UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): June 30, 2005
CENTER BANCORP, INC.
(Exact Name of Registrant as Specified in its Charter)
New Jersey 2-81353 52-1273725
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
2455 Morris Avenue, Union, New Jersey 07083
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (800) 862-3683
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements with
respect to the financial condition, results of operation and business of the
Registrant and its subsidiaries. These include, but are not limited to,
statements that relate to or are dependent on estimates or assumptions relating
to the prospects of loan growth, credit quality and certain operating
efficiencies resulting from the operations of the Registrant. These
forward-looking statements involve certain risks and uncertainties. Factors that
may cause actual results to differ materially from those contemplated by such
forward-looking statements include, among others, the following possibilities:
(1) competitive pressure among financial services companies may increase
significantly; (2) changes in the interest rate environment may reduce interest
margins; (3) general economic conditions, internationally, nationally or in the
State of New Jersey, may be less favorable than expected; (4) legislation or
regulatory requirements or changes may adversely affect the business in which
the Registrant will be engaged; and (5) other risks detailed in other filings
made by the Registrant with the Securities and Exchange Commission may adversely
impact the Registrant.
Item 1.01 Entry Into a Material Definitive Agreement
On June 30, 2005, the Registrant entered into a stock purchase agreement
(the "Stock Purchase Agreement") and a registration rights agreement (the
"Registration Rights Agreement") with certain accredited investors (the
"Purchasers"). Pursuant to the Stock Purchase Agreement, the Registrant agreed
to sell, and the Purchasers agreed to purchase, a total of 1,904,761 shares of
the Registrant's common stock, no par value, at a purchase price of $10.50 per
share, representing gross proceeds of approximately $20.0 million. Closing of
this stock purchase was effected concurrently with the execution of the Stock
Purchase Agreement. Net proceeds from this transaction are expected to be
approximately $18.9 million, after commissions and expenses.
The above-mentioned shares were issued in a private placement, were not
registered under the Securities Act of 1933, as amended (the "Act"), and may not
be offered or sold in the United States absent registration under the Act or an
applicable exemption from the registration requirements of the Act. Pursuant to
the Registration Rights Agreement, the Registrant has agreed to register such
shares for resale under the Act. The Registration Rights Agreements provides for
the payment of certain liquidated damages in the event that, among other things,
delays are experienced either in the Registrant's filing the applicable
registration statement with the SEC or in the SEC's declaring that registration
statement effective or if for any reason the registration statement is not
available to holders of the shares for specified periods of time. The
Registration Rights Agreement also provides indemnification and contribution
remedies to the Purchasers in connection with the resale of shares pursuant to
such registration statement.
The Purchasers are OZ Master Fund, Ltd., Bay Pond Investors (Bermuda)
L.P., Bay Pond Partners, L.P., Wolf Creek Investors (Bermuda), L.P., Wolf Creek
Partners, L.P., Keefe-Rainbow Partners, L.P., Keefe-Rainbow Offshore Fund, Ltd.,
IVY MA Holdings 4, LLC, IVY MA Holdings 1, Ltd., Moors and Mendon Master Fund,
L.P., Norguard Insurance Company and Royal Investments of Delaware.
To the Registrant's knowledge, the Purchasers have no material
relationships with the Registrant other than (i) the relationship established
pursuant to the above-mentioned agreements and (ii) the fact that Moors and
Mendon Master Fund, L.P. and one or more entities managed by Keefe Managers, LLC
own shares of the Registrant's common stock.
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Item 3.02 Unregistered Sales of Equity Securities.
Reference is made to Item 1.01 hereof with respect to the issuance of
1,904,761 shares of the Registrant's common stock, no par value. The aggregate
offering price was approximately $20.0 million. The Registrant paid commissions
to a placement agent aggregating $1,000,000 in connection with this transaction.
The 1,904,761 shares represent approximately 14.8% of the Registrant's
outstanding shares of common stock on a post-transaction basis.
The Registrant relies upon the exemption from registration afforded by
Section 4(2) of the Act, in that: (a) the shares were sold to a limited number
of sophisticated accredited investors, (b) the shares were sold without any
general solicitation or public advertising, (c) the Purchasers provided the
Registrant with representations customary for a private placement of securities
and (d) the certificates delivered to the Purchasers bear restrictive legends.
Item 7.01 Regulation FD Disclosure
In connection with the sale of the above-mentioned shares to the
Purchasers, the Registrant also provided the Purchasers with certain information
regarding the Registrant and its business. Such information, which was provided
to the Purchasers on a confidential basis and is to be deemed "filed" for
purposes of the Securities Exchange Act of 1934, consisted of the following:
o As a result of the consolidation in the Registrant's markets and as
previously announced, the Registrant intends to increase shareholder value over
the next three to five years by taking advantage of its strong markets. The
Registrant confirms that it plans to:
o Open at least three more branches over the next five years
(including a branch in Boonton/Mountain Lakes, New Jersey, which is
scheduled to open within the next three months);
o Increase fee income, possibly by acquiring an asset management
company and/or by developing existing trust services, or other
businesses such as the mortgage brokerage business;
o Continue to increase the Registrant's loan to deposit ratio (which
was 67.11% at June 1, 2005 (after giving effect to the Registrant's
acquisition of Red Oak Bank) as compared with 55.12% at March 31,
2005), while placing a particular emphasis on commercial mortgage
and business loan originations.
o The Registrant confirmed that its goals over the next five years
include:
o Increasing the loan to deposit ratio to approach 75%;
o Building fee income to at least 15% of total revenues;
o Maintaining solid credit quality as the business grows;
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o Improving the efficiency ratio (which was 68.25% as of March 31,
2005 and is defined as (i) total non-interest expense minus
foreclosed property expense plus amortization of intangibles and
goodwill impairment as a percentage of (ii) net interest income, on
a fully taxable equivalent basis, if available, plus non-interest
income) to 50-55% within five years; and
o Increasing the Registrant's presence in attractive communities in
New Jersey.
o In the Registrant's recent acquisition of Red Oak Bank, the merger
consideration represented 221.3% of Red Oak Bank's book value and 26.8 times Red
Oak Bank's forward-looking earnings per share. Pursuant to that acquisition, the
Registrant added approximately $90 million in loans and $100 million in core
deposits.
o The Registrant is currently negotiating to open two branch locations in
addition to the above-mentioned Boonton/Mountain Lakes branch.
o The Registrant's goal is to be a community banking business with total
assets of at least $1.5 billion within five years.
o As of June 1, 2005 the Registrant's consolidated balance sheet reflects
the following (in thousands of dollars):
Net loans $ 488,669
Investment securities $ 596,807
Total intangible assets $ 18,683
Total assets $1,174,408
Deposits $ 734,840
Borrowings $ 336,495
Total liabilities $1,092,076
Trust preferred securities $ 15,465
Preferred equity 0
Common equity $ 82,332
Total equity $ 82,332
o As of June 1, 2005, the Registrant's consolidated balance sheet reflects
the following balance sheet ratios:
Equity/assets 7.01%
Tangible equity/assets 5.51%
Intangibles/equity 22.69%
Borrowings/assets 28.65%
Leverage ratio 7.55%
Tier 1 leveraged capital ratio 13.92%
Total leveraged capital ratio 14.79%
o As of June 1, 2005, the Registrant's asset quality ratios were as
follows:
Non-performing assets/total loans plus Other Real Estate Owned 0.06%
Non-performing assets/total assets 0.0255%
Allowance for loan losses/total loans 1.01%
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As of March 31, 2005, the Registrant had no non-performing loans. For the
quarter ended March 31, 2005, the Registrant had net charge-offs of $2,000. The
Registrant's goal is to increase the ratio of its allowance for loan losses to
total loans to 1.20% over the next five years, as the Registrant continues to
emphasize commercial real estate lending. As of March 31, 2005, the Registrant's
ratio of its allowance for loan losses to total loans was 0.99%.
o For the five months ended June 1, 2005, the Registrant's profitability
ratios were as follows:
Annualized return on average assets 0.69%
Annualized return on average equity 10.22%
Annualized net interest margin (tax equivalent
yield as a percentage of
average interest-earning assets) 2.95%
Efficiency ratio 62.60%
Non-interest income/operating revenue* 7.65%
Core earnings per share (quarter ended
June 1, 2005) $ 0.18
Diluted earnings per share (quarter ended
June 1, 2005) $ 0.17
*For purposes of this ratio, operating revenue is defined as total revenue
minus securities gains.
o Commercial loans are becoming a larger part of the Registrant's
consolidated loan portfolio. The Registrant expects that this trend will
continue. The Registrant's loan composition as of March 31, 2005 and June 1,
2005 was as follows:
March 31, 2005
Residential mortgage 57%
Commercial real estate and multi-family 29%
Consumer 9%
Commercial 4%
Construction 1%
June 1, 2005
Residential mortgage 49%
Commercial real estate and multi-family 35%
Consumer 1%
Commercial 11%
Construction 4%
o As of June 1, 2005, institutional investors owned 20.86% of the
Registrant's outstanding common stock and all other investors (other than
executive officers and directors of the Registrant) owned 69.08% of the
Registrant's outstanding common stock.
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o As of June 1, 2005 (after the date of the Red Oak Bank acquisition), the
Registrant's core deposits totaled $277 million. As of March 31, 2005 (before
the date of the Red Oak Bank acquisition), the Registrant's deposit composition
was as follows:
Transaction accounts 31.87%
Money market and savings 33.24%
Certificate of deposit greater than $100,000 10.96%
Certificate of deposit less than $100,000 23.93%
o The Registrant's deposits have grown as follows (the June 1, 2005 data
includes Red Oak Bank; all other figures, including CAGR (defined as compound
annual growth rate), exclude Red Oak Bank):
As of:
December 31, 2000 $425,296
December 31, 2001 $497,833
December 31, 2002 $616,351
December 31, 2003 $632,921
December 31, 2004 $702,272
March 31, 2005 $695,984
June 1, 2005 $734,840
CAGR 9%
o The Registrant's total loans have grown as follows (the June 1, 2005
data includes Red Oak Bank; all other figures, including CAGR, exclude Red Oak
Bank):
As of:
December 31, 2000 $117,762
December 31, 2001 $116,335
December 31, 2002 $119,674
December 31, 2003 $214,482
December 31, 2004 $221,893
March 31, 2005 $383,631
June 1, 2005 $488,669
CAGR 12%
o The Registrant has a goal of reaching a 75% loan to deposit ratio by 2006. The
following table sets forth the Registrant's loan to deposit ratios as of the
dates noted:
December 31, 1995 33.00%
December 31, 1996 27.61%
December 31, 1997 30.37%
December 31, 1998 39.80%
December 31, 1999 43.44%
December 31, 2000 46.78%
December 31, 2001 42.43%
December 31, 2002 37.16%
December 31, 2003 55.22%
December 31, 2004 53.73%
March 31, 2005 55.12%
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o As noted above, the Registrant has a goal of reducing its efficiency
ratio to 50-55% by 2009. The following table sets forth the Registrant's
efficiency ratios for the periods noted (Red Oak Bank is only included in the
last ratio presented):
Year ended December 31, 2000 60.76%
Year ended December 31, 2001 59.66%
Year ended December 31, 2002 59.28%
Year ended December 31, 2003 66.43%
Year ended December 31, 2004 62.24%
Three months ended March 31, 2005 62.92%
Five months ended May 31, 2005 62.60%
o The Registrant previously stated that it expected that its 2005 earnings
per share would be in the range of $0.85 to $0.87. The Registrant now expects
that, without giving effect to the earnings derived from the Registrant's June
30, 2005 common stock offering and without giving effect to the additional
shares of common stock issued in such offering, 2005 earnings per share will
approximate $0.81. This estimate is consistent with the estimates published by
the two analysts which have published their estimates for the Registrant's 2005
earnings per share. The reduction in the Registrant's estimate is based
primarily upon further flattening of the yield curve.
Item 9.01 Financial Statements and Exhibits.
(c) The following exhibits are attached to this Current Report:
10.1 Stock Purchase Agreement, dated June 30, 2005
10.2 Registration Rights Agreement, dated June 30, 2005
99.1 Press release dated June 30, 2005
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CENTER BANCORP, INC.
By: /s/ John J. Davis
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Name: John J. Davis
Title: President and Chief Executive Officer
Dated: June 30, 2005
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EXHIBIT INDEX
10.1 Stock Purchase Agreement, dated June 30, 2005
10.2 Registration Rights Agreement, dated June 30, 2005
99.1 Press release dated June 30, 2005
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