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Peapack-Gladstone Financial Corporation Reports Strong Third Quarter Results, Driven by Solid Advances in Wealth and Commercial Banking Activities

BEDMINSTER, N.J., Oct. 25, 2019 (GLOBE NEWSWIRE) -- Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) announces its third quarter 2019 results, a quarterly dividend, and the status of the stock repurchase program. 

For the quarter ended September 30, 2019, the Company recorded revenue of $44.51 million, pretax income of $17.45 million, net income of $12.23 million and diluted earnings per share of $0.63, compared to $39.12 million, $14.34 million, $10.72 million and $0.56 for the same three-month period last year. The 2019 quarter included increased net interest income and non-interest income, partially offset by an increased provision for loan and lease losses (due to loan growth) and increased operating expenses. In comparing the third quarter of 2019 to the third quarter of 2018, revenue increased 14% and pretax income increased 22%, reflecting favorable operating leverage during the period. For the same periods net income increased 14% and EPS increased 13%.  The lower growth in net income relative to pre-tax income was due to a higher effective tax rate in 2019.      

For the nine months ended September 30, 2019, the Company recorded total revenue of $128.53 million, pretax income of $48.33 million, net income of $35.20 million and diluted earnings per share of $1.81, compared to $118.71 million, $44.10 million, $33.44 million and $1.75, respectively, for the nine months ended September 30, 2018, reflecting increases of 8% in revenue and 10% in pretax income, reflecting favorable operating leverage. Net income and EPS increased 5% and 3%, respectively, due to the increase in the effective tax rate in 2019. The effective tax rate was 27.17% for nine months of 2019 compared to 24.17% for the nine months of 2018; the increase was caused by changes in NJ State tax law.    

As previously announced, on July 25, 2019, the Company authorized the repurchase of up to 960,000 shares, or approximately 5% of its outstanding shares, through June 30, 2020.  During the third quarter of 2019, under this program, the Company purchased 595,853 shares, at an average price of $28.06, for a total cost of $16.7 million.

Douglas L. Kennedy, President and CEO, said, “We acknowledge the challenges the Bank and the industry face given the current yield curve and Fed rate decreases.  We were pleased our core net interest margin remained relatively stable over the periods reported.  Further, we believe our strategy (which results in a higher incidence of fee income - 32% of total revenue for the third quarter of 2019) will enable us to deliver higher quality earnings and increased shareholder value over time.”

EXECUTIVE SUMMARY:

The following tables summarize specified financial measures for the periods shown.

September 2019 Quarter Compared to Prior Year Quarter

    Three Months Ended       Three Months Ended                  
    September 30,       September 30,     Increase/  
(Dollars in millions, except per share data)   2019       2018     (Decrease)  
Net interest income   $ 30.09       $ 28.14     $ 1.95       7 %
Provision for loan and lease losses     0.80         0.50       0.30       60  
Net interest income after provision     29.29         27.64       1.65       6  
Wealth management fee income (A)     9.50         8.20       1.30       16  
Other income     4.92         2.78       2.14       77  
Total other income     14.42         10.98       3.44       31  
Operating expenses     26.26         24.28       1.98       8  
Pretax income     17.45         14.34       3.11       22  
Income tax expense     5.22         3.62       1.60       44  
Net income   $ 12.23       $ 10.72     $ 1.51       14 %
Diluted EPS   $ 0.63       $ 0.56     $ 0.07       13 %
                                   
Total Revenue   $ 44.51       $ 39.12     $ 5.39       14 %
                                   
Effective tax rate     29.91 %       25.24 %     4.67          
Return on average assets annualized     1.00 %       0.99 %     0.01          
Return on average equity annualized     9.87 %       9.68 %     0.19          

(A) The September 2019 quarter included a full quarter of wealth management fee income and expense related to Lassus Wherley, which was acquired effective September 1, 2018, and includes one month of wealth management fee income and expense related to Point View Wealth Management, which was acquired effective September 1, 2019.

September 2019 Quarter Compared to Linked Quarter

    Three Months Ended     Three Months Ended                    
    September 30,     June 30,       Increase/  
(Dollars in millions, except per share data)   2019     2019       (Decrease)  
Net interest income   $ 30.09     $ 29.27       $ 0.82       3 %
Provision for loan and lease losses     0.80       1.15         (0.35 )     (30 )
Net interest income after provision     29.29       28.12         1.17       4  
Wealth management fee income (A)     9.50       9.57         (0.07 )     (1 )
Other income     4.92       3.45         1.47       43  
Total other income     14.42       13.02         1.40       11  
Operating expenses     26.26       26.17         0.09       0  
Pretax income     17.45       14.97         2.48       17  
Income tax expense     5.22       3.42         1.80       53  
Net income   $ 12.23     $ 11.55       $ 0.68       6 %
Diluted EPS   $ 0.63     $ 0.59       $ 0.04       7 %
                                   
Total Revenue   $ 44.51     $ 42.29       $ 2.22       5 %
                                   
Effective tax rate     29.91 %     22.85 %       7.06          
Return on average assets annualized     1.00 %     0.99 %       0.01          
Return on average equity annualized     9.87 %     9.49 %       0.38          

             
(A) The quarter ended September 30, 2019 includes one month of wealth management fee income and expense related to Point View Wealth Management, which was acquired effective September 1, 2019.

Year over Year Comparison

    Nine Months Ended     Nine Months Ended                    
    September 30,     September 30,       Increase/  
(Dollars in millions, except per share data)   2019     2018       (Decrease)  
Net interest income   $ 89.36     $ 85.78       $ 3.58       4 %
Provision for loan and lease losses     2.05       2.05                
Net interest income after provision     87.31       83.73         3.58       4  
Wealth management fee income (A)     28.24       24.69         3.55       14  
Other income     10.93       8.24         2.69       33  
Total other income     39.17       32.93         6.24       19  
Operating expenses     78.15       72.56         5.59       8  
Pretax income     48.33       44.10         4.23       10  
Income tax expense     13.13       10.66         2.47       23  
Net income   $ 35.20     $ 33.44       $ 1.76       5 %
Diluted EPS   $ 1.81     $ 1.75       $ 0.06       3 %
                                   
Total Revenue   $ 128.53     $ 118.71       $ 9.82       8 %
                                   
Effective tax rate     27.17 %     24.17 %       3.00          
Return on average assets annualized     0.99 %     1.04 %       (0.05 )        
Return on average equity annualized     9.67 %     10.43 %       (0.76 )        

               
(A) The nine months ended September 30, 2019 included a full nine months of wealth management fee income and expense related to Lassus Wherley, which was acquired effective September 1, 2018, and includes one month of wealth management fee income and expense related to Point View Wealth Management, which was acquired effective September 1, 2019.

Mr. Kennedy said, “Our continued revenue growth and expense management has delivered additional positive operating leverage. Additionally, as noted below, we closed on another strategic wealth management acquisition in the last month of the quarter.”

Other highlights for the quarter included:

  • Wealth Management remains integral to our strategy and provides a diversified, predictable, and stable source of revenue over time:

    • As previously announced, effective September 1, 2019 the Company completed its acquisition of Point View Wealth Management, Inc. (“Point View”), a registered investment advisor headquartered in Summit, NJ, which added nearly $350 million of assets under management and/or administration (“AUM/AUA”).
    • At September 30, 2019, the market value of AUM/AUA at the Peapack Private Wealth Management Division of Peapack-Gladstone Bank (the “Bank”) was $7.0 billion reflecting an increase of $469 million from $6.6 billion at June 30, 2019, and $594 million from $6.4 billion at September 30, 2018, reflecting growth of 9% from prior year.
    • Wealth management fee income totaled $9.50 million for the quarter ended September 30, 2019, reflecting an increase of $1.3 million, or 16%, from the September 2018 quarter. 
    • Wealth management fee income, which comprised approximately 21% of the Company’s total revenue for the quarter ended September 30, 2019, continues to contribute significantly to the Company’s diversified revenue sources.

  • Growth in Commercial Banking also continues to be integral to our strategy:

    • Total commercial and industrial (“C&I”) loans (including equipment finance leases and loans of $547 million) at September 30, 2019 were $1.58 billion.  This reflected net growth of $394 million (33%) when compared to $1.18 billion at September 30, 2018 and reflected net growth of $56 million when compared to the June 30, 2019 balance (4% growth linked quarter; 15% annualized). 
    • C&I momentum has continued to build and pipelines remain strong as of September 30, 2019.
    • As of September 30, 2019, total C&I loans comprised 38% of the total loan portfolio, as compared to 31% at September 30, 2018.  As of September 30, 2019, total multifamily loans comprised 29% of the total loan portfolio compared to 34% a year earlier at September 30, 2018.
    • The Bank’s concentration in commercial real estate loans was 390% of risk-based capital at September 30, 2019 compared to 416% at September 30, 2018.

  • Deposits, funding, and interest rate risk continue to be actively managed:

    • Deposits totaled $4.06 billion at September 30, 2019.  This reflected net growth of $402 million (11%) when compared to $3.66 billion at September 30, 2018 and declined slightly when compared to the June 30, 2019 balance, as several larger higher cost deposit accounts were managed out of the Bank.   
    • The Company’s loan-to-deposit ratio was 102.6% at September 30, 2019, up from June 30, 2019 levels, due in part to higher cost deposits being managed out of the Bank. This level is well within manageable and acceptable levels and has declined from 103.9% at September 30, 2018.   
    • The Company continues to have access to approximately $1.5 billion of available secured funding at the Federal Home Loan Bank.
    • With the transformation to a commercial bank balance sheet and business model, the Company’s interest rate sensitivity models indicate the Company is asset sensitive as of September 30, 2019, and that net interest income would improve in a rising rate environment but decline in a falling rate environment. Over the past quarter, the Company has been managing its balance sheet to be closer to interest rate neutral.

  • Capital and asset quality continue to be strong.

    • The Company’s and Bank’s capital ratios at September 30, 2019 remain strong, despite $16.7 million of share repurchases made during the third quarter as part of the Company’s stock repurchase program. At September 30, 2019 the Company’s tangible capital ratio stood at 9.30%. The Company believes its existing capital and capital generation from earnings will be more than adequate to support planned balance sheet growth, wealth acquisitions, and potential purchases under its stock repurchase program.
    • The Company authorized a 5% (960,000 shares) stock repurchase program on July 25, 2019 under which the Company has purchased 595,853 shares through the end of the third quarter.
    • The Company’s tangible book value per share at September 30, 2019 was $23.91 reflecting an increase of 9% from $21.88 at September 30, 2018.
    • Asset quality metrics continued to be strong as of September 30, 2019. Nonperforming assets at September 30, 2019 were $29.7 million, or 0.60% of total assets as compared to $25.7 million and 0.56% of total assets at December 31, 2018.  

SUPPLEMENTAL QUARTERLY DETAILS:

Wealth Management Business

In the September 2019 quarter, the Bank’s wealth management business generated $9.50 million in fee income, reflecting an increase of $1.30 million compared to $8.20 million for the September 2018 quarter, but relatively flat to the June 2019 quarter. The June 2019 quarter included $509,000 of tax preparation fee income, while the September 2019 quarter only included $87,000. The September 2019 quarter included three months of fee income related to Lassus Wherley compared to one month in the September 2018 quarter, which was acquired effective September 1, 2018 and one month of fee income related to Point View, which was acquired September 1, 2019, as well as increased fees from net organic growth in assets under management. 

John P. Babcock, President of the newly-branded, “Peapack Private Wealth Management” division said, “I am pleased with our results; we had $585 million of new business inflows so far in 2019 and have a strong pipeline as we look ahead to finish the year strong.  We are making significant forward progress on integrating the systems, processes and people from our 2017, 2018, and 2019 acquisitions and continue to selectively look for additional acquisitions that can add talent and expertise to our wealth management organization.”

Loans / Commercial Banking

Net loans increased by $133 million from $3.99 billion at June 30, 2019 to $4.13 billion at September 30, 2019 (3% growth linked quarter, 13% annualized). Loan/line origination levels continued to be strong ($401 million for the September 30, 2019 quarter) but paydown activity was also robust. Mr. Kennedy noted, “We were pleased to have strong net loan growth, despite increased paydown activity. And, we have entered the fourth quarter with very strong loan pipelines.” 

Total C&I loans (including equipment finance leases and loans) grew $56 million (4% growth linked quarter, 15% annualized) to $1.58 billion at the end of the third quarter of 2019, as compared to $1.52 billion at the end of the second quarter of 2019.

Mr. Kennedy said, “The loan market continues to be extremely competitive from a structure/credit and a pricing perspective. As I have noted before, we will continue to be disciplined and not compromise our credit standards, but we will compete on price, as long as returns remain reasonable as measured by our proprietary loan pricing model.”

Mr. Kennedy also said, “Our newly expanded Corporate Advisory and Structured Finance businesses give us the capability to engage in high level strategic debt, capital and valuation analysis coupled with succession, estate and wealth planning strategies, enabling us to provide a unique boutique level of service, giving us a competitive advantage over much of our peers.”

Funding / Liquidity / Interest Rate Risk Management

The Company actively manages its deposit base to reduce reliance on wholesale sourced deposits, volatility, and/or operational risk.

For the quarter ended September 30, 2019, the Company utilized its excess balance sheet liquidity (basically interest-earning deposits) and a short-term borrowing position to fund its loan growth while managing some higher cost deposit relationships out of the bank.

Mr. Kennedy noted, “As a commercial bank with an asset sensitive balance sheet, as the Fed reduces rates, our loans reprice faster than our deposits. Thus, we remain focused on our comprehensive deposit rate reduction program with an eye toward relationship profitability.” 

As of September 30, 2019, in addition to approximately $585 million of cash, cash equivalents and investment securities on its balance sheet, the Company also had approximately $1.5 billion of secured funding available from the Federal Home Loan Bank, of which only $172 million was drawn as of September 30, 2019.
             
Mr. Kennedy noted, “We may continue to utilize lower cost fixed rate wholesale borrowings and/or interest rate swaps, as opposed to retail deposits, to fund fixed rate loan production.”

Kennedy went on to note, “The northeast market continues to be extremely competitive for deposits. The Company is focused on providing high touch client service, a key element in growing its personal and commercial core deposit base.  The Company is focused on multiple retail channels, as well as commercial channels, including its enhanced Treasury Management and Escrow offerings. Further, all of our Private Bankers remain keenly focused on deposit gathering.”

Net Interest Income (NII)/Net Interest Margin (NIM)

  Nine Months Ended     Nine Months Ended                  
  September 30, 2019     September 30, 2018                  
  NII     NIM     NII     NIM                  
                                               
NII/NIM excluding the below $ 88,762     2.70 %     $ 83,949     2.70 %                  
Prepayment premiums received on loan paydowns   914     0.03 %       1,508     0.04 %                  
Effect of maintaining excess interest earning cash during 2019   (316 )   -0.08 %       0     0.00 %                  
Material fees recognized on full paydowns of C&I loans   0     0.00 %       321     0.01 %                  
NII/NIM as reported $ 89,360     2.65 %     $ 85,778     2.75 %                  
                                               
  Three Months Ended     Three Months Ended     Three Months Ended  
  September 30, 2019     June 30, 2019     September 30, 2018  
  NII     NIM     NII     NIM     NII     NIM  
                                               
NII/NIM excluding the below $ 29,896     2.67 %     $ 29,106     2.69 %     $ 27,804     2.66 %  
Prepayment premiums received on loan paydowns   236     0.02 %       246     0.02 %       338     0.03 %  
Effect of maintaining excess interest earning cash during 2019   (47 )   -0.09 %       (84 )   -0.07 %       0     0.00 %  
Material fees recognized on full paydowns of C&I loans   0     0.00 %       0     0.00 %       0     0.00 %  
NII/NIM as reported $ 30,085     2.60 %     $ 29,268     2.64 %     $ 28,142     2.69 %  

Net interest income and net interest margin comparisons are shown above.

Mr. Kennedy noted, “Last quarter we said that our forecasting models indicated a net interest margin in the 2.95% to 3.00% range by the end of 2021 (previously guidance was the end of 2020). We also said, while we still believe our margin will improve over that time frame, the target may be difficult to attain if the shape of the current yield curve remains for an extended period. Given the extended inverted yield curve as well as the prospects for continued Fed rate decreases in the near term, we still believe our margin will improve over a two to three-year time frame, but we cannot commit to a 2.95% to 3.00% margin by the end of 2021.  We will manage our Company accordingly by focusing even more on fee based activities and expense management.”    

Other Noninterest Income (other than Wealth Management fee income)

The third quarter of 2019 included $2.3 million of loan level, back-to-back swap income compared to $721,000 in the June 2019 quarter and $854,000 in the September 2018 quarter.  This program provides a borrower with a degree of interest rate protection on a variable rate loan, while still providing an adjustable rate to the Company, thus helping to manage the Company’s interest rate risk, while contributing to income.

The third quarter of 2019 included $224,000 of income related to the Company’s SBA lending and sale program, compared to $573,000 generated in the June 2019 quarter, and $514,000 in the September 2018 quarter.

Income from both of these programs are not linear each quarter, as some quarters will be higher than others.

Other income totaled $902,000 for the third quarter of 2019, compared to $740,000 for the second quarter of 2019, and $444,000 for the third quarter of 2018. The September 2019 quarter included increased commercial lending fees, particularly unused line of credit fees and other fees.

Operating Expenses

The Company’s total operating expenses were $26.26 million for the quarter ended September 30, 2019, compared to $26.17 million for the June 2019 quarter and $24.28 million for the September 2018 quarter.  The September 2019 and the June 2019 quarters each included three months of expense related to Lassus Wherley (which closed in September 2018) while the September 2018 quarter included only one month. Further, the September 2019 quarter included one month of expenses related to Point View’s operations as well as approximately $200,000 of professional fees related to the acquisition.  Strategic hiring and normal salary increases also contributed to the increase for the September 2019 quarter.  FDIC insurance expense for the September 2019 quarter reflected a credit of $277,000, which was a reversal of the June 2019 quarterly accrual and included no accrual for the September 2019 quarter, as the Bank was notified by the FDIC of a small bank assessment credit.  Mr. Kennedy said, “As we reported last quarter, the Company launched a company-wide expense review, with a goal of slowing expense growth, while continuing our investment in digital and in client acquisition initiatives.  Both activities are becoming more important given the current yield curve.”

Income Taxes

The effective tax rate for the September 2019 quarter was 29.9%, compared to 22.9% for the June 2019 quarter, and 25.2% for the September 2018 quarter. The September 2019 quarter included higher NJ State Income Tax due to the change in NJ Tax law. The effective tax rate for the nine months ended September 30, 2019 was 27.2% compared to 24.2% for the nine months ended September 30, 2018.   

Asset Quality / Provision for Loan and Lease Losses

Nonperforming assets at September 30, 2019 (which does not include troubled debt restructured loans that are performing in accordance with their terms) were $29.7 million, or 0.60% of total assets, compared to $31.2 million, or 0.64% of total assets, at June 30, 2019 and $10.8 million, or 0.24% of total assets, at September 30, 2018.  Total loans past due 30 through 89 days and still accruing were $6.3 million at September 30, 2019, compared to $432,000 at June 30, 2019 and $2.5 million at September 30, 2018. The $6.3 million at September 30, 2019 included one $4.3 million commercial real estate loan that was in process of a rate modification (not a troubled debt modification) at September 30, 2019. The loan was brought fully current in early October.

For the quarter ended September 30, 2019, the Company’s provision for loan and lease losses was $800,000 compared to $1.2 million for the June 2019 quarter and $500,000 for the September 2018 quarter. The Company’s provision for loan and lease losses (and its allowance for loan and lease losses) reflect, among other things, the Company’s asset quality metrics, net loan growth, net charge-offs/recoveries, and the composition of the loan portfolio.

At September 30, 2019, the allowance for loan and lease losses of $41.58 million (142% of nonperforming loans and 1.00% of total loans), compared to $39.79 million at June 30, 2019 (128% of nonperforming loans and 0.99% of total loans), and $37.29 million (348% of nonperforming loans and 0.98% of total loans) at September 30, 2018. 

The September 2019 quarter included an approximate $1 million recovery resulting from the payoff of a nonperforming loan. The current quarter also included $1.5 million of specific reserves allocated to two nonperforming loans.

Capital / Dividend / Stock Repurchase Program

The Company’s capital position during the September 2019 quarter was benefitted by net income, as well as shares issued in the acquisition of Point View Wealth Management, almost fully offset by the purchase of shares through the Company’s stock repurchase program. During the quarter, the Company purchased 595,853 shares, at an average price of $28.06, for a total cost of $16.7 million.

The Company’s and Bank’s capital ratios at September 30, 2019 all remain strong.  Such ratios remain well above regulatory well capitalized standards.

On October 24, 2019, the Company declared a cash dividend of $0.05 per share payable on November 22, 2019 to shareholders of record on November 7, 2019.

ABOUT THE COMPANY

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $4.93 billion and AUM/AUA of $7.0 billion as of September 30, 2019.  Founded in 1921, Peapack-Gladstone Bank is a commercial bank that provides innovative private banking services to businesses, non-profits and consumers, which help them to establish, maintain and expand their legacy.  Through its private banking locations in Bedminster, Morristown, Princeton and Teaneck, its Private Wealth Management Division, and its branch network and online platforms, Peapack-Gladstone Bank offers an unparalleled commitment to client service.

The foregoing may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements are not historical facts and include expressions about management’s confidence and strategies and management’s expectations about new and existing programs and products, investments, relationships, opportunities and market conditions.  These statements may be identified by such forward-looking terminology as “expect,” “look,” “believe,” “anticipate,” “may” or similar statements or variations of such terms.  Actual results may differ materially from such forward-looking statements.  Factors that may cause results to differ materially from such forward-looking statements include, but are not limited to:

  • our inability to successfully grow our business and implement our strategic plan, including an inability to generate revenues to offset the increased personnel and other costs related to the strategic plan;
  • the impact of anticipated higher operating expenses in 2019 and beyond;
  • our inability to successfully integrate wealth management firm acquisitions;
  • our inability to manage our growth;
  • our inability to successfully integrate our expanded employee base;
  • an unexpected decline in the economy, in particular in our New Jersey and New York market areas;
  • declines in our net interest margin caused by the interest rate environment and/or our highly competitive market;
  • declines in value in our investment portfolio;
  • higher than expected increases in our allowance for loan and lease losses;
  • higher than expected increases in loan and lease losses or in the level of nonperforming loans;
  • changes in interest rates;
  • 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, Basel III and related regulations) that may result in increased compliance costs;
  • successful cyberattacks against our IT infrastructure and that of our IT and third party providers;
  • higher than expected FDIC insurance premiums;
  • adverse weather conditions;
  • our inability to successfully generate new business in new geographic markets;
  • our inability to execute upon new business initiatives;
  • our 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;
  • our inability to retain key employees;
  • demands for loans and deposits in our market areas;
  • adverse changes in securities markets;
  • changes in accounting policies and practices;
  • effects related to a prolonged shutdown of the federal government which could impact SBA and other government lending programs; and
  • other unexpected material adverse changes in our operations or earnings.

A discussion of these and other factors that could affect our results is included in our SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2018.  We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

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.

Contact:

Jeffrey J. Carfora, SEVP and CFO

Peapack-Gladstone Financial Corporation

T: 908-719-4308

 

PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands, except share data)
(Unaudited)

    For the Three Months Ended  
    Sept 30,     June 30,     March 31,     Dec 31,     Sept 30,  
    2019     2019     2019     2018     2018  
Income Statement Data:                                        
Interest income   $ 45,948     $ 44,603     $ 44,563     $ 42,781     $ 40,163  
Interest expense     15,863       15,335       14,556       13,396       12,021  
Net interest income     30,085       29,268       30,007       29,385       28,142  
Provision for loan and lease losses     800       1,150       100       1,500       500  
Net interest income after provision for loan and lease losses     29,285       28,118       29,907       27,885       27,642  
Wealth management fee income     9,501       9,568       9,174       8,552       8,200  
Service charges and fees     882       897       816       938       860  
Bank owned life insurance     332       326       338       351       349  
Gain on loans held for sale at fair value
  (Mortgage banking)
    198       132       47       74       87  
Loss on loans held for sale at lower of cost or
  fair value
    (6 )                 (4,392 )      
Fee income related to loan level, back-to-back
  swaps
    2,349       721       270       1,838       854  
Gain on sale of SBA loans     224       573       419       277       514  
Other income (A)     902       740       606       3,571       444  
Securities gains/(losses), net     34       69       59       46       (325 )
Total other income     14,416       13,026       11,729       11,255       10,983  
Salaries and employee benefits     17,476       17,543       17,156       16,372       16,025  
Premises and equipment     3,849       3,600       3,388       3,422       3,399  
FDIC insurance expense     (277 )     277       277       645       593  
Other expenses     5,211       4,753       4,894       5,085       4,267  
Total operating expenses     26,259       26,173       25,715       25,524       24,284  
Income before income taxes     17,442       14,971       15,921       13,616       14,341  
Income tax expense     5,216       3,421       4,496       2,887       3,617  
Net income   $ 12,226     $ 11,550     $ 11,425     $ 10,729     $ 10,724  
                                         
Total revenue (B)   $ 44,501     $ 42,294     $ 41,736     $ 40,640     $ 39,125  
Per Common Share Data:                                        
Earnings per share (basic)   $ 0.63     $ 0.59     $ 0.59     $ 0.56     $ 0.56  
Earnings per share (diluted)     0.63       0.59       0.58       0.55       0.56  
Weighted average number of common shares outstanding:                                        
Basic     19,314,666       19,447,155       19,350,452       19,260,033       19,053,849  
Diluted     19,484,905       19,568,371       19,658,006       19,424,906       19,240,098  
Performance Ratios:                                        
Return on average assets annualized (ROAA)     1.00 %     0.99 %     0.98 %     0.96 %     0.99 %
Return on average equity annualized (ROAE)     9.87 %     9.49 %     9.65 %     9.32 %     9.68 %
Net interest margin (tax- equivalent basis)     2.60 %     2.64 %     2.70 %     2.72 %     2.69 %
GAAP efficiency ratio (C)     59.01 %     61.88 %     61.61 %     62.81 %     62.07 %
Operating expenses / average assets annualized     2.16 %     2.25 %     2.21 %     2.28 %     2.24 %

(A) The December 31, 2018 quarter includes death benefit from life insurance policy of $3.0 million related to the December 31, 2018 passing of the founder and managing principal of MCM.
(B) Total revenue includes net interest income plus total other income.
(C) Calculated as total operating expenses as a percentage of total revenue.  For Non-GAAP efficiency ratio, see Non-GAAP financial measures reconciliation included in these tables.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands, except share data)
(Unaudited)

    For the Nine Months Ended                  
    Sept 30,     Change  
    2019     2018     $     %  
Income Statement Data:                                
Interest income   $ 135,114     $ 116,905     $ 18,209       16 %
Interest expense     45,754       31,127       14,627       47 %
Net interest income     89,360       85,778       3,582       4 %
Provision for loan and lease losses     2,050       2,050             0 %
Net interest income after provision for loan and lease losses     87,310       83,728       3,582       4 %
Wealth management fee income     28,243       24,693       3,550       14 %
Service charges and fees     2,595       2,564       31       1 %
Bank owned life insurance     996       1,030       (34 )     -3 %
Gain on loans held for sale at fair value (Mortgage banking)     377       260       117       45 %
Gain on loans held for sale at lower of cost or fair value     (6 )           (6 )   N/A  
Fee income related to loan level, back-to-back swaps     3,340       2,006       1,334       67 %
Gain on sale of SBA loans     1,216       1,359       (143 )     -11 %
Other income     2,248       1,465       783       53 %
Securities gains/(losses), net     162       (439 )     601       -137 %
Total other income     39,171       32,938       6,233       19 %
Salaries and employee benefits     52,175       46,430       5,745       12 %
Premises and equipment     10,837       10,075       762       8 %
FDIC insurance expense     277       1,798       (1,521 )     -85 %
Other expenses     14,858       14,259       599       4 %
Total operating expenses     78,147       72,562       5,585       8 %
Income before income taxes     48,334       44,104       4,230       10 %
Income tax expense     13,133       10,663       2,470       23 %
Net income   $ 35,201     $ 33,441     $ 1,760       5 %
                                 
Total revenue (A)   $ 128,531     $ 118,716     $ 9,815       8 %
Per Common Share Data:                                
Earnings per share (basic)   $ 1.82     $ 1.77     $ 0.05       3 %
Earnings per share (diluted)     1.81       1.75       0.06       3 %
Weighted average number of common shares outstanding:                                
Basic     19,370,627       18,865,982       504,645       3 %
Diluted     19,496,721       19,066,986       429,735       2 %
Performance Ratios:                                
Return on average assets annualized (ROAA)     0.99 %     1.04 %     (0.05 )%     -4 %
Return on average equity annualized (ROAE)     9.67 %     10.43 %     (0.76 )%     -7 %
Net interest margin (tax- equivalent basis)     2.65 %     2.75 %     (0.10 )%     -4 %
GAAP efficiency ratio (B)     60.80 %     61.12 %     (0.32 )%     -1 %
Operating expenses / average assets annualized     2.21 %     2.25 %     (0.04 )%     -2 %

(A) Total revenue includes net interest income plus total other income.
(B) Calculated as total operating expenses as a percentage of total revenue.  For Non-GAAP efficiency ratio, see Non-GAAP financial measures reconciliation included in these tables.


PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION

(Dollars in Thousands)
(Unaudited)

    As of  
    Sept 30,     June 30,     March 31,     Dec 31,     Sept 30,  
    2019 (A)     2019     2019     2018     2018  
ASSETS                                        
Cash and due from banks   $ 5,770     $ 5,351     $ 4,726     $ 5,914     $ 4,792  
Federal funds sold     101       101       101       101       101  
Interest-earning deposits     221,242       298,575       235,487       154,758       118,111  
Total cash and cash equivalents     227,113       304,027       240,314       160,773       123,004  
Securities available for sale     349,989       378,839       384,400       377,936       368,554  
Equity security     7,881       4,847       4,778       4,719       4,673  
FHLB and FRB stock, at cost     21,403       18,338       18,460       18,533       21,561  
Residential mortgage     561,543       572,926       569,304       573,146       562,930  
Multifamily mortgage     1,197,093       1,129,476       1,104,406       1,138,190       1,289,458  
Commercial mortgage     721,261       694,674       705,221       702,165       644,900  
Commercial loans     1,575,076       1,518,591       1,410,146       1,398,214       1,180,774  
Consumer loans     53,829       53,995       54,276       58,678       64,478  
Home equity lines of credit     58,423       62,522       57,639       62,191       59,930  
Other loans     380       424       355       465       432  
Total loans     4,167,605       4,032,608       3,901,347       3,933,049       3,802,902  
Less: Allowances for loan and lease losses     41,580       39,791       38,653       38,504       37,293  
Net loans     4,126,025       3,992,817       3,862,694       3,894,545       3,765,609  
Premises and equipment     20,898       20,987       21,201       27,408       27,874  
Other real estate owned     336                         96  
Accrued interest receivable     11,759       11,594       11,688       10,814       10,849  
Bank owned life insurance     45,940       45,744       45,554       45,353       45,181  
Goodwill and other intangible assets     41,111       31,941       32,170       32,399       34,297  
Finance lease right-of-use assets (B)     5,265       5,452       5,639              
Operating lease right-of-use assets (B)     10,328       11,017       7,541              
Other assets     57,361       45,631       27,867       45,378       34,011  
TOTAL ASSETS   $ 4,925,409     $ 4,871,234     $ 4,662,306     $ 4,617,858     $ 4,435,709  
                                         
LIABILITIES                                        
Deposits:                                        
Noninterest-bearing demand deposits   $ 544,464     $ 544,431     $ 476,013     $ 463,926     $ 503,388  
Interest-bearing demand deposits     1,352,471       1,388,821       1,268,823       1,247,305       1,148,660  
Savings     115,448       112,438       114,865       114,674       116,391  
Money market accounts     1,196,188       1,207,358       1,209,835       1,243,369       1,097,630  
Certificates of deposit – Retail     583,425       570,384       545,450       510,724       466,791  
Certificates of deposit – Listing Service     55,664       58,541       68,055       79,195       85,241  
Subtotal “customer” deposits     3,847,660       3,881,973       3,683,041       3,659,193       3,418,101  
IB Demand – Brokered     180,000       180,000       180,000       180,000       180,000  
Certificates of deposit – Brokered     33,696       33,682       56,165       56,147       61,193  
Total deposits     4,061,356       4,095,655       3,919,206       3,895,340       3,659,294  
Short-term borrowings     67,000                         95,190  
FHLB advances     105,000       105,000       105,000       108,000       84,000  
Finance lease liability (B)     7,793       7,985       8,175       8,362       8,548  
Operating lease liability (B)     10,619       11,269       7,683              
Subordinated debt, net     83,361       83,305       83,249       83,193       83,138  
Other liabilities     94,930       74,132       57,521       53,950       51,106  
TOTAL LIABILITIES     4,430,059       4,377,346       4,180,834       4,148,845       3,981,276  
Shareholders’ equity     495,350       493,888       481,472       469,013       454,433  
TOTAL LIABILITIES AND                                        
SHAREHOLDERS’ EQUITY   $ 4,925,409     $ 4,871,234     $ 4,662,306     $ 4,617,858     $ 4,435,709  
Assets under management and / or administration at
  Peapack-Gladstone Banks Private Wealth Management
  Division (market value, not included above-dollars in billions)
  $ 7.0     $ 6.6     $ 6.3     $ 5.8     $ 6.4  

(A) Includes goodwill and intangibles from the Murphy Capital Management, Quadrant Capital Management, Lassus Wherley and Associates and Point View Wealth Management acquisitions completed in August 2017, November 2017, September 2018 and September 2019, respectively.
(B) Resulted from the January 1, 2019 adoption of ASU No. 2016-02, “Leases (Topic 842)”.


PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED BALANCE SHEET DATA
(Dollars in Thousands)
(Unaudited)

    As of  
    Sept 30,     June 30,     March 31,     Dec 31,     Sept 30,  
    2019     2019     2019     2018     2018  
Asset Quality:                                        
Loans past due over 90 days and still accruing   $     $     $     $     $  
Nonaccrual loans (A)     29,383       31,150       24,892       25,715       10,722  
Other real estate owned     336                         96  
Total nonperforming assets   $ 29,719     $ 31,150     $ 24,892     $ 25,715     $ 10,818  
                                         
Nonperforming loans to total loans     0.71 %     0.77 %     0.64 %     0.65 %     0.28 %
Nonperforming assets to total assets     0.60 %     0.64 %     0.53 %     0.56 %     0.24 %
                                         
Performing TDRs (B)(C)   $ 2,527     $ 3,772     $ 4,274     $ 4,303     $ 19,334  
                                         
Loans past due 30 through 89 days and still accruing (D)   $ 6,333     $ 432     $ 2,492     $ 3,484     $ 2,528  
                                         
Classified loans   $ 53,882     $ 56,135     $ 51,306     $ 58,265     $ 51,783  
                                         
Impaired loans   $ 36,627     $ 34,941     $ 29,185     $ 31,300     $ 31,345  
                                         
Allowance for loan and lease losses:                                        
Beginning of period   $ 39,791     $ 38,653     $ 38,504     $ 37,293     $ 38,066  
Provision for loan and lease losses     800       1,150       100       1,500       500  
Recoveries (charge-offs), net     989       (12 )     49       (289 )     (1,273 )
End of period   $ 41,580     $ 39,791     $ 38,653     $ 38,504     $ 37,293  
                                         
ALLL to nonperforming loans     141.51 %     127.74 %     155.28 %     149.73 %     347.82 %
ALLL to total loans     0.998 %     0.987 %     0.991 %     0.979 %     0.981 %
General ALLL to total loans (E)     0.932 %     0.956 %     0.984 %     0.972 %     0.961 %

(A) Amount includes one healthcare real estate secured loan with a loan balance of $14.5 million at September 30, 2019, $14.6 million at June 30, 2019, $14.8 million at March 31, 2019 and $15.2 million at December 31, 2018.  In addition, one casual dining commercial banking relationship with a balance of $6.3 million at September 30, 2019 and $6.6 million at June 30, 2019 went on nonaccrual at June 30, 2019.
(B) Amounts reflect TDRs that are paying according to restructured terms.
(C) Amount does not include $19.7 million at September 30, 2019, $19.8 million at June 30, 2019, $20.0 million at March 31, 2019, $20.5 million at December 31, 2018, and $5.5 million at September 30, 2018, of TDRs included in nonaccrual loans.
(D) The $6.3 million at September 30, 2019 included one $4.3 million commercial real estate loan that was in process of a rate modification (not a TDR modification).  The loan was brought fully current in early October 2019.
(E) Total ALLL less specific reserves equals general ALLL.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED BALANCE SHEET DATA
(Dollars in Thousands)
(Unaudited)

    September 30,     December 31,     September 30,  
    2019     2018     2018  
Capital Adequacy                                    
Equity to total assets (A)         10.06 %         10.16 %         10.24 %
Tangible Equity to tangible assets (B)         9.30 %         9.52 %         9.55 %
Book value per share (C)       $ 26.07         $ 24.25         $ 23.66  
Tangible Book Value per share (D)       $ 23.91         $ 22.58         $ 21.88  

 

    September 30,     December 31,     September 30,  
    2019      2018      2018  
Regulatory Capital Holding Company                                                
Tier I leverage   $ 455,179     9.43 %     $ 438,240     9.82 %     $ 423,124     9.80 %  
Tier I capital to risk-weighted assets     455,179     11.23         438,240     11.76         423,124     11.79    
Common equity tier I capital ratio to risk-weighted assets     455,177     11.23         438,238     11.76         423,122     11.79    
Tier I & II capital to risk-weighted assets     580,120     14.31         559,937     15.03         543,555     15.15    
                                                 
Regulatory Capital Bank                                                
Tier I leverage (E)   $ 534,351     11.08 %     $ 504,504     11.32 %     $ 489,308     11.34 %  
Tier I capital to risk-weighted assets (F)     534,351     13.20         504,504     13.56         489,308     13.65    
Common equity tier I capital ratio
  to risk-weighted assets (G)
    534,349     13.20         504,502     13.56         489,306     13.65    
Tier I & II capital to risk-weighted assets (H)     575,931     14.23         543,008     14.59         526,601     14.69    

(A) Equity to total assets is calculated as total shareholders’ equity as a percentage of total assets at period end.
(B) Tangible equity and tangible assets are calculated by excluding the balance of intangible assets from shareholders’ equity and total assets, respectively. Tangible equity as a percentage of tangible assets at period end is calculated by dividing tangible equity by tangible assets at period end.  See Non-GAAP financial measures reconciliation included in these tables.
(C) Book value per common share is calculated by dividing shareholders’ equity by period end common shares outstanding.
(D) Tangible book value per excludes intangible assets.  Tangible book value per share is calculated by dividing tangible equity by period end common shares outstanding.  See Non-GAAP financial measures reconciliation tables.
(E) Regulatory well capitalized standard = 5.00%
(F) Regulatory well capitalized standard = 6.50%
(G) Regulatory well capitalized standard = 8.00%
(H) Regulatory well capitalized standard = 10.00%

PEAPACK-GLADSTONE FINANCIAL CORPORATION
LOANS CLOSED
(Dollars in Thousands)
(Unaudited)

...
    For the Quarters Ended  
    Sept 30,     June 30,     March 31,     Dec 31,     Sept 30,  
    2019     2019     2019     2018