Anthony C. Weagley, Vice President & Treasurer
Center Bancorp, Inc. Reports Fourth Quarter 2006 Earnings
Union, NJ, January 25, 2007
UNION, NJ -- (MARKET WIRE) -- 1/25/07 -- Center Bancorp, Inc. (NASDAQ: CNBC), parent company of Union Center National Bank, today reported operating results for the fourth quarter ended December 31, 2006 and for the year ended December 31, 2006.
Center Bancorp reported:
| · | Net income of $2.3 million for the fourth quarter of 2006, as compared with $1.9 million for the fourth quarter of 2005. |
| · | EPS of $0.17 per share for the fourth quarter of 2006, as compared with $0.14 per share for the fourth quarter of 2005. |
| · | Strong deposit growth, with total deposits increasing to $726.8 million at December 31, 2006, a 3.74% increase from the end of 2005. |
| · | Continued loan growth. The Corporation achieved net growth in average loans of 8.47% for the fourth quarter of 2006. Commercial and commercial real estate loans provided the bulk of the loan growth in the fourth quarter. |
| · | Continued high credit quality; non-performing assets amounted to only .07% of total assets at December 31, 2006. |
| · | Continued strengthening of the balance sheet, designed to enhance the Corporation’s earnings profile and reduce exposure to future interest rate risk. |
| · | Redemption of $10.3 million of higher-cost subordinated debt, which will improve the Corporation’s cost of funds in 2007. |
| · | Net interest margin declined 8 basis points on a linked sequential quarter, from 2.70% for the third quarter of 2006 to 2.62% for the fourth quarter of 2006. |
| · | Total assets of $1.051 billion at December 31, 2006, which positions Center as one of the largest New Jersey headquartered financial institutions. |
| · | Book value per common share amounted to $7.37 at December 31, 2006 compared to $7.41 a year ago. |
Commenting on the results for the fourth quarter, President and Chief Executive Officer John J. Davis stated, “We continue to focus on our plan to enhance earnings and shareholder returns through improved efficiencies and sustained revenue growth. Loan volume continues to grow - which has the effect of improving the quality and composition of our balance sheet by reducing our securities portfolio and by decreasing borrowings. Credit quality remains very strong. We believe we have made good progress toward improving our balance sheet and restraining further compression of our net interest margin in light of a challenging interest rate environment.
We are very mindful of the need to lower our expenses and to further increase profitability, which will be a continued priority for 2007. In 2006 we implemented initiatives to increase branch profitability as well as to reduce salaries and benefits and overtime expense. In addition, we are considering various outsourcing opportunities and instituting other operating expense controls.”
Mr. Davis continued, “We are pleased with our strengths in commercial lending, credit quality and generating core deposits. Moreover, growth prospects in key markets where we operate remain attractive. Our Boonton/Mountain Lakes office was opened in the fourth quarter of 2006 and we look forward to further expansion of our footprint into new markets, specifically Florham Park, New Jersey in the near term. We continue to be encouraged by our long-term prospects and we will continue to pursue our strategic plan and expect to generate attractive returns for our shareholders.”
Fourth quarter 2006 net income amounted to $2.3 million, as compared with net income of $1.9 million in the fourth quarter of 2005. Earnings per share amounted to $0.17 on a diluted per common share basis, as compared with $0.14 per share for the fourth quarter of 2005. Results for the fourth quarter reflect positive loan growth trends, an increase in non interest income and favorable tax benefits offset in part by net interest margin compression during the period and increased non interest expense.
For the twelve-months ended December 31, 2006, the Corporation reported net income of $3.9 million, or $0.29 on a per diluted common share basis. The Corporation earned $7.6 million, or $0.63 per diluted common share, for the twelve-months ended December 31, 2005.
Net Interest Income
Total interest income on a fully taxable-equivalent basis for the fourth quarter of 2006 decreased by $360,000, or 2.52%, to $13.9 million, from the comparable 2005 quarterly period, while total interest expense for the fourth quarter of 2006 increased by $869,000, or 12.7%, to $7.7 million over the same quarterly period of 2005.
For the twelve-months ended December 31, 2006, total interest income on a fully tax-equivalent basis increased by $2.5 million, or 4.67%, to $55.5 million as compared to the twelve-months ended December 31, 2005. For the twelve-months ended December 31, 2006, total interest expense increased by $5.7 million, or 24.4%, to $29.0 million, as compared to the same period last year.
The Corporation recorded net interest income of $5.7 million for the three months ended December 31, 2006 and $24.4 million for the twelve-months ended December 31, 2006. This compared with net interest income of $6.8 million for the three months ended December 31, 2005 and $27.2 million for the twelve-months ended December 31, 2005. The decrease in net interest income for both the three and twelve-months ended December 31, 2006 related principally to the increase in interest expense during these periods.
The three and twelve-month increases in interest expense reflect the impact of the rise in short-term interest rates, the sustained flatness of the yield curve and intense competition for deposits. The Corporation reduced its average borrowings by $149.1 million, including subordinated debentures, during the fourth quarter of 2006 as compared with the same quarter in 2005. The average balance of interest-bearing liabilities, including borrowings, declined by $104.8 million, or 11.7%, to $793.9 million in the current fourth quarter. However, the positive effect of the reduction in this type of funding source was offset by an increase in the average cost of funds, which rose (on an annualized basis) by 84 basis points to 3.89% from 3.05% during the fourth quarter of 2005.
Average interest-earning assets for the three months ended December 31, 2006 declined by $111.1 million, or 10.44%, to $952.4 million, reflecting the Corporation’s balance sheet repositioning. The repositioning at the end of the first quarter of 2006 included the sale of $86.3 million of securities with an average yield under 4.0%. While the annualized average yield on earnings assets for the fourth quarter of 2006 increased 48 basis points over the annualized average yield during the fourth quarter of 2005, it was not sufficient to offset the effect of the rise in the average cost of funds over the same period.
For the three months ended December 31, 2006, the Corporation’s net interest spread declined 36 basis points to 1.97% (annualized) as compared to 2.33% (annualized) for the comparable three month period in 2005 and the Corporation’s net interest margin (net interest income as a percentage of earning assets, calculated on an annualized basis) declined by 19 basis points from 2.81% to 2.62%. For the twelve-months of 2006, the Corporation's net interest spread and net interest margin were equal to 2.17% (annualized) and 2.75% (annualized), respectively, down 32 and 14 basis points, respectively, from the same measures for the comparable period in 2005.
The Federal Reserve Board did not raise the Federal Funds target rate in the fourth quarter of 2006. The yield curve, however, continued to flatten and has been inverted during the 2006 period causing continued upward pressure on short term funding costs, which continued to exert pressure on interest margins.
The interest rate environment did not improve in the fourth quarter, making it difficult for the Corporation to lower its overall cost of funds. As a result, the Corporation’s net interest margin declined from the fourth quarter of 2005 to the fourth quarter of 2006. Due to the uncertainty of the timing and direction of interest rates in general, the Corporation expects that its net interest margin for 2007 will be lower than its net interest margin for previous years. The Corporation took several important steps in the fourth quarter to stem further compression of its margin by redeeming $10.3 million in subordinated debt, reducing the Corporation’s reliance on retail certificates of deposit as part of the funding mix and by lowering rates on money market deposits. The Corporation believes that these steps, coupled with further actions to restrain the cost of funds, will have a favorable impact on the margin in 2007.
Other Income
Total other income increased $820,000 for the fourth quarter of 2006 compared with the fourth quarter of 2005, primarily as a result of increases in gains on securities sold. The Corporation continues to pursue opportunities to expand other non-interest income, such as insurance and annuity sales origination, sales of mortgages and improving service charge revenue.
Excluding net securities losses and gains in the respective periods, the Corporation recorded other income of $3.2 million in the twelve-months ended December 31, 2006, compared to $3.5 million in the twelve-months ended December 31, 2005. This decrease was primarily attributable to a $163,000 decline in service charges, decreased commissions and fees revenue, which included a one time commission on check book charges in 2005, lower overdraft fees and service charge income on deposit accounts, and a $177,000 decline in other fee income. The decline in other fee income was attributable to a decline in letter of credit income and loan fees. Total other income including net securities losses and gains , which takes into account the balance sheet repositioning undertaken during the first quarter of 2006, the Corporation recorded $633,000 from other income sources in the twelve- months ended December 31, 2006 as compared with other income of $3.8 million in the twelve-months ended December 31, 2005.
Other Expense
Other expense for the fourth quarter of 2006 totaled $6.7 million, an increase of $1.142 million or 20.71% over the comparable period in 2005. The increase in operating expenses during the fourth quarter resulted primarily from an $1.019 million increase in other general and administrative expenses, including an increased expense related to customer third party services provided to customers of $200,000, or 20% of the increase, coupled with a write-off of the expenses related to the proposed branch site in Cranford, New Jersey which amounted to approximately $162,000. The amortization of core deposit intangibles ("CDI") accounted for $2,500 and $21,000, respectively, of other expense in the current and year-earlier periods, with the increase reflecting the CDI amortization stemming from the acquisition of Red Oak Bank in May, 2005.
Salaries and benefits decreased by $43,000, or 1.4% to $3.0 million, reflecting an increase in staffing in comparison to the prior quarterly period in 2005, as well as normal merit and promotional increases, pension expense, and stock option expense under FAS 123(R), offset in part by a reversal of incentive accruals during the fourth quarter of 2006. Full time equivalent staffing levels were 214 as of December 31, 2006 compared to 211 as of December 31, 2005. The change in staffing levels includes the impact of the acquisition of Red Oak Bank in 2005 and staffing for the Boonton/Mountain Lakes branch which opened in October of 2006.
Other expense for the twelve-months ended December 31, 2006 totaled $24.4 million, an increase of $2.15 million, or 9.66%, over the comparable period in 2005. Higher operating expenses during the twelve-month period resulted primarily from an increase in other general and administrative expenses as well as certain specific customer-related expenses. Other general and administrative expense increased $1.7 million, reflecting increases in professional consulting, compliance, audit fees, insurance and stationary and printing expense and certain increased expenses related to customer third party services provided amounting to $294,000 for the twelve-month period. Amortization of CDI accounted for $120,000 of other expense in the current twelve month period and $75,000 in the comparable period in 2005.
Income Tax Expense
The effective tax rate, exclusive of the impact of the realized loss on securities sold, continues to be less than statutory rates. During the fourth quarter of 2006, the Corporation effected an internal entity reorganization which resulted in a $1.4 million tax savings. Additionally, tax-free income generated from the Corporation's municipal and other tax advantaged investments continues to reduce the effective tax rate.
The Corporation recorded an income tax benefit of $1.7 million in the current fourth quarter, compared to a tax expense of $140,000 for the fourth quarter of 2005. The change was primarily due to a $1.5 million decline in pre-tax income to $596,000 for the three months ended December 31, 2006 coupled with the above-mentioned internal reorganization.
The Corporation recorded an income tax benefit of $3.3 million for the twelve-months ended December 31, 2006, compared to a tax expense of $1.2 million for the comparable 2005 period. The change was primarily due to the decline of $8.3 million of pre-tax income and the above-mentioned internal entity reorganization. The Corporation had pre-tax income of $8.8 million for the twelve-months ended December 31, 2005.
Balance Sheet Summary
The Corporation had total assets of $1.051 billion at December 31, 2006, down $63.5 million from December 31, 2005. The reduction in assets, in part, reflects the balance sheet restructuring announced in the first quarter of 2006. The Corporation utilized a portion of the cash flows generated by redemptions and sales of securities to fund increased loans. During the twelve-months ended December 31, 2006, the Corporation experienced growth in its deposits and reduced its borrowings. Loans totaled $550.4 million at December 31, 2006, up $44.6 million, or 8.81%, from the year-end 2005 balance. On December 31, 2006, securities totaled $389.5 million, a decline of $139.1 million, or 26.32%, from the year-end 2005 balance.
Deposits totaled $726.8 million at December 31, 2006, an increase of $26.2 million from the December 31, 2005 balance. Short-term borrowings declined to $206.4 million at December 31, 2006, reflecting the Corporation’s goal of reducing its reliance on short-term borrowings.
Stockholders' equity totaled $97.6 million at December 31, 2006, down $1.9 million from the December 31, 2005 total. Tangible stockholders' equity (representing total stockholders’ equity less recorded intangible assets) totaled $80.3 million at December 31, 2006, down $1.8 million from December 31, 2005.
Loans
Total average loan volume for the fourth quarter of 2006 increased to $543.7 million, an increase of $42.4 million, or 8.46%, from $501.3 million for the comparable quarter of the previous year. On a linked sequential quarter comparison, total average loans increased by $11.2 million, from $532.5 million on average during the third quarter of 2006. The Corporation continues to focus on building loan volume in its marketplace.
For the twelve-months ended December 31, 2006, total average loan volume was $522.4 million, an increase of approximately $68.0 million, or 14.96%, from $454.4 million on average for the twelve-months ended December 31, 2005.
The Corporation had total loans of $550.4 million at December 31, 2006, representing a $44.6 million, or 8.81%, increase from the Corporation’s balance at December 31, 2005. At December 31, 2006, the Corporation had outstanding commitments of $28.3 million, with commercial and commercial real-estate loans representing 96.8% of that amount. Management expects loan balances to continue to grow during the first quarter of 2007, fueled by a continued increase in the commercial sectors of the Corporation’s loan portfolio.
Asset Quality
Asset quality remained strong during the fourth quarter of 2006. At December 31, 2006, non-performing assets totaled $700,000. Non-performing assets represented 0.07% of total assets at December 31, 2006.
Despite the continued high quality of the Corporation’s assets, commensurate with the growth in the loan portfolio and increase in the average size of the loan portfolio, the Corporation made a provision of $56,525 to the allowance for loan losses during the three months ended December 31, 2006. At December 31, 2006, the total allowance for loans losses amounted to approximately $5.0 million, or 0.90% of total loans. At December 31, 2006, total non-accrual loans amounted to $475,000, or 0.09% of total loans.
Securities
Consistent with the balance sheet strategies outlined by management in the first quarter of 2006, the Corporation sought to reduce the size of its investment securities portfolio during 2006. Securities totaled $389.5 million at December 31, 2006, representing 37.1% of total assets, compared to $528.7 million, representing 47.4% of total assets at December 31, 2005.
Reflecting the lower balance of the securities portfolio and an increase in market interest rates over the course of the twelve-months ended December 31, 2006, the net unrealized loss on securities available for sale decreased to $4.6 million at December 31, 2006 from $6.8 million at December 31, 2005.
Deposits/Funding Sources
Deposits totaled $726.8 million at December 31, 2006, an increase of $26.2 million from the December 31, 2005 balance. The increase in deposits reflects an increase in interest bearing money market deposits offset by decreases in more volatile certificates of deposit of $100,000 or more. The decline in certificates of $100,000 or more involved municipal deposits that were more costly than other funding sources.
Borrowings totaled $211.6 million at December 31, 2006, reflecting a decline of $97.8 million, or 31.6%, from the December 31, 2005 balance. Federal Home Loan Bank of New York advances represented approximately $109.0 million of the December 31, 2006 total, with repurchase agreements representing $97.4 million at the same date. Overnight customer repurchase transactions covering commercial sweep accounts comprised $29.4 million of the securities sold under repurchase agreements figure at December 31, 2006.
Stockholders' Equity
Total stockholders’ equity amounted to $97.6 million or 9.28% of total assets at December 31, 2006, compared to $99.5 million or 8.92% of total assets at December 31, 2005. Contributions to capital during the twelve-months ended December 31, 2006 from the Corporation’s stock option plans and dividend reinvestment and optional stock purchase plan amounted to approximately $658,000, compared to approximately $627,000 for the twelve-months ended December 31, 2005. The Corporation’s dividend reinvestment and optional stock purchase plan is currently a market issuance plan. During most of 2005, that plan was operating under the original issuance method for purchases made for the plan. The change in stockholders’ equity at December 31, 2006 also reflects the impact of the adoption of FASB No 158 under which the Corporation recorded a $815,000, net of tax charge to the other comprehensive income component of stockholders’ equity.
Book value per common share was $7.37 at December 31, 2006, compared to $7.41 at December 31, 2005. Tangible book value (i.e., total stockholders’ equity less goodwill and other intangible assets) per common share was $6.06 at December 31, 2006, and $6.11 at December 31, 2005. The $.05 per common share decline as compared to 2005 reflects the increase in goodwill and other intangible assets resulting from the acquisition of Red Oak Bank.
All common stock per share amounts have been restated to reflect all previously declared and paid common stock splits and common stock dividends. Weighted average shares outstanding reflect 1,015,816 common shares issued in May 2005 in connection with the acquisition of Red Oak Bank and 1,904,761 common shares issued in June 2005 in a private placement. The Corporation had no share repurchases of common stock during the fourth quarter of 2006 under its buy back program; the Corporation repurchased a total of 269,578 common shares during the twelve-months ended December 31, 2006 at an average cost per share of $11.95. The repurchased shares were recorded as treasury stock, which resulted in a decrease in stockholders’ equity. At December 31, 2006, there were 344,894 shares still available for repurchase under the Corporation’s stock buy back program.
At December 31 2006, 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 ("FDICIA").
At December 31, 2006, the Corporation’s Tier 1 Capital Leverage ratio was 8.64%, the Corporation’s total Tier 1 Risk Based Capital ratio was 13.18 % and the Corporation’s total Risk Based Capital ratio was 13.92%. Total Tier 1 capital decreased to approximately $88.0 million at December 31, 2006 from $102.2 million at December 31, 2005. The reduction in Tier 1 Capital at December 31, 2006 reflects the Corporation’s redemption of Trust Preferred securities by its subsidiary Center Bancorp, Inc. Statutory Trust I on December 18, 2006. The Trust redeemed all $10 million of its floating rate capital trust pass through securities due December 18, 2031, at $1,000 per share plus accumulated and unpaid dividends to the redemption date. The current rate was 8.99%.
Mr. Davis noted, "We continue to focus on our commercial business base and our goal of increasing loans. We also remain committed to containing and controlling operating expense. We believe that the fourth quarter results demonstrate stability in this challenging rate environment and adherence to our stated goals to deliver consistent earnings performance over the long term."
About Center Bancorp
Center Bancorp, Inc., through its wholly owned subsidiary, Union Center National Bank, Union, New Jersey, currently operates fourteen banking locations. Banking centers are located in Union Township (6 locations), Berkeley Heights, Boonton/Mountain Lakes, Madison, Millburn/Vauxhall, Morristown (3 locations), Springfield, and Summit, New Jersey. The Bank also operates remote ATM locations in the Union and Chatham New Jersey Transit train station, Union Hospital and the Boys and Girls Club of Union. The Bank recently received approvals to install and operate one additional off-premise ATM location in the Madison New Jersey Transit Station, which is scheduled to be operational in 2007.
Union Center National Bank is the largest commercial bank headquartered in Union County; it was 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
Non-GAAP Financial Measures
The Corporation’s reference to its total other income, exclusive of the losses recorded on securities sales, may constitute a “non-GAAP financial measure”. The Corporation has provided a reconciliation by also reporting its total other income for the applicable periods. The Corporation believes that the above-mentioned reference enhances the public’s ability to compare results between the twelve-months of 2006 and the twelve-months of 2005.
Tangible stockholders’ equity represents a non-GAAP financial measure and equals total stockholders’ equity minus recorded intangible assets. The Corporation has provided a reconciliation by also reporting its total stockholders’ equity. The Corporation believes that a disclosure of tangible stockholders’ equity may be helpful for those investors who seek to evaluate the Corporation’s total stockholders’ equity without giving effect to intangible assets.
Tangible book value is also non-GAAP financial measure and represents total stockholders’ equity less goodwill and other intangible assets, calculated on a per common share basis. The Corporation has provided reconciliation by also reporting its total book value per share. 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.
Forward-Looking Statements
All non-historical statements in this press release (including statements regarding the Corporation’s cost of funds in 2007, the Corporation’s net interest margin for 2007 and future loan balances) 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 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, 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.
Media Inquiries:
Mike Pascale or Tom Johnson
Abernathy MacGregor
212-371-5999
Investor Relations Inquiries:
Anthony C. Weagley
Vice President & Treasurer
Center Bancorp, Inc.
908-206-2886
CENTER BANCORP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
| | | | December 31, | | | December 31, | |
(dollars in thousands) | | | 2006 | | | 2005 | |
| | | | (unaudited) | | | | |
ASSETS | | | | | | | |
| Cash and due from banks | | $ | 34,088 | | $ | 19,343 | |
| Federal funds sold and securities purchased under agreement to resell | | | 10,275 | | | — | |
| Total cash and cash equivalents | | | 44,363 | | | 19,343 | |
| Investment securities held to maturity (approximate market value of $130,900 in 2006 and $140,628 in 2005) | | | 131,130 | | | 140,514 | |
| Investment securities available-for-sale | | | 258,408 | | | 388,170 | |
| Total investment securities | | | 389,538 | | | 528,684 | |
| Loans, net of unearned income | | | 550,414 | | | 505,826 | |
| Less - Allowance for loan losses | | | 4,960 | | | 4,937 | |
| Net Loans | | | 545,454 | | | 500,889 | |
| Premises and equipment, net | | | 18,829 | | | 18,343 | |
| Accrued interest receivable | | | 4,932 | | | 5,875 | |
| Bank owned life insurance | | | 21,368 | | | 18,588 | |
| Other assets | | | 9,563 | | | 5,670 | |
| Goodwill and other intangible assets | | | 17,312 | | | 17,437 | |
| Total assets | | $ | $1,051,359 | | $ | 1,114,829 | |
| | | | | | | | |
LIABILITIES | | | | | | | |
| Deposits: | | | | | | | |
| Non-interest bearing | | $ | 136,453 | | $ | 139,911 | |
| Interest-bearing | | | | | | | |
| Certificates of deposit $100 and over | | | 83,623 | | | 154,409 | |
| Interest-bearing transactions, savings and time deposits $100 and less | | | 506,695 | | | 406,281 | |
| Total deposits | | | 726,771 | | | 700,601 | |
| Term borrowings | | | 108,991 | | | 157,370 | |
| Fed funds purchased | | | — | | | 40,000 | |
| Overnight FHLB borrowings | | | — | | | 20,900 | |
| Securities sold under agreement to repurchase | | | 97,443 | | | 75,693 | |
| Subordinated debentures | | | 5,155 | | | 15,465 | |
| Accounts payable and accrued liabilities | | | 15,386 | | | 5,311 | |
| Total liabilities | | | 953,746 | | | 1,015,340 | |
| | | | | | | | |
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 14,467,962 shares at December 31, 2006 and December 31, 2005; outstanding shares 13,248,406 at December 31, 2006 and 13,431,628 at December 31, 2005 | | | 65,592 | | | 65,592 | |
| Additional paid in capital | | | 4,535 | | | 3,787 | |
| Retained earnings | | | 37,527 | | | 38,453 | |
| | | | 107,654 | | | 107,832 | |
| Treasury stock at cost (1,219,556 and 1,036,334 shares in 2006 and 2005, respectively) | | | (6,631 | ) | | (3,701 | ) |
| Accumulated other comprehensive loss | | | (3,410 | ) | | (4,642 | ) |
| Total stockholders’ equity | | | 97,613 | | | 99,489 | |
| Total liabilities and stockholders’ equity | | $ | 1,051,359 | | $ | 1,114,829 | |
CENTER BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
| | | | Three-Months Ended | | | Twelve-Months Ended | |
| | | | December 31, | | | December 31, | |
(dollars in thousands, except per share data) | | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
| | | | (Unaudited) | | | | | | (Unaudited) | | | | |
Interest income: | | | | | | | | | | | | | |
| Interest and fees on loans | | $ | 8,516 | | $ | 7,324 | | $ | 31,999 | | $ | 25,329 | |
| Interest and dividends on investment securities: | | | | | | | | | | | | | |
| Taxable interest income | | | 3,454 | | | 4,602 | | | 15,521 | | | 18,849 | |
| Non-taxable interest income | | | 903 | | | 1,047 | | | 3,874 | | | 4,001 | |
| Dividends | | | 373 | | | 663 | | | 1,384 | | | 2,295 | |
| Interest on Federal funds sold and securities purchased under agreement to resell | | | 162 | | | — | | | 547 | | | 29 | |
| Total interest income | | | 13,408 | | | 13,636 | | | 53,325 | | | 50,503 | |
Interest expense: | | | | | | | | | | | | | |
| Interest on certificates of deposit $100 or more | | | 1,047 | | | 1,022 | | | 4,930 | | | 3,828 | |
| Interest on other deposits | | | 4,137 | | | 2,210 | | | 13,075 | | | 7,771 | |
| Interest on borrowings | | | 2,533 | | | 3,616 | | | 10,969 | | | 11,697 | |
| Total interest expense | | | 7,717 | | | 6,848 | | | 28,974 | | | 23,296 | |
| Net interest income | | | 5,691 | | | 6,788 | | | 24,351 | | | 27,207 | |
| Provision for loan losses | | | 57 | | | — | | | 57 | | | — | |
| Net interest income after provision for loan losses | | | 5,634 | | | 6,788 | | | 24,294 | | | 27,207 | |
Other income: | | | | | | | | | | | | | |
| Service charges, commissions and fees | | | 429 | | | 451 | | | 1,759 | | | 1,922 | |
| Other income | | | 145 | | | 141 | | | 454 | | | 631 | |
| Annuity and insurance | | | 60 | | | 30 | | | 205 | | | 193 | |
| Bank owned life insurance | | | 183 | | | 188 | | | 780 | | | 740 | |
| Gain (loss) on securities sold | | | 801 | | | (12 | ) | | (2,565 | ) | | 350 | |
| Total other income | | | 1,618 | | | 798 | | | 633 | | | 3,836 | |
Other expense: | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 3,016 | | | 3,059 | | | 12,290 | | | 12,108 | |
| Occupancy, net | | | 619 | | | 578 | | | 2,309 | | | 2,165 | |
| Premises and equipment | | | 564 | | | 550 | | | 1,940 | | | 1,990 | |
| Stationery and printing | | | 144 | | | 170 | | | 692 | | | 628 | |
| Marketing and advertising | | | 266 | | | 129 | | | 731 | | | 644 | |
| Other | | | 2,047 | | | 1,028 | | | 6,396 | | | 4,678 | |
| Total other expense | | | 6,656 | | | 5,514 | | | 24,358 | | | 22,213 | |
| Income before income tax (benefit) expense | | | 596 | | | 2,072 | | | 569 | | | 8,830 | |
| Income tax (benefit) expense | | | (1,695 | ) | | 140 | | | (3,329 | ) | | 1,184 | |
| Net income | | $ | 2,291 | | $ | 1,932 | | $ | 3,898 | | $ | 7,646 | |
Earnings per share: | | | | | | | | | | | | | |
| Basic | | $ | 0.17 | | $ | 0.14 | | $ | 0.29 | | $ | 0.63 | |
| Diluted | | $ | 0.17 | | $ | 0.14 | | $ | 0.29 | | $ | 0.63 | |
Weighted average common shares outstanding: | | | | | | | | | | | | | |
| Basic | | | 13,236,360 | | | 13,429,606 | | | 13,294,937 | | | 12,074,870 | |
| Diluted | | | 13,314,543 | | | 13,471,205 | | | 13,371,750 | | | 12,119,291 | |
Average Statements of Condition with Interest and Average Rates
| | | | | | | Twelve Month Period Ended December 31, | | | | |
(tax-equivalent basis, dollars in thousands) | | | Average Balance | | | 2006 Interest Income/ Expense | | | Average Yield/ Rate | | | Average Balance | | | 2005 Interest Income/ Expense | | | Average Yield/ Rate | |
| | | | | | | | | | | | | | | | | | | | |
Assets | | | | | | | | | | | | | | | | | | | |
| Interest-earning assets: | | | | | | | | | | | | | | | | | | | |
| Investment securities(1): | | | | | | | | | | | | | | | | | | | |
| Taxable | | $ | 320,168 | | $ | 16,259 | | | 5.08 | % | $ | 422,507 | | $ | 19,596 | | | 4.64 | % |
| Non-taxable | | | 112,831 | | | 6,718 | | | 5.95 | % | | 150,149 | | | 8,094 | | | 5.39 | % |
| Federal funds sold and securities purchased under agreement to resell | | | 10,539 | | | 547 | | | 5.19 | % | | 1,091 | | | 29 | | | 2.66 | % |
| Loans, net of unearned income(2) | | | 522,352 | | | 31,999 | | | 6.13 | % | | 454,372 | | | 25,329 | | | 5.57 | % |
| Total interest-earning assets | | | 965,890 | | | 55,523 | | | 5.75 | % | | 1,028,119 | | | 53,048 | | | 5.16 | % |
| Non-interest-earning assets | | | | | | | | | | | | | | | | | | | |
| Cash and due from banks | | | 20,711 | | | | | | | | | 19,418 | | | | | | | |
| Bank owned life insurance | | | 20,225 | | | | | | | | | 18,200 | | | | | | | |
| Intangible assets | | | 17,378 | | | | | | | | | 11,814 | | | | | | | |
| Other assets | | | 28,405 | | | | | | | | | 28,620 | | | | | | | |
| Allowance for loan losses | | | (4,932 | ) | | | | | | | | (4,534 | ) | | | | | | |
| Total non-interest-earning assets | | | 81,787 | | | | | | | | | 73,518 | | | | | | | |
| Total assets | | $ | 1,047,677 | | | | | | | | $ | 1,101,637 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | | | | | | | | | | | | |
| Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | |
| Money market deposits | | $ | 126,502 | | $ | 4,384 | | | 3.47 | % | $ | 92,875 | | $ | 1,963 | | | 2.11 | % |
| Savings deposits | | | 90,768 | | | 1,807 | | | 1.99 | % | | 114,305 | | | 1,610 | | | 1.41 | % |
| Time deposits | | | 232,803 | | | 9,950 | | | 4.27 | % | | 227,249 | | | 6,766 | | | 2.98 | % |
| Other interest-bearing deposits | | | 119,231 | | | 1,864 | | | 1.56 | % | | 118,881 | | | 1,260 | | | 1.06 | % |
| Short-term borrowings and FHLB advances | | | 226,004 | | | 9,655 | | | 4.27 | % | | 304,364 | | | 10,624 | | | 3.49 | % |
| Subordinated debentures | | | 15,070 | | | 1,314 | | | 8.72 | % | | 15,465 | | | 1,073 | | | 6.94 | % |
| Total interest-bearing liabilities | | | 810,378 | | | 28,974 | | | 3.58 | % | | 873,139 | | | 23,296 | | | 2.67 | % |
| Non-interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | |
| Demand deposits | | | 135,761 | | | | | | | | | 134,837 | | | | | | | |
| Other non-interest-bearing deposits | | | 1,470 | | | | | | | | | 2,813 | | | | | | | |
| Other liabilities | | | 3,563 | | | | | | | | | 5,076 | | | | | | | |
| Total non-interest-bearing liabilities | | | 140,794 | | | | | | | | | 142,726 | | | | | | | |
| Stockholders’ equity | | | 96,505 | | | | | | | | | 85,772 | | | | | | | |
| Total liabilities and stockholders’ equity | | $ | 1,047,677 | | | | | | | | $ | 1,101,637 | | | | | | | |
| Net interest income (tax-equivalent basis) | | | | | $ | 26,549 | | | | | | | | $ | 29,752 | | | | |
| Net interest spread | | | | | | | | | 2.17 | % | | | | | | | | 2.49 | % |
| Net interest income as percent of earning-assets (net interest margin) | | | | | | | | | 2.75 | % | | | | | | | | 2.89 | % |
| Tax-equivalent adjustment(3) | | | | | | (2,198 | ) | | | | | | | | (2,545 | ) | | | |
| Net interest income | | | | | $ | 24,351 | | | | | | | | $ | 27,207 | | | | |
| (1) | Average balances for available-for-sale securities are based on amortized cost |
| (2) | Average balances for loans include loans on non-accrual status |
| (3) | The tax-equivalent adjustment was computed based on a statutory Federal income tax rate of 34 percent |
Average Statements of Condition with Interest and Average Rates
| | | | | | | | | | | | | | |
| | | Three Month Period Ended December 31, | |
(tax-equivalent basis, dollars in thousands) | | Average Balance | | 2006 Interest Income/ Expense | | Average Yield/ Rate | | Average Balance | | 2005 Interest Income/ Expense | | Average Yield/ Rate | |
| | | | | | | | | | | | | | |
Assets | | | | | | | | | | | | | | | | | | | |
| Interest-earning assets: | | | | | | | | | | | | | | | | | | | |
| Investment securities(1): | | | | | | | | | | | | | | | | | | | |
| Taxable | | $ | 281,255 | | $ | 3,591 | | | 5.11 | % | $ | 411,088 | | $ | 4,842 | | | 4.71 | % |
| Non-taxable | | | 114,994 | | | 1,678 | | | 5.84 | % | | 151,098 | | | 2,141 | | | 5.67 | % |
| Federal funds sold and securities purchased under agreement to resell | | | 12,434 | | | 162 | | | 5.21 | % | | — | | | — | | | — | |
| Loans, net of unearned income(2) | | | 543,707 | | | 8,516 | | | 6.27 | % | | 501,260 | | | 7,324 | | | 5.84 | % |
| Total interest-earning assets | | | 952,390 | | | 13,947 | | | 5.86 | % | | 1,063,446 | | | 14,307 | | | 5.38 | % |
| Non-interest-earning assets | | | | | | | | | | | | | | | | | | | |
| Cash and due from banks | | | 21,176 | | | | | | | | | 19,350 | | | | | | | |
| Bank owned life insurance | | | 21,261 | | | | | | | | | 18,479 | | | | | | | |
| Intangible Assets | | | 17,334 | | | | | | | | | 17,500 | | | | | | | |
| Other assets | | | 28,238 | | | | | | | | | 29,377 | | | | | | | |
| Allowance for loan losses | | | (4,918 | ) | | | | | | | | (4,967 | ) | | | | | | |
| Total non-interest-earning assets | | | 83,091 | | | | | | | | | 79,739 | | | | | | | |
| Total assets | | $ | 1,035,481 | | | | | | | | $ | 1,143,185 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | | | | | | | | | | | | |
| Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | |
| Money market deposits | | $ | 180,660 | | $ | 1,812 | | | 4.01 | % | $ | 81,410 | | $ | 458 | | | 2.25 | % |
| Savings deposits | | | 78,623 | | | 412 | | | 2.10 | % | | 111,643 | | | 423 | | | 1.52 | % |
| Time deposits | | | 213,008 | | | 2,480 | | | 4.66 | % | | 226,908 | | | 1,927 | | | 3.40 | % |
| Other interest-bearing deposits | | | 114,097 | | | 480 | | | 1.68 | % | | 122,088 | | | 424 | | | 1.39 | % |
| Short-term borrowings & FHLB advances | | | 193,628 | | | 2,226 | | | 4.60 | % | | 341,149 | | | 3,299 | | | 3.87 | % |
| Subordinated debentures | | | 13,896 | | | 307 | | | 8.84 | % | | 15,465 | | | 317 | | | 8.20 | % |
| Total interest-bearing liabilities | | | 793,912 | | | 7,717 | | | 3.89 | % | | 898,663 | | | 6,848 | | | 3.05 | % |
| Non-interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | |
| Demand deposits | | | 140,326 | | | | | | | | | 137,450 | | | | | | | |
| Other non-interest-bearing deposits | | | 419 | | | | | | | | | 3,361 | | | | | | | |
| Other liabilities | | | 4,004 | | | | | | | | | 4,539 | | | | | | | |
| Total non-interest-bearing liabilities | | | 144,749 | | | | | | | | | 145,350 | | | | | | | |
| Stockholders’ equity | | | 96,820 | | | | | | | | | 99,172 | | | | | | | |
| Total liabilities and stockholders’ equity | | $ | 1,035,481 | | | | | | | | $ | 1,143,185 | | | | | | | |
| Net interest income (tax-equivalent basis) | | | | | $ | 6,230 | | | | | | | | $ | 7,459 | | | | |
| Net interest spread | | | | | | | | | 1.97 | % | | | | | | | | 2.33 | % |
| Net interest income as percent of earning-assets (net interest margin) | | | | | | | | | 2.62 | % | | | | | | | | 2.81 | % |
| Tax-equivalent adjustment(3) | | | | | | (539 | ) | | | | | | | | (671 | ) | | | |
| Net interest income | | | | | $ | 5,691 | | | | | | | | $ | 6,788 | | | | |
| (1) | Average balances for available-for-sale securities are based on amortized cost |
| (2) | Average balances for loans include loans on non-accrual status |
| (3) | The tax-equivalent adjustment was computed based on a statutory Federal income tax rate of 34 percent |
