##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
  þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 for the fiscal year ended December 31, 2010
 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 number: 001-34089
 Bancorp of New Jersey, Inc.
  New Jersey
    
    20-8444387(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification)1365 Palisade Avenue, Fort Lee, NJ
    
    07024(Address of principal executive offices)
    
    (Zip Code)
 201-944-8600
  Title of each class
    
    Name of each exchange on which registeredCommon stock
    
    NYSE Amex, LLC
  o þ
 o þ
 þ o
 o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



TABLE OF CONTENTS
 PAGEPART IItem 1 Business
    
    
    3Item 1A Risk Factors
    
    
    14Item 1B Unresolved Staff Comments
    
    
    14Item 2 Properties
    
    
    15Item 3 Legal Proceedings
    
    
    15Item 4 Removed and Reserved
    
    
    15PART IIItem 5 Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    16Item 6 Selected Financial Data
    
    
    17Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 7A Quantitative and Qualitative Disclosures about Market Risk
    
    
    40Item 8 Financial Statements and Supplementary Data
    
    
    41Item 9 Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    79Item 9A Controls and Procedures
    
    
    79Item 9B Other Information
    
    
    80PART IIIItem 10 Directors, Executive Officers and Corporate Governance
    
    
    81Item 11 Executive Compensation
    
    
    81Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    81Item 13 Certain Relationships and Related Transactions, and Director Independence
    
    
    81Item 14 Principal Accountant Fees and Services
    
    
    81PART IVItem 15 Exhibits, Financial Statement Schedules
    
    
    82EX-21EX-23EX-31.1EX-31.2EX-32
   2




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##### Table of Contents



PART I
 FORWARD-LOOKING STATEMENTS
   
    
    Current economic crisis affecting the financial industry;
    
    Volatility in interest rates and shape of the yield curve;
    
    Increased credit risk and risks associated with the real estate market;
    
    Operating, legal and regulatory risk;
    
    Economic, political and competitive forces affecting the Companys business; and
    
    That managements analysis of these risks and factors could be incorrect, and/or that
the strategies developed to address them could be unsuccessful.
  
 ITEM 1.
    
    BUSINESS
 General
    3




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Business of the Company
   
    
    To provide local businesses, professionals, and individuals with banking services
responsive to and determined by the local market;
 
    
    Direct access to Bank management by members of the community, whether during or after
business hours;
 
    
    To attract deposits and loans by competitive pricing; and
 
    
    To provide a reasonable return to shareholders on capital invested.
 Market Area
   4




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Extended Hours
  Competition
   Concentration
  Employees
   5




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Supervision and Regulation
 General
   Bank Holding Company Act
     6




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Supervision and Regulation of the Bank
   Securities and Exchange Commission
  Monetary Policy
  Deposit Insurance
   7




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8




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Dividend Restrictions
   Capital Adequacy Guidelines
     9




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Prompt Corrective Action
    Community Reinvestment Act
   10




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USA Patriot Act
   Sarbanes-Oxley Act of 2002
   Dodd-Frank Act
    
    
    Applies the same leverage and risk-based capital requirements to most bank holding
companies (BHCs) that apply to insured depository institutions;
    
    Requires the FDIC to make its capital requirements for insured depository institutions
countercyclical, so that capital requirements increase in times of economic expansion and
decrease in times of economic contractions;
    
    Requires BHCs and banks to be both well-capitalized and well-managed in order to
acquire banks located outside their home state and requires any BHC electing to be treated
as a financial holding company to be both well-managed and well-capitalized;
  11




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
    
    Changes the assessment base for federal deposit insurance from the amount of insured
deposits held by the depository institution to the depository institutions average total
consolidated assets less tangible equity, eliminates the ceiling on the size of the DIF
and increases the floor of the size of the DIF;
    
    Makes permanent the $250,000 limit for federal deposit insurance and increases the cash
limit of Securities Investor Protection Corporation protection from $100,000 to $250,000
and provides unlimited federal deposit insurance until January 1, 2013 for
noninterest-bearing demand transaction accounts at all insured depository institutions;
    
    Eliminates all remaining restrictions on interstate banking by authorizing national and
state banks to establish de novo branches in any state that would permit a bank chartered
in that state to open a branch at that location; and
    
    Repeals the federal prohibitions on the payment of interest on demand deposits,
effective July 21, 2011, thereby permitting depository institutions to pay interest on
business transaction and other accounts.
        
    
    A minimum ratio of common equity to risk-weighted assets reaching 4.5%, plus an
additional 2.5% as a capital conservation buffer, by 2019 after a phase-in period.
    
    A minimum ratio of Tier 1 capital to risk-weighted assets reaching 6.0% by 2019 after a
phase-in period.
    
    A minimum ratio of total capital to risk-weighted assets, plus the additional 2.5%
capital conservation buffer, reaching 10.5% by 2019 after a phase-in period.
    
    An additional countercyclical capital buffer to be imposed by applicable national
banking regulators periodically at their discretion, with advance notice.
    
    Restrictions on capital distributions and discretionary bonuses applicable when capital
ratios fall within the buffer zone.
    
    Deduction from common equity of deferred tax assets that depend on future profitability
to be realized.
    
    Increased capital requirements for counterparty credit risk relating to OTC
derivatives, repos and securities financing activities.
  12




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
    
    For capital instruments issued on or after January 13, 2013 (other than common equity),
a loss-absorbency requirement such that the instrument must be written off or converted to
common equity if a trigger event occurs, either pursuant to applicable law or at the
direction of the banking regulator. A trigger event is an event under which the banking
entity would become nonviable without the write-off or conversion, or without an injection
of capital from the public sector. The issuer must maintain authorization to issue the
requisite shares of common equity if conversion were required.
  Federal Home Loan Bank Membership
   Other Laws and Regulations
    Future Legislation and Regulation
   13




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ITEM 1A.
    
    RISK FACTORS
  
 ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
   14




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ITEM 2.
    
    PROPERTIES
  Leased
    
    Date of LeaseLocation
    
    or Owned
    
    Expiration1365 Palisade Avenue
    
    Owned
    
    N/AFort Lee, NJ204 Main Street
    
    Leased
    
    March, 2015Fort Lee, NJ401 Hackensack Avenue
    
    Leased
    
    August, 2020Hackensack, NJ 07601458 West Street
    
    Leased
    
    December, 2025Fort Lee, NJ 07024320 Haworth Avenue
    
    Owned
    
    N/AHaworth, NJ 076414 Park Street
Harrington Park, NJ, 07640
    
    Leased
    
    January, 2014
  
 ITEM 3.
    
    LEGAL PROCEEDINGS
  
 ITEM 4.
    
    (REMOVED AND RESERVED)
  15




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PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
 Market Information
   High
    
    
    LowYear Ended December 31, 2010Fourth quarter
    
    $
    12.63
    
    
    $
    10.00Third quarter
    
    
    13.64
    
    
    
    10.65Second quarter
    
    
    13.63
    
    
    
    10.76First quarter
    
    
    16.33
    
    
    
    9.31Year Ended December 31, 2009Fourth quarter
    
    $
    10.97
    
    
    $
    8.49Third quarter
    
    
    11.50
    
    
    
    9.25Second quarter
    
    
    10.90
    
    
    
    9.25First quarter
    
    
    11.25
    
    
    
    8.52
 Holders
  Dividends
     16




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Securities Authorized for Issuance under Equity Compensation Plans
  Number of
    
    
    
    
    
    
    Number ofshares of
    
    
    
    
    
    
    shares ofcommon stock
    
    
    Weighted-
    
    
    common stockto be issued
    
    
    average exercise
    
    
    remainingupon exercise of
    
    
    price of
    
    
    available foroutstanding
    
    
    outstanding
    
    
    future issuanceoptions,
    
    
    options,
    
    
    under equitywarrants and
    
    
    warrants and
    
    
    compensationPlan Category
    
    rights
    
    
    rights
    
    
    plansEquity Compensation
Plans approved by
security holders:2006 Stock Option Plan
    
    
    187,900
    
    
    $
    10.26
    
    
    
    30,0842007 Non-Qualified
Stock Option Plan for
Directors
    
    
    414,668
    
    
    $
    11.50
    
    
    
    43,334Equity compensation
plans not approved by
security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    602,568
    
    
    $
    11.11
    
    
    
    64,018
 
 ITEM 6.
    
    SELECTED FINANCIAL DATA
   17




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ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
   OVERVIEW AND STRATEGY
    
    
    To provide local businesses, professionals, and individuals with banking services
responsive to and determined by the local market;
 
    
    Direct access to Bank management by members of the community, whether during or after
business hours;
 
    
    To attract deposits and loans by competitive pricing; and
   18




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Critical Accounting Policies and Judgments
  Allowance for Loan Losses
    Deferred Tax Assets and Valuation Allowance
   19




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Impairment of Assets
    20




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RESULTS OF OPERATIONS   2010 versus 2009
  NET INCOME
   Analysis of Net Interest Income
  Average Balance Sheets
   21




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For the years ended December 31,  (dollars in thousands)
 2010
    
    
    2009
    
    
    2008Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yield/Cost
    
    
    Balance
    
    
    Interest
    
    
    Yield/Cost
    
    
    Balance
    
    
    Interest
    
    
    Yield/CostASSETS:Interest-Earning Assets:Loans
    
    $
    279,500
    
    
    $
    16,233
    
    
    
    5.81
    %
    
    $
    251,695
    
    
    $
    14,630
    
    
    
    5.81
    %
    
    $
    209,498
    
    
    $
    12,977
    
    
    
    6.19
    %Securities
    
    
    30,719
    
    
    
    729
    
    
    
    2.37
    
    
    
    26,800
    
    
    
    783
    
    
    
    2.90
    
    
    
    17,147
    
    
    
    708
    
    
    
    4.13Federal Funds Sold
    
    
    3,577
    
    
    
    12
    
    
    
    0.34
    
    
    
    5,369
    
    
    
    7
    
    
    
    0.15
    
    
    
    24,185
    
    
    
    725
    
    
    
    3.00Interest-earning cash accounts*
    
    
    18,324
    
    
    
    39
    
    
    
    0.21
    
    
    
    23,062
    
    
    
    75
    
    
    
    0.33
    
    
    
    9,091
    
    
    
    45
    
    
    
    0.49Total Interest-earning Assets
    
    
    332,120
    
    
    
    17,013
    
    
    
    5.12
    %
    
    
    306,926
    
    
    
    15,496
    
    
    
    5.05
    %
    
    
    259,921
    
    
    
    14,455
    
    
    
    5.56
    %Non-interest earning Assets
    
    
    16,146
    
    
    
    
    
    
    
    
    
    
    
    13,842
    
    
    
    
    
    
    
    
    
    
    
    12,074Allowance for Loan Losses
    
    
    (3,269
    )
    
    
    
    
    
    
    
    
    
    
    (2,547
    )
    
    
    
    
    
    
    
    
    
    
    (2,135
    )TOTAL ASSETS
    
    $
    344,997
    
    
    
    
    
    
    
    
    
    
    $
    318,221
    
    
    
    
    
    
    
    
    
    
    $
    269,860LIABILITIES AND STOCKHOLDERS EQUITYInterest-Bearing Liabilities:Demand Deposits
    
    $
    8,558
    
    
    
    23
    
    
    
    0.27
    %
    
    $
    6,312
    
    
    
    11
    
    
    
    0.18
    %
    
    $
    5,632
    
    
    $
    63
    
    
    
    1.12
    %Savings Deposits
    
    
    4,753
    
    
    
    18
    
    
    
    0.38
    
    
    
    3,593
    
    
    
    12
    
    
    
    0.30
    
    
    
    3,016
    
    
    
    8
    
    
    
    0.26Money Market Deposits
    
    
    39,279
    
    
    
    129
    
    
    
    0.33
    
    
    
    46,757
    
    
    
    228
    
    
    
    0.49
    
    
    
    53,831
    
    
    
    1,189
    
    
    
    2.21Time Deposits
    
    
    207,723
    
    
    
    4,166
    
    
    
    2.01
    
    
    
    178,749
    
    
    
    5,681
    
    
    
    3.18
    
    
    
    133,266
    
    
    
    6,273
    
    
    
    4.71Short Term Borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    378
    
    
    
    11
    
    
    
    2.91Total Interest-Bearing Liabilities
    
    
    260,313
    
    
    
    4,336
    
    
    
    1.67
    %
    
    
    235,411
    
    
    
    5,932
    
    
    
    2.52
    %
    
    
    196,123
    
    
    
    7,544
    
    
    
    3.85
    %Non-Interest Bearing Liabilities:Demand Deposits
    
    
    32,113
    
    
    
    
    
    
    
    
    
    
    
    32,271
    
    
    
    
    
    
    
    
    
    
    
    25,361Other Liabilities
    
    
    1,799
    
    
    
    
    
    
    
    
    
    
    
    1,495
    
    
    
    
    
    
    
    
    
    
    
    1,541Total Non-Interest Bearing Liabilities
    
    
    33,912
    
    
    
    
    
    
    
    
    
    
    
    33,766
    
    
    
    
    
    
    
    
    
    
    
    26,902Stockholders Equity
    
    
    50,772
    
    
    
    
    
    
    
    
    
    
    
    49,044
    
    
    
    
    
    
    
    
    
    
    
    46,835TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    344,997
    
    
    
    
    
    
    
    
    
    
    $
    318,221
    
    
    
    
    
    
    
    
    
    
    $
    269,860Net Interest Income
(Tax Equivalent Basis)
    
    
    
    
    
    $
    12,677
    
    
    
    
    
    
    
    
    
    
    $
    9,564
    
    
    
    
    
    
    
    
    
    
    $
    6,911Tax Equivalent Basis 
Adjustment
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    0Net Interest Income
    
    
    
    
    
    $
    12,675
    
    
    
    
    
    
    
    
    
    
    $
    9,559
    
    
    
    
    
    
    
    
    
    
    $
    6,911Net Interest Rate Spread
    
    
    
    
    
    
    
    
    
    
    3.45
    %
    
    
    
    
    
    
    
    
    
    
    2.53
    %
    
    
    
    
    
    
    
    
    
    
    1.71
    %Net Interest Margin
    
    
    
    
    
    
    
    
    
    
    3.82
    %
    
    
    
    
    
    
    
    
    
    
    3.11
    %
    
    
    
    
    
    
    
    
    
    
    2.66
    %Ratio of Interest-Earning Assets to
Interest-Bearing Liabilities
    
    
    1.28
    
    
    
    
    
    
    
    
    
    
    
    1.30
    
    
    
    
    
    
    
    
    
    
    
    1.33
 *
    
    Interest-earning cash accounts includes funds held at the FRB as the FRB began paying
interest on deposits during the fourth quarter of 2009.
  22




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Rate/Volume Analysis
  Year ended December 31,
    
    
    Year ended December 31,2010 versus 2009
    
    
    2009 versus 2008Increase (Decrease)
    
    
    Increase (Decrease)Due to Change in Average
    
    
    Due to Change in AverageVolume
    
    
    Rate
    
    
    Net
    
    
    Volume
    
    
    Rate
    
    
    NetInterest income:Loans
    
    $
    1,603
    
    
    $
    
    
    
    $
    1,603
    
    
    $
    2,378
    
    
    $
    (725
    )
    
    $
    1,653Securities
    
    
    204
    
    
    
    (255
    )
    
    
    (51
    )
    
    
    149
    
    
    
    (79
    )
    
    
    70Federal funds sold
    
    
    (1
    )
    
    
    5
    
    
    
    4
    
    
    
    (323
    )
    
    
    (394
    )
    
    
    (717
    )Interest bearing deposits in banks
    
    
    (13
    )
    
    
    (23
    )
    
    
    (36
    )
    
    
    38
    
    
    
    (8
    )
    
    
    30Total interest income
    
    
    1,793
    
    
    
    (273
    )
    
    
    1,520
    
    
    
    2,242
    
    
    
    (1,206
    )
    
    
    1,036Interest expense:Demand deposits
    
    
    5
    
    
    
    7
    
    
    
    12
    
    
    
    9
    
    
    
    (61
    )
    
    
    (52
    )Savings deposits
    
    
    4
    
    
    
    2
    
    
    
    6
    
    
    
    2
    
    
    
    2
    
    
    
    4Money market deposits
    
    
    (33
    )
    
    
    (66
    )
    
    
    (99
    )
    
    
    (139
    )
    
    
    (822
    )
    
    
    (961
    )Time deposits
    
    
    745
    
    
    
    (2,260
    )
    
    
    (1,515
    )
    
    
    1,786
    
    
    
    (2,378
    )
    
    
    (592
    )Short-term borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )
    
    
    (12
    )Total interest expense
    
    
    721
    
    
    
    (2,317
    )
    
    
    (1,596
    )
    
    
    1,652
    
    
    
    (3,265
    )
    
    
    (1,613
    )Change in net interest income
    
    $
    1,072
    
    
    $
    2,044
    
    
    $
    3,116
    
    
    $
    590
    
    
    $
    2,059
    
    
    $
    2,649
  23




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PROVISION FOR LOAN LOSSES
  NON-INTEREST INCOME
  NON-INTEREST EXPENSES
  INCOME TAX EXPENSE
   24




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FINANCIAL CONDITION
  LOANS
     25




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December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Real Estate
    
    $
    194,605
    
    
    $
    177,031
    
    
    $
    158,950
    
    
    $
    123,979
    
    
    $
    50,786Commercial
    
    
    46,073
    
    
    
    36,036
    
    
    
    33,205
    
    
    
    26,642
    
    
    
    13,716Credit Lines
    
    
    60,378
    
    
    
    49,969
    
    
    
    41,186
    
    
    
    31,566
    
    
    
    14,582Consumer
    
    
    1,047
    
    
    
    895
    
    
    
    1,505
    
    
    
    1,273
    
    
    
    1,554Total Loans
    
    $
    302,103
    
    
    $
    263,931
    
    
    $
    234,846
    
    
    $
    183,460
    
    
    $
    80,638
  Within
    
    
    1 to 5
    
    
    After 5One Year
    
    
    Years
    
    
    Years
    
    
    TotalLoans with Fixed RateCommercial
    
    $
    35,909
    
    
    $
    3,244
    
    
    $
    3,260
    
    
    $
    42,413Real Estate
    
    
    35,507
    
    
    
    19,058
    
    
    
    133,938
    
    
    
    188,503Credit Lines
    
    
    714
    
    
    
    1,018
    
    
    
    7,545
    
    
    
    9,277Consumer
    
    
    348
    
    
    
    699
    
    
    
    
    
    
    
    1,047Loans with Adjustable RateCommercial
    
    $
    3,463
    
    
    $
    197
    
    
    $
    
    
    
    $
    3,660Real Estate
    
    
    3,385
    
    
    
    1,124
    
    
    
    1,593
    
    
    
    6,102Credit Lines
    
    
    51,101
    
    
    
    
    
    
    
    
    
    
    
    51,101Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 LOAN QUALITY
     26




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ALLOWANCE FOR LOAN LOSSES
   27




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2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Balance, January 1
    
    $
    2,792
    
    
    $
    2,371
    
    
    $
    1,912
    
    
    $
    866
    
    
    $
    Charge-offs:Residential mortgages
    
    
    (160
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer Loans
    
    
    (219
    )
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    Recoveries:Consumer loans
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Net charge-offs
    
    
    (378
    )
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    Provision charged to expense
    
    
    1,335
    
    
    
    424
    
    
    
    459
    
    
    
    1,046
    
    
    
    866Balance, December 31
    
    $
    3,749
    
    
    $
    2,792
    
    
    $
    2,371
    
    
    $
    1,912
    
    
    $
    866Ratio of net charge-offs to average
Outstanding
    
    
    0.14
    %
    
    
    *
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
 *
    
    Less than 0.01%
  28




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##### Table of Contents



The following table sets forth, for each of the Companys major lending areas, the amount and
percentage of the Companys allowance for loan losses attributable to such category, and the
percentage of total loans represented by such category, as of the periods indicated :
 
 2010
    
    
    2009% of
    
    
    
    
    
    
    
    
    
    
    % of% of
    
    
    Total
    
    
    
    
    
    
    % of
    
    
    TotalAmount
    
    
    ALLL
    
    
    Loans
    
    
    Amount
    
    
    ALLL
    
    
    LoansBalance applicable to:Real Estate
    
    $
    2,178
    
    
    
    58.09
    %
    
    
    65.25
    %
    
    $
    2,032
    
    
    
    72.78
    %
    
    
    80.92
    %Commercial
    
    
    780
    
    
    
    20.81
    %
    
    
    23.37
    %
    
    
    213
    
    
    
    7.63
    %
    
    
    8.48
    %Credit Lines
    
    
    358
    
    
    
    9.55
    %
    
    
    10.72
    %
    
    
    249
    
    
    
    8.92
    %
    
    
    9.92
    %Consumer
    
    
    22
    
    
    
    0.59
    %
    
    
    0.66
    %
    
    
    17
    
    
    
    0.61
    %
    
    
    0.68
    %Sub-total
    
    
    3,338
    
    
    
    89.04
    %
    
    
    100.00
    %
    
    
    2,511
    
    
    
    89.94
    %
    
    
    100.00
    %Unallocated Reserves
    
    
    411
    
    
    
    10.96
    %
    
    
    
    
    
    
    281
    
    
    
    10.06
    %TOTAL
    
    $
    3,749
    
    
    
    100.00
    %
    
    
    
    
    
    $
    2,792
    
    
    
    100.00
    %
 2008
    
    
    2007
    
    
    2006% of
    
    
    
    
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    
    
    
    
    % of% of
    
    
    Total
    
    
    
    
    
    
    % of
    
    
    Total
    
    
    
    
    
    
    % of
    
    
    TotalAmount
    
    
    ALLL
    
    
    Loans
    
    
    Amount
    
    
    ALLL
    
    
    Loans
    
    
    Amount
    
    
    ALLL
    
    
    LoansBalance applicable to:Real Estate
    
    $
    1,774
    
    
    
    74.82
    %
    
    
    78.85
    %
    
    $
    1,373
    
    
    
    71.81
    %
    
    
    67.23
    %
    
    $
    653
    
    
    
    75.41
    %
    
    
    62.98
    %Commercial
    
    
    244
    
    
    
    10.29
    %
    
    
    10.84
    %
    
    
    241
    
    
    
    12.61
    %
    
    
    14.75
    %
    
    
    92
    
    
    
    10.62
    %
    
    
    17.01
    %Credit Lines
    
    
    205
    
    
    
    8.65
    %
    
    
    9.11
    %
    
    
    152
    
    
    
    7.95
    %
    
    
    15.34
    %
    
    
    77
    
    
    
    8.89
    %
    
    
    18.08
    %Consumer
    
    
    27
    
    
    
    1.14
    %
    
    
    1.20
    %
    
    
    5
    
    
    
    0.26
    %
    
    
    2.68
    %
    
    
    2
    
    
    
    0.23
    %
    
    
    1.93
    %Sub-total
    
    
    2,250
    
    
    
    94.90
    %
    
    
    100.00
    %
    
    
    1,771
    
    
    
    92.63
    %
    
    
    100.00
    %
    
    
    824
    
    
    
    95.15
    %
    
    
    100.00
    %Unallocated Reserves
    
    
    121
    
    
    
    5.10
    %
    
    
    
    
    
    
    141
    
    
    
    7.37
    %
    
    
    
    
    
    
    42
    
    
    
    4.85
    %TOTAL
    
    $
    2,371
    
    
    
    100.00
    %
    
    
    
    
    
    $
    1,912
    
    
    
    100.00
    %
    
    
    
    
    
    $
    866
    
    
    
    100.00
    %
   29




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##### Table of Contents



INVESTMENT SECURITIES
     2010
    
    
    2009
    
    
    2008Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    ValueAvailable for saleU.S. Agency Obligations
    
    $
    18,994
    
    
    $
    18,899
    
    
    $
    19,000
    
    
    $
    19,111
    
    
    $
    17,641
    
    
    $
    17,731U.S. Treasury obligations
    
    
    9,029
    
    
    
    9,024
    
    
    
    2,005
    
    
    
    2,000
    
    
    
    
    
    
    
    Total available for sale
    
    
    28,023
    
    
    
    27,923
    
    
    
    21,005
    
    
    
    21,111
    
    
    
    17,641
    
    
    
    17,731Held to MaturityObligations of states and
political subdivisioins
    
    
    3,728
    
    
    
    3,724
    
    
    
    4,296
    
    
    
    4,297
    
    
    
    
    
    
    
    Total held to maturity
    
    
    3,728
    
    
    
    3,724
    
    
    
    4,296
    
    
    
    4,297
    
    
    
    
    
    
    
    Total Investment Securities
    
    $
    31,751
    
    
    $
    31,647
    
    
    $
    25,301
    
    
    $
    25,408
    
    
    $
    17,641
    
    
    $
    17,731
  30




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##### Table of Contents



Securities Held to Maturity
    
    
    Securities Available for Sale
    
    
    WeightedAmortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair
    
    
    AverageCost
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Yield (1)Within 1 yearObligations of states and political subdivisions
    
    $
    3,728
    
    
    $
    3,724
    
    
    $
    
    
    
    $
    
    
    
    
    0.80
    %U.S. Treasury obligations
    
    
    
    
    
    
    
    
    
    
    999
    
    
    
    999
    
    
    
    0.22
    %U.S. Agency obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,728
    
    
    
    3,724
    
    
    
    999
    
    
    
    999
    
    
    
    0.68
    %1 to 5 yearsU.S. Treasury obligations
    
    
    
    
    
    
    
    
    
    
    8,031
    
    
    
    8,026
    
    
    
    1.42
    %U.S. Agency obligations
    
    
    
    
    
    
    
    
    
    
    10,993
    
    
    
    11,054
    
    
    
    2.58
    %
    
    
    
    
    
    
    
    19,024
    
    
    
    19,080
    
    
    
    2.09
    %5-10 yearsU.S. Agency obligations
    
    
    
    
    
    
    
    
    
    
    8,000
    
    
    
    7,844
    
    
    
    3.08
    %Total
    
    $
    3,728
    
    
    $
    3,724
    
    
    $
    28,023
    
    
    $
    27,923
    
    
    
    1.83
    %
 
 Securities Held to Maturity
    
    
    Securities Available for Sale
    
    
    WeightedAmortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair
    
    
    AverageCost
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Yield (1)Within 1 yearObligations of states and political subdivisions
    
    $
    4,296
    
    
    $
    4,297
    
    
    $
    
    
    
    $
    
    
    
    
    2.00
    %1 to 5 yearsU.S. Treasury obligations
    
    
    
    
    
    
    
    
    
    
    2,005
    
    
    
    2,000
    
    
    
    2.32
    %U.S. Agency obligations
    
    
    
    
    
    
    
    
    
    
    17,000
    
    
    
    17,115
    
    
    
    2.43
    %
    
    
    
    
    
    
    
    19,005
    
    
    
    19,115
    
    
    
    2.42
    %5-10 yearsU.S. Agency obligations
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    1,996
    
    
    
    3.25
    %Total
    
    $
    4,296
    
    
    $
    4,297
    
    
    $
    21,005
    
    
    $
    21,111
    
    
    
    2.42
    %
 (1)
    
    Yields have been computed on a fully tax-equivalent basis, assuming a blended tax rate of 41%
in 2010 and 2009.
  31




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DEPOSITS
   32




---



##### Table of Contents



2010
    
    
    2009
    
    
    2008Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageAmount
    
    
    Yield/Rate
    
    
    Amount
    
    
    Yield/Rate
    
    
    Amount
    
    
    Yield/RateNon-interest Bearing Demand
    
    $
    33,244
    
    
    
    
    
    
    $
    36,687
    
    
    
    
    
    
    $
    28,187
    
    
    
    Interest Bearing Demand
    
    
    50,827
    
    
    
    0.33
    %
    
    
    45,899
    
    
    
    0.45
    %
    
    
    57,645
    
    
    
    2.11
    %Savings
    
    
    6,112
    
    
    
    0.46
    %
    
    
    4,473
    
    
    
    0.30
    %
    
    
    2,644
    
    
    
    0.26
    %Time Deposits
    
    
    228,238
    
    
    
    1.82
    %
    
    
    180,084
    
    
    
    3.18
    %
    
    
    165,530
    
    
    
    4.39
    %$
    318,421
    
    
    
    
    
    
    $
    267,143
    
    
    
    
    
    
    $
    254,006
  Three months or less
    
    $
    52,970Over three months through six months
    
    
    41,074Over six months through twelve months
    
    
    50,307Over one year through three years
    
    
    23,814Over three years
    
    
    19,282Total
    
    $
    187,447
 RETURN ON EQUITY AND ASSETS
  At or for the year ended December 31,Selected Financial Ratios:
    
    2010
    
    
    2009
    
    
    2008Return on Average Assets (ROA)
    
    
    0.62
    %
    
    
    0.40
    %
    
    
    0.20
    %Return on Average Equity (ROE)
    
    
    4.24
    %
    
    
    2.56
    %
    
    
    1.13
    %Equity to Total Assets at Year-End
    
    
    13.54
    %
    
    
    15.50
    %
    
    
    16.24
    %Dividend Payout Ratio
    
    
    79.87
    %
    
    
    124.24
    %
    
    
    N/A
 LIQUIDITY
   33




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##### Table of Contents



INTEREST RATE SENSITIVITY ANALYSIS
    34




---



##### Table of Contents



0-3
    
    
    0-6
    
    
    0-1
    
    
    0-5
    
    
    AllMonths
    
    
    Months
    
    
    Year
    
    
    Years
    
    
    Others
    
    
    TOTALSecurities, excluding
equity securities
    
    
    2,400
    
    
    
    2,400
    
    
    
    4,727
    
    
    
    23,807
    
    
    
    7,844
    
    
    
    31,651Loans:Commercial
    
    
    37,840
    
    
    
    38,382
    
    
    
    41,077
    
    
    
    44,167
    
    
    
    1,906
    
    
    
    46,073Real Estate
    
    
    29,376
    
    
    
    38,592
    
    
    
    52,243
    
    
    
    133,684
    
    
    
    60,921
    
    
    
    194,605Credit Lines
    
    
    52,566
    
    
    
    52,566
    
    
    
    52,900
    
    
    
    53,922
    
    
    
    6,456
    
    
    
    60,378Consumer
    
    
    141
    
    
    
    163
    
    
    
    356
    
    
    
    1,047
    
    
    
    
    
    
    
    1,047Federal Funds Sold and Interest Bearing Deposits
in Banks
    
    
    22,598
    
    
    
    22,598
    
    
    
    22,598
    
    
    
    22,598
    
    
    
    
    
    
    
    22,598Other Assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,903
    
    
    
    13,903TOTAL ASSETS
    
    
    144,921
    
    
    
    154,701
    
    
    
    173,901
    
    
    
    279,225
    
    
    
    91,030
    
    
    
    370,255Transaction / DemandAccounts
    
    
    9,471
    
    
    
    9,471
    
    
    
    9,471
    
    
    
    9,471
    
    
    
    
    
    
    
    9,471Money Market
    
    
    41,356
    
    
    
    41,356
    
    
    
    41,356
    
    
    
    41,356
    
    
    
    
    
    
    
    41,356Savings Time Deposits
    
    
    6,112
    
    
    
    6,112
    
    
    
    6,112
    
    
    
    6,112
    
    
    
    
    
    
    
    6,112Tiume Deposits
    
    
    64,933
    
    
    
    114,959
    
    
    
    179,470
    
    
    
    228,238
    
    
    
    
    
    
    
    228,238Other Liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,940
    
    
    
    34,940Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,138
    
    
    
    50,138TOTAL LIABILITIES AND
EQUITY
    
    
    121,872
    
    
    
    171,898
    
    
    
    236,409
    
    
    
    285,177
    
    
    
    85,078
    
    
    
    370,255Dollar Gap
    
    
    23,049
    
    
    
    (17,197
    )
    
    
    (62,508
    )
    
    
    (5,952
    )Gap / Total Assets
    
    
    6.23
    %
    
    
    -4.64
    %
    
    
    -16.88
    %
    
    
    -1.61
    %Tartet Gap Range
    
    
    +/- 35.00
    %
    
    
    +/- 30.00
    %
    
    
    +/-25.00
    %
    
    
    +/-25.00
    %RSA / RSL
    
    
    118.91
    %
    
    
    90.00
    %
    
    
    73.56
    %
    
    
    97.91
    %
 
  35




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##### Table of Contents



MARKET RISK
      36




---



##### Table of Contents



Avg.Int.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    There-
    
    
    
    
    
    
    FairRate
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    After
    
    
    Total
    
    
    ValueInterest Rate Sensitive Assets:Loans
    
    
    5.81
    %
    
    $
    146,577
    
    
    $
    20,677
    
    
    $
    18,968
    
    
    $
    25,683
    
    
    $
    20,915
    
    
    $
    69,283
    
    
    $
    302,103
    
    
    $
    305,671Securities net of equity securities
    
    
    2.37
    %
    
    $
    4,727
    
    
    $
    2,014
    
    
    $
    2,083
    
    
    $
    3,990
    
    
    $
    10,993
    
    
    $
    7,844
    
    
    $
    31,651
    
    
    $
    31,647Fed Funds Sold
    
    
    0.34
    %
    
    $
    465
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    465
    
    
    $
    465Interest-earning Cash
    
    
    0.21
    %
    
    $
    22,134
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    22,134
    
    
    $
    22,134Interest Rate Sensitive Liabilities:Demand Deposits
    
    
    0.27
    %
    
    $
    9,471
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    9,471
    
    
    $
    9,471Savings Deposits
    
    
    0.38
    %
    
    $
    6,112
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,112
    
    
    $
    6,112Money Market Deposits
    
    
    0.33
    %
    
    $
    41,356
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    41,356
    
    
    $
    41,356Time Deposits
    
    
    2.01
    %
    
    $
    179,470
    
    
    $
    22,228
    
    
    $
    5,520
    
    
    $
    8,565
    
    
    $
    12,455
    
    
    
    
    
    
    $
    228,238
    
    
    $
    229,291
    37




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##### Table of Contents



CAPITAL
     Minimum Requirementsto be
    
    
    Minimum RequirementsAdequately
    
    
    to beDecember 31, 2010
    
    
    Capitalized
    
    
    Well CapitalizedRisk-Based Capital :Tier 1 Capital Ratio
    
    
    16.79
    %
    
    
    4.00
    %
    
    
    6.00
    %Total Capital Ratio
    
    
    18.04
    %
    
    
    8.00
    %
    
    
    10.00
    %Leverage Ratio
    
    
    13.85
    %
    
    
    4.00
    %
    
    
    5.00
    %
    38




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##### Table of Contents



CONTRACTUAL OBLIGATIONS
  Contractual Obligations
 Payment due by PeriodTotalLess than 1
    
    
    1 to 3
    
    
    4 to 5
    
    
    After 5
    
    
    Amountsyear
    
    
    years
    
    
    years
    
    
    years
    
    
    CommittedMinimum annual rental under
non-cancelable operating leases
    
    $
    538
    
    
    $
    1,098
    
    
    $
    832
    
    
    $
    3,040
    
    
    $
    5,508Remaining contractual maturities
of time deposits
    
    
    179,470
    
    
    
    27,748
    
    
    
    21,020
    
    
    
    
    
    
    
    228,238Total Contractual Obligations
    
    $
    180,008
    
    
    $
    28,846
    
    
    $
    21,852
    
    
    $
    3,040
    
    
    $
    233,746
  Commercial real estate, construction, and
land development secured by land
    
    $
    24,327Home equity loans
    
    
    21,535Standby letters of credit and other
    
    
    730$
    46.592
 FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
   39




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##### Table of Contents



IMPACT OF INFLATION AND CHANGING PRICES
  RECENTLY ISSUED ACCOUNTING STANDARDS
  
 ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   40




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##### Table of Contents



ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm
    
    
    42Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    43Consolidated Statements of Income for the years
ended December 31, 2010 and 2009
    
    
    44Consolidated Statements of Stockholders Equity and Comprehensive Income
for the years ended December 31, 2010 and 2009
    
    
    45Consolidated Statements of Cash Flows for the years
ended December 31, 2010 and 2009
    
    
    46Notes to Consolidated Financial Statements
    
    
    47
  41




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Report of Independent Registered Public Accounting Firm
 
     
  42




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##### Table of Contents



CONSOLIDATED BALANCE SHEETS
 
 2010
    
    
    2009AssetsCash and due from banks
    
    $
    605
    
    
    $
    576Interest bearing deposits in banks
    
    
    22,134
    
    
    
    17,055Federal funds sold
    
    
    465
    
    
    
    467Total cash and cash equivalents
    
    
    23,204
    
    
    
    18,098Securities available for sale
    
    
    27,923
    
    
    
    21,111Securities held to maturity (fair value approximates
$3,724 and $4,297 at December 31, 2010 and 2009
respectively)
    
    
    3,728
    
    
    
    4,296Restricted investment in bank stock, at cost
    
    
    491
    
    
    
    419Loans
    
    
    302,103
    
    
    
    263,931Deferred loan fees and costs, net
    
    
    
    
    
    
    13Allowance for loan losses
    
    
    (3,749
    )
    
    
    (2,792
    )Net loans
    
    
    298,354
    
    
    
    261,152Premises and equipment, net
    
    
    9,927
    
    
    
    10,214Accrued interest receivable
    
    
    1,285
    
    
    
    1,173Other real estate owned
    
    
    1,938
    
    
    
    Other assets
    
    
    3,405
    
    
    
    3,145Total assets
    
    $
    370,255
    
    
    $
    319,608Liabilities and Stockholders EquityDeposits:Noninterest-bearing demand deposits
    
    $
    33,244
    
    
    $
    36,687Interest bearing deposits:Savings, money market and time deposits
    
    
    97,730
    
    
    
    85,161Time deposits of $100 or more
    
    
    187,447
    
    
    
    145,295Total deposits
    
    
    318,421
    
    
    
    267,143Accrued expenses and other liabilities
    
    
    1,696
    
    
    
    2,930Total liabilities
    
    
    320,117
    
    
    
    270,073Commitments and contingenciesStockholders equity:Common stock, no par value. Authorized 20,000,000
shares; issued and outstanding 5,206,932 shares at
December 31, 2010; and December 31, 2009
    
    
    49,390
    
    
    
    49,096Retained Earnings
    
    
    807
    
    
    
    373Accumulated other comprehensive (loss) income
    
    
    (59
    )
    
    
    66Total stockholders equity
    
    
    50,138
    
    
    
    49,535Total liabilities and stockholders equity
    
    $
    370,255
    
    
    $
    319,608
   43




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##### Table of Contents



CONSOLIDATED STATEMENTS OF INCOME
 
 2010
    
    
    2009Interest income:Loans, including fees
    
    $
    16,233
    
    
    $
    14,630Securities
    
    
    727
    
    
    
    779Interest-earning deposits in banks
    
    
    39
    
    
    
    75Federal funds sold
    
    
    12
    
    
    
    7Total interest income
    
    
    17,011
    
    
    
    15,491Interest expense:Savings and money markets
    
    
    170
    
    
    
    251Time deposits
    
    
    4,166
    
    
    
    5,681Total interest expense
    
    
    4,336
    
    
    
    5,932Net interest income
    
    
    12,675
    
    
    
    9,559Provision for loan losses
    
    
    1,335
    
    
    
    424Net interest income after provision for loan losses
    
    
    11,340
    
    
    
    9,135Non interest incomeFees and service charges on deposit accounts
    
    
    185
    
    
    
    173Fees earned from mortgage referrals
    
    
    21
    
    
    
    10Gains on sales of securities
    
    
    127
    
    
    
    Total non interest income
    
    
    333
    
    
    
    183Non interest expenseSalaries and employee benefits
    
    
    3,946
    
    
    
    3,785Occupancy and equipment expense
    
    
    1,487
    
    
    
    1,397FDIC and state assessments
    
    
    524
    
    
    
    545Professional fees
    
    
    380
    
    
    
    275Data processing
    
    
    463
    
    
    
    411Other real estate owned related expenses
    
    
    387
    
    
    
    Other operating expenses
    
    
    863
    
    
    
    770Total non interest expenses
    
    
    8,050
    
    
    
    7,183Income before income taxes
    
    
    3,623
    
    
    
    2,135Income tax expense
    
    
    1,472
    
    
    
    878Net income
    
    $
    2,151
    
    
    $
    1,257Earnings per share:Basic
    
    $
    0.41
    
    
    $
    0.25Diluted
    
    $
    0.41
    
    
    $
    0.25
   44




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##### Table of Contents



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
 Years ended December 31, 2010 and 2009
(Dollars in Thousands)
 AccumulatedOtherCommon
    
    
    Retained
    
    
    ComprehensiveStock
    
    
    Earnings
    
    
    (Loss) Income
    
    
    TotalBalance at January 1, 2009
    
    $
    47,133
    
    
    $
    678
    
    
    $
    53
    
    
    $
    47,864Exercise of warrants (139,651 shares)
    
    
    1,524
    
    
    
    
    
    
    
    
    
    
    
    1,524Exercise of stock options (2,000 shares)
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    23Recognition of stock option expense
    
    
    416
    
    
    
    
    
    
    
    
    
    
    
    416Dividends on common stock
    
    
    
    
    
    
    (1,562
    )
    
    
    
    
    
    
    (1,562
    )Comprehensive Income:Net income
    
    
    
    
    
    
    1,257
    
    
    
    
    
    
    
    1,257Unrealized losses on securities available for sale
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    13Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,270Balance at December 31, 2009
    
    
    49,096
    
    
    
    373
    
    
    
    66
    
    
    
    49,535Recognition of stock option expense
    
    
    294
    
    
    
    
    
    
    
    
    
    
    
    294Dividends on common stock
    
    
    
    
    
    
    (1,717
    )
    
    
    
    
    
    
    (1,717
    )Comprehensive Income:Net income
    
    
    
    
    
    
    2,151
    
    
    
    
    
    
    
    2,151Unrealized losses on securities available for sale
    
    
    
    
    
    
    
    
    
    
    (125
    )
    
    
    (125
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,026Balance at December 31, 2010
    
    $
    49,390
    
    
    $
    807
    
    
    $
    (59
    )
    
    $
    50,138
   45




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##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 2010
    
    
    2009Cash Flows from operating activities:Net Income
    
    $
    2,151
    
    
    $
    1,257Adjustments to reconcile net income to net cash provided by
Operating activities:Provision for loan losses
    
    
    1,335
    
    
    
    424Deferred tax benefit
    
    
    (444
    )
    
    
    (283
    )Depreciation and amortization
    
    
    430
    
    
    
    425Recognition of stock option expense
    
    
    294
    
    
    
    416Gains on sale of securities
    
    
    (127
    )
    
    
    Changes in operating assets and liabilities:Increase in accrued interest receivable
    
    
    (112
    )
    
    
    (326
    )Decrease (increase) in other assets
    
    
    265
    
    
    
    (1,005
    )(Decrease) increase in other liabilities
    
    
    328
    
    
    
    (13
    )Net cash provided by operating activities
    
    
    4,120
    
    
    
    895Cash flows from investing activities:Purchases of securities available for sale
    
    
    (38,074
    )
    
    
    (34,005
    )Purchases of securities held to maturity
    
    
    (3,728
    )
    
    
    (4,296
    )Proceeds from maturities of securities held to maturity
    
    
    4,296
    
    
    
    Proceeds from called or matured securities available for sale
    
    
    25,014
    
    
    
    30,642Proceeds from sales of securities available for sale
    
    
    6,169
    
    
    
    Purchase of restricted investment in bank stock
    
    
    (72
    )
    
    
    (73
    )Net increase in loans
    
    
    (40,475
    )
    
    
    (29,021
    )Purchases of premises and equipment
    
    
    (143
    )
    
    
    (355
    )Net cash used by operating activities
    
    
    (47,013
    )
    
    
    (37,108
    )Cash flows from investing activities:Net increase in deposits
    
    
    51,278
    
    
    
    13,137Net increase (decrease) in short term borrowings
    
    
    
    
    
    
    (853
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    23Cash dividends paid
    
    
    (3,279
    )
    
    
    Proceeds from exercise of warrants
    
    
    
    
    
    
    1,524Net cash provided by financing activities
    
    
    47,999
    
    
    
    13,831Increase (decrease) in cash and cash equivalents
    
    
    5,106
    
    
    
    (22,382
    )Cash and cash equivalents at beginning of year
    
    
    18,098
    
    
    
    40,480Cash and cash equivalents at end of year
    
    $
    23,204
    
    
    $
    18,098Supplemental information:Cash paid during the year for:Interest
    
    $
    4,270
    
    
    $
    6,099Taxes
    
    $
    2,544
    
    
    $
    930Supplemental disclosure of non-cash investing and financing transactions:Loans transferred to other real estate owned
    
    $
    1,938
    
    
    
    
   46




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1. Summary of Significant Accounting Policies
 Basis of Financial Statement Presentation
     Nature of Operations
    Use of Estimates
    47




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##### Table of Contents



Subsequent Events
  Significant Group of Concentration of Credit Risk
  Cash and Cash Equivalents
  Interest-bearing deposits in banks
  Regulators
  Securities
     48




---



##### Table of Contents



Premises and Equipment
   49




---



##### Table of Contents



Loans and Allowance for Loan Losses
    .
   1.
    
    Lending policies and procedures, including underwriting standards and collection,
charge-off, and recovery practices.
  50




---



##### Table of Contents



2.
    
    National, regional, and local economic and business conditions as well as the condition of
various market segments, including the value of underlying collateral for collateral dependent
loans.3.
    
    Nature and volume of the portfolio and terms of loans.4.
    
    Experience, ability, and depth of lending management and staff.5.
    
    Volume and severity of past due, classified and nonaccrual loans as well as and other loan
modifications.6.
    
    Quality of the Companys loan review system, and the degree of oversight by the Companys
Board of Directors.7.
    
    Existence and effect of any concentrations of credit and changes in the level of such
concentrations.8.
    
    Effect of external factors, such as competition and legal and regulatory requirements.
          51




---



##### Table of Contents



Other Real Estate Owned
  Stock-Based Compensation
   Income Taxes
   52




---



##### Table of Contents



Earnings Per Share
  Comprehensive Income
  Advertising
  Transfer of Financial Assets
  Restricted Investment in Bank Stock
   Financial Services Depository and Lending
  Restrictions on Cash and Amounts Due From Banks
   53




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##### Table of Contents



NOTE 2. Securities
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairDecember 31, 2010
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueSecurities Held to Maturity:Obligations of states and
Political subdivisions
    
    $
    3,728
    
    
    $
    
    
    
    $
    (4
    )
    
    $
    3,724Securities Available for Sale:U.S. Treasury obligations
    
    
    9,029
    
    
    
    11
    
    
    
    (16
    )
    
    
    9,024Government Sponsored
Enterprise obligations
    
    
    18,994
    
    
    
    110
    
    
    
    (205
    )
    
    
    18,899Total securities available for sale
    
    
    28,023
    
    
    
    121
    
    
    
    (221
    )
    
    
    27,923Total securities
    
    $
    31,751
    
    
    $
    121
    
    
    $
    (225
    )
    
    $
    31,647
 Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairDecember 31, 2009
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueSecurities Held to Maturity:Obligations of states and
Political subdivisions
    
    $
    4,296
    
    
    $
    1
    
    
    $
    
    
    
    $
    4,297Securities Available for Sale:U.S. Treasury obligations
    
    
    2,005
    
    
    
    
    
    
    
    (5
    )
    
    
    2,000Government Sponsored
Enterprise obligations
    
    
    19,000
    
    
    
    127
    
    
    
    (16
    )
    
    
    19,11121,005
    
    
    
    127
    
    
    
    (21
    )
    
    
    21,111Total securities
    
    $
    25,301
    
    
    $
    128
    
    
    $
    (21
    )
    
    $
    25,408
   U. S. Treasury and Government Sponsored Enterprise obligations.
  54




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##### Table of Contents



Obligations of states and Political subdivisions.
  Less than 12 Months
    
    
    More than 12 Months
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDecember 31, 2010
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Treasury obligations
    
    $
    6,007
    
    
    $
    16
    
    
    $
    
    
    
    $
    
    
    
    $
    6,007
    
    
    $
    16Government Sponsored
Enterprise obligations
    
    
    9,788
    
    
    
    205
    
    
    
    
    
    
    
    
    
    
    
    9,788
    
    
    
    205Total securities available for sale
    
    $
    15,795
    
    
    $
    221
    
    
    $
    
    
    
    $
    
    
    
    $
    15,795
    
    
    $
    221
 Less than 12 Months
    
    
    More than 12 Months
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDecember 31, 2009
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Treasury obligations
    
    $
    2,000
    
    
    $
    5
    
    
    $
    
    
    
    $
    
    
    
    $
    2,000
    
    
    $
    5Government Sponsored
Enterprise obligations
    
    
    5,984
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    5,984
    
    
    
    16Total securities available for sale
    
    $
    7,984
    
    
    $
    21
    
    
    $
    
    
    
    $
    
    
    
    $
    7,984
    
    
    $
    21
  Less than 12 Months
    
    
    More than 12 Months
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDecember 31, 2010
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesObligations of states and
political subdivisions
    
    $
    2,396
    
    
    $
    4
    
    
    $
    
    
    
    $
    
    
    
    $
    2,396
    
    
    $
    4Total securities available for sale
    
    $
    2,396
    
    
    $
    4
    
    
    $
    
    
    
    $
    
    
    
    $
    2,396
    
    
    $
    4
   55




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##### Table of Contents



2010Securities Held to Maturity
    
    
    Securities Available for SaleAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    ValueWithin 1 year
    
    $
    3,728
    
    
    $
    3,724
    
    
    $
    999
    
    
    $
    9991 to 5 years
    
    
    
    
    
    
    
    
    
    $
    19,024
    
    
    $
    19,080Over 5 years
    
    
    
    
    
    
    
    
    
    $
    8,000
    
    
    $
    7,844$
    3,728
    
    
    $
    3,724
    
    
    $
    28,023
    
    
    $
    27,923
 NOTE 3. Loans and Allowance for Loan Losses
  December 31,2010
    
    
    2009Commercial real estate
    
    $
    142,198
    
    
    $
    121,504Residential mortgages
    
    
    52,407
    
    
    
    55,527Commercial
    
    
    46,073
    
    
    
    36,036Home Equity
    
    
    60,378
    
    
    
    49,969Consumer
    
    
    1,047
    
    
    
    895$
    302,103
    
    
    $
    263,931
   Years ended December 31,2010
    
    
    2009Balance at beginning of year
    
    $
    2,792
    
    
    $
    2,371Provision charged to expense
    
    
    1,335
    
    
    
    424Loans charged off
    
    
    (379
    )
    
    
    (4
    )Recoveries
    
    
    1
    
    
    
    1Balance at end of year
    
    $
    3,749
    
    
    $
    2,792
  56




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##### Table of Contents



Commercial
    
    
    Residential
    
    
    
    
    
    
    Homereal estate
    
    
    mortgages
    
    
    Commercial
    
    
    equity
    
    
    Consumer
    
    
    Unallocated
    
    
    TotalAllowance for loan losses:Ending balance
    
    $
    1,962
    
    
    $
    366
    
    
    $
    627
    
    
    $
    358
    
    
    $
    22
    
    
    $
    414
    
    
    $
    3,749Ending balance:Individually evaluated for
impairment
    
    
    255
    
    
    
    8
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    288Ending balance:Collectively evaluated for
impairment
    
    
    1,707
    
    
    
    358
    
    
    
    627
    
    
    
    333
    
    
    
    22
    
    
    
    414
    
    
    
    3,461Loan receivables:Ending balance
    
    $
    142,198
    
    
    $
    52,407
    
    
    $
    46,073
    
    
    $
    60,378
    
    
    $
    1,047
    
    
    $
    
    
    
    $
    302,103Individually evaluated for
impairment
    
    
    1,580
    
    
    
    1,087
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    2,692Ending balance:Collectively evaluated for
impairment
    
    
    140,618
    
    
    
    51,320
    
    
    
    46,073
    
    
    
    60,353
    
    
    
    1,047
    
    
    
    
    
    
    
    299,411
    30-59 Days
    
    
    60-89 Days
    
    
    Greater than
    
    
    Total Past
    
    
    
    
    
    
    Total LoansPast Due
    
    
    Past Due
    
    
    90 Days
    
    
    Due
    
    
    Current
    
    
    ReceivablesCommercial real estate
    
    $
    
    
    
    $
    
    
    
    $
    1,580
    
    
    $
    1,580
    
    
    $
    140,618
    
    
    $
    142,198Residential mortgages
    
    
    
    
    
    
    
    
    
    
    554
    
    
    
    554
    
    
    
    51,853
    
    
    
    52,407Commercial
    
    
    
    
    
    
    405
    
    
    
    
    
    
    
    405
    
    
    
    45,668
    
    
    
    46,073Credit Lines
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    25
    
    
    
    60,353
    
    
    
    60,378Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,047
    
    
    
    1,047Total
    
    $
    
    
    
    $
    405
    
    
    $
    2,159
    
    
    $
    2,564
    
    
    $
    299,539
    
    
    $
    302,103
  57




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##### Table of Contents



Commercial
    
    
    Residentialreal estate
    
    
    mortgages
    
    
    Commercial
    
    
    Home equity
    
    
    Consumer
    
    
    TotalPass
    
    $
    136,451
    
    
    $
    50,881
    
    
    $
    45,748
    
    
    $
    60,353
    
    
    $
    1,047
    
    
    $
    294,480Special Mention
    
    
    4,942
    
    
    
    1,526
    
    
    
    325
    
    
    
    
    
    
    
    
    
    
    
    6,793Substandard
    
    
    805
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    805Doubtful
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    25Total
    
    $
    142,198
    
    
    $
    52,407
    
    
    $
    46,073
    
    
    $
    60,378
    
    
    $
    1,047
    
    
    $
    302,103
    2010
    
    
    2009Impaired loans without a valuation allowance
    
    $
    1,329
    
    
    $
    1,181Impaired loans with a valuation allowance
    
    
    1,363
    
    
    
    2,7772,692
    
    
    
    3,958Valuation allowance related to impaired loans
    
    
    288
    
    
    
    99Total non-accrual loans
    
    $
    2,159
    
    
    $
    3,859Total loans past due ninety days or more still accruing
    
    $
    
    
    
    $
    
   58




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##### Table of Contents



Unpaid
    
    
    
    
    
    
    Average
    
    
    InterestRecorded
    
    
    Principal
    
    
    Related
    
    
    Recorded
    
    
    IncomeInvestment
    
    
    Balance
    
    
    Allowance
    
    
    Investment
    
    
    RecognizedImpaired loans with specific reserves:Commercial real estate
    
    $
    550
    
    
    $
    805
    
    
    $
    255
    
    
    $
    805
    
    
    $
    Residential mortgage
    
    
    525
    
    
    
    533
    
    
    
    8
    
    
    
    320
    
    
    
    Home equity
    
    
    
    
    
    
    25
    
    
    
    25
    
    
    
    5
    
    
    
    1Total impaired loans with specific reserves
    
    
    1,075
    
    
    
    1,363
    
    
    
    288
    
    
    
    1,130
    
    
    
    1Impaired loans with no specific reserves:Commercial real estate
    
    
    775
    
    
    
    775
    
    
    
    
    
    
    
    465
    
    
    
    Residential mortgage
    
    
    554
    
    
    
    554
    
    
    
    
    
    
    
    359
    
    
    
    17Home equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total impaired loans with no specific reserves
    
    
    1,329
    
    
    
    1,329
    
    
    
    
    
    
    
    824
    
    
    
    17Total impaired loans
    
    $
    2,404
    
    
    $
    2,692
    
    
    $
    288
    
    
    $
    1,954
    
    
    $
    18
  NOTE 4. Premises and Equipment
  2010
    
    
    2009Land
    
    $
    4,828
    
    
    $
    4,828Buildings and improvements
    
    
    5,115
    
    
    
    5,076Furniture and fixtures
    
    
    551
    
    
    
    551Equipment
    
    
    881
    
    
    
    77711,375
    
    
    
    11,232Less accumulated depreciation and
amortization
    
    
    1,448
    
    
    
    1,018Total premises and equipment, net
    
    $
    9,927
    
    
    $
    10,214
   59




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##### Table of Contents



NOTE 5. Deposits
  2010
    
    
    2009Three months or less
    
    $
    64,933
    
    
    $
    66,514Over three months through twelve months
    
    
    114,537
    
    
    
    87,466Over 1 year through 2 years
    
    
    22,228
    
    
    
    15,896Over 2 years through 3 years
    
    
    5,520
    
    
    
    812Over 3 years through 4 years
    
    
    8,565
    
    
    
    2,439Over 4 years through 5 years
    
    
    12,455
    
    
    
    6,957Over 5 years
    
    
    
    
    
    
    $
    228,238
    
    
    $
    180,084
 NOTE 6. Short Term Borrowings
    60




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##### Table of Contents



NOTE 7. Income Taxes
  2010
    
    
    2009Current tax expense:Federal
    
    $
    1,465
    
    
    $
    894State
    
    
    451
    
    
    
    267Deferred income tax benefit:Federal
    
    
    (309
    )
    
    
    (219
    )State
    
    
    (135
    )
    
    
    (64
    )Income tax expense
    
    $
    1,472
    
    
    $
    878
  2010
    
    
    2009Deferred tax assets:Start up expenses
    
    $
    363
    
    
    $
    398Allowance for loan losses
    
    
    1,497
    
    
    
    1,025Accrued expenses
    
    
    165
    
    
    
    97Stock Compensation plans
    
    
    371
    
    
    
    277Unrealized losses on AFS securities
    
    
    41
    
    
    
    Total gross deferred tax assets
    
    
    2,437
    
    
    
    1,797Deferred tax Liabilities:Deferred loan costs
    
    
    (72
    )
    
    
    (68
    )Prepaid expenses
    
    
    (52
    )
    
    
    (47
    )Unrealized gains on AFS securities
    
    
    
    
    
    
    (40
    )Other
    
    
    (165
    )
    
    
    (21
    )Total gross deferred tax liabilities
    
    
    (291
    )
    
    
    (176
    )Net deferred tax asset
    
    $
    2,146
    
    
    $
    1,621
   61




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##### Table of Contents



2010
    
    
    2009Computed expected tax expense
    
    $
    1,232
    
    
    $
    726Increase(decrease) in taxes resulting from:State taxes, net of federal income tax expense
    
    
    209
    
    
    
    134Tax exempt income
    
    
    (8
    )
    
    
    (20
    )Stock-based compensation
    
    
    20
    
    
    
    34Meals and entertainment
    
    
    4
    
    
    
    3Other
    
    
    15
    
    
    
    1$
    1,472
    
    
    $
    878
  NOTE 8. Leases
   Year ending December 31:2011
    
    $
    5262012
    
    
    5322013
    
    
    5402014
    
    
    4642015
    
    
    341Thereafter
    
    
    2,955$
    5,358
  62




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##### Table of Contents



NOTE 9. Related-party Transactions
   2010
    
    
    2009Outstanding loans at beginning of the year
    
    $
    27,190
    
    
    $
    17,635New Loans
    
    
    15,481
    
    
    
    12,995Repayments
    
    
    (7,921
    )
    
    
    (3,440
    )Outstanding loans at end of the year
    
    $
    34,750
    
    
    $
    27,190
       63




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##### Table of Contents



NOTE 10. Earnings Per Share
  For the Year EndedDecember 31,(In Thousands, except per share data)
    
    2010
    
    
    2009Net income applicble to common stock
    
    $
    2,151
    
    
    $
    1,257Weighted average number of common
shares outstanding  basic
    
    
    5,207
    
    
    
    5,112Basic earnings per share
    
    $
    0.41
    
    
    $
    0.25Net income applicble to common stock
    
    $
    2,151
    
    
    $
    1,257Weighted average number of common
shares outstanding  dilutedWeighted average number of common
shares outstanding
    
    
    5,207
    
    
    
    5,112Effect of dilutive warrants
    
    
    14
    
    
    
    Weighted average number of common
shares outstanding  diluted
    
    
    5,221
    
    
    
    5,112Diluted earnings per share
    
    $
    0.41
    
    
    $
    0.25
    64




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##### Table of Contents



NOTE 11. Comprehensive Income
  Comprehensive Income
    
    2010
    
    
    2009Net income
    
    $
    2,151
    
    
    $
    1,257Urealized holding gains (losses) on securities available for
sale, net of taxes of $(132) and $4 for 2010 and 2009, respectively
    
    
    (202
    )
    
    
    13Reclassification adjustment for gain on sale of securities, net of
tax expense of $(50) and $0 for 2010 and 2009, respectively
    
    
    77
    
    
    
    Total comprehensive income
    
    $
    2,026
    
    
    $
    1,270
 NOTE 12. Stockholders Equity and Dividend Restrictions
       65




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NOTE 13. Benefit Plans
 2006 Stock Option Plan
     66




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##### Table of Contents



Weighted Average
    
    
    AverageNumber of
    
    
    Exercise price
    
    
    IntrinsicShares
    
    
    per share
    
    
    Value (1)Outstanding at
December 31, 2008
    
    
    188,900
    
    
    $
    10.24
    
    
    $
    139,786Granted
    
    
    
    
    
    
    Forfeited
    
    
    (400
    )
    
    $
    11.50Exercised
    
    
    
    
    
    
    Outstanding at
December 31, 2009
    
    
    188,500
    
    
    $
    10.24
    
    
    $
    156,810Granted
    
    
    
    
    
    
    Forfeited
    
    
    ( 600
    )
    
    $
    11.50Exercised
    
    
    
    
    
    
    Outstanding at
December 31, 2010
    
    
    187,900
    
    
    $
    10.24Exercisable at
December 31, 2010
    
    
    153,017
    
    
    $
    9.96
    
    
    $
    211,464
 (1)
    
    The aggregate intrinsic value of a stock option in the table above represents
the total pre-tax intrinsic value (the amount by which the current market value of the
underlying stock exceeds the exercise price of the option) that would have been received by
the option holders had they exercised their options on December 31, 2010. This amount
changes based on the changes in the market value in the Companys stock.  Number
    
    
    Weighted Average
    
    
    WeightedOf Shares
    
    
    Remaining
    
    
    AverageRange of Exercise Prices
    
    Outstanding
    
    
    Contractual life (years)
    
    
    Exercise Price$9.09
    
    
    97,900
    
    
    
    5.83
    
    
    $
    9.09$11.50
    
    
    90,000
    
    
    
    6.92
    
    
    $
    11.50187,900
   67




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##### Table of Contents



2007 Director Plan
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageNumber
    
    
    Exercise
    
    
    Average
    
    
    Remainingof
    
    
    price per
    
    
    Intrinsic
    
    
    Contractual lifeShares
    
    
    share
    
    
    Value (1)
    
    
    (years)Outstanding at December 31, 2008
    
    
    416,668
    
    
    $
    11.50
    
    
    $
    
    
    
    
    8.81Granted
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Exercised
    
    
    (2,000
    )
    
    $
    11.50Outstanding at December 31, 2009
    
    
    414,668
    
    
    $
    11.50
    
    
    $
    
    
    
    
    7.81Granted
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Outstanding at December 31, 2010
    
    
    414,668
    
    
    $
    11.50
    
    
    $
    
    
    
    
    6.81Exercisable at December 31, 2010
    
    
    357,173
 (1)
    
    The aggregate intrinsic value of a stock option in the table above represents
the total pre-tax intrinsic value (the amount by which the current market value of the
underlying stock exceeds the exercise price of the option) that would have been received by
the option holders had they exercised their options on December 31, 2010 and 2009,
respectively. This amount changes based on the changes in the market value in the Companys
stock.   68




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##### Table of Contents



NOTE 13. Benefit Plans (continued)
 Weighted Average Assuptions for options granted
  2007 Stock Option Plan
    
    
    2006 Stock Option PlanDividend yield
    
    
    0.00
    %
    
    
    0.00
    %Expected life
    
    4.50 years
    
    
    2.44 yearsExpected volatility
    
    
    17.72
    %
    
    
    17.75
    %Risk-free interest rate
    
    
    3.70
    %
    
    
    4.77
    %
   Defined Contribution Plan
   69




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##### Table of Contents



NOTE 14. Regulatory Capital Requirements
     FDIC requirementsMinimum Capital
    
    
    For ClassificationBank actual
    
    
    Adequacy
    
    
    As Well CapitalizedAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioDecember 31, 2010:Leverage (Tier 1) Capital
    
    $
    50,197
    
    
    
    13.85
    %
    
    $
    14,495
    
    
    
    4.00
    %
    
    $
    18,119
    
    
    
    5.00
    %Risk-based capital:Tier 1
    
    $
    50,197
    
    
    
    16.79
    %
    
    $
    11,956
    
    
    
    4.00
    %
    
    $
    17,934
    
    
    
    6.00
    %Total
    
    $
    53,944
    
    
    
    18.04
    %
    
    $
    23,912
    
    
    
    8.00
    %
    
    $
    29,889
    
    
    
    10.00
    %December 31, 2009:Leverage (Tier 1) Capital
    
    $
    49,469
    
    
    
    15.10
    %
    
    $
    13,102
    
    
    
    4.00
    %
    
    $
    16,377
    
    
    
    5.00
    %Risk-based capital:Tier 1
    
    $
    49,469
    
    
    
    19.13
    %
    
    $
    10,342
    
    
    
    4.00
    %
    
    $
    15,513
    
    
    
    6.00
    %Total
    
    $
    52,261
    
    
    
    20.21
    %
    
    $
    20,685
    
    
    
    8.00
    %
    
    $
    25,856
    
    
    
    10.00
    %
   70




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##### Table of Contents



NOTE 15. Financial Instruments with Off-Balance Sheet Risk
    NOTE 16. Financial Information of Parent Company
  Balance Sheet
 December 31,2010
    
    
    2009Assets:Investment in subsidiary, net
    
    $
    50,138
    
    
    $
    49,535Dividends receivable from Bank of New Jersey
    
    
    
    
    
    
    1,562Total assets
    
    $
    50,138
    
    
    $
    51,097Liabilities and stockholders equity:Dividends payable to shareholders
    
    $
    
    
    
    $
    1,562Total liabilities
    
    
    
    
    
    
    1,562Stockholders equity:
    
    
    50,138
    
    
    
    49,535Total liabillities and stockholders equity
    
    $
    50,138
    
    
    $
    51,097
  71




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##### Table of Contents



Statement of Income
 2010
    
    
    2009Equity in undistributed
earnings of subsidiary bank
    
    $
    2,151
    
    
    $
    1,257Net income
    
    $
    2,151
    
    
    $
    1,257
 Statement of Cash Flow
 2010
    
    
    2009Cash flows from operating activities:Net income
    
    $
    2,151
    
    
    $
    1,257Adjustments to reconcile net income to net cash
provided by operating activities:Equity in undistributed earnings of the
subsidiary bank
    
    
    (2,151
    )
    
    
    (1,257
    )Decrease (increase) in other assets, net
    
    
    1,562
    
    
    
    (1,562
    )(Decrease) increase in other liabilities, net
    
    
    (1,562
    )
    
    
    1,562Net cash provided by operating activities
    
    
    
    
    
    
    Cash flows from investing activities:Capital contributed to subsidiary bank
    
    
    
    
    
    
    (1,547
    )Cash dividend received from subsidiary bank
    
    
    3,279
    
    
    
    Net cash used in financing activities
    
    
    3,279
    
    
    
    (1,547
    )Cash flows from financing activities:Proceeds from exercise of warrants
    
    
    
    
    
    
    1,524Proceeds from issuance of common stock
    
    
    
    
    
    
    23Cash dividends paid
    
    
    (3,279
    )
    
    
    Net cash provided by financing
Activities
    
    
    (3,279
    )
    
    
    1,547Net change in cash for the period
    
    
    
    
    
    
    Net cash at beginning of year
    
    
    
    
    
    
    Net cash at end of year
    
    $
    
    
    
    $
    
  72




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##### Table of Contents



NOTE 17. Fair Value Measurement and Fair Value of Financial Instruments
    
    
    Level 1 Inputs- Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities.
    
    Level 2 Inputs- Quoted prices in markets that are not active, or inputs that are
observable either directly or indirectly, for substantially the full term of the asset or
liability.
    
    Level 3 Inputs- Prices or valuation techniques that require inputs that are both
significant to the fair value measurement and unobservable (i.e. supported with little or
no market activity).
   (Level I)
    
    
    (Level 2)
    
    
    (Level 3)QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantDecember 31,
    
    
    Identical
    
    
    Observable
    
    
    UnobservableDescription
    
    2010
    
    
    Assets
    
    
    Inputs
    
    
    InputsSecurities available for sale:U.S. Treasury obligations
    
    $
    9,024
    
    
    $
    9,024
    
    
    $
    
    
    
    $
    Government Sponsored Enterprise obligations
    
    
    18,899
    
    
    
    
    
    
    
    18,899
    
    
    
    Total securities
available for sale
    
    $
    27,923
    
    
    $
    9,024
    
    
    $
    18,899
    
    
    $
    
  73




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##### Table of Contents



(Level I)
    
    
    (Level 2)
    
    
    (Level 3)QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantDecember 31,
    
    
    Identical
    
    
    Observable
    
    
    UnobservableDescription
    
    2010
    
    
    Assets
    
    
    Inputs
    
    
    InputsImpaired loans
    
    $
    1,075
    
    
    $
    
    
    
    $
    
    
    
    $
    1,075Other real estate owned
    
    
    1,938
    
    
    $
    
    
    
    
    
    
    
    
    1,938Total impaired loans
and
other real estate owned
    
    $
    3,013
    
    
    $
    
    
    
    $
    
    
    
    $
    3,013
  2010Beginning balance, January 1
    
    $
    Total additions
    
    
    1,938Ending balance, December 31, 2010
    
    $
    1,938
  (Level I)
    
    
    (Level 2)
    
    
    (Level 3)QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantDecember 31,
    
    
    Identical
    
    
    Observable
    
    
    UnobservableDescription
    
    2009
    
    
    Assets
    
    
    Inputs
    
    
    InputsSecurities available for sale:U.S. Treasury obligations
    
    $
    2,000
    
    
    $
    2,000
    
    
    $
    
    
    
    $
    Government Sponsored Enterprise obligations
    
    
    19,111
    
    
    
    
    
    
    
    19,111
    
    
    
    Total securities
available for sale
    
    $
    21,111
    
    
    $
    2,000
    
    
    $
    19,111
    
    
    $
    
  (Level I)
    
    
    (Level 2)
    
    
    (Level 3)QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantDecember 31,
    
    
    Identical
    
    
    Observable
    
    
    UnobservableDescription
    
    2009
    
    
    Assets
    
    
    Inputs
    
    
    InputsImpaired loans
    
    $
    2,678
    
    
    $
    
    
    
    $
    
    
    
    $
    2,678
  74




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##### Table of Contents



Cash and Cash Equivalents (Carried at cost)
  Securities
  Restricted Investment in Bank Stock (Carried at Cost)
  Loans Receivable (Carried at Cost)
  Impaired loans
  Accrued Interest Receivable and Payable (Carried at Cost)
   75




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##### Table of Contents



Other real estate owned
  Deposits (Carried at Cost)
   2010
    
    
    2009Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    Estimatedamount
    
    
    Fair Value
    
    
    amount
    
    
    Fair ValueFinancial assets:Cash and cash equivalents
    
    $
    23,204
    
    
    $
    23,204
    
    
    $
    18,098
    
    
    $
    18,098Securities available for sale
    
    
    27,923
    
    
    
    27,923
    
    
    
    21,111
    
    
    
    21,111Securities held to maturity
    
    
    3,728
    
    
    
    3,724
    
    
    
    4,296
    
    
    
    4,297Restricted investment in
bank stock
    
    
    491
    
    
    
    491
    
    
    
    419
    
    
    
    419Net loans
    
    
    298,354
    
    
    
    301,922
    
    
    
    261,152
    
    
    
    261,329Accrued interest receivable
    
    
    1,285
    
    
    
    1,285
    
    
    
    1,173
    
    
    
    1,173Financial liabilities:Deposits
    
    
    318,421
    
    
    
    313,888
    
    
    
    267,143
    
    
    
    268,101Accrued interest payable
    
    
    438
    
    
    
    438
    
    
    
    372
    
    
    
    372
 Limitation
    76




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##### Table of Contents



NOTE 18. Quarterly Financial Data (unaudited)
  
 December. 31
    
    
    September. 31
    
    
    June. 31
    
    
    March. 312010Interest income
    
    $
    4,449
    
    
    $
    4,310
    
    
    $
    4,206
    
    
    $
    4,046Interest expense
    
    
    1,099
    
    
    
    1,105
    
    
    
    1,087
    
    
    
    1,045Net interest income
    
    
    3,350
    
    
    
    3,205
    
    
    
    3,119
    
    
    
    3,001Provision for loan losses
    
    
    250
    
    
    
    431
    
    
    
    384
    
    
    
    270Other expense, net
    
    
    2,149
    
    
    
    1,862
    
    
    
    1,840
    
    
    
    1,866Provision for federal and state
income taxes
    
    
    382
    
    
    
    368
    
    
    
    371
    
    
    
    351Net income
    
    $
    569
    
    
    $
    544
    
    
    $
    524
    
    
    $
    514Earnings per share:Basic
    
    $
    0.11
    
    
    $
    0.10
    
    
    $
    0.10
    
    
    $
    0.10Diluted
    
    $
    0.11
    
    
    $
    0.10
    
    
    $
    0.10
    
    
    $
    0.102009Interest income
    
    $
    4,031
    
    
    $
    4,052
    
    
    $
    3,810
    
    
    $
    3,598Interest expense
    
    
    1,320
    
    
    
    1,398
    
    
    
    1,489
    
    
    
    1,729Net interest income
    
    
    2,711
    
    
    
    2,654
    
    
    
    2,321
    
    
    
    1,869Provision for loan losses
    
    
    145
    
    
    
    74
    
    
    
    144
    
    
    
    61Other expense, net
    
    
    1,834
    
    
    
    1,718
    
    
    
    1,850
    
    
    
    1,598Provision (benefit) for
federal and state
income taxes
    
    
    297
    
    
    
    351
    
    
    
    136
    
    
    
    94Net income
    
    $
    435
    
    
    $
    515
    
    
    $
    191
    
    
    $
    116Earnings per share:Basic
    
    $
    0.08
    
    
    $
    0.10
    
    
    $
    0.04
    
    
    $
    0.03Diluted
    
    $
    0.08
    
    
    $
    0.10
    
    
    $
    0.04
    
    
    $
    0.03
  77




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NOTE 19. Recent Accounting Pronouncements
      Transfers and Servicing Transfers and Servicing
  78




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ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A.
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Managements Annual Report On Internal Control Over Financial Reporting
      79




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Changes in Internal Controls Over Financial Reporting
  Limitations on Effectiveness of Controls
  
 ITEM 9B.
    
    OTHER INFORMATION
   80




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##### Table of Contents



PART III
 
 ITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  
 ITEM 11.
    
    EXECUTIVE COMPENSATION
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
  
 ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
   81




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##### Table of Contents



PART IV
 
 ITEM 15.
    
    EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 (a)
    
    The following portions of the Companys consolidated financial statements are
set forth in Item 8 of this Annual Report:
 (i)
    
    Consolidated Balance Sheets as of December 31, 2010 and 2009.(ii)
    
    Consolidated Statements of Income for the years ended
December 31, 2010 and 2009.(iii)
    
    Consolidated Statements of Stockholders Equity for the
years ended December 31, 2010 and 2009.(iv)
    
    Consolidated Statements of Cash Flows for the years ended
December 31, 2010 and 2009.(v)
    
    Notes to Consolidated Financial Statement(vi)
    
    Reports of Independent Registered Public Accounting Firms
 (b)
    
    Financial Statement SchedulesAll financial statement schedules are omitted as the information, if applicable, is
presented in the consolidated financial statement or notes thereto.(c)
    
    ExhibitsThe exhibits filed or incorporated by reference as a part of this report are listed
in the Exhibit Index which appears at page 82.
  82




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##### Table of Contents



SIGNATURES
  BANCORP OF NEW JERSEY, INC.By:
    /s/ Albert F. BuzzettiAlbert F. BuzzettiChairman, and CEO
(Principal Executive Officer)BANCORP OF NEW JERSEY, INC.By:
    /s/ Michael LeslerMichael LeslerVice Chairman, President
And Chief Operating Officer
(Principal Financial Officer)   Name
    
    Title
    
    Date/s/ Albert F. Buzzetti

Albert F. Buzzetti
    
    Chairman and
Chief Executive Officer
    
    March 31, 2011/s/ Michael Lesler

Michael Lesler
    
    Vice Chairman, President
and Chief Operating Officer
    
    March 31, 2011/s/ Michael Bello

Michael Bello
    
    Director
    
    March 31, 2011/s/ Jay Blau

Jay Blau
    
    Director
    
    March 31, 2011/s/ Albert L. Buzzetti

Albert L. Buzzetti
    
    Director
    
    March 31, 2011/s/ Gerald A. Calabrese, Jr.

Gerald a. Calabrese, Jr.
    
    Director
    
    March 31, 2011/s/ Stephen Crevani

Stephen Crevani
    
    Director
    
    March 31, 2011/s/ John K. Daily

John K. Daily
    
    Director
    
    March 31, 2011/s/ Anthony M. Lo Conte

Anthony M. Lo Conte
    
    Director
    
    March 31, 2011
  83




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Name
    
    Title
    
    Date/s/ Carmelo Luppino, Jr.

Carmelo Luppino, Jr.
    
    Director
    
    March 31, 2011/s/ Rosario Luppino

Rosario Luppino
    
    Director
    
    March 31, 2011/s/ Howard Mann

Howard Mann
    
    Director
    
    March 31, 2011/s/ Josephine Mauro

Josephine Mauro
    
    Director
    
    March 31, 2011/s/ Joel P. Paritz

Joel P. Paritz
    
    Director
    
    March 31, 2011/s/ Christopher M. Shaari

Christopher M. Shaari
    
    Director
    
    March 31, 2011/s/ Anthony Siniscalchi

Anthony Siniscalchi
    
    Director
    
    March 31, 2010/s/ Mark Sokolich

Mark Sokolich
    
    Director
    
    March 31, 2011/s/ Diane M. Spinner

Diane M. Spinner
    
    Director and
Executive Vice President
    
    March 31, 2011
  84




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##### Table of Contents



ExhibitNo.
    
    Description2.1
    (A)
    
    Plan of Acquisition3.1
    (A)
    
    Certificate of Incorporation3.2
    (B)
    
    Amended and Restated Bylaws4.1
    (A)
    
    Specimen form of stock certificate10.1
    (A)
    
    Change In Control Agreement between the Bank and Albert F.
Buzzetti*10.2
    (A)
    
    Change In Control Agreement between the Bank and Michael Lesler*10.3
    (A)
    
    Change In Control Agreement between the Bank and Leo J. Faresich*10.4
    (A)
    
    Change In Control Agreement between the Bank and Diane M.
Spinner*10.5
    (A)
    
    2006 Stock Option Plan*10.6
    (A)
    
    Form of Stock Option Award Agreement*10.7
    (C)
    
    2007 Non-Qualified Stock Option Plan For Directors10.8
    (D)
    
    Form of Stock Option Award Agreement21
    
    
    Subsidiaries of the Registrant23
    
    
    Consent of ParenteBeard LLC31.1
    
    
    Rule 13a-14(a) Certification of the Principal Executive Officer31.2
    
    
    Rule 13a-14(a) Certification of the Principal Financial Officer32
    
    
    Section 1350 Certifications
 *
    
    Management contract or compensatory plan, contract or arrangement.(A)
    
    Incorporated by reference to the exhibit to registrants Registration Statement on Form S-4
(Registration No. 333-141124), filed with the Securities and Exchange Commission on March 7,
2007, as amended by Amendment No. 1 on Form S-4/A, filed on April 27, 2007, and Amendment No.
2 on Form S-4/A, filed on May 15, 2007(B)
    
    Incorporated by reference to the registrants Current Report on Form 8-K, filed with the
Securities and Exchange Commission on March 30, 2011.(C)
    
    Incorporated by reference to Exhibit A to the proxy statement/prospectus included in the
registrants Registration Statement on Form S-4 (Registration No. 333-141124), filed with the
Securities and Exchange Commission on March 7, 2007, as amended by Amendment No. 1 on Form
S-4/A, filed on April 27, 2007, and Amendment No. 2 on Form S-4/A, filed on May 15, 2007(D)
    
    Incorporated by reference to the registrants Quarterly Report on Form 10-Q, for the
quarterly period ended September 30, 2007, filed with the Securities and Exchange Commission
on November 14, 2007  85