Peapack Gladstone Bank

News Details

Peapack-Gladstone Financial Corporation Reports Strong Third Quarter Results, as Net Interest Margin Continues to Expand  

Company Release - 10/27/2022

Bedminster, NJ, Oct. 27, 2022 (GLOBE NEWSWIRE) -- via NewMediaWire -- Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) announces its third quarter 2022 results.

This earnings release should be read in conjunction with the Company’s Q3 2022 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

The Company recorded total revenue of $61.91 million, net income of $20.13 million and diluted earnings per share (“EPS”) of $1.09 for the quarter ended September 30, 2022, compared to revenue of $52.99 million, net income of $14.17 million and diluted EPS of $0.74 for the three months ended September 30, 2021.

The Company’s return on average assets, return on average equity, and return on average tangible equity totaled 1.30%, 15.21% and 16.73%, respectively, for the September 2022 quarter. 

The September 2022 quarter results were driven by continued improvement in net interest income and net interest margin, which improved $10.3 million and 56 basis points, when compared to the September 2021 quarter (and $2.6 million and 15 basis points when compared to the June 2022 quarter). This benefit was partially offset by a decline in noninterest income, principally wealth management fee income and capital markets activity fee income, due to volatility in the markets.

The September 2022 quarter included a $571,000 fair value adjustment on an equity security held for CRA investment purposes. This adjustment reduced total revenue by $571,000; net income by $414,000; and EPS by $0.03, for the September 2022 quarter.

Douglas L. Kennedy, President and CEO said, “Our third quarter 2022 results continued to reflect the asset sensitivity of our loan portfolio, as loans continued to reprice upward in the rising rate environment.”

Mr. Kennedy also noted,  "As previously announced, the Company has entered the Life Insurance Premium Finance business.  Life insurance premium finance is a safe and profitable business, and we believe it is the next logical step in our growth plan. While Q4 of 2022 will include some level of loan originations, the business is expected to be fully operational at the beginning of 2023."

The following are select highlights:

Peapack Private Wealth Management:

  • AUM/AUA in our Peapack Private Wealth Management Division totaled $9.3 billion at September 30, 2022.
  • Gross new business inflows for Q3 2022 totaled $219 million (and for the first nine months of 2022 totaled $775 million).
  • Wealth Management fee income of $12.9 million for Q3 2022 comprised 21% of total revenue for the quarter.
  • Successfully opened our new Summit Wealth Management office, which has consolidated the teams of several previously acquired firms with legacy Peapack Private team members.

Commercial Banking and Balance Sheet Management:

  • The net interest margin ("NIM") improved by 15 basis points in Q3 2022 compared to Q2 2022 and improved 56 basis points when compared to Q3 2021.
  • During the third quarter of 2022, the Company successfully migrated $287 million of interest-bearing checking into noninterest-bearing demand deposits.
  • Noninterest-bearing demand deposits comprised 25% of total deposits as of September 30, 2022.
  • Core deposits (which includes noninterest-bearing demand and interest-bearing demand, savings and money market accounts) totaled 91% of total deposits at September 30, 2022.
  • Commercial & industrial lending (“C&I”) loan/lease balances comprised 40% of the total loan portfolio at September 30, 2022.
  • Total loans grew 7% (9% annualized) to $5.19 billion at September 30, 2022 compared to $4.84 billion at December 31, 2021.
  • Fee income on unused commercial lines of credit totaled $818,000 for Q3 2022.

Capital Management:

  • Repurchased 290,399 shares of Company stock for a total cost of $9.9 million during Q3 2022. (790,277 shares of Company stock for a total cost of $27.5 million were repurchased during the first nine months of 2022.)
  • At September 30, 2022, Regulatory Tier 1 Leverage Ratio stood at 10.8% for Peapack-Gladstone Bank (the "Bank") and 8.7% for the Company; and Regulatory Common Equity Tier 1 Ratio (to Risk-Weighted Assets) stood at 13.5% for the Bank and 10.9% for the Company. These ratios have increased from June 30, 2022 levels (and from December 31, 2021 levels) and are significantly above well capitalized standards, as capital has benefitted from strong net income generation.

SUMMARY INCOME STATEMENT DETAILS:

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

September 2022 Year Compared to Prior Year

    Nine Months Ended     Nine Months Ended                
    September 30,     September 30,       Increase/  
(Dollars in millions, except per share data)   2022     2021       (Decrease)  
Net interest income   $ 128.04     $ 100.85       $ 27.19       27 %
Wealth management fee income (A)     41.67       39.03         2.64       7  
Capital markets activity (B)     8.30       7.10         1.20       17  
Other income (C)     (0.36 )     7.15         (7.51 )     (105 )
Total other income     49.61       53.28         (3.67 )     (7 )
Operating expenses (A) (D)     100.39       94.46         5.93       6  
Pretax income before provision for credit losses     77.26       59.67         17.59       29  
Provision for credit losses     4.42       2.73         1.69       62  
Pretax income     72.84       56.94         15.90       28  
Income tax expense/(benefit)     19.17       15.17         4.00       26  
Net income   $ 53.67     $ 41.77       $ 11.90       28 %
Diluted EPS   $ 2.88     $ 2.15       $ 0.73       34 %
                           
Total Revenue (E)   $ 177.65     $ 154.13       $ 23.52       15 %
                           
Return on average assets annualized     1.16 %     0.94 %       0.22        
Return on average equity annualized     13.46 %     10.43 %       3.03        

(A) The nine months ended September 30, 2022 included nine months of wealth management fee income and expense related to the July 2021 acquisition of Princeton Portfolio Strategies Group, while the nine months ended September 30, 2021 included three months.
(B) Capital markets activity includes fee income from loan level back-to-back swaps, the Small Business Association ("SBA") lending and sale program, corporate advisory and mortgage banking activities.
(C) Other income for the nine months ended September 30, 2022 included a $6.6 million loss on sale of securities associated with a balance sheet repositioning executed in the first quarter of 2022, and a $1.7 million fair value adjustment on a CRA equity security.  The September 2021 nine months included a cost of $842,000 related to the termination of interest rate swaps; a $1.4 million gain on loans; $722,000 of fee income related to the referral of Paycheck Protection Program ("PPP") loans to a third party; $455,000 of additional Bank Owned Life Insurance ("BOLI") income related to the receipt of life insurance proceeds; and a $293,000 fair value adjustment on a CRA equity security.
(D) The nine months ended September 2022 and 2021 each included $1.5 million of severance expense related to certain staff reorganizations within several areas of the Bank.  The nine months ended September 2021 also included $648,000 of expense related to the redemption of subordinated debt; and $1.4 million related to a swap valuation allowance.
(E) Total revenue equals the sum of net interest income plus total other income.

September 2022 Quarter Compared to Prior Year Quarter

    Three Months Ended       Three Months Ended              
    September 30,       September 30,     Increase/  
(Dollars in millions, except per share data)   2022       2021     (Decrease)  
Net interest income   $ 45.53       $ 35.21     $ 10.32       29 %
Wealth management fee income     12.94         13.86       (0.92 )     (7 )
Capital markets activity (A)     0.78         2.06       (1.28 )     (62 )
Other income (B)     2.66         1.86       0.80       43  
Total other income     16.38         17.78       (1.40 )     (8 )
Operating expenses (C)     33.56         32.18       1.38       4  
Pretax income before provision for credit losses     28.35         20.81       7.54       36  
Provision for credit losses     0.60         1.60       (1.00 )     (63 )
Pretax income     27.75         19.21       8.54       44  
Income tax expense     7.62         5.04       2.58       51  
Net income   $ 20.13       $ 14.17     $ 5.96       42 %
Diluted EPS   $ 1.09       $ 0.74     $ 0.35       48 %
                           
Total Revenue (D)   $ 61.91       $ 52.99     $ 8.92       17 %
                           
Return on average assets annualized     1.30 %       0.95 %     0.35        
Return on average equity annualized     15.21 %       10.40 %     4.81        

(A) Capital markets activity includes fee income from loan level back-to-back swaps, the SBA lending and sale program, corporate advisory and mortgage banking activities.
(B) Other income for the September 2022 and 2021 quarters included a fair value adjustment on a CRA equity security of $571,000 and $70,000, respectively
(C) The September 2021 quarter included $1.4 million of expense related to a swap valuation allowance.
(D) Total revenue equals the sum of net interest income plus total other income.

September 2022 Quarter Compared to Linked Quarter

    Three Months Ended     Three Months Ended                
    September 30,     June 30,       Increase/  
(Dollars in millions, except per share data)   2022     2022       (Decrease)  
Net interest income   $ 45.53     $ 42.89       $ 2.64       6 %
Wealth management fee income     12.94       13.89         (0.95 )     (7 )
Capital markets activity (A)     0.78       2.86         (2.08 )     (73 )
Other income (B)     2.66       1.76         0.90       51  
Total other income     16.38       18.51         (2.13 )     (12 )
Operating expenses     33.56       32.66         0.90       3  
Pretax income before provision for credit losses     28.35       28.74         (0.39 )     (1 )
Provision for credit losses     0.60       1.45         (0.85 )     (59 )
Pretax income     27.75       27.29         0.46       2  
Income tax expense     7.62       7.19         0.43       6  
Net income   $ 20.13     $ 20.10       $ 0.03       0 %
Diluted EPS   $ 1.09     $ 1.08       $ 0.01       1 %
                           
Total Revenue (C)   $ 61.91     $ 61.40       $ 0.51       1 %
                           
Return on average assets annualized     1.30 %     1.30 %       0.00        
Return on average equity annualized     15.21 %     15.43 %       (0.22 )      

(A) Capital markets activity includes fee income from loan level back-to-back swaps, the SBA lending and sale program, corporate advisory and mortgage banking activities.
(B) Other income for the September 2022 and June 2022 quarters included a fair value adjustment on a CRA equity security of $571,000 and $475,000, respectively.
(C) Total revenue equals the sum of net interest income plus total other income.

SUPPLEMENTAL QUARTERLY DETAILS:

Peapack Private Wealth Management

In the September 2022 quarter, the Bank’s wealth management business, Peapack Private Wealth Management ("PPWM"), generated $12.94 million in fee income, compared to $13.89 million for the June 30, 2022 quarter and $13.86 million for the September 2021 quarter. Continued market declines in 2022 further impacted the results in the September 2022 quarter, as the S&P decreased another 5% in Q3 2022 (and YTD down 25%).

John Babcock, President of Peapack Private Wealth Management, noted, “Notwithstanding broad market forces that have negatively impacted both the equities and bond markets, and with economic challenges ahead, our business is sound and continues to attract new clients as well as additional funds from existing relationships.  In Q3 2022, total new accounts and client additions totaled $219 million which brings our nine-month 2022 total to $775 million, an annualized pace consistent with the last several years.  As we enter Q4 2022, our new business pipeline is healthy, and we remain focused on delivering excellent service and advice to our clients during these turbulent times. Our highly skilled professionals, our fiduciary powers and expertise, our financial planning capabilities and our high-touch client service model distinguishes PPWM in our market and are the drivers behind our growth and success.” 

Loans / Commercial Banking

Total loans grew 7% (9% annualized) to $5.19 billion at September 30, 2022 compared to $4.84 billion at December 31, 2021.

Total C&I loans and leases at September 30, 2022 were $2.10 billion or 40% of the total loan portfolio.

Mr. Kennedy noted, “Our loan growth has historically been strong however, given economic uncertainty and rising interest rates, we believe loan demand will subside somewhat. Further, we have tightened our initial underwriting in anticipation of a potential economic downturn and higher rate environment. Given that, we believe we will achieve modest growth for the remainder of 2022, resulting in mid to high single digit growth for all of 2022.”

Mr. Kennedy also noted, “We are proud to have built a leading middle market commercial banking franchise, as evidenced by our C&I Portfolio, Treasury Management services, and Corporate Advisory and SBA businesses.  Additionally, we are encouraged by the expansion into the Life Insurance Premium Finance business and believe it will prove to be a safe and profitable business line that aligns with the Company's strategy.”

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

  Nine Months Ended   Nine Months Ended          
  September 30, 2022   September 30, 2021          
  NII     NIM   NII     NIM          
                             
NII/NIM excluding the below $ 126,643     2.84%   $ 97,655     2.53%          
Prepayment premiums received on loan paydowns   912     0.02%     1,530     0.03%          
Effect of maintaining excess interest earning cash   485     -0.03%     (365 )   -0.17%          
Effect of PPP loans       0.00%     2,029     -0.04%          
NII/NIM as reported $ 128,040     2.83%   $ 100,849     2.35%          
                             
  Three Months Ended   Three Months Ended   Three Months Ended
  September 30, 2022   June 30, 2022   September 30, 2021
  NII     NIM   NII     NIM   NII     NIM
                             
NII/NIM excluding the below $ 44,728     2.99%   $ 42,526     2.83%   $ 34,635     2.56%
Prepayment premiums received on loan paydowns   305     0.02%     255     0.02%     325     0.02%
Effect of maintaining excess interest earning cash   492     -0.03%     112     -0.02%     (46 )   -0.14%
Effect of PPP loans       0.00%         0.00%     297     -0.02%
NII/NIM as reported $ 45,525     2.98%   $ 42,893     2.83%   $ 35,211     2.42%

The Company’s reported NII and NIM for Q3 2022 increased $2.6 million and 15 basis points, respectively, compared to the linked quarter (Q2 2022) and $10.3 million and 56 basis points compared to the prior year quarter (Q3 2021). When comparing to the prior year quarter the Bank grew its loan portfolio at rates/spreads beneficial to NIM, while reducing lower-yielding liquidity. Additionally, the Bank benefitted from the increases in LIBOR and the Prime rate during 2022.

Mr. Kennedy stated, “As noted above, we benefitted from the increases in LIBOR and Prime during 2022 and our loan portfolio is positioned to continue to benefit from a rise in interest rates. 23% of our loan portfolio reprices within one-month; 36% within three-months and 46% ($2.4 billion) within one year. Our current modeling, with an average deposit beta assumption of 45% on a go-forward basis, indicates net interest income will improve approximately 2.2% in year one and 5.8% in year two, after a 150-basis point rate shock.”

Funding / Liquidity / Interest Rate Risk Management

The Company actively manages its deposit base to reduce reliance on wholesale funding, volatility, and/or operational risk.  Total deposits increased $33 million to $5.30 billion at September 30, 2022 from $5.27 billion at December 31, 2021 and decreased $105 million from $5.40 billion at June 30, 2022. The deposit outflows for the quarter included large relationships strategically utilizing their funds, including investing into our Wealth Management business, acquisitions, further investing in their business, and purchasing real estate and other investments. As noted previously, during the third quarter of 2022, the Company successfully migrated $287 million of interest-bearing checking into noninterest-bearing demand deposits. 

Mr. Kennedy noted, “91% of our deposits are demand, savings, or money market accounts, and our noninterest bearing deposits comprise 25% of our total deposits; both metrics reflect the core nature of our deposit base.”

At September 30, 2022, the Company’s balance sheet liquidity (investments available for sale, interest-earning deposits and cash) totaled $634.1 million (or 10% of assets).

The Company maintains backup liquidity of approximately $1.8 billion of secured available funding with the Federal Home Loan Bank and $1.7 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.

Income from Capital Markets Activities

Noninterest income from Capital Markets activities (detailed below) totaled $784,000 for the September 2022 quarter compared to $2.86 million for the June 2022 quarter and $2.06 million for the September 2021 quarter. The June 2022 quarter results were driven by $2.68 million in gains on sales of SBA loans. The September 2021 quarter reflected $1.57 million in gains on the sale of SBA loans and increased mortgage banking activity due to greater refinance activity in the low-rate environment.

    Nine Months Ended     Nine Months Ended        
    September 30,     September 30,        
(Dollars in thousands, except per share data)   2022     2021        
Gain on loans held for sale at fair value (Mortgage banking)   $ 458     $ 1,842        
Fee income related to loan level, back-to-back swaps                  
Gain on sale of SBA loans     6,141       3,950        
Corporate advisory fee income     1,696       1,303        
Total capital markets activity   $ 8,295     $ 7,095        
                   
    Three Months Ended     Three Months Ended     Three Months Ended  
    September 30,     June 30,     September 30,  
(Dollars in thousands, except per share data)   2022     2022     2021  
Gain on loans held for sale at fair value (Mortgage banking)   $ 60     $ 151     $ 408  
Fee income related to loan level, back-to-back swaps                  
Gain on sale of SBA loans     622       2,675       1,569  
Corporate advisory fee income     102       33       84  
Total capital markets activity   $ 784     $ 2,859     $ 2,061  

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

Other noninterest income was $2.66 million for Q3 2022 compared to $1.76 million for Q2 2022 and $1.86 million for Q3 2021. Q3 2022 included $818,000 of unused line fees compared to $529,000 for Q2 2022 and $163,000 for Q3 2021. Additionally, Q3 2022 included $547,000 of income recorded by the Equipment Finance Division related to equipment transfers to lessees.

Operating Expenses

The Company’s total operating expenses were $33.56 million for the quarter ended September 30, 2022, compared to $32.66 million for the June 2022 quarter and $32.19 million for the September 2021 quarter. The 2022 quarters included increased costs related to health insurance and corporate insurance, as well as normal annual merit increases and year-end bonuses. The September 2021 quarter included $1.4 million related to a swap valuation allowance.

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

Income Taxes

The effective tax rate for the three months ended September 30, 2022 was 27.47%, as compared to 26.35% for the June 2022 quarter and 26.22% for the quarter ended September 30, 2021, reflecting higher pre-tax income.

Asset Quality / Provision for Credit Losses

Nonperforming assets (which does not include troubled debt restructured loans that are performing in accordance with their terms) were $15.8 million, or 0.26% of total assets at September 30, 2022.  Loans past due 30 to 89 days and still accruing were $7.2 million, which included a $5.1 million outstanding loan to a US governmental unit. 

Criticized and classified loans totaled $109.6 million at September 30, 2022, reflecting declines from both December 31, 2021 and June 30, 2022 levels.

The Company currently has no loans or leases on deferral and accruing. (During the COVID-19 pandemic, $914 million was on deferral status at June 30, 2020).

On January 1, 2022, the Company implemented Current Expected Credit Losses (“CECL”) methodology for calculating the Company’s Allowance for Credit Losses (“ACL”). The day one CECL adjustment totaled $5.5 million (a reduction to December 31, 2021 ACL, and benefit to Capital, net of tax effect).

For the quarter ended September 30, 2022, the Company’s provision for credit losses was $599,000 compared to $1.4 million for the June 2022 quarter and $1.6 million for the September 2021 quarter. The provision for credit losses in the September 2022 was lower, when compared to the June 2022 and September 2021 quarters, principally driven by modest loan growth when compared to prior periods.

At September 30, 2022, the ACL was $59.68 million (1.15% of total loans), compared to $59.02 million (1.14% of loans) at June 30, 2022. The ALLL at December 31, 2021 (before adoption of CECL) was $61.70 million (1.27% of loans). 

Capital

The Company’s capital position during the September 2022 quarter was benefitted by net income of $20.13 million which was partially offset by the repurchase of 290,399 shares through the Company’s stock repurchase program at a total cost of $9.9 million and the quarterly dividend of $909,000. U.S. Generally Accepted Accounting Principles (“GAAP”) Capital at September 30, 2022 was also impacted by a $23.6 million increase in the unrealized loss on available-for-sale securities in the third quarter of 2022 due to the significant rise in medium-term Treasury yields.

Mr. Kennedy noted, “Despite capital spent on stock repurchases, and capital being affected by the increased unrealized loss on AFS securities, our tangible book value per share improved slightly during Q3 2022 to $26.10 at September 30, 2022.”

The Company’s and Bank’s regulatory capital ratios as of September 30, 2022 remain strong, and reflect increases from June 30, 2022 and December 31, 2021 levels. Where applicable, such ratios remain well above regulatory well capitalized standards.

The Company employs quarterly capital stress testing – adverse case and severely adverse case. In the most recent completed stress test (as of June 30, 2022), under the severely adverse case, and no growth scenario, the Bank remains well capitalized over a two-year stress period. With an additional stress overlay (impacting the industries most affected by the Pandemic more severely), the Bank still remains well capitalized over the two-year stress period.

On October 27, 2022, the Company declared a cash dividend of $0.05 per share payable on November 28, 2022, to shareholders of record on November 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 $9.3 billion as of September 30, 2022.  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 credit losses and capital levels;
  • the continuing impact of the COVID-19 pandemic on our business and results of operation;
  • higher than expected increases in our allowance for credit losses;
  • higher than expected increases in loan and lease losses or in the level of delinquent, nonperforming, classified and criticized loans;
  • inflation and changes in interest rates, which may adversely impact or margins and yields, reduce the fair value of our financial instruments, reduce our loan originations and lead to higher operating costs;
  • 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;
  • the current or anticipated impact of military conflict, terrorism or other geopolitical events;
  • 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.

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, 2021.  We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

Contact:

Jeffrey J. Carfora, SEVP and CFO

Peapack-Gladstone Financial Corporation

T: 908-719-4308


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

    For the Three Months Ended
    Sept 30,    June 30,   March 31,   Dec 31,   Sept 30,
    2022   2022   2022   2021   2021
Income Statement Data:                    
Interest income    $55,013    $48,520    $44,140    $42,075    $40,067
Interest expense     9,488     5,627     4,518     4,863     4,856
Net interest income    45,525    42,893    39,622    37,212    35,211
Wealth management fee income    12,943    13,891    14,834    13,962    13,860
Service charges and fees    1,060    1,063    952    996    959
Bank owned life insurance    299    310    313    308    311
Gain on loans held for sale at fair value
   (Mortgage banking) (A)
   60    151    247    352    408
Gain/(loss) on loans held for sale at lower of cost or
   fair value
   —    —    —    (265)    —
Fee income related to loan level, back-to-back
   swaps (A)
   —    —    —    —    —
Gain on sale of SBA loans (A)    622    2,675    2,844    989    1,569
Corporate advisory fee income (A)    102    33    1,561    2,180    84
Other income    1,868    860    1,254    581    660
Loss on securities sale, net (B)    —    —    (6,609)    —    —
Fair value adjustment for CRA equity security    (571)    (475)    (682)    (139)    (70)
Total other income    16,383    18,508    14,714    18,964    17,781
Salaries and employee benefits (C)    22,656    21,882    22,449    20,105    19,859
Premises and equipment    4,534    4,640    4,647    4,519    4,459
FDIC insurance expense    510    503    471     402    555
Swap valuation allowance    —    —    673    893    1,350
Other expenses    5,860    5,634    5,929    5,785    5,962
Total operating expenses    33,560    32,659    34,169    31,704    32,185
Pretax income before provision for credit losses    28,348    28,742    20,167    24,472    20,807
Provision for credit losses (D)    599    1,449    2,375    3,750    1,600
Income before income taxes    27,749    27,293    17,792    20,722    19,207
Income tax expense    7,623    7,193    4,351    5,867    5,036
Net income    $20,126    $20,100    $13,441    $14,855    $14,171
                     
Total revenue (E)    $61,908    $61,401    $54,336    $56,176    $52,992
Per Common Share Data:                    
Earnings per share (basic)    $1.11    $1.10    $0.73    $0.80    $0.76
Earnings per share (diluted)    1.09    1.08    0.71    0.78    0.74
Weighted average number of common
   shares outstanding:
                   
Basic    18,072,385    18,325,605    18,339,013    18,483,268    18,763,316
Diluted    18,420,661    18,637,340    18,946,683    19,070,594    19,273,831
Performance Ratios:                    
Return on average assets annualized (ROAA)   1.30%   1.30%   0.87%   0.96%   0.95%
Return on average equity annualized (ROAE)   15.21%   15.43%   9.88%   10.94%   10.40%
Return on average tangible common equity (ROATCE) (F)   16.73%   17.00%   10.85%   12.03%   11.43%
Net interest margin (tax-equivalent basis)   2.98%   2.83%   2.69%   2.46%   2.42%
GAAP efficiency ratio (G)   54.21%   53.19%   62.88%   56.44%   60.74%
Operating expenses / average assets annualized   2.17%   2.11%   2.22%   2.05%   2.16%

(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) Loss on sale of securities was a result of a balance sheet repositioning employed in the March 2022 quarter.
(C) The March 2022 quarter included $1.5 million of severance expense related to corporate restructuring.
(D) Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology.  Prior to January 1, 2022, the calculation was based on the incurred loss methodology.
(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.

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

    For the Nine Months Ended        
    Sept 30,   Change
    2022   2021   $   %
Income Statement Data:                
Interest income    $147,673    $117,992    $29,681   25%
Interest expense     19,633     17,143     2,490   15%
Net interest income    128,040    100,849    27,191   27%
Wealth management fee income    41,668    39,025    2,643   7%
Service charges and fees    3,075    2,701    374   14%
Bank owned life insurance    922    1,388    (466)   -34%
Gain on loans held for sale at fair value (Mortgage banking) (A)    458    1,842    (1,384)   -75%
Gain on loans held for sale at lower of cost or fair value (B)    —    1,407    (1,407)   -100%
Fee income related to loan level, back-to-back swaps (A)    —    —    —   N/A
Gain on sale of SBA loans (A)    6,141    3,950    2,191   55%
Corporate advisory fee income (A)    1,696    1,303    393   30%
Loss on swap termination    —    (842)    842   -100%
Other income (C)    3,982    2,798    1,184   42%
Loss on securities sale, net (D)    (6,609)    —    (6,609)   N/A
Fair value adjustment for CRA equity security    (1,728)    (293)    (1,435)   490%
Total other income    49,605    53,279    (3,674)   -7%
Salaries and employee benefits (E)    66,987    61,759    5,228   8%
Premises and equipment    13,821    12,646    1,175   9%
FDIC insurance expense    1,484    1,669    (185)   -11%
Swap valuation allowance    673    1,350    (677)   -50%
Other expenses    17,423    17,039    384   2%
Total operating expenses    100,388    94,463    5,925   6%
Pretax income before provision for credit losses    77,257    59,665    17,592   29%
Provision for credit losses (F)    4,423    2,725     1,698   62%
Income before income taxes    72,834    56,940    15,894   28%
Income tax expense    19,167    15,173    3,994   26%
Net income    $53,667    $41,767    $11,900   28%
                 
Total revenue (G)    $177,645    $154,128    $23,517   15%
Per Common Share Data:                
Earnings per share (basic)    $2.94    $2.21    $0.73   33%
Earnings per share (diluted)    2.88    2.15    0.73   34%
Weighted average number of common shares outstanding:                
Basic    18,244,691    18,891,601    (646,910)   -3%
Diluted    18,652,042    19,390,522    (738,480)   -4%
Performance Ratios:                
Return on average assets annualized (ROAA)   1.16%   0.94%   0.22%   23%
Return on average equity annualized (ROAE)   13.46%   10.43%   3.03%   29%
Return on average tangible common equity (ROATCE) (H)   14.81%   11.40%   3.41%   30%
Net interest margin (tax-equivalent basis)   2.83%   2.35%   0.48%   21%
GAAP efficiency ratio (I)   56.51%   61.29%   (4.78)%   -8%
Operating expenses / average assets annualized   2.17%   2.12%   0.05%   2%
                 

(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 gain on sale of $57 million of PPP loans completed in the nine months ended September 30, 2021.
(C) Includes income of $722,000 from the referral of PPP loans to a third-party firm during the nine months ended September 30, 2021.
(D) Loss on sale of securities was a result of a balance sheet repositioning employed in the March 2022 quarter.
(E) The September 2022 and 2021 nine months ended each included $1.5 million of severance expense related to corporate restructuring.
(F) Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology.  Prior to January 1, 2022, the calculation was based on the incurred loss methodology.
(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 annualized 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
    Sept 30,   June 30,   March 31,   Dec 31,   Sept 30,
    2022   2022   2022   2021   2021
ASSETS                    
Cash and due from banks    $5,066    $6,203    $8,849    $5,929    $9,299
Federal funds sold     —     —     —     —     —
Interest-earning deposits    103,214    147,222    105,111    140,875    606,913
Total cash and cash equivalents    108,280    153,425    113,960    146,804    616,212
Securities available for sale    497,880    556,791    601,163    796,753    843,779
Securities held to maturity    103,551    105,048     106,816     108,680     —
CRA equity security, at fair value    12,957    13,528    14,003    14,685    14,824
FHLB and FRB stock, at cost (A)    14,986    13,710    18,570    12,950    12,950
                     
Residential mortgage    519,088    512,341    513,289    501,340    510,878
Multifamily mortgage    1,856,675    1,876,783    1,850,097    1,595,866    1,497,683
Commercial mortgage    638,903    657,812    669,899    662,626    680,107
Commercial and industrial loans    2,099,917    2,048,474    2,041,720    2,009,252    1,833,532
Consumer loans    37,412    37,675    35,322    33,687    30,689
Home equity lines of credit    36,375    36,023    38,604    40,803    42,512
Other loans    259    236    226    238    245
Total loans    5,188,629    5,169,344    5,149,157    4,843,812    4,595,646
Less: Allowances for credit losses (B)    59,683    59,022    58,386    61,697    65,133
Net loans    5,128,946    5,110,322    5,090,771    4,782,115    4,530,513
                     
Premises and equipment    23,781    22,804    22,960    23,044    23,123
Other real estate owned     116     116     —     —     —
Accrued interest receivable    17,816    23,468    22,890    21,589    22,790
Bank owned life insurance    47,072    46,944    46,805    46,663    46,510
Goodwill and other intangible assets    47,698    48,082    48,471    48,902    49,333
Finance lease right-of-use assets    3,021     3,209     3,395     3,582     3,769
Operating lease right-of-use assets    13,404     14,192     14,725     9,775     10,307
Due from brokers (C)     —     —     120,245     —     —
Other assets (D)    67,753    39,528    30,890    62,451    66,175
TOTAL ASSETS    $6,087,261    $6,151,167    $6,255,664    $6,077,993    $6,240,285
                     
LIABILITIES                    
Deposits:                    
Noninterest-bearing demand deposits    $1,317,954    $1,043,225    $1,023,208    $956,482    $986,765
Interest-bearing demand deposits    2,149,629    2,456,988    2,362,987    2,287,894    2,355,892
Savings    166,821    168,441    162,116    154,914    168,831
Money market accounts    1,178,112    1,217,516    1,304,017    1,307,051    1,287,686
Certificates of deposit – Retail    345,047    375,387    384,909    409,608    426,981
Certificates of deposit – Listing Service    30,647    31,348    31,348    31,382    31,382
Subtotal “customer” deposits    5,188,210    5,292,905    5,268,585    5,147,331    5,257,537
IB Demand – Brokered    85,000    85,000    85,000    85,000    85,000
Certificates of deposit – Brokered    25,974    25,963    33,831    33,818    33,804
Total deposits    5,299,184    5,403,868    5,387,416    5,266,149    5,376,341
Short-term borrowings     32,369     —     122,085     —    —
Paycheck Protection Program Liquidity Facility (E)     —     —     —     —     48,496
Finance lease liability    5,003    5,305    5,573    5,820    6,063
Operating lease liability    14,101    14,756    15,155    10,111    10,644
Subordinated debt, net     132,916    132,844    132,772    132,701    132,629
Other liabilities (D)    88,174    74,070    69,237    116,824    123,098
TOTAL LIABILITIES    5,571,747    5,630,843    5,732,238    5,531,605    5,697,271
Shareholders’ equity    515,514    520,324    523,426    546,388    543,014
TOTAL LIABILITIES AND                    
SHAREHOLDERS’ EQUITY    $6,087,261    $6,151,167    $6,255,664    $6,077,993    $6,240,285
Assets under management and / or administration at
   Peapack-Gladstone Bank’s Private Wealth Management
   Division (market value, not included above-dollars in billions)
   $9.3    $9.5    $10.7    $11.1    $10.3
                     

(A) FHLB means "Federal Home Loan Bank" and FRB means "Federal Reserve Bank."
(B) Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology.  Prior to January 1, 2022, the calculation was based on the incurred loss methodology.
(C) Includes $120 million due from FHLB related to securities sales at March 31, 2022.  The $120 million received on April 1, 2022, was used to reduce short term borrowings.
(D) 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.
(E) Represents funding provided by the Federal Reserve for pledged PPP loans.

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

    As of
    Sept 30,   June 30,   March 31,   Dec 31,   Sept 30,
    2022   2022   2022   2021   2021
Asset Quality:                    
Loans past due over 90 days and still accruing    $—    $—    $—    $—    $—
Nonaccrual loans    15,724    15,078    15,884    15,573    25,925
Other real estate owned     116     116     —     —     —
Total nonperforming assets    $15,840    $15,194    $15,884    $15,573    $25,925
                     
Nonperforming loans to total loans   0.30%   0.29%   0.31%   0.32%   0.56%
Nonperforming assets to total assets   0.26%   0.25%   0.25%   0.26%   0.42%
                     
Performing TDRs (A)(B)    $2,761    $2,272    $2,375    $2,479    $416
                     
Loans past due 30 through 89 days and still accruing (C)    $7,248    $3,126    $606    $8,606    $1,193
                     
Loans subject to special mention    $82,107    $98,787    $110,252    $116,490    $115,935
                     
Classified loans    $27,507    $27,167    $47,386    $50,702    $51,937
                     
Impaired loans    $13,047    $13,227    $16,147    $18,052    $26,341
                     
Allowance for credit losses ("ACL"):                    
Beginning of quarter    $59,022    $58,386    $61,697    $65,133    $63,505
Day one CECL adjustment     —     —     (5,536)     —     —
Provision for credit losses (D)     665     646     2,489     3,750     1,600
(Charge-offs)/recoveries, net     (4)     (10)     (264)     (7,186)     28
End of quarter    $59,683    $59,022    $58,386    $61,697    $65,133
                     
ACL to nonperforming loans   379.57%   391.44%   367.58%   396.18%   251.24%
ACL to total loans   1.15%   1.14%   1.13%   1.27%   1.42%
General ACL to total loans (E)   1.10%   1.09%   1.09%   1.19%   1.26%

(A) Amounts reflect troubled debt restructurings (“TDRs”) that are paying according to restructured terms.
(B) Excludes TDRs included in nonaccrual loans in the following amounts:  $12.9 million at September 30, 2022; $13.5 million at June 30, 2022; $13.6 million at March 31, 2022; $1.1 million at December 31, 2021 and $4.0 million at September 30, 2021.
(C) Includes $5.1 million outstanding to a U.S. governmental unit at September 30, 2022; and $6.9 million for one equipment lease principally due to administrative issues with the servicer and the lessee/borrower at December 31, 2021.
(D) Commencing on January 1, 2022, the allowance calculation is based on the CECL methodology.  Prior to January 1, 2022, the calculation was based on the incurred loss methodology. Provision to roll forward the ACL excludes a credit of $66,000 at September 30, 2022, a provision of $803,000 at June 30, 2022 and a credit of $114,000 at March 31, 2022 related to off-balance sheet commitments.
(E) Total ACL less specific reserves equals general ACL.


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

    September 30,   December 31,   September 30,
    2022   2021   2021
Capital Adequacy                  
Equity to total assets (A)     8.47%     8.99%     8.70%
Tangible equity to tangible assets (B)     7.75%     8.25%     7.97%
Book value per share (C)      $28.77      $29.70      $29.15
Tangible book value per share (D)      $26.10      $27.05      $26.50
                   
Tangible equity to tangible assets excluding other comprehensive loss*     8.88%     8.44%     8.11%
Tangible book value per share excluding other comprehensive loss*      $30.29      $27.72      $26.99

*Excludes other comprehensive loss of $75.0 million for the quarter ended September 30, 2022, $12.4 million for the quarter ended December 31, 2021, and $9.0 million for the quarter ended September 30, 2021.

    As of
    September 30,   December 31,   September 30,
    2022   2021   2021
Regulatory Capital – Holding Company                        
Tier I leverage    $540,464   8.70%    $508,231   8.29%    $501,188   8.56%
Tier I capital to risk-weighted assets    540,464   10.86    508,231   10.62    501,188   10.97
Common equity tier I capital ratio
   to risk-weighted assets
   540,440   10.86    508,207   10.62    501,159   10.97
Tier I & II capital to risk-weighted assets    733,988   14.74    700,790   14.64    691,044   15.12
                         
Regulatory Capital – Bank                        
Tier I leverage (E)    $670,717   10.79%    $612,762   9.99%    $594,610   10.15%
Tier I capital to risk-weighted assets (F)    670,717   13.48    612,762   12.80    594,610   13.01
Common equity tier I capital ratio
   to risk-weighted assets (G)
   670,693   13.48    612,738   12.80    594,581   13.01
Tier I & II capital to risk-weighted assets (H)    731,325   14.69    672,614   14.05    651,841   14.26

(A) Equity to total assets is calculated as total shareholders’ equity as a percentage of total assets at quarter 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 quarter end is calculated by dividing tangible equity by tangible assets at quarter end.  See Non-GAAP financial measures reconciliation included in these tables.
(C) Book value per common share is calculated by dividing shareholders’ equity by quarter 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 quarter end common shares outstanding.  See Non-GAAP financial measures reconciliation tables.
(E) Regulatory well capitalized standard = 5.00% ($311 million)
(F) Regulatory well capitalized standard = 8.00% ($398 million)
(G) Regulatory well capitalized standard = 6.50% ($324 million)
(H) Regulatory well capitalized standard = 10.00% ($498 million)

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

    For the Quarters Ended
    Sept 30,   June 30,   March 31,   Dec 31,   Sept 30,
    2022   2022   2022   2021   2021
Residential loans retained    $17,885    $35,172    $41,547    $22,953    $36,845
Residential loans sold    4,898    9,886    15,669    20,694    24,041
Total residential loans    22,783    45,058    57,216    43,647    60,886
Commercial real estate    7,320    13,960    25,575    16,134    14,944
Multifamily    4,000    74,564    265,650    162,740    120,716
Commercial (C&I) loans/leases (A) (B)    251,249    332,801    143,029    341,886    143,121
SBA    5,682    10,534    26,093    27,630    11,570
Wealth lines of credit (A)    4,450    12,575    9,400    7,500    10,020
Total commercial loans    272,701    444,434    469,747    555,890    300,371
Installment loans    1,253    100    131    94    178
Home equity lines of credit (A)    5,614    3,897    1,341    5,359    2,535
Total loans closed    $302,351    $493,489    $528,435    $604,990    $363,970
                     


    For the Nine Months Ended
    Sept 30,   Sept 30,
    2022   2021
Residential loans retained    $94,604    $89,742
Residential loans sold    30,453    95,346
Total residential loans    125,057    185,088
Commercial real estate    46,855    65,550
Multifamily    344,214    461,545
Commercial (C&I) loans (A) (B)    727,079    413,547
SBA (C)    42,309    86,276
Wealth lines of credit (A)    26,425    15,695
Total commercial loans    1,186,882    1,042,613
Installment loans    1,484    266
Home equity lines of credit (A)    10,852    8,574
Total loans closed    $1,324,275    $1,236,541
         

(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 $56 million for the nine months ended September 30, 2021.



PEAPACK-GLADSTONE FINANCIAL CORPORATION
AVERAGE BALANCE SHEET
(Tax-Equivalent Basis, Dollars in Thousands)
(Unaudited)

    For the Three Months Ended
    September 30, 2022   September 30, 2021
    Average   Income/       Average   Income/    
    Balance   Expense   Yield   Balance   Expense   Yield
ASSETS:                        
Interest-earning assets:                        
Investments:                        
Taxable (A)    $754,180    $2,853   1.51%    $820,574    $2,824   1.38%
Tax-exempt (A) (B)    3,226    30    3.72    6,035    64    4.24
                         
Loans (B) (C):                        
Mortgages    513,864    3,861    3.01    503,621    3,779    3.00
Commercial mortgages    2,510,616    23,121    3.68    2,133,259    16,114    3.02
Commercial    2,016,590    23,362    4.63    1,826,368    16,553    3.63
Commercial construction    12,073    143    4.74     24,596     198     3.22
Installment    38,338    399    4.16    32,219    245    3.04
Home equity    36,706    451    4.91    43,182    357    3.31
Other    263    7    10.65    252    5    7.94
Total loans    5,128,450    51,344    4.00    4,563,497    37,251    3.27
Federal funds sold    —    —    —    —    —    —
Interest-earning deposits    232,158    1,162    2.00    413,623    142    0.14
Total interest-earning assets     6,118,014     55,389   3.62%     5,803,729     40,281   2.78%
Noninterest-earning assets:                        
Cash and due from banks    8,296            8,592        
Allowance for credit losses    (59,464)            (64,100)        
Premises and equipment    23,580            23,311        
Other assets    97,583            201,287        
Total noninterest-earning assets    69,995            169,090        
Total assets    $6,188,009            $5,972,819        
                         
LIABILITIES:                        
Interest-bearing deposits:                        
Checking    $2,408,206    $5,127   0.85%    $2,098,827    $1,177   0.22%
Money markets    1,237,975    1,557    0.50    1,257,760    683    0.22
Savings    168,281    5    0.01    152,759    20    0.05
Certificates of deposit – retail    391,340    791    0.81    461,917    836    0.72
Subtotal interest-bearing deposits    4,205,802    7,480    0.71    3,971,263    2,716    0.27
Interest-bearing demand – brokered    85,000    345    1.62    85,000    385    1.81
Certificates of deposit – brokered    25,968    210    3.23    33,796    266    3.15
Total interest-bearing deposits    4,316,770    8,035    0.74    4,090,059    3,367    0.33
Borrowings    3,810    29    3.04    64,332    57    0.35
Capital lease obligation    5,106    61    4.78    6,147    74    4.82
Subordinated debt    132,874    1,363    4.10    132,588    1,358    4.10
Total interest-bearing liabilities    4,458,560    9,488   0.85%    4,293,126    4,856   0.45%
Noninterest-bearing liabilities:                        
Demand deposits    1,116,843            997,450        
Accrued expenses and other liabilities    83,446            137,387        
Total noninterest-bearing liabilities    1,200,289            1,134,837        
Shareholders’ equity    529,160            544,856        
Total liabilities and shareholders’ equity    $6,188,009            $5,972,819        
Net interest income        $45,901            $35,425    
Net interest spread           2.77%           2.33%
Net interest margin (D)           2.98%           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
(Tax-Equivalent Basis, Dollars in Thousands)
(Unaudited)

    For the Three Months Ended
    September 30, 2022   June 30, 2022
    Average   Income/       Average   Income/    
    Balance   Expense   Yield   Balance   Expense   Yield
ASSETS:                        
Interest-earning assets:                        
Investments:                        
Taxable (A)    $754,180    $2,853   1.51%    $774,145    $3,535   1.83%
Tax-exempt (A) (B)     3,226     30     3.72     4,193     40     3.82
                         
Loans (B) (C):                        
Mortgages     513,864     3,861     3.01     513,666     3,630     2.83
Commercial mortgages     2,510,616     23,121     3.68     2,552,128     21,185     3.32
Commercial     2,016,590     23,362     4.63     2,024,457     19,348     3.82
Commercial construction     12,073     143     4.74     16,186     162     4.00
Installment     38,338     399     4.16     37,235     297     3.19
Home equity     36,706     451     4.91     38,061     331     3.48
Other     263     7     10.65     258     6     9.30
Total loans     5,128,450     51,344     4.00     5,181,991     44,959     3.47
Federal funds sold     —     —     —     —     —     —
Interest-earning deposits     232,158     1,162    2.00     164,066     314    0.77
Total interest-earning assets     6,118,014     55,389   3.62%     6,124,395     48,848   3.19%
Noninterest-earning assets:                        
Cash and due from banks     8,296             9,715        
Allowance for credit losses     (59,464)             (59,629)        
Premises and equipment     23,580             22,952        
Other assets     97,583             96,232        
Total noninterest-earning assets     69,995             69,270        
Total assets    $6,188,009            $6,193,665        
                         
LIABILITIES:                        
Interest-bearing deposits:                        
Checking    $2,408,206    $5,127   0.85%    $2,493,668    $2,330   0.37%
Money markets    1,237,975    1,557    0.50    1,234,564    579    0.19
Savings    168,281    5    0.01    163,062    5    0.01
Certificates of deposit – retail    391,340    791    0.81    411,202    651    0.63
Subtotal interest-bearing deposits    4,205,802    7,480    0.71    4,302,496    3,565    0.33
Interest-bearing demand – brokered    85,000    345    1.62    85,000    364    1.71
Certificates of deposit – brokered    25,968    210    3.23    33,470    261    3.12
Total interest-bearing deposits    4,316,770    8,035    0.74    4,420,966    4,190    0.38
Borrowings    3,810    29    3.04    3,873    10    1.03
Capital lease obligation    5,106    61    4.78    5,406    64    4.74
Subordinated debt    132,874    1,363    4.10    132,803    1,363    4.11
Total interest-bearing liabilities    4,458,560    9,488   0.85%    4,563,048    5,627   0.49%
Noninterest-bearing liabilities:                        
Demand deposits    1,116,843            1,029,538        
Accrued expenses and other liabilities    83,446            79,882        
Total noninterest-bearing liabilities    1,200,289            1,109,420        
Shareholders’ equity    529,160            521,197        
Total liabilities and shareholders’ equity    $6,188,009            $6,193,665        
Net interest income        $45,901            $43,221    
Net interest spread           2.77%           2.70%
Net interest margin (D)           2.98%           2.83%
                         

(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
(Tax-Equivalent Basis, Dollars in Thousands)
(Unaudited)

    For the Nine Months Ended
    September 30, 2022   September 30, 2021
    Average   Income/       Average   Income/    
    Balance   Expense   Yield   Balance   Expense   Yield
ASSETS:                        
Interest-earning assets:                        
Investments:                        
Taxable (A)    $818,411    $9,995   1.63%    $822,262    $8,473   1.37%
Tax-exempt (A) (B)     4,035     117    3.87     6,961     243    4.65
                         
Loans (B) (C):                        
Mortgages     511,999     11,148    2.90     501,276     11,559    3.07
Commercial mortgages     2,472,503     62,481    3.37     1,972,723     45,590    3.08
Commercial     2,016,533     60,911    4.03     1,900,231     49,992    3.51
Commercial construction     15,427     465    4.02     20,418     516    3.37
Installment     36,697     951    3.46     34,724     777    2.98
Home equity     38,324     1,106    3.85     45,672     1,133    3.31
Other     268     18    8.96     239     15    8.37
Total loans     5,091,751     137,080    3.59     4,475,283     109,582    3.26
Federal funds sold     —     —     —     64     —    0.13
Interest-earning deposits     174,833     1,505    1.15     465,287     367    0.11
Total interest-earning assets     6,089,030     148,697   3.26%     5,769,857     118,665   2.74%
Noninterest-earning assets:                        
Cash and due from banks     8,491             10,018        
Allowance for credit losses     (60,026)             (67,592)        
Premises and equipment     23,187             23,087        
Other assets     119,908             203,344        
Total noninterest-earning assets     91,560             168,857        
Total assets    $6,180,590            $5,938,714        
                         
LIABILITIES:                        
Interest-bearing deposits:                        
Checking    $2,411,023    $8,695   0.48%    $1,996,663    $3,099   0.21%
Money markets    1,255,341    2,675    0.28    1,250,933    2,204    0.23
Savings    162,675    15    0.01    140,066    55    0.05
Certificates of deposit – retail    409,442    2,048    0.67    494,255    3,333    0.90
Subtotal interest-bearing deposits    4,238,481    13,433    0.42    3,881,917    8,691    0.30
Interest-bearing demand – brokered    85,000    1,082    1.70    100,110    1,334    1.78
Certificates of deposit – brokered    31,058    732    3.14    33,783    791    3.12
Total interest-bearing deposits    4,354,539    15,247    0.47    4,015,810    10,816    0.36
Borrowings    20,876    103    0.66    138,448    448    0.43
Capital lease obligation    5,389    193    4.78    6,376    229    4.79
Subordinated debt    132,803    4,090    4.11    165,053    5,650    4.56
Total interest-bearing liabilities    4,513,607    19,633   0.58%    4,325,687    17,143   0.53%
Noninterest-bearing liabilities:                        
Demand deposits    1,042,064            932,088        
Accrued expenses and other liabilities    93,462            143,045        
Total noninterest-bearing liabilities    1,135,526            1,075,133        
Shareholders’ equity    531,457            533,894        
Total liabilities and shareholders’ equity    $6,180,590            $5,934,714        
Net interest income        $129,064            $101,522    
Net interest spread           2.68%           2.21%
Net interest margin (D)           2.83%           2.35%
                         

(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.

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
    Sept 30,   June 30,   March 31,   Dec 31,   Sept 30,
Tangible Book Value Per Share   2022   2022   2022   2021   2021
Shareholders’ equity    $515,514    $520,324    $523,426    $546,388    $543,014
Less:  Intangible assets, net    47,698    48,082    48,471    48,902    49,333
Tangible equity    $467,816    $472,242    $474,955    $497,486    $493,681
Less: other comprehensive loss    (74,983)    (58,727)    (40,938)    (12,374)    (9,035)
Tangible equity excluding other comprehensive loss    $542,799    $530,969    $515,893    $509,860    $502,716
                     
Period end shares outstanding    17,920,571    18,190,009    18,370,312    18,393,888    18,627,910
Tangible book value per share    $26.10    $25.96    $25.85    $27.05    $26.50
Tangible book value per share excluding other comprehensive loss    $30.29    $29.19    $28.08    $27.72    $26.99
Book value per share    28.77    28.60    28.49    29.70    29.15
                     
Tangible Equity to Tangible Assets                    
Total assets    $6,087,261    $6,151,167    $6,255,664    $6,077,993    $6,240,285
Less: Intangible assets, net    47,698    48,082    48,471    48,902    49,333
Tangible assets    $6,039,563    $6,103,085    $6,207,193    $6,029,091    $6,190,952
Less: other comprehensive loss    (74,983)    (58,727)    (40,938)    (12,374)    (9,035)
Tangible assets excluding other comprehensive loss    $6,114,546    $6,161,812    $6,248,131    $6,041,465    $6,199,987
                     
Tangible equity to tangible assets   7.75%   7.74%   7.65%   8.25%   7.97%
Tangible equity to tangible assets excluding other comprehensive loss   8.88%   8.62%   8.26%   8.44%   8.11%
Equity to assets   8.47%   8.46%   8.37%   8.99%   8.70%
                     


    Three Months Ended
    Sept 30,   June 30,   March 31,   Dec 31,   Sept 30,
Return on Average Tangible Equity   2022   2022   2022   2021   2021
Net income    $20,126    $20,100    $13,441    $14,855    $14,171
                     
Average shareholders’ equity    $529,160    $521,197    $544,179    $543,035    $544,856
Less:  Average intangible assets, net    47,922    48,291    48,717    49,151    48,757
Average tangible equity    $481,238    $472,906    $495,462    $493,884    $496,099
                     
Return on average tangible common equity    16.73%   17.00%   10.85%   12.03%   11.43%
                     


    For the Nine Months Ended
    Sept 30,   Sept 30,
Return on Average Tangible Equity   2022   2021
Net income    $53,667    $41,767
         
Average shareholders’ equity    $531,457    $533,894
Less:  Average intangible assets, net    48,307    45,306
Average tangible equity    483,150    488,588
         
Return on average tangible common equity    14.81%   11.40%
         


    Three Months Ended
    Sept 30,   June 30,   March 31,   Dec 31,   Sept 30,
Efficiency Ratio   2022   2022   2022   2021   2021
Net interest income    $45,525    $42,893    $39,622    $37,212    $35,211
Total other income    16,383    18,508    14,714    18,964    17,781
Add:                    
   Fair value adjustment for CRA equity security    571    475    682    139    70
Less:                    
   Loss/(gain) on loans held for sale                    
   at lower of cost or fair value    —    —    —    265    —
   Loss on securities sale, net    —    —    6,609    —    —
Total recurring revenue    62,479    61,876    61,627    56,580    53,062
                     
Operating expenses    33,560    32,659    34,169    31,704    32,185
Less:                     
   Swap valuation allowance    —    —    673    893    1,350
   Severance expense    —    —    1,476    —    —
Total operating expense    33,560    32,659    32,020    30,811    30,835
                     
Efficiency ratio   53.71%   52.78%   51.96%   54.46%   58.11%
                     


    For the Nine Months Ended
    Sept 30,   Sept 30,
Efficiency Ratio   2022   2021
Net interest income    $128,040    $100,849
Total other income    49,605    53,279
Add:        
   Fair value adjustment for CRA equity security    1,728    293
Less:        
   Loss on swap termination    —    842
   Income from life insurance proceeds    —    (455)
   Loss/(gain) on loans held for sale        
   at lower of cost or fair value    —    (1,407)
   Loss on securities sale, net    6,609    —
Total recurring revenue    185,982    153,401
         
Operating expenses    100,388    94,463
Less:        
   Write-off of subordinated debt costs    —    648
   Swap valuation allowance    673    1,350
   Severance expense    1,476    1,532
Total operating expense    98,239    90,933
         
Efficiency ratio   52.82%   59.28%
         








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Source: Peapack-Gladstone Financial Corporation