Center Bancorp, Inc. Reports Net Income Available to Common Shareholders of $4.9 Million or $0.30 Per Share for the First Quarter of 2013, Representing a 19% Increase

UNION, N.J., April 25, 2013 (GLOBE NEWSWIRE) -- Center Bancorp, Inc. (Nasdaq:CNBC) (the "Corporation", or "Center"), parent company of Union Center National Bank ("UCNB" or the "Bank"), reported operating results for the first quarter ended March 31, 2013. Net income available to common stockholders amounted to $4.9 million, or $0.30 per fully diluted common share, for the quarter ended March 31, 2013, an increase of $778,000 or approximately 19 percent as compared with net income available to common stockholders of $4.1 million, or $0.25 per fully diluted common share, for the quarter ended March 31, 2012.

"Our first quarter operating performance remained strong with a continued improvement in our asset quality profile. We continued to move forward with momentum in expanding our presence in key markets with the announcement of our new Princeton office, our first location in Mercer County. This continues our goal of expanding our presence and visibility in markets we are drawing business from, allowing us to solidify and expand our service relationships. These types of actions, supported by our core earnings performance and strategic growth, create incremental shareholder value," said Anthony C. Weagley, President & Chief Executive Officer of Union Center National Bank.

Mr. Weagley added: "We are pleased with this quarter's earnings and believe that our sequential earnings performance demonstrates the Corporation's commitment to achieving meaningful growth in earnings performance -- an essential component of providing consistent and favorable long-term returns to our shareholders. Margins were relatively stable and are poised for an increase. We were challenged this quarter by the level of payoffs that we experienced, which dampened the solid new loan growth that was achieved. Nevertheless, the sequential growth that we have been experiencing in loans has enabled us to buck the current industry trends of soft loan growth across the industry, thanks to our solid pipelines and core loan growth. Small businesses lending remains strong despite the continued uncertainty about the economic recovery and broader fiscal uncertainty. Our current targeted net growth for the second quarter will achieve our year-on-year growth projection."

Highlights for the quarter include:

• Strong balance sheet with improved credit trends compared to prior year.
   
• At March 31, 2013, total loans amounted to $879.4 million, an increase of $90.8 million compared to total loans at March 31, 2012, in part as a result of the Saddle River Valley Bank transaction completed in the third quarter of 2012.
   
• Reduction in non-performing assets, to 0.26 percent of total assets at March 31, 2013, compared to 0.59 percent at March 31, 2012 and 0.31 percent at December 31, 2012. The allowance for loan losses as a percentage of total non-performing loans was 390.7 percent at March 31, 2013 compared to 119.1 percent at March 31, 2012 and 278.9 percent at December 31, 2012.
   
• The Tier 1 leverage capital ratio was 9.31 percent at March 31, 2013, compared to 9.21 percent at March 31, 2012, and 9.02 percent at December 31, 2012, exceeding regulatory guidelines in all periods.
   
• Tangible book value per common share rose to $8.36 at March 31, 2013, compared to $6.98 at March 31, 2012 and $8.11 at December 31, 2012.
   
• The efficiency ratio for the first quarter of 2013 on an annualized basis was 48.5 percent as compared to 49.3 percent in the first quarter of 2012 and 46.9 percent in the fourth quarter of 2012.
   
• Deposits increased $128.8 million to $1.28 billion at March 31, 2013, from $1.15 billion at March 31, 2012, in part as a result of the Saddle River Valley Bank transaction.

Non-performing assets (NPAs) at the end of the first quarter totaled $4.2 million, or 0.26 percent of total assets, as compared with $5.0 million, or 0.31 percent, at December 31, 2012 and $8.7 million, or 0.59 percent, at March 31, 2012. "Asset quality remains a primary focus, and our actions with respect to asset quality have placed us near the top of all publicly traded banks and thrifts in the state of New Jersey," said Mr. Weagley.

Net Interest Income

For the three months ended March 31, 2013, total interest income on a fully taxable equivalent basis increased $0.9 million or 6.3 percent, to $14.1 million, compared to the three months ended March 31, 2012. Total interest expense decreased by $316,000, or 10.4 percent, to $2.7 million, for the three months ended March 31, 2013, compared to the same period last year. Net interest income on a fully taxable equivalent basis was $12.0 million for the three months ended March 31, 2013, increasing $1.2 million, or 11.0 percent, from $10.8 million for the comparable period in 2012. Compared to 2012, for the three months ended March 31, 2013, average interest earning assets increased $172.6 million while net interest spread and margin, on a tax-equivalent basis, decreased on an annualized basis by 11 basis points and 8 basis points, respectively. For the quarter ended March 31, 2013, the Corporation's net interest margin on a fully taxable equivalent annualized basis decreased to 3.31 percent as compared to 3.39 percent for the same three month period in 2012.

The 10.4 percent decrease in interest expense reflects a favorable shift in the deposit mix and the impact of the sustained low levels in short-term interest rates, offsetting higher volumes of interest bearing deposits. The average cost of funds declined 17 basis points to 0.90 percent from 1.07 percent for the quarter ended March 31, 2012 and on a linked sequential quarter decreased 2 basis points compared to the fourth quarter of 2012. For the quarter ended March 31, 2013, the Corporation's annualized net interest spread decreased to 3.17 percent as compared to 3.28 percent for the same three month period in 2012.

Commenting on the Corporation's net interest margins, Mr. Weagley remarked: "We stabilized margins during the period, but continue to lag our targeted goals as a result of a continued high liquidity pool carried during the periods, which has not been entirely offset by the projected investing activity. We expect 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 as we move through the second quarter of 2013."  

Earnings Summary for the Period Ended March 31, 2013

The following table presents condensed consolidated statement of income data for the periods indicated.

Other Income

Other income decreased $110,000 for the first quarter of 2013 compared with the same period in 2012. During the first quarter of 2013, the Corporation recorded net investment securities gains of $319,000 compared to $937,000 in net investment securities gains for the same period last year. Excluding net securities gains, the Corporation recorded other income of $1.5 million for the three months ended March 31, 2013 compared to other income, excluding net securities gains, of $1.0 million for the first quarter of 2012 and $1.2 million for the three months ended December 31, 2012. The increase in other income in the first quarter of 2013 when compared to the first quarter of 2012 (excluding securities losses/gains) was primarily from an increase of $137,000 in other fees, $29,000 in loan related fees, an increase in bank owned life insurance income of $314,000, which include $291,000 in tax free proceeds in excess of contract value on the death of one participant, and an increase of $56,000 in annuities and insurance commissions.

The following table presents the components of other income for the periods indicated.

Other Expense

Total other expense for the first quarter of 2013 amounted to $6.5 million, which was approximately $345,000 or 5.3 percent higher than other expense for the three months ended December 31, 2012 and primarily related to an increase in employee salaries and benefits, which increased $285,000. The increase from the last quarter in 2012 includes the acquisition of the assets of Saddle River Valley Bank and, to a lesser extent, normal merit increases in salaries and higher benefit costs. Other increases contributing to the rise in operating overhead included FDIC insurance, marketing and advertising, other real estate owned and all other expense. These increases were partially offset by decreases in occupancy and equipment expense of $36,000, and professional and consulting expenses of $41,000.

The following table presents the components of other expense for the periods indicated.

The increase in other expense for the three months ended March 31, 2013, when compared to the quarter ended March 31, 2012, was approximately $731,000. Increases primarily included salaries and benefit expense of $372,000, occupancy and equipment expense of $206,000, FDIC insurance of $14,000, marketing and advertising expense of $70,000, bank regulatory related expenses of $12,000, ATM related expenses of $9,000 and all other expenses of $143,000. These increases were partially offset by decreases of $27,000 in professional and consulting, $23,000 in postage and delivery and $43,000 in other real estate owned expense.

Statement of Condition Highlights at March 31, 2013

• Continued strength in balance sheet with total assets amounted to $1.6 billion at March 31, 2013.
   
• Total loans were $879.4 million at March 31, 2013, increasing $90.8 million, or 11.5 percent, from March 31, 2012. Total real estate loans increased $58.6 million, or 10.6 percent, from March 31, 2012. Commercial loans increased $32.2 million, or 13.7 percent, year over year.
   
• Investment securities totaled $536.2 million at March 31, 2013, reflecting an increase of $11.6 million or 2.2 percent from March 31, 2012.
   
• Deposits totaled $1.28 billion at March 31, 2013, increasing $128.8 million, or 11.2 percent, since March 31, 2012. Total Demand, Savings, Money Market, and certificates of deposit less than $100,000 increased $142.3 million or 13.7 percent from March 31, 2012. The increases were attributable to continued core deposit growth in overall segments of the deposit base, as well as the Saddle River Valley Bank transaction.
   
• Borrowings totaled $151.2 million at March 31, 2013, decreasing $15.0 million from March 31, 2012, primarily due to the termination of a $10.0 million repurchase agreement and the prepayment of a $5.0 million FHLB New York advance.

Condensed Statements of Condition

The following table presents condensed statements of condition data as of the dates indicated.

The following table reflects the composition of the Corporation's deposits as of the dates indicated.

Loans

The Corporation's net loans in the first quarter of 2013 decreased $10.2 million, to $869.2 million at March 31, 2013, from $879.4 million at December 31, 2012. This includes allowance for loan losses of $10.2 million at both March 31, 2013 and December 31, 2012. The loan growth during the period amounted to approximately $64.1 million in new loans and advances during the first quarter. This growth was offset in part by prepayments of $33.1 million coupled with scheduled payments, maturities and payoffs of $41.1 million. Average loans during the first quarter of 2013 totaled $873.9 million as compared to $755.8 million during the first quarter of 2012, representing a 15.6 percent increase.

At the end of the first quarter of 2013, the loan portfolio remained well diversified with commercial and industrial (C&I) loans, including owner-occupied commercial real estate loans, accounting for 30.3 percent of the loan portfolio, commercial real estate loans representing 49.1 percent of the loan portfolio, and consumer and other loans representing 16.6 percent of the loan portfolio. Construction and development loans accounted for only 4.0 percent of the loan portfolio. The loan volume increase within the portfolio amounted to $102.9 million in commercial and commercial real estate loans, offset by decreases of $9.5 million in construction loans and $2.4 million in residential mortgage loans. At March 31, 2012, net loans totaled $778.8 million.

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

At March 31, 2013, the Corporation had $212.7 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 $45.1 million in commercial and commercial real estate loans and $5.6 million in residential mortgages expected to fund over the next 90 days.

Asset Quality

Non-accrual loans decreased from $3.6 million at December 31, 2012 to $2.6 million at March 31, 2013. Loans past due 90 days or more and still accruing decreased marginally from $55,000 at December 31, 2012 to $54,000 at March 31, 2013. Other real estate owned at March 31, 2013 was $1.5 million, as compared to $1.3 million at December 31, 2012. Both properties are currently being marketed and the Corporation anticipates sales with no further losses.  Performing troubled debt restructured loans, which are performing loans, remained stable at $6.81 million at December 31, 2012, $6.79 million at March 31, 2013 and $6.90 million at March 31, 2012 respectively.

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

At March 31, 2013, non-performing assets totaled $4.2 million, or 0.26 percent of total assets, as compared with $8.7 million, or 0.59 percent, at March 31, 2012 and $5.0 million, or 0.31 percent, at December 31, 2012. The decrease from March 31, 2012 reflects the ability to satisfactorily work out the problem loans that exist. The largest component of the remaining non-accrual loans is comprised of one relationship totaling $639,000, or 24.9 percent of the total, secured by senior liens on a residential property, located in Morris County, New Jersey. This loan has been restructured and is performing and it is anticipated that it will be returned to a performing status in the second quarter of 2013. The remaining loans are primarily residential properties and are in the process of being worked out. Subsequent to March 31, 2013, a commercial property with a recorded value of $129,000 was resolved with no further loss to its recorded value. 

The allowance for loan losses at March 31, 2013 amounted to approximately $10.2 million, or 1.16 percent of total loans. Excluding loans acquired from Saddle River Valley Bank and carried at fair value, the coverage ratio was 1.22 percent, compared to 1.24 percent of total loans at March 31, 2012. The allowance for loan losses as a percentage of total non-performing loans was 390.7 percent at March 31, 2013 compared to 119.1 percent at March 31, 2012.

Capital

At March 31, 2013, total stockholders' equity amounted to $164.8 million, or 10.2 percent of total assets. Tangible common stockholders' equity was $136.8 million, or 8.58 percent of tangible assets, compared to 7.81 percent at March 31, 2012. Book value per common share was $9.39 at March 31, 2013, compared to $8.01 at March 31, 2012. Tangible book value per common share was $8.36 at March 31, 2013 compared to $6.98 at March 31, 2012.

At March 31, 2013, the Corporation's Tier 1 leverage capital ratio was 9.31 percent, the Tier 1 risk-based capital ratio was 11.63 percent and the total risk-based capital ratio was 12.46 percent. Tier 1 capital increased to approximately $147.8 million at March 31, 2013 from $133.1 million at March 31, 2012, reflecting an increase in retained earnings.

At March 31, 2013, 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 table presents a reconciliation of average tangible stockholders' equity and a reconciliation of return on average tangible stockholders' equity for the periods presented.

"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 table presents 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.

"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 table presents 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.

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

"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:

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

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 Banking and 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. The Bank, through a strategic partnership between the Bank's Private Banking Division and Alexander, Troy & Company ("AT&CO."), Family Office Services, of Katonah, New York, provides customized financial and administrative services to high-net worth individuals.

Center, through a strategic partnership with Compass Financial Management, LLC and ING, offers 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 15 banking locations in Union, Morris and Bergen Counties in New Jersey. Banking centers are located in Union Township (5 locations), Berkeley Heights, Boonton/Mountain Lakes, Englewood, Madison, Millburn/Vauxhall, Morristown, Oakland, Saddle River, Springfield, and Summit, New Jersey. Center received approval from the Office of the Comptroller of the Currency to open a Private Banking and Loan Production Office in Princeton, NJ. The Bank's primary market area is comprised of central and northern New Jersey.

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 www.ucnb.com.

Forward-Looking Statements

All non-historical statements in this press release (including statements regarding future margin performance, the Bank's ability to market non-performing assets, the performance of restructured assets and other aspects of the Corporation's future performance ) 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.