-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GpWyp94OWNEkWYZ3LsSyBBxT/GTU19Hrik/+wNb/h1FdN5YdBA7phJvnw/DDwjAY Xo+WqNlCb1I59pKkawLHKA== 0000950110-97-001288.txt : 19970815 0000950110-97-001288.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950110-97-001288 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTER BANCORP INC CENTRAL INDEX KEY: 0000712771 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 521273725 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11486 FILM NUMBER: 97663176 BUSINESS ADDRESS: STREET 1: 2455 MORRIS AVE CITY: UNION STATE: NJ ZIP: 07083 BUSINESS PHONE: 9086889500 MAIL ADDRESS: STREET 1: 2455 MORRIS AVE CITY: UNION STATE: NJ ZIP: 07083 10-Q 1 FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 OR [ ] 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. ----------------------------------------------------- (Exact name of registrant as specified in its charter) NEW JERSEY 52-1273725 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2455 MORRIS AVENUE, UNION, NEW JERSEY 07083 ---------------------------------------------------- (Address of principal executives offices) (Zip Code) (908) 688-9500 ---------------------------------------------------- (Registrant's telephone number, including area code) ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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] No [ ] SHARES OUTSTANDING ON JUNE 30, 1997 --------------------------------------------- Common stock no par value -- 2,355,888 shares ================================================================================ CENTER BANCORP, INC. INDEX TO FORM 10-Q PART I. FINANCIAL INFORMATION Page ---- Item 1. Financial Statements Consolidated Statements of Condition at June 30, 1997 (Unaudited) and December 31, 1996 ....... 3 Consolidated Statements of Income for the Three and Six Months Ended June 30, 1997 and 1996 (Unaudited) .............................................. 4 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1997 and 1996 (Unaudited) .............................................. 5 Notes to the Consolidated Financial Statements ............ 6 In the opinion of Management, all adjustments necessary for a fair presentation of the company's financial position and results of operations for the interim periods have been made. Such adjustments are of a normal recurring nature. All share and per share amounts have been restated to reflect a 3 for 2 split to shareholders of record May 1, 1996, paid on May 31, 1996. Also reflected is the 5% stock dividend to shareholders of record May 18, 1997, paid on May 31, 1997. Results for the period ended June 30, 1997 are not necessarily indicative of results for any other interim period or for the entire fiscal year. Reference is made to the Company's Annual Report on Form 10-K for the year ended December 31, 1996 for information regarding accounting principles. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ...................... 7-19 PART II. OTHER INFORMATION ............................................... 20 SIGNATURES ........................................................ 21 Page 2 CENTER BANCORP, INC. CONSOLIDATED STATEMENTS OF CONDITION June 30, December 31, (Dollars in thousands) 1997 1996 - -------------------------------------------------------------------------------- (unaudited) Assets: Cash and due from banks ............................ $ 18,418 $ 19,761 Federal funds sold ................................. 0 10,000 Securities purchased under agreement to resell ..... 0 13,300 - ----------------------------------------------------------------------------- Total cash and cash equivalents ................ 18,418 43,061 - ----------------------------------------------------------------------------- Investment securities held to maturity (approximate market value of $238,900 in 1997 and $218,788 in 1996) .................... 237,232 218,584 Investment securities available for sale ........... 80,458 61,539 - ----------------------------------------------------------------------------- Total investment securities .................... 317,690 280,123 - ----------------------------------------------------------------------------- Loans, net of unearned income ...................... 125,935 117,830 Less -- Allowance for loan losses ................ 1,277 1,293 - ----------------------------------------------------------------------------- Net loans .................................... 124,658 116,537 - ----------------------------------------------------------------------------- Premises and equipment, net ........................ 9,561 10,104 Accrued interest receivable ........................ 4,779 4,371 Other assets ....................................... 1,600 1,341 Goodwill ........................................... 3,545 3,681 - ----------------------------------------------------------------------------- Total assets ................................. $480,251 $459,218 ============================================================================= Liabilities Deposits: Non-interest bearing ............................. $ 73,085 $ 68,086 Interest bearing: Certificates of deposit $100,000 and over ...... 103,308 99,818 Other .......................................... 245,825 258,750 - ----------------------------------------------------------------------------- Total deposits ............................... 422,218 426,654 Federal funds purchased and securities sold under agreements to repurchase ......................... 23,482 0 Accounts payable and accrued liabilities............ 2,907 2,351 - ----------------------------------------------------------------------------- Total Liabilities ............................ 448,607 429,005 Stockholders' equity Common stock, no par value: Authorized 20,000,000 shares; issued 2,699,893 and 2,663,160 shares in 1997 and 1996, respectively ..................................... 4,613 4,468 Appropriated surplus ............................... 3,510 3,510 Retained earnings .................................. 25,005 23,738 - ----------------------------------------------------------------------------- 33,128 31,716 Less -- Treasury stock at cost (314,005 shares in 1997 and 1996 respectively) ............ 1,814 1,814 Net unrealized gain on investment securities available-for-sale, net of taxes ................. 330 311 - ----------------------------------------------------------------------------- Total stockholders' equity ................... 31,644 30,213 - ----------------------------------------------------------------------------- Total liabilities and stockholders' equity ...................... $480,251 $459,218 ============================================================================= Page 3 CENTER BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Three Months Ended Six Months Ended June 30, June 30, ----------------------- ----------------------- (in thousands, except per share data) 1997 1996 1997 1996 - ---------------------------------------------------------------------------------------------------------------- Interest income Interest and fees on loans ............................. $ 2,455 $ 1,979 $ 4,853 $ 3,953 Interest and dividends on investment securities: Taxable interest income .............................. 4,933 3,790 9,437 7,426 Nontaxable interest income ........................... 240 290 499 574 Interest on Federal funds sold and securities purchased under agreement to resell .................. 108 55 309 163 - ---------------------------------------------------------------------------------------------------------------- Total interest income ............................ 7,736 6,114 15,098 12,116 - ---------------------------------------------------------------------------------------------------------------- Interest expense: Interest on certificates of deposit $100,000 or more ... 1,495 1,113 2,765 1,981 Interest on other deposits ............................. 2,013 1,397 4,025 2,898 Interest on short-term borrowings ...................... 188 164 295 343 - ---------------------------------------------------------------------------------------------------------------- Total interest expense ........................... 3,696 2,674 7,085 5,222 Net interest income .............................. 4,040 3,440 8,013 6,894 - ---------------------------------------------------------------------------------------------------------------- Provision for loan losses ................................ 0 0 0 0 Net interest income after provision for loan losses ...... 4,040 3,440 8,013 6,894 - ---------------------------------------------------------------------------------------------------------------- Other income: Service charges, commissions and fees .................. 137 122 275 236 Other income ........................................... 39 30 70 63 Gain on securities sold ................................ 0 80 0 80 - ---------------------------------------------------------------------------------------------------------------- Total other income ............................... 176 232 345 379 - ---------------------------------------------------------------------------------------------------------------- Other expense: Salaries and employee benefits ......................... 1,384 1,280 2,682 2,374 Occupancy expense, net ................................. 242 180 520 415 Premises and equipment expense ......................... 321 228 649 422 Stationary and printing expense ........................ 120 168 196 235 Marketing and advertising .............................. 81 65 208 133 Other expenses ......................................... 568 333 932 668 - ---------------------------------------------------------------------------------------------------------------- Total other expense .............................. 2,716 2,254 5,187 4,247 - ---------------------------------------------------------------------------------------------------------------- Income before income tax expense ................. 1,500 1,418 3,171 3,026 Income tax expense ....................................... 554 416 985 788 - ---------------------------------------------------------------------------------------------------------------- Net income ....................................... $ 946 $ 1,002 $ 2,186 $ 2,238 ================================================================================================================ Earnings per share ....................................... $ 0.40 $ 0.43 $ 0.93 $ 0.96 ================================================================================================================ Average weighted common shares outstanding ............... 2,355,874 2,340,265 2,353,567 2,338,185 ================================================================================================================ * All share and per share amounts have been restated to reflect the three-for-two stock split in May of 1996 and the 5% stock dividend paid in May of 1997. Page 4
CONSOLIDATED STATEMENTS OF CASH FLOWS June 30, ---------------------- (Dollars in thousands) 1997 1996 - -------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ......................................... $ 2,186 $ 2,238 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .................. 735 385 (Increase) in accrued interest receivable ...... (408) (893) (Increase) in other assets ..................... (283) (5,448) (Increase) in other liabilities ................ 556 43 Amortization of premium and accretion of discount on investment securities, net ....... 141 263 - -------------------------------------------------------------------------------- Net cash provided (used in) operating activities ..................... 2,927 (3,412) - -------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities of securities available-for-sale .................... 8,801 6,834 Proceeds from maturities of securities held-to-maturity....................... 17,265 17,241 Proceeds from sales of investment securities available-for-sale .................... 0 36,086 Purchase of securities available-for-sale................................ (27,744) (57,141) Purchase of securities ............................. (36,011) (66,605) held-to-maturity Net (increase) in loans ............................ (8,121) (16,728) Property and equipment expenditures, net ................................ (32) (2,359) - -------------------------------------------------------------------------------- Net cash used in investing activities ...... (45,842) (82,672) - -------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net (increase) in deposits ......................... (4,436) 119,549 Dividends paid ..................................... (919) (900) Proceeds from issuance of common stock ............. 145 116 Net increase (decrease) in short term borrowing .... 23,482 (13,185) - -------------------------------------------------------------------------------- Net cash provided by financing activities .. 18,272 105,580 - -------------------------------------------------------------------------------- Net (decrease) increase in cash and cash equivalents ..................... (24,643) 19,496 - -------------------------------------------------------------------------------- Cash and cash equivalents at beginning of period ..... 43,061 30,172 - -------------------------------------------------------------------------------- Cash and cash equivalents at end of period ........... $ 18,418 $ 49,668 ================================================================================ Supplemental disclosures of cash flow information: Interest paid on deposits and short-term borrowings ....................................... $ 7,007 $ 5,233 Income taxes ....................................... $ 353 $ 728 Page 5 NOTE 1. ACQUISITION On June 28, 1996, the Corporation acquired Lehigh Savings Bank SLA, (Lehigh), a New Jersey chartered savings and loan institution in a transaction accounted for under the purchase method of accounting. At June 28, 1996, Lehigh had assets of $70.9 million (primarily cash and cash equivalents of $53.0 million and loans of $15.0 million) and deposits and stockholders' equity of $68.2 million and $2.7 million, respectively. The Corporation paid $5.5 million for Lehigh, resulting in goodwill of $3.8 million. The goodwill is being amortized on a straight-line basis over 15 years. The June 30, 1996 and 1997 consolidated financial statements of the Corporation includes assets, liabilities and results of operations of Lehigh since the acquisition date on both a current and comparable basis. Page 6 MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net income and earnings per share remained relatively flat for the first six months of 1997 compared to the first six months of 1996. Net income for the six months ended June 30, 1997 was $2,186,000 as compared to $2,238,000 earned for the comparable six month period of 1996. On a per share basis, earnings were $0.93 as compared to $0.96 per share for the six months ended June 30, 1996. The annualized return on average assets was .92 percent for the six months ended June 30, 1997 as compared with 1.16 percent for the comparable period in 1996, while the annualized return on average stockholders' equity was 14.2 percent and 16.0 percent, respectively. Earnings performance for the six months ended June 30, 1997, reflected increased net interest income offset by increases in non-interest expense and income tax expense. All share and per share amounts have been restated to reflect the 1996 3 for 2 stock split and the 1997 5% stock dividend which paid on May 18, 1997. Net income for the three months ended June 30, 1997 amounted to $946,000 as compared to $1,002,000 earned for the comparable three month period ended June 30, 1996. On a per share basis, earnings decreased to $.40 per share as compared with $.43 per share for the three months ended June 30, 1997 and 1996, respectively, while the annualized return on average assets was .78 percent compared with 1.02 percent for the comparable three month period in 1996. The annualized return on average stockholders' equity was 12.2 percent for the three month period ended June 30, 1997 as compared to 14.5 percent for the comparable three months ended June 30, 1996. Earnings performance for the second quarter of 1997 reflects a rise in non-interest expense and income-tax expense, coupled with a decline of $56,000 in other income, which together was greater than the change in the net interest margin, an increase of $1.1 million, as compared to the comparable period in 1996. Net interest income is the difference between the interest earned on the portfolio of earnings-assets (principally loans and investments) and the interest paid for deposits and short-term borrowings which support these assets. Net interest income is presented below first in accordance with the Corporation's consolidated financial statements and then on a fully tax-equivalent basis by adjusting tax-exempt income (primarily interest earned on various obligations of state and political subdivisions) by the amount of income tax which would have been paid had the assets been invested in taxable issues. NET INTEREST INCOME
- --------------------------------------------------------------------------------------------- (dollars in thousands) Three months Six months ended ended June 30, June 30, ---------------- Percent ----------------- Percent 1997 1996 Change 1997 1996 Change - --------------------------------------------------------------------------------------------- Interest income: Investments ...................... $5,173 $4,135 25.1 $ 9,936 $8,067 23.2 Loans, including fees ............ 2,455 1,979 24.1 4,853 3,953 22.8 Federal funds sold ............... 108 0 100.0 309 96 221.9 - --------------------------------------------------------------------------------------------- Total interest income .......... 7,736 6,114 26.5 15,098 2,116 24.6 - --------------------------------------------------------------------------------------------- Interest expense: Certificates $100,000 or more .... 1,495 1,113 34.3 2,765 1,981 39.6 Deposits ......................... 2,013 1,397 44.1 4,025 2,898 38.9 Short-term borrowings ............ 188 164 14.6 295 346 14.7 - --------------------------------------------------------------------------------------------- Total interest expense ......... 3,696 2,674 38.2 7,085 5,222 35.7 - --------------------------------------------------------------------------------------------- NET INTEREST INCOME* ........... 4,040 3,440 17.4 8,013 6,894 16.2 - --------------------------------------------------------------------------------------------- Tax-equivalent adjustment .......... 124 149 -16.8 257 296 -13.2 Net interest income on a fully tax-equivalent basis ............. $4,164 $3,589 16.0 $ 8,270 $7,190 15.0 ============================================================================================= * Before the provision for loan losses. NOTE: The tax-equivalent adjustment was computed based on an assumed statutory Federal income tax rate of 34 percent. Adjustments were made for interest accrued on securities of state and political subdivisions. Page 7
Net interest income on a fully tax-equivalent basis for the six months ended June 30, 1997 increased $1,083,000 or 15.1 percent, from approximately $7.2 million for the comparable six month period in 1996. The Corporation's net interest margin declined to 3.76 percent from 3.98 in 1997 due to an increased cost of funds reflecting the continued pressure, in general, on short-term interest rates. This trend was consistent with the first quarter as the yield curve continues to flatten. For the six months ended June 30, 1997 earning assets increased by $79.2 million on average as compared with the six months ended June 30, 1996. The increase in the average yield on interest-earning assets of 10 basis points was offset by a more substantial increase in the average cost of interest-bearing liabilities of 27 basis points. Net interest income on a fully tax-equivalent basis increased $575,000 or 16.0 percent to approximately $4.2 million for the three months ended June 30, 1997, from approximately $3.6 million for the comparable period in 1996. The net interest margin decreased to 3.71 percent from 3.92 percent due to the increased cost of funds reflecting the continued pressure, in general, on short-term interest rates. For the three months ended June 30, 1997, an increase in the average yield on interest earning-assets of 15 basis points was offset by a more substantial increase in the average cost of interest-bearing liabilities of 33 basis points. The decline in net interest spreads is primarily a result of the increased cost of interest-bearing liabilities and the Corporation's inability to fund a greater portion of the increase in earning-assets through increases in non-interest-bearing sources and core deposits. Average earning-assets increased by $83.0 million, as compared with the comparable three month period in 1996. The net increase in average interest-bearing liabilities was $78.7 million over the comparable three month period in 1996. The 1997 second quarter changes in average volumes were primarily due to increased volumes of loans and taxable investments funded with more costly time deposits. The change further reflects the impact of the Lehigh acquisition on volumes. Interest income for the six month period ended June 30, 1997 increased by approximately $3.0 million or 23.7 percent, as compared to the comparable period ended June 30, 1996. The primary factor contributing to the increase was the previously cited changes in the growth of average earning-assets. The Corporation's loan portfolio increased on average $22.6 million to $122.509 million from $99.9 million in the same quarter of 1996. This growth was primarily driven by growth in commercial loans, commercial mortgages, home equity lines of credit, inclusive of the loans acquired from Lehigh. This growth was funded by deposit growth. The loan portfolio (traditionally the Corporation's highest yielding earning asset) represented approximately 28 percent of the Corporation's interest earning assets (on average) for the six months ended June 30, 1997 as compared with 27.3 percent for the comparable period in 1996. For the three month period ended June 30, 1997 interest income increased by $1.6 million or 25.5 percent over the comparable three month period in 1996 on fully tax equivalent basis. The primary factor contributing to the increase was the previously cited changes in the growth of earning-assets. The Corporation's loan portfolio increased on average $24.2 million to $124.1 million from $99.9 million in the same quarter in 1996, primarily driven by growth in commercial loans, commercial mortgages and home equity lines of credit. This growth was funded through deposit growth. The loan portfolio represented approximately 28 percent of the Corporation's interest-earning assets (on average) during the second quarter of 1997 and 1996. Interest income generated from the loan portfolio during the three months ended June 30, 1997 was driven by the stable loan demand attributed in part to an aggressive advertising program. Investments contributed the most significant change in the earning-asset mix for both the six and three month periods ended June 30, 1997. Investment volume was funded by the increased deposit volumes gained through the Corporation's expanded branch network and additional funds. These deposit funds for both the six and three month periods of 1997 and 1996, which increased approximately $86.2 million and $87.6 million, respectively on average, were used in investing activities, and interest rate risk management strategies. Within the investment portfolio the most significant changes in increased volumes took place among taxable securities segments which far outweighed the decreases in the nontaxable portfolio. The continued growth of taxable investment securities reflects the change in interest rates, making the yields on taxable investments more attractive. Page 8 Interest expense for the six months ended June 30, 1997 increased as a result of the growth in deposit volumes, and the continued pressure on the cost of funds in the short-term market. This pressure was heightened by the Federal Reserve's action on March 25, 1997, raising the federal funds index to 5.5 percent from the previous targeted level of 5.25 percent. As a result, pricing pressures have increased within the financial industry, to retain and attract new deposits and increased usage of money indexed to federal funds. For the six months ended June 30, 1997, interest expense increased $1.9 million or 35.6 percent as compared with the comparable six month period in 1996. Interest expense for the three months ended June 30, 1997 increased as a result of the continued growth in deposit volumes, coupled with the changes in deposit mix. Rate pressures brought about by the gridlock in the short-term markets, primarily indexed to money center 30-90 day indicies, contributed significantly to the overall increased expense, as compared with the comparable three month period ended June 30, 1996. Inflationary concerns and pace of the expanding economy have locked short-term interest rates at current levels, while the long and intermediate sectors of the curve have flattened. There continues to be disintermediation of rates in the short-term interest rate market. This in turn has effected the cost of funds associated with a number of the Corporation's funding products, i.e. municipal deposits tied to market indices, "Jumbo" Certificates of Deposits, and short-term repurchase agreements. Management believes that this pressure and continued disparity in the level of interest rates in the short-term end of the yield curve will continue to exert upward pressure on the cost of funds throughout 1997. Deposit growth during the first and second quarter of 1997 continue to be impacted by the depositors' desire for higher-yielding investment alternatives, such as mutual funds, stocks, tax-free instruments, and a variety of insurance products. As interest rates have remained high in the short-term market in the six and three month periods of 1997, depositors continued to shift funds from lower yielding savings and money market accounts into higher yielding certificates of deposit. Furthermore, the impact of this volume change in the deposit mix, coupled with the increased deposit volume indexed to this end of the curve, was a major factor in net change in the cost of funds, during 1997 as compared with 1996. For the six months ended June 30, 1997, the Corporation's net interest yield on a tax-equivalent basis (i.e. net interest income on a tax equivalent basis as a percent of average interest-earning assets) declined to 3.16 percent from 3.33 percent for the six months ended June 30, 1996. This decline reflected a narrowing of margins due to the previously discussed pressure on rates at the short-end of the yield curve. The rise in these funding costs continue to change disproportionately to the rates on new loans and investments. Primarily this is reflected in time certificates greater than $100,000 supporting assets. For the three months ended June 30, 1997, the Corporation's net interest yield on a tax-equivalent basis declined to 3.10 percent from 3.28 percent for the three months ended June 30, 1996. This decline reflected a narrowing of spreads between yields earned on loans and investments and rates paid for supporting funds. There was a favorable change in the mix of supporting interest-earning assets, primarily the increased investment and loan volumes. However, this was offset to some extent by the change in the mix of interest-bearing liabilities to more costly funding. The contribution of non-interest-bearing sources (i.e. the differential between the average rate paid on all sources of funds and the average rate paid on interest-bearing sources) remained stable at approximately 60 and 61 basis points during both six month periods ended June 30, 1997 and 1996, respectively, and 61 and 62 basis points for the respective three month periods ended June 30, 1997 and 1996. This trend reflects the continued deposit pricing pressure exerted on interest margins, due to a shifting of these deposits to interest-bearing accounts. Historically the Corporation has enjoyed more favorable volumes of these deposits which further underscores the "Industry" change to more reliance on interest-bearing funding sources. Page 9 INVESTMENTS For the six months ended June 30, 1997, the average volume of investment securities increased by $50.6 million as compared to the same period in 1996. The tax-equivalent yield on investments increased to 6.65 percent or 17 basis points from a yield of 6.48 percent during the six month period ended June 30, 1996. The retention and increased yield on the investment portfolio during the first six months of 1997 was achieved through comparable to higher market rates obtained on purchases made to replace, in some cases, lower yielding investments which had matured, were prepaid, or were called. For the three months ended June 30, 1997, the average volume of investment securities increased by $55.1 million from $262.0 million on average for the same three month period in 1996. The tax-equivalent yield on the investments increased, 6.68 percent and 6.46 percent in 1997 and 1996, respectively. The impact of repricing activity on yields was lessened by a change in bond segmentation and some extension where risk is minimal within the portfolio investment maturities, resulting in narrowed spreads and by the current uncertainty of rates. Securities available-for-sale are a part of the Corporation's interest rate risk management strategy and may be sold in response to changes in interest rates, changes in prepayment risk, liquidity management and other factors. At June 30, 1997, the total investment portfolio excluding overnight investments, averaged $306.6 million, or 69.6 percent of earning-assets, as compared to $256.0 million or 70.9 percent at June 30, 1996. The principal components of the investment portfolio are U.S. Government Treasury and Federal Agency callable and noncallable securities, including agency issued collateralized mortgage obligations. At June 30, 1997 the net unrealized loss carried as a component of shareholders' equity amounted to a net unrealized gain of $330,000, as compared with an unrealized gain of $311,000 at December 31, 1996 resulting from the continued rally in the bond market. At June 30, 1996 the available-for-sale portfolio carried an unrealized gain of $186,000. This loss reflects the increase in rates that was occurring during that period versus a decline in rates at present producing the resulting increase in prices. LOANS Loan growth during the first six months of 1997 occurred in all segments of the loan portfolio. This growth occurred from the volume acquired in the Lehigh acquisition enhanced by the Corporation's marketing programs and new product lines. The stabilization of yield in the portfolio was a result of a stable prime rate environment coupled with a competitive rate structure to attract new loans. The results of increased volume were lessened by continued re-financing activity and by the heightened demand in the competing lending markets that exists. The Corporation's desire to grow this segment of the earning asset mix is reflected in its current business development plan and marketing plans, as well as, its short-term strategic plan. Analyzing the loan portfolio for the six months ended June 30, 1997, average loan volume increased $22.6 million or 22.6 percent, while portfolio yield remained flat, increasing by 1 basis point compared which the same period in 1996. The volume related factors contributed increased earnings of $895,000 enhanced by $5,000 in the rate related change. The increased total average loan volume was due to increased customer activity and the purchase of Lehigh. For the three months ended June 30, 1997, average loan volume increased $24.2 million, while the portfolio yield remained flat as compared with the same period in 1996. The volume related factors contributed increased earnings of $4.3 million offset by a decline of $3.8 million due to rate related changes. Total average loan volume increased to $124.1 million with a net interest yield of 7.92 percent, as compared to $99.9 million with a yield of 7.92% for the three months ended June 30, 1996. Page 10 RISK ELEMENTS ASSET QUALITY The Corporation manages asset quality and credit risk by maintaining diversification in its loan portfolio and through review processes that include analysis of credit requests and ongoing examination of outstanding loans and delinquencies, with particular attention to portfolio dynamics and mix. The Corporation strives to identify loans experiencing difficulty early enough to correct the problems, to record charge-offs promptly based on realistic assessments of current collateral values, and to maintain an adequate allowance for loan losses at all times. These practices have protected the Corporation during economic downturns and periods of uncertainty. It is generally the Corporation's policy to discontinue interest accruals once a loan is past due as to interest/or principal payments for a period of ninety days. When a loan is placed on non-accrual, interest accruals cease and uncollected accrued interest is reversed and charged against current income. Payments received on non-accrual loans are applied against principal. A loan may only be restored to an accruing basis when it again becomes well secured and in the process of collection or all past due amounts have been collected. Loan origination fees and certain direct loan origination costs are deferred and recognized over the life of the loan as an adjustment to the loan's yield. At June 30, 1997 and 1996, the Corporation had no restructured loans. Non-accrual loans amounted to $129,000 at June 30, 1997, and were comprised of two residential mortgage loans, as compared to $475,000 at June 30, 1996. Past due loans 90 days or more and still accruing amounted to $87,000 as of June 30, 1997 and $50,000 as of 1996. Of the balance, respectively, in each period, $87,000 and $40,000 were comprised of student loans, which are wholly guaranteed by the U.S. Government. Additionally, the Corporation did not have any other real estate owned (OREO) at June 30, 1997 and 1996. (dollars in thousands) 1997 1996 - -------------------------------------------------------------------------------- Loans past due 90 days and still accruing ................... $ 87 $ 50 Non-accrual loans ........................................... 129 475 - -------------------------------------------------------------------------------- Total non-performing assets ................................. $216 $525 ================================================================================ ALLOWANCE FOR LOAN LOSSES The purpose of the allowance for loan losses is to absorb the impact of losses inherent in the loan portfolio. Additions to the allowance are made through provisions charged against current operations and through recoveries made on loans previously charged-off. The allowance for loan losses is maintained at an amount considered adequate by Management to provide for potential credit losses based upon a periodic evaluation of the risk characteristics of the loan portfolio. In establishing an appropriate allowance, an assessment of the individual borrowers, a determination of the value of the underlying collateral, a review of historical loss experience and an analysis of the levels and trends of loan categories, delinquencies, and problem loans are considered. Such factors as the level and trend of interest rates and current economic conditions are also reviewed. At June 30, 1997 the level of allowance was $1,277,000 as compared to a level of $1,595,000 at June 30, 1996. There was no provision for loan losses during the six and three month periods ended June 30. Various regulatory agencies, as an integral part of their examination process, periodically review the Corporation's allowance for loan losses. Such agencies may require the Corporation to increase the allowance based on their analysis of information available to them at the time of their examinations. The Page 11 allowance for loan losses as a percentage of total loans amounted to 1.01 percent and 1.39 percent at June 30, 1997, and 1996, respectively. In Management's view the level of allowance during the first six months of 1997 has been adequate to cover any loss experience and therefore has not warranted any additions to the allowance during 1997. During the six month period ended June 30, 1997, the Corporation did not experience any substantial problems within its loan portfolio. Net charge-offs were approximately $16,000. At June 30, 1997 the Corporation had non-accrual loans amounting to $129,000, and $475,000 non-accrual loans at June 30, 1996. The Corporation continues to aggressively pursue collections of principal and interest on loans previously charged off. The Corporation defines impaired loans to consist of non-accrual loans and loans internally classified as substandard or below, in each instance above an established dollar threshold. All loans below the established dollar threshold are considered homogenous and are collectively evaluated for impairment. The Corporation did not have any impaired loans in either 1997 or 1996. The Corporation's statements herein regarding the adequacy of the allowance for loan losses may constitute forward looking statements under the Private Securities Reform Litigation Act of 1995. Actual results may indicate that the amount of the Corporation's allowance was inadequate. Factors that could cause the allowance to be inaccurate are the same factors that are analyzed by the Corporation in establishing the amount of the allowance. Changes in the allowance for possible loans losses for the period ended June 30, 1997 and 1996, respectively, are set forth below. ALLOWANCE FOR LOAN LOSSES (in thousands) - -------------------------------------------------------------------------------- Three months ending June 30, ----------------------- 1997 1996 - -------------------------------------------------------------------------------- Average loans outstanding .......................... $122,509 $ 99,911 - -------------------------------------------------------------------------------- Total loans at end of period ....................... 125,935 114,820 - -------------------------------------------------------------------------------- Analysis of the allowance for loan losses Balance at the beginning of year ................... 1,293 1,073 Charge-offs: Commercial ..................................... 1 0 Real estate-mortgage ........................... 0 0 Installment loans .............................. 19 6 - -------------------------------------------------------------------------------- Total charge-offs .......................... 20 6 Recoveries: Commercial ....................................... 0 0 Real estate-mortgage ............................. 0 0 Installment loans ................................ 4 3 - -------------------------------------------------------------------------------- Total recoveries ........................... 4 3 Net Charge-offs: ................................... 16 3 Adjustments from the Acquisition of Lehigh Savings SLA .......................... 0 525 - -------------------------------------------------------------------------------- Balance at end of period ........................... $ 1,277 $ 1,595 ================================================================================ Ratio of net charge-offs during the period to average loans outstanding during the period ...... 0.01% 0.00% - -------------------------------------------------------------------------------- Allowance for loan losses as a percentage of total loans ........................ 1.01 1.39 - -------------------------------------------------------------------------------- Page 12 OTHER NON-INTEREST INCOME The following table presents the principal categories of non-interest income for the three and six month periods ended June 30, 1997 and 1996.
- --------------------------------------------------------------------------------------------- (dollars in thousands) Three months Six months ended ended June 30, June 30, ---------------- Percent ----------------- Percent 1997 1996 Change 1997 1996 Change - --------------------------------------------------------------------------------------------- Other income: Service charges, commissions and fees ...................... $137 $122 12.3 $275 $236 16.5 Other income .................... 39 30 30.0 70 63 11.1 Gain on securities sold ......... 0 80 100.0 0 80 100.0 - --------------------------------------------------------------------------------------------- Total other income ......... $176 $232 -24.1 $345 $379 -9.0 =============================================================================================
For the six month period ended June 30, 1997, total other (non-interest) income, net of gains on securities sold, reflects an increase of $46,000 or 15.4 percent compared with the comparable six month period ended June 30, 1997. This overall increase was primarily as a result of service charges, commissions, and fees. These fees increased primarily as a result of an increase in business activity. Gains on securities sold during 1996 were made in the available-for-sale portfolio in managing the Bank's investment portfolio and interest rate risk position. These needs arise on an "as required" basis and are not normal routine transactions. No such transactions occurred during 1997, for either the three or six month periods. For the three months ended June 30, 1997, total other (non-interest) income net of gains on securities sold, increased $24,000 or 15.8 percent as compared to the three months ended June 30, 1997. The increase in other income is primarily due to the increase in service charges, commissions and fees which primarily increased as a result of an increase in business activity. OTHER NON-INTEREST EXPENSE The following table presents the principal categories of non-interest expense for the three and six month periods ended June 30, 1997 and 1996.
- --------------------------------------------------------------------------------------------- (dollars in thousands) Three months Six months ended ended June 30, June 30, ---------------- Percent ----------------- Percent 1997 1996 Change 1997 1996 Change - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- Other expense: Salaries and employee benefits $1,384 $1,280 8.1 $2,682 $2,374 13.0 Occupancy expense, net 242 180 34.4 520 415 25.3 Premise & equipment expense 321 228 40.8 649 422 53.8 Stationery and printing expense 120 168 -28.6 196 235 -16.6 Marketing & Advertising 81 65 24.6 208 133 56.4 Other expenses 568 333 70.6 932 668 39.5 - --------------------------------------------------------------------------------------------- Total other expense $2,716 $2,254 20.5 $5,187 $4,247 22.1 =============================================================================================
For the six month period ended June 30, 1997, total other (non-interest) expenses increased $940,000 or 22.1 percent over the comparable period ended June 30, 1996. Included in the 1997 expense figures is the amortization expenses of goodwill, resulting from the acquisition of Lehigh. This expense amounted to $160,000 for the 1997 period as compared with $0 in 1996. For the three month period ended June 30, 1997, total other (non-interest) expense increased $462,000 or 20.5 percent over the comparable three months ended June 30, 1996. This was due largely to expansion of Page 13 the Bank's branch network coupled with the expense of on-going technological and automation programs. Salaries and employee benefits cost coupled with premise and equipment expenses comprised the primary components of the total increase for both the three and six month periods. Strict control over other expenses has been a key strategic objective of Management to maximize earnings efficiency. The Corporation's efficiency ratio (other expenses less nonrecurring expense and other income as a percentage of net interest income on tax-equivalent basis) for the six months ended June 30, 1997, was 58.5 percent as compared with 53.8 percent at June 30, 1996. For the three month ended June 30, 1997 this ratio was 61.0 percent as compared with 56.3 for the comparable period ended June 30, 1996. The increase in employment expense is primarily attributable to increased staffing levels, 159 full-time equivalent employees at June 30, 1997 versus 146 at June 30, 1996, and merit and promotional raises and higher benefit costs. The increase of $104,000 or 8.1 percent during the three months ended June 30, 1997 as compared with the comparable three month period in 1996, was also attributable to these factors. The increased staffing levels were required to support the growth of the Bank and reflects maintaining full staffing levels at the Corporation's office locations. The benefit component of the increase relates to increased medical and other employee benefit expense. Occupancy and Bank premise expense for the six months ended June 30, 1997 increased $332,000 or 39.7 percent as compared to the comparable period ended June 30, 1996. This increase in expense includes an increase of $97,000 in rent and real estate taxes, coupled with a $286,000 increase in depreciation charges for Bank premise and equipment, as compared with the comparable six month period ended June 30, 1996. These expenses are related to properties acquired as a result of the acquisition of Lehigh Savings SLA, the new Madison banking center, and capital expenditures on associated fixed asset purchases. Occupancy and bank premise and equipment expense for the three month period ended June 30, 1997 increased $155,000 or 38 percent over the comparable three month period in 1996. This increase in bank premise and equivalent expense in 1997 is primarily attributable to normal operating costs of the Corporation's expanded facilities coupled with a full quarter's depreciation expense on 1996's fixed asset purchases and technology expenditures; these include check imaging and PC Banking. Occupancy expenses similarly reflect the associated costs of the Corporation's expanded facilities. For the three month period June 30, 1997, rental expenses increased $45,000 over the comparable three month period in 1996. These rents are associated with the acquired Millburn Mall Banking Center and the new Madison Banking Center. PROVISION FOR INCOME TAXES The effective tax rate for the six month period ended June 30, 1997 was 31.1 percent as compared to 26.0 percent for the six months ended June 30, 1996. The effective tax rate continues to be less than the statutory Federal tax rate of 34 percent and New Jersey corporate tax rate of approximately 9 percent. The difference between the statutory and the effective tax rates, other than increased taxable revenues, primarily reflects the federal tax-exempt status of interest income on obligations of states and political subdivisions. The Corporation's provision for income taxes increased for both the three and six months from 1996 to 1997 primarily as a result of increased state taxes, a reduction of tax-exempt income and the disallowance of amortization expense associated with goodwill. Page 14 ASSET LIABILITY MANAGEMENT The composition of the Corporation's statement of condition is planned and monitored by the Asset and Liability Committee (ALCO). Asset and Liability management encompasses the control of interest rate risk (interest sensitivity management) and the ongoing maintenance and planning of liquidity and capital. In general, management's objective is to optimize net interest income and minimize interest rate risk by monitoring these components of the statement of condition. INTEREST SENSITIVITY The management of interest rate risk is also important to the profitability of the Corporation. Interest rate risk arises when an earning asset matures or when its interest rate changes in a time period different from that of a supporting interest bearing liability, or when an interest bearing liability matures or when its interest rate changes in a time period different from that of an earning asset that it supports. While the Corporation matches only a small portion of specific assets and liabilities, total earning assets and interest bearing liabilities are grouped to determine the overall interest rate risk within a number of specific time frames. Interest sensitivity analysis attempts to measure the responsiveness of net interest income to changes in interest rate levels. The difference between interest sensitive assets and interest sensitive liabilities is referred to as the interest sensitivity gap. At any given point in time, the Corporation may be in an asset-sensitive position, whereby its interest-sensitive assets exceed its interest-sensitive liabilities, or in a liability-sensitive position, whereby its interest-sensitive liabilities exceed its interest-sensitive assets, depending on management's judgment as to projected interest rate trends. The Corporation's rate sensitivity position in each time frame may be expressed as assets less liabilities, as liabilities less assets, or as the ratio between rate sensitive assets (RSA) and rate sensitive liabilities (RSL). For example, a short funded position (liabilities repricing before assets) would be expressed as a net negative position, when period gaps are computed by subtracting repricing liabilities from repricing assets. When using the ratio method, a RSA/RSL ratio of 1 indicates a balanced position, a ratio greater than 1 indicates an asset sensitive position, and a ratio less than 1 indicates a liability sensitive position. A negative gap and/or a rate sensitivity ratio less than 1 tends to expand net interest margins in a falling rate environment and to reduce net interest margins in a rising rate environment. Conversely, when a positive gap occurs, generally margins expand in a rising rate environment and contract in a falling rate environment. From time to time, the Corporation may elect to deliberately mismatch liabilities and assets in a strategic gap position. At June 30, 1997, the Corporation reflects a negative interest sensitivity gap (or an interest sensitivity ratio) of .38:1.00 at the cumulative one year position. During much of 1997 the Corporation had a negative interest sensitivity gap. The maintenance of a liability-sensitive position during 1996 had an adverse impact on the Corporation's net interest margins; however, based on management's perception that interest rates will continue to be volatile, emphasis has been placed on interest-sensitivity matching with the objective of achieving a stable net interest spread during 1997. LIQUIDITY The liquidity position of the Corporation is dependent on successful management of its assets and liabilities so as to meet the needs of both deposit and credit customers. Liquidity needs arise principally to accommodate possible deposit outflows and to meet customers' requests for loans. Such needs can be satisfied by scheduled principal loan repayments, maturing investments, short-term liquid assets and deposit in-flows. The objective of liquidity management is to enable the Corporation to maintain sufficient liquidity to meet its obligations in a timely and cost-effective manner. Management monitors current and projected Page 15 cashflows, and adjusts positions as necessary to maintain adequate levels of liquidity. By using a variety of potential funding sources and staggering maturities, the risk of potential funding pressure is significantly reduced. Management also maintains a detailed liquidity contingency plan designed to adequately respond to situations which could lead to liquidity concerns. Anticipated cash-flows at June 30, 1997, projected to June of 1998, indicates that the Bank's liquidity should remain strong, with an approximate projection of $62.0 million in anticipated cashflows over the next twelve months. This projection represents a forward-looking statement under the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from this projection depending upon a number of factors, including the liquidity needs of the Bank's customers, the availability of sources of liquidity and general economic conditions. The Corporation derives a significant proportion of its liquidity from its core deposit base. For the six month period ended June 30, 1997, average core deposits (comprised of total demand, savings accounts and money market accounts under $100,000) represented 47.6 percent of total deposits as compared with 53.5 percent on average in the comparable period in 1996. More volatile rate sensitive deposits, concentrated in time certificates of deposit for the six month period ended June 30, 1997, increased to 39.5 percent on average of total deposits from 28.8 percent during the six months ended June 30, 1996. This change has resulted from the rise in short-term rates during the latter part of 1996 which continued into 1997. The increase in average funding sources during the six months ended June 30, 1997 resulted primarily from an increase in business and public fund deposits offset by a decrease of $1.4 million on average in Federal funds purchased and securities sold under agreement to repurchase. Non-interest bearing funding sources as a percentage of the funding mix decreased to 15.9 percent on average as compared to 17.3 percent for the six month period ended June 30, 1996. Demand deposits as a percentage of the funding mix continue to be replaced by more expensive interest-bearing core deposits. Short-term borrowings can be used to satisfy daily funding needs. Balances in these accounts fluctuate significantly on a day-to-day basis. The Corporation's principal short-term funding sources are securities sold under agreement to repurchase. Average short-term borrowings during the first six months of 1997 were $10.9 million, a decrease of $1.4 million or 11.5 percent from $12.3 million in average short-term borrowings during the comparable six months ended June 30, 1996. This change was due primarily to insufficient funding. CASH FLOW The consolidated statements of cash flows present the changes in cash and cash equivalents from operating, investing and financing activities. During the six months ended June 30, 1997, cash and cash equivalents (which decreased overall by $ 24.6 million) were provided (on a net basis) by the $2.9 million in cashflow from operating activities and by $18.3 million in cash flows provided by financing activities. A total of $45.8 million was used in investing activities principals through net investments in investments and $8.1 million increase in loans. SHAREHOLDER'S EQUITY Shareholders' equity averaged $30.9 million for the six month period ended June 30, 1997, an increase from $28.0 million, or 10.4 percent, during the same period in 1996. The Corporation's dividend reinvestment and optional stock purchase plan contributed $145,000 in new capital for the six months ended June 30, 1997 as compared with $116,000 for the comparable period in 1996. Tangible book value per common share, after the 5% stock dividend effective May 18, 1997, paid May 31, 1997 and the 3-for-2 stock split effective May 1, 1996, paid May 31, 1996, was $11.76 at June 30, 1997 as compared to $11.29 at December 31, 1996. Tangible book value per common share was $10.41 at June 30, 1996, as adjusted for above noted stock split and 5% stock dividend. Page 16 CAPITAL The maintenance of a solid capital foundation continues to be a primary goal for the Corporation. Accordingly, capital plans and dividend policies are monitored on an ongoing basis. The most important objective of the capital planning process is to balance effectively the retention of capital to support future growth and the goal of providing stockholders with an attractive long-term return on their investment. RISK-BASED CAPITAL/LEVERAGE Banking regulations require banks to maintain minimum levels of regulatory capital. Under the regulations in effect at June 30, 1997, the Bank was required to maintain (i) a minimum leverage ratio of Tier 1 capital to total adjusted assets of 4.0%, and (ii) minimum ratios of Tier 1 and total capital to risk-weighted assets of 4.0% and 8.0%, respectively. At June 30, 1997, total Tier l capital (defined as tangible stockholders' equity for common stock and certain perpetual preferred stock) amounted to $27.8 million or 6.51 percent of total assets. The total Tier II leverage capital ratio was an additional 5.76 percent of total assets. Tier I capital excludes the effect of SFAS No. 115, which amounted to $330,000 of net unrealized gain, after tax, on securities available-for-sale (included as a component of stockholders' equity) and goodwill of approximately $3.5 million as of June 30, 1997. At June 30, 1997, the Corporation's estimated Tier I risk based and total risk-based capital ratios were 16.1 percent and 16.9 percent, respectively. These ratios are well above the minimum guidelines of capital to risk-adjusted assets in effect as of June 30, 1997. Under its prompt corrective action regulations, bank regulators are required to take certain supervisory actions (and may take additional discretionary actions) with respect to an undercapitalized institution. Such actions could have a direct material effect on the institution's financial statements. The regulations establish a framework for the classification of financial institutions into five categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Generally, an institution is considered well capitalized if it has a leverage (Tier 1) capital ratio of at least 5.0%; a Tier 1 risk-based capital ratio of at least 6.0%; and a total risk-based capital ratio of at least 10.0%. The foregoing capital ratios are based in part on specific quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by the bank regulators about capital components, risk weightings and other factors. As of June 30, 1997, management believes that the Bank meets all capital adequacy requirements to which it is subject. Page 17 RECENT ACCOUNTING PRONOUNCEMENTS SFAS No. 128 FASB Statement No. 128, Earnings Per Share (Statement 128) supersedes APB Opinion No. 15, Earnings Per Share, and specifies the computation, presentation, and disclosure requirements for earnings per share (EPS) for entities with publicly held common stock or potential common stock. Statement 128 was issued to simplify the computation of EPS and to make the U.S. standard more compatible with the EPS standards of other countries and that of the International Accounting Standards Committee: (IASC). It replaces Primary EPS and Fully Diluted EPS with Basic EPS and Diluted EPS, respectively. It also requires dual presentation of Basic EPS and Diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the Basic EPS computation to the numerator and denominator of the Diluted EPS computation. Basic EPS, unlike Primary EPS, excludes all dilution while Diluted EPS, like Fully Diluted EPS, reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. For many entities Basic EPS will be higher than Primary EPS and Diluted EPS will be approximately the same as Fully Diluted EPS. Statement 128 is applicable to all entities that have issued common stock or potential common stock (e.g., options, warrants, convertible securities, contingent stock agreements, etc.) if those securities trade in a public market either on a stock exchange (domestic or foreign) or in the over-the-counter market, including securities quoted only locally or regionally. This Statement also applies to an entity that has made a filing or is in the process of filing with a regulatory agency in preparation for the sale of those securities in a public market. However, Statement 128 does not require presentation of EPS for investment companies or in statements of wholly-owned subsidiaries. Statement 128 is effective for financial statements for both interim and annual periods ending after December 15, 1997. Earlier application is not permitted (although pro forma EPS disclosure in the footnotes for periods prior to required adoption is permitted). After adoption, all prior period EPS data presented shall be restated (including interim financial statements, summaries of earnings and selected financial data) to conform with Statement 128. SFAS No. 130 FASB Statement No. 130, "Reporting Comprehensive Income" (Statement 130) establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general-purpose financial statements. Statement 130 requires that all items that are required to be recognized under accounting standards as components of comprehensive income reported in a financial statement that is displayed with the same prominence as other financial statements. Statement 130 does not require a specific format for that financial statement but requires that an enterprise display an amount representing total comprehensive income for the period in that financial statement. Statement 130 requires that an enterprise (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately form retained earnings and additional paid-in capital in the equity section of a statement of financial position. This statement is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods provided for comparative purposes is required. Page 18 SFAS No. 131 FASB Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information" (Statement 131) requires public companies to report information about business segments in their annual financial statements and selected business segment information in quarterly reports issued to shareholders. Statement 131 requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assets and reports revenues, and its major customers. This statement supersedes FASB Statement No. 14, "Financial Reporting for Segments of a Business Enterprise." Statement 131 is effective for fiscal years beginning after December 15, 1997. Page 19 II. OTHER INFORMATION Item 1. Legal proceedings None Item 2. Change in securities Item 3. Defaults upon senior securities Item 4. Submission of Matters to Vote of Security Holders None Item 6. Exhibits and Reports on Form 8-K A) Exhibits B) Reports on Form 8-K There were no reports on Form 8-K filed during the three months ended June 30, 1997. Page 20 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, thereunto duly authorized. CENTER BANCORP, INC. Date: /s/ ANTHONY C. WEAGLEY - ---------------------- ------------------------------------- Anthony C. Weagley, Treasurer (Chief Financial Officer) Page 21 EX-27 2 FDS FOR 1996 ANNUAL REPORT
9 1,000 6-MOS DEC-31-1997 JUN-30-1997 18,418 349,133 0 0 80,458 237,232 238,900 125,935 (1,277) 480,251 422,218 23,482 2,907 0 0 0 4,613 27,031 480,251 4,853 9,936 309 15,098 6,790 7,085 8,013 0 0 5,187 3,171 2,186 0 0 2,186 0.93 0.93 6.97 129 87 0 0 1,293 20 4 1,277 759 0 518
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