Peapack Gladstone Bank

News Details

Peapack-Gladstone Financial Corporation Reports Strong Fourth Quarter Results and Announces Another 5% Stock Repurchase Program  

Company Release - 1/28/2022

Bedminster, NJ, Jan. 28, 2022 (GLOBE NEWSWIRE) -- via NewMediaWire -- Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) announces its fourth quarter 2021 results.

This earnings release should be read in conjunction with the Company’s Q4 2021 Investor Update, 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 quarter ended December 31, 2021, the Company recorded total revenue of $56.17 million, net income of $14.86 million and diluted earnings per share (“EPS”) of $0.78, compared to revenue of $46.14 million, net income of $3.03 million and diluted EPS of $0.16, respectively, for the three-month period ended December 31, 2020.

For the year ended December 31, 2021, the Company recorded total revenue of $210.31 million, net income of $56.62 million and diluted earnings per share (“EPS”) of $2.93 compared to revenue of $189.36 million, net income of $26.19 million and diluted EPS of $1.37, respectively, for the year ended December 31, 2020.

Improvement in the 2021 periods was principally driven by the Company’s wealth management and commercial banking businesses. 2021 included increased wealth management income, corporate advisory fees and SBA income, as well as increased net interest income resulting from asset growth, coupled with margin improvement.  The earnings for the full year of 2021 also benefitted from a significantly lower provision for loan losses.

The Q4 2021 period included a $893,000 swap valuation allowance recorded in operating expenses related to a loan placed on nonaccrual in Q3 2021. Q4 2021 also included a higher provision for loan losses due to the loan growth during the quarter. 

Douglas L. Kennedy, President and CEO, said, “Our fourth quarter and full year results reflected continued solid growth in our wealth management business and commercial banking, including both corporate advisory and SBA activities.  Increases in these areas year-over-year more than made up for the $7.4 million of PPP gains that the Company had recorded in 2020. As we look into the new year our pipelines for wealth management and commercial banking continue to be robust and we remain quite constructive toward 2022.”

During the fourth quarter of 2021 the Company repurchased 274,929 shares under its stock repurchase program at an average price of $33.50 for a total cost of $9.21 million. For the full year of 2021, the Company repurchased 894,744 shares at an average price of $31.99 for a total cost of $28.63 million.

On January 27, 2022, the Company authorized a new 5% stock repurchase program of up to 920,000 shares.  Purchases will be conducted in accordance with the limitations set forth in the SEC’s Rule 10b-18.

Mr. Kennedy noted, “We believe that repurchasing our stock continues to be a great opportunity to take advantage of the Company’s discounted valuation relative to peers.”

EXECUTIVE SUMMARY:

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

2021 Year Compared to Prior Year

    Year Ended     Year Ended                    
    December   31,     December   31,       Increase/  
(Dollars in millions, except per share data)   2021     2020       (Decrease)  
Net interest income   $ 138.06     $ 127.60       $ 10.46       8 %
Wealth management fee income (A)     52.99       40.86         12.13       30  
Capital markets activity (B)     10.62       6.65         3.97       60  
Other income (C)     8.64       14.25         (5.61 )     (39 )
Total other income     72.25       61.76         10.49       17  
Operating expenses (A) (D)     126.17       124.96         1.21       1  
Pretax income before provision for loan losses     84.14       64.40         19.74       31  
Provision for loan and lease losses (E)     6.48       32.40         (25.92 )     (80 )
Pretax income     77.66       32.00         45.66       143  
Income tax expense (F)     21.04       5.81         15.23       262  
Net income   $ 56.62     $ 26.19       $ 30.43       116 %
Diluted EPS   $ 2.93     $ 1.37       $ 1.56       114 %
                                   
Total Revenue (G)   $ 210.31     $ 189.36       $ 20.95       11 %
                                   
Return on average assets     0.94 %     0.45 %       0.49          
Return on average equity     10.56 %     5.11 %       5.45          

(A) The 2021 results included twelve months of wealth management fee income and expense related to the December 2020 hires of the teams from Lucas Capital Management (“Lucas”) and Noyes Capital Management (“Noyes”) and six months of wealth management fee income and expense related to the July 2021 acquisition of Princeton Portfolio Strategies Group.

(B) Capital markets activity included fee income from loan level back-to-back swaps, the SBA lending and sale program, corporate advisory activities and mortgage banking activities. The 2021 results included $3.5 million of corporate advisory fee income. There were no fees related to loan level back-to-back swap activities in the twelve months ended December 31, 2021, compared to $1.6 million for 2020.

(C) The 2021 results included a cost of $842,000 related to the termination of interest rate swaps; a $1.1 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.  The 2020 results included a $7.4 million gain on the sale of PPP loans.

(D) The 2021 results included $1.5 million of severance expense related to certain corporate restructurings within several areas of the Bank; $648,000 of expense related to the redemption of subordinated debt; and $2.2 million related to a swap valuation allowance.   The 2020 results included $4.8 million for the prepayment of FHLB advances, $4.4 million for the valuation allowance for a loan held for sale, $210,000 for the consolidation of two private banking locations, and $278,000 for the closure of a retail branch.

(E) The 2020 results included a provision for loan and lease losses of $32.4 million, primarily due to the COVID-19 pandemic.

(F) The 2020 results included a $3.2 million tax benefit related to the carryback of tax NOLs.

(G) Total revenue equals the sum of net interest income plus total other income.

December 2021 Quarter Compared to Prior Year Quarter

    Three Months Ended       Three Months Ended                  
    December   31,       December   31,     Increase/  
(Dollars in millions, except per share data)   2021       2020     (Decrease)  
Net interest income   $ 37.21       $ 31.74     $ 5.47       17 %
Wealth management fee income (A)     13.96         10.79       3.17       29  
Capital markets activity (B)     3.52         1.89       1.63       86  
Other income (C)     1.48         1.72       (0.24 )     (14 )
Total other income     18.96         14.40       4.56       32  
Operating expenses (A) (D)     31.70         39.25       (7.55 )     (19 )
Pretax income before provision for loan losses     24.47         6.89       17.58       255  
Provision for loan and lease losses     3.75         2.35       1.40       60  
Pretax income     20.72         4.54       16.18       356  
Income tax expense     5.86         1.51       4.35       288  
Net income   $ 14.86       $ 3.03     $ 11.83       390 %
Diluted EPS   $ 0.78       $ 0.16     $ 0.62       387 %
                                   
Total Revenue (E)   $ 56.17       $ 46.14     $ 10.03       22 %
                                   
Return on average assets annualized     0.96 %       0.21 %     0.75          
Return on average equity annualized     10.94 %       2.32 %     8.62          

(A) The December 2021 quarter included a full quarter of wealth management fee income and expense related to the December 2020 hires of the teams from Lucas and Noyes and the July 2021 acquisition of PPSG.

(B) Capital markets activity included fee income from loan level back-to-back swaps, the SBA lending and sale program, corporate advisory activities, and mortgage banking activities. The December 2021 quarter included $2.2 million of corporate advisory fee income, the majority of which related to a large investment banking advisory event.

(C) The December 31, 2021 quarter included a $265,000 loss on the sale of loans.

(D) The December 2021 quarter included $893,000 related to a swap valuation allowance.   The December 2020 quarter included $4.8 million for the prepayment of FHLB advances, $4.4 million for the valuation allowance for a loan held for sale, and $210,000 for the consolidation of two private banking locations

(E) Total revenue equals the sum of net interest income plus total other income.

December 2021 Quarter Compared to Linked Quarter

    Three Months Ended     Three Months Ended                    
    December   31,     September   30,       Increase/  
(Dollars in millions, except per share data)   2021     2021       (Decrease)  
Net interest income   $ 37.21     $ 35.21       $ 2.00       6 %
Wealth management fee income     13.96       13.86         0.10       1  
Capital markets activity (A)     3.52       2.06         1.46       71  
Other income (B)     1.48       1.86         (0.38 )     (20 )
Total other income     18.96       17.78         1.18       7  
Operating expenses (C)     31.70       32.18         (0.48 )     (1 )
Pretax income before provision for loan losses     24.47       20.81         3.66       18  
Provision for loan and lease losses     3.75       1.60         2.15       134  
Pretax income     20.72       19.21         1.51       8  
Income tax expense     5.86       5.04         0.82       16  
Net income   $ 14.86     $ 14.17       $ 0.69       5 %
Diluted EPS   $ 0.78     $ 0.74       $ 0.04       5 %
                                   
Total Revenue (D)   $ 56.17     $ 52.99       $ 3.18       6 %
                                   
Return on average assets annualized     0.96 %     0.95 %       0.01          
Return on average equity annualized     10.94 %     10.40 %       0.54          

(A) Capital markets activity included fee income from loan level back-to-back swaps, the SBA lending and sale program, corporate advisory and mortgage banking activities.

(B) The December 31, 2021 quarter included a $265,000 loss on sale of loans.

(C) The December 2021 quarter included $893,000 related to a swap valuation allowance.  The September 2021 quarter included $1.4 million related to a swap valuation allowance.

(D) Total revenue equals the sum of net interest income plus total other income.

Select highlights:

Peapack Private Wealth Management:

  • AUM/AUA in our Peapack Private Wealth Management Division grew 8% (31% annualized) to $11.1 billion at December 31, 2021 from $10.3 billion at September 30, 2021, and 26% over the $8.8 billion at December 31, 2020.
  • Gross new business inflows for 2021 totaled $840 million.
  • Wealth Management fee income increased 30% to $14.0 million for Q4 2021 compared to $10.8 million for Q4 2020.
  • On July 1, 2021, we closed on the acquisition of Princeton Portfolio Strategies Group (“PPSG”).

Commercial Banking and Balance Sheet Management:

  • At December 31, 2021, total loans (excluding $14 million of PPP loans) grew 15% to $4.83 billion compared to $4.21 billion (excluding $196 million of PPP loans) at December 31, 2020.
  • C&I loan/lease balances (excluding PPP loans) grew $216 million or 12% over 2020, with a large portion of that net growth occurring in Q4 2021.  
  • SBA Income ($4.9 million) and Corporate Advisory fees ($3.5 million) totaled $8.4 million in 2021.
  • Core deposits (which includes noninterest-bearing demand and interest-bearing demand, savings and money market) totaled 89% of total deposits at December 31, 2021, with an average cost of 0.17%.
  • The net interest margin improved by 4 basis points in Q4 2021 compared to Q3 2021 and improved 21 basis points when compared to Q4 2020.   

Capital Management:

  • Continued to execute on the previously approved stock repurchase program – during Q4 repurchased 274,929 shares at an average price of $33.50 for a total cost of $9.2 million. (For the year ended December 31, 2021, the Company repurchased 894,744 shares).
  • Tangible book value per share increased 6.2% to $27.05 at December 31, 2021 from $25.47 at December 31, 2020, despite recent stock repurchase activity and a wealth acquisition. See the Non-GAAP financial measures reconciliation included in this release.

SUPPLEMENTAL QUARTERLY DETAILS :

Wealth Management

In the December 2021 quarter, the Bank’s wealth management business generated a record $13.96 million in fee income, compared to $13.86 million for the September 30, 2021 quarter and $10.79 million for the December 2020 quarter.

The market value of the Company’s AUM/AUA increased 26% to $11.1 billion at December 31, 2021 from $8.8 billion at December 31, 2020, due to organic new business, the PPSG acquisition, and favorable market conditions.

John P. Babcock, President of the Peapack Private Wealth Management division, said, “2021 showed continued strong business from new clients as well as additional business from existing clients.  Positive net flows, combined with solid client retention and favorable market conditions, all contributed to our strong quarterly and full year results.”  Mr. Babcock went on to note, “While we will continue to look at supplementing our organic growth with selective acquisitions, M&A activity in the RIA space is hyper-competitive with purchase price multiples reaching all-time highs – making it challenging for us to obtain acceptable returns on invested capital.  Internally, we are focused on completing our One Team consolidation of the businesses and people we have acquired over the last several years under a single operating and technology framework, completing our migration to a single trading platform and re-organizing our wealth business under a new, streamlined organizational structure to ensure the highest level of client experience, maximum efficiency, and growth.”

Loans / Commercial Banking

At December 31, 2021, loans totaled $4.83 billion (excluding $14 million of PPP loans), compared to $4.21 billion (excluding $196 million of PPP loans) at December 31, 2020, reflecting growth of 15%. This growth was achieved despite over $900 million of net paydown/payoff activity over the twelve-month period.  

Total C&I loans and leases (including the $14 million of PPP loans) at December 31, 2021 were $2.01 billion or 41% of the total loan portfolio.

Mr. Kennedy noted, “Our commercial loan pipelines continue to be strong going into the new year, standing at approximately $350 million with the likelihood of a first quarter closing. Notwithstanding significant payoff activity, we believe that we will achieve high single digit loan growth for 2022.”

Mr. Kennedy also noted, “We are proud to have built a leading middle market commercial banking franchise, as evidenced by over $200 million of net growth in our C&I Portfolio, continued growth in Treasury Management income, and our over $3 million of corporate advisory fees by our investment banking group – this team had record earnings in 2021 and continues to have a robust pipeline of new business opportunities.”

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 December 31, 2021 increased $448 million to $5.27 billion from $4.82 billion at December 31, 2020. Along with the deposit growth, the change in mix was favorable, as noninterest bearing demand deposits increased $123 million, interest-bearing demand increased $439 million, while higher costing CDs declined $121 million and brokered deposits declined $25 million, when comparing December 31, 2021 to December 31, 2020. 

Mr. Kennedy noted, “89% of our deposits are demand, savings, or money market accounts, and our noninterest bearing deposits comprise 18% of our total deposits; both metrics reflect the relationship aspect of our deposit base.”

At December 31, 2021, the Company’s balance sheet liquidity (investments available for sale, interest-earning deposits and cash) totaled $971.2 million (or 16% of assets).  This level is lower than the level at September 30, 2021 due to an increase in loan activity during Q4 2021 and more in line with historical levels.

The Company maintains backup liquidity of approximately $1.8 billion of secured funding with the Federal Home Loan Bank and $1.2 billion of secured funding from the Federal Reserve Discount Window.  The available funding from the Federal Home Loan Bank and the Federal Reserve are secured by the Company’s loan and investment portfolios.

Mr. Kennedy noted, “We are well positioned for a rise in interest rates given that 40% of our loan portfolio reprices within three months and 52% within one year. Our current modeling, with what we believe include conservative deposit beta assumptions, indicates net interest income will improve approximately 3% in year one and 5% in year two after a 100 basis point rate shock.”

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

  Twelve Months Ended     Twelve Months Ended                  
  December 31, 2021     December 31, 2020                  
  NII     NIM     NII     NIM                  
                                               
NII/NIM excluding the below $ 134,206     2.50%     $ 123,099     2.58%                  
Prepayment premiums received on loan paydowns   2,085     0.04%       1,452     0.02%                  
Effect of maintaining excess interest earning cash   (420 )   -0.17%       (1,320 )   -0.21%                  
Effect of PPP loans   2,190     0.01%       4,371     -0.08%                  
NII/NIM as reported $ 138,061     2.38%     $ 127,602     2.31%                  
                                               
  Three Months Ended     Three Months Ended     Three Months Ended  
  December 31, 2021     September 30, 2021     December 31, 2020  
  NII     NIM     NII     NIM     NII     NIM  
                                               
NII/NIM excluding the below $ 36,564     2.60%     $ 34,635     2.56%     $ 30,897     2.51%  
Prepayment premiums received on loan paydowns   555     0.04%       325     0.02%       413     0.02%  
Effect of maintaining excess interest earning cash   (68 )   -0.18%       (46 )   -0.14%       (206 )   -0.24%  
Effect of PPP loans   161     0.00%       297     -0.02%       631     -0.04%  
NII/NIM as reported $ 37,212     2.46%     $ 35,211     2.42%     $ 31,735     2.25%  

As shown above, the Company’s reported NII increased $2.0 million and NIM increased 4 basis points compared to the linked quarter. The Bank further lowered its cost of funds strategically and grew its average loan portfolio at rates/spreads beneficial to NIM.

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

  • Robust loan pipelines to generate loan growth.
  • Continued downward repricing of maturing CDs.
  • An increase in target Fed funds (should that occur).

Income from Capital Markets Activities

Noninterest income from Capital Markets activities (detailed below) totaled $3.52 million for the December 2021 quarter compared to $2.06 million for the September 2021 quarter and $1.90 million for the December 2020 quarter.  The December 2021 quarterly results were driven by $2.18 million in Corporate Advisory income. The September 2021 quarter results were driven by $1.57 million in gains on sale of SBA loans. The December 2020 quarter reflected increased mortgage banking activity due to greater refinance activity in the low-rate environment. The December 2021, September 2021 and December 2020 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.

    Three Months Ended     Three Months Ended     Three Months Ended  
    December   31,     September   30,     December   31,  
(Dollars in thousands, except per share data)   2021     2021     2020  
Gain on loans held for sale at fair value (Mortgage banking)   $ 352     $ 408     $ 1,470  
Fee income related to loan level, back-to-back swaps                  
Gain on sale of SBA loans     989       1,569       375  
Corporate advisory fee income     2,180       84       50  
Total capital markets activity   $ 3,521     $ 2,061     $ 1,895  

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

                Other noninterest income (as defined above) totaled $1.48 million, $1.86 million, and $1.72 million, for the December 2021, September 2021, and December 2020 quarters, respectively. The December 2021 quarter included $265,000 net loss on loans held for sale.

Operating Expenses

The Company’s total operating expenses were $31.70 million for the quarter ended December 31, 2021, compared to $32.18 million for the September 2021 quarter and $39.25 million for the December 2020 quarter. The December 2021 and September 2021 quarters included $893,000 and $1.35 million related to a swap valuation allowance, respectively.  The December and September 2021 quarters also included a full quarter’s worth of expense related to the teams hired from Lucas and Noyes and the acquisition of PPSG. The December 2020 quarter included $4.8 million for the prepayment of FHLB advances, $4.4 million for a valuation allowance on a loan held for sale and $210,000 related to the consolidation of two private banking offices. 

Mr. Kennedy noted, “While we continue to manage expenses closely and prudently, we will invest in our existing people as the market demands in order to retain the talent we have acquired, grow and expand our core wealth management and commercial banking businesses, including lift-outs, strategic hires, and wealth M&A, and invest in digital enhancements to further enhance the client experience.”

Income Taxes

The effective tax rate for the three months ended December 31, 2021 was 28.31%, as compared to 26.22% for the September 2021 quarter and 33.29% for the quarter ended December 31, 2020. A tax return to book adjustment recorded in the December 2020 quarter coupled with reduced pretax income in the quarter, increased the December 2020 effective tax rate by approximately 5%.

The effective annual tax rate for 2021 was 27.09% compared to 18.16% for 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

Nonperforming assets (which does not include troubled debt restructured loans that are performing in accordance with their terms) at December 31, 2021 were $15.6 million, or 0.26% of total assets, compared to $25.9 million, or 0.42% of total assets, at September 30, 2021. The $10.3 million decline was largely due to a $2 million C&I loan moved back to accrual status, and a $7 million charge-off of the specific reserve on the commercial real estate loan with a large retail component located in Manhattan, and on deferral, that was placed on nonaccrual status in the third quarter of 2021.  

For the quarter ended December 31, 2021, the Company’s provision for loan and lease losses was $3.8 million compared to $1.6 million for the September 2021 quarter and $2.4 million for the December 2020 quarter. The increased provision for loan and lease losses in the December 2021 quarter, when compared to the linked quarter and the 2020 quarter, was due principally to significant loan growth during the December 2021 quarter and additional specific reserves of $4.2 million on the commercial real estate loan noted above, offset by 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.

Loans on deferral, and accruing, entered into during the COVID-19 pandemic have come down significantly from $914 million at June 30, 2020 to $13 million at December 31, 2021. The Company’s provision for loan and lease losses, and its allowance for loan and lease losses (ALLL) also reflect, among other things, the Company’s assessment of asset quality metrics, net charge-offs/recoveries, and the composition of the loan portfolio.

At December 31, 2021, the allowance for loan and lease losses was $61.70 million (1.27% of total loans), compared to $65.13 million at September 30, 2021 (1.42% of loans) and $67.31 million at December 31, 2020 (1.53% of total loans). 

The Company will adopt CECL during the first quarter of 2022 and does not expect a material adjustment upon adoption.

Capital

The Company’s capital position during the December 2021 quarter was benefitted by net income of $14.86 million, which was offset by the purchase of shares through the Company’s stock repurchase program and the quarterly dividend. During the fourth quarter of 2021, the Company repurchased 274,929 shares at an average price of $33.50 for a total cost of $9.2 million.  GAAP Capital at December 31, 2021 was also impacted by an increase in the unrealized loss on available-for-sale securities in the fourth quarter of 2021, due to a rise in medium-term Treasury yields.

The Company’s and Bank’s capital ratios at December 31, 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 then existing 6% subordinated debt and acquisitions of wealth management firms. Throughout the twelve months of 2021, the Company repurchased $29 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 PPSG.

The Company employs quarterly capital stress testing – adverse case and severely adverse case. In the most recent completed stress test on September 30, 2021, under severely adverse case, and no growth scenarios, the Bank remains well capitalized over a two-year stress period. With a Pandemic stress overlay, the Bank still remains well capitalized over the two-year stress period.

On January 27, 2022, the Company declared a cash dividend of $0.05 per share payable on February 25, 2022, to shareholders of record on February 10, 2022.

ABOUT THE COMPANY

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $6.1 billion and assets under management/administration of $11.1 billion as of December 31, 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 ability to successfully grow our business and implement our strategic plan, including our ability to generate revenues to offset the increased personnel and other costs related to the strategic plan;
  • the impact of anticipated higher operating expenses in 2022 and beyond;
  • our ability to successfully integrate wealth management firm acquisitions;
  • our ability to manage our growth;
  • our ability 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 the value in our investment portfolio;
  • impact 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 delinquent, nonperforming, classified and criticized 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 pandemic 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.  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 worsens, 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 or 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.

Contact:

Jeffrey J. Carfora, SEVP and CFO

Peapack-Gladstone Financial Corporation

T: 908-719-4308

 (Tables to follow)


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

    For the Three Months Ended  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
    2021     2021     2021     2021     2020  
Income Statement Data:                                        
Interest income   $ 42,075     $ 40,067     $ 39,686     $ 38,239     $ 38,532  
Interest expense     4,863       4,856       5,841       6,446       6,797  
Net interest income     37,212       35,211       33,845       31,793       31,735  
Wealth management fee income     13,962       13,860       13,034       12,131       10,791  
Service charges and fees     996       959       896       846       859  
Bank owned life insurance     308       311       466       611       313  
Gain on loans held for sale at fair value
   (Mortgage banking) (A)
    352       408       409       1,025       1,470  
(Loss)/Gain on loans held for sale at lower of
   cost or fair value (B)
    (265 )           1,125       282        
Fee income related to loan level, back-to-back
   swaps (A)
                             
Gain on sale of SBA loans (A)     989       1,569       932       1,449       375  
Corporate advisory fee income (A)     2,180       84       121       1,098       50  
Loss on swap termination                 (842 )            
Other income (C)     581       660       1,495       643       590  
Securities (losses)/gains, net     (139 )     (70 )     42       (265 )     (42 )
Total other income     18,964       17,781       17,678       17,820       14,406  
Salaries and employee benefits (D)     20,105       19,859       19,910       21,990       19,902  
Premises and equipment     4,519       4,459       4,074       4,113       4,189  
FDIC insurance expense     402       555       529       585       665  
FHLB prepayment penalty                             4,784  
Valuation allowance loans held for sale                             4,425  
Swap valuation allowance     893       1,350                    
Other expenses     5,785       5,962       6,171       4,906       5,284  
Total operating expenses     31,704       32,185       30,684       31,594       39,249  
Pretax income before provision for loan losses     24,472       20,807       20,839       18,019       6,892  
Provision for loan and lease losses     3,750       1,600       900       225       2,350  
Income before income taxes     20,722       19,207       19,939       17,794       4,542  
Income tax expense     5,867       5,036       5,521       4,616       1,512  
Net income   $ 14,855     $ 14,171     $ 14,418     $ 13,178     $ 3,030  
                                         
Total revenue (E)   $ 56,176     $ 52,992     $ 51,523     $ 49,613     $ 46,141  
Per Common Share Data:                                        
Earnings per share (basic)   $ 0.80     $ 0.76     $ 0.76     $ 0.70     $ 0.16  
Earnings per share (diluted)     0.78       0.74       0.74       0.67       0.16  
Weighted average number of common
   shares outstanding:
                                       
Basic     18,483,268       18,763,316       18,963,237       18,950,305       18,947,864  
Diluted     19,070,594       19,273,831       19,439,439       19,531,689       19,334,569  
Performance Ratios:                                        
Return on average assets annualized (ROAA)     0.96 %     0.95 %     0.97 %     0.89 %     0.21 %
Return on average equity annualized (ROAE)     10.94 %     10.40 %     10.86 %     10.03 %     2.32 %
Return on average tangible common equity (ROATCE) (F)     12.03 %     11.43 %     11.83 %     10.94 %     2.51 %
Net interest margin (tax-equivalent basis)     2.46 %     2.42 %     2.38 %     2.28 %     2.25 %
GAAP efficiency ratio (G)     56.44 %     60.74 %     59.55 %     63.68 %     85.06 %
Operating expenses / average assets annualized     2.05 %     2.16 %     2.06 %     2.14 %     2.66 %

(A) 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.

(B) Includes a $1.1 million gain on sale of $57 million of PPP loans completed in the June 2021 quarter.

(C) Includes income of $722,000 from the referral of PPP loans to a third-party firm during the June 2021 quarter.

(D) The March 2021 quarter included $1.5 million of severance expense related to corporate restructuring.

(E) Total revenue equals the sum of net interest income plus total other income.

(F) 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.

(G) Calculated as total operating expenses as a percentage of total revenue.  For Non-GAAP efficiency ratio, see the 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 Twelve Months Ended                  
    December 31,     Change  
    2021     2020     $     %  
Income Statement Data:                                
Interest income   $ 160,067     $ 165,750     $ (5,683 )     -3 %
Interest expense     22,006       38,148       (16,142 )     -42 %
Net interest income     138,061       127,602       10,459       8 %
Wealth management fee income     52,987       40,861       12,126       30 %
Service charges and fees     3,697       3,155       542       17 %
Bank owned life insurance     1,696       1,273       423       33 %
Gain on loans held for sale at fair value (Mortgage banking) (A)     2,194       3,266       (1,072 )     -33 %
Gain on loans held for sale at lower of cost or fair value (B)     1,142       7,426       (6,284 )     -85 %
Fee income related to loan level, back-to-back swaps (A)           1,620       (1,620 )     -100 %
Gain on sale of SBA loans (A)     4,939       1,766       3,173       180 %
Corporate advisory fee income (A)     3,483       265       3,218       1214 %
Loss on swap termination     (842 )           (842 )   N/A  
Other income (C)     3,379       1,847       1,532       83 %
Securities (losses)/gains, net     (432 )     281       (713 )     -254 %
Total other income     72,243       61,760       10,483       17 %
Salaries and employee benefits (D)     81,864       77,516       4,348       6 %
Premises and equipment     17,165       16,377       788       5 %
FDIC insurance expense     2,071       1,975       96       5 %
FHLB prepayment penalty           4,784       (4,784 )     -100 %
Valuation allowance loans held for sale           4,425       (4,425 )     -100 %
Swap valuation allowance     2,243             2,243     N/A  
Other expenses     22,824       19,882       2,942       15 %
Total operating expenses     126,167       124,959       1,208       1 %
Pretax income before provision for loan losses     84,137       64,403       19,734       31 %
Provision for loan and lease losses (E)     6,475       32,400       (25,925 )     -80 %
Income before income taxes     77,662       32,003       45,659       143 %
Income tax expense (F)     21,040       5,811       15,229       262 %
Net income   $ 56,622     $ 26,192     $ 30,430       116 %
                                 
Total revenue (G)   $ 210,304     $ 189,362     $ 20,942       11 %
Per Common Share Data:                                
Earnings per share (basic)   $ 3.01     $ 1.39     $ 1.62       117 %
Earnings per share (diluted)     2.93       1.37       1.56       114 %
Weighted average number of common shares outstanding:                                
Basic     18,788,679       18,896,825       (108,146 )     -1 %
Diluted     19,292,602       19,081,187       211,415       1 %
Performance Ratios:                                
Return on average assets (ROAA)     0.94 %     0.45 %     0.49 %     110 %
Return on average equity (ROAE)     10.56 %     5.11 %     5.45 %     107 %
Return on average tangible common equity (ROATCE) (H)     11.56 %     5.55 %     6.01 %     108 %
Net interest margin (tax-equivalent basis)     2.38 %     2.31 %     0.07 %     3 %
GAAP efficiency ratio (I)     59.99 %     65.99 %     (6.00 )%     -9 %
Operating expenses / average assets     2.10 %     2.16 %     (0.06 )%     -3 %

(A) 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.

(B) Includes $1.1 million (2021) and $7.4 million (2020) of gains on sale of PPP loans of $57 million and $355 million completed in the twelve months ended December 31, 2021 and 2020, respectively.

(C) Includes income of $722,000 from the referral of PPP loans to a third-party firm during the twelve months ended December 31, 2021.

(D) 2021 included $1.5 million of severance expense related to corporate restructuring.

(E) 2020 included a higher provision for loan and lease losses primarily due to the COVID-19 pandemic.

(F) 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.

(G) Total revenue equals the sum of net interest income plus total other income.

(H) Return on average tangible common equity is calculated by dividing tangible common equity by net income.  See Non-GAAP financial measures reconciliation included in these tables.

(I) Calculated as total operating expenses as a percentage of total revenue.  For Non-GAAP efficiency ratio, see the Non-GAAP financial measures reconciliation included in these tables.

PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION

(Dollars in Thousands)
(Unaudited)

    As of  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
    2021     2021     2021     2021     2020  
ASSETS                                        
Cash and due from banks   $ 5,929     $ 9,299     $ 12,684     $ 8,159     $ 10,629  
Federal funds sold                       102       102  
Interest-earning deposits     140,875       606,913       190,778       468,276       642,591  
Total cash and cash equivalents     146,804       616,212       203,462       476,537       653,322  
Securities held to maturity     108,680                          
Securities available for sale     796,753       843,779       823,820       875,301       622,689  
Equity security     14,685       14,824       14,894       14,852       15,117  
FHLB and FRB stock, at cost     12,950       12,950       12,901       13,699       13,709  
Residential mortgage     501,340       510,878       504,181       498,884       520,188  
Multifamily mortgage     1,595,866       1,497,683       1,420,043       1,178,940       1,127,198  
Commercial mortgage     662,626       680,107       702,777       697,599       694,034  
Commercial loans (A)     2,009,252       1,833,532       1,880,830       1,982,570       1,975,337  
Consumer loans     33,687       30,689       31,889       36,519       37,016  
Home equity lines of credit     40,803       42,512       44,062       45,624       50,547  
Other loans     238       245       204       199       225  
Total loans     4,843,812       4,595,646       4,583,986       4,440,335       4,404,545  
Less: Allowances for loan and lease losses     61,697       65,133       63,505       67,536       67,309  
Net loans     4,782,115       4,530,513       4,520,481       4,372,799       4,337,236  
Premises and equipment     23,044       23,123       23,261       23,260       21,609  
Other real estate owned                       50       50  
Accrued interest receivable     21,589       22,790       23,117       23,916       22,495  
Bank owned life insurance     46,663       46,510       46,605       46,448       46,809  
Goodwill and other intangible assets     48,902       49,333       43,156       43,524       43,891  
Finance lease right-of-use assets     3,582       3,769       3,956       4,143       4,330  
Operating lease right-of-use assets     9,775       10,307       9,569       10,186       9,421  
Other assets (B)     62,451       66,175       66,466       64,912       99,764  
TOTAL ASSETS   $ 6,077,993     $ 6,240,285     $ 5,791,688     $ 5,969,627     $ 5,890,442  
                                         
LIABILITIES                                        
Deposits:                                        
Noninterest-bearing demand deposits   $ 956,482     $ 986,765     $ 959,494     $ 908,922     $ 833,500  
Interest-bearing demand deposits     2,287,894       2,355,892       1,978,497       1,987,567       1,849,254  
Savings     154,914       168,831       147,227       141,743       130,731  
Money market accounts     1,307,051       1,287,686       1,213,992       1,256,605       1,298,885  
Certificates of deposit – Retail     409,608       426,981       446,143       474,668       530,222  
Certificates of deposit – Listing Service     31,382       31,382       31,631       31,631       32,128  
Subtotal “customer” deposits     5,147,331       5,257,537       4,776,984       4,801,136       4,674,720  
IB Demand – Brokered     85,000       85,000       85,000       110,000       110,000  
Certificates of deposit – Brokered     33,818       33,804       33,791       33,777       33,764  
Total deposits     5,266,149       5,376,341       4,895,775       4,944,913       4,818,484  
Short-term borrowings                       15,000       15,000  
FHLB advances                              
Paycheck Protection Program Liquidity Facility (C)           48,496       83,586       168,180       177,086  
Finance lease liability     5,820       6,063       6,299       6,528       6,753  
Operating lease liability     10,111       10,644       9,902       10,509       9,737  
Subordinated debt, net (D)     132,701       132,629       132,557       181,837       181,794  
Other liabilities (B)     116,824       123,098       125,110       120,219       154,466  
TOTAL LIABILITIES     5,531,605       5,697,271       5,253,229       5,447,186       5,363,320  
Shareholders’ equity     546,388       543,014       538,459       522,441       527,122  
TOTAL LIABILITIES AND                                        
SHAREHOLDERS’ EQUITY   $ 6,077,993     $ 6,240,285     $ 5,791,688     $ 5,969,627     $ 5,890,442  
Assets under management and / or administration at
   Peapack-Gladstone Bank s Private Wealth Management
   Division (market value, not included above-dollars in billions)
  $ 11.1     $ 10.3     $ 9.8     $ 9.4     $ 8.8  

(A) Includes PPP loans of $14 million at December 31, 2021; $49 million at September 30, 2021; $84 million at June 30, 2021; $233 million at March 31, 2021; and $196 million at December 31, 2020.

(B) 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.

(C) Represents funding provided by the Federal Reserve for pledged PPP loans.

(D) The decrease was due to the redemption of a $50 million subordinated debt on June 30, 2021. 

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

    As of  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
    2021     2021     2021     2021     2020  
Asset Quality:                                        
Loans past due over 90 days and still accruing   $     $     $     $     $  
Nonaccrual loans (A)     15,573       25,925       5,962       11,767       11,410  
Other real estate owned                       50       50  
Total nonperforming assets   $ 15,573     $ 25,925     $ 5,962     $ 11,817     $ 11,460  
                                         
Nonperforming loans to total loans     0.32 %     0.56 %     0.13 %     0.27 %     0.26 %
Nonperforming assets to total assets     0.26 %     0.42 %     0.10 %     0.20 %     0.19 %
                                         
Performing TDRs (B)(C)   $ 2,479     $ 416     $ 190     $ 197     $ 201  
                                         
Loans past due 30 through 89 days and still accruing (D)(E)   $ 8,606     $ 1,193     $ 1,678     $ 1,622     $ 5,053  
                                         
Loans subject to special mention   $ 116,490     $ 115,935     $ 148,601     $ 166,013     $ 162,103  
                                         
Classified loans   $ 50,702     $ 51,937     $ 11,178     $ 25,714     $ 37,771  
                                         
Impaired loans   $ 18,052     $ 26,341     $ 6,498     $ 11,964     $ 16,204  
                                         
Allowance for loan and lease losses:                                        
Beginning of period   $ 65,133     $ 63,505     $ 67,536     $ 67,309     $ 66,145  
Provision for loan and lease losses     3,750       1,600       900       225       2,350  
(Charge-offs)/recoveries, net     (7,186 )     28       (4,931 )     2       (1,186 )
End of period   $ 61,697     $ 65,133     $ 63,505     $ 67,536     $ 67,309  
                                         
ALLL to nonperforming loans     396.18 %     251.24 %     1065.16 %     573.94 %     589.91 %
ALLL to total loans     1.27 %     1.42 %     1.39 %     1.52 %     1.53 %
General ALLL to total loans (F)     1.19 %     1.26 %     1.38 %     1.45 %     1.47 %

(A) Increase at September 30, 2021 due to one large CRE loan with a retail component, located in Manhattan.

(B) Amounts reflect TDRs that are paying according to restructured terms.

(C) Amount excludes $1.1 million at December 31, 2021, $4.0 million at September 30, 2021, $3.9 million at June 30, 2021, $3.9 million at March 31, 2021 and $4.0 million at December 31, 2020 of TDRs included in nonaccrual loans.

(D) Includes $6.9 million for one equipment lease principally due to administrative issues with the servicer and at the lessee/borrower at December 31, 2021. Payment was received in January.

(E) 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.

(F) Total ALLL less specific reserves equals general ALLL.

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

    December   31,     September 30,     December   31,  
    2021     2021     2020  
Capital Adequacy                                    
Equity to total assets (A)         8.99 %         8.70 %         8.95 %
Tangible Equity to tangible assets (B)         8.25 %         7.97 %         8.27 %
Book value per share (C)       $ 29.70         $ 29.15         $ 27.78  
Tangible Book Value per share (D)       $ 27.05         $ 26.50         $ 25.47  

 

    December   31,     September 30,     December   31,  
    2021     2021     2020  
Regulatory Capital Holding Company                                                
Tier I leverage   $ 508,231     8.29%     $ 501,188     8.56%     $ 483,535     8.53%  
Tier I capital to risk-weighted assets     508,231       10.62       501,188     10.97       483,535     11.93  
Common equity tier I capital ratio
   to risk-weighted assets
    508,207       10.62       501,159     10.97       483,500     11.93  
Tier I & II capital to risk-weighted assets     700,790       14.64       691,044     15.12       716,210     17.67  
                                                 
Regulatory Capital Bank                                                
Tier I leverage (E)   $ 612,762     9.99%     $ 594,610     10.15%     $ 549,575     9.71%  
Tier I capital to risk-weighted assets (F)     612,762       12.80       594,610     13.01       549,575      

13.55
 
Common equity tier I capital ratio
   to risk-weighted assets (G)
    612,738       12.80       594,581     13.01       549,540        
13.55
   
Tier I & II capital to risk-weighted assets (H)     672,614       14.05       651,841     14.26       600,478     14.81  

(A) Equity to total assets is calculated as total shareholders’ equity as a percentage of total assets at period end.

(B) Tangible equity and tangible assets are calculated by excluding the balance of intangible assets from shareholders’ equity and total assets, respectively. Tangible equity as a percentage of tangible assets at period end is calculated by dividing tangible equity by tangible assets at period end.  See Non-GAAP financial measures reconciliation included in these tables.

(C) Book value per common share is calculated by dividing shareholders’ equity by period end common shares outstanding

(D) Tangible book value per 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.

(E) Regulatory well capitalized standard = 5.00% ($307 million)

(F) Regulatory well capitalized standard = 8.00% ($383 million)

(G) Regulatory well capitalized standard = 6.50% ($311 million)

(H) Regulatory well capitalized standard = 10.00% ($479 million)

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

    For the Quarters Ended  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
    2021     2021     2021     2021     2020  
Residential loans retained   $ 22,953     $ 36,845     $ 37,083     $ 15,814     $ 22,316  
Residential loans sold     20,694       24,041       25,432       45,873       64,630  
Total residential loans     43,647       60,886       62,515       61,687       86,946  
Commercial real estate     16,134       14,944       12,243       38,363        
Multifamily     162,740       120,716       255,820       85,009       1,184  
Commercial (C&I) loans (A) (B)     341,886       143,121       141,285       129,141       218,235  
SBA (C)     27,630       11,570       15,976       58,730       8,355  
Wealth lines of credit (A)     7,500       10,020       3,200       2,475       3,925  
Total commercial loans     555,890       300,371       428,524       313,718       231,699  
Installment loans     94       178       25       63       690  
Home equity lines of credit (A)     5,359       2,535       4,140       1,899       2,330  
Total loans closed   $ 604,990     $ 363,970     $ 495,204     $ 377,367     $ 321,665  

 

    For the Twelve Months Ended  
    Dec 31,     Dec 31,  
    2021     2020  
Residential loans retained   $ 112,695     $ 88,373  
Residential loans sold     116,040       175,603  
Total residential loans     228,735       263,976  
Commercial real estate     81,684       11,219  
Multifamily     624,285       76,642  
Commercial (C&I) loans (A) (B)     755,433       478,485  
SBA (C)     113,906       622,798  
Wealth lines of credit (A)     23,195       9,675  
Total commercial loans     1,598,503       1,198,819  
Installment loans     360       2,149  
Home equity lines of credit (A)     13,933       15,001  
Total loans closed   $ 1,841,531     $ 1,479,945  

(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 $9 million for the quarter ended June 30, 2021, $47 million for the quarter ended March 31, 2021 and $596 million for the twelve months ended December 31, 2020.

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

    December   31, 2021     December   31, 2020  
    Average     Income/             Average     Income/          
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                                
Interest-earning assets:                                                
Investments:                                                
Taxable (A)   $ 885,390     $ 3,104       1.40 %   $ 636,417     $ 2,033       1.28 %
Tax-exempt (A) (B)     5,443       54       3.97       8,137       101       4.96  
                                                 
Loans (B) (C):                                                
Mortgages     510,562       3,799       2.98       520,123       4,372       3.36  
Commercial mortgages     2,209,160       17,708       3.21       1,865,953       14,796       3.17  
Commercial     1,826,640       16,660       3.65       1,943,855       16,587       3.41  
Commercial construction     20,426       176       3.45       10,376       108       4.16  
Installment     33,400       253       3.03       44,581       320       2.87  
Home equity     41,955       346       3.30       51,545       429       3.33  
Other     270       6       8.89       281       6       8.54  
Total loans     4,642,413       38,948       3.36       4,436,714       36,618       3.30  
Federal funds sold                       102             0.25  
Interest-earning deposits     513,650       178       0.14       614,024       148       0.10  
Total interest-earning assets     6,046,896       42,284       2.80 %     5,695,394       38,900       2.73 %
Noninterest-earning assets:                                                
Cash and due from banks     11,517                       9,632                  
Allowance for loan and lease losses     (65,542 )                     (68,862 )                
Premises and equipment     23,117                       21,698                  
Other assets     182,154                       238,856                  
Total noninterest-earning assets     151,246                       201,324                  
Total assets   $ 6,198,142                     $ 5,896,718                  
                                                 
LIABILITIES:                                                
Interest-bearing deposits:                                                
Checking   $ 2,321,970     $ 1,327       0.23 %   $ 1,850,917     $ 1,059       0.23 %
Money markets     1,290,334       678       0.21       1,273,681       811       0.25  
Savings     152,570       20       0.05       128,195       17       0.05  
Certificates of deposit – retail     453,127       725       0.64       602,068       2,106       1.40  
Subtotal interest-bearing deposits     4,218,001       2,750       0.26       3,854,861       3,993       0.41  
Interest-bearing demand – brokered     85,000       387       1.82       113,696       514       1.81  
Certificates of deposit – brokered     33,810       267       3.16       33,756       267       3.16  
Total interest-bearing deposits     4,336,811       3,404       0.31       4,002,313       4,774       0.48  
Borrowings     25,890       25       0.39       244,753       616       1.01  
Capital lease obligation     5,913       71       4.80       6,832       82       4.80  
Subordinated debt     132,659       1,363       4.11       94,437       1,325       5.61  
Total interest-bearing liabilities     4,501,273       4,863       0.43 %     4,348,335       6,797       0.63 %
Noninterest-bearing liabilities:                                                
Demand deposits     1,042,477                       858,004                  
Accrued expenses and other liabilities     111,357                       166,933                  
Total noninterest-bearing liabilities     1,153,834                       1,024,937                  
Shareholders’ equity     543,035                       523,446                  
Total liabilities and shareholders’ equity   $ 6,198,142                     $ 5,896,718                  
Net interest income           $ 37,421                     $ 32,103          
Net interest spread                     2.37 %                     2.10 %
Net interest margin (D)                     2.46 %                     2.25 %

(A) Average balances for available for sale securities are based on amortized cost.

(B) Interest income is presented on a tax-equivalent basis using a 21% federal tax rate.

(C) Loans are stated net of unearned income and include nonaccrual loans.

(D) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

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

    December   31, 2021     September 30, 2021  
    Average     Income/             Average     Income/          
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                                
Interest-earning assets:                                                
Investments:                                                
Taxable (A)   $ 885,390     $ 3,104       1.40 %   $ 820,574     $ 2,824       1.38 %
Tax-exempt (A) (B)     5,443       54       3.97       6,035       64       4.24  
                                                 
Loans (B) (C):                                                
Mortgages     510,562       3,799       2.98       503,621       3,779       3.00  
Commercial mortgages     2,209,160       17,708       3.21       2,133,259       16,114       3.02  
Commercial     1,826,640       16,660       3.65       1,826,368       16,553       3.63  
Commercial construction     20,426       176       3.45       24,596       198       3.22  
Installment     33,400       253       3.03       32,219       245       3.04  
Home equity     41,955       346       3.30       43,182       357       3.31  
Other     270       6       8.89       252       5       7.94  
Total loans     4,642,413       38,948       3.36       4,563,497       37,251       3.27  
Federal funds sold                                    
Interest-earning deposits     513,650       178       0.14       413,623       142       0.14  
Total interest-earning assets     6,046,896       42,284       2.80 %     5,803,729       40,281       2.78 %
Noninterest-earning assets:                                                
Cash and due from banks     11,517                       8,592                  
Allowance for loan and lease losses     (65,542 )                     (64,100 )                
Premises and equipment     23,117                       23,311                  
Other assets     182,154                       201,287                  
Total noninterest-earning assets     151,246                       169,090                  
Total assets   $ 6,198,142                     $ 5,972,819                  
                                                 
LIABILITIES:                                                
Interest-bearing deposits:                                                
Checking   $ 2,321,970     $ 1,327       0.23 %   $ 2,098,827     $ 1,177       0.22 %
Money markets     1,290,334       678       0.21       1,257,760       683       0.22  
Savings     152,570       20       0.05       152,759       20       0.05  
Certificates of deposit – retail     453,127       725       0.64       461,917       836       0.72  
Subtotal interest-bearing deposits     4,218,001       2,750       0.26       3,971,263       2,716       0.27  
Interest-bearing demand – brokered     85,000       387       1.82       85,000       385       1.81  
Certificates of deposit – brokered     33,810       267       3.16       33,796       266       3.15  
Total interest-bearing deposits     4,336,811       3,404       0.31       4,090,059       3,367       0.33  
Borrowings     25,890       25       0.39       64,332       57       0.35  
Capital lease obligation     5,913       71       4.80       6,147       74       4.82  
Subordinated debt     132,659       1,363       4.11       132,588       1,358       4.10  
Total interest-bearing liabilities     4,501,273       4,863       0.43 %     4,293,126       4,856       0.45 %
Noninterest-bearing liabilities:                                                
Demand deposits     1,042,477                       997,450                  
Accrued expenses and other liabilities     111,357                       137,387                  
Total noninterest-bearing liabilities     1,153,834                       1,134,837                  
Shareholders’ equity     543,035                       544,856                  
Total liabilities and shareholders’ equity   $ 6,198,142                     $ 5,972,819                  
Net interest income           $ 37,421                     $ 35,425          
Net interest spread                     2.37 %                     2.33 %
Net interest margin (D)                     2.46 %                     2.42 %

(A) Average balances for available for sale securities are based on amortized cost.

(B) Interest income is presented on a tax-equivalent basis using a 21% federal tax rate.

(C) Loans are stated net of unearned income and include nonaccrual loans.

(D) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

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

    December   31, 2021     December 31, 2020  
    Average     Income/             Average     Income/          
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                                
Interest-earning assets:                                                
Investments:                                                
Taxable (A)   $ 838,174     $ 11,577       1.38 %   $ 510,245     $ 8,782       1.72 %
Tax-exempt (A) (B)     6,579       296       4.50       9,479       477       5.03  
                                                 
Loans (B) (C):                                                
Mortgages     503,616       15,359       3.05       528,687       17,882       3.38  
Commercial mortgages     2,032,318       63,298       3.11       1,958,262       64,541       3.30  
Commercial     1,881,683       66,652       3.54       1,969,115       71,037       3.61  
Commercial construction     20,420       692       3.39       5,932       295       4.97  
Installment     34,390       1,030       3.00       51,007       1,532       3.00  
Home equity     44,735       1,479       3.31       53,853       1,940       3.60  
Other     247       21       8.50       311       29       9.32  
Total loans     4,517,409       148,531       3.29       4,567,167       157,256       3.44  
Federal funds sold     48             0.13       102             0.25  
Interest-earning deposits     477,477       545       0.11       504,753       968       0.19  
Total interest-earning assets     5,839,687       160,949       2.76 %     5,591,746       167,483       3.00 %
Noninterest-earning assets:                                                
Cash and due from banks     10,396                       7,025                  
Allowance for loan and lease losses     (67,075 )                     (61,401 )                
Premises and equipment     23,094                       21,455                  
Other assets     197,893                       219,287                  
Total noninterest-earning assets     164,308                       186,366                  
Total assets   $ 6,003,995                     $ 5,778,112                  
                                                 
LIABILITIES:                                                
Interest-bearing deposits:                                                
Checking   $ 2,078,658     $ 4,426       0.21 %   $ 1,742,846     $ 7,279       0.42 %
Money markets     1,260,865       2,882       0.23       1,227,295       6,185       0.50  
Savings     146,210       75       0.05       120,780       63       0.05  
Certificates of deposit – retail     483,889       4,058       0.84       654,652       11,476       1.75  
Subtotal interest-bearing deposits     3,969,622       11,441       0.29       3,745,573       25,003       0.67  
Interest-bearing demand – brokered     96,301       1,721       1.79       143,388       2,773       1.93  
Certificates of deposit – brokered     33,790       1,058       3.13       33,735       1,061       3.15  
Total interest-bearing deposits     4,099,713       14,220       0.35       3,922,696       28,837       0.74  
Borrowings     110,077       473       0.43       308,814       3,976       1.29  
Capital lease obligation     6,260       300       4.79       7,157       343       4.79  
Subordinated debt     156,888       7,013       4.47       86,246       4,992       5.79  
Total interest-bearing liabilities     4,372,938       22,006       0.50 %     4,324,913       38,148       0.88 %
Noninterest-bearing liabilities:                                                
Demand deposits     959,912                       787,191                  
Accrued expenses and other liabilities     134,948                       153,648                  
Total noninterest-bearing liabilities     1,094,860                       940,839                  
Shareholders’ equity     536,197                       512,360                  
Total liabilities and shareholders’ equity   $ 6,003,995                     $ 5,778,112                  
Net interest income           $ 138,943                     $ 129,335          
Net interest spread                     2.26 %                     2.12 %
Net interest margin (D)                     2.38 %                     2.31 %

(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 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 these non-GAAP financial measures provide information that is important to investors and useful in understanding our financial position, results and ratios because 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  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
Tangible Book Value Per Share   2021     2021     2021     2021     2020  
Shareholders’ equity   $ 546,388     $ 543,014     $ 538,459     $ 522,441     $ 527,122  
Less:  Intangible assets, net     48,902       49,333       43,156       43,524       43,891  
Tangible equity   $ 497,486     $ 493,681     $ 495,303     $ 478,917     $ 483,231  
                                         
Period end shares outstanding     18,393,888       18,627,910       18,829,877       19,034,870       18,974,703  
Tangible book value per share   $ 27.05     $ 26.50     $ 26.30     $ 25.16     $ 25.47  
Book value per share     29.70       29.15       28.60       27.45       27.78  
                                         
Tangible Equity to Tangible Assets                                        
Total assets   $ 6,077,993     $ 6,240,285     $ 5,791,688     $ 5,969,627     $ 5,890,442  
Less: Intangible assets, net     48,902       49,333       43,156       43,524       43,891  
Tangible assets   $ 6,029,091     $ 6,190,952     $ 5,748,532     $ 5,926,103     $ 5,846,551  
Tangible equity to tangible assets     8.25 %     7.97 %     8.62 %     8.08 %     8.27 %
Equity to assets     8.99 %     8.70 %     9.30 %     8.75 %     8.95 %

 

    Three Months Ended  
    Dec 31,     Sept 30,     June 30,     March 31,     Dec 31,  
Return on Average Tangible Equity   2021     2021     2021     2021     2020  
Net income   $ 14,855     $ 14,171     $ 14,418     $ 13,178     $ 3,030  
                                         
Average shareholders’ equity   $ 543,035     $ 544,856     $ 530,971     $ 525,643     $ 523,446  
Less:  Average intangible assets, net     49,151       48,757       43,366       43,742       40,336  
Average tangible equity   $ 493,884     $ 496,099     $ 487,605     $ 481,901     $ 483,110  
                                         
Return on average tangible common equity     12.03 %     11.43 %     11.83 %     10.94 %     2.51 %

 

    For the Twelve Months Ended  
    Dec 31,     Dec 31,  
Return on Average Tangible Equity   2021     2020  
Net income   $ 56,622     $ 26,192  
                 
Average shareholders’ equity   $ 536,197     $ 512,360  
Less:  Average intangible assets, net     46,275       40,186  
Average tangible equity   $ 489,922     $ 472,174  
                 
Return on average tangible common equity     11.56 %     5.55