UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported):  October 28, 2010

CENTER BANCORP, INC.

(Exact Name of Registrant as Specified in its Charter)

New Jersey                                       2-81353                                       52-1273725
(State or Other Jurisdiction       (Commission File Number)        (IRS Employer
of Incorporation)                                                                             Identification No.)

2455 Morris Avenue, Union, New Jersey                          07083
(Address of principal executive offices)                      (Zip Code)

Registrant's telephone number, including area code (800) 862-3683

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 

Item 2.02.  Results of Operations and Financial Condition.

On October 28, 2010, the Registrant issued a press release regarding results for the three and nine months ended September 30, 2010.  A copy of this press release is included as Exhibit 99.1 to this Current Report on Form 8-K.

Item 9.01.  Financial Statements and Exhibits.

(d)            Exhibits

Exhibit 99.1 – Press release, dated October 28, 2010, regarding results for the three and nine months ended September 30, 2010.

The only portions of Exhibit 99.1 which are to be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 are the Registrant’s consolidated statements of condition and consolidated statements of income.  All other portions of Exhibit 99.1 are deemed “furnished”, and not “filed”, for purposes of Section 18 of the Securities Exchange Act of 1934.
 
 
-2-
 

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 hereunto duly authorized.

CENTER BANCORP, INC.
 
By:
/s/ Anthony C. Weagley
 
Name:
Anthony C. Weagley
Title:
President and Chief Executive Officer

Dated:  October 29, 2010

 
-3-
 

EXHIBIT INDEX

Exhibit 99.1 – Press release, dated October 28, 2010, regarding results for the three and nine months ended September 30, 2010.

 
-4-
 


Center Bancorp, Inc. Reports Third Quarter 2010 Earnings

UNION, NJ—October 28, 2010—Center Bancorp, Inc. (Nasdaq:CNBC) (the "Corporation", or "Center"), parent company of Union Center National Bank, today reported operating results for the third quarter ended September 30, 2010. Net income available to common stockholders amounted to $2.0 million, or $0.14 per fully diluted common share, for the quarter ended September 30, 2010, as compared with net income available to common stockholders of $1.4 million, or $0.11 per fully diluted common share, for the quarter ended September 30, 2009.
 
"The Corporation's performance for the third quarter of 2010 reflected sustained progress on multiple levels with solid core results that underscores Center's sustained progress in improving growth of revenue streams and balance sheet strength. Results are consistent with the work started in prior quarters and scheduled to continue into 2011. With these actions, we enter the remainder of 2010 with a marked improvement in our balance sheet positioned to expand net interest margins, and with adequate loan loss reserves, good credit quality in the asset portfolios and a strong underpinning to reduce operating overhead and support net income levels," remarked Anthony C. Weagley, President & CEO.
 
"We are pleased with the performance achieved for the quarter and are optimistic that the Corporation will build its outstanding loan volume from this level through the fourth quarter of 2010. Our pipelines are strong, and we expect that increased activity in the commercial sectors of the portfolio will support our strategic goals of increased loan volume and improving our earning asset mix," said Mr. Weagley.
 
"Notwithstanding a slowdown in the general markets and a volatile yield curve, we believe that our increased business development efforts and brand recognition offer a unique window of opportunity for Center to expand its franchise as the market and businesses seek a strong community bank with the capacity and commitment to meet their needs.  Our emphasis will continue to be on the commercial mortgage, construction and commercial loan sectors of the portfolio." At September 30, 2010, the Corporation had $163.0 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.  Our “Approved, Accepted but Unfunded” pipelines include $12.4 million in commercial and commercial real estate loans expected to fund over the next 90 days.
 
“ Our allowance for loan loss level , our ability to reduce credit exposures and our low credit losses provide us the opportunity to continue to manage risk exposures as we grow the loan portfolio . The increase in this quarter's loan loss provision was primarily related to one large troubled debt restructuring of a commercial real estate loan, which is performing, coupled with some charge-offs in the residential mortgage portfolio. At September 30, 2010, our non-performing loans were 1.67% of total loans, down from 1.80% a year ago. Net charge-offs for the third quarter were an annualized 0.63% of average loans and were an annualized 0.55% for the nine months ended September 30, 2010, well below industry peer levels,” added Mr. Weagley.
 
Earnings for the current quarter included the effects of actions taken to further improve the strength of the Corporation ’ s balance sheet.  Certain bank-owned life insurance policies, with insurance carriers that had deteriorated credit ratings and investment yields, were surrendered and the proceeds were reinvested with more creditworthy carriers. The surrender of the policies had the e ffect of increasing income tax expense by $633,000.  In addition, the provision for loan losses for the quarter was higher than anticipated by $670,000, which increased the allowance for loan losses to 1.25% of total loans.  The earnings effect of these actions during the quarter was offset in part by a recognized income tax benefit of $204,000 and a recapture of incom e tax interest reserves of $121,000.   Although earnings for the current quarter included these one-time charges and benefits, the results for the quarter and the year to date period nonetheless continue to reflect the core growth in key performance areas of the Corporation:  asset growth, margin expansion and a reduction in operating overhead.

 
 
 
 
For the nine months ended September 30, 2010, net income available to common stockholders amounted to $4.0 million, or $0.27 per fully diluted common share, compared t o $3.1 million, or $0.24 per fully diluted common share, for the same period in 2009 .   The results for the nine months ended September 30, 2010 included various one-time charges and benefits which, if excluded, would have reflected additional net income available to common shareholders of $3.0 million, or $0.21 per fully diluted common share. Such charges and benefits primarily included:  $5.1 million in other-than-temporary impairment charges on investment securities; a $594,000 early termination charge incurred to unwind a structured repurchase agreement; a one-time charge of $437,000 in connection with the lease/sale of the Corporation’s former operations facility; $633,000 in increased income tax expense due to the surrender of bank-owned life insurance policies; and $1.2 million in recognized income tax benefits.

Highlights for the quarter include:

 
·
Net interest income increased to $8.4 million, compared to $7.4 million for the third quarter 2009. Net interest margin on a fully taxable equivalent basis increased 51 basis points to 3.30%, compared to 2.79% for the third quarter of 2009, primarily the result of lower interest rates on deposits and borrowings and changes in volume mix.
 
 
·
Deposits increased to $836.9 million at September 30, 2010, or 4.3%, from $802.5 million at June 30, 2010 and decreased $124.3 million from the balance reported at September 30, 2009. The growth in the current quarter was primarily in noninterest-bearing checking deposits, savings and money market deposit accounts, while the decline from a year ago was largely in time deposits.
 
 
·
At September 30, 2010, total loans amounted to $701.9 million, a decrease of $20.6 million, compared to total loans at June 30, 2010. The decrease occurred primarily in the real estate loan portfolio.
 
 
·
Overall credit quality in the loan portfolio declined slightly during the quarter. Non-performing assets, consisting of non-accrual loans, accruing loans past due 90 days or more and other real estate owned (“OREO”), amounted to 1.12% of total assets at September 30, 2010, compared to 0.79% at June 30, 2010 and 0.94% at December 31, 2009. However, in early October the Corporation disposed of $1.8 million in OREO property and recorded a loss of approximately $185,000. Excluding this item from total non-performing assets reported at September 30, 2010, non-performing assets as a percent of total assets would have been 0.97%.   At September 30, 2010, the allowance for loan losses amounted to approximately $8.8 million, or 1.25% of total loans. The allowance for loan losses as a percentage of total non-performing loans was 74.7% at September 30, 2010 compared to 112.4% at June 30, 2010 and 77.2% at December 31, 2009.
 
 
·
The Corporation added $11.4 million to its capital base as a result of its successful common stock offerings in September 2010. The Tier 1 leverage capital ratio of 9.60% at September 30, 2010, compared to 6.74% at September 30, 2009, and 7.73% at December 31, 2009, exceeding regulatory guidelines.
 
 
·
Book value per common share was $6.90 at September 30, 2010, compared to $6.32 at December 31, 2009 and $6.36 at September 30, 2009. Tangible book value per common share was $5.86 at September 30, 2010, compared to $5.15 at December 31, 2009 and $5.04 at September 30, 2009 .
 
Selected F inancial R atios
(unaudited; annualized where applicable)

As   of   or   for   the   quarter   ended:
 
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
 
Return on average assets
    0.72 %     0.69 %     0.10 %     0.07 %     0.46 %
Return on average equity
    7.74 %     7.60 %     1.07 %     0.91 %     6.77 %
Net interest margin (tax equivalent basis)
    3.30 %     3.37 %     3.35 %     3.05 %     2.79 %
Loans / deposits ratio
    83.87 %     90.04 %     90.08 %     88.44 %     74.50 %
Stockholders’ equity / total assets
    10.00 %     8.98 %     8. 81 %     8.51 %     6.83 %
Efficiency ratio (1)
    57.3 %     65.9 %     67.5 %     57.6 %     62.0 %
Book value per common share
  $ 6.90     $ 6.71     $ 6. 5 2     $ 6.32     $ 6.36  
Return on average tangible stockholders’ equity (1)
    9.14 %     9.06 %     1.28 %     1.09 %     8.33 %
Tangible common stockholders’ equity / tangible assets (1)
    7.93 %     6.87 %     6. 66 %     6.37 %     4.92 %
Tangible book value per common share (1)
  $ 5.86     $ 5.54     $ 5. 35     $ 5.15     $ 5.04  
 
 
 
 
 
(1)   Information reconciling non-GAAP measures to GAAP measures is presented elsewhere in this press release.
 
Earnings Summary for the Period Ended September 30, 2010
 
The following presents condensed consolidated statement of income data for the periods indicated.

Condensed Consolidated Statements of Income (unaudited)
 
(dollars in thousands, except per share data)
For the quarter ended:
 
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
 
Net interest income
  $ 8,382     $ 8,657     $ 8,509     $ 8,018     $ 7,441  
Provision for loan losses
    1,307       781       940       2,740       280  
Net interest income after provision for loan losses
    7,075       7,876       7,569       5,278       7,161  
Other income (charges)
    2,135       1,482       ( 2,449 )     (340 )     311  
Other expense
    5,442       6,268       6,392       5,238       5,186  
Income before income tax expense
    3,768       3,090       (1,272 )     (300 )     2,286  
Income tax expense (benefit)
    1,629       1,076       (1,553 )     (536 )     751  
Net income
  $ 2,139     $ 2,014     $ 281     $ 236     $ 1,535  
Net income available to common stockholders
  $ 1,993     $ 1,868     $ 136     $ 94     $ 1,387  
Earnings per common share:
                                       
Basic
  $ 0.14     $ 0.13     $ 0.0 1     $ 0.01     $ 0.11  
Diluted
  $ 0.14     $ 0.13     $ 0.0 1     $ 0.01     $ 0.11  
Weighted average common shares outstanding:
                                       
Basic
    14,649,397       14,574,832       14,574,832       14,531,387       13,000,601  
Diluted
    14,649,397       14,576,223       14,579,871       14,534,255       13,005,101  
 
Net Interest Income
 
For the three   months ended September 30 , 2010 , total interest income on a fully taxable  equivalent basis de crease d $1.5 million or 11.3%, to $12.0 million,   compared to the three   months ended September 30 , 2009. T otal interest expense de creased by $2.4 million, or 39.6%, to $3.7 million,  for  the three   months ended September 30 , 2010, compared to the same period last year.  Net  interest income on a fully taxable equivalent basis was $ 8.4  million  for the three months  ended September 30 , 2010, increasing $857,000, or 11.4%, from $7.5 million  for the comparable period in   2009 .
 
The de crease in interest expense reflects the impact of the sustained low leve ls in short-term interest rates and lower volume of time deposits. The   combined positive effect was a  decrease  in the average cost of funds, which declined 60   basis points to 1.58%  from 2.18 % for the quarter ended September 30 , 2009 and on a linked sequential quarter de creased 9 basis points   compared to the  second  quarter  of 2010 .
 
For the quarter ended September 30 , 2010 , the Corporation ’ s net interest spread increased 30 basis points to 3 .16 % as compared to 2.86% for the same three   month period in 2009, and the Corporation ’ s net interest margin (net interest income as a percentage of interest- earning assets) widened by 51 basis points from 2.79% to 3.30%, in all cases on an annualized basis.
 
For the nine months ended September 30, 2010, net interest income on a fully taxable equivalent basis amounted to $25.6 million, compared to $20.8 million for the same period in 2009. Interest income decreased by $1.2 million while interest expense decreased by $6.0 million from the same period last year. Compared to the same period in 2009, for the nine months ended September 30, 2010, average interest earning assets increased $20.8 million while net interest spread and margin increased on an annualized basis by 47 basis points and 57 basis points, respectively. The Corporation’s net interest income and   margin w ere favorably impacted primarily by lower interest rates on deposits and borrowings and changes in volume mix.
 
 
 
 
 
Other Income
 
The following presents the components of other income for the periods indicated.

(in   thousands , unaudited )
                             
For   the   quarter   ended:
 
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
 
Service charges on deposit accounts
  $ 413     $ 337     $ 325     $ 371     $ 350  
Fees from mortgage banking activity
    -       -       -       1       4  
Loan related fees
    104       40       45       25       35  
Mutual funds and annuities commissions
    3       23       93       24       17  
Debit card and ATM fees
    122       122       105       111       114  
Bank-owned life insurance
    429       264       264       408       273  
Net investment securities gains (losses)
    1,033       657       (3,344 )     (1,308 )     (511 )
Other service charges and fees
    31       39       63       28       29  
Total other income (charges)
  $ 2,135     $ 1,482     $ (2,449 )   $ (340 )   $ 311  
 
Other income increased $1.8 million for the third quarter of 2010 compared with the same period in 2009. During the third quarter of 2010, the Corporation recorded net investment securities gains of $1.0 million compared to $511,000 in net investment securities losses for the same period last year. Excluding net securities gains, the Corporation recorded other income of $1.1 million for the three months ended September 30, 2010 compared to other income, excluding net securities gains, of $825,000 on a sequential linked quarter basis and other income, excluding net securities losses, of $822,000 for the three months ended September 30, 2009. The increase in other income in the third quarter 2010 when compared to the second quarter 2010 was primarily in service charges on deposit accounts, loan fees and bank-owned life insurance income.
 
For the nine months ended September 30, 2010, total other income decreased $3.1 million compared to the same period in 2009, primarily as a result of net securities losses including impairment charges taken on investment securities. Excluding net securities losses, the Corporation recorded other income of $2.8 million for the nine months ended September 30, 2010 compared to $2.4 million for the comparable period in 2009, an increase of $375,000 or 15.3%. Increases in other income for the nine months ended September 30, 2010 when compared to the nine months ended September 30, 2009 were primarily in service charges on deposits accounts, loan fees and bank-owned life insurance income.
 
Other Expense
 
The following presents the components of other expense for the periods indicated.
 
(in   thousands , unaudited )
                             
For   the   quarter   ended:
 
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
 
Salaries
  $ 2,178     $ 2,103     $ 2,043     $ 1,934     $ 1,981  
Employee benefits
    543       624       614       552       548  
Occupancy and equipment
    754       734       889       917       862  
Professional and consulting
    153       422       274       173       190  
Stationery and printing
    68       90       84       86       81  
FDIC Insurance
    510       458       618       430       320  
Marketing and advertising
    36       105       93       20       75  
Computer expense
    320       340       340       302       220  
Bank regulatory related expenses
    97       97       98       68       63  
Postage and delivery
    65       74       91       76       72  
ATM related expenses
    59       66       64       63       63  
Other real estate owned expense
    20       43       -       -       30  
Amortization of core deposit intangible
    16       19       19       19       19  
Loss (gain)  on fixed assets
    -       437       (10 )     -       -  
Repurchase agreement termination fee
    -       -       594       -       -  
All other expenses
    623       656       581       598       662  
Total other expense
  $ 5,442     $ 6,268     $ 6,392     $ 5,238     $ 5,186  
 
Other expense for the third   quarter of 2010 totaled $ 5.4 million, which was approximately $ 826,000 lower than   other expense for the three months ended J une 30 , 2010 .   Professional and consulting expense for the three months ended September 30, 2010 decreased $269,000 compared to the three months ended June 30, 2010, and there were also decreases in employee benefits, primarily in pension expense of $81,000, and in marketing and advertising expense of $69,000. The increase in other expense for the three months ended September 30, 2010 when compared to the same period in 2009 was approximately $256,000 and was primarily associated with FDIC insurance expense.
 
 
For the nine months ended September 30, 2010, total other expense increased $282,000, or 1.6%, compared to the same period in 2009. A decrease in other real estate owned expense of $1.4 million served to largely offset increases in other expense categories which primarily included $1.0 million in one-time charges incurred with the lease/sale of the Corporation’s former operations facility and the early termination of a structure repurchase agreement.
 
Asset Quality
 
The following presents the components of non-performing assets and other asset quality data for the periods indicated.
 
(dollars   in   thousands , unaudited )
                             
As   of   or   for   the   quarter   ended:
 
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
 
Non-accrual loans
  $ 8,339     $ 7,312     $ 9,770     $ 11,245     $ 11,448  
Loans 90 days or more past due and still accruing
    3,402       336       1,584       39       1,477  
Total non-performing loans
    11,741       7,648       11,354       11,284       12,925  
Other real estate owned
    1,927       1,780       -       -       -  
Total non-performing assets
  $ 13,668     $ 9,428     $ 11,354     $ 11,284     $ 12,925  
Troubled debt restructured loans
  $ 10,417     $ 9,388     $ 4,465     $ 966     $ 970  
                                         
Non-performing assets / total assets
    1.12 %     0.79 %     0.96 %     0.94 %     0.96 %
Non-performing loans / total loans
    1.67 %     1.06 %     1.59 %     1.57 %     1.80 %
Net charge-offs
  $ 1,133     $ 325     $ 1,512     $ 1,171     $ 55  
Net charge-offs / average loans (1)
    0.63 %     0.18 %     0. 85 %     0.66 %     0.03 %
Allowance for loan losses / total loans
    1.25 %     1.19 %     1.14 %     1.21 %     1.00 %
Allowance for loan losses / non-performing loans
    74.7 %     112.4 %     71.7 %     77.2 %     55.3 %
                                         
Total assets
  $ 1,221,278     $ 1,195,819     $ 1, 187,655     $ 1,195, 488     $ 1,349,516  
Total loans
    701,936       722,527       713,906       719,606       716,100  
Average loans
    715,849       718,078       711,860       709,612       693,670  
Allowance for loan losses
    8,770       8,595       8, 139       8,711       7,142  
 
 
(1)
Annualized.
 
At September 30 , 2010, non-performing assets totaled $13.7 million, or 1.12% of total assets, as compared with $11.3 million, or 0.94%, at December 31, 2009 and $12.9 million, or 0.96%, at September 30 , 2009.
 
The allowance for loan losses at September 30, 2010 amounted to approximately $8.8 million, or 1.25% of total loans compared to 1.21% of total loans at December 31, 2009. The allowance for loan losses as a percentage of total non-performing loans was 74.7% at September 30, 2010 compared to 77.2% at December 31, 2009.
 
Non-accrual loans increased from $7.3 million at June 30, 2010 to $8.3 million at September 30, 2010. Loans past due 90 days or more and still accruing increased from $336,000 at June 30, 2010 to $3.4 million at September 30, 2010. The increase in this category was primarily attributable to four residential loans totaling $1.4 million that are believed to be temporarily in this category, and a $1.6 million commercial loan currently being reviewed for potential modification. The borrower owns a building occupied by a day care center that has sought rent relief thus straining our borrower’s ability to pay per the loan contract. Other real estate owned at September 30, 2010 amounting to $1.9 million consisted of two residential properties, one of which for $1.8 million was disposed of in early October 2010 at a loss of approximately $185,000 and another that is under contract of sale and subject to close in the fourth quarter of 2010. Troubled debt restructured loans, which are performing loans, increased $1.0 million from June 30, 2010 to $10.4 million at September 30, 2010, due to the addition of two restructurings totaling $1.5 million, offset in part by the charge-off of one restructured loan for $473,000.
 
A discussion of the significant components of non-performing assets at September 30, 2010 is outlined below.
 
 
·
A $3.0 million nonaccrual loan secured by a commercial property located in Essex County, New Jersey. This non-accrual loan represents an expired participation with Highlands State Bank.
 
 
 
·
A $2.0 million nonaccrual loan secured by a commercial property located in Monmouth County, New Jersey. At present, the borrower has changed listing brokers to one that specializes in this type of property. Aggressive marketing is anticipated, and the Corporation expects to be repaid in full from the ultimate sale of the property.
 
 
·
A $1.0 million nonaccrual loan for a construction project secured by a commercial property in Union County, New Jersey. The borrower has entered into a contract of sale with a closing expected during the fourth quarter of 2010. From a combination of the net sales proceeds and a restructuring agreement entered into with the borrower, guarantors and affiliated entities, the Corporation expects to be repaid as a result.
 
 
·
A $1.6 million loan 90 days past due and still accruing secured by a commercial property in Atlantic County, New Jersey. The borrower is renegotiating the lease with its tenants and has been making partial payments regularly and may be looking to restructure the loan with the Corporation.
 
 
·
Other real estate owned at September 30, 2010 totaled $1.9 million and consisted of two residential properties. One of the properties carried at $1.8 million was disposed of in early October 2010 at a loss of approximately $185,000, and the other property is under contract of sale scheduled to close in the fourth quarter 2010.
 
 
·
Troubled debt restructured loans at September 30, 2010 totaled $10.4 million, increasing $1.0 million from June 30, 2010. These loans are all performing according to their restructured terms.
 
Capital
 
The Corporation completed a capital offering on September 27, 2010. Center sold an aggregate of 1,715,000 shares of its common stock under its previously filed shelf registration statement, which was declared effective by the Securities and Exchange Commission on May 5, 2010. Center sold, through Stifel Nicolaus Weisel as underwriter, 1,430,000 shares of common stock at a price of $7.00 per share, with underwriting discounts and commissions of $0.39 per share, for gross proceeds from this offering of $10,010,000. Center also sold 285,000 shares of common stock directly to certain of its directors at a price of $7.50 per share, for gross proceeds from this offering of $2,137,500.
 
At September 30, 2010, total stockholders' equity amounted to $122.2 million, or 10.0% of total assets. Tangible common stockholders' equity was $95.5 million, or 7.93% of tangible assets. Book value per common share was $6.90 at September 30, 2010, compared to $6.36 at September   30, 2009. Tangible book value per common share was $5.86 at September 30, 2010 compared to $5.04 at September 30, 2009.
 
At September 30, 2010, the Corporation’s Tier 1 leverage capital ratio was 9.60%, the Tier 1 risk-based capital ratio was 13.09% and the Total risk-based capital ratio was 14.12%. Tier 1 capital increased to approximately $112.3 million at September 30, 2010 from $89.6 million at September 30, 2009, reflecting the Corporation’s proceeds from a rights offering and private placement with its standby purchaser in October 2009, proceeds from the Corporation’s common stock offerings in September 2010 and increases in retained earnings.
 
Statement of Condition Highlights at September 30, 2010

 
·
Total assets amounted to $1.2 billion at September 30, 2010.
 
 
·
Total loans were $701.9 million at September 30, 2010, decreasing $14.2 million, or 2.0%, from September 30, 2009. Total real estate loans declined $36.5 million from the comparable period in 2009 as a result of a decrease in the residential real estate portfolio. Commercial loans increased $22.9 million, or 13.9%, year over year.
 
 
·
Investment securities totaled $362.7 million at September 30, 2010, decreasing $13.4 million compared to September 30, 2009, and reflecting an increase from December 31, 2009 of $64.6 million.
 
 
·
Deposits totaled $836.9 million at September 30, 2010, increasing $23.2 million, or 2.9%, since December 31, 2009. Total deposits decreased $124.3 million from September 30, 2009, primarily in time certificates of deposit of $100,000 or more which were CDARS Reciprocal deposits.
 
 
·
Total deposit funding sources, including overnight repurchase agreements (which agreements are considered part of the demand deposit base), amounted to $873.3 million at September 30, 2010, a decrease of $140.0 million from September 30, 2009, reflecting outflows of CDARS time deposits. The Corporation’s core deposit gathering efforts remain strong.
 
 
·
Borrowings totaled $232.6 million at September 30, 2010, decreasing $41.8 million from December 31, 2009, primarily due to repayment of a Federal Home Loan Bank advance and a structured repurchase agreement, coupled with a reduction in overnight repurchase agreement activity.
 
 
The following reflects the composition of the Corporation’s loan portfolio as of the dates indicated.
 
Loans (unaudited)
                             
                               
(in thousands)
                             
At quarter ended:
 
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
 
Real estate loans:
                             
Residential
  $ 165,535     $ 176,697     $ 184,598     $ 190,138     $ 200,533  
Commercial
    295,003       299,694       297,167       304,662       291,133  
Construction
    52,518       58,118       50,574       51,099       57,898  
Total real estate loans
    513,056       531,516       532,339       545,899       549,564  
Commercial loans
    188,052       187,104       180,597       172,226       165,173  
Consumer and other loans
    445       467       505       954       952  
Total loans before deferred fees and costs
    701,553       722,080       713,441       719,079       715,689  
Deferred costs, net
    383       447       465       527       411  
Total loans
  $ 701,936     $ 722,527     $ 713,906     $ 719,606     $ 716,100  

The following reflects the composition of the Corporation’s deposits as of the dates indicated.
 
Deposits (unaudited)
                             
                               
(in thousands)
                             
At quarter ended:
 
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
 
Demand:
                             
Non interest-bearing
  $ 147,213     $ 138,152     $ 137,422     $ 130,518     $ 126,205  
Interest-bearing
    176,728       176,284       156,865       156,738       136,070  
Savings
    202,242       189,920       188,712       192,996       215,275  
Money market
    139,440       125,055       126,647       116,450       132,395  
Time
    171,279       173,048       182,864       217,003       351,212  
Total deposits
  $ 836,902     $ 802,459     $ 792,510     $ 813,705     $ 961,157  

Condensed Statements of Condition
 
The following tables present condensed statements of condition at or for the periods indicated.
 
Condensed Consolidated Statements of Condition (unaudited )
 
(in thousands)
                             
At quarter ended:
 
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
 
Cash and due from banks
  $ 75,478     $ 97,651     $ 66,863     $ 89,168     $ 172,401  
Investment  securities
    362,683       294,277       322,309       298,124       376,097  
Loans
    701,936       722,527       713,906       719,606       716,100  
Allowance for loan losses
    (8,770 )     (8,595 )     (8, 139 )     (8,711 )     (7,142 )
Restricted investment in bank stocks, at cost
    10,255       10,707       10,551       10,672       10,673  
Premises and equipment, net
    13,178       13,349       17,635       17,860       18,155  
Goodwill
    16,804       16,804       16,804       16,804       16,804  
Core deposit intangible
    170       186       205       224       243  
Bank-owned life insurance
    27,636       26,832       26,568       26,304       26,162  
Other real estate owned
    1,927       1,780       -       -       -  
Other assets
    19,981       20,301       20,953       25,437       20,023  
Total assets
  $ 1,221,278     $ 1,195,819     $ 1,187,655     $ 1,195,488     $ 1,349,516  
Deposits
  $ 836,902     $ 802,459     $ 792,510     $ 813,705     $ 961,157  
Borrowings
    232,568       248,883       258,477       274,408       280,509  
Other liabilities
    29,651       37,058       32,065       5,626       15,623  
Stockholders' equity
    122,157       107,419       104,603       101,749       92,227  
Total liabilities and stockholders’ equity
  $ 1,221,278     $ 1,195,819     $ 1,187,655     $ 1,195,488     $ 1,349,516  
 
 
 
 

Condensed Consolidated Average Statements of Condition (unaudited )
 
(in thousands)
  For the quarter ended:
 
9 /30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
 
Investment securities
  $ 301,316     $ 313,905     $ 310,525     $ 357,471     $ 385,270  
Loans
    715,849       718,078       711,860       709,612       693,670  
Allowance for loan   losses
    ( 8,738 )     (8,362 )     (8,378 )     (7,401 )     (6,978 )
All other assets
    180,974       150,842       164,708       233,341       274,103  
Total a ssets
  $ 1,189,401     $ 1,174,463     $ 1,178,715     $ 1,293,023     $ 1,346,065  
Non interest-bearing deposits
  $ 142,829     $ 139,759     $ 135,358     $ 134,325     $ 129,592  
Interest-bearing deposits
    685,830       659,608       661,630       764,469     $ 845,504  
Borrowings
    238,266       256,854       268,775       279,344       266,825  
Other liabilities
    11,932       12,295       8,316       11,018       13,411  
Stockholders’ equity
    110,544       105,947       104,636       103,867       90,733  
Total liabilities and stockholders’ equity
  $ 1,189,401     $ 1,174,463     $ 1,178,715     $ 1,293,023     $ 1,346,065  
 
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 is utilized by market analysts and others to evaluate a company's financial condition and, therefore, 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 which may be 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 our return on equity excluding the effect of changes in intangible assets on equity.
 
The following presents a reconciliation of average tangible stockholders’ equity and a reconciliation of return on average tangible stockholders’ equity for the periods presented.
 
(dollars in thousands)
                             
For the quarter ended:
 
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
 
Net income
  $ 2,139     $ 2,014     $ 281     $ 236     $ 1,535  
Average stockholders’ equity
  $ 110,544     $ 105,947     $ 104,6 36     $ 103,867     $ 90,733  
Less:                                         
Average goodwill and other intangible assets
    16,984       17,001       17,020       17,039       17,058  
Average tangible stockholders’ equity
  $ 93,560     $ 88,946     $ 87,616     $ 86,828     $ 73,675  
                                         
Return on average stockholders’ equity
    7.74 %     7.60 %     1.07 %     0.91 %     6.77 %
Add:                                         
Average goodwill and other intangible assets
    1.40 %     1.46 %     0.21 %     0.18 %     1.56 %
Return on average tangible stockholders’ equity
    9.14 %     9.06 %     1.28 %     1.09 %     8.33 %
 
“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 pre sents a reconciliation of book value per common share to tangible book value per common share as of th e dates presented.
 
( dollars  in   thousands , except per share data )
                             
At   quarter   ended:
 
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
 
Common shares outstanding
    16,289,832       14,574,832       14,574,832       14,572,029       13,000,601  
Stockholders’ equity
  $ 122,157     $ 107,419     $ 104,603     $ 101,749     $ 92,227  
Less: Preferred stock
    9,680       9,6 60       9,639       9,619       9,599  
Less: Goodwill and other intangible assets
    16,974       16,990       17,009       17,028       17,047  
Tangible common stockholders’ equity
  $ 95,503     $ 80,769     $ 77,955     $ 75,102     $  65,581  
                                         
Book value per common share
  $ 6.90     $ 6.71     $ 6. 5 2     $ 6.32     $ 6.36  
Less: Goodwill and other intangible assets
    1.04       1.17       1.17       1.17       1.32  
Tangible book value per common share
  $ 5.86     $ 5.54     $ 5.35     $ 5.15     $ 5.04  
 
"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 presents a reconciliation of total assets to tangible assets and a reconciliation of total stockholders' equity/total assets to tangible common stockholders' equity/tangible assets as of the dates presented.
 
(dollars   in   thousands)
                             
At   quarter   ended:
 
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
 
Total assets
  $ 1,221,278     $ 1,195,819     $ 1, 187,655     $ 1 , 195 ,488     $ 1,349,516  
Less: Goodwill and other intangible assets
    16,974       16,990       17,009       17,028       17,047  
Tangible assets
  $ 1,204,304     $ 1,178,829     $ 1,170,646     $ 1,178,460     $ 1,332,469  
                                         
Total stockholders' equity / total assets
    10.00 %     8.98 %     8. 81 %     8.5 1 %     6.83 %
Tangible common stockholders' equity / tangible assets
    7.93 %     6.85 %     6. 66 %     6.3 7 %     4.92 %
 
Other income is presented in the table below including and excluding net securities gains (losses). We believe that many investors desire to evaluate other income without regard for securities gains (losses).
 
(in   thousands)
                             
For   the   quarter   ended:
 
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
 
Other income (charges)
  $ 2,135     $ 1,482     $ (2,449 )   $ (340 )   $ 311  
Less: Net investment securities gains (losses)
    1,033       657       (3,344 )     (1,308 )     (511 )
Other income, excluding net investment securities gains (losses)
  $ 1,102     $ 825     $ 895     $ 968     $ 822  
 
“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 (losses), calculated as follows:
 
(dollars   in   thousands)
                             
For   the   quarter   ended:
 
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
 
Other expense
  $ 5,442     $ 6,268     $ 6,392     $ 5,238     $ 5,186  
                                         
Net interest income (tax equivalent basis)
  $ 8,393     $ 8,686     $ 8,569     $ 8,129     $ 7,536  
Other income, excluding net investment securities gains (losses)
    1,102       825       895       968       822  
Total
  $ 9,495     $ 9,511     $ 9,464     $ 9,097     $ 8,358  
                                         
Efficiency ratio
    57.3 %     65.9 %     67.5 %     57.6 %     62.0 %
 
 
 
 
 
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 currently the largest commercial bank headquartered in Union County. Its primary market niche is its commercial banking business. The Bank focuses its lending activities on commercial lending to small and medium-sized businesses, real estate developers and high net worth individuals.
 
The Bank, through its Private Wealth Management Division, which includes its wholly-owned subsidiary, Center Financial Group LLC, provides financial services including brokerage services, insurance and annuities, mutual funds, financial planning, estate and tax planning, trust, elder care and benefit plan administration.
 
The Bank currently operates 13 banking locations in Union and Morris Counties in New Jersey. Banking centers are located in Union Township (6 locations), Berkeley Heights, Boonton/Mountain Lakes, Madison, Millburn/Vauxhall, Morristown, Springfield, and Summit, New Jersey. The Bank also operates remote ATM locations in the Chatham and Madison New Jersey Transit train stations, and the Boys and Girls Club of Union.
 
While the Bank’s primary market area is comprised of Union and Morris Counties, New Jersey, the Corporation has expanded to northern and central New Jersey. At September 30, 2010, the Corporation had total assets of $1.2 billion, total deposit funding sources, which includes overnight repurchase agreements, of $873.3 million and stockholders’ equity of $122.2 million. For further information regarding Center Bancorp, Inc., visit our web site at http://www.centerbancorp.com or call (800) 862-3683. For information regarding Union Center National Bank, visit our web site at http://www.ucnb.com .
 
Forward-Looking Statements
 
All non-historical statements in this press release (including statements regarding work started in prior quarters and scheduled to continue into 2011, future net interest margins, future loan volumes, including future commercial loan volumes, the potential expansion of the Corporation’s franchise, the Corporation’s intention to focus on the commercial mortgage, construction and commercial loan sectors, the future funding of undisbursed loan commitments and the Corporation’s ability to manage risk exposures in the future) 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, 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 protracted global financial crisis 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.

Investor Inquiries:
Anthony C. Weagley
President & Chief Executive Officer
 (908) 206-2886

Joseph Gangemi
Investor Relations
 (908) 206- 2863

 
 
 

CENTER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION

( in thousands, except for share data)
 
September 30,
2010
   
December 31,
2009
 
   
(Unaudited)
       
ASSETS
           
Cash and due from banks
  $ 75,478     $ 89,168  
Investment securities
    362,683       298,124  
Loans
    701,936       719,606  
Less: Allowance for loan losses
    8,770       8,711  
Net loans
    693,166       710,895  
Restricted investment in bank stocks, at cost
    10,255       10,672  
Premises and equipment, net
    13,178       17,860  
Accrued interest receivable
    4,091       4,033  
Bank-owned life insurance
    27,636       26,304  
Goodwill
    16,804       16,804  
Prepaid FDIC assessments
    4,042       5,374  
Other real estate owned
    1,927       —  
Other assets
    12,018       16,254  
Total assets
  $ 1,221,278     $ 1,195,488  
LIABILITIES
               
Deposits:
               
Non-interest bearing
  $ 147,213     $ 130,518  
Interest-bearing:
               
Time deposits $100 and over
    114,019       144,802  
Interest-bearing transaction, savings and time deposits $100 and less
    575,670       538,385  
Total deposits
    836,902       813,705  
Short-term borrowings
    36,386       46,109  
Long-term borrowings
    191,027       223,144  
Subordinated debentures
    5,155       5,155  
Accounts payable and accrued liabilities
    7,456       5,626  
Due to brokers for investment securities
    22,195       —  
Total liabilities
    1,099,121       1,093,739  
STOCKHOLDERS’ EQUITY
               
Preferred stock, $1,000 liquidation value per share, authorized 5,000,000 shares; issued 10,000 shares at September 30, 2010 and December 31, 2009
    9,680       9,619  
Common stock, no par value, authorized 25,000,000 shares; issued 18,477,412 shares at September 30, 2010 and 16,762,412 shares at December 31, 2009; outstanding 16,289,832 shares at September 30, 2010 and 14,572,029 shares at December 31, 2009
    110,056       97,908  
Additional paid in capital
    5,500       5,650  
Retained earnings
    19,192       17,068  
Treasury stock, at cost (2,187,580 common shares at September 30, 2010 and 2,190,383 common shares at December 31, 2009)
    (17,698 )     (17,720 )
Accumulated other comprehensive loss
    (4,573 )     (10,776 )
Total stockholders’ equity
    122,157       101,749  
Total liabilities and stockholders’ equity
  $ 1,221,278     $ 1,195,488  
 
 
 
 

CENTER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

   
Three Months Ended 
September 30,
   
Nine Months Ended 
September 30,
 
(in thousands, except for share data)
 
2010
   
2009
   
2010
   
2009
 
                         
Interest income
                       
Interest and fees on loans
  $ 9,378     $ 9,255     $ 28,165     $ 27,568  
Interest and dividends on investment securities:
                               
Taxable
    2,464       3,874       8,337       9,333  
Tax-exempt
    21       185       194       773  
Dividends
    43       27       97       85  
Dividends on restricted investment in bank stocks
    129       150       402       380  
Total interest income
    12,035       13,491       37,195       38,139  
Interest expense
                               
Interest on certificates of deposit $100 or more
    282       1,077       1.036       2,844  
Interest on other deposits
    1,213       2,362       3,712       7,191  
Interest on borrowings
    2,158       2,611       6,899       7,657  
Total interest expense
    3,653       6,050       11,647       17,692  
Net interest income
    8,382       7,441       25,548       20,447  
Provision for loan losses
    1,307       280       3,028       1,857  
Net interest income after provision for loan losses
    7,075       7,161       22,520       18,590  
Other income
                               
Service charges, commissions and fees
    535       464       1,424       1,353  
Annuities and insurance commissions
    3       17       119       102  
Bank-owned life insurance
    429       273       957       748  
Other
    135       68       322       244  
Other-than-temporary impairment losses on investment securities
    (23 )     (1,878 )     (8,495 )     (2,018 )
Portion of losses recognized in other comprehensive  income, before taxes
    —       478       3,377       478  
Net other-than-temporary impairment losses on  investment securities
    (23 )     (1,400 )     (5,118 )     (1,540 )
Net gains on sale of investment securities
    1,056       889       3,464       3,339  
Net investment securities gains (losses)
    1,033       (511 )     (1,654 )     1,799  
Total other income
    2,135       311       1,168       4,246  
Other expense
                               
Salaries and employee benefits
    2,721       2,529       8,106       7,429  
Occupancy and equipment
    754       862       2,377       2,882  
FDIC insurance
    510       320       1,586       1,625  
Professional and consulting
    153       190       849       638  
Stationery and printing
    68       81       242       253  
Marketing and advertising
    36       75       234       346  
Computer expense
    320       220       1,001       662  
Other real estate owned
    20       30       63       1,438  
Loss on fixed assets, net
    —       —       42 7       —  
Repurchase agreement termination fee
    —       —       594       —  
All other
    860       879       2,622       2,546  
Total other expense
    5,442       5,186       18,101       17,819  
Income before income tax expense
    3,768       2,286       5,587       5,017  
Income tax expense
    1,629       751       1,153       1,482  
Net Income
    2,139       1,535       4,434       3,535  
Preferred stock dividends and accretion
    146       148       437       425  
Net income available to common stockholders
  $ 1,993     $ 1,387     $ 3,997     $ 3,110  
Earnings per common share
                               
Basic
  $ 0.14     $ 0.11     $ 0.27     $ 0.24  
Diluted
  $ 0.14     $ 0.11     $ 0.27     $ 0.24  
Weighted Average Common Shares Outstanding
                               
Basic
    14,649,397       13,000,601       14,599,919       12,995,481  
Diluted
    14,649,397       13,005,101       14,601,478       12,998,211  
 
 
 
 
 
CENTER BANCORP, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL AND STATISTICAL DATA
(Unaudited)

   
Three Months Ended
 
(in thousands, except for share data) 
 
9/30/2010
   
6/30/2010
   
9/30/2009
 
Statements of Income Data
                 
Interest income
  $ 12,035     $ 12,488     $ 13,491  
Interest expense
    3,653       3,831       6,050  
Net interest income
    8,382       8,657       7,441  
Provision for loan losses
    1,307       781       280  
Net interest income after provision for loan losses
    7,075       7,876       7,161  
Other income
    2,135       1,482       311  
Other expense
    5,442       6,268       5,186  
Income before income tax expense
    3,768       3,090       2,286  
Income tax expense
    1,629       1,076       751  
Net income
    2,139     $ 2,014     $ 1,535  
Net income available to common stockholders
    1,993     $ 1,868     $ 1,387  
Earnings per Common Share
                       
Basic
  $ 0.14     $ 0.13     $ 0.11  
Diluted
  $ 0.14     $ 0.13     $ 0.11  
Statements of Condition Data (Period-End)
                       
Investment securities
  $ 362,683     $ 294,277     $ 376,097  
Loans
    701,936       722,527       716,100  
Assets
    1,221,278       1,195,819       1,349,516  
Deposits
    836,902       802,459       961,157  
Borrowings
    232,568       248,883       280,509  
Stockholders' equity
    122,157       107,419       92,227  
Common Shares Dividend Data
                       
Cash dividends
  $ 437     $ 437     $ 390  
Cash dividends per share
  $ 0.03     $ 0.03     $ 0.03  
Dividend payout ratio
    21.93 %     23.39 %     28.12 %
Weighted Average Common Shares Outstanding
                       
Basic
    14,649,397       14,574,832       13,000,601  
Diluted
    14,649,397       14,576,223       13,005,101  
Operating Ratios
                       
Return on average assets
    0.72 %     0.69 %     0.46 %
Return on average equity
    7.74 %     7.60 %     6.77 %
Return on average tangible equity
    9.14 %     9.06 %     8.33 %
Average equity / average assets
    9.29 %     9.02 %     6.74 %
Book value per common share (period-end)
  $ 6.90     $ 6.71     $ 6.36  
Tangible book value per common share (period-end)
  $ 5.86     $ 5.54     $ 5.04  
Non-Financial Information (Period-End)
                       
Common stockholders of record
    592       592       617  
Full-time equivalent staff
    165       163       165