The Company has successfully focused on:
•Business and personal core deposit generation, particularly checking; •Municipal relationships within its market territory; and •Growth in deposits associated with its commercial mortgage/commercial loan growth.
Average certificates of deposit (CDs) declined $19 million for the December 2012 quarter from the December 2011 quarter. These higher-cost CDs were replaced with lower-cost, more stable core deposits.
From December 31, 2011 to December 31, 2012, total deposits increased $73 million, or 5 percent.
Mr. Kennedy commented, "This continues to be a strong and valuable deposit franchise, as evidenced by our high level of lower-cost, more stable core deposits. I see a lot of opportunity for growth in our core markets. Over the course of 2013, we plan to further grow our core deposit base, while maintaining and enhancing our high level of customer service."
PGB Trust & Investments
PGB Trust & Investments generated $2.93 million in fee income in the fourth quarter of 2012 compared to $2.58 million for the fourth quarter of 2011, reflecting growth in excess of 13 percent. The market value of the assets under administration of the wealth management division stood at $2.30 billion at December 31, 2012, up from $1.96 billion reported at December 31, 2011. The growth was due to new business, as well as market action coupled with solid investment advisory and management.
Mr. Kennedy noted, "The wealth management business adds significant value to the Company. I look forward to growing this business further through our new Delaware Trust subsidiary; in and around our market areas; through our existing wealth, loan and depository client base; and through discussions with all potential loan and depository clients. We will continue to provide the personalized, high touch service our valued clients have come to expect."
Other Noninterest Income
Other noninterest income, exclusive of Trust fees, totaled $4.42 million in the December 2012 quarter compared to $1.67 million in the same quarter a year ago. The December 2012 quarter included $370 thousand of fee income from the sale of longer-term, fixed-rate residential mortgage loans, compared to $139 thousand in the same 2011 quarter. The $230 thousand increase was due to higher residential mortgage loan origination levels, as well as a decision to retain less fixed rate loans in the portfolio. The December 2012 quarter also included a $2.87 million gain from one of the strategic initiatives noted earlier, which is the sale of the Company's Pooled Trust Preferred Securities portfolio. These positives were slightly offset by reduced service charges, some due to waivers resulting from an across the board Hurricane Sandy program and some due to customers being more diligent in managing their accounts.
The Company's total operating expenses were $13.55 million in the December 2012 quarter compared to $11.55 million in the December 2011 quarter. The 2012 expense levels included: costs associated with several of the strategic initiatives discussed earlier, specifically, a $965 thousand severance accrual associated with staffing and organizational restructuring; $74 thousand of legal expenses associated with the organization and set-up of PGB Trust & Investments of Delaware; $336 thousand of professional, legal, and other fees associated with the CEO search; and various expenses associated with Hurricane Sandy. The December 2012 quarter also included costs for the Company to keep up with the increased regulatory burden on financial institutions; costs associated with key additions to staff in PGB Trust & Investments to enhance their ability to grow and service their client base; increased commissions related to increased loan originations; normal salary increases; and increased bonus and profit sharing accruals. The net effect of the additional costs in the fourth quarter of 2012 was partially offset by various operational efficiencies.
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