Peapack-Gladstone Financial Corporation Reports Third Quarter Results

Company Release - 10/28/2020

Bedminster, N.J., Oct. 28, 2020 (GLOBE NEWSWIRE) -- via NewMediaWire -- Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) announces its third quarter 2020 results.

This earnings release should be read in conjunction with the Company’s Q3 2020 Investor Update (and Supplemental Financial Information), a copy of which is available on our website at www.pgbank.com and via a current report on Form 8-K on the website of the Securities and Exchange Commission at www.sec.gov

The Company recorded total revenue of $143.22 million, net income of $23.16 million and diluted earnings per share (“EPS”) of $1.22 for the nine months ended September 30, 2020, compared to $128.53 million, $35.20 million and $1.81, respectively, for the nine months ended September 30, 2019.

The 2020 nine-month period included increased net interest income and increased non-interest income due principally to earnings from the Paycheck Protection Program (“PPP”) and increased wealth management income (primarily due to the acquisition of Point View Wealth Management acquired in September 2019) , which was partially offset by increased operating expenses (due in part to the previous mentioned firm acquired in September 2019).

The 2020 nine-month period also included a tax benefit of $3.2 million recorded in the first quarter of 2020 caused by the changes in the treatment of tax net operating losses (“NOL”) under the provisions of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.   The decrease in net income and EPS for the 2020 nine-month period was the result of a $30.05 million provision for loan losses due to the current environment created by the COVID-19 pandemic, which led to increased qualitative loss factors when calculating the allowance for loan losses. This compared to a $2.05 million provision for the 2019 nine-month period.   

For the quarter ended September 30, 2020, the Company recorded revenue of $52.36 million, net income of $13.55 million and EPS of $0.71, compared to $44.51 million, $12.23 million and $0.63, respectively, for the same three-month period last year.

The 2020 quarter included increased net interest income and increased non-interest income due principally to earnings from the PPP and increased wealth management income (primarily due to the acquisition of Point View  in September 2019) , which was partially offset by increased operating expenses (due in part to the previous mentioned firm acquired in September 2019), and an increase in the provision for loan and lease losses to $5.15 million due to the current environment created by the COVID-19 pandemic, compared to an $800,000 provision for loan and lease losses for the 2019 quarter.   

Douglas L. Kennedy, President and CEO, said, “As I mentioned last quarter, our employees worked tirelessly to process approximately 2,500 PPP applications resulting in approximately $600 million in fundings. The Bank made a decision to sell a significant portion ($355 million) of its PPP loans in the third quarter, which generated a $7.4 million gain. The sale was to a well-respected firm that focuses on the forgiveness and ongoing servicing process associated with PPP loans, who will serve our clients well. Our client relationship is still maintained as we maintained all depository relationships (including those from the PPP loan fundings) and all loan relationships outside of PPP loans. Further the sale has given us the ability to free up internal resources to focus on generating new business and continuing to provide excellent service to our clients.” 

As of September 30, 2020, the Bank still holds $202 million of PPP loans (almost all of which exceed $2.0 million in original principal amount) with approximately $1.5 million of net deferred fees which will be recognized into income over the two-year maturity of the loan or as forgiven or repaid.

Mr. Kennedy also said, “The COVID-19 pandemic continues to have a devastating effect on businesses both locally and nationally. We have allowed our commercial and business clients to have their loan deferred for a six-month period. As of June 30, 2020, our deferrals stood at $914 million. As of September 30, 2020, deferrals were $828 million. An additional $247 million came off deferral status in October bringing deferrals down to $581 million. An additional $449 million is scheduled to come off in November. Further, as of this writing, our deferrals in sectors with COVID elevated residual risk (Hospitality and Food Services and Retail - Non-Grocery Anchored) totaled $95 million or 2% of total loans.”

For more information about the Company’s loan deferrals, including a breakdown by loan type and industry, as well as detail concerning our loan exposure to industries, please see the Q3 2020 Investor Update (and Supplemental financial Information).

EXECUTIVE SUMMARY:

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

Year over Year Comparison

    Nine Months Ended     Nine Months Ended                    
    September   30,     September   30,       Increase/  
(Dollars in millions, except per share data)   2020     2019       (Decrease)  
Net interest income   $ 95.87     $ 89.36       $ 6.51       7 %
Wealth management fee income (A)     30.07       28.24         1.83       6  
Capital markets activity (B)     4.81       4.93         (0.12 )     (2 )
Other income (C)     12.47       6.00         6.47       108  
Total other income     47.35       39.17         8.18       21  
Operating expenses     85.71       78.15         7.56       10  
Pretax income before provision for loan losses     57.51       50.38         7.13       14  
Provision for loan and lease losses (D)     30.05       2.05         28.00       1,366  
Pretax income     27.46       48.33         (20.87 )     (43 )
Income tax expense (E)     4.30       13.13         (8.83 )     (67 )
Net income   $ 23.16     $ 35.20       $ (12.04 )     (34 )%
Diluted EPS   $ 1.22     $ 1.81       $ (0.59 )     (33 )%
                                   
Total Revenue   $ 143.22     $ 128.53       $ 14.69       11 %
                                   
Return on average assets annualized     0.54 %     0.99 %       (0.45 )        
Return on average equity annualized     6.07 %     9.67 %       (3.60 )        

 

  1. The nine months ended September 30, 2020 included wealth management fee income and expense related to Point View Wealth Management, (“Point View”), which was acquired effective September 1, 2019. 
  2. Capital markets activity includes loan level back-to-back swap activities, the SBA lending and sale program, and mortgage banking activities.
  3. The nine months ended September 30, 2020 includes a gain on sale of $7.4 million on the sale of $355 million of PPP loans.
  4. The nine months ended September 30, 2020 included a provision for loan and lease losses of $30.05 million, which was primarily due to the current environment created by the COVID-19 pandemic.
  5. The 2020 period included a $3.2 million tax benefit related to the carryback of tax NOLs to prior years when the Federal tax rate was 14% higher.

            September 2020 Quarter Compared to Prior Year Quarter

    Three Months Ended       Three Months Ended                  
    September   30,       September   30,     Increase/  
(Dollars in millions, except per share data)   2020       2019     (Decrease)  
Net interest income   $ 32.15       $ 30.09     $ 2.06       7 %
Wealth management fee income (A)     10.12         9.50       0.62       7  
Capital markets activity (B)     1.03         2.77       (1.74 )     (63 )
Other income (C)     9.06         2.15       6.91       321  
Total other income     20.21         14.42       5.79       40  
Operating expenses     28.46         26.26       2.20       8  
Pretax income before provision for loan losses     23.90         18.25       5.65       31  
Provision for loan and lease losses (D)     5.15         0.80       4.35       544  
Pretax income     18.75         17.45       1.30       7  
Income tax expense     5.20         5.22       (0.02 )     (0 )
Net income   $ 13.55       $ 12.23     $ 1.32       11 %
Diluted EPS   $ 0.71       $ 0.63     $ 0.08       12 %
                                   
Total Revenue   $ 52.36       $ 44.51     $ 7.85       18 %
                                   
Return on average assets annualized     0.89 %       1.00 %     (0.11 )        
Return on average equity annualized     10.53 %       9.87 %     0.66          

 

  1. The September 2020 quarter included a full quarter of wealth management fee income and expense related to Point View, which was acquired effective September 1, 2019. 
  2. Capital markets activity includes loan level back-to-back swap activities, the SBA lending and sale program, and mortgage banking activities.
  3. The quarter ended September 30, 2020 includes a gain on sale of $7.4 million on the sale of $355 million of PPP loans.
  4. The September 2020 quarter included a provision for loan and lease losses of $5.15 million.  The increase in the provision for loan and lease losses was primarily due to the current environment created by the COVID-19 pandemic.

September 2020 Quarter Compared to Linked Quarter

    Three Months Ended     Three Months Ended                    
    September   30,     June   30,       Increase/  
(Dollars in millions, except per share data)   2020     2020       (Decrease)  
Net interest income   $ 32.15     $ 31.97       $ 0.18       1 %
Wealth management fee income     10.12       10.00         0.12       1  
Capital markets activity (A)     1.03       1.01         0.02       2  
Other income (B)     9.06       1.61         7.45       463  
Total other income     20.21       12.62         7.59       60  
Operating expenses     28.46       29.01         (0.55 )     (2 )
Pretax income before provision for loan losses     23.90       15.58         8.32       53  
Provision for loan and lease losses     5.15       4.90         0.25       5  
Pretax (loss)/income     18.75       10.68         8.07       76  
Income tax expense     5.20       2.44         2.76       113  
Net income   $ 13.55     $ 8.24       $ 5.31       64 %
Diluted EPS   $ 0.71     $ 0.43       $ 0.28       65 %
                                   
Total Revenue   $ 52.36     $ 44.59       $ 7.77       17 %
                                   
Return on average assets annualized     0.89 %     0.56 %       0.33          
Return on average equity annualized     10.53 %     6.56 %       3.97          

 

  1. Capital markets activity includes loan level back-to-back swap activities, the SBA lending and sale program, and mortgage banking activities. 
  2. The quarter ended September 30, 2020 includes a gain on sale of $7.4 million on the sale of $355 million of PPP loans.

The Company’s near-term priorities include:
                   

  • Continued emphasis on the health and safety of our employees and clients.
  • Actively manage credit risk associated with the COVID-19 pandemic.
  • Grow and expand our core wealth management and commercial banking businesses.
  • Prudently manage costs, capital and liquidity, but remain opportunistic for accretive wealth M&A and talent lift-outs.
  • Evaluate office space and branch requirements.
  • Accelerate digital enhancement initiatives to improve the client experience.
  • Grow fee income to 35% to 45% of total bank revenue.

Other select highlights for the quarter included:

  • Wealth management fee income, which comprised approximately 21% of the Company’s total revenue for the nine-months ended September 30, 2020, continues to contribute significantly to the Company’s diversified revenue sources.
  • As of September 30, 2020, total C&I loans (including PPP loans) comprised 43% of the total loan portfolio. 
  • Deposits totaled $4.86 billion at September 30, 2020.  This reflected net growth of $616 million or 15% (19% annualized) when compared to $4.24 billion at December 31, 2019. 
  • The Company’s core net interest margin stabilized in the quarter when compared to the June 2020 quarter. (See subsequent discussion of Net Interest Income / Net Interest Margin)
  • In addition to $1.3 billion (22% of total assets) of balance sheet liquidity (investments, interest-earning deposits and cash) as of September 30, 2020, the Company also has access to approximately $2.7 billion of available secured funding at the Federal Home Loan Bank and the Federal Reserve.
  • The Company’s and Bank’s capital ratios at September 30, 2020 remain strong and the Company’s tangible book value per share at September 30, 2020 was $25.53 reflecting an increase of 7% from $23.91 at September 30, 2019, despite a higher than normal provision for loan and lease losses during 2020.
  • Nonperforming assets at September 30, 2020 declined $18.1 million to $8.7 million, or 0.15% of total assets at September 30, 2020, from $26.8 million or 0.43% at June 30, 2020.   

SUPPLEMENTAL QUARTERLY DETAILS :

Wealth Management Business

In the September 2020 quarter, the Bank’s wealth management business generated $10.12 million in fee income, compared to $9.50 million for the September 2019 quarter, and $10.00 million for the June 2020 quarter. The September 2020 and June 2020 quarters included three months of fee income related to Point View, which was acquired effective September 1, 2019, while the September 2019 quarter included one month of fee income.

The market value of the Company’s assets under management and/or administration (“AUM/AUA”) increased from $7.2 billion at June 30, 2020 to a record $7.6 billion at September 30, 2020, reflecting a 6% (22% annualized) increase.

John P. Babcock, President of the “Peapack Private Wealth Management” division, said, “Client retention during the COVID-19 crisis continues to be excellent with negligible account closings and no atypical withdrawal activity. Proactive client outreach continues at full strength.” Babcock went on to note, “Year-to-date gross client inflows totaled $528 million. We continue to look to grow our wealth business organically and through acquisition, and our pipeline for both is strong.  At year-end 2020, we will combine two more of our acquired RIAs with Peapack Private to further integrate our wealth acquisitions.”

Loans / Commercial Banking

Total loans of $4.46 billion at September 30, 2020 increased $47 million when compared to the December 31, 2019 balance, and declined $441 million from $4.90 billion at June 30, 2020. Growth as compared to December 31, 2019 was driven by robust PPP loan originations of $596 million during the second quarter of 2020, which was partially offset by the sale of $355 million of PPP loans during the third quarter of 2020. Excluding PPP loan originations, 2020 origination levels were less than 2019 due to the COVID-19 pandemic.

Total C&I loans (including equipment finance leases and loans of $686 million and $202 million of PPP loans) at September 30, 2020 were $1.93 billion.  This reflected net growth of $155 million when compared to $1.78 billion at December 31, 2019.  Excluding the $202 million of PPP loans at September 30, 2020, total C&I loans declined $47 million in 2020 due to the paydown of several large lines of credit, as well the Company’s workout and asset recovery efforts, including several nonaccrual and/or classified credits during Q3 2020.

The Company maintains a well-diversified loan portfolio, by loan type and by industry concentration, as detailed in the Q3 2020 Investor Update (and Supplemental Financial Information).

Mr. Kennedy noted, “Our commercial pipelines going into the fourth quarter are strong. Further, and as I noted in prior periods, our Corporate Advisory business complements our commercial banking and wealth management businesses by giving 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. Our Corporate Advisory pipelines are also strong.”

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.  Total deposits at September 30, 2020 were $4.86 billion reflecting an increase of $616 million when compared to $4.24 billion at December 31, 2019. Noninterest bearing demand deposits increased $309 million, interest bearing demand increased $348 million, brokered deposits declined $50 million, and higher costing CDs declined $62 million.  Mr. Kennedy noted, “Of our total deposits, only 17 percent are above the FDIC insurance limit, reinforcing the “core” nature of our deposit base.”

For the quarter ended September 30, 2020, the Company’s balance sheet liquidity (investments, interest-earning deposits and cash) totaled $1.3 billion (or 22% of assets).  In addition to the $1.3 billion of balance sheet liquidity, the Company also had approximately $1.7 billion of secured funding available from the Federal Home Loan Bank. Additionally, the Company also had $1.0 billion of secured funding available from the Federal Reserve Discount Window.

Mr. Kennedy noted, “As a commercial bank, a large portion of our loans reprice when the Fed changes rates. The 150-basis point reduction in target Fed Funds near the end of Q1 2020 reduced the Company’s interest income earned on assets. However, we were able to strategically reprice our deposits over time to offset much of that decline by the end of 2020.” 

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

  Nine Months Ended     Nine Months Ended                  
  September 30, 2020     September 30, 2019                  
  NII     NIM     NII     NIM                  
                                               
NII/NIM excluding the below $ 91,901     2.51 %     $ 88,762     2.70 %                  
Prepayment premiums received on loan paydowns   1,005     0.02 %       914     0.03 %                  
Effect of maintaining excess interest earning cash   (1,000 )   -0.19 %       (316 )   -0.08 %                  
Effect of PPP loans   3,961     -0.01 %           0.00 %                  
NII/NIM as reported $ 95,867     2.33 %     $ 89,360     2.65 %                  
                                               
  Three Months Ended     Three Months Ended     Three Months Ended  
  September 30, 2020     June 30, 2020
    September 30, 2019  
  NII     NIM     NII     NIM     NII     NIM  
                                               
NII/NIM excluding the below $ 30,327     2.45 %     $ 29,881     2.45 %     $ 29,896     2.67 %  
Prepayment premiums received on loan paydowns   104     0.01 %       376     0.03 %       236     0.02 %  
Effect of maintaining excess interest earning cash   (266 )   -0.24 %       (263 )   -0.19 %       (47 )   -0.09 %  
Effect of PPP loans   1,984     -0.02 %       1,977     -0.02 %           0.00 %  
NII/NIM as reported $ 32,149     2.20 %     $ 31,971     2.27 %     $ 30,085     2.60 %  


As shown above, the Company’s reported NIM declined 7 basis points compared to the linked quarter, while core NIM remained flat compared to the linked quarter.

Future net interest income will be benefitted by the repricing of the Company’s time certificates of deposit (“CDs”). Over the next 12-months, approximately $510 million of CDs with an average rate of approximately 1.35% will mature.

Other Noninterest Income (other than Wealth Management fee income)

Noninterest income from Capital Markets activities (loan level back-to-back swap activities, the SBA lending and sale program, and mortgage banking income) totaled $1.03 million for the September 2020 quarter compared to $1.01 million for the June 2020 quarter and $2.77 million for the September 2019 quarter.  The September 2020 quarter reflected increased mortgage banking activity due to greater refinance activity in the current low rate environment. The higher mortgage banking activity was offset by a significant decrease in loan level back-to-back swap activities and SBA lending and sale program, as there is, and will continue to be, minimal activity for such in the current environment. 

Operating Expenses

The Company’s total operating expenses were $28.46 million for the quarter ended September 30, 2020, compared to $29.01 million for the June 2020 quarter and $26.26 million for the September 2019 quarter.  The September 2020 and June 2020 quarters included three months of expenses (approximately $500,000 per quarter) related to Point View’s operations while the September 2019 quarter included one month. The June 2020 quarter also included a one-time expense of $278,000 related to the consolidation of the Whitehouse branch into the Oldwick branch. Thus far, the Bank has retained the majority of the deposits that were associated with that branch. The Company also spent $225,000 on marketing and advertising related to the PPP program during the June 2020 quarter. FDIC insurance expense increased to $605,000 in the September 2020 quarter from $455,000 in the June 2020 quarter and a credit of $277,000 in the September 2019 quarter.  The increase in FDIC expense in the September 2020 quarter was due to average asset growth, which negatively impacted some of the ratios used in calculating the quarterly assessment.

Mr. Kennedy noted, “During the fourth quarter of 2020, the Company will consolidate two of its private banking locations into existing offices which will result in future expense savings of approximately $200,000 on an annual basis. We continue to further evaluate office space and branch requirements.”

Income Taxes

The effective tax rate for the three months ended September 30, 2020 was 27.75%, as compared to 29.90% for the September 2019 quarter.  The slightly higher rate in the September 2019 quarter included higher NJ State Income Tax due to the change in NJ tax law.

During the first quarter of 2020, the Company recorded a $3.34 million tax benefit, principally due to a $3.2 million Federal income tax benefit that resulted from a tax NOL carryback. The Company had a $23 million operating loss for tax purposes in 2018 (when the Federal tax rate was 21%) resulting from accelerated tax depreciation. Under the CARES Act, the Company was allowed to carry this NOL back to a period when the Federal tax rate was 35%, generating a permanent tax benefit. 

Asset Quality / Provision for Loan and Lease Losses

For further details, see the Q3 2020 Investor Update (and Supplemental Financial Information).

Nonperforming assets at September 30, 2020 (which does not include troubled debt restructured loans that are performing in accordance with their terms) were $8.7 million, or 0.15% of total assets, down from $26.7 million, or 0.43% of total assets, at June 30, 2020 and $28.9 million, or 0.56% of total assets, at December 31, 2019.  The September 30, 2020 balance excludes one $10.0 million commercial loan classified as held for sale. Total loans past due 30 through 89 days and still accruing were $6.6 million at September 30, 2020 (of which $4.1 million made their past due payments in October), compared to $3.8 million at June 30, 2020 and $1.9 million at December 31, 2019.  During the third quarter of 2020, the Company’s asset recovery and workout efforts reduced nonperforming and classified assets.   

For the quarter ended September 30, 2020, the Company’s provision for loan and lease losses was $5.15 million compared to $4.90 million for the June 2020 quarter and $800,000 for the September 2019 quarter. The increased provision for loan and lease losses in the September and June 2020 quarters reflect the current environment created by the COVID-19 pandemic which led to increased qualitative loss factors when calculating the allowance for loan losses. The Company’s provision for loan and lease losses (and its allowance for loan and lease losses) also reflect, among other things, the Company’s assessment of asset quality metrics, net loan growth, net charge-offs/recoveries, and the composition of the loan portfolio.

At September 30, 2020, the allowance for loan and lease losses was $66.15 million (1.56% of total loans, excluding PPP loans), compared to $66.07 million at June 30, 2020 (1.52% of total loans), and $43.68 million at December 31, 2019 (0.99% of total loans). 

Capital

The Company’s capital position during the September 2020 quarter was benefitted by net income of $13.55 million.

The Company’s and Bank’s capital ratios at September 30, 2020 all remain strong.  Such ratios remain well above regulatory well capitalized standards.

The Company employs quarterly capital stress testing run under multiple scenarios, including a no growth, severely adverse case. In such case as of June 30, 2020, the Bank remains well capitalized over a two-year stress period. With a Pandemic stress overlay on this case, the Bank still remains well capitalized over the two-year stress period. For further details, see the Q3 2020 Investor Update (and Supplemental Financial Information).

On October 27, 2020, the Company declared a cash dividend of $0.05 per share payable on November 25, 2020 to shareholders of record on November 10, 2020.

ABOUT THE COMPANY

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $6.0 billion and AUM/AUA administration of $7.6 billion as of September 30, 2020.  Founded in 1921, Peapack-Gladstone Bank is a commercial bank that provides innovative wealth management, commercial and retail solutions, including residential lending and online platforms, to businesses and consumers.  Peapack Private, the bank’s wealth management division, offers comprehensive financial, tax, fiduciary and investment advice and solutions, to individuals, families, privately-held businesses, family offices and not-for-profit organizations, which help them to establish, maintain and expand their legacy.  Together, Peapack-Gladstone Bank and Peapack Private offer an unparalleled commitment to client service.  Visit www.pgbank.com and www.peapackprivate.com for more information.

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 2020 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;
  • impact on our business from a pandemic event on our business, operations, customers, allowance for loan losses and capital levels;
  • 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; and
  • other unexpected material adverse changes in our operations or earnings.

             
Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and whether the gradual reopening of businesses will result in a meaningful increase in economic activity.  As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

  • demand for our products and services may decline, making it difficult to grow assets and income;
  • if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;
  • collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;
  • our allowance for loan losses may have to be increased if borrowers experience financial difficulties, which will adversely affect our net income;
  • the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;
  • as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income;
  • a material decrease in net income or a net loss over several quarters could result in a decrease in the rate of our quarterly cash dividend;
  • our wealth management revenues may decline with continuing market turmoil;
  • a worsening of business and economic conditions or in the financial markets could result in an impairment of certain intangible assets, such as goodwill;
  • the unanticipated loss or unavailability of key employees due to the outbreak, which could harm our ability to operate our business or execute our business strategy, especially as we may not be successful in finding and integrating suitable successors;
  • we may face litigation, regulatory enforcement and reputation risk as a result of our participation in the PPP and the risk that the SBA may not fund some or all PPP loan guaranties;
  • our cyber security risks are increased as the result of an increase in the number of employees working remotely; and
  • FDIC premiums may increase if the agency experience additional resolution costs.

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, 2019.  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.

 (Tables to follow)


P EAPACK-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,  
    2020     2020     2020     2019     2019  
Income Statement Data:                                        
Interest income   $ 40,174     $ 41,649     $ 45,395     $ 45,556     $ 45,948  
Interest expense     8,025       9,678       13,648       14,642       15,863  
Net interest income     32,149       31,971       31,747       30,914       30,085  
Wealth management fee income     10,119       9,996       9,955       10,120       9,501  
Service charges and fees     785       695       816       893       882  
Bank owned life insurance     314       318       328       325       332  
Gain on loans held for sale at fair value     954       550       292       344       198  
   (Mortgage banking) (A)
Gain/(loss) on loans held for sale at lower of cost or     7,429             (3 )     (4 )     (6 )
   fair value(B)
Fee income related to loan level, back-to-back           202       1,418       2,459       2,349  
   swaps (A)
Gain on sale of SBA loans (A)     79       258       1,054       929       224  
Other income     531       482       459       504       902  
Securities gains/(losses), net           125       198       (45 )     34  
Total other income     20,211       12,626       14,517       15,525       14,416  
Salaries and employee benefits     19,202       19,186       19,226       17,954       17,476  
Premises and equipment     4,109       4,036       4,043       3,898       3,849  
FDIC insurance expense     605       455       250             (277 )
Other expenses     4,545       5,337       4,716       4,849       5,211  
Total operating expenses     28,461       29,014       28,235       26,701       26,259  
Pretax income before provision for loan losses     23,899       15,583       18,029       19,738       18,242  
Provision for loan and lease losses (C)     5,150       4,900       20,000       1,950       800  
Income/(loss) before income taxes     18,749       10,683       (1,971 )     17,788       17,442  
Income tax expense/(benefit) (D)     5,202       2,441       (3,344 )     5,555       5,216  
Net income   $ 13,547     $ 8,242     $ 1,373     $ 12,233     $ 12,226  
                                         
Total revenue (E)   $ 52,360     $ 44,597     $ 46,264     $ 46,439     $ 44,501  
Per Common Share Data:                                        
Earnings per share (basic)   $ 0.72     $ 0.44     $ 0.07     $ 0.64     $ 0.63  
Earnings per share (diluted)     0.71       0.43       0.07       0.64       0.63  
Weighted average number of common                                        
   shares outstanding:
Basic     18,908,337       18,872,070       18,858,343       18,966,917       19,314,666  
Diluted     19,132,650       19,059,822       19,079,575       19,207,738       19,484,905  
Performance Ratios:                                        
Return on average assets annualized (ROAA)     0.89 %     0.56 %     0.11 %     0.98 %     1.00 %
Return on average equity annualized (ROAE)     10.53 %     6.56 %     1.08 %     9.81 %     9.87 %
Net interest margin (tax-equivalent basis)     2.20 %     2.27 %     2.57 %     2.60 %     2.60 %
GAAP efficiency ratio (F)     54.36 %     65.06 %     61.03 %     57.5 0%     59.01 %
Operating expenses / average assets annualized     1.86 %     1.97 %     2.18 %     2.13 %     2.16 %

 

  1. 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.
  2. Includes gain on sale of PPP loans of 355 million completed in the September quarter.
  3. The March 2020, June 2020 and September 2020 quarter included a higher provision for loan and lease losses primarily due to the current environment created by the COVID-19 pandemic.
  4. The March 2020 quarter included a $3.2 million tax benefit related to the carryback of tax NOLs to prior years when the Federal tax rate was 14% higher.
  5. Total revenue includes net interest income plus total other income.
  6. 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.

             

 

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

    For the Nine Months Ended                  
    September 30,     Change  
    2020     2019     $     %  
Income Statement Data:                                
Interest income   $ 127,218     $ 135,114     $ (7,896 )     -6 %
Interest expense     31,351       45,754       (14,403 )     -31 %
Net interest income     95,867       89,360       6,507       7 %
Wealth management fee income     30,070       28,243       1,827       6 %
Service charges and fees     2,296       2,595       (299 )     -12 %
Bank owned life insurance     960       996       (36 )     -4 %
Gain on loans held for sale at fair value (Mortgage banking) (A)     1,796       377       1,419       376 %
Gain on loans held for sale at lower of cost or fair value (B)     7,426       (6 )     7,432       -123867 %
Fee income related to loan level, back-to-back swaps (A)     1,620       3,340       (1,720 )     -51 %
Gain on sale of SBA loans (A)     1,391       1,216       175       14 %
Other income     1,472       2,248       (776 )     -35 %
Securities gains/(losses), net     323       162       161       99 %
Total other income     47,354       39,171       8,183       21 %
Salaries and employee benefits     57,614       52,175       5,439       10 %
Premises and equipment     12,188       10,837       1,351       12 %
FDIC insurance expense     1,310       277       1,033       373 %
Other expenses     14,598       14,858       (260 )     -2 %
Total operating expenses     85,710       78,147       7,563       10 %
Pretax income before provision for loan losses     57,511       50,384       7,127       14 %
Provision for loan and lease losses (C)     30,050       2,050       28,000       1366 %
Income before income taxes     27,461       48,334       (20,873 )     -43 %
Income tax (benefit)/expense (D)     4,299       13,133       (8,834 )     -67 %
Net income   $ 23,162     $ 35,201     $ (12,039 )     -34 %
                                 
Total revenue (E)   $ 143,221     $ 128,531     $ 14,690       11 %
Per Common Share Data:                                
Earnings per share (basic)   $ 1.23     $ 1.82     $ (0.59 )     -32 %
Earnings per share (diluted)     1.22       1.81       (0.59 )     -33 %
Weighted average number of common shares outstanding:                                
Basic     18,879,688       19,370,627       (490,939 )     -3 %
Diluted     19,052,605       19,496,721       (444,116 )     -2 %
Performance Ratios:                                
Return on average assets annualized (ROAA)     0.54 %     0.99 %     (0.45 )%     -46 %
Return on average equity annualized (ROAE)     6.07 %     9.67 %     (3.60 )%     -37 %
Net interest margin (tax-equivalent basis)     2.33 %     2.65 %     (0.32 )%     -12 %
GAAP efficiency ratio (F)     59.84 %     60.80 %     (0.95 )%     -2 %
Operating expenses / average assets annualized     1.99 %     2.21 %     (0.22 )%     -10 %


      (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)  Includes gain on sale of PPP loans of $355 million completed in the September quarter.
      (C)  The increase in the provision for loan and lease losses in 2020 was primarily due to the current environment created by the COVID-19 pandemic.
      (D)   2020 year included a $3.2 million tax benefit related to the carryback of tax NOLs to prior years when the Federal tax rate was 14% higher.
      (E)   Total revenue includes net interest income plus total other income.
      (F)  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,  
    2020     2020     2020     2019     2019  
ASSETS                                        
Cash and due from banks   $ 8,400     $ 5,608     $ 6,171     $ 6,591     $ 5,770  
Federal funds sold     102       102       102       102       101  
Interest-earning deposits     670,863       617,117       767,730       201,492       221,242  
Total cash and cash equivalents     679,365       622,827       774,003       208,185       227,113  
Securities available for sale     596,929       539,742       400,558       390,755       349,989  
Equity security     15,159       15,159       14,034       10,836       7,881  
FHLB and FRB stock, at cost     18,433       18,598       40,871       24,068       21,403  
Residential mortgage     532,120       536,015       532,063       552,019       561,543  
Multifamily mortgage     1,168,796       1,178,494       1,203,487       1,210,003       1,197,093  
Commercial mortgage     722,678       761,910       760,648       761,244       721,261  
Commercial loans (A)     1,930,984       2,316,125       1,810,214       1,776,450       1,575,076  
Consumer loans     51,859       53,111       53,365       54,372       53,829  
Home equity lines of credit     52,194       54,006       55,856       57,248       58,423  
Other loans     260       272       347       349       380  
Total loans     4,458,891       4,899,933       4,415,980       4,411,685       4,167,605  
Less: Allowances for loan and lease losses     66,145       66,065       63,783       43,676       41,580  
Net loans     4,392,746       4,833,868       4,352,197       4,368,009       4,126,025  
Premises and equipment     21,668       21,449       21,243       20,913       20,898  
Other real estate owned     50       50       50       50       336  
Accrued interest receivable     22,192       15,956       11,816       10,494       11,759  
Bank owned life insurance     46,645       46,479       46,309       46,128       45,940  
Goodwill and other intangible assets     39,622       39,943       40,265       40,588       41,111  
Finance lease right-of-use assets     4,517       4,704       4,891       5,078       5,265  
Operating lease right-of-use assets     10,011       10,810       11,553       12,132       10,328  
Other assets (B)     110,770       111,630       113,668       45,643       57,361  
TOTAL ASSETS   $ 5,958,107     $ 6,281,215     $ 5,831,458     $ 5,182,879     $ 4,925,409  
                                         
LIABILITIES                                        
Deposits:                                        
Noninterest-bearing demand deposits   $ 838,307     $ 911,989     $ 581,085     $ 529,281     $ 544,464  
Interest-bearing demand deposits     1,858,529       1,804,102       1,680,452       1,510,363       1,352,471  
Savings     127,737       123,140       112,668       112,652       115,448  
Money market accounts     1,251,349       1,183,603       1,163,410       1,196,313       1,196,188  
Certificates of deposit – Retail     586,801       629,941       651,000       633,763       583,425  
Certificates of deposit – Listing Service     32,677       35,327       38,895       47,430       55,664  
Subtotal “customer” deposits     4,695,400       4,688,102       4,227,510       4,029,802       3,847,660  
IB Demand – Brokered     130,000       130,000       180,000       180,000       180,000  
Certificates of deposit – Brokered     33,750       33,736       33,723       33,709       33,696  
Total deposits     4,859,150       4,851,838       4,441,233       4,243,511       4,061,356  
Short-term borrowings     15,000       15,000       515,000       128,100       67,000  
FHLB advances     105,000       105,000       105,000       105,000       105,000  
Paycheck Protection Program Liquidity Facility (C)     183,790       535,837                    
Finance lease liability     6,976       7,196       7,402       7,598       7,793  
Operating lease liability     10,318       11,116       11,852       12,423       10,619  
Subordinated debt, net     83,585       83,529       83,473       83,417       83,361  
Other liabilities (B)     156,472       163,719       160,173       91,227       94,930  
Due to brokers     15,088             10,885       7,951        
TOTAL LIABILITIES     5,435,379       5,773,235       5,335,018       4,679,227       4,430,059  
Shareholders’ equity     522,728       507,980       496,440       503,652       495,350  
TOTAL LIABILITIES AND                                        
SHAREHOLDERS’ EQUITY   $ 5,958,107     $ 6,281,215     $ 5,831,458     $ 5,182,879     $ 4,925,409  
Assets under management and / or administration at   $ 7.6     $ 7.2     $ 6.4     $ 7.5     $ 7.0  
Peapack-Gladstone Bank s Private Wealth Management
   Division (market value, not included above-dollars in billions)

 

(A)     Includes PPP loans of $202 million at September 30, 2020 and $547 million at June 30, 2020.
(B)    The increase in other assets and other liabilities at March 31, 2020, June 30, 2020 and September 30, 2020 was primarily due to the change in the fair value of our back-to-back swap program.
(C)     Represents funding provided by the Federal Reserve for pledged PPP loans at June 30, 2020 and September 30, 2020.

 

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

    As of  
    Sept 30,     June 30,     March 31,     Dec 31,     Sept 30,  
    2020     2020     2020     2019     2019  
Asset Quality:                                        
Loans past due over 90 days and still accruing   $     $     $     $     $  
Nonaccrual loans (A)     8,611       26,697       29,324       28,881       29,383  
Other real estate owned     50       50       50       50       336  
Total nonperforming assets   $ 8,661     $ 26,747     $ 29,374     $ 28,931     $ 29,719  
                                         
Nonperforming loans to total loans     0.19 %     0.54 %     0.66 %     0.65 %     0.71 %
Nonperforming assets to total assets     0.15 %     0.43 %     0.50 %     0.56 %     0.60 %
                                         
Performing TDRs (B)(C)   $ 2,278     $ 2,376     $ 2,389     $ 2,357     $ 2,527  
                                         
Loans past due 30 through 89 days and still accruing (D)   $ 6,609     $ 3,785     $ 8,261     $ 1,910     $ 6,333  
                                         
Loans subject to special mention   $ 129,700     $ 27,922     $ 13,222     $ 13,643     $ 21,870  
                                         
Classified loans   $ 41,263     $ 63,562     $ 58,938     $ 58,908     $ 53,882  
                                         
Impaired loans   $ 15,514     $ 33,708     $ 36,369     $ 35,924     $ 36,627  
                                         
Allowance for loan and lease losses:                                        
Beginning of period   $ 66,065     $ 63,783     $ 43,676     $ 41,580     $ 39,791  
Provision for loan and lease losses     5,150       4,900       20,000       1,950       800  
(Charge-offs)/recoveries, net     (5,070 )     (2,618 )     107       146       989  
End of period   $ 66,145     $ 66,065     $ 63,783     $ 43,676     $ 41,580  
                                         
ALLL to nonperforming loans     768.15 %     247.46 %     217.51 %     151.23 %     141.51 %
ALLL to total loans (E)     1.56 %     1.52 %     1.44 %     0.99 %     1.00 %
General ALLL to total loans (E)(F)     1.56 %     1.42 %     1.30 %     0.93 %     0.93 %


      (A) Excludes one commercial loan held for sale of $10.0 million at September 30, 2020.
      (B) Amounts reflect TDRs that are paying according to restructured terms.
      (C) Amount does not include $15.2 million at September 30, 2020, $23.2 million at June 30, 2020, $25.9 million at March 31, 2020, $25.8 million at December 31, 2019 and $19.7 million at September 30, 2019, of TDRs included in nonaccrual loans.
      (D) Of the $6.6 million at September 30, 2020, $4.1 million made their past due payments in October.  Includes a non-owner occupied CRE loan with a balance of $3.5 million at March 31, 2020.  This loan was brought fully current in early April 2020.  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) The September 30, 2020 and June 30, 2020 ALLL coverage ratios exclude PPP loans of $202 million and $547 million, respectively, from total loans.
      (F) 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,  
    2020     2019     2019  
Capital Adequacy                                    
Equity to total assets (A)(J)         8.77 %         9.72 %         10.06 %
Tangible Equity to tangible assets (B)         8.16 %         9.01 %         9.30 %
Tangible Equity to tangible assets excluding         8.45 %         9.01 %         9.30 %
   PPP loans (C)
Book value per share (D)       $ 27.62         $ 26.61         $ 26.07  
Tangible Book Value per share (E)       $ 25.53         $ 24.47         $ 23.91  

 

    September   30,     December 31,     September   30,  
    2020       2019       2019    
Regulatory Capital Holding Company                                                
Tier I leverage   $ 483,782     8.54 %     $ 463,521     9.33 %     $ 455,179     9.43 %  
Tier I capital to risk-weighted assets     483,782     11.76         463,521     11.14         455,179     11.23    
Common equity tier I capital ratio     483,747     11.75         463,520     11.14         455,177     11.23    
   to risk-weighted assets
Tier I & II capital to risk-weighted assets     618,993     15.04         590,614     14.20         580,120     14.31    
                                                 
Regulatory Capital Bank                                                
Tier I leverage (F)   $ 547,761     9.68 %     $ 527,833     10.63 %     $ 534,351     11.08 %  
Tier I capital to risk-weighted assets (G)     547,761     13.33         527,833     12.70         534,351     13.20    
Common equity tier I capital ratio     547,726     13.33         527,832     12.70         534,349     13.20    
   to risk-weighted assets (H)
Tier I & II capital to risk-weighted assets (I)     599,314     14.58         571,509     13.76         575,931     14.23    

 

     (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) Tangible equity and tangible assets excluding PPP loans are calculated by excluding the balance of intangible assets from shareholders’ equity and excluding the balance of intangible assets and PPP loans from total assets. Tangible equity as a percentage of tangible assets excluding PPP loans at period end is calculated by dividing tangible equity by tangible assets excluding PPP loans at period end.  See Non-GAAP financial measures reconciliation included in these tables.
     (D) Book value per common share is calculated by dividing shareholders’ equity by period end common shares outstanding
    (E) 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.
     (F)  Regulatory well capitalized standard = 5.00% ($283 million)
     (G)  Regulatory well capitalized standard = 8.00% ($329 million)
     (H)  Regulatory well capitalized standard = 6.50% ($267 million)
     (I) Regulatory well capitalized standard = 10.00% ($411 million)
     (J) PPP loans with a balance of $202 million increased total assets at September 30, 2020.  Equity to total assets would be 9.08% if PPP loans were excluded from total assets.

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

    For the Quarters Ended  
    Sept 30,     June 30,     March 31,     Dec 31,     Sept 30,  
    2020     2020     2020     2019     2019  
Residential loans retained   $ 32,599     $ 18,627     $ 14,831     $ 17,115     $ 19,073  
Residential loans sold     54,521       37,061       19,391       21,255       15,846  
Total residential loans     87,120       55,688       34,222       38,370       34,919  
Commercial real estate     1,613       748       8,858       52,630       43,414  
Multifamily     1,500       11,960       61,998       63,627       77,138  
Commercial (C&I) loans (A) (B)     118,048       99,294       42,908       174,946       228,903  
SBA (C)     4,962       595,651       13,830       19,195       3,510  
Wealth lines of credit (A)     2,000       500       3,250       42,575       6,980  
Total commercial loans     128,123       708,153       130,844       352,973       359,945  
Installment loans     253       950       256       984       362  
Home equity lines of credit (A)     4,759       4,280       3,632       2,414       5,631  
Total loans closed   $ 220,255     $ 769,071     $ 168,954     $ 394,741     $ 400,857  
                                         

 

    For the Nine Months Ended  
    Sept 30,     Sept 30,  
    2020     2019  
Residential loans retained   $ 66,057     $ 51,910  
Residential loans sold     110,973       28,721  
Total residential loans     177,030       80,631  
Commercial real estate     11,219       98,643  
Multifamily     75,458       156,864  
Commercial (C&I) loans (A) (B)     260,250       513,975  
SBA (C)     614,443       16,300  
Wealth lines of credit (A)     5,750       21,085  
Total commercial loans     967,120       806,867  
Installment loans     1,459       2,417  
Home equity lines of credit (A)     12,671       10,864  
Total loans closed   $ 1,158,280     $ 900,779  
                 


      (A)    Includes loans and lines of credit that closed in the period but not necessarily funded.
      (B)    Includes equipment finance.
      (C)    Includes PPP loans of $596 million for the three months ended June 30, 2020 and for the nine months ended September 30, 2020.

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

    September   30, 2020     September   30, 2019  
    Average     Income/             Average     Income/          
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                                
Interest-earning assets:                                                
Investments:                                                
Taxable (A)   $ 553,607     $ 2,182       1.58 %   $ 393,386     $ 2,477       2.52 %
Tax-exempt (A) (B)     9,127       116       5.08       13,497       165       4.89  
                                                 
Loans (B) (C):                                                
Mortgages     529,500       4,437       3.35       567,097       4,811       3.39  
Commercial mortgages     1,929,319       15,115       3.13       1,856,216       17,870       3.85  
Commercial     2,134,399       17,653       3.31       1,530,131       18,605       4.86  
Commercial construction     4,395       55       5.01       2,619.00       51       7.79  
Installment     52,659       377       2.86       53,891       560       4.16  
Home equity     53,373       444       3.33       58,573       736       5.03  
Other     283       7       9.89       396       11       11.11  
Total loans     4,703,928       38,088       3.24       4,068,923       42,644       4.19  
Federal funds sold     102             0.25       101             0.25  
Interest-earning deposits     652,832       159       0.10       256,865       1,362       2.12  
Total interest-earning assets     5,919,596       40,545       2.74 %     4,732,772       46,648       3.94 %
Noninterest-earning assets:                                                
Cash and due from banks     7,479                       5,628                  
Allowance for loan and lease losses     (68,110 )                     (40,806 )                
Premises and equipment     21,511                       21,121                  
Other assets     242,017                       151,265                  
Total noninterest-earning assets     202,897                       137,208                  
Total assets   $ 6,122,493                     $ 4,869,980                  
                                                 
LIABILITIES:                                                
Interest-bearing deposits:                                                
Checking   $ 1,828,780     $ 1,130       0.25 %   $ 1,410,837     $ 4,467       1.27 %
Money markets     1,235,040       920       0.30       1,184,589       4,227       1.43  
Savings     125,016       16       0.05       113,961       16       0.06  
Certificates of deposit – retail     642,732       2,529       1.57       649,393       3,781       2.33  
Subtotal interest-bearing deposits     3,831,568       4,595       0.48       3,358,780       12,491       1.49  
Interest-bearing demand – brokered     130,000       636       1.96       180,000       901       2.00  
Certificates of deposit – brokered     33,742       267       3.17       33,688       267       3.17  
Total interest-bearing deposits     3,995,310       5,498       0.55       3,572,468       13,659       1.53  
Borrowings     475,465       1,221       1.03       114,584       886       3.09  
Capital lease obligation     7,054       84       4.76       7,866       94       4.78  
Subordinated debt     83,552       1,222       5.85       83,329       1,224       5.88  
Total interest-bearing liabilities     4,561,381       8,025       0.70 %     3,778,247       15,863       1.68 %
Noninterest-bearing liabilities:                                                
Demand deposits     872,560                       512,497                  
Accrued expenses and other liabilities     173,816                       83,554                  
Total noninterest-bearing liabilities     1,046,376                       596,051                  
Shareholders’ equity     514,736                       495,682                  
Total liabilities and shareholders’ equity   $ 6,122,493                     $ 4,869,980                  
Net interest income           $ 32,520                     $ 30,785          
Net interest spread                     2.04 %                     2.26 %
Net interest margin (D)                     2.20 %                     2.60 %
                                                 

 

  1. Average balances for available for sale securities are based on amortized cost.
  2. Interest income is presented on a tax-equivalent basis using a 21% federal tax rate.
  3. Loans are stated net of unearned income and include nonaccrual loans.
  4. 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, 2020     June 30, 2020
 
    Average     Income/             Average     Income/          
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                                
Interest-earning assets:                                                
Investments:                                                
Taxable (A)   $ 553,607     $ 2,182       1.58 %   $ 437,288     $ 2,108       1.93 %
Tax-exempt (A) (B)     9,127       116       5.08       10,137       129       5.09  
                                                 
Loans (B) (C):                                                
Mortgages     529,500       4,437       3.35       530,087       4,497       3.39  
Commercial mortgages     1,929,319       15,115       3.13       2,083,310       16,147       3.10  
Commercial     2,134,399       17,653       3.31       2,038,530       18,204       3.57  
Commercial construction     4,395       55       5.01       3,296       44       5.34  
Installment     52,659       377       2.86       52,859       371       2.81  
Home equity     53,373       444       3.33       54,869       453       3.30  
Other     283       7       9.89       318       7       8.81  
Total loans     4,703,928       38,088       3.24       4,763,269       39,723       3.34  
Federal funds sold     102             0.25       102             0.25  
Interest-earning deposits     652,832       159       0.10       497,764       109       0.09  
Total interest-earning assets     5,919,596       40,545       2.74 %     5,708,560       42,069       2.95 %
Noninterest-earning assets:                                                
Cash and due from banks     7,479                       5,437                  
Allowance for loan and lease losses     (68,110 )                     (64,109 )                
Premises and equipment     21,511                       21,462                  
Other assets     242,017                       234,357                  
Total noninterest-earning assets     202,897                       197,147                  
Total assets   $ 6,122,493                     $ 5,905,707                  
                                                 
LIABILITIES:                                                
Interest-bearing deposits:                                                
Checking   $ 1,828,780     $ 1,130       0.25 %   $ 1,748,753     $ 1,642       0.38 %
Money markets     1,235,040       920       0.30       1,207,816       1,473       0.49  
Savings     125,016       16       0.05       118,878       16       0.05  
Certificates of deposit – retail     642,732       2,529       1.57       676,498       3,147       1.86  
Subtotal interest-bearing deposits     3,831,568       4,595       0.48       3,751,945       6,278       0.67  
Interest-bearing demand – brokered     130,000       636       1.96       150,330       700       1.86  
Certificates of deposit – brokered     33,742       267       3.17       33,729       264       3.13  
Total interest-bearing deposits     3,995,310       5,498       0.55       3,936,004       7,242       0.74  
Borrowings     475,465       1,221       1.03       330,514       1,127       1.36  
Capital lease obligation     7,054       84       4.76       7,270       87       4.79  
Subordinated debt     83,552       1,222       5.85       83,496       1,222       5.85  
Total interest-bearing liabilities     4,561,381       8,025       0.70 %     4,357,284       9,678       0.89 %
Noninterest-bearing liabilities:                                                
Demand deposits     872,560                       873,926                  
Accrued expenses and other liabilities     173,816                       171,814                  
Total noninterest-bearing liabilities     1,046,376                       1,045,740                  
Shareholders’ equity     514,736                       502,683                  
Total liabilities and shareholders’ equity   $ 6,122,493                     $ 5,905,707                  
Net interest income           $ 32,520                     $ 32,391          
Net interest spread                     2.04 %                     2.06 %
Net interest margin (D)                     2.20 %                     2.27 %
                                                 

 

  1. Average balances for available for sale securities are based on amortized cost.
  2. Interest income is presented on a tax-equivalent basis using a 21% federal tax rate.
  3. Loans are stated net of unearned income and include nonaccrual loans.
  4. 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, 2020     September 30, 2019
 
    Average     Income/             Average     Income/          
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                                
Interest-earning assets:                                                
Investments:                                                
Taxable (A)   $ 467,881     $ 6,749       1.92 %   $ 391,032     $ 7,800       2.66 %
Tax-exempt (A) (B)     9,930       376       5.05       15,904       581       4.87  
                                                 
Loans (B) (C):                                                
Mortgages     531,563       13,510       3.39       568,902       14,541       3.41  
Commercial mortgages     1,989,256       49,745       3.33       1,822,341       53,472       3.91  
Commercial     1,977,597       54,450       3.67       1,442,827       52,659       4.87  
Commercial construction     4,440       187       5.62       883       51       8  
Installment     53,165       1,212       3.04       54,552       1,722       4.21  
Home equity     54,627       1,512       3.69       60,695       2,319       5.09  
Other     321       23       9.55       394       32       10.83  
Total loans     4,610,969       120,639       3.49       3,950,594       124,796       4.21  
Federal funds sold     102             0.25       101             0.25  
Interest-earning deposits     468,064       820       0.23       245,153       3,897       2.12  
Total interest-earning assets     5,556,946       128,584       3.09 %     4,602,784       137,074       3.97 %
Noninterest-earning assets:                                                
Cash and due from banks     6,149                       5,436                  
Allowance for loan and lease losses     (58,896 )                     (39,638 )                
Premises and equipment     21,373                       21,253                  
Other assets     212,716                       133,830                  
Total noninterest-earning assets     181,342                       120,881                  
Total assets   $ 5,738,288                     $ 4,723,665                  
                                                 
LIABILITIES:                                                
Interest-bearing deposits:                                                
Checking   $ 1,706,558     $ 6,219       0.49 %   $ 1,321,248     $ 12,299       1.24 %
Money markets     1,211,720       5,374       0.59       1,196,778       12,978       1.45  
Savings     118,291       47       0.05       113,552       48       0.06  
Certificates of deposit – retail     672,308       9,370       1.86       622,509       10,476       2.24  
Subtotal interest-bearing deposits     3,708,877       21,010       0.76       3,254,087       35,801       1.47  
Interest-bearing demand – brokered     153,358       2,259       1.96       180,000       2,476       1.83  
Certificates of deposit – brokered     33,729       794       3.14       45,412       958       2.81  
Total interest-bearing deposits     3,895,964       24,063       0.82       3,479,499       39,235       1.50  
Borrowings     330,324       3,360       1.36       108,526       2,558       3.14  
Capital lease obligation     7,266       261       4.79       8,052       290       4.80  
Subordinated debt     83,496       3,667       5.86       83,272       3,671       5.88  
Total interest-bearing liabilities     4,317,050       31,351       0.97 %     3,679,349       45,754       1.66 %
Noninterest-bearing liabilities:                                                
Demand deposits     763,414                       494,023                  
Accrued expenses and other liabilities     149,187                       64,806                  
Total noninterest-bearing liabilities     912,601                       558,829                  
Shareholders’ equity     508,637                       485,487                  
Total liabilities and shareholders’ equity   $ 5,738,288                     $ 4,723,665                  
Net interest income           $ 97,233                     $ 91,320          
Net interest spread                     2.12 %                     2.31 %
Net interest margin (D)                     2.33 %                     2.65 %
                                                 


  
      (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   2020     2020     2020     2019     2019  
Shareholders’ equity   $ 522,728     $ 507,980     $ 496,440     $ 503,652     $ 495,350  
Less: Intangible assets, net     39,622       39,943       40,265       40,588       41,111  
Tangible equity     483,106       468,037       456,175       463,064       454,239  
                                         
Period end shares outstanding     18,924,953       18,905,135       18,852,523       18,926,810       18,999,241  
Tangible book value per share   $ 25.53     $ 24.76     $ 24.20     $ 24.47     $ 23.91  
Book value per share     27.62       26.87       26.33       26.61       26.07  
                                         
Tangible Equity to Tangible Assets                                        
Total assets   $ 5,958,107     $ 6,281,215     $ 5,831,458     $ 5,182,879     $ 4,925,409  
Less: Intangible assets, net     39,622       39,943       40,265       40,588       41,111  
Tangible assets     5,918,485       6,241,272       5,791,193       5,142,291       4,884,298  
Less: PPP Loans     201,991       547,004                    
Tangible Assets excluding PPP Loans     5,716,494       5,694,268       5,791,193       5,142,291       4,884,298  
Tangible equity to tangible assets     8.16 %     7.50 %     7.88 %     9.01 %     9.30 %
Tangible equity to tangible assets excluding PPP loans     8.45 %     8.22 %     7.88 %     9.01 %     9.30 %
Equity to assets (A)     8.77 %     8.09 %     8.51 %     9.72 %     10.06 %


      (A)    Equity to total assets would be 9.08% if PPP loans of $202 million were excluded from total assets as of September 30, 2020. Equity to total assets would be 8.86% if PPP loans of $547 million were excluded from total assets as of June 30, 2020.

    Three Months Ended  
    Sept 30,     June 30,     March 31,     Dec 30,     Sept 30,  
Efficiency Ratio   2020     2020     2020     2019     2019  
Net interest income   $ 32,149     $ 31,971     $ 31,747     $ 30,914     $ 30,085  
Total other income     20,211       12,626       14,517       15,525       14,416  
Less: Loss/(gain) on loans held for sale                                        
at lower of cost or fair value     (7,429 )           3       4       6  
Less: Income from life insurance proceeds                              
Add: Securities (gains)/losses, net           (125 )     (198 )     45       (34 )
Total recurring revenue     44,931       44,472       46,069       46,488       44,473  
                                         
Operating expenses     28,461       29,014       28,235       26,701       26,259  
Less: ORE provision                              
Total operating expense     28,461       29,014       28,235       26,701       26,259  
                                         
Efficiency ratio     63.34 %     65.24 %     61.29 %     57.44 %     59.04 %

 

    For the Nine Months Ended  
    Sept 30,     Sept 30,  
Efficiency Ratio   2020     2019  
Net interest income   $ 95,867     $ 89,360  
Total other income     47,354       39,171  
Add: Securities (gains)/losses, net     (323 )     (162 )
Less: Loss/(gain) on loans held for sale                
at lower of cost or fair value     (7,426 )      
Total recurring revenue     135,472       128,369  
                 
Operating expenses     85,710       78,147  
Less: ORE provision            
Total operating expense     85,710       78,147  
                 
Efficiency ratio     63.27 %     60.88 %


Contact:

Jeffrey J. Carfora, SEVP and CFO

Peapack-Gladstone Financial Corporation

T: 908-719-4308

 


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Source: Peapack-Gladstone Financial Corporation