CENTER BANCORP INC, 10-K, 1999-03-29

CENTER BANCORP INC
10-K, 1999-03-29
STATE COMMERCIAL BANKS

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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Form 10-K

(Mark One)

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 1998.

[ ] 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 IRS Employer
incorporation or organization) identification No.)

2455 Morris Avenue, Union, NJ 07083-0007
------------------------------------------------------------
(Address of Principal Executive Offices, Including Zip Code)

(908) 688-9500
----------------------------------------------------
(Registrant's telephone number, including area code)

Securities registered
pursuant to Section 12(b) of the Act: none

Securities registered pursuant to Section 12(g) of the Act:
Common stock, no par value
(Title of class)

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_ or No_

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation 5-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to the
Form 10-K. _X_

Aggregate Market value of voting stock held by non-affiliates based on the
average of Bid and Asked prices on February 26, 1999 was approximately $57.3
million

Shares outstanding on February 26, 1999
- ---------------------------------------
Common stock no par value - 3,582,841 shares

Parts of Form 10-K in which
Documents Incorporated by reference document is incorporated
- ----------------------------------- ------------------------

Definitive proxy statement dated March 12, 1999,
in connection with the 1999 Annual Stockholders
Meeting filed with the Commission pursuant to
Regulation 14A............................................ Part III

Annual Report to Stockholders for the fiscal
year ended December 31, 1998.............................. Part I and Part II

<PAGE>

INDEX TO FORM 10-K
PART I

ITEM 1 BUSINESS 1

ITEM 2 PROPERTIES 9-10

ITEM 3 LEGAL PROCEEDINGS 10

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 10

ITEM 4A EXECUTIVE OFFICERS OF THE REGISTRANT 10

PART II

ITEM 5 MARKET FOR THE REGISTRANTS COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 11

ITEM 6 SELECTED FINANCIAL DATA 11

ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 11

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 11

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 11

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 11

PART III

ITEM 10 DIRECTORS OF THE REGISTRANT 12

ITEM 11 EXECUTIVE COMPENSATION 12

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 12

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 12

PART IV

ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K 13-14

SIGNATURES 15

<PAGE>
Center Bancorp Inc.

Form 10 K

Part I

Item I-Business
- --------------------------------------------------------------------------------

A)Historical Development Of Business

Center Bancorp Inc., a one-bank holding company, was incorporated in the state
of New Jersey on November 12, 1982. Center Bancorp Inc. commenced operations on
May 1, 1983, upon the acquisition of all outstanding shares of The Union Center
National Bank (the "Bank"). The holding company's sole activity, at this time,
is to act as a holding company for the Bank. As used herein, the term
"Corporation" shall refer to Center Bancorp Inc. and its subsidiary and the term
"Parent Corporation" shall refer to Center Bancorp Inc. on an unconsolidated
basis.

The Bank was organized in 1923 under the law of the United States of America.
The Bank operates five offices in Union Township, Union County, New Jersey, one
office in Springfield Township, Union County, New Jersey, one office in Berkeley
Heights, Union County, New Jersey, one office in Madison, and one office in
Morristown, Morris County, New Jersey and currently employs 153 full time
equivalent persons. A tenth office, located in Summit, Union County, New Jersey
is scheduled to open in June 1999. The Bank is a full service commercial bank
offering a complete range of individual and commercial services.

On June 28, 1996, the Corporation acquired Lehigh Savings Bank SLA ("Lehigh"), a
New Jersey chartered savings & loan association, in a transaction accounted for
under the purchase method of accounting. At June 28, 1996, Lehigh Savings Bank
SLA had assets of $70.9 million (primarily cash and cash equivalents of $53.0
million and loans of $15.0 million), deposits of $68.2 million and stockholders'
equity of $2.7 million. The Corporation paid a total of $5.5 million in cash for
Lehigh resulting in goodwill of $3.8 million. The goodwill is being amortized on
a straight-line basis over 15 years. The consolidated financial statements of
the Corporation include the assets, liabilities, and results of operations of
Lehigh since the acquisition date.

B)Narrative Description Of Business

The Bank offers a broad range of lending, depository and related financial
services to commercial, industrial and governmental customers. In the lending
area, these services include short and medium term loans, lines of credit,
letters of credit, working capital loans, real estate construction loans and
mortgage loans. In the depository area, the Bank offers demand deposits, savings
accounts and time deposits. In addition, the Bank offers collection services,
wire transfers, night depository and lock box services.

The Bank offers a broad range of consumer banking services, including interest
bearing and non-interest bearing checking accounts, savings accounts, money
market accounts, certificates of deposit, IRA accounts, Automated Teller
Machines ("ATM") accessibility using Money Access(TM) service, secured and
unsecured loans, mortgage loans, home equity lines of credit, safe deposit
boxes, Christmas club accounts, vacation club accounts, collection services,
money orders and traveler's checks.

The Bank offers various money market services. It deals in U.S. Treasury and
U.S. Governmental agency securities, certificates of deposits, commercial paper
and repurchase agreements.

Competitive pressures affect the Corporation's manner of conducting business.
Competition stems not only from other commercial banks but also from other
financial institutions such as savings banks, savings and loan associations,
mortgage companies, leasing companies and various other financial service and
advisory companies. Many of the financial institutions operating in the
Corporation's primary market are substantially larger and offer a wider variety
of products and services than the Corporation.

The Parent Corporation is subject to regulation by the Board of Governors of the
Federal Reserve System and the New Jersey Department of Banking. As a national
bank, the Bank is subject to regulation and periodic examination by the
Comptroller of the Currency. Deposits in the Bank are insured by the Federal
Deposit Insurance Corporation (the "FDIC").

29 March 99 Center Bancorp Inc. Form 10-K Page 1

<PAGE>

The Parent Corporation is required to file with the Federal Reserve Board an
annual report and such additional information as the Federal Reserve Board may
require pursuant to the Bank Holding Company Act of 1956, as amended (the
"Act"). In addition, the Federal Reserve Board makes examinations of bank
holding companies and their subsidiaries. The Act requires each bank holding
company to obtain the prior approval of the Federal Reserve Board before it may
acquire substantially all of the assets of any bank, or before it may acquire
ownership or control of any voting shares of any bank, if, after such
acquisition, it would own or control, directly or indirectly, more than 5
percent of the voting shares of such bank. The Act also restricts the types of
businesses and operations in which a bank holding company and its subsidiaries
may engage.

The operations of the Bank are subject to requirements and restrictions under
federal law, including requirements to maintain reserves against deposits,
restrictions on the types and amounts of loans that may be granted, limitations
on the types of investments that may be made and the types of services which may
be offered. Various consumer laws and regulations also affect the operations of
the Bank. Approval of the Comptroller of the Currency is required for branching,
bank mergers in which the continuing bank is a national bank and in connection
with certain fundamental corporate changes affecting the Bank. Federal law also
limits the extent to which the Parent Corporation may borrow from the Bank and
prohibits the Parent Corporation and the Bank from engaging in certain tie-in
arrangements.

FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
substantially revised the bank regulatory provisions of the Federal Deposit
Insurance Act and several other federal banking statutes. Among other things,
FDICIA requires federal banking agencies to broaden the scope of regulatory
corrective action taken with respect to banks that do not meet minimum capital
requirements and to take such actions promptly in order to minimize losses to
the FDIC. Under FDICIA, federal banking agencies have established five capital
tiers: "well capitalized", "adequately capitalized", "undercapitalized",
"significantly undercapitalized" and "critically undercapitalized".

Under regulations adopted under these provisions, for an institution to be well
capitalized it must have a total risk-based capital ratio of at least 10
percent, a Tier I risk-based capital ratio of at least 6 percent and a Tier I
leverage ratio of at least 5 percent and not be subject to any specific capital
order or directive. For an institution to be adequately capitalized, it must
have a total risk-based capital ratio of at least 8 percent, a Tier I risk-based
capital ratio of at least 4 percent and a Tier I leverage ratio of at least 4
percent (or in some cases 3 percent). Under the regulations, an institution will
be deemed to be undercapitalized if the bank has a total risk-based capital
ratio that is less than 8 percent, a Tier I risk-based capital ratio that is
less than 4 percent or a Tier I leverage ratio of less than 4 percent (or in
some cases 3 percent). An institution will be deemed to be significantly
undercapitalized if the bank has a total risk-based capital ratio that is less
than 6 percent, a Tier I risk-based capital ratio that is less than 3 percent,
or a Tier I leverage ratio of less than 3 percent and will be deemed to be
critically undercapitalized if it has a ratio of tangible equity to total assets
that is equal to or less than 2 percent.

FDICIA also directs that each federal banking agency prescribe standards for
depository institutions and depository institution holding companies relating to
internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth, a
maximum ratio of classified assets to capital, a minimum ratio of market value
to book value for publicly traded shares (if feasible) and such other standards
as the agency deems appropriate.

FDICIA also contains a variety of other provisions that could affect the
operations of the Corporation, including reporting requirements, regulatory
standards for real estate lending, "truth in savings" provisions, the
requirement that depository institutions give 90 days notice to customers and
regulatory authorities before closing any branch, limitations on credit exposure
between banks, restrictions on loans to a bank's insiders and guidelines
governing regulatory examinations.

29 March 99 Center Bancorp Inc. Form 10-K Page 2

<PAGE>

BIF Premiums and Recapitalization of SAIF

The Corporation is a member of the Bank Insurance Fund ("BIF") of the FDIC. The
FDIC also maintains another insurance fund, the Savings Association Insurance
Fund ("SAIF"), which primarily covers savings and loan association deposits but
also covers deposits that are acquired by a BIF-insured institution from a
savings and loan association ("Oakar deposits"), the Corporation had
approximately $64.5 million of deposits at December 31, 1998, with respect to
which it pays SAIF insurance premiums.

The Economic Growth and Regulatory Reduction Act of 1996 (the "1996 Act") signed
into law on September 30, 1996, included the Deposit Insurance Funds Act of 1996
(the "Funds Act") under which the FDIC was required to impose a special
assessments on SAIF-assessable deposits to recapitalize the SAIF. Under the
Funds Act, the FDIC also will charge assessments for SAIF and BIF deposits in a
5 to 1 ratio to pay Financing Corp. ("FICO") bonds until January 1, 2000, at
which time the assessment will be equal. A FICO rate of approximately 1.29 basis
points will be charged on BIF deposits, and approximately 6.44 basis points will
be charged on SAIF deposits. Oaker deposits will be treated as SAIF deposits for
purposes of the FICO bond assessment. After the 1996 Act, SAIF deposit
assessments were lowered to the BIF assessment level, except for the FICO bond
assessment. The 1996 Act instituted a number of other regulatory relief
provisions.

Proposed Legislation

From time to time proposals are made in the U.S. Congress and before various
bank regulatory authorities which would alter the policies of and place
restrictions on different types of banking operations. It is impossible to
predict the impact, if any, of potential legislative trends on the business of
the Corporation and the Bank.

C)Dividend Restrictions

Most of the revenue of the Corporation available for payment of dividends on its
capital stock will result from amounts paid to the Parent Corporation by the
Bank. There are a number of statutory and regulatory restrictions applicable to
the payment of dividends by national banks and bank holding companies. First,
the Bank must obtain the approval of the Comptroller of the Currency (the
"Comptroller") if the total dividends declared by the Bank in any year will
exceed the total of the Bank's net profits (as defined and interpreted by
regulation) for that year and retained profits (as defined) for the preceding
two years, less any required transfers to surplus. Second, the Bank cannot pay
dividends except to the extent that net profits then on hand exceed statutory
bad debts. Third, the authority of federal regulators to monitor the levels of
capital maintained by the Corporation and the Bank (see Item 7 of this Annual
Report on Form 10-K and the discussion of FDICIA above), as well as the
authority of such regulators to prohibit unsafe or unsound practices, could
limit the amount of dividends which the Parent Corporation and the Bank may pay.
Regulatory pressures to reclassify and charge off loans to establish additional
loan loss reserves also can have the effect of reducing current operating
earnings and thus impacting an institution's ability to pay dividends.
Regulatory authorities have indicated that bank holding companies which are
experiencing high levels of non-performing loans and loan charge-offs should
review their dividend policies. Reference is also made to Note 13 of the Notes
to the Corporation's Consolidated Financial Statements included in the 1998
Annual Report incorporated herein by reference.

D)Statistical Information
(Reference is also made to Exhibit 13.1 of this Annual Report on Form 10-K)

Information regarding interest sensitivity is incorporated by reference to pages
27 through 29 of the 1998 Annual Report to Shareholders (the 1998 Annual
Report).

Information regarding related party transactions is incorporated by reference to
Note 5 of the Notes to the Corporation's Consolidated Financial Statements
included in the 1998 Annual Report incorporated herein by reference.

The market risk results and gap results noted on pages 27 through 29 of the 1998
Annual Report take into consideration repricing and maturities of assets and
liabilities, but fail to consider the interest sensitivities of those asset and
liability accounts. Management has prepared for its use an income simulation
model to forecast

29 March 99 Center Bancorp Inc. Form 10-K Page 3

<PAGE>

future net interest income, in light of the current gap position. Management has
also prepared for its use alternative scenarios to measure levels of net
interest income associated with various changes in interest rates. Results have
indicated that an interest rate increase of 100 basis points and a decline of
100 basis resulted in an impact on future net interest income which is
consistent with target levels contained in the Corporation's Asset/Liability
Policy. Management cannot provide any assurances about the actual effect of
changes in interest rates on the Corporation's net income.

I. Investment Portfolio

a) For information regarding the carrying value of the investment portfolio,
see pages 41 and 42 of the 1998 Annual Report which is incorporated herein
by reference.

b) The following table illustrates the maturity distribution and weighted
average yield on a tax-equivalent basis for investment securities at
December 31, 1998, on a contractual maturity basis.
<TABLE>
<CAPTION>
Obligations Other Securities,
of US Obligations Federal Reserve
Treasury & of States and Federal
Government & Political Home Loan
(Dollars in Thousands) Agencies Subdivisions Bank Stock Total
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in 1 year or less
Amortized Cost $ 78,334 $ 5,793 $ 3,004 $ 87,131
Market Value 79,037 5,843 3,028 87,908
Weighted Average Yield 6.519% 5.678% 6.666% 6.469%
Due after one year through five years
Amortized Cost $ 100,207 $ 22,308 $ 19,428 $ 141,943
Market Value 100,961 22,997 19,883 143,841
Weighted Average Yield 6.644% 5.812% 6.614% 6.696%
Due after five years through ten years
Amortized Cost $ 12,607 $ 18,005 $ 1,495 $ 32,107
Market Value 13,243 18,449 1,540 33,232
Weighted Average Yield 6.752% 5.617% 6.300% 6.213%
Due after ten years
Amortized Cost $ 20,926 $ 0 $ 0 $ 20,926
Market Value 21,149 0 0 21,149
Weighted Average Yield 6.735% 0.000% 0.000% 6.735%
No Maturity
Amortized Cost $ 0 $ 0 $ 4,006 $ 4,006
Market Value 0 0 4,006 4,006
Weighted Average Yield 0.000% 0.000% 7.122% 7.122%
- ---------------------------------------------------------------------------------------------------------
Total
Amortized Cost $ 212,074 $ 46,106 $ 27,933 $ 286,113
Market Value 214,390 47,289 28,457 290,136
Weighted Average Yield 6.616% 5.822% 6.679% 6.494%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
c) Securities of a single issuer exceeding 10 percent of stockholders' equity
amounted to -0- for 1998. For other information regarding the Corporation's
investment securities portfolio, see Pages 20, 41 and 42 of the 1998 Annual
Report.

II. Loan Portfolio

The following table presents information regarding the components of the
Corporation's loan portfolio on the dates indicated.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------

(Dollars in thousands) 1998 1997 1996 1995 1994
---------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
Commercial $ 52,182 $ 39,397 $ 25,950 $ 21,302 $ 18,674
Real estate-mortgage 91,189 88,067 85,994 69,954 64,666
Installment Loan 7,060 5,565 6,584 7,012 6,250
---------------------------------------------------------------------------------------------------------
Total 150,431 133,029 118,528 98,268 89,590
Less:
Unearned discount 332 605 698 698 785
Allowance for loan losses 1,326 1,269 1,293 1,073 1,073
---------------------------------------------------------------------------------------------------------
Net total $ 148,773 $ 131,155 $ 116,537 $ 96,497 $ 87,732
=========================================================================================================
</TABLE>
29 March 99 Center Bancorp Inc. Form 10-K Page 4
<PAGE>

Since 1994, demand for the Bank's commercial loan, commercial real estate and
real estate mortgage products improved gradually. Business development and
marketing programs coupled with positive market trends supported the growth in
1995, 1996, 1997 and 1998. The Lehigh acquisition also accounted for a portion
of 1996 loan growth approximating $15.2 million.

The maturities of commercial loans at December 31, 1998 are listed below.
<TABLE>
<CAPTION>
At December 31, 1998, Maturing
----------------------------------------------------------------------------------
After One Year
In One Year Through After
(Dollars in thousands) Or Less Five Years Five Years Total
- -------------------------------------------------- ------------------ ------------------ ----------------
<S> <C> <C> <C> <C>
Construction loans $ 654 $ 113 $ 0 $ 767
Commercial real estate loans 1,122 1,789 17,660 20,571
Commercial loans 16,098 5,652 9,094 30,844
------- ------ ------- -------
Total $17,874 $7,554 $26,754 $52,182
======= ====== ======= =======
Loans with:
Fixed rates $ 421 $6,419 $26,754 $33,594
Variable rates 17,453 1,135 0 18,588
------- ------ ------- -------
Total $17,874 $7,554 $26,754 $52,182
======= ====== ======= =======
</TABLE>

Lending is one of Center Bancorp's primary business activities. The
Corporation's loan portfolio consists of both retail and commercial loans,
serving the diverse customer base in its market area. In 1998, average total
loans comprised 31.21 percent of average interest-earning assets. The
Corporation has experienced a compound growth rate in average loans since 1994
of 10.9 percent. Average loans amounted to $139.0 million in 1998 compared with
$125.5 million in 1997, $107.9 million in 1996. The composition of Center
Bancorp's loan portfolio continues to change due to the local economy. Factors
such as the economic climate, interest rates, real estate values and employment
all contribute to these changes. Loan growth has been generated through
marketing and business development efforts.

Average commercial loans increased approximately $5.6 million or 26.7 percent in
1998 as compared with 1997. The Corporation seeks to create growth in commercial
lending by offering new products, lowering pricing and capitalizing on the
positive trends in its market area. Specialized products are offered to meet the
financial requirements of the Corporation's clients. It is the objective of the
Corporation's credit policies to diversify the commercial loan portfolio to
limit concentrations in any single industry.

The Corporation's commercial loan portfolio includes, in addition to real estate
development, loans to the manufacturing, services, automobile, professional and
retail trade sectors, and to specialized borrowers, including high technology
businesses. A large proportion of the Corporation's commercial loans have
interest rates which reprice with changes in short-term market interest rates or
mature in one year or less.

Average mortgage loans, which amounted to $86.4 million in 1998 increased $5.8
million or 7.2 percent as compared with average mortgage loans of $80.5 million
in 1997 (which reflected a 12.4 percent increase over 1996). The Corporation's
long-term mortgage portfolio includes both residential and commercial financing.
Growth during the past two years largely reflected brisk activity in mortgage
financing. Although a portion of the Corporation's commercial mortgages adjust
to changes in the prime rate, as well as indices tied to the 5 year Treasury
Notes, most of these loans and residential mortgage loans have fixed interest
rates.

Residential loans increased steadily in 1994 and 1995. In 1996 the increase is
attributable to the Lehigh acquisition. During 1997 growth increased as rates
stabilized with similar trends experienced during 1998. During 1997 and 1998
growth was affected by refinancing activity.

Average construction loans and other temporary mortgage financing increased from
1997 to 1998 by $209,000 to $767,000. Such loans declined by $ 2.3 million from
1996 to 1997. The change in construction and other temporary mortgage lending
has been generated by the market activity of our customers engaging in
residential and commercial development throughout New Jersey. Interest rates on
such mortgages are generally tied to key

29 March 99 Center Bancorp Inc. Form 10-K Page 5
<PAGE>

short-term market interest rates. Funds are typically advanced to the builder or
developer during various stages of construction and upon completion of the
project it is contemplated that the loans will be repaid by cash flows derived
from the ongoing project.

Loans to individuals include personal loans, student loans, and home improvement
loans, as well as financing for automobiles and other vehicles. Such loans
averaged $7.1 million in 1998, as compared with $5.6 million in 1997 and $6.6
million in 1996. The growth in loans to individuals, during 1998, was buoyed by
increases in personal loans, offset in part by sales of student loans and
declines in automobile loans.

Home equity loans, which the Corporation has been actively promoting since 1994,
as well as traditional secondary mortgage loans, have become popular with
consumers due to their tax advantages over other forms of consumer borrowing
vehicles. Home equity loans and secondary mortgages averaged $21.5 million in
1998, an increase of $3.1 million or 17.1 percent as compared with average home
equity loans of $18.2 million in 1997. Interest rates on floating rate home
equity loans are generally tied to the prime rate while most other loans to
individuals, including fixed rate home equity loans, are medium-term (ranging
between one-to-five years) and carry fixed interest rates.

At December 31, 1998, the Corporation had total lending commitments outstanding
of $43.8 million, of which approximately 43.1 percent and 26.8 percent were for
commercial loans and commercial real estate and construction loans,
respectively.

Credit risks are an inherent part of the lending function. The Corporation has
set in place specific policies and guidelines to limit credit risks to the
degree possible. The following describes the Corporation's credit management
policy and describes certain risk elements in its earning assets portfolio.

Credit Management. The maintenance of comprehensive and effective credit
policies is a paramount objective of the Corporation. Credit procedures are
enforced at each individual branch office and are maintained at the senior
administrative level as well as through internal control procedures.

Prior to extending credit, the Corporation's credit policy generally requires a
review of the borrower's credit history, collateral and purpose of each loan.
Requests for most commercial and financial loans are to be accompanied by
financial statements and other relevant financial data for evaluation. After the
granting of a loan or lending commitment, this financial data is typically
updated and evaluated by the credit staff on a periodic basis for the purpose of
identifying potential problems. Construction financing requires a periodic
submission by the borrowers of sales/leasing status reports regarding their
projects, as well as, in some cases, inspections of the project sites by
independent engineering firms. Advances are normally made only upon the
satisfactory completion of periodic phases of construction.

Certain lending authorities are granted to loan officers based upon each
officer's position and experience. However, large dollar loans and lending lines
are reported to and are subject to the approval of the Bank's loan committee
and/or board of directors. Loan committees are chaired by either the president
or a senior officer of the Bank.

Real estate lending policies include changes implemented by FDICIA, more
specifically the requirement to monitor and report the aggregate of any loans
with loan-to-value ratios in excess of the supervisory limits set forth in the
Interagency Guidelines for Real Estate Lending Policies. The Corporation has
established its own internal loan-to-value limits for real estate loans. In
general, except as described below, these internal limits are not permitted to
exceed the following supervisory limits.

Loan Category Loan-to-Value Limit

Raw Land 65%
Land Development 75%
Construction:
Commercial, Multifamily *,
and other Nonresidential 80%
Improved Property 85%

Owner-occupied 1 to 4 family and home equity **

29 March 99 Center Bancorp Inc. Form 10-K Page 6
<PAGE>

* Multifamily construction includes condominiums and cooperatives.

** A loan-to-value limit has not been established for permanent mortgage
or home equity loans on owner-occupied, 1 to 4 family residential
property. However, for any such loan with a loan-to-value ratio that
equals or exceeds 90 percent at origination, an institution is expected
to require appropriate credit enhancement in the form of either
mortgage insurance or readily marketable collateral.

It may be appropriate in individual cases to originate loans with loan-to-value
ratios in excess of the supervisory loan-to-value limits, based on the support
provided by other credit factors. The President or Board of Directors must
approve such exceptions. These loans must be identified by the Bank as
exceptions to the supervisory limits and their aggregate amount must be reported
at least quarterly to the Board of Directors. Non-conforming loans should not
exceed 100% of capital, or 30% with respect to non 1 to 4 family residential
loans.

Collateral margin guidelines are based on cost, market, or other appraised value
to maintain a reasonable amount of collateral protection in relation to the
inherent risk in the loan. This does not mitigate the fundamental analysis of
cash flow from the conversion of assets in the normal course of business or from
operations to repay the loan. It is merely designed to provide a cushion to
minimize the risk of loss if the ultimate collection of the loan becomes
dependent on the liquidation of security pledged.

The Corporation also seeks to minimize lending risk through loan
diversification. The composition of the Corporation's commercial loan portfolio
reflects and is highly dependent upon the economy and industrial make-up of the
region it serves. Effective loan diversification spreads risk to many different
industries, thereby reducing the impact of downturns in any specific industry on
overall loan profitability.

Weakening credits are monitored through a loan review process which requires
that, on a regular basis, a classified loan report is prepared. Classified loans
are categorized into one of several categories depending upon the condition of
the borrower and the strength of the underlying collateral. "Other assets
especially mentioned" is an early warning signal consisting of loans with only
modest deficiencies in documentation or with potentially weakening credit
features.

A consolidated classified loan report is prepared on a monthly basis and is
examined by both the senior management of the Bank and the Corporation's Board
of Directors. The review of classified loan reports is designed to enable
management to take such action as is considered necessary to remedy problems on
a timely basis.

Regularly scheduled audits performed by the Corporation's internal and external
credit review staff further the integrity of the credit monitoring process. Any
noted deficiencies are expected to be corrected within a reasonable period of
time.

Risk Elements. Risk elements include non-performing loans, loans past due ninety
days or more as to interest or principal payments but not placed on a
non-accrual status, potential problem loans, other real estate owned, net, and
other non-performing, interest-earning assets.

Non-performing and Past Due Loans Non-performing loans include non accrual loans
and troubled debt restructurings. Non-accrual loans represent loans on which
interest accruals have been suspended. It is the Corporation's general policy to
consider the charge-off of loans when they become contractually past due ninety
days or more as to interest or principal payments or when other internal or
external factors indicate that collection of principal or interest is doubtful.
Troubled debt restructurings represent loans on which a concession was granted
to a borrower, such as a reduction in interest rate which is lower than the
current market rate for new debt with similar risks. At December 31, 1998, other
real estate owned (OREO) consisted of a closed branch facility with a carrying
value of approximately $73,000.

29 March 99 Center Bancorp Inc. Form 10-K Page 7
<PAGE>

Loans accounted for on a non-accrual basis at December 31, 1998, 1997, 1996,
1995, and 1994 are as follows.

(Dollars in thousands) 1998 1997 1996 1995 1994
-----------------------------------------------------------------------------

Mortgage Real Estate $ 38 $ 27 $ 298 $ 0 $ 0
Commercial 0 0 0 0 0
Installment 3 0 0 0 0
-----------------------------------------------------------------------------
Total non-accrual loans $ 41 $ 27 $ 298 $ 0 $ 0
=============================================================================

Accruing loans which are contractually past due 90 days or more as to
principal or interest payments are as follows:

December 31,
------------
(Dollars in thousands) 1998 1997 1996 1995 1994
-----------------------------------------------------------------------------
Commercial $ 0 $ 0 $ 11 $ 0 $ 0
Installment 24 73 110 48 0
-----------------------------------------------------------------------------
Total $ 24 $ 73 $ 121 $ 48 $ 0
=============================================================================

There were no loans which are "troubled debt restructurings" as of the last day
of each of the last five years.

In general, it is the policy of management to consider the charge-off of loans
at the point that they become past due in excess of 90 days, with the exception
of loans that are secured by cash or marketable securities or mortgage loans
which are in the process of foreclosure.

There were no other known "potential problem loans" (as defined by SEC
regulations) as of December 31, 1998 that have not been identified and
classified. Such loans, consisting of other assets especially mentioned and
substandard loans, amounted to $119,440 and $75,670, respectively, at December
31, 1998. At December 31, 1997 these loans amounted to $239,304 and $0
respectively.

The Corporation has no foreign loans.

As of December 31, 1998, $10.3 million of the commercial loan portfolio, or 32.2
percent of $31.9 million, represented outstanding working capital loans to
various real estate developers. All but $3.5 million of these loans are secured
by mortgages on land and on buildings under construction.

29 March 99 Center Bancorp Inc. Form 10-K Page 8
<PAGE>

III. Allowance for Loan Losses

Implicit in the lending function is the fact that loan losses will be
experienced and that the risk of loss will vary with the type of loan being
made, the creditworthiness of the borrower and prevailing economic conditions.
The allowance for loan losses has been allocated below according to the
estimated amount deemed to be reasonably necessary to provide for the
possibility of losses being incurred within the following categories of loans at
December 31, for each of the past five years. The table below shows, for three
types of loans, the amounts of the allowance allocable to such loans and the
percentage of such loans to total loans. The percentage of loans to total loans
is based upon the classification of loans shown on page 5 of this report.

<TABLE>
<CAPTION>
Commercial Real Estate Mortgage Installment Unallocated
---------- -------------------- ----------- -----------

Amount Loans to Amount Loans to Amount Loans to Amount
Total Loans Total Loans Total Loans
(Dollars in thousands) % % %
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 $ 553 34.7 $ 330 60.6 $ 66 4.7 $ 377
1997 $ 498 29.6 $ 262 66.2 $ 56 4.2 $ 453
1996 $ 415 21.9 $ 220 66.1 $ 62 12.0 $ 596
1995 $ 467 21.7 $ 187 71.2 $ 22 7.1 $ 397
1994 $ 399 20.2 $ 185 72.8 $ 55 7.0 $ 434
</TABLE>

Information regarding charge-offs and recoveries is incorporated by reference to
page 22 of the 1998 Annual Report.

IV. Deposits

Information regarding average amounts/rates of deposits is incorporated by
reference to pages 29 and 33 of the 1998 Annual Report. Information regarding
the amount of time certificates of deposit of $100,000 or more is presented on
pages 29, 30 and 34 of the 1998 Annual Report.

V. Return on Equity and Assets

Information regarding the return on average assets, return on average equity and
dividend payout ratio is incorporated by reference to pages 1 and 15 of the 1998
Annual Report. Return on average assets was 0.88 percent, 0.94 percent and 1.00
percent for the years ended December 31, 1998, 1997 and 1996, respectively. The
dividend payout ratio was 48.0 percent, 41.0 percent and 43.0 percent for the
years ended December 31, 1998, 1997 and 1996, respectively. Return on tangible
average shareholders equity was 12.9 percent in 1998, compared with 15.9 percent
for 1997 and 15.2 percent in 1996.

VI. Short-term Borrowings

Information regarding the amount outstanding of short-term borrowings is
incorporated by reference to page 30 of the 1998 Annual Report.

ITEM 2-Properties
- --------------------------------------------------------------------------------

The Bank's operations are located at five sites in Union Township, one in
Springfield Township, one in Berkeley Heights, and one in Vauxhall, Union
County, New Jersey. The Bank also has one site in Madison, and one site in
Morristown, Morris County, New Jersey. The Bank is scheduled to open a full
service branch in Summit, Union County, New Jersey in June 1999 The principal
office is located at 2455 Morris Avenue, Union, Union County, New Jersey. The
principal office is a two story building constructed in 1993.

All but six of the locations are owned by the Bank. The lease of the Five Points
Branch located at 356 Chestnut Street, Union, New Jersey expires November 30,
2002 and is subject to renewal at the Bank's option. The lease of the Career
Center Branch located in Union High School expires December 31, 2002 and is also
subject to renewal at the Bank's option and the lease of the Madison office
located at 300 Main Street, Madison, New Jersey expires June 6, 2005 and is
subject to renewal at the Bank's option. The lease of the Millburn Mall Branch
located at 2933 Vauxhall Road, Vauxhall, New Jersey expires February 01, 2003
and is subject to renewal at the Bank's option and the lease of the Morristown
office located at 86 South Street, Suite 2A, Morristown, New Jersey expires
February 28, 2003 and is subject to renewal at the Bank's option. The lease of

29 March 99 Center Bancorp Inc. Form 10-K Page 9
<PAGE>

the Summit branch located 392 Springfield Avenue, Summit, New Jersey expires
March 31, 2009 and is subject to renewal at the Bank's option. (See page 56 of
the 1998 Annual Report for a complete listing of all branches and locations. The
Drive In/Walk Up located at 2022 Stowe Street, Union, New Jersey is adjacent to
a part of the Main Office facility.) The Bank has two off-site ATM's, one at
Union Hospital, 100 Galloping Hill Road, Union, New Jersey and one at Union
County College, 1033 Springfield Avenue, Cranford, New Jersey.

ITEM 3-Legal Proceedings
- --------------------------------------------------------------------------------

There are no significant pending legal proceedings involving the Parent
Corporation or Bank other than those arising out of routine operations.
Management does not anticipate that the ultimate liability, if any, arising out
of such litigation will have a material effect on the financial condition or
results of operations of the Parent Corporation and Bank on a consolidated
basis.

ITEM 4-Submission of Matters to a Vote of Security Holders
- --------------------------------------------------------------------------------

The Corporation had no matter submitted to a vote of security holders during the
fourth quarter of 1998.

ITEM 4 A-Executive Officers
- --------------------------------------------------------------------------------

The following table sets forth the name and age of each executive officer of the
Parent Corporation, the period during which each such person has served as an
officer of the Parent Corporation or the Bank and each such person's business
experience (including all positions with the Parent Corporation and the Bank)
for the past five years:
<TABLE>
<CAPTION>

Name and Age Officer Since Business Experience
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
John J. Davis 1982 the Parent Corporation President & Chief Executive Officer
Age - 56 1977 the Bank of the Parent Corporation and the Bank

Anthony C. Weagley 1996 the Parent Corporation Vice President & Treasurer of the Parent
Age - 37 1995 the Bank Corporation
1985 the Bank Senior Vice President & Cashier (1996-Present),
Vice President & Cashier (1991 - 1996) and
Assistant Vice President prior years of the Bank

Donald Bennetti 1996 the Parent Corporation Vice President of the Parent Corporation
Age - 55 1990 the Bank Senior Vice President (1997-Present)
Vice President of the Bank (1993-1997)
Assistant Vice President (1992-1993)
Assistant Cashier (1990-1992)

Robert J. Diesner 1998 the Parent Corporation Vice President of the Parent Corporation
Age - 51 1996 the Bank Senior Vice President & Senior Loan Officer
(1998-Present)
Vice President (1997-1998)
Assistant Vice President (1996-1997)

John F. McGowan 1998 the Parent Corporation Vice President of the Parent Corporation
Age - 52 1996 the Bank Senior Vice President ( 1998-Present)
Vice President (1996-1998)

Lori A. Wunder 1998 the Parent Corporation Vice President of the Parent Corporation
Age - 35 1995 the Bank Senior Vice President (1998-Present)
Vice President (1997-1998)
Assistant Vice President (1996-1997)
Assistant Cashier (1995-1996)

</TABLE>

29 March 99 Center Bancorp Inc. Form 10-K Page 10

<PAGE>

Part II

ITEM 5-Market Information For the Registrant's Stock and Related
Stockholder Matters
- --------------------------------------------------------------------------------

The information required by Item 5 of Form 10-K appears on page 32 of the 1998
Annual Report and is incorporated herein by reference. As of December 31, 1998
there were 606 holders of record of the Parent Corporation's Common Stock.

ITEM 6-Selected Financial Data
- --------------------------------------------------------------------------------

The information required by Item 6 of Form 10-K appears on pages 1 and 15 of the
1998 Annual Report and is incorporated herein by reference.

ITEM 7-Management's Discussion And Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------

The information required by Item 7 of Form 10-K appears on pages 16 - 33 of the
1998 Annual Report and is incorporated herein by reference.

ITEM 7A-Quantitative and Qualitative Disclosures About Market Risk
- --------------------------------------------------------------------------------

The information required by Item 7A of Form 10-K appears on pages 27, 28, and 29
of the 1998 Annual Report and is incorporated herein by reference.

ITEM 8-Financial Statements and Supplementary Data
- --------------------------------------------------------------------------------

The information required by Item 8 of Form 10-K appears on pages 34 through 54
of the 1998 Annual Report and is incorporated herein by reference.

ITEM 9-Changes In and Disagreements With Accountants on Accounting and
Financial Disclosures
- --------------------------------------------------------------------------------

None

29 March 99 Center Bancorp Inc. Form 10-K Page 11
<PAGE>

Part III

ITEM 10-Directors of the Registrant
- --------------------------------------------------------------------------------

The Corporation responds to this item by incorporating herein by reference the
material responsive to such item in the Corporation's definitive proxy statement
for its 1999 Annual Meeting of Stockholders.

ITEM 11-Executive Compensation
- --------------------------------------------------------------------------------

ITEM 12-Security Ownership of Certain Beneficial Owners and Management
- --------------------------------------------------------------------------------

ITEM 13-Certain Relationships and Related Transactions
- --------------------------------------------------------------------------------

29 March 99 Center Bancorp Inc. Form 10-K Page 12
<PAGE>

Part IV

ITEM 14-Exhibits, Financial Statement Schedules, and
Reports on Form 8 -K
- --------------------------------------------------------------------------------
A1. Financial Statements
<TABLE>
<CAPTION>
Page in Annual Report

<S> <C>
Consolidated Statements of Condition at December 31, 1998, and 1997 34
---------------------------------------------------------------------------------------------------

Consolidated Statements of Income for the years ended
December 31, 1998, 1997 and 1996 35
---------------------------------------------------------------------------------------------------

Consolidated Statements of Changes in Stockholders' Equity for the years ended 36
December 31, 1998, 1997 and 1996
---------------------------------------------------------------------------------------------------

Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 37
---------------------------------------------------------------------------------------------------

Notes to Consolidated Financial Statements 38- 53
---------------------------------------------------------------------------------------------------

Report of Independent Auditors 54
---------------------------------------------------------------------------------------------------
</TABLE>

A2. Financial Statement Schedules

All Schedules have been omitted as inapplicable, or not required, or because the
required information is included in the Consolidated Financial Statements or the
notes thereto.

A3. Exhibits

3.1 Certificate of Incorporation of the Registrant

3.2 Bylaws of the Registrant

10.1 Employment agreement between the Registrant and Donald Bennetti, dated
January 1, 1996, is incorporated by reference to exhibit 10.1 to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1995.

10.2 Employment agreement between the Registrant and John J. Davis is
incorporated by reference to exhibit 10.2 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1995

10.3 The Registrant's Employee Stock Option Plan is incorporated by
reference to exhibit 10.3 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993

10.4 The Registrant's Outside Director Stock Option Plan is incorporated by
reference to exhibit 10.4 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993

10.5 Supplemental Executive Retirement Plans ("SERPS") are incorporated by
reference to exhibit 10.5 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994

10.6 Executive Split Dollar Life Insurance Plan is incorporated by reference
to exhibit 10.5 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994

10.7 Employment agreement between the Registrant and Anthony C. Weagley,
dated as of January 1, 1996 is incorporated by reference to exhibit 10.7 to
the Registrant's Annual Report on Form 10-K for the year ended December 31,
1995

29 March 99 Center Bancorp Inc. Form 10-K Page 13
<PAGE>

10.8 Agreement and Plan of Merger, by and between the Registrant and Lehigh
Savings Bank, SLA., dated as of February 14, 1996, as amended is
incorporated by reference to exhibit 2 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995

10.9 Inducement Agreement, dated February 14, 1996 by and between the
Registrant and the trustee under a trust agreement applicable to the
majority shareholder of Lehigh Savings Bank, SLA is incorporated by
reference to exhibit 10.2 of the Registrant's for 10-Q for the period ended
March 31, 1996.

10.10 Directors' Retirement Plan

11.1 Statement regarding computation of per share earnings is omitted
because the computation can be clearly determined from the material
incorporated by reference in this Report.

13.1 Registrant's Annual Report to Shareholders for the year ended December
31, 1998 (parts not incorporated by reference are furnished for information
purposes only and are not to be deemed to be filed herewith.)

21.1 Subsidiaries of the Registrant

23.1 Consent of KPMG LLP

27.1 Financial Data Schedule

B. Reports on Form 8-K

There were no reports on Form 8-K filed by the Registrant during the fourth
quarter of 1998.

29 March 99 Center Bancorp Inc. Form 10-K Page 14
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Center Bancorp Inc. has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

CENTER BANCORP INC.

/s/ JOHN J. DAVIS
-------------------------------------
John J. Davis
President and Chief Executive Officer

Dated March 29, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant, in
the capacities described below and on the date indicated above:

/s/ CHARLES P. WOODWARD /s/ HUGO BARTH, III
- ------------------------------------ -------------------------------------
Charles P. Woodward, Hugo Barth, III
Director and Chairman of the Board Director

/s/ ROBERT L. BISCHOFF /s/ ALEXANDER BOL
- ------------------------------------ -------------------------------------
Robert L. Bischoff Alexander Bol
Director Director

/s/ BRENDA CURTIS /s/ DONALD G. KEIN
- ------------------------------------ -------------------------------------
Brenda Curtis Donald G. Kein
Director Director

/s/ JOHN J. DAVIS /s/ HERBERT SCHILLER
- ------------------------------------ -------------------------------------
John J. Davis Herbert Schiller
President and Chief Executive Officer Director
and Director

/s/ PAUL LOMAKIN, JR. /s/ STAN R. SOMMER
- ------------------------------------ -------------------------------------
Paul Lomakin, Jr. Stan R. Sommer
Director Director

/s/ WILLIAM THOMPSON /s/ ANTHONY C. WEAGLEY
- ------------------------------------ -------------------------------------
William Thompson Anthony C. Weagley
Director Vice President & Treasurer (Chief
Accounting and Financial Officer)

29 March 99 Center Bancorp Inc. Form 10-K Page 15
<PAGE>
EXHIBIT INDEX

3.1 Certificate of Incorporation of the Registrant

3.2 Bylaws of the Registrant

10.2 Employment agreement between the Registrant and John J. Davis is
incorporated by reference to exhibit 10.2 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1995

10.3 The Registrant's Employee Stock Option Plan is incorporated by
reference to exhibit 10.3 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993

10.4 The Registrant's Outside Director Stock Option Plan is incorporated by
reference to exhibit 10.4 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993

10.5 Supplemental Executive Retirement Plans ("SERPS") are incorporated by
reference to exhibit 10.5 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994

10.6 Executive Split Dollar Life Insurance Plan is incorporated by reference
to exhibit 10.5 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994

10.10 Directors' Retirement Plan

11.1 Statement regarding computation of per share earnings is omitted
because the computation can be clearly determined from the material
incorporated by reference in this Report.

21.1 Subsidiaries of the Registrant

23.1 Consent of KPMG LLP

27.1 Financial Data Schedule

29 March 99 Center Bancorp Inc. Form 10-K Page 16

<PAGE>
FILED
NOV 12, 1982
JANE BURGIO
Secretary of State

CERTIFICATE OF INCORPORATION

CENTER BANCORP INC.

This is to certify that, there is hereby organized a corporation under and by
virtue of N.J. State 14:1-1 et seq., the New Jersey "Business Corporation Act."

First: Corporate Name. The name of the Corporation is Center Bancorp Inc.

Second: Registered Office. The address of this corporation's initial registered
office is 2003 Morris Avenue, Union, New Jersey 07083, and the name of the
corporation's initial registered agent at such address is John J. Davis.

Third: Corporate Purposes. The purpose or purposes for which the corporation is
organized are:

(a) To act as a bank holding company, with all of the rights, powers and
privileges, and subject to all of the limitations, specified in any
applicable state or federal legislation from time to time in effect;

(b) To engage in any other activities within the purposes for which
corporations may be organized under the New Jersey Business
Corporation Act.

Fourth: Capitalization. The total authorized capital stock of the Corporation
shall consist of 1,000,000 shares of common stock, par value $5.00 per share.
Shares of the authorized capital stock may be issued from time to time for such
consideration not less than the par value thereof as may be fixed from time to
time by the Board of Directors.

Fifth: Initial Directors. The number of directors constituting the initial Board
of Directors of the corporation shall be three; and the names and addresses of
the directors are:

Name Address
---- -------
Jack McDonnell 1070 Wychwood Rd., Westfield, N. J. 07090

John J. Davis 6 Knollwood Dr., Morristown, N.J. 07960

Donald G. Kein 103 Huron Dr., Chatham Township, N.J. 07928

Sixth: Incorporation. The name and address of each incorporator is:

Name Address
---- -------
Jack McDonnell 1070 Wychwood Rd., Westfield, N.J. 07090

John J. Davis 6 Knollwood Dr., Morristown, N.J. 07960

Donald G. Kein 103 Huron Dr., Chatham Township, N.J. 07928

Seventh: No Cumulative Voting Rights. Cumulative voting for the
election of directors shall not be permitted.

<PAGE>

Eight: Indebtedness. The corporation shall have authority to borrow money and
the Board of Directors, without the approval of the shareholders and acting
within their sole discretion, shall have the authority to issue debt instruments
of the corporation upon such terms and conditions and with such limitation as
the Board of Directors deems advisable. The authority of the Board of Directors
shall include, but not be limited to, the power to issue convertible debentures.

Ninth: The Board of Directors may, if it deems advisable, oppose a tender, or
other offer for the corporation's securities, whether the offer is in cash or in
securities of a corporation or otherwise. When considering whether to oppose an
offer, the Board of Directors may, but it is not legally obligated to, consider
any and all of the following:

(1) Whether the offer price is acceptable based on the historical and
present operating results or financial conditions of the corporation.

(2) Whether a more favorable price could be obtained for the corporation's
securities in the future.

(3) The impact which an acquisition of the corporation would have on its
employees, depositors and customers of the corporation and its
subsidiaries in the community which they serve.

(4) The reputation and business practices of the offeror and its
management and affiliates as they would affect the employees,
depositors and customers of the corporation and its subsidiaries and
the future value of the corporation's stock.

(5) The value of the securities, if any, which the offeror is offering in
exchange for the corporation's securities, based on an analysis of the
worth of the corporation as compared to the corporation or other
entity whose securities are being offered.

(6) Any antitrust or other legal and regulatory issues that are raised by
the offer.

If the Board of Directors determines that an offer should be rejected, it may
take any lawful action to accomplish its purpose including, but not limited to,
any and all of the following: advising shareholders not to accept the offer;
litigation against the offeror; filing complaints with all governmental and
regulatory authorities; acquiring the corporation's securities; selling or
otherwise issuing authorized but unissued securities or treasury stock or
granting options with respect thereto; acquiring a company to create an
antitrust or other regulatory problem for the offeror; and obtaining a more
favorable offer from another individual or entity.

Tenth: Preemptive Rights. No holder of common stock of the corporation, as such,
shall be entitled, as a matter of right, to subscribe for or purchase any part
of any new or additional issue of stock of any class whatsoever, any rights or
options to purchase stock of any class whatsoever, or any securities covertible
into, exchangeable for or carrying rights or options to purchase stock of any
class whatsoever, whether now or hereafter authorized, and whether issued for
cash or other consideration, or by way of dividend.

<PAGE>

Eleventh: Number of Directors. The By-Laws shall specify the number of directors
other than the number constituting the First Board. Any vacancy in the Board,
including a vacancy created by an increase in the number of directors, may be
filled by the affirmative vote of a majority of the remaining directors, even
though less than a quorum of the Board, or by a sole remaining director.

Twelfth: Classification of Directors. The Board of Directors of the corporation
shall be divided into three classes, the respective terms of office of which
shall end in successive years. The number of directors in each class shall be
specified in the By-Laws and shall be as nearly equal as possible. Unless they
are elected to fill vacancies, the directors in each class shall be elected to
hold office until the third successive annual meeting of shareholders after
their election and until their successors shall have been elected and qualified.
At each annual meeting of shareholders the directors of only one class shall be
elected, except directors who may be elected to fill vacancies.

Thirteenth: Indemnification. Every person who is or was a director, officer,
employee, or agent of the corporation, or of any corporation which he served as
such at the request of the corporation, shall be indemnified by the corporation
to the fullest extent permitted by law against all expenses and liabilities
reasonably incurred by or imposed upon him, in connection with any proceeding to
which he may be made, or threatened to be made, a party, or in which he may
become involved by reason of his being or having been a director, officer,
employee or agent of the corporation, or of such other corporation, whether or
not he is a director, officer, employee or agent of the corporation or such
other corporation at the time the expenses or liabilities are incurred.

Fourteenth: No mergers, consolidation, liquidation or dissolution of the
Corporation nor any action that would result in the sale or other disposition of
all or substantially all of the assets of the Corporation shall be valid unless
first approved by the affirmative vote of the holders of at least sixty six and
2/3 percent (66-2/3%) of the outstanding shares of Common Stock. This Article 14
may not be amended unless first approved by the affirmative vote of the holders
of at least sixty-six and 2/3 percent (66-2/3%) of the outstanding shares of
Common Stock.

IN WITNESS WHEREOF, we, the incorporators of the above-named corporation
hereunto signed this Certificate of Incorporation on the Twelfth day of
November 1982.

/s/ JACK MCDONNELL
---------------------
Incorporator

/s/ JOHN J. DAVIS
---------------------
Incorporator

/s/ DONALD G. KEIN
---------------------
Incorporator

<PAGE>

AMENDMENT TO

CERTIFICATE OF INCORPORATION

CENTER BANCORP, INC.

Fourth: Capitalization. The total authorized capital stock of the Corporation
shall consist of 10,000,000 shares of common stock, no par value per share.
Shares of the authorized capital stock may be issued from time to time for such
consideration as may be fixed from time to time by the Board of Directors.

Fifteen: So long as permitted by law, no director of the corporation shall be
personally liable to the corporation or its shareholders for damages for breach
of any duty owed by such person to the corporation or its shareholders;
provided, however, that this paragraph fifteen shall not relieve any person from
liability to the extent provided by applicable law for any breach of duty based
upon an act or omission (a) in breach of such person's duty of loyalty to the
corporation or its shareholders, (b) not in good faith or involving a knowing
violation of law or (c) resulting in receipt by such person of an improper
personal benefit. No amendment to or repeal of this paragraph fifteen and to
amendment, repeal or termination of effectiveness of any law authorizing this
paragraph fifteen shall apply to or have any effect on the liability or alleged
liability of any director for or with respect to any acts or omissions of such
director occurring prior to such amendment, repeal or termination of
effectiveness.

Sixteen: So long as permitted by law, no officer of the corporation shall be
personally liable to the corporation or its shareholders for damages for breach
of any duty owed by such person to the corporation or its shareholders;
provided, however, that this paragraph sixteen shall not relieve any person from
liability to the extent provided by applicable law for any breach of duty based
upon an act or omission

<PAGE>

(a) in breach of such person's duty of loyalty to the corporation or its
shareholders, (b) not in good faith or involving a knowing violation of law or
(c) resulting in receipt by such person of an improper personal benefit. No
amendment to or repeal of this paragraph fifteen and to amendment, repeal or
termination of effectiveness of any law authorizing this paragraph fifteen shall
apply to or have any effect on the liability or alleged liability of any
director for or with respect to any acts or omissions of such director occurring
prior to such amendment, repeal or termination of effectiveness.

It is hereby certified that the above amendments to the Certificate of
Incorporation were approved by the Shareholders at the Annual Meeting held on
March 15, 1988.

Center Bancorp, Inc.

/s/ JOHN J. DAVIS
---------------
John J. Davis
President and
Chief Executive Officer

Attest:

/s/ JOHN J. DAVIS /s/ HELEN MAKO
----------------- --------------
John J. Davis Helen Mako
Secretary Senior Vice President and Treasurer

<PAGE>

Form: C-102a
Rev: 701071

FILED
MAR 17 1988
JANE BURGIO
Secretary of State

CERTIFICATE OF AMENDMENT TO THE

CERTIFICATE OF INCORPORATION OF

CENTER BANCORP. INC.

(For Use by Domestic Corporations Only)

To: The Secretary of State
State of New Jersey

Pursuant to the provisions of Section 14A:9-2(4) and Section
14A:9-4(3), Corporations, General, of the New Jersey Statutes, the
undersigned corporation executes the following Certificate of Amendment to
its Certificate of Incorporation:

1. The name of the corporation is Center Bancorp Inc., a New Jersey
Corporation.

2. The following amendment to the Certificate of Incorporation was
approved by the directors and thereafter duly adopted by the shareholders
of the corporation on the 15th day of March, 1988.

Resolved, that the Article Fourth of the Certificate of Incorporation
be amended to read as follows:

Fourth: Capitalization. The total authorized capital stock of the
Corporation shall consist of 10,000,000 shares of common stock, no par
value per share. Shares of the authorized capital stock may be issued
from time to time for such consideration as may be fixed from time to
time by the Board of Directors.

3. The number of shares outstanding at the time of the adoption of the
amendment was 348,158. The total number of shares entitled to vote thereon
was 348,158.

If the shares of any class or series are entitled to vote thereon as a
class, set forth below the designation and number of outstanding shares
entitled to vote thereon of each such class or series. (Omit if not
Applicable.)

4. The number of shares voting for and against such amendment is as
follows:

(If the shares of any class or series are entitled to vote as a class,
set forth the number of shares of each such class and series voting for and
against the amendment, respectively.)

Number of shares Number of shares Number of shares
Voting for Amendment Voting Against Amendment Abstaining

267,697 19,300 4,876

5. The following amendment to the Certificate of Incorporation was
approved by the directors and thereafter duly adopted by the share-
holders of the corporation on the 15th day of March, 1988.

Resolved, that the Certificate of Incorporation be amended to add
Articles Fifteenth and Sixteenth and shall read as follows:

Fifteenth: So long as permitted by law, no director of the corporation
shall be personally liable to the corporation or its shareholders for
damages for breach of any duty owed by such person to the corporation
or its shareholders; provided, however, that this paragraph fifteen
shall not relieve any person from liability to the extent provided by
applicable law for any breach of duty based upon an act or omission
(a) in breach of such person's duty of loyalty to the corporation or
its shareholders, (b) not in good faith or involving a knowing
violation of law or (c) resulting in

<PAGE>

receipt by such person of any improper personal benefit. No amendment
to or repeal of this paragraph fifteen and no amendment, repeal or
termination of effectiveness of any law authorizing this paragraph
fifteen shall apply to or have any effect on the liability or alleged
liability of any director or with respect to any acts or omissions of
such director occurring prior to such amendment, repeal or termination
of effectiveness.

Sixteenth: So long as permitted by law, no officer of the corporation
shall be personally liable to the corporation or its shareholders for
damages for breach of any duty owed by such person to the corporation
or its shareholders; provided, however, that this paragraph sixteen
shall not relieve any person from liability to the extent provided by
applicable law for any breach of duty based upon an act or omission
(a) in breach of such person's duty of loyalty to the corporation or
its shareholders, (b) not in good faith or involving a knowing
violation of law or (c) resulting in receipt by such person of an
improper personal benefit. No amendment to or repeal of this paragraph
sixteen and no amendment, repeal or termination of effectiveness of
any law authorizing this paragraph sixteen shall apply to or have any
effect on the liability or alleged liability of any officer for or
with respect to any acts or omissions of such officer occurring prior
to such amendment, repeal or termination of effectiveness.

6. The number of shares outstanding at the time of the adoption of the
amendment was 348,158. The total number of shares entitled to vote thereon
was 348,158.

(If the shares of any class of series are entitled to vote thereon as a
class, set forth below the designation and number of outstanding shares
entitled to vote thereon of each such class or series. (Omit if not
Applicable).

7. The number of shares voting for and against such amendment is as
follows:

(If the shares of any class or series are entitled to vote as a class,
set forth the number of shares of each such class and series voting for and
against the amendment, respectively.)

Number of shares Number of shares Number of shares
Voting for Amendment Voting Against Amendment Abstaining
279,424 2,954 9,495

(If the amendment is accompanied by a reduction of stated capital, the
following clause may be inserted in the Certificate of Amendment, in lieu
of filing a Certificate of Reduction under Section 14A:7-19, Corporations,
General, of the New Jersey Statutes. Omit this clause if not applicable.)

8. The stated capital of the corporation is reduced in the following
amount: OMIT. The manner in which the reduction is effected is as follows:

The amount of stated capital of the corporation after giving effect to
the reduction is $ OMIT. (Must be set forth in dollars.)

<PAGE>

9. If the amendment provides for an exchange, reclassification or
cancellation of issued shares, set forth a statement of the manner in which
the same shall be effected (Omit if not applicable.) OMIT

(Use the following only if an effective date, not later than 30 days
subsequent to the date of filing is desired.)

10. The effective date of this Amendment to the Certificate of
Incorporation shall be _____________________.

Dated this 17th day of March, 1988.

CENTER BANCORP INC.

---------------------
(Corporation Name)

By: /s/ JOHN J. DAVIS
-----------------------------
(Signature)

JOHN J. DAVIS, President
-----------------------------
(Type or Print Name & Title)

(*May be executed by the chairman of the board, or the president, or a
vice-president of the corporation)

Return to Secretary of State, P.O. Box 1330, Trenton, N.J. 08625,

Att: Corporation filing.

Filing Fee $50.00

NOTE: No recording fees will be assessed.

CERTIFICATE OF AMENDMENT TO

CERTIFICATE OF INCORPORATION OF RECORDED AND FILED:

CENTER BANCORP INC.

--------------------------------
(Domestic Corporation Only)

FILED BY:
KEIN, POLLATSCHEK & GREENSTEIN
2042 Morris Avenue
P.O. Box 68 -------------------
Union, New Jersey 07083 Recorder's Initials

TRANSACTION NO.:

<PAGE>

FILED
NOV 22 1993
DANNIEL J. DALTON
Secretary of State

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CENTER BANCORP, INC.

Pursuant to N.J.S. 14A:7-15.1(3)

Dated: As of July 1, 1993

The undersigned corporation, having adopted an amendment to its
certificate of incorporation in connection with a stock split, hereby
certifies as follows:

1. The name of the corporation is Center Bancorp, Inc.

2. The date of adoption by the board of directors of the corporation
of the resolution approving the two for one stock split effectuated on
July 1, 1993 (the "Stock Split") was May 20, 1993.

3. The amendment to the certificate of incorporation will not
adversely affect the rights or preferences of the holders of outstanding
shares of any class or series and will not result in the percentage of
authorized shares that remains unissued after the Stock Split exceeding the
percentage of authorized shares that was unissued before the Stock Split.

4. The only class of shares subject to the Stock Split was the
corporation's Common Stock. The number of shares of Common Stock subject to
the Stock Split was 800,000. The number of shares issued in connection the
Stock Split was 800,000.

5. The certificate of incorporation is amended to increase the
corporation's number of authorized shares of Common Stock from 10,000,000
to 20,000,000. In connection therewith, the fourth paragraph of the
certificate of incorporation is deleted in its entirety and a new fourth
paragraph, annexed hereto as Exhibit A, is substituted for it.

IN WITNESS WHEREOF, the undersigned corporation has caused this
certificate to be executed on its behalf by its duly authorized officer as
of the date first above written.

CENTER BANCORP, INC
By: /s/ John Davis
-----------------------
John Davis
President

<PAGE>

Exhibit A

Fourth: Capitalization. The total authorized capital stock of the
Corporation shall consist of 20,000,000 shares of Common Stock,
without par value. Shares of the authorized capital stock may be
issued from time to time for such consideration as may be fixed from
time to time by the Board of Directors.

BYLAWS - CENTER BANCORP INC.

<PAGE>

INDEX

TO BYLAWS OF

CENTER BANCORP, INC.

ARTICLE I - MEETINGS OF SHAREHOLDERS

Section 101. Place of Meetings
Section 102. Annual Meetings
Section 103. Special Meetings
Section 104. Conduct of Shareholders' Meetings

ARTICLE II - DIRECTORS AND BOARD MEETINGS

Section 201. Management by Board of Directors
Section 202. Nomination for Directors
Section 203. Directors Must be Shareholders
Section 204. Number of Directors
Section 205. Classification of Directors
Section 206. Vacancies
Section 207. Resignations
Section 208. Compensation of Directors
Section 209. Regular Meetings
Section 210. Special Meetings
Section 211. Reports and Records

ARTICLE III - COMMITTEES

Section 301. Committees
Section 302. Executive Committee
Section 303. Audit Committee
Section 304. Appointment of Committee Members
Section 305. Organization and Proceedings

ARTICLE IV - OFFICERS

Section 401. Officers
Section 402. Chairman
Section 403. President
Section 404. Vice Presidents
Section 405. Secretary
Section 406. Treasurer
Section 407. Assistant Officers
Section 408. Compensation
Section 409. General Powers

<PAGE>

ARTICLE V - SHARES OF CAPITAL STOCK

SECTION 501. Authority to Sign Share Certificates
SECTION 502. Lost or Destroyed Certificates

ARTICLE VI - GENERAL

SECTION 601. Fiscal Year
SECTION 602. Record Date
SECTION 603. Absentee Participation in Meetings
SECTION 604. Emergency Bylaws
SECTION 605. Severability

ARTICLE VII - AMENDMENT OR REPEAL

SECTION 701. Amendment or Repeal by the Board of Directors
SECTION 702. Recording Amendments and Repeals

ARTICLE VIII - APPROVAL OF AMENDED BYLAWS AND RECORD OF AMENDMENTS AND REPEALS

SECTION 801. Approval and Effective Date
SECTION 802. Amendments or Repeals

<PAGE>

BYLAWS

CENTER BANCORP, INC.

These Bylaws are supplemental to the New Jersey Business Corporation
Act and other applicable provisions of law, as the same shall from
time to time be in effect.

ARTICLE I. MEETINGS OF SHAREHOLDERS.

Section 101. Place of Meetings. All meetings of the shareholders shall be
held at such place or places, within or without the State of New Jersey, as
shall be determined by the Board of Directors from time to time.

Section 102. Annual Meetings. The annual meeting of the shareholders for
the election of Directors and the transaction of such other business as may
properly come before the meeting shall be held on such day, at such hour, and at
such place, consistent with applicable law, as the Board shall from time to time
designate or as may be designated in any notice from the Secretary calling the
meeting. Any Business which is a proper subject for shareholder action may be
transacted at the annual meeting, irrespective of whether the notice of said
meeting contains any reference thereto, except as otherwise provided by
applicable law.

Section 103. Special Meetings. Special meetings of the shareholders may be
called at any time by the Board of Directors, the Chairman of the Board, the
President, or by the shareholders entitled to cast at least twenty-five percent
(25%) of the vote which all shareholders are entitled to cast at the particular
meeting.

<PAGE>

Section 104. Conduct of Shareholders' Meetings. The Chairman of the Board
shall preside at all shareholders' meetings. In the absence of the Chairman of
the Board, the President shall preside or, in his/her absence, any Officer
designated by the Board of Directors. The Officer presiding over the
shareholders' meeting may establish such rules and regulations for the conduct
of the meeting as he/she may deem to be reasonably necessary or desirable for
the orderly and expeditious conduct of the meeting. Unless the Officer presiding
over the shareholders' meeting otherwise requires, shareholders need not vote by
ballot on any question.

ARTICLE II. DIRECTORS AND BOARD MEETINGS.

Section 201. Management by Board of Directors. The business and affairs of
the Corporation shall be managed by its Board of Directors. The Board of
Directors may exercise all such powers at the Corporation and do all such lawful
acts and things as are not by statute, regulation, the Articles of Incorporation
or these Bylaws directed or required to be exercised or done by the
shareholders.

Section 202. Nomination for Directors. Nominations for directors to be
elected at an annual meeting of shareholders must be submitted to the Secretary
of the Corporation in writing not later than the close of business on the
twentieth (20th) day immediately preceding the date of the meeting. Such
notification shall contain the following information to the extent known to the
notifying shareholder: (a) name and address of each proposed

<PAGE>

nominee; (b) the principal occupation of each proposed nominee; (c) the total
number of shares of capital stock of the Corporation that will be voted for each
proposed nominee; (d) the name and residence address of the notifying
shareholder; and (e) the number of shares of capital stock of the Corporation
owned by the notifying shareholder. Nominations not made in accordance
herewithin may, in his/her discretion, be disregarded by the Presiding Officer
of the meeting, and upon his/her instruction, the vote tellers may disregard all
votes cast for each such nominee. In the event the same person is nominated by
more than one shareholder, the nomination shall be honored, and all shares of
capital stock of the Corporation shall be counted if at least one nomination for
that person complies herewith.

Section 203. Directors Must be Shareholders. Every Director must be a
shareholder of the Corporation and shall own in his/her own right the number of
shares (if any) required by law in order to qualify as such Director. Any
Director shall forthwith cease to be a Director when he/she no longer holds such
shares, which fact shall be reported to the Board of Directors by the Secretary,
whereupon the Board of Directors shall declare the seat of such Directors
vacated. Each Director, during the full term of his directorship, shall own a
minimum of One Thousand and 00/ 100 ($1,000.00) Dollars par value of stock in
the Corporation.

Section 204. Number of Directors. The Board of Directors shall consist of
not less than five (5) nor more than twenty-five (25) shareholders, the exact
number to be fixed and determined from

<PAGE>

time to time by resolution of a majority of the full Board of Directors or by
resolution of the shareholders at any annual or special meeting thereof.

Section 205. Classification of Directors. The Directors shall be divided
into three (3) classes, as nearly equal in number as possible, known as Class 1,
consisting of not more than eight (8) Directors; Class 2, consisting of not more
than eight (8) Directors; and Class 3, consisting of not more than nine (9)
Directors. The initial Directors of Class 1 shall serve until the third (3rd)
annual meeting of shareholders. At the third (3rd) annual meeting of the
shareholders, the Directors of Class 1 shall be elected for a term of three (3)
years and, after expiration of such term, shall thereinafter be elected every
three (3) years for three (3) year terms. The initial Directors of Class 2 shall
serve until the second (2nd) annual meeting of shareholders. At the second (2nd)
annual meeting of the shareholders, the Directors of Class 2 shall be elected
for a term of three (3) years and, after the expiration of such term, shall
thereafter be elected every three (3) years for three (3) year terms. The
initial Directors of Class 3 shall serve until the first (1st) annual meeting of
shareholders. At The first (1st) annual meeting of shareholders, the Directors
of Class 3 shall be elected for a term of three (3) years and, after the
expiration of such term, shall thereafter be elected every three (3) years for
three (3) year terms. Each Director shall serve until his/her successor shall
have been elected and shall qualify, even though his/her term of office as

<PAGE>

herein provided has otherwise expired, except: in the event of his/her earlier
resignation, removal or disqualification.

Section 206. Vacancies. Vacancies in the Board of Directors, including
vacancies resulting from an increase in the number of Directors, may be filled
by the remaining members of the Board even though less than a quorum. Any
Director elected to fill a vacancy in the Board of Directors shall become a
member of the same Class of Directors in which the vacancy existed; but if the
vacancy is due to an increase in the number of Directors a majority of the
members of the Board of Directors shall designate such directorship as belonging
to Class 1, Class 2 or Class 3 so as to maintain the three (3) classes of
Directors as nearly equal in number as possible. Each Director so elected shall
be a Director until his/her successor is elected by the shareholders, who may
make such election at the next annual meeting of the shareholders or at any
special meeting duly called for that purpose and held prior thereto.

Section 207. Resignations. Any Director may resign at any time. Such
resignation shall be in writing, but the acceptance thereof shall not be
necessary to make it effective.

Section 208. Compensation of directors. No Director shall be entitled to
any salary as such; but the Board of Directors may fix, from time to time, a
reasonable annual fee for acting as a Director and a reasonable fee to be paid
each Director for his/her services in attending meetings of the Board and
meetings of

<PAGE>

committees appointed by the Board. The Corporation may reimburse Directors for
expenses related to their duties as a member of the Board. No salaried Officer
is entitled to compensation as a Director.

Section 209. Regular meetings. Regular meetings of the Board of Directors
shall be held on such day, at such hour, and at such place, consistent with
applicable law, as the Board shall from time to time designate or as may be
designated in any notice from the Secretary of the meeting. The Board of
Directors shall meet for reorganization at the first regular meeting following
the annual meeting of shareholders at which the Directors are elected. Notice
need not be given of regular meetings of the Board of Directors which are held
at the time and place designated by the Board of Directors. If a regular meeting
is not to be held at the time and place designated by the Board of Directors,
notice of such meeting, which need not specify the business to be transacted
thereat and which may be either verbal or in writing, shall be given by the
Secretary to each member of the Board at least twenty-four (24) hours before the
time of the meeting.

A majority of the members of the Board of Directors shall constitute a
quorum for the transaction of business. If at the time fixed for the meeting,
including the meeting to organize the new Board following the annual meeting of
shareholders, a quorum is not present, the directors in attendance may adjourn
the meeting from time to time until a quorum is obtained.

Except as otherwise provided herein, a majority of directors shall decide
each matter considered. A director cannot vote by

<PAGE>

proxy, or otherwise act by proxy at a meeting of the Board of Directors.

Section 210. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, the President or at the request of
three (3) or more members of the Board of Directors. A special meeting of the
Board of Directors shall be deemed to be any meeting other than the regular
meeting of the Board of Directors. Notice of the time and place of every special
meeting, which need not specify the business to be transacted thereat and which
may be either verbal or in writing, shall be given by the Secretary to each
member of the Board at least twenty-four (24) hours before the time of such
meeting excepting the Organization Meeting following the election of Directors.

Section 211. Reports and Records. The reports of Officers and Committees
and the records of the proceedings of all Committees shall be filed with the
Secretary of the Corporation and presented to the Board of Directors, if
practicable, at its next regular meeting. The Board of Directors shall keep
complete records of its proceedings in a minute book kept for that purpose. When
a Director shall request it, the vote of each Director upon a particular
question shall be recorded in the minutes.

ARTICLE III. COMMITTEES.

Section 301. Committees. The following two (2) Committees of the Board of
Directors shall be established by the Board of Directors in addition to any
other Committee the Board of Directors may in its discretion establish:
Executive, Audit.

<PAGE>

Section 302. Executive Committee. The Executive Committee shall consist of
any four (4) or more Directors. A majority of the members of the Executive
Committee shall reconstitute a quorum, and actions of a majority and those
present at a meeting at which a quorum is present shall be actions of the
Committee. Meetings of the Committee may be called at any time by the Chairman
or Secretary of the committee, and shall be called whenever two (2) or more
members of the Committee so request in writing. The Executive Committee shall
have and exercise the authority of the Board of Directors in the Management of
the business of the Corporation between the dates of regular meetings of the
Board.

SECTION 303. Audit Committee. The Audit Committee shall consist of at least
four (4) Directors, none of whom shall be Officers of the Corporation. Meetings
of the Committee may be called at any time by the Chairman or Secretary of the
Committee, and shall be called whenever two (2) or more members of the Committee
so request in writing. A majority of the members of the Committee shall
constitute a quorum, and actions of a majority of those present at a meeting at
which a quorum is present shall be actions of the Committee. The Committee shall
supervise the audit of the books of the Corporation and recommend for approval
by the Board the services of a reputable Certified Public Accounting firm to
examine the affairs of the Corporation.

<PAGE>

Section 304. Appointment of Committee Members. The Board of Directors shall
elect the members of the Executive, Audit Committees to serve until the next
annual meeting of shareholders. The Chairman of the Board shall appoint and
shall establish a method of appointing, subject to the approval of the Board of
Directors, the members of any other Committees established by the Board of
Directors, and the Chairman of such Committee, to serve until the next annual
meeting of shareholders. The Board of Directors may appoint, from time to time,
other committees, for such purposes and with such powers as the Board may
determine.

Section 305. Organization and Proceedings. Each Committee of the Board of
Directors shall have a chairman appointed by the Chairman of the Board. A record
of proceedings of all Committees shall be kept by the Secretary of such
Committee and filed and presented provided in Section 211 of these Bylaws.

ARTICLE IV. OFFICERS.

Section 401. Officers. The Officers of the Corporation shall be a Chairman
of the Board, President, one (1) or more Vice Presidents. a Secretary, a
Treasurer, and such other Officers and Assistant Officers as the Board of
Directors may from time to time deem advisable. Except for the President,
Secretary, and Treasurer, the Board may refrain from filling any of the said
offices at any time and from time to time. The same individual may hold any two
(2) or more offices except both the offices of President and Treasurer. The
following Officers shall be elected by the Board of Directors at the time, in
the manner and for such

<PAGE>

terms as the Board of Directors from time to time shall determine: Chairman of
the Board, President, Executive Vice President, Senior Vice President,
Administrative Vice President, Secretary, and Treasurer. The Chairman may,
subject to change by the Board of Directors, appoint such Officers and Assistant
Officers as he may deem advisable provided such Officers or Assistant Officers
have a title not higher than Vice President, who shall hold office for such
periods as the Chairman shall determine. Any Officer may be removed at any time,
with or without cause, and regardless of the term for which such Officer was
elected, but without prejudice to any contract right of such Officer. Each
Officer shall hold his office for the current year for which he was elected or
appointed by the Board unless he shall resign, becomes disqualified, or be
removed at the pleasure of the Board of Directors.

Section 402. Chairman. The Chairman shall have general supervision of all
of the departments and business of the Corporation and shall prescribe the
duties of the other Officers and Employees and see to the proper performance
thereof. The Chairman shall be responsible for having all orders and resolutions
of the Board of Directors carried into effect. The Chairman shall execute on
behalf of the Corporation and may affix or cause to be affixed a seal to all
authorized documents and instruments requiring such execution, except to the
extent that signing and execution thereof shall have been delegated to some
other Officer or Agent of the Corporation by the Board of Directors or by the
Chairman.

<PAGE>

Section 403. President. The Board of Directors shall appoint one of its
members to be President of the Association. In the absence of the Chairman, he
shall preside at any meeting of the Board. The President shall have general
executive powers, and shall have and may exercise any and all other powers and
duties pertaining by law, regulation, or practice, to the office of President,
or imposed by these Bylaws. He shall also have and may exercise such further
powers and duties as from time to time may be conferred upon, or assigned to,
him by the Board of Directors. The President shall be responsible for overall
operations under the direction of the Chairman of the Board and Chief Executive
Officer.

Section 404. Vice Presidents. The Vice Presidents shall perform such
duties, do such acts and be subject to such supervision as may be prescribed by
the Board of Directors or the President. In the event of the absence or
disability of the President or his/her refusal to act, the Vice Presidents, in
the order of their rank, and within the same rank in the order of their
authority, shall perform the duties and have the powers and authorities of the
President, except to the extent inconsistent with applicable law.

Section 404. Secretary. The Secretary shall act under the supervision of
the President or such other Officers as the President may designate. Unless a
designation to the contrary is made at a meeting, The Secretary shall attend all
meetings of the Board of Directors and all meetings of the shareholders and
record all of the proceedings at such meetings in a book to be kept for that

<PAGE>

purpose, and shall perform like duties for the standing Committees when required
by these Bylaws or otherwise. The Secretary shall give, or cause to be given,
notice of all the meeting of the shareholders and of the Board of Directors. The
Secretary shall keep a seal of the Corporation, and, when authorized by the
Board of Directors or the President, cause it to be affixed to any documents and
instruments requiring it. The Secretary shall perform such other duties as may
be prescribed by the Board of Directors, President, or such other Supervising
Officer as the President may designate.

Section 406. Treasurer. The Treasurer shall act under the supervision of
the President or such other Officer as the President may designate. The
Treasurer shall have custody of the Corporation's funds and such other duties as
may be prescribed by the Board of Directors, President or such other Supervising
Officer as the President may designate.

Section 407. Assistant Officers. Unless otherwise provided by the Board of
Directors, each Assistant Officer shall perform such duties as shall be
prescribed by the Board of Directors, the President or the Officer to whom
he/she is an Assistant. In the event of the absence or disability of an Officer
or his/her refusal to act, his/her Assistant Officer shall, in the order of
their rank, and within the same rank in the order of their seniority, have the
powers and authorities of such Officer.

Section 408. Compensation. Unless otherwise provided by the Board of
Directors, the salaries and compensation of all Officers shall be fixed by and
in the manner designated by the Board.

<PAGE>

Section 409. General Powers. The Officers are authorized to do and perform
such corporate acts as are necessary in the carrying on of the business of the
Corporation, subject always to the direction of the Board of Directors.

ARTICLE V. SHARES OF CAPITAL STOCK.

Section 501. Authority to Sign Share Certificates. Every share certificate
of the Corporation shall be signed by the President and by the Treasurer.
Certificates may be signed by a facsimile signature of the President and the
Treasurer.

Section 502. Lost or Destroyed Certificates. Any person claiming a share
certificate to be lost, destroyed or wrongfully taken shall receive a
replacement certificate if such person shall have: (a) requested such
replacement certificate before the Corporation has notice that the shares have
been acquired by a bonafide purchaser; (b) provided the Corporation with an
indemnity agreement satisfactory in form and substance to the Board of
Directors, or the President or the Treasurer; and (c) satisfied any other
reasonable requirements (including providing an affidavit and a surety bond)
fixed by the Board of Directors, or the President or the Treasurer.

ARTICLE VI. GENERAL.

Section 601. Fiscal Year. The fiscal year of the Corporation shall begin on
the first (1st) day of January in each year and end on the thirty-first (31st)
day of December in each year.

<PAGE>

Section 602. Record Date. The Board of Directors may fix any time
whatsoever (whether or not the same is more than fifty (50) days) prior to the
date of any meeting of shareholders, or the date for the payment of any dividend
or distribution, or the date for the allotment of rights, or the date when any
change or conversion or exchange of shares will be made or will go into effect,
as a record date for the determination of the shareholders entitled to notice
of, or to vote at, any such meetings, or entitled to receive payment of any such
dividend or distribution, or to receive any such allotment of rights, or to
exercise the rights in respect to any such change, conversion or exchange of
shares.

Section 603. Absentee Participation in Meetings. One (1) or more Directors
may participate in a meeting of the Board of Directors, or of a Committee of the
Board, by means of a conference telephone or similar communications equipment,
by means of which all persons participating in the meeting can hear each other.

Section 604. Emergency Bylaws. In the event of any emergency resulting from
a nuclear attack or similar disaster, aid during the continuance of such
emergency, the following Bylaw provisions shall be in effect, notwithstanding
any other provisions of the Bylaws:

(a) A meeting of the Board of Directors or of any Committee thereof
may be called by any Officer or Director upon one (1) hour's notice to all
persons entitled to notice whom, in the sole judgment of the notifier, it
is feasible to notify;

<PAGE>

(b) The Director or Directors in attendance at the meeting of the
Board of Directors or of any Committee thereof shall constitute a quorum;
and

(c) These Bylaws may be amended or repealed, in whole or in part, by a
majority vote of tie Directors attending any meeting of the Board of
Directors, provided such amendment or repeal shall only be effective for
the duration of such emergency.

Section 605. Severability. If any provision of these Bylaws is illegal or
unenforceable as such, such illegality or unenforceability shall not affect any
other provisions of these Bylaws and such other provisions shall continue in
full force and effect.

ARTICLE VII. AMENDMENT OR REPEAL.

Section 701 Amendment or Repeal by the Board of Directors. These Bylaws may
be amended or repealed, in whole or in part, by a majority vote of members of
the Board of Directors at any regular or special meeting of the Board duly
convened. Notice need not be given of the purpose of the meeting of the Board
of Directors at which the amendment or repeal is to be considered.

Section 702. Recording Amendments and Repeals. The text of all amendments
and repeals to these Bylaws shall be attached to the Bylaws with a notation of
the date and vote of such amendment or repeal.

<PAGE>

ARTICLE VIII. APPROVAL OF AMENDED BYLAWS AND RECORD OF AMENDMENTS AND REPEALS.

Section 801. Approval and Effective Date. These Bylaws have been approved
as the Bylaws of the Corporation this 18th day of November, 1982, and shall be
effected as of said date.

Section 802. Amendments or Repeals.

Date Amended
Section Involved or Repealed Approved by
- ---------------- ----------- -----------

<PAGE>

UNION CENTER NATIONAL BANK

DIRECTORS' RETIREMENT PLAN

<PAGE>

TABLE OF CONTENTS

ARTICLE 1 - PURPOSE AND SCOPE

1.1 ESTABLISHMENT ....................................................... 1
1.2 PURPOSE ............................................................. 1
1.3 APPLICATION OF THE PLAN ............................................. 1
1.4 SCOPE ............................................................... 1

ARTICLE II - DEFINITIONS ................................................... 1

ARTICLE III - PARTICIPATION

3.1 ELIGIBILITY FOR PARTICIPATION ....................................... 3
3.2 DURATION OF PARTICIPATION ........................................... 3

ARTICLE IV - BENEFITS

4.1 ELIGIBILITY TO RECEIVE BENEFITS ..................................... 3
4.2 AMOUNT AND FORM OF BENEFIT .......................................... 3
4.3 FORFEITURE FOR CAUSE ................................................ 3

ARTICLE V - ADMINISTRATION

5.1 DUTIES OF THE COMMITTEE ............................................. 4
5.2 LIABILITIES OF THE COMMITTEE ........................................ 4
5.3 EXPENSES ............................................................ 4
5.4 UNFUNDED CHARACTER OF THE PLAN ...................................... 4

ARTICLE VI - AMENDMENT AND TERMINATION

6.1 AMENDMENT AND TERMINATION ........................................... 4
6.2 PRESERVATION OF BENEFITS ON
TERMINATION OR AMENDMENT ............................................ 5
6.3 DISTRIBUTION OF BENEFITS ON TERMINATION ............................. 5

ARTICLE VII - MISCELLANEOUS PROVISIONS

7.1 NO RIGHT TO CONTINUED EMPLOYMENT .................................... 5
7.2 CONSTRUCTION OF LANGUAGE ............................................ 5
7.3 NON-ALIENATION OF BENEFITS .......................................... 5
7.4 SEPARABILITY ........................................................ 5

-i-

<PAGE>

7.5 AUTHORIZED OFFICERS ................................................. 6
7.6 CONSTRUCTION ........................................................ 6

-ii-

<PAGE>

ARTICLE I - PURPOSE AND SCOPE

1.1 ESTABLISHMENT

Union Center National Bank hereby establishes effective as of July 1, 1998 an
unfunded retirement plan for its eligible Directors and their beneficiaries as
described herein which shall be known as the "Union Center National Bank
Directors' Retirement Plan."

1.2 PURPOSE

The purpose of this Plan is to provide benefits for eligible Directors of the
Bank in recognition of their service to the Bank.

1.3 APPLICATION OF THE PLAN

The terms of the Plan are applicable only to eligible Directors who serve on the
Board of Directors of the Bank on or after July 1, 1998. Any Director who
retired or whose relationship as Director with the Bank was otherwise terminated
prior to such date shall not be eligible to participate in the Plan.

1.4 SCOPE

This Plan is designed to provide Directors of the Bank certain retirement
benefits. Nothing herein contained, and no action taken pursuant to the
provisions of this Plan, shall create or be construed to create a fiduciary
relationship between the Bank and any Director of the Bank, their surviving
spouse or dependents, their estate or their beneficiaries or any other person.

Any reserves or liabilities set upon the Bank's books of account with respect to
any benefits to be paid under this Plan shall continue for all purposes to be a
part of the general funds or assets of the Bank. To the extent that any person
acquires right to receive payments from the Bank under this Plan, such right
shall be no greater than the right of any unsecured general creditor of the
Bank.

ARTICLE II - DEFINITIONS

2.1 "BOARD" means the Board of Directors of the Bank,

2.2 "CODE" means the Internal Revenue Code of 1986, as amended.

2.3 "COMMITTEE" means such person, committee or entity as shall be designated by
the Board to perform the duties set forth in Article V; provided, however, that
if no such person, committee or entity is designated by the Board, then the
Board shall serve as the Committee.

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<PAGE>

2.4 "BANK" means Union Center National Bank, a national bank chartered under the
laws of Congress, and its successors and assigns whether by merger,
consolidation, sale of assets, statutory receivership, operation of law or
otherwise.

2.5 "DIRECTOR" means any individual who serves as a director of the Board on or
after the Effective Date.

2.6 "INSIDE DIRECTOR" means a Director who also serves as an employee or officer
of the Bank.

2.7 "EFFECTIVE DATE" means July 1, 1998.

2.8 "OUTSIDE DIRECTOR" means a Director who is not an Inside Director.

2.9 "PARTICIPANT" means any Director who is participating in the Plan in
accordance with its terms.

2.10 "PLAN" means the Union Center National Bank Directors' Retirement Plan.

2.11 "NORMAL RETIREMENT DATE" means with respect to a Director, the first day of
the calendar month following the Director's Termination of Service occurring
after (1) May 1, 2000, and (2) his attainment of age 70 and completion of 15
Years of Service.

2.12 "YEARS OF SERVICE" means each 12 month period for which a Director serves
as a member of the Board. A Year of Service shall initially commence on the date
on which a Director is appointed or elected to the Board and shall thereafter
commence on each successive yearly anniversary of such date. A Director shall be
deemed to have served as a member of the Board for a full month if he serves as
a member of the Board for any portion of such month. Non-consecutive periods of
service as a Director shall be aggregated for purposes of determining a
Director's total Years of Service. Years of Service shall include service as a
Director prior to the Effective Date.

2.13 "TERMINATION OF SERVICE" means a Director's termination of service as a
member of the Board, whether by removal, resignation, death, disability or
otherwise.

2.14 "VESTED PARTICIPANT" means a Participant who (1) is an Outside Director on
or after July 1, 1999, (2) has completed fifteen (15) Years of Service, and (3)
attains age 70 prior to incurring a Termination of Service.

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<PAGE>

ARTICLE III - PARTICIPATION

3.1 ELIGIBILITY FOR PARTICIPATION

Each Outside Director who has completed 15 Years of Service as of the Effective
Date shall become a Participant on the Effective Date. Each other Director shall
become a Participant upon completion of 15 Years of Service; provided he is at
such time an Outside Director.

3.2 DURATION OF PARTICIPATION

A Director who becomes a Participant shall continue to be a Participant until
the later of his Termination of Service or the date he or she is no longer
entitled to benefits under the Plan.

ARTICLE IV - BENEFITS

4.1 ELIGIBILITY TO RECEIVE BENEFITS

A Vested Participant shall be paid a retirement benefit under the Plan in
accordance with Section 4.2.

4.2 AMOUNT AND FORM OF BENEFIT

A Vested Participant shall be paid an annual retirement benefit of $8,500.00
payable in substantially equal monthly installments for one hundred eighty (180)
months commencing upon his Normal Retirement Date. In the event of the Vested
Participant's death after payments have commenced but prior to the payment all
such monthly installments, such installments shall continue to be paid to the
Participant's surviving spouse, if any, until the earlier of (i) such spouse's
death or (ii) the aggregate number of monthly payments to both the Participant
and such spouse total one hundred eighty (180). In the event a Vested
Participant and his surviving spouse both die before one hundred eighty (180)
monthly payments have been paid, benefits shall cease as of the date of the
second to die and no further benefits under the Plan shall be payable.

In the event of the death of a Vested Participant after July 1, 1998 and after
his completion of fifteen (15) Years of Service, but prior to the commencement
of payment of benefits hereunder, his surviving spouse, if any, shall be paid an
annual retirement benefit of $8,500.00 payable in substantially equal monthly
installments until the earlier of (i) such spouse's death, or (ii) the payment
of one hundred eighty (180) such installments.

4.3 FORFEITURE FOR CAUSE

Notwithstanding any other provisions of this Plan, if a Director shall be
terminated for reason of acts of fraud, dishonesty, larceny, misappropriation or
embezzlement committed against the Company, all of such Director's rights to
benefits under this Plan shall be forfeited.

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<PAGE>

ARTICLE V - ADMINISTRATION

5.1 DUTIES OF THE COMMITTEE

The Committee shall have full responsibility for the management, operation,
interpretation and administration of the Plan in accordance with its terms, and
shall have such authority as is necessary or appropriate in carrying out its
responsibilities. The Committee is expressly authorized to exercise discretion
in carrying out its responsibilities and deciding any question of fact or law
in connection therewith. Actions taken by the Committee pursuant to this Section
5.1 shall be conclusive and binding upon the Bank, Participants and any other
interested parties.

5.2 LIABILITIES OF THE COMMITTEE

Neither the Committee nor its individual members shall be deemed to be a
fiduciary or fiduciaries with respect to this Plan; nor shall any of the
foregoing individuals or entities be liable to any Participant or beneficiary in
connection with the management, operation, interpretation or administration of
the Plan, any such liability being solely that of the Bank.

5.3 EXPENSES

Any expenses incurred in the management, operation, interpretation or
administration of the Plan shall be paid by the Bank. In no event shall the
benefits otherwise payable under this Plan be reduced to offset the expenses
incurred in managing, operating, interpreting or administering the Plan.

5.4 UNFUNDED CHARACTER OF THE PLAN

The benefits payable under the Plan shall be paid by the Bank out of its general
assets; provided, however, that the Bank may establish a separate account, an
escrow account or a trust or may purchase an annuity or insurance contract,
which account, trust or contract shall be subject to the claims of the Bank's
general unsecured creditors. Any liability of the Bank to any person with
respect to benefits payable under the Plan shall be based solely upon such
contractual obligations, if any, as shall be created by the Plan, and shall give
rise only to a claim against the general assets of the Bank. No such liability
shall be deemed to be secured by any pledge or any other encumbrance on any
specific property of the Bank.

Subject to the foregoing, in the event of a Change of Control (as defined below)
or threatened Change in Control, the Bank may contribute to any such account,
trust or contract an amount that the Board determines to be sufficient to pay
each Plan participant or beneficiary the benefits to which such participants and
beneficiaries would be entitled pursuant to the terms of the Plan as of the date
on which the Change of Control occurs. A "Change in Control" shall mean:

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<PAGE>

(1) the consummation of an acquisition by a third party of a majority of
the voting capital stock of the Bank or Center Bancorp Inc. or substantially all
of the assets of the Bank or Center Bancorp Inc., or

(2) a change in the composition of the Board of Directors of the Bank or
Center Bancorp such that "Continuing Directors" (as defined herein) no longer
constitute a majority of the Board. For purposes of this Agreement, the term
"Continuing Director" shall mean (i) each current member of the Center Bancorp
Inc. Board of Directors and (ii) each person who is hereinafter first nominated
to such board by unanimous vote of the persons who then constitute Continuing
Directors.

ARTICLE VI - AMENDMENT AND TERMINATION

6.1 AMENDMENT AND TERMINATION

Subject to the provisions of Section 6.2, the Board shall have the right to
amend or terminate the Plan, in whole or in part.

6.2 PRESERVATION OF BENEFITS ON TERMINATION OR AMENDMENT

Neither the termination nor amendment of the Plan shall reduce the benefits
accrued by a Participant under this Plan.

6.3 DISTRIBUTION OF BENEFITS ON TERMINATION

In the event of termination of the Plan, the retirement benefits, if any, to
which recipients are entitled, or may become entitled, under Article IV shall
continue to be payable as provided in Article IV.

ARTICLE VII - MISCELLANEOUS PROVISIONS

7.1 NO RIGHT TO CONTINUED EMPLOYMENT

Neither the establishment of the Plan nor any provisions of the Plan, nor any
action of the Committee shall be held or construed to confer upon any Director
the right to continue to serve on the board.

7.2 CONSTRUCTION OF LANGUAGE

Wherever appropriate in the Plan, words used in the singular may be read in the
plural, words in the plural may be read in the singular, and words importing the
masculine gender shall be

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<PAGE>

deemed equally to refer to the feminine and the neuter. Any reference to any
Article or Section shall be to an Article or Section of this Plan, unless
otherwise indicated.

-6-

<PAGE>

7.3 NON-ALIENATION OF BENEFITS

The right to receive a benefit under the Plan shall not be subject in any manner
to anticipation, alienation, or assignment, nor shall such right be liable for
or subject to debts, contracts, liabilities or torts. Should any Participant,
beneficiary or other person attempt to anticipate, alienate or assign his
interest in or right to a benefit, or should any person claiming against him
seek to subject such interest or right to legal or equitable process, all the
interest or right of such Participant or beneficiary or other person entitled to
benefits under the Plan shall cease, and in that event, such interest or right
shall be held or applied, at the direction of the Committee, to or for the
benefit of such Participant, beneficiary or other person or his spouse, children
or other dependents in such manner and in such proportion as the Committee may
deem proper.

7.4 SEPARABILITY

If any term or provision of this Plan as presently in effect or as amended from
time to time, or the application thereof to any payments or circumstances, shall
to any extent be invalid or unenforceable, the remainder of the Plan, and the
application of such term or provision to payments or circumstances other than
those as to which it is invalid or unenforceable, shall not be affected thereby,
and each term or provision of the Plan shall be valid and enforced to the
fullest extent permitted by law.

7.5 AUTHORIZED OFFICERS

Whenever the Bank under the terms of the Plan is permitted or required to do or
to perform any act or matter or thing, it shall be done and performed by a duly
authorized officer of the Bank.

7.6 CONSTRUCTION

The provisions of the plan shall be construed, administered and enforced
according to the laws of the State of New Jersey.

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<PAGE>

A3.Exhibits
Organizational Chart

21.1 Subsidiaries of the Registrant
As of December 31, 1998

CENTER BANCORP INC.
2455 Morris Avenue
Union, NJ 07083

UNION CENTER NATIONAL BANK
2455 MORRIS AVENUE
UNION, NJ 07083
(100% Owned by Center Bancorp Inc.)

<PAGE>

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Center Bancorp Inc.:

We consent to the incorporation by reference in the Registration Statement No.
33-72176 on Form S-8 and Registration Statement No. 33-72178 of Form S-3 of
Center Bancorp Inc. of our report dated January 27, 1999, relating to the
consolidated statements of condition of Center Bancorp Inc. as of December 31,
1998 and 1997 and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1998, which report is incorporated by reference in the
December 31, 1998 Annual Report on Form 10-K of Center Bancorp Inc.

KPMG LLP

Short Hills, New Jersey
March 29, 1999

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

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