Bancorp of New Jersey, Inc. - FORM 10-Q

Attached files

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EX-32 - EX-32 - Bancorp of New Jersey, Inc.	a15-17986_1ex32.htm
EX-10.2 - EX-10.2 - Bancorp of New Jersey, Inc.	a15-17986_1ex10d2.htm
EX-31.2 - EX-31.2 - Bancorp of New Jersey, Inc.	a15-17986_1ex31d2.htm
EX-31.1 - EX-31.1 - Bancorp of New Jersey, Inc.	a15-17986_1ex31d1.htm
EX-10.4 - EX-10.4 - Bancorp of New Jersey, Inc.	a15-17986_1ex10d4.htm
EX-10.1 - EX-10.1 - Bancorp of New Jersey, Inc.	a15-17986_1ex10d1.htm
EX-10.3 - EX-10.3 - Bancorp of New Jersey, Inc.	a15-17986_1ex10d3.htm

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended September 30, 2015

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

For the transition period from to

Commission file number: 001-34089

BANCORP OF NEW JERSEY, INC.

(Exact name of registrant as specified in its charter)

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

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

(201) 944-8600
(Registrant’s telephone number, including area code)

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

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

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

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of November 7, 2015 there were 6,240,241 outstanding shares of the issuer’s class of common stock, no par value.

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INDEX

		PAGE
Part I Financial Information

Item 1.	Financial Statements:

	Unaudited Consolidated Statements of Financial Condition - September 30, 2015 and December 31, 2014	3

	Unaudited Consolidated Statements of Income - Three Months Ended September 30, 2015 and 2014	4

	Unaudited Consolidated Statements of Income – Nine Months Ended September 30, 2015 and 2014	5

	Unaudited Consolidated Statements of Comprehensive Income- Three and Nine Months Ended September 30, 2015 and 2014	6

	Unaudited Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2015 and 2014	7

	Notes to Unaudited Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38

Item 4.	Controls and Procedures	38

Part II Other Information

Item 1.	Legal Proceedings	39

Item 1A.	Risk Factors	39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3.	Defaults Upon Senior Securities	39

Item 4.	Mine Safety Disclosures	39

Item 5.	Other Information	39

Item 6.	Exhibits	39

Signatures		40

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BANCORP OF NEW JERSEY, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(in thousands, except share data)

	September 30, 2015			December 31, 2014

ASSETS

Cash and due from banks	$	1,986		$	1,218
Interest bearing deposits	96,899			20,386
Federal funds sold	454			456
Total cash and cash equivalents	99,339			22,060

Interest bearing time deposits	1,000			1,000

Securities available for sale	64,280			58,451
Securities held to maturity (fair value approximates $8,718 and $15,921, at September 30, 2015 and December 31, 2014, respectively)	8,718			15,923
Restricted investment in bank stock, at cost	2,092			2,162

Loans receivable	625,128			633,958
Deferred loan fees and unamortized costs, net	(374		)	(414		)
Less: allowance for loan losses	(7,719		)	(7,192		)
Net loans	617,035			626,352
Premises and equipment, net	10,125			10,136
Accrued interest receivable	2,340			2,441
Other real estate owned	549			897
Other assets	4,704			4,266
TOTAL ASSETS	$	810,182		$	743,688

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposits
Noninterest bearing	$	108,765		$	89,510
Savings and interest bearing transaction accounts	221,749			200,585
Time deposits under $100	55,090			54,396
Time deposits $100 and over	321,387			304,483
Total deposits	706,991			648,974
Borrowed funds	28,144			32,950
Accrued interest payable and other liabilities	2,463			1,870
TOTAL LIABILITIES	737,598			683,794

Commitments and Contingencies	—			—
Stockholders’ equity:
Common stock, no par value, authorized 20,000,000 shares; issued and outstanding 6,240,241 and 5,369,984 at September 30, 2015 and December 31, 2014, respectively	60,456			50,998
Retained earnings	12,286			9,635
Accumulated other comprehensive loss	(158		)	(739		)
Total stockholders’ equity	72,584			59,894
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	810,182		$	743,688

See accompanying notes to unaudited consolidated financial statements

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BANCORP OF NEW JERSEY, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

	For the Three Months Ended September 30,
	2015			2014

INTEREST INCOME
Loans, including fees	$	7,545		$	7,267
Securities	229			226
Federal funds sold and other	51			7
TOTAL INTEREST INCOME	7,825			7,500

INTEREST EXPENSE
Savings and money markets	321			251
Time deposits	1,629			1,360
Borrowed funds	113			82
TOTAL INTEREST EXPENSE	2,063			1,693

NET INTEREST INCOME	5,762			5,807
(Recovery of) provision for loan losses	(124		)	693
NET INTEREST INCOME AFTER (RECOVERY OF) PROVISION FOR LOAN LOSSES	5,886			5,114
NON-INTEREST INCOME
Fees and service charges	98			51
Losses on sales of securities	—			(3		)
TOTAL NON-INTEREST INCOME	98			48

NON-INTEREST EXPENSE
Salaries and employee benefits	1,866			1,685
Occupancy and equipment expense	662			638
FDIC premiums and related expenses	243			104
Legal fees	69			45
Other real estate owned expenses	6			—
Professional fees	223			133
Data processing	256			215
Other expenses	563			389
TOTAL NON-INTEREST EXPENSE	3,888			3,209
Income before provision for income taxes	2,096			1,953
Income tax expense	738			692
Net income	$	1,358		$	1,261

PER SHARE OF COMMON STOCK
Basic	$	0.22		$	0.23
Diluted	$	0.22		$	0.23

See accompanying notes to unaudited consolidated financial statements

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BANCORP OF NEW JERSEY, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

	For the Nine Months Ended September 30,
	2015			2014

INTEREST INCOME
Loans, including fees	$	22,956		$	19,703
Securities	677			700
Federal funds sold and other	116			39
TOTAL INTEREST INCOME	23,749			20,442

INTEREST EXPENSE
Savings and money markets	924			715
Time deposits	4,770			3,969
Borrowed funds	358			83
TOTAL INTEREST EXPENSE	6,052			4,767

NET INTEREST INCOME	17,697			15,675
Provision for loan losses	659			1,477
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	17,038			14,198
NON-INTEREST INCOME
Fees and service charges	239			155
Losses on sales of securities	(15		)	(5		)
TOTAL NON-INTEREST INCOME	224			150

NON-INTEREST EXPENSE
Salaries and employee benefits	5,588			4,815
Occupancy and equipment expense	2,143			1,924
FDIC premiums and related expenses	522			286
Legal fees	249			142
Other real estate owned expenses	183			35
Professional fees	626			475
Data processing	732			607
Other expenses	1,447			896
TOTAL NON-INTEREST EXPENSE	11,490			9,180
Income before provision for income taxes	5,772			5,168
Income tax expense	1,998			1,958
Net income	$	3,774		$	3,210

PER SHARE OF COMMON STOCK
Basic	$	0.62		$	0.60
Diluted	$	0.62		$	0.59

See accompanying notes to unaudited consolidated financial statements

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BANCORP OF NEW JERSEY, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	For the Three Months Ended September 30,
	2015		2014

Net income	$	1,358	$	1,261
Other comprehensive income
Unrealized holding gains on securities available for sale, net of deferred income tax expense of $188 and $52, respectively	306		134
Less: Reclassification adjustment for loss on sale of securities, net of income tax benefit of $0 and $1, respectively	—		(2		)
Comprehensive income	$	1,664	$	1,397

	For the Nine Months Ended September 30,
	2015			2014

Net income	$	3,774		$	3,210
Other comprehensive income
Unrealized holding gains on securities available for sale, net of deferred income tax expense of $326 and $458, respectively	572			685
Less: Reclassification adjustment for loss on sale of securities, net of income tax benefit of $6 and $2, respectively	(9		)	(3		)
Comprehensive income	$	4,355		$	3,898

See accompanying notes to unaudited consolidated financial statements

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BANCORP OF NEW JERSEY

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	For the Nine Months Ended September 30,
	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	3,774		$	3,210
Adjustments to reconcile net income to net cash provided by Operating activities:
Provision for loan losses	659			1,477
Amortization of securities premiums	82			80
Deferred tax benefit	(1,085		)	(14		)
Depreciation and amortization	458			424
Stock based compensation	159			198
(Amortization) accretion of net loan origination fees and costs	(40		)	90
Loss on sale of securities	15			5
Loss on sale of other real estate owned	6			35
Write down of other real estate owned	180			—
Changes in operating assets and liabilities:
Decrease (increase) in accrued interest receivable	101			(998		)
Decrease in other assets	315			1,543
Increase in accrued interest payable and other liabilities	593			1,503
NET CASH PROVIDED BY OPERATING ACTIVITIES	5,217			7,553

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available for sale	(11,998		)	—
Purchases of securities held to maturity	(4,718		)	(9,106		)
Purchases of restricted investment in bank stock	(171		)	(962		)
Proceeds from maturities of securities held to maturity	11,923			14,014
Proceeds from sales of securities available for sale	6,985			6,995
Proceeds from call of restricted investment in bank stock	241			—
Proceeds from sale of other real estate owned	162			939
Net decrease (increase) in loans	8,697			(117,862		)
Purchases of premises and equipment	(447		)	(169		)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	10,674			(106,151		)

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	58,017			52,346
Net (decrease) increase in borrowed funds	(4,806		)	33,025
Dividends	(1,123		)	(965		)
Proceeds from the sale of common stock through the private placement	9,280			—
Proceeds from the exercise of options	20			273
NET CASH PROVIDED BY FINANCING ACTIVITIES	61,388			84,679

Net increase (decrease) in cash and cash equivalents	77,279			(13,919		)
Cash and cash equivalents, beginning of year	22,060			37,741
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	99,339		$	23,822

Supplemental information:
Cash paid during the period for:
Interest	$	6,062		$	4,718
Income taxes	$	2,424		$	1,214

Supplemental disclosure of non-cash investing and financing transactions:
Loans transferred to other real estate owned	$	—		$	1,077

See accompanying notes to unaudited consolidated financial statements.

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BANCORP OF NEW JERSEY, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Significant Accounting Policies

Basis of Financial Statement Presentation

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

The Company was incorporated under the laws of the State of New Jersey to serve as a holding company for the Bank and to acquire all the capital stock of the Bank (referred to herein as the “holding company reorganization”).

The Company’s class of common stock has no par value and the Bank’s class of common stock has a par value of $10 per share.

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

Organization

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

Note 2. Stockholders’ Equity and Related Transactions

On March 2, 2015, the Company closed on a private placement of approximately $9.5 million (net of expenses, approximatley $9.3 million) or 868,057 shares of its common stock at a price of $10.95 per share. The shares of common stock were offered and were sold in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. The shares have not been registered under the Securities Act, or the securities laws of any other jurisdiction, and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements. Each of the investors in the

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private placement was a member of the Company’s board of directors or related party. The Company contributed the proceeds of the private placement to the Bank.

Note 3. Benefit Plans and Stock-Based Compensation

2006 Stock Option Plan

During 2006, the Bank’s stockholders approved the 2006 Stock Option Plan. At the time of the holding company reorganization, the 2006 Stock Option Plan was assumed by the Company. The plan allows the Company to grant options to directors and employees of the Company to purchase up to 239,984 shares of the Company’s common stock. At September 30, 2015, incentive stock options to purchase 210,900 shares have been issued to employees of the Bank under the 2006 Stock Option Plan, of which options to purchase 159,700 shares were outstanding.

Under the 2006 Stock Option Plan, there were no unvested options at September 30, 2015 and accordingly no unrecognized share based compensation expense. During the nine months ended September 30, 2015, options to purchase 2,200 shares of common stock, at a weighted average price of $9.09 per share were exercised for a total price of $20,000. During the nine months ended September 30, 2014, options to purchase 26,000 shares of common stock at a weighted average price of $10.48 per share were exercised for a total price of $273,000. No options were granted or forfeited through the 2006 Stock Option Plan during the nine months ended September 30, 2015.

2007 Director Plan

During 2007, the Bank’s stockholders approved the 2007 Non-Qualified Stock Option Plan for Directors (the “2007 Director Plan”). At the time of the holding company reorganization, the 2007 Director Plan was assumed by the Company. This plan provides for 480,000 options to purchase shares of the Company’s common stock to be issued to non-employee directors of the Company. At September 30, 2015, non-qualified options to purchase 460,000 shares of the Company’s stock have been issued to non-employee directors of the Company under the 2007 Director Plan and approximately 331,334 were outstanding at September 30, 2015. No options were granted, exercised or forfeited through the 2007 Director Plan during the first nine months of 2015.

Under the 2007 Director Plan, there were no unvested options at September 30, 2015 and no unrecognized compensation expense.

In connection with both the 2006 Stock Option Plan and the 2007 Director Plan, no share based compensation expense was recognized for the three and nine months ended September 30, 2015 and 2014, respectively.

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

The aggregate intrinsic value of options outstanding as of September 30, 2015 under the 2006 Stock Option Plan and the 2007 Director Plan was approximately $200 thousand.

2011 Equity Incentive Plan

During 2011, the shareholders of the Company approved the Bancorp of New Jersey, Inc. 2011 Equity Incentive Plan ( the “2011 Plan”). This plan authorizes the issuance of up to 250,000 shares of the Company’s common stock, subject to adjustment in certain circumstances described in the 2011 Plan, pursuant to awards of incentive stock options or non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units or performance awards.

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During the nine months ended September 30, 2014, the Company issued 3,218 shares of stock to certain members of the Bank’s management team. These shares vested immediately and the expense was recorded during the first nine months of 2014. For the three months ended September 30, 2015 and 2014, $53 thousand and $52 thousand, respectively, was recorded as expense for restricted stock that has been issued through the 2011 Plan in prior years. For the nine months ended September 30, 2015 and 2014, $159 thousand and $198 thousand, respectively, was recorded as expense for restricted stock that has been issued through the 2011 Plan in prior years. At September 30, 2015, there were a total of approximately 48,500 shares of unvested restricted stock and approximately $509 thousand of compensation expense which will be recorded over the next three years. No options were granted, exercised or forfeited through the 2011 Plan during the nine months of 2015.

Note 4. Earnings Per Share.

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

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

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

	For the three months ended
	September 30,
(In thousands except per share data)	2015		2014
Net income applicable to common stock	$	1,358	$	1,261
Weighted average number of common shares outstanding - basic	6,240		5,369
Basic earnings per share	$	0.22	$	0.23

Net income applicable to common stock	$	1,358	$	1,261
Weighted average number of common shares outstanding	6,240		5,369
Effect of dilutive options	16		50
Weighted average number of common shares and common share equivalents-diluted	6,256		5,419
Diluted earnings per share	$	0.22	$	0.23

Incentive stock options to purchase 84,700 shares of common stock at a weighted average price of $9.09; and 48,500 unvested shares of restricted common stock were included in the computation of diluted earnings per share for the three months ended September 30, 2015. Incentive stock options to purchase 75,000 shares of common stock at a weighted average price of $11.50 and non-qualified options to purchase 331,334 shares of common stock at a weighted average price of $11.50 were not included in the computation of diluted earnings per share for the three months ended September 30, 2015, because they were anti-dilutive.

Non-qualified options to purchase 331,334 shares of common stock at a weighted average price of $11.50; incentive stock options to purchase 75,000 shares of common stock at a weighted average price of $11.50; incentive stock options to purchase 86,900 shares of common stock at a weighted average price of $9.09; and

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64,000 unvested shares of restricted common stock were included in the computation of diluted earnings per share for the three months ended September 30, 2014.

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

	For the nine months ended
	September 30,
(In thousands except per share data)	2015		2014
Net income applicable to common stock	$	3,774	$	3,210
Weighted average number of common shares outstanding - basic	6,049		5,355
Basic earnings per share	$	0.62	$	0.60

Net income applicable to common stock	$	3,774	$	3,210
Weighted average number of common shares outstanding	6,049		5,355
Effect of dilutive options	16		59
Weighted average number of common shares and common share equivalents-diluted	6,065		5,414
Diluted earnings per share	$	0.62	$	0.59

Incentive stock options to purchase 84,700 shares of common stock at a weighted average price of $9.09; and 48,500 unvested shares of restricted common stock were included in the computation of diluted earnings per share for the three months ended September 30, 2015. Incentive stock options to purchase 75,000 shares of common stock at a weighted average price of $11.50 and non-qualified options to purchase 331,334 shares of common stock at a weighted average price of $11.50 were not included in the computation of diluted earnings per share for the nine months ended September 30, 2015, because they were anti-dilutive.

Non-qualified options to purchase 331,334 shares of common stock at a weighted average price of $11.50; 75,000 incentive stock options at a weighted average price of $11.50; incentive stock options to purchase 86,900 shares of common stock at a weighted average price of $9.09; and 80,000 unvested shares of restricted stock were included in the computation of diluted earnings per share for the nine months ended September 30, 2014.

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Note 5. Securities Available for Sale and Investment Securities

A summary of securities held to maturity and securities available for sale at September 30, 2015 and December 31, 2014 is as follows (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
September 30, 2015
Securities Held to Maturity:
Obligations of states and political subdivisions	$	4,718	$	—	$	—		$	4,718
U.S. Treasury obligations	4,000		—		—			4,000
Total securities held to maturity	8,718		—		—			8,718

Securities Available for Sale:
U.S. Treasury obligations	6,540		—		(101		)	6,439
Government sponsored enterprise obligations	57,999		1		(159		)	57,841
Total securities available for sale	64,539		1		(260		)	64,280

Total securities	$	73,257	$	1	$	(260	)	$	72,998

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
December 31, 2014
Securities Held to Maturity:
Obligations of states and political subdivisions	$	11,923	$	—	$	—		$	11,923
Government sponsored enterprise obligations					—			—
U.S. Treasury obligations	4,000		—		(2		)	3,998
Total securities held to maturity	15,923		—		(2		)	15,921

Securities Available for Sale:
U.S. Treasury obligations	6,623		—		(221		)	6,402
Government sponsored enterprise obligations	53,000		—		(951		)	52,049
Total securities available for sale	59,623		—		(1,172		)	58,451

Total securities	$	75,546	$	—	$	(1,174	)	$	74,372

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

	Less than 12 Months					More than 12 Months					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
September 30, 2015
Securities Available for Sale:
U.S. Treasury obligations	$	—	$	—		$	6,439	$	(101	)	$	6,439	$	(101	)
Government sponsored enterprise obligations	3,993		(7		)	41,847		(152		)	45,840		(159		)
Total securities available for sale	$	3,993	$	(7	)	$	48,286	$	(253	)	$	52,279	$	(260	)

	Less than 12 Months					More than 12 Months					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
December 31, 2014
Securities Held to Maturity:
U.S. Treasury obligations	$	—	$	—		$	3,998	$	(2	)	$	3,998	$	(2	)

Securities Available for Sale:
U.S. Treasury obligation	—		—			6,402		(221		)	6,402		(221		)
Government sponsored enterprise obligations	2,994		(6		)	49,055		(945		)	52,049		(951		)
Total securities available for sale	2,994		(6		)	55,457		(1,166		)	58,451		(1,172		)

Total securities	$	2,994	$	(6	)	$	59,455	$	(1,168	)	$	62,449	$	(1,174	)

The amortized cost and fair value of securities held to maturity and securities available for sale at September 30, 2015 by contractual maturity are shown below. Expected maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands):

	Securities Held to Maturity				Securities Available for Sale
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
One year or less	$	8,718	$	8,718	$	7,999	$	7,992
After one to five years	—		—		51,540		51,332
After five to ten years	—		—		5,000		4,956
Total	$	8,718	$	8,718	$	64,539	$	64,280

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

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

At September 30, 2015, the Company’s available for sale securities portfolio consisted of twenty-three securities, of which eighteen were in an unrealized loss position for more than twelve months and one was in a loss position for less than twelve months. No OTTI charges were recorded for the three or nine months ended September 30, 2015. The Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell these securities. Unrealized losses primarily relate to interest rate fluctuations and not credit concerns.

Securities with an amortized cost of $16.3 million and a fair value of $16.2 million were pledged to secure public funds on deposit at September 30, 2015. In addition, securities with an amortized cost of $15.2 million and a fair value of $15.1 million were pledged to secure borrowings with the Federal Home Loan Bank of New York (“FHLBNY”) as of September 30, 2015. Securities with an amortized cost of $10.4 million and a fair value of $10.1 million, respectively, were pledged to secure public funds on deposit at December 31, 2014.

During the three months ended September 30, 2015, the Company had no sales from its available for sale portfolio. For the nine months ended September 30, 2015, the Company sold three securities from its available for sale portfolio and recognized a loss of approximately $15 thousand. During the three months ended September 30, 2014, the Company sold one security from its available for sale portfolio and recognized a loss of approximately $3 thousand. During the nine months ended September 30, 2014, the Company sold three securities from its available for sale portfolio and recognized a loss of approximately $5 thousand.

For the three and nine months ended September 30, 2015 and 2014, the Company did not sell any securities from its held to maturity portfolio.

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Note 6. Loans.

The components of the loan portfolio at September 30, 2015 and December 31, 2014 are summarized as follows (in thousands):

	September 30, 2015		December 31, 2014

Commercial real estate	$	439,473	$	431,727
Residential mortgages	49,289		56,079
Commercial	72,038		75,174
Home equity	62,067		69,631
Consumer	2,261		1,347

	$	625,128	$	633,958

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

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

For the three months ended and as of:

September 30, 2015	Commercial Real Estate			Residential Mortgages			Commercial			Home Equity		Consumer			Unallocated		Total
Allowance for loan losses:
Beginning Balance	$	5,691		$	640		$	980		$	543	$	24		$	—	$	7,878
Charge-offs	—						(36		)								(36		)
Recoveries	—			—			1			—		—			—		1
Provisions	(246		)	(16		)	(10		)	95		(7		)	60		(124		)
Ending balance	$	5,445		$	624		$	935		$	638	$	17		$	60	$	7,719
Ending balance: individually evaluated for impairment	$	—		$	90		$	—		$	75	$	—		$	—	$	165
Ending balance: collectively evaluted for impairment	$	5,445		$	534		$	935		$	563	$	17		$	60	$	7,554

Loans receivables:
Ending balance	$	439,473		$	49,289		$	72,038		$	62,067	$	2,261		$	—	$	625,128
Ending balance: individually evaluted for impairment	373			4,571			2			2,640		—			—		7,586
Ending balance: collectively evaluated for impairment	$	439,100		$	44,718		$	72,036		$	59,427	$	2,261		$	—	$	617,542

September 30, 2014	Commercial Real Estate		Residential Mortgages		Commercial		Home Equity			Consumer			Unallocated		Total
Allowance for loan losses:
Beginning Balance	$	4,044	$	287	$	859	$	607		$	54		$	195	$	6,046
Charge-offs	—		—		—		—			(93		)	—		(93		)
Recoveries	—		—		1		—			—			—		1
Provisions	426		31		163		(6		)	61			18		693
Ending balance	$	4,470	$	318	$	1,023	$	601		$	22		$	213	$	6,647

December 31, 2014
Allowance for loan losses:
Ending balance	$	4,950	$	348	$	1,128	$	500		$	24		$	242	$	7,192
Ending balance: individually evaluated for impairment	$	—	$	—	$	—	$	—		$	—		$	—	$	—
Ending balance: collectively evaluated for impairment	$	4,950	$	348	$	1,128	$	500		$	24		$	242	$	7,192

Loans receivables:
Ending balance	$	431,727	$	56,079	$	75,174	$	69,631		$	1,347		$	—	$	633,958
Ending balance: individually evaluted for impairment	$	1,787	$	4,455	$	—	$	2,512		$	—		$	—	$	8,754
Ending balance: collectively evaluated for impairment	$	429,940	$	51,624	$	75,174	$	67,119		$	1,347		$	—	$	625,204

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

For the nine months ended:

	Commercial			Residential
September 30, 2015	Real Estate			Mortgages		Commercial			Home Equity		Consumer			Unallocated			Total
Allowance for loan losses
Beginning Balance	$	4,950		$	348	$	1,128		$	500	$	24		$	242		$	7,192
Charge-offs	(60		)	—		(265		)	—		—			—			(325		)
Recoveries	191			—		2			—		—			—			193
Provisions	364			276		70			138		(7		)	(182		)	659
Ending balance	$	5,445		$	624	$	935		$	638	$	17		$	60		$	7,719

	Commercial			Residential
September 30, 2014	Real Estate			Mortgages			Commercial			Home Equity		Consumer			Unallocated			Total
Allowance for loan losses
Beginning Balance	$	3,707		$	325		$	969		$	593	$	26		$	155		$	5,775
Charge-offs	(237		)	(30		)	(50		)	—		(93		)	—			(410		)
Recoveries	—			—			3			—		—			—			3
Provisions	1,000			23			101			8		89			256			1,477
Transfer	—			—			—			—		—			(198		)	(198		)
Ending balance	$	4,470		$	318		$	1,023		$	601	$	22		$	213		$	6,647

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the past due status as of September 30, 2015 and December 31, 2014, (in thousands):

September 30, 2015	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans Receivables		Nonaccrual Loans
Commercial real estate	$	—	$	—	$	373	$	373	$	439,100	$	439,473	$	373
Residential mortgages	—		—		4,038		4,038		45,251		49,289		4,038
Commercial	—		—		2		2		72,036		72,038		2
Home equity	100		475		2,536		3,111		58,956		62,067		2,536
Consumer	—		—		—		—		2,261		2,261		—
Total	$	100	$	475	$	6,949	$	7,524	$	617,604	$	625,128	$	6,949

December 31, 2014	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans Receivables		Nonaccrual Loans
Commercial real estate	$	—	$	377	$	—	$	377	$	431,350	$	431,727	$	1,787
Residential mortgages	361		—		963		1,324		54,755		56,079		4,279
Commercial	—		—		—		—		75,174		75,174		—
Home equity	—		475		1,275		1,750		67,881		69,631		2,453
Consumer	—		—		—		—		1,347		1,347		—
Total	$	361	$	852	$	2,238	$	3,451	$	630,507	$	633,958	$	8,519

The Company had no loans greater than ninety days delinquent and accruing interest at September 30, 2015 and December 31, 2014.

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If nonaccrual loans had been current in accordance with their original terms and had been outstanding throughout the three and nine month periods ended September 30, 2015, the gross interest income that would have been recorded in such periods would have been $57 thousand and $255 thousand, respectively. If nonaccrual loans had been current in accordance with their original terms and had been outstanding throughout the three and nine month periods ended September 30, 2014, the gross interest income that would have been recorded in such periods would have been $39 thousand and $124 thousand, respectively. Actual interest income recognized on these loans during the three and nine months ended September 30, 2015 was $0 and $17 thousand, respectively. Actual interest income recognized on these loans during the three and nine months ended September 30, 2014 was $0 and $22 thousand, respectively.

The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of September 30, 2015 and December 31, 2014 (in thousands):

September 30, 2015	Commercial Real Estate		Residential Mortgages		Commercial		Home Equity		Consumer		Total

Pass	$	427,953	$	48,765	$	63,654	$	55,135	$	2,261	$	597,768
Special Mention	8,958		—		4,815		4,400		—		18,173
Substandard	2,562		524		3,569		2,532		—		9,187
Doubtful	—		—		—		—		—		—
Total	$	439,473	$	49,289	$	72,038	$	62,067	$	2,261	$	625,128

December 31, 2014	Commercial Real Estate		Residential Mortgages		Commercial		Home Equity		Consumer		Total

Pass	$	429,940	$	47,700	$	73,174	$	66,878	$	1,347	$	619,039
Special Mention	—		4,100		500		300		—		4,900
Substandard	1,787		4,279		1,500		2,453		—		10,019
Doubtful	—		—		—		—		—		—
Total	$	431,727	$	56,079	$	75,174	$	69,631	$	1,347	$	633,958

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A loan is considered impaired when based on current information and events, it is probable that the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. The following table provides information about the Company’s impaired loans at September 30, 2015 and December 31, 2014 (in thousands):

September 30, 2015	Recorded Investment		Unpaid Principal Balance		Related Allowance
Impaired loans with specific reserves:
Residential mortgages	$	248	$	250	$	90
Home equity	175		175		75
Total impaired loans with specific reserves	423		425		165

Impaired loans with no specific reserves:
Commercial real estate	373		397		—
Residential mortgages	4,323		4,856		—
Commercial	2		2		—
Home equity	2,465		2,722		—
Total impaired loans with no specific reserves	7,163		7,977		—
Total impaired loans	$	7,586	$	8,402	$	165

December 31, 2014	Recorded Investment		Unpaid Principal Balance		Related Allowance
Impaired loans with no specific reserves:
Commercial real estate	1,787		1,787		—
Residential mortgages	4,455		4,543		—
Home equity	2,512		2,613		—
Total impaired loans with no specific reserves	$	8,754	$	8,943	$	—

The following tables provide information about the Company’s impaired loans for the three month and nine month periods ended September 30, 2015 and 2014 (in thousands):

	Three Months Ended				Three Months Ended
	September 30, 2015				September 30, 2014
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Received		Investment		Received
Impaired loans with specific reserves:
Residential mortgages	$	248	$	—	$	693	$	—
Home equity	175		—		1,594		17
Total impaired loans with specific reserves	423		—		2,287		17

Impaired loans with no specific reserves:
Commercial real estate	373		—		2,856		42
Residential mortgages	4,344		—		3,722		45
Commercial	7		—		60		4
Home equity	2,474		—		1,113		13
Consumer	—		—		47		—
Total impaired loans with no specific reserves	7,198		—		7,798		104
Total impaired loans	$	7,621	$	—	$	10,085	$	121

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	Nine Months Ended				Nine Months Ended
	September 30, 2015				September 30, 2014
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Received		Investment		Received
Impaired loans with specific reserves:
Commercial real estate	$	—	$	—	$	418	$	—
Residential mortgages	248		—		810		42
Commercial	—		—		25		—
Home equity	87		3		1,594		—
Total impaired loans with specific reserves	335		3		2,847		42

Impaired loans with no specific reserves:
Commercial real estate	1,070		—		3,049		96
Residential mortgages	4,196		12		3,895		134
Commercial	4		—		30		4
Home equity	2,489		2		626		20
Consumer	—		—		23		—
Total impaired loans with no specific reserves	7,759		14		7,623		254
Total impaired loans	$	8,094	$	17	$	10,470	$	296

Troubled debt restructured loans (“TDRs”) are loans where the contractual terms of the loan have been modified for a borrower experiencing financial difficulties. These modifications could include a reduction in the interest rate of the loan, payment extensions, forgiveness of principal, a combination of these concessions or other actions to maximize collection.

The following table summarizes information in regards to TDRs by loan portfolio class as of September 30, 2015 and December 31, 2014 (dollars in thousands):

September 30, 2015	Accrual Status		Number of Loans	Nonaccrual Status		Number of Loans	Total
Residential mortgages	$	534	2	$	3,513	4	$	4,047
Commercial real estate	—		—	373		1	373
Home equity	104		2	872		1	976
	$	638	4	$	4,758	6	$	5,396

December 31, 2014	Accrual Status		Number of Loans	Nonaccrual Status		Number of Loans	Total
Residential mortgages	$	175	1	$	4,008	5	$	4,183
Commercial real estate	—		—	377		1	377
Home equity	60		1	954		2	1,014
	$	235	2	$	5,339	8	$	5,574

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For the three and nine months ended September 30, 2015 and for the three months ended September 30, 2014, there were no new TDRs that occurred. The following table summarizes information in regards to TDRs that occurred during the nine months ended September 30, 2014 (dollars in thousands):

		Pre-Modification		Post- Modification
		Outstanding		Outstanding
	Number of	Recorded		Recorded
2014	Loans	Investments		Investments

Residential mortgages	1	$	365	$	400

During the three and nine months ended September 30, 2015 and 2014, there were no defaults of loans modified in troubled debt restructurings during the previous twelve months.

We may obtain physical possession of real estate collateralizing a residential mortgage loan or home equity loan via foreclosure or an in-substance repossession. As of September 30, 2015, we have no foreclosed residential real estate properties as a result of obtaining physical possession. In addition, as of September 30, 2015, we had residential mortgage loans and home equity loans with a carrying value of $2.3 million collateralized by residential real estate property for which formal foreclosure proceedings were in process.

Note 7. Guarantees

The Company does not issue any guarantees that would require liability recognition or disclosure, other than the Company’s standby letters of credit. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Generally, all letters of credit, when issued have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers. The Company generally holds collateral and/or personal guarantees supporting these commitments. As of September 30, 2015, the Company had $1.7 million of commercial and similar letters of credit. Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payment required under the corresponding guarantees. Management believes that the current amount of the liability as of September 30, 2015 for guarantees under standby letters of credit issued is not material.

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Note 8 — Borrowed Funds

Borrowings may consist of long-term debt fixed rate advances from the Federal Home Loan Bank of New York (“FHLBNY”) as well as short term borrowings through lines of credit with other financial institutions. Information concerning long-term borrowings at September 30, 2015 and December 31, 2014, is as follows (in thousands):

September 30, 2015	Amount (in thousands)		Rate		Original Term (years)	Maturity
Fixed Rate Amortizing Note	$	3,867	1.50	%	5	June 2019
Fixed Rate Amortizing Note	5,923		1.51	%	5	July 2019
Fixed Rate Amortizing Note	5,642		1.51	%	5	August 2019
Fixed Rate Amortizing Note	4,328		2.02	%	7	August 2021
Fixed Rate Amortizing Note	8,384		1.48	%	5	October 2019

Total FHLB Advances	$	28,144	1.58	%

December 31, 2014	Amount (in thousands)		Rate		Original Term (years)	Maturity
Fixed Rate Amortizing Note	$	4,598	1.50	%	5	June 2019
Fixed Rate Amortizing Note	7,018		1.51	%	5	July 2019
Fixed Rate Amortizing Note	6,662		1.51	%	5	August 2019
Fixed Rate Amortizing Note	4,833		2.02	%	7	August 2021
Fixed Rate Amortizing Note	9,839		1.48	%	5	October 2019

	$	32,950	1.57	%

As of September 30, 2015, we had a $12 million overnight line of credit with First Tennessee Bank and a $10 million overnight line of credit with Atlantic Central Bankers Bank for the purchase of federal funds in the event that temporary liquidity needs arise. There were no amounts outstanding under either facility at September 30, 2015. We are an approved member of the Federal Home Loan Bank of New York, or “FHLBNY.” The FHLBNY relationship could provide additional sources of liquidity, if required. At September 30, 2015, we had $28.1 million of borrowed funds from the FHLBNY.

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Note 9. Fair Value Measurements

U. S. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy are described below:

· Level 1 Inputs - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

· Level 2 Inputs - Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

· Level 3 Inputs - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (that is, supported with little or no market activity).

The level of an asset or liability within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement of that asset or liability.

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2015 and December 31, 2014, respectively, are as follows (in thousands):

			(Level 1)		(Level 2)		(Level 3)
Description	September 30, 2015		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Securities available for sale:
U.S. Treasury obligations	$	6,439	$	—	$	6,439	$	—
Government sponsored enterprise obligations	57,841		—		57,841		—
Total securities available for sale	$	64,280	$	—	$	64,280	$	—

			(Level 1)		(Level 2)		(Level 3)
Description	December 31, 2014		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Securities available for sale:
U.S. Treasury obligations	$	6,402	$	—	$	6,402	$	—
Government sponsored enterprise obligations	52,049		—		52,049		—
Total securities available for sale	$	58,451	$	—	$	58,451	$	—

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For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2015 and December 31, 2014, respectively, follows (in thousands):

			(Level 1)		(Level 2)		(Level 3)
Description	September 30, 2015		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs

Impaired loans	$	258	$	—	$	—	$	258

Other real estate owned	$	549	$	—	$	—	$	549

			(Level 1)		(Level 2)		(Level 3)
Description	December 31, 2014		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs

Impaired loans	$	1,723	$	—	$	—	$	1,723

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The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:

September 30, 2015	Fair Value Estimate (in thousands)		Valuation Techniques	Unobservable Input	Range (Weighted Average)

Impaired loans	$	258	Appraisal of Collateral (1)	Appraisal Adjustments (2)	0% - 45.0% (-41.2%)

				Liquidation Expenses (2)	0% - 48.1% (-33.8%)

Other real estate owned	$	549	Appraisal of Collateral (1)	Appraisal Adjustments (2)	-4.5%

December 31, 2014	Fair Value Estimate (in thousands)		Valuation Techniques	Unobservable Input	Range (Weighted Average)

Impaired loans	$	1,723	Appraisal of Collateral (1)	Appriasal Adjustments (2)	0% - 46.3% (-38.4%)

				Liquidation Expenses (2)	0% - 60.2% (-20.2%)

(1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable.

(2) Appraisals may be adjusted for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

Other real estate owned assets are adjusted to fair value less estimated selling costs upon transfer of the loans to other real estate owned. The fair value of other real estate owned is based upon independent third party appraisal values of the collateral or management’s estimation of the value of the collateral. These assets are included as Level 3 fair values.

Impaired loans are those for which the Company has measured impairment generally based on the fair value of the loan’s collateral or discounted cash flows based upon the expected proceeds. Fair value is generally based upon independent third-party appraisals of the properties. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Management uses its best judgment in estimating the fair value of the Company’s financial instruments, however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in sales transactions on the dates indicated. The estimated fair value amounts have been measured as of their respective period end and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period end.

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of the Company’s finanical instruments at September 30, 2015 and December 31, 2014:

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Fair value estimates and assumptions are set forth below for the Company’s financial instruments at September 30, 2015 and December 31, 2014 (in thousands):

					(Level 1)		(Level 2)		(Level 3)
					Quoted Prices in				Significant
	September 30, 2015				Active Markets for		Significant Other		Unobservable
	Carrying amount		Fair Value		Identical Assets		Observable Inputs		Inputs

Financial assets:
Cash and cash equivalents	$	99,339	$	99,339	$	99,339	$	—	$	—
Interest bearing time deposits	1,000		1,000		—		1,000		—
Securities available for sale	64,280		64,280		—		64,280
Securities held to maturity	8,718		8,718		—		8,718
Restricted investment in bank stock	2,092		2,092		—		2,092		—
Loans receivable, net	617,035		617,972		—		—		617,972
Accrued interest receivable	2,340		2,340		—		2,340		—
Financial liabilities:
Deposits	706,991		699,857		330,514		369,343		—
Borrowed funds	28,144		28,311		—		28,311		—
Accrued interest payable	748		748		—		748		—

					(Level 1)		(Level 2)		(Level 3)
					Quoted Prices in				Significant
	December 31, 2014				Active Markets for		Significant Other		Unobservable
	Carrying amount		Fair Value		Identical Assets		Observable Inputs		Inputs

Financial assets:
Cash and cash equivalents	$	22,060	$	22,060	$	22,060	$	—	$	—
Interest bearing time deposits	1,000		1,000		—		1,000		—
Securities available for sale	58,451		58,451		—		58,451
Securities held to maturity	15,923		15,921		—		15,921
Restricted investment in bank stock	2,162		2,162		—		2,162		—
Loans receivable, net	626,352		629,086		—		—		629,086
Accrued interest receivable	2,441		2,441		—		2,441		—
Financial liabilities:
Deposits	648,974		650,729		290,095		360,634		—
Borrowed funds	32,950		32,972		—		32,972		—
Accrued interest payable	758		758		—		758		—

Cash and Cash Equivalents and Interest Bearing Time Deposits

The carrying amounts reported in the balance sheet for cash and cash equivalents approximate those assets’ fair values.

Securities

The fair value of securities available for sale (carried at fair value) and held to maturity (carried at amortized cost) are determined by obtaining market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices. For certain securities which are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquiditiy and/or non-transferability, and such adjustments are generally based on available market evidence (Level 3). In the absence of such evidence, management’s best estimate is used. Management’s best estimate consists of both internal and external support on certain Level 3 investments. Internal cash flow models using a present value

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formula that includes assumptions market participants would use along with indicative exit pricing obtained from broker/dealers (where available) were used to support fair values of certain Level 3 investments.

Restricted Investment in Bank Stock

The carrying amount of restricted investment in bank stock approximates fair value, and considers the limited marketability of such securities.

Loans Receivable

The fair value of loans are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and the interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. Generally, for variable rate loans that re-price frequently and with no significant change in credit risk, fair values approximate carrying values.

Accrued Interest Receivable and Payable

The carrying amount of accrued interest receivable and accrued interest payable approximates fair value.

Deposits

The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities of time deposits.

Borrowed Funds

Fair values of FHLBNY amortizing advances are based on the discounted value of contractual cash flows using discount rates determined by where the cash flow falls on the FHLBNY advance curve. These discount rates (curve) are found on one of the various FHLBNY web sites. Fair values disclosed for short term advances on lines of credit are equal to their carrying value due to their term generally being no more than 14 days.

Limitation

The preceding fair value estimates were made at September 30, 2015 and December 31, 2014 based on pertinent market data and relevant information on the financial instrument. These estimates do not include any premium or discount that could result from an offer to sell at one time the Company’s entire holdings of a particular financial instrument or category thereof. Since no market exists for a substantial portion of the Company’s financial instruments, fair value estimates were necessarily based on judgments regarding future expected loss experience, current economic conditions, risk assessment of various financial instruments, and other factors. Given the innately subjective nature of these estimates, the uncertainties surrounding them and the matter of significant judgment that must be applied, these fair value estimates cannot be calculated with precision. Modifications in such assumptions could meaningfully alter these estimates.

Since these fair value approximations were made solely for on and off balance sheet financial instruments at September 30, 2015 and December 31, 2014, no attempt was made to estimate the value of anticipated future

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business. Furthermore, certain tax implications related to the realization of the unrealized gains and losses could have a substantial impact on these fair value estimates and have not been incorporated into the estimates.

Note 10. Recent Accounting Pronouncements

This note provides a summary description of recent accounting standards that have significant implications (elected or required) within the consolidated financial statements, or that management expects may have a significant impact on financial statements issued in the near future.

ASU 2014-04, Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure

In January, 2014, the FASB issued ASU 2014-04, Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. This ASU clarifies that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The ASU also requires additional related interim and annual disclosures. The guidance in this ASU is effective for annual and interim periods beginning after December 15, 2014. The implementation of ASU 2014-01 did not have a material impact on the Company’s financial position or results of operations.

ASU 2014-09, Revenue from Contracts with Customers (Topic 606)

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The amendments in this ASU establish a comprehensive revenue recognition standard for virtually all industries under U.S. GAAP, including those that previously followed industry-specific guidance such as the real estate, construction and software industries. The revenue standard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. To accomplish this objective, the standard requires five basic steps: i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. Public entities will apply the new standard for annual periods beginning after December 15, 2017, including interim periods therein. Three basic transition methods are available — full retrospective, retrospective with certain practical expedients, and a cumulative effect approach. Under the third alternative, an entity would apply the new revenue standard only to contracts that are incomplete under legacy U.S. GAAP at the date of initial application (e.g. January 1, 2018) and recognize the cumulative effect of the new standard as an adjustment to the opening balance of retained earnings. That is, prior years would not be restated and additional disclosures would be required to enable users of the financial statements to understand the impact of adopting the new standard in the current year compared to prior years that are presented under legacy U.S. GAAP. Early adoption is prohibited under U.S. GAAP. The same three transition alternatives apply. The implementation of ASU 2014-09 should not have a material impact on the Company’s financial position or results of operations.

ASU 2014-14, Receivables — Troubled Debt Restructurings by Creditors (Subtopic 310-40): Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure (a consensus of the FASB Emerging Issues Task Force

In August 2014 the FASB issued ASU 2014-14, Receivables — Troubled Debt Restructurings by Creditors (Subtopic 310-40): Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure (a consensus of the FASB Emerging Issues Task Force. The amendments in this ASU address a practice issue related to the classification of certain foreclosed residential and nonresidential mortgage loans that are either

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fully or partially guaranteed under government programs. Specifically, creditors should reclassify loans that meet certain conditions to “other receivables” upon foreclosure, rather than reclassifying them to other real estate owned (OREO). The separate other receivable recorded upon foreclosure is to be measured based on the amount of the loan balance (principal and interest) the creditor expects to recover from the guarantor. The ASU is effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The implementation of ASU 2014-14 did not have a material impact on the Company’s financial position or results of operations.

Note 11. Accumulated Other Comprehensive Income

There were no reclassifications out of accumulated other comprehensive income for the three months ended September 30, 2015. Reclassifications out of accumulated other comprehensive income for the nine months ended September 30, 2015 are as follows (in thousands):

Details About Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statements of Income

Nine months ended September 30, 2015
Available for Sale Securities
Realized loss on sale of securities	$	(15	)	Losses on sale of securities
	6			Income tax expense
Total reclassifications	$	(9	)	Net of tax

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ITEM 2

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

You should read this discussion and analysis in conjunction with the consolidated unaudited interim consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, and with our audited consolidated financial statements for the year ended December 31, 2014 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” presented in our Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission.

Statements Regarding Forward Looking Information

This document contains forward-looking statements, in addition to historical information. Forward looking statements are typically identified by words or phrases such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” and variations of such words and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may,” or similar expressions. The U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, provide a safe harbor in regard to the inclusion of forward-looking statements in this document and documents incorporated by reference.

You should note that many factors, some of which are discussed elsewhere in this document and in the documents that are incorporated by reference, could affect the future financial results of Bancorp of New Jersey, Inc. and its subsidiaries and could cause those results to differ materially from those expressed in the forward-looking statements contained or incorporated by reference in this document. These factors include, but are not limited, to the following:

· Economic conditions affecting the financial industry;

· Changes in interest rates and shape of the yield curve;

· Credit risk associated with our lending activities;

· Risks relating to our market area, significant real estate collateral and the real estate market;

· Legislative and regulatory changes impacting the banking and financial services industry;

· Operating, legal and regulatory compliance risk;

· Regulatory capital requirements and our ability to raise and maintain capital;

· Continually evolving cybersecurity and other technological risks and attacks;

· Our ability to safeguard confidential information of our customers;

· Our ability to attract and retain well-qualified management;

· Fiscal and monetary policy;

· Economic, political and competitive forces affecting our business; and

· That management’s analysis of these risks and factors could be incorrect, and/or that the strategies developed to address them could be unsuccessful.

Bancorp of New Jersey, Inc., referred to as “we” or the “Company,” cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, all of which change over time, and we assume no duty to update forward-looking statements, except as may be required by applicable law or regulation, and except as required by applicable law or regulation, we do not undertake, and specifically disclaim any obligation, to publicly release any revisions to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. We caution readers not to place undue reliance on any forward-looking statements. These statements speak only as of the date made, and we advise readers that various factors, including those described above, could affect our financial performance and could cause actual results or circumstances for future periods to differ materially from those anticipated or projected.

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Critical Accounting Policies, Judgments and Estimates

The consolidated unaudited financial statements have been prepared in conformity with U.S. generally accepted accounting principles. In preparing the consolidated unaudited financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statement of financial condition and revenues and expenses for the period indicated. Actual results could differ significantly from those estimates. Management believes the following critical accounting policies encompass the more significant judgments and estimates used in the preparation of the consolidated unaudited financial statements.

Allowance for Loan Losses

The allowance for loan losses (“ALLL”) represents our best estimate of losses known and inherent in our loan portfolio that are both probable and reasonable to estimate. In determining the ALLL, we consider the losses inherent in our loan portfolio and changes in the nature and volume of our loan activities, along with general economic and real estate market conditions. We utilize a segmented approach which identifies: (1) impaired loans for which specific reserves are established; (2) classified loans for which the general valuation allowance for the respective loan type is deemed to be inadequate; and (3) performing loans for which a general valuation allowance is established. We maintain a loan review system which provides for a systematic review of the loan portfolios and the identification of impaired loans. The review of residential real estate and home equity consumer loans, as well as other more complex loans, is triggered by identified evaluation factors, including delinquency status, size of loan, type of collateral and the financial condition of the borrower. Specific reserves are established for impaired loans based on a review of such information and/or appraisals of the underlying collateral. General reserves are based upon a combination of factors including, but not limited to, actual loan loss experience, composition of the loan portfolio, current economic conditions and management’s judgment.

Although specific and general reserves are established in accordance with management’s best estimates, actual losses are dependent upon future events, and as such, further provisions for loan losses may be necessary in order to maintain the allowance for loan losses at an adequate level. For example, our evaluation of the allowance includes consideration of current economic conditions, and a change in economic conditions could reduce the ability of borrowers to make timely repayments of their loans. This could result in increased delinquencies and increased non-performing loans, and thus a need to make additional provisions for loan losses. Any provision reduces our net income. While the allowance is increased by the provision for loan losses, it is decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. A change in economic conditions could adversely affect the value of properties collateralizing real estate loans, resulting in increased charges against the allowance and reduced recoveries, and require additional provisions for loan losses. Furthermore, growth or a change in the composition of our loan portfolio could require additional provisions for loan losses. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses. Such agencies may require the Bank to effect changes that result in additions to the allowance based on the agencies’ judgments about information available to them at the time of their examinations.

Deferred Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the period in which the deferred tax asset or liability is expected to be settled or realized. The effect on deferred taxes of a change in tax rates is recognized in income in the period in which the change occurs. Deferred tax assets are reduced, through a valuation allowance, if necessary, by the amount of such benefits that are not expected to be realized based on current available evidence.

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Results of Operations

Three Months and Nine Months Ended September 30, 2015 and 2014

Our results of operations depend primarily on net interest income, which is the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. Interest-earning assets consist principally of loans and investment securities, while interest-bearing liabilities consist primarily of deposits. Net income is also affected by the provision for loan losses and the level of non-interest income, as well as by non-interest expenses, including salaries and employee benefits, occupancy and equipment expense, and other expenses, and income tax expense.

Net Income

Net income for the third quarter of 2015 was $1.4 million compared to $1.3 million for the third quarter of 2014. An increase of $97 thousand, or 7.7%, was primarily due to a decrease in the provision for loan losses of $817 thousand offset somewhat by an increase in non-interest expenses of $679 thousand.

Net income for the nine months ended September 30, 2015 was $3.8 million compared to net income of $3.2 million for the nine months ended September 30, 2014, an increase of $564 thousand, or 17.6%. This increase was due to an increase in net interest income of $2.0 million and a decrease in the provision for loan losses of $818 offset by an increase in non-interest expenses of $2.3 million.

On a per share basis, basic and diluted earnings per share were $0.22 for the third quarter of 2015, compared to $0.23 for the same quarter in 2014. Basic and diluted earnings per share were $0.62 and $0.62, respectively, for the nine months ended September 30, 2015 as compared to basic and diluted earnings per share of $0.60 and $0.59, respectively, for the nine months ended September 30, 2014, an increase of $.02, or 3.3% for basic earnings per share, and $.03, or 5.1%, per share for diluted earnings per share.

Net Interest Income

Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income depends upon the volume of interest-earning assets and interest-bearing liabilities and the interest rate earned or paid on them. For the three month period ended September 30, 2015, the decrease in net interest income was due primarily to an increase in interest expense of $370 thousand, offset by an increase in interest income of $325 thousand, compared to the three month period ended September 30, 2014. The increase in interest expense was due to the increase in the average balance of interest bearing deposits of $100.0 million from the average balance of $537.0 million for the three month period ended September 30, 2014 up to $637.0 million for the three months ended September 30, 2015. The increase in interest income was driven by an increase in the average balance of loans for the quarter ended September 30, 2015 of $62.4 million to $629.9 million compared to the average balance of loans of $567.5 million for the same quarter one year ago. Offsetting the increase in average loans for the quarter ended September 30, 2015 compared to the quarter ended September 30, 2014, was a decrease in the average rate earned on loans from 5.08% during the 2014 period, down to 4.73% for the 2015 period.

During the nine months ended September 30, 2015, net interest income reached $17.7 million compared to $15.7 million for the nine months ended September 30, 2014, an increase of $2.0 million, or 12.9%. This increase is attributable to the increase in interest income from loans, including fees and is due in most part to the increase in average loans. Interest income from loans, including fees, securities and federal funds sold reached $23.7 million for the nine months ended September 30, 2015 from $20.4 million for the nine months ended September 30, 2014, an increase of $3.3 million, or 16.2%. At the same time, total interest expense increased by $1.3 million for the nine months ended September 30, 2015 from the nine months ended September 30, 2014. The Company’s average rate paid on interest bearing liabilities increased to 1.26% for the nine months ended September 30, 2015, from 1.25% for the nine months ended September 30, 2014.

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Provision for Loan Losses

The provision for loan losses represents our determination of the amount necessary to bring our allowance for loan losses to the level that we consider adequate to absorb probable losses inherent in our loan portfolio. See Note 6 in Notes to the Unaudited Consolidated Financial Statements in Part I, Item I of this quarterly report on form 10-Q and “Financial Condition” below for additional information about our allowance for loan losses. The (recovery) provision for loan losses was $(124) thousand and $659 thousand for the three months and nine months ended September 30, 2015, respectively, compared to $693 thousand and $1.5 million for the three month and nine month periods ended September 30, 2014. The decrease in the provision is due in most part to the decrease in the gross loan balance at September 30, 2015, of $8.9 million to $625.1 million from $634.0 million at December 31, 2014. There was also a significant decrease in the quarter for gross loans from $651.6 million at June 30, 2015, down to $625.1 million at September 30, 2015, a decrease of $26.5 million. The provision for loan losses decreased also due to a recovery of $124 thousand related to a nonperforming loan.

Non-interest Income

Our non-interest income is comprised primarily of service fees received from deposit accounts and gains (losses) on the sales of securities. For the three months and nine months ended September 30, 2015, non-interest income increased by $50 thousand and $74 thousand, respectively, as compared to the three months and nine months ended September 30, 2014.

Non-interest Expense

Non-interest expense grew to $3.9 million during the third quarter of 2015 compared to $3.2 million in the third quarter of 2014, an increase of approximately $679 thousand. This increase was due in most part to increases in salaries and employee benefits, other expenses and FDIC related expenses of $181 thousand, $174 thousand and $139 thousand, respectively. These increases were due in part to general increases in staff, salaries and benefits as well as the costs associated with the Bank’s entry into the Certificate of Deposit Account Registry Service (“CDARS”) program. During the nine months ended September 30, 2015, non-interest expense reached approximately $11.5 million from approximately $9.2 million for the nine months ended September 30, 2014, an increase of $2.3 million, or 25.2%. The nine month increases were due in most part to increases in salaries and benefits, other expenses and FDIC premiums and related expenses of $773 thousand, $551 thousand and $236 thousand, respectively. The increase in salaries and employee benefits was primarily due to general increases in staff, salaries and benefits. Other expenses increased, in part, due to increases in advertising, printing and third party payroll servicing expenses, which increased $87 thousand, $73 thousand and $70 thousand, respectively. FDIC premiums and related expenses increased in part due to the increase in deposits.

Income Tax Expense

The income tax provision increased $46 thousand to $738 thousand for the three months ended September 30, 2015 from $692 thousand for the quarter ended September 30, 2014. For the nine months ended September 30, 2015, and 2014 income tax expense stayed flat at $2.0 million. The effective tax rate for the three and nine month periods ended September 30, 2015, were 35.2% and 34.6%, respectively, compared to 35.4% and 37.9%, respectively, for the corresponding periods in 2014.

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FINANCIAL CONDITION

Total consolidated assets increased $66.5 million, or approximately 8.9%, from $743.7 million at December 31, 2014 to $810.2 million at September 30, 2015. Loans receivable, or “net loans,” decreased from $626.4 million at December 31, 2014 to $617.0 million at September 30, 2015, a decrease of approximately $9.3 million, or 1.5%. Total cash and cash equivalents increased from $22.1 million at December 31, 2014 to $99.3 million at September 30, 2015, an increase of $77.3 million. Total deposits grew by $58.0 million to $707.0 million at September 30, 2015, from $649.0 million at December 31, 2014.

Loans

Our loan portfolio is the primary component of our assets. Total loans, which exclude net deferred fees and costs and the allowance for loan losses, decreased by 1.5% to $617.0 million at September 30, 2015 from $626.4 million at December 31 2014. Home equity loans, residential mortgages and commercial loans decreased $7.6 million, $6.9 million and $3.1 million, respectively, during the nine months ended September 30, 2015, while commercial real estate and consumer loans increased by $7.7 million and $914 thousand, respectively. We believe that we will continue to have opportunities for loan growth within the Bergen County market of northern New Jersey, due in part, to our customer service and competitive rate structures.

Our loan portfolio consists of commercial loans, commercial and residential real estate loans, consumer loans and home equity loans. Commercial loans are made for the purpose of providing working capital, financing the purchase of equipment or inventory, as well as for other business purposes. Real estate loans consist of loans secured by commercial or residential real property and loans for the construction of commercial or residential property. Consumer loans and home equity loans, are made for the purpose of financing the purchase of consumer goods, home improvements, and other personal needs, and are generally secured by the personal property being owned or being purchased.

Our loans are primarily to businesses and individuals located in Bergen County, New Jersey. We have not made loans to borrowers outside of the United States. We have not made any sub-prime loans. Commercial lending activities are focused primarily on lending to small business borrowers. We believe that our strategy of customer service, competitive rate structures, and selective marketing have enabled us to gain market entry to local loans. Furthermore, we believe that bank mergers and lending restrictions at larger financial institutions with which we compete have also contributed to the success of our efforts to attract borrowers.

For more information on the loan portfolio, see Note 6 in Notes to the Unaudited Consolidated Financial Statements in Part I, Item 1of this Quarterly Report on Form 10-Q.

Loan Quality

As mentioned above, our principal assets are our loans. Inherent in the lending function is the risk of the borrower’s inability to repay a loan under its existing terms. Risk elements include past due and restructured loans, potential problem loans and loan concentrations.

Non-performing assets include loans that are not accruing interest (nonaccrual loans) as a result of principal or interest being in default for a period of 90 days or more and accruing loans that are 90 days past due, troubled debt restructuring loans and foreclosed assets. When a loan is classified as nonaccrual, interest accruals discontinue and all past due interest, including interest applicable to prior years, is reversed and charged against current income. Until the loan becomes current, any payments received from the borrower are applied to outstanding principal until such time as management determines that the financial condition of the borrower and other factors merit recognition of such payments of interest.

We attempt to manage overall credit risk through loan diversification and our loan underwriting and approval procedures. Due diligence begins at the time we begin to discuss the origination of a loan with a borrower. Documentation, including a borrower’s credit history, materials establishing the value and liquidity of potential collateral, the purpose of the loan, the source and timing of the repayment of the loan, and other

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factors are analyzed before a loan is submitted for approval. Loans made are also subject to periodic audit and review.

As of Setember 30, 2015 the Bank had fifteen nonaccrual loans totaling approximately $6.9 million, of which two loans totaling approximately $423 thousand had specific reserves of $165 thousand and thirteen loans totaling approximately $6.5 million had no specific reserve. If nonaccrual loans had been current in accordance with their original terms and had been outstanding throughout the three and nine month periods ended September 30, 2015, the gross interest income that would have been recorded in such periods would have been approximately $57 thousand and $255 thousand, respectively.

Within its nonaccrual loans at September 30, 2015, the Bank had four residential mortgage loans, one home equity loan and one commercial real estate loan that met the definition of a troubled debt restructuring (“TDR”) loan. TDRs are loans where the contractual terms have been modified for borrowers experiencing financial difficulties. These modifications could include a reduction in the interest rate of the loan, payment extensions, forgiveness of principal, a combination of these concessions or other actions to maximize collection. At September 30, 2015, nonaccrual TDR loans had an outstanding balance of $4.8 million and had specific reserves of $90 thousand connected with them. Of the nonaccruing TDR loans, two residential mortgage loans and one home equity loan totaling $2.8 million and $872 thousand, respectively, are performing in accordance with their modified terms.

During the first nine months of 2015, there were no new TDR loans. During the first nine months of 2014, one residential mortgage loan totaling $400 thousand was modified as a TDR. This loan is performing in accordance with its modified terms. At September 30, 2015, the Bank had a total of four accruing loans which met the definition of a TDR.

As a community bank, our market area is concentrated in Bergen County, New Jersey, and as a result we have a concentration of loans collateralized by real estate, primarily in our market area at September 30, 2015 and December 31, 2014.

Investment Securities

Securities held as available for sale (“AFS”) were $64.3 million at September 30, 2015 compared to $58.5 million at December 31, 2014.

Deposits

Deposits remain our primary source of funds. Total deposits increased to $707.0 million at September 30, 2015 from $649.0 million at December 31, 2014, an increase of $58.0 million, or 8.9%. Savings and interest bearing transaction accounts, noninterest bearing accounts and time deposit accounts increased by $21.2 million, $19.3 million, and $17.6 million, respectively, during the first nine months of 2015.

Borrowed Funds

Borrowings consist of long term advances from the Federal Home Loan Bank of New York (“ FHLBNY”) and short term advances on lines of credit with Atlantic Community Bankers Bank (“ACBB”). The long term advances are secured under terms of a blanket collateral agreement by a pledge of qualifying mortgage loans. At September 30, 2015 and December 31, 2014, the Bank had outstanding borrowings of $28.1 million and $33.0 million, respectively, with the FHLBNY.

Liquidity

Our liquidity is a measure of our ability to fund loans, withdrawals or maturities of deposits, and other cash outflows in a cost-effective manner. Our principal sources of funds are deposits, scheduled amortization and prepayments of loan principal, maturities of investment securities, and funds provided by operations. While scheduled loan payments and maturing investments are relatively predictable sources of funds, deposit flow

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and loan prepayments are greatly influenced by prevailing interest rates, economic conditions, and competition. In addition, if warranted, we would be able to borrow funds.

Our total deposits equaled $707.0 million and $649.0 million, respectively, at September 30, 2015 and December 31, 2014. During the first nine months of 2015, the Company closed on a private placement of approximately $9.5 million, or 868,057 shares of common stock and contributed the proceeds to the Bank. Cash and cash equivalents increased from $22.1 million on December 31, 2014 to $99.3 million on September 30, 2015. The increase in deposits and the proceeds from the private placement, along with the decrease in loans funded the increase in cash and cash equivalents.

Through the investment portfolio, we have generally sought to obtain a safe, yet slightly higher yield than would have been available to us as a net seller of overnight federal funds, while maintaining liquidity. Through our investment portfolio, we also attempt to manage our maturity gap, by seeking maturities of investments which coincide with maturities of deposits. The investment portfolio also includes securities available for sale to provide liquidity for anticipated loan demand and other liquidity needs.

As of September 30, 2015, we had a $12 million overnight line of credit with First Tennessee Bank and a $10 million overnight line of credit with ACBB for the purchase of federal funds in the event that temporary liquidity needs arise. There were no amounts outstanding under either facility at September 30, 2015. We are an approved member of the FHLBNY. The FHLBNY relationship could provide additional sources of liquidity, if required. At September 30, 2015, we had $28.1 million of borrowed funds from the FHLBNY.

We believe that our current sources of funds provide adequate liquidity for our current cash flow needs.

Capital Resources

A significant measure of the strength of a financial institution is its capital base.

In July 2013, the federal banking agencies issued final rules to implement the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (commonly known as Basel III) and changes required by the Dodd-Frank Act. The phase-in period for community banking organizations began January 1, 2015. The final rules call for a minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5%, a minimum ratio of tier 1 capital to risk-weighted assets of 6%, a minimum ratio of total capital to risk-weighted assets of 8% (no change from the current rule) and a minimum leverage ratio of 4%.

In addition, the final rules establish a common equity tier 1 capital conservation buffer of 2.5% of risk-weighted assets applicable to all banking organizations. If a banking organization fails to hold capital above the minimum capital ratios and the capital conservation buffer, it will be subject to certain restrictions on capital distributions and discretionary bonus payments. The phase-in period for the capital conservation, as well as countercyclical capital buffers, which increase the required amount of capital in times of economic expansion, consistent with safety and soundness, will begin for all banking organizations on January 1, 2016.

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The following table summarizes the Bank’s risk-based capital and leverage ratios at September 30, 2015, as well as the applicable minimum ratios:

	September 30, 2015		Minimum Required For Capital Adequency Purposes		To Be Well Capitalized Under Prompt Corrective Action Regulations

Common Equity Tier 1 Capital	11.24	%	4.50	%	6.50	%
Risk-Based Capital:
Tier 1 Capital Ratio	11.24	%	6.00	%	8.00	%
Total Capital Ratio	12.47	%	8.00	%	10.00	%
Leverage Ratio	8.90	%	4.00	%	5.00	%

The Company is subject to similar regulatory capital requirements, and its capital ratios are similar to the Bank’s capital ratios as presented in the table above.

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ITEM 3. Quantitative and Qualitative Disclosures about Market/Interest Risk

As a smaller reporting company, the Company is not required to provide the information otherwise required by this Item.

ITEM 4. Controls and Procedures

Evaluation of disclosure controls and procedures.

As of September 30, 2015, the Company’s management including the Chief Executive Officer and President (our Principal Executive Officer) and Senior Vice President and Chief Financial Officer (our Principal Financial and Accounting Officer), evaluated the Company’s disclosure controls and procedures related to the recording, processing, summarization, and reporting of information in the Company’s periodic reports that the Company files with the Securities and Exchange Commission.

Based on their evaluation as of September 30, 2015, the Company’s Chief Executive Officer and President and the Company’s Senior Vice President and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective to ensure that the information required to be disclosed by the Company in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms.

Changes in internal controls over financial reporting.

There was no change in our internal control over financial reporting identified during the quarter ended September 30, 2015 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II OTHER INFORMATION

Item 1. Legal Proceedings

The Company and the Bank are periodically parties to or otherwise involved in legal proceedings arising in the normal course of business, such as claims to enforce liens, claims involving the making and servicing of real property loans, and other issues incident to the Bank’s business. Management does not believe that there is any pending or threatened proceedings against the Company or the Bank which, if determined adversely, would have a material effect on the business, financial position or results of operations of the Company or the Bank.

Item 1A. Risk Factors

As a smaller reporting company, the Company is not required to provide the information otherwise required by this Item.

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

None

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits filed or incorporated by reference as part of this report are listed in the Exhibit Index, which appears at page 41.

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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.

	Bancorp of New Jersey, Inc.

Date: November 16, 2015		By:	/s/ Michael Lesler
		Michael Lesler
		Chief Executive Officer and President
		(Principal Executive Officer)

	By:	/s/ Matthew Levinson
		Matthew Levinson
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

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EXHIBIT INDEX

Exhibit
Number		Description

10.1		Letter agreement effective July 23, 2015 between Bank of New Jersey and Michael Lesler*

10.2		Change of Control Agreement dated June 23, 2006 between Bank of New Jersey and Stephanie Caggiano*

10.3		Change of Control Agreement dated April 11, 2014 between Bank of New Jersey and Richard Capone *

10.4		Termination of Change of Control Agreement between Bank of New Jersey and Richard Capone*

31.1		Rule 13a-14(a) Certification of the Principal Executive Officer

31.2		Rule 13a-14(a) Certification of the Principal Financial Officer

32		Section 1350 Certifications

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Labels Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

Management compensatory plan, contract or arrangement.

Bancorp of New Jersey, Inc. - FORM 10-Q - November 16, 2015

Attached files

Bancorp of New Jersey, Inc. Reports