================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________TO___________
Commission file number 2-81353
CENTER BANCORP, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW JERSEY 52-1273725
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2455 MORRIS AVENUE, UNION, NEW JERSEY 07083
----------------------------------------------------
(Address of principal executives offices) (Zip Code)
(908) 688-9500
----------------------------------------------------
(Registrant's telephone number, including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
SHARES OUTSTANDING ON JUNE 30, 1997
---------------------------------------------
Common stock no par value -- 2,355,888 shares
================================================================================
<PAGE>
CENTER BANCORP, INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Consolidated Statements of Condition
at June 30, 1997 (Unaudited) and December 31, 1996 ....... 3
Consolidated Statements of Income for the
Three and Six Months Ended June 30, 1997 and 1996
(Unaudited) .............................................. 4
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1997 and 1996
(Unaudited) .............................................. 5
Notes to the Consolidated Financial Statements ............ 6
In the opinion of Management, all adjustments necessary for a
fair presentation of the company's financial position and
results of operations for the interim periods have been made.
Such adjustments are of a normal recurring nature. All share
and per share amounts have been restated to reflect a 3 for 2
split to shareholders of record May 1, 1996, paid on May 31,
1996. Also reflected is the 5% stock dividend to shareholders
of record May 18, 1997, paid on May 31, 1997. Results for the
period ended June 30, 1997 are not necessarily indicative of
results for any other interim period or for the entire fiscal
year. Reference is made to the Company's Annual Report on Form
10-K for the year ended December 31, 1996 for information
regarding accounting principles.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................... 7-19
PART II. OTHER INFORMATION ............................................... 20
SIGNATURES ........................................................ 21
Page 2
<PAGE>
CENTER BANCORP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
June 30, December 31,
(Dollars in thousands) 1997 1996
- --------------------------------------------------------------------------------
(unaudited)
Assets:
Cash and due from banks ............................ $ 18,418 $ 19,761
Federal funds sold ................................. 0 10,000
Securities purchased under agreement to resell ..... 0 13,300
- -----------------------------------------------------------------------------
Total cash and cash equivalents ................ 18,418 43,061
- -----------------------------------------------------------------------------
Investment securities held to maturity
(approximate market value of $238,900
in 1997 and $218,788 in 1996) .................... 237,232 218,584
Investment securities available for sale ........... 80,458 61,539
- -----------------------------------------------------------------------------
Total investment securities .................... 317,690 280,123
- -----------------------------------------------------------------------------
Loans, net of unearned income ...................... 125,935 117,830
Less -- Allowance for loan losses ................ 1,277 1,293
- -----------------------------------------------------------------------------
Net loans .................................... 124,658 116,537
- -----------------------------------------------------------------------------
Premises and equipment, net ........................ 9,561 10,104
Accrued interest receivable ........................ 4,779 4,371
Other assets ....................................... 1,600 1,341
Goodwill ........................................... 3,545 3,681
- -----------------------------------------------------------------------------
Total assets ................................. $480,251 $459,218
=============================================================================
Liabilities
Deposits:
Non-interest bearing ............................. $ 73,085 $ 68,086
Interest bearing:
Certificates of deposit $100,000 and over ...... 103,308 99,818
Other .......................................... 245,825 258,750
- -----------------------------------------------------------------------------
Total deposits ............................... 422,218 426,654
Federal funds purchased and securities sold under
agreements to repurchase ......................... 23,482 0
Accounts payable and accrued liabilities............ 2,907 2,351
- -----------------------------------------------------------------------------
Total Liabilities ............................ 448,607 429,005
Stockholders' equity
Common stock, no par value:
Authorized 20,000,000 shares; issued 2,699,893
and 2,663,160 shares in 1997 and 1996,
respectively ..................................... 4,613 4,468
Appropriated surplus ............................... 3,510 3,510
Retained earnings .................................. 25,005 23,738
- -----------------------------------------------------------------------------
33,128 31,716
Less -- Treasury stock at cost (314,005
shares in 1997 and 1996 respectively) ............ 1,814 1,814
Net unrealized gain on investment securities
available-for-sale, net of taxes ................. 330 311
- -----------------------------------------------------------------------------
Total stockholders' equity ................... 31,644 30,213
- -----------------------------------------------------------------------------
Total liabilities and
stockholders' equity ...................... $480,251 $459,218
=============================================================================
Page 3
<PAGE>
<TABLE>
CENTER BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
(in thousands, except per share data) 1997 1996 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans ............................. $ 2,455 $ 1,979 $ 4,853 $ 3,953
Interest and dividends on investment securities:
Taxable interest income .............................. 4,933 3,790 9,437 7,426
Nontaxable interest income ........................... 240 290 499 574
Interest on Federal funds sold and securities
purchased under agreement to resell .................. 108 55 309 163
- ----------------------------------------------------------------------------------------------------------------
Total interest income ............................ 7,736 6,114 15,098 12,116
- ----------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on certificates of deposit $100,000 or more ... 1,495 1,113 2,765 1,981
Interest on other deposits ............................. 2,013 1,397 4,025 2,898
Interest on short-term borrowings ...................... 188 164 295 343
- ----------------------------------------------------------------------------------------------------------------
Total interest expense ........................... 3,696 2,674 7,085 5,222
Net interest income .............................. 4,040 3,440 8,013 6,894
- ----------------------------------------------------------------------------------------------------------------
Provision for loan losses ................................ 0 0 0 0
Net interest income after provision for loan losses ...... 4,040 3,440 8,013 6,894
- ----------------------------------------------------------------------------------------------------------------
Other income:
Service charges, commissions and fees .................. 137 122 275 236
Other income ........................................... 39 30 70 63
Gain on securities sold ................................ 0 80 0 80
- ----------------------------------------------------------------------------------------------------------------
Total other income ............................... 176 232 345 379
- ----------------------------------------------------------------------------------------------------------------
Other expense:
Salaries and employee benefits ......................... 1,384 1,280 2,682 2,374
Occupancy expense, net ................................. 242 180 520 415
Premises and equipment expense ......................... 321 228 649 422
Stationary and printing expense ........................ 120 168 196 235
Marketing and advertising .............................. 81 65 208 133
Other expenses ......................................... 568 333 932 668
- ----------------------------------------------------------------------------------------------------------------
Total other expense .............................. 2,716 2,254 5,187 4,247
- ----------------------------------------------------------------------------------------------------------------
Income before income tax expense ................. 1,500 1,418 3,171 3,026
Income tax expense ....................................... 554 416 985 788
- ----------------------------------------------------------------------------------------------------------------
Net income ....................................... $ 946 $ 1,002 $ 2,186 $ 2,238
================================================================================================================
Earnings per share ....................................... $ 0.40 $ 0.43 $ 0.93 $ 0.96
================================================================================================================
Average weighted common shares outstanding ............... 2,355,874 2,340,265 2,353,567 2,338,185
================================================================================================================
* All share and per share amounts have been restated to reflect the three-for-two stock split in May of 1996
and the 5% stock dividend paid in May of 1997.
Page 4
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
June 30,
----------------------
(Dollars in thousands) 1997 1996
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................... $ 2,186 $ 2,238
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization .................. 735 385
(Increase) in accrued interest receivable ...... (408) (893)
(Increase) in other assets ..................... (283) (5,448)
(Increase) in other liabilities ................ 556 43
Amortization of premium and accretion of
discount on investment securities, net ....... 141 263
- --------------------------------------------------------------------------------
Net cash provided (used in)
operating activities ..................... 2,927 (3,412)
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of
securities available-for-sale .................... 8,801 6,834
Proceeds from maturities of
securities held-to-maturity....................... 17,265 17,241
Proceeds from sales of investment
securities available-for-sale .................... 0 36,086
Purchase of securities
available-for-sale................................ (27,744) (57,141)
Purchase of securities ............................. (36,011) (66,605)
held-to-maturity
Net (increase) in loans ............................ (8,121) (16,728)
Property and equipment
expenditures, net ................................ (32) (2,359)
- --------------------------------------------------------------------------------
Net cash used in investing activities ...... (45,842) (82,672)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (increase) in deposits ......................... (4,436) 119,549
Dividends paid ..................................... (919) (900)
Proceeds from issuance of common stock ............. 145 116
Net increase (decrease) in short term borrowing .... 23,482 (13,185)
- --------------------------------------------------------------------------------
Net cash provided by financing activities .. 18,272 105,580
- --------------------------------------------------------------------------------
Net (decrease) increase in cash
and cash equivalents ..................... (24,643) 19,496
- --------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period ..... 43,061 30,172
- --------------------------------------------------------------------------------
Cash and cash equivalents at end of period ........... $ 18,418 $ 49,668
================================================================================
Supplemental disclosures of cash flow information:
Interest paid on deposits and short-term
borrowings ....................................... $ 7,007 $ 5,233
Income taxes ....................................... $ 353 $ 728
Page 5
<PAGE>
NOTE 1. ACQUISITION
On June 28, 1996, the Corporation acquired Lehigh Savings Bank SLA, (Lehigh), a
New Jersey chartered savings and loan institution in a transaction accounted for
under the purchase method of accounting. At June 28, 1996, Lehigh had assets of
$70.9 million (primarily cash and cash equivalents of $53.0 million and loans of
$15.0 million) and deposits and stockholders' equity of $68.2 million and $2.7
million, respectively. The Corporation paid $5.5 million for Lehigh, resulting
in goodwill of $3.8 million. The goodwill is being amortized on a straight-line
basis over 15 years. The June 30, 1996 and 1997 consolidated financial
statements of the Corporation includes assets, liabilities and results of
operations of Lehigh since the acquisition date on both a current and comparable
basis.
Page 6
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net income and earnings per share remained relatively flat for the first six
months of 1997 compared to the first six months of 1996. Net income for the six
months ended June 30, 1997 was $2,186,000 as compared to $2,238,000 earned for
the comparable six month period of 1996. On a per share basis, earnings were
$0.93 as compared to $0.96 per share for the six months ended June 30, 1996. The
annualized return on average assets was .92 percent for the six months ended
June 30, 1997 as compared with 1.16 percent for the comparable period in 1996,
while the annualized return on average stockholders' equity was 14.2 percent and
16.0 percent, respectively. Earnings performance for the six months ended June
30, 1997, reflected increased net interest income offset by increases in
non-interest expense and income tax expense. All share and per share amounts
have been restated to reflect the 1996 3 for 2 stock split and the 1997 5% stock
dividend which paid on May 18, 1997.
Net income for the three months ended June 30, 1997 amounted to $946,000 as
compared to $1,002,000 earned for the comparable three month period ended June
30, 1996. On a per share basis, earnings decreased to $.40 per share as compared
with $.43 per share for the three months ended June 30, 1997 and 1996,
respectively, while the annualized return on average assets was .78 percent
compared with 1.02 percent for the comparable three month period in 1996. The
annualized return on average stockholders' equity was 12.2 percent for the three
month period ended June 30, 1997 as compared to 14.5 percent for the comparable
three months ended June 30, 1996. Earnings performance for the second quarter of
1997 reflects a rise in non-interest expense and income-tax expense, coupled
with a decline of $56,000 in other income, which together was greater than the
change in the net interest margin, an increase of $1.1 million, as compared to
the comparable period in 1996.
Net interest income is the difference between the interest earned on the
portfolio of earnings-assets (principally loans and investments) and the
interest paid for deposits and short-term borrowings which support these assets.
Net interest income is presented below first in accordance with the
Corporation's consolidated financial statements and then on a fully
tax-equivalent basis by adjusting tax-exempt income (primarily interest earned
on various obligations of state and political subdivisions) by the amount of
income tax which would have been paid had the assets been invested in taxable
issues.
<TABLE>
NET INTEREST INCOME
<CAPTION>
- ---------------------------------------------------------------------------------------------
(dollars in thousands) Three months Six months
ended ended
June 30, June 30,
---------------- Percent ----------------- Percent
1997 1996 Change 1997 1996 Change
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Investments ...................... $5,173 $4,135 25.1 $ 9,936 $8,067 23.2
Loans, including fees ............ 2,455 1,979 24.1 4,853 3,953 22.8
Federal funds sold ............... 108 0 100.0 309 96 221.9
- ---------------------------------------------------------------------------------------------
Total interest income .......... 7,736 6,114 26.5 15,098 2,116 24.6
- ---------------------------------------------------------------------------------------------
Interest expense:
Certificates $100,000 or more .... 1,495 1,113 34.3 2,765 1,981 39.6
Deposits ......................... 2,013 1,397 44.1 4,025 2,898 38.9
Short-term borrowings ............ 188 164 14.6 295 346 14.7
- ---------------------------------------------------------------------------------------------
Total interest expense ......... 3,696 2,674 38.2 7,085 5,222 35.7
- ---------------------------------------------------------------------------------------------
NET INTEREST INCOME* ........... 4,040 3,440 17.4 8,013 6,894 16.2
- ---------------------------------------------------------------------------------------------
Tax-equivalent adjustment .......... 124 149 -16.8 257 296 -13.2
Net interest income on a fully
tax-equivalent basis ............. $4,164 $3,589 16.0 $ 8,270 $7,190 15.0
=============================================================================================
* Before the provision for loan losses. NOTE: The tax-equivalent adjustment was computed
based on an assumed statutory Federal income tax rate of 34 percent. Adjustments were
made for interest accrued on securities of state and political subdivisions.
Page 7
</TABLE>
<PAGE>
Net interest income on a fully tax-equivalent basis for the six months ended
June 30, 1997 increased $1,083,000 or 15.1 percent, from approximately $7.2
million for the comparable six month period in 1996. The Corporation's net
interest margin declined to 3.76 percent from 3.98 in 1997 due to an increased
cost of funds reflecting the continued pressure, in general, on short-term
interest rates. This trend was consistent with the first quarter as the yield
curve continues to flatten. For the six months ended June 30, 1997 earning
assets increased by $79.2 million on average as compared with the six months
ended June 30, 1996. The increase in the average yield on interest-earning
assets of 10 basis points was offset by a more substantial increase in the
average cost of interest-bearing liabilities of 27 basis points.
Net interest income on a fully tax-equivalent basis increased $575,000 or 16.0
percent to approximately $4.2 million for the three months ended June 30, 1997,
from approximately $3.6 million for the comparable period in 1996. The net
interest margin decreased to 3.71 percent from 3.92 percent due to the increased
cost of funds reflecting the continued pressure, in general, on short-term
interest rates. For the three months ended June 30, 1997, an increase in the
average yield on interest earning-assets of 15 basis points was offset by a more
substantial increase in the average cost of interest-bearing liabilities of 33
basis points. The decline in net interest spreads is primarily a result of the
increased cost of interest-bearing liabilities and the Corporation's inability
to fund a greater portion of the increase in earning-assets through increases in
non-interest-bearing sources and core deposits. Average earning-assets increased
by $83.0 million, as compared with the comparable three month period in 1996.
The net increase in average interest-bearing liabilities was $78.7 million over
the comparable three month period in 1996. The 1997 second quarter changes in
average volumes were primarily due to increased volumes of loans and taxable
investments funded with more costly time deposits. The change further reflects
the impact of the Lehigh acquisition on volumes.
Interest income for the six month period ended June 30, 1997 increased by
approximately $3.0 million or 23.7 percent, as compared to the comparable period
ended June 30, 1996. The primary factor contributing to the increase was the
previously cited changes in the growth of average earning-assets. The
Corporation's loan portfolio increased on average $22.6 million to $122.509
million from $99.9 million in the same quarter of 1996. This growth was
primarily driven by growth in commercial loans, commercial mortgages, home
equity lines of credit, inclusive of the loans acquired from Lehigh. This growth
was funded by deposit growth. The loan portfolio (traditionally the
Corporation's highest yielding earning asset) represented approximately 28
percent of the Corporation's interest earning assets (on average) for the six
months ended June 30, 1997 as compared with 27.3 percent for the comparable
period in 1996.
For the three month period ended June 30, 1997 interest income increased by $1.6
million or 25.5 percent over the comparable three month period in 1996 on fully
tax equivalent basis. The primary factor contributing to the increase was the
previously cited changes in the growth of earning-assets. The Corporation's loan
portfolio increased on average $24.2 million to $124.1 million from $99.9
million in the same quarter in 1996, primarily driven by growth in commercial
loans, commercial mortgages and home equity lines of credit. This growth was
funded through deposit growth. The loan portfolio represented approximately 28
percent of the Corporation's interest-earning assets (on average) during the
second quarter of 1997 and 1996. Interest income generated from the loan
portfolio during the three months ended June 30, 1997 was driven by the stable
loan demand attributed in part to an aggressive advertising program.
Investments contributed the most significant change in the earning-asset mix for
both the six and three month periods ended June 30, 1997. Investment volume was
funded by the increased deposit volumes gained through the Corporation's
expanded branch network and additional funds. These deposit funds for both the
six and three month periods of 1997 and 1996, which increased approximately
$86.2 million and $87.6 million, respectively on average, were used in investing
activities, and interest rate risk management strategies. Within the investment
portfolio the most significant changes in increased volumes took place among
taxable securities segments which far outweighed the decreases in the nontaxable
portfolio. The continued growth of taxable investment securities reflects the
change in interest rates, making the yields on taxable investments more
attractive.
Page 8
<PAGE>
Interest expense for the six months ended June 30, 1997 increased as a result of
the growth in deposit volumes, and the continued pressure on the cost of funds
in the short-term market. This pressure was heightened by the Federal Reserve's
action on March 25, 1997, raising the federal funds index to 5.5 percent from
the previous targeted level of 5.25 percent. As a result, pricing pressures have
increased within the financial industry, to retain and attract new deposits and
increased usage of money indexed to federal funds. For the six months ended June
30, 1997, interest expense increased $1.9 million or 35.6 percent as compared
with the comparable six month period in 1996.
Interest expense for the three months ended June 30, 1997 increased as a result
of the continued growth in deposit volumes, coupled with the changes in deposit
mix. Rate pressures brought about by the gridlock in the short-term markets,
primarily indexed to money center 30-90 day indicies, contributed significantly
to the overall increased expense, as compared with the comparable three month
period ended June 30, 1996.
Inflationary concerns and pace of the expanding economy have locked short-term
interest rates at current levels, while the long and intermediate sectors of the
curve have flattened. There continues to be disintermediation of rates in the
short-term interest rate market. This in turn has effected the cost of funds
associated with a number of the Corporation's funding products, i.e. municipal
deposits tied to market indices, "Jumbo" Certificates of Deposits, and
short-term repurchase agreements. Management believes that this pressure and
continued disparity in the level of interest rates in the short-term end of the
yield curve will continue to exert upward pressure on the cost of funds
throughout 1997. Deposit growth during the first and second quarter of 1997
continue to be impacted by the depositors' desire for higher-yielding investment
alternatives, such as mutual funds, stocks, tax-free instruments, and a variety
of insurance products. As interest rates have remained high in the short-term
market in the six and three month periods of 1997, depositors continued to shift
funds from lower yielding savings and money market accounts into higher yielding
certificates of deposit. Furthermore, the impact of this volume change in the
deposit mix, coupled with the increased deposit volume indexed to this end of
the curve, was a major factor in net change in the cost of funds, during 1997 as
compared with 1996.
For the six months ended June 30, 1997, the Corporation's net interest yield on
a tax-equivalent basis (i.e. net interest income on a tax equivalent basis as a
percent of average interest-earning assets) declined to 3.16 percent from 3.33
percent for the six months ended June 30, 1996. This decline reflected a
narrowing of margins due to the previously discussed pressure on rates at the
short-end of the yield curve. The rise in these funding costs continue to change
disproportionately to the rates on new loans and investments. Primarily this is
reflected in time certificates greater than $100,000 supporting assets.
For the three months ended June 30, 1997, the Corporation's net interest yield
on a tax-equivalent basis declined to 3.10 percent from 3.28 percent for the
three months ended June 30, 1996. This decline reflected a narrowing of spreads
between yields earned on loans and investments and rates paid for supporting
funds. There was a favorable change in the mix of supporting interest-earning
assets, primarily the increased investment and loan volumes. However, this was
offset to some extent by the change in the mix of interest-bearing liabilities
to more costly funding.
The contribution of non-interest-bearing sources (i.e. the differential between
the average rate paid on all sources of funds and the average rate paid on
interest-bearing sources) remained stable at approximately 60 and 61 basis
points during both six month periods ended June 30, 1997 and 1996, respectively,
and 61 and 62 basis points for the respective three month periods ended June 30,
1997 and 1996. This trend reflects the continued deposit pricing pressure
exerted on interest margins, due to a shifting of these deposits to
interest-bearing accounts.
Historically the Corporation has enjoyed more favorable volumes of these
deposits which further underscores the "Industry" change to more reliance on
interest-bearing funding sources.
Page 9
<PAGE>
INVESTMENTS
For the six months ended June 30, 1997, the average volume of investment
securities increased by $50.6 million as compared to the same period in 1996.
The tax-equivalent yield on investments increased to 6.65 percent or 17 basis
points from a yield of 6.48 percent during the six month period ended June 30,
1996. The retention and increased yield on the investment portfolio during the
first six months of 1997 was achieved through comparable to higher market rates
obtained on purchases made to replace, in some cases, lower yielding investments
which had matured, were prepaid, or were called.
For the three months ended June 30, 1997, the average volume of investment
securities increased by $55.1 million from $262.0 million on average for the
same three month period in 1996. The tax-equivalent yield on the investments
increased, 6.68 percent and 6.46 percent in 1997 and 1996, respectively.
The impact of repricing activity on yields was lessened by a change in bond
segmentation and some extension where risk is minimal within the portfolio
investment maturities, resulting in narrowed spreads and by the current
uncertainty of rates. Securities available-for-sale are a part of the
Corporation's interest rate risk management strategy and may be sold in response
to changes in interest rates, changes in prepayment risk, liquidity management
and other factors.
At June 30, 1997, the total investment portfolio excluding overnight
investments, averaged $306.6 million, or 69.6 percent of earning-assets, as
compared to $256.0 million or 70.9 percent at June 30, 1996. The principal
components of the investment portfolio are U.S. Government Treasury and Federal
Agency callable and noncallable securities, including agency issued
collateralized mortgage obligations.
At June 30, 1997 the net unrealized loss carried as a component of shareholders'
equity amounted to a net unrealized gain of $330,000, as compared with an
unrealized gain of $311,000 at December 31, 1996 resulting from the continued
rally in the bond market. At June 30, 1996 the available-for-sale portfolio
carried an unrealized gain of $186,000. This loss reflects the increase in rates
that was occurring during that period versus a decline in rates at present
producing the resulting increase in prices.
LOANS
Loan growth during the first six months of 1997 occurred in all segments of the
loan portfolio. This growth occurred from the volume acquired in the Lehigh
acquisition enhanced by the Corporation's marketing programs and new product
lines. The stabilization of yield in the portfolio was a result of a stable
prime rate environment coupled with a competitive rate structure to attract new
loans. The results of increased volume were lessened by continued re-financing
activity and by the heightened demand in the competing lending markets that
exists. The Corporation's desire to grow this segment of the earning asset mix
is reflected in its current business development plan and marketing plans, as
well as, its short-term strategic plan.
Analyzing the loan portfolio for the six months ended June 30, 1997, average
loan volume increased $22.6 million or 22.6 percent, while portfolio yield
remained flat, increasing by 1 basis point compared which the same period in
1996. The volume related factors contributed increased earnings of $895,000
enhanced by $5,000 in the rate related change. The increased total average loan
volume was due to increased customer activity and the purchase of Lehigh. For
the three months ended June 30, 1997, average loan volume increased $24.2
million, while the portfolio yield remained flat as compared with the same
period in 1996. The volume related factors contributed increased earnings of
$4.3 million offset by a decline of $3.8 million due to rate related changes.
Total average loan volume increased to $124.1 million with a net interest yield
of 7.92 percent, as compared to $99.9 million with a yield of 7.92% for the
three months ended June 30, 1996.
Page 10
<PAGE>
RISK ELEMENTS
ASSET QUALITY
The Corporation manages asset quality and credit risk by maintaining
diversification in its loan portfolio and through review processes that include
analysis of credit requests and ongoing examination of outstanding loans and
delinquencies, with particular attention to portfolio dynamics and mix. The
Corporation strives to identify loans experiencing difficulty early enough to
correct the problems, to record charge-offs promptly based on realistic
assessments of current collateral values, and to maintain an adequate allowance
for loan losses at all times. These practices have protected the Corporation
during economic downturns and periods of uncertainty.
It is generally the Corporation's policy to discontinue interest accruals once a
loan is past due as to interest/or principal payments for a period of ninety
days. When a loan is placed on non-accrual, interest accruals cease and
uncollected accrued interest is reversed and charged against current income.
Payments received on non-accrual loans are applied against principal. A loan may
only be restored to an accruing basis when it again becomes well secured and in
the process of collection or all past due amounts have been collected. Loan
origination fees and certain direct loan origination costs are deferred and
recognized over the life of the loan as an adjustment to the loan's yield.
At June 30, 1997 and 1996, the Corporation had no restructured loans.
Non-accrual loans amounted to $129,000 at June 30, 1997, and were comprised of
two residential mortgage loans, as compared to $475,000 at June 30, 1996. Past
due loans 90 days or more and still accruing amounted to $87,000 as of June 30,
1997 and $50,000 as of 1996. Of the balance, respectively, in each period,
$87,000 and $40,000 were comprised of student loans, which are wholly guaranteed
by the U.S. Government. Additionally, the Corporation did not have any other
real estate owned (OREO) at June 30, 1997 and 1996.
(dollars in thousands) 1997 1996
- --------------------------------------------------------------------------------
Loans past due 90 days and still accruing ................... $ 87 $ 50
Non-accrual loans ........................................... 129 475
- --------------------------------------------------------------------------------
Total non-performing assets ................................. $216 $525
================================================================================
ALLOWANCE FOR LOAN LOSSES
The purpose of the allowance for loan losses is to absorb the impact of losses
inherent in the loan portfolio. Additions to the allowance are made through
provisions charged against current operations and through recoveries made on
loans previously charged-off. The allowance for loan losses is maintained at an
amount considered adequate by Management to provide for potential credit losses
based upon a periodic evaluation of the risk characteristics of the loan
portfolio. In establishing an appropriate allowance, an assessment of the
individual borrowers, a determination of the value of the underlying collateral,
a review of historical loss experience and an analysis of the levels and trends
of loan categories, delinquencies, and problem loans are considered. Such
factors as the level and trend of interest rates and current economic conditions
are also reviewed. At June 30, 1997 the level of allowance was $1,277,000 as
compared to a level of $1,595,000 at June 30, 1996. There was no provision for
loan losses during the six and three month periods ended June 30.
Various regulatory agencies, as an integral part of their examination process,
periodically review the Corporation's allowance for loan losses. Such agencies
may require the Corporation to increase the allowance based on their analysis of
information available to them at the time of their examinations. The
Page 11
<PAGE>
allowance for loan losses as a percentage of total loans amounted to 1.01
percent and 1.39 percent at June 30, 1997, and 1996, respectively. In
Management's view the level of allowance during the first six months of 1997 has
been adequate to cover any loss experience and therefore has not warranted any
additions to the allowance during 1997.
During the six month period ended June 30, 1997, the Corporation did not
experience any substantial problems within its loan portfolio. Net charge-offs
were approximately $16,000. At June 30, 1997 the Corporation had non-accrual
loans amounting to $129,000, and $475,000 non-accrual loans at June 30, 1996.
The Corporation continues to aggressively pursue collections of principal and
interest on loans previously charged off.
The Corporation defines impaired loans to consist of non-accrual loans and loans
internally classified as substandard or below, in each instance above an
established dollar threshold. All loans below the established dollar threshold
are considered homogenous and are collectively evaluated for impairment. The
Corporation did not have any impaired loans in either 1997 or 1996.
The Corporation's statements herein regarding the adequacy of the allowance for
loan losses may constitute forward looking statements under the Private
Securities Reform Litigation Act of 1995. Actual results may indicate that the
amount of the Corporation's allowance was inadequate. Factors that could cause
the allowance to be inaccurate are the same factors that are analyzed by the
Corporation in establishing the amount of the allowance.
Changes in the allowance for possible loans losses for the period ended June 30,
1997 and 1996, respectively, are set forth below.
ALLOWANCE FOR LOAN LOSSES
(in thousands)
- --------------------------------------------------------------------------------
Three months ending
June 30,
-----------------------
1997 1996
- --------------------------------------------------------------------------------
Average loans outstanding .......................... $122,509 $ 99,911
- --------------------------------------------------------------------------------
Total loans at end of period ....................... 125,935 114,820
- --------------------------------------------------------------------------------
Analysis of the allowance for loan losses
Balance at the beginning of year ................... 1,293 1,073
Charge-offs:
Commercial ..................................... 1 0
Real estate-mortgage ........................... 0 0
Installment loans .............................. 19 6
- --------------------------------------------------------------------------------
Total charge-offs .......................... 20 6
Recoveries:
Commercial ....................................... 0 0
Real estate-mortgage ............................. 0 0
Installment loans ................................ 4 3
- --------------------------------------------------------------------------------
Total recoveries ........................... 4 3
Net Charge-offs: ................................... 16 3
Adjustments from the Acquisition
of Lehigh Savings SLA .......................... 0 525
- --------------------------------------------------------------------------------
Balance at end of period ........................... $ 1,277 $ 1,595
================================================================================
Ratio of net charge-offs during the period to
average loans outstanding during the period ...... 0.01% 0.00%
- --------------------------------------------------------------------------------
Allowance for loan losses as a
percentage of total loans ........................ 1.01 1.39
- --------------------------------------------------------------------------------
Page 12
<PAGE>
<TABLE>
OTHER NON-INTEREST INCOME
The following table presents the principal categories of non-interest income for
the three and six month periods ended June 30, 1997 and 1996.
<CAPTION>
- ---------------------------------------------------------------------------------------------
(dollars in thousands) Three months Six months
ended ended
June 30, June 30,
---------------- Percent ----------------- Percent
1997 1996 Change 1997 1996 Change
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Other income:
Service charges, commissions
and fees ...................... $137 $122 12.3 $275 $236 16.5
Other income .................... 39 30 30.0 70 63 11.1
Gain on securities sold ......... 0 80 100.0 0 80 100.0
- ---------------------------------------------------------------------------------------------
Total other income ......... $176 $232 -24.1 $345 $379 -9.0
=============================================================================================
</TABLE>
For the six month period ended June 30, 1997, total other (non-interest) income,
net of gains on securities sold, reflects an increase of $46,000 or 15.4 percent
compared with the comparable six month period ended June 30, 1997. This overall
increase was primarily as a result of service charges, commissions, and fees.
These fees increased primarily as a result of an increase in business activity.
Gains on securities sold during 1996 were made in the available-for-sale
portfolio in managing the Bank's investment portfolio and interest rate risk
position. These needs arise on an "as required" basis and are not normal routine
transactions. No such transactions occurred during 1997, for either the three or
six month periods.
For the three months ended June 30, 1997, total other (non-interest) income net
of gains on securities sold, increased $24,000 or 15.8 percent as compared to
the three months ended June 30, 1997. The increase in other income is primarily
due to the increase in service charges, commissions and fees which primarily
increased as a result of an increase in business activity.
OTHER NON-INTEREST EXPENSE
<TABLE>
The following table presents the principal categories of non-interest expense
for the three and six month periods ended June 30, 1997 and 1996.
<CAPTION>
- ---------------------------------------------------------------------------------------------
(dollars in thousands) Three months Six months
ended ended
June 30, June 30,
---------------- Percent ----------------- Percent
1997 1996 Change 1997 1996 Change
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Other expense:
Salaries and employee benefits $1,384 $1,280 8.1 $2,682 $2,374 13.0
Occupancy expense, net 242 180 34.4 520 415 25.3
Premise & equipment expense 321 228 40.8 649 422 53.8
Stationery and printing expense 120 168 -28.6 196 235 -16.6
Marketing & Advertising 81 65 24.6 208 133 56.4
Other expenses 568 333 70.6 932 668 39.5
- ---------------------------------------------------------------------------------------------
Total other expense $2,716 $2,254 20.5 $5,187 $4,247 22.1
=============================================================================================
</TABLE>
For the six month period ended June 30, 1997, total other (non-interest)
expenses increased $940,000 or 22.1 percent over the comparable period ended
June 30, 1996. Included in the 1997 expense figures is the amortization expenses
of goodwill, resulting from the acquisition of Lehigh. This expense amounted to
$160,000 for the 1997 period as compared with $0 in 1996.
For the three month period ended June 30, 1997, total other (non-interest)
expense increased $462,000 or 20.5 percent over the comparable three months
ended June 30, 1996. This was due largely to expansion of
Page 13
<PAGE>
the Bank's branch network coupled with the expense of on-going technological and
automation programs. Salaries and employee benefits cost coupled with premise
and equipment expenses comprised the primary components of the total increase
for both the three and six month periods. Strict control over other expenses has
been a key strategic objective of Management to maximize earnings efficiency.
The Corporation's efficiency ratio (other expenses less nonrecurring expense and
other income as a percentage of net interest income on tax-equivalent basis) for
the six months ended June 30, 1997, was 58.5 percent as compared with 53.8
percent at June 30, 1996. For the three month ended June 30, 1997 this ratio was
61.0 percent as compared with 56.3 for the comparable period ended June 30,
1996.
The increase in employment expense is primarily attributable to increased
staffing levels, 159 full-time equivalent employees at June 30, 1997 versus 146
at June 30, 1996, and merit and promotional raises and higher benefit costs. The
increase of $104,000 or 8.1 percent during the three months ended June 30, 1997
as compared with the comparable three month period in 1996, was also
attributable to these factors.
The increased staffing levels were required to support the growth of the Bank
and reflects maintaining full staffing levels at the Corporation's office
locations. The benefit component of the increase relates to increased medical
and other employee benefit expense.
Occupancy and Bank premise expense for the six months ended June 30, 1997
increased $332,000 or 39.7 percent as compared to the comparable period ended
June 30, 1996. This increase in expense includes an increase of $97,000 in rent
and real estate taxes, coupled with a $286,000 increase in depreciation charges
for Bank premise and equipment, as compared with the comparable six month period
ended June 30, 1996. These expenses are related to properties acquired as a
result of the acquisition of Lehigh Savings SLA, the new Madison banking center,
and capital expenditures on associated fixed asset purchases.
Occupancy and bank premise and equipment expense for the three month period
ended June 30, 1997 increased $155,000 or 38 percent over the comparable three
month period in 1996. This increase in bank premise and equivalent expense in
1997 is primarily attributable to normal operating costs of the Corporation's
expanded facilities coupled with a full quarter's depreciation expense on 1996's
fixed asset purchases and technology expenditures; these include check imaging
and PC Banking. Occupancy expenses similarly reflect the associated costs of the
Corporation's expanded facilities. For the three month period June 30, 1997,
rental expenses increased $45,000 over the comparable three month period in
1996. These rents are associated with the acquired Millburn Mall Banking Center
and the new Madison Banking Center.
PROVISION FOR INCOME TAXES
The effective tax rate for the six month period ended June 30, 1997 was 31.1
percent as compared to 26.0 percent for the six months ended June 30, 1996. The
effective tax rate continues to be less than the statutory Federal tax rate of
34 percent and New Jersey corporate tax rate of approximately 9 percent. The
difference between the statutory and the effective tax rates, other than
increased taxable revenues, primarily reflects the federal tax-exempt status of
interest income on obligations of states and political subdivisions.
The Corporation's provision for income taxes increased for both the three and
six months from 1996 to 1997 primarily as a result of increased state taxes, a
reduction of tax-exempt income and the disallowance of amortization expense
associated with goodwill.
Page 14
<PAGE>
ASSET LIABILITY MANAGEMENT
The composition of the Corporation's statement of condition is planned and
monitored by the Asset and Liability Committee (ALCO). Asset and Liability
management encompasses the control of interest rate risk (interest sensitivity
management) and the ongoing maintenance and planning of liquidity and capital.
In general, management's objective is to optimize net interest income and
minimize interest rate risk by monitoring these components of the statement of
condition.
INTEREST SENSITIVITY
The management of interest rate risk is also important to the profitability of
the Corporation. Interest rate risk arises when an earning asset matures or when
its interest rate changes in a time period different from that of a supporting
interest bearing liability, or when an interest bearing liability matures or
when its interest rate changes in a time period different from that of an
earning asset that it supports. While the Corporation matches only a small
portion of specific assets and liabilities, total earning assets and interest
bearing liabilities are grouped to determine the overall interest rate risk
within a number of specific time frames.
Interest sensitivity analysis attempts to measure the responsiveness of net
interest income to changes in interest rate levels. The difference between
interest sensitive assets and interest sensitive liabilities is referred to as
the interest sensitivity gap. At any given point in time, the Corporation may be
in an asset-sensitive position, whereby its interest-sensitive assets exceed its
interest-sensitive liabilities, or in a liability-sensitive position, whereby
its interest-sensitive liabilities exceed its interest-sensitive assets,
depending on management's judgment as to projected interest rate trends.
The Corporation's rate sensitivity position in each time frame may be expressed
as assets less liabilities, as liabilities less assets, or as the ratio between
rate sensitive assets (RSA) and rate sensitive liabilities (RSL). For example, a
short funded position (liabilities repricing before assets) would be expressed
as a net negative position, when period gaps are computed by subtracting
repricing liabilities from repricing assets. When using the ratio method, a
RSA/RSL ratio of 1 indicates a balanced position, a ratio greater than 1
indicates an asset sensitive position, and a ratio less than 1 indicates a
liability sensitive position.
A negative gap and/or a rate sensitivity ratio less than 1 tends to expand net
interest margins in a falling rate environment and to reduce net interest
margins in a rising rate environment. Conversely, when a positive gap occurs,
generally margins expand in a rising rate environment and contract in a falling
rate environment.
From time to time, the Corporation may elect to deliberately mismatch
liabilities and assets in a strategic gap position.
At June 30, 1997, the Corporation reflects a negative interest sensitivity gap
(or an interest sensitivity ratio) of .38:1.00 at the cumulative one year
position. During much of 1997 the Corporation had a negative interest
sensitivity gap. The maintenance of a liability-sensitive position during 1996
had an adverse impact on the Corporation's net interest margins; however, based
on management's perception that interest rates will continue to be volatile,
emphasis has been placed on interest-sensitivity matching with the objective of
achieving a stable net interest spread during 1997.
LIQUIDITY
The liquidity position of the Corporation is dependent on successful management
of its assets and liabilities so as to meet the needs of both deposit and credit
customers. Liquidity needs arise principally to accommodate possible deposit
outflows and to meet customers' requests for loans. Such needs can be satisfied
by scheduled principal loan repayments, maturing investments, short-term liquid
assets and deposit in-flows. The objective of liquidity management is to enable
the Corporation to maintain sufficient liquidity to meet its obligations in a
timely and cost-effective manner. Management monitors current and projected
Page 15
<PAGE>
cashflows, and adjusts positions as necessary to maintain adequate levels of
liquidity. By using a variety of potential funding sources and staggering
maturities, the risk of potential funding pressure is significantly reduced.
Management also maintains a detailed liquidity contingency plan designed to
adequately respond to situations which could lead to liquidity concerns.
Anticipated cash-flows at June 30, 1997, projected to June of 1998, indicates
that the Bank's liquidity should remain strong, with an approximate projection
of $62.0 million in anticipated cashflows over the next twelve months. This
projection represents a forward-looking statement under the Private Securities
Litigation Reform Act of 1995. Actual results could differ materially from this
projection depending upon a number of factors, including the liquidity needs of
the Bank's customers, the availability of sources of liquidity and general
economic conditions.
The Corporation derives a significant proportion of its liquidity from its core
deposit base. For the six month period ended June 30, 1997, average core
deposits (comprised of total demand, savings accounts and money market accounts
under $100,000) represented 47.6 percent of total deposits as compared with 53.5
percent on average in the comparable period in 1996. More volatile rate
sensitive deposits, concentrated in time certificates of deposit for the six
month period ended June 30, 1997, increased to 39.5 percent on average of total
deposits from 28.8 percent during the six months ended June 30, 1996. This
change has resulted from the rise in short-term rates during the latter part of
1996 which continued into 1997.
The increase in average funding sources during the six months ended June 30,
1997 resulted primarily from an increase in business and public fund deposits
offset by a decrease of $1.4 million on average in Federal funds purchased and
securities sold under agreement to repurchase. Non-interest bearing funding
sources as a percentage of the funding mix decreased to 15.9 percent on average
as compared to 17.3 percent for the six month period ended June 30, 1996. Demand
deposits as a percentage of the funding mix continue to be replaced by more
expensive interest-bearing core deposits.
Short-term borrowings can be used to satisfy daily funding needs. Balances in
these accounts fluctuate significantly on a day-to-day basis. The Corporation's
principal short-term funding sources are securities sold under agreement to
repurchase. Average short-term borrowings during the first six months of 1997
were $10.9 million, a decrease of $1.4 million or 11.5 percent from $12.3
million in average short-term borrowings during the comparable six months ended
June 30, 1996. This change was due primarily to insufficient funding.
CASH FLOW
The consolidated statements of cash flows present the changes in cash and cash
equivalents from operating, investing and financing activities. During the six
months ended June 30, 1997, cash and cash equivalents (which decreased overall
by $ 24.6 million) were provided (on a net basis) by the $2.9 million in
cashflow from operating activities and by $18.3 million in cash flows provided
by financing activities. A total of $45.8 million was used in investing
activities principals through net investments in investments and $8.1 million
increase in loans.
SHAREHOLDER'S EQUITY
Shareholders' equity averaged $30.9 million for the six month period ended June
30, 1997, an increase from $28.0 million, or 10.4 percent, during the same
period in 1996. The Corporation's dividend reinvestment and optional stock
purchase plan contributed $145,000 in new capital for the six months ended June
30, 1997 as compared with $116,000 for the comparable period in 1996. Tangible
book value per common share, after the 5% stock dividend effective May 18, 1997,
paid May 31, 1997 and the 3-for-2 stock split effective May 1, 1996, paid May
31, 1996, was $11.76 at June 30, 1997 as compared to $11.29 at December 31,
1996. Tangible book value per common share was $10.41 at June 30, 1996, as
adjusted for above noted stock split and 5% stock dividend.
Page 16
<PAGE>
CAPITAL
The maintenance of a solid capital foundation continues to be a primary goal for
the Corporation. Accordingly, capital plans and dividend policies are monitored
on an ongoing basis. The most important objective of the capital planning
process is to balance effectively the retention of capital to support future
growth and the goal of providing stockholders with an attractive long-term
return on their investment.
RISK-BASED CAPITAL/LEVERAGE
Banking regulations require banks to maintain minimum levels of regulatory
capital. Under the regulations in effect at June 30, 1997, the Bank was required
to maintain (i) a minimum leverage ratio of Tier 1 capital to total adjusted
assets of 4.0%, and (ii) minimum ratios of Tier 1 and total capital to
risk-weighted assets of 4.0% and 8.0%, respectively.
At June 30, 1997, total Tier l capital (defined as tangible stockholders' equity
for common stock and certain perpetual preferred stock) amounted to $27.8
million or 6.51 percent of total assets. The total Tier II leverage capital
ratio was an additional 5.76 percent of total assets. Tier I capital excludes
the effect of SFAS No. 115, which amounted to $330,000 of net unrealized gain,
after tax, on securities available-for-sale (included as a component of
stockholders' equity) and goodwill of approximately $3.5 million as of June 30,
1997.
At June 30, 1997, the Corporation's estimated Tier I risk based and total
risk-based capital ratios were 16.1 percent and 16.9 percent, respectively.
These ratios are well above the minimum guidelines of capital to risk-adjusted
assets in effect as of June 30, 1997.
Under its prompt corrective action regulations, bank regulators are required to
take certain supervisory actions (and may take additional discretionary actions)
with respect to an undercapitalized institution. Such actions could have a
direct material effect on the institution's financial statements. The
regulations establish a framework for the classification of financial
institutions into five categories: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized. Generally, an institution is considered well capitalized if it
has a leverage (Tier 1) capital ratio of at least 5.0%; a Tier 1 risk-based
capital ratio of at least 6.0%; and a total risk-based capital ratio of at least
10.0%.
The foregoing capital ratios are based in part on specific quantitative measures
of assets, liabilities and certain off-balance sheet items as calculated under
regulatory accounting practices. Capital amounts and classifications are also
subject to qualitative judgments by the bank regulators about capital
components, risk weightings and other factors.
As of June 30, 1997, management believes that the Bank meets all capital
adequacy requirements to which it is subject.
Page 17
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 128
FASB Statement No. 128, Earnings Per Share (Statement 128) supersedes APB
Opinion No. 15, Earnings Per Share, and specifies the computation, presentation,
and disclosure requirements for earnings per share (EPS) for entities with
publicly held common stock or potential common stock. Statement 128 was issued
to simplify the computation of EPS and to make the U.S. standard more compatible
with the EPS standards of other countries and that of the International
Accounting Standards Committee: (IASC). It replaces Primary EPS and Fully
Diluted EPS with Basic EPS and Diluted EPS, respectively. It also requires dual
presentation of Basic EPS and Diluted EPS on the face of the income statement
for all entities with complex capital structures and requires a reconciliation
of the numerator and denominator of the Basic EPS computation to the numerator
and denominator of the Diluted EPS computation.
Basic EPS, unlike Primary EPS, excludes all dilution while Diluted EPS, like
Fully Diluted EPS, reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. For many entities Basic EPS will be higher than
Primary EPS and Diluted EPS will be approximately the same as Fully Diluted EPS.
Statement 128 is applicable to all entities that have issued common stock or
potential common stock (e.g., options, warrants, convertible securities,
contingent stock agreements, etc.) if those securities trade in a public market
either on a stock exchange (domestic or foreign) or in the over-the-counter
market, including securities quoted only locally or regionally. This Statement
also applies to an entity that has made a filing or is in the process of filing
with a regulatory agency in preparation for the sale of those securities in a
public market. However, Statement 128 does not require presentation of EPS for
investment companies or in statements of wholly-owned subsidiaries.
Statement 128 is effective for financial statements for both interim and annual
periods ending after December 15, 1997. Earlier application is not permitted
(although pro forma EPS disclosure in the footnotes for periods prior to
required adoption is permitted). After adoption, all prior period EPS data
presented shall be restated (including interim financial statements, summaries
of earnings and selected financial data) to conform with Statement 128.
SFAS No. 130
FASB Statement No. 130, "Reporting Comprehensive Income" (Statement 130)
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains, and losses) in a full set of
general-purpose financial statements. Statement 130 requires that all items that
are required to be recognized under accounting standards as components of
comprehensive income reported in a financial statement that is displayed with
the same prominence as other financial statements. Statement 130 does not
require a specific format for that financial statement but requires that an
enterprise display an amount representing total comprehensive income for the
period in that financial statement.
Statement 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately form retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. This statement is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required.
Page 18
<PAGE>
SFAS No. 131
FASB Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (Statement 131) requires public companies to report information
about business segments in their annual financial statements and selected
business segment information in quarterly reports issued to shareholders.
Statement 131 requires entity-wide disclosures about the products and services
an entity provides, the material countries in which it holds assets and reports
revenues, and its major customers. This statement supersedes FASB Statement No.
14, "Financial Reporting for Segments of a Business Enterprise." Statement 131
is effective for fiscal years beginning after December 15, 1997.
Page 19
<PAGE>
II. OTHER INFORMATION
Item 1. Legal proceedings
None
Item 2. Change in securities
Item 3. Defaults upon senior securities
Item 4. Submission of Matters to Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
A) Exhibits
B) Reports on Form 8-K
There were no reports on Form 8-K filed during the
three months ended June 30, 1997.
Page 20
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf, by the
undersigned, thereunto duly authorized.
CENTER BANCORP, INC.
Date: /s/ ANTHONY C. WEAGLEY
- ---------------------- -------------------------------------
Anthony C. Weagley, Treasurer
(Chief Financial Officer)
Page 21
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 18,418
<INT-BEARING-DEPOSITS> 349,133
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 80,458
<INVESTMENTS-CARRYING> 237,232
<INVESTMENTS-MARKET> 238,900
<LOANS> 125,935
<ALLOWANCE> (1,277)
<TOTAL-ASSETS> 480,251
<DEPOSITS> 422,218
<SHORT-TERM> 23,482
<LIABILITIES-OTHER> 2,907
<LONG-TERM> 0
0
0
<COMMON> 4,613
<OTHER-SE> 27,031
<TOTAL-LIABILITIES-AND-EQUITY> 480,251
<INTEREST-LOAN> 4,853
<INTEREST-INVEST> 9,936
<INTEREST-OTHER> 309
<INTEREST-TOTAL> 15,098
<INTEREST-DEPOSIT> 6,790
<INTEREST-EXPENSE> 7,085
<INTEREST-INCOME-NET> 8,013
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,187
<INCOME-PRETAX> 3,171
<INCOME-PRE-EXTRAORDINARY> 2,186
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,186
<EPS-PRIMARY> 0.93
<EPS-DILUTED> 0.93
<YIELD-ACTUAL> 6.97
<LOANS-NON> 129
<LOANS-PAST> 87
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,293
<CHARGE-OFFS> 20
<RECOVERIES> 4
<ALLOWANCE-CLOSE> 1,277
<ALLOWANCE-DOMESTIC> 759
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 518
</TABLE>
