SOURCE: Center Bancorp, Inc.

January 25, 2007 08:40 ET

Center Bancorp, Inc. Reports Fourth Quarter 2006 Earnings

UNION, NJ -- (MARKET WIRE) -- January 25, 2007 --Center Bancorp, Inc. (NASDAQ: CNBC), parent company of Union Center National Bank, today reported operating results for the fourth quarter ended December 31, 2006 and for the year ended December 31, 2006.

Center Bancorp reported:

--  Net income of $2.3 million for the fourth quarter of 2006, as compared
    with $1.9 million for the fourth quarter of 2005.
--  EPS of $0.17 per share for the fourth quarter of 2006, as compared
    with $0.14 per share for the fourth quarter of 2005.
--  Strong deposit growth, with total deposits increasing to $726.8
    million at December 31, 2006, a 3.74% increase from the end of 2005.
--  Continued loan growth.  The Corporation achieved net growth in average
    loans of 8.47% for the fourth quarter of 2006.  Commercial and commercial
    real estate loans provided the bulk of the loan growth in the fourth
    quarter.
--  Continued high credit quality; non-performing assets amounted to only
    .07% of total assets at December 31, 2006.
--  Continued strengthening of the balance sheet, designed to enhance the
    Corporation's earnings profile and reduce exposure to future interest rate
    risk.
--  Redemption of $10.3 million of higher-cost subordinated debt, which
    will improve the Corporation's cost of funds in 2007.
--  Net interest margin declined 8 basis points on a linked sequential
    quarter,  from 2.70% for the third quarter of 2006 to 2.62% for the fourth
    quarter of 2006.
--  Total assets of $1.051 billion at December 31, 2006, which positions
    Center as one of the largest New Jersey headquartered financial
    institutions.
--  Book value per common share amounted to $7.37 at December 31, 2006
    compared to $7.41 a year ago.
    
Commenting on the results for the fourth quarter, President and Chief Executive Officer John J. Davis stated, "We continue to focus on our plan to enhance earnings and shareholder returns through improved efficiencies and sustained revenue growth. Loan volume continues to grow -- which has the effect of improving the quality and composition of our balance sheet by reducing our securities portfolio and by decreasing borrowings. Credit quality remains very strong. We believe we have made good progress toward improving our balance sheet and restraining further compression of our net interest margin in light of a challenging interest rate environment. We are very mindful of the need to lower our expenses and to further increase profitability, which will be a continued priority for 2007. In 2006 we implemented initiatives to increase branch profitability as well as to reduce salaries and benefits and overtime expense. In addition, we are considering various outsourcing opportunities and instituting other operating expense controls."

Mr. Davis continued, "We are pleased with our strengths in commercial lending, credit quality and generating core deposits. Moreover, growth prospects in key markets where we operate remain attractive. Our Boonton/Mountain Lakes office was opened in the fourth quarter of 2006 and we look forward to further expansion of our footprint into new markets, specifically Florham Park, New Jersey in the near term. We continue to be encouraged by our long-term prospects and we will continue to pursue our strategic plan and expect to generate attractive returns for our shareholders."

Fourth quarter 2006 net income amounted to $2.3 million, as compared with net income of $1.9 million in the fourth quarter of 2005. Earnings per share amounted to $0.17 on a diluted per common share basis, as compared with $0.14 per share for the fourth quarter of 2005. Results for the fourth quarter reflect positive loan growth trends, an increase in non-interest income and favorable tax benefits offset in part by net interest margin compression during the period and increased non-interest expense.

For the twelve-months ended December 31, 2006, the Corporation reported net income of $3.9 million, or $0.29 on a diluted per common share basis. The Corporation earned $7.6 million, or $0.63 per diluted common share, for the twelve-months ended December 31, 2005.

Net Interest Income

Total interest income on a fully taxable-equivalent basis for the fourth quarter of 2006 decreased by $360,000, or 2.52%, to $13.9 million, from the comparable 2005 quarterly period, while total interest expense for the fourth quarter of 2006 increased by $869,000, or 12.7%, to $7.7 million over the same quarterly period of 2005.

For the twelve-months ended December 31, 2006, total interest income on a fully tax-equivalent basis increased by $2.5 million, or 4.67%, to $55.5 million as compared to the twelve-months ended December 31, 2005. For the twelve-months ended December 31, 2006, total interest expense increased by $5.7 million, or 24.4%, to $29.0 million, as compared to the same period last year.

The Corporation recorded net interest income of $5.7 million for the three months ended December 31, 2006 and $24.4 million for the twelve-months ended December 31, 2006. This compared with net interest income of $6.8 million for the three months ended December 31, 2005 and $27.2 million for the twelve-months ended December 31, 2005. The decrease in net interest income for both the three and twelve-months ended December 31, 2006 related principally to the increase in interest expense during these periods.

The three and twelve-month increases in interest expense reflect the impact of the rise in short-term interest rates, the sustained flatness of the yield curve and intense competition for deposits. The Corporation reduced its average borrowings by $149.1 million including subordinated debentures, during the fourth quarter of 2006 as compared with the same quarter in 2005. The average balance of interest-bearing liabilities, including borrowings, declined by $104.8 million, or 11.7%, to $793.9 million in the current fourth quarter. However, the positive effect of the reduction in this type of funding source was offset by an increase in the average cost of funds, which rose (on an annualized basis) by 84 basis points to 3.89% from 3.05% during the fourth quarter of 2005.

Average interest-earning assets for the three months ended December 31, 2006 declined by $111.1 million, or 10.44%, to $952.4 million, reflecting the Corporation's balance sheet repositioning. The repositioning at the end of the first quarter of 2006 included the sale of $86.3 million of securities with an average yield under 4.0%. While the annualized average yield on earnings assets for the fourth quarter of 2006 increased 48 basis points over the annualized average yield during the fourth quarter of 2005, it was not sufficient to offset the effect of the rise in the average cost of funds over the same period.

For the three months ended December 31, 2006, the Corporation's net interest spread declined 36 basis points to 1.97% (annualized) as compared to 2.33% (annualized) for the comparable three month period in 2005 and the Corporation's net interest margin (net interest income as a percentage of earning assets, calculated on an annualized basis) declined by 19 basis points from 2.81% to 2.62%. For the twelve-months of 2006, the Corporation's net interest spread and net interest margin were equal to 2.17%(annualized) and 2.75% (annualized), respectively, down 32 and 14 basis points, respectively, from the same measures for the comparable period in 2005.

The Federal Reserve Board did not raise the Federal Funds target rate in the fourth quarter of 2006. The yield curve, however, continued to flatten and has been inverted during the 2006 period causing continued upward pressure on short-term funding costs, which continued to exert pressure on interest margins.

The interest rate environment did not improve in the fourth quarter, making it difficult for the Corporation to lower its overall cost of funds. As a result, the Corporation's net interest margin declined from the fourth quarter of 2005 to the fourth quarter of 2006. Due to the uncertainty of the timing and direction of interest rates in general, the Corporation expects that its net interest margin for 2007 will be lower than its net interest margin for previous years. The Corporation took several important steps in the fourth quarter to stem further compression of its margin by redeeming $10.3 million in subordinated debt, reducing the Corporation's reliance on retail certificates of deposit as part of the funding mix and by lowering rates on money market deposits. The Corporation believes that these steps, coupled with further actions to restrain the cost of funds, will have a favorable impact on the margin in 2007.

Other Income

Total other income increased $820,000 for the fourth quarter of 2006 compared with the fourth quarter of 2005, primarily as a result of increases in gains on securities sold. The Corporation continues to pursue opportunities to expand other non-interest income, such as insurance and annuity sales origination, sales of mortgages and improving service charge revenue.

Excluding net securities losses and gains in the respective periods, the Corporation recorded other income of $3.2 million in the twelve-months ended December 31, 2006, compared to $3.5 million in the twelve-months ended December 31, 2005. This decrease was primarily attributable to a $163,000 decline in service charges, decreased commissions and fees revenue, which included a one time commission on check book charges in 2005, lower overdraft fees and service charge income on deposit accounts, and a $177,000 decline in other fee income. The decline in other fee income was attributable to a decline in letter of credit income and loan fees. Total other income including net securities losses and gains, which takes into account the balance sheet repositioning undertaken during the first quarter of 2006, the Corporation recorded $633,000 from other income sources in the twelve-months ended December 31, 2006 as compared with other income of $3.8 million in the twelve-months ended December 31, 2005.

Other Expense

Other expense for the fourth quarter of 2006 totaled $6.7 million, an increase of $1.142 million or 20.71% over the comparable period in 2005. The increase in operating expenses during the fourth quarter resulted primarily from an $1.019 million increase in other general and administrative expenses, including an increased expense related to customer third party services provided to customers of $200,000, or 20% of the increase, coupled with a write-off of the expenses related to the proposed branch site in Cranford New Jersey which amounted to approximately $162,000. The amortization of core deposit intangibles ("CDI") accounted for $2,500 and $21,000, respectively, of other expense in the current and year-earlier periods, with the increase reflecting the CDI amortization stemming from the acquisition of Red Oak Bank in May 2005.

Salaries and benefits decreased by $43,000, or 1.4% to $3.0 million, reflecting an increase in staffing in comparison to the prior quarterly period in 2005, as well as normal merit and promotional increases, pension expense, and stock option expense under FAS 123(R), offset in part by a reversal of incentive accruals during the fourth quarter of 2006. Full time equivalent staffing levels were 214 as of December 31, 2006 compared to 211 as of December 31, 2005. The change in staffing levels includes the impact of the acquisition of Red Oak Bank in 2005 and staffing for the Boonton/Mountain Lakes branch which opened in October of 2006.

Other expense for the twelve-months ended December 31, 2006 totaled $24.4 million, an increase of $2.15 million, or 9.66%, over the comparable period in 2005. Higher operating expenses during the twelve-month period resulted primarily from an increase in other general and administrative expenses as well as certain specific customer-related expenses. Other general and administrative expense increased $1.7 million, reflecting increases in professional consulting, compliance, audit fees, insurance and stationary and printing expense and certain increased expenses related to customer third party services provided amounting to $294,000 for the twelve-month period. Amortization of CDI accounted for $120,000 of other expense in the current twelve-month period and $75,000 in the comparable period in 2005.

Income Tax Expense

The effective tax rate, exclusive of the impact of the realized loss on securities sold, continues to be less than statutory rates. During the fourth quarter of 2006, the Corporation effected an internal entity reorganization which resulted in a $1.4 million tax savings. Additionally, tax-free income generated from the Corporation's municipal and other tax advantaged investments continues to reduce the effective tax rate.

The Corporation recorded an income tax benefit of $1.7 million in the current fourth quarter, compared to a tax expense of $140,000 for the fourth quarter of 2005. The change was primarily due to a $1.5 million decline in pre-tax income to $596,000 for the three months ended December 31, 2006 coupled with the above-mentioned internal reorganization.

The Corporation recorded an income tax benefit of $3.3 million for the twelve-months ended December 31, 2006, compared to a tax expense of $1.2 million for the comparable 2005 period. The change was primarily due to the decline of $8.3 million of pre-tax income and the above-mentioned internal entity reorganization.. The Corporation had pre-tax income of $8.8 million for the twelve-months ended December 31, 2005.

Balance Sheet Summary

The Corporation had total assets of $1.051 billion at December 31, 2006, down $63.5 million from December 31, 2005. The reduction in assets, in part, reflects the balance sheet restructuring announced in the first quarter of 2006. The Corporation utilized a portion of the cash flows generated by redemptions and sales of securities to fund increased loans. During the twelve-months ended December 31, 2006, the Corporation experienced growth in its deposits and reduced its borrowings. Loans totaled $550.4 million at December 31, 2006, up $44.6 million, or 8.81%, from the year-end 2005 balance. On December 31, 2006, securities totaled $389.5 million, a decline of $139.1 million, or 26.32%, from the year-end 2005 balance.

Deposits totaled $726.8 million at December 31, 2006, an increase of $26.2 million from the December 31, 2005 balance. Short-term borrowings declined to $206.4 million at December 31, 2006, reflecting the Corporation's goal of reducing its reliance on short-term borrowings.

Stockholders' equity totaled $97.6 million at December 31, 2006, down $1.9 million from the December 31, 2005 total. Tangible stockholders' equity (representing total stockholders' equity less recorded intangible assets) totaled $80.3 million at December 31, 2006, down $1.8 million from December 31, 2005.

Loans

Total average loan volume for the fourth quarter of 2006 increased to $543.7 million, an increase of $42.4 million, or 8.46%, from $501.3 million for the comparable quarter of the previous year. On a linked sequential quarter comparison, total average loans increased by $11.2 million, from $532.5 million on average during the third quarter of 2006. The Corporation continues to focus on building loan volume in its marketplace.

For the twelve-months ended December 31, 2006, total average loan volume was $522.4 million, an increase of approximately $68.0 million, or 14.96%, from $454.4 million on average for the twelve-months ended December 31, 2005.

The Corporation had total loans of $550.4 million at December 31, 2006, representing a $44.6 million, or 8.81%, increase from the Corporation's balance at December 31, 2005. At December 31, 2006, the Corporation had outstanding commitments of $28.3 million, with commercial and commercial real-estate loans representing 96.8% of that amount. Management expects loan balances to continue to grow during the first quarter of 2007, fueled by a continued increase in the commercial sectors of the Corporation's loan portfolio.

Asset Quality

Asset quality remained strong during the fourth quarter of 2006. At December 31, 2006, non-performing assets totaled $700,000. Non-performing assets represented 0.07% of total assets at December 31, 2006.

Despite the continued high quality of the Corporation's assets, commensurate with the growth in the loan portfolio and increase in the average size of the loan portfolio, the Corporation made a provision of $56,525 to the allowance for loan losses during the three months ended December 31, 2006. At December, 31 2006, the total allowance for loans amounted to approximately $5.0 million, or 0.90% of total loans. At December 31, 2006, total non-accrual loans amounted to $475,000, or 0.09% of total loans.

Securities

Consistent with the balance sheet strategies outlined by management in the first quarter of 2006, the Corporation sought to reduce the size of its investment securities portfolio during 2006. Securities totaled $389.5 million at December 31, 2006, representing 37.1% of total assets, compared to $528.7 million, representing 47.4% of total assets at December 31, 2005.

Reflecting the lower balance of the securities portfolio and an increase in market interest rates over the course of the twelve-months ended December 31, 2006, the net unrealized loss on securities available for sale decreased to $4.6 million at December 31, 2006 from $6.8 million at December 31, 2005.

Deposits/Funding Sources

Deposits totaled $726.8 million at December 31, 2006, an increase of $26.2 million from the December 31, 2005 balance. The increase in deposits reflects an increase in interest bearing money market deposits offset by decreases in more volatile certificates of deposit of $100,000 or more. The decline in certificates of $100,000 or more involved municipal deposits that were more costly than other funding sources.

Borrowings totaled $211.6 million at December 31, 2006, reflecting a decline of $97.8 million, or 31.6%, from the December 31, 2005 balance. Federal Home Loan Bank of New York advances represented approximately $109.0 million of the December 31, 2006 total, with repurchase agreements representing $97.4 million at the same date. Overnight customer repurchase transactions covering commercial sweep accounts comprised $29.4 million of the securities sold under repurchase agreements figure at December 31, 2006.

Stockholders' Equity

Total stockholders' equity amounted to $97.6 million or 9.28% of total assets at December 31, 2006, compared to $99.5 million or 8.92% of total assets at December 31, 2005. Contributions to capital during the twelve-months ended December 31, 2006 from the Corporation's stock option plans and dividend reinvestment and optional stock purchase plan amounted to approximately $658,000, compared to approximately $627,000 for the twelve-months ended December 31, 2005. The Corporation's dividend reinvestment and optional stock purchase plan is currently a market issuance plan. During most of 2005, that plan was operating under the original issuance method for purchases made for the plan. The change in stockholders' equity at December 31, 2006 also reflects the impact of the adoption of FASB No 158 under which the Corporation recorded a $815,000, net of tax charge to the other comprehensive income component of stockholders' equity.

Book value per common share was $7.37 at December 31, 2006, compared to $7.41 at December 31, 2005. Tangible book value (i.e., total stockholders' equity less goodwill and other intangible assets) per common share was $6.06 at December 31, 2006, and $6.11 at December 31, 2005. The $.05 per common share decline as compared to 2005 reflects the increase in goodwill and other intangible assets resulting from the acquisition of Red Oak Bank.

All common stock per share amounts have been restated to reflect all previously declared and paid common stock splits and common stock dividends. Weighted average shares outstanding reflect 1,015,816 common shares issued in May 2005 in connection with the acquisition of Red Oak Bank and 1,904,761 common shares issued in June 2005 in a private placement. The Corporation had no share repurchases of common stock during the fourth quarter of 2006 under its buy back program; the Corporation repurchased a total of 269,578 common shares during the twelve-months ended December 31, 2006 at an average cost per share of $11.95. The repurchased shares were recorded as treasury stock, which resulted in a decrease in stockholders' equity. At December 31, 2006, there were 344,894 shares still available for repurchase under the Corporation's stock buyback program.

At December 31 2006, the Corporation's capital ratios continued to exceed the minimum Federal requirements for a bank holding company, and Union Center National Bank's capital ratios continued to exceed each of the minimum levels required for classification as a "well capitalized institution" under the Federal Deposit Insurance Corporation Improvement Act ("FDICIA").

At December 31, 2006, the Corporation's Tier 1 Capital Leverage ratio was 8.64%, the Corporation's total Tier 1 Risk Based Capital ratio was 13.18 % and the Corporation's total Risk Based Capital ratio was 13.92%. Total Tier 1 capital decreased to approximately $88.0 million at December 31, 2006 from $102.2 million at December 31, 2005. The reduction in Tier 1 Capital at December 31, 2006 reflects the Corporation's redemption of Trust Preferred securities by its subsidiary Center Bancorp, Inc. Statutory Trust I on December 18, 2006. The Trust redeemed all $10 million of its floating rate capital trust pass through securities due December 18, 2031, at $1,000 per share plus accumulated and unpaid dividends to the redemption date. The current rate was 8.99%.

Mr. Davis noted, "We continue to focus on our commercial business base and our goal of increasing loans. We also remain committed to containing and controlling operating expense. We believe that the fourth quarter results demonstrate stability in this challenging rate environment and adherence to our stated goals to deliver consistent earnings performance over the long term."

About Center Bancorp

Center Bancorp, Inc., through its wholly owned subsidiary, Union Center National Bank, Union, New Jersey, currently operates fourteen banking locations. Banking centers are located in Union Township (6 locations), Berkeley Heights, Boonton/Mountain Lakes, Madison, Millburn/Vauxhall, Morristown (3 locations), Springfield, and Summit, New Jersey. The Bank also operates remote ATM locations in the Union and Chatham New Jersey Transit train station, Union Hospital and the Boys and Girls Club of Union. The Bank recently received approvals to install and operate one additional off-premise ATM location in the Madison New Jersey Transit Station, which is scheduled to be operational in 2007.

Union Center National Bank is the largest commercial bank headquartered in Union County; it was chartered in 1923 and is a full-service banking company.

For further information regarding Center Bancorp Inc., call 1-(800)-862-3683. For information regarding Union Center National Bank, visit our web site at http://www.centerbancorp.com

Non-GAAP Financial Measures

The Corporation's reference to its total other income, exclusive of the losses recorded on securities sales, may constitute a "non-GAAP financial measure." The Corporation has provided a reconciliation by also reporting its total other income for the applicable periods. The Corporation believes that the above-mentioned reference enhances the public's ability to compare results between the twelve-months of 2006 and the twelve-months of 2005.

Tangible stockholders' equity represents a non-GAAP financial measure and equals total stockholders' equity minus recorded intangible assets. The Corporation has provided a reconciliation by also reporting its total stockholders' equity. The Corporation believes that a disclosure of tangible stockholders' equity may be helpful for those investors who seek to evaluate the Corporation's total stockholders' equity without giving effect to intangible assets.

Tangible book value is also non-GAAP financial measure and represents total stockholders' equity less goodwill and other intangible assets, calculated on a per common share basis. The Corporation has provided reconciliation by also reporting its total book value per share. The Corporation believes that a disclosure of tangible book value per share may be helpful for those investors who seek to evaluate the Corporation's book value per share without giving effect to goodwill and other intangible assets.

Forward-Looking Statements

All non-historical statements in this press release (including statements regarding the Corporation's cost of funds in 2007, the Corporation's net interest margin for 2007 and future loan balances) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may use such forward-looking terminology as "expect," "look," "believe," "plan," "anticipate," "may," "will" or similar statements or variations of such terms or otherwise express views concerning trends and the future. Such forward-looking statements involve certain risks and uncertainties. These include, but are not limited to, the direction of interest rates, continued levels of loan quality and origination volume, continued relationships with major customers including sources for loans, as well as the effects of international, national, regional and local economic conditions and legal and regulatory barriers and structure, including those relating to the deregulation of the financial services industry, and other risks cited in reports filed by the Corporation with the Securities and Exchange Commission. Actual results may differ materially from such forward-looking statements. Center Bancorp, Inc. assumes no obligation for updating any such forward-looking statement at any time.

                           CENTER BANCORP, INC.
                   CONSOLIDATED STATEMENTS OF CONDITION


                                               December 31,   December 31,
(dollars in thousands)                            2006           2005
                                              -------------  -------------
                                                (unaudited)
ASSETS
Cash and due from banks                       $      34,088  $      19,343
Federal funds sold and securities purchased
 under agreement to resell                           10,275             --
Total cash and cash equivalents                      44,363         19,343
Investment securities held to maturity
 (approximate market value of
 $130,900 in 2006 and $140,628 in 2005)             131,130        140,514
Investment securities available-for-sale            258,408        388,170
                                              -------------  -------------
   Total investment securities                      389,538        528,684
Loans, net of unearned income                       550,414        505,826
Less - Allowance for loan losses                      4,960          4,937
                                              -------------  -------------
   Net Loans                                        545,454        500,889
Premises and equipment, net                          18,829         18,343
Accrued interest receivable                           4,932          5,875
Bank owned life insurance                            21,368         18,588
Other assets                                          9,563          5,670
Goodwill and other intangible assets                 17,312         17,437
                                              -------------  -------------
Total assets                                  $   1,051,359  $   1,114,829
                                              =============  =============

LIABILITIES
Deposits:
   Non-interest bearing                       $     136,453  $     139,911
   Interest-bearing
     Certificates of deposit $100 and over           83,623        154,409
     Interest-bearing transactions, savings
      and time deposits $100 and less               506,695        406,281
                                              -------------  -------------
Total deposits                                      726,771        700,601
Term borrowings                                     108,991        157,370
Fed funds purchased                                      --         40,000
Overnight FHLB Borrowings                                --         20,900
Securities sold under agreement to repurchase        97,443         75,693
Subordinated debentures                               5,155         15,465
Accounts payable and accrued liabilities             15,386          5,311
                                              -------------  -------------
Total liabilities                                   953,746      1,015,340
                                              -------------  -------------

STOCKHOLDERS’ EQUITY
Preferred Stock, no par value:
Authorized 5,000,000 shares; none issued                 --             --
Common stock, no par value:
Authorized 20,000,000 shares; issued
 14,467,962 shares at December 31, 2006 and
 December 31, 2005; outstanding shares
 13,248,406 at December 31, 2006 and
 13,431,628 at December 31, 2005                     65,592         65,592
Additional paid in capital                            4,535          3,787
Retained earnings                                    37,527         38,453
                                              -------------  -------------
                                                    107,654        107,832
Treasury stock at cost (1,219,556 and
 1,036,334 shares in 2006 and 2005,
 respectively)                                       (6,631)        (3,701)
Accumulated other comprehensive loss                 (3,410)        (4,642)
                                              -------------  -------------
Total stockholders’ equity                           97,613         99,489
                                              -------------  -------------
Total liabilities and stockholders’ equity    $   1,051,359  $   1,114,829
                                              =============  =============



                           CENTER BANCORP, INC.
                   CONSOLIDATED STATEMENTS OF INCOME


                              Three-Months Ended      Twelve-Months Ended
                                 December 31,            December 31,
(dollars in thousands,      ----------------------  ----------------------
 except per share data)        2006        2005        2006        2005
                            ----------  ----------  ----------  -----------
                            (Unaudited)             (Unaudited)
Interest income:
Interest and fees on loans  $    8,516  $    7,324  $   31,999  $    25,329
Interest and dividends on
 investment securities:
   Taxable interest income       3,454       4,602      15,521       18,849
   Non-taxable interest
    income                         903       1,047       3,874        4,001
   Dividends                       373         663       1,384        2,295
Interest on Federal funds
 sold and securities
 purchased under agreement
 to resell                         162          --         547           29
                            ----------  ----------  ----------  -----------
Total interest income           13,408      13,636      53,325       50,503
                            ----------  ----------  ----------  -----------
Interest expense:
   Interest on certificates
    of deposit $100,000 or
    more                         1,047       1,022       4,930        3,828
   Interest on other
    deposits                     4,137       2,210      13,075        7,771
   Interest on borrowings        2,533       3,616      10,969       11,697
                            ----------  ----------  ----------  -----------
Total interest expense           7,717       6,848      28,974       23,296
                            ----------  ----------  ----------  -----------
   Net interest income           5,691       6,788      24,351       27,207
   Provision for loan
    losses                          57          --          57           --
                            ----------  ----------  ----------  -----------
Net interest income after
 provision for loan losses       5,634       6,788      24,294       27,207
                            ----------  ----------  ----------  -----------
Other income:
   Service charges,
    commissions and fees           429         451       1,759        1,922
   Other income                    145         141         454          631
   Annuity and insurance            60          30         205          193
   Bank owned life
    insurance                      183         188         780          740
   Gain (loss) on
    securities sold                801         (12)     (2,565)         350
                            ----------  ----------  ----------  -----------
Total other income (loss)        1,618         798         633        3,836
                            ----------  ----------  ----------  -----------
Other expense:
   Salaries and employee
    benefits                     3,016       3,059      12,290       12,108
   Occupancy, net                  619         578       2,309        2,165
   Premises and equipment          564         550       1,940        1,990
   Stationery and printing         144         170         692          628
   Marketing and
    advertising                    266         129         731          644
   Other                         2,047       1,028       6,396        4,678
                            ----------  ----------  ----------  -----------
Total other expense              6,656       5,514      24,358       22,213
                            ----------  ----------  ----------  -----------
   Income (loss) before
    income tax (benefit)
    expense                        596       2,072         569        8,830
   Income tax (benefit)
    expense                     (1,695)        140      (3,329)       1,184
                            ----------  ----------  ----------  -----------
Net income                  $    2,291  $    1,932  $    3,898  $     7,646
                            ==========  ==========  ==========  ===========
Earnings per share:
   Basic                    $     0.17  $     0.14  $     0.29  $      0.63
   Diluted                  $     0.17  $     0.14  $     0.29  $      0.63
                            ----------  ----------  ----------  -----------
Weighted average common
 shares outstanding:
   Basic                    13,236,360  13,429,606  13,294,937   12,074,870
   Diluted                  13,314,543  13,471,205  13,371,750   12,119,291
                            ==========  ==========  ==========  ===========



     Average Statements of Condition with Interest and Average Rates

                          Twelve Month Period Ended December 31,
                ----------------------------------------------------------
                              2006                         2005
(tax-equivalent             Interest  Average            Interest   Average
basis, dollars   Average    Income/   Yield/   Average   Income/    Yield/
in thousands)    Balance    Expense    Rate    Balance   Expense     Rate
                ---------  ---------  ------  ---------  ---------  ------

Assets
Interest-earning
 assets:
Investment
 securities(1):
Taxable         $ 320,168  $  16,259    5.08% $ 422,507  $  19,596   4.64%
Non-taxable       112,831      6,718    5.95%   150,149      8,094   5.39%
Federal funds
 sold and
 securities
 purchased
 under
 agreement to
 resell            10,539        547    5.19%     1,091         29   2.66%
Loans, net of
 unearned
 income(2)        522,352     31,999    6.13%   454,372     25,329   5.57%
                ---------  ---------  ------  ---------  ---------  ------
Total interest-
 earning assets   965,890     55,523    5.75% 1,028,119     53,048   5.16%
                =========  =========  ======  =========  =========  ======
Non-interest-
earning assets
Cash and due
 from banks        20,711                        19,418
BOLI               20,225                        18,200
Intangible
 assets            17,378                        11,814
Other assets       28,405                        28,620
Allowance for
 possible loan
 losses            (4,932)                       (4,534)
                ---------                     ---------
Total
 non-interest-
 earning assets    81,787                        73,518
                ---------                     ---------
Total assets   $1,047,677                    $1,101,637
                =========                     =========

Liabilities and
 Stockholders’
 Equity
Interest-bearing
 liabilities:
Money market
 deposits       $ 126,502  $   4,384    3.47% $  92,875  $   1,963   2.11%
Savings
 deposits          90,768      1,807    1.99%   114,305      1,610   1.41%
Time deposits     232,803      9,950    4.27%   227,249      6,766   2.98%
Other
 interest-bearing
 deposits         119,231      1,864    1.56%   118,881      1,260   1.06%
Short-term
 Borrowings and
 FHLB Advances    226,004      9,655    4.27%   304,364     10,624   3.49%
Subordinated
 Debentures        15,070      1,314    8.72%    15,465      1,073   6.94%
                ---------  ---------  ------  ---------  ---------  ------
Total
 interest-bearing
 liabilities      810,378     28,974    3.58%   873,139     23,296   2.67%
                =========  =========  ======  =========  =========  ======
Non-interest-bearing
 liabilities:
Demand deposits   135,761                       134,837
Other non-
 interest-bearing
 deposits           1,470                         2,813
Other
 liabilities        3,563                         5,076
                ---------                     ---------
Total non-
 interest-bearing
 liabilities      140,794                       142,726
Stockholders’
 equity            96,505                        85,772
                ---------                     ---------
Total liabilities
 and stockholders’
 equity        $1,047,677                    $1,101,637
                ---------                     ---------
Net interest income
 (tax-equivalent
  basis)                   $  26,549                     $  29,752
                              ------                        ------
Net Interest
 Spread                                 2.17%                        2.49%
                                      ------                       ------
Net interest
 income as
 percent of
 earning-assets
 (net interest
 margin)                                2.75%                        2.89%
                                      ------                       ------
Tax-equivalent
 adjustment(3)                (2,198)                       (2,545)
                              ------                        ------
Net interest
 income                    $  24,351                     $  27,207
                           =========                     =========

(1) Average balances for available-for-sale securities are based on
    amortized cost
(2) Average balances for loans include loans on non-accrual status
(3) The tax-equivalent adjustment was computed based on a statutory
    Federal income tax rate of 34 percent



      Average Statements of Condition with Interest and Average Rates


                              Three Month Period Ended December 31,
                      ----------------------------------------------------
                                   2006                      2005
                                 Interest Average          Interest Average
(tax-equivalent basis,  Average  Income/  Yield/  Average   Income/  Yield/
 dollars in thousands)  Balance  Expense  Rate    Balance   Expense  Rate
                      ----------  ------  ----  ----------  ------  ------

Assets
Interest-earning assets:
Investment securities(1):

Taxable               $  281,255  $3,591  5.11% $  411,088  $4,842    4.71%

Non-taxable              114,994   1,678  5.84%    151,098   2,141    5.67%
Federal funds sold and
 securities purchased
 under agreement to
 resell                   12,434     162  5.21%         --      --      --
Loans, net of unearned
 income(2)               543,707   8,516  6.27%    501,260   7,324    5.84%
                      ----------  ------  ----  ----------  ------  ------
Total interest-earning
 assets                  952,390  13,947  5.86%  1,063,446  14,307    5.38%
                      ==========  ======  ====  ==========  ======  ======
Non-interest-earning
 assets
Cash and due from
 banks                    21,176                    19,350
BOLI                      21,261                    18,479
Intangible Assets         17,334                    17,500
Other assets              28,238                    29,377
Allowance for possible
 loan losses              (4,918)                   (4,967)
                      ----------                ----------
Total
 non-interest-earning
 assets                   83,091                    79,739
                      ----------                ----------
Total assets          $1,035,481                $1,143,185
                      ==========                ==========

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:

Money market deposits $  180,660  $1,812  4.01% $   81,410  $  458    2.25%

Savings deposits          78,623     412  2.10%    111,643     423    1.52%

Time deposits            213,008   2,480  4.66%    226,908   1,927    3.40%
Other interest-bearing
 deposits                114,097     480  1.68%    122,088     424    1.39%
Short-term Borrowings
 & FHLB Advances         193,628   2,226  4.60%    341,149   3,299    3.87%
Subordinated
 Debentures               13,896     307  8.84%     15,465     317    8.20%
                      ----------  ------  ----  ----------  ------  ------
Total interest-bearing
 liabilities             793,912   7,717  3.89%    898,663   6,848    3.05%
                      ==========  ======  ====  ==========  ======  ======
Non-interest-bearing
 liabilities:
Demand deposits          140,326                   137,450
Other non-interest-
 bearing deposits            419                     3,361
Other liabilities          4,004                     4,539
                      ----------                ----------
Total non-interest-
 bearing liabilities     144,749                   145,350
Stockholders’ equity      96,820                    99,172
                      ----------                ----------
Total liabilities and
 stockholders’ equity $1,035,481                $1,143,185
                      ----------                ----------
Net interest income
 (tax-equivalent basis)           $6,230                    $7,459
                                  ------                    ------

Net Interest Spread                       1.97%                       2.33%
                                          ----                      ------
Net interest income as
 percent of
 earning-assets (net
 interest margin)                         2.62%                       2.81%
                                          ----                      ------
Tax-equivalent
 adjustment(3)                      (539)                     (672)
                                  ------                    ------
Net interest income               $5,691                    $6,787
                                  ======                    ======


(1)Average balances for available-for-sale securities are based on
   amortized cost
(2)Average balances for loans include loans on non-accrual status
(3)The tax-equivalent adjustment was computed based on a statutory Federal
   income tax rate of 34 percent

Contact Information

  • Media Inquiries:

    Mike Pascale or Tom Johnson
    Abernathy MacGregor
    212-371-5999

    Investor Relations Inquiries:

    Anthony C. Weagley
    Vice President & Treasurer
    Center Bancorp, Inc.
    908-206-2886