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Center Bancorp, Inc. Reports 24.1 percent Increase in Net Income Available to Common Shareholders or $0.26 per share for the Second Quarter of 2012 and 52.8 percent Reduction in Non-Performing Assets Compared to the Second Quarter of 2011

 

UNION, N.J., July 26, 2012 (GLOBE NEWSWIRE) — Center Bancorp, Inc. (NASDAQ: CNBC) (the "Corporation", or "Center"), parent company of Union Center National Bank (“UCNB or the Bank”), today reported operating results for the second quarter ended June 30, 2012. Net income available to common stockholders amounted to $4.3 million, or $0.26 per fully diluted common share, for the quarter ended June 30, 2012, as compared with net income available to common stockholders of $3.4 million, or $0.21 per fully diluted common share, for the quarter ended June 30, 2011.

 

For the six months ended June 30, 2012, net income available to common stockholders amounted to $8.4 million, or $0.51 per fully diluted common share, compared to $6.3 million, or $0.39 per fully diluted common share, for the same period in 2011.

 

Anthony C. Weagley, President and Chief Executive Officer of Center, indicated: "The results for the second quarter announced today mark another consistent quarter of positive earnings results. Our non-performing assets were reduced by $ 3.3 million or 38.0 percent during the quarter bringing total non-performers to 0.36 percent of total assets.”

 

Non-performing assets (NPA’s) at the end of the second quarter totaled $5.4 million, or 0.36 percent of total assets, as compared with $11.5 million, or 0.88 percent, at June 30, 2011 and $8.7 million, or 0.59 percent, at March 31, 2012. "Asset quality remains our primary focus, and with primarily several larger residential non-performing loans making up the balance of what is still on nonaccrual status at the end of the second quarter, our asset quality has placed us near the top of all publicly traded banks and thrifts in the state of New Jersey," said Mr. Weagley. "At the same time, we continue to cautiously maintain our reserves for any potential loan losses."

 

 

“We have navigated through some of the most difficult economic conditions by sticking to and executing our business strategy," continued Mr. Weagley. "The result is a strong balance sheet and an improved credit and capital position, which will allow us to expand our franchise and build upon our hallmark service. We believe the prospects of a full economic recovery will be slow; therefore, we will continue to stay the course and guide our actions to steer our way through any challenges and opportunities which may come our way."  

 

Highlights for the quarter include:

 

·

Strong balance sheet with improving credit trends.

 

·

At June 30, 2012, total loans amounted to $807.5 million, an increase of $109.3 million compared to total loans at June 30, 2011.

 

·

Non-performing assets, consisting of non-accrual loans, accruing loans past due 90 days or more, other real estate owned (“OREO”) and other nonperforming assets amounted to 0.36 percent of total assets at June 30, 2012, compared to 0.88 percent at June 30, 2011 and 0.59 percent at December 31, 2011. The allowance for loan losses as a percentage of total non-performing loans was 205.7 percent at June 30, 2012 compared to 88.2 percent at June 30, 2011 and 121.5 percent at December 31, 2011.

 

·

The Tier 1 leverage capital ratio was 9.23 percent at June 30, 2012, compared to 9.50 percent at June 30, 2011, and 9.29 percent at December 31, 2011, exceeding regulatory guidelines in all periods.

 

·

The Board of Directors declared an 83.3 percent increase in the quarterly cash dividend payable to common shareholder to 5.5 cents from 3.0 cents per share.

 

·

Tangible book value per common share rose to $7.33 at June 30, 2012, compared to $6.60 at December 31, 2011 and $6.35 at June 30, 2011.

 

·

The efficiency ratio for the second quarter of 2012 on an annualized basis was 47.1 percent as compared to 52.8 percent in the second quarter of 2011 and 49.3 percent in the first quarter of 2012.

 

·

Deposits increased $209.0 million to $1.17 billion at June 30, 2012, from $965.7 million at June 30, 2011.

 

·

Small Business Lending Fund dividend decreased to 3.0 percent from 5.0 percent for the previous quarter and is projected to decrease to 1.0 percent for the third quarter due to targeted commercial and industrial small business loan growth.

 

Selected Financial Ratios (unaudited; annualized where applicable)
As of or for the quarter ended:		6/30/12				3/31/12				12/31/11				9/30/11				6/30/11
Return on average assets			1.16	%			1.16	%			1.03	%			1.10	%			1.10	%
Return on average equity			11.96	%			12.05	%			10.72	%			11.12	%			11.17	%
Net interest margin (tax equivalent basis)			3.29	%			3.39	%			3.50	%			3.54	%			3.53	%
Loans / deposits ratio			68.74	%			68.54	%			67.42	%			68.07	%			72.30	%
Stockholders’ equity / total assets			9.86	%			9.62	%			9.49	%			9.72	%			9.95	%
Efficiency ratio (1)			47.1	%			49.3	%			53.7	%			49.5	%			52.8	%
Book value per common share		$	8.36			$	8.01			$	7.63			$	7.54			$	7.39
Return on average tangible equity (1)			13.53	%			13.70	%			12.25	%			12.74	%			12.86	%
Tangible common stockholders’ equity / tangible assets (1)			8.08	%			7.81	%			7.61	%			7.79	%			8.02	%
Tangible book value per common share (1)		$	7.33			$	6.98			$	6.60			$	6.50			$	6.35

 

(1) Information reconciling non-GAAP measures to GAAP measures is presented elsewhere in this press release.

 

 

Net Interest Income

 

For the three months ended June 30, 2012, total interest income on a fully taxable equivalent basis increased $881,000 or 6.75 percent, to $13.9 million, compared to the three months ended June 30, 2011. Total interest expense decreased by $135,000, or 4.38 percent, to $3.0 million, for the three months ended June 30, 2012, compared to the same period last year. Net interest income on a fully taxable equivalent basis was $11.0 million for the three months ended June 30, 2012, increasing $1.0 million, or 10.2 percent, from $10.0 million for the comparable period in 2011. Compared to 2011, for the three months ended June 30, 2012, average interest earning assets increased $205.8 million while net interest spread and margin, on a tax-equivalent basis, decreased on an annualized basis by 24 basis points and 24 basis points, respectively. For the quarter ended June 30, 2012, the Corporation’s net interest margin on a fully taxable equivalent annualized basis decreased 24 basis points to 3.29 percent as compared to 3.53 percent for the same three month period in 2011.

 

The 4.38 percent decrease in interest expense reflects higher volumes of interest bearing deposits offset in part by a favorable shift in the deposit mix and the impact of the sustained low levels in short-term interest rates. The average cost of funds declined 21 basis points to 1.01 percent from 1.22 percent for the quarter ended June 30, 2011 and on a linked sequential quarter decreased 6 basis points compared to the first quarter of 2012. For the quarter ended June 30, 2012, the Corporation’s net interest spread decreased 24 basis points to 3.16 percent as compared to 3.40 percent for the same three month period in 2011.

 

For the six months ended June 30, 2012, net interest income on a fully taxable equivalent basis amounted to $21.8 million, compared to $20.0 million for the same period in 2011. For the six month period ended June 30, 2012, interest income increased by $1.8 million while interest expense decreased by $7,000 from the same period last year. Compared to the same period in 2011, for the six months ended June 30, 2012, average interest earning assets increased $175.3 million while net interest spread and margin decreased on an annualized tax-equivalent basis by 15 basis points and 20 basis points, respectively.

 

Net interest margin compression during the second quarter period of 2012, occurred primarily as result of a high liquidity pool carried during the quarter and timing of a substantial portion of loan growth, which occurred in the later part of the quarter. This, coupled with a continued high level of prepayment speeds on mortgage-backed securities in the investment portfolio and a high level of loan modifications during the quarter, dampened other action taken to improve the margin. Mr. Weagley noted, "While the net interest margin had flattened during the second quarter, the Corporation continues to work on strategies to lift the margin and still expects an improvement in margin, principally given the continued volume of asset deployment into loans from cash and elimination of temporary factors holding the margin down. “  

 

Earnings Summary for the Period Ended June 30, 2012

 

The following tables present condensed consolidated statement of income data for the periods indicated.

 

Condensed Consolidated Statements of Income (unaudited)

 

(dollars in thousands, except per share data)
For the quarter ended:		6/30/12				3/31/12				12/31/11				9/30/11				6/30/11
Net interest income		$	10,546			$	10,345			$	10,162			$	9,850			$	9,793
Provision for loan losses			(107	)			107				300				1,020				250
Net interest income after provision for loan losses			10,653				10,238				9,862				8,830				9,543
Other income			1,604				1,955				1,866				2,283				1,732
Other expense			5,690				5,807				6,222				5,529				5,757
Income before income tax expense			6,567				6,386				5,506				5,584				5,518
Income tax expense			2,214				2,155				1,884				1,882				1,934
Net income		$	4,353			$	4,231			$	3,622			$	3,702			$	3,584
Net income available to common stockholders		$	4,269			$	4,090			$	3,238			$	3,557			$	3,439
Earnings per common share:
Basic		$	0.26			$	0.25			$	0.20			$	0.22			$	0.21
Diluted		$	0.26			$	0.25			$	0.20			$	0.22			$	0.21
Weighted average common shares outstanding:
Basic			16,333,653				16,332,327				16,311,193				16,290,700				16,290,700
Diluted			16,341,767				16,338,162				16,327,990				16,313,366				16,315,667

 

 

Other Income

 

The following tables present the components of other income for the periods indicated.

 

(in thousands, unaudited)
For the quarter ended:		6/30/12				3/31/12				12/31/11				9/30/11				6/30/11
Service charges on deposit accounts		$	287			$	314			$	344			$	369			$	328
Loan related fees			195				236				248				203				145
Annuities and insurance commissions			48				44				29				42				33
Debit card and ATM fees			134				132				137				135				133
Bank-owned life insurance			246				251				258				260				261
Net investment securities gains			513				937				817				1,250				801
Other fees			181				41				33				24				31
Total other income		$	1,604			$	1,955			$	1,866			$	2,283			$	1,732

 

Other income decreased $128,000 for the second quarter of 2012 compared with the same period in 2011. During the second quarter of 2012, the Corporation recorded net investment securities gains of $513,000 compared to $801,000 in net investment securities gains for the same period last year. Excluding net securities gains, the Corporation recorded other income of $1.1 million for the three months ended June 30, 2012 compared to other income, excluding net securities gains, of $931,000 for the second quarter of 2011 and $1.0 million for the three months ended March 31, 2012. The increase in other income in the second quarter of 2012 when compared to the second quarter of 2011 (excluding securities gains) was primarily from an increase in other fees of $150,000 related to the sale of a judgment, $50,000 in loan related fees, and $15,000 in commissions on annuities and insurance contracts offset by declines in service charges on deposits of $41,000 and a decline in bank owned life insurance income of $15,000.

 

For the six months ended June 30, 2012, total other income increased $230,000 compared to the same period in 2011, primarily as a result of $150,000 related to the sale of a judgment, higher loan fees and annuity commissions offset by lower net securities gains. Excluding net securities gains and losses, the Corporation recorded other income of $2.1 million for the six months ended June 30, 2012 compared to other income, excluding net securities gains and losses, of $1.8 million for the comparable period in 2011, an increase of $347,000 or 19.69 percent.

 

Other Expense

 

The following tables present the components of other expense for the periods indicated.

 

(in thousands, unaudited)
For the quarter ended:		6/30/12				3/31/12				12/31/11				9/30/11				6/30/11
Salaries		$	2,347			$	2,344			$	2,290			$	2,235			$	2,253
Employee benefits			708				774				619				613				650
Occupancy and equipment			606				700				701				713				667
Professional and consulting			294				246				351				319				245
Stationery and printing			96				84				95				73				99
FDIC Insurance			270				299				328				328				528
Marketing and advertising			56				31				15				30				65
Computer expense			362				353				323				300				350
Bank regulatory related expenses			75				78				108				102				100
Postage and delivery			71				79				42				67				51
ATM related expenses			69				62				58				60				57
Other real estate owned expense			22				62				399				—				—
Amortization of core deposit intangible			11				13				12				12				16
All other expenses			703				682				881				677				676
Total other expense		$	5,690			$	5,807			$	6,222			$	5,529			$	5,757

 

 

Total other expense for the second quarter of 2012 amounted to $5.7 million, which was approximately $117,000 or 2.01 percent lower than other expense for the three months ended March 31, 2012. Employee salaries and benefits decreased by $63,000 or 2.02 percent, reflecting a flat salary expense and decreased benefits expense of $66,000 as compared to the quarter ended March 31, 2012. OREO expense decreased $40,000 and FDIC expense decreased $29,000 while professional and consulting increased $48,000, marketing and advertising increased $25,000 and other expense increased $21,000.

 

The decrease in other expense for the three months ended June 30, 2012, when compared to the quarter ended June 30, 2011, was approximately $67,000 and was primarily associated with decreases of $258,000 in FDIC Insurance, $61,000 in occupancy and equipment expenses and $25,000 in regulatory expenses. These decreases were partially offset by increases of $152,000 in salaries and benefits, $49,000 in professional and consulting fees, OREO expenses of $22,000, postage and delivery expense of $20,000 and $27,000 in all other expenses.

 

For the six months ended June 30, 2012, total other expense decreased $195,000, or 1.67 percent, compared to the same period in 2011. Decreases primarily included $487,000 in FDIC insurance, and $227,000 in occupancy and equipment expense. These decreases were partially offset by an increase in salaries and employee benefits of $403,000, $54,000 in professional and consulting fees, $85,000 in OREO expense, and $26,000 in computer expense.

 

Statement of Condition Highlights at June 30, 2012

 

·

Total assets amounted to $1.5 billion at June 30, 2012.

 

·

Total loans were $807.5 million at June 30, 2012, increasing $109.3 million, or 15.66 percent, from June 30, 2011. Total real estate loans increased $61.6 million, or 12.3 percent, from June 30, 2011. Commercial loans increased $47.8 million, or 24.3 percent, year over year.

 

·

Investment securities totaled $530.2 million at June 30, 2012, reflecting an increase of $111.2 million or 26.53 percent from June 30, 2011.

 

·

Deposits totaled $1.17 billion at June 30, 2012, increasing $209.0 million, or 21.64 percent, since June 30, 2011. Total Demand, Savings, Money Market, and certificates of deposit less than $100,000 increased $271.5 million or 34.07 percent from June 30, 2011. Time certificates of deposit of $100,000 or more decreased by $62.5 million or 36.98 percent from June 30, 2011. These increases were attributable to continued core deposit growth in overall segments of the deposit base and in niche areas, such as municipal government, private schools and universities.

 

·

Borrowings totaled $166.3 million at June 30, 2012, decreasing $32.3 million from June 30, 2011, primarily due to the fact that certain sweep relationships that were previously classified as short term borrowings were discontinued and were moved to interest bearing checking accounts during the third quarter of 2011.

 

 

Condensed Statements of Condition

 

The following tables present condensed statements of condition as of the dates indicated.

 

Condensed Consolidated Statements of Condition (unaudited)
(in thousands)
At quarter ended:		6/30/12				3/31/12				12/31/11				9/30/11				6/30/11
Cash and due from banks		$	73,668			$	78,207			$	111,101			$	113,080			$	109,467
Interest bearing deposits with banks			12,000				—				—				—				—
Investment securities:
Available for sale			467,190				454,994				414,507				388,858				377,214
Held to maturity			62,997				69,610				72,233				70,142				41,804
Loans			807,454				790,622				756,010				721,608				698,148
Allowance for loan losses			(10,221	)			(9,754	)			(9,602	)			(9,536	)			(9,836	)
Restricted investment in bank stocks, at cost			9,139				9,233				9,233				9,194				9,194
Premises and equipment, net			12,218				12,266				12,327				12,386				12,578
Goodwill			16,804				16,804				16,804				16,804				16,804
Core deposit intangible			73				85				98				111				123
Bank-owned life insurance			29,440				29,194				28,943				28,685				28,426
Other real estate owned			453				558				591				—				—
Other assets			19,807				24,776				20,493				25,185				23,516
Total assets		$	1,501,022			$	1,476,595			$	1,432,738			$	1,376,517			$	1,307,438
Deposits		$	1,174,649			$	1,153,473			$	1,121,415			$	1,060,022			$	965,676
Borrowings			166,262				166,155				166,155				166,155				198,529
Other liabilities			12,128				14,886				9,252				16,532				13,129
Stockholders' equity			147,983				142,081				135,916				133,808				130,104
Total liabilities and stockholders’ equity		$	1,501,022			$	1,476,595			$	1,432,738			$	1,376,517			$	1,307,438

 

The following tables reflect the composition of the Corporation’s deposits as of the dates indicated.

 

Deposits (unaudited)
(in thousands)
At quarter ended:		6/30/12				3/31/12				12/31/11				9/30/11				6/30/11
Demand:
Non-interest bearing		$	181,282			$	172,342			$	167,164			$	161,340			$	158,689
Interest-bearing			199,064				197,648				215,523				224,052				190,994
Savings			207,151				209,436				200,930				237,900				204,051
Money market			432,507				411,626				351,237				245,787				191,277
Time			154,645				162,421				186,561				190,943				220,665
Total deposits		$	1,174,649			$	1,153,473			$	1,121,415			$	1,060,022			$	965,676

 

Loans

 

“Total loans achieved a milestone level breaking $800 million during the second quarter, reaching a total of $807.5 million at June 30, 2012, representing an increase of $ 16.8 million for the three months ended June 30, 2012, “commented Mr. Weagley. “Outstanding loan balances increased during the second quarter and additional lending opportunities continued to fuel the Corporation's pipelines. Growth in our client base and in our New Jersey market continues to underpin the overall business development process “added Mr. Weagley.

 

The Corporation experienced growth of approximately $74.9 million in new loans and advances during the second quarter offset in part by prepayments of $30.3 million coupled with scheduled payments and payoffs of $28.2 million. Average loans during the second quarter of 2012 totaled $790.4 million as compared to $701.1 million during the second quarter of 2011, representing a 12.7 percent increase.

 

 

At June 30, 2012, the Corporation had $208.6 million in overall undisbursed loan commitments, which includes largely unused commercial lines of credit, home equity lines of credit and available usage from active construction facilities. Included in the overall undisbursed commitments are the Corporation's "Approved, Accepted but Unfunded" pipeline, which includes approximately $61.0 million in commercial and commercial real estate loans and $13.9 million in residential mortgages expected to fund over the next 90 days.  

 

The Corporation’s net loans in the second quarter of 2012 increased $16.4 million, to $797.2 million at June 30, 2012, from $780.9 million at March 31, 2012. The loan volume increase was $18.7 million in commercial loans and a decrease of $203,000 in consumer loans, offset by a decrease of $1.7 million in residential mortgage loans.  At June 30, 2011, net loans totaled $688.3 million.

 

"We continue to see improvement in our credit quality, as we focus on small to medium size businesses, which have provided the Bank with a well-diversified loan portfolio. At the end of the second quarter of 2012, the loan portfolio remained well diversified with commercial and industrial (C&I) loans, including owner-occupied commercial real estate loans, accounting for 31.4 percent of the loan portfolio, commercial real estate loans representing 43.5 percent, and personal and other loans representing 20.9 percent of the loan portfolio.  Construction and development loans account for only 4.2 percent of the loan portfolio,” commented Mr. Weagley.

The following reflects the composition of the Corporation’s loan portfolio as of the dates indicated.

 

Loans (unaudited)
(in thousands)
At quarter ended:		6/30/12				3/31/12				12/31/11				9/30/11				6/30/11
Real estate loans:
Residential		$	147,932			$	149,667			$	151,767			$	158,625			$	150,271
Commercial			381,348				371,855				358,245				328,096				310,475
Construction			33,521				34,093				31,378				39,621				40,421
Total real estate loans			562,801				555,615				541,390				526,342				501,167
Commercial loans			244,294				234,549				214,167				194,923				196,464
Consumer and other loans			196				399				436				298				434
Total loans before deferred fees and costs			807,291				790,563				755,993				721,563				698,065
Deferred costs, net			163				59				17				45				83
Total loans		$	807,454			$	790,622			$	756,010			$	721,608			$	698,148

 

Asset Quality

 

The following tables present the components of non-performing assets and other asset quality data for the periods indicated.

 

(dollars in thousands, unaudited)
As of or for the quarter ended:		6/30/12				3/31/12				12/31/11				9/30/11				6/30/11
Non-accrual loans		$	3,943			$	7,125			$	6,871			$	14,083			$	10,137
Loans 90 days or more past due and still accruing			1,026				1,062				1,029				451				1,013
Total non-performing loans			4,969				8,187				7,900				14,534				11,150
Other non-performing assets			—				—				—				327				327
Other real estate owned			453				558				591				—				—
Total non-performing assets		$	5,422			$	8,745			$	8,491			$	14,861			$	11,477
Performing troubled debt restructured loans		$	8,736			$	6,900			$	7,459			$	8,898			$	8,223
Non-performing assets / total assets			0.36	%			0.59	%			0.59	%			1.08	%			0.88	%
Non-performing loans / total loans			0.62	%			1.04	%			1.04	%			2.01	%			1.60	%
Net (recoveries) charge-offs		$	(574	)		$	(45	)		$	234			$	1,320			$	5
Net (recoveries) charge-offs / average loans (1)			(0.29	)%			(0.02	)%			0.13	%			0.75	%			0.003	%
Allowance for loan losses / total loans			1.27	%			1.23	%			1.27	%			1.32	%			1.41	%
Allowance for loan losses / non-performing loans			205.7	%			119.1	%			121.5	%			65.6	%			88.2	%
Total assets		$	1,501,022			$	1,476,595			$	1,432,738			$	1,376,517			$	1,307,438
Total loans			807,454				790,622				756,010				721,608				698,148
Average loans			790,382				755,813				725,974				707,935				701,056
Allowance for loan losses			10,221				9,754				9,602				9,536				9,836

_______________

(1)    Annualized.

 

 

Non-accrual loans decreased from $7.1 million at March 31, 2012 to $3.9 million at June 30, 2012. Loans past due 90 days or more and still accruing decreased from $1.1 million at March 31, 2012 to $1.0 million at June 30, 2012. Other real estate owned “OREO” at June 30, 2012 was $453,000. During July the Corporation received a contract of sale on the property, which should close in the third quarter reducing OREO to $0.00. Troubled debt restructured loans, which are performing loans, increased from $6.9 million at March 31, 2012 to $8.7 million at June 30, 2012, reflecting one new residential mortgage totaling $1.4 million, and the return to performing status from non performing status of a $590,000 residential mortgage troubled debt restructuring. Interest income lost on loans placed into non-accrual status during the three and six months ended June 30, 2012 amounted to $10,000 and $17,000 respectively.

 

At June 30, 2012, non-performing assets totaled $5.4 million, or 0.36 percent of total assets, as compared with $11.5 million, or 0.88 percent, at June 30, 2011 and $8.7 million, or 0.59 percent, at March 31, 2012. The decrease from June 30, 2011 was achieved notwithstanding the addition of several new residential loans (totaling approximately $1.9 million) and commercial loans (totaling approximately $900,000) into non-performing status. This was more than offset by decreases from payoffs and pay-downs of $2.4 million, total charge-offs or write downs of $500,000, the transfer to other real estate owned and subsequently sold during the last twelve months of $100,000 and the return to performing status of $5.8 million.

 

Subsequent to June 30, 2012 the Corporation received a payoff of a commercial mortgage loan totaling $448,000, reducing loans past due 90 days or more and still accruing to $578,000 and non-performing assets to $5.0 million, or 0.33 percent of total assets as asset quality continues to improve.

 

The allowance for loan losses at June 30, 2012 amounted to approximately $10.2 million, or 1.27 percent of total loans, compared to 1.41 percent of total loans at June 30, 2011. The allowance for loan losses as a percentage of total non-performing loans was 205.7 percent at June 30, 2012 compared to 88.2 percent at June 30, 2011.

 

A discussion of the significant components of non-performing assets at June 30, 2012 is outlined below.

 

·

One non-accrual relationship totaling $2.1 million, secured by senior liens on two separate residential properties, located in Morris County in New Jersey, has been in foreclosure; no material loss to the Corporation is anticipated, although no assurance can be made with respect to the outcome at this time. One of the loans secured by a Morris County property totaling $705,000 has been modified. The related foreclosure action was suspended and the loan is currently performing. The property is listed for sale by the borrower.

 

·

One commercial relationship totaling $578,000 that is accruing but is 90 days past due is secured with a senior lien on retail property in Essex County. The Corporation is currently receiving the rents from the retail tenants that, to date, have been sufficient to bring all past due real estate taxes current. Foreclosure is underway. While we believe the property will be sold by the owner before the foreclosure is completed at no loss to the Corporation, no assurance can be made with respect to the outcome at this time.

 

 

Capital

 

At June 30, 2012, total stockholders' equity amounted to $148.0 million, or 9.86 percent of total assets. Tangible common stockholders' equity was $119.9 million, or 8.08 percent of tangible assets, compared to 8.02 percent at June 30, 2011. Book value per common share was $8.36 at June 30, 2012, compared to $7.39 at June 30, 2011. Tangible book value per common share was $7.33 at June 30, 2012 compared to $6.35 at June 30, 2011.

 

At June 30, 2012, the Corporation’s Tier 1 leverage capital ratio was 9.23 percent, the Tier 1 risk-based capital ratio was 11.75 percent and the total risk-based capital ratio was 12.64 percent. Tier 1 capital increased to approximately $136.7 million at June 30, 2012 from $122.1 million at June 30, 2011, reflecting an increase in retained earnings.

 

At June 30, 2012, 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").

 

Non-GAAP Financial Measures

 

Reported amounts are presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The Corporation's management believes that the supplemental non-GAAP information provided in this press release is utilized by market analysts and others to evaluate a company's financial condition and, therefore, that such information is useful to investors. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures presented by other companies.

 

“Return on average tangible stockholders’ equity” is a non-GAAP financial measure and is defined as net income as a percentage of tangible stockholders’ equity. Tangible stockholders’ equity is defined as common stockholders’ equity less goodwill and other intangible assets. The return on average tangible stockholders’ equity measure may be important to investors that are interested in analyzing the Corporation’s return on equity excluding the effect of changes in intangible assets on equity.

 

The following tables present a reconciliation of average tangible stockholders’ equity and a reconciliation of return on average tangible stockholders’ equity for the periods presented.

 

(dollars in thousands)
For the quarter ended:		6/30/12				3/31/12				12/31/11				9/30/11				6/30/11
Net income		$	4,353			$	4,231			$	3,622			$	3,702			$	3,584
Average stockholders’ equity		$	145,607			$	140,411			$	135,142			$	133,151			$	128,391
Less: Average goodwill and other intangible assets			16,884				16,897				16,910				16,922				16,936
Average tangible stockholders’ equity		$	128,723			$	123,514			$	118,232			$	116,229			$	111,455
Return on average stockholders’ equity			11.96	%			12.05	%			10.72	%			11.12	%			11.17	%
Add: Average goodwill and other intangible assets			1.57	%			1.65	%			1.53	%			1.62	%			1.70	%
Return on average tangible stockholders’ equity			13.53	%			13.70	%			12.25	%			12.74	%			12.86	%

 

 

“Tangible book value per common share” is a non-GAAP financial measure and represents tangible stockholders’ equity (or tangible book value) calculated on a per common share basis. The disclosure of tangible book value per common share may be helpful to those investors who seek to evaluate the Corporation’s book value per common share without giving effect to goodwill and other intangible assets.

 

The following tables present a reconciliation of stockholders’ equity to tangible common stockholders’ equity and book value per common share to tangible book value per common share as of the dates presented.

 

(dollars in thousands, except per share data)
At quarter ended:		6/30/12				3/31/12				12/31/11				9/30/11				6/30/11
Common shares outstanding			16,347,088				16,332,327				16,332,327				16,290,700				16,290,700
Stockholders’ equity		$	147,983			$	142,081			$	135,916			$	133,808			$	130,104
Less: Preferred stock			11,250				11,250				11,250				11,012				9,741
Less: Goodwill and other intangible assets			16,877				16,889				16,902				16,915				16,927
Tangible common stockholders’ equity		$	119,856			$	113,942			$	107,764			$	105,881			$	103,436
Book value per common share		$	8.36			$	8.01			$	7.63			$	7.54			$	7.39
Less: Goodwill and other intangible assets			1.03				1.03				1.03				1.04				1.04
Tangible book value per common share		$	7.33			$	6.98			$	6.60			$	6.50			$	6.35

 

"Tangible common stockholders' equity/tangible assets" is a non-GAAP financial measure and is defined as tangible common stockholders' equity as a percentage of total assets minus goodwill and other intangible assets. This measure may be important to investors that are interested in analyzing the financial condition of the Corporation without consideration of intangible assets, inasmuch as tangible common stockholders' equity and tangible assets both exclude goodwill and other intangible assets.

 

The following tables present a reconciliation of total assets to tangible assets and a comparison of total stockholders' equity/total assets to tangible common stockholders' equity/tangible assets as of the dates presented.

 

(dollars in thousands)
At quarter ended:		6/30/12				3/31/12				12/31/11				9/30/11				6/30/11
Total assets		$	1,501,022			$	1,476,595			$	1,432,738			$	1,376,517			$	1,307,438
Less: Goodwill and other intangible assets			16,877				16,889				16,902				16,915				16,927
Tangible assets		$	1,484,145			$	1,459,706			$	1,415,836			$	1,359,602			$	1,290,511
Total stockholders' equity / total assets			9.86	%			9.62	%			9.49	%			9.72	%			9.95	%
Tangible common stockholders' equity / tangible assets			8.08	%			7.81	%			7.61	%			7.79	%			8.02	%

 

Other income is presented in the table below including and excluding net securities gains. We believe that many investors desire to evaluate other income without regard for securities gains.

 

(in thousands)
For the quarter ended:		6/30/12				3/31/12				12/31/11				9/30/11				6/30/11
Other income		$	1,604			$	1,955			$	1,866			$	2,283			$	1,732
Less: Net investment securities gains			513				937				817				1,250				801
Other income, excluding net investment securities gains		$	1,091			$	1,018			$	1,049			$	1,033			$	931

 

 

“Efficiency ratio” is a non-GAAP financial measure and is defined as other expense as a percentage of net interest income on a tax equivalent basis plus other income, excluding net securities gains, calculated as follows:

 

(dollars in thousands)
For the quarter ended:		6/30/12				3/31/12				12/31/11				9/30/11				6/30/11
Other expense		$	5,690			$	5,807			$	6,222			$	5,529			$	5,757
Net interest income (tax equivalent basis)		$	10,990			$	10,761			$	10,531			$	10,130			$	9,974
Other income, excluding net investment securities gains			1,091				1,018				1,049				1,033				931
Total		$	12,081			$	11,779			$	11,580			$	11,163			$	10,905
Efficiency ratio			47.1	%			49.3	%			53.7	%			49.5	%			52.8	%

 

The following table sets forth the Corporation’s consolidated average statements of condition for the periods presented.

 

Condensed Consolidated Average Statements of Condition (unaudited)

 

(in thousands)
For the quarter ended:		6/30/12				3/31/12				12/31/11				9/30/11				6/30/11
Investment securities
Available for sale		$	473,963			$	443,109			$	409,480			$	365,422			$	390,391
Held to maturity			66,626				72,401				69,587				71,789				38,985
Loans			790,382				755,813				725,974				707,935				701,056
Allowance for loan losses			(9,813	)			(9,683	)			(9,506	)			(10,383	)			(9,601	)
All other assets			177,100				199,631				214,984				206,857				180,753
Total assets		$	1,498,258			$	1,461,271			$	1,410,519			$	1,341,620			$	1,301,584
Non-interest bearing deposits		$	173,248			$	167,921			$	166,027			$	161,744			$	157,002
Interest-bearing deposits			1,002,230				976,958				934,774				838,508				805,752
Borrowings			166,299				166,375				166,155				199,747				202,902
Other liabilities			10,874				9,606				8,421				8,470				7,537
Stockholders’ equity			145,607				140,411				135,142				133,151				128,391
Total liabilities and stockholders’ equity		$	1,498,258			$	1,461,271			$	1,410,519			$	1,341,620			$	1,301,584

 

About Center Bancorp

 

Center Bancorp, Inc. is a bank holding company, which 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 now ranks as the third largest national bank headquartered in the state. Union Center National Bank is 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 Private Wealth Management Division, which includes its wholly-owned subsidiary, Center Financial Group LLC, provides personalized wealth management and advisory services to high net worth individuals and families. Our services include banking, liquidity management, investment services, custody, tailored lending, wealth planning, trust and fiduciary services, insurance, family wealth advisory services and philanthropic advisory services.

 

Center also recently announced a strategic partnership with Compass Financial Management, LLC and ING to offer pension/401(k) planning services. Compass is an Investment Advisory Company with five decades of cumulative experience providing investment services in a personal, professional and attentive manner. They provide discretionary private investment management for individuals and corporate accounts as well as 401(k) advisory services.

 

The Bank currently operates 12 banking locations in Union and Morris Counties in New Jersey. Banking centers are located in Union Township (5 locations), Berkeley Heights, Boonton/Mountain Lakes, Madison, Millburn/Vauxhall, Morristown, Springfield, and Summit, New Jersey. While the Bank's primary market area is comprised of Union and Morris Counties, New Jersey, the Corporation is expanding to northern and central New Jersey with its recent announcement of the pending purchase and assumption of specific assets and liabilities of Saddle River Valley Bank. Saddle River Valley Bank has two branch locations in Saddle River and Oakland, NJ. Also the pending opening of the new Englewood banking center location located in downtown Englewood, NJ.  As of June 30, 2012, Saddle River Valley Bank had approximately $102.1 million in assets, $52.8 million in loans, $88.6 million of deposits and $12.8 million of stockholders' equity.

 

For further information regarding Center Bancorp, Inc., please visit our web site at http://www.centerbancorp.com or call (800) 862-3683. For information regarding Union Center National Bank, please visit our web site at http://www.ucnb.com.

 

Forward-Looking Statements

 

All non-historical statements in this press release (including statements regarding future margin figures, future credit trends, levels of future non-performing loans and the future status of particular non-performing loans) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may use forward-looking terminology such 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, Center Bancorp’s ability to integrate Saddle River Valley Bank’s branches into Center Bancorp’s branch network, 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 economic recovery and the deregulation of the financial services industry, and other risks cited in the Corporation's most recent Annual Report on Form 10-K and other 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

(Unaudited)

 

(in thousands, except for share and per share data)		June 30, 2012				December 31, 2011
ASSETS
Cash and due from banks		$	73,668			$	111,101
Interest bearing deposits with banks			12,000				—
Total cash and cash equivalents			85,668				111,101
Investment securities:
Available for sale			467,190				414,507
Held to maturity (fair value of $66,562 at June 30, 2012 and $74,922 at December 31, 2011)			62,997				72,233
Loans			807,454				756,010
Less: Allowance for loan losses			10,221				9,602
Net loans			797,233				746,408
Restricted investment in bank stocks, at cost			9,139				9,233
Premises and equipment, net			12,218				12,327
Accrued interest receivable			6,465				6,219
Bank-owned life insurance			29,440				28,943
Goodwill			16,804				16,804
Prepaid FDIC assessments			1,350				1,884
Other real estate owned			453				591
Other assets			12,065				12,488
Total assets		$	1,501,022			$	1,432,738
LIABILITIES
Deposits:
Non-interest bearing		$	181,282			$	167,164
Interest-bearing:
Time deposits $100 and over			106,452				137,998
Interest-bearing transaction, savings and time deposits less than $100			886,915				816,253
Total deposits			1,174,649				1,121,415
Short-term borrowings			107				—
Long-term borrowings			161,000				161,000
Subordinated debentures			5,155				5,155
Due to brokers for investment securities			1,545				—
Accounts payable and accrued liabilities			10,583				9,252
Total liabilities			1,353,039				1,296,822
STOCKHOLDERS’ EQUITY
Preferred stock, $1,000 liquidation value per share, authorized 5,000,000 shares; issued 11,250 shares Series B at June 30, 2012 and December 31, 2011			11,250				11,250
Common stock, no par value, authorized 25,000,000 shares; issued 18,477,412 shares at June 30, 2012 and December 31, 2011; outstanding 16,347,088 shares at June 30, 2012 and 16,332,327 shares at December 31, 2011			110,056				110,056
Additional paid in capital			4,742				4,715
Retained earnings			39,663				32,695
Treasury stock, at cost (2,130,324 common shares at June 30, 2012 and 2,145,085 common shares December 31, 2011)			(17,234	)			(17,354	)
Accumulated other comprehensive loss			(494	)			(5,446	)
Total stockholders’ equity			147,983				135,916
Total liabilities and stockholders’ equity		$	1,501,022			$	1,432,738

 

 

CENTER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands, except for share and per share data)		2012				2011				2012				2011
Interest income
Interest and fees on loans		$	9,414			$	8,950			$	18,799			$	18,167
Interest and dividends on investment securities:
Taxable			3,112				3,428				6,200				6,806
Tax-exempt			826				351				1,599				439
Dividends			140				149				289				333
Interest on federal funds sold and other short-term investment			4				—				4				—
Total interest income			13,496				12,878				26,891				25,745
Interest expense
Interest on certificates of deposit $100 or more			182				348				434				613
Interest on other deposits			1,126				1,072				2,282				2,074
Interest on borrowings			1,642				1,665				3,284				3,320
Total interest expense			2,950				3,085				6,000				6,007
Net interest income			10,546				9,793				20,891				19,738
Provision for loan losses			(107	)			250				—				1,128
Net interest income after provision for loan losses			10,653				9,543				20,891				18,610
Other income
Service charges, commissions and fees			421				461				867				910
Annuities and insurance commissions			48				33				92				39
Bank-owned life insurance			246				261				497				521
Loan related fees			195				145				431				232
Other			181				31				222				60
Other-than-temporary impairment losses on investment securities			(140	)			(142	)			(198	)			(237	)
Net other-than-temporary impairment losses on investment securities			(140	)			(142	)			(198	)			(237	)
Net gains on sale of investment securities			653				943				1,648				1,804
Net investment securities gains			513				801				1,450				1,567
Total other income			1,604				1,732				3,559				3,329
Other expense
Salaries and employee benefits			3,055				2,903				6,173				5,770
Occupancy and equipment			606				667				1,306				1,533
FDIC insurance			270				528				569				1,056
Professional and consulting			294				245				540				486
Stationery and printing			96				99				180				200
Marketing and advertising			56				65				87				86
Computer expense			362				350				715				689
Other real estate owned, net			22				—				84				(1	)
Other			929				900				1,843				1,873
Total other expense			5,690				5,757				11,497				11,692
Income before income tax expense			6,567				5,518				12,953				10,247
Income tax expense			2,214				1,934				4,369				3,645
Net Income			4,353				3,584				8,584				6,602
Preferred stock dividends and accretion			84				145				225				291
Net income available to common stockholders		$	4,269			$	3,439			$	8,359			$	6,311
Earnings per common share
Basic		$	0.26			$	0.21			$	0.51			$	0.39
Diluted		$	0.26			$	0.21			$	0.51			$	0.39
Weighted Average Common Shares Outstanding
Basic			16,333,653				16,290,700				16,332,990				16,290,547
Diluted			16,341,767				16,315,667				16,340,011				16,309,026

 

 

CENTER BANCORP, INC. AND SUBSIDIARIES

SELECTED QUARTERLY FINANCIAL AND STATISTICAL DATA

(Unaudited)

 

		Three Months Ended
(in thousands, except for share and per share data) (annualized where applicable)		6/30/2012				3/31/2012				6/30/2011
Statements of Income Data
Interest income		$	13,496			$	13,395			$	12,878
Interest expense			2,950				3,050				3,085
Net interest income			10,546				10,345				9,793
Provision for loan losses			(107	)			107				250
Net interest income after provision for loan losses			10,653				10,238				9,543
Other income			1,604				1,955				1,732
Other expense			5,690				5,807				5,757
Income before income tax expense			6,567				6,386				5,518
Income tax expense			2,214				2,155				1,934
Net income		$	4,353			$	4,231			$	3,584
Net income available to common stockholders		$	4,269			$	4,090			$	3,439
Earnings per Common Share
Basic		$	0.26			$	0.25			$	0.21
Diluted		$	0.26			$	0.25			$	0.21
Statements of Condition Data (Period-End)
Investment securities:
Available for sale		$	467,190			$	454,994			$	377,214
Held for maturity( fair value $66,562, $72,403 and $42,122)			62,997				69,610				41,804
Loans			807,454				790,622				698,148
Assets			1,501,022				1,476,595				1,307,438
Deposits			1,174,649				1,153,473				965,676
Borrowings			166,262				166,155				198,529
Stockholders' equity			147,983				142,081				130,104
Common Shares Dividend Data
Cash dividends		$	490			$	490			$	489
Cash dividends per share		$	0.03			$	0.03			$	0.03
Dividend payout ratio			11.48	%			11.98	%			14.22	%
Weighted Average Common Shares Outstanding
Basic			16,333,653				16,332,327				16,290,700
Diluted			16,341,767				16,338,162				16,315,667
Operating Ratios
Return on average assets			1.16	%			1.16	%			1.10	%
Return on average equity			11.96	%			12.05	%			11.17	%
Return on average tangible equity			13.53	%			13.70	%			12.86	%
Average equity / average assets			9.72	%			9.61	%			9.86	%
Book value per common share (period-end)		$	8.36			$	8.01			$	7.39
Tangible book value per common share (period-end)		$	7.33			$	6.98			$	6.35
Non-Financial Information (Period-End)
Common stockholders of record			542				552				575
Full-time equivalent staff			165				170				167