendered based upon facts already in
      existence or transactions that have already occurred to document, compute
      amounts to be included in tax filings and consisted of federal, state and
      local income tax return assistance;
and
 
 ·
              Tax
      planning and advice - services rendered with respect to proposed
      transactions or that alter a transaction to obtain a particular tax
      result.  Such services consisted of tax advice related to
      structuring certain proposed mergers, acquisitions and
      disposals.
 
 In
considering the nature of the services provided by D&T, the Audit Committee
determined that such services are compatible with the provision of independent
audit services.  The Audit Committee discussed these services with
D&T and the Company management to determine that they are permitted under
the rules and regulations concerning auditor independence promulgated by the SEC
to implement the Sarbanes-Oxley Act of 2002, as well as the American Institute
of Certified Public Accountants.
 
 It is the
Audit Committee’s policy to pre-approve all audit and non-audit services prior
to the engagement of the Company’s independent registered public accounting firm
to perform any service.  The policy contains a de minimus provision
that operates to provide retroactive approval for permissible non-audit services
under certain circumstances.  The provision allows for the
pre-approval requirement to be waived if all of the following criteria are
met:
 
 ·
              The
      service is not an audit, review or other attest
  service;
 
 ·
              The
      aggregate amount of all such services provided under this provision does
      not exceed the lesser of $25,000 or five percent of total fees paid to the
      independent registered public accounting firm in a given fiscal
      year;
 
 ·
              Such
      services were not identified at the time of the engagement to be non-audit
      services;
 
 ·
              Such
      service is promptly brought to the attention of the Audit Committee and
      approved by the Audit Committee or its designee;
  and
 
 ·
              The
      service and fees are specifically disclosed in the proxy statement as
      meeting the de minimus requirement.
 
 During
2008, fees totaling $6,500 (or 0.9%) were approved under the de minimus
provision.
 
  - 20
-
  PART
IV
  Item
15.  Exhibits and Financial
Statement Schedules.
   (a)
              The
      following documents are filed as a part of this report:(1)
              The
      following consolidated financial statements and the report of independent
      registered public accounting firm of the Registrant included in the
      Registrant’s Annual Report to Shareholders are included herein as Exhibit
      13 and also in Item 8 hereof.Reports
      of Independent Registered Public Accounting Firm Consolidated Statements
      of Financial Condition as of December 31, 2008 and 2007
  *Consolidated
      Statements of Income for the Years Ended December 31, 2008, 2007 and 2006
      *Consolidated
      Statements of Shareholders’ Equity for the Years Ended December 31, 2008,
      2007 and 2006 *Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and
      2006 *Notes
      to Consolidated Financial Statements *(2)
              There
      are no financial statements schedules that are required to be included in
      Part II, Item 8.(b)
              The
      following exhibits are filed as part of this report:3.1
              Amended
      and Restated Certificate of Incorporation of Sun Bancorp, Inc.
      (1)3.2
              Certificate
      of Amendment to the Registrant’s Amended and Restated Certificate of
      Incorporation Setting Forth the Terms of the Fixed Rate Cumulative
      Perpetual Preferred Stock, Series A (2)3.3
              Amended
      and Restated Bylaws of Sun Bancorp, Inc. (3)4.1
              Form
      of certificate evidencing the Registrant’s Fixed Rate Cumulative Perpetual
      Preferred Stock, Series A(2)4.2
              Warrant
      to purchase shares of the Registrant’s common stock dated January 9,
      2009 (2)4.3
              Letter
      Agreement (including Securities Purchase Agreement-Standard Terms attached
      as Exhibit A) dated January 9, 2009 between the Registrant and the United
      States Department of the Treasury (2)10.1
              1995
      Stock Option Plan (4)10.2
              Amended
      and Restated 1997 Stock Option Plan (5)10.3
              2002
      Stock Option Plan (6)10.4
              Amended
      and Restated 2004 Stock-Based Incentive Plan (7)10.5
              Directors
      Stock Purchase Plan (8)10.7
              Form
      of Management Change in Control Severance Agreement, as amended and
      restated (A. Bruce Dansbury, Chief Operating Officer; Dan A. Chila,
      Executive Vice President and Chief Financial Officer; and Bart A.
      Speziali, Executive Vice President) (3)10.8
              Management
      Change in Control Severance Agreement, as amended and restated, for
      Chairman of the Board, Bernard A. Brown (3)10.9
              Management
      Change in Control Severance Agreement, as amended and restated, for
      Vice-Chairman of the Board, Sidney R. Brown (3)10.10
              Agreement
      with President and Chief Executive Officer Thomas X. Geisel
      (10)11
              Computation
      regarding earnings per share (11)13
              2008 Annual Report to
      Shareholders*21
              Subsidiaries of the
    Registrant*23
              Consent of Deloitte & Touche
      LLP*31
              Certifications pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232
              Certification pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002* 
      Filed as an Exhibit to the Original
Filing
 
  - 21
-
  
 (1)
              Incorporated
      by reference to Exhibit 3.1 of the Company’s Registration Statement on
      Form S-3 filed on February 6, 2009 (Registration Number
      333-157131).(2)
              Incorporated
      by reference to the exhibits to the Company’s Current Report on Form 8-K
      filed on January 9, 2009 (File No. 0-20957).(3)
              Incorporated
      by reference to the exhibits to the Company’s Current Report on Form 8-K
      filed on October 24, 2007 (File No. 0-20957).(4)
              Incorporated
      by reference to Exhibit 10 to the Company’s Registration Statement on Form
      10 filed on June 28, 1996 (File No. 0-20957).(5)
              Incorporated
      by reference Exhibit 10.3 to the Company’s Annual Report on Form 10-K for
      the fiscal year ended December 31, 1999 (File No.
  0-20957).(6)
              Incorporated
      by reference to Appendix A to the Company’s Proxy Statement for the 2002
      Annual Meeting of Shareholders filed with the SEC on April 16, 2002 (File
      No. 0-20957).(7)
              Incorporated
      by reference to Appendix A to the Company’s Proxy Statement for the 2007
      Annual Meeting of Shareholders filed with the SEC on April 12, 2007 (File
      No. 0-20957).(8)
              Incorporated
      by reference to Exhibit 4.3 to the Registrant’s Registration Statement on
      Form S-8, filed with the SEC on August 1, 1997 (File No.
      333-32681).(9)
              Incorporated
      by reference to the exhibit to the Company’s Current Report on Form 8-K
      filed on April 17, 2007 (File No. 0-20957).(10)
              Incorporated
      by reference to the exhibit to the Company’s Current Report on Form 8-K
      filed on December 14, 2007 (File No. 0-20957).(11)
              Incorporated
      by reference to Note 23 of the Notes to Consolidated Financial Statements
      of the Company included in Exhibit 13hereto.
   - 22
-
    SIGNATURES
  Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act
      of 1934, the registrant has duly caused this report to be signed on its
      behalf by the undersigned, thereunto duly authorized as of April 29,
      2009.
  SUN
      BANCORP, INC.By:
              /s/  Thomas X. GeiselThomas
      X. GeiselPresident
      and Chief Executive Officer(Duly
      Authorized Representative)