Exhibit 99.1

Central Jersey Bancorp

INDEX TO FORM 10-Q

		PAGE
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Financial Condition (unaudited) as of June 30, 2009 and December 31, 2008	1
	Consolidated Statements of Income (unaudited) for the three and six months ended June 30, 2009 and 2008	2
	Consolidated Statements of Changes in Shareholders’ Equity (unaudited) for the six months ended June 30, 2009 and 2008	3
	Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2009 and 2008	4
	Notes to Unaudited Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	47
Item 4.	Controls and Procedures	47
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults upon Senior Securities	48
Item 4.	Submission of Matters to a Vote of Security Holders	49
Item 5.	Other Information	49
Item 6.	Exhibits	50
Signatures		51
Index of Exhibits		E-1

Forward-Looking Statements

Certain information included in this Quarterly Report on Form 10-Q and other filings of the Registrant under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as information communicated orally or in writing between the dates of such filings, contains or may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Such statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from expected results. Among these risks, trends and uncertainties are the effect of governmental regulation on Central Jersey Bank, National Association, a nationally chartered commercial bank and wholly-owned subsidiary of the Registrant, interest rate fluctuations, regional economic and other conditions, the availability of working capital, the cost of personnel and technology and the competitive markets in which Central Jersey Bank, N.A. operates.

i

In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms or other comparable terminology. Although the Registrant believes that the expectations reflected in the forward-looking statements contained herein are reasonable, the Registrant cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither the Registrant, nor any other person, assumes responsibility for the accuracy and completeness of such statements. The Registrant is under no duty to update any of the forward-looking statements contained herein after the date of this Quarterly Report on Form 10-Q.

ii

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CENTRAL JERSEY BANCORP

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(unaudited)

(dollars in thousands, except share amounts)

	June 30, 2009			December 31, 2008
ASSETS
Cash and due from banks	$	13,532		$	9,306
Federal funds sold		23			461
Cash and cash equivalents		13,555			9,767
Investment securities available-for-sale, at fair value		186,701			170,683
Investment securities held-to-maturity (fair value of $10,760 and $15,124, respectively, at June 30, 2009 and December 31, 2008)		10,467			14,679
Federal Reserve Bank stock		2,409			1,960
Federal Home Loan Bank stock		3,617			2,940
Loans held-for-sale		1,312			400
Loans		375,080			360,998
Less: Allowance for loan losses		7,605			4,741
Loans, net		367,475			356,257
Accrued interest receivable		2,349			2,251
Premises and equipment		6,096			6,303
Bank owned life insurance		3,750			3,685
Goodwill		—			26,957
Core deposit intangible		1,237			1,444
Other assets		4,344			2,059
Total assets	$	603,312		$	599,385
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Non-interest bearing	$	74,980		$	75,947
Interest bearing		369,746			342,868
		444,726			418,815
Borrowings		95,805			71,741
Subordinated debentures		5,155			5,155
Accrued expenses and other liabilities		1,938			1,546
Investment securities purchased not settled		—			19,676
Total liabilities		547,624			516,933
Shareholders’ equity:
Common stock, par value $0.01 per share. Authorized 100,000,000 shares, 9,108,068 and 9,000,531 shares outstanding and 9,354,516 and 9,246,979 shares issued, respectively, at June 30, 2009 and December 31, 2008		91			90
Preferred stock, liquidation value $1,000 per share. Authorized 10,000,000 shares and issued and outstanding 11,300 shares at June 30, 2009 and December 31, 2008		11,300			11,300
Additional paid-in capital		64,952			64,502
Accumulated other comprehensive income, net of tax expense		1,075			1,925
Treasury stock – at cost, 246,448 shares at June 30, 2009 and December 31, 2008		(1,806	)		(1,806	)
Retained (deficit)/earnings		(19,924	)		6,441
Total shareholders’ equity		55,688			82,452
Total liabilities and shareholders’ equity	$	603,312		$	599,385

See accompanying notes to unaudited consolidated financial statements.

1

CENTRAL JERSEY BANCORP

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(dollars in thousands, except per share amounts)

	Three months ended June 30,					Six months ended June 30,
	2009			2008		2009			2008
Interest income:
Interest and fees on loans	$	5,008		$	5,087	$	10,039		$	10,425
Interest on securities available for sale		1,270			1,704		2,997			3,273
Interest on securities held to maturity		151			153		369			306
Interest on federal funds sold and due from banks		104			79		137			271
Total interest income		6,533			7,023		13,542			14,275
Interest expense:
Interest expense on deposits		1,910			2,167		3,892			4,903
Interest expense on other borrowings		247			311		494			560
Interest expense on subordinated debentures		50			66		107			173
Total interest expense		2,207			2,544		4,493			5,636
Net interest income		4,326			4,479		9,049			8,639
Provision for loan losses		316			81		3,452			146
Net interest income after provision for loan losses		4,010			4,398		5,597			8,493
Other income:
Service charges on deposit accounts		385			381		720			267
Gain on the sale of investment securities available-for-sale		279			63		2,068			763
Gain on loans held-for-sale		194			66		206			—
Income on bank owned life insurance		36			29		66			59
Total other income		894			539		3,060			1,152
Operating expenses:
Goodwill impairment		26,957			—		26,957			—
Salaries and employee benefits		1,873			1,900		3,811			3,866
Net occupancy expenses		467			512		1,050			1,009
FDIC deposit insurance premiums		360			67		431			139
Data processing fees		232			220		465			436
Outside service fees		177			212		380			426
Premises and equipment depreciation		122			121		246			220
Audit and accounting services		75			115		203			160
Core deposit intangible amortization		103			85		206			241
Other operating expenses		584			644		1,245			1,203
Total other expenses		30,950			3,876		34,994			7,700
(Loss) income before provision for income taxes		(26,046	)		1,061		(26,337	)		1,945
Income tax expense (benefit)		258			350		(343	)		653
Net (loss) income	$	(26,304	)	$	711	$	(25,994	)	$	1,292
Dividend on preferred stock and accretion		186			—		371			—
Net (loss) income available to common shareholders	$	(26,490	)	$	711	$	(26,365	)	$	1,292
Basic (loss) earnings per common share	$	(2.92	)	$	0.08	$	(2.91	)	$	0.14
Diluted (loss) earnings per common share	$	(2.92	)	$	0.07	$	(2.91	)	$	0.14

See accompanying notes to unaudited consolidated financial statements.

2

CENTRAL JERSEY BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(dollars in thousands, except share amounts)

	Common stock		Preferred stock		Additional paid-in capital			Accumulated other comprehensive income			Treasury stock			Retained earnings/ (deficit)			Total
Balance at December 31, 2007	$	91	$	—	$	60,787		$	848		$	—		$	7,160		$	68,886
Comprehensive loss:
Net income		—		—		—			—			—			1,292			1,292
Unrealized loss on securities available-for-sale, net of tax of $840		—		—		—			(1,392	)		—			—			(1,392	)
Total comprehensive loss																	$	(100	)
Exercise of stock options – 29,699 shares, including tax benefit $41		—		—		171			—			—			—			171
Purchase of 102,653 shares outstanding stock; placed in treasury		—		—		—			—			(762	)		—			(762	)
5% stock dividend		—		—		3,390			—			—			(3,390	)		—
Cash paid for fractional shares		—		—		(4	)		—			—			—			(4	)
Cumulative effect adjustment adoption of EITF 06-4		—		—		—			—			—			(228	)		(228	)
Balance at June 30, 2008	$	91	$	—	$	64,344		$	(544	)	$	(762	)	$	4,834		$	67,963
Balance at December 31, 2008	$	90	$	11,300	$	64,502		$	1,925		$	(1,806	)	$	6,441		$	82,452
Comprehensive loss:
Net loss		—		—		—			—			—			(25,994	)		(25,994	)
Unrealized loss on securities available-for-sale, net of tax of ($536)		—		—		—			(850	)		—			—			(850	)
Total comprehensive loss																	$	(26,844	)
Exercise of stock options – 107,537 shares, including tax benefit $23		1		—		362			—			—			—			363
Discount – preferred stock		—		—		88			—			—			(88	)		—
Cash dividends accrued on preferred stock		—		—		—			—			—			(283	)		(283	)
Balance at June 30, 2009	$	91	$	11,300	$	64,952		$	1,075		$	(1,806	)	$	(19,924	)	$	55,688

See accompanying notes to unaudited consolidated financial statements.

3

CENTRAL JERSEY BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(dollars in thousands)

	Six months ended June 30,
	2009			2008
Cash flows from operating activities:
Net (loss) income	$	(25,994	)	$	1,292
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Goodwill impairment charge		26,957			—
Earnings on cash surrender value of life insurance		(65	)		(59	)
Deferred tax (benefit) expense		(235	)		109
Provision for loan losses		3,452			146
Depreciation and amortization		365			326
Net premium amortization (discount accretion) on held-to-maturity securities		5			(8	)
Net premium amortization (discount accretion) on available-for-sale securities		326			(6	)
Core deposit intangible amortization		207			241
Gain on sale of securities available-for-sale		(2,068	)		(63	)
Gain on the sale of loans held-for-sale		(206	)		(267	)
Originations of loans held-for-sale		(10,925	)		(2,795	)
Proceeds from the sale of loans held-for-sale		10,070			3,464
(Increase) decrease in accrued interest receivable		(98	)		286
Increase in other assets		(3,095	)		(1,386	)
Decrease (increase) in accrued expenses and other liabilities		332			(481	)
Net cash (used in) provided by operating activities		(972	)		799
Cash flows from investing activities:
Maturities, sales of and paydowns on investment securities held-to-maturity		4,207			7,067
Maturities, sales of and paydowns on investment securities available-for-sale		131,548			28,445
Purchase of investment securities available-for-sale		(166,431	)		(42,249	)
Purchase of investment securities held-to-maturity		—			(2,985	)
Due from broker		—			(8,472	)
Net increase in loans		(14,521	)		(14,223	)
Purchases of premises and equipment, net		(158	)		(1,391	)
Net cash used in investment activities		(45,355	)		(33,808	)
Cash flows from financing activities:
Proceeds from stock options exercised		363			171
Net (decrease) increase in non-interest bearing deposits		(967	)		7,750
Net increase (decrease) in interest bearing deposits		26,878			(4,877	)
Net increase in other borrowings		11,705			7,292
Net increase in Federal Home Loan Bank advances		12,324			21,240
Repayment of Federal Home Loan Bank advances		35			—
Cash dividend on preferred stock		(223	)		—
Purchase of outstanding stock; placed in treasury		—			(762	)
Cash paid for fractional shares		—			(4	)
Net cash provided by financing activities		50,115			30,810
(Decrease) increase in cash and cash equivalents		3,788			(2,199	)
Cash and cash equivalents at beginning of period		9,767			14,877
Cash and cash equivalents at end of period	$	13,555		$	12,678
Cash paid during the period for:
Interest	$	4,485		$	5,636
Income taxes	$	1,082		$	1,162

See accompanying notes to unaudited consolidated financial statements.

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Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of Central Jersey Bancorp and its wholly-owned subsidiary, Central Jersey Bank, N.A., which are sometimes collectively referred to herein as the “Company.”

The interim unaudited consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, considered necessary for a fair presentation of the financial condition and results of operations for the periods presented. The results of operations for the three and six months ended June 30, 2009 are not necessarily indicative of the results of operations that may be expected for all of 2009.

Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

Earnings per share, average shares outstanding, stock options, stock appreciation rights and related amounts set forth herein for all periods presented have been adjusted to reflect the 5% stock dividend paid on July 1, 2008.

These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Central Jersey Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2008.

Certain prior period amounts have been reclassified to correspond with the current period presentation.

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of June 30, 2009, for items that should potentially be recognized or disclosed in the accompanying unaudited consolidated financial statements. The evaluation was conducted through August 10, 2009, the date the accompanying unaudited consolidated financials statements were issued.

On January 1, 2008, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements. On January 1, 2009, the Company adopted the provisions of SFAS No. 157-2, Effective Date of FASB Statement No. 157. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements (see Note 9 – Fair Value Measurements).

On January 1, 2008, the Company changed its accounting policy and recognized a cumulative-effect adjustment to retained earnings totaling $227,000. This adjustment, related to accounting for certain endorsement split-dollar insurance arrangements, was made in accordance with Emerging Issues Task Force (“EITF”) Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements (see Note 10—Post Retirement Benefits).

5

Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 2. (Loss) Earnings Per Common Share

The following tables reconcile shares outstanding for basic and diluted (loss) earnings per share for the three and six months ended June 30, 2009 and 2008:

	Three months ended June 30, 2009
(amounts in thousands, except for per share data)	Income (numerator)			Average shares (denominator)	Per share amount
Basic loss per common share
Net loss available to common shareholders	$	(26,490	)	9,087	$	(2.92	)
Effect of dilutive securities:
Stock options and warrants		—		—		—
Diluted loss per common share
Net loss available to common shareholders, plus assumed exercise of options and warrants	$	(26,490	)	9,087	$	(2.92	)

	Six months ended June 30, 2009
(amounts in thousands, except for per share data)	Income (numerator)			Average shares (denominator)	Per share amount
Basic loss per common share
Net loss available to common shareholders	$	(26,365	)	9,053	$	(2.91	)
Effect of dilutive securities:
Stock options and warrants		—		—		—
Diluted loss per common share
Net loss available to common shareholders, plus assumed exercise of options and warrants	$	(26,365	)	9,053	$	(2.91	)

For the three and six months ended June 30, 2009, the effect of dilutive securities related to the Company's employee and director stock option plans totaled 249,356 and 270,026, respectively, which, when added to the average basic shares outstanding totaling 9,087,287 and 9,053,082, respectively, would have resulted in average diluted shares outstanding totaling 9,336,643 and 9,323,108, respectively. However, in accordance with SFAS No. 128, Earnings per Share, due to the Company reporting a net loss for the three and six months ended June 30, 2009, including potential common shares in the denominator of a diluted per-share computation would result in an antidilutive per-share amount.

6

Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Three months ended June 30, 2008
(amounts in thousands, except for per share data)	Income (numerator)		Average shares (denominator)	Per share amount
Basic earnings per common share
Net income available to common shareholders	$	711	9,117	$	0.08
Effect of dilutive securities:
Stock options		—	433		—
Diluted earnings per common share
Net income available to common shareholders, plus assumed exercise of options	$	711	9,550	$	0.07

	Six months ended June 30, 2008
(amounts in thousands, except for per share data)	Income (numerator)		Average shares (denominator)	Per share amount
Basic earnings per common share
Net income available to common shareholders	$	1,292	9,141	$	0.14
Effect of dilutive securities:
Stock options		—	414		—
Diluted earnings per common share
Net income available to common shareholders, plus assumed exercise of options	$	1,292	9,555	$	0.14

For the three months ended June 30, 2009, dilutive securities relating to the Company’s employee and director stock option plans totaled 249,356, which, when added to the average basic shares outstanding of 9,087,287, resulted in average diluted shares outstanding of 9,336,643. For the six months ended June 30, 2009, dilutive securities relating to the Company’s employee and director stock option plans totaled 270,026, which, when added to the average basic shares outstanding of 9,053,082, resulted in average diluted shares outstanding of 9,323,108. For the three months ended June 30, 2008, dilutive securities relating to the Company’s employee and director stock option plans totaled 433,063, which, when added to the average basic shares outstanding of 9,116,813, resulted in average diluted shares outstanding of 9,549,876. For the six months ended June 30, 2008, dilutive securities relating to the Company’s employee and director stock option plans totaled 413,685, which, when added to the average basic shares outstanding of 9,141,078, resulted in average diluted shares outstanding of 9,554,763.

Capital Purchase Program

On October 14, 2008, the U.S. government announced a series of initiatives to strengthen market stability, improve the strength of financial institutions and enhance market liquidity. In connection therewith, the U.S. Department of the Treasury announced the Capital Purchase Program, pursuant to which qualified U.S. financial institutions could voluntarily build capital to increase the flow of financing to U.S. businesses and consumers and to support the U.S. economy.

7

Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On December 23, 2008, Central Jersey Bancorp, as part of the Capital Purchase Program, sold 11,300 shares of Central Jersey Bancorp’s Fixed Rate Cumulative Perpetual Senior Preferred Stock, Series A, having a liquidation preference of $1,000 per share (the “Series A Preferred Shares”), and a warrant to purchase up to 268,621 of Central Jersey Bancorp’s common stock at an exercise price of $6.31 per share (the “Warrant”). Central Jersey Bancorp is utilizing the $11.3 million in gross investment proceeds for general corporate purposes and to enhance lending operations. Both the Series A Preferred Shares and the Warrant qualify as components of Central Jersey Bancorp’s regulatory Tier 1 Capital.

The Series A Preferred Shares pay cumulative dividends at a rate of 5% per annum, or approximately $550,000 annually, and will reset to a rate of 9% at the end of the fifth year. The Warrant has a term of 10 years and is exercisable, in whole or part, at any time during the term. The exercise price for the Warrant was the market price of Central Jersey Bancorp’s common stock at the time of issuance calculated on a 20-trading day trailing average. The fair value of the Warrant was estimated on December 23, 2008 using the Black-Scholes option pricing model with the following weighted-average assumptions used: stock price $6.31, dividend yield of 0%; expected volatility of 46.50%; risk free interest rate of 1.45%; and expected life of five years.

Central Jersey Bancorp is subject to certain requirements regarding executive compensation and corporate governance during the period in which any obligation arising from financial assistance provided under the Capital Purchase Program remains outstanding. These requirements are set forth in the Emergency Economic Stabilization Act of 2008 (the “EESA”) and the regulations promulgated thereunder by the U.S. Department of the Treasury (the “Regulations”), and include the following: (1) Central Jersey Bancorp’s Compensation Committee is required to review incentive compensation arrangements with senior risk officers at least annually to ensure that no such arrangement encourages senior executive officers to take unnecessary and excessive risks that threaten the value of Central Jersey Bancorp, and the Compensation Committee must provide certifications to that effect to the OCC; (2) Central Jersey Bancorp is required to recover any bonus or incentive compensation paid to a senior executive officer that is based on statements of earnings that are subsequently proven to be materially inaccurate; and (3) Central Jersey Bancorp is prohibited from making any “golden parachute payments” as defined in the EESA and the Regulations.

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 (the “ARRA”) into law, which amended the executive compensation and corporate governance provisions of the EESA. The amendments elaborate on the requirements and obligations under the EESA and provide that Capital Purchase Program participants: (1) may not provide incentives for senior executive officers to take unnecessary and excessive risks that threaten the value of the financial institution; (2) must recover any bonus or incentive compensation paid to senior executive officers based on statements of earning that are subsequently proven to be materially inaccurate; (3) may not make any “golden parachute payments” to senior executive officers; (4) may not pay any bonus, retention award or incentive compensation to certain of the most highly compensated employees, except pursuant to employment contracts executed on or before February 11, 2009 and except for long-term restricted stock that meets certain requirements; (5) may not adopt any compensation plan that would encourage manipulation of reported earnings to enhance the compensation paid to any employee;

8

Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(6) must establish a compensation committee of independent directors to review employee compensation plans; and (7) must provide certain certifications regarding executive compensation and compliance with the requirements of the EESA. ARRA also provides that, subject to consultation with the appropriate federal banking agency, the Secretary of the U.S. Department of the Treasury will permit a participant in the Capital Purchase Program to repay any assistance previously provided under the Capital Purchase Program. The participant will not have to replace the assistance with Tier I Capital, as originally provided in the Capital Purchase Program.

Stock Appreciation Rights

On January 31, 2006, the Company granted under its 2005 Equity Incentive Plan, 173,644 Stock Appreciation Rights (“SARS”) (98,398 were granted to employees and 75,246 were granted to directors), each with an exercise price of $9.40. These SARS can only be settled in cash. The SARS vest over a four year period and expire February 1, 2016. The fair value of SARS granted was estimated on June 30, 2009 using the Black-Scholes option pricing model with the following weighted-average assumptions used: stock price $5.50; dividend yield of 0%; expected volatility of 74.39%; risk free interest rate of 2.56%; and expected life of seven years. These SARS had a fair value of approximately $3.38 per share at June 30, 2009. The Company recorded $29,000 share based payment expense for the six months ended June 30, 2009, related to the granting of SARS. As of June 30, 2009, total unvested compensation expense associated with the outstanding SARS was approximately $57,000 (pre-tax), which will vest over 10 months.

A summary of the status of the Company’s SARS as of and for the six months ended June 30, 2009 is presented below:

	As of and for the six months ended June 30, 2009
	SARS			Weighted average exercise price
Outstanding at beginning of year		130,811		$	9.40
Granted		—			—
Forfeited		(15,048	)	$	9.40
Exercised		—			—
Outstanding at period end		115,763		$	9.40
SARS exercisable at period end		86,822		$	9.40
Weighted average fair value of SARS granted	$	3.38
Unvested SARS at period end		28,941
Weighted average fair value of unvested SARS	$	97,821

9

Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Stock Option Plans

In 2000, the Company established its Employee and Director Stock Option Plan (the “Plan”). The Plan currently provides for the granting of stock options to purchase in aggregate up to 1,263,197 shares of the Company’s common stock, subject to adjustment for certain dilutive events such as stock distributions. During the three months ended June 30, 2009, no options were granted. As a result of the January 1, 2005 combination with Allaire Community Bank, all outstanding options granted under the Plan became fully vested. The Company does not anticipate granting any additional stock options under the Plan or any of the Allaire Community Bank stock option plans assumed by the Company.

A summary of the status of the Company’s stock options as of and for the six months ended June 30, 2009 is presented below:

	As of and for the six months ended June 30, 2009
	Shares		Weighted average exercise price
Outstanding at beginning of year	1,289,948		$	4.71
Granted	—			—
Forfeited	—			—
Exercised	(107,537	)	$	3.16
Outstanding at period end	1,182,411		$	5.14
Options exercisable at period end	1,182,411		$	5.14
Weighted average fair value of options granted				n/a

Stock Based Compensation

Effective January 1, 2006, the Company began recording compensation expense associated with stock options in accordance with SFAS No. 123(R), Share-Based Payment. Prior to January 1, 2006, the Company accounted for stock-based compensation related to stock options under the recognition and measurement principles of Accounting Principle Board Opinion No. 25; therefore, the Company measured compensation expense for its stock option plans using the intrinsic value method, that is, the excess, if any, of the fair market value of the Company’s stock at the grant date over the amount required to be paid to acquire the stock, and provided the disclosures required by SFAS No. 123(R) and SFAS No. 148, Accounting for Stock-Based Compensation. The Company has adopted the modified prospective transition method provided by SFAS No. 123(R), and, as a result, has not retroactively adjusted results from prior periods.

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Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As a result of the adoption of SFAS No. 123(R), the Company incurred no compensation expense related to the Company’s stock compensation plans for the three months ended June 30, 2009 and 2008, as no stock options were granted during 2009 and 2008 and all stock options were fully vested prior to January 1, 2006.

Note 3. Loans Receivable, Net and Loans Held-for-Sale

Loans receivable, net and loans held-for-sale at June 30, 2009 and December 31, 2008, consisted of the following (in thousands):

	June 30, 2009			December 31, 2008
Loan Type
Real estate loans – commercial	$	252,652		$	246,617
Home equity and second mortgages		57,828			51,688
Commercial and industrial loans		42,488			37,111
Construction loans		17,546			20,956
1-4 family real estate loans		2,374			2,646
Consumer loans		1,748			1,647
Total loans	$	374,636		$	360,665
Deferred origination costs, net		444			333
Allowance for loan losses		(7,605	)		(4,741	)
Loans receivable, net	$	367,475		$	356,257
Loans held-for-sale	$	1,312		$	400

Non-Performing Loans/Impaired Loans

Loans are considered to be non-performing if they (a) are on a non-accrual basis, (b) are past due ninety days or more and still accruing interest, or (c) have been renegotiated to provide a reduction or deferral of interest because of a weakening in the financial position of the borrowers. A loan, which is past due ninety days or more and still accruing interest, remains on accrual status only when it is both adequately secured as to principal and is in the process of collection.

When necessary, Central Jersey Bancorp performs individual loan reviews in accordance with SFAS No. 114, Accounting by Creditors for Impairment of a Loan, to determine whether any individually reviewed loans are impaired and, if impaired, measures a valuation allowance allocation in accordance with SFAS No. 114. A loan is recognized as impaired when it is probable that principal and/or interest are not collectible in accordance with the loan’s contractual terms. The Company considers loans on non-accrual status or risk rated “8” or higher as impaired and automatically subject to a SFAS No. 114 review. In addition, any other loan that management considers possibly impaired due to deteriorating conditions or for any other reasons, is, at management’s discretion, subject to a SFAS No. 114 review.

Non-performing/impaired loans totaled $11.5 million at June 30, 2009, as compared to $2.7 million at December 31, 2008. Of that amount, non-accrual loans totaled $8.5 million at June 30, 2009, as compared to $2.5 million at December 31, 2008. The increase in non-performing/impaired loans was due primarily to certain commercial loans which were placed on non-accrual status and/or deemed to be impaired during the six months ended June 30, 2009. The loans which were deemed to be impaired required a specific reserve in accordance with SFAS No.114. Specific allowance for loan loss totaled $1.6 million at June 30, 2009, as compared to $474,000 at December 31, 2008.

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Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

If the non-accrual loans had performed in accordance with their original terms, interest income would have increased by $194,000 and $252,000, respectively, for the three and six months ended June 30, 2009, as compared to $49,000 and $52,000, respectively, for the three and six months ended June 30, 2008. At June 30, 2009, there were no commitments to lend additional funds to borrowers whose loans were on non-accrual status.

The Company’s policy for interest income recognition on impaired loans is to recognize income on currently performing restructured loans under the accrual method. The Company recognizes income on non-accrual loans under the accrual basis when the principal payments on the loans become current and the collateral on the loan is sufficient to cover the outstanding obligation to the Company. If these factors do not exist, the Company does not recognize income. No interest income was recognized on impaired loans subsequent to classification as impaired in 2009. Total cash collected on impaired loans during the three and six months ended June 30, 2009 was $45,000 and $84,000, respectively, all of which was credited to the principal balance outstanding, as compared to no cash collected on impaired loans for the three and six months ended June 30, 2008.

The allowance for loan losses (“ALL”), which began the year at $4.7 million, or 1.31% of total loans, increased to $7.6 million at June 30, 2009, or 2.03% of total loans, resulting from credit deterioration of several commercial borrowers due to general economic conditions. There was $17,000 and $715,000, respectively, in loan charge-offs during the three and six months ended June 30, 2009, as compared to no loan charge-offs for the same periods in 2008. There were $119,000 and $121,000, respectively, in loan loss recoveries during the three and six months ended June 30, 2009, as compared to $3,000 and $6,000, respectively, for the same periods in 2008.

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Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	For the three months ended
(dollars in thousands)	June 30, 2009			December 31, 2008			June 30, 2008
General provision for loan losses	$	84		$	461		$	81
Specific provision for loan losses		232			459			—
Total provision for loan losses	$	316		$	920		$	81
Net charge-offs	$	17			—			—
Net charge-off ratio (annualized)		0.01	%		—			—
Average loans outstanding	$	354,999		$	353,324		$	324,078
(dollars in thousands)	At June 30, 2009			At December 31, 2008			At June 30, 2008
Non-performing loans (“NPL”) (includes non-accrual and impaired loans)	$	11,523		$	2,690		$	2,102
NPL to total loans ratio		3.07	%		0.75	%		0.63	%
Total ALL to total NPL		0.66x			1.76x			1.69x
NPL to tangible common equity + ALL ratio		22.74	%		5.66	%		4.90	%
NPL to Tier I capital + ALL ratio		21.61	%		4.45	%		4.38	%
General allowance for loan losses	$	6,017		$	4,267		$	3,560
Specific allowance for loan losses		1,588			474			—
Total allowance for loan losses	$	7,605		$	4,741		$	3,560
Allowance for loan losses to total loans ratio		2.03	%		1.31	%		1.08	%
Total loans	$	375,080		$	360,998		$	329,658
Tangible common equity	$	43,063		$	42,751		$	39,321
Tier I capital	$	45,727		$	55,740		$	44,325

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Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 4. Investment Securities

The amortized cost, gross unrealized gains and losses, and fair value of investment securities held-to-maturity and securities available-for-sale at June 30, 2009 and December 31, 2008 are as follows (in thousands):

	June 30, 2009
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Investment securities held-to-maturity:
Obligations of U.S. Government sponsored agencies	$	1,912	$	67	$	—	$	1,979
Mortgage-backed securities of U.S. Government sponsored agencies		8,555		226		—		8,782
Total	$	10,467	$	293	$	—	$	10,761
Investment securities available-for-sale:
Obligations of U.S. Government sponsored agencies	$	10,906	$	7	$	—	$	10,913
Municipal obligations		83,624		79		221		83,482
Mortgage-backed securities of U.S. Government sponsored agencies		84,303		1,965		129		86,139
Other debt securities		6,167		—		—		6,167
Total	$	185,000	$	2,052	$	350	$	186,701

	December 31, 2008
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Investment securities held-to-maturity:
Obligations of U.S. Government sponsored agencies	$	4,335	$	168	$	—	$	4,503
Mortgage-backed securities of U.S. Government sponsored agencies		10,344		277		—		10,621
Total	$	14,679	$	445	$	—	$	15,124
Investment securities available-for-sale:
Obligations of U.S. Government sponsored agencies	$	32,000	$	33	$	—	$	32,033
Mortgage-backed securities of U.S. Government sponsored agencies		130,868		3,059		5		133,922
Other debt securities		4,728		—		—		4,728
Total	$	167,596	$	3,092	$	5	$	170,683

14

Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The amortized cost and fair value of investment securities held-to-maturity and investment securities available-for-sale at June 30, 2009 by contractual maturity are shown below (in thousands). Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized cost		Fair value
Investment securities held-to-maturity:
Due in one year or less	$	—	$	—
Due after one year through fifth year		1,928		1,988
Due after fifth year through tenth year		4,203		4,338
Due after tenth year		4,336		4,435
Total	$	10,467	$	10,761
Investment securities available-for-sale:
Due in one year or less	$	73,564	$	73,600
Due after one year through fifth year		21,233		21,257
Due after fifth year through tenth year		23,466		24,009
Due after tenth year		66,737		67,835
Total	$	185,000	$	186,701

Management evaluates the debt securities of the U. S. Government, Government Sponsored Agencies, municipalities and other issuers which are held by the Company, for other-than-temporary impairment and considers the current economic conditions, the length of time and the extent to which the fair value has been less than cost, interest rates and the bond rating of each security. All of the debt securities held by the Company are highly rated as investment grade and management believes that the Company will not incur any losses as a result of these debt securities. The unrealized losses on the Company’s investments in debt securities are temporary in nature since they are primarily related to market interest rates and are not related to the underlying credit quality of the issuers within the Company’s investment portfolio. The Company has the intent to hold the securities and will not be required to sell the securities before recovery occurs.

Gross unrealized losses on both investment securities held-to-maturity and investment securities available-for-sale and their fair values, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2009 and December 31, 2008, were as follows (in thousands):

	June 30, 2009
	Less than 12 months				12 months or more				Total
Investment securities	Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value
Mortgage-backed securities	$	3	$	1,346	$	126	$	11,537	$	129	$	12,883
Municipal obligations	$	19	$	10,508	$	202	$	9,399	$	221	$	19,979
Total	$	22	$	11,854	$	328	$	20,936	$	350	$	32,862

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Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	December 31, 2008
	Less than 12 months				12 months or more				Total
Investment securities	Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value
Mortgage-backed securities	$	5	$	1,934	$	—	$	—	$	5	$	1,934
Total	$	5	$	1,934	$	—	$	—	$	5	$	1,934

Municipal obligations – The unrealized losses in municipal obligations were caused by general interest rate increases. Since the decrease in fair value is attributable to changes in interest rates and not credit quality, and because the Company has the intent to hold the securities and will not be required to sell the securities before recovery occurs, these securities are not considered other-than-temporarily impaired.

Mortgage-backed securities – The unrealized losses on mortgage-backed securities were caused by general interest rate increases. At June 30, 2009, there were 11 securities in the less than 12 months category and 18 securities in the 12 or more months category. Fannie Mae and Freddie Mac guarantee the contractual cash flows of these investment securities. Since the decrease in fair value is attributable to changes in interest rates and not credit quality, and because the Company has the intent to hold the securities and will not be required to sell the securities before recovery occurs, these investment securities are not considered other-than-temporarily impaired.

Note 5. Deposits

The major types of deposits at June 30, 2009 and December 31, 2008 were as follows (in thousands):

	June 30, 2009		December 31, 2008
Deposit Type
Demand deposits, non-interest bearing	$	74,980	$	75,947
Savings, N.O.W. and money market accounts		206,142		190,475
Certificates of deposit of less than $100		76,147		78,949
Certificates of deposit of $100 or more		87,457		73,444
Total	$	444,726	$	418,815

Note 6. Borrowings

Borrowed funds at June 30, 2009 and December 31, 2008 are summarized as follows (in thousands):

	June 30, 2009		December 31, 2008
Borrowings	$	95,805	$	71,741
Total	$	95,805	$	71,741

16

Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Borrowings were $95.8 million at June 30, 2009, as compared to $71.7 million at December 31, 2008. Borrowings typically include wholesale borrowing arrangements with correspondent banks as well as arrangements with deposit customers of Central Jersey Bank, N.A. to sweep funds into short-term borrowings. As of June 30, 2009, borrowings included $34.7 million in bank sweep funds, $21.2 million in Federal Home Loan Bank callable advances and $39.9 million in Federal Home Loan Bank fixed rate advances. These borrowings were used to fund interest-earning assets. Central Jersey Bank, N.A. uses investment securities to pledge as collateral for repurchase agreements. At June 30, 2009 and December 31, 2008, Central Jersey Bank, N.A. had unused lines of credit with the Federal Home Loan Bank (“FHLB”) of $36.9 million and $33.8 million, respectively.

At June 30, 2009, Central Jersey Bank, N.A. had outstanding Federal Home Loan Bank callable advances as follows (in thousands):

Date	Amount		Rate		Term	Call Feature
1/24/2008	$	10,000	2.710	%	10 year non-call 2 years	One Time
2/01/2008		5,000	2.903	%	7 year non-call 3 years	One Time
	$	15,000	2.774	%

At June 30, 2009, Central Jersey Bank, N.A. had the following outstanding Federal Home Loan Bank fixed rate advance (in thousands):

Date	Amount		Rate		Term	Maturity
2/01/2008	$	5,000	2.380	%	5 years	2/01/2013
5/28/2008	$	1,164	4.940	%	13 years	5/28/2021
	$	6,164	2.871	%

Note 7. Subordinated Debentures

In March 2004, MCBK Capital Trust I, a special purpose business trust of Central Jersey Bancorp, issued an aggregate of $5.0 million of trust preferred securities to ALESCO Preferred Funding III, a pooled investment vehicle. The securities issued by MCBK Capital Trust I are fully guaranteed by Central Jersey Bancorp with respect to distributions and amounts payable upon liquidation, redemption or repayment. These securities have a floating interest rate equal to the three-month LIBOR plus 285 basis points, which resets quarterly. The securities mature on April 7, 2034 and may be called at par by Central Jersey Bancorp any time after April 7, 2009. These securities were placed in a private transaction exempt from registration under the Securities Act.

The entire proceeds to MCBK Capital Trust I from the sale of the trust preferred securities were used by MCBK Capital Trust I in order to purchase $5.1 million of subordinated debentures from Central Jersey Bancorp. The subordinated debentures bear a variable interest rate equal to LIBOR plus 285 basis points. Although the subordinated debentures are treated as debt of Central Jersey Bancorp, they currently qualify as Tier I Capital investments, subject to the 25%

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Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

limitation under risk-based capital guidelines of the Federal Reserve. The portion of the trust preferred securities that exceeds this limitation qualifies as Tier II Capital of Central Jersey Bancorp. At June 30, 2009, $5.0 million of the trust preferred securities qualified for treatment as Tier I Capital. Central Jersey Bancorp is using the proceeds it received from the subordinated debentures to support the general balance sheet growth of Central Jersey Bancorp and to help ensure that Central Jersey Bank, N.A. maintains the required regulatory capital ratios.

On March 1, 2005, the Federal Reserve adopted a final rule that allows the continued inclusion of outstanding and prospective issuances of trust preferred securities in the Tier I Capital of bank holding companies, subject to stricter quantitative limits and qualitative standards. The new quantitative limits became effective after a five-year transition period which ended June 30, 2009. Under the final rules, trust preferred securities and other restricted core capital elements are limited to 25% of all core capital elements. Amounts of restricted core capital elements in excess of these limits may be included in Tier II Capital. At June 30, 2009, the only restricted core capital element owned by Central Jersey Bancorp is trust preferred securities. Central Jersey Bancorp believes that its trust preferred issues qualify as Tier I Capital. However, in the event that the trust preferred issues do not qualify as Tier I Capital, Central Jersey Bancorp and Central Jersey Bank, N.A. would remain “well capitalized.”

Note 8. Income Tax Expense (Benefit)

The Company recorded an income tax expense of $258,000 on a loss before taxes of $26.5 million for the three months ended June 30, 2009. Excluding the impact of the goodwill impairment charge, which is non tax-deductible, the Company’s effective tax rate was 28.32% for the three months ended June 30, 2009. For the three months ended June 30, 2008, the Company recorded an income tax expense of $350,000 on income before taxes of $1.1 million, resulting in an effective tax rate of 32.99%. The reduction in the Company’s effective tax rate was primarily the result of a larger proportion of the Company’s income being derived from tax-exempt sources.

The Company recorded an income tax benefit of $343,000 on a loss before taxes of $26.3 million for the six months ended June 30, 2009. Excluding the impact of the goodwill impairment charge, which is non tax-deductible, the Company’s effective tax benefit rate was (55.32%) for the six months ended June 30, 2009. For the six months ended June 30, 2008, the Company recorded an income tax expense of $653,000 on income before taxes of $1.9 million, resulting in an effective tax rate of 33.57%. The income tax benefit was due to the utilization of capital tax loss carry-forwards which resulted from the 2007 balance sheet restructuring initiative. As a result of the restructuring, a deferred tax valuation allowance was established against deferred tax assets generated from the capital tax loss carry-forwards. Since $772,000 of the $1.3 million in gains from the sale of available-for-sale investment securities, recorded during the six months ended June 30, 2009, were realized in CJB Investment Company, a wholly-owned subsidiary of Central Jersey Bank, N.A., these gains are considered capital gains and are permitted to be offset against the remaining capital tax loss carry-forwards. The federal income tax benefit is primarily the result of the reversal of the deferred tax valuation allowance which totaled approximately $369,000.

Note 9. Fair Value Measurements

Effective January 1, 2008, the Company adopted the provisions of SFAS No. 157, Fair Value Measurements, for financial assets and financial liabilities. Effective September 30, 2008, the

18

Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Company adopted the provisions of SFAS No. 157-3, Determining the Fair Value of a Financial Asset When The Market for That Asset Is Not Active. Effective January 1, 2009, the Company adopted the provisions of SFAS No. 157-2, Effective Date of FASB Statement No. 157, for non-financial assets and non-financial liabilities. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. The adoption of SFAS No. 157 for financial assets and financial liabilities and non-financial assets and non-financial liabilities did not have a significant impact on the Company’s consolidated financial condition or results of operations.

Beginning January 1, 2008, financial assets and financial liabilities recorded at fair value in the consolidated statement of financial condition are categorized based upon the level of judgment associated with the inputs used to measure their fair value. SFAS No. 157 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 or liabilities and the lowest priority to unobservable inputs. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The three levels of the fair value hierarchy under SFAS No. 157 are described below:

Basis of Fair Value Measurement

Level I	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level II	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; and
Level III	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value, effective January 1, 2008.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality, the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time.

Investment securities available-for-sale – Investment securities classified as available-for-sale are reported at fair value utilizing Level II inputs. For these investment securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Department of the Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the investment security’s terms and conditions, among other things.

19

Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Loans held-for-sale – The fair value of loans held-for-sale is determined, when possible, using quoted secondary-market prices. If no such quoted price exists, the fair value of a loan is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of that loan.

Impaired loans – Certain impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level III inputs based on customized net present value discounting criteria.

Servicing rights – The fair value of mortgage servicing rights is based on a valuation model that calculates the present value of estimated net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income. The Company is able to compare the valuation model inputs and results to widely available published industry data for reasonableness.

Goodwill – Goodwill is evaluated for impairment at least annually utilizing the “market approach” as prescribed by SFAS No. 142, Goodwill and Other Intangible Assets. Asset impairment is recorded when required. Goodwill represents the excess of the purchase price over the estimated fair value of identifiable net assets acquired through purchase acquisitions. In accordance with SFAS No. 142, goodwill with an indefinite useful life is not amortized, but is evaluated for impairment on an annual basis and on an interim basis when indicators of impairment exist.

Goodwill decreased to a zero balance due to an impairment charge recorded during the three months ended June 30, 2009, as compared to a $27.0 million balance at December 31, 2008. The $27.0 million in goodwill was recorded as an intangible asset on January 1, 2005 in conjunction with the combination of Monmouth Community Bancorp (the predecessor to Central Jersey Bancorp) and Allaire Community Bank.

The following tables summarize financial assets measured fair value on a recurring basis as of June 30, 2009 and December 31, 2008, segregated by the level of valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	At June 30, 2009
	Level I		Level II		Level III		Total fair value
Investment securities available-for-sale:
Obligations of U.S. Government sponsored agencies	$	—	$	10,913	$	—	$	10,913
Municipal obligations		—		89,649		—		89,649
Mortgage-backed securities of U.S. Government sponsored agencies		—		81,630		—		81,630
Other securities		—		4,509		—		4,509
Total assets measured fair value on a recurring basis	$	—	$	186,701	$	—	$	186,701

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Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	At December 31, 2008
	Level I		Level II		Level III		Total fair value
Investment securities available-for-sale:
Obligations of U.S. Government sponsored agencies	$	—	$	32,033	$	—	$	32,033
Municipal obligations		—		4,728		—		4,728
Mortgage-backed securities of U.S. Government sponsored agencies		—		129,411		—		129,411
Other securities		—		4,511		—		4,511
Total assets measured fair value on a recurring basis	$	—	$	170,683	$	—	$	170,683

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

The following tables summarize financial assets measured at fair value on a nonrecurring basis at June 30, 2009 and December 31, 2008, segregated by the level of valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	At June 30, 2009
	Level I		Level II		Level III		Total fair value
Impaired loans	$	—	$	—	$	9,935	$	9,935
Servicing rights		—		—		197		197
Goodwill		—		—		—		—
Total assets measured fair value on a nonrecurring basis	$	—	$	—	$	10,132	$	10,132

	At December 31, 2008
	Level I		Level II		Level III		Total Fair value
Impaired loans	$	—	$	—	$	1,533	$	1,533
Servicing rights		—		—		133		133
Total assets measured fair value on a nonrecurring basis	$	—	$	—	$	1,666	$	1,666

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 financial instruments at June 30, 2009 and December 31, 2008:

Cash and Cash Equivalents (Carried at Cost)

The carrying amounts reported in the Consolidated Statements of Financial Condition for cash and short-term instruments approximate those assets’ fair values.

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Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 quoted 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 illiquidity and/or nontransferability, 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 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.

Loans Receivable (Carried at Cost)

The fair values of loans are estimated using discounted cash flow analyses, using market rates at the Consolidated Statements of Financial Condition date that reflect the credit and 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 reprice frequently and with no significant change in credit risk, fair values are based on carrying values.

Loans Held for Sale (Carried at Lower of Cost or Fair Value)

The fair value of loans held for sale is determined, when possible, using quoted secondary-market prices. If no such quoted prices exist, the fair value of a loan is determined using quoted prices for a similar loan or loans, adjusted for the specific attributes of that loan.

Impaired Loans (Generally Carried at Fair Value)

Impaired loans are those that are accounted for under Financial Accounting Standards Board (“FASB”) Statement No. 114, Accounting by Creditors for Impairment of a Loan, in which the Company has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These impaired loans are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value of these impaired loans consists of the loan balances of $9.9 million, net of a valuation allowance of $1.6 million.

Servicing Rights (Carried at Lower of Cost or Fair Value)

The fair value of mortgage servicing rights is based on a valuation model that calculates the present value of estimated net servicing income. The valuation incorporates assumptions that market participants would use in estimating future net servicing income. The Company is able to compare the valuation model inputs and results to widely available published industry date for reasonableness.

22

Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Restricted Investment in Bank Stock (Carried at Cost)

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

Accrued Interest Receivable and Payable (Carried at Cost)

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

Deposit Liabilities (Carried at Cost)

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 on time deposits.

Borrowings (Carried at Cost)

Fair values of FHLB advances are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar credit risk characteristics, terms and remaining maturity. These prices obtained from this active market represent a fair value that is deemed to represent the transfer price if the liability were assumed by a third party.

Subordinated Debt (Carried at Cost)

The fair value of the subordinated debentures is assumed to approximate book value since the securities are variable rate.

Off-Balance Sheet Financial Instruments (Disclosed at Cost)

Fair values for the Company’s off-balance sheet financial instruments (lending commitments and letters of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties’ credit standing.

Limitations

Fair value estimates were made at June 30, 2009 and December 31, 2008, based upon pertinent market data and relevant information on each financial instrument. These estimates do not include any premium or discount that could result from an offer to sell the Company’s entire holdings of a particular financial instrument or category thereof at one time. Since no market exists for a substantial portion of the Company’s financial instruments, fair value estimates were necessarily based on judgments with respect to future loss experience, current economic conditions, risk assessments of various financial instruments involving a myriad of individual borrowers, and other factors. Given the subjective nature of these estimates, the uncertainties surrounding them and other matters of significant judgment that must be applied, these fair value estimations cannot be calculated with precision. Modifications in such assumptions could meaningfully alter these estimates. Since these fair value approximations were made solely for the Consolidated Statements of Financial Condition financial instruments at June 30, 2009 and

23

Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2008, no attempt was made to estimate the value of anticipated future business or the value of non-financial statement assets or liabilities. 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.

The estimated fair values of the Company’s financial instruments were as follows at June 30, 2009 and December 31, 2008 (dollars in thousands):

	June 30, 2009				December 31, 2008
	Book value		Fair value		Book value		Fair value
Financial Assets:
Cash and cash equivalents	$	13,555	$	13,555	$	9,767	$	9,767
Investment securities available-for-sale		186,782		186,782		170,683		170,683
Investment securities held-to-maturity		10,467		10,760		14,679		15,124
Loans, net		367,475		380,862		356,257		364,684
Loans held-for-sale		1,312		1,312		400		400
Impaired loans, net		9,935		9,935		1,533		1,533
Servicing rights		197		197		133		133
Restricted stock		6,107		6,107		4,982		4,982
Accrued interest receivable		2,349		2,349		2,251		2,251
Financial Liabilities:
Deposits		444,726		432,864		418,815		408,391
Borrowings		95,805		96,770		71,741		72,679
Accrued interest payable		225		225		217		217
Subordinated debentures		5,155		5,157		5,155		5,167
Off-balance sheet financial instruments	$	—	$	—	$	—	$	—

Note 10. Post Retirement Benefits

In September 2006, the EITF of the FASB discussed public comments received on two issues: (1) EITF Issue No. 06-4, Accounting for Deferred Compensation and Post-Retirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements, and (2) EITF Issue 06-5, Accounting for Purchases of Life Insurance — Determining the Amount that could be Realized in

24

Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Accordance with FASB Technical Bulletin 85-4 (Accounting for Purchases of Life Insurance). On September 7, 2006, the EITF agreed to clarify certain points based on public comments. The EITF reached a consensus that an employer should recognize a liability for future benefits under SFAS No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions, or APB Opinion No. 12, Omnibus Opinion – 1967, for an endorsement split-dollar life insurance arrangement subject to the EITF Issue No. 06-4. This liability is to be based on the substantive agreement with the employee. The consensus is effective for fiscal years beginning after December 15, 2007. Entities should recognize the effects of applying the consensus on this issue as a change in accounting principle through a cumulative-effect adjustment to retained earnings or to other components of equity or net assets in the statement of financial position as of the beginning of the year of adoption. Retrospective application to all prior periods is permitted.

During 2008, Central Jersey Bancorp recognized and recorded a deferred compensation liability of $230,000 for future benefits related to an endorsement split-dollar life insurance arrangement subject to EITF Issue No. 06-4.

Note 11. Goodwill

Goodwill decreased to a zero balance due to an impairment charge recorded during the three months ended June 30, 2009, compared to a $27.0 million balance at December 31, 2008. The $27.0 million in goodwill was recorded as an intangible asset on January 1, 2005 in conjunction with the combination of Monmouth Community Bancorp (the predecessor to Central Jersey Bancorp) and Allaire Community Bank. The goodwill impairment charge is a non-cash adjustment to Central Jersey Bancorp’s financial statements which has no affect on cash flows, liquidity, or tangible capital. As goodwill is excluded from regulatory capital, the impairment charge had no impact on the regulatory capital ratios of Central Jersey Bancorp or Central Jersey Bank, N.A., both of which remain “well-capitalized” under regulatory requirements.

The goodwill impairment charge was recorded in accordance with SFAS No. 142, which requires an interim goodwill impairment analysis under certain events, including “a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or otherwise disposed of.” On May 26, 2009, Central Jersey Bancorp and OceanFirst Financial Corp. (“OceanFirst”), the parent company of OceanFirst Bank, entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which Central Jersey Bancorp will merge with and into OceanFirst. As a result of this proposed merger announcement, Central Jersey Bancorp was required to perform an interim goodwill impairment analysis.

As previously reported in Central Jersey Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2008, the Company performed an annual goodwill impairment test at December 31, 2008. The results of the analyses, at that time, indicated that goodwill was not impaired. As a result of the continued decline in the Company’s common stock price, lower merger valuations in the financial services industry and the announced merger of Central Jersey Bancorp with OceanFirst, the Company initiated a goodwill impairment test as of June 30, 2009. The step one analysis at June 30, 2009, indicated potential impairment due in large part to the decline in the Company’s common stock price and lower merger valuations in the financial services industry. Upon completion of the second step test, it was determined that the carrying amount of the goodwill exceeded its implied fair value, therefore causing the recorded impairment charge. The methodology used in determining the amount of the impairment was to compare the appraised fair value of the Company, from the intangible impairment analysis, relative to the net asset value after adjusting for the market values of assets and liabilities. Since December 31, 2008, the trading price of the Company’s common stock and the appraised acquisition value has declined. At June 30, 2009, the Company’s actual market value was below the Company’s equity carrying value.

Note 12. Recent Accounting Pronouncements

FASB Statement No. 168

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162. SFAS 168 replaces SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, to establish the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in preparation of financial statements in conformity with generally accepted accounting principles in the United States. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. The Company is currently reviewing the effect this new pronouncement will have on its consolidated financial condition and results of operations.

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Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

FASB Statement No. 167

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R). This statement amends FASB Interpretation No. 46, Consolidation of Variable Interest Entities (revised December 2003) — an interpretation of ARB No. 51, or FIN 46(R), to require an enterprise to determine whether it’s variable interest or interests give it a controlling financial interest in a variable interest entity. The primary beneficiary of a variable interest entity is the enterprise that has both (1) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. SFAS 167 also amends FIN 46(R) to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. SFAS 167 is effective for fiscal years beginning after November 15, 2009. The Company is currently reviewing the effect this new pronouncement will have on its consolidated financial condition and results of operations.

FASB Statement No. 166

In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140. This Statement prescribes the information that a reporting entity must provide in its financial reports about a transfer of financial assets; the effects of a transfer on its financial position, financial performance and cash flows; and a transferor’s continuing involvement in transferred financial assets. Specifically, among other aspects, SFAS 166 amends Statement of Financial Standard No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, or SFAS 140, by removing the concept of a qualifying special-purpose entity from SFAS 140 and removes the exception from applying FIN 46(R) to variable interest entities that are qualifying special-purpose entities. It also modifies the financial-components approach used in SFAS 140. SFAS 166 is effective for fiscal years beginning after November 15, 2009. The Company is currently reviewing the effect this new pronouncement will have on its consolidated financial condition and results of operations.

SFAS No. 162

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. The hierarchy of authoritative accounting guidance is not expected to change current practice but is expected to facilitate the FASB’s plan to designate as authoritative its forthcoming codification of accounting standards. This Statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board’s (“PCAOB”) related amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles, to remove the GAAP hierarchy from its auditing standards. The hierarchical guidance provided by SFAS No. 162 is not expected to have a significant impact on the Company’s consolidated financial condition or results of operations.

26

Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

International Financial Reporting Standards

In November 2008, the SEC released a proposed roadmap regarding the potential use by U.S. issuers of financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”). IFRS is a comprehensive series of accounting standards published by the International Accounting Standards Board (“IASB”). Under the proposed roadmap, the Company may be required to prepare financial statements in accordance with IFRS as early as 2014. The SEC will make a determination in 2011 regarding the mandatory adoption of IFRS. The Company is currently assessing the impact that this potential change would have on its consolidated financial statements, and it will continue to monitor the development of the potential implementation of IFRS.

FSP FAS 132(R)-1

In December 2008, the FASB issued FSP FAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets. This FSP amends SFAS 132(R), Employers’ Disclosures about Pensions and Other Postretirement Benefits, to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The disclosures about plan assets required by this FSP shall be provided for fiscal years ending after December 15, 2009. The Company is currently reviewing the effect this new pronouncement will have on its consolidated financial condition and results of operations.

FSP FAS 157-4

In April 2009, the FASB issued FSP SFAS No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. FASB Statement 157, Fair Value Measurements, defines fair value as the price that would be received to sell the asset or transfer the liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. FSP FAS 157-4 provides additional guidance on determining when the volume and level of activity for the asset or liability has significantly decreased. The FSP also includes guidance on identifying circumstances when a transaction may not be considered orderly.

FSP FAS 157-4 provides a list of factors that a reporting entity should evaluate to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability. When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with Statement 157.

This FSP clarifies that when there has been a significant decrease in the volume and level of activity for the asset or liability, some transactions may not be orderly. In those situations, the entity must evaluate the weight of the evidence to determine whether the transaction is orderly. The FSP provides a list of circumstances that may indicate that a transaction is not orderly. A transaction price that is not associated with an orderly transaction is given little, if any, weight when estimating fair value.

27

Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

This FSP is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity choosing to early adopt FSP FAS 157-4 must also early adopt FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. The implementation of this standard did not have a material impact on the Company’s consolidated financial condition or results of operations.

FSP FAS 115-2 and FAS 124-2

In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. FSP FAS 115-2 and FAS 124-2 clarify the interaction of the factors that should be considered when determining whether a debt security is other-than-temporarily impaired. For debt securities, management must assess whether (a) it has the intent to sell the security and (b) it is more likely than not that it will be required to sell the security prior to its anticipated recovery. These steps are done before assessing whether the entity will recover the cost basis of the investment. Previously, this assessment required management to assert it has both the intent and the ability to hold a security for a period of time sufficient to allow for an anticipated recovery in fair value to avoid recognizing an other-than-temporary impairment. This change does not affect the need to forecast recovery of the value of the security through either cash flows or market price.

In instances when a determination is made that an other-than-temporary impairment exists but the investor does not intend to sell the debt security and it is not more likely than not that it will be required to sell the debt security prior to its anticipated recovery, FSP FAS 115-2 and FAS 124-2 changes the presentation and amount of the other-than-temporary impairment recognized in the income statement. The other-than-temporary impairment is separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive income.

This FSP is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity choosing to early adopt FSP FAS 115-2 and FAS 124-2 must also early adopt FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. The implementation of this standard did not have a material impact on the Company’s consolidated financial condition or results of operations.

FSP FAS 107-1 and APB 28-1

In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. FSP FAS 107-1 and APB 28-1 amend FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods.

28

Central Jersey Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

This FSP is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity choosing to early adopt FSP FAS 107-1 and APB 28-1 must also early adopt FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly and FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. The implementation of this standard did not have a material impact on the Company’s consolidated financial condition or results of operations.

Note 13. Commitments and Contingencies

From time to time, the Company is a party to routine legal proceedings within the normal course of business. Such routine legal proceedings in the aggregate are believed by management to be immaterial to the Company's financial condition or results of operations.

In addition, on June 8, 2009 and July 15, 2009, purported class action complaints were filed against the Company, each director of the Company (except that Robert S. Vuono was not named in the second class action complaint), and OceanFirst in the Superior Court of New Jersey in Ocean County. The actions were brought by two separate alleged shareholders of the Company, each on behalf of himself and all others similarly situated. The complaints allege, among other things, that the directors of the Company are in breach of their fiduciary duties to shareholders in connection with the Company’s entry into the Merger Agreement with OceanFirst. The complaints also allege that the Company and OceanFirst knowingly assisted the Company’s directors’ alleged breaches of fiduciary duty in connection with the proposed merger.

The complaints seek, among other things, damages and injunctive relief to enjoin the Company, the directors of the Company, and OceanFirst from consummating the transactions contemplated in the Merger Agreement, along with attorneys’ fees and costs. The Company believes that the allegations in the complaints are without merit and intend to vigorously defend against the claims and causes of action asserted in these legal matters.

Note 14. Proposed Merger

On May 26, 2009, the Company and OceanFirst, the parent company of OceanFirst Bank, entered into the Merger Agreement pursuant to which the Company will merge with and into OceanFirst. Concurrent with the merger, it is expected that Central Jersey Bank, N.A. will merge with and into OceanFirst Bank. Under the terms of the Merger Agreement, each outstanding share of the Company’s common stock will be converted into the right to receive 0.50 shares of OceanFirst common stock.

James S. Vaccaro, the current Chairman, President and Chief Executive Officer of the Company, will be appointed as an Executive Vice President and a member of the senior executive management team of OceanFirst Bank. In addition, at the closing of the merger, OceanFirst will expand the size of its board by two members and will appoint James G. Aaron, Esq. and Mark G. Solow, two non-officer members of the Company’s board of directors, to OceanFirst’s board.

The transaction is subject to customary closing conditions, including the receipt of regulatory approvals and approval by the shareholders of the Company and OceanFirst, and is intended to qualify as a tax free reorganization for federal income tax purposes, with shares of the Company exchanged for OceanFirst shares on a tax free basis. Certain of the executive officers and directors of the Company and OceanFirst have agreed to vote their shares in favor of the approval of the Merger Agreement at the shareholders meetings to be held by each company to vote on the proposed transaction. If the merger is not consummated under certain circumstances, the Company has agreed to pay OceanFirst a termination fee of $2,400,000. The merger is currently expected to be completed in the fourth quarter of 2009.

For more information regarding the proposed merger of the Company with and into OceanFirst, please see the Company’s Current Report on Form 8-K filed with the SEC on May 27, 2009 and the Merger Agreement attached thereto as Exhibit 2.1 and Amendment No. 1 to OceanFirst’s Registration Statement on Form S-4 (SEC File No. 333-160873) filed with the SEC on August 6, 2009.

29

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

General

The following discussion and analysis is intended to provide information about the Company’s financial condition as of June 30, 2009 and results of operations for the three and six months ended June 30, 2009 and 2008. The following information should be read in conjunction with the Company’s unaudited consolidated financial statements for the three and six months ended June 30, 2009 and 2008, including the related notes thereto, contained elsewhere in this document.

Critical Accounting Policies

“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as disclosures found elsewhere in this quarterly report on Form 10-Q, are based upon the Company’s unaudited consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these unaudited consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Note 1 to Central Jersey Bancorp’s audited consolidated financial statements for the year ended December 31, 2008, included with Central Jersey Bancorp’s annual report on Form 10-K for the year ended December 31, 2008, contains a summary of the Company’s significant accounting policies. Management believes the Company’s policy with respect to the methodology for the determination of the allowance for loan losses and the impairment of investment securities requires management to make difficult and subjective judgments that often require assumptions or estimates about uncertain matters. Changes in these judgments, assumptions or estimates could materially impact results of operations. This critical policy and its application are periodically reviewed with Central Jersey Bancorp’s Audit Committee and its Board of Directors.

Additional critical accounting policies relate to judgments about other asset impairments, including goodwill, servicing rights and deferred tax assets. Central Jersey Bancorp performs an annual analysis to test the aggregate balance of goodwill for impairment in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. For purposes of the goodwill impairment evaluation, Central Jersey Bancorp is identified as the reporting unit. The fair value of goodwill is determined using standard valuation methodologies similar to those used to determine the fair value of goodwill in a business combination, including a review of comparable transactions. If the carrying amount of goodwill pursuant to this analysis were to exceed the implied fair value of goodwill, an impairment loss would be recognized.

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks and overnight federal funds sold. Federal funds sold are generally sold for one-day periods.

Investment securities held-to-maturity are comprised of debt securities that Central Jersey Bank, N.A. The Company has the intent to hold the securities and will not be required to sell the securities before recovery occurs. Such securities are stated at cost, adjusted for amortization of premiums and accretion of discounts over the estimated remaining lives of the investment

30

securities utilizing the level-yield method. Investment securities to be held for indefinite periods of time and not intended to be held-to-maturity, including all equity securities, are classified as available-for-sale. Investment securities available-for-sale include investment securities that management intends to use as part of its asset/liability management strategy and that may be sold in response to changes in interest rates, resultant prepayment risk and other factors related to interest rate and resultant prepayment risk changes. Investment securities available-for-sale are carried at estimated fair value. Unrealized holding gains and losses on such investment securities available-for-sale are excluded from earnings and reported as a separate component of shareholders’ equity. Gains and losses on sales of investment securities are based on the specific identification method and are accounted for on a trade date basis.

On a quarterly basis, Central Jersey Bank, N.A. evaluates investment securities for other-than-temporary impairment. For individual investment securities classified as either available-for-sale or held-to-maturity, a determination is made as to whether a decline in fair value below the amortized cost basis is other than temporary. If the decline in fair value is judged to be other than temporary, the cost basis of the individual investment security shall be written down to fair value and the amount of the write-down shall be recognized in earnings. Subsequent increases in the fair value of available-for-sale securities shall be included as a separate component of equity; subsequent decreases in fair value, if not an other-than-temporary impairment, also shall be included as a separate component of equity. After evaluation, as of June 30, 2009, Central Jersey Bank, N.A. noted no other-than-temporary impairment. The overall investment security portfolio is in an unrealized gain position and does not reflect any significant individual investment security losses.

Loans are stated at unpaid principal balances, less unearned income and deferred loan fees and costs.

Interest on loans is credited to operations based upon the principal amount outstanding.

Loan origination and commitment fees and certain direct loan origination costs are deferred, and the net amount is amortized over the estimated life of the loan as an adjustment to the loan’s yield using the level-yield method.

A loan is considered impaired when, based on current information and events, it is probable that Central Jersey Bank, N.A. will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are measured based on the present value of expected future cash flows, or, as a practical expedient, at the loan’s observable market price, or the fair value of the underlying collateral, if the loan is collateral dependent. Conforming residential mortgage loans, home equity and second mortgages and loans to individuals, are excluded from the definition of impaired loans as they are characterized as smaller balance, homogeneous loans and are collectively evaluated.

The accrual of income on loans, including impaired loans, is generally discontinued when a loan becomes more than ninety days delinquent as to principal or interest or when other circumstances indicate that collection is questionable, unless the loan is well secured and in the process of collection. Income on non-accrual loans, including impaired loans, is recognized only in the period in which it is collected, and only if management determines that the loan principal is fully collectible. Loans are returned to an accrual status when a loan is brought current as to principal and interest and reasons for doubtful collection no longer exist.

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A loan is considered past due when a payment has not been received in accordance with the contractual terms. Generally, commercial loans are placed on non-accrual status when they are ninety days past due unless they are well secured and in the process of collection or, regardless of the past due status of the loan, when management determines that the complete recovery of principal and interest is in doubt. Commercial loans are generally charged off after an analysis is completed which indicates that collectibility of the full principal balance is in doubt. Consumer loans are generally charged off after they become one hundred twenty days past due. Mortgage loans are not generally placed on a non-accrual status unless the value of the real estate has deteriorated to the point that a potential loss of principal or interest exists. Subsequent payments are credited to income only if collection of principal is not in doubt. If principal and interest payments are brought contractually current and future collectibility is reasonably assured, loans are returned to accrual status. Mortgage loans are generally charged off when the value of the underlying collateral does not cover the outstanding principal balance. Loan origination and commitment fees less certain costs are deferred and the net amount amortized as an adjustment to the related loan’s yield. Loans held-for-sale are recorded at the lower of aggregate cost or market value.

The allowance for loan losses is based upon the Interagency Policy Statement on the Allowance for Loan and Lease Losses issued jointly by the federal banking agencies on December 13, 2006 (OCC Bulletin 2006-47) and management’s evaluation of the adequacy of the allowance, including an assessment of: (a) known and inherent risks in the loan portfolio, (b) the size and composition of the loan portfolio, (c) actual loan loss experience, (d) the level of delinquencies, (e) the individual loans for which full collectibility may not be assured, (f) the existence and estimated net realizable value of any underlying collateral and guarantees securing the loans, and (g) the current economic and market conditions. Although management uses the best information available, the level of the allowance for loan losses remains an estimate that is subject to significant judgment and short-term change. Various regulatory agencies, as an integral part of their examination process, periodically review Central Jersey Bank, N.A.’s allowance for loan losses. Such agencies may require Central Jersey Bank, N.A. to make additional provisions for loan losses based upon information available to them at the time of their examination. Furthermore, the majority of Central Jersey Bank, N.A.’s loans are secured by real estate in the State of New Jersey. Accordingly, the collectibility of a substantial portion of the carrying value of Central Jersey Bank, N.A.’s loan portfolio is susceptible to changes in local market conditions and may be adversely affected should real estate values decline or the Central New Jersey area experience an adverse economic climate. Future adjustments to the allowance for loan losses may be necessary due to economic, operating, regulatory and other conditions beyond Central Jersey Bank, N.A.’s control. Management believes that the allowance for loan losses is adequate as of June 30, 2009.

Income taxes are accounted for under the asset and liability method. Current income taxes are provided for based upon amounts estimated to be currently payable, for both federal and state income taxes. Deferred federal and state tax assets and liabilities are recognized for the expected future tax consequences of existing differences between financial statement and tax basis of existing assets and liabilities. Deferred tax assets are recognized for future deductible temporary differences and tax loss carry forwards if their realization is “more-likely-than-not.” The effect of a change in the tax rate on deferred taxes is recognized in the period of the enactment date. The determination of whether deferred tax assets will be realizable is predicted on estimates of future taxable income. Such estimates are subject to management’s judgment. A valuation reserve is established when management is unable to conclude that it is more likely than not that it will realize deferred tax assets based on the nature and timing of these items.

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Comprehensive income is segregated into net income and other comprehensive income. Other comprehensive income includes items previously recorded directly to equity, such as unrealized gains and losses on securities available-for-sale. Comprehensive income is presented in the Statements of Changes in Shareholders’ Equity.

Central Jersey Bank, N.A.’s operations are solely in the financial services industry and include traditional banking and other financial services. Central Jersey Bank, N.A. operates primarily in the geographical region of Central New Jersey. Management makes operating decisions and assesses performance based on an ongoing review of Central Jersey Bank, N.A.’s consolidated financial results. Therefore, Central Jersey Bancorp has a single operating segment for financial reporting purposes.

The Company originates SBA loans and, when favorable market conditions exist, sells up to 90% of the outstanding loan balance to investors, with servicing retained. Servicing rights fees, which are usually based on a percentage of the outstanding principal balance of the loan, are recorded for servicing functions. The Company accounts for its transfers and servicing of financial assets in accordance with SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The Company records servicing rights based on the fair values at the date of sale.

Core deposit premiums represent the intangible value of depositor relationships assumed in purchase acquisitions and are amortized on an accelerated basis over a period of ten years. The amortization of the core deposit premiums is recorded in other operating expenses.

Long-lived assets including goodwill and certain identifiable intangibles are periodically evaluated for impairment in value. Long-lived assets and deferred costs are typically measured whenever events or circumstances indicate that the carrying amount may not be recoverable. Certain identifiable intangibles and goodwill are evaluated for impairment at least annually utilizing the “market approach” as prescribed by SFAS No. 142, Goodwill and Other Intangible Assets. Asset impairment is recorded when required. Intangible assets consist of goodwill, core deposit premiums and servicing rights. Goodwill represents the excess of the purchase price over the estimated fair value of identifiable net assets acquired through purchase acquisitions. In accordance with SFAS No. 142, goodwill with an indefinite useful life is not amortized, but is evaluated for impairment on an annual basis and on an interim basis when indicators of impairment exist.

On January 7, 2008, Central Jersey Bancorp announced a common stock repurchase program. As authorized by Central Jersey Bancorp’s Board of Directors, Central Jersey Bancorp could repurchase up to 5.7%, or 525,000 shares, of the 9,183,290 shares of its common stock outstanding at the time the repurchase program was announced. Repurchases could be made from time to time, in the open market, in unsolicited negotiated transactions or in such other manner deemed appropriate by management, at prices not exceeding prevailing market prices, subject to availability of the shares, over 24 months ending December 31, 2009, or such shorter or longer period of time as Central Jersey Bancorp determined. The acquired shares are held in treasury to be used for general corporate purposes. Central Jersey Bancorp’s repurchase activities were transacted in accordance with SEC safe harbor rules and guidance for issuer repurchases. During the year ended December 31, 2008, Central Jersey Bancorp repurchased 246,448 shares of its common stock at an average price of $7.29 per share. Central Jersey Bank,

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N.A. declared and paid $2.045 million in cash dividends to Central Jersey Bancorp in order to effectuate the common stock repurchase program. Effective December 23, 2008, Central Jersey Bancorp suspended its stock repurchase program due to its participation in the U.S. Department of the Treasury’s Capital Purchase Program, as further described herein.

Overview

Central Jersey Bancorp reported a net loss and a net loss available to common shareholders of $26.3 million and $26.5 million, respectively, for the three months ended June 30, 2009, as compared to $711,000 for both net income and net income available to common shareholders for the same period in 2008. The net income available to common shareholders figure takes into account $186,000 in preferred stock discount amortization and preferred stock dividends accrued and paid to the U.S. Department of the Treasury as part of the Capital Purchase Program during the three months ended June 30, 2009. During the three months ended June 30, 2009, Central Jersey Bancorp recognized a $27.0 million non-cash goodwill impairment charge. Excluding the goodwill impairment charge, Central Jersey Bancorp reported net income and net income available to common shareholders of $653,000 and $467,000, respectively, for the three months ended June 30, 2009, as compared to $711,000 for both for the same period in 2008. The decrease in net income is primarily attributable to a one-time Federal Deposit Insurance Corporation (the “FDIC”) deposit insurance assessment of $257,000 and a $316,000 provision for loan losses charge recorded during the three months ended June 30, 2009. These expenses were partly offset by $279,000 in gains realized from the sale of investment securities during the period. Basic and diluted loss per share for the three months ended June 30, 2009 were ($2.92), as compared to basic and diluted earnings per share of $0.08 and $0.07, respectively, for the same period in 2008.

The $27.0 million in goodwill was recorded as an intangible asset on January 1, 2005 in conjunction with the combination of, the then, Monmouth Community Bancorp (the predecessor to Central Jersey Bancorp) and Allaire Community Bank. The goodwill impairment charge is a non-cash adjustment to Central Jersey Bancorp’s financial statements which has no affect on cash flows, liquidity, or tangible capital. As goodwill is excluded from regulatory capital, the impairment charge had no impact on regulatory capital ratios of Central Jersey Bancorp or Central Jersey Bank, N.A., both of which remain “well-capitalized” under regulatory requirements. The goodwill impairment charge was recorded in accordance with SFAS No. 142, Goodwill and Other Intangible Assets, which requires an interim goodwill impairment analysis under certain events.

For the six months ended June 30, 2009, Central Jersey Bancorp reported a net loss and a net loss available to common shareholders of $26.0 million and $26.4 million, respectively, as compared to $1.3 million for both net income and net income available to common shareholders for the same period in 2008. The net income available to common shareholders figure considers $371,000 in preferred stock discount amortization and preferred stock dividends accrued and paid to the U.S. Department of the Treasury as part of the Capital Purchase Program during the six months ended June 30, 2009. During the six months ended June 30, 2009, Central Jersey Bancorp recognized the previously-mentioned $27.0 million goodwill impairment charge. Excluding the non-cash goodwill impairment charge, Central Jersey Bancorp reported net income and net income available to common shareholders of $963,000 and $592,000, respectively, for the six months ended June 30, 2009, as compared to $1.3 million for both for the same period in 2008. Basic and diluted loss per share for the six months ended June 30, 2009 were ($2.91), as compared to basic and diluted earnings per share of $0.14 for both for the same period in 2008. Per share earnings were adjusted in all periods to reflect the 5% stock dividend paid on July 1, 2008.

Total assets of $603.3 million at June 30, 2009 were comprised primarily of $367.5 million in net loans, $197.2 million in investment securities, $13.6 million in cash and cash equivalents and $1.3

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million in residential loans held-for-sale, as compared to total assets of $599.4 million at December 31, 2008, which primarily consisted of $356.3 million in net loans, $185.4 million in investment securities, $9.8 million in cash and cash equivalents and $400,000 in residential loans held-for-sale. Total assets at June 30, 2009 were funded primarily through deposits totaling $444.7 million and other borrowings totaling $95.8 million, as compared to deposits totaling $418.8 million and other borrowings totaling $71.7 million at December 31, 2008.

Non-performing/impaired loans totaled $11.5 million at June 30, 2009, as compared to $2.7 million at December 31, 2008. Of that amount, non-accrual loans totaled $8.5 million at June 30, 2009, as compared to $2.5 million at December 31, 2008. The increase in non-performing/impaired loans was due primarily to certain commercial loans which were placed on non-accrual status and/or deemed to be impaired during the six months ended June 30, 2009. The loans which were deemed to be impaired required a specific reserve in accordance with SFAS No. 114. There was $17,000 and $715,000, respectively, in loan charge-offs during the three and six months ended June 30, 2009, as compared to no loan charge-offs for the same periods in 2008. There were $119,000 and $121,000, respectively, in loan loss recoveries during the three and six months ended June 30, 2009, as compared to $3,000 and $6,000 for the same periods in 2008.

Results of Operations

General

Central Jersey Bancorp’s principal source of revenue is derived from its bank subsidiary’s net interest income, which is the difference between interest income on earning assets and interest expense on deposits and borrowed funds. Interest-earning assets consist principally of loans, investment securities and federal funds sold, while the sources used to fund such assets consist primarily of deposits. Central Jersey Bancorp’s net income is also affected by its bank subsidiary’s provision for loan losses, other-than-temporary impairment of investment securities, other income and other expenses. Other income consists primarily of service charges and fees. Other expenses consist primarily of salaries and employee benefits, occupancy costs, data processing fees and other operating related expenses.

For the Three Months Ended June 30, 2009 and 2008

Net Interest Income

Net interest income was $4.3 million for the three months ended June 30, 2009, as compared to $4.5 million for the same period in 2008. Net interest income for the three months ended June 30, 2009 and 2008 was comprised primarily of $5.0 million and $5.1 million, respectively, in interest and fees on loans, $1.4 million and $1.9 million, respectively, in interest on investment securities and $104,000 and $79,000, respectively, in interest income on federal funds sold and due from banks, less interest expense on deposits of $1.9 million and $2.2 million, respectively, interest expense on borrowed funds of $247,000 and $311,000, respectively, and interest expense on subordinated debentures of $50,000 and $66,000, respectively. The net interest margin for the three months ended June 30, 2009 was 3.27%, as compared to 3.79% for the same period in 2008.

Interest income was $6.5 million for the three months ended June 30, 2009, as compared to $7.0 million for the same period in 2008. This represents a decrease of $490,000, or 7.0%. The average yield on interest–earning assets decreased to 4.46% for the three months ended June 30, 2009,

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from 5.87% for the same period in 2008. The decrease in the average yield on interest-earning assets for the three months ended June 30, 2009 was primarily due to the significant reduction in the general level of short term interest rates and the 500 basis point reduction in the Prime Rate of interest which occurred between September 2007 and December 2008. Average interest-earning assets, which were 89.7% of average total assets, totaled $551.5 million for the three months ended June 30, 2009, and were comprised of $355.0 million in loans, $189.6 million in investment securities, $1.0 million in federal funds sold and $5.9 million in other interest bearing deposits.

Interest expense was $2.2 million for the three months ended June 30, 2009, as compared to $2.5 million for the same period in 2008. This represents a decrease of $337,000, or 13.2%. The decrease was due primarily to average cost of deposits and interest bearing liabilities which decreased to an average cost of 1.91% for the three months ended June 30, 2009 from an average cost of 2.66% for the same period in 2008. Average interest-bearing deposits totaled $362.3 million for the three months ended June 30, 2009, as compared to $319.7 million for the same period in 2008, an increase of $42.5 million, or 13.3%, and were comprised of $144.4 million in interest-bearing checking and money market deposits, $56.8 million in savings deposits and $161.1 million in time deposits. Interest expense associated with borrowings and subordinated debentures totaled $247,000 and $50,000, respectively, for the three months ended June 30, 2009, as compared to $311,000 and $66,000, respectively, for the same period in 2008. Borrowings for the three months ended June 30, 2009 averaged $89.8 million, as compared to $53.2 million for the same period in 2008. The increase was due to growth in the bank subsidiary’s sweep account product for business customers and in FHLB advances. The FHLB advances were used to fund interest-earning assets during the period.

Provision for Loan Losses

For the three months ended June 30, 2009, the provision for loan losses was $316,000, as compared to $81,000 for the same period in 2008. The recorded provision for loan losses was mostly related to the risk rating downgrade of certain loans, a $233,000 increase in the specific reserve of certain impaired loans and loan charge-offs totaling $17,000. The significant increase in the provision for loan losses is due to the credit deterioration of certain commercial loans as a result of general economic conditions. There were $17,000 in loan charge-offs during the three months ended June 30, 2009, as compared to no loan charge-offs for the same period in 2008. Loan loss recoveries totaled $119,000 during the three months ended June 30, 2009, as compared to $3,000 for the same period in 2008.

Non-Interest Income

Non-interest income, which consists of service charges on deposit accounts, gains on the sale of investment securities available-for-sale, gains on the sale of loans held-for-sale and income from bank owned life insurance was $894,000 for the three months ended June 30, 2009, as compared to $539,000 for the same period in 2008. Gains on the sale of investment securities available-for-sale totaled $279,000 for the three months ended June 30, 2009, as compared to $63,000 for the same period in 2008. These gains were generated as a result of favorable market conditions due to the low interest rate environment. Gains on the sale of loans held-for-sale were $194,000 for the three months ended June 30, 2009, as compared to $66,000 for the three months ended June 30, 2008. The increase in gains on the sale of loans held-for-sale was due to fees realized from the sale and servicing of SBA loans for the six months ended June 30, 2009. Servicing rights fees recorded in conjunction with SBA loans sold were $70,000 for the three months ended June 30, 2009, as compared to $28,000 for the same period in 2008. The secondary market for SBA loans has been soft since the latter part of 2008 and, as a result, most newly originated SBA loans were held in Central Jersey Bank, N.A.’s loan portfolio.

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Non-Interest Expense

Excluding the $27.0 million non-cash goodwill impairment charge recorded for the three months ended June 30, 2009, non-interest expense was $4.0 million, as compared to $3.9 million for the same period in 2008. Non-interest expense generally includes costs associated with employee salaries and benefits, occupancy expenses, data processing fees, core deposit intangible amortization, and other operating expenses.

The $27.0 million in goodwill was recorded as an intangible asset on January 1, 2005 in conjunction with the combination of Monmouth Community Bancorp (the predecessor to Central Jersey Bancorp) and Allaire Community Bank. The goodwill impairment charge is a non-cash adjustment to Central Jersey Bancorp’s financial statements which has no affect on cash flows, liquidity, or tangible capital. As goodwill is excluded from regulatory capital, the impairment charge had no impact on regulatory capital ratios of Central Jersey Bancorp or Central Jersey Bank, N.A., both of which remain “well-capitalized” under regulatory requirements. The goodwill impairment charge was recorded in accordance with SFAS No. 142, Goodwill and Other Intangible Assets, which requires an interim goodwill impairment analysis under certain events.

On February 27, 2009 the Board of Directors of the FDIC voted to amend the restoration plan for the Deposit Insurance Fund. The Board also took action to ensure the continued strength of the insurance fund by imposing a special assessment on insured institutions of 5 basis points, implementing changes to the risk-based assessment system, and setting rates beginning the second quarter of 2009. The special assessment payment is to be made September 30, 2009; however, in accordance with the rule, the full amount of $257,000 was accrued in the second quarter of 2009, when the June 30 deposits were measurable.

The table below presents non-interest expense, excluding the $27.0 million non-cash goodwill impairment charge, by major category, for the three months ended June 30, 2009 and 2008 (in thousands):

	Three months ended June 30,
	2009		2008
Non-Interest Expense
Salaries and employee benefits	$	1,873	$	1,900
Net occupancy expenses		467		512
FDIC deposit insurance premiums		360		67
Data processing fees		232		212
Outside service fees		177		220
Premises and equipment depreciation		122		303
Legal fees		39		65
Audit and tax fees		75		85
Core deposit intangible amortization		103		121
Printing, stationery and supplies		50		53
Advertising and marketing expenses		57		72
Other operating expenses		438		266
Total	$	3,993	$	3,876

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Income Tax Expense

The Company recorded an income tax expense of $258,000 on a loss before taxes of $26.5 million for the three months ended June 30, 2009. Excluding the impact of the goodwill impairment charge, which is non tax-deductible, the Company’s effective tax rate was 28.32% for the three months ended June 30, 2009. For the three months ended June 30, 2008, the Company recorded an income tax expense of $350,000 on income before taxes of $1.1 million, resulting in an effective tax rate of 32.99%. The reduction in the Company’s effective tax rate was primarily the result of a larger proportion of the Company’s income being derived from tax-exempt sources.

For the Six Months Ended June 30, 2009 and 2008

Net Interest Income

Net interest income was $9.1 million for the six months ended June 30, 2009, as compared to $8.6 million for the same period in 2008. Net interest income for the six months ended June 30, 2009 and 2008 was comprised primarily of $10.0 million and $10.4 million, respectively, in interest and fees on loans, $3.4 million and $3.6 million, respectively, in interest on investment securities and $137,000 and $271,000, respectively, in interest income on federal funds sold and due from banks, less interest expense on deposits of $3.9 million and $4.9 million, respectively, interest expense on borrowed funds of $494,000 and $560,000, respectively, and interest expense on subordinated debentures of $107,000 and $173,000, respectively. The net interest margin for the six months ended June 30, 2009 was 3.36%, as compared to 3.66% for the same period in 2008.

Interest income was $13.5 million for the six months ended June 30, 2009, as compared to $14.3 million for the same period in 2008. This represents a decrease of $733,000, or 5.1%. The average yield on interest–earning assets decreased to 4.94% for the six months ended June 30, 2009, from 5.98% for the same period in 2008. The decrease in the average yield on interest-earning assets for the six months ended June 30, 2009 was primarily due to the significant reduction in the general level of short term interest rates and the 500 basis point reduction in the Prime Rate of interest which occurred between September 2007 and December 2008. Average interest-earning assets, which were 92.3% of average total assets, totaled $555.9 million for the six months ended June 30, 2009, and were comprised of $365.6 million in loans, $183.9 million in investment securities, $830,000 in federal funds sold and $5.6 million in other interest bearing deposits.

Interest expense was $4.5 million for the six months ended June 30, 2009, as compared to $5.6 million for the same period in 2008. This represents a decrease of $1.1 million, or 20.3%. The decrease was due primarily to average cost of deposits and interest bearing liabilities which decreased to an average cost of 2.01% for the six months ended June 30, 2009 from an average cost of 2.51% for the same period in 2008. Average interest-bearing deposits totaled $356.2 million for the six months ended June 30, 2009, as compared to $326.6 million for the same period in 2008, an increase of $29.6 million, or 9.1%, and were comprised of $136.9 million in interest-bearing checking and money market deposits, $59.7 million in savings deposits and $159.6 million in time deposits. Interest expense associated with borrowings and subordinated debentures totaled $494,000 and $107,000, respectively, for the six months ended June 30, 2009, as compared to $560,000 and $173,000, respectively, for the same period in 2008. Borrowings for the six months ended June 30, 2009 averaged $84.7 million, as compared to $46.5 million for the same period in 2008. The increase was due to growth in the bank subsidiary’s sweep account product for business customers and in FHLB advances. The FHLB advances were used to fund interest-earning assets during the period.

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Provision for Loan Losses

For the six months ended June 30, 2009, the provision for loan losses was $3.5 million, as compared to $146,000 for the same period in 2008. The recorded provision for loan losses was mostly related to the risk rating downgrade of certain loans, a $1.1 million increase in the specific reserve of certain impaired loans and loan charge-offs totaling $715,000. The significant increase in the provision for loan losses is due to the credit deterioration of certain commercial loans as a result of general economic conditions. There were $715,000 in loan charge-offs during the six months ended June 30, 2009, as compared to no loan charge-offs for the same period in 2008. Loan loss recoveries totaled $121,000 during the six months ended June 30, 2009, as compared to $6,000 for the same period in 2008.

Non-Interest Income

Non-interest income, which consists of gains on the sale of investment securities available-for-sale, service charges on deposit accounts, income from bank owned life insurance and gains on the sale of loans held-for-sale, was $3.0 million for the six months ended June 30, 2009, as compared to $1.2 million for the same period in 2008. Gains on the sale of investment securities available-for-sale totaled $2.1 million for the six months ended June 30, 2009, as compared to $763,000 for the same period in 2008. These gains were generated as a result of favorable market conditions due to the low interest rate environment. Gains on the sale of loans held-for-sale were $206,000 for the six months ended June 30, 2009, as compared to no gains for the same period in 2008. The increase in gains on the sale of loans held-for-sale was due to fees realized from the sale and servicing of SBA loans for the six months ended June 30, 2009. Servicing rights fees recorded in conjunction with SBA loans sold were $70,000 for the six months ended June 30, 2009, as compared to $107,000 for the same period in 2008. The secondary market for SBA loans has been soft since the latter part of 2008 and, as a result, most newly originated SBA loans were held in Central Jersey Bank, N.A.’s loan portfolio.

Non-Interest Expense

Excluding the $27.0 million non-cash goodwill impairment charge recorded for the six months ended June 30, 2009, non-interest expense was $8.0 million, as compared to $7.7 million for the same period in 2008. Non-interest expense generally includes costs associated with employee salaries and benefits, occupancy expenses, data processing fees, core deposit intangible amortization, and other operating expenses.

The $27.0 million in goodwill was recorded as an intangible asset on January 1, 2005 in conjunction with the combination of Monmouth Community Bancorp (the predecessor to Central Jersey Bancorp) and Allaire Community Bank. The goodwill impairment charge is a non-cash adjustment to Central Jersey Bancorp’s financial statements which has no affect on cash flows, liquidity, or tangible capital. As goodwill is excluded from regulatory capital, the impairment charge had no impact on regulatory capital ratios of Central Jersey Bancorp or Central Jersey Bank, N.A., both of which remain “well-capitalized” under regulatory requirements. The goodwill impairment charge was recorded in accordance with SFAS No. 142, Goodwill and Other Intangible Assets, which requires an interim goodwill impairment analysis under certain events.

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On February 27, 2009 the Board of Directors of the FDIC voted to amend the restoration plan for the Deposit Insurance Fund. The Board also took action to ensure the continued strength of the insurance fund by imposing a special assessment on insured institutions of 5 basis points, implementing changes to the risk-based assessment system, and setting rates beginning the second quarter of 2009. The special assessment payment is to be made September 30, 2009; however, in accordance with the rule, the full amount of $257,000 was accrued in the second quarter of 2009, when the June 30 deposits were measurable.

The table below presents non-interest expense, excluding the $27.0 million non-cash goodwill impairment charge, by major category, for the six months ended June 30, 2009 and 2008 (in thousands):

	Six months ended June 30,
	2009		2008
Non-Interest Expense
Salaries and employee benefits	$	3,811	$	3,866
Net occupancy expenses		1,050		1,009
FDIC deposit insurance premiums		431		139
Data processing fees		465		436
Outside service fees		380		426
Premises and equipment depreciation		246		220
Legal fees		190		110
Audit and tax fees		203		160
Core deposit intangible amortization		207		241
Printing, stationery and supplies		112		104
Advertising and marketing expenses		116		139
Other operating expenses		826		850
Total	$	8,037	$	7,700

Income Tax (Benefit) Expense

The Company recorded an income tax benefit of $343,000 on a loss before taxes of $26.3 million for the six months ended June 30, 2009. Excluding the impact of the goodwill impairment charge, which is non tax-deductible, the Company’s effective tax benefit rate was (55.32%) for the six months ended June 30, 2009. For the six months ended June 30, 2008, the Company recorded an income tax expense of $653,000 on income before taxes of $1.9 million, resulting in an effective tax rate of 33.57%. The income tax benefit was due to the utilization of capital tax loss carry-forwards which resulted from the 2007 balance sheet restructuring initiative. As a result of the restructuring, a deferred tax valuation allowance was established against deferred tax assets generated from the capital tax loss carry-forwards. Since $772,000 of the $1.3 million in gains from the sale of available-for-sale investment securities, recorded during the six months ended June 30, 2009, were realized in CJB Investment Company, a wholly-owned subsidiary of Central Jersey Bank, N.A., these gains are considered capital gains and are permitted to be offset against the remaining capital tax loss carry-forwards. The federal income tax benefit is primarily the result of the reversal of the deferred tax valuation allowance which totaled approximately $369,000.

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Financial Condition

Cash and Cash Equivalents

Cash and cash equivalents consist primarily of cash on hand, due from banks and federal funds sold. At June 30, 2009, cash and cash equivalents were $13.6 million, an increase of $3.8 million, or 38.8%, from the December 31, 2008 total of $9.8 million. This increase was due primarily to the timing of cash flows related to the Company’s business activities.

Investment Portfolio

Investment securities totaled $197.2 million at June 30, 2009, an increase of $11.8 million, or 6.4%, over the December 31, 2008 total of $185.4 million. The increase was primarily due to the purchase of $43.2 million of mortgage-backed securities, $91.7 million of tax-exempt municipal bond and note obligations and $11.8 million in government-sponsored agency securities. For the six months ended June 30, 2009, principal pay downs of securities totaled $19.1 million, sales of mortgage-backed securities totaled $78.2 million, $35.3 million of government-sponsored agency securities were matured and/or called, $592,000 of municipal bonds were matured and/or called and net premium/discount amortization totaled $331,000. In addition, at June 30, 2009, the net change of the unrealized gain on available-for-sale securities decreased by $1.4 million from December 31, 2008.

Loan Portfolio

Loans, net of the allowance for loan losses, closed the three months ended June 30, 2009 at $367.5 million, a decrease of $11.2 million, or 3.1%, from the $356.3 million balance at December 31, 2008. Gross loans totaled $375.1 million at June 30, 2009, an increase of $14.1 million, or 3.9%, over the $361.0 million balance at December 31, 2008. The increase in loan balances was due primarily to the origination of commercial real estate loans, consumer home equity loans and lines of credit during the period.

Loan portfolio composition remained fairly consistent at June 30, 2009, with commercial loans as a percentage of total loans outstanding decreasing to 83.5% at June 30, 2009 from 84.5% at December 31, 2008.

Loans held-for-sale at June 30, 2009, totaled $1.3 million, as compared to $400,000 at December 31, 2008. The increase in loans held-for-sale is due primarily to the timing of residential mortgage loan closings.

Allowance for Loan Losses and Related Provision

The allowance for loan losses, which began the year at $4.7 million, or 1.31% of total loans, increased to $7.6 million at June 30, 2009, or 2.03% of total loans. There was $17,000 and $715,000, respectively, in loan charge-offs during the three and six months ended June 30, 2009, as compared to no loan charge-offs for the same periods in 2008. There were $119,000 and $121,000, respectively, in loan loss recoveries during the three and six months ended June 30, 2009, as compared to $3,000 and $6,000 for the same periods in 2008.

For the three and six months ended June 30, 2009, the provision for loan losses was $316,000 and $3.5 million, respectively, as compared to $81,000 and $146,000, respectively, for the same periods

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in 2008. The recorded provision for loan losses was mostly related to the risk rating downgrade of certain loans, a $1.1 million increase in the specific reserve of certain impaired loans and loan charge-offs totaling $716,000. The significant increase in the provision for loan losses is due to the credit deterioration of certain commercial loans as a result of general economic conditions.

Non-Performing Loans/Impaired Loans

Loans are considered to be non-performing if they (a) are on a non-accrual basis, (b) are past due ninety days or more and still accruing interest, or (c) have been renegotiated to provide a reduction or deferral of interest because of a weakening in the financial position of the borrowers. A loan, which is past due ninety days or more and still accruing interest, remains on accrual status only when it is both adequately secured as to principal and is in the process of collection.

When necessary, Central Jersey Bancorp performs individual loan reviews in accordance with SFAS No. 114, Accounting by Creditors for Impairment of a Loan, to determine whether any individually reviewed loans are impaired and, if impaired, measures a valuation allowance allocation in accordance with SFAS No. 114. A loan is recognized as impaired when it is probable that principal and/or interest are not collectible in accordance with the loan’s contractual terms. The Company considers loans on non-accrual status or risk rated “8” or higher as impaired and automatically subject to a SFAS No. 114 review. In addition, any other loan that management considers possibly impaired due to deteriorating conditions or for any other reasons, is, at management’s discretion, subject to a SFAS No. 114 review.

Non-performing/impaired loans totaled $11.5 million at June 30, 2009, as compared to $2.7 million at December 31, 2008. Of that amount, non-accrual loans totaled $8.5 million at June 30, 2009, as compared to $2.5 million at December 31, 2008. The increase in non-performing/impaired loans was due primarily to certain commercial loans which were placed on non-accrual status and/or deemed to be impaired during the six months ended June 30, 2009. The loans which were deemed to be impaired required a specific reserve in accordance with SFAS No. 114.

If the non-accrual loans had performed in accordance with their original terms, interest income would have increased by $194,000 and $252,000, respectively, for the three and six months ended June 30, 2009, as compared to $49,000 and $52,000, respectively, for the three and six months ended June 30, 2008. At June 30, 2009, there were no commitments to lend additional funds to borrowers whose loans were on non-accrual status.

The Company’s policy for interest income recognition on impaired loans is to recognize income on currently performing restructured loans under the accrual method. The Company recognizes income on non-accrual loans under the accrual basis when the principal payments on the loans become current and the collateral on the loan is sufficient to cover the outstanding obligation to the Company. If these factors do not exist, the Company does not recognize income. No interest income was recognized on impaired loans subsequent to classification as impaired in 2009. Total cash collected on impaired loans during the three and six months ended June 30, 2009 was $45,000 and $84,000, respectively, all of which was credited to the principal balance outstanding, as compared to no cash collected on impaired loans for the three and six months ended June 30, 2008.

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Potential Problem Loans

In addition to non-performing/impaired loans, Central Jersey Bancorp maintains a “watch list” of loans which are subject to heightened scrutiny and more frequent review by management. Loans may be placed on the “watch list” because of documentation deficiencies, or because management has identified “structural weakness” which potentially could cause such loans to become non-performing in future periods.

As of June 30, 2009, loans on the watch list totaled $38.6 million, as compared to $24.2 million at December 31, 2008. This increase was representative of the change in the risk profile of the loan portfolio. Loans which were risk rated “special mention” decreased by $3.1 million, to $20.0 million, at June 30, 2009, from $23.1 million at December 31, 2008. Loans which were risk rated “substandard” increased by $14.7 million, to $17.5 million, at June 30, 2009, from $2.8 million at December 31, 2008. Loans which were risk rated “doubtful” increased by $1.0 million, to $1.1 million at June 30, 2009, from $50,000 at December 31, 2008. There were no loans which were risk rated “loss” at June 30, 2009, as compared to $94,000 at December 31, 2008. A majority of the risk rating downgrades occurred in the commercial mortgage loan portfolio as a result of general economic conditions.

Commitments and Conditional Obligations

In the ordinary course of business to meet the financial needs of the Company’s customers, the Company is party to financial instruments with off-balance sheet risk. These financial instruments include unused lines of credit and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated financial statements. The contract or notional amounts of these instruments express the extent of involvement the Company has in each category of financial instruments.

The Company’s exposure to credit loss from nonperformance by the other party to the above-mentioned financial instruments is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. The contract or notional amount of financial instruments which represent credit risk at June 30, 2009 and December 31, 2008 is as follows (in thousands):

	June 30, 2009		December 31, 2008
Standby letters of credit	$	1,947	$	2,206
Outstanding loan and credit line commitments	$	68,764	$	65,079

Standby letters of credit are conditional commitments issued by the Company which guarantee performance by a customer to a third party. The credit risk and underwriting procedures involved in issuing letters of credit are essentially the same as that involved in extending loan facilities to customers. All of Central Jersey Bank, N.A.’s outstanding standby letters of credit are performance standby letters within the scope of the FASB Interpretation No. 45. These are irrevocable undertakings by Central Jersey Bank, N.A., as guarantor, to make payments in the event a specified third party fails to perform under a non-financial contractual obligation. Most of Central Jersey Bank, N.A.’s performance standby letters of credit arise in connection with lending relationships and have terms of one year or less. The maximum potential future payments Central Jersey Bank, N.A. could be required to make equals the face amount of the letters of credit. Central Jersey Bank, N.A.’s liability for performance standby letters of credit was immaterial at June 30, 2009 and December 31, 2008.

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Outstanding loan commitments represent the unused portion of loan commitments available to individuals and companies as long as there is no violation of any condition established in the contract. Outstanding loan commitments generally have a fixed expiration date of one year or less, except for home equity loan commitments which generally have an expiration date of up to fifteen years. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if any, upon extension of credit is based upon management’s credit evaluation of the customer. Various types of collateral may be held, including property and marketable securities. The credit risk involved in these financial instruments is essentially the same as that involved in extending loan facilities to customers.

Deposits

One of Central Jersey Bancorp’s primary strategies is the accumulation and retention of core deposits. Core deposits are defined as all deposits with the exception of certificates of deposits in excess of $100,000. Deposits, at June 30, 2009, totaled $444.7 million, an increase of $25.9 million, or 6.18%, over the December 31, 2008 total of $418.8 million. The increase in deposit balances was reflective of continued core deposit growth that occurred throughout Central Jersey Bank, N.A.’s retail franchise. Core deposits as a percentage of total deposits was 80.3% at June 30, 2009 and 82.5% at December 31, 2008.

Borrowings

Borrowings were $95.8 million at June 30, 2009, as compared to $71.7 million at December 31, 2008. Borrowings typically include wholesale borrowing arrangements with correspondent banks as well as arrangements with deposit customers of Central Jersey Bank, N.A. to sweep funds into short-term borrowings. As of June 30, 2009, borrowings included $34.7 million in bank sweep funds, $21.2 million in FHLB callable advances and $39.9 million in FHLB fixed rate advances. These borrowings were used to fund interest-earning assets. Central Jersey Bank, N.A. uses investment securities to pledge as collateral for repurchase agreements. At June 30, 2009 and December 31, 2008, Central Jersey Bank, N.A. had unused lines of credit with the FHLB of $36.9 million and $33.8 million, respectively.

Liquidity and Capital Resources

Liquidity defines the ability of Central Jersey Bank, N.A. to generate funds to support asset growth, meet deposit withdrawals, maintain reserve requirements and otherwise operate on an ongoing basis. An important component of a bank’s asset and liability management structure is the level of liquidity, which are net liquid assets available to meet the needs of its customers and regulatory requirements. The liquidity needs of Central Jersey Bank, N.A. have been primarily met by cash on hand, loan and investment amortizations and borrowings. Central Jersey Bank, N.A. invests funds not needed for operations (excess liquidity) primarily in daily federal funds sold. During the six months ended June 30, 2009, Central Jersey Bank, N.A. continued to maintain a large secondary source of liquidity known as investment securities available-for-sale. The fair value of that portfolio was $186.8 million at June 30, 2009 and $170.7 million at December 31, 2008.

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It has been Central Jersey Bank, N.A.’s experience that its core deposit base (which is defined as transaction accounts and term deposits of less than $100,000) is primarily relationship-driven. Non-core deposits (which are defined as term deposits of $100,000 or greater) are much more interest rate sensitive. In any event, adequate sources of reasonably priced on-balance sheet funds, such as overnight federal funds sold, due from banks and short-term investments maturing in less than one year, must be continually accessible for contingency purposes. This is accomplished primarily by the daily monitoring of certain accounts for sufficient balances to meet future loan commitments, as well as measuring Central Jersey Bank, N.A.’s liquidity position on a monthly basis.

Supplemental sources of liquidity include large certificates of deposit, wholesale and retail repurchase agreements, and lines of credit with correspondent banks. Correspondent banks, which are typically referred to as “banker’s banks,” offer essential services such as cash letter processing, investment services, loan participation support, wire transfer operations and other traditional banking services. Brokered deposits, which are deposits obtained, directly or indirectly, from or through the mediation or assistance of a deposit broker, may be utilized as supplemental sources of liquidity in accordance with Central Jersey Bank, N.A.’s balance sheet management policy. Contingent liquidity sources may include off-balance sheet funds, such as advances from both the FHLB and the Federal Reserve Bank, and federal funds purchase lines with “upstream” correspondents. An additional source of liquidity is made available by curtailing loan activity and instead using the available cash to fund short-term investments such as overnight federal funds sold or other approved investments maturing in less than one year. In addition, future expansion of Central Jersey Bank, N.A.’s retail banking network is expected to create additional sources of liquidity from new deposit customer relationships. Available liquidity and borrowing capacity is reviewed by management on a monthly basis. As of June 30, 2009, the Company’s liquidity surplus was $120.9 million.

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

Quantitative measures established by regulation to ensure capital adequacy require Central Jersey Bank, N.A. to maintain minimum amounts and ratios (set forth in the following table) of Total Capital and Tier 1 Capital to risk weighted assets and of Tier 1 Capital to average assets (leverage ratio). As of June 30, 2009, Central Jersey Bancorp and Central Jersey Bank, N.A. met all capital adequacy requirements to which they were subject.

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The following is a summary of Central Jersey Bank, N.A.’s and Central Jersey Bancorp’s actual capital ratios as of June 30, 2009 and December 31, 2008, compared to the minimum capital adequacy requirements and the requirements for classification as a “well-capitalized” institution:

	Tier I Capital to Average Assets Ratio (Leverage Ratio)				Tier I Capital to Risk Weighted Asset Ratio				Total Capital to Risk Weighted Asset Ratio
	June 30, 2009		December 31, 2008		June 30, 2009		December 31, 2008		June 30, 2009		December 31, 2008
Actual Ratios
Central Jersey Bancorp	7.32	%	8.13	%	9.34	%	11.09	%	12.97	%	15.09	%
Central Jersey Bank, N.A.	7.47	%	8.49	%	9.53	%	11.59	%	13.16	%	15.58	%
Required Regulatory Ratios
“Adequately capitalized” institution (under federal regulations)	4.00	%	4.00	%	4.00	%	4.00	%	8.00	%	8.00	%
“Well capitalized” institution (under federal regulations)	5.00	%	5.00	%	6.00	%	6.00	%	10.00	%	10.00	%

Capital Purchase Program

On October 14, 2008, the U.S. government announced a series of initiatives to strengthen market stability, improve the strength of financial institutions and enhance market liquidity. In connection therewith, the U.S. Department of the Treasury announced the Capital Purchase Program, pursuant to which qualified U.S. financial institutions could voluntarily build capital to increase the flow of financing to U.S. businesses and consumers and to support the U.S. economy.

On December 23, 2008, Central Jersey Bancorp, as part of the Capital Purchase Program, sold 11,300 Series A Preferred Shares and the Warrant to purchase up to 268,621 of Central Jersey Bancorp’s common stock at an exercise price of $6.31 per share. Central Jersey Bancorp is utilizing the $11.3 million in gross investment proceeds for general corporate purposes and to enhance lending operations. Both the Series A Preferred Shares and the Warrant qualify as components of Central Jersey Bancorp’s regulatory Tier 1 Capital.

The Series A Preferred Shares pay cumulative dividends at a rate of 5% per annum, or approximately $550,000 annually, and will reset to a rate of 9% at the end of the fifth year. The Warrant has a term of 10 years and is exercisable, in whole or part, at any time during the term. The exercise price for the Warrant was the market price of Central Jersey Bancorp’s common stock at the time of issuance calculated on a 20-trading day trailing average. The fair value of the Warrant was estimated on December 23, 2008 using the Black-Scholes option pricing model with the following weighted-average assumptions used: stock price $6.31, dividend yield of 0%; expected volatility of 46.50%; risk free interest rate of 1.45%; and expected life of five years.

Central Jersey Bancorp is subject to certain requirements regarding executive compensation and corporate governance during the period in which any obligation arising from financial assistance provided under the Capital Purchase Program remains outstanding. These requirements are set forth in the EESA and the Regulations promulgated thereunder by the U.S. Department of the Treasury, and include the following: (1) Central Jersey Bancorp’s Compensation Committee is required to review incentive compensation arrangements with senior risk officers at least annually to ensure that no such arrangement encourages senior executive officers to take unnecessary and excessive risks that threaten the value of Central Jersey Bancorp, and the Compensation Committee must provide certifications to that effect to the OCC; (2) Central Jersey Bancorp is

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required to recover any bonus or incentive compensation paid to a senior executive officer that is based on statements of earnings that are subsequently proven to be materially inaccurate; and (3) Central Jersey Bancorp is prohibited from making any “golden parachute payments” as defined in the EESA and the Regulations.

On February 17, 2009, President Obama signed the ARRA into law, which amended the executive compensation and corporate governance provisions of the EESA. The amendments elaborate on the requirements and obligations under the EESA and provide that Capital Purchase Program participants: (1) may not provide incentives for senior executive officers to take unnecessary and excessive risks that threaten the value of the financial institution; (2) must recover any bonus or incentive compensation paid to senior executive officers based on statements of earning that are subsequently proven to be materially inaccurate; (3) may not make any “golden parachute payments” to senior executive officers; (4) may not pay any bonus, retention award or incentive compensation to certain of the most highly compensated employees, except pursuant to employment contracts executed on or before February 11, 2009 and except for long-term restricted stock that meets certain requirements; (5) may not adopt any compensation plan that would encourage manipulation of reported earnings to enhance the compensation paid to any employee; (6) must establish a compensation committee of independent directors to review employee compensation plans; and (7) must provide certain certifications regarding executive compensation and compliance with the requirements of the EESA. The ARRA also provides that, subject to consultation with the appropriate federal banking agency, the Secretary of the U.S. Department of the Treasury will permit a participant in the Capital Purchase Program to repay any assistance previously provided under the Capital Purchase Program. The participant will not have to replace the assistance with Tier I Capital, as originally provided in the Capital Purchase Program.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, as of the end of the period covered by this quarterly report, the Company carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company’s management, including its President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, who concluded that the Company’s disclosure controls and procedures are effective. The Company's Internal Auditors also participated in this evaluation. There has been no change in the Company’s internal controls during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed under the Exchange Act is accumulated and communicated to management, including its President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, to allow timely decisions regarding required disclosure.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, the Company is a party to routine legal proceedings within the normal course of business. Such routine legal proceedings in the aggregate are believed by management to be immaterial to the Company’s financial condition or results of operations.

In addition, on June 8, 2009 and July 15, 2009, purported class action complaints were filed against the Company, each director of the Company (except that Robert S. Vuono was not named in the second class action complaint), and OceanFirst in the Superior Court of New Jersey in Ocean County. The actions were brought by two separate alleged shareholders of the Company, each on behalf of himself and all others similarly situated. The complaints allege, among other things, that the directors of the Company are in breach of their fiduciary duties to shareholders in connection with the Company’s entry into the Merger Agreement with OceanFirst. The complaints also allege that the Company and OceanFirst knowingly assisted the Company’s directors’ alleged breaches of fiduciary duty in connection with the proposed merger.

The complaints seek, among other things, damages and injunctive relief to enjoin the Company, the directors of the Company, and OceanFirst from consummating the transactions contemplated in the Merger Agreement, along with attorneys’ fees and costs. The Company believes that the allegations in the complaints are without merit and intend to vigorously defend against the claims and causes of action asserted in these legal matters.

Item 1A. Risk Factors

Not Applicable.

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

Not Applicable.

Item 3. Defaults Upon Senior Securities

Not Applicable.

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

At the 2009 Annual Meeting of Shareholders of Central Jersey Bancorp held on May 27, 2009, the shareholders elected each of James G. Aaron, Esq., Mark R. Aikins, Esq., John A. Brockriede, George S. Callas, Paul A. Larson, Jr., John F. McCann, Carmen M. Penta, C.P.A., Mark G. Solow, James S. Vaccaro and Robert S. Vuono to serve as a director of the Company. Each nominee for director was elected for a one year term. The balloting for election was as follows:

Name of Director	Votes For	Percentage of Votes For	Votes Withheld	Percentage of Votes Withheld
James G. Aaron, Esq.	7,031,219	92.2	595,977	7.8
Mark R. Aikins, Esq.	7,309,228	95.8	317,968	4.2
John A. Brockriede	7,321,918	96.0	305,278	4.0
George S. Callas	7,053,086	92.5	574,110	7.5
Paul A. Larson, Jr.	7,341,745	96.3	285,451	3.7
John F. McCann	7,216,610	94.6	410,586	5.4
Carmen M. Penta, C.P.A.	7,298,127	95.6	329,069	4.4
Mark G. Solow	7,194,976	94.3	432,220	5.7
James S. Vaccaro	7,253,069	95.0	374,127	5.0
Robert S. Vuono	7,291,245	95.6	335,951	4.4

Item 5. Other Information

On May 26, 2009, the Company and OceanFirst, the parent company of OceanFirst Bank, entered into the Merger Agreement pursuant to which the Company will merge with and into OceanFirst. Concurrent with the merger, it is expected that Central Jersey Bank, N.A. will merge with and into OceanFirst Bank. Under the terms of the Merger Agreement, each outstanding share of the Company’s common stock will be converted into the right to receive 0.50 shares of OceanFirst common stock.

James S. Vaccaro, the current Chairman, President and Chief Executive Officer of the Company, will be appointed as an Executive Vice President and a member of the senior executive management team of OceanFirst Bank. In addition, at the closing of the merger, OceanFirst will expand the size of its board by two members and will appoint James G. Aaron, Esq. and Mark G. Solow, two non-officer members of the Company’s board of directors, to OceanFirst’s board.

The transaction is subject to customary closing conditions, including the receipt of regulatory approvals and approval by the shareholders of the Company and OceanFirst, and is intended to qualify as a tax free reorganization for federal income tax purposes, with shares of the Company exchanged for OceanFirst shares on a tax free basis. Certain of the executive officers and directors of the Company and OceanFirst have agreed to vote their shares in favor of the approval of the Merger Agreement at the shareholders meetings to be held by each company to vote on the proposed transaction. If the merger is not consummated under certain circumstances, the Company has agreed to pay OceanFirst a termination fee of $2,400,000. The merger is currently expected to be completed in the fourth quarter of 2009.

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For more information regarding the proposed merger of the Company with and into OceanFirst, please see the Company’s Current Report on Form 8-K filed with the SEC on May 27, 2009 and the Merger Agreement attached thereto as Exhibit 2.1 and Amendment No. 1 to OceanFirst’s Registration Statement on Form S-4 (SEC File No. 333-160873) filed with the SEC on August 6, 2009.

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