Center Bancorp, Inc. Reports Fourth Quarter and 2003 Earnings
UNION, NJ -- 01/22/2004 -- Center Bancorp, Inc. (NASDAQ: CNBC), parent
company to Union Center National Bank of Union, New Jersey, today reported
earnings results for the fourth quarter and twelve months ended December
31, 2003.
"We are pleased with the Corporation's results for the fourth quarter and
for the year" indicated John J. Davis, President & CEO. "While we were
unable to reach the record levels of profitability reported in 2002, the
financial performance of the Corporation continues to reflect core growth
in market share." He further noted that the Corporation's quarterly
earnings performance improvement was driven by a strengthening of net
interest margins in comparison to the third quarter in 2003.
Net income for the fourth quarter of 2003 amounted to $1,711,000 or $.20
per fully diluted common share, a decrease of $66,000 or 3.71% over the
$1,777,000 or $.21 per fully diluted common share earned for the comparable
quarter of the previous year. All share and per share amounts have been
restated to reflect the 2-for-1 common stock split distributed on June 2,
2003.
The Corporation's earnings results for the fourth quarter of 2003 reflected
a decline in revenue impacted by low interest rates, which prevailed due to
the weak economy and unsettled business climate in comparison to the
comparable period in 2002. Revenue growth for the twelve months ended
December 31, 2003 declined due to a continued compression of net interest
margins as compared to prior periods.
For the full twelve months ended December 31, 2003, net income amounted to
$6,419,000, a decrease of $1.584 million or 19.79% from the $8,003,000
earned in the twelve months of 2002. On a year-to-date basis, earnings per
fully diluted common share were $.75, a decline of 21.05% from $.95 for the
full twelve months of 2002.
Total interest income on a fully taxable-equivalent basis for the fourth
quarter of 2003 increased by $65,000 to $9,721,000 or .67%, from the
comparable 2002 period, while total interest expense decreased by $277,000
or 8.03%.
"Center Bancorp continued to achieve results and to track with its business
plans to increase the size of its loan portfolio relative to total
earning-assets, despite the challenges presented by our unprecedented
interest rate environment," stated John J. Davis, President & CEO. "We
remain optimistic regarding the earnings prospects for 2004, given our
current strong loan demand. We are very pleased to announce that our total
loan portfolio exceeded our historical levels set in the third quarter of
this year and amounted to $349.5 million on December 31, 2003. This is a
significant milestone, a milestone that we believe will benefit our net
interest income in future quarters."
The Corporation continued to have earning-asset growth both in the loan and
the investment securities portfolios. Total average loan volumes for the
fourth quarter of 2003 increased to $331.0 million, an increase of $104.6
million (up 46.2% from $226.4 million for the comparable prior year
quarter) and the investment securities portfolio increased on average $10.3
million for the fourth quarter (up 2.1% over the comparable prior year
quarter). Despite the slowdown experienced in the economy, the Corporation
continues to experience loan demand in certain portfolio sectors, primarily
real estate related. Demand for 1-4 family residential mortgages remained
high during the fourth quarter. Loan growth was also attributable to a
lower prevailing rate environment coupled with branch network expansion,
higher visibility in new markets, and a continued enhancement of product
lines to meet market demands. The increased securities portfolio largely
reflects the execution of the Corporation's investment strategies in
response to the growth in average funding sources.
While asset quality continues to remain high, during the fourth quarter of
2003 provisions of $260,000 were made to the allowance for loan losses, to
maintain adequate loan loss reserves in relationship with loan portfolio
growth. At December 31, 2003, the total allowance for loan and lease losses
amounted to $3.002 million or .86% of total loans.
Average funding sources grew $112.5 million or approximately 15.5% from the
fourth quarter of 2002 to the fourth quarter of 2003. Interest-bearing
liabilities increased $102.2 million on average during the fourth quarter,
as compared to the fourth quarter in 2002.
Total non-interest bearing core deposits increased $10.2 million on average
and continue to be a low-cost source of funding. At December 31, 2003 this
source of funding, which has swelled as a result of a flight from the stock
market to short-term insured deposit accounts, amounted to $120.5 million
or 13.96% of total funding sources and 19.0% of total deposits.
Net interest margins continued to come under pressure from the prevailing
low interest rate environment during the fourth quarter of 2003,
contracting overall for the period as compared with the same quarter in
2002. The continued compression of net interest margins is the result of
falling interest rates, increased prepayments on mortgage related
earning-assets and the effects of shorter duration assets coupled with low
replacement yields received on those shorter duration additions made to the
earning-asset portfolio. The net interest spread decreased 22 basis points
in the fourth quarter of 2003 to 2.88% from 3.10% for the comparable
quarter in 2002; however, the net interest spread increased 46 basis points
compared to the third quarter of 2003. The positive increase in the fourth
quarter was attributable to an increase of 48 basis points on the average
yields derived on earning assets, specifically in the investment portfolio.
For the three months ended December 31, 2003 the net interest margin (net
interest income as a percentage of earning assets), decreased 31 basis
points to 3.14% from 3.45% for the fourth quarter in 2002; however, the net
interest margin increased 47 basis points from 2.67% for the third quarter
of 2003. The increase of 48 basis points on the yield in earning-assets
during the fourth quarter coupled with a stable cost of funds is the
primary contributing factor to the increased margin for the period.
For the twelve months ended December 31, 2003 the Corporation's net
interest margin decreased 76 basis points as compared to the comparable
twelve months in 2002. The sustained heightened level of prepayments
further exposed the Corporation's balance sheet, which subsequently
impacted returns on earning-assets for both the current quarter and twelve
months ended December 31, 2003. Earning-asset yields will be susceptible to
further reductions, should the current low interest rate environment
prevail throughout 2004.
Other non-interest income, exclusive of gains on securities sold (which
decreased $101,000 during the quarter), decreased $22,000 or 3.07% for the
fourth quarter compared with the comparable quarter in 2002. The change
from the comparable period in 2002 was driven primarily by the decrease in
the cash surrender value of bank owned life insurance, which amounted to
$171,000 or a decrease of $25,000 for the fourth quarter in comparison
to$196,000 for the comparable quarter of 2002. The decrease in other income
is primarily a result of a decrease in letter of credit fees during the
quarter.
Operating expenses rose approximately 5.39% for the fourth quarter in 2003
over the comparable period in 2002, with increased salary and benefit
expense representing most of the increase and reflecting the continued
growth of the Corporation's franchise.
Total assets at December 31, 2003, reached $921.8 million, an increase of
$98.4 million or 11.9% from assets of $823.4 million at December 31, 2002.
The annualized return on average assets for the twelve months ended
December 31, 2003, amounted to .74% as compared with 1.07% for the
comparable period in 2002.
Deposit growth continued to surge during the fourth quarter and for the
year, up 6.8% and 7.7% respectively, on average, for the period ended
December 31, 2003. The growth in average deposits was reflected in core
interest-bearing accounts, savings and demand deposits. The Corporation's
entry into Morris County over the last several years continues to provide
growth opportunities to the Corporation.
The total Tier 1 capital leverage ratio was 7.44% at December 31, 2003, and
the Total Risk Based Capital ratio was 13.8% at December 31, 2003. Total
Tier 1 capital increased to approximately $66.3 million at December 31,
2003. The increase in Tier 1 capital reflects the total cumulative
issuance of $15.0 million in Trust Preferred Securities as of December 31,
2003. The most recent issuance of $5.0 in floating rate MMCapS(SM)
Securities occurred on December 19, 2003. As a result of the adoption of
FASB Interpretation No. 46, these securities are classified as subordinated
debentures on the Consolidated Statement of Condition. The Corporation
expects to use the net proceeds of this issuance for general corporate
purposes, including capital contributions to the Company's banking
subsidiary to support its growth strategies, for working capital and for
other corporate purposes. Book value per common share was $6.36 as compared
with $6.06 a year ago. Tangible book value per common share increased to
$6.11 from $5.81 a year ago. Annualized return on average stockholders'
equity for the twelve months ended December 31, 2002 was 12.35% compared to
16.6% for the comparable period in 2002.
President & CEO Davis additionally noted that "we remain cautious about the
national economy, Anticipated increases in operating expenses to support
growth and expansion in our new and existing markets could continue to
limit income growth; however, we are optimistic about our prospects and
anticipated continued earnings performance in 2004. We feel we had a good
year of growth despite the economic downturn that shadowed much of 2003. "
Center Bancorp Inc., through its wholly owned subsidiary, Union Center
National Bank, Union, New Jersey, operates thirteen banking locations.
Banking centers are located in Union Township (6 locations), Berkeley
Heights, Madison, Millburn/Vauxhall, Morristown (2 locations), Springfield,
and Summit New Jersey. The Bank also operates remote ATM locations in the
Union New Jersey Transit train station and in Union Hospital. Union Center
National Bank is the largest commercial Bank headquartered in Union County;
chartered in 1923 and is a full-service banking company.
For further information regarding Center Bancorp Inc., call
1-(800)-862-3683. For information regarding Union Center National Bank
visit our web site at http://www.centerbancorp.com.
All non-historical statements in this press release constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements include expressions about
management's views regarding future performance, including statements
regarding earnings prospects. These forward-looking statements may use such
forward-looking terminology as "expect," "look," "believe," "plan,"
"anticipate," "may," "will" or similar statements or variations of such
terms or otherwise express views concerning trends and the future. Such
forward-looking statements involve certain risks and uncertainties. These
include, but are not limited to, the direction of interest rates, continued
levels of loan quality and origination volume, continued relationships with
major customers including sources for loans, as well as the effects of
international, national, regional and local economic conditions and legal
and regulatory barriers and structure, including those relating to the
deregulation of the financial services industry. 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)
Dec-31-03 Dec-31-02
--------- ---------
Assets:
Cash and due from banks $ 16,509 $ 23,220
Federal funds sold and securities
purchased under agr to resell 0 0
--------- ---------
Total cash and cash equivalents 16,509 23,220
Investment securities held to maturity
(approximate market value of $159,492
in 2003 and $219,921 in 2002) 155,149 214,902
Investment securities available for sale 364,085 322,717
--------- ---------
Total investment securities 519,234 537,619
Loans, net of unearned income 349,525 229,051
Less - Allowance for loan losses 3,002 2,498
--------- ---------
Net loans 346,523 226,553
Premises and equipment, net 15,610 12,976
Accrued interest receivable 4,485 4,439
Bank Owned Life Insurance 14,614 14,143
Other assets 2,758 2,395
Goodwill 2,091 2,091
--------- ---------
Total assets 921,824 823,436
========= =========
Liabilities
Deposits:
Non-interest bearing 120,526 116,984
Interest bearing:
Certificates of deposit $100,000 and over 58,245 33,396
Savings and Time Deposits 454,150 465,971
--------- ---------
Total deposits 632,921 616,351
Federal Home Loan Bank advances 115,000 65,000
Federal funds purchased and securities
sold under agreements to repurchase 99,724 75,431
Subordinated debentures 15,000 10,000
Accounts payable and accrued liabilities 4,999 5,600
--------- ---------
Total Liabilities 867,644 772,382
--------- ---------
Stockholder's equity
Preferred stock, no par value:
Authorized 5,000,000 shares; non issued 0 0
Common stock, no par value:
Authorized 20,000,000 shares;
issued 9,527,219 and 9,499,114
shares in 2003 and 2002, respectively 19,405 18,984
Additional paid in capital 10,314 4,562
Retained earnings 27,631 29,863
--------- ---------
57,350 53,409
Treasury stock at cost (1,008,703 and
1,078,404 shares in 2003 and 2002,
respectively) (3,978) (4,254)
Restricted stock (14) (285)
Accumulated other comprehensive income 822 2,184
--------- ---------
Total stockholders' equity 54,180 51,054
--------- ---------
Total liabilities and stockholders' equity $ 921,824 $ 823,436
========= =========
All common share and per share amounts have
been restated to reflect the declared 2-for-1
common stock split April 15, 2003, distributed
June 2, 2003 to shareholders of record May 19, 2003.
Center Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
(in thousands, except
per share data) 2003 2002 2003 2002
--------- --------- --------- ---------
Interest income:
Interest and fees
on loans $ 4,183 $ 3,635 $ 15,131 $ 14,880
Interest and dividends
on investment securities:
Taxable interest income 4,162 5,754 18,013 24,903
Nontaxable
interest income 908 176 2,775 627
Interest on Federal funds
sold and securities
purchased under agreement. 0 0 0 59
--------- --------- --------- ---------
Total interest income 9,253 9,565 35,919 40,469
--------- --------- --------- ---------
Interest expense:
Interest on certificates of
deposit $100,000 or more 106 89 461 472
Interest on other deposits 1,679 2,043 6,712 8,749
Interest on
short-term borrowings 1,388 1,318 5,553 5,301
--------- --------- --------- ---------
Total interest expense 3,173 3,450 12,726 14,522
--------- --------- --------- ---------
Net interest income 6,080 6,115 23,193 25,947
Provision for loan losses 260 90 522 360
--------- --------- --------- ---------
Net interest income after
provision for
loan losses 5,820 6,025 22,671 25,587
--------- --------- --------- ---------
Other income:
Service charges,
commissions and fees 444 417 1,683 1,600
Other income 37 104 457 383
Annuity & Insurance 43 0 43 0
BOLI 171 196 798 760
Gain on securities sold 46 147 266 592
--------- --------- --------- ---------
Total other income 741 864 3,247 3,335
--------- --------- --------- ---------
Other expense:
Salaries and
employee benefits 2,591 2,497 10,425 9,452
Occupancy expense, net 470 411 1,835 1,644
Premises and equipment
expense 430 428 1,708 1,600
Stationery and printing
expense 123 164 559 583
Marketing and Advertising 124 98 533 576
Other expenses 837 743 3,276 3,343
--------- --------- --------- ---------
Total other expense 4,575 4,341 18,336 17,198
--------- --------- --------- ---------
Income before income
tax expense 1,986 2,548 7,582 11,724
Income tax expense 275 771 1,163 3,721
--------- --------- --------- ---------
Net income $ 1,711 $ 1,777 $ 6,419 $ 8,003
========= ========= ========= =========
Earnings per share
Basic $ 0.20 $ 0.21 $ 0.76 $ 0.95
Diluted 0.20 0.21 0.75 0.95
========= ========= ========= =========
Weighted average common
shares outstanding
Basic 8,514,542 8,406,182 8,475,394 8,393,482
Diluted 8,601,830 8,477,248 8,564,147 8,460,964
========= ========= ========= =========
All common share and per share amounts have been restated to reflect the
2-for-1 common stock split declared April 15, 2003, distributed June 2,
2003 to shareholders of record May 19, 2003.
Center Bancorp, Inc. and Subsidiaries
Average Balance Sheet with Interest and Average Rates
(12 Month Quarterly Averages)
Period Ended December 31,
(unaudited) 2003 2002
---- ----
Interest Average Interest Average
(tax equivalent basis, Average Income/ Yield/ Average Income/ Yield/
dollars in thousands) Balance Expense Rate Balance Expense Rate
-------- ------- ----- -------- -------- -----
Assets
Interest-earning assets:
Investment securities:
Taxable $462,422 $18,013 3.90% $451,867 $ 24,903 5.51%
Non-taxable 71,504 4,205 5.88% 13,694 950 6.94%
Federal funds sold and
securities purchased
under agreement
to resell 0 0 0.00% 3,415 59 1.73%
Loans, net of
unearned income(1) 276,457 15,131 5.47% 222,819 14,880 6.68%
-------- ------- ----- -------- -------- -----
Total
interest-earning
assets 810,383 37,349 4.61% 691,795 40,792 5.90%
-------- ------- ----- -------- -------- -----
Non-interest
earning assets
Cash and due from banks 21,720 18,901
BOLI 14,390 13,738
Other assets 27,302 25,220
Allowance for possible
loan losses (2,664) (2,336)
-------- --------
Total non-interest
earning assets 60,748 55,523
-------- --------
Total assets $871,131 $747,318
-------- --------
Liabilities and
stockholders' equity
Interest bearing
liabilities:
Money Market deposits $ 94,579 1,024 1.08% $ 96,788 1,798 1.86%
Savings deposits 153,856 1,877 1.22% 168,930 3,502 2.07%
Time deposits 147,941 3,881 2.62% 103,772 3,218 3.10%
Other interest
bearing deposits 70,522 391 0.55% 65,096 703 1.08%
Short-term borrowings 216,615 5,058 2.34% 137,013 4,738 3.46%
Subordinated debentures 10,151 495 4.88% 10,000 563 5.63%
-------- ------- ----- -------- -------- -----
Total
interest-bearing
liabilities 693,664 12,726 1.83% $581,599 14,522 2.50%
======== ======= ===== ======== ======== =====
Noninterest-bearing
liabilities:
Demand deposits 120,607 110,896
Other
noninterest-bearing
deposits 422 603
Other liabilities 4,479 5,962
-------- --------
Total
noninterest-bearing
liabilities 125,508 117,461
-------- --------
Stockholders' equity 51,959 48,258
-------- --------
Total liabilities
and stockholders'
equity $871,131 $747,318
======== ========
Net interest income
(tax equivalent basis) $ 24,623 $ 26,270
------- --------
Net Interest Spread 2.78% 3.40%
===== =====
Net interest income as
percent of
earning-assets 3.04% 3.80%
===== =====
Tax equivalent
adjustment (1,430) (323)
------- --------
Net interest income $ 23,193 $ 25,947
======= ========
(1) Includes loan fees (fee income is not material)
Center Bancorp, Inc. and Subsidiaries
Average Balance Sheet with Interest and Average Rates
(3 Month Quarterly Averages)
Period Ended December 31,
(unaudited) 2003 2002
---- ----
Interest Average Interest Average
(tax equivalent basis, Average Income/ Yield/ Average Income/ Yield/
dollars in thousands) Balance Expense Rate Balance Expense Rate
------- ----- ---- ------- ----- ----
Assets
Interest-earning assets:
Investment securities:
Taxable $407,761 $4,162 4.08% $476,981 $5,754 4.83%
Non-taxable 95,111 1,376 5.79% 15,579 267 6.86%
Federal funds sold and
securities purchased 0 0 0.00% 0 0 0.00%
under agreement to resell
Loans, net of
unearned income (1) 331,017 4,183 5.05% 226,394 3,635 6.42%
------- ----- ---- ------- ----- ----
Total interest-
earning assets 833,889 9,721 4.66% 718,954 9,656 5.37%
------- ----- ---- ------- ----- ----
Non-interest earning
assets
Cash and due from banks 21,006 20,702
BOLI 14,509 14,027
Other assets 26,127 29,519
Allowance for possible
loan losses (2,829) (2,452)
------- -------
Total non-interest
earning assets 58,813 61,796
------- -------
Total assets $892,702 $780,750
------- -------
Liabilities and stockholders' equity
Interest bearing liabilities:
Money Market deposits $99,080 245 0.99% $96,737 378 1.56%
Savings deposits 149,227 415 1.11% 168,921 989 2.34%
Time deposits 158,031 1,045 2.65% 119,127 626 2.10%
Other interest
bearing deposits 73,708 80 0.43% 66,924 139 0.83%
Short-term borrowings 220,677 1,260 2.28% 147,388 1,175 3.19%
Subrdinated debentures 10,598 128 4.83% 10,000 143 5.60%
------- ----- ---- ------- ----- ----
Total interest-
bearing liabilities 711,321 3,173 1.78% $609,097 3,450 2.27%
------- ----- ---- ------- ----- ----
Noninterest-bearing
liabilities:
Demand deposits 126,160 115,539
Other noninterest-
bearing deposits 332 701
Other liabilities 3,372 5,745
------- -------
Total noninterest-
bearing liabilities 129,864 121,985
------- -------
Stockholders' equity 51,517 49,668
------- -------
Total liabilities and
stockholders' equity $892,702 $780,750
------- -------
Net interest income
(tax equivalent basis) $6,548 $6,206
----- -----
Net Interest Spread 2.88% 3.10%
==== ====
Net interest income
as percent of
earning-assets 3.14% 3.45%
==== ====
Tax equivalent adjustment (908) (91)
----- -----
Net interest income $5,640 $6,115
===== =====
(1) Includes loan fees (fee income is not material)