Center Bancorp, Inc. Reports Increase in Third Quarter 2008 Earnings


UNION, N.J., Oct. 24, 2008 (GLOBE NEWSWIRE) -- Center Bancorp, Inc. (Nasdaq:CNBC), parent company of Union Center National Bank, today reported operating results for the third quarter ended September 30, 2008. Earnings amounted to $1.5 million, or $0.12 per diluted share, for the quarter ended September 30, 2008, as compared with earnings of $1.0 million, or $0.07 per diluted share, for the quarter ended September 30, 2007.

Anthony C. Weagley, President and Chief Executive Officer, commented: "We continue to sustain growth in core earnings performance and strength in the balance sheet. Despite the extraordinary events that have unfolded over the last several months and the challenges of the current environment, the Corporation remains strong, well capitalized, with sufficient liquidity, focused on asset quality and positioned to weather the global financial crises and economic recession. Loans grew by 20.0 percent over the comparable period in 2007 and 4.7 percent from the prior quarter in 2008. The Corporation will continue to focus on fundamentals with an emphasis on credit and asset quality. Our healthy allowance for loan loss levels, our ability to reduce credit exposures and low credit losses provides us the opportunity to continue to manage risk exposures as we grow the loan portfolio."

During the third quarter, the Corporation recorded certain non-recurring items, including gains related to employee benefit plans and our bank owned life insurance offset by an impairment charge taken on a Lehman Brothers corporate bond as a result of their September bankruptcy. These items amounted to an after-tax charge of $0.02 per diluted share. Nonetheless, the results for the period continue to reflect the core strengths of the Corporation -- asset growth, margin expansion and a reduction in operating overhead. Earnings for both the current period and year-to-date reflect the progress that the Corporation is making in building a strong balance sheet, maintaining strong credit quality and improving the future stability of revenue streams.

For the nine months ended September 30, 2008, net income amounted to $4.1 million, an increase of $819,000 as compared to the comparable nine-month period ended September 30, 2007. Diluted earnings per common share for the nine months ended September 30, 2008 were $0.32 as compared with $0.24 for the same period in 2007.



 Quarterly Condensed Consolidated Income Statements (unaudited)

 (Dollars in thousands, except per share data)

 For the quarter ended:          9/30/08       6/30/08       3/31/08
 ----------------------        -----------   -----------   -----------
 Net interest income           $     6,860   $     6,429   $     5,687
 Provision for loan losses             465           521           150
 ---------------------------------------------------------------------
 Net interest income after 
  provision for loan losses          6,395         5,908         5,537
 Other income                           47         1,116           866
 Other expense                      (4,578)       (5,188)       (4,953)
 Income (loss) before income
  tax                                1,864         1,836         1,450
 Income tax expense (benefit)          346           428           233
 NET INCOME                    $     1,518   $     1,408   $     1,217
 Earnings per share (basic)    $      0.12   $      0.11   $      0.09
 Earnings per share (diluted)  $      0.12   $      0.11   $      0.09
 Weighted average common
  shares outstanding:
 Basic                          12,990,441    13,070,868    13,144,747
 Diluted                        13,003,954    13,083,558    13,163,586


 For the quarter ended:          12/31/07       9/30/07       6/30/07
 ----------------------        -----------   -----------   -----------
 Net interest income           $     5,172   $     5,481   $     5,225
 Provision for loan losses             150           100           100
 ---------------------------------------------------------------------
 Net interest income after  
  provision for loan losses          5,022         5,381         5,125
 Other income                          874           911         1,177
 Other expense                      (6,034)       (6,080)       (6,056)
 Income (loss) before income
  tax                                 (138)          212           246
 Income tax expense (benefit)         (670)         (786)         (771)
 NET INCOME                    $       532   $       998   $     1,017
 Earnings per share (basic)    $      0.04   $      0.07   $      0.07
 Earnings per share (diluted)  $      0.04   $      0.07   $      0.07
 Weighted average common
  shares outstanding:
 Basic                          13,441,082    13,864,722    13,910,450
 Diluted                        13,469,764    13,913,919    13,990,642

 All common share and per common share amounts have been adjusted for
  prior stock dividends.



 Selected financial ratios (annualized where
 applicable)

 As of or for the
 quarter ended:   9/30/08  6/30/08  3/31/08  12/31/07 9/30/07   6/30/07
 ---------------- -------  -------  -------  -------- -------   -------
 Return on average
  assets            0.60%     0.57%    0.50%    0.22%    0.40%    0.40%
 Return on average
  equity            7.55%     6.69%    5.60%    2.44%    4.21%    4.15%
 Net interest
  margin (tax
  equivalent
  basis)            3.09%     3.00%    2.74%    2.48%    2.63%    2.43%
 Loan/Deposit
  ratio            97.64%   101.61%   90.71%   78.91%   84.62%   78.71%
 Stockholders'
  equity/total
  assets            7.73%     8.15%    8.58%    8.38%    9.49%    9.57%
 Efficiency ratio   55.4%     67.7%    70.9%    92.7%    89.3%    92.8%
 Book value per
  share           $ 6.21   $  6.18   $ 6.51   $ 6.48   $ 6.85   $ 6.89
 Return on average
  tangible
  stockholders'     9.60%     8.41%    6.98%    3.04%    5.15%    5.04%
  equity
 Tangible
  stockholders'
  equity/tangible   6.19%     6.52%    6.98%    6.80%    7.88%    7.98%
  assets
 Tangible book
  value per share $ 4.89   $  4.86   $ 5.20   $ 5.17   $ 5.59   $ 5.65

Interest Income and Expense

The Corporation recorded net interest income on a fully taxable equivalent basis of $7.1 million for the three months ended September 30, 2008 as compared to $5.9 million for the comparable quarter in 2007. Interest income decreased by $0.4 million while interest expense decreased by $1.6 million from the same period last year. Compared to 2007, net interest average earning assets increased by $24.2 million while the net interest spread and net interest margin improved by 73 basis points and 46 basis points, respectively, due primarily to reduced funding costs. On a linked quarter basis, the net interest spread and margin improved by 12 basis points and 9 basis points, respectively.

The Corporation recorded net interest income on a fully taxable equivalent basis of $20.0 million for the nine months ended September 30, 2008 as compared to $17.7 million for the comparable nine month period in 2007. Interest income declined by $2.4 million while interest expense decreased by $4.7 million from the same period last year. Compared to 2007, net interest earning assets declined by $24.9 million while the net interest spread and net interest margin improved by 62 basis points and 42 basis points, respectively, due primarily to reduced funding costs.

Steps were taken during the fourth quarter of 2007 to improve the Corporation's net interest margin by allowing a runoff of certain high rate deposits and by positioning the Corporation's cash position for further outflows in the first and second quarters of 2008. The result was an improvement in margin from the comparable period in 2007. The policy stance of the Federal Open Market Committee allowed the Corporation to further reduce liability costs in the later part of the first quarter and throughout the second and third quarters of this year. During the first nine months of 2008, the Corporation secured approximately $55 million of longer term lower cost funding with a weighted average rate of 2.90% in an effort to support continued loan growth.

The $4.7 million decline in interest expense for the nine months ended September 30, 2008 as compared with the same period last year reflects the runoff of higher cost deposits and the replacement with lower cost funding, due primarily to recent actions by the Federal Open Market Committee in lowering the target Federal funds rate. Compared to the comparable nine-month period in 2007, the Corporation's average interest bearing deposits declined by $63 million, due primarily to the planned runoff of high cost deposits, while average borrowings, generally placed at favorable terms and rates, increased by $66 million.

Other Income

Total other income decreased $864,000 for the third quarter of 2008 compared with the comparable quarter of 2007, primarily as a result of securities losses during the third quarter of 2008. During the third quarter of 2008, the Corporation incurred an impairment charge of $1.2 million in its securities portfolio related to Lehman Brothers. Excluding net securities gains (losses), the Corporation recorded other income of $1,122,000 in the three months ended September 30, 2008, compared to $897,000 in the three months ended September 30, 2007, an increase of $225,000 or 25.1%. During the third quarter of 2008, the Corporation recognized $230,000 in tax-free proceeds in excess of contract value on our bank owned life insurance (BOLI) due to the death of one insured participant. In addition, higher levels of service charges, commissions and fees and higher earnings from the appreciation in the cash surrender value of our BOLI investment were offset in part by a decline in commissions from sales of mutual funds and annuities.

For the nine months ended September 30, 2008, total other income decreased $1,469,000 as compared to the first nine months of 2007, primarily as a result of net securities losses and impairment charges in 2008 as compared to net securities gains in 2007. Excluding net securities gains (losses), the Corporation recorded other income of $2.9 million in the nine months ended September 30, 2008, compared to $2.6 million in the nine months ended September 30, 2007, an increase of 12.7%. This increase was primarily attributable to the $230,000 in tax-free proceeds in excess of contract value on our BOLI due to the death of one insured participant. Additionally, the Corporation recognized higher service charges, commissions and fees and higher earnings from the appreciation in the cash surrender value of our BOLI investment, partially offset by a decline in commissions from sales of mutual funds and annuities.



 Quarterly Consolidated Non-Interest Income
 (unaudited)

 (Dollars in
  thousands)

 For the quarter
 ended:              9/30/08  6/30/08 3/31/08 12/31/07 9/30/07 6/30/07
 ----------------    -------  ------- ------- -------- ------- -------
 Service charges on
  deposit accounts   $   360   $  383  $  404  $  399   $  312  $  306
 Commissions from
  mortgage broker          6       17      12      16       15      25
  activities
 Loan related
  fees (LOC)              46       37      41      31       49      26
 Commissions from
  sale of mutual
  funds and
  annuities               35       38      17      44      131      60
 Debit card and
  ATM fees               124      130     125     132      126     130
 Bank owned life
  insurance              507      228     221     217      223     230
 Net securities
  gains (losses)      (1,075)     225      --     (43)      14     341
 Other service
  charges and fees        44       58      46      78       41      59
 ---------------------------------------------------------------------
 Total other income  $    47   $1,116  $  866  $  874   $  911  $1,177
 ---------------------------------------------------------------------

Other Expense

Other expense for the third quarter of 2008 totaled $4.6 million, a decrease of $1.5 million, or 24.7%, from the comparable period in 2007. Salary and benefit expense decreased by $1.2 million or 38.2%, to $1.9 million. Other expense for the nine months ended September 30, 2008 totaled $14.7 million, a decrease of $3.8 million, or 20.7%, from the comparable period in 2007. Salary and benefit expense decreased by $2.3 million, or 25.2%, to $6.8 million. These reductions were primarily attributable to reductions in staff, pension curtailment and elimination of certain benefit plans. Full-time equivalent staffing levels were 156 at September 30, 2008 compared to 172 at December 31, 2007 and 180 at September 30, 2007. During the third quarter of 2008, the Corporation recognized a $272,000 benefit relating to the lump-sum payment and termination of the directors retirement plan. This benefit represented the difference between the actuarial present value of the lump-sum payment and the accrued liability previously recorded on the Corporation's balance sheet. Other decreases were recognized in premises and equipment, professional fees and other general expenses, offset in part by an increase in occupancy costs.

The efficiency ratio for the third quarter of 2008 was 55.4% as compared to 92.7% in the fourth quarter of 2007 and 89.3% in the comparable quarterly period in 2007. The Corporation has moved ahead on the previously announced strategic outsourcing agreements, to aid in the realization of its goal to reduce operating overhead and shrink the infrastructure of the Corporation. The cost reduction plans resulted in the reduction of workforce by 12 staff positions in the second quarter, which in turn resulted in a one-time charge of $145,000 for the three-month period ended June 30, 2008 for severance and termination benefits. Additionally, the Corporation completed its outsourcing arrangement with Atlantic Central Bankers Bank, BITS program and the migration of its telecommunications lines to their service platform. The result of these initiatives is expected to result in annual cost savings of $600,000.

In February of 2008, the Corporation completed the sale of its Florham Park office for $2.4 million, which approximated the carrying value. As previously announced in June 2008, the Corporation is pursuing strategic alternatives for its Union data center/operations building, which includes the relocation of all or part of its operations into other facilities in Union.



 Quarterly Consolidated Non-Interest Expense(unaudited)

 (Dollars in
  thousands)

  For the quarter
  ended:           9/30/08  6/30/08  3/31/08  12/31/07  9/30/07 6/30/07
 ----------------  -------   ------   ------   ------   ------   ------
 Employee salaries
  and wages         $1,752   $2,013   $1,896   $1,932   $3,551   $2,059
 Employee stock
  option expense        23       36       45       46       46       35
 ----------------------------------------------------------------------
 Health insurance
  and other
  employee benefits    (32)     285      218      237     (687)     543
 ----------------------------------------------------------------------
 Payroll taxes         167      182      179      124      183      181
 ----------------------------------------------------------------------
 Other employee
  related expenses       9        8       14       14       14       16
 ----------------------------------------------------------------------
 Total salaries and
  employee benefits $1,919   $2,524   $2,352   $2,353   $3,107   $2,834
 ----------------------------------------------------------------------

 ----------------------------------------------------------------------
 Occupancy, net        803      734      759      799      692      629
 ----------------------------------------------------------------------
 Premises and
  equipment expense    352      356      366      437      442      436
 ----------------------------------------------------------------------
 Legal, auditing
  and other
  professional fees    189      190      172      690      311      599
 ----------------------------------------------------------------------
 Stationary and
  printing              87      118       95      104       87      115
 ----------------------------------------------------------------------
 Marketing and
  advertising          145      188      160      179      152      109
 ----------------------------------------------------------------------
 Computer
  expense              238      226      141      150      151      148
 ----------------------------------------------------------------------
 Bank regulatory
  related expenses      54       55       58       58       60       60
 ----------------------------------------------------------------------
 Postage and
  delivery              67       65       78       57       73       75
 ----------------------------------------------------------------------
 ATM related
  expenses              61       62       60       59       63       77
 ----------------------------------------------------------------------
 Amortization of
  CDI                   23       24       25       25       26       27
 ----------------------------------------------------------------------
 Other expenses        640      646      687    1,123      916      947
 ----------------------------------------------------------------------
 Total other
  expense           $4,578   $5,188   $4,953   $6,034   $6,080   $6,056
 ----------------------------------------------------------------------



 Quarterly Condensed Consolidated Balance Sheets (unaudited)

 (Dollars in thousands)

 At quarter ended:                 9/30/08        6/30/08     3/31/08
 -----------------                ----------      --------   ---------
 Cash and due from banks          $   15,952      $ 16,172   $  15,155
 Fed funds and money market funds          0             0      45,300
 Investments                         284,349       253,780     281,746
 Loans                               661,157       631,221     565,025
 Allowance for loan losses           (6,080)       (5,660)     (5,245)
 Restricted investment in bank        10,277        10,325      10,036
  stocks, at cost
 Premises and equipment, net          18,545        18,203      17,404
 Goodwill                             16,804        16,804      16,804
 Core deposit intangible                 328           350         375
 Bank owned life insurance            22,690        22,710      22,483
 Other assets                         18,756        22,531      26,084
 ----------------------------------------------------------------------
 TOTAL ASSETS                     $1,042,778     $ 986,436   $ 995,167
 ----------------------------------------------------------------------
 Deposits                            677,144       621,190     622,924
 Other borrowings                    281,046       279,585     279,024
 Other liabilities                     3,964         5,268       7,818
 Stockholders' equity                 80,624        80,393      85,401
 ----------------------------------------------------------------------
 TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY           $1,042,778     $ 986,436   $ 995,167
 ----------------------------------------------------------------------


 At quarter ended:                 12/31/07        9/30/07     6/30/07
 -----------------                ----------      --------   ----------
 Cash and due from banks          $   20,541      $ 15,277   $   24,363
 Fed funds and money market funds     49,490             0            0
 Investments                         314,194       343,979      366,224
 Loans                               551,669       550,847      533,675
 Allowance for loan losses           (5,163)       (5,021)      (4,974)
 Restricted investment in bank         8,467         7,347        8,299
  stocks, at cost
 Premises and equipment, net          17,419        17,662       18,400
 Goodwill                             16,804        16,804       16,804
 Core deposit intangible                 400           426          452
 Bank owned life insurance            22,261        22,044       21,822
 Other assets                         21,563        18,425       16,557
 ----------------------------------------------------------------------
 TOTAL ASSETS                     $1,017,645   $   987,790   $1,001,622
 ----------------------------------------------------------------------
 Deposits                            699,070       650,999      678,011
 Other borrowings                    223,264       237,744      221,994
 Other liabilities                    10,033         5,317        5,804
 Stockholders' equity                 85,278        93,730       95,813
 ----------------------------------------------------------------------
 TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY           $1,017,645   $   987,790   $1,001,622
 ----------------------------------------------------------------------



 Condensed Consolidated Average Balance Sheets (unaudited)

 (Dollars in thousands)

 For the quarter ended:          9/30/08      6/30/08      3/31/08
 ----------------------        -----------  -----------  -----------
 Investments, Fed funds,
  and other                    $  271,064   $  301,118   $   326,397
 Loans                            651,766      601,655       565,654
 Allowance for loan losses         (5,840)      (5,404)       (5,237)
 All other assets                  95,808       91,631        93,088
 --------------------------------------------------------------------
 TOTAL ASSETS                  $1,012,798   $  989,000   $   979,902
 --------------------------------------------------------------------
 Deposits-interest bearing        521,459      499,342       519,295
 Deposits-non interest bearing    118,623      114,744       112,695
 Other borrowings                 288,002      284,264       251,222
 Other liabilities                  4,321        6,508         9,769
 Stockholders' equity              80,393       84,142        86,921
 --------------------------------------------------------------------
 TOTAL LIABILITIES AND
  STOCKHOLDERS' EQUITY         $1,012,798   $  989,000   $   979,902
 --------------------------------------------------------------------


 For the quarter ended:         12/31/07      9/30/07       6/30/07
 ----------------------        -----------  -----------   -----------
 Investments, Fed funds,
  and other                    $  351,302   $  362,119   $   404,975
 Loans                            552,521      538,798       532,799
 Allowance for loan losses         (5,077)      (4,984)       (4,986)
 All other assets                  91,016       90,533        92,038
 --------------------------------------------------------------------
 TOTAL ASSETS                  $  989,762   $  986,466   $ 1,024,826
 --------------------------------------------------------------------
 Deposits-interest bearing        564,334      557,555       578,819
 Deposits-non interest bearing    115,859      128,449       130,701
 Other borrowings                 216,761      200,257       211,228
 Other liabilities                  5,543        5,372         6,159
 Stockholders' equity              87,265       94,833        97,919
 --------------------------------------------------------------------
 TOTAL LIABILITIES AND
  STOCKHOLDERS' EQUITY         $  989,762   $  986,466   $ 1,024,826
 --------------------------------------------------------------------

Loans

The Corporation had total loans of $661.2 million at September 30, 2008, representing a $29.9 million, or 4.7%, increase on a linked-quarter basis and a $109.5 million, or 19.8%, increase from December 31, 2007. Loan growth continued during the quarter in the Corporation's commercial real estate related segment of the portfolio. At September 30, 2008, the Corporation had $44 million in overall undispersed loan commitments which are expected to fund over the next 90 days.

Loan originations for the quarter increased in the commercial sector, primarily in commercial mortgages. "We are pleased with the loan and customer growth achieved for the third quarter and first nine months of 2008 and are optimistic that the Corporation will continue to build its loan volume throughout 2008. Our pipelines are strong; we expect that increased activity in commercial building will support continued growth in the portfolio and improvement in our earning-asset mix. As we continue to move through this economic downturn, we are focused on aggressively managing the risks associated with the current credit cycle and underwriting standards. We continue to work at strengthening existing customer relationships and building new ones by seizing opportunities resulting from the improved client base," said Mr. Weagley.



 Loan Mix:
 (unaudited)

 (Dollars in
  thousands)

 At quarter
 ended:          9/30/08  6/30/08  3/31/08  12/31/07 9/30/07   6/30/07
 ----------      -------- -------- -------- -------- -------- --------
 Real estate
  loans
   Residential   $249,258 $255,817 $260,237 $265,597 $265,301 $261,849
   Commercial     246,089  224,990  163,664  137,585  136,289  135,707
   Construction    47,722   50,638   48,494   51,367   53,286   47,910
 ---------------------------------------------------------------------
 Total real
  estate
  loans           543,069  531,445  472,395  454,549  454,876  445,466
 Commercial
  loans           116,891   98,845   91,492   95,978   94,444   86,848
 Consumer
  and other
  loans               672      339      592      563      960      741
 ---------------------------------------------------------------------
 Total loans      660,632  630,629  564,479  551,090  550,280  533,055
  before
  unearned
  fees and        
  costs
 Unearned
  fees and
  costs, net          525      592      546      579      567      620
 ---------------------------------------------------------------------
 Total loans     $661,157 $631,221 $565,025 $551,669 $550,847 $533,675
 =====================================================================

Asset Quality

The Corporation has been successful in maintaining loan credit quality. At September 30, 2008, non-performing assets totaled $654,000, or 0.06% of total assets, as compared with $4.4 million, or 0.43%, at December 31, 2007. The decrease in non-accrual loans from December 31, 2007 was primarily attributable to the repayment during the first quarter of 2008 of principal of $2.5 million and interest of $83,277 on one commercial mortgage. At September 30, 2008, the Corporation has no other real estate owned.

"The Corporation is well positioned to weather the unprecedented volatility in the credit markets as we do not have exposure to the sub prime home mortgage business or to other sub prime issues such as securitizations and collateralized debt obligations. Our home equity portfolio is sound and was originated with conservative underwriting practices," remarked Mr. Weagley.

At September 30, 2008, the total allowance for loan losses amounted to approximately $6.1 million, or 0.92% of total loans. The allowance for loan losses as a percent of total non-performing loans amounted to 929.7% at September 30, 2008 as compared to 132.2% at December 31, 2007.



 Selected credit quality ratios (unaudited)

 (Dollars in thousands)

 As of or for the quarter ended:     9/30/08      6/30/08     3/31/08
 -------------------------------    ----------   ---------   ----------
 Non-accrual loans                  $      541   $     265   $   1,215
 Troubled debt restructuring                95          97           0
 Past due loans 90 days or more
  and still accruing interest               18           0           0
 ---------------------------------------------------------------------
 Total non performing loans                654         362       1,215
 Other real estate owned ("OREO")            0           0         478
 Repossessed assets other than
  real-estate                                0           0           0
 ---------------------------------------------------------------------
 Total non performing assets        $      654   $     362   $   1,693
 ---------------------------------------------------------------------
 Non performing assets as a
  percentage of total assets              0.06%       0.04%       0.17%
 Non performing loans as a
  percentage of total loans               0.10%       0.06%       0.22%
 Net charge-offs                    $       45   $     106   $      68
 Net charge-offs as a percentage of
  average loans for the period
  (annualized)                            0.03%       0.07%       0.05%
 Allowance for loan losses as a
  percentage of period end loans          0.92%       0.90%       0.93%
 Allowance for loan losses as a
  percentage of non-performing loans     929.7%    1,563.5%      431.7%
 ---------------------------------------------------------------------

 Total Assets                       $1,042,778   $ 986,436   $ 995,167
 Total Loans                           661,157     631,221     565,025
 Average loans for the quarter         651,766     601,655     565,654
 Allowance for loan losses               6,080       5,660       5,245
 ---------------------------------------------------------------------


 As of or for the quarter ended:     12/31/07    9/30/07     6/30/07
 -------------------------------    ----------   --------   ----------
 Non-accrual loans                  $    3,907   $    986   $    1,070
 Troubled debt restructuring                 0          0            0
 Past due loans 90 days or more
  and still accruing interest                0          0            0
 ---------------------------------------------------------------------
 Total non performing loans              3,907        986        1,070
 Other real estate owned ("OREO")          501        586          586
 Repossessed assets other than
  real-estate                                0          0            0
 ---------------------------------------------------------------------
 Total non performing assets        $    4,408   $  1,572   $    1,656
 ---------------------------------------------------------------------
 Non performing assets as a
  percentage of total assets              0.43%      0.16%        0.17%
 Non performing loans as a
  percentage of total loans               0.71%      0.18%        0.20%
 Net charge-offs                    $      147   $    139   $       86
 Net charge-offs as a percentage of
  average loans for the period
  (annualized)                            0.11%      0.10%        0.06%
 Allowance for loan losses as a
  percentage of period end loans          0.94%      0.91%        0.93%
 Allowance for loan losses as a
  percentage of non-performing loans     132.2%     509.2%       464.9%
 ---------------------------------------------------------------------

 Total Assets                       $1,017,645   $987,790   $1,001,622
 Total Loans                           551,669    550,847      533,675
 Average loans for the quarter         552,521    538,798      532,799
 Allowance for loan losses               5,163      5,021        4,974
 ---------------------------------------------------------------------

Securities

Investment securities reflected a decline of $29.8 million at September 30, 2008 compared to December 31, 2007. The decline is consistent with maintaining the balance sheet strategies the Corporation has previously outlined in seeking to reduce the size of its investment securities portfolio while increasing loans as a percentage of the earning-asset mix.

The reduction in the volume of the investment portfolio was made in anticipation of providing cash flow for loan funding and forecasted liability outflows. This action had a positive impact on net interest income in the quarter and nine months ended September 30, 2008.

Deposits/Funding Sources

Deposits and customer relationships grew during the third quarter of 2008. Deposits totaled $677.1 million at September 30, 2008, an increase of $56.0 million from June 30, 2008.

The following table reflects the Corporation's deposits for the periods specified.



 Deposit Mix                                                          
 (unaudited)                                                          
                                                                      
 (Dollars in                                                          
  thousands)                                                          
 At quarter                                                           
  ended:         9/30/08  6/30/08  3/31/08  12/31/07  9/30/07  6/30/07
 -------------   -------  -------  -------  --------  -------  -------
 Checking                                                             
  accounts                                                            
  Non interest                                                        
   bearing       $114,631 $110,891 $117,053 $111,422 $121,884 $127,797
  Interest                                                            
   bearing        129,070  124,469  125,152  155,406  110,177  126,112
 Savings                                                              
  deposits         61,623   63,918   68,028   86,341   92,789   92,474
 Money market                                                         
  accounts        140,533  147,202  170,742  196,601  167,442  171,923
 Time                                                                 
  Deposits        231,287  174,710  141,949  149,300  158,707  159,705
 ---------------------------------------------------------------------
 Total Deposits  $677,144 $621,190 $622,924 $699,070 $650,999 $678,011
 =====================================================================

 

Non-interest bearing deposits totaled $114.6 million at September 30, 2008, an increase of $3.7 million from June 30, 2008 and an increase of $3.2 million from December 31, 2007. Interest bearing demand, savings, money market accounts and time deposits increased $52.2 million from June 30, 2008 as customers' preference in seeking more stable returns from certificates of deposit became more prevalent. These interest bearing deposits declined $25.1 million from December 31, 2007 as a result of a decision to continue to reduce the Corporation's dependency on more rate sensitive high costing funds, which were subject to maturity and repricing in favor of lower costing wholesale funds available. Time certificates of deposit of $100,000 increased $22.7 million and $53.0 million as compared to June 30, 2008 and December 31, 2007, respectively, as the cost of this type of funding source became competitive with wholesale funds. Total deposit funding sources, including overnight repurchase agreements (which agreements are part of the demand deposit base), amounted to $721.7 million at September 30, 2008, which represents a decrease of $25.9 million as compared to December 31, 2007. The Corporation expects its deposit gathering efforts to remain strong, supported in part by the recent actions by the FDIC in temporarily raising the deposit insurance limits.

Borrowings totaled $281.0 million at September 30, 2008, reflecting an increase of $57.8 million from December 31, 2007. Overnight customer repurchase transactions covering commercial customer sweep accounts totaled $44.6 million at September 30, 2008 as compared with $48.5 million at December 31, 2007. This shift in the volume of repurchase agreements also accounted for a portion of the change in non-interest bearing commercial checking accounts during the period.

Stockholders' Equity

Total stockholders' equity amounted to $80.6 million, or 7.73% of total assets, at September 30, 2008. Tangible stockholders' equity was $63.5 million, or 6.19% of tangible assets. Book value per common share was $6.21 at September 30, 2008, compared to $6.48 at December 31, 2007 and $6.85 at September 30, 2007. Tangible book value per common share was $4.89 at September 30, 2008 compared to $5.17 at December 31, 2007 and $5.59 at September 30, 2007.

During the three months ended September 30, 2008, the Corporation purchased 31,500 shares of common stock at an average cost of $8.95 per share. The total shares purchased to date in 2008 totaled 193,083 shares of common stock at an average price of $9.96 per share.

During 2007, the Corporation purchased 850,527 common shares at an average cost per share of $11.79 under the stock buyback program adopted on January 24, 2002. The repurchased shares were recorded as Treasury Stock, which resulted in a decrease in stockholders' equity. On September 27, 2007, the Board approved an increase in its buyback program to an additional 5% of outstanding shares, enhancing its then current authorization by 684,627 shares. Subsequent to that action, on June 26, 2008 the Board approved an increase in its buyback program to an additional 5% of outstanding shares, enhancing its then current authorization by 649,712 shares. Any purchases by the Corporation may be made, from time to time, in the open market, in privately negotiated transactions or otherwise. At September 30, 2008, there were 652,868 shares available for repurchase under the Corporation's stock buyback program.

These actions allow the Corporation to continue to repurchase shares and deliver value to the shareholders. The Corporation's strong capital position allows the Corporation to increase the shares authorized for the stock repurchase program. The additional capacity to repurchase shares provides the flexibility to allocate capital as the Corporation seeks to maximize shareholder returns.

At September 30, 2008, the Corporation's Tier 1 Capital Leverage ratio was 7.73%, the Corporation's total Tier 1 Risk Based Capital ratio was 10.22% and the Corporation's Total Risk Based Capital ratio was 11.03%. Total Tier 1 capital decreased to approximately $77.0 million at September 30, 2008 from $79.1 million at December 31, 2007 and from $85.8 million at September 30, 2007.

At September 30, 2008, the Corporation's capital ratios continued to exceed the minimum Federal requirements for a bank holding company, and Union Center National Bank's capital ratios continued to exceed each of the minimum levels required for classification as a "well capitalized institution" under the Federal Deposit Insurance Corporation Improvement Act.

About Center Bancorp

Center Bancorp, Inc. is a financial services holding company and operates Union Center National Bank, its main subsidiary. Chartered in 1923, Union Center National Bank is one of the oldest national banks headquartered in the state of New Jersey and currently the largest commercial bank headquartered in Union County. Its primary market niche is its commercial banking business. The Bank focuses its lending activities on commercial lending to small and medium sized businesses, real estate developers and high net worth individuals.

The Bank, through its Private Wealth Management Division which includes its wholly owned subsidiary, Center Financial Group LLC, and through a strategic partnership with American Economic Planning Group, provides financial services, including brokerage services, insurance and annuities, mutual funds, financial planning, estate and tax planning, trust, elder care and benefit plan administration. Center additionally offers title insurance services in connection with the closing of real estate transactions, through two subsidiaries, Union Title Company and Center Title Company.

The Bank currently operates 13 banking locations in Union and Morris counties in New Jersey. Banking centers are located in Union Township (6 locations), Berkeley Heights, Boonton/Mountain Lakes, Madison, Millburn/Vauxhall, Morristown, Springfield, and Summit, New Jersey. The Bank also operates remote ATM locations in the Union, Chatham and Madison, New Jersey Transit train stations, Union Hospital and the Boys and Girls Club of Union.

While the Bank's primary market area is comprised of Morris and Union Counties, New Jersey, the Corporation has expanded to northern and central New Jersey. At September 30, 2008, the Bank had total assets of $1.0 billion, total deposit funding sources, which includes overnight repurchase agreements, of $721.7 million and stockholders' equity of approximately $80.6 million. For further information regarding Center Bancorp, Inc., call 1-(800)-862-3683. For information regarding Union Center National Bank, visit our web site at http://www.centerbancorp.com

Non-GAAP Financial Measures

"Return on average tangible stockholders' equity" is a non-GAAP financial measure and is defined as net income as a percentage of tangible stockholders equity. This measure may be important to investors that are interested in analyzing our return on equity exclusive of the effect of changes in intangible assets on equity. The following table presents a reconciliation of return on average stockholders equity and return on average tangible stockholders equity for the periods presented:



 (Dollars in
   thousands)
 For the
  quarter ended: 9/30/08  6/30/08  3/31/08  12/31/07  9/30/07  6/30/07
 --------------  -------  -------  -------  --------  -------  -------
 Net income      $ 1,518  $ 1,408  $ 1,217  $   532  $   998  $ 1,017
 ---------------------------------------------------------------------
 Average
  stockholders'
  equity         $80,393  $84,142  $86,921  $87,265  $94,833  $97,919
 Less: Average
  goodwill and
  other
  intangible
  assets          17,145   17,169   17,194   17,220   17,245   17,272
 ---------------------------------------------------------------------
 Average
  tangible
  stockholders'
  equity         $63,248  $66,973  $69,727  $70,045  $77,588  $80,647
 ---------------------------------------------------------------------
 Return on
  average
  stockholders'
  equity            7.55%    6.69%    5.60%    2.44%    4.21%    4.15%
 Add: Average
  goodwill
  and other
  intangible
  assets            2.05     1.72     1.38     0.60     0.94     0.89
 ---------------------------------------------------------------------
 Return on
  average
  tangible
  stockholders'
  equity            9.60%    8.41%    6.98%    3.04%    5.15%    5.04%
 ---------------------------------------------------------------------

"Tangible book value per share" is also a non-GAAP financial measure and represents tangible stockholders' equity (or tangible book value) calculated on a per common share basis. The Corporation believes that a disclosure of tangible book value per share may be helpful for those investors who seek to evaluate the Corporation's book value per share without giving effect to goodwill and other intangible assets. The following table presents a reconciliation of total book value per share to tangible book value per share as of the dates presented:



 (Dollars in thousands)
 ---------------------
 At quarter ended:              9/30/08       6/30/08       3/31/08
 -----------------              -------       -------       -------
 Common shares outstanding    12,988,284    13,016,075    13,113,760
 Stockholders' equity           $ 80,624      $ 80,393      $ 85,401
 Less: Goodwill and other
  intangible assets               17,132        17,154        17,179
 -------------------------------------------------------------------
 Tangible stockholders'
  equity                        $ 63,492      $ 63,239      $ 68,222
 -------------------------------------------------------------------
 Book value per share           $   6.21      $   6.18      $   6.51
 Less: Goodwill and other
  intangible assets                 1.32          1.32          1.31
 -------------------------------------------------------------------
 Tangible book value
  per share                     $   4.89      $   4.86      $   5.20
 -------------------------------------------------------------------


 At quarter ended:             12/31/07       9/30/07       6/30/07
 -----------------             --------       -------       -------
 Common shares outstanding    13,155,784    13,692,534    13,910,826
 Stockholders' equity           $ 85,278      $ 93,730      $ 95,813
 Less: Goodwill and other
  intangible assets               17,204        17,230        17,256
 -------------------------------------------------------------------
 Tangible stockholders'
  equity                        $ 68,074      $ 76,500      $ 78,557
 -------------------------------------------------------------------
 Book value per share           $   6.48      $   6.85      $   6.89
 Less: Goodwill and other
  intangible assets                 1.31          1.26          1.24
 -------------------------------------------------------------------
 Tangible book value
  per share                     $   5.17      $   5.59      $   5.65
 -------------------------------------------------------------------

"Tangible stockholders' equity/tangible assets" is a non-GAAP financial measure and is defined as tangible stockholders' equity as a percentage of total assets minus goodwill and other intangible assets. This measure may be important to investors that are interested in analyzing the financial condition of the Corporation without consideration for intangible assets, inasmuch as tangible stockholders' equity and tangible assets both back out goodwill and other intangible assets. The following table presents a reconciliation of total assets to tangible assets and then presents a reconciliation of total stockholders' equity/total assets to tangible stockholders' equity/tangible assets as of the dates presented:



 (Dollars in thousands)
 ----------------------
 At quarter ended:               9/30/08       6/30/08       3/31/08
 -----------------              ----------    ----------    ----------
 Total assets                   $1,042,778    $  986,436    $  995,167
 Less: Goodwill and other
  intangible assets                 17,132        17,154        17,179
 ---------------------------------------------------------------------
 Tangible assets                $1,025,646    $  969,282    $  977,988
 ---------------------------------------------------------------------
 Total stockholders'
  equity/total assets                 7.73%         8.15%         8.58%
 Tangible stockholders'
  equity/tangible assets              6.19%         6.52%         6.98%


 At quarter ended:               12/31/07      9/30/07       6/30/07
 -----------------              ----------    ----------    ----------
 Total assets                   $1,017,645    $  987,790    $1,001,622
 Less: Goodwill and other
  intangible assets                 17,204        17,230        17,256
 ---------------------------------------------------------------------
 Tangible assets                $1,000,441    $  970,560    $  984,366
 ---------------------------------------------------------------------
 Total stockholders' equity/
  total assets                        8.38%         9.49%         9.57%
 Tangible stockholders' equity/
  tangible assets
                                      6.80%         7.88%         7.98%

Total non-interest income is presented both including and excluding net securities gains (losses). We believe that many investors desire to evaluate non-interest income without regard for securities transactions. The following table presents a reconciliation of total non-interest (or other) income with total non-interest (or other) income excluding the impact of securities transactions.



 (Dollars in thousands)

 For the quarter
  ended:              9/30/08  6/30/08 3/31/08 12/31/07 9/30/07 6/30/07
 ---------------      -------  ------- ------- -------- ------- -------
 Total non-interest
  income              $    47  $1,116  $  866  $   874  $  911  $1,177
 Net securities gains
  (losses)             (1,075)    225      --      (43)     14     341
 ----------------------------------------------------------------------
 Total non-interest
  income, excluding
  net securities
  gains (losses)      $ 1,122  $  891  $  866  $   917  $  897  $  836
 ----------------------------------------------------------------------

"Efficiency ratio" is a non-GAAP financial measure and is defined as non-interest expense as a percentage of net interest income on a tax equivalent basis plus non-interest income, excluding net securities gains (losses), as follows:



 (Dollars in thousands)
 ----------------------
 For the quarter
 ended:              9/30/08 6/30/08 3/31/08 12/31/07 9/30/07  6/30/07
 ---------------     ------- ------- ------- -------- -------  -------
 Other expense        $4,578  $5,188  $4,953  $6,034   $6,080   $6,056
 ----------------------------------------------------------------------
 Net interest income
  (tax equivalent
  basis)              $7,148  $6,776  $6,117  $5,594   $5,915   $5,692
 Other income,
  excluding net
  securities gains
  (losses)             1,122     891     866     917      897      836
 ----------------------------------------------------------------------
                      $8,270  $7,667  $6,983  $6,511   $6,812   $6,528
 ----------------------------------------------------------------------
 Efficiency ratio       55.4%   67.7%   70.9%   92.7%    89.3%    92.8%
 ----------------------------------------------------------------------

Forward-Looking Statements

All non-historical statements in this press release (including statements regarding positioning to weather the global financial crisis, the stability of future revenues, anticipated cost savings, the relocation of the Corporation's Union data center/operations, the funding of loan commitments and anticipated loan growth) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may use such forward-looking terminology such as "expect," "look," "believe," "plan," "anticipate," "may," "will" or similar statements or variations of such terms or otherwise express views concerning trends and the future. Such forward-looking statements involve certain risks and uncertainties. These include, but are not limited to, the direction of interest rates, continued levels of loan quality and origination volume, continued relationships with major customers including sources for loans, as well as the effects of international, national, regional and local economic conditions and legal and regulatory barriers and structure, including those relating to the current global financial crisis and the deregulation of the financial services industry, and other risks cited in reports filed by the Corporation with the Securities and Exchange Commission. Actual results may differ materially from such forward-looking statements. Center Bancorp, Inc. assumes no obligation for updating any such forward-looking statement at any time.



                 CENTER BANCORP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF CONDITION
                              (unaudited)

                                            September 30,  December 31,
 (Dollars in Thousands)                          2008          2007
 ---------------------------------------------------------------------

 ASSETS
 Cash and due from banks                     $    15,952   $    20,541
 Federal funds sold and securities
  purchased under agreement to resell                  0        49,490
 ---------------------------------------------------------------------
    Total cash and cash equivalents               15,952        70,031
 ---------------------------------------------------------------------
 Investment securities available-for sale        284,349       314,194
 Loans, net of unearned income                   661,157       551,669
 Less -- Allowance for loan losses                 6,080         5,163
 ---------------------------------------------------------------------
    Net Loans                                    655,077       546,506
 Restricted investment in bank stocks,
  at cost                                         10,277         8,467
 Premises and equipment, net                      18,545        17,419
 Accrued interest receivable                       4,555         4,535
 Bank owned life insurance                        22,690        22,261
 Other assets                                     14,201        17,028
 Goodwill and other intangible assets             17,132        17,204
 ---------------------------------------------------------------------
 Total assets                                $ 1,042,778   $ 1,017,645
 =====================================================================

 LIABILITIES
 Deposits:
    Non-interest bearing                     $   114,631   $   111,422
    Interest-bearing
      Time deposits $100 and over                116,986        63,997
      Interest-bearing transactions, savings
       and time deposits $100 and less           445,527       523,651
 ---------------------------------------------------------------------
      Total deposits                             677,144       699,070
 Securities sold under agreement to
  repurchase                                      44,557        48,541
 Short-term borrowings                             8,000         1,123
 Long-term borrowings                            223,334       168,445
 Subordinated debentures                           5,155         5,155
 Accounts payable and accrued liabilities          3,964        10,033
 ---------------------------------------------------------------------
 Total liabilities                               962,154       932,367
 ---------------------------------------------------------------------
 STOCKHOLDERS' EQUITY
 Preferred stock, no par value:
    Authorized 5,000,000 shares; none issued                        --
 Common stock, no par value:
    Authorized 20,000,000 shares; issued
     15,190,984 shares in 2008 and
     2007; outstanding 12,988,284 shares in
     2008 and 13,155,784 shares in 2007           86,908        86,908
 Additional paid in capital                        5,258         5,133
 Retained earnings                                15,784        15,161
 Treasury stock, at cost (2,202,700 shares
  in 2008 and 2,035,200 shares in 2007)          (17,820)      (16,100)
 Accumulated other comprehensive loss             (9,506)       (5,824)
 ---------------------------------------------------------------------
 Total stockholders' equity                       80,624        85,278
 ---------------------------------------------------------------------
 Total liabilities and stockholders'
  equity                                     $ 1,042,778   $ 1,017,645
 =====================================================================




                CENTER BANCORP, INC. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF INCOME
                              (unaudited)

                           Three Months Ended       Nine Months Ended
                              September 30,           September 30,
 ----------------------------------------------------------------------
 (Dollars in Thousands,
  Except Per Share Data)    2008       2007         2008       2007
 ---------------------------------------------------------------------
 Interest income:
  Interest and fees
   on loans           $      9,427 $     8,460 $    26,575 $    25,087
  Interest and
   dividends on
   investment
   securities:
    Taxable interest
     income                  2,514       3,390       7,914      10,344
    Non-taxable
     interest income           559         792       2,036       2,399
    Dividends                  189         254         645         981
  Interest on Federal
   funds sold and
   securities purchased
   under agreement to
   resell                       --          40         109         521
 ---------------------------------------------------------------------
 Total interest income      12,689      12,936      37,279      39,332
 ---------------------------------------------------------------------
 Interest expense:
   Interest on
    certificates of
    deposit $100 or
    more                       618       1,132       1,830       3,022
   Interest on other
    deposits                 2,434       3,954       8,302      12,704
   Interest on
    borrowings               2,777       2,369       8,171       7,279
 ---------------------------------------------------------------------
 Total interest
  expense                    5,829       7,455      18,303      23,005
 ---------------------------------------------------------------------
 Net interest income         6,860       5,481      18,976      16,327
 Provision for loan
  losses                       465         100       1,136         200
 ---------------------------------------------------------------------
 Net interest income
  after provision for
  loan losses                6,395       5,381      17,840      16,127
 ---------------------------------------------------------------------
 Other income:
  Service charges,
   commissions and fees        484         438       1,526       1,293
  Annuity and insurance         35         131          90         254
  Bank owned life
   insurance                   507         223         956         676
  Net securities gains
   (losses)                 (1,075)         14        (850)        943
  Other income                  96         105         307         332
 ---------------------------------------------------------------------
 Total other income             47         911       2,029       3,498
 ---------------------------------------------------------------------
 Other expense:
  Salaries and employee
   benefits                  1,919       3,107       6,795       9,083
  Occupancy, net               803         692       2,296       2,044
  Premises and
   equipment                   352         442       1,074       1,340
  Professional and
   consulting                  189         311         551       1,449
  Stationery and
   printing                     87          87         300         361
  Marketing and
   advertising                 145         152         493         424
  Computer expense             238         151         605         464
  Other                        845       1,138       2,605       3,399
 ---------------------------------------------------------------------
 Total other expense         4,578       6,080      14,719      18,564
 ---------------------------------------------------------------------
 Income before income
  tax expense
  (benefit)                  1,864         212       5,150       1,061
 Income tax expense
  (benefit)                    346        (786)      1,007      (2,263)
 ---------------------------------------------------------------------
 Net income            $     1,518 $       998 $     4,143 $     3,324
 =====================================================================
 Earnings per share:
   Basic               $      0.12 $      0.07 $      0.32 $      0.24
   Diluted             $      0.12 $      0.07 $      0.32 $      0.24
 ---------------------------------------------------------------------
 Weighted average
  common shares
  outstanding:
    Basic               12,990,441  13,864,722  13,068,400  13,894,888
    Diluted             13,003,954  13,913,919  13,083,112  13,950,298
 =====================================================================



 SUMMARY SELECTED QUARTERLY STATISTICAL
 INFORMATION AND FINANCIAL DATA

 (Dollars in Thousands, Except per Share Data)

                                       Three Months Ended
                               9/30/2008     6/30/2008     9/30/2007
                               ---------     ---------     ---------
 Statements of Income Data:
 Interest income              $    12,689    $  12,230     $  12,936
 Interest expense                   5,829        5,801         7,455
 Net interest income                6,860        6,429         5,481
 Provision for loan losses            465          521           100
 Net interest income after 
  provision for loan losses         6,395        5,908         5,381
 Other income                          47        1,116           911
 Other expense                      4,578        5,188         6,080
 Income before income tax 
  expense (benefit)                 1,864        1,836           212
 Income tax expense 
  (benefit)                           346          428          (786)
 Net income                   $     1,518    $   1,408     $     998
 Earnings per share:
 Basic                        $      0.12    $    0.11     $    0.07
 Diluted                      $      0.12    $    0.11     $    0.07
 Statements of Condition 
  Data (Period End):
 Investments                  $   284,349    $ 253,780     $ 343,979
 Total loans                      661,157      631,221       550,847
 Goodwill and other 
  intangibles                      17,132       17,154        17,230
 Total assets                   1,042,778      986,436       987,790
 Deposits                         677,144      621,190       650,999
 Borrowings                       281,046      279,585       237,744
 Stockholders' equity         $    80,624    $  80,393     $  93,730
 Dividend Data:
 Cash dividends               $     1,169    $   1,177     $   1,361
 Dividend payout ratio              77.01%       83.59%       136.37%
 Cash dividends per share     $      0.09    $    0.09     $    0.09
 Weighted Average Common 
  Shares Outstanding:
 Basic                         12,990,441   13,070,868    13,864,722
 Diluted                       13,003,954   13,083,558    13,913,919
 Operating Ratios:
 Return on average assets            0.60%        0.57%         0.40%
 Average stockholders' 
  equity to average assets           7.94%        8.51%         9.61%
 Return on average equity            7.55%        6.69%         4.21%
 Return on average 
  tangible stockholders' 
  equity                             9.60%        8.41%         5.15%
 Book value per common 
  share                       $      6.21    $    6.18     $    6.85
 Tangible book value per  
  common share                $      4.89    $    4.86     $    5.59
 Non-Financial Information
  (Period End):
 Common stockholders of 
  record                              649          658           689
 Staff-full time equivalent           156          164           180


            

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