Cash and cash equivalents decreased by 18

The provision for loan losses increased $25,000, or 27.8, to $115,000 duringthe nine months ended December 31, 2008 from $90,000 during the same 2007period. There were no provisions for loan losses recorded during the threemonths ended December 31, 2008 and 2007. The larger provision in the currentnine month period was the result of both increases in non-performing loans andthe loan portfolio balance. Non-performing loans increased from $265,000 atMarch 31, 2008 (consisting of three one- to four-family residential real estateloans) to $444,000 at December 31, 2008 (consisting of six one- to four-familyresidential real estate loans). At December 31, 2007, the $151,000 innon-performing loans consisted of two one- to four-family residential realestate loans.

The gross loan portfolio increased $8.3million, or 2.0, to $427.4 million at December 31, 2007 from $419.1 million atMarch 31, 2007. Non-interest income increased $3,000 or 1.1, to $288,000 for the three monthsended December 31, 2008 as compared to $285,000 for the three months endedDecember 31, 2007, and increased $20,000, or 2.4, to $863,000 for the ninemonths ended December 31, 2008 as compared to $843,000 for the nine months endedDecember 31, 2007. Non-interest expense increased $30,000, or 1.0, to $2.90 million for the threemonths ended December 31, 2008 as compared to $2.87 million for the three monthsended December 31, 2007. The increase was primarily the result of increases of$31,000, or 1.9, in salaries and employee benefits, and $19,000, or 7.3, innet occupancy expense of premises, partially offset by a decrease of $28,000, or36.4, in advertising expenses, as a result of a reduction in the number ofnewspaper advertisements during the 2008 quarter. The decrease wasprimarily the result of decreases of $156,000, or 3.0, in salaries and employeebenefits, $122,000, or 69.8, in legal expenses, and $111,000, or 9.7, inmiscellaneous expenses.

The decrease in legal expenses was mostly due to a $92,000insurance recovery of previously expensed fees relating to litigation, andmiscellaneous expenses decreased mainly due to a $49,000 recovery of previouslyexpensed consulting fees relating to litigation and a decrease of $47,000 inState of New Jersey bank supervisory fees. This wasthe result of higher pre-tax income, coupled with an increase in the overallincome tax rate which was 31.9 and 31.8, respectively, for the three and ninemonths ended December 31, 2008, as compared with 21.6 and 21.3, respectively,for the same periods in 2007. During both of the 2007 and 2008 periods, the Bankrecognized tax exempt income from the cash surrender value of bank owned lifeinsurance. The Companys total assets increased $34.7 million, or 3.9, to $933.8 millionat December 31, 2008, from $899.1 million at March 31, 2008. Net loans increased$45.3 million, or 10.8, to $465.9 million at December 31, 2008 from $420.6million at March 31, 2008, primarily due to internal origination volume coupledwith the purchase of approximately $3.8 million of loans secured by propertylocated in the State of New Jersey, which more than offset repayment levels.Securities, including both available for sale and held to maturity issues,increased $8.1 million, or 2.1, to $389.0 million at December 31, 2008, from$380.9 million at March 31, 2008. Cash and cash equivalents decreased by $18.7million, or 35.8, to $33.5 million at December 31, 2008 as compared to $52.2million at March 31, 2008.

The funds received from maturities and repayments ofsecurities, along with cash and cash equivalents, were redeployed into higheryielding loans. Total liabilities increased $35.5 million, or 4.9, to $762.2 million atDecember 31, 2008, from $726.7 million at March 31, 2008. During the nine months endedDecember 31, 2008, $25.0 million in long-term borrowings with an average rate of3.77 were originated, while $21.0 million of long-term borrowings were repaidin accordance with their original terms. The decrease resultedprimarily from the repurchase of approximately 544,000 shares of Company commonstock for $5.6 million, and cash dividends paid of $1.4 million, partiallyoffset by net income of $4.0 million, a net increase in unrealized gains of$583,000 on the available for sale securities portfolios, ESOP shares committedto be released of $584,000, and $1.1 million for stock options and restrictedstock awards earned under the Companys 2005 Equity Incentive Plan and relatedtax benefits.