NEWBRIDGE BANCORP - FORM 10-Q - November 10, 2011

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EX-31.01 - CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - NEWBRIDGE BANCORP	d253847dex3101.htm
EX-31.02 - CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - NEWBRIDGE BANCORP	d253847dex3102.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended:

September 30, 2011

Commission File Number: 000-11448

NEWBRIDGE BANCORP

(Exact name of Registrant as specified in its Charter)


North Carolina		56-1348147
(State of Incorporation)		(I.R.S. Employer Identification No.)

1501 Highwoods Boulevard, Suite 400
Greensboro, North Carolina		27410
(Address of principal executive offices)		(Zip Code)

(336) 369-0900

(Registrant’s telephone number, including area code)

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

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 ¨

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 ¨		Accelerated filer ¨		Non-accelerated filer ¨		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 ¨ No þ

At November 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

Item 1	Financial Statements		3
	Consolidated Balance Sheets September 30, 2011 and December 31, 2010		3
	Consolidated Statements of Income Three Months and Nine Months Ended September 30, 2011 and 2010		4
	Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income Nine Months Ended September 30, 2011 and 2010		5
	Consolidated Statements of Cash Flows Nine Months Ended September 30, 2011 and 2010		6
	Notes to Consolidated Financial Statements		8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3	Quantitative and Qualitative Disclosures About Market Risk		29
Item 4	Controls and Procedures		29

	PART II Other Information

Item 1	Legal Proceedings		30
Item 1A	Risk Factors		30
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 3	Defaults Upon Senior Securities		30
Item 4	Removed and Reserved		30
Item 5	Other Information		30
Item 6	Exhibits		31

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

NewBridge Bancorp and Subsidiary

Consolidated Balance Sheets

(Dollars in thousands, except per share data)


	September 30 2011 (Unaudited)			December 31 2010

Assets
Cash and due from banks	$	33,488		$	23,479
Interest-bearing bank balances		30,519			5,596
Loans held for sale		6,894			76,994
Investment securities		295,461			325,129
Loans		1,217,058			1,260,585
Less allowance for credit losses		(27,750	)		(28,752	)

Net loans		1,189,308			1,231,833
Premises and equipment		36,238			38,442
Real estate acquired in settlement of loans		26,469			26,718
Bank-owned life insurance		31,357			30,317
Deferred tax assets		26,780			27,089
Other assets		23,416			21,564

Total assets	$	1,699,930		$	1,807,161


Liabilities
Deposits:
Non-interest bearing	$	167,689		$	161,734
Savings, NOW and money market accounts		826,695			795,696
Time		401,287			495,565

Total deposits		1,395,671			1,452,995
Borrowings from the Federal Home Loan Bank		73,000			112,700
Other borrowings		46,774			61,774
Accrued expenses and other liabilities		19,937			16,504

Total liabilities		1,535,382			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		51,714			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		87,152			87,048
Directors’ deferred compensation plan		(575	)		(618	)
Retained deficit		(50,969	)		(52,016	)
Accumulated other comprehensive (loss)		(1,053	)		(995	)

Total shareholders’ equity		164,548			163,188

Total liabilities and shareholders’ equity	$	1,699,930		$	1,807,161

See notes to consolidated financial statements

NewBridge Bancorp and Subsidiary

Consolidated Statements of Income

(Unaudited; dollars in thousands, except per share data)


	Three Months Ended September 30						Nine Months Ended September 30
	2011			2010			2011			2010
Interest Income
Interest and fees on loans	$	16,121		$	18,545		$	50,052		$	56,926
Interest on investment securities:
Taxable		3,147			2,895			9,595			8,529
Tax exempt		190			959			572			3,132
Interest-bearing bank balances and Federal funds sold		20			20			44			54

Total interest income		19,478			22,419			60,263			68,641

Interest Expense
Deposits		2,252			3,556			7,513			11,841
Borrowings from the Federal Home Loan Bank		275			520			907			2,639
Other borrowings		329			617			1,313			1,822

Total interest expense		2,856			4,693			9,733			16,302

Net interest income		16,622			17,726			50,530			52,339
Provision for credit losses		3,445			7,965			12,539			16,616

Net interest income after provision for credit losses		13,177			9,761			37,991			35,723


Noninterest Income
Retail banking		2,457			2,923			7,511			8,925
Mortgage banking services		395			742			1,088			1,453
Wealth management services		702			520			1,873			1,542
Gain on sale of investment securities		65			3,637			2,026			3,637
Writedowns and losses on sales of real estate acquired in settlement of loans		(799	)		(1,563	)		(3,871	)		(3,722	)
Other		480			294			1,607			1,140

Total noninterest income		3,300			6,553			10,234			12,975

Noninterest Expense
Personnel		7,857			7,421			22,498			22,745
Occupancy		983			1,035			3,043			3,210
Furniture and equipment		896			1,159			2,784			3,511
Technology and data processing		960			1,075			2,970			3,400
Legal and professional		664			699			2,032			2,324
FDIC insurance		600			833			2,027			2,633
Real estate acquired in settlement of loans		451			499			1,233			1,099
Other		2,482			2,444			7,278			7,265

Total noninterest expense		14,893			15,165			43,865			46,187

Income before income taxes		1,584			1,149			4,360			2,511
Income taxes		501			115			1,125			251

Net Income		1,083			1,034			3,235			2,260
Dividends and accretion on preferred stock		(730	)		(730	)		(2,189	)		(2,190	)

Net Income available to common shareholders	$	353		$	304		$	1,046		$	70


Earnings per share:
Basic	$	0.02		$	0.02		$	0.07		$	0.00
Diluted	$	0.02		$	0.02		$	0.06		$	0.00

Weighted average shares outstanding:
Basic		15,655,868			15,655,868			15,655,868			15,655,868
Diluted		16,467,550			16,019,719			16,558,862			16,025,102

See notes to consolidated financial statements

NewBridge Bancorp and Subsidiary

Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income

Nine months ended September 30, 2011 and 2010

(Unaudited; Dollars in thousands)


	Preferred Stock		Common Stock				Paid-in		Directors’ Deferred Compensation			Retained Earnings			Accumulated Other Comprehensive			Total Shareholders’
			Common Stock				Paid-in		Directors’ Deferred Compensation			Retained Earnings			Accumulated Other Comprehensive			Total Shareholders’
			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													2,260						2,260
Change in unrealized gain on securities available for sale, net of deferred income taxes																1,624			1,624

Total comprehensive income																			3,884
Dividends and accretion on preferred stock		225											(2,190	)					(1,965	)
Stock-based compensation expense								61											61
Common stock distributed										16									16

Balances at September 30, 2010	$	51,415		15,655,868	$	78,279	$	87,030	$	(618	)	$	(52,407	)	$	2,901		$	166,600


Balances at December 31, 2010	$	51,490		15,655,868	$	78,279	$	87,048	$	(618	)	$	(52,016	)	$	(995	)	$	163,188
Net Income													3,235						3,235
Change in unrealized gain on securities available for sale, net of deferred income taxes																(58	)		(58	)

Total comprehensive income																			3,177
Dividends and accretion on preferred stock		224											(2,188	)					(1,964	)
Stock-based compensation expense								104											104
Common stock distributed										43									43

Balances at September 30, 2011	$	51,714		15,655,868	$	78,279	$	87,152	$	(575	)	$	(50,969	)	$	(1,053	)	$	164,548

See notes to consolidated financial statements

NewBridge Bancorp and Subsidiary

Consolidated Statements of Cash Flows

(Unaudited; dollars in thousands)


	Nine Months Ended September 30
	2011			2010
Cash Flow from operating activities
Net Income	$	3,235		$	2,260
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4,626			5,255
Decrease in deferred income taxes		309			1,371
Decrease in income taxes receivable		—			2,717
Decrease in income earned but not received		311			1,283
Decrease in interest accrued but not paid		(327	)		(569	)
Net decrease in other assets		3,729			2,648
Net increase (decrease) in other liabilities		3,759			(1,176	)
Provision for credit losses		12,539			16,616
Gain on sale of loans held for sale		(1,555	)		(1,453	)
Originations of loans held for sale		(72,928	)		(136,707	)
Proceeds from sales of loans held for sale		144,584			126,935
(Gain) Loss on sale of premises, equipment and real estate acquired in settlement of loans		(107	)		1,457
Stock based compensation		104			61

Net cash provided by operating activities		98,279			20,698


Cash Flow from investing activities
Purchases of securities available for sale		(86,418	)		(101,500	)
Purchases of securities held to maturity		—			(39,160	)
Proceeds from sales/maturities/calls of securities available for sale		114,272			193,802
Gain on sales of securities available for sale		(2,026	)		(3,637	)
Net decrease in loans made to customers		17,586			65,044
Proceeds from sale of premises, equipment and real estate acquired in settlement of loans		10,233			13,321
Expenditures for improvements to real estate acquired in settlement of loans, net of income received		27			37
Purchases of premises and equipment		(3,076	)		(2,523	)

Net cash provided by investing activities		50,598			125,384


Cash Flow from financing activities
Net increase in demand, NOW, money market and savings deposits		36,954			125,410
Net decrease in time deposits		(94,278	)		(114,128	)
Net decrease in other borrowings		(15,000	)		(27,647	)
Net decrease in borrowings from Federal
Home Loan Bank		(39,700	)		(67,500	)
Dividends paid		(1,964	)		(1,964	)
Common stock distributed		43			15

Net cash used for financing activities		(113,945	)		(85,814	)

Increase in cash and cash equivalents		34,932			60,268
Cash and cash equivalents at the beginning of the period		29,075			44,840

Cash and cash equivalents at the end of the period	$	64,007		$	105,108

See notes to consolidated financial statements

NewBridge Bancorp and Subsidiary

Consolidated Statements of Cash Flows (continued)

(Unaudited; dollars in thousands)


	Nine Months Ended September 30
	2011			2010

Supplemental disclosures of cash flow information
Cash paid during the periods for:
Interest	$	10,060		$	16,871
Income Taxes		—			—

Supplemental disclosures of noncash transactions
Transfer of loans to real estate acquired in settlement of loans	$	10,980		$	18,089
Transfer of investment securities from Held to Maturity to Available for Sale		—			27,389
Accretion on U.S. Treasury preferred stock		224			225
Dividends accrued but unpaid		327			327
Unrealized gains/(losses) on securities available for sale:
Change in securities available for sale		1,430			(855	)
Change in deferred income taxes		(1,372	)		(769	)
Change in shareholders’ equity		(58	)		1,624

See notes to consolidated financial statements

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 and nine month periods ended September 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 September 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 $0.3 million of loans outstanding as of September 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 June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220) – Presentation of Comprehensive Income. This Update requires companies to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Presentation of comprehensive income in the statement of changes in stockholders’ equity will no longer be acceptable. The update does not change the items that must be reported in other comprehensive income, when an item of other comprehensive income must be reclassified to net income, the option for an entity to present components of other comprehensive income net or before related tax effects, or how earnings per share is calculated or presented. This guidance becomes effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. The Company currently presents other comprehensive income in its Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income and plans to adopt the new disclosure requirements in its first quarter 2012 Form 10-Q.

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 Per Share

Basic and diluted net income 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 the basic and diluted weighted average number of shares used in the computation of net income per share follows (in thousands, except per share data):


	Three Months Ended September 30				Nine Months Ended September 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		811,682		363,851		902,994		369,234

Diluted weighted average common shares outstanding		16,467,550		16,019,719		16,558,862		16,025,102

Note 3 — Investment Securities

Investment securities consist of the following (in thousands):


					September 30, 2011
	Amortized Cost		Unrealized Gains		Unrealized Losses			Market Value		Average Yield			Average Duration¹

U.S. government agency securities	$	48,000	$	166	$	—		$	48,166		4.04	%		0.15
Mortgage backed securities		34,399		3,156		—			37,555		5.12			4.49
State and municipal obligations		17,392		241		(378	)		17,255		6.31	²		7.06
Covered bonds		51,471		2,144		(82	)		53,533		5.25			2.36
Corporate bonds		100,558		82		(1,796	)		98,844		3.86			4.05
Collateralized mortgage obligations		25,828		521		(541	)		25,808		5.56			3.48
Federal Home Loan Bank stock		8,270		—		—			8,270
Other equity securities		5,775		314		(59	)		6,030

Total	$	291,693	$	6,624	$	(2,856	)	$	295,461

¹	Average remaining duration to maturity, in years

²	Fully taxable equivalent basis


					December 31, 2010
	Amortized Cost		Unrealized Gains		Unrealized Losses			Market Value		Average Yield			Average Duration¹

U.S. government agency securities	$	109,274	$	267	$	(2,017	)	$	107,524		3.88	%		6.10
Mortgage backed securities		55,989		4,320		—			60,309		5.65			2.14
State and municipal obligations		17,380		13		(1,982	)		15,411		6.71	²		11.46
Covered bonds		44,256		1,802		—			46,058		5.30			2.62
Corporate bonds		38,560		507		(612	)		38,455		5.50			6.42
Collateralized mortgage obligations		39,679		823		(90	)		40,412		5.52			2.10
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

¹	Average remaining duration to maturity, in years

²	Fully taxable equivalent basis

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 September 30, 2011 (in thousands):


	Less than 1 year					1 Year or More					Total
	Market Value		Unrealized Loss			Market Value		Unrealized Loss			Market Value		Unrealized Loss

State and municipal obligations	$	510	$	(43	)	$	3,820	$	(335	)	$	4,330	$	(378	)
Covered bonds		4,856		(82	)		—		—			4,856		(82	)
Corporate bonds		65,381		(1,527	)		4,714		(269	)		70,095		(1,796	)
Collateralized mortgage obligations		11,013		(444	)		2,161		(97	)		13,174		(541	)
Other equity securities		780		(59	)		—		—			780		(29	)

Total securities	$	82,540	$	(2,155	)	$	10,695	$	(701	)	$	93,235	$	(2,856	)

Investment securities with an amortized cost of $74,319,000 and $98,111,000, as of September 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 nine months of 2011, the Company sold $39,209,000 of investments for a gain of $2,026,000. The investments sold by the Company consisted of shorter-duration, odd-lot mortgage backed securities and certain corporate bonds. Investment securities with a book value of $82,052,000 were sold during the nine months ended September 30, 2010, for a gain of $3,637,000, to reposition the investment portfolio and reduce the Company’s exposure to municipalities.

Note 4 — Loans and Allowance for Credit Losses

Loans are summarized as follows (in thousands):


	September 30 2011		December 31 2010

Secured by owner-occupied nonfarm nonresidential properties	$	263,438	$	222,889
Secured by other nonfarm nonresidential properties		157,370		159,086
Other commercial and industrial		121,489		134,011

Total Commercial		542,297		515,986
Construction loans — 1 to 4 family residential		9,606		16,736
Other construction and land development		96,773		122,382

Total Real estate — construction		106,379		139,118
Closed-end loans secured by 1 to 4 family residential properties		288,785		304,640
Lines of credit secured by 1 to 4 family residential properties		214,016		219,557
Loans secured by 5 or more family residential properties		23,554		20,207

Total Real estate — mortgage		526,355		544,404
Credit cards		7,315		7,749
Other revolving credit plans		9,415		9,042
Other consumer loans		19,556		36,224

Total Consumer		36,286		53,015
Loans to other depository institutions		—		3,800
All other loans		5,741		4,262

Total Other		5,741		8,062

Total loans		1,217,058		1,260,585
Loans held for sale		6,894		76,994

Total loans and loans held for sale	$	1,223,952	$	1,337,579

Nonperforming assets are summarized as follows (in thousands):


	September 30 2011			December 31 2010
Commercial nonaccrual loans, not restructured	$	17,477		$	23,453
Commercial nonaccrual loans, restructured		9,870			11,190
Non-commercial nonaccrual loans		8,922			8,537

Total nonaccrual loans		36,269			43,180
Troubled debt restructured, accruing		7,167			7,378
Accruing loans which are contractually past due 90 days or more		26			27

Total nonperforming loans		43,462			50,585
Real estate acquired in settlement of loans		26,469			26,718

Total nonperforming assets	$	69,931		$	77,303

Nonperforming loans to loans outstanding at end of period		3.57	%		4.01	%
Nonperforming assets to total assets at end of period		4.11	%		4.28	%
Allowance for credit losses to nonperforming loans		63.85	%		56.84	%

The aging of loans is summarized in the following table (in thousands):


	30-89 days past due		90 + days past due		Nonaccrual Loans		Total past due + nonaccrual		Current		Total loans receivable
September 30, 2011
Secured by owner-occupied nonfarm nonresidential property	$	5,951	$	—	$	5,711	$	11,662	$	251,776	$	263,438
Secured by other nonfarm nonresidential property		1,230		—		1,604		2,834		154,536		157,370
Other commercial and industrial		1,025		—		705		1,730		119,760		121,490

Total Commercial		8,206		—		8,020		16,226		526,072		542,298

Construction loans — 1 to 4 family residential		—		—		453		453		9,153		9,606
Other construction and land development		614		—		11,093		11,707		85,066		96,773

Total Real estate — construction		614		—		11,546		12,160		94,219		106,379

Closed-end loans secured by 1 to 4 family residential property		5,019		—		11,877		16,896		271,889		288,785
Lines of credit secured by 1 to 4 family residential property		5,270		—		1,044		6,314		207,702		214,016
Loans secured by 5 or more family residential property		2,549		—		3,524		6,072		17,482		23,554

Total Real estate — mortgage		12,838		—		16,445		29,282		497,073		526,355

Credit cards		126		25		—		151		7,164		7,315
Other revolving credit plans		321		—		156		477		8,938		9,415
Other consumer loans		140		1		102		244		19,312		19,556

Total Consumer		587		26		258		872		35,414		36,286

Loans to other depository institutions		—		—		—		—		—		—
All other loans		—		—		—		—		5,740		5,740

Total Other		—		—		—		—		5,740		5,740

Total loans		22,245		26		36,269		58,540		1,158,518		1,217,058
Loans held for sale		—		—		—		—		6,894		6,894

Total loans and loans held for sale	$	22,245	$	26	$	36,269	$	58,540	$	1,165,412	$	1,223,952


	30-89 days Past due		90 + days Past due		Nonaccrual Loans		Total past due + nonaccrual		Current		Total loans 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 totaled $33.8 million and $38.3 million at September 30, 2011 and December 31, 2010, respectively. Included in these balances were $17.0 million and $18.6 million, respectively, of loans classified as troubled debt restructurings (“TDRs”). A modification of a loan’s terms constitutes a TDR if the creditor grants a concession to the borrower for economic or legal reasons related to the borrower’s financial difficulties that it would not otherwise consider. For loans classified as TDRs, the Company further evaluates the loans as performing or nonperforming. TDRs originally classified as non-accrual are able to be reclassified as accruing if, subsequent to restructure, they experience six months of payment performance according to the restructured terms. Further, TDRs may be considered performing and subsequently removed from impaired status in years subsequent to the restructuring if it meets the following criteria:

•

At the time of restructure, the loan was made at a market rate of interest

•

The loan has shown at least 6 months of payment performance in accordance with the restructured terms.

Quarterly, the Company reviews those loans designated as TDRs for compliance with the previously stated criteria. In the third quarter, the Company removed 7 loans totaling $1.3 million from impaired status, due to the loans meeting performance and other criteria.

Modifications of terms for loans and their inclusion as TDRs are based on individual facts and circumstances. Loan modifications that are included as TDRs may involve either an increase or reduction of the interest rate, extension of the term of the loan, or deferral of principal payments, regardless of the period of the modification. The loans included in all loan classes as TDRs at September 30, 2011 had either an interest rate modification or a deferral of principal payments, which the Company considers are concessions. All loans designated as TDRs were modified due to financial difficulties experienced by the borrower.

The Company monitors the performance of modified loans on an ongoing basis. Loans retain their accrual status at the time of their modification. As a result, if a loan is on non-accrual at the time it is modified, it stays as non-accrual, and if a loan is on accrual at the time of the modification, it generally stays on accrual. A modified loan will be reclassified to non-accrual if the loan becomes 90 days delinquent or other weaknesses are observed which make collection of principal and interest unlikely. A loan on non-accrual will be individually evaluated based on sustained adherence to the terms of the modification agreement for a minimum of six months prior to being reclassified to accrual status. TDRs are considered impaired. However, TDRs that specified a market rate of interest at the date of restructure and have performed in accordance with the revised terms for a minimum of six months may be removed from the impaired loan disclosures in years subsequent to the modification.

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


			Impaired Loans
	Recorded balance		Unpaid principal balance		Specific Allowance
September 30, 2011
Loans without a specific valuation allowance
Commercial	$	3,226	$	3,242	$	—
Real estate — construction		7,694		11,729		—
Real estate — mortgage		9,126		9,348		—
Consumer		—		—		—

Total		20,046		24,319		—

Loans with a specific valuation allowance
Commercial		2,321		2,903		368
Real estate — construction		2,863		3,183		281
Real estate — mortgage		8,478		9,479		1,073
Consumer		119		119		119

Total		13,781		15,684		1,841

Total impaired loans
Commercial		5,547		6,145		368
Real estate — construction		10,557		14,912		281
Real estate — mortgage		17,604		18,827		1,073
Consumer		119		119		119

Total	$	33,827	$	40,003	$	1,841


			Impaired Loans
	Recorded Balance		Unpaid principal Balance		Specific 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


	September 30 2011		December 31 2010
Loans identified as impaired	$	33,827	$	38,303
Other nonperforming loans		9,635		12,282

Total nonperforming loans		43,462		50,585
Other potential problem loans		93,459		110,924

Total impaired and potential problem loans	$	136,921	$	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).


	September 30 2011										December 31 2010
	Pass		Special Mention		Sub- standard		Doubtful		Total		Pass		Special Mention		Sub- Standard		Doubtful		Total
Commercial	$	437,510	$	52,217	$	84,301	$	180	$	574,208	$	423,474	$	48,651	$	75,682	$	1,121	$	548,928
Real estate — construction		40,001		15,255		26,988		487		82,731		66,766		13,673		47,319		630		128,388
Real estate — mortgage		59,451		6,707		14,735		179		81,072		92,610		7,898		20,288		798		121,594
Consumer		—		—		—		—		—		2		—		—		—		2
Other		5,152		—		—		—		5,152		3,448		—		3,903		—		7,351

Total	$	542,114	$	74,179	$	126,024	$	846	$	743,163	$	586,300	$	70,222	$	147,192	$	2,549	$	806,263

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


	Nine Months Ended September 30
	2011		2010
Balance, beginning of period	$	28,752	$	35,843
Loans charged off:
Commercial		4,037		7,227
Real estate — construction		3,426		3,177
Real estate — mortgage		5,030		5,361
Consumer		1,109		2,294
Other		1,300		—

Total chargeoffs		14,902		18,059
Recoveries of loans previously charged off:
Commercial		212		305
Real estate — construction		341		49
Real estate — mortgage		450		224
Consumer		328		576
Other		30		—

Total recoveries		1,361		1,154

Net loans charged off		13,541		16,905

Provision for loan losses		12,539		16,616

Balance, end of period	$	27,750	$	35,554

Loans totaling $6,838,000 and $76,994,000 as of September 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 $567,845,000 and $569,896,000 as of September 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 $104,000, or less than $0.01 per diluted share, and $61,000, or less than $0.01 per diluted share, of total stock-based compensation expense for the nine-month periods ended September 30, 2011 and September 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 September 30, 2011, there was $416,000 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 per unit, 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 third quarter and first nine months of 2011. There were no stock options granted in the nine months ended September 30, 2011.

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 for identical assets (Level 1)	Significant other observable inputs (Level 2)	Significant unobservable inputs (Level 3)
Available for sale securities at September 30, 2011	$ —	$287,191	$ 8,270
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 for identical assets (Level 1)	Significant other observable inputs (Level 2)	Significant unobservable inputs (Level 3)
Loans held for sale at September 30, 2011	$ —	$ 6,894	$ —
Loans held for sale at December 31, 2010	—	76,994	—
Real estate acquired in settlement of loans at September 30, 2011	—	—	26,469
Real estate acquired in settlement of loans at December 31, 2010	—	—	26,718
Core deposit intangible at September 30, 2011	—	—	3,982
Core deposit intangible at December 31, 2010	—	—	4,526
Impaired loans, net of allowance at September 30, 2011	—	—	31,986
Impaired loans, net of allowance at December 31, 2010	—	—	36,376

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 the 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 5% for the first five years and 9% thereafter, unless the Company redeems the shares.

Note 8 — Sale of Harrisonburg, Virginia Operations

On May 20, 2011, the Bank sold its Harrisonburg, Virginia operations. This transaction included the sale of approximately $72.5 million of loans and the assignment of $48.8 million of deposits, as well as a branch office building and a parcel of land. The Bank retained approximately $30.5 million of loans in its Virginia Region. The Bank provided for an estimated loss of $338,000 in the fourth quarter of 2010, and recorded a gain of approximately $71,000 in the second quarter of 2011 when the sale closed.

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.

Introduction

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”). The Company’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.”

Three Months Ended September 30, 2011 Compared to Three Months Ended September 30, 2010

Net Interest Income

Net interest income for the third quarter of 2011, on a taxable equivalent basis, was $16.7 million, a decrease of $1.5 million or 8.0%, from $18.2 million for the third quarter of 2010. Average earning assets in the third quarter of 2011 decreased $181.9 million, or 10.3%, to $1.58 billion, compared to $1.76 billion in the third quarter of 2010. Average loans decreased $126.6 million as a result of soft loan demand and the sale of approximately $72.5 million in loans in connection with the sale of the Bank’s Harrisonburg, Virginia operations. Average interest-bearing liabilities for the third quarter of 2011 decreased $175.7 million, or 11.4%, to $1.37 billion, compared to $1.55 billion for the third quarter of 2010. The impact on net interest income caused by the decrease in earning assets was partially offset by an 11 basis points increase in taxable-equivalent net interest margin to 4.20% for the third quarter of 2011, compared to 4.09% for the third quarter of 2010.

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 third quarter of 2011 was 24 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 37 basis points during the same time period, which resulted in a 13 basis points increase in the interest rate spread in the third quarter of 2011 over the third 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 September 30, 2011 and 2010.

(Fully taxable equivalent basis¹, in thousands)


	Three Months Ended September 30, 2011								Three Months Ended September 30, 2010
	Average Balance			Interest Income/ Expense		Annualized Average Yield/Rate			Average Balance			Interest Income/ Expense		Annualized Average Yield/Rate
Earning assets:
Loans receivable²	$	1,234,861		$	16,121		5.18	%	$	1,391,390		$	18,545		5.29	%
Taxable securities		286,736			3,128		4.33			244,483			2,882		4.68
Tax exempt securities		16,790			283		6.69			77,598			1,403		7.17
FHLB stock		8,830			18		0.83			11,113			13		0.46
Interest-bearing bank balances		32,709			20		0.24			37,264			20		0.22
Federal funds sold		—			—		—			—			—		—


Total earning assets		1,579,926			19,570		4.91			1,761,848			22,863		5.15

Non-earning assets:
Cash and due from banks		25,623								27,909
Premises and equipment		36,387								39,198
Other assets		104,938								103,823
Allowance for credit losses		(28,456	)							(34,656	)


Total assets	$	1,718,418		$	19,570				$	1,898,122		$	23,863


Interest-bearing liabilities:
Savings deposits	$	40,675		$	10		0.10	%	$	40,097		$	10		0.10	%
NOW deposits		420,734			557		0.53			394,645			867		0.87
Money market deposits		364,813			657		0.71			343,335			672		0.78
Time deposits		428,291			1,027		0.95			590,880			2,007		1.35
Other borrowings		46,774			328		2.78			72,628			617		3.37
Borrowings from Federal Home Loan Bank		70,761			276		1.55			106,129			520		1.94


Total interest-bearing liabilities		1,372,048			2,856		0.83			1,547,714			4,693		1.20

Other liabilities and shareholders’ equity:
Demand deposits		163,440								165,951
Other liabilities		17,849								16,660
Shareholders’ equity		165,081								167,797

Total liabilities and shareholders’ equity	$	1,718,418			2,856				$	1,898,122			4,693


Net interest income and net interest margin³				$	16,714		4.20	%				$	18,170		4.09	%


Interest rate spread⁴							4.08	%							3.95	%

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 $92 for 2011 and $444 for 2010.

²	The average loans receivable balances include non-accruing loans. Amortization of loan fees, net of deferred costs, of $139 and $179 for the three months ended September 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.

Noninterest Income and Expense

In the third quarter of 2011, noninterest income decreased to $3.3 million, from $6.5 million during the same period in 2010, primarily as a result of a $3.6 million gain on the sale of investment securities during the third quarter of 2010. Retail banking income decreased 15.9% to $2.5 million in the third quarter of 2011 from $2.9 million in the third quarter of 2010, due primarily to ongoing regulatory changes and changes in consumer behavior. Mortgage banking revenue decreased to $395,000 in the third quarter of 2011, compared to $742,000 in the third quarter of 2010, as a result of substantially reduced mortgage production. Writedowns and loss on sale of real estate acquired in settlement of loans (“OREO”) decreased to $799,000 in the third quarter of 2011 from $1.6 million in the third quarter of 2010. Wealth management income increased $182,000 to $702,000 for the three months ending September 30, 2011 compared to the same period a year ago, as a result of an 85% increase, to $140.1 million, in assets under management compared to the prior year quarter reflecting the impact of our expanded wealth management team.

In the third quarter of 2011, noninterest expense decreased to $14.9 million from $15.2 million in the third quarter of 2010. Personnel expense increased to $7.9 million in the third quarter of 2011 from $7.4 million in the third quarter of 2010, primarily as a result of $435,000 of one time expenses related to severance costs. 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 (in thousands).


	Three Months Ended September 30,				Percentage
	2011		2010		Variance
Other noninterest expense:
Advertising	$	346	$	395		(12.4	)%
Bankcard expense		166		126		31.7
Postage		225		303		(25.7	)
Amortization of core deposit intangible		182		182		0.0
Telephone		164		191		(14.1	)
Travel, dues and subscriptions		181		226		(19.9	)
Stationery, printing and supplies		125		160		(21.9	)
Other expense		1,093		861		26.9

	$	2,482	$	2,444		1.6

Nine Months Ended September 30, 2011 Compared to Nine Months Ended September 30, 2010

Net Interest Income

Net interest income for the first nine months of 2011, on a taxable equivalent basis, was $50.8 million, a decrease of $3.0 million, or 5.5%, from $53.8 million for the first nine months of 2010. Average earning assets in the first nine months of 2011 decreased $179.4 million, or 10.0%, to $1.62 billion, compared to $1.79 billion in the first nine months of 2010. Average loans decreased $133.7 million as a result of soft loan demand and the sale of approximately $72.5 million in loans in connection with the Bank’s termination of its Harrisonburg, Virginia operations. Average interest-bearing liabilities for the first nine months of 2011 decreased $169.2 million, or 10.7%, to $1.41 billion, compared to $1.58 billion for the first nine 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 nine months of 2011, compared to 4.01% for the first nine months of 2010, an increase of 20 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 nine months of 2011 was 21 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 45 basis points during the same time period, which resulted in an increase in the interest rate spread in the first nine months of 2011 of 24 basis points compared to the first nine 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 nine months ended September 30, 2011 and 2010.

(Fully taxable equivalent basis¹, in thousands)


	Nine Months Ended September 30, 2011								Nine Months Ended September 30, 2010
	Average Balance			Interest Income/ Expense		Annualized Average Yield/Rate			Average Balance			Interest Income/ Expense		Annualized Average Yield/Rate
Earning assets:
Loans receivable²	$	1,289,198		$	50,052		5.19	%	$	1,422,947		$	56,926		5.35	%
Taxable securities		275,665			9,535		4.62			249,695			8,501		4.55
Tax exempt securities		16,247			848		6.98			82,392			4,567		7.41
FHLB stock		9,625			60		0.83			11,458			28		0.33
Interest-bearing bank balances		24,359			44		0.24			28,046			54		0.26
Federal funds sold		—			—		—			—			—		—


Total earning assets		1,615,094			60,539		5.01			1,794,538			70,076		5.22

Non-earning assets:
Cash and due from banks		29,815								27,489
Premises and equipment		37,579								40,143
Other assets		106,483								105,656
Allowance for credit losses		(29,446	)							(35,610	)


Total assets	$	1,759,525		$	60,539				$	1,932,216		$	70,076


Interest-bearing liabilities:
Savings deposits	$	40,823		$	30		0.10	%	$	40,487		$	30		0.10	%
NOW deposits		433,346			2,018		0.62			349,769			2,321		0.89
Money market deposits		347,244			1,912		0.74			348,155			2,247		0.86
Time deposits		443,166			3,554		1.07			634,059			7,243		1.53
Other borrowings		56,712			1,313		3.10			78,419			1,822		3.11
Borrowings from Federal Home Loan Bank		93,701			907		1.29			133,282			2,639		2.65


Total interest-bearing liabilities		1,414,992			9,733		0.92			1,584,171			16,302		1.37

Other liabilities and shareholders’ equity:
Demand deposits		164,047								163,973
Other liabilities		16,657								17,317
Shareholders’ equity		163,929								166,755

Total liabilities and shareholders’ equity	$	1,759,525			9,733				$	1,932,216			16,302


Net interest income and net interest margin³				$	50,806		4.21	%				$	53,774		4.01	%


Interest rate spread⁴							4.09	%							3.85	%

²	The average loans receivable balances include non-accruing loans. Amortization of loan fees, net of deferred costs, of $422 and $578 for the nine months ended September 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.

Noninterest Income and Expense

In the first nine months of 2011, noninterest income decreased to $10.2 million, from $13.0 million during the same period in 2010. The Company recognized gains on the sale of investment securities of $2.0 million during the first nine months of 2011, compared to gains of $3.6 million recognized during the same period in 2010. Retail banking income decreased 15.8% to $7.5 million in the first nine months of 2011 from $8.9 million in the first nine months of 2010, due primarily to ongoing regulatory changes in the industry and changes in consumer behavior. Wealth management income increased $331,000 for the nine months ending September 30, 2011 compared to the same period a year ago, but was offset by a decrease in mortgage banking revenue of $365,000 during the same time period, as a result of substantially reduced mortgage production.

In the first nine months of 2011, noninterest expense decreased to $43.9 million from $46.2 million in the first nine months of 2010. The Company recorded decreases in all major categories, including personnel, 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 (in thousands).


	Nine Months Ended September 30,				Percentage
	2011		2010		Variance
Other noninterest expense:
Advertising	$	1,160	$	1,192		(2.8	)%
Bankcard expense		459		412		10.2
Postage		585		743		(21.3	)
Amortization of core deposit intangible		545		545		0.0
Telephone		489		551		(11.3	)
Travel, dues and subscriptions		505		626		(19.3	)
Stationery, printing and supplies		375		496		(24.4	)
Other expense		3,160		2,700		17.0

	$	7,278	$	7,265		0.2

Asset Quality and Allowance for Credit losses

The Company’s allowance for credit losses, which is utilized to absorb actual losses in the loan portfolio, is analyzed monthly by management. This analysis includes a methodology that segments the loan portfolio into risk-graded loans and 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. The Company, like many financial institutions, has recently faced a challenging credit environment and will likely continue to face such an environment in the coming months as a result of the overall economic slowdown in the region and the nation. The majority of the Bank’s loan portfolio is comprised of loans secured by real estate, and is therefore subject to risk as a result of the weak 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 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 loans in the 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 September 30, 2011, the allowance for credit losses was $27.8 million, or 2.27%, of total loans outstanding compared to $28.8 million, or 2.15%, of loans outstanding at December 31, 2010, and $35.6 million, or 2.59%, of loans outstanding at September 30, 2010. At September 30, 2011, the allowance for credit losses was 63.85% of nonperforming loans compared to 56.84% at December 31, 2010 and 68.35% at September 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 $43.5 million at September 30, 2011, compared to $50.6 million at December 31, 2010 and $52.0 million at September 30, 2010. The decreases from the 2010 year end of 14% and from the prior year of 16% are primarily driven by decreases in non-accrual loans. OREO was $26.5 million at September 30, 2011, $26.7 million at December 31, 2010, and $29.6 million at September 30, 2010. Approximately $11.0 million was transferred from loans into OREO and approximately $7.3 million of such assets were disposed of during the first nine months of 2011. A net loss of $3.9 million has been recorded on disposition and writedowns of OREO in the current year, compared to a net loss of $3.7 million in the first nine months of 2010. The Company recorded $1.2 million of expenses on OREO during the first nine months of 2011, compared to $1.1 in the first six months of 2010. Nonperforming assets (comprised of nonaccrual loans, restructured loans and OREO) totaled $69.9 million, or 4.11% of total assets, at September 30, 2011, compared to $77.3 million, or 4.28% of total assets, at December 31, 2010 and $81.6 million, or 4.38% of total assets, a year ago. Total impaired and potential problem loans declined $24.6 million, or 15.2%, from December 31, 2010 and $33.2 million, or 19.5%, from a year ago.

The provision for credit losses charged to operations for the nine months ended September 30, 2011 totaled $12.5 million, compared to $16.6 million for the nine months ended September 30, 2010. Net charge-offs for the nine months ended September 30, 2011 were $13.5 million, or 1.40% of average loans outstanding on an annualized basis, compared to net charge-offs of $16.9 million, or 1.59% of average loans outstanding on an annualized basis, for the nine months ended September 30, 2010. Charge-offs and provision expense for the nine months ended September 30, 2011 and 2010 include $1.3 million and $5.0 million, respectively, related to a subordinated debt loan to a financial institution.


Asset Quality Analysis (in thousands)	Nine Months Ended September 30 2011			Year Ended December 31 2010			Nine Months Ended September 30 2010
Allowance for credit losses:
Balance, beginning of period	$	28,752		$	35,843		$	35,843
Loans charged off
Commercial		4,037			9,052			7,227
Real estate — construction		3,426			5,379			3,177
Real estate — mortgage		5,030			7,260			5,361
Consumer		1,109			2,829			2,294
Other		1,300			6,200			—

Total chargeoffs		14,902			30,720			18,059
Recoveries of loans previously charged off:
Commercial		212			1,370			305
Real estate — construction		341			80			49
Real estate — mortgage		450			270			224
Consumer		328			647			576
Other		30			10			—

Total recoveries		1,361			2,377			1,154

Net loans charged off		13,541			28,343			16,905

Provision for loan losses		12,539			21,252			16,616

Balance, end of period	$	27,750		$	28,752		$	35,554


Nonperforming Assets:
Commercial nonaccrual loans, not restructured	$	17,477		$	23,453		$	28,699
Commercial nonaccrual loans, restructured		9,870			11,190			8,338
Non-commercial nonaccrual loans		8,922			8,537			7,828

Total nonaccrual loans		36,269			43,180			44,865
Troubled debt restructured, accruing		7,167			7,378			5,865
Loans 90 days or more past due and still accruing		26			27			1,290

Total nonperforming loans		43,462			50,585			52,020
Real estate acquired in settlement of loans		26,469			26,718			29,571

Total nonperforming assets	$	69,931		$	77,303		$	81,591

Restructured loans, performing		4,577

Loans identified as impaired	$	33,827		$	38,303		$	40,621
Other nonperforming loans		9,635			12,282			11,399

Total nonperforming loans		43,462			50,585			52,020
Other potential problem loans		93,459			110,924			118,067

Total impaired and potential problem loans	$	136,921		$	161,509		$	170,087


Asset Quality Ratios:
Nonperforming loans to total loans outstanding at end of period		3.55	%		3.78	%		3.79	%
Nonperforming assets to total assets at end of period		4.11			4.28			4.38
Allowance for credit losses as a percentage of total loans outstanding at end of period		2.27			2.15			2.59
Allowance for credit losses to nonperforming loans		63.85			56.84			68.35
Net charge-offs as a percentage of average loans outstanding during the period		1.40	*		2.01			1.59	*

*	Denotes annualized

Income Taxes

The Company recorded income tax expense of $1,125,000 for the first nine months of 2011, compared to income tax expense of $251,000 for the first nine months of 2010. The Company’s effective tax rate was 25.8% for the nine-month period ended June 30, 2011, compared to 10.0% for the first nine 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, as the Company sold the majority of its tax exempt investment securities during the third quarter of 2010, and also as a result of higher pre-tax income.

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 Company uses several interest rate risk measurement tools provided by a national asset liability management consultant to help manage this risk. The Bank’s Asset/Liability policy provides guidance for acceptable levels of interest rate risk and potential remediations. Management provides the consultant with key assumptions, which are used as inputs into the measurement tools. The Company has not experienced any material changes in interest rate risk since the end of the fiscal year ended December 31, 2010.

Liquidity Management

Liquidity management refers to the policies and practices that ensure the Company has the ability to meet day-to-day cash flow requirements based primarily on activity in loan and deposit accounts of the Company’s customers. Deposit withdrawals, loan funding and general corporate activity create the primary needs for liquidity for the Company. Liquidity is derived from sources such as deposit growth; maturity, calls or sales of investment securities; principal and interest payments on loans; access to borrowed funds or lines of credit; and profits.

During the first nine months of 2011, the Company had net cash provided by operating activities of $98.3 million, compared to $20.7 million in the first nine months of 2010. The increase was primarily the result of the Company’s sale of $72.5 million of loans in connection with the termination of its Harrisonburg, Virginia operations.

Net cash provided by investing activities for the first nine months of 2011 was $50.6 million, compared to $125.4 million in the first nine months of 2010 of. This change is primarily attributable to a decrease in loans of $17.6 million during the first nine months of 2011, compared to a decrease of $65.0 during the same period of 2010. In addition, investment securities declined by $29.7 million during the first nine months of 2011, compared to a decrease of $49.8 million during the first nine months of 2010.

During the nine months ended September 30, 2011, financing activities used $113.9 million, compared to $85.8 million during the same period of 2010. The change was primarily the result of a $57.3 million decrease in deposits during the first nine months of 2011, compared to an increase of $11.3 million in total deposits during the first nine months of 2010. The Bank assigned approximately $48.8 million of deposits in connection with the sale of its Harrisonburg, Virginia operations during the second quarter of 2011. The change was partially offset by reductions in other borrowings, which declined to $54.7 million during the nine months ended September 30, 2011, from $95.1 million during the same period of 2010.

Cash and cash equivalents totaled $64.0 million at September 30, 2011, compared to $29.1 million at December 31, 2010 and $105.1 million at September 30, 2010.

The Company has borrowing capacity of approximately $268.3 million with the Federal Home Loan Bank (“FHLB”), of which approximately $136.8 million was available at September 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 $34.5 million of borrowing capacity through the Federal Reserve Bank System, of which none was used as of September 30, 2011. The line with the Federal Reserve Bank of Richmond (“Federal Reserve”) 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 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 Emergency Economic Stabilization Act of 2008, the American Recovery and Reinvestment Act of 2009 and related regulations. The Bank is currently restricted from paying dividends to Bancorp unless it receives advance approval from the FDIC and the Commissioner. 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.

Bancorp did not repurchase any of its equity securities during 2010 or the first nine months 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.

As shown in the accompanying table, the Company and the Bank have capital levels exceeding the minimum levels for “well capitalized” banks and bank holding companies as of September 30, 2011.


	Regulatory Capital

	Well Capitalized		Adequately Capitalized		Company		Bank


Total Capital		10.0%		8.0%		14.63%		14.38%
Tier 1 Capital		6.0		4.0		13.36		13.11
Leverage Capital		5.0		4.0		10.52		10.32

The Company holds $3.5 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 is discussed under the heading “Interest Rate Risk Management” on page 26.

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 September 30, 2011. Based upon that evaluation, the Company’s CEO, CFO and CAO each concluded that as of September 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 September 30, 2011 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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 its 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 nine months 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 nine months of 2011.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Removed and Reserved

Item 5. Other Information

Not applicable

Item 6. Exhibits


Exhibit No.		Description

3.1		Articles of Incorporation, and amendments thereto, incorporated by reference to Exhibit 4.1 of the Registration Statement on Form S-8, filed with the SEC on May 16, 2001 (SEC File No. 333-61046).

3.2		Articles of Merger of FNB with and into LSB, including amendments to the Articles of Incorporation, as amended, incorporated by reference to Exhibit 3.4 of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, filed with the SEC on November 9, 2007 (SEC File No. 000-11448).

3.3		Amended and Restated Bylaws adopted by the Board of Directors on August 17, 2004 and amended on July 23, 2008 (with identified Bylaw approved by the shareholders) incorporated by reference to Exhibit 3.3 of the Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, filed with the SEC on May 8, 2009 (SEC File No. 000-11448).

4.1		Specimen certificate of common stock, $5.00 par value, incorporated by reference to Exhibit 4.1 of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, filed with the SEC on November 9, 2007 (SEC File No. 000-11448).

4.2		Amended and Restated Trust Agreement, regarding Trust Preferred Securities, dated August 23, 2005, incorporated herein by reference to Exhibit 4.02 of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed with the SEC (SEC File No. 000-13086).

4.3		Guarantee Agreement, regarding Trust Preferred Securities, dated August 23, 2005, incorporated herein by reference to Exhibit 4.03 of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed with the SEC (SEC File No. 000-13086).

4.4		Indenture, regarding Trust Preferred Securities, dated August 23, 2005, incorporated herein by reference to Exhibit 4.04 of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed with the SEC (SEC File No. 000-13086).

4.5		Articles of Amendment, filed with the North Carolina Department of the Secretary of State on December 12, 2008, incorporated herein by reference to Exhibit 4.1 of the Current Report on Form 8-K filed with the SEC on December 12, 2008 (SEC File No. 000-11448).

4.6		Form of Certificate for the Fixed Rate Cumulative Perpetual Preferred Stock, Series A, incorporated herein by reference to Exhibit 4.2 of the Current Report on Form 8-K filed with the SEC on December 12, 2008 (SEC File No. 000-11448).

4.7		Warrant for Purchase of Shares of Common Stock issued by Bancorp to the United States Department of the Treasury on December 12, 2008, incorporated herein by reference to Exhibit 4.3 of the Current Report on Form 8-K filed with the SEC on December 12, 2008 (SEC File No. 000-11448).

10.1		Benefit Equivalency Plan of FNB Southeast, effective January 1, 1994 incorporated herein by reference to Exhibit 10 of the Quarterly Report on Form 10-QSB for the fiscal quarter ended June 30, 1995, filed with the SEC (SEC File No. 000-13086).

10.2		1994 Director Stock Option Plan, incorporated herein by reference to Exhibit 4 of the Registration Statement on Form S-8 filed with the SEC on July 15, 1994 (SEC File No. 33-81664).



10.3		1996 Omnibus Stock Incentive Plan, incorporated herein by reference to Exhibit 10.2 of the Annual Report on Form 10-K for the year ended December 31, 1995 filed with the SEC on March 28, 1996 (SEC File No. 000-11448).

10.4		Omnibus Equity Compensation Plan, incorporated herein by reference to Exhibit 10(B) of the Annual Report on Form 10-KSB40 for the fiscal year ended December 31, 1996, filed with the SEC on March 31, 1997 (SEC File No. 000-13086).

10.5		Amendment to Benefit Equivalency Plan of FNB Southeast, effective January 1, 1998, incorporated herein by reference to Exhibit 10.16 of the Annual Report on Form 10-K for the fiscal year ended December 31, 1998, filed with the SEC on March 25, 1999 (SEC File No. 000-13086)

10.6		Amendment Number 1 to 1996 Omnibus Stock Incentive Plan, incorporated herein by reference to Exhibit 4.5 of the Registration Statement on Form S-8, filed with the SEC on May 16, 2001 (SEC File No. 333-61046).

10.7		Long Term Stock Incentive Plan for certain senior management employees of FNB Southeast incorporated herein by reference to Exhibit 10.10 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2002, filed with the SEC on March 27, 2003 (SEC File No. 000-13086).

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).



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).



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.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date: November 10, 2011
	NEWBRIDGE BANCORP
	(Registrant)

	By:	/s/ Ramsey K. Hamadi
		Name:	Ramsey K. Hamadi
		Title:	Executive Vice President and Chief Financial Officer (Authorized Officer)

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.

NEWBRIDGE BANCORP - FORM 10-Q - November 10, 2011

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