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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20429
 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, 2006
 o
    
    TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 0-1354835  (Commission File Number)
 BOARDWALK BANCORP, INC.
  New Jersey
    
    20-4392739(State or other jurisdiction of incorporation or organization)
    
    (IRS Employer Identification Number)
 201 Shore Road, Linwood, NJ
    
    08221(Address of principal executive offices)
    
    (Zip Code)
 609-601-0600
   (Former name, former address and former fiscal year, if changed since last report)
  Title of Class
    
    Name of each exchange on which registeredCommon Stock ($5 par value)
    
    The NASDAQ Stock Market LLC
  o þ
 o þ
 þ o
 o
  o o þ
 o þ
  Documents Incorporated By Reference




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TABLE OF CONTENTS  PART IItem 1  BusinessItem 1A  Risk FactorsItem 1B  Unresolved Staff CommentsItem 2  PropertiesItem 3  Legal ProceedingsItem 4  Submission of Matters to a Vote of Security HoldersPART IIItem 5  Market for the Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity SecuritiesItem 6  Selected Financial DataItem 7  Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A  Quantitative and Qualitative Disclosure About Market RiskItem 8  Financial Statements and Supplementary DataPART IIIItem 9  Changes and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A  Controls and ProceduresItem 10  Directors, Executive Officers and Corporate GovernanceItem 11  Executive CompensationItem 12  Security Ownership of Certain Beneficial Owners and Management and Related Shareholder MattersItem 13  Certain Relationships and Related Transactions, and Director IndependenceItem 14  Principal Accounting Fees and ServicesPART IVItem 15  Exhibits and Financial Statement SchedulesSIGNATURESCertification of Chief Executive OfficerCertification of Chief Financial OfficerCertification of CEO and CFO under Section 906    Table of Contents  
 PART I
 
 Item 1  Business
 Boardwalk Bank/Boardwalk Bancorp, Inc.
      Market Area
   Business Strategy
  Page 2 of 65




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Lending Activities
  
    
    To establish a diversified loan portfolio comprised primarily of commercial loans but
including mortgage loans and consumer loans;
    
    To provide a satisfactory return to our shareholders by properly pricing loans to include
the cost of funds, administrative costs, bad debts, local economic conditions, competition,
customer relationships, the term of the loan, credit risk, collateral quality and a
reasonable profit margin;
    
    To provide protection for our shareholders by maintaining a prudent level of credit risk;
and
    
    To provide the highest quality of lending services to small and mid-sized businesses
located in the Banks extended market area.
       Page 3 of 65




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Investment Activities
     Sources of Funds
  Competition
    Page 4 of 65




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Supervision and Regulation
 Bank Regulation
    Environmental Laws
  Federal Reserve Board Requirements
  
 Item 1A  Risk Factors
  Our success will depend upon our ability to effectively sustain and manage our future growth.
   Page 5 of 65




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We depend primarily on net interest income for our earnings rather than fee income.
 .
 Changes in interest rates may adversely affect our earnings and financial condition.
    Most of our loans are commercial loans, which have a higher degree of risk than other types of
loans.
  Most of our loans are secured, in whole or in part, with real estate collateral which is subject to
declines in value.
  The concentration of our commercial loans in specific business sectors and geographic areas exposes
us to the risk of a possible economic downturn affecting those sectors and areas.
  Page 6 of 65




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We have incurred and expect to continue to incur significant expenses in connection with our branch
expansion.
  Loss of our key personnel or an inability to hire and retain qualified personnel could adversely
affect our business.
  If we experience loan losses in excess of our allowance, our earnings will decrease.
   Competition from other financial institutions in originating loans and attracting deposits may
adversely affect our profitability.
   Page 7 of 65




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The laws that regulate our operations are designed for the protection of depositors and the public,
not our shareholders.
  There is a limited trading market for our common stock, which may adversely impact your ability to
sell your shares and the price you receive for your shares.
  Our common stock is not insured by the FDIC or any other governmental agency and you could lose the
value of your entire investment.
  Our management and significant shareholders control a substantial percentage of our stock and
therefore have the ability to exercise substantial control over our affairs.
  
 Item 1B  Unresolved Staff Comments
  
 Item 2  Properties
  
 Item 3  Legal Proceedings
  
 Item 4  Submission of Matters to a Vote of Security Holders
  Page 8 of 65




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PART II
 
 Item 5  Market for the Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
   High
    
    Low2006:First Quarter
    
    $
    18.97
    
    
    $
    16.90Second Quarter
    
    $
    18.50
    
    
    $
    16.50Third Quarter
    
    $
    17.00
    
    
    $
    15.48Fourth Quarter
    
    $
    17.06
    
    
    $
    15.92
 High
    
    Low2005:First Quarter
    
    $
    19.00
    
    
    $
    16.65Second Quarter
    
    $
    17.72
    
    
    $
    16.59Third Quarter
    
    $
    17.68
    
    
    $
    16.20Fourth Quarter
    
    $
    17.59
    
    
    $
    15.70
  Dividend
    
    Date paid2006:First Quarter
    
    $
    0.06
    
    
    
    02/13/06Second Quarter
    
    $
    0.07
    
    
    
    05/18/06Third Quarter
    
    $
    0.07
    
    
    
    08/07/06Fourth Quarter
    
    $
    0.08
    
    
    
    11/09/06
    Prior to July 1, 2006, the Bank was subject to the informational requirements of the
Securities and Exchange Act of 1934, as amended, and in accordance therewith filed reports and
other information with the FDIC. Reports, registration statements, proxy statements and other
information filed by the Bank with the FDIC can be inspected and copied at the public reference
facilities maintained by the FDIC at 550 17 th Street, N.W., Washington, D.C.
 Subsequent to July 1, 2006, Bancorp is subject to the informational requirements of the
Exchange Act, and in accordance therewith files reports and other information with the Securities
and Exchange Commission (SEC). We file annual, quarterly and current reports, proxy statements
and other information with the SEC. Our SEC filings are available to the public over the internet
at the SECs web site at http://www.sec.gov. You can also read and copy any document we file with
the SEC at its public reference facilities at 450 Fifth Street, N.W., Washington, D.C. 20549. You
can also obtain copies of
 Page 9 of 65




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the documents at prescribed rates by writing to the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the SECs Regional Offices in Chicago (Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661).
 Page 10 of 65




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Item 6  Selected Financial Data
 At and For Years Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in thousands, except per share)INCOME STATEMENTInterest income
    
    $
    26,394
    
    
    $
    18,867
    
    
    $
    12,699
    
    
    $
    9,079
    
    
    $
    7,172Interest expense
    
    
    14,161
    
    
    
    8,492
    
    
    
    5,052
    
    
    
    3,396
    
    
    
    3,134Net interest income
    
    
    12,233
    
    
    
    10,375
    
    
    
    7,647
    
    
    
    5,683
    
    
    
    4,038Provision for loan losses
    
    
    448
    
    
    
    674
    
    
    
    248
    
    
    
    600
    
    
    
    424Net interest income after provision for loan
losses
    
    
    11,785
    
    
    
    9,701
    
    
    
    7,399
    
    
    
    5,083
    
    
    
    3,614Non-interest income
    
    
    1,197
    
    
    
    828
    
    
    
    679
    
    
    
    797
    
    
    
    591Non-interest expense
    
    
    8,923
    
    
    
    6,719
    
    
    
    5,026
    
    
    
    3,609
    
    
    
    2,847Income before income tax expense
    
    
    4,059
    
    
    
    3,810
    
    
    
    3,052
    
    
    
    2,271
    
    
    
    1,358Income tax expense
    
    
    1,034
    
    
    
    1,210
    
    
    
    981
    
    
    
    847
    
    
    
    20Net income
    
    $
    3,025
    
    
    $
    2,600
    
    
    $
    2,071
    
    
    $
    1,424
    
    
    $
    1,338PER SHARE INFORMATION1Weighted average basic shares outstanding
    
    
    3,258,696
    
    
    
    2,941,597
    
    
    
    2,432,096
    
    
    
    2,349,427
    
    
    
    1,279,043Weighted average diluted shares outstanding
    
    
    3,626,888
    
    
    
    3,387,524
    
    
    
    2,759,725
    
    
    
    2,415,297
    
    
    
    1,324,685Net income
    
    $
    3,025
    
    
    $
    2,600
    
    
    $
    2,071
    
    
    $
    1,424
    
    
    $
    1,338Basic earnings per share
    
    
    0.93
    
    
    
    0.88
    
    
    
    0.85
    
    
    
    0.61
    
    
    
    1.05Diluted earnings per share
    
    
    0.83
    
    
    
    0.77
    
    
    
    0.75
    
    
    
    0.59
    
    
    
    1.01Book Value
    
    $
    11.92
    
    
    $
    11.47
    
    
    $
    10.37
    
    
    $
    9.71
    
    
    $
    9.44BALANCE SHEET DATALoans
    
    $
    277,466
    
    
    $
    244,237
    
    
    $
    179,881
    
    
    $
    118,042
    
    
    $
    86,281Allowance for loan losses
    
    
    (3,273
    )
    
    
    (2,861
    )
    
    
    (2,185
    )
    
    
    (1,482
    )
    
    
    (1,340
    )Total deposits
    
    
    309,953
    
    
    
    272,494
    
    
    
    210,954
    
    
    
    145,142
    
    
    
    104,620Total assets
    
    
    453,280
    
    
    
    401,666
    
    
    
    298,395
    
    
    
    221,585
    
    
    
    141,551Total shareholders equity
    
    $
    51,127
    
    
    $
    35,343
    
    
    $
    27,031
    
    
    $
    24,458
    
    
    $
    12,072OPERATING RATIOSReturn on average assets
    
    
    0.70
    %
    
    
    0.77
    %
    
    
    0.79
    %
    
    
    0.79
    %
    
    
    1.06
    %Return on average equity
    
    
    8.01
    %
    
    
    7.93
    %
    
    
    8.11
    %
    
    
    6.35
    %
    
    
    11.63
    %Interest rate spread
    
    
    2.71
    %
    
    
    3.01
    %
    
    
    2.94
    %
    
    
    3.10
    %
    
    
    3.04
    %Net interest margin
    
    
    3.02
    %
    
    
    3.27
    %
    
    
    3.14
    %
    
    
    3.37
    %
    
    
    3.33
    %ASSET QUALITYNon-performing loans/total loans
    
    
    0.17
    %
    
    
    
    
    
    
    
    
    
    
    1.32
    %
    
    
    0.84
    %Non-performing assets/total assets
    
    
    0.11
    %
    
    
    
    
    
    
    
    
    
    
    0.71
    %
    
    
    0.51
    %Allowance/total loans
    
    
    1.18
    %
    
    
    1.17
    %
    
    
    1.21
    %
    
    
    1.26
    %
    
    
    1.55
    %Allowance/non- performing loans
    
    
    681.88
    %
    
    
    
    
    
    
    
    
    
    
    94.82
    %
    
    
    184.32
    %Net charge-offs/average loans
    
    
    0.01
    %
    
    
    
    
    
    
    
    
    
    
    0.44
    %
    
    
    0.05
    %ALLOWANCE FOR LOAN LOSSESBeginning of the period
    
    $
    2,861
    
    
    $
    2,185
    
    
    $
    1,482
    
    
    $
    1,340
    
    
    $
    882Charge-offs
    
    
    (39
    )
    
    
    
    
    
    
    
    
    
    
    (474
    )
    
    
    (14
    )Recoveries
    
    
    3
    
    
    
    2
    
    
    
    455
    
    
    
    16
    
    
    
    48Provision for loan losses
    
    
    448
    
    
    
    674
    
    
    
    248
    
    
    
    600
    
    
    
    424End of the period
    
    $
    3,273
    
    
    $
    2,861
    
    
    $
    2,185
    
    
    $
    1,482
    
    
    $
    1,340CAPITAL RATIOSEnding equity/ending assets
    
    
    11.28
    %
    
    
    8.80
    %
    
    
    9.06
    %
    
    
    11.04
    %
    
    
    8.53
    %Tier I capital/average assets
    
    
    8.86
    %
    
    
    9.54
    %
    
    
    9.42
    %
    
    
    11.86
    %
    
    
    8.27
    %Tier I capital/risk-weighted assets
    
    
    10.96
    %
    
    
    11.82
    %
    
    
    12.14
    %
    
    
    15.84
    %
    
    
    10.73
    %Total risk-based capital/risk-weighted assets
    
    
    11.86
    %
    
    
    12.75
    %
    
    
    13.12
    %
    
    
    16.80
    %
    
    
    11.94
    %
 
 1
    
    As adjusted for stock dividends Page 11 of 65




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Item 7  Managements Discussion and Analysis of Financial Condition and Results of Operations
 General
   Management Strategy
     Critical Accounting Matters
 Allowance for Loan Losses
   Page 12 of 65




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Income Taxes
  Page 13 of 65




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Results of Operations  Overview
     Net Interest Income
    Page 14 of 65




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Average Balances, Yields and Interest Income and Expense Summary
 For the Years Ended December 31,2006
    
    
    2005
    
    
    2004Interest
    
    
    
    
    
    
    
    
    
    
    Interest
    
    
    
    
    
    
    
    
    
    
    InterestAverage
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    AverageBalance
    
    
    Expense
    
    
    Yield
    
    
    Balance
    
    
    Expense
    
    
    Yield
    
    
    Balance
    
    
    Expense
    
    
    Yield(Dollars in thousands)Interest Earning AssetsShort Term Investments
    
    $
    4,029
    
    
    $
    196
    
    
    
    4.86
    %
    
    $
    4,799
    
    
    $
    156
    
    
    
    3.25
    %
    
    $
    9,211
    
    
    $
    125
    
    
    
    1.36
    %Investments
    
    
    135,923
    
    
    
    6,919
    
    
    
    5.09
    %
    
    
    98,925
    
    
    
    4,405
    
    
    
    4.45
    %
    
    
    86,993
    
    
    
    3,307
    
    
    
    3.80
    %Loans
    
    
    265,383
    
    
    
    19,279
    
    
    
    7.26
    %
    
    
    213,634
    
    
    
    14,306
    
    
    
    6.70
    %
    
    
    146,648
    
    
    
    9,267
    
    
    
    6.32
    %Total interest earning assets
    
    
    405,335
    
    
    
    26,394
    
    
    
    6.51
    %
    
    
    317,358
    
    
    
    18,867
    
    
    
    5.95
    %
    
    
    242,852
    
    
    
    12,699
    
    
    
    5.23
    %Non-interest earning assets
    
    
    31,535
    
    
    
    
    
    
    
    
    
    
    
    24,226
    
    
    
    
    
    
    
    
    
    
    
    19,466Allowance for loan losses
    
    
    (3,098
    )
    
    
    
    
    
    
    
    
    
    
    (2,554
    )
    
    
    
    
    
    
    
    
    
    
    (1,771
    )Total assets
    
    $
    433,772
    
    
    
    
    
    
    
    
    
    
    $
    339,030
    
    
    
    
    
    
    
    
    
    
    $
    260,547Interest Bearing LiabilitiesInterest bearing demand accounts
    
    $
    35,574
    
    
    
    643
    
    
    
    1.81
    %
    
    $
    42,781
    
    
    
    739
    
    
    
    1.73
    %
    
    $
    41,096
    
    
    
    504
    
    
    
    1.23
    %Savings accounts
    
    
    7,626
    
    
    
    103
    
    
    
    1.35
    %
    
    
    8,371
    
    
    
    107
    
    
    
    1.28
    %
    
    
    8,613
    
    
    
    108
    
    
    
    1.25
    %Corporate money market accounts
    
    
    22,251
    
    
    
    472
    
    
    
    2.12
    %
    
    
    23,843
    
    
    
    464
    
    
    
    1.95
    %
    
    
    16,443
    
    
    
    243
    
    
    
    1.48
    %Certificates of deposit
    
    
    216,940
    
    
    
    9,351
    
    
    
    4.31
    %
    
    
    144,774
    
    
    
    4,727
    
    
    
    3.27
    %
    
    
    104,673
    
    
    
    2,666
    
    
    
    2.55
    %FHLB borrowings
    
    
    90,343
    
    
    
    3,592
    
    
    
    3.98
    %
    
    
    69,385
    
    
    
    2,455
    
    
    
    3.54
    %
    
    
    51,016
    
    
    
    1,531
    
    
    
    3.00
    %Total interest bearing liabilities
    
    
    372,734
    
    
    
    14,161
    
    
    
    3.80
    %
    
    
    289,154
    
    
    
    8,492
    
    
    
    2.94
    %
    
    
    221,841
    
    
    
    5,052
    
    
    
    2.28
    %Non-interest bearing deposits
    
    
    22,216
    
    
    
    
    
    
    
    
    
    
    
    16,319
    
    
    
    
    
    
    
    
    
    
    
    12,531Other liabilities
    
    
    1,051
    
    
    
    
    
    
    
    
    
    
    
    784
    
    
    
    
    
    
    
    
    
    
    
    699Total liabilities
    
    
    396,001
    
    
    
    
    
    
    
    
    
    
    
    306,257
    
    
    
    
    
    
    
    
    
    
    
    235,071Stockholders equity
    
    
    37,771
    
    
    
    
    
    
    
    
    
    
    
    32,773
    
    
    
    
    
    
    
    
    
    
    
    25,476Total liabilities & shareholders
equity
    
    $
    433,772
    
    
    
    
    
    
    
    
    
    
    $
    339,030
    
    
    
    
    
    
    
    
    
    
    $
    260,547
    
    
    
    Net interest income
    
    
    
    
    
    $
    12,233
    
    
    
    
    
    
    
    
    
    
    $
    10,375
    
    
    
    
    
    
    
    
    
    
    $
    7,647Net interest spread
    
    
    
    
    
    
    
    
    
    
    2.71
    %
    
    
    
    
    
    
    
    
    
    
    3.01
    %
    
    
    
    
    
    
    
    
    
    
    2.95
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.02
    %
    
    
    
    
    
    
    
    
    
    
    3.27
    %
    
    
    
    
    
    
    
    
    
    
    3.14
    %Net interest income and margin
(tax equivalent basis)(1)
    
    
    
    
    
    $
    12,474
    
    
    
    3.08
    %
    
    
    
    
    
    $
    10,396
    
    
    
    3.28
    %
    
    
    
    
    
    $
    7,647
    
    
    
    3.14
    %Ratio of average interest earning
assets to average interest
bearing liabilities
    
    
    108.75
    %
    
    
    
    
    
    
    
    
    
    
    109.75
    %
    
    
    
    
    
    
    
    
    
    
    109.47
    %
 
 (1)
    
    In order to present pre-tax income and resultant yields on tax-exempt investments on a
basis comparable to those on taxable investments, a tax equivalent yield adjustment is made to
interest income. The tax equilvalent adjustment has been computed using a Federal income tax rate
of 35%, and has the effect of increasing interest income by $241,000 and $21,000 for the twelve
month period ended December 31, 2006 and 2005 respectively. The average yield on investments
increased to 5.27% from 5.09% for the twelve month period ended December 31, 2006 and increased to
4.47% from 4.45% or the twelve month period ended December 31, 2005. The Bank did not have
tax-exempt investments in 2004 Page 15 of 65




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Rate/Volume Analysis
  For the Year Ended December 31, 2006Compared to the Year Ended December 31, 2005Increase (Decrease) due to changes in:Average Volume
    
    
    Average Rate
    
    
    Net(i)
    
    
    (ii)
    
    
    (iii)(In thousands)Interest Earning AssetsFed funds sold
    
    $
    (37
    )
    
    $
    77
    
    
    $
    40Investments  available for sale
    
    
    1,883
    
    
    
    631
    
    
    
    2,514Loans
    
    
    3,759
    
    
    
    1,214
    
    
    
    4,973Total interest income
    
    
    5,605
    
    
    
    1,922
    
    
    
    7,527Interest ExpenseInterest bearing demand accounts
    
    
    (130
    )
    
    
    34
    
    
    
    (96
    )Savings accounts
    
    
    (10
    )
    
    
    6
    
    
    
    (4
    )Corporate money market accounts
    
    
    (34
    )
    
    
    42
    
    
    
    8Certificates of deposit
    
    
    3,111
    
    
    
    1,513
    
    
    
    4,624FHLB borrowings
    
    
    833
    
    
    
    304
    
    
    
    1,137Total interest expense
    
    
    3,770
    
    
    
    1,899
    
    
    
    5,669Total net interest income
    
    $
    1,835
    
    
    $
    23
    
    
    $
    1,858
 Page 16 of 65




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For the Year Ended December 31, 2005Compared to the Year Ended December 31, 2004Increase (Decrease) due to changes in:Average Volume
    
    
    Average Rate
    
    
    Net(i)
    
    
    (ii)
    
    
    (iii)(In thousands)Interest Earning AssetsFed funds sold
    
    $
    (143
    )
    
    $
    174
    
    
    $
    31Investments  available for sale
    
    
    531
    
    
    
    567
    
    
    
    1,098Loans
    
    
    4,486
    
    
    
    553
    
    
    
    5,039Total interest income
    
    
    4,874
    
    
    
    1,294
    
    
    
    6,168Interest ExpenseInterest bearing demand accounts
    
    
    29
    
    
    
    206
    
    
    
    235Savings accounts
    
    
    (3
    )
    
    
    2
    
    
    
    (1
    )Corporate money market accounts
    
    
    144
    
    
    
    77
    
    
    
    221Certificates of deposit
    
    
    1,309
    
    
    
    752
    
    
    
    2,061FHLB borrowings
    
    
    650
    
    
    
    274
    
    
    
    924Total interest expense
    
    
    2,129
    
    
    
    1,311
    
    
    
    3,440Total net interest income
    
    $
    2,745
    
    
    $
    (17
    )
    
    $
    2,728
 Interest Income
   Interest Expense
    Page 17 of 65




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##### Table of Contents



Interest Rate Sensitivity
     Interest Rate Risk Analysis.
    Page 18 of 65




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##### Table of Contents



INTEREST RATE RISK MEASUREMENTDecember 31, 2006% Chng
    
    PolicyNet Interest Income
    
    Result
    
    Change from Ref.
    
    from Ref.
    
    LimitRates up 200 basis points
    
    
    11,608,136
    
    
    $
    (1,347,927
    )
    
    
    -10.40
    %
    
    
    20
    %Rates up 100 basis points
    
    
    12,296,439
    
    
    $
    (659,624
    )
    
    
    -5.09
    %Rates unchanged
    
    
    12,956,063Rates down 100 basis points
    
    
    13,535,642
    
    
    $
    579,579
    
    
    
    4.47
    %Rates down 200 basis points
    
    
    14,192,801
    
    
    $
    1,236,738
    
    
    
    9.55
    %
    
    
    20
    %
 INTEREST RATE RISK MEASUREMENTDecember 31, 2005% Chng
    
    PolicyNet Interest Income
    
    Result
    
    Change from Ref.
    
    from Ref.
    
    LimitRates up 200 basis points
    
    
    12,269,487
    
    
    $
    (266,616
    )
    
    
    -2.13
    %
    
    
    20
    %Rates up 100 basis points
    
    
    12,752,199
    
    
    $
    216,096
    
    
    
    1.72
    %Rates unchanged
    
    
    12,536,103Rates down 100 basis points
    
    
    13,227,773
    
    
    $
    691,670
    
    
    
    5.52
    %Rates down 200 basis points
    
    
    13,135,075
    
    
    $
    598,972
    
    
    
    4.78
    %
    
    
    20
    %
  Non-Interest Income
   Page 19 of 65




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##### Table of Contents



Non-Interest Expense
 For the Years Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Compensation and benefits
    
    $
    4,935
    
    
    $
    3,835
    
    
    $
    2,864Occupancy & equipment
    
    
    1,386
    
    
    
    996
    
    
    
    720Data processing and other servicing
    
    
    530
    
    
    
    397
    
    
    
    349Advertising & promotion
    
    
    187
    
    
    
    223
    
    
    
    125Professional services
    
    
    585
    
    
    
    567
    
    
    
    362Investor Relations
    
    
    102
    
    
    
    77
    
    
    
    45Other operating
    
    
    1,198
    
    
    
    624
    
    
    
    561Total non-interest expense
    
    $
    8,923
    
    
    $
    6,719
    
    
    $
    5,026
   Provision for Loan Losses
   Page 20 of 65




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##### Table of Contents



Income Taxes
     Financial Condition  Overview
  Investment Securities
  Page 21 of 65




---



##### Table of Contents



Page 22 of 65




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##### Table of Contents



Available for SaleDecember 31, 2006
    
    
    December 31, 2005Estimated Fair
    
    
    
    
    
    
    Estimated FairAmortized Cost
    
    
    Value
    
    
    Amortized Cost
    
    
    Value(In thousands)U.S. treasury securities
    
    $
    2,002
    
    
    $
    2,003
    
    
    $
    
    
    
    $
    U.S. government agencies
    
    
    24,432
    
    
    
    24,169
    
    
    
    32,318
    
    
    
    32,043State & municipal
obligations
    
    
    14,915
    
    
    
    14,926
    
    
    
    8,841
    
    
    
    8,798Mortgage-backed
securities
    
    
    18,514
    
    
    
    18,264
    
    
    
    14,315
    
    
    
    14,015Corporate debt securities
    
    
    28,139
    
    
    
    27,716
    
    
    
    18,587
    
    
    
    18,411Equity Securities
    
    
    8,371
    
    
    
    8,257
    
    
    
    8,560
    
    
    
    8,454Total
    
    $
    96,373
    
    
    $
    95,335
    
    
    $
    82,621
    
    
    $
    81,721
 Held to MaturityDecember 31, 2006
    
    
    December 31, 2005Estimated Fair
    
    
    
    
    
    
    Estimated FairAmortized Cost
    
    
    Value
    
    
    Amortized Cost
    
    
    Value(In thousands)U.S. treasury securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    U.S. government agencies
    
    
    24,998
    
    
    
    24,424
    
    
    
    24,970
    
    
    
    24,441Mortgage-backed
securities
    
    
    13,957
    
    
    
    13,466
    
    
    
    17,954
    
    
    
    17,379Certificates of Deposit
    
    
    5,052
    
    
    
    5,052
    
    
    
    6,339
    
    
    
    6,339Total
    
    $
    44,007
    
    
    $
    42,942
    
    
    $
    49,263
    
    
    $
    48,159
  Investment Securities Maturities
 Under 1
    
    
    
    
    
    
    
    
    
    
    Over 10
    
    
    No StatedYear
    
    

1  5 Years
    
    
    5  10 Years
    
    
    Years
    
    
    Maturity
    
    
    TotalDecember 31, 2006
    
    (In thousands)U.S. government agencies
    
    $
    3,000
    
    
    $
    5,994
    
    
    $
    17,969
    
    
    $
    22,468
    
    
    $
    
    
    
    $
    49,431U.S. treasuries
    
    
    
    
    
    
    2,002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,002Mortgage-backed securities
    
    
    7,102
    
    
    
    20,092
    
    
    
    4,051
    
    
    
    1,227
    
    
    
    
    
    
    
    32,471Certificates of deposit
    
    
    4,854
    
    
    
    198
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,052Municipal bonds
    
    
    
    
    
    
    
    
    
    
    549
    
    
    
    14,366
    
    
    
    
    
    
    
    14,915Corporate bonds
    
    
    
    
    
    
    4,001
    
    
    
    12,523
    
    
    
    11,615
    
    
    
    
    
    
    
    28,139Equities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,371
    
    
    
    8,371Total amortized cost
    
    $
    14,956
    
    
    $
    32,287
    
    
    $
    35,092
    
    
    $
    49,676
    
    
    $
    8,371
    
    
    $
    140,381Total fair value
    
    $
    14,784
    
    
    $
    31,692
    
    
    $
    34,406
    
    
    $
    49,139
    
    
    $
    8,257
    
    
    $
    138,277
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Loans
       Lending Policy.
     Page 24 of 65




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##### Table of Contents



Commercial Real Estate and Commercial Loans .
 Construction Loans
 Marina Loans
 Hotel, Motel and Bed and Breakfast Inn Loans
 Restaurant Loans
 Residential Real Estate Loans .
 Consumer Loans .
 Loan Composition .
 Page 25 of 65




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##### Table of Contents



December 31, 2006
    
    
    December 31, 2005Amount
    
    
    % of Total
    
    
    Amount
    
    
    % of Total(Dollars in thousands)Residential Mortgage
    
    $
    32,216
    
    
    
    11.61
    %
    
    $
    33,268
    
    
    
    13.62
    %Construction
    
    
    26,184
    
    
    
    9.44
    %
    
    
    28,097
    
    
    
    11.50
    %Commercial & commercial real estate
    
    
    208,632
    
    
    
    75.20
    %
    
    
    173,148
    
    
    
    70.88
    %Home Equity
    
    
    8,969
    
    
    
    3.23
    %
    
    
    7,504
    
    
    
    3.07
    %Consumer
    
    
    1,480
    
    
    
    0.53
    %
    
    
    2,248
    
    
    
    0.92
    %Overdrawn Accounts
    
    
    11
    
    
    
    0.00
    %
    
    
    28
    
    
    
    0.01
    %Loan Payments in Process
    
    
    (64
    )
    
    
    -0.01
    %
    
    
    
    
    
    
    0.00
    %Gross Loans
    
    
    277,428
    
    
    
    100.00
    %
    
    
    244,293
    
    
    
    100.00
    %Deferred Costs, net
    
    
    38
    
    
    
    
    
    
    
    (56
    )Total Loans
    
    
    277,466
    
    
    
    
    
    
    
    244,237Allowance for loan losses
    
    
    (3,273
    )
    
    
    
    
    
    
    (2,861
    )Net Loans
    
    $
    274,193
    
    
    
    
    
    
    $
    241,376
 Loan MaturitiesDecember 31, 2006Under 1 Year
    
    
    1 - 5 Years
    
    
    Over 5 Years
    
    
    Total(In thousands)Residential Mortgage
    
    $
    817
    
    
    $
    1,236
    
    
    $
    30,163
    
    
    $
    32,216Consumer
    
    
    989
    
    
    
    235
    
    
    
    256
    
    
    
    1,480Construction
    
    
    21,014
    
    
    
    4,469
    
    
    
    701
    
    
    
    26,184Commercial & commercial
real estate
    
    
    50,558
    
    
    
    42,130
    
    
    
    115,944
    
    
    
    208,632Home Equity
    
    
    588
    
    
    
    3,021
    
    
    
    5,360
    
    
    
    8,969Overdrawn Accounts
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    11Loan Payments in Process
    
    
    (64
    )
    
    
    
    
    
    
    
    
    
    
    (64
    )Total
    
    $
    73,913
    
    
    $
    51,091
    
    
    $
    152,424
    
    
    $
    277,428
  Loan Maturities by Loan TypeDecember 31, 2006Maturities Less
    
    
    Maturities Greaterthan 1 Year
    
    
    than 1 Year
    
    
    Total(In thousands)Fixed Interest Rate Loans
    
    $
    24,283
    
    
    $
    180,350
    
    
    $
    204,633Variable Interest Rate Loans
    
    
    49,619
    
    
    
    23,165
    
    
    
    72,784Overdrawn Accounts
    
    
    11
    
    
    
    
    
    
    
    11$
    73,913
    
    
    $
    203,515
    
    
    $
    277,428
 Allowance for Loan Losses
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Allowance for Loan Loss ActivityFor years ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Balance at beginning of year
    
    $
    2,861
    
    
    $
    2,185
    
    
    $
    1,482Loan charge-offs
    
    
    (32
    )
    
    
    
    
    
    
    Overdraft charge-offs
    
    
    (7
    )
    
    
    
    
    
    
    Recoveries
    
    
    3
    
    
    
    2
    
    
    
    455Provision for losses
    
    
    448
    
    
    
    674
    
    
    
    248Balance at end of year
    
    $
    3,273
    
    
    $
    2,861
    
    
    $
    2,185
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Allowance for Loan Loss Allocation
 December 31, 2006
    
    
    December 31, 2005Percent of loans
    
    
    
    
    
    
    Percent of loansin each category
    
    
    
    
    
    
    in each categoryAmount
    
    
    to total loans
    
    
    Amount
    
    
    to total loans(Dollars in thousands)Balance at
end of period
applicable to:Residential Mortgage
    
    $
    113
    
    
    
    11.60
    %
    
    $
    116
    
    
    
    13.62
    %Construction
    
    
    471
    
    
    
    9.44
    %
    
    
    492
    
    
    
    10.79
    %Commercial & Comml R/E
    
    
    2,636
    
    
    
    75.20
    %
    
    
    2,208
    
    
    
    71.60
    %Home Equity
    
    
    46
    
    
    
    3.23
    %
    
    
    39
    
    
    
    3.07
    %Consumer
    
    
    7
    
    
    
    0.53
    %
    
    
    6
    
    
    
    0.92
    %Total
    
    $
    3,273
    
    
    
    100.00
    %
    
    $
    2,861
    
    
    
    100.00
    %
  Other Real Estate Owned
  Account Receivables
  Other Assets
  Deposits
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##### Table of Contents



Deposits by Major ClassificationDecember 31,2006
    
    
    2005
    
    
    
    
    
    
    2004Interest
    
    
    
    
    
    
    Interest
    
    
    
    
    
    
    
    
    
    
    InterestAmount
    
    
    Expense
    
    
    Amount
    
    
    Expense
    
    
    
    
    
    
    Amount
    
    
    Expense(in thousands)Non-interest bearing deposits
    
    $
    22,699
    
    
    $
    
    
    
    $
    18,797
    
    
    $
    
    
    
    
    
    
    
    $
    14,913
    
    
    $
    Interest bearing demand
accounts
    
    
    31,802
    
    
    
    643
    
    
    
    42,702
    
    
    
    739
    
    
    
    
    
    
    
    44,534
    
    
    
    504Savings accounts
    
    
    6,613
    
    
    
    103
    
    
    
    7,896
    
    
    
    107
    
    
    
    
    
    
    
    9,664
    
    
    
    108Corporate money market
accounts
    
    
    17,198
    
    
    
    472
    
    
    
    24,065
    
    
    
    464
    
    
    
    
    
    
    
    24,234
    
    
    
    243Certificates of deposit
    
    
    231,641
    
    
    
    9,351
    
    
    
    179,034
    
    
    
    4,727
    
    
    
    
    
    
    
    117,636
    
    
    
    2,666Total
    
    $
    309,953
    
    
    $
    10,569
    
    
    $
    272,494
    
    
    $
    6,037
    
    
    
    
    
    
    $
    210,981
    
    
    $
    3,521
 Average Deposits by Major ClassificationFor the Years Ended December 31,2006
    
    
    2005Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(dollars in thousands)Non-interest bearing deposits
    
    $
    22,216
    
    
    
    0.00
    %
    
    $
    16,319
    
    
    
    0.00
    %Interest bearing demand accounts
    
    
    35,574
    
    
    
    1.81
    %
    
    
    42,781
    
    
    
    1.73
    %Savings accounts
    
    
    7,626
    
    
    
    1.35
    %
    
    
    8,371
    
    
    
    1.28
    %Corporate money market accounts
    
    
    22,251
    
    
    
    2.12
    %
    
    
    23,843
    
    
    
    1.95
    %Certificates of deposit
    
    
    216,940
    
    
    
    4.31
    %
    
    
    144,774
    
    
    
    3.26
    %Total
    
    $
    304,607
    
    
    
    3.47
    %
    
    $
    236,088
    
    
    
    2.55
    %
 Maturity of Time DepositsDecember 31, 2006(In thousands)2007
    
    $
    215,4382008
    
    $
    5,2332009
    
    $
    8,5232010
    
    $
    2,1002011
    
    $
    279Over five years
    
    $
    68Total
    
    $
    231,641
  Other Liabilities
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Capital
    Capital Components
 December 31,2006
    
    
    2005
    
    
    2004(In thousands)Tier IShareholders equity
    
    $
    38,978
    
    
    $
    35,343
    
    
    $
    27,031Net unrealized gains(losses) on investments
    
    
    (1,057
    )
    
    
    (939
    )
    
    
    (122
    )Allowable portion of unrealized losses on equity investments
    
    
    114
    
    
    
    106
    
    
    
    41Disallowed deferred tax assets
    
    
    
    
    
    
    
    
    
    
    Total Tier I capital
    
    $
    39,921
    
    
    $
    36,176
    
    
    $
    27,112Tier IIAllowable portion of the allowance for loan losses
    
    $
    3,273
    
    
    $
    2,861
    
    
    $
    2,185Allowable portion of unrealized gains on equity investments
    
    
    
    
    
    
    
    
    
    
    Total Tier II capital
    
    $
    3,273
    
    
    $
    2,861
    
    
    $
    2,185Total capital
    
    $
    43,194
    
    
    $
    39,037
    
    
    $
    29,297Risk Weighted Assets
    
    $
    364,118
    
    
    $
    306,119
    
    
    $
    223,344
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Capital Ratios
 Per Regulatory GuidelinesActual
    
    
    Minimum
    
    
    Well CapitalizedAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioDecember 31, 2006Risk based capital ratios:Tier I
    
    $
    39,921
    
    
    
    10.96
    %
    
    $
    14,570
    
    
    
    4.00
    %
    
    $
    21,855
    
    
    
    6.00
    %Total capital
    
    $
    43,194
    
    
    
    11.86
    %
    
    $
    29,136
    
    
    
    8.00
    %
    
    $
    36,420
    
    
    
    10.00
    %Leverage ratio
    
    $
    39,921
    
    
    
    8.86
    %
    
    $
    18,023
    
    
    
    4.00
    %
    
    $
    22,529
    
    
    
    5.00
    %December 31, 2005Risk based capital ratios:Tier I
    
    $
    36,176
    
    
    
    11.82
    %
    
    $
    12,242
    
    
    
    4.00
    %
    
    $
    18,363
    
    
    
    6.00
    %Total capital
    
    $
    39,037
    
    
    
    12.75
    %
    
    $
    24,494
    
    
    
    8.00
    %
    
    $
    30,617
    
    
    
    10.00
    %Leverage ratio
    
    $
    36,176
    
    
    
    9.54
    %
    
    $
    15,168
    
    
    
    4.00
    %
    
    $
    18,960
    
    
    
    5.00
    %December 31, 2004Risk based capital ratios:Tier I
    
    $
    27,112
    
    
    
    12.14
    %
    
    $
    8,934
    
    
    
    4.00
    %
    
    $
    13,400
    
    
    
    6.00
    %Total capital
    
    $
    29,297
    
    
    
    13.12
    %
    
    $
    17,867
    
    
    
    8.00
    %
    
    $
    22,330
    
    
    
    10.00
    %Leverage ratio
    
    $
    27,112
    
    
    
    9.42
    %
    
    $
    11,511
    
    
    
    4.00
    %
    
    $
    14,391
    
    
    
    5.00
    %
 Dividend Policy
    Liquidity
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Off-Balance Sheet Arrangements
  Contractual Obligations
  December 31, 2006Less than 1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    Over 5 years
    
    
    TotalTime deposits
    
    $
    215,438
    
    
    $
    13,756
    
    
    $
    2,379
    
    
    $
    68
    
    
    $
    231,641Long term debt
    
    
    23,171
    
    
    
    25,890
    
    
    
    
    
    
    
    42,000
    
    
    
    91,061Operating lease
    
    
    83
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    135Total
    
    $
    238,692
    
    
    $
    39,698
    
    
    $
    2,379
    
    
    $
    42,068
    
    
    $
    322,837
 Impact of Inflation and Changing Prices
  
 Item 7A  Quantitative and Qualitative Disclosure About Market Risk
  Page 32 of 65




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Item 8  Financial Statements and Supplementary Data
 (a)
    
    The following audited financial statements and related documents are set forth in
this Annual Report on the following pages:
 PageReport of Independent Registered Public Accounting Firm
    
    
    34Statements of Financial Condition
    
    
    35Statements of Operations
    
    
    36Statements of Changes in Shareholders Equity and Comprehensive Income(Loss)
    
    
    37Statements of Cash Flows
    
    
    38Notes to Financial Statements
    
    
    39-57
 Page 33 of 65




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KPMG LLP
 Report of Independent Registered Public Accounting Firm
 
    
 
 Page 34 of 65




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BOARDWALK BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
For the years ended December 31, 2006 and 2005
(Dollars in thousands, except share data)
 December 31, 2006
    
    
    December 31, 2005ASSETSCash & due from banks
    
    $
    8,681
    
    
    $
    4,801Fed funds sold
    
    
    138
    
    
    
    1,873Cash and cash equivalents
    
    
    8,819
    
    
    
    6,674Investments  available for sale, amortized cost 2006  $96,374, 2005  $82,624
    
    
    95,335
    
    
    
    81,721Investments  held to maturity, market value 2006  $42,942, 2005  $48,159
    
    
    44,007
    
    
    
    49,263Total Investments
    
    
    139,342
    
    
    
    130,984Loans
    
    
    277,466
    
    
    
    244,237Allowance for loan losses
    
    
    (3,273
    )
    
    
    (2,861
    )Net loans
    
    
    274,193
    
    
    
    241,376Premise and equipment, net
    
    
    16,186
    
    
    
    11,725Accrued interest receivable
    
    
    2,206
    
    
    
    1,843Bank owned life insurance
    
    
    9,601
    
    
    
    7,006Accounts Receivable
    
    
    2,263
    
    
    
    1,756Other assets
    
    
    670
    
    
    
    302Total assets
    
    $
    453,280
    
    
    $
    401,666LIABILITIESDeposits:Non-Interest bearing
    
    $
    22,699
    
    
    $
    18,797Interest bearing
    
    
    55,613
    
    
    
    74,663Time
    
    
    231,641
    
    
    
    179,034Total deposits
    
    
    309,953
    
    
    
    272,494Borrowings
    
    
    91,061
    
    
    
    92,695Accrued interest payable
    
    
    561
    
    
    
    437Other liabilities
    
    
    578
    
    
    
    697Total liabilities
    
    
    402,153
    
    
    
    366,323SHAREHOLDERS EQUITYCommon stock, $5 par value: authorized 12,500,000 shares and 4,289,395 issued
and outstanding in 2006, 3,633 warrants to buy 3,815 shares of common stock at
$11.43 expiring 12/31/06 outstanding in 2006, authorized 12,500,000 shares and
3,081,639 issued and outstanding in 2005, 1,123,888 warrants to buy 1,180,082
shares of common stock at $11.43 expiring 12/31/06 outstanding in 2005.
    
    
    21,447
    
    
    
    15,408Additional paid in capital
    
    
    25,425
    
    
    
    17,679Accumulated earnings
    
    
    5,312
    
    
    
    3,195Accumulated other comprehensive income (loss), net
    
    
    (1,057
    )
    
    
    (939
    )Total shareholders equity
    
    
    51,127
    
    
    
    35,343Total liabilities & shareholders equity
    
    $
    453,280
    
    
    $
    401,666
 The accompanying notes are an integral part of the financial statements.
 Page 35 of 65




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BOARDWALK BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2006, 2005 and 2004
(Dollars in thousands, except share data)
 2006
    
    
    2005
    
    
    2004Interest income:Interest and fees on loans
    
    $
    19,279
    
    
    $
    14,306
    
    
    $
    9,267Interest on short term investments
    
    
    196
    
    
    
    156
    
    
    
    125Interest on investment securities
    
    
    6,919
    
    
    
    4,405
    
    
    
    3,307Total Interest Income
    
    
    26,394
    
    
    
    18,867
    
    
    
    12,699Interest expense:Interest on deposits
    
    
    10,569
    
    
    
    6,037
    
    
    
    3,521Interest on borrowings
    
    
    3,592
    
    
    
    2,455
    
    
    
    1,531Total Interest Expense
    
    
    14,161
    
    
    
    8,492
    
    
    
    5,052Net interest income
    
    
    12,233
    
    
    
    10,375
    
    
    
    7,647Provision for loan losses
    
    
    448
    
    
    
    674
    
    
    
    248Net interest income after provision
    
    
    11,785
    
    
    
    9,701
    
    
    
    7,399Non-interest income:Service charges, fees and other income
    
    
    971
    
    
    
    610
    
    
    
    358Bank owned life insurance
    
    
    282
    
    
    
    246
    
    
    
    246(Loss) on sales of loans
    
    
    (17
    )
    
    
    
    
    
    
    Gain/(loss) on sales of other assets
    
    
    1
    
    
    
    (5
    )
    
    
    (Loss)/gain on sales of investment
securities available for sale, net
    
    
    (40
    )
    
    
    (23
    )
    
    
    75Total non-interest income
    
    
    1,197
    
    
    
    828
    
    
    
    679Non-interest expense:Compensation & benefits
    
    
    4,935
    
    
    
    3,835
    
    
    
    2,864Occupancy & equipment
    
    
    1,386
    
    
    
    996
    
    
    
    720Data processing & other servicing costs
    
    
    530
    
    
    
    397
    
    
    
    349Advertising & promotion
    
    
    187
    
    
    
    223
    
    
    
    125Professional services
    
    
    585
    
    
    
    567
    
    
    
    362Investor relations
    
    
    102
    
    
    
    77
    
    
    
    45Other operating
    
    
    1,198
    
    
    
    624
    
    
    
    561Total non-interest expense
    
    
    8,923
    
    
    
    6,719
    
    
    
    5,026Income before income taxes
    
    
    4,059
    
    
    
    3,810
    
    
    
    3,052Income tax expense
    
    
    1,034
    
    
    
    1,210
    
    
    
    981Net income
    
    $
    3,025
    
    
    $
    2,600
    
    
    $
    2,071Earnings per share:Basic
    
    $
    0.93
    
    
    $
    0.88
    
    
    $
    0.85Diluted
    
    $
    0.83
    
    
    $
    0.77
    
    
    $
    0.75Weighted average number of shares outstanding:Basic
    
    
    3,258,696
    
    
    
    2,941,597
    
    
    
    2,432,096Dilutive effect of options
    
    
    368,192
    
    
    
    445,927
    
    
    
    327,629Diluted
    
    
    3,626,888
    
    
    
    3,387,524
    
    
    
    2,759,725
 The accompanying notes are an integral part of the financial statements.
 Page 36 of 65




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BOARDWALK BANCORP, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS)
For the Years Ended December 31, 2006, 2005 and 2004
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalCommon
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    ShareholdersStock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalance, January 1, 2004
    
    $
    11,986
    
    
    
    11,230
    
    
    
    1,352
    
    
    
    (110
    )
    
    
    24,458Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    2,071
    
    
    
    
    
    
    
    2,071Other comprehensive income:Change in unrealized gain/loss on
investments transferred from AFS to HTM, net
of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    31Amortization/Accretion of previous
unrealized gain/loss on securities
transferred to held to maturity, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    (7
    )Net change in previous unrealized gain/loss
on securities transferred to held to
maturity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24Change in unrealized gain/loss on securities
available for sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    10Less: reclassification adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (46
    )
    
    
    (46
    )Net change in unrealized gain/loss on
securities available for sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36
    )Total other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,059Cash dividend on common stock
    
    
    
    
    
    
    
    
    
    
    (241
    )
    
    
    
    
    
    
    (241
    )Tax benefit on 22,345 stock options exercised
    
    
    
    
    
    
    67
    
    
    
    
    
    
    
    
    
    
    
    67Shares issued for stock option plans (66,845
shares)
    
    
    334
    
    
    
    113
    
    
    
    
    
    
    
    
    
    
    
    447Shares issued for exercise of 20,100
warrants (20,605 shares)
    
    
    103
    
    
    
    138
    
    
    
    
    
    
    
    
    
    
    
    241Declaration of 5% stock dividend
    
    
    611
    
    
    
    1,498
    
    
    
    (2,109
    )
    
    
    
    
    
    
    Balance, December 31, 2004
    
    
    13,034
    
    
    
    13,046
    
    
    
    1,073
    
    
    
    (122
    )
    
    
    27,031Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    2,600
    
    
    
    
    
    
    
    2,600Other comprehensive income:(Amortization)/Accretion of previous
unrealized gain/loss on securities
transferred to held to maturity, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )Change in unrealized gain/loss on securities
available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (840
    )
    
    
    (840
    )Less: reclassification adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29
    
    
    
    29Net change in unrealized gain/loss on
securities available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (811
    )Total other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,783Cash dividend on common stock
    
    
    
    
    
    
    
    
    
    
    (478
    )
    
    
    
    
    
    
    (478
    )Tax benefit on 4,845 stock options exercised
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    19Issuance of Common Stock(431,650 shares)
    
    
    2,159
    
    
    
    4,439
    
    
    
    
    
    
    
    
    
    
    
    6,598Shares issued for stock option plans (21,036
shares)
    
    
    105
    
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    138Shares issued for exercise of 21,012
warrants (22,062 shares)
    
    
    110
    
    
    
    142
    
    
    
    
    
    
    
    
    
    
    
    252Balance, December 31, 2005
    
    
    15,408
    
    
    
    17,679
    
    
    
    3,195
    
    
    
    (939
    )
    
    
    35,343Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    3,025
    
    
    
    
    
    
    
    3,025Other comprehensive income:(Amortization)/Accretion of previous
unrealized gain/loss on securities
transferred to held to maturity, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    18Change in unrealized gain/loss on securities
available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (202
    )
    
    
    (202
    )Less: reclassification adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66
    
    
    
    66Net change in unrealized gain/loss on
securities available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (136
    )Total other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,907Cash dividend on common stock
    
    
    
    
    
    
    
    
    
    
    (908
    )
    
    
    
    
    
    
    (908
    )Tax benefit on 25,605 stock options exercised
    
    
    
    
    
    
    94
    
    
    
    
    
    
    
    
    
    
    
    94Shares issued for stock option plans (27,406
shares)
    
    
    137
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    180Shares issued for exercise of 1,120,255
warrants (1,176,256 shares)
    
    
    5,881
    
    
    
    7,562
    
    
    
    
    
    
    
    
    
    
    
    13,443Shares issued for dividend reinvestment
plan(4,092)
    
    
    21
    
    
    
    47
    
    
    
    
    
    
    
    
    
    
    
    68Balance, December 31, 2006
    
    $
    21,447
    
    
    $
    25,425
    
    
    $
    5,312
    
    
    $
    (1,057
    )
    
    
    51,127
 The accompanying notes are an integral part of the financial statements.
 Page 37 of 65




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BOARDWALK BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For years ended December 31, 2006, 2005 and 2004
 2006
    
    
    2005
    
    
    2004(In thousands)Cash flows from operating activities:Net Income
    
    $
    3,025
    
    
    $
    2,600
    
    
    $
    2,071Adjustments to reconcile net income to
net cash provided by operating activities:Provision for loan losses
    
    
    448
    
    
    
    674
    
    
    
    248Provision for deferred income tax (benefit) expense
    
    
    (308
    )
    
    
    (74
    )
    
    
    544Loss (gain) on sales of investment securities available for sale
    
    
    40
    
    
    
    23
    
    
    
    (75
    )Loss on retirement of fixed asset
    
    
    
    
    
    
    5
    
    
    
    Loss on sale of loans
    
    
    17
    
    
    
    
    
    
    
    Income on bank owned life insurance
    
    
    (282
    )
    
    
    (246
    )
    
    
    (246
    )Depreciation and amortization
    
    
    783
    
    
    
    562
    
    
    
    382Amortization and accretion of premiums and
discounts on investments, net
    
    
    (18
    )
    
    
    72
    
    
    
    359Amortization and accretion of deferred loan fees and costs
    
    
    19
    
    
    
    (31
    )
    
    
    (6
    )Increase in accrued interest receivable
    
    
    (363
    )
    
    
    (736
    )
    
    
    (128
    )Increase in accounts receivable
    
    
    (507
    )
    
    
    (578
    )(Increase) decrease in other assets
    
    
    (124
    )
    
    
    (1,124
    )
    
    
    603Increase (decrease) in accrued interest payable
    
    
    124
    
    
    
    122
    
    
    
    (136
    )(Decrease) increase in other liabilities
    
    
    (119
    )
    
    
    209
    
    
    
    203Net cash provided by operating activities
    
    
    2,735
    
    
    
    1,478
    
    
    
    3,819Cash flows from investing activities:Purchases of investments, HTM
    
    
    (233,935
    )
    
    
    (91,651
    )
    
    
    (70,731
    )Purchase of investments, AFS
    
    
    (43,191
    )
    
    
    (62,098
    )
    
    
    (45,872
    )Proceeds from sales, calls & maturities of investments
    
    
    262,078
    
    
    
    106,539
    
    
    
    102,029Principal collected on mortgage-backed securities
    
    
    6,559
    
    
    
    7,790
    
    
    
    5,468Purchase of Bank Owned Life Insurance
    
    
    (2,313
    )
    
    
    
    
    
    
    (3,300
    )Net Increase in loans receivable
    
    
    (33,246
    )
    
    
    (64,385
    )
    
    
    (61,390
    )Purchase of premises and equipment
    
    
    (5,244
    )
    
    
    (4,243
    )
    
    
    (2,249
    )Net cash used in investing activities
    
    
    (49,292
    )
    
    
    (108,048
    )
    
    
    (76,045
    )Cash flows from financing activities:Net increase in deposits
    
    
    37,459
    
    
    
    61,540
    
    
    
    65,812Proceeds from borrowings
    
    
    1,007,235
    
    
    
    378,600
    
    
    
    54,450Principal payments on borrowings
    
    
    (1,008,869
    )
    
    
    (345,493
    )
    
    
    (46,025
    )Proceeds from issuance of common stock, net
    
    
    
    
    
    
    6,598
    
    
    
    Exercise of 27,406 shares from option plans
    
    
    180
    
    
    
    138
    
    
    
    447Exercise of 1,120,255 warrants from unit offering
    
    
    13,443
    
    
    
    252
    
    
    
    241Proceeds from dividend reinvestment plan
    
    
    68
    
    
    
    
    
    
    
    Tax benefit on exercise of stock options
    
    
    94
    
    
    
    
    
    
    
    Cash dividend paid
    
    
    (908
    )
    
    
    (478
    )
    
    
    (241
    )Net cash provided by financing activities
    
    
    48,702
    
    
    
    101,157
    
    
    
    74,684Net increase (decrease) in cash and cash equivalents
    
    
    2,145
    
    
    
    (5,413
    )
    
    
    2,458Cash and cash equivalents at the beginning of the year
    
    
    6,674
    
    
    
    12,087
    
    
    
    9,629Cash and cash equivalents at the end of the year
    
    $
    8,819
    
    
    $
    6,674
    
    
    $
    12,087Supplemental disclosures of cash flow information:Interest payments
    
    $
    14,037
    
    
    $
    8,370
    
    
    $
    5,188Net change in unrealized gain/loss on investments available
for sale
    
    $
    (136
    )
    
    $
    (811
    )
    
    $
    (36
    )Net change in unrealized gain (loss) on investments transferred
from AFS to HTM, net of tax
    
    $
    18
    
    
    $
    (6
    )
    
    $
    24Income taxes paid
    
    $
    1,548
    
    
    $
    1,032
    
    
    $
    449Tax benefit on exercise of stock options
    
    $
    
    
    
    $
    19
    
    
    $
    67
 The accompanying notes are an integral part of the financial statements.
 Page 38 of 65




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NOTES TO THE FINANCIAL STATEMENTS
 NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Business
   Basis of Financial Statement Presentation
  Consolidation
  Use of Estimates
  Statement of Cash Flows
  Investment Securities
    Page 39 of 65




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Loans
    Allowance for Loan Losses
    Bank Owned Life Insurance
  Premises and Equipment
   Page 40 of 65




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Other Real Estate Owned
  Income Taxes
  Earnings Per Share
  Stock Options
   For years ended December 31,2005
    
    
    2004(In thousands, except per share data)Net IncomeAs Reported
    
    $
    2,600
    
    
    $
    2,071Stock based compensation
expense as determined under
the fair value method
    
    $
    1
    
    
    $
    9Pro forma
    
    $
    2,599
    
    
    $
    2,062Basic earnings per shareAs Reported
    
    $
    0.88
    
    
    $
    0.85Pro forma
    
    $
    0.88
    
    
    $
    0.85Diluted earnings per shareAs Reported
    
    $
    0.77
    
    
    $
    0.75Pro forma
    
    $
    0.77
    
    
    $
    0.75
   Page 41 of 65




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Recent Accounting Pronouncements
    Page 42 of 65




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Accounting for Uncertainty in Income Taxes: an interpretation of FASB Statement No. 109 Accounting for Income Taxes
 The Fair Value Option for Financial Assets and
Financial LiabilitiesIncluding an amendment of FASB Statement No. 115
  Page 43 of 65




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NOTE 2  INVESTMENT AND MORTGAGE-BACKED SECURITIES
  Available for SaleDecember 31, 2006Unrealized
    
    
    Unrealized
    
    
    Estimated FairAmortized Cost
    
    
    Gains
    
    
    Losses
    
    
    Value(In thousands)U.S. Treasury
    
    $
    2,002
    
    
    $
    1
    
    
    $
    
    
    
    $
    2,003U.S. government agencies
    
    
    24,432
    
    
    
    7
    
    
    
    270
    
    
    
    24,169State & Municipal Obligations
    
    
    14,915
    
    
    
    167
    
    
    
    156
    
    
    
    14,926Mortgage-backed securities
    
    
    18,514
    
    
    
    39
    
    
    
    289
    
    
    
    18,264Corporate debt securities
    
    
    28,140
    
    
    
    30
    
    
    
    454
    
    
    
    27,716Equity Securities
    
    
    8,371
    
    
    
    
    
    
    
    114
    
    
    
    8,257Total
    
    $
    96,374
    
    
    $
    244
    
    
    $
    1,283
    
    
    $
    95,335
 Held to MaturityDecember 31, 2006Amortized Cost
    
    
    Unrealized Gains
    
    
    Unrealized Losses
    
    
    Estimated Fair Value(In thousands)U.S. government agencies
    
    $
    24,998
    
    
    $
    
    
    
    $
    574
    
    
    $
    24,424Mortgage-backed securities
    
    
    13,957
    
    
    
    
    
    
    
    491
    
    
    
    13,466Certificates of Deposit
    
    
    5,052
    
    
    
    
    
    
    
    
    
    
    
    5,052Total
    
    $
    44,007
    
    
    
    
    
    
    $
    1,065
    
    
    $
    42,942
 Available for SaleDecember 31, 2005Amortized Cost
    
    
    Unrealized Gains
    
    
    Unrealized Losses
    
    
    Estimated Fair Value(In thousands)U.S. government agencies
    
    $
    32,321
    
    
    $
    13
    
    
    $
    291
    
    
    $
    32,043State & Municipal Obligations
    
    
    8,841
    
    
    
    
    
    
    
    43
    
    
    
    8,798Mortgage-backed securities
    
    
    14,315
    
    
    
    
    
    
    
    300
    
    
    
    14,015Corporate debt securities
    
    
    18,587
    
    
    
    
    
    
    
    176
    
    
    
    18,411Equity Securities
    
    
    8,560
    
    
    
    
    
    
    
    106
    
    
    
    8,454Total
    
    $
    82,624
    
    
    $
    13
    
    
    $
    916
    
    
    $
    81,721
 Held to MaturityDecember 31, 2005Amortized Cost
    
    
    Unrealized Gains
    
    
    Unrealized Losses
    
    
    Estimated Fair Value(In thousands)U.S. government agencies
    
    $
    24,970
    
    
    $
    
    
    
    $
    529
    
    
    $
    24,441Mortgage-backed securities
    
    
    17,954
    
    
    
    4
    
    
    
    579
    
    
    
    17,379Certificates of Deposit
    
    
    6,339
    
    
    
    
    
    
    
    
    
    
    
    6,339Total
    
    $
    49,263
    
    
    
    4
    
    
    $
    1,108
    
    
    $
    48,159
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2006
    
    
    2005
    
    
    2004(In thousands)Proceeds
    
    $
    26,713
    
    
    $
    11,390
    
    
    $
    42,488Gross Gains
    
    
    28
    
    
    
    4
    
    
    
    171Gross Losses
    
    
    68
    
    
    
    27
    
    
    
    96
  Investment Securities Maturities
 Under 1
    
    
    
    
    
    
    
    
    
    
    Over 10
    
    
    No StatedYear
    
    

1  5 Years
    
    
    5  10 Years
    
    
    Years
    
    
    Maturity
    
    
    TotalDecember 31, 2006
    
    
    
    
    
    
    
    
    
    (In thousands)U.S. government agencies
    
    $
    3,000
    
    
    $
    5,994
    
    
    $
    17,969
    
    
    $
    22,468
    
    
    $
    
    
    
    $
    49,431U.S. treasuries
    
    
    
    
    
    
    2,002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,002Mortgage-backed
securities
    
    
    7,102
    
    
    
    20,092
    
    
    
    4,051
    
    
    
    1,227
    
    
    
    
    
    
    
    32,471Certificates of deposit
    
    
    4,854
    
    
    
    198
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,052Municipal bonds
    
    
    
    
    
    
    
    
    
    
    549
    
    
    
    14,366
    
    
    
    
    
    
    
    14,915Corporate bonds
    
    
    
    
    
    
    4,001
    
    
    
    12,523
    
    
    
    11,615
    
    
    
    
    
    
    
    28,139Equities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,371
    
    
    
    8,371Total amortized cost
    
    $
    14,956
    
    
    $
    32,287
    
    
    $
    35,092
    
    
    $
    49,676
    
    
    $
    8,371
    
    
    $
    140,381Total fair value
    
    $
    14,784
    
    
    $
    31,692
    
    
    $
    34,406
    
    
    $
    49,139
    
    
    $
    8,257
    
    
    $
    138,277
  Less than 12 month
    
    
    12 months or longer
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair value
    
    
    losses
    
    
    Fair value
    
    
    losses
    
    
    Fair value
    
    
    losses(In
thousands)U.S. government agencies
    
    $
    9,500
    
    
    $
    56
    
    
    $
    11,668
    
    
    $
    214
    
    
    $
    21,168
    
    
    $
    270State & municipal obligations
    
    
    5,566
    
    
    
    117
    
    
    
    1,409
    
    
    
    39
    
    
    
    6,975
    
    
    
    156Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    11,465
    
    
    
    289
    
    
    
    11,465
    
    
    
    289Corporate debt securities
    
    
    6,549
    
    
    
    60
    
    
    
    6,616
    
    
    
    394
    
    
    
    13,165
    
    
    
    454Equity securities
    
    
    
    
    
    
    
    
    
    
    3,872
    
    
    
    114
    
    
    
    3,872
    
    
    
    114Total
    
    $
    21,615
    
    
    $
    233
    
    
    $
    35,030
    
    
    $
    1,050
    
    
    $
    56,645
    
    
    $
    1,283
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NOTE 3  LOANS
   Loan Portfolio
 December 31, 2006
    
    
    December 31, 2005Amount
    
    
    % of Total
    
    
    Amount
    
    
    % of Total(Dollars in thousands)Residential Mortgage
    
    $
    32,216
    
    
    
    11.61
    %
    
    $
    33,268
    
    
    
    13.62
    %Construction
    
    
    26,184
    
    
    
    9.44
    %
    
    
    28,097
    
    
    
    11.50
    %Commercial & commercial real estate
    
    
    208,632
    
    
    
    75.20
    %
    
    
    173,148
    
    
    
    70.88
    %Home Equity
    
    
    8,969
    
    
    
    3.23
    %
    
    
    7,504
    
    
    
    3.07
    %Consumer
    
    
    1,480
    
    
    
    0.53
    %
    
    
    2,248
    
    
    
    0.92
    %Overdrawn Accounts
    
    
    11
    
    
    
    0.00
    %
    
    
    28
    
    
    
    0.01
    %Loan Payments in Process
    
    
    (64
    )
    
    
    -0.01
    %
    
    
    
    
    
    
    0.00
    %Gross Loans
    
    
    277,428
    
    
    
    100.00
    %
    
    
    244,293
    
    
    
    100.00
    %Deferred Costs, net
    
    
    38
    
    
    
    
    
    
    
    (56
    )Total Loans
    
    
    277,466
    
    
    
    
    
    
    
    244,237Allowance for loan losses
    
    
    (3,273
    )
    
    
    
    
    
    
    (2,861
    )Net Loans
    
    $
    274,193
    
    
    
    
    
    
    $
    241,376
  2006 Director & Executive Officer Loan Activity
for Aggregate Balances Exceeding 5% of Capital
 Retirement ofJanuary 1, 2006

    
    Advances
    
    
    Repayments
    
    
    Director
    
    
    December 31, 2006$
    10,736
    
    $
    4,093
    
    
    $
    2,987
    
    
    $
    2,777
    
    
    $
    9,065
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NOTE 4  ALLOWANCE FOR LOAN LOSSES
  Allowance for Loan Loss ActivityFor years ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Balance at beginning of year
    
    $
    2,861
    
    
    $
    2,185
    
    
    $
    1,482Loan charge-offs
    
    
    (32
    )
    
    
    
    
    
    
    Overdraft charge-offs
    
    
    (7
    )
    
    
    
    
    
    
    Recoveries
    
    
    3
    
    
    
    2
    
    
    
    455Provision for losses
    
    
    448
    
    
    
    674
    
    
    
    248Balance at end of year
    
    $
    3,273
    
    
    $
    2,861
    
    
    $
    2,185
 NOTE 5  PREMISES AND EQUIPMENT
  For years ended December 31,2006
    
    
    2005(In thousands)Land
    
    $
    4,290
    
    
    $
    2,786Buildings
    
    
    10,900
    
    
    
    7,869Furniture, fixtures and equipment
    
    
    3,765
    
    
    
    3,05618,955
    
    
    
    13,711Less: accumulated depreciation
    
    
    2,769
    
    
    
    1,986Total
    
    $
    16,186
    
    
    $
    11,725
   Years ending December 31,
    
    Operating Leases(In thousands)2007
    
    $
    832008
    
    $
    522009
    
    
    2010
    
    
    2011
    
    
    Total lease payments
    
    $
    135
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NOTE 6  DEPOSITS
 December 31,2006
    
    
    2005
    
    
    2004Interest
    
    
    
    
    
    
    Interest
    
    
    
    
    
    
    InterestAmount
    
    
    Expense
    
    
    Amount
    
    
    Expense
    
    
    Amount
    
    
    Expense(in thousands)Non-interest bearing deposits
    
    $
    22,699
    
    
    $
    
    
    
    $
    18,797
    
    
    $
    
    
    
    $
    14,913
    
    
    $
    Interest bearing demand accounts
    
    
    31,802
    
    
    
    643
    
    
    
    42,702
    
    
    
    739
    
    
    
    44,534
    
    
    
    504Savings accounts
    
    
    6,613
    
    
    
    103
    
    
    
    7,896
    
    
    
    107
    
    
    
    9,664
    
    
    
    108Corporate money market accounts
    
    
    17,198
    
    
    
    472
    
    
    
    24,065
    
    
    
    464
    
    
    
    24,234
    
    
    
    243Certificates of deposit
    
    
    231,641
    
    
    
    9,351
    
    
    
    179,034
    
    
    
    4,727
    
    
    
    117,636
    
    
    
    2,666Total
    
    $
    309,953
    
    
    $
    10,569
    
    
    $
    272,494
    
    
    $
    6,037
    
    
    $
    210,981
    
    
    $
    3,521
  Maturity of Time DepositsDecember 31, 2006(In thousands)2007
    
    $
    215,4382008
    
    
    5,2332009
    
    
    8,5232010
    
    
    2,1002011
    
    
    279Over five years
    
    
    68Total
    
    $
    231,641
  NOTE 7  EARNINGS PER SHARE
  Earnings per share tableFor the years endedDecember 31, 2006
    
    
    December 31, 2005
    
    
    December 31, 2004(Dollars in thousands, except per share data)Net Income
    
    $
    3,025
    
    
    $
    2,600
    
    
    $
    2,071Weighted average basic number of shares
    
    
    3,258,696
    
    
    
    2,941,597
    
    
    
    2,432,096Dilutive effect of options and warrants
    
    
    368,192
    
    
    
    445,927
    
    
    
    327,629Weighted average diluted number of shares
    
    
    3,626,888
    
    
    
    3,387,524
    
    
    
    2,759,725Basic Earnings per share
    
    $
    0.93
    
    
    $
    0.88
    
    
    $
    0.85Diluted Earnings per share
    
    $
    0.83
    
    
    $
    0.77
    
    
    $
    0.75
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NOTE 8  INCOME TAXES
  2006
    
    
    2005
    
    
    2004(In thousands)Federal:Current
    
    $
    1,342
    
    
    $
    1,265
    
    
    $
    416Deferred
    
    
    (90
    )
    
    
    (57
    )
    
    
    5321,252
    
    
    
    1,208
    
    
    
    948State:Current
    
    
    
    
    
    
    19
    
    
    
    21Deferred
    
    
    (218
    )
    
    
    (17
    )
    
    
    12(218
    )
    
    
    2
    
    
    
    33Total:
    
    $
    1,034
    
    
    $
    1,210
    
    
    $
    981
  2006
    
    
    2005
    
    
    2004(In thousands)At federal statutory rate
    
    $
    1,380
    
    
    $
    1,295
    
    
    $
    1,038Adjustment resulting from:State tax, net of federal benefit
    
    
    (144
    )
    
    
    2
    
    
    
    22Bank owned life insurance
    
    
    (96
    )
    
    
    (84
    )
    
    
    (84
    )Tax Exempt Income  Muni Interest
    
    
    (148
    )
    
    
    (16
    )
    
    
    Other
    
    
    42
    
    
    
    13
    
    
    
    5Total
    
    $
    1,034
    
    
    $
    1,210
    
    
    $
    981
  2006
    
    
    2005
    
    
    2004(In thousands)Deferred tax assets:Book bad debt reserves-loans
    
    
    739
    
    
    
    520
    
    
    
    291Investments  HTM
    
    
    11
    
    
    
    20
    
    
    
    22Unrealized loss on securities AFS
    
    
    
    
    
    
    
    
    
    
    60Compensation  Deferred
    
    
    66
    
    
    
    
    
    
    
    Net Operating Loss  State
    
    
    187
    
    
    
    57
    
    
    
    57Other
    
    
    2
    
    
    
    1
    
    
    
    Total gross deferred tax assets
    
    
    1,005
    
    
    
    598
    
    
    
    430Deferred tax liabilities:Deferred loan costs
    
    
    (170
    )
    
    
    (132
    )
    
    
    (117
    )Depreciation
    
    
    (514
    )
    
    
    (444
    )
    
    
    (303
    )Total gross deferred tax liabilities
    
    
    (684
    )
    
    
    (576
    )
    
    
    (420
    )Net deferred tax asset
    
    $
    321
    
    
    $
    22
    
    
    $
    10
  Page 49 of 65




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NOTE 9  EMPLOYEE BENEFIT PLANS
  NOTE 10  STOCK OPTION PLANS
    Page 50 of 65




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Weighted
    
    Weightedaverage
    
    average fairWeighted
    
    Cash received
    
    
    
    
    
    remaining
    
    value ofNumber of
    
    average
    
    on options
    
    Aggregate
    
    contractual
    
    optionsOptions
    
    exercise price
    
    exercised
    
    Intrinsic value
    
    term
    
    grantedOutstanding & exercisable - 1/1/04
    
    
    149,585
    
    
    $
    6.61Granted
    
    
    3,800
    
    
    $
    13.22
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4.93Exercised
    
    
    65,345
    
    
    $
    6.55
    
    
    $
    449
    
    
    $
    598Expired
    
    
    Forfeited
    
    
    Outstanding - 12/31/04
    
    
    88,040
    
    
    $
    6.94
    
    
    
    
    
    
    $
    970
    
    
    
    5.76Options exercisable at 12/31/04
    
    
    86,040
    
    
    $
    6.80Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    Exercised
    
    
    20,035
    
    
    $
    6.60
    
    
    $
    139
    
    
    
    229Expired
    
    
    Forfeited
    
    
    Outstanding & exercisable -
12/31/05
    
    
    68,005
    
    
    $
    7.10
    
    
    
    
    
    
    $
    689
    
    
    
    4.82Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    Exercised
    
    
    26,105
    
    
    $
    6.55
    
    
    $
    180
    
    
    $
    283Expired
    
    
    Forfeited
    
    
    Outstanding & exercisable -
12/31/06
    
    
    41,900
    
    
    $
    7.35
    
    
    
    
    
    
    $
    406
    
    
    
    3.99
  Options Outstanding
    
    
    Options ExercisableWeightedaverageNumber
    
    
    remaining
    
    
    Weighted
    
    
    Number
    
    
    Weightedoutstanding at
    
    
    contractual
    
    
    average
    
    
    exercisable at
    
    
    averageExercise prices
    
    12/31/06
    
    
    life in years
    
    
    exercise price
    
    
    12/31/06
    
    
    exercise price$  6.548
    
    
    35,600
    
    
    
    3.5
    
    
    $
    6.548
    
    
    
    35,600
    
    
    $
    6.548$  9.857
    
    
    2,500
    
    
    
    5.7
    
    
    $
    9.857
    
    
    
    2,500
    
    
    
    9.857$13.219
    
    
    3,800
    
    
    
    7.1
    
    
    $
    13.219
    
    
    
    3,800
    
    
    
    13.21941,900
    
    
    
    4.0
    
    
    $
    7.350
    
    
    
    41,900
    
    
    $
    7.350
 NOTE 11  COMMITMENTS AND CONTINGENCIES
 Financial Instruments with Off-balance Sheet Risk
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Contract or notional amount2006
    
    
    2005(In thousands)Commitments to extend credit
    
    $
    64,287
    
    
    $
    59,865Letters of Credit
    
    
    4,350
    
    
    
    2,954$
    68,637
    
    
    $
    62,819
    Concentrations of Credit Risk
  Legal Proceedings
  NOTE 12  BORROWINGS
 BorrowingsYears ended December 31,2006
    
    
    2005Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageAmount
    
    
    Interest Rate
    
    
    Amount
    
    
    Interest Rate(Dollars in thousands)Short-term:FHLB New York advances
    
    $
    9,171
    
    
    
    4.37
    %
    
    $
    6,285
    
    
    
    2.61
    %FHLB New York repurchase agreements
    
    
    14,000
    
    
    
    3.98
    %
    
    $
    5,000
    
    
    
    3.43
    %Long-term:FHLB New York advances
    
    
    31,390
    
    
    
    4.10
    %
    
    
    50,910
    
    
    
    3.83
    %FHLB New York repurchase agreements
    
    
    31,500
    
    
    
    4.00
    %
    
    
    30,500
    
    
    
    3.82
    %Other borrowings
    
    
    5,000
    
    
    
    4.37
    %
    
    
    
    
    
    
    0.00
    %Total borrowings
    
    $
    91,061
    
    
    
    4.09
    %
    
    $
    92,695
    
    
    
    3.72
    %
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Years Ending December 31,(In thousands)2007
    
    $
    23,1712008
    
    
    16,8902009
    
    
    9,0002015
    
    
    15,0002016
    
    
    27,000Total
    
    $
    91,061
    NOTE 13  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
  December 31, 2006
    
    
    December 31, 2005Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair Value(In thousands)Financial Assets:Cash and cash equivalents
    
    $
    8,819
    
    
    $
    8,819
    
    
    $
    6,674
    
    
    $
    6,674Investments  available for sale
    
    
    95,335
    
    
    
    95,335
    
    
    
    81,721
    
    
    
    81,721Investments  held to maturity
    
    
    44,007
    
    
    
    42,942
    
    
    
    49,263
    
    
    
    48,159Loans
    
    
    277,466
    
    
    
    274,180
    
    
    
    244,237
    
    
    
    240,917Accrued interest receivable
    
    
    2,206
    
    
    
    2,206
    
    
    
    1,843
    
    
    
    1,843Total
    
    $
    427,833
    
    
    $
    423,482
    
    
    $
    383,738
    
    
    $
    379,314Financial Liabilities:Deposits with no stated maturities
    
    $
    78,312
    
    
    $
    78,312
    
    
    $
    93,460
    
    
    $
    93,460Deposits with stated maturities
    
    
    231,641
    
    
    
    232,452
    
    
    
    179,034
    
    
    
    178,922Borrowings
    
    
    91,061
    
    
    
    93,805
    
    
    
    92,695
    
    
    
    91,403Accrued interest payable
    
    
    561
    
    
    
    561
    
    
    
    437
    
    
    
    437Total
    
    $
    401,575
    
    
    $
    405,130
    
    
    $
    365,626
    
    
    $
    364,222
  Cash and due from banks:
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Investment securities:
 Loans:
 Deposit liabilities:
 Borrowings
 Off-balance-sheet instruments:
 NOTE 14  REGULATORY RESTRICTIONS
    Page 54 of 65




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Per Regulatory GuidelinesActual
    
    Minimum
    
    Well CapitalizedAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioDecember 31, 2006Risk based capital ratios:Tier I
    
    $
    39,921
    
    
    
    10.96
    %
    
    $
    14,570
    
    
    
    4.00
    %
    
    $
    21,855
    
    
    
    6.00
    %Total capital
    
    $
    43,194
    
    
    
    11.86
    %
    
    $
    29,136
    
    
    
    8.00
    %
    
    $
    36,420
    
    
    
    10.00
    %Leverage ratio
    
    $
    39,921
    
    
    
    8.86
    %
    
    $
    18,023
    
    
    
    4.00
    %
    
    $
    22,529
    
    
    
    5.00
    %December 31, 2005Risk based capital ratios:Tier I
    
    $
    36,176
    
    
    
    11.82
    %
    
    $
    12,242
    
    
    
    4.00
    %
    
    $
    18,363
    
    
    
    6.00
    %Total capital
    
    $
    39,037
    
    
    
    12.75
    %
    
    $
    24,494
    
    
    
    8.00
    %
    
    $
    30,617
    
    
    
    10.00
    %Leverage ratio
    
    $
    36,176
    
    
    
    9.54
    %
    
    $
    15,168
    
    
    
    4.00
    %
    
    $
    18,960
    
    
    
    5.00
    %December 31, 2004Risk based capital ratios:Tier I
    
    $
    27,112
    
    
    
    12.14
    %
    
    $
    8,934
    
    
    
    4.00
    %
    
    $
    13,400
    
    
    
    6.00
    %Total capital
    
    $
    29,297
    
    
    
    13.12
    %
    
    $
    17,867
    
    
    
    8.00
    %
    
    $
    22,330
    
    
    
    10.00
    %Leverage ratio
    
    $
    27,112
    
    
    
    9.42
    %
    
    $
    11,511
    
    
    
    4.00
    %
    
    $
    14,391
    
    
    
    5.00
    %
  NOTE 15  RELATED PARTY TRANSACTIONS
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Note 16  PARENT COMPANY FINANCIAL INFORMATION
  
 December 31, 2006
    
    
    July 1, 2006ASSETSCash
    
    $
    12,056
    
    
    $
    Investment in subsidiary
    
    
    38,979
    
    
    
    36,130Other assets
    
    
    94
    
    
    
    Total assets
    
    $
    51,129
    
    
    $
    36,130LIABILITIESOther liabilities
    
    
    2
    
    
    
    Total liabilities
    
    
    2
    
    
    
    SHAREHOLDERS EQUITYShareholders equity
    
    
    51,127
    
    
    
    36,130Total liabilities & shareholders equity
    
    $
    51,129
    
    
    $
    36,130
 
 For the six monthsended December 31,2006IncomeEquity in undistributed income from subsidiary
    
    
    1,315Dividends from subsidiary
    
    
    226Total Income
    
    
    1,541ExpensesOther expenses
    
    
    48Total Expenses
    
    
    48Net Income
    
    
    1,493
 Page 56 of 65




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For the six months endedDecember 31, 2006Cash flows from operating activities:Net Income
    
    $
    1,493Adjustments to reconcile net income to
net cash used in operating activities:Changes in operating assets and liabilities:Equity in undistributed income of subsidiary
    
    
    (1,315
    )(Increase) in other assets
    
    
    (94
    )Increase in other liabilities
    
    
    2Net cash provided by (used in) operating activities
    
    
    86Cash flows from investing activities:Net cash used in investing activities
    
    
    Cash flows from financing activities:Exercise of 19,185 shares from option plans
    
    
    132Exercise of 1,014,674 warrants from unit offering
    
    
    12,176Proceeds from dividend reinvestment plan
    
    
    68Tax benefit on exercise of stock options
    
    
    94Cash dividends paid
    
    
    (500
    )Net cash provided by financing activities
    
    
    11,970Net increase in cash and cash equivalents
    
    
    12,056Cash and cash equivalents at the beginning of the period
    
    
    Cash and cash equivalents at the end of the period
    
    $
    12,056
 
 PART III
 
 Item 9  Changes and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A  Controls and Procedures
  
 Item 10  Directors, Executive Officers and Corporate Governance
  Page 57 of 65




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##### Table of Contents



Item 11  Executive Compensation
  
 Item 12  Security Ownership of Certain Beneficial Owners and Management and Related Shareholder
Matters
  
 Item 13  Certain Relationships and Related Transactions, and Director Independence
  
 Item 14  Principal Accounting Fees and Services
  
 PART IV
 
 Item 15  Exhibits and Financial Statement Schedules
 (a) 1. Financial Statements.
  (a) 2. Financial Statement Schedules
  (b) Exhibits
 (3) (i)
    
    Certificate of incorporation (Incorporated by reference to Exhibit B of the
Prospectus forming a part of Registration Statement on Form S-4, No.333-132195).(3) (ii)
    
    By-laws (Incorporated by reference to Exhibit C of the Prospectus forming a
part of Registration Statement on Form S-4, No.333-132915).
 Page 58 of 65




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##### Table of Contents



(10) (i)
    
    Boardwalk Bank 2000 Employee Stock Option Plan (Incorporated by reference to
Exhibit 10.6 of Registration Statement on Form S-4, No. 333-132195).(10) (ii)
    
    Boardwalk Bank 2000 Director Stock Option Plan (Incorporated by reference to
Exhibit 10.7 of Registration Statement on Form S-4, No. 333-132195 ).(10) (iii)
    
    Employment Agreement, dated June 1, 1999, between Boardwalk Bank and
Michael D. Devlin (Incorporated by reference to Exhibit 10.3 of Registration Statement
on Form S-4, No. 333-132195)(10)(iv)
    
    Change in Control Agreement, Dated February 22, 2005, between the Bank and
Wayne S. Hardenbrook (Incorporated by reference to Exhibit 10.4 of Registration
Statement on Form S-4, No. 333-132195).(10) (v)
    
    Change in Control Agreement, Dated February 22, 2005, between the Bank and
Guy A. Deninger (Incorporated by reference to Exhibit 10.5 of Registration Statement on
Form S-4, No. 333-132195).(10) (vi)
    
    Boardwalk Bancorp, Inc. 2006 Stock Incentive Plan (Incorporated by reference
to Exhibit F of the Prospectus forming a part of Registration Statement on Form S-4, No.
333-132195)(31) (i)
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer(31) (ii)
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer(32)
    
    Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
under section 906 of Sarbanes-Oxley Act of 2002.
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##### Table of Contents



SIGNATURES
  Dated: March 20, 2007
    Boardwalk Bancorp, Inc.
RegistrantBy:

/s/ Wayne S. HardenbrookName:
    Wayne S. HardenbrookTitle:
    Executive Vice President and
Chief Financial Officer
(Authorized Officer and Principal Financial
officer) Page 60 of 65




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##### Table of Contents



SIGNATURES
  Signature
    
    Title
    
    DateBy:
    
    /s/ Michael D. Devlin
    
    President, Chief Executive Officer,
    
    March 20, 2007Michael D. Devlin
    
    Chairman
of the Board, Director
(Principal Executive Officer)By:
    
    /s/ Wayne S. Hardenbrook
    
    Executive Vice President
    
    March 20, 2007Wayne S. Hardenbrook
    
    Chief
Financial Officer
(Principal Financial and Principal
Accounting Officer)By:
    
    /s/ Mark Benevento
    
    Director
    
    March 20, 2007Mark BeneventoBy:
    
    /s/ Joseph M. Brennan
    
    Director
    
    March 20, 2007Joseph M. BrennanBy:
    
    /s/ Arthur R. Coslop
    
    Director
    
    March 20, 2007Arthur R. CoslopBy:
    
    /s/ Agostino R. Fabietti
    
    Director
    
    March 20, 2007Agostino R. FabiettiBy:
    
    /s/ James L. Fraser
    
    Director
    
    March 20, 2007James L. FraserBy:
    
    /s/ Arthur J. Galletta
    
    Director
    
    March 20, 2007Arthur J. GallettaBy:
    
    /s/ Thomas L. Glenn, III
    
    Director
    
    March 20, 2007Thomas L. Glenn, IIIBy:
    
    /s/ Roy Goldberg
    
    Director
    
    March 20, 2007Roy Goldberg
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Signature
    
    Title
    
    DateBy:
    
    /s/ Carol Nugent Harris
    
    Director
    
    March 20, 2007

Carol Nugent HarrisBy:
    
    
    
    Director
    
    March 20, 2007Pravin KhatiwalaBy:
    
    /s/ Patricia C. Koelling
    
    Director
    
    March 20, 2007Patricia C. KoellingBy:
    
    /s/ Thomas S. Rittenhouse
    
    Director
    
    March 20, 2007Thomas S. RittenhouseBy:
    
    /s/ Thomas K. Ritter
    
    Director
    
    March 20, 2007Thomas K. Ritter
 Page 62 of 65