UNION, NJ -- (MARKET WIRE) -- 10/23/2003 -- Center Bancorp Inc. (NASDAQ: CNBC) parent company to Union Center National Bank of Union, New Jersey, today reported earnings results for the third quarter ended September 30, 2003.
Net income for the third quarter of 2003 amounted to $1,515,000 or $.18 per fully diluted share, a decrease of 27.8% or $589,000 from the $2,104,000 or $.25 per fully diluted share earned for the comparable quarter of the previous year. Basic earnings per share were $.18 a decrease of 28% from $.25 per share earned in the third quarter of 2002. For the three months ended September 30, 2003 net income increased $8,000 or .53 percent as compared with to the second quarter of 2003. Per share earnings amounted to $0.18 per fully diluted and basic share for both quarters.
For the nine months ended September 30, 2003 net income amounted to $4.7 million or $.55 per fully diluted share representing a decrease of 24.2% or $1.5 million from the $6.2 million or $.74 per fully diluted share for the comparable nine-month period in 2002. Basic earnings per share were $.56 representing a decrease of 24.3% from the $.74 per share earned in 2002. All share and per share amounts have been restated to reflect the 2-for-1 common stock split distributed on June 2, 2003.
Center Bancorp continues on track with its business plan despite the challenges presented by our unprecedented interest rate environment," stated John J. Davis, President & CEO. "We remain optimistic regarding the earnings prospects for the remainder of the year given our current strong loan demand. We are very pleased to announce that our total loan portfolio exceeded $300 million on September 30, 2003. This is a significant milestone, a milestone which we believe, will benefit our net interest income in future quarters.
The Corporation's earnings results for the third quarter of 2003 reflected a decline in revenue impacted by low interest rates (which reached historical lows during the second quarter of 2003) and the sluggish national economy, which has squeezed net interest margins. The sustained nature of these low interest rate levels has diminished revenue growth due to a continued compression of yield on earning assets.
Net interest margins continued to come under pressure from the prevailing low interest rate environment during the third quarter of 2003, contracting 111 basis points for the period as compared with the same quarter in 2002. The continued compression of net interest margins is the result of falling interest rates, increased prepayments on mortgage related earning-assets and the effects of shorter duration assets contributing to the asset sensitivity maintained in the balance sheet coupled with low replacements yields received on shorter duration additions made to the earning-asset portfolio. The net interest spread decreased 93 basis points in the third quarter of 2003 to 2.38% from 3.31% for the comparable quarter in 2002 and decreased 40 basis points compared to the second quarter of 2003. For the three months ended September 30, 2003 the annualized net interest margin (net interest income as a percentage of earning assets), decreased to 2.63% from 3.74% for the comparable quarter in 2002; and decreased 42 basis points from 3.05% from the second quarter of 2003. This sustained heightened level of prepayments has further exposed the Corporation, which was in an asset sensitive position; to position the balance sheet to be reactive to future changes in rates, which subsequently impacted returns on earning-assets for both the current quarter and nine months ended September 30, 2003.
Total interest income, on a tax-equivalent basis, for the third quarter of 2003, decreased $1.8 million or 17.5%, over the comparable 2002 period. Total interest expense decreased by $673,000 over the same period.
Positive earning asset growth in both the loan and the investment securities portfolios reduced the effects of the decline in yield earned on those assets. During the third quarter of 2003, the loan portfolio increased on average $60.0 million, an increase of 26.2% from the comparable period in 2002. Despite the slowdown experienced in the economy, loan demand continues to remain steady, fueled by the Company's branch network expansion, increased loan staffing, higher visibility in new markets, and a continued enhancement of product lines to meet market demands and aggressive promotion of a teaser rate Home Equity Loan product. Our business model has been built on a strong credit culture. As a result, asset quality continues to remain high. During the third quarter, additional provisions of approximately $103,000 were made to the allowance for loan losses, to maintain adequate loan loss reserves in relationship with loan portfolio growth. Both non-performing assets and net charge-offs are expected to be consistent with prior levels.
The Corporation's investment securities portfolio increased on average $75.1 million (up 16.3% over the comparable prior year quarter). The heightened levels of repayments on mortgage related securities adversely affected the resultant yield on the investment portfolio.
Average funding sources grew $132.8 million or 19% for the three-month period ended September 30, 2003 as compared with the comparable 2002 period. Interest-bearing deposits increased $20.5 million on average during the third quarter of 2003, as compared to the third quarter in 2002. Total non-interest bearing core deposits increased $9.4 million on average in the third quarter of 2003 in comparison to the comparable quarter in 2002 and continue to be a low-cost source of funding. At September 30, 2003, this source of funding amounted to $124.2 million or 15.5% of total funding sources and 21.4% of total deposits. Borrowings comprised of securities sold under agreements to repurchase and advances from he Federal Home Loan Bank of New York increased $102.9 million on average during the third quarter of 2003, as compared with the third quarter of 2002.
Other non-interest income, exclusive of gains on securities sold (which decreased $220,000) increased $126,000 or 17.6% for the third quarter compared with the comparable quarter in 2002. Other non-interest income, including gains on securities sold decreased $94,000 or 10.2 percent for the third quarter compared with the comparable quarter n 2002.The increased revenue was primarily driven by the increase in other fee income which is primarily comprised of fees related to loan origination and increased letters of credit fees. Also contributing to the increase during the third quarter was a net increase of $75,000 in Bank Owned Life Insurance. Operating overhead increased 5.5% for the third quarter over the comparative period and was primarily related to increased staffing expense and increased premise expense.
Total assets at September 30, 2003, were $857.2 million, an increase of 12.3% from assets of $763.5 million at September 30, 2002. The annualized return on average assets for the third quarter ended September 30, 2003, decreased to .68% as compared with 1.12% for the third quarter of 2002.
The total Tier 1 capital ratio was 6.79% at September 30, 2003, as compared to 7.42% for the comparable period in 2002. Total Tier I capital amounted to approximately $60.1 million, and includes $10.0 million in Trust Preferred Securities issued on December 18, 2001. Book value per common share was $6.06 as compared with $5.92 a year ago. Tangible book value per common share increased to $5.81 from $5.68 a year ago. Annualized return on average stockholders' equity for the third quarter ended September 30, 2003 was 11.67% compared to 16.89% for the comparable quarter in 2002.
President & CEO Davis also announced that on October 3, 2003 the Corporation purchased a 19,555 square foot office facility on Springfield Road in Union that will serve as Union Center National Bank's new operations and data center. He stated: "This is another important and exciting opportunity for us and should be a key contributor to our ability to continue to grow and expand our product lines for future success. We expect to be up and running in the new facility by mid-spring 2004.
President & CEO Davis additionally noted that "while we remain cautious about the national economy, anticipated increases in operating expenses to support growth and expansion in our new and existing markets could continue to limit income growth, however, we are optimistic about our prospects and anticipated continued earnings performance in 2004."
Center Bancorp Inc., through its wholly owned subsidiary, Union Center National Bank, Union, New Jersey operates thirteen banking locations. Banking centers are located in Union Township (6 locations), Berkeley Heights, Madison, Millburn/Vauxhall, Morristown (2 locations), Springfield, and Summit New Jersey. The Bank also operates remote ATM locations in the Union New Jersey Transit train station and in Union Hospital in Union. Union Center National Bank is the largest commercial Bank headquartered in Union County; chartered in 1923 and is a full service banking company.
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.
All non-historical statements in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include expressions about management's views regarding future performance, including statements regarding earnings prospects and the impact of the new operation and data center. These forward-looking statements may use such forward-looking terminology 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 deregulation of the financial services industry. 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.
FINANCIAL HIGHLIGHTS (UNAUDITED)
For the 3 Months Ended For the 9 Months Ended
---------------------- ----------------------
9/30/03 9/30/02 9/30/03 9/30/02
Net Income $1,515,000 $2,104,000 $4,708,000 $6,226,000
Earnings per
Share
Basic $0.18 $0.25 $0.56 $0.74
Diluted $0.18 $0.25 $0.55 $0.74
Weighted Average
Shares Outstanding
Basic 8,480,651 8,425,730 8,462,345 8,389,248
Diluted 8,570,874 8,488,768 8,551,586 8,455,536
All share and per share amounts have been restated to reflect the 2-for-1 stock split distributed on June 2, 2003.
Center Bancorp, Inc.
Consolidated Statements of Condition
Sep-30-03 Dec-31-02 Sep-30-02
-------- -------- --------
Assets:
Cash and due from banks $ 25,344 $ 23,220 $ 19,351
Federal funds sold and
securities purchased
under agr to resell 0 0 0
-------- -------- --------
Total cash and
cash equivalents 25,344 23,220 19,351
Investment securities held
to maturity (approximate
market value of $172,365 in
2003 and $219,921 in 2002) 167,578 214,902 220,730
Investment securities available
for sale 321,420 322,717 263,440
-------- -------- --------
Total investment securities 488,998 537,619 484,170
Loans, net of unearned income 308,634 229,051 226,656
Less - Allowance for loan
losses 2,751 2,498 2,381
-------- -------- --------
Net loans 305,883 226,553 224,275
Premises and equipment, net 13,499 12,976 12,582
Accrued interest receivable 4,952 4,439 5,078
Bank Owned Life Insurance 14,443 14,143 13,946
Other assets 1,941 2,395 1,974
Goodwill 2,091 2,091 2,091
-------- -------- --------
Total assets $857,151 $823,436 $763,467
-------- -------- --------
Liabilities
Deposits:
Non-interest bearing $124,236 $116,984 $110,437
Interest bearing:
Certificates of deposit
$100,000 and over 49,083 33,396 30,862
Savings and Time Deposits 406,698 465,971 409,246
-------- -------- --------
Total deposits 580,017 616,351 550,545
Federal Home Loan Bank advances 125,000 65,000 65,000
Federal funds purchased and
securities sold under
agreements to repurchase 87,195 75,431 81,494
Corporation - obligated Mandatorily
redeemable trust preferred
securities of subsidiary trust
holding solely junior subordinated
debentures of the Corporation 10,000 10,000 10,000
Accounts payable and accrued
liabilities 3,554 5,600 6,392
-------- -------- --------
Total Liabilities 805,766 772,382 713,431
-------- -------- --------
Stockholder's equity
Preferred stock, no par value:
Authorized 5,000,000 shares;
none issued 0 0 0
Common stock, no par value:
Authorized 20,000,000 shares;
issued 9,522,244 and 9,499,114
shares in 2003 and 2002,
respectively 19,317 18,984 18,893
Additional paid in capital 4,632 4,562 4,392
Retained earnings 32,323 29,863 28,792
-------- -------- --------
56,272 53,409 52,077
Treasury stock at cost
(1,037,094 and 1,078,404
shares in 2003 and 2002,
respectively) (4,091) (4,254) (4,129)
Restricted stock (14) (285) (28)
Accumulated other comprehensive
(loss) income (782) 2,184 2,116
-------- -------- --------
Total stockholders' equity 51,385 51,054 50,036
-------- -------- --------
Total liabilities and
stockholders' equity $857,151 $823,436 $763,467
-------- -------- --------
All common share and per share amounts have been restated to reflect the
2-for-1 common stock split declared April 15, 2003, distributed
June 2, 2003 to shareholders of record May 19, 2003.
Center Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands, except per
share data) 2003 2002 2003 2002
---- ---- ---- ----
Interest income:
Interest and fees on loans $ 3,840 $ 3,816 $ 10,948 $ 11,245
Interest and dividends on
investment securities:
Taxable interest income 3,432 6,226 13,851 19,149
Nontaxable interest income 880 150 1,867 451
Interest on Federal funds
sold and securities
purchased under agreement. 0 50 0 59
--------- --------- --------- ---------
Total interest income 8,152 10,242 26,666 30,904
--------- --------- --------- ---------
Interest expense:
Interest on certificates
of deposit $100,000 or more 117 94 355 383
Interest on other deposits 1,570 2,350 5,033 6,706
Interest on short-term
borrowings 1,424 1,340 4,165 3,983
--------- --------- --------- ---------
Total interest expense 3,111 3,784 9,553 11,072
--------- --------- --------- ---------
Net interest income 5,041 6,458 17,113 19,832
Provision for loan losses 103 90 262 270
--------- --------- --------- ---------
Net interest income
after provision for
loan losses 4,938 6,368 16,851 19,562
--------- --------- --------- ---------
Other income:
Service charges, commissions
and fees 401 409 1,239 1,183
Other income 173 114 420 279
BOLI 268 193 627 564
(Loss) gain on securities sold (17) 203 220 445
--------- --------- --------- ---------
Total other income 825 919 2,506 2,471
--------- --------- --------- ---------
Other expense:
Salaries and employee benefits 2,507 2,373 7,834 6,955
Occupancy expense, net 393 395 1,365 1,233
Premises and equipment expense 384 388 1,278 1,172
Stationery and printing expense 131 115 436 419
Marketing and Advertising 120 122 409 478
Other expenses 880 792 2,439 2,600
--------- --------- --------- ---------
Total other expense 4,415 4,185 13,761 12,857
--------- --------- --------- ---------
Income before income
tax expense 1,348 3,102 5,596 9,176
Income tax expense (167) 998 888 2,950
--------- --------- --------- ---------
Net income $ 1,515 $ 2,104 $ 4,708 $ 6,226
--------- --------- --------- ---------
Earnings per share
Basic $ 0.18 $ 0.25 $ 0.56 $ 0.74
Diluted 0.18 0.25 0.55 0.74
--------- --------- --------- ---------
Weighted average common
shares outstanding
Basic 8,480,651 8,425,730 8,462,345 8,389,248
Diluted 8,570,874 8,488,768 8,551,586 8,455,536
--------- --------- --------- ---------
All common share and per share amounts have been restated to reflect the
2-for-1 common stock split declared April 15, 2003, distributed
June 2, 2003 to shareholders of record May 19, 2003.
Center Bancorp, Inc. and Subsidiaries
Average Balance Sheet with Interest and Average Rates
9 Month Period Ended September 30,
(unaudited) 2003 2002
(tax equivalent basis,
dollars in thousands)
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
--------- --------- ----- --------- --------- -----
Assets
Interest-earning
assets:
Investment
securities:
Taxable $ 480,843 $ 13,851 3.84% $ 443,427 $ 19,149 5.76%
Non-taxable 63,548 2,829 5.94% 13,053 683 6.98%
Federal funds
sold and secur-
ities purchased
under agreement
to resell 0 0 0.00% 4,565 59 1.72%
Loans, net
of unearned
income (1) 258,070 10,948 5.66% 221,614 11,245 6.77%
--------- --------- ----- --------- --------- -----
Total
interest-
earning
assets 802,461 27,628 4.59% 682,659 31,136 6.08%
--------- --------- ----- --------- --------- -----
Non-interest-
earning assets
Cash and due
from banks 21,961 18,293
BOLI 14,350 13,641
Other assets 27,698 23,771
Allowance for pos-
sible loan losses (2,608) (2,296)
--------- ---------
Total non
-interest
earning
assets 61,401 53,409
--------- ---------
Total assets $ 863,862 $ 736,068
--------- ---------
Liabilities and
stockholders' equity
Interest-bearing
liabilities:
Money Market
deposits $ 93,063 779 1.12% $ 96,805 1,420 1.96%
Savings deposits 155,416 1,462 1.25% 156,854 2,513 2.14%
Time deposits 144,540 2,836 2.62% 110,677 2,592 3.12%
Other interest-
bearing deposits 69,448 311 0.60% 64,480 564 1.17%
Short-term
borrowings 215,247 3,798 2.35% 133,518 3,563 3.56%
Trust Preferred 10,000 367 4.89% 10,000 420 5.60%
--------- --------- ----- --------- --------- -----
Total interest-
bearing
liabilities $ 687,714 9,553 1.85% $ 572,334 11,072 2.58%
--------- --------- ----- --------- --------- -----
Noninterest-
bearing liabilities:
Demand deposits 118,736 109,331
Other noninterest-
bearing deposits 452 569
Other liabilities 4,852 6,035
--------- ---------
Total noninter-
est-bearing
liabilities 124,040 115,935
Stockholders'
equity 52,108 47,799
--------- ---------
Total liabili-
ties and
stockholders'
equity $ 863,862 $ 736,068
--------- ---------
Net interest
income (tax
equivalent basis) $ 18,075 $ 20,064
--------- ---------
Net Interest Spread 2.74% 3.50%
----- -----
Net interest income
as percent of
earning-assets 3.00% 3.92%
----- -----
Tax equivalent
adjustment (962) (232)
--------- ---------
Net interest
income $ 17,113 $ 19,832
--------- ---------
1) Includes loan fees (fee income is not material)
Center Bancorp, Inc. and Subsidiaries
Average Balance Sheet with Interest and Average Rates
3 Month Period Ended September 30,
(unaudited) 2003 2002
Interest Average Interest Average
(tax equivalent Average Income/ Yield/ Average Income/ Yield/
basis, dollars Balance Expense Rate Balance Expense Rate
in thousands)
------- ------- ------- ------- ------- -------
Assets
Interest-earning
assets:
Investment
securities:
Taxable $438,432 $ 3,342 3.05% $446,434 $ 6,226 5.58%
Non-taxable 96,115 1,333 5.55% 13,020 227 6.97%
Federal funds
sold and
securities
purchased
under
agreement
to resell 0 0 0.00% 11,583 50 1.73%
Loans, net of
unearned
income (1) 288,810 3,840 5.32% 228,764 3,816 6.67%
-------- ------- ------ -------- -------- -----
Total
interest
-earning
assets 823,357 8,515 4.14% 699,801 10,319 5.90%
-------- ------- ------ -------- -------- -----
Non-interest
earning assets
Cash and due
from banks 22,068 18,107
BOLI 14,446 13,831
Other assets 29,549 24,889
Allowance for
possible loan
losses (2,680) (2,368)
-------- --------
Total non
-interest
earning
assets 63,383 54,459
-------- --------
Total
assets $886,740 $754,260
-------- --------
Liabilities and
stockholders'
equity
Interest bearing
liabilities:
Money Market
deposits $ 88,561 209 0.94% $ 90,362 440 1.95%
Savings
deposits 153,381 423 1.10% 157,546 587 1.49%
Time deposits 145,831 969 2.66% 128,624 1,266 3.94%
Other interest
bearing
deposits 68,686 86 0.50% 59,431 151 1.02%
Short-term
borrowings 242,338 1,304 2.15% 139,459 1,200 3.44%
Trust Preferred 10,000 120 4.80% 10,000 140 5.60%
-------- ------- ------ -------- -------- -----
Total interest
-bearing
liabilities 708,797 3,111 1.76% $585,422 3,784 2.59%
-------- ------- ------ -------- -------- -----
Noninterest
-bearing
liabilities:
Demand deposits 121,518 111,858
Other
noninterest
-bearing
deposits 422 684
Other
liabilities 4,066 6,472
-------- --------
Total
noninterest
-bearing
liabilities 126,006 119,014
Stockholders'
equity 51,937 49,824
-------- --------
Total
liabilities
and
stockholders'
equity $886,740 $754,260
-------- --------
Net interest
income
(tax equivalent
basis) $ 5,404 $ 6,535
------- --------
Net Interest
Spread 2.38% 3.31%
------ -----
Net interest
income as
percent
of earning
-assets 2.63% 3.74%
------ -----
Tax equivalent adjustment (453) (77)
------- --------
Net interest income $ 4,951 $ 6,458
------- --------
1) Includes loan fees (fee income is not material)
Anthony C. Weagley Vice President & Treasurer Center Bancorp 908-688-9500