The Company had net income of $7.1 million for the three months ended March 31, 2009 compared to net income of $4.5 million for the three months ended March 31, 2008. Basic and diluted earnings per share were $0.07 for the three months ended March 31, 2009 compared to basic and diluted earnings of $0.04 per share for the three months ended March 31, 2008.

The Company had a net loss for the nine months ended March 31, 2009 of $70.4 million compared to net income of $10.6 million for the nine months ended March 31, 2008. Basic loss per share was $0.68 for the nine months ended March 31, 2009 compared to basic and diluted earnings of $0.10 per share for the nine months ended March 31, 2008. The net loss for the nine months ended March 31, 2009 was due to the Company recognizing a $156.7 million pre-tax, non-cash other-than-temporary impairment ("OTTI") charge for the six months ended December 31, 2008 related to our portfolio of pooled bank trust preferred collateralized debt obligations ("CDOs").

   The results for the periods ended March 31, 2009 reflect the following:    --  Tier 1 risk-based capital ratio was 16.5 percent while the tangible       common equity ratio was 10.4 percent at March 31, 2009.     --  Pretax income, excluding the impairment losses for the nine months       ended March 31, 2009 totaled $38.5 million, an increase of 131% over       the same period last year.     --  Net interest income increased 53.2% and 66.6% for the three months and       nine months ended March 31, 2009 as compared to the same periods last       year driven by strong balance sheet growth and an increase in the net       interest margin.     --  Net interest margin for the three months ended March 31, 2009       increased 49 basis points to 2.34% compared to prior year quarter of       1.85%.     --  Total assets increased by 14.8% to $7.37 billion at March 31, 2009 as       compared to $6.42 billion at June 30, 2008.     --  Net loans increased by $890.5 million, or 19.1%, to $5.56 billion at       March 31, 2009 from $4.67 billion at June 30, 2008.     --  Non-performing loans as a percentage of total loans increased to 1.44%       from 0.85% in the December 2008 quarter.     --  The Company's loan loss provision totaled $8.0 million for the current       quarter and $21.0 million for the nine month period ending March 31,       2009, due to strong growth in the loan portfolio, recent deterioration       in the economic conditions in our local markets and an increase in       loan delinquencies.  Net charge-offs were immaterial for both periods.     --  Deposits increased $799.9 million, or 20.1%, to $4.77 billion at March       31, 2009 from $3.97 billion at June 30, 2008.     --  FDIC insurance premiums increased to $1.8 million for the three months       ended March 31, 2009 from $0.1 million for the three months ended       March 31, 2008.    

On April 14, 2009 the Company announced it received all of the necessary regulatory approvals to proceed with the acquisition of American Bancorp of New Jersey, Inc. The American Bancorp annual meeting of shareholders, at which their shareholders will vote on the acquisition, is scheduled to be held on May 19, 2009. If shareholder approval is received the merger is scheduled to close on or about May 29, 2009.

Commenting on the quarterly results, Kevin Cummings, the Company's president and CEO said, "We are pleased with the financial results for this quarter considering the current turbulent economic environment. Our quarterly year-over-year operating results reflect significant increases in net income and net interest margin. We had substantial core deposit growth as we attracted new deposit customers at our existing branches as well as at our newest branch located in Morristown which opened during the quarter. We have also been successful in increasing deposits at the branches we acquired in the June 2008 Summit Federal merger. Building on this momentum, we are excited about the pending addition of American Bancorp to our franchise as it will complement our geographic presence and give us an opportunity to leverage our competitive strengths."

Commenting on the economic conditions Mr. Cummings said, "We remain focused on maintaining our conservative lending practices and continue to make loans to well qualified borrowers in this environment. The adverse conditions being experienced by the local economy have resulted in increased loan delinquency and non-performing loans most notably in our construction loan portfolio. We believe our loan underwriting standards and strong capital position will enable us to withstand the difficult times ahead."

   Comparison of Operating Results    Interest and Dividend Income   

Total interest and dividend income increased by $14.6 million, or 18.7%, to $92.7 million for the three months ended March 31, 2009 from $78.2 million for the three months ended March 31, 2008. This increase is attributed to the average balance of interest-earning assets increasing $1.25 billion, or 21.6%, to $7.05 billion for the three months ended March 31, 2009 from $5.80 billion for the three months ended March 31, 2008. This was partially offset by a 13 basis point decrease in the weighted average yield on interest-earning assets to 5.26% for the three months ended March 31, 2009 compared to 5.39% for the three months ended March 31, 2008 as a result of the lower interest rate environment and the impact of non-performing loans.

Interest income on loans increased by $19.1 million, or 33.2%, to $76.7 million for the three months ended March 31, 2009 from $57.6 million for the three months ended March 31, 2008, reflecting a $1.58 billion, or 38.9%, increase in the average balance of net loans to $5.63 billion for the three months ended March 31, 2009 from $4.05 billion for the three months ended March 31, 2008. The average yield on loans decreased 23 basis points to 5.45% for the three months ended March 31, 2009 from 5.68% for the three months ended March 31, 2008 reflecting the current low interest rate environment and the impact of non-performing loans.

Interest income on all other interest-earning assets, excluding loans, decreased by $4.5 million, or 22.0%, to $16.0 million for the three months ended March 31, 2009 from $20.6 million for the three months ended March 31, 2008. This decrease reflected a $325.0 million decrease in the average balance of all other interest-earning assets, excluding loans, and a 20 basis point decrease in the average yield on all other interest-earning assets, excluding loans, to 4.52% for the three months ended March 31, 2009 from 4.72% for the three months ended March 31, 2008. The decrease in yield resulted from maintaining higher cash balances this quarter at lower yields and receiving less dividend income on stock in FHLB partially offset by $1.3 million in accretion related to our expected cashflows on the previously written down trust preferred CDOs.

Total interest and dividend income increased by $41.3 million, or 17.7%, to $274.7 million for the nine months ended March 31, 2009 from $233.4 million for the nine months ended March 31, 2008. This increase is due to the average balance of interest-earning assets increasing $1.11 billion, or 19.3%, to $6.84 billion for the nine months ended March 31, 2009 from $5.74 billion for the nine months ended March 31, 2008. This was partially offset by a 7 basis point decrease in the weighted average yield on interest-earning assets to 5.35% for the nine months ended March 31, 2009 compared to 5.42% for the nine months ended March 31, 2008.

Interest income on loans increased by $57.2 million, or 34.0%, to $225.5 million for the nine months ended March 31, 2009 from $168.3 million for the nine months ended March 31, 2008, reflecting a $1.44 billion, or 36.8%, increase in the average balance of net loans to $5.37 billion for the nine months ended March 31, 2009 from $3.93 billion for the nine months ended March 31, 2008. The average yield on loans decreased 11 basis points to 5.60% for the nine months ended March 31, 2009 from 5.71% for the nine months ended March 31, 2008 reflecting the current low interest rate environment and the impact of non-performing loans.

Interest income on all other interest-earning assets, excluding loans, decreased by $15.9 million, or 24.4%, to $49.2 million for the nine months ended March 31, 2009 from $65.1 million for the nine months ended March 31, 2008. This decrease reflected a $334.9 million decrease in the average balance of all other interest-earning assets and a 35 basis point decrease in the average yield on all other interest-earning assets, excluding loans, to 4.45% for the nine months ended March 31, 2009 from 4.80% for the nine months ended March 31, 2008. The decrease in yield resulted from maintaining higher balances of cash this quarter at lower yields and receiving less dividend income from the FHLB partially offset by $1.3 million in accretion related to our expected cashflows on the previously written down trust preferred CDOs.

Interest Expense

Total interest expense increased by $309,000, or 0.6%, to $51.6 million for the three months ended March 31, 2009 from $51.3 million for the three months ended March 31, 2008. This increase was due to the average balance of total interest-bearing liabilities increasing by $1.36 billion, or 27.0%, to $6.42 billion for the three months ended March 31, 2009 from $5.06 billion for the three months ended March 31, 2008. This was significantly offset by the weighted average cost of total interest-bearing liabilities decreasing 85 basis points to 3.21% for the three months ended March 31, 2009 compared to 4.06% for the three months ended March 31, 2008 as the lower interest rate environment resulted in our certificate of deposit accounts repricing downward to current market rates.

Interest expense on interest-bearing deposits decreased $4.5 million, or 11.7% to $33.9 million for the three months ended March 31, 2009 from $38.4 million for the three months ended March 31, 2008. This decrease was due to a 101 basis point decrease in the average cost of interest-bearing deposits to 2.96% for the three months ended March 31, 2009 from 3.97% for the three months ended March 31, 2008. This was partially offset by the average balance of interest-bearing deposits increasing $718.5 million, or 18.6% to $4.59 billion for the three months ended March 31, 2009 from $3.87 billion for the three months ended March 31, 2008.

Interest expense on borrowed funds increased by $4.8 million, or 37.3%, to $17.7 million for the three months ended March 31, 2009 from $12.9 million for the three months ended March 31, 2008. This increase is due to the average balance of borrowed funds increasing by $646.4 million or 54.3%, to $1.84 billion for the three months ended March 31, 2009 from $1.19 billion for the three months ended March 31, 2008. This was partially offset by the average cost of borrowed funds decreasing 48 basis points to 3.85% for the three months ended March 31, 2009 from 4.33% for the three months ended March 31, 2008.

Total interest expense decreased by $7.7 million, or 4.8%, to $151.9 million for the nine months ended March 31, 2009 from $159.6 million for the nine months ended March 31, 2008. This decrease was due to the weighted average cost of total interest-bearing liabilities decreasing 97 basis points to 3.30% for the nine months ended March 31, 2009 compared to 4.27% for the nine months ended March 31, 2008 as the lower interest rate environment resulted in our certificate of deposit accounts repricing downward to current market rates. This was partially offset by the average balance of total interest-bearing liabilities increasing by $1.15 billion, or 23.1%, to $6.14 billion for the nine months ended March 31, 2009 from $4.98 billion for the nine months ended March 31, 2008.

Interest expense on interest-bearing deposits decreased $21.4 million, or 18.1% to $96.8 million for the nine months ended March 31, 2009 from $118.2 million for the nine months ended March 31, 2008. This decrease was due to a 105 basis point decrease in the average cost of interest-bearing deposits to 3.08% for the nine months ended March 31, 2009 from 4.13% for the nine months ended March 31, 2008. This was partially offset by the average balance of interest-bearing deposits increasing $383.5 million, or 10.1% to $4.20 billion for the nine months ended March 31, 2009 from $3.81 billion for the nine months ended March 31, 2008.

Interest expense on borrowed funds increased by $13.6 million, or 32.9%, to $55.1 million for the nine months ended March 31, 2009 from $41.4 million for the nine months ended March 31, 2008. This increase is attributed to the average balance of borrowed funds increasing by $768.4 million or 65.7%, to $1.94 billion for the nine months ended March 31, 2009 from $1.17 billion for the nine months ended March 31, 2008. This was partially offset by the average cost of borrowed funds decreasing 93 basis points to 3.79% for the nine months ended March 31, 2009 from 4.72% for the nine months ended March 31, 2008.

Net Interest Income

Our net interest margin for the three months and nine months ended March 31, 2009 was positively impacted by the steeper yield curve which allowed us to reduce deposit rates and borrow money at lower rates while keeping mortgage rates relatively stable.

Net interest income increased by $14.3 million, or 53.1%, to $41.2 million for the three months ended March 31, 2009 from $26.9 million for the three months ended March 31, 2008. The increase was caused by an 85 basis point decrease in our cost of interest-bearing liabilities to 3.21% for the three months ended March 31, 2009 from 4.06% for the three months ended March 31, 2008 and growth in average interest earning assets. This was partially offset by a 13 basis point decrease in our yield on interest-earning assets to 5.26% for the three months ended March 31, 2009 from 5.39% for the three months ended March 31, 2008. Our net interest margin improved by 49 basis points from 1.85% for the three months ended March 31, 2008 to 2.34% for the three months ended March 31, 2009.

Net interest income increased by $49.1 million, or 66.6%, to $122.8 million for the nine months ended March 31, 2009 from $73.7 million for the nine months ended March 31, 2008. The increase was caused primarily by a 97 basis point decrease in our cost of interest-bearing liabilities to 3.30% for the nine months ended March 31, 2009 from 4.27% for the nine months ended March 31, 2008 and growth in average interest earning assets. This was partially offset by a 7 basis point decrease in our yield on interest-earning assets to 5.35% for the nine months ended March 31, 2009 from 5.42% for the nine months ended March 31, 2008. Our net interest margin improved by 68 basis points from 1.71% for the nine months ended March 31, 2008 to 2.39% for the nine months ended March 31, 2009.

Provision for Loan Losses

Our provision for loan losses was $8.0 million for the three month period ended March 31, 2009 compared to $1.0 million for the three month period ended March 31, 2008. For the three months ended March 31, 2009, net charge-offs totaled $8,000 compared to net charge-offs of $22,000 for the three months ended March 31, 2008. The increase in our provision is due to internal downgrades of certain loans in the commercial real estate portfolio resulting in specific reserves; an increase in specific reserves on a previously disclosed impaired loan; the increased inherent credit risk in our overall portfolio, particularly the credit risk associated with commercial real estate lending; an increase in loan delinquency and non-performing loans; and the adverse economic conditions in our lending area.

Our provision for loan losses was $21.0 million for the nine month period ended March 31, 2009 compared to $2.9 million for the nine month period ended March 31, 2008. For the nine months ended March 31, 2009, net charge-offs totaled $25,000 compared to net charge-offs of $31,000 for the nine months ended March 31, 2008. The increase in our provision is due to continued growth in the loan portfolio; internal downgrades of certain loans in the commercial real estate portfolio resulting in specific reserves; an increase in specific reserves on a previously disclosed impaired loan; the increased inherent credit risk in our overall portfolio, particularly the credit risk associated with commercial real estate lending; an increase in loan delinquency and non-performing loans; and the adverse economic conditions in our lending area.

The comparative table below details non-performing loans and allowance for loan loss coverage ratios over the last four quarters.