Cape Bancorp 10-Q 2008 Q3 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2008

OR

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from            to            

Commission File No. 001-33934

Cape Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Maryland	26-1294270
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

225 North Main Street, Cape May Court House, New Jersey	08210
(Address of Principal Executive Offices)	Zip Code

(609) 465-5600

(Registrant’s telephone number)

N/A

(Former name or former address, 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 requirements for the past 90 days.    YES  x    NO  ¨.

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

Large accelerated filer  ¨	Accelerated filer  ¨	Non-accelerated filer  x	Smaller Reporting Company  ¨
		(Do not check if smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

As of November 14, 2008 there were 13,313,521 shares of the Registrant’s common stock, par value $0.01 per share, outstanding.

CAPE BANCORP, INC.

FORM 10-Q

Index

		Page
	Part I. Financial Information
Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of September 30, 2008 (unaudited) and December 31, 2007	3
	Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2008 and September 30, 2007 (unaudited)	4
	Consolidated Statement of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2008 (unaudited)	5
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and September 30, 2007 (unaudited)	6
	Notes to Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	24
	Part II. Other Information
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults upon Senior Securities	25
Item 4.	Submission of Matters to a Vote of Security Holders	26
Item 5.	Other Information	26
Item 6.	Exhibits	27
	Signature Page	28

2

Item 1. Financial Statements

CAPE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of September 30, 2008 and December 31, 2007

(unaudited)

	September 30, 2008			December 31, 2007
	(in thousands)
ASSETS
Cash & due from financial institutions	$	16,257		$	14,596
Federal funds sold		—			1,035
Cash and cash equivalents		16,257			15,631
Interest-earning deposits in other financial institutions		8,862			5,721
Investment securities available for sale, at fair value		131,958			62,128
Investment securities held to maturity (fair value of $47,921 at September 30, 2008 and $45,427 at December 31, 2007		48,186			45,140
Loans held for sale		—			350
Loans, net of allowance of $9,949 and $4,121		778,683			459,936
Accrued interest receivable		4,883			3,081
Premise and equipment, net		29,778			16,131
Federal Home Loan Bank (FHLB) stock, at cost		10,628			3,848
Bank owned life insurance (BOLI)		26,192			15,421
Deferred stock issuance and acquisition costs		—			1,916
Goodwill		54,523			—
Intangible assets		888			45
Other assets		17,421			4,463
Total assets	$	1,128,259		$	633,811
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Deposits	$	730,276		$	465,648
Stock subscriptions		—			21,500
Borrowings		212,863			65,000
Advances from borrowers for taxes and insurance		706			651
Accrued interest payable		862			401
Other liabilities		5,870			7,782
Total liabilities		950,577			560,982
Stockholders’ Equity
Common stock, $.01 par value: authorized 100,000,000 shares and 13,313,521 issued and outstanding in 2008		133			—
Additional paid-in capital		126,771			—
Unearned ESOP shares		(10,348	)		—
Accumulated other comprehensive (loss) gain		(11,093	)		293
Retained earnings		72,219			72,536
Total stockholders’ equity		177,682			72,829
Total liabilities & stockholders’ equity	$	1,128,259		$	633,811

See Notes to unaudited consolidated financial statements.

3

CAPE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Three and Nine months ended September 30, 2008 and September 30, 2007

(unaudited)

	For the three months ended September 30						For the nine months ended September 30
	2008			2007			2008			2007
	(in thousands, except share data)
Interest income:
Interest on loans	$	12,523		$	7,836		$	35,888		$	23,267
Interest and dividends on investments
Taxable		1,243			523			3,885			1,594
Tax-exempt		349			164			945			440
Interest on mortgage-backed securities		1,039			708			2,938			2,021
Total interest income		15,154			9,231			43,656			27,322
Interest expense:
Interest on deposits		4,286			3,631			13,639			9,937
Interest on borrowings		1,798			675			4,950			2,891
Total interest expense		6,084			4,306			18,589			12,828
Net interest income before provision for loan losses		9,070			4,925			25,067			14,494
Provision for loan losses		1,309			78			2,149			234
Net interest income after provision for loan losses		7,761			4,847			22,918			14,260
Non-interest income:
Service fees		898			621			2,389			1,838
Net gains on sale of loans		7			47			31			259
Net income from BOLI		263			167			753			457
Net rental income		83			85			258			254
Gain on sales of investment securities available for sale, net		—			—			2			—
Other than temporary impairment		(2,213	)		—			(2,414	)		—
Loss on disposal of other assets		(16	)		(1	)		(149	)		(1	)
Other		108			51			333			212
Total non-interest income		(870	)		970			1,203			3,019
Non-interest expense:
Salaries and employee benefits		3,739			2,305			11,047			7,116
Occupancy & equipment		964			477			2,673			1,449
Federal insurance premiums		143			13			375			39
Data processing		322			230			1,048			701
Charitable Foundation contribution		—			—			6,256			—
Advertising		111			79			509			400
Telecommunications		211			148			670			410
Professional services		238			47			448			137
Investor relations		19			—			87			—
Other operating		975			615			3,353			2,066
Total non-interest expense		6,722			3,914			26,466			12,318
Income (loss) before income taxes		169			1,903			(2,345	)		4,961
Income tax expense (benefit)		(424	)		562			(2,028	)		1,567
Net income (loss)	$	593		$	1,341		$	(317	)	$	3,394
Earnings (loss) per share (see Note 4):
Basic	$	0.05			n/a		$	(0.06	)		n/a
Diluted	$	0.05			n/a		$	(0.06	)		n/a
Weighted average number of shares outstanding:
Basic		12,273,615			n/a			12,278,695			n/a
Diluted		12,273,615			n/a			12,278,695			n/a

See Notes to unaudited consolidated financial statements.

4

CAPE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Nine months ended September 30, 2008

(unaudited)

	Common Stock		Paid-In Capital			Unearned ESOP Shares			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
	(in thousands)
Balance, December 31, 2007	$	—	$	—		$	—		$	72,536		$	293		$	72,829
Net loss		—		—			—			(317	)		—			(317	)
Other comprehensive loss, net of reclassification adjustments and taxes		—		—			—			—			(11,386	)		(11,386	)
Total comprehensive loss																(11,703	)
Conversion from mutual to stock company and simultaneous acquisition of Boardwalk Bancorp		133		126,783			(10,658	)		—			—			116,258
ESOP shares earned		—		(12	)		310			—			—			298
Balance, September 30, 2008	$	133	$	126,771		$	(10,348	)	$	72,219		$	(11,093	)	$	177,682

See Notes to unaudited consolidated financial statements.

5

CAPE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended September 30, 2008 and 2007

(unaudited)

	Nine Months Ended September 30
	2008			2007
	(in thousands)
Cash Flows from Operating Activities
Net income (loss)	$	(317	)	$	3,394
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Provision for loan losses		2,149			234
Net gain on the sale of loans		(31	)		(259	)
Other than temporary impairment charge		2,414			—
Net gain on called investments		(2	)		—
Earnings on BOLI		(753	)		(457	)
Depreciation and amortization		728			672
ESOP compensation expense		297			—
Stock issuance for charitable contribution		5,474			—
Deferred income taxes		(3,064	)		89
Changes in assets and liabilities that (used) provided cash:
Loans held for sale		350			61
Accrued interest receivable		637			(265	)
Other assets (prepaid and accounts receivable)		2,111			(1,036	)
Accrued interest payable		(62	)		(26	)
Other liabilities		(2,238	)		1,820
Net cash provided by operating activities		7,693			4,227
Cash Flows from Investing Activities
Proceeds from calls, maturities, and principal repayments of investment securities and mortgage-backed securities		55,889			33,365
Purchases of investment securities and mortgage-backed securities		(55,322	)		(36,550	)
Purchase of Federal Home Loan Bank stock		(2,951	)		—
Decrease in interest-earning deposits in other financial institutions		523			(736	)
Increase in loans, net		(6,394	)		(3,650	)
Purchase of property and equipment, net		(1,094	)		(2,981	)
Acquisition of Boardwalk Bancorp		(46,839	)		—
Purchase of BOLI policy		—			(325	)
Net cash used in investing activities		(56,188	)		(10,877	)
Cash Flows from financing activities
Net increase (decrease) in deposits		(56,075	)		53,754
Increase in advances from borrowers for taxes and insurance		56			12
Borrowings		96,775			(39,000	)
Payments on borrowings		(31,458	)		(10,000	)
Net proceeds from stock issuance in conversion		39,823			—
Net cash provided by financing activities		49,121			4,766
Net increase (decrease) in cash and cash equivalents		626			(1,884	)
Cash and cash equivalents at beginning of period		15,631			17,492
Cash and cash equivalents at end of period	$	16,257		$	15,608
Supplemental disclosure of cash flow information:
Cash paid during period for
Income taxes, net of refunds	$	253		$	1,502
Interest	$	18,128		$	12,855
Non-cash disclosure of financing activities
Stock subscriptions applied to equity	$	21,500			NA
Issuance of stock to charitable foundation	$	5,474			NA
Issuance of stock for acquisition of Boardwalk Bancorp	$	49,461			NA

See Notes to unaudited consolidated financial statements.

6

Notes to Financial Statements (Unaudited)

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X and, therefore, do not include all disclosures necessary for a complete presentation of the financial statements in conformity with U.S. generally accepted accounting principles. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation of the results of operations for the interim periods. The results of operations for the three and nine months ended September 30, 2008 are not necessarily indicative of the results that may be expected for the entire year or any other interim period. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission.

Cape Bancorp, Inc. did not become the holding company for Cape Bank (“Bank”) until January 31, 2008. Accordingly the information presented as of and for the year ended December 31, 2007 is for Cape Bank and its subsidiaries.

NOTE 2 – ORGANIZATION

On January 31, 2008, Cape Bancorp (“Company”) completed its initial public stock offering in connection with the mutual to stock conversion of Cape Bank and the simultaneous acquisition by Cape Bancorp of Boardwalk Bancorp, Inc. (“Boardwalk Bancorp”), Linwood, New Jersey and its wholly owned New Jersey-chartered bank subsidiary, Boardwalk Bank (“Boardwalk”).

In the offering, the Company sold 7,820,000 shares of its common stock at $10.00 per share to depositors; Cape Bank’s tax qualified employee benefit plans and the general public in subscription, community and syndicated offerings. The Company also issued 547,400 shares of its common stock and contributed $782,000 in cash to The CapeBank Charitable Foundation. Cape Bancorp loaned $10,658,253 to the Bank’s employee stock ownership plan and the ESOP used these funds to acquire 1,065,082 shares of common stock at an average price of $10.01 per share.

As a result of the transactions, Cape Bancorp has 13,313,521 issued and outstanding shares of common stock.

In the acquisition of Boardwalk Bancorp, Cape Bancorp issued merger consideration of approximately $99.0 million, consisting of 4,946,121 shares of Cape Bancorp common stock and approximately $49.5 million in cash. With the acquisition of Boardwalk Bank, Cape Bank now operates 18 full service branches in Cape May and Atlantic Counties, New Jersey. On March 17, 2008, Boardwalk’s Cape May branch office was consolidated with Cape Bank’s Cape May branch office, and on June 16, 2008, Boardwalk’s Galloway branch was consolidated with Cape Bank’s Galloway branch office. Both unoccupied properties are currently listed for sale. On June 30, 2008, the former Boardwalk loan production office which leased space in Vineland, Cumberland County, New Jersey was closed. On September 30, 2008 the leased office space of the former Boardwalk loan center in Linwood, Atlantic County, New Jersey was closed.

Cape Bank is a New Jersey-chartered stock savings bank. The Bank provides a complete line of business and personal banking products through its eighteen full service branch offices located throughout Atlantic and Cape May counties in southern New Jersey.

The Bank competes with other banking and financial institutions in its primary market areas. Commercial banks, savings banks, savings and loan associations, credit unions and money market funds actively compete for savings and time certificates of deposit and all types of loans. Such institutions, as well as consumer financial and insurance companies, may be considered competitors of the Bank with respect to one or more of the services it renders.

The Bank is subject to regulations of certain state and federal agencies, and accordingly, the Bank is periodically examined by such regulatory authorities. As a consequence of the regulation of commercial banking activities, the Bank’s business is particularly susceptible to future state and federal legislation and regulations.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Financial Statement Presentation: The accounting and reporting policies of the Bank conform to accounting principles generally accepted in the United States of America (US GAAP) and predominant practices within the banking industry.

The consolidated financial statements include the accounts of Cape Bancorp, Inc. and its wholly-owned subsidiary Cape Bank and Cape Bank’s wholly-owned subsidiaries, Cape New Jersey Investment Company, Cape Delaware Investment Company, Cape May County Savings Service Corporation and CASABA Real Estate Holding Corporation. Cape May County Savings Service Corporation is presently inactive. Intercompany transactions and balances are eliminated in consolidation.

7

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)

In preparing financial statements in conformity with US GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent 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 those estimates.

The principal estimate that is particularly susceptible to significant change in the near term relates to the allowance for loan losses. The evaluation of the adequacy of the allowance for loan losses includes an analysis of the individual loans and overall risk characteristics and size of the different loan portfolios, and takes into consideration current economic and market conditions, the capability of specific borrowers to pay specific loan obligations, as well as current loan collateral values. However, actual losses on specific loans, which are also encompassed in the analysis, may vary from estimated losses.

Cash and Cash Equivalents: For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, overnight deposits and federal funds sold. Net cash flows are reported for customer loan and deposit transactions, interest bearing deposits in other financial institutions, and federal funds purchased and repurchase agreements.

Investment Securities: The Bank classifies investment securities as either held to maturity or available for sale. Investment securities held to maturity are carried at cost adjusted for amortization of premium and accretion of discount over the term of the related investments using the interest method. Investment securities classified as available for sale are carried at fair value with unrealized gains and losses excluded from earnings and reported in a separate component of equity, net of related income tax effects. The Bank holds a number of securities in portfolio that may be particularly susceptible to changes in Fair Value in the near term as a result of market volatility. Gains and losses on sales of investment securities are recognized upon realization utilizing the specific identification method.

Premium or discount on investment securities is recognized as an adjustment of yield by use of the interest method over the life of the investment security.

Declines in the fair value of securities below their cost that are other-than-temporary are reflected as realized losses. In estimating other-than-temporary losses, management considers: the length of time and extent that fair value has been less than cost, the financial condition and near term prospects of the issuer, cash flow, stress testing analysis on securities when applicable, and the Company’s ability and intent to hold the security for a period sufficient to allow for any anticipated recovery in fair value.

Loans Held for Sale: Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or market, as determined by outstanding commitments from investors. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

Loans and Allowance for Loan Losses: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the amount of unpaid principal, net of unearned interest, deferred loan fees and costs, and reduced by an allowance for loan losses. Interest on loans is accrued and credited to operations based upon the principal amounts outstanding. The allowance for loan losses is established through a provision for loan losses charged to operations. Loans are charged against the allowance for loan losses when management believes that the collectability of the principal is unlikely.

Income recognition of interest is discontinued when, in the opinion of management, the collectability of such interest becomes doubtful. A commercial loan is generally classified as nonaccrual when the loan is 90 days or more delinquent. Consumer and residential loans are classified as nonaccrual when the loan is 90 days or more delinquent with a loan to value ratio greater than 70 percent. Loan origination fees and certain direct origination costs are deferred and amortized over the life of the related loans as an adjustment to the yield on loans receivable in a manner which approximates the interest method.

All interest accrued but not received for loans placed on nonaccrual are reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The allowance for loan losses is maintained at an amount management deems adequate to cover probable incurred losses. In determining the level to be maintained, management evaluates many factors including current economic trends, industry experience, historical loss experience, industry loan concentrations, the borrowers’ ability to repay and repayment performance and estimated collateral values. In the opinion of management, the present allowance is adequate to absorb reasonable, foreseeable loan losses. While management uses the best information available to make such evaluations, future adjustments to the allowance may be necessary based on changes in economic conditions or any of the other factors used in management’s determination. In addition,

8

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)

various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for losses on loans. Such agencies may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. Charge-offs to the allowance is made when the loan is transferred to other real estate owned or a determination of loss is made.

A loan is impaired when full payment under the loan terms is not expected. Commercial and commercial real estate loans are individually evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures.

Bank Owned Life Insurance (BOLI): The Bank has an investment of bank owned life insurance (BOLI). BOLI involves the purchasing of life insurance by the Bank on a chosen group of employees. The Bank is the owner and beneficiary of the policies and the amount recorded is the cash surrender value, which is the amount realizable.

Defined Benefit Plan: The Bank participates in a multi-employer defined benefit plan. The plan was amended to freeze participation to new employees commencing January 1, 2008. Employees who became eligible to participate prior to January 1, 2008, will continue to accrue a benefit under the plan. The Bank accrues pension costs as incurred. The plan was further amended to freeze benefits as of December 31, 2008 for all employees eligible to participate prior to January 1, 2008.

401(k) Plan: The Bank maintains a tax-qualified defined contribution plan for all salaried employees of Cape Bank who have satisfied the 401(k) Plan’s eligibility requirements. The Plan was amended to modify the matching contribution formula effective January 1, 2008, so that matching contributions will be equal to 100% of the participants’ contribution on up to 3% of the participants’ salary contributed to the plan and 50% of the participants’ additional contributions on the next 2% of salary contributed by the participants, with a maximum potential matching contribution of 4%.

Income Taxes: Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these temporary differences are estimated to reverse. Deferred tax expense is the result of changes in deferred tax assets and liabilities. The principal types of accounts resulting in differences between assets and liabilities for financial statement and tax return purposes are allowance for loan losses, deferred compensation, deferred loan fees, charitable contribution carry forwards, accumulated depreciation and other-than-temporary impairment charges.

Employee Stock Ownership Plan: The cost of shares issued to the ESOP, but not yet allocated to participants is shown as a reduction of equity. Compensation expense is based on the market price of shares as they are committed to be released to participant accounts.

Comprehensive Income (Loss): Comprehensive income includes net income as well as certain other items which result in a change to equity during the period. Other comprehensive income includes unrealized gains and losses on securities available for sale which are also recognized as separate components of equity as follows:

	Before Tax Amount			Tax Benefit (Expense)			Net of Tax Amount
	(in thousands)
For the three months ended September 30, 2008
Unrealized gains (losses) on securities
Unrealized holding losses arising during period	$	(10,864	)	$	3,694		$	(7,170	)
Reclassification adjustment for losses realized in net income		2,213			(753	)		1,460
Other comprehensive loss, net	$	(8,651	)	$	2,941		$	(5,710	)
For the three months ended September 30, 2007
Unrealized gains (losses) on securities
Unrealized holding gains arising during period	$	414		$	(145	)	$	269
Reclassification adjustment for losses realized in net income		—			—			—
Other comprehensive income, net	$	414		$	(145	)	$	269

9

	Before Tax Amount			Tax Benefit (Expense)			Net of Tax Amount
	(in thousands)
For the nine months ended September 30, 2008
Unrealized gains (losses) on securities
Unrealized holding losses arising during period	$	(19,743	)	$	6,772		$	(12,971	)
Reclassification adjustment for losses realized in net income		2,412			(827	)		1,585
Other comprehensive loss, net	$	(17,331	)	$	5,945		$	(11,386	)
For the nine months ended September 30, 2007
Unrealized gains (losses) on securities
Unrealized holding gains arising during period	$	512		$	(179	)	$	333
Reclassification adjustment for losses realized in net income		—			—			—
Other comprehensive income, net	$	512		$	(179	)	$	333

Recent Accounting Pronouncements: In September 2006, the Financial Accounting Standards Board (FASB) issued Statement No. 157,Fair Value Measurements. This Statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This Statement establishes a fair value hierarchy about the assumptions used to measure fair value and clarifies assumptions about risk and the effect of a restriction on the sale or use of an asset. The standard is effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued Staff Position (“FSP”) 157-2, “Effective Date of FASB Statement No. 157.” This FSP delays the effective date of FAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The impact of adoption was not material.

In February 2007, the FASB issued Statement No. 159,The Fair Value Option for Financial Assets and Financial Liabilities. The standard provides companies with an option to report selected financial assets and liabilities at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The new standard is effective for the Bank on January 1, 2008. The Bank did not elect the fair value option for any financial assets or financial liabilities as of January 1, 2008.

In September 2006, the FASB Emerging Issues Task Force finalized Issue No. 06-4,Accounting for Deferred Compensation and Postretirement Benefit Aspect of Endorsement Split-Dollar Life Insurance Arrangements. This issue requires that a liability be recorded during the service period when a split-dollar life insurance agreement continues after participants’ employment or retirement. The required accrued liability will be based on either the post-employment benefit cost for the continuing life insurance or based on the future death benefit depending on the contractual terms of the underlying agreement. This issue is effective for fiscal years beginning after December 15, 2007. The impact of adoption was not material.

10

NOTE 4 – EARNINGS PER SHARE

Earnings Per Common Share: Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. ESOP shares are not considered outstanding for this calculation unless earned. Diluted earnings per share includes the dilutive effect of additional potential common shares issuable under stock option and restricted stock awards, if any. Earnings per share is calculated on earnings since the date of conversion on January 31, 2008.

The following is a reconciliation of the calculation of basic earnings per share for the periods January 31, 2008 through September 30, 2008, and July 1, 2008 through September 30, 2008. There are no potentially dilutive common shares at or for the period ended September 30, 2008.

	For the three months ended September 30, 2008		For the nine months ended September 30, 2008
	(in thousands, except share data)
Net income (loss)	$	593	$	(317	)
Less net income from January 1 to January 31		—		(402	)
Net income (loss) post conversion for earnings per share	$	593	$	(719	)
Weighted average shares outstanding		12,273,615		12,278,695
Basic earnings (loss) per share	$	0.05	$	(0.06	)

NOTE 5 – FAIR VALUE

Statement 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Statement 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value of items:

Securities: The fair values of securities available for sale are determined by nationally recognized third party vendors who obtain quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities relationship to other benchmark quoted securities (Level 2 inputs).

Loans: Impaired loans are carried at fair value utilizing Level 3 inputs, consisting of appraisals of underlying collateral and discounted cash flow analysis. A loan is impaired when full payment under the loan terms is not expected. Commercial business and commercial real estate loans are individually evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported net, at present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures.

11

NOTE 5 – FAIR VALUE(Continued)

Assets and liabilities measured at fair value on a recurring basis are summarized below:

			Fair Value Measurements at September 30, 2008 Using
	September 30, 2008		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observation Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Assets:
Available for sale securities	$	131,958	—	$	131,958		—
Impaired loans	$	22,298	—		—	$	22,298

Impaired loans are evaluated using the following factors: fair value of the collateral, cash flows, financial condition, industry sector and specific management knowledge of credits. As of September 30, 2008 these loans had a carrying amount of $22.3 million, with a valuation allowance of $3.7 million.

NOTE 6 – LOANS RECEIVABLE

Loans receivable consists of the following;

	September 30, 2008			December 31, 2007
	(in thousands)
Commercial mortgage	$	410,641		$	199,777
Residential mortgage		218,698			175,809
Construction		55,179			38,554
Home equity loans and lines of credit		46,384			37,308
Commercial business loans		56,640			12,018
Other consumer loans		1,443			1,257
Total loans		788,985			464,723
Less
Allowance for loan losses		(9,949	)		(4,121	)
Deferred loan fees		(353	)		(666	)
Loans receivable, net	$	778,683		$	459,936

12

Activity in the allowance for loan losses is as follows:

	September 30, 2008			December 31, 2007
	(in thousands)
Balance at beginning of year	$	4,121		$	4,009
Allowance from acquired entity		3,791			—
Provisions charged to operations		2,149			357
Reserve on loan commitments re-classified as other liabilities		—			(56	)
Charge-offs		(132	)		(232	)
Recoveries		20			43
Balance at end of period	$	9,949		$	4,121
Individually impaired as follows:
	September 30, 2008			December 31, 2007
	(in thousands)
Period-end loans with no allocated allowance for loan losses	$	575		$	633
Period-end loans with allocated allowance for loan losses		21,723			3,319
Total	$	22,298		$	3,952
Amount of the allowance for loan losses allocated	$	3,655		$	778

NOTE 7 – ACQUISITION OF BOARDWALK BANCORP

On January 31, 2008, Cape Bancorp, Inc. acquired Boardwalk Bancorp, Inc, as previously discussed in Note 1. As a result of the acquisition, Cape Bancorp expects to further solidify its market share in the southern New Jersey market, expand it’s customer base to enhance deposit fee income and provide an opportunity to market additional products and services to new customers, including expansion of services to commercial loan customers.

Under the terms of the merger agreement, the shareholders of Boardwalk Bancorp received total merger consideration of approximately $99.0 million, consisting of 4,946,121 shares of Cape Bancorp common stock and approximately $49.5 million in cash. Based on the total elections made by Boardwalk Bancorp shareholders, Boardwalk Bancorp shareholders who properly elected to receive Cape Bancorp, Inc. common stock received 2.3 Cape Bancorp shares for each share of Boardwalk Bancorp common stock, and Boardwalk Bancorp shareholders who properly elected to receive cash received $23 in cash for each share of Boardwalk Bancorp common stock. The purchase price resulted in approximately $54.2 million in goodwill, and $1.0 million in core deposit and customer relationship intangible, none of which is deductible for tax purposes. The intangible asset(s) will be amortized over 7-10 years, using an accelerated method. Goodwill will not be amortized but instead evaluated periodically for impairment. Purchase accounting adjustments are subject to refinement as management finalizes their calculations.

Boardwalk Bancorp shareholders holding approximately 350,000 shares that did not make proper elections or did not participate in the election received a combination of 0.347775 shares of the Company’s common stock and $19.5245 in cash for each share of Boardwalk Bancorp common stock. The Company paid cash in lieu of fractional shares at a rate of $10 per share.

Net assets acquired are shown in the table below (in thousands):

Securities available for sale	$	92,949
Loans, net		314,471
Goodwill		54,523
Core deposit and other intangibles		1,050
Other assets		40,027
Total assets acquired		503,020
Deposits		(320,520	)
Borrowings		(82,729	)
Other liabilities		(848	)
Total liabilities assumed		(404,097	)
Net assets acquired	$	98,923

13

NOTE 7 – ACQUISITION OF BOARDWALK BANCORP(Continued)

Boardwalk Bancorp Inc’s results of operations have been reflected in Cape Bancorp’s consolidated statements of income beginning as of the acquisition date. Pro forma condensed consolidated income statements for the quarter ended September 30, 2008 and 2007 are shown as if the merger occurred at the beginning of each period presented as follows (in thousands):

	For the nine months ended September 30
	2008			2007
Interest and dividend income	$	46,046		$	48,979
Interest expense		19,948			24,749
Net interest income		26,098			24,230
Provision for loan losses		2,149			656
Net interest income after provision for loan losses		23,949			23,574
Non-interest income		1,324			2,597
Non-interest expense		29,040			20,583
Income (loss) before income taxes		(3,767	)		5,588
Income tax expense (benefit)		(2,234	)		1,548
Net income (loss)	$	(1,533	)	$	4,040
Basic EPS	$	(0.12	)		N/A

Non-interest expense for the nine months ended September 30, 2008 includes a $6.3 million expense ($3.8 million net of tax) for a contribution to the charitable foundation established and funded in connection with the stock conversion. Non-interest income for the nine months ended September 30, 2008 includes a $2.4 million charge ($1.6 million net of tax) for other-than-temporary impairment on investment securities. Non-interest income for the nine months ended September 30, 2007 includes a $1.5 million charge for other-than-temporary impairment on investment securities.

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

Forward Looking Statements

When used in this Form 10-Q, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995. Such statements are subject to certain risks and uncertainties including changes in economic conditions in our market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in our market area, and competition that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution you not to place undue reliance on any such forward-looking statements, which only speak as of the date made. The Company wishes to advise you that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Overview

Cape Bank was organized in 1923. Over the years, we have expanded primarily through internal growth, reaching $633.8 million in assets at December 31, 2007. On January 31, 2008, we completed our mutual-to-stock conversion and initial public stock offering, and our acquisition of Boardwalk Bancorp and Boardwalk Bank. At December 31, 2007, Boardwalk Bancorp had total assets of $450.2 million. As of September 30, 2008 Cape Bank had $1.13 billion in total assets.

Comparison of Financial Condition at September 30, 2008 and December 31, 2007

At September 30, 2008, the Company’s total assets increased to $1.13 billion from $633.8 million at December 31, 2007, an increase of $496.2 million or 78.3%. Assets increased by $450.2 million as a result of our acquisition of Boardwalk Bancorp on January 31, 2008. As a result of the acquisition, goodwill and intangible assets increased by $55.4 million. Subsequent to the closing of the acquisition, asset decline for the remainder of the nine months ended September 30, 2008, totaled $10.4 million or 0.9%.

14

Cash and cash equivalents increased $0.7 million, or 4.5%, to $16.3 million at September 30, 2008 from $15.6 million at December 31, 2007.

At September 30, 2008, the Company’s total net loans increased to $778.7 million from $459.9 million at December 31, 2007, an increase of $318.8 million or 69.3%. Net loans increased by $314.5 million, net of an allowance for loan losses of $3.8 million, as a result of our acquisition of Boardwalk Bancorp on January 31, 2008. Subsequent to the closing of the acquisition, loan growth for the remainder of the nine months ended September 30, 2008, totaled $5.3 million or 0.7%.

At September 30, 2008, the Company had $33.3 million in total delinquent loans (includes non-performing) or 4.22% of total gross loans, an increase from $15.7 million or 3.4% at December 31, 2007. Total delinquent loans increased by $16.0 million as a result of Cape Bancorp’s acquisition of Boardwalk Bancorp on January 31, 2008, and increased $1.6 million subsequent to the closing of the acquisition. Total delinquent loans by portfolio were $29.6 million of commercial mortgages, $2.9 million of residential mortgages and $835 thousand of consumer loans. Delinquent loan balance by number of days delinquent was as follows: 31 to 60 days – $9.1 million, 61 to 90 days – $1.9 million, and 90 days and greater – $22.3 million.

At September 30, 2008, the Company had $22.3 million in non-performing loans or 2.83% of total gross loans, an increase from $4.0 million or 0.9% at December 31, 2007. Total non-performing loans increased by $6.2 million as a result of Cape Bancorp’s acquisition of Boardwalk Bancorp on January 31, 2008 and increased $12.1 million subsequent to the closing of the acquisition. Total non-performing loans by portfolio were $21.2 million of commercial mortgages, and $1.1 million of residential mortgages.

Commercial non-performing loans had collateral type concentrations of 17% in residential, duplex and multi-family related loans, 22% in land and building lot related loans, 14% in retail store and restaurant related loans, 26% in marina and auto dealership related loans, 7% in B&B and hotel related loans and 13% in commercial building and equipment related loans. The three largest relationships in this category of non-performing loans are $3.5 million, $2.7 million, and $2.5 million.

While non-performing loans increased subsequent to the acquisition by $12.1 million, total delinquent loans (including non-performing loans) increased only $1.6 million. We believe we have identified the problem loans and are not continuing to see a trend of increasing delinquencies. Cape Bank is aggressively managing all loan relationships, and where necessary, will apply its loan workout experience to protect its collateral position and actively negotiate with mortgagors to bring resolution to these non-performing loans.

At September 30, 2008, the Bank’s total investment securities increased to $180.1 million ($132.0 million classified as available-for-sale or 73%) from $107.3 million at December 31, 2007, an increase of $72.8 million or 67.8%. Securities increased by $98.1 million as a result of our acquisition of Boardwalk Bancorp on January 31, 2008. For the period January 31, 2008 through September 30, 2008, investment securities decreased $24.5 million or 12.0%. Management evaluates the portfolio for other-than-temporary impairment (OTTI) on a quarterly basis. Factors considered in the analysis are credit agency downgrades, changes in projected cash flows that are not adequate to meet contractual obligations, and declines in market value of securities that remain depressed for a substantial period of time, and where applicable, several external sources are utilized to ascertain market pricing.

During the nine month period ended September 30, 2008, the collateralized debt obligation portion of the investment portfolio declined in value by approximately $15.2 million. This decline in value excludes an unrealized loss of $4.8 million that existed on the date of acquisition which was recorded as an adjustment to book value through purchase accounting. At September 30, 2008, the cost basis of such securities was $25.1 million with a fair market value of $10.0 million. Market value has been adversely affected by the prolonged existence of an illiquid market for these securities. For the quarter ended September 30, 2008, the Bank recognized an other-than-temporary impairment charge of $2.2 million pre-tax which includes: a charge of $976 thousand on equity securities of two financial institutions (Freddie Mac and Fannie Mae), leaving a current book value of $96 thousand, and an OTTI charge of $1.2 million on a collateralized debt obligation (CDO), leaving a current book value of $498 thousand. The decision to take an OTTI charge against the CDO was evident after management received notification from the security underwriter that additional bank defaults occurred during the quarter, no interest payments realized on the security for two consecutive quarters, and security showed an adverse change in the projected cash flow analysis which was not adequate to meet the contractual obligation.

For the quarter ended September 30, 2008, we had one corporate note that was downgraded, resulting in no adverse impact on the valuation of this security. Subsequent to the quarter end, Moody’s announced on November 12, 2008 credit rating downgrades that affected three CDO securities in our portfolio. Management has considered this additional information and has determined that it has no current adverse impact on the valuation of these securities.

The table below reflects the write-downs by the associated portfolio type and their current balances.

15

	For the Three Months Ended September 30, 2008							For the Nine Months Ended September 30, 2008
Portfolio	Fair Value		Amortized Cost		Write-downs			Fair Value		Amortized Cost		Write-downs
	(in thousands)
FNMA & FHLMC Preferred Stock	$	96	$	96	$	(976	)	$	96	$	96	$	(1,176	)
Collateralized Debt Obligations		9,858		25,063		(1,238	)		9,858		25,063		(1,238	)
	$	9,954	$	25,159	$	(2,213	)	$	9,954	$	25,159	$	(2,414	)

At September 30, 2008, the Company’s total deposits increased to $730.3 million from $465.6 million at December 31, 2007, an increase of $264.7 million or 56.9%. Deposits increased by $320.5 million as a result of our acquisition of Boardwalk, and includes purchase accounting adjustments of $1.1 million. Subsequent to the closing of the acquisition, deposit decline for the nine months ended September 30, 2008, totaled $45.4 million or 5.9%. This decline was attributable to a high volume of certificate of deposit maturities that did not renew with Cape Bank, as management determined to increase borrowings as a funding source in lieu of renewing high cost certificates of deposit.

Certificates of deposit increased $169.5 million, or 96.5%, to $345.2 million at September 30, 2008 from $175.7 million at December 31, 2007, and NOW and money market accounts increased $58.3 million, or 34.4%, to $227.8 million at September 30, 2008 from $169.5 million at December 31, 2007. Savings accounts increased $3.0 million, or 3.8%, to $82.5 million at September 30, 2008 from $79.5 million at December 31, 2007. Non-interest bearing deposits increased $33.9 million, or 82.9%, to $74.8 million at September 30, 2008 from $40.9 million at December 31, 2007. Total non-certificate deposit balances increased $8.9 million, or 2.4%, to $385.1 million at September 30, 2008 from $376.2 million at January 31, 2008.

Borrowings increased $147.9 million, or 227.5%, to $212.9 million at September 30, 2008 from $65.0 million at December 31, 2007. Borrowings increased by $82.3 million as a result of our acquisition of Boardwalk Bancorp on January 31, 2008. The increase in borrowings was at a lower cost compared to funding through certificate of deposits. At September 30, 2008, Cape Bank’s borrowings to assets ratio increased to 18.9% from 10.3% at December 31, 2007. Borrowings to total liabilities increased to 22.4% at September 30, 2008 from 11.6% at December 31, 2007.

At September 30, 2008, the Company’s total equity increased to $177.7 million from $72.8 million at December 31, 2007, an increase of $104.9 million or 144.1%. Equity increased by $61.5 million from the net proceeds of 7,820,000 shares of stock sold in the initial public offering, net of a loan to our ESOP of $10.7 million, $49.5 million as a result of the issuance of 4,946,121 shares for the purchase of Boardwalk Bancorp stock, and $5.5 million as a result of the issuance of stock to the charitable foundation. These increases were offset by a net income loss of $317 thousand and an increase in accumulated other comprehensive loss of $11.4 million. Stockholders’ equity totaled $177.7 million or 15.74% of period end assets, and tangible equity totaled $122.3 million or 11.4% of period end tangible assets.

16

The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense. Yields and rates have been annualized.

	For the Three Months Ended September 30
	2008							2007
	Average Balance			Interest Income/ Expense		Average Yield		Average Balance			Interest Income/ Expense		Average Yield
	(Dollars in thousands)
Interest Earning Assets
Interest earning deposits	$	7,689		$	53	2.74	%	$	2,346		$	29	4.90	%
Investments		119,060			1,539	5.14	%		56,516			658	4.62	%
Mortgage-backed securities		82,577			1,039	5.01	%		54,585			708	5.15	%
Loans		789,943			12,523	6.31	%		454,355			7,836	6.84	%
Total interest earning assets		999,269		$	15,154	6.03	%		567,802		$	9,231	6.45	%
Non-interest earning assets		146,135							52,296
Allowance for loan losses		(8,855	)						(3,957	)
Total assets	$	1,136,549						$	616,141
Interest Bearing Liabilities
Interest bearing demand accounts	$	109,780		$	296	1.07	%	$	83,786		$	357	1.69	%
Savings accounts		83,574			273	1.30	%		80,672			357	1.76	%
Money market accounts		126,621			782	2.46	%		85,305			830	3.86	%
Certificates of deposit		345,384			2,935	3.38	%		179,430			2,087	4.61	%
FHLB borrowings		205,655			1,798	3.48	%		57,946			675	4.62	%
Total interest bearing liabilities		871,014		$	6,084	2.78	%		487,139		$	4,306	3.51	%
Non-interest bearing deposits		75,890							49,316
Other liabilities		6,896							7,876
Total liabilities		953,800							544,331
Stockholders’ equity		182,749							71,810
Total liabilities & stockholders’ equity	$	1,136,549			—			$	616,141			—
Net interest income				$	9,070						$	4,925
Net interest spread						3.25	%						2.94	%
Net interest margin						3.61	%						3.44	%
Net interest income and margin (tax equivalent basis)(1)				$	9,224	3.67	%				$	4,993	3.49	%
Ratio of average interest earning assets to average interest bearing liabilities		114.72	%						116.56	%

(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 equivalent adjustment has been computed using a Federal income tax rate of 34%, and has the effect of increasing interest income by $154,000 and $68,000 for the three month period ended September 30, 2008 and 2007 respectively. The average yield on investments increased to 5.64% from 5.14% for the three month period ended September 30, 2008 and increased to 5.10% from 4.62% for the three month period ended September 30, 2007.

17

	For the Nine Months Ended September 30
	2008							2007
	Average Balance			Interest Income/ Expense		Average Yield		Average Balance			Interest Income/ Expense		Average Yield
	(Dollars in thousands)
Interest Earning Assets
Interest earning deposits	$	9,029		$	216	3.20	%	$	3,304		$	118	4.77	%
Investments		120,804			4,614	5.10	%		56,260			1,916	4.55	%
Mortgage-backed securities		76,731			2,938	5.11	%		53,450			2,021	5.06	%
Loans		758,193			35,888	6.32	%		453,691			23,267	6.86	%
Total interest earning assets		964,757		$	43,656	6.04	%		566,705		$	27,322	6.45	%
Non-interest earning assets		135,843							49,422
Allowance for loan losses		(7,960	)						(3,977	)
Total assets	$	1,092,640						$	612,150
Interest Bearing Liabilities
Interest bearing demand accounts	$	105,894		$	822	1.04	%	$	71,247		$	652	1.22	%
Savings accounts		82,661			845	1.37	%		78,877			932	1.58	%
Money market accounts		119,309			2,462	2.76	%		83,506			2,404	3.85	%
Certificates of deposit		352,717			9,510	3.60	%		175,049			5,949	4.54	%
FHLB borrowings		184,233			4,950	3.59	%		80,026			2,891	4.83	%
Total interest bearing liabilities		844,814		$	18,589	2.94	%		488,705		$	12,828	3.51	%
Non-interest bearing deposits		68,922							45,290
Other liabilities		5,866							7,522
Total liabilities		919,602							541,517
Stockholders’ equity		173,038							70,633
Total liabilities & stockholders’ equity	$	1,092,640			—			$	612,150			—
Net interest income				$	25,067						$	14,494
Net interest spread						3.10	%						2.94	%
Net interest margin						3.47	%						3.42	%
Net interest income and margin (tax equivalent basis)(1)				$	25,479	3.53	%				$	14,677	3.45	%
Ratio of average interest earning assets to average interest bearing liabilities		114.20	%						115.96	%

(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 equivalent adjustment has been computed using a Federal income tax rate of 34%, and has the effect of increasing interest income by $412,000 and $183,000 for the nine month period ended September 30, 2008 and 2007 respectively. The average yield on investments increased to 5.54% from 5.10% for the nine month period ended September 30, 2008 and increased to 4.97% from 4.55% for the nine month period ended September 30, 2007.

18

Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.

	For the Three Months Ended September 30, 2008 Compared to September 30, 2007
	Increase (Decrease) due to changes in:
	Average Volume		Average Rate			Net Change
	(in thousands)
Interest Earning Assets
Interest earning deposits	$	37	$	(13	)	$	24
Investments		808		73			881
Mortgage-backed securities		352		(21	)		331
Loans		5,320		(633	)		4,687
Total interest income	$	6,517	$	(594	)	$	5,923
Interest Bearing Liabilities
Interest bearing demand accounts	$	70	$	(131	)	$	(61	)
Savings accounts		9		(93	)		(84	)
Money market accounts		255		(303	)		(48	)
Certificates of deposit		1,410		(562	)		848
FHLB borrowings		1,291		(168	)		1,123
Total interest expense		3,035		(1,257	)		1,778
Total net interest income	$	3,482	$	663		$	4,145
	For the Nine Months Ended September 30, 2008 Compared to September 30, 2007
	Increase (Decrease) due to changes in:
	Average Volume		Average Rate			Net Change
	(in thousands)
Interest Earning Assets
Interest earning deposits	$	138	$	(40	)	$	98
Investments		2,472		226			2,698
Mortgage-backed securities		899		18			917
Loans		14,511		(1,889	)		12,622
Total interest income	$	18,020	$	(1,685	)	$	16,335
Interest Bearing Liabilities
Interest bearing demand accounts	$	273	$	(104	)	$	169
Savings accounts		37		(125	)		(88	)
Money market accounts		852		(794	)		58
Certificates of deposit		4,820		(1,259	)		3,561
FHLB borrowings		2,814		(754	)		2,060
Total interest expense		8,796		(3,036	)		5,760
Total net interest income	$	9,224	$	1,351		$	10,575

19

Comparison of Operating Results for the Three and Nine Months Ended September 30, 2008 and 2007

General.Net income decreased $748 thousand or 55.8%, to $593 thousand for the three months ended September 30, 2008, from $1.3 million for the three months ended September 30, 2007. The nine months ended September 30, 2008 reflected a net loss of $317 thousand, a decrease of $3.7 million from net income of $3.4 million reported for the nine months ended September 30, 2007. The decrease was primarily the result of the Bank’s donation to its charitable foundation of $3.8 million, net of taxes, approximately $785 thousand of expenses, net of taxes, associated with the Bank’s name change and costs related to the acquisition of Boardwalk Bank, and OTTI charges of $2.4 million on investment securities. These expenses were partially offset by a tax benefit of $2.0 million and increased net income resulting from the acquisition of Boardwalk Bank.

Interest Income.Interest income increased $5.9 million, or 64.1%, to $15.1 million for the three months ended September 30, 2008, from $9.2 million for the three months ended September 30, 2007. For the nine months ended September 30, 2008 interest income totaled $43.6 million, an increase of $16.3 million, or 59.7%, from the $27.3 million reported for the nine months ended September 30, 2007. The increase for the quarter resulted primarily from a $4.7 million, or 59.8%, increase in interest income on loans. The increase for the nine month period resulted primarily from a $12.6 million, or 54.2%, increase in interest income on loans. Average loans for the nine months ended September 30, 2008, increased $304.5 million, or 67.1%, to $758.2 million, compared to $453.7 million for the nine months ended September 30, 2007. The average yield on the loan portfolio decreased 54 basis points to 6.32% for the nine months ended September 30, 2008 from 6.86% for the nine months ended September 30, 2007, resulting from the decline in short term interest rates, indexed loans repricing at lower rates, and strong competition in a declining market for new loan originations. The increase in average balance of loans was the result of the acquisition of Boardwalk Bank during the period.

The average balance of investments and mortgage-backed securities increased $62.5 million, or 110.7% and $28.0 million, or 51.3% respectively, to $119.1 million and $82.6 million for the three months ended September 30, 2008, compared to $56.5 million and $54.6 million respectively for the three months ended September 30, 2007. The average balance of investments and mortgage-backed securities increased $64.5 million, or 114.7% and $23.3 million, or 43.6% respectively, to $120.8 million and $76.7 million for the nine months ended September 30, 2008, compared to $56.3 million and $53.4 million respectively for the nine months ended September 30, 2007. The average yield on investments increased 55 basis points to 5.10%, from 4.55% for the nine month period ended September 30, 2008. Mortgage-backed securities increased 5 basis points from 5.11% to 5.06% for the nine month period ended September 30, 2008.The increase in the average balance and yield on investments and mortgage-backed securities was the result of the acquisition of Boardwalk Bank during the period.

Interest Expense.Interest expense increased $1.8 million, or 41.3%, to $6.1 million for the three months ended September 30, 2008, from $4.3 million for the three months ended September 30, 2007. Interest expense increased $5.8 million, or 44.9%, to $18.6 million for the nine months ended September 30, 2008, from $12.8 million for the nine months ended September 30, 2007. The increase in interest expense primarily resulted from the acquisition of Boardwalk Bank.

Interest expense on NOW (interest bearing demand accounts) and money market accounts decreased $109 thousand, or 9.2%, to $1.1 million for the three months ended September 30, 2008, from $1.2 million for the three months ended September 30, 2007, and interest expense on certificates of deposit increased $848 thousand, or 40.6%, to $2.9 million for the three months ended September 30, 2008, from $2.1 million for the three months ended September 30, 2007. For the nine months ended September 30, 2008, interest expense on NOW and money market accounts increased $228 thousand, or 7.5%, to $3.3 million, from $3.1 million for the nine month period ended September 30, 2007. Interest expense on certificates of deposit increased $3.6 million, or 59.9%, to $9.5 million for the nine months ended September 30, 2008, from $5.9 million for the nine months ended September 30, 2007. The average rate paid on certificates of deposit decreased 94 basis points to 3.60% for the nine months ended September 30, 2008, from 4.54% for the nine months ended September 30, 2007, while the average balance of certificates of deposit increased $177.7 million, or 101.5% to $352.7 million for the nine months ended September 30, 2008, from $175.0 million for the nine months ended September 30, 2007. Similarly, the average rate paid on NOW and money market accounts decreased 69 basis points to 1.95% for the nine months ended September 30, 2008, from 2.64% for the nine months ended September 30, 2007. The average balance of NOW and money market accounts increased $70.5 million, or 45.5% to $225.2 million for the nine months ended September 30, 2008, from $154.7 million for the nine months ended September 30, 2007. We decreased rates on maturing certificates of deposit, and money market accounts in response to the decline in short term interest rates. The NOW and money market accounts average balance includes indexed priced municipal accounts for the nine months ended September 30, 2008, with an average balance of $23.5 million and an average rate of 2.06%, and for the nine months ended September 30, 2007, these funds only existed from May 2007, with an average balance of $19.8 million and an average rate of 4.86%. The overall increase in average total deposits was the result of the acquisition of Boardwalk Bank.

Interest expense on borrowings (Federal Home Loan Bank of New York advances) increased $1.1 million, or 166.4%, to $1.8 million for the three months ended September 30, 2008 from $675 thousand for the three months ended September 30, 2007. Interest expense on borrowings increased $2.1 million, or 71.2%, to $5.0 million for the nine months ended September 30, 2008, from $2.9 million for the nine months ended September 30, 2007. The average balance of borrowings increased $104.2 million, or 130.2%, to

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$184.2 million for the nine months ended September 30, 2008, from $80.0 million for the nine months ended September 30, 2007. These increases resulted primarily from the addition of $82.3 million in borrowings from the acquisition of Boardwalk Bank and replacement funding for certificate of deposit runoff. The average rate we paid on borrowings decreased 124 basis points to 3.59% for the nine months ended September 30, 2008, from 4.83% for the nine months ended September 30, 2007 resulting from the decline in short-term interest rates, and a higher proportional balance of overnight versus fixed rate advances.

Net Interest Income.Net interest income increased $4.2 million, or 84.1%, to $9.1 million for the three months ended September 30, 2008, from $4.9 million for the three months ended September 30, 2007. For the nine months ended September 30, 2008, net interest income increased $10.6 million, or 73.0% to $25.1 million from $14.5 million for the nine months ended September 30, 2007.

We experienced an increase in our net interest rate spread of 31 basis points, to 3.25% for the three months ended September 30, 2008, from 2.94% for the three months ended September 30, 2007, and an increase in our net interest margin of 17 basis points, to 3.61% for the three months ended September 30, 2008, from 3.44% for the three months ended September 30, 2007. The increase in our net interest spread was a result of having more rate-sensitive liabilities than assets tied to short term interest rates, which declined during the period. The smaller increase in our net interest margin was due to the decline in the ratio of average interest earning assets to average interest bearing liabilities to 114.7% during the nine period ended September 30, 2008, from 116.6% for the period ended September 30, 2007.

We experienced an increase in our net interest rate spread of 16 basis points, to 3.10% for the nine months ended September 30, 2008, from 2.94% for the nine months ended September 30, 2007. In addition, the net interest margin increased 5 basis points to 3.47% for the nine months ended September 30, 2008, from 3.42% for the nine months ended September 30, 2007. The increase in our net interest spread was a result of having more rate-sensitive liabilities than assets tied to short term interest rates, which declined during the period. The stable net interest margin was the result of the increase in net interest spread being offset by a decline in the ratio of average interest earning assets to average interest bearing liabilities to 114.2% during the nine month period ended September 30, 2008 from 116.0% for the nine month period ended September 30, 2007.

Provision for Loan Losses.We establish provisions for loan losses, which are charged to operations, in order to maintain the allowance for loan losses at a level we consider necessary to absorb credit losses incurred in the loan portfolio that are both probable and reasonably estimable at the balance sheet date. In determining the level of the allowance for loan losses, we consider, among other things, past and current loss experience, evaluations of real estate collateral, current economic conditions, volume and type of lending, adverse situations that may affect a borrower’s ability to repay a loan and the levels of delinquent loans. The amount of the allowance is based on estimates, and the ultimate losses may vary from such estimates as more information becomes available or conditions change. We assess the allowance for loan losses and make provisions for loan losses on a monthly basis.

At September 30, 2008, the Company’s allowance for loans losses increased to $9.9 million from $8.7 million at June 30, 2008, an increase of $1.2 million or 14.3%. The allowance for loan loss ratio increased to 1.26% of gross loans at September 30, 2008, from 1.08% of gross loans at June 30, 2008. The allowance for loan losses to non-performing loans coverage ratio increased to 44.6% at September 30, 2008, from 33.9% at June 30, 2008. The increase in the provision for loan losses during the quarter is the result of management’s analysis of impaired loans which required an increase to $3.7 million at September 30, 2008 from $2.1 million at June 30, 2008, offset by a decline in total loans. For the quarter ended September 30, 2008, charge-offs were $31 thousand compared to $26 thousand for the quarter ended June 30, 2008, and were related to overdraft checking accounts reported as consumer loans.

We recorded a provision for loan losses of $1.3 million and $2.1 million for the three and nine months ended September 30, 2008, respectively, compared to $78 thousand and $234 thousand for the three and nine months ended September 30, 2007, respectively. The increase in the provision for losses over the prior year correlates to management’s analysis of impaired loans.

Non-Interest Income.Non-interest income decreased $1.8 million or 189.7%, to $(870) thousand for the three months ended September 30, 2008, from $970 thousand for the three months ended September 30, 2007. For the nine months ended September 30, 2008, non-interest income decreased $1.8 million or 60.2%, to $1.2 million from $3.0 million for the nine months ended September 30, 2007. The decrease resulted from the Bank recognizing an other-than-temporary impairment charge to non-interest income on equity securities of two financial institutions (Freddie Mac and Fannie Mae) totaling $975 thousand and $1.2 million for the three and nine month periods, respectively and an additional OTTI charge of $1.2 million on a collateralized debt obligation. The decline in non-interest income was partially offset by higher service fee income of $277 thousand and $551 thousand for the three and nine month periods, respectively and an increase in income from BOLI of $96 thousand and $296 thousand for the three and nine month periods. These increases are primarily associated with the acquisition of Boardwalk Bank. The increases were offset by a reduction in net gains on the sale of loans of $40 thousand and $228 thousand for the three and nine month periods, respectively. In addition, for the three and nine month periods, a $16 thousand and $149 thousand charge to non-interest income was recognized resulting from the retirement of old equipment and replacement of signage associated with the acquisition of Boardwalk Bank. The nine month period ended September 30, 2007 also included a $50 thousand loss recovery on real estate foreclosed on in a prior year.

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Non-Interest Expense.Non-interest expense increased $2.8 million to $6.7 million for the three months ended September 30, 2008. Non-interest expense increased $14.1 million to $26.5 million for the nine months ended September 30, 2008. The year-to-date increase resulted primarily from a $6.3 million previously reported expense related to the formation of The CapeBank Charitable Foundation, increased expenses directly related to the Boardwalk acquisition, increased compensation expense of $3.9 million, increased Data Processing expenses of $347 thousand, an increase of $109 thousand in general advertising costs primarily as a result of Cape Bank’s name change, increased professional services (audit and legal) of $311 thousand, increased occupancy and equipment expenses of $1.2 million, increased telecommunications expense of $260 thousand, increased office supply expense of $244 thousand, and increased FDIC expense of $336 thousand.

Income Tax Expense.For the three months ended September 30, 2008 the income tax benefit was $424 thousand, compared to an income tax provision of $562 thousand for the three months ended September 30, 2007, a change of $986 thousand. The provision for income taxes decreased $3.6 million to a tax benefit of $2.0 million for the nine months ended September 30, 2008, compared to tax expense of $1.6 million for the nine months ended September 30, 2007 as a result of the Bank’s contribution of $6.3 million to The CapeBank Charitable Foundation. The effective tax rate was a benefit of 250.9% for the three months ended September 30, 2008 compared to 29.5% for the three months ended September 30, 2007. Our effective tax rate was a benefit of 86.5% for the nine months ended September 30, 2008 compared to 31.6% for the nine months ended September 30, 2007. The change in the effective tax rate is a result of an increase in non-taxable items including interest on tax-exempt securities of $500 thousand and BOLI income of $300 thousand and a $400 thousand deduction for merger and acquisition costs that were capitalized for book purposes. Additionally, the non-taxable items represent a larger portion of the pre-tax loss of $2.3 million for the nine months ended September 30, 2008 than those items do when compared to the pre-tax income of $5.0 million for the nine months ended September 30, 2007.

Critical Accounting Policies

Certain accounting policies involve significant judgments and assumptions by us that have a material impact on the carrying value of certain assets and liabilities. We consider these accounting policies to be critical accounting policies. The judgments and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances. Actual results could differ from these judgments and estimates under different conditions, resulting in a change that could have a material impact on the carrying values of our assets and liabilities and our results of operations.

Allowance for Loan Losses.We consider the allowance for loan losses to be a critical accounting policy. The allowance for loan losses is the amount estimated by management as necessary to cover losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses, which is charged to income. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment.

In evaluating the allowance for loan losses, management considers historical loss factors, the mix of the loan portfolio (types of loans and amounts), geographic and industry concentrations, current national and local economic conditions and other factors related to the collectability loan portfolio, including underlying collateral values and estimated future cash flows. All of these estimates are susceptible to significant change. Large groups of smaller balance homogeneous loans, such as residential real estate, home equity loans, and consumer loans, are evaluated in the aggregate under Statement of Financial Accounting Standards (SFAS) No. 5, “Accounting for Contingencies, using historical loss factors adjusted for economic conditions and other environmental factors. Other environmental factors include trends in delinquencies and classified loans, loan concentrations by loan category and by property type, seasonality of the portfolio, internal and external analysis of credit quality, peer group data, and single and total credit exposure. Large balance and/or more complex loans, such as multi-family and commercial real estate loans, commercial business loans, and construction loans are evaluated individually for impairment in accordance with SFAS No. 114 “Accounting by Creditors for Impairment of a Loan, an Amendment of FASB Statements No. 5 and 15”and SFAS No. 118,“Accounting by Creditors for Impairment of a Loan – Income Recognition and Disclosures, an Amendment of SFAS No. 114”. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available or as projected events change.

Management reviews the level of the allowance monthly. Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. In addition, the Federal Deposit Insurance Corporation and the New Jersey Department of Banking and Insurance, as an integral part of their examination process, periodically review our allowance for loan losses. Such agencies may require us to recognize adjustments to the allowance based on judgments about information available to them at the time of their examination. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings.

Securities Impairment. We periodically perform analyses to determine whether there has been an other-than-temporary decline in the value of one or more of our securities. Our available-for-sale securities portfolio is carried at estimated fair value, with any unrealized gains or losses, net of taxes, reported as accumulated other comprehensive income or loss in stockholder’s equity. Our

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held-to-maturity securities portfolio, consisting of debt securities for which we have a positive intent and ability to hold to maturity, is carried at amortized cost. We conduct a quarterly review and evaluation of the securities portfolio to determine if the value of any security has declined below its cost or amortized cost, and whether such decline is other-than-temporary. If such decline is deemed other-than-temporary, we would adjust the cost basis of the security by writing down the security to estimated fair market value through a charge to current period operations. The market values of our securities are affected by changes in interest rates.

Goodwill Impairment. The Bank follows the provisions of SFAS No. 142, “Goodwill and Other Intangibles,” and performs an annual impairment test of goodwill. However, when circumstances indicate that an event has occurred during an interim period, the Bank will perform an impairment test at that time. The Bank determined that such an event did not occur during the quarter ended September 30, 2008.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

General. The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of mortgage-related assets, have longer maturities than our liabilities, consisting primarily of deposits. As a result, a principal part of our business strategy is to manage interest rate risk and limit the exposure of our net interest income to changes in market interest rates. Accordingly, we have an Interest Rate Risk Management Committee of the Board as well as an Asset/Liability Committee, comprised of our Chief Executive Officer, EVP/Chief Financial Officer, EVP/Chief Operating Officer, EVP/Chief Lending Officer, SVP of Residential Lending, Vice President Accounting/Finance and our Controller. The Interest Rate Risk Management Committee is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for recommending to our Board of Directors the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the Board of Directors.

We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. As part of our ongoing asset-liability management, we currently use the following strategies to manage our interest rate risk:

• originating commercial mortgage loans that generally tend to have shorter maturities and higher interest rates;

• investing in shorter duration investment grade corporate securities and mortgage-backed securities;

• originating adjustable-rate and short-term consumer loans;

• selling our long-term residential mortgage loans to our correspondent banks; and

• obtaining general financing through lower cost deposits and laddered maturities of Federal Home Loan Bank advances.

Shortening the average maturity of our interest-earning assets by increasing our investments in shorter-term loans, as well as loans with variable interest rates, helps to better match the maturities and interest rates of our assets and liabilities, thereby reducing the exposure of our net interest income to changes in market interest rates.

Net Interest Income Analysis.We analyze our sensitivity to changes in interest rates through our net interest income model. Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings. In our model, we estimate what our net interest income would be for a twelve-month period. We then calculate what the net interest income would be for the same period under the assumption that interest rates experience an instantaneous and sustained increase of 100 or 200 basis points or decrease of 100 or 200 basis points.

The table below sets forth, as of September 30, 2008, our calculation of the estimated changes in our net interest income that would result from the designated instantaneous and sustained changes in interest rates. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.

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	Net Interest Income
Change in Interest Rates (basis points)(1)	Estimated Net Interest		Increase (decrease) in Estimated Net Interest Income
	Income		Amount			Percent
	(Dollars in thousands)
+200	$	36,502	$	(237	)	-0.65	%
+100	$	36,679	$	(60	)	-0.16	%
0	$	36,739		N/A		N/A
-100	$	36,602	$	(137	)	-0.37	%
-200	$	35,731	$	(1,008	)	-2.74	%

⁽¹⁾ Assumes an instantaneous and sustained uniform change in interest rates at all maturities.

The table above indicates that at September 30, 2008, in the event of a 100 basis point increase in interest rates, we would experience a $60 thousand decrease in net interest income. In the event of a 100 basis point decrease in interest rates, we would experience a $137 thousand decrease in net interest income.

Certain shortcomings are inherent in the methodologies used in determining interest rate risk through changes in net interest income. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the net interest income information presented assumes that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although interest rate risk calculations provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results.

Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

During the quarter ended September 30, 2008, there were no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II – Other Information

Item 1. Legal Proceedings

The Company and its subsidiaries are subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s financial condition or results of operations.

Item 1A. Risk Factors

The risks set forth below, in addition to the other risks described in this quarterly report, represent material changes from those risk factors previously disclosed in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 31, 2008, and may adversely affect our business, financial condition and operating results. In addition to the risks set forth below and the other risks described in this quarterly report, there may also be additional risks and uncertainties that are not currently known to us or that we currently deem to be immaterial that could materially and adversely affect our business, financial condition or operating results. As a result, past financial performance may not be a reliable indicator of future performance, and

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historical trends should not be used to anticipate results or trends in future periods. Further, to the extent that any of the information contained in this Quarterly Report on Form 10-Q constitutes forward-looking statements, the risk factors set forth below also are cautionary statements identifying important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of us.

Our Expenses Will Increase as a Result of Increases in FDIC Insurance Premiums

The Federal Deposit Insurance Corporation (“FDIC”) imposes an assessment against institutions for deposit insurance. This assessment is based on the risk category of the institution and ranges from 5 to 43 basis points of the institution’s deposits. Federal law requires that the designated reserve ratio for the deposit insurance fund be established by the FDIC at 1.15% to 1.50% of estimated insured deposits. If this reserve ratio drops below 1.15% or the FDIC expects it to do so within six months, the FDIC must, within 90 days, establish and implement a plan to restore the designated reserve ratio to 1.15% of estimated insured deposits within five years (absent extraordinary circumstances).

Recent bank failures coupled with deteriorating economic conditions have significantly reduced the deposit insurance fund’s reserve ratio. As of June 30, 2008, the designated reserve ratio was 1.01% of estimated insured deposits at March 31, 2008. As a result of this reduced reserve ratio, on October 16, 2008, the FDIC published a proposed rule that would restore the reserve ratios to its required level. The proposed rule would raise the current deposit insurance assessment rates uniformly for all institutions by 7 basis points (to a range from 12 to 50 basis points) for the first quarter of 2009. The proposed rule would also alter the way the FDIC calculates federal deposit insurance assessment rates beginning in the second quarter of 2009 and thereafter.

Under the proposed rule, the FDIC would first establish an institution’s initial base assessment rate. This initial base assessment rate would range, depending on the risk category of the institution, from 10 to 45 basis points. The FDIC would then adjust the initial base assessment (higher or lower) to obtain the total base assessment rate. The adjustments to the initial base assessment rate would be based upon an institution’s levels of unsecured debt, secured liabilities, and brokered deposits. The total base assessment rate would range from 8 to 77.5 basis points of the institution’s deposits. There can be no assurance that the proposed rule will be implemented by the FDIC or implemented in its proposed form.

In addition, the Emergency Economic Stabilization Act of 2008 (EESA) temporarily increased the limit on FDIC insurance coverage for deposits to $250,000 through December 31, 2009, and the FDIC took action to provide coverage for newly issued senior unsecured debt and non-interest bearing transaction accounts in excess of the $250,000 limit, for which institutions will be assessed additional premiums.

These actions will significantly increase the Company’s non-interest expense in 2009 and in future years as long as the increased premiums are in place.

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

(a) There were no sales of unregistered securities during the period covered by this Report.

(b) The Company commenced its initial stock offering on or about November 23, 2007, and the offering closed on January 31, 2008. Subscriptions received in the offering earned interest at Cape Bank’s passbook savings rate. There has been no material changes in the Company’s projected use of the offering proceeds as from what was disclosed in the section entitled “Use of Proceeds” in the Company’s Registration Statement on Form S-1 (Commission File No. 333-146178).

(c) There were no issuer repurchases of securities during the period covered by this Report.

Item 3. Defaults Upon Senior Securities

Not applicable.

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

The Annual Meeting of Stockholders of the Company (the “Meeting”) was held on August 25, 2008. There were outstanding and entitled to vote at the Meeting 13,313,521 votes. There were present at the meeting, in person or by proxy, the holders of 11,455,431 shares of Common Stock representing 86.0% of the total votes. Proposal 1 was to elect four directors of the Company. Proposal 2 was to approve the Company’s 2008 Equity Incentive Plan. Proposal 3 was to ratify the appointment of the independent registered public accounting firm for the year ending December 31, 2008. The result of the voting at the Meeting is as follows:

Proposal 1: The election of four directors for terms of three years each.

	For	%	Withheld	%
Louis H. Griesbach, Jr.	10,912,997	95.3	542,434	4.7
Herbert L. Hornsby, Jr.	10,990,508	95.9	464,923	4.1
Joanne D. Kay	10,056,031	87.8	1,399,400	12.2
Agostino R. Fabietti	11,054,945	96.5	400,486	3.5

Proposal 2: Approval of the Company’s 2008 Equity Incentive Plan.

For	%	Against	%	Abstain	%	Broker Non-Votes	%
7,312,139	54.9	1,900,682	14.3	98,098	0.7	2,144,511	16.1

Proposal 3: Ratification of the appointment of Crowe Chizek and Company LLC as the Company’s independent registered public accounting firm for the year ending December 31, 2008.

For	%	Against	%	Abstain	%
11,235,231	98.6	163,430	1.4	56,771	0.5

Item 5. Other Information

Not applicable

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Item 6. Exhibits

The following exhibits are either filed as part of this report or are incorporated herein by reference:

3.1	Charter of Cape Bancorp, Inc. *
3.2	Amended and Restated Bylaws of Cape Bancorp, Inc. * *
4	Form of Common Stock Certificate of Cape Bancorp, Inc. *
10.1	Form of Employee Stock Ownership Plan *
10.2	Existing Employment Agreement for Chief Executive Officer *
10.3	Existing Employment Agreement for Chief Financial Officer *
10.4	Proposed Employment Agreement for Chief Operating Officer *
10.5	Proposed Employment Agreement for Chief Lending Officer *
10.6	Form of Change in Control Agreement *
10.7	Change in Control Agreement for Wayne S. Hardenbrook *
10.8	Amended and Restated Phantom Incentive Stock Option Plan *
10.9	Amended and Restated Phantom Restricted Stock Plan *
10.10	Form of Director Retirement Plan *
10.11	Benefit Equalization Plan *
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Filed as exhibits to the Company’s Registration Statement on Form S-1, and any amendments thereto, with the Securities and Exchange Commission (Registration No. 333-146178).

** Filed as an exhibit to the Company’s Current Report Form 8-K with the Securities and Exchange Commission on July 18, 2008.

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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.

	CAPE BANCORP, INC.
Date: November 14, 2008	/s/ Herbert L. Hornsby, Jr.
	Herbert L. Hornsby, Jr.
	President and Chief Executive Officer
Date: November 14, 2008	/s/ Robert J. Boyer
	Robert J. Boyer
	Executive Vice President and Chief Financial Officer

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