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

PGC

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  2018 
Residential loans retained $19,073  $21,998  $10,839  $24,937  $14,412 
Residential loans sold  15,846   9,785   3,090   4,686   6,717 
Total residential loans  34,919   31,783   13,929   29,623   21,129 
Commercial real estate  43,414   34,204   21,025   63,486   23,950 
Multifamily  77,138   58,604   21,122   58,175   12,328 
Commercial (C&I) loans (A) (B)  228,903   143,944   141,128   285,950   133,973 
SBA  3,510   3,740   9,050   5,695   4,800 
Wealth lines of credit (A)  6,980   6,725   7,380   5,850   6,100 
Total commercial loans  359,945   247,217   199,705   419,156   181,151 
Installment loans  362   1,497   558   649   1,634 
Home equity lines of credit (A)  5,631   3,626   1,607   3,625   10,273 
Total loans closed $400,857  $284,123  $215,799  $453,053  $214,187 

 

  For the Nine Months Ended 
  Sept 30,  Sept 30, 
  2019  2018 
Residential loans retained $51,910  $48,271 
Residential loans sold  28,721   20,877 
Total residential loans  80,631   69,148 
Commercial real estate  98,643   79,115 
Multifamily  156,864   38,071 
Commercial (C&I) loans (A) (B)  513,975   390,203 
SBA  16,300   19,810 
Wealth lines of credit (A)  21,085   36,898 
Total commercial loans  806,867   564,097 
Installment loans  2,417   4,020 
Home equity lines of credit (A)  10,864   17,861 
Total loans closed $900,779  $655,126 

(A) Includes loans and lines of credit that closed in the period but not necessarily funded.
(B) Includes equipment finance.


PEAPACK-GLADSTONE FINANCIAL CORPORATION
AVERAGE BALANCE SHEET
UNAUDITED
THREE MONTHS ENDED
(Tax-Equivalent Basis, Dollars in Thousands)

  September 30, 2019  September 30, 2018 
  Average  Income/      Average  Income/     
  Balance  Expense  Yield  Balance  Expense  Yield 
ASSETS:                        
Interest-earning assets:                        
Investments:                        
Taxable (A) $393,386  $2,477   2.52% $367,955  $2,385   2.59%
Tax-exempt (A) (B)  13,497   165   4.89   19,201   179   3.73 
                         
Loans (B) (C):                        
Mortgages  567,097   4,811   3.39   563,066   4,671   3.32 
Commercial mortgages  1,856,216   17,870   3.85   1,960,801   18,488   3.77 
Commercial  1,530,131   18,605   4.86   1,109,492   13,055   4.71 
Commercial construction  2,619   51   7.79          
Installment  53,891   560   4.16   72,246   674   3.73 
Home equity  58,573   736   5.03   58,082   682   4.70 
Other  396   11   11.11   439   11   10.02 
Total loans  4,068,923   42,644   4.19   3,764,126   37,581   3.99 
Federal funds sold  101      0.25   101      0.25 
Interest-earning deposits  256,865   1,362   2.12   95,014   418   1.76 
Total interest-earning assets  4,732,772   46,648   3.94%  4,246,397   40,563   3.82%
Noninterest-earning assets:                        
Cash and due from banks  5,628           5,141         
Allowance for loan and lease losses  (40,806)          (38,473)        
Premises and equipment  21,121           28,216         
Other assets  151,265           103,422         
Total noninterest-earning assets  137,208           98,306         
Total assets $4,869,980          $4,344,703         
                         
LIABILITIES:                        
Interest-bearing deposits:                        
Checking $1,410,837  $4,467   1.27% $1,148,921  $2,644   0.92%
Money markets  1,184,589   4,227   1.43   1,065,338   3,261   1.22 
Savings  113,961   16   0.06   118,996   17   0.06 
Certificates of deposit – retail  649,393   3,781   2.33   538,985   2,545   1.89 
Subtotal interest-bearing deposits  3,358,780   12,491   1.49   2,872,240   8,467   1.18 
Interest-bearing demand – brokered  180,000   901   2.00   180,000   796   1.77 
Certificates of deposit – brokered  33,688   267   3.17   61,192   394   2.58 
Total interest-bearing deposits  3,572,468   13,659   1.53   3,113,432   9,657   1.24 
Borrowings  114,584   886   3.09   167,153   1,038   2.48 
Capital lease obligation  7,866   94   4.78   8,614   103   4.78 
Subordinated debt  83,329   1,224   5.88   83,115   1,223   5.89 
Total interest-bearing liabilities  3,778,247   15,863   1.68%  3,372,314   12,021   1.43%
Noninterest-bearing liabilities:                        
Demand deposits  512,497           495,163         
Accrued expenses and other liabilities  83,554           33,943         
Total noninterest-bearing liabilities  596,051           529,106         
Shareholders’ equity  495,682           443,283         
Total liabilities and shareholders’ equity $4,869,980          $4,344,703         
Net interest income     $30,785          $28,542     
Net interest spread          2.26%          2.39%
Net interest margin (D)          2.60%          2.69%

(A) Average balances for available for sale securities are based on amortized cost.
(B) Interest income is presented on a tax-equivalent basis using a 21% federal tax rate.
(C) Loans are stated net of unearned income and include nonaccrual loans.
(D) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
AVERAGE BALANCE SHEET
UNAUDITED
THREE MONTHS ENDED
(Tax-Equivalent Basis, Dollars in Thousands)

  September 30, 2019  June 30, 2019 
  Average  Income/      Average  Income/     
  Balance  Expense  Yield  Balance  Expense  Yield 
ASSETS:                        
Interest-earning assets:                        
Investments:                        
Taxable (A) $393,386  $2,477   2.52% $392,079  $2,639   2.69%
Tax-exempt (A) (B)  13,497   165   4.89   16,913   206   4.87 
                         
Loans (B) (C):                        
Mortgages  567,097   4,811   3.39   568,020   4,835   3.40 
Commercial mortgages  1,856,216   17,870   3.85   1,786,086   17,581   3.94 
Commercial  1,530,131   18,605   4.86   1,417,112   17,303   4.88 
Commercial construction  2,619   51   7.79          
Installment  53,891   560   4.16   54,565   585   4.29 
Home equity  58,573   736   5.03   63,112   818   5.18 
Other  396   11   11.11   375   10   10.67 
Total loans  4,068,923   42,644   4.19   3,889,270   41,132   4.23 
Federal funds sold  101      0.25   101      0.25 
Interest-earning deposits  256,865   1,362   2.12   241,129   1,265   2.10 
Total interest-earning assets  4,732,772   46,648   3.94%  4,539,492   45,242   3.99%
Noninterest-earning assets:                        
Cash and due from banks  5,628           5,280         
Allowance for loan and lease losses  (40,806)          (39,138)        
Premises and equipment  21,121           21,176         
Other assets  151,265           127,798         
Total noninterest-earning assets  137,208           115,116         
Total assets $4,869,980          $4,654,608         
                         
LIABILITIES:                        
Interest-bearing deposits:                        
Checking $1,410,837  $4,467   1.27% $1,266,909  $4,123   1.30%
Money markets  1,184,589   4,227   1.43   1,197,998   4,415   1.47 
Savings  113,961   16   0.06   112,693   16   0.06 
Certificates of deposit – retail  649,393   3,781   2.33   610,493   3,461   2.27 
Subtotal interest-bearing deposits  3,358,780   12,491   1.49   3,188,093   12,015   1.51 
Interest-bearing demand – brokered  180,000   901   2.00   180,000   836   1.86 
Certificates of deposit – brokered  33,688   267   3.17   46,639   326   2.80 
Total interest-bearing deposits  3,572,468   13,659   1.53   3,414,732   13,177   1.54 
Borrowings  114,584   886   3.09   105,000   838   3.19 
Capital lease obligation  7,866   94   4.78   8,052   97   4.82 
Subordinated debt  83,329   1,224   5.88   83,272   1,223   5.87 
Total interest-bearing liabilities  3,778,247   15,863   1.68%  3,611,056   15,335   1.70%
Noninterest-bearing liabilities:                        
Demand deposits  512,497           497,853         
Accrued expenses and other liabilities  83,554           58,721         
Total noninterest-bearing liabilities  596,051           556,574         
Shareholders’ equity  495,682           486,978         
Total liabilities and shareholders’ equity $4,869,980          $4,654,608         
Net interest income     $30,785          $29,907     
Net interest spread          2.26%          2.29%
Net interest margin (D)          2.60%          2.64%

(A) Average balances for available for sale securities are based on amortized cost.
(B) Interest income is presented on a tax-equivalent basis using a 21% federal tax rate.
(C) Loans are stated net of unearned income and include nonaccrual loans.
(D) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
AVERAGE BALANCE SHEET
UNAUDITED
NINE MONTHS ENDED
Tax-Equivalent Basis, Dollars in Thousands

  September 30, 2019  September 30, 2018 
  Average  Income/      Average  Income/     
  Balance  Expense  Yield  Balance  Expense  Yield 
ASSETS:                        
Interest-earning assets:                        
Investments:                        
Taxable (A) $391,032  $7,800   2.66% $356,453  $6,382   2.39%
Tax-exempt (A) (B)  15,904   581   4.87   21,365   558   3.48 
                         
Loans (B) (C):                        
Mortgages  568,902   14,541   3.41   566,600   14,110   3.32 
Commercial mortgages  1,822,341   53,472   3.91   1,986,497   55,868   3.75 
Commercial  1,442,827   52,659   4.87   1,042,609   35,938   4.60 
Commercial construction  883   51   7.70          
Installment  54,552   1,722   4.21   75,279   1,979   3.51 
Home equity  60,695   2,319   5.09   61,964   2,028   4.36 
Other  394   32   10.83   448   34   10.12 
Total loans  3,950,594   124,796   4.21   3,733,397   109,957   3.93 
Federal funds sold  101      0.25   101      0.25 
Interest-earning deposits  245,153   3,897   2.12   96,402   1,170   1.62 
Total interest-earning assets  4,602,784   137,074   3.97%  4,207,718   118,067   3.74%
Noninterest-earning assets:                        
Cash and due from banks  5,436           4,831         
Allowance for loan and lease losses  (39,638)          (37,947)        
Premises and equipment  21,253           28,722         
Other assets  133,830           100,867         
Total noninterest-earning assets  120,881           96,473         
Total assets $4,723,665          $4,304,191         
                         
LIABILITIES:                        
Interest-bearing deposits:                        
Checking $1,321,248  $12,299   1.24% $1,121,748  $6,369   0.76%
Money markets  1,196,778   12,978   1.45   1,033,313   7,639   0.99 
Savings  113,552   48   0.06   121,176   49   0.05 
Certificates of deposit – retail  622,509   10,476   2.24   550,101   7,024   1.70 
Subtotal interest-bearing deposits  3,254,087   35,801   1.47   2,826,338   21,081   0.99 
Interest-bearing demand – brokered  180,000   2,476   1.83   180,000   2,280   1.69 
Certificates of deposit – brokered  45,412   958   2.81   65,677   1,222   2.48 
Total interest-bearing deposits  3,479,499   39,235   1.50   3,072,015   24,583   1.07 
Borrowings  108,526   2,558   3.14   158,612   2,563   2.15 
Capital lease obligation  8,052   290   4.80   8,789   316   4.79 
Subordinated debt  83,272   3,671   5.88   83,086   3,665   5.88 
Total interest-bearing liabilities  3,679,349   45,754   1.66%  3,322,502   31,127   1.25%
Noninterest-bearing liabilities:                        
Demand deposits  494,023           523,620         
Accrued expenses and other liabilities  64,806           30,533         
Total noninterest-bearing liabilities  558,829           554,153         
Shareholders’ equity  485,487           427,536         
Total liabilities and shareholders’ equity $4,723,665          $4,304,191         
Net interest income     $91,320          $86,940     
Net interest spread          2.31%          2.49%
Net interest margin (D)          2.65%          2.75%

(A) Average balances for available for sale securities are based on amortized cost.
(B) Interest income is presented on a tax-equivalent basis using a 21% federal tax rate.
(C) Loans are stated net of unearned income and include nonaccrual loans.
(D) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
NON-GAAP FINANCIAL MEASURES RECONCILIATION

Tangible book value per share and tangible equity as a percentage of tangible assets at period end are non-GAAP financial measures derived from GAAP-based amounts.  We calculate tangible equity and tangible assets by excluding the balance of intangible assets from shareholders’ equity and total assets, respectively.  We calculate tangible book value per share by dividing tangible equity by period end common shares outstanding, as compared to book value per common share, which we calculate by dividing shareholders’ equity by period end common shares outstanding.  We calculate tangible equity as a percentage of tangible assets at period end by dividing tangible equity by tangible assets at period end.  We believe that this is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of risk-based capital ratios.

The efficiency ratio is a non-GAAP measure of expense control relative to recurring revenue.  We calculate the efficiency ratio by dividing total noninterest expenses, excluding ORE provision, as determined under GAAP, by net interest income and total noninterest income as determined under GAAP, but excluding net gains/(losses) on loans held for sale at lower of cost or fair value and excluding net gains on securities from this calculation, which we refer to below as recurring revenue.  We believe that this provides one reasonable measure of core expenses relative to core revenue.

We believe that these non-GAAP financial measures provide information that is important to investors and that is useful in understanding our financial position, results and ratios.  Our management internally assesses our performance based, in part, on these measures.  However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures.  As other companies may use different calculations for these measures, this presentation may not be comparable to other similarly titles measures reported by other companies.  A reconciliation of the non-GAAP measures of tangible common equity, tangible book value per share and efficiency ratio to the underlying GAAP numbers is set forth below.

Non-GAAP Financial Reconciliation

(Dollars in thousands, except share data)

  Three Months Ended 
  Sept 30,  June 30,  March 31,  Dec 31,  Sept 30, 
Tangible Book Value Per Share 2019  2019  2019  2018  2018 
Shareholders’ equity $495,350  $493,888  $481,472  $469,013  $454,433 
Less:  Intangible assets, net  41,111   31,941   32,170   32,399   34,297 
Tangible equity  454,239   461,947   449,302   436,614   420,136 
                     
Period end shares outstanding  18,999,241   19,456,312   19,445,363   19,337,662   19,203,727 
Tangible book value per share $23.91  $23.74  $23.11  $22.58  $21.88 
Book value per share  26.07   25.38   24.76   24.25   23.66 
                     
Tangible Equity to Tangible Assets                    
Total assets $4,925,409  $4,871,234  $4,662,306  $4,617,858  $4,435,709 
Less: Intangible assets, net  41,111   31,941   32,170   32,399   34,297 
Tangible assets  4,884,298   4,839,293   4,630,136   4,585,459   4,401,412 
Tangible equity to tangible assets  9.30%  9.55%  9.70%  9.52%  9.55%
Equity to assets  10.06%  10.14%  10.33%  10.16%  10.24%

 

  Three Months Ended 
  Sept 30,  June 30,  March 31,  Dec 31,  Sept 30, 
Efficiency Ratio 2019  2019  2019  2018  2018 
Net interest income $30,085  $29,268  $30,007  $29,385  $28,142 
Total other income  14,416   13,026   11,729   11,255   10,983 
Less:  Loss/(gain) on loans held for sale                    
at lower of cost or fair value  6         4,392    
Less:  Income from life insurance proceeds           (3,000)   
Add:  Securities (gains)/losses, net  (34)  (69)  (59)  (46)  325 
Total recurring revenue  44,473   42,225   41,677   41,986   39,450 
                     
Operating expenses  26,259   26,173   25,715   25,524   24,284 
Less: ORE provision              28 
Total operating expense  26,259   26,173   25,715   25,524   24,256 
                     
Efficiency ratio  59.04%  61.98%  61.70%  60.79%  61.49%

 

  For the Nine Months Ended 
  Sept 30,  Sept 30, 
Efficiency Ratio 2019  2018 
Net interest income $89,360  $85,778 
Total other income  39,171   32,938 
Add:  Securities (gains)/losses, net  (162)  439 
Less:  Loss/(gain) on loans held for sale        
at lower of cost or fair value  6    
Total recurring revenue  128,375   119,155 
         
Operating expenses  78,147   72,562 
Less: ORE provision     232 
Total operating expense  78,147   72,330 
         
Efficiency ratio  60.87%  60.70%

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