Peapack-Gladstone Financial Corporation Reports a Strong First Quarter and Declares Its Quarterly Cash Dividend

Company Release - 4/27/2018 9:00 AM ET

BEDMINSTER, N.J., April 27, 2018 (GLOBE NEWSWIRE) -- Peapack-Gladstone Financial Corporation (NASDAQ:PGC) (the “Company”) recorded net income of $10.81 million and diluted earnings per share of $0.57 for the quarter ended March 31, 2018, compared to $7.98 million and $0.46, respectively, for the quarter ended March 31, 2017, reflecting increases of $2.83 million, or 35 percent, and $0.11 per share, or 24 percent, respectively.

Executive Summary:

The following tables summarize specified financial measures for the periods shown. The explanatory footnotes following each table are integral to the table.

March 2018 Quarter Compared to Prior Year Quarter 
  
  Qtr ended  Qtr ended    
  March  March  Increase/ 
(Dollars in millions, except per share data) 2018 (1)  2017  (Decrease) 
Net interest income$28.39 $25.59 $2.80 11 %
Provision for loan and lease losses 1.25  1.60  (0.35)(22) 
Net interest income after provision 27.14  23.99  3.15 13  
Wealth management fee income 8.37  4.82  3.55 74  
Other income 1.85  2.20  (0.35)(16) 
Total other income 10.22  7.02  3.20 46  
Operating expenses 23.34  19.30  4.04 21  
Pretax income 14.02  11.71  2.31 20  
Income tax expense 3.21(2) 3.73(2) (0.52)(14) 
Net income$10.81 $7.98 $2.83 35 %
Diluted EPS$0.57 $0.46 $0.11 24 %
           
Return on average assets annualized 1.01% 0.82% 0.19   
Return on average equity annualized 10.54% 9.62% 0.92   
           


(1) The March 2018 quarter included results of operations of the Equipment Finance team hired in April 2017, Murphy Capital Management, acquired effective August 1, 2017, and Quadrant Capital Management, acquired effective November 1, 2017.
(2) The March 2018 quarter reflected the reduced Federal income tax rate due to the new tax law signed in December 2017.  The March 2018 quarter included a $362 thousand reduction in income taxes, while the March 2017 quarter included a $662 thousand reduction in income taxes, both associated with the vesting of restricted stock under ASU 2016-09.


  
March 2018 Quarter Compared to Linked Quarter 
  
  Qtr ended  Qtr ended    
  March  December  Increase/ 
(Dollars in millions, except per share data) 2018  2017  (Decrease) 
Net interest income$28.39 $28.59 $(0.20)(1)%
Provision for loan and lease losses 1.25  1.65  (0.40)(24) 
Net interest income after provision 27.14  26.94  0.20 1  
Wealth management fee income 8.37(1) 7.49  0.88 12  
Other income 1.85  3.11(2) (1.26)(41) 
Total other income 10.22  10.60  (0.38)(4) 
Operating expenses 23.34(1) 24.25(3) (0.91)(4) 
Pretax income 14.02  13.29  0.73 5  
Income tax expense 3.21(5) 2.92(4) 0.29 10  
Net income$10.81 $10.37 $0.44 4 %
Diluted EPS$0.57 $0.56 $0.01 2 %
           
Return on average assets annualized 1.01% 0.98% 0.03   
Return on average equity annualized 10.54% 10.61% (0.07)  
           


(1) The March 2018 quarter included a full three months of operations of Quadrant Capital Management, acquired effective November 1, 2017. (The December 2017 quarter included two months of operations.)
(2) The December 2017 quarter included $378 thousand of gains on sales of loans held for sale at lower of cost or fair value.
(3) The December 2017 quarter included $300 thousand of investment banking expenses related to the Quadrant Capital Management acquisition, and also included $1.3 million of separation expenses related to two senior officers.
(4) The December 2017 quarter included a $1.60 million tax benefit from the reduction of the Company’s deferred tax liability due to the new tax law.
(5) The March 2018 quarter reflected the reduced Federal income tax rate due to the new tax law. 
The March 2018 quarter also included a $362 thousand reduction in income taxes, associated with the vesting of restricted stock under ASU 2016-09.
   

Douglas L. Kennedy, President and CEO, said, “We had a good start to 2018, as we continued to execute on our strategic plan – Expanding Our Reach.  Earnings per share growth was 24 percent over the same quarter last year and return on average equity was 10.54 percent for the first quarter of 2018.”

Highlights for the quarter included:

  • Wealth Management remains integral to the strategy and diversified revenue sources:
    -- The March 2018 quarter included results from both Quadrant Capital Management, acquired November 1, 2017, and Murphy Capital Management, acquired August 1, 2017.
    -- At March 31, 2018, the market value of AUM/AUA at the Private Wealth Management Division of Peapack-Gladstone Bank (the “Bank”) increased $1.8 billion to $5.6 billion from $3.8 billion at March 31, 2017, reflecting growth of 47 percent.   Organic growth was $500 million of the $1.8 billion in growth, while acquisitions accounted for $1.3 billion of the growth.
    -- Fee income from the Private Wealth Management Division totaled $8.4 million for the quarter ended March 31, 2018, an increase of $3.5 million, or 74 percent, from $4.8 million for the quarter ended March 31, 2017. 
    -- Wealth management fee income, comprised approximately 22 percent of the Company’s total revenue for the quarter ended March 31, 2018, contributed significantly to the Company’s diversified revenue sources.
    -- In addition to wealth income, also contributing to the Company’s diversified revenue sources is fee income related to loan level, back-to-back swaps, and gain on sale of SBA loans. (At March 31, 2018, there were approximately $3 million of SBA loans held for sale).
  • The balance sheet growth was managed with a focus on Commercial and Industrial lending:
    -- Loans at March 31, 2018 totaled $3.71 billion.  This reflected net growth of $272 million, or 8 percent, when compared to the $3.44 billion at March 31, 2017. 
    -- During the second quarter of 2017, the Company hired a team of highly experienced bankers to focus on equipment financing. Net outstanding financings from this business totaled $178 million as of March 31, 2018, and were included in total commercial and industrial (“C&I”) loans.
    -- Total C&I loans at March 31, 2018 were $997 million.  This reflected net growth of $309 million (45 percent) when compared to $688 million in C&I loans at March 31, 2017.
    -- The Company continued to manage its balance sheet such that lower yielding multifamily loans decline as a percentage of the overall loan portfolio and higher yielding C&I loans become a larger percentage of the overall loan portfolio. As of March 31, 2018, total C&I loans comprised 27 percent of the total loan portfolio, as compared to 20 percent a year earlier.  As of March 31, 2018, total multifamily loans comprised of 37 percent of the total loan portfolio, as compared to 43 percent a year earlier.
    -- The Bank’s concentration in multifamily and investor commercial real estate loans declined to 446 percent of risk based capital at March 31, 2018 from 552 percent at March 31, 2017.
    -- Total “customer” deposit balances (defined as deposits excluding brokered CDs and brokered “overnight” interest-bearing demand deposits) totaled $3.30 billion at March 31, 2018.  This reflected net growth of $143 million (5 percent) when compared to $3.16 billion of total “customer” deposit balances at March 31, 2017. During the March 2018 quarter, $66 million of listing service deposits matured – the Company has chosen to not participate in listing service programs at this time, so maturing listing service deposits are not replaced with new listing service deposits. Other net deposit outflows in the quarter were concentrated primarily in a small number of larger depositors, who remain clients of the Company.

  • Capital and asset quality continue to be strong.
    -- Asset quality metrics continued to be strong at March 31, 2018.  Nonperforming assets at March 31, 2018 were $15.4 million, or 0.36 percent of total assets.  Total loans past due 30 through 89 days and still accruing were $674 thousand, or 0.02 percent of total loans at March 31, 2018.
    -- The Company’s and Bank’s capital ratios at March 31, 2018 all increased compared to the December 31, 2017 levels. These capital positions were benefitted by net income of $10.81 million and $10.62 million of voluntary share purchases under the Dividend Reinvestment Plan for the first quarter of 2018.

Supplemental Quarterly Details:

Wealth Management Business

In the March 2018 quarter, the Bank’s wealth management business generated $8.37 million in fee income compared to $7.49 million for the December 2017 quarter, and $4.82 million for the March 2017 quarter. 

The March 2018 quarter included a full three months of income related to Murphy Capital, which was acquired effective August 1, 2017, and three months of income related to Quadrant, which was acquired effective November 1, 2017. The March 2018 quarter included increased “recurring type” fee income (tied principally to asset management fees and custody fees), which was due to net inflows from new business, as well as additions to accounts from existing clients, partially offset by normal levels of disbursements and outflows.

John P. Babcock, President of the PGB Private Wealth Management Division, said, “We continue to provide personalized, pro-active advice. Our new business pipeline continues to be strong and we expect continued growth through potential strategic acquisitions of wealth management firms, as well as organically.”

Loans

For the quarter ended March 31, 2018, total commercial and industrial loans grew $38 million (4 percent for the quarter, or 16 percent annualized) to $997 million at the end of the first quarter, compared to $958 million at end of year 2017. Additionally, commercial mortgage loans grew $17 million (3 percent for the quarter, or 11 percent annualized) to $644 million at the end of the first quarter, compared to $627 million at end of year 2017.  This growth was principally funded by reductions in lower yielding multifamily and 1-4 family residential loans, as well as a partial paydown of a large investment credit line (included in consumer loans).          

Mr. Kennedy said, “Our private banking business model addresses the needs and expectations of successful business owners and entrepreneurs.  We have the capability to engage in high level strategic debt, capital and valuation analysis coupled with succession, estate and wealth planning strategies, enabling us to provide a unique boutique level of service.”

Funding

As noted previously, during the first quarter of 2018, $66 million of listing service deposits matured - the Company has chosen not to participate in listing service programs at this time, so maturing listing service deposits are not replaced with new listing service deposits. Other net deposit outflows in the quarter were concentrated primarily in a small number of larger depositors, who remain clients of the Company.

Managed reductions in the lower yielding multifamily, 1-4 family residential, and investment credit line loan portfolios of $48 million funded the increased higher yielding C&I portfolio ($38 million), and commercial mortgage portfolio ($17 million). Capital growth of $19 million and overnight borrowings of $216 million funded the matured listing service deposits of $66 million, other net deposit outflows discussed above of $80 million, increased on balance sheet liquidity (cash and securities) by $60 million, and maturity of FHLB advances of $15 million.    

In addition to approximately $501 million of cash, cash equivalents and investment securities on its balance sheet, the Company also had approximately $1.3 billion of secured funding available from the Federal Home Loan Bank, of which $239 million was drawn as of March 31, 2018.

Mr. Kennedy noted, “The Company continues to focus on providing high touch client service, a key element in growing its personal and commercial core deposit base.  The Company expects that our treasury management capabilities, including our new Treasury Management platform and our new escrow management product software, as well as added treasury management sales professionals and private bankers, will result in growth of commercial deposits.”

Mr. Kennedy added, “Our overall loan growth will continue to be governed by our continued ability to generate value-added core deposits, and by our in-house relationship-based loan profitability model used to manage the origination of loans with competitive risk-adjusted returns.”

Net Interest Income / Net Interest Margin

Net interest income and net interest margin were $28.39 million and 2.76 percent for the first quarter of 2018, compared to $28.59 million and 2.78 percent for the fourth quarter of 2017, and compared to $25.59 million and 2.71 percent for the same quarter last year.  Net interest income for the first quarter of 2018 benefitted from loan growth as well as $433 thousand (approximately 4 basis points of net interest margin) of prepayment premiums received on the prepayment of multifamily loans, which reflected a decrease from $945 thousand (approximately 9 basis points of net interest margin) for the December 2017 quarter and a decrease from $515 thousand (approximately 6 basis points of net interest margin) in the March 2017 quarter.  In addition, the March 2018 quarter included three months of the subordinated debt issued in mid-December 2017.

Net interest margin for the first quarter of 2018 decreased when compared to the fourth quarter of 2017, and increased from the same quarter of 2017.  The increase from the first quarter of 2017 was due to the effect of the increased market rates on our adjustable rate assets, partially offset by an increase in our cost of deposits and lower prepayment penalties. The decrease from the previous quarter was due to the significantly higher prepayment premiums in the December 2017 quarter.  The issuance of $35 million of subordinated debt issued in mid-December 2017 also negatively impacted net interest margin slightly in the March 2018 quarter.

Excluding the effect of prepayment premiums, net interest margins would have been 2.72 percent, 2.69 percent, and 2.65 percent for the March 2018 quarter, December 2017 quarter, and the March 2017 quarter, respectively.

The Company’s interest rate sensitivity models indicate that the Company’s net interest income and margin would improve slightly in a rising interest rate environment. However, such income and margin may also be impacted by competitive pressures in attracting and/or retaining deposits.

Other Noninterest Income

The first quarter of 2018 included $31 thousand of income related to the Company’s SBA lending and sale program, compared to $774 thousand generated in the December 2017 quarter, and $155 thousand in the March 2017 quarter.  At March 31, 2018, there were approximately $3 million of SBA loans held for sale.  Such loans were sold in early April at a gain of approximately $275 thousand.

The first quarter of 2018 also included $252 thousand of loan level, back-to-back swap income compared to $179 thousand in the December 2017 quarter and $456 thousand in the March 2017 quarter.  This program provides a borrower with a fixed interest rate on a loan, while providing an adjustable rate to the Company, thus helping to manage the Company’s interest rate risk, while contributing to income.

The Company noted that income from both of these programs are not linear each quarter, as some quarters will be higher than others.

The March 2018 quarter included a negative $78 thousand mark to market adjustment of a CRA investment security which is classified as an equity security.  Such security has been owned for years for CRA purposes, but under Accounting Standards Update 2016-01, Financial Instruments, equity securities now require a quarterly mark to market through the income statement.    

Operating Expenses

The Company’s total operating expenses were $23.34 million for the quarter ended March 31, 2018, compared to $24.25 million for the December 2017 quarter and $19.30 million for the March 2017 quarter.

Compensation and employee benefits expense for the March 2018 quarter was $14.58 million compared to $15.30 million for the December 2017 quarter, and $11.91 million for the March 2017 quarter.  The March 2018 quarter included a full quarter of expense related to the Equipment Finance team (who joined in April 2017) Murphy Capital (which closed in August 2017), and Quadrant (which closed in November 2017). Strategic hiring, normal salary increases and increased bonus/incentive accruals associated with the Company’s profitability and growth also contributed to the increase for the March 2018 quarter as compared to the March 2017 quarter. Additionally, the Company recorded expense of $1.3 million related to the separation of two senior officers in the December 2017 quarter.           

Other expenses for the March 2018 quarter were $4.91 million compared to $5.27 million for the December 2017 quarter and $3.89 million for the March 2017 quarter. The March 2018 quarter included a full quarter of other expenses related to the Equipment Finance business, Murphy Capital, and Quadrant. The December 2017 quarter included approximately $300 thousand of investment banking fee expenses related to the Quadrant acquisition. Further, when compared to the March 2017 quarter, the March 2018 quarter included increased advertising and marketing expenses relating to various target marketing campaigns.

Income Taxes

The March 2018 quarter included a reduced Federal income tax rate due to the new tax law signed in December 2017. The March 2018 quarter also included a $362 thousand reduction in income taxes, while the March 2017 quarter included a $662 thousand reduction in income taxes, both associated with the vesting of restricted stock under ASU 2016-09. The December 2017 quarter included a $1.60 million tax benefit from the reduction of the Company’s deferred tax liability due to the new tax law.  The effective tax rate for the March 2018 quarter was 22.9 percent. Excluding the $362 thousand benefit associated with ASU 2016-09, the effective tax rate for the March 2018 quarter would have been 25.5 percent.

Provision for Loan and Lease Losses / Asset Quality

For the quarter ended March 31, 2018, the Company’s provision for loan and lease losses was $1.25 million, compared to $1.65 million for the December 2017 quarter and $1.60 million for the March 2017 quarter. The Company’s provision for loan and lease losses (and its allowance for loan and lease losses) reflect, among other things, the Company’s asset quality metrics, net loan growth and the composition of the loan portfolio.

At March 31, 2018, the allowance for loan and lease losses of $37.70 million (283 percent of nonperforming loans and 1.02 percent of total loans), compared to $36.44 million at December 31, 2017 (269 percent of nonperforming loans and 0.98 percent of total loans), and $33.61 million (292 percent of nonperforming loans and 0.98 percent of total loans) at March 31, 2017.   

Nonperforming assets at March 31, 2018 (which does not include troubled debt restructured loans that are performing in accordance with their terms) were $15.4 million, or 0.36 percent of total assets, compared to $15.6 million, or 0.37 percent of total assets, at December 31, 2017 and $12.2 million, or 0.31 percent of total assets, at March 31, 2017.  Total loans past due 30 through 89 days and still accruing were $674 thousand at March 31, 2018, compared to $246 thousand at December 31, 2017 and $622 thousand at March 31, 2017.

Capital / Dividends

The Company’s and Bank’s capital positions in the March 2018 quarter benefitted by net income of $10.81 million and $10.62 million of voluntary share purchases under the Dividend Reinvestment Plan. Voluntary share purchases in the Dividend Reinvestment Plan can be filled from the Company’s authorized but unissued shares and/or in the open market, at the discretion of the Company – all of the share purchases in the March 2018 quarter were from authorized but unissued shares. The Company’s and Bank’s March 2018 and December 2017 regulatory capital positions were also benefitted by the mid-December 2017 subordinated debt issuance, and subsequent downstream of a large portion of the proceeds to the Bank as regulatory capital.

The Bank’s regulatory capital ratios are all above the ratios to be considered well capitalized under regulatory guidance.

On April 24, 2018, the Company’s Board of Directors declared a cash dividend of $0.05 per share payable on May 22, 2018 to shareholders of record on May 8, 2018.

ABOUT THE COMPANY

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $4.34 billion as of March 31, 2018.  Founded in 1921, Peapack-Gladstone Bank is a commercial bank that provides innovative private banking services to businesses, non-profits and consumers, which help them to establish, maintain and expand their legacy.  Through its private banking locations in Bedminster, Morristown, Princeton and Teaneck, its Private Wealth Management Division, and its branch network and online platforms, Peapack-Gladstone Bank offers an unparalleled commitment to client service.

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:

  • inability to successfully grow our business and implement our strategic plan, including an inability to generate revenues to offset the increased personnel and other costs related to the strategic plan;
  • the impact of anticipated higher operating expenses in 2018 and beyond;
  • inability to manage our growth;
  • inability to successfully integrate our expanded employee base;
  • unexpected decline in the economy, in particular in our New Jersey and New York market areas;
  • declines in our net interest margin caused by the interest rate environment and/or highly competitive market;
  • declines in the value in our investment portfolio;
  • higher than expected increases in our allowance for loan and lease losses;
  • higher than expected increases in loan and lease losses or in the level of nonperforming loans;
  • unexpected changes in interest rates;
  • unexpected 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 providers;
  • higher than expected FDIC insurance premiums;
  • adverse weather conditions;
  • inability to successfully generate new business in new geographic markets;
  • inability to execute upon new business initiatives;
  • lack of liquidity to fund our various cash obligations;
  • reduction in our lower-cost funding sources;
  • our inability to adapt to technological changes;
  • claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters; 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, 2017.  We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

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

 
(Tables to follow)
 
 
PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands, except share data)
(Unaudited)
 For the Three Months Ended
  March 31, Dec 31, Sept 30, June 30, March 31,
  2018  2017  2017  2017  2017 
Income Statement Data:          
Interest income$37,068 $36,439 $37,491 $33,412 $31,385 
Interest expense 8,675  7,853  7,499  6,440  5,794 
  Net interest income 28,393  28,586  29,992  26,972  25,591 
Provision for loan and lease losses 1,250  1,650  400  2,200  1,600 
  Net interest income after          
  provision for loan and lease losses 27,143  26,936  29,592  24,772  23,991 
Wealth management fee income 8,367  7,489  5,790  5,086  4,818 
Service charges and fees 831  837  816  815  771 
Bank owned life insurance 336  341  343  350  322 
Gain on loans held for sale at fair          
  value (Mortgage banking) 94  122  141  91  47 
Gain on loans held for sale at          
  lower of cost or fair value -  378  34  -  - 
Fee income related to loan level,          
  back-to-back swaps 252  179  888  1,291  456 
Gain on sale of SBA loans 31  774  493  142  155 
Other income 382  486  326  396  450 
Securities losses, net (78) -  -  -  - 
  Total other income 10,215  10,606  8,831  8,171  7,019 
Salaries and employee benefits 14,579  15,296  13,996  12,751  11,913 
Premises and equipment 3,270  3,194  2,945  3,033  2,816 
FDIC insurance expense 580  495  583  602  686 
Other expenses 4,908  5,266  4,437  3,709  3,889 
  Total operating expenses 23,337  24,251  21,961  20,095  19,304 
Income before income taxes 14,021  13,291  16,462  12,848  11,706 
Income tax expense 3,214  2,922  6,256  4,908  3,724 
Net income$10,807 $10,369 $10,206 $7,940 $7,982 
           
Total revenue (A)$38,608 $39,192 $38,823 $35,143 $32,610 
Per Common Share Data:          
Earnings per share (basic)$0.58 $0.57 $0.57 $0.45 $0.47 
Earnings per share (diluted) 0.57  0.56  0.56  0.45  0.46 
Weighted average number of           
  common shares outstanding:          
Basic 18,608,309  18,197,708  17,800,153  17,505,638  17,121,631 
Diluted 18,908,692  18,527,829  18,123,268  17,756,390  17,438,907 
Performance Ratios:          
Return on average assets annualized (ROAA) 1.01% 0.98% 0.97% 0.79% 0.82%
Return on average equity annualized (ROAE) 10.54% 10.61% 11.09% 9.06% 9.62%
Net interest margin (tax- equivalent basis) 2.76% 2.78% 2.95% 2.76% 2.71%
GAAP efficiency ratio (B) 60.45% 61.88% 56.57% 57.18% 59.20%
Operating expenses / average          
  assets annualized 2.19% 2.28% 2.10% 2.00% 1.97%


(A) Total revenue includes net interest income plus total other income.
(B) Calculated as total operating expenses as a percentage of total revenue.  For Non-GAAP efficiency ratio, see Non-GAAP financial measures reconciliation included in these tables beginning on page 22.


 
PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in Thousands)
(Unaudited)
 As of
  March 31, Dec 31, Sept 30, June 30, March 31,
  2018 2017 2017 2017 2017
ASSETS          
Cash and due from banks$4,223$4,415$4,446$4,119$4,910
Federal funds sold 101 101 101 101 101
Interest-earning deposits 149,192 108,931 88,793 89,600 113,953
  Total cash and cash equivalents 153,516 113,447 93,340 93,820 118,964
           
Securities available for sale 342,553 327,633 315,112 315,224 300,232
Equity security (A) 4,746 - - - -
FHLB and FRB stock, at cost 23,703 13,378 13,589 18,487 15,436
           
Residential mortgage (B) 567,885 577,340 605,015 611,316 571,496
Multifamily mortgage 1,366,712 1,388,958 1,441,851 1,504,581 1,468,890
Commercial mortgage 643,761 626,656 625,467 609,444 573,253
Commercial loans (B) 996,788 958,481 845,831 800,927 687,805
Consumer loans 71,580 86,277 81,671 72,943 69,802
Home equity lines of credit 64,570 67,497 68,787 67,051 68,055
Other loans 420 402 815 458 477
  Total loans 3,711,716 3,705,611 3,669,437 3,666,720 3,439,778
  Less: Allowances for loan and lease losses 37,696 36,440 35,915 35,751 33,610
  Net loans 3,674,020 3,669,171 3,633,522 3,630,969 3,406,168
           
Premises and equipment 28,923 29,476 29,832 29,806 30,113
Other real estate owned 2,090 2,090 137 373 671
Accrued interest receivable 7,306 9,452 6,803 6,776 6,823
Bank owned life insurance 44,779 44,586 44,380 44,172 43,992
Deferred tax assets, net 629 552 16,636 16,912 15,325
Goodwill and other intangible assets (C) 23,656 23,836 15,064 3,095 3,126
Other assets (D) 30,573 26,926 7,917 6,045 6,712
  TOTAL ASSETS$4,336,494$4,260,547$4,176,332$4,165,679$3,947,562
           
LIABILITIES          
Deposits:          
  Noninterest-bearing demand deposits$536,054$539,304$557,117$548,427$528,554
  Interest-bearing demand deposits 1,089,980 1,152,483 1,144,714 1,085,805 1,015,178
  Savings 126,026 119,556 121,830 121,480 122,262
  Money market accounts 1,006,540 1,091,385 1,046,997 1,081,366 1,049,909
  Certificates of deposit – Retail 540,942 543,035 528,251 475,395 440,991
Subtotal “customer” deposits 3,299,542 3,445,763 3,398,909 3,312,473 3,156,894
  IB Demand – Brokered 180,000 180,000 180,000 180,000 180,000
  Certificates of deposit – Brokered 72,614 72,591 83,788 88,780 93,750
Total deposits 3,552,156 3,698,354 3,662,697 3,581,253 3,430,644
           
Overnight borrowings 216,000 - - 87,000 34,550
Federal home loan bank advances 22,898 37,898 49,898 58,795 58,795
Capital lease obligation 8,900 9,072 9,240 9,407 9,556
Subordinated debt, net 83,079 83,024 48,862 48,829 48,796
Other liabilities 31,055 28,521 25,699 23,548 24,293
  TOTAL LIABILITIES 3,914,088 3,856,869 3,796,396 3,808,832 3,606,634
Shareholders’ equity 422,406 403,678 379,936 356,847 340,928
  TOTAL LIABILITIES AND          
  SHAREHOLDERS’ EQUITY$4,336,494$4,260,547$4,176,332$4,165,679$3,947,562
           
Assets under management and / or 
administration at Peapack-Gladstone
          
Bank’s Private Wealth Management          
Division (market value, not          
included above-dollars in billions)$5.6$5.5$4.8$3.9$3.8


   
(A) Represents investment in CRA Investment Fund.  This investment was classified as an equity security, carried at market, in accordance with the adoption of Accounting Standard Update 2016-01, Financial Instruments on January 1, 2018.
(B) Includes loans held for sale at fair value and/or lower cost or market.
(C) Includes goodwill and intangibles from the Murphy Capital Management and the Quadrant Capital Management acquisitions completed in August and November 2017, respectively.
(D) Increase principally due to prepaid taxes.


PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED BALANCE SHEET DATA
(Dollars in Thousands)
(Unaudited)
 
 As of
  March 31, Dec 31, Sept 30, June 30, March 31,
  2018  2017  2017  2017  2017 
Asset Quality:          
Loans past due over 90 days          
  and still accruing$- $- $- $- $- 
Nonaccrual loans (A) 13,314  13,530  15,367  15,643  11,494 
Other real estate owned 2,090  2,090  137  373  671 
  Total nonperforming assets$15,404 $15,620 $15,504 $16,016 $12,165 
           
Nonperforming loans to          
  total loans 0.36% 0.37% 0.42% 0.43% 0.33%
Nonperforming assets to          
  total assets 0.36% 0.37% 0.37% 0.38% 0.31%
           
Performing TDRs (B)(C)$7,888 $9,514 $9,658 $9,725 $15,030 
           
Loans past due 30 through 89          
  days and still accruing$674 $246 $589 $1,232 $622 
           
Classified loans$55,945 $41,706 $44,170 $43,608 $43,002 
           
Impaired loans$21,223 $23,065 $25,046 $25,294 $26,546 
           
Allowance for loan and lease losses:          
  Beginning of period$36,440 $35,915 $35,751 $33,610 $32,208 
  Provision for loan and lease losses 1,250  1,650  400  2,200  1,600 
  Charge-offs, net 6  (1,125) (236) (59) (198)
  End of period$37,696 $36,440 $35,915 $35,751 $33,610 
           
ALLL to nonperforming loans 283.13% 269.33% 233.72% 228.54% 292.41%
ALLL to total loans 1.02% 0.98% 0.98% 0.98% 0.98%


   
(A) March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017 includes one commercial mortgage totaling $4.9 million.  The loan was past maturity at June 30, 2017, however interest payments continued to be made.  The loan is secured by real estate valued at $7.0 million as of October 2017.
(B) Amounts reflect TDRs that are paying according to restructured terms.
(C) Amount does not include $8.0 million at March 31, 2018, $8.1 million at December 31, 2017, $9.1 million at September 30, 2017, $9.6 million at June 30, 2017 and $4.6 million at March 31, 2017 of TDRs included in nonaccrual loans.


 
PEAPACK-GLADSTONE FINANCIAL CORPORATION
SELECTED BALANCE SHEET DATA
(Dollars in Thousands)
(Unaudited)
 
 
  March 31, Dec 31, March 31,
  2018  2017  2017 
Capital Adequacy
 
Equity to total assets (A) 9.74% 9.47% 8.64%
 
Tangible Equity to tangible assets (B) 9.25% 8.97% 8.56%
 
Book value per share (C)$22.32 $21.68 $19.39 
 
Tangible Book Value per share (D)$21.07 $20.40 $19.22 
 
             
  March 31,  Dec 31,  March 31, 
  2018  2017  2017 
Regulatory Capital – Holding Company            
             
Tier I leverage$401,4989.46%$382,8709.04%$338,5618.66%
             
Tier I capital to risk weighted assets 401,49811.77  382,87011.31  338,56110.79 
             
Common equity tier I capital ratio            
  to risk-weighted assets 401,49611.77  382,86811.31  338,55810.79 
             
Tier I & II capital to            
  risk-weighted assets 522,27315.32  502,33414.84  420,96713.41 
             
Regulatory Capital – Bank            
             
Tier I leverage$466,89611.00%$448,81210.61%$375,9319.61%
             
Tier I capital to risk weighted assets 466,89613.70  448,81213.27  375,93111.98 
             
Common equity tier I capital ratio            
  to risk-weighted assets 466,89413.70  448,81013.27  375,92811.98 
             
Tier I & II capital to            
  risk-weighted assets 504,59214.81  485,25214.34  409,54113.05 


   
(A) Equity to total assets is calculated as total shareholders’ equity as a percentage of total assets at period end.
(B) Tangible equity and tangible assets are calculated by excluding the balance of intangible assets from shareholders’ equity and total assets, respectively. Tangible equity as a percentage of tangible assets at period end is calculated by dividing tangible equity by tangible assets at period end.  See Non-GAAP financial measures reconciliation included in these tables beginning on page 22.
(C) Book value per common share is calculated by dividing shareholders’ equity by period end common shares outstanding.
(D) Tangible book value per share is different than book value per share because it excludes intangible assets.  Tangible book value per share is calculated by dividing tangible equity by period end common shares outstanding.  See Non-GAAP financial measures reconciliation tables beginning on page 22.


 
PEAPACK-GLADSTONE FINANCIAL CORPORATION
LOANS CLOSED
(Dollars in Thousands)
(Unaudited)
 For the Quarters Ended
  March 31, Dec 31, Sept 30, June 30, March 31,
  2018 2017 2017 2017 2017
Residential loans retained$11,642$20,791$22,322$54,833$64,831
Residential loans sold 7,672 8,282 10,596 6,491 3,115
  Total residential loans 19,314 29,073 32,918 61,324 67,946
           
Commercial real estate 34,385 19,090 24,870 46,931 33,216
Multifamily 21,000 5,400 85,488 78,824 47,125
Commercial (C&I) loans (A) (B) 118,425 141,672 131,321 158,476 128,130
SBA 4,270 9,640 4,560 3,900 1,700
Wealth lines of credit (A) 19,238 14,800 15,200 14,905 7,200
  Total commercial loans 197,318 190,602 261,439 303,036 217,371
           
Installment loans 1,350 802 1,967 2,075 2,146
           
Home equity lines of credit (A) 2,497 4,513 6,879 5,444 6,973
           
  Total loans closed$220,479$224,990$303,203$371,879$294,436


(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
UNAUDITED
THREE MONTHS ENDED
(Tax-Equivalent Basis, Dollars in Thousands)
 March 31, 2018March 31, 2017
  Average Income/   Average Income/  
  Balance ExpenseYield  Balance ExpenseYield 
ASSETS:            
Interest-earning assets:            
  Investments:            
  Taxable (1)$339,556 $1,9252.27%$289,237 $1,5042.08%
  Tax-exempt (1) (2) 24,304  1983.26  27,152  1992.93 
             
  Loans (2) (3):            
  Mortgages 574,400  4,7313.29  544,854  4,4733.28 
  Commercial mortgages 2,013,128  18,4073.66  2,035,304  17,7323.48 
  Commercial 969,496  10,4874.33  648,266  6,3803.94 
  Commercial construction -  --  390  44.10 
  Installment 81,762  6703.28  69,415  5012.89 
  Home equity 65,158  6604.05  66,311  5573.36 
  Other 455  119.67  514  118.56 
  Total loans 3,704,399  34,9663.78  3,365,054  29,6583.53 
  Federal funds sold 101  -0.25  101  -0.25 
  Interest-earning deposits 99,471  3571.44  137,589  2640.77 
  Total interest-earning assets 4,167,831  37,4463.59% 3,819,133  31,6253.31%
Noninterest-earning assets:            
  Cash and due from banks 4,686      21,615     
  Allowance for loan and lease losses (37,076)     (32,913)    
  Premises and equipment 29,256      30,279     
  Other assets 99,541      73,467     
  Total noninterest-earning assets 96,407      92,448     
Total assets$4,264,238     $3,911,581     
             
LIABILITIES:            
Interest-bearing deposits:            
  Checking$1,143,152 $1,7570.61%$1,029,012 $8620.34%
  Money markets 1,033,937  1,9460.75  1,068,552  9340.35 
  Savings 121,065  160.05  120,623  160.05 
  Certificates of deposit – retail 555,564  2,1491.55  448,844  1,5701.40 
  Subtotal interest-bearing deposits 2,853,718  5,8680.82  2,667,031  3,3820.51 
  Interest-bearing demand – brokered 180,000  6801.51  180,000  7201.60 
  Certificates of deposit – brokered 72,601  4292.36  93,733  4912.10 
  Total interest-bearing deposits 3,106,319  6,9770.90  2,940,764  4,5930.62 
  Borrowings 86,458  3701.71  60,123  3032.02 
  Capital lease obligation 8,963  1074.78  9,605  1154.79 
  Subordinated debt 83,043  1,2215.88  48,775  7836.42 
  Total interest-bearing liabilities 3,284,783  8,6751.06  3,059,267  5,7940.76 
Noninterest-bearing liabilities:            
  Demand deposits 539,882      501,183     
  Accrued expenses and            
  other liabilities 29,358      19,151     
  Total noninterest-bearing liabilities 569,240      520,334     
Shareholders’ equity 410,215      331,980     
  Total liabilities and            
  shareholders’ equity$4,264,238     $3,911,581     
  Net interest income  $28,771    $25,831  
  Net interest spread    2.53%    2.55%
  Net interest margin (4)    2.76%    2.71%


(1) Average balances for available for sale securities are based on amortized cost.
(2) Interest income is presented on a tax-equivalent basis using a 21 percent federal tax rate at March 31, 2018 and a 35 percent federal tax rate at March 31, 2017.
(3) Loans are stated net of unearned income and include nonaccrual loans.
(4) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.


 
PEAPACK-GLADSTONE FINANCIAL CORPORATION
AVERAGE BALANCE SHEET
UNAUDITED
THREE MONTHS ENDED
(Tax-Equivalent Basis, Dollars in Thousands)
 March 31, 2018Dec 31, 2017
  Average Income/   Average Income/  
  Balance ExpenseYield  Balance ExpenseYield 
ASSETS:            
Interest-earning assets:            
  Investments:            
  Taxable (1)$339,556 $1,9252.27%$316,148 $1,7262.18%
  Tax-exempt (1) (2) 24,304  1983.26  24,836  1832.95 
             
  Loans (2) (3):            
  Mortgages 574,400  4,7313.29  598,407  4,8803.26 
  Commercial mortgages 2,013,128  18,4073.66  2,053,221  19,0393.71 
  Commercial 969,496  10,4874.33  886,170  9,2634.18 
  Installment 81,762  6703.28  85,390  6563.07 
  Home equity 65,158  6604.05  68,485  6673.90 
  Other 455  119.67  638  116.90 
  Total loans 3,704,399  34,9663.78  3,692,311  34,5163.74 
  Federal funds sold 101  -0.25  101  -0.25 
  Interest-earning deposits 99,471  3571.44  125,495  3050.97 
  Total interest-earning assets 4,167,831  37,4463.59% 4,158,891  36,7303.53%
Noninterest-earning assets:            
  Cash and due from banks 4,686      5,096     
  Allowance for loan and lease losses (37,076)     (37,000)    
  Premises and equipment 29,256      29,670     
  Other assets 99,541      96,607     
  Total noninterest-earning assets 96,407      94,373     
Total assets$4,264,238     $4,253,264     
             
LIABILITIES:            
Interest-bearing deposits:            
  Checking$1,143,152 $1,7570.61%$1,135,660 $1,5910.56%
  Money markets 1,033,937  1,9460.75  1,101,862  1,7810.65 
  Savings 121,065  160.05  120,768  170.06 
  Certificates of deposit – retail 555,564  2,1491.55  537,685  2,0341.51 
  Subtotal interest-bearing deposits 2,853,718  5,8680.82  2,895,975  5,4230.75 
  Interest-bearing demand – brokered 180,000  6801.51  180,000  7511.67 
  Certificates of deposit – brokered 72,601  4292.36  74,529  4452.39 
  Total interest-bearing deposits 3,106,319  6,9770.90  3,150,504  6,6190.84 
  Borrowings 86,458  3701.71  51,265  2672.08 
  Capital lease obligation 8,963  1074.78  9,136  1104.82 
  Subordinated debt 83,043  1,2215.88  56,444  8576.07 
  Total interest-bearing liabilities 3,284,783  8,6751.06  3,267,349  7,8530.96 
Noninterest-bearing liabilities:            
  Demand deposits 539,882      567,041     
  Accrued expenses and            
  other liabilities 29,358      28,138     
  Total noninterest-bearing liabilities 569,240      595,179     
Shareholders’ equity 410,215      390,736     
  Total liabilities and            
  shareholders’ equity$4,264,238     $4,253,264     
  Net interest income  $28,771    $28,877  
  Net interest spread    2.53%    2.57%
  Net interest margin (4)    2.76%    2.78%


   
(1) Average balances for available for sale securities are based on amortized cost.
(2) Interest income is presented on a tax-equivalent basis using a 21 percent federal tax rate at March 31, 2018 and a 35 percent federal tax rate at December 31, 2017.
(3) Loans are stated net of unearned income and include nonaccrual loans.
(4) Net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.
   

PEAPACK-GLADSTONE FINANCIAL CORPORATION
NON-GAAP FINANCIAL MEASURES RECONCILIATION

Tangible book value per share and tangible equity as a percentage of tangible assets at period end are non-GAAP financial measures derived from GAAP-based amounts.  We calculate tangible equity and tangible assets by excluding the balance of intangible assets from shareholders’ equity and total assets, respectively.  We calculate tangible book value per share by dividing tangible equity by period end common shares outstanding, as compared to book value per common share, which we calculate by dividing shareholders’ equity by period end common shares outstanding.  We calculate tangible equity as a percentage of tangible assets at period end by dividing tangible equity by tangible assets at period end.  We believe that this is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of risk-based capital ratios.
                   
The efficiency ratio is a non-GAAP measure of expense control relative to recurring revenue.  We calculate the efficiency ratio by dividing total noninterest expenses, excluding ORE 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 one reasonable measure of core expenses relative to core revenue.
                   
We believe that these non-GAAP financial measures provide information that is important to investors and that is useful in understanding our financial position, results and ratios.  Our management internally assesses our performance based, in part, on these measures.  However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures.  As other companies may use different calculations for these measures, this presentation may not be comparable to other similarly titles measures reported by other companies.  A reconciliation of the non-GAAP measures of tangible common equity, tangible book value per share and efficiency ratio to the underlying GAAP numbers is set forth below.

 
Non-GAAP Financial Reconciliation
 
(Dollars in thousands, except share data) 
   
 Three Months Ended 
  March 31, Dec 31, Sept 30, June 30, March 31,
Tangible Book Value Per Share 2018  2017  2017  2017  2017 
Shareholders’ equity$422,406 $403,678 $379,936 $356,847 $340,928 
Less:  Intangible assets, net 23,656  23,836  15,064  3,095  3,126 
  Tangible equity 398,750  379,842  364,872  353,752  337,802 
           
Period end shares outstanding 18,921,114  18,619,634  18,214,759  17,846,404  17,579,274 
Tangible book value per share$21.07 $20.40 $20.03 $19.82 $19.22 
Book value per share 22.32  21.68  20.86  20.00  19.39 
           
Tangible Equity to Tangible Assets          
Total assets$4,336,494 $4,260,547 $4,176,332 $4,165,679 $3,947,562 
Less: Intangible assets, net 23,656  23,836  15,064  3,095  3,126 
  Tangible assets 4,312,838  4,236,711  4,161,268  4,162,584  3,944,436 
Tangible equity to tangible assets 9.25% 8.97% 8.77% 8.50% 8.56%
Equity to assets 9.74% 9.47% 9.10% 8.57% 8.64%


  
 Three Months Ended
  March 31, Dec 31, Sept 30, June 30, March 31,
Efficiency Ratio 2018  2017  2017  2017  2017 
Net interest income$28,393 $28,586 $29,992 $26,972 $25,591 
Total other income 10,215  10,606  8,831  8,171  7,019 
Less:  Gain on loans held for sale          
  at lower of cost or fair value -  378  34  -  - 
Less:  Securities losses, net (78) -  -  -  - 
Total recurring revenue 38,686  38,814  38,789  35,143  32,610 
           
Operating expenses 23,337  24,251  21,961  20,095  19,304 
Total operating expense 23,337  24,251  21,961  20,095  19,304 
           
Efficiency ratio 60.32% 62.48% 56.62% 57.18% 59.20%

Contact:

Jeffrey J. Carfora, SEVP and CFO

Peapack-Gladstone Financial Corporation

T: 908-719-4308

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Source: Peapack-Gladstone Financial Corporation