##### 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 June 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 June 30, 2009 (unaudited) and December 31, 2008
    
    
    3Consolidated Statements of Income for the Three and Six Months Ended June 30, 2009 and June 30, 2008
(unaudited)
    
    
    4Consolidated Statements of Changes in Stockholders Equity for the Twelve Months Ended December 31, 2008
and Six Months Ended June 30, 2009 (unaudited)
    
    
    5Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and June 30, 2008 (unaudited)
    
    
    6Notes to Consolidated Financial Statements (unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    33Item 4. Controls and Procedures
    
    
    34Part II. Other InformationItem 1. Legal Proceedings
    
    
    34Item 1A. Risk Factors
    
    
    34Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 3. Defaults upon Senior Securities
    
    
    35Item 4. Submission of Matters to a Vote of Security Holders
    
    
    35Item 5. Other Information
    
    
    35Item 6. Exhibits
    
    
    36Signature Page
    
    
    37Exhibit 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)
 June 30,
    
    
    December 31,2009
    
    
    2008(in thousands)ASSETSCash & due from financial institutions
    
    $
    15,429
    
    
    $
    10,117Federal funds sold
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    15,429
    
    
    
    10,117Interest-earning deposits in other financial institutions
    
    
    6,388
    
    
    
    17,918Investment securities available for sale, at fair value (amortized
cost of $135,878 at June 30, 2009 and $123,831 at December 31, 2008)
    
    
    123,716
    
    
    
    114,655Investment securities held to maturity (fair value of $48,278
at June 30, 2009 and $49,938 at December 31, 2008)
    
    
    47,163
    
    
    
    48,825Loans held for sale
    
    
    612
    
    
    
    Loans, net of allowance of $12,081 and $11,240
    
    
    800,284
    
    
    
    783,869Accrued interest receivable
    
    
    5,051
    
    
    
    4,736Premises and equipment, net
    
    
    26,963
    
    
    
    27,342Other real estate owned
    
    
    1,416
    
    
    
    798Federal Home Loan Bank (FHLB) stock, at cost
    
    
    10,862
    
    
    
    11,602Bank owned life insurance (BOLI)
    
    
    26,681
    
    
    
    26,446Goodwill
    
    
    22,575
    
    
    
    22,575Intangible
assets, net
    
    
    682
    
    
    
    786Assets held for sale
    
    
    2,026
    
    
    
    2,026Other assets
    
    
    20,766
    
    
    
    19,040Total assets
    
    $
    1,110,614
    
    
    $
    1,090,735LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesDepositsNoninterest-bearing deposits
    
    $
    73,162
    
    
    $
    63,258Interest-bearing deposits
    
    
    671,406
    
    
    
    647,872Borrowings
    
    
    217,034
    
    
    
    234,484Advances from borrowers for taxes and insurance
    
    
    613
    
    
    
    585Accrued interest payable
    
    
    838
    
    
    
    778Other liabilities
    
    
    4,572
    
    
    
    3,033Total liabilities
    
    
    967,625
    
    
    
    950,010Stockholders EquityCommon stock, $.01 par value: authorized 100,000,000 shares;
issued and outstanding 13,313,521 shares
    
    
    133
    
    
    
    133Additional paid-in capital
    
    
    126,751
    
    
    
    126,801Unearned ESOP shares
    
    
    (10,019
    )
    
    
    (10,232
    )Accumulated other comprehensive income (loss), net
    
    
    (7,992
    )
    
    
    (6,022
    )Retained earnings
    
    
    34,116
    
    
    
    30,045Total stockholders equity
    
    
    142,989
    
    
    
    140,725Total liabilities & stockholders equity
    
    $
    1,110,614
    
    
    $
    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 six months,ended June 30,
    
    
    ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(dollars in thousands, except share data)Interest income:Interest on loans
    
    $
    11,774
    
    
    $
    12,317
    
    
    $
    23,401
    
    
    $
    23,365Interest and dividends on investmentsTaxable
    
    
    832
    
    
    
    1,407
    
    
    
    1,687
    
    
    
    2,642Tax-exempt
    
    
    341
    
    
    
    328
    
    
    
    686
    
    
    
    596Interest on mortgage-backed securities
    
    
    1,045
    
    
    
    996
    
    
    
    2,161
    
    
    
    1,899Total interest income
    
    
    13,992
    
    
    
    15,048
    
    
    
    27,935
    
    
    
    28,502Interest expense:Interest on deposits
    
    
    3,374
    
    
    
    4,565
    
    
    
    6,985
    
    
    
    9,354Interest on borrowings
    
    
    1,700
    
    
    
    1,723
    
    
    
    3,296
    
    
    
    3,151Total interest expense
    
    
    5,074
    
    
    
    6,288
    
    
    
    10,281
    
    
    
    12,505Net interest income before provision for loan losses
    
    
    8,918
    
    
    
    8,760
    
    
    
    17,654
    
    
    
    15,997Provision for loan losses
    
    
    1,864
    
    
    
    558
    
    
    
    2,609
    
    
    
    840Net interest income after provision for loan losses
    
    
    7,054
    
    
    
    8,202
    
    
    
    15,045
    
    
    
    15,157Non-interest income:Service fees
    
    
    794
    
    
    
    826
    
    
    
    1,503
    
    
    
    1,492Net gains on sale of loans
    
    
    36
    
    
    
    6
    
    
    
    63
    
    
    
    25Net income from BOLI
    
    
    220
    
    
    
    261
    
    
    
    512
    
    
    
    490Net rental income
    
    
    86
    
    
    
    91
    
    
    
    172
    
    
    
    174Gain (loss) on sales of investment securities held for sale, net
    
    
    600
    
    
    
    2
    
    
    
    600
    
    
    
    2Loss on disposal of other assets
    
    
    
    
    
    
    (132
    )
    
    
    
    
    
    
    (132
    )Loss on sale of OREO
    
    
    (226
    )
    
    
    
    
    
    
    (255
    )
    
    
    Other income
    
    
    562
    
    
    
    122
    
    
    
    583
    
    
    
    224Gross other-than-temporary impairment losses
    
    
    (2,429
    )
    
    
    (201
    )
    
    
    (3,968
    )
    
    
    (201
    )Less: Portion of loss recognized in other comprehensive income
(pre-tax)
    
    
    (74
    )
    
    
    
    
    
    
    (74
    )
    
    
    Net other-than-temporary impairment losses
    
    
    (2,503
    )
    
    
    (201
    )
    
    
    (4,042
    )
    
    
    (201
    )Total non-interest income
    
    
    (431
    )
    
    
    975
    
    
    
    (864
    )
    
    
    2,074Non-interest expense:Salaries and employee benefits
    
    
    3,705
    
    
    
    3,954
    
    
    
    8,432
    
    
    
    7,308Occupancy & equipment
    
    
    819
    
    
    
    966
    
    
    
    1,675
    
    
    
    1,709Federal insurance premiums
    
    
    247
    
    
    
    80
    
    
    
    1,101
    
    
    
    232Data processing
    
    
    301
    
    
    
    408
    
    
    
    580
    
    
    
    726Charitable Foundation contribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,256Advertising
    
    
    164
    
    
    
    216
    
    
    
    215
    
    
    
    398Telecommunications
    
    
    205
    
    
    
    283
    
    
    
    407
    
    
    
    458Professional services
    
    
    221
    
    
    
    238
    
    
    
    444
    
    
    
    448OREO write-down
    
    
    
    
    
    
    
    
    
    
    68
    
    
    
    Other operating
    
    
    991
    
    
    
    1,325
    
    
    
    1,815
    
    
    
    2,210Total non-interest expense
    
    
    6,653
    
    
    
    7,470
    
    
    
    14,737
    
    
    
    19,745Income (loss) before income taxes
    
    
    (30
    )
    
    
    1,707
    
    
    
    (556
    )
    
    
    (2,514
    )Income tax expense (benefit)
    
    
    (133
    )
    
    
    370
    
    
    
    (560
    )
    
    
    (1,604
    )Net income (loss)
    
    $
    103
    
    
    $
    1,337
    
    
    $
    4
    
    
    $
    (910
    )Earnings (loss) per share (see Note 9):Basic
    
    $
    0.01
    
    
    $
    0.11
    
    
    $
    
    
    
    $
    (0.11
    )Diluted
    
    $
    0.01
    
    
    $
    0.11
    
    
    $
    
    
    
    $
    (0.11
    )Weighted average number of shares outstanding:Basic
    
    
    12,307,619
    
    
    
    12,262,048
    
    
    
    12,302,278
    
    
    
    12,281,769Diluted
    
    
    12,307,619
    
    
    
    12,262,048
    
    
    
    12,302,278
    
    
    
    12,281,769
   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 six months ended June 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)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4Net unrealized income (loss), net of
reclassification adjustments and taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,097
    
    
    
    2,097Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,101Cumulative effect of adopting FSP FAS
115-2
and FAS 124-2 (net of $2.1 million
tax effect)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,067
    
    
    
    (4,067
    )
    
    
    ESOP shares earned
    
    
    
    
    
    
    (50
    )
    
    
    213
    
    
    
    
    
    
    
    
    
    
    
    163Balance, June 30, 2009
    
    $
    133
    
    
    $
    126,751
    
    
    $
    (10,019
    )
    
    $
    34,116
    
    
    $
    (7,992
    )
    
    $
    142,989
   5




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##### Table of Contents



CAPE BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited)
 Six months ended June30,2009
    
    
    2008(in thousands)Cash flows from operating activitiesNet income (loss)
    
    $
    4
    
    
    $
    (910
    )Adjustments to reconcile net income (loss) to net cash provided by operating
activities:Provision for loan losses
    
    
    2,609
    
    
    
    840Net gain on the sale of loans
    
    
    (63
    )
    
    
    (25
    )Net loss on the sale of other real estate owned
    
    
    255
    
    
    
    Loss on impairment of securities
    
    
    4,042
    
    
    
    201Net gain on sale of investments
    
    
    (600
    )
    
    
    (2
    )Earnings on BOLI
    
    
    (512
    )
    
    
    (490
    )Depreciation and amortization
    
    
    933
    
    
    
    699ESOP compensation expense
    
    
    163
    
    
    
    190Stock issuance for charitable contribution
    
    
    
    
    
    
    5,474Deferred income taxes
    
    
    (1,242
    )
    
    
    (1,411
    )Changes in assets and liabilities that (used) provided cash:Origination of loans held for sale
    
    
    (5,550
    )
    
    
    (939
    )Proceeds from sale of loans
    
    
    4,938
    
    
    
    1,289Accrued interest receivable
    
    
    (315
    )
    
    
    531Other assets
    
    
    (1,287
    )
    
    
    2,094Accrued interest payable
    
    
    60
    
    
    
    (21
    )Other liabilities
    
    
    1,539
    
    
    
    (4,017
    )Net cash provided by operating activities
    
    
    4,974
    
    
    
    3,503Cash flows from investing activitiesProceeds from sales of AFS securities
    
    
    14,163
    
    
    
    Proceeds from calls, maturities, and principal repayments of HTM securities
    
    
    4,548
    
    
    
    4,184Proceeds from calls, maturities, and principal repayments of AFS securities
    
    
    43,196
    
    
    
    37,537Purchases of HTM securities
    
    
    (2,998
    )
    
    
    (4,945
    )Purchases of AFS securities
    
    
    (66,375
    )
    
    
    (41,804
    )Redemption (purchase) of Federal Home Loan Bank stock
    
    
    740
    
    
    
    (3,502
    )Proceeds from sale of other real estate owned
    
    
    543
    
    
    
    (Increase) decrease in interest-earning deposits in other financial institutions
    
    
    11,530
    
    
    
    535Increase in loans, net
    
    
    (20,779
    )
    
    
    (25,975
    )Purchase of property and equipment, net
    
    
    (386
    )
    
    
    (803
    )Acquisition of Boardwalk Bancorp
    
    
    
    
    
    
    (46,839
    )Net cash used in investing activities
    
    
    (15,818
    )
    
    
    (81,612
    )Cash flows from financing activitiesNet increase (decrease) in deposits
    
    
    33,528
    
    
    
    (40,990
    )Increase in advances from borrowers for taxes and insurance
    
    
    28
    
    
    
    75Borrowings
    
    
    45,000
    
    
    
    96,775Payments on borrowings
    
    
    (62,400
    )
    
    
    (19,106
    )Net proceeds from stock issuance in conversion
    
    
    
    
    
    
    39,823Net cash provided by financing activities
    
    
    16,156
    
    
    
    76,577Net increase (decrease) in cash and cash equivalents
    
    
    5,312
    
    
    
    (1,532
    )Cash and cash equivalents at beginning of period
    
    
    10,117
    
    
    
    15,631Cash and cash equivalents at end of period
    
    $
    15,429
    
    
    $
    14,099Supplementary disclosure of cash flow information:Cash paid during period for:Interest
    
    $
    10,221
    
    
    $
    12,004Income taxes, net of refunds
    
    $
    (518
    )
    
    $
    247Supplementary 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:
  Use of Estimates:
 Cash and Cash Equivalents:
 Interest-Bearing Deposits in Other Financial Institutions:
  7




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##### Table of Contents



Investment Securities:
  Loans Held for Sale:
 Loans and Allowance for Loan Losses:
     Other Real Estate Owned:
 Premises and Equipment:
  8




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##### Table of Contents



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):
 Income Taxes: Accounting for Uncertainty in Income Taxes .
   9




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##### Table of Contents



Comprehensive Income (Loss):
 Before Tax
    
    
    Tax Benefit
    
    
    Net of TaxAmount
    
    
    (Expense)
    
    
    Amount(in thousands)Three months ended June 30, 2009Unrealized losses on securitiesUnrealized holding gains arising during the period
    
    $
    417
    
    
    $
    (142
    )
    
    $
    275Non-credit related unrealized gain on other-than-temporarily impaired
CDOs
    
    
    74
    
    
    
    (25
    )
    
    
    49Reclassification adjustment for securities losses realized in net income
    
    
    1,903
    
    
    
    (647
    )
    
    
    1,256Other comprehensive income, net
    
    $
    2,394
    
    
    $
    (814
    )
    
    $
    1,580Three months ended June 30, 2008Unrealized losses on securitiesUnrealized holding losses arising during the period
    
    $
    (7,925
    )
    
    $
    2,731
    
    
    $
    (5,194
    )Reclassification adjustment for net losses realized in net income
    
    
    199
    
    
    
    (69
    )
    
    
    130Other comprehensive loss, net
    
    $
    (7,726
    )
    
    $
    2,662
    
    
    $
    (5,064
    )
 Before Tax
    
    
    Tax Benefit
    
    
    Net of TaxAmount
    
    
    (Expense)
    
    
    Amount(in thousands)Six months ended June 30, 2009Unrealized losses on securitiesUnrealized holding losses arising during the period
    
    $
    (339
    )
    
    $
    115
    
    
    $
    (224
    )Non-credit related unrealized gain on other-than-temporarily
impaired CDOs
    
    
    74
    
    
    $
    (25
    )
    
    $
    49Reclassification adjustment for net losses realized in net income
    
    
    3,442
    
    
    
    (1,170
    )
    
    
    2,272Other comprehensive income, net
    
    $
    3,177
    
    
    $
    (1,080
    )
    
    $
    2,097Six months ended June 30, 2008Unrealized losses on securitiesUnrealized holding losses arising during the period
    
    $
    (8,879
    )
    
    $
    3,073
    
    
    $
    (5,806
    )Reclassification adjustment for net losses realized in net income
    
    
    199
    
    
    
    (69
    )
    
    
    130Other comprehensive loss, net
    
    $
    (8,680
    )
    
    $
    3,004
    
    
    $
    (5,676
    )
  10




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Operating Segments:
 Recent Accounting Pronouncements: Determining the Fair Value of a Financial Asset
when the Market for That Asset Is Not Active.
   Effect of Newly Issued Accounting Standards:
    11




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12




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##### Table of Contents



NOTE 3  INVESTMENT SECURITIES
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(in thousands)June 30, 2009Investment securities held to maturityMunicipal bonds
    
    $
    24,126
    
    
    $
    513
    
    
    $
    (32
    )
    
    $
    24,607Mortgage-backed securitiesGNMA pass-through certificates
    
    
    16
    
    
    
    1
    
    
    
    
    
    
    
    17FHLMC pass-through certificates
    
    
    1,761
    
    
    
    50
    
    
    
    
    
    
    
    1,811FNMA pass-through certificates
    
    
    10,103
    
    
    
    390
    
    
    
    
    
    
    
    10,493Collateralized mortgage obligations
    
    
    11,157
    
    
    
    306
    
    
    
    (113
    )
    
    
    11,350Total securities held to maturity
    
    $
    47,163
    
    
    $
    1,260
    
    
    $
    (145
    )
    
    $
    48,278Investment securities available for saleDebt securitiesU.S. Government and agency
obligations
    
    $
    40,709
    
    
    $
    64
    
    
    $
    (27
    )
    
    $
    40,746Municipal bonds
    
    
    11,081
    
    
    
    22
    
    
    
    (458
    )
    
    
    10,645Collateralized debt obligations
    
    
    14,045
    
    
    
    192
    
    
    
    (12,261
    )
    
    
    1,976Corporate bonds
    
    
    12,927
    
    
    
    88
    
    
    
    (26
    )
    
    
    12,989Total debt securities
    
    
    78,762
    
    
    
    366
    
    
    
    (12,772
    )
    
    
    66,356Mortgage-backed securitiesGNMA pass-through certificates
    
    $
    719
    
    
    $
    14
    
    
    $
    
    
    
    $
    733FHLMC pass-through certificates
    
    
    10,785
    
    
    
    271
    
    
    
    (4
    )
    
    
    11,052FNMA pass-through certificates
    
    
    29,536
    
    
    
    849
    
    
    
    (11
    )
    
    
    30,374Collateralized mortgage obligations
    
    
    16,076
    
    
    
    201
    
    
    
    (1,076
    )
    
    
    15,201Total mortgage-backed securities
    
    
    57,116
    
    
    
    1,335
    
    
    
    (1,091
    )
    
    
    57,360Total securities available for sale
    
    $
    135,878
    
    
    $
    1,701
    
    
    $
    (13,863
    )
    
    $
    123,716
  13




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##### Table of Contents



Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    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
    )
    
    
    10,111Grantor 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
    14




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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
    
    $
    6,787
    
    
    $
    6,773
    
    
    $
    1,564
    
    
    $
    1,577Due after one year but within
five years
    
    
    44,857
    
    
    
    44,958
    
    
    
    10,163
    
    
    
    10,474Due after five years but
within ten years
    
    
    2,411
    
    
    
    2,402
    
    
    
    11,901
    
    
    
    12,056Due after ten years
    
    
    24,707
    
    
    
    12,223
    
    
    
    498
    
    
    
    500Mortgage-backed securities
    
    
    57,116
    
    
    
    57,360
    
    
    
    23,037
    
    
    
    23,671Total investment securities
    
    $
    135,878
    
    
    $
    123,716
    
    
    $
    47,163
    
    
    $
    48,278
  Beginning balance of cumulative credit losses on CDO securities, April 1, 2009 (1)
    
    $
    (9,840
    )Additions for credit losses recorded during the second quarter of 2009 which were not previously
recognized as components of earnings
    
    
    (2,503
    )Ending balance of cumulative credit losses on CDO securities, June 30, 2009
    
    $
    (12,343
    )
 
 (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 upon adoption of FSP FAS 115-2, 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
    
    $
    22,790
    
    
    $
    (27
    )
    
    $
    
    
    
    $
    
    
    
    $
    22,790
    
    
    $
    (27
    )Corporate and municipal bonds
    
    
    9,246
    
    
    
    (91
    )
    
    
    7,752
    
    
    
    (425
    )
    
    
    16,998
    
    
    
    (516
    )Collateralized debt obligations
    
    
    307
    
    
    
    (3,801
    )
    
    
    1,358
    
    
    
    (8,460
    )
    
    
    1,665
    
    
    
    (12,261
    )Mortgage-backed securities
    
    
    8,496
    
    
    
    (144
    )
    
    
    2,918
    
    
    
    (1,060
    )
    
    
    11,414
    
    
    
    (1,204
    )$
    40,839
    
    
    $
    (4,063
    )
    
    $
    12,028
    
    
    $
    (9,945
    )
    
    $
    52,867
    
    
    $
    (14,008
    )
   15




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##### Table of Contents



NOTE 4  LOANS RECEIVABLE
  June 30,
    
    
    December 31,2009
    
    
    2008(in thousands)Commercial mortgage
    
    $
    436,102
    
    
    $
    411,809Residential mortgage
    
    
    243,248
    
    
    
    226,963Construction
    
    
    34,055
    
    
    
    54,187Home equity loans and lines of credit
    
    
    47,065
    
    
    
    46,850Commercial business loans
    
    
    50,861
    
    
    
    54,319Other consumer loans
    
    
    1,282
    
    
    
    1,388Loans receivable, gross
    
    
    812,613
    
    
    
    795,516Less:Allowance for loan losses
    
    
    12,081
    
    
    
    11,240Deferred loan fees
    
    
    248
    
    
    
    407Loans receivable, net
    
    $
    800,284
    
    
    $
    783,869
  16




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##### Table of Contents



June 30,
    
    
    December 31,2009
    
    
    2008(in thousands)Balance at beginning of year
    
    $
    11,240
    
    
    $
    4,121Allowance from acquired entity
    
    
    
    
    
    
    3,791Provision charged to operations
    
    
    2,609
    
    
    
    9,009Charge-offs
    
    
    (2,169
    )
    
    
    (5,708
    )Recoveries
    
    
    401
    
    
    
    27Balance at end of period
    
    $
    12,081
    
    
    $
    11,240
  June 30,
    
    
    December 31,2009
    
    
    2008(in thousands)Period-end loans with no allocated allowance for loan losses
    
    $
    25,462
    
    
    $
    24,998Period-end loans with allocated allowance for loan losses
    
    
    4,452
    
    
    
    Total
    
    $
    29,914
    
    
    $
    24,998Amount of the allowance for loan losses allocated
    
    $
    750
    
    
    $
    
 For
the three months ended
    
    

For
the six months endedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)
    
    
    (in thousands)Average of impaired loans during the period
    
    $
    30,979
    
    
    $
    22,325
    
    
    $
    29,122
    
    
    $
    16,492Interest income recognized during
impairment
    
    
    8
    
    
    
    
    
    
    
    29
    
    
    
    Cash-basis interest income recognized
    
    
    15
    
    
    
    
    
    
    
    30
    
    
    
    
 NOTE 5  FAIR VALUE
       17




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##### Table of Contents



Financial Assets and Liabilities Measured on a Recurring Basis
  Fair Value Measurements
    
    
    Fair Value Measurementsat June 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
    
    $
    51,391
    
    
    $
    
    
    
    $
    
    
    
    $
    42,481
    
    
    $
    
    
    
    $
    Corporate bonds and
mortgage-backed securities
    
    $
    
    
    
    $
    70,349
    
    
    $
    
    
    
    $
    
    
    
    $
    69,141
    
    
    $
    Collateralized debt obligations
    
    $
    
    
    
    $
    
    
    
    $
    1,976
    
    
    $
    
    
    
    $
    
    
    
    $
    3,033
  18




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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
    
    
    95Payments received
    
    
    (2
    )Increase in amortized cost due to adoption
of FSP FAS 115-2
    
    
    6,162Unrealized holding loss
    
    
    (3,270
    )Other-than-temporary impairment included in
earnings
    
    
    (4,042
    )Ending balance, June 30, 2009
    
    $
    1,976
 Financial Assets and Liabilities Measured on a Non-Recurring Basis
  Fair Value Measurements
    
    
    Fair Value Measurementsat June 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
    
    $
    
    
    
    $
    29,914
    
    
    $
    
    
    
    $
    
    
    
    $
    24,998
    
    
    $
    
 Non-Financial Assets and Liabilities Measured on a Non-Recurring Basis
  Fair Value Measurementsat June 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
    
    $
    
    
    
    $
    
    
    
    $
    1,416
  19




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##### Table of Contents



At June 30, 2009
    
    
    At December 31, 2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    Value(in thousands)AssetsCash and cash equivalents
    
    $
    15,429
    
    
    $
    15,429
    
    
    $
    10,117
    
    
    $
    10,117Interest bearing deposits in
other banks
    
    
    6,388
    
    
    
    6,388
    
    
    
    17,918
    
    
    
    17,918Investment securities
    
    
    170,879
    
    
    
    171,994
    
    
    
    163,480
    
    
    
    164,593Loans held for sale
    
    
    612
    
    
    
    612
    
    
    
    
    
    
    
    Loans receivable
    
    
    800,284
    
    
    
    816,923
    
    
    
    783,869
    
    
    
    799,064FHLB Stock
    
    
    10,862
    
    
    
    n/a
    
    
    
    11,602
    
    
    
    n/aAccrued interest receivable
    
    
    5,051
    
    
    
    5,051
    
    
    
    4,736
    
    
    
    4,736LiabilitiesSavings deposits
    
    $
    80,592
    
    
    $
    80,592
    
    
    $
    79,494
    
    
    $
    79,494NOW, checking and MMDA deposits
    
    
    304,834
    
    
    
    304,834
    
    
    
    275,443
    
    
    
    275,443Ceritificates of deposit
    
    
    359,142
    
    
    
    364,039
    
    
    
    356,193
    
    
    
    360,717Borrowings
    
    
    217,034
    
    
    
    212,307
    
    
    
    234,484
    
    
    
    232,090Accrued interest payable
    
    
    838
    
    
    
    838
    
    
    
    778
    
    
    
    778
        20




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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
  21




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##### Table of Contents



NOTE 7  ACQUISITION OF BOARDWALK BANCORP
  Six months endedJune 30, 2008(in thousands)Interest and dividend income
    
    $
    30,935Interest expense
    
    
    13,862Net interest income
    
    
    17,073Provision for loan losses
    
    
    840Net interest income after provision for loan
losses
    
    
    16,233Non-interest income
    
    
    2,103Non-interest expense
    
    
    22,272Income (loss) before income taxes
    
    
    (3,936
    )Income tax expense (benefit)
    
    
    (1,811
    )Net income (loss)
    
    $
    (2,125
    )Basic EPS
    
    $
    (0.11
    )
  NOTE 8  DEPOSITS
  June 30,
    
    
    December 31,2009
    
    
    2008(in thousands)Savings accounts
    
    $
    80,592
    
    
    $
    79,494NOW accounts and money market funds
    
    
    231,672
    
    
    
    212,185Non-interest bearing checking
    
    
    73,162
    
    
    
    63,258Certificates of deposit of less than $100,000
    
    
    229,111
    
    
    
    229,533Certificates of deposit of $100,000 or more
    
    
    130,031
    
    
    
    126,660Total deposits
    
    $
    744,568
    
    
    $
    711,130
  22




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##### Table of Contents



NOTE 9  EARNINGS PER SHARE
   For the three months
    
    
    For the three monthsended June 30,
    
    
    ended June 30,2009
    
    
    2008(dollars in thousands, except share data)Net income post conversion for earnings per share
    
    $
    103
    
    
    $
    1,337Weighted average shares outstanding
    
    
    12,307,619
    
    
    
    12,262,048Basic earnings per share
    
    $
    0.01
    
    
    $
    0.11
 For the six months
    
    
    For the five monthsended June 30,
    
    
    ended June 30,2009
    
    
    2008(dollars in thousands, except share data)Net income
    
    $
    4
    
    
    $
    (910
    )Less: Net income from January 1,
2008 to January 31, 2008
    
    
    
    
    
    
    (402
    )Net income (loss) post conversion
for earnings per share
    
    $
    4
    
    
    $
    (1,312
    )Weighted average shares outstanding
    
    
    12,302,278
    
    
    
    12,281,769Basic earnings (loss) per share
    
    $
    0.00
    
    
    $
    (0.11
    )
 
 Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward Looking Statements
    23




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##### Table of Contents



Overview
   Comparison of Financial Condition at June 30, 2009 and December 31, 2008
         24




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##### Table of Contents



25




---



##### Table of Contents



For the Three Months Ended June 30,2009
    
    
    2008Interest
    
    
    
    
    
    
    
    
    
    
    InterestAverage
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    AverageBalance
    
    
    Expense
    
    
    Yield
    
    
    Balance
    
    
    Expense
    
    
    Yield(dollars in thousands)AssetsInterest-earning deposits
    
    $
    15,989
    
    
    $
    52
    
    
    
    1.29
    %
    
    $
    12,235
    
    
    $
    89
    
    
    
    2.93
    %Investments
    
    
    192,063
    
    
    
    2,166
    
    
    
    4.46
    %
    
    
    209,926
    
    
    
    2,642
    
    
    
    5.06
    %Loans
    
    
    808,545
    
    
    
    11,774
    
    
    
    5.84
    %
    
    
    801,739
    
    
    
    12,317
    
    
    
    6.18
    %Total interest-earning assets
    
    
    1,016,597
    
    
    
    13,992
    
    
    
    5.52
    %
    
    
    1,023,900
    
    
    
    15,048
    
    
    
    5.91
    %Noninterest-earning assets
    
    
    105,256
    
    
    
    
    
    
    
    
    
    
    
    143,923Allowance for loan losses
    
    
    (12,579
    )
    
    
    
    
    
    
    
    
    
    
    (8,298
    )Total assets
    
    $
    1,109,274
    
    
    
    
    
    
    
    
    
    
    $
    1,159,525Liabilities and Stockholders EquityInterest-bearing demand accounts
    
    $
    104,075
    
    
    
    95
    
    
    
    0.37
    %
    
    $
    106,815
    
    
    
    217
    
    
    
    0.82
    %Savings accounts
    
    
    80,078
    
    
    
    87
    
    
    
    0.44
    %
    
    
    83,038
    
    
    
    258
    
    
    
    1.25
    %Money market accounts
    
    
    130,250
    
    
    
    424
    
    
    
    1.31
    %
    
    
    120,621
    
    
    
    776
    
    
    
    2.59
    %Certificates of deposit
    
    
    381,616
    
    
    
    2,768
    
    
    
    2.91
    %
    
    
    384,067
    
    
    
    3,315
    
    
    
    3.47
    %Borrowings
    
    
    195,052
    
    
    
    1,700
    
    
    
    3.50
    %
    
    
    203,513
    
    
    
    1,722
    
    
    
    3.40
    %Total interest-bearing liabilities
    
    
    891,071
    
    
    
    5,074
    
    
    
    2.28
    %
    
    
    898,054
    
    
    
    6,288
    
    
    
    2.82
    %Noninterest-bearing deposits
    
    
    67,527
    
    
    
    
    
    
    
    
    
    
    
    68,184Other liabilities
    
    
    7,857
    
    
    
    
    
    
    
    
    
    
    
    6,007Total liabilities
    
    
    966,455
    
    
    
    
    
    
    
    
    
    
    
    972,245Stockholders equity
    
    
    142,819
    
    
    
    
    
    
    
    
    
    
    
    187,280Total liabilities & stockholders
equity
    
    $
    1,109,274
    
    
    
    
    
    
    
    
    
    
    $
    1,159,525Net interest income
    
    
    
    
    
    $
    8,918
    
    
    
    
    
    
    
    
    
    
    $
    8,760Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.24
    %
    
    
    
    
    
    
    
    
    
    
    3.09
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.52
    %
    
    
    
    
    
    
    
    
    
    
    3.44
    %Net interest income and margin (tax
equivalent basis) (1)
    
    
    
    
    
    $
    9,073
    
    
    
    3.58
    %
    
    
    
    
    
    $
    8,905
    
    
    
    3.50
    %Ratio of average interest-earning
assets to average interest-bearing
liabilities
    
    
    114.09
    %
    
    
    
    
    
    
    
    
    
    
    114.01
    %
 (1)
    
    In order to present pre-tax income and resultant yields on tax-exempt investments on a
basis comparable to those on
taxable investments, a tax equivalent yield adjustment is made to interest income. The tax
equilvalent adjustment has been
computed using a Federal income tax rate of 34%, and has the effect of increasing interest
income by $155,000, and $145,000 for the three month period ended June 30, 2009 and 2008,
respectively. The average yield on investments increased to 4.85% from 4.46% for the three
month period ended June 30, 2009 and increased to 5.41% from 5.06% for the three month
period ended June 30, 2008.  26




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##### Table of Contents



For the Six Months Ended June 30,2009
    
    
    2008Interest
    
    
    
    
    
    
    
    
    
    
    InterestAverage
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    AverageBalance
    
    
    Expense
    
    
    Yield
    
    
    Balance
    
    
    Expense
    
    
    Yield(dollars in thousands)AssetsInterest-earning deposits
    
    $
    15,508
    
    
    $
    119
    
    
    
    1.53
    %
    
    $
    9,682
    
    
    $
    163
    
    
    
    3.39
    %Investments
    
    
    189,579
    
    
    
    4,415
    
    
    
    4.63
    %
    
    
    194,833
    
    
    
    4,974
    
    
    
    5.13
    %Loans
    
    
    804,380
    
    
    
    23,401
    
    
    
    5.87
    %
    
    
    740,071
    
    
    
    23,365
    
    
    
    6.35
    %Total interest-earning assets
    
    
    1,009,467
    
    
    
    27,935
    
    
    
    5.58
    %
    
    
    944,586
    
    
    
    28,502
    
    
    
    6.07
    %Noninterest-earning assets
    
    
    106,293
    
    
    
    
    
    
    
    
    
    
    
    130,641Allowance for loan losses
    
    
    (11,963
    )
    
    
    
    
    
    
    
    
    
    
    (7,507
    )Total assets
    
    $
    1,103,797
    
    
    
    
    
    
    
    
    
    
    $
    1,067,720Liabilities and Stockholders EquityInterest-bearing demand accounts
    
    $
    104,079
    
    
    
    202
    
    
    
    0.39
    %
    
    $
    107,337
    
    
    
    526
    
    
    
    0.99
    %Savings accounts
    
    
    79,771
    
    
    
    204
    
    
    
    0.52
    %
    
    
    82,161
    
    
    
    571
    
    
    
    1.40
    %Money market accounts
    
    
    123,689
    
    
    
    852
    
    
    
    1.39
    %
    
    
    115,359
    
    
    
    1,680
    
    
    
    2.93
    %Certificates of deposit
    
    
    381,319
    
    
    
    5,727
    
    
    
    3.03
    %
    
    
    354,931
    
    
    
    6,576
    
    
    
    3.73
    %Borrowings
    
    
    200,079
    
    
    
    3,296
    
    
    
    3.32
    %
    
    
    172,863
    
    
    
    3,152
    
    
    
    3.67
    %Total interest-bearing liabilities
    
    
    888,937
    
    
    
    10,281
    
    
    
    2.33
    %
    
    
    832,651
    
    
    
    12,505
    
    
    
    3.02
    %Noninterest-bearing deposits
    
    
    65,694
    
    
    
    
    
    
    
    
    
    
    
    61,839Other liabilities
    
    
    7,047
    
    
    
    
    
    
    
    
    
    
    
    5,344Total liabilities
    
    
    961,678
    
    
    
    
    
    
    
    
    
    
    
    899,834Stockholders equity
    
    
    142,119
    
    
    
    
    
    
    
    
    
    
    
    167,886Total liabilities & stockholders
equity
    
    $
    1,103,797
    
    
    
    
    
    
    
    
    
    
    $
    1,067,720Net interest income
    
    
    
    
    
    $
    17,654
    
    
    
    
    
    
    
    
    
    
    $
    15,997Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.25
    %
    
    
    
    
    
    
    
    
    
    
    3.05
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.53
    %
    
    
    
    
    
    
    
    
    
    
    3.41
    %Net interest income and margin (tax
equivalent basis) (1)
    
    
    
    
    
    $
    17,965
    
    
    
    3.59
    %
    
    
    
    
    
    $
    16,256
    
    
    
    3.46
    %Ratio of average interest-earning
assets to average interest-bearing
liabilities
    
    
    113.56
    %
    
    
    
    
    
    
    
    
    
    
    113.44
    %
 (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 34%, and has the effect of increasing interest
income by $311,000, and $259,000
for the six month period ended June 30, 2009 and 2008, respectively. The average yield on
investments increased to
5.03% from 4.63% for the six month period ended June 30, 2009 and increased to 5.52% from
5.13% for the
six month period ended June 30, 2008.  27




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##### Table of Contents



Rate/Volume Analysis
   28




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##### Table of Contents



For the Three Months Ended June 30, 2009Compared to June 30, 2008Increase (decrease) due to changes in:Average
    
    
    Average
    
    
    NetVolume
    
    
    Rate
    
    
    Change(in thousands)Interest-Earning AssetsInterest-earning deposits
    
    $
    21
    
    
    $
    (58
    )
    
    $
    (37
    )Investments
    
    
    (236
    )
    
    
    (240
    )
    
    
    (476
    )Loans
    
    
    104
    
    
    
    (647
    )
    
    
    (543
    )Total interest income
    
    
    (111
    )
    
    
    (945
    )
    
    
    (1,056
    )Interest-Bearing LiabilitiesInterest-bearing demand accounts
    
    
    (5
    )
    
    
    (117
    )
    
    
    (122
    )Savings accounts
    
    
    (9
    )
    
    
    (162
    )
    
    
    (171
    )Money market accounts
    
    
    58
    
    
    
    (410
    )
    
    
    (352
    )Certificates of deposit
    
    
    (21
    )
    
    
    (526
    )
    
    
    (547
    )Borrowings
    
    
    (75
    )
    
    
    53
    
    
    
    (22
    )Total interest expense
    
    
    (52
    )
    
    
    (1,162
    )
    
    
    (1,214
    )Total net interest income
    
    $
    (59
    )
    
    $
    217
    
    
    $
    158
 For the Six Months Ended June 30, 2009Compared to June 30, 2008Increase (decrease) due to changes in:Average
    
    
    Average
    
    
    NetVolume
    
    
    Rate
    
    
    Change(in thousands)Interest-Earning AssetsInterest-earning deposits
    
    $
    69
    
    
    $
    (114
    )
    
    $
    (45
    )Investments
    
    
    (130
    )
    
    
    (429
    )
    
    
    (559
    )Loans
    
    
    1,872
    
    
    
    (1,835
    )
    
    
    37Total interest income
    
    
    1,811
    
    
    
    (2,378
    )
    
    
    (567
    )Interest-Bearing LiabilitiesInterest-bearing demand accounts
    
    
    (16
    )
    
    
    (308
    )
    
    
    (324
    )Savings accounts
    
    
    (17
    )
    
    
    (351
    )
    
    
    (368
    )Money market accounts
    
    
    112
    
    
    
    (939
    )
    
    
    (827
    )Certificates of deposit
    
    
    451
    
    
    
    (1,300
    )
    
    
    (849
    )Borrowings
    
    
    454
    
    
    
    (310
    )
    
    
    144Total interest expense
    
    
    984
    
    
    
    (3,208
    )
    
    
    (2,224
    )Total net interest income
    
    $
    827
    
    
    $
    830
    
    
    $
    1,657
  29




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##### Table of Contents



Comparison of Operating Results for the Three and Six Months Ended June 30, 2009 and 2008
 General.
 Interest Income.
  Interest Expense.
   30




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##### Table of Contents



Net Interest Income.
  Provision for Loan Losses.
   Non-Interest Income.
  31




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##### Table of Contents



Non-Interest Expense .
 Income
Tax Expense (Benefit).
 Critical Accounting Policies
   Allowance for Loan Losses.
 Accounting for
Contingencies, Accounting by Creditors for Impairment of a Loan, an Amendment of FASB Statements No. 5 and 15 Accounting by Creditors for Impairment of a Loan  Income Recognition and
Disclosures, an Amendment of SFAS No. 114
  32




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##### Table of Contents



Securities Impairment
 Goodwill Impairment
 
 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.
  Net Interest Income Analysis.
  33




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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
    
    $
    38,888
    
    
    $
    (982
    )
    
    
    -2.46
    %+100
    
    
    39,419
    
    
    
    (451
    )
    
    
    -1.13
    %0
    
    
    39,870-100
    
    
    40,280
    
    
    
    410
    
    
    
    1.03
    %-200
    
    
    39,353
    
    
    
    (517
    )
    
    
    -1.30
    %
 
 (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
  
 Item 1A.
    
    Risk Factors
   34




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##### Table of Contents



Any Future FDIC Insurance Premiums Will Adversely Impact Our Earnings
  
 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)
    
    The Company commenced its initial stock offering on or about November 23, 2007, and the
offering closed on January 31, 2008. There has been no material changes in the Companys
projected use of the offering proceeds as from what was disclosed in the section entitled Use
of Proceeds in the Companys Registration Statement on Form S-1 (Commission File No.
333-146178).
 (c)
    
    There were no issuer repurchases of securities during the period covered by this Report.
 
 Item 3.
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
  
 Item 5.
    
    Other Information
   35




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##### Table of Contents



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.  36




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##### Table of Contents



SIGNATURES
  CAPE BANCORP, INC.Date: August 7, 2009
    /s/ Michael D. DevlinMichael D. DevlinPresident and Chief Executive OfficerDate: August 7, 2009
    /s/ Guy HackneyGuy HackneySenior Vice President and Chief Financial Officer  37




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    
    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
  38