By Lauren Otis, Staff Writer
Princeton’s startup community bank is growing according to plan, and avoiding fallout from the economic downturn, even if it is not likely to achieve profitability anytime soon, according to senior executives.
”Generating income in the year one was never our goal, never our plan, and we succeeded mightily,” said Stephen Distler, chairman of The Bank of Princeton, at the bank’s annual meeting of stockholders in Princeton on Thursday.
The year-old bank is losing approximately $110,000 a month presently, Mr. Distler said. “Our budget has us approaching break-even in November and December,” he said, adding “we may well be in profitability in the first half of 2009.”
On net income of $1,313,794 for the year ended Dec. 31, 2007 the bank incurred a net loss of $1,613,134, according to audited financial statements the bank distributed at the stockholders meeting.
Mr. Distler said that the bank’s growth was “fairly slow but steady” in its first year, but growth in certain areas is accelerating. “Our deposit gathering has been picking up very nicely,” he said. The bank had total assets of approximately $66.5 million at the end of 2007, but its total assets currently amount to about $94 million, Mr. Distler said.
The Bank of Princeton has leveraged its $30 million of startup capital well, and has developed good initial relationships with Princeton University, the township and borough, and a number of other Princeton organizations, said President Peter Crowley.
The bank, with 27 employees, has three branches open and operating in Princeton, Pennington and Hamilton, where the bank’s latest branch opened in mid-April, Mr. Crowley said. The bank’s currently-under-construction Princeton headquarters on Bayard Lane is scheduled to open this December, he said.
Despite the slowing economy, and bank and other company losses announced as a result of sub-prime mortgage investments, The Bank of Princeton’s loan portfolio is “pristine,” said Mr. Crowley. “We have an absolutely sound credit portfolio,” he said.
Commercial real estate loans accounted for $16.1 million of the bank’s $29.6 million in total loans receivable at Dec. 31, 2007. As the bank writes new loans, the percentage of commercial real estate loans it writes is declining slightly, said Mr. Crowley. In the bank’s loan growth “we are not going out there and putting anything on our books, we are very careful,” he said.
The bank’s $350,000 provision for loan losses is “very conservative,” according to Mr. Distler, with the bank setting aside 1.2 percent of every loan it writes for the loss reserve.
As a new bank, The Bank of Princeton is not faced with any possible loan liabilities from older business because it doesn’t have any, said Gerard Murray, executive vice president and chief lending officer.
”We are sort of recession resistant in this particular area,” Mr. Murray said, although Hamilton, with a greater blue-collar population, may be more affected by the economy. “I will be honest with you, the phone is not ringing off the hook. People are not borrowing money, they are not buying swimming pools, they are not putting additions on the house,” Mr. Murray said.
The bank is maintaining its stringent underwriting standards — “we are not stretching, we are just being very, very careful,” Mr. Murray said.
”In Princeton there are a lot of smart people,” said Mr. Distler. These businesspeople have already pulled back, and “the smarter ones know this is a good time to start putting their toe back in the water,” which should present economic opportunities for the bank.
The bank’s yield of around 2.63 percent is lower than it wants but is expected to increase to a more acceptable 3 to 3.5 percent later in the year, Mr. Distler said.
The recent sale of Hamilton-based Yardville National Bank to PNC Bank, and the opening of a Bank of Princeton branch there, run by a former Yardville National Bank banker, has resulted in The Bank of Princeton being “extremely well situated to bring a lot of the (Yardville) business over,” Mr. Distler said.
Mr. Distler said The Bank of Princeton would like to open more branches, particularly in West Windsor or Montgomery, but finding good locations was difficult, with permitting, construction and other approvals for opening branches often elaborate and time consuming. “We thought we were going into the banking business but we went into the real estate business,” he said.
”Foot traffic isn’t overwhelming” at the bank’s Chambers Street location in downtown Princeton, so the bank will adopt a wait and see attitude in deciding whether to keep that branch once the Bayard Lane headquarters opens, Mr. Distler said.
He also said that soon the bank will bring on an additional investor — “a very significant local investor and business person” — who will invest in a five to 10 percent stake in The Bank of Princeton.
First Choice Bank, another start-up community bank located in Lawrence, also held its initial stockholders annual meeting last Thursday.
”We enjoyed a fast start in 2007,” said First Choice President Randy Hanks, at the meeting in Lawrence, adding that “2008 has begun with more of the same.” The bank currently has deposits of $63 million, $54 million in outstanding loans and total assets of $75 million, he said.
”We do expect things to get more competitive, but we think we have an edge,” said First Choice Chairman Munish Sood.
First Choice reported a net loss of $1,404,000 on net income of $762,000 for the year ended Dec. 31, 2007.
