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Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended:
June 30, 2011
Commission File Number: 000-11448
NewBridge Bancorp
(Exact name of Registrant as specified in its Charter)
     
North Carolina
(State of Incorporation)
  56-1348147
(I.R.S. Employer Identification No.)
     
1501 Highwoods Boulevard, Suite 400
Greensboro, North Carolina
(Address of principal executive offices)
  27410
(Zip Code)
(336) 369-0900
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One)
Large accelerated filer o Accelerated filer o  Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o No þ
At August 9, 2011, 15,655,868 shares of the registrant’s common stock were outstanding.
 
 


 

NEWBRIDGE BANCORP
FORM 10-Q
TABLE OF CONTENTS
             
        Page
 
  PART I
Financial Information
       
 
           
  Financial Statements     3  
 
  Consolidated Balance Sheets June 30, 2011 and December 31, 2010     3  
 
  Consolidated Statements of Income Three Months and Six Months Ended June 30, 2011 and 2010     4  
 
      5  
 
  Consolidated Statements of Cash Flows Six Months Ended June 30, 2011 and 2010     6  
 
  Notes to Consolidated Financial Statements     8  
  Management’s Discussion and Analysis of Financial Condition and Results of Operations     17  
  Quantitative and Qualitative Disclosures About Market Risk     29  
  Controls and Procedures     29  
 
           
 
  PART II
Other Information
       
 
           
  Legal Proceedings     30  
  Risk Factors     30  
  Unregistered Sales of Equity Securities and Use of Proceeds     30  
  Defaults Upon Senior Securities     30  
  Removed and Reserved     30  
  Other Information     30  
  Exhibits     31  
 EX-31.01
 EX-31.02
 EX-32.01
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT

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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
NewBridge Bancorp and Subsidiary
Consolidated Balance Sheets

(Dollars in thousands, except per share data)
                 
    June 30        
    2011     December 31  
    (Unaudited)     2010  
 
               
Assets
               
Cash and due from banks
  $ 26,890     $ 23,479  
Interest-bearing bank balances
    53,917       5,596  
Loans held for sale
    2,754       76,994  
Investment securities
    292,898       325,129  
Loans
    1,244,288       1,260,585  
Less allowance for credit losses
    (28,040 )     (28,752 )
 
           
Net loans
    1,216,248       1,231,833  
Premises and equipment
    36,670       38,442  
Real estate acquired in settlement of loans
    25,729       26,718  
Bank-owned life insurance
    31,053       30,317  
Deferred tax assets
    27,353       27,089  
Other assets
    22,317       21,564  
 
           
Total assets
  $ 1,735,829     $ 1,807,161  
 
           
 
               
Liabilities
               
Deposits:
               
Non-interest bearing
  $ 161,703     $ 161,734  
Savings, NOW and money market accounts
    829,491       795,696  
Time deposits
    435,895       495,565  
 
           
Total deposits
    1,427,089       1,452,995  
Borrowings from the Federal Home Loan Bank
    80,200       112,700  
Other borrowings
    46,774       61,774  
Accrued expenses and other liabilities
    17,795       16,504  
 
           
Total liabilities
    1,571,858       1,643,973  
 
           
 
               
Shareholders’ Equity
               
Preferred stock, par value $.01 per share:
               
Authorized 10,000,000 shares; issued and outstanding (liquidation preference $1,000 per share) — 52,372
    51,639       51,490  
Common stock, par value $5 per share:
               
Authorized 50,000,000 shares; issued and outstanding — 15,655,868
    78,279       78,279  
Paid-in capital
    87,115       87,048  
Directors’ deferred compensation plan
    (575 )     (618 )
Retained deficit
    (51,323 )     (52,016 )
Accumulated other comprehensive (loss)
    (1,164 )     (995 )
 
           
Total shareholders’ equity
    163,971       163,188  
 
           
Total liabilities and shareholders’ equity
  $ 1,735,829     $ 1,807,161  
 
           
See notes to consolidated financial statements

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NewBridge Bancorp and Subsidiary
Consolidated Statements of Income
(Unaudited; dollars in thousands, except per share data)
                                 
    Three Months Ended     Six Months Ended  
    June 30     June 30  
    2011     2010     2011     2010  
Interest Income
                               
Interest and fees on loans
  $ 16,694     $ 18,951     $ 33,930     $ 38,381  
Interest on investment securities:
                               
Taxable
    2,974       2,954       6,448       5,634  
Tax exempt
    191       1,054       382       2,173  
Interest-bearing bank balances and Federal funds sold
    20       13       24       34  
 
                       
Total interest income
    19,879       22,972       40,784       46,222  
 
                       
Interest Expense
                               
Deposits
    2,574       3,984       5,262       8,286  
Borrowings from the Federal Home Loan Bank
    284       1,017       631       2,118  
Other borrowings
    492       595       984       1,205  
 
                       
Total interest expense
    3,350       5,596       6,877       11,609  
 
                       
Net interest income
    16,529       17,376       33,907       34,613  
Provision for credit losses
    3,020       4,928       9,093       8,651  
 
                       
Net interest income after provision for credit losses
    13,509       12,448       24,814       25,962  
 
                       
 
                               
Noninterest Income
                               
Retail banking
    2,554       3,102       5,054       6,001  
Mortgage banking services
    268       442       693       712  
Wealth management services
    626       498       1,171       1,022  
Gain on sale of investment securities
                1,961        
Writedowns and loss on sale of real estate acquired in settlement of loans
    (1,585 )     (717 )     (3,071 )     (2,158 )
Other
    538       583       1,127       845  
 
                       
Total noninterest income
    2,401       3,908       6,935       6,422  
 
                       
Noninterest Expense
                               
Personnel
    7,352       7,510       14,641       15,324  
Occupancy
    1,017       1,040       2,060       2,174  
Furniture and equipment
    924       1,170       1,888       2,352  
Technology and data processing
    960       1,120       1,877       2,274  
FDIC insurance
    632       900       1,427       1,800  
Other
    3,694       3,728       7,080       7,097  
 
                       
Total noninterest expense
    14,579       15,468       28,973       31,021  
 
                       
Income before income taxes
    1,331       888       2,776       1,363  
Income taxes
    190       34       624       136  
 
                       
Net Income
    1,141       854       2,152       1,227  
Dividends and accretion on preferred stock
    (730 )     (730 )     (1,459 )     (1,460 )
 
                       
Net Income (Loss) available to common shareholders
  $ 411     $ 124     $ 693     $ (233 )
 
                       
 
                               
Earnings (loss) per share:
                               
Basic
  $ 0.03     $ 0.01     $ 0.04     $ (0.01 )
Diluted
  $ 0.02     $ 0.01     $ 0.04     $ (0.01 )
 
                               
Weighted average shares outstanding:
                               
Basic
    15,655,868       15,655,868       15,655,868       15,655,868  
Diluted
    16,521,391       16,441,749       16,602,032       15,655,868  
See notes to consolidated financial statements

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NewBridge Bancorp and Subsidiary
Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income
Six months ended June 30, 2011 and 2010
(Unaudited; Dollars in thousands)
                                                                 
                                    Directors’             Accumulated        
                                    Deferred     Retained     Other     Total  
    Preferred     Common Stock     Paid-in     Compensation     Earnings     Comprehensive     Shareholders’  
    Stock     Shares     Amount     Capital     Plan     (Deficit)     Income (Loss)     Equity  
 
Balances at December 31, 2009
  $ 51,190       15,655,868     $ 78,279     $ 86,969     $ (634 )   $ (52,477 )   $ 1,277     $ 164,604  
Net Income
                                            1,227               1,227  
Change in unrealized gain on securities available for sale, net of deferred income taxes
                                                    2,103       2,103  
 
                                                             
Total comprehensive income
                                                            3,330  
Dividends and accretion on preferred stock
    150                                       (1,460 )             (1,310 )
Stock-based compensation expense
                            40                               40  
Common stock distributed
                                    15                       15  
 
                                               
Balances at June 30, 2010
  $ 51,340       15,655,868     $ 78,279     $ 87,009     $ (619 )   $ (52,710 )   $ 3,380     $ 166,679  
 
                                               
 
                                                               
Balances at December 31, 2010
  $ 51,490       15,655,868     $ 78,279     $ 87,048     $ (618 )   $ (52,016 )   $ (995 )   $ 163,188  
Net Income
                                            2,152               2,152  
Change in unrealized gain on securities available for sale, net of deferred income taxes
                                                    (169 )     (169 )
 
                                                             
Total comprehensive income
                                                            1,983  
Dividends and accretion on preferred stock
    149                                       (1,459 )             (1,310 )
Stock-based compensation expense
                            67                               67  
Common stock distributed
                                    43                       43  
 
                                               
Balances at June 30, 2011
  $ 51,639       15,655,868     $ 78,279     $ 87,115     $ (575 )   $ (51,323 )   $ (1,164 )   $ 163,971  
 
                                               
See notes to consolidated financial statements

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NewBridge Bancorp and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited; dollars in thousands)
                 
    Six Months Ended  
    June 30  
    2011     2010  
 
Cash Flow from operating activities
               
Net Income
  $ 2,152     $ 1,227  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    3,110       3,251  
(Increase) decrease in deferred income taxes
    (264 )     1,486  
Decrease in income taxes receivable
          2,692  
Decrease in income earned but not received
    554       244  
Decrease in interest accrued but not paid
    (236 )     (409 )
Net decrease in other assets
    3,542       987  
Net increase (decrease) in other liabilities
    1,526       (245 )
Provision for credit losses
    9,093       8,651  
Gain on sale of loans held for sale
    (693 )     (712 )
Originations of loans held for sale
    (39,615 )     (85,532 )
Proceeds from sales of loans held for sale
    114,549       81,919  
(Gain) Loss on sale of premises, equipment and real estate acquired in settlement of loans
    (239 )     955  
Stock based compensation
    67       40  
 
           
Net cash provided by operating activities
    93,546       14,554  
 
           
 
               
Cash Flow from investing activities
               
Purchases of securities available for sale
    (27,426 )     (45,007 )
Purchases of securities held to maturity
          (39,160 )
Proceeds from sales/maturities of securities available for sale
    58,566       62,169  
Gain on sales of securities available for sale
    (1,961 )      
Net (increase) decrease in loans made to customers
    (626 )     27,040  
Proceeds from sale of premises, equipment and real estate acquired in settlement of loans
    6,245       10,084  
Expenditures for improvements to real estate acquired in settlement of loans, net of income received
    52       46  
Purchases of premises and equipment
    (1,991 )     (2,440 )
 
           
Net cash provided by investing activities
    32,859       12,732  
 
           
 
               
Cash Flow from financing activities
               
Net increase in demand deposits, NOW, money market and savings accounts
    33,764       119,114  
Net decrease in time deposits
    (59,670 )     (67,077 )
Net decrease in other borrowings
    (15,000 )     (27,642 )
Net decrease in borrowings from Federal Home Loan Bank
    (32,500 )     (41,500 )
Dividends paid
    (1,310 )     (1,309 )
Common stock distributed (acquired)
    43       15  
 
           
Net cash provided by (used for) financing activities
    (74,673 )     (18,399 )
 
           
Increase in cash and cash equivalents
    51,732       8,887  
Cash and cash equivalents at the beginning of the period
    29,075       44,840  
 
           
Cash and cash equivalents at the end of the period
  $ 80,807     $ 53,727  
 
           
See notes to consolidated financial statements

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NewBridge Bancorp and Subsidiary
Consolidated Statements of Cash Flows (continued)
(Unaudited; dollars in thousands)
                 
    Six Months Ended  
    June 30  
    2011     2010  
 
  
Supplemental disclosures of cash flow information
               
Cash paid during the periods for:
               
Interest
  $ 7,113     $ 13,116  
Income Taxes
           
 
               
Supplemental disclosures of noncash transactions
               
Transfer of loans to real estate acquired in settlement of loans
  $ 6,225     $ 9,724  
Accretion on U.S. Treasury preferred stock
    149       150  
Unrealized gains/(losses) on securities available for sale:
               
Change in securities available for sale
    1,555       (2,420 )
Change in deferred income taxes
    (1,386 )     317  
Change in shareholders’ equity
    (169 )     2,103  
See notes to consolidated financial statements

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NewBridge Bancorp and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 — Basis of Presentation
The accompanying interim unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) and provisions for credit losses considered necessary for a fair presentation have been included. Operating results for the three-month period ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.
NewBridge Bancorp (“Bancorp” or the “Company”) is a bank holding company incorporated under the laws of North Carolina (“NC”) and registered under the Bank Holding Company Act of 1956, as amended (the “BHCA”). Bancorp’s principal asset is stock of its banking subsidiary, NewBridge Bank (the “Bank”). Accordingly, throughout this Quarterly Report on Form 10-Q, there are frequent references to the Bank.
Through its branch network, the Bank provides a wide range of banking products to individuals, small to medium-sized businesses and other organizations in its market areas, including interest bearing and non-interest bearing checking accounts, certificates of deposit, individual retirement accounts, overdraft protection, personal and corporate trust services, safe deposit boxes, online banking, corporate cash management, brokerage, financial planning and asset management, mortgage loans and secured and unsecured loans.
As of June 30, 2011, the Bank operated four active non-bank subsidiaries: Peoples Finance Company of Lexington, Inc. (“Peoples Finance”), LSB Properties, Inc. (“LSB Properties”), Henry Properties, LLC (“Henry Properties”) and Prince George Court Holdings, Inc. (“Prince George”). Peoples Finance, a NC licensed finance company, with approximately $0.4 million of loans outstanding as of June 30, 2011, is no longer actively soliciting loans. LSB Properties, Henry Properties and Prince George together own the real estate acquired in settlement of loans of the Bank.
The organization and business of the Company, accounting policies followed by the Company and other relevant information are contained in the notes to the consolidated financial statements in Bancorp’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, filed with the Securities and Exchange Commission (the “SEC”) on March 24, 2011 (SEC File No. 000-11448) (the “Annual Report”). This Quarterly Report should be read in conjunction with the Annual Report.
Recent accounting pronouncements
In July 2010, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2010-20, Receivables (ASC 310) — “Disclosure about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.” This ASU requires new disclosures and clarifies existing disclosure requirements about the nature of credit risk inherent in an entity’s loan portfolio; how that risk is analyzed and assessed in arriving at the allowance for loan losses; and the changes and reasons for those changes in the allowance for credit losses. The FASB’s objective is to improve these disclosures and, thus, increase the transparency in financial reporting, as well as clarify the requirements for existing disclosures. ASU 2010-20 became effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. In January 2011, the FASB delayed the effective date of the portion of ASU 2010-20 related to troubled debt restructurings to June 2011. The Company adopted the required portions of ASU-

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2010-20 as of December 31, 2010, which only impacted disclosures. The adoption of the remainder of this pronouncement did not have a material impact on the Company’s financial condition or results of operations.
In April 2011, the FASB issued Update ASU No. 2011-02 Receivables (ASC 310) — “A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring.” The amendments clarify guidance on whether a restructuring constitutes a troubled debt restructuring. The creditor must separately conclude that both of the following exist 1) the restructuring constitutes a concession, and 2) the debtor is experiencing financial difficulties. The amendments are effective for the first interim or annual period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. For purposes of measuring impairment of those receivables, an entity should apply the amendments prospectively for the first interim or annual period beginning on or after June 15, 2011. The adoption of this pronouncement did not have a material impact on the Company’s financial condition or results of operations.
Reclassification
Certain items for 2010 have been reclassified to conform to the 2011 presentation. Such reclassifications had no effect on net income, total assets or shareholders’ equity as previously reported.
Note 2 — Net Income (Loss) Per Share
Basic and diluted net income (loss) per share are computed based on the weighted average number of shares outstanding during each period. Diluted net income per share reflects the potential dilution that could occur if stock options or warrants were exercised, or restricted stock vested, resulting in the issuance of common stock sharing in the net income of the Company. A summary of basic and diluted weighted average number of shares used in the computation of net income (loss) per share follows (in thousands, except per share data):
                                 
    Three Months Ended     Six Months Ended  
    June 30     June 30  
    2011     2010     2011     2010  
 
 
                               
Weighted average number of common shares used in computing basic net income per share
    15,655,868       15,655,868       15,655,868       15,655,868  
Effect of dilutive stock options, warrants and restricted stock grants
    865,523       785,881       946,164        
 
                       
Diluted weighted average common shares outstanding
    16,521,391       16,441,749       16,602,032       15,655,868  
 
                       

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Note 3 — Investment Securities
Investment securities consist of the following (in thousands):
                                 
    June 30, 2011  
    Amortized     Unrealized     Unrealized     Market  
    Cost     Gains     Losses     Value  
 
 
U.S. government agency securities
  $ 92,279     $ 136     $ (1,224 )   $ 91,191  
Mortgage backed securities
    36,146       2,837             38,983  
State and municipal obligations
    17,388       71       (932 )     16,527  
Corporate bonds
    100,882       1,821       (523 )     102,180  
Collateralized mortgage obligations
    27,744       1,134       (40 )     28,838  
Federal Home Loan Bank stock
    9,115                   9,115  
Other equity securities
    5,775       289             6,064  
 
                       
Total
  $ 289,329     $ 6,288     $ (2,719 )   $ 292,898  
 
                       
                                 
    December 31, 2010  
    Amortized     Unrealized     Unrealized     Market  
    Cost     Gains     Losses     Value  
 
 
                               
U.S. government agency securities
  $ 109,274     $ 267     $ (2,017 )   $ 107,524  
Mortgage backed securities
    55,989       4,320             60,309  
State and municipal obligations
    17,380       13       (1,982 )     15,411  
Corporate bonds
    82,816       2,309       (612 )     84,513  
Collateralized mortgage obligations
    39,679       823       (90 )     40,412  
Federal Home Loan Bank stock
    10,399                   10,399  
Other equity securities
    5,775       786             6,561  
 
                       
Total
  $ 321,312     $ 8,518     $ (4,701 )   $ 325,129  
 
                       
All securities were classified as available for sale as of each date presented.
The following is a schedule of securities in a loss position as of June 30, 2011 (in thousands):
                                                 
    Less than 1 year     1 Year or More     Total  
    Market     Unrealized     Market     Unrealized     Market     Unrealized  
    Value     Loss     Value     Loss     Value     Loss  
 
 
U.S. government agency securities
  $ 74,066     $ (1,224 )   $     $     $ 74,066     $ (1,224 )
State and municipal obligations
    7,630       (309 )     5,498       (623 )     13,128       (932 )
Corporate bonds
    28,084       (523 )                 28,084       (523 )
Collateralized mortgage obligations
    1,337       (10 )     2,486       (30 )     3,823       (40 )
 
                                   
Total securities
  $ 111,117     $ (2,066 )   $ 7,984     $ (653 )   $ 119,101     $ (2,719 )
 
                                   
Investment securities with an amortized cost of $77,408,000 and $98,111,000, as of June 30, 2011, and December 31, 2010, respectively, were pledged to secure public deposits and for other purposes. The Bank has obtained $50,000,000 in letters of credit, which are used in lieu of securities to pledge against public deposits.
During the first quarter of 2011, the Company sold $31,510,000 of investments for a gain of $1,961,000. The Company elected to sell shorter-duration, odd-lot mortgage backed securities and corporate bonds that

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had significant gain positions. No investment securities were sold during the six months ended June 30, 2010.
Note 4 — Loans and Allowance for Credit Losses
Loans are summarized as follows (in thousands):
                 
    June 30     December 31  
    2011     2010  
 
 
               
Secured by owner-occupied nonfarm nonresidential properties
    239,746       222,889  
Secured by other nonfarm nonresidential properties
    164,778       159,086  
Other commercial and industrial
    134,792       134,011  
 
           
Total Commercial
    539,316       515,986  
Construction loans — 1 to 4 family residential
    11,584       16,736  
Other construction and land development
    118,289       122,382  
 
           
Total Real estate — construction
    129,873       139,118  
Closed-end loans secured by 1 to 4 family residential properties
    296,232       304,640  
Lines of credit secured by 1 to 4 family residential properties
    215,417       219,557  
Loans secured by 5 or more family residential properties
    19,376       20,207  
 
           
Total Real estate — mortgage
    531,025       544,404  
Credit cards
    7,507       7,749  
Other revolving credit plans
    9,273       9,042  
Other consumer loans
    22,602       36,224  
 
           
Total Consumer
    39,382       53,015  
Loans to other depository institutions
          3,800  
All other loans
    4,692       4,262  
 
           
Total Other
    4,692       8,062  
 
           
Total loans
    1,244,288       1,260,585  
Loans held for sale
    2,754       76,994  
 
           
Total loans and loans held for sale
    1,247,042       1,337,579  

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Nonperforming assets are summarized as follows (in thousands):
                 
    June 30     December 31  
    2011     2010  
 
Commercial nonaccrual loans, not restructured
  $ 17,839     $ 23,453  
Commercial nonaccrual loans, restructured
    11,042       11,190  
Non-commercial nonaccrual loans
    10,383       8,537  
 
           
Total nonaccrual loans
    39,264       43,180  
Troubled debt restructured, accruing
    8,351       7,378  
Accruing loans which are contractually past due 90 days or more
    65       27  
 
           
Total nonperforming loans
    47,680       50,585  
Real estate acquired in settlement of loans
    25,729       26,718  
 
           
Total nonperforming assets
  $ 73,409     $ 77,303  
 
           
Nonperforming loans to loans outstanding at end of period
    3.83 %     4.01 %
Nonperforming assets to total assets at end of period
    4.23 %     4.28 %
Allowance for credit losses to non-performing loans
    58.81 %     56.84 %
The aging of loans is summarized in the following table (in thousands):
                                                 
    30-89 days     90 + days     Nonaccrual     Total past due             Total loans  
    Past due     Past due     Loans     + nonaccrual     Current     Receivable  
June 30, 2011
                                               
Secured by owner-occupied nonfarm nonresidential property
  $ 4,377     $     $ 5,751     $ 10,128     $ 229,618     $ 239,746  
Secured by other nonfarm nonresidential property
    1,187             1,658       2,845       161,933       164,778  
Other commercial and industrial
    215             847       1,062       133,730       134,792  
 
                                   
Total Commercial
    5,779             8,256       14,035       525,281       539,316  
 
                                               
Construction loans — 1 to 4 family residential
    250             1,276       1,526       10,058       11,584  
Other construction and land development
    1,876             13,665       15,541       102,728       118,289  
 
                                   
Total Real estate — construction
    2,126             14,941       17,067       118,007       129,873  
 
                                               
Closed-end loans secured by 1 to 4 family residential property
    5,794             13,854       19,648       276,584       296,232  
Lines of credit secured by 1 to 4 family residential property
    1,672             1,440       3,112       212,305       215,417  
Loans secured by 5 or more family residential property
    6,417             394       6,811       12,565       19,376  
 
                                   
Total Real estate — mortgage
    13,883             15,688       29,571       501,454       531,025  
 
                                               
Credit cards
    83       58             141       7,366       7,507  
Other revolving credit plans
    208             24       232       9,041       9,273  
Other consumer loans
    343       7       355       705       21,897       22,602  
 
                                   
Total Consumer
    634       65       379       1,078       38,304       39,382  
 
                                               
Loans to other depository institutions
                                   
All other loans
                            4,692       4,692  
 
                                   
Total Other
                            4,692       4,692  
 
                                               
Total loans
    22,422       65       39,264       61,751       1,182,537       1,244,288  
Loans held for sale
                            2,754       2,754  
 
                                   
Total loans and loans held for sale
  $ 22,422     $ 65     $ 39,264     $ 61,751     $ 1,185,291     $ 1,247,042  
 
                                   

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    30-89 days     90 + days     Nonaccrual     Total past due             Total loans  
    Past due     Past due     Loans     + nonaccrual     Current     Receivable  
December 31, 2010
                                               
Secured by owner-occupied nonfarm nonresidential property
  $ 2,619     $     $ 5,953     $ 8,572     $ 214,317     $ 222,889  
Secured by other nonfarm nonresidential property
    1,767             1,076       2,843       156,243       159,086  
Other commercial and industrial
    2,641             1,875       4,516       129,495       134,011  
 
                                   
Total Commercial
    7,027             8,904       15,931       500,055       515,986  
 
                                               
Construction loans — 1 to 4 family residential
    1,166             2,666       3,832       12,904       16,736  
Other construction and land development
    3,354             13,925       17,279       105,103       122,382  
 
                                   
Total Real estate — construction
    4,520             16,591       21,111       118,007       139,118  
 
                                               
Closed-end loans secured by 1 to 4 family residential property
    10,444             10,830       21,274       283,366       304,640  
Lines of credit secured by 1 to 4 family residential property
    4,549             1,611       6,160       213,397       219,557  
Loans secured by 5 or more family residential property
    147             1,004       1,151       19,056       20,207  
 
                                   
Total Real estate — mortgage
    15,140             13,445       28,585       515,189       544,404  
 
                                               
Credit cards
    122       27             149       7,600       7,749  
Other revolving credit plans
    226             11       237       8,805       9,042  
Other consumer loans
    847             429       1,276       34,948       36,224  
 
                                   
Total Consumer
    1,195       27       440       1,662       51,353       53,015  
 
                                               
Loans to other depository institutions
                3,800       3,800             3,800  
All other loans
                            4,262       4,262  
 
                                   
Total Other
                3,800       3,800       4,262       8,062  
 
                                               
Total loans
    27,882       27       43,180       71,089       1,189,496       1,260,585  
Loans held for sale
    359                   359       76,635       76,994  
 
                                   
Total loans and loans held for sale
  $ 28,241     $ 27     $ 43,180     $ 71,448     $ 1,266,131     $ 1,337,579  
 
                                   
Impaired loans and related information are summarized in the following tables (in thousands):
                         
            Impaired Loans        
    Recorded     Unpaid principal     Specific  
    Balance     Balance     Allowance  
June 30, 2011
                       
Loans without a specific valuation allowance
                       
Commercial
  $ 4,204     $ 4,399     $  
Real estate — construction
    9,237       13,546        
Real estate — mortgage
    9,204       9,758        
Consumer
    117       117        
 
                 
Total
    22,762       27,820        
 
                       
Loans with a specific valuation allowance
                       
Commercial
    2,961       3,447       1,304  
Real estate — construction
    3,840       4,140       456  
Real estate — mortgage
    7,920       8,474       1,008  
Consumer
                 
 
                 
Total
    14,721       16,061       2,768  
 
                       
Total impaired loans
                       
Commercial
    7,165       7,846       1,304  
Real estate — construction
    13,077       17,686       456  
Real estate — mortgage
    17,124       18,232       1,008  
Consumer
    117       117        
 
                 
Total
  $ 37,483     $ 43,881     $ 2,768  

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            Impaired Loans        
    Recorded     Unpaid principal     Specific  
    Balance     Balance     Allowance  
December 31, 2010
                       
Loans without a specific valuation allowance
                       
Commercial
  $ 4,651     $ 5,437     $  
Real estate — construction
    12,489       17,165        
Real estate — mortgage
    6,633       7,676        
Consumer
    112       112        
Other
    3,800       10,000        
 
                 
Total
    27,685       40,390        
 
                       
Loans with a specific valuation allowance
                       
Commercial
    1,375       1,482       578  
Real estate — construction
    1,606       2,577       251  
Real estate — mortgage
    7,290       7,290       976  
Consumer
    347       347       122  
Other
                 
 
                 
Total
    10,618       11,696       1,927  
 
                       
Total impaired loans
                       
Commercial
    6,026       6,919       578  
Real estate — construction
    14,095       19,742       251  
Real estate — mortgage
    13,923       14,966       976  
Consumer
    459       459       122  
Other
    3,800       10,000        
 
                 
Total
  $ 38,303     $ 52,086     $ 1,927  
                 
    June 30     December 31  
    2011     2010  
 
Loans identified as impaired
  $ 37,483     $ 38,303  
Other nonperforming loans
    10,197       12,282  
 
           
Total nonperforming loans
    47,680       50,585  
Other potential problem loans
    97,141       110,924  
 
           
Total impaired and potential problem loans
  $ 144,821     $ 161,509  
 
           
The Bank’s policy for impaired loan accounting subjects all loans to impairment recognition except for large groups of smaller balance homogeneous loans such as credit card, residential mortgage and consumer loans. The Bank generally considers loans 90 days or more past due and all nonaccrual loans to be impaired.
The following table summarizes, by internally assigned risk grade, the risk grade for loans for which the bank has assigned a risk grade (in thousands).
                                                                                 
    June 30     December 31  
    2011     2010  
            Special     Sub-                             Special     Sub-              
    Pass     Mention     standard     Doubtful     Total     Pass     Mention     standard     Doubtful     Total  
Commercial
  $ 428,361     $ 52,771     $ 85,355     $ 207     $ 566,694     $ 423,474     $ 48,651     $ 75,682     $ 1,121     $ 548,928  
Real estate — construction
    56,885       16,583       30,538       722       104,728       66,766       13,673       47,319       630       128,388  
Real estate — mortgage
    62,169       6,529       16,219       66       84,983       92,610       7,898       20,288       798       121,594  
Consumer
                                  2                         2  
Other
    4,007                         4,007       3,448             3,903             7,351  
 
                                                           
Total
  $ 551,422     $ 75,883     $ 132,112     $ 995     $ 760,412     $ 586,300     $ 70,222     $ 147,192     $ 2,549     $ 806,263  
 
                                                           

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An analysis of the changes in the allowance for credit losses follows (in thousands):
                 
    Six Months Ended  
    June 30  
    2011     2010  
 
Balance, beginning of period
  $ 28,752     $ 35,843  
Loans charged off:
               
Commercial
    2,459       4,964  
Real estate — construction
    2,248       1,329  
Real estate — mortgage
    4,005       4,273  
Consumer
    710       1,584  
Other
    1,300        
 
           
Total chargeoffs
    10,722       12,150  
Recoveries of loans previously charged off:
               
Commercial
    198       227  
Real estate — construction
    184       47  
Real estate — mortgage
    295       135  
Consumer
    221       328  
Other
    19        
 
           
Total recoveries
    917       737  
 
           
Net loans charged off
    9,805       11,413  
 
           
Provision for loan losses
    9,093       8,651  
 
           
Balance, end of period
  $ 28,040     $ 33,081  
 
           
Loans totaling $2,754,000 and $76,994,000, as of June 30, 2011 and December 31, 2010, respectively, were held for sale, and stated at the lower of cost or market on an individual basis.
Loans totaling $519,718,000 and $569,896,000, as of June 30, 2011 and December 31, 2010, respectively, were pledged to secure lines of the credit with the Federal Home Loan Bank and Federal Reserve Bank.
Note 5 — Stock Compensation Plans
The Company recorded $67,000, or less than $0.01 per diluted share and $40,000, or less than $0.01 per diluted share, of total stock-based compensation expense for the six-month periods ended June 30, 2011 and June 30, 2010, respectively. The stock-based compensation expense is calculated on a ratable basis over the vesting periods of the related stock options or restricted stock grants and is reported under personnel expense. This expense had no impact on the Company’s reported cash flows. As of June 30, 2011, there was $453,000 of total unrecognized stock-based compensation expense. This expense will be fully recognized by December 31, 2014.
For purposes of determining estimated fair value of the stock options and restricted stock grants, the Company has computed the estimated fair values of all stock-based compensation using the Black-Scholes option pricing model and, for stock options and restricted stock grants granted prior to December 31, 2010, has applied the assumptions set forth in the Annual Report.
On February 9, 2011, the Company’s Board of Directors awarded a total of 83,551 restricted stock units to certain executive officers. The fair value of these restricted stock units is $5.15, which was the closing price of the Company’s common stock on that date. The restricted stock units vest over a period of four years, and are subject to the Company repaying certain portions of the funds it received under the U.S. Department of the Treasury (the “U.S. Treasury”) Capital Purchase Program. The stock-based compensation expense for these awards was immaterial for the second quarter and first six months of 2011. There were no stock options granted in 2011.

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Note 6 — Fair Value of Financial Instruments
The table below presents the assets measured at fair value on a recurring basis categorized by the level of inputs used in the valuation of each asset (in thousands):
                         
    Quoted prices        
    in active markets   Significant other   Significant
    for identical   observable inputs   unobservable inputs
    assets (Level 1)   (Level 2)   (Level 3)
Available for sale securities at June 30, 2011
      $ 265,793     $ 9,115  
Available for sale securities at December 31, 2010
          314,730       10,399  
The table below presents the assets measured at fair value on a non-recurring basis categorized by the level of inputs used in the valuation of each asset (in thousands):
                         
    Quoted prices        
    in active markets   Significant other   Significant
    for identical   observable inputs   unobservable inputs
    assets (Level 1)   (Level 2)   (Level 3)
Loans held for sale at June 30, 2011
      $ 2,754     $  
Loans held for sale at December 31, 2010
          76,994        
Real estate acquired in settlement of loans at June 30, 2011
                25,729  
Real estate acquired in settlement of loans at December 31, 2010
                26,718  
Core deposit intangible at June 30, 2011
                4,163  
Core deposit intangible at December 31, 2010
                4,526  
Impaired loans, net of allowance at June 30, 2011
                33,598  
Impaired loans, net of allowance at December 31, 2010
                36,368  
Note 7 — U.S. Treasury Capital Purchase Program
Pursuant to the U.S. Treasury Capital Purchase Program, on December 12, 2008, the Company issued and sold to the U.S. Treasury (i) 52,372 shares of Bancorp’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”) and (ii) a warrant (the “Warrant”) to purchase 2,567,255 shares of the Company’s common stock at an exercise price of $3.06 per share, for an aggregate purchase price of $52,372,000 in cash. The Warrant may be exercised by U.S. Treasury at any time before it expires on December 12, 2018. The fair value of the Warrant of $1,497,000 was estimated on the date of the grant using the Black-Scholes option-pricing model. The Series A Preferred Stock pays cumulative dividends of five percent for the first five years and nine percent thereafter, unless the Company redeems the shares.
Note 8 — Sale of Harrisonburg, Virginia Operations
On May 20, 2011, the bank sold it Harrisonburg, Virginia operations. This transaction included the sale of approximately $73.0 million of loans and $48.8 million of deposits, as well as a bank branch and a parcel of land. The bank retained approximately $30.5 million of loans in its Virginia Region. The bank had provided for an estimated loss of $322,000 in the fourth quarter of 2010, and recorded a gain of approximately $100,000 in the second quarter of 2011 when the sale closed.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The discussion presented herein is intended to provide an overview of the changes in financial condition and results of operations during the time periods required by Item 303 of Regulation S-K for NewBridge Bancorp (“Bancorp” or the “Company”) and its wholly-owned subsidiary NewBridge Bank (the “Bank”).
The consolidated financial statements also include the accounts and results of operations of the Bank’s wholly-owned subsidiaries. This discussion and analysis is intended to complement the unaudited financial statements, notes and supplemental financial data in this Quarterly Report on Form 10-Q, and should be read in conjunction therewith.
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements represent expectations and beliefs of Bancorp including but not limited to Bancorp’s operations, performance, financial condition, growth or strategies. These forward-looking statements are identified by words such as “expects”, “anticipates”, “should”, “estimates”, “believes” and variations of these words and other similar statements. For this purpose, any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. These forward-looking statements involve estimates, assumptions, risks and uncertainties that could cause actual results to differ materially from current projections depending on a variety of important factors, including without limitation: (1) recently enacted legislation, or legislation enacted in the future, or any proposed federal programs may subject Bancorp to increased regulation and may adversely affect Bancorp; (2) the strength of the United States economy generally, and the strength of the local economies in which Bancorp conducts operations, may be different than expected, resulting in, among other things, a continued deterioration in credit quality, including the resultant effect on Bancorp’s loan portfolio and allowance for credit losses; (3) the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve”); (4) inflation, deflation, interest rate, market and monetary fluctuations; (5) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate and market liquidity conditions) and the impact of such conditions on Bancorp’s capital markets and capital management activities; (6) the timely development of competitive new products and services by Bancorp and the acceptance of these products and services by new and existing customers; (7) the willingness of customers to accept third party products marketed by Bancorp; (8) the willingness of customers to substitute competitors’ products and services for Bancorp’s products and services and vice versa; (9) the impact of changes in financial services’ laws and regulations (including laws concerning taxes, banking and securities); (10) technological changes; (11) changes in consumer spending and saving habits; (12) the effect of corporate restructurings, acquisitions and/or dispositions, and the failure to achieve the expected revenue growth and/or expense savings from such corporate restructurings, acquisitions and/or dispositions; (13) the current stresses in the financial and real estate markets, including possible continued deterioration in property values; (14) unanticipated regulatory or judicial proceedings; (15) the impact of changes in accounting policies by the Securities and Exchange Commission (the “SEC”); (16) adverse changes in financial performance and/or condition of Bancorp’s borrowers which could impact repayment of such borrowers’ outstanding loans; and (17) Bancorp’s success at managing the risks involved in the foregoing. Bancorp cautions that the foregoing list of important factors is not exhaustive. See also those risk factors identified in the section headed “Risk Factors”, beginning on page 14 of Bancorp’s Annual Report on Form 10-K for the fiscal year ended December  31, 2010, filed with the Securities and Exchange Commission (the “SEC”) on March 24, 2011 (the “Annual Report”). Bancorp undertakes no obligation to update any forward-looking statement, whether written or oral, which may be made from time to time by or on behalf of Bancorp.

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Introduction
Bancorp is a bank holding company incorporated under the laws of North Carolina (“NC”) and registered under the Bank Holding Company Act of 1956, as amended (the “BHCA”). Bancorp’s principal asset is the stock of its banking subsidiary, the Bank.
The Company’s results of operations are dependent primarily on the results of operations of the Bank and thus are dependent to a significant extent on net interest income, which is the difference between the income earned on the Bank’s loan and investment portfolios and cost of funds, consisting of interest paid on deposits and borrowings. Results of operations are also affected by the Company’s provision for credit losses, mortgage loan sales activities, service charges and other fee income, and noninterest expense. The Company’s noninterest expense principally consists of compensation and employee benefits, office occupancy and equipment expense, data processing, professional fees, and advertising and business promotion expenses. The Company’s results of operations are also significantly affected by general economic and competitive conditions, particularly changes in interest rates, government policies and actions of regulatory authorities.
Commercial banking in North Carolina is extremely competitive, due in large part to intrastate and interstate branching laws. Many of the Company’s competitors are significantly larger and have greater resources. The Company continues to encounter significant competition from a number of sources, including bank holding companies, financial holding companies, commercial banks, thrift institutions, credit unions and other financial institutions and financial intermediaries. The Company competes in its market areas with some of the largest banking organizations in the Southeast and nationally, almost all of which have numerous branches in NC. The Company’s competition is not limited to financial institutions based in NC. The enactment of federal legislation authorizing nationwide interstate banking has greatly increased the size and financial resources of some of the Company’s competitors. Many of its competitors have substantially higher lending limits due to their greater total capitalization, and some perform functions for their customers that the Company generally does not offer. The Company primarily relies on providing quality products and services at a competitive price within its market areas. As a result of interstate banking legislation, the Company’s market is also open to further future penetration by banks located in other states.
The following discussion and analysis is presented on a consolidated basis and focuses on the major components of the Company’s operations and significant changes in its results of operations for the periods presented. For further information, refer to the Consolidated Financial Statements and notes thereto included in the Annual Report.
Application of Critical Accounting Policies
The accounting and reporting policies of the Company and its subsidiary comply with accounting principles generally accepted in the United States and conform to standards within the banking industry. The preparation of the financial information contained in this Quarterly Report on Form 10-Q requires the Company’s management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company’s management evaluates these estimates on an ongoing basis. A summary of the allowance for credit losses, one of the most complex and subjective accounting policies of the Company, is discussed under the heading “Asset Quality and Allowance for Credit losses.”

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Three Months Ended June 30, 2011 Compared to Three Months Ended June 30, 2010
Net Interest Income
The primary source of earnings for the Bank is net interest income, which represents the dollar amount by which interest generated from earning assets exceeds the cost of funds. Earning assets consist primarily of loans and investment securities. Cost of funds is the interest paid on interest-bearing deposits and borrowed funds.
Net interest income for the second quarter of 2011, on a taxable equivalent basis, was $16.6 million, a decrease of $1.2 million or 6.9%, from $17.9 million for the second quarter of 2011. Average earning assets in the second quarter of 2011 decreased $198.5 million, or 11.0%, to $1.61 billion, compared to $1.81 billion in the second quarter of 2010. Average loans decreased $126.6 million as a result of soft loan demand and the sale of approximately $73.0 million in loans in connection with the sale of the Bank’s Harrisonburg, Virginia operations. Average interest-bearing liabilities for the second quarter of 2011 decreased $178.3 million, or 11.2%, to $1.42 billion, compared to $1.59 billion for the second quarter of 2010. The impact on net interest income caused by the decrease in earning assets was partially offset by an increase in taxable-equivalent net interest margin, which increased to 4.14% for the second quarter of 2011, compared to 3.96% for the second quarter of 2010, an increase of 18 basis points.
The increase in net interest margin was due to the Company’s continued shift in focus away from higher cost time deposits and towards checking accounts and other core deposit relationships. The average yield on earning assets during the second quarter of 2011 was 22 basis points lower than the average yield on earning assets during the comparable period in 2010, while the average rate on interest-bearing liabilities decreased by 46 basis points during the same time period, which resulted in an increase in the interest rate spread in the second quarter of 2011 of 24 basis points compared to the second quarter of 2010. The following table provides an analysis of average volumes, yields and rates and net interest income on a tax-equivalent basis for the three months ended June 30, 2011 and 2010.

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(Fully taxable equivalent basis1, in thousands)
                                                 
    Three Months Ended     Three Months Ended  
    June 30, 2011     June 30, 2010  
            Interest     Annualized             Interest     Annualized  
    Average     Income/     Average     Average     Income/     Average  
    Balance     Expense     Yield/Rate     Balance     Expense     Yield/Rate  
 
Earning assets:
                                               
Loans receivable2
  $ 1,298,832     $ 16,694       5.16 %   $ 1,425,417     $ 18,951       5.33 %
Taxable securities
    251,964       2,953       4.70       243,771       2,947       4.85  
Tax exempt securities
    16,225       282       6.96       101,712       1,536       6.06  
FHLB stock
    9,664       21       0.86       11,640       7       0.26  
Interest-bearing bank balances
    32,514       20       0.25       25,251       13       0.21  
Federal funds sold
                                   
 
                                       
 
                                               
Total earning assets
    1,609,229       19,970       4.98       1,807,791       23,454       5.20  
 
                                               
Non-earning assets:
                                               
Cash and due from banks
    35,781                       27,820                  
Premises and equipment
    37,706                       40,635                  
Other assets
    107,386                       104,518                  
Allowance for credit losses
    (29,988 )                     (35,492 )                
 
                                       
 
                                               
Total assets
  $ 1,760,112     $ 19,970             $ 1,945,272     $ 23,454          
 
                                       
 
                                               
Interest-bearing liabilities:
                                               
Savings deposits
  $ 41,598     $ 10       0.10 %   $ 40,934     $ 10       0.10 %
NOW deposits
    439,153       710       0.65       363,390       866       0.96  
Money market deposits
    358,642       703       0.79       346,760       767       0.89  
Time deposits
    429,205       1,151       1.08       630,581       2,341       1.49  
Other borrowings
    61,279       492       3.22       72,476       596       3.30  
Borrowings from Federal Home Loan Bank
    86,299       284       1.32       140,431       1,017       2.90  
 
                                       
 
                                               
Total interest-bearing liabilities
    1,416,176       3,350       0.95       1,594,472       5,597       1.41  
 
                                               
Other liabilities and shareholders’ equity:
                                               
Demand deposits
    165,070                       166,588                  
Other liabilities
    15,920                       19,126                  
Shareholders’ equity
    162,946                       164,986                  
 
                                       
Total liabilities and shareholders’ equity
  $ 1,760,112       3,350             $ 1,945,272       5,597          
 
                                       
 
                                               
Net interest income and net interest margin3
          $ 16,620       4.14 %           $ 17,857       3.96 %
 
                                       
 
                                               
Interest rate spread4
                    4.03 %                     3.79 %
 
                                           
 
1  
Income related to securities exempt from federal income taxes is stated on a fully taxable-equivalent basis, assuming a federal income tax rate of 35%, and is then reduced by the non-deductible portion of interest expense. The adjustments made to convert to a fully taxable equivalent basis were $91 for 2011 and $482 for 2010.
 
2  
The average loans receivable balances include non-accruing loans. Amortization of loan fees, net of deferred costs, of $150 and $139 for the three months ended June 30, 2011 and 2010, respectively, are included in interest income.
 
3   Net interest margin is computed by dividing net interest income by average earning assets.
 
4  
Earning assets yield minus interest-bearing liability rate.

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Noninterest Income and Expense
In the second quarter of 2011, noninterest income decreased to $2.4 million, from $3.9 million during the same period in 2010. Retail banking income decreased 17.7% to $2.6 million in the second quarter of 2011 from $3.1 million in the second quarter of 2010, due primarily to ongoing regulatory changes in the industry and changes in consumer behavior. Mortgage revenue decreased to $268,000 in the second quarter of 2011, compared to $442,000 in the second quarter of 2010. Writedowns and loss on sale of OREO increased from ($717,000) in the second quarter of 2010 to ($1.6) million in the second quarter of 2011. Wealth management income increased $128,000 to $626,000 for the three months ending June 30, 2011 compared to the same period a year ago.
In the second quarter of 2011, noninterest expense decreased to $14.6 million from $15.5 million in the second quarter of 2010. Personnel expense, technology and data processing expense, occupancy costs and furniture and equipment expenses all decreased as a result of the Company’s continued focus on a disciplined cost management culture.
The following table presents the details of Other Noninterest Expense.
Other Noninterest Expense (in thousands)
                         
    Three Months Ended        
    June 30,     Percentage  
    2011     2010     Variance  
Other operating expenses:
                       
Advertising
  $ 376     $ 408       (7.8 )%
Bankcard expense
    125       106       17.9  
Legal and professional fees
    742       901       (17.6 )
Postage
    146       228       (36.0 )
Amortization of core deposit intangible
    182       182       0.0  
OREO expense
    393       376       4.5  
Telephone
    175       171       2.3  
Travel, dues and subscriptions
    242       250       (3.2 )
Stationery, printing and supplies
    104       197       (47.2 )
Other expense
    1,209       909       33.0  
 
                   
 
  $ 3,694     $ 3,728       (0.9 )
 
                   

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Six Months Ended June 30, 2011 Compared to Six Months Ended June 30, 2010
Net Interest Income
Net interest income for the first six months of 2011, on a taxable equivalent basis, was $34.1 million, a decrease of $1.5 million or 4.3%, from $35.6 million for the first six months of 2010. Average earning assets in the first six months of 2011 decreased $178.2 million, or 9.8%, to $1.63 billion, compared to $1.81 billion in the first six months of 2010. Average loans decreased $122.2 million as a result of soft loan demand and the sale of approximately $73.0 million in loans in connection with the sale of the Bank’s Harrisonburg, Virginia operations. Average interest-bearing liabilities for the first six months of 2011 decreased $161.2 million, or 10.1%, to $1.46 billion, compared to $1.61 billion for the first six months of 2010. The impact on net interest income caused by the decrease in earning assets was partially offset by an increase in taxable-equivalent net interest margin, which increased to 4.21% for the first six months of 2011, compared to 3.96% for the first six months of 2010, an increase of 25 basis points.
The increase in net interest margin was due to the Company’s continued shift in focus away from higher cost time deposits and towards checking accounts and other core deposit relationships. The average yield on earning assets during the first six months of 2011 was 20 basis points lower than the average yield on earning assets during the comparable period in 2010, while the average rate on interest-bearing liabilities decreased by 50 basis points during the same time period, which resulted in an increase in the interest rate spread in the first six months of 2011 of 30 basis points compared to the first six months of 2010. The following table provides an analysis of average volumes, yields and rates and net interest income on a tax-equivalent basis for the six months ended June 30, 2011 and 2010.

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(Fully taxable equivalent basis1, in thousands)
                                                 
    Six Months Ended     Six Months Ended  
    June 30, 2011     June 30, 2010  
            Interest     Annualized             Interest     Annualized  
    Average     Income/     Average     Average     Income/     Average  
    Balance     Expense     Yield/Rate     Balance     Expense     Yield/Rate  
 
Earning assets:
                                               
Loans receivable2
  $ 1,316,817     $ 33,930       5.20 %   $ 1,438,986     $ 38,381       5.38 %
Taxable securities
    270,038       6,406       4.78       234,182       5,619       4.84  
Tax exempt securities
    15,970       564       7.13       102,991       3,165       6.20  
FHLB stock
    10,029       42       0.84       11,633       15       0.26  
Interest-bearing bank balances
    20,115       24       0.24       23,361       33       0.29  
Federal funds sold
                                   
 
                                       
 
                                               
Total earning assets
    1,632,969       40,966       5.06       1,811,153       47,213       5.26  
 
                                               
Non-earning assets:
                                               
Cash and due from banks
    31,911                       27,405                  
Premises and equipment
    38,175                       40,623                  
Other assets
    107,306                       106,647                  
Allowance for credit losses
    (29,941 )                     (36,095 )                
 
                                       
 
                                               
Total assets
  $ 1,780,420     $ 40,967             $ 1,949,733     $ 47,213          
 
                                       
 
                                               
Interest-bearing liabilities:
                                               
Savings deposits
  $ 40,898     $ 20       0.10 %   $ 40,685     $ 20       0.10 %
NOW deposits
    439,756       1,461       0.67       326,959       1,454       0.90  
Money market deposits
    338,314       1,255       0.75       350,606       1,574       0.91  
Time deposits
    450,727       2,525       1.13       656,007       5,237       1.61  
Other borrowings
    61,763       984       3.21       81,362       1,205       2.99  
Borrowings from Federal Home Loan Bank
    105,361       631       1.21       147,084       2,118       2.90  
 
                                       
 
                                               
Total interest-bearing liabilities
    1,436,819       6,877       0.97       1,602,702       11,609       1.46  
 
                                               
Other liabilities and shareholders’ equity:
                                               
Demand deposits
    164,355                       162,968                  
Other liabilities
    16,327                       19,396                  
Shareholders’ equity
    162,919                       164,481                  
 
                                       
Total liabilities and shareholders’ equity
  $ 1,780,420       6,877             $ 1,949,546       11,609          
 
                                       
 
                                               
Net interest income and net interest margin3
          $ 34,090       4.21 %           $ 35,604       3.96 %
 
                                       
 
                                               
Interest rate spread4
                    4.09 %                     3.80 %
 
                                           
 
1   Income related to securities exempt from federal income taxes is stated on a fully taxable-equivalent basis, assuming a federal income tax rate of 35%, and is then reduced by the non-deductible portion of interest expense. The adjustments made to convert to a fully taxable equivalent basis were $182 for 2011 and $991 for 2010.
 
2   The average loans receivable balances include non-accruing loans. Amortization of loan fees, net of deferred costs, of $359 and $422 for the six months ended June 30, 2011 and 2010, respectively, are included in interest income.
 
3   Net interest margin is computed by dividing net interest income by average earning assets.
 
4   Earning assets yield minus interest-bearing liability rate.

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Noninterest Income and Expense
In the first six months of 2011, noninterest income increased to $6.9 million, from $6.4 million during the same period in 2010. The Company recognized gains on the sale of investment securities of $2.0 million during the first six months of 2011. The Company elected to sell shorter-duration, odd-lot mortgage backed securities and corporate bonds that had significant gain positions. No investment securities were sold during the six months ended June 30, 2010. Retail banking income decreased 15.8% to $5.1 million in the first six months of 2011 from $6.0 million in the first six months of 2010, due primarily to ongoing regulatory changes in the industry and changes in consumer behavior. Writedowns and loss on sale of OREO increased from ($2.2) million in the first six months of 2010 to ($3.1) million in the first six months of 2011. Wealth management income increased $149,000 to $1.2 million for the six months ending June 30, 2011 compared to the same period a year ago.
In the first six months of 2011, noninterest expense decreased to $29.0 million from $31.0 million in the first six months of 2010. Personnel expense decreased to $14.6 million in the first six months of 2011 from $15.3 million in the first six months of 2010, primarily as a result of headcount reductions from branches closed in 2010. In addition, the Company recorded decreases in technology and data processing expense, occupancy costs, and furniture and equipment expenses as a result of the Company’s continued focus on a disciplined cost management culture.
The following table presents the details of Other Noninterest Expense.
Other Noninterest Expense (in thousands)
                         
    Six Months Ended        
    June 30,     Percentage  
    2011     2010     Variance  
 
Other operating expenses:
                       
Advertising
  $ 814     $ 797       2.1 %
Bankcard expense
    232       258       (10.1 )
Legal and professional fees
    1,368       1,625       (15.8 )
Postage
    360       439       (18.0 )
Amortization of core deposit intangible
    363       363       0.0  
OREO expense
    762       600       27.0  
Telephone
    325       361       (10.0 )
Travel, dues and subscriptions
    457       451       1.3  
Stationery, printing and supplies
    251       356       (29.5 )
Other expense
    2,148       1,847       16.3  
 
                   
 
  $ 7,080     $ 7,097       (0.2 )
 
                   
Asset Quality and Allowance for Credit losses
The Company’s allowance for credit losses is analyzed monthly by management. This analysis includes a methodology that segments the loan portfolio into homogeneous loan classifications and considers the current status of the portfolio, historical charge-off experience, current levels of delinquent, impaired and non-performing loans and their underlying collateral values, as well as economic and other risk factors. It is also subject to regulatory examinations and determinations as to adequacy, which may take into account such factors as the methodology employed and other analytical measures in comparison to a group of peer banks. Management believes the allowance for credit losses is sufficient to absorb known risk in the portfolio. The Company, like many financial institutions, has recently and will likely continue to face a challenging credit environment in the coming months as a result of the overall economic slowdown in the region and the nation. The majority of the Bank’s loan portfolio is comprised of loans secured by real

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estate, and is therefore subject to risk as a result of the weakening real estate market. No assurances can be given that future economic conditions will not adversely affect borrowers and result in increases in credit losses and non-performing asset levels.
The allowance for credit losses, which is utilized to absorb actual losses in the loan portfolio, is maintained at a level consistent with management’s best estimate of probable credit losses incurred as of the balance sheet date. Major loan portfolio subgroups include: risk graded commercial loans, mortgage loans, home equity loans, retail loans and retail credit lines. Management also analyzes the loan portfolio on an ongoing basis to evaluate current risk levels, and risk grades are adjusted accordingly. While management uses the best information available to make evaluations, future adjustments may be needed if economic or other conditions differ substantially from the assumptions used.
At June 30, 2011, the allowance for credit losses was $28.0 million or 2.25% of total loans outstanding compared to $28.8 million or 2.15% of loans outstanding at December 31, 2010, and $33.1 million or 2.33% of loans outstanding at June 30, 2010. At June 30, 2011, the allowance for credit losses was 58.81% of nonperforming loans compared to 56.84% at December 31, 2010 and 55.64% at June 30, 2010. Based on analysis of the current loan portfolio and levels of current problem loans and potential problem loans, management believes the allowance for credit losses to be adequate. Additional information regarding the allowance for credit losses is presented in the table headed “Asset Quality Analysis”, on the following page.
Nonperforming loans totaled $47.7 million at June 30, 2011, compared to $50.6 million at December 31, 2010 and $59.5 million at June 30, 2010. The decrease from the 2010 year end and from the prior year is primarily driven by decreases in non-accrual loans. Real estate acquired in settlement of loans (“OREO”) was $25.7 million at June 30, 2011, $26.7 million at December 31, 2010, and $26.0 million at June 30, 2010. Approximately $6.2 million was transferred from loans into OREO and approximately $4.1 million of such assets were disposed of during the first six months of 2011. A net loss of $3.1 million has been recorded on disposition and writedowns of OREO in the current year, compared to a net loss of $2.2 million in the first six months of 2010. The Company recorded $782,000 of expenses on OREO during the first six months of 2011, compared to $919,000 million in the first six months of 2010. Nonperforming assets (comprised of nonaccrual loans, restructured loans and OREO) totaled $73.4 million, or 4.23% of total assets, at March 31, 2011, compared to $77.3 million, or 4.28% of total assets, at December 31, 2010 and $85.4 million, or 4.42% of total assets, a year ago. Total impaired and potential problem loans declined $15.0 million, or 9.3%, primarily due to a reduction in other potential problem loans.
The provision for credit losses charged to operations for the six months ended June 30, 2011 totaled $9.1 million, compared to $8.7 million for the six months ended June 30, 2010. Net charge-offs for the six months ended June 30, 2011 were $9.8 million, or 1.50% of average loans held for investment on an annualized basis, compared to net charge-offs of $11.4 million, or 1.60% of average loans held for investment on an annualized basis, for the six months ended June 30, 2010. Charge-offs and provision expense for the six months ended June 30, 2011 include $1.3 million related to a subordinated debt loan to a financial institution.

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    Six Months Ended     Year Ended     Six Months Ended  
Asset Quality Analysis   June 30     December 31     June 30  
(Dollars in thousands)   2011     2010     2010  
 
Allowance for credit losses:
                       
Balance, beginning of period
  $ 28,752     $ 35,843     $ 35,843  
Loans charged off
                       
Commercial
    2,459       9,052       4,964  
Real estate — construction
    2,248       5,379       1,329  
Real estate — mortgage
    4,005       7,260       4,273  
Consumer
    710       2,829       1,584  
Other
    1,300       6,200        
 
                 
Total chargeoffs
    10,722       30,720       12,150  
Recoveries of loans previously charged off:
                       
Commercial
    1,398       1,370       227  
Real estate — construction
    184       80       47  
Real estate — mortgage
    295       270       135  
Consumer
    221       647       328  
Other
    19       10        
 
                 
Total recoveries
    917       2,377       737  
 
                 
Net loans charged off
    9,805       28,343       11,413  
 
                 
Provision for loan losses
    9,093       21,252       8,651  
 
                 
Balance, end of period
  $ 28,040     $ 28,752     $ 33,081  
 
                 
 
                       
Nonperforming Assets:
                       
Commercial nonaccrual loans, not restructured
  $ 18,147     $ 23,453     $ 38,326  
Commercial nonaccrual loans, restructured
    11,042       11,190       8,915  
Non-commercial nonaccrual loans
    10,075       8,537       6,184  
 
                 
Total nonaccrual loans
    39,264       43,180       53,425  
Troubled debt restructured, accruing
    8,351       7,378       5,379  
Loans 90 days or more past due and still accruing
    65       27       649  
 
                 
Total non-performing loans
    47,680       50,585       59,453  
Real estate acquired in settlement of loans
    25,729       26,718       25,966  
 
                 
Total nonperforming assets
  $ 73,409     $ 77,303     $ 85,419  
 
                 
 
                       
Loans identified as impaired
  $ 37,483     $ 38,303     $ 38,677  
Other nonperforming loans
    10,197       12,282       20,776  
 
                 
Total nonperforming loans
    47,680       50,585       59,453  
Other potential problem loans
    97,141       110,924       100,912  
 
                 
Total impaired and potential problem loans
  $ 144,821     $ 161,509     $ 160,365  
 
                 
 
                       
Asset Quality Ratios:
                       
Nonperforming loans to total loans outstanding at end of period
    3.83 %     3.78 %     4.19 %
Nonperforming assets to total assets at end of period
    4.23       4.28       4.42  
Allowance for credit losses as a percentage of total loans outstanding at end of period
    2.25       2.15       2.33  
Allowance for credit losses to nonperforming loans
    58.81       56.84       55.64  
Net charge-offs as a percentage of average loans outstanding during the period
    1.50 *     2.01       1.60 *
 
*   Denotes annualized

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Income Taxes
The Company recorded income tax expense of $624,000 for the first six months of 2011, compared to income tax expense of $136,000 for the first six months of 2010. The Company’s effective tax rate was 22.5% for the six-month period ended June 30, 2011, compared to 10.0% for the first six months of 2010. The change in the effective rate is primarily as a result of the reduction in tax exempt income from 2010 to 2011.
Interest Rate Risk Management
Interest rate risk management is a part of the Bank’s overall asset/liability management process. The primary oversight of asset/liability management rests with the Bank’s Asset and Liability Committee, which is comprised of the Bank’s Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), and other senior executives. The Committee meets on a monthly basis to review the asset/liability management activities of the Bank and monitor compliance with established policies. Activities of the Asset and Liability Committee are reported to the Audit and Risk Management Committee of the Company’s Board of Directors.
A primary objective of interest rate risk management is to ensure the stability and quality of the Company’s primary earnings component, net interest income. This process involves monitoring the Company’s balance sheet in order to determine the potential impact that changes in the interest rate environment may have on net interest income. Rate sensitive assets and liabilities have interest rates that are subject to change within a specific time period, due to either maturity or to contractual agreements which allow the instruments to reprice prior to maturity. Interest rate sensitivity management seeks to ensure that both assets and liabilities react to changes in interest rates within a similar time period, thereby minimizing the risk to net interest income.
The Bank utilizes a computer based interest rate risk simulation model prepared by an independent consultant. This comprehensive model includes rate sensitivity gap analysis, net interest income analysis, and present value of equity analysis, under various rate scenarios. The Bank uses this model to monitor interest rate risk on a quarterly basis and to detect trends that may affect the overall net interest income of the Bank. This simulation incorporates the dynamics of balance sheet and interest rate changes and calculates the related effect on net interest income. The Bank’s asset/liability policy provides guidance for levels of interest rate risk and potential remediations, if necessary, to mitigate excessive levels of risk. The modeling results indicate the Bank is subject to an acceptable level of interest rate risk. The Bank is not subject to other types of market risk, such as foreign currency exchange rate risk, commodity or equity price risk.
Liquidity Management
Liquidity management refers to the policies and practices that ensure the Bank has the ability to meet day-to-day cash flow requirements based primarily on activity in loan and deposit accounts of the Bank’s customers. Deposit withdrawals, loan funding and general corporate activity create the primary needs for liquidity for the Bank. Liquidity is derived from sources such as deposit growth; maturity, calls or sales of investment securities; principal and interest payments on loans; access to borrowed funds or lines of credit; and profits.
During the first six months of 2011, the Company had net cash provided by operating activities of $93.5 million, compared to $14.6 million of net cash provided by operating activities in the first six months of 2010. The increase was primarily the result of the Company’s sale of $73.0 million of loans in connection with the sale of its Harrisonburg, Virginia operations.
Net cash provided by investing activities for the first six months of 2011 was $32.9 million, compared to net cash provided by for investing activities in the first six months of 2010 of $12.7 million. This change is primarily attributable to proceeds from the sale of securities exceeding purchases of securities by $31.1

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million during the six months of 2011. During the first six months of 2010, purchases of securities exceeded proceeds from sales of securities by $22.0 million. This was partially offset by a decrease of $27.0 million in loans to customers during the first six months of 2010.
During the six months ended June 30, 2011, financing activities used $74.7 million, compared to net cash used by financing activities of $18.4 million during the same period of 2010. The change was primarily the result of the Company decreasing its total deposits by $25.9 million during the first six months of 2011, while total deposits increased by $52.0 million during the same period in 2011. The Company sold approximately $48.8 million of deposits in connection with the sale of its Harrisonburg, Virginia operations.
Cash and cash equivalents totaled $80.8 million at June 30, 2011, compared to $29.1 million at December 31, 2010 and $53.7 million at June 30, 2010.
The Bank has borrowing capacity of approximately $275.9 million with the FHLB, of which approximately $145.7 million was available at June 30, 2011. These borrowings are collateralized by FHLB stock, investment securities, qualifying 1 to 4 family residential mortgage loans, and qualifying commercial real estate loans. The Bank provides various reports to the FHLB on a regular basis to maintain the availability of the credit line. Each borrowing request to the FHLB is initiated through an advance application that is subject to approval by the FHLB before funds are advanced under the line of credit. The Bank also has $24.9 million of borrowing capacity through the Federal Reserve Bank System, of which none was used as of June 30, 2011. The line with the Federal Reserve Bank of Richmond is collateralized using investment securities and qualified loans.
Capital Resources and Shareholders’ Equity
Pursuant to the U.S. Department of the Treasury (the “U.S. Treasury”) Capital Purchase Program (the “CPP”), on December 12, 2008, Bancorp issued and sold to the U.S. Treasury (i) 52,372 shares of Bancorp’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”) and (ii) a warrant (the “Warrant”) to purchase 2,567,255 shares of Bancorp’s common stock, par value $5.00 per share, for an aggregate purchase price of $52,372,000 in cash. The Securities Purchase Agreement, dated December 12, 2008, pursuant to which the securities issued to the U.S. Treasury under the CPP were sold, restricts Bancorp, without the prior approval of the U.S. Treasury, from increasing dividends payable on its common stock from the last quarterly cash dividend per share ($0.05) declared on the common stock prior to October 14, 2008, limits Bancorp’s ability to repurchase shares of its common stock (with certain exceptions, including the repurchase of its common stock to offset share dilution from equity-based compensation awards), grants the holders of the Series A Preferred Stock, the Warrant and the common stock of Bancorp to be issued under the Warrant, certain registration rights, and subjects Bancorp to certain of the executive compensation limitations included in the EESA, the ARRA and related regulations. Additionally, the Company’s Board of Directors has resolved not to declare or pay any dividend, common or preferred, or make any payments on trust preferred securities without the prior approval of the Federal Reserve Bank.
Bancorp did not repurchase any of its equity securities during 2010 or the first two quarters of 2011.
Banks and bank holding companies, as regulated institutions, must meet required levels of capital. The Commissioner of Banks in North Carolina, the Federal Reserve and the FDIC, which are the primary banking regulatory agencies for the Bank and the Company, have adopted minimum capital regulations or guidelines that categorize components and the level of risk associated with various types of assets. Financial institutions are required to maintain a level of capital commensurate with the risk profile assigned to their assets in accordance with the guidelines.

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As shown in the accompanying table, the Company and the Bank have capital levels exceeding the minimum levels for “well capitalized” banks and bank holding companies as of June 30, 2011.
                                 
    Regulatory Capital
    Well   Adequately        
    Capitalized   Capitalized   Company   Bank
     
 
                               
Total Capital
    10.0 %     8.0 %     14.72 %     14.38 %
Tier 1 Capital
    6.0       4.0       13.45       13.11  
Leverage Capital
    5.0       4.0       10.20       9.94  
The Company holds $4.4 million of the $52.4 million received from the U.S. Treasury under the CPP, which may be invested in the Bank to increase the Bank’s total risk based capital ratio from the present level of 14.38%.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the possible chance of loss from unfavorable changes in market prices and rates. These changes may result in a reduction of future period net interest income or other comprehensive income.
The Company considers interest rate risk to be its most significant market risk, which could potentially have the greatest impact on operating earnings. The primary oversight of asset/liability management rests with the Bank’s Asset and Liability Committee. The Committee meets on a monthly basis to review the asset/liability management activities of the Bank and monitor compliance with established policies. Activities of the Asset and Liability Committee are reported to the Audit and Risk Management Committee of the Company’s Board of Directors.
The Company has not experienced any material changes in interest rate risk since the end of the fiscal year ended December 31, 2010.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
The Company’s management, including its CEO, CFO and Chief Accounting Officer (“CAO”) evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of June 30, 2011. Based upon that evaluation, the Company’s CEO, CFO and CAO each concluded that as of June 30, 2011, the end of the period covered by this Quarterly Report on Form 10-Q, the Company maintained effective disclosure controls and procedures.
Changes in internal control over financial reporting
There have been no changes to the Company’s internal controls over financial reporting that occurred during the quarter ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
     Not applicable.
Item 1A. Risk Factors
There have been no material changes to the Company’s Risk Factors as previously disclosed in Bancorp’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no sales of equity securities during the first two quarters of 2011 which were not registered under the Securities Act of 1933, as amended. The Company did not repurchase any of its equity securities during the first two quarters of 2011.
Item 3. Defaults Upon Senior Securities
     Not applicable.
Item 4. Removed and Reserved
Item 5. Other Information
     Not applicable

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Item 6. Exhibits
     
Exhibit    
No.   Description
 
   
3.1
 
Articles of Incorporation, and amendments thereto, incorporated by reference to Exhibit 4.1 of the Registration Statement on Form S-8, filed with the SEC on May 16, 2001 (SEC File No. 333-61046).
 
   
3.2
 
Articles of Merger of FNB with and into LSB, including amendments to the Articles of Incorporation, as amended, incorporated by reference to Exhibit 3.4 of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, filed with the SEC on November 9, 2007 (SEC File No. 000-11448).
 
   
3.3
 
Amended and Restated Bylaws adopted by the Board of Directors on August 17, 2004 and amended on July 23, 2008 (with identified Bylaw approved by the shareholders) incorporated by reference to Exhibit 3.3 of the Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, filed with the SEC on May 8, 2009 (SEC File No. 000-11448).
 
   
4.1
 
Specimen certificate of common stock, $5.00 par value, incorporated by reference to Exhibit 4.1 of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, filed with the SEC on November 9, 2007 (SEC File No. 000-11448).
 
   
4.2
 
Amended and Restated Trust Agreement, regarding Trust Preferred Securities, dated August 23, 2005, incorporated herein by reference to Exhibit 4.02 of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed with the SEC (SEC File No. 000-13086).
 
   
4.3
 
Guarantee Agreement, regarding Trust Preferred Securities, dated August 23, 2005, incorporated herein by reference to Exhibit 4.03 of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed with the SEC (SEC File No. 000-13086).
 
   
4.4
 
Indenture, regarding Trust Preferred Securities, dated August 23, 2005, incorporated herein by reference to Exhibit 4.04 of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed with the SEC (SEC File No. 000-13086).
 
   
4.5
 
Articles of Amendment, filed with the North Carolina Department of the Secretary of State on December 12, 2008, incorporated herein by reference to Exhibit 4.1 of the Current Report on Form 8-K filed with the SEC on December 12, 2008 (SEC File No. 000-11448).
 
   
4.6
 
Form of Certificate for the Fixed Rate Cumulative Perpetual Preferred Stock, Series A, incorporated herein by reference to Exhibit 4.2 of the Current Report on Form 8-K filed with the SEC on December 12, 2008 (SEC File No. 000-11448).
 
   
4.7
 
Warrant for Purchase of Shares of Common Stock issued by Bancorp to the United States Department of the Treasury on December 12, 2008, incorporated herein by reference to Exhibit 4.3 of the Current Report on Form 8-K filed with the SEC on December 12, 2008 (SEC File No. 000-11448).
 
   
10.1
 
Benefit Equivalency Plan of FNB Southeast, effective January 1, 1994 incorporated herein by reference to Exhibit 10 of the Quarterly Report on Form 10-QSB for the fiscal quarter ended June 30, 1995, filed with the SEC (SEC File No. 000-13086).
 
   
10.2
 
1994 Director Stock Option Plan, incorporated herein by reference to Exhibit 4 of the Registration Statement on Form S-8 filed with the SEC on July 15, 1994 (SEC File No. 33-81664).

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Exhibit    
No.   Description
 
   
10.3
 
1996 Omnibus Stock Incentive Plan, incorporated herein by reference to Exhibit 10.2 of the Annual Report on Form 10-K for the year ended December 31, 1995 filed with the SEC on March 28, 1996 (SEC File No. 000-11448).
 
   
10.4
 
Omnibus Equity Compensation Plan, incorporated herein by reference to Exhibit 10(B) of the Annual Report on Form 10-KSB40 for the fiscal year ended December 31, 1996, filed with the SEC on March 31, 1997 (SEC File No. 000-13086).
 
   
10.5
 
Amendment to Benefit Equivalency Plan of FNB Southeast, effective January 1, 1998., incorporated herein by reference to Exhibit 10.16 of the Annual Report on Form 10-K for the fiscal year ended December 31, 1998, filed with the SEC on March 25, 1999 (SEC File No. 000-13086)
 
   
10.6
 
Amendment Number 1 to 1996 Omnibus Stock Incentive Plan, incorporated herein by reference to Exhibit 4.5 of the Registration Statement on Form S-8, filed with the SEC on May 16, 2001 (SEC File No. 333-61046).
 
   
10.7
 
Long Term Stock Incentive Plan for certain senior management employees of FNB Southeast incorporated herein by reference to Exhibit 10.10 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2002, filed with the SEC on March 27, 2003 (SEC File No. 000-13086).
 
   
10.8
 
Form of Employment Continuity Agreement effective as of January 1, 2004 between LSB and Robert E. Lineback, Jr. and Philip G. Gibson with a Schedule setting forth the material details in which such documents differ from the document a copy of which is filed, incorporated herein by reference to Exhibit 10.10 of the Annual Report on Form 10-K for the year ended December 31, 2003 filed with the SEC on March 15, 2004 (SEC File No. 000-11448).
 
   
10.9
 
Form of Stock Option Award Agreement for a Director adopted under LSB Comprehensive Equity Compensation Plan for Directors and Employees, incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the SEC on December 23, 2004 (SEC File No. 000-11448).
 
   
10.10
 
Form of Incentive Stock Option Award Agreement for an Employee adopted under LSB Comprehensive Equity Compensation Plan for Directors and Employees, incorporated herein by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the SEC on December 23, 2004 (SEC File No. 000-11448).
 
   
10.11
 
Form of Amendment to the applicable Grant Agreements under the 1996 Omnibus Stock Incentive Plan, incorporated herein by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the SEC on April 15, 2005 (SEC File No. 000-11448).
 
   
10.12
 
Form of Amendment to the Incentive Stock Option Award Agreement for an Employee adopted under LSB Comprehensive Equity Compensation Plan for Directors and Employees, incorporated herein by reference to Exhibit 10.3 of the Current Report on Form 8-K filed with the SEC on April 15, 2005 (SEC File No. 000-11448).
 
   
10.13
 
Restated Form of Director Fee Deferral Agreement adopted under LSB Comprehensive Equity Compensation Plan for Directors and Employees, incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K filed with the SEC on December 23, 2005 (SEC File No. 000-11448).
 
   
10.14
 
Form of Stock Appreciation Rights Award Agreement adopted under LSB Comprehensive Equity Compensation Plan for Directors and Employees, incorporated herein by reference to Exhibit 99.2 of the Current Report on Form 8-K filed with the SEC on December 23, 2005 (SEC File No. 000-11448).
 
   
10.15
 
FNB Amended and Restated Directors Retirement Policy, incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K, filed with the SEC on August 3, 2007 (SEC File No. 000-11448).

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Exhibit    
No.   Description
 
   
10.16
 
Amendment to the FNB Directors and Senior Management Deferred Compensation Plan Trust Agreement among Regions Bank d/b/a/ Regions Morgan Keegan Trust, FNB Southeast and FNB, dated July 31, 2007, incorporated herein by reference to Exhibit 99.2 of the Current Report on Form 8-K, filed with the SEC on August 3, 2007 (SEC File No. 000-11448).
 
   
10.17
 
Employment and Change of Control Agreement with William W. Budd, Jr. incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K, filed with the SEC on March 11, 2010 (SEC File No. 000-11448).
 
   
10.18
 
Employment and Change of Control Agreement with Jerry W. Beasley, incorporated herein by reference to Exhibit 99.3 of the Current Report on Form 8-K, filed with the SEC on March 14, 2008 (SEC File No. 000-11448).
 
   
10.19
 
Employment and Change of Control Agreement with Robin S. Hager, incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K, filed with the SEC on August 3, 2010 (SEC File No. 000-11448).
 
   
10.20
 
Employment and Change of Control Agreement with Paul McCombie, incorporated herein by reference to Exhibit 99.5 of the Current Report on Form 8-K, filed with the SEC on March 14, 2008 (SEC File No. 000-11448).
 
   
10.21
 
Directors and Senior Management Deferred Compensation Plan Trust Agreement between FNB Southeast and Morgan Trust Company, incorporated herein by reference to Exhibit 99.7 of the Current Report on Form 8-K, filed with the SEC on March 14, 2008 (SEC File No. 000-11448).
 
   
10.22
 
Bancorp Non-Qualified Deferred Compensation Plan for Directors and Senior Management, incorporated herein by reference to Exhibit 99.9 of the Current Report on Form 8-K, filed with the SEC on March 14, 2008 (SEC File No. 000-11448).
 
   
10.23
 
First Amendment to the Bancorp Non-Qualified Deferred Compensation Plan for Directors and Senior Management, incorporated herein by reference to Exhibit 99.10 of the Current Report on Form 8-K, filed with the SEC on March 14, 2008 (SEC File No. 000-11448).
 
   
10.24
 
Bancorp Amended and Restated Long Term Stock Incentive Plan, formerly the “FNB Long Term Stock Incentive Plan” (the “2006 Omnibus Plan”), incorporated herein by reference to Exhibit 10.27 of the Quarterly Report on Form 10-Q filed with the SEC on May 9, 2008 (SEC File No. 000-11448).
 
   
10.25
 
Amended and Restated Comprehensive Equity Compensation Plan for Directors and Employees, incorporated herein by reference to Exhibit 10.44 of the Quarterly Report on Form 10-Q, filed with the SEC on August 11, 2008 (SEC File No. 000-11448).
 
   
10.26
 
Form of Restricted Stock Award Agreement adopted under the Amended and Restated Comprehensive Equity Compensation Plan for Directors and Employees, incorporated herein by reference to Exhibit 10.45 of the Quarterly Report on Form 10-Q, filed with the SEC on August 11, 2008 (SEC File No. 000-11448).
 
   
10.27
 
Employment and Change of Control Agreement with David P. Barksdale, incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K, filed with the SEC on October 17, 2008 (SEC File No. 000-11448).
 
   
10.28
 
Letter Agreement, dated December 12, 2008, between Bancorp and the United States Department of the Treasury, with respect to the issuance and sale of the Fixed Rate Cumulative Perpetual Preferred Stock, Series A and the Warrant, incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the SEC on December 12, 2008 (SEC File No. 000-11448).

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Exhibit    
No.   Description
 
   
10.29
 
Form of Employment Agreement Amendment, dated December 12, 2008 among Bancorp, the Bank and the senior executive officers of Bancorp, incorporated herein by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the SEC on December 12, 2008 (SEC File No. 000-11448).
 
   
10.30
 
Bancorp Management Incentive Plan, dated February 18, 2008, incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K, filed with the SEC on March 6, 2009 (SEC File No. 000-11448).
 
   
10.31
 
Employment and Change of Control Agreement with Ramsey K. Hamadi, incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K, filed with the SEC on March 30, 2009 (SEC File No. 000-11448).
 
   
10.32
 
Promissory Note by Ramsey K. Hamadi in favor of the Bank incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K, filed with the SEC on April 21, 2009 (SEC File No. 000-11448).
 
   
10.33
 
Excessive and Luxury Expenditure Policy of Bancorp and the Bank, incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K filed with the SEC on September 9, 2009 (SEC File No. 000-11448).
 
   
10.34
 
Employment and Change of Control Agreement among Bancorp, the Bank and Pressley A. Ridgill, executed September 9, 2009, and effective January 1, 2010, incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K filed with the SEC on September 11, 2009 (SEC File No. 000-11448).
 
   
10.35
 
Form of Amendment to Employment and Change of Control Agreement, dated September 16, 2009, among Bancorp, the Bank and the senior executive officers of Bancorp, incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K filed with the SEC on September 16, 2009 (SEC File No. 000-11448).
 
   
31.01
 
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
31.02
 
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
32.01
 
Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
   
101
 
The following materials from the Company’s 10-Q Report for the quarterly period ended June 30, 2011, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Changes in Shareholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) the Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text.*
 
   
 
*       Furnished, not filed

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
Date: August 12, 2011 
NEWBRIDGE BANCORP
(Registrant)
 
 
  By:   /s/ Ramsey K. Hamadi    
    Name:   Ramsey K. Hamadi   
    Title:   Executive Vice President and Chief Financial Officer (Authorized Officer)   

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Table of Contents

         
EXHIBIT INDEX
     
Exhibit    
No.   Description
 
   
31.01
 
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
31.02
 
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
32.01
 
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
   
101
 
The following materials from the Company’s 10-Q Report for the quarterly period ended June 30, 2011, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Changes in Shareholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) the Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text.*
 
   
 
*       Furnished, not filed

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