Peapack Gladstone Bank

News Details

Peapack-Gladstone Financial Corporation Reports Third Quarter Results

Company Release - 10/24/2023

BEDMINSTER, NJ, Oct. 24, 2023 (GLOBE NEWSWIRE) -- via NewMediaWire Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) announces its third quarter 2023 financial results.

This earnings release should be read in conjunction with the Company’s Q3 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 $55.9 million, net income of $8.8 million and diluted earnings per share (“EPS”) of $0.49 for the quarter ended September 30, 2023, compared to revenue of $61.9 million, net income of $20.1 million and diluted EPS of $1.09 for the quarter ended September 30, 2022.

The net interest margin declined to 2.28% for the quarter ended September 30, 2023, compared to 2.49% for the quarter ended June 30, 2023 and 2.98% for the quarter ended September 30, 2022.

The Company’s return on average assets was 0.54%, return on average equity was 6.20%, and return on average tangible equity was 6.75% for the quarter ended September 30, 2023. Loans grew by $44 million to $5.5 billion funded by deposit growth of $61 million to $5.3 billion during the third quarter.

The Company’s liquidity position remains strong as balance sheet liquidity was $756 million as of September 30, 2023, which was 11.59% of total assets. The Company also had $2.8 billion of external borrowing capacity available, when combined with balance sheet liquidity provides us with 294% coverage of our uninsured deposits. Approximately 77% of our deposits are presently covered by FDIC insurance or are fully collateralized.

Douglas L. Kennedy, President and CEO, said, “Our third quarter results were impacted by the continuing compression of our net interest margin primarily driven by the rapid rise in our cost of funds. We were however encouraged to see signs of stabilization in the margin during the quarter as we look at our results on a monthly basis. In addition, our business continues to generated a sizable and consistent stream of noninterest income led by the revenue generated by our Wealth Management business. Noninterest income represented 35% of total revenue during the third quarter."

Mr. Kennedy also noted, “The third quarter results also reflect an elevated provision for credit losses driven by two credit relationships that were transferred to non-performing status during the quarter. Both of these relationships are in the freight industry which is currently facing a massive downturn due to supply and demand imbalances. As we move forward through this challenging economic environment consisting of persistent inflation and rapidly rising interest rates, we continue to analyze our loan portfolio for areas of concern. We believe the diversity of our portfolio and strength of our underwriting standards will protect us in the long term. Unfortunately, we have been forced to deal with a handful of credit issues that have arisen as a result of current economic conditions."

As previously announced, the Company has been approved by its regulators to open a location in mid-town Manhattan in 2024 and has hired a team of experienced professionals to gain entry into this lucrative market. The team, who predominantly started during the third quarter, is performing above expectations and is building robust pipelines.

Mr. Kennedy said, "From a strategic standpoint, the Company is adopting new technology and processes to improve the client experience, which includes empowering all employees to provide innovative solutions and a white glove experience in every interaction."

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

Wealth Management:

  • Gross new business inflows for Q3 2023 totaled $160 million ($96 million managed). For the first nine months of 2023, gross business inflows totaled $688 million ($547 million managed).
  • AUM/AUA in our Wealth Management Division totaled $10.4 billion at September 30, 2023 compared to $9.3 billion at September 30, 2022, which is an increase of 12% year over year.
  • Wealth Management fee income of $14.0 million for Q3 2023 comprised 25% of total revenue for the quarter.

Commercial Banking and Balance Sheet Management:

  • Total loans were $5.5 billion at September 30, 2023 reflecting growth of $193 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 September 30, 2023.
  • Fee income on unused commercial lines of credit totaled $794,000 for Q3 2023.
  • Fee income recorded by the Equipment Finance division related to equipment transfers to lessees totaled $2.3 million for Q3 2023.
  • The net interest margin ("NIM") was 2.28% in Q3 2023, a decline of 21 basis points compared to Q2 2023 and a decline of 70 basis points when compared to Q3 2022.
  • Total deposits increased $54 million to $5.3 billion from December 31, 2022.
  • Noninterest-bearing demand deposits have declined by $299 million since December 31, 2022.
  • Noninterest-bearing demand deposits represented 18% of total deposits as of September 30, 2023.
  • Core deposits (which includes noninterest-bearing demand and interest-bearing demand, savings and money market accounts) totaled 89% of total deposits at September 30, 2023.

Capital Management:

  • During the quarter, the Company repurchased 100,000 shares of Company stock for a cost of $2.8 million. On a year to date basis 367,014 shares have been repurchased during 2023. The Company repurchased 930,977 shares of stock for a cost of $32.7 million during the year ended December 31, 2022.
  • At September 30, 2023, the Regulatory Tier 1 Leverage Ratio stood at 10.75% for Peapack-Gladstone Bank (the "Bank") and 9.05% for the Company. The Regulatory Common Equity Tier 1 Ratio (to Risk-Weighted Assets) stood at 13.22% for the Bank and 11.13% for the Company at September 30, 2023. These ratios are significantly above well capitalized standards, as capital has benefited from net income generation.

Non-Core Items:

The September 2023 quarter included a:

  • $404,000 negative fair value adjustment on an equity security held for CRA investment, which decreased total revenue by $404,000, reduced net income by $293,000 and EPS by $0.01 for the September 2023 quarter. Management believes this to be a non-core item.

SUMMARY INCOME STATEMENT DETAILS:

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

September 2023 Year Compared to Prior Year

    Nine Months Ended     Nine Months Ended                
    September 30,     September 30,       Increase/  
(Dollars in millions, except per share data)   2023     2022       (Decrease)  
Net interest income   $ 119.41     $ 128.04       $ (8.63 )     (7 )%
Wealth management fee income     41.99       41.67         0.32       1  
Capital markets activity     2.45       8.30         (5.85 )     (70 )
Other income (A)     11.55       (0.36 )       11.91     N/A  
Total other income     55.99       49.61         6.38       13  
                           
Total Revenue     175.40       177.65         (2.25 )     (1 )%
                           
Operating expenses (B)     110.68       100.39         10.29       10  
Pretax income before provision for credit losses     64.72       77.26         (12.54 )     (16 )
Provision for credit losses     9.06       4.42         4.64       105  
Pretax income     55.66       72.84         (17.18 )     (24 )
Income tax expense     15.40       19.17         (3.77 )     (20 )
Net income   $ 40.26     $ 53.67       $ (13.41 )     (25 )%
Diluted EPS   $ 2.23     $ 2.88       $ (0.65 )     (23 )%
                           
Return on average assets     0.84 %     1.16 %       (0.32 )      
Return on average equity     9.66 %     13.46 %       (3.80 )      

(A) Other income for the nine months ended September 30, 2023 included fee income from equipment finance activity of $2.7 million and a fair value adjustment on a CRA equity security of negative $404,000. Other income for the nine months ended September 30, 2022 included a $6.6 million loss on sale of securities and a fair value adjustment on a CRA equity security of negative $1.7 million.
(B) The nine months ended September 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 nine months ended September 30, 2022 included $1.5 million of severance expense related to certain staff reorganizations.

September 2023 Quarter Compared to Prior Year Quarter

    Three Months Ended       Three Months Ended              
    September 30,       September 30,     Increase/  
(Dollars in millions, except per share data)   2023       2022     (Decrease)  
Net interest income   $ 36.52       $ 45.53     $ (9.01 )     (20 )%
Wealth management fee income     13.98         12.94       1.04       8  
Capital markets activity     0.61         0.78       (0.17 )     (22 )
Other income (A)     4.76         2.66       2.10       79  
Total other income     19.35         16.38       2.97       18  
                           
Total Revenue     55.87         61.91       (6.04 )     (10 )%
                           
Operating expenses     37.41         33.56       3.85       11  
Pretax income before provision for credit losses     18.46         28.35       (9.89 )     (35 )
Provision for credit losses     5.86         0.60       5.26       877  
Pretax income     12.60         27.75       (15.15 )     (55 )
Income tax expense     3.84         7.62       (3.78 )     (50 )
Net income   $ 8.76       $ 20.13     $ (11.37 )     (56 )%
Diluted EPS   $ 0.49       $ 1.09     $ (0.60 )     (55 )%
                           
Return on average assets annualized     0.54 %       1.30 %     (0.76 )      
Return on average equity annualized     6.20 %       15.21 %     (9.01 )      

(A) Other income for the September 2023 quarter included fee income from equipment finance activity of $2.3 million and a fair value adjustment on a CRA equity security of negative $404,000. Other income for the September 2022 quarter included a fair value adjustment on a CRA equity security of negative $571,000.

September 2023 Quarter Compared to Linked Quarter

    Three Months Ended     Three Months Ended                
    September 30,     June 30,       Increase/  
(Dollars in millions, except per share data)   2023     2023       (Decrease)  
Net interest income   $ 36.52     $ 38.92       $ (2.40 )     (6 )%
Wealth management fee income     13.98       14.25         (0.27 )     (2 )
Capital markets activity     0.61       0.87         (0.26 )     (30 )
Other income (A)     4.76       3.46         1.30       38  
Total other income     19.35       18.58         0.77       4  
                           
Total Revenue     55.87       57.50         (1.63 )     (3 )%
                           
Operating expenses (B)     37.41       37.69         (0.28 )     (1 )
Pretax income before provision for credit losses     18.46       19.81         (1.35 )     (7 )
Provision for credit losses     5.86       1.70         4.16       245  
Pretax income     12.60       18.11         (5.51 )     (30 )
Income tax expense (C)     3.84       4.96         (1.12 )     (23 )
Net income   $ 8.76     $ 13.15       $ (4.39 )     (33 )%
Diluted EPS   $ 0.49     $ 0.73       $ (0.24 )     (33 )%
                           
Return on average assets annualized     0.54 %     0.82 %       (0.28 )      
Return on average equity annualized     6.20 %     9.43 %       (3.23 )      

(A) Other income for the September 2023 quarter included fee income from equipment finance activity of $2.3 million and a fair value adjustment on a CRA equity security of negative $404,000. Other income for the June 2023 quarter included a fair value adjustment on a CRA equity security of negative $209,000.
(B) The June 2023 quarter included one-time charges of $1.7 million associated with the recent retirement of certain employees.
(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.

SUPPLEMENTAL QUARTERLY DETAILS :

Wealth Management

AUM/AUA in the Bank’s Wealth Management Division were $10.4 billion at September 30, 2023. For the September 2023 quarter, the Wealth Management Team generated $14.0 million in fee income, compared to $14.3 million for the June 30, 2023 quarter and $12.9 million for the September 2022 quarter. The equity market declined slightly during Q3 2023, contributing to the decrease in AUM/AUA on a linked quarter basis.

John Babcock, President of the Bank's Wealth Management Division, noted, “In Q3 2023, total new accounts and client additions amounted to $160 million ($96 million managed). As we look ahead to the fourth quarter of 2023 and beyond, 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 us in our market and continues to drive our growth and success.”

Loans / Commercial Banking

Total loans grew $193 million or 4% (5% annualized) to $5.5 billion at September 30, 2023 when compared to $5.3 billion at December 31, 2022.

Total C&I loans and leases at September 30, 2023 were $2.3 billion or 42% of the total loan portfolio.

Mr. Kennedy noted, “Given economic uncertainty and rising interest rates, we believe loan demand will be muted somewhat compared to recent prior years. 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, Corporate Advisory and SBA businesses. We believe these business lines fit perfectly with our private banking business model.”

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

The Company’s NII of $36.5 million and NIM of 2.28% for Q3 2023 decreased $2.4 million and 21 basis points from NII of $38.9 million and NIM of 2.49% for the linked quarter (Q2 2023) and decreased $9.0 million and 70 basis points from NII of $45.5 million and NIM of 2.98% for the prior year (Q3 2022). When comparing Q3 2023 to the linked and prior year quarter, the Company has seen a sharp increase in interest expense mostly driven by higher deposit rates during 2023. Cycle to date betas are approximately 44%. The intense competition for deposit balances from other banks and alternative investment opportunities due to the significant rise in interest rates at such a rapid pace were the primary drivers for increased deposit costs.

Funding / Liquidity / Interest Rate Risk Management

Total deposits increased $54.2 million to $5.3 billion at September 30, 2023 from December 31, 2022. Deposit inflows were benefitted by net growth in brokered/listing service certificates of deposit of $77.2 million partially offset by a decline in brokered interest-bearing deposits of $50.0 million. The Company saw limited net deposit outflows in 2023 mostly including larger deposit relationships using their funds for normal business purposes such as deployment of excess liquidity into higher yielding treasuries or the equity market, tax payments, or asset acquisitions or investment into their business. The Company has also seen clients transition money from noninterest-bearing deposit accounts to higher yielding deposit accounts as a result of increases in the Fed Funds rate.

At September 30, 2023, the Company’s balance sheet liquidity (investments available for sale, interest-earning deposits and cash) totaled $756 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 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 294% of the total uninsured/uncollateralized deposits on the Company's balance sheet.

Income from Capital Markets Activities

Noninterest income from Capital Markets activities (detailed below) totaled $613,000 for the September 2023 quarter compared to $868,000 for the June 2023 quarter and $784,000 for the September 2022 quarter. The gain on sale of SBA loans was lower in Q3 2023 due to less activity in the higher interest rate environment and tighter margins.

    Three Months Ended     Three Months Ended     Three Months Ended  
    September 30,     June 30,     September 30,  
(Dollars in thousands, except per share data)   2023     2023     2022  
Gain on loans held for sale at fair value (Mortgage banking)   $ 37     $ 15     $ 60  
Fee income related to loan level, back-to-back swaps                  
Gain on sale of SBA loans     491       838       622  
Corporate advisory fee income     85       15       102  
Total capital markets activity   $ 613     $ 868     $ 784  

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

Other noninterest income was $4.8 million for Q3 2023 compared to $3.5 million for Q2 2023 and $2.7 million for Q3 2022. Q3 2023 included $2.3 million of income recorded by the Equipment Finance Division related to equipment transfers to lessees upon the termination of leases while Q2 2023 included $221,000 and Q3 2022 included $547,000 respectively. Additionally, Q3 2023 included $794,000 of unused line fees compared to $809,000 for Q2 2023 and $818,000 for Q3 2022.

Operating Expenses

The Company’s total operating expenses were $37.4 million for the third quarter of 2023, compared to $37.7 million for the June 2023 quarter and $33.6 million for the September 2022 quarter. The September 2023 quarter included expenses associated with the previously announced New York City expansion. The June 2023 quarter included one-time charge of $1.7 million associated with the recent retirement of certain employees.

Mr. Kennedy noted, “The Company is committed to be in a position of strength when industry headwinds recede as evidenced by the recent announcement of its decision 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 also plan to 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 software tools to further enhance the client experience.”

Income Taxes

The effective tax rate for the three months ended September 30, 2023 was 30.5%, as compared to 27.4% for the June 2023 quarter and 27.5% for the quarter ended September 30, 2022. The higher tax rate for the September 30 quarter was primarily due to the impact of certain non-deductible expenses related to compensation and benefits.

Asset Quality / Provision for Credit Losses

Nonperforming assets (which does not include modified loans that are performing in accordance with their terms) were $70.8 million, or 1.09% of total assets at September 30, 2023, as compared to $34.5 million, or 0.53% of total assets at June 30, 2023. The increase during the third quarter was primarily due to two freight related clients totaling $33.4 million that were transferred to nonaccrual status during the quarter. Management is working diligently to resolve both matters as quickly and efficiently as possible. Loans past due 30 to 89 days and still accruing were $9.8 million, or 0.18% of total loans at September 30, 2023 compared to $14.5 million, or 0.27% of total loans at June 30, 2023.

Criticized and classified loans totaled $148.2 million at September 30, 2023, reflecting an increase from June 30, 2023 and September 30, 2022 levels. The Company currently has no loans or leases on deferral and accruing.

For the quarter ended September 30, 2023, the Company’s provision for credit losses was $5.9 million compared to $1.7 million for the June 2023 quarter and $665,000 for the September 2022 quarter. The increased provision for credit losses in the September 2023 quarter was primarily driven by specific provisions related to the two freight credits that were transferred to nonaccrual status during the quarter as described above.

At September 30, 2023, the allowance for credit losses was $68.6 million (1.25% of total loans), compared to $62.7 million (1.15% of loans) at June 30, 2023, and $59.7 million (1.15% of loans) at September 30, 2022.

Capital

The Company’s capital position declined by $6.1 million during the September 2023 quarter as the Company repurchased 100,000 shares of common stock through the Company’s stock repurchase program at a cost of $2.8 million and paid a quarterly cash dividend of $893,000. Additionally, during the third quarter of 2023, the Company recorded a net loss in accumulated other comprehensive income of $13.7 million, net of tax. This amount was driven by a $15.0 million decline in the value of the available for sale securities portfolio partially offset by a $1.3 million gain on cash flow hedges. The total accumulated other comprehensive loss grew to $81.7 million as of September 30, 2023, ($91.0 million loss related to the available for sale securities portfolio partially offset by a $9.3 million gain on the cash flow hedges). These were partially offset by net income of $8.8 million.

Tangible book value per share declined during Q3 2023 to $28.77 at September 30, 2023 from $28.98 at June 30, 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 September 30, 2023 remain strong, and generally reflect increases from September 30, 2022 levels. Where applicable, such ratios remain well above regulatory well capitalized standards.

The Company employs quarterly capital stress testing modeling of an adverse case and severely adverse case. In the most recently completed stress test (as of June 30, 2023), under the severely adverse case, and no growth scenario, the Bank remains well capitalized over a two-year stress period.

On September 27, 2023, the Company declared a cash dividend of $0.05 per share payable on November 27, 2023 to shareholders of record on November 9, 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 $10.4 billion as of September 30, 2023. Founded in 1921, Peapack-Gladstone Bank is a commercial bank that provides Private Banking customized solutions through its 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 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;
  • a potential government shutdown;
  • 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/or
  • 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  
    Sept 30,     June 30,     March 31,     Dec 31,     Sept 30,  
    2023     2023     2023     2022     2022  
Income Statement Data:                              
Interest income   $ 78,489     $ 74,852     $ 70,491     $ 64,202     $ 55,013  
Interest expense     41,974       35,931       26,513       16,162       9,488  
Net interest income     36,515       38,921       43,978       48,040       45,525  
Wealth management fee income     13,975       14,252       13,762       12,983       12,943  
Service charges and fees     1,319       1,320       1,258       1,150       1,060  
Bank owned life insurance     310       305       297       321       299  
Gain on loans held for sale at fair value
(Mortgage banking)
    37       15       21       25       60  
Fee income related to loan level, back-to-back
swaps
                      293        
Gain on sale of SBA loans     491       838       865       624       622  
Corporate advisory fee income     85       15       80       8       102  
Other income (A)     3,541       2,039       1,567       1,380       1,868  
Fair value adjustment for CRA equity security     (404 )     (209 )     209       28       (571 )
Total other income     19,354       18,575       18,059       16,812       16,383  
                               
Total revenue     55,869       57,496       62,037       64,852       61,908  
                               
Salaries and employee benefits (B)     25,264       26,354       24,586       22,489       22,656  
Premises and equipment     5,214       4,729       4,374       4,898       4,534  
FDIC insurance expense     741       729       711       455       510  
Other expenses     6,194       5,880       5,903       5,570       5,860  
Total operating expenses     37,413       37,692       35,574       33,412       33,560  
Pretax income before provision for credit losses     18,456       19,804       26,463       31,440       28,348  
Provision for credit losses     5,856       1,696       1,513       1,930       599  
Income before income taxes     12,600       18,108       24,950       29,510       27,749  
Income tax expense (C)     3,845       4,963       6,595       8,931       7,623  
Net income   $ 8,755     $ 13,145     $ 18,355     $ 20,579     $ 20,126  
                               
Per Common Share Data:                              
Earnings per share (basic)   $ 0.49     $ 0.73     $ 1.03     $ 1.15     $ 1.11  
Earnings per share (diluted)     0.49       0.73       1.01       1.12       1.09  
Weighted average number of common
shares outstanding:
                             
Basic     17,856,961       17,930,611       17,841,203       17,915,058       18,072,385  
Diluted     18,010,127       18,078,848       18,263,310       18,382,193       18,420,661  
Performance Ratios:                              
Return on average assets annualized (ROAA)     0.54 %     0.82 %     1.16 %     1.33 %     1.30 %
Return on average equity annualized (ROAE)     6.20 %     9.43 %     13.50 %     15.73 %     15.21 %
Return on average tangible common equity annualized (ROATCE) (D)     6.75 %     10.30 %     14.78 %     17.30 %     16.73 %
Net interest margin (tax-equivalent basis)     2.28 %     2.49 %     2.88 %     3.12 %     2.98 %
GAAP efficiency ratio (E)     66.97 %     65.56 %     57.34 %     51.52 %     54.21 %
Operating expenses / average assets annualized     2.31 %     2.36 %     2.26 %     2.15 %     2.17 %

(A) The September 2023 quarter included $2.3 million of fee income from equipment finance activity.
(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) 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.
(E) 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              
    September 30,     Change  
    2023     2022     $     %  
Income Statement Data:                        
Interest income   $ 223,832     $ 147,673     $ 76,159       52 %
Interest expense     104,418       19,633       84,785       432 %
Net interest income     119,414       128,040       (8,626 )     -7 %
Wealth management fee income     41,989       41,668       321       1 %
Service charges and fees     3,897       3,075       822       27 %
Bank owned life insurance     912       922       (10 )     -1 %
Gain on loans held for sale at fair value (Mortgage banking)     73       458       (385 )     -84 %
Fee income related to loan level, back-to-back swaps                     N/A  
Gain on sale of SBA loans     2,194       6,141       (3,947 )     -64 %
Corporate advisory fee income     180       1,696       (1,516 )     -89 %
Other income (A)     7,147       3,982       3,165       79 %
Loss on securities sale, net (B)           (6,609 )     6,609       -100 %
Fair value adjustment for CRA equity security     (404 )     (1,728 )     1,324       -77 %
Total other income     55,988       49,605       6,383       13 %
                         
Total revenue     175,402       177,645       (2,243 )     -1 %
                         
Salaries and employee benefits (C)     76,204       66,987       9,217       14 %
Premises and equipment     14,317       13,821       496       4 %
FDIC insurance expense     2,181       1,484       697       47 %
Swap valuation allowance           673       (673 )     -100 %
Other expenses     17,977       17,423       554       3 %
Total operating expenses     110,679       100,388       10,291       10 %
Pretax income before provision for credit losses     64,723       77,257       (12,534 )     -16 %
Provision for credit losses     9,065       4,423       4,642       105 %
Income before income taxes     55,658       72,834       (17,176 )     -24 %
Income tax expense     15,403       19,167       (3,764 )     -20 %
Net income   $ 40,255     $ 53,667     $ (13,412 )     -25 %
                         
                         
Per Common Share Data:                        
Earnings per share (basic)   $ 2.25     $ 2.94     $ (0.69 )     -23 %
Earnings per share (diluted)     2.23       2.88       (0.65 )     -23 %
Weighted average number of common shares outstanding:                        
Basic     17,876,316       18,244,691       (368,375 )     -2 %
Diluted     18,091,524       18,652,042       (560,518 )     -3 %
Performance Ratios:                        
Return on average assets (ROAA)     0.84 %     1.16 %     (0.32 )%     -28 %
Return on average equity (ROAE)     9.66 %     13.46 %     (3.80 )%     -28 %
Return on average tangible common equity (ROATCE) (D)     10.55 %     14.81 %     (4.26 )%     -29 %
Net interest margin (tax-equivalent basis)     2.54 %     2.83 %     (0.29 )%     -10 %
GAAP efficiency ratio (E)     63.10 %     56.51 %     6.59 %     12 %
Operating expenses / average assets     2.31 %     2.17 %     0.14 %     6 %

(A) The nine months ended September 2023 included $2.7 million of fee income from equipment finance activity.
(B) Loss on sale of securities was a result of a balance sheet repositioning employed in the March 2022 quarter.
(C) The nine months ended September 30, 2023 included $2.0 million of expense associated with the recent retirement of certain employees. The nine months ended September 30, 2022 quarter included $1.5 million of severance expense related to corporate restructuring.
(D) 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.
(E) 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,  
    2023     2023     2023     2022     2022  
ASSETS                              
Cash and due from banks   $ 7,400     $ 4,859     $ 6,514     $ 5,937     $ 5,066  
Federal funds sold                              
Interest-earning deposits     180,469       166,769       244,779       184,138       103,214  
Total cash and cash equivalents     187,869       171,628       251,293       190,075       108,280  
Securities available for sale     521,005       540,519       556,266       554,648       497,880  
Securities held to maturity     108,940       110,438       111,609       102,291       103,551  
CRA equity security, at fair value     12,581       12,985       13,194       12,985       12,957  
FHLB and FRB stock, at cost (A)     34,158       35,402       30,338       30,672       14,986  
                               
Residential mortgage     585,295       575,238       544,655       525,756       519,088  
Multifamily mortgage     1,871,853       1,884,369       1,871,387       1,863,915       1,856,675  
Commercial mortgage     622,469       624,710       613,911       624,625       638,903  
Commercial and industrial loans     2,321,917       2,278,133       2,266,837       2,213,762       2,099,917  
Consumer loans     57,227       52,098       49,002       38,014       37,412  
Home equity lines of credit     34,411       34,397       33,294       34,496       36,375  
Other loans     265       269       443       304       259  
Total loans     5,493,437       5,449,214       5,379,529       5,300,872       5,188,629  
Less: Allowance for credit losses     68,592       62,704       62,250       60,829       59,683  
Net loans     5,424,845       5,386,510       5,317,279       5,240,043       5,128,946  
                               
Premises and equipment     23,969       23,814       23,782       23,831       23,781  
Other real estate owned                 116       116       116  
Accrued interest receivable     22,889       20,865       19,143       25,157       17,816  
Bank owned life insurance     47,509       47,382       47,261       47,147       47,072  
Goodwill and other intangible assets     46,286       46,624       46,979       47,333       47,698  
Finance lease right-of-use assets     2,274       2,461       2,648       2,835       3,021  
Operating lease right-of-use assets     12,800       13,500       12,262       12,873       13,404  
Other assets     76,456       67,572       47,848       63,587       67,753  
TOTAL ASSETS   $ 6,521,581     $ 6,479,700     $ 6,480,018     $ 6,353,593     $ 6,087,261  
                               
LIABILITIES                              
Deposits:                              
Noninterest-bearing demand deposits   $ 947,405     $ 1,024,105     $ 1,096,549     $ 1,246,066     $ 1,317,954  
Interest-bearing demand deposits     2,871,359       2,816,913       2,797,493       2,143,611       2,149,629  
Savings     117,905       120,082       132,523       157,338       166,821  
Money market accounts     761,833       763,026       873,329       1,228,234       1,178,112  
Certificates of deposit – Retail     422,291       384,106       357,131       318,573       345,047  
Certificates of deposit – Listing Service     9,103       10,822       15,922       25,358       30,647  
Subtotal “customer” deposits     5,129,896       5,119,054       5,272,947       5,119,180       5,188,210  
IB Demand – Brokered     10,000       10,000       10,000       60,000       85,000  
Certificates of deposit – Brokered     119,463       69,443       25,895       25,984       25,974  
Total deposits     5,259,359       5,198,497       5,308,842       5,205,164       5,299,184  
Short-term borrowings     470,576       485,360       378,800       379,530       32,369  
Finance lease liability     3,752       4,071       4,385       4,696       5,003  
Operating lease liability     13,595       14,308       13,082       13,704       14,101  
Subordinated debt, net     133,203       133,131       133,059       132,987       132,916  
Due to brokers                 8,308              
Other liabilities     82,140       79,264       78,584       84,532       88,174  
TOTAL LIABILITIES     5,962,625       5,914,631       5,925,060       5,820,613       5,571,747  
Shareholders’ equity     558,956       565,069       554,958       532,980       515,514  
TOTAL LIABILITIES AND                              
SHAREHOLDERS’ EQUITY   $ 6,521,581     $ 6,479,700     $ 6,480,018     $ 6,353,593     $ 6,087,261  
Assets under management and / or administration at
Peapack-Gladstone Bank’s Private Wealth Management
Division (market value, not included above-dollars in billions)
  $ 10.4     $ 10.7     $ 10.4     $ 9.9     $ 9.3  

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

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

    As of  
    Sept 30,     June 30,     March 31,     Dec 31,     Sept 30,  
    2023     2023     2023     2022     2022  
Asset Quality:                              
Loans past due over 90 days and still accruing   $     $     $     $     $  
Nonaccrual loans (A)     70,809       34,505       28,659       18,974       15,724  
Other real estate owned                 116       116       116  
Total nonperforming assets   $ 70,809     $ 34,505     $ 28,775     $ 19,090     $ 15,840  
                               
Nonperforming loans to total loans     1.29 %     0.63 %     0.53 %     0.36 %     0.30 %
Nonperforming assets to total assets     1.09 %     0.53 %     0.44 %     0.30 %     0.26 %
                               
Performing modifications (B)(C)   $ 248     $ 248     $ 248     $     $  
                               
Performing TDRs (D)(E)   $     $     $     $ 965     $ 2,761  
                               
Loans past due 30 through 89 days and still accruing   $ 9,780     $ 14,524     $ 2,762     $ 7,592     $ 7,248  
                               
Loans subject to special mention   $ 53,328     $ 53,606     $ 46,566     $ 64,842     $ 82,107  
                               
Classified loans   $ 94,866     $ 58,655     $ 58,010     $ 42,985     $ 27,507  
                               
Individually evaluated loans   $ 70,184     $ 33,867     $ 27,736     $ 16,732     $ 13,047  
                               
Allowance for credit losses ("ACL"):                              
Beginning of quarter   $ 62,704     $ 62,250     $ 60,829     $ 59,683     $ 59,022  
Provision for credit losses (F)     5,944       1,666       1,464       2,103       665  
(Charge-offs)/recoveries, net (G)     (56 )     (1,212 )     (43 )     (957 )     (4 )
End of quarter   $ 68,592     $ 62,704     $ 62,250     $ 60,829     $ 59,683  
                               
ACL to nonperforming loans     96.87 %     181.72 %     217.21 %     320.59 %     379.57 %
ACL to total loans     1.25 %     1.15 %     1.16 %     1.15 %     1.15 %
Collectively evaluated ACL to total loans (H)     1.10 %     1.11 %     1.11 %     1.12 %     1.10 %

(A) Excludes $1.6 million in held for sale at September 30, 2023. Includes two freight credits totaling $33.4 million at September 30, 2023.
(B) Amounts reflect modifications that are paying according to modified terms.
(C) Excludes modifications included in nonaccrual loans of $3.1 million at September 30, 2023 and $777,000 at June 30, 2023.
(D) Amounts reflect troubled debt restructurings (“TDRs”) that are paying according to restructured terms.
(E) Excludes TDRs included in nonaccrual loans in the following amounts: $13.4 million at December 31, 2022 and $12.9 million at September 30, 2022. On January 1, 2023, the Company adopted Accounting Standards Update 2022-02, which replaced the accounting and recognition of TDRs.
(F) Provision to roll forward the ACL excludes a credit of $88,000 at September 30, 2023, a provision of $30,000 at June 30, 2023, a provision of $49,000 at March 31, 2023, a credit of $173,000 at December 31, 2022 and a credit of $66,000 at September 30, 2022 related to off-balance sheet commitments.
(G) 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.
(H) 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  
    September 30,     December 31,     September 30,  
    2023     2022     2022  
Capital Adequacy                              
Equity to total assets (A)         8.57 %         8.39 %         8.47 %
Tangible equity to tangible assets (B)         7.92 %         7.70 %         7.75 %
Book value per share (C)       $ 31.37         $ 29.92         $ 28.77  
Tangible book value per share (D)       $ 28.77         $ 27.26         $ 26.10  
                               
Tangible equity to tangible assets excluding other comprehensive loss*         9.06 %         8.77 %         8.88 %
Tangible book value per share excluding other comprehensive loss*       $ 33.36         $ 31.43         $ 30.29  

*Excludes other comprehensive loss of $81.7 million for the quarter ended September 30, 2023, $74.2 million for the quarter ended December 31, 2022, and $75.0 million for the quarter ended September 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
    September 30,   December 31,   September 30,
    2023     2022     2022  
Regulatory Capital – Holding Company                              
Tier I leverage   $ 592,061     9.05 %   $ 557,627     8.90 %   $ 540,464     8.70 %
Tier I capital to risk-weighted assets     592,061     11.13       557,627     11.02       540,464     10.86  
Common equity tier I capital ratio
to risk-weighted assets
    592,043     11.13       557,609     11.02       540,440     10.86  
Tier I & II capital to risk-weighted assets     784,777     14.76       745,197     14.73       733,988     14.74  
                               
Regulatory Capital – Bank                              
Tier I leverage (E)   $ 702,517     10.75 %   $ 680,137     10.85 %   $ 670,717     10.79 %
Tier I capital to risk-weighted assets (F)     702,517     13.22       680,137     13.45       670,717     13.48  
Common equity tier I capital ratio
to risk-weighted assets (G)
    702,499     13.22       680,119     13.45       670,693     13.48  
Tier I & II capital to risk-weighted assets (H)     768,979     14.47       741,719     14.67       731,325     14.69  

(E) Regulatory well capitalized standard (including capital conservation buffer) = 4.00% ($261 million)
(F) Regulatory well capitalized standard (including capital conservation buffer) = 8.50% ($452 million)
(G) Regulatory well capitalized standard (including capital conservation buffer) = 7.00% ($372 million)
(H) Regulatory well capitalized standard (including capital conservation buffer) = 10.50% ($558 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,  
    2023     2023     2023     2022     2022  
Residential loans retained   $ 21,310     $ 39,358     $ 30,303     $ 28,051     $ 17,885  
Residential loans sold     2,503       1,072       1,477       1,840       4,898  
Total residential loans     23,813       40,430       31,780       29,891       22,783  
Commercial real estate     3,900       43,235       18,990       6,747       7,320  
Multifamily     3,000       26,662       30,150       37,500       4,000  
Commercial (C&I) loans/leases (A) (B)     176,845       158,972       207,814       238,568       251,249  
SBA     300       13,713       9,950       17,431       5,682  
Wealth lines of credit (A)     6,875       3,950       23,225       7,700       4,450  
Total commercial loans     190,920       246,532       290,129       307,946       272,701  
Installment loans     6,999       4,587       12,086       1,845       1,253  
Home equity lines of credit (A)     6,275       6,107       2,921       3,815       5,614  
Total loans closed   $ 228,007     $ 297,656     $ 336,916     $ 343,497     $ 302,351  


    For the Nine Months Ended  
    Sept 30,     Sept 30,  
    2023     2022  
Residential loans retained   $ 90,971     $ 94,604  
Residential loans sold     5,052       30,453  
Total residential loans     96,023       125,057  
Commercial real estate     66,125       46,855  
Multifamily     59,812       344,214  
Commercial (C&I) loans (A) (B)     543,631       727,079  
SBA     23,963       42,309  
Wealth lines of credit (A)     34,050       26,425  
Total commercial loans     727,581       1,186,882  
Installment loans     23,672       1,484  
Home equity lines of credit (A)     15,303       10,852  
Total loans closed   $ 862,579     $ 1,324,275  

(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  
    September 30, 2023     September 30, 2022  
    Average     Income/           Average     Income/        
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                    
Interest-earning assets:                                    
Investments:                                    
Taxable (A)   $ 806,861     $ 5,170       2.56 %   $ 754,180     $ 2,853       1.51 %
Tax-exempt (A) (B)     1,198       11       3.67       3,226       30       3.72  
                                     
Loans (B) (C):                                    
Mortgages     580,951       5,208       3.59       513,864       3,861       3.01  
Commercial mortgages     2,502,351       27,746       4.44       2,510,616       23,121       3.68  
Commercial     2,298,723       37,357       6.50       2,016,590       23,362       4.63  
Commercial construction     12,346       282       9.14       12,073       143       4.74  
Installment     56,248       967       6.88       38,338       399       4.16  
Home equity     34,250       680       7.94       36,706       451       4.91  
Other     234       7       11.97       263       7       10.65  
Total loans     5,485,103       72,247       5.27       5,128,450       51,344       4.00  
Federal funds sold                                    
Interest-earning deposits     136,315       1,463       4.29       232,158       1,162       2.00  
Total interest-earning assets     6,429,477       78,891       4.91 %     6,118,014       55,389       3.62 %
Noninterest-earning assets:                                    
Cash and due from banks     6,954                   8,296              
Allowance for credit losses     (63,625 )                 (59,464 )            
Premises and equipment     23,880                   23,580              
Other assets     85,582                   97,583              
Total noninterest-earning assets     52,791                   69,995              
Total assets   $ 6,482,268                 $ 6,188,009              
                                     
LIABILITIES:                                    
Interest-bearing deposits:                                    
Checking   $ 2,813,080     $ 24,318       3.46 %   $ 2,408,206     $ 5,127       0.85 %
Money markets     771,781       4,458       2.31       1,237,975       1,557       0.50  
Savings     118,718       75       0.25       168,281       5       0.01  
Certificates of deposit – retail     415,665       3,459       3.33       391,340       791       0.81  
Subtotal interest-bearing deposits     4,119,244       32,310       3.14       4,205,802       7,480       0.71  
Interest-bearing demand – brokered     10,000       136       5.44       85,000       345       1.62  
Certificates of deposit – brokered     102,777       1,183       4.60       25,968       210       3.23  
Total interest-bearing deposits     4,232,021       33,629       3.18       4,316,770       8,035       0.74  
Borrowings     470,616       6,569       5.58       3,810       29       3.04  
Capital lease obligation     3,863       46       4.76       5,106       61       4.78  
Subordinated debt     133,163       1,730       5.20       132,874       1,363       4.10  
Total interest-bearing liabilities     4,839,663       41,974       3.47 %     4,458,560       9,488       0.85 %
Noninterest-bearing liabilities:                                    
Demand deposits     990,854                   1,116,843              
Accrued expenses and other liabilities     86,598                   83,446              
Total noninterest-bearing liabilities     1,077,452                   1,200,289              
Shareholders’ equity     565,153                   529,160              
Total liabilities and shareholders’ equity   $ 6,482,268                 $ 6,188,009              
Net interest income         $ 36,917                 $ 45,901        
Net interest spread                 1.44 %                 2.77 %
Net interest margin (D)                 2.28 %                 2.98 %

(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, 2023     June 30, 2023  
    Average     Income/           Average     Income/        
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                    
Interest-earning assets:                                    
Investments:                                    
Taxable (A)   $ 806,861     $ 5,170       2.56 %   $ 806,447     $ 4,900       2.43 %
Tax-exempt (A) (B)     1,198       11       3.67       1,858       20       4.31  
                                     
Loans (B) (C):                                    
Mortgages     580,951       5,208       3.59       557,575       4,942       3.55  
Commercial mortgages     2,502,351       27,746       4.44       2,504,268       26,839       4.29  
Commercial     2,298,723       37,357       6.50       2,241,817       35,457       6.33  
Commercial construction     12,346       282       9.14       6,977       165       9.46  
Installment     56,248       967       6.88       51,269       841       6.56  
Home equity     34,250       680       7.94       33,650       633       7.52  
Other     234       7       11.97       271       7       10.33  
Total loans     5,485,103       72,247       5.27       5,395,827       68,884       5.11  
Federal funds sold                                    
Interest-earning deposits     136,315       1,463       4.29       141,968       1,451       4.09  
Total interest-earning assets     6,429,477       78,891       4.91 %     6,346,100       75,255       4.74 %
Noninterest-earning assets:                                    
Cash and due from banks     6,954                   7,800              
Allowance for credit losses     (63,625 )                 (63,045 )            
Premises and equipment     23,880                   23,745              
Other assets     85,582                   85,969              
Total noninterest-earning assets     52,791                   54,469              
Total assets   $ 6,482,268                 $ 6,400,569              
                                     
LIABILITIES:                                    
Interest-bearing deposits:                                    
Checking   $ 2,813,080     $ 24,318       3.46 %   $ 2,834,140     $ 22,219       3.14 %
Money markets     771,781       4,458       2.31       788,745       3,853       1.95  
Savings     118,718       75       0.25       125,555       45       0.14  
Certificates of deposit – retail     415,665       3,459       3.33       385,211       2,462       2.56  
Subtotal interest-bearing deposits     4,119,244       32,310       3.14       4,133,651       28,579       2.77  
Interest-bearing demand – brokered     10,000       136       5.44       10,000       125       5.00  
Certificates of deposit – brokered     102,777       1,183       4.60       26,165       196       3.00  
Total interest-bearing deposits     4,232,021       33,629       3.18       4,169,816       28,900       2.77  
Borrowings     470,616       6,569       5.58       413,961       5,384       5.20  
Capital lease obligation     3,863       46       4.76       4,187       50       4.78  
Subordinated debt     133,163       1,730       5.20       133,090       1,597       4.80  
Total interest-bearing liabilities     4,839,663       41,974       3.47 %     4,721,054       35,931       3.04 %
Noninterest-bearing liabilities:                                    
Demand deposits     990,854                   1,033,176              
Accrued expenses and other liabilities     86,598                   88,911              
Total noninterest-bearing liabilities     1,077,452                   1,122,087              
Shareholders’ equity     565,153                   557,428              
Total liabilities and shareholders’ equity   $ 6,482,268                 $ 6,400,569              
Net interest income         $ 36,917                 $ 39,324        
Net interest spread                 1.44 %                 1.70 %
Net interest margin (D)                 2.28 %                 2.49 %

(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, 2023     September 30, 2022  
    Average     Income/           Average     Income/        
    Balance     Expense     Yield     Balance     Expense     Yield  
ASSETS:                                    
Interest-earning assets:                                    
Investments:                                    
Taxable (A)   $ 801,535     $ 14,541       2.42 %   $ 818,411     $ 9,995       1.63 %
Tax-exempt (A) (B)     1,637       49       3.99       4,035       117       3.87  
                                     
Loans (B) (C):                                    
Mortgages     556,220       14,433       3.46       511,999       11,148       2.90  
Commercial mortgages     2,495,175       80,503       4.30       2,472,503       62,481       3.37  
Commercial     2,247,803       106,182       6.30       2,016,533       60,911       4.03  
Commercial construction     7,903       536       9.04       15,427       465       4.02  
Installment     49,214       2,416       6.55       36,697       951       3.46  
Home equity     33,914       1,903       7.48       38,324       1,106       3.85  
Other     260       22       11.28       268       18       8.96  
Total loans     5,390,489       205,995       5.10       5,091,751       137,080       3.59  
Federal funds sold                                    
Interest-earning deposits     147,071       4,452       4.04       174,833       1,505       1.15  
Total interest-earning assets     6,340,732       225,037       4.73 %     6,089,030       148,697       3.26 %
Noninterest-earning assets:                                    
Cash and due from banks     8,388                   8,491              
Allowance for credit losses     (62,753 )                 (60,026 )            
Premises and equipment     23,850                   23,187              
Other assets     76,992                   119,908              
Total noninterest-earning assets     46,477                   91,560              
Total assets   $ 6,387,209                 $ 6,180,590              
                                     
LIABILITIES:                                    
Interest-bearing deposits:                                    
Checking   $ 2,739,115     $ 63,018       3.07 %   $ 2,411,023     $ 8,695       0.48 %
Money markets     893,567       13,185       1.97       1,255,341       2,675       0.28  
Savings     128,437       148       0.15       162,675       15       0.01  
Certificates of deposit – retail     386,488       7,650       2.64       409,442       2,048       0.67  
Subtotal interest-bearing deposits     4,147,607       84,001       2.70       4,238,481       13,433       0.42  
Interest-bearing demand – brokered     15,311       469       4.08       85,000       1,082       1.70  
Certificates of deposit – brokered     51,916       1,584       4.07       31,058       732       3.14  
Total interest-bearing deposits     4,214,834       86,054       2.72       4,354,539       15,247       0.47  
Borrowings     331,170       13,249       5.33       20,876       103       0.66  
Capital lease obligation     4,179       149       4.75       5,389       193       4.78  
Subordinated debt     133,090       4,966       4.98       132,803       4,090       4.11  
Total interest-bearing liabilities     4,683,273       104,418       2.97 %     4,513,607       19,633       0.58 %
Noninterest-bearing liabilities:                                    
Demand deposits     1,066,162                   1,042,064              
Accrued expenses and other liabilities     82,215                   93,462              
Total noninterest-bearing liabilities     1,148,377                   1,135,526              
Shareholders’ equity     555,559                   531,457              
Total liabilities and shareholders’ equity   $ 6,387,209                 $ 6,180,590              
Net interest income         $ 120,619                 $ 129,064        
Net interest spread                 1.76 %                 2.68 %
Net interest margin (D)                 2.54 %                 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
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  
    Sept 30,     June 30,     March 31,     Dec 31,     Sept 30,  
Tangible Book Value Per Share   2023     2023     2023     2022     2022  
Shareholders’ equity   $ 558,956     $ 565,069     $ 554,958     $ 532,980     $ 515,514  
Less: Intangible assets, net     46,286       46,624       46,979       47,333       47,698  
Tangible equity   $ 512,670     $ 518,445     $ 507,979     $ 485,647     $ 467,816  
Less: other comprehensive loss     (81,653 )     (67,997 )     (67,445 )     (74,211 )     (74,983 )
Tangible equity excluding other comprehensive loss   $ 594,323     $ 586,442     $ 575,424     $ 559,858     $ 542,799  
                               
Period end shares outstanding     17,816,922       17,887,895       18,014,757       17,813,451       17,920,571  
Tangible book value per share   $ 28.77     $ 28.98     $ 28.20     $ 27.26     $ 26.10  
Tangible book value per share excluding other comprehensive loss   $ 33.36     $ 32.78     $ 31.94     $ 31.43     $ 30.29  
Book value per share     31.37       31.59       30.81       29.92       28.77  
                               
Tangible Equity to Tangible Assets                              
Total assets   $ 6,521,581     $ 6,479,700     $ 6,480,018     $ 6,353,593     $ 6,087,261  
Less: Intangible assets, net     46,286       46,624       46,979       47,333       47,698  
Tangible assets   $ 6,475,295     $ 6,433,076     $ 6,433,039     $ 6,306,260     $ 6,039,563  
Less: other comprehensive loss     (81,653 )     (67,997 )     (67,445 )     (74,211 )     (74,983 )
Tangible assets excluding other comprehensive loss   $ 6,556,948     $ 6,501,073     $ 6,500,484     $ 6,380,471     $ 6,114,546  
                               
Tangible equity to tangible assets     7.92 %     8.06 %     7.90 %     7.70 %     7.75 %
Tangible equity to tangible assets excluding other comprehensive loss     9.06 %     9.02 %     8.85 %     8.77 %     8.88 %
Equity to assets     8.57 %     8.72 %     8.56 %     8.39 %     8.47 %

(Dollars in thousands, except per share data)

    Three Months Ended  
    Sept 30,     June 30,     March 31,     Dec 31,     Sept 30,  
Return on Average Tangible Equity   2023     2023     2023     2022     2022  
Net income   $ 8,755     $ 13,145     $ 18,355     $ 20,579     $ 20,126  
                               
Average shareholders’ equity   $ 565,153     $ 557,428     $ 543,861     $ 523,406     $ 529,160  
Less: Average intangible assets, net     46,468       46,828       47,189       47,531       47,922  
Average tangible equity   $ 518,685     $ 510,600     $ 496,672     $ 475,875     $ 481,238  
                               
Return on average tangible common equity     6.75 %     10.30 %     14.78 %     17.30 %     16.73 %


    For the Nine Months Ended  
    Sept 30,     Sept 30,  
Return on Average Tangible Equity   2023     2022  
Net income   $ 40,255     $ 53,667  
             
Average shareholders’ equity   $ 555,559     $ 531,457  
Less: Average intangible assets, net     46,825       48,307  
Average tangible equity     508,734       483,150  
             
Return on average tangible common equity     10.55 %     14.81 %

(Dollars in thousands, except per share data)

    Three Months Ended  
    Sept 30,     June 30,     March 31,     Dec 31,     Sept 30,  
Efficiency Ratio   2023     2023     2023     2022     2022  
Net interest income   $ 36,515     $ 38,921     $ 43,978     $ 48,040     $ 45,525  
Total other income     19,354       18,575       18,059       16,812       16,383  
Add:                              
Fair value adjustment for CRA equity security     404       209       (209 )     (28 )     571  
Less:                              
Gain on sale of property                       (275 )      
Income from life insurance proceeds                       (25 )      
Total recurring revenue     56,273       57,705       61,828       64,524       62,479  
                               
Operating expenses     37,413       37,692       35,574       33,412       33,560  
Less:                              
Accelerated Expense for Retirement           1,665       300              
Branch Closure Expense                 175              
Total operating expense     37,413       36,027       35,099       33,412       33,560  
                               
Efficiency ratio     66.48 %     62.43 %     56.77 %     51.78 %     53.71 %


    For the Nine Months Ended  
    Sept 30,     Sept 30,  
Efficiency Ratio   2023     2022  
Net interest income   $ 119,414     $ 128,040  
Total other income     55,988       49,605  
Add:            
Fair value adjustment for CRA equity security     404       1,728  
Less:            
Loss on securities sale, net           6,609  
Total recurring revenue     175,806       185,982  
             
Operating expenses     110,679       100,388  
Less:            
Swap valuation allowance           673  
Accelerated Expense for Retirement     1,965        
Branch Closure Expense     175        
Severance expense           1,476  
Total operating expense     108,539       98,239  
             
Efficiency ratio     61.74 %     52.82 %


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Source: Peapack-Gladstone Financial Corporation