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Peapack-Gladstone Financial Corporation Reports Second Quarter Results of Operations
BEDMINSTER, N.J.-(BUSINESS WIRE) - August 2, 2010 - Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market:PGC) (the Corporation) recorded net income of $1.8 million and diluted earnings per share of $0.16, for the quarter ended June 30, 2010. This compared to diluted earnings per share of $0.17 for the quarter ended June 30, 2009 and diluted earnings per share of $0.16 for the quarter ended March 31, 2010.
When compared to the quarter ended June 30, 2009, the June 2010 quarter included increased net interest income and increased income from the PGB Trust and Investment business, the effects of which were offset by reduced gains from securities sales and an increased provision for loan losses.
Frank A. Kissel, Chairman and CEO, stated, “We are pleased to continue to report positive earnings and growth in capital during these challenging times. Our internal capital generation enabled us to redeem 25 percent of our preferred shares issued previously under the U.S. Treasury’s Capital Purchase Program (the “CPP”).this past January. Building capital internally to redeem the Treasury’s CPP investment over time, while remaining well capitalized, continues to be an important business objective of the Corporation.”
The Corporation’s provision for loan losses for the quarter ended June 30, 2010 was $2.7 million. While this was lower than the highest recent quarterly level (which was in the fourth quarter of 2009), it was higher than the $2.0 million provision in the second quarter of 2009. Mr. Kissel noted, “The level of the June 2010 quarterly provision was due principally to one commercial customer relationship with three construction loans being placed on non-accrual status. We continue to be extremely diligent and proactive in managing our loan portfolio and placed this entire relationship on non-accrual status and charged-off $2.4 million related to this relationship during the quarter, leaving a balance after charge-off of $6.7 million.”
Mr. Kissel went on to say “We continue to be pleased with the progress we have made throughout 2009 and into 2010 in resolving certain problem assets.”
Net Interest Income and Margins
In the second quarter of 2010, net interest income, on a fully tax-equivalent basis, was $12.7 million, reflecting an increase from $12.4 million for the second quarter of 2009, due principally to growth in the investment portfolio funded by growth in lower costing core deposits.
On a fully tax-equivalent basis, the net interest margin was 3.64 percent for the June 2010 quarter compared to 3.71 percent for the June 2009 quarter. In comparing the June 2010 quarter to the same quarter last year, the effect of growth in lower yielding, but less risky and shorter duration cash deposits and investment securities coupled with declining loan balances, contributed to a reduction in margin. This effect was partially offset by the growth of lower cost core deposits and the intentional run-off of higher cost certificates of deposit.
Mr. Kissel stated, “Throughout 2009 and into 2010, we have built substantial liquidity into our balance sheet, so as to be better positioned in the future when we expect loan demand will increase and interest rates will rise.”
Loans
Average loans totaled $964.1 million for the second quarter of 2010 as compared to $1.03 billion for the same 2009 quarter, reflecting a decrease of $68.6 million or 6.6 percent. The average residential mortgage loan portfolio declined $53.2 million or 10.9 percent to $436.0 million in the second quarter of 2010 from the same quarter of 2009. The Corporation has opted to sell its longer-term, fixed-rate loan production as an interest rate risk management strategy in the lower rate environment, and loan pay-downs have outpaced the originations retained in portfolio. The average commercial portfolio declined $18.2 million or 3.8 percent from the second quarter of 2009 to $462.5 million for the same quarter in 2010, as loan demand and quality borrowers on the commercial front have remained scarce.
The average home equity line portfolio rose $6.5 million or 18.9 percent to $40.8 million for the second quarter of 2010 compared to the same quarter in 2009. The Corporation focused on the origination of these adjustable-rate loans. Loan originations outpaced principal paydowns over the year.
Deposits
Average total deposits (interest-bearing and noninterest-bearing) grew $46.9 million or 3.7 percent from $1.28 billion in the second quarter of 2009 to $1.33 billion in the second quarter of 2010. Average noninterest-bearing checking grew $16.6 million or 8.4 percent to $214.2 million in the second quarter of 2010 from the second quarter of 2009. Average interest-bearing checking balances totaled $254.0 million in the second quarter of 2010, rising $60.8 million or 31.4 percent from the same quarter in 2009. Checking growth is attributable to the Corporation’s focus on core deposit growth, particularly checking, coupled with growth in our Ultimate Checking product, which provides customers with a low-cost checking product and a higher yield for larger balances.
Average money market accounts also rose, from $414.1 million in the second quarter of 2009 to $510.6 million for the same quarter of 2010, an increase of $96.5 million or 23.3 percent. The Corporation’s focus on core deposit growth, as well as certain customers tending to “park” funds in money market accounts in lower interest rate environments accounted for this growth.
Average certificates of deposit declined from $406.5 million in the June 2009 quarter to $274.2 million in the June 2010 quarter, a decline of $132.3 million or 32.5 percent. The Corporation allowed higher costing certificates of deposit to run-off and replaced those funds with lower costing, more stable core deposits.
Mr. Kissel commented, “Our reduced reliance on certificates of deposit and our core deposit growth continues to strengthen customer relationships, reduce the overall cost of funds, contribute to profitability and enhance franchise value.”
PGB Trust and Investments
PGB Trust and Investments generated $2.7 million in fee income in the second quarter of 2010, compared to $2.5 million in the second quarter of 2009, reflecting an increase of 5.3 percent. The market value of the assets under administration of the Trust Division increased from $1.70 billion at June 30, 2009 to $1.83 billion at June 30, 2010.
Craig C. Spengeman, President of PGB Trust & Investments commented, “We have a seen a nice increase in our managed asset business and related recurring fee income. Further, we are pleased with the recovery and performance of our assets under administration throughout 2009 and into 2010. The financial markets continue to experience extreme volatility as we continue to manage through the most challenging period since the Great Depression. The recovery of the value of assets under administration and our performance reflect the sound financial management of our trust and investment professionals. Further, we continue to book new business as prospective clients continue to seek our professional advice during these challenging times.”
Other Income
Other income, excluding trust fee income and net security gains, totaled $1.1 million in each of the quarters ended June 30, 2010 and 2009. Fee income earned on the sale of mortgage loans at origination decreased, as there were less mortgage originations in 2010. This effect was partially offset by a greater targeted sale price for originations in 2010. The 2010 June quarter included increased income from overdraft and NSF charges, when compared to the 2009 June quarter.
Operating Expenses
The Corporation’s total operating expenses were $11.0 million in the June 2010 quarter compared to $11.2 million in the June 2009 quarter. The decrease for 2010, when compared to the year ago quarter, was principally due to decreased FDIC insurance expense, due to an industry wide special FDIC insurance premium assessed in the June 2009 quarter. This decrease in FDIC insurance expense in the 2010 quarter was partially offset by expenses associated with a new Trust office opened in June 2009, a new branch office opened in September 2009, a new corporate headquarters occupied in June 2010, and increased expenses related to problem loans and REO.
ASSET QUALITY
At June 30, 2010, nonperforming assets increased to $21.3 million or 1.44 percent of total assets as compared to $12.9 million or 0.87 percent of total assets at March 31, 2010. As noted earlier, one commercial customer consisting of three construction loans, was placed on non-accrual status in the quarter. That relationship totaled approximately $6.7 million, after charge-offs of $2.4 million in the quarter.
Mr. Kissel continued, “We have the capital and liquidity to lend to well-qualified individuals and businesses. However, we do remain committed to our conservative underwriting standards that have served us well.”
The allowance for loan losses was $13.9 million or 1.44 percent of total loans at June 30, 2010 as compared to $13.2 million or 1.34 percent of total loans at December 31, 2009.
CAPITAL
At June 30, 2010, the Corporation’s leverage ratio, tier 1 and total risk based capital ratios were 7.85 percent, 12.28 percent and 13.53 percent, respectively. All ratios include the $7.2 million reduction in regulatory capital due to the partial redemption in January 2010 of the preferred shares previously issued under the CPP. All are above the levels necessary to be considered well capitalized under applicable regulatory guidelines. Additionally, the Corporation’s common equity ratio (common equity to total assets) at June 30, 2010 is 6.45 percent compared to 6.09 percent at December 31, 2009.
As previously announced, on July 15, 2010 the Board of Directors declared a regular cash dividend of $0.05 per share payable on August 12, 2010 to shareholders of record on July 29, 2010.
ABOUT THE CORPORATION
Peapack-Gladstone Financial Corporation is a bank holding company with total assets of $1.48 billion as of June 30, 2010. Peapack-Gladstone Bank, its wholly owned community bank, was established in 1921, and has 23 branches in Somerset, Hunterdon, Morris, Middlesex and Union Counties. Its Trust Division, PGB Trust and Investments, operates at the Bank’s new corporate offices located at 500 Hills Drive in Bedminster and at four other locations in Clinton, Morristown and Summit, New Jersey and Bethlehem, Pennsylvania. To learn more about Peapack-Gladstone Financial Corporation and its services please visit our web site at www.pgbank.com or call 908-234-0700..
Contact:
Jeffery J. Carfora
Peapack-Gladstone Financial Corporation
T: 908-719-4308
- a continued or unexpected decline in the economy, in particular in our New Jersey market area;
- declines in value in our investment portfolio;
- higher than expected increases in our allowance for loan losses;
- higher than expected increases in loan losses or in the level of nonperforming loans;
- unexpected changes in interest rates;
- we may be unable to successfully grow our business;
- we may be unable to manage our growth;
- a continued or unexpected decline in real estate values within our market areas;
- legislative and regulatory actions (including the impact of the Dodd-Frank Wall Street and Consumer Protection Act and the Electronic Fund transfer Act and related regulations) subject us to additional regulatory oversight which may result in increased compliance costs;
- higher than expected FDIC insurance premiums;
- lack of liquidity to fund our various cash obligations;
- repurchase of our preferred shares issued under the Treasury’s Capital Purchase Program which will impact net income available to our common shareholders and our earnings per share;
- further offerings of our equity securities may result in dilution of our common stock;
- reduction in our lower-cost funding sources;
- changes in accounting policies or accounting standards;
- we may be unable to adapt to technological changes;
- our internal controls and procedures may not be adequate to prevent losses;
- claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters; and
- other unexpected material adverse changes in our operations or earnings.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
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