Newbridge Bancorp (NBBC) 10-Q 2009 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended:

September 30, 2009

Commission File Number: 000-11448

NewBridge Bancorp

(Exact name of Registrant as specified in its Charter)

North Carolina	56-1348147
(State of Incorporation)	(I.R.S. Employer Identification No.)
1501 Highwoods Boulevard, Suite 400
Greensboro, North Carolina	27410
(Address of principal executive offices)	(Zip Code)

(336) 369-0900
(Registrant’s telephone number, including area code)

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

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

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

Large accelerated filer o Accelerated filer o  Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company þ

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

At November 2, 2009, 15,655,868 shares of the registrant’s common stock were outstanding.

NEWBRIDGE BANCORP

FORM 10-Q
TABLE OF CONTENTS

		Page
PART I
Financial Information
Item 1	Financial Statements		3
	Consolidated Balance Sheets September 30, 2009 and December 31, 2008		3
	Consolidated Statements of Income Three Months and Nine Months Ended September 30, 2009 and 2008		4
	Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income Nine Months Ended September 30, 2009 and 2008		5
	Consolidated Statements of Cash Flows Nine Months Ended September 30, 2009 and 2008		6
	Notes to Consolidated Financial Statements		8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3	Quantitative and Qualitative Disclosures About Market Risk		27
Item 4	Controls and Procedures		28
PART II
Other Information
Item 1	Legal Proceedings		29
Item 1A	Risk Factors		29
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		29
Item 3	Defaults Upon Senior Securities		29
Item 4	Submission of Matters to a Vote of Security Holders		29
Item 5	Other Information		29
Item 6	Exhibits		30
EX-31.01
EX-31.02
EX-32

2

PART I
FINANCIAL INFORMATION

Item 1. Financial Statements.

NewBridge Bancorp and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share data)

	September 30
	2009			December 31
	(Unaudited)			2008
Assets
Cash and due from banks	$	32,623		$	32,993
Interest-bearing bank balances		31,322			12,824
Federal funds sold		—			42,043
Investment securities:
Held to maturity, market value $22,513 at September 30, 2009 and $27,269 at December 31, 2008		21,656			27,037
Available for sale		322,612			261,535
Loans held for sale		1,543			937
Loans		1,494,423			1,603,588
Less allowance for credit losses		(38,902	)		(35,805	)
Net loans		1,457,064			1,568,720
Premises and equipment		40,024			45,253
Real estate acquired in settlement of loans		19,031			9,080
Other assets		85,212			79,142
Total assets	$	2,009,544		$	2,078,627
Liabilities
Deposits:
Non-interest bearing	$	159,725		$	149,583
Savings, NOW and money market accounts		628,917			613,732
Certificates of deposit		823,916			900,148
Total deposits		1,612,558			1,663,463
Borrowings from the Federal Home Loan Bank		136,700			139,000
Other borrowings		73,274			76,815
Accrued expenses and other liabilities		20,615			20,113
Total liabilities		1,843,147			1,899,391
Shareholders’ Equity
Preferred stock, par value $.01 per share:
Authorized 10,000,000 shares; issued and outstanding (liquidation preference $1,000 per share) — 52,372 at September 30, 2009 and at December 31, 2008		51,115			50,891
Common stock, par value $5 per share:
Authorized 50,000,000 shares; issued and outstanding — 15,655,868 at September 30, 2009 and at December 31, 2008		78,279			78,279
Paid-in capital		86,941			86,852
Directors’ deferred compensation plan		(634	)		(650	)
Retained earnings (deficit)		(51,799	)		(34,427	)
Accumulated other comprehensive income (loss)		2,495			(1,709	)
Total shareholders’ equity		166,397			179,236
Total liabilities and shareholders’ equity	$	2,009,544		$	2,078,627

See notes to consolidated financial statements

3

NewBridge Bancorp and Subsidiary
Consolidated Statements of Income
(Unaudited; dollars in thousands, except per share data)

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2009			2008			2009			2008
Interest Income
Interest and fees on loans	$	20,735		$	25,112		$	63,990		$	77,406
Interest on investment securities:
Taxable		2,479			1,860			6,750			8,690
Tax exempt		1,209			1,217			3,614			3,571
Interest-bearing bank balances		31			47			116			196
Federal funds sold		17			20			97			52
Total interest income		24,471			28,256			74,567			89,915
Interest Expense
Deposits		7,649			10,894			26,226			33,916
Borrowings from the Federal Home Loan Bank		1,172			1,168			3,515			4,153
Other borrowings		620			851			1,949			2,769
Total interest expense		9,441			12,913			31,690			40,838
Net interest income		15,030			15,343			42,877			49,077
Provision for credit losses		10,808			4,656			30,179			10,682
Net interest income after provision for credit losses		4,222			10,687			12,698			38,395
Noninterest Income
Service charges on deposit accounts		2,189			2,425			6,427			6,868
Gain on sales of mortgage loans		104			83			489			325
Gain on sales of investment securities		—			—			—			2,459
Other operating income		3,302			2,129			7,378			6,341
Total noninterest income		5,595			4,637			14,294			15,993
Noninterest Expense
Personnel		8,304			8,607			23,625			26,797
Occupancy		2,097			1,122			4,411			3,384
Furniture and equipment		2,335			1,271			4,891			3,439
FDIC insurance		965			332			3,870			451
Other operating		6,117			6,308			17,098			17,862
Total noninterest expense		19,818			17,640			53,895			51,933
Income (loss) before income taxes		(10,001	)		(2,316	)		(26,903	)		2,455
Income taxes		(4,347	)		(726	)		(11,719	)		774
Net Income (Loss)		(5,654	)		(1,590	)		(15,184	)		1,681
Dividends and accretion on preferred stock		(729	)		—			(2,188	)		—
Net Income (Loss) available to common shareholders	$	(6,383	)	$	(1,590	)	$	(17,372	)	$	1,681
Earnings (loss) per share:
Basic	$	(0.41	)	$	(0.10	)	$	(1.11	)	$	0.11
Diluted	$	(0.41	)	$	(0.10	)	$	(1.11	)	$	0.11
Weighted average shares outstanding:
Basic		15,655,868			15,655,868			15,655,868			15,666,365
Diluted		15,655,868			15,655,868			15,655,868			15,702,790

See notes to consolidated financial statements

4

NewBridge Bancorp and Subsidiary
Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income

Nine months ended September 30, 2009 and 2008
(Unaudited; Dollars in thousands)

												Directors’						Accumulated
												Deferred			Retained			Other			Total
	Preferred		Common Stock						Paid-in			Compensation			Earnings			Comprehensive			Shareholders’
	Stock		Shares			Amount			Capital			Plan			(Deficit)			Income (Loss)			Equity
Balances at December 31, 2007	$	—		15,694,068		$	78,470		$	85,412		$	(1,301	)	$	28,751		$	1,821		$	193,153
Net Income																1,681						1,681
Change in unrealized gain (loss) on securities available for sale, net of deferred income taxes																			(4,946	)		(4,946	)
Comprehensive income (loss)																						(3,265	)
Cash dividends declared on common stock																(6,122	)					(6,122	)
Stock-based compensation expense										73												73
Common stock distributed													653									653
Common stock acquired				(38,200	)		(191	)		(150	)											(341	)
Balances at September 30, 2008	$	—		15,655,868		$	78,279		$	85,335		$	(648	)	$	24,310		$	(3,125	)	$	184,151
Balances at December 31, 2008	$	50,891		15,655,868		$	78,279		$	86,852		$	(650	)	$	(34,427	)	$	(1,709	)	$	179,236
Net Loss																(15,184	)					(15,184	)
Change in unrealized gain (loss) on securities available for sale, net of deferred income taxes																			4,204			4,204
Comprehensive income (loss)																						(10,980	)
Dividends and accretion on preferred stock		224														(2,188	)					(1,964	)
Stock-based compensation expense										89												89
Common stock distributed													16									16
Balances at September 30, 2009	$	51,115		15,655,868		$	78,279		$	86,941		$	(634	)	$	(51,799	)	$	2,495		$	166,397

See notes to consolidated financial statements

5

NewBridge Bancorp and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited; dollars in thousands)

	Nine Months Ended
	September 30
	2009			2008
Cash Flow from operating activities
Net (Loss) Income	$	(15,184	)	$	1,681
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		5,540			3,971
(Increase) decrease in income tax assets		(8,234	)		(4,966	)
(Increase) decrease in income earned but not received		(96	)		2,121
Increase (decrease) in interest accrued but not paid		(606	)		(1,137	)
Net (increase) decrease in other assets		399			2,054
Net increase (decrease) in other liabilities		1,125			(6,305	)
Provision for credit losses		30,179			10,681
Gain on sale of loans held for sale		(489	)		(325	)
Originations of loans held for sale		(68,854	)		(39,277	)
Proceeds from sales of loans held for sale		68,737			51,331
Loss on sale of premises, equipment and real estate acquired in settlement of loans		523			680
Stock based compensation		89			73
Net cash provided by operating activities		13,129			20,582
Cash Flow from investing activities
Purchases of securities available for sale		(106,754	)		(116,489	)
Proceeds from maturities of securities available for sale		58,372			207,402
Net decrease (increase) in loans made to customers		63,081			(164,558	)
Proceeds from sale of premises, equipment and real estate acquired in settlement of loans		8,487			4,467
Expenditures for improvements to real estate acquired in settlement of loans		(1,105	)		(2,513	)
Purchases of premises and equipment		(416	)		(5,283	)
Net decrease in federal funds sold		42,043			2,013
Net cash provided by (used for) investing activities		63,708			(74,961	)
Cash Flow from financing activities
Net increase in demand deposits, NOW, money market and savings accounts		25,327			(26,858	)
Net increase (decrease) in time deposits		(76,232	)		24,430
Net (decrease) increase in other borrowings		(3,557	)		18,800
Net increase (decrease) in borrowings from Federal Home Loan Bank		(2,300	)		52,500
Dividends paid		(1,964	)		(6,122	)
Common stock distributed (acquired)		17			(341	)
Net cash provided by (used for) financing activities		(58,709	)		62,409
Increase in cash and cash equivalents		18,128			8,030
Cash and cash equivalents at the beginning of the period		45,817			58,689
Cash and cash equivalents at the end of the period	$	63,945		$	66,719

See notes to consolidated financial statements

6

NewBridge Bancorp and Subsidiary
Consolidated Statements of Cash Flows (continued)
(Unaudited; dollars in thousands)

	Nine Months Ended
	September 30
	2009			2008
Supplemental disclosures of cash flow information
Cash paid during the periods for:
Interest	$	31,084		$	42,473
Income Taxes		—			3,500
Supplemental disclosures of noncash transactions
Transfer of loans to real estate acquired in settlement of loans	$	16,451		$	5,723
Accretion on preferred stock		224			—
Dividends accrued but unpaid		194			—
Unrealized gains (losses) on securities available for sale:
Change in securities available for sale		6,414			(8,838	)
Change in deferred income taxes		(2,210	)		3,982
Change in shareholders’ equity		4,204			4,856

See notes to consolidated financial statements

7

NewBridge Bancorp and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)

Note 1 — Basis of Presentation

The accompanying interim unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) and provisions for credit losses considered necessary for a fair presentation have been included. Operating results for the three-month and nine-month periods ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.

NewBridge Bancorp (“Bancorp” or the “Company”) is a bank holding company incorporated under the laws of North Carolina (“NC”) and registered under the Bank Holding Company Act of 1956, as amended (the “BHCA”). Bancorp’s principal asset is stock of its banking subsidiary, NewBridge Bank (the “Bank”), a NC chartered non-member bank. Accordingly, throughout this Quarterly Report on Form 10-Q, there are frequent references to the Bank.

Through its branch network, the Bank provides a wide range of banking products to individuals, small to medium-sized businesses and other organizations in its market areas, including interest bearing and non-interest bearing checking accounts, certificates of deposit, individual retirement accounts, overdraft protection, personal and corporate trust services, safe deposit boxes, online banking, corporate cash management, brokerage, financial planning and asset management, mortgage loans and secured and unsecured loans.

In addition, as of September 30, 2009, the Bank also operated four active non-bank subsidiaries: Peoples Finance Company of Lexington, Inc. (“Peoples Finance”), LSB Properties, Inc. (“LSB Properties”), Henry Properties, LLC (“Henry Properties”) and Prince George Court Holdings, Inc. (“Prince George”). Peoples Finance is a state licensed finance company. As a finance company, Peoples Finance offers secured and unsecured loans to individuals up to a maximum of $30,000 secured, and $10,000 unsecured, as well as dealer originated loans. The Company announced during the second quarter of 2008 that Peoples Finance will no longer proactively solicit new loans to the Bank’s loan portfolio. As of September 30, 2009, Peoples Finance had approximately $3.5 million of loans outstanding. LSB Properties owns the majority of real estate acquired in settlement of loans of the Bank, while Henry Properties owns a leasehold interest in a commercial property in Greensboro, NC and Prince George owns a condominium project in Georgetown, South Carolina, acquired through a deed-in-lieu of foreclosure, as described in greater detail in “Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations”, under the heading “Asset Quality and Allowance for Credit Losses”.

Bancorp has one non-bank subsidiary, FNB Financial Services Capital Trust I (“FNB Trust”), a Delaware statutory trust, formed to facilitate the issuance of trust preferred securities. FNB Trust is not consolidated in Bancorp’s financial statements.

The organization and business of the Company, accounting policies followed by the Company and other relevant information are contained in the notes to the consolidated financial statements in Bancorp’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2009 (SEC File No. 000-11448) (the “Annual Report”). This Quarterly Report should be read in conjunction with the Annual Report.

8

Certain items for 2008 have been reclassified to conform to the 2009 presentation. Such reclassifications had no effect on net income or shareholders’ equity as previously reported.

Note 2 — Net Income Per Share

Basic and diluted net income per share is computed based on the weighted average number of shares outstanding during each period. Diluted net income per share reflects the potential dilution that could occur if stock options, restricted stock grants and a warrant to purchase shares were exercised, resulting in the issuance of common stock sharing in the net income of the Company. For the three months ended September 30, 2009 and 2008, there were 807,865 options and 838,451 options, respectively, on a weighted average basis, which were antidilutive since the exercise price exceeded the average market price for the period. For the nine months ended September 30, 2009 and 2008, there were 828,335 options and 739,835 options, respectively, on a weighted averaged basis, which were antidilutive. In addition, for the three months and nine months ended September 30, 2009, there was a warrant to purchase 2,567,255 shares which was antidilutive.

A reconciliation of the basic average common shares outstanding to the diluted average common shares outstanding is as follows:

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2009		2008		2009		2008
Weighted average number of common shares used in computing basic net income per share		15,655,868		15,655,868		15,655,868		15,666,365
Effect of dilutive stock options, restricted stock and warrant to purchase shares		—		—		—		36,425
Diluted weighted average common shares outstanding		15,655,868		15,655,868		15,655,868		15,702,790

Note 3 — Investment Securities

Investment securities consist of the following (in thousands):

	September 30, 2009 — Securities Held to Maturity
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
State and municipal obligations	$	21,656	$	857	$	—	$	22,513

	September 30, 2009 — Securities Available for Sale
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
U.S. government agency securities	$	49,617	$	814	$	(1	)	$	50,430
Mortgage backed securities		83,916		4,961		(3	)		88,874
Collateralized mortgage obligations		34,702		80		(493	)		34,289
State and municipal obligations		85,215		4,186		(650	)		88,751
Corporate bonds		40,868		1,982		—			42,850
Federal Home Loan Bank stock		11,190		—		—			11,190
Other equity securities		5,775		660		(207	)		6,228
Total	$	311,283	$	12,683	$	(1,354	)	$	322,612

9

	December 31, 2008 — Securities Held to Maturity
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
State and municipal obligations	$	27,037	$	444	$	(212	)	$	27,269

	December 31, 2008 — Securities Available for Sale
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
U.S. government agency securities	$	56,622	$	1,332	$	—		$	57,954
Mortgage backed securities		97,843		4,199		—			102,042
State and municipal obligations		88,590		1,064		(2,011	)		87,643
Federal Home Loan Bank stock		9,867		—		—			9,867
Other equity securities		3,775		570		(316	)		4,029
Total	$	256,697	$	7,165	$	(2,327	)	$	261,535

The following is a schedule of securities in a loss position as of September 30, 2009 (in thousands):

	Less than 1 year					1 Year or More					Total
	Market		Unrealized			Market		Unrealized			Market		Unrealized
	Value		Loss			Value		Loss			Value		Loss
U.S. government agency obligations	$	2,000	$	(1	)	$	—	$	—		$	2,000	$	(1	)
Mortgage backed securities		1,957		(3	)		—		—			1,957		(3	)
Collateralized mortgage obligations		20,423		(493	)		—		—			20,423		(493	)
State and municipal obligations		776		(14	)		4,410		(636	)		5,186		(650	)
Other equity securities		—		—			633		(207	)		633		(207	)
Total securities	$	25,156	$	(511	)	$	5,043	$	(843	)	$	30,199	$	(1,354	)

Investment securities with an amortized cost of $150,184,000 and $187,275,000, as of September 30, 2009, and December 31, 2008, respectively, were pledged to secure public deposits and for other purposes. The Bank has obtained a $50,000,000 irrevocable letter of credit from the Federal Home Loan Bank (“FHLB”), which is used in lieu of securities to pledge against public deposits.

The Company did not sell any investment securities during the nine months ended September 30, 2009. Investment securities with a book value of $151,438,000 were sold during the nine months ended September 30, 2008, to reposition the investment portfolio. The Company recognized a gain of $2,089,000 on the sale of those securities. In addition, during the nine months ended September 30, 2008, the Company recognized a gain of $370,000 from the sale of securities from the mandatory redemption of shares upon VISA Inc.’s initial public offering of stock, as described in Management’s Discussion and Analysis of Financial Condition.

10

Note 4 — Loans and Allowance for Credit Loss

A summary of consolidated loans follows (in thousands):

	September 30		December 31
	2009		2008
Commercial	$	596,471	$	617,591
Real estate — construction		197,351		218,741
Real estate — mortgage		607,756		631,792
Installment loans to individuals		80,821		122,412
Other		12,024		13,052
Total loans		1,494,423		1,603,588
Loans held for sale		1,543		937
Total loans and loans held for sale	$	1,495,966	$	1,604,525

Nonperforming assets are summarized as follows (in thousands):

	September 30			December 31
	2009			2008
Nonaccrual loans	$	51,332		$	38,029
Restructured loans		3,007			250
Accruing loans which are contractually past due 90 days or more		3,354			1,277
Total nonperforming loans		57,693			39,556
Real estate acquired in settlement of loans		19,031			9,080
Total nonperforming assets	$	76,724		$	48,636
Nonperforming loans to loans outstanding at end of period		3.86	%		2.47	%
Nonperforming assets to total assets at end of period		3.82	%		2.34	%

Impaired loans and related information are summarized in the following tables (in thousands):

	September 30		December 31
	2009		2008
Loans specifically identified as impaired
Commercial and real estate	$	104,144	$	84,421
Installment and other		1,845		6,625
Total	$	105,989	$	91,046
Allowance for credit losses associated with impaired loans	$	15,728	$	12,768

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2009		2008		2009		2008
Average balances of impaired loans	$	109,029	$	68,128	$	100,633	$	50,732
Interest income recorded for impaired loans	$	832	$	447	$	2,344	$	1,770

The Bank’s policy for impaired loan accounting subjects all loans to impairment recognition except for large groups of smaller balance homogeneous loans such as credit card, residential mortgage and consumer loans. The Bank generally considers loans 90 days or more past due and all nonaccrual loans to be impaired.

An analysis of the changes in the allowance for credit losses follows (in thousands):

11

	Nine Months Ended
	September 30
	2009			2008
Balance, beginning of period	$	35,805		$	30,370
Provision for credit losses		30,179			10,682
Net charge-offs		(27,082	)		(10,068	)
Balance, end of period	$	38,902		$	30,984

Loans totaling $1,543,000 and $937,000, as of September 30, 2009 and December 31, 2008, respectively, were held for sale, and stated at the lower of cost or market on an individual basis.

Note 5 — Fair Values of Financial Instruments

GAAP establishes a fair value hierarchy with the highest level priority given to quoted prices in active markets for identical assets or liabilities. The next level of priority is given to other than quoted prices that are observable for the asset or liability while the least priority is given to unobservable inputs. The Company reports fair value on a limited basis, most notably for available for sale investment securities and mortgage loans held for sale. However, impairment, which could result in reporting at fair value, is considered for other purposes, including impaired loans and other than temporary impairment on held to maturity investment securities. The fair value for such impaired assets is measured on a non-recurring basis.

In addition, certain of the Company’s nonfinancial assets and liabilities are required to be reported at fair value. These include core deposit intangibles and real estate acquired in settlement of loans, which primarily represents collateral that is received in satisfaction of troubled loans.

The table below presents the assets measured at fair value on a recurring basis categorized by the level of inputs used in the valuation of each asset (in thousands):

September 30, 2009 — Assets measured at fair value, recurring

	Quoted prices
	in active		Significant
	markets for		other		Significant
	identical		observable		unobservable
	assets		inputs		inputs
	(Level 1)		(Level 2)		(Level 3)
Available for sale securities	$	233,861	$	88,751		—
Core deposit intangible		—		—		5,434
Real estate acquired in settlement of loans		—		—		19,031
Mortgage loans held for sale		—		1,543		—
Total	$	233,861	$	90,294	$	24,465

The table below presents the assets measured at fair value on a non-recurring basis categorized by the level of inputs used in the valuation of each asset (in thousands):

September 30, 2009 — Assets measured at fair value, non-recurring

	Quoted prices
	in active		Significant
	markets for		other		Significant
	identical		observable		unobservable
	assets		inputs		inputs
	(Level 1)		(Level 2)		(Level 3)
Impaired loans, net of allowance		—		—	$	90,261
Total		—		—	$	90,261

12

Note 6 — Recent Accounting Pronouncements

On July 1, 2009, the Financial Accounting Standards Board (“FASB”) GAAP Codification became effective as the sole authoritative source of GAAP. This Codification reorganizes current GAAP for non-governmental entities into a topical index to facilitate accounting research and to provide users additional assurance that they have referenced all related literature pertaining to a given topic. Existing GAAP prior to the Codification was not altered in compilation of the GAAP Codification. The Codification encompasses all FASB Statements of Financial Accounting Standards (“SFAS”), Emerging Issues Task Force statements, FASB Staff Positions, FASB Interpretations, FASB Derivative Implementation Guides, American Institute of Certified Public Accountants Statement of Positions, Accounting Principals Board Opinions and Accounting Research Bulletins along with the remaining body of GAAP effective as of June 30, 2009. Financial statements issued for all interim and annual periods ending after September 15, 2009 will need to reference accounting guidance embodied in the Codification as opposed to referencing the previously authoritative pronouncements. Accounting literature included in the Codification is referenced by Topic, Subtopic, Section and paragraph.

In August 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-05, Measuring Liabilities at Fair Value, which is codified as Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures. This Update provides amendments to Topic 820-10, Fair Value Measurements and Disclosures — Overall, for the fair value measurement of liabilities. This Update provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using a valuation technique that uses the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities or similar liabilities when traded as assets, or that is consistent with the principles of Topic 820. The amendments in this Update also clarify that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents transfer of the liability. The amendments in this Update also clarify that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The guidance provided in this Update is effective for the first reporting period (including interim periods) beginning after issuance. The adoption of this Update did not have a significant impact to the Company’s financial condition, results of operations or cash flows.

The Company adopted ASC 855 “Subsequent Events” (“ASC 855”) effective June 30, 2009. ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. ASC 855 defines (i) the period after the balance sheet date during which a reporting entity’s management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and (iii) the disclosures an entity should make about events or transactions that occurred after the balance sheet date. ASC 855 also requires entities to disclose the date through which subsequent events have been evaluated and the nature and estimated financial effects of certain subsequent events. The Company adopted ASC 855. This adoption did not result in any material effect on the Company’s financial position or operating results.

In June 2009, the FASB issued SFAS No. 166, “Accounting for the Transfer of Financial Assets and Amendment of FASB Statement No. 140 Instruments” (“SFAS 166”). Under FASB’s Codification at ASC 105-10-65-1-d, SFAS 166 will remain authoritative until integrated into the FASB Codification. SFAS 166 removes the concept of a special purpose entity (“SPE”) from Statement 140 and removes the exception of applying FASB Interpretation 46 Variable Interest Entities, to Variable Interest Entities that are SPEs. It limits the circumstances in which a transferor discontinues recognizing a financial asset. SFAS 166 amends the requirements for the transfer of a financial asset to meet the requirements

13

for “sale” accounting. The Statement is effective for all interim and annual periods beginning after November 15, 2009. The Company does not expect the adoption to have a material impact on the Company’s financial condition, results of operations or cash flows.

In June 2009 the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”). Under FASB’s Codification at ASC 105-10-65-1-d, SFAS 167 will remain authoritative until integrated into the FASB Codification. SFAS 167 amends Interpretation 46(R) to require an enterprise to perform an analysis to determine whether the enterprise’s variable interest gives it a controlling financial interest in the variable interest entity. SFAS 167 is effective for all interim and annual periods beginning after November 15, 2009. The Company does not expect the adoption to have a material impact on the Company’s financial condition, results of operations or cash flows.

Note 7 — Stock Compensation Plans

The Company recorded $30,000 and $20,000 of total stock-based compensation expense for the three-month periods ended September 30, 2009 and September 30, 2008, respectively and $89,000 and $73,000 of total stock-based compensation expense for the nine-month periods ended September 30, 2009 and September 30, 2008, respectively, pursuant to the provisions of ASC 718. The stock-based compensation expense is calculated on a ratable basis over the vesting periods of the related options and restricted stock grants and is reported under personnel expense. This expense had an immaterial impact on the Company’s reported cash flows. As of September 30, 2009, there was $261,000 of total unrecognized stock-based compensation expense. This expense will be fully recognized by March of 2013.

For purposes of determining estimated fair value under ASC 718, the Company has computed the estimated fair values of all stock-based compensation using the Black-Scholes option pricing model and, for stock options and restricted stock grants granted prior to December 31, 2008, has applied the assumptions set forth in the Annual Report. During the first nine months of 2009, no stock options or restricted stock grants were granted to employees or directors.

Note 8 — U.S. Treasury Capital Purchase Program

Pursuant to the U.S. Department of the Treasury (the “U.S. Treasury”) Capital Purchase Program (the “CPP”), on December 12, 2008, the Company issued and sold to the U.S. Treasury (i) 52,372 shares of Bancorp’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”) and (ii) a warrant (the “Warrant”) to purchase 2,567,255 shares of the Company’s common stock at an exercise price of $3.06 per share, representing an aggregate market price of approximately $7.9 million, for an aggregate purchase price of $52,372,000 in cash. The Warrant may be exercised by the U.S. Treasury at any time before it expires on December 12, 2018. The Series A Preferred Stock can be redeemed in the first three years with the proceeds from the issuance of certain qualifying Tier 1 capital or after three years with any funds. The assigned value of the Warrant of $1,497,000 was estimated on the date of the grant using the Black-Scholes option-pricing model. The Series A Preferred Stock pays cumulative dividends of five percent for the first five years and nine percent thereafter, unless the Company redeems the shares.

Note 9 — Subsequent Events

In accordance with ASC 855 the Company has evaluated subsequent events through November 6, 2009, and has determined that there are no subsequent events that would have a material effect on the Company’s financial position or operating results.

14

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

The discussion presented herein is intended to provide an overview of the changes in financial condition and results of operations during the time periods presented as required by Item 303 of Regulation S-K for NewBridge Bancorp (“Bancorp” or the “Company”) and its wholly-owned subsidiary, NewBridge Bank (the “Bank”).

The consolidated financial statements also include the accounts and results of operations of the Bank’s wholly-owned subsidiaries. This discussion and analysis is intended to complement the unaudited financial statements, notes and supplemental financial data in this Quarterly Report on Form 10-Q, and should be read in conjunction therewith.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements represent expectations and beliefs of Bancorp including but not limited to Bancorp’s operations, performance, financial condition, growth or strategies. These forward-looking statements are identified by words such as “expects”, “anticipates”, “should”, “estimates”, “believes” and variations of these words and other similar statements. For this purpose, any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. These forward-looking statements involve estimates, assumptions, risks and uncertainties that could cause actual results to differ materially from current projections depending on a variety of important factors, including without limitation: (1) in October of 2008, the Emergency Economic Stabilization Act of 2008 (the “EESA”) was signed into law, followed in February 2009 by the American Recovery and Reinvestment Act of 2009 (the “ARRA”). In addition, the U.S. Department of the Treasury (the “U.S. Treasury”) and federal banking regulators are implementing a number of programs to address capital and liquidity issues in the banking system, all of which may have significant effects on Bancorp and the banking industry, the exact nature and extent of which cannot be determined at this time; (2) the strength of the United States economy generally, and the strength of the local economies in which Bancorp conducts operations, may be different than expected, resulting in, among other things, a continued deterioration in credit quality, including the resultant effect on Bancorp’s loan portfolio and allowance for credit losses; (3) the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve”); (4) inflation, deflation, interest rate, market and monetary fluctuations; (5) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate and market liquidity conditions) and the impact of such conditions on Bancorp’s capital markets and capital management activities; (6) the timely development of competitive new products and services by Bancorp and the acceptance of these products and services by new and existing customers; (7) the willingness of customers to accept third party products marketed by Bancorp; (8) the willingness of customers to substitute competitors’ products and services for Bancorp’s products and services and vice versa; (9) the impact of changes in financial services’ laws and regulations (including laws concerning taxes, banking and securities); (10) technological changes; (11) changes in consumer spending and saving habits; (12) the effect of corporate restructurings, acquisitions and/or dispositions, and the failure to achieve the expected revenue growth and/or expense savings from such corporate restructurings, acquisitions and/or dispositions; (13) the current stresses in the financial and real estate markets, including possible continued deterioration in property values; (14) unanticipated regulatory or judicial proceedings; (15) the impact of changes in accounting policies by the Securities and Exchange Commission (the “SEC”); (16) adverse changes in financial performance and/or condition of Bancorp’s borrowers which could impact repayment of such borrowers’ outstanding loans; and (17) Bancorp’s success at managing the risks involved in the foregoing. Bancorp cautions that the foregoing list of important factors is not exhaustive. See also those risk factors identified in the section headed “Risk Factors”, beginning on page 14 of Bancorp’s Annual Report on Form 10-K for the fiscal year ended

15

December 31, 2008, filed with the SEC on March 16, 2009 (the “Annual Report”). Bancorp undertakes no obligation to update any forward-looking statement, whether written or oral, which may be made from time to time by or on behalf of Bancorp.

Introduction

Bancorp is a bank holding company incorporated under the laws of North Carolina (“NC”) and registered under the Bank Holding Company Act of 1956, as amended (the “BHCA”). Bancorp’s principal asset is the stock of its banking subsidiary, the Bank.

Bancorp is the successor entity to LSB Bancshares, Inc., which was incorporated on December 8, 1982 (“LSB”). On July 31, 2007, FNB Financial Services Corporation (“FNB”), a bank holding company, also incorporated in NC and registered under the BHCA, merged with and into LSB in a merger of equals (the “Merger”). LSB’s name was then changed to “NewBridge Bancorp”.

The Bank, a NC chartered non-member bank, is the successor entity to Lexington State Bank (“LSB Bank”), which was incorporated on July 5, 1949. As a result of the Merger, Bancorp acquired FNB Southeast, a NC chartered member bank, the sole banking subsidiary of FNB. On November 12, 2007, FNB Southeast merged with and into LSB Bank and the surviving bank changed its name to “NewBridge Bank”.

The Company’s results of operations are dependent primarily on the results of operations of the Bank and thus are dependent to a significant extent on net interest income, which is the difference between the income earned on the Bank’s loan and investment portfolios and cost of funds, consisting of interest paid on deposits and borrowings. Results of operations are also affected by the Company’s provision for credit losses, mortgage loan sales activities, service charges and other fee income, and noninterest expense. The Company’s noninterest expense principally consists of compensation and employee benefits, office occupancy and equipment expense, data processing, professional fees, and advertising and business promotion expenses. The Company’s results of operations are also significantly affected by general economic and competitive conditions, particularly changes in interest rates, government policies and actions of regulatory authorities.

Commercial banking in North Carolina and Virginia (“VA”) is extremely competitive, due in large part to intrastate and interstate branching laws. Currently, many of the Company’s competitors are significantly larger and have greater resources. The Company encounters competition from a number of sources, including bank holding companies, financial holding companies, commercial banks, thrift institutions, credit unions and other financial institutions and financial intermediaries. The Company competes in its market areas with some of the largest banking organizations in the Southeast and nationally, several of which have numerous branches in NC and VA. The Company’s competition is not limited to financial institutions based in NC and VA. The enactment of federal legislation authorizing nationwide interstate banking has greatly increased the size and financial resources of some of the Company’s competitors. Consequently, many of its competitors have substantially higher lending limits due to their greater total capitalization, and some may perform functions for their customers that the Company generally does not offer. The Company primarily relies on providing quality products and services at a competitive price within its market areas. As a result of interstate banking legislation, the Company’s market is open to future penetration by banks located in other states, provided that the other states also permit de novo branching and acquisitions by NC and VA banking institutions, thereby increasing competition.

The following discussion and analysis is presented on a consolidated basis and focuses on the major components of the Company’s operations and significant changes in its results of operations for the periods presented. For further information, refer to the consolidated financial statements and notes thereto included in the Annual Report.

16

Application of Critical Accounting Policies

The accounting and reporting policies of the Company and its subsidiary comply with accounting principles generally accepted in the United States and conform to standards within the banking industry. The preparation of the financial information contained in this Quarterly Report on Form 10-Q requires the Company’s management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company’s management evaluates these estimates on an ongoing basis. The following is a summary of the policy regarding the allowance for credit losses, one of the most complex and subjective accounting policies of the Company.

The allowance for credit losses, which is utilized to absorb actual losses in the loan portfolio, is maintained at a level consistent with management’s best estimate of probable credit losses incurred as of the balance sheet date. The Company’s allowance for credit losses is analyzed monthly by management. This analysis includes a methodology that separates the total loan portfolio into loans deemed impaired and homogeneous loan classifications for purposes of evaluating risk, as well as analysis of certain individually identified loans. The required allowance is calculated by applying a risk adjusted reserve requirement to the dollar volume of loans within a homogenous group. Major loan portfolio subgroups include: risk graded commercial loans, mortgage loans, home equity loans, retail loans and retail credit lines. The required allowance for impaired loans is determined based on expected future cash flows to be received from the borrower, and the fair value of the underlying collateral. Management also analyzes the loan portfolio on an ongoing basis to evaluate current risk levels, and risk grades are adjusted accordingly. While management uses the best information to make evaluations, future adjustments may be needed if economic or other conditions differ substantially from the assumptions used.

Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

Net Interest Income

The primary source of earnings for the Bank is net interest income, which represents the dollar amount by which interest generated from earning assets exceeds the cost of funds. Earning assets consist primarily of loans and investment securities and cost of funds is the interest paid on interest-bearing deposits and borrowed funds.

Net interest income for the third quarter of 2009, on a taxable equivalent basis, was $15.6 million, a decrease of $0.2 million or 1.5%, from $15.8 million for the third quarter of 2008. This was primarily due to a slight decline in net interest margin. The taxable-equivalent net interest margin for the third quarter of 2009 was 3.27%, compared to 3.34% for the same period of 2008, a decline of 7 basis points. The average yield on earning assets during the third quarter of 2009 was 82 basis points lower than the average yield on earning assets during the comparable period in 2008, while the average rate on interest-bearing liabilities decreased by 79 basis points during the same time period, which resulted in a decrease in the interest rate spread in the third quarter of 2009 of 3 basis points compared to the third quarter of 2008. Approximately $483 million of time deposits will mature and reprice during the fourth quarter of 2009 from a current weighted average interest rate of 3.15%.

Average earning assets in the third quarter of 2009 increased $5.4 million, or 0.3%, to $1.89 billion, compared to $1.88 billion in the third quarter of 2008. Average interest-bearing liabilities for the third quarter of 2009 decreased $23.6 million, or 1.4%, to $1.67 billion, compared to $1.69 billion for the third quarter of 2008. The following table provides an analysis of average volumes, yields and rates and net interest income on a tax-equivalent basis for the three months ended September 30, 2009 and 2008.

17

(Fully taxable equivalent basis¹, in thousands)

	Three Months Ended								Three Months Ended
	September 30, 2009								September 30, 2008
				Interest		Annualized						Interest		Annualized
	Average			Income/		Average			Average			Income/		Average
	Balance			Expense		Yield/Rate			Balance			Expense		Yield/Rate
Earning assets:
Loans receivable2	$	1,518,257		$	20,736		5.42	%	$	1,601,183		$	25,100		6.24	%
Taxable securities		203,993			2,478		4.82			142,782			1,797		5.01
Tax exempt securities		107,410			1,728		6.38			115,089			1,672		5.78
Equity securities		11,190			—		0.00			8,721			63		2.87
Interest-bearing bank balances		39,129			31		0.31			9,494			55		2.30
Federal funds sold		6,809			17		0.99			4,167			20		1.91
Total earning assets		1,886,788			24,990		5.25			1,881,436			28,707		6.07
Non-earning assets:
Cash and due from banks		31,362								37,075
Premises and equipment		42,687								45,760
Other assets		101,751								122,466
Allowance for credit losses		(44,401	)							(31,946	)
Total assets	$	2,018,187		$	24,990				$	2,054,795		$	28,707
Interest-bearing liabilities:
Savings deposits	$	41,016		$	10		0.10	%	$	40,998		$	16		0.16	%
NOW deposits		184,194			132		0.28			176,264			204		0.46
Money market deposits		392,633			935		0.94			425,669			2,419		2.26
Time deposits		851,089			6,571		3.06			849,750			8,257		3.87
Other borrowings		72,017			620		3.42			86,843			849		3.89
Borrowings from Federal
Home Loan Bank		128.537			1,172		3.62			113,543			1,168		4.09
Total interest-bearing liabilities		1,669,486			9,440		2.24			1,693,067			12,913		3.03
Other liabilities and shareholders’ equity:
Demand deposits		157,889								161,367
Other liabilities		22,870								12,739
Shareholders’ equity		167,942								187,622
Total liabilities and shareholders’ equity	$	2,018,187			9,440				$	2,054,795			12,913
Net interest income and net interest margin3				$	15,550		3.27	%				$	15,794		3.34	%
Interest rate spread4							3.01	%							3.04	%

1	Income related to securities exempt from federal income taxes is stated on a fully taxable-equivalent basis, assuming a federal income tax rate of 35%, and is then reduced by the non-deductible portion of interest expense. The adjustments made to convert to a fully taxable equivalent basis were $519 for 2009 and $451 for 2008.
2	The average loans receivable balances include non-accruing loans. Amortization of loan fees, net of deferred costs, of $313 and $528 for the three months ended September 30, 2009 and 2008, respectively, are included in interest income.
3	Net interest margin is computed by dividing net interest income by average earning assets.
4	Earning assets yield minus interest-bearing liabilities rate.

18

Noninterest Income and Expense

In the third quarter of 2009, noninterest income increased to $5.6 million, from $4.6 million during the same period in 2008. The Company recorded a net pre-tax gain of $1.2 million during the third quarter of 2009 from the sale of its merchant services portfolio. Service charge income decreased to $2.2 million in the third quarter of 2009 from $2.4 million in the third quarter of 2008. Income on bank-owned life insurance decreased to $156,000 in the third quarter of 2009 from $290,000 in the third quarter of 2008.

In the third quarter of 2009, noninterest expense increased to $19.8 million from $17.6 million in the third quarter of 2008. The increase was primarily the result of $2.9 million of one-time charges, including $1.2 million related to the recently announced plan to restructure operations in the Piedmont Triad region of North Carolina, $1.1 million for the Company’s decision to upgrade to a new core processing system, and $580,000 to terminate certain non-executive employment agreements. In addition, insurance premiums to the Federal Deposit Insurance Corporation (the “FDIC”) increased to $965,000 in the third quarter of 2009 from $332,000 in the third quarter of 2008, as a result of an increase in risk-based assessment rates, as well as the expiration of a one-time credit issued by the FDIC. These charges were partially offset by savings from a reduction in the number of employees, as well as lower costs for legal and professional fees, advertising, telephone, travel and printing and supplies expense.

The following table presents the details of Other Operating Income and Expenses.

Other Operating Income and Expenses (dollars in thousands)

	Three Months Ended
	September 30,						Percentage
	2009			2008			Variance
Other operating income:
Bankcard income	$	643		$	653			(1.6	)%
Fee income		983			707			39.0
Investment services commissions		345			221			55.9
Insurance commissions		16			21			(24.8	)
Trust income		135			151			(10.5	)
Gain (loss) on sale of real estate		(309	)		(37	)		735.7
Income on bank-owned life insurance		156			290			(46.2	)
Gain on sale of merchant services portfolio		1,177			—			N/A
Other income		157			123			27.7
	$	3,302			2,129			55.1
Other operating expenses:
Advertising	$	374		$	479			(21.9	)%
Automated services		1,434			1,595			(10.1	)
Bankcard expense		598			661			(9.6	)
Legal and professional fees		771			1,082			(28.7	)
Postage		206			234			(12.2	)
Stationery, printing and supplies		53			175			(69.9	)
OREO expense		191			101			89.2
OREO write-down		659			348			89.3
Other expense		1,831			1,633			12.1
	$	6,117		$	6,308			(3.0	)

19

Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008

Net Interest Income

Net interest income for the first nine months of 2009, on a taxable equivalent basis, was $44.4 million, a decrease of $6.0 million or 12.0%, from $50.4 million for the first nine months of 2008. This was primarily due to a decline in net interest margin, which was due, in part, to irrational deposit pricing that occurred in the Bank’s markets last fall, as a number of financial institutions entered a period of liquidity crisis. The taxable-equivalent net interest margin for the first nine months of 2009 decreased to 3.03%, compared to 3.55% for the same period in 2008, a decline of 52 basis points. In the first nine months of 2009, the average yield on earning assets decreased by 122 basis points from the first nine months of 2008, while the average rate on interest-bearing liabilities decreased by 75 basis points during the same time period. This resulted in a decrease in the interest rate spread in the first nine months of 2009 of 47 basis points compared to the same period of 2008.

The decline in net interest margin was partially offset by an increase in average earning assets of $57.0 million, or 3.0%, to $1.96 billion in the first nine months of 2009 from $1.90 billion in the first nine months of 2008. Average interest-bearing liabilities for the first nine months of 2009 increased $24.6 million, or 1.4%, to $1.73 billion, compared to $1.70 billion for the first nine months of 2008. The following table provides an analysis of average volumes, yields and rates and net interest income on a tax-equivalent basis for the nine months ended September 30, 2009 and 2008.

20

(Fully taxable equivalent basis¹, in thousands)

	Nine Months Ended								Nine Months Ended
	September 30, 2009								September 30, 2008
				Interest		Annualized						Interest		Annualized
	Average			Income/		Average			Average			Income/		Average
	Balance			Expense		Yield/Rate			Balance			Expense		Yield/Rate
Earning assets:
Loans receivable2	$	1,555,566		$	63,990		5.50	%	$	1,560,476		$	77,377		6.62	%
Taxable securities		189,333			6,749		4.77			204,819			8,323		5.45
Tax exempt securities		110,349			5,116		6.20			114,130			4,906		5.70
Equity securities		11,161			4		0.05			9,883			368		4.97
Interest-bearing bank balances		64,738			112		0.23			7,011			224		4.27
Federal funds sold		25,071			97		0.52			2,878			52		2.41
Total earning assets		1,956,218			76,068		5.20			1,899,197			91,250		6.42
Non-earning assets:
Cash and due from banks		22,648								42,403
Premises and equipment		43,842								45,310
Other assets		96,339								122,305
Allowance for credit losses		(40,761	)							(30,954	)
Total assets	$	2,078,286		$	76,068				$	2,078,261		$	91,250
Interest-bearing liabilities:
Savings deposits	$	40,876		$	30		0.10	%	$	41,691		$	51		0.16	%
NOW deposits		180,367			405		0.30			171,964			626		0.49
Money market deposits		395,354			3,461		1.17			434,278			7,942		2.44
Time deposits		888,512			22,330		3.36			825,159			25,297		4.10
Other borrowings		73,411			1,949		3.55			90,812			2,769		4.07
Borrowings from Federal Home Loan Bank		149,399			3,515		3.15			139,366			4,153		3.98
Total interest-bearing liabilities		1,727,919			31,690		2.45			1,703,270			40,838		3.20
Other liabilities and shareholders’ equity:
Demand deposits		157,196								166,940
Other liabilities		21,084								15,489
Shareholders’ equity		172,087								192,562
Total liabilities and shareholders’ equity	$	2,078,286			31,690				$	2,078,261			40,838
Net interest income and net interest margin3				$	44,378		3.03	%				$	50,412		3.55	%
Interest rate spread4							2.75	%							3.22	%

1	Income related to securities exempt from federal income taxes is stated on a fully taxable-equivalent basis, assuming a federal income tax rate of 35%, and is then reduced by the non-deductible portion of interest expense. The adjustments made to convert to a fully taxable equivalent basis were $1,501 for 2009 and $1,335 for 2008.
2	The average loans receivable balances include non-accruing loans. Amortization of loan fees, net of deferred costs, of $1,124 and $1,718 for the nine months ended September 30, 2009 and 2008, respectively, are included in interest income.
3	Net interest margin is computed by dividing net interest income by average earning assets.
4	Earning assets yield minus interest-bearing liabilities rate.

21

Noninterest Income and Expense

In the first nine months of 2009, noninterest income decreased to $14.3 million, from $16.0 million during the same period in 2008. The Company recorded a net pre-tax gain of $1.2 million during 2009 from the sale of its merchant services portfolio. Noninterest income in the first nine months of 2008 included gains from the sales of investment securities of $2.1 million, as well as $370,000 of gain on the sales of securities from the mandatory redemption of shares upon VISA Inc.’s initial public offering of stock. Service charge income decreased to $6.4 million in the first nine months of 2009 from $6.9 million in the first nine months of 2008. In addition, income on bank-owned life insurance decreased to $357,000 in the first nine months of 2009 from $819,000 in the first nine months of 2008.

In the first nine months of 2009, noninterest expense increased to $53.9 million from $51.9 million in the first nine months of 2008. FDIC insurance premiums increased to $3.9 million in the first nine months of 2009 from $451,000 in the comparable period of 2008, as a result of a special one-time assessment of $970,000 and an increase in risk-based assessment rates, as well as the expiration of a one-time credit issued by the FDIC. Personnel expense decreased to $23.6 million in the first nine months of 2009 from $26.8 million in the first nine months of 2008 as a result of a reduction in the number of employees. Non-interest expense for the first nine months of 2009 also includes $2.9 million of one-time charges described on page 19.

The following table presents the details of Other Operating Income and Expenses.

Other Operating Income and Expenses (dollars in thousands)

	Nine Months Ended
	September 30,						Percentage
	2009			2008			Variance
Other operating income:
Bankcard income	$	1,834		$	1,955			(8.6	)%
Fee income		2,872			2,295			21.2
Investment services commissions		866			621			30.6
Insurance commissions		49			141			(72.5	)
Trust income		415			433			(1.1	)
Gain (loss) on sale of real estate		(543	)		(339	)		22.5
Income on bank-owned life insurance		357			819			(62.0	)
Gain on sale of merchant services portfolio		1,177			—			N/A
Other income		353			416			(15.1	)
	$	7,378			6,341			16.4
Other operating expenses:
Advertising	$	974		$	1,388			(29.8	)%
Automated services		4,377			4,503			(2.8	)
Bankcard expense		1,777			1,841			(3.5	)
Legal and professional fees		2,457			2,730			(10.0	)
Postage		663			743			(10.8	)
Stationery, printing and supplies		434			703			(38.2	)
OREO expense		543			572			(5.2	)
OREO write-down		703			348			102.1
Other expense		5,170			5,034			2.7
	$	17,098		$	17,862			(4.3	)

Asset Quality and Allowance for Credit losses

The Company’s allowance for credit losses is analyzed monthly by management. This analysis includes a methodology that segments the loan portfolio into loans deemed impaired and homogeneous

22

loan classifications and considers the current status of the portfolio, historical charge-off experience, current levels of delinquent, impaired and non-performing loans and their underlying collateral values, as well as economic and other risk factors. It is also subject to regulatory examinations and determinations as to adequacy, which may take into account such factors as the methodology employed and other analytical measures in comparison to a group of peer banks. Management believes the allowance for credit losses is sufficient to absorb known risk in the portfolio. The Company, like many financial institutions, has recently and will likely continue to face a challenging credit environment in the coming months, as a result of the overall economic slowdown in the region and the nation. The majority of the Bank’s loan portfolio is comprised of loans secured by real estate, and is therefore subject to risk as a result of the weakened real estate market. No assurances can be given that future economic conditions will not adversely affect borrowers and result in increases in credit losses and non-performing asset levels.

At September 30, 2009, the allowance for credit losses was $38.9 million or 2.60% of loans outstanding compared to $35.8 million or 2.23% of loans outstanding at December 31, 2008, and $31.0 million or 1.90% of loans outstanding at September 30, 2008. At September 30, 2009, the allowance for credit losses was 0.67 times nonperforming loans compared to 0.91 times at December 31, 2008 and 0.90 times at September 30, 2008. Based on analysis of the current loan portfolio and levels of current problem assets and potential problem loans, management believes the allowance for credit losses to be adequate. Additional information regarding the allowance for credit losses is presented in the table headed “Asset Quality Analysis”, on the following page.

The provision for credit losses charged to operations for the nine months ended September 30, 2009 totaled $30.2 million, compared to $10.7 for the nine months ended September 30, 2008. Net charge-offs for the nine months ended September 30, 2009 were $27.1 million, or 2.32% of average loans outstanding on an annualized basis, compared to net charge-offs of $10.1 million, or 0.86% of average loans outstanding on an annualized basis, for the nine months ended September 30, 2008. The increases from 2008 were primarily the result of the weakness in the regional and national economy. In North Carolina, unemployment rates have doubled in the last 18 months, rising from approximately 5% to more than 10%. In certain counties in the Bank’s geographic market area, unemployment rates have risen to as high as 14%.

Nonperforming loans totaled $57.7 million at September 30, 2009, compared to $39.6 million at year end 2008 and $34.5 million at September 30, 2008. The increase from the 2008 year end and from the prior year is primarily driven by increases in non-accrual loans and, to a lesser extent, restructured loans. Real estate acquired in settlement of loans (“OREO”) was $19.0 million at September 30, 2009, $9.1 million at December 31, 2008, and $7.6 million at September 30, 2008. Restructured loans totaled $3.0 million at September 30, 2009, $250,000 at December 31, 2008, and $260,000 at September 30, 2008. Approximately $16.9 million was transferred from loans into OREO and approximately $7.4 million of such assets were disposed of during the first nine months of 2009. A net loss of $543,000 has been recorded on disposition of OREO in the current year, compared to a net loss of $339,000 in the first nine months of 2008. The Company recorded $703,000 of writedowns of OREO during the first nine months of 2009, compared to $348,000 of writedowns in the first nine months of 2008. Total non-performing assets (comprised of nonaccrual loans, restructured loans and OREO) increased to $76.7 million, or 3.82% of total assets, at September 30, 2009, from $48.6 million, or 2.34% of total assets, at December 31, 2008 and $42.1 million, or 2.00% of total assets, a year ago.

During the second quarter of 2005, Prince George Court Holdings, Inc, a subsidiary of the Bank, acquired a partially completed residential condominium development project in Georgetown, South Carolina by means of a deed-in-lieu of foreclosure in satisfaction of a $3.4 million loan previously made to develop the project. Writedowns were recorded for $400,000 in 2005 and $1.0 million in 2006. In the first quarter of 2007, the Bank began to build out the project in preparation for future sale. In the fourth quarter of 2007, management made the property available for sale, while at the same time continuing to build out the project, and recorded an additional $2.0 million writedown. A further

23

writedown of $1.3 million was recorded during the fourth quarter of 2008. As of September 30, 2009, construction of the project is complete, two units have been sold and marketing of the remaining 14 units continues. The property has a carrying value of approximately $4.0 million as of September 30, 2009.

	Nine Months Ended			Year Ended			Nine Months Ended
Asset Quality Analysis	September 30			December 31			September 30
(Dollars in thousands)	2009			2008			2008
Allowance for credit losses:
Beginning balance	$	35,805		$	30,370		$	30,370
Provision for credit losses		30,179			25,262			10,682
Net charge-offs		(27,082	)		(19,827	)		(10,068	)
Ending balance	$	38,902		$	35,805		$	30,984
Nonperforming Assets:
Nonperforming loans:
Nonaccrual loans	$	51,332		$	38,029		$	33,865
Restructured loans		3,007			250			260
Loans 90 days or more past due and still accruing		3,354			1,277			413
Total non-performing loans		57,693			39,556			34,538
Real estate acquired in settlement of loans		19,031			9,080			7,587
Total nonperforming assets	$	76,724		$	48,636		$	42,125
Asset Quality Ratios:
Nonperforming loans to loans outstanding at end of period		3.86	%		2.47	%		2.12	%
Nonperforming assets to total assets at end of period		3.82			2.34			2.00
Net charge-offs as a percentage of average loans outstanding during the period		2.32	*		1.26			0.86	*
Allowance for credit losses as a percentage of loans outstanding at end of period		2.60			2.23			1.90
Ratio of allowance for credit losses to nonperforming loans		0.67X			0.91X			0.90X

* Denotes annualized

Income Taxes

The Company recorded an income tax benefit of $11.7 million for the first nine months of 2009, compared to an income tax expense totaling $774,000 for the first nine months of 2008. The Company’s effective tax rate was 43.6% for the nine-month period ended September 30, 2009, compared to 31.6% for the first nine months of 2008. The change to a benefit for the first nine months of 2009 from an expense for the comparable period in 2008, and the change in the effective rate, are both primarily the result of the change from a pre-tax profit in the first nine months of 2008 to a pre-tax loss in the comparable period in 2009.

Management has evaluated the recorded deferred tax assets at September 30, 2009 and has concluded that it is more likely than not that the deferred taxes will be realized in the next 18 years (the carryforward period for the oldest net operating loss carryforward) and therefore, no valuation allowance is necessary. This evaluation included a review of recent improving trends and expected near term levels in the net interest margin, non performing assets, operating expenses and other factors. It also included a current forecast of quarterly performance for the remainder of 2009 and the four quarters of 2010 based on management’s expectations of what we will actually experience. It further

24

included the consideration of the items that have given rise to the deferred tax assets, as well as tax planning strategies.

Risk Management

It is the design of risk management to ensure long-range profitable performance, minimize risk, insure adequate liquidity and maintain sound capital. To meet these objectives, asset/liability management monitors the exposure to interest rate risk, balance sheet trends, pricing policies and liquidity position. Reports regarding credit, asset/liability, market and operational risks are regularly provided to the Bank’s Board of Directors.

Risk management practices include key elements such as independent checks and balances, formal authority limits, policies and procedures and portfolio management performed by experienced personnel.

Interest Rate Risk Management

Interest rate risk management is a part of the Bank’s overall asset/liability management process. The primary oversight of asset/liability management rests with the Bank’s Asset and Liability Committee, which is comprised of members of senior management. The Committee meets on a regular basis to review the asset/liability management activities of the Bank and monitor compliance with established policies. Activities of the Asset and Liability Committee are reported to the Audit Committee of the Company’s Board of Directors.

A primary objective of interest rate sensitivity management is to ensure the stability and quality of the Company’s primary earnings component, net interest income. This process involves monitoring the Company’s balance sheet in order to determine the potential impact that changes in the interest rate environment may have on net interest income. Rate sensitive assets and liabilities have interest rates that are subject to change within a specific time period, due to either maturity or to contractual agreements which allow the instruments to reprice prior to maturity. Interest rate sensitivity management seeks to ensure that both assets and liabilities react to changes in interest rates within a similar time period, thereby minimizing the risk to net interest income.

The Bank utilizes a computer-based interest rate risk simulation model. This comprehensive model includes rate sensitivity gap analysis, rate shock net interest income analysis, and present value of equity analysis, under various rate shock scenarios. The Bank uses this model to monitor interest rate risk on a quarterly basis and to detect trends that may affect the overall net interest income for the Bank. This simulation incorporates the dynamics of balance sheet and interest rate changes and calculates the related effect on net interest income. As a result, this analysis more accurately projects the risk to net interest income over the upcoming twelve-month period, compared to the traditional gap analysis. In addition, during the second quarter of 2009, the Bank began using the services of a third party consulting firm to assist with the Bank’s asset/liability management. The Bank’s asset/liability policy provides guidance for levels of interest rate risk and potential remediations, if necessary, to mitigate excessive levels of risk. The modeling results indicate the Bank is subject to an acceptable level of interest rate risk within the given rate shock parameters. The Bank is liability sensitive over the near term, based on the results of its simulation model, which means that rising interest rates could result in a reduced amount of net interest income. The Bank is not subject to other types of market risk, such as foreign currency exchange rate risk, commodity or equity price risk.

Liquidity Management

Liquidity management refers to the policies and practices that ensure the Bank has the ability to meet day-to-day cash flow requirements based primarily on activity in loan and deposit accounts of the

25

Bank’s customers. Deposit withdrawals, loan funding and general corporate activity create the primary needs for liquidity for the Bank. Liquidity is derived from sources such as deposit growth; maturity, calls or sales of investment securities; principal and interest payments on loans; access to borrowed funds or lines of credit; and profits.

During the first nine months of 2009, the Company had net cash provided by operating activities of $13.1 million, compared to $20.6 million of net cash provided by operating activities in the first nine months of 2008. The decrease in cash flows resulting from the change in net income for the first nine months of 2008 compared to net loss in the first nine months of 2009 was mostly offset by a substantial increase in the provision for credit losses from 2008 to 2009.

Net cash provided by investing activities for the first nine months of 2009 was $63.7 million, compared to net cash used for investing activities in the first nine months of 2008 of $75.0 million. During 2009, cash was provided by a decrease in loans made to customers of $63.1 million, as well as a decrease in federal funds sold of $42.0 million partially offset by an increase in investment securities. During the first nine months of 2008, $164.6 million of cash was used to fund net increases in loans to customers. This was partially offset by cash received by a reduction in investment securities.

During the nine months ended September 30, 2009, financing activities used $58.7 million, compared to net cash provided by financing activities of $62.4 million during the same period of 2008. During the first nine months of 2009, customer deposits decreased $50.9 million, primarily as a result of interest rates offered by banks on certificates of deposits compared to the prior year. In the first nine months of 2008, the Company increased its borrowings from the FHLB by $52.5 million, primarily to fund increased loan demand.

Cash and cash equivalents totaled $63.9 million at September 30, 2009, compared to $45.8 million at December 31, 2008 and $66.7 million at September 30, 2008.

The Bank has borrowing capacity of approximately $281.0 million with the FHLB, of which approximately $94.3 million was available at September 30, 2009. These borrowings are collateralized by FHLB stock, investment securities, qualifying 1 to 4 family residential mortgage loans, and qualifying commercial real estate loans. The Bank provides various reports to the FHLB on a regular basis to maintain the availability of the credit line. Each borrowing request to the FHLB is initiated through an advance application that is subject to approval by the FHLB before funds are advanced under the line of credit. The Bank also has $90.4 million of borrowing capacity through the Federal Reserve Bank System, of which none was used. The line with the Federal Reserve Bank is collateralized using investment securities and qualified loans.

Capital Resources and Shareholders’ Equity

Pursuant to the U.S. Department of the Treasury (the “U.S. Treasury”) Capital Purchase Program (the “CPP”), on December 12, 2008, Bancorp issued and sold to the U.S. Treasury (i) 52,372 shares of Bancorp’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”) and (ii) a warrant (the “Warrant”) to purchase 2,567,255 shares of Bancorp’s common stock, par value $5.00 per share, for an aggregate purchase price of $52,372,000 in cash. The Securities Purchase Agreement, dated December 12, 2008, pursuant to which the securities issued to the U.S. Treasury under the CPP were sold, restricts Bancorp, without the prior approval of the U.S. Treasury, from increasing dividends payable on its common stock from the last quarterly cash dividend per share ($0.05) declared on the common stock prior to October 14, 2008, limits Bancorp’s ability to repurchase shares of its common stock (with certain exceptions, including the repurchase of its common stock to offset share dilution from equity-based compensation awards), grants the holders of the Series A Preferred Stock, the Warrant and the common stock of Bancorp to be issued under the Warrant, certain registration rights, and subjects Bancorp to certain of the executive compensation limitations included in the EESA, the ARRA and related regulations.

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Bancorp’s stock repurchase program was originally announced in November 1998. It was subsequently amended and extended in August 1999, May 2004, May 2006 and October 2007. The program expired on May 31, 2009. The stock repurchase program provided that Bancorp might repurchase its common stock in the open market or privately negotiated transactions on a time-to-time and ongoing basis, depending upon market conditions and subject to compliance with all applicable securities laws and regulations. Notwithstanding the stock repurchase program, Bancorp’s participation in the CPP limits Bancorp’s ability to repurchase its common stock, except with the prior approval of the U.S. Treasury.

Bancorp did not repurchase any shares under the stock repurchase program during the first nine months of 2009.

Banks and bank holding companies, as regulated institutions, must meet required levels of capital. The Commissioner of Banks in North Carolina, the Federal Reserve and the FDIC, which are the primary banking regulatory agencies for the Bank and the Company, have adopted minimum capital regulations or guidelines that categorize components and the level of risk associated with various types of assets. Financial institutions are required to maintain a level of capital commensurate with the risk profile assigned to their assets in accordance with the guidelines.

As shown in the accompanying table, the Company and the Bank have capital levels exceeding the minimum levels for “well capitalized” banks and bank holding companies as of September 30, 2009.

	Regulatory Capital
	Well			Adequately
	Capitalized			Capitalized			Company			Bank
Total Capital		10.0	%		8.0	%		12.21	%		11.55	%
Tier 1 Capital		6.0			4.0			10.93			10.27
Leverage Capital		5.0			4.0			8.92			8.38

The Company holds $10.0 million of the $52.4 million received from the U.S. Treasury under the CPP, some of which may be invested in the Bank to increase the Bank’s total risk based capital ratio from the present level of 11.55%.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the possible chance of loss from unfavorable changes in market prices and rates. These changes may result in a reduction of current and future period net interest income, which is the favorable spread earned from the excess of interest income on interest-earning assets, over interest expense on interest-bearing liabilities.

The Company considers interest rate risk to be its most significant market risk, which could potentially have the greatest impact on operating earnings. The Company is liability sensitive over the near term, which means that rising interest rates could result in a reduced amount of net interest income. The monitoring of interest rate risk is part of the Company’s overall asset/liability management process. The primary oversight of asset/liability management rests with the Bank’s Asset and Liability Committee. The Committee meets on a regular basis to review asset/liability activities and to monitor compliance with established policies. Activities of the Asset and Liability Committee are reported to the Audit Committee of the Bank’s Board of Directors.

The Company has not experienced any material changes in interest rate risk since the end of the fiscal year ended December 31, 2008.

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Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

The Company’s management, including its Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and Chief Accounting Officer (“CAO”) evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of September 30, 2009. Based upon that evaluation, the Company’s CEO, CFO and CAO each concluded that as of September 30, 2009, the end of the period covered by this Quarterly Report on Form 10-Q, the Company maintained effective disclosure controls and procedures.

Changes in internal control over financial reporting

There have been no changes to the Company’s internal controls over financial reporting that occurred during the fiscal quarter ended September 30, 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     Not applicable.

Item 1A. Risk Factors

There have been no material changes to the Company’s Risk Factors as previously disclosed in the Annual Report.

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

There were no sales of equity securities during the third quarter of 2009 which were not registered under the Securities Act of 1933, as amended. The Company did not repurchase any of its equity securities during the third quarter of 2009.

Item 3. Defaults Upon Senior Securities

     Not applicable.

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

     Not applicable

Item 5. Other Information

     Not applicable.

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Item 6. Exhibits

Exhibit
No.		Description
	3.1	Articles of Incorporation, and amendments thereto, incorporated by reference to Exhibit 4.1 of the Registration Statement on Form S-8, filed with the SEC on May 16, 2001 (SEC File No. 333-61046).
	3.2	Articles of Merger of FNB with and into LSB, including amendments to the Articles of Incorporation, as amended, incorporated by reference to Exhibit 3.4 of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, filed with the SEC on November 9, 2007 (SEC File No. 000- 11448)
	3.3	Amended and Restated Bylaws adopted by the Board of Directors on August 17, 2004 and amended on July 23, 2008 (with identified Bylaw approved by the shareholders) incorporated by reference to Exhibit 3.3 of the Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, filed with the SEC on May 8, 2009 (SEC File No. 000-11448).
	4.1	Specimen certificate of common stock, $5.00 par value, incorporated by reference to Exhibit 4.1 of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, filed with the SEC on November 9, 2007 (SEC File No. 000-11448).
	4.2	Amended and Restated Trust Agreement, regarding Trust Preferred Securities, dated August 23, 2005, incorporated herein by reference to Exhibit 4.02 of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed with the SEC (SEC File No. 000-13086).
	4.3	Guarantee Agreement, regarding Trust Preferred Securities, dated August 23, 2005, incorporated herein by reference to Exhibit 4.03 of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed with the SEC (SEC File No. 000-13086).
	4.4	Indenture, regarding Trust Preferred Securities, dated August 23, 2005, incorporated herein by reference to Exhibit 4.04 of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed with the SEC (SEC File No. 000-13086).
	4.5	Articles of Amendment, filed with the North Carolina Department of the Secretary of State on December 12, 2008, incorporated herein by reference to Exhibit 4.1 of the Current Report on Form 8-K filed with the SEC on December 12, 2008 (SEC File No. 000-11448).
	4.6	Form of Certificate for the Fixed Rate Cumulative Perpetual Preferred Stock, Series A, incorporated herein by reference to Exhibit 4.2 of the Current Report on Form 8-K filed with the SEC on December 12, 2008 (SEC File No. 000-11448).
	4.7	Warrant for Purchase of Shares of Common Stock issued by Bancorp to the United States Department of the Treasury on December 12, 2008, incorporated herein by reference to Exhibit 4.3 of the Current Report on Form 8-K filed with the SEC on December 12, 2008 (SEC File No. 000-11448).
	10.1	Benefit Equivalency Plan of FNB Southeast, effective January 1, 1994 incorporated herein by reference to Exhibit 10 of the Quarterly Report on Form 10-QSB for the fiscal quarter ended June 30, 1995, filed with the SEC (SEC File No. 000-13086).
	10.2	1994 Director Stock Option Plan, incorporated herein by reference to Exhibit 4 of the Registration Statement on Form S-8 filed with the SEC on July 15, 1994 (SEC File No. 33-81664).
	10.3	1996 Omnibus Stock Incentive Plan, incorporated herein by reference to Exhibit 10.2 of the Annual Report on Form 10-K for the year ended December 31, 1995 filed with the SEC on March 28, 1996 (SEC File No. 000-11448).
	10.4	Omnibus Equity Compensation Plan, incorporated herein by reference to Exhibit 10(B) of the Annual Report on Form 10-KSB40 for the fiscal year ended December 31, 1996, filed with the SEC on March 31, 1997 (SEC File No. 000-13086).
	10.5	Amendment to Benefit Equivalency Plan of FNB Southeast, effective January 1, 1998., incorporated herein by reference to Exhibit 10.16 of the Annual Report on Form 10-K for the fiscal year ended December 31, 1998, filed with the SEC on March 25, 1999 (SEC File No. 000-13086)
	10.6	Amendment Number 1 to 1996 Omnibus Stock Incentive Plan, incorporated herein by reference to Exhibit 4.5 of the Registration Statement on Form S-8, filed with the SEC on May 16, 2001 (SEC File No. 333-61046).
	10.7	Long Term Stock Incentive Plan for certain senior management employees of FNB Southeast incorporated herein by reference to Exhibit 10.10 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2002, filed with the SEC on March 27, 2003 (SEC File No. 000-13086).

30

Exhibit
No.		Description
	10.8	Form of Employment Continuity Agreement effective as of January 1, 2004 between LSB and Robert E. Lineback, Jr. and Philip G. Gibson with a Schedule setting forth the material details in which such documents differ from the document a copy of which is filed, incorporated herein by reference to Exhibit 10.10 of the Annual Report on Form 10-K for the year ended December 31, 2003 filed with the SEC on March 15, 2004 (SEC File No. 000-11448).
	10.9	Form of Employment Continuity Agreement effective as of January 1, 2004 between LSB and Ronald E. Coleman, D. Gerald Sink, Robin A. Huneycutt and Ronald W. Sink with a Schedule setting forth the material details in which such documents differ from the document a copy of which is filed, incorporated herein by reference to Exhibit 10.11 of the Annual Report on Form 10-K for the year ended December 31, 2003 filed with the SEC on March 15, 2004 (SEC File No. 000-11448).
	10.10	Form of Stock Option Award Agreement for a Director adopted under LSB Comprehensive Equity Compensation Plan for Directors and Employees, incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the SEC on December 23, 2004 (SEC File No. 000-11448).
	10.11	Form of Incentive Stock Option Award Agreement for an Employee adopted under LSB Comprehensive Equity Compensation Plan for Directors and Employees, incorporated herein by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the SEC on December 23, 2004 (SEC File No. 000-11448).
	10.12	Form of Amendment to the applicable Grant Agreements under the 1996 Omnibus Stock Incentive Plan, incorporated herein by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the SEC on April 15, 2005 (SEC File No. 000-11448).
	10.13	Form of Amendment to the Incentive Stock Option Award Agreement for an Employee adopted under LSB Comprehensive Equity Compensation Plan for Directors and Employees, incorporated herein by reference to Exhibit 10.3 of the Current Report on Form 8-K filed with the SEC on April 15, 2005 (SEC File No. 000-11448).
	10.14	Restated Form of Director Fee Deferral Agreement adopted under LSB Comprehensive Equity Compensation Plan for Directors and Employees, incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K filed with the SEC on December 23, 2005 (SEC File No. 000-11448).
	10.15	Form of Stock Appreciation Rights Award Agreement adopted under LSB Comprehensive Equity Compensation Plan for Directors and Employees, incorporated herein by reference to Exhibit 99.2 of the Current Report on Form 8-K filed with the SEC on December 23, 2005 (SEC File No. 000-11448).
	10.16	Employment Agreement dated January 25, 2007, between FNB and FNB Southeast, as employer, and Pressley A. Ridgill, President and Chief Executive Officer of the Bank and President of Bancorp, incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K filed with the SEC on January 30, 2007 (SEC File No. 000-13086).
	10.17	Agreement and Plan of Merger by and between LSB and FNB, incorporated herein by reference as Exhibit 2.1 of the Current Report on Form 8-K filed with the SEC on February 27, 2007 (SEC File No. 000-11448).
	10.18	Agreement and Plan of Bank Merger by and between FNB Southeast, LSB Bank, LSB and FNB, incorporated herein by reference as Exhibit 2.2 of the Current Report on Form 8-K filed with the SEC on February 27, 2007 (SEC File No. 000-11448).
	10.19	Amendment and Waiver to Employment and Change of Control Agreement, among FNB, FNB Southeast and Pressley A. Ridgill incorporated herein by reference to Exhibit 10.27 of the Registration Statement on Form S-4 POS filed with the SEC on June 18, 2007 (SEC File No. 000-11448).
	10.20	FNB Amended and Restated Directors Retirement Policy, incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K, filed with the SEC on August 3, 2007 (SEC File No. 000-11448).
	10.21	Amendment to the FNB Directors and Senior Management Deferred Compensation Plan Trust Agreement among Regions Bank d/b/a/ Regions Morgan Keegan Trust, FNB Southeast and FNB, dated July 31, 2007, incorporated herein by reference to Exhibit 99.2 of the Current Report on Form 8-K, filed with the SEC on August 3, 2007 (SEC File No. 000-11448).
	10.22	Employment and Change of Control Agreement with William W. Budd, Jr. incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K, filed with the SEC on March 14, 2008 (SEC File No. 000-11448).

31

Exhibit
No.		Description
	10.23	Employment and Change of Control Agreement with Jerry W. Beasley, incorporated herein by reference to Exhibit 99.3 of the Current Report on Form 8-K, filed with the SEC on March 14, 2008 (SEC File No. 000-11448).
	10.24	Employment and Change of Control Agreement with Robin S. Hager, incorporated herein by reference to Exhibit 99.4 of the Current Report on Form 8-K, filed with the SEC on March 14, 2008 (SEC File No. 000-11448).
	10.25	Employment and Change of Control Agreement with Paul McCombie, incorporated herein by reference to Exhibit 99.5 of the Current Report on Form 8-K, filed with the SEC on March 14, 2008 (SEC File No. 000-11448).
	10.26	Employment and Change of Control Agreement with George Richard Webster, incorporated herein by reference to Exhibit 99.6 of the Current Report on Form 8-K, filed with the SEC on March 14, 2008 (SEC File No. 000-11448).
	10.27	Directors and Senior Management Deferred Compensation Plan Trust Agreement between FNB Southeast and Morgan Trust Company, incorporated herein by reference to Exhibit 99.7 of the Current Report on Form 8-K, filed with the SEC on March 14, 2008 (SEC File No. 000-11448).
	10.28	Second Amendment to the Directors and Senior Management Deferred Compensation Plan and Directors Retirement Policy Trust Agreement among Regions bank d/b/a/Regions Morgan Keegan Trust, Bancorp and the Bank, incorporated herein by reference to Exhibit 99.8 of the Current Report on Form 8-K, filed with the SEC on March 14, 2008 (SEC File No. 000-11448).
	10.29	Bancorp Non-Qualified Deferred Compensation Plan for Directors and Senior Management, incorporated herein by reference to Exhibit 99.9 of the Current Report on Form 8-K, filed with the SEC on March 14, 2008 (SEC File No. 000-11448).
	10.30	First Amendment to the Bancorp Non-Qualified Deferred Compensation Plan for Directors and Senior Management, incorporated herein by reference to Exhibit 99.10 of the Current Report on Form 8-K, filed with the SEC on March 14, 2008 (SEC File No. 000-11448).
	10.31	Bancorp Amended and Restated Long Term Stock Incentive Plan, formerly the “FNB Long Term Stock Incentive Plan” (the “2006 Omnibus Plan”), incorporated herein by reference to Exhibit 10.27 of the Quarterly Report on Form 10-Q filed with the SEC on May 9, 2008 (SEC File No. 000-11448).
	10.32	Amended and Restated Comprehensive Equity Compensation Plan for Directors and Employees, incorporated herein by reference to Exhibit 10.44 of the Quarterly Report on Form 10-Q, filed with the SEC on August 11, 2008 (SEC File No. 000-11448).
	10.33	Form of Restricted Stock Award Agreement adopted under the Amended and Restated Comprehensive Equity Compensation Plan for Directors and Employees, incorporated herein by reference to Exhibit 10.45 of the Quarterly Report on Form 10-Q, filed with the SEC on August 11, 2008 (SEC File No. 000-11448).
	10.34	Employment and Change of Control Agreement with David P. Barksdale, incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K, filed with the SEC on October 17, 2008 (SEC File No. 000-11448).
	10.35	Letter Agreement, dated December 12, 2008, between Bancorp and the United States Department of the Treasury, with respect to the issuance and sale of the Fixed Rate Cumulative Perpetual Preferred Stock, Series A and the Warrant, incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the SEC on December 12, 2008 (SEC File No. 000-11448).
	10.36	Form of Employment Agreement Amendment, dated December 12, 2008 among Bancorp, the Bank and the senior executive officers of Bancorp, incorporated herein by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the SEC on December 12, 2008 (SEC File No. 000-11448).
	10.37	Bancorp Management Incentive Plan, dated February 18, 2008, incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K, filed with the SEC on March 6, 2009 (SEC File No. 000-11448).
	10.38	Employment and Change of Control Agreement with Ramsey K. Hamadi, incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K, filed with the SEC on March 30, 2009 (SEC File No. 000-11448).
	10.39	Promissory Note by Ramsey K. Hamadi in favor of the Bank (SEC File No. 000-11448).

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Exhibit
No.		Description
	10.40	Excessive and Luxury Expenditure Policy of Bancorp and the Bank, incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K filed with the SEC on September 9, 2009 (SEC File No. 000-11448).
	10.41	Employment and Change of Control Agreement among Bancorp, the Bank and Pressley A. Ridgill, executed September 9, 2009, and effective January 1, 2010, incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K filed with the SEC on September 11, 2009 (SEC File No. 000-11448).
	10.42	Form of Amendment to Employment and Change of Control Agreement, dated September 16, 2009, among Bancorp, the Bank and the senior executive officers of Bancorp, incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K filed with the SEC on September 16, 2009 (SEC File No. 000-11448).
	31.01	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.02	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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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.

Date: November 6, 2009	NEWBRIDGE BANCORP          (Registrant)
	By:	/s/ Ramsey K. Hamadi
		Name:	Ramsey K. Hamadi
		Title:	Executive Vice President and Chief Financial Officer (Authorized Officer)

34

EXHIBIT INDEX

Exhibit No.		Description
	31.01	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.02	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

35