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

Company Release - 4/26/2019 9:00 AM ET

BEDMINSTER, N.J., April 26, 2019 (GLOBE NEWSWIRE) -- via NEWMEDIAWIRE -- Peapack-Gladstone Financial Corporation (NASDAQ Global Select Market: PGC) (the “Company”) recorded net income of $11.43 million and diluted earnings per share of $0.58 for the quarter ended March 31, 2019, compared to $10.81 million and $0.57, respectively, for the quarter ended March 31, 2018, reflecting increases of $618,000, or 6%, and $0.01 per share, or 2%, respectively.

The increased net income in the 2019 quarter was driven by increased net interest income, increased wealth management fee income, and a reduced provision for loan losses, partially offset by increased operating expenses and a higher effective tax rate (due to significant changes to NJ State Tax law). Douglas L. Kennedy, President and CEO, said, “Our Strategy continues to drive growth in our wealth management business, both organically and through acquisition. This business generally provides a more stable and predictable revenue stream over time than other sources of income.”

EXECUTIVE SUMMARY:

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

March 2019 Quarter Compared to Prior Year Quarter

  Three Months Ended   Three Months Ended         
  March 31,   March 31,  Increase/ 
(Dollars in millions, except per share data) 2019 (1)   2018  (Decrease) 
Net interest income $30.01   $28.39  $1.62   6%
Provision for loan and lease losses  0.10    1.25   (1.15)  (92)
Net interest income after provision  29.91    27.14   2.77   10 
Wealth management fee income  9.17    8.37   0.80   10 
Other income  2.56    1.85   0.71   38 
Total other income  11.73    10.22   1.51   15 
Operating expenses  25.72    23.34   2.38   10 
Pretax income  15.92    14.02   1.90   14 
Income tax expense (2)  4.49    3.21   1.28   40 
Net income $11.43   $10.81  $0.62   6%
Diluted EPS $0.58   $0.57  $0.01   2%
                  
Return on average assets annualized  0.98%   1.01%  (0.03)    
Return on average equity annualized  9.65%   10.54%  (0.89)    
                  
  1. The March 2019 quarter included a full quarter of wealth management fee income and expense related to Lassus Wherley, which was acquired effective September 1, 2018.
  2. The effective tax rate for the March 2019 quarter was 28.2% compared to 22.9% for the March 2018 quarter. The March 2019 quarter included higher NJ State Income Tax due to changes signed into law July 1, 2018. The 2018 quarter included a tax benefit resulting from the vesting of restricted stock under ASU 2016-09.

March 2019 Quarter Compared to Linked Quarter

  Three Months Ended  Three Months Ended          
  March 31,  December 31,   Increase/ 
(Dollars in millions, except per share data) 2019  2018 (1)   (Decrease) 
Net interest income $30.01  $29.39   $0.62   2%
Provision for loan and lease losses  0.10   1.50    (1.40)  (93)
Net interest income after provision  29.91   27.89    2.02   7 
Wealth management fee income  9.17   8.55    0.62   7 
Other income  2.56   2.70    (0.14)  (5)
Total other income  11.73   11.25    0.48   4 
Operating expenses  25.72   25.52    0.20   1 
Pretax income  15.92   13.62    2.30   17 
Income tax expense (2)  4.49   2.89    1.60   55 
Net income $11.43  $10.73   $0.70   7%
Diluted EPS $0.58  $0.55   $0.03   5%
                  
Return on average assets annualized  0.98%  0.96%   0.02     
Return on average equity annualized  9.65%  9.32%   0.33     
                  
  1. The December 2018 quarter included $4.39 million loss on sale of multifamily loans; $3.00 million of life insurance proceeds related to the December 31, 2018 passing of the founder and managing principal of MCM; and $405,000 write-down of intangible assets related to MCM. These three items, on a net basis, reduced pretax income by $1.80 million; net income by $655,000; EPS by $0.04; ROAA by 0.06%; and ROAE by 0.57%.
  2. The effective tax rate for the March 2019 quarter was 28.2% compared to 21.2% for the December 2018 quarter. The March 2019 quarter included higher NJ State Income Tax. The December 2018 quarter was benefitted by $3 million of life insurance proceeds that were not taxable.


Douglas L. Kennedy, President and CEO, said, “I am pleased with our results, especially our revenue growth this quarter which reflected increases of $1.10 million compared to the December 2018 quarter, and $3.13 million compared to the March 2018 quarter. Further, our focus on wealth management and fee income, provides a strong base for future performance.”

Highlights for the quarter included:

  • Wealth Management remains integral to our strategy and provides a diversified, predictable, and stable source of revenue over time:

    • The March 2019 quarter included results from Lassus Wherley, which was acquired on September 1, 2018.  Lassus Wherley, a registered investment advisor, headquartered in New Providence, NJ, added approximately $550 million of assets under management and/or administration (“AUM/AUA”).

    • At March 31, 2019, the market value of AUM/AUA at the Peapack Private Wealth Management Division of Peapack-Gladstone Bank (the “Bank”) was $6.3 billion reflecting an increase of $697 million from $5.6 billion at March 31, 2018, reflecting growth of 13%.  While new business and the Lassus Wherley acquisition accounted for significant growth, negative market action (particularly in the fourth quarter of 2018) partially offset some of that growth.

    • Wealth management fee income totaled $9.17 million for the quarter ended March 31, 2019, reflecting an increase of $622,000 or 7% from the December 2018 quarter, and an increase of $807,000, or 10%, from the March 2018 quarter.

    • Wealth management fee income, which comprised approximately 22% of the Company’s total revenue for the quarter ended March 31, 2019, continues to contribute significantly to the Company’s diversified revenue sources.

    • In addition to wealth management fee 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.

  • The loan portfolio continues to shift from lower yielding multifamily to higher yielding commercial and industrial (C&I) lending (including equipment finance):

    • Total C&I loans (including equipment finance leases and loans of $429 million) at March 31, 2019 were $1.41 billion.  This reflected net growth of $413 million (41%) when compared to $997 million at March 31, 2018.

    • As of March 31, 2019, total C&I loans (including equipment finance) comprised 36% of the total loan portfolio, as compared to 27% a year earlier.  As of March 31, 2019, total multifamily loans comprised 28% of the total loan portfolio, as compared to 37% a year earlier.

    • The Bank’s concentration in commercial real estate loans declined to 379% of risk-based capital at March 31, 2019 from 446% at March 31, 2018.

  • Deposits, funding, and interest rate risk continue to be actively managed:

    • Deposits totaled $3.92 billion at March 31, 2019.  This reflected net growth of $367 million (10%) when compared to $3.55 billion at March 31, 2018.

    • The Company’s loan-to-deposit ratio improved to 99.5% at March 31, 2019, from 101.0% at December 31, 2018, and 104.5% at March 31, 2018.

    • The Company continues to have access to $1.3 billion of available secured funding at the Federal Home Loan Bank.

    • The Company has actively managed its balance sheet to remain generally balanced (not materially asset sensitive or materially liability sensitive), despite rising deposit betas and costs throughout all of 2018.  At March 31, 2019, the Company’s interest rate sensitivity models indicate the Company is slightly asset sensitive, and that net interest income would improve slightly in a rising rate environment.

  • Capital and asset quality continue to be strong:

    • The Company’s and Bank’s capital ratios at March 31, 2019 generally increased compared to both the December 31, 2018 and the March 31, 2018 levels. And, such ratios remain well above regulatory well capitalized standards.

    • Asset quality metrics continued to be strong as of March 31, 2019 and were improved from December 31, 2018 and March 31, 2018 levels.  Nonperforming assets at March 31, 2019 were $24.9 million, or 0.53% of total assets.  Total loans past due 30 through 89 days and still accruing were $2.5 million, or 0.06% of total loans at March 31, 2019.


SUPPLEMENTAL QUARTERLY DETAILS
:

Wealth Management Business

In the March 2019 quarter, the Bank’s wealth management business generated $9.17 million in fee income compared to $8.55 million for the December 2018 quarter, and $8.37 million for the March 2018 quarter. 

When compared to the March 2018 quarter, the March 2019 quarter included three months of income related to Lassus Wherley (approximately $1 million), which was acquired effective September 1, 2018, as well as increased earnings from organic growth in assets under management. These positive effects on fee income, were partially offset by negative market action, particularly in the fourth quarter of 2018.  

John P. Babcock, President of the newly-branded “Peapack Private Wealth Management Division”, said, “Despite challenging market conditions in the December 2018 quarter that impacted our recurring fee revenues in the March 2019 quarter, I am pleased with our first quarter results.  We had solid new business production in the first quarter of 2019 and have a strong pipeline as we look ahead over the next two quarters.  We are making significant forward progress on integrating the systems, processes and people from our 2017 and 2018 acquisitions and continue to selectively look for additional acquisitions that can add talent and expertise to our wealth management organization.”

Loans / Commercial Banking

For the quarter ended March 31, 2019, total net loans declined by $32 million (1% for the quarter 3% annualized). Loan/line origination levels ($216 million for the March 31, 2019 quarter) were more than offset by paydown activity.

Total commercial and industrial loans (including Equipment Finance) grew $12 million (1% for the quarter, or 3% annualized) to $1.41 billion at the end of the first quarter, compared to $1.40 billion at the end of the fourth quarter of 2018. New loan growth was funded by managed reductions in lower yielding multifamily loans and deposit growth. There were several larger loan payoffs late in the March 31, 2019 quarter.

Mr. Kennedy said, “Commercial loan pipelines are very strong at the end of the quarter. However, the loan market continues to be extremely competitive from a structure/credit and a pricing perspective. As I have noted before, we will continue to be disciplined and not compromise our credit standards, but we will compete on price, as long as returns remain reasonable as measured by our proprietary loan pricing model.”

Mr. Kennedy also said, “We recently announced our strategic decision to expand our Corporate Advisory and Structured Finance businesses under a new Investment Banking Division, led by Eric Waser, our former head of commercial banking. Eric and his Corporate Advisory team 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, giving us a competitive advantage over much of our peers.”

Kennedy went on to say, “We also recently announced that Greg Smith joined us as head of commercial banking. Greg is a seasoned commercial banking professional, whom I have known for many years. Greg joined us from Capital One Bank.”

Funding / Liquidity / Interest Rate Risk Management

As noted in prior quarters, the Company has actively managed its deposit base to reduce reliance on wholesale sourced deposits and/or reduce volatility or operational risk.

For the quarter ended March 31, 2019, the Company utilized its increased capital, deposit growth, and reductions in its multifamily loan portfolio, to fund its commercial loan (including Equipment Finance) growth and increase its on balance sheet liquidity (interest earning deposits and investment securities). 

In addition to approximately $629 million of cash, cash equivalents and investment securities on its balance sheet, the Company also had approximately $1.4 billion of secured funding available from the Federal Home Loan Bank, of which only $105 million was drawn as of March 31, 2019.

Mr. Kennedy noted, “The northeast market continues to be extremely competitive for deposits. The Company is focused on providing high touch client service, a key element in growing its personal and commercial core deposit base.  The Company is focused on multiple retail channels, as well as commercial channels, including its enhanced Treasury Management and Escrow offerings. Further, all our Private Bankers remain keenly focused on deposit gathering, including our new Professional Services Group, led by a seasoned commercial banker who joined us recently.”

Mr. Kennedy also noted, “We announced earlier this week that Rick DeBel will be joining us from Wells Fargo as EVP, Deposit Solutions, a newly created position. Rick’s responsibilities will include strengthening and expanding our retail and commercial deposit efforts. Rick will oversee our retail, platinum, treasury, and escrow services teams.” 

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

 Three Months Ended  Three Months Ended  Three Months Ended 
 March 31, 2019  December 31, 2018  March 31, 2018 
 NII  NIM  NII  NIM  NII  NIM 
                        
NII/NIM excluding the below$29,575  2.72%  $28,890  2.68%  $27,960  2.72% 
Prepayment premiums received on multifamily loan paydowns 432  0.04%   495  0.04%   433  0.04% 
Effect of maintaining excess interest earning cash during Q1 2019 143  -0.06%   0  0.00%   0  0.00% 
NII/NIM as reported$30,150  2.70%  $29,385  2.72%  $28,393  2.76% 

Net interest income and net interest margin comparisons are shown above.

Mr. Kennedy said, “As the Company signaled last quarter, the Company’s margin (excluding prepayment premiums and the effect of maintaining higher liquidity) improved slightly in Q1 2019, when compared to Q4 2018." 

Mr. Kennedy also noted, “Last quarter we said that our forecasting models indicated a net interest margin in the 3.00% range by the end of 2020. While we still believe our margin will improve over that same timeframe, the 3.00% target may be difficult to attain if the shape of the current yield curve remains for an extended period.”

Other Noninterest Income

The first quarter of 2019 included $419,000 of income related to the Company’s SBA lending and sale program, compared to $277,000 generated in the December 2018 quarter, and $31,000 in the March 2018 quarter.

The first quarter of 2019 included $270,000 of loan level, back-to-back swap income compared to $1.8 million in the December 2018 quarter and $252,000 in the March 2018 quarter.  This program provides a borrower with a degree of interest rate protection on a variable rate loan, while still 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 December 2018 quarter reflected higher swap income due to the Company’s higher level of loan activity coupled with borrowers’ desire to protect themselves from rates rising beyond current levels. 

The December 2018 quarter included a $4.39 million loss on the sale of loans. As noted previously, $131 million of fixed rate, multifamily loans were sold as part of the Bank’s balance sheet management strategy.

Other income for the December 2018 quarter included $3.00 million of life insurance proceeds related to the December 31, 2018 passing of the founder and managing principal of Murphy Capital Management.

Operating Expenses

The Company’s total operating expenses were $25.72 million for the quarter ended March 31, 2019, compared to $25.52 million for the December 2018 quarter and $23.34 million for the March 2018 quarter.  The March 2019 and the December 2018 quarters each included: three months of expense related to Lassus Wherley (which closed in September 2018). Strategic hiring and normal salary increases also contributed to the increase for the March 2019 quarter. FDIC insurance expense for the March 2019 quarter decreased by over 50% when compared to each of the linked (December 2018) and prior year (March 2018) quarters.

Income Taxes

The effective tax rate for the March 2019 quarter was 28.2%, compared to 21.2% for the December 2018 quarter, and 22.9% for the March 2018 quarter. The March 2019 quarter included higher NJ State Income Tax. The December 2018 quarter was benefitted by $3 million of life insurance proceeds that were not taxable. The March 2018 quarter included a tax benefit resulting from the vesting of restricted stock under ASU 2016-09.

Asset Quality / Provision for Loan and Lease Losses

Nonperforming assets at March 31, 2019 (which does not include troubled debt restructured loans that are performing in accordance with their terms) were $24.9 million, or 0.53% of total assets, compared to $25.7 million, or 0.56% of total assets, at December 31, 2018 and $15.4 million, or 0.36% of total assets, at March 31, 2018.  Total loans past due 30 through 89 days and still accruing were $2.5 million at March 31, 2019, compared to $3.5 million at December 31, 2018 and $674,000 at March 31, 2018. The increase in nonperforming assets in the December 2018 quarter was due to one $15 million healthcare real estate secured loan which continues to pay as agreed, and which the Company still believes to be well secured.

For the quarter ended March 31, 2019, the Company’s provision for loan and lease losses was $100,000 compared to $1.5 million for the December 2018 quarter and $1.25 million for the March 2018 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, net charge-offs, and the composition of the loan portfolio. The reduced provision for the March 2019 quarter resulted from a reduced loan portfolio due to paydown activity in excess of origination activity, as well as net recoveries in the quarter.

At March 31, 2019, the allowance for loan and lease losses of $38.65 million (155% of nonperforming loans and 0.99% of total loans), compared to $38.50 million at December 31, 2018 (150% of nonperforming loans and 0.98% of total loans), and $37.70 million (283% of nonperforming loans and 1.02% of total loans) at March 31, 2018. 

Capital / Dividends

The Company’s capital position in the March 2019 quarter was benefitted by net income of $11.43 million. 

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 – none of the shares purchased during the March 2019 quarter were from authorized but unissued shares, while 126,442 shares were purchased in the open market.

The Company’s and Bank’s capital ratios at March 31, 2019 all increased significantly compared to the March 31, 2018 levels. And, such ratios remain well above regulatory well capitalized standards.

On April 25, 2019, the Company’s Board of Directors declared a cash dividend of $0.05 per share payable on May 23, 2019 to shareholders of record on May 9, 2019.

ABOUT THE COMPANY

Peapack-Gladstone Financial Corporation is a New Jersey bank holding company with total assets of $4.66 billion and wealth management assets under management and/or administration (AUM/AUA) of $6.3 billion as of March 31, 2019.  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:

  • our 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 2019 and beyond;
  • our inability to successfully integrate wealth management firm acquisitions;
  • our inability to manage our growth;
  • our inability to successfully integrate our expanded employee base;
  • an unexpected decline in the economy, in particular in our New Jersey and New York market areas;
  • declines in our net interest margin caused by the interest rate environment and/or our highly competitive market;
  • declines in 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;
  • changes in interest rates;
  • decline in real estate values within our market areas;
  • legislative and regulatory actions (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Basel III and related regulations) that may result in increased compliance costs;
  • successful cyberattacks against our IT infrastructure and that of our IT and third party providers;
  • higher than expected FDIC insurance premiums;
  • adverse weather conditions;
  • our inability to successfully generate new business in new geographic markets;
  • our inability to execute upon new business initiatives;
  • our 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;
  • our ability to retain key employees;
  • demands for loans and deposits in our market areas;
  • adverse changes in securities markets;
  • changes in accounting policies and practices;
  • effects related to a prolonged shutdown of the federal government which could impact SBA and other government lending programs; 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, 2018.  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.


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, 
  2019  2018  2018  2018  2018 
Income Statement Data:                    
Interest income $44,563  $42,781  $40,163  $39,674  $37,068 
Interest expense  14,556   13,396   12,021   10,431   8,675 
Net interest income  30,007   29,385   28,142   29,243   28,393 
Provision for loan and lease losses  100   1,500   500   300   1,250 
Net interest income after provision for loan and lease losses  29,907   27,885   27,642   28,943   27,143 
Wealth management fee income  9,174   8,552   8,200   8,126   8,367 
Service charges and fees  816   938   860   873   831 
Bank owned life insurance  338   351   349   345   336 
Gain on loans held for sale at fair value (Mortgage banking)  47   74   87   79   94 
Gain on loans held for sale at lower of cost or fair value     (4,392)         
Fee income related to loan level, back-to-back swaps  270   1,838   854   900   252 
Gain on sale of SBA loans  419   277   514   814   31 
Other income (A)  606   3,571   444   639   382 
Securities losses, net  59   46   (325)  (36)  (78)
Total other income  11,729   11,255   10,983   11,740   10,215 
Salaries and employee benefits  17,156   16,372   16,025   15,826   14,579 
Premises and equipment  3,388   3,422   3,399   3,406   3,270 
FDIC insurance expense  277   645   593   625   580 
Other expenses  4,894   5,085   4,267   5,084   4,908 
Total operating expenses  25,715   25,524   24,284   24,941   23,337 
Income before income taxes  15,921   13,616   14,341   15,742   14,021 
Income tax expense  4,496   2,887   3,617   3,832   3,214 
Net income $11,425  $10,729  $10,724  $11,910  $10,807 
                     
Total revenue (B) $41,736  $40,640  $39,125  $40,983  $38,608 
Per Common Share Data:                    
Earnings per share (basic) $0.59  $0.56  $0.56  $0.63  $0.58 
Earnings per share (diluted)  0.58   0.55   0.56   0.62   0.57 
Weighted average number of common shares outstanding:                    
Basic  19,350,452   19,260,033   19,053,849   18,930,893   18,608,309 
Diluted  19,658,006   19,424,906   19,240,098   19,098,838   18,908,692 
Performance Ratios:                    
Return on average assets annualized (ROAA)  0.98%  0.96%  0.99%  1.11%  1.01%
Return on average equity annualized (ROAE)  9.65%  9.32%  9.68%  11.11%  10.54%
Net interest margin (tax-equivalent basis)  2.70%  2.72%  2.69%  2.82%  2.76%
GAAP efficiency ratio (C)  61.61%  62.81%  62.07%  60.86%  60.45%
Operating expenses / average assets annualized  2.21%  2.28%  2.24%  2.32%  2.19%
                     
  1. Includes death benefit from life insurance policy of $3.0 million for the quarter ended December 31, 2018 related to the December 31, 2018 passing of the founder and managing principal of MCM.
  2. Total revenue includes net interest income plus total other income.
  3. 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.


PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION

(Dollars in Thousands)
(Unaudited)

  As of 
  March 31,  Dec 31,  Sept 30,  June 30,  March 31, 
  2019  2018  2018  2018  2018 
ASSETS                    
Cash and due from banks $4,726  $5,914  $4,792  $4,458  $4,223 
Federal funds sold  101   101   101   101   101 
Interest-earning deposits  235,487   154,758   118,111   62,231   149,192 
Total cash and cash equivalents  240,314   160,773   123,004   66,790   153,516 
Securities available for sale  384,400   377,936   368,554   346,790   342,553 
Equity security  4,778   4,719   4,673   4,710   4,746 
FHLB and FRB stock, at cost  18,460   18,533   21,561   21,533   23,703 
Residential mortgage  569,304   573,146   562,930   567,459   567,885 
Multifamily mortgage  1,104,406   1,138,190   1,289,458   1,320,251   1,366,712 
Commercial mortgage  705,221   702,165   644,900   637,705   643,761 
Commercial loans  1,410,146   1,398,214   1,180,774   1,069,526   996,788 
Consumer loans  54,276   58,678   64,478   76,509   71,580 
Home equity lines of credit  57,639   62,191   59,930   55,020   64,570 
Other loans  355   465   432   431   420 
Total loans  3,901,347   3,933,049   3,802,902   3,726,901   3,711,716 
Less: Allowances for loan and lease losses  38,653   38,504   37,293   38,066   37,696 
Net loans  3,862,694   3,894,545   3,765,609   3,688,835   3,674,020 
Premises and equipment  21,201   27,408   27,874   28,404   28,923 
Other real estate owned        96   1,608   2,090 
Accrued interest receivable  11,688   10,814   10,849   7,202   7,306 
Bank owned life insurance  45,554   45,353   45,181   44,980   44,779 
Goodwill and other intangible assets (A)  32,170   32,399   34,297   23,477   23,656 
Finance lease right-of-use assets (B)  5,639             
Operating lease right-of-use assets (B)  7,541             
Other assets  27,867   45,378   34,011   30,845   31,202 
TOTAL ASSETS $4,662,306  $4,617,858  $4,435,709  $4,265,174  $4,336,494 
                     
LIABILITIES                    
Deposits:                    
Noninterest-bearing demand deposits $476,013  $463,926  $503,388  $527,453  $536,054 
Interest-bearing demand deposits  1,268,823   1,247,305   1,148,660   1,053,004   1,089,980 
Savings  114,865   114,674   116,391   120,986   126,026 
Money market accounts  1,209,835   1,243,369   1,097,630   1,051,893   1,006,540 
Certificates of deposit – Retail  545,450   510,724   466,791   431,679   408,621 
Certificates of deposit – Listing Service  68,055   79,195   85,241   96,644   132,321 
Subtotal “customer” deposits  3,683,041   3,659,193   3,418,101   3,281,659   3,299,542 
IB Demand – Brokered  180,000   180,000   180,000   180,000   180,000 
Certificates of deposit – Brokered  56,165   56,147   61,193   61,254   72,614 
Total deposits  3,919,206   3,895,340   3,659,294   3,522,913   3,552,156 
Overnight borrowings        95,190   127,350   216,000 
Federal home loan bank advances  105,000   108,000   84,000   52,898   22,898 
Finance lease liability (B)  8,175   8,362   8,548   8,728   8,900 
Operating lease liability (B)  7,683             
Subordinated debt, net  83,249   83,193   83,138   83,133   83,079 
Other liabilities  57,521   53,950   51,106   33,133   31,055 
TOTAL LIABILITIES  4,180,834   4,148,845   3,981,276   3,828,155   3,914,088 
Shareholders’ equity  481,472   469,013   454,433   437,019   422,406 
TOTAL LIABILITIES AND                    
SHAREHOLDERS’ EQUITY $4,662,306  $4,617,858  $4,435,709  $4,265,174  $4,336,494 
Assets under management and / or administration at
Peapack-Gladstone Banks Private Wealth Management
Division (market value, not included above-dollars in billions)
 $6.3  $5.8  $6.4  $5.7  $5.6 
                     
  1. Includes goodwill and intangibles from the Murphy Capital Management, Quadrant Capital Management and Lassus Wherley and Associates acquisitions completed in August 2017, November 2017 and September 2018, respectively.
  2. Resulted from the adoption of ASU No. 2016-02, “Leases (Topic 842)”.


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

  As of 
  March 31,  Dec 31,  Sept 30,  June 30,  March 31, 
  2019  2018  2018  2018  2018 
Asset Quality:                    
Loans past due over 90 days and still accruing $  $  $  $  $ 
Nonaccrual loans (A)  24,892   25,715   10,722   12,025   13,314 
Other real estate owned        96   1,608   2,090 
Total nonperforming assets $24,892  $25,715  $10,818  $13,633  $15,404 
                     
Nonperforming loans to total loans  0.64%  0.65%  0.28%  0.32%  0.36%
Nonperforming assets to total assets  0.53%  0.56%  0.24%  0.32%  0.36%
                     
Performing TDRs (B)(C) $4,274  $4,303  $19,334  $18,665  $7,888 
                     
Loans past due 30 through 89 days and still accruing $2,492  $3,484  $2,528  $3,539  $674 
                     
Classified loans $51,306  $58,265  $51,783  $51,216  $55,945 
                     
Impaired loans $29,185  $31,300  $31,345  $30,711  $21,223 
                     
Allowance for loan and lease losses:                    
Beginning of period $38,504  $37,293  $38,066  $37,696  $36,440 
Provision for loan and lease losses  100   1,500   500   300   1,250 
Charge-offs, net  49   (289)  (1,273)  70   6 
End of period $38,653  $38,504  $37,293  $38,066  $37,696 
                     
ALLL to nonperforming loans  155.28%  149.73%  347.82%  316.56%  283.13%
ALLL to total loans  0.991%  0.979%  0.981%  1.021%  1.016%
General ALLL to total loans (D)  0.984%  0.972%  0.961%  0.978%  1.006%
                     
  1. Amount includes one commercial real estate loan with a loan balance of $14.8 million at March 31, 2019 and $15.2 million at December 31, 2018 which continues to pay as agreed, and which the Company believes to be well secured.
  2. Amounts reflect TDRs that are paying according to restructured terms.
  3. Amount does not include $20.0 million at March 31, 2019, $20.5 million at December 31, 2018, $5.5 million at September 30, 2018, $6.9 million at June 30, 2018 and $8.0 million at March 31, 2018 of TDRs included in nonaccrual loans.
  4. Total ALLL less specific reserves equals general ALLL.


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

  March 31,  December 31,  March 31, 
  2019  2018  2018 
Capital Adequacy               
Equity to total assets (A)   10.33%   10.16%   9.74%
Tangible Equity to tangible assets (B)   9.70%   9.52%   9.25%
Book value per share (C)  $24.76   $24.25   $22.32 
Tangible Book Value per share (D)  $23.11   $22.58   $21.07 


  2019  2018
 2018
 
Regulatory Capital Holding Company             
Tier I leverage  $450,244 9.76%   $438,240 9.82%   $401,498 9.46%  
Tier I capital to risk weighted assets  450,244 12.19   438,240 11.76   401,498 11.77  
Common equity tier I capital ratio to risk-weighted assets  450,242 12.19   438,238 11.76   401,496 11.77  
Tier I & II capital to risk-weighted assets  572,146 15.49   559,937 15.03   522,273 15.32  
              
Regulatory Capital Bank             
Tier I leverage  $518,702 11.25%   $504,504 11.32%   $466,896 11.00%  
Tier I capital to risk weighted assets  518,702 14.06   504,504 13.56   466,896 13.70  
Common equity tier I capital ratio to risk-weighted assets  518,700 14.06   504,502 13.56   466,894 13.70  
Tier I & II capital to risk-weighted assets  557,355 15.10   543,008 14.59   504,592 14.81  
              
  1. Equity to total assets is calculated as total shareholders’ equity as a percentage of total assets at period end.
  2. 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.
  3. Book value per common share is calculated by dividing shareholders’ equity by period end common shares outstanding.
  4. 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.


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

  For the Quarters Ended 
  March 31,  Dec 31,  Sept 30,  June 30,  March 31, 
  2019  2018  2018  2018  2018 
Residential loans retained $10,839  $24,937  $14,412  $22,217  $11,642 
Residential loans sold  3,090   4,686   6,717   6,488   7,672 
Total residential loans  13,929   29,623   21,129   28,705   19,314 
Commercial real estate  21,025   63,486   23,950   20,780   34,385 
Multifamily  21,122   58,175   12,328   4,743   21,000 
Commercial (C&I) loans (A) (B)  141,128   285,950   133,973   137,805   118,425 
SBA  9,050   5,695   4,800   10,740   4,270 
Wealth lines of credit (A)  7,380   5,850   6,100   11,560   19,238 
Total commercial loans  199,705   419,156   181,151   185,628   197,318 
Installment loans  558   649   1,634   1,036   1,350 
Home equity lines of credit (A)  1,607   3,625   10,273   5,091   2,497 
Total loans closed $215,799  $453,053  $214,187  $220,460  $220,479 
  
  1. Includes loans and lines of credit that closed in the period, but not necessarily funded.
  2. Includes equipment finance.


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

  March 31, 2019  March 31, 2018 
  Average  Income/      Average  Income/     
  Balance  Expense  Yield  Balance  Expense  Yield 
ASSETS:                        
Interest-earning assets:                        
Investments:                        
Taxable (1) $387,566  $2,684   2.77% $339,556  $1,925   2.27%
Tax-exempt (1) (2)  17,345   210   4.84   24,304   198   3.26 
                         
Loans (2) (3):                        
Mortgages  571,637   4,895   3.43   574,400   4,731   3.29 
Commercial mortgages  1,824,371   18,021   3.95   2,013,128   18,407   3.66 
Commercial  1,379,585   16,750   4.86   969,496   10,487   4.33 
Installment  55,215   577   4.18   81,762   670   3.28 
Home equity  60,421   766   5.07   65,158   660   4.05 
Other  412   11   10.68   455   11   9.67 
Total loans  3,891,641   41,020   4.22   3,704,399   34,966   3.78 
Federal funds sold  101      0.25   101      0.25 
Interest-earning deposits  237,251   1,270   2.14   99,471   357   1.44 
Total interest-earning assets  4,533,904   45,184   3.99%  4,167,831   37,446   3.59%
Noninterest-earning assets:                        
Cash and due from banks  5,398           4,686         
Allowance for loan and lease losses  (38,948)          (37,076)        
Premises and equipment  21,467           29,256         
Other assets  122,102           99,541         
Total noninterest-earning assets  110,019           96,407         
Total assets $4,643,923          $4,264,238         
                         
LIABILITIES:                        
Interest-bearing deposits:                        
Checking  1,284,611   3,710   1.16%  1,143,152   1,757   0.61%
Money markets  1,208,004   4,335   1.44   1,033,937   1,946   0.75 
Savings  114,003   16   0.06   121,065   16   0.05 
Certificates of deposit – retail  607,178   3,234   2.13   555,564   2,149   1.55 
Subtotal interest-bearing deposits  3,213,796   11,295   1.41   2,853,718   5,868   0.82 
Interest-bearing demand – brokered  180,000   739   1.64   180,000   680   1.51 
Certificates of deposit – brokered  56,154   365   2.60   72,601   429   2.36 
Total interest-bearing deposits  3,449,950   12,399   1.44   3,106,319   6,977   0.90 
Borrowings  105,900   834   3.15   86,458   370   1.71 
Capital lease obligation  8,244   99   4.80   8,963   107   4.78 
Subordinated debt  83,213   1,224   5.88   83,043   1,221   5.88 
Total interest-bearing liabilities  3,647,307   14,556   1.60%  3,284,783   8,675   1.06%
Noninterest-bearing liabilities:                        
Demand deposits  471,265           539,882         
Accrued expenses and other liabilities  51,791           29,358         
Total noninterest-bearing liabilities  523,056           569,240         
Shareholders’ equity  473,560           410,215         
Total liabilities and shareholders’ equity $4,643,923          $4,264,238         
Net interest income     $30,628          $28,771     
 Net interest spread          2.39%          2.53%
 Net interest margin (4)          2.70%          2.76%
 
  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% federal tax rate.
  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, 2019  December 31, 2018 
  Average  Income/      Average  Income/     
  Balance  Expense  Yield  Balance  Expense  Yield 
ASSETS:                        
Interest-earning assets:                        
Investments:                        
Taxable (1) $387,566  $2,684   2.77% $383,455  $2,521   2.63%
Tax-exempt (1) (2)  17,345   210   4.84   17,887   173   3.87 
                         
Loans (2) (3):                        
Mortgages  571,637   4,895   3.43   562,284   4,732   3.37 
Commercial mortgages  1,824,371   18,021   3.95   1,947,674   18,825   3.87 
Commercial  1,379,585   16,750   4.86   1,221,111   14,915   4.89 
Installment  55,215   577   4.18   60,855   624   4.10 
Home equity  60,421   766   5.07   61,423   759   4.94 
Other  412   11   10.68   461   11   9.54 
Total loans  3,891,641   41,020   4.22   3,853,808   39,866   4.14 
Federal funds sold  101      0.25   101      0.25 
Interest-earning deposits  237,251   1,270   2.14   122,813   636   2.07 
Total interest-earning assets  4,533,904   45,184   3.99%  4,378,064   43,196   3.95%
Noninterest-earning assets:                        
Cash and due from banks  5,398           6,876         
Allowance for loan and lease losses  (38,948)          (37,774)        
Premises and equipment  21,467           27,749         
Other assets  122,102           112,348         
Total noninterest-earning assets  110,019           109,199         
Total assets $4,643,923          $4,487,263         
                         
LIABILITIES:                        
Interest-bearing deposits:                        
Checking $1,284,611  $3,710   1.16% $1,208,604  $3,174   1.05%
Money markets  1,208,004   4,335   1.44   1,124,780   3,684   1.31 
Savings  114,003   16   0.06   115,316   16   0.06 
Certificates of deposit – retail  607,178   3,234   2.13   569,151   2,914   2.05 
Subtotal interest-bearing deposits  3,213,796   11,295   1.41   3,017,851   9,788   1.30 
Interest-bearing demand – brokered  180,000   739   1.64   180,000   855   1.90 
Certificates of deposit – brokered  56,154   365   2.60   59,061   386   2.61 
Total interest-bearing deposits  3,449,950   12,399   1.44   3,256,912   11,029   1.35 
Borrowings  105,900   834   3.15   143,348   1,043   2.91 
Capital lease obligation  8,244   99   4.80   8,428   102   4.84 
Subordinated debt  83,213   1,224   5.88   83,157   1,222   5.88 
Total interest-bearing liabilities  3,647,307   14,556   1.60%  3,491,845   13,396   1.53%
Noninterest-bearing liabilities:                        
Demand deposits  471,265           496,238         
Accrued expenses and other liabilities  51,791           38,498         
Total noninterest-bearing liabilities  523,056           534,736         
Shareholders’ equity  473,560           460,682         
Total liabilities and shareholders’ equity $4,643,923          $4,487,263         
Net interest income     $30,628          $29,800     
 Net interest spread          2.39%          2.42%
 Net interest margin (4)          2.70%          2.72%
 
  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% federal tax rate.
  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 2019  2018  2018  2018  2018 
Shareholders’ equity $481,472  $469,013  $454,433  $437,019  $422,406 
Less: Intangible assets, net  32,170   32,399   34,297   23,477   23,656 
Tangible equity  449,302   436,614   420,136   413,542   398,750 
                     
Period end shares outstanding  19,445,363   19,337,662   19,203,727   19,007,312   18,921,114 
Tangible book value per share $23.11  $22.58  $21.88  $21.76  $21.07 
Book value per share  24.76   24.25   23.66   22.99   22.32 
                     
Tangible Equity to Tangible Assets                    
Total assets $4,662,306  $4,617,858  $4,435,709  $4,265,174  $4,336,494 
Less: Intangible assets, net  32,170   32,399   34,297   23,477   23,656 
Tangible assets  4,630,136   4,585,459   4,401,412   4,241,697   4,312,838 
Tangible equity to tangible assets  9.70%  9.52%  9.55%  9.75%  9.25%
Equity to assets  10.33%  10.16%  10.24%  10.25%  9.74%


  Three Months Ended 
  March 31,