(Source: PrimeNewswire)UNION, N.J., July 30, 2009 (GLOBE NEWSWIRE) -- Center Bancorp, Inc. (Nasdaq:CNBC), parent company of Union Center National Bank (UCNB), today reported operating results for the second quarter ended June 30, 2009. Net income amounted to $1.2 million, or $0.08 per fully diluted common share, for the quarter ended June 30, 2009, as compared with earnings of $1.4 million, or $0.11 per fully diluted common share, for the quarter ended June 30, 2008.

For the six months ended June 30, 2009, net income amounted to $2.0 million, or $0.13 per fully diluted common share, as compared to $2.6 million, or $0.20 per fully diluted common share, for the same period in 2008.

President & CEO's Remarks

"Center Bancorp continues to reflect strong core performance despite difficult economic conditions in the second quarter," indicated Anthony C. Weagley, President & CEO. "Most notably, we see overall growth in our core business, a continued growth of deposits, loans and most important, client relationships. This continues to translate into improved balance sheet trends. Certain credit quality indicators improved, such as reduced net charge-offs and other real estate owned (OREO) compared to the previous quarter. We remain cautiously optimistic on market trends and resulting challenges in the months ahead. Furthermore, we believe we have taken the appropriate actions in dealing with the financial crisis and have positioned ourselves to continue to expand our franchise and build shareholder value. Another key factor underpinning our performance is the control of operating overhead."

The Corporation continued to focus on building a superior balance sheet and increasing its liquidity. This resulted in a minor compression in net interest margin in the quarter and in year-to-date key performance measures. As of June 30, 2009, the Corporation maintained $173.6 million in cash at the Federal Reserve Bank of New York compared to $10.8 million at December 31, 2008. This represented growth in the Corporation's customer base and enhanced our liquidity position while we continue to expand our earning asset base in a prudent manner. Further, the Corporation has had no outstanding overnight borrowings under its $93.7 million line of credit facility with the Federal Home Loan Bank of New York since October 2008. The Corporation's available for sale investment portfolio provides an additional source of liquidity.

"During the second quarter, the Corporation recorded an increase in other real estate expense of $1.3 million coupled with higher FDIC insurance expense of $920,000 due primarily to an additional expense taken on the special assessment coupled with changes in the premium rates. Taken together, these increases reduced second quarter earnings by approximately $0.10 per fully diluted common share, and skewed our efficiency ratio measurement for the period," indicated Mr. Weagley.

"Despite these actions, we maintained solid core quarterly earnings, which fortified an already strong capital position. Overall, loans continued to show marked growth with commercial and commercial real estate demand still gaining strength, while new production of 1-4 family loans for sale into the secondary market coupled with refinancing activity reduced the residential loan portfolio. As we move forward, our focus will remain on preserving and growing our core business, and providing sound, prudent management of the Corporation."

Key items for the quarter include:

    * Net income of $1,201,000 for the second quarter of 2009 compared    with net income of $799,000 for the first quarter of 2009 and    $1.4 million for the second quarter of 2008.   * EPS of $0.08 per fully diluted common share compared with $0.05 per    fully diluted common share for the first quarter of 2009 and $0.11    per fully diluted common share for the comparable second quarter    period of 2008. Dividends and accretion relating to the preferred    stock and warrants issued to the U.S. Treasury reduced earnings by    approximately $0.01 per fully diluted common share.   * Other real estate expense increased by $1.3 million compared to the    same quarter last year, due primarily to the recognition of a    $926,000 write-down coupled with the continued build out costs    relating to the residential real estate condominium project in    Union County, New Jersey. The Corporation currently has a contract    for sale on this project, which is expected to close in the third    quarter of 2009.   * FDIC insurance expense increased $920,000 over the same quarter    last year due to the recording of the mandated FDIC special    assessment, which amounted to $630,000, along with higher FDIC    assessments resulting from changes in the premium rates.   * Overall credit quality in the Bank's portfolio remains high, even    though the economic weakness has impacted several potential problem    loans. Non-performing assets amounted to 0.80% of total assets at    June 30, 2009 compared to 0.81% at March 31, 2009 and 0.04% at    June 30, 2008.   * Strong Tier 1 capital ratio of 7.52% at June 30, 2009, 8.42% at    March 31, 2009, and 8.03% at June 30, 2008.   * A contraction in annualized net interest margin by 8 basis points    to 2.73% compared to 2.81% for the first quarter of 2009 and down    27 basis points as compared to the comparable quarter of 2008, as a    high level of uninvested excess cash has been accumulated due to    strong deposit growth experienced during the quarter.   * An increase in deposits to $955.1 million at June 30, 2009 from    $768.4 million at March 31, 2009 and $621.2 million at June 30,    2008, reflecting inflows in core savings deposits and CDARS    Reciprocal deposits, as customers' desires for safety and liquidity    became paramount in light of the financial crisis.   * Book value per common share amounting to $6.14 at June 30, 2009    compared to $6.15 at March 31, 2009 and $6.18 at June 30, 2008.    Tangible book value per common share was $4.83 at June 30, 2009    compared to $4.83 at March 31, 2009 and $4.86 at June 30, 2008.    Selected financial ratios (annualized where applicable)   As of or for the   quarter ended:       6/30/   3/31/   12/31/   9/30/    6/30/   3/31/  -----------------      09      09       08      08       08      08                        -----   -----   ------   -----   ------   -----  Return on average   assets                0.40%   0.30%    0.66%   0.60%    0.57%   0.50%  Return on average   equity                5.35%   3.52%    8.38%   7.55%    6.69%   5.60%  Net interest margin   (tax equivalent   basis)                2.73%   2.81%    3.01%   3.09%    3.00%   2.74%  Loan/Deposit   ratio                72.68%  88.24%  102.53%  97.64%  101.61%  90.71%  Stockholders' equity/   total assets          6.67%   7.98%    7.99%   7.73%    8.15%   8.58%  Efficiency ratio       96.3%   72.5%    59.7%   55.4%    67.7%   70.9%  Book value per common   share                $6.14   $6.15    $6.29   $6.21    $6.18   $6.51  Return on average   tangible   stockholders' equity  6.61%   4.33%   10.62%   9.60%    8.41%   6.98%  Tangible common   stockholders'            equity/tangible    assets                4.74%   5.69%    6.42%   6.19%    6.52%   6.98%  Tangible book value   per common share     $4.83   $4.83    $4.97   $4.89    $4.86   $5.20 

Capital and Liquidity

Center remained well capitalized with strong liquidity in the second quarter of 2009. Total stockholders' equity amounted to $89.5 million, or 6.67% of total assets, at June 30, 2009. Tangible common stockholders' equity was $62.8 million, or 4.74% of tangible assets. Book value per common share was $6.14 at June 30, 2009, compared to $6.18 at June 30, 2008. Tangible book value per common share was $4.83 at June 30, 2009 compared to $4.86 at June 30, 2008.

At June 30, 2009, the Corporation's Tier 1 Capital Leverage ratio was 7.52%, the Corporation's total Tier 1 Risk Based Capital ratio was 10.46% and the Corporation's Total Risk Based Capital ratio was 11.28%. Total Tier 1 capital increased to approximately $88.6 million at June 30, 2009 from $78.2 million at December 31, 2008, reflecting the Corporation's participation in the TARP Capital Purchase Program. At June 30, 2009, the Corporation's capital ratios continued to exceed each of 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.

The Corporation also announced that its Board of Directors has authorized a rights offering of up to approximately $11 million of common stock to its existing stockholders. The Corporation expects to use the net proceeds from the proposed rights offering to purchase the shares of preferred stock and the warrant to purchase shares of common stock issued to the U.S. Department of the Treasury in January 2009 under the TARP Capital Purchase Program.

Under the proposed rights offering, each shareholder of record as of a record date to be determined will receive, at no charge, one non-transferable subscription right for each share of Center Bancorp common stock owned on the record date. Each right will entitle the holder to purchase its pro rata allocation of the shares to be offered at a subscription price which is expected to be at a discount from the average market price of the Company's common stock for several trading days prior to the commencement of the rights offering. The proposed rights offering will also include an over-subscription privilege which will entitle each rights holder that exercises its basic subscription privilege in full to purchase any shares not purchased by other shareholders pursuant to the exercise of their basic subscription privileges at the same subscription price. Lawrence B. Seidman, an existing shareholder and member of the Corporation's Board of Directors, and certain of his affiliates have agreed to purchase any shares of common stock that remain unsubscribed for at the same price as the subscription price.

The Corporation anticipates that the specific terms of the rights offering will be determined, and the rights offering will commence, within the next month.

Center Bancorp plans to file a registration statement with the Securities and Exchange Commission pertaining to the rights offering. This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction, nor shall there be any offer or sale of the common stock referred to in this press release in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. The proposed rights offering will be made only by means of a prospectus.

Asset Quality

At June 30, 2009, non-performing assets totaled $10.8 million, or 0.80% of total assets, as compared with $9.1 million, or 0.81%, at March 31, 2009 and $0.4 million, or 0.04%, at June 30, 2008.

"While overall credit quality in the Bank's portfolio remains high, continued economic weakness has impacted several problem loans in the portfolio which have been previously disclosed. Non-accrual loans increased from $4.6 million at March 31, 2009 to $5.0 million at June 30, 2009; this increase was due primarily to the addition of one residential mortgage credit. Troubled debt restructurings increased from $91,000 at March 31, 2009 to $1.0 million at June 30, 2009; the increase in troubled debt restructurings reflects modifications to residential mortgage loans, which are all performing according to the terms in their respective modification agreements. Loans past due 90 days or more and still accruing increased from none at March 31, 2009 to $1.3 million at June 30, 2009 due to three new credits which are well secured and in the process of collection. With respect to the $4.0 million industrial warehouse project placed into non-accrual during the first quarter of 2009, we are currently working with the borrowers and the participating bank that is involved with the project, in an effort to sell or lease the remaining industrial warehouse units. Proceeds from the current units under contract, as well as the remaining units, will be used to make further principal reductions to our loan," remarked Mr. Weagley.

The OREO balance decreased from $4.4 million at March 31, 2009 to $3.5 million at June 30, 2009. This decrease was related to the writedown of the carrying value of the residential condominium project that was taken into OREO during the fourth quarter of 2008. The Corporation currently has a contract for sale on the project, which is expected to close during the third quarter of 2009. Had this sale occurred on June 30, 2009, the Corporation's total non-performing assets would have reflected a significant improvement from March 31, 2009. The Corporation expects to record a gain on the sale of the property in the approximate amount of $150,000.

At June 30, 2009, the total allowance for loan losses amounted to approximately $6.9 million, or 1.00% of total loans. The allowance for loan losses as a percent of total non-performing loans amounted to 94.8% at June 30, 2009 as compared to 145.4% at March 31, 2009 and 1,563.5% at June 30, 2008.

    Selected credit quality ratios (unaudited)   (Dollars in thousands)  As of or for the   quarter ended:          6/30/09     3/31/09    12/31/08     9/30/08  ----------------         -------     -------    --------     -------  Non-accrual loans      $    5,058  $    4,566  $      541  $      541  Troubled debt   restructuring                975          91          93          95  Past due loans 90 days   or more and still   accruing interest          1,260          --         139          18  ----------------------------------------------------------------------  Total non performing   loans                      7,293       4,657         773         654  Other real estate owned   ("OREO")                   3,500       4,426       3,949          --  ----------------------------------------------------------------------  Total non performing   assets                $   10,793  $    9,083  $    4,722  $      654  ----------------------------------------------------------------------  Non performing assets   as a percentage of   total assets                0.80%       0.81%       0.46%       0.06%  Non performing loans as   a percentage of total   loans                       1.05%       0.69%       0.11%       0.10%  Net charge-offs        $        8  $      906  $      251  $       45  Net charge-offs as a   percentage of average   loans for the period   (annualized)                0.00%       0.53%       0.15%       0.03%  Allowance for loan   losses as a percentage   of period end loans         1.00%       1.00%       0.92%       0.92%  Allowance for loan   losses as a percentage   of non-performing   loans                       94.8%      145.4%      809.1%      929.7%  ----------------------------------------------------------------------   Total Assets           $1,341,603  $1,121,013  $1,023,293  $1,042,778  Total Loans               694,214     678,017     676,203     661,157  Average loans for the   quarter                  686,675     679,953     670,212     651,766  Allowance for loan   losses                     6,917       6,769       6,254       6,080  ----------------------------------------------------------------------   (Dollars in thousands)  As of or for the quarter ended:                     6/30/08   3/31/08  -------------------------------                    --------  --------  Non-accrual loans                                  $    265  $  1,215  Troubled debt restructuring                              97        --  Past due loans 90 days or more and still accruing   interest                                                --        --  ----------------------------------------------------------------------  Total non performing loans                              362     1,215  Other real estate owned ("OREO")                         --       478  ----------------------------------------------------------------------  Total non performing assets                        $    362  $  1,693  ----------------------------------------------------------------------  Non performing assets as a percentage of total   assets                                                0.04%     0.17%  Non performing loans as a percentage of total loans    0.06%     0.22%  Net charge-offs                                    $    106  $     68  Net charge-offs as a percentage of average loans   for the period (annualized)                           0.07%     0.05%  Allowance for loan losses as a percentage of   period end loans                                      0.90%     0.93%  Allowance for loan losses as a percentage of   non-performing loans                               1,563.5%    431.7%  ----------------------------------------------------------------------   Total Assets                                       $986,436  $995,167  Total Loans                                         631,221   565,025  Average loans for the quarter                       601,655   565,654  Allowance for loan losses                             5,660     5,245  ---------------------------------------------------------------------- 

Net Interest Income and Margin

The Corporation recorded net interest income on a fully taxable equivalent basis of $6.8 million for the three months ended June 30, 2009 as compared to $6.8 million for the comparable quarter in 2008. Interest income increased by $0.3 million and interest expense increased by $0.3 million from the same period last year. Compared to 2008, average interest earning assets increased by $88.4 million while the net interest spread and net interest margin improved by 6 basis points and decreased by 27 basis points, respectively. On a linked quarter basis, the net interest spread and margin increased by 12 basis points and decreased by 8 basis points, respectively. Our net interest margin was impacted by the high level of uninvested excess cash, which accumulated due to strong deposit growth experienced during the quarter.

For the six months ended June 30, 2009, net interest income on a fully taxable equivalent basis amounted to $13.3 million as compared to $12.9 million for the same period in 2008. Interest income declined by $0.4 million while interest expense decreased by $0.8 million from the same period last year. Compared to 2008, average interest earning assets increased $65.0 million while our net interest spread and margin increased by 17 basis points and decreased by 10 basis points, respectively. Our net interest margin was impacted by the high level of uninvested excess cash, which accumulated due to strong deposit growth experienced during the first six months.