##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2009
 OR
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission File No. 001-33934
 Cape Bancorp, Inc.
 (Exact name of registrant as specified in its charter)
 Maryland
    
    26-1294270(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)225 North Main Street, Cape May Court House, New Jersey
    
    08210(Address of Principal Executive Offices)
    
    Zip Code
 (609) 465-5600
(Registrants telephone number)
 N/A
 (Former name or former address, if changed since last report)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller Reporting Company o(Do not check if smaller reporting company)
 YES o NO þ




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##### 



CAPE BANCORP, INC.
FORM 10-Q
 Index
 PagePart I. Financial InformationItem 1. Financial Statements
    
    
    3Consolidated Balance Sheets as of September 30, 2009 (unaudited) and December 31, 2008
    
    
    3Consolidated Statements of Income for the Three and Nine Months Ended September 30,
2009 and September 30, 2008 (unaudited)
    
    
    4Consolidated Statements of Changes in Stockholders Equity for the Twelve Months
Ended December 31, 2008 and Nine Months Ended September 30, 2009 (unaudited)
    
    
    5Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009
and September 30, 2008 (unaudited)
    
    
    6Notes to Consolidated Financial Statements (unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    36Item 4. Controls and Procedures
    
    
    37Part II. Other InformationItem 1. Legal Proceedings
    
    
    38Item 1A. Risk Factors
    
    
    38Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    38Item 3. Defaults upon Senior Securities
    
    
    39Item 4. Submission of Matters to a Vote of Security Holders
    
    
    39Item 5. Other Information
    
    
    39Item 6. Exhibits
    
    
    39Signature Page
    
    
    40Exhibit 31.1Exhibit 31.2Exhibit 32
   2




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##### Table of Contents



Item 1.

Financial Statements
 CAPE BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (unaudited)September 30,
    
    
    December 31,2009
    
    
    2008(in thousands)ASSETSCash & due from financial institutions
    
    $
    9,876
    
    
    $
    10,117Federal funds sold
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    9,876
    
    
    
    10,117Interest-earning deposits in other financial institutions
    
    
    9,631
    
    
    
    17,918Investment securities available for sale, at fair value (amortized
cost of $122,495 at September 30, 2009 and $123,831 at December
31, 2008)
    
    
    111,513
    
    
    
    114,655Investment securities held to maturity (fair value of $46,913
at September 30, 2009 and $49,938 at December 31, 2008)
    
    
    44,942
    
    
    
    48,825Loans held for sale
    
    
    862
    
    
    
    Loans, net of allowance of $13,778 at September 30, 2009
and $11,240 at December 31, 2008
    
    
    789,622
    
    
    
    783,869Accrued interest receivable
    
    
    4,732
    
    
    
    4,736Premises and equipment, net
    
    
    26,619
    
    
    
    27,342Other real estate owned
    
    
    508
    
    
    
    798Federal Home Loan Bank (FHLB) stock, at cost
    
    
    8,904
    
    
    
    11,602Bank owned life insurance (BOLI)
    
    
    26,938
    
    
    
    26,446Goodwill
    
    
    22,575
    
    
    
    22,575Intangible assets, net
    
    
    634
    
    
    
    786Assets held for sale
    
    
    2,026
    
    
    
    2,026Other assets
    
    
    7,857
    
    
    
    19,040Total assets
    
    $
    1,067,239
    
    
    $
    1,090,735LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesDepositsNoninterest-bearing deposits
    
    $
    73,017
    
    
    $
    63,258Interest-bearing deposits
    
    
    690,403
    
    
    
    647,872Borrowings
    
    
    173,532
    
    
    
    234,484Advances from borrowers for taxes and insurance
    
    
    563
    
    
    
    585Accrued interest payable
    
    
    794
    
    
    
    778Other liabilities
    
    
    4,249
    
    
    
    3,033Total liabilities
    
    
    942,558
    
    
    
    950,010Stockholders EquityCommon stock, $.01 par value: authorized 100,000,000 shares;
issued and outstanding 13,313,521 shares
    
    
    133
    
    
    
    133Additional paid-in capital
    
    
    126,733
    
    
    
    126,801Unearned ESOP shares
    
    
    (9,913
    )
    
    
    (10,232
    )Accumulated other comprehensive (loss), net
    
    
    (7,213
    )
    
    
    (6,022
    )Retained earnings
    
    
    14,941
    
    
    
    30,045Total stockholders equity
    
    
    124,681
    
    
    
    140,725Total liabilities & stockholders equity
    
    $
    1,067,239
    
    
    $
    1,090,735
   3




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##### Table of Contents



CAPE BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 (unaudited)
 For the three months
    
    
    For the nine monthsended September 30,
    
    
    ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(dollars in thousands, except share data)Interest income:Interest on loans
    
    $
    11,667
    
    
    $
    12,523
    
    
    $
    35,068
    
    
    $
    35,888Interest and dividends on investmentsTaxable
    
    
    585
    
    
    
    1,243
    
    
    
    2,272
    
    
    
    3,885Tax-exempt
    
    
    338
    
    
    
    349
    
    
    
    1,024
    
    
    
    945Interest on mortgage-backed securities
    
    
    819
    
    
    
    1,039
    
    
    
    2,980
    
    
    
    2,938Total interest income
    
    
    13,409
    
    
    
    15,154
    
    
    
    41,344
    
    
    
    43,656Interest expense:Interest on deposits
    
    
    2,823
    
    
    
    4,286
    
    
    
    9,808
    
    
    
    13,639Interest on borrowings
    
    
    1,664
    
    
    
    1,798
    
    
    
    4,960
    
    
    
    4,950Total interest expense
    
    
    4,487
    
    
    
    6,084
    
    
    
    14,768
    
    
    
    18,589Net interest income before provision for loan losses
    
    
    8,922
    
    
    
    9,070
    
    
    
    26,576
    
    
    
    25,067Provision for loan losses
    
    
    9,765
    
    
    
    1,309
    
    
    
    12,374
    
    
    
    2,149Net interest income (expense) after provision for loan losses
    
    
    (843
    )
    
    
    7,761
    
    
    
    14,202
    
    
    
    22,918Non-interest income:Service fees
    
    
    775
    
    
    
    898
    
    
    
    2,278
    
    
    
    2,389Net gains on sale of loans
    
    
    38
    
    
    
    7
    
    
    
    101
    
    
    
    31Net income from BOLI
    
    
    256
    
    
    
    263
    
    
    
    768
    
    
    
    753Net rental income
    
    
    86
    
    
    
    83
    
    
    
    258
    
    
    
    258Gain (loss) on sales of investment securities held for sale, net
    
    
    595
    
    
    
    
    
    
    
    1,195
    
    
    
    2Loss on disposal of other assets
    
    
    
    
    
    
    (16
    )
    
    
    
    
    
    
    (149
    )Loss on sale of OREO
    
    
    (122
    )
    
    
    
    
    
    
    (377
    )
    
    
    Other income
    
    
    59
    
    
    
    108
    
    
    
    642
    
    
    
    333Gross other-than-temporary impairment losses
    
    
    (3,103
    )
    
    
    (2,213
    )
    
    
    (7,071
    )
    
    
    (2,414
    )Less: Portion of loss recognized in other comprehensive income
    
    
    2,304
    
    
    
    
    
    
    
    2,230
    
    
    
    Net other-than-temporary impairment losses
    
    
    (799
    )
    
    
    (2,213
    )
    
    
    (4,841
    )
    
    
    (2,414
    )Total non-interest income
    
    
    888
    
    
    
    (870
    )
    
    
    24
    
    
    
    1,203Non-interest expense:Salaries and employee benefits
    
    
    3,316
    
    
    
    3,739
    
    
    
    11,748
    
    
    
    11,047Occupancy and equipment
    
    
    874
    
    
    
    964
    
    
    
    2,549
    
    
    
    2,673Federal insurance premiums
    
    
    300
    
    
    
    143
    
    
    
    1,401
    
    
    
    375Data processing
    
    
    323
    
    
    
    322
    
    
    
    903
    
    
    
    1,048Charitable Foundation contribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,256Advertising
    
    
    47
    
    
    
    111
    
    
    
    262
    
    
    
    509Telecommunications
    
    
    226
    
    
    
    211
    
    
    
    633
    
    
    
    670Professional services
    
    
    217
    
    
    
    285
    
    
    
    661
    
    
    
    733OREO expenses
    
    
    92
    
    
    
    
    
    
    
    197
    
    
    
    Other operating
    
    
    1,214
    
    
    
    947
    
    
    
    2,992
    
    
    
    3,155Total non-interest expense
    
    
    6,609
    
    
    
    6,722
    
    
    
    21,346
    
    
    
    26,466Income (loss) before income taxes
    
    
    (6,564
    )
    
    
    169
    
    
    
    (7,120
    )
    
    
    (2,345
    )Income tax expense (benefit)
    
    
    12,571
    
    
    
    (424
    )
    
    
    12,011
    
    
    
    (2,028
    )Net income (loss)
    
    $
    (19,135
    )
    
    $
    593
    
    
    $
    (19,131
    )
    
    $
    (317
    )Earnings (loss) per share (see Note 9):Basic
    
    $
    (1.55
    )
    
    $
    0.05
    
    
    $
    (1.55
    )
    
    $
    (0.06
    )Diluted
    
    $
    (1.55
    )
    
    $
    0.05
    
    
    $
    (1.55
    )
    
    $
    (0.06
    )Weighted average number of shares outstanding:Basic
    
    
    12,317,638
    
    
    
    12,273,615
    
    
    
    12,307,455
    
    
    
    12,278,695Diluted
    
    
    12,317,638
    
    
    
    12,273,615
    
    
    
    12,307,455
    
    
    
    12,278,695
   4




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##### Table of Contents



CAPE BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 Year ended December 31, 2008 and nine months ended September 30, 2009
 (unaudited)
 AccumulatedUnearned
    
    
    
    
    
    
    Other
    
    
    TotalCommon
    
    
    Paid-In
    
    
    ESOP
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Capital
    
    
    Shares
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Equity(in thousands)Balance, January 1, 2008
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    72,536
    
    
    $
    293
    
    
    $
    72,829Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42,491
    )
    
    
    
    
    
    
    (42,491
    )Net unrealized losses, net of
reclassification adjustments and taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,315
    )
    
    
    (6,315
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48,806
    )Conversion from mutual to stock company
and simultaneous acquisition of
Boardwalk Bancorp
    
    
    133
    
    
    
    126,832
    
    
    
    (10,658
    )
    
    
    
    
    
    
    
    
    
    
    116,307ESOP shares earned
    
    
    
    
    
    
    (31
    )
    
    
    426
    
    
    
    
    
    
    
    
    
    
    
    395Balance, December 31, 2008
    
    
    133
    
    
    
    126,801
    
    
    
    (10,232
    )
    
    
    30,045
    
    
    
    (6,022
    )
    
    
    140,725Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,131
    )
    
    
    
    
    
    
    (19,131
    )Net unrealized income, net of
reclassification adjustments and taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,836
    
    
    
    2,836Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,295
    )Cumulative effect adjustment to reclassify
non-credit component of previously
recorded
other-than-temporary impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,027
    
    
    
    (4,027
    )
    
    
    ESOP shares earned
    
    
    
    
    
    
    (68
    )
    
    
    319
    
    
    
    
    
    
    
    
    
    
    
    251Balance, September 30, 2009
    
    $
    133
    
    
    $
    126,733
    
    
    $
    (9,913
    )
    
    $
    14,941
    
    
    $
    (7,213
    )
    
    $
    124,681
   5




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##### Table of Contents



CAPE BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited)
 Nine months ended September 30,2009
    
    
    2008(in thousands)Cash flows from operating activitiesNet income (loss)
    
    $
    (19,131
    )
    
    $
    (317
    )Adjustments to reconcile net income (loss) to net cash provided by operating activities:Provision for loan losses
    
    
    12,374
    
    
    
    2,149Net gain on the sale of loans
    
    
    (101
    )
    
    
    (31
    )Net loss on the sale of other real estate owned
    
    
    377
    
    
    
    Loss on impairment of securities
    
    
    4,841
    
    
    
    2,414Net gain on sale of investments
    
    
    (1,195
    )
    
    
    (2
    )Earnings on BOLI
    
    
    (768
    )
    
    
    (753
    )Depreciation and amortization
    
    
    1,380
    
    
    
    728ESOP compensation expense
    
    
    251
    
    
    
    297Stock issuance for charitable contribution
    
    
    
    
    
    
    5,474Deferred income taxes
    
    
    11,997
    
    
    
    (3,064
    )Changes in assets and liabilities that (used) provided cash:Origination of loans held for sale
    
    
    (9,165
    )
    
    
    (1,400
    )Proceeds from sale of loans
    
    
    8,303
    
    
    
    1,750Accrued interest receivable
    
    
    4
    
    
    
    637Other assets
    
    
    (1,914
    )
    
    
    2,111Accrued interest payable
    
    
    16
    
    
    
    (62
    )Other liabilities
    
    
    1,216
    
    
    
    (2,238
    )Net cash provided by operating activities
    
    
    8,485
    
    
    
    7,693Cash flows from investing activitiesProceeds from sales of AFS securities
    
    
    31,708
    
    
    
    Proceeds from calls, maturities, and principal repayments of HTM securities
    
    
    6,768
    
    
    
    5,416Proceeds from calls, maturities, and principal repayments of AFS securities
    
    
    62,503
    
    
    
    50,473Purchases of HTM securities
    
    
    (2,998
    )
    
    
    (5,956
    )Purchases of AFS securities
    
    
    (90,002
    )
    
    
    (49,366
    )Redemption (purchase) of Federal Home Loan Bank stock
    
    
    2,698
    
    
    
    (2,951
    )Proceeds from sale of other real estate owned
    
    
    1,503
    
    
    
    Decrease in interest-earning deposits in other financial institutions
    
    
    8,287
    
    
    
    523Increase in loans, net
    
    
    (20,273
    )
    
    
    (6,394
    )Purchase of property and equipment, net
    
    
    (416
    )
    
    
    (1,094
    )Acquisition of Boardwalk Bancorp
    
    
    
    
    
    
    (46,839
    )Net cash used in investing activities
    
    
    (222
    )
    
    
    (56,188
    )Cash flows from financing activitiesNet increase (decrease) in deposits
    
    
    52,418
    
    
    
    (56,075
    )Increase (decrease) in advances from borrowers for taxes and insurance
    
    
    (22
    )
    
    
    56Borrowings
    
    
    45,000
    
    
    
    96,775Payments on borrowings
    
    
    (105,900
    )
    
    
    (31,458
    )Net proceeds from stock issuance in conversion
    
    
    
    
    
    
    39,823Net cash provided by financing activities
    
    
    (8,504
    )
    
    
    49,121Net increase (decrease) in cash and cash equivalents
    
    
    (241
    )
    
    
    626Cash and cash equivalents at beginning of period
    
    
    10,117
    
    
    
    15,631Cash and cash equivalents at end of period
    
    $
    9,876
    
    
    $
    16,257Supplementary disclosure of cash flow information:Cash paid during period for:Interest
    
    $
    14,752
    
    
    $
    18,128Income taxes, net of refunds
    
    $
    3
    
    
    $
    253Supplementary disclosure of non-cash financing and investing activities:Stock subscriptions applied to equity
    
    $
    
    
    
    $
    21,500Issuance of stock to charitable foundation
    
    $
    
    
    
    $
    5,474Issuance of stock for acquisition of Boardwalk Bancorp
    
    $
    
    
    
    $
    49,461
   6




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##### Table of Contents



Notes to Financial Statements (Unaudited)
 NOTE 1  ORGANIZATION
        NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Financial Statement Presentation:
    7




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##### Table of Contents



Use of Estimates:
 Cash and Cash Equivalents:
 Interest-Bearing Deposits in Other Financial Institutions:
 Investment Securities:
  Loans Held for Sale:
 Loans and Allowance for Loan Losses:
     8




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##### Table of Contents



Other Real Estate Owned:
 Premises and Equipment:
 Federal Home Loan Bank (FHLB) Stock:
 Bank Owned Life Insurance (BOLI):
 Goodwill and Other Intangible Assets:
  Loan Commitments and Related Financial Instruments:
 Defined Benefit Plan:
 4 01(k) Plan:
 Employee Stock Ownership Plan (ESOP):
  9




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##### Table of Contents



Income Taxes:
    10




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##### Table of Contents



Comprehensive Income (Loss):
 Before Tax
    
    
    Tax Benefit
    
    
    Net of TaxAmount
    
    
    (Expense)
    
    
    Amount(in thousands)Three months ended September 30, 2009Unrealized losses on securitiesUnrealized holding gains arising during the period
    
    $
    3,220
    
    
    $
    (1,095
    )
    
    $
    2,125Non-credit related unrealized loss on other-than-temporarily impaired
CDOs
    
    
    (2,304
    )
    
    
    783
    
    
    
    (1,521
    )Reclassification adjustment for securities losses realized in net income
    
    
    204
    
    
    
    (70
    )
    
    
    134Other comprehensive income, net
    
    $
    1,120
    
    
    $
    (382
    )
    
    $
    738Three months ended September 30, 2008Unrealized losses on securitiesUnrealized holding losses arising during the period
    
    $
    (10,864
    )
    
    $
    3,694
    
    
    $
    (7,170
    )Reclassification adjustment for net losses realized in net income
    
    
    2,213
    
    
    
    (753
    )
    
    
    1,460Other comprehensive loss, net
    
    $
    (8,651
    )
    
    $
    2,941
    
    
    $
    (5,710
    )
 Before Tax
    
    
    Tax Benefit
    
    
    Net of TaxAmount
    
    
    (Expense)
    
    
    Amount(in thousands)Nine months ended September 30, 2009Unrealized losses on securitiesUnrealized holding gains arising during the period
    
    $
    2,881
    
    
    $
    (980
    )
    
    $
    1,901Non-credit related unrealized loss on other-than-temporarily
impaired CDOs
    
    
    (2,230
    )
    
    $
    758
    
    
    $
    (1,472
    )Reclassification adjustment for net losses realized in net income
    
    
    3,646
    
    
    
    (1,240
    )
    
    
    2,406Other comprehensive income, net
    
    $
    4,297
    
    
    $
    (1,461
    )
    
    $
    2,836Nine months ended September 30, 2008Unrealized losses on securitiesUnrealized holding losses arising during the period
    
    $
    (19,743
    )
    
    $
    6,772
    
    
    $
    (12,970
    )Reclassification adjustment for net losses realized in net income
    
    
    2,412
    
    
    
    (827
    )
    
    
    1,585Other comprehensive loss, net
    
    $
    (17,331
    )
    
    $
    5,945
    
    
    $
    (11,386
    )
  11




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##### Table of Contents



Operating Segments:
 Recent Accounting Pronouncements: .
   Effect of Newly Issued Accounting Standards:
     12




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13




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##### Table of Contents



NOTE 3  INVESTMENT SECURITIES
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    

Fair Value(in thousands)September 30, 2009Investment securities held to maturityMunicipal bonds
    
    $
    23,570
    
    
    $
    1,190
    
    
    $
    (13
    )
    
    $
    24,747Mortgage-backed securitiesGNMA pass-through certificates
    
    
    12
    
    
    
    1
    
    
    
    
    
    
    
    13FHLMC pass-through certificates
    
    
    1,483
    
    
    
    40
    
    
    
    
    
    
    
    1,523FNMA pass-through certificates
    
    
    9,716
    
    
    
    475
    
    
    
    
    
    
    
    10,191Collateralized mortgage obligations
    
    
    10,161
    
    
    
    332
    
    
    
    (54
    )
    
    
    10,439Total mortgage-backed securities
    
    
    21,372
    
    
    
    848
    
    
    
    (54
    )
    
    
    22,166Total securities held to maturity
    
    $
    44,942
    
    
    $
    2,038
    
    
    $
    (67
    )
    
    $
    46,913Investment securities available for saleDebt securitiesU.S. Government and agency obligations
    
    $
    45,998
    
    
    $
    200
    
    
    $
    (4
    )
    
    $
    46,194Municipal bonds
    
    
    11,110
    
    
    
    321
    
    
    
    (123
    )
    
    
    11,308Collateralized debt obligations
    
    
    13,275
    
    
    
    94
    
    
    
    (11,778
    )
    
    
    1,591Corporate bonds
    
    
    12,892
    
    
    
    227
    
    
    
    
    
    
    
    13,119Total debt securities
    
    
    83,275
    
    
    
    842
    
    
    
    (11,905
    )
    
    
    72,212Mortgage-backed securitiesGNMA pass-through certificates
    
    $
    693
    
    
    $
    14
    
    
    $
    
    
    
    $
    707FHLMC pass-through certificates
    
    
    4,343
    
    
    
    132
    
    
    
    (2
    )
    
    
    4,473FNMA pass-through certificates
    
    
    18,193
    
    
    
    593
    
    
    
    (5
    )
    
    
    18,781Collateralized mortgage obligations
    
    
    15,991
    
    
    
    271
    
    
    
    (922
    )
    
    
    15,340Total mortgage-backed securities
    
    
    39,220
    
    
    
    1,010
    
    
    
    (929
    )
    
    
    39,301Total securities available for sale
    
    $
    122,495
    
    
    $
    1,852
    
    
    $
    (12,834
    )
    
    $
    111,513
  14




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##### Table of Contents



Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    

Fair Value(in thousands)December 31, 2008Investment securities held to maturityMunicipal bonds
    
    $
    24,582
    
    
    $
    604
    
    
    $
    (32
    )
    
    $
    25,154Mortgage-backed securitiesGNMA pass-through certificates
    
    
    17
    
    
    
    1
    
    
    
    
    
    
    
    18FHLMC pass-through certificates
    
    
    2,670
    
    
    
    45
    
    
    
    
    
    
    
    2,715FNMA pass-through certificates
    
    
    10,897
    
    
    
    323
    
    
    
    (17
    )
    
    
    11,203Collateralized mortgage obligations
    
    
    9,922
    
    
    
    199
    
    
    
    (10
    )
    
    
    10,111Total mortgage-backed securities
    
    
    23,506
    
    
    
    568
    
    
    
    (27
    )
    
    
    24,047Grantor Trust (money market fund)
    
    
    737
    
    
    
    
    
    
    
    
    
    
    
    737Total securities held to maturity
    
    $
    48,825
    
    
    $
    1,172
    
    
    $
    (59
    )
    
    $
    49,938Investment securities available for saleDebt securitiesU.S. Government and agency obligations
    
    $
    31,296
    
    
    $
    480
    
    
    $
    (10
    )
    
    $
    31,766Municipal bonds
    
    
    11,024
    
    
    
    26
    
    
    
    (336
    )
    
    
    10,714Collateralized debt obligations
    
    
    11,832
    
    
    
    
    
    
    
    (8,799
    )
    
    
    3,033Corporate bonds
    
    
    4,975
    
    
    
    
    
    
    
    (197
    )
    
    
    4,778Total debt securities
    
    
    59,127
    
    
    
    506
    
    
    
    (9,342
    )
    
    
    50,291Mortgage-backed securitiesGNMA pass-through certificates
    
    $
    773
    
    
    $
    2
    
    
    $
    (12
    )
    
    $
    763FHLMC pass-through certificates
    
    
    20,449
    
    
    
    352
    
    
    
    (31
    )
    
    
    20,770FNMA pass-through certificates
    
    
    33,465
    
    
    
    472
    
    
    
    (539
    )
    
    
    33,398Collateralized mortgage obligations
    
    
    10,017
    
    
    
    31
    
    
    
    (615
    )
    
    
    9,433Total mortgage-backed securities
    
    
    64,704
    
    
    
    857
    
    
    
    (1,197
    )
    
    
    64,364Total securities available for sale
    
    $
    123,831
    
    
    $
    1,363
    
    
    $
    (10,539
    )
    
    $
    114,655
    15




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##### Table of Contents



Available for Sale
    
    
    Held to MaturityAmortized
    
    
    
    
    
    
    AmortizedCost
    
    
    Fair Value
    
    
    Cost
    
    

Fair Value(in thousands)Due within one year or less
    
    $
    5,993
    
    
    $
    6,005
    
    
    $
    1,919
    
    
    $
    1,940Due after one year but within five years
    
    
    51,094
    
    
    
    51,484
    
    
    
    10,027
    
    
    
    10,538Due after five years but within ten years
    
    
    2,222
    
    
    
    2,244
    
    
    
    11,126
    
    
    
    11,755Due after ten years
    
    
    23,966
    
    
    
    12,479
    
    
    
    498
    
    
    
    514Mortgage-backed securities
    
    
    39,220
    
    
    
    39,301
    
    
    
    21,372
    
    
    
    22,166Total investment securities
    
    $
    122,495
    
    
    $
    111,513
    
    
    $
    44,942
    
    
    $
    46,913
  Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2009
    
    
    September 30, 2009Beginning balance of cumulative credit losses on CDO securities (1)
    
    $
    (12,343
    )
    
    $
    (9,840
    )Additions for credit losses recorded during the second and third quarters of 2009
which were not
previously recognized as components of earnings
    
    
    (799
    )
    
    
    (3,302
    )Ending balance of cumulative credit losses on CDO securities, September 30, 2009
    
    $
    (13,142
    )
    
    $
    (13,142
    )
 
 (1)
    
    Amount represents the OTTI charges recorded beginning
with the quarter ending September 30, 2008 through March 31, 2009 for CDO securities,
net of the Companys cumulative effect adjustment based upon FASB guidance regarding the
recognition and presentation of other-than-temporary impairment, effective April 1, 2009.  Less Than 12 Months
    
    
    12 Months or Longer
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses(in thousands)U.S. Government and agency
obligations
    
    $
    1,004
    
    
    $
    (4
    )
    
    $
    
    
    
    $
    
    
    
    $
    1,004
    
    
    $
    (4
    )Corporate and municipal bonds
    
    
    
    
    
    
    
    
    
    
    4,288
    
    
    
    (136
    )
    
    
    4,288
    
    
    
    (136
    )Collateralized debt obligations
    
    
    114
    
    
    
    (3,551
    )
    
    
    1,383
    
    
    
    (8,227
    )
    
    
    1,497
    
    
    
    (11,778
    )Mortgage-backed securities
    
    
    7,398
    
    
    
    (74
    )
    
    
    2,987
    
    
    
    (909
    )
    
    
    10,385
    
    
    
    (983
    )$
    8,516
    
    
    $
    (3,629
    )
    
    $
    8,658
    
    
    $
    (9,272
    )
    
    $
    17,174
    
    
    $
    (12,901
    )
   16




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##### Table of Contents



NOTE 4  LOANS RECEIVABLE
  September 30,
    
    
    December 31,2009
    
    
    2008(in thousands)Commercial mortgage
    
    $
    456,004
    
    
    $
    411,809Residential mortgage
    
    
    242,375
    
    
    
    226,963Construction
    
    
    32,110
    
    
    
    54,187Home equity loans and lines of credit
    
    
    47,076
    
    
    
    46,850Commercial business loans
    
    
    24,686
    
    
    
    54,319Other consumer loans
    
    
    1,380
    
    
    
    1,388Loans receivable, gross
    
    
    803,631
    
    
    
    795,516Less:Allowance for loan losses
    
    
    13,778
    
    
    
    11,240Deferred loan fees
    
    
    231
    
    
    
    407Loans receivable, net
    
    $
    789,622
    
    
    $
    783,869
  17




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##### Table of Contents



Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Balance at beginning of period
    
    $
    12,081
    
    
    $
    8,708
    
    
    $
    11,240
    
    
    $
    4,121Allowance from acquired entity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,791Provision charged to operations
    
    
    9,765
    
    
    
    1,309
    
    
    
    12,374
    
    
    
    2,149Charge-offs
    
    
    (8,077
    )
    
    
    (75
    )
    
    
    (10,246
    )
    
    
    (132
    )Recoveries
    
    
    9
    
    
    
    7
    
    
    
    410
    
    
    
    20Balance at end of period
    
    $
    13,778
    
    
    $
    9,949
    
    
    $
    13,778
    
    
    $
    9,949
  :
 September 30,
    
    
    December 31,2009
    
    
    2008(in thousands)Period-end loans with no allocated allowance for loan losses
    
    $
    30,877
    
    
    $
    24,998Period-end loans with allocated allowance for loan losses
    
    
    5,453
    
    
    
    Total
    
    $
    36,330
    
    
    $
    24,998Amount of the allowance for loan losses allocated
    
    $
    1,696
    
    
    $
    
 For the three months ended
    
    
    For the nine months endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)
    
    
    (in thousands)Average of impaired loans during the period
    
    $
    31,682
    
    
    $
    24,047
    
    
    $
    29,512
    
    
    $
    18,814Interest income recognized during impairment
    
    
    8
    
    
    
    
    
    
    
    37
    
    
    
    Cash basis interest income recognized
    
    
    8
    
    
    
    
    
    
    
    38
    
    
    
    
 NOTE 5  FAIR VALUE
       18




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##### Table of Contents



Financial Assets and Liabilities Measured on a Recurring Basis
  Fair Value Measurements
    
    
    Fair Value Measurementsat September 30, 2009
    
    
    at December 31, 2008Quoted
    
    
    
    
    
    
    
    
    
    
    QuotedPrices
    
    
    
    
    
    
    
    
    
    
    Pricesin Active
    
    
    Significant
    
    
    Significant
    
    
    in Active
    
    
    Significant
    
    
    SignificantMarkets for
    
    
    Other
    
    
    Other
    
    
    Markets for
    
    
    Other
    
    
    OtherIdentical
    
    
    Observable
    
    
    Observable
    
    
    Identical
    
    
    Observable
    
    
    ObservableAssets
    
    
    Inputs
    
    
    Inputs
    
    
    Assets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(in thousands)
    
    
    (in thousands)Available for sale securities:U.S. Government and agency
obligations and municipal bonds
    
    $
    57,502
    
    
    $
    
    
    
    $
    
    
    
    $
    42,481
    
    
    $
    
    
    
    $
    Corporate bonds and
mortgage-backed securities
    
    $
    
    
    
    $
    52,420
    
    
    $
    
    
    
    $
    
    
    
    $
    69,141
    
    
    $
    Collateralized debt obligations
    
    $
    
    
    
    $
    
    
    
    $
    1,591
    
    
    $
    
    
    
    $
    
    
    
    $
    3,033
  19




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##### Table of Contents



Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)CDO Securities Available for Sale(in thousands)Beginning balance, January 1, 2009
    
    $
    3,033Accretion/amortization of discount or premium
    
    
    183Payments received
    
    
    (2
    )Increase in
amortized
cost(1)
    
    
    6,103Unrealized holding loss
    
    
    (2,885
    )Other-than-temporary impairment included in earnings
    
    
    (4,841
    )Ending balance, September 30, 2009
    
    $
    1,591
 (1)
    
    Increase is due to FASB guidance regarding the recognition and
presentation of other-than-temporary impairments. Financial Assets and Liabilities Measured on a Non-Recurring Basis
  Fair Value Measurements
    
    
    Fair Value Measurementsat September 30, 2009
    
    
    at December 31, 2008Quoted
    
    
    
    
    
    
    
    
    
    
    QuotedPrices
    
    
    
    
    
    
    
    
    
    
    Pricesin Active
    
    
    Significant
    
    
    Significant
    
    
    in Active
    
    
    Significant
    
    
    SignificantMarkets for
    
    
    Other
    
    
    Other
    
    
    Markets for
    
    
    Other
    
    
    OtherIdentical
    
    
    Observable
    
    
    Unobservable
    
    
    Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs
    
    
    Assets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(in thousands)
    
    
    (in thousands)Assets:Impaired loans
    
    $
    
    
    
    $
    36,330
    
    
    $
    
    
    
    $
    
    
    
    $
    24,998
    
    
    $
    
 Non-Financial Assets and Liabilities Measured on a Non-Recurring Basis
  Fair Value Measurementsat September 30, 2009QuotedPricesin Active
    
    
    Significant
    
    
    SignificantMarkets for
    
    
    Other
    
    
    OtherIdentical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(in thousands)Assets:Other real estate owned
    
    $
    
    
    
    $
    
    
    
    $
    508Goodwill
    
    $
    
    
    
    $
    
    
    
    $
    22,575Other Intangibles
    
    $
    
    
    
    $
    
    
    
    $
    634
  20




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##### Table of Contents



At September 30, 2009
    
    
    At December 31, 2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    

Value
    
    
    Amount
    
    

Value(in thousands)AssetsCash and cash equivalents
    
    $
    9,876
    
    
    $
    9,876
    
    
    $
    10,117
    
    
    $
    10,117Interest bearing deposits in other banks
    
    
    9,631
    
    
    
    9,631
    
    
    
    17,918
    
    
    
    17,918Investment securities
    
    
    156,455
    
    
    
    158,426
    
    
    
    163,480
    
    
    
    164,593Loans held for sale
    
    
    862
    
    
    
    862
    
    
    
    
    
    
    
    Loans receivable
    
    
    789,622
    
    
    
    803,910
    
    
    
    783,869
    
    
    
    799,064FHLB Stock
    
    
    8,904
    
    
    
    8,904
    
    
    
    11,602
    
    
    
    11,602Accrued interest receivable
    
    
    4,732
    
    
    
    4,732
    
    
    
    4,736
    
    
    
    4,736LiabilitiesSavings deposits
    
    $
    81,665
    
    
    $
    81,665
    
    
    $
    79,494
    
    
    $
    79,494NOW, checking and MMDA deposits
    
    
    317,010
    
    
    
    317,010
    
    
    
    275,443
    
    
    
    275,443Certificates of deposit
    
    
    364,745
    
    
    
    369,212
    
    
    
    356,193
    
    
    
    360,717Borrowings
    
    
    173,532
    
    
    
    170,479
    
    
    
    234,484
    
    
    
    232,090Accrued interest payable
    
    
    794
    
    
    
    794
    
    
    
    778
    
    
    
    778
         21




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##### Table of Contents



NOTE 6  OTHER REAL ESTATE OWNED
   NOTE 7  ACQUISITION OF BOARDWALK BANCORP
     Securities available for sale
    
    $
    92,949Loans, net
    
    
    314,471Goodwill
    
    
    54,523Core deposit and other intangibles
    
    
    1,050Other assets
    
    
    40,027Total assets acquired
    
    
    503,020Deposits
    
    
    (320,520
    )Borrowings
    
    
    (82,729
    )Other liabilities
    
    
    (848
    )Total liabilities assumed
    
    
    (404,097
    )Net assets acquired
    
    $
    98,923
  22




---



##### Table of Contents



NOTE 7  ACQUISITION OF BOARDWALK BANCORP
  Nine months endedSeptember 30, 2008(in thousands)Interest and dividend income
    
    $
    46,089Interest expense
    
    
    19,946Net interest income
    
    
    26,143Provision for loan losses
    
    
    2,149Net interest income after provision for loan losses
    
    
    23,994Non-interest income
    
    
    1,233Non-interest expense
    
    
    28,994Income (loss) before income taxes
    
    
    (3,767
    )Income tax expense (benefit)
    
    
    (2,235
    )Net income (loss)
    
    $
    (1,532
    )Basic EPS
    
    $
    (0.12
    )
  NOTE 8  DEPOSITS
  September 30,
    
    
    December 31,2009
    
    
    2008(in thousands)Savings accounts
    
    $
    81,665
    
    
    $
    79,494NOW accounts and money market funds
    
    
    243,993
    
    
    
    212,185Non-interest bearing checking
    
    
    73,017
    
    
    
    63,258Certificates of deposit of less than $100,000
    
    
    215,782
    
    
    
    229,533Certificates of deposit of $100,000 or more
    
    
    148,963
    
    
    
    126,660Total deposits
    
    $
    763,420
    
    
    $
    711,130
  23




---



##### Table of Contents



NOTE 9  EARNINGS PER SHARE
   For the three months
    
    
    For the three monthsended September 30,
    
    
    ended September 30,2009
    
    
    2008(dollars in thousands, except share data)Net income (loss) post conversion for earnings per share
    
    $
    (19,135
    )
    
    $
    593Weighted average shares outstanding
    
    
    12,317,638
    
    
    
    12,273,615Basic earnings per share
    
    $
    (1.55
    )
    
    $
    0.05
 For the nine months
    
    
    For the eight monthsended September 30,
    
    
    ended September 30,2009
    
    
    2008(dollars in thousands, except share data)Net income (loss)
    
    $
    (19,131
    )
    
    $
    (317
    )Less: Net income from January 1, 2008 to January 31, 2008
    
    
    
    
    
    
    (402
    )Net income (loss) post conversion for earnings per share
    
    $
    (19,131
    )
    
    $
    (719
    )Weighted average shares outstanding
    
    
    12,307,455
    
    
    
    12,278,695Basic earnings (loss) per share
    
    $
    (1.55
    )
    
    $
    (0.06
    )
 NOTE 10  INCOME TAXES
   24




---



##### Table of Contents



September 30,
    
    
    December 31,2009
    
    
    2008(in thousands)Deferred tax assets:Other than temporary impairment
    
    $
    4,433
    
    
    $
    4,917Allowance for loan losses
    
    
    5,108
    
    
    
    4,043Charitable foundation contribution carryforward
    
    
    2,476
    
    
    
    2,527Purchase accounting adjustments
    
    
    1,746
    
    
    
    1,660Non-accrual loan interest income
    
    
    1,860
    
    
    
    1,013Deferred compensation
    
    
    642
    
    
    
    667Net operating losses
    
    
    541
    
    
    
    913Net unrealized loss on available for sale securities
    
    
    3,789
    
    
    
    3,155Capital loss carryforward
    
    
    
    
    
    
    233AMT credit carryforward
    
    
    238
    
    
    
    231Other
    
    
    364
    
    
    
    156Valuation allowance
    
    
    (16,001
    )
    
    
    (233
    )5,196
    
    
    
    19,282Deferred tax liabilities:Depreciation
    
    
    (860
    )
    
    
    (837
    )Deferred loan fees
    
    
    (539
    )
    
    
    (667
    )Pension
    
    
    
    
    
    
    (175
    )Net unrealized gain on available for sale securities
    
    
    
    
    
    
    Other
    
    
    (8
    )
    
    
    (356
    )(1,407
    )
    
    
    (2,035
    )Net deferred tax asset
    
    $
    3,789
    
    
    $
    17,247
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward Looking Statements
    25




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##### Table of Contents



Overview
   Comparison of Financial Condition at September 30, 2009 and December 31, 2008
       26




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27




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##### Table of Contents



For the Three Months Ended September 30,2009
    
    
    2008Interest
    
    
    
    
    
    
    
    
    
    
    InterestAverage
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    AverageBalance
    
    
    Expense
    
    
    Yield
    
    
    Balance
    
    
    Expense
    
    
    Yield(dollars in thousands)AssetsInterest-earning deposits
    
    $
    10,107
    
    
    $
    61
    
    
    
    2.36
    %
    
    $
    7,689
    
    
    $
    53
    
    
    
    2.74
    %Investments
    
    
    184,235
    
    
    
    1,681
    
    
    
    3.57
    %
    
    
    201,637
    
    
    
    2,578
    
    
    
    5.09
    %Loans
    
    
    809,878
    
    
    
    11,667
    
    
    
    5.72
    %
    
    
    789,943
    
    
    
    12,523
    
    
    
    6.31
    %Total interest-earning assets
    
    
    1,004,220
    
    
    
    13,409
    
    
    
    5.30
    %
    
    
    999,269
    
    
    
    15,154
    
    
    
    6.03
    %Noninterest-earning assets
    
    
    105,390
    
    
    
    
    
    
    
    
    
    
    
    146,135Allowance for loan losses
    
    
    (12,259
    )
    
    
    
    
    
    
    
    
    
    
    (8,855
    )Total assets
    
    $
    1,097,351
    
    
    
    
    
    
    
    
    
    
    $
    1,136,549Liabilities and Stockholders
EquityInterest-bearing demand accounts
    
    $
    111,591
    
    
    
    105
    
    
    
    0.37
    %
    
    $
    109,780
    
    
    
    296
    
    
    
    1.07
    %Savings accounts
    
    
    81,138
    
    
    
    91
    
    
    
    0.44
    %
    
    
    83,574
    
    
    
    273
    
    
    
    1.30
    %Money market accounts
    
    
    127,436
    
    
    
    406
    
    
    
    1.26
    %
    
    
    126,621
    
    
    
    782
    
    
    
    2.46
    %Certificates of deposit
    
    
    370,273
    
    
    
    2,221
    
    
    
    2.38
    %
    
    
    345,384
    
    
    
    2,935
    
    
    
    3.38
    %Borrowings
    
    
    181,785
    
    
    
    1,664
    
    
    
    3.63
    %
    
    
    205,655
    
    
    
    1,798
    
    
    
    3.48
    %Total interest-bearing liabilities
    
    
    872,223
    
    
    
    4,487
    
    
    
    2.04
    %
    
    
    871,014
    
    
    
    6,084
    
    
    
    2.78
    %Noninterest-bearing deposits
    
    
    73,492
    
    
    
    
    
    
    
    
    
    
    
    75,890Other liabilities
    
    
    6,860
    
    
    
    
    
    
    
    
    
    
    
    6,896Total liabilities
    
    
    952,575
    
    
    
    
    
    
    
    
    
    
    
    953,800Stockholders equity
    
    
    144,776
    
    
    
    
    
    
    
    
    
    
    
    182,749Total liabilities & stockholders
equity
    
    $
    1,097,351
    
    
    
    
    
    
    
    
    
    
    $
    1,136,549Net interest income
    
    
    
    
    
    $
    8,922
    
    
    
    
    
    
    
    
    
    
    $
    9,070Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.26
    %
    
    
    
    
    
    
    
    
    
    
    3.25
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.52
    %
    
    
    
    
    
    
    
    
    
    
    3.61
    %Net interest income and margin (tax equivalent basis) (1)
    
    
    
    
    
    $
    9,070
    
    
    
    3.58
    %
    
    
    
    
    
    $
    9,224
    
    
    
    3.66
    %Ratio of average interest-earning assets to average
interest-bearing liabilities
    
    
    115.13
    %
    
    
    
    
    
    
    
    
    
    
    114.72
    %
 (1)
    
    In order to present pre-tax income and resultant yields on tax-exempt investments on a
basis comparable to those on taxable investments, a tax equivalent yield adjustment is made to
interest income. The tax equivalent adjustment has been computed using a Federal income tax rate
of 35%, and has the effect of increasing interest income by $148,000, and $154,000 for the three
month period ended September 30, 2009 and 2008, respectively. The average yield on investments
increased to 3.94% from 3.57% for the three month period ended September 30, 2009 and increased to
5.41% from 5.09% for the three month period ended September 30, 2008.  28




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##### Table of Contents



For the Nine Months Ended September 30,2009
    
    
    2008Interest
    
    
    
    
    
    
    
    
    
    
    InterestAverage
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    AverageBalance
    
    
    Expense
    
    
    Yield
    
    
    Balance
    
    
    Expense
    
    
    Yield(dollars in thousands)AssetsInterest-earning deposits
    
    $
    13,688
    
    
    $
    186
    
    
    
    1.79
    %
    
    $
    9,029
    
    
    $
    216
    
    
    
    3.20
    %Investments
    
    
    188,259
    
    
    
    6,090
    
    
    
    4.27
    %
    
    
    197,535
    
    
    
    7,552
    
    
    
    5.11
    %Loans
    
    
    806,676
    
    
    
    35,068
    
    
    
    5.81
    %
    
    
    758,193
    
    
    
    35,888
    
    
    
    6.32
    %Total interest-earning assets
    
    
    1,008,623
    
    
    
    41,344
    
    
    
    5.48
    %
    
    
    964,757
    
    
    
    43,656
    
    
    
    6.04
    %Noninterest-earning assets
    
    
    105,065
    
    
    
    
    
    
    
    
    
    
    
    135,843Allowance for loan losses
    
    
    (12,063
    )
    
    
    
    
    
    
    
    
    
    
    (7,960
    )Total assets
    
    $
    1,101,625
    
    
    
    
    
    
    
    
    
    
    $
    1,092,640Liabilities and Stockholders
EquityInterest-bearing demand accounts
    
    $
    106,610
    
    
    
    308
    
    
    
    0.39
    %
    
    $
    105,894
    
    
    
    822
    
    
    
    1.04
    %Savings accounts
    
    
    80,231
    
    
    
    295
    
    
    
    0.49
    %
    
    
    82,661
    
    
    
    845
    
    
    
    1.37
    %Money market accounts
    
    
    124,952
    
    
    
    1,257
    
    
    
    1.34
    %
    
    
    119,309
    
    
    
    2,462
    
    
    
    2.76
    %Certificates of deposit
    
    
    377,598
    
    
    
    7,948
    
    
    
    2.81
    %
    
    
    352,717
    
    
    
    9,510
    
    
    
    3.60
    %Borrowings
    
    
    193,914
    
    
    
    4,960
    
    
    
    3.42
    %
    
    
    184,233
    
    
    
    4,950
    
    
    
    3.59
    %Total interest-bearing liabilities
    
    
    883,305
    
    
    
    14,768
    
    
    
    2.24
    %
    
    
    844,814
    
    
    
    18,589
    
    
    
    2.94
    %Noninterest-bearing deposits
    
    
    68,321
    
    
    
    
    
    
    
    
    
    
    
    68,922Other liabilities
    
    
    6,984
    
    
    
    
    
    
    
    
    
    
    
    5,866Total liabilities
    
    
    958,610
    
    
    
    
    
    
    
    
    
    
    
    919,602Stockholders equity
    
    
    143,015
    
    
    
    
    
    
    
    
    
    
    
    173,038Total liabilities & stockholders
equity
    
    $
    1,101,625
    
    
    
    
    
    
    
    
    
    
    $
    1,092,640Net interest income
    
    
    
    
    
    $
    26,576
    
    
    
    
    
    
    
    
    
    
    $
    25,067Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.24
    %
    
    
    
    
    
    
    
    
    
    
    3.10
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.52
    %
    
    
    
    
    
    
    
    
    
    
    3.47
    %Net interest income and margin
(tax equivalent basis) (1)
    
    
    
    
    
    $
    27,064
    
    
    
    3.59
    %
    
    
    
    
    
    $
    25,479
    
    
    
    3.53
    %Ratio of average interest-earning
assets to average
interest-bearing liabilities
    
    
    114.19
    %
    
    
    
    
    
    
    
    
    
    
    114.20
    %
 (1)
    
    In order to present pre-tax income and resultant yields on tax-exempt investments on a
basis comparable to those on taxable investments, a tax equivalent yield adjustment is made to
interest income. The tax equivalent adjustment has been computed using a Federal income tax rate
of 35%, and has the effect of increasing interest income by $488,000, and $433,000 for the nine
month period ended September 30, 2009 and 2008, respectively. The average yield on investments
increased to 4.67% from 4.27% for the nine month period ended September 30, 2009 and increased to
5.52% from 5.11% for the nine month period ended September 30, 2008.  29




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##### Table of Contents



Rate/Volume Analysis
  For the Three Months Ended September 30, 2009Compared to September 30, 2008Increase (decrease) due to changes in:Average
    
    
    Average
    
    
    NetVolume
    
    
    Rate
    
    
    Change(in thousands)Interest-Earning AssetsInterest-earning deposits
    
    $
    15
    
    
    $
    (7
    )
    
    $
    8Investments
    
    
    (208
    )
    
    
    (689
    )
    
    
    (897
    )Loans
    
    
    310
    
    
    
    (1,166
    )
    
    
    (856
    )Total interest income
    
    
    117
    
    
    
    (1,862
    )
    
    
    (1,745
    )Interest-Bearing LiabilitiesInterest-bearing demand accounts
    
    
    5
    
    
    
    (196
    )
    
    
    (191
    )Savings accounts
    
    
    (8
    )
    
    
    (174
    )
    
    
    (182
    )Money market accounts
    
    
    5
    
    
    
    (381
    )
    
    
    (376
    )Certificates of deposit
    
    
    200
    
    
    
    (914
    )
    
    
    (714
    )Borrowings
    
    
    (215
    )
    
    
    81
    
    
    
    (134
    )Total interest expense
    
    
    (13
    )
    
    
    (1,584
    )
    
    
    (1,597
    )Total net interest income
    
    $
    130
    
    
    $
    (278
    )
    
    $
    (148
    )
  30




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##### Table of Contents



For the Nine Months Ended September 30, 2009Compared to September 30, 2008Increase (decrease) due to changes in:Average
    
    
    Average
    
    
    NetVolume
    
    
    Rate
    
    
    Change(in thousands)Interest-Earning AssetsInterest-earning deposits
    
    $
    85
    
    
    $
    (115
    )
    
    $
    (30
    )Investments
    
    
    (348
    )
    
    
    (1,114
    )
    
    
    (1,462
    )Loans
    
    
    2,151
    
    
    
    (2,971
    )
    
    
    (820
    )Total interest income
    
    
    1,888
    
    
    
    (4,200
    )
    
    
    (2,312
    )Interest-Bearing LiabilitiesInterest-bearing demand accounts
    
    
    6
    
    
    
    (520
    )
    
    
    (514
    )Savings accounts
    
    
    (24
    )
    
    
    (526
    )
    
    
    (550
    )Money market accounts
    
    
    110
    
    
    
    (1,315
    )
    
    
    (1,205
    )Certificates of deposit
    
    
    626
    
    
    
    (2,188
    )
    
    
    (1,562
    )Borrowings
    
    
    244
    
    
    
    (234
    )
    
    
    10Total interest expense
    
    
    962
    
    
    
    (4,783
    )
    
    
    (3,821
    )Total net interest income
    
    $
    926
    
    
    $
    583
    
    
    $
    1,509
 Comparison of Operating Results for the Three and Nine Months Ended September 30, 2009 and 2008
 General.
 Interest Income.
  31




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##### Table of Contents



Interest Expense.
     32




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##### Table of Contents



Net Interest Income.
  Provision for Loan Losses.
   Non-Interest Income.
  33




---



##### Table of Contents



Non-Interest Expense .
 Income Tax Expense (Benefit).
 Liquidity
         Capital
   34




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##### Table of Contents



Per Regulatory GuidelinesActual
    
    
    Minimum
    
    

Well
CapitalizedAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(dollars in thousands)September 30, 2009Risk based capital ratios:Tier I
    
    $
    96,948
    
    
    
    10.89
    %
    
    $
    35,610
    
    
    
    4.00
    %
    
    $
    53,415
    
    
    
    6.00
    %Total capital
    
    $
    108,113
    
    
    
    12.14
    %
    
    $
    71,244
    
    
    
    8.00
    %
    
    $
    89,055
    
    
    
    10.00
    %Leverage ratio
    
    $
    96,948
    
    
    
    9.03
    %
    
    $
    42,945
    
    
    
    4.00
    %
    
    $
    53,681
    
    
    
    5.00
    %December 31, 2008Risk based capital ratios:Tier I
    
    $
    108,922
    
    
    
    13.00
    %
    
    $
    33,514
    
    
    
    4.00
    %
    
    $
    50,272
    
    
    
    6.00
    %Total capital
    
    $
    119,403
    
    
    
    14.25
    %
    
    $
    67,033
    
    
    
    8.00
    %
    
    $
    83,792
    
    
    
    10.00
    %Leverage ratio
    
    $
    108,922
    
    
    
    9.87
    %
    
    $
    44,143
    
    
    
    4.00
    %
    
    $
    55,178
    
    
    
    5.00
    %
 Critical Accounting Policies
   Allowance for Loan Losses.
   35




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##### Table of Contents



Securities Impairment
 Goodwill Impairment
 Income Taxes.
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 General
  
    
    originating commercial mortgage loans that generally tend to have shorter maturities
or rate resets;
 
    
    investing in shorter duration investment grade corporate securities, government
agency debt and mortgage-backed securities;
 
    
    originating adjustable-rate and short-term consumer loans;
 
    
    selling our long-term residential mortgage loans to our correspondent banks;
 
    
    utilizing both fixed term advances and an overnight line of credit with the Federal
Home Loan Bank of New York;
 
    
    utilizing low cost short-term brokered deposits as an alternative funding source; and
 
    
    obtaining general financing through lower cost deposits.
  36




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##### Table of Contents



Net Interest Income Analysis.
  Net Interest IncomeChange in
    
    Estimated
    
    
    Increase (Decrease) inInterest Rates
    
    Net Interest
    
    
    Estimated Net Interest Income(basis points)(1)
    
    Income
    
    
    Amount
    
    
    Percent(dollars in thousands)+200
    
    $
    39,617
    
    
    $
    (1,106
    )
    
    
    -2.72
    %+100
    
    
    40,241
    
    
    
    (482
    )
    
    
    -1.18
    %0
    
    
    40,723-100
    
    
    40,478
    
    
    
    (245
    )
    
    
    -0.60
    %-200
    
    
    39,454
    
    
    
    (1,269
    )
    
    
    -3.12
    %
 
 (1)
    
    Assumes an instantaneous and sustained uniform change in interest rates at all
maturities.   
 Item 4. Controls and Procedures
    37




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##### Table of Contents



Part II  Other Information
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  The FDIC Has Proposed a Rule That Would Require Us to Prepay Insurance Premiums
  A Legislative Proposal Has Been Introduced That Would Eliminate Cape Bancorp., Inc.s Primary
Federal Regulator And Subject Cape Bancorp To Be Treated as a Bank Holding Company Regulated By The
Federal Reserve Board
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (a)
    
    There were no sales of unregistered securities during the period covered by this Report.(b)
    
    Not applicable.(c)
    
    There were no issuer repurchases of securities during the period covered by this Report.
  38




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##### Table of Contents



Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
  3.1
    
    Charter of Cape Bancorp, Inc. *3.2
    
    Amended and Restated Bylaws of Cape Bancorp, Inc. * *4
    
    Form of Common Stock Certificate of Cape Bancorp, Inc. *10.1
    
    Form of Employee Stock Ownership Plan *10.2
    
    Form of Change in Control Agreement *10.3
    
    Amended and Restated Phantom Incentive Stock Option Plan *10.4
    
    Amended and Restated Phantom Restricted Stock Plan *10.5
    
    Form of Director Retirement Plan *10.6
    
    Benefit Equalization Plan *31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 *
    
    Filed as exhibits to the Companys Registration Statement on Form S-1, and any amendments
thereto, with the Securities and Exchange Commission (Registration No. 333-146178).**
    
    Filed as an exhibit to the Companys Current Report Form 8-K with the Securities and Exchange
Commission on July 18, 2008.  39




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##### Table of Contents



SIGNATURES
  CAPE BANCORP, INC.Date: November 9, 2009
    /s/ Michael D. DevlinMichael D. DevlinPresident and Chief Executive OfficerDate: November 9, 2009
    /s/ Guy HackneyGuy HackneySenior Vice President and Chief Financial Officer  40




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description3.1
    
    
    Charter of Cape Bancorp, Inc. *3.2
    
    
    Amended and Restated Bylaws of Cape Bancorp, Inc. * *4
    
    
    Form of Common Stock Certificate of Cape Bancorp, Inc. *10.1
    
    
    Form of Employee Stock Ownership Plan *10.2
    
    
    Form of Change in Control Agreement *10.3
    
    
    Amended and Restated Phantom Incentive Stock Option Plan *10.4
    
    
    Amended and Restated Phantom Restricted Stock Plan *10.5
    
    
    Form of Director Retirement Plan *10.6
    
    
    Benefit Equalization Plan *31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
    
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 *
    
    Filed as exhibits to the Companys Registration Statement on Form S-1, and any amendments
thereto, with the Securities and Exchange Commission (Registration No. 333-146178).**
    
    Filed as an exhibit to the Companys Current Report Form 8-K with the Securities and Exchange
Commission on July 18, 2008.  41