SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 2002.
__Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. for the transition period from ___ to ___.
Commission File Number 2-81353
CENTER BANCORP, INC.
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(exact name of registrant as specified in its charter)
NEW JERSEY 52-1273725
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(State or other jurisdiction of (IRS Employer
incorporation or organization)
identification No.)
2455 MORRIS AVENUE, UNION, NJ 07083-0007
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(Address of Principal Executive Offices, Including Zip Code)
(908) 688-9500
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(Registrant's telephone number, including area code)
Securities registered
pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes[X] or No[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation 5-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to the
Form 10-K.
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [X] No [ ]
"The aggregate market value of the voting common equity of the registrant held
by non-affiliates (for this purpose, persons and entitles other then executive
officers, directors, and 5% or more shareholders) of the registrant, as of the
last business day of the registrant's most recently completed second fiscal
quarter (June 30, 2002), was $ 79.4 million.
SHARES OUTSTANDING ON FEBRUARY 28, 2003
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Common stock, no par value: 4,224,822 shares
DOCUMENTS INCORPORATED BY REFERENCE
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Definitive proxy statement dated March 14, 2003 in connection with the 2003
Annual Stockholders Meeting filed with the Commission pursuant to Regulation 14A
will be incorporated by reference in Part III
Annual Report to Stockholders for the fiscal year ended December 31, 2002 will
be incorporated by reference in Part I and Part II
1
INDEX TO FORM 10-K
PART I
ITEM 1 BUSINESS 3
ITEM 2 PROPERTIES 14
ITEM 3 LEGAL PROCEEDINGS 14
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14
ITEM 4A EXECUTIVE OFFICERS OF THE REGISTRANT 15
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 16
ITEM 6 SELECTED FINANCIAL DATA 16
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 16
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 16
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 16
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 16
PART III
ITEM 10 DIRECTORS OF THE REGISTRANT 17
ITEM 11 EXECUTIVE COMPENSATION 17
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 17
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 17
ITEM 14 CONTROLS AND PROCEDURES 17
PART IV
ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K 18-19
SIGNATURES 20
CERTIFICATIONS 21
2
CENTER BANCORP INC.
FORM 10 K
PART I
ITEM I-BUSINESS
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A) HISTORICAL DEVELOPMENT OF BUSINESS
Center Bancorp, Inc., a one-bank holding company, was incorporated in the state
of New Jersey on November 12, 1982. Center Bancorp, Inc. commenced operations on
May 1, 1983, upon the acquisition of all outstanding shares of The Union Center
National Bank (the "Bank"). The holding company's sole activity, at this time,
is to act as a holding company for the Bank and its subsidiaries. As used
herein, the term "Corporation" shall refer to Center Bancorp, Inc. and its
direct and indirect subsidiaries and the term "Parent Corporation" shall refer
to Center Bancorp, Inc. on an unconsolidated basis.
The Bank was organized in 1923 under the law of the United States of America.
The Bank operates five offices in Union Township, Union County, New Jersey, one
office in Summit, Union County, New Jersey, one office in Springfield Township,
Union County, New Jersey, one office in Berkeley Heights, Union County, New
Jersey, one office in Madison, Morris County, New Jersey and two offices in
Morristown, Morris County, New Jersey and currently employs 182 full-time
equivalent persons. The Bank is a full service commercial bank offering a
complete range of individual and commercial services.
During 2001, the Corporation formed a statutory business trust under the laws of
the State of Connecticut, which exists for the exclusive purpose of (i) issuing
Trust Securities representing undivided beneficial interests in the assets of
the Trust; (ii) investing the gross proceeds of the Trust securities in junior
subordinated deferrable interest debentures (subordinated debentures) of the
Corporation; and (iii) engaging in only those activities necessary or incidental
thereto. These subordinated debentures and the related income effects are
eliminated in the consolidated financial statements. Distributions on the
mandatorily redeemable securities of subsidiary trusts below have been
classified as interest expense in the Consolidated Statement of Income.
On December 11, 2001, the Corporation completed an issuance of $10.0 million in
floating rate Capital Trust Preferred Securities, through a pooled offering with
First Tennessee Capital Markets. The securities are included as a component of
Tier I capital for regulatory capital purposes. The Tier I Leverage capital
ratio subsequently increased to 7.77 percent of total assets at December 31,
2001 and was 7.29 percent at December 31, 2002.
The Corporation's website address is WWW.CENTERBANCORP.COM. The Corporation
makes available free of charge on or through its website the following: its
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and all amendments to those reports as soon as reasonably practicable
after such material is electronically filed with or furnished to the SEC.
During 2002, the Bank established two investment subsidiaries to hold portions
of its securities portfolio and in January of 2003, established an insurance
subsidiary for the sale of insurance and annuity products.
B) NARRATIVE DESCRIPTION OF BUSINESS
The Bank offers a broad range of lending, depository and related financial
services including trust, to commercial, industrial and governmental customers.
In 1999, the Bank obtained full trust powers, enabling it to offer a variety of
trust services to its customers. In the lending area, the Bank's services
include short and medium term loans, lines of credit, letters of credit, working
capital loans, real estate construction loans and mortgage loans. In the
depository area, the Bank offers demand deposits, savings accounts and time
deposits. In addition, the Bank offers collection services, wire transfers,
night depository and lock box services.
The Bank offers a broad range of consumer banking services, including interest
bearing and non-interest bearing checking accounts, savings accounts, money
market accounts, certificates of deposit, IRA accounts, Automated Teller
Machines ("ATM") accessibility using Money AccessTM service, secured and
unsecured loans, mortgage loans, home equity lines of credit, safe deposit
boxes, Christmas club accounts, vacation club accounts, collection services,
money orders and traveler's checks.
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The Bank offers various money market services. It deals in U.S. Treasury and
U.S. Governmental agency securities, certificates of deposits, commercial paper
and repurchase agreements.
Competitive pressures affect the Corporation's manner of conducting business.
Competition stems not only from other commercial banks but also from other
financial institutions such as savings banks, savings and loan associations,
mortgage companies, leasing companies and various other financial service and
advisory companies. Many of the financial institutions operating in the
Corporation's primary market are substantially larger and offer a wider variety
of products and services than the Corporation.
The Parent Corporation is subject to regulation by the Board of Governors of the
Federal Reserve System and the New Jersey Department of Banking. As a national
bank, the Bank is subject to regulation and periodic examination by the Office
of the Comptroller of the Currency (the "OCC"). Deposits in the Bank are insured
by the Federal Deposit Insurance Corporation (the "FDIC").
The Parent Corporation is required to file with the Federal Reserve Board an
annual report and such additional information as the Federal Reserve Board may
require pursuant to the Bank Holding Company Act of 1956, as amended (the
"Act"). In addition, the Federal Reserve Board makes periodic examinations of
bank holding companies and their subsidiaries. The Act requires each bank
holding company to obtain the prior approval of the Federal Reserve Board before
it may acquire substantially all of the assets of any bank, or before it may
acquire ownership or control of any voting shares of any bank, if, after such
acquisition, it would own or control, directly or indirectly, more than 5
percent of the voting shares of such bank. The Act also restricts the types of
businesses and operations in which a bank holding company and its subsidiaries
may engage.
The operations of the Bank are subject to requirements and restrictions under
federal law, including requirements to maintain reserves against deposits,
restrictions on the types and amounts of loans that may be granted, limitations
on the types of investments that may be made and the types of services which may
be offered. Various consumer laws and regulations also affect the operations of
the Bank. Approval of the Comptroller of the Currency is required for branching,
bank mergers in which the continuing bank is a national bank and in connection
with certain fundamental corporate changes affecting the Bank. Federal law also
limits the extent to which the Parent Corporation may borrow from the Bank and
prohibits the Parent Corporation and the Bank from engaging in certain tie-in
arrangements.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
substantially revised the bank regulatory provisions of the Federal Deposit
Insurance Act and several other federal banking statutes. Among other things,
FDICIA requires federal banking agencies to broaden the scope of regulatory
corrective action taken with respect to banks that do not meet minimum capital
requirements and to take such actions promptly in order to minimize losses to
the FDIC. Under FDICIA, federal banking agencies have established five capital
tiers: "well capitalized", "adequately capitalized", "undercapitalized",
"significantly undercapitalized" and "critically undercapitalized".
Under regulations adopted pursuant to these provisions, for an institution to be
well capitalized it must have a total risk-based capital ratio of at least 10
percent, a Tier I risk-based capital ratio of at least 6 percent and a Tier I
leverage ratio of at least 5 percent and not be subject to any specific capital
order or directive. For an institution to be adequately capitalized, it must
have a total risk-based capital ratio of at least 8 percent, a Tier I risk-based
capital ratio of at least 4 percent and a Tier I leverage ratio of at least 4
percent (or in some cases 3 percent). Under the regulations, an institution will
be deemed to be undercapitalized if the bank has a total risk-based capital
ratio that is less than 8 percent, a Tier I risk-based capital ratio that is
less than 4 percent or a Tier I leverage ratio of less than 4 percent (or in
some cases 3 percent). An institution will be deemed to be significantly
undercapitalized if the bank has a total risk-based capital ratio that is less
than 6 percent, a Tier I risk-based capital ratio that is less than 3 percent,
or a Tier I leverage ratio of less than 3 percent and will be deemed to be
critically undercapitalized if it has a ratio of tangible equity to total assets
that is equal to or less than 2 percent. An institution may be deemed to be in a
lower capitalization category if it receives an unsatisfactory examination
rating.
FDICIA also directs that each federal banking agency prescribe standards for
depository institutions and depository institution holding companies relating to
internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth, a
4
maximum ratio of classified assets to capital, a minimum ratio of market value
to book value for publicly traded shares (if feasible) and such other standards
as the agency deems appropriate.
FDICIA also contains a variety of other provisions that could affect the
operations of the Corporation, including reporting requirements, regulatory
standards for real estate lending, "truth in savings" provisions, the
requirement that depository institutions give 90 days notice to customers and
regulatory authorities before closing any branch, limitations on credit exposure
between banks, restrictions on loans to a bank's insiders and guidelines
governing regulatory examinations.
BIF PREMIUMS AND RECAPITALIZATION OF SAIF
The Corporation is a member of the Bank Insurance Fund ("BIF") of the FDIC. The
FDIC also maintains another insurance fund, the Savings Association Insurance
Fund ("SAIF"), which primarily covers savings and loan association deposits but
also covers deposits that are acquired by a BIF-insured institution from a
savings and loan association ("Oakar deposits"). The Corporation had
approximately $618.3 million of deposits at December 31, 2002, with respect to
which it pays SAIF FICO Assessments.
The Economic Growth and Regulatory Reduction Act of 1996 (the "1996 Act") signed
into law on September 30, 1996, included the Deposit Insurance Funds Act of 1996
(the "Funds Act") under which the FDIC was required to impose special
assessments on SAIF-assessable deposits to recapitalize the SAIF. Under the
Funds Act, the FDIC also changed assessments for SAIF and BIF deposits in a 5 to
1 ratio to pay Financing Corp. ("FICO") bonds until January 1, 2000. A FICO rate
of approximately 1.29 basis points was charged on BIF deposits, and
approximately 6.44 basis points was charged on SAIF deposits.
THE GRAMM-LEACH-BLILEY FINANCIAL MODERNIZATION ACT OF 1999
On November 12, 1999, President Clinton signed into law the Gramm-Leach-Bliley
Financial Modernization Act (the "GLB") which, among other things, permits
qualifying bank holding companies to become financial holding companies and
thereby affiliate with securities firms and insurance companies and engage in
other activities that are financial in nature. The GLB Act defines "financial in
nature" to include securities underwriting, dealing and market making;
sponsoring mutual funds and investment companies; insurance underwriting and
agency; merchant banking activities; and activities that the Board has
determined to be closely related to banking. A qualifying national bank also may
engage, subject to limitations on investment, in activities that are financial
in nature, other than insurance underwriting, insurance company portfolio
investment, real estate development, and real estate investment, through a
financial subsidiary of the bank.
COMMUNITY REINVESTMENT
Under the Community Reinvestment Act ("CRA"), as implemented by OCC regulations,
a national bank has a continuing and affirmative obligation consistent with its
safe and sound operation to help meet the credit needs of its entire community,
including low and moderate income neighborhoods. The CRA does not establish
specific lending requirements or programs for financial institutions nor does it
limit an institution's discretion to develop the types of products and services
that it believes are best suited to its particular community, consistent with
the CRA. The CRA requires the OCC, in connection with its examination of a
national bank; to assess the bank's record of meeting the credit needs of its
community and to take such record into account in its evaluation of certain
applications by such association.
RECENT LEGISLATION
As part of the USA Patriot Act, signed into law on October 26, 2001, Congress
adopted the International Money Laundering Abatement and Financial
anti-Terrorism Act of 2001 (the "Terrorism Act"). The Terrorism Act authorizes
the Secretary of the Treasury, in consultation with the heads of other
government agencies, to adopt special measures applicable to financial
institutions, such as banks, bank holding companies, broker-dealers and
insurance companies. Among its other provisions, the Terrorism Act requires each
financial institution: (i) to establish an anti-money laundering program; (ii)
to establish due diligence policies, procedures and controls that are reasonably
designed to detect and report instances of money laundering in United States
private banking accounts and correspondent accounts maintained for non-United
States persons or their representatives; and (iii) to avoid establishing,
maintaining, administering, or managing correspondent accounts in the United
States for, or on behalf of, a foreign shell bank that does not have a physical
5
presence in any country. In addition, the Act expands the circumstances under
which funds in a bank account may be forfeited and requires covered financial
institutions to respond under certain circumstances to requests for information
from federal banking agencies within 120 hours.
Treasury regulations implementing the due diligence requirements of the
Terrorism Act have been adopted. Additional regulations were adopted during 2002
to implement minimum standards to verify customer identity, to encourage
cooperation among financial institutions, federal banking agencies, and law
enforcement authorities regarding possible money laundering or terrorist
activities, to prohibit the anonymous use of "concentration accounts," and to
require all covered financial institutions to have in place a Bank Secrecy Act
compliance program.
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002,
or the SOA. The stated goals of the SOA are to increase corporate
responsibility, to provide for enhanced penalties for accounting and auditing
improprieties at publicly traded companies and to protect investors by improving
the accuracy and reliability of corporate disclosures pursuant to the securities
laws.
The SOA generally applies to all companies, both U.S. and non - U.S., that file
or are required to file periodic reports with the Securities and Exchange
Commission (the "SEC") under the Securities Exchange Act of 1934, or Exchange
Act. Given the extensive SEC role in implementing rules relating to many of the
SOA's new requirements, the final scope of many of these requirements remains to
be determined.
The SOA includes very specific additional disclosure requirements and new
corporate governance rules, requires the SEC and securities exchanges to adopt
extensive additional disclosure, corporate governance and other related rules
and mandates further studies of certain issues by the SEC. The SOA addresses,
among other matters:
o Audit committees for all reporting companies;
o Certification of financial statements by the chief executive officer
and the chief financial officer;
o The forfeiture of bonuses or other incentive-based compensation and
profits from the sale of an issuer's securities by directors and
senior officers in the twelve month period following initial
publication of any financial statements that later require
restatement;
o A prohibition on insider trading during pension plan black out periods;
o Disclosure of off- balance sheet transactions;
o A prohibition on personal loans to directors and officers;
o Expedited filing requirements for Forms 4's;
o Disclosure of a code of ethics and filing a Form 8-K for a change in
or waiver of such code;
o "Real time" filing of periodic reports;
o The formation of a public accounting oversight board;
o Auditor independence; and
o Various increased criminal penalties for violations of securities laws.
PROPOSED LEGISLATION
From time to time proposals are made in the U.S. Congress and before various
bank regulatory authorities, which would alter the policies of and place
restrictions on different types of banking operations. It is impossible to
predict the impact, if any, of potential legislative trends on the business of
the Corporation and the Bank.
C) DIVIDEND RESTRICTIONS
Most of the revenue of the Corporation available for payment of dividends on its
capital stock will result from amounts paid to the Parent Corporation by the
Bank. There are a number of statutory and regulatory restrictions applicable to
the payment of dividends by national banks and bank holding companies. First,
the Bank must obtain the approval of the Comptroller of the Currency (the
"Comptroller") if the total dividends declared by the Bank in any year will
exceed the total of the Bank's net profits (as defined and interpreted by
regulation) for that year and retained profits (as defined) for the preceding
two years, less any required transfers to surplus. Second, the Bank cannot pay
dividends unless, after the payment of such dividends, capital would be
unimpaired and remaining surplus would equal 100% of capital. Third, the
authority of federal regulators to monitor the levels of capital maintained by
the Corporation and the Bank (see Item 7 of this Annual Report on Form 10-K and
the discussion of FDICIA above), as well as the authority of such regulators to
prohibit unsafe or unsound practices, could limit the amount of dividends which
the Parent Corporation and the Bank may pay. Regulatory pressures to reclassify
and charge-off loans to establish additional loan loss reserves also can have
6
the effect of reducing current operating earnings and thus impacting an
institution's ability to pay dividends. Regulatory authorities have indicated
that bank holding companies which are experiencing high levels of non-performing
loans and loan charge-offs should review their dividend policies. Reference is
also made to Note 14 of the Notes to the Corporation's Consolidated Financial
Statements included in the 2002 Annual Report incorporated herein by reference.
D) STATISTICAL INFORMATION
(Reference is also made to Exhibit 13.1 of this Annual Report on Form 10-K)
Information regarding interest sensitivity is incorporated by reference to pages
34 through 36 of the 2002 Annual Report to Shareholders (the 2002 Annual
Report).
The market risk results and gap results noted on pages 34 through 36 of the 2002
Annual Report take into consideration repricing and maturities of assets and
liabilities, but fail to consider the interest sensitivities of those asset and
liability accounts. Management has prepared for its use an income simulation
model to forecast future net interest income, in light of the current gap
position. Management has also prepared for its use alternative scenarios to
measure levels of net interest income associated with various changes in
interest rates. Results have indicated that an interest rate increase of 200
basis points and a decline of 100 basis resulted in an impact on future net
interest income, which is consistent with target levels contained in the
Corporation's Asset/Liability Policy. Management cannot provide any assurances
about the actual effect of changes in interest rates on the Corporation's net
income.
Information regarding related party transactions is incorporated by reference to
Note 5 of the Notes to the Corporation's Consolidated Financial Statements
included in the 2002 Annual Report incorporated herein by reference.
7
I. INVESTMENT PORTFOLIO
a) For information regarding the carrying value of the investment portfolio,
see pages 52 and 53 of the 2002 Annual Report, which is incorporated herein
by reference.
b) The following table illustrates the maturity distribution and weighted
average yield on a tax-equivalent basis for investment securities at
December 31, 2002, on a contractual maturity basis.
Obligations of US obligations of Others Securities
Treasury & States & Federal Reserve &
Government Political Federal Home Loan
(Dollars in Thousands) Agencies Subdivisions Bank Stock Total
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Due in 1 year or less
Amortized Cost $1,400 $5,322 $63,398 $70,120
Market Value 1,414 5,482 63,443 70,339
Weighted Average Yield 4.8170% 6.4260% 1.8000% 2.2128%
Due after one year through five years
Amortized Cost $23,283 $3,538 $35,086 $61,907
Market Value 23,523 3,780 36,858 64,161
Weighted Average Yield 3.4660% 6.3298% 11.3130% 8.0769%
Due after five years through ten years
Amortized Cost $45,596 $7,848 $15,425 $68,869
Market Value 46,457 8,179 16,192 70,828
Weighted Average Yield 4.8050% 6.7439% 6.5840% 5.4244%
Due after ten years
Amortized Cost $248,745 $19,327 $59,073 $327,145
Market Value 250,326 19,826 60,889 331,041
Weighted Average Yield 4.3144% 6.6623% 5.8012% 4.7217%
No Maturity
Amortized Cost $0 $0 $6,269 $6,269
Market Value 0 0 6,269 6,269
Weighted Average Yield 0.0000% 0.0000% 4.9630% 4.9630%
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Total
Amortized Cost $319,024 $36,035 $179,251 $534,310
Market Value $321,720 $37,267 $183,651 $542,638
Weighted Average Yield 4.3248% 6.6123% 5.5030% 4.8744%
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c) Securities of a single issuer exceeding 10 percent of stockholders' equity
amounted to $10.9 million with a market value of $11.2 million at December
31, 2002 and are listed in the table below:
AGGREGATE
(DOLLARS IN THOUSANDS) BOOK VALUE MARKET VALUE
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ISSUER
Bear Stearns Inc. $ 5,446 $ 5,748
General Electric Capital 5,500 5,500
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Total $ 10,946 $ 11,248
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The securities listed in the table above are rated investment grade by Moody's
and/or Standard and Poors and conform to the Corporation's investment policy
guidelines.
For other information regarding the Corporation's investment securities
portfolio, see Pages 25, 36, 52 and 53 of the 2002 Annual Report.
II. LOAN PORTFOLIO
The following table presents information regarding the components of the
Corporation's loan portfolio on the dates indicated.
YEARS ENDED DECEMBER 31
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(Dollars in thousands) 2002 2001 2000 1999 1998
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Commercial $104,480 $89,722 $75,280 $61,861 $52,182
Real estate Residential-mortgage 119,674 116,335 117,762 99,801 91,189
Installment 4,897 5,179 5,907 7,669 7,060
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Total 229,051 211,236 198,949 169,331 150,431
Less:
Unearned discount 0 0 0 242 332
Allowance for loan losses 2,498 2,191 1,655 1,423 1,326
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Net total $226,553 $209,045 $197,294 $167,666 $148,773
========================================================================================================
Since 1998, demand for the Bank's commercial loan, commercial real estate and
real estate mortgage products improved gradually. Business development and
marketing programs coupled with positive market trends supported the growth in
1999, 2000, 2001 and 2002.
The maturities of commercial loans at December 31, 2002 are listed below.
AT DECEMBER 31, 2002, MATURING
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AFTER ONE YEAR
IN ONE YEAR THROUGH AFTER
(Dollars in thousands) Or Less Five Years Five Years Total
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Construction loans $13,478 $0 $0 $13,478
Commercial real estate loans 6,628 47,070 6,546 60,244
Commercial loans 21,823 7,196 1,739 30,758
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Total 41,929 54,266 8,285 104,480
Loans with:
Fixed rates 746 5,049 5,502 11,297
Variable rates 41,183 49,217 2,783 93,183
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Total $41,929 $54,266 $8,285 $104,480
======================================================================================================
Lending is one of Center Bancorp's primary business activities. The
Corporation's loan portfolio consists of both retail and commercial loans,
serving the diverse customer base in its market area. In 2002, average total
loans comprised 32.2 percent of average interest-earning assets. The Corporation
has experienced a compound growth rate in average loans since 1999 of 8.77
percent. Average loans amounted to $222.8 million in 2002 compared with $206.0
million in 2001 and $185.8 million in 2000. The composition of Center Bancorp's
loan portfolio continues to change due to the local economy. Factors such as the
economic climate, interest rates, real estate values and employment all
contribute to these changes. Loan growth has been generated through business
development efforts and entry, through branching, into new markets.
Average commercial loans increased approximately $9.3 million or 29.2 percent in
2002 as compared with 2001. The Corporation seeks to create growth in commercial
lending by offering customized products, by utilizing competitive pricing and by
capitalizing on the positive trends in its market area. Specialized products are
offered to meet the financial requirements of the Corporation's clients. It is
the objective of the Corporation's credit policies to diversify the commercial
loan portfolio to limit concentrations in any single industry.
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The Corporation's commercial loan portfolio includes, in addition to real estate
development, loans to the manufacturing, services, automobile, professional and
retail trade sectors, and to specialized borrowers, including high technology
businesses. A large proportion of the Corporation's commercial loans have
interest rates which reprice with changes in short-term market interest rates or
mature in one year or less.
Average mortgage loans, which amounted to $149.0 million in 2002, increased
$12.2 million or 9.0 percent as compared with average mortgage loans of $136.8
million in 2001 (which reflected a 23.7 percent increase over 2000). The
Corporation's long-term mortgage portfolio includes both residential and
commercial financing. Growth during the past two years largely reflected brisk
activity in mortgage financing. Although a portion of the Corporation's
commercial mortgages adjust to changes in the prime rate, as well as indices
tied to 5 year Treasury Notes, and the Federal Home Loan Bank of New York 5-year
advance rate, most of these loans and residential mortgage loans have fixed
interest rates.
Residential loans increased steadily in 1998 and in 1999. During 2000 growth
increased as rates stabilized and borrower activity remained strong. During 2001
and 2002 growth was affected by refinancing activity, competition among lenders
and falling interest rates throughout 2001 and during the second half of 2002.
Average construction loans and other temporary mortgage financing increased from
2001 to 2002 by $2,779,000 to $10,941,000. Such loans increased by $3,938,000
from 2000 to 2001. The change in construction and other temporary mortgage
lending has been generated by the market activity of the Corporation's customers
engaging in residential and commercial development throughout New Jersey.
Interest rates on such mortgages are generally tied to key short-term market
interest rates. Funds are typically advanced to the builder or developer during
various stages of construction and upon completion of the project it is
contemplated that the loans will be repaid by cash flows derived from the
ongoing project.
Loans to individuals include personal loans, student loans, and home improvement
loans, as well as financing for automobiles and other vehicles. Such loans
averaged $4.9 million in 2002, as compared with $5.2 million in 2001 and $5.9
million in 2000. The decrease in loans to individuals during 2002 was due to
decreases in personal loans, and declines in automobile loans, as a result of
aggressive marketing campaigns by automobile manufacturers.
Home equity loans, as well as traditional secondary mortgage loans, have become
popular with consumers due to their tax advantages over other forms of consumer
borrowing. Home equity loans and secondary mortgages averaged $31.1 million in
2002, a decrease of $3.4 million or 10.0 percent as compared with average home
equity loans of $34.5 million in 2001. Interest rates on floating rate home
equity loans are generally tied to the prime rate while most other loans to
individuals, including fixed rate home equity loans, are medium-term (ranging
between one-to-five years) and carry fixed interest rates. The decrease in home
equity loans outstanding during 2002 was attributable to the lower interest
environment, which resulted in refinancing activity.
At December 31, 2002, the Corporation had total lending commitments outstanding
of $42.3 million, of which approximately 27.3 percent were for commercial loans,
commercial real estate and construction loans.
Credit risks are an inherent part of the lending function. The Corporation has
set in place specific policies and guidelines to limit credit risks. The
following describes the Corporation's credit management policy and describes
certain risk elements in its earning assets portfolio.
CREDIT MANAGEMENT. The maintenance of comprehensive and effective credit
policies is a paramount objective of the Corporation. Credit procedures are
enforced at each individual branch office and are maintained at the senior
administrative level as well as through internal control procedures.
Prior to extending credit, the Corporation's credit policy generally requires a
review of the borrower's credit history, collateral and purpose of each loan.
Requests for most commercial and financial loans are to be accompanied by
financial statements and other relevant financial data for evaluation. After the
granting of a loan or lending commitment, this financial data is typically
updated and evaluated by the credit staff on a periodic basis for the purpose of
identifying potential problems. Construction financing requires a periodic
submission by the borrowers of sales/leasing status reports regarding their
projects, as well as, in some cases, inspections of the project sites by
independent engineering firms. Advances are normally made only upon the
satisfactory completion of periodic phases of construction.
10
Certain lending authorities are granted to loan officers based upon each
officer's position and experience. However, large dollar loans and lending lines
are reported to and are subject to the approval of the Bank's loan committee
and/or board of directors. Loan committees are chaired by either the president
or a senior officer of the Bank.
The Corporation has established its own internal loan-to-value limits for real
estate loans. In general, except as described below, these internal limits are
not permitted to exceed the following supervisory limits:
LOAN CATEGORY LOAN-TO-VALUE LIMIT
Raw Land 65%
Land Development 75%
Construction:
Commercial, Multifamily*
and other Nonresidential 80%
Improved Property 85%
Owner-occupied 1 to 4 family and home equity **
* Multifamily construction includes condominiums and cooperatives.
** A loan-to-value limit has not been established for permanent mortgage
or home equity loans on owner-occupied, 1 to 4 family residential
property. However, for any such loan with a loan-to-value ratio that
equals or exceeds 90 percent at origination, an institution is expected
to require appropriate credit enhancement in the form of either
mortgage insurance or readily marketable collateral.
It may be appropriate in individual cases to originate loans with loan-to-value
ratios in excess of the supervisory loan-to-value limits, based on support
provided by other credit factors. The President or Board of Directors must
approve such exceptions. The Bank must identify these loans, as exceptions to
the supervisory limits and their aggregate amount must be reported at least
quarterly to the Board of Directors. Non-conforming loans should not exceed 100%
of capital, or 30% with respect to non 1 to 4 family residential loans.
Collateral margin guidelines are based on cost, market or other appraised value
to maintain a reasonable amount of collateral protection in relation to the
inherent risk in the loan. This does not mitigate the fundamental analysis of
cash flow from the conversion of assets in the normal course of business or from
operations to repay the loan. It is merely designed to provide a cushion to
minimize the risk of loss if the ultimate collection of the loan becomes
dependent on the liquidation of security pledged.
The Corporation also seeks to minimize lending risk through loan
diversification. The composition of the Corporation's commercial loan portfolio
reflects and is highly dependent upon the economy and industrial make-up of the
region it serves. Effective loan diversification spreads risk to many different
industries, thereby reducing the impact of downturns in any specific industry on
overall loan profitability.
Credit quality is monitored through an internal review process, which includes a
Credit Risk rating System that facilitates the early detection of problem loans.
Under this grading system all commercial loans and commercial mortgage loans are
graded in accordance with the risk characteristics inherent in each loan.
Problem loans include "Watch List" loans, non-accrual loans, and loans, which
conform to the regulatory definitions of criticized and classified loans.
A Problem Asset Report is prepared monthly and is examined by both the senior
management of the Bank and the Corporation's Board of Directors. This review is
designed to enable management to take such actions as are considered necessary
to identify and remedy problems on a timely basis.
The Bank's internal loan review process is complimented by an independent loan
review conducted on an annual basis, under the mandate and approval of the
Corporation's Board of Directors. In addition, regularly scheduled audits
performed by the Bank's internal audit function further ensure the integrity of
the credit and risk monitoring systems currently in place.
11
RISK ELEMENTS. Risk elements include non-performing loans, loans past due ninety
days or more as to interest or principal payments but not placed on a
non-accrual status, potential problem loans, other real estate owned, net, and
other non-performing interest-earning assets.
NON-PERFORMING AND PAST DUE LOANS, OREO. Non-performing loans include
non-accrual loans and troubled debt restructuring. Non-accrual loans represent
loans on which interest accruals have been suspended. It is the Corporation's
general policy to consider the charge-off of loans when they become
contractually past due ninety days or more as to interest or principal payments
or when other internal or external factors indicate that collection of principal
or interest is doubtful. Troubled debt restructurings represent loans on which a
concession was granted to a borrower, such as a reduction in interest rate,
which is lower than the current market rate for new debt with similar risks. At
December 31, 2002 and 2001, the Corporation did not have any other real estate
owned (OREO), while at December 31, 2000 OREO consisted of a two family
residential property with a carrying value of $49,000.
Loans accounted for on a non-accrual basis at December 31, 2002, 2001, 2000,
1999, and 1998 are as follows:
(Dollars in thousands) 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------
Mortgage Real Estate $0 $0 $246 $269 $38
Commercial $0 $84 $0 $0 $0
Installment $229 $25 $0 $23 $3
- ---------------------------------------------------------------------------------------------------------------
Total non-accrual loans $229 $109 $246 $292 $41
- ---------------------------------------------------------------------------------------------------------------
Accruing loans which are contractually past due 90 days or more as to principal
or interest payments are as follows:
DECEMBER 31
-----------
(Dollars in thousands) 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------
Commercial $0 $0 $0 $0 $0
Installment $0 8 2 0 24
- ---------------------------------------------------------------------------------------------------------------
Total $0 $8 $2 $0 $24
- ---------------------------------------------------------------------------------------------------------------
There were no loans, which are "troubled debt restructurings" as of the last day
of each of the last five years.
In general, it is the policy of management to consider the charge-off of loans
at the point that they become past due in excess of 90 days, with the exception
of loans that are secured by cash or marketable securities or mortgage loans,
which are in the process of foreclosure.
There were no other known "potential problem loans" (as defined by SEC
regulations) as of December 31, 2002 that have not been identified and
classified. Such loans, consisting of other assets especially mentioned and
substandard loans, amounted to $158,000 and $175,000, respectively, at December
31, 2002. At December 31, 2001 these loans amounted to $215,000 and $1,882,000
respectively. The Corporation has no foreign loans.
As of December 31, 2002, $15.3 million of the commercial loan portfolio or 32.3
percent of $47.4 million, represented outstanding working capital loans to
various real estate developers. All $15.3 million of these loans are secured by
mortgages on land and on buildings under construction.
12
III. ALLOWANCE FOR LOAN LOSSES
Implicit in the lending function is the fact that loan losses will be
experienced and that the risk of loss will vary with the type of loan being
made, the creditworthiness of the borrower and prevailing economic conditions.
The allowance for loan losses has been allocated below according to the
estimated amount deemed to be reasonably necessary to provide for the
possibility of losses being incurred within the following categories of loans at
December 31, for each of the past five years. The table below shows, for three
types of loans, the amounts of the allowance allocable to such loans and the
percentage of such loans to total loans. The percentage of loans to total loans
is based upon the classification of loans shown on page 9 of this report.
COMMERCIAL REAL ESTATE MORTGAGE INSTALLMENT UNALLOCATED
----------- -------------------- ------------ -----------
Loans to Loans to Loans to
Amount Total Loans Amount Total Loans Amount Total Loans Amount
(Dollars in thousands) % % % Total
- -----------------------------------------------------------------------------------------------------------------
2002 $1,846 45.8 $494 52.3 $46 1.9 $112 $2,498
2001 $877 42.5 $876 55.1 $297 2.4 $141 $2,191
2000 $530 37.8 $894 59.2 $191 3.0 $40 $1,655
1999 $718 36.6 $492 58.9 $155 4.5 $58 $1,423
1998 $553 34.7 $330 60.6 $66 4.7 $377 $1,326
Information regarding charge-offs and recoveries is incorporated by reference to
page 28 of the 2002 Annual Report.
IV. DEPOSITS
Information regarding average amounts/rates of deposits is incorporated by
reference to pages 36 and 41 of the 2002 Annual Report. Information regarding
the amount of time certificates of deposit of $100,000 or more is presented on
pages 36 and 37 of the 2002 Annual Report.
V. RETURN ON EQUITY AND ASSETS
Information regarding the return on average assets, return on average equity,
the equity to assets ratio and dividend payout ratio is incorporated by
reference to pages 1 and 19 of the 2002 Annual Report. Return on average assets
was 1.07 percent, 0.99 percent and 0.94 percent for the years ended December 31,
2002, 2001, and 2000, respectively. The dividend payout ratio was 34.3 percent,
38.9 percent, and 45.3 percent for the years ended December 31, 2002, 2001, and
2000, respectively. Return on tangible average shareholders equity was 17.3
percent in 2002, compared with 14.9 percent in 2001, and 14.4 percent for 2000.
VI. SHORT-TERM BORROWINGS
Information regarding the amount outstanding of short-term borrowings is
incorporated by reference to pages 36 and 37 of the 2002 Annual Report.
13
ITEM 2-PROPERTIES
- --------------------------------------------------------------------------------
The Bank's operations are located at five sites in Union Township, one in
Springfield Township, one in Berkeley Heights, one in Vauxhall and one in
Summit, Union County, New Jersey. The Bank also has one site in Madison, and two
sites in Morristown, Morris County, New Jersey. The principal office is located
at 2455 Morris Avenue, Union, Union County, New Jersey. The principal office is
a two story building constructed in 1993.
Six of the locations are owned by the Bank and six of the locations are leased
by the Bank. The lease of the Five Points Branch located at 356 Chestnut Street,
Union, New Jersey expires November 30, 2007 and is subject to renewal at the
Bank's option. The lease of the Career Center Branch located in Union High
School expired March 30, 2002 and is subject to renewal at the Bank's option.
The lease the Bank is currently negotiating with the Township Board of Education
for the renewal of the lease. The lease of the Madison office located at 300
Main Street, Madison, New Jersey expires June 6, 2005 and is subject to renewal
at the Bank's option. The lease of the Millburn Mall Branch located at 2933
Vauxhall Road, Vauxhall, New Jersey expires January 31, 2013 and is subject to
renewal at the Bank's option. The lease of the Morristown office located at 86
South Street, Suite 2A, Morristown, New Jersey expires February 28, 2008 and is
subject to renewal at the Bank's option. The lease of the Summit branch located
at 392 Springfield Avenue, Summit, New Jersey expires March 31, 2009 and is
subject to renewal at the Bank's option. (See page 66 of the 2002 Annual Report
for a complete listing of all branches and locations. The Drive In/Walk Up
located at 2022 Stowe Street, Union, New Jersey is adjacent to a part of the
Main Office facility.) The Bank has one off-site ATM at Union Hospital, 100
Galloping Hill Road, Union, New Jersey.
ITEM 3-LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
There are no significant pending legal proceedings involving the Parent
Corporation or Bank other than those arising out of routine operations.
Management does not anticipate that the ultimate liability, if any, arising out
of such litigation will have a material effect on the financial condition or
results of operations of the Parent Corporation and Bank on a consolidated
basis. Such statement constitutes a forward-looking statement under the Private
Securities Litigation Reform Act of 1995. Actual results could differ materially
from this statement as a result of various factors, including the uncertainties
arising in proving facts within the judicial system.
ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- --------------------------------------------------------------------------------
The Corporation had no matter submitted to a vote of security holders during the
fourth quarter of 2002.
14
ITEM 4 A-EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The following table sets forth the name and age of each executive officer of the
Parent Corporation, the period during which each such person has served as an
officer of the Parent Corporation or the Bank and each such person's business
experience (including all positions with the Parent Corporation and the Bank)
for the past five years:
NAME AND AGE OFFICER SINCE BUSINESS EXPERIENCE
John J. Davis 1982 the Parent Corporation President & Chief Executive Officer
Age - 60 1977 the Bank of the Parent Corporation and the Bank
Anthony C. Weagley 1996 the Parent Corporation Vice President & Treasurer of the Parent Corporation
Age - 41 1985 the Bank Senior Vice President & Cashier (1996-Present),
Vice President & Cashier (1991 - 1996) and
Assistant Vice President (1991-1997) of the Bank
Donald Bennetti 1996 the Parent Corporation: Vice President of the Parent Corporation
Age - 59 1990 the Bank Senior Vice President (1997-Present)
Vice President (1993-1997)
Assistant Vice President (1992-1993) and
Assistant Cashier (1990-1992) of the Bank
John F. McGowan 1998 the Parent Corporation Vice President of the Parent Corporation
Age -56 1996 the Bank Senior Vice President (1998-Present) and
Vice President (1996-1998) of the Bank
Lori A. Wunder 1998 the Parent Corporation Vice President of the Parent Corporation
Age - 39 1995 the Bank Senior Vice President (1998-Present)
Vice President (1997-1998)
Assistant Vice President (1996-1997) and
Assistant Cashier (1995-1996) of the Bank
Julie D'Aloia 1999 the Parent Corporation Vice President & Secretary (Present)
Age - 41 Corporate Secretary (1998-2000) of the Corporation
1998 the Bank Senior Vice President & Secretary (2001)
Assistant-To-The-President of the Bank &
Corporate Secretary(1995-1998) of the Bank
William A. Arnold 2000 the Parent Corporation Vice President of the Parent Corporation
Age - 51 2000 the Bank Senior Vice President & Senior Loan Officer (2000-Present)
Metropolitan State bank
Executive V. P. and Senior Company Officer (1996-2000)
Mark S. Cardone 2001 the Parent Corporation Vice President of the Parent Corporation
Age - 39 2001 the Bank Senior Vice President & Branch Administrator
(2001 - Present)
Vice President Fleet Bank (1996-2001)
15
PART II
ITEM 5- MARKET INFORMATION FOR THE REGISTRANT'S STOCK AND RELATED
STOCKHOLDER MATTERS
- --------------------------------------------------------------------------------
The information required by Item 5 of Form 10-K appears on pages 38 and 39 of
the 2002 Annual Report to shareholders (the " 2002 Annual Report") and is
incorporated herein by reference. As of December 31, 2002 there were 542 holders
of record of the Parent Corporation's Common Stock.
ITEM 6- SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
The information required by Item 6 of Form 10-K appears on pages 1 and 19 of the
2002 Annual Report and is incorporated herein by reference.
ITEM 7- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
The information required by Item 7 of Form 10-K appears on pages 20 through 40
of the 2002 Annual Report and is incorporated herein by reference.
ITEM 7A- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------------------
The information required by Item 7A of Form 10-K appears on pages 34 through 37
of the 2002 Annual Report and is incorporated herein by reference.
ITEM 8- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
The information required by Item 8 of Form 10-K appears on pages 42 through 64
of the 2002 Annual Report and is incorporated herein by reference.
ITEM 9- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
- --------------------------------------------------------------------------------
None
16
PART III
ITEM 10- DIRECTORS OF THE REGISTRANT
- --------------------------------------------------------------------------------
The Corporation responds to this item by incorporating herein by reference the
material responsive to such item in the Corporation's definitive proxy statement
for its 2003 Annual Meeting of Stockholders.
ITEM 11- EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The Corporation responds to this item by incorporating herein by reference the
material responsive to such item in the Corporation's definitive proxy statement
for its 2003 Annual Meeting of Stockholders.
ITEM 12- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
The Corporation responds to this item by incorporating herein by reference the
material responsive to such item in the Corporation's definitive proxy statement
for its 2003 Annual Meeting of Stockholders.
ITEM 13- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
The Corporation responds to this item by incorporating herein by reference the
material responsive to such item in the Corporation's definitive proxy statement
for its 2003 Annual Meeting of Stockholders.
ITEM 14 - CONTROLS AND PROCEDURES
- --------------------------------------------------------------------------------
Within the 90 days prior to the date of this report, the Corporation carried out
an evaluation, under the supervision and with the participation of the
Corporation's management, including the Corporation's Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
the Corporation's disclosure controls and procedures pursuant to Securities
Exchange Act Rule 13a-14. Based upon the evaluation, the Corporation's Chief
Executive Officer and Chief Financial Officer concluded that the Corporation's
disclosure controls and procedures are effective in timely alerting them to
material information relating to the Corporation (including its consolidated
subsidiaries) required to be included in the Corporation's periodic SEC filings.
There have been no significant changes in the Corporation's internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
17
PART IV
ITEM 15-EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8 -K
- --------------------------------------------------------------------------------
Pages in 2002 Annual Report
Consolidated Statements of Condition at December 31, 2002, and 2001 42
Consolidated Statements of Income for the years ended
December 31, 2002, 2001 and 2000 43
Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 2002, 2001 and 2000 44
Consolidated Statements of Cash Flows for the years ended
December 31, 2002, 2001 and 2000 45
Notes to Consolidated Financial Statements 46 - 64
Independent Auditors' Report 65
A2. Financial Statement Schedules
All Schedules have been omitted as inapplicable, or not required, or because the
required information is included in the Consolidated Financial Statements or the
notes thereto.
A3. Exhibits
3.1 Certificate of Incorporation of the Registrant is incorporated by
reference to exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2002.
3.2 By- Laws of the Registrant is incorporated by reference to exhibit 3.2 to
the Registrant's Annual Report on Form 10K for the year ended December 31,
1998.
10.1 Employment agreement between the Registrant and Donald Bennetti, dated
January 1, 1996, is incorporated by reference to exhibit 10.1 to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
10.2 Employment agreement between the Registrant and John J. Davis is
incorporated by reference to exhibit 10.2 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1995
10.3 The Registrant's Employee Stock Option Plan is incorporated by reference
to exhibit 10.3 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993
10.4 The Registrant's Outside Director Stock Option Plan is incorporated by
reference to exhibit 10.4 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993
10.5 Supplemental Executive Retirement Plans ("SERPS") are incorporated by
reference to exhibit 10.5 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994
10.6 Executive Split Dollar Life Insurance Plan is incorporated by reference
to exhibit 10.5 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994
10.7 Employment agreement between the Registrant and Anthony C. Weagley,
dated as of January 1, 1996 is incorporated by reference to exhibit 10.7 to
the Registrant's Annual Report on Form 10-K for the year ended December 31,
1995
10.8 Employment agreement between the Registrant and Lori A. Wunder, dated as
of January 1, 1999 is incorporated by reference to exhibit 10.8 to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 2001.
10.9 Employment agreement between the Registrant and William E. Arnold, dated
as of January 1, 2002 is incorporated by reference to exhibit 10.9 of the
Registrant's Annual Report on Form 10-K for the year ended December 31, 2001.
18
10.10 Directors' Retirement Plan is incorporated by reference to exhibit
10.10 to the Registrant's Annual Report on Form 10K for the year ended
December 31, 1998.
10.11 Center Bancorp, Inc. 1999 Stock Incentive Plan is incorporated by
reference to exhibit 10.11 to the Registrant's Annual Report on Form 10K for
the year ended December 31, 1999.
10.12 Indenture between Registrant and State Street Bank and Trust Company as
debenture trustee for floating rate junior subordinated deferrable interest
debentures due 2031, is incorporated by reference to exhibit 10.13 of the
Registrant's Annual Report on Form 10-K for the year ended December 31, 2001.
10.13 Registrants amended and restated declaration of Trust of Center Bancorp
Statutory Trust 1, dated December 18, 2001 is incorporated by reference to
Exhibit 10.13 of the Registrant's Annual Report on Form 10-K for the year
ended December 31, 2001.
10.14 Guarantee agreement by Registrant and between Center Bancorp, Inc. and
State Street Bank and Trust Company of Connecticut, National Association,
dated as of December 18, 2001 is incorporated by reference to Exhibit 10.15
of the Registrant's Annual Report on Form 10-K for the year ended December
31, 2001.
11.1 Statement regarding computation of per share earnings is omitted because
the computation can be clearly determined from the material incorporated by
reference in this Report.
13.1 Registrant's Annual Report to Shareholders for the year ended December
31, 2002 (parts not incorporated by reference are furnished for information
purposes only and are not to be deemed to be filed herewith.)
21.1 Subsidiaries of the Registrant
23.1 Consent of KPMG LLP
99.1 Certificate of the Chief Executive Officer pursuant to Section 906 of
the Sarbanes - Oxley Act of 2002
99.2 Certificate of the Chief Financial Officer pursuant to Section 906 of
the Sarbanes - Oxley Act of 2002
B. Reports on Form 8-K
There were no reports on Form 8-K filed by the Registrant during the fourth
quarter of 2002.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Center Bancorp Inc. has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CENTER BANCORP, INC.
/S/ JOHN J. DAVIS
-------------------------------------
John J. Davis
President and Chief Executive Officer
Dated March 26, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant, in
the capacities described below and on the date indicated above:
/S/ ALEXANDER BOL /S/ HUGO BARTH, III
- ------------------------------------ -------------------------------------
Alexander A. Bol Hugo Barth, III
Director and Chairman of the BoardDirector
/S/ ROBERT L. BISCHOFF /S/ BRENDA CURTIS
- ------------------------------------ -------------------------------------
Robert L. Bischoff Brenda Curtis
Director Director
/S/ JOHN J. DAVIS
- ------------------------------------
John J. Davis /S/ DONALD G. KEIN
-------------------------------------
President and Chief Executive Officer Donald G. Kein
and Director Director
S/ HERBERT SCHILLER
- ------------------------------------ -------------------------------------
James J. Kennedy Herbert Schiller
Director Director
/S/ PAUL LOMAKIN, JR. /S/ NORMAN F. SCHROEDER
- ------------------------------------ -------------------------------------
Paul Lomakin, Jr. Norman F. Schroeder
Director Director
/S/ WILLIAM THOMPSON /S/ ANTHONY C. WEAGLEY
- ------------------------------------ -------------------------------------
William Thompson Anthony C. Weagley
Director Vice President & Treasurer (Chief
Officer) Accounting and Financial
- -----------------------------
Eugene V. Malinowski
Director
20
CERTIFICATION
I, JOHN J. DAVIS, CERTIFY THAT:
1. I have reviewed this annual report on Form 10-K of Center Bancorp, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) and any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this annual report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 26, 2003
/S/ JOHN J. DAVIS
- -------------------------------------
JOHN J. DAVIS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CENTER BANCORP, INC.
CERTIFICATION
I, ANTHONY C. WEAGLEY, CERTIFY THAT:
1. I have reviewed this annual report on Form 10-K of Center Bancorp, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report(the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) and any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 26, 2003
/S/ ANTHONY C. WEAGLEY
- ----------------------------------------
ANTHONY C. WEAGLEY
VICE PRESIDENT AND TREASURER
(CHIEF ACCOUNTING AND FINANCIAL OFFICER)
CENTER BANCORP, INC