Center Bancorp, Inc. Reports Fourth Quarter 2007 Earnings
UNION, NJ -- (MARKET WIRE) -- 01/31/08 -- Center Bancorp, Inc. (NASDAQ: CNBC), parent company of Union Center National Bank, today reported operating results for the fourth quarter and the year ended December 31, 2007. Earnings amounted to $532,000 or $0.04 per share for the quarter ended December 31, 2007 as compared with earnings for the quarter ended December 31, 2006 of $2.3 million or $0.16 per share.
"The results for the period announced today reflect our progress on improving the future stability of revenue streams and are in line with the work started in 2007 that we intend to continue into 2008. With these actions, we enter 2008 with a marked improvement in our balance sheet, positioned to expand net interest margins, adequate loan loss reserves, good credit quality in the asset portfolios and a strong underpinning to reduce operating overhead and support net income levels," remarked Anthony C. Weagley, President & CEO.
The results for the fourth quarter of 2007 included certain extraordinary charges and amounts associated with the termination of the previously announced Beacon Trust acquisition, which amounted to $607,000 pre-tax and $347,000 after tax or $.04 per common share. In addition, there were additional charges related to other real estate owned properties, and the Corporation's previously announced cost-cutting measures, which included lease terminations from liquidated subsidiaries under the corporate wide entity restructuring, amounting to an additional $235,000 pre-tax and $134,000 after tax or $.01 per common share.
For the twelve months ended December 31, 2007, net income amounted to $3.9 million, a decrease of $42,000 as compared to the comparable twelve-month period ended December 31, 2006. Earnings per common share for the twelve months ended December 31, 2007 were $0.28, equal to the 2006 period.
Quarterly Condensed Consolidated Income Statements (unaudited)
(dollars in thousands, except per share data)
For the quarter ended: | | 12/31/07 | | 9/30/07 | | 6/30/07 | | 3/31/07 | | 12/31/06 | | 9/30/06 | |
| Net interest income | | $ | 5,172 | | $ | 5,481 | | $ | 5,225 | | $ | 5,621 | | $ | 5,691 | | $ | 5,952 | |
| Provision for loan losses | | | 150 | | | 100 | | | 100 | | | 0 | | | 57 | | | 0 | |
| Net interest income after loan loss provision | | | 5,022 | | | 5,381 | | | 5,125 | | | 5,621 | | | 5,634 | | | 5,952 | |
| Non interest income | | | 874 | | | 911 | | | 1,177 | | | 1,410 | | | 1,618 | | | 1,007 | |
| Non interest expense | | | (6,034 | ) | | (6,080 | ) | | (6,056 | ) | | (6,428 | ) | | (6,656 | ) | | (5,735 | ) |
| Income (loss) before income tax | | | (138 | ) | | 212 | | | 246 | | | 603 | | | 596 | | | 1,224 | |
| Income tax expense/ (benefit) | | | (670 | ) | | (786 | ) | | (771 | ) | | (706 | ) | | (1,695 | ) | | (78 | ) |
| NET INCOME | | $ | 532 | | $ | 998 | | $ | 1,017 | | $ | 1,309 | | $ | 2,291 | | $ | 1,302 | |
| EPS (basic) | | $ | 0.04 | | $ | 0.07 | | $ | 0.07 | | $ | 0.09 | | $ | 0.16 | | $ | 0.09 | |
| EPS (diluted) | | $ | 0.04 | | $ | 0.07 | | $ | 0.07 | | $ | 0.09 | | $ | 0.16 | | $ | 0.09 | |
Weighted average common shares outstanding adjusted for 5% stock dividend:
Note: Due to rounding quarterly earnings per share may not add up to the reported annual earnings per share
| Basic | | | 13,441,082 | | | 13,864,272 | | | 13,910,450 | | | 13,910,450 | | | 13,898,178 | | | 13,896,165 | |
| Diluted | | | 13,543,486 | | | 13,938,892 | | | 13,962,934 | | | 13,986,333 | | | 13,980,270 | | | 13,989,262 | |
Selected financial ratios (annualized)
| As of or for the quarter ended: | | 12/31/07 | | 9/30/07 | | 6/30/07 | | 3/31/07 | | 12/31/06 | | 9/30/06 | |
| Return on average assets | | | 0.22 | % | | 0.40 | % | | 0.40 | % | | 0.50 | % | | 0.88 | % | | 0.50 | % |
| Return on average equity | | | 2.44 | % | | 4.21 | % | | 4.15 | % | | 5.37 | % | | 9.46 | % | | 5.48 | % |
| Net interest margin (tax equivalent basis) | | | 2.48 | % | | 2.63 | % | | 2.43 | % | | 2.55 | % | | 2.62 | % | | 2.70 | % |
| Loan/Deposit ratio | | | 78.91 | % | | 84.62 | % | | 78.71 | % | | 73.42 | % | | 75.73 | % | | 73.44 | % |
| Stockholders' equity/total assets | | | 8.38 | % | | 9.49 | % | | 9.57 | % | | 9.36 | % | | 9.28 | % | | 9.38 | % |
| Efficiency ratio | | | 92.7 | % | | 89.3 | % | | 92.8 | % | | 92.8 | % | | 94.5 | % | | 78.3 | % |
| Book value per share | | $ | 6.48 | | $ | 6.85 | | $ | 6.89 | | $ | 7.06 | | $ | 7.02 | | $ | 6.96 | |
| Return on tangible equity | | | 3.04 | % | | 5.15 | % | | 5.04 | % | | 6.53 | % | | 11.53 | % | | 6.71 | % |
| Tangible equity/tangible assets | | | 6.80 | % | | 7.88 | % | | 7.98 | % | | 7.84 | % | | 7.77 | % | | 7.83 | % |
| Tangible book value per share | | $ | 5.17 | | $ | 5.59 | | $ | 5.65 | | $ | 5.81 | | $ | 5.77 | | $ | 5.71 | |
The Corporation recorded net interest income on a fully taxable equivalent basis of $5.6 million for the three-months ended December 31, 2007 and $6.2 million for the comparable period of 2006. The decrease in net interest income for the three-months ended December 31, 2007 related principally to the decrease in interest income as a result of a decline in average interest earning assets of $48.6 million.
The Corporation recorded net interest income on a fully taxable equivalent basis of $23.3 million for the twelve-months ended December 31, 2007 and $26.5 million for the comparable period of 2006. The decrease in net interest income for the twelve-months ended December 31, 2007 related principally to a decrease in average interest-earning assets of $41.4 million.
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 to position the Corporation's cash position for further outflows in the first quarter of 2008. The result was a decline in margin from the comparison period in 2006. Recent action by the Federal Open Market Committee should benefit the Corporation's strategies to seek to reduce liability costs in the first quarter of 2008. At December 31, 2007, the Corporation has specific liabilities, not part of its core funding pool, in the amount of $71.0 million which the Corporation allowed to runoff its books on January 2, 2008. The Corporation expects to achieve a 225 basis point improvement in cost of these funds as a result.
During the three months ended December 31, 2007, the decline in interest expense was favorable and reflected recent actions by the Federal Open Market Committee in lowering the target federal funds rate. For the three-months ended December 31, 2007, the Corporation increased its average borrowings by $9.2 million (including subordinated debentures) as compared to the comparable quarter ended December 31, 2006. The positive effect of the change in rate and mix in this type of funding source, as well as, a reduction in time deposits was offset by an increase in the average cost of funds, which rose (on an annualized basis) by 1 basis point to 3.90% from 3.89% during the quarter ended December 31, 2006.
For the twelve-months ended December 31, 2007, the average balance of interest-bearing liabilities, including borrowings, declined by $26.5 million, or 3.27%, to $783.9 million compared to the twelve months ended December 31, 2006. However, the decline in the volume of interest-bearing liabilities was offset by an increase in the average cost of funds, which rose (on an annualized basis) by 33 basis points to 3.91% from 3.58% at December 31, 2006.
Other Income
Total other income decreased $744,000 for the fourth quarter of 2007 compared with the comparable quarter of 2006, primarily as a result of decreases in gains on securities sold. Excluding net securities gains and losses in the respective periods, the Corporation recorded other income of $917,000 in the three-months ended December 31, 2007, compared to $817,000 in the three-months ended December 31, 2006.
For the twelve-months ended December 31, 2007, total other income increased $3.7 million as compared with the twelve-months of 2006, primarily as a result of increases in gains on securities sold. Excluding net securities gains and losses in the respective periods, the Corporation recorded other income of $3.5 million in the twelve-months ended December 31, 2007, compared to $3.2 million in the twelve-months ended December 31, 2006. This increase was primarily attributable to a $206,000 increases in commissions from sales of mutual funds and annuities and bank owned life insurance income. This was bolstered by higher overdraft fees and service charge income on deposit accounts.
Quarterly Condensed Consolidated Non Interest Income (unaudited)
| For the quarter ended: | | 12/31/07 | | 9/30/07 | | 6/30/07 | | 3/31/07 | | 12/31/06 | | 9/30/06 | |
| Service charges on deposit accounts | | $ | 399 | | $ | 312 | | $ | 306 | | $ | 288 | | $ | 295 | | $ | 307 | |
| Commissions from mortgage broker activities | | | 16 | | | 15 | | | 25 | | | 46 | | | 45 | | | 32 | |
| Loan related fees (LOC) | | | 31 | | | 49 | | | 26 | | | 35 | | | 41 | | | 30 | |
| Commissions from sale of mutual funds and annuities | | | 44 | | | 131 | | | 60 | | | 63 | | | 60 | | | 40 | |
| Debit card and ATM fees | | | 132 | | | 126 | | | 130 | | | 131 | | | 134 | | | 136 | |
| BOLI income | | | 217 | | | 223 | | | 230 | | | 223 | | | 183 | | | 213 | |
| Net gain (loss) on sale of investments | | | (43 | ) | | 14 | | | 341 | | | 588 | | | 801 | | | 212 | |
| Other service charges and fees | | | 78 | | | 41 | | | 59 | | | 36 | | | 59 | | | 37 | |
| Total other income | | $ | 874 | | $ | 911 | | $ | 1,177 | | $ | 1,410 | | $ | 1,618 | | $ | 1,007 | |
Other Expense
Other expense for the fourth quarter of 2007 totaled $6.0 million, a decrease of $622,000 or 9.34% over the comparable period in 2006. Salary and benefit expense decreased by $663,000 or 21.98% to $2.4 million. Full time equivalent staffing levels were 172 at December 31, 2007 compared to 180 as of September 30, 2007 and 214 at December 31, 2006.
For the twelve-months ended December 31, 2007, total salaries and benefits decreased by $854,000 or 6.95% to $11.4 million. The reduction in expense was attributable to the reduction in staff, pension curtailment and elimination of certain benefit plans, offset in part by one-time charges related to severance payments in the third quarter.
Other expense for the twelve-months ended December 31, 2007 totaled $24.6 million, an increase of $240,000, or .99%, over the comparable period in 2006. Higher operating expenses during the twelve-month period resulted primarily from increases in occupancy and premise expense and other general and administrative expenses. Other general and administrative expense increased $722,000 associated with increases in professional consulting, legal, OREO expense, insurance and customer corporate analysis charges and the charge off of the Beacon Trust acquisition.
The efficiency ratio for the period, exclusive of the aforementioned one-time items in the period, would have been 88.5% for the period. The Corporation has previously announced a number of cost cutting initiatives and has expanded those initiatives in the fourth quarter to include the closing of its Red Oak Banking Center and its 84 South Street Morristown branch location. These facilities have been combined with the Morristown Town Hall office and will improve efficiency and increase customer service. We have additionally signed an agreement to outsource certain telecommunication service with the Atlantic Central Banker BITS program that will reduce telephone expense by approximately $235,000 in 2008. Additional similar outsourcing arrangements are currently being reviewed.
Quarterly Condensed Consolidated Non Interest Expense (unaudited)
(dollars in thousands)
| For the quarter ended: | | 12/31/07 | | 9/30/07 | | 6/30/07 | | 3/31/07 | | 12/31/06 | | 9/30/06 | |
| Employee salaries and wages | | $ | 2,005 | | $ | 3,632 | | $ | 2,133 | | $ | 2,372 | | $ | 2,303 | | $ | 2,214 | |
| Employee incentive/bonus compensation | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
| Employee stock option expense | | | 46 | | | 46 | | | 35 | | | 24 | | | 41 | | | 45 | |
| Health insurance and other employee benefits | | | 237 | | | (687 | ) | | 543 | | | 575 | | | 561 | | | 561 | |
| Payroll taxes | | | 124 | | | 183 | | | 181 | | | 234 | | | 167 | | | 184 | |
| Other employee related expenses | | | 14 | | | 14 | | | 16 | | | 9 | | | 32 | | | 21 | |
| Incremental direct cost of loan origination | | | (73 | ) | | (81 | ) | | (74 | ) | | (72 | ) | | (88 | ) | | (70 | ) |
| Total salaries, wages and employee benefits | | $ | 2,353 | | $ | 3,107 | | $ | 2,834 | | $ | 3,142 | | $ | 3,016 | | $ | 2,955 | |
| | | | | | | | | | | | | | | | | | | | |
| Occupancy expense | | | 829 | | | 728 | | | 674 | | | 797 | | | 700 | | | 595 | |
| Depreciation of premises and equipment | | | 407 | | | 406 | | | 391 | | | 388 | | | 482 | | | 430 | |
| Supplies stationary and printing | | | 104 | | | 87 | | | 115 | | | 159 | | | 144 | | | 159 | |
| Marketing expenses | | | 179 | | | 152 | | | 109 | | | 163 | | | 266 | | | 164 | |
| Data processing expenses | | | 150 | | | 151 | | | 148 | | | 165 | | | 196 | | | 181 | |
| Legal, auditing and other professional fees | | | 690 | | | 311 | | | 599 | | | 539 | | | 403 | | | 223 | |
| Bank regulatory related expenses | | | 58 | | | 60 | | | 60 | | | 60 | | | 57 | | | 60 | |
| Postage and delivery | | | 57 | | | 73 | | | 75 | | | 84 | | | 96 | | | 82 | |
| ATM related expenses | | | 59 | | | 63 | | | 77 | | | 61 | | | 53 | | | 58 | |
| Amortization of CDI | | | 25 | | | 26 | | | 27 | | | 29 | | | 29 | | | 28 | |
| Other expenses | | | 1,122 | | | 916 | | | 947 | | | 841 | | | 1,214 | | | 800 | |
| Total other expense | | $ | 6,034 | | $ | 6,080 | | $ | 6,056 | | $ | 6,428 | | $ | 6,656 | | $ | 5,735 | |
Balance Sheet Summary
Quarterly Condensed Consolidated Balance Sheets (unaudited)
(dollars in thousands )
| At quarter ended: | | 12/31/07 | | 9/30/07 | | 6/30/07 | | 3/31/07 | | 12/31/06 | | 9/30/06 | |
| Cash and due from banks | | $ | 20,541 | | $ | 15,277 | | $ | 24,363 | | $ | 19,245 | | $ | 34,088 | | $ | 18,431 | |
| Fed funds and money market | | | 49,490 | | | 0 | | | 0 | | | 35,374 | | | 10,275 | | | 7,884 | |
| Investments | | | 314,194 | | | 343,979 | | | 366,224 | | | 381,493 | | | 381,733 | | | 393,006 | |
| Loans | | | 51,669 | | | 550,847 | | | 533,675 | | | 530,573 | | | 550,414 | | | 537,350 | |
| Allowance for loan losses | | | (5,163 | ) | | (5,021 | ) | | (4,974 | ) | | (4,958 | ) | | (4,960 | ) | | (4,908 | ) |
| Restricted investment in bank stocks, at cost | | | 8,467 | | | 7,347 | | | 8,299 | | | 7,832 | | | 7,805 | | | 6,924 | |
| Premises and equipment, net | | | 17,419 | | | 17,662 | | | 18,400 | | | 18,314 | | | 18,829 | | | 18,621 | |
| Goodwill | | | 16,804 | | | 16,804 | | | 16,804 | | | 16,804 | | | 16,804 | | | 16,804 | |
| Core deposit intangible | | | 400 | | | 426 | | | 452 | | | 479 | | | 508 | | | 542 | |
| Bank owned life insurance | | | 22,261 | | | 22,044 | | | 21,822 | | | 21,591 | | | 21,368 | | | 21,185 | |
| Other assets | | | 21,563 | | | 18,425 | | | 16,557 | | | 22,219 | | | 14,520 | | | 14,587 | |
| TOTAL ASSETS | | $ | 1,017,645 | | $ | 987,790 | | $ | 1,001,622 | | $ | 1,048,966 | | $ | 1,051,384 | | $ | 1,030,426 | |
| Deposits | | | 699,070 | | | 650,999 | | | 678,011 | | | 722,648 | | | 726,771 | | | 731,727 | |
| Other borrowings | | | 223,264 | | | 237,744 | | | 221,994 | | | 220,327 | | | 211,589 | | | 197,953 | |
| Other liabilities | | | 10,033 | | | 5,317 | | | 5,804 | | | 7,828 | | | 15,411 | | | 4,069 | |
| Stockholders' equity | | | 85,278 | | | 93,730 | | | 95,813 | | | 98,163 | | | 97,613 | | | 96,677 | |
| TOTAL LIABILITIES AND STOCK HOLDERS' EQUITY | | $ | 1,017,645 | | $ | 987,790 | | $ | 1,001,622 | | $ | 1,048,966 | | $ | 1,051,384 | | $ | 1,030,426 | |
Condensed Consolidated Average Balance Sheets (unaudited)
(dollars in thousands)
| For three month period ended: | | 12/31/07 | | 9/30/07 | | 6/30/07 | | 3/31/07 | | 12/31/06 | | 9/30/06 | |
| Investments, fed funds, and other | | $ | 351,302 | | $ | 362,119 | | $ | 404,975 | | $ | 415,980 | | $ | 408,684 | | $ | 433,175 | |
| Loans | | | 552,521 | | | 538,798 | | | 532,799 | | | 540,971 | | | 543,707 | | | 532,452 | |
| Allowance for loan losses | | | (5,077 | ) | | (4,984 | ) | | (4,986 | ) | | (4,959 | ) | | (4,918 | ) | | (4,939 | ) |
| All other assets | | | 91,016 | | | 90,533 | | | 92,038 | | | 94,773 | | | 88,008 | | | 85,271 | |
| TOTAL ASSETS | | $ | 989,762 | | $ | 986,466 | | $ | 1,024,826 | | $ | 1,046,765 | | $ | 1,035,481 | | $ | 1,045,959 | |
| Deposits interest bearing | | | 564,334 | | | 557,555 | | | 578,819 | | | 592,073 | | | 586,388 | | | 612,376 | |
| Deposits non interest bearing | | | 115,859 | | | 128,449 | | | 130,701 | | | 135,161 | | | 140,745 | | | 132,094 | |
| Other borrowings | | | 216,761 | | | 200,257 | | | 211,228 | | | 215,198 | | | 207,524 | | | 203,675 | |
| Other liabilities | | | 5,543 | | | 5,372 | | | 6,159 | | | 6,867 | | | 4,004 | | | 2,858 | |
| Stockholders' equity | | | 87,265 | | | 94,833 | | | 97,919 | | | 97,466 | | | 96,820 | | | 94,956 | |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | $ | 989,762 | | $ | 986,466 | | $ | 1,024,826 | | $ | 1,046,765 | | $ | 1,035,481 | | $ | 1,045,959 | |
Loans
The Corporation had total loans of $551.7 million at December 31, 2007, representing an $822,000, or 0.15%, increase on a linked-quarter basis. Loan growth continued during the quarter in our commercial related segments of the portfolio. At December 31, 2007, the Corporation had $49.3 million in overall undispersed loan commitments, $47.8 million of which it expected to fund over the next 90 days. This includes $47.8 million in commitments for commercial and commercial real estate loans.
Loan origination for the quarter increased in the commercial sector primarily commercial mortgages. "We are pleased with the growth achieved for the quarter and are optimistic that the Corporation will continue to build its loans outstanding volume from this level through 2008. Our pipelines are strong; we expect that increased activity in the commercial sectors of the portfolio will support our strategic goals of increased loan volume and improving our earning-asset mix. We continue to work aggressively at strengthening existing customer relationships and building new ones by seizing opportunities that have been created by these events and the improved business development effort in the Bank," said Mr. Weagley.
Loan Mix:
(unaudited)
(dollars in thousands)
| For three month period ended: | | 12/31/07 | | 9/30/07 | | 6/30/07 | | 3/31/07 | | 12/31/06 | | 9/30/06 | |
| Real estate loans Residential | | $ | 265,597 | | $ | 265,301 | | $ | 261,849 | | $ | 262,958 | | $ | 268,748 | | $ | 261,652 | |
| Commercial | | | 137,585 | | | 136,289 | | | 135,707 | | | 135,062 | | | 135,802 | | | 132,032 | |
| Construction | | | 51,367 | | | 53,286 | | | 47,910 | | | 60,135 | | | 70,340 | | | 63,583 | |
| Total real estate loans | | | 454,549 | | | 454,876 | | | 445,466 | | | 458,155 | | | 474,890 | | | 457,267 | |
| Commercial loans | | | 95,978 | | | 94,444 | | | 86,848 | | | 71,020 | | | 74,135 | | | 77,925 | |
| Consumer and other loans | | | 563 | | | 960 | | | 741 | | | 754 | | | 699 | | | 1,443 | |
| Total loans before unearned fees and costs | | | 551,090 | | | 550,280 | | | 533,055 | | | 529,929 | | | 549,724 | | | 536,635 | |
| Unearned fees and costs | | | 579 | | | 567 | | | 620 | | | 644 | | | 690 | | | 715 | |
| Total loans | | $ | 551,669 | | $ | 550,847 | | $ | 533,675 | | $ | 530,573 | | $ | 550,414 | | $ | 537,350 | |
Asset Quality
Selected credit quality ratios
(unaudited)
(dollars in thousands)
| As of or for the quarter ended: | | 12/31/07 | | 9/30/07 | | 6/30/07 | | 3/31/07 | | 12/31/06 | | 9/30/06 | |
| Non-accrual loans | | $ | 3,907 | | $ | 986 | | $ | 1,070 | | $ | 1,207 | | $ | 475 | | $ | 315 | |
| Past due loans 90 days or more and still accruing interest | | | 0 | | | 0 | | | 0 | | | 0 | | | 225 | | | 346 | |
| Total non performing loans | | | 3,907 | | | 986 | | | 1,070 | | | 1,207 | | | 700 | | | 661 | |
| Other real estate owned ("OREO") | | | 501 | | | 586 | | | 586 | | | 0 | | | 0 | | | 0 | |
| Repossessed assets other than real estate | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
| Total non performing assets | | $ | 4,408 | | $ | 1,572 | | $ | 1,656 | | $ | 1,207 | | $ | 700 | | $ | 661 | |
| Non performing assets as a percentage of total assets | | | 0.43 | % | | 0.16 | % | | 0.17 | % | | 0.12 | % | | 0.07 | % | | 0.06 | % |
| Non performing loans as a percentage of total loans | | | 0.80 | % | | 0.29 | % | | 0.31 | % | | 0.23 | % | | 0.13 | % | | 0.12 | % |
| Net charge-offs (recoveries) | | $ | 147 | | $ | 139 | | $ | 86 | | $ | 2 | | $ | 34 | | $ | 29 | |
| Net charge-offs as a percentage of average loans for the period | | | 0.03 | % | | 0.03 | % | | 0.02 | % | | 0.00 | % | | 0.01 | % | | 0.01 | % |
| Allowance for loan losses as a percentage of period end loans | | | 0.94 | % | | 0.91 | % | | 0.93 | % | | 0.93 | % | | 0.90 | % | | 0.91 | % |
| Total Assets | | $ | 1,017,645 | | $ | 987,790 | | $ | 1,001,622 | | $ | 1,048,966 | | $ | 1,051,384 | | $ | 1,030,426 | |
| Total Loans | | | 551,669 | | | 550,847 | | | 533,675 | | | 530,573 | | | 550,414 | | | 537,350 | |
| Average loans for the quarter | | | 552,521 | | | 538,798 | | | 532,799 | | | 540,971 | | | 543,707 | | | 532,452 | |
| Allowance for loan losses | | | 5,163 | | | 5,021 | | | 4,974 | | | 4,958 | | | 4,960 | | | 4,908 | |
At December 31, 2007, non-performing assets totaled $4.4 million or 0.43% of total assets at December 31, 2007, as compared with $700,000 or 0.07 % at December 31, 2006. The increase in non-accrual loans was primarily attributable to one commercial mortgage in the amount of $2.5 million which subsequent to December 31, 2007 the Corporation has received full payment of the commercial mortgage including principal of $2.5 million and interest of $83,277 all of which will be reflected in the first quarter results of 2008. The Corporation continues to aggressively pursue the sale of other real estate owned and currently has a contract of sale on one of the properties in the amount of $385,000. These actions support our strong credit quality and would bring total non-performing loans to $1.5 million or .14 % of total assets.
"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 December 31, 2007, the total allowance for loan losses amounted to approximately $5.2 million, or 0.94% of total loans. The allowance for loan losses as a percent of total non-performing assets, exclusive of OREO, amounted to 132.15% for the fourth quarter of 2007 as compared 509.23% at September 30, 2007 and 708.6 % at December 31, 2006.
Securities
Investment securities reflected a decline of $67.5 million at December 31, 2007 compared to the comparable period in 2006. 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 on January 2, 2008. This action will have a positive impact on net interest income in the first quarter of 2008. Reductions in net interest income and the net interest margin were due to tighter spreads on deposits caused by the current interest rate environment and shifts in deposit mix driven by customer preference for higher rates.
On November 16, 2007, the Corporation transferred securities having a book value of $113.4 million and market value of $112.9 million from its held-to-maturity portfolio to its available-for-sale portfolio. The resultant loss of $272,000 after tax was record in other comprehensive income.
Deposits/Funding Sources
Deposit Mix
(dollars in thousands)
| At quarter ended: | | 12/31/07 | | 9/30/07 | | 6/30/07 | | 3/31/07 | | 12/31/06 | | 9/30/06 | |
| Checking accounts | | | | | | | | | | | | | |
| Non interest bearing | | $ | 111,262 | | $ | 121,451 | | $ | 127,479 | | $ | 128,394 | | $ | 136,284 | | $ | 134,774 | |
| Interest bearing | | | 155,406 | | | 110,177 | | | 126,112 | | | 131,337 | | | 107,359 | | | 74,316 | |
| Savings deposits | | | 86,501 | | | 93,222 | | | 92,792 | | | 95,542 | | | 99,823 | | | 107,038 | |
| Money market accounts | | | 196,601 | | | 167,442 | | | 171,923 | | | 173,569 | | | 184,102 | | | 197,816 | |
| Time Deposits | | | 149,300 | | | 158,707 | | | 159,705 | | | 193,806 | | | 199,203 | | | 217,783 | |
| Total Deposits | | $ | 699,070 | | $ | 650,999 | | $ | 678,011 | | $ | 722,648 | | $ | 726,771 | | $ | 731,727 | |
Deposits totaled $699.1 million at December 31, 2007, a decrease of $27.7 million from December 31, 2006. The declines were a result of a moderation in the yield curve and a decision to reduce the Corporation's dependence on more rate sensitive high costing funds, which were subject to maturity and repricing in favor of lower costing wholesale funds available. More volatile certificates of deposit of $100,000 or more declined as well as part of this strategy.
Borrowings totaled $223.3 million at December 31, 2007, reflecting an increase of $11.7 million, or 5.52%, from December 31, 2006. Overnight customer repurchase transactions covering commercial customer sweep accounts comprised $48.5 million of the securities sold under repurchase agreements figure at December 31, 2007 as compared with $29.4 million at December 31, 2006. This shift in the volume of repurchase agreements also accounted for a portion of the decline in non-interest bearing commercial checking accounts during the period.
Stockholders' Equity
Total stockholders' equity amounted to $85.3 million or 8.38% of total assets at December 31, 2007. Tangible equity was $68.1 million or 6.80% of tangible assets. Book value per common share was $6.48 at December 31, 2007, compared to $6.85 at September 30, 2007. Tangible book value per common share was $5.17at December 31, 2007 and $5.59 at September 30, 2007.
During the three months ended December 31, 2007 the Corporation purchased 558,353 shares of common stock at an average cost of $11.58 per share.
During 2007, the Corporation has 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 current share buyback program to an additional 5% of outstanding shares, enhancing its current authorization by 684,627 shares. Any purchases by the Corporation may be made, from time to time, in the open market, in privately negotiated transactions or otherwise. At December 31, 2007, there were 196,239 shares available for repurchase under the Corporation's stock buyback program.
At December 31, 2007, the Corporation's Tier 1 Capital Leverage ratio was 8.13%, the Corporation's total Tier 1 Risk Based Capital ratio was 11.65 % and the Corporation's total Risk Based Capital ratio was 12.41%. Total Tier 1 capital decreased to approximately $79.1 million at December 31, 2007 from $85.8 million at September 30, 2007 and decreased from $88.0 million at December 31, 2006.
At December 31, 2007, 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").
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 subsidiary, Center Financial Group LLC, provides financial services including brokerage services insurance and annuities, mutual funds and financial planning. In the fourth quarter of 2007, Center formed a title Insurance partnership, Center Title LLC, with Progressive Title Company in Parsippany to provide title services in connection with the closing of real estate transactions.
The Bank currently operates 13 branches in Union and Morris counties. Banking centers are located in Union Township (6 locations), Berkeley Heights, Boonton/Mountain Lakes, Madison, Millburn/Vauxhall, Morristown (1 location), 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 December 31, 2007, the Bank had total assets of $1.0 billion, total deposits of $699 million and stockholders' equity of approximately $85.3 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
The Corporation's reference to its total other income, exclusive of gains or 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 applicable periods in 2006 and 2007. Tangible stockholders' equity represents a non-GAAP financial measure and equals total stockholders' equity minus recorded goodwill and other intangible assets. The Corporation has provided 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 a 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 a 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 growth in loan volume, changes in earning asset mix, the funding of loan commitments, cost reduction strategies, future net interest margin and other future results) 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.
CENTER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
| (Dollars in Thousands) | | December 31, 2007 | | December 31, 2006 | |
| | | (unaudited) | | | |
| ASSETS | | | | | |
| Cash and due from banks | | $ | 20,541 | | $ | 34,088 | |
| Federal funds sold and securities purchased under agreement to resell | | | 49,490 | | | 10,275 | |
| Total cash and cash equivalents | | | 70,031 | | | 44,363 | |
| Investment securities available-for sale | | | 314,194 | | | 250,603 | |
| Investment securities held to maturity (approximate market value of $0 in 2007 and $130,900 in 2006) | | | -- | | | 131,130 | |
| Total investment securities | | | 314,194 | | | 381,733 | |
| Loans, net of unearned income | | | 551,669 | | | 550,414 | |
| Less -- Allowance for loan losses | | | 5,163 | | | 4,960 | |
| Net Loans | | | 546,506 | | | 545,454 | |
| Restricted investment in bank stocks, at cost | | | 8,467 | | | 7,805 | |
| Premises and equipment, net | | | 17,419 | | | 18,829 | |
| Accrued interest receivable | | | 4,535 | | | 4,932 | |
| Bank owned life insurance | | | 22,261 | | | 21,368 | |
| Other Assets | | | 17,028 | | | 9,588 | |
| Goodwill and other intangible assets | | | 17,204 | | | 17,312 | |
| Total assets | | $ | 1,017,645 | | $ | 1,051,384 | |
| | | | | | | | |
| LIABILITIES | | | | | | | |
| Deposits: | | | | | | | |
| Non-interest bearing | | $ | 111,422 | | $ | 136,453 | |
| Interest-bearing | | | | | | | |
| Time deposits $100 and over | | | 63,997 | | | 83,623 | |
| Interest-bearing transactions, savings and time deposits $100 and less | | | 523,651 | | | 506,695 | |
| Total deposits | | | 699,070 | | | 726,771 | |
| Overnight Federal funds and securities sold under agreement to repurchase | | | 48,541 | | | 29,443 | |
| Short-term borrowings | | | 1,123 | | | 2,000 | |
| Long-term borrowings | | | 168,445 | | | 174,991 | |
| Subordinated debentures | | | 5,155 | | | 5,155 | |
| Accounts payable and accrued liabilities | | | 10,033 | | | 15,411 | |
| Total liabilities | | | 932,367 | | | 953,771 | |
| | | | | | | | |
| 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 at December 31, 2007 and December 31, 2006; outstanding 13,155,784 shares at December 31, 2007 and 13,910,450 shares at December 31, 2006, respectively | | | 86,908 | | | 77,130 | |
| Additional paid in capital | | | 5,133 | | | 4,535 | |
| Retained earnings | | | 15,161 | | | 25,989 | |
| Treasury stock, at cost (2,035,200 shares at December 31, 2007 and 1,280,534 shares at December 31, 2006) | | | (16,100 | ) | | (6,631 | ) |
| Accumulated other comprehensive loss | | | (5,824 | ) | | (3,410 | ) |
| Total stockholders' equity | | | 85,278 | | | 97,613 | |
| Total liabilities and stockholders' equity | | $ | 1,017,645 | | $ | 1,051,384 | |
CENTER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
| | | Three Months Ended | | Twelve Months Ended | |
| | | December 31, | | December 31, | |
| (Dollars in Thousands, Except Per Share Data) | | 2007 | | 2006 | | 2007 | | 2006 | |
| | | (unaudited) | | (unaudited) | |
| Interest income: Interest and fees on loans | | $ | 8,440 | | $ | 8,516 | | $ | 33,527 | | $ | 31,999 | |
| Interest and dividends on investment securities: | | | | | | | | | | | | | |
| Taxable interest income | | | 3,241 | | | 3,454 | | | 13,585 | | | 15,521 | |
| Non-taxable interest income | | | 772 | | | 903 | | | 3,171 | | | 3,874 | |
| Dividends | | | 261 | | | 373 | | | 1,242 | | | 1,384 | |
| Interest on Federal funds sold and securities purchased under agreement to resell | | | 83 | | | 162 | | | 604 | | | 547 | |
| Total interest income | | | 12,797 | | | 13,408 | | | 52,129 | | | 53,325 | |
| Interest expense: | | | | | | | | | | | | | |
| Interest on certificates of deposit $100 or more | | | 942 | | | 1,047 | | | 3,964 | | | 4,930 | |
| Interest on other deposits | | | 4,167 | | | 4,137 | | | 16,871 | | | 13,075 | |
| Interest on borrowings | | | 2,516 | | | 2,533 | | | 9,795 | | | 10,969 | |
| Total interest expense | | | 7,625 | | | 7,717 | | | 30,630 | | | 28,974 | |
| Net interest income | | | 5,172 | | | 5,691 | | | 21,499 | | | 24,351 | |
| Provision for loan losses | | | 150 | | | 57 | | | 350 | | | 57 | |
| Net interest income after provision for loan losses | | | 5,022 | | | 5,634 | | | 21,149 | | | 24,294 | |
| Other income: | | | | | | | | | | | | | |
| Service charges, commissions and fees | | | 531 | | | 429 | | | 1,824 | | | 1,759 | |
| Other income | | | 125 | | | 145 | | | 457 | | | 454 | |
| Annuity and insurance | | | 44 | | | 60 | | | 298 | | | 205 | |
| Bank owned life insurance | | | 217 | | | 183 | | | 893 | | | 780 | |
| Net Gain (loss) on securities sold | | | (43 | ) | | 801 | | | 900 | | | (2,565 | ) |
| Total other income (loss) | | | 874 | | | 1,618 | | | 4,372 | | | 633 | |
| Other expense: | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 2,353 | | | 3,016 | | | 11,436 | | | 12,290 | |
| Occupancy, net | | | 799 | | | 619 | | | 2,843 | | | 2,309 | |
| Premises and equipment | | | 437 | | | 564 | | | 1,777 | | | 1,940 | |
| Professional and consulting | | | 690 | | | 403 | | | 2,139 | | | 1,179 | |
| Stationery and printing | | | 104 | | | 144 | | | 465 | | | 692 | |
| Marketing and advertising | | | 179 | | | 266 | | | 603 | | | 731 | |
| Computer expense | | | 150 | | | 196 | | | 614 | | | 741 | |
| Other | | | 1,322 | | | 1,448 | | | 4,721 | | | 4,476 | |
| Total other expense | | | 6,034 | | | 6,656 | | | 24,598 | | | 24,358 | |
| Income (loss) before income tax expense (benefit) | | | (138 | ) | | 596 | | | 923 | | | 569 | |
| Income tax benefit | | | (670 | ) | | (1,695 | ) | | (2,933 | ) | | (3,329 | ) |
| Net income | | $ | 532 | | $ | 2,291 | | $ | 3,856 | | $ | 3,898 | |
| Earnings per share: | | | | | | | | | | | | | |
| Basic | | $ | 0.04 | | $ | 0.16 | | $ | 0.28 | | $ | 0.28 | |
| Diluted | | $ | 0.04 | | $ | 0.16 | | $ | 0.28 | | $ | 0.28 | |
| Weighted average common shares outstanding: | | | | | | | | | | | | | |
| Basic | | | 13,441,082 | | | 13,898,178 | | | 13,780,504 | | | 13,959,684 | |
| Diluted | | | 13,543,486 | | | 13,980,270 | | | 13,840,756 | | | 14,040,338 | |
All common share and per common share amounts have been adjusted to reflect the 5 percent stock dividend declared on March 29, 2007 paid on June 1, 2007.
SUMMARY SELECTED YEAR-TO-DATE STATISTICAL INFORMATION AND FINANCIAL DATA
(Dollars in Thousands, Except per Share Data)
| Summary of financial condition data through stockholders' equity | | 12/31/2007 | | 9/30/2007 | | 12/31/2006 | |
| | | | | | | | |
| Interest income | | $ | 52,129 | | $ | 39,332 | | $ | 53,325 | |
| Interest expense | | | 30,630 | | | 23,005 | | | 28,974 | |
| Net interest income | | | 21,499 | | | 16,327 | | | 24,351 | |
| Provision for loan losses | | | 350 | | | 200 | | | 57 | |
| Net interest income after provision | | | | | | | | | | |
| for loan losses | | | 21,149 | | | 16,127 | | | 24,294 | |
| Other income | | | 4,372 | | | 3,498 | | | 633 | |
| Other expense | | | 24,598 | | | 18,564 | | | 24,358 | |
| Income before income tax expense | | | 923 | | | 1,061 | | | 569 | |
| Income tax (benefit) expense | | | (2,933 | ) | | (2,263 | ) | | (3,329 | ) |
| Net income | | $ | 3,856 | | $ | 3,324 | | $ | 3,898 | |
| | | | | | | | | | | |
| Statement of Financial Condition Data | | | | | | | | | | |
| Investments | | $ | 314,194 | | $ | 343,979 | | $ | 381,733 | |
| Total loans | | | 551,669 | | | 550,847 | | | 550,414 | |
| Goodwill and other intangibles | | | 17,204 | | | 17,230 | | | 17,312 | |
| Total assets | | | 1,017,645 | | | 987,790 | | | 1,051,384 | |
| Deposits | | | 699,070 | | | 650,999 | | | 726,771 | |
| Borrowings | | | 223,264 | | | 237,744 | | | 206,434 | |
| Stockholders' equity | | $ | 85,278 | | $ | 93,730 | | $ | 97,613 | |
| Summary of Income | | | | | | | | | | |
| Dividends | | | | | | | | | | |
| Cash Dividends | | $ | 4,885 | | $ | 3,714 | | $ | 4,808 | |
| Dividend payout ratio | | | 126.69 | % | | 111.73 | % | | 123.35 | % |
| Cash Dividends Per Share | | | | | | | | | | |
| Cash Dividends | | $ | 0.37 | | $ | 0.27 | | $ | 0.35 | |
| Earnings Per Share | | | | | | | | | | |
| Basic | | $ | 0.28 | | $ | 0.24 | | $ | 0.28 | |
| Diluted | | $ | 0.28 | | $ | 0.24 | | $ | 0.28 | |
| | | | | | | | | | | |
| Weighted Average Common Shares Outstanding | | | | | | | | | | |
| Basic | | | 13,780,504 | | | 13,894,888 | | | 13,959,684 | |
| Diluted | | | 13,840,756 | | | 13,950,298 | | | 14,060,338 | |
| Operating Ratios | | | | | | | | | | |
| Return on average assets | | | 0.38 | % | | 0.43 | % | | 0.37 | % |
Average stockholders' equity to average assets | | | 9.33 | % | | 9.49 | % | | 9.21 | % |
| Return on average equity | | | 4.09 | % | | 4.58 | % | | 4.04 | % |
Return on average tangible stockholders' equity | | | 5.00 | % | | 5.58 | % | | 4.93 | % |
| Book Value | | | | | | | | | | |
| Book value per common share | | $ | 6.48 | | $ | 6.85 | | $ | 7.02 | |
| Tangible book value per common share | | $ | 5.17 | | $ | 5.59 | | $ | 5.77 | |
| Non-Financial Information | | | | | | | | | | |
| Common stockholders of record | | | 679 | | | 689 | | | 717 | |
| Staff-full time equivalent | | | 172 | | | 180 | | | 214 | |
| | | 12/31/2007 | | 9/30/2007 | | 12/31/2006 | |
| | | | | | | | |
| Common shares outstanding | | | 13,155,784 | | | 13,692,534 | | | 13,910,450 | |
| Stockholders' equity | | $ | 85,278 | | $ | 93,730 | | $ | 97,613 | |
| Less: Goodwill and other intangible assets | | | 17,204 | | | 17,230 | | | 17,312 | |
| Tangible Stockholders' Equity | | $ | 68,074 | | $ | 76,500 | | $ | 80,301 | |
| Tangible Book Value | | $ | 5.17 | | $ | 5.59 | | $ | 5.77 | |
| Net Income | | $ | 3,856 | | $ | 3,324 | | $ | 3,898 | |
| Average Stockholders' Equity | | | 94,345 | | | 96,730 | | | 96,505 | |
| Less: Average Goodwill and other intangible assets | | | 17,259 | | | 17,272 | | | 17,378 | |
| Average Tangible Stockholders' Equity | | | 77,086 | | | 79,458 | | | 79,127 | |
| Return on Average Tangible Stockholders' Equity | | | 5.00 | % | | 5.58 | % | | 4.93 | % |
(1) "Return on average tangible stockholders' equity" is defined as net income as a percentage of average stockholders' equity reduced by recorded intangible assets. 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.
Investor Inquiries:
Anthony C. Weagley
President & Chief Executive Officer
(908) 206-2886
Joseph Gangemi
Investor Relations
(908) 206-2886
