Letter from the Chairman & President/CEO
Dear Friends and Shareholders,
During this period of systemic
financial turmoil and dislocation, we are pleased to report that Pascack
Community Bank remains a safe haven for our customers and shareholders. For
the year, our assets increased by $20,948,000 or 13.0%, to $181,978,000
while deposits increased by $18,901,000, or 15.5%, to $141,110,000. Net
loans increased by $28,334,000, or 32.5%, from $87,296,000 to $115,630,000
with almost all of that growth being generated in the last seven months of
the year.
We think it is important to
note not only what we did, but also what we did not do to remain strong in a
volatile market. Pascack totally avoided the subprime market meltdown. We
never invested in equities, especially those of Fannie Mae and Freddie Mac,
and we maintained a strong loan portfolio with limited write-downs along
with a portfolio of highly rated securities. What we also did in 2008 was
focus on building our franchise and increasing market share in a number of
ways which included the following:
Expanded our Branch Network.
In late August we
opened our third branch in
Commercial Lending.
We retooled and supplemented our
commercial lending department. In September 2008, we hired
Residential Lending. In July, 2008, we hired Stephen Duess to head our newly formed residential loan department. We believe the time is right to enter the residential loan market in order to provide our customer base with these value added products and services. By October 2008, we began offering traditional residential loans. Decisions on these loans are being based on conservative lending standards in terms of loan to value and debt to income ratios using current values that are now more in line with historical norms.
Aligned Management Roles. In June, 2008, the Board of Directors asked Bruce Meisel to assume the title and responsibilities of President in addition to those of Chief Executive Officer. These responsibilities include a deeper involvement in the day-to-day operations of the Bank. By year-end, both the Board and Mr. Meisel came to the conclusion that good corporate governance dictated that the functions of Chairman and President and CEO be separated. Accordingly, effective January 1, 2009, Jon F. Hanson, our founding and long time Vice Chairman, replaced Mr. Meisel as Chairman of the Board.
Finally, in February, 2009, the Bank elected to participate in the federal government’s TARP program. Unlike the large money center banks, only healthy regional and community banks qualified to participate in the TARP program. Because the $3,756,000 of TARP funds received by the Bank increased our capital, the Bank’s ability to make loans has increased exponentially. While we will be paying the government interest of approximately $205,000 per year, receipt of the funds increased the Bank’s ability to make new loans by approximately $57,000,000 on which we will earn more interest than we are paying. Accordingly, our participation in the TARP program will be accretive to both our net profits and book value.
Looking forward to 2009, it will be an important year for Pascack as we take another quantum leap in terms of building our franchise. From January to January, the physical number of our branches will increase by 100% from three to six. Our 2009 target is to make over $60,000,000 in new loans thereby substantially increasing loan generated revenue while also increasing our market share and solidifying the important role we continue to play in the economic health and well being of the communities we serve.
The substantial investment we will make in 2009 in our growth will come at a cost in terms of the short term suppression of profitability over the next 12 to 18 months. By doing so, we will be making a long term strategic investment in our franchise which will result in substantial returns in the future when we return to profitability.
Pascack Community Bank was founded on the premise that an essential component of a vibrant local economy is a strong community bank that provides vital financial services to the communities we serve. We did not know at the time how true this mission would become as big banks cut back on services and reduced, and in some cases virtually eliminated, lending to the businesses, professionals and individuals in the communities they had penetrated. We believe that the nation will certainly recover from this economic downturn and when it does the recovery will be led by local community financial institutions such as Pascack Community Bank.
Sincerely,
Jon F. Hanson,
Chairman of the Board
Bruce M. Meisel,
President and CEO
