Boardwalk Bancorp 10Q 2007 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


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

For the quarterly period ended: September 30, 2007


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.

(Exact name of registrant as specified in its charter)


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

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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. Yesþ Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filero Accelerated filero Non-accelerated filerþ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 4,300,975 shares as of November 9, 2007.

Page 1 of 40

PART I

Item 1 – Financial Statements

(a)

The following unaudited financial statements and related documents are set forth in this quarterly report on Form 10-Q on the following pages:


	Page
STATEMENTS OF FINANCIAL CONDITION		3
STATEMENTS OF OPERATIONS		4
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)		5
STATEMENTS OF CASH FLOWS		6
NOTES TO FINANCIAL STATEMENTS		7
Rule 13a-14(a) Certification of CFO
Rule 13a-14(a) Certificate of CEO
Certifications of CFO & CEO under Sec 906

Page 2 of 40

BOARDWALK BANCORP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except share data)


	(Unaudited)
	September 30, 2007			December 31, 2006
ASSETS
Cash & due from banks	$	5,832		$	8,681
Interest-earning demand deposits in other banks		84			138
Cash and cash equivalents		5,916			8,819
Interest-earning time deposits in other banks		4,260			5,052
Investments — available for sale, amortized cost 2007 - $106,888, 2006 - $96,374		105,093			95,335
Investments — held to maturity, market value 2007 - $0, 2006 - $37,890		—			38,955

Total Investments		105,093			134,290
Loans		301,791			277,466
Allowance for loan losses		(3,692	)		(3,273	)
Net loans		298,099			274,193
Premise and equipment, net		15,771			16,186
Accrued interest receivable		2,206			2,206
Bank owned life insurance		9,888			9,601
Accounts Receivable		2,950			2,263
Other assets		1,160			670

Total assets	$	445,343		$	453,280


LIABILITIES
Deposits:
Non-Interest bearing	$	26,483		$	22,699
Interest bearing		69,452			55,613
Time		215,314			231,641

Total deposits		311,249			309,953
Borrowings		82,723			91,061
Accrued interest payable		422			561
Other liabilities		1,064			578

Total liabilities		395,458			402,153

SHAREHOLDERS’ EQUITY
Common stock, $5 par value: authorized 12,500,000 shares and 4,299,925 issued and outstanding in 2007, authorized 12,500,000 shares and 4,289,395 issued and outstanding in 2006		21,590			21,447
Additional paid in capital		25,690			25,425
Treasury Stock, at cost, 18,000 shares		(313	)		—
Accumulated earnings		4,713			5,312
Accumulated other comprehensive loss, net		(1,795	)		(1,057	)
Total shareholders’ equity		49,885			51,127

Total liabilities & shareholders’ equity	$	445,343		$	453,280

The accompanying notes are an integral part of the financial statements.

Page 3 of 40

BOARDWALK BANCORP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

(Unaudited)


	For the three months,				For the nine months,
	ended September 30,				ended September 30,
	2007		2006		2007			2006
Interest income:
Interest and fees on loans	$	5,627	$	4,966	$	16,286		$	14,092
Interest on interest bearing deposits		163		116		390			403
Interest on investment securities		1,585		1,723		4,981			4,875

Total Interest Income		7,375		6,805		21,657			19,370

Interest expense:
Interest on deposits		3,197		2,885		9,167			7,570
Interest on borrowings		829		888		2,754			2,584

Total Interest Expense		4,026		3,773		11,921			10,154

Net interest income		3,349		3,032		9,736			9,216
Provision for loan losses		—		75		422			338

Net interest income after provision for loan losses		3,349		2,957		9,314			8,878

Non-interest income:
Service charges, fees and other income		390		242		946			691
Bank owned life insurance		95		65		287			197
Gain/ (loss) on sales of investment securities available for sale, net		—		—		(141	)		(9	)
Gain on sale of other assets		—		—		10			—
Other than temporary impairment		—		—		(1,524	)		—

Total non-interest income		485		307		(422	)		879
Non-interest expense:
Compensation & benefits		1,500		1,299		4,455			3,732
Occupancy & equipment		390		369		1,198			1,006
Data processing and other servicing costs		166		131		500			380
Advertising & promotion		27		42		102			137
Professional services		586		142		989			426
Investor Relations		30		31		90			72
Other operating		394		285		931			830

Total non-interest expense		3,093		2,299		8,265			6,583

Income/(loss) before income taxes		741		965		627			3,174
Income tax expense/(benefit)		188		175		(19	)		852

Net income	$	553	$	790	$	646		$	2,322


Earnings per share:
Basic	$	0.13	$	0.24	$	0.15		$	0.73
Diluted	$	0.13	$	0.22	$	0.15		$	0.65

Weighted average number of shares outstanding:
Basic		4,295,768		3,241,048		4,295,968			3,174,171
Dilutive effect of options and warrants		15,481		345,806		16,093			408,449

Diluted		4,311,249		3,586,854		4,312,061			3,582,620

The accompanying notes are an integral part of the financial statements

Page 4 of 40

BOARDWALK BANCORP, INC.
CONSOLIDATED

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

(In thousands)


											Accumulated
			Additional								Other			Total
	Common		Paid-in		Treasury			Accumulated			Comprehensive			Shareholders’
	Stock		Capital		Stock			Earnings			Income (Loss)			Equity
Balance, January 1, 2005		13,034		13,046		—			1,073			(122	)		27,031
Comprehensive income
Net income		—		—					2,600			—			2,600
(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			29


Net change in unrealized gain/loss on securities available for sale															(811	)


Total comprehensive income															1,783

Cash dividend on common stock									(478	)					(478	)
Tax benefit on 4,845 stock options exercised				19											19
Issuance of Common Stock(431,650 shares)		2,159		4,439											6,598
Shares issued for stock option plans (21,036 shares)		105		33					—			—			138
Shares issued for exercise of 21,012 warrants (22,062 shares)		110		142		—			—			—			252


Balance, December 31, 2005		15,408		17,679		—			3,195			(939	)		35,343
Comprehensive income
Net income		—		—					3,025			—			3,025
(Amortization)/Accretion of previous unrealized gain/loss on securities transferred to held to maturity, net of tax												18			18


Change in unrealized gain/(loss) on securities available for sale		—		—					—			(202	)		(202	)
Less: reclassification adjustment		—		—					—			66			66


Net change in unrealized gain/loss on securities available for sale															(136	)


Total comprehensive income															2,907
Cash dividend on common stock									(908	)					(908	)
Tax benefit on 25,605 stock options exercised				94											94
Shares issued for stock option plans (27,406 shares)		137		43											180
Shares issued for exercise of 1,120,255 warrants (1,176,256 shares)		5,881		7,562					—			—			13,443
Shares issued for dividend reinvestment plan(4,092)		21		47		—			—			—			68

Balance, December 31, 2006		21,447		25,425		—			5,312			(1,057	)		51,127


Comprehensive income
Net income		—		—					646			—			646
(Amortization)/Accretion of previous unrealized gain/loss on securities transferred to held to maturity, net of tax												20			20


Change in unrealized gain/(loss) on securities available for sale		—		—					—			(949	)		(949	)
Less: reclassification adjustment		—		—					—			191			191


Net change in unrealized gain/loss on securities available for sale															(758	)


Total comprehensive income															(92	)
Cash dividend on common stock									(1,245	)					(1,245	)
Treasury stock purchase (18,000 shares)						(313	)								(313	)
Tax benefit on 11,535 stock options exercised				46											46
Stock option compensation expense				118											118
Shares issued for stock option plans (23,188 shares)		116		45											161
Shares issued for exercise of 1,508 warrants (1,583 shares)		8		10					—			—			18
Shares issued for employee stock purchase plan (1,580)		8		19											27
Shares issued for dividend reinvestment plan (2,181)		11		27		—			—			—			38


Balance, Sept 30, 2007 (unaudited)	$	21,590	$	25,690	$	(313	)	$	4,713		$	(1,795	)		49,885

The accompanying notes are an integral part of the financial statements

Page 5 of 40

BOARDWALK BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the nine months ended
	September 30,
	2007			2006
	(In thousands)
Cash flows from operating activities:
Net income	$	646		$	2,322
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		422			338
Loss on sales of investment securities available for sale		141			9
Income on bank owned life insurance		(287	)		(197	)
Depreciation		648			576
Amortization and accretion of premiums and discounts on investments, net		(699	)		17
Amortization and accretion of deferred loan fees and costs		45			1
Changes in operating assets and liabilities:
Decrease (increase) in accrued interest receivable		—			(771	)
Increase in account receivables		(687	)		(400	)
Increase in other assets		(590	)		(56	)
(Decrease) increase in accrued interest payable		(139	)		32
Increase (decrease) in other liabilities		486			(321	)
Net cash (used in)/provided by operating activities		(14	)		1,550


Cash flows from investing activities:
Net maturities of interest-earning time deposits in other banks		792			—
Purchases of investments, HTM		(839	)		(231,224	)
Purchase of investments, AFS		(224,847	)		(27,416	)
Proceeds from sales, calls & maturities of investments		252,709			235,828
Principal collected on mortgage-backed securities		2,004			5,219
Net increase in loans receivable		(24,283	)		(31,065	)
Purchase of premises and equipment		(233	)		(4,369	)
Net cash provided by/(used in) investing activities		5,303			(53,027	)


Cash flows from financing activities:
Net increase in deposits		1,296			44,402
Net decrease in borrowings		(8,338	)		5,131
Proceeds from dividend reinvestment plan		38			—
Proceeds from employee stock purchase plan		27			—
Exercise of 23,188 shares from option plans		161			84
Exercise of 1,508 warrants from unit offering		18			2,410
Stock option expense		118			—
Tax benefit on exercise of stock options		46			—
Purchase of treasury stock, net		(313	)		—
Cash dividends paid		(1,245	)		(635	)

Net cash provided by financing activities		(8,192	)		51,392


Net increase in cash and cash equivalents		(2,903	)		(85	)
Cash and cash equivalents at the beginning of the period		8,819			6,674

Cash and cash equivalents at the end of the period	$	5,916		$	6,589


Supplemental disclosures of cash flow information:
Interest payments	$	12,061		$	10,122

Net change in unrealized loss on securities available for sale	$	(758	)	$	(143	)

(Amortization)/Accretion of previous unrealized gain/loss on securities transferred to held to maturity, net of income tax	$	20		$	13

Income taxes paid	$	100		$	1,274

The accompanying notes are an integral part of the financial statements

Page 6 of 40

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1 – SUBSEQUENT EVENT

On July 26, 2007, Boardwalk Bancorp, Inc. (Nasdaq “BORD”)(“Boardwalk” or “Bancorp”), Boardwalk Bank, Cape Savings Bank (“Cape Savings”), and Cape Bancorp, Inc. (“Cape Bancorp”), a new corporation being organized to facilitate the conversion of Cape Savings, entered into an Agreement and Plan of Reorganization (the “Merger Agreement”).

Subject to the terms and conditions of the Merger Agreement, Bancorp will be merged with and into Cape Bancorp with Cape Bancorp as the surviving entity (the “Merger”). Upon effectiveness of the Merger, each outstanding share of Bancorp, other than those shares owned by Bancorp, Cape Bancorp, Cape Savings or their subsidiaries, will be converted into the right to receive either $23.00 in cash or 2.3 shares of Cape Bancorp common stock, subject to the election and proration procedures set forth in the Merger Agreement which require that 50% of the merger consideration will consist of Cape Bancorp common stock and 50% of the merger consideration will consist of cash.

The Merger Agreement contains customary representations, warranties and covenants of Bancorp and Cape Bancorp, including, among others, covenants by Bancorp to conduct its business in the usual, regular and ordinary course during the interim period between the execution of the Merger Agreement and completion of the Merger, and to call a meeting of Bancorp shareholders to consider approval of the Merger, and covenants by Cape Bancorp and Cape Savings to take all reasonable steps necessary to complete the conversion of Cape Savings from mutual to stock form of organization

Completion of the Merger is subject to various conditions, including completion of the conversion of Cape Savings from mutual to stock form of organization, which conversion will require the approval of the depositors of Cape Savings and completion of a registered offering of shares of Cape Bancorp common stock in a subscription offering and, if necessary, a community offering and/or syndicated community offering. Completion of the Merger is also conditioned on the approval of the Merger Agreement by Bancorp’s shareholders, the receipt of the required regulatory approvals, the delivery of a customary legal opinion as to the federal tax treatment of the Merger, and other customary conditions for transactions such as the Merger.

The Merger is presently expected to close in the first quarter of 2008. A copy of the Merger Agreement is filed as Exhibit 2.1 to Bancorp’s Current Report on Form 8-K filed on August 1, 2007.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Boardwalk Bank (“Bank”) was incorporated under the laws of the State of New Jersey on June 24, 1999. We provide a full range of banking services to individual and corporate customers at our branch offices located in Linwood, Galloway Township, Margate City, Egg Harbor Township, Cape May Court House, and Cape May City, New Jersey, our lending offices in Linwood and Vineland, New Jersey and on a limited basis on the Internet. The Bank is a New Jersey state chartered commercial bank, the deposits of which are insured by the Federal Deposit Insurance Company (“FDIC”). We are subject to competition from other financial institutions and other financial service companies with respect to these services and customers.

Effective July 1, 2006, the Bank formed Bancorp as a bank holding company for the Bank. Each issued and outstanding share of common stock of the Bank was automatically, without any action on the part of shareholders, converted on July 1, 2006 into one share of common stock of Boardwalk. Each issued and outstanding warrant of the Bank was also automatically converted on July 1, 2006 into one warrant of Boardwalk. The transaction was accounted for in a manner similar to a pooling of interests and, accordingly, amounts in the financial statements prior to July 1, 2006 represent the previously reported amounts for the Bank as Bancorp had no activity prior to that point.

Basis of Financial Statement Presentation

The financial statements reflect the consolidated accounts of Bancorp. Such statements have been prepared in accordance with U.S. generally accepted accounting principles and applicable to the banking industry. The information for the interim periods is unaudited and includes all adjustments that are of a normal recurring nature and that management believes to be necessary for fair presentation. Results for the interim periods are not necessarily indicative of the results that may be expected for the full year.

Page 7 of 40

Use of Estimates

In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from such estimates. Material estimates that are particularly susceptible to significant change in the near term include the determination of the allowance for loan losses.

Investment Securities

Debt and equity securities are classified as either held to maturity (“HTM”), available for sale (“AFS”) or at fair market value (“Trading”). Investment securities that we have the positive intent and ability to hold to maturity are classified as HTM securities and reported at amortized cost. Investment securities not classified as HTM nor held for the purpose of trading in the near term are classified as AFS securities and reported at fair value, with unrealized gains and losses excluded from earnings and reported as accumulated other comprehensive income/(loss), a separate component of stockholders’ equity, net of tax. Investments accounted for at fair market value (“Trading”) are reported at fair value with unrealized gains and losses reported in earnings. We currently do not engage in any trading activities. Management determines the appropriate classification of securities at the time of purchase. In addition, management reviews the existing portfolio classifications for appropriateness.

AFS securities include securities that management intends to use as part of its asset/liability management strategy and that may be sold in response to changes in market interest rates and related changes in the securities’ prepayment or credit risk or to meet liquidity needs.

Amortization of premiums and accretion of discounts on debt securities are recognized in interest income using a constant yield method. Gains and losses on sales of investment securities are computed as of the settlement date on the specific identification basis and included in non-interest income. The unrealized gain or loss at the time a security is transferred from available for sale to held to maturity is amortized over the remaining life of that security.

We recently undertook a balance sheet restructuring program designed to reduce interest rate risk and improve net interest margin. We initially intended to elect early adoption of Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Liabilities” (“SFAS 159”) and account for the restructuring under the transition provisions of SFAS 159. Subsequent to the Company’s original decision to early adopt SFAS 159, clarifications of the interpretation of the application of that Statement by applicable regulatory and industry bodies, including the AICPA’s Center for Audit Quality, led us to conclude that the application of SFAS 159 to our transactions might be inconsistent with the intent and spirit of the statement. Consequently, we decided not to early-adopt SFAS 159. Based on our current understanding of the views of applicable regulatory agencies and bodies, we have reported the investment securities in our restructuring program that were designated for sale at March 31, 2007 and subsequently sold in April 2007 as being other-than-temporarily impaired at March 31, 2007. Accordingly, we have recognized a charge to earnings for other than temporary impairment of $1,524,000 for the three-month period ended March 31, 2007, to reflect the difference between book carrying value and market value. Changes in market values of the investment securities sold in our restructuring program between March 31, 2007 and the actual sale date in April 2007 resulted in net gains on sale of $95,035.

Accounts Receivable

Accounts Receivable includes a program called Business Manager/Med Cash. Business Manager/Med Cash is a program that enables us to purchase at a discount and manage the accounts receivable of credit-worthy merchants with required repurchase of delinquent accounts by the merchant and with the merchant’s repurchase obligation supported by a cash collateral account. The purchase of the merchant’s accounts receivable is recognized as accounts receivable in our financial statements.

Other Assets

Other Assets include prepaid accounts and deferred tax asset accounts.

Borrowings

Borrowings are reverse repurchase agreements with brokers or reverse repurchase agreements and advances with the Federal Home Loan Bank of New York (“FHLBNY”).

Page 8 of 40

Loans

Loans are stated at the principal amount outstanding, net of deferred loan fees and costs. Interest income is accrued on the principal amount outstanding using the interest method. Loan origination fees and related direct costs are deferred and amortized to income over the term of the respective loan and loan commitment period as a yield adjustment.

Non-accrual loans are those on which the accrual of interest has ceased. Non-consumer loans are generally placed on non-accrual status if, in the opinion of management, collection is doubtful, or when principal or interest is past due 90 days or more and collateral is insufficient to cover principal and interest. Interest accrued, but not collected at the date a loan is placed on non-accrual status, is reversed and charged against interest income. Subsequent cash receipts are applied either to the outstanding principal or recorded as interest income, depending on management’s assessment of ultimate collectibility of principal and interest. Loans are returned to an accrual status when the borrower’s ability to make periodic principal and interest payments has returned to normal (i.e. brought current with respect to principal or interest or restructured) and the paying capacity of the borrower and/or the underlying collateral is deemed sufficient to cover principal and interest. Consumer loans are not automatically placed on non-accrual status when principal or interest payments are 90 days past due, but in most instances, are charged-off when deemed uncollectible or after reaching 120 days past due.

Impaired loans are measured based on the present value of expected future discounted cash flows, the market price of the loan or the fair value of the underlying collateral if the loan is collateral dependent. The recognition of interest income on impaired loans is the same as for non-accrual loans discussed above. We had no impaired loans at September 30, 2007 or December 31, 2006.

Allowance for Loan Losses

The provision for loan losses charged to operating expense reflects the amount deemed appropriate by management to provide for known and inherent losses of the existing loan portfolio. Management’s judgment is based on the evaluation of individual loans, past experience, the assessment of current economic conditions, and other relevant factors. Based on all of these factors, loans are grouped by relative risk and risk factors assigned to each category. Appropriate reserves are determined for each category based on the risk factors established for that category. Loans or borrowers exhibiting credit deterioration are excluded from these calculations and are assigned specific reserves based on their risk classification.

All commercial borrowers, consumer loans and residential mortgage loans are periodically reviewed for any evidence of credit quality deterioration. Such factors as delinquencies, late payment history, company earnings performance and cash flow, downturns in a particular industry and specific changes in the local business environment that may affect a particular business are all considered in identifying weakening credit situations. Results of each assessment are assigned a risk rating, reported in terms of a classification (Superior, Pass, Management Attention, Special Mention, Substandard, Doubtful and Loss). Associated with each classification is a defined set of characteristics that are reflective of the particular level of risk. These defined characteristics provide a common bank-wide basis for quantifying risk so that each loan receives equal assessment.

A third party loan review is conducted annually on all loans over $500,000.

Loan losses are charged directly against the allowance for loan losses and recoveries on previously charged-off loans are added to the allowance.

Management relies significantly on estimates to determine the allowance for loan losses. Consideration is given to a variety of factors in establishing these estimates including current economic conditions, diversification of the loan portfolio, delinquency statistics, borrowers’ perceived financial and managerial strengths, the adequacy of underlying collateral, if collateral dependent, or present value of future cash flows, and other relevant factors. Since the allowance for loan losses is dependent, to a great extent, on conditions that may be beyond our control, it is at least reasonably possible that management’s estimates of the allowance for loan losses and actual results could differ in the near term.

In addition, regulatory authorities, as an integral part of their examinations, periodically review the allowance for loan losses. They may require additions to the allowance based upon their judgments about information available to them at the time of examination.

Premises and Equipment

Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are calculated on a straight-line basis over the estimated useful lives of the assets as follows: buildings — 39 years; equipment and

Page 9 of 40

computer hardware — 3 to 10 years; and software — 3 years. Expenditures for maintenance and repairs are charged to operations as incurred. Gains or losses upon disposition are reflected in earnings as realized. Land is carried at cost.

Other Real Estate Owned

Other real estate owned is comprised of properties acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure. Other real estate owned is recorded at the lower of the carrying value of the loan or the fair value of the property, net of estimated selling costs. Costs relating to the development or improvement of the properties are capitalized while expenses related to the operation and maintenance of properties are expensed as incurred. Gains and losses upon disposition are reflected in earnings as realized.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established against deferred tax assets when, in the judgment of management, it is more likely than not that such deferred tax assets will not become realizable.

Earnings Per Share

Basic earnings per share is calculated on the basis of the weighted average number of shares outstanding. Diluted earnings per share is calculated on the basis of the weighted average number of shares outstanding plus the weighted average number of additional dilutive shares.

Stock Options

Prior to the formation of Bancorp, the Bank maintained two stock option compensation plans, a non-qualified plan for the original members of the board of directors of the Bank and a qualified plan for the employees of the Bank. Prior to January 1, 2006, we accounted for these plans under the recognition and measurement principles of APB Opinion No. 25,Accounting for Stock Issued to Employees,and related interpretations. No stock-based employee compensation cost was reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of the grant. The plans were assumed by Bancorp upon its formation. Options to purchase Bank common stock were converted to options to purchase Bancorp common stock.

We sold 1,165,000 warrants to purchase our common stock during 2003. At June 30, 2006 these warrants were dilutive and expired on December 31, 2006.

In December 2004, the Bank paid a 5% stock dividend that resulted in adjustments to the outstanding options. Each option is now convertible to 1.05 shares of Bancorp common stock.

The fair value of each option granted in 2004 using the Black Scholes option pricing model was $4.93. Significant assumptions used in the model included a risk-free rate of return of 3.9667%, expected option life of ten years, a 20.515% volatility rate, and annual dividend of $.10. For the options granted in 2002 using the Black Scholes option pricing model the fair value of each option was $3.60. Significant assumptions used in the model included a risk-free rate of return of 3.817%, expected option life of ten years, a 24% volatility rate, and annual dividend of $.075. The fair value of each option granted in 2000 using the Black Scholes option pricing model was $3.12. Significant assumptions used in the model included a risk-free rate of return of 4.891%, a .01% volatility rate, expected option life of ten years and no dividends.

We adopted FASB 123R for financial statements beginning January 1, 2006. FASB 123R requires that expenses attributed to vesting options be accrued throughout the vesting period.

At the Bank’s annual meeting on April 27, 2006, in connection with the formation of the holding company, shareholders of the Bank approved the Boardwalk Bancorp, Inc. 2006 Stock Incentive Plan (the “2006 Plan”). The 2006 Plan authorizes the issuance of 433,155 shares of common stock, subject to certain annual increases, in the form of equity awards to employees and non-employee directors of Bancorp and its subsidiaries. On January 22, 2007, Bancorp granted 400,000 options with a vesting term of nine and a half years and an expiration date of January 19, 2017. Vesting of the options accelerates in the event of a change of control of Bancorp. The

Page 10 of 40

The following table presents compensation expense and the related tax impacts for equity awards recognized in the consolidated income statements.


	Three months ended				Nine months ended
	Sept 30				Sept 30
	2007		2006		2007		2006
	(in thousands)				(in thousands)
Compensation expense	$	43	$	—	$	118	$	—
Tax Benefit		15		—		40		—

Net Income effect	$	28	$	—	$	78	$	—

NOTE 3 — EARNINGS PER SHARE

The following is a reconciliation of the numerators and denominators of the basic and dilutive earnings per share calculation.


	Earnings per share table
	For the three months ended:				For the nine months ended:
	September 30, 2007		September 30, 2006		September 30, 2007		September 30, 2006
	(Dollars in thousands, except share data)				(Dollars in thousands, except share data)
Net Income	$	553	$	790	$	646	$	2,322
Weighted average basic number of shares		4,295,768		3,241,048		4,295,968		3,174,171
Dilutive effect of options and warrants		15,481		345,806		16,093		408,449
Weighted average diluted number of shares		4,311,249		3,586,854		4,312,061		3,582,620
Basic Earnings per share	$	0.13	$	0.24	$	0.15	$	0.73
Diluted Earnings per share	$	0.13	$	0.22	$	0.15	$	0.65

NOTE 4 — REGULATORY RESTRICTIONS

We are subject to various regulatory capital requirements of federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

We must maintain certain minimum capital amounts and ratios to be considered adequately capitalized as set forth in the table below. Management believes that we meet, as of September 30, 2007, all capital adequacy requirements to which we are subject. Management believes that we are well capitalized at September 30, 2007 under the regulatory framework for prompt corrective action provisions of Section 3b of the Federal Deposit Insurance Act.

Page 11 of 40


						Per Regulatory Guidelines
	Actual					Minimum					“Well Capitalized”
	Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2007
Risk based capital ratios:
Tier I	$	41,378		10.58	%	$	15,644		4.00	%	$	23,466		6.00	%
Total capital	$	45,070		11.53	%	$	31,271		8.00	%	$	39,089		10.00	%
Leverage ratio	$	41,378		9.16	%	$	18,069		4.00	%	$	22,586		5.00	%

December 31, 2006
Risk 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	%

Dividend payments by the Bank to Bancorp are subject to certain regulatory restrictions which are discussed below in “Dividend Policy.”

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

In addition to historical information, this management discussion and analysis contains forward-looking statements. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. We caution readers not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of this date. We are not obligated to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after this date. Readers should carefully review the risk factors described in other documents we file from time to time with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, and any current reports on Form 8-K.

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General

Boardwalk Bancorp, Inc. is a New Jersey business corporation and was organized as a bank holding company effective July 1, 2006. Its subsidiary, Boardwalk Bank, is a New Jersey state chartered commercial bank headquartered in Linwood, Atlantic County, New Jersey, in the southern Atlantic shore region of the state. We conduct business from our main office in Linwood and branch offices in Galloway Township, Margate City, Egg Harbor Township, Cape May Court House, and Cape May City, New Jersey and lending offices in Linwood and Vineland, New Jersey and, on a limited basis, on the Internet. Our second branch in Egg Harbor Township, New Jersey opened October 30, 2006. At September 30, 2007, we had total assets of $445,343,000, total deposits of $311,249,000 and shareholders’ equity of $49,885,000.

We are a member of the FHLBNY, and our deposits are insured up to the applicable limits by the FDIC. The address of our principal executive office is 201 Shore Road, Linwood, New Jersey 08221, and our telephone number is (609) 601-0600. Our website is www.boardwalkbank.com.

Our revenues are derived principally from interest on our loan and security portfolios. Our primary sources of funds are deposits, capital, repayments, prepayments and maturities of loans, repayments, prepayments and maturities of mortgage-backed and investment securities, and borrowed funds. We face significant competition from other financial institutions, many of which are larger organizations with more resources and locations.

Our results of operations are dependent primarily on net interest income, which is the difference between the interest income earned on our interest-earning assets, such as loans and securities, and the interest expense paid on our interest-bearing liabilities, such as deposits and borrowed money. We also generate non-interest income such as service charges, income from bank owned life insurance, income from Business Manager/Med Cash and other fees. Our non-interest expenses primarily consist of employee compensation and benefits, occupancy expenses, marketing, data processing costs and other operating expenses. We are subject to losses from our loan portfolio if borrowers fail to meet their obligations. Our results of operations are also significantly affected by general economic and competitive conditions, particularly changes in market interest rates, government policies and actions of regulatory agencies.

Pending Merger

Given the increasingly competitive nature of the banking industry as a whole, our Board of Directors believes the merger with Cape Bancorp is in the best interests of our customers, employees and shareholders. We believe that the Boardwalk Bank approach to community banking can be greatly enhanced by partnering with another outstanding community bank which has a long history of providing quality financial products and services to the communities and markets it serves. This transaction combines two well-respected community banking organizations creating a combined franchise with over $1 billion in total assets.

The following discussion focuses on the major components of our operations and our intention to conduct business in the usual, regular and ordinary course during the interim period between the execution of the Merger Agreement and completion of the Merger. This discussion section should be read in conjunction with the Financial Statements and accompanying notes. Current performance may not be indicative of future performance.

Management Strategy

We established Boardwalk Bank based on the belief that there was and continues to be excellent potential for a locally owned and managed commercial bank in our market area. As a result of increased bank consolidations and mergers in recent years in New Jersey, many local banks have been acquired by larger and out-of-state institutions. For example, some of the largest commercial banks in New Jersey in terms of deposit market share have their headquarters in other states. We believe that this consolidation and merger activity has made it more difficult for small and mid-sized businesses to obtain prompt service and access to decision-makers in many financial institutions. We address this need by offering quality, personalized, and friendly service traditionally associated with local community banks.

Our business objective is to be recognized as a reliable and responsive provider of high quality banking services to retail customers, small and mid-sized businesses and professional practices, such as medical doctors and lawyers, located in our target market area of Atlantic, Cape May and Cumberland counties, New Jersey. We actively pursue business relationships with our targeted clientele through diligent calling efforts and by capitalizing on our extensive knowledge of our market’s communities and the businesses serving these communities. The members of our Board of Directors and our loan officers have widespread business experience and contacts in our marketplace and are an important source of new business opportunities. This combined in-depth knowledge of our lending markets has contributed to our superior loan portfolio credit quality since the inception of the Bank. We also offer customized products to meet the needs of our customers, such as loans with variable payment features to account for the seasonal

Page 13 of 40

nature of certain of our customers’ businesses and courier service for deposit pickup. Our goal is to establish deposit and lending relationships that are based on service, will result in long-standing relationships and will lead to referrals from our satisfied customers.

Retail customer relationships are also important. We actively pursue retail deposit relationships by designing our deposit products to meet our retail customers’ needs and price these products to be amongst the most competitive in our markets.

An important element of our strategy is to hire bankers who have prior experience as well as pre-existing business relationships in our markets. Our team of lenders and branch personnel has prior experience at community banks and regional banks in our market. It is a fundamental belief of management that having knowledge of our local markets is a critical element in making sound credit decisions. This extensive knowledge of our local markets has allowed us to develop and implement a highly focused and disciplined approach to lending to the vacation-related and other businesses in our market area. We face a substantial challenge as we continue to expand our commercial lending portfolio to find additional lending personnel with experience in our market area. Management believes that the Bank is currently adequately staffed but also believes that the Atlantic, Cape May and Cumberland counties labor pool for experienced commercial lenders is limited. For this reason, we have developed an in-house lender training program.

We believe that our approach to building our customer base and our emphasis on service, when combined with the application of sound banking principles, will create value for our shareholders.

Critical Accounting Matters

The discussion and analysis of the financial condition and results of operations are based on the Consolidated Financial Statements, which are prepared in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenue and expenses. Management evaluates the estimates and assumptions on an ongoing basis, including those related to the allowance for loan losses and deferred taxes. Management bases its estimates on historical experience and various other factors and assumptions that are believed to be reasonable under the circumstances. These form the basis for making judgments on the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The following is the critical accounting policy that involves more significant judgment and estimates:

Allowance for Loan Losses

The provision for loan losses charged to operating expense reflects the amount deemed appropriate by management to provide for known and inherent losses in the existing loan portfolio. Loan losses are charged directly against the allowance for loan losses and recoveries on previously charged-off loans are added to the allowance.

Income Taxes

Page 14 of 40

Results of Operations

We reported a decrease of $237,000 or 30.0% in net income to $553,000 or $0.13 per diluted share for the three months ended September 30, 2007 from $790,000 or $0.22 per diluted share for the three months ended September 30, 2006.

Net income for the three months ended September 30, 2007 benefited from growth in loans and a resultant growth in interest income that was offset by approximately $273,000, net of taxes, of expenses associated with the merger with Cape Savings Bank. Interest income improved by $570,000 or 8.4% to $7,375,000 for the three months ended September 30, 2007 from $6,805,000 in the same quarter of 2006. The increase in interest income included a 13.3% increase in interest on loans to $5,627,000 for the three months ended September 30, 2007 from $4,966,000 for the three months ended September 30, 2006. Continuing deposit competition and growth in interest bearing deposits contributed to an increase in deposit interest expense. The cost of interest bearing deposits increased from 3.93% for the three month period ended September 30, 2006 to 4.29% for the three month period ended September 30, 2007. Deposit interest expense increased by $312,000 to $3,197,000 for the third quarter of 2007 from $2,885,000 during the third quarter of 2006. Despite the increase in deposit interest expense we experienced improved net interest margin as a result of our first quarter asset restructuring that enabled us to reduce rates on certificates of deposit and fund associated disintermediation (seeNet Interest Margin and Rate/Volume Analysisbelow). Interest expense on borrowings decreased as the Bank used proceeds from the first quarter asset restructuring program to reduce borrowings. Interest expense on borrowings decreased to $829,000 for the three months ended September 30, 2007 from $888,000 for the three months ended September 30, 2006. There was no provision for loan losses for the three month period ended September 30, 2007 as loan growth during this period experienced a greater than usual seasonal decline. The provision for the third quarter of 2006 was $75,000. Non-interest income increased to $485,000 for the three months ended September 30, 2007 from $307,000 for the three months ended September 30, 2006. This increase is attributable to additional purchase of BOLI and an increase in BOLI income of $30,000 and increases in fee income of $148,000.

The Bank reported a decrease of $1,676,000 in net income to $646,000 or $0.15 per diluted share for the nine months ended September 30, 2007 from $2,322,000 or $0.65 per diluted share for the nine months ended September 30, 2006, primarily as the result of the asset-restructuring program during the first quarter of 2007, increases in operating expenses associated with growth of the bank and merger related expenses. Net income for the nine months ended September 30, 2007 was driven by growth in interest income resulting from continued loan growth. Interest income improved by $2,287,000 or 11.8% to $21,657,000 for the nine months ended September 30, 2007 from $19,370,000 for the nine months ended September 30, 2006. The increase in interest income included a 15.6% increase in interest on loans to $16,286,000 for the nine months ended September 30, 2007 from $14,092,000 for the nine months ended September 30, 2006. Rising deposit rates and, to a lesser degree, deposit growth contributed to an increase in deposit interest expense. The cost of interest bearing deposits increased from 3.61% for the nine month period ending September 30, 2006 to 4.26% for the nine month period ending September 30, 2007. Deposit interest expense increased by $1,597,000 to $9,167,000 for the nine months ended September 30, 2007 from $7,570,000 during the nine months ended September 30, 2006. Interest expense on borrowings also increased as the Bank used borrowings to support asset growth during the first and second quarters of 2007. Interest expense on borrowings increased to $2,754,000 for the nine months ended September 30, 2007 from $2,584,000 for the nine months ended September 30, 2006. The provision for loan losses for the nine month period ended September 30, 2007 was $422,000 reflecting the growth in loans. Non-interest income decreased to ($422,000) for the nine months ended September 30, 2007 from $879,000 for the nine months ended September 30, 2006. Our asset-restructuring program, designed to reduce interest rate risk and improve net interest margin, resulted in pre-tax losses of $1,758,000 for the first and second quarters of 2007. Assets in our restructuring program that were designated for sale at March 31, 2007 and subsequently sold in April 2007 were reported as other than temporarily impaired at March 31, 2007 (see above; NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,Investment Securities). Other than temporary impairment treatment requires us to value these investments at market value with the difference between book carrying value and market value being recognized as a component of current earnings for the three month period ended March 31, 2007. Changes in market values of the investment securities sold in our restructuring program between March 31, 2007 and the actual sale date in April 2007 resulted in net gains on sale of $95,035.

Net Interest Income

Net interest income is the most significant component of our operating income. Net interest income depends upon the levels of interest-earning assets and interest-bearing liabilities and the difference or “spread” between the respective yields earned and rates paid. The interest rate spread is influenced by the overall interest rate environment and by competition. Net interest margin is the interest income earned on interest earning assets less interest expense paid on interest bearing liabilities, expressed as a percentage of earning assets.

Net interest income for the quarter ended September 30, 2007 grew from the quarter ended September 30, 2006 reflecting the strengthening of our core earnings from continued loan growth. Net interest income before provisions for loan losses increased $317,000 or 10.5% to $3,349,000 for the three months ended September 30, 2007 from $3,032,000 for the three months ended September 30, 2006. Increases in interest bearing liability costs as a result of increases in rates exceeded increases from growth in

Page 15 of 40

interest bearing account balances as strong deposit competition in the southern New Jersey market continued to keep pressure on deposit rates (seeNet Interest Margin and Rate/Volume Analysisbelow). Volume growth in loans combined with yield improvements in investments from the restructuring more than offset the decline in investment income and contributed to interest income growth. Deposit interest expense increased by $312,000 to $3,197,000 for the third quarter of 2007 from $2,885,000 during the third quarter of 2006. Increases in deposit interest expense were impacted by continued strong deposit competition. Interest expense on borrowings decreased from declines in the amount of borrowed funds. Interest expense on borrowings decreased to $829,000 for the three months ended September 30, 2007 from $888,000 for the three months ended September 30, 2006.

Improvements in net interest income for the nine months ended September 30, 2007 were primarily the result of growth in loans combined with changes in interest rates on both loans and investments and despite declines in investment volumes. Net interest income before provisions for loan losses increased $520,000 or 5.6% to $9,736,000 for the nine months ended September 30, 2007 from $9,216,000 for the nine months ended September 30, 2006. Growth in earning assets out-weighed increases in interest expense from growth of deposits and borrowings for the nine months ended September 30, 2007. Increases in volume of loans added $1,814,000 to interest income while growth in interest bearing liabilities added $583,000 to interest expense. Increases in rates on deposits and borrowings exceeded improvements in rates on investments and loans. Increases in rates on loans and investments of $1,055,000 were eclipsed by an additional $1,184,000 from increases in rates on deposits and borrowings. Changes in rates on investments were positively impacted by portfolio restructuring. The net impact of changes in interest rates for the same periods was ($129,000).

Net Interest Margin and Rate/Volume Analysis

Our net interest margin improved during the three months ended September 30, 2007 from the same period in the previous year. For the three months ended September 30, 2007, net interest margin rose to 3.17% from 2.93% for the comparable period in the prior year. This improvement in net interest margin reflects the yield improvements achieved as a result of the investment portfolio restructuring and a consistent effort to reduce deposit interest rates. Yields on loans have also had a positive impact on net interest margin, but to a lesser extent than the yield on investments.

Average total loans were $301,721,000 for the three months ended September 30, 2007 compared to $268,850,000 for the three months ended September 30, 2006 an increase of 12.2%. Growth in deposits and reductions in investments were utilized to fund loan growth. Adjustments in the mix of deposits and reductions in borrowings were utilized to help improve net interest margin. Average interest-bearing liabilities were $374,894,000 for the three months ended September 30, 2007 down from $378,369,000 for the three months ended September 30, 2006.

Increases in interest income for the three months ended September 30, 2007 were driven principally by loan growth and, to a lesser degree, by improved investment rates, offset by declines in investment volumes. Total interest income for the three months ended September 30, 2007 increased $236,000 as a result of growth in asset balances (volume) and $334,000 from increases in average interest rates. Net interest margin improvement for the three months ended September 30, 2007 was supported by investment restructuring and more conservative certificate of deposit pricing. Yields on interest-earning assets rose by 41 basis points from 6.57% in the third quarter of 2006 to 6.98% for the third quarter of 2007. Continued competitive deposit pricing was the primary cause of the cost of interest-bearing liabilities increasing by 30 basis points from 3.96% in the third quarter of 2006 to 4.26% for the third quarter of 2007.

During the third quarter of 2007 significant strides were made to improve net interest rate margin from the first quarter of 2007. For the three months ended September 30, 2007 net interest margin increased to 3.17% from 2.93% for the three months ended September 30, 2006 reflecting the positive impacts of the investment portfolio restructuring and consistent efforts to reduce deposit costs. Deposit costs were reduced by lowering certificate of deposit rates and introducing a highly successful personal money market account.

Net interest margin increased for the nine months ended September 30, 2007 from the same period in the previous year. For the nine months ended September 30, 2007, net interest margin rose to 3.10% from 3.08% for the comparable period in the prior year. Yields on interest-earning assets rose by 44 basis points to 6.90% for the first nine months of 2007 from 6.46% in the first nine months of 2006 while the cost of interest-bearing liabilities rose by 56 basis points to 4.24% for the first nine months of 2007 from 3.68% in the first nine months of 2006. Loan yields rose as a result of significant loan growth and higher loan rates on new loans.

Increases in total net interest income for the nine months ended September 30, 2007 from the nine months ended September 30, 2006 can be attributed primarily to growth in net earning assets as $649,000 of net interest income growth was the result of growth in average volumes and a decline of $129,000 is attributable to changes in average rates. An increase in deposit and borrowing rates

Page 16 of 40

offset all of the improvements in rates on earning assets. Increases in deposit and borrowings average balances increased interest costs by $583,000 and increases in interest bearing liability rates raised interest expense by $1,184,000 for the nine months ended September 30, 2007 from the nine months ended September 30, 2006.

Average interest-earning assets as a percent of total assets rose, as we added no new branches to our branch network while experiencing significant growth in our loan portfolio. As a result of this asset mix change, the ratio of average interest-earning assets to average interest-bearing liabilities increased to 111.64% for the nine months ended September 30, 2007 from 108.63% for the same period in 2006.

The following table sets forth, for the three month periods ended September 30, 2007 and September 30, 2006, information regarding average balances of assets and liabilities, the total dollar amounts of interest income from interest earning assets, interest expense on interest bearing liabilities, resultant yields or costs, net interest income, net interest spread, net interest margin and the ratio of interest earning assets to interest bearing liabilities. Non accrual loans are included in the average loan balance.

Page 17 of 40


	For the Three Months Ended September 30,
	2007								2006
				Interest								Interest
	Average			Income/		Average			Average			Income/		Average
	Balance			Expense		Yield			Balance			Expense		Yield
	(Dollars in thousands)
Interest Earning Assets
Interest bearing deposits	$	12,253		$	163		5.28	%	$	9,119		$	116		5.05	%
Investments		105,048			1,585		5.99	%		132,844			1,723		5.15	%
Loans		301,721			5,627		7.40	%		268,850			4,966		7.33	%

Total interest earning assets		419,022		$	7,375		6.98	%		410,813		$	6,805		6.57	%
Non-interest earning assets		36,365								32,022
Allowance for loan losses		(3,700	)							(3,135	)

Total assets	$	451,687							$	439,700

Interest Bearing Liabilities
Interest bearing demand accounts	$	25,484		$	110		1.71	%	$	33,286		$	150		1.79	%
Savings accounts		6,776			25		1.46	%		7,779			26		1.33	%
Corporate money market accounts		18,823			101		2.13	%		21,218			113		2.11	%
Personal money market accounts		20,019			207		4.10	%		—			—		0.00	%
Certificates of deposit		224,539			2,753		4.86	%		229,179			2,596		4.49	%
FHLB borrowings		79,253			829		4.15	%		86,907			888		4.05	%

Total interest bearing liabilities		374,894		$	4,025		4.26	%		378,369		$	3,773		3.96	%
Non-interest bearing deposits		24,807								22,893
Other liabilities		1,588								953
Total liabilities		401,289								402,215
Shareholders’ equity		50,398								37,485
Total liabilities & shareholders’ equity	$	451,687			—				$	439,700			—

Net interest income				$	3,350							$	3,032
Net interest spread							2.72	%							2.61	%
Net interest margin							3.17	%							2.93	%
Net interest income and margin (tax equivalent basis)(1)					3,401		3.22	%					3,096		2.99	%
Ratio of average interest earning assets to average interest bearing liabilities		111.77	%							108.57	%


(1)		In order to present pre-tax income and resultant yields on tax-exempt investments on a basis comparable to those on taxable investments, a tax equivalent yield adjustment is made to interest income. The tax equilvalent adjustment has been computed using a Federal income tax rate of 34%, and has the effect of increasing interest income by $51,000 and $64,000 for the three month period ended September 30, 2007 and 2006 respectively. The average yield on investments increased to 6.18% from 5.99% for the three month period ended September 30, 2007 and increased to 5.34% from 5.15% for the three month period ended September 30, 2006.

The following table sets forth, for the nine month periods ended September 30, 2007 and September 30, 2006, information regarding average balances of assets and liabilities, the total dollar amounts of interest income from interest earning assets, interest expense on interest bearing liabilities, resultant yields or costs, net interest income, net interest spread, net interest margin and the ratio of interest earning assets to interest bearing liabilities. Non accrual loans are included in the average loan balance.

Page 18 of 40


	For the Nine Months Ended September 30,
	2007								2006
				Interest								Interest
	Average			Income/		Average			Average			Income/		Average
	Balance			Expense		Yield			Balance			Expense		Yield
Interest Earning Assets
Interest bearing deposits	$	9,809			390		5.32	%	$	11,450		$	403		4.71	%
Investments		116,500			4,981		5.72	%		128,592			4,875		5.07	%
Loans		293,300			16,286		7.42	%		260,634			14,092		7.23	%

Total interest earning assets		419,609			21,657		6.90	%		400,676			19,370		6.46	%
Non-interest earning assets		34,645								30,436
Allowance for loan losses		(3,530	)							(3,047	)
Total assets	$	450,724							$	428,065


Interest Bearing Liabilities
Interest bearing demand accounts	$	27,201			349		1.72	%	$	36,636		$	498		1.82	%
Savings accounts		6,734			72		1.43	%		7,813			78		1.33	%
Corporate money market accounts		16,813			266		2.12	%		23,710			378		2.13	%
Personal money market accounts		11,144			344		4.13	%		—			—		0.00	%
Certificates of deposit		225,827			8,136		4.82	%		211,929			6,616		4.17	%
FHLB borrowings		88,131			2,754		4.18	%		88,759			2,584		3.89	%

Total interest bearing liabilities		375,850			11,921		4.24	%		368,847			10,154		3.68	%
Non-interest bearing deposits		23,573								21,783
Other liabilities		1,311								1,074

Total liabilities		400,734								391,704
Stockholders’ equity		49,990								36,361
Total liabilities & stockholders’ equity	$	450,724			—				$	428,065			—

Net interest income					9,736							$	9,216

Net interest spread							2.66	%							2.78	%
Net interest margin							3.10	%							3.08	%
Net interest income and margin (tax equivalent basis)(1)					9,912		3.16	%					9,381		3.13	%
Ratio of average interest earning assets to average interest bearing liabilities		111.64	%							108.63	%


(1)		In order to present pre-tax income and resultant yields on tax-exempt investments on a basis comparable to those on taxable investments, a tax equivalent yield adjustment is made to interest income. The tax equilvalent adjustment has been computed using a Federal income tax rate of 34%, and has the effect of increasing interest income by $176,000 and $165,000 for the nine month period ended September 30, 2007 and 2006 respectively. The average yield on investments increased to 5.92% from 5.72% for the nine month period ended September 30, 2007 and increased to 5.24% from 5.07% for the nine month period ended September 30, 2006.

Rate/Volume Analysis

The following tables analyze the dollar amount changes in interest income and interest expense for major components of interest earning assets and interest bearing liabilities. The tables distinguish between (i) changes attributable to volume (changes in volume multiplied by prior period’s rate), (ii) changes attributable to rate (changes in rate multiplied by the prior period’s volume), and (iii) net change (the sum of the Average Volume columns and the Average Rate columns). The change attributable to both rate and volume (changes in rate multiplied by changes in volume) has been allocated to the change attributable to volume.

Page 19 of 40


	For the Three Months Ended September 30, 2007
	Compared to September 30, 2006
	Increase (Decrease) due to changes in:
	Average Volume			Average Rate			Net Change
	(i)			(ii)			(iii)
	(In thousands)
Interest Earning Assets
Interest bearing deposits	$	41		$	6		$	47
Investments		(419	)		281			(138	)
Loans		613			48			661
Total interest income	$	235		$	335		$	570


Interest Bearing Liabilities
Interest bearing demand accounts	$	(34	)	$	(6	)	$	(40	)
Savings accounts		(4	)		3			(1	)
Corporate money market accounts		(13	)		1			(12	)
Personal money market accounts		207			—			207
Certificates of deposit		(57	)		214			157
FHLB borrowings		(80	)		21			(59	)
Total interest expense		19			233			252

Total net interest income	$	216		$	102		$	318


	For the Nine Months Ended September 30, 2007
	Compared to September 30, 2006
	Increase (Decrease) due to changes in:
	Average Volume			Average Rate			Net
	(i)			(ii)			(iii)
	(In thousands)
Interest Earning Assets
Interest bearing deposits	$	(65	)	$	52		$	(13	)
Investments		(517	)		623			106
Loans		1,814			380			2,194

Total interest income	$	1,232		$	1,055		$	2,287


Interest Bearing Liabilities
Interest bearing demand accounts	$	(121	)	$	(28	)	$	(149	)
Savings accounts		(12	)		6			(6	)
Corporate money market accounts		(109	)		(3	)		(112	)
Personal money market accounts		344			—			344
Certificates of deposit		501			1,019			1,520
FHLB borrowings		(20	)		190			170
Total interest expense		583			1,184			1,767

Total net interest income	$	649		$	(129	)	$	520

Interest Income

Total interest income increased to $7,375,000 for the three months ended September 30, 2007 from $6,805,000 for the three month period ended September 30, 2006 fueled primarily by loan growth and, to a lesser degree, by increasing interest rates on the investment portfolio as a result of the portfolio restructuring in the first quarter of 2007 (see discussions above onNet Interest Income

Page 20 of 40

andNet Interest Margin and Rate/Volume Analysis). The yield on interest earning assets was 6.98% and 6.57%, respectively, for the three months ended September 30, 2007 and 2006. The yields on investments and loans were 5.99% and 7.40%, respectively, for the three months ended September 30, 2007 and 5.15% and 7.33%, respectively, for the same period in the prior year.

Total interest income increased to $21,657,000 for the nine months September 30, 2007 from $19,370,000 for the nine-month period ended September 30, 2006 benefiting from growth in loans. The yield on interest earning assets was 6.90% and 6.46%, respectively, for the nine months ended September 30, 2007 and 2006. The yields on investments and loans were 5.72% and 7.42%, respectively, for the nine months ended September 30, 2007 and 5.05% and 7.23%, respectively, for the same period in the prior year.

Interest Expense

Total interest expense was $4,026,000 for the three month period ended September 30, 2007 and $3,773,000 for the three months ended September 30, 2006. Interest expense increased more from increases in interest rates than growth in deposits. Deposit rates continued to be negatively affected by competition for deposits during the third quarter of 2007. Efforts to control deposit costs and improve net interest margin resulted in declines in certificates of deposit during the third quarter of 2007. The shift in emphasis on cost was supported by strong growth in our new personal money market account that is priced at rates below certificates of deposit account rates. The cost of interest bearing deposits increased to 4.29% for the third quarter of 2007 as compared to 3.93% for the third quarter of 2006. While we continue to make progress in developing non-interest bearing demand deposit accounts, because of our strong deposit growth, our deposit mix continues to be concentrated in interest bearing deposits consisting of time deposit, business money market, business interest checking, interest checking deposit accounts and our new personal money market account. The average balances of non-interest bearing accounts increased 8.4% to $24,807,000 for the three month period ended September 30, 2007 from $22,893,000 for the three month period ended September 30, 2006. Average non-interest bearing accounts as a percent of average total deposits, improved to 7.7% as of September 30, 2007 as compared to 7.3% as of September 30, 2006.

Continued strong competition affected most deposit categories during the third quarter of 2007. The average cost of savings accounts was 1.46% for the third quarter of 2007 compared to 1.33% for the third quarter of 2006. The average cost of certificates of deposit rose to 4.86% for the three months ended September 30, 2007 from 4.49% for the three months ended September 30, 2006. The average cost of interest bearing demand accounts decreased to 1.71% from 1.79%, respectively, for the three months ended September 30, 2007 and September 30, 2006. The average cost of corporate money market deposits was 2.13% and 2.11%, respectively, for the three months ended September 30, 2007 and September 30, 2006. The decrease in the interest bearing demand accounts cost can be attributed primarily to deposits transferred from higher rate interest checking tiers to a new higher yield personal money market. The new personal money market account was developed to combat higher rate money market accounts at competitor banks.

Interest costs for the nine months ended September 30, 2007 also reflected the impact of competition. The cost of average interest-bearing deposits was 4.26% and 3.61%, respectively, for the first nine months of 2007 and 2006. The average cost of savings accounts was 1.43% for the first nine months of 2007 and 1.33% for the first nine months of 2006. The impact of increasing competition is particularly evident in certificates of deposit and money market sensitive accounts such as interest bearing demand accounts and corporate money market accounts. The average cost of time deposits was 4.82% for the nine months ended September 30, 2007 up from 4.17% for the nine months ended September 30, 2006. The average cost of interest bearing demand accounts was 1.72% and 1.82%, respectively, for the nine months ended September 30, 2007 and September 30, 2006. The average cost of corporate money market deposits was 2.12% and 2.13%, respectively, for the nine months ended September 30, 2007 and September 30, 2006.

Interest Rate Sensitivity

The asset/liability management, or interest rate risk management, program is focused primarily on evaluating and managing the composition of assets and liabilities in view of various interest rate scenarios. Factors beyond our control, such as market interest rates and competition, may also have an impact on our interest income and interest expense. In the absence of other factors, the yield or return associated with our earning assets generally will increase from existing levels when interest rates rise over an extended period of time and, conversely, interest income will decrease when interest rates decline. In general, interest expense will increase when interest rates rise over an extended period of time and, conversely, interest expense will decrease when interest rates decline. These fluctuations in interest rates will impact not only interest income/expense but also the market value of all interest-earning assets and interest-bearing liabilities, other than those with a short-term maturity. At September 30, 2007, we do not have any hedging transactions in place such as interest rate swaps, futures, caps or floors. We are not directly subject to foreign currency exchange or commodity price risk.

Our primary objective in managing interest rate risk is to minimize the adverse impact of changes in interest rates on our net interest income while creating an asset/liability structure that maximizes earnings. The Investment/ALCO Committee of the Board of

Page 21 of 40

Directors of the Bank is responsible for monitoring our interest rate risk exposure. We use computer-based simulation models to assess the impact of changes in interest rates on our business plan. The model incorporates management’s business plan assumptions and related asset and liability yields, deposit sensitivity and the size, composition and maturity or re-pricing characteristics of the balance sheet. The assumptions are based on what management believes at that time to be the most likely interest rate environment. Our models stress our business plan over a range of higher and lower interest rate scenarios to measure the interest rate risk inherent in the business plan. Actual results may differ from simulated results due to various factors including time, magnitude and frequency of interest rate changes, the relationship or spread between various rates, loan pricing and deposit sensitivity, and asset/liability strategies.

Interest Rate Risk Analysis.

The Board of Directors has established limits for interest rate risk in the form of measurements of variability in net interest income. The established limit on variability for interest rate changes is 20% for net interest income at plus 200 basis points and minus 200 basis points. Our modeling technique enables us to identify potential variability in net interest income resulting from changes in interest rates. Five modeling simulations are run under different interest rate scenarios. The scenarios are no change in interest rates, increases of 100 and 200 basis points and decreases of 100 and 200 basis points. The interest rate changes are assumed to occur instantaneously and persist for twelve months. Management believes that it is likely that responses to significant changes in interest rates would result in adjustments to business strategies and pricing during a twelve-month period reducing the value of interest rate risk modeling beyond twelve months. If, at any time, our interest rate risk profile exceeds the policy limits, it is the responsibility of the Investment/ALCO Committee to direct the adjustment of our assets or liabilities mix or business strategies to reduce interest rate risk. Reduction in interest rate risk is accomplished through adjustments to investment portfolio duration, the term to maturity of borrowings, and choice of deposit product emphasis.

Our financial modeling simulates our cash flows, interest income, and interest expense from earning assets and interest bearing liabilities for a twelve month period in each of the five different interest environments using actual individual deposit, loan and investment maturities and rates in the model calculations. Assumptions regarding the likelihood of prepayments on residential mortgage loans and investments are made based on historical relationships between interest rates and prepayments. Commercial loans with prepayment penalties are assumed to pay on schedule to maturity. In actual practice, commercial borrowers may request and be granted interest rate reductions during the life of a commercial loan due to competition from other financial institutions and declining interest rates.

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The following tables set forth our interest rate risk profile at September 30, 2007 and December 31, 2006. The interest rate sensitivity of our assets and liabilities illustrated in the following table would vary substantially if different assumptions were used or if actual experience differs from that indicated by such assumptions.

INTEREST RATE RISK MEASUREMENT


	September 30, 2007
						% Change
			Change from			from			Policy
	Result		Reference			Reference			Limit
Net Interest Income

Rates up 200 basis points	$	12,012,000	$	(1,997,000	)		-14.26	%		20	%
Rates up 100 basis points	$	13,215,000	$	(794,000	)		-5.67	%
Rates Unchanged	$	14,009,000
Rates down 100 basis points	$	14,331,000	$	322,000			2.30	%
Rates down 200 basis points	$	14,454,000	$	445,000			3.18	%		20	%

INTEREST RATE RISK MEASUREMENT


	December 31, 2006
						% Change
			Change from			from			Policy
	Result		Reference			Reference			Limit
Net Interest Income

Rates 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	$	12,956,063
Rates 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	%

The degree of variability, or risk to interest income, has been reduced by the actions we took to restructure our assets. We continue to be liability sensitive relative to changes in general levels of interest rates. This condition exists because the average term to maturity of our deposit liabilities is shorter than the average remaining term to maturity of our earning assets. Rising rates, therefore, have a negative effect on our net interest income while declining rates can be expected to improve net interest income. Actual results are affected by the slope of the yield curve as well as the general level of interest rates. Generally, a flat yield curve, as we have experienced during much of 2007, will put pressure on net interest margin and, absent growth in earning assets, have a negative impact on net interest income. The variation at both up and down 200 basis points is well within the acceptable parameters identified by our Board of Directors. The interest rate risk measurement technique presented here is a theoretical measurement of relative risk employing instantaneous and sustained increases in interest rates with no modification of strategies by management. In actual practice interest rates tend to change more gradually over time permitting management to adjust operating strategies to suit changing economic environments.

Interest Rate Risk Management and Asset Restructuring

During the first quarter of 2007, we undertook a balance sheet restructuring effort to reduce our liability sensitivity. Our objective was to reduce the mismatch between the durations of our assets and the duration of our liabilities that contributes to interest rate risk. Specific investments were analyzed for interest rate risk. We decided to retain some investments with longer durations and higher yields because of their contribution to our earnings. Other investments were selected for restructuring because they possessed durations in excess of our typical liability durations, had low yields and/or presented significant potential for duration extension. Mortgage-backed securities (“MBS”) were reviewed for interest rate risk based on such characteristics as weighted average coupon, original purpose for mortgage financing, geographic location, loan to value ratios, previous and projected prepayment experience and credit qualities that might affect timing of principal payment. MBS identified as having undesirable characteristics that increased potential volatility in principal prepayment and, hence, increased duration uncertainty were selected for restructuring. Agency and corporate securities were also analyzed for excessive duration and potential duration volatility. Corporate and agency investments possessing undesirable characteristics were also selected for restructuring. Investments selected for restructuring were considered other than temporarily impaired and valued at fair market value at March 31, 2007. During the three month period ended March 31, 2007, $13,843,000 of these investments were sold and during April 2007 an additional $45,901,000 were sold. Most of proceeds of these

Page 23 of 40

sales have been reinvested in investments with maturities matched to specific interest bearing liability maturities to reduce the mismatch of asset liability durations and reduce interest rate risk. Investments were matched with borrowings maturing in three years or less. This matching reduces interest rate risk and enables us to take advantage of higher yield provided by the current inverted yield curve. Sale proceeds not matched to specific interest bearing liabilities were reinvested in short term agency securities to maintain liquidity for anticipated loan originations. Further information regarding the accounting for our balance sheet restructuring is presented below under the caption “Investment Securities.”

Non-Interest Income

Non-interest income for the three month period ended September 30, 2007 increased 58.0% or $178,000 to $485,000 from $307,000 for the same period in the prior year. Non-interest income grew because of increases in numbers of loan and deposit accounts and associated fees and an increase in our investment in bank owned life insurance (“BOLI”). For the three months ended September 30, 2007, service charges, fees and other income of $390,000 consisted primarily of deposit service charges and other deposit and loan fees of $184,000, merchant card services income of $43,000, debit card interchange income of $29,000 and Business Manager/Med Cash receivables funding fees of $133,000. BOLI income for this period was $95,000. For the three months ended September 30, 2006, service charges, fees and other income of $242,000 consisted primarily of deposit service charges and other deposit fees of $95,000, merchant card service income of $35,000, residential mortgage origination income of $4,000, loan fees of $11,000, and Business Manager/Med Cash receivables funding fees of $97,000. BOLI income for this period was $65,000. There were no losses or gains on sales of securities.

Non-interest income totals for the nine month period ended September 30, 2007 decreased $1,301,000 to ($422,000) from $879,000 for the same period in the prior year. The net loss from other than temporary impairment associated with our portfolio restructuring was $1,524,000. Fee income increased due to growth of loan and deposit accounts. For the nine months ended September 30, 2007, service charges, fees and other income of $946,000 consisted primarily of deposit service charges and other deposit fees of $471,000, merchant card services income of $72,000, debit card interchange income of $78,000 and Business Manager/Med Cash receivables funding fees of $323,000. BOLI income for this period was $287,000. Losses on sales of securities and other assets were $131,000. For the nine months ended September 30, 2006, service charges, fees and other income of $691,000 consisted primarily of deposit service charges, fees, and other income of $197,000, merchant card services income of $73,000, debit card interchange income of $52,000, residential mortgage origination income of $36,000, loan fees of $39,000, and Business Manager/Med Cash receivables funding fees of $293,000. BOLI income for this period was $197,000. Losses on sales of securities and other assets were $8,000.

Non-Interest Expense

Non-interest expenses were impacted by both our overall growth in existing departments, the continued expansion of our branch banking and lending networks and expenses associated with our merger with Cape Savings Bank. While overall expense control continues to be good, our efficiency ratios have increased as the growth of our operating infrastructure has continued during a period when increasing competition has reduced our rate of loan portfolio growth. We believe it is important to continue to position to expand our market share with appropriately placed additional branches and loan production facilities such as our Cape May City and second Egg Harbor Township branches and Vineland loan production office. Our efficiency ratio for the three months ended September 30, 2007 was 81% compared to 69% for the three months ended September 30, 2006 and 77% for the nine months ended September 30, 2007 compared to 66% for the nine months ended September 30, 2006.

For the three months ended September 30, 2007 and September 30, 2006 non-interest expense was $3,093,000 and $2,299,000, respectively. Non-interest expense for the third quarter of 2007 increased by approximately $413,000 from expenses associated with the merger with Cape Savings Bank. The largest non-merger related component of non-interest expense is compensation and benefit expense. For the three months ended September 30, 2007 and September 30, 2006 compensation and benefit expense was $1,500,000 and $1,299,000, respectively. The increase of $201,000 in this category is attributable to increased salary expense due to expanding staffing requirements resulting from our branch growth, salary merit increases, increases in health insurance rates and the expense of the 2007 Director and Employee stock option plan. Occupancy and equipment expenses were also impacted by branch office expansion. For the three months ended September 30, 2007 and September 30, 2006 occupancy expense was $390,000 and $369,000, respectively. Data processing increased from $131,000 for the third quarter of 2006 to $166,000 for the third quarter of 2007 reflecting primarily the increased costs of additional loan and deposit accounts and additional branch locations. Marketing decreased by $15,000 for the third quarter ending September 30, 2007 to $27,000 compared to $42,000 for the same quarter in 2006. Professional services increased from $142,000 for the three month period ended September 30, 2006 to $586,000 for the three month period ended September 30, 2007 reflecting merger related expenses. Investor relations expense which represents the costs associated with being listed on the NASDAQ Global Market decreased from $31,000 for the three month period ended September 30, 2006 to $30,000 for the three month period ended September 30, 2007.

Page 24 of 40

For the nine months ended September 30, 2007 and September 30, 2006 non-interest expense was $8,265,000 and $6,583,000, respectively. For the nine months ended September 30, 2007 and September 30, 2006 compensation and benefit expense was $4,455,000 and $3,732,000, respectively. The increase of $723,000 in this category is attributable to increased salary expense due to expanding staffing requirements resulting from our growth and merit increases in salaries. Occupancy and equipment expenses also increased due to the growth in existing areas of the Bank. For the nine months ended September 30, 2007 and September 30, 2006 occupancy expense was $1,198,000 and $1,006,000, respectively. Data processing increased from $380,000 for the first nine months of 2006 to $500,000 for the first nine months of 2007. Professional services increased by $563,000 from $426,000 for the nine month period ended September 30, 2006 to $989,000 for the nine month period ended September 30, 2007. This increase is primarily attributable to merger related expense, increased accounting fees from the adoption and subsequent rescission of FAS 157/FAS 159 in the first quarter, retaining Sheshunoff Management Services, L.P. to review bank operations, annual increases in accounting and audit fees due to growth in the Bank, additional processing costs associated with deposit account growth and increased computer management expense associated with network protection and management. Investor relations expense represents the costs associated with being listed on the NASDAQ Global Market increased from $72,000 for the nine month period ended September 30, 2006 to $90,000 for the nine month period ended September 30, 2007. Other operating expenses increased by $101,000.

Provision for Loan Losses

The provision for loan losses represents the amount necessary to be charged to operations to bring the allowance for loan losses to a level that represents management’s best estimate of known and inherent losses in the existing loan portfolio. The amount of the provision for loan losses and the amount of the allowance for loan losses is subject to ongoing analysis of the loan portfolio which considers current economic conditions, actual loss experience, the current risk profile of the portfolio, the composition of loan types within the portfolio, and other relevant factors. During the three and nine months ended September 30, 2007, we had two loan charge-offs for $8,000.

During the third quarter of 2007, we added no provisions to the allowance for loan losses, reflecting slower loan growth during the period, and $75,000 during the third quarter of 2006. We had five non-accrual loans for $1,304,000 at September 30, 2007 and one non-accrual loan for $313,000 at September 30, 2006. The loan loss allowance as a percentage of total loans was 1.22% at September 30, 2007 and 1.16% at September 30, 2006.

Income Taxes

We recognized a third quarter 2007 tax expense of $188,000, based on pre-tax book income of $741,000. For the period ended September 30, 2006, we recognized tax expense of $175,000. Capital losses recorded during the quarter ended March 31, 2007 totaled $837,993 for which a valuation allowance for realizability of deferred tax assets was established, in the amount of $115,000.

The Bank made provisions for income taxes of ($19,000) and $852,000 during the nine months ended September 30, 2007 and September 30, 2006, respectively. The credit provision for income taxes for the nine months ended September 30, 2007 was primarily the result of losses on the sale of investments in the first quarter of 2007 and, to a lesser degree, tax advantaged investments such as BOLI and municipal bonds. The effective tax rate for the nine month period ended September 30, 2007 was negative due to the losses incurred with the portfolio restructuring that occurred during this period. The effective tax rate for the nine month period ended September 30, 2006 was 26.8%.

Financial Condition

Growth in assets and deposits during the first nine months of 2007 fell well below our historical growth rates for a number of reasons. Sales from the investment portfolio were utilized as a source of liquidity for loan originations, to restructure portfolio yield and to reduce the need to grow deposits in a highly competitive and expensive deposit market. These efforts, aimed at improving net interest margin, reduced our balance sheet growth, but helped to improve our net interest margin. Assets decreased $7,937,000 or a decline of 1.8% to $445,343,000 at September 30, 2007 from $453,280,000 at December 31, 2006. Loans, net of allowance for losses of $3,692,000 at September 30, 2007 and $3,273,000 at December 31, 2006, grew $23,906,000 or 8.7% to $298,099,000 at September 30, 2007 from $274,193,000 at December 31, 2006. Investments decreased to $105,093,000 at September 30, 2007 from $134,290,000 at December 31, 2006. Premise and equipment also decreased during the first nine months of 2007 by $415,000 from $16,186,000 at December 31, 2006 to $15,771,000 at September 30, 2007. Deposits grew by 0.4% to $311,249,000 at September 30, 2007 from

Page 25 of 40

$309,953,000 at December 31, 2006. Our shareholders’ equity decreased to $49,885,000 at September 30, 2007 from $51,127,000 at December 31, 2006. During the first nine months of 2007 we experienced two loan charge-offs for $8,000.

Investment Securities

Our investment policies include strict standards on permissible investment categories, credit quality, maturity intervals and investment concentrations. Our investment strategies are aimed at providing liquidity, maximizing income, managing interest rate risk and minimizing credit risk. We consider the investment portfolio as an alternative to loan originations only when excess liquidity cannot be invested in locally originated loans. Management formulates investment strategies and specific programs in conjunction with the Investment/ALCO Committee of the Board of Directors of the Bank. Management is responsible for making the specific investment purchases within such standards. At September 30, 2007, the investment portfolio was primarily comprised of U.S. government agency debt securities, agency mortgage-backed securities, corporate debt securities, municipal securities and equity securities.

The estimated fair value of our investment securities available for sale at September 30, 2007 was $105,093,000, including an unrealized loss of $1,795,000 and at December 31, 2006 was $95,335,000, including an unrealized loss of $1,039,000. We formerly maintained a held to maturity portfolio of investments. All held to maturity securities except for one, which was transferred to available for sale as of March 31, 2007, were sold as part of the restructuring program, and there will be no more held to maturity classified securities for the next two years. The held to maturity portfolio was recorded at amortized cost. The amortized cost of the held to maturity portfolio was $38,955,000 at December 31, 2006.

Our recent balance sheet restructuring program was designed to reduce interest rate risk and improve net interest margin. We initially intended to elect early adoption of Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Liabilities” (“SFAS 159”) and account for the restructuring under the transition provisions of SFAS 159. Subsequent to the Company’s original decision to early adopt SFAS 159, clarifications of the interpretation of the application of that Statement by applicable regulatory and industry bodies, including the AICPA’s Center for Audit Quality, led us to conclude that the application of SFAS 159 to our transactions might be inconsistent with the intent and spirit of the statement. Consequently, we decided not to early-adopt SFAS 159. Based on our understanding of the views of applicable regulatory agencies and bodies, we reported the investment securities in our restructuring program that were designated for sale at March 31, 2007 and subsequently sold in April 2007 as being other-than-temporarily impaired at March 31, 2007. Other than temporary impairment treatment requires us to value these investments at market value with the difference between book carrying value and market value being recognized as a component of current earnings for the three month period ending March 31, 2007. The recognition of other than temporary impairment resulted in a loss of $1,524,000. Available for sale securities and held to maturity securities were impacted by losses from other than temporary impairment recognition of $502,000 and $1,022,000, respectively.

Investment purchases during the nine months ended September 30, 2007 totaled $225,686,000 comprised of $178,133,000 in agency securities, $7,563,000 in corporate debt securities, $3,741,000 in MBS, $513,000 in state and municipal obligations, $2,000,000 in equity securities, $29,963,000 in commercial paper, and $3,773,000 in FHLBNY common stock.

Securities available for sale are stated at fair market value on the balance sheet with an adjustment to equity for unrealized gains and losses.

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The composition of our investment portfolio is as follows:


	Available for Sale
	September 30, 2007				December 31, 2006
			Estimated Fair				Estimated Fair
	Amortized Cost		Value		Amortized Cost		Value
	(In thousands)
U.S. Treasury	$	—	$	—	$	2,002	$	2,003
U.S. government agencies		50,133		50,105		24,432		24,169
State & municipal obligations		11,600		11,202		14,915		14,926
Mortgage-backed securities		9,963		9,873		18,514		18,264
Corporate debt securities		31,345		30,066		28,140		27,716
Equity securities		3,847		3,847		8,371		8,257
Commerical paper		—		—		—		—

Total	$	106,888	$	105,093	$	96,374	$	95,335


	Held to Maturity
	September 30, 2007				December 31, 2006
			Estimated Fair				Estimated Fair
	Amortized Cost		Value		Amortized Cost		Value
	(In thousands)
U.S. government agencies	$	—	$	—	$	24,998	$	24,424
Mortgage-backed securities		—		—		13,957		13,466

Total	$	—	$	—	$	38,955	$	37,890

Loans

The majority of our loan portfolio is collateralized, at least in part, by real estate or secured with personal guarantees. Our loans are mostly made to small and mid-sized businesses and individuals in Atlantic, Cumberland and Cape May counties in New Jersey. We focus our commercial lending activity on small businesses and professionals within these counties.

Inherent within the lending function is the evaluation and acceptance of credit risk and interest rate risk. We manage credit risk through underwriting policies and procedures, loan monitoring practices, and portfolio diversification. Loans above predetermined thresholds are reviewed and approved by the Loan Committee of the Board of Directors of the Bank. An independent firm is retained to periodically review adherence to underwriting policies and procedures. Interest rate risk is managed within our asset/liability management procedures using various modeling techniques. The majority of our loans are either fixed rate for a period of five years or less, or variable rate.

During the first nine months of 2007, loan growth declined from the prior year. Net loans grew by $23,906,000 for the nine months ended September 30, 2007 as compared to net loan growth of $30,728,000 during the same period in 2006. Slower loan growth can be attributed to less demand for new loans, less utilization of existing lines of credit and loan pay-offs, all factors that can be associated with slower economic growth. Loan growth has also been negatively impacted by increased competition from other financial institutions.

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Loan Portfolio


	September 30, 2007						December 31, 2006
	Amount			% of Total			Amount			% of Total
	(Dollars in thousands)
Residential Mortgage	$	32,136			10.65	%	$	32,216			11.61	%
Construction		21,198			7.03	%		26,184			9.44	%
Commercial & commercial real estate		236,925			78.51	%		208,632			75.20	%
Home Equity		8,496			2.82	%		8,969			3.23	%
Consumer		2,813			0.93	%		1,480			0.53	%
Overdrawn Accounts		81			0.03	%		11			0.00	%
Loans in Process		140			0.05	%		—			0.00	%
Loan Payments in Process		(59	)		-0.02	%		(64	)		-0.01	%
Gross Loans		301,730			100.00	%		277,428			100.00	%
Deferred Costs, net		61						38

Total Loans		301,791						277,466
Allowance for loan losses		(3,692	)					(3,273	)

Net Loans	$	298,099					$	274,193

Page 28 of 40

Allowance for Loan Losses

We maintain an allowance for loan losses and charge losses to this allowance when loan balances are considered uncollectible. The allowance for loan losses is maintained at a level which represents management’s best estimate of known and inherent losses. Management’s judgment is based on the evaluation of individual loans, past experience, the assessment of current economic conditions, and other relevant factors. Based on all of these factors loans are grouped by relative risk and risk factors assigned to each category. Appropriate reserves are determined for each category based on the risk factors established for that category. Loans or borrowers exhibiting credit deterioration are excluded from these calculations and are assigned specific reserves based on their risk classification. Because our loan portfolio has only seven years of history, management also uses peer group analysis to gauge the overall reasonableness of our loan loss reserves. The reserve is adjusted monthly to reflect new loans and pay-offs and to respond to changes in economic conditions and the financial condition of borrowers.

Regulatory authorities, as an integral part of their examination, periodically review our allowance for loan losses. They may require additions to the allowance based upon their judgments about information available to them at the time of the examination.

Management considers the allowance for loan losses to be reasonable. A reconciliation of the allowance for loan losses has been supplied in the table below.

Non-accrual loans are those where the accrual of interest has ceased. Loans are placed on non-accrual status immediately if, in the opinion of management, collection is doubtful or when principal or interest is past due 90 days or more and collateral is insufficient to cover principal and interest. Interest accrued, but not collected at the date a loan is placed on non-accrual status, is reversed and charged against interest income. Subsequent cash receipts are applied either to the outstanding principal or recorded as interest income, depending on management’s assessment of ultimate collectibility of principal and interest. We had five non-accrual loans for $1,304,000 at September 30, 2007 and one non-accrual loan for $313,000 at September 30, 2006. There were no impaired loans at September 30, 2007 or September 30, 2006. Deposit accounts overdrawn for more than 30 days are reviewed for collectibility, if collection is doubtful the account is charged-off. Subsequent cash receipts are recorded as recoveries.


	Allowance for Loan Loss Activity
	For the nine months ended September 30,
	2007			2006
	(In thousands)
Balance at beginning of year	$	3,273		$	2,861
Loan charge-offs		(8	)		—
Overdraft charge-offs		—			7
Recoveries		5			—
Provision for losses		422			338
Balance at end of period	$	3,692		$	3,192

Non-performing assets are defined as accruing loans past due 90 days or more, non-accruing loans, restructured loans and other real estate owned. We had $1,304,000 of non-performing assets at September 30, 2007 and $313,000 of non-performing assets at September 30, 2006.

Other Real Estate Owned

We had no other real estate owned at September 30, 2007 or December 31, 2006.

Account Receivables

Account receivables is primarily our Business Manager/Med Cash program. This is a program that enables us to purchase at a discount and manage the accounts receivable of credit-worthy merchants with required repurchase of delinquent accounts by the merchant and with the merchant’s repurchase obligation supported by a cash collateral account. The purchase of the merchant’s accounts receivable is recognized as accounts receivable in our financial statements. The balance in these accounts as of September 30, 2007 and December 31, 2006 was $2,950,000 and $2,263,000, respectively.

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Other Assets

Other assets totaled $1,160,000 at September 30, 2007 compared to $670,000 at December 31, 2006. Other assets at September 30, 2007 were primarily comprised of prepaid expenses of $228,000, other accounts receivable of $15,000, and deferred tax assets of $1,022,000 with a related allowance account of ($115,000). The significant change in the deferred tax asset account of $711,000 was the result of the balance sheet restructuring done during the first quarter of 2007. At December 31, 2006, other assets were primarily comprised of other accounts receivable of $8,000, deferred tax items of $321,000 and prepaid expenses of $331,000.

Deposits

We are largely dependent upon our base of competitively priced deposits to provide a stable source of funding. We have retained and grown our customer base since inception through a combination of additional branch locations, quality service, a well-structured product mix, price, convenience, and a stable and experienced staff.

Total deposits grew by $1,296,000 or 0.4% to $311,249,000 at September 30, 2007 from $309,953,000 at December 31, 2006. Slower loan growth and restructuring in the investment portfolio have reduced the need for aggressive deposit growth providing an opportunity to moderate deposit expense in a rising rate environment. Current deposit gathering efforts are focused on matching deposit growth to the slower rates of loan growth. The majority of our deposits were in time deposits, interest checking, personal money market and corporate money market accounts. It is our continuing goal to increase non-interest bearing deposits which consist primarily of commercial checking accounts and non-interest retail checking accounts. Non-interest bearing deposits are an important source of funds because they lower overall deposit costs. New branch offices typically experience their most rapid initial growth in interest bearing certificates of deposit. Our focus on core deposit growth has been successful in decreasing interest bearing deposits as a percent of total deposits. Interest bearing deposits comprised 91.5% of total deposits at September 30, 2007 compared to 92.7% at December 31, 2006. Non-interest bearing deposits were $26,483,000 or 8.5% and $22,699,000 or 7.3% of total deposits, respectively, at September 30, 2007 and December 31, 2006.

In August 2003, we opened our second branch site in Galloway, NJ. In July 2004, we opened our third branch site in Margate City, NJ. In August 2005, we opened our fourth branch site in Egg Harbor Township, NJ. In October 2005, we opened our fifth branch site in Cape May Court House, NJ and in June 2006, we opened our sixth branch site in Cape May City, NJ. In October 2006, we opened our seventh branch and second branch site in Egg Harbor Township, NJ. As of September 30, 2007, the Linwood branch had $123,516,000, the Galloway branch had $54,728,000, the Margate branch had $49,058,000, the Egg Harbor Township English Creek branch had $33,372,000, the Cape May Court House branch had $32,777,000, the Cape May City branch had $9,160,000, and the Egg Harbor Township Ocean Heights had $8,638,000 in total deposits.

Borrowings

Borrowings decreased to $82,723,000 at September 30, 2007 from $91,061,000 at December 31, 2006. As a community bank, our funding strategy is to utilize deposits from our local marketplace as our primary funding source in order to develop and enhance customer relationships. We utilize borrowings to supplement growth in periods when deposit funding is not adequate, when borrowings are more cost effective or as a short-term liquidity source. We also use FLHBNY advances as a source of longer fixed rate interest bearing liabilities to manage interest rate risk and in anticipation of rising interest rates. During the six months ended June 30, 2007 FHLBNY borrowing rates were consistently higher than our retail deposit alternatives. Consequently, we utilized deposits and investment liquidations to fund growth and reduced borrowing whenever possible. Borrowings at September 30, 2007 consisted of reverse repurchase agreements or advances with the FHLBNY and reverse repurchase agreements with Citigroup Global Markets Inc. The FHLBNY borrowings are secured by mortgage loans, commercial loans, agency securities and agency mortgage backed securities as collateral. All borrowings at December 31, 2006 were secured FHLBNY advances and reverse repurchase agreements.

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The following table summarizes our borrowings. Short-term borrowings have maturity dates of twelve months or less. Long-term borrowings have maturity dates in excess of twelve months.


	Borrowings
	September 30, 2007					December 31, 2006
			Weighted Average					Weighted Average
	Amount		Interest Rate			Amount		Interest Rate
	(Dollars in thousands)
Short-term:
FHLB New York advances	$	11,723		4.68	%	$	9,171		4.37	%
FHLB New York repurchase agreements	$	5,000		3.40	%	$	14,000		3.98	%
Long-term:

FHLB New York advances		23,500		4.10	%		31,390		4.10	%
FHLB New York repurchase agreements		32,500		4.15	%		31,500		4.00	%
Other borrowings		10,000		4.49	%		5,000		4.37	%
Total borrowings	$	82,723		4.21	%	$	91,061		4.09	%

Other Liabilities

Other liabilities at September 30, 2007 of $1,064,000 were comprised of accrued compensation related expenses of $602,000, accounts payable of $28,000, income tax payable of $283,000 and accrued expenses of $151,000. Accrued compensation and related expenses were notably higher at September 30, 2007 compared to December 31, 2006 due to growth in staff, differences in the length of accrual periods and increases in incentive compensation programs. Other liabilities at December 31, 2006 of $578,000 were comprised primarily of accrued compensation and salaries of $336,000, accounts payable of 143,000, and accrued expenses of $99,000.

Capital

A strong capital position is fundamental to support our continued growth. We are subject to various regulatory capital requirements. Regulatory capital is defined in terms of Tier I capital (shareholders’ equity less unrealized gains or losses on available-for-sale securities), Tier II capital (which includes a portion of the allowance for loan losses) and total capital (Tier I plus Tier II). Risk-based capital ratios are expressed as a percentage of risk-weighted assets. Risk-weighted assets are determined by assigning various weights to all assets and off-balance sheet financial instruments, such as letters of credit and loan commitments, based on associated risk. Regulators have also adopted minimum Tier I leverage ratio standards, which measure the ratio of Tier I capital to total assets.

At September 30, 2007, management believes Bancorp is “well capitalized” and in compliance with all regulatory capital requirements to which it is subject.

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Capital Components


	September 30, 2007			December 31, 2006
	(In thousands)
Tier I
Shareholders’ equity	$	39,583		$	38,978
Net unrealized gains(losses) on investments		(1,795	)		(1,057	)
Allowable portion of unrealized losses on equity investments		—			114

Total Tier I capital	$	41,378		$	39,921


Tier II
Allowable portion of the allowance for loan losses	$	3,692		$	3,273

Total Tier II capital	$	3,692		$	3,273


Total capital	$	45,070		$	43,194
Risk Weighted Assets	$	391,057		$	364,118

Capital Ratios


						Per Regulatory Guidelines
	Actual					Minimum					“Well Capitalized”
	Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2007
Risk based capital ratios:
Tier I	$	41,378		10.58	%	$	15,644		4.00	%	$	23,466		6.00	%
Total capital	$	45,070		11.53	%	$	31,271		8.00	%	$	39,089		10.00	%
Leverage Ratio	$	41,378		9.16	%	$	18,069		4.00	%	$	22,586		5.00	%

December 31, 2006
Risk 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	%

Dividend Policy

Our future dividend policy is subject to the discretion of the Board of Directors and will depend upon a number of factors, including future earnings, financial conditions, cash needs, regulation and general business conditions. Holders of common stock will be entitled to receive dividends as and when declared by the Board of Directors out of funds legally available for that purpose. Subsequent to the completion of the merger with Cape Savings Bank which is anticipated to occur in the first quarter of 2008, dividends will be at the discretion of the board of directors of the combined banks.

Dividend payments by Bancorp to its shareholders are subject to the New Jersey Business Corporation Act, and certain rules and policies of the Federal Reserve Board applicable to bank holding companies. Under the New Jersey Business Corporation Act, dividends may generally be paid if, after giving effect to the dividend, a corporation is able to pay its debts as they become due in the usual course of business and its assets are equal to or exceed its liabilities. Federal Reserve Board policy states that a bank holding company should pay cash dividends only out of income over the past year and only if prospective earnings retention is consistent with the corporation’s expected future needs. Funds available for dividend payments by Bancorp are largely dependent on dividends paid to Bancorp by the Bank, which are subject to the New Jersey Banking Act of 1948 (the “Banking Act”), and the applicable rules of the Federal Deposit Insurance Corporation ( the “FDIC”). Under the Banking Act, no dividends may be paid by the Bank to Bancorp unless, after payment of the dividend, the capital stock of the Bank would be unimpaired, and (a) the Bank will have a surplus of 50% or more of its capital stock or, if not, (b) the payment of the dividend will not reduce the surplus of the Bank. Under the Federal Deposit Insurance Act, the Bank may not pay a dividend if it is in arrears in the payment of any insurance assessment due to the FDIC.

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Requirements of federal and state banking agencies for the maintenance of certain levels of capital may also limit the ability of Bancorp and Bank to pay dividends.

We paid a quarterly cash dividend of $0.10 per share on our common stock on November 5, 2007. There can be no assurance that cash dividends will continue to be paid after the completion of the merger with Cape Savings Bank or that adequate dividend paying ability will exist in the future.

Liquidity

Liquidity represents an institution’s ability to generate cash or otherwise obtain funds at reasonable rates to satisfy commitments to borrowers and demands of depositors. Our primary sources of funds are deposits, proceeds from principal and interest payments on loans and investments, sales of investments available for sale and borrowings. While maturities and scheduled amortization of loans and investments are a predictable source of funds, economic conditions and competition influence deposit flows and loan prepayments.

We monitor our liquidity position on a daily basis. We use overnight federal funds and short-term securities to absorb daily excess liquidity. Federal funds are sold overnight through a correspondent bank.

In the event we should require funds beyond our ability to generate them internally, additional sources of funds are available through the use of reverse repurchase agreements, a line of credit with the Atlantic Central Bankers Bank, a line of credit with the Sun Trust Bank, FHLBNY advances, the Federal Reserve Bank discount window or sales of investment securities.

Impact of Inflation and Changing Prices

The financial statements and accompanying notes thereto presented in this quarterly report have been prepared in accordance with accounting principles generally accepted in the United States of America, which require the measurement of financial position and operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of the Bank’s operations. Unlike industrial companies, nearly all of our assets and liabilities are monetary in nature. As a result, interest rates have a greater impact on our performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the price of goods and services.

Recent Accounting Pronouncements

The Bank adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (“FIN 48”), on January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a threshold and a measurement process for recognizing in the financial statements a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. We have determined that there are no significant uncertain tax positions requiring recognition in our financial statements.

Federal tax years 2003 through 2006 remain subject to examination as of January 1, 2007, while tax years 2003 through 2006 remain subject to examination by state taxing jurisdictions. In the event the Bank is assessed for interest and/or penalties by taxing authorities, such assessed amounts will be classified in the financial statements as income tax expense.

In February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115(SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value and amends SFAS 115 to, among other things, require certain disclosures for amounts for which the fair value option is applied. Additionally, this Statement provides that an entity may reclassify held-to-maturity and available-for-sale securities to the trading account when the fair value option is elected for such securities, without calling into question the intent to hold other securities to maturity in the future. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS 157. Bancorp has not completed its assessment of SFAS 159 and the impact, if any, on the consolidated financial statements.

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In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurement” (Statement 157). Statement 157 defines fair value, establishes a framework for measuring fair value in U.S. generally accepted accounting principles, and expands disclosure requirements for fair value measurements. Statement 157 does not require any new fair value measurements and is effective for financial statements issued for fiscal years beginning after November 15, 2007, or January 1, 2008 for Bancorp. Bancorp has not completed its assessment of SFAS 157 and the impact, if any, on the consolidated financial statements.

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

Incorporated by reference from Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Interest Rate Sensitivity” hereof.

Item 4 – Controls and Procedures

Bancorp, under the supervision and with the participation of Bancorp’s management, including the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the design and operation of Bancorp’s disclosure controls and procedures. Based on that evaluation, Bancorp’s Chief Executive Officer and Chief Financial Officer concluded that Bancorp’s disclosure controls and procedures were effective as of September 30, 2007. There has been no change in Bancorp’s internal control over financial reporting that occurred during the quarter ended September 30, 2007 that has materially affected, or is reasonably likely to materially affect, Bancorp’s internal control over financial reporting.

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PART II

Item 1 — Legal Proceedings

At September 30, 2007, there were no material legal proceedings pending against either the Bank or Bancorp.

Item 1A – Risk Factors

There are no material changes to the risk factors set forth in Part I, Item 1A, “Risk Factors,” of Boardwalk’s Annual Report on Form 10-K for the year ended December 31, 2006 filed with the Commission. Please refer to that section for disclosures regarding the risks and uncertainties related to Bancorp’s business.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

The following chart sets forth share repurchases by the Bancorp during the nine months ended September 30, 2007.


	Total		Average		Total Number of Shares		Maximum Number (or
	Number of		Price Paid		(or Units) Purchased as		Approximate Dollar Value) of
	Shares (or		per Share		Part of Publicly		Shares (or Units) that May Yet
	Units)		(or Units)		Announced Plans or		Be Purchased Under the Plans or
Period	Purchased		Purchased		Programs		Programs
Month #1 (January 1-January 31, 2007)		—						214,791
Month #2 (February 1-February 28, 2007)		4,000	$	17.50		4,000		211,312
Month #3 (March 1-March 31, 2007)		11,000	$	17.41		11,000		199,793
Month #4 (April 1-April 30, 2007)		1,800	$	16.92		1,800		197,903
Month #5 (May 1-May 31, 2007)		1,200	$	16.75		1,200		196,710
Month #6 (June 1-June 30, 2007)		—	$	0.00		—		196,758
Month #7 (July 1-July 31, 2007)		—	$	0.00		—		200,786
Month #8 (August 1-August 31, 2007)		—	$	0.00		—		211,786
Month #9 (September 1-September 30, 2007)		—	$	0.00		—		213,796

On June 19, 2006, the Board of Directors authorized the repurchase of up to 5%, of the total outstanding shares of Bancorp for a twelve month period commencing July 1, 2006. On January 22, 2007 the Board of Directors extended the original plan for an additional six months to expire on December 31, 2007. To date, there have been 18,000 shares repurchased under this plan.

Item 3 – Defaults Upon Senior Securities

None

Item 4 – Submission of Matters to a Vote of Security Holders

None

Item 5 – Other Information

Our common stock is quoted on the Nasdaq Global Market under the symbol “BORD”. At September 30, 2007, 12,500,000 shares of common stock were authorized and 4,299,925 shares were outstanding. We had 371 shareholders of record as of September 30, 2007 with all shares held by brokers counted as a single shareholder. No other class of stock is authorized or outstanding.

Prior to formation of the holding company on 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 files reports and other information with the

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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 Securities and Exchange Act of 1934, as amended, 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 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). Please call the SEC at (800) SEC-0330 for more information on the operation of the Public Reference Room.

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Item 6 – Exhibits

2.1		Agreement and Plan of Reorganization, dated as of July 26, 2007, by and among Cape Bancorp, Inc., Cape Savings Bank, Boardwalk Bancorp, Inc. and Boardwalk Bank (incorporated by reference to Exhibit 2.1 of Boardwalk Bancorp’s Current Report on Form 8-K filed on August 1, 2007).

3.1		Certificate of Incorporation of Boardwalk Bancorp, Inc. (incorporated by reference to Exhibit B of the proxy statement/prospectus included in Boardwalk Bancorp’s Registration Statement on Form S-4 (File No. 333-132195)).

3.2		Bylaws of Boardwalk Bancorp, Inc. (incorporated by reference to Exhibit C of the proxy statement/prospectus included in Boardwalk Bancorp’s Registration Statement on Form S-4 (File No. 333-132195)).

10.1		Amendment No. 1 to Employment Agreement, dated as of June 1, 2007, between Boardwalk Bank and Michael D. Devlin (incorporated by reference to Exhibit 10.2 of Boardwalk Bancorp’s Current Report on Form 8-K filed on June 5, 2007).

10.2		Amendment No. 1 to Change in Control Agreement, dated as of June 1, 2007, between Boardwalk Bank and Wayne S. Hardenbrook (incorporated by reference to Exhibit 10.2 of Boardwalk Bancorp’s Current Report on Form 8-K filed on June 5, 2007)

10.3		Amendment No. 1 to Change in Control Agreement, dated as of June 1, 2007, between Boardwalk Bank and Guy S. Deninger (incorporated by reference to Exhibit 10.2 of Boardwalk Bancorp’s Current Report on Form 8-K filed on June 5, 2007)

31(i)		Rule 13a-14(a) Certification of Chief Financial Officer.

31(ii)		Rule 13a-14(a) Certificate of Chief Executive Officer.

32		Certifications of Chief Financial Officer and Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Boardwalk Bancorp, Inc. (Registrant)

		Dated: November 9, 2007

		By:		/s/ Wayne S. Hardenbrook


		Name: Wayne S. Hardenbrook
		Title: Chief Financial officer
		(Authorized Officer and Principal
				Financial officer)

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Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. freshman Avg

Boardwalk Bancorp (BORD) Inactive 10-Q2007 Q3 Quarterly report

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