##### 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, 2008
 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 
incorporation or organization)
    
    (I.R.S. Employer
Identification)1365 Palisade Avenue, Fort Lee, NJ
(Address of principal executive offices)
    
    07024
(Zip Code)
 201-944-8600
  Title of each class 
Common stock
    
    Name of each exchange on which registered
NYSE Alternext
  YES o NO þ
 o þ
 þ o
 þ
 Rule 12b-2
 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
    
    
    11Item 1B Unresolved Staff Comments
    
    
    11Item 2 Properties
    
    
    12Item 3 Legal Proceedings
    
    
    12Item 4 Submission of Matters to a Vote of Security Holders
    
    
    12PART IIItem 5 Market for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
    
    
    13Item 6 Selected Financial Data
    
    
    14Item 7 Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    15Item 7A Quantitative and Qualitative Disclosures about Market Risk
    
    
    36Item 8 Financial Statements and Supplementary Data
    
    
    37Item 9 Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure
    
    
    72Item 9A Controls and Procedures
    
    
    72Item 9B Other Information
    
    
    73PART IIIItem 10 Directors, Executive Officers and Corporate Governance
    
    
    74Item 11 Executive Compensation
    
    
    74Item 12 Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
    
    
    74Item 13 Certain Relationships and Related Transactions, and
Director Independence
    
    
    74Item 14 Principal Accounting Fees and Services
    
    
    74PART IVItem 15 Exhibits, Financial Statement Schedules
    
    
    75Exhibit 21Exhibit 23Exhibit 31.1Exhibit 31.2Exhibit 32
   2




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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 line of business;
and
 
    
    The risk that managements analysis of these risks and forces 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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Dividend Restrictions
   Capital Adequacy Guidelines
    8




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Prompt Corrective Action
     9




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Community Reinvestment Act
  USA Patriot Act
   Sarbanes-Oxley Act of 2002
  www.bonj.net
 Federal Home Loan Bank Membership
    10




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Other Laws and Regulations
  Future Legislation and Regulation
  Statistical Disclosure by Bank Holding Companies
  
 ITEM 1A. RISK FACTORS
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
   11




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ITEM 2. PROPERTIES
  Leased
    
    Date of LeaseLocation
    
    or Owned
    
    Expiration1365 Palisade Avenue
Fort Lee, NJ
    
    Owned
    
    N/A204 Main Street 
Fort Lee, NJ
    
    Leased
    
    March, 2010401 Hackensack Avenue
Hackensack, NJ 07601
    
    Leased
    
    August, 2010458 West Street
Fort Lee, NJ 07024
    
    Leased
    
    December, 2025320 Haworth Avenue
Haworth, NJ 07641
    
    Owned
    
    N/A
  
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   12




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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, 2008Fourth quarter
    
    $
    12.30
    
    
    $
    8.48Third quarter
    
    
    15.97
    
    
    
    10.51Second quarter
    
    
    25.25
    
    
    
    13.44First quarter
    
    
    11.50
    
    
    
    11.50Year Ended December 31, 2007Fourth quarter
    
    $
    11.50
    
    
    $
    11.50Third quarter
    
    
    11.50
    
    
    
    11.50Second quarter
    
    
    11.50
    
    
    
    11.50First quarter
    
    
    11.50
    
    
    
    9.09
 Holders
  Dividends
     13




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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 holders2006 Stock Option Plan
    
    
    188,900
    
    
    $
    10.26
    
    
    
    19,6842007 Non-Qualified
Stock Option Plan for
Directors
    
    
    414,668
    
    
    $
    11.50
    
    
    
    43,334Equity compensation
plans not approved by
security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    603,568
    
    
    $
    11.16
    
    
    
    63,018
 
 ITEM 6. SELECTED FINANCIAL DATA
   14




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##### Table of Contents



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
 
    
    To provide a reasonable return to shareholders on capital invested.
  15




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Critical Accounting Policies and Judgments
  Allowance for Loan Losses
  Note 1-
 Deferred Tax Assets and Valuation Allowance
   16




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Impairment of Assets
  Investment Securities Impairment
   17




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RESULTS OF OPERATIONS    2008 versus 2007
  NET INCOME
   Analysis of Net Interest Income
  Average Balance Sheets
   18




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For the years ended December 31,  (dollars in thousands)
 2008
    
    
    2007
    
    
    2006Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yield/Cost
    
    
    Balance
    
    
    Interest
    
    
    Yield/Cost
    
    
    Balance
    
    
    Interest
    
    
    Yield/CostASSETS:Interest-Earning Assets:Loans
    
    $
    209,498
    
    
    $
    12,977
    
    
    
    6.19
    %
    
    $
    139,546
    
    
    $
    10,111
    
    
    
    7.24
    %
    
    $
    43,971
    
    
    $
    1,983
    
    
    
    6.77
    %Securities
    
    
    17,147
    
    
    
    708
    
    
    
    4.13
    
    
    
    5,249
    
    
    
    264
    
    
    
    5.03
    
    
    
    7,915
    
    
    
    260
    
    
    
    4.99Federal Funds Sold
    
    
    24,185
    
    
    
    725
    
    
    
    3.00
    
    
    
    4,072
    
    
    
    199
    
    
    
    4.89
    
    
    
    21,752
    
    
    
    818
    
    
    
    5.64Interest-earning cash accounts*
    
    
    9,091
    
    
    
    45
    
    
    
    0.49
    
    
    
    1,038
    
    
    
    16
    
    
    
    1.54
    
    
    
    
    
    
    
    0
    
    
    
    0.00Total Interest-earning Assets
    
    
    259,921
    
    
    
    14,455
    
    
    
    5.56
    %
    
    
    149,905
    
    
    
    10,590
    
    
    
    7.06
    %
    
    
    73,638
    
    
    
    3,061
    
    
    
    6.26
    %Non-interest earning Assets
    
    
    12,074
    
    
    
    
    
    
    
    
    
    
    
    12,297
    
    
    
    
    
    
    
    
    
    
    
    5,011Allowance for Loan Losses
    
    
    (2,135
    )
    
    
    
    
    
    
    
    
    
    
    (1,863
    )
    
    
    
    
    
    
    
    
    
    
    (486
    )TOTAL ASSETS
    
    $
    269,860
    
    
    
    
    
    
    
    
    
    
    $
    160,339
    
    
    
    
    
    
    
    
    
    
    $
    78,163LIABILITIES AND STOCKHOLDERS EQUITYInterest-Bearing Liabilities:Demand Deposits
    
    $
    5,632
    
    
    $
    63
    
    
    
    1.12
    %
    
    $
    7,447
    
    
    $
    194
    
    
    
    2.61
    %
    
    $
    3,910
    
    
    $
    60
    
    
    
    2.30
    %Savings Deposits
    
    
    3,016
    
    
    
    8
    
    
    
    0.26
    
    
    
    2,569
    
    
    
    13
    
    
    
    0.51
    
    
    
    930
    
    
    
    5
    
    
    
    0.81Money Market Deposits
    
    
    53,831
    
    
    
    1,189
    
    
    
    2.21
    
    
    
    38,781
    
    
    
    1,757
    
    
    
    4.53
    
    
    
    16,216
    
    
    
    422
    
    
    
    3.89Time Deposits
    
    
    133,266
    
    
    
    6,273
    
    
    
    4.71
    
    
    
    41,114
    
    
    
    2,132
    
    
    
    5.18
    
    
    
    3,360
    
    
    
    77
    
    
    
    3.44Short Term Borrowings
    
    
    378
    
    
    
    11
    
    
    
    2.91
    
    
    
    6,432
    
    
    
    339
    
    
    
    5.27
    
    
    
    0
    
    
    
    0
    
    
    
    0.00Total Interest-Bearing Liabilities
    
    
    196,123
    
    
    
    7,544
    
    
    
    3.85
    %
    
    
    96,343
    
    
    
    4,435
    
    
    
    4.60
    %
    
    
    24,416
    
    
    
    564
    
    
    
    3.46
    %Non-Interest Bearing Liabilities:Demand Deposits
    
    
    25,361
    
    
    
    
    
    
    
    
    
    
    
    18,920
    
    
    
    
    
    
    
    
    
    
    
    10,384Other Liabilities
    
    
    1,541
    
    
    
    
    
    
    
    
    
    
    
    1,031
    
    
    
    
    
    
    
    
    
    
    
    164Total Non-Interest Bearing Liabilities
    
    
    26,902
    
    
    
    
    
    
    
    
    
    
    
    19,951
    
    
    
    
    
    
    
    
    
    
    
    10,548Stockholders Equity
    
    
    46,835
    
    
    
    
    
    
    
    
    
    
    
    44,045
    
    
    
    
    
    
    
    
    
    
    
    43,199TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY
    
    $
    269,860
    
    
    
    
    
    
    
    
    
    
    $
    160,339
    
    
    
    
    
    
    
    
    
    
    $
    78,163Net Interest Income
(Tax Equivalent Basis)
    
    
    
    
    
    $
    6,911
    
    
    
    
    
    
    
    
    
    
    $
    6,155
    
    
    
    
    
    
    
    
    
    
    $
    2,497Tax Equivalent Basis adjustment
    
    
    
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    0Net Interest Income
    
    
    
    
    
    $
    6,911
    
    
    
    
    
    
    
    
    
    
    $
    6,155
    
    
    
    
    
    
    
    
    
    
    $
    2,497Net Interest Rate Spread
    
    
    
    
    
    
    
    
    
    
    1.71
    %
    
    
    
    
    
    
    
    
    
    
    2.46
    %
    
    
    
    
    
    
    
    
    
    
    2.80
    %Net Interest Margin
    
    
    
    
    
    
    
    
    
    
    2.56
    %
    
    
    
    
    
    
    
    
    
    
    4.10
    %
    
    
    
    
    
    
    
    
    
    
    3.39
    %Ratio of Interest-Earning Assets to
Interest-Bearing Liabilities
    
    
    1.33
    
    
    
    
    
    
    
    
    
    
    
    1.56
    
    
    
    
    
    
    
    
    
    
    
    3.02
 *
    
    Interest-earning cash accounts includes funds held at the FRB as the FRB began paying interest
on deposits during the fourth quarter of 2008.  19




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Rate/Volume Analysis
  Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,2008 versus 2007
    
    
    2007 versus 2006Increase (Decrease)
    
    
    
    
    
    
    Increase (Decrease)due to change in
    
    
    
    
    
    
    due to change inAverage
    
    
    
    
    
    
    AverageVolume
    
    
    Rate
    
    
    Net
    
    
    Volume
    
    
    Rate
    
    
    NetInterest Income:Loans
    
    $
    5,064
    
    
    $
    (2,198
    )
    
    $
    2,866
    
    
    $
    7,472
    
    
    $
    656
    
    
    $
    8,128Securities
    
    
    598
    
    
    
    (154
    )
    
    
    444
    
    
    
    2
    
    
    
    2
    
    
    
    4Fed Funds Sold
    
    
    984
    
    
    
    (458
    )
    
    
    526
    
    
    
    (589
    )
    
    
    (30
    )
    
    
    (619
    )Interest earning cash accounts
    
    
    124
    
    
    
    (95
    )
    
    
    29
    
    
    
    16
    
    
    
    0
    
    
    
    16Total Interest Income
    
    
    6,770
    
    
    
    (2,905
    )
    
    
    3,865
    
    
    
    6,901
    
    
    
    628
    
    
    
    7,529Interest Expense:Demand Deposits
    
    
    (47
    )
    
    
    181
    
    
    
    134
    
    
    
    111
    
    
    
    23
    
    
    
    134Savings Deposits
    
    
    2
    
    
    
    6
    
    
    
    8
    
    
    
    15
    
    
    
    (7
    )
    
    
    8Money Market Deposits
    
    
    682
    
    
    
    654
    
    
    
    1,336
    
    
    
    1,088
    
    
    
    248
    
    
    
    1,336Time Deposits
    
    
    4,773
    
    
    
    (2,719
    )
    
    
    2,054
    
    
    
    1,339
    
    
    
    715
    
    
    
    2,054Short Term Borrowings
    
    
    (319
    )
    
    
    658
    
    
    
    339
    
    
    
    339
    
    
    
    0
    
    
    
    339Total Interest Expense
    
    
    5,091
    
    
    
    (1,220
    )
    
    
    3,871
    
    
    
    2,892
    
    
    
    979
    
    
    
    3,871Net change in Interest Income
    
    $
    1,679
    
    
    $
    (1,685
    )
    
    $
    (6
    )
    
    $
    4,009
    
    
    $
    (351
    )
    
    $
    3,658
  20




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PROVISION FOR LOAN LOSSES
  OTHER INCOME
  OTHER EXPENSES
  INCOME TAX EXPENSE
   21




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FINANCIAL CONDITION
  LOANS
     22




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December 31,2008
    
    
    2007
    
    
    2006Real Estate
    
    $
    159,056
    
    
    $
    123,335
    
    
    $
    50,787Commercial
    
    
    33,319
    
    
    
    27,056
    
    
    
    14,678Credit Lines
    
    
    37,962
    
    
    
    28,133
    
    
    
    13,519Consumer
    
    
    4,507
    
    
    
    4,936
    
    
    
    1,654Total Loans
    
    $
    234,844
    
    
    $
    183,460
    
    
    $
    80,638
  Within
    
    
    1 to 5
    
    
    After 5One Year
    
    
    Years
    
    
    Years
    
    
    TotalLoans with Fixed RateCommercial
    
    $
    7,204
    
    
    $
    5,596
    
    
    $
    2,220
    
    
    $
    15,020Real Estate
    
    
    13,412
    
    
    
    60,600
    
    
    
    51,290
    
    
    
    125,302Credit Lines
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    46Consumer
    
    
    647
    
    
    
    1,974
    
    
    
    1,886
    
    
    
    4,507Loans with Adjustable RateCommercial
    
    $
    17,339
    
    
    $
    960
    
    
    $
    
    
    
    $
    18,299Real Estate
    
    
    31,918
    
    
    
    931
    
    
    
    905
    
    
    
    33,754Credit Lines
    
    
    127
    
    
    
    
    
    
    
    37,789
    
    
    
    37,916Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 LOAN QUALITY
     23




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ALLOWANCE FOR LOAN LOSSES
   24




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2008
    
    
    2007
    
    
    2006Balance, January 1
    
    $
    1,912
    
    
    $
    866
    
    
    $
    Total Charge-offs
    
    
    
    
    
    
    
    
    
    
    Total Recoveries
    
    
    
    
    
    
    
    
    
    
    Net charge-offs
    
    
    
    
    
    
    
    
    
    
    Provision charged to expense
    
    
    459
    
    
    
    1,046
    
    
    
    866Balance, December 31
    
    $
    2,371
    
    
    $
    1,912
    
    
    $
    866Ratio of net charge-offs to average loans
Outstanding
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
  25




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2008
    
    
    2007
    
    
    2006% of
    
    
    
    
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    
    
    
    
    % ofTotal
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    TotalAmount
    
    
    % of ALL
    
    
    Loans
    
    
    Amount
    
    
    % of ALL
    
    
    Loans
    
    
    Amount
    
    
    % of ALL
    
    
    LoansBalance applicable to:Real Estate
    
    $
    1,774
    
    
    
    74.82
    %
    
    
    78.85
    %
    
    $
    1,373
    
    
    
    71.81
    %
    
    
    67.23
    %
    
    $
    479
    
    
    
    55.31
    %
    
    
    62.98
    %Commercial
    
    
    244
    
    
    
    10.29
    %
    
    
    10.84
    %
    
    
    241
    
    
    
    12.61
    %
    
    
    14.75
    %
    
    
    197
    
    
    
    22.75
    %
    
    
    18.20
    %Credit Lines
    
    
    205
    
    
    
    8.65
    %
    
    
    9.11
    %
    
    
    152
    
    
    
    7.95
    %
    
    
    15.34
    %
    
    
    69
    
    
    
    7.97
    %
    
    
    16.77
    %Consumer
    
    
    27
    
    
    
    1.14
    %
    
    
    1.20
    %
    
    
    5
    
    
    
    0.26
    %
    
    
    2.68
    %
    
    
    25
    
    
    
    2.89
    %
    
    
    2.05
    %Sub-total
    
    
    2,250
    
    
    
    94.90
    %
    
    
    100.00
    %
    
    
    1,771
    
    
    
    92.63
    %
    
    
    100.00
    %
    
    
    770
    
    
    
    88.92
    %
    
    
    100.00
    %Unallocated Reserves
    
    
    121
    
    
    
    5.10
    %
    
    
    
    
    
    
    141
    
    
    
    7.37
    %
    
    
    
    
    
    
    96
    
    
    
    11.08
    %TOTAL
    
    $
    2,371
    
    
    
    100.00
    %
    
    
    100.00
    %
    
    $
    1,912
    
    
    
    100.00
    %
    
    
    100.00
    %
    
    $
    866
    
    
    
    100.00
    %
    
    
    100.00
    %
   26




---



##### Table of Contents



INVESTMENT SECURITIES
     2008
    
    
    2007
    
    
    2006Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    ValueAvailable for saleU.S. Agency obligations
    
    $
    17,641
    
    
    $
    17,731
    
    
    $
    
    
    
    $
    
    
    
    $
    9,560
    
    
    $
    9,599Total available for sale
    
    $
    17,641
    
    
    $
    17,731
    
    
    $
    
    
    
    $
    
    
    
    $
    9,560
    
    
    $
    9,599Held to MaturityU.S. Treasury obligation
    
    $
    
    
    
    $
    
    
    
    $
    1,996
    
    
    $
    2,014
    
    
    $
    1,993
    
    
    $
    2,002Total held to maturity
    
    $
    
    
    
    $
    
    
    
    $
    1,996
    
    
    $
    2,014
    
    
    $
    1,993
    
    
    $
    2,002Total Investment Securities
    
    $
    17,641
    
    
    $
    17,731
    
    
    $
    1,996
    
    
    $
    2,014
    
    
    $
    11,553
    
    
    $
    11,601
  27




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##### Table of Contents



Securities Available for SaleWeightedAmortized
    
    
    Fair
    
    
    AverageCost
    
    
    Value
    
    
    YieldWithin 1 year
    
    
    
    
    
    
    
    
    
    
    1 to 5 years
    
    $
    13,391
    
    
    $
    13,478
    
    
    
    3.61
    %Over 5 years
    
    $
    4,250
    
    
    $
    4,253
    
    
    
    4.12
    %$
    17,641
    
    
    $
    17,731
 
 Securities Held to MaturityWeightedAmortized
    
    
    Fair
    
    
    AverageCost
    
    
    Value
    
    
    YieldWithin 1 year
    
    $
    1,996
    
    
    $
    2,014
    
    
    
    5.12
    %1 to 5 years
    
    
    
    
    
    
    
    
    
    
    Over 5 years
    
    
    
    
    
    
    
    
    
    
    $
    1,996
    
    
    $
    2,014
   DEPOSITS
   28




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##### Table of Contents



2008
    
    
    2007
    
    
    2006Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageAmount
    
    
    Yield/Rate
    
    
    Amount
    
    
    Yield/Rate
    
    
    Amount
    
    
    Yield/RateNon-interest Bearing Demand
    
    $
    28,187
    
    
    
    
    
    
    $
    23,292
    
    
    
    
    
    
    $
    10,244
    
    
    
    Interest Bearing Demand
    
    
    57,645
    
    
    
    2.11
    %
    
    
    52,215
    
    
    
    4.26
    %
    
    
    38,794
    
    
    
    3.58
    %Savings
    
    
    2,644
    
    
    
    0.26
    %
    
    
    3,430
    
    
    
    0.51
    %
    
    
    1,873
    
    
    
    0.81
    %Time Deposits
    
    
    165,530
    
    
    
    4.39
    %
    
    
    134,004
    
    
    
    5.18
    %
    
    
    10,956
    
    
    
    3.44
    %$
    254,006
    
    
    
    
    
    
    $
    212,941
    
    
    
    
    
    
    $
    61,867
  (in thousands)Three months or less
    
    $
    45,242Over three months through twelve months
    
    
    72,972Over one year through three years
    
    
    3,661Over three years
    
    
    1,800Total
    
    $
    123,675
 RETURN ON EQUITY AND ASSETS
  At or for the year ended December 31,2008
    
    
    2007
    
    
    2006Selected Financial Ratios:Return on Average Assets (ROA)
    
    
    0.20
    %
    
    
    0.51
    %
    
    
    (0.72
    %)Return on Average Equity (ROE)
    
    
    1.13
    %
    
    
    1.85
    %
    
    
    (1.31
    %)Equity to Total Assets at Year-End
    
    
    16.24
    %
    
    
    17.61
    %
    
    
    40.58
    %Dividend Payout Ratio
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
  29




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##### Table of Contents



LIQUIDITY
      INTEREST RATE SENSITIVITY ANALYSIS
    30




---



##### Table of Contents



0  3
    
    
    0  6
    
    
    0  1
    
    
    0  5Months
    
    
    Months
    
    
    Year
    
    
    Years
    
    
    5 + Years
    
    
    All Others
    
    
    TOTALSecurities, excluding
equity securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    13,477
    
    
    $
    4,254
    
    
    $
    
    
    
    $
    17,731Loans:Commercial
    
    
    23,802
    
    
    
    24,808
    
    
    
    25,502
    
    
    
    31,099
    
    
    
    2,220
    
    
    
    
    
    
    
    33,319Real Estate
    
    
    32,538
    
    
    
    41,618
    
    
    
    45,400
    
    
    
    107,766
    
    
    
    51,292
    
    
    
    
    
    
    
    159,058Credit Lines
    
    
    37,962
    
    
    
    37,962
    
    
    
    37,962
    
    
    
    37,962
    
    
    
    
    
    
    
    
    
    
    
    37,962Consumer
    
    
    65
    
    
    
    414
    
    
    
    647
    
    
    
    2,621
    
    
    
    1,886
    
    
    
    
    
    
    
    4,507Federal Funds Sold
    
    
    40,482
    
    
    
    40,482
    
    
    
    40,482
    
    
    
    40,482
    
    
    
    
    
    
    
    
    
    
    
    40,482Other Assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,045
    
    
    
    11,045TOTAL ASSETS
    
    $
    134,849
    
    
    $
    145,284
    
    
    $
    149,993
    
    
    $
    233,407
    
    
    $
    59,652
    
    
    $
    11,045
    
    
    $
    304,104Transaction /
Demand Accounts
    
    $
    6,104
    
    
    $
    6,104
    
    
    $
    6,104
    
    
    $
    6,104
    
    
    $
    
    
    
    $
    
    
    
    $
    6,104Money Market
    
    
    51,541
    
    
    
    51,541
    
    
    
    51,541
    
    
    
    51,541
    
    
    
    
    
    
    
    
    
    
    
    51,541Savings
    
    
    2,644
    
    
    
    2,644
    
    
    
    2,644
    
    
    
    2,644
    
    
    
    
    
    
    
    
    
    
    
    2,644Time Deposits
    
    
    48,760
    
    
    
    86,767
    
    
    
    161,788
    
    
    
    165,530
    
    
    
    
    
    
    
    
    
    
    
    165,530Other Liabilities
    
    
    853
    
    
    
    853
    
    
    
    853
    
    
    
    853
    
    
    
    
    
    
    
    29,568
    
    
    
    30,421Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,864
    
    
    
    47,864TOTAL LIABILITIES
AND EQUITY
    
    $
    109,902
    
    
    $
    147,909
    
    
    $
    222,930
    
    
    $
    226,672
    
    
    $
    
    
    
    $
    77,432
    
    
    $
    304,104Dollar Gap
    
    $
    24,947
    
    
    $
    (2,625
    )
    
    $
    (72,937
    )
    
    $
    6,735Gap / Total Assets
    
    
    8.20
    %
    
    
    (0.86
    %)
    
    
    (23.98
    %)
    
    
    2.21
    %Target Gap Range
    
    
    +/- 35.00
    
    
    
    +/- 30.00
    
    
    
    +/- 25.00
    
    
    
    +/- 25.00RSA / RSL
    
    
    122.70
    %
    
    
    98.23
    %
    
    
    67.28
    %
    
    
    102.97
    %(Rate Sensitive
Assets to
Rate Sensitive
Liabilities)
  31




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##### Table of Contents



MARKET RISK
      32




---



##### Table of Contents



Avg.Int.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    There-
    
    
    
    
    
    
    FairRate
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    After
    
    
    Total
    
    
    ValueInterest Rate
Sensitive
Assets:Loans
    
    
    6.19
    %
    
    $
    109,511
    
    
    
    6,754
    
    
    
    811
    
    
    
    2,792
    
    
    
    59,580
    
    
    
    55,398
    
    
    $
    234,846
    
    
    $
    235,025Securities available
for sale, net of
equity securities
    
    
    4.13
    %
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    1,000
    
    
    
    10,391
    
    
    
    4,250
    
    
    $
    17,641
    
    
    $
    17,731Investment Securities
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/AFed Funds Sold
    
    
    3.00
    %
    
    $
    69
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    69
    
    
    $
    69Interest-earning Cash
    
    
    0.49
    %
    
    $
    40,107
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    40,107
    
    
    $
    40,107Interest
Rate Sensitive
Liabilities:Demand Deposits
    
    
    1.12
    %
    
    $
    6,104
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,104
    
    
    $
    6,104Savings Deposits
    
    
    0.26
    %
    
    $
    2,644
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,644
    
    
    $
    2,644Money Market Deposits
    
    
    2.21
    %
    
    $
    51,541
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    51,547
    
    
    $
    51,547Time Deposits
    
    
    4.71
    %
    
    $
    161,788
    
    
    
    1,815
    
    
    
    127
    
    
    
    
    
    
    
    1,800
    
    
    
    
    
    
    $
    165,530
    
    
    $
    167,460
    33




---



##### Table of Contents



CAPITAL
     Minimum Requirementsto be
    
    
    Minimum RequirementsAdequately
    
    
    to beDecember 31, 2008
    
    
    Capitalized
    
    

Well CapitalizedRisk-Based Capital:Tier 1 Capital Ratio
    
    
    21.16
    %
    
    
    4.0
    %
    
    
    6.0
    %Total Capital Ratio
    
    
    22.20
    %
    
    
    8.0
    %
    
    
    10.0
    %Leverage Ratio
    
    
    16.95
    %
    
    
    4.0
    %
    
    
    5.0
    %
   34




---



##### 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
    
    
    437
    
    
    
    592
    
    
    
    546
    
    
    
    2,941
    
    
    $
    4,516Short term borrowings
    
    
    853
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    853Remaining contractual maturities
of time deposits
    
    
    161,788
    
    
    
    1,942
    
    
    
    1,800
    
    
    
    
    
    
    $
    165,530Total Contractual Obligations
    
    $
    163,078
    
    
    
    2,534
    
    
    
    2,346
    
    
    
    2,941
    
    
    $
    170,899
  Commercial real estate, construction, and
Land development secured by land
    
    $
    13,001Home Equity Loans
    
    
    17,871Standby letters of credit and other
    
    
    574$
    31,446
 FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
   35




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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
   36




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm
    
    
    38Consolidated Balance Sheets
as of December 31, 2008 and 2007
    
    
    39Consolidated Statements of Income
 for the years
ended December 31, 2008 and 2007
    
    
    40Consolidated Statements of Stockholders Equity
for the years ended December 31, 2008 and 2007
    
    
    41Consolidated Statements of Cash Flows 
for the years
ended December 31, 2008 and 2007,
    
    
    42Notes to Consolidated Financial Statements
    
    
    43
  37




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
     
  38




---



##### Table of Contents



CONSOLIDATED BALANCE SHEETS
 
 2008
    
    
    2007AssetsCash and due from banks
    
    $
    304
    
    
    $
    8,481Interest bearing deposits in banks
    
    
    40,107
    
    
    
    543Federal funds sold
    
    
    69
    
    
    
    57,091Total cash and cash equivalents
    
    
    40,480
    
    
    
    66,115Securities available for sale
    
    
    17,731
    
    
    
    Securities held to maturity (fair value approximates
$2,014 at December 31, 2007)
    
    
    
    
    
    
    1,996Restricted investment in bank stock, at cost
    
    
    346
    
    
    
    328Loans
    
    
    234,846
    
    
    
    183,460Deferred loan fees and costs, net
    
    
    90
    
    
    
    76Allowance for loan losses
    
    
    (2,371
    )
    
    
    (1,912
    )Net loans
    
    
    232,565
    
    
    
    181,624Premises and equipment, net
    
    
    10,284
    
    
    
    8,300Accrued interest receivable
    
    
    847
    
    
    
    613Other assets
    
    
    1,851
    
    
    
    1,269Total assets
    
    $
    304,104
    
    
    $
    260,245Liabilities and Stockholders EquityDeposits :Noninterest-bearing demand deposits
    
    $
    28,187
    
    
    $
    23,292Interest bearing deposits:Savings, money market and time deposits
    
    
    102,144
    
    
    
    96,948Time deposits of $100 or more
    
    
    123,675
    
    
    
    92,701Total deposits
    
    
    254,006
    
    
    
    212,941Short term borrowings
    
    
    853
    
    
    
    Accrued expenses and other liabilities
    
    
    1,381
    
    
    
    1,464Total liabilities
    
    
    256,240
    
    
    
    214,405Commitments and contingencies
    
    
    
    
    
    
    Stockholders equity :Common stock, no par value. Authorized 20,000,000
shares; issued and outstanding 5,065,283 shares at
December 31, 2008; and 4,970,090 at December 31, 2007
    
    
    47,133
    
    
    
    45,689Retained Earnings
    
    
    678
    
    
    
    151Accumulated other comprehensive income
    
    
    53
    
    
    
    Total stockholders equity
    
    
    47,864
    
    
    
    45,840Total liabilities and stockholders equity
    
    $
    304,104
    
    
    $
    260,245
   39




---



##### Table of Contents



CONSOLIDATED STATEMENTS OF INCOME
 
 2008
    
    
    2007Interest income:Loans, including fees
    
    $
    12,977
    
    
    $
    10,087Securities
    
    
    708
    
    
    
    264Federal funds sold and other
    
    
    770
    
    
    
    215Total interest income
    
    
    14,455
    
    
    
    10,566Interest expense:Savings and money markets
    
    
    1,260
    
    
    
    1,964Time deposits
    
    
    6,273
    
    
    
    2,132Short term borrowings
    
    
    11
    
    
    
    339Total interest expense
    
    
    7,544
    
    
    
    4,435Net interest income
    
    
    6,911
    
    
    
    6,131Provision for loan losses
    
    
    459
    
    
    
    1,046Net interest income after provision for loan losses
    
    
    6,452
    
    
    
    5,085Non interest incomeFees and service charges on deposit accounts
    
    
    220
    
    
    
    152Fees earned from mortgage referrals
    
    
    15
    
    
    
    12Gains on sale of securities
    
    
    2
    
    
    
    4Total non interest income
    
    
    237
    
    
    
    168Non interest expense:Salaries and employee benefits
    
    
    3,276
    
    
    
    2,451Occupancy and equipment expense
    
    
    1,124
    
    
    
    810Advertising and marketing expenses
    
    
    44
    
    
    
    51Data processing
    
    
    303
    
    
    
    181Legal fees
    
    
    46
    
    
    
    156Other operating expenses
    
    
    949
    
    
    
    714Total other expenses
    
    
    5,742
    
    
    
    4,363Income before income taxes
    
    
    947
    
    
    
    890Income tax expense
    
    
    420
    
    
    
    74Net Income
    
    $
    527
    
    
    $
    816Earnings per share:Basic
    
    $
    0.10
    
    
    $
    0.17Diluted
    
    $
    0.10
    
    
    $
    0.17
    40




---



##### Table of Contents



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
 Years ended December 31, 2008 and 2007
(Dollars in Thousands)
 Retained
    
    
    AccumulatedAdditional
    
    
    Earnings
    
    
    OtherCommon
    
    
    Paid-In
    
    
    (Accumulated
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    Deficit)
    
    

(loss) income
    
    
    TotalBalance at December 31, 2006
    
    $
    23,998
    
    
    $
    19,667
    
    
    $
    (665
    )
    
    $
    39
    
    
    $
    43,039Exchange of common stock 
holding company reorganization
    
    
    19,667
    
    
    
    (19,667
    )
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options (22,000 shares)
    
    
    200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200Exercise of warrants (104,936 shares)
    
    
    1,141
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,141Recognition of stock option expense
    
    
    183
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    183Issuance of common stock (43,478 shares)
    
    
    500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    816
    
    
    
    
    
    
    
    816Unrealized losses on securities available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39
    )
    
    
    (39
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    777Balance at December 31, 2007
    
    $
    45,689
    
    
    $
    
    
    
    $
    151
    
    
    $
    
    
    
    $
    45,840Exercise of warrants (76,195 shares)
    
    
    821
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    821Exercise of stock options (19,998 shares)
    
    
    230
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    230Recognition of stock option expense
    
    
    393
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    393Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    527
    
    
    
    
    
    
    
    527Unrealized gains on securities available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    53Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    580Balance at December 31, 2008
    
    $
    47,133
    
    
    $
    
    
    
    $
    678
    
    
    $
    53
    
    
    $
    47,864
   41




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##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    527
    
    
    $
    816Adjustments to reconcile net income to net cash provided by Operating
activities:Provision for loan losses
    
    
    459
    
    
    
    1,046Deferred tax benefit
    
    
    (206
    )
    
    
    (607
    )Depreciation and amortization
    
    
    345
    
    
    
    193Recognition of stock option expense
    
    
    393
    
    
    
    183Fees earned from mortgage referrals
    
    
    (15
    )
    
    
    (12
    )Gain on sale of securities
    
    
    (2
    )
    
    
    (4
    )Changes in operating assets and liabilities:Increase in accrued interest receivable
    
    
    (234
    )
    
    
    (174
    )Increase in other assets
    
    
    (398
    )
    
    
    (8
    )(Decrease)Increase in accrued expenses and other liabilities
    
    
    (82
    )
    
    
    323Net cash provided by operating activities
    
    
    787
    
    
    
    1,756Cash flows from investing activities:Purchases of securities available for sale
    
    
    (32,641
    )
    
    
    Proceeds from maturity of securities held to maturity
    
    
    1,996
    
    
    
    Proceeds from called and matured securities available for sale
    
    
    13,000
    
    
    
    Proceeds from sales of securities available for sale
    
    
    2,002
    
    
    
    9,565Purchase of restricted investment in bank stock
    
    
    (18
    )
    
    
    (228
    )Net increase in loans
    
    
    (51,400
    )
    
    
    (102,851
    )Purchases of premises and equipment
    
    
    (2,329
    )
    
    
    (3,881
    )Net cash used in investing activities
    
    
    (69,390
    )
    
    
    (97,395
    )Cash flows from financing activities:Net increase in deposits
    
    
    41,064
    
    
    
    151,074Net increase in short term borrowings
    
    
    853
    
    
    
    Proceeds from issuance of common stock
    
    
    
    
    
    
    500Proceeds from exercise of stock options
    
    
    821
    
    
    
    200Proceeds from exercise of warrants
    
    
    230
    
    
    
    1,141Net cash provided by financing activities
    
    
    42,968
    
    
    
    152,915(Decrease) Increase in cash and cash equivalents
    
    
    (25,635
    )
    
    
    57,276Cash and cash equivalents at beginning of year
    
    
    66,115
    
    
    
    8,839Cash and cash equivalents at end of year
    
    $
    40,480
    
    
    $
    66,115Supplemental information:Cash paid during the year for:Interest
    
    $
    7,920
    
    
    $
    3,558Taxes
    
    $
    372
    
    
    $
    578
   42




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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
    43




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##### Table of Contents



Significant Group of Concentration of Credit Risk
  Cash and Cash Equivalents
  Interest-bearing deposits in banks
  Regulators
  Securities
   Premises and Equipment
   44




---



##### Table of Contents



Loans and Allowance for Loan Losses
         45




---



##### Table of Contents



Stock-Based Compensation
   Income Taxes
   Earnings Per Share
  Comprehensive Income
   46




---



##### Table of Contents



Advertising
  Transfer of Financial Assets
  Restricted Investment in Bank Stock
  Accounting by Certain Entities (Including Entities With Trade
Receivables) That Lend to or Finance the Activities of Others
   47




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##### Table of Contents



NOTE 2. Securities
   Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairDecember 31, 2008
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueGovernment Sponsored
Enterprise obligations
    
    $
    17,641
    
    
    $
    90
    
    
    $
    
    
    
    $
    17,731
   Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairDecember 31, 2007
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury Obligations
    
    $
    1,996
    
    
    $
    18
    
    
    $
    
    
    
    $
    2,014
    Amortized
    
    
    FairCost
    
    
    ValueWithin 1 year
    
    
    
    
    
    
    1 to 5 years
    
    $
    13,391
    
    
    $
    13,478Over 5 years
    
    $
    4,250
    
    
    $
    4,253$
    17,641
    
    
    $
    17,731
  48




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##### Table of Contents



NOTE 3. Loans and Allowance for Loan Losses
  December 31,2008
    
    
    2007Real estate
    
    $
    159,058
    
    
    $
    123,335Commercial
    
    
    33,319
    
    
    
    27,056Credit lines
    
    
    37,962
    
    
    
    28,133Consumer
    
    
    4,507
    
    
    
    4,936$
    234,846
    
    
    $
    183,460
   Years ended December 31,2008
    
    
    2007Balance at beginning of year
    
    $
    1,912
    
    
    $
    866Provision charged to expense
    
    
    459
    
    
    
    1,046Loans charged off
    
    
    
    
    
    
    Recoveries
    
    
    
    
    
    
    Balance at end of year
    
    $
    2,371
    
    
    $
    1,912
  NOTE 4. Premises and Equipment
  2008
    
    
    2007Land
    
    $
    5,152
    
    
    $
    3,350Building
    
    
    4,642
    
    
    
    4,409Furniture and fixtures
    
    
    507
    
    
    
    375Equipment
    
    
    576
    
    
    
    41410,877
    
    
    
    8,548Less accumulated depreciation and amortization
    
    
    593
    
    
    
    248Total premises and equipment, net
    
    $
    10,284
    
    
    $
    8,300
   49




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##### Table of Contents



NOTE 5. Deposits
  2008
    
    
    2007Three months or less
    
    $
    48,760
    
    
    $
    20,408Over three months through twelve months
    
    
    113,028
    
    
    
    112,475Over 1 year through 2 years
    
    
    1,815
    
    
    
    921Over 2 years through 3 years
    
    
    127
    
    
    
    141Over 3 years through 4 years
    
    
    
    
    
    
    12Over 4 years through 5 years
    
    
    1,800
    
    
    
    47Over 5 years
    
    
    
    
    
    
    $
    165,530
    
    
    $
    134,004
 NOTE 6. Short Term Borrowings
   50




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##### Table of Contents



NOTE 7. Income Taxes
  2008
    
    
    2007Federal:Current
    
    $
    480
    
    
    $
    519Deferred
    
    
    (160
    )
    
    
    (349
    )State:Current
    
    
    146
    
    
    
    162Deferred
    
    
    (46
    )
    
    
    (258
    )Income tax expense
    
    $
    420
    
    
    $
    74
  2008
    
    
    2007Deferred tax assets:Start up expenses
    
    $
    433
    
    
    $
    468Allowance for loan losses
    
    
    854
    
    
    
    744Accrued expenses
    
    
    76
    
    
    
    50Stock compensation plans
    
    
    162
    
    
    
    39Total gross deferred tax assets
    
    
    1,525
    
    
    
    1,301Deferred tax liabilities:Deferred loan costs
    
    
    (68
    )
    
    
    (63
    )Prepaid expenses
    
    
    (57
    )
    
    
    (36
    )Unrealized gains on AFS securities
    
    
    (36
    )
    
    
    Other
    
    
    (23
    )
    
    
    (31
    )Total gross deferred tax liabilities
    
    
    (184
    )
    
    
    (130
    )Net deferred tax asset
    
    $
    1,341
    
    
    $
    1,171
   51




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##### Table of Contents



2008
    
    
    2007Computed expected tax expense
    
    $
    322
    
    
    $
    303Increase(decrease) in taxes resulting from:State taxes, net of federal income tax
(benefit)expense
    
    
    66
    
    
    
    (63
    )Non-deductible penalties
    
    
    
    
    
    
    5Stock-based compensation
    
    
    29
    
    
    
    28Meals and entertainment
    
    
    3
    
    
    
    3Change in valuation allowance
    
    
    
    
    
    
    (202
    )$
    420
    
    
    $
    74
  NOTE 8. Leases
   Year ending December 31:2009
    
    $
    4372010
    
    
    3302011
    
    
    2622012
    
    
    2692013
    
    
    277Thereafter
    
    
    2,941$
    4,516
  52




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##### Table of Contents



NOTE 9. Related-party Transactions
   Outstanding loans at beginning of the year
    
    $
    13,849New Loans
    
    
    11,959Repayments
    
    
    (6,003
    )Outstanding loans at end of the year
    
    $
    19,805
      53




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##### Table of Contents



NOTE 10. Earnings Per Share
 
 For the Year EndedDecember 31,(In thousands, except per share data)
    
    2008
    
    
    2007Net income applicable to common stock
    
    $
    527
    
    
    $
    816Weighted average number of common
shares outstanding  basic
    
    
    5,023
    
    
    
    4,856Basic earnings per share
    
    $
    0.10
    
    
    $
    0.17Net income applicable to common stock
    
    $
    527
    
    
    $
    816Weighted average number of common shares outstanding  dilutedWeighted average number of common
shares outstanding
    
    
    5,023
    
    
    
    4,856Effect of dilutive warrants
    
    
    67
    
    
    
    24Weighted average number of common
shares outstanding
    
    
    5,090
    
    
    
    4,880Diluted earnings per share
    
    $
    0.10
    
    
    $
    0.17
   54




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##### Table of Contents



NOTE 11. Stockholders Equity and Dividend Restrictions
        55




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##### Table of Contents



NOTE 12. Benefit Plans
 2006 Stock Option Plan
     56




---



##### Table of Contents



Weighted Average
    
    
    AverageNumber of
    
    
    Exercise price
    
    
    IntrinsicShares
    
    
    per share
    
    
    Value (1)Outstanding at December 31, 2006
    
    
    124,300
    
    
    $
    9.09Granted
    
    
    96,000
    
    
    $
    11.50Forfeited
    
    
    Exercised
    
    
    (22,000
    )
    
    $
    9.09Outstanding at December 31, 2007
    
    
    198,300
    
    
    $
    10.26
    
    
    $
    246,543Granted
    
    
    
    
    
    
    Forfeited
    
    
    (9,400
    )
    
    $
    10.37Exercised
    
    
    
    
    
    
    Outstanding at December 31, 2008
    
    
    188,900
    
    
    $
    10.26
    
    
    $
    139,786Exercisable at December 31, 2008
    
    
    106,673
    
    
    $
    9.53
    
    
    $
    156,810
 (1)
    
    The aggregate instirinsic 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, 2008. This amount changes based on
the changes in the market value in the Companys stock.  Weighted Average
    
    
    WeightedNumber
    
    
    Remaining
    
    
    AverageRange of Exercise Prices
    
    Outstanding
    
    
    Contractual life (years)
    
    
    Exercise Price$9.09
    
    
    97,900
    
    
    
    7.83
    
    
    $
    9.09$11.50
    
    
    91,000
    
    
    
    8.92
    
    
    $
    11.50188,900
   57




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##### Table of Contents



2007 Director Plan
    WeightedAverage
    
    
    
    
    
    
    Weighted AverageNumber
    
    
    Exercise
    
    
    Average
    
    
    Remainingof
    
    
    price per
    
    
    Intrinsic
    
    
    Contractual lifeShares
    
    
    share
    
    
    Value (1)
    
    
    (years)Outstanding at December 31, 2007
    
    
    460,000
    
    
    $
    11.50
    
    
    $
    
    
    
    
    8.81Granted
    
    
    
    
    
    
    Forfeited
    
    
    (23,334
    )
    
    $
    11.50Exercised
    
    
    (21,998
    )
    
    $
    11.50Outstanding at December 31, 2008
    
    
    414,668
    
    
    $
    11.50
    
    
    $
    Exercisable at December 31, 2008
    
    
    86,658
 (1)
    
    The aggregate instirinsic 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, 2008 and 2007, respectively. This
amount changes based on the changes in the market value in the Companys stock.   58




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##### Table of Contents



NOTE 12. Benefit Plans (continued)
 Weighted Average Assuptions for options granted
  2007 Director 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
   59




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##### Table of Contents



NOTE 13. Regulatory Capital Requirements
    60




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##### Table of Contents



FDIC requirementsMinimum capital
    
    
    For classificationBank actual
    
    
    adequacy
    
    
    as well capitalizedAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioDecember 31, 2008:Leverage (Tier 1)Capital
    
    $
    47,811
    
    
    
    16.95
    %
    
    $
    11,281
    
    
    
    4.00
    %
    
    $
    14,101
    
    
    
    5.00
    %Risk-based capital:Tier 1
    
    $
    47,811
    
    
    
    21.16
    %
    
    $
    9,040
    
    
    
    4.00
    %
    
    $
    13,560
    
    
    
    6.00
    %Total
    
    $
    50,182
    
    
    
    22.20
    %
    
    $
    18,080
    
    
    
    8.00
    %
    
    $
    22,600
    
    
    
    10.00
    %December 31, 2007:Leverage (Tier 1)Capital
    
    $
    45,840
    
    
    
    22.27
    %
    
    $
    8,235
    
    
    
    4.00
    %
    
    $
    10,293
    
    
    
    5.00
    %Risk-based capital:Tier 1
    
    $
    45,840
    
    
    
    25.06
    %
    
    $
    7,315
    
    
    
    4.00
    %
    
    $
    10,973
    
    
    
    6.00
    %Total
    
    $
    47,752
    
    
    
    26.11
    %
    
    $
    14,631
    
    
    
    8.00
    %
    
    $
    18,289
    
    
    
    10.00
    %
    61




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##### Table of Contents



NOTE 14. Financial Instruments with Off-Balance Sheet Risk
    NOTE 15. Financial Information of Parent Company
  Balance Sheet
 December 31,2008
    
    
    2007Assets:Investment in subsidiary, net
    
    $
    47,864
    
    
    $
    45,840Total assets
    
    $
    47,864
    
    
    $
    45,840Stockholders equity:
    
    $
    47,864
    
    
    $
    45,840
  62




---



##### Table of Contents



Statement of Income
 2008
    
    
    

2007
 Equity in undistributed
earnings of subsidiary bank
    
    $
    527
    
    
    $
    816Net income
    
    $
    527
    
    
    $
    816
 Statement of Cash Flow
 2008
    
    

2007Cash flows from operating activities:Net income
    
    $
    527
    
    
    $
    816Adjustments to reconcile net income to net cash
provided by operating activities:Equity in undistributed earnings of the
subsidiary bank
    
    
    (527
    )
    
    
    (816
    )Decrease in other assets, net
    
    
    
    
    
    
    Net cash provided by operating activities
    
    
    
    
    
    
    Cash flows from investing activities:Capital contributed to subsidiary bank
    
    
    (1,051
    )
    
    
    (1,585
    )Net cash used in financing activities
    
    
    (1,051
    )
    
    
    (1,585
    )Cash flows from financing activities:Proceeds from exercise of warrants
    
    
    821
    
    
    
    1,085Proceeds from issuance of common stock
    
    
    230
    
    
    
    500Net cash provided by financing activities
    
    
    1,051
    
    
    
    1,585Net change in cash for the period
    
    
    
    
    
    
    Net cash at beginning of year
    
    
    
    
    
    
    Net cash at end of year
    
    $
    
    
    
    $
    
  63




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##### Table of Contents



NOTE 16. Fair Value Measurement and Fair Value of Financial Instruments
  Fair Value Measurements
 Effective Date of FASB Statement
No. 157 (FSP 157-2). Determining the Fair Value of a Financial Asset When the Market for that Asset is Not Active
(FSP 157-3)
  
    
    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).
   64




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##### Table of Contents



(Level 1)QuotedPrices in
    
    
    (Level 2)Active
    
    
    Significant
    
    
    (Level 3)Markets for
    
    
    Other
    
    
    SignificantDecember 31,
    
    
    Identical
    
    
    Observable
    
    
    UnobservableDescription
    
    2008
    
    
    Assets
    
    
    Inputs
    
    
    InputsSecurities
available for sale
    
    $
    17,731
    
    
    $
    
    
    
    $
    17,731
    
    
    $
    
  (Level 1)QuotedPrices in
    
    
    (Level 2)Active
    
    
    Significant
    
    
    (Level 3)Markets for
    
    
    Other
    
    
    SignificantDecember 31,
    
    
    Identical
    
    
    Observable
    
    
    UnobservableDescription
    
    2008
    
    
    Assets
    
    
    Inputs
    
    
    InputsImpaired loans
    
    $
    1,977
    
    
    $
    
    
    
    $
    
    
    
    $
    1,977
   Cash and Cash Equivalents (Carried at cost)
   65




---



##### Table of Contents



Securities
  Restricted Investment in Bank Stock (Carried at Cost)
  Loans Receivable (Carried at Cost)
  Impaired loans
 Accounting
by Creditors for Impairment of a Loan (SFAS 114)
  Accrued Interest Receivable and Payable (Carried at Cost)
   66




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##### Table of Contents



Deposits (Carried at Cost)
  Federal Funds Purchased and Short-Term Borrowings (Carried at Cost)
   2008
    
    
    2007Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    Estimatedamount
    
    
    Fair Value
    
    
    amount
    
    
    Fair ValueFinancial assets:Cash and cash equivalents
    
    $
    40,480
    
    
    $
    40,480
    
    
    $
    66,115
    
    
    $
    66,115Securities available for sale
    
    
    17,641
    
    
    
    17,731
    
    
    
    
    
    
    
    Securities held to maturity
    
    
    
    
    
    
    
    
    
    
    1,996
    
    
    
    2,014Restricted investment in bank stock
    
    
    346
    
    
    
    346
    
    
    
    328
    
    
    
    328Net loans
    
    
    232,565
    
    
    
    232,744
    
    
    
    181,624
    
    
    
    181,068Accrued interest receivable
    
    
    847
    
    
    
    847
    
    
    
    613
    
    
    
    613Financial liabilities:Deposits
    
    
    254,005
    
    
    
    255,935
    
    
    
    212,941
    
    
    
    212,933Federal funds purchased
    
    
    853
    
    
    
    853
    
    
    
    
    
    
    
    Accrued interest payable
    
    
    541
    
    
    
    541
    
    
    
    917
    
    
    
    917
 Limitation
    67




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##### Table of Contents



NOTE 17. Quarterly Financial Data (unaudited)
  
 December 31
    
    
    September 30
    
    
    June 30
    
    

March 312008Interest income
    
    $
    3,653
    
    
    $
    3,543
    
    
    $
    3,530
    
    
    $
    3,729Interest expense
    
    
    1,779
    
    
    
    1,689
    
    
    
    1,862
    
    
    
    2,214Net interest income
    
    
    1,874
    
    
    
    1,854
    
    
    
    1,668
    
    
    
    1,515Provision for loan losses
    
    
    146
    
    
    
    88
    
    
    
    67
    
    
    
    158Other expense, net
    
    
    1,422
    
    
    
    1,349
    
    
    
    1,422
    
    
    
    1,312Provision for federal and state
income taxes
    
    
    132
    
    
    
    179
    
    
    
    77
    
    
    
    32Net income
    
    $
    174
    
    
    $
    238
    
    
    $
    102
    
    
    $
    13Earnings per share:Basic
    
    $
    0.03
    
    
    $
    0.05
    
    
    $
    0.02
    
    
    $
    0.00Diluted
    
    $
    0.03
    
    
    $
    0.05
    
    
    $
    0.02
    
    
    $
    0.002007Interest income
    
    $
    3,328
    
    
    $
    2,886
    
    
    $
    2,391
    
    
    $
    1,965Interest expense
    
    
    1,649
    
    
    
    1,242
    
    
    
    903
    
    
    
    641Net interest income
    
    
    1,679
    
    
    
    1,644
    
    
    
    1,488
    
    
    
    1,324Provision for loan losses
    
    
    140
    
    
    
    278
    
    
    
    239
    
    
    
    389Other expense, net
    
    
    1,290
    
    
    
    1,066
    
    
    
    963
    
    
    
    880Provision(benefit) for federal and state
income taxes
    
    
    111
    
    
    
    (144
    )
    
    
    80
    
    
    
    27Net income
    
    $
    138
    
    
    $
    444
    
    
    $
    206
    
    
    $
    28Earnings per share:Basic
    
    $
    0.03
    
    
    $
    0.09
    
    
    $
    0.04
    
    
    $
    0.01Diluted
    
    $
    0.03
    
    
    $
    0.09
    
    
    $
    0.04
    
    
    $
    0.01
  68




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NOTE 18. Recent Accounting Pronouncements
       69




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70




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71




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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
      72




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Changes in Internal Controls Over Financial Reporting
  Limitations on Effectiveness of Controls
  
 ITEM 9B. OTHER INFORMATION
   73




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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
   74




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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, 2008 and 2007.(ii)
    
    Consolidated Statements of Income for the years ended
December 31, 2008 and 2007.(iii)
    
    Consolidated Statements of Stockholders Equity for the
years ended December 31, 2008 and 2007.(iv)
    
    Consolidated Statements of Cash Flows for the years ended
December 31, 2008 and 2007.(v)
    
    Notes to Consolidated Financial Statement(vi)
    
    Reports of Independent Registered Public Accounting Firms
 (b)
    
    Financial Statement Schedules
  (c)
    
    Exhibits
   75




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SIGNATURES
  BANCORP OF NEW JERSEY, INC.By:
    /s/ Albert F. BuzzettiAlbert F. BuzzettiChairman, President and CEO   Name
    
    Title
    
    Date/s/ Albert F. Buzzetti

Albert F. Buzzetti
    
    Chairman, President, and

Chief Executive Officer
    
    March 31, 2009/s/ Armand Leone, Jr.

Armand Leone, Jr.
    
    Vice Chairman and Director
    
    March 31, 2009/s/ Michael Bello

Michael Bello
    
    Director
    
    March 31, 2009/s/ Jay Blau

Jay Blau
    
    Director
    
    March 31, 2009/s/ Albert L. Buzzetti

Albert L. Buzzetti
    
    Director
    
    March 31, 2009/s/ Gerald A. Calabrese, Jr.

Gerald A. Calabrese, Jr.
    
    Director
    
    March 31, 2009/s/ Stephen Crevani

Stephen Crevani
    
    Director
    
    March 31, 2009/s/ John K. Daily

John K. Daily
    
    Director
    
    March 31, 2009/s/ Anthony M. Lo Conte

Anthony M. Lo Conte
    
    Director
    
    March 31, 2009/s/ Rosario Luppino

Rosario Luppino
    
    Director
    
    March 31, 2009
  76




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Name
    
    Title
    
    Date/s/ Howard Mann

Howard Mann
    
    Director
    
    March 31, 2009/s/ Josephine Mauro

Josephine Mauro
    
    Director
    
    March 31, 2009/s/ Joel P. Paritz

Joel P. Paritz
    
    Director
    
    March 31, 2009/s/ Christopher M. Shaari

Christopher M. Shaari
    
    Director
    
    March 31, 2009/s/ Anthony Siniscalchi

Anthony Siniscalchi
    
    Director
    
    March 31, 2009/s/ Mark Sokolich

Mark Sokolich
    
    Director
    
    March 31, 2009/s/ Diane M. Spinner

Diane M. Spinner
    
    Executive Vice President and
Director
    
    March 31, 2009
  77




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##### Table of Contents



ExhibitNo.
    
    Description2.1
    (A)
    
    Plan of Acquisition3.1
    (A)
    
    Certificate of Incorporation3.2
    (A)
    
    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
    (B)
    
    2007 Non-Qualified Stock Option Plan For Directors10.8
    (C)
    
    Form of Stock Option Award Agreement21
    
    
    Subsidiaries of the Registrant23
    
    
    Consent of Beard Miller Company LLP31.1
    
    
    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 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(C)
    
    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  78