PGB News

Peapack-Gladstone Financial Corporation Reports Improved Results for the Third Quarter

BEDMINSTER, N.J. -- February 1, 2012 - For the year and quarter ended December 31, 2011, Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market:PGC) (the Corporation) recorded net income of $12.17 million (year) and $2.53 million (quarter), respectively, and diluted earnings per share of $1.25 (year) and $0.26 (quarter), respectively.

Income taxes for the year included a one-time state tax benefit of $2.99 million, or $0.34 per diluted share, related to the reversal of a previously recorded valuation allowance against net state tax benefits related to security impairment charges recorded in the year ended December 31, 2008. Circumstances and projections indicated that this deferred tax asset would be realized in future periods.

For comparative purposes, the Corporation believes that comparing earnings excluding the one-time state tax benefit provides a better analysis of earnings trends. The information discussed in the next paragraph is a non-GAAP measure.

Therefore, as detailed in the financial table on page 14, net income and diluted earnings per share for the year ended December 31, 2011, excluding the one-time state tax benefit, was $9.18 million and $0.91. This compared favorably to net income of $7.66 million and diluted earnings per share of $0.68 for the same full-year period last year.

Net income and diluted earnings per share for the quarter ended December 31, 2011 was $2.53 million and $0.26. This compared favorably to net income and diluted earnings per share of $1.88 million and $0.18 for the quarter ended December 31, 2010.

Frank A. Kissel, Chairman and CEO, stated, “This has been a solid year and quarter for us, as we continued to see growth in earnings. And, just after year end, we redeemed the final portion of the Treasury’s original investment under the Capital Purchase Program (CPP). When combining this redemption with our past two redemptions in 2010 and 2011, we repaid all of the original CPP investment completely from internally generated capital, without diluting existing shareholders. As I have said many times, this has always been our plan and we have been successful. It is quite an accomplishment.” Mr. Kissel also noted that the final redemption this year will save the Corporation approximately $720 thousand in dividend expense on an annual basis going forward.

The Corporation’s provision for loan losses for the quarter ended December 31, 2011 was $1.75 million, below the $2.85 million provision recorded in the December 2010 quarter, but slightly higher than the $1.50 million provision recorded in the September 2011 quarter.

Net Interest Income and Margin

Net interest income, on a fully tax-equivalent basis, was $12.79 million for the fourth quarter of 2011, up from $12.06 million for the third quarter of 2011, and up slightly from $12.65 million for the fourth quarter of 2010.

On a fully tax-equivalent basis, the net interest margin was 3.46 percent for the December 2011 quarter compared to 3.37 percent for the September 2011 quarter, and 3.62 percent for the December 2010 quarter.

In comparing the fourth quarter of 2011 to the third quarter of 2011, the December 2011 quarter benefitted from increased loans, reduced short term/overnight investments, and increased core deposits.

In comparing the 2011 quarter to the 2010 quarter, the lower Treasury yields and flatter Treasury yield curve environment, compressed asset yields more than the cost of funds. This effect was partially offset by the loan and core deposit growth noted above.
 

Loans

Average loans totaled $993 million for the fourth quarter of 2011 as compared to $943 million for the same 2010 quarter, reflecting an increase of $50 million.

The average residential mortgage loan portfolio for the fourth quarter of 2011 increased $38 million when compared to the same quarter of 2010. The increase is attributable to originations retained in the portfolio that have outpaced loan paydowns. During this period of lower interest rates, refinance activity has generally been robust. Many of these loans have been retained in portfolio. However, the Corporation does sell certain of its longer-term, fixed-rate loan production as a source of noninterest income and as part of its interest rate risk management strategy in the lower rate environment.

The average commercial mortgage and commercial loan portfolio for the fourth quarter of 2011 increased $31 million from the fourth quarter of 2010. The increase was attributable to commercial mortgage demand, principally from high quality borrowers looking to refinance multi-family and other commercial mortgages held by other institutions.

From December 31, 2010 to December 31, 2011, the total loan portfolio grew $106 million, or over 11 percent, to $1.04 billion. Mr. Kissel stated, “Contrary to reports that banks are not lending, we are and we have been successful in finding new solid credit opportunities. Loan originations increased to $321 million for the full year of 2011 up from $223 million for 2010. Included in the total were commercial mortgage/commercial loan originations of $103 million for 2011, up from $46 million for 2010.” Mr. Kissel went on to say, “We anticipate that we will benefit in the future from utilizing cash flows from our lower-yielding investment portfolio to fund our higher-yielding loan production. In doing so, we will continue to remain committed to our conservative underwriting standards.”

As of December 31, 2011, the residential first mortgage loan pipeline stood at $47 million and the commercial mortgage/commercial loan pipeline stood at $69 million, with many other lending opportunities in the discussion stage.

Deposits

Average total deposits (interest-bearing and noninterest-bearing) increased $82 million for the December 2011 quarter from  the same quarter last year.

Average noninterest-bearing checking balances grew $43 million for the fourth quarter of 2011 from the fourth quarter of 2010. Average interest-bearing checking balances for the quarter ended December 31, 2011 rose $61 million from the same quarter in 2010. Average savings accounts increased $12 million from the fourth quarter of 2010 to the fourth quarter of 2011.

Overall checking and savings growth is attributable to the Corporation’s relationship orientation. The Corporation has successfully focused on business and personal core deposit generation, particularly checking, establishing municipal relationships within its market territory and growth in deposits associated with its commercial mortgage/commercial loan growth.

Average certificates of deposit (CDs) declined $34 million for the December 2011 quarter from the December 2010 quarter. The Corporation allowed higher cost CDs to run-off, and replaced those funds with lower cost, more stable core deposits.

From December 31, 2010 to December 31, 2011, total deposits increased $92 million. The Corporation’s checking and savings balances increased $131 million, while higher costing CD balances declined by $31 million and money market balances declined by $8 million.

Mr. Kissel commented, “Our continued growth in checking and savings deposits has significantly reduced our cost of funds and increased our franchise value.”

PGB Trust & Investments

PGB Trust and Investments generated $2.58 million in fee income in the fourth quarter of 2011 and $10.69 million for the year ended December 31, 2011, reflecting nearly 8 percent growth over 2010’s full year. The market value of the assets under administration of the Trust Division stood at $1.96 billion at December 31, 2011.

Craig C. Spengeman, President of PGB Trust & Investments commented, “We are pleased with our success in guiding clients through the volatile equity markets and extended low interest rate environment during this challenging economic period.  As a result we continue to see growth in new relationships engaging our services and advice.  Recent key additions to staff were made to enhance our ability to both grow and service our valued clients generation to generation.”

Other Non Interest Income

Other noninterest income, exclusive of Trust fees, totaled $1.67 million in the December 2011 quarter compared to $1.04 million in the same quarter a year ago. The 2011 quarter included:

• Increased service charges and fees, principally due to increased core deposit accounts and activity from such account holders;
• Increased income from Bank Owned Life Insurance, due to improved crediting rates, as well as a benefit from life insurance proceeds paid to the Corporation in the quarter;
• Increased securities gains from the strategic sales of securities;
• Reduced broker fee income / gain on sale of loans, as more new loan originations were retained in portfolio in 2011 rather than sold; and
• A loss on sale of an OREO property.

The 2010 quarter included a $581 thousand other-than-temporary impairment charge on securities.  

Operating Expenses

The Corporation’s total operating expenses were $11.55 million in the December 2011 quarter compared to $10.69 million in the December 2010 quarter. The 2011 expenses included an $865 thousand write-down of a property in OREO and also included a $192 thousand prepayment penalty on the early payoff of a higher costing Federal Home Loan Bank borrowing. 

 The 2011 expense levels also include costs for the Corporation to keep up with the increased regulatory burden on financial institutions. The net effect of these new/additional costs were principally offset by various operational efficiencies and reduced FDIC insurance expense due to a regulatory change in the calculation of FDIC assessments. 

Asset Quality

At December 31, 2011, nonperforming loans totaled $19.2 million or 1.85 percent of loans compared to $22.9 million or 2.36 percent of loans at September 30, 2011 and $18.8 million or 2.01 percent of loans at December 31, 2010. Nonperforming assets at December 31, 2011 totaled $26.3 million or 1.65 percent of total assets, compared to $26.2 million or 1.66 percent of assets at September 30, 2011 and $22.8 million or 1.51 percent of assets at December 31, 2010. Mr. Kissel commented, “The Corporation is in active negotiations for sale of its largest commercial OREO property. We have been pleased with the overall progress in resolving problem assets, and we believe that progress will continue.” 

Capital/Dividends

At December 31, 2011, the Corporation’s leverage ratio, tier 1 and total risk based capital ratios were 7.73 percent, 12.51 percent and 13.76 percent, respectively. The Corporation’s ratios are all 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 December 31, 2011 was 6.81 percent of total assets of $1.60 billion, reflecting growth from 6.44 percent of total assets of $1.51 billion at December 31, 2010.

The Corporation’s preferred dividend and accretion for the December 2011 quarter was $220 thousand, flat to the September 2011 quarter, but down from $326 thousand for the December 2010 quarter. The reduction reflects the March 2011 $7.2 million partial redemption of the preferred shares previously issued under the Treasury’s CPP.

As previously announced, on January 19, 2012 the Board of Directors declared a regular cash dividend of $0.05 per share payable on February 16, 2012 to shareholders of record on February 2, 2012.
 

ABOUT THE CORPORATION

Peapack-Gladstone Financial Corporation is a bank holding company with total assets of $1.60 billion as of December 31, 2011. Peapack-Gladstone Bank, its wholly owned community bank, was established in 1921, and has 23 branches in Somerset, Hunterdon, Morris, Middlesex and Union Counties. The Bank’s 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 website 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;
• inability to successfully grow our business;
• inability 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 Reform and Consumer Protection Act and related regulations) subject us to additional regulatory oversight which may result in increased compliance costs;
• successful cyber attacks against our IT infrastructure or that of our IT providers
• higher than expected FDIC insurance premiums;
• lack of liquidity to fund our various cash obligations;
• reduction in our lower-cost funding sources;
• our inability to adapt to technological changes;
• claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters; and
• other unexpected material adverse changes in our operations or earnings.

2011
3Q11 Earnings Report
2Q11 Earnings Report
1Q11 Earnings Report

2010
4Q10 Earnings Report
3Q10 Earnings Report
2Q10 Earnings Report
1Q10 Earnings Report

2009
4Q09 Earnings Report
3Q09 Earnings Report
2Q09 Earnings Report
1Q09 Earnings Report

2008
4Q08 Earnings Report
3Q08 Earnings Report
2Q08 Earnings Report
1Q08 Earnings Report