Center Bancorp (CNBC) to Establish $1.4M Q1 Loan Loss Provision

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April 7, 2009 4:34 PM EDT

Center Bancorp, Inc. (Nasdaq: CNBC) today announced that for Q109, it intends to establish a loan loss provision of $1.4 million, which covers a charge-off of approximately $900,000 in connection with a $4.9 million commercial real estate construction project of industrial warehouses, that it has recently downgraded to non-accrual status, in addition to an increase of $521,000 in the level of the allowance for loan losses. The loan amount was included as other "potential problem loans" in Center Bancorp's annual report on Form 10-K for the year ended December 31, 2008.

Anthony Weagley, President and CEO of Center Bancorp, Inc. stated: "While overall credit quality in the Bank's portfolio remains high, continued economic weakness has impacted several potential problem loans in the portfolio. Our aggressive efforts to address credit quality issues in this stressed economic environment continue. In light of the adverse economic circumstances, management has deemed it prudent to increase the level of the allowance for loan losses to 1.00% of total loans from the level of 0.92% at December 31, 2008. Historically, we have managed to resolve delinquency issues in a manner that protected the Corporation. With respect to the industrial warehouse project, we are currently working with the borrowers and the participating bank that is involved with the project, in an effort to sell or lease the remaining industrial warehouse units. Proceeds from the current units under contract, as well as the remaining units, will be used to make further principal reductions to our loan."

Mr. Weagley added: "At March 31, 2009, the Corporation expects non-performing assets to amount to $9.1 million (up from $4.7 million at December 31, 2008), including OREO of $4.4 million (as compared to $3.9 million at December 31, 2008). The increase in the OREO balance in the first quarter was related to the construction costs incurred in completing the project to date. The non-performing assets are principally comprised of two matters; the above noted construction project and the previously disclosed residential condominium project that was taken into OREO in the fourth quarter of 2008. The Corporation is near completion of that project and has elected to begin to rent the units. We expect the total provision and total net charge-offs for the first quarter of 2009 to be $1.4 million and $906,000, respectively.

Earnings for Q1 will be further impacted by the substantial increase in FDIC insurance assessments previously announced. FDIC insurance assessments amounted to $365,000 for Q109, for an increase of $345,000 or 1,725% over the comparable period in 2008. Center Bancorp estimates that the impact of the additional loan loss provision and the increased FDIC insurance assessment will be to reduce first quarter earnings per share by approximately $0.08 per fully diluted common share to approximately $0.05 per fully diluted common share, subject to final adjustments for the first quarter.