Peapack Gladstone Bank

News Details

Peapack-Gladstone Financial Corporation Reports Second Quarter Results

Company Release - 7/25/2023

BEDMINSTER, NJ, July 25, 2023 (GLOBE NEWSWIRE) -- via NewMediaWire - Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) announces its second quarter 2023 results.

This earnings release should be read in conjunction with the Company’s Q2 2023 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 $57.5 million, net income of $13.1 million and diluted earnings per share (“EPS”) of $0.73 for the quarter ended June 30, 2023, compared to revenue of $61.4 million, net income of $20.1 million and diluted EPS of $1.08 for the three months ended June 30, 2022.

The Company’s return on average assets was 0.82%, return on average equity was 9.43%, and return on average tangible equity was 10.30%, each for the quarter ended June 30, 2023. Loans grew by $70 million to $5.4 billion while deposits declined by $110 million to $5.2 billion during the second quarter. Deposits have declined minimally on a year-to-date basis by $7 million.

The Company’s liquidity position remains strong as balance sheet liquidity (investments available for sale, interest-earning deposits and cash) was $761 million as of June 30, 2023 which is 11.74% of total assets. The Company also has $2.8 billion of external borrowing capacity, when combined with balance sheet liquidity provides us with 283% coverage of our uninsured deposits. Approximately 76% of our deposits are presently covered by FDIC insurance or are fully collateralized.

Douglas L. Kennedy, President and CEO said, “Our second quarter results were disappointing, but reflect the challenging nature of the current interest rate environment and the persistent inversion of the treasury yield curve. These conditions have resulted in compression of our net interest margin for a second consecutive quarter and a reduction in net interest income. The margin compression was primarily driven by an increase in our cost of funds during the first six months of 2023, as wealth and commercial clients moved funds from noninterest-bearing accounts to higher-yielding deposit products and other alternative investments. During these difficult times we are fortunate to be able to rely on a stable stream of wealth-related and other noninterest income, which represented 32% of revenue during the second quarter."

The Company recently announced its plan to expand into New York City. An application has been filed with regulatory agencies to open a location in mid-town Manhattan. The Company has hired and continues to actively recruit from the tri-state area to build a team of experienced financial service professionals to gain entry into this lucrative market.

Mr. Kennedy noted, “With the recent changes to the New York City banking landscape and the void left by the failure of larger, niche financial institutions, we believe the current environment has created an unprecedented opportunity to introduce our brand of private banking to this market. We have the right client-centric culture to take advantage of this rare sequence of events and seize this opportunity. We recently announced that Jeanne Scungio has joined our team as the Market President of New York City. Jeanne has spent the past 20 years as a Senior Leader at First Republic Bank. Under her leadership we expect to build a formidable presence in Manhattan."

The following are select highlights for the period ended June 30, 2023:

Peapack Private Wealth Management:

  • AUM/AUA in our Peapack Private Wealth Management Division totaled $10.7 billion at June 30, 2023, an increase of 4% (14% annualized) over March 31, 2023.
  • Gross new business inflows for Q2 2023 totaled $274 million ($214 million managed). For the first six months of 2023, gross business inflows totaled $528 million ($451 million managed). Managed gross inflows are on a record annualized pace for our Company.
  • Wealth Management fee income of $14.3 million for Q2 2023 comprised 25% of total revenue for the quarter.

Commercial Banking and Balance Sheet Management:

  • The net interest margin ("NIM") was 2.49% in Q2 2023, a decline of 39 basis points compared to Q1 2023 and a decline of 34 basis points when compared to Q2 2022.
  • Total deposits declined $7 million to $5.2 billion from December 31, 2022.
  • Noninterest-bearing demand deposits have declined by $222 million since December 31, 2022, but still comprised 20% of total deposits as of June 30, 2023.
  • Core deposits (which includes noninterest-bearing demand and interest-bearing demand, savings and money market accounts) totaled 91% of total deposits at June 30, 2023.
  • Total loans were $5.4 billion at June 30, 2023 reflecting growth of $148 million when compared to $5.3 billion at December 31, 2022.
  • Commercial & industrial lending (“C&I”) loan/lease balances comprised 42% of the total loan portfolio at June 30, 2023.
  • Fee income on unused commercial lines of credit totaled $809,000 for Q2 2023.

Capital Management:

  • During the quarter, the Company repurchased 184,000 shares of Company stock for a total cost of $4.7 million. The Company repurchased 930,977 shares of stock for a total cost of $32.7 million during the year ended December 31, 2022.
  • At June 30, 2023, the Regulatory Tier 1 Leverage Ratio stood at 10.80% for Peapack-Gladstone Bank (the "Bank") and 9.06% for the Company. The Regulatory Common Equity Tier 1 Ratio (to Risk-Weighted Assets) stood at 13.68% for the Bank and 11.47% for the Company. These ratios are significantly above well capitalized standards, as capital has benefitted from strong net income generation.

Non-Core Items:

The June 2023 quarter included the following items, which management believes are non-core items:

  • $209,000 negative fair value adjustment on an equity security held for CRA investment.
  • $1.7 million of expense associated with the recent retirement of certain employees.
  • $318,000 of an income tax benefit for a tax reversal.
  • These items decreased total revenue by $209,000, reduced net income by $1.5 million and EPS by $0.08 for the June 2023 quarter.

SUMMARY INCOME STATEMENT DETAILS:

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

June 2023 Year Compared to Prior Year

    Six Months Ended     Six Months Ended                
    June 30,     June 30,       Increase/  
(Dollars in millions, except per share data)   2023     2022       (Decrease)  
Net interest income   $ 82.90     $ 82.51       $ 0.39       0 %
Wealth management fee income     28.01       28.72         (0.71 )     (2 )
Capital markets activity (A)     1.83       7.51         (5.68 )     (76 )
Other income (B)     6.80       (3.01 )       9.81     N/A  
Total other income     36.64       33.22         3.42       10  
Operating expenses (C)     73.27       66.83         6.44       10  
Pretax income before provision for credit losses     46.27       48.90         (2.63 )     (5 )
Provision for credit losses     3.21       3.82         (0.61 )     (16 )
Pretax income     43.06       45.08         (2.02 )     (4 )
Income tax expense (D)     11.56       11.54         0.02       0  
Net income   $ 31.50     $ 33.54       $ (2.04 )     (6 )%
Diluted EPS   $ 1.74     $ 1.79       $ (0.05 )     (3 )%
                           
Total Revenue (E)   $ 119.54     $ 115.73       $ 3.81       3 %
                           
Return on average assets     0.99 %     1.09 %       (0.10 )      
Return on average equity     11.44 %     12.59 %       (1.15 )      

(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 six months ended June 30, 2022 included a $6.6 million loss on sale of securities. and a fair value adjustment on a CRA equity security of negative $1.2 million.
(C) The six months ended June 2023 included one-time charges of $2.0 million related to the recent retirement of certain employees and $175,000 of expense associated with three retail branch closures. The six months ended June 30, 2022 included $1.5 million of severance expense related to certain staff reorganizations.
(D) Income tax expense for the six months ended June 30, 2023 included a $318,000 tax benefit for the reversal of the New Jersey surtax, which is set to expire on December 31, 2023.
(E) Total revenue equals the sum of net interest income plus total other income.

June 2023 Quarter Compared to Prior Year Quarter

    Three Months Ended       Three Months Ended              
    June 30,       June 30,     Increase/  
(Dollars in millions, except per share data)   2023       2022     (Decrease)  
Net interest income   $ 38.92       $ 42.89     $ (3.97 )     (9 )%
Wealth management fee income     14.25         13.89       0.36       3  
Capital markets activity (A)     0.87         2.86       (1.99 )     (70 )
Other income (B)     3.46         1.76       1.70       97  
Total other income     18.58         18.51       0.07       0  
Operating expenses (C)     37.69         32.66       5.03       15  
Pretax income before provision for credit losses     19.81         28.74       (8.93 )     (31 )
Provision for credit losses     1.70         1.45       0.25       17  
Pretax income     18.11         27.29       (9.18 )     (34 )
Income tax expense (D)     4.96         7.19       (2.23 )     (31 )
Net income   $ 13.15       $ 20.10     $ (6.95 )     (35 )%
Diluted EPS   $ 0.73       $ 1.08     $ (0.35 )     (32 )%
                           
Total Revenue (E)   $ 57.50       $ 61.40     $ (3.90 )     (6 )%
                           
Return on average assets annualized     0.82 %       1.30 %     (0.48 )      
Return on average equity annualized     9.43 %       15.43 %     (6.00 )      

(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 June 2023 and 2022 quarters included a fair value adjustment on a CRA equity security of negative $209,000 and negative $475,000, respectively.
(C) The June 2023 quarter included one-time charges of $1.7 million associated with the recent retirement of certain employees.
(D) Income tax expense for quarter ended June 30, 2023 included a $318,000 tax benefit for the reversal of the New Jersey surtax, which is set to expire on December 31, 2023.
(E) Total revenue equals the sum of net interest income plus total other income.

June 2023 Quarter Compared to Linked Quarter

    Three Months Ended     Three Months Ended                
    June 30,     March 31,       Increase/  
(Dollars in millions, except per share data)   2023     2023       (Decrease)  
Net interest income   $ 38.92     $ 43.98       $ (5.06 )     (12 )%
Wealth management fee income     14.25       13.76         0.49       4  
Capital markets activity (A)     0.87       0.97         (0.10 )     (10 )
Other income     3.46       3.33         0.13       4  
Total other income     18.58       18.06         0.52       3  
Operating expenses (B)     37.69       35.57         2.12       6  
Pretax income before provision for credit losses     19.81       26.47         (6.66 )     (25 )
Provision for credit losses     1.70       1.51         0.19       13  
Pretax income     18.11       24.96         (6.85 )     (27 )
Income tax expense (C)     4.96       6.60         (1.64 )     (25 )
Net income   $ 13.15     $ 18.36       $ (5.21 )     (28 )%
Diluted EPS   $ 0.73     $ 1.01       $ (0.28 )     (28 )%
                           
Total Revenue (D)   $ 57.50     $ 62.04       $ (4.54 )     (7 )%
                           
Return on average assets annualized     0.82 %     1.16 %       (0.34 )      
Return on average equity annualized     9.43 %     13.50 %       (4.07 )      

(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) The June 2023 quarter included one-time charges of $1.7 million associated with the recent retirement of certain employees while the March 2023 quarter included $300,000 of expense related to accelerated vesting of restricted stock related to one executive and $175,000 of expense associated with three retail branch closures.
(C) The three months ended June 30, 2023 included a $318,000 tax benefit for the reversal of the New Jersey surtax, which is set to expire on December 31, 2023.
(D) Total revenue equals the sum of net interest income plus total other income.

SUPPLEMENTAL QUARTERLY DETAILS :

Peapack Private Wealth Management

AUM/AUA in the Bank’s Peapack Private Wealth Management (“PPWM”) Division increased to $10.7 billion at June 30, 2023. For the June 2023 quarter, PPWM generated $14.3 million in fee income, compared to $13.8 million for the March 31, 2023 quarter and $13.9 million for the June 2022 quarter. The equity market generally improved during Q2 2023, contributing to the growth in AUM/AUA.

John Babcock, President of Peapack Private Wealth Management noted, “In Q2 2023, total new accounts and client additions amounted to $274 million ($214 million managed), and net flows were positive. As we look ahead in 2023, our new business pipeline is healthy and we remain focused on delivering excellent service and advice to our clients. Our highly skilled wealth management professionals, our fiduciary powers and expertise, our financial planning capabilities and our high-touch client service model distinguishes PPWM in our market and continues to drive our growth and success.”

Loans / Commercial Banking

Total loans grew $148 million or 3% (6% annualized) to $5.4 billion at June 30, 2023 when compared to $5.3 billion at December 31, 2022.

Total C&I loans and leases at June 30, 2023 were $2.3 billion or 42% 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 compared to recent prior years. We began tightening our underwriting in anticipation of a potential economic downturn in early 2022 and have continued this practice in 2023. Given the current environment, we believe we will achieve modest loan growth in 2023.”

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 overall strategy.”

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

The Company’s NII of $38.9 million and NIM of 2.49% for Q2 2023 decreased $5.1 million and 39 basis points from NII of $44.0 million and NIM of 2.88%, for the linked quarter (Q1 2023) and decreased $4.0 million and 34 basis points from NII of $42.9 million and NIM of 2.83% for the prior year quarter (Q2 2022). When comparing Q2 2023 to the linked and prior year quarter the Company has seen a rapid increase in interest expense mostly driven by higher deposit rates during 2023. Cycle to date betas are approximately 41%, which is consistent with results across the financial services industry. The intense competition for deposit balances was the primary driver for increased costs.

Funding / Liquidity / Interest Rate Risk Management

Total deposits decreased $6.7 million to $5.2 billion at June 30, 2023. The Company saw limited net deposit outflows during first half of 2023 with most outflow activity related to larger deposit relationships utilizing their funds for normal business purposes such as deployment of excess liquidity into the equity or treasury markets, asset acquisitions or further investments into their businesses, and tax payments. The Company has also seen clients transitioning money into interest-bearing deposit accounts from noninterest-bearing deposit accounts as a result of the rapid increases in the Fed Funds rate.

Mr. Kennedy noted, "Although we did see minimal outflows associated with clients concerned about deposit insurance, our team actively engaged with many of our deposit customers during the first half of 2023 to discuss any concerns and provide assurance regarding the safety and soundness of our institution. Additionally, we migrated $344 million of uninsured deposits this year into fully-insured FDIC products for those customers that desired that type of protection."

Mr. Kennedy also noted, “91% of our deposits are demand, savings, or money market accounts, and our noninterest bearing deposits comprise 20% of our total deposits. 85% of deposits are held by clients with relationships greater than three years old and 66% of deposits are held by clients with relationships greater than five years old. These metrics reflect the core nature of the majority of our deposit base.”

At June 30, 2023, the Company’s balance sheet liquidity (investments available for sale, interest-earning deposits and cash) totaled $761 million (or 12% of assets).

The Company maintains additional liquidity resources of approximately $2.8 billion through secured available funding with the Federal Home Loan Bank and 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. In addition, the Company also has access to the Bank Term Funding Program offered by the Federal Reserve Bank if needed.

The Company's total on and off-balance sheet liquidity totaled $3.6 billion, which is 283% of the total uninsured deposits on the Company's balance sheet.

Income from Capital Markets Activities

Noninterest income from Capital Markets activities (detailed below) totaled $868,000 for the June 2023 quarter compared to $966,000 for the March 2023 quarter and $2.9 million for the June 2022 quarter.

    Three Months Ended     Three Months Ended     Three Months Ended  
    June 30,     March 31,     June 30,  
(Dollars in thousands, except per share data)   2023     2023     2022  
Gain on loans held for sale at fair value (Mortgage banking)   $ 15     $ 21     $ 151  
Fee income related to loan level, back-to-back swaps                  
Gain on sale of SBA loans     838       865       2,675  
Corporate advisory fee income     15       80       33  
Total capital markets activity   $ 868     $ 966     $ 2,859  

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

Other noninterest income was $3.5 million for Q2 2023 compared to $3.3 million for Q1 2023 and $1.8 million for Q2 2022. Q2 2023 included $809,000 of unused line fees compared to $852,000 for Q1 2023 and $529,000 for Q2 2022. Additionally, Q2 2023 included $221,000 of income recorded by the Equipment Finance Division related to equipment transfers to lessees while Q1 2023 included $145,000. The gain on sale of SBA loans for the first and second quarters of 2023 have been impacted by market volatility resulting in lower sale premiums and origination volumes.

Operating Expenses

The Company’s total operating expenses were $37.7 million for the second quarter of 2023, compared to $35.6 million for the March 2023 quarter and $32.7 million for the June 2022 quarter. The June 2023 quarter included $1.7 million of expense associated with the recent retirement of certain employees. The March 2023 quarter included $300,000 of restricted stock expense associated with an executive retiring and $175,000 of expense associated with the closure of three retail branch locations. The June 2023 quarter also included increases associated with compensation related to the addition of full-time equivalent employees, which grew to 520 at June 30, 2023 compared to 512 at March 31, 2023 and 472 at June 30, 2022, as well as normal annual merit increases.

Mr. Kennedy noted, “The Company is committed to be in a position of strength when industry headwinds recede as evident by the recent announcement of its intention to expand into New York City and the opening of a retail bank location in mid-town Manhattan. We will manage expenses closely and prudently, but will continue to invest to retain talent. We will also grow and expand our core wealth management and commercial banking businesses, including strategic hires and lift-outs if opportunities arise, and invest in digital and other enhancements to further enhance the client experience.”

Income Taxes

The effective tax rate for the three months ended June 30, 2023 was 27.4%, as compared to 26.4% for the March 2023 quarter and 26.4% for the quarter ended June 30, 2022. The June 30, 2023 quarter benefitted from a $318,000 reversal of a previously recorded New Jersey surtax. The March 31, 2023 quarter benefitted from the vesting of restricted stock at prices higher than grant prices.

Asset Quality / Provision for Credit Losses

Nonperforming assets (which does not include modified loans that are performing in accordance with their terms) were $34.5 million, or 0.53% of total assets at June 30, 2023, as compared to $28.8 million, or 0.44% of total assets at March 31, 2023. The increase during the second quarter was primarily due to one multifamily relationship totaling $7.6 million that transferred to a nonaccrual status during the quarter. Loans past due 30 to 89 days and still accruing were $14.5 million, or 0.27% of total loans.

Criticized and classified loans totaled $112.3 million at June 30, 2023, reflecting an increase from March 31, 2023 and a decline from June 30, 2022 levels. The Company currently has no loans or leases on deferral and accruing.

For the quarter ended June 30, 2023, the Company’s provision for credit losses was $1.7 million compared to $1.5 million for the March 2023 quarter and $646,000 for the June 2022 quarter. The provision for credit losses in the June 2023 quarter was driven by loan growth, in addition to Allowance for Credit Losses ("ACL") to individually evaluated loans related to one loan totaling $7.6 million that was transferred to nonaccrual status.

At June 30, 2023, the allowance for credit losses was $62.7 million (1.15% of total loans), compared to $62.3 million (1.16% of loans) at March 31, 2023, and $59.0 million (1.14% of loans) at June 30, 2022.

Capital

The Company’s capital position during the June 2023 quarter increased as a result of net income of $13.1 million, which was partially offset by the repurchase of 184,000 shares of common stock through the Company’s stock repurchase program at a total cost of $4.7 million and the quarterly cash dividend of $890,000. Additionally, during the second quarter of 2023 the Company recorded a net loss in accumulated other comprehensive income of $522,000 ($3.8 million loss related to the available for sale portfolio partially offset by a $3.2 million gain on cash flow hedges) increasing the total accumulated other comprehensive loss amount to $68.0 million as of June 30, 2023 ($76.0 million loss related to the available for sale portfolio partially offset by a $8.0 million gain on the cash flow hedges).

Tangible book value per share improved during Q2 2023 to $28.98 at June 30, 2023 from $28.20 at March 31, 2023. Tangible book value per share is a non-GAAP financial measure. See the reconciliation tables included in this release. The Company’s and Bank’s regulatory capital ratios as of June 30, 2023 remain strong, and generally reflect increases from March 31, 2023 and June 30, 2022 levels. Where applicable, such ratios remain well above regulatory well capitalized standards.

The Company employs quarterly capital stress testing modelling an adverse case and severely adverse case. In the most recently completed stress test (as of March 31, 2023), 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 June 22, 2023, the Company declared a cash dividend of $0.05 per share payable on August 24, 2023 to shareholders of record on August 10, 2023.

ABOUT THE COMPANY

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $6.5 billion and assets under management/administration of $10.7 billion as of June 30, 2023. 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 2023 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, including potential recessionary conditions;
  • 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 credit losses or in the level of delinquent, nonperforming, classified and criticized loans;
  • inflation and changes in interest rates, which may adversely impact our 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, including our expansion into New York City;
  • a reduction in our lower-cost funding sources;
  • changes in liquidity, including the size and composition of our deposit portfolio, including the percentage of uninsured deposits in the portfolio;
  • 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 governmental regulation, including, but not limited to, any increase in FDIC insurance premiums and changes in the monetary policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System;
  • 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, 2022. 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:

Frank A. Cavallaro, SEVP and CFO

Peapack-Gladstone Financial Corporation

T: 908-306-8933

(Tables to follow)

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

    For the Three Months Ended  
    June 30,     March 31,     Dec 31,     Sept 30,     June 30,  
    2023     2023     2022     2022     2022  
Income Statement Data:                              
Interest income   $ 74,852     $ 70,491     $ 64,202     $ 55,013     $ 48,520  
Interest expense     35,931       26,513       16,162       9,488       5,627  
Net interest income     38,921       43,978       48,040       45,525       42,893  
Wealth management fee income     14,252       13,762       12,983       12,943       13,891  
Service charges and fees     1,320       1,258       1,150       1,060       1,063  
Bank owned life insurance     305       297       321       299       310  
Gain on loans held for sale at fair value
(Mortgage banking) (A)
    15       21       25       60       151  
Gain/(loss) on loans held for sale at lower of cost or
fair value
                             
Fee income related to loan level, back-to-back
swaps (A)
                293              
Gain on sale of SBA loans (A)     838       865       624       622       2,675  
Corporate advisory fee income (A)     15       80       8       102       33  
Other income     2,039       1,567       1,380       1,868       860  
Fair value adjustment for CRA equity security     (209 )     209       28       (571 )     (475 )
Total other income     18,575       18,059       16,812       16,383       18,508  
Salaries and employee benefits (B)     26,354       24,586       22,489       22,656       21,882  
Premises and equipment     4,729       4,374       4,898       4,534       4,640  
FDIC insurance expense     729       711       455       510       503  
Other expenses     5,880       5,903       5,570       5,860       5,634  
Total operating expenses     37,692       35,574       33,412       33,560       32,659  
Pretax income before provision for credit losses     19,804       26,463       31,440       28,348       28,742  
Provision for credit losses     1,696       1,513       1,930       599       1,449  
Income before income taxes     18,108       24,950       29,510       27,749       27,293  
Income tax expense (C)     4,963       6,595       8,931       7,623       7,193  
Net income   $ 13,145     $ 18,355     $ 20,579     $ 20,126     $ 20,100  
                               
Total revenue (D)   $ 57,496     $ 62,037     $ 64,852     $ 61,908     $ 61,401  
Per Common Share Data:                              
Earnings per share (basic)   $ 0.73     $ 1.03     $ 1.15     $ 1.11     $ 1.10  
Earnings per share (diluted)     0.73       1.01       1.12       1.09       1.08  
Weighted average number of common
shares outstanding:
                             
Basic     17,930,611       17,841,203       17,915,058       18,072,385       18,325,605  
Diluted     18,078,848       18,263,310       18,382,193       18,420,661       18,637,340  
Performance Ratios:                              
Return on average assets annualized (ROAA)     0.82 %     1.16 %     1.33 %     1.30 %     1.30 %
Return on average equity annualized (ROAE)     9.43 %     13.50 %     15.73 %     15.21 %     15.43 %
Return on average tangible common equity annualized (ROATCE) (E)     10.30 %     14.78 %     17.30 %     16.73 %     17.00 %
Net interest margin (tax-equivalent basis)     2.49 %     2.88 %     3.12 %     2.98 %     2.83 %
GAAP efficiency ratio (F)     65.56 %     57.34 %     51.52 %     54.21 %     53.19 %
Operating expenses / average assets annualized     2.36 %     2.26 %     2.15 %     2.17 %     2.11 %

(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) The June 2023 quarter included $1.7 million of expense associated with the recent retirement of certain employees.
(C) The three months ended December 31, 2022 included $750,000 income tax expense (net federal benefit) related to a recent New York City nexus determination change which included $563,000 from prior quarters.
(D) Total revenue equals the sum of net interest income plus total other income.
(E) 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.
(F) 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 Six Months Ended              
    June 30,     Change  
    2023     2022     $     %  
Income Statement Data:                        
Interest income   $ 145,343     $ 92,660     $ 52,683       57 %
Interest expense     62,444       10,145       52,299       516 %
Net interest income     82,899       82,515       384       0 %
Wealth management fee income     28,014       28,725       (711 )     -2 %
Service charges and fees     2,578       2,015       563       28 %
Bank owned life insurance     602       623       (21 )     -3 %
Gain on loans held for sale at fair value (Mortgage banking) (A)     36       398       (362 )     -91 %
Gain on loans held for sale at lower of cost or fair value                     N/A  
Fee income related to loan level, back-to-back swaps (A)                     N/A  
Gain on sale of SBA loans (A)     1,703       5,519       (3,816 )     -69 %
Corporate advisory fee income (A)     95       1,594       (1,499 )     -94 %
Other income     3,606       2,114       1,492       71 %
Loss on securities sale, net (B)           (6,609 )     6,609       -100 %
Fair value adjustment for CRA equity security           (1,157 )     1,157       -100 %
Total other income     36,634       33,222       3,412       10 %
Salaries and employee benefits (C)     50,940       44,331       6,609       15 %
Premises and equipment     9,103       9,287       (184 )     -2 %
FDIC insurance expense     1,440       974       466       48 %
Swap valuation allowance           673       (673 )     -100 %
Other expenses     11,783       11,563       220       2 %
Total operating expenses     73,266       66,828       6,438       10 %
Pretax income before provision for credit losses     46,267       48,909       (2,642 )     -5 %
Provision for credit losses     3,209       3,824       (615 )     -16 %
Income before income taxes     43,058       45,085       (2,027 )     -4 %
Income tax expense     11,558       11,544       14       0 %
Net income   $ 31,500     $ 33,541     $ (2,041 )     -6 %
                         
Total revenue (D)   $ 119,533     $ 115,737     $ 3,796       3 %
Per Common Share Data:                        
Earnings per share (basic)   $ 1.76     $ 1.83     $ (0.07 )     -4 %
Earnings per share (diluted)     1.74       1.79       (0.05 )     -3 %
Weighted average number of common shares outstanding:                        
Basic     17,886,154       18,332,272       (446,118 )     -2 %
Diluted     18,153,267       18,782,559       (629,292 )     -3 %
Performance Ratios:                        
Return on average assets (ROAA)     0.99 %     1.09 %     (0.10 )%     -9 %
Return on average equity (ROAE)     11.44 %     12.59 %     (1.15 )%     -9 %
Return on average tangible common equity (ROATCE) (E)     12.51 %     13.86 %     (1.35 )%     -10 %
Net interest margin (tax-equivalent basis)     2.68 %     2.76 %     (0.08 )%     -3 %
GAAP efficiency ratio (F)     61.29 %     57.74 %     3.55 %     6 %
Operating expenses / average assets     2.31 %     2.16 %     0.15 %     7 %

(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 six months ended June 30, 2023 included $2.0 million of expense associated with the recent retirement of certain employees. The six months ended June 30, 2022 quarter included $1.5 million of severance expense related to corporate restructuring.
(D) Total revenue equals the sum of net interest income plus total other income.
(E) 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.
(F) 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  
    June 30,     March 31,     Dec 31,     Sept 30,     June 30,  
    2023     2023     2022     2022     2022  
ASSETS                              
Cash and due from banks   $ 4,859     $ 6,514     $ 5,937     $ 5,066     $ 6,203  
Federal funds sold                              
Interest-earning deposits     166,769       244,779       184,138       103,214       147,222  
Total cash and cash equivalents     171,628       251,293       190,075       108,280       153,425  
Securities available for sale     540,519       556,266       554,648       497,880       556,791  
Securities held to maturity     110,438       111,609       102,291       103,551       105,048  
CRA equity security, at fair value     12,985       13,194       12,985       12,957       13,528  
FHLB and FRB stock, at cost (A)     35,402       30,338       30,672       14,986       13,710  
                               
Residential mortgage     575,238       544,655       525,756       519,088       512,341  
Multifamily mortgage     1,884,369       1,871,387       1,863,915       1,856,675       1,876,783  
Commercial mortgage     624,710       613,911       624,625       638,903       657,812  
Commercial and industrial loans     2,278,133       2,266,837       2,213,762       2,099,917       2,048,474  
Consumer loans     52,098       49,002       38,014       37,412       37,675  
Home equity lines of credit     34,397       33,294       34,496       36,375       36,023  
Other loans     269       443       304       259       236  
Total loans     5,449,214       5,379,529       5,300,872       5,188,629       5,169,344  
Less: Allowance for credit losses     62,704       62,250       60,829       59,683       59,022  
Net loans     5,386,510       5,317,279       5,240,043       5,128,946       5,110,322  
                               
Premises and equipment     23,814       23,782       23,831       23,781       22,804  
Other real estate owned           116       116       116       116  
Accrued interest receivable     20,865       19,143       25,157       17,816       23,468  
Bank owned life insurance     47,382       47,261       47,147       47,072       46,944  
Goodwill and other intangible assets     46,624       46,979       47,333       47,698       48,082  
Finance lease right-of-use assets     2,461       2,648       2,835       3,021       3,209  
Operating lease right-of-use assets     13,500       12,262       12,873       13,404       14,192  
Other assets (B)     67,572       47,848       63,587       67,753       39,528  
TOTAL ASSETS   $ 6,479,700     $ 6,480,018     $ 6,353,593     $ 6,087,261     $ 6,151,167  
                               
LIABILITIES                              
Deposits:                              
Noninterest-bearing demand deposits   $ 1,024,105     $ 1,096,549     $ 1,246,066     $ 1,317,954     $ 1,043,225  
Interest-bearing demand deposits     2,816,913       2,797,493       2,143,611       2,149,629       2,456,988  
Savings     120,082       132,523       157,338       166,821       168,441  
Money market accounts     763,026       873,329       1,228,234       1,178,112       1,217,516  
Certificates of deposit – Retail     384,106       357,131       318,573       345,047       375,387  
Certificates of deposit – Listing Service     10,822       15,922       25,358       30,647       31,348  
Subtotal “customer” deposits     5,119,054       5,272,947       5,119,180       5,188,210       5,292,905  
IB Demand – Brokered     10,000       10,000       60,000       85,000       85,000  
Certificates of deposit – Brokered     69,443       25,895       25,984       25,974       25,963  
Total deposits     5,198,497       5,308,842       5,205,164       5,299,184       5,403,868  
Short-term borrowings     485,360       378,800       379,530       32,369        
Finance lease liability     4,071       4,385       4,696       5,003       5,305  
Operating lease liability     14,308       13,082       13,704       14,101       14,756  
Subordinated debt, net     133,131       133,059       132,987       132,916       132,844  
Due to brokers           8,308                    
Other liabilities (B)     79,264       78,584       84,532       88,174       74,070  
TOTAL LIABILITIES     5,914,631       5,925,060       5,820,613       5,571,747       5,630,843  
Shareholders’ equity     565,069       554,958       532,980       515,514       520,324  
TOTAL LIABILITIES AND                              
SHAREHOLDERS’ EQUITY   $ 6,479,700     $ 6,480,018     $ 6,353,593     $ 6,087,261     $ 6,151,167  
Assets under management and / or administration at
Peapack-Gladstone Bank’s Private Wealth Management
Division (market value, not included above-dollars in billions)
  $ 10.7     $ 10.4     $ 9.9     $ 9.3     $ 9.5  

(A) FHLB means "Federal Home Loan Bank" and FRB means "Federal Reserve Bank."
(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.
  

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

    As of  
    June 30,     March 31,     Dec 31,     Sept 30,     June 30,  
    2023     2023     2022     2022     2022  
Asset Quality:                              
Loans past due over 90 days and still accruing   $     $     $     $     $  
Nonaccrual loans     34,505       28,659       18,974       15,724       15,078  
Other real estate owned           116       116       116       116  
Total nonperforming assets   $ 34,505     $ 28,775     $ 19,090     $ 15,840     $ 15,194  
                               
Nonperforming loans to total loans     0.63 %     0.53 %     0.36 %     0.30 %     0.29 %
Nonperforming assets to total assets     0.53 %     0.44 %     0.30 %     0.26 %     0.25 %
                               
Performing modifications (A)(B)   $ 248     $ 248     $     $     $  
                               
Performing TDRs (C)(D)   $     $     $ 965     $ 2,761     $ 2,272  
                               
Loans past due 30 through 89 days and still accruing   $ 14,524     $ 2,762     $ 7,592     $ 7,248     $ 3,126  
                               
Loans subject to special mention   $ 53,606     $ 46,566     $ 64,842     $ 82,107     $ 98,787  
                               
Classified loans   $ 58,655     $ 58,010     $ 42,985     $ 27,507     $ 27,167  
                               
Individually evaluated loans   $ 33,867     $ 27,736     $ 16,732     $ 13,047     $ 13,227  
                               
Allowance for credit losses ("ACL"):                              
Beginning of quarter   $ 62,250     $ 60,829     $ 59,683     $ 59,022     $ 58,386  
Day one CECL adjustment                              
Provision for credit losses (E)     1,666       1,464       2,103       665       646  
(Charge-offs)/recoveries, net (F)     (1,212 )     (43 )     (957 )     (4 )     (10 )
End of quarter   $ 62,704     $ 62,250     $ 60,829     $ 59,683     $ 59,022  
                               
ACL to nonperforming loans     181.72 %     217.21 %     320.59 %     379.57 %     391.44 %
ACL to total loans     1.15 %     1.16 %     1.15 %     1.15 %     1.14 %
Collectively evaluated ACL to total loans (G)     1.11 %     1.11 %     1.12 %     1.10 %     1.09 %

(A) Amounts reflect modifications that are paying according to modified terms.
(B) Excludes modifications included in nonaccrual loans of $777,000 at June 30, 2023.
(C) Amounts reflect troubled debt restructurings (“TDRs”) that are paying according to restructured terms.
(D) Excludes TDRs included in nonaccrual loans in the following amounts: $13.4 million at December 31, 2022; $12.9 million at September 30, 2022 and $13.5 million at June 30, 2022. On January 1, 2023, the Company adopted Accounting Standards Update 2022-02, which replaced the accounting and recognition of TDRs.
(E) Provision to roll forward the ACL excludes a provision of $30,000 at June 30, 2023, $49,000 at March 31, 2023, a credit of $173,000 at December 31, 2022, a credit of $66,000 at September 30, 2022 and a provision of $803,000 at June 30, 2022 related to off-balance sheet commitments.
(F) Net charge-offs for the quarters ended June 30, 2023 and December 31, 2022 included a charge-off of $1.2 million of a previously established reserve to loans individually evaluated on one commercial real estate loan.
(G) Total ACL less reserves to loans individually evaluated equals collectively evaluated ACL.

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

    As of  
    June 30,     December 31,     June 30,  
    2023     2022     2022  
Capital Adequacy                              
Equity to total assets (A)         8.72 %         8.39 %         8.46 %
Tangible equity to tangible assets (B)         8.06 %         7.70 %         7.74 %
Book value per share (C)       $ 31.59         $ 29.92         $ 28.60  
Tangible book value per share (D)       $ 28.98         $ 27.26         $ 25.96  
                               
Tangible equity to tangible assets excluding other comprehensive loss*         9.02 %         8.77 %         8.62 %
Tangible book value per share excluding other comprehensive loss*       $ 32.78         $ 31.43         $ 29.19  

*Excludes other comprehensive loss of $68.0 million for the quarter ended June 30, 2023, $74.2 million for the quarter ended December 31, 2022, and $58.7 million for the quarter ended June 30, 2022. See Non-GAAP financial measures reconciliation included in these tables.

(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.

    As of
    June 30,   December 31,   June 30,
    2023     2022     2022  
Regulatory Capital – Holding Company                              
Tier I leverage   $ 584,140     9.06 %   $ 557,627     8.90 %   $ 528,646     8.51 %
Tier I capital to risk-weighted assets     584,140     11.47       557,627     11.02       528,646     10.70  
Common equity tier I capital ratio
to risk-weighted assets
    584,122     11.47       557,609     11.02       528,622     10.70  
Tier I & II capital to risk-weighted assets     773,808     15.20       745,197     14.73       721,503     14.60  
                               
Regulatory Capital – Bank                              
Tier I leverage (E)   $ 696,399     10.80 %   $ 680,137     10.85 %   $ 646,884     10.42 %
Tier I capital to risk-weighted assets (F)     696,399     13.69       680,137     13.45       646,884     13.10  
Common equity tier I capital ratio
to risk-weighted assets (G)
    696,381     13.68       680,119     13.45       646,860     13.10  
Tier I & II capital to risk-weighted assets (H)     759,935     14.93       741,719     14.67       706,897     14.31  

(E) Regulatory well capitalized standard (including capital conservation buffer) = 4.00% ($258 million)
(F) Regulatory well capitalized standard (including capital conservation buffer) = 8.50% ($433 million)
(G) Regulatory well capitalized standard (including capital conservation buffer) = 7.00% ($356 million)
(H) Regulatory well capitalized standard (including capital conservation buffer) = 10.50% ($534 million)

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

    For the Quarters Ended  
    June 30,     March 31,     Dec 31,     Sept 30,     June 30,  
    2023     2023     2022     2022     2022  
Residential loans retained   $ 39,358     $ 30,303     $ 28,051     $ 17,885     $ 35,172  
Residential loans sold     1,072       1,477       1,840       4,898       9,886  
Total residential loans     40,430       31,780       29,891       22,783       45,058  
Commercial real estate     43,235       18,990       6,747       7,320       13,960  
Multifamily     26,662       30,150       37,500       4,000       74,564  
Commercial (C&I) loans/leases (A) (B)     158,972       207,814       238,568       251,249       332,801  
SBA     13,713       9,950       17,431       5,682       10,534  
Wealth lines of credit (A)     3,950       23,225       7,700       4,450       12,575  
Total commercial loans     246,532       290,129       307,946       272,701       444,434  
Installment loans     4,587       12,086       1,845       1,253       100  
Home equity lines of credit (A)     6,107       2,921       3,815       5,614       3,897  
Total loans closed   $ 297,656     $ 336,916     $ 343,497     $ 302,351     $ 493,489  


    For the Six Months Ended  
    June 30,     June 30,  
    2023     2022  
Residential loans retained   $ 69,661     $ 76,719  
Residential loans sold     2,549       25,555  
Total residential loans     72,210       102,274  
Commercial real estate     62,225       39,535  
Multifamily     56,812       340,214  
Commercial (C&I) loans (A) (B)     366,786       475,830  
SBA     23,663       36,627  
Wealth lines of credit (A)     27,175       21,975  
Total commercial loans     536,661       914,181  
Installment loans     16,673       231  
Home equity lines of credit (A)     9,028       5,238  
Total loans closed   $ 634,572     $ 1,021,924  

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

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

    For the Three Months Ended  
    June 30, 2023     June 30, 2022  
    Average     Income/           Average     Income/        
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                    
Interest-earning assets:                                    
Investments:                                    
Taxable (A)   $ 806,447     $ 4,900       2.43 %   $ 774,145     $ 3,535       1.83 %
Tax-exempt (A) (B)     1,858       20       4.31       4,193       40       3.82  
                                     
Loans (B) (C):                                    
Mortgages     557,575       4,942       3.55       513,666       3,630       2.83  
Commercial mortgages     2,504,268       26,839       4.29       2,552,128       21,185       3.32  
Commercial     2,241,817       35,457       6.33       2,024,457       19,348       3.82  
Commercial construction     6,977       165       9.46       16,186       162       4.00  
Installment     51,269       841       6.56       37,235       297       3.19  
Home equity     33,650       633       7.52       38,061       331       3.48  
Other     271       7       10.33       258       6       9.30  
Total loans     5,395,827       68,884       5.11       5,181,991       44,959       3.47  
Federal funds sold                                    
Interest-earning deposits     141,968       1,451       4.09       164,066       314       0.77  
Total interest-earning assets     6,346,100       75,255       4.74 %     6,124,395       48,848       3.19 %
Noninterest-earning assets:                                    
Cash and due from banks     7,800                   9,715              
Allowance for credit losses     (63,045 )                 (59,629 )            
Premises and equipment     23,745                   22,952              
Other assets     85,969                   96,232              
Total noninterest-earning assets     54,469                   69,270              
Total assets   $ 6,400,569                 $ 6,193,665              
                                     
LIABILITIES:                                    
Interest-bearing deposits:                                    
Checking   $ 2,834,140     $ 22,219       3.14 %   $ 2,493,668     $ 2,330       0.37 %
Money markets     788,745       3,853       1.95       1,234,564       579       0.19  
Savings     125,555       45       0.14       163,062       5       0.01  
Certificates of deposit – retail     385,211       2,462       2.56       411,202       651       0.63  
Subtotal interest-bearing deposits     4,133,651       28,579       2.77       4,302,496       3,565       0.33  
Interest-bearing demand – brokered     10,000       125       5.00       85,000       364       1.71  
Certificates of deposit – brokered     26,165       196       3.00       33,470       261       3.12  
Total interest-bearing deposits     4,169,816       28,900       2.77       4,420,966       4,190       0.38  
Borrowings     413,961       5,384       5.20       3,873       10       1.03  
Capital lease obligation     4,187       50       4.78       5,406       64       4.74  
Subordinated debt     133,090       1,597       4.80       132,803       1,363       4.11  
Total interest-bearing liabilities     4,721,054       35,931       3.04 %     4,563,048       5,627       0.49 %
Noninterest-bearing liabilities:                                    
Demand deposits     1,033,176                   1,029,538              
Accrued expenses and other liabilities     88,911                   79,882              
Total noninterest-bearing liabilities     1,122,087                   1,109,420              
Shareholders’ equity     557,428                   521,197              
Total liabilities and shareholders’ equity   $ 6,400,569                 $ 6,193,665              
Net interest income         $ 39,324                 $ 43,221        
Net interest spread                 1.70 %                 2.70 %
Net interest margin (D)                 2.49 %                 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 Three Months Ended  
    June 30, 2023     March 31, 2023  
    Average     Income/           Average     Income/        
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                    
Interest-earning assets:                                    
Investments:                                    
Taxable (A)   $ 806,447     $ 4,900       2.43 %   $ 791,125     $ 4,471       2.26 %
Tax-exempt (A) (B)     1,858       20       4.31       1,864       19       4.08  
                                     
Loans (B) (C):                                    
Mortgages     557,575       4,942       3.55       529,570       4,283       3.24  
Commercial mortgages     2,504,268       26,839       4.29       2,478,645       25,917       4.18  
Commercial     2,241,817       35,457       6.33       2,201,801       33,369       6.06  
Commercial construction     6,977       165       9.46       4,296       88       8.19  
Installment     51,269       841       6.56       39,945       609       6.10  
Home equity     33,650       633       7.52       33,839       591       6.99  
Other     271       7       10.33       276       7       10.14  
Total loans     5,395,827       68,884       5.11       5,288,372       64,864       4.91  
Federal funds sold                                    
Interest-earning deposits     141,968       1,451       4.09       163,225       1,538       3.77  
Total interest-earning assets     6,346,100       75,255       4.74 %     6,244,586       70,892       4.54 %
Noninterest-earning assets:                                    
Cash and due from banks     7,800                   10,449              
Allowance for credit losses     (63,045 )                 (61,567 )            
Premises and equipment     23,745                   23,927              
Other assets     85,969                   84,800              
Total noninterest-earning assets     54,469                   57,609              
Total assets   $ 6,400,569                 $ 6,302,195              
                                     
LIABILITIES:                                    
Interest-bearing deposits:                                    
Checking   $ 2,834,140     $ 22,219       3.14 %   $ 2,567,426     $ 16,481       2.57 %
Money markets     788,745       3,853       1.95       1,124,047       4,874       1.73  
Savings     125,555       45       0.14       141,285       28       0.08  
Certificates of deposit – retail     385,211       2,462       2.56       357,953       1,729       1.93  
Subtotal interest-bearing deposits     4,133,651       28,579       2.77       4,190,711       23,112       2.21  
Interest-bearing demand – brokered     10,000       125       5.00       26,111       208       3.19  
Certificates of deposit – brokered     26,165       196       3.00       25,961       205       3.16  
Total interest-bearing deposits     4,169,816       28,900       2.77       4,242,783       23,525       2.22  
Borrowings     413,961       5,384       5.20       104,915       1,296       4.94  
Capital lease obligation     4,187       50       4.78       4,493       53       4.72  
Subordinated debt     133,090       1,597       4.80       133,017       1,639       4.93  
Total interest-bearing liabilities     4,721,054       35,931       3.04 %     4,485,208       26,513       2.36 %
Noninterest-bearing liabilities:                                    
Demand deposits     1,033,176                   1,176,495              
Accrued expenses and other liabilities     88,911                   96,631              
Total noninterest-bearing liabilities     1,122,087                   1,273,126              
Shareholders’ equity     557,428                   543,861              
Total liabilities and shareholders’ equity   $ 6,400,569                 $ 6,302,195              
Net interest income         $ 39,324                 $ 44,379        
Net interest spread                 1.70 %                 2.18 %
Net interest margin (D)                 2.49 %                 2.88 %

(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 Six Months Ended  
    June 30, 2023     June 30, 2022  
    Average     Income/           Average     Income/        
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                    
Interest-earning assets:                                    
Investments:                                    
Taxable (A)   $ 798,828     $ 9,371       2.35 %   $ 851,059     $ 7,142       1.68 %
Tax-exempt (A) (B)     1,861       38       4.08       4,446       88       3.96  
                                     
Loans (B) (C):                                    
Mortgages     543,650       9,225       3.39       511,051       7,286       2.85  
Commercial mortgages     2,491,527       52,756       4.23       2,453,130       39,360       3.21  
Commercial     2,221,921       68,827       6.20       2,016,504       37,550       3.72  
Commercial construction     5,644       253       8.97       17,131       322       3.76  
Installment     45,638       1,450       6.35       35,863       552       3.08  
Home equity     33,744       1,223       7.25       39,147       655       3.35  
Other     273       14       10.26       271       11       8.12  
Total loans     5,342,397       133,748       5.01       5,073,097       85,736       3.38  
Federal funds sold                       0             -  
Interest-earning deposits     152,538       2,989       3.92       145,696       343       0.47  
Total interest-earning assets     6,295,624       146,146       4.64 %     6,074,298       93,309       3.07 %
Noninterest-earning assets:                                    
Cash and due from banks     9,117                   8,591              
Allowance for credit losses     (62,310 )                 (60,311 )            
Premises and equipment     23,835                   22,987              
Other assets     86,288                   132,266              
Total noninterest-earning assets     56,930                   103,533              
Total assets   $ 6,352,554                 $ 6,177,831              
                                     
LIABILITIES:                                    
Interest-bearing deposits:                                    
Checking   $ 2,701,519     $ 38,700       2.87 %   $ 2,412,456     $ 3,568       0.30 %
Money markets     955,470       8,726       1.83       1,264,167       1,118       0.18  
Savings     133,377       74       0.11       159,826       10       0.01  
Certificates of deposit – retail     371,657       4,191       2.26       418,642       1,257       0.60  
Subtotal interest-bearing deposits     4,162,023       51,691       2.48       4,255,091       5,953       0.28  
Interest-bearing demand – brokered     18,011       333       3.70       85,000       737       1.73  
Certificates of deposit – brokered     26,064       401       3.08       33,646       522       3.10  
Total interest-bearing deposits     4,206,098       52,425       2.49       4,373,737       7,212       0.33  
Borrowings     260,292       6,680       5.13       29,550       74       0.50  
Capital lease obligation     4,339       103       4.75       5,533       132       4.77  
Subordinated debt     133,053       3,236       4.86       132,767       2,727       4.11  
Total interest-bearing liabilities     4,603,782       62,444       2.71 %     4,541,587       10,145       0.45 %
Noninterest-bearing liabilities:                                    
Demand deposits     1,104,440                   1,004,055              
Accrued expenses and other liabilities     93,650                   99,565              
Total noninterest-bearing liabilities     1,198,090                   1,103,620              
Shareholders’ equity     550,682                   532,624              
Total liabilities and shareholders’ equity   $ 6,352,554                 $ 6,177,831              
Net interest income         $ 83,702                 $ 83,164        
Net interest spread                 1.93 %                 2.62 %
Net interest margin (D)                 2.68 %                 2.76 %

(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 common shares outstanding, as compared to book value per common share, which we calculate by dividing shareholders’ equity by common shares outstanding at period end. 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 per share data)

    Three Months Ended  
    June 30,     March 31,     Dec 31,     Sept 30,     June 30,  
Tangible Book Value Per Share   2023     2023     2022     2022     2022  
Shareholders’ equity   $ 565,069     $ 554,958     $ 532,980     $ 515,514     $ 520,324  
Less: Intangible assets, net     46,624       46,979       47,333       47,698       48,082  
Tangible equity   $ 518,445     $ 507,979     $ 485,647     $ 467,816     $ 472,242  
Less: other comprehensive loss     (67,997 )     (67,445 )     (74,211 )     (74,983 )     (58,727 )
Tangible equity excluding other comprehensive loss   $ 586,442     $ 575,424     $ 559,858     $ 542,799     $ 530,969  
                               
Period end shares outstanding     17,887,895       18,014,757       17,813,451       17,920,571       18,190,009  
Tangible book value per share   $ 28.98     $ 28.20     $ 27.26     $ 26.10     $ 25.96  
Tangible book value per share excluding other comprehensive loss   $ 32.78     $ 31.94     $ 31.43     $ 30.29     $ 29.19  
Book value per share     31.59       30.81       29.92       28.77       28.60  
                               
Tangible Equity to Tangible Assets                              
Total assets   $ 6,479,700     $ 6,480,018     $ 6,353,593     $ 6,087,261     $ 6,151,167  
Less: Intangible assets, net     46,624       46,979       47,333       47,698       48,082  
Tangible assets   $ 6,433,076     $ 6,433,039     $ 6,306,260     $ 6,039,563     $ 6,103,085  
Less: other comprehensive loss     (67,997 )     (67,445 )     (74,211 )     (74,983 )     (58,727 )
Tangible assets excluding other comprehensive loss   $ 6,501,073     $ 6,500,484     $ 6,380,471     $ 6,114,546     $ 6,161,812  
                               
Tangible equity to tangible assets     8.06 %     7.90 %     7.70 %     7.75 %     7.74 %
Tangible equity to tangible assets excluding other comprehensive loss     9.02 %     8.85 %     8.77 %     8.88 %     8.62 %
Equity to assets     8.72 %     8.56 %     8.39 %     8.47 %     8.46 %

(Dollars in thousands, except per share data)

    Three Months Ended  
    June 30,     March 31,     Dec 31,     Sept 30,     June 30,  
Return on Average Tangible Equity   2023     2023     2022     2022     2022  
Net income   $ 13,145     $ 18,355     $ 20,579     $ 20,126     $ 20,100  
                               
Average shareholders’ equity   $ 557,428     $ 543,861     $ 523,406     $ 529,160     $ 521,197  
Less: Average intangible assets, net     46,828       47,189       47,531       47,922       48,291  
Average tangible equity   $ 510,600     $ 496,672     $ 475,875     $ 481,238     $ 472,906  
                               
Return on average tangible common equity     10.30 %     14.78 %     17.30 %     16.73 %     17.00 %


    For the Six Months Ended  
    June 30,     June 30,  
Return on Average Tangible Equity   2023     2022  
Net income   $ 31,500     $ 33,541  
             
Average shareholders’ equity   $ 550,682     $ 532,624  
Less: Average intangible assets, net     47,007       48,503  
Average tangible equity     503,675       484,121  
             
Return on average tangible common equity     12.51 %     13.86 %

(Dollars in thousands, except per share data)

    Three Months Ended  
    June 30,     March 31,     Dec 31,     Sept 30,     June 30,  
Efficiency Ratio   2023     2023     2022     2022     2022  
Net interest income   $ 38,921     $ 43,978     $ 48,040     $ 45,525     $ 42,893  
Total other income     18,575       18,059       16,812       16,383       18,508  
Add:                              
Fair value adjustment for CRA equity security     209       (209 )     (28 )     571       475  
Less:                              
Gain on sale of property                 (275 )            
Income from life insurance proceeds                 (25 )            
Total recurring revenue     57,705       61,828       64,524       62,479       61,876  
                               
Operating expenses     37,692       35,574       33,412       33,560       32,659  
Less:                              
Accelerated Expense for Retirement     1,665       300                    
Branch Closure Expense           175                    
Total operating expense     36,027       35,099       33,412       33,560       32,659  
                               
Efficiency ratio     62.43 %     56.77 %     51.78 %     53.71 %     52.78 %


    For the Six Months Ended  
    June 30,     June 30,  
Efficiency Ratio   2023     2022  
Net interest income   $ 82,899     $ 82,515  
Total other income     36,634       33,222  
Add:            
Fair value adjustment for CRA equity security           1,157  
Less:            
Loss on securities sale, net           6,609  
Total recurring revenue     119,533       123,503  
             
Operating expenses     73,266       66,828  
Less:            
Swap valuation allowance           673  
Accelerated Expense for Retirement     1,965        
Branch Closure Expense     175        
Severance expense           1,476  
Total operating expense     71,126       64,679  
             
Efficiency ratio     59.50 %     52.37 %


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Source: Peapack-Gladstone Financial Corporation