Peapack Gladstone Bank

News Details

Peapack-Gladstone Financial Corporation Reports Strong Second Quarter Results, Driven By Increased Wealth Management Fee Income, Strong Loan Growth And Margin Expansion

Company Release - 7/28/2021

Bedminster, NJ, July 28, 2021 (GLOBE NEWSWIRE) -- via NewMediaWire -- Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) announces its second quarter 2021 results.

This earnings release should be read in conjunction with the Company’s Q2 2021 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

For the six months ended June 30, 2021, the Company recorded total revenue of $101.14 million, net income of $27.60 million and diluted earnings per share (“EPS”) of $1.42 compared to $90.87 million, $9.62 million and $0.51, respectively, for the same six-month period ended June 30, 2020.

For the quarter ended June 30, 2021, the Company recorded total revenue of $51.52 million, net income of $14.42 million and diluted earnings per share (“EPS”) of $0.74, compared to $44.59 million, $8.24 million and $0.43, respectively, for the same three-month period ended June 30, 2020.

The quarter ended June 30, 2021 included increased noninterest income, principally wealth management income and income from capital markets activities (which includes mortgage banking income, loan level back-to-back swap income, SBA loan income, and corporate advisory fee income) when compared to the same quarter in 2020. The 2021 quarter also included a significantly reduced provision for loan losses when compared to the same quarter last year. The decreased provision in the June 2021 quarter was due to the environment in 2020 created by the COVID-19 pandemic, which led to increased qualitative loss factors when calculating the allowance for loan losses.

The June 2021 quarter included a $1.13 million gain on the sale of Paycheck Protection Program (“PPP”) loans; fee income of $722,000 relating to PPP loan referrals to a third party; and $153,000 of additional BOLI income related to receipt of life insurance proceeds. These positives were substantially offset by a $842,000 cost (included as a negative to noninterest income) related to the termination of two interest rate swaps, and $648,000 of accelerated expense related to the prepayment of $50.0 million of subordinated notes.  Both actions will have a positive impact on earnings going forward.

As previously disclosed, on January 28, 2021, the Company authorized the repurchase of up to 948,735 shares, or approximately 5% of its outstanding shares. During the second quarter of 2021 the Company purchased 234,722 shares at an average price of $32.40 for a total cost of $7.60 million under this program.  Since announced, the Company has purchased 392,755 shares at an average price of $30.51 for a total cost of $11.98 million under this program.

Douglas L. Kennedy, President and CEO, said, “Our capital is strong and we believe that purchasing the Company’s stock is an opportunity for us to effectively manage our excess capital, while taking advantage of the Company’s valuation relative to peers.”

Mr. Kennedy also said, “During 2021 the Company participated in the 2021 round of the PPP, which provided much needed funding to qualifying small businesses and organizations.  During the six months of 2021 we assisted with over $181 million of PPP loans - $57 million processed and funded by the Bank, and another $124 million referred directly to a third party for processing and funding.  During the second quarter, the Company sold the $57 million of loans to the same third party to create additional capacity to process our strong loan pipeline.”

EXECUTIVE SUMMARY:

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

June 2021 Year Compared to Prior Year

    Six Months Ended     Six Months Ended                    
    June   30,     June   30,       Increase/  
(Dollars in millions, except per share data)   2021     2020       (Decrease)  
Net interest income   $ 65.64     $ 63.72       $ 1.92       3 %
Wealth management fee income (A)     25.17       19.95         5.22       26  
Capital markets activity (B)     5.03       3.85         1.18       31  
Other income (C)     5.30       3.35         1.95       58  
Total other income     35.50       27.15         8.35       31  
Operating expenses (D)     62.28       57.25         5.03       9  
Pretax income before provision for loan losses     38.86       33.62         5.24       16  
Provision for loan and lease losses (E)     1.13       24.90         (23.77 )     (95 )
Pretax income     37.73       8.72         29.01       333  
Income tax expense/(benefit) (F)     10.13       (0.90 )       11.03     N/A  
Net income   $ 27.60     $ 9.62       $ 17.98       187 %
Diluted EPS   $ 1.42     $ 0.51       $ 0.91       178 %
                                   
Total Revenue (G)   $ 101.14     $ 90.87       $ 10.27       11 %
                                   
Return on average assets annualized     0.93 %     0.35 %       0.58          
Return on average equity annualized     10.45 %     3.80 %       6.65          
  1. The June 2021 six months included wealth management fee income and expense related to the December lift outs of teams from Lucas Capital Management (“Lucas”) and Noyes Capital Management (“Noyes”) - approximately $1.2 million of wealth management fee income and approximately $700,000 of operating expenses were recorded in 2021 from these teams.
  2. Capital markets activity includes loan level back-to-back swap activities, the SBA lending and sale program, corporate advisory activities and mortgage banking activities. There were no fees related to loan level back-to-back swap activities in the six months ended June 30, 2021, compared to $1.6 million in the same 2020 period.  The three months ended March 31, 2021 included $1.1 million of corporate advisory fee income related to a large investment banking advisory event which closed in that quarter.  
  3. Included a cost of $842,000 related to the termination of interest rate swaps; $1.4 million gain on loans held at lower of cost or fair value; $722,000 of fee income related to the referral of PPP loans to a third party; and $455,000 of additional BOLI income related to receipt of life insurance proceeds.
  4. The 2021 six months included $1.5 million of severance expense related to certain corporate restructuring within several areas of the Bank and $648,000 of expense related to the redemption of subordinated debt.  
  5. The 2020 year included a provision for loan and lease losses of $24.9 million, primarily due to the environment at that time created by the COVID-19 pandemic.
  6. The 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.
  7. Total revenue equals net interest income plus total other income.

June 2021 Quarter Compared to Prior Year Quarter

    Three Months Ended       Three Months Ended                  
    June   30,       June   30,     Increase/  
(Dollars in millions, except per share data)   2021       2020     (Decrease)  
Net interest income   $ 33.85       $ 31.97     $ 1.88       6 %
Wealth management fee income (A)     13.03         10.00       3.03       30  
Capital markets activity (B)     1.46         1.08       0.38       35  
Other income (C)     3.18         1.54       1.64       106  
Total other income     17.67         12.62       5.05       40  
Operating expenses (D)     30.68         29.01       1.67       6  
Pretax income before provision for loan losses     20.84         15.58       5.26       34  
Provision for loan and lease losses (E)     0.90         4.90       (4.00 )     (82 )
Pretax income     19.94         10.68       9.26       87  
Income tax expense     5.52         2.44       3.08       126  
Net income   $ 14.42       $ 8.24     $ 6.18       75 %
Diluted EPS   $ 0.74       $ 0.43     $ 0.31       72 %
                                   
Total Revenue (F)   $ 51.52       $ 44.59     $ 6.93       16 %
                                   
Return on average assets annualized     0.97 %       0.56 %     0.41          
Return on average equity annualized     10.86 %       6.56 %     4.30          
  1. The June 2021 quarter included a full quarter of wealth management fee income and expense related to the December lift outs of teams from Lucas and Noyes - approximately $625,000 of wealth management fee income and approximately $350,000 of operating expenses were recorded in the 2021 quarter.
  2. Capital markets activity includes loan level back-to-back swap activities, the SBA lending and sale program, corporate advisory activities, and mortgage banking activities.
  3. The quarter ended June 30, 2021 included a cost of $842,000 related to the termination of certain interest rate swaps; a $1.1 million gain on the sale of PPP loans; $722,000 of fee income related to the referral of PPP loans to a third party; and $153,000 of additional BOLI income related to receipt of life insurance proceeds.
  4. The June 2021 quarter includes $648,000 of expense related to the redemption of subordinated debt.  
  5. The June 2020 quarter included a provision for loan and lease losses of $4.9 million, primarily due to the environment at that time created by the COVID-19 pandemic.
  6. Total revenue equals net interest income plus total other income.

June 2021 Quarter Compared to Linked Quarter

    Three Months Ended     Three Months Ended                    
    June   30,     March   31,       Increase/  
(Dollars in millions, except per share data)   2021     2021       (Decrease)  
Net interest income   $ 33.85     $ 31.79       $ 2.06       6 %
Wealth management fee income     13.03       12.13         0.90       7  
Capital markets activity (A)     1.46       3.57         (2.11 )     (59 )
Other income (B)     3.18       2.12         1.06       50  
Total other income     17.67       17.82         (0.15 )     (1 )
Operating expenses (C)     30.68       31.59         (0.91 )     (3 )
Pretax income before provision for loan losses     20.84       18.02         2.82       16  
Provision for loan and lease losses     0.90       0.23         0.67       291  
Pretax income     19.94       17.79         2.15       12  
Income tax expense     5.52       4.61         0.91       20  
Net income   $ 14.42     $ 13.18       $ 1.24       9 %
Diluted EPS   $ 0.74     $ 0.67       $ 0.07       10 %
                                   
Total Revenue (D)   $ 51.52     $ 49.61       $ 1.91       4 %
                                   
Return on average assets annualized     0.97 %     0.89 %       0.08          
Return on average equity annualized     10.86 %     10.03 %       0.83          
  1. Capital markets activity includes loan level back-to-back swap activities, the SBA lending and sale program, corporate advisory and mortgage banking activities. The three months ended March 31, 2021 included $1.1 million of corporate advisory fee income related to a large investment banking advisory event which closed in that quarter. 
  2. The quarter ended June 30, 2021 included a cost of $842,000 related to the termination of interest rate swaps; $1.1 million gain on the sale of PPP loans; and $722,000 of fee income related to the referral of PPP loans to a third party; and $153,000 of additional BOLI income related to receipt of life insurance proceeds.
  3. The June 2021 quarter includes $648,000 of expense related to the redemption of subordinated debt. The quarter ended March 31, 2021 included $1.5 million of severance expense related to certain corporate restructuring within several areas of the Bank.
  4. Total revenue equals net interest income plus total other income.

The Company’s near-term priorities include:

  • Grow and expand our three primary drivers of profitability: Wealth Management, Commercial Banking and Capital Markets businesses.
  • Maintain loan and deposit pricing discipline to protect and grow our Net Interest Margin.
  • Continue to execute on our stock repurchase program.
  • Generate fee income at 35% - 45% of total bank revenue.
  • Drive ROA to greater than 1% and return on average tangible common equity to greater than 14%.

Highlights of the Company’s quarterly accomplishments follow:

Peapack Private Wealth Management:

  • AUM/AUA in our Peapack Private Wealth Management Division grew to $9.8 billion at June 30, 2021 (from $8.8 billion at December 31, 2020 and $7.5 billion at December 31, 2019).
  • Wealth Management Fee Income increased to $13 million for Q2 2021 (compared to $10 million for Q2 2020).
  • On July 1, 2021, closed on the acquisition of Princeton Portfolio Strategies Group (“PPSG”), a registered investment advisor headquartered in Princeton NJ with approximately $520 million of AUM/AUA.

Commercial Banking and Balance Sheet Management:

  • During Q2 2021, loans, excluding PPP loans, grew by $293 million (7% growth linked quarter: 28% annualized).  
  • Core deposits (which includes demand, savings and money market) totaled 88% of total deposits at June 30, 2021. The total cost of interest-bearing deposits improved to 0.34% for Q2 2021 compared to 0.40% for Q1 2021. Noninterest bearing DDA (included in core deposits) totaled 20% of total deposits.
  • Net interest margin improved by 10 basis points in Q2 2021 from Q1 2021. 
  • $50 million of 6% subordinated debt (set to reprice to 5% on July 1, 2021) was fully redeemed on June 30, 2021.   
  • $40 million of interest rate swaps with an all-in cost of approximately 1.50% were terminated.  
  • Sold $57 million of PPP loans recognizing a gain of $1.1 million.  
  • Received $722,000 of fee income in Q2 2021 for the referral of PPP loans to a third party for origination. (The sale and referral of PPP loans created additional capacity for the Company to process its strong loan pipeline).

Credit and Capital Management:

  • During Q2, non-performing assets declined $6 million; classified loans declined $15 million; and loans subject to special mention declined $17 million. NPAs stood at just 0.10% of assets at June 30, 2021.
  • Continued to execute on the previously approved stock repurchase program – during Q2 repurchased 234,722 shares at an average price of $32.40 for a total cost of $7.6 million. (Year-to-date through June 30, 2021, the Company has repurchased 392,755 shares).
  • Tangible book value per share increased to $26.30 at June 30, 2021, despite the stock repurchase activity at prices above tangible book value.

  

SUPPLEMENTAL QUARTERLY DETAILS :

Wealth Management Business

In the June 2021 quarter, the Bank’s wealth management business generated $13.03 million in fee income, compared to $10.00 million for the June 2020 quarter, and $12.13 million for the March 2021 quarter.

The market value of the Company’s AUM/AUA increased to $9.8 billion at June 30, 2021 from $8.8 billion at December 31, 2020, and $7.2 billion at June 30, 2020 due to new business as well as positive market action.

In the quarter ended June 30, 2021 the Company announced the acquisition of PPSG, a registered investment advisor headquartered in Princeton, New Jersey.  Upon joining the Company on July 1, 2021, PPSG had approximately $520 million of AUM/AUA.

John P. Babcock, President of the Peapack Private Wealth Management division, said, “2021 showed continued strong new business, new client acquisition and client retention. We ended 2020 with a very strong Q4 and this continued into 2021 with gross inflows of over $240 million for Q2 2021.” Babcock went on to note, “We continue to look to grow our wealth business organically and through selective acquisitions. And, we continue to make significant progress on our infrastructure consolidation including launching our new trading platform and a new CRM system, as well as adding more resources to our financial planning team.”

Loans / Commercial Banking

Total loans of $4.58 billion at June 30, 2021 (including PPP loans of $84 million) increased $144 million from $4.44 billion (including PPP loans of $233 million) at March 31, 2021. Excluding the decline in PPP loans during the June quarter, loans grew $293 million, or 7% on a linked quarter basis (28% annualized). During the quarter, multifamily loans grew $241 million and C&I loans grew $47 million.

Total C&I loans (including the PPP loans) at June 30, 2021 were $1.88 billion or 41% of the total loan portfolio. While C&I origination levels have been strong throughout 2021, paydown and payoff activity has also been robust, including paydowns of several large lines of credit, as well as the Company’s workout and asset recovery efforts, including the workout and recovery of several nonaccrual and/or classified credits in 2021.

Mr. Kennedy noted, “Our commercial loan pipelines are strong going into the third quarter, standing at approximately $250 million with likelihood of closing during the third quarter of 2021.”

Mr. Kennedy also noted, “As I have mentioned in the past, our Corporate Advisory business, which gives us the capability to engage in high level strategic debt, capital and valuation analysis, enables us to provide a unique boutique level of service, giving us a competitive advantage over many of our peers. Our Corporate Advisory pipelines are also strong.  Notwithstanding the sale and forgiveness of PPP loans and significant payoff activity, we believe that we will achieve high single digit loan growth, which was the upper end of our guidance provided in the beginning of 2021.”

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 June 30, 2021 were $4.90 billion. While total deposits did not increase significantly over the last year, the mix changed favorably, as noninterest bearing demand deposits increased $48 million and interest-bearing demand increased $174 million, while brokered deposits declined $45 million, and higher costing CDs declined $187 million, when comparing June 30, 2021 to June 30, 2020. 

Mr. Kennedy noted, “88% of our deposits are demand, savings, or money market, and, our noninterest bearing deposits comprise 20% of our total deposits; both metrics reinforce the ‘core’ nature of our deposit base.”

At June 30, 2021, the Company’s balance sheet liquidity (investments, interest-earning deposits and cash) totaled $1.1 billion (or 18% of assets).  The Company has approximately $1.7 billion of secured funding available from the Federal Home Loan Bank and $1.0 billion of secured funding available from the Federal Reserve Discount Window.  The available funding from the Federal Home Loan Bank and the Federal Reserve is secured by the Company’s loan and investment portfolios.

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 the first quarter of 2020 reduced the Company’s yield earned on assets. However, we were able to strategically reprice our deposits over time to offset much of that decline. Further, when interest rates rise, we expect that our net interest income will improve. Our current modeling indicates that 68% of our loan portfolio reprices within 2 years - 44% would reprice within 90 days, another 12% within 3 to 12 months and another 12% repricing within year two.”

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

  Six Months Ended     Six Months Ended                  
  June 30, 2021     June 30, 2020                  
  NII     NIM     NII     NIM                  
                                               
NII/NIM excluding the below $ 63,001     2.51%     $ 61,403     2.54%                  
Prepayment premiums received on loan paydowns   1,205     0.05%       901     0.04%                  
Effect of maintaining excess interest earning cash   (300 )   -0.18%       (563 )   -0.15%                  
Effect of PPP loans   1,732     -0.06%       1,977     -0.02%                  
NII/NIM as reported $ 65,638     2.32%     $ 63,718     2.41%                  
                                               
  Three Months Ended     Three Months Ended     Three Months Ended  
  June 30, 2021     March 31, 2021     June 30, 2020  
  NII     NIM     NII     NIM     NII     NIM  
                                               
NII/NIM excluding the below $ 32,446     2.56%     $ 30,565     2.49%     $ 29,881     2.45%  
Prepayment premiums received on loan paydowns   501     0.04%       704     0.05%       376     0.03%  
Effect of maintaining excess interest earning cash   (115 )   -0.15%       (195 )   -0.21%       (263 )   -0.19%  
Effect of PPP loans   1,013     -0.07%       719     -0.05%       1,977     -0.02%  
NII/NIM as reported $ 33,845     2.38%     $ 31,793     2.28%     $ 31,971     2.27%  

As shown above, the Company’s reported NIM increased 10 basis points compared to the linked quarter. The Bank strategically lowered its cost of deposits and used much of its excess liquidity to grow loans, both of which benefitted NIM.

Future net interest income and net interest margin should benefit from the following:

  • Full realization of the second quarter loan growth, as well as robust loan pipelines.
  • Continued downward repricing of maturing CDs.
  • Redemption of $50 million of subordinated debt during the June quarter.
  • Termination of $40 million notional interest rate swaps during the June quarter.

Income from Capital Markets Activities

    Three Months Ended     Three Months Ended     Three Months Ended  
    June   30,     March   31,     June   30,  
(Dollars in thousands, except per share data)   2021     2021     2020  
Gain on loans held for sale at fair value (Mortgage banking)   $ 409     $ 1,025     $ 550  
Fee income related to loan level, back-to-back swaps                 202  
Gain on sale of SBA loans     932       1,449       258  
Corporate advisory fee income     121       1,098       65  
Total capital markets activity   $ 1,462     $ 3,572     $ 1,075  

Noninterest income from Capital Markets activities (SBA lending and sale program, mortgage banking activity, corporate advisory activity and loan level back-to-back swap activities) totaled $1.46 million for the June 2021 quarter compared to $3.57 million for the March 2021 quarter and $1.08 million for the June 2020 quarter.  The June 2021 and March 2021 quarter results were driven by $932,000 and $1.45 million gain on sale of SBA loans, respectively. The March 2021 quarter reflected increased mortgage banking activity due to greater refinance activity in the low rate environment. During the March 2021 quarter, the Company recorded $1.1 million of corporate advisory fee income related to a large investment banking advisory event which closed in that quarter.  These transactions tend to be larger and take longer to complete. As noted previously, the pipeline of such business is fairly robust. The June 2021 and March 2021 quarters included no income from loan level, back-to-back swap activities, as there has been, and will continue to be, minimal activity for such in the current environment. The June 2020 quarter included $202,000 of such income.

Other Noninterest Income (other than Wealth Management fee income and Income from Capital Markets Activities)

The June 2021 quarter included approximately $153,000 and the March 2021 quarter included approximately $302,000 of Bank Owned Life Insurance income due to receipt of life insurance proceeds. Such proceeds were nontaxable. The June 2021 quarter included $1.13 million gain on the sale of PPP loans, while the March 2021 quarter included a $282,000 gain on sale of $8 million of loans that had payment issues and were classified as held for sale as of December 31, 2020. The Company also received $722,000 of fee income related to referral of PPP loans to a third party.  Partially offsetting the above items in the June 2021 quarter, the Company recorded a one-time $842,000 cost on the termination of $40 million notional interest rate swaps with an all-in cost of 1.50%.

Operating Expenses

The Company’s total operating expenses were $30.68 million for the quarter ended June 30, 2021, compared to $31.59 million for the March 2021 quarter and $29.01 million for the June 2020 quarter. The June 2021 quarter included $648,000 of expense related to the redemption of subordinated debt. The March 2021 quarter included $1.5 million of severance expense related to certain corporate restructuring within several areas of the Bank. The June and March 2021 quarter included a full quarter’s worth of expense related to Lucas and Noyes (approximately $350,000 in each quarter).

Mr. Kennedy noted, “While we continue to manage expenses closely and prudently, we will invest in digital enhancements to improve the client experience and grow and expand our core wealth management and commercial banking businesses, including lift-outs, strategic hires, and wealth M&A.”

Income Taxes

The effective tax rate for the three months ended June 30, 2021 was 27.69%, as compared to 25.94% for the March 2021 quarter and 22.85% for the quarter ended June 30, 2020. The March 31, 2021 quarter benefitted from life insurance proceeds that were not taxable and from the vesting of restricted stock at prices higher than grant prices. The effective tax rate for the June 2020 quarter was impacted by reduced taxable income due to the environment created by the Pandemic.

The effective tax rate for the six months of 2021 was 26.87% compared to a net tax benefit recorded for the first six months of 2020. 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 Q2 2021 Investor Update (and Supplemental Financial Information).

Nonperforming assets at June 30, 2021 (which does not include troubled debt restructured loans that are performing in accordance with their terms) were $6.0 million, or 0.10% of total assets, down from $11.8 million, or 0.20% of total assets, at March 31, 2021 and down significantly from $26.7 million, or 0.43% of total assets, at June 30, 2020. 

For the quarter ended June 30, 2021, the Company’s provision for loan and lease losses was $900,000 compared to $225,000 for the March 2021 quarter and $4.90 million for the June 2020 quarter. The decreased provision for loan and lease losses in the 2021 quarters when compared to the 2020 quarters reflects the reduced qualitative loss factors related to the unemployment rate and amount of loan deferrals and other economic qualitative factors due to the COVID-19 pandemic when calculating the allowance for loan losses. Loan deferrals entered into during the COVID-19 pandemic have come down significantly from the prior year (declined from $914 million at June 30, 2020 to $37 million at June 30, 2021). The Company’s provision for loan and lease losses (and its allowance for loan and lease losses) also reflects, among other things, the Company’s assessment of asset quality metrics, net charge-offs/recoveries, and the composition of the loan portfolio.

At June 30, 2021, the allowance for loan and lease losses was $63.51 million (1.39% of total loans), compared to $67.31 million at December 31, 2020 (1.53% of total loans), and $66.07 million at June 30, 2020 (1.35% of total loans).  The Company has elected to take additional time to adopt CECL and will implement effective January 1, 2022.

Capital

The Company’s capital position during the June 2021 quarter was benefitted by net income of $14.42 million which was offset by the purchase of shares through the Company’s stock repurchase program.  During the second quarter of 2021, the Company purchased 234,722 shares at an average price of $32.40 for a total cost of $7.6 million.  GAAP Capital at June 30, 2021 was also benefitted by a decrease in the unrealized loss on securities from March 31, 2021 to June 30, 2021, due to market value appreciation of the AFS investment securities portfolio.

The Company’s and Bank’s capital ratios at June 30, 2021 all remain strong.  Such ratios remain well above regulatory well capitalized standards.

As previously announced, in the fourth quarter of 2020 the Company successfully completed a private placement of $100 million in fixed-to floating rate subordinated notes due 2030 at a rate of 3.5%. Such funds benefitted the Company’s Regulatory Tier 2 Capital. At the time, the Company noted the proceeds raised would be used for general corporate purposes, which could include stock repurchases, the redemption of the Company’s existing 6% subordinated debt and acquisitions of wealth management firms. Throughout the first half of 2021, the Company repurchased $12 million of stock.  On June 30, 2021 the Company redeemed its 6% subordinated debt. On July 1, 2021 the Company closed on the acquisition of Princeton Portfolio Strategies Group.

The Company employs quarterly capital stress testing run under multiple scenarios, including a no growth, severely adverse case. In such case as of March 31, 2021, 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 Q2 2021 Investor Update (and Supplemental Financial Information).

On July 27, 2021, the Company declared a cash dividend of $0.05 per share payable on August 24, 2021 to shareholders of record on August 10, 2021.

ABOUT THE COMPANY

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $5.8 billion and assets under management/administration of $9.8 billion as of June 30, 2021.  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 2021 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;
  • a 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 higher 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 increase 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;
  • a material decrease in net income or a net loss over several quarters could result in an elimination of 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, 2020.  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  
    June 30,     March 31,     Dec 31,     Sept 30,     June 30,  
    2021     2021     2020     2020     2020  
Income Statement Data:                                        
Interest income   $ 39,686     $ 38,239     $ 38,532     $ 40,174     $ 41,649  
Interest expense     5,841       6,446       6,797       8,025       9,678  
Net interest income     33,845       31,793       31,735       32,149       31,971  
Wealth management fee income     13,034       12,131       10,791       10,119       9,996  
Service charges and fees     896       846       859       785       695  
Bank owned life insurance     466       611       313       314       318  
Gain on loans held for sale at fair value
   (Mortgage banking) (A)
    409       1,025       1,470       954       550  
Gain/(loss) on loans held for sale at lower of cost or
   fair value(B)
    1,125       282             7,429        
Fee income related to loan level, back-to-back
   swaps (A)
                            202  
Gain on sale of SBA loans (A)     932       1,449       375       79       258  
Corporate advisory fee income (A)     121       1,098       50       75       65  
Loss on swap termination     (842 )                        
Other income (C)     1,495       643       590       456       417  
Securities gains/(losses), net     42       (265 )     (42 )           125  
Total other income     17,678       17,820       14,406       20,211       12,626  
Salaries and employee benefits (D)     19,910       21,990       19,902       19,202       19,186  
Premises and equipment     4,074       4,113       4,189       4,109       4,036  
FDIC insurance expense     529       585       665       605       455  
FHLB prepayment penalty                 4,784              
Valuation allowance loans held for sale (E)                 4,425              
Other expenses     6,171       4,906       5,284       4,545       5,337  
Total operating expenses     30,684       31,594       39,249       28,461       29,014  
Pretax income before provision for loan losses     20,839       18,019       6,892       23,899       15,583  
Provision for loan and lease losses (F)     900       225       2,350       5,150       4,900  
Income/(loss) before income taxes     19,939       17,794       4,542       18,749       10,683  
Income tax expense     5,521       4,616       1,512       5,202       2,441  
Net income   $ 14,418     $ 13,178     $ 3,030     $ 13,547     $ 8,242  
                                         
Total revenue (G)   $ 51,523     $ 49,613     $ 46,141     $ 52,360     $ 44,597  
Per Common Share Data:                                        
Earnings per share (basic)   $ 0.76     $ 0.70     $ 0.16     $ 0.72     $ 0.44  
Earnings per share (diluted)     0.74       0.67       0.16       0.71       0.43  
Weighted average number of common
   shares outstanding:
                                       
Basic     18,963,237       18,950,305       18,947,864       18,908,337       18,872,070  
Diluted     19,439,439       19,531,689       19,334,569       19,132,650       19,059,822  
Performance Ratios:                                        
Return on average assets annualized (ROAA)     0.97 %     0.89 %     0.21 %     0.89 %     0.56 %
Return on average equity annualized (ROAE)     10.86 %     10.03 %     2.32 %     10.53 %     6.56 %
Return on average tangible common equity (ROATCE) (H)     11.83 %     10.94 %     2.51 %     11.41 %     7.13 %
Net interest margin (tax-equivalent basis)     2.38 %     2.28 %     2.25 %     2.20 %     2.27 %
GAAP efficiency ratio (I)     59.55 %     63.68 %     85.06 %     54.36 %     65.06 %
Operating expenses / average assets annualized     2.06 %     2.14 %     2.66 %     1.86 %     1.97 %
  1. Gain on loans held for sale at fair value (mortgage banking), fee income related to loan level, back-to-back swaps, gain on sale of SBA loans and corporate advisory fee income are all included in “capital markets activity” as referred to within the earnings release.
  2. Includes gain on sale $355 million and $57 million of PPP loans completed in the September 2020 and June 2021 quarters, respectively.
  3. Includes income of $722,000 from the referral of PPP loans to a third-party firm during the June 2021 quarter.
  4. The March 2021 quarter included $1.5 million of severance expense related to corporate restructuring.
  5. The December 2020 quarter reflects a $4.4 million write-down of a commercial real estate held for sale loan associated with an assisted living facility.
  6. The March 2020, June 2020 and September 2020 quarters included a higher provision for loan and lease losses primarily due to the environment created by the COVID-19 pandemic.
  7. Total revenue equals net interest income plus total other income.
  8. Return on average tangible common equity is calculated by dividing tangible common equity by annualized net income.  See Non-GAAP financial measures reconciliation included in these tables.
  9. 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 Six Months Ended                  
    June 30,     Change  
    2021     2020     $     %  
Income Statement Data:                                
Interest income   $ 77,925     $ 87,044     $ (9,119 )     -10 %
Interest expense     12,287       23,326       (11,039 )     -47 %
Net interest income     65,638       63,718       1,920       3 %
Wealth management fee income     25,165       19,951       5,214       26 %
Service charges and fees     1,742       1,511       231       15 %
Bank owned life insurance     1,077       646       431       67 %
Gain on loans held for sale at fair value (Mortgage banking) (A)     1,434       842       592       70 %
Gain on loans held for sale at lower of cost or fair value (B)     1,407       (3 )     1,410       -47000 %
Fee income related to loan level, back-to-back swaps (A)           1,620       (1,620 )     -100 %
Gain on sale of SBA loans (A)     2,381       1,312       1,069       81 %
Corporate advisory fee income (A)     1,219       75       1,144       1525 %
Loss on swap termination     (842 )           (842 )   N/A  
Other income (C)     2,138       866       1,272       147 %
Securities gains/(losses), net     (223 )     323       (546 )     -169 %
Total other income     35,498       27,143       8,355       31 %
Salaries and employee benefits (D)     41,900       38,412       3,488       9 %
Premises and equipment     8,187       8,079       108       1 %
FDIC insurance expense     1,114       705       409       58 %
Other expenses     11,077       10,053       1,024       10 %
Total operating expenses     62,278       57,249       5,029       9 %
Pretax income before provision for loan losses     38,858       33,612       5,246       16 %
Provision for loan and lease losses (E)     1,125       24,900       (23,775 )     -95 %
Income before income taxes     37,733       8,712       29,021       333 %
Income tax expense/(benefit) (F)     10,137       (903 )     11,040       -1223 %
Net income   $ 27,596     $ 9,615     $ 17,981       187 %
                                 
Total revenue (G)   $ 101,136     $ 90,861     $ 10,275       11 %
Per Common Share Data:                                
Earnings per share (basic)   $ 1.46     $ 0.51     $ 0.95       186 %
Earnings per share (diluted)     1.42       0.51       0.91       178 %
Weighted average number of common shares outstanding:                                
Basic     18,956,807       18,865,206       91,601       0 %
Diluted     19,473,150       18,991,056       482,094       3 %
Performance Ratios:                                
Return on average assets annualized (ROAA)     0.93 %     0.35 %     0.58 %     166 %
Return on average equity annualized (ROAE)     10.45 %     3.80 %     6.65 %     175 %
Return on average tangible common equity (ROATCE) (H)     11.39 %     4.13 %     7.25 %     175 %
Net interest margin (tax-equivalent basis)     2.32 %     2.41 %     (0.09 )%     -4 %
GAAP efficiency ratio (I)     61.58 %     63.01 %     (1.43 )%     -2 %
Operating expenses / average assets annualized     2.10 %     2.07 %     0.03 %     2 %
  1. Gain on loans held for sale at fair value (mortgage banking), fee income related to loan level, back-to-back swaps, gain on sale of SBA loans and corporate advisory fee income are all included in “capital markets activity” as referred to within the earnings release.
  2. Includes gain on sale of PPP loans of $57 million completed in the six months ended June 30, 2021.
  3. Includes income of $722,000 from the referral of PPP loans to a third-party firm during 2021.
  4. The six months ended June 30, 2021 included $1.5 million of severance expense related to corporate restructuring.
  5. The six months ended June 30, 2020 included a higher provision for loan and lease losses primarily due to the environment created by the COVID-19 pandemic.
  6. 2020 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.
  7. Total revenue equals net interest income plus total other income.
  8. Return on average tangible common equity is calculated by dividing tangible common equity by annualized net income.  See Non-GAAP financial measures reconciliation included in these tables.
  9. 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
    June 30,     March 31,     Dec 31,     Sept 30,     June 30,
    2021     2021     2020     2020     2020
ASSETS                                      
Cash and due from banks   $ 12,684     $ 8,159     $ 10,629     $ 8,400     $ 5,608
Federal funds sold           102       102       102       102
Interest-earning deposits     190,778       468,276       642,591       670,863       617,117
Total cash and cash equivalents     203,462       476,537       653,322       679,365       622,827
Securities available for sale     823,820       875,301       622,689       596,929       539,742
Equity security     14,894       14,852       15,117       15,159       15,159
FHLB and FRB stock, at cost     12,901       13,699       13,709       18,433       18,598
Residential mortgage     504,181       498,884       520,188       532,120       536,015
Multifamily mortgage     1,420,043       1,178,940       1,127,198       1,168,796       1,178,494
Commercial mortgage     702,777       697,599       694,034       722,678       761,910
Commercial loans (A)     1,880,830       1,982,570       1,975,337       1,930,984       2,316,125
Consumer loans     31,889       36,519       37,016       51,859       53,111
Home equity lines of credit     44,062       45,624       50,547       52,194       54,006
Other loans     204       199       225       260       272
Total loans     4,583,986       4,440,335       4,404,545       4,458,891       4,899,933
Less: Allowances for loan and lease losses     63,505       67,536       67,309       66,145       66,065
Net loans     4,520,481       4,372,799       4,337,236       4,392,746       4,833,868
Premises and equipment     23,261       23,260       21,609       21,668       21,449
Other real estate owned           50       50       50       50
Accrued interest receivable     23,117       23,916       22,495       22,192       15,956
Bank owned life insurance     46,605       46,448       46,809       46,645       46,479
Goodwill and other intangible assets     43,156       43,524       43,891       39,622       39,943
Finance lease right-of-use assets     3,956       4,143       4,330       4,517       4,704
Operating lease right-of-use assets     9,569       10,186       9,421       10,011       10,810
Other assets (B)     66,466       64,912       99,764       110,770       111,630
TOTAL ASSETS   $ 5,791,688     $ 5,969,627     $ 5,890,442     $ 5,958,107     $ 6,281,215
                                       
LIABILITIES                                      
Deposits:                                      
Noninterest-bearing demand deposits   $ 959,494     $ 908,922     $ 833,500     $ 838,307     $ 911,989
Interest-bearing demand deposits     1,978,497       1,987,567       1,849,254       1,858,529       1,804,102
Savings     147,227       141,743       130,731       127,737       123,140
Money market accounts     1,213,992       1,256,605       1,298,885       1,251,349       1,183,603
Certificates of deposit – Retail     446,143       474,668       530,222       586,801       629,941
Certificates of deposit – Listing Service     31,631       31,631       32,128       32,677       35,327
Subtotal “customer” deposits     4,776,984       4,801,136       4,674,720       4,695,400       4,688,102
IB Demand – Brokered     85,000       110,000       110,000       130,000       130,000
Certificates of deposit – Brokered     33,791       33,777       33,764       33,750       33,736
Total deposits     4,895,775       4,944,913       4,818,484       4,859,150       4,851,838
Short-term borrowings           15,000       15,000       15,000       15,000
FHLB advances (C)                       105,000       105,000
Paycheck Protection Program Liquidity Facility (D)     83,586       168,180       177,086       183,790       535,837.00
Finance lease liability     6,299       6,528       6,753       6,976       7,196
Operating lease liability     9,902       10,509       9,737       10,318       11,116
Subordinated debt, net (E)     132,557       181,837       181,794       83,585       83,529
Other liabilities (B)     125,110       120,219       154,466       156,472       163,719
Due to brokers                       15,088      
TOTAL LIABILITIES     5,253,229       5,447,186       5,363,320       5,435,379       5,773,235
Shareholders’ equity     538,459       522,441       527,122       522,728       507,980
TOTAL LIABILITIES AND                                      
SHAREHOLDERS’ EQUITY   $ 5,791,688     $ 5,969,627     $ 5,890,442     $ 5,958,107     $ 6,281,215
Assets under management and / or administration at
   Peapack-Gladstone Bank s Private Wealth Management
   Division (market value, not included above-dollars in billions)
  $ 9.8     $ 9.4     $ 8.8     $ 7.6     $ 7.2
  1. Includes PPP loans of $84 million at June 30, 2021, $233 million at March 31, 2021, $196 million at December 31, 2020, $202 million at September 30, 2020 and $547 million at June 30, 2020.
  2. The change in other assets and other liabilities was primarily due to the change in the fair value of our back-to-back swap program.
  3. The Company prepaid $105 million of FHLB advances with a weighted-average rate of 3.20% during the December 2020 quarter.
  4. Represents funding provided by the Federal Reserve for pledged PPP loans.
  5. The increase was due to the completion of a $100 million subordinated debt offering in December 22, 2020.  The Company redeemed $50 million of subordinated debt on June 30, 2021.

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

    As of  
    June 30,     March 31,     Dec 31,     Sept 30,     June 30,  
    2021     2021     2020     2020     2020  
Asset Quality:                                        
Loans past due over 90 days and still accruing   $     $     $     $     $  
Nonaccrual loans (A)     5,962       11,767       11,410       8,611       26,697  
Other real estate owned           50       50       50       50  
Total nonperforming assets   $ 5,962     $ 11,817     $ 11,460     $ 8,661     $ 26,747  
                                         
Nonperforming loans to total loans     0.13 %     0.27 %     0.26 %     0.19 %     0.54 %
Nonperforming assets to total assets     0.10 %     0.20 %     0.19 %     0.15 %     0.43 %
                                         
Performing TDRs (B)(C)   $ 190     $ 197     $ 201     $ 2,278     $ 2,376  
                                         
Loans past due 30 through 89 days and still accruing (D)(E)   $ 1,678     $ 1,622     $ 5,053     $ 6,609     $ 3,785  
                                         
Loans subject to special mention   $ 148,601     $ 166,013     $ 162,103     $ 129,700     $ 27,922  
                                         
Classified loans   $ 11,178     $ 25,714     $ 37,771     $ 41,263     $ 63,562  
                                         
Impaired loans   $ 6,498     $ 11,964     $ 16,204     $ 15,514     $ 33,708  
                                         
Allowance for loan and lease losses:                                        
Beginning of period   $ 67,536     $ 67,309     $ 66,145     $ 66,065     $ 63,783  
Provision for loan and lease losses     900       225       2,350       5,150       4,900  
(Charge-offs)/recoveries, net     (4,931 )     2       (1,186 )     (5,070 )     (2,618 )
End of period   $ 63,505     $ 67,536     $ 67,309     $ 66,145     $ 66,065  
                                         
ALLL to nonperforming loans     1065.16 %     573.94 %     589.91 %     768.15 %     247.46 %
ALLL to total loans     1.39 %     1.52 %     1.53 %     1.48 %     1.35 %
General ALLL to total loans (F)     1.38 %     1.45 %     1.47 %     1.48 %     1.26 %
  1. Excludes one commercial loan held for sale of $5.6 million at both June 30, 2021 and March 31, 2021. Excludes residential and commercial loans held for sale of $8.5 million at December 31, 2020.  Excludes one commercial loan held for sale of $10.0 million at September 30, 2020.
  2. Amounts reflect TDRs that are paying according to restructured terms.
  3. Amount excludes $3.9 million at June 30, 2021, $3.9 million at March 31, 2021, $4.0 million at December 31, 2020, $5.2 million at September 30, 2020 and $23.2 million at June 30, 2020 of TDRs included in nonaccrual loans.
  4. Excludes a residential loan held for sale of $93,000 at December 31, 2020.
  5. December 31, 2020 includes $1.3 million of residential loans that are classified as delinquent due to an escrow payment shortage due to a recent change in escrow payment requirement.
  6. Total ALLL less specific reserves equals general ALLL.

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

    June   30,     December 31,     June   30,  
    2021     2020     2020  
Capital Adequacy                                    
Equity to total assets (A)(J)         9.30 %         8.95 %         8.09 %
Tangible Equity to tangible assets (B)         8.62 %         8.27 %         7.50 %
Tangible Equity to tangible assets excluding
   PPP loans (C)
        8.74 %         8.55 %         8.22 %
Book value per share (D)       $ 28.60         $ 27.78         $ 26.87  
Tangible Book Value per share (E)       $ 26.30         $ 25.47         $ 24.76  

 

    June   30,     December 31,     June   30,
    2021     2020     2020
Regulatory Capital Holding Company                                              
Tier I leverage   $ 499,344     8.67%     $ 483,535     8.53%     $ 468,898     8.57%
Tier I capital to risk-weighted assets     499,344       11.45       483,535     11.93       468,898     11.35
Common equity tier I capital ratio
   to risk-weighted assets
    499,315       11.45       483,500     11.93       468,863     11.35
Tier I & II capital to risk-weighted assets     686,543       15.74       716,210     17.67       604,258     14.62
                                               
Regulatory Capital Bank                                              
Tier I leverage (F)   $ 583,208     10.13%     $ 549,575     9.71%     $ 534,794     9.79%
Tier I capital to risk-weighted assets (G)     583,208     13.37       549,575     13.55       534,794     12.96
Common equity tier I capital ratio
   to risk-weighted assets (H)
    583,179     13.37       549,540     13.55       534,759     12.95
Tier I & II capital to risk-weighted assets (I)     637,858     14.62       600,478     14.81       586,574     14.21
  1. Equity to total assets is calculated as total shareholders’ equity as a percentage of total assets at period end.
  2. 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.
  3. 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.
  4. Book value per common share is calculated by dividing shareholders’ equity by period end common shares outstanding
  5. Tangible book value per share 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.
  6. Regulatory well capitalized standard = 5.00% ($288 million)
  7. Regulatory well capitalized standard = 8.00% ($349 million)
  8. Regulatory well capitalized standard = 6.50% ($284 million)
  9. Regulatory well capitalized standard = 10.00% ($436 million)
  10. PPP loans with a balance of $84 million at June 30, 2021, $196 million at December 31, 2020 and $547 million at June 30, 2020 increased total assets.

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

    For the Quarters Ended  
    June 30,     March 31,     Dec 31,     Sept 30,     June 30,  
    2021     2021     2020     2020     2020  
Residential loans retained   $ 37,083     $ 15,814     $ 22,316     $ 32,599     $ 18,627  
Residential loans sold     25,432       45,873       64,630       54,521       37,061  
Total residential loans     62,515       61,687       86,946       87,120       55,688  
Commercial real estate     12,243       38,363             1,613       748  
Multifamily     255,820       85,009       1,184       1,500       11,960  
Commercial (C&I) loans (A) (B)     141,285       129,141       218,235       118,048       99,294  
SBA (C)     15,976       58,730       8,355       4,962       595,651  
Wealth lines of credit (A)     3,200       2,475       3,925       2,000       500  
Total commercial loans     428,524       313,718       231,699       128,123       708,153  
Installment loans     25       63       690       253       950  
Home equity lines of credit (A)     4,140       1,899       2,330       4,759       4,280  
Total loans closed   $ 495,204     $ 377,367     $ 321,665     $ 220,255     $ 769,071  

 

    For the Six Months Ended
    June 30,     June 30,
    2021     2020
Residential loans retained   $ 52,897     $ 33,458
Residential loans sold     71,305       56,452
Total residential loans     124,202       89,910
Commercial real estate     50,606       9,606
Multifamily     340,829       73,958
Commercial (C&I) loans (A) (B)     270,426       142,202
SBA (C)     74,706       609,481
Wealth lines of credit (A)     5,675       3,750
Total commercial loans     742,242       838,997
Installment loans     88       1,206
Home equity lines of credit (A)     6,039       7,912
Total loans closed   $ 872,571     $ 938,025
  1. Includes loans and lines of credit that closed in the period but not necessarily funded.
  2. Includes equipment finance.
  3. Includes PPP loans of $9.2 million for the quarter ended June 30, 2021, $47 million for the quarter ended March 31, 2021 and $596 million for the quarter ended June 30, 2020.

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

    June   30, 2021     June   30, 2020  
    Average     Income/             Average     Income/          
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                                
Interest-earning assets:                                                
Investments:                                                
Taxable (A)   $ 884,374     $ 3,020       1.37 %   $ 437,288     $ 2,108       1.93 %
Tax-exempt (A) (B)     6,891       81       4.70       10,137       129       5.09  
                                                 
Loans (B) (C):                                                
Mortgages     498,594       3,826       3.07       530,087       4,497       3.39  
Commercial mortgages     1,941,330       15,056       3.10       2,083,310       16,147       3.10  
Commercial     1,942,802       16,984       3.50       2,038,530       18,204       3.57  
Commercial construction     20,952       180       3.44       3,296       44       5.34  
Installment     34,319       255       2.97       52,859       371       2.81  
Home equity     45,042       377       3.35       54,869       453       3.30  
Other     219       5       9.13       318       7       8.81  
Total loans     4,483,258       36,683       3.27       4,763,269       39,723       3.34  
Federal funds sold     91             0.06       102             0.25  
Interest-earning deposits     428,464       97       0.09       497,764       109       0.09  
Total interest-earning assets     5,803,078       39,881       2.75 %     5,708,560       42,069       2.95 %
Noninterest-earning assets:                                                
Cash and due from banks     10,360                       5,437                  
Allowance for loan and lease losses     (67,593 )                     (64,109 )                
Premises and equipment     23,307                       21,462                  
Other assets     182,421                       234,357                  
Total noninterest-earning assets     148,495                       197,147                  
Total assets   $ 5,951,573                     $ 5,905,707                  
                                                 
LIABILITIES:                                                
Interest-bearing deposits:                                                
Checking   $ 1,980,688     $ 944       0.19 %   $ 1,748,753     $ 1,642       0.38 %
Money markets     1,235,464       727       0.24       1,207,816       1,473       0.49  
Savings     144,044       18       0.05       118,878       16       0.05  
Certificates of deposit – retail     488,148       1,027       0.84       676,498       3,147       1.86  
Subtotal interest-bearing deposits     3,848,344       2,716       0.28       3,751,945       6,278       0.67  
Interest-bearing demand – brokered     105,604       456       1.73       150,330       700       1.86  
Certificates of deposit – brokered     33,783       264       3.13       33,729       264       3.13  
Total interest-bearing deposits     3,987,731       3,436       0.34       3,936,004       7,242       0.74  
Borrowings     166,343       182       0.44       330,514       1,127       1.36  
Capital lease obligation     6,380       76       4.76       7,270       87       4.79  
Subordinated debt     181,317       2,147       4.74       83,496       1,222       5.85  
Total interest-bearing liabilities     4,341,771       5,841       0.54 %     4,357,284       9,678       0.89 %
Noninterest-bearing liabilities:                                                
Demand deposits     948,851                       873,926                  
Accrued expenses and other liabilities     129,980                       171,814                  
Total noninterest-bearing liabilities     1,078,831                       1,045,740                  
Shareholders’ equity     530,971                       502,683                  
Total liabilities and shareholders’ equity   $ 5,951,573                     $ 5,905,707                  
Net interest income           $ 34,040                     $ 32,391          
Net interest spread                     2.21 %                     2.06 %
Net interest margin (D)                     2.38 %                     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
THREE MONTHS ENDED
(Tax-Equivalent Basis, Dollars in Thousands)

    June   30, 2021     March 31, 2021  
    Average     Income/             Average     Income/          
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                                
Interest-earning assets:                                                
Investments:                                                
Taxable (A)   $ 884,374     $ 3,020       1.37 %   $ 761,187     $ 2,629       1.38 %
Tax-exempt (A) (B)     6,891       81       4.70       7,980       98       4.91  
                                                 
Loans (B) (C):                                                
Mortgages     498,594       3,826       3.07       501,590       3,954       3.15  
Commercial mortgages     1,941,330       15,056       3.10       1,840,363       14,420       3.13  
Commercial     1,942,802       16,984       3.50       1,932,692       16,455       3.41  
Commercial construction     20,952       180       3.44       15,606       139       3.56  
Installment     34,319       255       2.97       37,695       276       2.93  
Home equity     45,042       377       3.35       48,853       399       3.27  
Other     219       5       9.13       246       5       8.13  
Total loans     4,483,258       36,683       3.27       4,377,045       35,648       3.26  
Federal funds sold     91             0.06       102             0.25  
Interest-earning deposits     428,464       97       0.09       555,331       128       0.09  
Total interest-earning assets     5,803,078       39,881       2.75 %     5,701,645       38,503       2.70 %
Noninterest-earning assets:                                                
Cash and due from banks     10,360                       11,129                  
Allowance for loan and lease losses     (67,593 )                     (71,160 )                
Premises and equipment     23,307                       22,634                  
Other assets     182,421                       228,134                  
Total noninterest-earning assets     148,495                       190,737                  
Total assets   $ 5,951,573                     $ 5,892,382                  
                                                 
LIABILITIES:                                                
Interest-bearing deposits:                                                
Checking   $ 1,980,688     $ 944       0.19 %   $ 1,908,380     $ 978       0.20 %
Money markets     1,235,464       727       0.24       1,259,597       794       0.25  
Savings     144,044       18       0.05       135,202       17       0.05  
Certificates of deposit – retail     488,148       1,027       0.84       533,488       1,470       1.10  
Subtotal interest-bearing deposits     3,848,344       2,716       0.28       3,836,667       3,259       0.34  
Interest-bearing demand – brokered     105,604       456       1.73       110,000       493       1.79  
Certificates of deposit – brokered     33,783       264       3.13       33,769       261       3.09  
Total interest-bearing deposits     3,987,731       3,436       0.34       3,980,436       4,013       0.40  
Borrowings     166,343       182       0.44       186,006       209       0.45  
Capital lease obligation     6,380       76       4.76       6,608       79       4.78  
Subordinated debt     181,317       2,147       4.74       181,795       2,145       4.72  
Total interest-bearing liabilities     4,341,771       5,841       0.54 %     4,354,845       6,446       0.59 %
Noninterest-bearing liabilities:                                                
Demand deposits     948,851                       848,325                  
Accrued expenses and other liabilities     129,980                       163,569                  
Total noninterest-bearing liabilities     1,078,831                       1,011,894                  
Shareholders’ equity     530,971                       525,643                  
Total liabilities and shareholders’ equity   $ 5,951,573                     $ 5,892,382                  
Net interest income           $ 34,040                     $ 32,057          
Net interest spread                     2.21 %                     2.11 %
Net interest margin (D)                     2.38 %                     2.28 %
  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
SIX MONTHS ENDED
(Tax-Equivalent Basis, Dollars in Thousands)

    June   30, 2021     June 30, 2020  
    Average     Income/             Average     Income/          
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                                
Interest-earning assets:                                                
Investments:                                                
Taxable (A)   $ 823,120     $ 5,649       1.37 %   $ 424,547     $ 4,567       2.15 %
Tax-exempt (A) (B)     7,433       179       4.82       10,335       260       5.03  
                                                 
Loans (B) (C):                                                
Mortgages     500,084       7,780       3.11       532,601       9,073       3.41  
Commercial mortgages     1,891,125       29,476       3.12       2,019,559       34,629       3.43  
Commercial     1,937,776       33,439       3.45       1,898,334       36,798       3.88  
Commercial construction     18,294       319       3.49       4,462       132       6  
Installment     35,997       531       2.95       53,421       835       3.13  
Home equity     46,937       776       3.31       55,261       1,067       3.86  
Other     233       10       8.58       341       16       9.38  
Total loans     4,430,446       72,331       3.27       4,563,979       82,550       3.62  
Federal funds sold     96             0.11       102             0.25  
Interest-earning deposits     491,547       225       0.09       374,665       661       0.35  
Total interest-earning assets     5,752,642       78,384       2.73 %     5,373,628       88,038       3.28 %
Noninterest-earning assets:                                                
Cash and due from banks     10,743                       5,477                  
Allowance for loan and lease losses     (69,367 )                     (54,238 )                
Premises and equipment     22,972                       21,304                  
Other assets     204,390                       197,904                  
Total noninterest-earning assets     168,738                       170,447                  
Total assets   $ 5,921,380                     $ 5,544,075                  
                                                 
LIABILITIES:                                                
Interest-bearing deposits:                                                
Checking   $ 1,944,734     $ 1,922       0.20 %   $ 1,644,776     $ 5,089       0.62 %
Money markets     1,247,464       1,521       0.24       1,199,932       4,454       0.74  
Savings     139,648       35       0.05       114,892       31       0.05  
Certificates of deposit – retail     510,693       2,497       0.98       687,258       6,841       1.99  
Subtotal interest-bearing deposits     3,842,539       5,975       0.31       3,646,858       16,415       0.90  
Interest-bearing demand – brokered     107,790       949       1.76       165,165       1,623       1.97  
Certificates of deposit – brokered     33,776       525       3.11       33,722       527       3.13  
Total interest-bearing deposits     3,984,105       7,449       0.37       3,845,745       18,565       0.97  
Borrowings     176,120       391       0.44       256,956       2,139       1.66  
Capital lease obligation     6,493       155       4.77       7,373       177       4.80  
Subordinated debt     181,555       4,292       4.73       83,467       2,445       5.86  
Total interest-bearing liabilities     4,348,273       12,287       0.57 %     4,193,541       23,326       1.11 %
Noninterest-bearing liabilities:                                                
Demand deposits     898,866                       708,242                  
Accrued expenses and other liabilities     145,920                       136,738                  
Total noninterest-bearing liabilities     1,044,786                       844,980                  
Shareholders’ equity     528,322                       505,554                  
Total liabilities and shareholders’ equity   $ 5,921,381                     $ 5,544,075                  
Net interest income           $ 66,097                     $ 64,712          
Net interest spread                     2.16 %                     2.17 %
Net interest margin (D)                     2.32 %                     2.41 %
  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
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 other real estate owned 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 a 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.

(Dollars in thousands, except share data)

 

    Three Months Ended  
    June 30,     March 31,     Dec 31,     Sept 30,     June 30,  
Tangible Book Value Per Share   2021     2021     2020     2020     2020  
Shareholders’ equity   $ 538,459     $ 522,441     $ 527,122     $ 522,728     $ 507,980  
Less:  Intangible assets, net     43,156       43,524       43,891       39,622       39,943  
Tangible equity     495,303       478,917       483,231       483,106       468,037  
                                         
Period end shares outstanding     18,829,877       19,034,870       18,974,703       18,924,953       18,905,135  
Tangible book value per share   $ 26.30     $ 25.16     $ 25.47     $ 25.53     $ 24.76  
Book value per share     28.60       27.45       27.78       27.62       26.87  
                                         
Tangible Equity to Tangible Assets                                        
Total assets   $ 5,791,688     $ 5,969,627     $ 5,890,442     $ 5,958,107     $ 6,281,215  
Less: Intangible assets, net     43,156       43,524       43,891       39,622       39,943  
Tangible assets     5,748,532       5,926,103       5,846,551       5,918,485       6,241,272  
Less: PPP Loans     83,766       232,721       195,574       201,991       547,004  
Tangible Assets excluding PPP Loans     5,664,766       5,693,382       5,650,977       5,716,494       5,694,268  
Tangible equity to tangible assets     8.62 %     8.08 %     8.27 %     8.16 %     7.50 %
Tangible equity to tangible assets excluding PPP loans     8.74 %     8.41 %     8.55 %     8.45 %     8.22 %
Equity to assets (A)     9.30 %     8.75 %     8.95 %     8.77 %     8.09 %
  1. Equity to total assets would be 9.43% if PPP loans of $84 million were excluded from total assets as of June 30, 2021. Equity to total assets would be 9.11% if PPP loans of $233 million were excluded from total assets of March 31, 2021. Equity to total assets would be 9.26% if PPP loans of $196 million were excluded from total assets as of December 31, 2020. 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  
    June 30,     March 31,     Dec 31,     Sept 30,     June 30,  
Return on Average Tangible Equity   2021     2021     2020     2020     2020  
Net income   $ 14,418     $ 13,178     $ 3,030     $ 13,547     $ 8,242  
                                         
Average shareholders’ equity   $ 530,971     $ 525,643     $ 523,446     $ 514,736     $ 502,683  
Less:  Average intangible assets, net     43,366       43,742       40,336       39,811       40,139  
Average tangible equity     487,605       481,901       483,110       474,925       462,544  
                                         
Return on average tangible common equity     11.83 %     10.94 %     2.51 %     11.41 %     7.13 %

 

    For the Six Months Ended  
    June 30,     June 30,  
Return on Average Tangible Equity   2021     2020  
Net income   $ 27,596     $ 9,615  
                 
Average shareholders’ equity   $ 528,322     $ 505,554  
Less:  Average intangible assets, net     43,553       40,299  
Average tangible equity     484,769       465,255  
                 
Return on average tangible common equity     11.39 %     4.13 %

 

    Three Months Ended  
    June 30,     March 31,     Dec 31,     Sept 30,     June 30,  
Efficiency Ratio