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