UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC  20549

FORM 10-Q

(Mark one)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                            to

Commission file number:  001-34089

BANCORP OF NEW JERSEY, INC.

(Exact name of registrant as specified in its charter)

New Jersey	20-8444387
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1365 Palisade Ave, Fort Lee, New Jersey	07024
(Address of principal executive offices)	(Zip Code)

(201) 944-8600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer o	Accelerated filer o
Non-accelerated filero	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes  o  No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.  As of November 9, 2012 there were 5,206,932 outstanding shares of the issuer’s class of common stock, no par value.

INDEX

		PAGE
Part I Financial Information
Item 1.	Financial Statements:
	Unaudited Consolidated Statements of Financial Condition - September 30, 2012 and December 31, 2011	3
	Unaudited Consolidated Statements of Income - Three Months Ended September 30, 2012 and 2011	4
	Unaudited Consolidated Statements of Income — Nine Months Ended September 30, 2012 and 2011	5
	Unaudited Consolidated Statements of Comprehensive Income- Three and Nine Months Ended September 30, 2012 and 2011	6
	Unaudited Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2012 and 2011	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36
Item 4.	Controls and Procedures	36
Part II Other Information
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	37
Signatures		38

2

BANCORP OF NEW JERSEY, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except share data)

	September 30, 2012			December 31, 2011
ASSETS
Cash and due from banks	$	1,216		$	642
Interest bearing deposits	30,818			31,117
Federal funds sold	461			463
Total cash and cash equivalents	32,495			32,222
Interest bearing time deposits	250			250
Securities available for sale, at fair value (amortized cost of $82,537 and $56,148, respectively)	83,225			56,645
Securities held to maturity (fair value of $3,660 and $4,787 respectively)	3,660			4,787
Restricted investment in bank stock, at cost	669			549
Loans receivable	418,055			365,160
Deferred loan fees and unamortized costs, net	(160		)	(66		)
Less: allowance for loan losses	(5,022		)	(4,474		)
Net loans	412,873			360,620
Premises and equipment, net	10,270			10,203
Accrued interest receivable	2,094			1,515
Other assets	3,257			3,051
TOTAL ASSETS	$	548,793		$	469,842
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposits
Noninterest-bearing	$	66,914		$	49,585
Savings and interest bearing transaction accounts	117,747			85,456
Time deposits under $100	49,532			45,918
Time deposits $100 and over	258,281			235,204
Total deposits	492,474			416,163
Accrued interest payable and other liabilities	2,089			1,773
TOTAL LIABILITIES	494,563			417,936
Commitments and Contingencies
Stockholders’ equity:
Common stock, no par value, authorized 20,000,000 shares; issued and outstanding 5,206,932 at September 30, 2012 and December 31, 2011	49,653			49,546
Retained Earnings	4,143			2,046
Accumulated other comprehensive income	434			314
Total stockholders’ equity	54,230			51,906
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	548,793		$	469,842

See accompanying notes to unaudited consolidated financial statements

3

BANCORP OF NEW JERSEY, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF  INCOME

(in thousands, except per share data)

	For the Three Months Ended September 30,
	2012		2011
INTEREST INCOME
Loans, including fees	$	5,507	$	4,791
Securities	493		211
Federal funds sold and other	19		12
TOTAL INTEREST INCOME	6,019		5,014
INTEREST EXPENSE
Savings and money markets	155		55
Time deposits	1,404		1,141
Short term borrowings	—		2
TOTAL INTEREST EXPENSE	1,559		1,198
NET INTEREST INCOME	4,460		3,816
Provision for loan losses	260		300
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	4,200		3,516
NON-INTEREST INCOME
Fees and service charges	44		48
Gains on sales of securities	238		—
TOTAL NON-INTEREST INCOME	282		48
NON-INTEREST EXPENSE
Salaries and employee benefits	1,278		1,140
Occupancy and equipment expense	534		360
FDIC premiums and related expenses	86		81
Data processing	182		141
Professional fees	180		147
Other expenses	335		201
TOTAL NON-INTEREST EXPENSE	2,595		2,070
Income before provision for income taxes	1,887		1,494
Income tax expense	745		593
Net income	$	1,142	$	901
PER SHARE OF COMMON STOCK
Basic and diluted earnings	$	0.22	$	0.17

See accompanying notes to unaudited consolidated financial statements

4

BANCORP OF NEW JERSEY, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF  INCOME

(in thousands, except per share data)

	For the Nine Months Ended September 30,
	2012		2011
INTEREST INCOME
Loans, including fees	$	15,945	$	13,905
Securities	1,311		642
Federal funds sold and other	56		33
TOTAL INTEREST INCOME	17,312		14,580
INTEREST EXPENSE
Savings and money markets	348		161
Time deposits	4,185		3,244
Short term borrowings	—		3
TOTAL INTEREST EXPENSE	4,533		3,408
NET INTEREST INCOME	12,779		11,172
Provision for loan losses	885		898
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	11,894		10,274
NON-INTEREST INCOME (LOSS)
Fees and service charges	124		162
Gains on sales of securities	238		—
Loss on sale of other real estate owned	—		(203		)
TOTAL NON-INTEREST INCOME (LOSS)	362		(41		)
NON-INTEREST EXPENSE
Salaries and employee benefits	3,760		3,254
Occupancy and equipment expense	1,495		1,155
FDIC premiums and related expenses	239		380
Data processing	517		381
Professional fees	408		475
Other expenses	823		665
TOTAL NON-INTEREST EXPENSE	7,242		6,310
Income before provision for income taxes	5,014		3,923
Income tax expense	1,981		1,572
Net income	$	3,033	$	2,351
PER SHARE OF COMMON STOCK
Basic and diluted earnings	$	0.58	$	0.45

See accompanying notes to unaudited consolidated financial statements

5

BANCORP OF NEW JERSEY, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF  COMPREHENSIVE INCOME

(in thousands)

	For the Three Months Ended September 30,
	2012			2011
Net income	$	1,142		$	901
Other comprehensive income
Gross unrealized holding (losses) gains on securities available for sale, net of deferred income tax of $172 and $(31), respectively	(300		)	93
Reclassification adjustment for gain on sale of securities, net of tax expense of $(84) and $0, respectively	154			—
Comprehensive income (loss)	$	996		$	994

	For the Nine Months Ended September 30,
	2012			2011
Net income	$	3,033		$	2,351
Other comprehensive income
Gross unrealized holding (losses) gains on securities available for sale, net of deferred income tax of $14 and $(238), respectively	(33		)	402
Reclassification adjustment for gain on sale of securities, net of tax expense of $(84) and $0, respectively	154			—
Comprehensive income	$	3,154		$	2,753

See accompanying notes to unaudited consolidated financial statements

6

BANCORP OF NEW JERSEY

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Nine Months Ended September 30,
	2012			2011
	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	3,033		$	2,351
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	369			314
Provision for loan losses	885			898
Recognition of stock option expense	107			117
Increase in deferred income taxes	(359		)	(205		)
Loss on sale of OREO	—			203
Gains on sale of securities available for sale	(238		)	—
Changes in operating assets and liabilities:
Increase in accrued interest receivable	(579		)	(172		)
Decrease in other assets	83			188
Increase in other liabilities	316			364
NET CASH PROVIDED BY OPERATING ACTIVITIES	3,617			4,058
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available for sale, net	(69,822		)	(34,010		)
Purchases of investments in bank stock	(120		)	(58		)
Purchases of securities held to maturity, net	(3,960		)	(3,910		)
Purchase of interest bearing time deposits	—			(250		)
Proceeds from called or matured securities available for sale	37,750			21,998
Proceeds from sales of securities available for sale	5,921			—
Maturities of securities held to maturity	5,087			3,728
Net increase in loans	(53,139		)	(51,135		)
Proceeds from sale of OREO	—			1,484
Purchases of premises and equipment	(436		)	(499		)
NET CASH USED IN INVESTING ACTIVITIES	(78,719		)	(62,652		)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	76,311			63,139
Increase in borrowed funds	—			19,000
Repayment of borrowed funds	—			(19,000		)
Dividends	(936		)	—
NET CASH PROVIDED BY FINANCING ACTIVITIES	75,375			63,139
Net increase in cash and cash equivalents	273			4,545
Cash and cash equivalents, beginning of year	32,222			23,204
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	32,495		$	27,749
Cash paid during the period for:
Interest	$	4,462		$	3,306
Income taxes	$	2,075		$	2,050

See accompanying notes to unaudited consolidated financial statements.

7

BANCORP OF NEW JERSEY, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.  Significant Accounting Policies

Basis of Financial Statement Presentation

The accompanying consolidated financial statements include the accounts of Bancorp of New Jersey, Inc. (the “Company”), and its direct wholly-owned subsidiary, Bank of New Jersey (the “Bank”) and the Bank’s wholly-owned subsidiary, BONJ-New York Corp.  All significant inter-company accounts and transactions have been eliminated in consolidation.

The Company was incorporated under the laws of the State of New Jersey to serve as a holding company for the Bank and to acquire all the capital stock of the Bank.

The Company’s class of common stock has no par value and the Bank’s class of common stock had a par value of $10 per share.  As a result of the holding company reorganization, amounts previously recognized as additional paid in capital on the Bank’s financial statements were reclassified into common stock in the Company’s consolidated financial statements.

The financial information in this quarterly report has been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”); these financial statements have not been audited. Certain information and footnote disclosures required under GAAP have been condensed or omitted, as permitted by rules and regulations of the Securities and Exchange Commission.

8

Organization

The Company is a New Jersey corporation and bank holding company registered with the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”).  The Bank is a community bank which provides a full range of banking services to individuals and corporate customers in New Jersey.  Both the Company and the Bank are subject to competition from other financial institutions.  The Bank is regulated by state and federal agencies and is subject to periodic examinations by those regulatory authorities.  The Bank conducts a traditional commercial banking business, accepting deposits from the general public, including individuals, businesses, non-profit organizations, and governmental units.  The Bank makes commercial loans, consumer loans, and both residential and commercial real estate loans.  In addition, the Bank provides other customer services and makes investments in securities, as permitted by law.  The Bank has sought to offer an alternative, community-oriented style of banking in an area, that is presently dominated by larger, statewide and national institutions.  The Bank continues to focus on establishing and retaining customer relationships by offering a broad range of traditional financial services and products, competitively-priced and delivered in a responsive manner to small businesses, professionals and individuals in the local market.  As a community bank, the Bank endeavors to provide superior customer service that is highly personalized, efficient and responsive to local needs.  To better serve its customers and expand it market reach, the Bank provides for the delivery of certain of its financial products and services to its local customers and to a broader market through the use of mail, telephone and internet banking.  The Bank seeks to deliver these products and services with the care and professionalism expected of a community bank and with a special dedication to personalized customer service.

Note 2.  Stockholders’ Equity and Related Transactions

During the nine month periods ended September 30, 2012 and September 30, 2011, respectively, the Company issued no shares of common stock.

Note 3.  Benefit Plans and Stock-Based Compensation

2006 Stock Option Plan

During 2006, the Bank’s stockholders approved the 2006 Stock Option Plan.  At the time of the holding company reorganization, the 2006 Stock Option Plan was assumed by the Company.  The plan allows directors and employees of the Company to purchase up to 239,984 shares of the Company’s common stock.  At September 30, 2012, incentive stock options to purchase 209,900 shares have been issued to employees of the Bank, of which options to purchase 187,900 shares were outstanding.

Under the 2006 Stock Option Plan, there were a total of 3,033 unvested options at September 30, 2012 and approximately $13,000 remains to be recognized in expense over approximately the next three months.  Under the 2006 Stock Option Plan, no options were granted, exercised, or forfeited during the first nine months of 2012.

2007 Director Plan

During 2007, the Bank’s stockholders approved the 2007 Non-Qualified Stock Option Plan for Directors.  At the time of the holding company reorganization, the 2007 Non-Qualified Stock Option Plan was assumed by the Company. This plan provides for 480,000 options to purchase shares of the Company’s common stock to be issued to non-employee directors of the Company.  At September 

9

30, 2012, non-qualified options to purchase 460,000 shares of the Company’s stock have been issued to non-employee directors of the Company and approximately 414,668 were outstanding at September 30, 2012.   No options were granted, exercised or forfeited during the first nine months of 2012.

Under the 2007 Director Plan, there were a total of approximately 5,001 unvested options at September 30, 2012 and approximately $22,000 remains to be recognized in expense over approximately the next three months.

In connection with both the 2006 Stock Option Plan and the 2007 Director Plan, share based compensation totaled $36,000 and $39,000 for the three months ended September 30, 2012 and 2011, respectively.  For the nine months ended September 30, 2012 and 2011, respectively, share based compensation totaled $107,000 and $117,000, respectively.

The aggregate intrinsic value of  a stock option represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had they exercised their options on September 30, 2012.  This amount changes based on the changes in the market value in the Company’s stock.

The aggregate intrinsic value of options outstanding as of September 30, 2012 under the 2006 Stock Option Plan and the 2007 Director Plan was approximately $117,000.

The aggregate intrinsic value of options outstanding as of September 30, 2011 under the 2006 Stock Option Plan and the 2007 Director Plan was approximately $41,000.

2011 Equity Incentive Plan

During 2011, the shareholders of the Company approved the Bancorp of New Jersey, Inc. 2011 Equity Incentive Plan.  This plan authorizes the issuance of up to 250,000 shares of the Company’s common stock, subject to adjustment in certain circumstances described in the plan, pursuant to awards of incentive stock options or non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units or performance awards. Employees, directors, consultants, and other service providers of the Company and its affiliates (primarily the Bank) are eligible to receive awards under the plan, provided, that only employees are eligible to receive incentive stock options.  At September 30, 2012, no awards had been made under this plan.

Note 4.   Earnings Per Share.

Basic earnings per share is calculated by dividing the net income for a period by the weighted average number of common shares outstanding during that period.

Diluted earnings per share is calculated by dividing the net income for a period by the weighted average number of outstanding common shares and dilutive common share equivalents during that period.  Outstanding “common share equivalents” include options and warrants to purchase the Company’s common stock.

10

The following schedule shows earnings per share for the three month periods presented:

	For the three months ended
	September 30,
(In thousands except per share data)	2012		2011
Net income applicable to common stock	$	1,142	$	901
Weighted average number of common shares outstanding - basic	5,207		5,207
Basic earnings per share	$	0.22	$	0.17
Net income applicable to common stock	$	1,142	$	901
Weighted average number of common shares outstanding	5,207		5,207
Effect of dilutive options	8		2
Weighted average number of common shares and common share equivalents- diluted	5,215		5,209
Diluted earnings per share	$	0.22	$	0.17

Non-qualified options to purchase 414,668 shares of common stock at a weighted average price of $11.50; and 90,000 incentive stock options at a weighted average price of $11.50 were not included in the computation of diluted earnings per share for the three months ended September 30, 2012 because they were anti-dilutive.  Incentive stock options to purchase 97,900 shares of common stock at a weighted average price of $9.09 were included in the computation of diluted earnings per share for the three months ended September 30, 2012.

Non-qualified options to purchase 414,668 shares of common stock at a weighted average price of $11.50; and 90,000 incentive stock options at a weighted average price of $11.50 were not included in the computation of diluted earnings per share for the three months ended September 30, 2011 because they were anti-dilutive.  Incentive stock options to purchase 97,900 shares of common stock at a weighted average price of $9.09 were included in the computation of diluted earnings per share for the three months ended September 30, 2011.

11

The following schedule shows earnings per share for the nine month periods presented:

	For the nine months ended
	September 30,
(In thousands except per share data)	2012		2011
Net income applicable to common stock	$	3,033	$	2,351
Weighted average number of common shares outstanding - basic	5,207		5,207
Basic earnings per share	$	0.58	$	0.45
Net income applicable to common stock	$	3,033	$	2,351
Weighted average number of common shares outstanding	5,207		5,207
Effect of dilutive options	5		8
Weighted average number of common shares and common share equivalents- diluted	5,212		5,215
Diluted earnings per share	$	0.58	$	0.45

Non-qualified options to purchase 414,668 shares of common stock at a weighted average price of $11.50; and 90,000 incentive stock options at a weighted average price of $11.50 were not included in the computation of diluted earnings per share for the nine months ended September 30, 2012 because they were anti-dilutive.  Incentive stock options to purchase 97,900 shares of common stock at a weighted average price of $9.09 were included in the computation of diluted earnings per share for the nine months ended September 30, 2012.

Non-qualified options to purchase 414,668 shares of common stock at a weighted average price of $11.50; and 90,000 incentive stock options at a weighted average price of $11.50 were not included in the computation of diluted earnings per share for the nine months ended September 30, 2011 because they were anti-dilutive.  Incentive stock options to purchase 97,900 shares of common stock at a weighted average price of $9.09 were included in the computation of diluted earnings per share for the nine months ended September 30, 2011.

12

Note 5.  Securities Available for Sale and Investment Securities

A summary of securities held to maturity and securities available for sale at September 30, 2012 and December 31, 2011 is as follows (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
September 30, 2012
Securities Held to Maturity:
Obligations of states and political subdivisions	$	3,660	$	—	$	—		$	3,660
Securities Available for Sale:
U.S. Treasury obligations	11,148		313		—			11,461
Government Sponsored Enterprise obligations	71,389		517		(142		)	71,764
Total securities available for sale	82,537		830		(142		)	83,225
Total securities	$	86,197	$	830	$	(142	)	$	86,885

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
December 31, 2011
Securities Held to Maturity:
Obligations of states and political subdivisions	$	4,787	$	—	$	—		$	4,787
Securities Available for Sale:
U.S. Treasury obligations	11,079		245		—			11,324
Government Sponsored Enterprise obligations	45,069		267		(15		)	45,321
Total securities available for sale	56,148		512		(15		)	56,645
Total securities	$	60,935	$	512	$	(15	)	$	61,432

The unrealized losses, categorized by the length of time of continuous loss position, and the fair value of related securities available for sale are as follows (in thousands):

	Less than 12 Months				More than 12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
September 30, 2012
Government Sponsored Enterprise obligations	$	14,858	$	142	$	—	$	—	$	14,858	$	142
Total securities available for sale	$	14,858	$	142	$	—	$	—	$	14,858	$	142
December 31, 2011
Government Sponsored Enterprise obligations	$	4,985	$	15	$	—	$	—	$	4,985	$	15
Total securities available for sale	$	4,985	$	15	$	—	$	—	$	4,985	$	15

13

At September 30, 2012, and December 31, 2011,  the Company held no securities held to maturity with unrealized losses.

The amortized cost and estimated fair value of securities held to maturity and securities available for sale at September 30, 2012 by contractual maturity are shown below.  Expected maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands):

	Securities Held to Maturity				Securities Available for Sale
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
One year or less	$	3,660	$	3,660	$	2,001	$	2,031
After one to five years	—		—		15,017		15,351
After five to ten years	—		—		37,519		37,954
After ten years	—		—		28,000		27,889
Total	$	3,660	$	3,660	$	82,537	$	83,225

Management evaluates securities for other-than-temporary-impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.

In determining OTTI management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than amortized cost; (2) the financial condition and near term prospects of the issuer; (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery.  The assessment of whether an OTTI decline exists involves a high degree of subjectivity and judgment and is based on information available to management at a point in time.  An OTTI is deemed to have occurred if there has been an adverse change in the remaining expected future cash flows.

When OTTI for debt securities occurs, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis. If an entity intends to sell or more likely than not will be required  to sell the security before recovery of its amortized cost basis, the OTTI would be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date.  If the Company does not  intend to  sell  the security  and  it is not  more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis, the OTTI would be separated into the amount representing the credit loss and the amount related to all other factors.  The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings.  The amount of the total OTTI related to other factors would be recognized in other comprehensive income, net of applicable tax benefit.  The previous amortized cost basis less the OTTI recognized in earnings would become the new amortized cost basis of the investment.

At September 30, 2012, the Company’s available for sale securities portfolio consisted of 35 securities, of which five were in an unrealized loss position for less than twelve months and none were in a loss position for more than twelve months. No OTTI charges were recorded for the three or nine months ended September 30, 2012.  The Company does not intend to sell these securities and will not more likely than not be required to sell these securities. Unrealized losses primarily relate to interest rate fluctuations and not credit concerns.

14

At September 30, 2012 and December 31, 2011, the Company held no securities held to maturity that have been in a continuous unrealized loss position for twelve months.

Securities with an amortized cost of $13.1 million and $8.0 million, respectively, and a fair value of $13.5 million and $8.3 million, respectively, were pledged to secure public funds on deposit at September 30, 2012 and December 31, 2011, repectively.

Note 6.   Loans.

The components of the loan portfolio at September 30, 2012 and December 31, 2011 are summarized as follows (in thousands):

	September 30, 2012		December 31, 2011
Commercial real estate	$	228,714	$	186,187
Residential mortgages	54,379		52,595
Commercial	66,001		57,464
Home equity	67,676		67,895
Consumer	1,285		1,019
	$	418,055	$	365,160

The Bank grants commercial, mortgage and installment loans to those New Jersey residents and businesses within its local trading area.  Its borrowers’ abilities to repay their obligations are dependent upon various factors, including the borrowers’ income and net worth, cash flows generated by the underlying collateral, value of the underlying collateral and priority of the Bank’s lien on the property.  Such factors are dependent upon various economic conditions and individual circumstances beyond the Bank’s control; the Bank is therefore subject to risk of loss.  The Bank believes its lending policies and procedures adequately manage the potential exposure to such risks and that an allowance for loan losses is provided for management’s best estimate of probable loan losses.

The allowance for loan losses and recorded investment in loan receivables for the periods indicated are as follows (in thousands):

For the three months ended:

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September 30, 2012	Commercial Real Estate			Residential Mortgages		Commercial			Home Equity			Consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	2,725		$	439	$	1,274		$	418		$	22		$	223		$	5,101
Charge-offs	—			—		(340		)	—			—			—			(340		)
Recoveries	—			—		1			—			—			—			1
Provisions	209			2		60			23			3			(37		)	260
Ending balance	$	2,934		$	441	$	995		$	441		$	25		$	186		$	5,022
Ending balance: individually evaluated for impairment	$	250		$	127	$	50		$	70		$	—		$	—		$	497
Ending balance: collectively evaluated for impairment	$	2,684		$	314	$	945		$	371		$	25		$	186		$	4,525
Loan receivables:
Ending balance	$	228,714		$	54,379	$	66,001		$	67,676		$	1,285		$	—		$	418,055
Ending balance: individually evaluated for impairment	$	2,105		$	2,467	$	325		$	1,433		$	—		$	—		$	6,330
Ending balance: collectively evaluated for impairment	$	226,609		$	51,912	$	65,676		$	66,243		$	1,285		$	—		$	411,725
September 30, 2011	Commercial Real Estate			Residential Mortgages		Commercial			Home Equity			Consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	2,353		$	389	$	725		$	357		$	22		$	478		$	4,324
Charge-offs	(326		)	—		—			—			—			—			(326		)
Recoveries	—			—		—			—			—			—			—
Provisions	(94		)	9		217			(22		)	(2		)	192			300
Ending balance	$	1,933		$	398	$	942		$	335		$	20		$	670		$	4,298
Ending balance: individually evaluated for impairment	$	80		$	17	$	—		$	—		$	—		$	—		$	97
Ending balance: collectively evaluated for impairment	$	1,853		$	381	$	942		$	335		$	20		$	670		$	4,201
Loan receivables:
Ending balance	$	177,649		$	53,504	$	53,413		$	67,442		$	947		$	—		$	352,955
Ending balance: individually evaluated for impairment	$	2,340		$	2,784	$	—		$	1,253		$	—		$	—		$	6,377
Ending balance: collectively evaluated for impairment	$	175,309		$	50,720	$	53,413		$	66,189		$	947		$	—		$	346,578

The following tables present the activity in the allowance for loan losses and recorded investment in loan receivables for the periods indicated (in thousands):

For the nine months ended:

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September 30, 2012	Commercial Real Estate			Residential Mortgages			Commercial			Home Equity			Consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	2,408		$	470		$	827		$	368		$	21		$	380		$	4,474
Charge-offs	—			—			(340		)	—			—			—			(340		)
Recoveries	1			—			2			—			—			—			3
Provisions	525			(29		)	506			73			4			(194		)	885
Ending balance	$	2,934		$	441		$	995		$	441		$	25		$	186		$	5,022
Ending balance: individually evaluated for impairment	$	250		$	127		$	50		$	70		$	—		$	—		$	497
Ending balance: collectively evaluated for impairment	$	2,684		$	314		$	945		$	371		$	25		$	186		$	4,525
Loan receivables:
Ending balance	$	228,714		$	54,379		$	66,001		$	67,676		$	1,285		$	—		$	418,055
Ending balance: individually evaluated for impairment	$	2,105		$	2,467		$	325		$	1,433		$	—		$	—		$	6,330
Ending balance: collectively evaluated for impairment	$	226,609		$	51,912		$	65,676		$	66,243		$	1,285		$	—		$	411,725
September 30, 2011	Commercial Real Estate			Residential Mortgages			Commercial			Home Equity			Consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	1,962		$	366		$	627		$	358		$	22		$	414		$	3,749
Charge-offs	(326		)	—			—			(25		)	—			—			(351		)
Recoveries	—			—			—			—			2			—			2
Provisions	297			32			315			2			(4		)	256			898
Ending balance	$	1,933		$	398		$	942		$	335		$	20		$	670		$	4,298
Ending balance: individually evaluated for impairment	$	80		$	17		$	—		$	—		$	—		$	—		$	97
Ending balance: collectively evaluated for impairment	$	1,853		$	381		$	942		$	335		$	20		$	670		$	4,201
Loan receivables:
Ending balance	$	177,649		$	53,504		$	53,413		$	67,442		$	947		$	—		$	352,955
Ending balance: individually evaluated for impairment	$	2,340		$	2,784		$	—		$	1,253		$	—		$	—		$	6,377
Ending balance: collectively evaluated for impairment	$	175,309		$	50,720		$	53,413		$	66,189		$	947		$	—		$	346,578

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due.  The following table presents the classes of the loan portfolio summarized by the past due status as of September 30, 2012 and December 31, 2011, (in thousands):

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September 30, 2012	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivables
Commercial real estate	$	—	$	—	$	1,708	$	1,708	$	227,006	$	228,714
Residential mortgages	—		—		2,467		2,467		51,912		54,379
Commercial	—				325		325		65,676		66,001
Home equity	—		76		1,433		1,509		66,167		67,676
Consumer	10		—		—		10		1,275		1,285
Total	$	10	$	76	$	5,933	$	6,019	$	412,036	$	418,055
December 31, 2011	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivables
Commercial real estate	$	—	$	—	$	1,733	$	1,733	$	184,454	$	186,187
Residential mortgages	—		—		2,487		2,487		50,108		52,595
Commercial	—		—		325		325		57,139		57,464
Home equity	180		—		1,253		1,433		66,462		67,895
Consumer	27		—		—		27		992		1,019
Total	$	207	$	—	$	5,798	$	6,005	$	359,155	$	365,160

The Bank had no loans greater than ninety days delinquent and accruing interest.

The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Bank’s internal risk rating system as of September 30, 2012 and December 31, 2011 (in thousands):

September 30, 2012	Commercial Real Estate		Residential Mortgages		Commercial		Home Equity		Consumer		Total
Pass	$	223,450	$	51,912	$	64,176	$	66,243	$	1,285	$	407,066
Special Mention	3,557		—		1,500		—		—		5,057
Substandard	1,707		2,467		325		1,433		—		5,932
Doubtful	—		—		—		—		—		—
Total	$	228,714	$	54,379	$	66,001	$	67,676	$	1,285	$	418,055
December 31, 2011	Commercial Real Estate		Residential Mortgages		Commercial		Home Equity		Consumer		Total
Pass	$	180,897	$	50,108	$	57,139	$	66,642	$	1,019	$	355,805
Special Mention	3,160		—		—		—		—		3,160
Substandard	2,130		2,487		325		1,253		—		6,195
Doubtful	—		—		—		—		—		—
Total	$	186,187	$	52,595	$	57,464	$	67,895	$	1,019	$	365,160

As of September 30, 2012 the Bank had eleven non-accrual loans totaling approximately $5.9 million, of which six loans totaling approximately $2.0 million had specific reserves of $497 thousand and five loans totaling approximately $3.9 million had no specific reserve.  If interest had been accrued, such income would have been approximately $86 thousand and $260 thousand, respectively, for the three and nine month periods ended September 30, 2012.  Within its non-accrual loans at September 30, 2012, the Bank had two residential mortgage loans that met the definition of a troubled debt restructuring (“TDR”) loan.  TDRs are loans where the contractual terms of the loan have been modified for a borrower experiencing financial difficulties.  These modifications could include a reduction in the interest rate of the loan, payment extensions, forgiveness of principal or other actions to maximize collection.  At September 30, 2012, these TDR loans had an outstanding balance of $797 thousand and had specific reserves of $127

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thousand.  One of the TDR loans had an outstanding balance of $310 thousand and was performing in accordance with its modified terms.

Non-accrual loans and related amounts recorded in the allowance for loan losses are summarized as follows (in thousands):

September 30, 2012	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Nonaccrual loans with specific reserves:
Commercial real estate	$	957	$	957	$	250	$	957	$	—
Residential mortgages	797		840		127		798		9
Commercial	50		50		50		50		—
Home equity	180		180		70		135		—
Total nonaccrual loans with specific reserves	1,984		2,027		497		1,940		9
Nonaccrual loans with no specific reserves:
Commercial real estate	750		750		—		766		—
Residential mortgages	1,670		1,670		—		1,683		—
Commercial	275		275		—		275		—
Home equity	1,254		1,254		—		1,253		—
Total nonaccrual loans with no specific reserves	3,949		3,949		—		3,977		—
Total non-accrual loans	$	5,933	$	5,976	$	497	$	5,917	$	9
December 31, 2011	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Nonaccrual loans with specific reserves:
Commercial real estate	$	957	$	957	$	160	$	1,264	$	9
Residential mortgage	800		843		117		515		23
Commercial	50		50		50		10		2
Total nonaccrual loans with specific reserves