##### 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 March 31, 2011
 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 March 31, 2011 (unaudited) and December 31, 2010
    
    
    3Consolidated Statements of Income for the Three Months Ended March 31, 2011 and March 31, 2010 (unaudited)
    
    
    4Consolidated Statements of Changes in Stockholders Equity for the Twelve Months Ended December 31, 2010 and Three Months Ended March 31, 2011 (unaudited)
    
    
    5Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and March 31, 2010 (unaudited)
    
    
    6Notes to Consolidated Financial Statements (unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    29Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    42Item 4. Controls and Procedures
    
    
    43Part II. Other InformationItem 1. Legal Proceedings
    
    
    43Item 1A. Risk Factors
    
    
    44Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    44Item 3. Defaults upon Senior Securities
    
    
    44Item 4. (Reserved)
    
    
    44Item 5. Other Information
    
    
    44Item 6. Exhibits
    
    
    45Signature Page
    
    
    46Exhibit 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)March 31,
    
    
    December 31,2011
    
    
    2010(in thousands)ASSETSCash & due from financial institutions
    
    $
    11,590
    
    
    $
    10,181Interest-bearing bank balances
    
    
    14,926
    
    
    
    4,816Cash and cash equivalents
    
    
    26,516
    
    
    
    14,997Interest-bearing time deposits
    
    
    9,612
    
    
    
    9,361Investment securities available for sale, at fair value (amortized
cost of $156,296 and $165,877 respectively)
    
    
    148,546
    
    
    
    157,407Loans held for sale
    
    
    947
    
    
    
    1,224Loans, net of allowance of $13,032 and $12,538 respectively
    
    
    764,685
    
    
    
    772,318Accrued interest receivable
    
    
    4,088
    
    
    
    4,029Premises and equipment, net
    
    
    24,883
    
    
    
    25,212Other real estate owned
    
    
    3,981
    
    
    
    3,255Federal Home Loan Bank (FHLB) stock, at cost
    
    
    8,028
    
    
    
    8,721Prepaid FDIC insurance premium
    
    
    2,902
    
    
    
    3,195Deferred income taxes
    
    
    13,725
    
    
    
    6,054Bank owned life insurance (BOLI)
    
    
    28,499
    
    
    
    28,252Goodwill
    
    
    22,575
    
    
    
    22,575Intangible assets, net
    
    
    417
    
    
    
    445Assets held for sale
    
    
    
    
    
    
    479Other assets
    
    
    2,235
    
    
    
    3,518Total assets
    
    $
    1,061,639
    
    
    $
    1,061,042LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesDepositsNoninterest-bearing deposits
    
    $
    70,505
    
    
    $
    68,267Interest-bearing deposits
    
    
    690,459
    
    
    
    684,801Borrowings
    
    
    154,238
    
    
    
    169,637Advances from borrowers for taxes and insurance
    
    
    608
    
    
    
    554Accrued interest payable
    
    
    580
    
    
    
    714Other liabilities
    
    
    4,145
    
    
    
    4,915Total liabilities
    
    
    920,535
    
    
    
    928,888Stockholders EquityCommon stock, $.01 par value: authorized 100,000,000 shares;
issued 13,324,521 shares;
outstanding 13,313,521 shares
    
    
    133
    
    
    
    133Additional paid-in capital
    
    
    126,989
    
    
    
    126,864Treasury stock at cost  11,000 shares
    
    
    (85
    )
    
    
    (85
    )Unearned ESOP shares
    
    
    (9,274
    )
    
    
    (9,380
    )Accumulated other comprehensive loss, net
    
    
    (5,115
    )
    
    
    (5,590
    )Retained earnings
    
    
    28,456
    
    
    
    20,212Total stockholders equity
    
    
    141,104
    
    
    
    132,154Total liabilities & stockholders equity
    
    $
    1,061,639
    
    
    $
    1,061,042
   3




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##### Table of Contents



CAPE BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 (unaudited)
 For the three months ended March 31,2011
    
    
    2010(dollars in thousands, except share data)Interest income:Interest on loans
    
    $
    10,835
    
    
    $
    11,606Interest and dividends on investmentsTaxable
    
    
    636
    
    
    
    Tax-exempt
    
    
    233
    
    
    
    314Interest on mortgage-backed securities
    
    
    408
    
    
    
    645Total interest income
    
    
    12,112
    
    
    
    12,565Interest expense:Interest on deposits
    
    
    1,672
    
    
    
    2,381Interest on borrowings
    
    
    1,354
    
    
    
    1,587Total interest expense
    
    
    3,026
    
    
    
    3,968Net interest income before provision for loan losses
    
    
    9,086
    
    
    
    8,597Provision for loan losses
    
    
    2,400
    
    
    
    244Net interest income after provision for loan losses
    
    
    6,686
    
    
    
    8,353Non-interest income:Service fees
    
    
    828
    
    
    
    763Net gains on sale of loans
    
    
    42
    
    
    
    12Net income from BOLI
    
    
    247
    
    
    
    252Net rental income
    
    
    61
    
    
    
    58Gain on sale of investment securities held for sale, net
    
    
    148
    
    
    
    Net gain (loss) on sale of OREO
    
    
    63
    
    
    
    265Other
    
    
    78
    
    
    
    66Gross other-than-temporary impairment losses
    
    
    305
    
    
    
    (2,422
    )Less: Portion of loss recognized in other comprehensive
income
    
    
    (516
    )
    
    
    (149
    )Net other-than-temporary impairment losses
    
    
    (211
    )
    
    
    (2,571
    )Total non-interest income
    
    
    1,256
    
    
    
    (1,155
    )Non-interest expense:Salaries and employee benefits
    
    
    3,721
    
    
    
    3,559Occupancy and equipment
    
    
    848
    
    
    
    1,030Federal insurance premiums
    
    
    313
    
    
    
    320Data processing
    
    
    323
    
    
    
    314Loan related expenses
    
    
    286
    
    
    
    218Advertising
    
    
    99
    
    
    
    95Telecommunications
    
    
    240
    
    
    
    233Professional services
    
    
    200
    
    
    
    202OREO expenses
    
    
    105
    
    
    
    308Other operating
    
    
    983
    
    
    
    815Total non-interest expense
    
    
    7,118
    
    
    
    7,094Income before income taxes
    
    
    824
    
    
    
    104Income tax expense (benefit)
    
    
    (7,420
    )
    
    
    (531
    )Net income
    
    $
    8,244
    
    
    $
    635Earnings per share (see Note 10):Basic
    
    $
    0.67
    
    
    $
    0.05Diluted
    
    $
    0.67
    
    
    $
    0.05Weighted average number of shares outstanding:Basic
    
    
    12,393,888
    
    
    
    12,338,966Diluted
    
    
    12,396,463
    
    
    
    12,338,966
   4




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##### Table of Contents



CAPE BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 Year ended December 31, 2010 and three months ended March 31, 2011
 (unaudited)
 AccumulatedUnearned
    
    
    Other
    
    
    
    
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Treasury
    
    
    ESOP
    
    
    Comprehensive
    
    
    Retained
    
    
    StockholdersStock
    
    
    Capital
    
    
    Stock
    
    
    Shares
    
    
    Income (Loss)
    
    
    Earnings
    
    
    Equity(in thousands)Balance, December 31, 2009
    
    $
    133
    
    
    $
    126,695
    
    
    $
    
    
    
    $
    (9,806
    )
    
    $
    (6,645
    )
    
    $
    16,171
    
    
    $
    126,548Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,041
    
    
    
    4,041Stock option compensation expense
    
    
    
    
    
    
    268
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    268Restricted stock compensation expense
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Net unrealized gains, net of
reclassification adjustments and taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,055
    
    
    
    
    
    
    
    1,055Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,372Common stock repurchased  11,000 shares
    
    
    
    
    
    
    
    
    
    
    (85
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (85
    )ESOP shares earned
    
    
    
    
    
    
    (107
    )
    
    
    
    
    
    
    426
    
    
    
    
    
    
    
    
    
    
    
    319Balance, December 31, 2010
    
    
    133
    
    
    
    126,864
    
    
    
    (85
    )
    
    
    (9,380
    )
    
    
    (5,590
    )
    
    
    20,212
    
    
    
    132,154Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,244
    
    
    
    8,244Stock option compensation expense
    
    
    
    
    
    
    124
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124Restricted stock compensation expense
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Net unrealized gains, net of
reclassification adjustments and taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    475
    
    
    
    
    
    
    
    475Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,847ESOP shares earned
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    106
    
    
    
    
    
    
    
    
    
    
    
    103Balance, March 31, 2011
    
    $
    133
    
    
    $
    126,989
    
    
    $
    (85
    )
    
    $
    (9,274
    )
    
    $
    (5,115
    )
    
    $
    28,456
    
    
    $
    141,104
   5




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##### Table of Contents



CAPE BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited)
 Three months endedMarch 31,2011
    
    
    2010(in thousands)Cash flows from operating activitiesNet income
    
    $
    8,244
    
    
    $
    635Adjustments to reconcile net income (loss) to net cash provided by
operating activities:Provision for loan losses
    
    
    2,400
    
    
    
    244Net gain on the sale of loans
    
    
    (42
    )
    
    
    (12
    )Net gain on the sale of other real estate owned
    
    
    (63
    )
    
    
    (265
    )Write-down of other real estate owned
    
    
    47
    
    
    
    184Loss on impairment of securities
    
    
    211
    
    
    
    2,571Net gain on sale of investments
    
    
    (148
    )
    
    
    Earnings on BOLI
    
    
    (247
    )
    
    
    (252
    )Origination of loans held for sale
    
    
    (3,154
    )
    
    
    (1,479
    )Proceeds from sales of loans
    
    
    3,431
    
    
    
    818Depreciation and amortization
    
    
    413
    
    
    
    502ESOP and stock-based compensation expense
    
    
    231
    
    
    
    72Deferred income taxes
    
    
    (7,915
    )
    
    
    (1,173
    )Changes in assets and liabilities that (used) provided cash:Accrued interest receivable
    
    
    (59
    )
    
    
    623Other assets
    
    
    2,052
    
    
    
    15Accrued interest payable
    
    
    (134
    )
    
    
    (83
    )Other liabilities
    
    
    (770
    )
    
    
    377Net cash provided by operating activities
    
    
    4,497
    
    
    
    2,777Cash flows from investing activitiesProceeds from sales of AFS securities
    
    
    10,166
    
    
    
    Proceeds from calls, maturities, and principal repayments of AFS securities
    
    
    17,812
    
    
    
    22,069Purchases of AFS securities
    
    
    (18,432
    )
    
    
    (22,383
    )Redemption of Federal Home Loan Bank stock
    
    
    693
    
    
    
    1,481Proceeds from sale of other real estate owned
    
    
    946
    
    
    
    2,868Increase in interest-bearing time deposits
    
    
    (251
    )
    
    
    (951
    )Decrease in loans, net
    
    
    3,541
    
    
    
    4,932Purchase of property and equipment, net
    
    
    (6
    )
    
    
    (16
    )Net cash provided by investing activities
    
    
    14,469
    
    
    
    8,000Cash flows from financing activitiesNet increase in deposits
    
    
    7,899
    
    
    
    30,016Increase in advances from borrowers for taxes and insurance
    
    
    54
    
    
    
    11Increase in long-term borrowings
    
    
    10,000
    
    
    
    Repayments of long-term borrowings
    
    
    (20,000
    )
    
    
    (25,000
    )Net change in short-term borrowings
    
    
    (5,400
    )
    
    
    (7,900
    )Net cash used in financing activities
    
    
    (7,447
    )
    
    
    (2,873
    )Net increase in cash and cash equivalents
    
    
    11,519
    
    
    
    7,904Cash and cash equivalents at beginning of period
    
    
    14,997
    
    
    
    13,513Cash and cash equivalents at end of period
    
    $
    26,516
    
    
    $
    21,417Supplementary disclosure of cash flow information:Cash paid during period for:Interest
    
    $
    3,161
    
    
    $
    4,051Income taxes, net of refunds
    
    $
    
    
    
    $
    Supplementary disclosure of non-cash financing and investing activities:Transfers from loans to other real estate owned
    
    $
    1,655
    
    
    $
    484
   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:
   Use of Estimates:
 Cash and Cash Equivalents:
 Interest-Bearing Time Deposits:
  7




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##### Table of Contents



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 of New York (FHLB) Stock:
 Goodwill and Other Intangible Assets:
  Bank Owned Life Insurance (BOLI):
 Loan Commitments and Related Financial Instruments:
 Defined Benefit Plan:
 4 01(k) Plan:
 Employee Stock Ownership Plan (ESOP):
 Stock Benefit Plan:
  9




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##### Table of Contents



Income Taxes:
 Accounting for Uncertainty in
Income Taxes, Income Taxes  Overall
  Earnings Per Share:
 Comprehensive Income (Loss):
 Before Tax
    
    
    Tax Benefit
    
    
    Net of TaxAmount
    
    
    (Expense)
    
    
    Amount(in thousands)Three months ended March 31, 2011Unrealized holding gains arising during the period
    
    $
    140
    
    
    $
    (47
    )
    
    $
    93Non-credit related unrealized gain on other-than-temporarily impaired CDOs
    
    
    516
    
    
    
    (175
    )
    
    
    341Reclassification adjustment for gain on sale of AFS securities
    
    
    (148
    )
    
    
    50
    
    
    
    (98
    )Reclassification adjustment for credit related OTTI included in net income
    
    
    211
    
    
    
    (72
    )
    
    
    139Other comprehensive income, net
    
    $
    719
    
    
    $
    (244
    )
    
    $
    475Three months ended March 31, 2010Unrealized holding gains arising during the period
    
    $
    425
    
    
    $
    (178
    )
    
    $
    247Non-credit related unrealized gain on other-than-temporarily impaired CDOs
    
    
    149
    
    
    
    (51
    )
    
    
    98Reclassification adjustment for credit related OTTI included in net income
    
    
    2,571
    
    
    
    (874
    )
    
    
    1,697Other comprehensive income, net
    
    $
    3,145
    
    
    $
    (1,103
    )
    
    $
    2,042
  10




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##### Table of Contents



Operating Segments:
 Effect of Newly Issued Accounting Standards:
    NOTE 3  INVESTMENT SECURITIES
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(in thousands)March 31, 2011Investment securities available for saleDebt securitiesU.S. Government and agency
obligations
    
    $
    65,475
    
    
    $
    13
    
    
    $
    (957
    )
    
    $
    64,531Municipal bonds
    
    
    24,728
    
    
    
    439
    
    
    
    (635
    )
    
    
    24,532Collateralized debt obligations
    
    
    9,518
    
    
    
    
    
    
    
    (7,369
    )
    
    
    2,149Corporate bonds
    
    
    16,376
    
    
    
    69
    
    
    
    (48
    )
    
    
    16,397Total debt securities
    
    $
    116,097
    
    
    $
    521
    
    
    $
    (9,009
    )
    
    $
    107,609Mortgage-backed securitiesGNMA pass-through certificates
    
    $
    2,290
    
    
    $
    53
    
    
    $
    
    
    
    $
    2,343FHLMC pass-through certificates
    
    
    3,081
    
    
    
    128
    
    
    
    
    
    
    
    3,209FNMA pass-through certificates
    
    
    10,835
    
    
    
    491
    
    
    
    (52
    )
    
    
    11,274Collateralized mortgage obligations
    
    
    23,993
    
    
    
    236
    
    
    
    (118
    )
    
    
    24,111Total mortgage-backed securities
    
    $
    40,199
    
    
    $
    908
    
    
    $
    (170
    )
    
    $
    40,937Total securities available for sale
    
    $
    156,296
    
    
    $
    1,429
    
    
    $
    (9,179
    )
    
    $
    148,546
  11




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##### Table of Contents



Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(in thousands)December 31, 2010Investment securities available for saleDebt securitiesU.S. Government and agency
obligations
    
    $
    72,470
    
    
    $
    52
    
    
    $
    (787
    )
    
    $
    71,735Municipal bonds
    
    
    25,811
    
    
    
    456
    
    
    
    (861
    )
    
    
    25,406Collateralized debt obligations
    
    
    9,715
    
    
    
    
    
    
    
    (8,581
    )
    
    
    1,134Corporate bonds
    
    
    17,994
    
    
    
    187
    
    
    
    (46
    )
    
    
    18,135Total debt securities
    
    $
    125,990
    
    
    $
    695
    
    
    $
    (10,275
    )
    
    $
    116,410Mortgage-backed securitiesGNMA pass-through certificates
    
    $
    2,318
    
    
    $
    50
    
    
    $
    
    
    
    $
    2,368FHLMC pass-through certificates
    
    
    3,299
    
    
    
    134
    
    
    
    
    
    
    
    3,433FNMA pass-through certificates
    
    
    16,542
    
    
    
    765
    
    
    
    (41
    )
    
    
    17,266Collateralized mortgage obligations
    
    
    17,728
    
    
    
    309
    
    
    
    (107
    )
    
    
    17,930Total mortgage-backed securities
    
    $
    39,887
    
    
    $
    1,258
    
    
    $
    (148
    )
    
    $
    40,997Total securities available for sale
    
    $
    165,877
    
    
    $
    1,953
    
    
    $
    (10,423
    )
    
    $
    157,407
  Less Than 12 Months
    
    
    12 Months or Longer
    
    
    TotalUnrealized
    
    
    
    
    
    Unrealized
    
    
    
    
    
    UnrealizedDescription of Securities
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses(in thousands)U.S. Government and agency
obligations
    
    $
    57,518
    
    
    $
    (957
    )
    
    $
    
    
    
    $
    
    
    
    $
    57,518
    
    
    $
    (957
    )Municipal bonds
    
    
    5,148
    
    
    
    (73
    )
    
    
    2,420
    
    
    
    (562
    )
    
    
    7,568
    
    
    
    (635
    )Corporate bonds
    
    
    8,179
    
    
    
    (48
    )
    
    
    
    
    
    
    
    
    
    
    8,179
    
    
    
    (48
    )Collateralized debt obligations
    
    
    20
    
    
    
    (366
    )
    
    
    2,129
    
    
    
    (7,003
    )
    
    
    2,149
    
    
    
    (7,369
    )Mortgage-backed securities
    
    
    13,751
    
    
    
    (170
    )
    
    
    14
    
    
    
    (0
    )
    
    
    13,765
    
    
    
    (170
    )Total temporarily impaired
investment securities
    
    $
    84,616
    
    
    $
    (1,614
    )
    
    $
    4,563
    
    
    $
    (7,565
    )
    
    $
    89,179
    
    
    $
    (9,179
    )
  Less Than 12 Months
    
    
    12 Months or Longer
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedDescription of Securities
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses(in thousands)U.S. Government and agency
obligations
    
    $
    52,688
    
    
    $
    (787
    )
    
    $
    
    
    
    $
    
    
    
    $
    52,688
    
    
    $
    (787
    )Municipal bonds
    
    
    6,853
    
    
    
    (220
    )
    
    
    2,916
    
    
    
    (641
    )
    
    
    9,769
    
    
    
    (861
    )Corporate bonds
    
    
    9,427
    
    
    
    (46
    )
    
    
    
    
    
    
    
    
    
    
    9,427
    
    
    
    (46
    )Collateralized debt obligations
    
    
    35
    
    
    
    (364
    )
    
    
    1,099
    
    
    
    (8,217
    )
    
    
    1,134
    
    
    
    (8,581
    )Mortgage-backed securities
    
    
    6,675
    
    
    
    (110
    )
    
    
    3,140
    
    
    
    (38
    )
    
    
    9,815
    
    
    
    (148
    )Total temporarily impaired
investment securities
    
    $
    75,678
    
    
    $
    (1,527
    )
    
    $
    7,155
    
    
    $
    (8,896
    )
    
    $
    82,833
    
    
    $
    (10,423
    )
  12




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##### Table of Contents



Pooled Trust Preferred Collateralized Debt Obligations
 Amount ofDeferrals
    
    
    Excessand
    
    
    SubordinationCurrent
    
    
    Defaults
    
    
    as a % ofNumber
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Moodys/
    
    Number of
    
    
    as a % of
    
    
    Currentof
    
    
    
    
    Book
    
    
    Fair
    
    
    Unrealized
    
    
    Realized
    
    
    Fitch
    
    Performing
    
    
    Current
    
    
    PerformingDeal
    
    Securities
    
    
    Class
    
    Value
    
    
    Value
    
    
    Loss
    
    
    Loss
    
    
    Ratings
    
    Issuers
    
    
    Collateral
    
    
    CollateralPreTSL II
    
    
    2
    
    
    Mezzanine
    
    $
    431
    
    
    $
    92
    
    
    $
    (339
    )
    
    $
    (635
    )
    
    Ca/C
    
    
    23
    
    
    
    39.90
    %
    
    
    0.00
    %PreTSL VI
    
    
    1
    
    
    Mezzanine
    
    
    42
    
    
    
    20
    
    
    
    (22
    )
    
    
    (16
    )
    
    Ca/D
    
    
    3
    
    
    
    73.60
    %
    
    
    0.00
    %PreTSL XIX
    
    
    1
    
    
    Mezzanine
    
    
    966
    
    
    
    243
    
    
    
    (723
    )
    
    
    (614
    )
    
    C/C
    
    
    53
    
    
    
    24.30
    %
    
    
    0.00
    %I-PreTSL I
    
    
    2
    
    
    Mezzanine
    
    
    1,834
    
    
    
    416
    
    
    
    (1,418
    )
    
    
    
    
    
    NR/CCC
    
    
    16
    
    
    
    17.40
    %
    
    
    9.55
    %I-PreTSL II
    
    
    2
    
    
    Mezzanine
    
    
    2,717
    
    
    
    624
    
    
    
    (2,093
    )
    
    
    
    
    
    NR/B
    
    
    29
    
    
    
    4.90
    %
    
    
    14.33
    %I-PreTSL III
    
    
    3
    
    
    Mezzanine
    
    
    2,703
    
    
    
    621
    
    
    
    (2,082
    )
    
    
    
    
    
    B2/CCC
    
    
    24
    
    
    
    11.20
    %
    
    
    11.32
    %I-PreTSL IV
    
    
    1
    
    
    Mezzanine
    
    
    439
    
    
    
    113
    
    
    
    (326
    )
    
    
    
    
    
    Ba2/CCC
    
    
    29
    
    
    
    11.60
    %
    
    
    3.36
    %MM Comm I
    
    
    1
    
    
    Mezzanine
    
    
    386
    
    
    
    20
    
    
    
    (366
    )
    
    
    (1,153
    )
    
    NR/C
    
    
    7
    
    
    
    61.80
    %
    
    
    0.00
    %Total
    
    
    13
    
    
    
    
    $
    9,518
    
    
    $
    2,149
    
    
    $
    (7,369
    )
    
    $
    (2,418
    )
  13




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##### Table of Contents



Pooled Trust Preferred Collateralized Debt Obligations
 Amount ofDeferrals
    
    
    Excessand
    
    
    SubordinationCurrent
    
    
    Defaults
    
    
    as a % ofNumber
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Moodys/
    
    Number of
    
    
    as a % of
    
    
    Currentof
    
    
    
    
    Book
    
    
    Fair
    
    
    Unrealized
    
    
    Realized
    
    
    Fitch
    
    Performing
    
    
    Current
    
    
    PerformingDeal
    
    Securities
    
    
    Class
    
    Value
    
    
    Value
    
    
    Loss
    
    
    Loss
    
    
    Ratings
    
    Issuers
    
    
    Collateral
    
    
    CollateralPreTSL II
    
    
    2
    
    
    Mezzanine
    
    $
    419
    
    
    $
    15
    
    
    $
    (403
    )
    
    $
    (635
    )
    
    Ca/C
    
    
    23
    
    
    
    37.70
    %
    
    
    0.00
    %PreTSL VI
    
    
    1
    
    
    Mezzanine
    
    
    43
    
    
    
    1
    
    
    
    (41
    )
    
    
    (16
    )
    
    Ca/D
    
    
    2
    
    
    
    81.00
    %
    
    
    0.00
    %PreTSL XIX
    
    
    1
    
    
    Mezzanine
    
    
    1,168
    
    
    
    20
    
    
    
    (1,148
    )
    
    
    (614
    )
    
    C/C
    
    
    52
    
    
    
    24.60
    %
    
    
    0.00
    %I-PreTSL I
    
    
    2
    
    
    Mezzanine
    
    
    1,833
    
    
    
    251
    
    
    
    (1,582
    )
    
    
    
    
    
    NR/CCC
    
    
    16
    
    
    
    17.36
    %
    
    
    9.11
    %I-PreTSL II
    
    
    2
    
    
    Mezzanine
    
    
    2,715
    
    
    
    375
    
    
    
    (2,340
    )
    
    
    
    
    
    NR/B
    
    
    29
    
    
    
    4.87
    %
    
    
    14.33
    %I-PreTSL III
    
    
    3
    
    
    Mezzanine
    
    
    2,701
    
    
    
    375
    
    
    
    (2,326
    )
    
    
    
    
    
    B2/CCC
    
    
    24
    
    
    
    11.16
    %
    
    
    10.75
    %I-PreTSL IV
    
    
    1
    
    
    Mezzanine
    
    
    439
    
    
    
    63
    
    
    
    (376
    )
    
    
    
    
    
    Ba2/CCC
    
    
    29
    
    
    
    11.58
    %
    
    
    2.82
    %MM Comm I
    
    
    1
    
    
    Mezzanine
    
    
    399
    
    
    
    35
    
    
    
    (364
    )
    
    
    (1,153
    )
    
    NR/C
    
    
    7
    
    
    
    61.80
    %
    
    
    0.00
    %Total
    
    
    13
    
    
    
    
    $
    9,715
    
    
    $
    1,134
    
    
    $
    (8,581
    )
    
    $
    (2,418
    )
     14




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##### Table of Contents



Available for SaleAmortizedCost
    
    
    Fair Value(in thousands)Due within one year or less
    
    $
    4,245
    
    
    $
    4,269Due after one year but within five years
    
    
    86,882
    
    
    
    86,199Due after five years but within ten years
    
    
    5,854
    
    
    
    5,977Due after ten years
    
    
    19,116
    
    
    
    11,164Mortgage-backed securities
    
    
    40,199
    
    
    
    40,937Total investment securities
    
    $
    156,296
    
    
    $
    148,546
  For the three months ended March 31,2011
    
    
    2010Beginning balance of cumulative credit losses on CDO securities
    
    $
    (16,918
    )
    
    $
    (13,493
    )Additional credit losses for which other than temporary impairment
was previously recognized
    
    
    (211
    )
    
    
    (2,571
    )Ending balance of cumulative credit losses on CDO securities, March 31, 2011
    
    $
    (17,129
    )
    
    $
    (16,064
    )
  15




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##### Table of Contents



NOTE 4  LOANS RECEIVABLE
  March 31,
    
    
    December 31,2011
    
    
    2010(in thousands)Commercial mortgage
    
    $
    408,389
    
    
    $
    413,487Residential mortgage
    
    
    257,550
    
    
    
    258,047Construction
    
    
    14,228
    
    
    
    15,191Home equity loans and lines of credit
    
    
    47,436
    
    
    
    47,875Commercial business loans
    
    
    49,063
    
    
    
    48,223Other consumer loans
    
    
    1,277
    
    
    
    2,207Loans receivable, gross
    
    
    777,943
    
    
    
    785,030Less:Allowance for loan losses
    
    
    13,032
    
    
    
    12,538Deferred loan fees
    
    
    226
    
    
    
    174Loans receivable, net
    
    $
    764,685
    
    
    $
    772,318
  Three months ended March 31,2011
    
    
    2010(in thousands)Balance at beginning of period
    
    $
    12,538
    
    
    $
    13,311Provisions charged to operations
    
    
    2,400
    
    
    
    244Charge-offs
    
    
    (1,943
    )
    
    
    (2,164
    )Recoveries
    
    
    37
    
    
    
    485Balance at end of period
    
    $
    13,032
    
    
    $
    11,876
  At or for the three months ended March 31, 2011(in thousands)Commercial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Home EquitySecured by
    
    
    Commercial
    
    
    
    
    
    
    Other
    
    
    Residential
    
    
    & Lines
    
    
    OtherReal Estate
    
    
    Term Loans
    
    
    Construction
    
    
    Commercial (1)
    
    
    Mortgage
    
    
    of Credit
    
    
    Consumer
    
    
    Unallocated
    
    
    TotalBalance at beginning
of period
    
    $
    9,515
    
    
    $
    84
    
    
    $
    736
    
    
    $
    464
    
    
    $
    861
    
    
    $
    195
    
    
    $
    13
    
    
    $
    670
    
    
    $
    12,538Charge-offs
    
    
    (1,051
    )
    
    
    (86
    )
    
    
    (606
    )
    
    
    
    
    
    
    (83
    )
    
    
    (90
    )
    
    
    (27
    )
    
    
    
    
    
    
    (1,943
    )Recoveries
    
    
    16
    
    
    
    
    
    
    
    5
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    37Provision for
loan losses
    
    
    836
    
    
    
    93
    
    
    
    729
    
    
    
    505
    
    
    
    132
    
    
    
    114
    
    
    
    11
    
    
    
    (20
    )
    
    
    2,400Balance at end of
period
    
    $
    9,316
    
    
    $
    91
    
    
    $
    864
    
    
    $
    974
    
    
    $
    910
    
    
    $
    219
    
    
    $
    8
    
    
    $
    650
    
    
    $
    13,032
 (1)
    
    includes commercial lines of credit  16




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##### Table of Contents



March 31,
    
    
    December 31,2011
    
    
    2010(in thousands)Non-accrual loans (1)
    
    $
    41,565
    
    
    $
    40,827Loans delinquent greater than 90 days and
still accruing
    
    
    2,067
    
    
    
    2,639Troubled debt restructured loans
    
    
    8,163
    
    
    
    7,732Loans less than 90 days and still accruing
    
    
    7,852
    
    
    
    8,514Total impaired loans
    
    $
    59,647
    
    
    $
    59,712
 (1)
    
    includes non-accruing TDRs paying in accordance with restructured terms totaling $11.6
million at March 31, 2011 and $11.8 million at December 31, 2010. Three months ended
    
    
    Three months endedMarch 31, 2011
    
    
    March 31, 2010(in thousands)Average recorded investment of
impaired loans
    
    $
    61,242
    
    
    $
    39,889Interest income recognized during
impairment
    
    $
    251
    
    
    $
    94Cash basis interest income recognized
    
    $
    149
    
    
    $
    119
   17




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##### Table of Contents



Unpaid
    
    
    
    
    
    
    Average
    
    
    InterestRecorded
    
    
    Principal
    
    
    Related
    
    
    Recorded
    
    
    IncomeMarch 31, 2011
    
    Investment
    
    
    Balance
    
    
    Allowance
    
    
    Investment
    
    
    Recognized(in thousands)Impaired loans with a related allowanceCommercial secured by real estate
    
    $
    21,658
    
    
    $
    21,879
    
    
    $
    3,293
    
    
    $
    19,106
    
    
    $
    170Commercial secured by other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Construction
    
    
    3,398
    
    
    
    3,398
    
    
    
    719
    
    
    
    3,398
    
    
    
    16Other commercial
    
    
    900
    
    
    
    900
    
    
    
    550
    
    
    
    900
    
    
    
    Residential mortgage
    
    
    147
    
    
    
    191
    
    
    
    17
    
    
    
    147
    
    
    
    Home equity loans and lines of credit
    
    
    200
    
    
    
    200
    
    
    
    52
    
    
    
    200
    
    
    
    Other consumer loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Impaired loans with a related allowance
    
    $
    26,303
    
    
    $
    26,568
    
    
    $
    4,631
    
    
    $
    23,751
    
    
    $
    186Impaired loans with no related allowanceCommercial secured by real estate
    
    $
    20,335
    
    
    $
    25,680
    
    
    $
    
    
    
    $
    23,801
    
    
    $
    21Commercial secured by other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Construction
    
    
    3,299
    
    
    
    5,709
    
    
    
    
    
    
    
    3,827
    
    
    
    Other commercial
    
    
    3,410
    
    
    
    4,272
    
    
    
    
    
    
    
    3,469
    
    
    
    Residential mortgage
    
    
    5,985
    
    
    
    6,457
    
    
    
    
    
    
    
    6,028
    
    
    
    37Home equity loans and lines of credit
    
    
    315
    
    
    
    393
    
    
    
    
    
    
    
    366
    
    
    
    7Other consumer loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Impaired loans with no related
allowance
    
    $
    33,344
    
    
    $
    42,511
    
    
    $
    
    
    
    $
    37,491
    
    
    $
    65Total impaired loansCommercial secured by real estate
    
    $
    41,993
    
    
    $
    47,559
    
    
    $
    3,293
    
    
    $
    42,907
    
    
    $
    191Commercial secured by other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Construction
    
    
    6,697
    
    
    
    9,107
    
    
    
    719
    
    
    
    7,225
    
    
    
    16Other commercial
    
    
    4,310
    
    
    
    5,172
    
    
    
    550
    
    
    
    4,369
    
    
    
    Residential mortgage
    
    
    6,132
    
    
    
    6,648
    
    
    
    17
    
    
    
    6,175
    
    
    
    37Home equity loans and lines of credit
    
    
    515
    
    
    
    593
    
    
    
    52
    
    
    
    566
    
    
    
    7Other consumer loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total impaired loans
    
    $
    59,647
    
    
    $
    69,079
    
    
    $
    4,631
    
    
    $
    61,242
    
    
    $
    251
  18




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##### Table of Contents



Unpaid
    
    
    
    
    
    
    Average
    
    
    InterestRecorded
    
    
    Principal
    
    
    Related
    
    
    Recorded
    
    
    IncomeDecember 31, 2010
    
    Investment
    
    
    Balance
    
    
    Allowance
    
    
    Investment
    
    
    Recognized(in thousands)Impaired loans with a related allowanceCommercial secured by real estate
    
    $
    21,449
    
    
    $
    21,689
    
    
    $
    3,510
    
    
    $
    21,826
    
    
    $
    273Commercial secured by other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Construction
    
    
    4,966
    
    
    
    4,966
    
    
    
    603
    
    
    
    4,623
    
    
    
    Other commercial
    
    
    2,223
    
    
    
    2,249
    
    
    
    67
    
    
    
    2,166
    
    
    
    Residential mortgage
    
    
    619
    
    
    
    663
    
    
    
    19
    
    
    
    183
    
    
    
    5Home equity loans and lines of credit
    
    
    66
    
    
    
    66
    
    
    
    35
    
    
    
    66
    
    
    
    Other consumer loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Impaired loans with a related allowance
    
    $
    29,323
    
    
    $
    29,633
    
    
    $
    4,234
    
    
    $
    28,864
    
    
    $
    278Impaired loans with no related allowanceCommercial secured by real estate
    
    $
    18,923
    
    
    $
    24,426
    
    
    $
    
    
    
    $
    20,999
    
    
    $
    84Commercial secured by other
    
    
    86
    
    
    
    411
    
    
    
    
    
    
    
    337
    
    
    
    Construction
    
    
    3,980
    
    
    
    6,671
    
    
    
    
    
    
    
    2,790
    
    
    
    Other commercial
    
    
    2,162
    
    
    
    3,398
    
    
    
    
    
    
    
    2,362
    
    
    
    Residential mortgage
    
    
    4,508
    
    
    
    4,903
    
    
    
    
    
    
    
    4,600
    
    
    
    21Home equity loans and lines of credit
    
    
    730
    
    
    
    772
    
    
    
    
    
    
    
    576
    
    
    
    Other consumer loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Impaired loans with no related
allowance
    
    $
    30,389
    
    
    $
    40,581
    
    
    $
    
    
    
    $
    31,664
    
    
    $
    105Total impaired loansCommercial secured by real estate
    
    $
    40,372
    
    
    $
    46,115
    
    
    $
    3,510
    
    
    $
    42,825
    
    
    $
    357Commercial secured by other
    
    
    86
    
    
    
    411
    
    
    
    
    
    
    
    337
    
    
    
    Construction
    
    
    8,946
    
    
    
    11,637
    
    
    
    603
    
    
    
    7,413
    
    
    
    Other commercial
    
    
    4,385
    
    
    
    5,647
    
    
    
    67
    
    
    
    4,528
    
    
    
    Residential mortgage
    
    
    5,127
    
    
    
    5,566
    
    
    
    19
    
    
    
    4,783
    
    
    
    26Home equity loans and lines of credit
    
    
    796
    
    
    
    838
    
    
    
    35
    
    
    
    642
    
    
    
    Other consumer loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total impaired loans
    
    $
    59,712
    
    
    $
    70,214
    
    
    $
    4,234
    
    
    $
    60,528
    
    
    $
    383
  19




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##### Table of Contents



90 Daysor More
    
    
    Total30-59 Days
    
    
    60-89 Days
    
    
    Delinquent
    
    
    Delinquent
    
    
    
    
    
    
    
    
    
    
    TotalMarch 31, 2011
    
    Delinquent
    
    
    Delinquent
    
    
    and Accruing
    
    
    and Accruing
    
    
    Non-accrual
    
    
    Current
    
    
    Loans(in thousands)Real estate loans:Commercial mortgage
    
    $
    8,844
    
    
    $
    5,831
    
    
    $
    
    
    
    $
    14,675
    
    
    $
    27,357
    
    
    $
    366,357
    
    
    $
    408,389Residential mortgage
    
    
    1,167
    
    
    
    254
    
    
    
    1,973
    
    
    
    3,394
    
    
    
    2,720
    
    
    
    251,436
    
    
    
    257,550Construction
    
    
    1,799
    
    
    
    
    
    
    
    
    
    
    
    1,799
    
    
    
    5,037
    
    
    
    7,392
    
    
    
    14,228Home equity loans
and lines of credit
    
    
    106
    
    
    
    98
    
    
    
    94
    
    
    
    298
    
    
    
    421
    
    
    
    46,717
    
    
    
    47,436Commercial business
loans
    
    
    914
    
    
    
    74
    
    
    
    
    
    
    
    988
    
    
    
    6,030
    
    
    
    42,045
    
    
    
    49,063Other consumer loans
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    1,261
    
    
    
    1,277Total
    
    $
    12,846
    
    
    $
    6,257
    
    
    $
    2,067
    
    
    $
    21,170
    
    
    $
    41,565
    
    
    $
    715,208
    
    
    $
    777,943
  90 Daysor More
    
    
    Total30-59 Days
    
    
    60-89 Days
    
    
    Delinquent
    
    
    Delinquent
    
    
    
    
    
    
    
    
    
    
    TotalDecember 31, 2010
    
    Delinquent
    
    
    Delinquent
    
    
    and Accruing
    
    
    and Accruing
    
    
    Non-accrual
    
    
    Current
    
    
    Loans(in thousands)Real estate loans:Commercial mortgage
    
    $
    1,305
    
    
    $
    94
    
    
    $
    
    
    
    $
    1,399
    
    
    $
    27,781
    
    
    $
    384,307
    
    
    $
    413,487Residential mortgage
    
    
    796
    
    
    
    477
    
    
    
    2,207
    
    
    
    3,480
    
    
    
    2,449
    
    
    
    252,118
    
    
    
    258,047Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,980
    
    
    
    11,211
    
    
    
    15,191Home equity loans
and lines of credit
    
    
    164
    
    
    
    103
    
    
    
    432
    
    
    
    699
    
    
    
    363
    
    
    
    46,813
    
    
    
    47,875Commercial business
loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,254
    
    
    
    41,969
    
    
    
    48,223Other consumer loans
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    2,191
    
    
    
    2,207Total
    
    $
    2,265
    
    
    $
    690
    
    
    $
    2,639
    
    
    $
    5,594
    
    
    $
    40,827
    
    
    $
    738,609
    
    
    $
    785,030
        20




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##### Table of Contents



Risk RatingsGrades
    
    
    Grade
    
    
    Grade
    
    
    Grade
    
    
    GradeMarch 31, 2011
    
    1-5
    
    
    6
    
    
    7
    
    
    7.5
    
    
    7.9
    
    
    Total(in thousands)Commercial secured
by real estate
    
    $
    344,488
    
    
    $
    12,931
    
    
    $
    17,188
    
    
    $
    9,134
    
    
    $
    35,303
    
    
    $
    419,044Commercial term loans
    
    
    5,140
    
    
    
    12
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    5,161Construction
    
    
    5,034
    
    
    
    
    
    
    
    2,400
    
    
    
    
    
    
    
    6,794
    
    
    
    14,228Other commercial
    
    
    26,054
    
    
    
    988
    
    
    
    1,073
    
    
    
    822
    
    
    
    4,310
    
    
    
    33,247$
    380,716
    
    
    $
    13,931
    
    
    $
    20,670
    
    
    $
    9,956
    
    
    $
    46,407
    
    
    $
    471,680
  Risk RatingsGrades
    
    
    Grade
    
    
    Grade
    
    
    Grade
    
    
    GradeDecember 31, 2010
    
    1-5
    
    
    6
    
    
    7
    
    
    7.5
    
    
    7.9
    
    
    Total(in thousands)Commercial secured
by real estate
    
    $
    348,166
    
    
    $
    12,064
    
    
    $
    23,720
    
    
    $
    14,248
    
    
    $
    26,730
    
    
    $
    424,928Commercial term loans
    
    
    4,887
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    86
    
    
    
    4,987Construction
    
    
    3,725
    
    
    
    120
    
    
    
    2,400
    
    
    
    
    
    
    
    8,946
    
    
    
    15,191Other commercial
    
    
    24,262
    
    
    
    1,252
    
    
    
    3,297
    
    
    
    822
    
    
    
    2,162
    
    
    
    31,795$
    381,040
    
    
    $
    13,450
    
    
    $
    29,417
    
    
    $
    15,070
    
    
    $
    37,924
    
    
    $
    476,901
  30-89 Days
    
    
    
    
    
    
    ImpairedMarch 31, 2011
    
    Current
    
    
    Delinquent
    
    
    Non-accrual
    
    
    Loans
    
    
    Total(in thousands)Real estate loans:Residential mortgage
    
    $
    250,134
    
    
    $
    1,421
    
    
    $
    2,720
    
    
    $
    3,275
    
    
    $
    257,550Home equity loans
and lines of credit
    
    
    46,717
    
    
    
    204
    
    
    
    421
    
    
    
    94
    
    
    
    47,436Other consumer loans
    
    
    1,261
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    1,277Total consumer
loans
    
    $
    298,112
    
    
    $
    1,641
    
    
    $
    3,141
    
    
    $
    3,369
    
    
    $
    306,263
  21




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##### Table of Contents



30-89 Days
    
    
    
    
    
    
    ImpairedDecember 31, 2010
    
    Current
    
    
    Delinquent
    
    
    Non-accrual
    
    
    Loans
    
    
    Total(in thousands)Real estate loans:Residential mortgage
    
    $
    252,118
    
    
    $
    1,273
    
    
    $
    2,449
    
    
    $
    2,207
    
    
    $
    258,047Home equity loans
and lines of credit
    
    
    46,813
    
    
    
    267
    
    
    
    363
    
    
    
    432
    
    
    
    47,875Other consumer loans
    
    
    2,191
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    2,207Total consumer
loans
    
    $
    301,122
    
    
    $
    1,556
    
    
    $
    2,812
    
    
    $
    2,639
    
    
    $
    308,129
 NOTE 5  FAIR VALUE
          22




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Assets and Liabilities Measured on a Recurring Basis
  Fair Value Measurements
    
    
    Fair Value Measurementsat March 31, 2011
    
    
    at December 31, 2010Quoted
    
    
    
    
    
    
    
    
    
    
    QuotedPrices
    
    
    
    
    
    
    
    
    
    
    Pricesin Active
    
    
    Significant
    
    
    Significant
    
    
    in Active
    
    
    Significant
    
    
    SignificantMarkets for
    
    
    Other
    
    
    Other
    
    
    Markets for
    
    
    Other
    
    
    OtherIdentical
    
    
    Observable
    
    
    Observable
    
    
    Identical
    
    
    Observable
    
    
    ObservableAssets
    
    
    Inputs
    
    
    Inputs
    
    
    Assets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(in thousands)
    
    
    (in thousands)Investment securities
available
for sale:U.S. Government and agency
obligations
    
    $
    
    
    
    $
    64,531
    
    
    $
    
    
    
    $
    
    
    
    $
    71,735
    
    
    $
    Municipal bonds
    
    
    
    
    
    
    24,532
    
    
    
    
    
    
    
    
    
    
    
    25,406
    
    
    
    Collateralized debt
obligations
    
    
    
    
    
    
    
    
    
    
    2,149
    
    
    
    
    
    
    
    
    
    
    
    1,134Corporate bonds
    
    
    
    
    
    
    16,397
    
    
    
    
    
    
    
    
    
    
    
    18,135
    
    
    
    Mortgage-backed securities
    
    
    
    
    
    
    40,937
    
    
    
    
    
    
    
    
    
    
    
    40,997
    
    
    
    Total securities
available for
sale
    
    $
    
    
    
    $
    146,397
    
    
    $
    2,149
    
    
    $
    
    
    
    $
    156,273
    
    
    $
    1,134
  Fair Value MeasurementsUsing SignificantUnobservable Inputs(Level 3)CDO SecuritiesAvailable for Sale(in thousands)Three months ended March 31,2011
    
    
    2010Beginning balance
    
    $
    1,134
    
    
    $
    1,456Accretion of discount
    
    
    14
    
    
    
    56Payments received
    
    
    
    
    
    
    Unrealized holding gain (loss)
    
    
    1,212
    
    
    
    2,644Other-than-temporary impairment
included in earnings
    
    
    (211
    )
    
    
    (2,571
    )Ending balance
    
    $
    2,149
    
    
    $
    1,585
  23




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##### Table of Contents



Assets and Liabilities Measured on a Non-Recurring Basis
  Fair Value Measurements
    
    
    Fair Value Measurementsat March 31, 2011
    
    
    at December 31, 2010Quoted
    
    
    
    
    
    
    
    
    
    
    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:Commercial secured by real estate
    
    $
    
    
    
    $
    26,397
    
    
    $
    15,596
    
    
    $
    
    
    
    $
    35,891
    
    
    $
    4,481Commercial secured by other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86
    
    
    
    Construction
    
    
    
    
    
    
    3,934
    
    
    
    2,763
    
    
    
    
    
    
    
    8,657
    
    
    
    289Other commercial
    
    
    
    
    
    
    1,674
    
    
    
    2,636
    
    
    
    
    
    
    
    3,947
    
    
    
    438Residential mortgage
    
    
    
    
    
    
    5,820
    
    
    
    312
    
    
    
    
    
    
    
    5,127
    
    
    
    Home equity loans
    
    
    
    
    
    
    515
    
    
    
    
    
    
    
    
    
    
    
    796
    
    
    
    Total impaired loans
    
    $
    
    
    
    $
    38,340
    
    
    $
    21,307
    
    
    $
    
    
    
    $
    54,504
    
    
    $
    5,208Other real estate owned:Commercial
    
    $
    
    
    
    $
    2,976
    
    
    $
    
    
    
    $
    
    
    
    $
    2,257
    
    
    $
    Residential mortgage
    
    
    
    
    
    
    1,005
    
    
    
    
    
    
    
    
    
    
    
    998
    
    
    
    Total other real estate owned
    
    $
    
    
    
    $
    3,981
    
    
    $
    
    
    
    $
    
    
    
    $
    3,255
    
    
    $
    Loans held for sale
    
    $
    
    
    
    $
    947
    
    
    $
    
    
    
    $
    
    
    
    $
    1,224
    
    
    $
    Assets held for sale
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    479
    
    
    $
    Goodwill
    
    $
    
    
    
    $
    
    
    
    $
    22,575
    
    
    $
    
    
    
    $
    
    
    
    $
    22,575Other intangibles
    
    $
    
    
    
    $
    
    
    
    $
    417
    
    
    $
    
    
    
    $
    
    
    
    $
    445
   24




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##### Table of Contents



At March 31, 2011
    
    
    At December 31, 2010Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    Value(in thousands)AssetsCash and cash equivalents
    
    $
    26,516
    
    
    $
    26,516
    
    
    $
    14,997
    
    
    $
    14,997Interest-bearing time deposits
    
    $
    9,602
    
    
    $
    9,675
    
    
    $
    9,361
    
    
    $
    9,440Investment securities
    
    $
    148,546
    
    
    $
    148,546
    
    
    $
    157,407
    
    
    $
    157,407Loans held for sale
    
    $
    947
    
    
    $
    947
    
    
    $
    1,224
    
    
    $
    1,224Loans receivable
    
    $
    764,685
    
    
    $
    772,794
    
    
    $
    772,318
    
    
    $
    780,277FHLB Stock
    
    $
    8,028
    
    
    $
    8,028
    
    
    $
    8,721
    
    
    $
    8,721Bank owned life insurance
    
    $
    28,499
    
    
    $
    28,499
    
    
    $
    28,252
    
    
    $
    28,252Accrued interest receivable
    
    $
    4,088
    
    
    $
    4,088
    
    
    $
    4,029
    
    
    $
    4,029LiabilitiesSavings deposits
    
    $
    83,730
    
    
    $
    83,730
    
    
    $
    84,312
    
    
    $
    84,312NOW, checking and MMDA
deposits
    
    $
    352,911
    
    
    $
    352,911
    
    
    $
    361,973
    
    
    $
    361,973Certificates of deposit
    
    $
    324,323
    
    
    $
    327,180
    
    
    $
    306,783
    
    
    $
    309,897Borrowings
    
    $
    154,238
    
    
    $
    158,369
    
    
    $
    169,637
    
    
    $
    174,553Accrued interest payable
    
    $
    580
    
    
    $
    580
    
    
    $
    714
    
    
    $
    714
           25




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##### Table of Contents



NOTE 6  OTHER REAL ESTATE OWNED
    NOTE 7 DEPOSITS
  March 31,
    
    
    December 31,2011
    
    
    2010(in thousands)Savings accounts
    
    $
    83,730
    
    
    $
    84,312NOW accounts and money market funds
    
    
    282,407
    
    
    
    293,706Non-interest bearing checking
    
    
    70,504
    
    
    
    68,267Certificates
of deposit of less than $100,000
    
    
    171,422
    
    
    
    170,524Certificates of deposit of $100,000 or more
    
    
    152,901
    
    
    
    136,259$
    760,964
    
    
    $
    753,068
 NOTE 8  INCOME TAXES
  For the three months ended March 31,Income taxes
    
    2011
    
    
    2010Pre-tax income
    
    $
    824
    
    
    $
    104Income tax benefit
    
    $
    (7,420
    )
    
    $
    (531
    )
 2010 Annual
Report to Shareholders
  26




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##### Table of Contents



NOTE 9  STOCK BENEFIT PLAN
     WeightedWeighted
    
    
    AverageAverage
    
    
    RemainingNumber of
    
    
    Exercise
    
    
    ContractualOptions
    
    
    Price
    
    
    LifeOutstanding at January 1, 2011
    
    
    763,600
    
    
    $
    7.30
    
    
    
    Granted
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (10,000
    )
    
    $
    7.27
    
    
    
    Outstanding at March 31, 2011
    
    
    753,600
    
    
    $
    7.30
    
    
    
    9.2 yearsExercisable at March 31, 2011
    
    
    
    
    
    $
    
    
    
    
    Aggregate Intrinsic Value at
March 31, 2011
    
    
    
    27




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##### Table of Contents



Restricted
    
    
    Weighted AverageCommon
    
    
    Fair Value atShares
    
    
    Grant DateOutstanding at January 1, 2011
    
    
    11,000
    
    
    $
    7.68Granted
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding at March 31, 2011
    
    
    11,000
    
    
    $
    7.68
  Three months endedMarch 31, 2011(in thousands)Compensation expense:Common stock options
    
    $
    124Restricted common stock
    
    
    4Total compensation expense
    
    
    128Tax benefit
    
    
    3Net income effect
    
    $
    125
  NOTE 10  EARNINGS PER SHARE
   Three months ended March 31,2011
    
    
    2010(in thousands, except share data)Net income
    
    $
    8,244
    
    
    $
    635Weighted average shares outstanding
    
    
    12,393,888
    
    
    
    12,338,966Basic earnings per share
    
    $
    0.67
    
    
    $
    0.05Diluted weighted average shares
outstanding
    
    
    12,396,463
    
    
    
    12,338,966Diluted basic earnings per share
    
    $
    0.67
    
    
    $
    0.05
 NOTE 11  SALE OF BANK PREMISES
   28




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward Looking Statements
   Overview
      29




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##### Table of Contents



1)
    
    Managing our credit underwriting and administration through the economic
recovery.
 2)
    
    Managing non-performing assets to performing status or disposal.
 3)
    
    Managing net interest income and interest rate risk in an uncertain rate
environment.
 Managing our credit underwriting and administration through the economic recovery:
        30




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##### Table of Contents



Managing non-performing assets to performing status or disposal:
    Managing net interest income and interest rate risk in a potentially rising rate environment:
  2011 Overview
    31




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Comparison of Financial Condition at March 31, 2011 and December 31, 2010
    32




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33




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34




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##### Table of Contents



For the Three Months Ended March 31,2011
    
    
    2010Interest
    
    
    
    
    
    
    
    
    
    
    InterestAverage
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    AverageBalance
    
    
    Expense
    
    
    Yield
    
    
    Balance
    
    
    Expense
    
    
    Yield(dollars in thousands)AssetsInterest-earning deposits
    
    $
    18,335
    
    
    $
    32
    
    
    
    0.71
    %
    
    $
    12,456
    
    
    $
    40
    
    
    
    1.30
    %Investments
    
    
    171,019
    
    
    
    1,245
    
    
    
    2.91
    %
    
    
    172,723
    
    
    
    919
    
    
    
    2.13
    %Loans
    
    
    785,621
    
    
    
    10,835
    
    
    
    5.59
    %
    
    
    802,735
    
    
    
    11,606
    
    
    
    5.86
    %Total interest-earning assets
    
    
    974,975
    
    
    
    12,112
    
    
    
    5.04
    %
    
    
    987,914
    
    
    
    12,565
    
    
    
    5.16
    %Noninterest-earning assets
    
    
    99,722
    
    
    
    
    
    
    
    
    
    
    
    101,420Allowance for loan losses
    
    
    (12,897
    )
    
    
    
    
    
    
    
    
    
    
    (13,519
    )Total assets
    
    $
    1,061,800
    
    
    
    
    
    
    
    
    
    
    $
    1,075,815Liabilities and Stockholders
EquityInterest-bearing demand accounts
    
    $
    135,347
    
    
    
    112
    
    
    
    0.34
    %
    
    $
    112,395
    
    
    
    105
    
    
    
    0.38
    %Savings accounts
    
    
    83,396
    
    
    
    54
    
    
    
    0.26
    %
    
    
    79,467
    
    
    
    87
    
    
    
    0.44
    %Money market accounts
    
    
    154,168
    
    
    
    327
    
    
    
    0.86
    %
    
    
    143,629
    
    
    
    463
    
    
    
    1.31
    %Certificates of deposit
    
    
    312,081
    
    
    
    1,179
    
    
    
    1.53
    %
    
    
    359,917
    
    
    
    1,726
    
    
    
    1.94
    %Borrowings
    
    
    170,074
    
    
    
    1,354
    
    
    
    3.23
    %
    
    
    182,784
    
    
    
    1,587
    
    
    
    3.52
    %Total interest-bearing liabilities
    
    
    855,066
    
    
    
    3,026
    
    
    
    1.44
    %
    
    
    878,192
    
    
    
    3,968
    
    
    
    1.83
    %Noninterest-bearing deposits
    
    
    67,825
    
    
    
    
    
    
    
    
    
    
    
    62,892Other liabilities
    
    
    5,483
    
    
    
    
    
    
    
    
    
    
    
    5,730Total liabilities
    
    
    928,374
    
    
    
    
    
    
    
    
    
    
    
    946,814Stockholders equity
    
    
    133,426
    
    
    
    
    
    
    
    
    
    
    
    129,001Total liabilities & stockholders
equity
    
    $
    1,061,800
    
    
    
    
    
    
    
    
    
    
    $
    1,075,815Net interest income
    
    
    
    
    
    $
    9,086
    
    
    
    
    
    
    
    
    
    
    $
    8,597Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.60
    %
    
    
    
    
    
    
    
    
    
    
    3.33
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.78
    %
    
    
    
    
    
    
    
    
    
    
    3.53
    %Net interest income and margin (tax equivalent basis) (1)
    
    
    
    
    
    $
    9,202
    
    
    
    3.83
    %
    
    
    
    
    
    $
    8,735
    
    
    
    3.59
    %Ratio of average interest-earning assets to average
interest-bearing liabilities
    
    
    114.02
    %
    
    
    
    
    
    
    
    
    
    
    112.49
    %
 
 (1)
    
    In order to present pre-tax income and resultant yields on tax-exempt investments on a
basis comparable to those on taxable investments, a tax equivalent yield adjustment is made to
interest income. The tax equilvalent adjustment has been computed using a Federal income tax
rate of 35%, and has the effect of increasing interest income by $116,000, and $138,000 for
the three month period ended March 31, 2011 and 2010, respectively. The average yield on
investments increased to 3.23% from 2.91% for the three month period ended March 31, 2011 and
increased to 2.48% from 2.13% for the three month period ended March 31, 2010.  35




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Rate/Volume Analysis
  For the Three Months Ended March 31, 2011Compared to March 31, 2010Increase (decrease) due to changes in:Average
    
    
    Average
    
    
    NetVolume
    
    
    Rate
    
    
    Change(in thousands)Interest-Earning AssetsInterest-earning deposits
    
    $
    14
    
    
    $
    (22
    )
    
    $
    (8
    )Investments
    
    
    (9
    )
    
    
    335
    
    
    
    326Loans
    
    
    (244
    )
    
    
    (527
    )
    
    
    (771
    )Total interest income
    
    
    (239
    )
    
    
    (214
    )
    
    
    (453
    )Interest-Bearing LiabilitiesInterest-bearing demand
accounts
    
    
    20
    
    
    
    (13
    )
    
    
    7Savings accounts
    
    
    4
    
    
    
    (37
    )
    
    
    (33
    )Money market accounts
    
    
    32
    
    
    
    (168
    )
    
    
    (136
    )Certificates of deposit
    
    
    (211
    )
    
    
    (336
    )
    
    
    (547
    )Borrowings
    
    
    (106
    )
    
    
    (127
    )
    
    
    (233
    )Total interest expense
    
    
    (261
    )
    
    
    (681
    )
    
    
    (942
    )Total net interest income
    
    $
    22
    
    
    $
    467
    
    
    $
    489
 Comparison of Operating Results for the Three Months Ended March 31, 2011 and 2010
 General.
 Interest Income.
  36




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Interest Expense.
 Net Interest Income.
 Provision for Loan Losses.
      37




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Non-Interest Income.
 Non-Interest Expense .
 Income Tax Expense (Benefit).
 Liquidity and Capital Resources
    38




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39




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Per Regulatory GuidelinesActual
    
    
    Minimum
    
    
    Well CapitalizedAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(dollars in thousands)March 31, 2011Risk based capital
ratios:Tier I
    
    $
    101,514
    
    
    
    12.35
    %
    
    $
    32,879
    
    
    
    4.00
    %
    
    $
    49,319
    
    
    
    6.00
    %Total capital
    
    $
    111,827
    
    
    
    13.60
    %
    
    $
    65,781
    
    
    
    8.00
    %
    
    $
    82,226
    
    
    
    10.00
    %Leverage ratio
    
    $
    101,514
    
    
    
    9.87
    %
    
    $
    41,140
    
    
    
    4.00
    %
    
    $
    51,426
    
    
    
    5.00
    %December 31, 2010Risk based capital
ratios:Tier I
    
    $
    103,092
    
    
    
    12.65
    %
    
    $
    32,598
    
    
    
    4.00
    %
    
    $
    48,897
    
    
    
    6.00
    %Total capital
    
    $
    113,313
    
    
    
    13.90
    %
    
    $
    65,216
    
    
    
    8.00
    %
    
    $
    81,520
    
    
    
    10.00
    %Leverage ratio
    
    $
    103,092
    
    
    
    9.96
    %
    
    $
    41,402
    
    
    
    4.00
    %
    
    $
    51,753
    
    
    
    5.00
    %
 Critical Accounting Policies
 Note 2 of the Notes to
Consolidated Financial Statements.
  Allowance for Loan Losses.
   40




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See Note 2  Summary of Significant Accounting Policies of the Notes
to Consolidated Financial Statements.
 Securities Impairment .
   Income Taxes .
   41




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##### Table of Contents



Effect of Newly Issued Accounting Standards.
    
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
 General
  
    
    originating commercial loans that generally tend to have shorter repricing or reset
periods and higher interest rates than residential mortgage loans;
 
    
    investing in shorter duration investment grade corporate securities, U.S. Government
agency obligations and mortgage-backed securities;
 
    
    obtaining general financing through lower cost deposits, brokered deposits and
advances from the Federal Home Loan Bank;
 
    
    originating adjustable rate and short-term consumer loans;
 
    
    selling a portion of our long-term fixed rate residential mortgage loans; and
 
    
    lengthening the terms of borrowings and deposits.
  Net Interest Income Analysis.
  42




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##### Table of Contents



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
    
    
    $
    33,800
    
    
    $
    (2,302
    )
    
    
    -6.38
    %+100
    
    
    $
    35,013
    
    
    $
    (1,089
    )
    
    
    -3.02
    %0
    
    
    $
    36,102
    
    
    $
    
    
    
    
    -100
    
    
    $
    36,315
    
    
    $
    213
    
    
    
    0.59
    %-200
    
    
    $
    34,345
    
    
    $
    (1,757
    )
    
    
    -4.87
    %
 
 (1)
    
    Assumes an instantaneous and sustained uniform change in interest rates
at all maturities.   
 Item 4.
    
    Controls and Procedures
     
 Part II  Other Information
 
 Item 1.
    
    Legal Proceedings
   43




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##### Table of Contents



Item 1A.
    
    Risk Factors
  Financial Reform Legislation will, among other things, tighten capital standards, create a new
Consumer Financial Protection Bureau, and result in new laws and regulations that are expected to
increase our cost of operations.
  
 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.
 
 Item 3.
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    Reserved
 
 Item 5.
    
    Other Information
   44




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Item 6.
    
    Exhibits
  3.1
    
    
    Articles of Incorporation 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.  45




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SIGNATURES
  CAPE BANCORP, INC.Date: May 4, 2011
    
    /s/ Michael D. Devlin

Michael D. DevlinPresident and Chief Executive OfficerDate: May 4, 2011
    
    /s/ Guy Hackney

Guy HackneyExecutive Vice President and Chief Financial Officer
  46