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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, 2003.
[ ] 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
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(Address of Principal Executive Offices, Including Zip Code)
(908) 688-9500
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(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.
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes _X_ No___
The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold or the average bid and ask price of such common equity, as of the last
business day of the registrants most recently completed second fiscal quarter -
$122.1 million
Shares outstanding on February 27, 2004
Common stock, no par value: 8,525,967 shares
Documents Incorporated by reference Definitive proxy statement dated March 19,
2004 in connection with the 2004 Annual Stockholders Meeting filed with the
Commission pursuant to Regulation 14A will be incorporated by reference in Part
III
Annual Report to Stockholders for the fiscal year ended December 31, 2003 will
be incorporated by reference in Part I and Part II
Center Bancorp, Inc., Form 10-K
INDEX TO FORM 10-K
PART I
ITEM 1 BUSINESS 3
ITEM 2 PROPERTIES 14
ITEM 3 LEGAL PROCEEDINGS 14
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14
ITEM 4A EXECUTIVE OFFICERS OF THE REGISTRANT 15
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 16
ITEM 6 SELECTED FINANCIAL DATA 16
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 16
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 16
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 16
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 16
ITEM 9A CONTROLS AND PRECEDUERS
PART III
ITEM 10 DIRECTORS OF THE REGISTRANT 17
ITEM 11 EXECUTIVE COMPENSATION 17
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 17
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 17
ITEM 14 PRINCIPAL ACCOUNTANT FEES ANS SERVICES 17
PART IV
ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K 18-19
SIGNATURES 20
CERTIFICATIONS 21
Center Bancorp Inc., Form 10-K 2
Center Bancorp Inc.
Form 10 K
Part I
Item I-Business
A) Historical Development Of Business
This report includes forward-looking statements within the meaning of Sections
27A of the Securities Act of 1933, as amended, and 21E of the Securities
Exchange Act of 1934, as amended, that involve inherent risks and uncertainties.
This report contains certain forward-looking statements with respect to the
financial condition, results of operations, plans, objectives, future
performance and business of Center Bancorp including statements preceded by,
followed by or that include the words or phrases such as "believes," "expects,"
"anticipates," "plans," "trend," "objective," "continue," "remain," "pattern" or
similar expressions or future or conditional verbs such as "will," "would,"
"should," "could," "might," "can," "may" or similar expressions. There are a
number of important factors that could cause future results to differ materially
from historical performance and these forward-looking statements. Factors that
might cause such a difference include, but are not limited to: (1) competitive
pressures among depository institutions increase significantly; (2) changes in
the interest rate environment reduce interest margins; (3) prepayment speeds,
loan origination and sale volumes, charge-offs and loan loss provisions; (4)
general economic conditions are less favorable than expected; (5) political
developments, wars or other hostilities may disrupt or increase volatility in
securities markets or other economic conditions; (6) legislative or regulatory
changes or actions adversely affect the businesses in which Center Bancorp is
engaged; (7) changes and trends in the securities markets; (8) a delayed or
incomplete resolution of regulatory issues; (9) the impact of reputational risk
created by the developments discussed above on such matters as business
generation and retention, funding and liquidity; and (10) the outcome of
regulatory and legal investigations and proceedings. Further information on
other factors that could affect the financial results of Center Bancorp are
included in Center Bancorp's filings with the Securities and Exchange
Commission. These documents are available free of charge at the Commission's
website at http://www.sec.gov and/or from Center Bancorp.
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 and its subsidiaries. As used
herein, the term "Corporation" shall refer to Center Bancorp, Inc. and its
direct and indirect subsidiaries 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 Summit, 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, Morris County, New Jersey and two offices in
Morristown, Morris County, New Jersey and currently employs 191 full-time
equivalent persons. The Bank is a full service commercial bank offering a
complete range of individual and commercial services.
During 2001 and 2003, the Corporation formed statutory business trusts, which
exist for the exclusive purpose of (i) issuing Trust Securities representing
undivided beneficial interests in the assets of the Trust; (ii) investing the
gross proceeds of the Trust securities in junior subordinated deferrable
interest debentures (subordinated debentures) of the Corporation; and (iii)
engaging in only those activities necessary or incidental thereto. These
subordinated debentures and the related income effects are not eliminated in the
consolidated financial statements as the statutory business trusts are not
consolidated in accordance with FASB interpretation No.46 "Consolidation of
Variable Interest Entities." Distributions on the subordinated debentures owned
by the subsidiary trusts below have been classified as interest expense in the
Consolidated Statement of Income.
The Corporation issued $10.0 million in 2001 and $5.0 million in 2003 of
subordinated debentures. These securities are included as a component of Tier 1
Capital for regulatory purposes. The Tier 1 leverage capital ratio was 7.44
percent at December 31, 2003.
Center Bancorp Inc., Form 10-K 3
During 2002, the Bank established two investment subsidiaries to hold portions
of its securities portfolio and in January of 2003, established an insurance
subsidiary for the sale of insurance and annuity products.
The Corporation's website address is http://www.centerbancorpcom. The
Corporation makes available free of charge on or through its website the
following: its annual report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and all amendments to those reports as soon as
reasonably practicable after such material is electronically filed with or
furnished to the SEC.
B) Narrative Description Of Business
The Bank offers a broad range of lending, depository and related financial
services including trust, to commercial, industrial and governmental customers.
In 1999, the Bank obtained full trust powers, enabling it to offer a variety of
trust services to its customers. In the lending area, the Bank's 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 Star Systems, Inc. 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 Office
of the Comptroller of the Currency (the "OCC"). Deposits in the Bank are insured
by the Federal Deposit Insurance Corporation (the "FDIC").
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 periodic 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 Bank Holding Company Act limits
the activities which may be engaged in by the Company and its subsidiaries to
those of banking, the ownership and acquisition of assets and securities of
banking organizations, and the management of banking organizations, and to
certain non-banking activities which the Federal Reserve Board finds, by order
or regulation, to be so closely related to banking or managing or controlling a
bank as to be a proper incident thereto. The Federal Reserve Board is empowered
to differentiate between activities by a bank holding company or a subsidiary
thereof and activities commenced by acquisition of a going concern. With respect
to non-banking activities, the Federal Reserve Board has by regulation
determined that several non-banking activities are closely related to banking
within the meaning of the Holding Company Act and thus may be performed by bank
holding companies.
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. There are various
legal limitations, including Sections 23A and 23B of the Federal Reserve Act,
which govern the extent to which a bank subsidiary may finance or otherwise
supply funds to its holding company or its
Center Bancorp Inc., Form 10-K 4
holding company's non-bank subsidiaries. Under federal law, no bank subsidiary
may, subject to certain limited exceptions, make loans or extensions of credit
to, or investments in the securities of, its parent or the non-bank subsidiaries
of its parent (other than direct subsidiaries of such bank which are not
financial subsidiaries) or take their securities as collateral for loans to any
borrower. Each bank subsidiary is also subject to collateral security
requirements for any loans or extensions of credit permitted by such exceptions.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
among other things 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",
and "undercapitalized", "significantly undercapitalized and critically
undercapitalized".
Under regulations adopted pursuant to 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. An institution may be deemed to be in a
lower capitalization category if it receives an unsatisfactory examination
rating.
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.
Insurance Funds
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. The Corporation had approximately $572.2 million
of deposits at December 31, 2003, with respect to which it pays SAIF FICO
Assessments.
The Gramm-Leach-Bliley Financial Modernization Act Of 1999
The Gramm-Leach-Bliley Financial Modernization Act of 1999 became effective in
early 2000. The Modernization Act:
o allows bank holding companies meeting management, capital, and Community
Reinvestment Act standards to engage in a substantially broader range of
nonbanking activities than previously was permissible, including insurance
underwriting and making merchant banking investments in commercial and
financial companies; if a bank holding company elects to become a financial
holding company, it files a certification, effective in 30 days, and
thereafter may engage in certain financial activities without further
approvals;
o allows insurers and other financial services companies to acquire banks;
Center Bancorp Inc., Form 10-K 5
o removes various restrictions that previously applied to bank holding
company ownership of securities firms and mutual fund advisory companies;
and
o establishes the overall regulatory structure applicable to bank holding
companies that also engage in insurance and securities operations.
The Modernization Act also modified other financial laws, including laws related
to financial privacy and community reinvestment.
Community Reinvestment
Under the Community Reinvestment Act ("CRA"), as implemented by OCC regulations,
a national bank has a continuing and affirmative obligation consistent with its
safe and sound operation to help meet the credit needs of its entire community,
including low and moderate income neighborhoods. The CRA does not establish
specific lending requirements or programs for financial institutions nor does it
limit an institution's discretion to develop the types of products and services
that it believes are best suited to its particular community, consistent with
the CRA. The CRA requires the OCC, in connection with its examination of a
national bank; to assess the bank's record of meeting the credit needs of its
community and to take such record into account in its evaluation of certain
applications by such association.
Recent Legislation
In response to the events of September 11, 2001, the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (the "USA PATRIOT Act"), was signed into law on October
26, 2001. The USA PATRIOT Act gives the federal government new powers to address
terrorist threats through enhanced domestic security measures, expanded
surveillance powers, increased information sharing, and broadened anti-money
laundering requirements. By way of amendments to the Bank Secrecy Act, Title III
of the USA PATRIOT Act encourages information sharing among bank regulatory
agencies and law enforcement bodies. Further, certain provisions of Title III
impose affirmative obligations on a broad range of financial institutions,
including banks, thrifts, brokers, dealers, credit unions, money transfer agents
and parties registered under the Commodity Exchange Act.
Among other requirements, Title III of the USA PATRIOT Act imposes the following
requirements with respect to financial institutions:
o All financial institutions must establish anti-money laundering programs
that include, at minimum: (i) internal policies, procedures, and controls;
(ii) specific designation of an anti-money laundering compliance officer;
(iii) ongoing employee training programs; and (iv) an independent audit
function to test the anti-money laundering program.
o The Secretary of the Department of Treasury, in conjunction with other bank
regulators, was authorized to issue regulations that provide for minimum
standards with respect to customer identification at the time new accounts
are opened.
o Financial institutions that establish, maintain, administer, or manage
private banking accounts or correspondence accounts in the United States
for non-United States persons or their representatives (including foreign
individuals visiting the United States) are required to establish
appropriate, specific and, where necessary, enhanced due diligence
policies, procedures, and controls designed to detect and report money
laundering.
o Financial institutions are prohibited from establishing, maintaining,
administering or managing correspondent accounts for foreign shell banks
(foreign banks that do not have a physical presence in any country), and
will be subject to certain record keeping obligations with respect to
correspondent accounts of foreign banks.
o Bank regulators are directed to consider a holding company's effectiveness
in combating money laundering when ruling on Federal Reserve Act and Bank
Merger Act applications.
The federal banking agencies have begun to propose and implement regulations
pursuant to the USA PATRIOT Act. These proposed and interim regulations would
require financial institutions to adopt the policies and procedures contemplated
by the USA PATRIOT Act.
Center Bancorp Inc., Form 10-K 6
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002,
or the SOA. The stated goals of the SOA are to increase corporate
responsibility, to provide for enhanced penalties for accounting and auditing
improprieties at publicly traded companies and to protect investors by improving
the accuracy and reliability of corporate disclosures pursuant to the securities
laws.
The SOA generally applies to all companies, both U.S. and non - U.S., that file
or are required to file periodic reports with the Securities and Exchange
Commission (the "SEC") under the Securities Exchange Act of 1934, or Exchange
Act. Given the extensive SEC role in implementing rules relating to many of the
SOA's new requirements, the final scope of many of these requirements remains to
be determined.
The SOA includes very specific additional disclosure requirements and new
corporate governance rules, requires the SEC and securities exchanges to adopt
extensive additional disclosure, corporate governance and other related rules
and mandates further studies of certain issues by the SEC. The SOA addresses,
among other matters:
o Audit committees for all reporting companies;
o Certification of financial statements by the chief executive officer and
the chief financial officer;
o The forfeiture of bonuses or other incentive-based compensation and profits
from the sale of an issuer's securities by directors and senior officers in
the twelve month period following initial publication of any financial
statements that later require restatement;
o A prohibition on insider trading during pension plan black out periods;
o Disclosure of off-balance sheet transactions;
o A prohibition on personal loans to directors and officers;
o Expedited filing requirements for Forms 4's;
o Disclosure of a code of ethics and filing a Form 8-K for a change in or
waiver of such code;
o "Real time" filing of periodic reports;
o The formation of a public accounting oversight board;
o Auditor independence; and
o Various increased criminal penalties for violations of securities laws.
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 unless, after the payment of such dividends, capital would be
unimpaired and remaining surplus would equal 100% of capital. 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
Center Bancorp Inc., Form 10-K 7
loans and 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 14 of the Notes to the Corporation's Consolidated Financial Statements
included in the 2003 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
29 through 31 of the 2003 Annual Report to Shareholders (the 2003 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 2003 Annual Report incorporated herein by reference.
I. Investment Portfolio
a) For information regarding the carrying value of the investment
portfolio, see pages 48-50 of the 2003 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, 2003, on a contractual maturity basis.
Other
Securities
Federal
Obligations of Obligations Reserve
US Treasury & of States & & Federal
Government Political Home Loan
(Dollars in Thousands) Agencies Subdivisions Bank Stock Total
- ---------------------------------------------------------------------------------------------
Due in 1 year or less
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Amortized Cost $400 $3,400 $68,483 $72,283
Market Value 400 3,483 68,567 72,450
Weighted Average Yield 0.93% 6.27% 2.15% 2.34%
Due after one year through five years
Amortized Cost $13,230 $1,689 $31,660 $46,579
Market Value 13,358 1,781 33,613 48,752
Weighted Average Yield 4.05% 6.18% 5.96% 5.43%
Due after five years through ten years
Amortized Cost $54,532 $37,727 $8,550 $100,809
Market Value 54,690 38,455 8,968 102,113
Weighted Average Yield 4.11% 5.50% 5.55% 4.75%
Due after ten years
Amortized Cost $201,644 $56,695 $31,078 $289,417
Market Value 200,831 56,443 34,586 291,860
Weighted Average Yield 4.00% 6.05% 7.50% 4.78%
No Maturity
Amortized Cost $0 $0 $8,899 $8,899
Market Value 0 0 8,899 8,899
Weighted Average Yield 0.00% 0.00% 2.53% 2.53%
- ---------------------------------------------------------------------------------------------
Total
Amortized Cost $269,806 $99,511 $148,670 $517,987
Market Value 269,279 100,162 154,633 524,074
Weighted Average Yield 4.02% 5.77% 4.15% 4.41%
=============================================================================================
c) Securities of a single issuer exceeding 10 percent of stockholders'
equity amounted to $6.0 million with a market value of $5.9 million at
December 31, 2003 and are listed in the table below:
Center Bancorp Inc., Form 10-K 8
Aggregate
(Dollars in Thousands) Book Value Market Value
- ---------------------------------------------------------------------------
Issuer
Altoona PA Area School District 5,990 5,917
- ---------------------------------------------------------------------------
Total $ 5,990 $ 5,917
===========================================================================
The securities listed in the table above are rated investment grade by Moody's
and/or Standard and Poors and conform to the Corporation's investment policy
guidelines.
For other information regarding the Corporation's investment securities
portfolio, see Pages 20, 21, 31, 37 and 47-50 of the 2003 Annual Report.
II. Loan Portfolio
The following table presents information regarding the components of the
Corporation's loan portfolio on the dates indicated.
Years Ended December 31
-------------------------------------------------------------
(Dollars in thousands) 2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------
Commercial $127,327 $104,481 $89,772 $75,280 $61,861
Mortgage Real Estate Residential 214,482 119,674 116,335 117,762 99,801
Installment 7,736 4,896 5,179 5,907 7,669
- -------------------------------------------------------------------------------------------------
Total 349,525 229,051 211,286 198,949 169,331
Less:
Unearned discount 0 0 0 0 242
Allowance for loan losses 3,002 2,498 2,191 1,655 1,423
- -------------------------------------------------------------------------------------------------
Net total $346,523 $226,553 $209,095 $197,294 $167,666
=================================================================================================
Since 1999, demand for the Bank's commercial loan, commercial real estate and
real estate mortgage products improved gradually. In 2003 the increase in
Residential Mortgage Loans is attributable to the low interest environment that
spurred increased refinancing activity in the market. Business development and
marketing programs coupled with positive market trends supported the growth in
2000, 2001, 2002 and 2003.
The maturities of commercial loans at December 31, 2003 are listed below.
At December 31, 2003, Maturing
-------------------------------------------------------------
After One Year
In One Year Through After
(Dollars in thousands) Or Less Five Years Five Years Total
- -------------------------------------------------------------------------------------------
Construction loans $7,016 $0 $0 $7,016
Commercial real estate loans 3,489 4,682 83,277 91,448
Commercial loans 12,749 8,339 7,775 28,863
-------------------------------------------------------------
Total 23,254 13,021 91,052 127,327
Loans with:
Fixed rates 83 1,925 19,059 21,067
Variable rates 23,171 11,096 71,993 106,260
-------------------------------------------------------------
Total $23,254 $13,021 $91,052 $127,327
- -------------------------------------------------------------------------------------------
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 2003, average total
loans comprised 34.1 percent of average interest-earning assets. The Corporation
has experienced a compound growth rate in average loans since 2000 of 10.45
percent. Average loans amounted to $276.5 million in 2003 compared with $222.8
million in 2002 and $206.0 million in 2001. 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
Center Bancorp Inc., Form 10-K 9
growth has been generated through business development efforts and entry,
through branching, into new markets.
Average commercial loans increased approximately $10.2 million or 24.8 percent
in 2003 as compared with 2002. The Corporation seeks to create growth in
commercial lending by offering customized products, and competitive pricing and
by 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 $174.0 million in 2003, increased
$25.0 million or 16.8 percent as compared with average mortgage loans of $149.0
million in 2002 (which reflected a 9.0 percent increase over 2001). 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 5 year Treasury Notes, and the Federal Home Loan Bank of New York 5-year
advance rate, most of these loans and residential mortgage loans have fixed
interest rates.
Residential loans increased steadily in 1999 and in 2000. During 2001 growth
increased as rates stabilized and borrower activity remained strong. During 2002
and 2003 growth was affected by refinancing activity, competition among lenders
and falling interest rates. In 2003, this was mitigated to some extent, by the
promotion of specific products including a 10-year amortizing mortgage, 7/1
adjustable rate mortgage and home equity lines of credit, which resulted in
increased volumes in these categories of loans.
Average construction loans and other temporary mortgage financing increased from
2002 to 2003 by $694,000 to $10,247,000. Such loans increased by $2,079,000 from
2001 to 2002. The change in construction and other temporary mortgage lending
has been generated by the market activity of the Corporation's customers
engaging in residential and commercial development throughout New Jersey.
Interest rates on such mortgages are generally tied to key 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 $6.3 million in 2003, as compared with $4.9 million in 2002 and $5.2
million in 2001. The increase in loans to individuals during 2003 was due to
increases in personal loans, and offset in part by declines in automobile loans,
as a result of aggressive marketing campaigns by automobile manufacturers.
Home equity loans, as well as traditional secondary mortgage loans, have become
popular with consumers due to their tax advantages over other forms of consumer
borrowing. Home equity loans and secondary mortgages averaged $50.1 million in
2003, an increase of $19.0 million or 61.1 percent as compared with average home
equity loans of $31.1 million in 2002. 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. The increase in home
equity loans outstanding during 2003 was due in part to the Bank's promotion of
a home equity line that included a below market teaser rate for six months with
a subsequent reset to prime rate floating minus 50 basis points for the life of
the home equity line of credit. The decrease in home equity loans outstanding
during 2002 was attributable to the lower interest environment, which resulted
in substantial refinancing activity of fixed rate equity loans.
At December 31, 2003, the Corporation had total lending commitments outstanding
of $42.3 million, of which approximately 27.3 percent were for commercial loans,
commercial real estate loans and construction loans.
Credit risks are an inherent part of the lending function. The Corporation has
set in place specific policies and guidelines to limit credit risks. The
following describes the Corporation's credit management policy and describes
certain risk elements in its earning assets portfolio.
Center Bancorp Inc., Form 10-K 10
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.
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 **
- --------------------------------------------------------------------------------
* 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 support
provided by other credit factors. The President or Board of Directors must
approve such exceptions. The Bank must identify these loans, 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.
Center Bancorp Inc., Form 10-K 11
Credit quality is monitored through an internal review process, which includes a
credit risk rating System that facilitates the early detection of problem loans.
Under this grading system all commercial loans and commercial mortgage loans are
graded in accordance with the risk characteristics inherent in each loan.
Problem loans include "Watch List" loans, non-accrual loans, and loans which
conform to the regulatory definitions of criticized and classified loans.
A Problem Asset Report is prepared monthly and is examined by both the senior
management of the Bank and the Corporation's Board of Directors. This review is
designed to enable management to take such actions as are considered necessary
to identify and remedy problems on a timely basis.
The Bank's internal loan review process is complimented by an independent loan
review conducted on an annual basis, under the mandate and approval of the
Corporation's Board of Directors. In addition, regularly scheduled audits
performed by the Bank's internal audit function are designed to ensure the
integrity of the credit and risk monitoring systems currently in place.
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, OREO. Non-performing loans include
non-accrual loans and troubled debt restructuring. 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, 2003 and 2002, the Corporation did not have any other real estate
owned (OREO).
Loans accounted for on a non-accrual basis at December 31, 2003, 2002, 2001,
2000, and 1999 are as follows:
(Dollars in thousands) 2003 2002 2001 2000 1999
- --------------------------------------------------------------------------------
Mortgage Real Estate $0 $0 $0 $246 $269
Commercial $1 $0 $84 $0 $0
Installment $25 $229 $25 $0 $23
- --------------------------------------------------------------------------------
Total non-accrual loans $26 $229 $109 $246 $292
- --------------------------------------------------------------------------------
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) 2003 2002 2001 2000 1999
- --------------------------------------------------------------------------------
Installment $0 $0 8 2 0
- --------------------------------------------------------------------------------
Total $0 $0 $8 $2 $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, 2003 that have not been identified and
classified. Classified loans, consisting of other assets especially mentioned
and substandard loans, amounted to $151,000 and $358,000, respectively, at
December 31, 2003. At December 31, 2002 these loans amounted to $158,000 and
$175,000, respectively. The Corporation has no foreign loans.
Center Bancorp Inc., Form 10-K 12
As of December 31, 2003, $8.7 million of the commercial loan portfolio or 18.0
percent of $48.3 million, represented outstanding working capital loans to
various real estate developers. All but $3.7 million of these loans are secured
by mortgages on land and on buildings under construction.
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 9 of this report.
Commercial Real Estate Mortgage Installment Unallocated
------------ -------------------- ----------- -----------
Loans to Loans to Loans to
Amount Total Loans Amount Total Loans Amount Total Loans Amount
(Dollars in thousands) % % % Total
- -------------------------------------------------------------------------------------------------------------
2003 $1,763 38.6 $986 59.2 $80 2.2 $173 $3,002
2002 $1,846 45.8 $494 52.3 $46 1.9 $112 $2,498
2001 $877 42.5 $876 55.1 $297 2.4 $141 $2,191
2000 $530 37.8 $894 59.2 $191 3.0 $40 $1,655
1999 $718 36.6 $492 58.9 $155 4.5 $58 $1,423
Information regarding charge-offs and recoveries is incorporated by reference to
page 24 of the 2003 Annual Report.
IV. Deposits
Information regarding average amounts/rates of deposits is incorporated by
reference to pages 20 and 37 of the 2003 Annual Report. Information regarding
the amount of time certificates of deposit of $100,000 or more is presented on
pages 31 and 38 of the 2003 Annual Report.
V. Return on Equity and Assets
Information regarding the return on average assets, return on average equity,
the equity to assets ratio and dividend payout ratio is incorporated by
reference to pages 1 and 15 of the 2003 Annual Report. Return on average assets
was 0.74 percent, 1.07 percent and 0.99 percent for the years ended December 31,
2003, 2002, and 2001, respectively. The dividend payout ratio was 46.9 percent,
34.3 percent, and 38.9 percent for the years ended December 31, 2003, 2002, and
2001, respectively. Return on tangible average shareholders equity was 12.9
percent in 2003, compared with 17.3 percent in 2002 and 14.9 percent for 2001.
VI. Short-term Borrowings
Information regarding the amount outstanding of short-term borrowings is
incorporated by reference to pages 33 and 34 of the 2003 Annual Report.
Center Bancorp Inc., Form 10-K 13
ITEM 2-Properties
The Bank's operations are located at five sites in Union Township, one in
Springfield Township, one in Berkeley Heights, one in Vauxhall and one in
Summit, Union County, New Jersey. The Bank also has one site in Madison, and two
sites in Morristown, Morris County, New Jersey. 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. On October 3, 2003 the Bank purchased
a 19,555 square foot office facility on Springfield Road in Union New Jersey,
that will serve as the Bank's New Operations and Data Center.
Six of the locations are owned by the Bank and six of the locations are leased
by the Bank. The lease of the Five Points Branch located at 356 Chestnut Street,
Union, New Jersey expires November 30, 2007 and is subject to renewal at the
Bank's option. The lease of the Career Center Branch located in Union High
School which expired on March 30, 2002, was renegotiated during 2003, with the
Union Township Board of Education and expires October 31, 2008 with the township
Board of Education. 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 January 31, 2013 and is subject to renewal at the
Bank's option. The lease of the Morristown office located at 86 South Street,
Suite 2A, Morristown, New Jersey expires February 28, 2008 and is subject to
renewal at the Bank's option. The lease of the Summit branch located at 392
Springfield Avenue, Summit, New Jersey expires March 31, 2009 and is subject to
renewal at the Bank's option. (See page 67 of the 2003 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 Center Office
facility.) The Bank has one off-site ATM at Union Hospital, 100 Galloping Hill
Road, Union, New Jersey and another offsite ATM at the New Jersey Transit Union
Train Station located on Green Lane in Union, 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. Such statement constitutes a forward-looking statement under the Private
Securities Litigation Reform Act of 1995. Actual results could differ materially
from this statement as a result of various factors, including the uncertainties
arising in proving facts within the judicial system.
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 2003.
Center Bancorp Inc., Form 10-K 14
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:
Name and Age Officer Since Business Experience
- ------------ ------------- -------------------
John J. Davis 1982 the Parent Corporation President & Chief Executive Officer
Age - 61 1977 the Bank of the Parent Corporation and the Bank
Anthony C. Weagley 1996 the Parent Corporation Vice President & Treasurer of the Parent Corporation
Age - 42 1985 the Bank Senior Vice President & Cashier (1996-Present),
Vice President & Cashier (1991 - 1996) and
Assistant Vice President (1991-1997) of the Bank
Donald Bennetti 1996 the Parent Corporation: Vice President of the Parent Corporation
Age - 60 1990 the Bank Senior Vice President (1997-Present)
Vice President (1993-1997)
Assistant Vice President (1992-1993) and
Assistant Cashier (1990-1992) of the Bank
John F. McGowan 1998 the Parent Corporation Vice President of the Parent Corporation
Age -57 1996 the Bank Senior Vice President (1998-Present) and
Vice President (1996-1998) of the Bank
Lori A. Wunder 1998 the Parent Corporation Vice President of the Parent Corporation
Age - 40 1995 the Bank Senior Vice President (1998-Present)
Vice President (1997-1998)
Assistant Vice President (1996-1997) and
Assistant Cashier (1995-1996) of the Bank
Julie D'Aloia 1999 the Parent Corporation Vice President & Secretary (Present)
Age - 42 Corporate Secretary (1998-2000) of the Corporation
1998 the Bank Senior Vice President & Secretary (2001)
Assistant-To-The-President of the Bank &
Corporate Secretary(1995-1998) of the Bank
William E. Arnold 2000 the Parent Corporation Vice President of the Parent Corporation
Age - 52 2000 the Bank Senior Vice President & Senior Loan Officer (2000-Present)
Metropolitan State bank
Executive V. P. and Senior Company Officer (1996-2000)
Mark S. Cardone 2001 the Parent Corporation Vice President of the Parent Corporation
Age - 40 2001 the Bank Senior Vice President & Branch Administrator
(2001 - Present)
Vice President Fleet Bank (1996-2001)
Center Bancorp Inc., Form 10-K 15
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 pages 34-36 of the
2003 Annual Report to shareholders (the "2003 Annual Report") and is
incorporated herein by reference. As of December 31, 2003 there were 527 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
2003 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 through 37
of the 2003 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 29 through 32
of the 2003 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 38 through 41
of the 2003 Annual Report and is incorporated herein by reference.
ITEM 9-Changes In and Disagreements With Accountants on
Accounting and Financial Disclosures
None
ITEM 9A-Controls and Procedures
(A) Disclosure controls and procedures. As of the end of the Corporation's most
recently completed fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) covered by this report, the Corporation carried out an
evaluation, with the participation of the Corporation 's management, including
the Corporation's Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the Corporation 's disclosure controls and procedures pursuant
to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the
Corporation 's Chief Executive Officer and Chief Financial Officer concluded
that the Corporation 's disclosure controls and procedures are effective in
ensuring that information required to be disclosed by the Corporation in the
reports that it files or submits under the Securities Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
SEC's rules and forms.
(B) Changes in internal controls over financial reporting. There have been no
changes in the Corporation's internal controls over financial reporting that
occurred during the Corporation's last fiscal quarter to which this report
relates that have materially affected, or are reasonably likely to materially
affect, the Corporation 's internal control over financial reporting.
Center Bancorp Inc., Form 10-K 16
Part III
ITEM 10-Directors of the Registrant
Except as set forth in the next paragraph 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 2003 Annual Meeting of
Stockholders.
The Corporation maintains a code of ethics applicable to the Corporation's chief
executive officer, senior financial professional personnel( including the
Corporation's chief financial officer, principal accounting officer or
controller and persons performing similar transactions) all other executive
officers and all directors. A copy of this code of ethics is set forth in
Exhibit 14.1 to this Annual Report. The Corporation also maintains a code of
conduct applicable to all other employees. A copy of this code of conduct is set
forth in Exhibit 99.1 to this Annual Report.
ITEM 11-Executive Compensation
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 2004 Annual Meeting of Stockholders.
ITEM 12-Security Ownership of Certain Beneficial Owners and Management
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 2004 Annual Meeting of Stockholders.
ITEM 13-Certain Relationships and Related Transactions
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 2004 Annual Meeting of Stockholders.
ITEM 14-Principal Accountant Fees and Services
The Corporation responds to this item by incorporation herein by reference the
material response to such item in the Corporation's definitive proxy statement
for its 2004 Annual Meeting of Stockholders.
Center Bancorp Inc., Form 10-K 17
Part IV
ITEM 15-Exhibits, Financial Statement Schedules, and Reports on Form 8 -K
Pages in 2003
Annual Report
-------------
Consolidated Statements of Condition at December 31, 2003, and 2002 38
Consolidated Statements of Income for the years ended
December 31, 2003, 2002 and 2001 39
Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 2002, 2001 and 2000 40
Consolidated Statements of Cash Flows for the years ended
December 31, 2003, 2002 and 2001 41
Notes to Consolidated Financial Statements 42-63
Independent Auditors' Report 64
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 is incorporated by
reference to exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2002.
3.2 By- Laws of the Registrant is incorporated by reference to exhibit 3.2 to
the Registrant's Annual Report on Form 10K for the year ended December 31,
1998.
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
10.8 Employment agreement between the Registrant and Lori A. Wunder, dated as
of January 1, 1999 is incorporated by reference to exhibit 10.8 to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 2001.
10.9 Employment agreement between the Registrant and William E. Arnold, dated
as of January 1, 2002 is incorporated by reference to exhibit 10.9 of the
Registrant's Annual Report on Form 10-K for the year ended December 31, 2001.
Center Bancorp Inc., Form 10-K 18
10.10 Directors' Retirement Plan is incorporated by reference to exhibit
10.10 to the Registrant's Annual Report on Form 10K for the year ended
December 31, 1998.
10.11 Center Bancorp, Inc. 1999 Stock Incentive Plan is incorporated by
reference to exhibit 10.11 to the Registrant's Annual Report on Form 10K for
the year ended December 31, 1999.
10.12 Indenture between Registrant and State Street Bank and Trust Company as
debenture trustee for floating rate junior subordinated deferrable interest
debentures due 2031, is incorporated by reference to exhibit 10.13 of the
Registrant's Annual Report on Form 10-K for the year ended December 31, 2001.
10.13 Registrants amended and restated declaration of Trust of Center Bancorp
Statutory Trust 1, dated December 18, 2001 is incorporated by reference to
Exhibit 10.13 of the Registrant's Annual Report on Form 10-K for the year
ended December 31, 2001.
10.14 Guarantee agreement by Registrant and between Center Bancorp, Inc. and
State Street Bank and Trust Company of Connecticut, National Association,
dated as of December 18, 2001 is incorporated by reference to Exhibit 10.15
of the Registrant's Annual Report on Form 10-K for the year ended December
31, 2001.
10.15 Registrant's Placement Agreement dated December 12, 2003 with Sandler
O'Neill & Partners, L.P. to issue and sell $5 million aggregate liquidation
amount of floating rate MMCapS(SM) Securities.
10.16 Indenture dated as of December 19, 2003, between the registrant and
Wilmington Trust Company relating to $5.0 million aggregate principal amount
of floating rate debentures.
10.17 Amended and restated Declaration of Trust of Center Bancorp Statutory
Trust II, dated as of December 19, 2003
10.18 Guarantee agreement between Registrant and Wilmington Trust Company
dated as of December 19, 2003.
10.19 Senior Officer Protection 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 Parts of Registrant's Annual Report to Shareholders for the year ended
December 31, 2003 are incorporated by reference.
14.1 Code of Ethics
21.1 Subsidiaries of the Registrant
23.1 Consent of KPMG LLP
32.1 Personal certification the chief executive officer pursuant to section
302 of the Sarbanes-Oxley Act of 2002
32.2 Personal certification the chief financial officer pursuant to section
302 of the Sarbanes-Oxley Act of 2002
33.1 Personal certification the chief financial officer pursuant to section
906 of the Sarbanes-Oxley Act of 2002
33.2 Personal certification the chief financial officer pursuant to section
906 of the Sarbanes-Oxley Act of 2002
99.1 Code of conduct
Center Bancorp Inc., Form 10-K 19
B. Reports on Form 8-K
Current Report dated October 23, 2003, submitted to the SEC, disclosing (under
Items 7 and 12) a press release regarding third quarter earnings.
Current Report dated December 22, 2003, filed with the SEC, disclosing (under
Items 5 and 7) a press release regarding the offering of the trust preferred
securities.
Center Bancorp Inc., Form 10-K 20
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 15, 2004
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/ ALEXANDER BOL /s/ HUGO BARTH, III
- ------------------------------------ -------------------------------------
Alexander A. Bol Hugo Barth, III
Director and Chairman of the Board Director
/s/ ROBERT L. BISCHOFF /s/ BRENDA CURTIS
- ------------------------------------ -------------------------------------
Robert L. Bischoff Brenda Curtis
Director Director
/s/ JOHN J. DAVIS /s/ DONALD G. KEIN
- ------------------------------------ -------------------------------------
John J. Davis Donald G. Kein
President and Chief Executive Officer Director
and Director
/s/ JAMES J. KENNEDY /s/ HERBERT SCHILLER
- ------------------------------------ -------------------------------------
James J. Kennedy Herbert Schiller
Director Director
/s/ PAUL LOMAKIN, JR. /s/ NORMAN F. SCHROEDER
- ------------------------------------ -------------------------------------
Paul Lomakin, Jr. Norman F. Schroeder
Director Director
/s/ WILLIAM THOMPSON /s/ ANTHONY C. WEAGLEY
- ------------------------------------ -------------------------------------
William Thompson Anthony C. Weagley
Director Vice President & Treasurer (Chief
Accounting and Financial Officer)
/s/ EUGENE V. MALINOWSKI
- ------------------------------------
Eugene V. Malinowski
Director
Center Bancorp Inc., Form 10-K 21