UNION, NJ -- 04/20/2004 -- Center Bancorp, Inc. (NASDAQ: CNBC), parent company to Union Center National Bank of Union, New Jersey, today reported earnings results for the first quarter ended March 31, 2004.
Net income for the first quarter of 2004 amounted to $1,724,000 or $.20 per fully diluted common share, an increase of $38,000 or 2.25% over the $1,686,000 or $.20 per fully diluted common share earned for the comparable quarter of the previous year.
"Overall we are pleased with the Corporation's results for the first quarter," indicated John J. Davis, President & CEO. "The first quarter of 2004 was a good one for the Corporation and marks a positive beginning to this year. We believe that the demonstration of positive performance trends such as increased revenue and an improving margin, which has been steadily on the rise since the end of the third quarter of 2003, should have a continued visible impact on the bottom line." Other areas cited which contributed to first quarter results included increased non interest revenue, exclusive of securities gains, and a lower effective tax rate. This was offset in part by an increased provision to the allowance for loan and lease losses.
Total interest income on a fully taxable-equivalent basis for the first quarter of 2004 increased by $427,000 or 4.45% to $10.0 million, from the comparable 2003 period, while total interest expense decreased by $48,000 or 1.48%.
Mr. Davis, in referring to the Corporation's revenue growth, cited in particular strong fee income growth, and the Corporation's continuing efforts to increase the size of its loan portfolio relative to total earning-assets, despite the challenges presented by the unprecedented low interest rate environment.
Total average loan volumes for the first quarter of 2004 increased to $347.8 million, an increase of $112.3 million (up 47.7% from $235.5 million for the comparable prior year quarter). Despite the uncertainty experienced in the economy, the Corporation continues to experience loan demand in certain portfolio sectors, primarily real estate related. Demand for 1-4 family residential mortgages remained high during the first quarter.
While asset quality continues to remain strong, during the first quarter of 2004 the Corporation made a provision of $205,000 to the allowance for loan and lease losses, to maintain adequate loan loss reserves in relationship with loan portfolio growth. At March 31, 2004, the total allowance for loan and lease losses amounted to $3.2 million or .91% of total loans.
Net interest margins for the first quarter were in line with expectations and ongoing efforts to maintain the yield on earning assets and to control the cost of funds. During the first quarter, net interest margins came under further pressure from the prevailing low interest rate environment.
The lower interest rate environment continues to contribute to increased prepayments on mortgage related earning-assets. Margins have been further impacted by the effects of shorter duration assets in the investment portfolio coupled with low replacement yields received on those shorter duration additions made to the earning-asset portfolio The Corporation also benefited from continued stabilization of loan yields and interest expense.
For the three months ended March 31, 2004 the net interest margin (net interest income as a percentage of earning assets), decreased 15 basis points to 3.20% from 3.35% for the first quarter in 2003; however, the net interest margin increased 6 basis points from 3.14% for the fourth quarter of 2003. Management believes that the margin can be maintained at or near the first quarter 2004 level during the balance of 2004. Such performance, coupled with management's expectations of continuing growth in the loan portfolio, should facilitate overall performance during 2004.
Both total non interest income and non interest income excluding net securities gains reflected increases for the first quarter of 2004 as a percent of total revenue for the first quarter of 2004.
Other non-interest income, exclusive of gains on securities sold (which decreased $105,000 during the quarter), increased $49,000 or 6.92% for the first quarter compared with the comparable quarter in 2003. The change from the comparable period in 2003 was driven primarily by the increase in core service charges, commissions and fees derived from the check safe program launched during the fourth quarter of 2003. This was offset in part by a decrease in the cash surrender value of bank owned life insurance, which amounted to $166,000 or a decrease of $14,000 for the first quarter in comparison to $180,000 for the comparable quarter of 2003.
Total non interest expense in the first quarter of 2004 was $4.99 million, up 5.45% from the first quarter of 2003. Personnel-related expenses, the Corporation's largest operating expense component, decreased .53% from a year ago, and were primarily attributable to moderating employee related expenses and in certain cases reductions, such as employee health insurance costs, offset by increased salary expense associated with merit and promotional increases. The increase of 38% in other expenses in 2004 compared to the comparable quarter in 2003 was attributable to increased audit, legal and consulting fees in 2004, coupled with one time expense reductions of $136,000 recorded in 2003. The decrease in the effective tax rate was substantially as a result of increased levels of tax free income as compared to the comparable period in 2003.
Total non-interest bearing core deposits increased $10.6 million on average and continue to be a low-cost source of funding. At March 31, 2004 this source of funding, which has continued to maintain pace with the overall growth in funding sources, amounted to $131.8 million or 15.56% of total funding sources and 22.0% of total deposits.
Total assets at March 31, 2004, reached $913.2 million, an increase of $37.3 million or 4.26% from assets of $875.9 million at March 31, 2003. The annualized return on average assets for the three months ended March 31, 2004, amounted to .75% as compared with .81% for the comparable period in 2003. Deposit growth continued to remain consistent during the first quarter, up 2.12%, on average, for the period ended March 31, 2004 as compared to the comparable period in 2003. The growth in average deposits was reflected in core demand accounts, savings and time deposits.
The total Tier 1 capital leverage ratio was 7.39% at March 31, 2004, the total Tier 1 Risk Based Capital ratio was 13.55% and the Total Risk Based Capital ratio was 14.20% at March 31, 2004. Total Tier 1 capital increased to approximately $67.4 million at March 31, 2004. The increase in Tier 1 capital reflects the total cumulative issuance of $15.0 million in Trust Preferred Securities as of March 31, 2004. Book value per common share was $6.78 as compared with $6.20 a year ago. Tangible book value per common share increased to $6.53 from $5.95 a year ago. Annualized return on average stockholders' equity for the three months ended March 31, 2004 was 12.4% compared to 13.1% for the comparable period in 2003.
President & CEO Davis noted, "While the first quarter results are supportive of the Company's stated goal of delivering strong, consistent earnings growth, even under uncertain economic scenarios, we remain cautious about the strength of a recovery of the national economy. Furthermore, as we have indicated in recent months anticipated increases in operating expenses to support growth and expansion in our new and existing markets could continue to limit income growth."
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. Union Center National Bank is the largest commercial Bank headquartered in Union County; is 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 (including statements regarding future net interest margin and overall performance) 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. 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. and Subsidiaries
Consolidated Statements of Condition
Mar-31-04 Dec-31-03
--------- ---------
Assets: (Unaudited)
Cash and due from banks $ 20,865 $ 16,509
Federal funds sold and
securities purchased
under agr to resell 0 0
--------- ---------
Total cash and cash equivalents 20,865 16,509
Investment securities held
to maturity (approximate market
value of $150,199 in 2004 and
$159,492 in 2003) 143,280 155,149
Investment securities available
for sale 354,323 364,085
--------- ---------
Total investment securities 497,603 519,234
Loans, net of unearned income 354,132 349,525
Less - Allowance for loan losses 3,236 3,002
--------- ---------
Net loans 350,896 346,523
Premises and equipment, net 15,487 15,610
Accrued interest receivable 4,754 4,485
Bank Owned Life Insurance 17,281 14,614
Other assets 4,253 2,758
Goodwill 2,091 2,091
--------- ---------
Total assets 913,230 921,824
========= =========
Liabilities
Deposits:
Non-interest bearing 131,825 120,526
Interest bearing:
Certificates of deposit
$100,000 and over 46,514 58,245
Savings and Time Deposits 420,375 454,150
--------- ---------
Total deposits 598,714 632,921
Federal Home Loan Bank advances 140,000 115,000
Federal funds purchased and
securities sold under
agreements to repurchase 93,413 99,724
Subordinated debentures 15,000 15,000
Accounts payable and accrued
liabilities 8,287 4,999
--------- ---------
Total Liabilities 855,414 867,644
--------- ---------
Stockholders equity
Preferred stock, no par value:
Authorized 5,000,000 shares;
non issued 0 0
Common stock, no par value:
Authorized 20,000,000 shares;
issued 9,535,195 and 9,527,219
shares in 2004 and 2003,
respectively 19,547 19,405
Additional paid in capital 4,682 4,677
Retained earnings 34,220 33,268
--------- ---------
58,449 57,350
Treasury stock at cost
(1,005,251 and 1,008,703
shares in 2004 and 2003,
respectively) (3,965) (3,978)
Restricted stock (14) (14)
Accumulated other comprehensive
income 3,346 822
--------- ---------
Total stockholders' equity 57,816 54,180
--------- ---------
Total liabilities and
stockholders' equity $ 913,230 $ 921,824
========= =========
Center Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income
(unaudited)
Three Months Ended
March 31,
(in thousands, except per share data) 2004 2003
---- ----
Interest income:
Interest and fees on loans $ 4,376 $ 3,586
Interest and dividends on
investment securities:
Taxable interest income 4,314 5,545
Nontaxable interest income 880 307
Interest on Federal funds sold
and securities purchased
under agreement. 0 0
---------- ----------
Total interest income 9,570 9,438
---------- ----------
Interest expense:
Interest on certificates of
deposit $100,000 or more 101 152
Interest on other deposits 1,641 1,797
Interest on short-term borrowings 1,445 1,286
---------- ----------
Total interest expense 3,187 3,235
---------- ----------
Net interest income 6,383 6,203
Provision for loan losses 205 80
---------- ----------
Net interest income after
provision for loan losses 6,178 6,123
---------- ----------
Other income:
Service charges, commissions
and fees 481 417
Other income 102 111
Annuity & Insurance 8 0
BOLI 166 180
Gain on securities sold 126 231
---------- ----------
Total other income 883 939
---------- ----------
Other expense:
Salaries and employee benefits 2,637 2,651
Occupancy expense, net 563 528
Premises and equipment expense 445 447
Stationery and printing expense 152 174
Marketing and Advertising 149 177
Other expenses 1,045 756
---------- ----------
Total other expense 4,991 4,733
---------- ----------
Income before income tax
expense 2,070 2,329
Income tax expense 346 643
---------- ----------
Net income $ 1,724 $ 1,686
========== ==========
Earnings per share
Basic $ 0.20 $ 0.20
Diluted 0.20 0.20
========== ==========
Weighted average common shares
outstanding
Basic 8,524,154 8,440,622
Diluted 8,600,059 8,529,786
========== ==========
Center Bancorp, Inc. and Subsidiaries
Average Balance Sheet with Interest and
Average Rates (3 Month Quarterly Averages)
Period Ended March 31,
(unaudited) 2004
Interest Average
(tax equivalent basis, Average Income/ Yield/
dollars in thousands) Balance Expense Rate
--------- --------- ---------
Assets
Interest-earning assets:
Investment securities:
Taxable $ 415,447 $ 4,314 4.15%
Non-taxable 92,313 1,333 5.78%
Federal funds sold and
securities purchased
under agreement to resell 0 0 0.00%
Loans, net of
unearned income (1) 347,806 4,376 5.03%
--------- --------- ---------
Total interest-earning
assets 855,566 10,023 4.69%
--------- --------- ---------
Non-interest earning assets
Cash and due from banks 20,938
BOLI 15,503
Other assets 24,830
Allowance for possible
loan losses (3,094)
---------
Total non-interest
earning assets 58,177
---------
Total assets $ 913,743
---------
Liabilities and stockholders'
equity
Interest bearing liabilities:
Money Market deposits $ 107,559 263 0.98%
Savings deposits 146,542 353 0.96%
Time deposits 157,468 1,036 2.63%
Other interest bearing
deposits 72,640 90 0.50%
Short-term borrowings 228,704 1,272 2.22%
Subordinated debentures 15,000 173 4.61%
--------- --------- ---------
Total interest-bearing
liabilities 727,913 3,187 1.75%
========= ========= =========
Noninterest-bearing liabilities:
Demand deposits 123,314
Other noninterest-bearing
deposits 1,808
Other liabilities 5,263
---------
Total noninterest-bearing
liabilities 130,385
---------
Stockholders' equity 55,445
---------
Total liabilities and
stockholders' equity $ 913,743
=========
Net interest income
(tax equivalent basis) $ 6,836
---------
Net Interest Spread 2.94%
=========
Net interest income as percent
of earning-assets 3.20%
=========
Tax equivalent adjustment (453)
---------
Net interest income $ 6,383
=========
1) Includes loan fees (fee income is not material)
Center Bancorp, Inc. and Subsidiaries
Average Balance Sheet with Interest and
Average Rates (3 Month Quarterly Averages)
Period Ended March 31,
(unaudited) 2003
Interest Average
(tax equivalent basis, Average Income/ Yield/
dollars in thousands) Balance Expense Rate
--------- --------- ---------
Assets
Interest-earning assets:
Investment securities:
Taxable $ 505,498 $ 5,545 4.45%
Non-taxable 28,185 465 6.60%
Federal funds sold and
securities purchased
under agreement to resell 0 0.00%
Loans, net of
unearned income (1) 235,474 3,586 6.18%
--------- --------- ---------
Total interest-earning
assets 769,157 9,596 5.06%
--------- --------- ---------
Non-interest earning assets
Cash and due from banks 22,895
BOLI 14,205
Other assets 26,168
Allowance for possible
loan losses (2,533)
---------
Total non-interest
earning assets 60,735
---------
Total assets $ 829,892
---------
Liabilities and stockholders'
equity
Interest bearing liabilities:
Money Market deposits $ 100,427 306 1.24%
Savings deposits 155,472 520 1.36%
Time deposits 154,085 995 2.62%
Other interest bearing
deposits 72,235 128 0.72%
Short-term borrowings 166,595 1,161 2.79%
Subordinated debentures 10,000 125 5.00%
--------- --------- ---------
Total interest-bearing
liabilities $ 658,814 3,235 1.99%
========= ========= =========
Noninterest-bearing liabilities:
Demand deposits 113,996
Other noninterest-bearing
deposits 483
Other liabilities 5,132
---------
Total noninterest-bearing
liabilities 119,611
---------
Stockholders' equity 51,468
---------
Total liabilities and
stockholders' equity $ 829,893
=========
Net interest income
(tax equivalent basis) $ 6,361
---------
Net Interest Spread 3.07%
=========
Net interest income as percent
of earning-assets 3.35%
=========
Tax equivalent adjustment (158)
---------
Net interest income $ 6,203
=========
1) Includes loan fees (fee income is not material)
Contact: Anthony C. Weagley Vice President & Treasurer 1-(800)-862-3683