U.S. markets close in 2 hours 22 minutes

Peapack-Gladstone Financial Corporation Reports Record Fourth Quarter and Full Year Results, Driven by Solid Wealth Management and Commercial Banking Activities

BEDMINSTER, N.J., Jan. 29, 2020 (GLOBE NEWSWIRE) -- Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) announces its fourth quarter and full year 2019 results, a quarterly dividend, and the status of the stock repurchase program. 

For the quarter ended December 31, 2019, the Company recorded revenue of $46.44 million, pretax income of $17.79 million, net income of $12.23 million and diluted earnings per share (“EPS”) of $0.64, compared to $40.64 million, $13.62 million, $10.73 million and $0.55, respectively, 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 (due in part to the wealth management firm acquired in September 2019). In comparing the fourth quarter of 2019 to the fourth quarter of 2018, revenue increased 14% and pretax income increased 31%, reflecting favorable operating leverage during the period. For the same periods net income increased 14% and EPS increased 16%. The lower growth in net income and EPS relative to pre-tax income was due to a higher effective tax rate in 2019 caused by changes in NJ State tax law in 2018.       

For the twelve months ended December 31, 2019, the Company recorded total revenue of $174.97 million, pretax income of $66.12 million, net income of $47.43 million and diluted earnings per share of $2.44, compared to $159.36 million, $57.72 million, $44.17 million and $2.31, respectively, for the twelve months ended December 31, 2018, reflecting increases of 10% in revenue and 15% in pretax income, reflecting favorable operating leverage. Net income and EPS increased 7% and 6%, respectively, less than the increase in pretax income due to the increase in the effective tax rate in 2019. The effective tax rate was 28.26% for twelve months of 2019 compared to 23.48% for the twelve months of 2018. The increase was caused by changes in NJ State tax law in 2018.   

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 fourth quarter of 2019, under this program, the Company purchased 143,925 shares, at an average price of $29.78, for a total cost of $4.3 million. To date, under this program, the Company purchased 739,778 shares, at an average price of $28.39, for a total cost of $21.0 million. 220,222 shares remain to be purchased under the authorization.

Douglas L. Kennedy, President and CEO, said, “We were very pleased with our earnings this past quarter, as we continued to drive operating leverage. We acknowledge the challenges the Bank and the industry face given the recent Fed rate decreases and the shape of the yield curve. We were pleased our reported net interest margin (“NIM”) did not decrease and our NIM, adjusted for prepayment premiums and excess liquidity (see page 6), only decreased marginally in the fourth quarter, after the three rate decreases during the second half of 2019. Further, we believe our strategy (which results in a higher incidence of fee income - 33% of total revenue for the fourth 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.

December 2019 Quarter Compared to Prior Year Quarter

    Three Months Ended       Three Months Ended                  
    December 31,       December 31,     Increase/  
(Dollars in millions, except per share data)   2019 (A)       2018 (B)     (Decrease)  
Net interest income   $ 30.91       $ 29.39     $ 1.52       5 %
Provision for loan and lease losses     1.95         1.50       0.45       30  
Net interest income after provision     28.96         27.89       1.07       4  
Wealth management fee income     10.12         8.55       1.57       18  
Capital markets activity     3.73         2.19       1.54       70  
Other income     1.68         0.51       1.17       229  
Total other income     15.53         11.25       2.74       24  
Operating expenses     26.70         25.52       1.18       5  
Pretax income     17.79         13.62       2.63       19  
Income tax expense     5.56         2.89       2.67       92  
Net income   $ 12.23       $ 10.73     $ (0.04 )     (0 )%
Diluted EPS   $ 0.64       $ 0.55     $ 0.09       16 %
                                   
Total Revenue   $ 46.44       $ 40.64     $ 5.80       14 %
                                   
Effective tax rate     31.25 %       21.22 %     10.03          
Return on average assets annualized     0.98 %       0.96 %     0.02          
Return on average equity annualized     9.81 %       9.32 %     0.49          

(A) The December 2019 quarter included a full quarter of wealth management fee income and expense related to Point View Wealth Management, (“Point View”), which was acquired effective September 1, 2019. The December 2019 quarter included a higher effective tax rate than the prior year quarter due to changes in NJ state tax law.
(B) The December 2018 quarter included $4.39 million loss on the sale of multifamily loans; $3.00 million of life insurance proceeds related to the December 31, 2018 passing of the founder and managing principal of MCM; and a $405,000 write-down of intangible assets related to MCM.

December 2019 Quarter Compared to Linked Quarter

    Three Months Ended     Three Months Ended                    
    December 31,     September 30,       Increase/  
(Dollars in millions, except per share data)   2019 (A)     2019       (Decrease)  
Net interest income   $ 30.91     $ 30.09       $ 0.82       3 %
Provision for loan and lease losses     1.95       0.80         1.15       144  
Net interest income after provision     28.96       29.29         (0.33 )     (1 )
Wealth management fee income     10.12       9.50         0.62       7  
Capital markets activity     3.73       2.77         0.96       35  
Other income     1.68       2.15         (0.47 )     (22 )
Total other income     15.53       14.42         1.11       8  
Operating expenses     26.70       26.26         0.44       2  
Pretax income     17.79       17.45         0.34       2  
Income tax expense     5.56       5.22         0.34       7  
Net income   $ 12.23     $ 12.23       $ 0.00       0 %
Diluted EPS   $ 0.64     $ 0.63       $ 0.01       2 %
                                   
Total Revenue   $ 46.44     $ 44.51       $ 1.93       4 %
                                   
Effective tax rate     31.25 %     29.91 %       1.34          
Return on average assets annualized     0.98 %     1.00 %       (0.02 )        
Return on average equity annualized     9.81 %     9.87 %       (0.06 )        

(A) The quarter ended December 31, 2019 included a full quarter of wealth management fee income and expense related to Point View, which was acquired effective September 1, 2019 compared to one month in the quarter ended September 30, 2019.


Year over Year Comparison
            

    Year Ended     Year Ended                    
    December 31,     December 31,       Increase/  
(Dollars in millions, except per share data)   2019 (A)     2018 (B)       (Decrease)  
Net interest income   $ 120.27     $ 115.16       $ 5.11       4 %
Provision for loan and lease losses     4.00       3.55         0.45       13  
Net interest income after provision     116.27       111.61         4.66       4  
Wealth management fee income     38.36       33.25         5.11       15  
Capital markets activity     8.67       5.81         2.86       49  
Other income     7.67       5.14         2.53       49  
Total other income     54.70       44.20         10.50       24  
Operating expenses     104.85       98.09         6.76       7  
Pretax income     66.12       57.72         8.40       15  
Income tax expense     18.69       13.55         5.14       38  
Net income   $ 47.43     $ 44.17       $ 3.26       7 %
Diluted EPS   $ 2.44     $ 2.31       $ 0.13       6 %
                                   
Total Revenue   $ 174.97     $ 159.36       $ 15.61       10 %
                                   
Effective tax rate     28.26 %     23.48 %       4.78          
Return on average assets annualized     0.99 %     1.02 %       (0.03 )        
Return on average equity annualized     9.70 %     10.13 %       (0.43 )        

             

  1. The year ended December 31, 2019 included a full year of wealth management fee income and expense related to Lassus Wherley, which was acquired effective September 1, 2018, and includes four months of wealth management fee income and expense related to Point View, which was acquired effective September 1, 2019. The 2019 twelve months included a higher effective tax rate than the prior year due to changes in NJ state tax law.
  2. The 2018 year includes $4.39 million loss on the sale of multifamily loans; $3.00 million of life insurance proceeds related to the December 31, 2018 passing of the founder and managing principal of MCM; and a $405,000 write-down of intangible assets related to MCM. 

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, a registered investment advisor headquartered in Summit, NJ, which added nearly $350 million of assets under management and/or administration (“AUM/AUA”).
    • At December 31, 2019, the market value of AUM/AUA at the Peapack Private Wealth Management Division of Peapack-Gladstone Bank (the “Bank”) was $7.5 billion reflecting an increase of $1.7 billion from $5.8 billion at December 31, 2018, reflecting growth of 29% from the end of the prior year.
    • Wealth management fee income totaled $10.12 million and $38.36 million for the quarter and year ended December 31, 2019, reflecting an increase of $1.6 million, or 18%, from the December 2018 quarter and $5.1 million or 15% from the 2018 year. 
    • Wealth management fee income, which comprised approximately 22% of the Company’s total revenue for the quarter ended December 31, 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 $659 million) at December 31, 2019 were $1.78 billion. This reflected net growth of $378 million (27%) when compared to $1.40 billion at December 31, 2018 and reflected net growth of $201 million when compared to the September 30, 2019 balance (13% growth linked quarter; 51% annualized).
    • C&I momentum has continued to build and pipelines remain strong.
    • As of December 31, 2019, total C&I loans comprised 40% of the total loan portfolio, as compared to 36% at December 31, 2018. As of December 31, 2019, total multifamily loans comprised 27% of the total loan portfolio compared to 29% at December 31, 2018.
    • The Bank’s concentration in commercial real estate loans was 404% of risk-based capital at December 31, 2019 compared to 394% at December 31, 2018. The slight increase was due to management’s plan to generate volumes ahead of and at yields in excess of expected significant maturities/payoffs in 2020.

 

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

    • Deposits totaled $4.24 billion at December 31, 2019. This reflected net growth of $348 million (9%) when compared to $3.90 billion at December 31, 2018 and increased $182 million (4% growth linked quarter; 18% annualized) when compared to the September 30, 2019 balance.
    • The Company’s loan-to-deposit ratio was 104.0% at December 31, 2019, up slightly from September 30, 2019 and December 31, 2018 levels .
    • The Company continues to have access to approximately $1.3 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 December 31, 2019, and that net interest income would improve in a rising rate environment but decline in a falling rate environment. Over the past six months, the Company has been managing its balance sheet and deposit costs to mitigate the effects of a falling rate environment. 
  • Capital and asset quality continue to be strong.

    • The Company’s and Bank’s capital ratios at December 31, 2019 remain strong, despite $21.0 million of share repurchases made during the third and fourth quarters as part of the Company’s stock repurchase program. At December 31, 2019 the Company’s tangible capital ratio stood at 9.01%. 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 739,778 shares through the end of the fourth quarter.
    • The Company’s tangible book value per share at December 31, 2019 was $24.47 reflecting an increase of 8% from $22.58 at December 31, 2018.
    • Asset quality metrics continued to be strong as of December 31, 2019. Nonperforming assets at December 31, 2019 were $28.9 million, or 0.56% 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 December 2019 quarter, the Bank’s wealth management business generated $10.12 million in fee income, reflecting an increase of $1.57 million (18% growth) compared to $8.55 million for the December 2018 quarter, and reflecting an increase of $619,000 from the September 2019 quarter (7% growth linked quarter, 26% annualized). The December 2019 quarter included three months of fee income related to Point View compared to one month in the September 2019 quarter, which was acquired effective September 1, 2019, as well as increased fees from net organic growth in assets under management. 

John P. Babcock, President of the “Peapack Private Wealth Management” division said, “I am pleased with our results; we had approximately $750 million of new business inflows in 2019 and have a strong pipeline as we finished 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 to $4.37 billion at December 31, 2019 from $3.89 billion at December 31, 2018, reflecting 12% annual growth. Loan/line origination levels were robust as was paydown activity. Mr. Kennedy noted, “We were pleased to have strong net loan growth, despite increased paydown activity. And, we have entered the new year with strong loan pipelines.” 

Total C&I loans (including equipment finance leases and loans of $659 million) at December 31, 2019 were $1.78 billion. This reflected net growth of $378 million (27%) when compared to $1.40 billion at December 31, 2018 and reflected net growth of $201 million when compared to the September 30, 2019 balance (13% growth linked quarter; 51% annualized).  

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 December 31, 2019, the Company utilized its excess balance sheet liquidity (basically interest-earning deposits), increased client deposits and short-term borrowings to fund its loan growth.

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 have been and will remain keenly focused on our comprehensive deposit rate reduction program with an eye toward relationship profitability.” 

As of December 31, 2019, in addition to approximately $610 million of cash, cash equivalents and investment securities on its balance sheet, the Company also had approximately $1.55 billion of secured funding available from the Federal Home Loan Bank, of which only $233 million was drawn as of December 31, 2019.
             
Mr. Kennedy noted, “Depending on market conditions, we may 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)

  Twelve Months Ended     Twelve Months Ended                  
  December 31, 2019     December 31, 2018                  
  NII     NIM     NII     NIM                  
                                               
NII/NIM excluding the below $ 119,032     2.67%     $ 112,840     2.69%                  
Prepayment premiums received on loan paydowns   1,328     0.03%       2,002     0.05%                  
Effect of maintaining excess interest earning cash during 2019   (86 )   -0.07%                              
Material fees recognized on full paydowns of C&I loans               321     0.01%                  
NII/NIM as reported $ 120,274     2.63%     $ 115,163     2.75%                  
                                               
  Three Months Ended     Three Months Ended     Three Months Ended  
  December 31, 2019     September 30, 2019     December 31, 2018  
  NII     NIM     NII     NIM     NII     NIM  
                                               
NII/NIM excluding the below $ 30,385     2.61%     $ 29,896     2.67%     $ 28,899     2.70%  
Prepayment premiums received on loan paydowns   414     0.03%       236     0.02%       495     0.04%  
Effect of maintaining excess interest earning cash during 2019   115     -0.04%       (47 )   -0.09%       (9 )   -0.02%  
Material fees recognized on full paydowns of C&I loans                                  
NII/NIM as reported $ 30,914     2.60%     $ 30,085     2.60%     $ 29,385     2.72%  

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

Mr. Kennedy noted, “Given the yield curve as well as the recent Fed rate decreases, our reported NIM remained flat, but our core NIM declined slightly this quarter, as was expected. While our models indicate additional slight compression in Q1 2020, assuming no further Fed rate decreases, we believe our margin will gradually begin to improve after that. In addition to managing our balance sheet, asset yields and cost of deposits very closely, we will continue to focus even more on fee based activities.”    

Other Noninterest Income (other than Wealth Management fee income)

Noninterest income from Capital Markets activities (loan level back-to-back swap activities, SBA lending and sale program, and mortgage banking income) totaled $3.73 million for the December 2019 quarter compared to $2.77 million for the September 2019 quarter and $2.19 million for the December 2018 quarter. Income from these programs are not linear each quarter, as some quarters will be higher than others.

Other income totaled $504,000 for the fourth quarter of 2019, compared to $902,000 for the third quarter of 2019, and $3.6 million for the fourth quarter of 2018. The December 2018 quarter included $3.00 million of life insurance proceeds related to the December 31, 2018 passing of the founder and managing principal of Murphy Capital Management.

The December 2018 quarter included a $4.39 million loss on the sale of $131 million of fixed rate multifamily loans, sold as part of the Company’s balance sheet management strategy.    

Operating Expenses

The Company’s total operating expenses were $26.70 million for the quarter ended December 31, 2019, compared to $26.26 million for the September 2019 quarter and $25.52 million for the December 2018 quarter. The December 2019 quarter included three months of expenses related to Point View’s operations compared to one month in the September 2019 quarter. Strategic hiring and normal salary increases also contributed to the increase for the December 2019 quarter. There was no FDIC insurance expense for the December 2019 quarter or the September 2019 quarter as the Bank utilized its small bank assessment credit from the FDIC. 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 continue to be important given the current yield curve environment.”

Income Taxes

The effective tax rate for the December 2019 quarter was 31.2%, compared to 29.9% for the September 2019 quarter, and 21.2% for the December 2018 quarter. The effective tax rate for the year ended December 31, 2019 was 28.3% compared to 23.5% for the year ended December 31, 2018. The 2019 periods included higher NJ State Income Tax due to the change in NJ Tax law.

Asset Quality / Provision for Loan and Lease Losses

Nonperforming assets at December 31, 2019 (which does not include troubled debt restructured loans that are performing in accordance with their terms) were $28.9 million, or 0.56% of total assets, compared to $29.7 million, or 0.60% of total assets, at September 30, 2019 and $25.7 million, or 0.56% of total assets, at December 31, 2018. Total loans past due 30 through 89 days and still accruing were $1.9 million at December 31, 2019, compared to $6.3 million at September 30, 2019 and $3.5 million at December 31, 2018.    

For the quarter ended December 31, 2019, the Company’s provision for loan and lease losses was $2.0 million compared to $800,000 for the September 2019 quarter and $1.5 million for the December 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 December 31, 2019, the allowance for loan and lease losses was $43.68 million (151% of nonperforming loans and 0.99% of total loans), compared to $41.58 million at September 30, 2019 (142% of nonperforming loans and 1.00% of total loans), and $38.50 million (150% of nonperforming loans and 0.98% of total loans) at December 31, 2018. 

Capital / Dividend / Stock Repurchase Program

The Company’s capital position during the December 2019 quarter was benefitted by net income partially offset by the purchase of shares through the Company’s stock repurchase program. During the quarter, the Company purchased 143,925 shares, at an average price of $29.78, for a total cost of $4.3 million.

The Company’s and Bank’s capital ratios at December 31, 2019 all remain strong. Such ratios remain well above regulatory well capitalized standards.

On January 28, 2020, the Company declared a cash dividend of $0.05 per share payable on February 26, 2020 to shareholders of record on February 11, 2020.

ABOUT THE COMPANY

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $5.2 billion and AUM/AUA of $7.5 billion as of December 31, 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  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
    2019     2019     2019     2019     2018  
Income Statement Data:                                        
Interest income   $ 45,556     $ 45,948     $ 44,603     $ 44,563     $ 42,781  
Interest expense     14,642       15,863       15,335       14,556       13,396  
Net interest income     30,914       30,085       29,268       30,007       29,385  
Provision for loan and lease losses     1,950       800       1,150       100       1,500  
Net interest income after provision for loan and
  lease losses
    28,964       29,285       28,118       29,907       27,885  
Wealth management fee income     10,120       9,501       9,568       9,174       8,552  
Service charges and fees     893       882       897       816       938  
Bank owned life insurance     325       332       326       338       351  
Gain on loans held for sale at fair value
  (Mortgage banking) (A)
    344       198       132       47       74  
Loss on loans held for sale at lower of cost or
  fair value
    (4 )     (6 )                 (4,392 )
Fee income related to loan level, back-to-back
  swaps (A)
    2,459       2,349       721       270       1,838  
Gain on sale of SBA loans (A)     929       224       573       419       277  
Other income (B)     504       902       740       606       3,571  
Securities gains/(losses), net     (45 )     34       69       59       46  
Total other income     15,525       14,416       13,026       11,729       11,255  
Salaries and employee benefits     17,954       17,476       17,543       17,156       16,372  
Premises and equipment     3,898       3,849       3,600       3,388       3,422  
FDIC insurance expense           (277 )     277       277       645  
Other expenses     4,849       5,211       4,753       4,894       5,085  
Total operating expenses     26,701       26,259       26,173       25,715       25,524  
Income before income taxes     17,788       17,442       14,971       15,921       13,616  
Income tax expense     5,555       5,216       3,421       4,496       2,887  
Net income   $ 12,233     $ 12,226     $ 11,550     $ 11,425     $ 10,729  
                                         
Total revenue (C)   $ 46,439     $ 44,501     $ 42,294     $ 41,736     $ 40,640  
Per Common Share Data:                                        
Earnings per share (basic)   $ 0.64     $ 0.63     $ 0.59     $ 0.59     $ 0.56  
Earnings per share (diluted)     0.64       0.63       0.59       0.58       0.55  
Weighted average number of common
  shares outstanding:
                                       
Basic     18,966,917       19,314,666       19,447,155       19,350,452       19,260,033  
Diluted     19,207,738       19,484,905       19,568,371       19,658,006       19,424,906  
Performance Ratios:                                        
Return on average assets annualized (ROAA)     0.98 %     1.00 %     0.99 %     0.98 %     0.96 %
Return on average equity annualized (ROAE)     9.81 %     9.87 %     9.49 %     9.65 %     9.32 %
Net interest margin (tax- equivalent basis)     2.60 %     2.60 %     2.64 %     2.70 %     2.72 %
GAAP efficiency ratio (D)     57.50 %     59.01 %     61.88 %     61.61 %     62.81 %
Operating expenses / average assets annualized     2.13 %     2.16 %     2.25 %     2.21 %     2.28 %

(A) Gain on loans held for sale at fair value (mortgage banking), fee income related to loan level, back-to-back swaps and gain on sale of SBA loans are all included in “capital markets activity” as referred to within the earnings release.
(B) 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.
(C) Total revenue includes net interest income plus total other income.
(D) 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 Twelve Months Ended                  
    Dec 31,     Change  
    2019     2018     $     %  
Income Statement Data:                                
Interest income   $ 180,670     $ 159,686     $ 20,984       13 %
Interest expense     60,396       44,523       15,873       36 %
Net interest income     120,274       115,163       5,111       4 %
Provision for loan and lease losses     4,000       3,550       450       13 %
Net interest income after provision for loan and
  lease losses
    116,274       111,613       4,661       4 %
Wealth management fee income     38,363       33,245       5,118       15 %
Service charges and fees     3,488       3,502       (14 )     0 %
Bank owned life insurance     1,321       1,381       (60 )     -4 %
Gain on loans held for sale at fair value (Mortgage banking) (A)     721       334       387       116 %
Loss on loans held for sale at lower of cost or fair value     (10 )     (4,392 )     4,382       -100 %
Fee income related to loan level, back-to-back swaps (A)     5,799       3,844       1,955       51 %
Gain on sale of SBA loans (A)     2,145       1,636       509       31 %
Other income (B)     2,752       5,036       (2,284 )     -45 %
Securities gains/(losses), net     117       (393 )     510       -130 %
Total other income     54,696       44,193       10,503       24 %
Salaries and employee benefits     70,129       62,802       7,327       12 %
Premises and equipment     14,735       13,497       1,238       9 %
FDIC insurance expense     277       2,443       (2,166 )     -89 %
Other expenses     19,707       19,344       363       2 %
Total operating expenses     104,848       98,086       6,762       7 %
Income before income taxes     66,122       57,720       8,402       15 %
Income tax expense     18,688       13,550       5,138       38 %
Net income   $ 47,434     $ 44,170     $ 3,264       7 %
                                 
Total revenue (C)   $ 174,970     $ 159,356     $ 15,614       10 %
Per Common Share Data:                                
Earnings per share (basic)   $ 2.46     $ 2.33     $ 0.13       6 %
Earnings per share (diluted)     2.44       2.31       0.13       6 %
Weighted average number of common shares outstanding:                                
Basic     19,268,870       18,965,305       303,565       2 %
Diluted     19,411,448       19,148,645       262,803       1 %
Performance Ratios:                                
Return on average assets annualized (ROAA)     0.99 %     1.02 %     (0.03 )%        
Return on average equity annualized (ROAE)     9.70 %     10.13 %     (0.43 )%        
Net interest margin (tax- equivalent basis)     2.63 %     2.75 %     (0.12 )%        
GAAP efficiency ratio (D)     59.92 %     61.55 %     (1.63 )%        
Operating expenses / average assets annualized     2.19 %     2.25 %     (0.06 )%        

(A) Gain on loans held for sale at fair value (mortgage banking), fee income related to loan level, back-to-back swaps and gain on sale of SBA loans are all included in “capital markets activity” as referred to within the earnings release.
(B) 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.
(C) Total revenue includes net interest income plus total other income.
(D) 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  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
    2019 (A)     2019     2019     2019     2018  
ASSETS                                        
Cash and due from banks   $ 6,591     $ 5,770     $ 5,351     $ 4,726     $ 5,914  
Federal funds sold     102       101       101       101       101  
Interest-earning deposits     201,492       221,242       298,575       235,487       154,758  
Total cash and cash equivalents     208,185       227,113       304,027       240,314       160,773  
Securities available for sale     390,755       349,989       378,839       384,400       377,936  
Equity security     10,836       7,881       4,847       4,778       4,719  
FHLB and FRB stock, at cost     24,068       21,403       18,338       18,460       18,533  
Residential mortgage     552,019       561,543       572,926       569,304       573,146  
Multifamily mortgage     1,210,003       1,197,093       1,129,476       1,104,406       1,138,190  
Commercial mortgage     761,244       721,261       694,674       705,221       702,165  
Commercial loans     1,776,450       1,575,076       1,518,591       1,410,146       1,398,214  
Consumer loans     54,372       53,829       53,995       54,276       58,678  
Home equity lines of credit     57,248       58,423       62,522       57,639       62,191  
Other loans     349       380       424       355       465  
Total loans     4,411,685       4,167,605       4,032,608       3,901,347       3,933,049  
Less: Allowances for loan and lease losses     43,676       41,580       39,791       38,653       38,504  
Net loans     4,368,009       4,126,025       3,992,817       3,862,694       3,894,545  
Premises and equipment     20,913       20,898       20,987       21,201       27,408  
Other real estate owned     50       336                    
Accrued interest receivable     10,494       11,759       11,594       11,688       10,814  
Bank owned life insurance     46,128       45,940       45,744       45,554       45,353  
Goodwill and other intangible assets (A)     40,588       41,111       31,941       32,170       32,399  
Finance lease right-of-use assets (B)     5,078       5,265       5,452       5,639        
Operating lease right-of-use assets (B)     12,132       10,328       11,017       7,541        
Other assets     45,643       57,361       45,631       27,867       45,378  
TOTAL ASSETS   $ 5,182,879     $ 4,925,409     $ 4,871,234     $ 4,662,306     $ 4,617,858  
                                         
LIABILITIES                                        
Deposits:                                        
Noninterest-bearing demand deposits   $ 529,281     $ 544,464     $ 544,431     $ 476,013     $ 463,926  
Interest-bearing demand deposits     1,510,363       1,352,471       1,388,821       1,268,823       1,247,305  
Savings     112,652       115,448       112,438       114,865       114,674  
Money market accounts     1,196,313       1,196,188       1,207,358       1,209,835       1,243,369  
Certificates of deposit – Retail     633,763       583,425       570,384       545,450       510,724  
Certificates of deposit – Listing Service     47,430       55,664       58,541       68,055       79,195  
Subtotal “customer” deposits     4,029,802       3,847,660       3,881,973       3,683,041       3,659,193  
IB Demand – Brokered     180,000       180,000       180,000       180,000       180,000  
Certificates of deposit – Brokered     33,709       33,696       33,682       56,165       56,147  
Total deposits     4,243,511       4,061,356       4,095,655       3,919,206       3,895,340  
Short-term borrowings     128,100       67,000                    
FHLB advances     105,000       105,000       105,000       105,000       108,000  
Finance lease liability     7,598       7,793       7,985       8,175       8,362  
Operating lease liability (B)     12,423       10,619       11,269       7,683        
Subordinated debt, net     83,417       83,361       83,305       83,249       83,193  
Other liabilities     91,227       94,930       74,132       57,521       53,950  
Due to brokers, securities settlements     7,951                          
TOTAL LIABILITIES     4,679,227       4,430,059       4,377,346       4,180,834       4,148,845  
Shareholders’ equity     503,652       495,350       493,888       481,472       469,013  
TOTAL LIABILITIES AND                                        
SHAREHOLDERS’ EQUITY   $ 5,182,879     $ 4,925,409     $ 4,871,234     $ 4,662,306     $ 4,617,858  
Assets under management and / or administration at
  Peapack-Gladstone Banks Private Wealth Management
  Division (market value, not included above-dollars in billions)
  $ 7.5     $ 7.0     $ 6.6     $ 6.3     $ 5.8  

(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  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
    2019     2019     2019     2019     2018  
Asset Quality:                                        
Loans past due over 90 days and still accruing   $     $     $     $     $  
Nonaccrual loans (A)     28,881       29,383       31,150       24,892       25,715  
Other real estate owned     50       336                    
Total nonperforming assets   $ 28,931     $ 29,719     $ 31,150     $ 24,892     $ 25,715  
                                         
Nonperforming loans to total loans     0.65 %     0.71 %     0.77 %     0.64 %     0.65 %
Nonperforming assets to total assets     0.56 %     0.60 %     0.64 %     0.53 %     0.56 %
                                         
Performing TDRs (B)(C)   $ 2,357     $ 2,527     $ 3,772     $ 4,274     $ 4,303  
                                         
Loans past due 30 through 89 days and still accruing (D)   $ 1,910     $ 6,333     $ 432     $ 2,492     $ 3,484  
                                         
Classified loans   $ 58,908     $ 53,882     $ 56,135     $ 51,306     $ 58,265  
                                         
Impaired loans   $ 35,924     $ 36,627     $ 34,941     $ 29,185     $ 31,300  
                                         
Allowance for loan and lease losses:                                        
Beginning of period   $ 41,580     $ 39,791     $ 38,653     $ 38,504     $ 37,293  
Provision for loan and lease losses     1,950       800       1,150       100       1,500  
Recoveries (charge-offs), net     146       989       (12 )     49       (289 )
End of period   $ 43,676     $ 41,580     $ 39,791     $ 38,653     $ 38,504  
                                         
ALLL to nonperforming loans     151.23 %     141.51 %     127.74 %     155.28 %     149.73 %
ALLL to total loans     0.990 %     0.998 %     0.987 %     0.991 %     0.979 %
General ALLL to total loans (E)     0.927 %     0.932 %     0.956 %     0.984 %     0.972 %

(A) Amount includes one healthcare real estate secured loan with a loan balance of $14.5 million at December 31, 2019, that went on nonaccrual at December 31, 2018. In addition, one casual dining commercial banking relationship, with a balance of $5.9 million at December 31, 2019, that went on nonaccrual at June 30, 2019.
(B)  Amounts reflect TDRs that are paying according to restructured terms.
(C) Amount does not include $25.8 million at December 31, 2019, $19.7 million at September 30, 2019, $19.8 million at June 30, 2019, $20.0 million at March 31, 2019 and $20.5 million at December 31, 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)

    December 31,     September 30,     December 31,  
    2019     2019     2018  
Capital Adequacy                                    
Equity to total assets (A)         9.72 %         10.06 %         10.16 %
Tangible Equity to tangible assets (B)         9.01 %         9.30 %         9.52 %
Book value per share (C)       $ 26.61         $ 26.07         $ 24.25  
Tangible Book Value per share (D)       $ 24.47         $ 23.91         $ 22.58  


                   
    December 31,     September 30,     December 31,  
    2019     2019     2018  
Regulatory Capital Holding Company                                                
Tier I leverage   $ 463,521     9.33%     $ 455,179     9.43%     $ 438,240     9.82%  
Tier I capital to risk-weighted assets     463,521     11.14       455,179     11.23       438,240     11.76  
Common equity tier I capital ratio
  to risk-weighted assets
    463,520     11.14       455,177     11.23       438,238     11.76  
Tier I & II capital to risk-weighted assets     590,614     14.20       580,120     14.31       559,937     15.03  
                                                 
Regulatory Capital Bank                                                
Tier I leverage (E)   $ 527,833     10.63%     $ 534,351     11.08%     $ 504,504     11.32%  
Tier I capital to risk-weighted assets (F)     527,833     12.70       534,351     13.20       504,504     13.56  
Common equity tier I capital ratio
  to risk-weighted assets (G)
    527,832     12.70       534,349     13.20       504,502     13.56  
Tier I & II capital to risk-weighted assets (H)     571,509     13.76       575,931     14.23       543,008     14.59  


(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  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
    2019     2019     2019     2019     2018  
Residential loans retained   $ 17,115     $ 19,073     $ 21,998     $ 10,839     $ 24,937  
Residential loans sold     21,255       15,846